2013 Sales

ks
Hay
stac
Sales
Michael Vernon Guerrero

Mendiola 2003
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Table of Contents
Table of Contents
Spouses Ladanga vs. CA [GR L-55999, 24 August 1984] .........

137 Legarda Hermanos vs. Saldana [GR L-26578, 28 January
1974] ......... 138 Levy Hermanos vs. Gervacio [GR 46306, 27
October 1939] ......... 140 Lim vs. CA, 263 SCRA 569 (1996)
......... [unavailable]
Limketkai Sons Milling vs. CA [GR 118509, 1 December 1995]
......... 141 Loyola vs. CA [GR 115734, 23 February 2000]
......... 147
Luzon Brokerage vs. Maritime, 86 SCRA 305 (1978) .........
[unavailable] Macondray vs. Eustaquio [GR 43683, 16 July
1937] ......... 150
Manila Racing Club vs. Manila Jockey Club [GR L-46533, 28 October 1939]
......... 154 Mapalo vs. Mapalo [GR L-21489 and L-21628, 19 May 1966]
......... 155
Mate vs. CA [G.R, Nos, 120724-25, 21 May 1998]
......... 158 Mclaughin vs. CA, 144 SCRA 693 (1986)
Medina vs. Collector of Internal Revenue [GR L-15113, 28 January
1961] ......... 160 Melliza vs. Iloilo City [GR L-24732, 30
April 1968] ......... 161
Mendoza vs. Kalaw [GR 16420, 12 October 1921]
......... 163 Mindanao Academy vs. Yap [GR L-17681, 26
February 1965] ......... 165
Montilla vs. CA [GR L-47968, 9 May 1988] ......... 168
National Grains Authority vs. IAC [GR 74470, 8 March 1989]
......... 170 Navera vs. CA [GR L-56838, 26 April 1990]
......... 171
Nietes vs. CA, 46 SCRA 654 .........
[unavailable]
Noel vs. CA [GR 59550, 11 January 1995] .........
176 Spouses Nonato vs. IAC [GR L-67181, 22 November
1985] ......... 179
Nool vs. CA [GR 116635, 24 July 1997] ......... 180
Northern Motors vs. Sapinoso [GR L-28074, 29 May 1970]
......... 184
Odyssey Park Inc, vs. CA, 280 SCRA 253 (1997) .........
[unavailable] Ong vs. CA [GR 97347, 6 July 1999]
......... 186
Ong vs. Ong [GR L-67888, 8 October 1985]
......... 189 Pangilinan vs. CA, 279 SCRA 590 (1997)
Pasagui vs. Villablanca [GR L-21998, 10 November 1975]
......... 190 Paulmitan vs. CA [GR 61584, 25 November
1992] ......... 191
Philippine Trust Company vs. PNB [GR 16483, 7 December 1921]
......... 194 Philippine Trust Co. vs. Roldan [GR L-8477, 31 May
1956] ......... 198 Pichel vs. Alonzo [GR L-36902, 30 January
1982] ......... 199
PNB vs. CA, 262 SCRA 464 (1995)
Power Commercial and Industrial Corp. vs. CA [GR 119745, 20 June
1997] ......... 203 Puyat & Sons vs. Arco Amusement [GR 47538, 20 June
1941] ......... 206
Quijada vs. CA [GR 126444, 4 December 1998]
......... 208
Quimson vs. Rosete [GR L-2397, 9 August
1950] ......... 211
Quiroga vs. Parsons Hardware [GR 11491, 23 August 1918]
......... 213 Radiowealth Finance vs. Palileo [GR 83432, 20
May 1991] ......... 215
Republic vs. Philippine Development Corp. [GR L-10141, 31 January 1958]

......... 216 Ridad vs. Filipinas Investment [GR L-39806, 27 January
1983] ......... 219
Rillo vs. CA [GR 125347, 19 June 1997]
......... 221
Romero vs. CA [GR 103577, 7
October 1996] ......... 223
Roque vs. Lapuz, 96 SCRA
741 (1980) ......... [unavailable]
Rubias vs. Batiller
[GR L-35702, 29 May 1973] ......... 226
Sanchez vs.
Rigos [GR L-25494, 14 June 1972] ......... 229
Siy Cong Bieng and Co. vs. Hongkong and Shanghai Banking Corp. [GR 34655, 5 March
1932] ......... 232 Soriano, et al. vs. Bautista, et al. [GR L-15752, 29 December 1962]
......... 234
Sta. Ana vs. Hernandez [GR L-16394, 17 December
1966] ......... 236
Suria vs. IAC, 151 SCRA 661(1987) .........

[unavailable] Tagatac vs. Jimenez, 53 OG 3792 (1957)
Tajanlangit vs. Southern Motors [GR L-10789, 28 May 1957]
......... 239 Tanedo vs. CA [GR 104482, 22 January
1996] ......... 241
Torres vs. CA [GR 134559, 9 December 1999]
......... 243 Toyota Shaw vs. CA [GR 116650, 23
May 1995] ......... 246
Universal Food Corp. vs. CA, 33 SCRA 1 (1970) .........
[unavailable] Uy vs. CA [GR 120465, 9 September 1999]
......... 249
Vallarta vs. CA [GR L-40195, 29 May
1987] ......... 253
Vasquez vs. CA [GR 83759, 12 July
1991] ......... 256
Vda, De Gordon vs. CA [GR L-37831, 23 November 1981]
......... 258 Vda, De Jomoc vs. CA [GR 92871, 2 August
1991] ......... 260
Vda, De Quiambao vs. Manila Motor Company [GR L-17384, 31 October
1961] ......... 262 Velasco vs. CA [GR L-31018, 29 June 1973] ......... 264
Villafor vs. CA [GR 95694, 9 October 1997] ......... 268
Villamor vs. CA [GR 97332, 10 October 1991] ......... 274
Villonco Realty vs. Bormaheco Inc, [GR L-26872, 25 July 1975]
......... 277 Yao Ka Sin Trading vs. CA, 209 SCRA 763 .........
[unavailable]
Yu Tek vs. Gonzales [GR 9935, 1
February 1915] ......... 283
Yuviengco vs. Dacuycuy, 104 SCRA 668 (1981) ......... [unavailable]
Zayas vs. Luneta Motor Company [GR L-30583, 23 October 1982] ......... 285
This collection contains one hundred three

(103) out of one hundred twenty one (121)
assigned cases
summarized in this format by
Michael Vernon M. Guerrero (as a sophomore law
student) during the First Semester, school year
2003-2004
in the Sales class
under Atty. Amado Paolo
Dimayuga
at the Arellano University School of Law

(AUSL). Compiled as PDF, July 2011.
Berne Guerrero entered AUSL in June
2002 and eventually graduated
from AUSL in 2006.
He passed the Philippine bar examinations immediately after (April 2007).
www.berneguerrero.com
Haystacks (Berne Guerrero)
[1]
Acap v. CA [G.R. No. 118114. December
7, 1995.] First Division, Padilla (J): 4
concurring
Facts: The title to Lot 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was
evidenced by OCT R-12179. The lot has an area of 13,720 sq. m. The title was issued and is
registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses
died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized
document entitled Declaration of Heirship and Deed of Absolute Sale in favor of Cosme
Pido. Since 1960, Teodoro Acap had been the tenant of a portion of the said land, covering an
area of 9,500 sq. m. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap
continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido
and thereafter, upon Pidos death, to his widow Laurenciana. The controversy began when
Pido died interstate and on 27 November 1981, his surviving heirs executed a notarized
document denominated as Declaration of Heirship and Waiver of Rights of Lot 1130
Hinigaran Cadastre, wherein they declared to have adjudicated upon themselves the parcel
of land in equal share, and that they waive, quitclaim all right, interests and
participation over the parcel of land in favor of Edy de los Reyes. The document was signed by
all of Pidos heirs. Edy de los Reyes did not sign said document. It will be noted that at the
time of Cosme Pidos death, title to the property continued to be registered in the name of
the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of Rights in his
favor, de los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse
claim against the original certificate of title.
Thereafter, delos Reyes sought for Acap to personally inform him that he had become the new
owner of the land and that the lease rentals thereon should be paid to him. Delos Reyes
alleged that he and Acap entered into an oral lease agreement wherein Acap agreed to pay 10
cavans of palay per annum as lease rental. In 1982, Acap allegedly complied with said
obligation. In 1983, however, Acap refused to pay any further lease rentals on the land,
prompting delos Reyes to seek the assistance of the then Ministry of Agrarian Reform (MAR)
in Hinigaran, Negros Occidental. The MAR invited Acap, who sent his wife, to a
conference scheduled on 13 October 1983. The wife stated that the she and her husband did not
recognize delos Reyess claim of ownership over the land. On 28 April 1988, after the lapse
of four (4) years, delos Reys field a complaint for recovery of possession and damages
against Acap, alleging that as his leasehold tenant, Acap refused and failed to pay the agreed
annual rental of 10 cavans of palay despite repeated demands. On 20 August 1991, the lower
court rendered a decision in favor of delos Reyes, ordering the forfeiture of Acaps preferred
right of a Certificae of Land Transfer under PD 27 and his farmholdings, the return of the
farmland in Acaps possession to delos Reyes, and Acap to pay P5,000.00 as attorneys fees,
the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages.
Aggrieved, petitioner appealed to the Court of Appeals. Subsequently, the CA affirmed the
lower courts decision, holding that de los Reyes had acquired ownership of Lot No. 1130
of the Cadastral Survey of Hinigaran, Negros Occidental based on a document entitled
Declaration of Heirship and Waiver of Rights, and ordering the dispossession of Acap as
leasehold tenant of the land for failure to pay rentals. Hence, the petition for review on
certiorari.
The Supreme Court granted the petition, set aside the decision of the RTC Negros Occidental,
dismissed the complaint for recovery of possession and damages against Acap for failure to
properly state a cause of action, without prejudice to private respondent taking the proper legal
steps to establish the legal mode by which he claims to have acquired ownership of the land in
question.
1.
Asserted right or claim to ownership not suffcient per se to give rise to

ownership over the res An asserted right or claim to ownership or a real right over
a thing arising from a juridical act,
however justified, is not per se sufficient to give rise to ownership over the res. That right or
title must be
Sales, 2003 ( 1 )
completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are
acquired only pursuant to a legal mode or process. While title is the juridical justification,
mode is the actual process of acquisition transfer of ownership over a thing in question.
2.
Classes of modes of acquiring ownership

Under Article 712 of the Civil Code, the modes of acquiring ownership are generally
classified into two (2) classes, namely, the original mode (i.e, through occupation,
acquisitive prescription, law or intellectual creation) and the derivative mode (i.e., through
succession mortis causa or tradition as a result of certain contracts, such as sale, barter,
donation, assignment or mutuum).
3.
Contract of Sale; Declaration of Heirship and Waiver of Rights an
extrajudicial settlement between heirs under Rule 74 of the Rules of Court
In a Contract of Sale, one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other party to pay a price certain in
money or its equivalent. On the other hand, a declaration of heirship and waiver of rights
operates as a public instrument when filed with the Registry of Deeds whereby the intestate
heirs adjudicate and divide the estate left by the decedent among themselves as they see fit.
It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of
Court. In the present case, the trial court erred in equating the nature and effect of the
Declaration of Heirship and Waiver of Rights the same with a contract (deed) of sale.
4.
Sale of hereditary rights and waiver of hereditary rights distinguished

There is a marked difference between a sale of hereditary rights and a waiver of
hereditary rights. The first presumes the existence of a contract or deed of sale between the
parties. The second is, technically speaking, a mode of extinction of ownership where there is
an abdication or intentional relinquishment of a known right with knowledge of its existence
and intention to relinquish it, in favor of other persons who are co-heirs in the succession. In
the present case, de los Reyes, being then a stranger to the succession of Cosme Pido, cannot
conclusively claim ownership over the subject lot on the sole basis of the waiver document
which neither recites the elements of either a sale, or a donation, or any other derivative
mode of acquiring ownership.
5.
Summon of Ministry of Agrarian Reform does not conclude actuality of sale nor
notice of such sale
The conclusion, made by the trial and appellate courts, that a sale transpired between
Cosme Pidos heirs and de los Reyes and that Acap acquired actual knowledge of said sale when
he was summoned by the Ministry of Agrarian Reform to discuss de los Reyes claim over the
lot in question, has no basis both in fact and in law.
6.
A notice of adverse claim does not prove ownership over the lot; Adverse claim
not sufcient to cancel the certificate of tile and for another to be issued in his name
A notice of adverse claim, by its nature, does not however prove private respondents
ownership over the tenanted lot. A notice of adverse claim is nothing but a notice of a claim
adverse to the registered owner, the validity of which is yet to be established in court at some
future date, and is no better than a notice of lis pendens which is a notice of a case already
pending in court. In the present case, while the existence of said adverse claim was duly
proven (thus being filed with the Registry of Deeds which contained the Declaration of
Heirship with Waiver of rights an was annotated at the back of the Original Certificate of Title
to the land in question), there is no evidence whatsoever that a deed of sale was executed
between Cosme Pidos heirs and de los Reyes transferring the rights of the heirs to the land in
favor of de los Reyes. De los Reyes right or interest therefore in the tenanted lot remains an
adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title to be
issued in de los Reyes name.

7.
Transaction between heirs and de los Reyes binding between parties, but cannot
afect right of
Sales, 2003 ( 2 )
Acap to tenanted land without corresponding proof thereof

While the transaction between Pidos heirs and de los Reyes may be binding on both
parties, the right of Acap as a registered tenant to the land cannot be perfunctorily forfeited
on a mere allegation of de los Reyes ownership without the corresponding proof thereof.
Acap had been a registered tenant in the subject land since 1960 and religiously paid lease
rentals thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his
family (after Pidos death), even if in 1982, de los Reyes allegedly informed Acap that he had
become the new owner of the land.
8.
No unjustified or deliberate refusal to pay the lease rentals to the landowner
/ agricultural lessor
De los Reyes never registered the Declaration of Heirship with Waiver of Rights with the
Registry of Deeds or with the MAR, but instead, he filed a notice of adverse claim on the said
lot to establish ownership thereof (which cannot be done). It stands to reason, therefore, to
hold that there was no unjustified or deliberate refusal by Acap to pay the lease rentals or
amortizations to the landowner/agricultural lessor which, in this case, de los Reyes failed to
established in his favor by clear and convincing evidence. This notwithstanding the fact
that initially, Acap may have, in good faith, assumed such statement of de los Reyes to be true
and may have in fact delivered 10 cavans of palay as annual rental for 1982 to latter. For in
1983, it is clear that Acap had misgivings over de los Reyes claim of ownership over the said
land because in the October 1983 MAR conference, his wife Laurenciana categorically denied
all of de los Reyes allegations. In fact, Acap even secured a certificate from the MAR dated 9
May 1988 to the effect that he continued to be the registered tenant of Cosme Pido and not of
delos Reyes.
9.
Sanction of forfeiture of tenants preferred right and possession of farmholdings
should not be applied
The sanction of forfeiture of his preferred right to be issued a Certificate of Land
Transfer under PD 27 and to the possession of his farmholdings should not be applied against
Acap, since de los Reyes has not established a cause of action for recovery of possession
against Acap.
[2]
Adalin vs. CA [G.R. No. 120191. October 10, 1997.]
First Division, Hermosisima Jr. (J): 3 concurring, 1 took no part
Facts: In August 1987, Elena K. Palanca, in behalf of the Kado siblings, commissioned Ester
Bautista to look for buyers for their property fronting the Imperial Hotel in Cotabato City.
Bautista logically offered said property to the owners of the Imperial Hotel which may be
expected to grab the offer and take advantage of the proximity of the property to the hotel
site. True enough, Faustino Yu, the President-General Manager of Imperial Hotel, agreed to buy
said property. Thus during that same month of August 1987, a conference was held in Yus
office at the Imperial Hotel. Present there were Yu, Loreto Adalin who was one of the tenants
of the 5-door, 1-storey building standing on the subject property, and Elena Palanca and
Teofilo Kado in their own behalf as sellers and in behalf of the other tenants of said building.
During the conference, Yu and Lim categorically asked Palanca whether the other tenants were
interested to buy the property, but Palanca also categorically answered that the other tenants
were not interested to buy the same. Consequently, they agreed to meet at the house of Palanca
on 2 September 1987 to finalize the sale. On said date, Loreto Adalin; Yu and Lim and their
legal counsel; Palanca and Kado and their legal counsel; and one other tenant, Magno Adalin,
met at Palancas house. Magno Adalin was there in his own behalf as tenant of two of the five
doors of the one-storey building standing on the subject property and in behalf of the
tenants of the two other doors, namely. Carlos Calingasan and Demetrio Adaya. Again, Yu
and Lim asked Palanca and Magno Adalin whether the other tenants were interested to buy
the subject property, and Magno Adalin unequivocally answered that he and the other
tenants were not so interested mainly because they could not afford it. However, Magno
Adalin asserted that he and the other tenants were each entitled to a disturbance fee of
Sales, 2003 ( 3 )
P50,000.00 as consideration for their vacating the subject property. During said meeting,
Palanca and Kado, as sellers, and Loreto Adalin and Yu and Lim, as buyers, agreed that the
latter will pay P300,000 as downpayment for the property and that as soon as the former
secures the eviction of the tenants, they will be paid the balance of P2,300,000. Pursuant to the
above terms and conditions, a Deed of Conditional Sale was drafted by the counsel of Yu and
Lim. On 8 September 1987, at Yus Imperial Hotel office, Palanca and Eduarda Vargas,
representing the sellers, and Loreto Adalin and Yu and Lim signed the Deed of Conditional
Sale. They also agreed to defer the registration of the deed until after the sellers have secured
the eviction of the tenants from the subject property. The tenants, however, refused to vacate
the subject property.
Being under obligation to secure the eviction of the tenants, in accordance with the terms and
conditions of the Deed of Conditional Sale, Elena Palanca filed with the Barangay Captain a
letter complaint for unlawful detainer against the said tenants. Two days after Palanca filed an
ejectment case before the Barangay Captain against the tenants of the subject property,
Magno Adalin, Demetrio Adaya and Carlos Calingasan wrote letters to Palanca informing the
Kado siblings that they have decided to purchase the doors that they were leasing for the
purchase price of P600,000 per door. Almost instantly, Palanca, in behalf of the Kado siblings,
accepted the offer of the said tenants and returned the downpayments of Yu and Lim. Of
course, the latter refused to accept the reimbursements.
Yu and Lim filed a complaint witht the Barangay Captain for Breach of Contract against
Elena Palanca. During the conference, Yu and Lim, if only to accommodate Magno Adalin
and settle the case amicably, agreed to buy only 1 door each so that the latter could purchase
the two doors he was occupying. However, Magno Adalin adamantly refused, claiming that he
was already the owner of the 2 doors. When Lim asked Magno Adalin to show the Deed of Sale
for the two doors, the latter insouciantly walked out. There being no settlement forged, on 16
May 1988, the Barangay Captain issued the Certification to File Action.
On 5 May 1988, Yu and Lim filed their complaint for Specific Performance against the
Palanca, et. al. and Adalin in the RTC. On 14 June 1988, Yu and Lim caused the annotation of a
Notice of Lis Pendens at the dorsal portion of TCT 12963. On 25 October 1988, Calingasan,
Adalin, et.al. filed a Motion for Intervention as Plaintiffs-Intervenors appending thereto a
copy of the Deed of Sale of Registered Land signed by Palanca, et.al. On 27 October
1988, Calingasan et.al. filed the Deed of Sale of Registered Land with the Register of
Deeds on the basis of which TCT 24791 over the property was issued under their names. On the
same day, Calingasan, et.al. filed in the Court a quo a Motion To Admit Complaint-InIntervention. Attached to the Complaint-In-Intervention was the Deed of Sale of
Registered Land. Yu and Lim were shocked to learn that Palanca, et. al. had signed the said
deed. As a counter-move, Yu and Lim filed a motion for leave to amend Complaint and, on
11November1988, filed their Amended Complaint impleading Calingasan, et. al. as
additional Defendants. Palanca, et.al. suffered a rebuff when, on 10 January 1989, the RTC
General Santos City issued an Order dismissing the Petition of Calingasan, et. al. for
consignation. In the meantime, on 30 November 1989, Loreto Adalin died and was substituted,
per order of the Court a quo, on 5 January 1990, by his heirs, namely, Anita, Anelita, Loreto, Jr.,
Teresita, Wilfredo, Lilibeth, Nelson, Helen and Jocel, all surnamed Adalin. After trial, the
Court a quo rendered judgment in favor of Calingasan, Adalin, et.al. The Court order
Palanca, et.al. in solidum to pay moral damages of P500,000.00, P100,000.00 exemplary
damages each to both Yu and Lim and P50,000.00 as and for attorneys fees. They were ordered
to return the P200,000.00 initial payment received by them with legal interest from date of
receipt thereof up to 3 November 1987.
Yu and Lim wasted no time in appealing from the decision of the trial court. They were
vindicated when the Court of Appeals rendered its decision in their favor. Accordingly, the
Court of Appeals rendered another judgment in the case and ordered that the Deed of
Conditional Sale was declared valid; that the Deeds of Sale of Registered Land and TCT
24791 were hereby declared null and void; that Calingasan, et.al. except the heirs of Loreto
Adalin were ordered to vacate the property within 30 days from the finality of the
Decision; that Palanca, et.al were ordered to execute, in favor of Yu and Lim, a Deed of
Absolute Sale
Sales, 2003 ( 4 )
covering 4 doors of the property (which includes the area of the property on which said
four doors were constructed) except the door purchased by Loreto Adalin, free of any liens or
encumbrances; that Yu amd Lim were ordered to remit to Palanca, et.al. the balance of the
purchase price of the 4 doors in the amount of P1,880,000; that Palanca, et.al. were ordered
to refund to Calingasan, et.al. the amount of P840,000 which they paid for the property
under the Deed of Conditional Sale of Registered Land without interest considering
that they also acted in bad faith; that Magno Adalin was ordered to pay the amount of P3,000
a month, and each of other tenants, except Loreto Adalin, the amount of P1,500 to Yu and Lim,
from November 1987, up to the time the property was vacated and delivered to the latter, as
reasonable compensation for the occupancy of the property, with interest thereon at the rate
of 6% per annum; and that Palanca, et.al. were ordered to pay, jointly and severally, to Yu and
Lim, individually, the amount of P100,000.00 by way of moral damages, P20,000.00 by way of
exemplary damages and P20,000.00 by way of attorneys fees. Hence, the petition for review.
The Supreme Court dismissed the petition; with costs against Calingasan, Adalin, et.al.
1.
Grounds merely splits aspects of the issue, i.e. the true nature of transaction
entered by Yu and Lim with the Kado siblings
The grounds relied upon by Calingasan, Adalin, et.al. are essentially a splitting of the
various aspects of the one pivotal issue that holds the key to the resolution of this
controversy: the true nature of the sale transaction entered into by the Kado siblings with
Faustino Yu and Antonio Lim. The Courts task amounts to a declaration of what kind of contract
had been entered into by said parties and of what their respective rights and obligations are
thereunder.
2.
Deed of Conditional Sale; Obligation of the seller to eject the tenants and the
obligation of the buyer to pay the balance of the purchase price; Choice as to whom to
sell is determined
Palanca, in behalf of the Kado siblings who had already committed to sell the property to
Yu and Lim and Loreto Adalin, understood her obligation to eject the tenants on the subject
property. Having gone to the extent of filing an ejectment case before the Barangay
Captain, Palanca clearly showed an intelligent appreciation of the nature of the transaction
that she had entered into: that she, in behalf of the Kado siblings, had already sold the subject
property to Yu and Lim and Loreto Adalin, and that only the payment of the balance of the
purchase price was subject to the condition that she would successfully secure the eviction of
their tenants. In the sense that the payment of the balance of the purchase price was subject to a
condition, the sale transaction was not yet completed, and both sellers and buyers have their
respective obligations yet to be fulfilled: the former, the ejectment of their tenants; and the
latter, the payment of the balance of the purchase price. In this sense, the Deed of Conditional
Sale may be an accurate denomination of the transaction. But the sale was conditional only
inasmuch as there remained yet to be fulfilled, the obligation of the sellers to eject their
tenants and the obligation of the buyers to pay the balance of the purchase price. The choice of
who to sell the property to, however, had already been made by the sellers and is thus no
longer subject to any condition nor open to any change. In that sense, therefore, the sale made
by Palanca to Yu, Lim, and Adalin was definitive and absolute.
3.
No acts of parties justifes radical change of Palancas posture; No legal basis for
the acceptance of tenants ofer to buy
Nothing in the acts of the sellers and buyers before, during or after the said transaction
justifies the radical change of posture of Palanca who, in order to provide a legal basis for
her later acceptance of the tenants offer to buy the same property, in effect claimed that the
sale, being conditional, was dependent on the sellers not changing their minds about selling
the property to Yu and Lim. The tenants, for their part, defended Palancas subsequent
dealing with them by asserting their option rights under Palancas letter of 2 September 1987
and harking on the non-fulfillment of the condition that their ejectment be secured first.
4.
No legal rationalizing can sanction Palancas arbitrary breach of contract

Sales, 2003 ( 5 )
The Court cannot countenance the double dealing perpetrated by Palanca in behalf
of the Kado siblings. No amount of legal rationalizing can sanction the arbitrary breach of
contract that Palanca committed in accepting the offer of Magno Adalin, Adaya and Calingasan
to purchase a property already earlier sold to Yu and Lim.
5.
Alleged 30-day option for tenant to purchase void for lack of consideration
The 30-day option to purchase the subject property allegedly given to the tenants as
contained in the 2 September 1987 letter of Palanca, is not valid for utter lack of consideration.
6.
Palanca and tenants estopped

Yu and Lim twice asked Palanca and the tenants concerned as to whether or not the
latter were interested to buy the subject property, and twice, too, the answer given was that
the said tenants were not interested to buy the subject property because they could not afford
it. Clearly, said tenants and Palanca, who represented the former in the initial negotiations
with Yu and Lim, are estopped from denying their earlier statement to the effect that the said
tenants Magno Adalin, Adaya and Calingasan had no intention of buying the four doors that
they were leasing from the Kado siblings.
7.
Subsequent sale clearly made in bad faith

The subsequent sale of the subject property by Palanca to the tenants, smacks of
gross bad faith, considering that Palanca and the said tenants were in full awareness of
the August and September negotiations between Bautista and Palanca, on the one hand, and
Loreto Adalin, Faustino Yu and Antonio Lim, on the other, for the sale of the one-storey
building. It cannot be denied, thus, that Palanca and the said tenants entered into the
subsequent or second sale notwithstanding their full knowledge of the subsistence of the
earlier sale over the same property to Yu and Lim.
8.
Prior registration cannot erase gross bad faith characterizing second sale
Though the second sale to the said tenants was registered, such prior registration
cannot erase the gross bad faith that characterized such second sale, and consequently, there is
no legal basis to rule that such second sale prevails over the first sale of the said property to Yu
and Lim.
9.
Refusal of tenants from vacating property not a valid justifcation to renege on

obligation to sell Palanca, et.al. cannot invoke the refusal of the tenants to vacate the
property and the latters decision
to themselves purchase the property as a valid justification to renege on and turn their backs
against their obligation to deliver or cause the eviction of the tenants from and deliver physical
possession o the property to Yu and Lim. It would be the zenith of inequity for Palanca, et. al.
to invoke the occupation by the tenants, as of the property, as a justification to ignore their
obligation to have the tenants evicted from the property and for them to give P50,000.00
disturbance fee for each of the tenants and a justification for the latter to hold on to the
possession of the property.
10.
Second sale cannot be preferred even if the prior conditional sale was not
consummated Assuming, gratia arguendi, for the nonce, that there had been no
consummation of the Deed of
Conditional Sale by reason of the non-delivery to Yu and Lim of the property, it does not
thereby mean that the Deed of Sale of Registered Land executed by Palanca, et.al and the
tenants should be given preference.
[3]
Addison vs. Felix [G.R. No. 12342. August

3, 1918.] En Banc, Fisher (J): 5 concurring
Facts: By a public instrument dated 11 June 1914, A. A. Addison sold to Marciana Felix, with
the consent of her husband, Balbino Tioco, 4 parcels of land. Felix paid, at the time of the
execution of the deed, the sum of
Sales, 2003 ( 6 )
P3,000 on account of the purchase price, and bound herself to pay the remainder in
installments, the first of P2,000 on 15 July 1914, the second of P5,000 30 days after the
issuance to her of a certificate of title under the Land Registration Act, and further, within 10
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 4 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% of the value of the products
that she might obtain from the 4 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 1 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 Felix shall be obliged to return to Addison
the net value of all the products of the 4 parcels sold, and shall be obliged to return to her
all the sums that was paid, together with interest at the rate of 10% per annum. After the
execution of the deed of sale, at the request of Felix. Addison went to Lucena, accompanied by
the formers representative, for the purpose of designating and delivering the lands sold. He
was able to designate only 2 of the 4 parcels, and more than 2/3s of these were found to be in
the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by
him. Addison admitted that Felix would have to bring suit to obtain possession of the land.
In June 1914, Felix filed an application with the Land Court for the registration in her
name of 4 parcels of land described in the deed of sale executed in her favor, to obtain from the
Land Court a writ of injunction against the occupants, and for the purpose of the issuance of
this writ. 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.
In January 1915, Addison filed suit in the CFI Manila to compel Felix to make payment
of the first installment of P2,000, demandable on 15 July 1914, and of the interest in arrears,
at the stipulated rate of 8% per annum. Felix and Tioco answered the complaint and alleged by
way of special defense that Addison had absolutely failed to deliver 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, Addison 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 Addisons nonfulfilment of the contract. The trial court rendered judgment in
favor of Felix, holding the contract of sale to be rescinded and ordering the return the P3,000
paid on account of the price, together with interest thereon at the rate of 10% per annum. From
this judgment Addison appealed.
The Supreme Court held that the contract of purchase and sale entered into by and between the
Parties on 11 June 1914 is rescinded, and ordered Addison 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 Addison.
1.
Cross Complaint not founded on conventional rescission but on the failure to
deliver the land sold
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. 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 substantiates the contention.
The one years 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 shows that up to the present time that
condition has not been fulfilled; consequently Felix cannot be heard to invoke a right which
depends on the existence of that condition.
2.
Fulfillment of condition impossible for reason imputable to party not presented

Sales, 2003 ( 7 )
If in-the cross-complaint it had been alleged that the fulfillment of the condition was
impossible for reasons imputable to Addison, and if this allegation had been proven, perhaps
the condition would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code).
This issue, however, was not presented in Felixs answer.
3.
Tradition / Delivery by the vendor of the thing sold

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
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 not been
effected.
4.
Delivery, according to Dalloz

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 (Dalloz;Gen. Rep., vol. 43, p. 174 in his commentaries on article 1604 of the French
Civil Code).
5.
Execution of a public instrument, when sufficient

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.
6.
Fictitious tradition not necessarily implies real tradition of the thing sold
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 (Supreme
court of Spain, decision of November 10, 1903, [Civ. Rep., vol. 96, p. 560] interpreting
article 1462 of the Civil Code).
7.
Rescission of sale and return of price due to non-delivery of thing sold

In the present case, the mere execution of the instrument was not a fulfillment of
the vendors obligation to deliver the thing sold, and that from such nonfulfillment arises the
purchasers right to demand, as she has demanded, the rescission of the sale and the return of
the price. (Civ. Code, arts. 1506 and 1124.)
8.
No agreement for vendee to take steps to obtain material possession of thing sold
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.
Sales, 2003 ( 8 )
8.
Possession while land is being registered contemplated in contract

The obligation was incumbent upon 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 1/4 of the products of the 4 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 foreseen 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 4 parcels of land.
9.
Legal interest due as rescission is made by virtue of provisions of law

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.
[4]
Adelfa Properties vs. CA [G.R. No. 111238. January
25, 1995.] Second Division, Regalado (J): 3 concurring
Facts: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose and Dominador
Jimenez, were the registered co-owners of a parcel of land consisting of 17,710 sq. ms (TCT
309773) situated in Barrio Culasi, Las Pias, Metro Manila. On 28 July 1988, Jose and
Dominador Jimenez sold their share consisting of 1/2 of said parcel of land, specifically the
eastern portion thereof, to Adelfa Properties pursuant to a Kasulatan sa Bilihan ng Lupa.
Subsequently, a Confirmatory Extrajudicial Partition Agreement was executed by the
Jimenezes, wherein the eastern portion of the subject lot, with an area of 8,855 sq. ms. was
adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to Rosario
and Salud Jimenez. Thereafter, Adelfa Properties expressed interest in buying the western
portion of the property from Rosario and Salud. Accordingly, on 25 November 1989, an
Exclusive Option to Purchase was executed between the parties, with the condition that
the selling price shall be P2,856,150, that the option money of P50,000 shall be credited as
partial payment upon the consummation of sale, that the balance is to be paid on or before
30 November 1989, and that in case of default by Adelfa Properties to pay the balance, the
option is cancelled and 50% of the option money shall be forfeited and the other 50% refunded
upon the sale of the property to a third party, and that all expenses including capital gains tax,
cost of documentary stamps are for the account of the vendors and the expenses for the
registration of the deed of sale for the account of Adelfa properties. Considering, however,
that the owners copy of the certificate of title issued to Salud Jimenez had been lost, a petition
for the re-issuance of a new owners copy of said certificate of title was filed in court through
Atty. Bayani L. Bernardo. Eventually, a new owners copy of the certificate of title was issued
but it remained in the possession of Atty. Bernardo until he turned it over to Adelfa Properties,
Inc.
Before Adelfa Properties could make payment, it received summons on 29 November 1989,
together with a copy of a complaint filed by the nephews and nieces of Rosario and Salud
against the latter, Jose and Dominador Jimenez, and Adelfa Properties in the RTC Makati
(Civil Case 89-5541), for annulment of the deed of sale in favor of Household Corporation
and recovery of ownership of the property covered by TCT 309773. As a consequence, in a
letter dated 29 November 1989, Adelfa Properties informed Rosario and Salud that it would
hold payment of the full purchase price and suggested that the latter settle the case with their
nephews and nieces, adding that if possible, although 30 November 1989 is a holiday, we
will be waiting for you and said plaintiffs at our office up to 7:00 p.m. Another letter of the
same tenor and of even date was sent by Adelfa Properties to Jose and Dominador Jimenez.
Salud Jimenez refused to heed the suggestion of Adelfa Properties and attributed the
suspension of payment of the purchase price to lack of word of honor. On 7 December
1989, Adelfa Properties caused to be annotated on the title of the lot its option contract with
Salud and Rosario, and its contract of sale with Jose and Dominador Jimenez, as Entry
Sales, 2003 ( 9 )
No. 1437-4 and entry No. 1438-4, respectively. On 14 December 1989, Rosario and Salud
sent Francisca Jimenez to see Atty. Bernardo, in his capacity as Adelfa Properties counsel, and
to inform the latter that they were cancelling the transaction. In turn, Atty. Bernardo
offered to pay the purchase price provided that P500,000.00 be deducted therefrom for the
settlement of the civil case. This was rejected by Rosario and Salud. On 22 December 1989,
Atty. Bernardo wrote Rosario and Salud on the same matter but this time reducing the
amount from P500,000.00 to P300,000.00, and this was also rejected by the latter. On 23
February 1990, the RTC dismissed Civil Case 89-5541.
On 28 February 1990, Adelfa Properties caused to be annotated anew on TCT 309773 the
exclusive option to purchase as Entry 4442-4.On the same day, 28 February 1990, Rosario
and Salud executed a Deed of Conditional Sale in favor of Emylene Chua over the same
parcel of land for P3,029,250.00, of which P1,500,000.00 was paid to the former on said date,
with the balance to be paid upon the transfer of title to the specified 1/2 portion. On 16 April
1990, Atty. Bernardo wrote Rosario and Salud informing the latter that in view of the
dismissal of the case against them, Adelfa Properties was willing to pay the purchase price, and
he requested that the corresponding deed of absolute sale be executed. This was ignored by
Rosario and Salud. On 27 July 1990, Jimenez counsel sent a letter to Adelfa Properties enclosing
therein a check for P25,000.00 representing the refund of 50% of the option money paid under
the exclusive option to purchase. Rosario and Salud then requested Adelfa Properties to return
the owners duplicate copy of the certificate of title of Salud Jimenez. Adelfa Properties failed
to surrender the certificate of title.
Rosario and Salud Jimenez filed Civil Case 7532 in the RTC Pasay City (Branch 113) for
annulment of contract with damages, praying, among others, that the exclusive option to
purchase be declared null and void; that Adelfa Properties be ordered to return the owners
duplicate certificate of title; and that the annotation of the option contract on TCT 309773
be cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a complaint in
intervention. On 5 September 1991, the trial court rendered judgment holding that the
agreement entered into by the parties was merely an option contract, and declaring that the
suspension of payment by Adelfa Properties constituted a counter-offer which, therefore, was
tantamount to a rejection of the option. It likewise ruled that Adelfa Properties could not
validly suspend payment in favor of Rosario and Salud on the ground that the vindicatory
action filed by the latters kin did not involve the western portion of the land covered by the
contract between the parties, but the eastern portion thereof which was the subject of the sale
between Adelfa Properties and the brothers Jose and Dominador Jimenez. The trial court then
directed the cancellation of the exclusive option to purchase, declared the sale to intervenor
Emylene Chua as valid and binding, and ordered Adelfa Properties to pay damages and
attorneys fees to Rosario and Salud, with costs.
On appeal, the Court of appeals affirmed in toto the decision of the court a quo (CA-GR 34767)
and held that the failure of petitioner to pay the purchase price within the period agreed upon
was tantamount to an election by petitioner not to buy the property; that the suspension of
payment constituted an imposition of a condition which was actually a counter-offer
amounting to a rejection of the option; and that Article 1590 of the Civil Code on suspension
of payments applies only to a contract of sale or a contract to sell, but not to an option
contract which it opined was the nature of the document subject of the case at bar. Said
appellate court similarly upheld the validity of the deed of conditional sale executed by
Rosario and Salud in favor of intervenor Emylene Chua. Hence, the petition for review on
certiorari.
The Supreme Court affirmed the assailed judgment of the Court of Appeals in CA-GR CV
34767, with modificatory premises.
1.
Agreement between parties a contract to sell and not an option contract or a

contract of sale The alleged option contract is a contract to sell, rather than a contract
of sale. The distinction between
the two is important for in contract of sale, the title passes to the vendee upon the delivery of
the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the
Sales, 2003 ( 10 )
full payment of the price. In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell,
title is retained by the vendor until the full payment of the price, such payment being a
positive suspensive condition and failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is
considered absolute in nature where there is neither a stipulation in the deed that title to the
property sold is reserved in the seller until the full payment of the price, nor one giving the
vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a
fixed period.
2.
Intent not to transfer ownership need not be expressed

The parties never intended to transfer ownership to Adelfa Properties to completion of
payment of the purchase price, this is inferred by the fact that the exclusive option to
purchase, although it provided for automatic rescission of the contract and partial forfeiture
of the amount already paid in case of default, does not mention that Adelfa Properties is
obliged to return possession or ownership of the property as a consequence of nonpayment. There is no stipulation anent reversion or reconveyance of the property in the event
that petitioner does not comply with its obligation. With the absence of such a stipulation, it
may legally be inferred that there was an implied agreement that ownership shall not pass to
the purchaser until he had fully paid the price. Article 1478 of the Civil Code does not require
that such a stipulation be expressly made. Consequently, an implied stipulation to that effect
is considered valid and binding and enforceable between the parties. A contract which contains
this kind of stipulation is considered a contract to sell. Moreover, that the parties really
intended to execute a contract to sell is bolstered by the fact that the deed of absolute sale
would have been issued only upon the payment of the balance of the purchase price, as may be
gleaned from Adelfa Properties letter dated 16 April 1990 wherein it informed the vendors
that it is now ready and willing to pay you simultaneously with the execution of the
corresponding deed of absolute sale.
3.
No actual or constructive delivery of property to indicate contract of sale;
Circumstances negate presumption of possession of title is to be understood as delivery
It has not been shown that there was delivery of the property, actual or
constructive, made. The exclusive option to purchase is not contained in a public instrument
the execution of which would have been considered equivalent to delivery. Neither did
Adelfa Properties take actual, physical possession of the property at any given time. It is
true that after the reconstitution of the certificate of title, it remained in the possession of
Atty. Bayani L. Bernardo, Adelfas counsel. Normally, under the law, such possession by the
vendee is to be understood as a delivery. However, Rosario and Salud explained that there
was really no intention on their part to deliver the title to Adelfa Properties with the purpose
of transferring ownership to it. They claim that Atty. Bernardo had possession of the title only
because he was their counsel in the petition for reconstitution. The court found no reason not
to believe said explanation, aside from the fact that such contention was never refuted or
contradicted by Adelfa Properties.
4.
Perfected contract to sell

The controverted document should legally be considered as a perfected contract to
sell, and not strictly an option contract.
5.
Contract interpreted to ascertain intent of parties; Title not controlling if text

shows otherwise The important task in contract interpretation is always the
ascertainment of the intention of the
contracting parties and that task 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. Moreover, judging from the subsequent acts of
the parties which will hereinafter be discussed, it is undeniable that the intention of the
parties was to enter into a contract to sell. In addition, the title of a contract does not
necessarily determine its true nature. Hence, the fact that the document under discussion is
entitled Exclusive Option to Purchase is not controlling where the text thereof shows that it
is a contract to sell.
Sales, 2003 ( 11 )
6.
Option defned
As used in the law on sales, an option is a continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with, certain terms and
conditions, or which gives to the owner of the property the right to sell or demand a sale. It is
also sometimes called an unaccepted offer. An option is not of itself a purchase, but merely
secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. It is
simply a contract by which the owner of property agrees with another person that he shall have
the right to buy his property at a fixed price within a certain time. He does not sell his land; he
does not then agree to sell it; but he does sell something, that is, the right or privilege to buy
at the election or option of the other party. Its distinguishing characteristic is that it imposes
no binding obligation on the person holding the option, aside from the consideration for the
offer. Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or
agree to transfer, any title to, or any interest or right in the subject matter, but is merely a
contract by which the owner of property gives the optionee the right or privilege of accepting
the offer and buying the property on certain terms.
7.
Contract defined
A contract, like a contract to sell, involves a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some
service. Contracts, in general, are perfected by mere consent, which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute.
8.
Distinction between an option and a contract of sale

The distinction between an option and a contract of sale is that an option is an
unaccepted offer. It states the terms and conditions on which the owner is willing to sell his
land, if the holder elects to accept them within the time limited. If the holder does so elect,
he must give notice to the other party, and the accepted offer thereupon becomes a valid and
binding contract. If an acceptance is not made within the time fixed, the owner is no longer
bound by his offer, and the option is at an end. A contract of sale, on the other hand, fixes
definitely the relative rights and obligations of both parties at the time of its execution. The
offer and the acceptance are concurrent, since the minds of the contracting parties meet in
the terms of the agreement.
9.
Acceptance; formal or informal

Except where a formal acceptance is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced by some acts or conduct communicated
to the offeror, it may be made either in a formal or an informal manner, and may be shown by
acts, conduct, or words of the accepting party that clearly manifest a present intention or
determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts,
conduct, or words of a party recognizing the existence of the contract of sale. In the present
case, a perusal of the contract involved, as well as the oral and documentary evidence presented
by the parties, readily shows that there is indeed a concurrence of Adelfas offer to buy and
the Jimenezes acceptance thereof.
10.
Contract clear, only performance of obligations required of parties

The offer to buy a specific piece of land was definite and certain, while the acceptance
thereof was absolute and without any condition or qualification. The agreement as to the
object, the price of the property, and the terms of payment was clear and well-defined. No
other significance could be given to such acts that than that they were meant to finalize and
perfect the transaction. The parties even went beyond the basic requirements of the law by
stipulating that all expenses including the corresponding capital gains tax, cost of
documentary stamps are for the account of the vendors, and expenses for the registration of the
deed of sale in the Registry of Deeds are for the account of Adelfa Properties, Inc. Hence,
there was nothing left to be done except the performance of the respective obligations of the
parties.
Sales, 2003 ( 12 )
11.
No counter-ofer
The offer of Adelfa Properties to deduct P500,000.00, (later reduced to
P300,000.00) from the purchase price for the settlement of the civil case was not a counteroffer. There already existed a perfected contract between the parties at the time the alleged
counter-ofer was made. Thus, any new offer by a party becomes binding only when it is
accepted by the other. In the case of the Jimenezes, they actually refused to concur in said
offer of petitioner, by reason of which the original terms of the contract continued to be
enforceable. At any rate, the same cannot be considered a counter-offer for the simple
reason that Adelfa Properties sole purpose was to settle the civil case in order that it could
already comply with its obligation. In fact, it was even indicative of a desire by Adelfa
Properties to immediately comply therewith, except that it was being prevented from doing
so because of the filing of the civil case which, it believed in good faith, rendered
compliance improbable at that time. In addition, no inference can be drawn from that
suggestion given by Adelfa Properties that it was totally abandoning the original contract.
12.
Test to determine contract as a contract of sale or purchase or mere option

The test in determining whether a contract is a contract of sale or purchase or a
mere option is whether or not the agreement could be specifically enforced. There is no
doubt that Adelfas obligation to pay the purchase price is specific, definite and certain, and
consequently binding and enforceable. Had the Jimenezes chosen to enforce the contract, they
could have specifically compelled Adelfa to pay the balance of P2,806,150.00. This is distinctly
made manifest in the contract itself as an integral stipulation, compliance with which could
legally and definitely be demanded from petitioner as a consequence.
13.
Option agreement
An agreement is only an option when no obligation rests on the party to make any
payment except such as may be agreed on between the parties as consideration to support the
option until he has made up his mind within the time specified. An option, and not a contract
to purchase, is effected by an agreement to sell real estate for payments to be made within
specified time and providing for forfeiture of money paid upon failure to make payment,
where the purchaser does not agree to purchase, to make payment, or to bind himself in any
way other than the forfeiture of the payments made. This is not a case where no right is as yet
created nor an obligation declared, as where something further remains to be done before the
buyer and seller obligate themselves.
14.
Contract not an option contract; Balance

While there is jurisprudence to the effect that a contract which provides that the initial
payment shall be totally forfeited in case of default in payment is to be considered as an
option contract, the contract executed between the parties is an option contract, for the reason
that the parties were already contemplating the payment of the balance of the purchase
price, and were not merely quoting an agreed value for the property. The term balance,
connotes a remainder or something remaining from the original total sum already agreed
upon.
15.
When earnest money given in a contract of sale

Whenever earnest money is given in a contract of sale, it shall be considered as part of
the price and as proof of the perfection of the contract. It constitutes an advance payment and
must, therefore, be deducted from the total price. Also, earnest money is given by the buyer to
the seller to bind the bargain.
16.
Distinctions between earnest and option money
There are clear distinctions
between earnest money and option money, viz.: (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.
Sales, 2003 ( 13 )
17.
Article 1590, New Civil Code

Article 1590 of the Civil Code provides Should the vendee be disturbed in the
possession or ownership of the thing acquired, or should he have reasonable grounds to
fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend
the payment of the price until the vendor has caused the disturbance or danger to cease, unless
the latter gives security for the return of the price in a proper case, or it has been stipulated
that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A
mere act of trespass shall not authorize the suspension of the payment of the price. As the
agreement between the parties was not an option contract but a perfected contract to sell;
and therefore, Article 1590 would properly apply.
18.
Adelfa Properties justifed in suspending payment of balance by reason of
vindicatory action filed against it
In Civil Case 89-5541, it is easily discernible that, although the complaint prayed for
the annulment only of the contract of sale executed between Adelfa Properties and the Jimenez
brothers, the same likewise prayed for the recovery of therein Jimenez share in that parcel of
land specifically covered by TCT 309773. In other words, the Jimenezes were claiming to be
co-owners of the entire parcel of land described in TCT 309773, and not only of a portion
thereof nor did their claim pertain exclusively to the eastern half adjudicated to the
Jimenez brothers. Therefore, Adelfa Properties was justified in suspending payment of the
balance of the purchase price by reason of the aforesaid vindicatory action filed against it.
The assurance made by the Jimenezes that Adelfa Properties did not have to worry about the
case because it was pure and simple harassment is not the kind of guaranty contemplated
under the exceptive clause in Article 1590 wherein the vendor is bound to make payment
even with the existence of a vindicatory action if the vendee should give a security for the
return of the price.
19.
Jimenezes may no longer be compelled to sell and deliver subject property

Be that as it may, and the validity of the suspension of payment notwithstanding, the
Jimenezes may no longer be compelled to sell and deliver the subject property to Adelfa
Properties for two reasons, that is, Adelfas failure to duly effect the consignation of the
purchase price after the disturbance had ceased; and, secondarily, the fact that the contract to
sell had been validly rescinded by the Jimenezes.
20.
Tender and consignation required in discharge of obligation (eg. Contract to
sell); Diferent in cases involving exercise of right or privilege
The mere sending of a letter by the vendee expressing the intention to pay, without the
accompanying payment, is not considered a valid tender of payment. Besides, a mere tender of
payment is not sufficient to compel the Jimenezes to deliver the property and execute the deed
of absolute sale. It is consignation which is essential in order to extinguish Adelfa
Properties obligation to pay the balance of the purchase price. The rule is different in case of
an option contract or in legal redemption or in a sale with right to repurchase, wherein
consignation is not necessary because these cases involve an exercise of a right or privilege (to
buy, redeem or repurchase) rather than the discharge of an obligation, hence tender of
payment would be sufficient to preserve the right or privilege. This is because the provisions
on consignation are not applicable when there is no obligation to pay. A contract to sell
involves the performance of an obligation, not merely the exercise of a privilege or a right.
Consequently, performance or payment may be effected not by tender of payment alone but
by both tender and consignation.
21.
Adelfa no longer had right to suspend payment after dismissal of civil case against it
Adelfa Properties no longer had the right to suspend payment after the disturbance
ceased with the dismissal of the civil case filed against it. Necessarily, therefore, its obligation
to pay the balance again arose and resumed after it received notice of such dismissal.
Unfortunately, Adelfa failed to seasonably make payment, as in fact it has failed to do so up
to the present time, or even to deposit the money with the trial court when this case was
originally filed therein.
Sales, 2003 ( 14 )
22.
Rescission in a contract to sell

Article 1592 of the Civil Code which requires rescission either by judicial action or
notarial act is not applicable to a contract to sell. Furthermore, judicial action for rescission of
a contract is not necessary where the contract provides for automatic rescission in case of
breach, as in the contract involved in the present controversy. By Adelfas failure to comply
with its obligation, the Jimenezes elected to resort to and did announce the rescission of the
contract through its letter to Adelfa dated 27 July 1990. That written notice of rescission is
deemed sufficient under the circumstances.
23.
Resolution of reciprocal contracts may be made extrajudicially, unless impugned in
court
It was held in University of the Philippines vs. De los Angeles, etc. that the right to
rescind is not absolute, being ever subject to scrutiny and review by the proper court.
However, this rule applies to a situation where the extrajudicial rescission is contested by the
defaulting party. In other words, resolution of reciprocal contracts may be made extrajudicially
unless successfully impugned in court. If the debtor impugns the declaration, it shall be subject
to judicial determination. Otherwise, if said party does not oppose it, the extrajudicial
rescission shall have legal effect. In the present case, although Adelfa Properties was duly
furnished and did receive a written notice of rescission which specified the grounds therefore,
it failed to reply thereto or protest against it. Its silence thereon suggests an admission of
the veracity and validity of Jimenezes claim.
24.
Adelfa estopped
Furthermore, the initiative of instituting suit was transferred from the rescinder to the
defaulter by virtue of the automatic rescission clause in the contract. But then, aside from the
lackadaisical manner with which Adelfa Properties treated the Jimenezes letter of cancellation,
it utterly failed to seriously seek redress from the court for the enforcement of its alleged
rights under the contract. If the Jimenezes had not taken the initiative of filing Civil Case
7532, evidently Adelfa had no intention to take any legal action to compel specific
performance from the former. By such cavalier disregard, it has been effectively estopped
from seeking the affirmative relief it desires but which it had theretofore disdained.
[5]
Agricultural and Home Extension Development Group vs. CA [G.R. No. 92310.
September 3, 1992.] First Division, Cruz (J): 3 concurring
Facts: On 29 March 1972, the spouses Andres Diaz and Josefa Mia sold to Bruno Gundran a
19-hectare parcel of land in Las Pias, Rizal, covered by TCT 287416. The owners duplicate
copy of the title was turned over to Gundran. However, he did not register the Deed of
Absolute Sale because he said he was advised in the Office of the Register of Deeds of Pasig
of the existence of notices of lis pendens on the title. On 20 November 1972, Gundran and
Agricultural and Home Development Group (AHDG) entered into a Joint Venture Agreement
for the improvement and subdivision of the land. This agreement was also not annotated on the
title. On 30 August 1976, the spouses Andres Diaz and Josefa Mia again entered into another
contract of sale of the same property with Librado Cabautan. On 3 September 1976, by virtue
of an order of the CFI Rizal, a new owners copy of the certificate of title was issued to the
Diaz spouses, who had alleged the loss of their copy. On that same date, the notices of lis
pendens annotated on TCT 287416 were canceled and the Deed of Sale in favor of Cabautan
was recorded. A new TCT S-33850/T-172 was thereupon issued in his name in lieu of the
canceled TCT 287416.
On 14 March 1977, Gundran instituted an action for reconveyance before the CFI Pasay
City * against Librado Cabautan and Josefa Mia seeking, among others, the cancellation of
TCT 33850/T-172 and the issuance of a new certificate of title in his name. On 31 August
1977, AHDG, represented by Nicasio D. Sanchez, Sr. (later substituted by Milagros S. Bucu),
filed a complaint in intervention with substantially the same allegations and prayers as that in
Gundrans complaint. In a decision dated 12 January 1987, Gundrans
Sales, 2003 ( 15 )
complaint and petitioners complaint in intervention were dismissed for lack of merit. So
was Cabautans counterclaims, for insufficiency of evidence.
Upon appeal, this decision was affirmed by the Court of Appeals, with the modification that
Josefa Mia was ordered to pay Gundran the sum of P90,000.00, with legal interest from 3
September 1976, plus the costs of suit.
The Supreme Court denied the petition and affirmed in toto the questioned decision; with
costs against AHDG.
1.
Article 1544
Under Article 1544 of the Civil Code of the Philippines, it is provided that If the same
thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable
property. Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property. Should there be
no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided
there is good faith.
2.
Preferential right of first to register

The first sale to Gundran was not registered while the second sale to Cabautan was
registered. Preferential rights are accorded to Cabautan, who had registered the sale in his
favor, as against AHDGs co-venturer whose right to the same property had not been recorded.
3.
Purchaser in good faith

A purchaser in good faith is defined as one who buys the property of another
without notice that some other person has a right to or interest in such property and pays a full
and fair price for the same at the time of such purchase or before he has notice of the claim or
interest of some other person in the property. In the present case, an examination of TCT
287416 discloses no annotation of any sale, lien, encumbrance or adverse claim in favor of
Gundran or AHDC.
4.
Registered property under Torrens system; Person charge with notice of
burdens noted on the register of title
When the property sold is registered under the Torrens system, registration is the
operative act to convey or affect the land insofar as third persons are concerned. Thus, a person
dealing with registered land is only charged with notice of the burdens on the property which
are noted on the register or certificate of title.
5.
Notices of lis pendes not a lien or encumbrance, merely notice of litigation of
property subject to the result of the suit
Notices of lis pendens in favor of other persons were earlier inscribed on the title did
not have the effect of establishing a lien or encumbrance on the property affected. Their only
purpose was to give notice to third persons and to the whole world that any interest they
might acquire in the property pending litigation would be subject to the result of the suit.
6.
Cabautan a purchaser in good faith and for value

Cabautan took the risk of acquiring the property even in the light of notice of lis
pendens inscribed in the title. Significantly, three days after the execution of the deed of sale in
his favor, the notices of lis pendens were canceled by virtue of the orders of the CFI Rizal,
Branch 23, dated 1 and 4 April 1974. Cabautan therefore acquired the land free of any liens
or encumbrances and so could claim to be a purchaser in good faith and for value.
Sales, 2003 ( 16 )
7.
No evidence of alleged possession by AHDG

AHDG insists that it was already in possession of the disputed property when Cabautan
purchased it and that he could not have not known of that possession. Such knowledge should
belie his claim that he was an innocent purchaser for value. However, the courts below found
no evidence of the alleged possession, which the Supreme Court must also reject in deference
to this factual finding.
8.
Casis vs. CA not applicable; Different issues

The issue in the present case is whether Cabautan is an innocent purchaser for value and
so entitled to the priority granted under Article 1544 of the Civil Code. The Casis case, on the
other hand, involved the issues of whether or not: 1) certiorari was the proper remedy of the
petitioner: 2) the previous petition for certiorari which originated from the quieting of title
case was similar to and, hence, a bar to the petition for certiorari arising from the forcible
entry case; and 3) the court a quo committed grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing the order which dissolved the restraining order issued in
connection with the ejectment case. The Court was not called upon in that case to determine
who as between the two purchasers of the subject property should be preferred.
9.
Excerpt used by AHDG a narration of background facts and not adopted as a
doctrine by the Supreme Court
AHDG invokes the ruling of the lower court in that case to the effect that the
registration of the sale in favor of the second purchaser and the issuance of a new certificate
of title in his favor did not in any manner vest in him any right of possession and ownership
over the subject property because the seller, by reason of their prior sale, had already lost
whatever right or interest she might have had in the property at the time the second sale was
made. The excerpt was included in the ponencia only as part of the narration of the background
facts and was not thereby adopted as a doctrine of the Court. It was considered only for the
purpose of ascertaining if the court below had determined the issue of the possession of the
subject property pending resolution of the question of ownership. Obviously, the Court
could not have adopted that questionable ruling as it would clearly militate against the
provision of Article 1544.
10.
No one can sell what he does not own; Article 1544 either an exception to the
general rule or a reiteration of the general rule insofar as innocent third parties are
concerned
Justice Edgardo L. Paras observed that No one can sell what he does not own, but this is
merely the general rule. Is Art. 1544 then an exception to the general rule? In a sense,
yes, by reason of public convenience (See Aitken v. Lao, 36 Phil. 510); in still another sense, it
really reiterates the general rule in that insofar as innocent third persons are concerned, the
registered owner (in the case of real property) is still the owner, with power of disposition.
11.
Language of Article 1544 clear; Cabautan deemed owner

The language of Article 1544 is clear and unequivocal. In light of its mandate and
of the facts established in the present case, Ownership must be recognized in the private
respondent, who bought the property in good faith and, as an innocent purchaser for value,
duly and promptly registered the sale in his favor.
[6]
Almendra vs. IAC [G.R. No. 75111. November
21, 1991.] Third Division, Fernan (CJ): 4 concurring
Facts: The mother, Aleja Ceno, was first married to Juanso Yu Book with whom she had 3
children named Magdaleno, Melecia and Bernardina, all surnamed Ceno. Sometime in the
1920s, Juanso Yu Book took his family to China where he eventually died. Aleja and her
daughter Bernardina later returned to the Philippines. During said marriage, Aleja acquired a
parcel of land which she declared in her name under Tax Declaration
Sales, 2003 ( 17 )
11500. After Juanso Yu Books death, Bernardina filed against her mother a case for the
partition of the said property in the then CFI Leyte. On 17 August 1970, the lower court
rendered a supplemental decision finding that the said property had been subdivided into
Lots 6354 (13,738 sq.ms.), 6353 (16,604 sq.ms.), 6352 (23,868 sq.ms.) and 6366 (71,656
sq.ms.). The Court declared Bernardina Ojeda owner of and entitled to possession of Lot
6354; Ojeda as owner of and entitled to possession of Lot 6353 without prejudice to
whatever rights her sister Melecia Ceno (presently in China) may have over the property; Aleja
Almendra as owner of and entitled to possession of Lot 6366; and Aleja Almendra as owner of
and entitled to possession of Lot 6352, subject to whatever may be the rights thereto of her son
Magdaleno Ceno (presently in China). The Court ordered the parties to bear the fees of the
commissioner. Meanwhile, Aleja married Santiago Almendra with whom she had 4 children
named Margarito, Angeles, Roman and Delia. During said marriage Aleja and Santiago acquired
a 59,196-sq.ms. parcel of land in Cagbolo, Abuyog, Leyte. OCT 10094 was issued therefor in the
name of Santiago Almendra married to Aleja Ceno and it was declared for tax purposes in his
name. In addition to said properties, Aleja inherited from her father, Juan Geno, a 16,000-sq.ms.
parcel of land also in Cagbolo. For his part, her husband Santiago inherited from his mother,
Nicolasa Alvero, a 16-sq. ms. parcel of residential land located in Nalibunan, Abuyog, Leyte.
While Santiago was alive, he apportioned these properties among Alejas children in the
Philippines, including Bernardina, who, in turn, shared the produce of the properties with their
parents. After Santiagos death, Aleja sold to her daughter, Angeles Almendra, for P2,000 two
parcels of land in the deed of sale dated 10 August 1973 ( portion or conjugal share of land
[TD 22234, OCT 10094], and portion or conjugal share of land [TD 27190] both located
in Bo. Cagbolo, Abuyog, Leyte. On 26 December 1973, Aleja sold to her son, Roman
Almendra, also for P2,000 a parcel of land described in the deed of sale as located in Cagbolo,
Abuyog, Leyte under T/D 11500 which cancelled T/D 9635; having an area of 6.6181 hec.,
assessed at P1,580.00. On the same day, Aleja sold to Angeles and Roman again for P2,000 yet
another parcel of land described in the deed of sale (Lot 6352). Aleja died on 7 May 1975.
On 21 January 1977 Margarito, Delia and Bernardina (plaintiffs) filed a complaint against
Angeles and Roman for the annulment of the deeds of sale in their favor, partition of the
properties subjects therein and accounting of their produce. From China, their sister Melecia
signed a special power of attorney in favor of Bernardina. Magdaleno, who was still in China,
was impleaded as a defendant in the case and summons by publication was made on him.
Later, the plaintiffs informed the court that they had received a document in Chinese
characters which purportedly showed that Magdaleno had died. Said document, however, was
not produced in court. Thereafter, Magdaleno was considered as in default without prejudice to
the provisions of Section 4, Rule 18 of the Rules of Court which allows the court to decide a
case wherein there are several defendants upon the evidence submitted only by the answering
defendants. On 30 April 1981, the lower court rendered a decision declaring the deeds of sale
to be simulated and therefore null and void; ordering the partition of the estate of the
deceased Aleja Ceno among her heirs and assigns; appointing the Acting Clerk of Court, Atty.
Cristina T. Pontejos, as commissioner, for the purpose of said partition, who is expected to
proceed accordingly upon receipt of a copy of this decision; and to render her report on or
before 30 days from said receipt. The expenses of the commissioner shall be borne
proportionately by the parties.
The defendants appealed to the then Intermediate Appellate Court which, on 20 February
1986 rendered a decision upholding the validity of the deeds of sale and ordered the partition
of the undisposed properties left by Aleja and Santiago Almendra and, if an extrajudicial
partition can be had, that it be made within a reasonable period of time after receipt of its
decision. The plaintiffs filed their motion for reconsideration, which was denied. Hence, the
petition for review on certiorari.
The Supreme Court affirmed the decision of the then Intermediate Appellate Court
subject to the modifications stated in the present decision. The Court directed the lower court
to facilitate with dispatch the preparation and approval of a project of partition of the
properties considered unsold under the present decision.
Sales, 2003 ( 18 )
1.
No convincing reason to nullify deeds of sale; Testimony of the notary given more
credence There is no valid, legal and convincing reason for nullifying the questioned
deeds of sale. Petitioner
had not presented any strong, complete and conclusive proof to override the evidentiary
value of the duly notarized deeds of sale. Moreover, the testimony of the lawyer who notarized
the deeds of sale that he saw not only Aleja signing and affixing her thumbmark on the
questioned deeds but also Angeles and Aleja counting money between them, deserves more
credence than the self-serving allegations of the petitioners. Such testimony is admissible as
evidence without further proof of the due execution of the deeds in question and is conclusive
as to the truthfulness of their contents in the absence of clear and convincing evidence to
the contrary.
2.
No proof that price (P2,000) was grossly inadequate

The petitioners allegations that the deeds of sale were obtained through fraud, undue
influence and misrepresentation, and that there was a defect in the consent of Aleja in the
execution of the documents because she was then residing with Angeles, had not been fully
substantiated. They failed to show that the uniform price of P2,000 in all the sales was grossly
inadequate. It should be emphasized that the sales were effected between a mother and two of
her children in which case filial love must be taken into account.
3.
Defendants proved they have means to purchase the properties

Angeles and Roman amply proved that they had the means to purchase the
properties. Petitioner Margarito Almendra himself admitted that Angeles had a sari-sari store
and was engaged in the business of buying and selling logs. 20 Roman was a policeman before
he became an auto mechanic and his wife was a school teacher.
4.
Conjugal property; Aleja cannot claim title for definite portion of the conjugal
property before its partition
The 10 August 1973 sale to Angeles of one-half portion of the conjugal property covered
by OCT P-10094 may only be considered valid as a sale of Alejas one-half interest therein. Aleja
could not have sold the particular hilly portion specified in the deed of sale in the absence of
proof that the conjugal partnership property had been partitioned after the death of Santiago.
Before such partition, Aleja could not claim title to any definite portion of the property for all
she had was an ideal or abstract quota or proportionate share in the entire property.
5.
Paraphernal property; Sale valid

The sale of the one-half portion of the parcel of land covered by Tax Declaration
27190 is valid because the said property is paraphernal being Alejas inheritance from her own
father.
6.
Land subject to Civil Case 4387; Aleja could not have intended the sale of
whole property already subdivided
As regards the sale of the property covered by Tax Declaration 11500, since the
property had been found in Civil Case 4387 to have been subdivided, Aleja could not have
intended the sale of the whole property covered by said tax declaration. She could exercise her
right of ownership only over Lot 6366 which was unconditionally adjudicated to her in said
case.
7.
Caveat emptor on Lot 6352; Lot still subject to rights of Magdaleno Ceno
Lot 6352 was given to Aleja in Civil Case 4387 subject to whatever may be the rights
thereto of her son Magdaleno Ceno. A reading of the deed of Sale covering this parcel of
land would show that the sale is subject to the condition stated above; hence, the rights of
Magdaleno Ceno are amply protected. The role on caveat emptor applies.
[7]
Sales, 2003 ( 19 )
Ang Yu Asuncion, et.al. vs. CA [G.R. No. 109125.

December 2, 1994.] En Banc, Vitug (J): 11 concurring, 1 took
no part, 1 on leave
Facts: On 29 July 1987 a Second Amended Complaint for Specific Performance was filed
by Ann Yu Asuncion, Arthur Go, and Keh Tiong against Bobby Cu Unjieng, Rose Cu Unjieng
and Jose Tan before the RTC Manila (Branch 31, Civil Case 87-41058) alleging, among others,
that the former are tenants or lessees of residential and commercial spaces owned by the
latter described as 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 9 October 1986, the latter
informed the former 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 Ang Yu Asuncion, et.al. (plaintiffs) made a counter offer of P5-million; that plaintiffs
thereafter asked Bobby Cu Unjieng, Rose Cu Unjueng and Jose Tan (defendants) to put their
offer in writing to which request defendants acceded; that in reply to defendants letter,
plaintiffs wrote them on 24 October 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
28 January 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. 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.
Aggrieved by the decision, plaintiffs appealed to the Court of Appeals (CA-GR CV 21123). In
a decision promulgated on 21 September 1990 (penned by Justice Segundino G. Chua and
concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), the appellate court
affirmed with modification the lower courts judgment, holding that there was no meeting of
the minds between the parties concerning the sale of the property and thus, the claim for
specific performance will not lie. The appellate did not grant the appellants the right of
first refusal in the event the subject property is sold for a price in excess of P11 million.
The decision of the appellate court was brought to the Supreme Court by petition for review on
certiorari. The Supreme Court denied the appeal on 6 May 1991 for insufficiency in form and
substances.
On 15 November 1990, while CA-GR CV 21123 was pending consideration by the appellate
court, the Cu Unjieng spouses executed a Deed of Sale transferring the property in
question to Buen Realty and Development Corporation for P15 million. As a consequence of
the sale, TCT 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu
thereof, TCT 195816 was issued in the name of Buen Realty on 3 December 1990. On 1 July
1991, Buen Realty as the new owner of the subject property wrote a letter to the lessees
demanding that the latter vacate the premises. On 16 July 1991, the lessees wrote a reply to
Buen Realty stating that petitioner brought the property subject to the notice of lis pendens
regarding Civil Case 87-41058 annotated on TCT 105254/T-881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated 27 August 1991 of the Decision in Civil Case
87-41058 as modified by the Court of Appeals in CA-GR CV 21123. On 30 August 1991, the
Judge issued an order ordering Cu Unkieng 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 the latters right of first refusal and that
a new TCT be issued in favor of the buyer, and thus, setting aside all previous transactions
involving the same property notwithstanding the issuance of another title to Buen Realty
Corporation, which was said to have been executed in bad faith. On 22 September 1991, the
Judge issue another order directing the Deputy Sheriff to implement the Writ of Execution
ordering the defendants among
Sales, 2003 ( 20 )
others to comply with the Order of the Court within a period of 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. On the same day, the
corresponding writ of execution was issued.
On 4 December 1991, the appellate court, on appeal to it by Buen Realty (CA-GR SP 26345),
set aside and declared without force and effect the questioned orders of the court a quo. Hence,
the petition for certiorari.
The Supreme Court upheld the decision of the Court of Appeals in ultimately setting aside
the questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a quo;
with costs against Ang Yu Asuncion, et. al.
1.
Obligation defned
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code).
2.
Obligation, elements
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, quasi-contracts, 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.
3.
Contract as a source of obligation

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). Until the contract is
perfected, it cannot, as an independent source of obligation, serve as a binding juridical
relation.
4.
Various stages of a contract: Negotiation, preparation, and consummation

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 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 consummation begins when the
parties perform their respective undertakings under the contract culminating in the
extinguishment thereof.
5.
Perfection of a contract of sale

In sales, 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 that 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.
Sales, 2003 ( 21 )
6.
Contract to sell is conditional; Efect of breach of condition

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.
7.
Stipulations govern over title in determining contract to be a contract of sale or

contract to sell In Dignos vs. Court of Appeals (158 SCRA 375), 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. 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).
8.
Unconditional mutual promise to buy and sell obligatory on the parties

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.
9.
Perfected contract of option

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, which
provides that 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)
10.
Option not the contract of sale itself

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.
11.
Ofer
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).
12.
Ofer with a period; Efects of withdrawal

(1)
If the period is not itself founded upon or supported by a consideration, the
offeror is still free and has the right to withdrawal 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 (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,
Sales, 2003 ( 22 )
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).
13.
Right of first refusal innovative; neither an option nor an ofer

In the law on sales, the so-called right of first refusal is an innovative juridical
relation. 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, or possibly of
an offer under Article 1319 of the same Code.
14.
Distinction of right of first refusal to an option or to an ofer

An option or an offer would require, among other things, 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 grantors 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.
15.
Breach of right of first refusal does not warrant issuance of a writ of execution
nor sanction an action for specific performance; may only warrant recovery for
damages under Article 19 of the Civil Code
Even on the premise that such right of first refusal has been decreed under a final
judgment, 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. It is not to say, however, that the right of first refusal would be
inconsequential for an unjustified disregard thereof, the circumstances expressed in Article 19
of the Civil Code, can warrant a recovery for damages. In the present case, 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.
16.
Issue on Buen Realtys good faith should be addressed in appropriate
proceedings, as Buen Realty was not impleaded in Civil Case 87-41058
Whether 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 87-41058 are
matters that must be independently addressed in appropriate proceedings. Buen Realty, not
having been impleaded in Civil Case 87-41058, cannot be held subject to the writ of
execution issued, let alone ousted from the ownership and possession of the property, without
first being duly afforded its day in court.
17.
Decision in Civil Case 87-41058 could have not been decreed

Sales, 2003 ( 23 )
The decision in Civil Case 87-41058 could not have decreed at the time the execution of
any deed of sale between the Cu Unjiengs and Buen Realty. There was nothing in the
decision, as modified by the appellate court, that decreed the execution of a deed of sale
between the Cu Unjiengs and the lessees, or the fixing of the price of the sale, or the
cancellation of title in the name of Buen Realty (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).
[8]
Angeles vs. Calasanz [G.R. No. L-42283. March
18, 1985.] En Banc, Gutierrez Jr. (J): 5 concurring, 1
took no part
Facts: On 19 December 1957, Ursula Torres Calasanz and Tomas Calasanz and Buenaventura
Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta,
Rizal for the amount of P3,920.00 plus 7% interest per annum. Angeles made a downpayment
of P392.00 upon the execution of the contract. They promised to pay the balance in monthly
installments of P41.20 until fully paid, the installments being due and payable on the 19th day
of each month. They paid the monthly installments until July 1966, when their aggregate
payment already amounted to P4,533.38. On numerous occasions, Calasanz accepted and
received delayed installment payments from Angeles. On 7 December 1966, Calasanz wrote
Angeles a letter requesting the remittance of past due accounts. On 28 January 1967,
Calasanz cancelled the said contract because Angeles failed to meet subsequent
payments. Angeles letter with their plea for reconsideration of the said cancellation was
denied by Calasanz.
Angeles filed Civil Case 8943 with the CFI Rizal, Seventh Judicial District, Branch X to compel
Calasanz to execute in their favor the final deed of sale alleging inter alia that after computing
all subsequent payments for the land in question, they found out that they have already paid
the total amount of P4,533.38 including interests, realty taxes and incidental expenses for
the registration and transfer of the land. Calasanz, on the other hand, alleged that the
complaint states no cause of action and that Angeles violated paragraph 6 of the contract to
sell when they failed and refused to pay and/or offer to pay the monthly installments
corresponding to the month of August, 1966 for more than 5 months, thereby constraining
Calasanz to cancel the said contract. The lower court rendered judgment in favor of Angeles,
ordering that the contract was not validly cancelled by Calasanz, and ordered the latter to
execute a final Deed of Sale In favor of Angeles, and to pay the sum of P500 by way of
attorneys fees; with costs against Calasanz. A motion for reconsideration filed by Calasanz was
denied.
On Appeal, the then Court of Appeals certified the case to the Supreme Court considering
that the appeal involves pure questions of law.
The Supreme Court denied the petition for lack of merit, affirmed the decision appealed
from is with the modification that Angeles should pay the balance of P671.67 without any
interests; with costs against Calasanz.
1.
Contents of Paragraph 6 of the Contract

Paragraph six of the contract provides In case the party of the SECOND PART fails to
satisfy any monthly installments, or any other payments herein agreed upon, he is granted a
month of grace within which to make the retarded payment, together with the one
corresponding to the said month of grace; it is understood, however, that should the
month of grace herein granted to the party of the SECOND PART expired; without the
payments corresponding to both months having been satisfied, an interest of 10% per annum
will be charged on the amounts he should have paid; it is understood further, that should a
period of 90 days elapse, to begin from the expiration of the month of grace herein mentioned,
and the party of SECOND PART has not paid all the amounts he should have paid with the
corresponding interest up to that date, the
Sales, 2003 ( 24 )
party of the FIRST PART has the right to declare this contract cancelled and of no effect, and as
consequence thereof, the party of the FIRST PART may dispose of the parcel of land covered
by this contract in favor of other persons, as if this contract had never been entered into. In
case of such cancellation of the contract, all the amounts paid in accordance with this
agreement together with all the improvements made on the premises, shall be considered
as rents paid for the use and occupation of the above mentioned premises, and as payment for
the damages suffered by failure of the party of the SECOND PART to fulfill his part of the
agreement, and the party of the SECOND PART hereby renounces all his right to demand or
reclaim the return of the same and obliges himself to peacefully vacate the premises and
deliver the same to the party of the FIRST PART.
2.
Article 1191 of the Civil Code; Rescission of reciprocal obligations

Article 1191 of the Civil Code on the rescission of reciprocal obligations
provides:The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him. The injured party may
choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the
later should become impossible. Article 1191 is explicit. In reciprocal obligations, either
party has the right to rescind the contract upon the failure of the other to perform the
obligation assumed thereunder.
3.
Judicial action for rescission not necessary where contract provides for
revocation for breach; Froilan vs. Pan Oriental Shipping
There is nothing in the law that prohibits the parties from entering into an agreement
that violation of the terms of the contract would cause its cancellation even without court
intervention (Froilan v. Pan Oriental Shipping, Co., et al., 12 SCRA 276). A judicial action for
the rescission of a contract is not necessary where the contract provides that it may be revoked
and cancelled for violation of any of its terms and conditions (Lopez v. Commissioner of
Customs, 37 SCRA 327, 334, and cases cited therein). Resort to judicial action for rescission is
obviously not contemplated . . . The validity of the stipulation can not be seriously disputed. It
is in the nature of a facultative resolutory condition which in many cases has been upheld by
the Supreme Court. (Ponce Enrile v. Court of Appeals, 29 SCRA 504).
4.
UP vs. delos Angeles: Qualifcation to the Froilan ruling; Rescission must be
justifed
The rule that it is not always necessary for the injured party to resort to court for
rescission of the contract when the contract itself provides that it may be rescinded for
violation of its terms and conditions, was qualified by the Court in University of the
Philippines v. De los Angeles, (35 SCRA 102). It was held therein that the act of a party in
treating a contract as cancelled or resolved on account of infractions by the other contracting
party must be made known to the other and is always provisional, being ever subject to
scrutiny and review by the proper court. If the other party denies that rescission is justified, it
is free to resort to judicial action in its own behalf, and bring the matter to court. Then,
should the court, after due hearing, decide that the resolution of the contract was not
warranted, the responsible party will be sentenced to damages; in the contrary case, the
resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced.
Thus, the party who deems the contract violated many consider it resolved or rescinded, and act
accordingly, without previous court action, but it proceeds at its own risk. For it is only the
final judgment of the corresponding court that will conclusively and finally settle whether
the action taken was or was not correct in law . . .
5.
Extrajudicial resolution remains contestable and thus subject to judicial
invalidation, unless barred by acquiescence, estoppel or prescription

There is no conflict between this ruling and the previous jurisprudence of the Court
declaring that judicial action is necessary for the resolution of a reciprocal obligation; (Ocejo,
Perez & Co. v. International Banking Corp., 37 Phil. 631; Republic v. Hospital de San Juan de
Dios, et al., 84 Phil. 820) since in every case where the extrajudicial resolution is contested
only the final award of the court of competent jurisdiction
Sales, 2003 ( 25 )
can conclusively settle whether the resolution was proper or not. It is in this sense that judicial
action will be necessary, as without it, the extrajudicial resolution will remain
contestable and subject to judicial invalidation, unless attack thereon should become barred
by acquiescence, estoppel or prescription.
6.
Right to rescind contract for non-performance of stipulations not absolute;
Universal Food Corp. vs. CA
The right to rescind the contract for non-performance of one of its stipulations is not
absolute. In Universal Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated that
the general rule is that rescission of a contract will not be permitted for a slight or casual
breach, but only for such substantial and fundamental breach as would defeat the very object
of the parties in making the agreement. (Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil.
821, 827) The question of whether a breach of a contract is substantial depends upon the
attendant circumstances. (Corpus v. Hon. Alikpala, et al., L-23707 & L-23720, Jan. 17,
1968).
7.
Breach too slight; Sanctioning the rescission will do injustice, leads to unjust
enrichment
The breach of the contract adverted to by Calasanz is so slight and casual considering
that apart from the initial downpayment of P392.00 Angeles had already paid the monthly
installments for a period of almost 9 years. In other words, in only a short time, the entire
obligation would have been paid. Furthermore, although the principal obligation was only
P3,920.00 excluding the 7% interests, Angeles had already paid an aggregate amount of
P4,533.38. To sanction the rescission made by Calasanz will work injustice to Angeles. (See J.M.
Tuazon and Co., Inc. v. Javier, 31 SCRA 829) It would unjustly enrich Calasanz.
8.
Article 1234 of the Civil Code; Substantial performance

Article 1234 of the Civil Code which provides that: If the obligation has been
substantially performed in good faith, the obligor may recover as though there had been a
strict and complete fulfillment, less damages suffered by the obligee.
9.
Purpose of subdivisions
Although the primary object of selling subdivided lots is business, yet, it cannot be
denied that this subdivision is likewise purposely done to afford those landless, low income
group people of realizing their dream of a little parcel of land which they can really call their
own.
10.
Acceptance of delayed payments of installments, a waiver; Sellers estopped
from exercising right of rescission
When Calasanz, instead of availing of their alleged right to rescind, have accepted
and received delayed payments of installments, though Angeles have been in arrears beyond the
grace period mentioned in paragraph 6 of the contract, Calasanz has waived and is now
estopped from exercising her alleged right of rescission.
11.
De Guzman vs. Guieb in point

In De Guzman v. Guieb (48 SCRA 68), the Court held therein that In spite of the long
arrearages, neither they nor their predecessor, Teodoro de Guzman, even took steps to cancel
the option or to eject the appellees from the home-lot in question. On the contrary, it is
admitted that the delayed payments were received without protest or qualification. Under
these circumstances, the Court cannot but agree with the lower court that at the time
appellees exercised their option, appellants had already forfeited their right to invoke the
above-quoted provision regarding the nullifying effect of the non-payment of six months
rentals by appellees by their having accepted without qualification on July 21, 1964 the full
payment by appellees of all their arrearages.

12.
Present contract to sell has characteristics of contract of adhesion

The contract to sell entered into by the parties has some characteristics of a contract of
adhesion.
Sales, 2003 ( 26 )
Calasanz drafted and prepared the contract; while Angeles, eager to acquire a lot upon which to
build a home, affixed their signatures and assented to the terms and conditions of the contract.
They had no opportunity to question nor change any of the terms of the agreement. It was
offered to them on a take it or leave it basis.
13.
Contract of adhesion; Sweet Lines vs. Teves

In Sweet Lines, Inc. v. Teves (83 SCRA 361), the Court held that while generally,
stipulations in a contract come about after deliberate drafting by the parties thereto, .. there are
certain contracts almost all the provisions of which have been drafted only by one party,
usually a corporation. Such contracts are called contracts of adhesion, because the only
participation of the party is the signing of his signature or his `adhesion thereto. Insurance
contracts, bills of lading, contracts of sale of lots on the installment plan fall into this
category. (Paras, Civil Code of the Philippines, Seventh ed., Vol. I, p. 80.)
14.
Construction of a contract of adhesion

The contract to sell, being a contract of adhesion, must be construed against the party
causing it. The terms of a contract must be interpreted against the party who drafted the
same, especially where such interpretation will help effect justice to buyers who, after
having invested a big amount of money, are now sought to be deprived of the same thru
the prayed application of a contract clever in its phraseology, condemnable in its
lopsidedness and injurious in its effect which, in essence, and in its entirety is most unfair to
the buyers.
[9]
Azcona vs. Reyes [G.R. No. 39590. February
6, 1934.] Second Division, Villa-Real (J): 4
concurring
Facts: On 11 October 1920, Florentina Cordero, now deceased, executed a power of attorney
authorizing her only daughter, Alberta L. Reyes, to mortgage in her name and representation
all her land situated in the municipality of Pola, Mindoro. On 22 October 1920, Reyes,
personally and as attorney in fact of her mother Florentina Cordero, in consideration of the
sum of P6,500 received from Enrique Azcona, now deceased, sold to the latter, with the right of
repurchase within the period of 4 years, 5 parcels of land with certificates of title belonging to
her and Cordero. The vendors became lessees of the property sold, at a yearly rental of P780. On
23 October 1920, Reyes, as attorney in fact of Cordero, in consideration of the sum of P5,000
received from Azcona, sold to the latter, with the right of repurchase within the period of 4
years, a parcel of land with certificate of title 58 of the registry of deeds of Mindoro,
belonging to Cordero. Cordero became the lessee of said property at a yearly rental of P600. On
1 October 1925, Reyes and Cordero jointly executed a power of attorney authorizing Gregorio
Venturanza to sell and encumber all their real and personal including their cattle. Azcona
died on 12 May 1925, and was succeeded in all his rights by his only son, Jesus Azcona, to
whom the entire estate of his deceased father, together with the credits, was judicially
adjudicated.
Inasmuch as neither Reyes nor Cordero, during her lifetime, had exercised her right of
redemption within the period of4 years, and inasmuch as they had asked for an extension of
time, on 29 November 1926, Gregorio Venturanza, as attorney in fact of Reyes and Cordero, on
one side, and Jesus Azcona, on the other, executed a deed whereby the deeds of sale with the
right of repurchase dated October 22 and 23, 1920, respectively, were cancelled and their
respective amounts of P6,500 and P5,000, together with the sum of P1,000 representing the
unpaid accrued interest thereon, or a total amount of P12,500, were converted into a mortgage
credit. In order to secure the cancellation of the registration of the alleged sales with the right
of repurchase, the parcels of land described in the respective deeds were resold to the vendors
and a mortgage was constituted thereon to secure the payment of said mortgage credit of
P12,500 within the period of 2 years, extensible to another two years, with interest at 12% per
annum. Under said contract the mortgagors Reyes and Cordero were permitted to liquidate said
debt by installments in the sum of P2,500 with the interest due, to be paid on December 1 of
every year, beginning in 1927. Reyes and Cordero, through Venturanza, paid by way of
amortization and
Sales, 2003 ( 27 )
interest (P2,500 on 15 February 1927, P2,200 on 17 October 1927, P1,200 on 9 February 1929,
P350 on 30 June 1929, and P600 on 20 September 1929; leaving a balance of P8,935.12). Since
the last mentioned date, the mortgagors failed to pay amortization and interest so that on 30
June 1932, the unpaid balance thereof together with the unpaid accrued interest amounted to
P11,958.05.
<The facts do not provide the manner on how the issue was raised in the CFI Mindoro>. The
parties (Jesus Azcona, on one hand; and Alberta Reyes and Gervasio Larracas as special
administrator of the estate of Florentina Cordero, on the other) admit and the trial court so
found that, although the instruments are in the form of deeds of sale with pacto de retro, in
reality they represent mortgage loans. The CFI ordered Reyes, as administratix of Corderos
estate, to pay Azcona the um of P11,985.05 with 12% interest until fully paid, 10$ of the sum
representing expenses and attorneys fees, and P2 as fees for the registration of the mortgage
deed. The court also ordered that in case Reyes fails to pay the sums within 90 days from
final judgment, the parcels of land shall be sold at public auction and the proceeds thereof
applied to the payment of the sum and the balance delivered to Reyes. Reyes and Larracas
appealed separately.
The Supreme Court found no error in the judgment appealed from, and thus affirmed it in toto,
with the costs against Reyes and Larracas.
1.
Deeds of sale are not true deeds of pacto de retro sale but of mortgage; Resale
mere formality to cancellation of registration and the notation of the mortgage deed
The instruments are not true deeds of sale with pacto de retro but of mortgage, the
resale of the parcels of land, made by Jesus Azcona in favor of Reyes and Cordero, is null and
void on the ground that, as mere mortgagors, they never ceased to be the owners thereof and
that Enrique Azcona, as a mere mortgagee, never acquired any title of ownership thereto. In
order for a sale to be valid, it is necessary that the vendor be the owner of the thing sold,
inasmuch as it is a principle of law that nobody can dispose of that which does not belong to
him. However, the sales with pacto de retro were fictitious for the reason that the contracts
entered into by Reyes and the deceased Enrique Azcona were really mortgage in their nature.
Therefore, the resale was a mere formality resorted to for the purpose of obtaining the lawful
cancellation of the registration thereof in the registry of deeds and the notation of the mortgage
deed.
2.
Mortgage deed not void, does not lack consideration or principal obligation
which it purports to secure
Reyes received the sum of P6,500 and another sum of P5,000 from the deceased
Enrique Azcona, both sums representing the purchase price of certain parcels of land, which
were sold with the right of repurchase. The sum of P12,500 which constitutes the cause or
consideration of the deed of resale and mortgage Exhibit A is the total of the sums of P6,500
and P5,000 which Reyes, personally and as attorney in fact of Cordero, received from Enrique
Azcona, together with the sum of P1,000 representing the unpaid credits passed by
inheritance to Jesus Azcona. It cannot be said that the mortgage, executed by Venturanza, as
attorney in fact of Reyes and Cordero, in favor of Jesus Azcona, lacks consideration or
principal obligation for the fulfillment of which said instrument was executed as security.
3.
Contracts of mortgage loans executed in form (attachment of SPA), binds Cordero

Upon examination of said documents, Reyes made it appear that she acted as
Florentina Corderos attorney in fact under a power of attorney issued to her by attaching a
copy of said power of attorney to the deed in question. In the case of Orden de Dominicos vs.
De Coster (50 Phil., 115), the Court held that such form is valid and sufficient under the law.
Considered as mere contracts of mortgage loans, the deeds dated 22-23 October 1920 are
binding upon Cordero, and compliance with the obligations contracted thereunder may be
demanded in her intestate proceedings either as credit in favor of the intestate estate of
Enrique Azcona or as credit in favor of Jesus Azcona against Cordero under the mortgage deed.
4.
No statement of facts of alleged usury

Sales, 2003 ( 28 )
In regard to the question of usury raised, although it is true that failure to file a sworn
answer to a cross-complaint for the recovery of usurious interest paid implies an admission of
the existence of a usurious rate of interest (Lo Bun Chay vs. Paulino, 54 Phil., 144, cited with
approval in the case of Ramirez and Polido vs. Bergado, 56 Phil., 810), however, the
counterclaim and cross-complaint filed in the present case failed to state facts constituting the
alleged usury but merely allege that in payment of a debt of P9,500 Azcona and his predecessor
in interest received the amount of P20,130. Such statement does not in itself constitute an
allegation of usury and failure to file a reply thereto implies denial of such allegation (Sec.
104, Act No. 190).
5.
Existence of usurious interest not proven; 12% per annum stipulated,
Charging compound interest does not make loan usurious
The existence of usurious interest has not been proven during the trial inasmuch as it is
stipulated that the vendors, as lessees, would have to pay the sum of P1,380 as yearly rental.
Such sum, computed on the basis of a capital of P11,500 gives a rate of interest of only
12% per annum, which is allowed by law (Robinson vs. Sackermann and Postal Savings Bank,
46 Phil., 539). Furthermore, in the deed of resale and mortgage loan, interest at the rate of
only 12% per annum is stipulated. The existence of a stipulation to the effect that accrued
interest shall bear interest does not imply that the loans in question are usurious inasmuch as it
is permitted to charge compound interest (sec. 5, Act No. 2655, as amended by sec. 3 of Act
No. 3291; Cu Unjieng e Hijos vs. Mabalacat Sugar Co., 54 Phil., 976).
[10]
Aznar vs. Yapdiangco [G.R. No. L-18536. March
31, 1965.] En Banc, Regala (J): 10 concurring
Facts: In May 1959, Teodoro Santos advertised in two metropolitan papers the sale of his Ford
Fairlane 500. In the afternoon of 28 May 1959, a certain L. De Dios, claiming to be a nephew
of Vicente Marella, went to the Santos residence to answer the ad. However, Teodoro was out
during this call and only the latters son, Irineo received and talked with De Dios. The latter
told the young Santos that he had come in behalf of his uncle, Marella, who was interested to
buy the advertised car. On being informed of the above, Teodoro instructed his son to see
Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And
so, in the morning of 29 May 1959, Irineo went to said address. At this meeting, Marella agreed
to buy the car for P14,700.00 on the understanding that the price would be paid only after the
car had been registered in his name. Irineo then fetched his father who, together with De
Dios, went to the office of a certain Atty. Jose Padolina where the deed of sale for the car was
executed in Marellas favor. The parties to the contract thereafter proceeded to the Motor
Vehicles Office in Quezon City where the registration of the car in Marellas name was
effected. Up to that stage of the transaction, the purchase price had not been paid. From the
Motor Vehicles Office, Teodoro returned to his house. He gave the registration papers and a
copy of the deed of sale to his son and instructed him not to part with them until Marella
shall have given the full payment for the car. Irineo and De Dios then proceeded to 1642
Crisostomo Street, Sampaloc in Manila where the former demanded for the payment from
Marella. Marella said that the amount he had on hand then was short by some P2,000.00 and
begged off to be allowed to secure the shortage from a sister supposedly living somewhere in
Azcarraga Street, also in Manila. Thereafter, he ordered De Dios to go to the said sister and
suggested that Irineo to go with him. At the same time, he requested for the registration
papers and the deed of sale from Ireneo on the pretext that he would like to show them to his
lawyers. Trusting the good faith of Marella, Ireneo handed over the same to the latter and
thereupon, in the company of De Dios and another unidentified person, proceeded to the
alleged house of Marellas sister. At a place in Azcarraga, Irineo and De Dios alighted from the
car and entered a house, while their unidentified companion remained in the car. Once inside,
De Dios asked Irineo to wait at the sala while he went inside a room. That was the last that
Ireneo saw of him. For, after a considerable length of time waiting in vain for De Dios to
return, Ireneo went down to discover that neither the car nor their unidentified companion was
there anymore. Going back to the house, he inquired from a woman he saw for De Dios and
he was told that no such name lived or was even known
Sales, 2003 ( 29 )
therein. Whereupon, Ireneo rushed to 1642 Crisostomo to see Marella. He found the house
closed and Marella gone. Finally, he reported the matter to his father who promptly advised the
police authorities. That very same day, Marella was able to sell the car in question to Jose
B. Aznar, for P15,000.00. Aznar acquired the said car from Marella in good faith, for a valuable
consideration and without notice of the defect appertaining to the vendors title. While the car
was thus in the possession of Aznar and while he was attending to its registration in his name,
agents of the Philippine Constabulary seized and confiscated the same in consequence of the
report to them by Teodoro that the said car was unlawfully taken from him.
Aznar filed a complaint for replevin before the CFI Quezon City (Branch IV) against
Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized the car.
Claiming ownership of the vehicle, he prayed for its delivery to him. In the course of the
litigation, however, Teodoro Santos moved and was allowed to intervene by the lower court.
At the end of the trial, the lower court rendered a decision awarding the disputed motor
vehicle to Santos. From the decision, Aznar appealed.
The Supreme Court dismissed the appeal and affirmed the decision of the lower court in
full; with costs against Aznar.
1.
Article 559 of the Civil Code; Santos entitled to recovery of personal property
Santos had been unlawfully deprived of his personal property by Marella, from whom
Aznar traces his right. Consequently, although Aznar acquired the car in good faith and for a
valuable consideration from Marella, the said decision concluded, still Santos was entitled to its
recovery on the mandate of Article 559 of the New Civil Code which provides: The
possession of movable property acquired in good faith is equivalent to title. Nevertheless,
one who has lost any movable or has been unlawfully deprived thereof, may recover it from the
person in possession of the same. If the possessor of a movable lost or of which the owner has
been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain
its return without reimbursing the price paid therefor. Under Article 559, the rule is to the
effect that if the owner has lost the thing, or if he has been unlawfully deprived of it, he has a
right to recover it, not only from the finder, thief or robber, but also from the third person who
may have acquired it in good faith from such finder, thief or robber.
2.
Sellers title, voidable at least, essential in Article 1506; Article 559 applies
Article 1506 provides: Where the seller of goods has a voidable title thereto, but his
title has not been voided at the time of the sale, the buyer acquires a good title to the goods,
provided he buys them in good faith, for value, and without notice of the sellers defect of
title. Under the provision, it is essential that the seller should have a voidable title at least. It
is very clearly inapplicable where the seller had no title at all.
3.
Ownership or title acquired only by tradition or delivery; Article 712 of the Civil
Code
Under Article 712 of the Civil Code, ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition. As interpreted by this Court in a host of cases,
by this provision, ownership is not transferred by contract merely but by tradition or
delivery. Contracts only constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of accomplishing the same. (Gonzales vs.
Rojas, 16 Phil. 51; Ocejo, Perez and Co. vs. International Bank, 37 Phil. 631; Fidelity and
Deposit Co. vs. Wilson, 8 Phil. 51; Kuenzle & Streiff vs. Wacke & Chandler, 14 Phil. 610;
Easton vs. Diaz & Co., 32 Phil. 180). For the legal acquisition and transfer of ownership and
other property rights, the thing transferred must be delivered, inasmuch as, according to
settled jurisprudence the tradition of the thing is a necessary and indispensable requisite in
the acquisition of said ownership by virtue of a contract. (Walter Easton vs. E. Diaz & Co. &
the Provincial Sheriff of Albay, supra.) So long as property is not delivered, the ownership over
it is not transferred by contract merely but by delivery. Contracts only constitute titles or
rights to the transfer or acquisition of ownership, while delivery or tradition is the method of
accomplishing the same, the title and the method of acquiring it being different in our law.
(Gonzales vs. Rojas, 16 Phil. 51) In the present case, the
Sales, 2003 ( 30 )
car was never delivered to the vendee by the vendor as to complete or consummate the transfer
of ownership by virtue of the contract. It should be recalled that while there was indeed a
contract of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took
possession of the subject matter thereof by stealing the same while it was in the custody of the
latters son.
4.
Delivery of key not delivery contemplated by Article 712; Intent must be present
There is no adequate evidence on record as to whether Irineo Santos voluntarily
delivered the key to the car to the unidentified person who went with him and L. De Dios to
the place in Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it
was not the delivery contemplated by Article 712 of the Civil Code. For then, it would be
indisputable that he turned it over to the unidentified companion only so that he may drive
Irineo Santos and De Dios to the said place in Azcarraga and not vest the title to the said vehicle
to him as agent of Vicente Marella. Article 712 above contemplates that the act be coupled
with the intent of delivering the thing. (10 Manresa 132)
5.
Article 559 establishes exception to the general rule or irrevindicability

Article 559 establishes two exceptions to the general rule of irrevindicability to wit:
when the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these
cases, the possessor cannot retain the thing as against the owner, who may recover it without
paying any indemnity, except when the possessor acquired it in a public sale. (Del Rosario vs.
Lucena, 8 Phil. 535; Varela vs. Finnick, 9 Phil. 482; Varela vs. Matute, 9 Phil. 479; Arenas vs.
Raymundo, 19 Phil. 46. Tolentino, id., Vol II, p. 261.)
6.
Cruz vs. Pahati on Article 559

In the case of Cruz vs. Pahati, et al., 52 OG 3053, the Court ruled that Under Article 559
of the new Civil Code, a Person illegally deprived of any movable may recover it from the
person in possession of the same and the only defense the latter may have is if he has acquired
it in good faith at a public sale, in which case, the owner cannot obtain its return without
reimbursing the price paid therefor. In the present case, plaintiff has been illegally deprived
of his car through the ingenious scheme of defendant B to enable the latter to dispose of it as
if he were the owner thereof. Plaintiff, therefore, can still recover possession of the car even if
it is in the possession of a third party who had acquired it in good faith from defendant B. The
maxim that no man can transfer to another a better title than he has himself obtains in the
civil as well as in the common law. (U.S. vs. Sootelo, 28 Phil. 147)
7.
Common law principle yields to statutory provision

The right of the owner to recover personal property acquired in good faith by another, is
based on his being dispossessed without his consent. The common law principle that where one
of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss
upon the party who, by his misplaced confidence, has enabled the fraud to be committed,
cannot be applied in a case which is covered by an express provision of the new Civil Code,
specifically Article 559. Between a common law principle and a statutory provision, the latter
must prevail in this jurisdiction. (Cruz vs. Pahati, supra).
[11]
Babasa vs. CA [G.R. No. 124045. May 21,
1998.] First Division, Bellosillo (J): 4
concurring
Facts: On 11 April 1981 a contract of Conditional Sale of Registered Lands was executed
between the spouses Vivencio and Elena Babasa as vendors and Tabangao Realty Inc. (Tabangao)
as vendee over 3 parcels of land, Lots 17827-A, 17827-B and 17827-C, situated in Brgy. Libjo,
Batangas City. Since the certificates of title over the lots were in the name of third persons
who had already executed deeds of reconveyance and disclaimer in favor of the Babasas, it was
agreed that the total purchase price of P2,121,920.00 would be paid in the following manner:
P300,000.00 upon signing of the contract, and P1,821,920.00 upon presentation by
Sales, 2003 ( 31 )
the Babasas of transfer certificates of titles in their name, free from all liens and
encumbrances, and delivery of registerable documents of sale in favor of Tabangao within 20
months from the signing of the contract. In the meantime, the retained balance of the purchase
price would earn interest at 17% per annum or P20,648.43 monthly payable to the Babasas
until 31 December 1982. It was expressly stipulated that Tabangao would have the absolute
and unconditional right to take immediate possession of the lots as well as introduce any
improvements thereon. On 18 May 1981 Tabangao leased the lots to Shell Gas Philippines,
Inc. (SHELL), which immediately started the construction thereon of a Liquefied Petroleum
Gas Terminal Project, an approved zone export enterprise of the Export Processing Zone.
Tabangao is the real estate arm of SHELL. The parties substantially complied with the terms
of the contract. Tabangao paid the first installment of P300,000.00 to the Babasas while the
latter delivered actual possession of the lots to the former. In addition, Tabangao paid
P379,625.00 to the tenants of the lots as disturbance compensation and as payment for existing
crops as well as P334,700.00 to the owners of the houses standing thereon in addition to
granting them residential lots with the total area of 2,800 square meters. Tabangao likewise
paid the stipulated monthly interest for the 20-month period amounting to P408,580.80.
Meanwhile, the Babasas filed Civil Case 519 and Petition 373 for the transfer of titles of the
lots in their name. However, 2 days prior to the expiration of the 20-month period,
specifically on 31 December 1982, the Babasas asked Tabangao for an indefinite extension
within which to deliver clean titles over the lots. They asked that Tabangao continue paying
the monthly interest of P20,648.43 starting January 1983 on the ground that Civil Case 519
and Petition 373 had not yet been resolved with finality in their favor. Tabangao refused the
request. In retaliation the Babasas executed a notarized unilateral rescission dated 28
February 1983 to which Tabangao responded by reminding the Babasas that they were the
ones who did not comply with their contractual obligation to deliver clean titles within the
stipulated 20-month period, hence, had no right to rescind their contract. The Babasas insisted
on the unilateral rescission and demanded that SHELL vacate the lots.
On 19 July 1983 Tabangao instituted an action for specific performance with damages in the
RTC Batangas City to compel the spouses to comply with their obligation to deliver clean
titles over the properties. The Babasas moved to dismiss the complaint on the ground that
their contract with Tabangao became null and void with the expiration of the 20-month period
given them within which to deliver clean certificates of title. SHELL entered the dispute as
intervenor praying that its lease over the premises be respected by the Babasas. Eventually,
judgment was rendered in favor of Tabangao and SHELL, declaring that the notarial rescission
executed by the Babasas void and of no legal effect; declaring that the lease contract between
Tabangao and SHELL deemed legally binding on the spouses; ordering the spouses to deliver
to Tabangao clean transfer certificates in their name and execute all necessary deeds and
document necessary for the Register of Deeds to facilitate the issuance of TCTs; directing
Tabangao to pay the spouses the remaining balance of P1,821,920.00 out of the full
purchase price for these three lots enumerated in the agreement plus interest thereon of 17%
per annum or P20,648.43 a month compounded annually beginning January 1983 until fully
paid; making the restraining order against the spouses in putting up structures interfering with
the activities of SHELL, its employees and agents, and canceling the bond posted by Shell; and
ordering the spouses to pay the cost of the proceedings as well as the premium SHELL paid in
the posting of the P2 million bond for the issuance of the restraining order.
The spouses appealed to the Court of Appeals which on 29 February 1996 affirmed the
decision of the trial court; but ordered that the compounded interest to be paid from 19 July
1983 only and not from January 1983 as decreed by the trial court. Hence, the appeal.
The Supreme Court denied the petition, and affirmed the appealed decision of the Court
of Appeals in CA-GR CV 39554; without costs.
1.
Contract of sale and not of lease

The contract is replete with terms and stipulations clearly indicative of a contract of
sale. Thus, the opening whereas clause states that the parties desire and mutually agreed on
the sale and purchase of the . . .
Sales, 2003 ( 32 )
three parcels of land; the Babasas were described as the vendors while Tabangao as the
vendee from the beginning of the contract to its end; the amount of P2,121,920.00 was
stated as the purchase price of the lots; Tabangao, as vendee, was granted absolute and
unconditional right to take immediate possession of the premises while the Babasas, as
vendors, warranted such peaceful possession forever; Tabangao was to shoulder the capital
gains tax, and; lastly, the Babasas were expected to execute a Final Deed of Absolute Sale in
favor of Tabangao necessary for the issuance of transfer certificates of title the moment they
were able to secure clean certificates of title in their name. It cannot be said that the
contract was one of lease simply because the word ownership was never mentioned therein.
Besides, the spouses did not object to the terms and stipulations employed in the contract at
the time of its execution when they could have easily done so considering that they were then
ably assisted by their counsel, Atty. Edgardo M. Carreon, whose legal training negates their
pretended ignorance on the matter.
2.
Contracts valid thought parties entered into it against own wish and desire, or
even against his better judgment
Although Tabangao dangled the threat of expropriation by the government (through
the Export Processing Zone Authority) in the event voluntary negotiations failed, a cause
to commiserate with the spouses may be perceived, it is not enough to provide them with an
avenue to escape contractual obligations validly entered into. Contracts are valid even though
one of the parties entered into it against his own wish and desire, or even against his better
judgment. Besides, a threat of eminent domain proceedings by the government cannot be
legally classified as the kind of imminent, serious and wrongful injury to a contracting party as
to vitiate his consent. Private landowners ought to realize, and eventually accept, that property
rights must yield to the valid exercise by the state of its all-important power of eminent
domain.
3.
Contract is absolute although denominated a conditional sale; Actual and

constructive delivery Although denominated Conditional Sale of Registered
Lands, the contract of 11 April 1981
between the spouses and Tabangao is one of absolute sale. Aside from the terms and stipulations
used therein indicating such kind of sale, there is absolutely no proviso reserving title in the
Babasas until full payment of the purchase price, nor any stipulation giving them the right to
unilaterally rescind the contract in case of non-payment. A deed of sale is absolute in
nature although denominated a conditional sale absent such stipulations. In such cases,
ownership of the thing sold passes to the vendee upon the constructive or actual delivery
thereof. In the instant case, ownership over Lots 17827-A, 17827-B and 17827-C passed to
Tabangao both by constructive and actual delivery. Constructive delivery was accomplished
upon the execution of the contract of 11 April 1981 without any reservation of title on the part
of the Babasas while actual delivery was made when Tabangao took unconditional possession
of the lots and leased them to its associate company SHELL which constructed its multimillion peso LPG Project thereon.
4.
Distinction between conditions imposed on the perfection of contract and
condition imposed on the performance of an obligation
In Romero v. Court of Appeals and Lim v. Court of Appeals, the Court distinguished
between a condition imposed on the perfection of a contract and a condition imposed merely
on the performance of an obligation. While failure to comply with the first condition results
in the failure of a contract, failure to comply with the second merely gives the other party
the option to either refuse to proceed with the sale or to waive the condition. In the present
case, the spouses contract with Tabangao did not lose its efficacy when the 20-month period
stipulated therein expired without the spouses being able to deliver clean certificates of title
such that Tabangao may no longer demand performance of their obligation.
5.
Unilateral rescission of the contract by the spouses unwarranted

The spouses act of unilaterally rescinding their contract with Tabangao is unwarranted.
The failure of petitioners to deliver clean titles within 20 months from the signing of the
contract merely gives Tabangao the option to either refuse to proceed with the sale or to waive
the condition in consonance with Article 1545 of the New Civil Code. Besides, it would be the
height of inequity to allow the Babasas to rescind their contract
Sales, 2003 ( 33 )
of sale with Tabangao by invoking as a ground therefor their own failure to deliver the titles
over the lots within the stipulated period.
[12]
Bagnas v. CA [G.R. No. 38498. August
10, 1989.] First Division, Narvasa (J): 4
concurring
Facts: Hilario Mateum of Kawit, Cavite, died on 11 March 1964, single, without ascendants or
descendants, and survived only by collateral relatives, of whom Isaac, Encarnacion, Silvestre,
Maximina, and Sixto Bagtas, and Agatona Encarnacion, his first cousins, were the nearest.
Mateum left no will, no debts, and an estate consisting of 29 parcels of land in Kawit and
Imus, Cavite, 10 of which are involved in the case. On 3 April 1964, Rosa L. Retonil, Teofilo
Encarnacion and Jose B. Nambayan, themselves collateral relatives of Mateum though more
remote in degree, registered with the Registry of Deeds for the Province of Cavite 2 deeds of
sale purportedly executed by Mateum in their favor covering 10 parcels of land. Both deeds
were in Tagalog, save for the English descriptions of the lands conveyed under one of
them; and each recited the reconsideration of the sale to be P1, services rendered and to be
rendered for Mateums benefit. One deed was dated 6 February 1963 and covered 5 parcels of
land, and the other was dated 4 March 1963, covering 5 other parcels, both, therefore,
antedating Mateums death by more than a year. It is asserted by the Bagtas, et.al., but denied
by Retonil, et.al., that said sales notwithstanding, Mateum continued in the possession of the
lands purportedly conveyed until his death, that he remained the declared owner thereof and
that the tax payments thereon continued to be paid in his name. Whatever the truth, however,
is not crucial; what is not disputed is that on the strength of the deeds of sale, Retonil, et.al.
were able to secure title in their favor over 3 of the 10 parcels of land conveyed thereby.
On 22 May 1964, Bagtas et.al. commenced suit against Retonil, et.al. in the CFI Cavite, seeking
annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as
donations void for want of acceptance embodied in a public instrument. Claiming
ownership pro indiviso of the lands subject of the deeds by virtue of being intestate heirs of
Hilario Mateum, Bagtas, et. al. prayed for recovery of ownership and possession of said lands,
accounting of the fruits thereof and damages. Although the complaint originally sought
recovery of all the 29 parcels of land left by Mateum, at the pre-trial the parties agreed
that the controversy be limited to the 10 parcels subject of the questioned sales, and the
Trial Court ordered the exclusion of the 19 other parcels from the action. Of the 10 parcels
which remained in litigation, 9 were assessed for purposes of taxation at values aggregating
P10,500.00. The record does not disclose the assessed value of the tenth parcel, which has an
area of 1,443 sq.ms. Retonil, et.al. denied the allegations. After Bagtas, et.al. had presented
their evidence, Retonil, et.al. filed a motion for dismissal in effect, a demurrer to the
evidence reasserting the defense set up in their answer that Bagtas, et.al., as mere
collateral relatives of Hilario Mateum had no right to impugn the latters disposition of his
properties by means of the questioned conveyances and submitting, additionally, that no
evidence of fraud tainting said transfers had been presented. The Trial Court granted the motion
to dismiss, holding on the authority of Armentia vs. Patriarca, that Bagtas, et.al., as mere
collateral relatives, not forced heirs, of Hilario Mateum, could not legally question the
disposition made by said deceased during his life time, regardless of whether, as a matter of
objective reality, said dispositions were valid or not; and that Bagtas, et.al.s evidence of
alleged fraud was insufficient, the fact that the deeds of sale each stated a consideration of only
P1 not being in itself evidence of fraud or simulation.
On appeal by Bagtas, et. al. to the Court of Appeals, that court affirmed, adverting with
approval to the Trial Courts reliance on the Armentia ruling which, it would appear, both
courts saw as denying, without exception, to collaterals, of a decedent, not forced heirs, the
right to impugn the latters dispositions inter vivos of his property.
The Supreme Court reversed the appealed Decision of the Court of Appeals, and declared the
questioned
Sales, 2003 ( 34 )
transfers void and of no force or effect. The Court ordered the annulment of such certificates
of title Retonil, et.al. may have obtained over the properties subject of said transfers, and
ordered them to return to Bagtas, et.al. possession of all the properties involved in the action,
to account to the latter for the fruits thereof during the period of their possession, and to pay
the costs. No damages, attorneys fees or litigation expenses were awarded, there being no
evidence thereof before the Court.
1.
Void contracts: Cause not existing at time of transaction and contract without
or with false cause (where no hidden cause is proved)
Under the Civil Code of the Philippines, Article 1409, paragraph 3, Contracts, with a
cause that did not exist at the time of the transaction are in existent and void from the
beginning. The same is true of contracts stating a false cause (consideration) unless the
persons interested in upholding the contract should prove that there is another true and lawful
consideration therefor. (Article 1353).
2.
Intestate heirs have legal standing; Property subject of void contract does not
leave patrimony of transferor and recoverable by the heirs or the estate administrator
The heirs intestate have legal standing to contest the conveyance made by the deceased
if the same were made without any consideration, or for a false and fictitious consideration. If
therefore the contract has no causa or consideration, or the causa is false and fictitious (and no
true hidden causa is proved) the property allegedly conveyed never really leaves the
patrimony of the transferor, upon the latters death without a testament, such property
would passed to the transferors hairs intestate and be, recoverable by them or by the
Administrator of the transferors estate.
3.
Armentia ruling clarifed Concepcion and Solis rulings; False cause without
hidden cause now not merely voidable, but void ab initio
The Armentia ruling does not reject, and is not to be construed as rejecting, the
Concepcion and Solis rulings (Concepcion vs. Sta. Ana, 87 Phil. 787 and Solis vs. Chua Pua
Hermanos, 50 Phil. 536) as outrightly erroneous. On the contrary, those rulings undoubtedly
read and applied correctly the law extant in their time: Article 1276 of the Civil Code of 1889
under which the statement of a false cause in a contract rendered it voidable only, not void ab
initio. The fact that the law as it is now (during the time of Armentia) no longer deems
contracts with a false cause, or which are absolutely simulated or fictitious, merely
voidable, but declares them void, i.e., inexistent (nulo) unless it is shown that they are
supported by another true and lawful cause or consideration.
4.
Armentia case; Efect of the change in the juridical status of contracts based on
false cause A logical consequence of that change is the juridical status of contracts
without, or with a false, cause
is that conveyances of property affected with such a vice cannot operate to divest and
transfer ownership, even if unimpugned. If afterwards the transferor dies the property descends
to his heirs, and without regard to the manner in which they are called to the succession, said
heirs may bring an action to recover the property from the purported transferee. Such an
action is not founded on fraud, but on the premise that the property never leaves the estate of
the transferor and is transmitted upon his death to heirs, who would labor under no incapacity
to maintain the action from the mere fact that they may be only collateral relatives and
bound neither principally or subsidiarily under the deed / contract of conveyance.
5.
Armentia case; Conveyance merely annullable as action based on fraud vitiating
conveyance
In Armentia, the Court determined that the conveyance questioned was merely
annullable, not void ab initio, and that the action was based on fraud vitiating said conveyance.
The court found that Marta Armentia executed the document, a fact uncontroverted by the
cases plaintiff. Also, the vendees, being minors, makes the contract, at worst, only annullable
by them. Moreover, inadequacy of consideration does not imply total want of consideration.
Further, the purported acts of Marta Armentia after the sale did not indicate that the said sale
was void from the beginning. Thus, in essence the plaintiffs case is bottomed on fraud,
which renders the contract merely voidable.
Sales, 2003 ( 35 )
6.
Armentia case applies to voidable contracts obtained or made fraudulently;
does not apply to transfers which are void for lack or falsity of consideration
As a precedent, Armentia only ruled that transfers made by a decedent in his
lifetime, which are voidable for having been fraudulently made or obtained, cannot be
posthumously impugned by collateral relatives succeeding to his estate who are not
principally or subsidiarily bound by such transfers. That ruling is not extendible to transfers
which, though made under closely similar circumstances, are void ab initio for lack or falsity
of consideration.
7.
False and fictitious consideration, without any alternative true or lawful
cause presented, renders contract void
Upon the consideration alone that the apparent gross, not to say enormous, disproportion
between the stipulated price in each deed of P1 plus unspecified and unquantilled services and
the undisputably valuable real estate allegedly sold (worth at least P10,500.00 going only by
assessments for tax purposes which, it is well-known, are notoriously low indicators of actual
value) plainly and unquestionably demonstrates that they state a false and fictitious
consideration, and no other true and lawful cause having been shown, the Court finds both
said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.
10.
Donations of immovable property must be made and accepted in a public
document; Liberality as cause denied
The validity of the conveyances cannot be defended on the theory that their true causa is
the liberality of the transferor and they may be considered in reality donations, because
the law also prescribes that donations of immovable property, to be valid, must be made and
accepted in a public instrument, and it is not denied by Retonil, et. al. that there has been no
such acceptance which they claim is not required.
11.
Properties remained as part of estate of Mateum, and thus recoverable

The transfers in question being void, it follows as a necessary consequence and
conformably to the concurring opinion in Armentia, with which the Court fully agrees, that
the properties purportedly conveyed remained part of the estate of Hilario Mateum, said
transfers notwithstanding, recoverable by his intestate heirs, i.e. Bagtas, et.al., whose status as
such is not challenged.
12.
Lack of proof that could have saved transfers from taint of invalidity; Burden
of proof in the existence of a valid and licit contract
Retonil, et.al. have only themselves to blame for the lack of proof that might
have saved the questioned transfers from the taint of invalidity as being fictitious and without
licit cause; proof, to be brief, of the character and value of the services, past, present, and
future, constituting according to the very terms of said transfers the principal
consideration therefor. The onus of showing the existence of valid and licit consideration
for the questioned conveyances rested on Retonil, et.al.. But even on a contrary assumption, and
positing that Bagnas, et.al. initially had the burden of showing that the transfers lacked such
consideration as they alleged in their complaint, that burden was shifted to Retonil, et.al.
when Bagnas, et.al. presented the deeds which they claimed showed that defect on their face
and it became the duty of Retonil, et.al. to offer evidence of existent, lawful consideration.
13.
Demurrer to evidence; Efect

Retonil, et. al., opting to rely on a demurrer to Bagtas, et. al.s evidence and upon the
thesis that the latter, being mere collateral relatives of the deceased transferor, were without
right to the conveyances in question. In effect, they gambled their right to adduce evidence
on a dismissal in the Trial Court and lost, it being the rule that when a dismissal thus obtained
is reversed on appeal, the movant loses the right to present evidence in his behalf.
[13]
Sales, 2003 ( 36 )
Balatbat v. CA [G.R. No. 109410. August

