Sales

I. Introduction 1. Coronel v. CA (GR 103577, 7 October 1996)

Coronel v. CA [G.R. No. 103577. October 7, 1996.] Third division, Melo (J): 3 concur, 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 For this reason, Coronels canceled and rescinded the contract with Alcaraz by depositing the down payment in the bank in trust for Alcaraz.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 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 fulfillment 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
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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 seller’s 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 defined 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 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 fulfilled, 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 fulfilled, 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-seller’s 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 fulfillment 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 seller’s title thereto. In fact, if there had been previous delivery of the subject property, the seller’s 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 seller’s 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 buyer’s title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
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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 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 fulfilled when obligor voluntary prevents its fulfillment; Condition fulfilled, 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 instance of their father’s 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
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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 buyer’s mother; buyer’s 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, Ramona’s 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 Concepcion’s 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. Ramona’s 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 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 first buyer, exceptions
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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 (first 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 buyer’s 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 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.

2.

Romero v. CA (GR 107207, 23 November 1995)

Romero v. CA [GR 107207, 23 November 1995] 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, Parañaque, 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. Pursuant to this agreement, Ongsiong filed a complaint for ejectment (Civil Case 7579) against Melchor Musa and 29 other squatter families with the MTC Parañaque. A few months later, or on 21 February 1989, judgment was rendered ordering the
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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 Romero’s 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 Parañaque 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 client’s 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 client’s 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 Romero’s 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 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,
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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 Ongsiong’s 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 fulfillment of the obligation and not the birth thereof, only the condition is avoided and does not affect 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 on a breach of faith by the other party violates the reciprocity between them. In the present case, Ongsiong’s 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 Ongsiong’s 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.

3.

Fule v. CA (GR 112212, 2 March 1998)

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 Fule’s 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
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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 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 latter’s 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 prearranged, 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 bank’s 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 lawyer’s 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 court’s adverse decision, petitioner elevated the matter to the Court of Appeals. On 20 October 1992, the Court of Appeals, however, rendered a decision affirming in toto the lower court’s 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 Court’s review power 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 Court’s 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 court’s 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 Court’s 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
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more than Judge Jaramillo’s compliance with his duty as a judge to “dispose of the court’s 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. 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 petitioner’s 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 petitioner’s 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. 7. 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.” 8. 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
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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. 9. 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. 10 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 extrajudicial demand for the payment of the price.” 11. 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 vendee’s 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. 12 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 party’s 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. 13. Rule that moral damages cannot be recovered from person who filed 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 petitioner’s 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.

4.

Ong v. CA (GR 97347, 6 July 1999)

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
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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 seller’s 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 137708-157711). 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 attorney’s 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 affirming 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 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
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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. 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 obligor’s 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 vendor’s 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 petitioner’s 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 petitioner’s 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.

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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.

5.

Gaite v. Fonacier (GR L-11827, 31 July 1961)

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 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 attorney’s 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. 2. The words of the contract express no contingency in the buyer’s 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
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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 buyer’s 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 company’s undertaking on 8 December 1955 substantially reduced the security of the vendor’s 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 after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.” Appellants’ failure to renew or extend the surety company’s bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced. 8. No waiver intended by creditor Gaite’s acceptance of the surety company’s 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 company’s bond expired on 8 December 1955. But in the latter case the defendantsappellants’ obligation to pay became absolute after 1 year from the transfer of the ore to Fonacier by virtue of the deed.

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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 appellant’s 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 Gaite’s estimate appears to be substantially correct.

6.

Acap v. CA (GR 118114, 7 December 1995)

Acap v. CA [G.R. No. 118114. December 7, 1995.] First Division, Padilla (J): 4 concur 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 Pido’s 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 Pido’s heirs. Edy de los Reyes did not sign said document. It will be noted that at the time of Cosme Pido’s 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.
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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 Reyes’s 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 Acap’s preferred right of a Certificae of Land Transfer under PD 27 and his farmholdings, the return of the farmland in Acap’s possession to delos Reyes, and Acap to pay P5,000.00 as attorney’s 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 court’s 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 sufficient 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 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 Pido’s 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 sufficient 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 respondent’s 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
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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 Pido’s 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 affect right of Acap to tenanted land without corresponding proof thereof While the transaction between Pido’s 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 Pido’s 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 tenant’s 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.

