G.R. No. L-59266 February 29, 1988 SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, vs. HON.

COURT OF APPEALS and ATILANO G. JABIL, respondents. Ruling: I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell.

The Dignos spouses were owners of a parcel of land, in Lapu-Lapu City. On June 7, 1965, Dignos spouses sold the said parcel of land to Atilano J. Jabil for the sum of P28,000.00, payable in two installments, with an assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed of sale executed in favor of Jabil, and the next installment in the sum of P4,000.00 to be paid on or before September 15, 1965.

Dignos spouses sold the same land in favor of spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor of the Cabigas spouses, and which was registered in the Office of the Register of Deeds pursuant to the provisions of Act No. 3344.

In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is subject to two (2) positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or before September 15,1965 and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that in said contract, title or ownership over the property was expressly reserved in the vendor, the Dignos spouses until the suspensive condition of full and punctual payment of the balance of the purchase price shall have been met. So that there is no actual sale until full payment is made (Rollo, pp. 51-52). In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of conveyance is a very strong indication that the parties did not intend "transfer of ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very terms and conditions of the contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the herein mentioned property to Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned property upon the payment of the balance of four thousand pesos." Such contention is untenable. By and large, the issues in this case have already been settled by this Court in analogous cases.

As the Dignos spouses refused to accept from Jabil the balance of the purchase price of the land, and as Jabil discovered the second sale made by Spouses Dignos to the Cabigas spouses, Jabil brought the present suit.

Trial Court: Declared that the sale to Cabigas was null and void, ordered Jabil to pay the Dignos Spouses. Jabil and Dignos Spouses appealed to the CA, the CA affirmed the decision of the lower court, except as to the portion ordering Jabil to pay for expenses incurred by the Cabigas Spouses for the building upon the land in question. An MR was filed but was denied.

Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). A careful examination of the contract shows that there is no such stipulation reserving the title of the property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period. On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that "The ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. While it may be conceded that there was no constructive delivery of the land sold in the case at bar, as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses.

G.R. No. 2412 PEDRO ROMAN, plaintiff-appellant, vs. ANDRES GRIMALT, defendant-appellee.

Pedro Roman, the owner, and Andres Grimalt, the purchaser, verbally agreed upon the sale of the schooner Santa Marina. In his letter, Grimalt agreed to buy the vessel and offered to pay in three installments of P500 each on July 15, September 15, and November 15, provided the title papers to the vessel were in proper form. The title of the vessel, however, was in the name of one Paulina Giron and not in the name of Roman as the alleged owner. Roman promised to perfect his title to the vessel, but failed so the papers he presented did not show that he was the owner of the vessel. The vessel sank in the Manila harbor during a severe storm, even before Roman was able to produce for Grimalt the proper papers showing that the he was in fact the owner of the vessel in question and not Paulina Giron. As a result, Grimalt refused to pay the purchase price when Roman made a demand on June 30, 1904. Roman filed this complaint in the CFI of Manila, which found that the parties had not arrived at a definite understanding, and later dismissed said complaint. Ruling: The court below found that the parties had not arrived at a definite understanding. We think that this finding is supported by the evidence introduced at the trial.

A sale shall be considered perfected and binding as between vendor and vendee when they have agreed as to the thing which is the object of the contract and as to the price, even though neither has been actually delivered. (Art. 1450 of the Civil Code.) Ownership is not considered transmitted until the property is actually delivered and the purchaser has taken possession of the value and paid the price agreed upon, in which case the sale is considered perfected.

April 11, 1906

When the sale is made by means of a public instrument the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract.

Pedro Roman, the owner, and Andres Grimalt, the purchaser, had been for several days negotiating for the purchase of the schooner Santa Marina. They agreed upon the sale of the vessel for the sum of 1,500 pesos, payable in three installments, provided the title papers to the vessel were in proper form. It is so stated in the letter written by the purchaser to the owner on the 23rd of June. The sale of the schooner was not perfected and the purchaser did not consent to the execution of the deed of transfer for the reason that the title of the vessel was in the name of one Paulina Giron and not in the name of Pedro Roman, the alleged owner. Roman promised, however, to perfect his title to the vessel, but he failed to do so. The papers presented by him did not show that he was the owner of the vessel.

It follows, therefore, that article 1452 of the Civil Code relative to the injury or benefit of the thing sold after a contract has been perfected and articles 1096 and 1182 of the same code relative to the obligation to deliver a specified thing and the extinction of such obligation when the thing is either lost or destroyed, are not applicable to the case at bar. Toyota Shaw, Inc. vs.CA Facts: Sosa wanted to purchase a Toyota Lite Ace. upon contacting Toyota Shaw, Inc., he was told that there was an available unit. Sosa and his son, Gilbert, went to the Toyota and met Bernardo, a sales representative of Toyota. The parties agreed that the car shall be delivered on June 17, 1989 and that the balance of the purchase price would be paid by credit financing through B.A. Finance. They accomplished a printed Vehicle Sales Proposal (VSP) which shows that the customer's name, home address , the model series of the vehicle, the installment mode of payment with the initial cash outlay down. On the date of the delivery, the vehicle was not delivered. Toyota alleged that no sale was entered into between it and Sosa. Issue: WON the stnadard VSP woulfd represent a contract of sale between the parties. Ruling:
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It 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 of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But

If no contract of sale was actually executed by the parties the loss of the vessel must be borne by its owner and not by a party who only intended to purchase it and who was unable to do so on account of failure on the part of the owner to show proper title to the vessel and thus enable them to draw up the contract of sale.