28, 1996.] Second division, Torres Jr (J): 4
concurring
Facts: On 15 June 1977, Aurelio A. Roque filed a complaint for partition against his
children Corazon, Feliciano, Severa and Osmundo Roque, and Alberto de los Santos before the
CFI Manila (Branch IX, Civil Case 109032). The Roque children were declared in default and
Aurelio presented evidence ex-parte. On 29 March 1979, the trial court rendered a decision in
favor of Aurelio; holding that Aurelio and his wife Maria Mesina acquired the lot (TCT 51330)
during their conjugal union, as well as the house that was constructed thereon; that when
Maria Mesina died on 28 August 1966, leaving no debt, Aurelio (as surviving spouse) was
entitled to share pro-indiviso of the conjugal property (i.e. house and lot) and that
Aurelio and his 4 children were entitled to 1/5 share pro-indiviso each of the share proindiviso forming the estate of Maria Mesina; ordering the partition of the properties; and
dismissing Aurelios claim for moral, exemplary and actual damages and attorneys fees;
without pronouncement as to costs. On 2 June 1979, the decision became final and executory;
with the corresponding entry of judgment made 29 March 1979. On 5 October 1979, the
Register of Deeds of Manila issued TCT 135671 (with Aurelio Roque having 6/10 share; and
the Roque children with 1/10 share each).
On 1 April 1980, Aurelio sold his 6/10 share in TCT 135671 to spouses Aurora TuazonRepuyan and Jose Repuyan as evidenced by a Deed of Absolute Sale. On 21 July 1980,
Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim on the TCT
135671, claiming that she bought 6/10 portion of the property from Aurelio Roque for the
amount of P50,000.00 with a downpayment of P5,000.00 and the balance of P45,000.00 to
be paid after the partition and subdivision of the property. On 20 August 1980, Aurelio
Roque filed a complaint for Rescission of Contract against spouses Repuyan before the then
CFI Manila (Branch IV, Civil Case 134131). The complaint is grounded on spouses Repuyans
failure to pay the balance of P45,000.00 of the purchase price. On 5 September 1980, spouses
Repuyan filed their answer with counterclaim.
In the meantime, the trial court issued an order in Civil Case 109032 (Partition case) dated 2
February 1982, ordering the Deputy Clerk of the court to sign the deed of absolute sale for and
in behalf of Roque children pursuant to Section 10, Rule 39 of the Rules of Court, in order to
effect the partition of the property involved in the case (P100,000 purchase price for the 84 sq.
ms. In Callejon Sulu, Sta. Cruz, Manila is reasonable and fair; and that opportunities have been
given to the children to sign the deed voluntarily). A deed of absolute sale was executed on 4
February 1982 between Aurelio, Corazon, Feliciano, Severa and Osmundo Roque and Clara
Balatbat, married to Alejandro Balatbat. On 14 April 1982, Clara Balatbat filed a motion
for the issuance of a writ of possession which was granted by the trial court on 14
September 1982 subject, however, to valid rights and interest of third persons over the same
portion thereof, other than vendor or any other person or persons privy to or claiming any
rights or interest under it. The corresponding writ of possession was issued on 20
September 1982.
On 20 May 1982, Clara Balatbat filed a motion to intervene in Civil Case 134131 which was
granted as per courts resolution of 21 October 1982. However, Clara Balatbat failed to file her
complaint in intervention. On 15 April 1986, the trial court rendered a decision dismissing
the complaint, and declaring the Deed of Absolute Sale dated 1 April 1980 as valid and
enforceable and Aurelio is, as he is hereby ordered, to partition and subdivide the land covered
by TCT 135671, and to aggregate therefrom a portion equivalent to 6/10 thereof, and cause
the same to be titled in the name of spouses Repuyan, and after which, the latter to pay
Aurelio the sum of P45,000.00. Considering further that the spouses suffered damages since
they were forced to litigate unnecessarily, by way of their counterclaim, Aurelio is hereby
ordered to pay the spouses the sum of P15,000.00 as moral damages, attorneys fees in the
amount of P5,000.00; with costs against Aurelio.
On 3 March 1987, Balatbat filed a notice of lis pendens in Civil Case 109032 before the Register
of Deeds of
Sales, 2003 ( 37 )
Manila.
On 9 December 1988, Balatbat and her husband filed a complaint for delivery of the owners
duplicate copy of TCT 135671 before the RTC Manila (Branch 24, Civil Case 88-47176) against
Jose and Aurora Repuyan. On 27 January 1989, spouses Repuyan filed their answer with
affirmative defenses and compulsory counterclaim. The Repuyans and the Balatbats submitted
their memoranda on 13 November 1989 and 23 November 1989, respectively. On 2 August
1990, the RTC Manila rendered a decision dismissing the complaint, finding that the Balatbats
were not able to establish their cause of action against the Repuyans and have no right to the
reliefs demanded in the complaint, and ordering Balatbat to pay the Repuyans the amount
of P10,000 as attorneys fees, P5,000 as costs of litigation, and to pay the costs of the suit.
Dissatisfied, Balatbat filed an appeal before the Court of Appeals (CA-GR CV 29994)
which rendered decision on 12 August 1992, affirming the judgment appealed from with
modification deleting the awards of P10,000 for attomeys fees and P5,000 as costs of
litigation. On 22 March 1993, the Court of Appeals denied Balatbats motion for
reconsideration. Hence, the petition for review pursuant to Rule 45 of the Revised Rules of
Court.
The Supreme Court dismissed the petition for review for lack of merit; without pronouncement as to
costs.
1.
1 April 1980 sale consummated, valid and enforceable

The sale dated 1 April 1980 in favor the Repuyan spouses is consummated, hence,
valid and enforceable; not merely executory for the reason that there was no delivery of the
subject property and that consideration/price was not fully paid. In a decision dated 15 April
1986 of the RTC Manila (Branch IV, Civil Case 134131), the Court dismissed Aurelio complaint
for rescission of the deed of sale and declared that the sale dated 1 April 1980, as valid and
enforceable. No appeal having been made, the decision became final and executory. It must be
noted that Balatbat filed a motion for intervention in that case but did not file her
complaint in intervention.
2.
1 April 1980 Deed of Sale devoid of stipulation withholding ownership of
thing until full payment; Ownership pass upon delivery of thing sold even if purchase
price not fully paid
The terms and conditions of the Deed of Sale dated 1 April 1980, the P45,000.00
balance is payable only after the property covered by TCT 135671 has been partitioned and
subdivided, and title issued in the name of the buyer hence, the vendor cannot demand
payment of the balance unless and until the property has been subdivided and titled in the name
of the Repuyan spouses. Devoid of any stipulation that ownership in the thing shall not pass
to the purchaser until he has fully paid the price, ownership in the thing shall pass from the
vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase
price has not yet been fully paid.
3.
Non-payment in a contract of sale merely creates right to demand fulfllment
of obligation or rescission of contract; Article 1191
The failure of the buyer to make good the price does not, in law, cause the ownership to
revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant
to Article 1191 of the New Civil Code. Non-payment only creates a right to demand the
fulfillment of the obligation or to rescind the contract.
With respect to the non-delivery of the possession of the subject property to the
private respondent, suffice it to say that ownership of the thing sold is acquired only from
the time of delivery thereof, either actual or constructive. 28
4.
Ownership of a thing sold acquired from time of actual or constructive delivery;
Possession of public instrument of the land accords buyer rights of ownership
Article 1498 of the Civil Code provides that when the sale is made through a public
instrument,
Sales, 2003 ( 38 )
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 be inferred. The
execution of the public instrument, without actual delivery of the thing, transfers the
ownership from the vendor to the vendee, who may thereafter exercise the rights of an
owner over the same. It is not necessary that vendee be physically present at every square inch
of the land bought by him, possession of the public instrument of the land is sufficient to
accord him the rights of ownership. Thus, delivery of a parcel of land may be done by placing
the vendee in control and possession of the land (real) or by embodying the sale in a public
instrument (constructive). In the present case, vendor Roque delivered the owners certificate
of title to the Repuyan spouses.
5.
Necessity of public document merely for convenience, and not for validity or
enforceability of a contract of sale
The provision of Article 1358 on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not a requirement for the validity of a
contract of sale of a parcel of land that this be embodied in a public instrument.
6.
Contract of sale consensual, perfected by mere consent of the parties; Nonpayment does not render sale null and void for lack of consideration
A contract of sale being consensual, it is perfected by the mere consent of the parties.
Delivery of the thing bought or payment of the price is not necessary for the perfection of
the contract; and failure of the vendee to pay the price after the execution of the contract
does not make the sale null and void for lack of consideration but results at most in default on
the part of the vendee, for which the vendor may exercise his legal remedies.
7.
Present case is a double sale

The present case is a case of double sale contemplated under Article 1544 of the New
Civil Code. In the present case, Aurelio Roque sold 6/10 portion of his share in TCT 135671 to
the Repuyan spouses on 1 April 1980. Subsequently, the same lot was sold again by vendor
Aurelio Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to
Section 10, Rule 39 of the Rules of Court, on 4 February 1982.
8.
Article 1544; Double sale

Article 1544 of the New Civil Code provides that if the same thing should have
been sold to different vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be movable property. Should it
be movable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property. Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the possession and in the absence thereof,
to the person who present the oldest title, provided there is good faith. Article 1544 of the
Civil Code provides that in case of double sale of an immovable property, ownership shall be
transferred (1) to the person acquiring it who in good faith first recorded it in the Registry
of Property; (2) in default thereof, to the person who in good faith was first in possession; and
(3) in default thereof, to the person who presents the oldest title, provided there is good faith.
9.
Ownership vests in person who acquired the immovable property in good faith
and who first recorded it in the Registry of Property; Annotation of adverse claim
suffcient
In an instance of a double sale of an immovable property, the ownership shall vests
in the person acquiring it who in good faith first recorded it in the Registry of Property. In
the present case, the Repuyan spouses caused the annotation of an adverse claim on the title of
the subject property denominated as Entry 5627/T-135671 on 21 July 1980. The annotation of
the adverse claim on TCT 135671 in the Registry of Property is sufficient compliance as
mandated by law and serves notice to the whole world. Balatbat, on the other hand, filed a
notice of lis pendens only on 2 February 1982. Accordingly, the Repuyan spouses who first
caused the annotation of the adverse claim in good faith shall have a better right over Balatbat.
Sales, 2003 ( 39 )
10.
Possession of Balatbat merely provisionary

The physical possession of Balatbat by virtue of a writ of possession issued by the trial
court on 20 September 1982 is subject to the valid rights and interest of third persons over
the same portion thereof, other than vendor or any other person or persons privy to or claiming
any rights to interest under it.
11.
First registrant, first in possession, else oldest title

As between two purchasers, the one who has registered the sale in his favor, has a
preferred right over the other who has not registered his title even if the latter is in actual
possession of the immovable property. Even in default of the first registrant or first in
possession, the Repuyan spouses have presented the oldest title. Thus, the spouses who
acquired the subject property in good faith and for valuable consideration established a
superior right as against Balatbat.
12.
Due diligence in the purchase of real estate required to allege good faith
It is incumbent upon the vendee of the property to ask for the delivery of the owners
duplicate copy of the title from the vendor. A purchaser of a valued piece of property cannot
just close his eyes to facts which should put a reasonable man upon his guard and then claim
that he acted in good faith and under the belief that there were no defect in the title of the
vendor. One who purchases real estate with knowledge of a defect or lack of title in his vendor
cannot claim that he has acquired title thereto in good faith as against the true owner of the
land or of an interest therein; and the same rule must be applied to one who has knowledge of
facts which should have put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor. Good faith, or the want of it is not a
visible, tangible fact that can be seen or touched, but rather a state or condition of mind
which can only be judged of by actual or fancied tokens or signs.
13.
Balatbat not a buyer in good faith

Balatbat cannot be considered as a buyer in good faith. In the complaint for
rescission filed by Aurelio Roque on 20 August 1980, Balatbat filed a motion for intervention
on 20 May 1982 but did not file her complaint in intervention, hence, the decision was
rendered adversely against her. If Balatbat did investigate before buying the land on 4
February 1982, she should have known that there was a pending case and an annotation of
adverse claim was made in the title of the property before the Register of Deeds and she could
have discovered that the subject property was already sold to the Repuyan spouses.
14.
Gross negligence equvalent to intentional wrong

Balatbat had nobody to blame but herself in dealing with the disputed property for
failure to inquire or discover a flaw in the title to the property, thus, it is axiomatic that
culpa lata dolo aequiparatur gross negligence is equivalent to intentional wrong.
[14]
Calimlim-Canullas v. Fortun [G.R. No. 57499. June
22, 1984.] First Division, Melencio-Herrera (J): 5
concurring
Facts: Mercedes Calimlim-Canullas and Fernando Canullas were married on 19 December 1962.
They begot five children. They lived in a small house on the residential land in question with
an area of approximately 891 sq. m., located at Bacabac, Bugallon, Pangasinan. After
Canullas father died in 1965, he inherited the land. In 1978, Canullas abandoned his family
and lived with Corazon Daguines. On 15 April 1980, Canullas sold the subject property with
the house thereon to Daguines for the sum of P2,000.00. In the document of sale, Canullas
described the house as also inherited by me from my deceased parents. Unable to take
possession of the lot and house, Daguines initiated a complaint beore the CFI Pangasinan
(Branch 1, Civil Case 15620) on 19 June 1980 for quieting of title and damages against
Calimlim-Canullas. CalimlimSales, 2003 ( 40 )
Canullas resisted and claimed that the house in dispute where she and her children were
residing, including the coconut trees on the land, were built and planted with conjugal funds
and through her industry; that the sale of the land together with the house and improvements
to Daguines was null and void because they are conjugal properties and she had not given her
consent to the sale. On 6 October 1980, the trial court ruled in favor of Daguines as the
lawful owner of the land as well as of the house erected on the land. Upon
reconsideration and on 27 November 1980, however, the lower court modified the judgment
by declaring Daguines as the lawful owner of the land and 10 coconut trees thereon but
declaring the sale of the conjugal house including 3 coconuts and other crops during the
conjugal relation of the spouses null and void. A petition for review on certiorari was filed
with Supreme Court.
During the pendency of the appeal, however, Fernando Canullas and Corazon Daguines were
convicted of concubinage in a judgment rendered on 27 October 1981 by the then CFI
Pangasinan, Branch II, which judgment has become final.
The Supreme Court set aside the decision and resolution of the lower court, and declared the
sale of the lot, house and improvements null and void; without costs.
1.
Land and building belongs to the conjugal partnership, spouse owning the land
becomes the creditor of the conjugal partnership
Pursuant to the second paragraph of Article 158 of the Civil Code, which provides
that buildings constructed at the expense of the partnership during the marriage on land
belonging to one of the spouses also pertain to the partnership, but the value of the land shall
be reimbursed to the spouse who owns the same, both the land and the building belong to
the conjugal partnership but the conjugal partnership is indebted to the husband for the
value of the land. The spouse owning the lot becomes a creditor of the conjugal
partnership for the value of the lot, which value would be reimbursed at the liquidation of
the conjugal partnership.
2.
Padilla v. Paterno is better rule than Maramba v. Lozano; Spouse cannot
alienate property without the consent of the other
In the case of Maramba vs. Lozano, it was held that the land belonging to one of the
spouses, upon which the spouses have built a house, becomes conjugal property only when
the conjugal partnership is liquidated and indemnity paid to the owner of the land. The better
rule, however, is that held in Padilla vs. Paterno, where the conversion of the properties from
paraphernal to conjugal assets should be deemed to retroact to the time the conjugal
buildings were first constructed thereon or at the very latest, to the time immediately before
the death of one spouse that ended the conjugal partnership. They can not be considered to
have become conjugal property only as of the time their values were paid to the estate of
the widow because by that time the conjugal partnership no longer existed and it could not
acquire the ownership of said properties. The acquisition by the partnership of the properties
was, under the 1943 decision, subject to the suspensive condition that their values would be
reimbursed to the widow at the liquidation of the conjugal partnership; once paid, the effects
of the fulfillment of the condition should be deemed to retroact to the date the obligation was
constituted (Article 1187, New Civil Code). Thus, in the present case, considering the
foregoing premises, Canullas cannot have alienated the house and lot to Daguines since the
wife had not given her consent to the sale.
3.
Contract of sale null and void for being contrary to morals and public policy
Article 1409 of the Civil Code provides contracts whose cause, object, or purpose is
contrary to law, morals, good customs, public order, or public policy are void and inexistent
from the very beginning. Article 1352 also provides that contracts without cause, or with
unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law,
morals, good customs, public order, or public policy. In the present case, the contract of sale
was null and void for being contrary to morals and public policy. The sale was made by a
husband in favor of a concubine after he had abandoned his family and left the conjugal home
where his
Sales, 2003 ( 41 )
wife and children lived and from whence they derived their support. That sale was subversive
of the stability of the family, a basic social institution which public policy cherishes and
protects.
4.
Law prohibits sale and donation between husband and wife, such applies
even those living together without beneft of marriage
The law prohibits the spouses from selling property to each other subject to certain
exceptions. Similarly, donations between spouses during marriage are prohibited. And this is
so because if transfers or conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in civil law. It was also
designed to prevent the exercise of undue influence by one spouse over the other, as well as to
protect the institution of marriage, which is the cornerstone of family law. The prohibitions
apply to a couple living as husband and wife without benefit of marriage, otherwise, the
condition of those who incurred guilt would turn out to be better than those in legal union.
Those provisions are dictated by public interest and their criterion must be imposed upon the
will of the parties. (Buenaventura v. Bautista [CA])
5.
Disabilities attached to marriage also applies to concubinage

The ruling in Buenaventura vs. Bautista [CA] was cited in Matabuena vs. Cervantes,
reiterating that while Article 133 of the Civil Code considers as void a donation between the
spouses during the marriage, policy considerations of the most exigent character as well as the
dictates of morality require that the same prohibition should apply to a common-law
relationship. If the policy of the law is to prohibit donations in favor of the other consort and
his descendants because of fear of undue influence and improper pressure upon the donor, a
prejudice deeply rooted in our ancient law, then there is every reason to apply the same
prohibitive policy to persons living together as husband and wife without benefit of nuptials.
For it is not to be doubted that assent to such irregular connection for thirty years bespeaks
greater influence of one party over the other, so that the danger that the law seeks to avoid is
correspondingly increased. Moreover, as pointed out by Ulpian, it would not be just that such
donations should subsist, lest the conditions of those who incurred guilt should turn out to be
better. So long as marriage remains the cornerstone of our family law, reason and morality
alike demand that the disabilities attached to marriage should likewise attach to concubinage.
[15]
Carbonell vs. CA [G.R. No. L-29972. January
26, 1976.] First Division, Makasiar (J): 3 concurring
Facts: Prior to 27 January 1955, Jose Poncio, a native of the Batanes Islands, was the owner of
the parcel of land with improvements situated at 179 V. Agan St., San Juan, Rizal, having an
area of some 195 square meters, more or less, covered by TCT 5040 and subject to a mortgage
in favor of the Republic Savings Bank for the sum of P1,500.00. Rosario Carbonell, a cousin
and adjacent neighbor of Poncio, and also from the Batanes Islands, lived in the adjoining lot
at 177 V. Agan Street. Both Rosario Carbonell and Emma Infante offered to buy the said lot
from Poncio. Poncio, unable to keep up with the installments due on the mortgage, approached
Carbonell one day and offered to sell to the latter the said lot, excluding the house wherein
he lived. Carbonell accepted the offer and proposed the price of P9.50 per square meter.
Poncio, after having secured the consent of his wife and parents, accepted the price proposed
by Carbonell, on the condition that from the purchase price would come the money to be paid
to the bank. Carbonell and Poncio went to the bank and secured the consent of the President
thereof for her to pay the arrears on the mortgage and to continue the payment of the
installments as they fall due. The amount in arrears reached a total sum of P247.26. But
because Poncio had previously told her that the money needed was only P200, only the latter
amount was brought by Carbonell constraining respondent Poncio to withdraw the sum of P47
from his bank deposit with Republic Savings Bank. The next day, Carbonell refunded to Poncio
the sum of P47. On 27 January 1955, Carbonell and Poncio, in the presence of a witness,
made and executed a document in the Batanes dialect, allowing Poncio to occupy the land
sold within one year, and may continue occupying the site with rent
Sales, 2003 ( 42 )
thereafter if could not find any place to move his house. Thereafter, Carbonell asked Atty.
Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of sale, which she
brought to Poncio together with the amount of some P400, the balance she still had to pay in
addition to her assuming the mortgage obligation to Republic Savings Bank. Upon arriving at
Poncios house, however, the latter told Carbonell that he could not proceed any more with
the sale, because he had already given the lot to Emma Infante (and Ramon Infante); and
that he could not withdraw from his deal with Infante, even if he were to go to jail. Carbonell
then sought to contact Infante, but the latter refused to see her. On 5 February 1955,
Carbonell saw Infante erecting a wall around the lot with a gate.
Carbonell then consulted Atty. Jose Garcia, who advised her to present and adverse claim over
the land in question with the Office of the Register of Deeds Rizal. Atty. Garcia actually sent
a letter of inquiry to the Register of Deeds and demand letters to Jose Poncio and Emma
Infante. In his answer to the complaint, Poncio admitted that on 30 January 1955, Infante
improved her offer and he agreed to sell the land and its improvements to her for P3,535.00.
In a private memorandum agreement dated 31 January 1955, Poncio indeed bound himself to
sell to Infante, the property for the sum of P2,357.52, with Infante still assuming the existing
mortgage debt in favor of Republic Savings Bank in the amount of P1,177.48. Infante lives
just behind the houses of Poncio and Carbonell. On 2 February 1955, Poncio executed the
formal deed of sale in favor of Infante in the total sum of P3,554.00 and on the same date, the
latter paid Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on
the lot was eventually discharged. Informed that the sale in favor of Infante had not yet been
registered, Atty. Garcia prepared an adverse claim for Carbonell, who signed and swore to and
registered the same on 8 February 1955. The deed of sale in favor of Infante was registered
only on 12 February 1955. As a consequence thereof, a TCT was issued to her but with the
annotation of the adverse claim of Carbonell. Infante took immediate possession of the lot
involved, covered the same with 500 cubic meters of garden soil and built therein a wall and
gate, spending the sum of P1,500. She further contracted the services of an architect to build a
house; but the construction of the same started only in 1959, years after the litigation actually
began and during its pendency. Infante spent for the house the total amount of P11,929.
On 1 June 1955, Carbonell, thru counsel, filed a second amended complaint against Poncio
and Infante, praying that she be declared the lawful owner of the questioned parcel of land;
that the subsequent sale to Infante be declared null and void, and that Poncio be ordered
to execute the corresponding deed of conveyance of said land in her favor and for damages
and attorneys fees. Poncio and Infante first moved to dismiss the complaint on the ground,
among others, that Carbonells claim is unenforceable under the Statute of Frauds, the alleged
sale in her favor not being evidenced by a written document; and when said motion was denied
without prejudice to passing on the question raised therein when the case would be tried on the
merits, Poncio and Infante filed separate answers, reiterating the grounds of their motion to
dismiss. In its order of 26 April 1966, the trial court sustained the objection and dismissed
the complaint on the ground that the memorandum presented by Carbonell to prove said sale
does not satisfy the requirements of the law.
From the above order of dismissal, Carbonnel appealed to the Supreme Court (GR L-11231)
which ruled in a decision dated 12 May 1958, that the Statute of Frauds, being applicable only
to executory contracts, does not apply to the alleged sale between Carbonell and Poncio,
which Carbonell claimed to have been partially performed, so that Carbonell is entitled to
establish by parol evidence the truth of this allegation, as well as the contract itself. The
order appealed from was thus reversed, and the case remanded to the court a quo for further
proceedings.
After trial in the court a quo, a decision was rendered on 5 December 1962, declaring the
second sale by Poncio to Infante of the land in question null and void and ordering Poncio to
execute the proper deed of conveyance of said land in favor of Carbonell after compliance
by the latter of her covenants under her agreement with Poncio. On 23 January 1963, Infante,
through another counsel, filed a motion for re-trial to adduce evidence for the proper
implementation of the courts decision in case it would be affirmed on appeal,
Sales, 2003 ( 43 )
which motion was opposed by Carbonell for being premature. Before their motion for retrial could be resolved, Infante, this time through their former counsel, filed another motion
for new trial, claiming that the decision of the trial court is contrary to the evidence and
the law, which motion was also opposed by Carbonell. The trial court granted a new trial, at
which re-hearing only Infante introduced additional evidence consisting principally of the cost
of improvements they introduced on the land in question. After the re-hearing, the trial
court rendered a decision, reversing its decision of 5 December 1962 on the ground that the
claim of Infante was superior to the claim of Carbonell, and dismissing the complaint\. From
this decision, Carbonell appealed to the Court of Appeals.
On 2 November 1967, the Court of Appeals (Fifth Division composed of Justices Magno
Gatmaitan, Salvador V. Esguerra and Angel H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the trial court, declaring Carbonell
to have a superior right to the land in question, and condemning Infante to reconvey to
Carbonell, after her reimbursement to them of the sum of P3,000 plus legal interest, the land
in question and all its improvements.
Infante sought reconsideration of said decision and acting on the motion for reconsideration,
the Appellate Court, three Justices (Villamor, Esguerra and Nolasco), of Special Division of
Five, granted said motion, annulled and set aside its decision of 2 November 1967, and
entered another judgment affirming in toto the decision of the court a quo, with Justices
Gatmaitan and Rodriguez dissenting. Carbonell moved to reconsider the Resolution of the
Special Division of Five, which motion was denied by Minute Resolution of 6 December
1968 (but with Justices Rodriguez and Gatmaitan voting for reconsideration). Hence, this
appeal by certiorari.
The Supreme Court reversed the decision of the special division of five of the court of appeals
of 30 October 1968; declared Carbonell to have the superior right to the land in question
and directed Carbonell to reimburse to Infante the sum of P1,500 within 3 months from the
finality of the decision; directed the Register of Deeds of Rizal to cancel TCT 37842 issued in
favor of Infante covering the disputed lot, which cancelled TCT 5040 in the name of Poncio,
and to issue a new TCT in favor of Carbonell upon presentation of proof of payment by her to
Infante of the aforesaid amount. Infante may remove their useful improvements from the lot
within 3 months from the finality of this decision, unless Carbonell elects to acquire the
same and pay Infante the amount of P13,429 within 3 months from the finality of the decision.
Should Carbonell fail to pay the said amount within the period of 3 months from the finality of
the decision, the period of 3 months within which Infante may remove their useful
improvements shall commence from the expiration of the 3 months given Carbonell to pay for
the said useful improvements; with costs against Poncio and Infante.
1.
Double sale; Article 1544

Article 1544, New Civil Code, which is decisive of this case, recites If the same thing
should have been sold to different vendees, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property. Should there be no
inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided
there is good faith.
2.
Good faith essential in registering deed of sale

It is essential that the buyer of realty must act in good faith in registering his deed of
sale to merit the protection of the second paragraph of said Article 1544. Unlike the first and
third paragraphs of said Article 1544, which accord preference to the one who first takes
possession in good faith of personal or real property, the second paragraph directs that
ownership of immovable property should be recognized in favor of one who in good faith
first recorded his right. Under the first and third paragraphs, good faith must characterize the
prior possession. Under the second paragraph, good faith must characterize the act of anterior
registration
Sales, 2003 ( 44 )
(DBP vs. Mangawang, et al., 11 SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).
3.
Decisive fact if there is no inscription, or if there is inscription

If there is no inscription, what is decisive is prior possession in good faith. If there is
inscription, as in the present case, prior registration in good faith is a pre-condition to superior
title.
4.
Carbonells prior purchase and registration in good faith

When Carbonell bought the lot from Poncio on 27 January 1955, she was the only buyer
thereof and the title of Poncio was still in his name solely encumbered by bank mortgage
duly annotated thereon. Carbonell was not aware of any sale to Infante as there was no such
sale to Infante then. Hence, Carbonells prior purchase of the land was made in good faith. Her
good faith subsisted and continued to exist when she recorded her adverse claim 4 days prior to
the registration of Infantes deed of sale. Carbonells good faith did not cease after Poncio told
her on 31 January 1955 of his second sale of the same lot to Infante. Because of that
information, Carbonell wanted an audience with Infante, which desire underscores
Carbonells good faith. Infante refused to see her. Carbonell did the next best thing to
protect her right, she registered her adverse claim on 8 February 1955. Under the
circumstances, this recording of her adverse claim should be deemed to have been done in
good faith and should emphasize Infantes bad faith when she registered her deed of sale 4
days later on 12 February 1955.
5.
Bad faith of Infante; Facts showing bad faith

Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is
shown by the following facts: (1) Infante refused to see Carbonell, who wanted to see Infante
after she was informed by Poncio that he sold the lot to Infante but several days before
Infante registered her deed of sale. Ordinarily, one will not refuse to see a neighbor. Her
refusal to talk to Carbonell could only mean that she did not want to listen to Carbonells story
that the latter had previously bought the lot from Poncio. (2) Carbonell was already in
possession of the mortgage passbook [not Poncios savings deposit passbook: Infantes] and
Poncios copy of the mortgage contract, when Poncio sold the lot to Infante. This shows that
the lot was already sold to Carbonell who, after paying the arrearages of Poncio, assumed the
balance of his mortgage indebtedness to the bank, which in the normal course of business
must have necessarily informed Infante about the said assumption by Carbonell of the
mortgage indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of
Poncio to the bank, Infante naturally must have demanded from Poncio the delivery to her of
his mortgage passbook as well as Poncios mortgage contract so that the fact of full
payment of his bank mortgage will be entered therein; and Poncio, as well as the bank, must
have inevitably informed her that said mortgage passbook could not be given to her because it
was already delivered to Carbonell; (3) The fact that Poncio was no longer in possession of
his mortgage passbook and that the said mortgage passbook was already in possession of
Carbonell, should have compelled Infante to inquire from Poncio why he was no longer in
possession of the mortgage passbook and from Carbonell why she was in possession of the
same (Paglago, et al., vs. Jarabe, et al., 22 SCRA 1247, 1252-1253); (4) Carbonell registered on
8 February 1955 her adverse claim, which was accordingly annotated on Poncios title 4 days
before Infante registered on 12 February 1955 her deed of sale executed on 2 February 1955.
Infante was again on notice of the prior sale to Carbonell. Such registration of adverse claim is
valid and effective (Jovellanos vs. Dimalanta, L-11736-37, January 30, 1959, 105 Phil. 125051); (5) In his answer to the complaint filed by Poncio, as defendant in the CFI, he alleged that
both Infante and Carbonell offered to buy the lot at P15 per sq.m., which offers he rejected
as he believed that his lot is worth at least P20 per sq.m. Knowledge of this should have put
Infante on her guard and should have compelled her to inquire from Poncio whether or not he
had already sold the property to Carbonell (See Carbonell vs. Poncio, L-11231, 12 May 1958).
6.
Contract for lot not in the purview of Statute of Frauds; not a contract of
sale; indicates sale as an accomplished act
The private document executed by Poncio and Carbonell and witnessed by
Constancio Meonada captioned Contract for One-half Lot which I Bought from Jose Poncio,
was not such a memorandum in
Sales, 2003 ( 45 )
writing within the purview of the Statute of Frauds. The memorandum in question merely
states that Poncio is allowed to stay in the property which he had sold to Carbonell. There is
no mention of the consideration, a description of the property and such other essential
elements of the contract of sale. There is nothing in the memorandum which would tend to
show even in the slightest manner that it was intended to be an evidence of contract of sale.
On the contrary, from the terms of the memorandum, it tends to show that the sale of the
property in favor of Carbonell is already an accomplished act. By the very contents of the
memorandum itself, it cannot therefore, be considered to be the memorandum which would
show that a sale has been made by Poncio in favor of Carbonell.
7.
Contract of Sale not in the purview of Statute of Frauds as it is allegedly

partially performed Because the complaint alleges and the Carbonell claims that
the contract of sale was partly
performed, the same is removed from the application of the Statute of Frauds and
Carbonell should be allowed to establish by parol evidence the truth of her allegation of partial
performance of the contract of sale. There was a partial performance of the verbal sale
executed by Poncio in favor of the Carbonell, when the latter paid P247.26 to the Republic
Savings Bank on account of Poncios mortgage indebtedness.
8.
Language (Dialect) used of memorandum indicates lack of intent on the part
of Carbonell to mislead Poncio
The document signed by Poncio is in the Batanes dialect, which, according to
Carbonells uncontradicted evidence, is the one spoken by Poncio, he being a native of said
region. The allegation in Poncios answer to the effect that he signed the document under the
belief that it was a permit for him to remain in the premises in the event that he decided
to sell the property to Carbonell at P20 a sq. m. is, on its face, difficult to believe. If he had
not decided as yet to sell the land to Carbonell, who had never increased her offer of P15 a
sq,m., there was no reason for Poncio to get said permit from her. Upon the other hand, if
Carbonell intended to mislead Poncio, she would have caused the document to be drafted,
probably, in English, instead of taking the trouble of seeing to it that it was written
precisely in his native dialect, the Batanes. Moreover, Poncios signature on the document
suggests that he is neither illiterate nor so ignorant as to sign a document without reading its
contents, apart from the fact that Meonada had read the document to him and given him a
copy thereof , before he signed thereon, according to Meonadas uncontradicted testimony.
9.
Carbonell entitled to introduce parol evidence

The Court would not know why Poncios bank deposit book is in Carbonells possession,
or whether there is any relation between the P247.26 entry therein and the partial payment of
P247.26 allegedly made by Carbonell to Poncio on account of the price of his land, if the Court
does not allow Carbonell to explain it on the witness stand. She is entitled, legally as well as
from the viewpoint of equity, to an opportunity to introduce parol evidence in support of
the allegations of her second amended complaint.
10.
One-half lot clearly the parcel of land occupied by Poncio and where he has his
improvements erected
The one half lot was mentioned in the document because the original description
carried in the title states that it was formerly part of a bigger lot and only segregated later.
Such explanation is tenable, in considering the time value of the contents of the document,
there is a sufficient description of the lot referred to as none other than the parcel of land
occupied by Poncio and where he has his improvements erected. The identity of the parcel of
land involved is sufficiently established by the contents of the note.
11.
Existence of a contract of sale
There had been celebrated a sale of the property excluding the house for the price of
P9.50 per square meter, so much so that on faith of that, Rosario had advanced the sum of
P247.26 and binding herself to pay unto Jose the balance of the purchase price after deducting
the indebtedness to the Bank. Since the wording of the private document goes so far as to
describe their transaction as one of sale, already consummated between
Sales, 2003 ( 46 )
them, as can be noted with the past tense used in the phrase, the lot sold by him to me and
going so far even as to state that from that day onwards, vendor would continue to live therein,
for one year, during which time he will not pay anything this can only mean that between
Rosario and Jose, there had been a true contract of sale, consummated by delivery constitutum
possessorium (Art.1500, New Civil Code); vendors possession having become converted from
then on, as a mere tenant of vendee, with the special privilege of not paying rental for one
year.
12.
Contract is consensual; Oral contract does not invalidate sale but merely
incapable of proof Even if the document was not registered at all, it was a valid
contract nonetheless. Under the law, a
contract sale is consensual, perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Under
the New Civil Code, while a sale of an immovable is ordered to be reduced to a public
document (Art. 1358), that mandate does not render an oral sale of realty invalid, but merely
incapable of proof. Where still executory and action is brought and resisted for its performance
(1403, par. 2, 3); but where already wholly or partly executed or where even if not yet, it is
evidenced by a memorandum, in any case where evidence to further demonstrate is presented
and admitted, then the oral sale becomes perfectly good, and becomes a good cause of action
not only to reduce it to the form of a public document, but even to enforce the contract in its
entirety (Art. 1357).
13.
Perfected sale; Justice Gatmaitan correct

In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his
decision of 2 November 1967 as well as his findings of facts therein, and reiterated that the
private memorandum is a perfected sale, as a sale is consensual and consummated by mere
consent, and is binding on and effective between the parties. This statement of the principle is
correct.
14.
Mortgage of lot about to be foreclosed when Poncio agreed to sell the lot to
Carbonell; Ample consideration in the sale
The mortgage on the lot was about to be foreclosed by the bank for failure on the part
of Poncio to pay the amortizations thereon. To forestall the foreclosure and at the same time to
realize some money from his mortgaged lot, Poncio agreed to sell the same to Carbonell at
P9.50 per square meter, on condition that Carbonell [1] should pay (a) the amount of P400.00
to Poncio and (b) the arrears in the amount of P247.26 to the bank; and [2] should assume his
mortgage indebtedness. The bank president agreed to the said sale with assumption of
mortgage in favor of Carbonell and Carbonell accordingly paid the arrears of P247.26. On
January 27, 1955, she paid the amount of P200.00 to the bank because that was the amount that
Poncio told her as his arrearages and Poncio advanced the sum of P47.26 which amount
was refunded to him by Carbonell the following day. This conveyance was confirmed that
same day, January 27, 1955, by the private document which was prepared in the Batanes dialect
by the witness Constancio Meonada, who is also from Batanes like Poncio and Carbonell. The
sale did not include Poncios house on the lot. Poncio was given the right to continue staying
on the land without paying any rental for one year, after which he should pay rent if he could
not still find a place to transfer his house. All these terms are part of the consideration of the
sale to Carbonell. There was ample consideration, and not merely the sum of P200.00, for the
sale of Poncio to Carbonell of the lot in question.
15.
Carbonell, not Infante, victim of injustice and outrage

Poncio, induced by the higher price offered to him by Infante, reneged on his
commitment to Carbonell and told Carbonell, who confronted him about it, that he would not
withdraw from his deal with Infante even if he is sent to jail. The victim, therefore, of
injustice and outrage is the widow Carbonell and not the Infantes, who without moral
compunction exploited the greed and treacherous nature of Poncio, who, for love of money and
without remorse of conscience, dishonored his own plighted word to Carbonell, his own
cousin.
16.
Infante not entitled to recover value of improvements introduced in the lot

The bad faith of Emma Infante from the time she enticed Poncio to dishonor his
contract with
Sales, 2003 ( 47 )
Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a much hinger price
than the price for which he sold the same to Carbonell is clear. Being guilty of bad faith,
both in taking physical possession of the lot and in recording their deed of sale, the Infantes
cannot recover the value of the improvements they introduced in the lot. And after the filing
by Carbonell of the complaint in June 1955, the Infantes had less justification to erect a
building thereon since their title to said lot is seriously disputed by Carbonell on the basis of
a prior sale to her.
17.
Poncio did not remain owner by possessing the lot

Being a valid consensual contract, the document effectively transferred the possession of
the lot to the vendee Carbonell by constitutum possessorium (Article 1500, New Civil
Code); because thereunder the vendor Poncio continued to retain physical possession of the
lot as tenant of the vendee and no longer as owner thereof. More than just the signing of
the document by Poncio and Carbonell with Constancio Meonada as witness to perfect the
contract of sale, the transaction was further confirmed when Poncio agreed to the actual
payment by Carbonell of his mortgage arrearages to the bank on 27 January 1955 and by his
consequent delivery of his own mortgage passbook to Carbonell. If he remained owner and
mortgagor, Poncio would not have surrendered his mortgage passbook to Carbonell.
18.
Poncio does not own another parcel of land with the same area adjacent to Carbonell
It is not shown that Poncio owns another parcel with the same area, adjacent to the lot
of his cousin Carbonell and likewise mortgaged by him to the Republic Savings Bank. The
transaction therefore between Poncio and Carbonell can only refer and does refer to the lot
involved. If Poncio had another lot to remove his house, the document would not have
stipulated to allow him to stay in the sold lot without paying any rent for one year and
thereafter to pay rental in case he cannot find another place to transfer his house.
19.
Carbonell liable to efund amount Infante paid the bank to redeem the mortgage
While Carbonell has the superior title to the lot, she must however refund to Infante
the amount of P1,500, which Infante paid to the Republic Savings Bank to redeem the
mortgage.
20.
Article 546 and 547

The Infante spouses being possessors in bad faith, their rights to the improvements they
introduced on the disputed lot are governed by Articles 546 and 547 of the New Civil Code.
21.
Infantes expenses
Their expenses consisting of P1,500 for draining the property, filling it with 500
cubic meters of garden soil, building a wall around it and installing a gate and P11,929for
erecting a bungalow thereon, are useful expenditures; for they add to the value of the
property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia
vs. Ayala de Roxas, 13 Phil. 45).
21.
Article 546 and 547; Possessor in good faith entitled to right of retention of
useful improvement and right to a refund for useful expenses; Implies contrary to
possessor in bad faith
Under the second paragraph of Article 546, the possessor in good faith can retain
the useful improvements unless the person who defeated him in his possession refunds him
the amount of such useful expenses or pay him the increased value the land may have acquired
by reason thereof. Under Article 547, the possessor in good faith has also the right to remove
the useful improvements if such removal can be done without damage to the land, unless
the person with the superior right elects to pay for the useful improvements or
reimburse the expenses therefor under paragraph 2 of Article 546. These provisions seem to
imply that the possessor in bad faith has neither the right of retention of useful improvements
nor the right to a refund for useful expenses.
22.
Equity; Infantes right of remotion or the value of the improvements (not
current value) if Carbonell appropriates for herself the improvements
Sales, 2003 ( 48 )
If the lawful possessor can retain the improvements introduced by the possessor in bad
faith for pure luxury or mere pleasure only by paying the value thereof at the time he enters
into possession (Article 549 NCC), as a matter of equity, the Infantes, although possessors in
bad faith, should be allowed to remove the improvements, unless Carbonell chooses to pay for
their value at the time Infante introduced said useful improvements in 1955 and 1959.
Infante cannot claim reimbursement for the current value of the said useful improvements;
because they have been enjoying such improvements for about 2 decades without paying any
rent on the land and during which period Carbonell was deprived of its possession and use.
[16]
Carumba vs. CA [G.R. No. L-27587. February
18, 1970.] En Banc, Reyes JBL (J): 10 concurring
Facts: On 12 April 1956, the spouses Amado Canuto and Nemesia Ibasco, by virtue of a Deed
of Sale of Unregistered Land with Covenants of Warranty, sold a parcel of land, partly
residential and partly coconut land with a periphery (area) of 359.09 square meters, more or
less, located in the barrio of Santo Domingo, Iriga, Camarines Sur, to the spouses Amado
Carumba and Benita Canuto, for the sum of P350.00. The referred deed of sale was never
registered in the Office of the Register of Deeds of Camarines Sur, and the Notary, Mr.
Vicente Malaya, was not then an authorized notary public in the place. Besides, it has been
expressly admitted by Carumba that he is the brother-in-law of Canuto, the alleged vendor of
the property sold to him. Canuto is the older brother of the wife of Carumba.
On 21 January 1957, a complaint for a sum of money was filed by Santiago Balbuena (and
wife Angeles Boaquina) against Canuto and Ibasco before the Justice of the Peace Court of
Iriga, Camarines Sur (Civil Case 139) and on 15 April 1967, a decision was rendered in favor
of Balbuena. On 1 October 1958, the ex-officio Sheriff, Justo V. Imperial, of Camarines Sur,
issued a Definite Deed of Sale of the property in favor of Balbuena, which instrument of sale
was registered before the Office of the Register of Deeds of Camarines Sur, on 3 October 1958.
The aforesaid property was declared for taxation purposes in the name of Balbuena in 1958.
The Court of First Instance Camarines Sur (Civil Case 4646), finding that after execution of
the document Carumba had taken possession of the land, planting bananas, coffee and other
vegetables thereon, declared him to be the owner of the property under a consummated sale;
held void the execution levy made by the sheriff, pursuant to a judgment against Carumbas
vendor, Amado Canuto; and nullified the sale in favor of the judgment creditor, Balbuena. The
Court, therefore, declared Carumba the owner of the litigated property and ordered Balbuena
to pay P30.00, as damages, plus the costs.
The Court of Appeals (Case 36094-R), without altering the findings of fact made by the
court of origin, declared that there having been a double sale of the land subject of the suit
Balbuenas title was superior to that of his adversary under Article 1644 of the Civil Code of
the Philippines, since the execution sale had been properly registered in good faith and the sale
to Carumba was not recorded. Hence, the petition for review on certiorari by Amado Carumba.
The Supreme Court reversed the decision of the Court of Appeals and affirmed that of the
CFI; with costs against Santiago Balbuena.
1.
Unregistered land; Article 1544 does not apply

While under the invoked Article 1544, registration in good faith prevails over possession
in the event of a doubt sale by the vendor of the same piece of land to different vendees, said
article is of no application to the present case, even if Balbuena, the later vendee, was
ignorant of the prior sale made by his judgment debtor in favor of Carumba. The reason is
that the purchaser of Unregistered land at a sheriffs execution sale
Sales, 2003 ( 49 )
only steps into the shoes of the judgment debtor, and merely acquires the latters interest in
the property sold as of the time the property was levied upon. This is specifically provided
by section 35 of Rule 39 of the Revised Rules of Court, the second paragraph of said section
specifically providing that Upon the execution and delivery of said (final) deed the
purchaser, redemptioner, or his assignee shall be substituted to and acquire all the right,
title, interest, and claim of the judgment debtor to the property as of the time of the levy,
except as against the judgment debtor in possession, in which case the substitution shall be
effective as of the time of the deed.
2.
Deed of sale (even in private instrument) coupled with possession of registered
land suffice to vest ownership
The deed of sale in favor of Canuto had been executed on 12 April 1955, two years
before the decision against the former owners of the land was rendered in favor of Balbuena
(15 April 1957), and while only embodied in a private document, the same, coupled with the
fact that the buyer (Carumba) had taken possession of the unregistered land sold, sufficed to
vest ownership on the said buyer. When the levy was made by the Sheriff, therefore, the
judgment debtor no longer had dominical interest nor any real right over the land that could
pass to the purchaser at the execution sale. Hence, the latter must yield the land to
petitioner Carumba.
3.
Rule diferent in cases covered by Torrens title

The rule is different in case of lands covered by Torrens titles, where the prior sale is
neither recorded nor known to the execution purchaser prior to the levy; but the land here
in question is admittedly not registered under Act 496.
[17]
Celestino Co v. Collector of Internal Revenue [G.R. No. L-8506.
August 31, 1956.] First Division, Bengzon (J): 7 concurring
Facts: Celestino Co & Company is a duly registered general copartnership doing business
under the trade name of Oriental Sash Factory. From 1946 to 1951 it paid percentage taxes
of 7% on the gross receipts of its sash, door and window factory, in accordance with section
186 of the National Revenue Code imposing taxes on sales of manufactured articles. However
in 1952 it began to claim liability only to the contractors 3% tax (instead of 7%) under
section 191 of the same Code; and having failed to convince the Bureau of Internal Revenue,
it brought the matter to the Court of Tax Appeals, where it also failed. Hence, the appeal.
The Supreme Court affirmed the appealed decision.
1.
Business name and income militates against claim as ordinary contractor

The company has taken all the trouble and expense of registering a special trade name
for its sash business and has ordered company stationery carrying the bold print Oriental Sash
Factory (Celestino Co & Company, Prop.) 926 Raon St. Quiapo, Manila, Tel. No. 33076,
Manufacturers of all kinds of doors, windows, sashes, furnitures, etc. used season-dried and
kiln-dried lumber, of the best quality workmanship. It is unlikely that these act were made
solely for the purpose of supplying the needs for doors, windows and sash of its special and
limited customers. Further, the Company has chosen for its tradename and has offered itself to
the public as a Factory, which means it is out to do business, in its chosen lines on a big
scale. Moreover, as shown from the investigation of the Companys books of accounts (for
transactions covering the period of 1 January 1952 to 30 September 1952), it sold sash, doors
and windows worth P188,754.69. It will be difficult to believe that such amount that ran to six
figures was derived entirely from its few customers who made special orders. Thus, Celestino
Co & Company habitually makes sash, windows and doors, as it has represented in its
stationery and advertisements to the public, and it has admitted by the appellant itself that
the company manufactures.
Sales, 2003 ( 50 )
2.
Construction work contractors defined

Construction work contractors are those who alter or repair buildings, structures,
streets, highways, sewers, street railways, railroads, logging roads, electric, steam or water
plants telegraph and telephone plants and lines, electric lines or power lines, and includes any
other work for the construction, altering or repairing for which machinery driven by
mechanical power is used. (Payton vs. City of Anadardo 64 P. 2d 878, 880, 179 Okl. 68).
3.
Nature of business does not fall in any of the occupation that may be classified
as contractor within the purview of Section 191 of the National Internal Revenue Code
Even if it were to believe that the company does not manufacture ready-made sash,
doors and windows for the public and that it makes these articles only upon special order of its
customers, that does not make it a contractor within the purview of section 191 of the
National Internal Revenue Code. There are no less than fifty occupations enumerated in the
said section of the National Internal Revenue Code subject to percentage tax, not one under
which the business enterprise of petitioner could appropriately fall. It would require a stretch
of the law to make the business of manufacturing sash, doors and windows upon special
order of customers fall under the category of road, building, navigation, artesian well, water
works and other construction work contractors.
4.
Percentage tax imposed under Section 191 of the Tax Code a tax on sales of
service, while tax imposed by Section 186 a tax on original sales of articles
The percentage tax imposed in section 191 of the Tax Code is generally a tax on the sales
of services, in contradiction with the tax imposed in section 186 of the same Code which is a
tax on the original sales of articles by the manufacturer, producer or importer. (Formillezas
Commentaries and Jurisprudence on the National Internal Revenue Code, Vol II, p. 744). The
fact that the articles sold are manufactured by the seller does not exchange the contract from
the purview of section 186 of the National Internal Revenue Code as a sale of articles.
5.
Custom specifcations required by customer does not alter character of business,
the company does not become an employee or servant of the customer
Nobody will say that when a sawmill cuts lumber in accordance with the peculiar
specifications of a customer, sizes not previously held in stock for sale to the public, it thereby
becomes an employee or servant of the customer, not the seller of lumber. The same
consideration applies to this sash manufacturer. The Sash Factory does nothing more than sell
the goods that it mass-produces or habitually makes; sash, panels, mouldings, frames,
cutting them to such sizes and combining them in such forms as its customers may desire.
6.
Installation of window panels not construction work in common parlance

Petitioners idea of being a contractor doing construction jobs is untenable. Nobody
would regard the doing of two window panels as construction work in common parlance.
7.
Contract of sale distinguished from a contract for a piece of work

Article 1467 of the New Civil Code provides that a contract for the delivery at a
certain price of an article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same is on hand at the time
or not, is a contract of sale, but if the goods are to be manufactured specially for the
customer and upon his special order, and not for the general market, it is contract for a
piece of work. In the present case, it is apparent that the Factory did not merely sell its
services to Teodoro & Co. because it also sold the materials. When it sold materials
ordinarily manufactured by it (sash, panels, mouldings), although in such form or
combination as suited the fancy of the purchaser, such new form does not divest the Factory of
its character as manufacturer. Neither does it take the transaction out of the category of sales
under Article 1467 because although the Factory does not, in the ordinary course of its business,
manufacture and keep on stock doors of the kind sold to Teodoro, it could stock and/or probably
had
Sales, 2003 ( 51 )
in stock the sash, mouldings and panels it used therefor.

8.
Contract for a piece of work in Factory happens if the use of extraordinary
or additional equipment is required or if it involves services not generally performed
by it
When the Factory accepts a job that requires the use of extraordinary or additional
equipment, or involves services not generally performed by it, it thereby contracts for a
piece of work, i.e. filling special orders within the meaning of Article 1467. In the present
case, however, the orders exhibited were not shown to be special. They were merely orders for
work, regular work.
9.
Transfers under Section 186 of the Tax Code

If all the work of appellant is only to fill orders previously made, such orders should
not be called special work, but regular work; and supposing for the moment that the
transactions were not sales, they were neither lease of services nor contract jobs by a contractor.
Still, as the doors and windows had been admittedly manufactured by the Sash Factory, such
transactions could be, and should be taxed as transfers thereof under section 186 of the
National Revenue Code.
[18]
Cheng vs. Genato [G.R. No. 129760. December
29, 1998.] Second Division, Martinez (J): 3
concurring
Facts: Ramon B. Genato is the owner of two parcels of land located at Paradise Farms, San Jose
del Monte, Bulacan covered by TCTs T-76.196 (M) and T-76.197 (M) with an aggregate area of
35,821 square meters, more or less. On 6 September 1989, Genato entered into an agreement
with spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the two
parcels of land. The agreement culminated in the execution of a contract to sell for which
the purchase price was P80 per sq. m. The contract was in a public instrument and was duly
annotated at the back of the two certificates of title on the same day. On October 4, 1989, the
Da Jose spouses, not having finished verifying the titles (to confirm the truth and
authenticity of documents, and that no restrictions, limitations, and developments imposed on
and/or affecting the property subject of this contract shall be detrimental to his interest), asked
for and was granted by Genato an extension of another 30 days, or until 5 November 1989.
However, according to Genato, the extension was granted on condition that a new set of
documents is made 7 days from 4 October 1989, which was denied by the Da Jose spouses.
Pending the effectivity of the aforesaid extension period, and without due notice to the Da
Jose spouses, Genato executed an Affidavit to Annul the Contract to Sell on 13 October
1989. Moreover, no annotation of the said affidavit at the back of his titles was made right
away. The affidavit contained the stipulation that the parties agreed that the downpayment of
P950,000 shall be paid 30 days from the execution of the Contract (thus, on 6 October 1989),
that the vendees failed to pay the downpayment (thus, a breach of contract), and that the
affidavit was executed to annul the contract to sell. On 24 October 1989, Ricardo Cheng
went to Genatos residence and expressed interest in buying the subject properties. On that
occasion, Genato showed Cheng copies of his TCTs and the annotations at the back thereof of
his contract to sell with the Da Jose spouses. Genato also showed him the Affidavit to Annul
the Contract to Sell which has not been annotated at the back of the titles. Despite these,
Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato that the
previous contract with the Da Jose spouses will be annulled for which Genato issued a
handwritten receipt. On 25 October 1989, Genato deposited Chengs check. On the same day,
Cheng called up Genato reminding him to register the affidavit to annul the contract to
sell. The following day, acting on Chengs request, Genato caused the registration of the
Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan, Bulacan as
primary entry 262702. While the Da Jose spouses were at the Office of the Registry of Deeds of
Meycauayan, Bulacan on 27 October 1989, they met Genato by coincidence. It was only then
that the Da Jose spouses discovered about the affidavit to annul their contract. The latter were
shocked at the disclosure and protested against the rescission of their contract. After being
reminded that Genato had given the Da Jose spouses an additional 30-day period to finish
their
Sales, 2003 ( 52 )
verification of his titles, that the period was still in effect, and that they were willing and
able to pay the balance of the agreed down payment, later on in the day, Genato decided to
continue the Contract he had with them. The agreement to continue with their contract was
formalized in a conforme letter dated 27 October 1989. Thereafter, Genato advised Cheng of
his decision to continue his contract with the Da Jose spouses and the return of Chengs
P50,000.00 check. Consequently, on 30 October 1989, Chengs lawyer sent a letter to Genato
demanding compliance with their agreement to sell the property to him stating that the
contract to sell between him and Genato was already perfected and threatening legal action.
On 2 November 1989, Genato sent a letter to Cheng enclosing a BPI Cashiers Check for
P50,000 and expressed regret for his inability to consummate his transaction with him.
After having received the letter of Genato on 4 November 1989, Cheng, however, returned
the said check to the former via RCPI telegram dated 6 November 1989, reiterating that our
contract to sell your property had already been perfected. Meanwhile, also on 2 November
1989, Cheng executed an affidavit of adverse claim and had it annotated on the subject
TCTs. On the same day, consistent with the decision of Genato and the Da Jose spouses to
continue with their Contract to Sell, the Da Jose spouses paid Genato the complete down
payment of P950,000 and delivered to him 3 postdated checks (all dated 6 May 1990, the
stipulated due date) in the total amount of P1,865,680 to cover full payment of the balance of
the agreed purchase price.
On 8 December 1989, Cheng instituted a complaint for specific performance with the RTC
Quezon City (Branch 96) to compel Genato to execute a deed of sale to him of the subject
properties plus damages and prayer for preliminary attachment. After trial on the merits, and
on 18 January 1994, the lower court ruled that the receipt issued by Genato to Cheng
unerringly meant a sale and not just a priority or an option to buy. It cannot be true that the
transaction was subjected to some condition or reservation, like the priority in favor of the Da
Jose spouses as first buyer because, if it were otherwise, the receipt would have provided such
material condition or reservation, especially as it was Genato himself who had made the
receipt in his own hand. It also opined that there was a valid rescission of the Contract to
Sell by virtue of the Affidavit to Annul the Contract to Sell. Time was of the essence in the
execution of the agreement between Genato and Cheng, under this circumstance demand,
extrajudicial or judicial, is not necessary. It falls under the exception to the rule provided in
Article 1169 of the Civil Code. The right of Genato to unilaterally rescind the contract is said
to be under Article 1191 of the Civil Code. Additionally, after reference was made to the
substance of the agreement between Genato and the Da Jose spouses, the lower court also
concluded that Cheng should be preferred over the Da Jose spouses in the purchase of the
subject properties. The trial court rendered its decision declaring the contract to sell dated 6
September 1989 executed between Genato, as vendor, and Spouses Da Jose, as vendees,
resolved and rescinded in accordance with Article 1191, Civil Code, by virtue of Genatos
affidavit to annul contract to sell dated 13 October 1989 and as the consequence of the
spouses failure to execute within 7 days from 4 October 1989 another contract to sell
pursuant to their mutual agreement with Genato; ordering Genato to return to the spouses
the sum of P1 million plus interest at the legal rate from 2 November 1989 until full
payment; directing Genato to return to the spouses the 3 postdated checks immediately upon
finality of this judgment; commanding Genato to execute with and in favor of Cheng, as
vendee, a deed of conveyance and sale of the real properties described and covered in TCTs T76-196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan, Meycauayan Branch,
at the rate of P70/square meter, less the amount of P50,000.00 already paid to Genato, which
is considered as part of the purchase price, with the Cheng being liable for payment of the
capital gains taxes and other expenses of the transfer pursuant to the agreement to sell dated
24 October 1989; and ordering Genato to pay Cheng and the spouses P50,000.00, as nominal
damages, to Cheng; P50,000.00, as nominal damages, to the spouses; P20,000.00, as and for
attorneys fees, to Cheng; P20,000.00 as and for attorneys fees, to the spouses; and the cost of
the suit.
Not satisfied with the decision, Genato and Da Jose spouses appealed to the appellate court
(in CA-GR 44706) which, on 7 July 1997, reversed such judgment and ruled that the prior
contract to sell in favor of the Da Jose spouses was not validly rescinded; that the subsequent
contract to sell between Genato and Cheng, embodied in the handwritten receipt, was
without force and effect due to the failure to rescind the prior
Sales, 2003 ( 53 )
contract; and that Cheng should pay damages to Genato and the spouses herein being found to
be in bad faith. The Court of Appeals reversed and set aside the appealed decision ordering the
dismissal of the complaint; the cancellation of the annotations of the Genatos Affidavit to
Annul Contract to Sell and Chengs Notice of Adverse Claim in the subject TCTs namely,
TCT No. T-76.196 (M) and TCT No. T-76.197 (M); payment by the spouses of the remaining
balance of the purchase price pursuant to their agreement with the Genato to suspend
encashment of the three post-dated checks issued since 1989; execution by the Genato of the
Deed of Absolute Sale over the subject two lots in favor of the spouses; return by Genato of
the P50,000.00 paid to him by Cheng; and payment by Cheng of moral damages to the spouses
of P100,000, exemplary damages of P50,000, attorneys fees of P50,000, and costs of suit; and
to Genato, of P100,000 in exemplary damages, P50,000 in attorneys fees. The amounts
payable to Genato may be compensated by Cheng with the amount of the check Genato has to
pay Cheng. Hence, the petition for review on certiorari.
The Supreme Court denied the instant petition for review and affirmed the assailed decision en toto.
1.
Contract to sell; non-payment of purchase price not a breach

In a Contract to Sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that prevents
the obligation of the vendor to convey title from acquiring an obligatory force. It is one where
the happening of the event gives rise to an obligation. Thus, for its non-fulfillment there will
be no contract to speak of, the obligor having failed to perform the suspensive condition
which enforces a juridical relation. In fact with this circumstance, there can be no
rescission of an obligation that is still non-existent, the suspensive condition not having
occurred as yet.
2.
Breach contemplated in Article 1191

The breach contemplated in Article 1191 of the New Civil Code is the obligors
failure to comply with an obligation already extant, not a failure of a condition to render
binding that obligation.
3.
No default can be ascribed to the spouses

No default can be ascribed to the Da Jose spouses since the 30-day extension period
has not yet expired. The Da Jose spouses contention that no further condition was agreed when
they were granted the 30-days extension period from 7 October 1989 in connection with a
clause of their contract to sell dated 6 September 1989 should be upheld: firstly, If this
were not true, Genato could not have been persuaded to continue his contract with them and
later on agree to accept the full settlement of the purchase price knowing fully well that he
himself imposed such sine qua non condition in order for the extension to be valid;
secondly, Genato could have immediately annotated his affidavit to annul the contract to sell
on his title when it was executed on 13 October 1989 and not only on 26 October 1989 after
Cheng reminded him of the annotation; thirdly, Genato could have sent at least a notice of
such fact, there being no stipulation authorizing him for automatic rescission, so as to finally
clear the encumbrance on his titles and make it available to other would be buyers. It likewise
settles the holding of the trial court that Genato needed money urgently.
4.
Affidavit to annul contract uncalled for; Conditional obligation does not exist
if suspensive condition does not take place
Even assuming in gratia argumenti that the Da Jose spouses defaulted, in their Contract
to Sell, the execution by Genato of the affidavit to annul the contract is not even called for.
For with or without the affidavit their non-payment to complete the full downpayment of
the purchase price ipso facto avoids their contract to sell, it being subjected to a suspensive
condition. When a contract is subject to a suspensive condition, its birth or efectivity can
take place only if and when the event which constitutes the condition happens or is fulfilled.
If the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed.
5.
Notice to other party required to cancel contract; Act always provisional

Genato is not relieved from the giving of a notice, verbal or written, to the Da Jose spouses
for his
Sales, 2003 ( 54 )
decision to rescind their contract. In many cases, even though the validity of a stipulation in a
contract to sell authorizing automatic rescission for a violation of its terms and conditions is
upheld, at least a written notice must be sent to the defaulter informing him of the same. The
act of a party in treating a contract as cancelled should be made known to the other. For such
act is always provisional. It is always subject to scrutiny and review by the courts in case the
alleged defaulter brings the matter to the proper courts.
6.
Extrajudicial steps to protect interest an exercise of due diligence to minimize
damages
In University of the Philippines vs. De Los Angeles, it was held that the party who
deems the contract violated may consider it resolved or rescinded, and act accordingly,
without previous court action, but it proceeds at its own risk. For it is only the final judgment
of the corresponding court that will conclusively and finally settle whether the action taken
was or was not correct in law. But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a judgment before taking
extrajudicial steps to protect its interest. Otherwise, the party injured by the others breach
will have to passively sit and watch its damages accumulate during the pendency of the suit
until the final judgment of rescission is rendered when the law itself requires that he should
exercise due diligence to minimize its own damages (Civil Code. Article 2203).
7.
Notice required to prevent defaulting party from assuming ofer still in effect
The rule validates, both in equity and justice, contracts, in order to avoid and prevent
the defaulting party from assuming the offer as still in effect due to the obligees
tolerance for such non-fulfillment. Resultantly, litigations shall be prevented and the relations
among would-be parties may be preserved.
8.
Issue not raised during trial cannot be raised for the first time on appeal
An issue which was not raised during the trial in the court below cannot be raised for the
first time on appeal. Issues of fact and arguments not adequately brought to the attention of the
trial court need not be and ordinarily will not be considered by a reviewing court as they cannot
be raised for the first time on appeal. In the present case, Cheng alleged that the P50,000 was
earnest money, but in his testimony, offered to prove the transaction was actually a perfected
contract to sell. Both courts correctly held that the receipt which was the result of their
agreement is a contract to sell. This was, in fact Chengs contention in his pleadings before said
courts. The patent twist only operates against Chengs posture which is indicative of the
weakness of his claim.
9.
Receipt, even if a conditional contract of sale does not have any obligatory force
Even if it is assumed that the receipt is to be treated as a conditional contract of sale, it
did not acquire any obligatory force since it was subject to suspensive condition that the
earlier contract to sell between Genato and the Da Jose spouses should first be cancelled or
rescinded, a condition never met, as Genato, to his credit, upon realizing his error, redeemed
himself by respecting and maintaining his earlier contract with the Da Jose spouses.
10.
Receipt does not contain requisites of a valid contract of sale

A careful reading of the receipt alone would not even show that a conditional contract
of sale has been entered by Genato and Cheng. When the requisites of a valid contract of sale
are lacking in said receipt, therefore the sale is neither valid or enforceable.
11.
Coronel vs. CA not foursquare

The factual milieu in Coronel is not on all fours with those in the present case. In
Coronel, the Court found that the petitioners therein clearly intended to transfer title to the
buyer which petitioner themselves admitted in their pleading. The agreement of the parties
therein was definitively outlined in the Receipt of Down Payment both as to property, the
purchase price, the delivery of the seller of the property and the manner of the transfer of
title subject to the specific condition that upon the transfer in their names of the subject
property the Coronels will execute the deed of absolute sale. Whereas, in the present case, even
by a
Sales, 2003 ( 55 )
careful perusal of the receipt alone, such kind of circumstances cannot be ascertained
without however resorting to the exceptions of the Rule on Parol Evidence.
12.

Article 1544 provides that If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property. Should it be immovable property,
the ownership shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property. Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in possession; and in the absence thereof, to the person who
presents the oldest title, provided there is good faith
13.
Article 1544 is not apropos to present case, according to Court of Appeals

A meticulous reading of the Article 1544 shows that said law is not apropos to the
present case. This provision connotes that the following circumstances must concur: (a) The
two (or more) sales transactions in issue must pertain to exactly the same subject matter, and
must be valid sales transactions. (b) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each represent conflicting interests; and (c) The two
(or more) buyers at odds over the rightful ownership of the subject matter must each have
bought from the very same seller. These situations obviously are lacking in a contract to sell
for neither a transfer of ownership nor a sales transaction has been consummated. The contract
to be binding upon the obligee or the vendor depends upon the fulfillment or non-fulfillment
of an event.
15.
Article 1544 applies in the present case, according to Supreme Court: First in
time, stronger in right
The governing principle of Article 1544, Civil Code, applies in the present situation.
Jurisprudence teaches us that the governing principle is PRIMUS TEMPORE, PORTIOR JURE
(first in time, stronger in right). For not only was the contract between Genato and the spouses
first in time; it was also registered long before Chengs intrusion as a second buyer. This
principle only applies when the special rules provided in Article 1544 of the Civil Code do
not apply or fit the specific circumstances mandated under said law or by jurisprudence
interpreting the article.
16.
Article 1544, How second buyer can displace first buyer

The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to
displace the first buyer are: (1) that the second buyer must show that he acted in good faith
(i.e. in ignorance of the first sale and of the first buyers rights) from the time of acquisition
until title is transferred to him by registration or failing registration, by delivery of
possession; (2) the second buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full ownership through prior
registration as provided by law. In the present case, knowledge gained by Cheng of the
first transaction between the Da Jose spouses and Genato defeats his rights even if he is first to
register the second transaction, since such knowledge taints his prior registration with bad faith.
17.
Knowledge of first buyer of the second transaction does not defeat his rights
The knowledge gained by the Da Jose spouses, as first buyers, of the new agreement
between Cheng and Genato will not defeat their rights as first buyers except where Cheng,
as second buyer, registers or annotates his transaction or agreement on the title of the subject
properties in good faith ahead of the Da Jose spouses. Moreover, although the Da Jose spouses, as
first buyers, knew of the second transaction it will not bar them from availing of their rights
granted by law, among them, to register first their agreement as against the second buyer.
18.
Registration defined
Registration, as defined by Soler and Castillo, means any entry made in the books of
the registry, including both registration in its ordinary and strict sense, and cancellation,
annotation, and even marginal
Sales, 2003 ( 56 )
notes. In its strict acceptation, it is the entry made in the registry which records solemnly and
permanently the right of ownership and other real rights.
19.
Inscription of Deed of Sale in registry of property on original document a

registration of sale When a Deed of Sale is inscribed in the registry of property on the
original document itself, what was
done with respect to said entries or annotations and marginal notes amounted to a registration
of the sale. In the present case, there is no reason why the annotation made by the Da Jose
spouses with respect to their Contract to Sell dated 6 September 1989 should not be given
priority in right.
20.
Good faith in registration for right to be enforceable

Good faith must concur with registration for such prior right to be enforceable. In the
present case, the annotation made by the Da Jose spouses on the titles of Genato of their
Contract To Sell more than satisfies this requirement. Whereas in the case of Genatos
agreement with Cheng such is unavailing. For even before the receipt was issued to Cheng
information of such pre-existing agreement has been brought to his knowledge which did not
deter him from pursuing his agreement with Genato. Since Cheng was fully aware, or could
have been if he had chosen to inquire, of the rights of the Da Jose spouses under the Contract to
Sell duly annotated on the TCTs of Genato, it becomes unnecessary to further elaborate in detail
the fact that he is indeed in bad faith in entering into such agreement.
21.
Knowledge of defect in tile cannot claim good faith against another interest
In Leung Yee vs. F . L . Strong Machinery Co., it was stated that One who purchases
real estate with knowledge of a defect of title in his vendor cannot claim that he has acquired
title thereto in good faith as against an interest therein; and the same rule must be applied to
one who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor.
A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard,
and then claim that he acted in good faith under the belief that there was no defect in the
title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of
his eyes to the possibility of the existence of a defect in his vendors title, will not make
him an innocent purchaser for value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defect as would have led to its
discovery had he acted with that measure of precaution which may reasonably be required
of a prudent man in a like situation. Good faith, or lack of it, is in its last analysis a
question of intention; but in ascertaining the intention by which one is actuated on a given
occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by
which alone the inward motive may, with safety, be determined. So it is that the honesty of
intention, the honest lawful intent, which constitutes good faith implies a freedom from
knowledge and circumstances which ought to put a person on inquiry, and so it is that proof of
such knowledge overcomes the presumption of good faith in which the courts always indulge in
the absence of the proof to the contrary. Good faith, or the want of it, is not a visible, tangible
fact that can be seen or touched, but rather a state or condition of mind which can only be
judge of by actual or fancied tokens or signs. (Wilder vs. Gilman, 55 Vt. 504, 505; Cf.
Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La.
Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119 Mich., 8, 10, 17)
22.
Bad faith basis for damages

Damages were awarded by the appellate court on the basis of its finding that Cheng
was in bad faith when he filed the suit for specific performance knowing fully well that his
agreement with Genato did not push through. Such bad faith, coupled with his wrongful
interference with the contractual relations between Genato and the Da Jose spouses, which
culminated in his filing of the present suit and thereby creating what the counsel for Genato
and the spouses describes as a prolonged and economically unhealthy gridlock on both the
land itself and their rights provides ample basis for the damages awarded. Based on
these overwhelming evidence of bad faith on the part of Cheng, the award of damages made by
the appellate court is in order.
Sales, 2003 ( 57 )
[19]
CIR v. Engineering Equipment and Supply [G.R. No. L-27044.
June 30, 1975.] Engineering Equipment and Supply v. CIR [G.R. No. L27452. June 30, 1975.] First Division, Esguerra (J): 4 concurring
Facts: Engineering Equipment and Supply Co. is an engineering and machinery firm; and
being an operator of an integrated engineering ship, is engaged in the design and installation
of central type air conditioning system, pumping plants and steel fabrications. On 27 July
1956, one Juan de la Cruz, wrote the then Collector, now Commissioner, of Internal Revenue
denouncing the Company for tax evasion by misdeclaring its imported articles and failing to
pay the correct percentage taxes due thereon in connivance with its foreign suppliers. The
Company was likewise denounced to the Central Bank for alleged fraud in obtaining its dollar
allocations. Acting on these denunciations, a raid and search was conducted by a joint team of
Central Bank, (CB), National Bureau of Investigation (NBI) and Bureau of Internal Revenue
(BIR) agents on 27 September 1956, on which occasion voluminous records of the firm were
seized and confiscated.
On 30 September 1957, revenue examiners reported and recommended to the then
Collector, now Commissioner, of Internal Revenue that the Company be assessed for
P480,912.01 as deficiency advance sales tax on the theory that it misdeclared its importation
of air conditioning units and parts and accessories thereof which are subject to tax under
Section 185(m) 1 of the Tax Code, instead of Section 186 of the same Code. This assessment
was revised on 23 January 1959, in line with the observation of the Chief, BIR Law Division,
and was raised to P916,362.56 representing deficiency advance sales tax and manufacturers
sales tax, inclusive of the 25% and 50% surcharges. On 3 March 1959, the Commissioner
assessed against, and demanded upon, the Company payment of the increased amount and
suggested that P10,000 be paid as compromise in extrajudicial settlement of the Companys
penal liability for violation of the Tax Code. The firm, however, contested the tax assessment
and requested that it be furnished with the details and particulars of the Commissioners
assessment. The Commissioner replied that the assessment was in accordance with law and the
facts of the case.
On 30 July 1959, the Company appealed the case to the Court of Tax Appeals (CTA) and during
the pendency of the case the investigating revenue examiners reduced the Companys
deficiency tax liabilities from P916,362.65 to P740,587.86, based on findings after
conferences had with the Companys Accountant and Auditor. On 29 November 1966, the
CTA rendered its decision, modifying the decision appealed from, declaring the Company as
contractor exempt from the deficiency manufacturers sales tax covering the period from 1 June
1948 to 2 September 1956 but ordered said company to pay the Commissioner, or his collection
agent, the sum of P174,141.62 as compensating tax and 25% surcharge for the period from 1953
to September 1956; With costs against the Company.
The Commissioner, not satisfied with the decision of the CTA, appealed to the Supreme Court
on 18 January 1967, (GR L-27044). On the other hand, the Company, on 4 January 1967, filed
with the CTA a motion for reconsideration; which was denied on 6 April 1967, prompting the
Company to file also with the Supreme Court its appeal (GR L-27452). Since the two cases
involve the same parties and issues, the Court decided to consolidate and jointly decide them.
The Supreme Court affirmed the decision appealed from with modification that the Company
is also made liable to pay the 50% fraud surcharge.
1.
Manufacturer defned
Section 194 of the Tax code provides that Manufacturer includes every person who
by physical or chemical process alters the exterior texture or form or inner substance of any
raw material or manufactured or
Sales, 2003 ( 58 )
partially manufactured products in such manner as to prepare it for a special use or uses to
which it could not have been put in its original condition, or who by any such process alters
the quality of any such material or manufactured or partially manufactured product so as to
reduce it to marketable shape, or prepare it for any of the uses of industry, or who by any such
process combines any such raw material or manufactured or partially manufactured products
with other materials or products of the same or of different kinds and in such manner that the
finished product of such process of manufacture can be put to special use or uses to which such
raw material or manufactured or partially manufactured products in their original condition
could not have been put, and who in addition alters such raw material or manufactured or
partially manufactured products, or combines the same to produce such finished products for
the purpose of their sale or distribution to others and not for his own use or consumption.
2.
Test to distinguish contract of sale and contract for work, labor and materials
The distinction between a contract of sale and one for work, labor and materials is
tested by the inquiry whether the thing transferred is one not in existence and which never
would have existed but for the order of the party desiring to acquire it, or a thing which would
have existed and has been the subject of sale to some other persons even if the order had not
been given. If the article ordered by the purchaser is exactly such as the plaintiff makes and
keeps on hand for sale to anyone, and no change or modification of it is made at defendants
request, it is a contract of sale, even though it may be entirely made after, and in consequence
of, the defendants order for it.
3.
Contract of sale distinguished from a contract for a piece of work

The New Civil Code distinguishes a contract of sale from a contract for a piece of
work. Article 1467 provides that a contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business manufactures or procures for the
general market, whether the same is on hand at the time or not, is a contract of sale, but if the
goods are to be manufactured specially for the customer and upon his special order and not for
the general market, it is a contract for a piece of work.
4.
Contractor defined; Test to determine contractor
The word contractor has come to be used with special reference to a person who, in
the pursuit of the independent business, undertakes to do a specific job or piece of work for
other persons, using his own means and methods without submitting himself to control as to
the petty details. (Araas, Annotations and Jurisprudence on the National Internal Revenue
Code, p. 318, par. 191(2), 1970 Ed.) The true test of a contractor as was held in the cases of
Luzon Stevedoring Co., vs. Trinidad 43, Phil. 803, 807-808, and La Carlota Sugar Central vs.
Trinidad 43, Phil. 816, 819, would seem to be that he renders service in the course of an
independent occupation, representing the will of his employer only as to the result of his work,
and not as to the means by which it is accomplished.
5.
Engineering Equipment Co. is a contractor and not a manufacturer

The Company did not manufacture air conditioning units for sale to the general public,
but imported some items (as refrigeration compressors in complete set, heat exchangers or
coils), which were used in executing contracts entered into by it. The Company fabricates,
assembles, supplies and installs in the buildings of its various customers the central type
air conditioning system; prepares the plans and specifications therefor which are distinct
and different from each other; the air conditioning units and spare parts or accessories
thereof used are not the window type of air conditioner which are manufactured,
assembled and produced locally for sale to the general market; and the imported air
conditioning units and spare parts or accessories thereof are supplied and installed upon
previous orders of its customers conformably with their needs and requirements. The
facts and circumstances support the theory that the Company is a contractor rather than a
manufacturer.
6.
Engineering Equipment Co. subject to contractors tax (Section 191); As it
imports goods not subject to sales tax, it also liable to 30% compensation tax (Section
190 in relation to Section 18[m], but without the 50% mark up provided in Section
183[b]
Sales, 2003 ( 59 )
The Company, being a contractor and not a manufacturer, is subject to the contractors
tax prescribed by Section 191 of the Code and not to the advance sales tax imposed by Section
185(m) in relation to Section 194 of the same Code. Since it has been proved that the
Company imported air conditioning units parts or accessories thereof for use in its
construction business and these items were never sold resold bartered or exchanged the
Company should be held liable to pay taxes prescribed under Section 190 of the Code. This
compensating tax is not a tax on the importation of goods but a tax on the use of imported
goods not subject to sales tax. The Company, therefore, should be held liable to the payment
of 30% compensating tax in accordance with Section 190 of the Tax Code in relation to
Section 185(m) of the same, but without the 50% mark up provided in Section 183(b).
7.
Air conditioning equipment grouped into 2 classifcations, unitary and central system
There is a great variety of equipment in use to do air conditioning. Some devices are
designed to serve a specific type of space; others to perform a specific function; and still
others as components to be assembled into a tailor-made system to fit a particular building.
Generally, however, they may be grouped into two classifications, unitary and central system.
The unitary equipment classification includes those designs such as room air conditioner,
where all of the functional components are included in one or two packages, and installation
involves only making service connection such as electricity, water and drains. Centralstation systems, often referred to as applied or built-up systems, require the installation of
components at different points in a building and their interconnection. The room air
conditioner is a unitary equipment designed specifically for a room or similar small space. It
is unique among air conditioning equipment in two respects: It is in the electrical appliance
classification, and it is made by a great number of manufacturers (Engineering handbook by LC
Morrow). The central type air conditioning system is an engineering job that requires
planning and meticulous layout due to the fact that usually architects assign definite space
and usually the spaces they assign are very small and of various sizes, in buildings
dissimilar to existing buildings. The window type air conditioner is a sort of compromise; it
cannot control humidity to the desired level; rather the manufacturers, by hit and miss, were
able to satisfy themselves that the desired comfort within a room could be made by a definite
setting of the machine as it comes from the factory; whereas the central type system
definitely requires an intelligent operator.
8.
Celestino Co v. CIR, Advertising Associates v. Collector of customs, Manila
Trading v. City of Manila not applicable
The Company did not and was not engaged in the manufacture of air conditioning
units but had its services contracted for the installation of a central system. The cases cited by
the Commissioner (Advertising Associates, Inc. vs. Collector of Customs, 97, Phil. 636;
Celestino Co & Co. vs. Collector of Internal Revenue, 99 Phil. 841 and Manila Trading &
Supply Co. vs. City of Manila, 56 O.G. 3629), are not in point. Neither are they applicable
because the facts in all the cases cited are entirely different.
In Celestino Co, the Court held the taxpayer to be a manufacturer rather than a
contractor of sash, doors and windows manufactured in its factory. From the very start,
Celestino Co intended itself to be a manufacturer of doors, windows, sashes etc. as it did
register a special trade name for its sash business and ordered company stationery carrying the
bold print ORIENTAL SASH FACTORY (CELESTINO CO AND COMPANY, PROP.) 926 Raon
St., Quiapo, Manila, Tel. No. etc., Manufacturers of All Kinds of Doors, Windows . . .
Likewise, Celestino Co never put up a contractors bond as required by Article 1729 of the
Civil Code. Also, as a general rule, sash factories receive orders for doors and windows of special
design only in particular cases, but the bulk of their sales is derived from ready-made doors and
windows of standard sizes for the average home, which sales were reflected in their books
of accounts totalling P118,754.69 for the period of only nine (9) months. The Court found
said sum difficult to have been derived from its few customers who placed special orders for
these items.
In the present case, the Company advertised itself as Engineering Equipment and Supply
Company, Machinery Mechanical Supplies, Engineers, Contractors, 174 Marques de
Comillas, Manila and not as manufacturers. It likewise paid the contractors tax on all the
contracts for the design and construction of central system. Similarly, ot did not have readymade air conditioning units for sale.
Sales, 2003 ( 60 )
9.
SM Lawrence Co. v. McFarland, CIR of the State of Tennessee and McCanless
is on all fours with present case
The case of S.M. Lawrence Co. vs. McFarland, Commissioner of Internal Revenue of
the State of Tennessee and McCanless, 355 SW 2d, 100, 101, is the one on all fours with the
present case, where the cause presents the question of whether one engaged in the business of
contracting for the establishment of air conditioning system in buildings, which work
requires, in addition to the furnishing of a cooling unit, the connection of such unit with
electrical and plumbing facilities and the installation of ducts within and through walls,
ceilings and floors to convey cool air to various parts of the building, is liable for sale or use
tax as a contractor rather than a retailer of tangible personal property. Appellee took the
position that appellant was not engaged in the business of selling air conditioning equipment as
such but in the furnishing to its customers of completed air conditioning systems pursuant to
contract, was a contractor engaged in the construction or improvement of real property, and
as such was liable for sales or use tax as the consumer of materials and equipment used in the
consummation of contracts, irrespective of the tax status of its contractors. To transmit the
warm or cool air over the buildings, the appellant installed system of ducts running from the
basic units through walls, ceilings and floors to registers. The contract called for completed
air conditioning systems which became permanent part of the buildings and improvements to
the realty. The Court held the appellant a contractor which used the materials and the
equipment upon the value of which the tax herein imposed war levied in the performance of
its contracts with its customers, and that the customers did not purchase the equipment and
have the same installed.
10.
Engineering Equipment had intent to misdeclare its importation as
evidenced by its communications; Company liable to 50% fraud surcharge
The communications (between the Company and various suppliers such as Trane
Co., Acme Industries Inc., and Owens-Corning Fiberglass Corp.) presented as exhibits in
the case were strongly indicative of the fraudulent intent of the Company to misdeclare its
importation of air conditioning units and spare parts or accessories thereof to evade payment
of the 30% tax. Since the commission of fraud is altogether too glaring, the Court cannot
agree with the CTA in absolving the Company from the 50% fraud surcharge, otherwise it will
be tantamount to giving premium to a plainly intolerable act of tax evasion.
11.
Company liable to 25% compensation tax; Section 190 as amended

The original text of Section 190 of Commonwealth Act 466, otherwise know as the
National Internal Revenue Code, as amended by CA 503, effective on 1 October 1939, does
not provide for the filing of a compensating tax return and payment of the 25% surcharge for
late payment thereof. Under the original text of Section 190 of the Tax Code, as amended by
CA 503, the contention of the Company that it is not subject to the 25% surcharge appears to
be legally tenable. However, Section 190 of the Tax Code was subsequently amended by RA 48,
253, 361, 1511 and 1612 effective 1 October 1946, 1 July 1948, 9 June 1949, 16 June 1956
and 24 August 1956 respectively, which invariably provides among others, that if any
article withdrawn from the customhouse or the post office without payment of the
compensating tax is subsequently used by the importer for other purposes corresponding entry
should be made in the looks of accounts if any are kept or a written notice thereof sent to
the Collector of Internal Revenue and payment of the corresponding compensating tax
made within 30 days from the date of such entry or notice and if tax is not paid within such
period the amount of the tax shall be increased by 25% the increment to be a part of the tax,
and that since the imported air conditioning units and spare parts or accessories thereof are
subject to the compensating tax of 30% as the same were used in the construction business of
Engineering, it is incumbent upon the latter to comply with the aforequoted requirement of
Section 190 of the Code, by posting in its books of accounts or notifying the Collector of
Internal Revenue that the imported articles were used for other purposes within 30 days. . . .
Consequently, as the 30% compensating tax was not paid by petitioner within the time
prescribed by Section 190 of the Tax Code as amended, it is therefore subject to the 25%
surcharge for delinquency in the payment of the said tax.
Sales, 2003 ( 61 )
12.
Prescription not yet set in; Prescription of tax assessment is 10 years if
based on false or fraudulent return to evade tax
A review of the record reveals that the Company filed a tax return or declaration with
the Bureau of Customs before it paid the advance sales tax of 7%, and the declaration filed
reveals that it did in fact misdeclare its importations. Section 332 (a) of the Tax Code
therefore is applicable. Section 332 (a) provides for the exceptions as to period of limitation of
assessment and collection of taxes, providing that (a) in the case of a false or fraudulent
return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be begun without assessment at any time
within ten years after the discovery of the falsity, fraud or omission. Thus,
considering the preponderance of evidence of fraud with the intent to evade the higher rate of
percentage tax due from the Company, the tax assessment was made within the period
prescribed by law and prescription had not set in against the Government.
[20]
Coronel v. CA [G.R. No. 103577. October
7, 1996.] Third division, Melo (J): 3
concurring, 1 took no part
Facts: On 19 January 1985, Romulo Coronel, et al. executed a document entitled
Receipt of Down Payment in favor of Ramona Patricia Alcaraz for P50,000 downpayment
of the total amount of P1.24M as purchase price for an inherited house and lot (TCT 119627,
Registry of Deeds of Quezon City), promising to execute a deed of absolute sale of said
property as soon as such has been transferred in their name. The balance of P1.19M is due
upon the execution of said deed. On the same date, Concepcion D. Alcaraz, mother of Ramona,
paid the down payment of P50,000.00. On 6 February 1985, the property originally registered
in the name of the Coronels father was transferred in their names (TCT 327043). However,
on 18 February 1985, the Coronels sold the property to Catalina B. Mabanag for
P1,580,000.00 after the latter has paid P300,000.00. For this reason, Coronels canceled and
rescinded the contract with Alcaraz by depositing the down payment in the bank in trust
for Alcaraz.
On 22 February 1985, Alcaraz filed a complaint for specific performance against the Coronels
and caused the annotation of a notice of lis pendens at the back of TCT 327403. On 2 April
1985, Mabanag caused the annotation of a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon City. On 25 April 1985, the Coronels executed
a Deed of Absolute Sale over the subject property in favor of Mabanag. On 5 June 1985, a new
title over the subject property was issued in the name of Mabanag under TCT 351582.
In the course of the proceedings, the parties agreed to submit the case for decision solely on
the basis of documentary exhibits. Upon submission of their respective memoranda and the
corresponding comment or reply thereto, and on 1 March 1989, judgment was handed down
in favor of the plaintiffs, ordering the defendant to execute a deed of absolute sale of the
land covered by TCT 327403 and canceling TCT 331582 and declaring the latter without force
and effect. Claims for damages by plaintiffs and counterclaims by the defendants and
intervenors were dismissed. A motion for reconsideration was thereafter filed, which was
denied.
Petitioners interposed an appeal, but on 16 December 1991, the CA rendered its decision fully
agreeing with the trial court. Hence, the instant petition.
The Supreme Court dismissed the petition and affirmed the appealed judgment.
1.
Receipt of downpayment a binding contract; Meeting of the minds

The document embodied the binding contract between Ramona Patricia Alcaraz and the
heirs of
Sales, 2003 ( 62 )
Constancio P. Coronel, pertaining to a particular house and lot covered by TCT 119627, as
defined in Article 1305 of the Civil Code of the Philippines.
2.
Definition of contract of sale

The Civil Code defines a contract of sale, in Article 1458, as 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. Sale, thus, by its very
nature a consensual contract because it is perfected by mere consent.
3.
Elements of contract of sale; Contract to sell not contract of sale due to the lack
of first element; Distinction necessary when property is sold to a third person
The essential elements of a contract of sale are (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. A Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. It is essential to distinguish
between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third
person.
4.
Contract to sell: Seller agrees to sell property when purchase price is delivered
to him; seller reserves transfer of title until fulfllment of suspensive condition
(payment)
In a contract to sell, the prospective seller explicitly reserves the transfer of title to
the prospective buyer, meaning, the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell until the happening of an
event, which for present purposes taken to be the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when
the entire amount of the purchase price is delivered to him. In other words the full payment of
the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents
the obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.
5.
Contract to sell: failure to deliver payment is not a breach but event
preventing vendor to convey title; obligation demandable upon full payment of
price; promise binding if supported by payment distinct from the price
When a contract is a contract to sell where the ownership or title is retained by the seller
and is not to pass until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach, casual or serious, but simply an
event that prevented the obligation of the vendor to convey title from acquiring binding force
(Roque v. Lapuz). Upon the fulfillment of the suspensive condition which is the full payment of
the purchase price, the prospective sellers obligation to sell the subject property by entering
into a contract of sale with the prospective buyer becomes demandable as provided in
Article 1479 of the Civil Code (A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.) 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.
6.
Contract to sell defned

A contract to sell be defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery thereof to
the prospective buyer, binds himself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price.
7.
Contract to sell not a conditional contract of sale (existence of first element)

A contract to sell may not even be considered as a conditional contract of sale where
the seller may likewise reserve title to the property subject of the sale until the fulfillment of
a suspensive condition, because
Sales, 2003 ( 63 )
in a conditional contract of sale, the first element of consent is present, although it is

conditioned upon the happening of a contingent event which may or may not occur.
8.
Conditional contract of sale: if suspensive condition not fulflled, pefection
abated; if fulfilled, contract of sale perfected and ownership automatically transfers to
buyer
If the suspensive condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777
[1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery of the property subject of the
sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
9.
Contract to sell: if suspensive condition fulflled, seller has still to convey title
even if property is previously delivered
In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The prospective seller
still has to convey title to the prospective buyer by entering into a contract of absolute sale.
10.
Contract to sell: there is no double sale; if property sold to another, the seller
may be sued for damages
In a contract to sell, there being no previous sale of the property, a third person buying
such property despite the fulfillment of the suspensive condition such as the full payment of
the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property. There is no double sale in such
case. Title to the property will transfer to the buyer after registration because there is no defect
in the owner-sellers title per se, but the latter, of course, may be sued for damages by the
intending buyer.
11.
Conditional contract of sale: sale becomes absolute upon fulfllment of
condition; if property sold to another, first buyer may seek reconveyance
In a conditional contract of sale, upon the fulfillment of the suspensive condition, the
sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there
had been previous delivery of the subject property, the sellers ownership or title to the
property is automatically transferred to the buyer such that, the seller will no longer have any
title to transfer to any third person. Applying Article 1544 of the Civil Code, such second
buyer of the property who may have had actual or constructive knowledge of such defect in
the sellers title, or at least was charged with the obligation to discover such defect, cannot
be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a
title is issued to the second buyer, the first buyer may seek reconveyance of the property
subject of the sale.
12.
Interpretation of contracts, natural and meaning of words unless technical
meaning was intended
It is a canon in the interpretation of contracts that the words used therein should be
given their natural and ordinary meaning unless a technical meaning was intended (Tan vs.
Court of Appeals, 212 SCRA 586 [1992]).
13.
Document entitled Receipt of Down Payment indicates Conditional Contract
of Sale and not contract to sell
The agreement could not have been a contract to sell because the sellers made no express
reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance
which prevented the parties from entering into an absolute contract of sale pertained to the
sellers themselves (the certificate of title was not in their names) and not the full payment
of the purchase price. Under the established facts and circumstances of the case, had the
certificate of title been in the names of petitioners-sellers at that time, there
Sales, 2003 ( 64 )
would have been no reason why an absolute contract of sale could not have been executed and
consummated right there and then. Moreover, unlike in a contract to sell, petitioners did not
merely promise to sell the property to private respondent upon the fulfillment of the
suspensive condition. On the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title changed to their names and immediately
thereafter, to execute the written deed of absolute sale. What is clearly established by the plain
language of the subject document is that when the said Receipt of Down Payment was
prepared and signed by petitioners, the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of title
from the name of petitioners father to their names. The suspensive condition was fulfilled on
6 February 1985 and thus, the conditional contract of sale between the parties became
obligatory, the only act required for the consummation thereof being the delivery of the
property by means of the execution of the deed of absolute sale in a public instrument,
which petitioners unequivocally committed themselves to do as evidenced by the Receipt of
Down Payment.
14.
Article 1475 and 1181 applies to present case; Perfection of a contract of sale
and Conditional obligation based on the happening of the event
Article 1475 of the New Civil Code provides that the contract of sale is perfected at
the moment there is a meeting of minds upon the thing which is the object of the contract and
upon the price. From that moment, the parties may reciprocally demand performance, subject
to the provisions of the law governing the form of contracts. Article 1181 of the same code
provides that in conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of the event
which constitutes the condition. In the present case, since the condition contemplated by the
parties which is the issuance of a certificate of title in petitioners names was fulfilled on 6
February 1985, the respective obligations of the parties under the contract of sale became
mutually demandable, i.e. the sellers were obliged to present the TCT already in their names to
he buyer, and to immediately execute the deed of absolute sale, while the buyer on her part,
was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.
15.
Condition deemed fulflled when obligor voluntary prevents its fulfillment;
Condition fulflled, such fact controlling over hypothetical arguments
Article 1186 provides that the condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment. Thus, in the present case, the petitioners having
recognized that they entered into a contract of sale subject to a suspensive condition, as
evidenced in the first paragraph in page 9 of their petition, cannot now contend that there
could have been no perfected contract of sale had the petitioners not complied with the
condition of first transferring the title of the property under their names. It should be
stressed and emphasized that the condition was fulfilled on 6 February 1985, when TCT 327403
was issued in petitioners name, and such fact is more controlling than mere hypothetical
arguments.
16.
Retroactivity of conditional obligation to day of constitution of obligation

Article 1187 provides that the effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the constitution of the obligation. In
obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of
the condition that has been complied with. In the present case, the rights and obligations of
the parties with respect to the perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the suspensive condition on 6
February 1985. As of that point in time, reciprocal obligations of both seller and buyer arose.
17.
Succession as a mode of transferring ownership
Article 774 of the Civil Code defines Succession as a mode of transferring ownership,
providing succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent and value of the inheritance of a person are transmitted through his
death to another or others by his will or by operation of law. In the present case,
petitioners-sellers being the sons and daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation of law. Thus, at the
Sales, 2003 ( 65 )
instance of their fathers death, petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations pertaining thereto became
binding and enforceable upon them. It is expressly provided that rights to the succession
are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison
vs. Villanueva, 90 Phil. 850 [1952]).
18.
Estoppel, as to lack of capacity

Article 1431 provides that through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved as against
the person relying thereon. In the present case, the petitioners, having represented themselves
as the true owners of the subject property at the time of sale, cannot claim now that they were
not yet the absolute owners thereof at the time they entered into agreement.
19.
Mere allegation is not evidence

The supposed grounds for petitioners rescission, are mere allegations found only in
their responsive pleadings, which by express provision of the rules, are deemed controverted
even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The
records are absolutely bereft of any supporting evidence to substantiate petitioners
allegations. We have stressed time and again that allegations must be proven by sufficient
evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598
[1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
20.
No stipulation to authorize extrajudicial rescission of contract of sale

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on
6 February 1985, petitioners-sellers act of unilaterally and extrajudicially rescinding the
contract of sale cannot be justified as there was no express stipulation authorizing the sellers
to extrajudicially rescind the contract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba
vs. Vda. de Leon, 132 SCRA 722 [1984])
21.
Estoppel, acceptance of check from buyers mother; buyers absence not a
ground for rescission Petitioners are estopped from raising the alleged absence of Ramona P.
Alcaraz because although the evidence on record shows that the sale was in the name of
Ramona P. Alcaraz as the buyer, the sellers had
been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of
her daughter, if not also in her own behalf. Indeed, the down payment was made by
Concepcion D. Alcaraz with her own personal check (Exh. B; Exh. 2) for and in behalf of
Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned
Concepcions authority to represent Ramona P. Alcaraz when they accepted her personal check.
Neither did they raise any objection as regards payment being effected by a third person.
Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is
not a ground to rescind the contract of sale.
22.
Buyer not in default as there is no proof that seller presented the TCT and
signify their readiness to execute the deed of absolute sale
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
obligations may be considered in default. Said article provides that those obliged to deliver or
to do something, incur in delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation. xxx In reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the parties fulfill his obligation,
delay by the other begins. In the present case, there is no proof offered whatsoever to show
that the seller actually presented the new transfer certificate of title in their names and
signified their willingness and readiness to execute the deed of absolute sale in
accordance with their agreement. Ramonas corresponding obligation to pay the balance of
the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable
and, therefore, she cannot be deemed to have been in default.
23.
Double sale; Article 1544, paragraph 2 applies in the present case

Sales, 2003 ( 66 )
Article 1544 of the Civil Code provides that If the same thing should have been
sold to different vendees, the ownership shall be transferred to the person who may have first
taken possession thereof in good faith, if it should be movable property. Should if be
immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property. Should there be no inscription, the
ownership shall pertain to the person who in good faith was first in the possession; and, in the
absence thereof to the person who presents the oldest title, provided there is good faith. In
the present case, the record of the case shows that the Deed of Absolute Sale dated 25 April
1985 as proof of the second contract of sale was registered with the Registry of Deeds of
Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B.
Mabanag on 5 June 1985. Thus, the second paragraph of Article 1544 shall apply.
24.
Double sale presumes title to pass to frst buyer, exceptions

Article 1544, the provision on double sale, presumes title or ownership to pass to the
first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale
ahead of the first buyer, and (b) should there be no inscription by either of the two buyers,
when the second buyer, in good faith, acquires possession of the property ahead of the first
buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer
to him to the prejudice of the first buyer.
25.
Prius tempore, potior jure (frst in time, stronger in right); First to register in
good faith
The governing principle is prius tempore, potior jure (first in time, stronger in right).
Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except
when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159
SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his registration with bad faith (see also
Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). It was further held that it is
essential, to merit the protection of Article 1544, second paragraph, that the second realty buyer
must act in good faith in registering his deed of sale (Cruz v. Cabana, 129 SCRA 656, citing
Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September
1992).
26.
Double sale; good faith in recording of second sale, not in buying

In a case of double sale, what finds relevance and materiality is not whether or not the
second buyer was a buyer in good faith but whether or not said second buyer registers such
second sale in good faith, that is, without knowledge of any defect in the title of the property
sold. In the present case, Mabanag could not have in good faith registered the sale entered into
on 18 February 1985 because as early as 22 February 1985, a notice of lis pendens had been
annotated on the TCT in the names of petitioners, whereas Mabanag registered the said sale
sometime in April 1985. At the time of registration, therefore, petitioner knew that the same
property had already been previously sold to Coronel, or, at least, she was charged with
knowledge that a previous buyer is claiming title to the same property. Mabanag thus cannot
close her eyes to the defect in petitioners title to the property at the time of the registration of
the property.
27.
Double sale; Bad faith in registration does not confer registrant any right
If a vendee in a double sale registers the sale after he has acquired knowledge that
there was a previous sale of the same property to a third party or that another person claims
said property in a previous sale, the registration will constitute a registration in bad faith and
will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1981];citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43
Phil. 581.)
28.
Agency; The issue whether Concepcion, mother of Ramona, is an agent or a
co-buyer is undisturbed
Although there may be ample indications that there was in fact an agency between
Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract of
sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as
a co-buyer is not squarely raised in the
Sales, 2003 ( 67 )
instant petition, nor in such assumption disputed between mother and daughter. The Court did
not touch this issue and did not disturb the lower courts ruling on this point.
[21]
Coronel vs. Ona [G.R. No. 10280. February
7, 1916.] First Division, Torres (J): 3 concurring,
1 took no part
Facts: In the administration of the intestate estate of the deceased Isidra Coronel, the
administrator thereof, Engracio Coronel, discovered certain arrangements between the
surviving spouse, Cenon Ona, and other persons, which decreased and injured the property
under administration, whereof, by permission of the court, the said administrator on 16 May
1913, filed suit against Cenon, et. al., in which suit, by agreement of the parties, they were
included as plaintiffs the heirs of the said deceased named Francisco Coronel, Agripina
Coronel, Engracia Torres, Manuela Torres and her husband Lucio Paganiban, and the minor
Anastacia Ramon, represented by his curator ad litem, Engracio Coronel. Coronel, et. al. allege
in their complaint that the administration is the owner of one-half pro indiviso of a rural
estate, 10 hectares and 42 centares in area, situate in the barrio of Lagalag of the town of
Tiaong, Province of Tayabas, planted with 2,000 coco palms from 4 to 5 years old, the
boundaries whereof are set forth in the complaint, said realty being conjugal property as it
was acquired for a consideration by the deceased Isidra Coronel and her husband Cenon Ona
during their marriage; that upon the death of the wife in April 1911, the surviving spouse
Cenon Ona became the administrator of said undivided property, taking all its products and
refusing to make partition of the land with the lawful heirs of his deceased wife; that on 5
November 1912, Cenon Ona and the other defendants formed a conspiracy, with intent of gain
for themselves, to the fraud and injury of the plaintiff administration, and drew up and signed
an alleged instrument of sale, whereby Cenon Ona sold to the spouses Benigno Nadres and
Victoria Villa the said land, which instrument they falsely dated as prior to the death of his
wife Isidra Coronel and forged and imitated her signature or mark by writing her name and
surname thereon with a cross between them; that on the same date, 5 November 1912, the
same defendants, continuing their fraudulent proceedings, executed another instrument of sale
of the same land, wherein they made to appear as vendors thereof Benigno Nadres and Victoria
Villa and as vendees the spouses Crispin Castillo and Maria recto, so that thereby it would be
more difficult for the plaintiff administration to recover said estate, and from that date Cenon
Ona surrendered possession and enjoyment of the said land to the spouses Crispin Castillo and
Maria Recto, who have been up to the present time in possession thereof and have taken the
products therefrom, having refused to give the administration any portion of the latter; that by
reason of the malicious and fraudulent acts of these defendants the administration has sufered
damages to the extent of P1,000. On 29 May 1913, Benigno Nadres, Victoria Villa, Crispin
Castillo, and Maria Recto answered the complaint, denying all the allegations thereof
generally and specifically, and alleging in special defense: That on 8 November 1910, the
spouses Benigno Nadres and Victoria Castillo [Villa] had acquired the land which is the subject
matter of the complaint at a genuine and absolute sale from the spouses Cenon Ona and
Isidra Coronel, and that spouses Crispin Castillo and Maria Recto acquired the same land on 5
November 1912, at a genuine and absolute sale from Nadres and Villa. In another document of
a later date, Crispin Castillo and Maria Recto, denied the facts set forth in the complaint
and in special defense alleged that they are the exclusive owners of the land described in
the complaint, as they acquired it by purchase from the spouses Nadres and Villa. Counsel for
Cenon Ona in answer denied generally and specifically all the paragraphs of the complaint and
alleged solely in special defense that he had never, either before or at the time of the sale made
by him and his deceased wife Isidra Coronel of the land which is the subject matter of
the complaint, concerted or conspired with his codefendants to effect said sale. After trial and
examination of the evidence adduced by both parties and on 29 April 1914, the CFI Tayabas
rendered the judgment denying the claim of spouses Crispin Castillo and Maria Recto, for
recovery of damages they had suffered by reason of the filing of the complaint against them,
finding that the instruments of conveyance of the land in litigation void and of no force or
legal effect because the parties who sold the land by means of said instruments lacked any
right to alienate it; denying the claim of Coronel, et. al. that the defendants pay the value of
one-half of the products
Sales, 2003 ( 68 )
of this land received by them and a sum of money in the nature of compensatory
damages, and merely sentencing Cenon Ona and Benigno Nadres to the payment of the costs
in equal parts. Hence the appeal through a bill of exceptions by counsel for the defendants.
The Supreme affirmed the judgment appealed from, with the costs against the appellants.
1.
Facts: Identity of property not disputed

There is no question whatsoever as to the identity of the land claimed in the complaint,
it being a rural estate situated in the barrio of Lagalag of the municipality of Tiaong, Tayabas,
with an area of ten hectares and forty-two centiares and planted with 2,000 coco palms.
2.
Property conjugal; Coronels heirs by operation of law

Cenon Ona was lawfully married to Isidra Coronel and during their marriage they
acquired by purchase from Juan Cadiz the land, wherefore said realty is their conjugal
property. This marriage was dissolved by the death of Isidra Coronel on 13 April 1911, without
issue from these spouse and without a will executed in life by the woman, so the heirs that
by operations of law must succeed said deceased Isidra Coronel are her brothers and sisters
and nephews and nieces, residing in the town of San Juan de Bocboc, Batangas. The land in
litigation is not only conjugal property, with one-half thereof belonging to the deceased Isidra
Coronel, but also from the moment of her death it passed by operation of law into the
ownership of her intestate heirs, and for this reason her widower could not dispose of said
half to the injury of the nearest relatives and heirs of his deceased wife. (Arts. 657, 659, 661,
Civil Code.)
3.
Facts: Stipulations in the instrument of purchase and sale

In the instrument of purchase and sale, written in the Tagalog dialect (Case 776) and
translated in the present case, the spouses Cenon Ona and Isidra Coronel transferred by absolute
sale on 8 November 1910, the land litigation to te spouses Benigno Nadres and Victoria Villa,
under the following conditions: (1) The spouses Cenon Ona and Isidra Coronel had planted
coco palms on a certain tract of land belonging to Benigno Nadres and his wife, which land
Cenon Ona and Isidra Coronel had alienated without the consent of the owners thereof, the
said Nadres and wife; (2) on their part the spouses Ona and Coronel possessed another tract of
land which they had purchased from Juan Cadiz, whereon they has already set out 1,400 young
coco palms and 800 more could be planted; (3) as Benigno Nadres and his wife were demanding
return of the land previously sold by Ona and Coronel, the latter thought it fair to cede their
own land to said Nadres and wife in exchange for what they had alienated, Nadres and his wife
there in hand paying P2,500 as the increase in the price; (4) this exchange was made on the
condition that Cenon Ona and his wife should for the period of four years; (5) the betel nut,
paddy, buri, and other products shall pertain exclusively to the vendors, Cenon Ona and Isidra
Coronel, who shall pay the land tax for the said four years of the life of the contract; and (6)
the spouses Benigno Nadres and Victoria Villa were agreed that they would no participation in
the crops from the land. This instrument is signed by the contracting parties and the witnesses,
except Isidra Coronel, who placed her mark on the instrument her name and surname, which
must have been affixed by another person, as she could not write.
4.
Deduced facts of the case

From the abundant, but contradictory, evidence adduced at the trial, the following facts
are deduced: (1) The consideration which gave rise to the execution by Cenon Ona and Isidra
Coronel, with reference to their having alienated a parcel of land belonging to Benigno Nadres
and his wife, is not a valid one; (2) the consideration for the transfer of the land in question to
the Nadres couple, with payment by them of P2,500 to the vendors, is false and simulated; (3)
the instrument evidencing the sale of this land was executed after Isidra Coronels death and
cannot therefore produce any effect against her heirs; and (4) the transfer by exchange and
sale of the land to the vendee Benigno Nadres is not valid, as said transfer was recorded in the
instrument for the sole and deliberate purpose of preventing the lawful heirs of Isidra Coronel
from inheriting their portion thereof.
Sales, 2003 ( 69 )
5.
Consideration false and simulated

Cenon Ona stated that he and his wife Isidra Coronel had received a tract of land from
said Benigno Nadres, on which to set out coco-palms, with the condition that after the
planting had been finished and 6 years had elapsed, he and his wife should become the owners
if one-half of the said tract, as had happened, and as he was then in need of money he had sold
to a third person said portion of land that then belonged to him; but it is not true that he
obligated himself not to sell that portion of land to anybody but its original owner, Nadres.
This testimony of Ona, which was not rebutted or contradicted by the other defendants,
constitutes conclusive proof of the invalidity of the reason given for the exchange of the land
in question for that previously sold and for transferring it to the said Benigno Nadres and his
wife; and it is furthermore to be noted that Ona himself stated under oath that in transferring
this land to Nadres on 8 November 1910, he had no intention of transferring it absolutely but
had made this transfer appear in an instrument so that Nadres might take charge of the land
and not bother him, as he was then old, and also to prevent the heirs of his wife Coronel from
participating in her inheritance. Hence it is inferred that the consideration which gave rise to
the transfer of this land to Nadres and his wife is not valid, but false and simulated. Hence,
said realty was not sold to Nadres but a pretense was made of transferring it in order to sell it
as the agent of Ona, and therefore the land continued to belong to Ona and his wife, the
deceased Coronel. It is furthermore to be noted that when said transfer was made to Nadres
the heirs of the deceased Coronel had already filed a claim for the land and consequently any
alienation thereof that may have been made after the date of said claim filed by the heirs of the
deceased Coronel is fraudulent. (Oria vs. McMicking, 21 Phil., Rep., 243,249)
7.
Instrument simulated
The simulation of the instrument is corroborated by the fact that Cenon Ona
delivered to the administrator, Engracio Coronel, the sum of P900 so that the latter and his
coplaintiffs should desist from filing a judicial, claim to the land in litigation, and,
according to agreement, they executed the instrument setting forth that sum, both parties,
signing it in the presence of two witnesses and ratifying it before a justice of the peace.
Coronel and Ona affirm the truth of the fact set forth in said instrument to demonstrate that
the land was not absolutely alienated but continued to be at the disposition of the
widower. But the CFI disapproved said agreement and ordered restitution to the widower Ona
of the money received by Coronel.
8.
Suppressed testimony presumed prejudicial

One of the individuals who played a principal part in the sale of the realty, Benigno
Nadres, was not presented by the defendants s a witness at the trial to clear up certain obscure
and doubtful points, for he only testified in rebuttal, although he was present in the court at
the last session of the trial in this case; wherefore it is to be supposed, in the absence of proof
to the contrary, that his testimony, which was willfully suppressed by the defendants, would
have been prejudicial to them (No. 5, section 334, Code of Civil Procedure), while the record
shows that Cenon Ona made declarations contrary to the interest of his other codefendants,
which could not be contradicted or impugned as false.
9.
land
First sale simulated, Second sale void and inefective for lack of right to dispose of
Having reached the conclusion that the instrument, where it appears that the spouses
Benigno Nadres and Victoria Villa purchased the land in question, is false and void, because
said sale was not efected. Therefore, the sale made by them to the spouses Crispin Castillo
and Maria Recto on 5 November 1912, is also void and ineffective, for the parties who figure
therein as vendors had no right to dispose of the land, nor could they transmit to the vendees
any title of ownership, nor could the latter acquire ownership of the land sold.
10.
Article 1254 of the Civil Code; Consent

Article 1254 of the Civil Code states A contract exists from the moment one or
more persons consent to bind himself or themselves, with regard to another or others, to give
something or to render some service. In the present case, since Coronel was dead on the date
when the contract was drawn up and could
Sales, 2003 ( 70 )
not have taken part in the execution thereof or given her consent to the pretended sale of the
land to which it refers and which belonged to the conjugal partnership of Ona and Coronel,
said contract has never existed, and being void it could not serve as a legal means for
transferring ownership to the alleged purchasers, Nadres and Villa; and as they could not
acquire any right of ownership to the land sold by virtue of a contract that had not existed and
was consequently null and void they had not transfer such a right to the spouses Crispin
Castillo and Maria Recto.
11.
Requisites of a valid contract; Article 1261

There is no contract, says article 1261 of the same Code, unless there exist the essential
requisites of consent of the contracting parties, a definite object which may be the subject
of the contract, and the consideration for the obligation which may be established. In the
present case, Isidra Coronel was not present to give her consent to the alleged contract of sale,
because she was dead when said contract was simulated, nor is any consideration for the
obligation stated therein, and consequently the contract set forth in said instrument is
flagrantly null and void. Although it appears to have been dated 8 November 1910, while Isidra
Coronel was still alive, it was prepared on 5 November 1912, for the widower Cenon Ona so
testified.
12.
Crispin Castillo and Maria Recto not entitled to damages

Since Coronel, et. al. did not take part in the execution of the contracts of sale and did
not act in bad faith in filing this complaint against the efendants, Crispin Castillo and Maria
Recto, the latter are not entitled to recover any indemnity for damages.
13.
Coco palms not yet borne fruit, therefore claim on value of products cannot be
granted
By the declaration of the administrator himself, Engracio Coronel, and by that of Cenon Ona,
that the coco palms set out on the land in dispute have not yet borne fruit, wherefore Coronel
et.als claim that they be paid the value of one-half of the products taken from the land in
question cannot be granted.
[22]
Cruz vs. Cabana [G.R. No. 56232. June 22,
1984.] First Division, Teehankee (J): 5
concurring
Facts: The land in question was sold by Leodegracia Cabana with right of repurchase on 1
June 1965 to Spouses Teofilo Legaspi and lluminada Cabaa. The said document Bilihang
Muling Mabibili stipulated that the land can be repurchased by the vendor within 1 year
from 31 December 1966. Said land was not repurchased and in the meantime, said spouses
took possession of the land. Upon request of Leodegaria Cabaa, the title of the land was
lent to her in order to mortgage the property to the PNB. Said title was, forthwith, deposited
with the PNB. On 21 October 1968, Cabaa sold the land by way of absolute sale to the spouses.
Said spouses attempted to register the deed of sale but said registration was not
accomplished because they could not present the owners duplicate of title which was at that
time in the possession of the PNB as mortgage. However, on 29 November 1968 Cabana sold
the same property to Abellardo Cruz. Likewise, when Cruz tried to register the deed of sale
executed by Leodegaria Cabaa on 3 September 1970, he was informed that the owner thereof
had sold the land to the spouses on 21 October 1968. Still, Cruz was able to register the land in
his name on 9 February 1971.
Raised in the CFI Quezon Province, the court ruled in favor of the spouses. Appeal was made in
the Court of Appeals. Abelardo Cruz died while the case was pending, and by resolution, he
was substituted by his heirs, Consuelo C. Cruz, Claro C. Cruz and Stephen C. Cruz. The Court
of Appeals affirmed the decision of the CFI.
The Supreme Court affirmed in toto the appealed judgment of appellate court, upholding
spouses Teofilo Legaspi and Iluminada Cabana as the true and rightful owners of the property
in litigation and ordering the
Sales, 2003 ( 71 )
issuance of a new title with the cancellation as null and void of Title T-99140 obtained by
Abelardo C. Cruz; and ordered Leodegracia Cabana, in accordance with the partial grant of
Cruz prayer for alternative relief, to reimburse and pay to Cruz heirs the total sum of
P5,750 (P2,352.50 as payment to PNB to discharge mortgage obligation, and P3,397.50 as
consideration of the sale with pacto de retro of the property).
1.
CA Ruling: Applicability of Article 1544, when invoked; Registration should be in good
faith
In order that the provisions of Article 1544 of the new Civil Code may be invoked, it is
necessary that the conveyance must have been made by a party who has an existing right in
the thing and the power to dispose of it (10 Manresa 170, 171). It cannot be set up by a second
purchaser who comes into possession of the property that has already been acquired by the first
purchaser in full dominion (Bautista vs. Sison, 39 Phil. 615), this notwithstanding that the
second purchaser records his title in the public registry, if the registration be done in bad faith.
The philosophy underlying this rule being that the public records cannot be covered into
instruments of fraud and oppression by one who secures an inscription therein in bad faith
(Chupinghong vs. Borreros, 7 CA Rep. 699).
2.
CA Ruling: Purchaser with knowledge of defect of vendors title not a purchaser in
good faith
A purchaser who has knowledge of fact which would put him upon inquiry and
investigation as to possible defects of the title of the vendor and fails to make such inquiry
and investigation, cannot claim that he is a purchaser in good faith. Knowledge of a prior
transfer of a registered property by a subsequent purchaser makes him a purchaser in bad
faith and his knowledge of such transfer vitiates his title acquired by virtue of the latter
instrument of conveyance which creates no right as against the first purchaser (Reylago vs.
Jarabe, L-20046, March 27, 1968, 22 SCRA 1247).
3.
CA Ruling: Spouses first to register deed of sale

The spouses registered the deed of absolute sale ahead of Cruz. Said spouses were not
only able to obtain the title because at that time, the owners duplicate certificate was still
with the Philippine National Bank.
4.
CA Ruling: Spouses first in possession

The spouses have been in possession all along of the land in question. If immovable
property is sold to different vendees, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the registry of property; and should there be no inscription, the
ownership shall pertain to the person who in good faith was first in the possession (Soriano, et
al. vs. The Heirs of Domingo Magali, et al., L-15133, July 31, 1963, 8 SCRA 489). Priority of
possession stands good in favor of the spouses (Evangelista vs. Abad, [CA] 36 O.G. 2913;
Sanchez vs. Ramos, 40 Phil. 614; Quimson vs. Rosete, 87 Phil. 159).
5.
Double Sale; Article 1544

Article 1544 provides that If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property. Should it be immovable property,
the ownership shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property. Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
6.
Spouses are frst buyers; Spouses frst and only ones in possession
Spouses were the first buyers, first on 1 June 1965 under a sale with right of repurchase
and later on 21 October 1968 under a deed of absolute sale and that they had taken possession
of the land sold to them. Cruz was the second buyer under a deed of sale dated 29 November
1968, which to all indications, contrary to the text, was a sale with right of repurchase for 90
days. The spouses were the first and the only ones to be in possession of the subject property.
Sales, 2003 ( 72 )
7.
Spouses frst to register sale; Cruz registered sale in bad faith