7.

Quijada v. CA (GR 126444, 4 December 1998)

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 Sequeña and Paz Corvera Cabiltes and brother Epapiadito Corvera executed a conditional deed of donation of the 2-hectare 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 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 attorney’s 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
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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 attorney’s 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 Municipality’s 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 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 non-fulfillment of the resolutory condition was brought to the donor’s 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 nonfulfillment 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 complainant’s right after he had knowledge of the defendant’s 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 1960’s 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
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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. Seller’s 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 (Trinidad’s 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. Article 1434 of the New Civil Code supports the ruling that the seller’s “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 court’s award of attorney’s fees, litigation expenses and moral damages. Attorney’s 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 latter’s 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.

8.

Celestino v. CIR (GR L-8506, 31 August 1956)

Celestino Co v. Collector of Internal Revenue [G.R. No. L-8506. August 31, 1956.] First Division, Bengzon (J): 7 concur 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 contractor’s 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 Company’s 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
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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.” 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. (Formilleza’s 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 specifications 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 Petitioner’s 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 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
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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.

9.

CIR v. Engineering Equipment (GR L-27044, 30 June 1975)

CIR v. Engineering Equipment and Supply [G.R. No. L-27044. June 30, 1975.] Engineering Equipment and Supply v. CIR [G.R. No. L-27452. June 30, 1975.] First Division, Esguerra (J): 4 concur 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 Company’s 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 Commissioner’s 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 Company’s deficiency tax liabilities from P916,362.65 to P740,587.86, based on findings after conferences had with the Company’s 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 defined 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 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
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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 defendant’s 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. (Arañas, 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] 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 classifications, 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. Central-station 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
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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 contractor’s 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 ready-made air conditioning units for sale. 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
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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.” 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.

10.

Engineering Machinery v. CA (GR 52267, 24 January 1996)

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 latter’s 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 NIDC’s 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 76ºF — 2ºF.” 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 air-conditioning 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 attorney’s fees. 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 Corporation’s 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 Almeda’s 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 air-conditioning system installed by the Corporation in Almeda’s building, plus damages, attorney’s 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 Court’s 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

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both appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation 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. 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 Corporation’s 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 contractor’s 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
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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 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 appellant’s 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.”

11.

Puyat and Sons v. Arco Amusement (GR 47538, 20 June 1941)

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 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.
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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 dealer’s or trader’s 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 “dealer’s” or “trader’s 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 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 office, 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.

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12.

Quiroga v. Parsons (GR 11491, 23 August 1918)

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 Quiroga’s request, or in cash, if Parson so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. 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 Quiroga’s 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 Quiroga’s 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. Classification 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 In respect to the defendant’s 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.

II.

Parties to a contract of sale
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13.

Medina v. CIR (GR L-15113, 28 January 1961)

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 Antonio’s 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 Antonio’s 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 so-called 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 petitioner’s witnesses, the circumstantial evidence is against petitioner’s 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 court’s judgment on the degree of credence of witness considered seriously by the Supreme Court When the credibility of witnesses is the one at issue, the trial court’s 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
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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). Petitioner’s 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 Court’s 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.

14.

Calimlim-Canulas v. Fortun (GR 57499, 22 June 1984)

Calimlim-Canullas v. Fortun [G.R. No. 57499. June 22, 1984.] First Division, Melencio-Herrera (J): 5 concur 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. Calimlim-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 ½ 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
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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 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 benefit 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.