The vessel was sunk in the bay on the afternoon of the 25th of June, 1904, during a severe storm and before the owner had complied with the condition exacted by the proposed purchaser, to wit, the production of the proper papers showing that the plaintiff was in fact the owner of the vessel in question.

The defendant was under no obligation to pay the price of the vessel, the purchase of which had not been concluded. The conversations had between the parties and the letter written by defendant to plaintiff did not establish a contract sufficient in itself to create reciprocal rights between the parties.

nothing was mentioned about the full purchase price and the manner the installments were to be paid. This Court had already ruled that 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. Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold letters, 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. He 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. At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder, 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 Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP. Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts them with a financing company, and 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. We are inclined to believe 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. 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, according to Bernardo, the vehicle was delivered to another who was "mas malakas" does not inspire belief and was obviously a delayed afterthought. It is claimed that

Bernardo said, "Pasensiya kayo, nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an hour for the delivery of the vehicle in the afternoon of 17 June 1989. The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that 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.

G.R. No. L-55684 December 19, 1984 CHRYSLER PHILIPPINES CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and SAMBOK MOTORS CO. (BACOLOD), respondents,

Sambok, Bacolod, ordered from Chrysler various automotive products worth P30,909.61, payable in 45 days. Chrysler delivered said products to its forwarding agent, Allied Brokerage Corporation, for shipment. Allied Brokerage loaded the goods on board the M/S Doa Florentina, a vessel owned and operated by Negros Navigation Company, for delivery to Sambok, Bacolod. Chrysler tried to collect from the Sambok the amount of P31,037.56, representing the price of the spare parts plus handling charges, Sambok, Bacolod, refused to pay claiming that it had not received the merchandise. Chrysler also demanded the return of the merchandise or their value from Allied Brokerage and Negros Navigation, but both denied any liability.

In its Answer, Sambok, Bacolod, denied having received from petitioner or from any of its co-defendants, the automotive products referred to in the Complaint, and professed no knowledge of having ordered from Chrysler said articles. Upon a Joint Motion to Dismiss filed by Chrysler and Allied Brokerage, the Trial Court, dismissed the case with prejudice against Allied Brokerage for lack of cause of action, and also dismissed the latter's counterclaim against petitioner.

The Trial Court rendered its Decision dismissing the Complaint against Negros Navigation for lack of cause of action, but finding Sambok, Bacolod, liable for the claim of Chrysler.

Notwithstanding, upon receipt of the Bill of Lading, Sambok, Bacolod, initiated, but did not pursue, steps to take delivery as they were advised by Negros Navigation that because some parts were missing they would just be informed as soon as the missing parts were located.

Trial Court found that the act of Sambok, Bacolod, "in refusing to take delivery of the shipment for no justifiable reason from Negros Navigation despite having received the Bill of Lading constituted wrongful neglect or refusal to accept and pay for the subject shipment, by reason of which Sambok Motors may be held liable for damages."

It was only four years later, when a warehouseman of Negros Navigation, Severino Aguarte, found in their off-shore bodega, parts of the shipment.- in question, but already deteriorated and valueless.

Sambok, Bacolod, appealed. Appellate Court set aside the appealed judgment and dismissed Chrysler's Complaint, after finding that the latter had not performed its part of the obligation under the contract by not delivering the goods at Sambok, Iloilo, the place designated in the Parts Order Form and must, therefore, suffer the loss. In other words, respondent Appellate Court found that there was misdelivery.

Under the circumstances, Sambok, Bacolod, cannot be faulted for not accepting or refusing to accept the shipment from Negros Navigation four years after shipment. The evidence is clear that Negros Navigation could not produce the merchandise nor ascertain its whereabouts at the time Sambok, Bacolod, was ready to take delivery. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them.

Ruling: To our minds, the matter of misdelivery is not the decisive factor for relieving Sambok, Bacolod, of liability herein. While it may be that the Parts Order Form specifically indicated Iloilo as the destination, as testified to by Ernesto Ordonez, Parts Sales Representative of petitioner, Sambok, Bacolod, and Sambok, Iloilo, are actually one. In fact, admittedly, the order for spare parts was made by the President of Sambok, Pepito Ng, through its marketing consultant.

From the evidentiary record, Negros Navigation was the party negligent in failing to deliver the complete shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial Court found, petitioner failed to comply with the conditions precedent to the filing of a judicial action. Thus, in the last analysis, it is petitioner that must shoulder the resulting loss. The general rule that before, delivery, the risk of loss is home by the seller who is still the owner, under the principle of "res petit domino", is applicable in petitioner's case.

In sum, the judgment of respondent Appellate Court, will have to be sustained not on the basis of misdelivery but on non-delivery

since the merchandise was never placed in the control and possession of Sambok, Bacolod, the vendee.

G.R. No. L-21263

April 30, 1965

Defendant, in his answer, pleaded force majeure as a defense. He alleged that the books bought from the plaintiff were burned during the fire that broke out in Naga City on May 15, 1955, and since the loss was due to force majeure he cannot be held responsible for the loss. He prayed that the complaint be dismissed and that he be awarded moral damages in the amount of P15,000.00.

LAWYERS COOPERATIVE PUBLISHING COMPANY, plaintiffappellee, vs.PERFECTO A. TABORA, defendant-appellant. After due hearing, the court a quo rendered judgment for the plaintiff. It ordered the defendant to pay the sum of P1,382.40, with legal interest thereon from the filing of the complaint, plus a sum equivalent to 25% of the total amount due as liquidated damages, and the cost of action. Defendant took the case to the Court of Appeals, but the same is now before us by virtue of a certification issued by that Court that the case involves only questions of law.