The spouses were likewise the first to register the sale with right of repurchase in their
favor on 13 May 1965 under Primary Entry 210113 of the Register of Deeds. They could not
register the absolute deed of sale in their favor and obtain the corresponding transfer
certificate of title because at that time the sellers duplicate certificate was still with the
bank. When Cruz succeeded in registering the later sale in his favor, he knew and he was
informed of the prior sale in favor of the spouses. Such knowledge of a prior transfer of a
registered property by a subsequent purchaser makes him a purchaser in bad faith and his
knowledge of such transfer vitiates his title acquired by virtue of the latter instrument of
conveyance which creates no right as against the first purchaser.
8.
Buyer must act in good daith to merit protection of the second paragraph of
Article 1544; Governing principle is Prius tempore, potior jure; How second buyer may
displace first buyer
As held in Carbonell vs. Court of Appeals, it is essential that the buyer of realty
must act in good faith in registering his deed of sale to merit the protection of the second
paragraph of Article 1544. The governing principle here is prius tempore, potior jure (first in
time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat
the first buyers rights except only as provided by the Civil Code and that is where the second
buyer first registers in good faith the second sale ahead of the first. Such knowledge of the
first buyer does not bar her from availing of her rights under the law, among them, to
register first her purchase as against the second buyer. But in converso knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register the second sale,
since such knowledge taints his prior registration with bad faith. This is the price exacted by
Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that
before the second buyer can obtain priority over the first, he must show that he acted in good
faith throughout (i.e. in ignorance of the first sale and of the first buyers rights) from the
time of acquisition until the title is transferred to him by registration or failing registration, by
delivery of possession. The second buyer must show continuing good faith and innocence or
lack of knowledge of the first sale until his contract ripens into full ownership through prior
registration as provided by law.
9.
Cruz prayer of affirmative relief; Cabana, not the Legaspi spouses, liable for
amounts paid; No reimbursement for realty taxes
Cruz prayer for alternative relief for reimbursement of the amount of P2,352.50 paid
by him to the bank to discharge the existing mortgage on the property and of the amount of
P3,397.50 representing the price of the second sale are well taken insofar as the seller
Leodegaria Cabana is concerned. These amounts have been received by Cabana on account of a
void second sale and must be duly reimbursed by her to Cruz heirs, but the Legaspi spouses
cannot be held liable therefor since they had nothing to do with the said second sale nor did
they receive any benefit therefrom. Cruz claim for reimbursement of the amount of P102.58
as real estate taxes paid on the property is not well taken because the Legaspi spouses had been
paying the real estate taxes on the same property since 1 June 1969.
[23]
Cruz vs. Filipinas Investment [G.R. No. L-24772. May
27, 1968.] En Banc, Reyes JBL (J): 7 concurring, 1 on leave
Facts: On 15 July 1963, Ruperto G. Cruz purchased on installments, from the Far East Motor
Corporation, 1 unit of Isuzu Diesel Bus for P44,616.24, payable in installments of P1,487.20
per month for 30 months, beginning 22 October 1963, with 12% interest per annum, until
fully paid. As evidence of said indebtedness, Cruz executed and delivered to the Far East
Motor Corporation a negotiable promissory in the sum of P44,616.24. To secure the
payment of the promissory note, Cruz executed in favor of the seller Far East Motor
Corporation, a chattel mortgage over the motor vehicle. As no down payment was made by
Cruz, the seller, Far East Motor Corporation, on the very same date, 15 July 1963, required and
Cruz agreed to give, additional security for his obligation besides the chattel
mortgage. Additional security was given by Felicidad
Sales, 2003 ( 73 )
Vda. de Reyes in the form of Second Mortgage on a parcel of land owned by her (68,902 sq.
ms., TCT T-36480 of the Registry of Deeds of Bulacan, mortgaged to the DBP to secure loan of
P2,600), together with the building and improvements thereon, in San Miguel, Bulacan. On 15
July 1963, the Far East Motors for value received indorsed the promissory note and assigned all
its rights and interest in the Deeds of Chattel Mortgage and in the Deed of Real Estate
Mortgage to Filipinas Investment & Finance Corporation (FIFC), with due notice of such
assignment to Cruz, et.al. Cruz defaulted in the payment of the promissory note and that the
only sum ever paid was P500 on 2 October 1963, which was applied as partial payment of
interests on his principal obligation. Notwithstanding FIFCs demands, Cruz made no
payment on any of the installments stipulated in the promissory note. By reason of Cruzs
default, FIFC took steps to foreclose the chattel mortgage on the bus. However, said vehicle
had been damaged in an accident while in the possession of Cruz. At the foreclosure sale held
on 31 January 1964 by the Sheriff of Manila, FIFC was the highest bidder (for P15,000.00).
The proceeds of the sale of the bus were not sufficient to cover the expenses of sale, the
principal obligation, interests, and attorneys fees, i.e., they were not sufficient to
discharge fully the indebtedness of Cruz to FIFC. On 12 February 1964, preparatory to
foreclosing its real estate mortgage on Mrs. Reyes land, FIFC paid the mortgage indebtedness
of Mrs. Reyes to the DBP, in the sum of P2,148.07, the unpaid balance of said obligation.
Pursuant to a provision of the real estate mortgage contract, authorizing the mortgagee to
foreclose the mortgage judicially or extra-judicially, FIFC on 29 February 1964 requested the
Provincial Sheriff of Bulacan to take possession of, and sell, the land subject of the Real Estate
Mortgage to satisfy the sum of P43,318.92, the total outstanding obligation of Cruz, et. al. to
FIFC. Notices of sale were duly posted and served to the Mortgagor, Mrs. Reyes, pursuant to and
in compliance with the requirements of Act 3135. On 20 March 1964, Reyes through counsel,
wrote a letter to FIFC asking for the cancellation of the real estate mortgage on her land, but
FIFC did not comply with such demand as it was of the belief that Reyes request was
without any legal basis.
An action was commenced by Cruz and Reyes in the CFI Rizal (Civil Case Q- 7949), for
cancellation of the real estate mortgage constituted on Reyes land in favor of FIFC (as
assignee of the Far East Motor Corporation). The provincial Sheriff of Bulacan held in
abeyance the sale of the mortgaged real estate pending the resolution of the case. The trial
court in its decision of 21 April 1965, sustained Cruz, et.al.s stand and declared that the
extrajudicial foreclosure of the chattel mortgage on the bus barred further action against the
additional security put up by Reyes. Consequently, the real estate mortgage constituted on
Reyes land was ordered cancelled and FIFC was directed to pay Reyes attorneys fees in the
sum of P200.00. Hence, the appeal by FIFC.
The Supreme Court modified the decision appealed from, by ordering Reyes to reimburse to
FIFC the sum of P2,148.07, with legal interest thereon from the finality of this decision
until it is fully paid. In all other respects, the judgment of the trial court was affirmed, with
costs against FIFC.
1.
Article 1484 of the Civil Code

Article 1484 of the Civil Code of the Philippines is the pertinent legal provision on sale
of personal property on installments. It provides that 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 vendees failure to pay cover two or more installments; (3)
Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendees 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.
2.
Provision clear as to available remedies; Remedies alternative not cumulative

The provision is clear and simple: 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 one 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
Sales, 2003 ( 74 )
been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of
the orders.
3.
Foreclosure and actual sale of mortgage chattel bars recovery of any balance by
vendor; Reason for the doctrine
The foreclosure and actual sale of a mortgage chattel bars further recovery by the
vendor of any balance on the purchasers outstanding obligation not so satisfied by the sale.
The reason for the doctrine was aptly stated in the case of Bachrach Motor Co. vs. Millan, thus
the principal object of the 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.
4.
Further action against guarantor would indirectly subvert protection given by
Article 1484 to purchaser
To sustain FIFCs argument (that what is being withheld from the vendor, by the
proviso of Article 1484 of the Civil Code, is only the right to recover against the purchaser
and not a recourse to the additional security put up, not by the purchaser himself, but by a third
person) is to overlook the fact that if the guarantor should be compelled to pay the balance of
the purchaser price, the guarantor will in turn be entitled to recover what she has paid from the
debtor vendee (Article 2066, Civil Code). Thus, ultimately, it will be the vendee who will be
made to bear the payment of the balance of the price, despite the earlier foreclosure of the
chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly
subverted, and public policy overturned.
5.
Action without a defnitive or exclusive meaning; Action referred to in Article
1484 thus may be judicial or extrajudicial
The word action is without a definite or exclusive meaning. It has been invariably
defined as the legal demand of ones right, or rights; the lawful demand of ones rights in the
form given by law; a demand of a right in a court of justice; the lawful demand of ones
right in a court of justice; the legal and formal demand of ones rights from another person or
party, made and insisted on in a court of justice; a claim made before a tribunal; an assertion in
a court of justice of a right given by law; a demand or legal proceeding in a court of justice to
secure ones rights; the prosecution of some demand in a court of justice; the means by
which men litigate with each other; the means that the law has provided to put the cause of
action into effect (Gutierrez Hermanos vs. De la Riva, 46 Phil. 827, 834-835).
Considering the purpose for which the prohibition contained in Article 1484 was intended,
the word action used therein may be construed as referring to any judicial or extrajudicial
proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the
supposed unsatisfied balance of the purchase price from the purchaser or his privy. Certainly,
an extrajudicial foreclosure of a real estate mortgage is one such proceeding.
6.
Award of attorneys fees; Litigation was avoidable as law and jurisprudence are
explicit
The provision of law and jurisprudence on the matter being explicit so that this
litigation could have been avoided, the award by the lower court of attorneys fees to
Cruz, et.al. in the sum of P200.00 is reasonable and in order.
7.
Reimbursement for FIFC payment of Reyes outstanding balance on loan with DBP
To the extent that she was benefited by the payment of FIFC to DBP, for the release of
the first
Sales, 2003 ( 75 )
mortgage of Reyes land, Reyes should have been required to reimburse FIFC.
[24]
Cuyugan v. Santos, 34 PHIL 100 (1916)
[25]
Dagupan Trading vs. Macam [G.R. No. L-18497. May
31, 1965.] En Banc, Dizon (J): 7 concurring
Facts: In 1955, Sammy Maron and his 7 brothers and sisters were pro-indiviso owners of
a parcel of unregistered land located in barrio Parayao, Binmaley, Pangasinan. While their
application for registration of said land under Act 496 was pending, they executed, on June 19
and 21 September 1955, two deeds of sale conveying the property to Rustico Macam, who
thereafter took possession thereof and proceeded to introduce substantial improvements therein.
One month later, that is on 14 October 1955, OCT 6942 covering the land was issued in the
name of the Marons, free from all liens and encumbrances. On 4 August 1956, by virtue of a
final judgment rendered in Civil Case 42215 of the Municipal Court of Manila against Sammy
Maron in favor of the Manila Trading and Supply Company, levy was made upon whatever
interest he had in the the property, and thereafter said interest was sold at public auction to
the judgment creditor. The corresponding notice of levy, certificate of sale and the sheriffs
certificate of final sale in favor of the Manila Trading and Supply Co. (because nobody
exercised the right of redemption) were duly registered. On 1 March 1958, the latter sold all its
rights and title in the property to Dagupan Trading Company.
On 4 September 1958, Dagupan Trading commenced an action against Macam with the CFI
Pangasinan (Civil Case 13772), praying that it be declared owner of 1/7 portion of the land;
that a partition of the whole property be made; that Macam be ordered to pay it the amount of
P500.00 a year as damages from 1958 until said portion is delivered, plus attorneys fees and
costs. Answering the complaint, Macam alleged that Sammy Marons share in the property, as
well as that of all his co-heirs, had been acquired by purchase by him since June 19 and 21
September 1955, before the issuance of the OCT in their name; that at the time levy in
execution was made on Marons share therein, the latter had no longer any right or interest in
said property; that Dagupan Trading and its predecessor in interest were cognizant of the facts
already mentioned; that since the sales made in his favor, he had enjoyed uninterrupted
possession of the property and introduced considerable improvements therein. Macam
likewise sought to recover damages by way of counterclaim.
After trial upon the issue thus joined, the court rendered judgment dismissing the
complaint, which, on appear, was affirmed by the Court of Appeals. Hence, the appeal by
Dagupan Trading.
The Supreme Court affirmed the decision appealed from; with costs.
1.
[If] Situation 1: Unregistered land, Macam having better right

If the property covered by the conflicting sales were unregistered land, Macam would
undoubtedly have the better right in view of the fact that his claim is based on a prior sale
coupled with public, exclusive and continuous possession thereof as owner.
2.
[If] Situation 2: Registered Land, Dagupan Trading having better right

Were the land involved in the conflicting transactions duly registered land, Dagupan
Trading has the better right because in case of conveyance of registered real estate, the
registration of the deed of sale is the operative act that gives validity to the transfer. This
would be fatal to Macams claim, the deeds of sale executed in his favor by the Marons
not having been registered, while the levy in execution and the provisional certificate of
sale as well as the final deed of sale in favor of appellant were registered.
Sales, 2003 ( 76 )
Consequently, this registered conveyance must prevail although posterior to the one
executed in favor of Macam, and Dagupan Trading must be deemed to have acquired such
right, title and interest as appeared on the certificate of title issued in favor of Sammy Maron,
subject to no lien, encumbrance or burden not noted thereon. (Anderson & Co., vs. Garcia 64
Phil. 506; Reynes et al., vs. Barrera, et al., 68 Phil. 656; Banco National, etc. vs. Camus, 70
Phil. 289)
3.
Present case does not fall within either situation; Last paragraph of Section 35,
Rule 39 of Rules of Court applies
The sale in favor of Macam was executed before the land subject matter thereof was
registered, while the conflicting sale in favor of Dagupan Trading was executed after the same
property had been registered. The case, therefore, cannot be decide the case in the light of
whatever adjudicated cases there are covering the two situations mentioned. What should
determine the issue are the provisions of the last paragraph of Section 35, Rule 39 of the Rules
of Court, to the effect that upon the execution and delivery of the final certificate of sale in
favor of the purchaser of land sold in an execution sale, such purchaser shall be substituted
to and acquire all the right, title, interest and claim of the judgment debtor to the property as
of the time of the levy.
4.
Maron does not have claim and interest on 1/8 portion of land at time of levy
Sammy Maron has no interest or claim on the 1/8 portion of the property inherited by
him and his co-heirs, at the time of the levy, because for a considerable time prior to the levy,
his interest had already been conveyed to Macam, fully and irretrievably.
5.
Levy was void and of no effect

Consequently, subsequent levy made on the property for the purpose of satisfying
the judgment rendered against Sammy Maron in favor of the Manila Trading Company was
void and of no effect. (Buson vs. Licauco 13 Phil. 357-358; Landig vs. U. S. Commercial
Company, 89 Phil. 638).
6.
Torrens title did not cancel unregistered sale and consequent conveyance of title
and ownership The unregistered sale and the consequent conveyance of title and
ownership in favor of Macam could
not have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens
title over the entire parcel of land.
7.
Right fxed and established cannot be overthrown by artificial and technical
grounds
In the inevitable conflict between a right of ownership already fixed and established
under the Civil Law and/or the Spanish Mortgage Law (which cannot be affected by any
subsequent levy or attachment or executions) and a new law or system which would make
possible the overthrowing of such ownership on admittedly artificial and technical grounds,
the former must be upheld and applied.
8.
Circumstances does not justify technicality to prevail; Justice and Equity

An important circumstance must be noted; that upon the execution of the deed of sale in
his favor by Sammy Maron, Macam took possession of the land conveyed as owner thereof, and
introduced considerable improvements therein. To deprive him now of the same by sheer force
of technicality would be against both justice and equity.
[26]
Dalion vs. CA [G.R. No. 78903. February
28, 1990.] First Division, Medialdea (J): 3

concurring
Facts: On 28 May 1973, Ruperto Sabesaje Jr. sued to recover ownership of a parcel of land
(located at Panyawan, Sogod, Southern Leyte; TCT 11148, with an area of 8947 sq.ms.,
assessed at P180), based on a private document of absolute sale, dated 1 July 1965, allegedly
executed by Segundo Dalion, who, however
Sales, 2003 ( 77 )
denied the fact of sale, contending that the document sued upon is fictitious, his signature
thereon, a forgery, and that subject land is conjugal property, which he and his wife (Epifania
Sabesaje-Dalion) acquired in 1960 from Saturnina Sabesaje as evidenced by the Escritura de
Venta Absoluta. The spouses denied claims of Sabesaje that after executing a deed of sale
over the parcel of land, they had pleaded with Sabesaje, their relative, to be allowed to
administer the land because Dalion did not have any means of livelihood. They admitted,
however, administering since 1958, 5 parcels of land in Sogod, Southern Leyte, which belonged
to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They never received their
agreed 10% and 15% commission on the sales of copra and abaca, respectively.
Sabesajes suit, they countered, was intended merely to harass, preempt and forestall Dalions
threat to sue for these unpaid commissions. The trial court rendered its decision on 17 January
1984, ordering Dalion to deliver to Sabesaje the parcel of land subject of the case and to
execute the corresponding formal deed of conveyance in a public document in favor of Sabesaje
(or in case of default, the deed shall be executed in their behalf by the Provincial Sheriff or
his deputy), ordering Dalion to pay Sabesaje the amount of P2,000 as attorney fees and P500
as litigation fees, and to pay the costs.
From the adverse decision of the trial court, Dalion appealed, assigning errors some of which,
however, were disregarded by the appellate court, not having been raised in the trial court.
On 26 May 1987, the Court of Appeals affirmed in toto the ruling of the trial court, upholding
the validity of the sale of a parcel of land by Segundo Dalion in favor of Ruperto Sabesaje, Jr.
Hence, the petition.
The Supreme Court denied the petition, and affirmed the decision of the Court of Appeals
upholding the ruling of the trial court; without costs.
1.
Admissibility of a private writing

Section 21, Rule 132 of the Rules of Court (Private writing, its execution and
authenticity, how proved) provides that Before any private writing may be received in
evidence, its due execution and authenticity must be proved either: (a) By anyone who saw
the writing executed; (b) By evidence of the genuineness of the handwriting of the maker; or
(c) By a subscribing witness.
2.
Proof of Handwriting
Section 23, Rule 132 of the Rules of Court (Handwriting, how proved.) provides
that The handwriting of a person may be proved by any witness who believes it to be the
handwriting of such person, and has seen the person write, or has seen writing purporting to
be his upon which the witness has acted or been charged, and has thus acquired knowledge of
the handwriting of such person. Evidence respecting the handwriting may also be given by a
comparison, made by the witness or the court, with writings admitted or treated as genuine
by the party against whom the evidence is offered, or proved to be genuine to the
satisfaction of the judge.
3.
Each party must prove his own affrmative allegations

Against Dalions mere denial that he signed the document, the positive
testimonies of the instrumental witnesses Ogsoc (the one who prepared the deed) and
Espina, aside from the testimony of Sabesaje, must prevail. Dalion has affirmatively
alleged forgery, but he never presented any witness or evidence to prove his claim of
forgery. Each party must prove his own affirmative allegations (Section 1, Rule 131, Rules of
Court).
4.
Forgery not presumed; Presumption of innocence

It is presumed that a person is innocent of a crime or wrong (Section 5 (a), idem), and
defense should have come forward with clear and convincing evidence to show that Sabesaje
committed forgery or caused said forgery to be committed, to overcome the presumption of
innocence. Mere denial of having signed does not suffice to show forgery.
Sales, 2003 ( 78 )
5.
Forger would attempt to forge an unnecessary signature

Two signatures of Segundo D. Dalion appear on the face of the questioned document, one
at the right corner bottom of the document and the other at the left hand margin thereof. The
second signature is already a surplusage. A forger would not attempt to forge another
signature, an unnecessary one, for fear he may commit a revealing error or an erroneous
stroke.
6.
Conclusions and findings of fact by trial court entitled to great weight on appeal
Appellate courts have consistently subscribed to the principle that conclusions and
findings of fact by the trial courts are entitled to great weight on appeal and should not be
disturbed unless for strong and cogent reasons, since it is undeniable that the trial court is in a
more advantageous position to examine real evidence, as well as to observe the demeanor of
the witnesses while testifying in the case (Chase v. Buencamino, Sr., G.R. No. L-20395, May
13, 1985, 136 SCRA 365; Pring v. Court of Appeals, G.R. No. L-41605, August 19, 1985, 138
SCRA 185)
7.
Article 1358 for convenience, not for validity or enforceability

The provision of Article 1358 on the necessity of a public document (i.e. acts and
contracts which have for their object the creation, transmission, modification or extinction
of real rights over immovable property must appear in a public instrument) is only for
convenience, not for validity or enforceability. It is not a requirement for the validity of a
contract of sale of a parcel of land that this be embodied in a public instrument.
8.
Contract of sale is consensual

A contract of sale is a consensual contract, which means that the sale is perfected by
mere consent. No particular form is required for its validity. Upon perfection of the contract,
the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may
compel transfer of ownership of the object of the sale, and the vendor may require the vendee
to pay the thing sold (Art. 1458, NCC).
9.
Delivery; Execution of formal deed of conveyance in public document equivalent
to delivery of thing
Under Art. 1498, NCC, when the sale is made through a public instrument, the
execution of the corresponding formal deed of conveyance in a public document thereof is
equivalent to the delivery of the thing. Delivery may either be actual (real) or constructive.
Thus delivery of a parcel of land may be done by placing the vendee in control and possession
of the land (real) or by embodying the sale in a public instrument (constructive).
10.
Suit for recovery of ownership is proper

Article 1475 of the Civil Code gives the parties to a perfected contract of sale the right
to reciprocally demand performance, and to observe a particular form, if warranted, (Art.
1357). Sabesajes complaint sufficiently alleged a cause of action to compel Dalion to
execute a formal deed of sale, and the suit for recovery of ownership, which is premised on
the binding effect and validity inter partes of the contract of sale, merely seeks
consummation of said contract.
11.
Sale of real property may be in a private instrument

A sale of a real property may be in a private instrument, but that contract is valid and
binding between the parties upon its perfection. And a party may compel the other party
to execute a public instrument embodying their contract affecting real rights once the
contract appearing in a private instrument has been perfected (See Art. 1357).
[27]
Daguilan vs. IAC [G.R. No. L-69970. November 28, 1988.]

Sales, 2003 ( 79 )
First Division, Cruz (J): 4 concur

Facts: Two lots were owned by Domingo Melad. The lots are claimed by both Felix Daguilan
and Apolonia Melad (and her husband Jose Tagacay). On 29 January 1962, Apolonia Melad
filed a complaint against Daguilan in the then CFI Cagayan for recovery of a farm lot and a
residential lot which she claimed she had purchased from Domingo Melad in 1943 and were
now being unlawfully withheld by Daguilan. In his answer, Daguilan denied the allegation
and averred that he was the owner of the said lots of which he had been in open, continuous
and adverse possession, having acquired them from Domingo Melad in 1941 and 1943. The
case was dismissed for failure to prosecute but was refiled in 1967. At the trial, Melad presented
a deed of sale dated 4 December 1943, purportedly signed by Domingo Melad and duly
notarized, which conveyed the said properties to her for the sum of P80.00. She said the amount
was earned by her mother as a worker at the Tabacalera factory. She claimed to be the
illegitimate daughter of Domingo Melad, with whom she and her mother were living when he
died in 1945. She moved out of the farm only when in 1946 Felix Danguilan approached her
and asked permission to cultivate the land and to stay therein. She had agreed on condition that
he would deliver part of the harvest from the farm to her, which he did from that year to 1958.
The deliveries having stopped, she then consulted the municipal judge who advised her to file
the complaint against Danguilan. Melads mother, her only other witness, corroborated this
testimony. Daguilan testified that he was the husband of Isidra Melad, Domingos niece,
whom Domingo Melad and his wife Juana Malupang had taken into their home as their ward
as they had no children of their own. He and his wife lived with the couple in their house on
the residential lot and helped Domingo with the cultivation of the farm. Domingo Melad
signed in 1941 a private instrument in which he gave Daguilan the farm and in 1943 another
private instrument in which he also gave him the residential lot, on the understanding that
the latter would take care of the grantor and would bury him upon his death. Danguilan
presented three other witnesses to corroborate his statements and to prove that he had been
living in the land since his marriage to Isidra and had remained in possession thereof after
Domingo Melads death in 1945. Two of said witnesses declared that neither the plaintiff nor
her mother lived in the land with Domingo Melad. The trial court believed Daguilan and
rendered a decision based mainly on the issue of possession.
On appeal, however, the appellate court upheld Melad as the true and lawful owner of the
disputed property, holding that the private instruments where Domingo Melad had conveyed
the land to Daguilan were null and void for reason that donation of real property should be
effected through a public instrument. Hence, the petition to the Supreme Court.
The Supreme Court set aside the decision of the appellate court and reinstated that of the trial
court, with costs against Apolonia Melad.
1.
Onerous donations not covered by Articled 749, requiring donations of real
properties be efected through a public instrument
Considering the language of the two private instruments delivering the residential
lots, Domingo Melad did intend to donate the properties to Daqguilan. The donee,
however, was not moved by pure liberality. While truly donations, the conveyances were
onerous donations as the properties were given to Daguilan in exchange for his obligation to
take care of the donee for the rest of his life and provide for his burial. Hence, it was not
covered by the rule in Article 749 of the Civil Code requiring donations of real properties to
be effected through a public instrument.
2.
Doctrine in Manalo vs. de Mesa applies

The present case is squarely under the doctrine laid down in Manalo v. De Mesa, where
it was held that the donation in question was made for a valuable consideration, since the
donors made it conditional upon the donees bearing the expenses that might be occasioned
by the death and burial of the donor, a condition and obligation which the donee carried out
in his own behalf and for his wife. Therefore, in order to determine whether or not said
donation is valid and effective, it should be sufficient to demonstrate that, as a
Sales, 2003 ( 80 )
contract, it embraces the conditions the law requires and is valid and effective, although not
recorded in a public instrument.
3.
No evidence adduced to support values exchanged were disproportionate or equal

No evidence has been adduced to support the contention that the values exchanged (the
value of the lands donated and the services for which they were being exchanged) were
disproportionate or unequal for the two transactions to be considered pure or gratuitous
donations of real rights, and hence, be effected through a public instrument and not by mere
private writings.
4.
Daguilan took care of the Melad spouses; Proof of onerous donation

Both the trial and appellate court afirmed the factual allegation that Daguilan took care
of Domingo Melad and later arranged for his burial in accordance with the condition
imposed by the donor. Daguilan farmed the land practically by himself and so provided for
the donee (and his wife) during the latter part of Domingo Melads life. It may be assumed
that there was a fair exchange between the donor and the donee that made the transaction an
onerous donation.
5.
Deed of Sale in favor of Apolonia Melad suspicious

The deed of sale in favor of Apolonia Melad was suspicious. It was allegedly
executed when Apolonia was only three years old and the consideration was supposedly paid
by her mother, Maria Yedan, from her earnings as a wage worker in a factory. One may well
wonder why the transfer was not made to the mother herself, who was after all the one paying
for the lands. The sale was made out in favor of Apolonia Melad although she had been using
the surname Yedan, her mothers surname, before that instrument was signed and in fact
even after she got married. Averment was also made that the contract was simulated and
prepared after Domingo Melads death in 1945. It was also alleged that even after the supposed
execution of the said contract, Apolonia Melad considered Domingo Melad the owner of the
properties and that she had never occupied the same. Considering these serious challenges, the
appellate court could have devoted a little more time to examining the deed and the
circumstances surrounding its execution before pronouncing its validity.
6.
Presumption of due execution of a public instrument

Due execution of a public instrument is presumed, the presumption is disputable and
will yield to contradictory evidence, which in the present case was not refuted.
7.
Melads testimony inconsistent, fails to prove actual delivery of thing sold in the
alleged deed of sale
Even assuming the validity of the deed of sale, the record shows that Melad did not take
possession of the disputed properties and indeed waited until 1962 to file the action for
recovery of the lands from Daguilan. If she did have possession, she transferred the same
to Daguilan in 1946, by her own sworn admission, and moved out to another lot belonging to
her step-brother. Her claim that Daguilan was her tenant (later changed to administrator) was
disbelieved by the trial court, and properly so, for its inconsistency. In short, she failed to
show that she consummated the contract of sale by actual delivery of the properties to her and
her actual possession thereof in concept of purchaser-owner.
8.
Garchitorena vs. Almeda; Tradition: Ownership does not pass by mere
stipulation but only by delivery
As held in Garchitorena v. Almeda, it is a fundamental and elementary principle that
ownership does not pass by mere stipulation but only by delivery (Civil Code, Art. 1095;
Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a public document does not
constitute sufficient delivery where the property involved is in the actual and adverse
possession of third persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it
becomes incontestable that even if included in the contract, the ownership of the property in
dispute did not pass to the vendee.
Sales, 2003 ( 81 )
9.
Garchitorena vs. Almeda; Proper action against present possessors: specific
performance of sale and not revindicacion
Not having become the owner for lack of delivery, the vendee cannot presume to recover
the property from its present possessors. His action, therefore, is not one of revindicacion, but
one against his vendor for specific performance of the sale to him.
9.
Non mudis pactis, sed traditione dominia rerum transferuntur

In Fidelity and Deposit Co. v. Wilson, it was declared that it is a fundamental principle
in all matters of contracts and a well-known doctrine of law that non mudis pactis, sed
traditione dominia rerum transferuntur. As established in paragraph 2 of article 609 of Civil
Code, the ownership and other property rights are acquired and transmitted by law, by gift, by
testate or intestate succession, and, in consequence of certain contracts, by tradition. The logical
application of this disposition article 1095 prescribes that a creditor has the rights to the fruits
of a thing from the time the obligation to deliver it arises. However, he shall not acquire a
real right (and the ownership is surely such) until the property has been delivered to him.
In accordance with such disposition and provisions the delivery of a thing constitutes a
necessary and indispensable requisite for the purpose of acquiring the ownership of the same by
virtue of a contract.
10.
Doctrine of transfer of property by mere consent not admitted

As Manresa states in his Commentaries on the Civil Code, volume 10, pages 339 and
340: Our law does not admit the doctrine of the transfer of property by mere consent but
limits the effect of the agreement to the due execution of the contract . . . The ownership, the
property right, is only derived from the delivery of a thing . . .
11.
Actual delivery of the thing sold

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 not been effected. In the present case, Daguilan and not Melad is in actual possession
of the litigated properties.
12.
In case the respective claims of the parties are weak; Santos & Espinosa v. Estejada
Even if the respective claims of the parties were both to be discarded as being
inherently weak, the decision should still incline in favor of Daguilan pursuant to the doctrine
announced in Santos & Espinosa v. Estejada, where the Court announced that if the claim
of both the plaintiff and the defendant are weak, judgment must be for the one who is in
possession, as he is presumed to be the owner, and cannot be obliged to show or prove a better
right.
[28]
De la Cavada v. Diaz [G.R. No. L-11668. April
1, 1918.] First Division, Johnson (J): 5 concurring
Sales, 2003 ( 82 )
Facts: On 15 November 1912, Antonio Diaz and Antonio Enriquez de la Cavada entered into a
contract of option for the latter to purchase the formers hacienda at Pitogo, within the
period necessary for the approval and issuance of a Torrens title thereto by the Government for
P30,000 in cash or P40,000 with 6% interest per annum within 6 years with due security, i.e.
the 100 hectares of land in Pitogo, Tayabas; containing 20,000 coconut trees and 10,000 nipapalm trees sold to Enriquez for P70,000. Subsequently, Enriquez informed Diaz of his
conformity with the letter of option under the condition that he shall send a surveyor to survey
the said property, and to apply to the Government for a Torrens title therefor, and, if the
expenses incurred for the same should not exceed P1,000, he shall pay the P500 and you the
other P500; Provided, however, that Diaz shall give the surveyor all necessary assistance
during his stay at the hacienda; and that he shall pay the purchase price to you in conformity
with our letter of option of this date, and after the Torrens title shall have been officially
approved. Soon after the execution of said contract, and in part compliance with the terms
thereof, Diaz presented 2 petitions in the Court of Land Registration (13909 and 13919), each
for the purpose of obtaining the registration of a part of the Hacienda de Pitogo. Said
petitions were granted, and each parcel was registered and a certificate of title was issued for
each part under the Torrens system to Diaz. Later, and pretending to comply with the terms of
said contract, Diaz offered to transfer to Enriquez one of said parcels only, which was a part
of said hacienda. Enriquez refused to accept said certificate for a part only of said
hacienda upon the ground that it was only a part of the Hacienda de Pitogo, and under the
contract he was entitled to a transfer to him a all said hacienda.
Raised in the lower court, Diaz theorized that the contract of sale of said Hacienda de Pitogo
included only 100 hectares, more or less, of said hacienda, and that offering to convey to
Enriquez a portion of said hacienda, and that by offering to convey to Enriquez a
portion of said hacienda composed of 100 hectares, more or less, he thereby complied
with the terms of the contract. Enriquez theorized, on the other hand, that he had purchased all
of said hacienda, and that the same contained, at least, 100 hectares, more or less. The lower
court sustained the contention of Enriquez, that the sale was a sale of the Hacienda de
Pitogo and not a sale of a part of it. The Court ordered Diaz, within 30 days from the date
upon which this decision becomes final, convey to Enriquez a good and sufficient title in fee
simple to the Court of Land Registration, upon payment or legal tender of payment by
Enriquez of the sum of P30,000 in cash, and upon Enriquez giving security approved by this
court for the payment within the term of 6 years from the date of the conveyance for the
additional sum of P40,000 with interest at the rate of 6% per annum. The Court further ordered
and adjudged that in the event of the failure of Diaz to execute the conveyance, Enriquez has
and recover judgment against him, Diaz, for the sum of P20,000, with interest at the rate of
6% (6% per annum from the date upon which the conveyance should have been made). From
the judgment, Diaz appealed.
The Supreme Court affirmed the judgment of the lower court, with costs.
1.
Agreement between parties in civil litigation valid

On 21 November 1914, the parties agreed (with reference to the method of presenting
their proof) that each of the litigating parties shall present his evidence before Don Felipe
Canillas, assistant clerk of the CFI Manila, who, for such purpose, should be appointed
commissioner; that said commissioner shall set a day and hour for the presentation of the
evidence, both oral and documentary, and in the stenographic notes shall have record entered of
all objections made to the evidence by either party, in order that they may afterwards be
decided by the court; that the transcription of the stenographic notes, containing the record of
the evidence taken, shall be paid for in equal shares by both parties; and that at the close of the
taking of the evidence, each of the parties shall file his brief in respect to such evidence,
whereupon the case as it then stands shall be submitted to the decision of the court. Said
agreement was approved by the lower court. There is nothing in the law nor in public policy
which prohibits the parties in a civil litigation from making an agreement on the method of
presentation of their proofs. While the law concedes to parties litigant, generally, the right to
have their proof taken in the presence of the judge, such a right is a renounceable one. In a
civil action the parties litigant have a right to agree, outside of the court, upon the facts in
litigation. Under certain conditions the
Sales, 2003 ( 83 )
parties litigant have a right to take the depositions of witnesses and submit the sworn
statements in that form to the court. The proof, as it was submitted to the court in the present
case, by virtue of said agreement, was, in effect, in the form of a deposition of the various
witnesses presented. Having agreed to the method of taking the proof, and the same having
been taking in compliance with said agreement, it is now too late, there being no law to the
contrary, for them to deny and repudiate the effect of their agreement. (Biunas vs. Mora, R.G.
No. 11464, March 11, 1918; Behr vs. Levy Hermanos, R.G. No. 12211, March 19, 1918.) Not
only is there no law prohibiting the parties from entering into an agreement to submit their
proof to the court in civil actions, but it may be a method highly convenient, not only to the
parties, but to busy courts. The judgment of the lower court, therefore, should not be modified
or reversed.
2.
Contract offered in evidence, and not objected to; thus, was properly presented
The contract was offered in evidence and admitted as proof without objection. Said
contract was, therefore, properly presented to the court as proof. Not only was the contract
before the court by reason of its having been presented in evidence, but that Diaz himself made
said contract an integral part of his pleadings. Diaz admitted the execution and delivery of the
contract, and alleged that he made an effort to comply with its terms. His only defense is that
he sold to Enriquez a part of the hacienda only and that he offered, in compliance with
the terms of the contract, to convey to Enriquez all of the land which he had promised to sell.
3.
Inadequacy of consideration raised for the first time on appeal

With reference to the objection that there was no consideration for said contract it may
be said (a) that the contract was for the sale of a definite parcel of land: (b) that it was
reduced to writing; (c) that Diaz promised to convey to Enriquez said parcel of land; (d) that
Enriquez promised to pay therefor the sum of P70,000 in the manner prescribed in said
contract; (e) that Diaz admitted the execution and delivery of the contract and alleged that he
made an effort to comply with the same and requested Enriquez to comply with his part of the
contract; and (f) that no defense or prevention was made in the lower court that there was no
consideration for his contract. Having admitted the execution and delivery of the contract,
having admitted an attempt to comply with its terms, and having failed in the court below
to raise any question whatsoever concerning the inadequacy of consideration, it is rather
late, in the face of said admissions, to raise that question for the first time in the Supreme
Court.
4.
A promise made in accordance with forms required by law may be a good
consideration for a another partys promise
A promise made by one party, if made in accordance with the forms required by the
law, may be a good consideration (causa) for a promise made by another party. (Art. 1274,
Civil Code.) The consideration (causa) need not pass from one to the other at the time the
contract is entered into. For example, A promises to sell a certain parcel of land to B for the
sum of P70,000. If A, by virtue of the promise of B to P70,000, promises to sell said parcel
of land to B for said sum, then the contract is complete, provided they have complied with
the forms required by the law. A cannot enforce a compliance with the contract and require B
to pay said sum until he has complied with his part of the contract.
5.
Contract not an optional contract in its ordinary meaning, but an absolute
promise to sell a land for a fixed price upon definite condition
The contract was not an optional contract as that phrase in generally used. It is
clearly an absolute promise to sell a definite parcel of land for a fixed price upon definite
conditions. Diaz promised to convey to Enriquez the land in question as soon as the same was
registered under the Torrens system, and Enriquez promised to pay to Diaz the sum of
P70,000, under the condition named, upon the happening of that event.
6.
Contract of option distinguished from present contract

The contract was not what is generally known as a contract of option. It differs
very essentially from a contract of option. An optional contract is a privilege existing in one
person, for which he had paid a consideration, which gives him the right to buy, for
example, certain merchandise of certain specified
Sales, 2003 ( 84 )
property, from another person, if he chooses, at any time within the agreed period, at a
fixed price. The contract of option is a separate and distinct contract from the contract which
the parties may enter into upon the consummation of the option. A consideration for an
optional contract is just as important as the consideration for any other kind of contract. If
there was no consideration for the contract of option, then it cannot be enforced any more than
any other contract where no consideration exists. To illustrate, A and B the sum of P100,000
for the option of buying his property within the period of 30 days. While it is true that the
conditions upon which A promises to buy the property at the end of the period mentioned are
usually fixed in the option, the consideration from the consideration of the contract with
reference to which the option exists. A contract of option is a contract by virtue of the terms
of which the parties thereto promise and obligate themselves to enter into another contract
at a future time, upon the happening of certain events, or the fulfillment of certain
conditions.
7.
Laying the foundation for action damages

When Diaz alleged that he had complied with his part of the contract and demanded
that Enriquez should immediately comply with his part of the same, he evident was laying
the foundation for an action damages, the nullification or a specific compliance with contract.
8.
Contract made with Enriquez, and not Rosenstock

Upon the face of the contract, the contract was made by Diaz with Enriquez. Not
having raised the contention, that the contract was made with Rosenstock, Elser & Co. and
not with Enriquez, in the lower court, and having admitted the execution and delivery of
the contract in question with the plaintiff, Diaz admission is conclusive upon that question
and need not be further discussed.
9.
Action not premature; Payment simultaneous with delivery of deed of
conveyance but not need not be made until deed of conveyance is offered
The action was not premature. The contention that Enriquez had not paid nor offered to
pay the price agreed upon, under the conditions named, for the land in question was not raised
in the lower court, which fact, ordinarily, would be a sufficient answer to the contention of
the appellant. Still, Diaz could not demand the payment until he had offered the deeds of
conveyance, in accordance with the terms of the contract, as he did not offer to comply with
the terms of his contract. He offered to comply partially with the terms of the contract, but
not fully. While the payment must be simultaneous with the delivery of the deeds of
conveyance, the payment need not be made until deed of conveyance is offered. Enriquez
stood ready and willing to perform his part of the contract immediately upon on the part of
Diaz. (Arts. 1258 and 1451 of Civil Code.)
10.
Enriquez stood ready to comply

It cannot be said that Diaz was not obligated to sell the Hacienda de Pitogo to
Enriquez due to Enriquez alleged nonfulfillment, renunciation, abandonment and
negligence, as such question was not presented to the lower court. Still, the record shows
that Enriquez, at all times, insisted upon a compliance with the terms of the contract on the
part of Diaz, standing ready to comply with his part of the same. Enriquez was constantly
insisting upon compliance with the terms of the contract, to wit, a conveyance to him of the
Hacienda de Pitogo by Diaz. Naturally, he refused, under the contract, to accept a
conveyance of a part only be said hacienda.
11.
No modification due to Enriquez claim for damages

The only proof upon the question of damages suffered by Enriquez for the
noncompliance with the terms of the contract in question on the part of Diaz is that Enriquez,
in contemplation of the compliance with the terms of the contract on the part of Diaz,
entered into a contract with a third party to sell the said hacienda at a profit of P30,000.
That proof is not disputed. No attempt was made in the lower court to deny that fact. The proof
shows that the person with whom Enriquez had entered into a conditional sale of the land in
question had made a deposit for the purpose of guaranteeing the final consummation of the
that contract. By reason of the failure of Diaz to comply with the contract here in question,
Diaz was obliged to return the
Sales, 2003 ( 85 )
sum deposited by said third party with a promise to pay damages. The record does not show
why Enriquez did not ask for damages in the sum of P30,000, but asked for a judgment only in
the sum of P20,000. Considering the fact that he neither asked for a judgment for more than
P20,000 nor appealed from the judgment of the lower court, Enriquez request to modify the
judgment of the lower court cannot be granted.
12.
Subsequent sale of land to third person not an excuse for compliance of terms of
contracts or to answer for damages
The mere fact that Diaz had sold a part of the hacienda to other person, is no
sufficient reason for not requiring a strict compliance with the terms of his contract with
Enriquez, or to answer in damages for his failure. (Arts. 1101 and 1251 of the Civil Code.)
[29]
Delta Motors Sales vs. Niu Kim Duan [G.R. No. 61043.
September 2, 1992.] Second Division, Nocon (J): 4 concurring
Facts: On 5 July 1975, Niu Kim Duan and Chan Fue Eng (defendants) purchased from Delta
Motor Sales Corporation 3 units of DAIKIN air-conditioner all valued at P19,350.00. The deed
of sale stipulates that the defendants shall pay a down payment of P774.00 and the balance of
P18,576.00 shall be paid by them in 24 installments; that the title to the properties purchased
shall remain with Delta Motors until the purchase price thereof is fully paid; that if any two
installments are not paid by the defendants on their due dates, the whole of the principal sum
remaining unpaid shall become due, with interest at the rate of 14% per annum: and in case of
a suit, the defendants shall pay an amount equivalent to 25% of the remaining unpaid
obligation as damages, penalty and attorneys fees; that to secure the payment of the balance
of P18,576.00 the defendants jointly and severally executed in favor of the Delta Motors a
promissory note. The 3 air-conditioners were delivered to and received by the defendants.
After paying the amount of P6,966.00, the defendants failed to pay at least 2 monthly
installments; that as of 6 January 1977, the remaining unpaid obligation of the defendants
amounted to P12,920.08. Statements of accounts were sent to the defendants and the
Delta Motors collectors personally went to the former to effect collections but they failed to
do so. Because of the unjustified refusal of the defendants to pay their outstanding account
and their wrongful detention of the properties in question, Delta Motors tried to recover the
said properties extra-judicially but it failed to do so. The matter was later referred by Delta
Motors to its legal counsel for legal action.
In its verified complaint dated 28 January 1977, Delta Motors prayed for the issuance of a
writ of replevin, which the Court granted in its Order dated 28 February 1977, after Delta
Motors posted the requisite bond. On 11 April 1977, Delta Motors, by virtue of the writ,
succeeded in retrieving the properties in question. As of 3 October 1977, the outstanding
account of the defendants is only in the amount of P6,188.29 as shown by the computation,
after deducting the interests in arrears, cover charges, replevin bond premiums, the value of
the units repossessed and the like. In view of the failure of the defendants to pay their
obligations, the amount of P6,966.00 which had been paid by way of installments were treated
as rentals for the units in question for 2 years pursuant to the provisions of paragraph 5 of the
Deed of Conditional Sale. The trial court promulgated its decision on 11 October 1977 ordering
the defendants to pay Delta Motors the amount of P6,188.29 with a 14% per annum interest
which was due on the 3 Daikin air-conditioners the defendants purchased from Delta
Motors under a Deed of Conditional Sale, after the same was declared rescinded by the trial
court. They were likewise ordered to pay Delta Motors P1,000.00 for and as attorneys fees.
Niu Kim Duan and Chan Fue Eng appealed. The case was elevated to the Supreme Court by
the Court of Appeals, in its Resolution of 20 May 1982, on a pure question of law.
The Supreme Court set aside the judgment of the trial court in Civil Case 25578 and dismissed
the complaint filed by Delta Motor Sales Corporation; without costs.
Sales, 2003 ( 86 )
1.
Treatment of installment payments as rentals not unconscionable (even if it
approximates 1/3 of cost of the 3 airconditioners)
Defendants cannot complain that their downpayment of P774.00 and installment
payments of P5,655.92 were treated as rentals, even though the total amount of
P6,429,92 which they had paid, approximates one-third (1/3) of the cost of the 3 airconditioners. A stipulation in a contract that the installments paid shall not be returned to
the vendee is valid insofar as the same may not be unconscionable under the circumstances is
sanctioned by Article 1486 of the New Civil Code. The monthly installment payable by
defendants was P774.00. The P5,655.92 installment payments correspond only to 7 monthly
installments. Since they admit having used the air-conditioners for 22 months, this means
that they did not pay 15 monthly installments on the said air-conditioners and were thus using
the same FREE for said period, to the prejudice of Delta Motors. Under the circumstances,
the treatment of the installment payments as rentals cannot be said to be unconscionable.
2.
Remedies available to vendor in a sale of personal property payable in installments

The vendor in a sale of personal property payable in installments may exercise one of
three remedies, namely, (1) exact the fulfillment of the obligation, should the vendee fail to
pay; (2) cancel the sale upon the vendees failure to pay two or more installments; (3)
foreclose the chattel mortgage, if one has been constituted on the property sold, upon the
vendees failure to pay two or more installments. The third option or remedy, however, is
subject to the limitation that the vendor cannot recover any unpaid balance of the price and any
agreement to the contrary is void (Art. 1484).
3.
Remedies alternative, not cumulative

The 3 remedies are alternative and NOT cumulative. If the creditor chooses one
remedy, he cannot avail himself of the other two.
4.
Air-conditioning units repossessed, bars action to exact payment for balance of the
price
Delta Motors had taken possession of the 3 air-conditioners, through a writ of
replevin when defendants refused to extra-judicially surrender the same. The case Delta
Motors filed was to seek a judicial declaration that it had validly rescinded the Deed of
Conditional Sale. Delta Motors thus chose the second remedy of Article 1484 in seeking
enforcement of its contract with defendants. Having done so, it is barred from exacting
payment from defendants of the balance of the price of the three air-conditioning units which
it had already repossessed. It cannot have its cake and eat it too.
[30]
Dignos vs. Lumungsod [G.R. No. L-59266. February
29, 1988.] Third Division, Bidin (J): 4 concurring
Facts: The spouses Silvestre Dignos and Isabel Lumungsod were owners of a parcel of land (Lot
3453, Opon Cadastre), of the cadastral survey of Opon, Lapu-Lapu City. On 7 June 1965, the
Dignos spouses sold the said parcel of land to Atilano J. Jabil for the sum of P28,000.00, payable
in two installments, with an assumption of indebtedness with the First Insular Bank of
Cebu in the sum of P12,000.00, which was paid and acknowledged by the vendors in the
deed of sale executed in favor of Jabil, and the next installment in the sum of P4,000.00 to be
paid on or before 15 September 1965. On 25 November 1965, the Dignos spouses sold the
same land in favor of Luciano Cabigas and Jovita L. De Cabigas, who were then US citizens, for
the price of P35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor
of the Cabigas spouses, and which was registered in the Office of the Register of Deeds
pursuant to the provisions of Act 3344.

As the Dignos spouses refused to accept from Jabil the balance of the purchase price of the land,
and as Jabil
Sales, 2003 ( 87 )
discovered the second sale made by the Dignos spouses to the Cabigas spouses, Jabil filed the
suit with the CFI Cebu (Civil Case 23-L). After due trial, the CFI Cebu rendered its Decision on
25 August 1972, declaring the deed of sale executed on 25 November 1965 in favor of the
Cabigas spouses null and void, and the deed of sale in favor of Jabil not rescinded; ordering
Jabil to pay the sum of P16,0000 to the Dignos spouses upon the execution of the Deed of
Absolute Sale and when the decision of the case becomes final and executory; ordering Jabil to
reimburse the Cabigas couple reasonable amount corresponding to the expenses or costs of the
hollow block fence, so far constructed; ordering the Dignos spouses to return to the Cabigas
spouses the sum of P35,000; and making the writ of preliminary injunction issued 23
September 1966 permanent by virtue of the decision.
Jabil and the Dignos spouses appealed to the Court of Appeals (CA-GR 54393-R). On 31 July
1981, the Court of Appeals affirmed the decision of the lower court except as to the portion
ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a
fence upon the land in question. A motion for reconsideration of said decision was filed by the
Dignos spouses, but on 16 December 1981, a resolution was issued by the Court of Appeals
denying the motion for lack of merit. Hence, the petition for review on certiorari.
In the resolution of 10 February 1982, the Second Division of the Supreme Court denied the
petition for lack of merit. A motion for reconsideration of said resolution was filed on 16
March 1982. In the resolution dated 26 April 1982, Jabil was required to comment thereon,
which comment was filed on 11 May 1982 and a reply thereto was filed on 26 July 1982 in
compliance with the resolution of 16 June 1982 . On 9 August 1982, acting on the motion for
reconsideration and on all subsequent pleadings filed, the Supreme Court resolved to reconsider
its resolution of 10 February 1982 and to give due course to the present petition. On 6
September 1982, Jabil filed a rejoinder to reply of the Dignos spouses which was noted
on the resolution of 20 September 1982. The Supreme Court dismissed the petition filed for
lack of merit and affirmed the assailed decision of the Court of Appeals in toto.
1.
Contract is a Deed of Sale

The contract in question is a Deed of Sale, with the conditions that (1) Atilano G. Jabil
is to pay the amount of Twelve Thousand Pesos (P12,000.00) Philippine Currency as advance
payment; (2) Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00)
Loan from the First Insular Bank of Cebu; (3) Atilano G. Jabil is to pay the said spouses the
balance of Four Thousand Pesos (P4,000.00) on or before September 15, 1965. (4) That the said
spouses agreed to defend the said Atilano G. Jabil from other claims on the said property; (5)
the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the
above-mentioned property upon the payment of the balance of Four Thousand Pesos. By and
large, the issues in the present case have already been settled by the Court in analogous cases.
2.
Deed of Sale absolute although denominated as a Deed of Conditional Sale

A deed of sale is absolute in nature although denominated as a Deed of Conditional
Sale where nowhere in the contract in question is a proviso or stipulation to the effect that
title to the property sold is reserved in the vendor until full payment of the purchase price, nor
is there a stipulation giving the vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period (Taguba v. Vda. de Leon, 132 SCRA 722;
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). In the present case,
there is no stipulation reserving the title of the property on the vendors nor does it give them
the right to unilaterally rescind the contract upon non-payment of the balance thereof within a
fixed period.
3.
Elements of valid contract present; Article 1458

All the elements of a valid contract of sale under Article 1458 of the Civil Code, are
present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3)
price certain in money or its equivalent.
Sales, 2003 ( 88 )
4.
Ownership transferred upon actual or constructive delivery; Froilan vs. Pan

Oriental Shipping In addition, Article 1477 of the same Code provides that The
ownership of the thing sold shall be
transferred to the vendee upon actual or constructive delivery thereof. As applied in the case of
Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), the Supreme Court held that in the
absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee
upon actual or constructive delivery thereof.
.
5.
Actual delivery made in the present case
While there was no constructive delivery of the land sold in the present case, as subject
Deed of Sale is a private instrument, it is beyond question that there was actual delivery
thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in
question to Jabil as early as 27 March 1965 so that the latter constructed thereon Sallys Beach
Resort also known as Jabils Beach Resort in March, 1965; Mactan White Beach Resort on 15
January 1966 and Bevirlyns Beach Resort on 1 September 1965. Such facts were admitted by
the Dignos spouses.
6.
Contemporaneous acts show that absolute deed of sale was intended

The Court of Appeals in its resolution dated 16 December 1981 found that the acts of
the Dignos spouses, contemporaneous with the contract, clearly show that an absolute deed of
sale was intended by the parties and not a contract to sell.
7.
Subsequent sale to the Cabigas spouses null and void

When the Dignoes spouses sold said land to the Cabigas spouses, they were no longer
owners of the same and the sale is null and void.
8.
Taguba vs. Vda. De Leon on all fours; Articles 1592 of the Civil Code
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all
fours with the present case, the contract of sale being absolute in nature is governed by Article
1592 of the Civil Code. The Dignos spouses never notified Jabil by notarial act that they were
rescinding the contract, and neither did they file a suit in court to rescind the sale.
9.
Article 1358 of the Civil Code, Acts and contracts for the extinguishments of
reaql rights over immovable property must appear in public document
The most that the Dignos spouses were able to show is a letter of Cipriano Amistad who,
claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil
because the latter had no money and further advised the Dignos spouses to sell the land in
litigation to another party. There is no showing that Amistad was properly authorized by
Jabil to make such extra judicial rescission for the latter who, on the contrary, vigorously
denied having sent Amistad to tell the Dignos spouses that he was already waiving his rights
to the land in question. Under Article 1358 of the Civil Code, it is required that acts and
contracts which have for their object the extinguishment of real rights over immovable
property must appear in a public document.
10.
Slight delay by one party not sufficient ground fro rescission

Where time is not of the essence of the agreement, a slight delay on the part of one
party in the performance of his obligation is not a sufficient ground for the rescission of the
agreement (Taguba v. Vda. de Leon, supra). Considering that Jabil has only a balance of
P4,000.00 and was delayed in payment only for one month, equity and justice mandate as in
the case that Jabil be given an additional period within which to complete payment of the
purchase price.
[31]
Dizon v. CA, 302 SCRA 288
Sales, 2003 ( 89 )
[32]
Doromal vs. CA [G.R. No. L-36083. September 5,
1975.] En Banc, Barredo (J): 6 concurring, 2 took no
part, 2 on leave
Facts: Lot 3504 of the cadastral survey of Iloilo, situated in the poblacion of La Paz, one of its
districts, with an area of a little more than 2-1/2 hectares was originally decreed in the name
of the late Justice Antonio Horilleno, in 1916, under OCT 1314. Before he died, on a date not
particularized in the record, he executed a last will and testament attesting to the fact that it
was a co-ownership between himself and his brothers and sisters. The truth was that the
owners or better stated, the co-owners were, besides Justice Horilleno, Luis, Soledad, Fe,
Rosita, Carlos and Esperanza, all surnamed Horilleno, in the proportion of 1/7 undivided
ownership each. Since Esperanza had already died, she was succeeded by her only
daughter, Filomena Javellana. Still, even though their right had not as yet been annotated in the
title, the co-owners led by Carlos, and as to deceased Justice Antonio Horilleno, his daughter
Mary, sometime since early 1967, had wanted to sell their shares, or if possible if Filomena
Javellana were agreeable, to sell the entire property. They hired an acquaintance Cresencia
Harder, to look for buyers, and the latter came to the interest of Ramon Doromal, Sr. and Jr. In
preparation for the execution of the sale (since the brothers and sisters Horilleno were
scattered in various parts of the country: Carlos in Ilocos Sur, Mary in Baguio, Soledad and Fe,
in Mandaluyong, Rizal, and Rosita in Basilan City), the Horillenos executed various powers of
attorney in favor of their niece, Mary H. Jimenez. They also caused preparation of a power of
attorney of identical tenor for signature by Javellana, and sent it with a letter of Carlos, dated
18 January 1968 unto her thru Mrs. Harder. Carlos informed Javellana that the price was P4.00 a
square meter. It appears, however, that as early as 22 October, 1967, Carlos had received in
check as earnest money from Ramon Doromal, Jr., the sum of P5,000.00 and the price therein
agreed upon was P5.00 a square meter. At any rate, Javellana, not being agreeable, did not sign
the power of attorney, and the rest of the co-owners went ahead with their sale of their 6/7.
Carlos saw to it that the deed of sale prepared by their common attorney in fact, Mary H.
Jimenez, be signed and ratified. The Deed was signed and ratified in Candon, Ilocos Sur, on
15 January 1968, and was brought to Iloilo by Carlos in the same month. The Register of
Deeds of Iloilo refused to register right away, since the original registered owner, Justice
Antonio Horilleno was already dead. Carlos had to hire Atty. Teotimo Arandela to file a
petition within the cadastral case, on 26 February 1968, for the purpose. After which,
Carlos returned to Luzon. After compliance with the requisites of publication, hearing and
notice, the petition was approved. On 29 April 1968, Carlos (in Iloilo) went to the Register of
Deeds and caused the registration of the order of the cadastral court approving the issuance of
a new title in the name of the co-owners, as well as of the deed of sale to the Doromals, as a
result of which on that same date, a new title was issued TCT 23152, in the name of the
Horillenos to 6/7 and Javellana to 1/7, Exh. D, only to be cancelled on the same day under TCT
23153, , already in the names of the vendees Doromals for 6/7 and to Javellana, 1/7. On 30
April 1968, the Doromals paid Carlos the sum of P97,000.00 by a check of the Chartered Bank
which was later substituted by check of PNB, because there was no Chartered Bank Branch in
Ilocos Sur. Besides the amount paid in check, the Doromals according to their evidence still
paid an additional amount in cash of P18,250.00 since the agreed price was P5.00 a square
meter; and thus was consummated the transaction. On 10 June 1968, Atty. Arturo H. Villanueva
(Javellanas lawyer) arrived at the residence of the Doromals in Dumangas, Iloilo, bringing
with him her letter of that date, making a formal offer to repurchase or redeem the 6/7
undivided share in Lot No. 3504, of the Iloilo Cadastre, which the Doromals bought from her
erstwhile co-owners, the Horillenos, for the sum of P30,000.00 (the sum Atty. Villanueva has
with him which he would deliver to the Doromals as soon as they execute the contract of sale
in her favor). The Doromals refused.

On 11 June, 1968, Javellana filed the case before the CFI Iloilo seeking to exercise her right to
redeem the share of the property, as co-owner, at the price stated in the deed of sale, i.e.
P30,000.00. The trial judge, after hearing the evidence, ruled in favor of the Doromals, holding
that Javellana had no more right, to redeem as she was already informed of the intended sale
of the 6/7 share belonging to the Horillenos, and further condemned Javellana to pay
attorneys fees, and moral and exemplary damages. Javellana appealed.
Sales, 2003 ( 90 )
The Court of Appeals (in CA-GR 47945-R) reversed the trial courts decision and held
that although respondent Javellana was informed of her co-owners proposal to sell the land in
question to the Doromals she was, however, never notified least of all, in writing, of
the actual execution and registration of the corresponding deed of sale, hence, Javellana s
right to redeem had not yet expired at the time she made her offer for that purpose thru her
letter of 10 June 1968 delivered to the Doromals on even date. The intermediate court further
held that the redemption price to be paid by Javellana should be that stated in the deed of sale
which is P30,000 notwithstanding that the preponderance of the evidence proves that the actual
price paid by the Doromals was P115,250. The Doromals appealed.
The Supreme Court affirmed the decision of the Court of Appeals, with costs against Spouses
Doromal Sr. and Doromal Jr.
1.
Right of pre-emption or redemption

Article 1623 of the Civil Code which provides that The right of legal pre-emption or
redemption shall not be exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by an affidavit of the vendor
that he has given written notice thereof to all possible redemptioners. The right of
redemption of co-owners excludes that of adjoining owners.
2.
Carlos letters do not constitute notice for the computation of the 30-day period
in Article 1623; Alleged letters do not refer to a consummated sale
The letters sent by Carlos Horilleno to Filomena Javellana (dated 18 January 1968 and 5
November 1967) do not constitute the required notice in writing from which the 30-day
period fixed in said provision should be computed. There is no showing that said letters were
in fact received by Javellana and when they were actually received. In any event, neither of
said letters referred to a consummated sale. It was Carlos Horilleno alone who signed them,
and as of 18 January 1968, powers of attorney from the various co-owners were still to be
secured. Indeed, the later letter of 18 January 1968 mentioned that the price was P4.00/sq.m.
whereas in the earlier letter of 5 November 1967 it was P5.00. In fact, as early as 21 October
1967, Carlos had already received P5,000 from the Doromals supposedly as earnest money, of
which, however, mention was made by him to his niece only in the later letter of 18 January
1968, the explanation being that at later negotiation it was increased to P5.00/sq.m.
3.
Sale not yet perfected during the time of the sending of letters; Earnest
money was made as understood under the Old Civil Code
While the letters relied upon by the Doromals could convey the idea that more or less
some kind of consensus had been arrived at among the other co-owners to sell the property in
dispute to the Doromals, it cannot be said definitely that such a sale had even been actually
perfected. The difference in the prices per square meter in the two letters negatives the
possibility that a price definite had already been agreed upon. While P5,000 might have
indeed been paid to Carlos in October 1967, there is nothing to show that the same was in the
concept of the earnest money contemplated in Article 1482 of the Civil Code as
signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant
in the record, said P5,000 were paid in the concept of earnest money as the term was
understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out,
considering that it is not clear that there was already a definite agreement as to the price then
and that the Doromals were decided to buy 6/7 only of the property should Javellana refuse
to agree to part with her 1/7 share.
3.
Right of redemption; Requirement of notice, must be in a public instrument
(Article 1620 and 1623)

For purposes of the co-owners right of redemption granted by Article 1620 of the
Civil Code, the notice in writing which Article 1623 requires to be made to the other co-owners
and from receipt of which the
Sales, 2003 ( 91 )
30-day period to redeem should be counted is a notice not only of a perfected sale but of the
actual execution and delivery of the deed of sale. This is implied from the latter portion of
Article 1623 which requires that before a register of deeds can record a sale by a co-owner,
there must be presented to him, an affidavit to the effect that the notice of the sale had been
sent in writing to the other co-owners. A sale may not be presented to the register of deeds
for registration unless it be in the form of a duly executed public instrument. Moreover,
the law prefers that all the terms and conditions of the sale should be definite and in writing.
4.
Co-owners right of redemption (Article 1619)

Article 1619 of the Civil Code bestows unto a co-owner the right to redeem and to be
subrogated under the same terms and conditions stipulated in the contract, and to avoid any
controversy as to the terms and conditions under which the right to redeem may be exercised, it
is best that the period therefor should not be deemed to have commenced unless the notice of
the disposition is made after the formal deed of disposal has been duly executed.
5.
Javellana not notified in writing

Javellana has never been notified in writing of the execution of the deed of sale by
which the Doromals acquired the subject property, it necessarily follows that her tender to
redeem the same made on 10 June 1968 was well within the period prescribed by law. Indeed, it
is immaterial when she might have actually come to know about said deed, it appearing she
has never been shown a copy thereof through a written communication by either any of the
Doromals or any of the Horillenos. (Cf. Cornejo et al. vs. CA et al., 16 SCRA 775.)
6.
Tax evasion must be condemned

It is impossible for the Supreme Court to sanction the Doromals pragmatic but
immoral posture. Being patently violative of public policy and injurious to public interest,
the seemingly wide practice of understating considerations of transactions for the purpose of
evading taxes and fees due to the government must be condemned and all parties guilty thereof
must be made to suffer the consequences of their ill-advised agreement to defraud the state. The
trial court fell short of its devotion and loyalty to the Republic in officially giving its stamp of
approval to the stand of the Doromals and even berating Javellana as wanting to enrich herself
at the expense of her own blood relatives who are her aunts, uncles and cousins. On the
contrary, said blood relatives should have been sternly told that they are in pari-delicto
with the Doromals in committing tax evasion and should not receive any consideration from
any court in respect to the money paid for the sale in dispute. Their situation is similar to that
of parties to an illegal contract.
7.
Consideration is P30,000
The consideration of P30,000 only was placed in the deed of sale to minimize the
payment of the registration fees, stamps and sales tax. The redemption in controversy should
be only for the price stipulated in the deed, regardless of what might have been actually paid
by the Doromals.
8.
Article 1619: Legal redemption as the right to be subrogated

Legal redemption is the right to be subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by purchase or dation
in payment, or by any other transaction whereby ownership is transmitted by onerous title.
In the present case, the stipulation in the public evidence of the contract, made public by both
vendors and vendees is that the price was P30,000.00.
9.
Article 1620 and 1623; Reasonable price

A co-owner of a thing may exercise the right of redemption in case the share of all
the other co-owners or any of them, are sold to a third person. If the price of the alienation
is grossly excessive, the redemptioner shall pay only a reasonable one. The law seeks to
protect redemptioner and converts his position into one not that of a contractually but of a
legally subrogated creditor as to the right of redemption, if the price is not grossly excessive,
what the law had intended redemptioner to pay can be read in Art. 1623,
Sales, 2003 ( 92 )
which provides that The right of a legal pre-emption or redemption shall not be exercised
except within thirty (30) days from the notice in writing by the prospective vendor, or by the
vendor as the case may be. The deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given written notice thereof of
all possible redemptioners.
10.
Affidavits intended for a defnitive purpose

Affidavit must have been intended by the lawmakers for a definite purpose, to argue
that this affidavit has no purpose is to go against all canons of statutory construction. No law
mandatory in character and worse, prohibitive should be understood to have no purpose at all.
That would be an absurdity. Purpose could not but have been to give a clear and unmistakable
guide to redemptioner, on how much he should pay and when he should redeem. Notice must
have been intended to state the truth and if vendor and vendee should have instead, decided
to state an untruth therein, it is they who should bear the consequences of having thereby
misled the redemptioner who had the right to rely and act thereon and on nothing else.
11.
Equitable estoppel
Stated otherwise, all the elements of equitable estoppel are present since the requirement
of the law is to submit the affidavit of notice to all possible redemptioners, that affidavit to
be a condition precedent to registration of the sale therefore. The law must have intended
that it be by the parties understood that they were there asking a solemn representation to
all possible redemptioners, who upon faith of that are thus induced to act. In the present
case, the parties to the sale sought to avoid compliance with the law and certainly refusal
to comply cannot be rewarded with exception and acceptance of the plea that they cannot be
now estopped by their own representation.
12.
No unjust enrichment, as right is not contractual but granted by law

Javellanas right is not contractual, but a mere legal one, the exercise of a right granted
by the law, and the law is definite that she can subrogate herself in place of the buyer,
upon the same terms and conditions stipulated in the contract, in the words of Art. 1619, and
here the price. stipulated in the contract was P30,000.00, in other words, if this be possible
enrichment on the part of Javellana, it was not unjust but just enrichment because permitted by
the law.
13.
Exercise of right, just solution, promotion of justice

What Javellana sought to enforce is not an abuse but a mere exercise of a right. The
solution is not unjust because it only binds the parties to make good their solemn representation
to possible redemptioners on the price of the sale, to what they had solemnly averred in a
public document required by the law to be the only basis for that exercise of redemption. This
thus promote justice.
[33]
Dy vs. CA [G.R. No. 92989. July 8, 1991.]
Third Division, Gutierrez Jr. (J): 3 concur, 1 took no part
Facts: Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo Dy purchased a
truck and a farm tractor through financing extended by Libra Finance and Investment
Corporation (Libra). Both truck and tractor were mortgaged to Libra as security for the loan.
Perfecto Dy wanted to buy the tractor from his brother so on 20 August 1979, he wrote a
letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the said tractor
and assume the mortgage debt of the latter. In a letter dated 27 August 1979, Libra thru its
manager, Cipriano Ares approved the Perfectos request. Thus, on 4 September 1979, Wilfredo
executed a deed of absolute sale in favor of Perfecto over the tractor in question. At that
time, the subject tractor was in the possession of Libra Finance due to Wilfredos failure to
pay the amortizations. Despite the offer of full payment by Perfecto to Libra for the tractor,
the immediate release could not be effected because Wilfredo had obtained financing not only
for said tractor but also for a truck and Libra insisted on full
Sales, 2003 ( 93 )
payment for both. Perfecto was able to convince his sister, Carol Dy-Seno, to purchase the
truck so that full payment could be made for both. On 22 November 1979, a PNB check was
issued in the amount of P22,000 in favor of Libra, thus settling in full the indebtedness of
Wilfredo with the financing firm. Payment having been effected through an out-of-town
check, Libra insisted that it be cleared first before Libra could release the chattels in question.
Meanwhile, Civil Case R-16646 entitled Gelac Trading, Inc. v. Wilfredo Dy, a collection case
to recover the sum of P12,269.80 was pending in another court in Cebu. On the strength of an
alias writ of execution issued on 27 December 1979, the provincial sheriff was able to seize
and levy on the tractor which was in the premises of Libra in Carmen, Cebu. The tractor was
subsequently sold at public auction where Gelac Trading was the lone bidder. Later, Gelac sold
the tractor to one of its stockholders, Antonio Gonzales. It was only when the check was
cleared on 17 January 1980 that Perfecto learned about GELAC having already taken custody
of the subject tractor.
Perfecto Dy filed an action to recover the subject tractor against GELAC Trading with the RTC
Cebu City. On 8 April 1988, the RTC rendered judgment in favor of Perfecto, pronouncing that
Perfecto is the owner of the tractor and directing Gelac Trading Corporation and Antonio
Gonzales to return the same to Perfecto; directing the Gelac Trading and Gonzales jointly
and severally to pay Perfecto the amount of P1,541.00 as expenses for hiring a tractor;
P50,000 for moral damages; P50,000 for exemplary damages; and to pay the cost.
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the
complaint with costs against Perfecto. The Court of Appeals held that the tractor in question
still belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the
alias writ of execution issued in Civil Case R-16646. Hence, the petition for review on
certiorari.
The Supreme Court granted the petition, set aside the decision of the Court of Appeals
promulgated on 23 March 1990, and reinstated the decision of the Regional Trial Court dated 8
April 1988.
1.
Sale of mortgaged property valid; Mortgagor maintains ownership of the
property offered as security
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court (174
SCRA 80 [1989]), it was stated that the chattel mortgagor continues to be the owner of the
property, and therefore, has the power to alienate the same; however, he is obliged under pain
of penal liability, to secure the written consent of the mortgagee. (Francisco, Vicente, Jr.,
Revised Rules of Court in the Philippines, [1972], Volume IV-s Part I, p. 5s251) Thus, the
instruments of mortgage are binding, while they subsist, not only upon the parties executing
them but also upon those who later, by purchase or otherwise, acquire the properties referred
to therein. The absence of the written consent of the mortgagee to the sale of the mortgaged
property in favor of a third person, therefore, effects not the validity of the sale but only the
penal liability of the mortgagor under the Revised Penal Code and the binding effect of
such sale on the mortgagee under the Deed of Chattel Mortgage. The mortgagor who gave
the property as security under a chattel mortgage did not part with the ownership over the
same. He had the right to sell it although he was under the obligation to secure the written
consent of the mortgagee or he lays himself open to criminal prosecution under the provision
of Article 319 par. 2 of the Revised Penal Code. And even if no consent was obtained from the
mortgagee, the validity of the sale would still not be affected. In the present case, Wilfredo Dy
can sell the subject tractor. The consent of Libra Finance was obtained. In a letter dated 27
August 1979, Libra allowed Perfecto to purchase the tractor and assume the mortgage debt of
his brother. The sale between the brothers was therefore valid and binding as between them and
to the mortgagee, as well.

2.
Ownership acquired when thing delivered to vendee; Article 1496

Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by the
vendee
Sales, 2003 ( 94 )
from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501
or in any other manner signing an agreement that the possession is transferred from the vendor
to the vendee.
3.
Article 1498 and 1499 applicable in present case; Tractor cannot be delivered
Articles 1498 and 1499 are applicable in the present case. Article 1498 states 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. Article 1499 provides that The delivery of
movable property may likewise be made by the mere consent or agreement of the contracting
parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the
sale, or if the latter already had it in his possession for any other reason. In the present case,
actual delivery of the subject tractor could not be made. However, there was constructive
delivery already upon the execution of the public instrument pursuant to Article 1498 and upon
the consent or agreement of the parties when the thing sold cannot be immediately transferred
to the possession of the vendee.
4.
Mortgagees right of foreclosure; implied right to possess property to effect
foreclosure
A mortgagee has the right of foreclosure upon default by the mortgagor in the
performance of the conditions mentioned in the contract of mortgage. The law implies that
the mortgagee is entitled to possess the mortgaged property because possession is necessary in
order to enable him to have the property sold. In the present case, it was Libra Finance which
was in possession of the subject tractor due to Wilfredos failure to pay the amortization as a
preliminary step to foreclosure.
5.
Mortgagee not owner of the property mortgaged; Mortgagees remedy is to
have property sold in public auction and to apply proceeds to obligation secured
While it is true that Wilfredo Dy was not in actual possession and control of the
subject tractor, his right of ownership was not divested from him upon his default. Neither
could it be said that Libra was the owner of the subject tractor because the mortgagee can not
become the owner of or convert and appropriate to himself the property mortgaged. (Article
2088, Civil Code) Said property continues to belong to the mortgagor. The only remedy
given to the mortgagee is to have said property sold at public auction and the proceeds of the
sale applied to the payment of the obligation secured by the mortgagee. (See Martinez v. PNB,
93 Phil. 765, 767 [1953]) There is no showing that Libra Finance has already foreclosed the
mortgage and that it was the new owner of the subject tractor.
6.
Third person who purchases the mortgaged property assumes obligation of
original mortgagor Where a third person purchases the mortgaged property, he automatically
steps into the shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177
SCRA 521[1989]). His right of ownership shall be subject to the mortgage of the thing sold to
him. In the present case, Perfecto was fully aware of the existing mortgage of the subject
tractor to Libra. In fact, when he was obtaining Libras consent to the sale, he volunteered
to assume the remaining balance of the mortgage debt of Wilfredo which Libra undeniably
agreed to.
7.
Payment of check intended to extinguish mortgage obligation and not a
payment of purchase price
The payment of the check was actually intended to extinguish the mortgage
obligation so that the tractor could be released to Perfecto. It was never intended nor could
it be considered as payment of the purchase price because the relationship between Libra and
Perfecto is not one of sale but still a mortgage. The clearing or encashment of the check which
produced the effect of payment determined the full payment of the money obligation and the
release of the chattel mortgage. It was not determinative of the consummation of the sale. The
transaction between the brothers is distinct and apart from the transaction between Libra
and Perfecto. The contention, therefore, that the consummation of the sale depended upon the
encashment of the check is untenable.
Sales, 2003 ( 95 )
8.
Sale consummated upon execution of public instrument; Constructive delivery

The sale of the subject tractor was consummated upon the execution of the public
instrument on 4 September 1979. At this time constructive delivery was already effected.
Hence, the subject tractor was no longer owned by Wilfredo Dy when it was levied upon by
the sheriff in December 1979.
9.
Only properties unquestionably owned by judgment debtor can be levied upon

Only properties unquestionably owned by the judgment debtor and which are not
exempt by law from execution should be levied upon or sought to be levied upon. For the
power of the court in the execution of its judgment extends only over properties belonging to
the judgment debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No. 78771,
January 23, 1991).
10.
Third party not precluded from taking other legal remedies to prosecute claim
It is inconsequential whether a third party claim has been filed or not by Perfecto during
the time the sheriff levied on the subject tractor. A person other than the judgment debtor who
claims ownership or right over levied properties is not precluded, however, from taking other
legal remedies to prosecute his claim. (Consolidated Bank and Trust Corp. v. Court of Appeals,
supra) This is precisely what the petitioner did when he filed the action for replevin with the
RTC.
11.
Factual finding of trial court given great respect and weight; Fraud not
presumed but established by clear evidence; Relationship not a badge of fraud
The Court accords great respect and weight to the findings of fact of the trial court.
There is no sufficient evidence to show that the sale of the tractor was in fraud of Wilfredo
and creditors. While it is true that Wilfredo and Perfecto are brothers, this fact alone does not
give rise to the presumption that the sale was fraudulent. Relationship is not a badge of fraud
(Goquiolay v. Sycip, 9 SCRA 663 [1963]). Moreover, fraud can not be presumed; it must be
established by clear convincing evidence.
12.
Actuations of Gelac trading violative of provisions on human relations

Gelac Trading knew very well of the transfer of the property to Perfecto on 14 July
1980 when it received summons based on the complaint for replevin filed by Perfecto with the
RTC. Notwithstanding said summons, it continued to sell the subject tractor to one of its
stockholders on 2 August 1980.
[34]
EDCA Publishing vs. Santos [G.R. No. 80298. April
26, 1990.] First Division, Cruz (J): 4 concur
Facts: On 5 October 1981, a person identifying himself as Professor Jose Cruz placed an order
by telephone with EDCA Publishing and Distributing Corp. for 406 books, payable on
delivery. EDCA prepared the corresponding invoice and delivered the books as ordered, for
which Cruz issued a personal check covering the purchase price of P8,995.65. On 7 October
1981, Cruz sold 120 of the books to Leonor Santos who, after verifying the sellers ownership
from the invoice he showed her, paid him P1,700.00. Meanwhile, EDCA having become
suspicious over a second order placed by Cruz even before clearing of his first check, made
inquiries with the De la Salle College where he had claimed to be a dean and was informed that
there was no such person in its employ. Further verification revealed that Cruz had no more
account or deposit with the Philippine Amanah Bank, against which he had drawn the
payment check. EDCA then went to the police, which set a trap and arrested Cruz on 7
October 1981. Investigation disclosed his real name as Tomas de la Pea and his sale of 120 of
the books he had ordered from EDCA to Leonor Santos (and Gerardo Santos, doing business as
Santos Bookstore). On the night of said date 7 October 1981, EDCA sought the assistance of the
police in Precinct 5 at the UN Avenue, which forced their way into Santos Bookstore and
threatened Leonor Santos with prosecution for buying stolen property. They seized the 120
books without warrant, loading them in a van belonging to EDCA, and thereafter turned them
over to EDCA. Protesting this highSales, 2003 ( 96 )
handed action, the Santos spouses sued for recovery of the books after demand for their return
was rejected by EDCA. A writ of preliminary attachment was issued and EDCA, after initial
refusal, finally surrendered the books to the Santos spouses.
Ownership of the books was recognized in the Santos spouses by the Municipal Trial Court,
which was sustained by the Regional Trial Court, which was in turn sustained by the Court of
Appeals. EDCA appealed to the Supreme Court.
The Supreme Court afirmed the challenged decision and denied the petition, with costs
against EDCA Publishing.
1.

Article 559 provides that The possession of movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same. If the possessor of a
movable lost or of which the owner has been unlawfully deprived has acquired it in good faith
at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.
2.
Arbitrary action, act of taking the law on own hands, condemned

The Court expresses its disapproval of the arbitrary action of EDCA Publishing in taking
the law into its own hands and forcibly recovering the disputed books from the Santos spouses.
The circumstance that it did so with the assistance of the police, which should have been
the first to uphold legal and peaceful processes, has compounded the wrong even more
deplorably. Questions, such as the ownership of the books, are decided not by policemen but by
judges and with the use not of brute force but of lawful writs.
3.
Possession of movable property acquired in good faith equivalent to title

The first sentence of Article 559 provides that the possession of movable property
acquired in good faith is equivalent to a title, thus dispensing with further proof. It cannot
be said that the spouses cannot establish their ownership of the disputed books because they
have not even produced a receipt to prove they had bought the stock.
4.
Santos a purchaser in good faith, even if books were bought at discount

Leonor Santos first ascertained the ownership of the books from the EDCA invoice
showing that they had been sold to Cruz, who said he was selling them for a discount because
he was in financial need. The Santos spouses are in the business of buying and selling books
and often deal with hard-up sellers who urgently have to part with their books at reduced
prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was
accustomed to dealing with. It is hardly bad faith for any one in the business of buying and
selling books to buy them at a discount and resell them for a profit.
5.
Contract of sale consensual and is perfected upon agreement

The contract of sale is consensual and is perfected once agreement is reached between
the parties on the subject matter and the consideration. According to Article 1475 of the Civil
Code, The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts. Article 1477, on the other hand, provides that The
ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. Article 1478 provides that The parties may stipulate that
ownership in the thing shall not pass to the purchaser until he has fully paid the price.
6.
Rule in the transfer of ownership
Ownership in the thing sold shall not pass to the buyer until full payment of the purchase
price only if
Sales, 2003 ( 97 )
there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from
the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid. Absent the stipulation, delivery of the thing sold will
effectively transfer ownership to the buyer who can in turn transfer it to another.
7.
Effect of non-payment; Relief

Non-payment only creates a right to demand payment or to rescind the contract, or
to criminal prosecution in the case of bouncing checks.
8.
Asiatic Commercial Corporation vs. Ang; Company not unlawfully deprived of
property, sale valid
In Asiatic Commercial Corporation v. Ang, the company sold some cosmetics to
Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it
sued for the recovery of the articles from Tan, who claimed he had validly bought them
from Ang, paying for the same in cash. Finding that there was no conspiracy between Tan and
Ang to deceive Asiatic, the Court of Appeals declared that the company was not unlawfully
deprived of the cartons of Gloco Tonic within the scope of this legal provision. It has
voluntarily parted with them pursuant to a contract of purchase and sale. The circumstance that
the price was not subsequently paid did not render illegal a transaction which was valid and
legal at the beginning.
9.
Tagatac vs. Jimenez; Sale voidable due to fraud but subsists as valid until annulled
In Tagatac v. Jimenez, Trinidad C. Tagatac sold her car to Warner Feist, who sold it to
Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by Feist was
dishonored, Tagatac sued to recover the vehicle from Jimenez on the ground that she had
been unlawfully deprived of it by reason of Feists deception. In ruling for Jimenez, the Court
of Appeals held that the fraud and deceit practiced by Feist earmarks this sale as a voidable
contract (Article 1390). Being a voidable contract, it is susceptible of either ratification or
annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392) and
the contract is cleansed from all its defects (Article 1396); if the contract is annulled, the
contracting parties are restored to their respective situations before the contract and mutual
restitution follows as a consequence (Article 1398). However, as long as no action is taken by
the party entitled, either that of annulment or of ratification, the contract of sale remains
valid and binding. When Tagatac delivered the car to Feist by virtue of said voidable contract
of sale, the title to the car passed to Feist (the title was defective and voidable).
Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been
avoided and he therefore conferred a good title on the latter, provided he bought the car in
good faith, for value and without notice of the defect in Feists title (Article 1506). There
being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted
in good faith.
10.
Ownership validly transferred to the Santos spouses

Actual delivery of the books having been made, Cruz acquired ownership over the
books which he could then validly transfer to the Santos spouses. The fact that he had not yet
paid for them to EDCA was a matter between him and EDCA and did not impair the title
acquired by the spouses to the books.
11.
Injustice will arise if unlawfully deprived would be interpreted in a diferent
manner
One may well imagine the adverse consequences if the phrase unlawfully deprived
were to be interpreted in the manner premised on the argument that the impostor acquired no
title to the books that he could have validly transferred to the spouses. A person relying on
the sellers title who buys a movable property from him would have to surrender it to
another person claiming to be the original owner who had not yet been paid the purchase price
therefor. The buyer in the second sale would be left holding the bag, so to speak, and would
be compelled to return the thing bought by him in good faith without even the right to
reimbursement of the amount he had paid for it.
12.
Diligence exercised by Santos, but not by EDCA

Sales, 2003 ( 98 )
Leonor Santos took care to ascertain first that the books belonged to Cruz before
she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had
been paid for on delivery. Santos did not have to go beyond that invoice to satisfy herself that
the books being offered for sale by Cruz belonged to him; yet she did. Although the title of
Cruz was presumed under Article 559 by his mere possession of the books, these being
movable property, Leonor Santos nevertheless demanded more proof before deciding to buy
them. By contrast, EDCA was less than cautious in fact, too trusting in dealing with the
impostor. Although it had never transacted with him before, it readily delivered the books he
had ordered (by telephone) and as readily accepted his personal check in payment. It did not
verify his identity although it was easy enough to do this. It did not wait to clear the check
of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed
terms thereon, that the books had been paid for on delivery, thereby vesting ownership in the
buyer.
13.
Santos spouses cannot be made to sufer

It would certainly be unfair to make the spouses bear the prejudice sustained by EDCA
as a result of its own negligence. There is no justice in transferring EDCAs loss to the
Santoses who had acted in good faith, and with proper care, when they bought the books from
Cruz. While the Court sympathized with EDCA for its plight, it is clear that its remedy is not
against the spouses but against Tomas de la Pea, who has apparently caused all this trouble.
14.
Santos have the right to complain

The spouses have themselves been unduly inconvenienced, and for merely transacting a
customary deal not really unusual in their kind of business. It is they and not EDCA who have a
right to complain.
[35]
Elisco Tool Manufacturing v. CA, 308 SCRA 731 (1999)
[36]
Engineering and Machinery Corp. v. CA [G.R. No. 52267.
January 24, 1996.] Third Division, Panganiban (J): 3 concur
Facts: Pursuant to the contract dated 10 September 1962 between the Engineering and
Machinery Corporation (the Corporation) and Almeda, the former undertook to fabricate,
furnish and install the air-conditioning system in the latters building along Buendia
Avenue, Makati in consideration of P12,000.00. The Corporation was to furnish the materials,
labor, tools and all services required in order to so fabricate and install said system. The system
was completed in 1963 and accepted by Almeda, who paid in full the contract price. On 2
September 1965, Almeda sold the building to the National Investment and Development
Corporation (NIDC). The latter took possession of the building but on account of NIDCs
noncompliance with the terms and conditions of the deed of sale, Almeda was able to secure
judicial rescission thereof. The ownership of the building having been decreed back to Almeda,
he re-acquired possession sometime in 1971. It was then that he learned from some NIDC
employees of the defects of the air-conditioning system of the building. Acting on this
information, Almeda commissioned Engineer David R. Sapico to render a technical evaluation
of the system in relation to the contract with the Corporation. In his report, Sapico enumerated
the defects of the system and concluded that it was not capable of maintaining the desired
room temperature of 76F 2F.
On the basis of this report, Almeda filed on 8 May 1971 an action for damages against the
Corporation with the then CFI Rizal (Civil Case 14712). The complaint alleged that the airconditioning system installed by the Corporation did not comply with the agreed plans and
specifications, hence, Almeda prayed for the amount of P210,000.00 representing the
rectification cost, P100,000.00 as damages and P15,000.00 as attorneys fees.
Sales, 2003 ( 99 )
The Corporation moved to dismissed the case, alleging prescription, but which was denied
by the Court. Thereafter, Almeda filed an ex-parte motion for preliminary attachment on the
strength of the Corporations own statement to the effect that it had sold its business and was
no longer doing business in Manila. The trial court granted the motion and, upon Almedas
posting of a bond of P50,000.00, ordered the issuance of a writ of attachment.
In due course, and on 15 April 1974, the trial court rendered a decision, which ordered the
Corporation to pay Almeda the amount needed to rectify the faults and deficiencies of the airconditioning system installed by the Corporation in Almedas building, plus damages,
attorneys fees and costs). Petitioner appealed to the Court of Appeals, which affirmed on 28
November 1978 the decision of the trial court. Hence, it instituted a petition for review on
certiorari under Rule 45 of the Rules of Court.
The Supreme Court denied the petition and affirmed the decision assailed; without costs.
1.
The Courts power to review

The Supreme Court reviews only errors of law in petitions for review on certiorari under
Rule 45. It is not the function of this Court to re-examine the findings of fact of the appellate
court unless said findings are not supported by the evidence on record or the judgment is based
on a misapprehension of facts. The Court has consistently held that the factual findings of the
trial court, as well as the Court of Appeals, are final and conclusive and may not be reviewed
on appeal. Among the exceptional circumstances where a reassessment of facts found by the
lower courts is allowed are when the conclusion is a finding grounded entirely on
speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken
or impossible; when there is grave abuse of discretion in the appreciation of facts; when the
judgment is premised on a misapprehension of facts; when the findings went beyond the issues
of the case and the same are contrary to the admissions of both appellant and appellee. After a
careful study of the case at bench, we find none of the above grounds present to justify the reevaluation of the findings of fact made by the courts below.
2.
Contract of a piece of work defined

Article 1713 of the Civil Code defines a contract for a piece of work as by the contract
for a piece of work the contractor binds himself to execute a piece of work for the employer,
in consideration of a certain price or compensation. The contractor may either employ only his
labor or skill, or also furnish the material.
3.
Contract for a piece of work distinguished from a contract of sale

A contract for a piece of work, labor and materials may be distinguished from a contract
of sale by the inquiry as to whether the thing transferred is one not in existence and which
would never have existed but for the order of the person desiring it . In such case, the contract
is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract
would have existed and been the subject of a sale to some other person even if the order had not
been given, then the contract is one of sale.
A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market whether the
same is on hand at the time or not is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work (Art. 1467, Civil Code). The mere fact alone that
certain articles are made upon previous orders of customers will not argue against the
imposition of the sales tax if such articles are ordinarily manufactured by the taxpayer for sale
to the public. (Celestino Co. vs. Collector, 99 Phil. 8411).
To Tolentino, the distinction between the two contracts depends on the intention of the
parties. Thus, if the parties intended that at some future date an object has to be delivered,
without considering the work or labor of the party bound to deliver, the contract is one of sale.
But if one of the parties accepts the undertaking on the basis of some plan, taking into account
the work he will employ personally or through another, there is a contract for a piece of work.
Sales, 2003 ( 100 )
4.
Contract in question is one for a piece of work

The contract in question is one for a piece of work. It is not the Corporations line of
business to manufacture air-conditioning systems to be sold off-the-shelf. Its business and
particular field of expertise is the fabrication and installation of such systems as ordered
by customers and in accordance with the particular plans and specifications provided by the
customers. Naturally, the price or compensation for the system manufactured and installed
will depend greatly on the particular plans and specifications agreed upon with the customers.
5.
Obligations of a contractor for a piece of work

The obligations of a contractor for a piece of work are set forth in Articles 1714 and
1715 of the Civil Code. Article 1714 provides that if the contractor agrees to produce the
work from material furnished by him, he shall deliver the thing produced to the employer
and transfer dominion over the thing. This contract shall be governed by the following
articles as well as by the pertinent provisions on warranty of title and against hidden defects
and the payment of price in a contract of sale. Article 1715 provides that the contractor
shall execute the work in such a manner that it has the qualities agreed upon and has no
defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the
work be not of such quality, the employer may require that the contractor remove the
defect or execute another work. If the contractor fails or refuses to comply with this
obligation, the employer may have the defect removed or another work executed, at the
contractors cost.
6.
Provisions on warranty against hidden defects

The provisions on warranty against hidden defects, referred to in Article 1714, are
found in Articles 1561 and 1566. Article 1561 provides that the vendor shall be responsible
for warranty against the hidden defects which the thing sold may have, should they render it
unfit for the use for which it is intended, or should they diminish its fitness for such use to
such an extent that, had the vendee been aware thereof, he would not have acquired it or
would have given a lower price for it; but said vendor shall not be answerable for patent
defects or those which may be visible, or for those which are not visible if the vendee is an
expert who, by reason of his trade or profession, should have known them. Article 1566
provides that the vendor is responsible to the vendee for any hidden faults or defects in the
thing sold, even though he was not aware thereof, and provides further that the provision
shall not apply if the contrary has been stipulated, and the vendor was not aware of the
hidden faults or defects in the thing sold.
7.
Remedy against violation of the warranty against hidden defects

The remedy against violations of the warranty against hidden defects is either to
withdraw from the contract (rehibitory action) or to demand a proportionate reduction of the
price (accion quanti minoris), with damages in either case.
8.
Prescriptive period as specified in express warranty, or in the absence of
which, 4 years; Prescriptive period of 6 months for rehibitory action is applicable only
in implied warranties
While it is true that Article 1571 of the Civil Code provides for a prescriptive period of
six months for a rehibitory action, a cursory reading of the ten preceding articles to which it
refers will reveal that said rule may be applied only in case of implied warranties; and where
there is an express warranty in the contract, the prescriptive period is the one specified in the
express warranty, and in the absence of such period, the general rule on rescission of contract,
which is four years (Article 1389, Civil Code) shall apply. (Villostas v. CA)
9.
Original complaint is one for arising from breach of a written contact and not a
suit to enforce warranty against hidden defects; Article 1715 in relation to Article
1144 apply, prescription in 10 years; Action not prescribed
The lower courts opined and so held that the failure of the defendant to follow
the contract specifications and said omissions and deviations having resulted in the
operational ineffectiveness of the system installed makes the defendant liable to the plaintiff
in the amount necessary to rectify to put the air
Sales, 2003 ( 101 )
conditioning system in its proper operational condition to make it serve the purpose for
which the plaintiff entered into the contract with the defendant. Thus, having concluded that
the original complaint is one for damages arising from breach of a written contract, and not a
suit to enforce warranties against hidden defects, the governing law therefore is Article 1715.
However, inasmuch as this provision does not contain a specific prescriptive period, the general
law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states,
inter alia, that actions upon a written contract prescribe in 10 years. Since the governing
contract was executed on 10 September 1962 and the complaint was filed on 8 May 1971, it is
clear that the action has not prescribed.
10.
Acceptance of the work by the employer does not relieve the contractor of
liability for any defect in the work
The mere fact that Almeda accepted the work does not, ipso facto, relieve the
Corporation from liability for deviations from and violations of the written contract, as the
law gives him 10 years within which to file an action based on breach thereof. As held by the
Court of Appeals, as the breach of contract consisted in appellants omission to install the
equipment [sic], parts and accessories not in accordance with the plan and specifications
provided for in the contract and the deviations made in putting into the air-conditioning
system parts and accessories not in accordance with the contract specifications, it is evident
that the defect in the installation was not apparent at the time of the delivery and acceptance
of the work, considering further that Almeda is not an expert to recognize the same. From
the very nature of things, it is impossible to determine by the simple inspection of air
conditioning system installed in an 8-floor building whether it has been furnished and installed
as per agreed specifications.
[37]
Equatorial Realty vs. Mayfair Theater [G.R. No. 106063.
November 21, 1996.] En Banc, Hermosisima Jr. (J): 13 concur, 1 took
no part
Facts: Carmelo & Bauermann Inc. (Carmelo) owned a parcel of land, together with two 2storey buildings constructed thereon located at Claro M Recto Avenue, Manila (TCT 18529,
Register of Deeds of Manila). On 1 June 1967, Carmelo entered into a contract of lease with
Mayfair Theater for the latters lease of a portion of Carmelos property, i.e. a portion of the
2/F of the two-storey building with floor area of 1610 sq.ms. and the second floor and
mezzanine of the two-storey building situated at CM Recto Avenue, Manila with a floor area of
150 sq.ms. for use by Mayfair as a motion picture theater and for a term of 20 years.
Mayfair thereafter constructed on the leased property a movie house known as Maxim
Theatre. On 31 March 1969, Mayfair entered into a second contract of lease with Carmelo for
the lease of another portion of Carmelos property, i.e. a portion of the 2/F of the two-storey
building with floor area of 1064 sq.ms. and two store spaces at the ground floor and
mezzanine of the two-storey building situated at CM Recto Avenue, Manila with a floor area
of 300 sq.ms. and bearing street numbers 1871 and 1875 for similar use as a movie theater and
for a similar term of 20 years. Mayfair put up another movie house known as Miramar
Theatre on this leased property. Both contracts of lease provide 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. Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang,
President of Mayfair, through a telephone conversation that Carmelo was desirous of selling the
entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was
offering to buy the whole property for US$1,200,000, and Mr. Pascal asked Mr. Yang if the
latter was willing to buy the property for P6 million to P7 million. Mr. Yang replied that he
would let Mr. Pascal know of his decision. On 23 August 1974, Mayfair replied through a letter
confirming the correspondence between Pascual and Yang and reiterating paragraph 8 of
the two contracts of lease. Carmelo did no reply to this letter. On 18 September 1974,
Mayfair sent another letter to
Sales, 2003 ( 102 )
Carmelo purporting to express interest in acquiring not only the leased premises but the entire
building and other improvements if the price is reasonable. However, both Carmelo and
Equatorial questioned the authenticity of the second letter. Four years later, on 30 July 1978,
Carmelo sold its entire CM. Recto Avenue land and building, which included the leased
premises housing the Maxim and Miramar theatres, to Equatorial by virtue of a Deed
of Absolute Sale, for the total sum of P1,300,000.
In September 1978, Mayfair instituted the action for specific performance and annulment of
the sale of the leased premises to Equatorial. In its Answer, Carmelo alleged as special and
affirmative defense that it had informed Mayfair of its desire to sell the entire CM. Recto
Avenue property and offered the same to Mayfair, but the latter answered that it was interested
only in buying the areas under lease, which was impossible since the property was not a
condominium; and that the option to purchase invoked by Mayfair is null and void for lack of
consideration. Equatorial, in its Answer, pleaded as special and affirmative defense that the
option is void for lack of consideration and is unenforceable by reason of its impossibility of
performance because the leased premises could not be sold separately from the other
portions of the land and building. It counterclaimed for cancellation of the contracts of
lease, and for increase of rentals in view of alleged supervening extraordinary devaluation
of the currency. Equatorial likewise cross-claimed against codefendant Carmelo for
indemnification in respect of Mayfairs claims. After assessing the evidence, the court
rendered decision dismissing the complaint with costs against Mayfair; ordering Mayfair to pay
Carmelo & Bauermann P40,000.00 by way of attorneyss fees on its counterclaim; and
ordering Mayfair to pay Equatorial Realty P35,000.00 per month as reasonable compensation
for the use of areas not covered by the contracts of lease from 31 July 1979 until Mayfair
vacates said areas plus legal interest from 31 July 1978; P70,000.00 per month as reasonable
compensation for the use of the premises covered by the contracts of lease dated (1 June 1967
from 1 June 1987 until Mayfair vacates the premises plus legal interest from 1 June 1987;
P55,000.00 per month as reasonable compensation for the use of the premises covered by the
contract of lease dated 31 March 1969 from 30 March 1989 until Mayfair vacates the premises
plus legal interest from 30 March 1989; and P40,000.00 as attorneys fees; and dismissing
Equatorials crossclaim against Carmelo & Bauermann. The trial court adjudged the
identically worded paragraph 8 found in both lease contracts to be an option clause which
however cannot be deemed to be binding on Carmelo because of lack of distinct consideration
therefor.
Mayfair taking exception to the decision of the trial court, appealed to the Court of Appeals.
The appellate court reversed the trial court and rendered judgment reversing and setting
aside the appealed Decision; directing Mayfair to pay and return to Equatorial the amount of
P11,300,000.00 within 15 days from notice of this Decision, and ordering Equatorial to accept
such payment; directing Equatorial, upon payment of the sum of P11,300,000, to execute the
deeds and documents necessary for the issuance and transfer of ownership to Mayfair of the lot
registered under TCT 17350, 118612, 60936, and 52571; and should Mayfair be unable to pay
the amount as adjudged, declaring the Deed of Absolute Sale between Carmelo and Equatorial
as valid and binding upon an the parties. Hence, the petition for review.
The Supreme Court denied the petition for review of the decision of the Court of Appeals (23
June 1992, in CA-GR CV 32918), declaring the Deed of Absolute Sale between Equatorial
and Carmelo as deemed rescinded; ordering Carmelo to return to Equatorial the purchase
price; directing Equatorial to execute the deeds and documents necessary to return ownership
to Carmelo of the disputed lots; and ordering Carmelo to allow Mayfair to buy the lots for
P11,300,000.
1.
Issue on irregularities in Court of Appeals passed upon so as not to preempt the
administrative proceedings related thereto

It was raised that the Court of Appeals violated its own internal rules in the assignment
of appealed cases when it allowed the same Division XII, particularly Justice Manuel Herrera,
to resolve all the motions in the Completion Process and to still resolve the merits of the
case in the Decision Stage. This was related to letter complaint written by the counsel for
Equatorial on 20 September 1992 to the Supreme Court
Sales, 2003 ( 103 )
alleging certain irregularities and infractions committed by certain lawyers, and Justices of
the Court of Appeals and of the Supreme Court in connection with case CA-GR CV 32918 (GR
106063). This partakes of the nature of an administrative complaint for misconduct, against
members of the judiciary. While the letter-complaint arose as an incident in said case, the
disposition thereof should be separate and independent from case GR 106063. It would be
correct, prudent and consistent course of action not to pre-empt the administrative
proceedings to be undertaken respecting the said irregularities. A discussion of such in the
present case would entail a finding on the merits as to the real nature of the questioned
procedures and the true intentions and motives of the players therein.
2.
Paragraph 8 of lease contracts provides for a right of first refusal, and is not
an option clause nor an option contract
The contractual stipulation (Paragraph 8) provides for a right of first refusal in favor of
Mayfair. It is not an option clause or an option contact. It is a contract of a right of first
refusal. The true nature of the paragraph 8 is ascertained to be that of a contractual grant of
the right of first refusal to Mayfair.
3.
Option contract; Validity based on a separate and distinct consideration

As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our
characterization of an option contract as one necessarily invoking 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. T he deed of option or 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.
4.
Option contract, according to Bouvier Law Dictionary

Bouvier, in his Law Dictionary (edition of 1897) defines an option as a contract, 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.)
5.
Option contract, according to Words and Phrases

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, nor 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 this right, or, rather, from his
point of view, he receives the right to elect to buy. (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]).
6.
Cases involving option contracts

In Tuason vs. de Asis (107 PHIL 131 [1960]), it was 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 Mendoza vs. Comple (15 SCRA 162), the Court freed
the landowner from her promise to sell her land if the prospective buyer could raise P4,500.00
in 3 weeks because such option was not supported by a distinct consideration. In the same
vein, in Sanchez vs. Rigos (45 SCRA 368 [1972]), the Court 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 Vda de Quirino vs. Palarca (29 SCRA 1 [1969]), it was 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
Sales, 2003 ( 104 )
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.
Ang Yu Asuncion case:
7.

In sales, 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 that 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
8.
Contract to sell is conditional; Efect of breach of condition

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.
9.
Unconditional mutual promise to buy and sell obligatory on the parties

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.
10.
Perfected contract of option

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, which
provides that An accepted unilateral promise to buy or to sell a determinate thing for a price
from the price. (1451a)
11.
Option not the contract of sale itself

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.
12.
Ofer
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).
13.
Ofer with a period; Efects of withdrawal

(1) If the period is not itself founded upon or supported by a consideration, the offeror is
still free and has the right to withdrawal 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 (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;
Sales, 2003 ( 105 )
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).
14.
Requirement for separate consideration has no applicability as paragraph 8 is
not an option contract but a right of frst refusal
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. Paragraph 8 grants the
right of first refusal to Mayfair and is not an option contract. The requirement of a separate
consideration for the option, thus, has no applicability in the case. There is nothing in
paragraph 8 of the contracts which would bring them into the ambit of the usual offer or
option requiring an independent consideration.
15.
Option and Right of First Refusal distinguished

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.
16.
Right of First Refusal inutile if governed by Article 1324 on withdrawal of the
ofer on Article 1479 on promise to buy and sell
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 on 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. 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.
17.
Consideration in an agreement of right of first refusal: Consideration for lease

It is not 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.
18.
Consideration in an agreement of right of frst refusal: Consideration is
obligation or promise (reciprocal contract)
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.
Sales, 2003 ( 106 )
19.
Diference to Ang Yu Asuncion case: Equatorial Realty and Carmelo acted in bad
faith
Carmelo and Equatorial Realty acted in bad faith to render Paragraph 8 inutile. What
Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will
have the right of first refusal in the event Carmelo sells the leased premises. It is undisputed
that Carmelo did recognize this right of Mayfair, for it informed the latter of its intention to
sell the said property in 1974. There was an exchange of letters evidencing the offer and
counter-offers made by both parties. Carmelo, however, did not pursue the exercise to its
logical end. While it initially recognized Mayfairs right of first refusal, Carmelo violated
such right when without affording its negotiations with Mayfair the full process to ripen to
at least an interface of a definite offer and a possible corresponding acceptance within the
30-day exclusive option time granted Mayfair, Carmelo abandoned negotiations, kept a
low profile for some time, and then sold, without prior notice to Mayfair, the entire Claro M.
Recto property to Equatorial.
20.
Rescission lies when the purchase is in bad faith

Equatorial (being aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts) is a buyer in bad faith, and thus renders the sale to it of the property
in question rescissible.
Guzman, Bocaling & Co. vs. Bonnevie case
21.
Rescission as remedy
Rescission is a remedy granted by law to the contracting parties and even to third
persons, to secure reparation for damages caused to them by a contract, even if this should be
valid, by means of the restoration of things to their condition at the moment prior to the
celebration of said contract. It is a relief allowed for the protection of one of the contracting
parties and even third persons from all injury and damage the contract may cause, or to
protect some incompatible and preferential right created by the contract. Rescission implies a
contract which, even if initially valid, produces a lesion or pecuniary damage to someone
that justifies its invalidation for reasons of equity.
22.
Purchaser not considered a third party

It is true that the acquisition by a third person of the property subject of the contract is
an obstacle to the action for its rescission where it is shown that such third person is in lawful
possession of the subject of the contract and that he did not act in bad faith. However, this
rule is not applicable in the case before us because the petitoner is not considered a third party
in relation to the Contract of Sale nor may its possession of the subject property be regarded as
acquired lawfully and in good faith.
23.
Purchaser in good faith defned

A purchaser in good faith and for value who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full and fair
price for the same at the time of such purchase or before he has notice of the claim or interest
of some other person in the property. Good faith connotes an honest intention to abstain from
taking unconscientious advantage of another. Tested by these principles, the petitioner cannot
tenably claim to be a buyer in good faith as it had notice of the lease of the property and such
knowledge should have cautioned it to look deeper into the agreement to determine if it
involved stipulations that would prejudice its own interests.
24.
Purchaser required to know term of lease contract when buying property under
lease
Having known that the property it was buying was under lease, it behooved it as a
prudent person to have required the owner of the property or the broker to show to it the
Contract of Lease in which the right of first refusal is contained.
25.
Indivisibility of the property

Common sense and fairness dictate that instead of nullifying the agreement on the basis
that the entire
Sales, 2003 ( 107 )
property is indivisible property, the stipulation should be given effect by including

the indivisible appurtenances in the sale of the dominant portion under the right of first
refusal. A valid and legal contract where the ascendant or the more important of the two
parties is the landowner should be given effect, if possible, instead of being nullified on a
selfish pretext posited by the owner. Following the arguments of petitioners and the
participation of the owner in the attempt to strip Mayfair of its rights; the right of first
refusal should include not only the property specified in the contracts but also the appurtenant
portions sold to Equatorial which are claimed by petitioners to be indivisible.
26.
Boundaries of the property sold

Mayfair is authorized to exercise its right of first refusal under the contract to include
the entirety of the indivisible property. The boundaries of the property sold should be the
boundaries of the offer under the right of first refusal.
27.
Doctrine in Ang Yu Asuncion deemed modified

As to the remedy to enforce Mayfairs right, the Court disagrees to a certain
extent with the concluding part of the dissenting opinion of Justice Vitug. The doctrine
enunciated in Ang Yu Asuncion vs. Court of Appeals should be modified, it not amplified under
the peculiar facts of the present case.
28.
Multiplicity of suits frowned upon by Court; Relief: (1) Contract between
Equatorial and Carmelo rescinded, (2) Price fixed
The Supreme Court has always been against multiplicity of suits where all remedies
according to the facts and the law can be included. Since Mayfair has a right of first refusal, it
can exercise the right only if the fraudulent sale is first set aside or rescinded. All of these
matters are now before us and so there should be no piecemeal determination of this case and
leave festering sores to deteriorate into endless litigation. Since Carmelo sold the property for
P11,300,000 to Equatorial, the price at which Mayfair could have purchased the property is,
therefore, fixed. The damages which Mayfair suffered are in terms of actual injury and lost
opportunities. The fairest solution would be to allow Mayfair to exercise its right of first
refusal at the price which it was entitled to accept or reject which is P11,300,000. To follow an
alternative solution that Carmelo and Mayfair may resume negotiations for the sale to the
latter of the disputed property would be unjust and unkind to Mayfair because it is once more
compelled to litigate to enforce its right.
29.
Present case covered by law on contracts, not merely by codal provisions on

human relations Under the Ang Yu Asuncion vs. Court of Appeals decision, the Court
stated that there was nothing to
execute because a contract over the right of first refusal belongs to a class of preparatory
juridical relations governed not by the law on contracts but by the codal provisions on human
relations. This may apply if the contract is limited to the buying and selling of the real
property. However, the obligation of Carmelo to first offer the property to Mayfair is
embodied in a contract. It is Paragraph 8 on the right of first refusal which created the
obligation. It should be enforced according to the law on contracts instead of the panoramic
and indefinite rule on human relations. The latter remedy encourages multiplicity of suits.
There is something to execute and that is for Carmelo to comply with its obligation to the
property under the right of the first refusal according to the terms at which they should have
been offered then to Mayfair, at the price when that offer should have been made. Also,
Mayfair has to accept the offer. This juridical relation is not amorphous nor is it merely
preparatory. Paragraphs 8 of the two leases can be executed according to their terms.
30.
No interest due
Carmelo and Equatorial cannot avail of considerations based on equity which might
warrant the grant of interests. The vendor received as payment from the vendee what, at the
time, was a full and fair price for the property. It has used the P11,300,000.00 all these years
earning income or interest from the amount. Equatorial, on the other hand, has received rents
and otherwise profited from the use of the property turned over to it by Carmelo. In fact,
during all the years that this controversy was being litigated, Mayfair paid rentals regularly
to the buyer who had an inferior right to purchase the property. Mayfair is under no
Sales, 2003 ( 108 )
obligation to pay any interests arising from this judgment to either Carmelo or Equatorial.
[38]
Intestate Estate of Emilio Camon; Ereneta v. Bezore [G.R. No. L-29746.
November 26, 1973.] First Division, Castro (J): 5 concur
Facts: Emilio Camon was the lessee of the hacienda Rosario, located in Pontevedra, Negros
Occidental, for the period from crop year 1940-41 to crop year 1960-61. pro-indiviso of the
said sugar plantation belonged to Ignatius Henry Bezore, Elwood Knickerbocker and Mary
Irene Fallon McCormick (as their inheritance from the late Thomas Fallon), while the other
half belonged to Petronila Alunan vda. de Sta. Romana, Amparo Sta. Romana and Alberta vda. de
Hopon (as their inheritance from their mother Rosario Sta. Romana).
Upon the death of Emilio Camon in 1967, his widow, Concepcion Ereeta, filed a petition in
the CFI Negros Occidental (Special Proceeding 8366) praying for the grant to her of letters of
administration of the estate of the deceased Camon. The petition was granted. Thereafter, the
court issued an order requiring all persons with money claims against the estate to file their
claims within the period prescribed in the order.Thru their judicial administrator and counsel,
Martiniano O. de la Cruz, Bezore, et al. filed a claim against the estate in the amounts of
P62,065 as the money value of sugar allotments and allowances and P2,100 as the money value
of palay and rentals, or a total of P64,165, appertaining to the claimants half-share in the
hacienda. Bezore, et. al. and Ereneta are agreed that the late Emilio Camon appropriated for
himself the amounts claimed. Bezore, et. al. had demanded payment of their claim from Emilio
Camon when he was still alive, but Ereneta ignored the demands. At the trial, 3 documents
were submitted in evidence by Ereneta, the authenticity of each of which is not
controverted by Bezore, et.al.; i.e. (1) An Agreement to Sell, executed on 11 January 1961,
whereby Bezore, et al., agreed to sell their share in the hacienda Rosario to Amparo Sta.
Romana and Alberta vda. de Hopon; (2) A Release and Waiver of Claims, executed on 12
January 961, whereby Amparo Sta. Romana and Alberta vda. de Hopon, for and in consideration
of their gratitude for the various services, financial and personal extended to them by
Emilio Camon, released him from any and all claims that may have accrued pertaining to the
2/4 pro-indiviso share in Hacienda Rosario owned by Bezore, et. al. who had bound themselves
to sell their share in the said Hacienda Rosario to Amparo and Alberta, including rights
accrued or accruing, and whereby Amparo and Alberta bound themselves to waive in favor
of Mr. Emilio Camon for his own use and benefit said rights accrued or accruing; and (3)
A Deed of Sale, executed on 4 August 1961, whereby Bezore, et al., for and in consideration
of the sum of P78,000, to be paid in the manner stated in the instrument, sold, transferred and
conveyed all their rights, title, interest and participation, whether accrued or accruing in
their 2/4 pro-indiviso share in the hacienda Rosario, together with all the improvements
existing thereon, including its sugar quota, in favor of Amparo Sta. Romana and Alberta vda.
de Hopon. On 20 July 1968, the lower court dismissed the claim, rejecting Bezore et.als
contention that the sugar allotments and allowances, subject of their claim against the estate of
Emilio Camon, were not included in the sale, and held that by the positive and categorical
terms of the deed of sale, all benefits accrued and accruing to the appellants before 4 August
1961 were included in the sale. Bezore, et.al. filed a direct appeal with the Supreme Court.
The Supreme Court affirmed the order of the lower court, at Bezore et. al.s cost.
1.
Right to accrued claims not waived in January 1961

At the time of the execution, on 12 January 1961, of the deed of Release and Waiver
of Claims, Amparo Sta. Romana and Alberta vda. de Hopon could not release or waive
accrued claims belonging to Bezore et..al, because the right that Amparo and Alberta then had
was a mere promise by Bezore, et.al. to sell their share in the hacienda, not the right to the
accrued claims. What was agreed to be sold in the future was different from what was
purportedly waived; and even if the object in both contracts were the same, the waiver
would still be invalid for it is essential that a right, in order that it may be validly waived,
must be in
Sales, 2003 ( 109 )
existence at the time of the waiver.

2.
Defect in waiver cured in August 1961; Bezore, et.al. parted with their accrued rights
Whatever defect there was in the waiver was subsequently cured by the deed of sale of 4
August 1961 by virtue of which Bezore, et.al. sold not only their pro-indiviso half-share in
the hacienda but also their accrued rights therein. It is immaterial that Emilio Camon was
not the vendee since what mattered is that Bezore, et.al. parted with their accrued rights for a
valuable consideration.
3.
Question of fact not reviewable in direct appeal to Supreme Court

Whether the vendees (Bezore etal) represented to Martiniano O. de la Cruz that the sugar
quedans and palay were not included in the sale and that such was the intention of the parties,
involves a question of fact which is not reviewable in a direct appeal to the Supreme Court.
4.
Accrued or accruing; Literal meaning of contractual stipulations control if

terms are clear The words accrued or accruing in the deed of sale are not obscure
and, as the lower court declared,
are in fact positive and categorical enough to include accrued allotments and allowances. Since
the said words are not ambiguous, there is no need to interpret them. Article 1370 of the
Civil Code provides that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control.
5.
Inadequacy of cause does not of itself invalidates the contract

That the consideration in the sale was cheap is not a ground for the infirmity
of the sale. Inadequacy of cause in a contract does not of itself invalidate the contract.
6.
Silence as to demand letters not admission of debt

The silence of Camon with respect to the several demand letters sent to him was an
admission of his debt, is without support or sanction in law of evidence.
7.
No change in the juridical relationship between hacienda owners and Emilio
Camon after the written contract of lease; Continued cultivation merely implied a
new lease, did not convert into express trust
There was no change in the juridical relationship between the hacienda owners and
Emilio Camon when, after the expiration of their written contract of lease, he continued
cultivating the hacienda during the crop years 1952-53 to 1960-61. The continuance in the
cultivation, with the acquiescence of the owners, did not convert the original relationship into
an express trust but merely implied a new lease over the property, with the same terms and
conditions provided in the original contract, except as to the period of the lease.
8.