Guiang v. CA (GR 125172, 26 June 1998)

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 ½ portion of their lot to spouses Antonio and Luzviminda Guiang. The latter have since then occupied the ½ 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 ½ 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
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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 ½ portion of the lot and the house thereon to Luzviminda Guiang thru a document known as ‘Deed of Transfer of Rights’ (Exh. ‘A’) for a total consideration of P30,000.00 of which P5,000.00 was to be paid in June 1990. Judie Corpuz’s children Junie and Harriet signed the document as witnesses. On 5 March 1990, obviously to cure whatever defect in Judie Corpuz’s 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) Psd-165409. 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 ½ 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 ½ 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 respondent’s 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 husband’s decision shall prevail, 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. Amendatory effect of Article 124 FC to Article 166 NCC in relation to Article 173 NCC Under Article 166 of the Civil Code, the husband cannot generally alienate or encumber any real property of the conjugal partnership without the wife’s 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
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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 wife’s consent. 5. Void contract cannot be ratified 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 offer 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.

16.

Rubias v. Batiller (GR L-35702, 29 May 1973)

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 194546, for 1947, for 1947 & 1948, for 1948, and for 1948 and 1949. TD 2434 in the name of Liberato Demontaño for the land described therein was cancelled by TD 5172 of Militante. Demontaño 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
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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 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 attorney’s 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 Militante’s predecessors are already made of record. The chain of Militante’s 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. Batiller’s 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 Batiller’s right to the land as against Rubias. Therefore, the lower court did not err in dismissing Rubias’ complaint upon Batiller’s motion after the pretrial. 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 CA’s final judgment affirming the dismissal of Militante’s 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 Militante’s 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.” 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 litigant’s 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 lawyer’s 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
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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 Manresa’s 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 sale’s “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. Manresa’s 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 Manresa’s 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 officers, 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 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.”
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17.

Philippine Trust Co. v. Roldan (GR L-8477, 31 May 1956)

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 stepmother 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 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 ward’s interest and in line with the court’s suspicion whenever the guardian acquires the ward’s property, the Court has no hesitation to declare that, in the eyes of the law, the guardian (Roldan) took by purchase her ward’s 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 protege’s 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 different, sufficient 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 guardian’s 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.
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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.

III.

Subject Matter of Sale 18. Pichel v. Alonzo (GR L-36902, 30 January 1982)

Pichel v. Alonzo [G.R. No. L-36902. January 30, 1982.] First Division, Guerrero (J): 5 concur 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, Alonzo’s 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 vendor’s 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 vendor’s 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 attorney’s 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 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
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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 fisherman’s 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 difference 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 court’s 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 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.
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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 attorney’s fees not justified Article 2208 of the Civil Code provides that “in the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except (1) When exemplary damages are awarded; (2) When the defendant’s 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 plaintiff’s 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 workmen’s compensation and employer’s 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 attorney’s fees and expenses of litigation should be recovered. In all cases, the attorney’s fees and expenses of litigation must be reasonable.” None of the legal grounds enumerated exists to justify or warrant the grant of attorney’s fees.

19.

Melliza v. City of Iloilo (GR L-24732, 30 April 1968)

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 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 Melliza’s title certificate was the following “that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots 1412-B-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
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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 1214D), 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 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.
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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-in-interest, 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.

20.

Yutek v. Gonzales (GR 9935, 1 February 1915)

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 Gonzales was obligated to deliver 600 piculs of sugar of the 1st and 2nd 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 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 plaintiff’s employment redounding to the benefit of the defendant company. The contract contained no such condition and the court declined to receive parol evidence thereof. 4. Perfected contract of sale defined; 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
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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. 6. 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 vendee’s. It is our purpose to distinguish the case at bar from all these cases. 7. Contract in present case merely an executory agreement: a promise of sale and not a sale 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. 8. 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. 9. 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 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.” 10. 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. 11. 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
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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.

21.

National Grains Administration v. IAC (GR 74470, 8 March 1989)

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 Farmer’s 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 court’s 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 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 Soriano’s Farmer’s 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 Soriano’s 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 affect 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
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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 offer 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.)

22.