Perfecto A. Tabora bought from the Lawyers Cooperative Publishing Company one complete set of American Jurisprudence consisting of 48 volumes with 1954 pocket parts, plus one set of American Jurisprudence, General Index, consisting of 4 volumes, for a total price of P1,675.50 which, in addition to the cost of freight of P6.90, makes a total of P1,682.40. Tabora made a partial payment of P300.00, leaving a balance of P1,382.40. The books were duly delivered and receipted for by Tabora on May 15, 1955 in his law office Ignacio Building, Naga City.

Ruling: Appellant now contends that since it was agreed that the title to and the ownership of the books shall remain with the seller until the purchase price shall have been fully paid, and the books were burned or destroyed immediately after the transaction, appellee should be the one to bear the loss for, as a result, the loss is always borne by the owner. Moreover, even assuming that the ownership of the books were transferred to the buyer after the perfection of the contract the latter should not answer for the loss since the same occurred through force majeure. Here, there is no evidence that appellant has contributed in any way to the occurrence of the conflagration.

In the midnight of the same date, however, a big fire broke out in that locality which destroyed and burned all the buildings standing on one whole block including at the law office and library of Tabora As a result, the books bought from the company as above stated, together with Tabora's important documents and papers, were burned during the conflagration. This unfortunate event was immediately reported by Tabora to the company in a letter he sent on May 20, 1955. On May 23, the company replied and as a token of goodwill it sent to Tabora free of charge volumes 75, 76, 77 and 78 of the Philippine Reports. As Tabora failed to pay he monthly installments agreed upon on the balance of the purchase price notwithstanding the long time that had elapsed, the company demanded payment of the installments due, and having failed, to pay the same, it commenced the present action before the Court of First Instance of Manila for the recovery of the balance of the obligation. Plaintiff also prayed that defendant be ordered to pay 25% of the amount due as liquidated damages, and the cost of action.

This contention cannot be sustained. While as a rule the loss of the object of the contract of sale is borne by the owner or in case of force majeure the one under obligation to deliver the object is exempt from liability, the application of that rule does not here obtain because the law on the contract entered into on the matter

argues against it. It is true that in the contract entered into between the parties the seller agreed that the ownership of the books shall remain with it until the purchase price shall have been fully paid, but such stipulation cannot make the seller liable in case of loss not only because such was agreed merely to secure the performance by the buyer of his obligation but in the very contract it was expressly agreed that the "loss or damage to the books after delivery to the buyer shall be borne by the buyer." Any such stipulation is sanctioned by Article 1504 of our Civil Code,.

In her last will and testament, Justina Fabillo bequeathed to her brother, Florencio, a house and lot, in Palo, Leyte, and to her husband, Gregorio D. Brioso, a piece of land in Palo, Leyte. After Justina's death, Florencio filed a petition for the probate of said will. The probate court approved the project of partition "with the reservation that the ownership of the land declared under Tax Declaration No. 19335 and the house erected thereon be litigated and determined in a separate proceedings." Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property. Acquiescing to render his services, Murillo wrote Florencio the following handwritten letter:
Dear Mr. Fabillo: I have instructed my stenographer to prepare the complaint and file the same on Wednesday if you are ready with the filing fee and sheriffs fee of not less than P86.00 including transportation expenses. Considering that Atty. Montilla lost this case and the present action is a revival of a lost case, I trust that you will gladly give me 40% of the money value of the house and lot as a contigent fee in case of a success. When I come back I shall prepare the contract of services for your signature. Thank you.

Neither can appellant find comfort in the claim that since the books were destroyed by fire without any fault on his part he should be relieved from the resultant obligation under the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event. This is because this rule only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. Here these qualifications are not present. The obligation does not refer to a determinate thing, but is pecuniary in nature, and the obligor bound himself to assume the loss after the delivery of the goods to him. In other words, the obligor agreed to assume any risk concerning the goods from the time of their delivery, which is an exception to the rule provided for in Article 1262 of our Civil Code.

G.R. No. L-68838 March 11, 1991 FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case Division) and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M. Babol), respondents.

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case against Gregorio D. Brioso to recover the San Salvador property. The case was terminated when the court, upon the parties' joint motion in the nature of a compromise agreement, declared Florencio Fabillo as the lawful owner not only of the San Salvador property but also the Pugahanay parcel of land. Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo by taking possession and exercising rights of ownership over 40% of said properties. He installed a tenant in the Pugahanay property.

Florencio Fabillo claimed exclusive right over the two properties and refused to give Murillo his share of their produce. 5 Inasmuch as his demands for his share of the produce of the Pugahanay property were unheeded, Murillo filed on March 23, 1970 in the then Court of First Instance of Leyte a complaint captioned "ownership of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo, his wife Josefa Taa, and their children Ramon Fabillo and Cristeta F. Maglinte. Murillo prayed that he be declared the lawful owner of forty per cent of the two properties.

appeared to be highly educated. The spouses themselves were old but literate and physically fit.

Ruling that the contract of services did not violate Article 1491 of the Civil Code as said contract stipulated a contingent fee, the court upheld Murillo's claim for "contingent attorney's fees of 40% of the value of recoverable properties." However, the court declared Murillo to be the lawful owner of 40% of both the San Salvador and Pugahanay properties and the improvements thereon.