Article 1670 of the Civil Code provides that if at the end of the contract the lessee
should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, and
unless a notice to the contrary by either party has previously been given, it is understood
that there is an implied new lease, not for the period of the original contract, but for the
time established in articles 1682 and 1687. The other terms of the original contract shall be
revived.
9.
Fiduciary relationship an essential characteristic of trust; No express trust

There is nothing in the record that evidence the creation of a fiduciary relationship
between the lessors and the lessee after the expiration of their written contract of lease.
Fiduciary relationship is an essential characteristic of trust, and no written instrument has been
pointed to as establishing an express trust, which writing is required in express trusts over
immovables. There is no basis for the claim that an express trust was created when Camon
continued to cultivate the land after the expiration of the written contract of lease.
Sales, 2003 ( 110 )
[39]
Heirs of Escanlar, et.al. v. CA [G.R. No. 119777.
October 23, 1997.] Holgado, et. al. v. CA [G.R. No. 120690.
October 23, 1997.]
Third division, Romero (J): 3 concur, 1 on leave
Facts: Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924 and 1938,
respectively. Nombres heirs include his nephews and grandnephews. Victoriana Cari-an
was succeeded by her late brothers son, Gregorio Cari-an. The latter was declared as
Victorianas heir in the estate proceedings for Nombre and his wife (Special Proceeding 77279). After Gregorio died in 1971, his wife, Generosa Martinez, and children, Rodolfo,
Carmen, Leonardo and Fredisminda Cari-an, were also adjudged as heirs by representation
to Victorianas estate. Leonardo Cari-an passed away, leaving his widow, Nelly Chua vda. de
Cari-an and minor son Leonell, as his heirs.
2 parcels of land, denominated as Lot 1616 and 1617 of the Kabankalan Cadastre with an
area of 29,350 sq.ms. and 460,948 sq.ms., respectively, formed part of the estate of Nombre
and Cari-an. On 15 September 1978, Gregorio Cari-ans heirs executed the Deed of Sale of
Rights, Interests and Participation in favor of Pedro Escanlar and Francisco Holgado
portion pro-indiviso of Lot 1616 and 1617 of the Kabankalan Cadastre, pertaining to the
portion pro-indiviso of the late Victoriana Cari-an in consideration of P275,000 to be paid to
the heirs except the share of the minor Leonell Cari-an, which shall be deposited with the
Municipal Treasurer of Himamaylan, Negros Occidental; pursuant to the order of the CFI
Negros Occidental (Branch VI) Hiimamaylan; said contract of sale being effective only
upon the approval of said CFI in Himamaylan. Escanlar and Holgado, the vendees, were
concurrently the lessees of the lots referred to. They stipulated that the balance of the purchase
price (P225,000.00) shall be paid on or before May 1979 in a Deed of Agreement executed by
the parties on the same day confirming and affirming the Deed of Sale of 15 September
1978; that pending complete payment thereof, the vendees are not to assign, sell, lease,
nor mortgage the rights, interests and participation over said land; and that in the event the
vendees fail and/or omit to pay the balance of said purchase price on 31 May 1979 and the
cancellation of said Contract of Sale is made thereby, the sum of P50,000.00 shall be deemed as
damages thereof to vendors. Escanlar and Holgado were unable to pay the Cari-an heirs
individual shares, amounting to P55,000.00 each, by the due date. However, said heirs
received at least 12 installments from them after May 1979. Rodolfo Cari-an was fully paid
by 21 June 1979. Generosa Martinez, Carmen Cari-an and Fredisminda Cari-an were likewise
fully compensated for their individual shares, per receipts given in evidence. The minor
Leonells share was deposited with the RTC on 7 September 1982. Being former lessees,
Escanlar and Holgado continued in possession of Lots 1616 and 1617. Interestingly, they
continued to pay rent based on their lease contract.
On 10 September 1981, Escanlar and Holgado moved to intervene in the probate proceedings of
Nombre and Cari-an as the buyers of the Cari-ans share in Lots 1616 and 1617. Their
motion for approval of the 15 September 1978 sale before the same court, filed on 10
November 1981, was opposed by the Cari-ans on 5 January 1982. On 16 September 1982, the
probate court approved a motion filed by the heirs of Cari-an and Nombre to sell their
respective shares in the estate. On 21 September 1982, the Cari-ans, in addition to some heirs of
Guillermo Nombre, sold their shares in 8 parcels of land including Lots 1616 and 1617 to the
spouses Ney Sarrosa Chua and Paquito Chua for P1,850,000.00. A week later, the vendor-heirs,
including the Cari-ans, filed a motion for approval of sale of hereditary rights, i.e. the sale
made on 21 September 1982 to the Chuas.

The Cari-ans instituted a case for cancellation of sale against Escanlar and Holgado on 3
November 1982. They complained of the latters failure to pay the balance of the purchase
price by 31 May 1979 and alleged that they only received a total of P132,551.00 in cash and
goods. Escanlar and Holgado replied that the Cari-ans, having been paid, had no right to resell
the subject lots; that the Chuas were purchasers in bad faith; and
Sales, 2003 ( 111 )
that the court approval of the sale to the Chuas was subject to their existing claim over said
properties. On 20 April 1983, Escanlar and Holgado also sold their rights and interests in the
subject parcels of land (Lots 1616 and 1617) to Edwin Jayme for P735,000.00 and turned over
possession of both lots to the latter. The Jaymes in turn, were included in the civil case as
fourth-party defendants.
On 3 December 1984, the probate court approved the 21 September 1982 sale without
prejudice to whatever rights, claims and interests over any of those properties of the estate
which cannot be properly and legally ventilated and resolved by the court in the same
intestate proceedings. The certificates of title over the 8 lots sold by the heirs of Nombre and
Cari-an were later issued in the name of the spouses Chua.
The trial court allowed a third-party complaint against the spouses Chua on 7 January 1986
where Escanlar and Holgado alleged that the Cari-ans conspired with the Chuas when they
executed the second sale on 21 September 1982 and that the latter sale is illegal and of no
effect. Spouses Chua countered that they did not know of the earlier sale of portion of the
subject lots to Escanlar and Holgado. Both parties claimed damages. On 28 April 1988, the
trial court approved the Chuas motion to file a fourth-party complaint against the spouses
Jayme. Spouses Chua alleged that the Jaymes refused to vacate said lots despite repeated
demands; and that by reason of the illegal occupation of Lots 1616 and 1617 by the Jaymes,
they suffered materially from uncollected rentals.
Meanwhile, the RTC Himamaylan which took cognizance of Special Proceeding 7-7279
(Intestate Estate of Guillermo Nombre and Victoriana Cari-an) had rendered its decision on 30
October 1987. The probate court concluded that since all the properties of the estate were
disposed of or sold by the declared heirs of both spouses, the case is considered terminated
and the intestate estate of Guillermo Nombre and Victoriana Cari-an is closed, and thus found
it unnecessary to resolve the Motion for Subrogation of movants Escanlar and Holgado in
view of the proceedings summary nature and the probate courts lack of jurisdiction upon
the validity of sale of rights of the Nombre and Cari-an heirs to third parties.
On 18 December 1991, the trial court resolved the case in favor of the cancellation of the 15
September 1978 sale as it was not approved by the probate court as required by the contested
deed of sale of rights, interests and participation and because the Cari-ans were not fully paid.
Consequently, the Deed of Sale executed by the heirs of Nombre and Cari-an in favor of the
spouses Chua, which was approved by the probate court, was upheld. Thus, the court declared
the 15 September 1978 Deed of Sale, and likewise the Deed of Agreement of the same date,
executed by the heirs in favor of Escanlar and Holgado; the 20 April 1983 Deed of sale, and
likewise the sale of leasehold rights, executed by Escanlar and Holgado in favor of spouses
Jayme; were declared null and void and of no effect. The court also declared the amount of
P50,000 as forfeited in favor of the heirs but ordering the heirs to return to Escanlar and
Holgado the amounts they received after 31 May 1979 and the amount of P35,218.75
deposited with the Treasurer of Himamaylan; declared the 23 September 1982 Deed of Sale in
favor of spouses Chua as legal, valid and enforceable subject to the burdens of the estate;
ordered Holgado, Escanlar and spouses Jayme to pay in solidum the amount of P100,000 as
moral damages, P30,000 as attorneys fees to spouses Chua; ordered spouses Jayme to pay
spouses Chua the sum of P157,000 as rentals for the Riceland and P3,200,000 as rentals for the
fishpond from October 1985 to 24 July 1989 plus rentals from the latter date until the
property is delivered to the spouses Chua; ordered Escanlar, Holgado and spouses Jayme to
immediately vacate Lots 1616 and 1617, and to pay the costs.
Escanlar and Holgado raised the case to the Court of Appeals (CA-GR CV 39975). The
appellate court affirmed the decision of the trial court on 17 February 1995 and held that the
questioned deed of sale of rights, interests and participation is a contract to sell because it
shall become effective only upon approval by the probate court and upon full payment of the
purchase price. Their motion for reconsideration was denied by the appellate court on 3 April
1995. Hence, the consolidated petitions for review.
The Supreme Court granted the petitions; reversed and set aside the decision of the Court of Appeals
under
Sales, 2003 ( 112 )
review; remanded the case to the RTC Negros Occidental (Branch 61) for Escanlar and Holgado
and the Cari-ans or their successors-in-interest to determine exactly which portion of Lots
1616 and 1617 will be owned by each party, at the option of Escanlar and Holgado; and
directed the trial court to order the issuance of the corresponding certificates of title in the
name of the respective parties and to resolve the matter of rental payments of the land not
delivered to the Chua spouses subject to the rates specified by the Court with legal interest
from date of demand.
1.
Distinction with contracts of sale and contract to sell with reserved title
The distinction between contracts of sale and contracts to sell with reserved title has
been recognized by the Court in repeated decisions, such as that in Luzon Brokerage Co. Inc. v.
Maritime Building Co., Inc., upholding the power of promisors under contracts to sell in case
of failure of the other party to complete payment, to extrajudicially terminate the operation
of the contract, refuse the conveyance, and retain the sums of installments already received
where such rights are expressly provided for.
2.
Contract to sell vs. Deed of conditional sale

In contracts to sell, ownership is retained by the seller and is not to pass until the full
payment of the price. Such payment is a positive suspensive condition, the failure of which is
not a breach of contract but simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force. To illustrate, although a deed of conditional sale is
denominated as such, absent a proviso that title to the property sold is reserved in the vendor
until full payment of the purchase price nor a stipulation giving the vendor the right to
unilaterally rescind the contract the moment the vendee fails to pay within a fixed period,
by its nature, it shall be declared a deed of absolute sale.
3.
The 15 September 1978 Deed of Sale of Rights, Interests and Participation a

contract of sale The 15 September 1978 sale of rights, interests and participation as to
portion pro indiviso of the 2
subject lots is a contract of sale for the reasons that (1) the sellers did not reserve unto
themselves the ownership of the property until full payment of the unpaid balance of
P225,000.00; (2) there is no stipulation giving the sellers the right to unilaterally rescind the
contract the moment the buyer fails to pay within the fixed period.
4.
Delivery effected for the 15 September 1978 deed of sale; Traditio brevi manu
Prior to the sale, Escanlar were in possession of the subject property as lessees. Upon sale
to them of the rights, interests and participation as to the portion pro indiviso, they
remained in possession, not in concept of lessees anymore but as owners now through
symbolic delivery known as traditio brevi manu. Under Article 1477 of the Civil Code, the
ownership of the thing sold is acquired by the vendee upon actual or constructive delivery
thereof.
5.
Non-payment of price in a contract of sale; Remedies

In a contract of sale, the non-payment of the price is a resolutory condition which
extinguishes the transaction that, for a time, existed and discharges the obligations created
thereunder. The remedy of an unpaid seller in a contract of sale is to seek either specific
performance or rescission.
6.
Contracts, Requisites
Under Article 1318 of the Civil Code, the essential requisites of a contract are:
consent of the contracting parties; object certain which is the subject matter of the contract
and cause of the obligation which is established. Absent one of the above, no contract can arise.
Conversely, where all are present, the result is a valid contract.
7.
Modalities and restrictions do not afect validity of the contract, merely its
efectivity
Some parties introduce various kinds of restrictions or modalities, the lack of
which will not, however, affect the validity of the contract. In the present case, the Deed of
Sale is a valid one, even if it did
Sales, 2003 ( 113 )
not bear the stamp of approval of the probate court. The contracts validity was not affected
for in the words of the stipulation, this Contract of Sale of rights, interests and
participations shall become effective only upon the approval by the Honorable Court.
Only the effectivity and not the validity of the contract is affected.
8.
Need of probate courts approval exists where specifc properties of the estate
are sold and not when ideal and indivisible shares of an heir are disposed of
The need for approval by the probate court exists only where specific properties of the
estate are sold and not when only ideal and indivisible shares of an heir are disposed of. In
Dillena v. Court of Appeals, the Court declared that it is within the jurisdiction of the
probate court to approve the sale of properties of a deceased person by his prospective heirs
before final adjudication. The probate courts approval is necessary for the validity of any
disposition of the decedents estate. However, reference to judicial approval cannot adversely
affect the substantive rights of the heirs to dispose of their ideal share in the co-heirship and/or
co-ownership among the heirs. It must be recalled that during the period of indivision of a
decedents estate, each heir, being a co-owner, has full ownership of his part and may
therefore alienate it. But the effect of the alienation with respect to the co-owners shall be
limited to the portion which may be allotted to him in the division upon the termination of
the co-ownership.
9.
Hereditary rights in an estate validly sold without need of court approval

Hereditary rights in an estate can be validly sold without need of court approval. In the
present case, when the Cari-ans sold their rights, interests and participation in Lots 1616 and
1617, they could legally sell the same without the approval of the probate court.
10.
Contractual stipulations considered law between parties; Exception:
contemporaneous acts of parties
As a general rule, the pertinent contractual stipulation (requiring court approval) should
be considered as the law between the parties. However, the presence of two factors militate
against this conclusion: (1) the evident intention of the parties appears to be contrary to the
mandatory character of said stipulation. Whoever crafted the document of conveyance, must
have been of the belief that the controversial stipulation was a legal requirement for the
validity of the sale. But the contemporaneous and subsequent acts of the parties reveal that
the original objective of the parties was to give effect to the deed of sale even without court
approval. Receipt and acceptance of the numerous installments on the balance of the purchase
price by the Cari-ans, although the period to pay the balance of the purchase price expired in
May 1979, and leaving Escanlar and Holgado in possession of Lots 1616 and 1617 reveal their
intention to effect the mutual transmission of rights and obligations. The Cari-ans did not seek
judicial relief until late 1982 or three years later; (2) the requisite approval was virtually
rendered impossible by the Cari-ans because they opposed the motion for approval of the sale
filed by Escanlar and Holgado, and sued the latter for the cancellation of that sale. Having
provided the obstacle and the justification for the stipulated approval not to be granted, the
Cari-ans should not be allowed to cancel their first transaction with Escanlar and Holgado
because of lack of approval by the probate court, which lack is of their own making.
11.
Rescission of a sale of real property; Vendee may pay beyond due date as long
as there is no judicial or notarial demand for rescission
With respect to rescission of a sale of real property, Article 1592 of the Civil Code
governs. The provides that in the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay, even after the expiration of the period,
a long as no demand for rescission of the contract has been made upon him either judicially or
by a notarial act. After the demand, the court may not grant him a new term. In the present
case, the sellers gave the buyers until May 1979 to pay the balance of the purchase price. After
the latter failed to pay installments due, the former made no judicial demand for rescission of
the contract nor did they execute any notarial act demanding the same, as required under
Article 1592. Consequently, the buyers
Sales, 2003 ( 114 )
could lawfully make payments even after the May 1979 deadline, as in fact they paid several
installments to the sellers which the latter accepted.
12.
Acceptance of payment beyond due date a waiver to right to rescind; Sellers
estopped
As the sellers, upon the expiration of the period to pay, made no move to rescind
but continued accepting late payments, such act cannot but be construed as a waiver of the
right to rescind. When the sellers, instead of availing of their right to rescind, accepted and
received delayed payments of installments beyond the period stipulated, and the buyers were
in arrears, the sellers in effect waived and are now estopped from exercising said right to
rescind.
13.
Evidence does not prove Escanlar and Holgado were unable to complete payments
Despite all her claims, Fredismindas testimony fails to convince the Court that the
heirs were not fully compensated by Escanlar and Holgado. Fredisminda admits that her
mother and her sister signed their individual receipts of full payment on their own and not in
her presence. The receipts presented in evidence show that Generosa Martinez was paid
P45,625.00; Carmen Cari-an, P45,625.00; Rodolfo Cari-an, P47,500.00 on June 21, 1979;
Nelly Chua vda. de Cari-an, P11,334.00 and the sum of P34,218.00 was consigned in court
for the minor Leonell Cari-an. Fredisminda insists that she signed a receipt for full
payment without receiving the money therefor and admits that she did not object to the
computation. It is incredible that a mature woman like Fredisminda Cari-an, would sign a
receipt for money she did not receive. Furthermore, her claims regarding the actual amount of
the installments paid to her and her kin are quite vague and unsupported by competent
evidence. She even admits that all the receipts were taken by Escanlar. Supporting testimony
from her co-heirs and siblings Carmen Cari-an, Rodolfo Cari-an and Nelly Chua vda. de Cari-an
is also absent. Thus, in the absence of proof on the contrary, the Cari-ans were indeed paid
the balance of the purchase price, despite having accepted installments therefor belatedly. There
is thus no ground to rescind the contract of sale because of non-payment.
14.
Continued payment of lease indicate vendees did not take undue advantage of
the Cari-an heirs Escanlar and Holgado, in continuing to pay the rent for the parcels of
land they allegedly bought until
1986 in compliance with their lease contract, only proves that they respected the contract
and did not take undue advantage of the heirs of Nombre and Cari-an who benefited from the
lease; contrary to the findings of the lower court that such act admits that the purchase price
was not fully paid the Cari-ans. It should be stressed that Escanlar and Holgado purchased the
hereditary shares solely of the Cari-ans and not the entire lot.
15.
Subsequent sale of 8 parcels of land to spouses Chua is valid except to the
extent of what was sold to Escanlar and Holgado on 15 September 1978
It must be emphasized that what was sold to Escanlar and Holgado was only the Carians hereditary shares in Lots 1616 and 1617 being held pro indiviso by them and is thus a
valid conveyance only of said ideal shares. Specific or designated portions of land were not
involved. Thus, the subsequent sale of 8 parcels of land, including Lots 1616 and 1617, to the
spouses Chua is valid except to the extent of what was sold to Escanlar and Holgado in the 15
September 1978 conveyance.
16.
Intestate proceedings fnal and cannot be re-opened; Need for the Supreme
Court to resolve case defnitively
The proceedings surrounding the estate of Nombre and Cari-an having attained finality
for nearly a decade since, the same cannot be re-opened. It must be noted that the probate
court desisted from awarding the individual shares of each heir because all the properties
belonging to the estate had already been sold. Thus it is not certain how much the Cari-ans
were entitled to with respect to the two lots, or if they were even going to be awarded shares in
said lots. The protracted proceedings which have undoubtedly left the property under a cloud
and the parties involved in a state of uncertainty compels the Supreme Court to resolve it
definitively.
Sales, 2003 ( 115 )
17.
Cari-an heirs (and successor-in-interest) entitled to half of the estate, or half
interest in each property in the estate
The Cari-ans are the sole heirs by representation of Victoriana Cari-an who was
indisputably entitled to half of the estate. There being no exact apportionment of the shares of
each heir and no competent proof that the heirs received unequal shares in the disposition of
the estate, it can be assumed that the heirs of Victoriana Cari-an collectively are entitled to
half of each property in the estate. More particularly, the Cari-ans are entitled to half of Lots
1616 and 1617 (14,675 sq.ms. of Lot 1616 and 230,474 sq.ms. of Lot 1617). Consequently,
Escanlar and Holgado, as their successors-in-interest, own said half of the subject lots and
ought to deliver the possession of the other half, as well as pay rents thereon, to the spouses
Chua but only if the former (Escanlar and Holgado) remained in possession thereof.
18.
Rate of rentals
The rate of rental payments to be made were given in evidence by Ney Sarrosa
Chua in her unrebutted testimony on 24 July 1989: For the fishpond (Lot 1617) From 1982
up to 1986, rental payment of P3,000.00 per hectare; from 1986-1989 (and succeeding years),
rental payment of P10,000.00 per hectare. For the riceland (Lot 1616) 15 cavans per hectare
per year; from 1982 to 1986, P125.00 per cavan; 1987-1988; P175.00 per cavan; and 1989 and
succeeding years, P200.00 per cavan.
[40]
Espiritu vs. Valerio [G.R. No. L-18018. December
26, 1963.] En Banc, Dizon (J): 9 concur, 1 took no part
Facts: On 15 September 1955 Valerio filed an action to quiet title in the CFI Pangasinan (Civil
Case 13293) against Esperanza Espiritu and Antonia Apostol, alleging in his complaint that he
was the owner of a parcel of unregistered land containing an area of approximately 8,573
square meters situated in Barrio Olo, Municipality of Mangatarem, Pangasinan, having
acquired the same from the former owner, Pelagia Vegilia, as evidenced by a deed of sale
executed by the latter in his favor on 31 January 1955; that Espiritu and Apostol had been
asserting adversary rights over said land and disturbing his possession thereof. Espiritu and
Apostol denied the material allegations of the complaint and alleged that they were the owners
of the land in question, having acquired it by inheritance from the late Santiago Apostol,
husband and father of appellants Espiritu and Apostol, respectively; that said deceased bought
the property from Mariano Vegilia on 3 June 1934, as evidenced by the deed of sale, who, in
turn, had acquired it from his niece, Pelagia Vegilia, on 26 May 1932, by virtue of the deed of
sale. The CFI rendered decision declaring Valerio to be the owner of the land and enjoined
Espiritu and Apostol from molesting him in the peaceful possession thereof. Hence, the
appeal by Espiritu and her daughter Apostol.
The Supreme Court affirmed the decision appealed from, with costs.
1.
Espiritu and Apostol have better right only if both their deeds were valid
The present appeal depends entirely upon the validity of the Deed of Sale allegedly
executed by Pelagia Vegilia in favor of Mariano Vegilia, and of the Deed of Sale allegedly
executed by the latter in favor of Santiago Apostol. If both are valid, Espiritus and Apostols
contention that they have a better right than that claimed by Valerio would seem to be
meritorious in the light of the facts of the case and the provisions of Article 1544 of the New
Civil Code, it not being disputed that the Deed of Sale in favor of Valerio was registered
under the provisions of Act 3344 on 16 June 1955, while the two deeds of Espiritu and
Apostol were similarly registered 11 days before.

2.
Deeds / Documents falsifed; Witnesses and proof

The document dated 26 May 1932, is fictitious and a falsification, and that the private
document of
Sales, 2003 ( 116 )
3 June 1934 is likewise null and void, being without the necessary formal requisites, aside
to its being fictitious and the fact that the alleged vendor acquired no right whatsoever in the
land. The determination that the documents are falsified is based upon the testimony of
Pelagia Vegilia and Mariano Vegilia. Pelagia emphatically denied that she sold the land in
question to Mariano Vegilia, and that she appeared before Notary Public Lino Abad Pine before
whom the Escritura de Compraventa Definita, was allegedly ratified. On the other hand,
Mariano denied that he bought the said land from Pelagia Vegilia, and that he sold the same
to Santiago Apostol as recited in Pecivo. In giving credence to the testimony of the two
witnesses, the trial court said that (1) an examination of first deed reveals the glaring fact
that it cannot be determined whose thumbmark is the one appearing on said document for
the simple reason that it immediately precedes the name Anselmo Vegilia but it is under
the name Pelagia Vegilia. Ordinarily, this thumbmark would be considered as the
thumbmark of Anselmo Vegilia and not of Pelagia Vegilia; (2) that the one who wrote the
name Anselmo Vegilia is the very one who wrote the name Pelagia Vegilia; (3) that Anselmo
Vegilia could not have written the name Anselmo Vegilia in the document for the simple reason
that it has been certified by the Notary Public that said Anselmo Vegilia is physically
incapable (inutil physicamente); (4) that there is an apparent difference of the ink used in
writing the names of Pelagia Vegilia and Anselmo Vegilia from the ink used by the other
persons who signed the document indicating that the names Pelagia Vegilia and Anselmo
Vegilia must have been written in a much later date than the other names appearing in the said
document. On the other document, the names Mariano Vegilia and Jose B. Aviles must have
been written by only one man.
[41]
Estoque vs. Pajimula [G.R. No. L-24419. July
15, 1968.] En Banc, Reyes JBL (J): 8 concur
Facts: Lot 802 of the Cadastral survey of Rosario, covered by OCT RO-2720 (N.A.), was
originally owned by the late spouses Rosendo Perez and Fortunata Bernal, who were
survived by their children namely, Crispina Perez, Lorenzo Perez and Ricardo Perez. Ricardo
Perez is also now dead. On 28 October 1951, Crispina P. Vda. de Aquitania sold her right and
participation in Lot 802 consisting of 1/3 portion with an area of 640 square meters to Leonora
Estoque. On 29 October 1951, Lorenzo Perez, Crispina Perez and Emilia P. Posadas, widow of
her deceased husband, Ricardo Perez, for herself and in behalf of her minor children,
Gumersindo, Raquel, Emilio and Ricardo, Jr., executed a deed of extrajudicial settlement
wherein Lorenzo Perez, Emilia P. Posadas and her minor children assigned all their right,
interest and participation in Lot 802 to Crispina Perez. On 30 December 1959, Crispina Perez
and her children, Rosita Aquitania Belmonte, Remedios Aquitania Misa, Manuel Aquitania,
Sergio Aquitania and Aurora Aquitania sold to Elena Pajimula (and Ciriaco Pajimula), the
remaining 2/3 western portion of Lot 802 with an area of 958 square meters.
Leonora Estoque based her complaint for legal redemption on a claim that she is a co-owner of
lot 802, for having purchased 1/3 portion thereof, containing an area of 640 square meters as
evidenced by a deed of sale, which was executed on 28 October 1951 by Crispina Perez de
Aquitania, one of the co-owners, in her favor. On the other hand, Elena Pajimula (and Ciriaco
Pajimula), who on 30 December 1959 acquired the other 2/3 portion of Lot 802 from
Crispina Aquitania and her children, claimed that Estoque bought the 1/3 southeastern
portion, which is definitely identified and segregated hence there existed no co-ownership at
the time and after Estoque bought the portion, upon which right of legal redemption can be
exercised or taken advantage of. The CFI La Union (Civil Case 1990), upon motion by
Pajimula, dismissed the complaint for legal redemption by a co-owner (retracto legal de
comuneros) on account of failure to state a cause of action. The Court held that the deeds of
sale show that the lot acquired by Estoque was different from that of the Pajimula; hence
they never became co-owners, and the alleged right of legal redemption was not proper.
Estoque appealed.
The Supreme Court affirmed the appealed order of dismissal; with cost against Estoque.
Sales, 2003 ( 117 )
1.
Co-ownership does not exist; Article 1620 does not apply

The lower court held that the deeds of sale show that the lot acquired by Estoque was
different from that of the Pajimula; hence they never became co-owners, and the alleged right
of legal redemption was not proper. Article 1620, which provides that A co-owner of a thing
may exercise the right of redemption in case the shares of all the other co-owners or of any of
them, are sold to a third person. If the price of the alienation is grossly excessive the
redemptioner shall pay only a reasonable one. Should two or more co-owners desire to exercise
the right of redemption, they may only do so in proportion to the share they may respectively
have in the thing owned in common, does not apply.
2.
802
Object sold is the southeastern third portion, not one-third undivided interest in Lot
The deed of sale to Estoque clearly specifies the object sold as the southeastern third
portion of Lot 802 of the Rosario Cadastre, with an area of 840 square meters, more or less.
Granting that the seller, Crispina Perez Vda. de Aquitania could not have sold this particular
portion of the lot owned in common by her and her two brothers, Lorenzo and Ricardo Perez,
by no means does it follow that she intended to sell to Estoque her 1/3 undivided interest in
the lot. There is nothing in the deed of sale to justify such inference. That the seller could
have validly sold her one-third undivided interest to appellant is no proof that she did choose
to sell the same. Ab posse ad actu non valet illatio.
3.
Estoques deed initially inefective but validated when Crispina Perez acquired
entire interest in Lot 802
While on the date of the sale to Estoque said contract may have been ineffective, for lack
of power in the vendor to sell the specific portion described in the deed, the transaction was
validated and became fully effective when the next day the vendor, Crispina Perez, acquired
the entire interest of her remaining co-owners and thereby became the sole owner of Lot 802
of the Rosario Cadastral survey (Llacer vs. Muoz, 12 Phil. 328). Article 1434 of the Civil Code
of the Philippines clearly prescribes that When a person who is not the owner of a thing sells
or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes
by operation of law to the buyer or grantee. Pursuant to this rule, Estoque became the
actual owner of the southeastern third of lot 802 on 29 October 1951.
4.
Estoque acquired no undivided interest in Lot 802 as portions sold to Estoque
and Pajimula distinct and separate
Estoque never acquired an undivided interest in Lot 802. And when eight years later
Crispina Perez sold to Pajimula the western two-thirds of the same lot Estoque did not acquire a
right to redeem the property thus sold, since their respective portions were distinct and
separate.
[42]
Filinvest Credit vs. CA [G.R. No. 82508. September
29, 1989.] Second Division, Sarmiento (J): 3 concur, 1 on
leave
Facts: The spouses Jose Sy Bang and Iluminada Tan were engaged in the sale of gravel
produced from crushed rocks and used for construction purposes. In order to increase their
production, they engaged the services of Mr. Ruben Mercurio, the proprietor of Gemini
Motor Sales in Lucena City, to look for a rock crusher which they could buy. Mr. Mercurio
referred the spouses to the Rizal Consolidated Corporation which then had for sale one such
machinery (Lippman portable crushing plant, reconditioned; Jaw crusher, 10 x 16, Double roll
crusher, 16 x 16; 3 units product conveyor, 75 HP electric motor, 8 pcs. Brand new tires;
Chassis 19696, Good running condition). Oscar Sy Bang, a brother of Jose Sy Bang, went to
inspect the machine at the Rizal Consolidateds plant site. Apparently satisfied with the
machine, Sy Bang signified their intent to purchase the same. They were confronted with a
problem, the rock crusher carried a cash price tag of P550,000.00. Bent on acquiring the
machinery, the spouses applied for financial assistance from Filinvest Credit Corporation.
Filinvest agreed to extend to the spouses financial aid on the following conditions: that
Sales, 2003 ( 118 )
the machinery be purchased in Filinvests name; that it be leased (with option to

purchase upon the termination of the lease period) to the spouses; and that the spouses execute
a real estate mortgage in favor of Filinvest as security for the amount advanced by the latter.
Accordingly, on 18 May 1981, a contract of lease of machinery (with option to purchase) was
entered into by the parties whereby the spouses agreed to lease from the petitioner the rock
crusher for two years starting from 5 July 1981 payable at P10,000.00 for first 3 months,
P23,000.00 for the next 6 months, and P24,800.00 for the next 15 months. The contract
likewise stipulated that at the end of the two-year period, the machine would be owned by
the spouses. Thus, the spouses issued in favor of Filinvest a check for P150,550.00, as initial
rental (or guaranty deposit), and 24 postdated checks corresponding to the 24 monthly rentals.
In addition, to guarantee their compliance with the lease contract, the spouses executed a real
estate mortgage over two parcels of land in favor of Filinvest. The rock crusher was delivered
to the spouses on 9 June 1981. Three months from the date of delivery, or on 7 September
1981, however, the spouses, claiming that they had only tested the machine that month, sent
a letter-complaint to Filinvest, alleging that contrary to the 20 to 40 tons per hour capacity of
the machine as stated in the lease contract, the machine could only process 5 tons of rocks
and stones per hour. They then demanded that Filinvest make good the stipulation in the lease
contract. They followed that up with similar written complaints to Filinvest, but the latter
did not, however, act on them. Subsequently, the spouses stopped payment on the remaining
checks they had issued to Filinvest. As a consequence of the non-payment by the spouses of
the rentals on the rock crusher as they fell due despite the repeated written demands,
Filinvest extrajudicially foreclosed the real estate mortgage. On 18 April 1983, the spouses
received a Sheriff a Notice of Auction Sale informing them that their mortgaged properties
were going to be sold at a public auction on 25 May 1983, 10:00 a.m., at the Office of the
Provincial Sheriff in Lucena City to satisfy their indebtedness to Filinvest.
To thwart the impending auction of their properties, the spouses filed before the RTC Quezon
(Branch LIX, Lucena City), on 4 May 1983, a complaint against Filinvest for the rescission
of the contract of lease, annullment of the real estate mortgage, and for injunction and
damages, with prayer for the issuance of a writ of preliminary injunction. On 23 May 1983, 3
days before the scheduled auction sale, the trial court issued a temporary restraining order
commanding the Provincial Sheriff of Quezon, and Filinvest, to refrain and desist from
proceeding with the public auction. Two years later, on 4 September 1985, the trial court
rendered a decision in favor of the spouses, making the injunction permanent, rescinding the
contract of lease of the machinery and equipment and ordering the spouses to return to the
Filinvest the machinery subject of the lease contract, and Filinvest to return to the spouses
the sum of P470,950.00 it received from the latter as guaranty deposit and rentals with legal
interest thereon until the amount is fully restituted; annulling the real estate mortgage
constituted over the properties of the spouses covered by TCTs T-32480 and T-5779 of the
Registry of Deeds of Lucena City; and ordering the Filinvest to pay the spouses P30,000.00 as
attorneys fees and the costs of the suit.
Dissatisfied with the trial courts decision, Filinvest elevated the case to the Court of Appeals.
On 17 March 1988, the appellate court, finding no error in the appealed judgment, affirmed
the same in toto. Hence, the petition for review on certiorari by Filinvest.
The Supreme Court granted the petition, reversed and set aside the 17 March 1988 Decision of
the Court of Appeals, and rendered another one dismissing the complaint; with costs against the
spouses.
1.
Financial institution not immune from recourse of the spouses; Filinvest owns
crusher
While it is accepted that Filinvest Credit Corporation is a financing institution, it is
not, however, immune from any recourse by the private respondents. Notwithstanding the
testimony of Jose Sy Bang that he did not purchase the rock crusher from Filinvest, the fact
that the rock crusher was purchased from Rizal Consolidated Corporation in the name and
with the funds of Filinvest proves beyond doubt that the ownership thereof was effectively
transferred to it. It is precisely this ownership which enabled Filinvest to enter into the
Contract of Lease of Machinery and Equipment with the spouses
Sales, 2003 ( 119 )
2.
Nomenclature of agreement cannot change its true essence; sale on installment

The real intention of the parties should prevail. The nomenclature of the agreement
cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what
the law defines it and the parties intend it to be, not what it is called by the parties. It is
apparent that the intent of the parties to the subject contract is for the so-called rentals to be
the installment payments. Upon the completion of the payments, then the rock crusher, subject
matter of the contract, would become the property of the spouses. This form of agreement
has been criticized as a lease only in name.
3.
Payment in contract of lease with option to buy are installment payments

In Vda. de Jose v. Barrueco, it was stated that Sellers desirous of making conditional
sales of their goods, but who do not wish openly to make a bargain in that form, for one reason
or another, have frequently resorted to the device of making contracts in the form of leases
either with options to the buyer to purchase for a small consideration at the end of term,
provided the so-called rent has been duly paid, or with stipulations that if the rent
throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must necessarily be regarded as payment
of the price in installments since the due payment of the agreed amount results, by the terms
of bargain, in the transfer of title to the lessee.
4.
Article 1484
Article 1484 of the new Civil Code, which provides for the remedies of an unpaid seller
of movables in installment basis, states 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 vendees failure to pay cover two or more installments; (3) Foreclose
the chattel mortgage or the thing sold, if one has been constituted, should the vendees
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.
5.
Remedies under Article 1484 alternative and not cumulative

Under Article 1484, the seller of movables in installments, in case the buyer fails to pay
two or more installments, may elect to pursue either of the following remedies: (1) exact
fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the
mortgage on the purchased property if one was constituted thereon. It is now settled that
the said remedies are alternative and not cumulative and therefore, the exercise of one bars the
exercise of the others.
6.
Contract of lease with option to buy a device to circumvent Article 1484

The device contract of lease with option to buy is at times resorted to as a means
to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor,
by retaining ownership over the property in the guise of being the lessor, retains, likewise, the
right to repossess the same, without going through the process of foreclosure, in the event the
vendee-lessee defaults in the payment of the installments. There arises therefore no need to
constitute a chattel mortgage over the movable sold. More important, the vendor, after
repossessing the property and, in effect, canceling the contract of sale, gets to keep all the
installments-cum-rentals already paid.
7.
Article 1485 places contract of lease with option to buy within the applicability
of Article 1484 Article 1485 of the new Civil Code provides that The preceding article
shall be applied to contracts
purporting to be leases of personal property with option to buy, when the lessor has deprived
the lessee of possession or enjoyment of the thing.
8.
No reason to hold Filinvest liable for failure of rock crusher to produce in
accordance with its capacity
Sales, 2003 ( 120 )
The Court failed to find any reason to hold the petitioner liable for the rock
crushers failure to produce in accordance with its described capacity. It was the spouses who
chose, inspected, and tested the subject machinery. It was only after they had inspected
and tested the machine, and found it to their satisfaction, that the spouses sought financial
aid from Filinvest. These allegations of the petitioner had never been rebutted by the spouses,
but in fact, even been admitted in the contract they signed (LESSEES SELECTION,
INSPECTION AND VERIFICATION. The LESSEE hereby confirms and acknowledges that he
has independently inspected and verified the leased property and has selected and received the
same from the Dealer of his own choosing in good order and excellent running and operating
condition and on the basis of such verification, etc. the LESSEE has agreed to enter into this
Contract.)
9.
Spouses presumed knowledgeable on machinery subject of the contract; Spouses

negligent Considering that between the parties, it is the spouses, by reason of their
business, who are presumed
to be more knowledgeable, if not experts, on the machinery subject of the contract, they
should not therefore be heard now to complain of any alleged deficiency of the said
machinery. It is their failure or neglect to exercise the caution and prudence of an expert, or,
at least, of a prudent man, in the selection, testing, and inspection of the rock crusher that
gave rise to their difficulty and to this conflict. A well-established principle in law is that
between two parties, he, who by his negligence caused the loss, shall bear the same.
10.
Spouses precluded from imputing liability on Filinvest; Express waiver of
warranties
Even if the spouses could not be adjudged as negligent, they still are precluded from
imputing any liability on Filinvest. One of the stipulations in the contract they entered into
with Filinvest is an express waiver of warranties in favor of the latter. By so signing the
agreement, the spouses absolved Filinvest from any liability arising from any defect or
deficiency of the machinery they bought. The stipulation on the machines production
capacity being typewritten and that of the waiver being printed does not militate
against the latters effectivity. As such, whether a capacity of 20 to 40 tons per hour is a
condition or a description is of no moment. What stands is that the spouses had expressly
exemptd Filinvest from any warranty whatsoever. Their Contract of Lease Of Machinery
And Equipment states WARRANTY LESSEE absolutely releases the lessor from any
liability whatsoever as to any and all matters in relation to warranty in accordance with the
provisions hereinafter stipulated.
11.
Common sense dictates buyer inspects product before purchasing it; Caveat
emptor
Common sense dictates that a buyer inspects a product before purchasing it (under the
principle of caveat emptor or buyer beware) and does not return it for defects discovered
later on, particularly if the return of the product is not covered by or stipulated in a contract
or warranty.
12.
Declaration of waiver as non-efective would impair obligations of contracts

Taking into account that due to the nature of its business and its mode of
providing financial assistance to clients, Filinvest deals in goods over which it has no
sufficient know-how or expertise, and the selection of a particular item is left to the client
concerned, the latter, therefore, shoulders the responsibility of protecting himself against
product defects. This is where the waiver of warranties is of paramount importance. In the
present case, to declare the waiver as non-effective would impair the obligation of contracts.
Certainly, the waiver in question could not be considered a mere surplusage in the
contract between the parties. Moreover, nowhere is it shown in the records of the case that
the spouses has argued for its nullity or illegality.

13.
No ambiguity in the language of the waiver

In any event, there is no ambiguity in the language of the waiver or the release of
warranty. There is therefore no room for any interpretation as to its effect or applicability
vis-a-vis the deficient output of the rock crusher. Suffice it to say that the spouses have
validly excused Filinvest from any warranty on the rock crusher. Hence, they should bear the
loss for any defect found therein.
Sales, 2003 ( 121 )
[43]
Filipinas Investment vs. Ridad [G.R. No. L-27645.
November 28, 1969.] En Banc, Castro (J): 9 concur
Facts: The spouses Ridad (Lourdes V. Ridad and Luis Ridad) bought from the Supreme
Sales & Development Corporation, Filipinas Investment and Finance Corporation (FIFC)s
assignor-in-interest, a Ford Consul sedan for the total price of P13,371.40. The sum of P1,160
was paid on delivery, the balance of P12,211.50 being payable in 24 equal monthly
installments, with interest at 12% per annum, secured by a promissory note and a chattel
mortgage on the car executed on 19 March 1964. The spouses thereafter failed to pay 5
consecutive installments on a remaining balance of P5,274.53. On 13 October 1965, FIFC
instituted a replevin suit in the city court of Manila for the seizure of the car, or the recovery
of the unpaid balance in case delivery could not be effected. The car was then seized by the
sheriff of Manila and possession thereof was awarded to FIFC. During the progress of the case,
FIFC instituted extrajudicial foreclosure proceedings, as a result of which, on 22 December
1965, the car was sold at public auction with FIFC as the highest bidder and purchaser.
Meanwhile, in view of the failure of the spouses to appear at the scheduled hearing of the case,
allegedly due to non-receipt of the summons, they were declared in default. The default
judgment ordered them to pay to FIFC the sum of P500 as attorneys fees, and P163,65
representing actual expenses relative to the seizure of the car, plus costs. Their motion to set
aside the order of default and the decision having been denied, they appealed to the Court of
First Instance of Manila.
The CFI advanced the opinion (during pre-trial) that there was no need for the parties to adduce
evidence and that the case could be decided on the basis of the pleadings submitted by the
parties. On 5 September 1966, the trial court rendered judgment holding that FIFC is
entitled to recover the amout of P163.65 which represents the expenses incurred by FIFC in
the seizure of the car involved. The court also reduced the attorneys fees granted to the
plaintiff to P300.00 considering that FIFC recovered the car while still in the lower court and
that the Ridads did not resist the case. The spouses Ridads appealed.
The Supreme Court affirmed the judgment; without costs.
1.
Decision complies with requirements of law by referring to pre-trial order
as part of its conclusion
The disputed decision of the lower court complies substantially with the requirements of
law because it referred to the pre-trial order it issued on 27 May 1966 which contains
substantial findings of facts. For although settled is the doctrine that a decree with
absolutely nothing to support it is a nullity, the law, however, merely requires that a
decision state the essential ultimate facts upon which the courts conclusion is drawn. There
being an express reference to the pre-trial order, the latter must be considered and taken as
forming part of the decision. The claim, therefore, that the judgment clearly transgresses the
legal precept because it does not state the facts of the case and the law on which it is based and
hence, is a nullity, finds no justification here.
2.
Article 1484 applies even if case is one for replevin as it culminated in the
foreclosure of chattel mortgage
It is true that the present action is one for replevin, but because it culminated in the
foreclosure of the chattel mortgage and the sale of the car at public auction, it is our view that
the provisions of art. 1484 of the Civil Code (Recto Law) must govern the resolution of the
issue presented.
3.
Article 1484
In a contract of sale of personal property the price of which is payable in installments, the
vendor
Sales, 2003 ( 122 )
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 vendees failure to pay cover two or more
installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendees 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.
4.
Source of Article 1454

Article 1454 was reproduced from the old Article 1454-A, which in turn was inserted
by Act 4122 (Recto Law). Three remedies are available to the vendor who has sold personal
property on the installment plan: (1) He may elect to exact the fulfillment of the obligation.
(Bachrach Motor Co. vs. Millan, 61 Phil. 409) (2) If the vendee shall have failed to pay two or
more installments, the vendor may cancel the sale. (3) If the vendee shall have failed to pay
two or more installments, the vendor may foreclose the mortgage, if one has been given on the
property. The basis of the first option is the Civil Code. The basis of the last two options is Act
4122 (inserted in the Spanish Civil Code as art. 4154-A and now reproduced in arts. 1485 and
1485), amendatory of the Civil Code. And the proviso to the right to foreclose is that if the
vendor has chosen this remedy, he shall have no further action against the purchaser for the
recovery of any unpaid balance owing by the same. In other words, as we see it, the Act does no
more than qualify the remedy.
5.
Macondray & Co. vs. Eustaquio; Mortgage limited to property mortgage and
not entitled to attorney's fees and cost of suit
Under the amendment, in all proceedings for the foreclosure of a chattel mortgage,
executed on chattels which have been sold on the installment plan, the mortgagee is limited to
the property mortgaged and is not entitled to attorneys fees and costs of suit.
6.
Luneta Motor vs. Salvador; Cancellation of attorneys fees and cost of suit
when chattel mortgage was foreclosed during progress of action to recover unpaid
balance of purchase price
In a subsequent case, where the vendor in a sale of personal property in installments,
upon failure of the vendee to pay his obligations, the vendor commenced, through court action,
to recover the unpaid balance of the purchase price, but later, during the progress of the action,
foreclosed the chattel mortgage constituted on the property, attorneys fees and costs of suit
were denied to the vendor.
7.
Luneta Motor vs. Salvador; Remedies alternative not pursued conjunctively

Paragraph 3 of Article 1484, New Civil Code, is clear that foreclosure of the chattel
mortgage and recovery of the unpaid balance of the price are alternative remedies and may not
be pursued conjunctively. It appearing that the vendor had already foreclosed the chattel
mortgage constituted on the property and had taken possession thereof, the lower court acted
rightly in dismissing the complaint filed for the purpose of recovering the unpaid balance of
the purchase price. Thus, in that case, by seizing the truck and foreclosing the mortgage at the
progress of the suit, the plaintiff renounced whatever claim it may have had under the
promissory note, and consequently, he has no more cause of action against the promisor and
the guarantor. And he has no more right either to the costs and the attorneys fees that would
go with the suit. This might be considered a reiteration of the ruling in Macondray.
8.
Purpose of the doctrine as to Article 1484 (3)

The doctrines ultimate and salutary purpose is to prevent the vendor from
circumventing the Recto Law. Congress sought to protect the buyers on installment who more
often than not have been victimized by sellers who, before the enactment of this law, succeeded
in unjustly enriching themselves at the expense of the buyers, because aside from recovering
the goods sold, upon default of the buyer in the payment of two installments, still retained
for themselves all amounts already paid, and, in addition, were adjudged entitled to damages,
such as attorneys fees, expenses of litigation and costs. Congress could not have intended to
impair much less do away with, the right of the seller to make commercial use of his
credit against the buyer, provided the buyer is not burdened beyond what this law allows.
Sales, 2003 ( 123 )
9.
Philosophy of the Recto Law

The emphasis and precision of the language employed in the decisions already adverted
to that in no instance whatsoever may the mortgagee re cover from the mortgagor any amount
or sum after the foreclosure of the mortgage, for, as we understand it, the philosophy of
the Recto Law is that the underprivileged mortgagors must be afforded full protection
against the rapacity of the mortgagees.
10.
Action for replevin; Necessary expenses borne by mortgagor

It is part of conventional wisdom and the rule of law that no man can take the law into
his own hands; so it is not to be supposed that the Legislature intended that the mortgagee
should wrest or seize the chattel forcibly from the control and possession of the mortgagor,
even to the extent of using violence which is unwarranted in law. Since the mortgagee
would enforce his rights through the means and within the limits delineated by law, the next
step in such situations being the filing of an action for replevin to the end that he may recover
immediate possession of the chattel and, thereafter, enforce his rights in accordance with the
contractual relationship between him and the mortgagor as embodied in their agreement,
then it logically follows as a matter of common sense, that the necessary expenses
incurred in the prosecution by the mortgagee of the action for replevin so that he can regain
possession of the chattel, should be borne by the mortgagor. Recoverable expenses would
include expenses properly incurred in effecting seizure of the chattel and reasonable attorneys
fees in prosecuting the action for replevin. The amounts awarded by the lower court to the
mortgagee are reasonable.
11.
Note as to potential matters which may be obiter dictum

To the extent that the pronouncement in the present case conflicts with the ruling
announced and followed in the cases discussed, the latter must be considered pro tanto
qualified.
[44]
First Philippine International Bank v. CA, 252 SCRA (1996)
[45]
Froilan v. Pan-Oriental Shipping Co., 12 SCRA 276 (1964)
[46]
Fule v. CA [G.R. No. 112212. March
2, 1998.] Third division, Romero (J): 3
concur
Facts: Fr. Antonio Jacobe initially mortgage a 10-hectare property in Tanay, Rizal (covered by
TCT 320725) to the Rural Bank of Alaminos, Laguna to secure a loan in the amount of
P10,000. Said mortgage was later foreclosed and the property offered for public auction
upon his default. In June 1984, Gregorio Fule, as corporate secretary of the bank, asked
Remelia Dichoso and Olivia Mendoza to look for a buyer who might be interested in the Tanay
property. The two found one in the person of Ninevetch Cruz. It so happened that in January of
said year, Gregorio Fule, also a jeweler, has shown interest in buying a pair of emerald-cut
diamond earrings owned by Dr. Cruz. Dr. Cruz has declined Fules offer to buy said jewelry
for P100,000; and a subsequent bid by Fule to buy them for US$6,000 at $1 to P25 while
making a sketch of said jewelry during an inspection at the lobby of Prudential Bank (the latter
instance was declined, since the exchange rate appreciated to P19 per dollar). Subsequently,
however, negotiations for the barter of the jewelry and the Tanay property ensued. Atty.
Belarmino was requested by Dr. Cruz to check the property and found out that no sale or barter
was feasible as the 1-year period of redemption has not expired. In an effort to cut through any
legal impediment, Fule executed on 19 October 1984, a deed of redemption on behalf of Fr.
Jacobe purportedly in
Sales, 2003 ( 124 )
the amount of P15,987.78, and on even date, Fr. Jacobe sold the property to Fule for
P75,000.00. The haste with which the two deeds were executed is shown by the fact that the
deed of sale was notarized ahead of the deed of redemption. As Dr. Cruz had already agreed to
the proposed barter, Fule went to Prudential Bank to take a look at the jewelry.
On 23 October 1984, Fule met Atty. Belarmino at the latters residence to prepare the
documents of sale. Atty. Belarmino accordingly caused the preparation of a deed of absolute
sale while Fule and Dr. Cruz attended to the safekeeping of the jewelry. The following day,
Fule, together with Dichoso and Mendoza, arrived at the residence of Atty. Belarmino to
finally execute a deed of absolute sale. Fule signed the deed and gave Atty. Belarmino the
amount of P13,700.00 for necessary expenses in the transfer of title over the Tanay property;
and issued a certification to the effect that the actual consideration of the sale was
P200,000.00 and not P80,000.00 as indicated in the deed of absolute sale (the disparity
purportedly aimed at minimizing the amount of the capital gains tax that Fule would have
to shoulder). Since the jewelry was appraised only at P160,000.00, the parties agreed that the
balance of P40,000.00 would just be paid later in cash. Thereafter, at the bank, as pre-arranged,
Dr. Cruz and the cashier opened the safety deposit box, and delivered the contents thereof to
Fule. Fule inspected the jewelry, near the electric light at the banks lobby, for 10-15 minutes.
Fule expressed his satisfaction by nodding his head when asked by Dr. Cruz if the jewelry was
okay. For services rendered, Fule paid the agents, Dichoso and Mendoza, the amount of
US$300.00 and some pieces of jewelry. He did not, however, give them half of the pair of
earrings in question, which he had earlier promised. Later in the evening, Fule arrived at the
residence of Atty. Belarmino complaining that the jewelry given him was fake. Dichoso, who
borrowed the car of Dr. Cruz, called up Atty. Belarmino. Informed that Fule was at the
lawyers house, went there posthaste thinking that Fule had finally agreed to give them half
of the pair of earrings, only to find Fule demonstrating with a tester that the earrings were
fake. Fule then accused Dichoso and Mendoza of deceiving him which they, however, denied.
They countered that Fule could not have been fooled because he had vast experience
regarding jewelry. Fule nonetheless took back the US$300.00 and jewelry he had given them.
Thereafter, the group decided to go to the house of a certain Macario Dimayuga, a jeweler, to
have the earrings tested. Dimayuga, after taking one look at the earrings, immediately
declared them counterfeit. At around 9:30 p.m., Fule went to one Atty. Reynaldo Alcantara
residing at Lakeside Subdivision in San Pablo City, complaining about the fake jewelry. Upon
being advised by the latter, Fule reported the matter to the police station where Dichoso and
Mendoza likewise executed sworn statements.
On 26 October 1984, Fule filed a complaint before the RTC San Pablo City against private
respondents praying, among other things, that the contract of sale over the Tanay property be
declared null and void on the ground of fraud and deceit. On 30 October 1984, the lower
court issued a temporary restraining order directing the Register of Deeds of Rizal to refrain
from acting on the pertinent documents involved in the transaction. On 20 November 1984,
however, the same court lifted its previous order and denied the prayer for a writ of
preliminary injunction. After trial, the lower court rendered its decision on 7 March 1989;
holding that the genuine pair of earrings used as consideration for the sale was delivered by Dr.
Cruz to Fule, that the contract was valid even if the agreement between the parties was
principally a barter contract, that the agreement has been consummated at the time the
principal parties parted ways at the bank, and that damages are due to the defendants. From
the trial courts adverse decision, petitioner elevated the matter to the Court of Appeals. On
20 October 1992, the Court of Appeals, however, rendered a decision afirming in toto the
lower courts decision. His motion for reconsideration having been denied on 19 October
1993. Hence, the petition for review on certiorari.
The Supreme Court affirmed in toto the decision of the Court of Appeals, but ordered Dr. Cruz
to pay Fule the balance of the purchase price of P40,000 within 10 days from the finality of
the decision; with costs against petitioner.
1.
New factual issues cannot be examined as it unduly transcends the limits of
the Supreme Courts review power
Sales, 2003 ( 125 )
The Supreme Court cannot entertain a factual issue, and thus examine and weigh
anew the facts regarding the genuineness of the earrings bartered in exchange for the Tanay
property, as this would unduly transcend the limits of the Courts review power in petitions of
this nature which are confined merely to pure questions of law. As a general rule, the Supreme
Court accords conclusiveness to a lower courts findings of fact unless it is shown, inter alia,
that: (1) the conclusion is a finding grounded on speculations, surmises or conjectures; (2) the
inference is manifestly mistaken, absurd and impossible; (3) when there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings
of fact are conflicting; and (6) when the Court of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary to the admission of both parties. To reiterate,
the Supreme Courts jurisdiction is only limited to reviewing errors of law in the absence of
any showing that the findings complained of are totally devoid of support in the record or that
they are glaringly erroneous as to constitute serious abuse of discretion.
2.
Immediate rendition of decision not anomalous

No proof has been adduced that Judge Jaramillo was motivated by a malicious or
sinister intent in disposing of the case with dispatch. Neither is there proof that someone else
wrote the decision for him. The immediate rendition of the decision was no more than Judge
Jaramillos compliance with his duty as a judge to dispose of the courts business promptly
and decide cases within the required periods. The two-year period within which Judge
Jaramillo handled the case provided him with all the time to study it and even write down
its facts as soon as these were presented to court. In fact, the Supreme Court does not see
anything wrong in the practice of writing a decision days before the scheduled promulgation
of judgment and leaving the dispositive portion for typing at a time close to the date of
promulgation, provided that no malice or any wrongful conduct attends its adoption. The
practice serves the dual purposes of safeguarding the confidentiality of draft decisions
and rendering decisions with promptness. Neither can Judge Jaramillo be made
administratively answerable for the immediate rendition of the decision. The acts of a judge
which pertain to his judicial functions are not subject to disciplinary power unless they are
committed with fraud, dishonesty, corruption or bad faith. Hence, in the absence of sufficient
proof to the contrary, Judge Jaramillo is presumed to have performed his job in accordance with
law and should instead be commended for his close attention to duty.
3.
Contract perfected by mere consent, binds parties to stipulation and all the
consequences; Contract of sale perfected upon meeting of minds upon the thing object
of the contract and upon price; Embodiment of contract in public instrument only for
convenience, and registration only to affect third parties; Lack of formal requirements
does not invalidate the contract
The Civil Code provides that contracts are perfected by mere consent. From this
moment, the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may be in keeping
with good faith, usage and law.
A contract of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price. Being consensual, a contract of sale
has the force of law between the contracting parties and they are expected to abide in
good faith by their respective contractual commitments.
Article 1358 of the Civil Code which requires the embodiment of certain contracts
in a public instrument, is only for convenience, and registration of the instrument only
adversely affects third parties. Formal requirements are, therefore, for the benefit of third
parties. Non-compliance therewith does not adversely affect the validity of the contract nor
the contractual rights and obligations of the parties thereunder.
4.
Voidable or annullable contracts

Contracts that are voidable or annullable, even though there may have been no
damage to the contracting parties are: (1) those where one of the parties is incapable of giving
consent to a contract; and (2) those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud. The contract can be voided in accordance with law so as
to compel the parties to restore to each other the things that have been the subject of the
contract with their fruits, and the price with interest.
Sales, 2003 ( 126 )
5.
Fraud; No inducement made by the private respondents

There is fraud when, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would
not have agreed to. In the present case, the records, are bare of any evidence manifesting that
private respondents employed such insidious words or machinations to entice petitioner into
entering the contract of barter. Neither is there any evidence showing that Dr. Cruz induced
petitioner to sell his Tanay property or that she cajoled him to take the earrings in exchange for
said property. On the contrary, Dr. Cruz did not initially accede to petitioners proposal to buy
the said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz
to believe that the Tanay property was worth exchanging for her jewelry as he represented that
its value was P400,000.00 or more than double that of the jewelry which was valued only at
P160,000.00. If indeed petitioners property was truly worth that much, it was certainly
contrary to the nature of a businessman-banker like him to have parted with his real estate for
half its price. In short, it was in fact petitioner who resorted to machinations to convince Dr.
Cruz to exchange her jewelry for the Tanay property.
6.
Mistake; Mistake caused by manifest negligence cannot invalidate a judicial act
To invalidate a contract, mistake must refer to the substance of the thing that is the object of
the contract, or to those conditions which have principally moved one or both parties to enter
into the contract. An example of mistake as to the object of the contract is the substitution
of a specific thing contemplated by the parties with another. In the present case, the petitioner
failed to prove the fact that prior to the delivery of the jewelry to him, private respondents
endeavored to make such substitution of an inferior one or one with Russian diamonds for
the jewelry he wanted to exchange with his 10-hectare land. Further, on account of his work as
a banker-jeweler, it can be rightfully assumed that he was an expert on matters regarding
gems. He had the intellectual capacity and the business acumen as a banker to take
precautionary measures to avert such a mistake, considering the value of both the jewelry
and his land. A mistake caused by manifest negligence cannot invalidate a juridical act. As
the Civil Code provides, (t)here is no mistake if the party alleging it knew the doubt,
contingency or risk affecting the object of the contract.
7.
Contract of sale absolute if no stipulation that title to property is reserved to
seller until full payment; Ownership transferred upon actual or constructive delivery
A contract of sale being absolute in nature, title passed to the vendee upon delivery of
the thing sold since there was no stipulation in the contract that title to the property sold has
been reserved in the seller until full payment of the price or that the vendor has the right to
unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.
Such stipulations are not manifest in the contract of sale. In the present case, both the trial
and appellate courts, therefore, correctly ruled that there were no legal bases for the
nullification of the contract of sale. Ownership over the parcel of land and the pair of
emerald-cut diamond earrings had been transferred to Dr. Cruz and Fule, respectively, upon
the actual and constructive delivery thereof.
8.
Contract silent when balance is due and demandable; non-payment does not
invalidate the contract
While it is true that the amount of P40,000.00 forming part of the consideration was still
payable to Fule, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract
or bar the transfer of ownership and possession of the things exchanged considering the fact
that their contract is silent as to when it becomes due and demandable.
9.
No interest due if it is not stipulated

Failure to pay the balance of the purchase price does not result in the payment of
interest thereon. Article 1589 of the Civil Code prescribes the payment of interest by the
vendee for the period between the delivery of the thing and the payment of the price in
cases (1) Should it have been so stipulated; (2) Should the thing sold and delivered produce
fruits or income; (3) Should he be in default, from the time of judicial or
Sales, 2003 ( 127 )
extrajudicial demand for the payment of the price.

10.
Case distinguished from de la Cruz v Legaspi

The present case should be distinguished from De la Cruz v. Legaspi, where the court
held that failure to pay the consideration after the notarization of the contract as previously
promised resulted in the vendees liability for payment of interest. In the present, there is
no stipulation for the payment of interest in the contract of sale nor proof that the Tanay
property produced fruits or income. Neither did petitioner demand payment of the price as in
fact he filed an action to nullify the contract of sale.
11.
Award of moral and exemplary damages

Moral and exemplary damages may be awarded without proof of pecuniary loss. In
awarding such damages, the court shall take into account the circumstances obtaining in
the case and assess damages according to its discretion. To warrant the award of damages, it
must be shown that the person to whom these are awarded has sustained injury. He must
likewise establish sufficient data upon which the court can properly base its estimate of the
amount of damages. Statements of facts should establish such data rather than mere
conclusions or opinions of witnesses. Thus, for moral damages to be awarded, it is essential that
the claimant must have satisfactorily proved during the trial the existence of the factual basis
of the damages and its causal connection with the adverse partys acts. If the court has no proof
or evidence upon which the claim for moral damages could be based, such indemnity could not
be outrightly awarded. The same holds true with respect to the award of exemplary damages
where it must be shown that the party acted in a wanton, oppressive or malevolent manner.
12.
Rule that moral damages cannot be recovered from person who fled a
complaint does not apply in present case
While, as a rule, moral damages cannot be recovered from a person who has filed a
complaint against another in good faith because it is not sound policy to place a penalty on
the right to litigate, the same, however, cannot apply in the present case. This is not a
situation where petitioners complaint was simply found later to be based on an erroneous
ground which, under settled jurisprudence, would not have been a reason for awarding moral
and exemplary damages. Instead, the cause of action of the instant case appears to have been
contrived by petitioner himself. The factual findings of the courts a quo to the effect that
petitioner filed this case because he was the victim of fraud; that he could not have been
such a victim because he should have examined the jewelry in question before accepting
delivery thereof, considering his exposure to the banking and jewelry businesses; and that he
filed the action for the nullification of the contract of sale with unclean hands, all deserve
full faith and credit to support the conclusion that petitioner was motivated more by ill will
than a sincere attempt to protect his rights in commencing suit against respondents. It must be
noted that before petitioner was able to convince Dr. Cruz to exchange her jewelry for the
Tanay property, petitioner took pains to thoroughly examine said jewelry, even going to
the extent of sketching their appearance. Why at the precise moment when he was about to
take physical possession thereof he failed to exert extra efforts to check their genuineness
despite the large consideration involved has never been explained at all by petitioner. His
acts thus failed to accord with what an ordinary prudent man would have done in the same
situation.
[47]
Gaite v. Fonacier [G.R. No. L-11827. July
31, 1961.] En Banc, Reyes JBL (J): 9 concur
Facts: Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims
(Dawahan Group), situated in Jose Panganiban, Camarines Norte. By a Deed of
Assignment dated 29 September 1952, Fonacier constituted and appointed Fernando A. Gaite
as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical
person for the exploration and development of the mining claims on a
Sales, 2003 ( 128 )
royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom. On 19
March 1954, Gaite in turn executed a general assignment conveying the development and
exploitation of said mining claims unto the Larap Iron Mines, owned solely by him.
Thereafter Gaite embarked upon the development and exploitation of the mining claims,
opening and paving roads within and outside their boundaries, making other improvements
and installing facilities therein for use in the development of the mines, and in time
extracted therefrom what he claimed and estimated to be approximately 24,000 metric tons of
iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him
to Gaite, and Gaite assented thereto subject to certain conditions. As a result, a document
entitled Revocation of Power of Attorney and Contract was executed on 8 December 1954,
wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the
royalties that Fonacier would receive from the mining claims, all his rights and interests on all
the roads, improvements, and facilities in or outside said claims, the right to use the business
name Larap Iron Mines and its goodwill, and all the records and documents relative to the
mines. In the same document, Gaite transferred to Fonacier all his rights and interests over the
24,000 tons of iron ore, more or less that the former had already extracted from the mineral
claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing
of the agreement, and the balance to be paid out of the first letter of credit covering the first
shipment of iron ores or the first amount derived from the local sale of iron ore made by
the Larap Mines & Smelting Co. To secure the payment of the balance, Fonacier promised
to execute in favor of Gaite a surety bond; delivered on 8 December 1954 with Fonacier as
principal and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond
was executed by the parties to the first bond, on the same day, with the Far Eastern Surety and
Insurance Co. as additional surety, but it provided that the liability of the surety company
would attach only when there had been an actual sale of iron ore by the Larap Mines &
Smelting Co. for an amount of not less than P65,000. Both bond were attached and made
integral parts of the Revocation of Power of Attorney and Contract. On the same day that
Fonacier revoked the power of attorney, Fonacier entered into a Contract of Mining
Operation with Larap Mines and Smelting Co., Inc. to grant it the right to develop, exploit,
and explore the mining claims, together with the improvements therein and the use of the
name Larap Iron Mines and its goodwill, in consideration of certain royalties. Fonacier
likewise transferred, in the same document, the complete title to the approximately 24,000
tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co., in
consideration for the signing by the company and its stockholders of the surety bonds
delivered by Fonacier to Gaite. On 8 December 1955, the bond with respect to the Far
Eastern Surety and Insurance Company expired with no sale of the approximately 24,000 tons
of iron ore, nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier
and his sureties. Whereupon, Gaite demanded from Fonacier and his sureties payment of said
amount.
When Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed a complaint
against them in the CFI Manila (Civil Case 29310) for the payment of the P65,000 balance
of the price of the ore, consequential damages, and attorneys fees. Judgment was,
accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly
and severally, P65,000 with interest at 6% per annum from 9 December 1955 until full
payment, plus costs. From this judgment, defendants jointly appealed to the Supreme
Court as the claims involved aggregate to more than P200,000.
The Supreme Court affirmed the decision appealed from, with costs against appellants.
1.
Shipment or local sale of ore not a condition precedent but a suspensive period or
term
The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to
the payment of the balance of P65,000, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its efficacy or obligatory force (as
distinguished from its demandability) is subordinated to the happening of a future and
uncertain event; so that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.
Sales, 2003 ( 129 )
2.
The words of the contract express no contingency in the buyers obligation to pay.
The contract stipulates that the balance of Sixty-Five Thousand Pesos (P65,000) will be
paid out of the first letter of credit covering the first shipment of iron ore . . . etc. There
is no uncertainty that the payment will have to be made sooner or later; what is undetermined
is merely the exact date at which it will be made. By the very terms of the contract,
therefore, the existence of the obligation to pay is recognized; only its maturity or
demandability is deferred.
3.
Contract of sale commutative and onerous; Each party assume correlative
obligation and anticipate performance from the other
A contract of sale is normally commutative and onerous: not only does each one of the
parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing
sold and the buyer to pay the price), but each party anticipates performance by the other from
the very start. While in a sale the obligation of one party can be lawfully subordinated to an
uncertain event, so that the other understands that he assumes the risk of receiving nothing for
what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the
usual course of business to do so; hence, the contingent character of the obligation must clearly
appear. In the present case, nothing is found in the record to evidence that Gaite desired or
assumed to run the risk of losing his rights over the ore without getting paid for it, or that
Fonacier understood that Gaite assumed any such risk. The fact that appellants did put up such
bonds indicates that they admitted the definite existence of their obligation to pay the balance
of P65,000.
4.
To consider sale as a condition precedent leaves the payment at the discretion o fthe
debtor
To subordinate the obligation to pay the remaining P65,000 to the sale or shipment of
the ore as a condition precedent, would be tantamount to leaving the payment at the
discretion of the debtor, for the sale or shipment could not be made unless the appellants took
steps to sell the ore. Appellants would thus be able to postpone payment indefinitely. Such
construction of the contract should be avoided.
5.
Interpretation incline in favor of the greatest reciprocity of interests

Assuming that there could be doubt whether by the wording of the contract the
parties intended a suspensive condition or a suspensive period (dies ad quem) for the
payment of the P65,000, the rules of interpretation would incline the scales in favor of
the greatest reciprocity of interests, since sale is essentially onerous. The Civil Code of
the Philippines, Article 1378, paragraph 1, in fine, provides if the contract is onerous, the
doubt shall be settled in favor of the greatest reciprocity of interests and there can be no
question that greater reciprocity obtains if the buyers obligation is deemed to be actually
existing, with only its maturity (due date) postponed or deferred, than if such obligation were
viewed as non-existent or not binding until the ore was sold.
6.
Sale of ore to Fonacier was a sale on credit, not an aleatory contract

The sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where
the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale
or shipment of the ore was not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the payment.
7.
Non-renewal of bond impaired the securities given to the creditor

Appellants have forfeited the right to compel Gaite to wait for the sale of the ore
before receiving payment of the balance of P65,000, because of their failure to renew the
bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee.
The expiration of the bonding companys undertaking on 8 December 1955 substantially

reduced the security of the vendors rights as creditor for the unpaid P65,000, a security that
Gaite considered essential and upon which he had insisted when he executed the deed of sale of
the ore to Fonacier. The case squarely comes under paragraphs 2 and 3 of Article 1198 of the
Civil Code of the Philippines which provides (2) When he does not furnish to the creditor the
guaranties or securities which he has promised. (3) When by his own acts he has impaired said
guaranties or securities
Sales, 2003 ( 130 )
after their establishment, and when through fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory. Appellants failure to renew or extend
the surety companys bond upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or replaced.
8.
No waiver intended by creditor

Gaites acceptance of the surety companys bond with full knowledge that on its
face it would automatically expire within one year was not a waiver of its renewal after the
expiration date. No such waiver could have been intended, for Gaite stood to lose and had
nothing to gain thereby; and if there was any, it could be rationally explained only if the
appellants had agreed to sell the ore and pay Gaite before the surety companys bond expired
on 8 December 1955. But in the latter case the defendants- appellants obligation to pay
became absolute after 1 year from the transfer of the ore to Fonacier by virtue of the deed.
9.
No short-delivery made by Gaite

This is a case of a sale of a specific mass of fungible goods for a single price or a
lump sum, the quantity of 24,000 tons of iron ore, more or less, stated in the contract, being
a mere estimate by the parties of the total tonnage weight of the mass; and second, that the
evidence shows that neither of the parties had actually measured or weighed the mass, so that
they both tried to arrive at the total quantity by making an estimate of the volume thereof in
cubic meters and then multiplying it by the estimated weight per ton of each cubic meter. The
sale between the parties is a sale of a specific mass of iron ore because no provision was made
in their contract for the measuring or weighing of the ore sold in order to complete or perfect
the sale, nor was the price of P75,000 agreed upon by the parties based upon any such
measurement (see Art. 1480, second par., New Civil Code). The subject-matter of the sale is,
therefore, a determinate object, the mass, and not the actual number of units or tons contained
therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer
all of the ore found in the mass, notwithstanding that the quantity delivered is less than the
amount estimated by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage
Co., Inc. 171 So. 872, applying art. 2459 of the Luisiana Civil Code). The contract expressly
stated the amount to be 24,000 tons, more or less. Applying the tonnage factor provided by
the chief of Mines and Metallurgical Division of the Bureau of Mines which was between 3
metric tons minimum to 5 metric tons maximum, which was near the 3.3 metric ton tonnage
factor adopted by Engr. Gamatero (at the request of Krakower, a stockholder of Larap), and if
appellants witness is correct in his estimate of 6,609 cubic meters of ore, the product is
21,809.7 tons which is not far from the 24,000 tons estimate. (cf. Pine River Logging &
Improvement Co. vs. U. S., 186 U.S. 279, 46, L. Ed. 1164). Thus, there was no short-delivery as
would entitle appellants to the payment of damages, nor could Gaite have been guilty of
any fraud in making any misrepresentation to appellants as to the total quantity of ore in the
stockpiles of the mining claims in question since Gaites estimate appears to be substantially
correct.
[48]
Goldenrod Inc. vs. CA [G.R. No. 126812. November
24, 1998.] First Division, Bellosillo: 4 concur
Facts: Pio Barreto and Sons, Inc. owned 43 of registered land with a total area of 18,500 sq.
ms. located at Carlos Palanca St. Quiapo, Manila which were mortgaged with the United
Coconut Planters Bank (UCPB). In 1988, the obligation of the corporation with UCPB
remained unpaid making foreclosure of the mortgage imminent. Goldenrod, Inc. offered to
buy the property from Barreto & Sons. On 25 May 1988, through its president Sonya G.
Mathay, Goldenrod wrote Anthony Que, President of Barreto & Sons, confirming the latters
acceptance of formers offer to buy the Echague property (with the latters amendments
that the payment of interest should be monthly instead of semi-annually and the period to
remove the trusses, steel frames etc. which shall be 180 days instead of 90 days only), and
enclosing the earnest money of P1 million.
Sales, 2003 ( 131 )
[Barreto Realty; Additional agreement] When the term of existence of Barreto & Sons
expired, all its assets and liabilities including the property located in Quiapo, were transferred
to Pio Barreto Realty Development, Inc. Goldenrods offer to buy the property resulted in its
agreement with Barreto Realty that Goldenrod would pay the amounts of P24.5 million
representing the outstanding obligations of Barreto Realty with UCPB on 30 June 1988, the
deadline set by the bank for payment; and P20 million which was the balance of the
purchase price of the property to be paid in installments within a 3-year period with
interest at 18% per annum. Goldenrod did not pay UCPB the P24.5 million loan obligation of
Barreto Realty on the deadline set for payment; instead, it asked for an extension of 1 month or
up to 31 July 1988 to settle the obligation, which the bank granted. On 31 July 1988, Goldenrod
requested another extension of 60 days to pay the loan. This time the bank demurred. In the
meantime Barreto Realty was able to cause the reconsolidation of the 43 titles covering the
property subject of the purchase into 2 titles covering Lots 1 and 2, which were issued on 4
August 1988. The reconsolidation of the titles was made pursuant to the request of Goldenrod
in its letter to Barreto and Sons (or Barreto Realty) on 25 May 1988. Barreto Realty allegedly
incurred expenses for the reconsolidation amounting to P250,000. On 25 August 1988
Goldenrod sought reconsideration of the denial by the bank of its request for extension of 60
days by asking for a shorter period of 30 days. This was again denied by UCPB. [Rescission of
agreement by Goldenrod] On 30 August 1988 Alicia P. Logarta, President of Logarta Realty
and Development Corporation, which acted as agent and broker of Goldenrod, wrote Anthony
Que informing him on behalf of Goldenrod that it could not go through with the purchase of
the property due to circumstances beyond its fault, i.e., the denial by UCPB of its request for
extension of time to pay the obligation. In the same letter, Logarta also demanded the refund
of the earnest money of P1 million which Goldenrod gave to Barreto Realty. [Lot 2 sold to
Asiaworld] On 31 August 1988 Barreto Realty sold to Asiaworld Trade Center Phils., Inc., Lot
2, one of the 2 consolidated lots, for the price of P23 million. On 13 October 1988 Barreto
Realty executed deed transferring by way of dacion the property reconsolidated as Lot 1
in favor of UCPB, which in turn sold the property to Asiaworld for P24 million.
[Demand for reimbursement of earnest money] On 12 December 1988 Logarta again wrote
Que demanding the return of the earnest money to Goldenrod. On 7 February 1989 Goldenrod
through its lawyer reiterated its demand, but the same remained un-heeded by Barreto Realty.
Goldenrod filed a complaint with the RTC Manila against Barreto Realty, et.al. for the return of
the amount of P1 million and the payment of damages including lost interests or profits. In
their answer, Barreto Realty, et.al. contended that it was the agreement of the parties that
the earnest money of P1 million would be forfeited to answer for losses and damages that
might be suffered by Barreto Realty in case of failure by Goldenrod to comply with the
terms of their purchase agreement. On 15 March 1991 the trial court rendered a decision
ordering Barreto Realty, et.al. jointly and severally to pay Goldenrod P1,000,000.00 with
legal interest from 9 February 1989 until fully paid, P50,000.00 representing unrealized profits
and P10,000.00 as attorneys fees. The trial court found that there was no written agreement
between the parties concerning forfeiture of the earnest money if the sale did not push
through. It further declared that the earnest money given by Goldenrod to Barreto Realty was
intended to form part of the purchase price; thus, the refusal of the latter to return the money
when the sale was not consummated violated Arts. 22 and 23 of the Civil Code against unjust
enrichment.
Obviously dissatisfied with the decision of the trial court, Barreto Realty appealed to the
Court of Appeals which reversed the trial court and ordered the dismissal of the complaint;
hence, the petition.
The Supreme Court granted the petition, reversed and set aside the decision of the Court of
Appeals, and ordered Barreto Realty, its successors and assigns are ordered to return to
Goldenrod, the amount of P1,000,000.00 with legal interest thereon from 30 August 1988, the
date of notice of extrajudicial rescission, until the amount is fully paid, with costs against
Barreto Realty, et.al.
1.
Purpose of earnest money

Under Article 1482 of the Civil Code, whenever earnest money is given in a contract of sale,
it shall
Sales, 2003 ( 132 )
be considered as part of the purchase price and as proof of the perfection of the contract. In the
present case, Goldenrod clearly stated without any objection from Barreto Realty that the
earnest money was intended to form part of the purchase price. It was an advance payment
which must be deducted from the total price. Hence, the parties could not have intended that
the earnest money or advance payment would be forfeited when the buyer should fail to pay
the balance of the price, especially in the absence of a clear and express agreement thereon.
2.
Right to rescind not absolute, must be successfully impugned in court

In University of the Philippines v. de los Angeles, the right to rescind contracts is not
absolute and is subject to scrutiny and review by the proper court. In Adelfa Properties,
Inc. v. Court of Appeals, that rescission of reciprocal contracts may be extrajudicially
rescinded unless successfully impugned in court.
3.
Lack of opposition to rescission an admission of validity of the claim of rescinding
party
If the party does not oppose the declaration of rescission of the other party, specifying
the grounds therefor, and it fails to reply or protest against it, its silence thereon suggests an
admission of the veracity and validity of the rescinding partys claim. In the present case,
Barreto Realty did not interpose any objection to the rescission by Goldenrod of the agreement.
Barreto Realty even sold Lot 2 of the subject consolidated lots to another buyer, Asiaworld, one
day after its President Anthony Que received the brokers letter rescinding the sale.
Subsequently, on 13 October 1988 respondent Barreto Realty also conveyed ownership over Lot
1 to UCPB which, in turn, sold the same to Asiaworld.
4.
Rescission creates obligation to return things subject of contract with fruits and
interests
Article 1385 of the Civil Code provides that rescission creates the obligation to
return the things which were the object of the contract together with their fruits and interest.
The vendor is therefore obliged to return the purchase price paid to him by the buyer if the
latter rescinds the sale, or when the transaction was called off and the subject property had
already been sold to a third person, as what obtained in this case. In the present case, by virtue
of the extrajudicial rescission of the contract to sell, Barreto Realty as the vendor, had the
obligation to return the earnest money of P1,000,000 plus legal interest from the date it
received notice of rescission from Goldenrod, i.e., 30 August 1988, up to the date of the return
or payment.
[49]
Guiang v. CA [G.R. No. 125172. June 26,
1998.] First Division, Panganiban (J): 4
concur
Facts: Gilda and Judie Corpuz were married civilly on 24 December 1968 in Bacolod City. The
couple have 3 children (Junie, Harriet, and Jodie or Joji. On 14 February 1983, the Corpuzes,
with Gilda Corpuz as vendee, bought a 421 sq. m. lot (Lot 8, Block 9, (LRC) Psd-165409)
located in Barangay Gen. Paulino Santos (Bo. 1), Koronadal, South Cotabato from Manuel
Callejo who signed as vendor through a conditional deed of sale for a total consideration of
P14,735.00. The consideration was payable in installment, with right of cancellation in favor of
vendor should vendee fail to pay 3 successive installments. On 22 April 1988, the Corpuzes
sold portion of their lot to spouses Antonio and Luzviminda Guiang. The latter have since
then occupied the portion and built their house thereon. They are thus adjoining neighbors of
the Corpuzes. On June 1989, Gilda Corpuz left for Manila, with the consent of her husband, to
look for work abroad. Unfortunately, she became a victim of an unscrupulous illegal recruiter,
was not able to go abroad, and stayed for sometime in Manila. Sometime in January 1990,
Harriet Corpuz learned that her father intended to sell the remaining portion including
their house, of their homelot to the Guiangs. She wrote a letter to her mother informing her,
who in turn replied that she was objecting to the sale. Harriet, however, did not inform her
father about this; but instead gave the letter to Mrs. Luzviminda Guiang so that Guiang would
advise her father. However, in the absence of his wife Gilda Corpuz, and on 1 March 1990,
Judie Corpuz sold the remaining portion of the lot and the house thereon to Luzviminda
Guiang thru a document known as Deed of Transfer of Rights (Exh.
Sales, 2003 ( 133 )
A) for a total consideration of P30,000.00 of which P5,000.00 was to be paid in June 1990.
Judie Corpuzs children Junie and Harriet signed the document as witnesses. On 5 March 1990,
obviously to cure whatever defect in Judie Corpuzs title over the lot transferred,
Luzviminda Guiang as vendee executed another agreement over the lot with Manuela
Jimenez Callejo, widow of Manuel Callejo (the original registered owner), who signed as
vendor for a consideration of P9,000.00. Judie Corpuz signed as a witness to the sale. The new
sale describes the lot sold as Lot 8, Block 9, (LRC) Psd-165408. As a consequence of the sale,
the Guiangs spent P600.00 for the preparation of the Deed of Transfer of Rights; P9,000.00 as
the amount they paid to Mrs. Manuela Callejo, having assumed the remaining obligation of
the Corpuzes to Mrs. Callejo; P100.00; a total of P759.62 basic tax and special
educational fund on the lot; P127.50 as the total documentary stamp tax on the various
documents; P535.72 for the capital gains tax; P22.50 as transfer tax; a standard fee of P17.00;
certification fee of P5.00. These expenses particularly the taxes and other expenses towards
the transfer of the title to the Guiangs were incurred for the whole Lot 9, Block 8, (LRC) Psd165409.
On 11 March 1990, Gilda Corpuz returned home. She gathered her children, who were staying
in different households, together and stayed at their house. Her husband was nowhere to be
found. She was informed by her children that their father had a wife already. For staying in
their house sold by her husband, Gilda was complained against by the Guiangs before the
Barangay authorities of Barangay General Paulino Santos (Bo. 1), Koronadal, South Cotabato,
for trespassing (Barangay Case 38). On 16 March 1990, the parties thereat signed a document
known as amicable settlement requiring the Corpuzes to leave the house voluntarily on or
before 7 April 1990, without any charge. Believing that she had received the shorter end of
the bargain, Gilda approached the Barangay Captain for the annulment of the settlement.
Annulment not having been made, Gilda stayed put in her house and lot. The Guiangs followed
thru the amicable settlement with a motion for the execution of the amicable settlement,
filing the same with the MTC Koronadal, South Cotabato. The proceedings [are] still pending
before the said court, with the filing of the instant suit.
On 28 May 1990, Gilda Corpuz filed an Amended Complaint against her husband Judie
Corpuz and the Guiangs. The said Complaint sought the declaration of a certain deed of sale,
which involved the conjugal property of private respondent and her husband, null and void.
On 9 September 1992, The RTC Koronodal, South Cotabato (Branch 25) rendered a decision in
favor of Gilda Corpuz, recognizing her lawful and valid ownership and possession over the
remaining portion of the lot, declaring the deed of transfer of rights and the amicable
settlement null and void, and ordering Gilda Corpuz to reimburse the Guiangs the amount of
P9,000 corresponding to the payment made by the Guiangs to Callejo for the unpaid balance
and another P379.62 representing of the amount of realty taxes paid by the Guiangs, both
with legal interests thereon computed from the finality of the decision; without
pronouncement as to costs. Dissatisfied, the Guiangs filed an appeal with the Court of Appeals.
On 30 January 1996, the appellate court affirmed the decision of the lower court. Their
motion for reconsideration was also denied. A petition for review was before the Supreme
Court.
The Supreme Court denied the petition, and affirmed the challenged decision and
resolution; with costs against the Guiangs.
1.
Valid contract, elements

To constitute a valid contract, the Civil Code requires the concurrence of the following
elements: (1) cause, (2) object, and (3) consent. The last element is indubitably absent in the
present case, thus the nullity of the contract of sale is premised on the absence of private
respondents consent.
2.
Contract void for lack of consent by the other spouse

The consent of one spouse to the contract of sale of the conjugal property was totally
inexistent or absent. This being the case, said contract properly falls within the ambit of
Article 124 of the Family Code. Article 124 of the Family Code provides that the
administration and enjoyment of the conjugal partnership property shall belong to both
spouses jointly. In case of disagreement, the husbands decision shall prevail,
Sales, 2003 ( 134 )
subject to recourse to the court by the wife for proper remedy, which must be availed of
within five years from the date of the contract implementing such decision and that
in the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or encumbrance which
must have the authority of the court or the written consent of the other spouse. In the
absence of such authority or consent, the disposition or encumbrance shall be void. However,
the transaction shall be construed as a continuing offer on the part of the consenting spouse and
the third person, and may be perfected as a binding contract upon the acceptance by the other
spouse or authorization by the court before the offer is withdrawn by either or both offerors.
(165a)
3.
NCC
Amendatory effect of Article 124 FC to Article 166 NCC in relation to Article 173
Under Article 166 of the Civil Code, the husband cannot generally alienate or
encumber any real property of the conjugal partnership without the wifes consent. The
alienation or encumbrance if so made however is not null and void. It is merely voidable. The
offended wife may bring an action to annul the said alienation or encumbrance. Thus, the
provision of Article 173 of the Civil Code of the Philippines provides that the wife may,
during the marriage and within ten years from the transaction questioned, ask the courts for
the annulment of any contract of the husband entered into without her consent, when such
consent is required, or any act or contract of the husband which tends to defraud her or
impair her interest in the conjugal partnership property. Should the wife fail to exercise this
right, she or her heirs after the dissolution of the marriage, may demand the value of
property fraudulently alienated by the husband. The particular provision giving the wife 10
years during the marriage to annul the alienation or encumbrance was not carried over to the
Family Code. It is thus clear that any alienation or encumbrance made after 3 August 1988
when the Family Code took effect by the husband of the conjugal partnership property
without the consent of the wife is null and void.
4.
Execution of document amicable settlement does not affect void character of
deed of sale
The fraud and the intimidation referred to by petitioners were perpetrated in the
execution of the document embodying the amicable settlement. Gilda Corpuz alleged during
trial that barangay authorities made her sign said document through misrepresentation and
coercion. In any event, its execution does not alter the void character of the deed of sale
between the husband and the Guiangs. The fact remains that such contract was entered into
without the wifes consent.
5.
Void contract cannot be ratifed

By the specific provision of the law [Article 1390, Civil Code], the Deed of Transfer of
Rights cannot be ratified, even by an amicable settlement. The participation by some
barangay authorities in the amicable settlement cannot otherwise validate an invalid act.
Moreover, it cannot be denied that the amicable settlement entered into by Gilda Corpuz
and the Guiangs is a contract. It is a direct offshoot of the Deed of Transfer of Rights. By
express provision of law (Article 1422), such a contract is also void. Article 1422 of the Civil
Code provides that a contract which is the direct result of a previous illegal contract, is also
void and inexistent.
6.
Amicable settlement cannot be considered a continuing ofer

Neither can the amicable settlement be considered a continuing offer that was
accepted and perfected by the parties, following the last sentence of Article 124. The order of
the pertinent events is clear: after the sale, the Guiangs filed a complaint for trespassing
against Gilda Corpuz, after which the barangay authorities secured an amicable settlement
and the Guiangs filed before the MTC a motion for its execution. The settlement, however, does
not mention a continuing offer to sell the property or an acceptance of such a continuing offer.
Its tenor was to the effect that the Guiangs would vacate the property. By no stretch of the
imagination, can the Court interpret this document as the acceptance mentioned in Article 124.
[50]
Sales, 2003 ( 135 )
J. Schuback & Sons v. CA [G.R. No. 105387. November

11, 1993.] Third Division, Romero (J): 4 concur
Facts: In 1981, Ramon San Jose (Philippine SJ Industrial Trading) established contact with
Johannes Schuback & Sons Philippine Trading Corporation through the Philippine Consulate
General in Hamburg, West Germany, because he wanted to purchase MAN bus spare parts from
Germany. Schuback communicated with its trading partner, Johannes Schuback and Sohne
Handelsgesellschaft m.b.n. & Co. (Schuback Hamburg) regarding the spare parts San Jose
wanted to order. On 16 October 1981, San Jose submitted to Schuback a list of the parts he
wanted to purchase with specific part numbers and description. Schuback referred the list to
Schuback Hamburg for quotations. Upon receipt of the quotations, Schuback sent to San Jose a
letter dated 25 November 1981 enclosing its offer on the items listed. On 4 December 1981,
San Jose informed Schuback that he preferred genuine to replacement parts, and requested
that he be given a 15% discount on all items. On 17 December 1981, Schuback submitted
its formal offer containing the item number, quantity, part number, description, unit price
and total to San Jose. On 24 December 1981, San Jose informed Schuback of his desire to avail
of the prices of the parts at that time and enclosed its Purchase Order 0101 dated 14 December
1981. On 29 December 1981, San Jose personally submitted the quantities he wanted to Mr.
Dieter Reichert, General Manager of Schuback, at the latters residence. The quantities were
written in ink by San Jose in the same PO previously submitted. At the bottom of said PO, San
Jose wrote in ink above his signature: NOTE: Above PO will include a 3% discount. The
above will serve as our initial PO. Schuback immediately ordered the items needed by San
Jose from Schuback Hamburg. Schuback Hamburg in turn ordered the items from NDK, a
supplier of MAN spare parts in West Germany. On 4 January 1982, Schuback Hamburg sent
Schuback a proforma invoice to be used by San Jose in applying for a letter of credit. Said
invoice required that the letter of credit be opened in favor of Schuback Hamburg. San Jose
acknowledged receipt of the invoice. An order confirmation was later sent by Schuback
Hamburg to Schuback which was forwarded to and received by San Jose on 3 February 1981.
On 16 February 1982, Schuback reminded San Jose to open the letter of credit to avoid delay
in shipment and payment of interest. In the meantime, Schuback Hamburg received invoices
from NDK for partial deliveries on Order 12204. On 16 February 1984, Schuback Hamburg
paid NDK. On 18 October 1982, Schuback again reminded San Jose of his order and advised
that the case may be endorsed to its lawyers. San Jose replied that he did not make any valid
PO and that there was no definite contract between him and Schuback. Schuback sent a
rejoinder explaining that there is a valid PO and suggesting that San Jose either proceed with
the order and open a letter of credit or cancel the order and pay the cancellation fee of 30%
F.O.B. value, or Schuback will endorse the case to its lawyers. Schuback Hamburg issued a
Statement of Account to Schuback enclosing therewith Debit Note charging Schuback 30%
cancellation fee, storage and interest charges in the total amount of DM 51,917.81. Said
amount was deducted from Schubacks account with Schuback Hamburg. Demand letters sent to
San Jose by Schubacks counsel dated 22 March 1983 and 9 June 1983 were to no avail.
Schuback filed a complaint for recovery of actual or compensatory damages, unearned
profits, interest, attorneys fees and costs against San Jose. In its decision dated 13 June 1988,
the trial court ruled in favor of Schuback by ordering San Jose to pay it, among others, actual
compensatory damages in the amount of DM 51,917.81, unearned profits in the amount of DM
14,061.07, or their peso equivalent. San Jose elevated his case before the Court of Appeals. On
18 February 1992, the appellate court reversed the decision of the trial court and dismissed
Schubacks complaint. It ruled that there was no perfection of contract since there was no
meeting of the minds as to the price between the last week of December 1981 and the first
week of January 1982. Hence, the petition for review on certiorari.
The Supreme Court granted the petition, and reinstated the decision of the trial court dated 13
June 1988 with modification.
1.

Sales, 2003 ( 136 )
A contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price.
2.
Consent manifested: Ofer and acceptance

Article 1319 of the Civil Code provides that consent is manifested by the meeting of
the offer and 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. In the present case, the facts indicate that consent on both sides has been manifested.
The offer was manifested on 17 December 1981 when Schuback submitted its proposal
containing the item number, quantity, part number, description, the unit price and total to San
Jose. On 24 December 1981, San Jose informed Schuback of his desire to avail of the prices of
the parts at that time and simultaneously enclosed its PO 0101 dated 14 December 1981. At
this stage, a meeting of the minds between vendor and vendee has occurred, the object of the
contract being the spare parts and the consideration, the price stated in Schubacks offer dated
17 December 1981 and accepted by San Jose on 24 December 1981.
3.
Quantity is immaterial to the perfection of a sales contract

Although the quantity to be ordered was made determinate only on 29 December
1981, quantity is immaterial in the perfection of a sales contract. What is of importance is the
meeting of the minds as to the object and cause, which from the facts disclosed, show that as
of 24 December 1981, these essential elements had already concurred. Thus, perfection of the
contract took place, not on 29 December 1981, but rather on 24 December 1981.
4.
Letter of credit only a mode of payment, not an essential requirement of sale

The opening of a letter of credit in favor of a vendor is only a mode of payment. It is
not among the essential requirements of a contract of sale enumerated in Article 1305 and
1474 of the Civil Code, the absence of any of which will prevent the perfection of the
contract from taking place. In the present case, when San Jose failed to open an irrevocable
letter of credit without recourse in favor of Schuback Hamburg, such did not prevent the
perfection of the contract between the parties, for the opening of a letter of credit is not to be
deemed a suspensive condition. Schuback did not reserve title to the goods until San Juan
had opened a letter of credit. Schuback did not incorporate any provision declaring their
contract of sale without effect until after the fulfillment of the act of opening a letter of
credit. To adopt the Court of Appeals ruling that the contract of sale was dependent on the
opening of a letter of credit would be untenable from a pragmatic point of view because
San Jose would not be able to avail of the old prices which were open to him only for a limited
period of time.
[51]
Spouses Ladanga v. CA [G.R. No. L-55999. August 24,
1984.] Second Division, Aquino (J): 4 concur, 1 took no part,
1 reserved vote
Facts: Clemencia A. Aseneta, a spinster who retired as division superintendent of public
schools at 65 in 1961, had a nephew named Bernardo S. Aseneta, the child of her sister Gloria,
and a niece named Salvacion, the daughter of her sister Flora. She legally adopted Bernardo in
1961. On a single date, 6 April 1974, she 9then 78 years old) signed 9 deeds of sale in favor of
Salvacion, for various real properties. One deed of sale concerned the said Paco property (166
sq. m. lot located at 1238 Sison Street Paco Manila and administered by the Ladanga spouses,
Agustin and Salvacion) which purportedly was sold to Salvacion for P26,000. The total price
involved in the 9 deeds of sale and in the 10th sale executed on 8 November 1974 was
P92,200. The deed of sale for the Paco property was signed in the office of the Quezon City
registry of deeds.
In May 1975, Bernardo, as guardian of Clemencia, filed an action for reconveyance of the
Paco property, accounting of the rentals and damages, with the CFI Manila. Clemencia was not
mentally incompetent but she
Sales, 2003 ( 137 )
was placed under guardianship because she was an easy prey for exploitation and deceit.
Clemencia testified and denied having received even one centavo of the price of
P26,000), much less the P92,000. This testimony was corroborated by Soledad L. Maninang,
69, a dentist with whom Clemencia had lived for more than 30 years in Kamuning, Quezon
City. The notary public stated that he did not see Salvacion hand any money to Clemencia for
the purported sale when the deed was signed in the registry of deeds. The trial court declared
void the sale of the Paco property.
Clemencia died on 21 May 1977 at the age of 80. She allegedly bequeathed her properties in a
holographic will dated 23 November 1973 to Doctor Maninang. In that will she disinherited
Bernardo. The will was presented for probate. The testate case was consolidated with the
intestate proceeding filed by Bernardo in the sala of Judge Ricardo L. Pronove at Pasig, Rizal.
He dismissed the testate case. He appointed Bernardo as administrator in the intestate case.
On appeal, the Court of Appeals affirmed the decision of the CFI, ordered the register of deeds
to issue a new title to Clemencia, and ordered the spouses to pay Clemencias estate
P21,000 as moral and exemplary damages and attorneys fees and to render to Bernardo an
accounting of the rentals of the property from 6 April 1974. The spouses appealed to the
Supreme Court.
The Supreme Court afirmed the judgment of the Appellate Court with the modification that
the adjudication for moral and exemplary damages is discarded; Without costs.
1.
Only legal issues may be raised in a review of the decision of the appellate court
As a rule, only important legal issues, as contemplated in section 4, Rule 45 of the
Rules of Court, may be raised in a review of the Appellate Courts decision. The present case
does not fall within any of the exceptions to that rule (2 Morans Comments on the Rules of
Court, 1979 Ed. p. 475; Ramos vs. Pepsi-Cola Bottling Co., 125 Phil. 701).
2.
Burden of proof
Clemencia herself testified that the price of P26,000 was not paid to her; and thus, the
burden of the evidence shifted to the Ladanga spouses. They were not able to prove the
payment of that amount, thus the sale was fictitious.
3.
Void contract in the absence of price being paid; Sale inexistent and cannot
be considered consummated
A contract of sale is void and produces no effect whatsoever where the price, which
appears therein as paid, has in fact never been paid by the purchaser to the vendor (Meneses
Vda. de Catindig vs. Heirs of Catalina Roque, L-25777, November 26, 1976, 74 SCRA 83, 88;
Mapalo vs. Mapalo, 123 Phil. 979, 987; Syllabus, Ocejo, Perez & Co. vs. Flores and Bas, 40
Phil. 921). Such a sale is inexistent and cannot be considered consummated (Borromeo vs.
Borromeo, 98 Phil. 432; Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs.
Garanciang, L-22351, May 21, 1969, 28 SCRA 229).
4.
No evidence of intention of vendor to donate the property

Clemencia did not intended to donate the Paco property to the Ladangas. Her
testimony and the notarys testimony destroyed any presumption that the sale was fair and
regular and for a true consideration. It seemed that the Ladangas abused Clemencias confidence
and defrauded her of properties with a market value of P393,559.25 when she was already 78
years old.
5.
Bernardos capacity to sue

Bernardo was Clemencias adopted son. Moreover, Clemencia, by testifying in this
case, tacitly approved the action brought in her behalf. Bernardo had the right to institute the
instant action.
Sales, 2003 ( 138 )
6.
Award of moral damages not sanctioned

The moral damages awarded by the trial court is not sanctioned by articles 2217 to 2220
of the Civil Code. Clemencias own signature in the deed brought about the mess within which
she was entangled.
[52]
Legarda Hermanos vs. Saldana [G.R. No. L-26578. January
28, 1974.] First Division, Teehankee (J): 5 concur
Facts: Felipe Saldana had entered into two written contracts with Legarda Hermanos as
subdivision owner, whereby the latter agreed to sell to him Lots 7 and 8 of block 5N of the
subdivision with an area of 150 sq. ms. each, for the sum of P1,500.00 per lot, payable over the
span of 10 years divided into 120 equal monthly installments of P19.83 with 10% interest per
annum, to commence on 26 May 1948, date of execution of the contracts. Saldana faithfully
paid for 8 continuous years about 95 (of the stipulated 120) monthly installments totalling
P3,582.06 up to the month of February 1956, which as per Legarda Hermanos own statement
of account, was applied to Saldanas account (without distinguishing the two lots). After
February 1956 up to the filing of the complaint, Saldana did not make further payments. The
account shows that he owed Legarda Hermanos the sum of P1,311.72 on account of the balance
of the purchase price (principal) of the two lots (in the total sum of P3,000.00), although he
had paid more than the stipulated purchase price of P1,500.00 for one lot. Almost 5 years
later, on 2 February 1961 just before the filing of the action, Saldana wrote Legarda Hermanos
stating that his desire to build a house on the lots was prevented by their failure to
introduce improvements on the subdivision as there is still no road to these lots, and
requesting information of the amount owing to update his account as I intend to continue
paying the balance due on said lots. Legarda Hermanos replied in their letter of 11 February
1961 that as Saldana had failed to complete total payment of the 120 installments by May
1958 as stipulated in the contracts to sell, pursuant to the provisions of both contracts all
the amounts paid in accordance with the agreement together with the improvements on the
premises have been considered as rents paid and as payment for damages suffered by your
failure, and Said cancellation being in order, is hereby confirmed.
Saldana filed an action in the CFI Manila as a complaint for delivery of two parcels of land
in Sampaloc, Manila and for execution of the corresponding deed of conveyance after payment
of the balance still due on their purchase price. Subsequently, Legarda Hermanos partitioned
the subdivision among the brothers and sisters, and the two lots were among those allotted to
Jose Legarda, who was included as co-respondent as a result thereof in the case. On 17 July
1963, the trial court sustained Legarda Hermanos cancellation of the contracts and dismissing
Saldanas complaint.
On appeal and on 27 July 1966, the appellate court rendered its judgment reversing the
lower courts judgment and ordering Legarda Hermanos to deliver to Saldana possession of
one of the two lots, at the choice of Legarda Hermanos, and to execute the corresponding
deed of conveyance to Saldana for the said lot. Hence, the present petition for review.
The Supreme Court affirmed the appealed judgment of the appellate court; without
pronouncement as to costs.
1.
Application of broad principles of equity and justice by Court of Appeals

The Court of Appeals elected to apply the broad principles of equity and justice. Saldana
has paid the total sum of P3,582.06 including interests, which is even more than the value of
the two lots. And even if the sum applied to the principal alone were to be considered, which
was of the total of P1,682.28, the same was already more than the value of one lot, which is
P1,500.00. The only balance due on both lots was P1,317.72, which was even less than the value
of one lot. The Court considered as fully paid by Saldana at least one of the two lots, at the
choice of Legarda Hermanos. This is more in line with good conscience than a total denial
Sales, 2003 ( 139 )
to Saldana of a little token of what he has paid Legarda Hermanos.