Johannes-Schuback v. CA (GR 105387, 11 November 1993)

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 latter’s 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 Schuback’s account with Schuback Hamburg. Demand letters sent to San Jose by Schuback’s 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, attorney’s 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 Schuback’s 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.
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1. Perfection of a contract of sale 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: Offer 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 Schuback’s 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.

23.

Noel v. CA (GR 59550, 11 January 1995)

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, Gregorio’s 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 (Deleste’s 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, Hilaria’s brother, and Julio Tabuclin, a son of Hilaria’s 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
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Nanaman estate. In the document, Deleste agreed “to relinquish his rights to ½ 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 attorney’s 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 Gregorio’s heirs had slept on their rights by allowing Hilaria to exercise rights of ownership over Gregorio’s 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 37.7hectare land because it was conjugal property, and Hilaria could sell only her ½ 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 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 ½ 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 attorney’s 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 halfinterest 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.
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4. 1889 Civil Code; Virgilio is not a heir of Gregorio, being illegitimate; No right to transfer ownership 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. Virgilio’s 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 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
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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]).

24.

Nool v. CA (GR 116635, 24 July 1997)

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 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 plaintiffs 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 1-year 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
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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. Clarification 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 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 seller’s 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 certain is binding upon the promissor if the promise is supported by a consideration distinct 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.’” 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
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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 certain is binding upon the promissor if the promise is supported by a consideration distinct 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 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 latter’s tolerance ceased upon their counterclaim and demand on the former to vacate. Hence, their right to posses and cultivate the land ipso facto ceased.

25.

Villaflor v. CA (GR 95694, 9 October 1997)

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.
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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 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 Bureau’s 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 Villaflor’s 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 Villaflor’s protest. 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
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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 petitioner’s 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 petitioner’s heirs as owners — to be without basis. Not satisfied, petitioner’s 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 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
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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. Finding of fact by administrative agency accorded great respect ; Exception to the rule 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 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 affirming, 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. Petitioner’s 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 case of a substantial breach, to rescind the
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contract under Article 1191 of the Civil Code. However, failure to pay is not even a breach, but merely an event which prevents the vendor’s 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 qualification 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 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.
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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 fishponds 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.

IV.

Price 26. Loyola v. CA (GR 115734, 3 February 2000)

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-A1. 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 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 Biñan, 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
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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 attorney’s fees and cost of suit, dismissing the petitioner’s 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 coowners 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 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 Gaudencia’s 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 infimities 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
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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 influence defined, 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 influence 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 fiduciary 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 other’s 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. Petitioners failed to show that Romana used her aunt’s reliance upon her to take advantage or dominate her and dictate that she sell her land. 11. Undue influence 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 influence In Bañez 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.

27.

Uy v. CA (GR 120465, 9 September 1999)

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 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.
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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 daños 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-ininterest 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 defined; 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 affected 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 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-in-interest, either as plaintiff or defendant, in an action upon that 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 Español-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
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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 principal’s 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 principal’s 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 agent’s 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 principal’s 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 receive a commission from his principal upon the performance of a contract which he has made on his principal’s 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.
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14. Cause defined; 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 party’s motives for entering into the contract do not affect the contract. However, when 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. Report of Land Geosciences Bureau is sufficient basis for the cancellation of the sale 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 justified 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.

28.

Mapalo v. Mapalo (GR L-21489 and L-21628, 19 May 1966) [ haystack ]

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 spouses-owners, 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 Maximo’s favor covering ½ (the eastern half) of their land. Although the document of sale stated a consideration of P500, the spouses did not receive anything
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of value for the land. The attorney’s 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 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 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
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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 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 attorney’s 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.

29.

Ong v. Ong (GR L-67888, 8 October 1985)

Ong v. Ong [G.R. No. L-67888. October 8, 1985.] First Division, Relova (J): 5 concur, 1 concur in result
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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 10B 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 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, assignor’s liberality may be sufficient 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
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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 assignor’s 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).

30.