In their answer, the defendants stated that the consent to the contract of services of the Fabillo spouses was vitiated by old age and ailment; that Murillo misled them into believing that Special Proceedings No. 843 on the probate of Justina's will was already terminated when actually it was still pending resolution; and that the contingent fee of 40% of the value of the San Salvador property was excessive, unfair and unconscionable considering the nature of the case, the length of time spent for it, the efforts exerted by Murillo, and his professional standing.

Both parties filed motions for the reconsideration of said decision: Fabillo, insofar as the lower court awarded 40% of the properties to Murillo and the latter insofar as it granted only P1,200 for the produce of the properties from 1967 to 1973. The lower court resolved the motions and modified its decision thus: ACCORDINGLY, the judgment heretofore rendered is modified to read as follows:

They prayed that the contract of services be declared null and void; that Murillo's fee be fixed at 10% of the assessed value of P7,780 of the San Salvador property; that Murillo be ordered to account for the P1,000 rental of the San Salvador property which he withdrew from the court and for the produce of the Pugahanay property from 1965 to 1966; that Murillo be ordered to vacate the portion of the San Salvador property which he had occupied; that the Pugahanay property which was not the subject of either Special Proceedings No. 843 or Civil Case No. 3532 be declared as the exclusive property of Florencio Fabillo, and that Murillo be ordered to pay moral damages and the total amount of P1,000 representing expenses of litigation and attorney's fees. The lower court ruled that there was insufficient evidence to prove that the Fabillo spouses' consent to the contract was vitiated. It noted that the contract was witnessed by two of their children who

(a) Declaring the plaintiff as entitled to and the true and lawful owner of forty percent (40%) of the parcels of land and improvements thereon covered by Tax Declaration Nos. 19335 and 6229 described in Paragraph 5 of the complaint; (b) Directing all the defendants to pay jointly and severally to the plaintiff the sum of Two Thousand Four Hundred Fifty Pesos (P2,450.00) representing 40% of the net produce of the Pugahanay property from 1967 to 1973; (c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of said riceland now on deposit with the Prudential Bank, Tacloban City, deposited by Mr. Pedro Elona, designated receiver of the property;

(d) Ordering the defendants to pay the plaintiff the sum of Three Hundred Pesos (P 300.00) as attorney's fees; and (e) Ordering the defendants to pay the costs of this suit. SO ORDERED.

have a lien over funds and property of his client and may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements. 10 As long as the lawyer does not exert undue influence on his client, that no fraud is committed or imposition applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for contingent fee is valid and enforceable. Moreover, contingent fees were impliedly sanctioned by No. 13 of the Canons of Professional Ethics which governed lawyer-client relationships when the contract of services was entered into between the Fabillo spouses and Murillo. 12 However, we disagree with the courts below that the contingent fee stipulated between the Fabillo spouses and Murillo is forty percent of the properties subject of the litigation for which Murillo appeared for the Fabillos. A careful scrutiny of the contract shows that the parties intended forty percent of the value of the properties as Murillo's contingent fee. This is borne out by the stipulation that "in case of success of any or both cases," Murillo shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo would derive from favorable judgments. The same stipulation was earlier embodied by Murillo in his letter of August 9, 1964 aforequoted.

In view of the death of both Florencio and Justina Fabillo during the pendency of the case in the lower court, their children, who substituted them as parties to the case, appealed the decision of the lower court to the then Intermediate Appellate Court. On March 27, 1984, said appellate court affirmed in toto the decision of the lower court. 8

Ruling: The Fabillos herein question the appellate court's interpretation of the contract of services and contend that it is in violation of Article 1491 of the Civil Code. The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction, properties and rights which are the objects of litigation in which they may take part by virtue of their profession. The said prohibition, however, applies only if the sale or assignment of the property takes place during the pendency of the litigation involving the client's property. 9 Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may

April 26, 1991 A.M. No. 1302 PAULINO VALENCIA, complainant, vs. ATTY. ARSENIO FER CABANTING, respondent.

Paulino Valencia and his wife Romana allegedly bought a parcel of land, where they built their residential house, from a certain Serapia Raymundo, an heir of Pedro Raymundo the original owner. However, they failed to register the sale or secure a transfer certificate of title in their names. Sometime in December, 1968, a conference was held in the house of Atty. Eduardo Jovellanos to settle the land dispute between Serapia Raymundo another heir of Pedro Raymundo, and the Valencia spouses since both were relatives and distant kin of Atty. Jovellanos. Serapia was willing to relinquish ownership if the Valencias could show documents

evidencing ownership. Paulino exhibited a deed of sale written in the Ilocano dialect. However, Serapia claimed that the deed covered a different property. Paulino and Serapia were not able to settle their differences.

counsel. On March 21, 1974 the appellate court dismissed the petition of Paulino.

Serapia, assisted by Atty. Arsenio Fer. Cabanting, filed a complaint against Paulino for the recovery of possession with damages.