2.
Court of Appeals ruling fair and just and in accordance with law and equity;
Article 1234 vs. 1592
The appellate courts judgment finding that of the total sum of P3,582.06 (including
interests of P1,889.78) already paid by Saldana (which was more than the value of two
lots), the sum applied by petitioners to the principal alone in the amount of P1,682.28 was
already more than the value of one lot of P1,500.00 and hence one of the two lots as chosen by
Legarda Hermanos would be considered as fully paid, is fair and just and in accordance with
law and equity. Even considering that Saldana as having defaulted after February 1956, when
he suspended payments after the 95th installment, he had as of the already paid by way of
principal (P1,682.28) more than the full value of one lot (P1,500.00). The judgment
recognizing this fact and ordering the conveyance to him of one lot of his choice while also
recognizing Legarda Hermanos right to retain the interests of P1,889.78 paid by him for eight
years on both lots, besides the cancellation of the contract for one lot which thus reverts to
Legarda Hermanos, cannot be deemed to deny substantial justice to Legarda Hermanos nor to
defeat their rights under the letter and spirit of the contracts in question. Further, regardless
of the propriety of applying Article 1592 thereto, Legarda Hermanos has not been
denied substantial justice, for, according to Article 1234 of the Code: If the obligation
has been substantially performed in good faith, the obligor may recover as though there had
been a strict and complete fulfillment, less damages suffered by the obligee, and that in
the interest of justice and equity, the decision appealed from may be upheld upon the
authority of Article 1234 of the Code.
3.
Doctrine in JM Tuason & Co. vs. Javier case fully applicable

The doctrine in the case of J.M. Tuason & Co. Inc. vs. Javier is fully applicable to the
present case, with the buyer being granted lesser benefits, since no rescission of contract was
therein permitted. There, where the buyer had likewise defaulted in completing the
payments after having religiously paid the stipulated monthly installments for almost 8
years and notwithstanding that the seller had duly notified the buyer of the rescission of the
contract to sell, the Court upheld the lower courts judgment denying judicial confirmation of
the rescission and instead granting the buyer an additional grace period of 60 days from
notice of judgment to pay all the installment payments in arrears together with the stipulated
10% interest per annum from the date of default, apart from reasonable attorneys fees and
costs, which payments, the Court observed, would have the seller recover everything due
thereto, pursuant to its contract with the defendant, including such damages as the former may
have suffered in consequence of the latters default.
[53]
Levy Hermanos vs. Gervacio [G.R. No. 46306. October
27, 1939.] En Banc, Moran (J): 5 concur
Facts: On 15 March 1937, Levy Hermanos, Inc., sold to Lazaro Blas Gervacio, a Packard car.
Gervacio, after making the initial payment, executed a promissory note for the balance of
P2,400, payable on or before 15 June 1937, with interest at 12% per annum, and to secure the
payment of the note, he mortgaged the car to Levy Hermanos. Gervacio failed to pay the note
at its maturity; wherefore, Levy Hermanos foreclosed the mortgage and the car was sold at
public auction, at which plaintiff was the highest bidder for P800.
On 24 February 1938, Levy Hermanos filed a complaint in the CFI Manila for the collection of
the balance of P1,600 and interest. Gervacio 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 4122, inserted as articles 1454-A of the Civil Code, and rendered judgment in
favor of Gervacio. Levy Hermanos appealed.
The Supreme Court reversed the judgment, and Gervacio is hereby sentenced to pay Levy
Hermanos the sum of P1,600 interest at the rate of 12% per annum from 15 June 1937, and the
sum of P52.08 with interest at the
Sales, 2003 ( 140 )
rate of 6% from the date of the filing of the complaint, with costs in both instances against
Gervacio.
1.
Article 1454-A of Civil Code

Article 1454-A of the Civil Code provides that In a contract for the sale of personal
property payable in installments, failure to pay two or more 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 agaist the purchaser for the recovery of any unpaid balance
owing by the same, and any agreement to the contrary shall be null and void.
2.
Application of Article 1454: Contract of sale of personal property in installment
where there is failure to pay 2 or more installments
In Macondray & Co. vs. De Santos (33 OG 2170), it was 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 present 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, therefore, the one contemplated in Act 4122 and accordingly the
mortgagee is not bound by the prohibition therein contained as to its right to the recovery
of the unpaid balance.
3.
Article 1454; Price payable in several installments; possible miscalculation of
ability to pay
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 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.
4.
Diference exists in actual practice between paying price in 2 installments and
paying partly in cash and partly in an installment
Theoretically, there is no difference between paying the price in two installments and
paying the same partly in cash and partly in one installment, in so far as the size of each
partial payment is concerned; but in actual practice the 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.
5.
Law clear, does not require construction

The considerations made in the discussion of the decision in the current case are
immaterial as the language of the law being so clear as to require no construction at all.
6.
Article 1454 does not apply; cash payment not a payment by installment
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. In the present case, only one
installment was unpaid.
[54]
Lim v. CA, 263 SCRA 569 (1996)

[55]
Limketkai Sons Milling v. CA [G.R. No. 118509. December 1, 1995.]
Sales, 2003 ( 141 )
Third Division, Melo (J): 4 concur

Facts: On 14 May 1976, Philippine Remnants Co., Inc. constituted the Bank of the Philippine
Islands (BPI) as its trustee to manage, administer, and sell its real estate property. One such
piece of property placed under trust was the disputed lot, a 33,056-sq.ms. lot at Barrio Bagong
Ilog, Pasig (TCT 493122). On 23 June 1988, Pedro Revilla, Jr., a licensed real estate broker was
given formal authority by BPI to sell the lot for P1,000.00 per sq.m. This arrangement was
concurred in by the owners of the Philippine Remnants. Broker Revilla contacted Alfonso
Lim of Limketkai Sons Milling (LSM) who agreed to buy the land. On 8 July 1988, LSMs
officials and Revilla were given permission to enter and view the property they were buying
(by Rolando V. Aromin, BPI Assistant Vice-President). On 9 July 1988, Revilla formally
informed BPI that he had procured a buyer, LSM. On 11 July 1988, LSMs officials, Alfonso
Lim and Albino Limketkai, went to BPI to confirm the sale. They were entertained by VicePresident Merlin Albano and Asst. Vice-President Aromin. LSM asked that the price of
P1,000.00 per sq.m. be reduced to P900.00 while Albano stated the price to be P1,100.00.
The parties finally agreed that the lot would be sold at P1,000.00 per sq.m. to be paid in
cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it
may be mentioned at this juncture that there is no dispute over LSMs being the first
comer and the buyer to be first served. Notwithstanding the final agreement to pay P1,000.00
per sq.m. on a cash basis, Alfonso Lim asked if it was possible to pay on terms. The bank
officials stated that there was no harm in trying to ask for payment on terms because in
previous transactions, the same had been allowed. It was the understanding, however, that
should the term payment be disapproved, then the price shall be paid in cash. It was Albano
who dictated the terms under which the installment payment may be approved, and acting
thereon, Alfonso Lim, on the same date, 11 July 1988, wrote BPI through Merlin Albano
embodying the payment initially of 10% and the remaining 90% within a period of 90 days.
2 or 3 days later, LSM learned that its offer to pay on terms had been frozen. Alfonso Lim
went to BPI on 18 July 1988 and tendered the full payment of P33,056,000.00 to Albano. The
payment was refused because Albano stated that the authority to sell that particular piece of
property in Pasig had been withdrawn from his unit. The same check was tendered to BPI
Vice-President Nelson Bona who also refused to receive payment.
An action for specific performance with damages was thereupon filed on 25 August 1988 by
LSM against BPI with the RTC Pasig (Branch 151). In the course of the trial, BPI informed the
trial court that it had sold the property under litigation to National Book Store (NBS) on 14
July 1989. The complaint was thus amended to include NBS. On 10 June 1991, the trial court
rendered judgment in favor of LSM; holding that there was a perfected contract between LSM
and BPI, and thus declared the Deed of Sale involving the lot in Pasig in the name of BPI and in
favor of NBS as null and void; ordered the Register of Deeds of the Province of Rizal to cancel
the TCT which may have been issued in favor of NBS by virtue of the said deed; ordered BPI
upon receipt by it from LSM of the sum of P33,056,000,00 to execute a Deed of Sale in favor
of the latter of the said property at the price of P1,000.00 per sq.m. and in default thereof,
the Clerk of Court is directed to execute the deed dated 14 July 1989; ordered the Register
of Deeds of Pasig, upon registration of the said deed, whether executed by BPI or the Clerk of
Court and payment of the corresponding fees and charges, to cancel said TCT 493122 and to
issue, in lieu thereof, another transfer certificate of title in the name of LSM; ordered BPI and
NBS to pay in solidum to LSM the sums of P10,000,000.00 as actual and consequential
damages and P150,000.00 as attorneys fees and litigation expenses, both with interest at
12% per annum from date of judgment; on the cross-claim by the bank against NBS, ordered
NBS to indemnify the bank of whatever BPI shall have paid to LSM; dismissed the
counterclaim of both BPI and NBS against LSM and the cross-claim of NBS against BPI; with
costs against BPI and NBS.
Upon elevation of the case to the Court of Appeals, the decision of the trial court was
reversed and the complaint dismissed on 12 August 1994. It was held that no contract of sale
was perfected because there was no concurrence of the three requisites enumerated in Article
1318 of the Civil Code. Hence, the petition.
The Supreme Court reversed and set aside the questioned judgment of the Court of Appeals, and
reinstated the
Sales, 2003 ( 142 )
10 June 1991 judgment of Branch 151 of the RTC of The National Capital Judicial Region
stationed in Pasig, Metro Manila except for the award of P10,000,000.00 damages, which was
deleted.
1.
Broker given authority to sell and not merely to look for a buyer
BPI as trustee of the property of Philippine Remnant Co. authorized a licensed broker,
Pedro Revilla, to sell the lot for P1,000.00 per sq.m. Philippine Remnants confirmed the
authority to sell of Revilla and the price at which he may sell the lot. LSM and Revilla agreed
on the former buying the property. BPI Assistant Vice-President Rolando V. Aromin allowed the
broker and the buyer to inspect the property. BPI was formally informed about the broker
having procured a buyer. At the start of the transactions, Revilla by himself already had full
authority to sell the disputed lot. The note dated 23 June 1988 states, this will serve as your
authority to sell on an as is, where is basis the property located at Pasig Blvd., Bagong Ilog.
Thus, the authority given to Revilla was to sell and not merely to look for a buyer. Revilla
testified that at the time he perfected the agreement to sell the litigated property, he was
acting for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to
firm up the sale of the land, Revilla saw it fit to bring BPI officials into the transaction.
2.
BPI Vice Presidents have authority to sell

The alleged lack of authority of the bank officials acting in behalf of BPI is not
sustained by the record. If BPI could give the authority to sell to a licensed broker, there is no
reason to doubt the authority to sell of the two BPI Vice-Presidents whose precise job in the
Bank was to manage and administer real estate property. Rolando Aromin was BPI Assistant
Vice-President and Trust Officer. He directly supervised the BPI Real Property Management
Unit. He had been in the Real Estate Division since 1985 and was the head supervising
officer of real estate matters. He had been with the BPI Trust Department since 1968 and had
been involved in the handling of properties of beneficial owners since 1975. He was in
charge of Torrens titles, lease contracts, problems of tenants, insurance policies, installment
receivables, management fees, quitclaims, and other matters involving real estate
transactions. His immediate superior, Vice-President Merlin Albano had been with the Real
Estate Division for only 1 week but he was present and joined in the discussions with LSM.
There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the
incident. Revilla brought the brothers directly to Aromin upon entering the BPI
premises. Aromin acted in a perfectly natural manner on the transaction before him with not
the slightest indication that he was acting ultra vires. This shows that BPI held Aromin out to
the public as the officer routinely handling real estate transactions and, as Trust Officer,
entering into contracts to sell trust properties. Further, it must be noted that the authority to
buy and sell this particular trust property was later withdrawn from Trust Officer Aromin and
his entire unit. If Aromin did not have any authority to act as alleged, there was no need to
withdraw authority which he never possessed. Everything in the record points to the full
authority of Aromin to bind the bank, except for the self-serving memoranda or letters later
produced by BPI that Aromin was an inefficient and undesirable officer and who, in fact, was
dismissed after he testified in this case. But, of course, Aromins alleged inefficiency is not
proof that he was not fully clothed with authority to bind BPI.
3.
Trust Committee does not have to pass on regular transactions

On the allegation that sales of trust property need the approval of a Trust Committee
made up of top bank officials, it appears from the record that this trust committee meets
rather infrequently and it does not have to pass on regular transactions.
4.
Bank liable to innocent third persons where representation is made in course
of its business even if agent abused his authority
In Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank
vs. Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota
Trust Co. (52 ND 752, 204 NW 818, 40 ALR 1021), it was stated that a banking corporation is
liable to innocent third persons where the representation is made in the course of its business
by an agent acting within the general scope of his authority even though, in the particular
case, the agent is secretly abusing his authority and attempting to
Sales, 2003 ( 143 )
perpetrate a fraud upon his principal or some other person for his own ultimate benefit. In the
present case, the position and title of Aromin alone, not to mention the testimony and
documentary evidence about his work, leave no doubt that he had full authority to act for
BPI in the questioned transaction. There is no allegation of fraud, nor is there the least
indication that Aromin was acting for his own ultimate benefit. BPI later dismissed Aromin
because it appeared that a top official of the bank was personally interested in the sale of the
Pasig property and did not like Aromins testimony. Aromin was charged with poor performance
but his dismissal was only sometime after he testified in court. More than 2 long years after the
disputed transaction, he was still Assistant Vice-President of BPI.
5.
Meeting of the minds on the price; Manner of payment

Asst. Vice-President Aromin admitted that there was a meeting of the minds between
the buyer and the bank in respect to the price of P1,000.00 per sq.m. The requirements in the
payment of the purchase price on terms instead of cash were suggested by BPI Vice-President
Albano. Since the authority given to broker Revilla specified cash payment, the possibility of
paying on terms was referred to the Trust Committee but with the mutual agreement that
if the proposed payment on terms will not be approved by our Trust Committee,
Limketkai should pay in cash, the amount was no longer subject to the approval or disapproval
of the Committee, it is only on the terms. The record shows that if payment was in cash,
either broker Revilla or Aromin had full authority. But because LSM took advantage of the
suggestion of Vice-President Albano, the matter was sent to higher officials. Immediately upon
learning that payment on terms was frozen and/or denied, Limketkai exercised his right within
the period given to him and tendered payment in full. The BPI rejected the payment.
6.
Stages of the contract

The stages of a contracts are (a) preparation, conception or generation, which is
the period of negotiation and bargaining, ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come to
agree on the terms of the contract; and (c) consummation or death, which is the
fulfillment or performance of the terms agreed upon in the contract (Toyota Shaw Inc. vs.
Court of Appeals, G.R. No. 116650, May 23, 1995).
7.
Ang Yu Asuncion; Stages in ordinary contracts (consensual); Real contract:
delivery required; Solemn contract: compliance with formalities prescribe by law
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 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 consummation begins when the
parties perform their respective undertakings under the contract culminating in the
extinguishment thereof.
8.
Ang Yu Asuncion; Perfected contract of sale

Until the contract is perfected, it cannot, as an independent source of obligation, serve
as a binding juridical relation. In sales, particularly, 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 (Ang Yu Asuncion).
9.
Stages of the contract in the present case

The negotiation or preparation stage started with the authority given by Philippine
Remnants to BPI
Sales, 2003 ( 144 )
to sell the lot, followed by the authority given by BPI and confirmed by Philippine
Remnants to broker Revilla to sell the property, the offer to sell to Limketkai, the inspection
of the property and the negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI,
agreed to sell and Alfonso Lim with Albino Limketkai, acting for LSM, agreed to buy the
disputed lot at P1,000.00 per sq.m.. Aside from this there was the earlier agreement
between LSM and the authorized broker. There was a concurrence of offer and acceptance, on
the object, and on the cause thereof.
10.
Villonco Realty v. Bormaheco; Perfected contract of sale

The contract of sale is perfected at the moment there is a meeting of minds upon the
parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts. (Art. 1475 Ibid).
11.
Villonco Realty v. Bormaheco; Consent

Consent 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. A qualified acceptance constitutes a counter-offer (Art. 1319, Civil
Code). An acceptance may be express or implied (Art. 1320, Civil Code).
12.
Villonco Realty v. Bormaheco; A contract is formed if ofer is accepted,
whether request for changes in terms is granted or not; Change does not amount to
rejection of offer or a counter-ofer
An acceptance may contain a request for certain changes in the terms of the offer and
yet be a binding acceptance. So long as it is clear that the meaning of the acceptance is
positively and unequivocally to accept the offer. whether such request is granted or not, a
contract is formed. (Stuart vs. Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec. 79,
Williston on Contracts). The vendors change in a phrase of the offer to purchase, which
change does not essentially change the terms of the offer, does not amount to a rejection of
the offer and the tender or a counter-offer. (Stuart vs. Franklin Life Ins. Co., supra.)
13.
Requisite form under Article 1458 merely for greater effcacy or convenience
The fact that the deed of sale still had to be signed and notarized does not mean that no
contract had already been perfected. A sale of land is valid regardless of the form it may have
been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form
under Article 1458 of the Civil Code is merely for greater efficacy or convenience and the
failure to comply therewith does not affect the validity and binding effect of the act between
the parties. If the law requires a document or other special form, as in the sale of real
property, the contracting parties may compel each other to observe that form, once the contract
has been perfected. Their right may be exercised simultaneously with action upon the contract
(Article 1359, Civil Code).
14.
Abrenica Rule: Contracts infringing the Statute of Frauds ratifed when defense
fails to object or asks questions on cross-examination
In Abrenica vs. Gonda (34 Phil. 739 [1916]) it was held that contracts infringing
the Statute of Frauds are ratified when the defense fails to object, or asks questions on crossexamination. The reason for the rule is that if the answers of those witnesses were stricken
out, the cross-examination could have no object whatsoever and if the questions were put to
the witnesses and answered by them, they could only be taken into account by connecting
them with the answers given by those witnesses on direct examination. Under said rule
(reiterated in a number of cases, among them Talosig vs. Vda. de Nieba, 43 SCRA 472 [1972]),
even assuming that parol evidence was initially inadmissible, the same became competent and
admissible because of the cross-examination, which elicited evidence proving the evidence of
a perfected contract. The cross-examination on the contract is deemed a waiver of the defense
of the Statute of Frauds. In the present case, counsel for respondents cross-examined
petitioners witnesses at length on the contract itself, the purchase price, the tender of cash
payment, the authority of Aromin and Revilla, and other details of the litigated
Sales, 2003 ( 145 )
contract.
15.
Written note or memorandum an exception to the unenforceability of
contracts pursuant to Statute of Frauds
Under Article 1403 of the Civil Code, an exception to the unenforceability of contracts
pursuant to the Statute of Frauds is the existence of a written note or memorandum
evidencing the contract. The memorandum may be found in several writings, not
necessarily in one document. The memorandum or memoranda is/are written evidence that
such a contract was entered into. Thus, the existence of a written contract of the sale is not
necessary so long as the agreement to sell real property is evidenced by a written note or
memorandum, embodying the essentials of the contract and signed by the party charged or his
agent. Such note or memorandum suffices to make the verbal agreement enforceable, taking it
out of the operation of the statute. In the present case, while there is no written contract of sale
of the Pasig property executed by BPI in favor of LSM, there are abundant notes and
memoranda extant in the records of this case evidencing the elements of a perfected contract.
16.
Form of memorandum or note

No particular form of language or instrument is necessary to constitute a
memorandum or note in writing under the statute of frauds; any document or writing, formal
or informal, written either for the purpose of furnishing evidence of the contract or for
another purpose, which satisfies all the requirements of the statute as to contents and
signature is a sufficient memorandum or note. A memorandum may be written as well with
lead pencil as with pen and ink. It may also be filled in on a printed form. (37 C.J.S., 653-654).
The note or memorandum required by the statute of frauds need not be contained in a single
document, nor, when contained in two or more papers, need each paper be sufficient as to
contents and signature to satisfy the statute. Two or more writings properly connected may be
considered together, matters missing or uncertain in one may be supplied or rendered certain
by another, and their sufficiency will depend on whether, taken together, they meet the
requirements of the statute as to contents and the requirements of the statutes as to signature.
17.
Demeanor of witnesses as factor for Court to incline to the version of the case by one
party
The demeanor of the witnesses the parties presented is one important factor that
inclined the trial court to believe in the version given by LSM because its witnesses,
including hostile witness Roland V. Aromin, an assistant vice-president of the bank, were
straight forward, candid and unhesitating in giving their respective testimonies. Upon the other
hand, the witnesses of BPI were evasive, less than candid and hesitant in giving their answers
to cross examination questions. Moreover, the witnesses for BPI and NBS contradicted
each other.
18.
Credibility of witnesses where the fndings of the trial and appellate courts are
contrary to each other; Trial courts findings given great respect
On the matter of credibility of witnesses where the findings or conclusions of the
Court of Appeals and the trial court are contrary to each other, the pronouncement of the Court
in Serrano vs. Court of Appeals (196 SCRA 107 [1991]) bears stressing It is a settled principle
of civil procedure that the conclusions of the trial court regarding the credibility of witnesses
are entitled to great respect from the appellate courts because the trial court had an
opportunity to observe the demeanor of witnesses while giving testimony which may indicate
their candor or lack thereof. While the Supreme Court ordinarily does not rule on the issue
of credibility of witnesses, that being a question of fact not property raised in a petition under
Rule 45, the Court has undertaken to do so in exceptional situations where, for instance, as here,
the trial court and the Court of Appeals arrived at divergent conclusions on questions of fact
and the credibility of witnesses.
19.
NBS not an innocent purchaser for value

National Bookstore (NBS) is not an innocent purchaser for value, as it acted in bad
faith. NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It
was the willingness and
Sales, 2003 ( 146 )
design of NBS to buy property already sold to another party which led BPI to dishonor the
contract with LSM. It is the very nature of the deed of absolute sale between BPI and NBS
which clearly negates any allegation of good faith on the part of the buyer. Instead of the
vendee insisting that the vendor guarantee its title to the land and recognize the right of the
vendee against the vendor if the title to the land turns out to be defective as when the land
belongs to another person, the reverse is found in the deed of sale between BPI and NBS. Any
losses which NBS may incur in the event the title turns out to be vested in another person are
to be borne by NBS alone. BPI is expressly freed under the contract from any recourse of NBS
against it should BPIs title be found defective.
20.
Enumeration of badges of fraud found in Oria v. McMicking cannot cover all
indications from 1912 to present and future
NBS simply cited the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243
(1912]) in its memorandum and argues that the enumeration there is exclusive. The decision in
said case plainly states the following are some of the circumstances attending sales which
have been denominated by courts (as) badges of fraud. There are innumerable situations
where fraud is manifested. One enumeration in a 1912 decision cannot possibly cover all
indications of fraud from that time up to the present and into the future.
21.
Damages; Loss of profts and use of land compensated by appreciation in land
value
The profits and the use of the land which were denied to LSM because of the noncompliance or interference with a solemn obligation by BPI and NBS is somehow made up
by the appreciation in land values.
[56]
Loyola v. CA [G.R. No. 115734. February
23, 2000.] Second Division, Quisumbing (J): 3
concur, 1 on leave
Facts: A parcel of land (Lot 115-A-1 of subdivision plan [LRC] Psd-32117, a portion of Lot
115-A described on Plan Psd-55228, LRC [GLRO] Record 8374, located in Poblacion, Binan,
Laguna, and containing 753 sq.m., TCT T-32007) was originally owned in common by the
siblings Mariano and Gaudencia Zarraga, who inherited it from their father. Mariano
predeceased his sister who died single, without offspring on 5 August 1983, at the age of 97.
Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano.
The property was subject of Civil Case B-1094 before the then CFI Laguna (Branch 1, Spouses
Romualdo Zarraga, et al. v. Gaudencia Zarraga, et al.). Romualdo Zarraga was the plaintiff in
Civil Case B-1094. The defendants were his siblings: Nieves, Romana, Guillermo, Purificacion,
Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as well as his aunt, Gaudencia. The
trial court decided Civil Case B-1094 in favor of the defendants. Gaudencia was adjudged
owner of the 1/2 portion of Lot 115-A-1. Romualdo elevated the decision to the Court of
Appeals and later the Supreme Court. The petition (GR 59529) was denied by the Court on 17
March 1982.
On 24 August 1980, nearly 3 years before the death of Gaudencia while GR 59529 was still
pending before the Supreme Court. On said date, Gaudencia allegedly sold to the children
of Mariano Zarraga (Nieves, Romana, Romualdo, Guillermo, Lucia, Purificacion, Angeles,
Roberto, Estrella Zarraga) and the heirs of Jose Zarraga Aurora, Marita, Jose, Ronaldo, Victor,
Lauriano, and Ariel Zarraga; first cousins of the Loyolas) her share in Lot 115-A- 1 for
P34,000.00. The sale was evidenced by a notarized document denominated as Bilihang
Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa. Romualdo, the petitioner in GR 59529,
was among the vendees.
The decision in Civil Case B-1094 became final. The children of Mariano Zarraga and the
heirs of Jose
Sales, 2003 ( 147 )
Zarraga (private respondents) filed a motion for execution. On 16 February 1984, the sheriff
executed the corresponding deed of reconveyance to Gaudencia. On 23 July 1984, however,
the Register of Deeds of Laguna, Calamba Branch, issued in favor of private respondents, TCT
T-116067, on the basis of the sale on 24 August 1980 by Gaudencia to them.
On 31 January 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case B-2194,
with the RTC of Bian, Laguna, for the purpose of annulling the sale and the TCT. Victorina
died on 18 October 1989, while Civil Case B-2194 was pending with the trial court. Cecilia
died on 4 August 1990, unmarried and childless. Victorina and Cecilia were substituted by
Ruben, Candelaria, Lorenzo, Flora, Nicadro, Rosario, Teresita and Vicente Loyola as plaintiffs.
The trial court rendered judgment in favor of complainants; declaring the simulated deed
of absolute sale as well as the issuance of the corresponding TCT null and void, ordering the
Register of Deeds of Laguna to cancel TCT T-116087 and to issue another one in favor of the
plaintiffs and the defendants as co-owners and legal heirs of the late Gaudencia, ordering the
defendants to reconvey and deliver the possession of the shares of the plaintiff on the subject
property, ordering the defendants to pay P20,000 as attorneys fees and cost of suit,
dismissing the petitioners claim for moral and exemplary damages, and dismissing the
defendants counterclaim for lack of merit.
On appeal, and on 31 August 1993, the appellate court reversed the trial court (CA-GR CV
36090). On September 15, 1993, the petitioners (as substitute parties for Victorina and Cecilia,
the original plaintiffs) filed a motion for reconsideration, which was denied on 6 June 1994.
Hence, the petition for review on certiorari.
The Supreme Court denied the petition, and affirmed the assailed decision of the Court
of Appeals; with costs against petitioners.
1.
Presumption of regularity of notarized document

A notarized document carries the evidentiary weight conferred upon it with
respect to its due execution, and documents acknowledged before a notary public have in
their favor the presumption of regularity. In the present case, the petitioners allege that
since the notary public who prepared and acknowledged the questioned Bilihan did not
personally know Gaudencia, the execution of the deed was suspect. However, the notary
public testified that he interviewed Gaudencia prior to preparing the deed of sale. By their
failure to overcome this presumption, with clear and convincing evidence, petitioners are
estopped from questioning the regularity of the execution of the deed.
2.
Jose Zarraga alive when the sale took place

Petitioners charge that one of the vendees, Jose Zarraga, was already dead at the time
of the sale. However, the records reveal that Jose died on 29 July 1981. He was still alive on 24
August 1980, when the sale took place.
3.
Simulation defined
Simulation is the declaration of a fictitious will, deliberately made by agreement of
the parties, in order to produce, for the purposes of deception, the appearances of a juridical
act which does not exist or is different what that which was really executed. Characteristic of
simulation is that the apparent contract is not really desired or intended to produce legal
effect or in any way alter the juridical situation of the parties. Further, in a simulated
contract, the parties have no intention to be bound by the contract. In the present case, perusal
of the questioned deed shows that the sale of the property would convert the co-owners to
vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the
requisite of simulation that the apparent contract was not really meant to produce any legal
effect. The parties clearly intended to be bound by the contract of sale, an intention they did
not deny.
4.
Simulation, requisites
The requisites for simulation are: (a) an outward declaration of will different from the will
of the
Sales, 2003 ( 148 )
parties; (b) the false appearance must have been intended by mutual agreement; and (c) the
purpose is to deceive third persons. In the present case, none of these are present in the assailed
transaction.
5.
Contracts binding only upon parties executing them

Contracts are binding only upon the parties who execute them. Article 1311 of the Civil
Code clearly covers this situation. In the present case Romualdo had no knowledge of the sale,
and thus, he was a stranger and not a party to it. Even if curiously Romualdo, one of those
included as buyer in the deed of sale, was the one who questioned Gaudencias ownership in
Civil Case B-1094, Romana testified that Romualdo really had no knowledge of the transaction
and he was included as a buyer of the land only because he was a brother.
6.
Fraud is never presumed

Fraud is never presumed, but must be both alleged and proved. For a contract to be
annulled on the ground of fraud, it must be shown that the vendor never gave consent to its
execution. If a competent person has assented to a contract freely and fairly, said person is
bound. There also is a disputable presumption, that private transactions have been fair and
regular. Applied to contracts, the presumption is in favor of validity and regularity. In the
present case, the allegations of fraud was unsupported, and the presumption stands that the
contract Gaudencia entered into was fair and regular.
7.
Person not incapacitated to contract merely because of advanced age or
due to physical infmities
A person is not incapacitated to contract merely because of advanced years or by reason
of physical infirmities. Only when such age or infirmities impair his mental faculties to such
extent as to prevent him from properly, intelligently, and fairly protecting his property
rights, is he considered incapacitated. In the present case, petitioners show no proof that
Gaudencia had lost control of her mental faculties at the time of the sale. The notary public
who interviewed her, testified that when he talked to Gaudencia before preparing the deed of
sale, she answered correctly and he was convinced that Gaudencia was mentally fit and knew
what she was doing.
8.
Undue infuence defned, circumstances considered; Article 1337

Article 1337 of the Civil Code provides that there is undue influence when a person
takes improper advantage of his power over the will of another, depriving the latter of a
reasonable freedom of choice. The following circumstances shall be considered: confidential,
family, spiritual, and other relations between the parties, or the fact that the person alleged
to have been unduly influenced was suffering from mental weakness, or was ignorant or in
financial distress.
9.
Undue infuence case-to-case basis; Elements

Undue influence depends upon the circumstances of each case and not on bare academic
rules. For undue influence to be established to justify the cancellation of an instrument, three
elements must be present: (a) a person who can be influenced; (b) the fact that improper
influence was exerted; (c) submission to the overwhelming effect of such unlawful conduct.
10.
Confidential or fduciary relationship

In the absence of a confidential or fiduciary relationship between the parties, the
law does not presume that one person exercised undue influence upon the other. A
confidential or fiduciary relationship may include any relation between persons, which allows
one to dominate the other, with the opportunity to use that superiority to the others
disadvantage. Included are those of attorney and client, physician and patient, nurse and
invalid, parent and child, guardian and ward, member of a church or sect and spiritual
adviser, a person and his confidential adviser, or whenever a confidential relationship exists
as a fact. To prove a confidential relationship from which undue influence may arise, the
relationship must reflect a dominant, overmastering influence which controls over the
dependent person. In the present case, that Gaudencia looked after Romana in her old age is
not sufficient to show that the relationship was confidential.
Sales, 2003 ( 149 )
Petitioners failed to show that Romana used her aunts reliance upon her to take advantage or
dominate her and dictate that she sell her land.
11.
Undue infuence cannot be inferred from age, sickness, or debility of body

Undue influence is not to be inferred from age, sickness, or debility of body, if
sufficient intelligence remains. In the present case. petitioners never rebutted the testimony
of the notary public that he observed Gaudencia still alert and sharp.
12.
Solicitation, importunity, argument, and persuasion not undue infuence

In Baez v. Court of Appeals, (59 SCRA 15 [1974]), it was held that solicitation,
importunity, argument, and persuasion are not undue influence. A contract is not to be set
aside merely because one party used these means to obtain the consent of the other. In
Martinez v. Hongkong and Shanghai Bank (15 Phil. 252 [1910]), that influence obtained by
persuasion, argument, or by appeal to the affections is not prohibited either in law or morals,
and is not obnoxious even in courts of equity. In the present case, absent any proof that
Romana exerted undue influence, the presumption is that she did not.
13.
Issue cannot be raised for the first time on appeal

Lesion was not an issue raised before the lower courts. An issue which was neither
averred in the complaint nor raised in the court below, cannot be raised for the first time
on appeal. To do so would be offensive to the basic rules of fair play.
14.
Grounds of simulated sale and inadequacy of the price not reconcilable

Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for
being absolutely simulated or for inadequacy of the price. These two grounds are
irreconcilable. If there exists an actual consideration for transfer evidenced by the alleged act
of sale, no matter how inadequate it be, the transaction could not be a simulated sale. No
reversible error was thus committed by the Court of Appeals in refusing to annul the
questioned sale for alleged inadequacy of the price.
[57]
Luzon Brokerage v. Maritime, 86 SCRA 305 (1978)
[58]
Macondray vs. Eustaquio [G.R. No. 43683. July
16, 1937.] First Division, Imperial (J): 6 concur
Facts: Macondray & Co. Inc. sold Urbano Eustaquio a De Soto car, Sedan, for the price of
which, P595, he executed in its favor the note of 22 May 1934. Under the note, Eustaquio
undertook to pay the car in 12 monthly installments with 12% interest per annum, likewise
agreed that, should he fail to pay any monthly installment together with interest, the
remaining installments would become due and payable, and Eustaquio shall pay 20% upon the
principal owing as attorneys fees, expenses of collection which the plaintiff might incur, and
the costs. To guarantee the performance of his obligations under the note, Eustaquio on the
same date mortgaged the purchased car in favor of Macondray, and bound himself under
the same condition stipulated in the note relative to the monthly installments, interest,
attorneys fees, expenses of collection, and costs. The mortgaged deed was registered on 11
June 1934, in the office of the register of deeds of the Province of Rizal. On the 22nd of
the same month, Eustaquio paid P43.75 upon the first installment, and thereafter failed to
pay any of the remaining installments. In accordance with the terms of the mortgage,
Macondray called upon the sheriff to take possession of the car, but Eustaquio refused to
yield possession thereof. Whereupon, Macondray brought the replevin sought and thereby
succeeded in getting possession of the car. The car was sold at public auction to Macondray for
P250, the latter incurring legal expenses in the
Sales, 2003 ( 150 )
amount of P10.68.
Macondray brought the action against Eustaquio to obtain the possession of an automobile
mortgaged by the latter, and to recover the balance owing upon a note executed by him, the
interest thereon, attorneys fees, expenses of collection, and the costs (According to the
liquidation filed by Macondray, Eustaquio was still indebted in the amount of P342.20,
interest at 12% from 20 November 1934, P110.25 as attorneys fees, and the costs.). Eustaquio
was duly summoned, but he failed to appear or file his answer, wherefore, he was declared
in default. Still, the CFI Manila dismissed the complaint, without costs. Hence, the appeal
by Macondray.
The Supreme Court affirmed the appealed judgment, with the costs against Macondray and Co.
1.
Non-appearance by defendant does not imply a waiver of rights excepts those
of being heard and of presenting evidence in his favor; Court did not err in applying
Act 4122
Under section 128 of the Code of Civil Procedure, the judgment by default against a
defendant who has neither appeared nor filed his answer does not imply a waiver of rights
except that of being heard and of presenting evidence in his favor. It does not imply
admission by the defendant of the facts and causes of action of the plaintiff, because the
codal section requires the latter to adduce his evidence in support of his allegations as an
indispensable condition before final judgment could be given in his favor. Nor could it be
interpreted as an admission by the defendant that the plaintiffs causes of action find support in
the law or that the latter is entitled to the relief prayed for. (Chaffin vs. McFadden, 41 Ark., 42;
Johnson vs. Pierce, 12 Ark., 599; Mayden vs. Johnson, 59 Ga., 105; Peo. vs. Rust, 292 Ill., 412;
Madison County vs. Smith, 95 Ill., 328; Keen vs. Leipold, 211 Ill. A., 163; Chicago etc.
Electric R. Co. vs. Krempel, 116 Ill. A., 253.) Thus, the defendant did not waive the
application by the court of Act 4122.
2.
Act 4122 valid; Conclusion in Manila Trading vs. Reyes sustained

In Manila Trading & Supply Co. vs. Reyes (62 Phil., 461), the validity of the Act 4122
was already passed upon when it was questioned for the same reasons advanced, i.e. that it
takes property without due process of law, denies the equal protection of the laws, and
impairs the obligations of contract, thereby violating the provisions of section 3 of the Act of
The United States Congress of 29 August 1916, known as the Jones Law. As Macondray,
through counsel, advanced no new arguments which have not already been considered in the
Reyes case, there is no reason for reaching a different conclusion. The law seeks to remedy an
evil which the Legislature wished to suppress; this legislative body has power to promulgate
the law. The law does not completely deprive vendors on the installment basis of a remedy,
but requires them to elect among three alternative remedies. The law, on the other hand, does
not completely exonerate the purchasers, but only limits their liabilities. Finally, there is no
vested right when a procedural law is involved, wherefore the Legislature could enact Act 4122
without violating the organic law.
3.
Manila Trading vs. Reyes; Validity of act solely one of constitutional power;
Motive or results irrelevant
The question of the validity of an act is solely one of constitutional power. Questions of
expediency, of motive, or of results are irrelevant. Nevertheless it is not improper to inquire
as to the occasion for the enactment of a law. The legislative purpose thus disclosed can
then serve as a fit background for constitutional inquiry.
4.
Manila Trading vs. Reyes; Purpose of Act 4122

Act 4122 aims to correct a social and economic evil, the inordinate love for luxury of
those who, without sufficient means, purchase personal effects, and the ruinous practice of
some commercial houses of purchasing back the goods sold for a nominal price besides
keeping a part of the price already paid and collecting the balance, with stipulated interest,
costs, and attorneys fees. As a consequence, the vendor does not only recover the goods sold,
used hardly 2 months perhaps with only slight wear and tear, but also collects
Sales, 2003 ( 151 )
the entire stipulated purchase price, probably swelled up 50% including interest, costs, and
attorneys fees. This practice is worse than usurious in many instances. And although, of course,
the purchaser must suffer the consequences of his imprudence and lack of foresight, the
chastisement must not be to the extent of ruining him completely and, on the other hand,
enriching the vendor in a manner which shocks the conscience. The object of the law is highly
commendable.
5.
Manila Trading vs. Reyes, citing Bachrach Motor vs. Millan; Purpose of amendment
The principal object of the amendment was to remedy the abuses committed in
connection with the foreclosure of chattel mortgages. The 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. Under the amendment, in, all proceedings for the
foreclosure of chattel mortgages, executed on chattels which have been sold on the
installment plan, the mortgagee is limited to the property included in the mortgage. (Bachrach
Motor Co. vs. Millan [1935], 61 Phil., 409.)
6.
Manila Trading vs. Reyes; US Jurisprudence, 1897 Act passed in State of
Washington not controlling
In 1897, an Act was passed in the State of Washington which provided that in all
proceedings for the foreclosure of mortgages hereafter executed, or on judgments rendered
upon the debt thereby secured, the mortgagee or assignee shall be limited to the property
included in the mortgage. It was held by a divided court of three to two that the statute
since limiting the right to enforce a debt secured by mortgage to the property mortgaged,
whether realty or chattels, was an undue restraint upon the liberty of a citizen to contract with
respect to his property rights. But as is readily apparent, the Washington law and the
Philippine law are radically different in phraseology and in effect. (Dennis vs. Moses [1898],
40 L. R. A., 302.)
7.
Manila Trading vs. Reyes; US Jurisprudence, Act passed in State of Oregon not
controlling
In Oregon, in a decision of a later date, an Act abolishing deficiency judgments upon the
foreclosure of mortgages to secure the unpaid balance of the purchase price of real property
was unanimously sustained by the Supreme Court of that State. The importance of the subject
matter in that jurisdiction was revealed by the fact that four separate opinions were prepared
by the justices participating, in one of which Mr. Justice Johns, shortly thereafter to become a
member of this court, concurred. However, it is but fair to state that one of the reasons
prompting the court to uphold the law was the financial depression which had prevailed in that
State. While in the Philippines, the court can take judicial notice of the stringency of
finances that presses upon the people, there is no reason to believe that this was the reason
which motivated the enactment of Act 4122. (Wright vs. Wimberley [1919], 184 Pac., 740).
8.
Manila Trading vs. Reyes; US Jurisprudence, Bronzon vs. Kinzie

In the case of Bronzon vs. Kinzie [1843], 1 How., 311), decided by the Supreme Court of
the United States, the Court had under consideration a law passed in the State of Illinois,
which provided that the equitable estate of the mortgagor should not be extinguished for 12
months after sale on decree, and which prevented any sale of the mortgaged property unless 2/3
of the amount at which the property had been valued by appraisers should be bid therefor. The
court declared that Mortgages made since the passage of these laws must undoubtedly be
governed by them; for every State has the power to describe the legal and equitable
obligations of a contract to be made and executed within its jurisdiction. It may exempt any
property it thinks proper from sale for the payment of a debt; and may impose such conditions
and restrictions upon the creditor
Sales, 2003 ( 152 )
as its judgment and policy may dictate. And all future contracts would be subject to such
provisions; and they would be obligatory upon the parties in the courts of the United States, as
well as in those of the State.
9.
Manila Trading vs. Reyes; US Jurisprudence, Parties have no vested right
in particular remedies or modes of procedure
Parties have no vested right in particular remedies or modes of procedure, and the
legislature may change existing remedies or modes of procedure without impairing the
obligation of contracts, provided an efficacious remedy remains for enforcement. But changes
in the remedies available for the enforcement of a mortgage may not, even when public policy
is invoked as an excuse, be pressed so far as to cut down the security of a mortgage without
moderation or reason or in a spirit of oppression. (Brotherhood of American Yeoman vs. Manz
[1922], 206 Pac., 403; Oshkosh Waterworks Co. vs. Oshkosh [1908], 187 U. S., 437; W. B.
Worthen Co. vs. Kavanaugh [1935], 79 U. S. Supreme Court Advance Opinions, 638.)
10.
Manila Trading vs. Reyes; Chattel Mortgage Law does not provide for
defciency judgment upon foreclosure of mortgage
In the Philippines, the Chattel Mortgage Law did not expressly provide for a
deficiency judgment upon the foreclosure of a mortgage. Indeed, it required decisions of the
Court to authorize such a procedure. (Bank of the Philippine Islands vs. Olutanga Lumber Co.
[1924], 47 Phil., 20; Manila Trading & Supply Co. vs. Tamaraw Plantation Co., supra.) But the
practice became universal enough to acquire the force of direct legislative enactment
regarding procedure. To a certain extent the Legislature has now disauthorized the practice,
but has left a sufficient remedy remaining.
11.
Manila Trading vs. Reyes; Remedies available to vendor who has sold personal
property on installment plan; Basis of remedies
Three remedies are available to the vendor who has sold personal property on the
installment plan. (1) He may elect to exact the fulfillment of the obligation. (Bachrach Motor
Co. vs. Millan, supra.) (2) If the vendee shall have failed to pay two or more installments, the
vendor may cancel the sale. (3) If the vendee shall have failed to pay two or more
installments, the vendor may foreclose the mortgage, if one has been given on the property.
The basis of the first option is the Civil Code. The basis of the last two options is Act 4122,
amendatory of the Civil Code. And the proviso to the right to foreclose is, that if the vendor has
chosen this remedy, he shall have no further action against the purchaser for the recovery of
any unpaid balance owing by the same. In other words, as we see it, the Act does no more than
qualify the remedy.
12.
Manila Trading vs. Reyes; Determination of constitutional issues, all doubts
resolve in the presumption to their validity
Most constitutional issues are determined by the courts approach to them. The proper
approach in cases of this character should be to resolve all presumptions in favor of the validity
of an act in the absence of a clear conflict between it and the constitution. All doubts should be
resolved in its favor.
13.
Manila Trading vs. Reyes; Public policy defined and established by
legislature, courts to perpetuate policy
The controlling purpose of Act 4122 is revealed to be to close the door to abuses
committed in connection with the foreclosure of chattel mortgages when sales were payable
in installments. That public policy, obvious from the statute, was defined and established by
legislative authority. It is for the courts to perpetuate it.
14.
Manila Trading vs. Reyes; Legislature may change judicial methods and
remedies for the enforcement of contracts

The Legislature may change judicial methods and remedies for the enforcement of
contracts, as it has done by the enactment of Act 4122, without unduly interfering with the
obligation of the contract, without sanctioning class legislation, and without a denial of the
equal protection of the laws.
Sales, 2003 ( 153 )
15.
Interpretation of laws, Intent of legislature; Restriction of meaning of unpaid
balance should be expressly stated
The provision 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, is the subject of the
interpretation. The paragraph, as its language shows, refers to the mortgage contract executed
by the parties, whereby the purchaser mortgages the chattel sold to him on the installment
basis in order to guarantee the payment of its price, and the words any unpaid balance
should be interpreted as having reference to the deficiency judgment to which the mortgagee
may be entitled where, after the mortgaged chattel is sold at public auction, the proceeds
obtained therefrom are insufficient to cover the full amount of the secured obligations which,
in the case at bar as shown by the note and by the mortgage deed, include interest on the
principal, attorneys fees, expenses of collection, and the costs. The fundamental rule which
should govern the interpretation of laws is to ascertain the intention and meaning of the
Legislature and to give effect thereto. (Sec. 288, Code of Civil Procedure; U. S. vs. Toribio, 15
Phil., 85; U. S. vs. Navarro, 19 Phil., 134; De Jesus vs. City of Manila, 29 Phil., 73; Borromeo
vs. Mariano, 41 Phil., 322; People vs. Concepcion, 44 Phil., 126.) Were it the intention of
the Legislature to limit its meaning to the unpaid balance of the principal, it would have so
stated.
[59]
Manila Racing Club vs. Manila Jockey Club [G.R. No. L-46533.
October 28, 1939.] En Banc, Avancena (J): 6 concur
Facts: On 18 September 1936, Rafael J. Campos entered into a contract with the Manila
Jockey Club, an unregistered partnership, whereby he purchased from it the parcel of land
described in TCT 8724 with its improvements, the good-will, and certain personal property.
The price agreed upon in this transaction is P1,200,000 (P50,000 upon the signing of the
contract; P50,000 on or before 28 September 1936; P300,000 on or before 24 December 1936;
P200,000 on or before 24 March 1937; and P600,000 on or before 24 September 1937). It
was agreed that should the purchaser fail to pay the amount corresponding to each
installment in due time, the vendor may rescind the contract and keep the amounts paid for
itself. One of the clauses of the deed also states that the purchaser may form a corporation
called the Manila Racing Club, Inc., to whom he may transfer all his rights and obligations
under the contract. The purchaser Campos made the down payment of P50,000 upon signing
the contract and on 28 September 1938 paid the second installment of P50,000. On 22 October
1936, the Manila Racing Club, Inc., was organized and Campos transferred to it all his rights
and obligations under his contract with the Manila Jockey Club. As the third installment
of P300,000 became due on 24 December 1936, and the purchaser could not pay it, the vendor,
on 11 January 1937, declared the contract cancelled and kept the amount of P100,000
already paid. The purchaser was, however, granted an extension until 22 January 1937, to
revive the contract by paying the P300,000, but having failed to do this, the partners of the
vendor ratified on 23 January 1937, the cancellation of the contract agreed upon by its board of
directors and the forfeiture of the P100,000 paid by the purchaser. On 23 March 1937 the
Manila Jockey Club, Inc., was organized and to it were transferred all the properties, rights
and actions of the Manila Jockey Club.
An action was filed by the Manila Racing Club against the Manila Jockey Club and its
partners for the recovery from them of the forfeited amount of P100,000 and for the
payment of P50,000 as damages. The trial court rendered judgment absolving the Manila
Jockey Club and its partners.

The Supreme Court affirmed the appealed judgment, with the costs against the Manila Racing Club.
1.
Clause referring to forfeiture of amounts paid valid, not contrary to law,
morals or public order; Purpose of a penal clause
Sales, 2003 ( 154 )
The clause regarding the forfeiture of what has been partially paid is valid. It is in the
nature of a penal clause which may be legally established by the parties (articles 1152 and 1255
of the Civil Code). In its double purpose of insuring compliance with the contract and of
otherwise measuring beforehand the damages which may result from non-compliance, it is
not contrary to law, morals or public order because it was voluntarily and knowingly
agreed upon by the parties. Viewing concretely the true effects thereof in the present case,
the amount forfeited constitutes only 8% of the stipulated price, which is not excessive if
considered as the profit which would have been obtained had the contract been complied
with. There is evidence that the Manila Jockey Club, because of the contract with Campos, had
to reject other propositions to buy the same property. At any rate, the penal clause does away
with the duty to prove the existence and measure of the damages caused by the breach.
2.
Allegation that Manila Jockey Club responsible for non-compliance with contract
not justifed The allegation that the Manila Jockey Club was responsible for the noncompliance with the contract
is not justified. There is no sufficient evidence that the majority of the members of the
Manila Jockey Club promised to subscribe to one-half of the shares of Manila Racing Club,
and for failure to live up to this promise, the money to pay the third installment of
P300,000 could not be raised. Campos himself attributes the failure to pay the third
installment to the fact that the public, due to the state of the stock market, did not respond to
the expectations of the incorporators of the Manila Racing Club. But it seems that even this is
not the cause of the breach, for on the date the third installment became due, the Manila
Racing Club had subscribed shares of its capital stock in the amount of P600,000, paid in part
and the remainder payable on demand. The deduction from all this is that the breach of the
contract cannot be attributed to the Manila Jockey Club and, much less, to the company
which, it is also alleged, the defendants brought into being to defeat the organization of the
Manila Racing Club.
[60]
Mapalo v. Mapalo [G.R. No. L-21489 and L-21628. May
19, 1966.] En Banc, Bengzon JP (J): 10 concur
Facts: Spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered
owners of a 1,635 sq.ms. residential land in Manaoag, Pangasinan (OCT 46503). The spousesowners, out of love and affection for Maximo Mapalo, brother of Miguel who was about to get
married, decided to donate the eastern half of the land to him. OCT 46503 was delivered. As a
result, however, they were deceived into signing, on 15 October 1936, a deed of absolute sale
over the entire land in his favor. Their signature thereto were procured by fraud, i.e. they
were made to believe by Maximo Mapalo and the attorney who acted as notary public who
translated the document, that the same was a deed of donation in Maximos favor covering
(the eastern half) of their land. Although the document of sale stated a consideration of P500,
the spouses did not receive anything of value for the land. The attorneys misbehavior was the
subject of an investigation but its result does not appear on record. Following the execution of
the document the spouses immediately built a fence of permanent structure in the middle of
their land segregating the eastern portion from its western portion. Said fence still exists.
The spouses have always been in continued possession over the western half of the land up to
the present. Unknown to them, Maximo Mapalo, on 15 March 1938, registered the deed of sale
in his favor and obtained in his name TCT 12829 over the entire land. 13 years later, on 20
October 1951, he sold for P2,500.00 said entire land in favor Evaristo, Petronila, Pacifico and
Miguel Narciso. The sale to the Narcisos was in turn registered on 5 November 1951 and TCT
11350 was issued for the whole land in their names. The Narcisos took possession only of the
eastern portion of the land in 1951, after the sale in their favor was made.
On 7 February 1952 the Narcisos filed suit in the CFI Pangasinan (Civil Case 11991) to be
declared owners of the entire land; for possession of its western portion; for damages; and for
rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia
Mapalo Guieb who had a house on the western
Sales, 2003 ( 155 )
part of the land with the consent of the spouses Mapalo and Quiba. The Mapalo spouses filed
their answer with a counterclaim on 17 March 1952, seeking cancellation of the TCT of the
Narcisos as to the western half of the land, on the grounds that their signatures to the deed of
sale of 1936 were procured by fraud and that the Narcisos were buyers in bad faith. They asked
for reconveyance to them of the western portion of the land and issuance of a TCT in their
names as to said portion. In addition, the Mapalo spouses filed on 16 December 1957 their
own complaint in the CFI Pangasinan (Civil Case U-133) against the the Narcisos and Maximo
Mapalo. They asked that the deeds of sale of 1936 and of 1951 over the land in question
declared null and void as to the western half of said land. Judge Amado Santiago of the CFI
Pangasinan located in the municipality of Urdaneta the two cases jointly. Said court rendered
judgment on 18 January 1961 dismissing the complaint in Civil Case 11991, declaring the deed
as that of donation only over the eastern half portion of the land, and as null and void with
respect to the western half portion thereof, declaring TCT 12829 issued to Maximo Mapalo as
regards the western portion of the land null and void and without legal force as well as TCT
11350 subsequently issued to the Narcisos, ordering the Mapalo spouses and the Narcisos to
have the land subdivided by a competent land surveyor, the expenses of which to be borne out
by the parties pro-rata, ordering the Register of Deed to issue in lieu of TCT 11350 two new
titles upon completion of the subdivision plan (one in favor of the Mapalo spouses for the
western portion, and one for the Narcisos covering the eastern half), and ordering Maximo
Mapalo and the Narcisos to pay the costs.
The Narcisos appealed to the Court of Appeals. In its decision on 28 May 1963, the Court
of Appeals reversed the Judgment of the CFI, solely on the ground that the consent of the
Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was
voidable, not void ab initio, and, therefore, the action to annul the same, within 4 years from
notice of the fraud, had long prescribed. It reckoned said notice of the fraud from the date of
registration of the sale on 15 March 1938. The CFI and the CA are therefore unanimous that the
spouses Mapalo and Quiba were definitely the victims of fraud. It was only on prescription that
they lost in the Court of Appeals. From said decision of the Court of Appeals, the Mapalo
spouses appealed to the Court.
The Supreme Court reversed and set aside the decision of the Court of Appeals, and
rendered another affirming in toto the judgment of the CFI, with attorneys fees on appeal in
favor of the Mapalo Spouses in the amount of P1,000.00, plus the costs, both against Maximo
Mapalo and the Narcisos.
1.
Contract; Requisites
Under the Civil Code, either old or the new, for a contract to exist at all, three
essential requisites must concur: (1) consent; (2) object, and (3) cause or consideration.
2.
Eastern half donated; Finding of the lower court as to the donation not assailed
and thus is final As regards the eastern portion of the land, the Mapalo spouses are
not claiming the same, it being
their stand that they had donated and freely given said half of their land to Maximo Mapalo.
And since they did not appeal from the decision of the trial court finding that there was a
valid and effective donation of the eastern portion of their land in favor of Maximo Mapalo,
the same pronouncement has become final as to them, rendering it no longer proper herein to
examine the existence, validity or efficacy of said donation as to said eastern portion.
3.
Contracts without a cause void

Under the Civil Code, be it the old or the new, is that contracts without a cause or
consideration produce no effect whatsoever.
4.
Old Civil Code; Contracts with false consideration voidable; Prescription of

voidable contracts Under the Old Civil Code, the statement of a false consideration
renders the contract voidable, unless
it is proven that it is supported by another real and licit consideration. And it is further
provided by the Old Civil Code that the action for annulment of a contract on the ground of
falsity of consideration shall last 4
Sales, 2003 ( 156 )
years, the term to run from the date of the consummation of the contract.
5.
False consideration a real consideration but not the one stated in the document
According to Manresa, what is meant by a contract that states a false consideration is
one that has in fact a real consideration but the same is not the one stated in the
document. (The difference between simulation and the contract with fraudulent intention
(purpose). This, although illicit is real; but the first is false in fact, although it appears to be
real. [Manresa, Civil Code Volume VIII, vol. II, p. 354]).
6.
Only a disturbed man would contract without cause; False cause vitiates
consent and annuls contract (Sanchez Roman)
The inspection of cause in the contract is necessary, and that without it they are null;
it can only be conceived that a disturbed man would, in his reason, contract without cause.
For the same reason of the necessity of inspection of cause in the contract, it is precise that
such is real and not supposed, as it pretends or appears. The falsification of the cause vitiates
the consent and annuls the contract, that is, not only as a doctrine undoubtedly of scientific
law, but also of old laws of Castile, that in multitude of laws that declare it. (Sanchez
Roman, Civil Right, Volume IV, p. 206.)
7.
No consideration does not mean false consideration for Article 1276 to be applied
Where there was in fact no consideration, the statement of one in the deed will not
suffice to bring it under the rule of Article 1276 of the Old Civil Code as stating a false
consideration.
8.
Oceio Perez v. Flores applies; Contract null and void if without cause or
consideration
The ruling of the Court in Ocejo Perez & Co. vs. Flores (40 Phil. 921), is squarely
applicable herein. In that case, it was 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.
9.
Void contract incurable and cannot be subject of prescription

The inexistence of a contract is permanent and incurable and cannot be the subject of
prescription. The nonexistence is perpetual and irreplaceable not being able to be object of
confirmation nor prescription. As held in Eugenio vs. Perdido (97 Phil. 41, 42-43
[1932]), it was stated that under the existing classification, such contract would be
inexistent and the action or defense for declaration of such inexistence does not
prescribe. (Art. 1410, 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 a lapse of time cannot give efficacy to contracts that are null and void.
10.
Narcisos not purchasers in good faith

It has been positively shown by the undisputed testimony of Candida Quiba that Pacifico
Narciso and Evaristo Narciso stayed for some days on the western side of the land until their
house was removed in 1940 by the spouses Mapalo. Also, Pacifico Narciso admitted in his
testimony that when they bought the property, Miguel Mapalo was still in the premises in
question (western part) which he is occupying and his house is still standing thereon.
Moreover, Pacifico Narciso when presented as a rebuttal and sub-rebuttal witness
categorically declared that before buying the land in question he went to the house of spouses
Mapalo and asked them if they will permit Maximo Mapalo to sell the property. Further, as
the parties in the cases are neighbors (except Maximo Mapalo), it is clear that the Narcisos
were aware of the extent of the interest of Maximo Mapalo over the land before and after the
execution of the deed of sale. Under the situation, thus, the Narcisos may be considered in value
but certainly not as purchasers in good faith.
11.
No need to remand case to trial court as facts of trial court sustained by Court
of Appeals
As the Court of Appeals declared that on the merits, the appealed decision called have
been upheld under Article 1332 of Civil Code and the following authorities: Ayola vs.
Valderrama Lumber Manufacturers
Sales, 2003 ( 157 )
Ca., Inc., 49 OG 980, 982; Trasporte Beltran, 51 OG 1434, 1435; Cortez vs. Cortez, CA- 18451-R,
August 8, 1961; Castilllo vs. Laberinto, CA-G.R. No. 18118-R, December 20, 1961; and 13 C. J.
372-373, as well as the several facts and circumstances appreciated by the trial court as
supporting the Mapalo spouses case, it thus sustained barring only its ruling on
prescription the judgment and findings of the trial court, including that of bad faith on the
part of the Narcisos in purchasing the land in question. The Supreme Court thus do not see the
need to further remand the case to the Court of Appeals for a ruling on the point in the event
that the 1936 contract is held to be inexistent as regards the western portion of the land.
12.
Bad faith justifies award of attorneys fees

In view of the Narcisos bad faith under the circumstances we deem it just and equitable
to award, in the Mapalo spouses favor, attorneys fees on appeal, in the amount of
P1,000.00 as prayed for in the counterclaim.
[61]
Mate v. CA [G.R. Nos. 120724-25. May
21, 1998.] Second Division, Martinez (J): 4
concur
Facts: On 6 October 1986 Josefina R. Rey and Inocencio Tan went to the residence of
Fernando Mate at Tacloban City. Josie who is a cousin of Mates wife solicited his help to
stave off her and her familys prosecution by Tan for violation of BP 22 on account of the
rubber checks that she, her mother, sister and brother issued to Tan amounting to
P4,432,067.00. She requested Mate to cede to Tan his 3 lots in Tacloban City in order to
placate him. On hearing Josies proposal, he immediately rejected it as he owed Tan nothing
and he was under no obligation to convey to him his properties. Furthermore, his lots were not
for sale. Josie explained to him that he was in no danger of losing his properties as he will
merely execute a simulated document transferring them to Tan but they will be redeemed
by her with her own funds. After a long discussion, he agreed to execute a fictitious deed of
sale with right to repurchase covering his 3 lots, subject to the conditions that the amount to
be stated in the document is P1,400,000.00 with interest thereon at 5% a month; the
properties will be repurchased within 6 months or on or before 4 April 1987; although it
would appear in the document that Mate is the vendor, it is Josie who will provide the money
for the redemption of the properties with her own funds; and the titles to the properties will be
delivered to Tan but the sale will not be registered in the Register of Deeds and annotated on
the titles. Josie, to assure Mate that she will redeem the properties, issued him 2 BPI checks
both postdated 15 December 1986. One check was for P1,400,000.00 supposedly for the selling
price and the other was for P420,000.00 corresponding to the interests for 6 months.
Immediately thereafter Mate prepared the Deed of Sale with Right to Repurchase and after it
has been signed and notarized, it was given to Tan together with the titles of the properties
and the latter did not register the transaction in the Register of Deeds as agreed upon. On 14
January 1987, Mate deposited the check for P1,400,000.00 in his account at the UCPB and the
other check for P420,000.00 in his account at MetroBank preparatory to the redemption of
his properties. Both of them were dishonored by the drawee bank for having been drawn
against a closed account. Realizing that he was swindled, he sent Josie a telegram about her
checks and when she failed to respond, he went to Manila to look for her but she could not
be found.
Mate returned to Tacloban City and filed Criminal Cases 8310 and 8312 against her for
violation of BP 22 but the cases were later archived as the accused (Josie) could not be found as
she went into hiding. To protect his interest, he filed Civil Case 7396 of the RTC Leyte
(Branch VII, Mate vs. Rey and Tan) for Annulment of Contract with Damages. Josie was
declared in default and the case proceeded against Tan. But during the trial the RTC court asked
Tan to file an action for consolidation of ownership of the properties subject of the sale and
pursuant thereto he filed Civil Case 7587 that was consolidated with the case he filed earlier
which were later decided jointly by the trial court in favor of Tan and was subsequently
appealed to the Court of Appeals. The appellate court, on 29 August 1994 (CA-GR CV 2822526), affirmed the decision with modification that
Sales, 2003 ( 158 )
Mate is ordered to pay Tan the sum of P140,000 for and as attorneys fees; with costs
against Mate. Thereupon, Mate filed a motion to reconsider the decision but it was denied.
Hence, the petition for review.
The Supreme Court affirmed the decision of the Court of Appeals dated 29 August 1994, and
denied due course to the petition for review for lack of merit.
1.
Consideration exist in the Deed of Sale with Right to Repurchase (Sale with Pacto
de Retro)
To ensure that he could repurchase his lots, Mate got a check of P1,400,000.00 from
Josie. By allowing his titles to be in possession of Tan for a period of 6 months, Mate secured
from her another check for P420,000.00. It is thus plain that consideration existed at the time
of the execution of the deed of sale with right of repurchase. It is not only Mates kindness
to Josefina, being his cousin, but also his receipt of P420,000.00 from her which impelled
him to execute such contract. While Mate did not receive the P1.4M purchase price from Tan,
he had in his possession a postdated check of Josie in an equivalent amount precisely to
repurchase the 2 lots on or before the 6th month.
2.
No basis to file an action to annul the pacto de retro sale; Proper cause of action
is BP 22 against Josie; Filing of criminal case a tacit admission that there is
consideration of the pacto de retro sale
There is absolutely no basis for Mate to file a complaint against Tan and Josie to annul
the pacto de retro sale on the ground of lack of consideration, invoking his failure to encash the
two checks. Mates cause of action was to file criminal actions against Josie under BP 22, which
he did. The filing of the criminal cases was a tacit admission by petitioner that there was a
consideration of the pacto de retro sale. Mate knew that he was bound by the deed of sale with
right to repurchase, as evidenced by his filing criminal cases against Josie when the two checks
bounced.
3.
Singson v. Isabela Sawmill does not apply

Mates reliance on the doctrine in Singson vs. Isabela Sawmill (88 SCRA 633, 643),
where the Court said that where one or two innocent persons must suffer, that person who
gave occasion for the damages to be caused must bear consequences is misplaced. He is not an
innocent person. As a matter of fact, he gave occasion for the damage caused by virtue of the
deed of sale with right to repurchase which he prepared and signed. Thus, there is the equitable
maxim that between two innocent parties, the one who made it possible for the wrong to be
done should be the one to bear the resulting loss.
4.
Tan incurred no false pretense; Mate has no one to blame but himself for his
misfortune; Mate a lawyer
Tan did not employ any devious scheme to make the former sign the deed of sale. Tan
waived his right to collect from Josie by virtue of the pacto de retro sale. In turn, Josie gave
Mate a postdated check in the amount of P1.4M to ensure that the latter would not lose his two
lots. Mate, a lawyer, should have known that the transaction was fraught with risks since Josie
and family had a checkered history of issuing worthless checks. But had Mate not agreed to
the arrangement, Tan would not have agreed to waive prosecution of Josie. Apparently, it
was Mates greed for a huge profit that impelled him to accede to the scheme of Josie even if
he knew it was a dangerous undertaking. When he drafted the pacto de retro document, he
threw caution to the winds forgetting that prudence might have been the better course of
action. When Josies checks bounced, he should have repurchased his lots with his own money.
Instead, he sued not only Josie but also Tan for annulment of contract on the ground of lack of
consideration and false pretenses on their part.
5.
Contracts
A contract is a contract. Once agreed upon, and provided all the essential elements are
present, it is valid and binding between the parties.
[62]
Sales, 2003 ( 159 )
Mclaughin v. CA, 144 SCRA 693 (1986)

[63]
Medina v. Collector of Internal Revenue [G.R. No. L-15113.
January 28, 1961.] En Banc, Reyes JBL (J): 6 concur
Facts: On 20 May 1944, Antonio Medina married Antonia Rodriguez. Before 1946, the spouses
had neither property nor business of their own. Later, however, Antonio acquired forest
concessions in the municipalities of San Mariano and Palanan, Isabela. From 1946 to 1948, the
logs cut and removed by the Antonio from his concessions were sold to different persons in
Manila through his agent, Mariano Osorio. In 1949, Antonia started to engage in business as a
lumber dealer, and up to around 1952, Antonio sold to her almost all the logs produced in his
San Mariano concession. Antonia, in turn, sold in Manila the logs bought from her husband
through the same agent, Mariano Osorio. The proceeds were either received by Osorio
for Antonio or deposited by said agent in Antonios current account with the PNB.
On the thesis that the sales made by Antonio to his wife were null and void pursuant to the
provisions of Article 1490 of the Civil Code of the Philippines, the Collector considered the
sales made by Antonia as Antonios original sales taxable under Section 186 of the National
Internal Revenue Code and, therefore, imposed a tax assessment on Antonio. On 30 November
1963, Antonio protested the assessment; however, the Collector insisted on his demand. On 9
July 1954, Antonio filed a petition for reconsideration, revealing for the first time the
existence of an alleged premarital agreement of complete separation of properties between
him and his wife, and contending that the assessment for the years 1946 to 1952 had already
prescribed. After one hearing, the Conference Staff of the Bureau of Internal Revenue
eliminated the 50% fraud penalty and held that the taxes assessed against him before 1948
had already prescribed. Based on these findings, the Collector issued a modified assessment,
demanding the payment of only P3,325.68. Antonio again requested for reconsideration, but
the Collector, in his letter of 4 April 1955, denied the same.
Antonio appealed to the Court of Tax Appeals, which rendered judgment upholding a tax
assessment of the Collector of Internal Revenue except with respect to the imposition of socalled compromise penalties, which were set aside. Hence a petition to review the decision of
the CTA.
The Supreme Court affirmed the appealed decision with cost against the petitioner.
1.
No evidence proving pre-marital agreement of absolute separation between the
spouses
Aside from the material inconsistencies in the testimony of petitioners witnesses, the
circumstantial evidence is against petitioners claim. (1) It appears that at the time of the
marriage between the petitioner and his wife, they neither had any property nor business of
their own, as to have really urged them to enter into the supposed property agreement. (2) The
testimony that the separation of property agreement was recorded in the Registry of Property
3 months before the marriage, is patently absurd, since such a pre-nuptial agreement could not
be effective before marriage is celebrated. (3) Despite their insistence on the existence of the
ante-nuptial contract, the couple, strangely enough, did not act in accordance with its alleged
covenants; but that even during their taxable years, the ownership, usufruct, and
administration of their properties and business were in the husband. (4) Although petitioner
already knew that Article 1490 prohibits sales between spouses married under a community
system, it was not until July 1954 that the allege the existence of the alleged property
separation agreement. (5) The Day Book of the Register of Deeds on which the agreement
would have been entered, which was saved from the ravages of war, did not show that the
document in question was among those recorded therein.
2.
Trial courts judgment on the degree of credence of witness considered
seriously by the Supreme Court
Sales, 2003 ( 160 )
When the credibility of witnesses is the one at issue, the trial courts judgment as to
their degree of credence deserves serious consideration by this Court (Collector vs. Bautista, et
al., G. R. Nos. L-12250, L-12259, May 27, 1959). This is all the more true because not
every copy of the supposed agreement, particularly the one that was said to have been filed
with the Clerk of Court of Isabela, was accounted for as lost; so that, applying the best
evidence rule, the court did right in giving little or no credence to the secondary evidence
to prove the due execution and contents of the alleged document (see Comments on the Rules
of Court, Moran, 1957 Ed., Vol. 3, pp. 10-12).
3.
Article 7 and 10 of Code of Commerce does not exempt from the prohibition of
sale between spouses under Article 1490 of the Civil Code
Article 7 and 10 of the Code of Commerce merely state, under certain conditions, a
presumption that the wife is authorized to engage in business and for the incidents that flow
therefrom when she so engages therein. The transactions permitted therein however are
those entered into with strangers, and do not constitute exceptions to the prohibitory
provisions of Article 1490 against sales between spouses.
4.
Government always an interested party in taxable transactions

The government is always an interested party to all matters involving taxable
transactions and qualified to question their validity or legitimacy whenever necessary to
block tax evasion. It cannot be contended thus that the Collector cannot assail the questioned
sales, he being a stranger to said transactions.
5.
Contracts violative of Article 1490 null and void

Contracts violative of the provisions of Article 1490 of the Civil Code are null and void
(Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca, 45 Phil. 43). In the present case,
being void transactions, the sales made by the petitioner to his wife were correctly disregarded
by the Collector in his tax assessments that considered as the taxable sales those made by the
wife through the spouses common agent, Mariano Osorio.
6.
(?) Illegally obtained documents and papers admissible to evidence; Revenue
officers can require production of books of accounts and other records from taxpayers
Illegally obtained documents and papers are admissible in evidence, if they are found to
be competent and relevant to the case (see Wong & Lee vs. Collector of Internal Revenue,
104 Phil., 469). Petitioners imputation, that the documentary evidence is illegally seized, is
vehemently denied by him, and relying on Sections 3, 9, 337 and 338 of the Tax Code and the
pertinent portions of Revenue Regulations No. V-1 and citing this Courts ruling in U.S. vs.
Aviado 38 Phil., 10, the Collector maintains that he and other internal revenue officers and
agents could require the production of books of accounts and other records from a taxpayer.
[64]
Melliza v. Iloilo City [G.R. No. L-24732. April
30, 1968.] En Banc, Bengzon JP (J): 8 concur, 1 on
leave
Facts: Juliana Melliza during her lifetime owned, among other properties, 3 parcels of
residential land in Iloilo City (OCT 3462). Said parcels of land were known as Lots Nos. 2, 5
and 1214. The total area of Lot 1214 was 29,073 sq. m. On 27 November 1931 she donated to
the then Municipality of Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal
hall. The donation was however revoked by the parties for the reason that the area donated
was found inadequate to meet the requirements of the development plan of the municipality,
the so- called Arellano Plan. Subsequently, Lot 1214 was divided by Certeza Surveying Co.,
Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots
1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot 1214-B-1,
with 4,562 sq. m., became known as Lot 1214-B; Lot 1214-B-2, with 6,653 sq. m., was
designated as Lot 1214-C; and Lot 1214-B-3, with 4,135 sq. m., became Lot 1214-D. On 15
November 1932, Juliana Melliza executed an instrument
Sales, 2003 ( 161 )
without any caption providing for the absolute sale involving all of lot 5, 7669 sq. m. of Lot
2 (sublots 2-B and 2-C), and a portion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and
1214-B3) in favor of the Municipal Government of Iloilo for the sum of P6,422; these lots
and portions being the ones needed by the municipal government for the construction of
avenues, parks and City hall site according the Arellano plan. On 14 January 1938, Melliza
sold her remaining interest in Lot 1214 to Remedios Sian Villanueva (thereafter TCT 18178).
Remedios in turn on 4 November 1946 transferred her rights to said portion of land to Pio Sian
Melliza (thereafter TCT 2492). Annotated at the back of Pio Sian Mellizas title certificate was
the following that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots 1412B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per
instrument dated 15 November 1932. On 24 August 1949 the City of Iloilo, which
succeeded to the Municipality of Iloilo, donated the city hall site together with the
building thereon, to the University of the Philippines (Iloilo branch). The site donated
consisted of Lots 1214-B, 1214-C and 1214-D, with a total area of 15,350 sq. m., more or less.
Sometime in 1952, the University of the Philippines enclosed the site donated with a wire
fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city
authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained,
because as alleged by Pio Sian Melliza, the City did not have funds. The University of the
Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three
lots, Nos. 1214-B, 1214-C and 1214-D.
On 10 December 1955 Pio Sian Melizza filed an action in the CFI Iloilo against Iloilo City and
the University of the Philippines for recovery of Lot 1214-B or of its value. After
stipulation of facts and trial, the CFI rendered its decision on 15 August 1957, dismissing
the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of
Iloilo municipality included in the conveyance Lot 1214-B, and thus it held that Iloilo City
had the right to donate Lot 1214-B to UP. Pio Sian Melliza appealed to the Court of Appeals.
On 19 May 1965, the CA affirmed the interpretation of the CFI that the portion of Lot 1214
sold by Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but
included whatever was needed for the construction of avenues, parks and the city hall site.
Nonetheless, it ordered the remand of the case for reception of evidence to determine the
area actually taken by Iloilo City for the construction of avenues, parks and for city hall site.
Hence, the appeal by Pio San Melliza to the Supreme Court.
The Supreme Court affirmed the decision appealed from insofar as it affirms that of the CFI,
and dismissed the complaint; without costs.
1.
Interpretation of contract involves question of law

The interpretation of the public instrument dated 15 November 1932 involves a question
of law, since the contract is in the nature of law as between the parties and their successors in
interest.
2.
Intent of the parties as to the object of the public instrument

The paramount intention of the parties was to provide Iloilo municipality with lots
sufficient or adequate in area for the construction of the Iloilo City hall site, with its avenues
and parks. For this matter, a previous donation for this purpose between the same parties was
revoked by them, because of inadequacy of the area of the lot donated. Said instrument
described 4 parcels of land by their lot numbers and area; and then it goes on to further
describe, not only those lots already mentioned, but the lots object of the sale, by stating that
said lots were the ones needed for the construction of the city hall site, avenues and parks
according to the Arellano plan. If the parties intended merely to cover the specified lots (Lots
2, 5, 1214-C and 1214-D), there would scarcely have been any need for the next paragraph,
since these lots were already plainly and very clearly described by their respective lot number
and areas. Said next paragraph does not really add to the clear description that was already
given to them in the previous one. It is therefore the more reasonable interpretation to view
it as describing those other portions of land contiguous to the lots that, by reference to
the Arellano plan, will be found needed for the purpose at hand, the construction of the city
hall site.
3.
Requirement, that sale must have a determinate thing as object, is fulfilled if object
of sale is
Sales, 2003 ( 162 )
capable of being made determinate at the time of the contract

The requirement of the law that a sale must have for its object a determinate thing, is
fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of
being made determinate without the necessity of a new or further agreement between the
parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of
the lots plus the statement that the lots object of the sale are the ones needed for city hall site;
avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time
of the execution of the contract, for rendering determinate said lots without the need of a new
and further agreement of the parties.
4.
Arellano plan in existence since 1928; Area of land needed for the city hall site
known
The Arellano plan was in existence as early as 1928. Tthe previous donation of land for
city hall site on 27 November 1931 was revoked on 6 March 1932 for being inadequate in area
under said Arellano plan. The area needed under that plan for city hall site was then already
known; that the specific mention of some of the lots covered by the sale in effect fixed the
corresponding location of the city hall site under the plan; that, therefore, considering the said
lots specifically mentioned in the public instrument, and the projected city hall site, with its
area, as then shown in the Arellano plan (Exhibit 2), it could be determined which, and how
much of the portions of land contiguous to those specifically named, were needed for the
construction of the city hall site.
5.
Lot 1214-B is contiguous to Lot 1214-C and 1214-D, and is in the heart of the city
hall site
Lot 1214-B is contiguous to Lots 1214-C and 1214-D, admittedly covered by the public
instrument. It is stipulated that, after execution of the contract, the Municipality of Iloilo
possessed it together with the other lots sold. It sits practically in the heart of the city hall site.
6.
Pio Sian Melliza a notary public and thus aware of the terms of the public
instrument
Pio Sian Melliza, from the stipulation of facts, was the notary public of the public
instrument. As such, he was aware of its terms. Said instrument was also registered with the
Register of Deeds and such registration was annotated at the back of the corresponding title
certificate of Juliana Melliza. From these stipulated facts, it can be inferred that Pio Sian
Melliza knew of the aforesaid terms of the instrument or is chargeable with knowledge of
them; that knowing so, he should have examined the Arellano plan in relation to the public
instrument; that furthermore, he should have taken notice of the possession first by the
Municipality of Iloilo, then by the City of Iloilo and later by the University of the Philippines
of Lot 1214-B as part of the city hall site conveyed under that public instrument, and raised
proper objections thereto if it was his position that the same was not included in the same.
7.
Principles of civil law, as well as laches, estoppel and equity applied; Lot
included in conveyance For 20 long years, Pio Sian Melliza and his predecessors-ininterest, did not object to said possession,
nor exercise any act of possession over Lot 1214-B. Applying, therefore, principles of civil
law, as well as laches, estoppel, and equity, said lot must necessarily be deemed included in the
conveyance in favor of Iloilo municipality, now Iloilo City.
[65]
Mendoza vs. Kalaw [G.R. No. 16420. October
12, 1921.] Second Division, Johnson (J): 4 concur
Facts: On 24 September 1919, Federico Caet sold, under a conditional sale, the parcel of land
in question to the Primitivo Kalaw. On 8 November 1919, Caet made an absolute sale of said
parcel of land to Agripino Mendoza. On 12 November 1919, Mendoza entered upon, and took
actual possession of, said parcel of land, enclosed it with a fence, and began to clean the same.
After doing so, a representative of Kalaw claimed and attempted to obtain possession of said
lot, but Mendoza, who was then in possession, refused to deliver the
Sales, 2003 ( 163 )
possession, upon the ground that he was the owner. On 17 November (18 November) 1919,
Kalaw attempted to have his title registered in the registry of deeds of the City of Manila, but
such registration was denied by the register of deeds for the reason that there existed some
defect in the description of the property, and for the reason that the title of the vendor had
not theretofore been registered. The register of deeds, however, did make an anotacion
preventiva.
On 26 November 1919, Agripino Mendoza filed a petition in the CFI Manila for the
registration, under the Torrens system, of a piece or parcel of land, particularly described in
paragraph A of the petition. The said lot is alleged to have an area of 371.6 square meters.
Mendoza alleged that he was the owner in fee simple of said parcel of land for the reason that
he had purchased the same of Federico Caet on 8 November 1919. Accompanying the
petition, there was united a plan containing a technical description of the metes and
bounds of said parcel of land. To the registration of said parcel of land the oppositor,
Primitivo Kalaw, presented his opposition, alleging that he was the owner of the same and that
he had acquired it from the said Federico Caet. Upon the issue thus presented by the petition
and opposition, and on 23 January 1920, the Court reached the conclusion that Mendoza was
the owner in fee simple of said parcel of land, and ordered it registered in his name in
accordance with the provisions of the Land Registration Act. From that decree the oppositor
appealed to the Supreme Court.
The Supreme Court affirmed the judgment ordering the registration of the parcel of land
in question in Mendozas name; with costs.
1.
Lot sold to Mendoza in absolute sale; Mendoza frst in possession; Mendoza
actually paid purchase price
Federico Caet made two sales of the same property one to Kalaw and the other to
Mendoza. The first was but a conditional sale while the latter was an absolute sale. While the
absolute sale to Mendoza was subsequent to the conditional sale to Kalaw, the former obtained
the actual possession of the property first. Reading Exhibits 1 and B, it may be found that
Mendoza actually paid to his vendor the purchase price of the property in question, while the
payment by Kalaw depended upon the performance of certain conditions mentioned in the
contract of sale.
2.
Conditional sale hardly said to be a sale of property; Article 1473 of the Civil
Code does not apply
While there were two sales of the parcel of land in question, that is hardly the
fact, because a conditional sale, before the performance of the condition, can hardly be
said to be a sale of property, especially where the condition has not been performed or
complied with. Thus, article 1473 of the Civil Code can hardly be said to be applicable.
3.
Anotacion preventiva creates no advantage; protects rights of person securing it

for 30 days The anotacion preventiva obtained by Kalaw does not created any
advantage in his favor, for the
reason that a preventative precautionary notice on the records of the registry of deeds only
protects the rights of the person securing it for a period of thirty days. (Par. 2, art. 17,
Mortgage Law.) A preventative precautionary notice only protects the interests and rights of
the person who secures it against those who acquire an interest in the property subsequent
thereto, and then, only for a period of 30 days. It cannot afect the rights or interests of
persons who acquired an interest in the property theretofore. (Veguillas vs. Jaucian, 25 Phil.,
315; Samson vs. Garcia and Ycalina, 34 Phil., 805.)
4.
Anotacion preventiva does not afect right and or interests of persons
Mendoza had acquired an absolute deed to the land in question, and had actually
entered into the possession of the same, before the preventative precautionary notice was noted
in the office of the registry of deeds. Therefore, under the provisions of the Mortgage Law, it
could in no way affect the rights or interests of persons, acquired theretofore.
Sales, 2003 ( 164 )
[66]
Mindanao Academy vs. Yap [G.R. No. L-17681. February
26, 1965.] De Nuqui vs. Yap [G.R. No. L-17682. February 26,
1965]
En Banc, Makalintal (J): 6 concur, 4 took no part
Facts: By deed entitled Mutual Agreement, executed on 10 May 1964, Rosenda A. de
Nuqui (widow of Sotero Dionisio) and her son Sotero Dionisio, Jr. sold 3 parcels of
residential land in Oroquieta, Misamis Occidental, and another parcel in Ozamis City in favor
of Ildefonso D. Yap. Included in the sale were certain buildings situated on said lands as well
as laboratory equipment, books, furniture and fixtures used by 2 schools established in the
respective properties: the Mindanao Academy in Oroquieta and the Misamis Academy in
Ozamis City. The aggregate price stated in the deed was P100,700.00, to be paid according to
the terms and conditions specified in the contract. Besides Rosenda and her son Sotero, Jr., both
of whom signed the instrument, Adelaida Dionisio Nuesa (a daughter of Rosenda, and married
to Wilson Nuesa) is also named therein as co-vendor, but actually did not take part either
personally or through her uncle and supposed attorney-in-fact, Restituto Abuton. These three
(mother and children) are referred to in the deed as the owners pro-indiviso of the properties
sold. The truth, however, was that there were other co-owners of the lands, namely, Erlinda
D. Diaz (and Antolin Diaz), Ester Aida D. Bas (and Mauricio O. Bas), Rosalinda D. Belleza (and
Apolinario Belleza) and Luz Minda D. Dajao (and Elifio C. Dajao), children also of Rosenda
by her deceased husband Sotero Dionisio, Sr., and that as far as the school buildings, equipment,
books, furniture and fixtures were concerned, they were owned by the Mindanao Academy,
Inc., a corporation operating both the Mindanao Academy in Oroquieta and the Misamis
Academy in Ozamis City. The buyer, Ildefonso D. Yap, obtained possession of the properties
by virtue of the sale, took over the operation of the two schools and even changed their names
to Harvardian Colleges.
Two actions were commenced in the CFI Misamis Occidental; one for annulment of the sale and
recovery of rents and damages (Civil Case 1774, filed 3 May 1955) with the Mindanao
Academy, Inc., the five children of Rosenda Nuqui who did not take part in the deed of sale,
and several other persons who were stockholders of the said corporation (Pedro N. Abuton, Sy
Paoco, Josefa Dignum and Perfecto Velasquez), as plaintiffs, and the parties who signed the
deed of sale as defendants; and another for rescission (Civil Case 1907, filed 17 July 1956)
with Rosenda Nuqui, Sotero Dionisio, Jr. and Erlinda D. Diaz (and the latters husband Antolin
Diaz) as plaintiffs, and Ildefonso D. Yap as lone defendant. The other 4 children of Rosenda
did not join, having previously ceded and quitclaimed their shares in the litigated properties in
favor of their sister Erlinda D. Diaz. The actions were tried jointly and on 31 March 1960 the
court rendered judgment, declaring the Mutual Agreement null and void ab initio and
ordering Ildefonso Yap to pay the costs of the proceedings in both cases. The Court also
ordered Yap, in Civil Case 1907, to restore to the plaintifs in said case all the buildings and
grounds described in the Mutual Agreement together with all the permanent improvements
thereon; and to pay to the plaintiffs therein the amount of P300.00 monthly from 31 July 1956
up to the time he shall have surrendered the properties in question to the plaintiffs therein,
plus P1,000.00 as attorneys fees to plaintiffs Antolin and Erlinda D. Diaz. The Court
ordered Yap, in Civil Case 1774, to restore to the Mindanao Academy, Inc., all the books,
laboratory apparatus, furniture and other equipments described in the Mutual Agreement and
specified in the Inventory attached to the Records of this case; or in default thereof, their
value in the amount of P23,500.00; to return all the Records of the Mindanao Academy and
Misamis Academy; and to pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the
amount of P10,000.00 as nominal damages; P3,000.00 as exemplary damages; and P2,000.00
as attorneys fees. These damages being apportioned to each of the plaintiff-stockholders in

proportion to their respective interests in the corporation. Ildefonso D. Yap appealed from
the judgment.
The Supreme Court affirmed the judgment appealed from but modified it by eliminating
therefrom the award of attorneys fees of P1,000.00 in favor of Erlinda D. Diaz and her
husband, and the award of nominal and
Sales, 2003 ( 165 )
exemplary damages in Civil Case 1774; and making the award of attorneys fees in the sum
of P2,000.00 payable to counsel for the account of the Mindanao Academy, Inc. instead of
the plaintiff stockholders; without pronouncement as to costs.
1.
Mutual Agreement entirely void and non-existent; Question on rescission not
categorically ruled on
The mutual agreement dated 10 May 1954 is entirely void and legally non-existent in
that the vendors therein ceded to Yap not only their interest, rights, shares and participation in
the property sold but also those that belonged to persons who were not parties thereto. This
conclusion is premised on two grounds: (a) the contract purported to sell properties of which
the sellers were not the only owners, since of the four parcels of land mentioned in the deed
their shares consisted only of 7/12, (6/12: Rosenda Nuqui and 1/12 for Sotero, Jr.), while in the
buildings, laboratory equipment, books, furniture and fixtures they had no participation at all,
the owner being the Mindanao Academy, Inc.; and (b) the prestation involved in the sale was
indivisible, and therefore incapable of partial annulment, inasmuch as Yap would not have
entered into the transaction except to acquire all of the properties purchased by him.
2.
No bad faith committed by co-owners who did not take part in sale
The quitclaim, in the form of an extrajudicial partition, was made on 6 May 1956, after
the action for annulment was filed, wherein, the plaintiffs were not only Erlinda but also the
other co-owners who took no part in the sale and to whom there has been no imputation of bad
faith. Further, the trial courts finding of bad faith is an erroneous conclusion induced by a
manifest oversight of an undisputed fact, namely, that on 10 June 1954, just a month after the
deed of sale in question, Erlinda D. Diaz did file an action against Ildefonso D. Yap and Rosenda
Nuqui, among others, asserting her rights as co-owner of the properties (Case 1646). Finally,
bad faith on the part of Erlinda would not militate against the nullity of the sale, considering
that it included not only the lands in common by Rosenda Nuqui and her six children but
also the buildings and school facilities owned by the Mindanao Academy, Inc., an entity
which had nothing to do with the transaction and which could be represented solely by its
Board of Trustees.
3.
Vendor and vendee both in bad faith; treated to have acted in good faith vis-vis each other Both vendors and vendee in the sale acted in bad faith and therefore
must be treated, vis-a-vis each
other, as having acted in good faith. The return of the properties by the vendee is a necessary
consequence of the decree of annulment. No part of the purchase price having been paid, as far
as the record shows, the trial court correctly made no corresponding order for the restitution
thereof. Rosenda Nuqui and her son Sotero, it is true, acted in bad faith when they sold the
properties as theirs alone; but so did the defendant Yap when he purchased them with
knowledge of the fact that there were other co-owners. Although the bad faith of one party
neutralizes that of the other and hence as between themselves their rights would be as if both
of them had acted in good faith at the time of the transaction, this legal fiction of Yaps good
faith ceased when they sold the properties as theirs alone.
4.
Erlinda Diaz entitled to recover share of rents in proportion to her own
interest; Possessor in good faith entitled to fruits as long as possession is not legally
interrupted
Prior to the sale, the Mindanao Academy Inc. was paying P300.00 monthly for its
occupancy of the lands on which the buildings are situated. This is the amount the defendant
has been ordered to pay to the plaintiffs in Civil Case 1907, beginning 31 July 1956, when he
filed his first pleading in the case. There can be no doubt that Erlinda D. Diaz is entitled to
recover a share of the said rents in proportion to her own interest in the lands and the
interest of her four co-owners which she had acquired. A possessor in good faith is entitled to
the fruits only so long as his possession is not legally interrupted, and such interruption takes
place upon service of judicial summons (Arts. 544 and 1123, Civil Code).
5.
Award of attorneys fees to Erlinda Diaz erroneous; Erlinda had no cause
of action for rescission in Civil Case 1907 as she was not party to the agreement
Sales, 2003 ( 166 )
The award of attorneys fees to Erlinda D. Diaz and her husband is erroneous. Civil
Case 1907, in which said fees have been adjudged, is for rescission (more properly
resolution) of the so-called mutual agreement on the ground that Yap failed to comply with
certain undertakings specified therein relative to the payment of the purchase price. Erlinda
Diaz was not a party to that agreement and hence had no cause of action for rescission. The
trial court did not decide the matter of rescission because of the decree of annulment it
rendered in the other case (Civil Case 1774), wherein the defendants are not only Ildefonso D.
Yap but also Rosenda Nuqui and her son Sotero. Erlinda D. Diaz could just as well have refrained
from joining as plaintiff in the action for rescission, not being a part to the contract sought to
be rescinded and being already one of the plaintiffs in the other action. In other words, it
cannot be said with justification that she was constrained to litigate, in Civil Case 1907,
because of some cause attributable to the appellant.
6.
Builder in bad faith not entitled to reimbursement (New building)

Yap claims reimbursement for the value of the improvements he allegedly introduced
in the schools, consisting of new building worth P8,000.00 and a toilet costing P800.00,
besides laboratory equipment, furniture, fixtures and books for the libraries. It should be noted
that the judgment of the trial court specifies, for delivery to the plaintiffs (in Civil Case
1907), only the buildings and grounds described in the mutual agreement together with all
the permanent improvements thereon. If Yap constructed a new building, he cannot recover
its value because the construction was done after the filing of the action for annulment, thus
rendering him a builder in bad faith who is denied by law any right of reimbursement.
7.
Equipment, books, furniture and fxture brought in by him may be retained by
him as they are outside the scope of the judgment
In connection with the equipment, books, furniture and fixtures brought in by him, he
is not entitled to reimbursement either, because the judgment does not award them to any of
the plaintiffs in the two actions. What is adjudged (in Civil Case 1774) is for Yap to restore to
the Mindanao Academy, Inc. all the books, laboratory apparatus, furniture and other equipment
described in the Mutual Agreement and specified in the Inventory attached to the records of
this case; or in default thereof, their value in the amount of P23,500.00. In other words,
whatever has been brought in by the defendant is outside the scope of the judgment and may be
retained by him.
8.
Stockholders not entitled to nominal and exemplary damages

According to the second amended complaint the stockholders were joined merely pro
forma, and for the sole purpose of the moral damage which has been all the time alleged in
the original complaint. Indeed the interests of the said stockholders, if any, were already
represented by the corporation itself, which was the proper party plaintiff; and no cause of
action accruing to them separately from the corporation is alleged in the complaint, other
than that for moral damages due to extreme mental anguish, serious anxiety and
wounded feelings. The trial court, however, ruled out the claim for moral damages and no
appeal from such ruling has taken. The award for nominal and exemplary damages should be
eliminated in toto.
9.
Award for attorneys fees upheld for the corporation but not to stockholders
The award for attorneys fees in the amount of P2,000.00 was upheld, although the
same should be for the account of the corporation and not of the plaintiff stockholders of the
Mindanao Academy, Inc.; and payable to their common counsel as prayed for in the complaint.
10.
Nullity of contract precludes enforcement of its stipulation

A warranty clause in the deeds provides that if any claim shall be filed against the
properties or any right, share or interest which are in the possession of the party of the
vendors which had been hereby transferred, ceded and conveyed unto the vendee the vendor
assumes as it hereby holds itself answerable. It is unnecessary to pass upon the question in view
of the total annulment of the sale on grounds concerning which both parties thereto were at
fault. The nullity of the contract precludes enforcement of any of its stipulations.
Sales, 2003 ( 167 )
[67]
Montilla vs. CA [G.R. No. L-47968. May
9, 1988.] First Division, Narvasa (J): 3 concur
Facts: On 27 April 1972, Emilio Aragon Jr. filed an action before the CFI Iloilo to compel Lina
Montilla to comply with a verbal contract to sell to him a piece of land situated at Poblacion,
Iloilo City, known as Lot 4 of the Consolidated Subdivision plan (LRC) Psc-11605. In his
complaint, Aragon claimed that in the last week of June 1969, Montilla had orally offered to
sell the lot to him at a price of P57,650.00 (at the rate of P50 per sq. m.), the price being
payable at any time within a 3-year period from June, 1969 provided that Aragon constructed
on the lot a house of strong materials and paid a nominal monthly rental in the meantime; but
despite Aragons acceptance of the offer, fulfillment by him of the specified conditions, and his
seasonable tender of the purchase price, Montilla had refused to comply with her obligation.
In her answer Montilla categorically denied ever having entered into such an agreement, and
set up the affirmative defenses of (1) unenforceability of the alleged agreement under the
Statute of Frauds; and (2) failure of the complaint to state a cause of action, no allegation
having been made therein of any consideration for the promise to sell distinct and separate
from the price, as required by Article 1479 of the Civil Code. At Montillas instance, a
preliminary hearing was had on her affirmative defenses in accordance with Section 6, Rule 16
of the Rules of Court, as if a motion to dismiss had been filed. By Order dated 5
December 1972, the Court denied the implicit motion to dismiss. After trial, the Court
rendered judgment on 22 August 1974 sentencing Montilla to execute the requisite deed of
conveyance of Lot 4, covered by TCT T-29976 in favor of Aragon upon full payment by him to
Montilla of the total consideration thereof in the aggregate sum of P57,650.00; to pay to
Montilla P2,000.00 as attorneys fees, and to pay the costs.
The decision was affirmed by the Court of Appeals. The latters adjudgment has, in turn, been
duly brought up to the Supreme Court by Montilla, on appeal by certiorari under Rule 45 of the
Rules of Court.
The Supreme Court reversed and set aside the Decision of the Court of Appeals dated 18
January 1978 and that of the CFI dated 22 August 1974 thereby affirmed, and entered a new one
dismissing Aragons complaint, with costs against him.
1.
No admission by Montilla on the claimed verbal contract to sell; Affirmative
defense could not be taken as unconditional and irretrievably binding factual
admission
It is difficult to see by what process of ratiocination the Trial Court arrived at the
conclusion that Montillas answer had admitted the offer to sell as any such admission is
absolutely precluded by the specific and unequivocal denial by Montilla of the claimed
verbal contract to sell. She in fact branded the allegations to that effect in the complaint as
outrageously false, fantastically ridiculous and despicable fabrications of plaintiff . Nor
may any admission be inferred from the circumstance that Montilla, apart from unqualifiedly
denying the contract to sell, had also asserted in her responsive pleading that the contract was
unenforceable because violative of the Statute of Frauds and because not supported by any
consideration distinct from the price. For while those defenses imply an acceptance by the
pleader of the truth of the agreement at which the defenses are directed, the acceptance is
at best hypothetical, assumed only for purposes of determining the validity of the defenses,
but cannot in any sense be taken as an unconditional and irretrievably binding factual
admission. The import of the answer, couched in language that could not be made any plainer,
is that there was no verbal contract to sell ever agreed to by Montilla, but that, even
assuming hypothetically, or for the sake of argument that there was, the agreement was
unenforceable because in breach of the Statute of Frauds.
2.
Res judicata does not apply to interlocutory orders as these cannot become fnal
and executory The Courts interlocutory order of 5 December 1972 cannot become
conclusive, i.e., conclusive on
Sales, 2003 ( 168 )
Montilla with respect to the matter directly adjudged or as to any other matter that could
have been raised in relation thereto, as the doctrine of res judicata or bar by prior judgment (or,
for that matter, conclusiveness of judgment or estoppel by judgment) has relevance to, and
will become operative only on the basis of a final judgment or final order, the qualifying
term final being used in the sense of final and executory, i.e., not only final because
finally disposing of the case and leaving nothing more to be done by the adjudging court
relative to its merits, but also executory because the period for appeal has expired without
an appeal having been taken, or an appeal having been perfected, the judgment or order has
otherwise attained finality. An order such as that rendered on 5 December 1972, being
interlocutory, cannot become final and executory in the sense described, and cannot bring the
doctrine of res adjudicata into play at all. Indeed, the correctness of such an interlocutory
order may subsequently be impugned on appeal by any party adversely affected thereby,
regardless of whether or not he had presented a motion for the reconsideration thereof, if he
has otherwise made of record his position thereon.
3.
Identification of identity of alleged vendor

Montillas acknowledgment of being the defendant in the case can not in any manner
whatsoever be considered an admission that she had gone to see Aragon to offer her property for
sale. Non sequitur. Aragons disconcerting failure to identify Montilla is cogent confutation
of his allegation that he personally knew Montilla and had negotiated with her for his
purchase of the property in question, and strongly indicative of the inaccuracy of the
testimony of the witnesses who corroborated his dubious tale.
4.
Basis of dismissal: Statute of Frauds in relation to Rule 16 of the Rules of Court

There being therefore no admission whatever on Montillas part of the existence or
ratification of the claimed contract to sell, and taking account of her disavowal in her
pleadings and in her evidence of that contract, and necessarily of any fulfillment of the terms
thereof, it is clear that the action for its enforcement should have been dismissed pursuant to
the Statute of Frauds, in relation to Rule 16 of the Rules of Court.
5.
Basis of dismissal: Article 1479

The action is also dismissible upon another legal ground. Assuming arguendo
veritability of the oral promise to sell by Montilla, the promise was nevertheless not binding
upon her in view of the absence of any consideration therefor distinct from the stipulated
price. This is the principle laid down by the second paragraph of Article 1479: An
accepted unilateral promise 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.
6.
Document executed by Aragon as to lease; Absent any mention of alleged promise
to sell
A document, executed by Aragon on 9 July 1969 (some 9 or 10 days after Montilla had
supposedly promised to sell the lot in question to him), reveals several things. For one, the lot
on which Aragons house was being built was obviously part of the Montilla estate, and did
not as yet belong to any particular heir or person entitled thereto. For another, Aragon had been
given permission by the representative of the estate, Mr. Manaloto, to stay on the lot in
consideration of a prescribed rental, and he was imploring said Mr. Manaloto and the owners
for leave to stay in the premises until his children could finish their schooling, promising to
meet the prescribed rental obligations. Again, and this is quite significant as regards his
claim of a promise to sell by one of the Montillas, since that promise is not referred to or
even hinted at in any manner whatsoever, the genuineness of the claim is strongly suspect;
for surely, Aragon would never have implored for consideration of the owners and Mr.
Manaloto to stay in the premises until his children could finish their schooling, as lessee, if it
be true that he had accepted a promise for the sale thereof to him. The document cannot
therefore be interpreted otherwise than as denoting the concession to him of the privilege to
build a house on a lot belonging to the Montillas, and a solicitation by him of the
owners permission to lease the lot to him for a longer, and more or less determinable term, and
as an implied, though nonetheless clear, negation of any right on his part to purchase the
property.
7.
Lot 4 adjudicated to Lina Montilla pursuant to settlement of the Montilla Estate
2 years after
Sales, 2003 ( 169 )
her alleged ofer to sell

A Court Order issued on 17 June 1971 in the judicial proceedings for the settlement of
the Montilla Estate, obviously the same Montilla estate referred to by Aragon in his
certification of 9 July 1969 just described, approved the project of partition of said estate,
presented on 5 May 1971; and it states that Lot 4 was adjudicated to Lina Montilla on 17 June
1971, more than 2 years after she had supposedly offered to sell the property to Aragon. At the
time of the alleged promise to sell, Lot 4 still formed part of the amorphous mass of property
constituting the Montilla estate; at any rate, that particular lot had not been allotted to Lina
Montilla yet. The uncertainty of the eventual ownership of said Lot 4, considered
conjointly with the ostensible status of Aragon as a mere supplicant of favors from the
owners of the Montilla estate, make it very improbable indeed that Montilla would personally
go to him and promise to sell the lot to him.
[68]
National Grains Authority v. IAC [G.R. No. 74470.
March 8, 1989.] Third Division, Medialdea (J): 4 concur
Facts: National Grains Authority (now National Food Authority, NFA) is a government agency
created under PD 4. One of its incidental functions is the buying of palay grains from qualified
farmers. On 23 August 1979, Leon Soriano offered to sell palay grains to the NFA, through the
Provincial Manager (William Cabal) of NFA in Tuguegarao, Cagayan. He submitted the
documents required by the NFA for pre-qualifying as a seller, which were processed and
accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmers
Information Sheet represented the maximum number of cavans of palay that Soriano may sell
to the NFA. On 23 and 24 August 1979, Soriano delivered 630 cavans of palay. The palay
delivered were not rebagged, classified and weighed. When Soriano demanded payment of
the 630 cavans of palay, he was informed that its payment will be held in abeyance since Mr.
Cabal was still investigating on an information he received that Soriano was not a bona fide
farmer and the palay delivered by him was not produced from his farmland but was taken
from the warehouse of a rice trader, Ben de Guzman. On 28 August 1979, Cabal wrote
Soriano advising him to withdraw from the NFA warehouse the 630 cavans stating that NFA
cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX
technician (Napoleon Callangan) that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, Soriano insisted that the palay grains
delivered be paid. He then filed a complaint for specific performance and/or collection of
money with damages on 2 November 1979, against the NFA and William Cabal (Civil Case
2754). Meanwhile, by agreement of the parties and upon order of the trial court, the 630
cavans of palay in question were withdrawn from the warehouse of NFA. On 30 September
1982, the trial court found Soriano a bona fide farmer and rendered judgment ordering the
NFA, its officers and agents to pay Soriano the amount of P47,250.00 representing the unpaid
price of the 630 cavans of palay plus legal interest thereof (12% per annum, from the filing
of complaint on 20 November 1979 until fully paid). NFA and Cabal filed a motion for
reconsideration, which was denied by the court on 6 December 1982.
Appeal was filed with the Intermediate Appellate Court. On 23 December 1986, the then
IACupheld the findings of the trial court and affirmed the decision ordering NFA and its
officers to pay Soriano the price of the 630 cavans of rice plus interest. The motion for
reconsideration of the appellate courts decision was denied in a resolution dated 17 April
1986. Hence, the present petition for review with the sole issue of whether or not there was
a contract of sale in the present case.
The Supreme Court dismissed the instant petition for review, and affirmed the assailed
decision of the then IAC (now Court of Appeals) is affirmed; without costs.
1.
Sale defined
Sales, 2003 ( 170 )
Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby
one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other party to pay therefore a price certain in money or its
equivalent.
2.
Contract defined; requisites

A contract, on the other hand, is a meeting of minds between two (2) persons
whereby one binds himself, with respect to the other, to give something or to render some
service (Art. 1305, Civil Code of the Philippines). The essential requisites of contracts are: (1)
consent of the contracting parties, (2) object certain which is the subject matter of the
contract, and (3) cause of the obligation which is established (Art. 1318, Civil Code of the
Philippines.)
3.
Present case involves a perfected contract of sale

In the present case, Soriano initially offered to sell palay grains produced in his
farmland to NFA. When the latter accepted the offer by noting in Sorianos Farmers
Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between
the parties. The object of the contract, being the palay grains produced in Sorianos farmland
and the NFA was to pay the same depending upon its quality. The contention that since the
delivery were not rebagged, classified and weighed in accordance with the palay procurement
program of NFA, there was no acceptance of the offer thus this is a clear case of policitation or
an unaccepted offer to sell, is untenable.
4.
Quantity being indeterminate does not afect perfection of contract; No need
to create new contract
The fact that the exact number of cavans of palay to be delivered has not been
determined does not affect the perfection of the contract. Article 1349 of the New Civil
Code provides that the fact that the quantity is not determinate shall not be an obstacle to
the existence of the contract, provided it is possible to determine the same, without the need of
a new contract between the parties. In the present case, there was no need for NFA and Soriano
to enter into a new contract to determine the exact number of cavans of palay to be sold.
Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans.
5.
Sale a consensual contract; Acceptance is on the ofer and not the goods delivered
Sale is a consensual contract, there is perfection when there is consent upon the
subject matter and price, even if neither is delivered. (Obana vs. C.A., L-36249, March 29,
1985, 135 SCRA 557, 560) Article 1475 of the Civil Code provides that The contract of sale
is perfected at the moment there is a meeting of minds upon the thing which is the object of
the contract and upon the price. The acceptance referred to which determines consent is the
acceptance of the offer of one party by the other and not of the goods delivered.
6.
Compliance of mutual obligations once a contract of sale is perfected

From the moment the contract of sale is perfected, it is incumbent upon the parties to
comply with their mutual obligations or the parties may reciprocally demand performance
thereof. (Article 1475, Civil Code, 2nd par.)
[69]
Navera vs. CA [G.R. No. L-56838. April
concur
Facts: Leocadio Navera has 5 children, namely: Elena, Mariano, Basilio, Eduarda and Felix,
all surnamed Navera. Mariano Navera is the father of petitioner Genaro Navera (married to
Emma Amador). Elena Navera, on the other hand has three children by Antonio Nares. Two of
them are respondent Arsenio Nares and Felix Nares. The other child, Dionisia is already
deceased and has left children. Petitioner and respondents are
Sales, 2003 ( 171 )
therefore, first cousins. Way back in 1916, Leocadio Navera donated to Fausto Mustar in a
private instrument a certain property in consideration of the marriage of the formers son,
Mariano Navera, to the daughter of Fausto Mustar by the name of Restituta Mustar. On 19 July
1927, OCT RO-154(NA) was issued in the name of Elena Navera, et al., covering the land
in dispute, namely Lot 1460, situated in the Municipality of Camalig, Albay. Sometime in
1924, Elena Navera died. On 14 May 1947, Eduarda Navera, by means of a public instrument,
sold to her nephew, Arsenio Nares, all of her share in Lot 1460, which is titled in the name of
Elena Navera, et al.. Eduarda Naveras share in the lot is 1/2 of the total area of Lot 1460
(The other half allegedly owned by Lina Navera, the deceased mother of the buyer, who was
the administrator of said half. Arsenio Nares thus take care of the whole property). On 26 June
1948, Eduarda Navera sold for the second time a portion of Lot 1460 to Mariano Navera (50
meters long and 59 meters wide). On 30 January 1953, Arsenio Nares sold to Perpetua Dacillo
a portion of Lot 4167 containing an area of 5,726 sq. ms. Perpetua Dacillo thereafter donated
the said property to Francisco Dacillo. On 13 August 1955, Mariano Navera, sold to his brotherin-law, Serapio Mustar, the lot which he bought from Eduarda Navera. On 11 February 1956, a
deed of sale was supplemented by the following stipulation (b) as to the property under
paragraph (2) thereof, the same pertains to Cadastral Lot No. 1460, containing an area of 199-69 square meters, more or less, (in the said document there was clerical error of the area, as
previously stated in the total area of 00-09-16, which is hereto corrected as 1-90-71 square
meters, as the total area sold). On 7 April 1959, Serapio Mustar later sold to Genaro
Navera Lot 1460 which he bought from the latters father, Mariano Navera, containing an
area of 19,969 sq. ms. more or less. On 3 September 1971, Francisco Dacillo sold to Genaro
Navera the land which the former received by way of donation from Perpetua Dacillo. All of
the foregoing transfers of Lot 1460 were not annotated and inscribed in the OCT.
[Nares complaint] In their complaint dated 14 March 1971 filed with the then CFI Albay
(now RTC; Civil Case 4359), Arsenio and Felix Nares, alleged inter alia: that they are the
absolute owners of the whole of Lot 1460 covered by OCT No. RO-154(NA), and are entitled
to the possession of the same; that Lot 1460 is registered in the name of Elena Navera, et
al., the et al. being Eduarda Navera; that they acquired the property by inheritance from
their deceased mother Elena Navera; that a portion thereof which had been adjudicated to
Eduarda Navera was later sold to Arsenio Nares; that sometime in August, 1955, Mariano
Navera, without any legal right whatsoever and under the pretense of ownership sold the said
property to his brother-in-law Serapio Mustar, who in turn sold the same to Genaro Navera,
son of Mariano. They also claimed that all the foregoing sales were sham and manipulated
transactions and that Mariano Navera knew fully well that he had no right to sell the
property. They admitted however, that they sold a portion of the property containing 6,726
square meters to Perpetua Dacillo, so that the remaining portion still belongs to them. They
further contended that Genaro Navera entered the land after the sale to him by Mustar and
took possession of the same and acquired the produce thereof since 1957 up to the present time;
and that they have exerted earnest efforts toward a compromise but Navera instead challenged
them to go to court. [Naveras counterclaim] Genaro Navera and Emma Amador filed their
answer with counterclaim, denying Nares claims, and alleging inter alia: that Leocadio
Navera is the father of five children, namely, Elena, Mariano, Eduarda, Basilio and Felix; that
after deducting 12,415 square meters which Leocadio Navera donated to Fausto Mustar in
1916, the remaining area of Lot 1460 was divided in equal shares among Elena, Mariano and
Eduarda, to the extent of 4,860 square meters each; that Basilio and Felix were given their
shares in other parcels of land. They also submitted that the et al. appearing in the title of
the property refers to Fausto Mustar (12,415 sq. ms.), Eduarda Navera (4,860 sq. ms.), Mariano
Navera (4,860 sq. ms.) and Elena Navera (4,860 sq. ms.); that Eduarda Navera sold 2,695 sq. ms.
of her share to Mariano Navera while the remaining 2,166 sq sq. ms. of her share was sold to
Arsenio Nares; that Arsenios property totalled 7,026 sq. ms. which he later sold to Perpetua
Dacillo. They further contended that they are presently in possession of Lot 1460 and their
possession tacked to that of their predecessor-in-interest as early as 1916; that the complaint
states no cause of action and that if Nares had any, the same has long prescribed. [Courts
ruling] On 28 February 1978, the trial court rendered a decision declaring Nares owners of the
lot described in the OCT RO-15480, except 5,726 sq. ms. which rightfully belongs to Genaro
Navera.
Sales, 2003 ( 172 )
Not satisfied with the decision of the trial court, Navera appealed to the Court of Appeals (CAGR 63926-R). On 16 December 1980, the appellate court rendered judgment affirming in toto
the decision of the trial court. Hence the petition for review on certiorari.
The Supreme Court denied the petition but modified the decision of the Court of Appeals dated
16 December 1980 to the effect that as against Genaro Navera and Emma Amador, Arsenio
Nares and Felix Nares are declared the rightful owners of the disputed Lot 1460, except with
respect to 5,726 square meters thereof which belongs to Genaro Navera, without prejudice
however, to whatever rights and interests that the other compulsory heirs of Elena Navera
may have in the one-half portion of Lot 1460. The respective rights of respondents to Lot
1460 as between themselves is a matter outside of the controversy and is therefore, beyond the
jurisdiction of the Court to pass upon.
1.
Et. al refer only to Eduarda; Factual finding of courts conclusive upon the
Supreme Court The whole of Lot 1460 is titled in the name of Elena Navera, et al.,
the phrase et al. referring only
to Eduarda, sister of Elena since the other brothers of Elena and Eduarda namely, Mariano,
Basilio and Felix had received their shares from the other properties of their father Leocadio
Navera. These factual findings are conclusive upon the Supreme Court. Thus, when Elena
Navera died sometime in 1924, her compulsory heirs including Arsenio Nares and Felix Nares
acquired Elenas shares in Lot 1460 by inheritance, which is 1/2of Lot 1460. As to the other
half of Lot 1460 owned by Eduarda Navera, the latter sold the same to two vendees, one in
favor of Arsenio Nares and the other in favor of Mariano Navera, Genaro Naveras
predecessor-in-interest.
2.
Double Sale; Eduarda Navera had no existing right anymore to convey portion of
property in a subsequent sale to Mariano Navera
On this matter of double sale, all the transfers or conveyances are not inscribed in
the OCT RO-15480(NA). It would not be amiss to state that the sale of Eduarda Navera to
Arsenio Nares, and the sale of Eduarda Navera to Mariano Navera, the property referred to in
both sales is the very same property covered by reconstituted title. The sale of Eduarda Navera
to Arsenio Nares covered all her portion to the property, thus, she could not possibly sell on
26 June 1948, another portion of the same property to Mariano Navera. Thus, the portion
referred to in the sale to Mariano Navera by Eduarda Navera may not be validly transferred by
Mariano Navera to Serapio Mustar. It likewise follow that Serapio Mustar may not effectively
convey the same to Genaro Navera. It is irremissible to state that the alleged conveyance
made by Serapio Mustar in favor of Genaro Navera have no legal effect whatsoever, for the
simple reason that Serapio Mustar could not properly convey the portion referred to in the sale
of 26 June 1948, by Eduarda Navera in favor of Mariano Navera. In the first place, Eduarda
Navera has no existing right to convey another portion of the property because she had
already sold all her portion to Arsenio Nares. Thus at the time Eduarda Navera conveyed a
portion of the property which she already conveyed to appellee Arsenio Nares, she has no
right on the property and the power to dispose it. Mariano Navera therefore never acquired
that portion subject of the sale on 26 June 948. Having acquired that portion of the property
subject of the sale on 26 June 1948 from Mariano Navera, Serapio Mustar has likewise no
existing right and power to dispose of that portion of the property to Genaro Navera.
3.
Navera not possessors in good faith; Knowledge of flaw of title

Article 526 of the New Civil Code provides that a possessor in good faith is one who is
not aware that there exists in his title or mode of acquisition any flaw which invalidates it and
a possessor in bad faith is one who possesses in any case contrary to the foregoing. Every
possessor in good faith becomes a possessor in bad faith from the moment he becomes aware
that what he believed to be true is not so. His possession is legally interrupted when he is
summoned to trial according to Article 1123 of the New Civil Code (Tacas v. Tabon, 53 Phil.
356).
4.
Conclusions and finding of facts by trial court given great weight

Sales, 2003 ( 173 )
The conclusions and findings of facts by the trial court are entitled to great weight
and will not be disturbed on appeal unless for strong and cogent reasons because the trial
court is in a better position to examine real evidence as well as to observe the demeanor of
witnesses while testifying on the ease. (Macua vs. Intermediate Appellate Court, No. L-70810,
October 26, 1987, 155 SCRA 29).
5.

Article 1544 of the Civil Code provides that If the same thing should have been sold
to diferent vendees, the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property. Should it be immovable
property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property. Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the possession; and, in the absence thereof,
to the person who presents the oldest title, provided there is good faith.
6.
Sales not registered; Ownership vested upon first possessor in good faith
The first sale of Eduarda Naveras share in the said lot to Arsenio Nares was made
in a public instrument on 14 May 1947. The second sale of the same property was executed
also in a public instrument in favor of Mariano Navera, who is the predecessor in interest of
Genaro Navera, on 26 June 1948, or more than a year after the first sale. Since the records show
that both sales were not recorded in the Registry of Property, the law clearly vests the
ownership upon the person who in good faith was first in possession of the disputed lot.
7.
Possession of vendor includes not only the material but also symbolic possession;
Vendor does not transmit anything to second vendee
The possession mentioned in Article 1544 for determining who has better right when the
same piece of land has been sold several times by the same vendor includes not only the
material but also the symbolic possession, which is acquired by the execution of a public
instrument. This means that after the sale of a realty by means of a public instrument, the
vendor, who resells it to another, does not transmit anything to the second vendee, and if the
latter, by virtue of this second sale, takes material possession of the thing, he does it as mere
detainer, and it would be unjust to protect this detention against the rights of the thing
lawfully acquired by the first vendee (Quimson vs. Rosete, 87 Phil. 159; Sanchez vs. Ramos, 40
Phil. 614; Florendo vs. Foz, 20 Phil. 388).
8.
Constructive delivery in the execution of public instrument

The prior sale of the land to Arsenio Nares by means of a public instrument is clearly
tantamount to a delivery of the land resulting in the material and symbolic possession
thereof by the latter. Further, actual evidence points to the prior actual possession by Nares
before he was evicted from the land by Navera and their predecessors in 1957 when the latter
entered the disputed property. No other evidence exists on record to show the contrary.
9.
Prior est in tempore, potior est in jure

Prior est in tempore, potior est in jure (he who is first in time is preferred in right).
The priority of possession stands good in favor of Nares. Ownership should therefore be
recognized in favor of the first vendee, Arsenio Nares.
10.
Prescription must be expressly relied upon in the pleadings; One asserting
ownership through adverse possession must prove essential elements of acquisitive
prescription
Navera alleged that they have been in possession of the lot for more than 46 years.
Prescription, as a defense, must be expressly relied upon in the pleadings. It cannot be availed
of, unless it is specially pleaded in the answer; and it must be proved or established with
the same degree of certainty as any essential allegation in the civil action (Hodges vs. Salas,
63 Phil. 567; Corporacion de PP. Augustinus Recolectos vs. Crisostomo, 32 Phil. 427). In the
present case, Navera did not claim acquisitive prescription in their answer in
Sales, 2003 ( 174 )
the lower court, and even if they did, it cannot be given judicial sanction on mere
allegations. The law requires one who asserts ownership by adverse possession to prove the
presence of the essential elements of acquisitive prescription (Morales vs. CFI, et al., No. L52278, May 29, 1980, 97 SCRA 872).
11.
Nares evicted, thus Navera is in bad faith; 30-year requirement in adverse
possession not met (suit fled 1971, 14 years after dispossession)
There is lack of sufficient proof to establish clearly and positively Naveras claim
of acquisitive prescription. The Court is more inclined to believe Nares version that he was
evicted from the property by Navera sometime in 1957, thereby showing the latters bad
faith in acquiring the possession of the property until 1971 when the action against Navera
was filed. Thus, the ordinary acquisitive prescription of 10 years cannot be considered in
favor of Navera in the absence of good faith. Neither is Navera entitled to extraordinary
acquisitive prescription, in the absence of sufficient proof of compliance with the thirty-year
requirement of possession in case of bad faith.
12.
Navera has knowledge of right and interest of cousins in disputed land

The law clearly states that possession has to be in the concept of an owner, public,
peaceful and uninterrupted (Article 1118, Civil Code). A reading of the demand letter from
Nares dated 27 May 1970, submitted in evidence by Navera, shows that the dispute over Lot
1460 had been going on for a number of years among them and their families. During the time
when Navera bought the land in 1959 and the following years thereafter when the latter
possessed the property, they have known or should have known of the rights and interests of
their cousins over the disputed land.
13.
Naveras predecessor-in-interest did not declare themselves owner of land for

taxation purposes Moreover, the tax declarations for the years 1951 and 1965 showed
that Arsenio and Felix Nares were
the declared owners. Naveras predecessors in interest, namely, Mariano Navera and the
subsequent purchasers of the lot, had not bothered to declare the land in their own names for
purposes of taxation during the time that they were allegedly in possession of the land. It was
only in the year 1966 when Genaro Navera started to declare himself owner of the land for
taxation purposes.
14.
Nares not bound by alleged donation propter nuptias in favor of Mustar; No
evidence that donated property was transferred to Mariano Navera
Arsenio and Felix Nares are not bound by their alleged knowledge of the previous
donation propter nuptias by their ancestor, Leocadio Navera in favor of Fausto Mustar. The
donation propter nuptias made by Leocadio Navera sometime in October 1916, should have
been at least recorded in the registry of property or inscribed in the Original Certificate of
Title or the donee shall have titled the property in his name. The alleged donee Fausto
Mustar is not a party to the case nor had he transferred the said donated property to the spouses
Mariano Navera in a public instrument or conveyance. Nowhere in the evidence on record
would show that the said donated property was ever transferred to Mariano Navera, father of
Genaro Navera.
15.
Knowledge of alleged donation immaterial; OCT clear without mention of
any previous donation of any portion of the land
The knowledge of Nares concerning the alleged previous donation is immaterial. The
facts are clear that the original certificate of title itself covers the whole of 26,995 square
meters of the disputed Lot 1460 in the name of Elena Navera, et al., without any mention of
any previous donation of a portion of the said lot to the alleged donee.
[70]
Nietes v. CA, 46 SCRA 654
[71]
Sales, 2003 ( 175 )
Noel v. CA [G.R. No. 59550. January 11,

1995.] Mercado v. CA [G.R. No. 60636.
January 11, 1995.] First Division, Quiason (J):
4 concur
Facts: Gregorio Nanaman and Hilaria Tabuclin were a childless, legally-married couple.
Gregorio, however, had a child named Virgilio Nanaman by another woman. Virgilio was
reared by the Nanaman spouses since he was two years old. During their marriage, Gregorio and
Hilaria acquired certain property including a 34.7-hectare land in Tambo, Iligan City on which
they planted sugarcane, corn and bananas; where they lived with Virgilio and 15 tenants. On 2
October 1945, Gregorio died. Hilaria then administered the property with the help of Virgilio.
Through their tenants, Hilaria and Virgilio enjoyed the produce of the land to the exclusion of
Juan Nanaman, the brother of Gregorio, and Esperanza and Caridad Nanaman, Gregorios
daughters by still another woman. In 1953, Virgilio declared the property in his name for
taxation purposes under Tax Declaration 5534. On 1 November 1952, Hilaria and Virgilio,
mortgaged the 34.7-hectare land in favor of Jose C. Deleste, in consideration of the amount
of P4,800.00. On 16 February 1954, Hilaria and Virgilio executed a deed of sale over the
same tract of land also in favor of Deleste in consideration of the sum of P16,000.00.
Witnesses to the sale were the wife of Virgilio, Rosita S. Nanaman, Rufo C. Salas (Delestes
driver), and Remedios Pilotan. The document was notarized on 17 February 1954 and was
registered with the Register of Deeds of Iligan City on 2 March 1954. Having discovered that
the property was in arrears in the payment of taxes from 1952, Deleste paid the taxes for 1952,
1953 and 1954. From then on, Deleste has paid the taxes on the property.
On 15 May 1954, Hilaria died. On 27 October 1954, Esperanza and Caridad Nanaman filed
intestate estate proceedings concerning the estate of their father, Gregorio. As only Esperanza,
Caridad and Virgilio Nanaman were named as heirs of Gregorio in the petition, Juan
Nanaman opposed it. On 26 November 1954, the petition was amended to include the
estate of Hilaria with Alejo Tabuclin, Hilarias brother, and Julio Tabuclin, a son of
Hilarias deceased brother, Jose, as additional petitioners. Having been appointed special
administrator of the estate of the Nanaman couple, Juan Nanaman included the 34.7-hectare
land in the list of the assets of the estate. On 16 June 1956, when Edilberto Noel took over as
regular administrator of the estate, he was not able to take possession of the land in question
because it was in the possession of Deleste and some heirs of Hilaria. On 18 July 1957, Deleste
and the heirs of the Nanaman spouses executed an amicable settlement of the Nanaman estate.
In the document, Deleste agreed to relinquish his rights to of the entire parcel of land in
Tambo, Iligan City sold to him by Hilaria Tabuclin, in favor of all the heirs of the intestate
estate for the reason that not all of the heirs of Gregorio Nanaman have signed and
agreed. The court approved the amicable settlement but when it was questioned by some
heirs, the court set aside its approval and declared it null and void.
The court thereafter ordered Noel, as regular administrator, to file an action to recover the
34.7-hectare land from Deleste. Consequently, on 30 April 1963, Noel filed an action against
Deleste for the reversion of title over the 34.7-hectare land to the Nanaman estate and to order
Deleste to pay the rentals and attorneys fees to the estate. On 14 December 1973, the trial
court rendered a decision, holding that the action for annulment of the deed of sale had
prescribed in 1958 inasmuch as the sale was registered in 1954 and that Gregorios heirs had
slept on their rights by allowing Hilaria to exercise rights of ownership over Gregorios
share of the conjugal property after his death in 1945. Noel appealed to the Court of Appeals.
On 18 February 1980, the appellate court ruled that the transaction between Hilaria and
Virgilio, and Deleste, was indeed a sale. It found that no fraud, mistake or misrepresentation
attended in the execution of the deed of sale and that no proof was shown that the contract was
merely a mortgage. The appellate court, however, agreed with Noel that Hilaria could not
validly sell the 37.7-hectare land because it was conjugal property, and Hilaria could sell only
her share thereof. The Court also ruled that the prescriptive period of 10 years had not yet
elapsed when the action to recover the property was filed in 1963.; and held that in the
absence of proof of adverse possession by Hilaria, she should be considered as holding the
property pursuant to her usufructuary rights over the same
Sales, 2003 ( 176 )
under the provisions of the Spanish Civil Code of 1889, the law in force at the time of the
death of Gregorio. The Court further ordered Deleste to return the land in question to the
administrator of the estate, to pay the sum of P2,500 as rental of the interest of the estate
from 1957 until the land is returned, and to pay the expenses of litigation and the sum of
P3,000 as attorneys fees.
Deleste filed a motion for the reconsideration of said decision praying for the total affirmance
of the decision of the trial court. On 14 May 1981, the Court of Appeals promulgated an
amended decision. It affirmed its previous decision regarding the due execution of the deed
of sale adding that since no fraud attended its execution, there was no basis for the action
to annul the sale and therefore there was no starting point in reckoning the prescriptive
period of four years. It reconsidered the Decision of 18 February 1980 insofar as it declared
Deleste and the estate of Gregorio as co-owners of the 34.7-hectare land.
Pinito W. Mercado, as new administrator of the estate, appealed to the Supreme Court,
questioning the Court of Appeals Amended Decision applying the doctrine of laches and
equating the said doctrine with acquisitive prescription (GR 59550). Subsequently, another
petition for certiorari to declare the sale to Deleste as an equitable mortgage, was filed by
Atty. Bonifacio Legaspi, representing the heirs of Hilaria (GR 60636). The two cases, arising
from the same decision of the Court of Appeals, were consolidated in the resolution of 2
September 1991 and were jointly considered.
The Supreme Court reversed and set aside the amended decision dated 14 May 1981 of the Court
of Appeals, and reinstated and affirmed in toto the Decision dated 18 February 1980.
1.
Seemingly inadequate consideration does not render a contract of sale as one of
mortgage
The contract involving the 34.7-hectare property was one of sale and not of mortgage in
the absence of a showing that the findings complained of are totally devoid of support in the
record or that they are so glaringly erroneous as to constitute serious abuse of discretion
(Andres v. Manufacturers Hanover & Trust Corporation, 177 SCRA 618 [1989]). It should be
noted that two contracts had been executed involving said property (the 1 November 1952
mortgage and the 16 February 1954 sale). In the absence of proof of gross inadequacy of the
price, that the sale was made with what might appear as an inadequate consideration does not
make the contract one of mortgage (Askay v. Cosalan, 46 Phil. 179 [1924]).
2.
Succession in the present case governed by the Civil Code of 1889

Gregorio died in 1945 long before the effectivity of the Civil Code of the Philippines
on 30 August 1950. Under Article 2263 of the said Code, rights to the inheritance of a person
who died, with or without a will, before the effectivity of this Code, shall be governed by the
Civil Code of 1889, by other previous laws, and by the Rules of Court. Thus, succession to
the estate of Gregorio was governed primarily by the provisions of the Spanish Civil Code of
1889.
3.
1889 Civil Code; Wife has full ownership of undivided half-interest and the
usufruct over the other; Right to alienate half-interest
Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters
or children of brothers or sisters of the decedent was entitled to receive in usufruct the part of
the inheritance pertaining to said heirs. Hilaria, however, had full ownership, not merely
usufruct, over the undivided half of the estate (Spanish Civil Code of 1889, Art. 493). It is
only this undivided half-interest that she could validly alienate. Under the law in force in
1945, the surviving spouse was given the management of the conjugal property until the affairs
of the conjugal partnership were terminated. The surviving spouse became the owner of one-
half interest of the conjugal estate in his own right. He also became a trustee with respect to
the other half for the benefit of whoever may be legally entitled to inherit the said portion.
4.
1889 Civil Code; Virgilio is not a heir of Gregorio, being illegitimate; No
right to transfer ownership
Sales, 2003 ( 177 )
Virgilio was not an heir of Gregorio under the Spanish Civil Code of 1889. Although he
was treated as a child by the Nanaman spouses, illegitimate children who were not natural
were disqualified to inherit under the said Code (Cid v. Burnaman, 24 SCRA 434 [1968]).
Article 998 of the Civil Code of the Philippines, which gave an illegitimate child certain
hereditary rights, could not benefit Virgilio because the right of ownership of the collateral
heirs of Gregorio had become vested upon his death (Civil Code of the Philippines, Art. 2253;
Uson v. Del Rosario, 92 Phil. 530 [1953]). Therefore, Virgilio had no right at all to transfer
ownership over which he did not own.
5.
Contract of sale; essential that seller is the owner of the property

In a contract of sale, it is essential that the seller is the owner of the property he is
selling. The principal obligation of a seller is to transfer the ownership of the property
sold (Civil Code of the Philippines, Art. 1458). This law stems from the principle that
nobody can dispose of that which does not belong to him (Azcona v. Reyes, 59 Phil. 446
[1934]; Coronel v. Ona, 33 Phil. 456 [1916]). NEMO DAT QUAD NON HABET .
6.
Mistake attended sale of undivided interest in property belonging to the
collateral heirs of Gregorio
While it cannot be said that fraud attended the sale to Deleste, clearly there was a
mistake on the part of Hilaria and Virgilio in selling an undivided interest in the property
which belonged to the collateral heirs of Gregorio.
7.
Purchaser is a trustee of an implied trust if property is acquired by mistake or fraud

The sale, having been made in 1954, was governed by the Civil Code of the
Philippines. Under Article 1456 of said Code, an implied trust was created on the one-half
undivided interest over the 34.7-hectare land in favor of the real owners. Said Article provides
that if the property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes. In Diaz v. Gorricho, 103 Phil. 261 (1958), the Court said that Article 1456
merely expresses a rule recognized in Gayondato v. Insular Treasurer, 49 Phil. 244 (1926).
Applying said rule, the Gayondato court held that the buyer of a parcel of land at a public
auction to satisfy a judgment against a widow acquired only one-half interest on the land
corresponding to the share of the widow and the other half belonging to the heirs of her
husband became impressed with a constructive trust in behalf of said heirs.
8.
Surviving spouse cannot acquire a title by prescription over said administered half
Being a trustee with respect to the other half for the benefit of whoever may be
legally entitled to inherit the said portion, the surviving spouse could therefore no more
acquire a title by prescription against those for whom he was administering the conjugal estate
than could a guardian against his ward or a judicial administrator against the heirs of an estate.
The surviving husband as the administrator and liquidator of the conjugal estate occupies the
position of a trustee of the highest order and is not permitted by the law to hold that estate or
any portion thereof adversely to those for whose benefit the law imposes upon him the duty of
administration and liquidation (Pamittan v. Lasam, 60 Phil. 908 [1934]).
9.
Virgilios possession not under the claim of ownership

The possession of Virgilio, his registration of the land in his name for tax purposes,
his hiring of tenants to till the land, and his enjoyment of the produce of the tenants, appear
more as acts done to help Hilaria in managing the conjugal property. There is no evidence to
prove indubitably that Virgilio asserted a claim of ownership over the property in his own right
and adverse to all including Hilaria.
10.
Laches do not apply; Doctrine cannot prejudice the rights of an owner or
original transferee The doctrine of laches does not apply. Upon orders of the court in
the intestate proceedings, Noel, the
administrator of the estate of the Nanaman spouses, immediately filed an action to recover
possession and
Sales, 2003 ( 178 )
ownership of the property. There is no evidence showing any failure or neglect on his
part, for an unreasonable and unexplained length of time, to do that which, by exercising due
diligence, could or should have been done earlier (Cristobal v. Melchor, 78 SCRA 175 [1977]).
The doctrine of stale demands would apply only where by reason of the lapse of time, [i]t
would be inequitable to allow a party to enforce his legal rights (Z.E. Lotho, Inc. v. Ice and
Cold Storage Industries of the Philippines, Inc., 3 SCRA 744 [1961]). Moreover, this Court,
except for very strong reasons, is not disposed to sanction the application of the doctrine
of laches to prejudice or defeat the rights of an owner or original transferee (Raneses v.
Intermediate Appellate Court, 187 SCRA 397 [1990]).
11.
Prescription is ten years in an action to recover the undivided half-interest

The action to recover the undivided half-interest of the collateral heirs of Gregorio
prescribes in 10 years. The cause of action is based on Article 1456 of the Civil Code of the
Philippines, which made Deleste a trustee of an implied trust in favor of the said heirs. Under
Article 1144 of the Civil Code of the Philippines, actions based upon an obligation created by
law, can be brought within ten years from the time the right of action accrues (Rosario v.
Auditor General, 103 Phil. 1132 [1958]). The 10-year prescriptive period within which the
collateral heirs of Gregorio could file an action to recover their share in the property sold to
Deleste (prescripcion extintiva) accrued only on 2 March 1954, when the deed of sale was
registered with the Register of Deeds (Cf. Arradaza v. Court of Appeals, 170 SCRA 12 [1987]).
From 2 March 1954 to 30 April 1963, when the complaint for the recovery of the property was
filed, less than 10 years had elapsed. Therefore, the action had not been barred by prescription.
The 10-year prescriptive period before title to real estate shall vest by adverse possession
(prescripcion adquisitiva) is also reckoned in the case of Deleste from 2 March 1954
(Corporacion de PP. Agustinos Recoletos v. Crisostomo, 32 Phil. 427 [1915]).
[72]
Spouses Nonato vs. IAC [G.R. No. L-67181. November
22, 1985.] Second Division, Escolin (J): 4 concur
Facts: On 28 June 1976, spouses Restituto Nonato and Ester Nonato purchased 1 unit of
Volkswagen Sakbayan from the Peoples Car, Inc., on installment basis. To secure complete
payment, they executed a promissory note and a chattel mortgage in favor of Peoples Car,
Inc. Peoples Car, Inc., assigned its rights and interests over the note and mortgage in favor of
Investors Finance Corporation (IFC). For failure of the spouses to pay two or more
installments, despite demands, the car was repossessed by IFC on 20 March 1978. Despite
repossession, IFC demanded from the spouses that they pay the balance of the price of the car.
On 9 June 1978, IFC filed before the CFI Negros Occidental a complaint against the spouses for
the latter to pay the balance of the price of the car, with damages and attorneys fees. In their
answer, the spouses 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. The trial court, however, after due hearing, rendered a
decision in favor of IFC, ordering the spouses to pay IFC the amount of P17,537.60 with interest
at the rate of 14% per annum from 28 July 1976 until fully paid, 10% of the amount due as
attorneys fees, litigation expenses in the amount of P133.05 plus the costs of the suit; without
any pronouncement as to other charges and damages, the same not having been proven to the
satisfaction of the Court.
On appeal, the appellate court affirmed the judgment. Hence, the petition for review on certiorari.
The Supreme Court set aside the judgment of the appellate court in CA-GR 69276-R and
dismissed the complaint filed by Investors Finance Corporation against the Nonato spouses in
Civil Case 13852; without costs.
Sales, 2003 ( 179 )
1.
Article 1484 of the Civil Code; Remedies available to vendor of personal
property in sale payable in installments
Article 1484 of the Civil Code (on sale of personal property on installment)
provides that 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 vendees
failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the vendees 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.
2.
Meaning of Article 1484

The meaning of the 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.
3.
Repossession an exercise of canceling the contract of sale not merely to appraise

the cars value It is not disputed that the company had taken possession of the car
purchased by the Nonatos on
installments. 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 records show otherwise. The
receipt issued by the company to the Nonatos when it took possession of the vehicle states that
the vehicle could be redeemed within 15 days. This could only mean that should the spouses
fail to redeem the car within the period by paying the balance of the purchase price, the
company would retain permanent possession of the vehicle. The assertion that the company
repossessed the vehicle merely for the purpose of appraising its current value 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.
4.
Cancellation of contract bars company from exacting payment of balance

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.
[73]
Nool v. CA [G.R. No. 116635. July 24,
1997.] Third Division, Panganiban (J): 4
concur
Facts: One lot formerly owned by Victorio Nool (TCT T-74950) has an area of 1 hectare.
Another lot previously owned by Francisco Nool (TCT T-100945) has an area of 3.0880
hectares. Both parcels are situated in San Manuel, Isabela. Spouses Conchita Nool and
Gaudencio Almojera (plaintiffs) alleged that they are the owners of the subject land as they
bought the same from Victorio and Francisco Nool, and that as they are in dire need of money,
they obtained a loan from the Ilagan Branch of the DBP (Ilagan, Isabela), secured by a real
estate mortgage on said parcels of land, which were still registered in the names of Victorino
and Francisco Nool, at the time, and for the failure of the plaintiffs to pay the said loan,
including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that
within the period of redemption, the plaintiffs contacted Anacleto Nool for the latter to
redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of
the 2 parcels of land in question were transferred to Anacleto; that as
Sales, 2003 ( 180 )
part of their arrangement or understanding, Anacleto agreed to buy from Conchita the 2 parcels
of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was
paid to Conchita, and upon payment of the balance of P14,000.00, the plaintiffs were to regain
possession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emilia Nebre
(defendants) failed to pay, and the same day the said arrangement was made; another
covenant was entered into by the parties, whereby the defendants agreed to return to plaintifs
the lands in question, at anytime the latter have the necessary amount; that latter asked the
defendants to return the same but despite the intervention of the Barangay Captain of their
place, defendants refused to return the said parcels of land to plaintiffs; thereby impelling
the plaintiffs to come to court for relief. On the other hand, defendants theorized that they
acquired the lands in question from the DBP, through negotiated sale, and were misled by
plaintiffs when defendant Anacleto Nool signed the private writing, agreeing to return
subject lands when plaintiffs have the money to redeem the same; defendant Anacleto
having been made to believe, then, that his sister, Conchita, still had the right to redeem the
said properties.
It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the 1year redemption period (from 16 March 1982 up to 15 March 1983) and that the
mortgagors right of redemption was not exercised within this period. Hence, DBP became the
absolute owner of said parcels of land for which it was issued new certificates of title, both
entered on 23 May 1983 by the Registry of Deeds for the Province of Isabela. About 2 years
thereafter, on 1 April 1985, DBP entered into a Deed of Conditional Sale involving the same
parcels of land with Anacleto Nool as vendee. Subsequently, the latter was issued new
certificates of title on 8 February 1988.
The trial court ruled in favor of the defendants, declaring the private writing to be an
option to sell, not binding and considered validly withdrawn by the defendants for want of
consideration; ordering the plaintiffs to return to the defendants the sum of P30,000.00 plus
interest thereon at the legal rate, from the time of filing of defendants counterclaim until the
same is fully paid; to deliver peaceful possession of the 2 hectares; and to pay reasonable rents
on said 2 hectares at P5,000.00 per annum or at P2,500.00 per cropping from the time of
judicial demand until the said lots shall have been delivered to the defendants; and to pay the
costs. The plaintiffs appealed to the Court of Appeals (CA GR CV 36473), which affirmed the
appealed judgment in toto on 20 January 1993. Hence, the petition before the Supreme Court.
The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals.
1.
Contract of repurchase arising out of a contract of sale where the seller does not
have title not valid
A contract of repurchase arising out of a contract of sale where the seller did not have
any title to the property sold is not valid. Since nothing was sold, then there is also nothing
to repurchase.
2.
Article 1370 NCC applicable only to valid and enforcement contracts

Article 1370 of the Civil Code, which provides that if the terms of a contract are clear
and leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulations shall control, is applicable only to valid and enforceable contracts.
3.
A void contract cannot give rise to a valid one

A void contract cannot give rise to a valid one. Article 1422 of the Civil Code
provides that a contract which is the direct result of a previous illegal contract, is also void
and inexistent. In the present case. the alleged contract of repurchase being dependent on the
validity of the contract of sale, it is itself void. Thus, the principal contract of sale and the
auxiliary contract of repurchase are both void.