Bagnas v. CA (GR 38498, 10 August 1989)

Bagnas v. CA [G.R. No. 38498. August 10, 1989.] First Division, Narvasa (J): 4 concur 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 Mateum’s 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 Mateum’s 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 latter’s 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 Court’s 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 latter’s dispositions inter vivos of his property. The Supreme Court reversed the appealed Decision of the Court of Appeals, and declared the questioned 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, attorney’s 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
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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 latter’s death without a testament, such property would passed to the transferor’s hairs intestate and be, recoverable by them or by the Administrator of the transferor’s estate. 3. Armentia ruling clarified 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; Effect 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 case’s 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. 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.

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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; Effect 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.

31.

Mate v. CA (GR 120724-25, 21 May 1998) [ haystack ]

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 Mate’s wife solicited his help to stave off her and her family’s 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 Josie’s 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 28225-26), affirmed the decision with modification that Mate is ordered to pay Tan the sum of P140,000 for and as attorney’s fees; with costs against Mate. Thereupon, Mate filed a motion to reconsider the decision but it was denied. Hence, the petition for review.
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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 Mate’s 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. Mate’s 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 Mate’s 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 Mate’s 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 Josie’s 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.

32.

Ladanga v. CA (GR-L 55999m 24 August 1984)

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 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
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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 Clemencia’s estate P21,000 as moral and exemplary damages and attorney’s 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 affirmed 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 Court’s decision. The present case does not fall within any of the exceptions to that rule (2 Moran’s 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 notary’s testimony destroyed any presumption that the sale was fair and regular and for a true consideration. It seemed that the Ladangas abused Clemencia’s confidence and defrauded her of properties with a market value of P393,559.25 when she was already 78 years old. 5. Bernardo’s capacity to sue Bernardo was Clemencia’s 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. 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. Clemencia’s own signature in the deed brought about the mess within which she was entangled.

33.

Balatbat v. CA (GR 109410, 28 August 1996)

Balatbat v. CA [G.R. No. 109410. August 28, 1996.] Second division, Torres Jr (J): 4 concur 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 ½ 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 ½ share pro-indiviso forming the estate of Maria Mesina; ordering the partition of the properties; and dismissing Aurelio’s claim for moral, exemplary and actual damages and attorney’s 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).
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On 1 April 1980, Aurelio sold his 6/10 share in TCT 135671 to spouses Aurora Tuazon-Repuyan 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 Repuyan’s 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 court’s 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, attorney’s 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 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 attorney’s 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 attomey’s fees and P5,000 as costs of litigation. On 22 March 1993, the Court of Appeals denied Balatbat’s 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.
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3. Non-payment in a contract of sale merely creates right to demand fulfillment 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, 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 owner’s 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; Non-payment 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 sufficient 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. 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.”
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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 owner’s 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.

34.

Heirs of Escanlar v. CA (GR 119777, 23 October 1997)

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. Nombre’s heirs include his nephews and grandnephews. Victoriana Cari-an was succeeded by her late brother’s son, Gregorio Cari-an. The latter was declared as Victoriana’s heir in the estate proceedings for Nombre and his wife (Special Proceeding 7-7279). 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 Victoriana’s 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-an’s heirs executed the Deed of Sale of Rights, Interests and Participation in favor of Pedro Escanlar and Francisco Holgado ½ portion pro-indiviso of Lot 1616 and 1617 of the Kabankalan Cadastre, pertaining to the ½ 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 Carian were likewise fully compensated for their individual shares, per receipts given in evidence. The minor Leonell’s share was
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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 latter’s 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 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 ½ 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 proceeding’s summary nature and the probate court’s 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 attorney’s 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.
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The Supreme Court granted the petitions; reversed and set aside the decision of the Court of Appeals under 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 ½ 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 ½ 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 ½ 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 affect validity of the contract, merely its effectivity 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 not bear the stamp of approval of the probate court. The contract’s 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 court’s approval exists where specific 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 court’s approval is necessary for the validity of any disposition of the decedent’s estate. However, reference to judicial approval cannot adversely affect the substantive rights of the heirs to dispose of their ideal share in the coheirship and/or co-ownership among the heirs. It must be recalled that during the period of indivision of a decedent’s 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
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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 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, Fredisminda’s 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 Carian, 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
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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 Cari-an’s 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 final and cannot be re-opened; Need for the Supreme Court to resolve case definitively 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. 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.