Pursuant to the resolution of the First Division of this Court dated December 9, 1974, the resolution of the Second Division dated March 3, 1975 and the two resolutions of the Second Division both dated December 3, 1975, Administrative Cases Nos. 1302, 1391 and 1543 were referred to the Office of the Solicitor General for investigation, report and recommendation. Upon formal request of Constancia L. Valencia and Lydia Bernal dated March 3, 1976, all of these cases were ordered consolidated by Solicitor General Estelito P. Mendoza per his handwritten directive of March 9, 1976. On April 12, 1988, We referred the investigation of these cases to the Integrated Bar of the Philippines. When Atty. Jovellanos was appointed as Municipal Circuit Trial Court Judge of Alcala-Bautista, Pangasinan, We referred the investigation of these cases to Acting Presiding Judge Cesar Mindaro, Regional Trial Court, Branch 50, Villasis, Pangasinan, for further investigation. In view of the seriousness of the charge against the respondents and the alleged threats against the person of complainant Constancia L. Valencia, We directed the transfer of investigation to the Regional Trial Court of Manila. The three administrative cases were raffled to Branch XVII of the Regional Trial Court of Manila, under the sala of Judge Catalino Castaneda, Jr. After investigation, Judge Catalino Castaeda, Jr., recommended the dismissal of cases against Atty. Jovellanos and Atty. Arsenio Fer. Cabanting; dismissal of Administrative Case No. 1543 and the additional charges in Administrative Case No. 1391 against Antiniw and Judge Jovellanos; however, he recommended the suspension of Atty. Antiniw from the practice of law for six months finding him guilty of malpractice in falsifying the Compraventa Definitiva.

Summoned to plead, the Valencias engaged the services of Atty. Dionisio Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the private document written in Ilocano. For this purpose, Paulino gave Atty. Antiniw an amount of P200.00 to pay the person who would falsify the signature of the alleged vendor.

Court of First Instance rendered a decision in favor of Serapia Raymundo. The lower court expressed the belief that the said document is not authentic.

Paulino, thereafter, filed a Petition for Certiorari, before the Court of Appeals alleging that the trial court failed to provide a workable solution concerning his house. While the petition was pending, the trial court, on March 9, 1973, issued an order of execution stating that the decision in this case has already become final and executory. On March 14, 1973, a writ of execution was issued. Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the remaining portion she sold to her counsel, Atty. Arsenio Fer. Cabanting.

Paulino filed a disbarment proceeding against Atty. Cabanting on the ground that said counsel allegedly violated Article 1491 of the New Civil Code as well as Article II of the Canons of Professional Ethics, prohibiting the purchase of property under litigation by a

Ruling:

The simplified issues of these consolidated cases are: I. Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of the New Civil Code.

Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice and is a ground for suspension.

Marcos Mata conveyed a large tract of agricultural land covered by Original Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The deed of absolute sale in favor of the plaintiff was not registered because it was not acknowledged before a notary public or any other authorized officer. At the time the sale was executed, there was no authorized officer before whom the sale could be acknowledged inasmuch as the civil government in Tagum, Davao was not as yet organized. However, the defendant Marcos Mata delivered to Laureta the peaceful and lawful possession of the premises of the land together with the pertinent papers thereof such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax declaration, tax receipts and other papers related thereto. 3 Since June 10, 1945, the plaintiff Laureta had been and is stin in continuous, adverse and notorious occupation of said land, without being molested, disturbed or stopped by any of the defendants or their representatives. In fact, Laureta had been paying realty taxes due thereon and had introduced improvements worth not less than P20,000.00 at the time of the filing of the complaint.4 On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. On May 22, 1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed with the Court of First Instance of Davao a petition for the issuance of a new Owner's Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor the loss of said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao issued an order directing the Register of Deeds of Davao to issue a new Owner's Duplicate Certificate of Title No. 3019 in favor of Marcos Mata and declaring the lost title as null and void. On December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was registered with the Register of Deeds. On the same date, Transfer Certificate of Title No. 140 was issued in favor of Fermin Caram Jr. 5 On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with counterclaim admitting the existence of a private absolute deed of sale of his only property in favor of Claro L. Laureta but alleging that he signed the same as he was subjected to duress, threat and intimidation for the plaintiff was the commanding officer of the 10th division USFIP operating in the unoccupied areas of Northern Davao with its headquarters at Project No. 7 (Km. 60, Davao Agusan Highways), in the Municipality of Tagum, Province of Davao; that Laureta's words and requests were laws; that although the defendant Mata did not like to sell his property or sign the document without even understanding the same, he was ordered to accept P650.00 Mindanao Emergency notes; and that due to his fear of harm or danger that will happen to him or to his family, if he refused he had no other alternative but to sign the document. 6

Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending. In the case at bar, while it is true that Atty. Arsenio Fer. Cabanting purchased the lot after finality of judgment, there was still a pending certiorari proceeding. A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. Logic indicates, in certiorari iproceedings, that the appellate court may either grant or dismiss the petition. Hence, it is not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the judgment of the trial court become final while a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of Professional Ethics. Clearly, this malpractice is a ground for suspension. The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-client relationship between Serapia and Atty. Jovellanos, considering that the latter did not take part as counsel in Civil Case No. V-2170. The transaction is not covered by Art. 1491 nor by the Canons adverted to.
G.R. No. L-28740 February 24, 1981 FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent.

The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the Registry of Deeds regarding a document allegedly signed by him in favor of his co-defendant Fermin Caram, Jr. but denies that he ever signed the document for he knew before hand that he had signed a deed of sale in favor of the plaintiff and that the plaintiff was in possession of the certificate of title; that if ever his thumb mark appeared in the document purportedly alienating the property to Fermin Caram, did his consent was obtained through fraud and misrepresentation for the defendant Mata is illiterate and ignorant and did not know what he was signing; and that he did not receive a consideration for the said sale. 7 The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he has no knowledge or information about the previous encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints. 8 The trial court rendered a decision: Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro L. Laureta stands and prevails over the deed of sale, Exhibit F, in favor of Fermin Caram, Jr.; The defendants appealed from the judgment to the Court of Appeals. The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial court. Ruling: The petitioner assails the finding of the trial court that the second sale of the property was made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He argues that Pedro Irespe was acting merely as a broker or intermediary with the specific task and duty to pay Marcos Mata the sum of P1,000.00 for the latter's property and to see to it that the requisite deed of sale covering the purchase was properly executed by Marcos Mata; that the Identity of the property to be bought and the price of the purchase had already been agreed upon by the parties; and that the other alleged representative, Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale. The contention of the petitioner has no merit. The facts of record show that Mata, the vendor, and Caram, the second vendee had never met. During the trial, Marcos Mata testified that he knows Atty. Aportadera but did not know Caram. 12 Thus, the sale of the property could have only been through Caram's representatives, Irespe and Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public and attorney-in-fact at the same time in the purchase of the property. 13