4.
Clarifcation of sale of property, when seller is no longer the owner, null
and void; Sale possible even if owner is not owner at time of sale, provided that he
acquires title to the property at time of delivery
Sales, 2003 ( 181 )
In the case of Dignos v. CA, the Court did not cite its basis for ruling that a sale is
null and void where the sellers were no longer the owners of the property. Such a
situation (where the sellers were no longer owners) does not appear to be one of the void
contracts enumerated in Article 1409 of the Civil Code. Moreover, the Civil Code itself
recognizes a sale where the goods are to be acquired by the seller after the perfection of the
contract of sale, clearly implying that a sale is possible even if the seller was not the owner at
the time of sale, provided he acquires title to the property later on.
5.
Void contracts (Article 1409 [5]); those which contemplates an impossible service
Article 1459 of the Civil Code provides that the vendor must have a right to transfer
the ownership thereof [object of the sale] at the time it is delivered. Here, delivery of
ownership is no longer possible. The sellers can no longer deliver the object of the sale to
the buyers, as the buyers themselves have already acquired title and delivery thereof from the
rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and may thus
fall, by analogy, under item 5 of Article 1409 of the Civil Code: Those which contemplate
an impossible service.
6.
Nono dat quod non habet, No one can give what he does not have; Contract
of repurchase inoperative thus void
Article 1505 of the Civil Code provides that where goods are sold by a person who is
not the owner thereof, and who does not sell them under authority or with consent of the
owner, the buyer acquires no better title to the goods than the seller had, unless the owner of
the goods is by his conduct precluded from denying the sellers authority to sell.
Jurisprudence, on the other hand, teaches us that a person can sell only what he owns or is
authorized to sell; the buyer can as a consequence acquire no more than what the seller can
legally transfer. No one can give what he does not have nono dat quod non habet. In the
present case, there is no allegation at all that petitioners were authorized by DBP to sell the
property to the private respondents. Further, the contract of repurchase that the parties
entered into presupposes that petitioners could repurchase the property that they sold to
private respondents. As petitioners sold nothing, it follows that they can also repurchase
nothing. In this light, the contract of repurchase is also inoperative and by the same analogy,
void.
7.
Right to repurchase presupposes a valid contract of sale

One repurchases only what one has previously sold. In other words, the right to
repurchase presupposes a valid contract of sale between the same parties. Undisputedly, private
respondents acquired title to the property from DBP, and not from petitioners.
8.
Arguendo, Scenario where the Contract of repurchase distinct from that of
sale; Petitions still do not acquire a right to repurchase the property; Unilateral
promise to pay only binding if supported by consideration distinct from price
Assuming arguendo that the contract of repurchase is separate and distinct from the
contract of sale and is not affected by the nullity of the latter, still petitioners do not thereby
acquire a right to repurchase the property. In that scenario, the contract of repurchase ceases
to be a right to repurchase ancillary and incidental to the contract of sale; rather, it
becomes an accepted unilateral promise to sell. Article 1479 of the Civil Code, however,
provides that an accepted unilateral promise to buy or sell a determinate thing for a price
from the price. In the present case, the alleged written contract of repurchase is bereft of
any consideration distinct from the price. Accordingly, as an independent contract, it cannot
bind private respondents.
9.
Conventional redemption; Compliance with Article 1616 and other agreed
stipulations
Article 1601 of the Civil Code provides that conventional redemption shall take
place when the vendor reserves the right to repurchase the thing sold, with the obligation to
comply with the provisions of Article 1616 and other stipulations which may have been agreed
upon.
Sales, 2003 ( 182 )
10.
Right of repurchase a right granted by vendor in the same instrument of
sale, not in a subsequent instrument
In Villarica v. CA (29 November 1968), the Court ruled that the right of repurchase
is not a right granted the vendor by the vendee is a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as one of the stipulations of the contract.
Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to
repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument
cannot be a right of repurchase but some other right (like the option to buy).
11.
Sale, without agreement to repurchase, absolute

In Ramos, et al. vs. Icasiano, et al. (1927) the Court ruled that an agreement to
repurchase becomes a promise to sell when made after the sale, because when the sale is made
without such an agreement, the purchaser acquires the thing sold absolutely. and if he
afterwards grants the vendor the right to repurchase, it is a new contract entered into by the
purchaser, as absolute owner already of the object. In that case the vendor has not reserved to
himself the right to repurchase.
12.
Option to repurchase a promise to sell, governed by Article 1479

The Option to Repurchase executed by private respondent in the present case, was
merely a promise to sell, which must be governed by Article 1479 of the Civil Code which
provides that a promise to buy and sell a determinate thing for a price certain is reciprocally
demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price
from the price.
13.
Arguendo, Section 119 of Public Land Act

The brothers Victorino and Francisco Noel, together with Conchita Nool and Anacleto
Nool, were all siblings and heirs qualified to repurchase the two parcels of land under Section
119 of the Public Land Act which provides that (e)very conveyance of land acquired under
the free patent or homestead provisions, when proper, shall be subject to repurchase by the
applicant, his widow or legal heirs, within a period of 5 years from the date of
conveyance. Assuming the applicability of this statutory provision to the present case, it is
indisputable that Anacleto Nool already repurchased from DBP the contested properties. Hence,
there was no more right of repurchase that his sister Conchita or brothers Victorino and
Francisco could exercise. The properties were already owned by an heir of the homestead
grantee and the rationale of the provision to keep homestead lands within the family of the
grantee was thus fulfilled.
14.
Action/Defense for the declaration of an inexistent contract does not
prescribe; Validity of a contract cannot be acquired through estoppel
The private respondents cannot be estopped from raising the defense of nullity of
contract, specially in this case where they acted in good faith, believing that indeed petitioners
could sell the two parcels of land in question. Article 1410 of the Civil Code mandates that
the action or defense for the declaration of the inexistence of a contract does not prescribe.
It is a well-settled doctrine that as between parties to a contract, validity cannot be given to it
by estoppel if it is prohibited by law or it is against public policy. It is not within the
competence of any citizen to barter away what public policy by law seeks to preserve.
Thus, it is immaterial that private respondents initially acted to implement the contract of
sale, believing in good faith that the same was valid. A contract void at inception cannot be
validated by ratification or prescription and certainly cannot be binding on or enforceable
against private respondents.
15.
Petitioners required to return sum of P30,000 with interest and to pay rent
The balance of P14,000.00 under the void contract of sale may not be enforced.
Petitioners are the ones who have an obligation to return what they unduly and improperly
received by reason of the invalid contract of sale. Since they cannot legally give title to what
they sold, they cannot keep the money paid for the object of the sale. It is basic that
every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal
Sales, 2003 ( 183 )
ground, shall return the same. Thus, if a void contract has already been performed, the
restoration of what has been given is in order.
16.
Interest runs from the time tolerance ceased upon counterclaim

Interest to the amount will run only from the time of private respondents demand for
the return of this amount in their counterclaim, for the petitioners possession and
cultivation of the two hectares are anchored on private respondents tolerance. The latters
tolerance ceased upon their counterclaim and demand on the former to vacate. Hence, their
right to posses and cultivate the land ipso facto ceased.
[74]
Northern Motors vs. Sapinoso [G.R. No. L-28074. May
29, 1970.] En Banc, Villamor (J): 7 concur, 1 concur in result,
1 on leave of absence
Facts: On 4 June 1965, Casiano Sapinoso purchased from Northern Motors, Inc. an Opel Kadett
car for the price of P12,171.00, making a down payment and executing a promissory note for
the balance of P10,540.00 payable in installments with interest at 12% per annum, as follows:
P361.00 on 5 July 1965, and P351.00 on the 5th day of each month beginning August 1965,
up to and including December, 1967. To secure the payment of the promissory note,
Sapinoso executed in favor of Northern Motors, Inc. a chattel mortgage on the car. The
mortgage contract provided, among others, that upon default by the mortgagor in the payment
of any part of the principal or interest due, the mortgagee may elect any of the following
remedies: (a) sale of the car by the mortgagee; (b) cancellation of the contract of sale; (c)
extrajudicial foreclosure; (d) judicial foreclosure; (e) ordinary civil action to exact
fulfillment of the mortgage contract. It was further stipulated that [w]hichever remedy is
elected by the mortgagee, the mortgagor expressly waives his right to reimbursement by
the mortgagee of any and all amounts on the principal and interest already paid by him.
Sapinoso failed to pay the first installment of P361.00 due on 5 July 1965, and the second,
third, fourth and fifth installments of P351.00 each due on the 5th day of August, September,
October and November, 1965, respectively. Several payments were, however, made by
Sapinoso, to wit: P530.52 on 21 November 1965, P480.00 on 21 December 1965, and P400.00
on 30 April 1966. The first and third payments aforesaid were applied to accrued interest up
to 17 April 1966, while the second payment was applied partly (P158.10) to interest, and
partly (P321.90) to the principal, thereby reducing the balance unpaid to P10,218.10.
Sapinoso having failed to make further payments, Northern Motors, Inc. filed a complaint on
22 July 1966, against Sapinoso and a certain person whose name, identity and address were
still unknown to Northern Motors, hence denominated in the complaint as John Doe. In its
complaint, Northern Motors, Inc. stated that it was availing itself of the option given it under
the mortgage contract of extrajudicially foreclosing the mortgage, and prayed that a writ of
replevin be issued upon its filing of a bond for the seizure of the car and for its delivery to it;
that after hearing, it be adjudged to have the rightful possession and ownership of the car; that
in default of delivery, Sapinoso and Doe be ordered to pay Northern Motors the sum of
P10,218.10 with interest at 12% per annum from 18 April 1966, until full payment of the said
sum, as well as an amount equivalent to 25% of the sum due as and for attorneys fees and
expenses of collection, and the costs of the suit. Northern Motors also prayed for such other
remedy as might be deemed just and equitable in the premises. Subsequent to the
commencement of the action, but before the filing of his answer, Sapinoso made 2 payments on
the promissory note, the first on 22 August 1966, for P500.00, and the second on 27 September
1966, for P750.00. In the meantime, on 9 August 1966, upon Northern Motors filing of a
bond, a writ of replevin was issued by the court. On 20 October 1966, copies of the summons,
complaint and annexes thereto were served on Sapinoso by the sheriff who executed the seizure
warrant by seizing the car from Sapinoso on the same date, and turning over its possession to
the plaintiff on 25 October 1966. After trial and on 4 April 1967, the trial court held that
Sapinoso having failed to pay more than 2 installments, Northern Motors acquired the right
to foreclose the chattel mortgage, which it could avail of by filing an action of replevin to
secure possession of the mortgaged car as a preliminary step to the foreclosure sale
contemplated in the
Sales, 2003 ( 184 )
Chattel Mortgage Law; and that the foreclosure of the chattel mortgage and the recovery
of the unpaid balance of the price are alternative remedies which may not be pursued
conjunctively, so that in availing itself of its right to foreclose the chattel mortgage, Northern
Mortors thereby renounced whatever claim it may have had on the promissory note, and,
therefore, it has no more right to the collection of the attorneys fees stipulated in the
promissory note, and should return to Sapinoso the sum of P1,250.00 which Northern Motors
had received from the latter after having filed the present case on 22 July 1966, and elected to
foreclose the chattel mortgage.
Direct appeal was made by Northern Motors on questions of law from the portion of the
judgment of the CFI Manila, Branch XXII (Civil Case 66199), ordering Northern Motors to pay
Sapinoso the sum of P1,250.00.
The Supreme Court modified the judgment appealed from by setting aside the portion thereof
which orders Northern Motors to pay Sapinoso the sum of P1,250.00, with costs in this instance
against Sapinoso.
1.
Replevin as a preliminary step to the foreclosure sale

In issuing a writ of replevin, and, after trial, in upholding Northern Motors right to the
possession of the car, and ratifying and confirming its delivery to the aforementioned, the trial
court correctly considered the action as one of replevin to secure possession of the
mortgaged vehicle as a preliminary step to the foreclosure sale contemplated in Section 14
of Act 1508 (Bachrach Motor Co. vs. Summers, 42 Phil., 3; Seo vs. Pestolante, G.R. No. L11755, April 23, 1958).
2.
note
Replevin does not bar seller from accepting further payments on the promissory
The trial court erred in concluding that the legal effect of the filing of the action was to
bar Northern Motors from accepting further payments on the promissory note.
3.
Fact of foreclosure and actual sale of mortgage chattel one that bars recovery
of outstanding balance
That the ultimate object of the action is the foreclosure of the chattel mortgage, is of no
moment, for it is the fact of foreclosure and actual sale of the mortgaged chattel that bar
further recovery by the vendor of any balance on the purchasers outstanding obligation not
satisfied by the sale (Manila Motor Co., Inc. vs. Fernandez, 99 Phil., 782, 786; Bachrach Motor
Co. vs. Millan, 61 Phil., 409; Manila Trading & Suppy Co. vs. Reyes, 62 Phil. 461, 471; Cruz et
al. vs. Filipinas Investment & Finance Corporation, G.R. No. L-24772, May 27, 1968 [23
SCRA 791, 796].)
4.
Article 1484 (3); Further action to recover unpaid balance prohibited;
Prohibition does not preclude voluntary payments
What Article 1484(3) prohibits is further action against the purchaser to recover any
unpaid balance of the price. Although the Court has construed the word action in said
Article 1484 to mean any judicial or extrajudicial proceeding by virtue of which the vendor
may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase
price from the purchaser or his privy (Cruz, et al. vs. Filipinas Investment & Finance
Corporation, supra), there is no occasion at this stage to apply the restrictive provision of the
said article, because there has not yet been a foreclosure sale resulting in a deficiency. The
payment of the sum of P1,250.00 by Sapinoso was a voluntary act on his part and did not
result from a further action instituted by Northern Motors. If the mortgage creditor, before
the actual foreclosure sale, is not precluded from recovering the unpaid balance of the price
although he has filed an action of replevin for the purpose of extra-judicial foreclosure, or if a
mortgage creditor who has elected to foreclose but who subsequently desists from proceeding
with the auction sale, without gaining any advantage or benefit, and without causing any
disadvantage or harm to the vendee-mortgagor, is not barred from suing on the unpaid account
(Radiowealth, Inc. vs. Lavin, et al., G.R. No. L-18563, April 27, 1963 [7 SCRA 804, 807]),
there is no reason why a mortgage creditor should be barred from accepting, before a
foreclosure sale, payments voluntarily tendered by the debtor-mortgagor who admits a
subsisting indebtedness.
Sales, 2003 ( 185 )
[75]
Odyssey Park Inc. v. CA, 280 SCRA 253 (1997)
[76]
Ong v. CA [G.R. No. 97347. July 6,
1999.] First division, Ynares-Santiago
(J): 4 concur
Facts: On 10 May 1983, Jaime Ong and spouses Miguel and Alejandra Robles executed an
Agreement of Purchase and Sale respecting 2 parcels of land situated at Barrio Puri, San
Antonio, Quezon (agricultural including rice mill, piggery) for P2M (initial payment of
P600,000 broken into P103,499.91 directly paid to seller on 22 March 1983 and P496,500.09
directly paid to BPI to answer for part of sellers loan with the bank; and balance of 1.4M to
be paid in 4 equal quarterly installments of P350,000 the first of which due and demandable on
15 June 1983); binding themselves that upon the payment of the total purchase price the seller
delivers a good and sufficient deed of sale and conveyance for the parcels of land free and
clear from liens and encumbrances, that seller delivers, surrenders and transfers the parcels of
land including all improvements thereon and to transfer the operations of the piggery and rice
mill to the buyer; and that all payments due and demandable under the contract effected in
the residence of the seller unless otherwise designated by the parties in writing. On 15 May
1983, Ong took possession of the subject parcels of land together with the piggery, building,
ricemill, residential house and other improvements thereon. Pursuant to the contract, Ong paid
the spouses the sum of P103,499.91 2 by depositing it with the UUCPB. Subsequently, Ong
deposited sums of money with the BPI, in accordance with their stipulation that petitioner pay
the loan of the spouses with BPI. To answer for his balance of P 1.4M, Ong issued 4 post-dated
Metro Bank checks payable to the spouses in the amount of P350,000.00 each (Check 137708157711). When presented for payment, however, the checks were dishonored due to insufficient
funds. Ong promised to replace the checks but failed to do so. To make matters worse, out of
the P496,500.00 loan of the spouses with BPI, which ong, as per agreement, should have paid,
Ong only managed to dole out no more than P393,679.60. When the bank threatened to
foreclose the spouses mortgage, they sold 3 transformers of the rice mill worth P51,411.00 to
pay off their outstanding obligation with said bank, with the knowledge and conformity of
Ong. Ong, in return, voluntarily gave the spouses authority to operate the rice mill. He,
however, continued to be in possession of the two parcels of land while the spouses were
forced to use the rice mill for residential purposes.
On 2 August 1985, the spouses, through counsel, sent Ong a demand letter asking for the
return of the properties. Their demand was left unheeded, so, on 2 September 1985, they filed
with the RTC Lucena City, Branch 60, a complaint for rescission of contract and recovery of
properties with damages. Later, while the case was still pending with the trial court, Ong
introduced major improvements on the subject properties by constructing a complete fence
made of hollow blocks and expanding the piggery. These prompted the spouses to ask for a
writ of preliminary injunction; which the trial court granted, and thus enjoined Ong from
introducing improvements on the properties except for repairs. On 1 June 1989, the trial
court rendered a decision in favor of the spouses: ordering the contract entered into by the
parties set aside, ordering the delivery of the parcels of land and the improvements thereon to
the spouses, ordering the return of the sum of P497,179.51 to Ong by the spouses, ordering Ong
to pay the spouses P100,000 for exemplary damages and P20,000 as attorneys fees and
litigation expenses. From this decision, petitioner appealed to the Court of Appeals, which
affirmed the decision of the RTC but deleted the award of exemplary damages. In afirming
the decision of the trial court, the Court of Appeals noted that the failure of petitioner to
completely pay the purchase price is a substantial breach of his obligation which entitles the
private respondents to rescind their contract under Article 1191 of the New Civil Code. Hence,
the petition for review on certiorari.
The Supreme Court affirmed the decision rendered by the Court of Appeals with the modification
that the
Sales, 2003 ( 186 )
spouses are ordered to return to Ong the sum P48,680.00 in addition to the amounts already
awarded; with costs against petitioner Ong.
1.
Reevaluation of evidence not the function of the Supreme Court

It is not the function of the Supreme Court to assess and evaluate all over again
the evidence, testimonial and documentary, adduced by the parties to an appeal, particularly
where the findings of both the trial court and the appellate court on the matter coincide. There
is no cogent reason shown that would justify the court to discard the factual findings of the
two courts below and to superimpose its own.
2.
Rescission as a remedy to secure the reparation of damages caused by a

contract; Article 1380 Rescission, as contemplated in Articles 1380, et seq., of the New
Civil Code, is a remedy granted by
law to the contracting parties and even to third persons, to secure the reparation of damages
caused to them by a contract, even if this should be valid, by restoration of things to their
condition at the moment prior to the celebration of the contract. It implies a contract, which
even if initially valid, produces a lesion or a pecuniary damage to someone.
3.
Rescission applicable to reciprocal obligations under Article 1191

Article 1191 of the New Civil Code refers to rescission applicable to reciprocal
obligations. Reciprocal obligations are those which arise from the same cause, and in which
each party is a debtor and a creditor of the other, such that the obligation of one is dependent
upon the obligation of the other. They are to be performed simultaneously such that the
performance of one is conditioned upon the simultaneous fulfillment of the other.
4.
Rescission of reciprocal obligations under Article 1191 distinguished from
rescission of contract under Article 1383
Rescission of reciprocal obligations under Article 1191 of the New Civil Code
should be distinguished from rescission of contracts under Article 1383. Although both
presuppose contracts validly entered into and subsisting and both require mutual restitution
when proper, they are not entirely identical. While Article 1191 uses the term rescission,
the original term which was used in the old Civil Code, from which the article was based, was
resolution. Resolution is a principal action which is based on breach of a party, while
rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion
under Article 1381 of the New Civil Code.
5.
Rescissible contract under Article 1381

Article 1381 of the New Civil Code enumerates rescissible contracts as (1) those which
are entered into by guardians whenever the wards whom they represent suffer lesion by more
than one fourth of the value of the things which are the object thereof; (2) those agreed upon
in representation of absentees, if the latter suffer the lesion stated in the preceding number;
(3) those undertaken in fraud of creditors when the latter cannot in any manner collect the
claims due them; (4) those which refer to things under litigation if they have been entered into
by the defendant without the knowledge and approval of the litigants or of competent
judicial authority; (5) all other contracts specially declared by law to be subject to rescission.
In the present case, the contract entered into by the parties obviously does not fall under any of
those mentioned by Article 1381. Consequently, Article 1383 is inapplicable.
6.
Contract to sell distinguished from contract of sale

In a contract of sale, the title to the property passes to the vendee upon the delivery of
the thing sold; while in a contract to sell, ownership is, by agreement, reserved in the vendor
and is not to pass to the vendee until full payment of the purchase price. In a contract to sell,
the payment of the purchase price is a positive suspensive condition, the failure of which is
not a breach, casual or serious, but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force.
Sales, 2003 ( 187 )
7.
Agreement of Purchase and Sale is in the nature of contract to sell

A careful reading of the parties Agreement of Purchase and Sale shows that it is in
the nature of a contract to sell. The spouses bound themselves to deliver a deed of absolute sale
and clean title covering the two parcels of land upon full payment by the buyer of the
purchase price of P2M. This promise to sell was subject to the fulfillment of the suspensive
condition of full payment of the purchase price by the Ong. The non-fulfillment of the
condition of full payment rendered the contract to sell ineffective and without force and effect.
It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the
obligors failure to comply with an obligation already extant, not a failure of a condition
to render binding that obligation. Failure to pay, in this instance, is not even a breach but
merely an event which prevents the vendors obligation to convey title from acquiring
binding force. Hence, the agreement of the parties the present case may be set aside, but not
because of a breach on the part of Ong for failure to complete payment of the purchase price.
Rather, his failure to do so brought about a situation which prevented the obligation of the
spouses to convey title from acquiring an obligatory force.
8.
Contract was not novated as to the manner and time of payment; Novation not
presumed Article 1292 of the New Civil Code states that, In order that an obligation
may be extinguished by
another which substitutes the same, it is imperative that it be so declared in unequivocal terms,
or that the old and the new obligations be on every point incompatible with each other.
Novation is never presumed, it must be proven as a fact either by express stipulation of the
parties or by implication derived from an irreconcilable incompatibility between the old and
the new obligation. In the present case, the parties never even intended to novate their
previous agreement. It is true that Ong paid the spouses small sums of money amounting to
P48,680.00, in contravention of the manner of payment stipulated in their contract. These
installments were, however, objected to by the spouses, and ong replied that these represented
the interest of the principal amount which he owed them. Records further show that Ong
agreed to the sale of MERALCO transformers by the spousess to pay for the balance of their
subsisting loan with BPI. Although the parties agreed to credit the proceeds from the sale of
the transformers to petitioners obligation, he was supposed to reimburse the same later to
respondent spouses. This can only mean that there was never an intention on the part of either
of the parties to novate petitioners manner of payment.
9.
Requisites of novation
In order for novation to take place, the concurrence of the following requisites is
indispensable: (1) there must be a previous valid obligation; (2) there must be an agreement of
the parties concerned to a new contract; (3) there must be the extinguishment of the old
contract; and (4) there must be the validity of the new contract. In the present case, the
requisites are not found. The subsequent acts of the parties hardly demonstrate their intent
to dissolve the old obligation as a consideration for the emergence of the new one. Novation is
never presumed, there must be an express intention to novate.
10.
Builder in bad faith

As regards the improvements introduced by Ong to the premises and for which
he claims reimbursement, the Court found no reason to depart from the ruling of the trial
court and the appellate court that petitioner is a builder in bad faith. He introduced the
improvements on the premises knowing fully well that he has not paid the consideration of
the contract in full and over the vigorous objections of respondent spouses. Moreover, Ong
introduced major improvements on the premises even while the case against him was pending
before the trial court.
11.
Deletion of award of exemplary damages correct
The award of exemplary damages was correctly deleted by the Court of Appeals
inasmuch as no moral, temperate, liquidated or compensatory damages in addition to
exemplary damages were awarded.
[77]
Sales, 2003 ( 188 )
Ong v. Ong [G.R. No. L-67888. October 8,

1985.] First Division, Relova (J): 5 concur, 1
concur in result
Facts: On 25 February 1976, Imelda Ong for and in consideration of P1 and other valuable
considerations, executed in favor of Sandra Maruzzo, then a minor, a Quitclaim Deed
whereby she transferred, released, assigned and forever quitclaimed to Sandra Maruzzo, her
heirs and assigns, all her rights, title, interest and participation in 1/2 undivided portion of a
parcel of land (Lot 10-B of the subdivision plan (LRC) Psd-157841, a portion of lot 10
Block 18 of PSD-13288 LCR (GLRC) Record 2029, situated in Makati, containing 125
square meters. On 19 November 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim
and, thereafter, on 20 January 1982 donated the whole property to her son, Rex Ong Jimenez.
On 20 June 1983, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with the
RTC Makati an action against Imelda Ong, for the recovery of ownership/possession and
nullification of the Deed of Donation over the portion belonging to her and for accounting.
Imelda Ong claimed that the Quitclaim Deed is null and void inasmuch as it is equivalent to
a Deed of Donation, acceptance of which by the donee is necessary to give it validity.
Further, it is averred that the donee, Sandra Maruzzo, being a minor, had no legal personality
and therefore incapable of accepting the donation. Upon admission of the documents
involved, the parties filed their responsive memoranda and submitted the case for decision. On
12 December 1983, the trial court rendered judgment in favor of Maruzzo and held that the
Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid conveyance in
favor of the latter.
Imelda Ong appealed to the Intermediate Appellate Court. On 20 June 1984, IAC promulgated
its Decision affirming the appealed judgment and held that the Quitclaim Deed is a
conveyance of property with a valid cause or consideration; that the consideration is P1 which
is clearly stated in the deed itself; that the apparent inadequacy is of no moment since it is the
usual practice in deeds of conveyance to place a nominal amount although there is a more
valuable consideration given. Hence, the petition for review on certiorari.
On 15 March 1985, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed an
Omnibus Motion informing this Court that she has reached the age of majority as evidenced
by her Birth Certificate and she prays that she be substituted as private respondent in place of
her guardian ad litem. On 15 April 1985, the Court issued a resolution granting the same.
The Supreme Court affirmed the appealed decision of the IAC, with costs against Imelda Ong.
1.
Consideration or cause is not P1 alone but also other valuable considerations

The subject deed reveals that the conveyance of the 1/2 undivided portion of the
property was for and in consideration of P1 and the other valuable considerations paid by
Sandra Maruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated
differently, the cause or consideration is not P1 alone but also the other valuable considerations.
2.
Cause not stated in contract is presumed existing unless proven to the
contrary; Execution of deed a prima facie evidence of existence of valuable
consideration
Although the cause is not stated in the contract it is presumed that it is existing
unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable
presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules
of Court). It is a legal presumption of sufficient cause or consideration supporting a contract
even if such cause is not stated therein (Article 1354, New Civil Code) This presumption cannot
be overcome by a simple assertion of lack of consideration especially when the contract itself
states that consideration was given, and the same has been reduced into a public instrument
with all due formalities and solemnities. To overcome the presumption of consideration the
alleged lack of consideration must be shown by preponderance of evidence in a proper action.
(Samanilla vs. Cajucom, et al., 107 Phil. 432). The execution of a deed purporting to convey
ownership of a realty is in itself prima facie
Sales, 2003 ( 189 )
evidence of the existence of a valuable consideration, the party alleging lack of consideration
has the burden of proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G.
2536).
3.
Acceptance by legal representatives of minor applies to onerous and conditional

donations Granting that the Quitclaim deed is a donation, Article 741 of the Civil
Code provides that the
requirement of the acceptance of the donation in favor of minor by parents of legal
representatives applies only to onerous and conditional donations where the donation may have
to assume certain charges or burdens (Article 726, Civil Code). The acceptance by a legal
guardian of a simple or pure donation does not seem to be necessary (Perez vs. Calingo, CA-40
O.G. 53). Thus, Supreme Court ruled in Kapunan vs. Casilan and CA (109 Phil. 889) that the
donation to an incapacitated donee does not need the acceptance by the lawful
representative if said donation does not contain any condition. In simple and pure
donation, the formal acceptance is not important for the donor requires no right to be
protected and the donee neither undertakes to do anything nor assumes any obligation. The
Quitclaim in question does not impose any condition.
4.
Bad faith and inadequacy of monetary consideration does not render
conveyance inexistent, assignors liberality may be suffcient cause for a valid contract
It is not unusual in deeds of conveyance adhering to the Anglo-Saxon practice of
stating that the consideration given is the sum of P1, although the actual consideration may
have been much more. Moreover, assuming that said consideration of P1 is suspicious, this
circumstance, alone, does not necessarily justify the inference that the vendees were not
purchasers in good faith and for value. Neither does this inference warrant the conclusion that
the sales were null and void ab initio. Indeed, bad faith and inadequacy of the monetary
consideration do not render a conveyance inexistent, for the assignors liberality may be
sufficient cause for a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may
render either rescissible or voidable, although valid until annulled, a contract concerning an
object certain entered into with a cause and with the consent of the contracting parties(See
Morales Development v. CA, 27 SCRA 484).
[78]
Pangilinan v. CA, 279 SCRA 590 (1997)
[79]
Pasagui vs. Villablanca [G.R. No. L-21998. November 10, 1975.]
Second Division, Antonio (J): 4 concur, 1 on leave, 1 designated to sit in the Second Division
Facts: On 4 February 1963, Calixto Pasagui and Fausta Mosar filed a complaint with the CFI
Tacloban City, alleging that on 15 November 1962, for and in consideration of P2,800, they
bought from Eustaquia Bocar and Catalina Bocar a parcel of agricultural land with an area of
2.6814 hectares, situated in Hamindangon, Pastrana, Leyte; that the corresponding document
of sale was executed, notarized on the same date, and recorded in the Registry of Deeds of
Tacloban, Leyte on 16 November 1962; that during the first week of February 1963, spouses
Ester T. Villablanca and Zosimo Villablanca, illegally and without any right, whatsoever,
took possession of the property harvesting coconuts from the coconut plantation thereon,
thus depriving Pasaqui and Mosar of its possession; that despite demands made by Pasagui and
Mosar upon the Villablancas to surrender to them the property and its possession the latter
failed or refused to return said parcel of land to the former, causing them damage; and that
Eustaquia and Catalina Bocar, vendors of the property, are included defendants in the
complaint by virtue of the warranty clause contained in the document of sale.
On 13 May 1963, the trial court issued an order dismissing the complaint for lack of
jurisdiction, it appearing from the allegations in the complaint that the case is one for
forcible entry, which belongs to the exclusive jurisdiction of the Justice of the Peace (now
Municipal Court) of Pastrana, Leyte. The first Motion for
Sales, 2003 ( 190 )
Reconsideration was denied on 27 May 1963 and the second was likewise denied on 5 July
1963. From the orders, appeal on a pure question of law was interposed to the Supreme Court.
The Supreme Court set aside the order of dismissal, and remanded the case to the court a quo
for further proceedings; with costs against the Villablancas and the Bocars.
1.
Averments of complaint and character of relief determines jurisdiction of
municipal court in a forcible entry case
What determines the jurisdiction of the municipal court in a forcible entry case is the
nature of the action pleaded as appears from the allegations in the complaint. In ascertaining
whether or not the action is one of forcible entry within the original exclusive jurisdiction of
the municipal court, the averments of the complaint and the character of the relief sought
are the ones to be consulted. In the present case, the complaint does not allege that
Pasagui and Mosar were in physical possession of the land and have been deprived of that
possession through force, intimidation, threat, strategy, or stealth.
In order that an action may be considered as one for forcible entry, it is not only necessary
that the plaintiff should allege his prior physical possession of the property but also that he
was deprived of his possession by any of the means provided in section 1, Rule 70 of the
Revised Rules of Court, namely: force, intimidation, threats, strategy and stealth. For, if the
dispossession did not take place by any of these means, the courts of first instance, not the
municipal courts, have jurisdiction. The bare allegation in the complaint that the plaintiff
has been deprived of the land of which he is and has been the legal owner for a long
period has been held to be insufficient. Though it is true that the mere act of a trespasser in
unlawfully entering the land, planting himself on the ground and excluding therefrom the prior
possessor would imply the use of force, no such inference could be made as Pasagui and
Mosar had not claimed that they were in actual physical possession of the property prior to
the entry of the Villablancas.
2.
Execution of deed of absolute sale in public instrument equivalent to delivery
of land, unless there is impediment
The execution of the deed of absolute sale in a public instrument is equivalent to
delivery of the land subject of the sale. This presumptive delivery only holds true when there
is no impediment that may prevent the passing of the property from the hands of the vendor
into those of the vendee. It can be negated by the reality that the vendees actually failed to
obtain material possession of the land subject of the sale. In the present case, Pasagui and
Mosar had not acquired physical possession of the land since its purchase on 12 November
1962. As a matter of fact, their purpose in filing the complaint in Civil Case 3285 is precisely
to get the possession of the property.
3.
Case is not an action of forcibly entry

The case is, not the summary action of forcible entry within the context of the Rules; as
Pasagui and Mosar are not only seeking to get the possession of the property, but as an
alternative cause of action, they seek the return of the price and payment of damages by the
vendors in case of eviction or loss of ownership of the said property.
[80]
Paulmitan vs. CA [G.R. No. 61584. November
25, 1992.] Third Division, Romero (J): 4 concur
Facts: From her marriage with Ciriaco Paulmitan, deceased, Agatona Sagario Paulmitan begot
two legitimate children, Pascual and Donato Paulmitan. Agatona Sagario Paulmitan died
sometime in 1953 and left the 2 parcels of land located in the Province of Negros Occidental
(Lot 757 with an area of 1,946 sq.ms., OCT RO-8376; and Lot 1091 with an area of 69,080
sq.ms., OCT RO-11653). Pascual Paulmitan also died in 1953, apparently shortly after his
mother passed away, leaving his children, namely: Alicio, Elena, Abelino, Adelina,
Sales, 2003 ( 191 )
Anita, Baking and Anito, all surnamed Paulmitan. Until 1963, the estate of Agatona
Sagario Paulmitan remained unsettled and the titles to the two lots remained in the name of
Agatona. However, on 11 August 1963, Donato Paulmitan executed an Affidavit of
Declaration of Heirship, extrajudicially adjudicating unto himself Lot 757 based on the claim
that he is the only surviving heir of Agatona Sagario. The affidavit was filed with the Register
of Deeds of Negros Occidental who, on 20 August 1963, cancelled OCT RO-8376 in the name
of Agatona Sagario and issued TCT 35979 in Donatos name. As regards Lot 1091, Donato
executed on 28 May 1974 a Deed of Sale over the same in favor of Juliana P. Fanesa, his
daughter (married to Rodolfo Fanesa). In the meantime, sometime in 1952, for non-payment of
taxes, Lot 1091 was forfeited and sold at a public auction, with the Provincial Government of
Negros Occidental being the buyer. A Certificate of Sale over the land was executed by the
Provincial Treasurer in favor of the Provincial Board of Negros Occidental. On 29 May 1974,
Juliana P. Fanesa redeemed the property from the Provincial Government of Negros
Occidental for the amount of P2,959.09.
On learning of these transactions, the children of the Late Pascual Paulmitan filed on 18
th
January 1975 with the CFI Negros Occidental (12 Judicial District, Branch IV, Bacolod City,
Civil Case 11770) a Complaint against Donato and Juliana to partition the properties plus
damages. Donato and Juliana set up the affirmative defense of prescription (complaint being
filed 11 years after the issuance of the title) with respect to Lot 757. The trial court issued an
order dated 22 April 1976 dismissing the complaint as to the said property upon finding
merit in Donatos and Julianas affirmative defense. This order became final after Pascuals
children failed to appeal therefrom.
Trial proceeded with respect to Lot 1091. In a decision dated 20 May 1977, the trial court
decided in favor of Pascuals children as to Lot 1091. According to the trial court, the
respondents, as descendants of Agatona Sagario Paulmitan were entitled to of Lot 1091, pro
indiviso. The sale by Donato Paulmitan to his daughter, Juliana Fanesa, did not prejudice their
rights; and the repurchase by Juliana of the land from the Provincial Government of Negros
Occidental did not vest in Juliana exclusive ownership over the entire land but only gave her
the right to be reimbursed for the amount paid to redeem the property. The trial court
ordered the partition of the land and directed Donato and Juliana to pay pascuals Children
certain amounts representing the latters share in the fruits of the land. On the other hand, the
children were directed to pay P1,479.55 to Juliana as their share in the redemption price
paid by Fanesa to the Provincial Government of Negros Occidental.
On appeal and on 14 July 1982 (CA-GR 62255-R), the Court of Appeals affirmed the trial
courts decision. Hence the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals.
1.
Pascual predecease mother, precludes operation of provisions on right of
representation
Pascual did not predecease his mother, decedent Agatona Sagario Paulmitan, thus
precluding the operation of the provisions in the Civil Code on the right of representation with
respect to his seven children.
2.
Rights of succession transmitted at the moment of the decedents death;
Both Pascual and Donato entitled to ownership
When Agatona Sagario Paulmitan died intestate in 1952, her two (2) sons Donato and
Pascual were still alive. Since it is well-settled by virtue of Article 777 of the Civil Code that
[t]he rights to the succession are transmitted from the moment of the death of the decedent,
the right of ownership, not only of Donato but also of Pascual, over their respective shares in
the inheritance was automatically and by operation of law vested in them in 1953 when their
mother died intestate. At that stage, the children of Donato and Pascual did not yet have any
right over the inheritance since [i]n every inheritance the relative nearest in degree excludes
the more distant ones. Donato and Pascual excluded their children as to the right to inherit
from Agatona
Sales, 2003 ( 192 )
Sagario Paulmitan, their mother.

3.
Heirs own in common the estate of the decedent before its partition
From the time of the death of Agatona Sagario Paulmitan to the subsequent passing
away of her son Pascual in 1953, the estate remained unpartitioned. Donato and Pascual
Paulmitan were co-owners of the estate left by their mother as no partition was ever made,
pursuant to Article 1078 of the Civil Code, which provides that where there are two or
more heirs, the whole estate of the decedent is, before its partition, owned in common by
such heirs, subject to the payment of debts of the deceased.
4.
Pascuals children succeeded him in the co-ownership of the property when he

died intestate When Pascual Paulmitan died intestate in 1953, his children succeeded
him in the co-ownership of
the disputed property. Pascual Paulmitans right of ownership over an undivided portion of
the property passed on to his children, who, from the time of Pascuals death, became coowners with their uncle Donato over the disputed decedent estate.
5.
Fanesas claim of ownership

Juliana P. Fanesa, Donatos daughter, claims ownership over Lot 1091 by virtue of two
transactions, namely: (a) the sale made in her favor by her father Donato Paulmitan; and (b)
her redemption of the land from the Provincial Government of Negros Occidental after it was
forfeited for non-payment of taxes.
6.
Sale of Lot 1091 by Donato to Juliana did not prejudice rights of Pascuals
children over the undivided share
When Donato Paulmitan sold on 28 May 1974 Lot 1091 to his daughter Juliana P.
Fanesa, he was only a co-owner with Pascuals children and as such, he could only sell that
portion which may be allotted to him upon termination of the co-ownership. The sale did not
prejudice the rights of the children to undivided share of the land which they inherited from
their father. It did not vest ownership in the entire land with the buyer but transferred only
the sellers pro indiviso share in the property and consequently made the buyer a co-owner of
the land until it is partitioned.
7.
Effect of sale of property by one co-owner without the consent of all coowners; Article 493: Only the rights of the seller are transferred, buyer becomes coowner
In Bailon-Casilao v. Court of Appeals, the Court outlined the effects of a sale by
one co-owner without the content of all the co-owners. The rights of a co-owner of a certain
property are clearly specified in Article 493 of the Civil Code which provides that each coowner shall have the full ownership of his part and of the fruits and benefits pertaining thereto,
and he may therefore alienate, assign or mortgage it and even substitute another person in its
enjoyment, except when personal rights are involved. But the effect of the alienation or
mortgage, with respect to the co owners, shall be limited to the portion which may be allotted
to him in the division upon the termination of the co-ownership. Even if a co-owner sells the
whole property as his, the sale will affect only his own share but not those of the other coowners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is
because under the codal provision, the sale or other disposition affects only his undivided
share and the transferee gets only what would correspond to his grantor in the partition of the
thing owned in common. [Ramirez v. Bautista, 14 Phil. 528 (1909)]. Thus, it may be deduced
that since a co-owner is entitled to sell his undivided share, a sale of the entire property by
one co-owner without the consent of the other co-owners is not null and void. However, only
the rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the
property. Thus, in the present case, the sale by Donato Paulmitan of the land to his daughter
did not give to the latter ownership over the entire land but merely transferred to her the
undivided share of her father, thus making her the co-owner of the land in question with her
first cousins.
8.
land
Redemption does not terminate the co-ownership nor give her title to the entire
The redemption of the land made by Fanesa did not terminate the co-ownership nor give
her title to
Sales, 2003 ( 193 )
the entire land subject of the co-ownership. Speaking on the same issue, the Court, in Adille
v. Court of Appeals, resolved the same by holding that the right of repurchase may be
exercised by a co-owner with respect to his share alone (CIVIL CODE, art. 1612; CIVIL CODE
(1889), art. 1514.). While the records show that the property was redeemed in its entirety, the
plaintiff shouldering the expenses therefor, that did not make him the owner of all of it. In
other words, it did not put to end the existing state of co-ownership (Supra, art. 489). There is
no doubt that redemption of property entails a necessary expense.
9.
Right to compel other co-owners to contribute to expenses of preservation of
thing owned in common; Payer in redemption holds lien upon the subject property
until reimbursed
Article 488 of the Civil Code provides that each co-owner shall have a right to compel
the other co-owners to contribute to the expenses of preservation of the thing or right owned in
common and to the taxes. Any one of the latter may exempt himself from this obligation by
renouncing so much of his undivided interest as may be equivalent to his share of the
expenses and taxes. No such waiver shall be made if it is prejudicial to the co-ownership.
Thus, although Fanesa did not acquire ownership over the entire lot by virtue of the
redemption she made, nevertheless, she did acquire the right to be reimbursed for half of the
redemption price she paid to the Provincial Government of Negros Occidental on behalf of
her co-owners. Until reimbursed, Fanesa holds a lien upon the subject property for the amount
due her.
10.
Lease issue not passed on as it is a factual issue; Factual findings of lower
courts fnal and conclusive upon the Supreme Court
Donato and Juliana dispute the order of the trial court, which the Court of Appeals
affirmed, for them to pay Pascuals children P5,000.00 per year from 1966 until the partition
of the estate which represents the latters share in the fruits of the land. According to the
former, the land is being leased for P2,000.00 per year only. This assigned error, however, raises
a factual question. The settled rule is that only questions of law may be raised in a petition for
review. As a general rule, findings of fact made by the trial court and the Court of Appeals are
final and conclusive and cannot be reviewed on appeal.
[81]
Philippine Trust Company vs. PNB [G.R. No. 16483.
December 7, 1921.] First Division, Johns (J): 7 concur
Facts: The Philippine Trust company and the Philippine National Banks are corporations
organized under the laws of the Philippine Islands and domiciled in the city of Manila.
Salvador Hermanos was a copartnership and during the month of January 1919, executed to
PNB 8 promissory notes aggregating P156,000, payable on demand, and each secured by a
quedan, or warehouse receipt, issued by the firm of Nieva, Ruiz & Company. Each note
recites that it is payable on demand after date, for value received, and that the firm has
deposited with the said bank as collateral security for the payment of this note, or any
note given in extension or renewal thereof, as well as for the payment of any other liability or
liabilities of the undersigned to the said bank, due or to become due, whether now existing or
hereafter arising, the following property owned by the undersigned. The note then specifies
the number of the quedan and the amount of copra in piculs, and states that the quedan was
issued by Nieva, Ruiz & Company. The note for P8,000, dated 18 January 1919, was secured
by warehouse Receipt 30; for P20,000, dated 22 January 1919, was secured by Receipt 35; for
P20,000, dated 24 January 1919, was secured by Receipt 38; for P20,000, dated 27 January
1919, was secured by Receipt 41; for P14,000, dated 28 January 1919, was secured by
Receipt 42; for P18,000, dated 21 January 1919, was secured by Receipt 33; for P18,000, dated
23 January 1919, was secured by Receipt 36; and for P18,000, dated 25 January 1919, was
secured by Receipt 39, making a total of 16,051.10 piculs of copra, covered by the warehouse
receipts of the firm of Nieva, Ruiz & Company issued to the firm of Salvador Hermanos, and
by that firm pledged as collateral to PNB to secure the payment of the eight notes. Each of
them further recites that on the nonperformance of this promise, or upon the non-payment
of any of the liabilities above-mentioned, or upon the failure of the undersigned forthwith,
with or
Sales, 2003 ( 194 )
without notice, to furnish satisfactory additional securities in case of decline, as aforesaid,

then and in either such case, this note and all liabilities of the undersigned, or any of them,
shall forthwith become due and payable, without demand or notice, and full power and
authority are hereby given to said bank to sell, assign transfer and deliver the whole of the
said securities, or any part thereof, or any substitutes therefor or any additions thereto, or
any other securities or property given unto or left in the possession of or hereafter given unto
or left in the possession of the said bank by the undersigned for safe keeping or otherwise,
at any brokers board or at public or private sale, at the option of said bank or of its president
or secretary, without either demand, advertise mentor notice of any kind, which are hereby
expressly waived. At any such sale, the said bank may itself purchase the whole or any part of
the property sold, free from any right of redemption on the part of the undersigned, which is
hereby waived and released. Stamped in red ink across the face of each quedan are the words
Negotiable Warrant, and each of them was in the usual form of warehouse receipts. On 10
February 1919, the firm of Salvador Hermanos withdrew from the bank, by and with its
consent, warehouse receipts 33, 36, and 39, which the bank was holding as collateral security
for each of the 3 18,000-peso notes amounting to P54,000. The total amount of copra
evidenced by the receipts withdrawn was 6,024.55 piculs, the declared value of which, shown
on the face of such receipts, was P90,368.25. At the time of the withdrawal, the firm executed
a writing, promising to return to the bank the warehouse receipts on or before the 27 January,
the receipts being guaranteed by the attached certificate of existence of the effects issued by
the firm on 8 February 1919. Neither writing was in any manner authenticated by a notary or
by a competent public official. The writing of February 10 is in form a receipt from the firm of
Salvador Hermanos to the PNB of the quedans, or warehouse receipts, for the copra. The one of
February 8 is, in legal effect, the certificate of Salvador Hermanos that there exist the
following articles in our bodegas as follows: That is to say, that the firm certifies that the
property described is in the warehouse of the firm.
On 21 April 1919, Salvador Hermanos filed a petition of insolvency in the CFI Manila. On 3
May 1919, Gregorio Salvador, a member of the firm of Salvador Hermanos, delivered
certain goods, wares, and merchandise to and in the warehouse of Nieva, Ruiz & Company,
and requested that firm to issue its receipt therefor to and in favor of the PNB, and that,
pursuant to such request, that firm did issue 8 quedans to the bank (161 for 32 bales of hemp;
162 for 953 bundles of rattan; 165 for 72 bundles of empty sacks; 167 for 136 sacks of gum;
168 for 1,461 bales of kapok; 175 for 288 packages of Talcum Powder; 176 for 35
packages of cardboard; and 185 for 134 bundles of empty sacks). On and between 6 May 1919
and 7 August 1919, acting under the terms and provisions of its respective notes, the bank sold
all of the personal property for which it held warehouse receipts, or which had been
surrendered to it by the Hermanos firm, save and except the property described in the three
warehouse receipts, which were released and surrendered to that firm on 10 February 1919.
Based upon its insolvency petition, and in the ordinary course of business, the firm of Salvador
Hermanos was adjudged insolvent, and on 19 July 1919, the Philippine Trust Company was
elected assignee of said firm and duly qualified. On 13 September 1919, as such assignee, it
made a demand upon the bank for the surrender and delivery of the property described in all of
the above receipts.
Upon the banks refusal, Philippine Trust Company commenced this action to recover its value
alleged to be P242,579.61, claiming that on 21 April 1919, the firm of Salvador Hermanos
was the sole and exclusive owner of the property, and that, as to the copra, about 28 June
1919, and after the filing of the insolvency petition, the bank unlawfully seized and converted
the copra to its own use, the value of which was P192,260. For a second cause of action,
Philippine Trust alleged that, as such assignee, it was the owner of the remaining personal
property, and that, after the insolvency petition was filed, the bank unlawfully seized and
converted such property to its own use, and that it was of the value of P50,319.61. For answer,
the bank makes a general denial, as to each cause of action, of all of the material allegations of
the complaint.
The Supreme Court, on the first cause of action, held that in January 1919, the bank became and
remained the owner of the 5 quedans 30, 35, 38, 41, and 42; that they were in form negotiable,
and that, as such owner, it was legally entitled to the possession and control of the property
therein described at the time the insolvency petition was filed and had a right to sell it and
apply the proceeds of the sale to its promissory notes, including
Sales, 2003 ( 195 )
the 3 notes of P18,000 each, which were formerly secured by the 3 quedans 33, 36, and 39,
which the bank surrendered to the firm. That is to say, the bank had a legal right to apply
the Proceeds from the property described in the five remaining quedans to the payment of its
eight promissory notes. The Court, however reversed the judgment of the lower court as to
the second cause of action, and one entered in favor of the Philippine Trust Company and
against the PNB, for P40,742.62, the declared value of the property described in quedans Nos.
161 to 185, inclusive, and for the further sum of P7,631.40, the value of the gasoline sold in
May, 1919, or a total of P48,374.02, with interest thereon from September 22, 1919, at the rate
of 6 per cent per annum, and for the costs and disbursements in the Courts.
1.
Purpose of Act 1956 or the Insolvency Law

Act 1956 of the Philippine Legislature provides for the suspension of payments, the
relief of insolvent debtors, the protection of creditors, and the punishment of fraudulent
debtors.
2.
Section 1 of Act 1956

Section 1 provides that this Act shall be known and may be cited as The Insolvency
Law, and in accordance with its provisions every insolvent debtor may be permitted to suspend
payments or be discharged from his debts and liabilities.
3.

Section 2 provides that debtor who possesses sufficient property to cover the
debts, be it an individual, firm or corporation, and who is unable to meet them at maturity,
may petition that he be declared in the state of suspension of payments by the court, or the
judge thereof in vacation.
4.

Section 3 enacts that upon the filing of the petition, the court shall make an order
calling a meeting of creditors specifying the time and place; that notice thereof shall be
published in a newspaper, and that said order shall further contain an absolute injunction
forbidding the petitioning debtor from disposing in any manner of his property, except in so
far as concerns the ordinary operations of commerce or of industry in which the petitioner is
engaged, and, furthermore, from making any payments outside of the necessary or legitimate
expenses of his business or industry, so long as the proceedings relative to the suspension
of payments are pending, and said proceedings for the purposes of this Act shall be
considered to have been instituted from the date of the filing of the petition.
5.

Section 14, chapter 3, provides that any person owing debts exceeding P1,000 may
apply to be discharged from his debts and liabilities by petition to the Court of First Instance
in which he has resided for six months preceding the filing of the petition.
6.

Section 18 enacts that upon receiving and filing of the petition, schedule, and inventory,
the court, or the judge, shall make an order declaring the petitioner insolvent, and shall
further forbid the payment to the debtor of any debts due to him and the delivery to the
debtor, or to any person for him, of any property belonging to him, and the transfer of any
property by him, and shall further appoint a time and place for a meeting of the creditors to
choose an assignee of the estate.
7.
Quedans recognized to be owned by PNB

At the time the eight promissory notes were executed, a given quedan, or warehouse
receipt, was described and incorporated in the note as to its number, when and by whom
issued, and the property it represented, and each receipt was then delivered by the firm to
the defendant bank, all of which was during the month of January, 1919. The bank never had
the manual possession or the physical control of any of this property until after the insolvency
petition was filed, and it is for such reason that the plaintiff claims that it
Sales, 2003 ( 196 )
was the property of the firm, and that the defendant should account to the assignee. Each
quedan, or warehouse receipt, was specifically described in a given note, and was made a part
of it, and the note recites that, for any breach of its terms or conditions, the bank has full
power and authority to sell, assign, transfer and deliver the whole of the said security, or any
part thereof, etc., and that at any such sale, the said bank may itself purchase the whole or
any part of the property sold, free from any right of redemption on the part of the
undersigned, which is hereby waived and released. In addition, the quedan itself was delivered
to and held by the bank, and the warehouseman recognized the bank as the owner of the
property. Legally speaking, the owner of the quedans, or warehouse receipts, was the owner of
the property described in them, and the quedans were given as collateral to secure promissory
notes, which, for value received, were executed to the bank.
8.
The execution of the notes, the physical possession of the negotiable quedan,
or warehouse receipt, and the recognition of ownership by the warehouseman, legally
carries with it both the title to, and the possession of, the property
The execution of the notes, the physical possession of the negotiable quedan, or
warehouse receipt, and the recognition of ownership by the warehouseman, legally carries
with it both the title to, and the possession of, the property. In such a case, title is not
founded on a public instrument which should be authenticated by a notary or by a competent
public official. Legally speaking, the execution of the promissory notes and the pledging of the
quedans, or warehouse receipts, as collateral, and the describing of them in the notes, and the
manual delivery of the quedan, or warehouse receipt itself, carries with it not only the title, but
the legal possession of the property. In other words, as to the property described in the quedans,
or warehouse receipts, which were pledged, as collateral, in January, 1919, to secure the eight
respective promissory notes, both the title and the possession of that property were delivered
to and vested in PNB in January 31919. Three of those quedans, or warehouse receipts, were
returned to the firm by the bank on 10 February 1919, but the bank still owned and held the
notes, which were secured but those warehouse receipts, and no part of the debt itself was paid
by or through the surrender of the receipts.
9.
Legal efect of the 10 February receipt; Statement of 8 February merely a
representation of property inside its warehouse; Writing does not vest ownership of
warehoused items to PNB
The legal effect of this receipt is a promise on the part of the firm to return the three
quedans on or before 27 January 1919, and a statement that such receipts are guaranteed by
the attached certificate of the existence in the warehouse of the property described in the
certificate. The statement of February 8, recites we hereby certify that there exist the
following articles in our bodegas. Then follows a description of the property. This is nothing
but a statement or representation to the effect that the firm has the property in its warehouse.
Nothing more. After describing the property, the certificate then says: And promise that none
of the above articles would be removed without consulting first with the Philippine National
Bank. There is no statement or representation of any kind showing when or from whom the
property was received, or how it was held, or who was the owner, or when or to whom it
would be delivered. When analyzed, this writing is nothing more than a certificate of the
firm that the described property was then in its warehouse, and a promise that none of the
articles would be removed without consulting first with the Philippine National Bank.
Such a writing would not transfer the title of the property to the bank, or give it possession,
either actual or constructive. It will be noted that both the receipt of February 10 and the
certificate and promise of February 8, are signed by the firm of Salvador Hermanos, and that
the certificate says that the property was then in the firms warehouse, and that neither
instrument was in any manner authenticated by a notary or a competent public official, as
provided by article 1216 of the Civil Code, and that the property was in the warehouse of
the firm.
10.
Article 1863 of the Civil Code; Property not left to the possession of the bank;
thus it cannot sell, transfer and deliver the whole or part of said securities
Article 1863 of the Civil Code provides In addition to the requisites mentioned in
article 1857, it shall be necessary, in order to constitute the contract of pledge, that the pledge
be placed in the possession of
Sales, 2003 ( 197 )
the creditor or of a third person appointed by common consent. It appears in the present case
however that from the certificate that the property was then in the possession of the firm, who
made the certificate, and that it was in the possession of that firm when its insolvency petition
was filed on 21 April 1919. It will be noted that the promissory notes executed by the firm to
the bank recite that Full power and authority are hereby given to said bank to sell, assign,
transfer and deliver the whole of the said securities, or any part thereof, or any substitutes
therefor or any additions thereto, or any other securities or property given unto or left in the
possession of or hereafter given unto or left in the possession of the said Bank by the
undersigned. Thus, the power and authority of the bank to sell, assign, or transfer is confined
to property which was given unto or left in its possession. None of the property described in the
certificate of February 8 was ever given unto or left in the possession of the bank.
11.
Capacity of Philippine Trust Company; Although appointed July 19, power and
authority was vested on it 21 April 1919 when the insolvency petition was filed
The insolvency petition was filed 21 April 1919, and the Philippine Trust Co was duly
elected and qualified, as assignee, on 19 July 1919, and, as such, it represents both the creditors
and the firm. Although it was not appointed until July 1919, yet when it did qualify its right
and title to all the property of the firm related back and became vested as of 21 April 1919,
when the insolvency petition was filed, and from that time it alone had the power and
authority to act for and represent the firm. Under the terms and provisions of Act 1956 of the
Philippine Legislature, after it was filed, the power of the firm or any member of it to deliver
possession of the property to secure a preexisting debt was suspended pending final
adjudication. That is to say, if the debt was not legally secured before the insolvency petition
was filed, no member of the firm had any legal right to secure it after the petition was filed,
and any attempt to do so would be null and void.
[82]
Philippine Trust Co. v. Roldan [G.R. No. L-8477. May
31, 1956.] En Banc, Bengzon (J): 8 concur
Facts: 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by
Mariano L. Bernardo from his father, the late Marcelo Bernardo. In view of his minority,
guardianship proceedings were instituted, wherein Socorro Roldan, surviving spouse of
Bernardo and stepmother to Mariano, was appointed his guardian. On 27 July 1947, Roldan
filed in said guardianship proceedings (Special Proceeding 2485, Manila), a motion asking for
authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, her
brother-in-law, the purpose of the sale being allegedly to invest the money in a residential
house, which the minor desired to have on Tindalo Street, Manila. The motion was granted. On
5 August 1947, Roldan, as guardian, executed the proper deed of sale in favor of Ramos, and
on 12 August 1947 obtained a judicial confirmation of the sale. On 13 August 1947, Ramos
executed in favor of Roldan, a deed of conveyance covering the same 17 parcels, for the sum
of P15,000. On 21 October 1947, Roldan sold 4 parcels out of the 17 to Emilio Cruz for P3,000,
reserving to herself the right to repurchase.
The Philippine Trust Company replaced Roldan as guardian on 10 August 1948. Two
months later, the Company, as guardian, filed before the CFI Manila a complaint against
Roldan to annul 2 contracts regarding 17 parcels of land claiming that the step-mother in
effect, sold to herself, the properties of her ward, and the sale should be annulled for
violating Article 1459 of the Civil Code prohibiting the guardian from purchasing the property
of her ward. The trial court upheld the contracts but allowing the minor to repurchase all
the parcels by paying P15,000, within 1 year. The CA affirmed the judgment. Hence, the appeal.
The Supreme Court annulled the 3 contracts of sale in question; declared the minor as the
owner of the 17 parcels of land, with the obligation to return to Roldan the price of P14,700
with legal interest from 12 August 1947; ordered Roldan and Emilio Cruz to deliver said
parcels of land to the minor; required Roldan to pay him beginning with 1947 the fruits,
which her attorney admits, amounted to P1,522 a year; authorized the
Sales, 2003 ( 198 )
minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the sum
of P3,000; and charged appellees with the costs.
1.
Guardianship is a trust of the highest order; Article 1459 applies

Remembering the general doctrine that guardianship is a trust of the highest order,
and the trustee cannot be allowed to have any inducement to neglect his wards interest and in
line with the courts suspicion whenever the guardian acquires the wards property, the Court
has no hesitation to declare that, in the eyes of the law, the guardian (Roldan) took by purchase
her wards parcels (thru Dr. Ramos), and that Article 1459 of the Civil Code applies.
2.
Annulment of the transaction, even if no collusion is proved, would uphold

equity and justice The guardian may have acted without malice; there may have been
no previous agreement between
her and Dr. Ramos to the effect that the latter would buy the lands for her but the fact
remains that she acquired her proteges properties, through her brother-in-law. That she
planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced
from the very short time between the two sales. The temptation which naturally besets a
guardian so circumstanced, necessitates the annulment of the transaction, even if no actual
collusion is proved (so hard to prove) between such guardian and the intermediate purchaser.
This would uphold a sound principle of equity and justice.
3.
Rodriguez v. Mactal does not apply; length of time diferent, suffcient to dispel
suspicion
In Rodrigues v. Mactal, where the guardian Mactal sold in January 1926 the property of
her ward to Silverio Chioco, and in March 1928 she bought it from Chioco, the Court declared
the in order to bring the sale in this case within the part of Article 1459, quoted above, it is
essential that the proof submitted establish some agreement between Silverio Chioco and
Trinidad Mactal to the effect that Chioco should buy the property for the benefit of Mactal.
If there was no such agreement, either express or implied, then the sale cannot be set aside.
The subsequent purchase of Mactal, in said case, cannot be annulled as there was no proof of
a previous agreement between Chioco and her. Two years had elapsed between the sales, and
such period of time was sufficient to dispel the natural suspicion of the guardians motives or
actions. In the present case, only 1 week had elapsed. And if we were technical, only 1 day had
elapsed from the judicial approval of the sale (August 12), to the purchase by the guardian
(August 13).
4.
Minor on losing end in the transaction

The calculation, that the investment in the Tindalo Street house produces to the minor
the rentals of P2,400 yearly while the parcels of land yield for the stepmother an average o
P1,522 yearly, does not include the price of the lot on which the house was erected. Estimating
such lot at P14,700 only, (ordinarily the city lot is more valuable than the building) the result
is that the price paid for the 17 parcels gave the minor an income of only P1,200 a year,
whereas the harvest from the seventeen parcels netted his step-mother a yearly profit of
P1,522.00. The minor was on the losing end.
5.
Three Sales void

From both the legal and equitable standpoints these three sales should not be sustained:
the first two for violation of article 1459 of the Civil Code; and the third because Roldan
could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil Code)
the obligation of Roldan to return the 17 parcels together with their fruits and the duty of
the minor, through his guardian to repay P14,700 with legal interest.
[83]
Pichel v. Alonzo [G.R. No. L-36902. January

30, 1982.] First Division, Guerrero (J): 5 concur
Sales, 2003 ( 199 )
Facts: Prudencio Alonzo was awarded by the Government that parcel of land designated
as Lot 21 of Subdivision Plan Psd-32465 of Balactasan, Lamitan, Basilan City in accordance
with RA 477. The award was cancelled by the Board of Liquidators on 27 January 1965 on the
ground that, previous thereto, Alonzo was proved to have alienated the land to another, in
violation of law. In 1972, Alonzos rights to the land were reinstated. On 14 August
1968, Alonzo and his wife sold to Pichel through a deed of sale all the fruits of the coconut
trees which may be harvested in the land for the period, from 15 September 1968 to 1 January
1976, in consideration of P4,200.00. It was further stipulated that the vendors right, title,
interest and participation herein conveyed is of his own exclusive and absolute property, free
from any liens and encumbrances and he warrants to the Vendee good title thereto and to
defend the same against any and all claims of all persons whomsoever. Even as of the date of
sale, however, the land was still under lease to one Ramon Sua, and it was the agreement that
part of the consideration of the sale, in the sum of P3,650.00, was to be paid by Pichel
directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said
payment Alonzo refused to allow the Pichel to make any harvest. In July 1972, Pichel for the
first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of
the coconut trees in the land.
Alonzo filed an action for the annulment of a Deed of Sale before the CFI Basilan City. On 5
January 1973, the lower court rendered its decision holding that although the agreement in
question is denominated by the parties as a deed of sale of fruits of the coconut trees found in
the vendors land, it actually is, for all legal intents and purposes, a contract of lease of the
land itself; an encumbrance prohibited under RA 477. The court thus held that the deed of sale
is null and void, and ordered Alonzo to pay back Pichel the consideration of the sale in the sum
of P4,200 with interests from the date of the filing of the complaint until paid, and Pichel to
pay the sum of P500.00 as attorneys fees; with costs against Pichel. Hence, the petition to
review on certiorari was raised before the Supreme Court.
The Supreme Court set aside the judgment of the lower court and entered another dismissing
the complaint; without costs.
1.
Vendor grantee under RA 477, and could exercise all the rights pertaining
thereto, following ruling in Ras v. Sua
In Ras vs. Sua, it was categorically stated that a cancellation of an award granted
pursuant to the provisions of RA 477 does not automatically divest the awardee of his rights
to the land. Such cancellation does not result in the immediate reversion of the property
subject of the award, to the State. Until and unless an appropriate proceeding for reversion is
instituted by the State, and its reacquisition of the ownership and possession of the land
decreed by a competent court, the grantee cannot be said to have been divested of whatever
right that he may have over the same property. In the present case, there is nothing in the
record to show that at any time after the supposed cancellation of the award on 27 January
1965, reversion proceedings against Lot 21 were instituted by the State. Instead, the admitted
fact is that the award was reinstated in 1972. Applying the doctrine announced in the Ras case,
therefore, Alonzo is not deemed to have lost any of his rights as grantee of Lot 21 under
RA 477 during the period material to the present case, i.e., from the cancellation of the
award in 1965 to its reinstatement in 1972. Within said period, Alonzo could exercise all the
rights pertaining to a grantee with respect to Lot 21.
2.
Court to apply the contract according to its express terms

The first and fundamental duty of the courts is the application of the contract according
to its express terms, interpretation being resorted to only when such literal application is
impossible.
3.
Contract clear and unequivocal; Construction or interpretation of document not

called for Construction or interpretation of the document in question is not called
for. A perusal of the deed fails
to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real
intention of the contracting parties. The terms of the agreement are clear and unequivocal,
hence the literal and plain meaning thereof should be observed. Such is the mandate of the
Civil Code of the Philippines which provides that if
Sales, 2003 ( 200 )
the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulation shall control. In the present case, the Deed
of Sale dated 14 August 1968 is precisely what it purports to be. It is a document
evidencing the agreement of herein parties for the sale of coconut fruits of Lot 21, and not
for the lease of the land itself. In clear and express terms, the document defines the object
of the contract thus: the herein sale of coconut fruits are for all the fruits on the
aforementioned parcel of land during the years from 15 September 1968; up to 1 January
1976.
4.
Contract of sale valid, essential elements valid

The document in question expresses a valid contract of sale as it has the essential
elements of a contract of sale as defined under Article 1458 of the New Civil Code. Article
1458 provides that 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, and that a contract of sale may be absolute or
conditional. The subject matter of the contract of sale are the fruits of the coconut trees on
the land during the years from 15 September 1968 up to 1 January 1976, which subject
matter is a determinate thing.
5.
Things having potential existence may be the object of the contract of sale
Under Article 1461 of the New Civil Code, things having a potential existence may be
the object of the contract of sale. A valid sale may be made of a thing, which though not
yet actually in existence, is reasonably certain to come into existence as the natural increment
or usual incident of something already in existence, and then belonging to the vendor, and the
title will vest in the buyer the moment the thing comes into existence (Emerson vs. European
Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63). Things of this
nature are said to have a potential existence. A man may sell property of which he is potentially
and not actually possessed. He may make a valid sale of the wine that a vineyard is expected
to produce; or the grain a fieldmay grow in a given time; or the milk a cow may yield during
the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the
next case of a fishermans net; or fruits to grow; or young animals not yet in existence; or the
good will of a trade and the like. The thing sold, however, must be specific and identified. They
must be also owned at the time by the vendor (Hull vs. Hull, 48 Conn., 250; 40 Am. Rep.,
165) pp. 522-523). Thus, pending crops which have potential existence may be the subject
matter of sale (Sibal vs. Valdez, 50 Phil. 512).
6.
Contract of sale and lease of things distinguished

The essential diference between a contract of sale and a lease of things is that the
delivery of the thing sold transfers ownership, while in lease no such transfer of ownership
results as the rights of the lessee are limited to the use and enjoyment of the thing leased. In the
present case, the lower courts holding that the contract in question fits the definition of a lease
of things wherein one of the parties binds himself to give to another the enjoyment or use of a
thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil
Code of the Philippines) is erroneous.
7.
Contract of lease, enjoyment of property

Article 1543 of the Civil Code defines the contract of lease as the giving or the
concession of the enjoyment or use of a thing for a specified time and fixed price, and
since such contract is a form of enjoyment of the property, it is evident that it must be
regarded as one of the means of enjoyment referred to in said Article 398, inasmuch as the
terms enjoyment, use, and benefit involve the same and analogous meaning relative to the
general utility of which a given thing is capable. (104 Jurisprudencia Civil, 443; Rodriguez
vs. Borromeo, 43 Phil. 479, 490).
8.
Transfer of accessory does not transfer principal

The possession and enjoyment of the coconut trees cannot be said to be the possession
and enjoyment of the land itself because these rights are distinct and separate from each
other, the first pertaining to the accessory or improvements (coconut trees) while the second,
to the principal (the land). A transfer of the
Sales, 2003 ( 201 )
accessory or improvement is not a transfer of the principal. It is the other way around, the
accessory follows the principal. In the present case, the sale of the nuts cannot be interpreted
nor construed to be a lease of the trees, much less extended further to include the lease of the
land itself. In cannot be said that the possession and enjoyment of the coconut trees to be the
possession and enjoyment of the land itself because the lessee in order to enjoy his right under
the contract, he actually takes possession of the land, at least during harvest time, gathers all
of the fruits of the coconut trees in the land, and gains exclusive use thereof without the
interference or intervention of the lessor.
9.
Grantee under RA 477 not prohibited to sell the natural/industrial fruits of the
land awarded to him
The grantee of a parcel of land under RA 477 is not prohibited from alienating or
disposing of the natural and/or industrial fruits of the land awarded to him, pursuant to the
terms of the first paragraph of Section 8. What the law expressly disallows is the encumbrance
or alienation of the land itself or any of the permanent improvements thereon. Permanent
improvements on a parcel of land are things incorporated or attached to the property in a
fixed manner, naturally or artificially. They include whatever is built, planted or sown on the
land which is characterized by fixity, immutability or immovability. Houses, buildings,
machinery, animal houses, trees and plants would fall under the category of permanent
improvements, the alienation or encumbrance of which is prohibited by RA 477. While
coconut trees are permanent improvements of a land, their nuts are natural or industrial
fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or
otherwise disposed of by the owner of the land. Hence, the grantee of Lot 21 had the right and
prerogative to sell the coconut fruits of the trees growing on the property.
10.
Purpose of RA 477, and Section 8 thereof

By virtue of RA 477, bona fide occupants, veterans, members of guerilla
organizations and other qualified persons were given the opportunity to acquire government
lands by purchase, taking into account their limited means. It was intended for these persons
to make good and productive use of the lands awarded to them, not only to enable them to
improve their standard of living, but likewise to help provide for the annual payments to the
Government of the purchase price of the lots awarded to them. Section 8 was included to
protect the grantees from themselves and the incursions of opportunists who prey on their
misery and poverty. It is there to insure that the grantees themselves benefit from their
respective lots, to the exclusion of other persons.
11.
Legislature does not intend to prohibit the grantee from selling natural and
industrial fruits of his land
The purpose of the law is not violated when a grantee sells the produce or fruits of his
land. On the contrary, the aim of the law is thereby achieved, for the grantee is encouraged
and induced to be more industrious and productive, thus making it possible for him and his
family to be economically self-sufficient and to lead a respectable life. At the same time,
the Government is assured of payment on the annual installments on the land. It could not
have been the intention of the legislature to prohibit the grantee from selling the natural and
industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the
grantee would not be able to receive and enjoy the fruits of the property in the real and
complete sense.
12.
Party cannot impugn the validity of the contract after receiving the
consideration for the sale The vendor-grantee, after having received the consideration
for the sale of his coconut fruits, cannot
be allowed to impugn the validity of the contracts he entered into, to the prejudice of
petitioner who contracted in good faith and for a consideration. The vendor cannot claim that
he has the privilege to change his mind and claim it as (an) implied lease, and he has the
legitimate right to file an action for annulment which no law can stop as there is a
perfected and valid contract.
13.
Grant of attorneys fees not justifed

Article 2208 of the Civil Code provides that in the absence of stipulation, attorneys
fees and
Sales, 2003 ( 202 )
expenses of litigation, other than judicial costs, cannot be recovered, except (1) When
exemplary damages are awarded; (2) When the defendants act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In
criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded
civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim;
(6) In actions for legal support; (7) In actions for the recovery of wages of household helpers,
laborers and skilled workers; (8) In actions for indemnity under workmens compensation and
employers liability laws; (9) In a separate civil action to recover civil liability arising from a
crime; (10) When at least double judicial costs are awarded; (11) In any other case where the
court deems it just and equitable that attorneys fees and expenses of litigation should be
recovered. In all cases, the attorneys fees and expenses of litigation must be
reasonable. None of the legal grounds enumerated exists to justify or warrant the grant of
attorneys fees.
[84]
PNB v. CA, 262 SCRA 464 (1995)
[85]
Power Commercial and Industrial Corp. vs. CA [G.R. No. 119745.
June 20, 1997.] Third Division, Panganiban (J): 3 concur, 1 on leave
Facts: Power Commercial & Industrial Development Corporation (PCID), an
industrial asbestos manufacturer, needed a bigger office space and warehouse for its products.
For this purpose, on 31 January 1979, it entered into a contract of sale with the spouses
Reynaldo and Angelita R. Quiambao. The contract involved a 612 sq. m. parcel of land
covered by TCT S-6686 located at the corner of Bagtican and St Paul Streets, San Antonio
Village, Makati City. The parties agreed that PCID would pay the spouses P108,000.00 as down
payment, and the balance of P295,000.00 upon the execution of the deed of transfer of the title
over the property. Further, PCID assumed, as part of the purchase price, the existing mortgage
on the land. In full satisfaction thereof, he paid P79,145.77 to PNB, the mortgagee. On 1 June
1979, the spouses mortgaged again said land to PNB to guarantee a loan of P145,000.00,
P80,000.00 of which was paid to the spouses. PCID agreed to assume payment of the loan. On
26 June 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage
(P295,000 payment, with assumption of PNB mortgage worth P145,000, pending consent by
PNB. The Deed of Sale also provides a clause stating that We hereby also warrant that we are
the lawful and absolute owners of the above described property, free from any lien and/or
encumbrance, and we hereby agree and warrant to defend its title and peaceful possession
thereof in favor of the said Power Commercial and Industrial Development Corporation,
its successors and assigns, against any claims whatsoever of any and all third persons;
subject, however, to the provisions hereunder provided to wit.). On the same date, Mrs. C.D.
Constantino, then PCIDs General Manager, submitted to PNB said deed with a formal
application for assumption of mortgage. On 15 February 1980, PNB informed the spouses
that, for PCIDs failure to submit the papers necessary for approval pursuant to the the
spouses letter dated 15 January 1980, the application for assumption of mortgage was
considered withdrawn; that the outstanding balance of P145,000.00 was deemed fully due and
demandable; and that said loan was to be paid in full within 15 days from notice. PCID paid
PNB P41,880.45 on 24 June 1980 and P20,283.14 on 23 December 1980, payments which were
to be applied to the outstanding loan. On 23 December 1980, PNB received a letter from PCID
requesting that its assumption of mortgage be given favorable consideration, and that the title
be transferred to its name so that it may undertake the necessary procedures to make use of
the lot, in exclusion of people currently in physical occupation of the lot. On 19 February
1982, PNB sent PCID a letter informing PCID that the loan is past due from last maturity with
interest arrearages amounting to P25,826.08 as of 19 February 1982, and requesting PCID to
remit payments to cover interest, charges, and at least part of the principal in order to place
PCIDs account in current form.
Sales, 2003 ( 203 )
On 17 March 1982, PCID filed Civil Case 45217 against the spouses for rescission and damages
before the RTC Pasig, Branch 159. Then, in its reply to PNBs letter of 19 February 1982, PCID
demanded the return of the payments it made on the ground that its assumption of mortgage
was never approved. On 31 May 1983, while the case was pending, the mortgage was
foreclosed. The property was subsequently bought by PNB during the public auction. Thus, an
amended complaint was filed impleading PNB as party defendant. On 12 July 1990, the trial
court ruled that the failure of respondent spouses to deliver actual possession to petitioner
entitled the latter to rescind the sale, and in view of such failure and of the denial of the
latters assumption of mortgage, the spouses and PNB was obliged to return the payments
made by PCID (P187,144.77 with legal interest of 12% per annum from the date of the filing
of the complaint until fully paid by the spouses; and P62,163.59 with 12% from date of
judgment until fully paid by the bank). No award of other damages and attorneys fees were
made. The counterclaim of the spouses and PNB were dismissed for lack of merit.
On appeal by the spouses and PNB, and on 27 March 1995, the Court of Appeals (in CA-GR
CV 32298) reversed the trial court. It held that the deed of sale between the spouses and PCID
did not obligate the former to eject the lessees from the land in question as a condition of the
sale, nor was the occupation thereof by said lessees a violation of the warranty against
eviction. Hence, there was no substantial breach to justify the rescission of said contract or
the return of the payments made. Hence, the petition for review on certiorari.
The Supreme Court denied the petition, and affirmed the assailed decision.
1.
Alleged failure to eject lessee from lot not substantial breach

The alleged failure of the spouses to eject the lessees from the lot in question and to
deliver actual and physical possession thereof cannot be considered a substantial breach of a
condition for two reasons: first, such failure was not stipulated as a condition whether
resolutory or suspensive in the contract; and second, its effects and consequences were not
specified either. The provision adverted to does not impose a condition or an obligation to
eject the lessees from the lot. By his own admission, Anthony Powers, PCIDs General Manager,
did not ask its lawyers to stipulate in the contract that the spouses were guaranteeing the
ejectment of the occupants, because there was already a proviso in said deed of sale that the
sellers were guaranteeing the peaceful possession by the buyer of the land.
2.
Obscurity in a contract construed against party causing it

Any of obscurity in a contract, if the above-quoted provision can be described, must
be construed against the party who caused it. PCID itself caused the obscurity because it
omitted this alleged condition when its lawyer drafted said contract.
3.
Stipulation similar to Romero vs. CA required in ejecting tenants; What was
not intended by parties cannot be a ground for rescission
If the parties intended to impose on the spouses the obligation to eject the tenants from
the lot sold, it should have included in the contract a provision similar to that referred to in
Romero vs. Court of Appeals, where the ejectment of the occupants of the lot sold was the
operative act which set into motion the period of buyers compliance with his own obligation,
i.e., to pay the balance of the purchase price. Failure to remove the squatters within the
stipulated period gave the other party the right to either refuse to proceed with the agreement
or to waive that condition of ejectment in consonance with Article 1545 of the Civil Code. In
the case cited, the contract specifically stipulated that the ejectment was a condition to be
fulfilled; otherwise, the obligation to pay the balance would not arise. This is not so in the
present case. Absent a stipulation therefor, the parties could not have intended to make its
nonfulfillment a ground for rescission. If they did intend this, their contract should have
expressly stipulated so.

4.
Rescission also not allowed if breach is not substantial and fundament to
fulfillment of obligation to sell
In Ang vs. C.A., rescission was sought on the ground that the seller had failed to fulfill
their
Sales, 2003 ( 204 )
obligation to remove and clear the lot sold, the performance of which would have given rise
to the payment of the consideration by buyer. Rescission was not allowed, however, because
the breach was not substantial and fundamental to the fulfillment by the petitioners of the
obligation to sell.
5.
Warranty and not condition; Terms of contract clear

The provision adverted to in the contract pertains to the usual warranty against
eviction, and not to a condition that was not met. The terms of the contract are so clear as
to leave no room for any other interpretation.
6.
Delivery an indispensable requisite; Actual or constructive; Symbolic delivery

Although most authorities consider transfer of ownership as the primary purpose of
sale; delivery remains an indispensable requisite as the law does not admit the doctrine of
transfer of property by mere consent. The Civil Code provides that delivery can either be
(1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic delivery
(Article 1498), as species of constructive delivery, effects the transfer of ownership
through the execution of a public document. Its efficacy can, however, be prevented if the
vendor does not possess control over the thing sold, in which case this legal fiction must yield
to reality.
7.
Requisites for symbolic delivery to produce effect of tradition

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 . . . 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.
8.
Delivery efected through execution of deed, allowing PCID to file
ejectment suit against occupants
Considering that the deed of sale between the parties did not stipulate or infer
otherwise, delivery was effected through the execution of said deed. The lot sold had been
placed under the control of PCID; thus, the filing of the ejectment suit was subsequently done.
It signified that its new owner intended to obtain for itself and to terminate said
occupants actual possession thereof. Prior physical delivery or possession is not legally required
and the execution of the deed of sale is deemed equivalent to delivery. This deed operates as a
formal or symbolic delivery of the property sold and authorizes the buyer to use the document
as proof of ownership. Nothing more is required.
9.
Requisites of Breach of Warranty Against Eviction

A breach of this warranty requires the concurrence of the following circumstances: (1)
The purchaser has been deprived of the whole or part of the thing sold; (2) This eviction is by a
final judgment; (3) The basis thereof is by virtue of a right prior to the sale made by the
vendor; and (4) The vendor has been summoned and made co-defendant in the suit for eviction
at the instance of the vendee. In the absence of these requisites, a breach of the warranty against
eviction under Article 1547 cannot be declared.
10.
Presence of lessee does not constitute encumbrance of land nor deprives control
thereof
The presence of lessees does not constitute an encumbrance of the land, nor does it
deprive PCID of its control thereof. It should be noted that PCIDs deprivation of ownership and
control finally occurred when it failed and/or discontinued paying the amortizations on the
mortgage, causing the lot to be foreclosed and sold at public auction. But this deprivation is
due to PCIDs fault, and not to any act attributable to the spouses.
Sales, 2003 ( 205 )
11.
Contract presumed to be valid and subsisting

Because PCID failed to impugn its integrity, the contract is presumed, under the law, to
be valid and subsisting.
12.
Application of Solutio Indebiti

The doctrine of Solutio Indebiti applies where: (1) a payment is made when there
exists no binding relation between the payor, who has no duty to pay, and the person who
received the payment, and (2) the payment is made through mistake, and not through
liberality or some other cause. Solutio indebiti does not apply in the present case.
13.
PCID has duty to pay amortizations

PCID was under obligation to pay the amortizations on the mortgage under the contract
of sale and the deed of real estate mortgage. Under the deed of sale, both parties agreed to
abide by any and all the requirements of PNB in connection with the real estate mortgage.
PCID was aware that the deed of mortgage made it solidarily, and, therefore, primarily liable
for the mortgage obligation. It was stipulated that the Mortgagor shall neither lease the
mortgaged property nor sell or dispose of the same in any manner, without the written consent
of the Mortgagee. However, if not withstanding this stipulation and during the existence of this
mortgage, the property herein mortgaged, or any portion thereof, is sold, it shall be the
obligation of the Mortgagor to impose as a condition of the sale, alienation or encumbrance
that the vendee, or the party in whose favor the alienation or encumbrance is to be made,
should take the property subject to the obligation of this mortgage in the same terms and
condition under which it is constituted, it being understood that the Mortgagor is not in any
manner relieved of his obligation to the Mortgagee under this mortgage by such sale,
alienation or encumbrance; on the contrary both the vendor and the vendee, or the party in
whose favor the alienation or encumbrance is made shall be jointly and severally liable for said
mortgage obligations.
14.
No mistake in the payment of amortization to PNB

Even if PCID was a third party in regard to the mortgage of the land purchased (on the
insistence that PNB disapproved PCIDs assumption of mortgage after it failed to submit
the necessary papers for the approval of such assumption), the payment of the loan by PCID
was a condition clearly imposed by the contract of sale. This fact alone disproves PCIDs
insistence that there was a mistake in payment. On the contrary, such payments were
necessary to protect its interest as a the buyer(s) and new owner(s) of the lot.
15.
No unjust enrichment
The quasi-contract of solutio indebiti is one of the concrete manifestations of the
ancient principle that no one shall enrich himself unjustly at the expense of another. The
payment of the mortgage was an obligation PCID assumed under the contract of sale. There is
no unjust enrichment where the transaction, as in the present case, is quid pro quo, value for
value.
[86]
Puyat & Sons v. Arco Amusement [G.R. No. 47538. June
20, 1941.] First Division, Laurel (J): 4 concur
Facts: In the year 1929, the Teatro Arco, was engaged in the business of operating
cinematographs. In 1930, its name was changed to Arco Amusement Company. About the same
time, Gonzalo Puyat & Sons, Inc., in addition to its other business, was acting as exclusive
agents in the Philippines for the Starr Piano Company of Richmond, Indiana, USA, which dealt
in cinematograph equipment and machinery. Arco, desiring to equip its cinematograph with
sound reproducing devices, approached Puyat. After some negotiations, it was agreed between
the parties, Puyat would, on behalf of Arco Amusement, order sound reproducing equipment
from the Star Piano Company and that Arco Amusement would pay Puyat, in addition to
the price of the
Sales, 2003 ( 206 )
equipment, 10% commission, plus all expenses, such as, freight, insurance, banking charges,
cables, etc. At the expense of the Arco, Puyat sent a cable to the Starr Piano Company, inquiring
about the equipment desired and making the said company to quote its price of $1,700 FOB
factory Richmond, Indiana. Puyat informed the plaintiff of the price of $1,700, and being
agreeable to the price, Arco, in a letter dated 19 November 1929, formally authorized the order.
The equipment arrived about the end of the year 1929, and upon delivery of the same to Arco
and the presentation of necessary papers, the price of $1,700, plus the 10% commission agreed
upon the plus all the expenses and charges, was duly paid by the Arco to Puyat. he following
year, another order for sound reproducing equipment was placed by Arco with Puyat, on the
same terms as the first order. The equipment under the second order arrived in due time, and
the defendant was duly paid the price of $1,600 with its 10 per cent commission, and $160,
for all expenses and charges. This amount of $160 does not represent actual out-of-pocket
expenses paid by Puyat, but a mere flat charge and rough estimate made by Puyat equivalent
to 10% of the price of $1,600 of the equipment.
Three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against
Puyat, the officials of the Arco discovered that the price quoted to them by Puyat with regard
to their two orders was not the net price but rather the list price, and that the defendant had
obtained a discount from the Starr Piano Company. Moreover, by reading reviews and
literature on prices of machinery and cinematograph equipment, said officials of Arco were
convinced that the prices charged them by the defendant were much too high including the
charges for out-of-pocket expenses. For these reasons, they sought to obtain a reduction from
Puyat or rather a reimbursement. Failing in this they brought an action with the CFI Manila.
The trial court held that the contract between the parties was one of the outright purchase
and sale, and absolved Puyat from the complaint. The appellate court, however, held that the
relation between the parties was that of agent and principal, Puyat acting as agent of Arco in
the purchase of the equipment in question, and sentenced Puyat to pay Arco alleged
overpayments in the total sum of $1,335.52 or P2,671.04, together with legal interest thereon
from the date of the filing of the complaint until said amount is fully paid, as well as to pay
the costs of the suit in both instances. Hence, the petition for the issuance of a writ of
certiorari to the Court of Appeals for the purposed of reviewing its decision in civil case GR
1023.
The Supreme Court granted the writ of certiorari, reversed the decision of the appellate court,
and absolved Puyat & Sons from the complaint in GR 1023, without pronouncement regarding
costs.
1.
Contract, and those agreed upon, is the law between the parties; What does
not appear are regarded as dealers or traders not binding the parties
The contract is the law between the parties and should include all the things they are
supposed to have been agreed upon. What does not appear on the face of the contract should be
regarded merely as dealers or traders talk, which can not bind either party. (Nolbrook v.
Conner, 56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 Ill., 161; Bank v. Palmer, 47 Ill.,
92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters which Arco
accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing equipment
subject of its contract with Puyat, are clear in their terms and admit of no other
interpretation than that Arco agreed to purchase from Puyat the equipment in question at the
prices indicated which are fixed and determinate.
2.
Agency; Agent exempt from all liability in discharge of commission if in
accordance with instructions received from principal
In agency, the agent is exempted from all liability in the discharge of his commission
provided he acts in accordance with the instructions received from his principal (section 254,
Code of Commerce), and the principal must indemnify the agent for all damages which the
latter may incur in carrying out the agency without fault or imprudence on his part (article
1729, Civil Code). The fact that whatever unforseen events might have taken place
unfavorable to the defendant (petitioner), such as change in prices, mistake in their quotation,
loss of the goods not covered by insurance or failure of the Starr Piano Company to properly
fill
Sales, 2003 ( 207 )
the orders as per specifications, the plaintiff (respondent) might still legally hold the defendant
(petitioner) to the prices fixed of $1,700 and $1,600 is incompatible with the pretended
relation of agency between the parties.
3.
Commission does not necessarily make one the agent of the other
While the letters state that Puyat was to receive 10% commission, this does not
necessarily make the petitioner an agent of the respondent, as this provision is only an
additional price which the respondent bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale. (See Quiroga vs. Parsons Hardware Co., 38
Phil., 501.)
4.
Puyat & Sons already the agent of Starr Piano Company of Richmond,
Indiana, in the Philippines
To hold the petitioner an agent of Arco in the purchase of equipment and machinery
from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact
that Puyat is the exclusive agent of Starr Piano in the Philippines. It is out of the ordinary for
one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated
to not point to anything but plain ordinary transaction where Arco enters into a contract
transaction, a contract of purchase and sale, with Puyat, the latter as exclusive agent of the
Starr Piano Company in the United States.
5.
Vendor not bound to reimburse difference of cost and sales price

A vendor is not bound to the vendee for any difference between the cost price and the
sales price which represents the profit realized by the vendor out of the transaction. This is the
very essence of commerce without which merchants or middleman would not exist.
6.
Not every concealment is fraud, maybe business acumen; Buyer estopped when
it agreed to conditions and price
It is well known that local dealers acting as agents of foreign manufacturers, aside
from obtaining a discount from the home ofice, sometimes add to the list price when they
resell to local purchasers. It was apparently to guard against an exhorbitant additional price
that Arco sought to limit it to 10%t. Arco is estopped from questioning that additional price.
If the respondent later on discovers itself at the short end of a bad bargain. it alone must
bear the blame, and it cannot rescind the contract, much less compel a reimbursement
of the excess price, on that ground alone. The fact that Puyat obtained more or less profit than
Arco calculated before entering into the contract of purchase and sale, is no ground for
rescinding the contract of purchase and sale, is no ground for rescinding the contract or
reducing the price agreed upon between the parties. Puyat was not duty bound to reveal the
private arrangement it had with the Starr Piano Company relative to such discount to its
prospective customers. Not every concealment is fraud; and short of fraud, it were better that,
within certain limits, business acumen permit of the loosening of the sleeves and of the
sharpening of the intellect of men and women in the business world.
[87]
Quijada v. CA [G.R. No. 126444. December
4, 1998.] Second Division, Martinez (J): 3 concur
Facts: Petitioners (Alfonso, Cresente, Reynalda, Demetrio, Eliuteria, Eulalio, and Warlito) are
the children of the late Trinidad Corvera Vda. de Quijada. Trinidad was one of the heirs of
the late Pedro Corvera and inherited from the latter the 2-hectare parcel of land subject of the
case, situated in the barrio of San Agustin, Talacogon, Agusan del Sur. On 5 April 1956,
Trinidad Quijada together with her sisters Leonila Corvera Vda. de Sequea and Paz Corvera
Cabiltes and brother Epapiadito Corvera executed a conditional deed of donation of the 2hectare parcel of land in favor of the Municipality of Talacogon, the condition being that the
parcel of land shall be used solely and exclusively as part of the campus of the proposed
provincial high school in
Sales, 2003 ( 208 )
Talacogon. Apparently, Trinidad remained in possession of the parcel of land despite the
donation. On 29 July 1962, Trinidad sold 1 hectare of the subject parcel of land to Regalado
Mondejar. Subsequently, Trinidad verbally sold the remaining 1 hectare to Mondejar without
the benefit of a written deed of sale and evidenced solely by receipts of payment. In 1980,
the heirs of Trinidad, who at that time was already dead, filed a complaint for forcible
entry against Mondejar, which complaint was, however, dismissed for failure to prosecute.
In 1987, the proposed provincial high school having failed to materialize, the Sangguniang
Bayan of the municipality of Talacogon enacted a resolution reverting the 2 hectares of land
donated back to the donors. In the meantime, Mondejar sold portions of the land to Fernando
Bautista, Rodolfo Goloran, Efren Guden, and Ernesto Goloran.
On 5 July 1988, the petitioners filed a complaint against private respondents (Mondejar,
Rodulfo and Ernesto Goloran, Asis, Ras, Abiso, Bautista, Macasero and Maguisay) for quieting of
title, recovery of possession and ownership of parcels of land with claim for attorneys fees and
damages. The trial court rendered judgment in favor of the petitioners, holding that Trinidad
Quijada did not have legal title or right to sell the land to Mondejar as it belongs to the
Municipality of Talacogon at that time, and that the deed of sale in favor of Mondejar did
not carry the conformity and acquiescence of her children considering that Trinidad was already
63 years old and a widow. The trial court ordered the defendants (private respondents), and any
person acting in defendants behalf to return and vacate the 2 hectares of land to the
plaintiff, and to remove their improvements constructed on the lot; ordered the cancellation
of the deed of sale executed by Trinidad to Mondejar, as well as the deeds of
sale/relinquishments executed by Mondejar to the other defendants; and ordered the
defendants to pay the plaintiffs, in solidum, the amount of P10,000, P8,000, and P30,000 as
attorneys fees, expenses of litigation and moral damages, respectively.
On appeal, the Court of Appeals reversed and set aside the judgment a quo ruling that the
sale made by Trinidad Quijada to respondent Mondejar was valid as the former retained an
inchoate interest on the lots by virtue of the automatic reversion clause in the deed of
donation. Thereafter, petitioners filed a motion for reconsideration. When the CA denied their
motion, petitioners instituted a petition for review to the Supreme Court.
The Supreme Court affirmed the assailed decision of the Court of Appeals.
1.
Condition valid in donation if not contrary to law, morals, good customs, public
order or public policy
The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters
was subject to the condition that the donated property shall be used solely and exclusively as
a part of the campus of the proposed Provincial High School in Talacogon. The donation
further provides that should the proposed Provincial High School be discontinued or if the
same shall be opened but for some reason or another, the same may in the future be closed
the donated property shall automatically revert to the donor. Such condition, not being
contrary to law, morals, good customs, public order or public policy was validly imposed in the
donation.
2.
Donation as mode of acquiring ownership

When the Municipalitys acceptance of the donation was made known to the donor,
the former became the new owner of the donated property, donation being a mode of
acquiring and transmitting ownership, notwithstanding the condition imposed by the
donee. The donation is perfected once the acceptance by the donee is made known to the
donor. Accordingly, ownership is immediately transferred to the latter and that ownership will
only revert to the donor if the resolutory condition is not fulfilled.
3.
Condition to construct school is a resolutory condition

The resolutory condition, in the present case, is the construction of the school. It has
been ruled that when a person donates land to another on the condition that the latter would
build upon the land a school, the
Sales, 2003 ( 209 )
condition imposed is not a condition precedent or a suspensive condition but a resolutory one.
So long as the resolutory condition subsists and is capable of fulfillment, the donation
remains effective and the donee continues to be the owner subject only to the rights of the
donor or his successors-in-interest under the deed of donation. Since no period was imposed by
the donor on when must the donee comply with the condition, the latter remains the owner so
long as he has tried to comply with the condition within a reasonable period. Such period,
however, became irrelevant herein when the donee manifested that it cannot comply
with the condition and the same was made known to the donor. Only then, when the nonfulfillment of the resolutory condition was brought to the donors knowledge, that ownership
of the donated property reverted to the donor as provided in the automatic reversion clause of
the deed of donation.
4.
Inchoate interest may be subject of contract including a contract of sale;
Interest over property under conditional deed of donation, not the land itself
The donor may have an inchoate interest in the donated property during the time that
ownership of the land has not reverted to her. Such inchoate interest may be the subject of
contracts including a contract of sale. In the present case, however, what the donor sold was the
land itself which she no longer owns. It would have been different if the donor-seller sold her
interests over the property under the deed of donation which is subject to the possibility of
reversion of ownership arising from the non-fulfillment of the resolutory condition.
5.
Laches, elements
Laches presupposes failure or neglect for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence, could or should have been done earlier;
it is negligence or omission to assert a right within a reasonable time, thus, giving rise to a
presumption that the party entitled to assert it either has abandoned or declined to assert
it. Its essential elements of (a) Conduct on the part of the defendant, or of one under
whom he claims, giving rise to the situation complained of; (b) Delay in asserting
complainants right after he had knowledge of the defendants conduct and after he has an
opportunity to sue; (c) Lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and, (d) Injury or prejudice to
the defendant in the event relief is accorded to the complainant are absent in this case. In the
present case, petitioners cause of action to quiet title commenced only when the property
reverted to the donor and/or his successors-in-interest in 1987, not in the 1960s when they had
no interest over the property at that time except under the deed of donation to which
private respondents were not privy. Moreover, petitioners had previously filed an ejectment
suit against private respondents only that it did not prosper on a technicality.
6.
Sale, being a consensual contract, is perfected by mere consent; Seller need not
own property when sold but when delivered
Sale, being a consensual contract, is perfected by mere consent, which is manifested
the moment there is a meeting of the minds as to the offer and acceptance thereof on three
(3) elements: subject matter, price and terms of payment of the price. Ownership by the seller
on the thing sold at the time of the perfection of the contract of sale is not an element for its
perfection. What the law requires is that the seller has the right to transfer ownership at the
time the thing sold is delivered. Perfection per se does not transfer ownership which occurs
upon the actual or constructive delivery of the thing sold. A perfected contract of sale cannot be
challenged on the ground of non-ownership on the part of the seller at the time of its
perfection; hence, the sale is still valid.
7.
Sellers title passes by operation of law to the buyer

The consummation of the perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer when the seller or her
successors-in-interest subsequently acquires ownership thereof. In the present case, such

circumstance happened in this case when petitioners (Trinidads heirs) became the owners of
the subject property upon the reversion of the ownership of the land to them. Consequently,
ownership is transferred to Mondejar and those who claim their right from him.
Sales, 2003 ( 210 )
Article 1434 of the New Civil Code supports the ruling that the sellers title passes by
operation of law to the buyer. This rule applies not only when the subject matter of the
contract of sale is goods, but also to other kinds of property, including real property.
8.
Article 1409 (4) does not provide that the properties of a municipality are
outside the commerce of man; Objects outside of the commerce of man are those which
cannot be appropriated
Nowhere in Article 1409 (4) is it provided that the properties of a municipality, whether
it be those for public use or its patrimonial property, are outside the commerce of men; so as to
render the contract involving the same inexistent and void from the beginning when sold. In
the present case, the lots were conditionally owned by the municipality. To rule that the
donated properties are outside the commerce of men would render nugatory the unchallenged
reasonableness and justness of the condition which the donor has the right to impose as
owner thereof. Moreover, the objects referred to as outside the commerce of man are those
which cannot be appropriated, such as the open seas and the heavenly bodies.
9.
No factual or legal basis for the award of fees and damages

There is neither factual nor legal basis for the trial courts award of attorneys fees,
litigation expenses and moral damages. Attorneys fees and expenses of litigation cannot,
following the general rule in Article 2208 of the New Civil Code, be recovered in the present
case, there being no stipulation to that effect and the case does not fall under any of the
exceptions. It cannot be said that private respondents had compelled petitioners to litigate
with third persons. Neither can it be ruled that the former acted in gross and evident bad
faith in refusing to satisfy the latters claims considering that private respondents were under
an honest belief that they have a legal right over the property by virtue of the deed of sale.
Moral damages cannot likewise be justified as none of the circumstances enumerated
under Articles 2219 27 and 2220 28 of the New Civil Code concur in this case.
[88]
Quimson v. Rosete [G.R. No. L-2397. August
9, 1950.] En Banc, Tuason (J): 5 concur
Facts: The property, i.e. the land, originally belonged to the late Dionisio Quimson, who, on
7 June 1932, executed a deed Exhibit A transferring the same in favor of his daughter Tomasa
Quimson, but remaining in continuous possession and enjoyment. It was sold to the spouses
Magno Agustin and Paulina Manzano on 3 May 1935, with right to repurchase within the term
of six years; and two years after, on 5 April 1937, again was sold to Francisco Rosete, also
with pacto de retro within five years, thereafter having verified its repurchase of Agustin
and Manzano, with money furnished to him by Rosete, executing in the end the deed Exhibit
1. Since then, Rosete was the one in possession and who enjoys, in a peaceful manner even after
the death of Dionisio Quimson, which occurred on 6 June 1939, until January 1943, when
Tomasa Quimson filed with the Justice of Peace of San Marcelino, Zambales, intervening in the
agreement with Rosete over the said property, whose failure was the reason for the race toward
Iba, the capital of Zambales, to acquire priority in the registration and inscription of the deeds
of sale Exhibits A and 1 which Dionisio Quimson executed in favor of Tomasa Quimson and
Francisco Rosete, respectively, the former arriving one hour earlier, at 9:30 a.m. of 17
February 1943, whereas the latter arrived at 10:30 a.m. of the same day.
The Court of First instance of Zambales ruled in favor of Tomasa Quimson and Marcos Santos;
the decision being reversed later by the Court of Appeals. Hence, the appeal by certiorari.
The Supreme Court set aside the decision of the Court of Appeals, and accepted the trial
courts appraisal of the damages (assessed damages of P180 for the occupation of the land for
the agricultural years 1943-44, 1944-45 and 1945-46, and P60 a year thereafter until the
possession of the property was restituted); with costs against Rosete.
Sales, 2003 ( 211 )
1.
Article 1462 and 1473 of the Civil Code

Articles 1462 of the Civil Code provides that The thing sold shall be deemed
delivered, when it is placed in the control and possession of the vendee. When the sale is made
by means of 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 said instrument the contrary does not
appear or may not be clearly inferred. Article 1473 provides, on the other hand, that If the
same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable
property. Should it be immovable property, the ownership shall belong to the person
acquiring it who first recorded it in the registry. Should there be no inscription, the
ownership shall belong to the person who in good faith was first in the possession; and, in the
absence of this, to the person who presents the oldest title, provided there is good faith.
2.
Buencamino vs. Viceo; Execution of notarial document of sale sufficient delivery

In the case of Buencamino vs. Viceo (13 Phil., 97), Article 1462 was cited. The
provision provides that Upon a sale of real estate the execution of a notarial document of
sale is a sufficient delivery of the property sold.
3.
Florendo vs. Foz: Execution of sale thru public instrument tantamount to conveyance
In the case of Florendo vs. Foz (20 Phil., 388), it was ruled that When the sale is made
by means of a public instrument, the execution thereof is tantamount to conveyance of the
subject matter, unless the contrary clearly follows or be deduced from such instrument itself,
and in the absence of this condition such execution by the vendor is per se a formal or
symbolical conveyance of the property sold, that is, the vendor in the instrument itself
authorizes the purchaser to use the title of ownership as proof that the latter is thenceforth the
owner of the property.
4.
Sanchez vs. Ramos almost on all fours

In the case of Sanchez vs. Ramos (40 Phil., 614), it appeared that one Fernandez sold a
piece of land to Marcelino Gomez and Narcisa Sanchez under pacto de retro in a public
instrument. The purchasers neither recorded their deed in the registry of property nor ever took
material possession of the land. Later, Fernandez sold the same property by means of a
private document to Ramos who immediately entered upon the possession of it. It was held
that, according to article 1473 of the Civil Code, Gomez and Sanchez were the first in
possession and, consequently, that the sale in their favor was superior.
5.
Interpretation of Article 1473; Material and symbolic possession

Possession is acquired by the material occupancy of the thing or right possessed, or by
the fact that the latter is subjected to the action of our will, or by the appropriate acts and
legal formalities established for acquiring possession (art. 438, Civil Code). By a simple
reasoning, it appears that, because the law does not mention to which of these kinds of
possession the article (1473) refers, it must be understood that it refers to all of these kinds.
The possession mentioned in article 1473 (for determining who has better right when the same
piece of land has been sold several times by the vendor) includes not only the material but
also the symbolic possession, which is acquired by the execution of a public instrument.
6.
Interpretation of Article 1473: in consonance with the principles of justice

The Courts interpretation of article 1473 is more in consonance with the principles of
justice. The execution of a public instrument is equivalent to the delivery of the realty sold
(art.1462, Civil Code) and its possession by the vendee (art. 438). Under these conditions
the sale is considered consummated and completely transfers to the vendee all of the
vendors rights of ownership including his real right over the thing. The vendee by virtue of
this sale has acquired everything and nothing, absolutely nothing, is left to the vendor. From
this moment the vendor is a stranger to the thing sold like any other who has never been its
owner. As the thing is considered delivered, the vendor has no longer the obligation of even
delivering it. If he
Sales, 2003 ( 212 )
continues taking material possession of it, is simply on account of vendees tolerance and, in
this sense, his possession is vendors possession. And if the latter should have to ask him for
the delivery of this material possession, it would not be by virtue of the sale, because this
has been already consummated and has produced all its effects, but by virtue of the vendees
ownership, in the same way as said vendee could require of another person although same were
not the vendor. This means that after the sale of a realty by means of a public instrument, the
vendor, who resells it to another, does not transmit anything to the second vendee and if the
latter, by virtue of this second sale, takes material possession of the thing, he does it as mere
detainer, and it would be unjust to protect this detention against the rights to the thing
lawfully acquired by the first vendee.
7.
Spirit or intent of law prevails over its letter

The statement of Sr. Manresa (pp. 157, 158, Vol. X, of his treatise on the Spanish
Civil Code) expresses the literal meaning of article 1473, for the decision of 24 November
1894 reflects, according to the learned author, the intention of the lawmaker and is in
conformity with the principles of justice. Now, under both the Spanish and the Philippine
rules of interpretation, the spirit, the intent, of the law prevails over its letter.
8.
Deed of conveyance means land was sold, in absence of any qualifying statement
The finding that a deed of conveyance was made by Dionisio Quimson in favor of his
daughter could have no other meaning, in the absence of any qualifying statement, than that the
land was sold by the father to his daughter. The trial courts explicit finding which was not
reversed by the Court of Appeals and stands as the fact of the case. Looking into the document
itself, Exhibit A states categorically that the vendor received from the vendee the consideration
of sale, P250, and acknowledged before the notary public having executed the instrument of his
own free will.
9.
Cruzado vs. Escaler, obiter dictum; Prescription

The expression in thedecision in the case of Cruzado vs. Escaler (34 Phil., 17),
apparently to the effect that physical possession by the purchaser is essential to the
consummation of a sale of real estate, is at best obiter dictum; for the court distinctly found
that the sale to Cruzados father was a sham, executed with the sole purpose of enabling the
senior Cruzado to mortgage the property and become procurador. And with reference to the
failure of the second vendee, Escaler, to register his purchase, the court disregarded the
omission as well as the entry of the first sale in the registry because that entry was made by
the son and heir of the first supposed vendee, more than a score years after the alleged
transaction, when Cruzado was no longer or had any right therein (in the land), because it
already belonged to the Escaler, its lawful owner. When Escaler, the second purchaser was
sued, he had become the owner of the land by prescription. In the present case, Rosetes
possession fell far short of having ripened into title by prescription when the Quimson
commenced her action.
[89]
Quiroga v. Parsons Hardware [G.R. No. 11491. August
23, 1918.] En Banc, Avancena (J): 5 concur
Facts: On 24 January 1911, in Manila, a contract was entered into by and between the Quiroga
and J. Parsons (to whose rights and obligations Parsons Hardware later subrogated itself) for the
exclusive sale of Quiroga Beds in the Visayan Islands. Quiroga was to furnish the Parson with
the beds (which the latter might order, at the price stipulated) and that Parson was to pay the
price in the manner stipulated. The price agreed upon was the one determined by Quiroga for
the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their
class. Payment was to be made at the end of sixty days, or before, at Quirogas request, or in
cash, if Parson so preferred, and in these last two cases an additional discount was to be allowed
for prompt payment.
Sales, 2003 ( 213 )
<The case facts are bereft of details regarding the event that led to the controversy of the
case, the litigation in the lower courts, up to appeal>
Quiroga alleges that Parson violated its obligation not to sell the beds at higher prices than
those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency;
to keep the beds on public exhibition, and to pay for the advertisement expenses for the same;
and to order the beds by the dozen and in no other manner. None of these, except the obligation
to order the beds by the dozen and in no other manner, are expressly set forth in the contract.
Quiroga maintains that Parsons is his agent for the sale of his bed in Iloilo, and such
obligations implied in a contract of commercial agency.
The Supreme Court held that the contract by and between the plaintiff and the defendant was
one of purchase and sale, and that the obligations the breach of which is alleged as a cause of
action are not imposed upon the defendant, either by agreement or by law. The Court thus
affirmed the judgment appealed from, with costs against the appellant.
1.
Essential clauses given due regard to classify a contract; Contract of purchase and sale
In order to classify a contract, due regard must be given to its essential clauses. In the
contract in question, the clauses, constituting its cause and subject matter, are precisely the
essential features of a contract of purchase and sale. There was the obligation on the part of
Quiroga to supply the beds, and, on the part of Parson, to pay their price. These features
exclude the legal conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the principal the price he
obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he
returns it. By virtue of the contract between Quiroga and Parson, the latter, on receiving the
beds, was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
2.
Commission on sale merely a discount, other clauses are not incompatible
with contract of purchase and sale
The contract by and between the defendant and the plaintiff is one of purchase and sale.
Besides the clause made in the basis of a commission on sales, none of the other clauses of
the contract is found to substantially support Quirogas contention. None of these conveys
the idea of an agency. The words commission on sales used in clause (A) of article 1 mean
nothing else than a mere discount on the invoice price. The word agency, also used in articles 2
and 3, only expresses that the defendant was the only one that could sell Quirogas beds in the
Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are
not incompatible with the contract of purchase and sale.
3.
Classifcation of a contract defined by law, and not one called by the parties
The agreements contained in the document that has been drafted, constitute a contract of
purchase and sale, and not one of commercial agency. In the classification of the contract, it
must be understood that a contract is what the law defines it to be, and not what it is called by
the contracting parties.
4.
Acts subsequent to contract suppletory, not considered when essential
agreements are set forth in the contract
The acts of the parties merely show that, on the part of each of them, there was mutual
tolerance in the performance of the contract in disregard of its terms; and it gives no right to
have the contract considered, not as the parties stipulated it, but as they performed it. Only the
acts of the contracting parties, subsequent to, and in connection with, the execution of the
contract, must be considered for the purpose interpreting the contract, when such
interpretation is necessary, but not when, as in the instant case, its essential agreements are
clearly set forth and plainly show that the contract belongs to a certain kind and not to another.
5.
Effect of breach, and effect of subsequent consent to such breach

Sales, 2003 ( 214 )
In respect to the defendants obligation to order by the dozen, the only one expressly
imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard
the orders which the defendant might place under other conditions; but if the plaintiff
consents to fill them, he waives his right and cannot complain for having acted thus at his
own free will.
[90]
Radiowealth Finance vs. Palileo [G.R. No. 83432. May
20, 1991.] First Division, Gancayco (J): 4 concur
Facts: On 13 April 1970, spouses Enrique Castro and Herminia R. Castro sold to Manuelito
Palileo, a parcel of unregistered coconut land situated in Candiis, Mansayaw, Mainit, Surigao del
Norte. The sale is evidenced by a notarized Deed of Absolute Sale. The deed was not registered
in the Registry of Property for unregistered lands in the province of Surigao del Norte. Since
the execution of the deed of sale, Manuelito Palileo who was then employed at Lianga, Surigao
del Sur, exercised acts of ownership over the land through his mother Rafaela Palileo, as
administratrix or overseer. He has continuously paid the real estate taxes on said land from
1971 until the present.
On 29 November 1976, a judgment was rendered against Enrique T. Castro, in Civil Case
0103145 by the then CFI Manila, Branch XIX, to pay Radiowealth Finance Company, the sum
of P22,350.35 with interest thereon at the rate of 16% per annum from 2 November 1975
until fully paid, and the for the sum of P2,235.03 as attorneys fees, and to pay the costs.
Upon the finality of the judgment, a writ of execution was issued. Pursuant to said writ, the
provincial Sheriff Marietta E. Eviota, through Deputy Provincial Sheriff Leopoldo Risma,
levied upon and finally sold at public auction the subject land that Castro had sold to
Palileo. A certificate of sale was executed by the Provincial Sheriff in favor of
Radiowealth Finance Company, being the only bidder. After the period of redemption had
expired, a deed of final sale was also executed by the same Provincial Sherif. Both the
certificate of sale and the deed of final sale were registered with the Registry of Deeds.
Learning of what happened to the land, Palileo filed an action for quieting of title over the
same. After a trial on the merits, the court a quo rendered a decision in his favor. On appeal
(CA-GR CV 10788), the decision of the trial court was affirmed. Hence, the petition for review
on certiorari.
The Supreme Court affirmed the decision of the Court of Appeals; without costs.
1.
Article 1544; No ambiguity with respect to lands registered under the Torrens
System
Article 1544 of the Civil Code provides that in case of double sale of an
immovable property, ownership shall be transferred: (1) to the person acquiring it who in good
faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in
good faith was first in possession; and (3) in default thereof, to the person who presents the
oldest title, provided there is good faith. There is no ambiguity regarding the application of
the law with respect to lands registered under the Torrens System.
2.
Section 51 of PD 1529; Registration an operative act to convey or afect
registered lands insofar as third persons are concerned
Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No. 496
clearly provides that the act of registration is the operative act to convey or affect registered
lands insofar as third persons are concerned. Thus, a person dealing with registered land is not
required to go behind the register to determine the condition of the property. He is only
charged with notice of the burdens on the property which are noted on the face of the register
or certificate of title.
3.
title
Purchaser in good faith of registered land under the Torrens system acquires good
Sales, 2003 ( 215 )
A purchaser in good faith of registered land (covered by a Torrens Title) acquires a

good title as against all the transferees thereof whose right is not recorded in the registry of
deeds at the time of the sale.
4.
Finding of fact by Court of Appeals conclusive upon the Supreme Court;
Notarized deed of sale presumed authentic
The findings of fact of the Court of Appeals are conclusive on this Court and will not
be disturbed unless there is grave abuse of discretion. The finding of the Court of Appeals that
the property in question was already sold to Palileo by its previous owner before the execution
sale is evidenced by a deed of sale. Said deed of sale is notarized and is presumed authentic.
There is no substantive proof to support petitioners allegation that the document is fictitious
or simulated. There is no reason to reject the conclusion of the Court of Appeals that Palileo was
not a mere administrator of the property. It is undisputed that he exercised acts of ownership
through his mother.
5.
Levy on land previously sold to Palileo contrary to directive in writ of execution

The execution is contrary to the directive contained in the writ of execution which
commanded that the lands and buildings belonging to Enrique Castro be sold to satisfy the
execution. What the Provincial Sheriff levied upon and sold to Radiowealth Finance is a
parcel of land that does not belong to Enrique Castro, the judgment debtor.
6.
Bona fide purchaser of registered land at auction sale acquires good title
There is no doubt that had the property in question been a registered land, this case
would have been decided in favor of Radiowealth Finance since it was Radiowealth that had
its claim first recorded in the Registry of Deeds. Therefore, a bona fide purchaser of a
registered land at an execution sale acquires a good title as against a prior transferee, if such
transfer was unrecorded.
7.
Registration affecting unregistered lands without prejudice to third party with

a better right Under Act 3344, registration of instruments affecting unregistered
lands is without prejudice to a
third party with a better right. The mere registration of a sale in ones favor does not give
him any right over the land if the vendor was not anymore the owner of the land having
previously sold the same to somebody else even if the earlier sale was unrecorded.
8.
Carumba vs. CA a case in point

The case of Carumba vs. Court of Appeals 6 is a case in point. It was held therein that
Article 1544 of the Civil Code has no application to land not registered under Act 496.
Similar to the present case, Carumba dealt with a double sale of the same unregistered land.
The first sale was made by the original owners and was unrecorded while the second was an
execution sale that resulted from a complaint for a sum of money filed against the said original
owners. Applying Section 35, Rule 39 of the Revised Rules of Court, it was held that Article
1544 of the Civil Code cannot be invoked to benefit the purchaser at the execution sale though
the latter was a buyer in good faith and even if this second sale was registered. It was
explained that this is because the purchaser of unregistered land at a sheriff s execution sale
only steps into the shoes of the judgment debtor, and merely acquires the latters interest in
the property sold as of the time the property was levied upon. Applying the principle to the
present case, the Court of Appeals correctly held that the execution sale of the unregistered land
in favor of petitioner is of no efect because the land no longer belonged to the judgment
debtor as of the time of the said execution sale.
[91]
Republic v. Philippine Development Corp. [G.R. No. L-10141.