35.

Republic v. Philippine Resources Development (GR L-10141, 31 January 1958)

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 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 Apostol’s 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 Apostol’s 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
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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 corporation’s complaint-in-intervention, 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 15767-R) 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 affected 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 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 intervenor’s 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 affected 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 corporation’s 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 counsel’s 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
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Philippine Resource Corporation is a duly organized corporation with offices 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 file the complaint-in-intervention in the proper court.

36.

Torres v. CA (GR 134559, 9 December 1999)

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 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 “Manuel’s 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 Council’s 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 Manuel’s 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
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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. Manuel’s actions clearly belie Antonia’s and Emeteria’s 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 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 Antonia’s and Emeteria’s 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. 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.
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37.

Toyota Shaw v. CA (GR 116650, 23 May 1995) [ haystack ]

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 seller’s 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 customer’s name is “Mr. Luna Sosa” with home address at 2316 Guijo Street, United Parañaque 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 latter’s 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 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 Toyota’s failure to do so he would be constrained to take legal action; and the other on 4 November 1989 (signed by M.O. Caballes, Sosa’s 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. Toyota’s 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 latter’s 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 attorney’s fees plus P2,000 lawyer’s transportation fare per trip in attending to the hearing of the case, P2,000 for Sosa’s transportation fare per trip in attending the hearing of the case, and to pay the cost of the suit.
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Dissatisfied with the trial court’s 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 equivalent. A contract of sale may be absolute or conditional. 2. Contract of sale, when perfected; Effect 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 recourse to one’s 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 Bernardo’s authority as an agent in respect of contracts to sell Toyota’s 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 defined 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
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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 financed by a financing 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 Sosa’s application, there was then no meeting of minds on the sale on installment basis. 10. Toyota’s version of circumstances leading to non-release of vehicle more credible Toyota’s version that B.A. Finance disapproved Sosa’s 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. Sosa’s 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 non-delivery 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 attorney’s fees without basis For attorney’s 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 attorney’s 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.

38.

Velasco v. CA (GR L-31018, 29 June 1973)

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 attorney’s fees. Magdalena Estate denied that it has had any direct-dealings, much less, contractual relations with the Lorenzo Velasco
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regarding the property in question, and contends that the alleged contract described in the document attached to the 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 Estate’s motion to dismiss, granted the Velasco’s motion for 30-day extension from 15 January 1969, and admitted the latter’s 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 (Velasco’s 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, Ordoñez, 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. 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
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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 Fiscal’s 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 Malindog’s sworn declaration believable; Malindog induced to issue false registry receipts for the Velasco’s 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, while Malindog’s 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 Fiscal’s 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.

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7. Jurisprudence replete with cases where Court dismissed appeal on grounds not mentioned specifically 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 not waived, contrary to Velasco’s 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 Velasco’s 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 plaintiff’s 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.

39.

Ereneta v. Bezore (GR L-29746, 26 November 1973)

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. ½ 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 Ereñeta, 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
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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 ½ 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.al’s 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 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
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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 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.

40.

Vda. de Gordon v. CA (GR L-37831, 23 November 1981)

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 office 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. The appellate court upheld the tax sale of the real properties at which Duazo acquired the same and her ownership upon vda. de Gordon’s 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.” The Supreme Court affirmed the appellate court’s decision under review; Without costs. 1. (CA Decision) Material averments admitted The opposition *to Duazo’s petition for consolidation of ownership+ has not controverted by specific 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.
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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 owner’s 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 one’s 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; 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 Duazo’s 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”.

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