The petitioner contends that he cannot be considered to have acted in bad faith because there is no direct proof showing that Irespe and Aportadera, his alleged agents, had knowledge of the first sale to Laureta. This contention is also without merit. Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had knowledge of the defect or lack of title of his vendor. In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put them an inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining to the land was taken by soldiers under the command of Col. Claro L. Laureta. 16 Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. Irespe and Aportadera should have investigated the nature of Laureta's possession. If they failed to exercise the ordinary care expected of a buyer of real estate they must suffer the consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to such failure. 17 The principle that a person dealing with the owner of the registered land is not bound to go behind the certificate and inquire into transactions the existence of which is not there intimated 18 should not apply in this case. It was of common knowledge that at the time the soldiers of Laureta took the documents from Mata, the civil government of Tagum was not yet established and that there were no officials to ratify contracts of sale and make them registerable. Obviously, Aportadera and Irespe knew that even if Mata previously had sold t he Disputed such sale could not have been registered. There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith. Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. 19 The question to be determined now is, who was first in possession in good faith? A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. 20 Laureta was first in possession of the property. He is also a possessor in good faith. It is true that Mata had alleged that the deed of sale in favor of Laureta was procured by force. 21 Such defect, however, was cured when, after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an

action for annulment or to set up nullity of the contract as a defense in an action to enforce the same. A more important reason why Laureta's action could not have prescribed is that the second contract of sale, having been registered in bad faith, is null and void. Article 1410 of the Civil Code of the Philippines provides that any action or defense for the declaration of the inexistence of a contract does not prescribe. In a Memorandum of Authorities 22 submitted to this Court on March 13, 1978, the petitioner insists that the action of Laureta against Caram has prescribed because the second contract of sale is not void under Article 1409 23 of the Civil Code of the Philippines which enumerates the kinds of contracts which are considered void. Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a second sale of immovable registered in bad faith. The fact that the second contract is not considered void under Article 1409 and that Article 1544 does not declare void a deed of sale registered in bad faith does not mean that said contract is not void. Article 1544 specifically provides who shall be the owner in case of a double sale of an immovable property. To give full effect to this provision, the status of the two contracts must be declared valid so that one vendee may contract must be declared void to cut off all rights which may arise from said contract. Otherwise, Article 1544 win be meaningless. The first sale in favor of Laureta prevails over the sale in favor of Caram.

Cabrito, for P4,800.00, which deed contained the following stipulation that there is a warranty against eviction.

Spouses Ariston Andaya and Micaela Cabrito commenced this case in the CFI against Melencio Manansala to recover damages suffered by them by reason of the latter's breach of his warranty of title or against eviction embodied in his sale of the land in question to plaintiffs. Manansala denied liability for the damages claimed, and alleged that it was plaintiffs and their co-purchasers who pleaded with him to sell said land to them at a low price after they had been sued by Eustaquia Llanes in Civil Case No. 399, considering that Manansala had registered the land in his name with the office of the Register of Deeds. After the case was submitted for a summary judgment and the parties had agreed on a statement of facts, the lower court entered the following decision that :
Considering that the same land was already sold to the plaintiffs and their co-vendee, Ciriaco Casio and Fidela Valdez, it is obvious that their only purpose in acquiring the same land from the defendant at the low price of P1,500.00 was to enable them to register the prior deed of sale executed by Maria Viloria. This is true, because the title of the defendant had already consolidated pursuant to Article 1509 of the Spanish Civil Code as shown by an affidavit of the defendant registered with the Register of Deeds of this province. This was clearly the understanding of the parties, and the plaintiffs apparently knew that the stipulation on warranty in the deed was made pro forma and could not have been intended, considering the above circumstances from the fact that said property was then subject of a pending litigation as an actual warranty on the title and possession of the purchasers. This being so, it would be inequitable now to hold that the defendant is liable under the provisions of Article 1555 of the new Civil Code or under Act 1478 of the Spanish Civil Code which is the law that should be applied, the said transaction being before August 30, 1950. In determining therefore the obligations of the defendant, those applicable to a vendor in cases of rescission of a contract should be applied. WHEREFORE, the Court renders judgment sentencing the defendant to return to the plaintiffs the sum of P750.00 which

G.R. No. L-14714

April 30, 1960

ARISTON ANDAYA, ET AL., plaintiffs-appellees, vs. DR. MELENCIO MANANSALA, defendant-appellant.