January 31, 1958.] En Banc, Padilla (J): 10 concur
Facts: On 6 May 1955, the Republic of the Philippines in representation of the Bureau of Prisons
instituted
Sales, 2003 ( 216 )
against Macario Apostol and the Empire Insurance Co. a complaint with the CFI Manila (Civil
Case 26166). The complaint alleges that Apostol submitted the highest bid in the amount
of P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau of
Prisons; that a contract therefor was drawn and by virtue of which, Apostol obtained goods
from the Bureau of Prisons valued P15,878.59; that of said account, Apostol paid only
P691.10 leaving a balance obligation of P15, 187.49. The complaint further avers that Apostol
submitted the best bid with the Bureau of Prisons for the purchase of 3 million board feet of
logs at P88.00 per 1,000 board feet; that a contract was executed between the Director of
Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at
P65,830.00; and that Apostol failed to pay a balance account of P18,827.57. All told, the total
demand set forth in complaint against Apostol is for P34,015.06 with legal interests thereon
from 8 January 1952. The Empire Insurance Company was included in the complaint having
executed a performance bond of P10,000.00 in favor of Apostol.
In his answer, Apostol interposed payment as a defense and sought the dismissal of the
complaint. On 19 July 1955, the Philippine Resources Development Corp. moved to
intervene, appending to its motion, the complaint in intervention of even date. The
complaint recites that for sometime prior to Apostols transactions the corporate had some
goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the president of
the corporation but without the knowledge or consent of the stockholders thereof, disposed
of said goods by delivering the same to the Bureau of Prisons in an attempt to settle his
personal debts with the latter entity; that upon discovery of Apostols act, the corporation
took steps to recover said goods by demanding from the Bureau of Prisons the return
thereof; and that upon the refusal of the Bureau to return said goods, the corporation sought
leave to intervene in Civil Case 26166. The Judge (Magno Gatmaitan) denied the motion for
intervention and thereby issued an order to this effect on 23 July 1955. A motion for the
reconsideration of said order was filed by the corporation and the same was likewise denied
on 18 August 1955.
On 3 September 1955, the corporation filed a petition for a writ of certiorari with the Court
of Appeals by. On 12 December 1955 the Court of Appeals set aside the order denying the
motion to intervene and ordered the trial court to admit the corporations complaint-inintervention, with costs against Macario Apostol. On 9 January 1956 the Government filed a
petition under Rule 46 to review the judgment rendered by the appellate court (CA-GR 15767R) with the Supreme Court. The Government contends that the intervenor has no legal interest
in the matter in litigation, because the action brought in the CFI Manila against Macario
Apostol and the Empire Insurance Company (Civil Case 26166) is just for the collection from
the defendant Apostol of a sum of money, the unpaid balance of the purchase price of logs and
almaciga bought by him from the Bureau of Prisons, whereas the intervenor seeks to recover
ownership and possession of G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes
that it claims it owns an intervention which would change a personal action into one ad rem
and would unduly delay the disposition of the case.
The Supreme Court affirmed the judgment under review, without pronouncement as to costs.
1.
Intervenor has legal capacity as it stands to be adversely afected by the

judgment of the court It is true that the very subject matter of the original case is a
sum of money, but it is likewise true as
borne out by the records, that the materials purportedly belonging to the corporation have
been assessed and evaluated and their price equivalent in terms of money have been
determined; and that said materials for whatever price they have been assessed, have been
assigned by Apostol as tokens of payment of his private debts with the Bureau of Prisons. In
view of these considerations, it becomes enormously plain in the event the judge decides to
credit Macario Apostol with the value of the goods delivered by the latter to the Bureau of
Prisons, the corporation stands to be adversely affected by such judgment. The conclusion is
inescapable that the corporation possesses a legal interest in the matter in litigation and that
such interest is of an actual, material, direct and immediate nature as to entitle the corporation
to intervene.
2.
Lower court has discretion to allow or disapprove a motion for intervention;
Principle
Sales, 2003 ( 217 )
Section 3 of Rule 13 of the Rules of Court endows the lower court with discretion
to allow or disapprove a motion for intervention (Santarromana et al. vs. Barrios, 63 Phil.
456); and that in the exercise of such discretion, the court shall consider whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of the original
parties and whether or not the intervenors rights may be fully protected in a separate
proceeding. In the present case, the corporation is positively authorized to file a separate
action against any of all the respondents; but considering that the resolution of the issues
raised in and joined by the pleadings in the main case, would vitally affect the rights not only
of the original parties but also of the corporation; that far from unduly delaying or
prejudicing the adjudication of the rights of the original parties or bringing about
confusion in the original case, the admission of the complaint in intervention would help
clarify the vital issue of the true and real ownership of the materials involved, besides
preventing an abhorrent multiplicity of suits. The motion to intervene should be given due
course.
3.
Article 1458 admits purchaser may pay a price certain in money or its equivalent
The Government argues that Price is always paid in terms of money and the
supposed payment being in kind, it is no payment at all, citing article 1458 of the new Civil
Code. However, the same article provides that the purchaser may pay a price certain in
money or its equivalent, which means that payment of the price need not be in money.
Whether the G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes claimed by the
corporation to belong to it and delivered to the Bureau of Prisons by Apostol in payment of his
account is sufficient payment therefor, is for the Court to pass upon and decide after hearing
all the parties in the case. Should the trial court hold that it is as to credit Apostol with the
value or price of the materials delivered by him, certainly the corporation would be afected
adversely if its claim of ownership of such sheets, plates, bars and pipes is true.
4.
Authority of corporate counsel presumed

By virtue of Section 20 of Rule 127, the authority of corporations counsel is presumed.
Withal, the claim of the counsel for the petitioner that a resolution to proceed against
Apostol, had been unanimously adopted by the stockholders of the corporation, has not been
refuted. It cannot be said that the counsel is acting merely in an individual capacity without
the benefit of a corporate act authorizing him to bring suit. As counsels authority to appear for
the corporation was never questioned in the CFI, it is to be presumed that he was properly
authorized to file the complaint-in intervention and appear for his client. It was only in the
Court of Appeals where his authority to appear was questioned. As the Court of Appeals was
satisfied that counsel was duly authorized by his client to file the complaint-in-intervention
and to appear in its behalf, the resolution of the Court of Appeals should not be disturbed.
5.
Corporation has separate personality from president or stockholder; Power to
sue lodged in the board of directors and not the president
Philippine Resource Corporation is a duly organized corporation with ofices at the
Samanillo Building and that as such, it is endowed with a personality distinct and separate
from that of its president or stockholders. It has the right to bring suit to safeguard its interests
and ordinarily, such right is exercised at the instance of the president. However, under the
circumstance, such right properly devolves upon the other officers of the corporation as said
right is sought to be exercised against the president himself who is the very object of the
intended suit. The power of a corporation to sue and be sued in any court is lodged in the board
of directors which exercises its corporate powers, and not in the president.
6.
Counsel is the secretary-treasurer of the corporation

Granting that counsel has not been actually authorized by the board of directors to
appear for and in behalf of the corporation, the fact that counsel is the secretary-treasurer of
the corporation and a member of the board of directors; and that the other members of the
board, namely, Macario Apostol, the president, and his wife Pacita R. Apostol, who should
normally initiate the action to protect the corporate properties and interests are the ones to be
adversely affected thereby, a single stockholder under such circumtances may sue in behalf of
the corporation. Counsel as a stockholder and director of the corporation may sue in its behalf
and
Sales, 2003 ( 218 )
file the complaint-in-intervention in the proper court.

[92]
Ridad vs. Filipinas Investment [G.R. No. L-39806. January
27, 1983.] Second Division, de Castro (J): 6 concur
Facts: On 14 April 1964, Luis and Lourdes Ridad purchased from the Supreme Sales and
Development Corporation 2 brand new Ford Consul Sedans complete with accessories, for
P26,887 payable in 24 monthly installments. To secure payment thereof, the Ridads executed
on the same date a promissory note covering the purchase price and a deed of chattel mortgage
not only on the 2 vehicles purchased but also on another car (Chevrolet) and their franchise
or certificate of public convenience granted by the defunct Public Service Commission for
the operation of a taxi fleet. Then, with the conformity of the Ridads, the vendor assigned its
rights, title and interest to the promissory note and chattel mortgage to Filipinas
Investment and Finance Corporation. Due to the failure of the Ridads to pay their monthly
installments as per promissory note, the corporation foreclosed the chattel mortgage
extrajudicially, and at the public auction sale of the 2 Ford Consul cars, of which the Ridads
were not notified, the corporation was the highest bidder and purchaser. Another auction sale
was held on 16 November 1965, involving the remaining properties subject of the deed of
chattel mortgage since the Ridads obligation was not fully satisfied by the sale of the
aforesaid vehicles, and at the public auction sale, the franchise of the Ridads to operate 5 units
of taxicab service was sold for P8,000 to the highest bidder, the corporation, which
subsequently sold and conveyed the same to Jose D. Sebastian, who then filed with the Public
Service Commission an application for approval of said sale in his favor.
On 21 February 1966, plaintiffs filed an action for annulment of contract before the CFI Rizal
(Branch I, Civil Case 9140) with Filipinas Investment and Finance Corporation, Jose D.
Sebastian and Sheriff Jose San Agustin, as party-defendants. By agreement of the parties, the
case was submitted for decision in the lower court on the basis of the documentary
evidence adduced by the parties during the pre-trial conference. Thereafter, the lower court
rendered judgment declaring the chattel mortgage null and void insofar as the taxicab
franchise and the used Chevrolet car of the plaintiffs are concerned, that the public auction
conducted concerning said franchise to be of no legal effect, that the certificate of sale issued
by the sheriff concerning the franchise is cancelled and set aside, and that the assignment
made by Filipinas Investment in favor of Sebastian was declared void and of no legal effect.
Appeal was filed with the Court of Appeals but was subsequently certified to the Supreme
Court pursuant to Section 3 of Rule 50 of the Rules of Court, there being no issue of fact
involved in the appeal.
The Supreme Court affirmed the judgment appealed from, with costs against Filipinas Investment,
et. al.
1.

Article 1484 of the Civil Code provides that 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 vendees failure to pay cover two or more installments; (3) Foreclose the
chattel mortgage on the thing sold, if one has been constituted, should the vendees 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.
2.
Remedies of vendor alternative, not cumulative; If vendor elects tight to
foreclose mortgage, law prohibits him from bringing further action to recover balance
of debt
Under Article 1484 of the Civil Code, the vendor of personal property the purchase price
of which is payable in installments, has the right, should the vendee default in the payment of
two or more of the agreed
Sales, 2003 ( 219 )
installments, 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.
Whichever right the vendor elects, he cannot avail of the other, these remedies being
alternative, not cumulative. Furthermore, if the vendor avails himself of the right to foreclose
his mortgage, the law prohibits him from further bringing an action against the vendee for the
purpose of recovering whatever balance of the debt secured not satisfied by the foreclosure sale.
The precise purpose of the law is to prevent 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, otherwise, the mortgagor-buyer would find himself without the
property and still owing practically the full amount of his original indebtedness.
3.
FIFC barred from further action as to payment of unpaid balance

FIFC elected to foreclose its mortgage upon default by the plaintiffs in the payment
of the agreed installments. Having chosen to foreclose the chattel mortgage, and bought the
purchased vehicles at the public auction as the highest bidder, it submitted itself to the
consequences of the law as specifically mentioned, by which it is deemed to have renounced
any and all rights which it might otherwise have under the promissory note and the chattel
mortgage as well as the payment of the unpaid balance.
4.
Vendors right to foreclose chattel mortgage only of the thing sold; not other
mortgages; Levy Hermanos case applies
The chattel mortgage in question is a nullity insofar as the taxicab franchise and the
used Chevrolet car of the Ridads are concerned, under the authority of the ruling in the case
of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil. 587, the facts of which are
similar to those in the present case. There, the same situation occurred wherein the vendees
offered as security for the payment of the purchase price not only the motor vehicles which
were bought on installment, but also a residential lot and a house of strong materials. This
Court sustained the pronouncement made by the lower court on the nullity of the mortgage in
so far as it included the house and lot of the vendees, holding that under the law, should the
vendor choose to foreclose the mortgage, he has to content himself with the proceeds of the
sale at the public auction of the chattels which were sold on installment and mortgaged to him,
and having chosen the remedy of foreclosure, he cannot nor should he be allowed to insist on
the sale of the house and lot of the vendees, for to do so would be equivalent to obtaining a writ
of execution against them concerning other properties which are separate and distinct from
those which were sold on installment. This would indeed be contrary to public policy and the
very spirit and purpose of the law, limiting the vendors right to foreclose the chattel
mortgage only on the thing sold.
5.
Cruz vs. FIFC; Additional mortgaged cancelled as it indirectly subverts
protection given by Article 1484
In the case of Cruz v. Filipinas Investment & Finance Corporation, 23 SCRA 791, the
Court ruled that the vendor of personal property sold on the installment basis is precluded,
after foreclosing the chattel mortgage on the thing sold, from having a recourse against the
additional security put up by a third party to guarantee the purchasers performance of his
obligation on the theory that to sustain the same would overlook the fact that if the guarantor
should be compelled to pay the balance of the purchase price, said guarantor will in turn be
entitled to recover what he has paid from the debtor-vendee, and ultimately it will be the latter
who will be made to bear the payment of the balance of the price, despite the earlier
foreclosure of the chattel mortgage given by him, thereby indirectly subverting the
protection given the latter. Consequently, the additional mortgage was ordered cancelled.
6.
Ruling in Cruz vs. FIFC reiterated in Pascual vs. United Motors; Vendor
precluded from further extrajudicial foreclose of additional security

The ruling in Cruz vs. FIFC was reiterated in the case of Pascual v. Universal Motors
Corporation, 61 SCRA 121. If the vendor under such circumstance is prohibited from having a
recourse against the additional security for reasons therein stated, there is no ground why such
vendor should not likewise be precluded from
Sales, 2003 ( 220 )
further extrajudicially foreclosing the additional security put up by the vendees

themselves, it being tantamount to a further action that would violate Article 1484 of the
Civil Code, for there is actually no difference between an additional security put up by the
vendee himself and such security put up by a third party insofar as how the burden would
ultimately fall on the vendee himself is concerned.
7.
Southern Motors vs. Moscoso does not apply as remedy availed of if that case is
the fulfillment of the obligation and not the foreclosure of the chattel mortgage
The ruling in Southern Motors, Inc. v. Moscoso, 2 SCRA 168 that in sales on
installments, where the action instituted is for specific performance and the mortgaged
property is subsequently attached and sold, the sale thereof does not amount to a foreclosure
of the mortgage, hence, the seller-creditor is entitled to a deficiency judgment does not
fortify the stand of the appellants for that case is entirely different from the present case. In
that case, the vendor has availed of the first remedy provided by Article 1484 of the Civil
Code, i.e., to exact fulfillment of the obligation; whereas in the present case, the remedy
availed of was foreclosure of the chattel mortgage.
8.
Issue on the validity of auction sale superfluous

The disposition of the Court renders superfluous a determination of the other issue
raised by the parties as to the validity of the auction sale, insofar as the Ridads franchise is
concerned, which sale had been admittedly held without any notice to them.
[93]
Rillo vs. CA [G.R. No. 125347. June 19,
1997.] Second Division, Puno (J): 4 concur
Facts: On 18 June 1985, Emiliano Rillo signed a Contract To Sell of Condominium Unit with
Corb Realty Investment Corporation. Under the contract, Corb Realty agreed to sell to Rillo a
61.5 sq. m. condominium unit located in Mandaluyong, Metro Manila. The contract price was
P150,000.00, of which was paid upon its execution, while the balance of P75,000.00 was to
be paid in 12 equal monthly installments of P7,092.00 beginning 18 July 1985. It was also
stipulated that all outstanding balance would bear an interest of 24% per annum; the
installment in arrears would be subject to liquidated penalty of 1.5% for every month of
default from due date. It was further agreed that should the buyer default in the payment
of 3 or 4 monthly installments, forfeiture proceedings would be governed by existing laws,
particularly the Condominium Act. On 18 July 1985, Rillo failed to pay the initial monthly
amortization. On 18 August 1985, he again defaulted in his payment. On 20 September 1985,
he paid the first monthly installment of P7,092.00. On 2 October 1985, he paid the second
monthly installment of P7,092.00. His third payment was on 2 February 1986 but he paid only
P5,000.00 instead of the stipulated P7,092.00. On 20 July 1987 or 17 months after Rillos
last payment, Corb Realty informed him by letter that it is cancelling their contract due to his
failure to settle his accounts on time. Corb Realty also expressed its willingness to refund
Rillos money. Corb Realty, however, did not cancel the contract for on 28 September 1987, it
received P60,000.00 from Rillo. Rillo defaulted again in his monthly installment payment.
Consequently, Corb Realty informed Rillo through letter that it was proceeding to rescind
their contract. In a letter dated 29 August 1988, it requested Rillo to come to its office and
withdraw P102,459.35 less the rentals of the unit from 1 July 1985 to 28 February 1989.
Again the threatened rescission did not materialize. A compromise was entered into by the
parties on 12 March 1989 (Restructure Outstanding Balance Down to P50,000.00; Payment @
P2,000.00/Month @ 18% -Monthly- To Compute No. of Installments; To Pay Titling Plus Any
Real Estate Tax Due; Installments to start 15 April 1989). Rillo once more failed to honor
their agreement. Rillo was able to pay P2,000.00 on 25 April 1989 and P2,000.00 on 15 May
1989. On 3 April 1990, Corb Realty sent Rillo a statement of accounts which fixed his total
arrears, including interests and penalties, to P155,129.00.
When Rillo failed to pay the amount, Corb Realty filed a complaint for cancellation of the
contract to sell
Sales, 2003 ( 221 )
with the RTC Pasig. In his answer to the complaint, Rillo averred, among others, that while he
had already paid a total of P149,000.00, Corb Realty could not deliver to him his individual
title to the subject property; that Corb Realty could not claim any right under their previous
agreement as the same was already novated by their new agreement for him to pay
P50,000.00 representing interest charges and other penalties spread through 25 months
beginning April 1989; and that Corb Realtys claim of P155,129.99 over and above the
amount he already paid has no legal basis. After trial, the RTC held that Corb Realty cannot
rescind the Contract to Sell because Rillo did not commit a substantial breach of its
terms. It found that Rillo substantially complied with the Contract to Sell by paying a
total of P154,184.00. It ruled that the remedy of Corb Realty is to file a case for specific
performance to collect the outstanding balance of the purchase price.
Corb Realty appealed the decision to the Court of Appeals (CA GR CV 39108), which reversed
the decision. It ruled that rescission does not apply as the contract between the parties is not an
absolute conveyance of real property but is a contract to sell; that the Condominium Act (RA
4726, as amended by RA 7899) does not provide anything on forfeiture proceedings in cases
involving installment sales of condominium units, hence, it is PD 957 (Subdivision and
Condominium Buyers Protective Decree) which should be applied to the present case. Under
PD 957, the rights of a buyer in the event of failure to pay installment due, other than the
failure of the owner or developer to develop the project, shall be governed by RA 6552
or the Realty Installment Buyer Protection Act also known as the Maceda Law (enacted on 14
September 1972). The Court thus declared the contract to sell cancelled and rendered
ineffective and ordered Corb Realty to return 50% of P158,184.00 (or P79,092.00) to Rillo who
was ordered to vacate the subject premises. Rillo appealed pursuant to Rule 45 of the Rules of
Court.
The Supreme Court affirmed with modification the decision appealed from, in the sense that
the refund of 50% P158,184.00 or P79,092.00 made in favor of Rillo is deleted; without costs.
1.
Article 1191 and 1592 do not apply as contract is not an absolute conveyance of
real property but a contract to sell; Payment is a positive suspensive condition and not
a breach; No rescission of an obligation which is still not existent
The appellate court did not err when it did not apply Articles 1191 and 1592 of the
Civil Code on rescission to the present case. The contract between the parties is not an absolute
conveyance of real property but a contract to sell. In a contract to sell real property on
installments, the full payment of the purchase price is a positive suspensive condition, the
failure of which is not considered a breach, casual or serious, but simply an event which
prevented the obligation of the vendor to convey title from acquiring any obligatory force.
The transfer of ownership and title would occur after full payment of the purchase price. It was
held in Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc. that there can be no rescission
of an obligation that is still non-existent, the suspensive condition not having happened.
2.
RA 6552, or Maceda Law, applies

Given the nature of the contract of the parties, the appellate court correctly applied
RA 6552, also known as the Maceda Law. TA 6552 recognizes in conditional sales of all kinds
of real estate (industrial, commercial, residential) the right of the seller to cancel the contract
upon non-payment of an installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force. It also provides the
right of the buyer on installments in case he defaults in the payment of succeeding
installments, i.e. (1) Where he has paid at least 2 years of installments, (a) To pay,
without additional interest, the unpaid installments due within the total grace period earned
by him, which is hereby fixed at the rate of 1 month grace period for every year of
installment payments made: Provided, That this right shall be exercised by the buyer only once
in every 5 years of the life of the contract and its extensions, if any; or (b) If the contract is
cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to 50% of the total payments made and, after 5 years of installments, an
additional 5% every year but not to exceed 90% of the total payments made: Provided,
That the actual
Sales, 2003 ( 222 )
cancellation of the contract shall take place after cancellation or the demand for rescission of
the contract by a notarial act and upon full payment of the cash surrender value to the
buyer. Down payments, deposits or options on the contract shall be included in the
computation of the total number of installments made; (2) Where he has paid less than two
years in installments, (Sec. 4) the seller shall give the buyer a grace period of not less than 60
days from the date the installment became due. If the buyer fails to pay the installments due at
the expiration of the grace period, the seller may cancel the contract after 30 days from receipt
by the buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.
3.
Rillo not entitled to grace period of 60 days; Corb Realty has right to cancel
contract after 30 days of Rillos receipt of cancellation
Rillo paid less than two years in installment payments, hence, he is only entitled to a
grace period of not less than 60 days from the due date within which to make his installment
payment. Corb Realty, on the other hand, has the right to cancel the contract after 30
days from receipt by Rillo of the notice of cancellation. The appellate court did not err
when it upheld Corb Realtys right to cancel the subject contract upon repeated defaults in
payment by Rillo.
4.
Novation not presumed; In absence of express agreement, novation occurs when
old and new obligations are incompatible on every point; Contract in present case not
novated
Article 1292 of the Civil Code provides that In order that an obligation may be
extinguished by another which substitutes the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on every point incompatible with
each other. Novation is never presumed. Parties to a contract must expressly agree that they
are abrogating their old contract in favor of a new one. In the absence of an express
agreement, novation takes place only when the old and the new obligations are
incompatible on every point. In the present case, the parties executed their 12 May 1989
compromise agreement precisely to give life to their Contract to Sell. It merely clarified
the total sum owed by Rillo to Corb Realty with the view that the former would find it
easier to comply with his obligations under the Contract to Sell. In fine, the compromise
agreement can stand together with the Contract to Sell.
5.
Rillo not entitled to refund of 50% of payments

Under RA 6552, the right of the buyer to a refund accrues only when he has paid at
least 2 years of installments. In the present case, Rillo has paid less than 2 years in
installments, hence, he is not entitled to a refund.
[94]
Romero v. CA [G.R. No. 103577. October
7, 1996.] Third division, Vitug (J): 4 concur
Facts: Virgilio R. Romero, a civil engineer, was engaged in the business of production,
manufacture and exportation of perlite filter aids, permalite insulation and process perlite ore.
In 1988, Romero and his foreign partners decided to put up a central warehouse in Metro
Manila on a land area of approximately 2,000 sq. m. The project was made known to several
freelance real estate brokers. A day or so after the announcement, Alfonso Flores and his
wife, accompanied by a broker, offered a parcel of land measuring 1,952 sq. m. Located in
Barangay San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT 361402 in the
name of Enriqueta Chua Vda. de Ongsiong. Romero visited the property and, except for the
presence of squatters in the area, he found the place suitable for a central warehouse. Later, the
Flores spouses called on Romero with a proposal that should he advance the amount of
P50,000.00 which could be used in taking up an ejectment case against the squatters, Ongsiong
would agree to sell the property for only P800.00 per sq. m. Romero expressed his concurrence.
On 09 June 1988, a contract, denominated Deed of Conditional Sale, was executed between
Romero and Ongsiong. Flores, in behalf of Ongsiong, forthwith received and acknowledge
a check for P50,000.00 from Romero.
Sales, 2003 ( 223 )
Pursuant to this agreement, Ongsiong filed a complaint for ejectment (Civil Case 7579) against
Melchor Musa and 29 other squatter families with the MTC Paraaque. A few months later,
or on 21 February 1989, judgment was rendered ordering the defendants to vacate the
premises. The decision was handed down beyond the 60-day period (expiring 09 August
1988) stipulated in the contract. The writ of execution of the judgment was issued, still later,
on 30 March 1989.
In a letter, dated 07 April 1989, Ongsiong sought to return the P50,000.00 she received from
Romero since, she said, she could not get rid of the squatters on the lot. Atty. Sergio A.F.
Apostol, counsel for Romero, refused the tender, citing the favorable decision and the writ
of execution issued pursuant thereto, and expressed Romeros willingness to underwrite the
expenses for the execution of the judgment and ejectment of the occupants chargeable to the
purchase price of the land.
Meanwhile, the Presidential Commission for the Urban Poor (PCUD), through its Regional
Director for Luzon (Viloria), asked the MTC Paraaque for a grace period of 45 days from
21 April 1989 within which to relocate and transfer the squatter families. Acting favorably
on the request, the court suspended the enforcement of the writ of execution accordingly.
On 08 June 1989, Atty. Apostol reminded Ongsiong on the expiry of the 45-day grace period
and reiterated his clients willingness to underwrite the expenses for the execution of the
judgment and ejectment of the occupants. On 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel
for Ongsion, advised Atty. Apostol that the Deed of Conditional Sale had been rendered null
and void by virtue of his clients failure to evict the squatters from the premises within the
agreed 60-day period. He added that private respondent had decided to retain the property.
Meanwhile, on 25 August 1989, the MTC issued an alias writ of execution in Civil Case 7579
on motion of Ongsiong but the squatters apparently still stayed on.
On 27 June 1989, Ongsiong prompted by Romeros continued refusal to accept the return of
the P50,000.00 advance payment, filed with the RTC Makati (Branch 133, Civil Case 89-4394)
for a rescission of the deed of conditional sale, plus damages, and for the consignation of
P50,000.00 cash. On 26 June 1990, the RTC rendered decision holding that Ongsiong had no
right to rescind the contract since it was she who violated her obligation to eject the
squatters from the subject property and that Romero, being the injured party, was the party
who could, under Article 1191 of the Civil Code, rescind the agreement. The lower court,
thus dismissed the complaint and ordered Ongsiong to eject or cause the ejectment of the
squatters from the property and to execute the absolute deed of conveyance upon payment of
the full purchase price by Romero.
Ongsiong appealed to the Court of Appeals. On 29 May 1992, the appellate court rendered
its decision, reversed and set aside the decision appealed from and entered another declaring
he contract of conditional sale of 9 June 1988 cancelled and ordering Romero to accept the
return of the downpayment in the amount of P50,000 deposited with the trial court; without
pronouncement as to cost. Failing to obtain a reconsideration, Romero filed his petition for
review on certiorari before the Supreme Court.
The Supreme Court reversed and set aside the questioned decision of the Court of Appeals,
and entered another ordering Romero to pay Ongsiong the balance of the purchase price and the
latter to execute the deed of absolute sale in favor of petitioner; without costs.
1.
Perfected contract of sale, absolute or conditional
A perfected contract of sale may either be absolute or conditional depending on

whether the agreement is devoid of, or subject to, any condition imposed on the passing
of title of the thing to be conveyed or on the obligation of party thereto. When ownership is
retained until the fulfillment of a positive
Sales, 2003 ( 224 )
condition the breach of the condition will simply prevent the duty to convey title from
acquiring an obligatory force. If the condition is imposed on an obligation of a party which is
not complied with, the other party may either refuse to proceed or waive said condition (Art.
1545, Civil Code). Where, of course, the condition is imposed upon the perfection of the
contract itself, the failure of such condition would prevent the juridical relation itself from
coming into existence.
2.
Real character of a contract, substance more significant than title given to it by
parties
In determining the real character of the contract, the title given to it by the parties is
not as much as significant as its substance. For example, a deed of sale, although denominated
as a deed of conditional sale, may be treated as absolute in nature, if title to the property sold
is not reserved in the vendor or if the vendor is not granted the right to unilaterally rescind the
contract predicated on the fulfillment or non-fulfillment, as the case may be, of the prescribed
condition.
3.
Condition in the context of a perfected contract of sale

The term condition in the context of a perfected contract of sale pertains, in
reality, to the compliance by one party of an undertaking the fulfillment of which would
beckon, in turn, the demandability of the reciprocal prestation of the other party. The
reciprocal obligations referred to would normally be, in the case of vendee, the payment of the
agreed purchase price and, in the case of the vendor, the fulfillment of certain express
warranties (which, in the present case is the timely eviction of the squatters on the property).
4.
Perfection of a sale; Parties bound to fulfill what is expressly stipulated and all
consequences in keeping with good faith, usage and law
A sale is at once perfected where a person (the seller) obligates himself, for a price
certain, to deliver and to transfer ownership of a specified thing or right to another (the
buyer) over which the latter agrees. From the moment the contract is perfected, the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law. In the present cas, under the agreement, Ongsiong is obligated to evict the squatters on the
property. The ejectment of the squatters is a condition the operative act of which sets into
motion the period of compliance by Romero of his own obligation, i.e., to pay the balance of
the purchase price.
5.
Options available under Article 1545 belongs to injured party

Ongsiongs failure to remove the squatters from the property within the stipulated
period gives Romero the right to either refuse to proceed with the agreement or waive that
condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to
petitioner (Romero) and not to private respondent (Ongsiong).
In contracts of sale particularly, Article 1545 of the Civil Code allows the obligee to
choose between proceeding with the agreement or waiving the performance of the condition.
Evidently, Romero has waived the performance of the condition imposed on Ongsiong to free
the property from squatters.
6.
Potestative condition is mixed, and not dependent on the sole will of the debtor;
If condition is imposed on the fulfllment of the obligation and not the birth thereof,
only the condition is avoided and does not afect obligation itself
The undertaking required of private respondent does not constitute a potestative
condition dependent solely on his will that might, otherwise, be void in accordance with
Article 1182 of the Civil Code but a mixed condition dependent not on the will of the
vendor alone but also of third persons like the squatters and government agencies and personnel
concerned. However, where the so-called potestative condition is imposed not on the birth
of the obligation but on its fulfillment, only the condition is avoided, leaving unaffected
obligation itself.
7.
Rescission by non-injured party not warranted; Article 1191

The right of resolution of a party to an obligation under Article 1191 of the Civil Code is
predicated
Sales, 2003 ( 225 )
on a breach of faith by the other party violates the reciprocity between them. In the present
case, Ongsiongs action for rescission was not warranted as she was not the injured party. It was
Ongsiong who has failed in her obligation under the contract. Romero did not breach the
agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment
in the ejectment case and to make arrangement with the sheriff to effect such execution.
Parenthetically, this offer to pay, hiring been made prior to the demand for rescission,
assuming for the sake of argument that such a demand is proper under Article 1592 of the Civil
Code, would likewise suffice to defeat Ongsiongs prerogative to rescind thereunder.
8.
Petitioner, opting to proceed with sale, may not demand the reimbursement
of the advance payment
When petitioner having opted to proceed with the sale, neither may petitioner
demand its reimbursement from private respondent. Further, private respondent may not
subject it to forfeiture.
[95]
Roque v. Lapuz, 96 SCRA 741 (1980)
[96]
Rubias v. Batiller [G.R. No. L-35702. May
29, 1973.] First Division, Teehankee (J): 8
concur
Facts: Francisco Militante claimed ownership of a parcel of land located in the Barrio General
Luna, Barotac Viejo, Iloilo, which he caused to be surveyed on 18-31 July 1934, whereby he
was issued a plan Psu-99791 (containing an area of 171.3561 hectares.) Before the war with
Japan, Militante filed with the CFI Iloilo an application for the registration of title of the land
technically described in Psu-99791 opposed by the Director of Lands, the Director of Forestry
and other oppositors. However, during the war with Japan, the record of the case was lost before
it was heard, so after the war Militante petitioned the Court to reconstitute the record of the
case. The record was reconstituted in the CFI Iloilo (Land Case R-695, GLRO Rec. 54852).
The CFI heard the land registration case on 11 November 1952, and after trial the Court
dismissed the application for registration. Militante appealed to the Court of Appeals (CA-GR
13497-R). Pending the disposal of the appeal or on 18 June 1956, Militante sold to Domingo
Rubias, his son-in-law and a lawyer by profession, the land technically described in Psu-99791.
The sale was duly recorded in the Office of the Register of Deeds for the Province of Iloilo
(Entry 13609) on 14 July 1960. On 22 September 1958, the CA promulgated its judgment
confirming the decision of the trial court dismissing the Application for Registration filed by
Militante.
Domingo Rubias declared the land for taxation purposes under Tax Declaration (TD) 8585 for
1957; TD 9533 and TD 10019 for 1961; TD 9868 for 1964, paying the land taxes under TD
8585 and TD 9533. Militante has also declared the land for taxation purposes under TD 5172 in
1940, under TD T-86 for 1945, under TD 7122 for 1948, and paid the land taxes for 1940, for
1945-46, for 1947, for 1947 & 1948, for 1948, and for 1948 and 1949. TD 2434 in the name
of Liberato Demontao for the land described therein was cancelled by TD 5172 of Militante.
Demontao paid the land tax under TD 2434 on 20 December 1939 for the years 1938 and
1959. Isaias Batiller had declared for taxation purposes Lot 2 of Psu-144241 under TD 8583 for
1957 and a portion of Lot 2 under TD 8584 for 1945. TD 8483 was revised by TD 9498 while
TD 9584 was cancelled by TD 9584 both in the name of Batiller. Batiller paid the land taxes for
Lot 2 on 9 November 1960 for the year 1945 and 1946, 1950 and 1960 as shown by the
certificate of the treasurer.The land claimed by Batiller as his own was surveyed on 6-7 June
1956, and a plan approved by Director of Lands on 15 November 1956 was issued, identified
as Psu 155241.
On 22 April 1960, Rubias filed a forcible Entry and Detainer case against Batiller in the Justice
of the Peace Court of Barotac Viejo, Iloilo. On May 1961 and after trial, the Municipal Court of
Barotac Viejo decided the
Sales, 2003 ( 226 )
case in favor of the Batiller. Rubias appealed from the decision of the Municipal Court of
Barotac Viejo to the CFI Iloilo. On 26 November 1964 and after the trial, the CFI decided the
case likewise in favor of Batiller, holding that he has better right to possess the land in
question having been in the actual possession thereof under a claim of title many years before
Militante sold the land to Rubias.
On 31 August 1964, Rubias filed a suit to recover the ownership and possession of certain
portions of lot under Psu-99791, bought from his father-in-law, Francisco Militante in 1956,
against its present occupant Batiller, who allegedly entered said portions of the lot in 1945
and in 1959. Rubias prayed also for damages and attorneys fees. On 17 August 1965, the CFI
dismissed the case, the court therein practically agreeing that the contract between Rubias and
Militante was null and void. Rubias filed a motion for reconsideration, which was likewise
denied by the lower court on 14 January 1966. Thereafter, Rubias filed an appeal before the
Court of Appeals, which certified said appeal to the Supreme as involving purely legal
questions.
The Supreme Court affirmed the order of dismissal appealed, with costs against Rubias.
1.
Pre-trial practically amounted to a full dress trial when parties agreed and
stipulated on facts and submitted their respective documentary exhibits
The pre-trial conference held by the trial court at which the parties with their
counsel agreed and stipulated on the material and relevant facts and submitted their respective
documentary exhibits as referred to in the pre-trial order, practically amounted to a full dress
trial which placed on record all the facts and exhibits necessary for adjudication of the case.
Rubias evidence dealing with the source of the alleged right and title of Militantes
predecessors are already made of record. The chain of Militantes alleged title and right to the
land allegedly tracing back to Demontano in the land registration case and was rejected by
the Iloilo land registration court, the decision of which was affirmed by final judgment by
the Court of Appeals. Batillers evidence dealing with his and his ancestors continuous, open,
public and peaceful possession in the concept of owner of the land and the Director of
Lands approval of his survey plan thereof, are likewise already duly established facts of record,
in the land registration case as well as in the ejectment case wherein the Iloilo CFI recognized
the superiority of Batillers right to the land as against Rubias. Therefore, the lower court did
not err in dismissing Rubias complaint upon Batillers motion after the pre-trial.
2.
Rubias had no cause of action

Rubias complaint, to be declared absolute owner of the land and to be restored to
possession thereof with damages, was bereft of any factual or legal basis. The CAs final
judgment affirming the dismissal of Militantes application of registration made it conclusive
that Militante lack rightful claim or title to the land. There was no right or title to the land that
could be transferred or sold by Militantes purported sale in favor of Rubias in 1956.
3.
Purchase of a lawyer of a property in litigation prohibited; Contract void and

cannot be ratified The purchase by a lawyer of the property in litigation from his
client is categorically prohibited by
Article 1491, paragraph (5) of the Philippine Civil Code (The following persons cannot
acquire any purchase, even at a public or judicial auction, either in person or through the
mediation of another xxx [5] Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with the administration of
justice, the property and rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory their exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect to
the property and rights which may be the object of any litigation in which they may take part
by virtue of their profession.) and that consequently, Rubias purchase of the property in
litigation from his client(and father-in-law) was void and could produce no legal effect, by
virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts expressly
prohibited or declared void by law are inexistent and void from the beginning and that
(T)hese contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.
Sales, 2003 ( 227 )
4.
Wolfson v. Estate of Martinez superceded by case of Director of Lands v. Abagat

The 1911 case of Wolfson v. Estate of Martinez which held that a sale of property in
litigation to the party litigants lawyer its not void but voidable at the election of the
vendor has been superseded by the 1929 case of Director of Lands vs. Abagat. In this later
case of Abagat, the Court expressly cited two antecedent cases involving the same transaction
of purchase of property in litigation by the lawyer which was expressly declared invalid under
Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code of the
Philippines is the counterpart) upon challenge thereof not by the vendor-client but by the
adverse parties against whom the lawyer was seeking to enforce his rights as vendee thus
acquired. Thus, the Court in Abagat affirmed the invalidity and nullity of the lawyers
purchase of the land in litigation from his client, ordered the issuance of a writ of possession
for the return of the land by the lawyer to the adverse parties without reimbursement of the
price paid by him and other expenses, and ruled that the purchaser-lawyer is a lawyer and is
presumed to know the law. He must, therefore, from the beginning, have been well aware of the
defect in his title and is, consequently, a possessor in bad faith.
5.
Prohibitions under Article 1491 NCC (Article 1459 Spanish Civil Code)
Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code)
prohibits in its six paragraphs certain persons, by reason of the relation of trust or their
peculiar control over the property, from acquiring such property in their trust or control
either directly or indirectly and even at a public or judicial auction, as follows: (1)
guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers
and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by
law.
6.
Wolfson case decided in line with Manresas view

In Wolfson, the Court expressly reserved decision on whether or not the judgment
in question actually falls within the prohibition of the article and held only that the sales
voidability can not be asserted by one not a property to the transaction or his
representative, citing from Manresa that (C)onsidering the question from the point of view
of the civil law, the view taken by the code, the Court must limit ourselves to classifying as
void all acts done contrary to the express prohibition of the statute. Now then: As the code does
not recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore
referred to must be asserted by the person having the necessary legal capacity to do so and
decreed by a competent court.
7.
Manresas view not applicable under the NCC; Spanish Supreme Court and
modern authors have veered away from Manresa on this point
The reason given by Manresa in considering such prohibited acquisitions under Article
1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and
not void is that the Code does not recognize such nullity de pleno derecho. This is no longer
true and applicable to the Philippine Civil Code which does recognize the absolute nullity of
contracts whose cause, object, or purpose is contrary to law, morals, good customs, public
order or public policy or which are expressly prohibited or declared void by law and
declares such contracts inexistent and void from the beginning.
The Supreme Court of Spain and modern authors have likewise veered from Manresas view of
the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain
ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy,
that violation of the prohibition contract cannot be validated by confirmation or ratification.
The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil
Code (Article 1491 of our Civil Code) as a matter of public order and policy as applied by the
Supreme Court of Spain to administrators and agents should certainly apply with greater
reason to judges, judicial oficers, fiscals and lawyers under paragraph 5 of the codal
article. [also see viewpoints of Gullon Ballesteros in Curso de Derecho Civil (Contratos
Especiales 1968), of Perez Gonzales, and of Castan]
8.
Nullity of prohibited contracts definite and permanent and cannot be cured by
ratification; If object has subsequently become legal, such may be subject to second
contract
Sales, 2003 ( 228 )
The nullity of prohibited contracts is definite and permanent and cannot be cured by
ratification. The public interest and public policy remain paramount and do not permit of
compromise or ratification. In this aspect, the permanent disqualification of public and
judicial officers and lawyers grounded on public policy differs from the first three cases of
guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions, it
has been opined that they may be ratified by means of and in the form of a new
contract, in which case its validity shall be determined only by the circumstances at the time
of execution of such new contract. The causes of nullity which have ceased to exist cannot
impair the validity of the new contract. Thus, the object which was illegal at the time of the
first contract, may have already become lawful at the time of the ratification or second
contract; or the service which was impossible may have become possible; or the intention
which could not be ascertained may have been clarified by the parties. The ratification or
second contract would then be valid from its execution; however, it does not retroact to the
date of the first contract.
9.
Who may invoke the inexistence of contract; Proper action to be filed

Tolentino, in his treaties on the Civil Code, stated that (as to persons affected) any
person may invoke the inexistence of the contract whenever juridical effects founded thereon
are asserted against him. Thus, if there has been a void transfer of property, the transferor can
recover it by the accion reivindicatoria; and any possessor may refuse to deliver it to the
transferee, who cannot enforce the contract. Creditors may attach property of the debtor which
has been alienated by the latter under a void contract; a mortgagee can allege the inexistence
of a prior encumbrance; a debtor can assert the nullity of an assignment of credit as a defense
to an action by the assignee.
He further stated that (as to action on contract) even when the contract is void or
inexistent, an action is necessary to declare its inexistence, when it has already been fulfilled.
Nobody can take the law into his own hands; hence, the intervention of the competent court is
necessary to declare the absolute nullity of the contract and to decree the restitution of what
has been given under it. The judgment, however, will retroact to the very day when the
contract was entered into. If the void contract is still fully executory, no party need bring an
action to declare its nullity; but if any party should bring an action to enforce it, the other
party can simply set up the nullity as a defense.
[97]
Sanchez vs. Rigos [G.R. No. L-25494. June 14, 1972.]
En Banc, Concepcion (J): 7 concur, 1 took no part, 1 concurs in separate opinion
Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument, entitled
Option to Purchase, whereby Mrs. Rigos agreed, promised and committed . . . to sell to
Sanchez, for the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot,
municipality of San Jose, province of Nueva Ecija, and more particularly described in TCT NT12528 of said province, within two (2) years from said date with the understanding that said
option shall be deemed terminated and elapsed, if Sanchez shall fail to exercise his right
to buy the property within the stipulated period. Inasmuch as several tenders of payment
of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on
12 March 1963, the former deposited said amount with the CFI Nueva Ecija and commenced
against the latter the present action, for specific performance and damages. On 11
February 1964, after the filing of defendants answer, both parties, assisted by their
respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on 28
February 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept
the sum judicially consigned by him and to execute, in his favor, the requisite deed of
conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorneys fees, and the
costs. Hence, the appeal by Mrs. Rigos to the Court of Appeals, which case was the certified by
the latter court to the Supreme Court upon the ground that it involves a question purely of law.
The Supreme Court affirmed the decision appealed from, with costs against Severina Rigos.
Sales, 2003 ( 229 )
1.
Option to purchase not a contract to buy and sell

The option did not impose upon Sanchez the obligation to purchase Rigos property.
The contract denominated as Option to Purchase is not a contract to buy and sell, it
merely granted Sanchez an option to buy, and both parties so understood it, as
indicated by the caption given by them to said instrument. Under the provisions thereof,
Rigos agreed, promised and committed herself to sell the land therein described to
Sanchez for P1,510.00, but there is nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is supported by a consideration distinct
from the price stipulated for the sale of the land.
2.
Article 1354 applicable to contracts in general, Article 1479 refers to sales in
particular
Relying upon Article 1354 of the Civil Code, which provides that when the offerer has
allowed 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 consideration, as something paid or promised, the lower court presumed the
existence of a consideration distinct from the price. It must be noted however that Article 1354
applies to contracts in general, whereas the second paragraph of Article 1479 refers to sales
in particular, and, more specifically, to an accepted unilateral promise to buy or to sell. In
other words, Article 1479 is controlling in the present case. Article 1479 provides that A
promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 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.
3.
Article 1479 imposes condition for a unilateral promise to be binding; Burden of
proof
In order that a unilateral promise may be binding upon the promisor, Article 1479
requires the concurrence of a condition, namely, that the promise be supported by a
consideration distinct from the price. Accordingly, the promisee can not compel the promisor
to comply with the promise, unless the former establishes the existence of said distinct
consideration. In other words, the promisee has the burden of proving such consideration. In the
present case, Sanchez has not even alleged the existence thereof in his complaint.
4.
Implied admission of the truth of the other partys averment if party joins in
the petition for a judgment based on the pleadings without introducing evidence
In the case of Bauermann v. Casas (14 March 1908), it was held that one who prays
for judgment on the pleadings without offering proof as to the truth of hie own allegations, and
without giving the opposing party an opportunity to introduce evidence, must be understood
to admit the truth of all the material and relevant allegations of the opposing party, and to
rest his motion for judgment on those allegations taken together with such of his own as are
admitted in the pleading. (La Yebana Company vs. Sevilla, 9 Phil. 210). This view was
reiterated in Evangelista V. De la Rosa and Mercys Incorporated v. Herminia Verde. In
the present case, Rigos explicitly averred in her answer, and pleaded as a special defense, the
absence of said consideration for her promise to sell and, by joining in the petition for a
judgment on the pleadings, Sanchez has impliedly admitted the truth of said averment in
Rigos answer.
5.
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacifc Co. case
The Court in the Southwestern Sugar case held that under article 1479 of the new
Civil Code an option to sell, or a promise to buy or to sell, as used in said article, to be
valid must be supported by a consideration distinct from the price. This is clearly inferred
from the context of said article that a unilateral promise to buy or to sell, even if accepted, is
only binding if supported by a consideration. In other words, an accepted unilateral
promise can only have a binding effect if supported by a consideration, which means that the
option can still be withdrawn, even if accepted, if the same is not supported by any
consideration. Here it is not disputed that the option is without consideration. It can therefore
be withdrawn notwithstanding the acceptance made of it by appellee. The Court held that the
general rule regarding offer and acceptance under Article 1324 must be interpreted as modified
by the provision of article 1479, which applies to a promise to
Sales, 2003 ( 230 )
buy and sell specifically. In short, the rule requires that a promise to sell to be valid must be
supported by a consideration distinct from the price.
6.
Atkins, Kroll and Co. v. Cua Hian Tek

In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later than
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., the Court saw no distinction
between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral
promise to sell similar to the one sued upon here was involved, treating such promise as an
option which, although not binding as a contract in itself for lack of a separate consideration,
nevertheless generated a bilateral contract of purchase and sale upon acceptance.
7.
Option is unilateral
Furthermore, an option is unilateral: a promise to sell 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 buy later. In the present case, however, upon accepting Rigos offer
a bilateral promise to sell and to buy ensued, and Sanchez ipso facto assumed the obligation 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 bilateral contract of sale.
8.
Option without consideration is a mere ofer of a contract of sale, which is not
binding until accepted
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 that the option contract was not valid
for lack of consideration. But it was, at least, an offer to sell, which was accepted by latter,
and of the acceptance the offerer had knowledge before said offer was withdrawn. The
concurrence of both acts the offer and the acceptance could at all events have generated
a contract, if none there was before (arts. 1254 and 1262 of the Civil Code; Zayco vs. Serra, 44
Phil. 331.) In other words, since there may be no valid contract without a cause or
consideration, the promisor is not bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an
offer to sell which, if accepted, results in a perfected contract of sale.
9.
Proper construction of conficting provisions of the same law; Harmonize to
implement the same principle rather than to create exceptions
In line with the cardinal rule of statutory construction that, in construing different
provisions of one and the same law or code, such interpretation should be favored as will
reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the
presumption is that, in the process of drafting the Code, its author has maintained a consistent
philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co.
v. Atlantic Gulf & pacific Co., holding that Art. 1324 (on the general principles on contracts) is
modified by Art. 1479 (on sales) of the Civil Code, in effect, considers the latter as an exception
to the former, and exceptions are not favored, unless the intention to the contrary is clear, and
it is not so, insofar as said 2 articles are concerned. What is more, the reference, in both the
second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded
upon a consideration, strongly suggests that the 2 provisions intended to enforce or implement
the same principle.
10.
Atkins, Kroll & Co. case modifes or abandons Southwestern Sugar case
insofar as to inconsistencies
Upon mature deliberation, the Court is of the considered opinion that it should, as it
hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar all
inconsistent therewith, the view adhered to in the South western Sugar & Molasses Co. case
should be deemed abandoned or modified.
Sales, 2003 ( 231 )
[98]
Siy Cong Bieng and Co. vs. Hongkong and Shanghai Banking Corp. [G.R. No. 34655.
March 5, 1932.] En Banc, Ostrand (J): 6 concur
Facts: Siy Cong Bieng & Co., a corporation engaged in business generally, and Hongkong
& Shanghai Banking Corporation, a foreign bank authorized to engage in the banking
business in the Philippines, are domiciled in the City of Manila. On 25 June 1926, certain
negotiable warehouse receipts were pledged by Otto Ranft to the bank to secure the
payment of his preexisting debts to the latter (Siy Cong Bieng as depositor: 1707, Public
Warehouse Co., 27 bales; 133, W.F. Stevenson Co, 67 bales; 1722, Public Warehouse Co., 60
bales; 1723, W.F. Stevenson Co, 4 bales; 1634, The Philippine Warehouse Company, 99 bales;
1702, The Philippine Warehouse Company, 39 bales. O. Ranft as depositor: 1918, Public
Warehouse Co, 166 bales; 2, Siy Cong Bieng & Co. Inc., 2 bales). The baled hemp covered
by the warehouse receipts was worth P31,635; receipts numbers 1707, 133, 1722, 1723,
1634, and 1702 being endorsed in blank by Siy Cong Bieng and Otto Ranft, and numbers
1918 and 2, by Otto Ranft alone. On 25 June 1926, Ranft called at the office of Siy Cong Bieng
to purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans. The
parties agreed to the price (P31,645), and on the same date the quedans, together with the
covering invoice, were sent to Ranft, without having been paid for the hemp, but Siy
Cong Biengs understanding was that the payment would be made against the same quedans,
and it appears that in previous transactions of the same kind between the bank and Siy Cong
Bieng, quedans were paid one or two days after their delivery to them. In the evening of the
day upon which the quedans in question were delivered to the bank, Ranft died suddenly at his
home in the city of Manila, and when Siy Cong Bieng found that such was the case, it
immediately demanded the return of the quedans, or the payment of the value, but was told
that the quedans had been sent to the bank as soon as they were received by Ranft.
Siy Cong Bieng filed a claim for the sum of P31,645 (the value of 464 bales of hemp
deposited in certain bonded warehouses) in the intestate proceedings of the estate of the
deceased Otto Ranft, which on an appeal from the decision of the committee on claims, was
allowed by the CFI in case 31372 (City of Manila). In the meantime, demand had been made by
Siy Cong Bieng on the bank for the return of the quedans (warehouse receipts), or their value,
which demand was refused by the bank on the ground that it was a holder of the quedans in
due course. Thereupon Siy Cong Bieng filed its first complaint against the bank, wherein it
alleged that it had sold the quedans in question to the deceased Ranft for cash, but that
the said Ranft had not fulfilled the conditions of the sale. Later on, Siy Cong Bieng filed an
amended complaint, wherein they changed the word sold referred to in the first
complaint to the words attempted to sell. Upon trial the judge of the lower court rendered
judgment in favor of Siy Cong Bieng.
The Supreme Court reversed the appealed judgment and absolved the bank from the complaint;
Without costs.
1.
Circumstances involving the quedans

The quedans in question were negotiable in form. They were pledged by Otto Ranft to
the bank to secure the payment of his preexisting debts to said bank. Such of the quedans as
were issued in the name of Siy Cong Bieng were duly endorsed in blank by Siy Cong Bieng
and by Otto Ranft. The two remaining quedans which were issued directly in the name of Otto
Ranft were also duly endorsed in blank by him.
2.
Quedans were received by the bank to secure the payment of Ranfts preexisting
debts
When the quedans were negotiated, Otto Ranft was indebted to the Hongkong &
Shanghai Banking Corporation in the sum of P622,753.22, which indebtedness was partly
covered by quedans. He was also being pressed to deposit additional payments as a further
security to the bank.
3.
No evidence that bank is bound to pay back Ranft the amount of the quedans;
On the delivery of the quedans, indorser does not own property anymore unless he
liquidated his debt with the bank
Sales, 2003 ( 232 )
It has been the practice of the bank in its transactions with Ranft that the value of the
quedans has been entered in the current accounts between Ranft and the bank, but there is no
evidence to the effect that the bank was at any time bound to pay back to Ranft the amount of
any of the quedans. There is also nothing in the record to show that the bank has promised to
pay the value of the quedans neither to Ranft nor to Siy Cong Bieng. On the contrary, as
stated in the stipulation of facts, the negotiable warehouse receipts were pledged by Otto
Ranft to the Hongkong & Shanghai Banking Corporation to secure the payment of his
preexisting debts to the latter, and taking into consideration that the quedans were
negotiable in form and duly endorsed in blank by Siy Cong Bieng and by Otto Ranft, it follows
that on the delivery of the quedans to the bank they were no longer the property of the indorser
unless he liquidated his debt with the bank.
4.
No compelling reason to compel bank to investigate indorser

There is nothing in the record which in any manner would have compelled the bank to
investigate the indorser, especially as to his authority to negotiate the quedans. The bank had a
perfect right to act as it did, and its action is in accordance with sections 47, 38, and 40 of the
Warehouse Receipts Act (Act 2137).
5.
Section 47 of the Warehouse Receipts Act; When negotiation not impaired by
fraud, mistake or duress
Section 47 (When negotiation not impaired by fraud, mistake, or duress) provides that
the validity of the negotiation of a receipt is not impaired by the fact that such negotiation
was a breach of duty on the part of the person making the negotiation, or by the fact that the
owner of the receipt was induced by fraud, mistake, or duress to intrust the possession or
custody of the receipt to such person, if the person to whom the receipt was negotiated, or a
person to whom the receipt was subsequently negotiated, paid value therefor, without notice
of the breach of duty, or fraud, mistake, or duress.
6.
Section 38 of the Warehouse Receipts Act; Negotiation of negotiable receipts by

indorsement Section 38 (Negotiation of negotiable receipts by indorsement) provides
that a negotiable receipt
may be negotiated by the indorsement of the person to whose order the goods are, by the terms
of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a specified
person. . . Subsequent negotiation may be made in like manner.
7.
Section 40 of the Warehouse Receipts Act; Who may negotiate a receipt

Section 40 (Who may negotiate a receipt) provides that a negotiable receipt may be
negotiated (a) By the owner thereof, or (b) By any person to whom the possession or
custody of the receipt has been entrusted by the owner, if, by the terms of the receipt, the
warehouseman undertakes to deliver the goods to the order of the person to whom the
possession or custody of the receipt has been entrusted, or if at the time of such entrusting the
receipt is in such form that it may be negotiated by delivery.
8.
Rights of bank over the quedans after indorsement; Section 41 of the Warehouse
Receipts Act The rights the bank acquired over the quedans after indorsement and
delivery to it by Ranft are
covered by Section 41 of the Warehouse Receipt Act. Section 41 (Rights of person to whom a
receipt has been negotiated) provides that a person to whom a negotiable receipt has been
duly negotiated acquires thereby: (a) Such title to the goods as the person negotiating the
receipt to him had or had ability to convey to a purchaser in good faith for value, and also
such title to the goods as the depositor of person to whose order the goods were to be delivered
by the terms of the receipt had or had ability to convey to a purchaser in good faith for value.
9.
Use of warehouse receipts as documents of title; Intrusting receipts more than
delivery, it is to intrust title to the goods; Purchasers for value entitled to rely on
representation despite breach of trust and agreement
In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana
Bank & Trust Co. (239 U. S., 520), it was observed that one who takes by trespass or a
finder is not included within the
Sales, 2003 ( 233 )
description of those who may negotiate. (Report of Commissioner on Uniform State Laws,
January 1, 1910, p. 204.) Aside from this, the intention is plain to facilitate the use of warehouse
receipts as documents of title. Under Section 40, the person who may negotiate the receipt is
either the owner thereof, or a person to whom the possession or custody of the receipt has
been intrusted by the owner if the receipt is in the form described. The warehouse receipt
represents the goods, but the intrusting of the receipt, as stated, is more than the mere delivery
of the goods; it is a representation that the one to whom the possession of the receipt has been
so intrusted has the title to the goods. By Section 47, the negotiation of the receipt to a
purchaser for value without notice is not impaired by the fact that it is a breach of duty, or that
the owner of the receipt was induced by fraud, mistake, or duress to intrust the receipt to
the person who negotiated it. And, under Section 41, one to whom the negotiable receipt has
been duly negotiated acquires such title to the goods as the person negotiating the receipt to
him, or the depositor or person to whose order the goods were deliverable by the terms of the
receipt, either had or had ability to convey to a purchaser in good faith for value. The clear
import of these provisions is that if the owner of the goods permits another to have the
possession or custody of negotiable warehouse receipts running to the order of the latter, or to
bearer, it is a representation of title upon which bona fide purchasers for value are entitled
to rely, despite breaches of trust or violations of agreement on the part of the apparent
owner.
10.
Siy Cong Bieng estopped to deny bank had valid title to the quedans
Siy Cong Bieng is estopped to deny that the bank had a valid title to the quedans for
the reason that Siy Cong Bieng had voluntarily clothed Ranft with all the attributes of
ownership and upon which the bank relied.
11.
Equitable estoppel; Where one or two innocent persons must sufer a loss, he
who by his conduct made the loss possible must bear it
In the National Safe Deposit vs. Hibbs (229 U. S., 391), certain certificates of stock
were pledged as collateral by the defendant in error to the bank, which certificates were
converted by one of the trusted employees of the bank to his own use and sold by him. The
stock certificates were unqualifiedly endorsed in blank by the defendant when delivered to
the bank. The Supreme Court of the United States applied the familiar rule of equitable
estoppel that where one of two innocent persons must suffer a loss he who by his conduct
made the loss possible must bear it. Thus, when the broker obtained the stock certificates,
containing all the indicia of ownership and possible of ready transfer, from one who had
possession with the banks consent, and who brought the certificates to him, apparently
clothed with the full ownership thereof by all the tests usually applied by business men to gain
knowledge upon the subject before making a purchase of such property. On the other hand, the
bank, for a legitimate purpose, with confidence in one of its own employees, instrusted the
certificates to him, with every evidence of title and transferability upon them. The banks
trusted agent, in gross breach of his duty, whether with technical criminality or not is
unimportant, took such certificates, thus authenticated with evidence of title, to one who, in
the ordinary course of business, sold them to parties who paid full value for them. In such
case we think the principles which underlie equitable estoppel place the loss upon him whose
misplaced confidence has made the wrong possible.
12.
No remedy available to Siy Cong Bieng

Siy Cong Bieng has suffered the loss of the quedans, but there is now no remedy
available to it. The bank is not responsible for the loss; the negotiable quedans wee duly
negotiated to the bank and as far as the record shows, there has been no fraud on the part of the
bank.
[99]
Soriano, et. al. v. Bautista, et. al. [G.R. No. L-15752.

December 29, 1962.] Bautista, et. al. v. Soriano, et. al. [G.R. No.
L-17457. December 29, 1962.] En Banc, Makalintal (J): 9 concur
Sales, 2003 ( 234 )
Facts: Spouses Basilio Bautista and Sofia de Rosas are the absolute and registered owners of a
parcel of land, situated in Teresa, Rizal (OCT 3905, Register of Deeds of Rizal). On 30 May
1956, the said spouses for and in consideration on the sum of P1,800, signed a document
entitled Kasulatan Ng Sanglaan in favor of Ruperto Soriano and Olimpia de Jesus.
Simultaneously with the signing of the deed, the spouses Bautista and de Rosas transferred the
possession of the said land to Soriano and de Jesus who have been and are still in possession of
the said property and have since that date been and are cultivating the said land and have
enjoyed and are still enjoying the produce thereof to the exclusion of all other persons.
Sometimes after 30 May 1956, the spouses Bautista and de Rosas received from Soriano and
de Jesus, the sum of P450.00 pursuant to the conditions agreed upon in the document for
which no receipt was issued and which was returned by the spouses sometime on 31 May
1958. On 13 May 1958, a certain Atty. Angel O. Ver wrote a letter to the spouses Bautista
informing the said spouses that his clients Soriano and de Jesus have decided to buy the parcel
of land in question pursuant to paragraph 5 of the document in question (That it has likewise
been agreed that if the financial condition of the mortgagees will permit, they may
purchase said land absolutely on any date within the two-year term of this mortgage at the
agreed price of P3,900.00.). The spouses in spite of the receipt of the letter refused to comply
with the demand contained therein.
On 31 May 1958, Soriano and de Jesus filed before the Trial Court Civil Case 5023, praying
that they be allowed to consign or deposit with the Clerk of Court the sum of P1,650.00 as
the balance of the purchase price of the parcel of land in question. After due hearing,
judgment be rendered ordering Bautista and de Rosas to execute an absolute deed of sale of
the said property in their favor, plus damages.
On 9 June 1958, spouses Bautista and de Rosas filed a complaint against Soriano and de Jesus,
which case after hearing was dismissed for lack of jurisdiction. On 5 August 1959, the
spouses Bautista and de Rosas again filed a case in the CFI against Soriano and de Jesus asking
the Court to order Soriano and de Jesus to accept the payment of the principal obligation and
release the mortgage and to make an accounting of the harvest for the two harvest seasons
(1956-1957). The two cases, were by agreement of the parties assigned to one branch so that
they can be tried jointly. On 10 March 1959, the CFI Rizal, after a joint trial of both cases,
ordered Bautista and de Rosas to execute a deed of sale covering the property in question in
favor of Soriano and de Jesus upon payment by the latter of P1,650.00 which is the balance
of the price agreed upon, i.e. P3,900.00, and the amount previously received by way of loan by
the said spouses from Soriano and de Jesus, to pay the sum of P500.00 by way of attorneys fees,
and to pay the costs.
The Supreme Court affirmed the judgment appealed from, with costs.
1.
Mortgagors right to redeem defeasible due to stipulation on option to buy

While the transaction is undoubtedly a mortgage and contains the customary
stipulation concerning redemption, it carries the added special provision, which renders the
mortgagors right to redeem defeasible at the election of the mortgagees. There is nothing
illegal or immoral in this. It is simply an option to buy, sanctioned by Article 1479 of the
Civil Code, which states: A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. An accepted unilateral 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.
2.
Promise to sell supported by same consideration of the mortgage, which is
distinct from which would support the sale; Continuing offer
In the present case, the mortgagors promise to sell is supported by the same
consideration as that of the mortgage itself, which is distinct from that which would support
the sale, an additional amount having been agreed upon, to make up the entire price of
P3,900.00, should the option be exercised. The mortgagors promise was in the nature of a
continuing offer, non-withdrawable during a period of two years, which upon acceptance by the
mortgagees gave rise to a perfected contract of purchase and sale.
Sales, 2003 ( 235 )
3.
Inigo vs. CA case affrms right of appellees for specifc performance for the
execution of deed of sale
In the case of Iigo vs. Court of Appeals (96 Phil., 37; 50 O.G. 11 5281), it was held that
a stipulation in a contract of mortgage to sell the property to the mortgagee does not bind
the same but creates only a personal obligation on the part of the mortgagor. The citation,
confirms the position of the appellees, who are not enforcing any real right to the disputed
land but are rather seeking to obtain specific performance of a personal obligation, namely,
the execution of a deed of sale for the price agreed upon, the corresponding amount to cover
which was duly deposited in court upon the filing of the complaint.
4.
Tender inefective as preemptive right to purchase by other party has been exercised
The tender of the sum of P1,800 to redeem the mortgage by Bautista and de Rosas was
ineffective for other purpose intended. Such tender must have been made after the option to
purchase had been exercised by Soriano and de Jesus (Civil Case 99 was filed on 9 June 1958,
only to be dismissed for lack of jurisdiction). Bautistas and de Rosas offer to redeem could
be defeated by Sorianos and de Jesus preemptive right to purchase within the period of 2
years from 30 May 1956. Such right was availed of and Bautista and de Rosas were accordingly
notified by letter dated 13 May 1958, which was received by them on the following May 22.
Offer and acceptance converged and gave rise to a perfected and binding contract of purchase
and sale.
[100]
Sta. Ana vs. Hernandez [G.R. No. L-16394. December
17, 1966.] En Banc, Reyes JBL (J): 8 concur, 1 took no part
Facts: Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned a 115,850-sq.m. parcel of
land situated in barrio Balasing, Sta. Maria, Bulacan, and covered by TCT T-3598. On 28 May
1954, they sold two (2) separate portions of the land for P11,000.00 to Rosa Hernandez. These
portions were described in the deed of sale as the northern lot (N: Maria Perez and Aurelio
Perez, S: adjoining lot [Sta. Ana], E: Mariano Flores and Emilio Ignacio, W: Cornelio Ignacio;
12,500 sq.m.) and eastern lot (N: Rosa Hernandez, E: Domingo and Antonio Hernandez, S: Sta.
Maria-Tigbi Road; W: adjoining lot [Sta. Ana]; 26,500 sq.m.) After the sale (there were 2 other
previous sales to different vendees of other portions of the land), the spouses caused the
preparation of a subdivision plan, of the entire land by a surveyor, whole subdivision plan
Psd-43187, was approved on 13 January 1955 by the Director of Lands. Rosa Hernandez,
however, unlike the previous vendees, did not conform to the plan and refused to execute an
agreement of subdivision and partition for registration with the Register of Deeds of Bulacan;
and she, likewise, refused to vacate the areas that she had occupied. Instead, she caused the
preparation of a different subdivision plan, which was approved by the Director of Lands on
24 February 1955. This plan, Psd-42844, tallied with the areas that Rosa Hernandez had actually
occupied.
On 28 February 1955, the spouses filed suit against Rosa Hernandez in the CFI Bulacan (Civil
Case 1036), claiming that Hernandez was occupying an excess of 17,000 sq. m. in area of what
she had bought from them. Hernandez, on the other hand, claimed that the alleged excess was
part of the areas that she bought. The only question determined is whether or not the spouses
had sold two portions without clear boundaries but with exact areas (12,500 sq. m. and 26.000
sq. m.) at the rate of P0.29 per square meter or two portions, the areas of which were not
definite but which were well defined on the land and with definite boundaries and sold for the
lump sum of P11,000.00. Finding for the spouses, the said court ordered Hernandez, among
other things, to vacate the excess partitions actually occupied by her and to confine her
occupation only to Lots 4-a and 4-b as shown in the plan of the spouses.
Not satisfied with the judgment, Hernandez appealed to the Court of Appeals. The Court of
Appeals (CA-GR 20582-R) dismissed the complaint and declared Rosa Hernandez the owner of
lots 4-a and 4-b in her plan, Psd-42844; in effect reversing the decision of the CFI Bulacan.
Hence, the appeal.
Sales, 2003 ( 236 )
The Supreme Court afirmed the decision of the Court of Appeals, with costs against Jose Santa
Ana, Jr. and Lourdes Sto. Domingo.
1.
Witness testimony: Boundaries prevail over area

Gonzalo V. Ignacio, the notarial officer before whom the contract of sale was executed,
testified that Hernandez complained to him and Sta. Ana to the effect that the areas stated in
the contract were less than the actual areas of the parcels of land being sold. Ignacio assured
her that the area stated in the document will not be the one to prevail but the one to prevail
is the boundary of the land which you already know. Sta. Ana being the nephew of Hernandez,
and the formers assurance probably appeased the latter against insisting in the correction of
the areas stated in the contract of sale.
2.
Witness testimony: Purchase price always lump sums

Two witnesses testified for Hernandez. Jesus Policarpio divulged that the same
parcels of land involved in this case were previously offered to him by Sta. Ana for the single
purchase price of P12,000.00. Julio Hernandez stated that his sister, Rosa Hernandez, had offered
P10,000.00 as against Sta. Anas price of P12,000.00, end that he was able to persuade the
parties to meet halfway on the price. Furthermore, the previous conveyances made by
Sta. Ana for other portions of the same property are also for lump sums.
3.
Parcels of land sold are identifed by conspicuous boundaries

Sta. Ana admitted the lands in question were separated from the rest of their property
by a long and continuous pilapil or dike, and there is convincing proof to show that the
bigger lot (Lot 4-a) was wholly tenanted for Sta. Ana by Ciriaco Nicolas and Santiago
Castillo and the smaller lot (Lot 4-b) was wholly tenanted for Sta. Ana by Gregorio
Gatchalian. These facts support the theory that the two parcels of land sold to Hernandez were
identified by the conspicuous boundaries and the extent or area each tenant used to till or the
vendors. Sta. Ana should not be heard to complain about the deficiency in the area (17,000 sq.
m. or total are of two parcels of land) because registered owners and possessors of the entire
land since 1949 they can rightly be presumed to have acquired a good estimate of the
value and areas of the portions they subsequently sold. From the facts, the difference in the
lot area does not infer gross mistake on the part of Sta. Ana.
4.
Article 1542 applied

Article 1542 of the new Civil Code provides that In the sale of real estate, made for a
lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be
no increase or decrease of the price, although there be greater or less area or number than that
stated in the contract. The same rule shall be applied when two or more immovables are sold
for a single price; but if, besides mentioning the boundaries, which is indispensable in every
conveyance of real estate, its area or number should be designated in the contract, the vendor
shall be bound to deliver all that is included within said boundaries, even when it exceeds the
area or number specified in the contract; and, should he not be able to do so, he shall suffer a
reduction in the price, in proportion to what is lacking in the area or number, unless the
contract is rescinded because the vendee does not accede to the failure to deliver what has been
stipulated.
5.
Jurisdiction of the Courts

The credibility of witnesses and the weighing of conflicting evidence are matters within
the exclusive authority of the Court of Appeals, and it is not necessarily bound by the
conclusions of the trial court. Both the Judiciary Act (R.A. 296, section 29) and the Rules of
Court (Rule 45, section 2) only allow a review of decisions of the Court of Appeals on
question of law; and numerous decisions of this Court have invariably and repeatedly held
that findings of fact by the Court of Appeals are conclusive and not reviewable by the
Supreme Court (Galang vs. Court of Appeals, L-17248, 29 January 1962; Fonnacier vs. Court of
Appeals, 96 Phil. 418, 421; and cases therein cited; Onglengco vs. Ozaeta, 70 Phil. 43;
Nazareno vs. Magwagi, 71 Phil. 101). Barring, therefore, a showing that the findings
complained of are totally devoid of support in the record,
Sales, 2003 ( 237 )
or that they are so glaringly erroneous as to constitute serious abuse of discretion, such
findings must stand, for the Supreme Court is not expected or required to examine and correct
the oral and documentary evidence submitted by the parties. As pointed out by former Chief
Justice Moran in his Comments on the Rules of Court (1963 Ed., Vol. 2, p. 412), the law
creating the Court of Appeals was intended mainly to take away from the Supreme Court the
work of examining the evidence, and confine its task for the determination of questions
which do not call for the reading and study of transcripts containing the testimony of
witnesses.
6.
Corpus centum
The two parcels of land sold to Rosa Hernandez were identified by the conspicuous
boundaries, consisting in a long and continuous pilapil or dike that separated the lands in
question from the rest of the property. On the basis of such findings, it is unquestionable that
the sale made was of a definite and identified tract, a corpus certum, that obligated the
vendors to deliver to the buyer all the land within the boundaries, irrespective of whether its
real area should be greater or smaller than what is recited in the deed (Goyena vs. Tambunting,
I Phil. 490; Teran vs. Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil. 599; Mondragon vs.
Santos, 87 Phil. 471). And this is particularly true where the area given is qualified to be
approximate only humigit kumulang, i.e., more or less. It cannot be said that the
boundaries are indefinite just because the deed of sale provides boundaries given as lupang
kasanib.
7.
Requisites to hold buyer to no more than the area recited

To hold the buyer to no more than the area recited on the area, it must be made clear
therein that the sale was made by unit of measure at a definite price for each unit. If the
defendant intended to buy by the meter he should have so stated in the contract (Goyena vs.
Tambunting, supra).
8.
La venta a cuerpo cierto; Sale of a certain thing

The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish
Civil Code (copied verbatim in Article 1542 of the Civil Code) is highly persuasive that as
between the absence of a recital of a given price per unit of measurement, and the
specification of the total area sold, the former must prevail and determines the applicability of
the norms concerning sales for a lump sum.
? The sale of a certain thing is doubtlessly verified when in the contract there is no
single nor precise price by unit of measurement, without neither indicating the global
dimensions of the immovable, but it also verified when even having not indicated a singular
price by unit of measurement, nevertheless the total dimension of immovable, in which
ultimately entered contrasting indices, constituted a [by] the lack of a singular price for a
unit of measure, and another by the concretion of the global dimensions of the immovable, the
prevailing law is the first, and presumes that the individualization does not speak of the parts
of essential value that constitutes an overprice, and does not mean that the parts have been
agreed that the global price of the immovable is for the total dimensions, considering that this
is an absolute presumption, against any proof presented by either the buyer or the seller.
? Therefore, neither the buyer nor the seller can try to reduce or provide a price
supplement, when the global dimensions of a larger or smaller immovable results therefrom
from the ones indicated in the contract, unless it can be adduced that they have agreed upon
precisely are the dimensions of the thing in the contract. (Supreme Court of Spain, Decision of
26, June 1956; Rep. Jurisp. Aranzadi, 2729)
9.
Section 58 of Act 496 merely a procedure directive to Registers of Deeds and
does not modify Civil Code Rule as to sales a cuerpo cierto
The Civil Codes rule as to sales a cuerpo cierto was not modified by Act 496,
section 58 prohibiting the issuance of a certificate of title to a grantee of part of a registered

tract until a subdivision plan and technical description are duly approved by the Director of
Lands, and authorizing only the entry of a memorandum on the grantors certificate of title
in default of such plan. The latter provision is purely a procedural directive to Registers of
Deeds that does not attempt to govern the rights of vendor and vendee inter se, that remain
controlled by the Civil Code of the Philippines. It does not even bar the registration of the
contract itself to bind the land.
Sales, 2003 ( 238 )
[101]
Suria v. IAC, 151 SCRA 661(1987)
[102]
Tagatac v. Jimenez, 53 OG 3792 (1957)
[103]
Tajanlangit vs. Southern Motors [G.R. No. L-10789.
May 28, 1957.] Second Division, Bengzon (J): 8 concur
Facts: In April 1953 Amador Tajanlangit and his wife Angeles, bought from the Southern
Motors Inc. of Iloilo two tractors and a thresher. In payment for the same, they executed the
promissory note whereby they undertook to satisfy the total purchase price of P24,755.75 in
several installments (with interest) payable on stated dates from 18 May 1953 to 10
December 1955. The note stipulated that if default be made in the payment of interest or of
any installment, then the total principal sum still unpaid with interest shall at once become
demandable etc. The spouses failed to meet any installment.
The spouses were sued (Civil Case 2942), for the amount of the promissory note. The spouses
defaulted, and the court, after listening to the Southern Motors evidence entered judgment
for it in the total sum of P24,755.75 together with interest at 12%, plus 10% of the total
amount due as attorneys fees and costs of collection. Carrying out the order of execution,
the sheriff levied on the same machineries and farm implements which had been bought by
the spouses; and later sold them at public auction to the highest bidder, which turned out to be
the Southern Motors itself, for the total sum of P10,000. As its judgment called for much
more, the Southern Motors subsequently asked and obtained, an alias writ of execution; and
pursuant thereto, the provincial sheriff levied attachment on the Tajanlangits rights and
interests in certain real properties, with a view to another sale on execution.
To prevent such sale, the Tajanlangits instituted the action in the CFI Iloilo for the purpose
among others, of annulling the alias writ of execution and all proceedings subsequent thereto.
They alleged that (1) they had returned the machineries and farm implements to the Southern
Motors Inc., the latter accepted them, and had thereby settled their accounts; for that reason,
said spouses did not contest the action in Civil Case 2942; and (2) as the Southern Motors Inc.
had repossessed the machines purchased on installment (and mortgaged) the buyers were
thereby relieved from further responsibility, in view of the Recto Law, now article 1484 of
the New Civil Code. For answer, the company denied the alleged settlement and
understanding during the pendency of Civil Case 2942. It also denied having repossessed
the machineries, the truth being that they were attached by the sheriff and then deposited by
the latter in its shop for safekeeping, before the sale at public auction. The case was
submitted for decision mostly upon a stipulation of facts. Additional testimony was offered
together with documentary evidence. The lower court dismissed the complaint, holding that it
has no authority and jurisdiction to declare null and void the order directing the issuance of
alias writ of execution because it was made by another court of equal rank and category.
The spouses reasonably brought the matter to the Court of Appeals, but the latter forwarded
the expediente, being of the opinion that the appeal involved questions of jurisdiction and/or
law.
The Supreme Court affirmed the decision dismissing the complaint, with costs against the
appellants.
1.

Sales, 2003 ( 239 )
Article 1484 of the Civil Code provides that 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 vendees failure to pay cover two or more installments; (3) Foreclose the
chattel mortgage on the thing sold, if one has been constituted, should the vendees 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.
2.
Article 1484 (3) does not apply

The spouses invoked the last paragraph of Article 1484, but there has been no
foreclosure of the chattel mortgage nor a foreclosure sale in the present case. Therefore the
prohibition against further collection does not apply.
3.
Sale of mortgage chattel

It is the actual sale of the mortgaged chattel in accordance with section 14 Act 1508
that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance.
(Pacific Com. Co. vs. De la Rama, 72 Phil. 380; Manila Motor Co. vs. Fernandez, 99 Phil., 782.)
4.
Option exercised by Southern Motors

It is true that there was a chattel mortgage on the goods sold, but the Southern Motors
elected to sue on the note exclusively, i.e. to exact fulfillment of the obligation to pay. It had
a right to select among the three remedies established in Article 1484. In choosing to sue on
the note, it was not thereby limited to the proceeds of the sale, on execution, of the mortgaged
good.
5.
Similar situation in Southern Motors vs. Magbanua

In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation arose in
connection with the purchase on installment of a Chevrolet truck by Magbanua. Upon the
latters default, suit on the note was filed, and the truck levied on together with other
properties of the debtor. Contending that the seller was limited to the truck, the debtor
obtained a discharge of the other properties. This court said that by praying that the
defendant be ordered to pay the sum of P4,690 together with the stipulated interest at 12% per
annum from 17 March 1954 until fully paid, plus 10% of the total amount due as
attorneys fees and cost of collection, the plaintiff elected to exact the fulfillment of the
obligation and not to foreclose the mortgage on the truck.As the plaintiff has chosen to exact
the fulfillment of the defendants obligation, the former may enforce execution of the
judgment rendered in its favor on the personal and real properties of the latter not exempt
from execution sufficient to satisfy the judgment. That part of the judgment depriving the
plaintiff of its right to enforce judgment against the properties of the defendant except
the mortgaged truck and discharging the writ of attachment on his other properties is
erroneous.
6.
Cancellation and settlement theory of spouses not heeded as it would
contravene decision in Civil Case 2942
The argument of the spouses (that upon the return of the same chattels and due
acceptance of the same by the vendor-mortgagee, the conditional sale is ipso facto cancelled,
with the right of the vendor-mortgagee to appropriate whatever down-payment and
posterior monthly installments made by the purchaser) assumes that acceptance of the
goods by the Southern Motors Co. with a view to cancellation of the sale. The company
denies such acceptance and cancellation, asserting the goods were deposited in its shop when
the sheriff attached them in pursuance of the execution. Its assertion is backed up by the sheriff,
of whose credibility there is no reason to doubt. The cancellation or settlement theory may
not be heeded, because it would contravene the decision in Civil Case 2942 (it would show the
Tajanlangits owned nothing to Southern Motors Inc.). Such decision is binding upon them,
unless and until they manage to set it aside in a proper proceeding, which is not the present
case.
Sales, 2003 ( 240 )
7.
Procedural aspect not necessary to deal with as spouses are not entitled to relief
demanded
The Court deemed it unnecessary to deal with the procedural aspect, such as the
authority of the judge of one branch of the CFI to enjoin proceedings in another branch of the
same court, inasmuch as that, on the merits, the spouses are not entitled to the relief demanded.
[104]
Tanedo vs. CA [G.R. No. 104482. January
22, 1996.] Third Division, Panganiban (J): 4
concur
Facts: On 20 October 1962, Lazardo Taedo executed a notarized deed of absolute sale in favor
of his eldest brother, Ricardo Taedo, and the latters wife, Teresita Barera, whereby he
conveyed to the latter in consideration of P1,500, 1 hectare of whatever share he shall have
over Lot 191 of the cadastral survey of Gerona, Tarlac (TCT T-1389 of the Register of
Deeds of Tarlac), the said property being his future inheritance from his parents. Upon
the death of his father Matias, Lazaro executed an Affidavit of Conformity dated 28
February 1980 to re-affirm respect, acknowledge and validate the sale he made in 1962. On 13
January 1981, Lazaro executed another notarized deed of sale in favor of Ricardo Tanedo and his
wife covering his undivided 1/12 of a parcel of land known as Lot 191. He acknowledged
therein his receipt of P10,000 as consideration therefor. In February 1981, Ricardo learned that
Lazaro sold the same property to his children, through a deed of sale dated 29 December 1980.
On 7 June 1982, Ricardo Tanedo and his wife recorded the Deed of Sale in their favor in the
Registry of Deeds and the corresponding entry was made in TCT16645.
Belinda Tanedo, for herself and in representation of her brothers and sisters, and Teofila
Corpuz Tanedo, representing her minor daughter, Verna Tanedo, on 16 July 1982 filed a
complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in favor of
Ricardo Tanedo and his wife covering the property inherited by Lazaro from his father with
the Regional Trial Court Tarlac (Branch 63, Third Judicial Region, Tarlac, Tarlac; Civil Case
6328). They claimed that their father, Lazaro, executed an Absolute Deed of Sale dated 29
December 1980, conveying to his 10 children his allotted portion under the extrajudicial
partition executed by the heirs of Matias, which deed included the land in litigation (Lot
191). Ricardo Tanedo, on the other hand, presented in evidence a Deed of Revocation of a
Deed of Sale dated 12 March 1981, wherein Lazaro revoked the sale in favor of petitioners for
the reason that it was simulated or fictitious without any consideration whatsoever.
Lazaro however executed a sworn statement which virtually repudiated the contents of the
Deed of Revocation of a Deed of Sale and the Deed of Sale in favor of Ricardo Tenedo, but
testified that he sold the property to Ricardo, and that it was a lawyer who induced him to
execute a deed of sale in favor of his children after giving him P5 to buy a drink. The trial
court decided in favor of Ricardo Tanedo and his wife, holding that his children failed to
adduce a preponderance of evidence to support (their) claim.
On appeal and on 26 September 1991, the Court of Appeals (CA-GR CV 24987) affirmed the
decision of the trial court, ruling that the Deed of Sale dated 13 January 1981 was valid and
that its registration in good faith vested title in Ricardo Tanedo and his wife. The motion for
reconsideration was denied on 27 May 1992. Hence, the petition for review on certiorari under
Rule 45 of the Rules of Court by the children.
The Supreme Court denied the petition and affirmed the assailed Decision of the Court of
Appeals; without costs.
1.
Errors reviewable by Supreme Court are those committed by the Court of
Appeals; Issues delved into to give parties substantial justice
The errors which are reviewable by the Court in the petition for review on certiorari
are only those allegedly committed by the Court of Appeals and not directly those of the trial
court, which is not a party. The
Sales, 2003 ( 241 )
assignment of errors in the petition are totally misplaced, and for that reason, the
petition should be dismissed. But in order to give the parties substantial justice, the Court
decided to delve into the issues as rephrased. The errors attributed to the trial court would be
discussed only insofar as they are relevant to the appellate courts assailed Decision and
Resolution.
2.
Contract upon a future inheritance void unless authorized by law

Pursuant to Article 1347 of the Civil Code, (n)o contract may be entered into
upon a future inheritance except in cases expressly authorized by law. The contract made in
1962 is not valid and cannot be the source of any right nor the creator of any obligation
between the parties.
3.
Validating contract also useless

The affidavit of conformity dated 28 February 1980, insofar as it sought to validate
or ratify the 1962 sale, is also useless and suffers from the same infirmity.
4.
Critical documents in the resolution of the case; documents not infected with
infirmities of 1962 sale
The documents that are critical to the resolution of this case are: (a) the deed of sale of
13 January 1981 in favor of Ricardo Tanedo covering Lazaros undivided inheritance of 1/12
share in Lot 191, which was subsequently registered on 7 June 1982; and (b) the deed of sale
dated 29 December 1980 in favor of Lazaros children covering the same property. These two
documents were executed after the death of Matias (and his spouse) and after a deed of extrajudicial settlement of his (Matias) estate was executed, thus vesting in Lazaro actual title
over said property. These dispositions, though conflicting, were no longer infected with the
infirmities of the 1962 sale.
5.
Subject matter of sale is the Lazaros entire undivided 1/12 share in Lot 191
The subject matter of the 13 January 1981 sale to be the entire undivided 1/12 share of
Lazaro in Lot 191 and which is the same property disposed of on 29 December 1980 in favor of
Lazaros children.
6.

Article 1544 of the Civil Code governs the preferential rights of vendees in cases of
multiple sales. It provides that If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken possession thereof
in good faith, if it should be movable property. Should it be immovable property, the
ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property. Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
7.
Immovable property; First to register has better right

The property in question is land, an immovable. Ownership therefore shall belong to the
buyer who in good faith registers it first in the registry of property. Thus, although the deed
of sale in favor of Ricardo Tanedo was later than the one in favor of the children, ownership
would vest in the former because of the undisputed fact of registration. On the other hand, the
Children have not registered the sale to them at all.
8.
Registration preferred, even if one without his title registered actually possesses the
property
As between two purchasers, the one who registered the sale in his favor has a preferred
right over the other who has not registered his title, even if the latter is in actual possession of
the immovable property.

9.
Allegation of bad faith a question of fact; Supreme Court not trier of facts
Lazaros children (petitioners) alleged that the respondent Court allegedly ignored the
claimed fact that respondent Ricardo by fraud and deceit and with foreknowledge that
the property in question had already been sold to petitioners, made Lazaro execute the deed
of 13 January 1981; that there is allegedly
Sales, 2003 ( 242 )
adequate evidence to show that only 1/2 of the purchase price of P10,000 was paid at the
time of the execution of the deed of sale, contrary to the written acknowledgment, thus
showing bad faith; that there is allegedly sufficient evidence showing that the deed of
revocation of the sale in favor of petitioners was tainted with fraud or deceit; that there
is allegedly enough evidence to show that private respondents took undue advantage over the
weakness and unschooled and pitiful situation of Lazaro Taedo and that Ricardo Taedo
exercised moral ascendancy over his younger brother he being the eldest brother and who
reached fourth year college of law and at one time a former Vice-Governor of Tarlac, while his
younger brother only attained first year high school; and that the respondent Court erred in
not giving credence to petitioners evidence, especially Lazaro Taedos Sinumpaang Salaysay
dated 27 July 1982 stating that Ricardo Taedo deceived the former in executing the deed of
sale in favor of private respondents. There are indeed many conflicting documents and
testimonies as well as arguments over their probative value and significance. All the
contentions involve questions of fact, appreciation of evidence and credibility of witnesses,
which are not proper in the present review. The Supreme Court is not a trier of facts. Suffice
that the appellate court, in reviewing the trial courts findings, refused to overturn the
latters assessment of the testimonial evidence, declaring that it was not prepared to set
aside the finding of the lower court upholding Ricardo Taedos testimony, as it involves a
matter of credibility of witnesses which the trial judge, who presided at the hearing, was in a
better position to resolve.
10.
Only questions of law may be raised in petition for review under Rule 45
In petitions for review under Rule 45 of the Revised Rules of Court, only questions of
law may be raised and passed upon. Absent any whimsical or capricious exercise of judgment,
and unless the lack of any basis for the conclusions made by the lower courts be amply
demonstrated, the Supreme Court will not disturb their findings. At most, it appears that
Lazaros children have shown that their evidence was not believed by both the trial and the
appellate courts, and that the said courts tended to give more credence to the evidence
presented by Ricardo Tanedo. But this in itself is not a reason for setting aside such findings.
The Court is far from convinced that both courts gravely abused their respective
authorities and judicial prerogatives.
11.
Factual findings of trial court as well as Court of Appeals are final and
conclusive; Exceptions As held in Chua Tiong Tay vs. Court of Appeals and
Goldrock Construction and Development
Corp.: the Court has consistently held that the factual findings of the trial court, as well
as the Court of Appeals, are final and conclusive and may not be reviewed on appeal. Among
the exceptional circumstances where a reassessment of facts found by the lower courts is
allowed are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when
there is grave abuse of discretion in the appreciation of facts; when the judgment is
premised on a misapprehension of facts; when the findings went beyond the issues of the case
and the same are contrary to the admissions of both appellant and appellee.
12.
Reassessment and reevaluation of evidence not the function of the Supreme Court
In South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals, et al., it was
held that It is not the function of the Supreme Court to assess and evaluate all over again the
evidence, testimonial and documentary, adduced by the parties, particularly where the findings
of both the trial court and the appellate court on the matter coincide.
[105]
Torres v. CA [G.R. No. 134559. December

9, 1999.] Third division, Panganiban (J): 4
concur
Facts: Sisters Antonia Torres and Emeteria Baring entered into a joint venture agreement
with Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to
the contract, they executed a
Sales, 2003 ( 243 )
Deed of Sale covering the said parcel of land in favor of Manuel, who then had it registered in
his name. By mortgaging the property, Manuel obtained from Equitable Bank a loan of
P40,000 which, under the Joint Venture Agreement, was to be used for the development of the
subdivision. All 3 of them also agreed to share the proceeds from the sale of the subdivided
lots. The project did not push through, and the land was subsequently foreclosed by the
bank. Antonia and Emeteria alleged that the project failed because of Manuels lack of
funds or means and skills. They add that Manuel used the loan not for the development of the
subdivision, but in furtherance of his own company, Universal Umbrella Company.On the
other hand, Manuel alleged that he used the loan to implement the Agreement. With the
said amount, he was able to effect the survey and the subdivision of the lots. He secured the
Lapu Lapu City Councils approval of the subdivision project which he advertised in a local
newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered
into a contract with an engineering firm for the building of 60 low-cost housing units and
actually even set up a model house on one of the subdivision lots. He did all of these for a total
expense of P85,000. He further claimed that the subdivision project failed because
Antonia and Emeteria and their relatives had separately caused the annotations of adverse
claims on the title to the land, which eventually scared away prospective buyers. Despite his
requests, Antonia and Emeteria refused to cause the clearing of the claims, thereby forcing
him to give up on the project.
Antonia and Emeteria filed a criminal case for estafa against Manuel and his wife, who
were however acquitted. Thereafter, they filed the present civil case which, upon Manuels
motion, was later dismissed by the trial court in an Order dated 6 September 1982. On appeal,
however, the appellate court remanded the case for further proceedings. Thereafter, the RTC
Cebu City (Civil Case R-21208) issued its assailed Decision, which was affirmed by the CA
on 5 March 1998 (CA-GR CV 42378). Reconsideration was denied by the Court of Appeals
through its Resolution of 5 March 1998. Hence, the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the challenged decision; with costs against
Antonia and Emeteria.
1.
Partnership exists
A reading of the terms embodied in the Agreement indubitably shows the existence of
a partnership pursuant to Article 1767 of the Civil Code, which provides that By the contract
of partnership two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves. In
the present case, Antonia and Emeteria would contribute property to the partnership in the
form of land which was to be developed into a subdivision; while Manuel would give, in
addition to his industry, the amount needed for general expenses and other costs.
Furthermore, the income from the said project would be divided according to the stipulated
percentage. Clearly, the contract manifested the intention of the parties to form a partnership.
2.
Parties implemented contract; Partners may contribute not only money or
property but also industry
The parties implemented the contract. Antonia and Emeteria transferred the title to
the land to facilitate its use in the name of Manuel. On the other hand, Manuel caused the
subject land to be mortgaged, the proceeds of which were used for the survey and the
subdivision of the land. He developed the roads, the curbs and the gutters of the subdivision
and entered into a contract to construct low-cost housing units on the property. Manuels
actions clearly belie Antonias and Emeterias contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.
3.
Contract binds party to stipulations and all necessary consequences thereof

Under Article 1315 of the Civil Code, contracts bind the parties not only to what has
been expressly stipulated, but also to all necessary consequences thereof. Article 1315 provides
that Contracts are perfected by mere consent, and from that moment the parties are bound
not only to the fulfillment of what has been
Sales, 2003 ( 244 )
expressly stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. It is undisputed that Antonia and Emeteria are
educated and are thus presumed to have understood the terms of the contract they
voluntarily signed. If it was not in consonance with their expectations, they should have
objected to it and insisted on the provisions they wanted.
4.
Courts may not extricate parties from the necessary consequences of their acts
Courts may not extricate parties from the necessary consequences of their acts, and the
fact that the terms of a contract turn out to be financially disadvantageous to them will not
relieve them of their obligations therein. They cannot now disavow the relationship formed
from such agreement due to their supposed misunderstanding of its terms.
5.
Article 1773 must be interpreted in relation to Article 1771; Present case does
not prejudice third parties
The lack of an inventory of real property will not ipso facto release the contracting
partners from their respective obligations to each other arising from acts executed in
accordance with their agreement. Article 1773 providing that a contract of partnership is
void, whenever immovable property is contributed thereto, if an inventory of said property is
not made, signed by the parties, and attached to the public instrument was intended
primarily to protect third persons. Tolentino states that under the provision which is a
complement of Article 1771, the execution of a public instrument would be useless if there
is no inventory of the property contributed, because without its designation and description,
they cannot be subject to inscription in the Registry of Property, and their contribution
cannot prejudice third persons. This will result in fraud to those who contract with the
partnership in the belief [in] the efficacy of the guaranty in which the immovables may
consist. Thus, the contract is declared void by the law when no such inventory is made. The
present case does not involve third parties who may be prejudiced.
6.
Parties cannot adopt inconsistent positions in regard to a contract

Antonia and Emeteria invoke the allegedly void contract as basis for their claim that
Manuel should pay them 60% of the value of the property. They cannot in one breath deny
the contract and in another recognize it, depending on what momentarily suits their purpose.
Parties cannot adopt inconsistent positions in regard to a contract and courts will not tolerate,
much less approve, such practice.
7.
Nullity of partnership does not prevent courts from considering Joint Venture
Agreement as an ordinary contract
The alleged nullity of the partnership will not prevent courts from considering the
Joint Venture Agreement an ordinary contract from which the parties rights and obligations
to each other may be inferred and enforced.
8.
Joint Venture Agreement states consideration

The Joint Venture Agreement clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first stipulation states that Antonia
and Emeteria did not actually receive payment for the parcel of land sold to Manuel. Thus, it
cannot be contended that the Joint Venture Agreement is void under Article 1422 of the Civil
Code, because it is the direct result of an earlier illegal contract, which was for the sale of the
land without valid consideration.
9.
Consideration or cause may take many forms

Consideration, more properly denominated as cause, can take different forms, such as
the prestation or promise of a thing or service by another. In the present case, the cause of the
contract of sale consisted not in the stated peso value of the land, but in the expectation of
profits from the subdivision project, for which the land was intended to be used. The land was
in effect given to the partnership as Antonias and Emeterias participation therein. There was
therefore a consideration for the sale, Antonia and Emeteria acting in the expectation that,
should the venture come into fruition, they would get 60% of the net profits.
Sales, 2003 ( 245 )
10.
Factual issues cannot be resolved on a petition of review under Rule 45; Damages
not due Factual issues cannot be resolved in a petition for review under Rule 45, as
in the present case.
Antonia and Emeteria have not alleged, not to say shown, that their petition constitutes one of
the exceptions to this doctrine. The Court of Appeals held that the acts of Antonia and
Emeteria did not cause the failure of the project, nor was Manuel responsible therefore. In
imputing the blame solely to him, Antonia and Emeteria failed to give any reason why the
Court should disregard the factual findings of the appellate court relieving him of fault.
Antonia and Emeteria, thus, are not entitled to damages.
[106]
Toyota Shaw v. CA [G.R. No. 116650. May
23, 1995.] First Division, Davide Jr (J): 3 concur,
1 on leave
Facts: Sometime in June 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was
then a sellers market and Sosa had difficulty finding a dealer with an available unit for sale.
But upon contracting Toyota Shaw, Inc., he was told that there was an available unit. So on 14
June 1989, Sosa and his son, Gilbert, went to the Toyota Shaw Boulevard, Pasig, Metro Manila.
They met Popong Bernardo, a sales representative of Toyota. Sosa emphasized to Bernardo that
he needed the Lite Ace not later than 17 June 1989 because he, his family, and a balikbayan
guest would use it on 18 June 1989 to go Marinduque, his home province, where he would
celebrate his birthday on 19 June. He added that if he does not arrive in his hometown with
the new car, he would become a laughing stock. Bernardo assured Sosa that a unit would be
ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed a document entitled
Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc, stipulating that all
necessary documents will be submitted to Toyota Shaw (Popong Bernardo) a week after, upon
arrival of Mr. Sosa from the Province (Marinduque) where the unit will be used on the 19 June;
that the downpayment of P100,000.00 will be paid by Mr. Sosa on 15 June 1989; and that the
Toyota Shaw, Inc. will be released a yellow Lite Ace unit. It was also agreed upon by the
parties that the balance of the purchase price would be paid by credit financing through B.A.
Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota and
B.A. Finance pertaining to the application for financing. The next day, Sosa and Gilbert
went to Toyota to deliver the downpayment of P100,000.00. They met Bernardo who then
accomplished a printed Vehicle Sales Proposal (VSP) 928, on which Gilbert signed under the
subheading conforme. This document shows that the customers name is Mr. Luna Sosa
with home address at 2316 Guijo Street, United Paraaque II; that the model series of the
vehicle is a Lite Ace 1500 described as 4 Dr minibus; that payment is by installment,
to be financed by B.A., with the initial cash outlay of P100,000.00 (downpayment:
P53,148.00; insurance: P13,970.00; BLT registration fee: P1,067.00; CHMO fee: P2,715.00;
Service fee: P500.00; and accessories: P29,000.00) and the balance to be financed is
P274,137.00. The spaces provided for delivery terms were not filled-up. It also contains
conditions of sales providing that the sale is subject to the availability of the unit, and that the
stated price is subject to change without prior notice, and that the price prevailing and in effect
at time of selling will apply. Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and
approved the VSP.
On 17 June (9:30 a.m.), Bernardo called Gilbert to inform him that the vehicle would not be
ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that same day. At
2:00 p.m., Sosa and Gilbert met Bernardo at the latters office. According to Sosa, Bernardo
informed them that the Lite Ace was being readied for delivery. After waiting for about an
hour, Bernardo told them that the car could not be delivered because it was acquired by a
more influential person. Toyota contends, however, that the Lite Ace was not delivered to
Sosa because of the disapproval of B.A. Finance of the credit financing application of Sosa. It
further alleged that a particular unit had already been reversed and earmarked for Sosa but
could not be released due to the uncertainty of payment of the balance of the purchase price.
Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash
but Sosa refused. After it became clear that the Lite Ace would not be delivered to him, Sosa
asked that his downpayment be refunded. Toyota did so
Sales, 2003 ( 246 )
on the very same day by issuing a Far East Bank check for the full amount of P100,000.00,
the receipt of which was shown by a check voucher of Toyota, which Sosa signed with the
reservation, without prejudice to our future claims for damages. Thereafter, Sosa sent
two letters to Toyota: one on 27 June 1989 demanding the refund, within 5 days from
receipt, of the downpayment of P100,000.00 plus interest from the time he paid it and the
payment of damages with a warning that in case of Toyotas failure to do so he would be
constrained to take legal action; and the other on 4 November 1989 (signed by M.O.
Caballes, Sosas counsel) demanding P1M representing interest and damages, again, with a
warning that legal action would be taken if payment was not made within 3 days. Toyotas
counsel answered through as letter dated 27 November 1989 8 refusing to accede to the
demands of Sosa.
But even before the answer was made and received by Sosa, the latter filed on 20 November
1989 with the RTC Marinduque (Branch 38) a complaint against Toyota for damages under
Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. After trial on the
issue agreed upon during the pre-trial session, the trial court rendered on 18 February 1992 a
decision in favor of Sosa. It ruled that the Agreement between Mr. Sosa and Popong
Bernardo, was a valid perfected and contract of sale between Sosa and Toyota which bound
Toyota to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad
faith in selling to another the unit already reserved for him; that Bernardo, as an authorized
sales executive of Toyota Shaw, was the latters agent and thus bound Toyota Shaw; that Luna
Sosa proved his social standing in the community and suffered besmirched reputation,
wounded feelings and sleepless nights for which he ought to be compensated; and thus rendered
judgment ordering Toyota Shaw to pay Sosa the sum of P75,000 as moral damages, P10,000 as
exemplary damages, P30,000 as attorneys fees plus P2,000 lawyers transportation fare per trip
in attending to the hearing of the case, P2,000 for Sosas transportation fare per trip in
attending the hearing of the case, and to pay the cost of the suit.
Dissatisfied with the trial courts judgment, Toyota appealed to the Court of Appeals (CA-GR
CV 40043). In its decision promulgated on 29 July 1994, the Court of Appeals affirmed in toto
the appealed decision. Hence the petition for review by certiorari by Toyota Shaw.
The Supreme Court granted the petition, and dismissed the challenged decision of the Court of
Appeals and that of Branch 38 of the Regional Trial Court of Marinduque, and the
counterclaim therein; without pronouncement as to costs.
1.
Contract of sale defined; Kinds

Article 1458 of the Civil Code defines a contract of sale as By the contract of the
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
2.
Contract of sale, when perfected; Efect

Article 1475 of the Civil Code specifically provides when the contract of sale is
deemed perfected, i.e. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts.
3.
Agreement between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc. not a
contract of sale The Agreements between Mr. Sosa & Popong Bernardo of Toyota
Shaw, Inc. executed on 4 June
1989, is not a contract of sale. No obligation on the part of Toyota to transfer ownership of
a determinate thing to Sosa and no correlative obligation on the part of the latter to pay
therefor a price certain appears therein. The provision on the downpayment of P100,000.00
made no specific reference to a sale, it could only refer to a sale on installment basis, as the
VSP executed the following day confirmed. But nothing was mentioned about the full
purchase price and the manner the installments were to be paid. Neither logic nor
Sales, 2003 ( 247 )
recourse to ones imagination can lead to the conclusion that such agreement is a perfected contract
of sale.
4.
Definitive price is an essential element in the formation of a binding and
enforceable contract of sale
A definite agreement on the manner of payment of the price is an essential element in
the formation of a binding and enforceable contract of sale. This is so because the agreement as
to the manner of payment goes into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price. Definiteness as to the price is an
essential element of a binding agreement to sell personal property.
5.
No meeting of the minds

The Agreements between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc. shows the
absence of a meeting of minds between Toyota and Sosa. Sosa did not even sign it. Further, Sosa
was well aware from its title, written in bold letters, and thus knew that he was not dealing
with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the
authority to sell any Toyota vehicle.
6.
Prudence and reasonable diligence in inquiring authority of agent

Sosa knew that Bernardo was only a sales representative of Toyota and hence a mere
agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardos authority as an agent in respect of contracts to sell
Toyotas vehicles. A person dealing with an agent is put upon inquiry and must discover upon
his peril the authority of the agent.
7.
Three stages in the contract of sale

There are three stages in the contract of sale, namely (a) preparation, conception, or
generation, which is the period of negotiation and bargaining, ending at the moment of
agreement of the parties; (b) perfection of birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and (c) consummation or death, which is the
fulfillment or performance of the terms agreed upon in the contract. In the present case, the
Agreements between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc. may be considered
as part of the initial phase of the generation of negotiation stage of a contract sale. The
second phase of the generation or negotiation stage was the execution of the VSP (the
downpayment of the purchase price was P53,148.00 while the balance to be paid on
installment should be financed by B.A. Finance. It is assumed that B.A Finance was acceptable
to Toyota).
8.
Financing companies defned

Financing companies are defined in Section 3(a) of RA 5980, as amended by PDs 1454
and 1793, as corporations or partnerships, except those regulated by the Central Bank of the
Philippines, the Insurance Commission and the and the Cooperatives Administration Office,
which are primarily organized for the purpose of extending credit facilities to consumers and
to industrial, commercial, or agricultural enterprises, either by discounting or factoring
commercial papers or accounts receivable, or by buying and selling contracts, leases,
chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy
equipment and industrial machinery, business and office machines and equipment,
appliances and other movable property.
9.
Parties in a sale on installment basis fnanced by a fnancing company; No
meeting of minds as financing application was disapproved
In a sale on installment basis which is financed by a financing company, 3 parties are
thus involved: (1) the buyer who executes a note or notes for the unpaid balance of the price
of the thing purchased on installment, (2) the seller who assigns the notes or discounts them
with a financing company, and (3) the financing company which is subrogated in the place
of the seller, as the creditor of the installment buyer. Since B.A. Finance did not approve
Sosas application, there was then no meeting of minds on the sale on installment basis.
Sales, 2003 ( 248 )
10.
Toyotas version of circumstances leading to non-release of vehicle more credible

Toyotas version that B.A. Finance disapproved Sosas application for which reason it
suggested to Sosa that he pay the full purchase price is more credible. When the latter refused,
Toyota cancelled the VSP and returned to him his P100,000.00. Sosas version, that the VSP
was cancelled because the vehicle was delivered to another because of a more influential
client, is contradicted by paragraph 7 of his complaint which states that Bernardo for
reasons known only to its representatives, refused and/or failed to release the vehicle to the
plaintiff . Plaintiff demanded for an explanation, but nothing was given.
11.
VSP mere proposal and did not create demandable right in favor of Sosa when it
was aborted The VSP was a mere proposal which was aborted in lieu of subsequent
events. Thus, the VSP created
no demandable right in favor of Sosa for the delivery of the vehicle to him, and its nondelivery did not cause any legally indemnifiable injury.
12.
Award of moral damages without legal basis

The award of moral damages is without legal basis. The only ground upon which Sosa
claimed moral damages is that since it was known to his friends, townmates, and relatives that
he was buying a Toyota Lite Ace which they expected to see on his birthday, he suffered
humiliation, shame, and sleepless nights when the van was not delivered. The van became the
subject matter of talks during his celebration that he may not have paid for it, and this created
an impression against his business standing and reputation created an impression against his
business standing and reputation. At the bottom of this claim is nothing but misplaced pride
and ego. He should not have announced his plan to buy Toyota Lite Ace knowing that he might
not be able to pay the full purchase price. It was he who brought embarrassment upon himself
by bragging about a thing which he did not own yet.
13.
Award of exemplary damages without basis; Purpose of exemplary damages

Since Sosa is not entitled to moral damages and there being no award for temperate,
liquidated, or compensatory damages, he is likewise not entitled to exemplary damages.
Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by way of
example or correction for the public good, in addition to moral, temperate, liquidated, or
compensatory damages.
14.
Award of attorneys fees without basis

For attorneys fees to be granted the court must explicitly state in the body of the
decision, and not only in the dispositive portion thereof, the legal reason for the award of
attorneys fees. No such explicit determination thereon was made in the body of the decision
of the trial court. Thus, no reason exists for such award.
[107]
Universal Food Corp. v. CA, 33 SCRA 1 (1970)
[108]
Uy v. CA [G.R. No. 120465. September
9, 1999.] First Division, Kapunan (J): 3
concur, 1 on leave
Facts: William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the
owners thereof. By virtue of such authority, they offered to sell the lands, located in Tuba,
Tadiangan, Benguet to National Housing Authority (NHA) to be utilized and developed as a
housing project. On 14 February 1989, the NHA Board passed Resolution 1632 approving the
acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million,
pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject
lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report
it
Sales, 2003 ( 249 )
received from the Land Geosciences Bureau of the Department of Environment and
Natural Resources (DENR) that the remaining area is located at an active landslide area
and therefore, not suitable for development into a housing project. On 22 November 1991,
the NHA issued Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA,
through Resolution 2394, subsequently offered the amount of P1.225 million to the
landowners as daos perjuicios.
On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a Complaint
for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered
a decision declaring the cancellation of the contract to be justified. The trial court
nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount
initially offered by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and
entered a new one dismissing the complaint. It held that since there was sufficient justifiable
basis in cancelling the sale, it saw no reason for the award of damages. The Court of
Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real
parties-in-interest in the action before the trial court. Their motion for reconsideration having
been denied, petitioners seek relief from the Supreme Court.
The Supreme Court denied the petition.
1.
Real party-in-interest defned; Action to be prosecuted in the name of a party
whose right is sought to be enforced
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and
defended in the name of the real party-in-interest. The real party-in-interest is the party who
stands to be benefited or injured by the judgment or the party entitled to the avails of the
suit. Interest, within the meaning of the rule, means material interest, an interest in the
issue and to be afected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. Cases construing the real party-in-interest provision can
be more easily understood if it is borne in mind that the true meaning of real party-in-interest
may be summarized as follows: An action shall be prosecuted in the name of the party who, by
the substantive law, has the right sought to be enforced.
2.
Action brought by an attorney-in-fact in his name and not in the name of
his principal dismissed
Where the action is brought by an attorney-in-fact of a land owner in his name, (as in
our present action) and not in the name of his principal, the action was properly dismissed
(Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) because the
rule is that every action must be prosecuted in the name of the real parties-in-interest (Section
2, Rule 3, Rules of Court).
3.