Isidro Fenis sold the land in question to Eustaquia Llanes, with right of repurchase within a period of five years. After the expiry of said period, and without repurchasing the said property, Isidro Fenis sold it again to Maria Viloria. Seven months later, or on August 21, 1914, Maria Viloria sold by way of sale with right to repurchase within a period of one year, the said property together with another parcel of land to Melencio Manansala. On August 1, 1946, upon the expiry of the said period, Manansala registered with the Register of Deeds an affidavit consolidating his title on the property. A year later, or on September 28, 1947, Manansala sold by way of absolute sale the same property to Ciriaco Casio, Fidela Valdez, and the plaintiff spouses Ariston Andaya and Micaela

represent one-half of the purchase price with interest at 6% from June 9, 1948 until fully paid, and to pay the costs of this suit.

obliged to restore to them the price of the land at the time of eviction, but is completely exempt from liability whatsoever.

From the above decision, Melencio Manansala appealed, claiming that after finding that he was not liable to plaintiffs-appellees for breach of warranty against eviction, the lower court erred in holding him liable as in rescission of sale and ordering him to return to plaintiffs-appellees the price of the land in question with interests. There is merit in the appeal.

RULING: The vendor's liability for warranty against eviction in a contract of sale is waivable and may be renounced by the vendee. The contract of sale between herein appellant and the appellees included a stipulation as to the warranty; but the lower court found that the parties understood that such stipulation was merely pro forma and that the appellant vendor was not to be bound thereby, in view of the fact that the same land had been previously bought by appellees from Maria Viloria and that their only purpose in buying the same again from appellant was to enable them to register their prior deed of sale; and the further fact that when the sale between appellant and appellee was made, the property was already the subject of a pending litigation between appellees and one Eustaquia Llanes, who claimed its title and possession by virtue of an earlier sale from the original owner, and it was by final judgment in this litigation that appellees were evicted from and land. Not having appealed from the decision of the court below, appellees are bound by these findings, the implication of which is that they not only renounced or waived the warranty against eviction, but that they knew of the danger of eviction and assumed its consequences.

Neither may appellant be condemned to return the price received from appellees on the theory of rescission of their contract of sale, as held by the court below. In the first place, the remedy of rescission contemplates that the one demanding it is able to return whatever he has received under the contract; and when this can not be done, rescission can not be carried out. It is for this reason that the law on sales does not make rescission a remedy in case the vendee is totally evicted from the thing sold, as in this case, for he can no longer restore the thing to the vendor. It is only when the vendee loses "a part of the thing sold of such importance, in relation to the whole, that he would not have purchased it without said part" that he may ask for rescission, but he has "the obligation return the thing without other encumbrances than those which it had when he acquired it" (Art. 1479, old Code; 1556, New). In the second place, appellees, as already stated, assumed the risk of eviction, which stops them from asking for rescission even were it possible for them to restore what they had received under the contract. On their part, appellees claim that in view of the eviction from the land in question, they are entitled to recover from appellant more items of damages under Article 1555 of the New Code than the mere return of the price with interests as ordered by the trial court. The claim is untenable, not only because appellant, as we have held, is exempt from any liability for appellees eviction, but also because not having appealed from the decision of the court below, appellees can not ask for a modification thereof or an award of damages not included therein

July 27, 1960 G.R. No. L-13435 EUSEBIO MANUEL, plaintiff and appellant, vs. EULOGIO RODRIGUEZ, SR., ET AL., defendants and appellees.

As already stated, appellees knew of the danger of eviction at the time they purchased the land in question from appellant, and assumed its consequences. Therefore, the appellant is not even

Januaria Rodriguez was the original registered owner of a big tract of land. In 1924, Januaria Rodriguez ceded and transferred said land to the Payatas Subdivision Inc., to be administered by said firm, subdivided, sold, leased or otherwise disposed of. Eulogio Rodriguez was then the Secretary-Treasurer of said Payatas Subdivision Inc.

on several occasions, the Company sent to his residence its acting secretary, Conrado Vicente, to collect the balance.

Eusebio Manuel offered to buy the lot in question.The Company agreed to sell said lot (Lot 51) for P2,240 in cash, or by installments with 10% interest. Manuel made a counter-offer for P2,000, which the Payatas Subdivision accepted, provided it was paid in each. Manuel wanted to pay in installments, and on August 2, 1926, the Company wrote him that it was agreeable to a downpayment of P1,500, the balance to be paid within 9 to 10 months without interest, or if the down-payment be less than P1,500, with interest at 10% on the balance. Manuel then requested that the down-payment be reduced to P1,300, and through the intercession of Eulogio Rodriguez, Sr., who was plaintiff-appellants friend, this was granted. After making the initial payment of P1,300, a provisional receipt was issued, which, on August 25, 1926, was substituted by the official receipt sent by Casiano M. de Vera, the Companys bookkeeper. Soon after, Manuel was placed in the possession of the lot.

Eulogio Rodriguez advance the theory that in view of plaintiffappellants repeated default in paying his outstanding account, the Payatas Subdivision Inc. then considered his contract cancelled and extinguished, and the amounts already paid (P1,600), forfeited to the Company, the transaction being merely a contract to sell or promise to sell; that sometime in 1939, the Payatas Subdivision Inc., having sold all its properties (except some properties it was administering for Januaria Rodriguez), was extrajudically dissolved, but its papers of dissolution were lost or destroyed during the war; that after said dissolution, all unsold properties belonging to Januaria Rodriguez were returned to her.

Sometime in 1941, Januaria Rodriguez, who was the aunt of defendant-appellee Eulogio Rodriguez, sold several properties to the latter, including Lot 51 in question, in consideration of the monthly advances, support, services, care, maintenance, medical expenses, etc. which she received from the said Eulogio Rodriguez (Exhibit U).Pursuant to such sale, Transfer Certificate of Title No. 44709 was issued to Eulogio Rodriguez, Sr. (Exhibit 21-a).

It also appears that Manuel did not make any payments within the 9 to 10-month period, so that on April 30, 1928, the Payatas Subdivision Inc. sent him a letter urging immediate payment of his unpaid account with the Company, which, including interest, amounted to P819.23, and asking him to answer within 10 days. Thereafter, Manuel made another payment of P300 for which a receipt dated June 20, 1928 was issued to him (Exhibit I). So far as the record discloses, this appears to be the last payment made by plaintiff-appellant on Lot 51, the property in question. On April 24, 1929, the Payatas Subdivision Inc. sent plaintiff-appellant a detailed statement of his unpaid account which, including interest and taxes, amounted to P596.21, urging immediate payment thereof, so that title could be transferred to him as per agreement, and requesting answer within 10 days (Exhibit J). Still, plaintiffappellant did not pay his account, despite the fact that thereafter,

Likewise, it appears that on February 4, 1941, Eulogio Rodriguez, Sr., then Mayor of Manila, instructed his secretary to write plaintiffappellant to urge him to pay his unsettled account with the Payatas Subdivision, Inc. As per instructions, his secretary wrote plaintiff-appellant (Exhibit O). Still, there was no payment.

On August 5, 1944, Eulogio Rodriguez, Sr. sold Lot 51(among others) to John Landahl (represented in the transaction by Carlos Landahl as attorney-in-fact), for and in consideration of P157,192.80, in Japanese war notes (Exhibit 1-Landahl). The sale was duly registered and Transfer Certificate of Title No. 46521 was issued in Landahls name (Exhibit 3-Landahl).

On April 6, 1949, or just a little less than 23 years after the alleged sale to him of Lot 51 in 1926, plaintiff-appellant brought the instant case, as aforesaid, to compel the execution of a formal deed of conveyance in his favor covering the purported sale in 1926; to compel receipt of the unpaid balance of the price which plaintiffappellant consigned in court; and to annul the subsequent sales to Eulogio Rodriguez and to John Landahl, and the corresponding transfer certificates to title issued to them.

3. The statement in Exhibit J, introduced by plaintiff as his evidence, requesting payment of the balance at ng kayo naman y mabigyan na ng katibayan, alinsunod sa pinagkayarian, confirms that the agreement between plaintiff and the company was that title would be transferred to plaintiff only upon full payment of the price. 4. Plaintiff would not have waited for more than 20 years to file this action to enforce the contract if this where an absolute sale, considering that the land being covered by a Torrens title, it was easy for the vendor to resell or encumber the same property to some other person on the basis of a clean title. 5. The nature of the transaction as a mere contract to sell is established by the testimony of witnesses for defendantsappellees. 6. The dissolution of the Payatas Subdivision Inc. sometime in 1939 must have been the reason which prompted the cancellation of plaintiffs contract, as it had to wind up all its affairs and conclude all pending business before dissolution. 7. It may be taken judicial notice of that it is a general practice among subdivision companies engaging in installment sales to place the buyer immediately in possession after the downpayment, the company remaining owner of the property until full payment, at which time the deed of conveyance is then executed in favor of the buyer; and if the buyer defaults in paying the installments due, the corporation cancels the contracts and forfeits the amount already paid.

The decision of the trial court dismissing the complaint is predicated on two main findings Firstly. That the transaction in 1926 was mere contract to sell or promise to sell of Lot 51 to plaintiff-appellant, the understanding being that upon failure to pay the installments as demanded, the vendor corporation had the right to consider the contract cancelled and the amounts already paid, forfeited. Secondly. That even under plaintiff-appellants theory that his contract with defunct Payatas Subdivision Inc. was an absolute sale, involving immediate transfer of ownership, his right of action to compel the execution of a formal deed of conveyance has prescribed, whether the contract is considered written or verbal (Sec. 43, pars. 1 & 2, Code of Civil Procedure, Act 190); moreover, the action is barred by laches.

The findings that the contract entered into 1926 was a mere contract to sell or promise to sell was predicted on the following premises: 1. The alleged contract of absolute sale was not reduced to a formal deed of conveyance, much less registered, which is unlikely if the contract had been an absolute sale, because plaintiffappellant would have insisted that it be reduced to a public document, the land being covered by a Torrens title. 2. It is highly improbable that the Payatas Subdivision Inc. would agree to an immediate transfer of ownership to plaintiff without any guaranty or security that the balance of the price would be completely paid.

Ruling: Plaintiff-appellant, however, argues (Errors I-IV; VI; VIII) that the Payatas Subdivision had no right to cancel the contract, as there was no demand by suit or notarial act, as provided by Article 1504 of the Old Code (Art. 1592, N. C. C.). This is without merit, because Article 1504 requiring demand by suit or notarial act in case the vendor of realty wants to rescind, does not apply to a contract to sell or promise to sell, where title remains with the vendor until fulfillment to a positive suspensive condition, such as full payment of the price.

The contention of plaintiff-appellant that Payatas Subdivision Inc. had no right to cancel the contract as there was only a casual breach is likewise untenable. In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensive condition, the 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, in accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case. Whether the trial court could take judicial notice of the alleged practice in subdivision companies to retain ownership over lands they contracted to sell, until full payment of the price, we find not necessary to discuss. The circumstances shown by the trend of evidence, including the oral testimony of the witnesses for defendant-appellees, more than convince this Court that the transaction in 1926 was merely a contract to sell, subject to a suspensive condition that was terminated for the Payatas Subdivision Inc. before its dissolution, by reason of the nonpayment of the balance of the price.