Article 1311 of the Civil Code, provides that Contracts take effect only between the
parties, their assigns, and heirs, except in case where the rights and obligations arising
from the contract are not transmissible by their nature, or by stipulation, or by provision
of law. If a contract should contain some stipulation in favor of a third person, he may
demand its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third person.
4.
Agents rendering service in behalf of parties do not render them parties to the
contract of sale Petitioners are not parties to the contract of sale between their
principals and NHA. They are mere

agents of the owners of the land subject of the sale. As agents, they only render some service or
do something in representation or on behalf of their principals. The rendering of such service
did not make them parties to the contracts of sale executed in behalf of the latter. Since a
contract may be violated only by the parties thereto as against each other, the real parties-ininterest, either as plaintiff or defendant, in an action upon that
Sales, 2003 ( 250 )
contract must, generally, either be parties to said contract. Neither has there been any
allegation, much less proof, that petitioners are the heirs of their principals.
5.
Assignment of rights
In McMicking vs. Banco Espaol-Filipino, it was held that the rule requiring every
action to be prosecuted in the name of the real party-in-interest recognizes the assignments
of rights of action and also recognizes that when one has a right of action assigned to him he
is then the real party in interest and may maintain an action upon such claim or right. The
purpose is to require the plaintiff to be the real party in interest, or, in other words, he must
be the person to whom the proceeds of the action shall belong, and to prevent actions by
persons who have no interest in the result of the same. Thus, an agent, in his own behalf, may
bring an action founded on a contract made for his principal, as an assignee of such contract.
6.
Section 372 (1) of the Restatement of the Law on Agency

Section 372 (1) of the Restatement of the Law on Agency [Agent as Owner of
Contract Right] declares that Unless otherwise agreed, an agent who has or who acquires an
interest in a contract which he makes on behalf of his principal can, although not a
promisee, maintain such action thereon as might a transferee having a similar interest.
7.
Agent-transferee; Section 372 (1) explained

One who has made a contract on behalf of another may become an assignee of the
contract and bring suit against the other party to it, as any other transferee. The customs of
business or the course of conduct between the principal and the agent may indicate that an
agent who ordinarily has merely a security interest is a transferee of the principals rights
under the contract and as such is permitted to bring suit. If the agent has settled with his
principal with the understanding that he is to collect the claim against the obligor by way of
reimbursing himself for his advances and commissions, the agent is in the position of an
assignee who is the beneficial owner of the chose in action. He has an irrevocable power to
sue in his principals name. And, under the statutes which permit the real party in interest to
sue, he can maintain an action in his own name. This power to sue is not affected by a
settlement between the principal and the obligor if the latter has notice of the agents interest.
Even though the agent has not settled with his principal, he may, by agreement with the
principal, have a right to receive payment and out of the proceeds to reimburse himself for
advances and commissions before turning the balance over to the principal. In such a case,
although there is no formal assignment, the agent is in the position of a transferee of the
whole claim for security; he has an irrevocable power to sue in his principals name and, under
statutes which permit the real party in interest to sue, he can maintain an action in his own
name.
8.
Petitioners not assignees

Petitioners have not shown that they are assignees of their principals to the subject
contracts. While they alleged that they made advances and that they suffered loss of
commissions, they have not established any agreement granting them the right to receive
payment and out of the proceeds to reimburse themselves for advances and commissions before
turning the balance over to the principals. Further, it does not appear that petitioners are
beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil
Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale clearly and
deliberately conferring a favor to any third person.
9.
Section 372 (2) of the Restatement of the Law on Agency

Section 372 (2) of the Restatement of the Law on Agency (Second) provides that An
agent does not have such an interest in a contract as to entitle him to maintain an action at
law upon it in his own name merely because he is entitled to a portion of the proceeds as
compensation for making it or because he is liable for its breach. The fact that an agent who
makes a contract for his principal will gain or suffer loss by the performance or
nonperformance of the contract by the principal or by the other party thereto does not
entitle him to maintain an action on his own behalf against the other party for its breach. An
agent entitled to
Sales, 2003 ( 251 )
receive a commission from his principal upon the performance of a contract which he has
made on his principals account does not, from this fact alone, have any claim against the
other party for breach of the contract, either in an action on the contract or otherwise. An
agent who is not a promisee cannot maintain an action at law against a purchaser merely
because he is entitled to have his compensation or advances paid out of the purchase price
before payment to the principal.
10.
Failure to obtain commissions due non-performance of contract does not entitle
petitioners to file action against NHA
In Hopkins vs. Ives, the Supreme Court of Arkansas, citing Section 372 (2) above,
denied the claim of a real estate broker to recover his alleged commission against the
purchaser in an agreement to purchase property. In Goduco vs. Court of Appeals, it was held
that granting that appellant had the authority to sell the property, the same did not make the
buyer liable for the commission she claimed. At most, the owner of the property and the one
who promised to give her a commission should be the one liable to pay the same and to whom
the claim should have been directed. Similarly, in the present case, that petitioners did not
obtain their commissions or recoup their advances because of the non-performance of the
contract did not entitle them to file the action below against NHA. As petitioners are not
parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of
sale, they do not, under substantive law, possess the right they seek to enforce.
11.
Decision pointless if petitioners are not real parties-in-interest

Petitioners not being the real parties-in-interest, any decision rendered would be
pointless since the same would not bind the real parties-in-interest.
12.
Cancellation of contract in present case not rescission under Article 1191

The right of rescission or, more accurately, resolution, of a party to an obligation
under Article 1191 is predicated on a breach of faith by the other party that violates the
reciprocity between them. The power to rescind, therefore, is given to the injured party.
Article 1191 states that the power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him. The injured
party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible. In the present case, the NHA did not
rescind the contract. Indeed, it did not have the right to do so for the other parties to the
contract, the vendors, did not commit any breach, much less a substantial breach, of their
obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation
that they fulfilled. The NHA did not suffer any injury by the performance thereof.
13.
Cancellation based on the negation of cause

The cancellation was based on the negation of the cause arising from the realization
that the lands, which were the object of the sale, were not suitable for housing.
14.
Cause defned; Distinguished from motive

Cause is the essential reason which moves the contracting parties to enter into it. The
cause is the immediate, direct and proximate reason which justifies the creation of an
obligation through the will of the contracting parties. Cause, which is the essential reason for
the contract, should be distinguished from motive, which is the particular reason of a
contracting party which does not affect the other party. For example, in a contract of sale of a
piece of land, such as in this case, the cause of the vendor in entering into the contract is to
obtain the price. For the vendee, it is the acquisition of the land. The motive of the NHA, on the
other hand, is to use said lands for housing.
15.
Motives ordinarily affects the contract, unless if it predetermines the cause;
motive thus may be regarded as the cause
Ordinarily, a partys motives for entering into the contract do not affect the contract.
However, when
Sales, 2003 ( 252 )
the motive predetermines the cause, the motive may be regarded as the cause. In Liguez vs.
Court of Appeals, it was noted that Manresa himself (Vol. 8, pp. 641-642), while maintaining
the distinction and upholding the inoperativeness of the motives of the parties to determine the
validity of the contract, expressly excepts from the rule those contracts that are conditioned
upon the attainment of the motives of either party. The same view is held by the Supreme
Court of Spain, in its decisions of 4 February 1941, and 4 December 1946, holding that the
motive may be regarded as causa when it predetermines the purpose of the contract. In the
present case, it is clear that NHA would not have entered into the contract were the lands not
suitable for housing. The quality of the land was an implied condition for the NHA to enter into
the contract. On the part of the NHA, therefore, the motive was the cause for its being a party
to the sale.
16.
sale
Report of Land Geosciences Bureau is sufficient basis for the cancellation of the
The findings contained in the report of the Land Geosciences Bureau dated 15 July 1991
sufficient basis for the cancellation of the sale. The report stated that In Tadiangan, Tuba, the
housing site is situated in an area of moderate topography. There are more areas of less sloping
ground apparently habitable. The site is underlain by thick slide deposits (4-45m) consisting
of huge conglomerate boulders mixed with silty clay materials. These clay particles when
saturated have some swelling characteristics which is dangerous for any civil structures
especially mass housing development.
17.
Assessment preliminary only insofar as to the ascertainment of geological
attributes; otherwise conclusive
The portion stating that there is a need to conduct further geottechnical [sic]
studies in the NHA property. Standard Penetration Test (SPT) must be carried out to give an
estimate of the degree of compaction (the relative density) of the slide deposit and also the
bearing capacity of the soil materials. Another thing to consider is the vulnerability of the
area to landslides and other mass movements due to thick soil cover. Preventive physical
mitigation methods such as surface and subsurface drainage and regrading of the slope must
be done in the area mean only that further tests are required to determine the degree of
compaction, the bearing capacity of the soil materials, and the vulnerability of the area
to landslides, since the tests already conducted were inadequate to ascertain such geological
attributes. It is only in this sense that the assessment was preliminary.
18.
Vendee justifed in canceling contract; Requisites of contract

NHA was justified in cancelling the contract. The realization of the mistake as regards
the quality of the land resulted in the negation of the motive/cause thus rendering the contract
inexistent. Article 1318 of the Civil Code states that There 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; and (3) Cause of the obligation which is established.
19.
Petitioners not entitled to damages

Assuming that petitioners are parties, assignees or beneficiaries to the contract of sale,
they would not be entitled to any award of damages, as the cancellation of the contract is
justified.
[109]
Vallarta vs. CA [G.R. No. L-40195. May
29, 1987.] En Banc, Cortes (J): 11 concur, 1 on
leave
Facts: Rosalinda Cruz and Victoria Vallarta are long time friends and business
acquaintances. On 20 November 1968, Cruz entrusted to Vallarta 7 pieces of jewelry. In
December 1968, Vallarta decided to buy some items, exchanged one item with another, and
issued a post-dated check in the amount of P5,000 dated 30 January 1969. Cruz deposited said
check with the bank. However, upon presentment, the check was dishonored and Cruz was
informed that Vallartas account had been closed. Cruz apprised Vallarta of the
Sales, 2003 ( 253 )
dishonor and the latter promised to give another check. Later, Vallarta pleaded for more time.
Still later, she started avoiding Cruz. Hence, the 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. Vallarta seeks reversal of the CAs
decision of 13 December 1974. The Supreme Court denied the petition initially but granted a
motion for reconsideration and gave the petition due course.
The Supreme Court affirmed the assailed decision of the Court of Appeals, with costs against Vallarta.
1.
Estafa: Article 315 (2d) as amended by RA 4885

Vallarta is charged under Art. 315 (2) (d) as amended by RA 4885, of the Revised Penal
Code, which penalizes any person who shall defraud another by 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 RA
4885, the failure of the drawer of the check to deposit the amount necessary to cover his
check within 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 postdating 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 postdated 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]).
2.
Sale perfected December 1968 and not 20 November 1968

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 20 November 1968 was only for the purpose of
enabling Vallarta to select what jewelry she wanted.
3.
Sale on approval and not a sale or return

The transaction entered into by Cruz and Vallarta was not a sale or return but 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. It was a sale on
approval since ownership passed to the buyer on December 1967, the date when the check
was issued, when Vallarta signified her approval or acceptance to the seller, Cruz, and the price
was agreed upon.
4.
Check was not payment of a pre-existing obligation

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. There was no meeting of the minds on 20 November 1968, and thus, as of
that date, there was yet no contract of sale which could be the basis of delivery or tradition. The
delivery made on 20 November 1968 was not a delivery for purposes of transferring ownership
the prestation incumbent on the vendor. Ownership passed to the buyer on December 1967,
the date when the check was issued, when Vallarta signified her approval or acceptance to
the seller, Cruz, and the price was agreed upon.
5.
Prima facie evidence of deceit established in RA 4885

Sales, 2003 ( 254 )
RA 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 Vallartas 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.
6.
Absence of deceit cannot be based on social position

It cannot be suggested that in light of a persons social standing, he or she cannot be
guilty of deceit, at least in so far as issuing bouncing checks is concerned. This reasoning does
not merit serious consideration for if accepted, it could result in a law that falls unequally on
persons depending on their social position.
7.
Jewelry obtained because of issuance of check

Vallarta was able to obtain the jewelry because she issued the check, not solely because
Cruz knew Vallarta to be rich. 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, RA 4885, which she failed to rebut.
8.
Presumption of deceit under RA 4885 rebuttable

The presumption of deceit under RA 4885 is not conclusive. It is rebuttable. For instance,
in the case of People v. Villapando (56 Phil. 31[1931]), 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. RA
4885 is not unconstitutional as it does not violate the constitutional presumption of innocence.
9.
Constitutionality of laws providing contrary presumption on innocence

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). 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]).
10.
Art. 315 (2d) characterize fraudulent act or false pretense

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. RA 4885 does nothing more than limit the period within which the drawer/issuer
must pay the creditor.
11.
RA 4885 still pursues criminal fraud or deceit in the issuance of a check and
not the non-payment of the debt
In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), the Court ruled
that RA 4885 has not changed the rule established in Art. 315 (2) (d) prior to the
amendment; that RA 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 RA 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.
Sales, 2003 ( 255 )
[110]
Vasquez vs. CA [G.R. No. 83759. July 12,
1991.] Third Division, Gutierrez Jr. (J): 4
concur
Facts: On 21 September 1964, Vallejera and Olea sold the lot to Vasquez and Gayaleno under a
Deed of Sale for the amount of P9,000.00. The Deed of Sale was duly ratified and notarized.
On the same day and along with the execution of the Deed of Sale, a separate instrument,
denominated as Right to Repurchase, was executed by the parties granting the Vallejera and
Olea the right to repurchase the lot for P12,000.00, said document was likewise duly ratified
and notarized. By virtue of the sale, the Vasquez and Gayaleno secured TCT T-58898 in their
name. On 2 January 1969, Vallejera and Olea sold the same lot to Benito Derrama, Jr., after
securing Vasquez and Gayalenos title, for the sum of P12,000.00. Upon the protestations of
Vasquez and Gayaleno, assisted by counsel, the said second sale was cancelled after the
payment of P12,000.00 by Vasquez and Gayaleno to Derrama.
On 15 January 1975, Spouses Martin Vallejera and Apolonia Olea filed an action against
Spouses Cirpriano Vasquez and Valeriana Gayaleno seeking to redeem Lot 1860 of the
Himamaylan Cadastre which was previously sold by the former to the latter on 21
September 1964. Said lot was registered in the name of Vallejera and Olea. On October 1959,
the same was leased by them to Vasquez and Gayalleno up to crop year 1966-67, which was
extended to crop year 1968-69. After the execution of the lease, Vasquez and Gayaleno took
possession of the lot, up to now and devoted the same to the cultivation of sugar. Vasquez and
Gayeleno resisted the action for redemption on the premise that the Right to Repurchase is just
an option to buy since it is not embodied in the same document of sale but in a separate
document, and since such option is not supported by a consideration distinct from the price,
said deed for right to repurchase is not binding upon them. After trial, the RTC Himamaylan,
th
Negros Occidental (6 Judicial Region, Branch 56, Civil Case 839) rendered judgment against
Vasquez and Gayeleno, ordering them to resell lot 1860 of the Himamaylan Cadastre to
Vallejera and Olea for the repurchase price of P24,000.00, which amount combines the price
paid for the first sale and the price paid by the former to Benito Derrama, Jr. Vallejera and
Gayeleno moved for, but were denied reconsideration. Excepting thereto, they appealed.
The Court of Appeals affirmed the decision of the RTC Himamaylan, Negros Occidental in Civil
Case 839. In addition, the appellate court ordered Vasquez and Gayeleno to pay the amount of
P5,000.00 as necessary and useful expenses in accordance with Article 1616 of the Civil Code.
Hence, the petition.
The Supreme Court granted the petition, reversed and set aside the questioned decision and
resolution of the Court of Appeals , and dismissed the complaint in Civil Case 839 of the then
CFI Negros Occidental 12th Judicial District Branch 6; without costs.
1.
Right of repurchase not supported by a consideration distinct from the price;

Burden of proof In the present case, it is clear that the right to repurchase was not
supported by a consideration distinct
from the price. The rule is that the promisee has the burden of proving such consideration.
Unfortunately, the promises (Vallejera) in the right to repurchase failed to prove such
consideration. They did not even allege the existence thereof in their complaint. (See Sanchez
v. Rigos supra).
2.
Application of Sanchez vs. Rigos case
In order that the Sanchez case can be applied, the evidence must show that the
Vallejera and Olea accepted the right to repurchase. The record, however, does not show
that they accepted the Right to Repurchase the land in question.
3.
Annotation and registration of right to repurchase not an acceptance but for the
purpose of
Sales, 2003 ( 256 )
binding purchasers of such registered land

The annotation and registration of the right to repurchase at the back of the
certificate of title of Vasquez and Gayeleno can not be considered as acceptance of the right to
repurchase. Annotation at the back of the certificate of title of registered land is for the
purpose of binding purchasers of such registered land. In the case of Bel Air Village
Association, Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco v. Aquino (154 SCRA 1
[1987]), and Constantino v. Espiritu (45 SCRA 557 [1972]), it was ruled that purchasers of a
registered land are bound by the annotations found at the back of the certificate of title
covering the subject parcel of land. In effect, the annotation of the right to repurchase found
at the back of the certificate of title over the subject parcel of land of Vasquez and
Gayeleno only served as notice of the existence of such unilateral promise of Vasquez and
Gayeleno to resell the same to Vallejera and Olea. This, however, can not be equated with
acceptance of such right to repurchase.
4.
Signature in the document called right to repurchase does not signify
acceptance of right to repurchase
Neither can the signature of Vasquez and Gayeleno in the document called right to
repurchase signify acceptance of the right to repurchase, as Vallejera and Olea did not sign the
offer. Acceptance should be made by the promisee and not the promisors. It would be absurd
to require the promisor of an option to buy to accept his own offer instead of the promisee to
whom the option to buy is given.
4.
Actions of Vallejera and Olea cannot be considered as acceptance; Sending of
letters without tender of redemption price falls short of requirement to repurchase
The actions of the private respondents (a) filing a complaint to compel re-sale and
their demands for resale prior to filing of the complaint cannot be considered acceptance. As
stated in Vda. de Zulueta v. Octaviano (121 SCRA 314 [1983]), mere sending of letters by the
vendor expressing his desire to repurchase the property without accompanying tender of the
redemption price fell short of the requirements of law. (Lee v. Court of Appeals, 68 SCRA 197
[1972]). Neither did a judicial consignation of the repurchase price made within the agreed
period.
5.
Contract of sale with right of repurchase

In a contract of sale with a right of repurchase, the redemptioner who may offer
to make the repurchase on the option date of redemption should deposit the full amount in
court . . . (Rumbaoa v. Arzaga, 84 Phil. 812 [1949]).
6.
Right of vendor a retro to repurchase

To effectively exercise the right to repurchase the vendor a retro must make an
actual and simultaneous tender of payment or consignation. (Catangcatang v. Legayada, 84
SCRA 51 [1978]).
7.
Refusal to sell parcel of land a withdrawal of the option to buy

The ineffectual acceptance of the option to buy validated the vendors refusal to sell the
parcel which can be considered as a withdrawal of the option to buy.
8.
Conventional redemption, when occurs

Conventional redemption takes place when the vendor reserves the right to repurchase
the thing sold, with the obligation to comply with the provisions of Article 1616 and other
stipulations which may have been agreed upon. (Article 1601, Civil Code).
9.
Right of repurchase not granted in a subsequent document but in the same

instrument of sale As held in Villarica v. Court of Appeals (26 SCRA 189 [1968]), The
right of repurchase is not a right

granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the
vendor in the same instrument of sale as one of the stipulations of the contract. Once the
instrument of absolute sale is executed, the vendor can no longer reserve the right to
repurchase, and any right thereafter granted the vendor by the
Sales, 2003 ( 257 )
vendee in a separate instrument cannot be a right of repurchase but some other right like the option
to buy.
10.
Applicability of the Zulueta case as to the transaction being not a option to
repurchase but an option to buy
As in the present case, the option to repurchase involved in the Zulueta case was
executed in a separate document but on the same date that the deed of definite sale was
executed. While it is true that the Court in the Zulueta case found Zulueta guilty of laches,
this, however, was not the primary reason why the Court disallowed the redemption of the
property by Zulueta. It is clear from the decision that the ruling in the Zulueta case was based
mainly on the finding that the transaction between Zulueta and Octaviano was not a sale with
right to repurchase and that the option to repurchase was but an option to buy or a mere
promise on the part of Octaviano to resell the property to Zulueta. In the present case, since
the transaction between the petitioners and private respondents was not a sale with right to
repurchase, the private respondents cannot avail of Article 1601 of the Civil Code which
provides for conventional redemption.
[111]
Vda. De Gordon v. CA [G.R. No. L-37831. November
23, 1981.] First Division, Teehankee (J): 4 concur, 1 took
no part
Facts: Two parcels of land belong to Restituta V. Vda. De Gordon (covered by TCT 12204 and
12205). For the years 1953 to 1963, inclusive, the taxes against said parcels of land
remained unpaid. The combined assessed value of the parcels of land is P16,800 and the
residential house on the land was assessed at P45,580. The City Treasurer of Quezon City, upon
warrant of a certified copy of the record of such delinquency, advertised for sale the parcels
of land to satisfy the taxes, penalties and costs for a period of 30 days prior to the sale on 3
December 1964, by keeping a notice of sale posted at the main entrance on the City Hall and in
a public and conspicuous place in the district where the same is located and by publication of
said notice once a week for 3 weeks in the Daily Mirror, a newspaper of general circulation
in Quezon City, the advertisement stating the amount of taxes and penalties due, time and
place of sale, name of the taxpayer against whom the taxes are levied, approximate area, lot
and block number, location by district, street and street number of the property. The public
sale on 3 December 1964, the parcels of land were sold to Rosario Duazo for the amount of
P10,500.00 representing the tax, penalty and costs. The certificate of sale executed by the City
Treasurer was duly registered on 28 December 1964 in the ofice of the Register of Deeds of
Quezon City. Upon the failure of the registered owner to redeem the parcels of land within the
1-year period prescribed by law, the City Treasurer of Quezon City executed on 4 January
1966 a final deed of sale of said lands and the improvements thereon. Said final deed of
sale was also registered in the Office of the Register of Deeds of Quezon City on 18 January
1966.
Later on, Duazo filed a petition for consolidation of ownership. <Case facts involving
proceedings in lower court absent; It may be implied however that lower court denied the
petition as it cited the case of Director of Lands v. Abarca in its decision>
The appellate court upheld the tax sale of the real properties at which Duazo acquired the
same and her ownership upon vda. de Gordons failure to redeem the same, having found the
sale to have been conducted under the direction and supervision of the City Treasurer of
Quezon City after the proper procedure and legal formalities had been duly accomplished.
<It appears that the appellate court reversed the lower courts decision, with Gordon
appealing therefrom>
The Supreme Court affirmed the appellate courts decision under review; Without costs.
1.
(CA Decision) Material averments admitted

The opposition [to Duazos petition for consolidation of ownership] has not controverted by
specific
Sales, 2003 ( 258 )
denials the material averments in the petition. Hence, the material averments in the
petition are deemed admitted. (Section 1, Rule 9, Revised Rules of Court)
2.
(CA Decision) Issue on the irregularity of public sale of parcels of land waived
The opposition has not raised the issue of irregularity in the public sale of the two
parcels of land in question. This defense is deemed waived. (Section 2, Rule 9, id.)
3.
(CA Decision) Price in auction sale not grossly inadequate to be shocking to the
conscience of court
Noting that the 1961 assessment of the combined value of the two parcels of land is
P16,800, and the residential house on the land is P45,580; that the present value of the house
would be much less considering the depreciation for over 10 years; and that while the price of
P10,500 is less than the total assessed value of the land and the improvement thereon, said
price cannot be considered so grossly inadequate as to be shocking to the conscience of the
court.
4.
(CA Decision) Director of Lands v. Abarca: Price inadequate to shock conscience of
court
In Director of Lands vs. Abarca (61 Phil. 70), the Supreme Court considered the price of
P877.25 as so inadequate to shock the conscience of the court because the assessed value of the
property in question was P60,000.00. The assessed value of the land was more than 60 times
the price paid at the auction sale. In the present case, the price of P10,500.00 is about 1/6 of
the total assessed value of the two parcels of land in question and the residential house
thereon. The finding of the lower court that the house and land in question have a fair market
value of not less than P200,000.00 has no factual basis. It cannot be said, therefore, that the
price of P10,500.00 is so inadequate as to be shocking to the conscience of the court.
5.
(CA Decision) Mere inadequacy of price not ground to annul public sale,
unlike in ordinary sale; Inadequacy of price an advantage in relation to owners right
to redeem
Mere inadequacy of the price alone is not sufficient ground to annul the public sale.
(Barrozo vs. Macaraeg, 83 Phil. 378) In Velasquez vs. Coronel (5 SCRA 985, 988), it was
held that while in ordinary sales for reasons of equity a transaction may be invalidated on
the ground of inadequacy of price, or when such inadequacy shocks ones conscience as to
justify the courts to interfere, such does not follow when the law gives to the owner the right
to redeem, as when a sale is made at public auction, upon the theory that the lesser the price
the easier it is for the owner to effect the redemption. And so it was aptly said: When there is
the right to redeem, inadequacy of price should not be material, because the judgment debtor
may reacquire the property or also sell his right to redeem and thus recover the loss he claims
to have suffered by reason of the price obtained at the auction sale.
6.
(CA Decision) Public Sale governed by Section 40 of CA 470

The public sale is governed by Section 40 of Commonwealth Act 470 which gives the
delinquent taxpayer a period of 1 year from the date of the sale within which to repurchase the
property sold. In case the delinquent taxpayer does not repurchase the property sold within
the period of 1 year from the date of the sale, it becomes a mandatory duty of the provincial
treasurer to issue in favor of the purchaser a final deed of sale. (Velasquez vs. Coronel)
7.
No lack of personal notice of tax sale

The alleged lack of personal notice of the tax sale is negated by her own averments
in her own opposition filed in the lower court a quo that the Oppositor in the petition is a
woman 80 years of age. She was not aware of the auction sale conducted by the City Treasurer
of Quezon City on 3 December 1964 or if there was any notice sent to her, the same did not
reach her or it must have escaped her mind considering her age.
8.
Quezon City Charter (CA 502), not RA 1275, controlling on length of
redemption period;
Sales, 2003 ( 259 )
Special law prevails over general law

The period for redemption is not the 2-year period provided in RA 1275, since the
specific law governing tax sales of properties in Quezon City is the Quezon City Charter,
Commonwealth Act 502 which provides in section 31 thereof for a 1-year redemption
period. The special law covering Quezon City necessarily prevails over the general law. In
the present case, since the filing of Duazos brief in 1974, Vda. De Gordon had not sought to
exercise her alleged right of redemption or make an actual tender thereof.
9.
Gross inadequacy of purchase price not material if owner has right to redeem
As held in Velasquez vs. Coronel, alleged gross inadequacy of price is not material
when the law gives the owner the right to redeem as when a sale is made at public auction,
upon the theory that the lesser the price the easier it is for the owner to effect the
redemption.
10.
Laws on tax sales for delinquent taxes necessary as taxes essential to life of
Government
As stressed in Tajonera vs. Court of Appeals, the law governing tax sales for delinquent
taxes may be harsh and drastic, but it is a necessary means of insuring the prompt collection
of taxes so essential to the life of the Government.
[112]
Vda. De Jomoc vs. CA [G.R. No. 92871. August
2, 1991.] Lim Leong Hong vs. So [G.R. No. 92860.
August 2, 1991.] Third Division, Gutierrez Jr. (J): 4
concur
Facts: The subject lot in Cagayan de Oro City forms part of the estate of the late Pantaleon
Jomoc. Because it was fictiously sold and transferred to third persons, Maria P. Vda. Jomoc, as
administratrix of the estate and in behalf of all the heirs, filed suit to recover the property
before the trial court of Misamis Oriental in Civil Case 4750. Mariano So, the last of the
transferees and the husband of Maria So, intervened. The case was decided in favor of Jomoc
and was accordingly appealed by Mariano So and one Gaw Sur Cheng to the Court of
Appeals. In February 1979, pending the appeal, Jomoc executed a Deed of Extrajudicial
Settlement and Sale of Land with Maria So for P300,000. The document was not yet signed by
all the parties nor notarized but in the meantime, Maura So had made partial payments
amounting to P49,000. In 1983, Mariano So, the appellant in the recovery proceeding,
agreed to settle the case by executing a Deed of Reconveyance of the land in favor of the
heirs of Pantaleon Jomoc. The reconveyance was in compliance with the decision in the
recovery case and resulted in the dismissal of his appeal. On 28 February 1983, the heirs of
Jomoc executed another extrajudicial settlement with absolute sale in favor of intervenors
Lim Leong Kang and Lim Pue King. Later, Maura So demanded from the Jomoc family the
execution of a final deed of conveyance. They ignored the demand.
Maria So sued the heirs for specific performance to compel them to execute and deliver the
proper registrable deed of sale over the lot (Civil Case 8983). So then filed a notice of lis
pendens with the Register of Deeds on 28 February 1983. It was on the same date, allegedly
upon the Jomocs belief that Maura So had backed out from the transaction that the Jomocs
executed the other extrajudicial settlement with sale of registered land in favor of the spouses
Lim for a consideration of P200,000.00 part of which amount was allegedly intended to be
returned to Maura So as reimbursement. The spouses Lim, however, registered their
settlement and sale only on 27 April 1983. The lower court, finding that there was no
suficient evidence to show complainant-respondents withdrawal from the sale, concluded
that: (1) the case is one of double sale; (2) the spouses-intervenors are registrants in bad faith
who registered their questioned deed of sale long after the notice of lis pendens of Civil Case
8983 was recorded.
On appeal, the trial court decision was affirmed except for the award of moral and exemplary
damages and attorneys fees and expenses for litigation. Hence, the petitions.
Sales, 2003 ( 260 )
The Supreme Court dismissed the petitions, and affirmed the decision of the Court of
Appeals dated 13 September 1989 and its resolution dated 2 April 1990.
1.
Valid and existent, and partially executed (thus enforceable) contract

The heirs do not deny the existence of Exhibit A; including its terms and contents,
notwithstanding the incompleteness in form. The meeting of the minds and the delivery of
sums as partial payment is clear and this is admitted by both parties to the agreement. Hence,
there was already a valid and existing contract, not merely perfected as the trial court saw
it, but partly executed. It is of no moment whether or not it is enforceable under the
Statute of Frauds, which rule is not applicable because of partial payment of the vendees
obligation and its acceptance by the vendors-heirs. The contract of sale of real property even if
not complete in form, so long as the essential requisites of consent of the contracting parties,
object, and cause of the obligation concur and they were clearly established to be present, is
valid and effective as between the parties. Under Article 1357 of the Civil Code, its
enforceability is recognized as each contracting party is granted the right to compel the other
to execute the proper public instrument so that the valid contract of sale of registered land can
be duly registered and can bind third persons. The complainant-respondent correctly exercised
such right simultaneously with a prayer for the enforcement of the contract in one complaint.
2.
Continuing interest by Maura So; Parole evidence cannot reform intention of
parties
Maura So did not subsequently abandon her intention of purchasing the subject lot. The
facts reveal an agreement between the contracting parties to Exhibit A to the effect that
the consideration of P300,000 or whatever balance remains after deducting the advanced
payments thereon, shall be paid upon the termination of (Mariano Sos) appeal in the case
involving the property in question. (GR 92871). Even if the sums paid by Maura So were
allegedly intended to expedite the dismissal of the appeal of Mariano So, such payment only
indicates interest in acquiring the subject lot. In addition, the claim by the defendantspetitioners that the payments were for the gathering of the several heirs from far places to
sign Exhibit A confirms Maura Sos continuing interest. The terms of Exhibit A and the
actual intention of the parties are clear and no reform requiring parole evidence is being
sought to elucidate the intention further. The oral evidence ofered by defendants-petitioners
to show a subsequent refusal to proceed with the sale cannot be considered to reverse the
express intention in the contract.
3.
Issue of double sale material to determination whether So is entitled to reliefs
prayed for
The issue of double sale had to be resolved to determine whether or not complainant
Maura So was entitled to the reliefs prayed for. There was no hard evidence to show that the
vinculum or contractual relation between petitioners-heirs and Maura So had been cut-off. Yet,
petitioners-heirs sold the same lot to spouses Lim. The case requires the discernment of who
has the better right to the property.
4.
Article 1544, NCC; So has better right of ownership

Article 1544 of the Civil Code provides that should it be immovable property, the
ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property. In view of this provision, the spouses Lim do not have a better right.
They purchased the land with full knowledge of a previous sale to Maura So and without
requiring from the vendors-heirs any proof of the prior vendees revocation of her purchase.
5.
Lim spouses not buyers in good faith

The spouses Lim cannot be said to be buyers in good faith as they should have exercised
extra caution in their purchase especially if at the time of the sale, the land was still covered
by TCT 19648 bearing the name of Mariano So and was not yet registered in the name of the
heirs of Pantaleon Jomoc, although it had been reconveyed to said heirs. When they registered
the sale on 27 April 1983 after having been charged with notice of lis pendens annotated as
early as 28 February 1983, they did so in bad faith or on the belief that a registration may
improve their position being subsequent buyers of the same lot. Under Article 1544, mere
Sales, 2003 ( 261 )
registration is not enough to acquire new title. Good faith must concur. (Bergado v. Court of
Appeals, 173 SCRA 497 [1989]; Concepcion v. Court of Appeals, G.R. No. 83208, February 6,
1991)
[113]
Vda. De Quiambao vs. Manila Motor Company [G.R. No. L-17384.
October 31, 1961.] En Banc, Reyes JBL (J): 8 concur, 1 took no part
Facts: On 7 March 1940, Gaudencio R. Quiambao, deceased husband of Nestora Rigor Vda. de
Quiambao and father of the other petitioners, bought from Manila Motor Company, Inc. 1
Studebaker car on the installment plan. Upon default in the payment of a number of
installments, the company sued Gaudencio Quiambao in Civil Case 58043 of the CFI Manila.
On 4 December 1940, judgment was entered in said case, awarding in favor of the company the
sum of P3,054.32, with interest thereon at 12% per annum, and P300.00 attorneys fees. On 14
July 1941, the court issued a writ of execution directed to the Provincial Sheriff of Tarlac,
who thereupon levied on and attached two parcels of land covered by TCT 18390 of the Office
of the Register of Deeds for Tarlac. On 27 August 1941, Attorney Felix P. David, then counsel
for the Manila Motor Company, accompanied by the sheriff, personally apprised Gaudencio
Quiambao of the levy. The latter pleaded to have the execution sale suspended and begged for
time within which to satisfy the judgment debt, proposing that in the meanwhile, he would
surrender to the company the Studebaker car. This proposition was accepted; accordingly,
Gaudencio Quiambao delivered the car to the company, and Attorney David issued a receipt
therefore. On 16 October 1941, Gaudencio Quiambao remitted to the company, on account
of the judgment, the sum of P500.00; he, however, failed to make further payments, thus
leaving a balance still unsettled of P1,952.47, with interest thereon at 12% per annum from 6
March 1940.
In the meantime, the Pacific war broke out, and when the Japanese forces occupied the
country shortly thereafter, the invaders seized all the assets of the Manila Motor Company, Inc.
as enemy property. After the war, the company filed with the Philippine War Damage
Commission, among other things, a claim for its mortgage lien on the car of Gaudencio
Quiambao and was awarded the sum of P780.47, P409.75 of which amount had already been
paid. On 12 October 1949, the company addressed a letter to Gaudencio Quiambao asking him
to fill a blank form relative to the lost car. Quiambao having since died, his widow, Nestora
Rigor Vda. de Quiambao, returned the form with the statement that the questioned car was
surrendered to the company for storage. On 18 May 1953, a demand was made on the widow
to settle the deceaseds unpaid accounts, but in view of her refusal, the company urged the
Provincial Sheriff of Tarlac to carry out the pre-war writ of execution issued in Civil Case
58043. Although the records of that case had been lost during the war, and have not been
reconstituted, a copy of said writ of execution kept on file by the provincial sheriff was
saved. Accordingly, the latter advertised for sale at public auction the properties levied upon.
Notified of the sheriffs action, the heirs of the deceased Quiambao filed the suit to annul
and set aside the writ of execution and to recover damages. Judgment was rendered by the CFI
in favor of the Quiambaos, but on appeal to the Court of Appeals (CA-GR 17031-R), the
decision was reversed and another entered dismissing the complaint. Hence, the appeal by
writ of certiorari.
The Supreme Court affirmed the judgment of the Court of Appeals appealed from, with costs
against the Quiambaos.
1.
Heacock case does not apply; Delivery of car to company did not produce efect
of rescinding or annulling the contract of sale; Buyer surrendered car to postpone

satisfaction of the judgment amount
Unlike the situation that arose in the H. E. Heacock Company case (66 PHIL 245-246)
wherein the vendor demanded the return of the thing sold, and thereby indicated an
unequivocal desire on its part to rescind its contract with the vendee, here it was the buyer
(deceased Gaudencio Quiambao) who offered indeed pleaded, to surrender his car only in order
that he might be given more time within which to satisfy the
Sales, 2003 ( 262 )
judgment debt, and suspend the impending execution sale of the properties levied upon. The
very receipt issued then by the company, and accepted without objection by the deceased
(Gaudencio Quiambao), indicated that the car was received pending settlement of the
judgment in Civil Case 58043. Other circumstances that militate against the Quiambaos
theory of rescission or annulment of the contract of sale and waiver of the judgment debt and,
conversely, strengthen the proposition that the delivery of the car to the company was merely
to postpone the satisfaction of the judgment amount, are that the deceased still paid the further
sum of P500.00 on account of his indebtedness about two months after the car was
surrendered, and that despite the companys acceptance of the car, the company made repeated
demands against the petitioners to settle the deceaseds unpaid accounts.
2.
Receipt of car not for appropriation but as security to satisfaction of judgment
credit; Does not amount to foreclosure of chattel mortgage
Since the company did not receive the car for the purpose of appropriating the same,
but merely as security for the ultimate satisfaction of its judgment credit, the situation under
consideration could not have amounted to a foreclosure of the chattel mortgage.
3.
Payment of war damage compensation does not produce same and equal legal
efect as formal foreclosure
Having been the party who was last in possession of the lost car, the company was
well within its rights, or better still, under obligation, to protect the interest of the car owner,
as well as its own, by claiming, as it did, the corresponding war damage compensation for
the car. Such action of the company cannot reasonably be construed as a constriction of its
rights under the pre-war judgment.
4.
Scenario barring recovery of any unpaid balance

In Manila Motor Company, Inc., vs. Fernandez (52 OG 16, 6883, 6885), it was held
that it is the actual sale of the mortgaged chattel in accordance with section 14 of Act 1508
that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance
(Pacific Commercial Company vs. De la Rama, 72 Phil, 380).
5.
Suit filed was for specifc performance and not for rescission or cancellation of
contract of sale The best reason why respondent company may not be construed as
having rescinded or cancelled the
contract of sale or foreclosed the mortgage on the automobile is precisely because it brought
suit for specific performance, and won, in the pre-war Civil Case 58043.
6.
Pre-war judgment has not prescribed; Period covered by moratorium law
and closure of regular courts at the outbreak of war deducted
The pre-war judgment was entered on 4 December 1940, and on 14 July 1941, a writ of
execution was issued. The company took no further step to enforce the judgment until 19
May 1954, on which date, Manila Motors scheduled 2 parcels of land owned by the Quiambaos
for sale at public auction pursuant to the writ of 14 July 1941. From the entry of the judgment
to 19 May 1954, a period of 13 years, 5 months and 15 days had elapsed.
From this term, the period covered by the debt moratorium under Executive Order 32
(which applied to all debts payable within the Philippines), from the time the order took effect
on 10 March 1945, until it was partially lifted by RA 342 on 26 July 1948 must be deducted.
Deducting the period during which EO 32 was in force, which is 3 years, 4 months and 16
days, from 13 years, 5 months and 15 days, the period covered from the entry of the pre-war
judgment to the time the company attempted to sell the levied properties at auction, there is
still left a period of 10 years and 29 days.
But as held in Talens vs. Chuakay & Co., G.R. No. L-10127, June 30, 1958, the Court
took judicial notice of the fact that regular courts in Luzon were closed for months during the
early part of the Japanese occupation until they were reconstituted by order of the Chairman
of the Executive Commission on 30 January 1942. This interruption in the functions of the
courts has also been held to interrupt the running of the
Sales, 2003 ( 263 )
prescriptive period (see also Palma vs. Celda, 81 Phil. 416). That being the case, respondent
company could not be barred by prescription from proceeding with the execution sale
pursuant to the levy and writ of execution issued under the pre-war judgment, considering
that even the minimum period of from 8 December 1941, the outbreak of the Pacific War, to
30 January 1942 is already a term of 1 month and 23 days.
7.
Pre-war writ of execution and levy may still be enforced by sale of the levied
property after the lapse of the 5-year period within which a judgment may be
executed by motion
A valid execution issued and levy made within the period provided by law may be
enforced by a sale thereafter. The sale of the property by the sheriff and the application of the
proceeds are simply the carrying out of the writ of execution and levy which when issued were
valid. This rests upon the principle that the levy is the essential act by which the property is
set apart for the satisfaction of the judgment and taken into custody of the law, and that
after it has been taken from the defendant, his interest is limited to its application to the
judgment, irrespective of the time when it may be sold (Southern Cal. L. Co. vs. Hotel Co., 94
Cal. 217, 222; Government of P.I. vs. Echaus, 71 Phil. 318). Thus, a valid judgment may be
enforced by motion within 5 years after its entry, and by action after the lapse of said period
but before the same shall have been barred by any statute of limitations, and that a valid
execution issued and levy made within the 5-year period after entry of the judgment may be
enforced by sale of the property levied upon thereafter, provided the sale is made within 10
years after the entry of the judgment.
8.
Ansaldo vs. Fidelity not in point

The case of Ansaldo vs. Fidelity and Surety Company of the Philippine Islands, G.R.
No. L-2378, April 27, 1951, is not in point, for there the judgment creditor attempted to carry
out the writ of execution 10 years after the entry of judgment.
9.
Amount received from the Philippine War Damage Commission must be
credited to the Quiambaos account
The Quiambaos should be credited the amount of P409.75 which the Manila Motors
actually received from the Philippine War Damage Commission on account of the car of
Gaudencio Quiambao that had been seized from it by the enemy occupant during the war. This
should reduce the principal amount still due Manila Motors from the Quiambaos to the sum of
P1,542.72.
[114]
Velasco v. CA [G.R. No. L-31018. June 29, 1973.]
First Division, Castro (J):3 concur, 1 concurs with reservation, 2 dissents, 1 concurring with a
dissent, 1 took no part
Facts: A suit for specific performance filed by Lorenzo Velasco against the Magdalena Estate
(Civil Case 7761) on the allegation that on 29 November 1962, Velasco and the Magdalena
Estate had entered into a contract of sale by virtue of which Magdalena Estate offered to sell
Velasco, to which the latter agreed to buy, a parcel of land with an area of 2,059 sq.ms. (Lot 15,
Block 7, Psd-6129,) located at No. 39 corner 6th Street and Pacific Avenue, New Manila, Quezon
City, for the total purchase price of P100,000.00. Velasco alleged that he was to give a
down payment of P10,000.00 to be followed by P20,000.00 and the balance of P70,000.00
would be paid in installments, the equal monthly amortization of which was to be determined
as soon as the P30,000.00 down payment had been completed. He further alleged that he paid
the downpayment on 29 November 1962 (Receipt 207848) and that when on 8 January 1964 he
tendered to the payment of the additional P20,000.00 to complete the P30,000.00, Magdalena
Estate refused to accept and that eventually it likewise refused to execute a formal deed of
sale obviously agreed upon. Velasco demanded P25,000.00 exemplary damages, P2,000.00
actual damages and P7,000.00 attorneys fees. Magdalena Estate denied that it has had any
direct-dealings, much less, contractual relations with the Lorenzo Velasco regarding the
property in question, and contends that the alleged contract described in the document
attached to the
Sales, 2003 ( 264 )
complaint is entirely unenforceable under the Statute of Frauds; that the truth of the matter is
that a portion of the property in question was being leased by a certain Socorro Velasco who, on
29 November 1962, went to the office of Magdalena Estate indicated her desire to purchase the
lot; that the latter indicated its willingness to sell the property to her at the price of
P100,000.00 under the condition that a down payment of P30,000.00 be made, P20,000.00 of
which was to be paid on 31 November 1962, and that the balance of P70,000.00 including
interest at 9% per annum was to be paid on installments for a period of 10 years at the rate
of P5,381.32 on June 30 and December of every year until the same shall have been fully
paid; that on 29 November 1962, Socorro Velasco offered to pay P10,000.00 as initial
payment instead of the agreed P20,000.00 but because the amount was short of the alleged
P20,000.00 the same was accepted merely as deposit and upon request of Socorro Velasco the
receipt was made in the name of her brother-in-law ,Lorenzo Velasco; that Socorro Velasco
failed to complete the down payment of P30,000.00 and neither has she paid any installments
on the balance of P70,000.00 up to the present time; that it was only on 8 January 1964 that
Socorro Velasco tendered payment of P20,000.00, which offer Magdalena Estate refused to
accept because it had considered the offer to sell rescinded on account of her failure to
complete the down payment on or before 31 December 1962. On 3 November 1968, the CFI
Quezon City rendered a decision, dismissing the complaint filed by Lorenzo and Socorro
Velasco against the Magdalena Estate, Inc. for the purpose of compelling specific
performance by Magdalena Estate of an alleged deed of sale of a parcel of residential land in
favor of the Velascos. The basis for the dismissal of the complaint was that the alleged
purchase and sale agreement was not perfected.
On 18 November 1968, after the perfection of their appeal to the Court of Appeals, the
Velascos received a notice from the said court requiring them to file their printed record on
appeal within 60 days from receipt of said notice. This 60-day term was to expire on 17 January
1969. Allegedly on 15 January 1969, the Velascos allegedly sent to the CA and to counsel
for Magdalena Estate, by registered mail allegedly deposited personally by its mailing clerk,
one Juanito D. Quiachon, at the Makati Post Office, a Motion For Extension of Time To File
Printed Record on Appeal. The extension of time was sought on the ground of mechanical
failures of the printing machines, and the voluminous printing job now pending with the Vera
Printing Press. On 10 February 1969, the Velascos filed their printed record on appeal in the
CA. Thereafter, the Velascos received from Magdalena Estate a motion filed on 8 February 1969
praying for the dismissal of the appeal on the ground that the Velascos had failed to file their
printed record on appeal on time. The CA, on 25 February 1969, denied the Magdalena Estates
motion to dismiss, granted the Velascos motion for 30-day extension from 15 January 1969,
and admitted the latters printed record on appeal. On 11 March 1969, Magdalena Estate
prayed for a reconsideration of said resolution. The Velascos opposed the motion for
reconsideration and submitted to the CA the registry receipts (0215 and 0216), both stamped
15 January 1969, which were issued by the receiving clerk of the registry section of the
Makati Post Office covering the mails for the disputed motion for extension of time to file
their printed record on appeal and the affidavit of its mailing clerk. After several other
pleadings and manifestations relative to the motion for reconsideration and on 28 June 1969,
the CA promulgated a resolution granting the motion for reconsideration and ordered
Atty. Patrocinio Corpuz (Velascos counsel) to show cause within 10 days from notice why
he should not be suspended from the practice of his profession for deceit, falsehood and
violation of his sworn duty to the Court, and directed the Provincial Fiscal of Rizal to
conduct the necessary investigation against Juanito D. Quiachon of the Salonga, Ordoez, Yap,
Sicat & Associates Law Office and Flaviano O. Malindog, a letter carrier at the Makati Post
Office, and to file the appropriate criminal action against them (it appears that Malindog
postmark the letters 15 January 1969 on 7 February 1969 at the request of Quiachon). On
5 September 1969, the CA promulgated another resolution, denying the motion for
reconsideration of the Velascos but, at the same time, accepting as satisfactory the explanation
of Atty. Corpuz why he should not be suspended from the practice of the legal profession.
On 20 September 1969, the First Assistant Fiscal of Rizal notified the Court of Appeals that he
had found a prima facie case against Malindog and would file the corresponding information
for falsification of public documents against him, but dismissed the complaint against
Quiachon for lack of sufficient evidence.
Sales, 2003 ( 265 )
A petition for certiorari and mandamus was filed by the Velascos against the resolution of
the Court of Appeals dated 28 June 1969 in CA-GR 42376, which ordered the dismissal of the
appeal interposed by them from a decision of the CFI Quezon City on the ground that they
had failed seasonably to file their printed record on appeal.
The Supreme Court denied the instant petition; without pronouncement as to costs.
1.
Issues raised by Velascos; Some issues are subject of appeal on certiorari under
Rule 45 rather than that of certiorari under Rule 65
The Velascos contend that the Court of Appeals acted without or in excess of
jurisdiction, or with such whimsical and grave abuse of discretion as to amount to lack of
jurisdiction, because (a) it declared that the motion for extension of time to file the printed
record on appeal was not mailed on 15 January 1969, when, in fact, it was mailed on the said
date as evidenced by the registry receipts and the post office stamp of the Makati Post Office;
(b) it declared that the record on appeal was filed only on 10 February 1969, beyond the time
authorized by the appellate court, when the truth is that the said date of filing was within the
30-day extension granted by it; (c) the adverse conclusions of the appellate court were not
supported by the records of the case, because the said court ignored the affidavit of the
mailing clerk of the petitioners counsel, the registry receipts and postmarked envelopes and,
instead, chose to rely upon the affidavit of the mail carrier Malindog, which affidavit was
prepared by counsel for Magdalena Estate at the affiant himself so declared at the preliminary
investigation at the Fiscals office which absolved the Velascos counsel mailing clerk
Quiachon from any criminal liability; (d) section 1, Rule 50 of the Rules of Court, which
enumerates the grounds upon which the Court of Appeals may dismiss an appeal, does not
include as a ground the failure to file a printed record on appeal; (e) the said section does not
state either that the mismailing of a motion to extend the time to file the printed record on
appeal, assuming this to be the case, may be a basis for the dismissal of the appeal; (f) the
Court of Appeals has no jurisdiction to revoke the extension of time to file the printed record
on appeal it had granted to the petitioners based on a ground not specified in section 1, Rule 50
of the Rules of Court; and (g) the objection to an appeal may be waived as when the appellee
has allowed the record on appeal to be printed and approved. Some of the objections raised by
the Velascos to the questioned resolution of the Court of Appeals are obviously matters
involving the correct construction of our rules of procedure and, consequently, are proper
subjects of an appeal by way of certiorari under Rule 45 of the Rules of Court, rather than a
special civil action for certiorari under Rule 65. The petitioners, however, have correctly
appreciated the nature of its objections and have asked this Court to treat the instant petition
as an appeal by way of certiorari under Rule 45 in the event that the Supreme Court should
deem that an appeal is an adequate remedy The nature of the present case permits a
disquisition of both types of assignments.
2.
Date stamped on receipts and envelopes; Henning and Caltex cases do not apply
While it is true that stamped on the registry receipts 0215 and 0216 as well as on
the envelopes covering the mails in question is the date 15 January 1969, this, by itself, does
not establish an unrebuttable presumption of the fact or date of mailing. The Henning and
Caltex cases are not in point because the specific adjective issue resolved in those cases was
whether or not the date of mailing a pleading is to be considered as the date of its filing, The
issue in the present case is whether or not the motion of the petitioners for extension of time to
file the printed record on appeal was, in point of fact, mailed (and, therefore, filed) on 15
January 1969.
3.
Certification of postmasters and Malindogs sworn declaration believable;
Malindog induced to issue false registry receipts for the Velascos counsel
The certifications issued by the two postmasters of Makati, Rizal and the sworn
declaration of the mail carrier Malindog describing how the said registry receipts came to be
issued, are worthy of belief. It will be observed that the said certifications explain clearly and
in detail how it was improbable that the registry receipts in question could have been issued
to Velascos counsel in the ordinary course of official business,
Sales, 2003 ( 266 )
while Malindogs sworn statement, which constitutes a very grave admission against his
own interest, provides ample basis for a finding that where official duty was not performed it
was at the behest of a person interested in the Velascos side of the action below. That at the
preliminary investigation at the Fiscals office, Malindog failed to identify Quiachon as the
person who induced him to issue falsified receipts, contrary to what he declared in his
affidavit, is of no moment since the findings of the inquest fiscal as reflected in the
information for falsification filed against Malindog indicate that someone did induce
Malindog to make and issue false registry receipts to the counsel for the Velascos.
4.
Right to appeal a statutory privilege and not a natural right nor a part of due
process
In Bello vs. Fernando, it was held that the right to appeal is not a natural right nor a
part of due process; it is merely a statutory privilege. and may he exercised only in the manner
provided by law.
5.
Duty of appellant to file printed record on appeal with CA within 60 days from
receipt of notice The Rules of Court expressly makes it the duty of an appellant to file
a printed record on appeal with
the Court of Appeals within 60 days from receipt of notice from the clerk of that court that
the record on appeal approved by the trial court has already been received by the said court.
Section 5 of Rule 46 (Duty of appellant upon receipt of notice) states that It shall be the duty
of the appellant within 15 days from the date of the notice referred to in the preceding
section, to pay the clerk of the Court of Appeals the fee for the docketing of the appeal, and
within 60 days from such notice to submit to the court 40 printed copies of the record on
appeal, together with proof of service of 15 printed copies thereof upon the appellee.
6.
Appellate court did not abuse its discretion

After a careful study and appraisal of the pleadings, admissions and denials respectively
adduced and made by the parties, it is clear that the Court of Appeals did not gravely abuse its
discretion and did not act without or in excess of its jurisdiction. As the Velascos failed to
comply with the duty to file the printed record on appeal within 60 days from receipt of notice
which the Rules of Court enjoins, and considering that there was a deliberate effort on their
part to mislead the said Court in granting them an extension of time within which to file
their printed record on appeal, it stands to reason that the appellate court cannot be said to have
abused its discretion or to have acted without or in excess of its jurisdiction in ordering the
dismissal of their appeal.
7.
Jurisprudence replete with cases where Court dismissed appeal on grounds
not mentioned specifcally in Rule 50, Section 1
Jurisprudence is replete with cases in which this Court dismissed an appeal on grounds
not mentioned specifically in Section 1, Rule 50 of the Rules of Court. (See, for example, De
la Cruz vs. Blanco, 73 Phil. 596 (1942); Government of the Philippines vs. Court of Appeals.
108 Phil. 86 (1960); Ferinion vs. Sta. Romana, L-25521, February 28, 66, 16 SCRA 370, 375).
8.
Motion for extension of period must be made before the expiration of the period
to be extended Inasmuch as the motion for extension of the period to file the printed
record on appeal was belatedly
filed, then, it is as though the same were non-existent. In Baquiran vs. Court of Appeals, it
was stated that the motion for extension of the period for filing pleadings and papers in
court must be made before the expiration of the period to be extended. The soundness of this
dictum in matters of procedure is self-evident. For, were the doctrine otherwise, the
uncertainties that would follow when litigants are left to determine and redetermine for
themselves whether to seek further redress in court forthwith or take their own sweet time
will result in litigations becoming more unbearable than the very grievances they are intended
to redress.
9.
Objection to appeal not waived

Magdalena Estate did file a motion in the Court of Appeals on 8 February 1969
praying for the dismissal of the appeal on the ground that up to the said date the Velascos
had not yet filed their record on appeal and, therefore, must be considered to have abandoned
their appeal. The objection to an appeal was thus
Sales, 2003 ( 267 )
not waived, contrary to Velascos argument that it was waived when the appellee allows the
record on appeal to be printed and approved/
10.
No contract of sale perfected because the minds of the parties did not meet in
regard to the manner of payment
No contract of sale was perfected because the minds of the parties did not meet in
regard to the manner of payment. The material averments contained in Velascos complaint
themselves disclose a lack of complete agreement in regard to the manner of payment of
the lot in question. The complaint states pertinently that plaintiff and defendant further
agreed that the total down payment shall be P30,000.00, including the P10,000.00 partial
payment mentioned in paragraph 3 hereof, and that upon completion of the said down payment
of P30,000.00, the balance of P70,000.00 shall be paid by the plaintiff to the defendant in 10
years from November 29, 1962; and that the time within which the full down payment of the
P30,000.00 was to be completed was not specified by the parties but the defendant was duly
compensated during the said time prior to completion of the down payment of P30,000.00 by
way of lease rentals on the house existing thereon which was earlier leased by defendant to
the plaintiffs sister-in-law, Socorro J. Velasco, and which were duly paid to the defendant by
checks drawn by plaintiff. The Velascos themselves admit that they and Magdalena Estate
still had to meet and agree on how and when the down payment and the installment
payments were to be paid. Such being the situation, it cannot be said that a definite and firm
sales agreement between the parties had been perfected over the lot in question.
11.
Definite agreement on the matter of payment of purchase price an essential
element to form binding and enforceable contract of sale
A definite agreement on the manner of payment of the purchase price is an essential
element in the formation of a binding and enforceable contract of sale. In the present
case, the Velascos delivered to Magdalena Estate the sum of P10,000 as part of the
downpayment that they had to pay cannot be considered as sufficient proof of the perfection of
any purchase and sale agreement between the parties under article 1482 of the new Civil Code,
as the Velascos themselves admit that some essential matter (the terms of payment) still had
to be mutually covenanted.
[115]
Villaflor v. CA [G.R. No. 95694. October 9,
1997.] Third Division, Panganiban (J): 3 concur,
1 took no part
Facts: On 16 January 1940, Cirilo Piencenaves, in a Deed of Absolute Sale, sold to Vicente
Villafor, a parcel of agricultural land (planted to Abaca) containing an area of 50 hectares, more
or less. The deed states that the land was sold to Villaflor on 22 June 1937, but no formal
document was then executed, and since then until the present time, Villaflor has been in
possession and occupation of the same. Before the sale of said property, Piencenaves inherited
said property form his parents and was in adverse possession of such without
interruption for more than 50 years. On the same day, Claudio Otero, in a Deed of Absolute
Sale sold to Villaflor a parcel of agricultural land (planted to corn), containing an area of
24 hectares, more or less; Hermogenes Patete, in a Deed of Absolute Sale sold to Villaflor, a
parcel of agricultural land (planted to abaca and corn), containing an area of 20 hectares,
more or less. Both deed state the same details or circumstances as that of Piencenaves. On
15 February 1940, Fermin Bocobo, in a Deed of Absolute Sale sold to Villaflor, a parcel of
agricultural land (planted with abaca), containing an area of 18 hectares, more or less.
On 8 November 1946, Villaflor leased to Nasipit Lumber Co., Inc. a parcel of land, containing
an area of 2 hectares, together with all the improvements existing thereon, for a period of 5
years (from 1 June 1946) at a rental of P200.00 per annum to cover the annual rental of house
and building sites for 33 houses or buildings. The lease agreement allowed the lessee to
sublease the premises to any person, firm or corporation; and to build and construct
additional houses with the condition the lessee shall pay to the lessor the amount of 50
Sales, 2003 ( 268 )
centavos per month for every house and building; provided that said constructions and
improvements become the property of the lessor at the end of the lease without obligation
on the part of the latter for expenses incurred in the construction of the same. On 7 July
1948, in an Agreement to Sell Villaflor conveyed to Nasipit Lumber, 2 parcels of land.
Parcel 1 contains an area of 112,000 hectares more or less, divided into lots 5412, 5413, 5488,
5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and
5852; and containing abaca, fruit trees, coconuts and thirty houses of mixed materials
belonging to the Nasipit Lumber Company. Parcel 2 contains an area of 48,000 more or less,
divided into lots 5411, 5410, 5409, and 5399, and containing 100 coconut trees, productive,
and 300 cacao trees. From said day, the parties agreed that Nasipit Lumber shall continue to
occupy the property not anymore in concept of lessee but as prospective owners.
On 2 December 1948, Villaflor filed Sales Application V-807 with the Bureau of Lands, Manila,
to purchase under the provisions of Chapter V, XI or IX of CA 141 (The Public Lands Act), as
amended, the tract of public lands. Paragraph 6 of the Application, states: I understand that
this application conveys no right to occupy the land prior to its approval, and I recognize that
the land covered by the same is of public domain and any and all rights I may have with
respect thereto by virtue of continuous occupation and cultivation are hereby relinquished to
the Government. On 7 December 1948, Villaflor and Nasipit Lumber executed an
Agreement, confirming the Agreement to Sell of 7 July 1948, but with reference to the
Sales Application filed with the Bureau of Land. On 31 December 1949, the Report by the
public land inspector (District Land Office, Bureau of Lands, in Butuan) contained an
endorsement of the said officer recommending rejection of the Sales Application of Villaflor
for having leased the property to another even before he had acquired transmissible rights
thereto. In a letter of Villaflor dated 23 January 1950, addressed to the Bureau of Lands, he
informed the Bureau Director that he was already occupying the property when the
Bureaus Agusan River Valley Subdivision Project was inaugurated, that the property was
formerly claimed as private property, and that therefore, the property was segregated or
excluded from disposition because of the claim of private ownership. Likewise, in a letter
of Nasipit Lumber dated 22 February 1950 addressed to the Director of Lands, the
corporation informed the Bureau that it recognized Villaflor as the real owner, claimant
and occupant of the land; that since June 1946, Villaflor leased 2 hectares inside the land to the
company; that it has no other interest on the land; and that the Sales Application of
Villaflor should be given favorable consideration. On 24 July 1950, the scheduled date of
auction of the property covered by the Sales Application, Nasipit Lumber offered the
highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the
bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of
the bid price and then paid the assessment in full.
On 16 August 1950, Villaflor executed a document, denominated as a Deed of Relinquishment
of Rights, in favor on Nasipit Lumber, in consideration of the amount of P5,000 that was to
be reimbursed to the former representing part of the purchase price of the land, the value
of the improvements Villaflor introduced thereon, and the expenses incurred in the
publication of the Notice of Sale; in light of his difficulty to develop the same as Villaflor has
moved to Manila. Pursuant thereto, on 16 August 1950, Nasipit Lumber filed a Sales
Application over the 2 parcels of land, covering an area of 140 hectares, more or less. This
application was also numbered V-807. On 17 August 1950 the Director of Lands issued an
Order of Award in favor of Nasipit Lumber; and its application was entered in the record as
Sales Entry V-407.
On 27 November 1973, Villafor wrote a letter to Nasipit Lumber, reminding the latter of
their verbal agreement in 1955; but the new set of corporate officers refused to recognize
Villaflors claim. In a formal protest dated 31 January 1974 which Villaflor filed with the
Bureau of Lands, he protested the Sales Application of Nasipit Lumber, claiming that the
company has not paid him P5,000.00 as provided in the Deed of Relinquishment of Rights
dated 16 August 1950. On 8 August 1977, the Director of Lands found that the payment of the
amount of P5,000.00 in the Deed and the consideration in the Agreement to Sell were duly
proven, and ordered the dismissal of Villaflors protest.
Sales, 2003 ( 269 )
On 6 July 1978, Villaflor filed a complaint in the trial court for Declaration of Nullity of
Contract (Deed of Relinquishment of Rights), Recovery of Possession (of two parcels of land
subject of the contract), and Damages at about the same time that he appealed the decision
of the Minister of Natural Resources to the Office of the President. On 28 January 1983, he
died. The trial court ordered his widow, Lourdes D. Villaflor, to be substituted as petitioner.
After trial in due course, the then CFI Agusan del Norte and Butuan City, Branch III,
dismissed the complaint on the grounds that: (1) petitioner admitted the due execution
and genuineness of the contract and was estopped from proving its nullity, (2) the verbal lease
agreements were unenforceable under Article 1403 (2)(e) of the Civil Code, and (3) his
causes of action were barred by extinctive prescription and/or laches. It ruled that there was
prescription and/or laches because the alleged verbal lease ended in 1966, but the action was
filed only on 6 January 1978. The 6-year period within which to file an action on an oral
contract per Article 1145 (1) of the Civil Code expired in 1972. Nasipit Lumber was declared
the lawful owner and actual physical possessor of the 2 parcels of land (containing a total area
of 160 hectares). The Agreements to Sell Real Rights and the Deed of Relinquishment of
Rights over the 2 parcels were likewise declared binding between the parties, their successors
and assigns; with double costs against Villaflor.
The heirs of petitioner appealed to the Court of Appeals which, however, rendered judgment
against them via the assailed Decision dated 27 September 1990 finding petitioners prayers
(1) for the declaration of nullity of the deed of relinquishment, (2) for the eviction of
private respondent from the property and (3) for the declaration of petitioners heirs as owners
to be without basis. Not satisfied, petitioners heirs filed the petition for review dated 7
December 1990. In a Resolution dated 23 June 1991, the Court denied this petition for being
late. On reconsideration, the Court reinstated the petition.
The Supreme Court dismissed the petition.
1.
Doctrine of primary jurisdiction; Court does not interfere if question is within
jurisdiction of an administrative tribunal
Underlying the rulings of the trial and appellate courts is the doctrine of primary
jurisdiction; i.e., courts cannot and will not resolve a controversy involving a question which
is within the jurisdiction of an administrative tribunal, especially where the question demands
the exercise of sound administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate matters of fact. In
cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot arrogate
unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged
with an administrative body of special competence.
2.
Doctrine of primary jurisdiction; may apply even to questions which are judicial
character
It has been the jurisprudential trend to apply the doctrine to cases involving matters
that demand the special competence of administrative agencies even if the question involved
is also judicial in character. It applies where a claim is originally cognizable in the courts,
and comes into play whenever enforcement of the claim requires the resolution of issues
which, under a regulatory scheme, have been placed within the special competence of an
administrative body; in such case, the judicial process is suspended pending referral of such
issues to the administrative body for its view.
3.
Doctrine of primary jurisdiction; cases

In Machete vs. Court of Appeals, the Court upheld the primary jurisdiction of the
Department of Agrarian Reform Adjudicatory Board (DARAB) in an agrarian dispute over
the payment of back rentals under a leasehold contract. In Concerned Officials of the
Metropolitan Waterworks and Sewerage System vs. Vasquez, the Court recognized that the
MWSS was in the best position to evaluate and to decide which bid for a waterworks project
was compatible with its development plan. In the present case, the questions on the identity of
the land in dispute and the factual qualification of private respondent as an awardee of a
sales application require a technical determination by the Bureau of Lands as the
administrative agency with the
Sales, 2003 ( 270 )
expertise to determine such matters. Because these issues preclude prior judicial
determination, it behooves the courts to stand aside even when they apparently have
statutory power to proceed, in recognition of the primary jurisdiction of the administrative
agency.
4.
Interpretation of contracts and determination of private rights no longer
uniquely judicial function
One thrust of the multiplication of administrative agencies is that the interpretation of
contracts and the determination of private rights thereunder is no longer a uniquely judicial
function, exercisable only by our regular courts.
5.
Primary jurisdiction of director of lands and minister or natural resources
regarding identity of disputed land and qualification of awardee of a sales patent
The primary jurisdiction of the director of lands and the minister of natural resources
over the issues regarding the identity of the disputed land and the qualification of an awardee
of a sales patent is established by Sections 3 and 4 of CA 141, also known as the Public Land
Act. Section 3 of said act provides that the Secretary of Agriculture and Commerce (now
Secretary of Natural Resources) shall be the executive officer charged with carrying out the
provisions of this Act through the Director of Lands, who shall act under his immediate
control. Section 4 provides that subject to said control, the Director of Lands shall have
direct executive control of the survey, classification, lease, sale or any other form of
concession or disposition and management of the lands of the public domain, and his decision
as to questions of fact shall be conclusive when approved by the Secretary of Agriculture and
Commerce. Sections 3 and 4 of the Public Land Law mean that the Secretary of Agriculture
and Natural Resources shall be the final arbiter on questions of fact in public land conflicts
(Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442). The Supreme Court has
recognized that the Director of Lands is a quasi-judicial officer who passes on issues of mixed
facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440).
6.
Finding of fact by administrative agency accorded great respect

Reliance by the trial and the appellate courts on the factual findings of the Director of
Lands and the Minister of Natural Resources is not misplaced. By reason of the special
knowledge and expertise of said administrative agencies over matters falling under their
jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of
fact in that regard are generally accorded great respect, if not finality, by the courts. The
findings of fact of an administrative agency must be respected as long as they are supported by
substantial evidence, even if such evidence might not be overwhelming or even preponderant.
It is not the task of an appellate court to weigh once more the evidence submitted before the
administrative body and to substitute its own judgment for that of the administrative agency
in respect of sufficiency of evidence.
7.
rule
Finding of fact by administrative agency accorded great respect ; Exception to the
The rule that factual findings of an administrative agency are accorded respect and
even finality by courts admits of exceptions. This is true also in assessing factual findings of
lower courts. It is incumbent on the petitioner to show that the resolution of the factual issues
by the administrative agency and/or by the trial court falls under any of the exceptions.
Otherwise, this Court will not disturb such findings.
8.
Public land; Lack of Technical description does not prove that the findings
lacked substantial evidence
The lack of technical description did not prove that the finding of the Director of
Lands lacked substantial evidence. The evidence adduced by petitioner to establish his claim of
ownership over the subject area consists of deeds of absolute sale executed in his favor.
However, an examination of the technical descriptions of the tracts of land subject of the
deeds of sale will disclose that said parcels are not identical to, and do not tally with, the area
in controversy.
9.
Public land; Property admitted to be public, cannot now be claimed otherwise

Sales, 2003 ( 271 )
The provision of the law is specific that public lands can only be acquired in the manner
provided for therein and not otherwise (Sec. 11, CA. No. 141, as amended). In his sales
application, petitioner expressly admitted that said property was public land. This is formidable
evidence as it amounts to an admission against interest. The records show that Villaflor had
applied for the purchase of lands in question with this Office (Sales Application V-807) on 2
December 948. There is a condition in the sales application to the effect that he recognizes that
the land covered by the same is of public domain and any and all rights he may have with
respect thereto by virtue of continuous occupation and cultivation are relinquished to the
Government of which Villaflor is very much aware. It also appears that Villaflor had paid for
the publication fees appurtenant to the sale of the land. He participated in the public auction
where he was declared the successful bidder. He had fully paid the purchase price thereof. It
would be a height of absurdity for Villaflor to be buying that which is owned by him if his
claim of private ownership thereof is to be believed. The area in dispute is not the private
property of the petitioner.
10.
Lands belong to the state, unless alienated

It is a basic assumption of public policy that lands of whatever classification belong
to the state. Unless alienated in accordance with law, it retains its rights over the same as
dominus. (Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 152). No public
land can be acquired by private persons without any grant, express or implied from the
government. It is indispensable then that there be showing of title from the state or any other
mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389,
December 27, 1972, 48 SCRA 379).
11.
Filing of sales application acknowledges that the land is not the private
property of the applicant
As such sales applicant manifestly acknowledged that he does not own the land and that
the same is a public land under the administration of the Bureau of Lands, to which the
application was submitted, all of its acts prior thereof, including its real estate tax declarations,
characterized its possessions of the land as that of a sales applicant. And consequently, as
one who expects to buy it, but has not as yet done so, and is not, therefore, its owner.
(Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21,
1972, 44 SCRA 15).
12.
Rule on the interpretation of contracts is used in afirming, not negating, their
validity
The rule on the interpretation of contracts (Article 1371) is used in affirming, not
negating, their validity. Article 1373, which is a conjunct of Article 1371, provides that, if
the instrument is susceptible of two or more interpretations, the interpretation which will
make it valid and effectual should be adopted. In this light, it is not difficult to understand
that the legal basis urged by petitioner does not support his allegation that the contracts to sell
and the deed of relinquishment are simulated and fictitious.
13.
Simulation not existing in the present case

Simulation occurs when an apparent contract is a declaration of a fictitious will,
deliberately made by agreement of the parties, in order to produce, for the purpose of
deception, the appearance of a juridical act which does not exist or is different from that
which was really executed. Such an intention is not apparent in the agreements. The intent to
sell, on the other hand, is as clear as daylight. The fact, that the agreement to sell (7 December
1948) did not absolutely transfer ownership of the land to private respondent, does not show
that the agreement was simulated. Petitioners delivery of the Certificate of Ownership and
execution of the deed of absolute sale were suspensive conditions, which gave rise to a
corresponding obligation on the part of the private respondent, i.e., the payment of the last
installment of the consideration mentioned in the Agreement. Such conditions did not affect
the perfection of the contract or prove simulation.
14.
Nonpayment of the consideration does not prove simulation

Nonpayment, at most, gives the vendor only the right to sue for collection. Generally, in
a contract of sale, payment of the price is a resolutory condition and the remedy of the seller
is to exact fulfillment or, in
Sales, 2003 ( 272 )
case of a substantial breach, to rescind the contract under Article 1191 of the Civil Code.
However, failure to pay is not even a breach, but merely an event which prevents the
vendors obligation to convey title from acquiring binding force.
15.
Burden of proof rests upon the party who asserts the affirmative of an issue
Prior to the amendment of the rules on evidence on March 14, 1989, Section 1, Rule
131, states that each party must prove his or her own affirmative allegations. Thus, the burden
of proof in any cause rested upon the party who, as determined by the pleadings or the nature
of the case, asserts the affirmative of an issue and remains there until the termination of the
action. Although nonpayment is a negative fact which need not be proved, the party seeking
payment is still required to prove the existence of the debt and the fact that it is already due.
Petitioner showed the existence of the obligation with the presentation of the contracts, but did
not present any evidence that he demanded payment from private respondent. The demand
letters dated January 2 and 5, 1974, adduced in evidence by petitioner, were for the
payment of back rentals, damages to improvements and reimbursement of acquisition costs
and realty taxes, not payment arising from the contract to sell.
16.
Lack of Notice of the Award not a suppression of evidence

The lack of notice for petitioner (not listed as one of the parties to furnished a copy by
the Director of Lands) can be easily explained. Petitioner was not entitled to said notice of
award from the Director of Lands, because by then, he had already relinquished his rights to the
disputed land in favor of private respondent. In the heading of the order, he was referred to as
sales applicant-assignor. In paragraph number 4, the order stated that, on 16 August 1950,
he relinquished his rights to the land subject of the award to private respondent. From
such date, the sales application was considered to be a matter between the Bureau of Lands and
private respondent only. Considering these facts, the failure to give petitioner a copy of the
notice of the award cannot be considered as suppression of evidence. Furthermore, this order
was in fact available to petitioner and had been referred to by him since 31 January 1974 when
he filed his protest with the Bureau of Lands.
17.
Requirement for a sales application under CA 141

The requirements for a sales application under the Public Land Act are: (1) the
possession of the qualifications required by said Act (under Section 29) and (2) the lack of
the disqualifications mentioned therein (under Sections 121, 122, and 123). Section 121 of
the Act pertains to acquisitions of public land by a corporation from a grantee: The private
respondent, not the petitioner, was the direct grantee of the disputed land. Sections 122 and
123 disqualify corporations, which are not authorized by their charter, from acquiring public
land; the records do not show that private respondent was not so authorized under its charter.
18.
Determination of qualifcation of applicant included in the powers to dispose
public lands
In Espinosa vs. Makalintal, the Court ruled that, by law, the powers of the Secretary of
Agriculture and Natural Resources regarding the disposition of public lands including the
approval, rejection, and reinstatement of applications are of executive and administrative
nature. (Such powers, however, do not include the judicial power to decide controversies
arising from disagreements in civil or contractual relations between the litigants.)
Consequently, the determination of whether private respondent is qualified to become an
awardee of public land under CA 141 by sales application is included therein.
19.
Prohibition of 1973 Constitution against the holding of public alienable lands
by corporation not retroactive
In Ayog vs. Cusi, Jr., the Court ruled that the constitutional prohibition of the 1973
Constitution against the holding of alienable lands of the public domain by corporations had no
retroactive effect and could not prevail over a vested right to the land. Vested rights have to be
respected. It could not be abrogated by the new Constitution. Section 2, Article XIII of the
1935 Constitution allowed private corporations to purchase public agricultural lands not
exceeding 1,024 hectares. Action for prohibition is barred by the doctrine of
Sales, 2003 ( 273 )
vested rights in constitutional law.

20.
Vested right
A right is vested when the right to enjoyment has become the property of some
particular person or persons as a present interest. It is the privilege to enjoy property legally
vested, to enforce contracts, and enjoy the rights of property conferred by existing law or
some right or interest in property which has become fixed and established and is no longer open
to doubt or controversy (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51
Phil, 498, 502). Generally, the term vested right expresses the concept of present fixed
interest, which in right reason and natural justice should be protected against arbitrary State
action, or an innately just and imperative right which an enlightened free society, sensitive
to inherent and irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5,
citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 At. 2nd 587).
21.
Due process prohibits annihilation of vested rights

The due process clause prohibits the annihilation of vested rights. A state may not impair
vested rights by legislative enactment, by the enactment or by the subsequent repeal of a
municipal ordinance, or by a change in the constitution of the State, except in a legitimate
exercise of the police power.
22.
Vested interest in sales application; Opinions of the Secretary of Justice

In Opinion 64, series of 1973, the Secretary of Justice held that where the applicant,
before the Constitution took effect, had fully complied with all his obligations under the
Public Land Act in order to entitle him to a sales patent, there would seem to be no legal or
equitable justification for refusing to issue or release the sales patent. In Opinion 140, series
of 1974, the Secretary of Justice held that as soon as the applicant had fulfilled the
construction or cultivation requirements and has fully paid the purchase price, he should be
deemed to have acquired by purchase the particular tract of land and to him the area
limitation in the new Constitution would not apply. In Opinion 185, series of 1976, the
Secretary of Justice held that where the cultivation requirements were fulfilled before the new
Constitution took effect but the full payment of the price was completed after 17 January 1973,
the applicant was, nevertheless, entitled to a sales patent.
23.
Executive construction given great respect

A contemporaneous construction of the constitutional prohibition by a high executive
official carries great weight and should be accorded much respect. It is a correct interpretation
of section 11 of Article XIV.
24.
Implementation of DOJ Opinion 64, s. 1973; Sales application for
fshponds and for agricultural use
Implementing Opinion 64, the then Secretary of Agriculture and Natural
Resources issued a memorandum, dated 18 February 1974, providing that sales application of
private individuals covering areas in excess of 24 hectares and those of corporations,
associations, or partnership which fall under any of the following categories shall be given
due course and issued patents, to wit: Sales application for fishponds and for agricultural
purposes (SFA, SA and IGPSA) wherein prior to 17 January 1973, the land covered thereby was
awarded; cultivation requirements of law were complied with as shown by investigation
reports submitted prior to 17 January 1973; land was surveyed and survey returns already
submitted to the Director of Lands for verification and approval; and purchase price was fully
paid.
[116]
Villamor vs. CA [G.R. No. 97332. October

concur, 1 took no part
Facts: Macaria Labingisa Reyes was the owner of a 600-square meter lot located at Baesa,
Caloocan City (TCT [18431] 18938, Register of Deeds of Rizal). In July 1971, Macaria sold a
portion of 300 sq. ms. of the
Sales, 2003 ( 274 )
lot to the Spouses Julio and Marina Villamor for the total amount of P21,000.00. Earlier,
Macaria borrowed P2,000.00 from the spouses which amount was deducted from the total
purchase price of the 300 sq. m. lot sold. The portion sold to the Villamor spouses is now
covered by TCT 39935 while the remaining portion which is still in the name of Macaria
Labingisa- is covered by TCT 39934. On 11 November 1971, Macaria executed a Deed of
option in favor of Villamor in which the remaining 300 sq. m. portion (TCT No. 39934) of the
lot would be sold to Villamor under the conditions stated therein. According to Macaria,
when her husband, Roberto Reyes, retired in 1984, they offered to repurchase the lot sold by
them to the Villamor spouses but Marina Villamor refused and reminded them instead that the
Deed of Option in fact gave them the option to purchase the remaining portion of the lot. The
Villamors, on the other hand, claimed that they had expressed their desire to purchase the
remaining 300 sq. m. portion of the lot but the Reyes had been ignoring them.
On 13 July 1987, after conciliation proceedings in the barangay level failed, the Villamors
filed a complaint for specific performance against the Reyes before the RTC Caloocan City
(Branch 121, Civil Case C-12942). On 26 July 1989, judgment was rendered by the trial court
in favor of the Villamor spouses, ordering the Reyeses to sell the land to the Villamors, to pay
the the latter the sum of P3,000 as attorneys fees, and to pay the cost of suit. The court
dismissed the counterclaim for lack of merit.
Not satisfied with the decision of the trial court, the Reyes spouses appealed to the Court
of Appeals (CA-GR CV 24176). On 12 February 1991, the Court of Appeals rendered a decision
reversing the decision of the trial court and dismissing the complaint. The reversal of the trial
courts decision was premised on the finding of respondent court that the Deed of Option is
void for lack of consideration. The Villamor spouses brought the petition for review on
certiorari before the Supreme Court.
The Supreme Court denied the petition, affirmed the decision of the appellate court for
reasons cited in the decision, and dismissed the complaint in Civil Case C-12942 on the ground
of prescription and laches.
1.
Consideration defned
As expressed in Gonzales v. Trinidad (67 Phil. 682), consideration is the why of the
contracts, the essential reason which moves the contracting parties to enter into the contract.
In the present case, the cause or the impelling reason on the part of private respondent in
executing the deed of option as appearing in the deed itself is the Villamors having agreed to
buy the 300 sq. m. portion of Reyes spouses land at P70.00 per sq. m. which was greatly
higher than the actual reasonable prevailing price. This cause or consideration is clear from
the deed which stated that the only reason why the spouses-vendees Julio Villamor and Marina
V Villamor agreed to buy the said one-half portion at the above stated price of about P70.00 per
square meter, is because I, and my husband Roberto Reyes, have agreed to sell and convey to
them the remaining one-half portion still owned by me . . . It must be noted that in 1969 the
Villamor spouses bought an adjacent lot from the brother of Macaria Labing-isa for only P18.00
per square meter, such fact not being rebutted by Macaria. Thus, expressed in terms of money,
the consideration for the deed of option is the difference between the purchase price of the
300 sq. m. portion of the lot in 1971 (P70.00 per sq. m.) and the prevailing reasonable price of
the same lot in 1971. Whatever it is, (P25.00 or P18.00) though not specifically stated in the
deed of option, was ascertainable. Villamors allegedly paying P52.00 per square meter for the
option may, as opined by the appellate court, be improbable but improbabilities does not
invalidate a contract freely entered into by the parties.
2.
Option contract defined

An optional contract is a privilege existing in one person, for which he had paid a
consideration and which gives him the right to buy, for example, certain merchandise or certain
specified property, from another person, if he chooses, at any time within the agreed period at a
fixed price (Enriquez de la Cavada v. Diaz, 37 Phil. 982).
Sales, 2003 ( 275 )
3.
Deed of option unique; grants option to sell to both the Villamors and the Reyeses
The deed of option entered into by the parties in the present case had unique features.
The first part covered the statement on the sale of the 300 sq. m. portion of the lot to Spouses
Villamor at the price of P70 per sq. m. which was higher than the actual reasonable prevailing
value of the lands in that place at that time (of sale). The second part stated that the only
reason why the Villamor spouses agreed to buy the said lot at a much higher price is because
the vendor (Reyes) also agreed to sell to the Villamors the other half-portion of 300 square
meters of the land. Had the deed stopped there, there would be no dispute that the deed is
really an ordinary deed of option granting the Villamors the option to buy the remaining 300
sq. m.-half portion of the lot in consideration for their having agreed to buy the other half of
the land for a much higher price. But, the deed of option went on and stated that the sale of
the other half would be made whenever the need of such sale arises, either on our (Reyes) part
or on the part of the Spouses Julio Villamor and Marina V. Villamor. It was not only the
Villamors who were granted an option to buy for which they paid a consideration. The Reyes as
well were granted an option to sell should the need for such sale on their part arise.
4.
Ofer and Acceptance

In the present case, the option offered by the Reyeses had been accepted by the
Villamors, the promises, in the same document. The acceptance of an offer to sell for a
price certain created a bilateral contract to sell and buy and upon acceptance, the offered,
ipso facto assumes obligations of a vendee (See Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil.
948).
5.
Perfection of contract of sale; Demandability

A contract of sale is, under Article 1475 of the Civil Code, perfected at the
moment there is a meeting of minds upon the thing which is the object of the contract and
upon the price. From that moment, the parties may reciprocally demand performance, subject
to the provisions of the law governing the form of contracts. Since there was, between the
parties, a meeting of minds upon the object and the price, there was already a perfected
contract of sale. What was, however, left to be done was for either party to demand from the
other their respective undertakings under the contract. In Sanchez v. Rigos, No. L-25494, June
14, 1972, 45 SCRA 368, 376, it was held that since there may be no valid contract without a
cause of consideration, the promisor is not bound by his promise and may, accordingly
withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the
nature of an offer to sell which, if accepted, results in a perfected contract of sale. In
the present case, demandability may be exercised at any time after the execution of the
deed. The Reyeses may compel the Villamors to pay for the property or that the latter may
compel the former to deliver the property.
6.
Deed of Option does not provide for period for both parties to demand
performance of undertaking, renders contract inefective
The Deed of Option did not provide for the period within which the parties may
demand the performance of their respective undertakings in the instrument. The parties could
not have contemplated that the delivery of the property and the payment thereof could be
made indefinitely and render uncertain the status of the land. The failure of either parties to
demand performance of the obligation of the other for an unreasonable length of time renders
the contract ineffective.
7.
Prescription of actions upon written contracts

Under Article 1144 (1) of the Civil Code, actions upon a written contract must be
brought within 10 years. The Deed of Option was executed on 11 November 1971. The
acceptance, as already mentioned, was also accepted in the same instrument. The complaint in
this case was filed by the Villamors on 13 July 1987, 17 years from the time of the execution of
the contract. Hence, the right of action had prescribed. There were allegations by the Villamors
that they demanded from the Reyeses as early as 1984 the enforcement of their rights under
the contract. Still, it was beyond the 10 year period prescribed by the Civil Code. (See also
Santos vs. Genayo, L-31854, 9 September 1982, 116 SCRA 431: bar by laches)
Sales, 2003 ( 276 )
8.
Court in exercise of its equity jurisdiction

It is of judicial notice that the price of real estate in Metro Manila is continuously on
the rise. To allow the petitioner to demand the delivery of the property subject 13 years or 17
years after the execution of the deed at the price of only P70 per sq. m. is inequitous. For
reasons also of equity and in consideration of the fact that the Reyeses have no other decent
place to live, the Court, in the exercise of its equity jurisdiction is not inclined to grant
Villamors prayer.
[117]
Villonco Realty vs. Bormaheco Inc. [G.R. No. L-26872. July
25, 1975.] En Banc, Aquino (J): 9 concur, 1 on leave
Facts: Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of
Lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with a total area of 3,500
sq.ms. (TCTs 43530, 43531 and 43532). The lots were mortgaged to the Development Bank of
the Philippines (DBP) on 21 April 1959 as security for a loan of P441,000. The mortgage debt
was fully paid on 10 July 1969. Cervantes is the president of Bormaheco, Inc., a dealer and
importer of industrial and agricultural machinery. The entire three lots are occupied by the
building, machinery and equipment of Bormaheco, Inc. and are adjacent to the property of
Villonco Realty Company situated at 219 Buendia Avenue. [Negotiations] In the early part of
February 1964 there were negotiations for the sale of the said lots and the improvements
thereon between Romeo Villonco of Villonco Realty Company and Bormaheco, Inc.,
represented by its president, Francisco N. Cervantes, through the intervention of Edith Perez
de Tagle, a real estate-broker. In the course of the negotiations, the brothers Romeo and
Teofilo Villonco conferred with Cervantes in his office to discuss the price and terms of the
sale. Later, Cervantes went to see Villonco for the same reason until some agreement was
arrived at. On a subsequent occasion, Cervantes, accompanied by Edith Perez de Tagle, discussed
again the terms of the sale with Villonco. During the negotiations, Villonco Realty
Company assumed that the lots belonged to Bormaheco and that Cervantes was duly
authorized to sell the same. Cervantes did not disclose to the broker and to Villonco Realty
that the lots were conjugal properties of himself and his wife and that they were
mortgaged to the DBP. Bormaheco, through Cervantes, made a written offer dated 12
February 1964, to Romeo Villonco for the sale of the property (stipulating price at
P400/sq.m., deposit of P100,000 in earnest money, consummation pending Bormahecos
purchase of property in Sta. Ana Manila, the final negotiations on both properties known after
45 days). The property mentioned in Bormahecos letter was the land of the National
Shipyards & Steel Corporation (Nassco), with an area of 20,000 sq.ms., located at Punta, Sta.
Ana, Manila. At the bidding held on 17 January 1964 that land was awarded to Bormaheco, the
highest bidder, for the price of P552,000. The Nassco Board of Directors in its resolution of
18 February 1964 authorized the General Manager to sign the necessary contract. On 28
February 1964, the Nassco Acting General Manager wrote a letter to the Economic
Coordinator, requesting approval of that resolution. The Acting Economic Coordinator
approved the resolution on 24 March 1964. Meanwhile, Bormaheco and Villonco Realty
continued their negotiations for the sale of the Buendia Avenue property. Cervantes and Teofilo
Villonco had a final conference on 27 February 1964. As a result of that conference Villonco
Realty, in its letter of 4 March 1964 made a revised counter-offer (Romeo Villoncos first
counter-offer was dated 24 February 1964) for the purchase of the property. [Perfection] The
counter-offer was accepted by Cervantes (stipulating interest of 10% of the amount tendered
in case the Sta. Ana purchase does not push through, downpayment at P650,000 and the balance
payable every 3 months in 4 payments [P100,000, P125,000, P212,500, and P212,500]).
Enclosed to it was a MBTC Check worth P100,000 as earnest money. The check for P100,000
was delivered by Perez de Tagle to Bormaheco on 4 March 1964 and was received by
Cervantes. In the voucher-receipt evidencing the delivery the broker indicated in her
handwriting that the earnest money was subject to the terms and conditions embodied in
Bormahecos letter of February 12 and Villonco Realty Companys letter of 4 March 1964.
[Rescission] Unexpectedly, in a letter dated 30 March 1964, Cervantes returned the earnest
money, with interest amounting to P694.24 (at 10% per annum). Cervantes cited as an
excuse the circumstance that despite the lapse of 45 days from 12 February 1964 there is
no certainty yet for the
Sales, 2003 ( 277 )
acquisition of the Punta property. Villonco Realty Company refused to accept the letter and
the checks of Bormaheco. Cervantes sent them by registered mail. When he rescinded the
contract, he was already aware that the Punta lot had been awarded to Bormaheco. Edith Perez
de Tagle, the broker, in a letter to Cervantes dated 31 March 1964 articulated her shock and
surprise at Bormahecos turnabout. Cervantes in his letter of 6 April 1964, a reply to Miss
Tagles letter, alleged that the 45 day period had already expired and the sale to Bormaheco,
Inc. of the Punta property had not been consummated. Cervantes said that his letter was a
manifestation that we are no longer interested to sell the Buendia Avenue property to
Villonco Realty. The latter was furnished with a copy of that letter. In a letter dated 7
April 1964 Villonco Realty Company returned the two checks to Bormaheco, Inc., stating that
the condition for the cancellation of the contract had not arisen and at the same time
announcing that an action for breach of contract would be filed against Bormaheco.
On that same date, 7 April 1964 Villonco Realty filed the complaint (dated April 6) for
specific performance against Bormaheco. A notice of lis pendens was annotated on the titles
of the said lots. Bormaheco in its answers dated 5 May and 25 May 1964 pleaded the defense
that the perfection of the contract of sale was subject to the conditions that final
acceptance or not shall be made after 45 days and that Bormaheco acquires the Sta. Ana
property.
On 2 June 1964 or during the pendency of this case, the Nassco Acting General Manager
wrote to Bormaheco, Inc., advising it that the Board of Directors and the Economic Coordinator
had approved the sale of the Punta lot to Bormaheco and requesting the latter to send its
duly authorized representative to the Nassco for the signing of the deed of sale. The deed of
sale for the Punta land was executed on 26 June 1964. Bormaheco was represented by Cervantes.
In view of the disclosure in Bormahecos amended answer that the 3 lots were registered in the
names of the Cervantes spouses and not in the name of Bormaheco, Villonco Realty on 21
July 1964 filed an amended complaint impleading the said spouses as defendants. Bormaheco
and the Cervantes spouses filed separate answers. As of 15 January 1965 Villonco Realty had
paid to the Manufacturers Bank & Trust Company the sum of P8,712.25 as interests on the
overdraft line of P100,000 and the sum of P27.39 as interests daily on the same loan since 16
January 1965. (That overdraft line was later settled by Villonco Realty on a date not
mentioned in its manifestation of 19 February 1975). Villonco Realty had obligated itself to
pay the sum of P20,000 as attorneys fees to its lawyers. It claimed that it was damaged in the
sum of P10,000 a month from 24 March 1964 when the award of the Punta lot to Bormaheco
was approved. On the other hand, Bormaheco claimed that it had sustained damages of
P200,000 annually due to the notice of lis pendens which had prevented it from
constructing a multistory building on the 3 lots. Miss Tagle testified that for her services
Bormaheco, through Cervantes, obligated itself to pay her a 3% commission on the price of
P1,400,000 or the amount of P42,000. After trial, the lower court rendered a decision ordering
the Cervantes spouses to execute in favor of Bormaheco a deed of conveyance for the 3 lots and
directing Bormaheco to convey the same lots to Villonco Realty, to pay the latter, as
consequential damages, the sum of P10,000 monthly from 24 March 1964 up to the
consummation of the sale, to pay Edith Perez de Tagle the sum of P42,000 as brokers
commission and to pay P20,000 as attorneys fees
Bormaheco, Inc. and the Cervantes spouses appealed. The Supreme Court took cognizance of
the appeal because the amount involved is more than P200,000 and the appeal was perfected
before RA 5440 took effect on 9 September 1968.
The Supreme court modified the trial courts decision by ordering the spouses Cervantes,
within 10 days from the date they receive notice from the clerk of the lower court that the
records of the case have been received from the Supreme Court, to execute a deed conveying
to Bormaheco their 3 lots covered by TCT 43530, 43531 and 43532 of the Registry of Deeds
of Rizal; ordering Bormaheco, within 5 days from the execution of such deed of conveyance, to
execute in favor of Villonco Realty a registerable deed of sale for the said 3 lots
Sales, 2003 ( 278 )
and all the improvements thereon, free from all lien and encumbrances, at the price of
P400 per sq.m., deducting from the total purchase price the sum of P100,000 previously paid
by Villonco Realty Company to Bormaheco, Inc.; and obligating Villonco Realty, upon the
execution of such deed of sale, to pay Bormaheco the balance of the price in the sum of
P1,300,000; and ordering Bormaheco to pay Villonco Realty P20,000 as attorneys fees and to
pay Edith Perez de Tagle the sum of P42,000 as commission; with costs against Villonco
Realty.
1.
Contract of sale
By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determining thing, and the other to pay therefor a price certain
in money or its equivalent. A contract of sale may be absolute or conditional (Art. 1458, Civil
Code).
2.
Perfection of a contract of sale; Present case

The contract of sale is perfected at the moment there is a meeting of minds upon the
parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts (Art. 1475, Ibid.). In the present case, Bormahecos acceptance of
Villonco Realtys offer to purchase the Buendia Avenue property, as shown in Teofilo
Villoncos letter dated 4 March 1964 indubitably proves that there was a meeting of minds
upon the subject matter and consideration of the sale. Therefore, on that date the sale
was perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs.
Tambunting, 1 Phil. 490)
3.
Perfection of contracts; Efect

Contracts are perfected by mere consent, and from that moment the parties are bound
not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law (Art. 1315, Civil Code).
4.
Consent: Ofer, counter-ofer, acceptance

Consent 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. A qualified acceptance constitutes a counter-offer (Art. 1319, Civil
Code). An acceptance may be express or implied (Art. 1320, Civil Code).
5.
Present contract conditionally consummated or partly executed

Bormahecos acceptance of the part payment of P100,000 shows that the sale was
conditionally consummated or partly executed subject to the purchase by Bormaheco, Inc. of
the Punta property. The non-consummation of that purchase would be a negative resolutory
condition (Taylor vs. Uy Tieng Piao, 43 Phil. 873).
6.
Borhamecos bid already accepted by Nassco

On 18 February 1964 Bormahecos bid for the Punta property as already accepted by
the Nassco which had authorized its General Manager to sign the corresponding deed of sale.
What was necessary only was the approval of the sale by the Economic Coordinator and a
request for that approval was already pending in the office of that functionary on 4 March
1964.
7.
Revised counter offer not material but are merely clarifications of what was
agreed upon
There is no evidence as to what changes were made by Cervantes in Villoncos revised
offer, and there is no evidence that Villonco Realty did not assent to the supposed changes
and that such assent was never made known to Cervantes. The alleged changes or qualifications
made by Cervantes were approved by Villonco Realty and that such approval was duly
communicated to Cervantes or Bormaheco by the broker as shown by the fact that Villonco
Realty paid, and Bormaheco accepted, the sum of P100,000 as earnest money or down payment.
That crucial fact implies that Cervantes was aware that Villonco Realty had accepted the
Sales, 2003 ( 279 )
modifications which he had made in Villoncos counter-offer. Had Villonco Realty not
asserted to those insertions and annotations, then it would have stopped payment on its
check for P100,000. The fact that Villonco Realty allowed its check to be cashed by
Bormaheco signifies that the company was in conformity with the changes made by Cervantes
and that Bormaheco was aware of that conformity. Had those insertions not been binding, then
Bormaheco would not have paid interest at the rate of 10% per annum on the earnest money of
P100,000. The truth is that the alleged changes or qualifications in the revised counter-offer are
not material or are mere clarifications of what the parties had previously agreed upon.
8.
Amendment of another instead of Nassco in paragraph 3 of counter-ofer is

trivial Cervantes allegedly crossed out the word Nassco in paragraph 3 of Villoncos
revised counter-offer
and substituted for it the word another so that the original phrase Nasscos property in
Sta. Ana, was made to read as another property in Sta. Ana. That change is trivial. What
Cervantes did was merely to adhere to the wording of paragraph 3 of Bormahecos original
offer which mentions another property located at Sta. Ana His obvious purpose was to avoid
jeopardizing his negotiation with the Nassco for the purchase of its Sta. Ana property by
unduly publicizing it. It is noteworthy that Cervantes, in his letter to the broker dated 6
April 1964 or after the Nassco property had been awarded to Bormaheco alluded to the
Nassco property. At that time, there was no more need of concealing from the public that
Bormaheco was interested in the Nassco property.
9.
Insertion of letters PA not a major alteration, alternative contemplation to
be monthly or semi-annually would be usurious
Cervantes alleged insertion of the letters PA (per annum) after the word
interest in that same paragraph 3 of the revised counter-offer could not be categorized as a
major alteration of that counter-offer that prevented a meeting of the minds of the parties. It
was understood that the parties had contemplated a rate of 10% per annum since 10% a month
or semi-annually would be usurious.
10.
Revised counter-offer merely amplifes original ofer; acceptance is not
qualifed and conditional
The stipulation subject to the terms and conditions embodied in Bormahecos letter of
February 12, 1964 and your (Villoncos) letter of March 4, 1964" does not make Bormahecos
acceptance qualified and conditional. There is no incompatibility between Bormahecos
offer of February 12, 1964 and Villoncos counter-offer of March 4, 1964 (Exh. D). The
revised counter-offer merely amplified Bormahecos original offer.
11.
Payment of earnest money proof of perfection of contract

The controlling fact is that there was agreement between the parties on the subject
matter, the price and the mode of payment and that part of the price was paid. Whenever
earnest money is given in a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract (Art. 1482, Civil Code).
12.
Non-essential changes in terms does not reject ofer nor tender a counter offer
It is true that an acceptance may contain a request for certain changes in the terms of the
offer and yet be a binding acceptance. So long as it is clear that the meaning of the
acceptance is positively and unequivocally to accept the offer, whether such request is
granted or not, a contract is formed. (Stuart vs. Franklin Life Ins. Co., 165 Fed. 2nd 965,
citing Sec. 79, Williston on Contracts). Thus, it was held that the vendors change in a phrase
of the offer to purchase, which change does not essentially change the terms of the offer, does
not amount to a rejection of the offer, and the tender of a counter-offer (Stuart vs. Franklin Life
Ins. Co., supra).
13.
Beaumont vs. Prieto and Zayco vs. Serra do not apply

The present case is not governed by the rulings laid down in Beaumont vs. Prieto, 41 Phil.
670, 985,
Sales, 2003 ( 280 )
63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In those two cases the acceptance radically
altered the offer and, consequently, there was no meeting of the minds of the parties.
14.
Zayco Case: Facts

In the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar central for
P1,000,000 on condition that the price be paid in cash, or, if not paid in cash, the price
would be payable within 3 years provided security is given for the payment of the balance
within three years with interest. Zayco, instead of unconditionally accepting those terms,
countered that he was going to make a down payment of P100,000, that Serras mortgage
obligation to the PNB of P600,000 could be transferred to Zaycos account and that he
(plaintiff) would give a bond to secure the payment of the balance of the price. It was held that
the acceptance was conditional or was a counter-offer which had to be accepted by Serra.
There was no such acceptance. Serra revoked his offer. Hence, there was no perfected contract.
15.
Beaumont case: Facts

In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan Hacienda
owned by Benito Legarda, who had empowered Valdes to sell it. Borck was given three months
from December 4, 1911 to buy the hacienda for P307,000. On 17 January 1912 Borck wrote
to Valdes, offering to purchase the hacienda for P307,000 payable on 1 May 1912. No reply
was made to that letter. Borck wrote other letters modifying his proposal. Legarda refused to
convey the property. It was held that Borcks January 17th letter plainly departed from the
terms of the offer as to the time of payment and was a counter-offer which amounted to a
rejection of Valdes original offer. A subsequent unconditional acceptance could not revive that
offer.
16.
Laudico and Harden vs. Arias Rodriguez does not apply

The present case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270
where the written offer to sell was revoked by the offeror before the offerees acceptance
came to the offerors knowledge.
17.
45-day period merrely an estimate and forecast, not a condition or deadline set
for corporation to decide to pursue transaction
The 45-day period was merely an estimate or a forecast of how long it would take
Bormaheco to acquire the Nassco property and it was not a condition or a deadline set for
the defendant corporation to decide whether or not to go through with the sale of its
Buendia property. The statement that final negotiations on both property can be
definitely known after 45 days does not and cannot mean that Bormaheco should acquire
the Nassco property within 45 days from 12 February 1964 as pretended by Cervantes. It is
simply a surmise that after 45 days (in fact when the 45 day period should be computed is not
clear) it would be known whether Bormaheco would be able to acquire the Nassco property
and whether it would be able to sell the Buendia property. Paragraph 5 does not even specify
how long after the 45 days the outcome of the final negotiations would be known. Still, the
condition that Bormaheco should acquire the Nassco property was fulfilled. Assuming that
had Cervantes been more assiduous in following up the transaction, the Nassco property
could have been transferred to Bormaheco by 28 March 1964, the supposed last day of the 45day period.
18.
Cervantes misled parties as to ownership of the lots; Opposition of wife was not
raised during rescission
Cervantes, in rescinding the contract of sale and in returning the earnest money, cited as
an excuse the circumstance that there was no certainty in Bormahecos acquisition of the
Nassco property. He did not say that Mrs. Cervantes was opposed to the sale of the three lots.
He did not tell Villonco Realty that he could not bind the conjugal partnership. In truth, he
concealed the fact that the three lots were registered in the name of Francisco Cervantes,
Filipino, of legal age, married to Rosario P. Navarra, as owner thereof in fee simple. He
certainly led the Villonco brothers to believe that as president of Bormaheco he could dispose
of the said lots.
Sales, 2003 ( 281 )
He inveigled the Villoncos into believing that he had untrammelled control of Bormaheco,
that Bormaheco owned the lots and that he was invested with adequate authority to sell the
same. The pleadings disclose that Bormaheco and Cervantes deliberately and studiously
avoided making the allegation that Cervantes was not authorized by his wife to sell the 3 lots
or that he acted merely as president of Bormaheco. That defense was not interposed so as not
to place Cervantes in the ridiculous position of having acted under false pretenses when he
negotiated with the Villoncos for the sale of the 3 lots. Bormaheco in its 3 answers, which
were verified by Cervantes, never pleaded as an affirmative defense that Mrs. Cervantes
opposed the sale of the 3 lots or that she did not authorize her husband to sell those lots.
Likewise, it should he noted that in their separate answer the Cervantes spouses never pleaded
as a defense that Mrs. Cervantes was opposed to the sale of 3 lots or that Cervantes could not
bind the conjugal partnership. The appellants were at first hesitant to make it appear that
Cervantes had committed the skullduggery of trying to sell property which he had no
authority to alienate.
19.
Defense waived for not having pleaded

The defense, that Mrs. Cervantes opposed to the sale, must have been an afterthought or
was evolved post litem motam since it was never disclosed in Cervantes letter of rescission and
in his letter to Miss Tagle. Moreover, Mrs. Cervantes did not testify at the trial to fortify that
defense which had already been waived for not having been pleaded (See sec. 2, Rule 9, Rules of
Court).
20.
Plea that Cervantes has no authority to sell the lots strain the rives of credibility
Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife and
the fact that the three lots were entirely occupied by Bormahecos building, machinery
and equipment and were mortgaged to the DBP as security for its obligation, and
considering that appellants vague affirmative defenses do not include Mrs. Cervantes
alleged opposition to the sale, the plea that Cervantes had no authority to sell the lots
strains the rivets of credibility (Cf. Papa and Delgado vs. Montenegro, 54 Phil. 331; Riobo vs.
Hontiveros, 21 Phil. 31).
21.
Contract is the law between parties

Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith (Art. 1159, Civil Code). Inasmuch as the
sale was perfected and even partly executed, Bormaheco, Inc. and the Cervantes spouses, as a
matter of justice and good faith, are bound to comply with their contractual commitments.
22.
The necessity of a lawyer in drafting contract to sell

Much misunderstanding could have been avoided had the broker and the buyer taken
the trouble of making some research in the Registry of Deeds and availing themselves of the
services of a competent lawyer in drafting the contract to sell.
23.
Damages not specifcally pleaded and proven

Stipulation of facts simply means that Villonco Realty Company speculates that it
has suffered damages but it does not mean that the parties have agreed that Villonco Realty
Company is entitled to those damages. The damages in question were not specifically pleaded
and proven and were clearly conjectural and speculative.
24.
Attorneys fees due

Under the facts of the case, it is evident that Bormaheco acted in gross and evident
bad faith in refusing to satisfy the valid and just demand of Villonco Realty for specific
performance. It compelled Villonco Realty to insure expenses to protect its interest. Moreover,
this is a case where it is just and equitable that the Villonco Realty should recover attorneys
fees (Art. 2208, Civil Code).

25.
Tagle is entitled to brokers commission

Sales, 2003 ( 282 )
Paragraph 3 of the stipulation of facts and by the documentary evidence proves that
Bormaheco engaged Tagles services as a broker in the projected sale of the 3 lots and the
improvements thereon. It was stipulated that Miss Tagle intervened in the negotiations for the
sale of the 3 lots. Cervantes in his original offer of 12 February 1964 apprised Villonco Realty
that the earnest money should be delivered to Miss Tagle, the bearer of the letter-offer.
[118]
Yao Ka Sin Trading v. CA, 209 SCRA 763
[119]
Yu Tek v. Gonzales [G.R. No. 9935. February
1, 1915.] First Division, Trent (J): 4 concur, 1
dissents
Facts: A written contract was executed between Basilio Gonzalez and Yu Tek and Co., where
st
nd
Gonzales was obligated to deliver 600 piculs of sugar of the 1 and 2
grade to Yu Tek,
within the period of 3 months (1 January-31 March 1912) at any place within the
municipality of Sta. Rosa, which Yu Tek & Co. or its representative may designate; and in
case, Gonnzales does not deliver, the contract will be rescinded and Gonzales shall be
obligated to return the P3,000 received and also the sum of P1,200 by way of indemnity for loss
and damages. No sugar had been delivered to Yu Tek & Co. under this contract nor had it been
able to recover the P3,000. Yu Tek & Co. filed a complaint against Gonzales, and prayed for
judgment for the P3,000 and the additional P1,200. Judgment was rendered for P3,000 only,
and from this judgment both parties appealed.
The Supreme Court affirmed the judgment appealed from with the modification allowing
the recovery of P1,200 under paragraph 4 of the contract, without costs.
1.
Rights determined by the writing itself

Parties are presumed to have reduced to writing all the essential conditions of their
contract. The rights of the parties must be determined by the writing itself.
2.
Parol evidence not admissible as it should not serve to incorporate additional
conditions into a contract
While parol evidence is admissible in a variety of ways to explain the meaning of
written contracts, it cannot serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in the writing, unless there has
been fraud or mistake. In the present case, Gonzales alleged that the court erred in refusing
to permit parol evidence showing that the parties intended that the sugar was to be secured
from the crop which the defendant raised on his plantation, and that he was unable to fulfill the
contract by reason of the almost total failure of his crop. The case appears to be one to which
the rule which excludes parol evidence to add to or vary the terms of a written contract is
decidedly applicable. There is not the slightest intimation in the contract that the sugar was
to be raised by Gonzales. In the contract, Gonzales undertook to deliver a specified quantity
of sugar within a specified time. The contract placed no restriction upon him in the matter of
obtaining the sugar, as he was at liberty to purchase it on the market or raise it himself,
notwithstanding that he owned a plantation himself.
3.
Cases where parol evidence was denied by the Court

In Pastor v. Gaspar (2 Phil 592) the Court declined to allow parol evidence showing
that a party to a written contract was to become a partner in a firm instead of a creditor of the
firm. In Eveland vs. Eastern Mining Co. (14 Phil 509) a contract of employment provided
that the plaintiff should receive from the
Sales, 2003 ( 283 )
defendant a stipulated salary and expenses The defendant in said case sought to interpose as
a defense to recovery that the payment of the salary was contingent upon the plaintiffs
employment redounding to the benefit of the defendant company. The contract contained no
such condition and the court declined to receive parol evidence thereof.
4.
Perfected contract of sale defned; Relief for non-delivery

Article 1450 defines a perfected sale as follows: The sale shall be perfected between
vendor and vendee and shall be binding on both of them, if they have agreed upon the thing
which is the object of the contract and upon the price, even when neither has been delivered.
Article 1452 provides that the injury to or the profit of the thing sold shall, after the
contract has been perfected, be governed by the provisions of articles 1096 and 1182. There
is a perfected sale with regard to the thing whenever the article of sale has been physically
segregated from all other articles.
5.
Perfected sale; Cases

In McCullough vs. Aenlle & Co. (3 Phil 285), a particular tobacco factory with its
contents was held sold under a contract which did not provide for either delivery of the price or
of the thing until a future time. In Barretto vs. Santa Marina (26 Phil 200), specified shares
of stock in a tobacco factory were held sold by a contract which deferred delivery of both the
price and the stock until the latter had been appraised by an inventory of the entire assets of
the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was held
perfected between the vendor and vendee, although the delivery of the price was withheld
until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs.
Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into the
warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800,
representing the price which had been agreed upon for the hemp thus delivered. Prior to the
presentation of the bill for payment, in said case, the hemp was destroyed. Whereupon, the
defendant suspended payment of the bill. It was held that the hemp having been already
delivered, the title had passed and the loss was the vendees. It is our purpose to distinguish the
case at bar from all these cases.
6.
sale
Contract in present case merely an executory agreement: a promise of sale and not a
The contract in the present case was merely an executory agreement; a promise of sale
and not a sale. As there was no perfected sale, it is clear that articles 1452, 1096, and
1182 are not applicable. The agreement upon the thing which was the object of the
contract was not within the meaning of article 1450. Sugar is one of the staple commodities
of this country. For the purpose of sale its bulk is weighed, the customary unit of weight
being denominated a picul. There was no delivery under the contract. If called upon to
designate the article sold, it is clear that Gonzales could only say that it was sugar. He could
only use this generic name for the thing sold. There was no appropriation of any particular
lot of sugar. Neither party could point to any specific quantity of sugar.
7.
Present case different from cases cited with perfected contracts

The contract in the present case is different from the contracts discussed in the cases
referred to. In the McCullough case, for instance, the tobacco factory which the parties dealt
with was specifically pointed out and distinguished from all other tobacco factories. So, in the
Barretto case, the particular shares of stock which the parties desired to transfer were capable
of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the
contract, it was shown that quantity had been deposited in a specific warehouse, and thus set
apart and distinguished from all other hemp.
8.
American jurisprudence; Executory contracts
In Witt Shoe Co. vs. Seegars & Co. (122 La., 145; 47 Sou., 444), a contract was
entered into by a traveling salesman for a quantity of shoes, the sales having been made by
sample. Since Mitchell was offering to sell by sample shoes, part of which had not been
manufactured and the rest of which were incorporated in Witt Shoe Co.s stock in Lynchburg,
Va., it was impossible that he and Seegars & Co. should at that time have
Sales, 2003 ( 284 )
agreed upon the specific objects, the title to which was to pass, and hence there could have been
no sale.
In State vs. Shields, et al. (110 La., 547, 34 Sou., 673), it was held that in receiving an order
for a quantity of goods, of a kind and at a price agreed on, to be supplied from a general stock,
warehoused at another place, the agent receiving the order merely enters into an executory
contract for the sale of the goods, which does not divest or transfer the title of any
determinate object, and which becomes effective for that purpose only when specific goods
are thereafter appropriated to the contract; and, in the absence of a more specific
agreement on the subject, that such appropriation takes place only when the goods as ordered
are delivered to the public carriers at the place from which they are to be shipped, consigned to
the person by whom the order is given, at which time and place, therefore, the sale is perfected
and the title passes.
9.
American jurisprudence: Recovery of payment; Applicability to present case

In Larue & Prevost vs. Rugely, Blair & Co. (10 La. Ann., 242), the defendants therein
had made a contract for the sale, by weight, of a lot of cotton, had received $3,000 on account
of the price, and had given an order for its delivery, which had been presented to the purchaser,
and recognized by the press in which the cotton was stored, but that the cotton had been
destroyed by fire before it was weighed. It was held that it was still at the risk of the seller, and
that the buyer was entitled to recover the $3,000 paid on account of the price. Similarly, in the
present case, Gonzales having defaulted in his engagement, Yu Tek & Co. is entitled to
recover the P3,000 which it advanced to Gonzales.
10.
Contracting parties free to stipulate; Stipulation clear, no room for
interpretation; Liquidated damage
The contract plainly states that if Gonzales fails to deliver the 600 piculs of sugar
within the time agreed on, the contract will be rescinded and he will be obliged to return
the P3,000 and pay the sum of P1,200 by way of indemnity for loss and damages. There
cannot be the slightest doubt about the meaning of this language or the intention of the parties.
There is no room for either interpretation or construction. Under the provisions of article 1255
of the Civil Code contracting parties are free to execute the contracts that they may consider
suitable, provided they are not in contravention of law, morals, or public order. In our opinion
there is nothing in the contract under consideration which is opposed to any of these principles.
Thus, this is a clear case of liquidated damages.
[120]
Yuviengco v. Dacuycuy, 104 SCRA 668 (1981)
[121]
Zayas vs. Luneta Motor Company [G.R. No. L-30583.
October 23, 1982.] First Division, Gutierrez Jr. (J): 5 concur
Facts: Eutropio Zayas, Jr. purchased on installment basis a Ford Thames Freighter with PUH
Body (Engine 400E-127738 and Chassis 400E-127738) from Mr. Roque Escao of the Escao
Enterprises in Cagayan de Oro City, dealer of Luneta Motor Company (Conditions: Selling
price, P 7,500.00; Financing charge, 1,426.82; Total Selling Price, 8,926.82; Payable on
Delivery, 1,006.82; Payable in 24 months at 12 % interest per annum, 7,920.00) The motor
vehicle was delivered to the Zayas who paid the initial payment in the amount of
P1,006.82, and executed a promissory note in the amount of P7,920.00, the balance of the
total selling price, in favor of Luneta Motor Company. The promissory note stated the
amounts and dates of payment of 26 installments covering the P7,920.00 debt. Simultaneously
with the execution of the promissory note and to secure its payment, Zayas executed a chattel
mortgage on the subject motor vehicle in favor of Luneta Motors. After paying a total
amount of P3,148.00, Zayas was unable to pay further monthly installments prompting
the Luneta Motors to extrajudicially foreclose the chattel mortgage. The motor vehicle was sold
at public auction with the Luneta Motors represented by Atty. Leandro B. Fernandez as the
highest
Sales, 2003 ( 285 )
bidder in the amount of P5,000.00.

Since the payments made by Zayas 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 Zayas in
favor of the respondent Luneta Motors, the latter filed Civil Case 165263 with the City Court
of Manila for the recovery of the balance of P1,551.74 plus interests. After several
postponements, the case was set for hearing. As a result of Luneta Motors and its counsels
non-appearance on the date set for hearing, Zayas, Jr. moved to have the case dismissed for
lack of interest on the part of Luneta Motors. 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 Zayas 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). Acting on the
motion, the case was dismissed without pronouncement as to costs. Luneta Motor Company
filed an Urgent Motion for Reconsideration, which the court denied for lack of merit.
Luneta Motor Company appealed the case to the CFI Manila (Branch XXXI, presided by
Judge Juan O. Reyes; Civil Case 74381). After various incidents, the CFI issued an order
remanding the case to the court of origin for further proceedings at it is in the opinion that
the City Court should have not decided the case merely on the question of law since the
presentation of evidence is necessary to adjudicate the questions involved. Hence, the petition
for review by certiorari filed by Zayas.
The Supreme Court granted the petition, annulled the orders remanding the case to the court
of origin and denying the motion for reconsideration of the CFI Manila, directed the CFI to
dismiss the appeal in Civil Case 74381, and affirmed the order of the City Court of Manila
dismissing the complaint in Civil Case 165263.
1.
Escano Enterprises an agent of Luneta Motor Company

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 a certification from the cashier of Escao
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 Luneta Motor Company.
Thus, Escao Enterprises, a dealer of 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. Luneta Motors argument that Escano Enterprises is a distinct and
different entity, that its role in the said transaction was only to finance the purchase price of
the motor vehicle; 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 executed by
Zayas; and thus that the contract between the parties was only an ordinary loan removed from
the coverage of Article 1484 of the New Civil Code; is without merit.
2.
Nature of transaction remains to be a sale of personal property in installment
covered by Article 1484
Even assuming that the distinct and independent entity theory of Luneta Motors 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 Luneta
Motors, the nature of the transaction involving Escao Enterprises and Eutropio Zayas, Jr. did
not change at all. As assignee, Luneta Motors 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.
3.

Sales, 2003 ( 286 )
Article 1484 of the New Civil Code, on the foreclosure of chattel mortgages over
personal property sold on installment basis, provides that 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: (3) Foreclose the chattel ,mortgage on the thing sold, if one has been
constituted, should the vendees 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.
4.
Foreclosure and actual sale of a mortgaged chattel bars further recovery of

balance by vendor The foreclosure and actual sale of a mortgaged chattel bars further
recovery by the vendor of any
balance on the purchasers outstanding obligation not so satisfied by the sale. The reason for the
doctrine was aptly stated in the case of Bachrach Motor Co. vs. Millan, thus the principal
object of the 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)
5.
No need for remand of records to city court

The Courts findings and conclusions are borne out by the records available to the
appellate 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.
Sales, 2003 ( 287 )

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Michael Vernon Guerrero

Some Rights Reserved.

Spouses Ladanga vs. CA [GR L-55999, 24 August 1984] .........

Republic vs. Philippine Development Corp. [GR L-10141, 31 January 1958]

Suria vs. IAC, 151 SCRA 661(1987) .........

This collection contains one hundred three

at the Arellano University School of Law

Haystacks (Berne Guerrero)

Asserted right or claim to ownership not suffcient per se to give rise to

Haystacks (Berne Guerrero)

Classes of modes of acquiring ownership

Sale of hereditary rights and waiver of hereditary rights distinguished

issued in de los Reyes name.

Haystacks (Berne Guerrero)

Acap to tenanted land without corresponding proof thereof

Haystacks (Berne Guerrero)

Haystacks (Berne Guerrero)

No legal rationalizing can sanction Palancas arbitrary breach of contract

Haystacks (Berne Guerrero)

Palanca and tenants estopped

Subsequent sale clearly made in bad faith

Refusal of tenants from vacating property not a valid justifcation to renege on

Addison vs. Felix [G.R. No. 12342. August

Haystacks (Berne Guerrero)

Fulfillment of condition impossible for reason imputable to party not presented

Haystacks (Berne Guerrero)

Tradition / Delivery by the vendor of the thing sold

Delivery, according to Dalloz

Execution of a public instrument, when sufficient

Rescission of sale and return of price due to non-delivery of thing sold

Haystacks (Berne Guerrero)

Possession while land is being registered contemplated in contract

Legal interest due as rescission is made by virtue of provisions of law

Haystacks (Berne Guerrero)

Agreement between parties a contract to sell and not an option contract or a

Haystacks (Berne Guerrero)

Intent not to transfer ownership need not be expressed

Perfected contract to sell

Contract interpreted to ascertain intent of parties; Title not controlling if text

Haystacks (Berne Guerrero)

Distinction between an option and a contract of sale

Acceptance; formal or informal

Contract clear, only performance of obligations required of parties

Haystacks (Berne Guerrero)

Test to determine contract as a contract of sale or purchase or mere option

Contract not an option contract; Balance

When earnest money given in a contract of sale

Haystacks (Berne Guerrero)

Article 1590, New Civil Code

Jimenezes may no longer be compelled to sell and deliver subject property

Haystacks (Berne Guerrero)

Rescission in a contract to sell

Haystacks (Berne Guerrero)

Preferential right of first to register

Purchaser in good faith

Cabautan a purchaser in good faith and for value

Haystacks (Berne Guerrero)

No evidence of alleged possession by AHDG

Casis vs. CA not applicable; Different issues

Language of Article 1544 clear; Cabautan deemed owner

Haystacks (Berne Guerrero)

Haystacks (Berne Guerrero)