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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

L-61623 December 26, 1984 PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant, vs. COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. MENDOZA, respondents-appellees. Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner PHHC. Tolentino, Cruz, Reyes, Lava and Manuel for private respondents. AQUINO, J.: The question in this case is whether the People's Homesite & Housing Corporation bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised consolidation subdivision plan with an area of 2,6,08.7 (2,503.7) square meters located at Diliman, Quezon City. The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein it stated "that subject to the approval of the Quezon City Council of the above-mentioned Consolidation Subdivision Plan, Lot 4. containing 4,182.2 square meters be, as it is hereby awarded to Spouses Rizalino Mendoza and Adelaida Mendoza, at a price of twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to the approval of the OEC (PHHC) Valuation Committee and higher authorities". The city council disapproved the proposed consolidation subdivision plan on August 20, 1961 (Exh. 2). The said spouses were advised by registered mail of the disapproval of the plan (Exh. 2-PHHC). Another subdivision plan was prepared and submitted to the city council for approval. The revised plan, which included Lot 4, with a reduced area of 2,608.7, was approved by the city council on February 25, 1964 (Exh. H). On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of lots to persons who failed to pay the deposit or down payment for the lots awarded to them (Exh. 5). The Mendozas never paid the price of the lot nor made the 20% initial deposit.

On October 18, 1965 the PHHC board of directors passed Resolution No. 218, withdrawing the tentative award of Lot 4 to the Mendoza -spouses under Resolution No. 513 and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, subject to existing PHHC rules and regulations. The prices would be the same as those of the adjoining lots. The awardees were required to deposit an amount equivalent to 20% of the total selling price (Exh. F). The five awardees made the initial deposit. The corresponding deeds of sale were executed in their favor. The subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands. On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of the previous award to them of Lot 4 and for the cancellation of the re-award of said lot to Sto. Domingo and four others. Before the request could be acted upon, the spouses filed the instant action for specific performance and damages. The trial court sustained the withdrawal of the award. The Mendozas appealed. The Appellate Court reversed that decision and declared void the re-award of Lot 4 and the deeds of sale and directed the PHHC to sell to the Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's fees and litigation expenses. The PHHC appealed to this Court. The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which they can enforce against the PHHC by an action for specific performance. We hold that there was no perfected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities. The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its purchase although the area was reduced and to obviate ally doubt on the matter. They did not do so. The PHHC board of directors acted within its rights in withdrawing the tentative award. "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 law governing the form of contracts." (Art. 1475, Civil Code).

"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de las partes o de la ley, se celebra la venta bajo una condicion suspensiva, y en los cuales no se perfecciona la venta hasta el cumplimiento de la condicion" (4 Castan Tobenas, Derecho Civil Espaol 8th ed. p. 81). "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. (Art. 1181, Civil Code). "Se llama suspensive la condicion de la que depende la perfeccion, o sea el principio del contrato". (9 Giorgi, Teoria de las Obligaciones, p. 57). Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter. The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the awardee in that case applied for the purchase of the lot, paid the 10% deposit and a conditional contract to sell was executed in his favor. The PHHC could not re-award that lot to another person. WHEREFORE, the decision of the Appellate Court is reversed and set aside and the judgment of the trial court is affirmed. No costs. SO ORDERED. Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-55665 February 8, 1989 DELTA MOTOR CORPORATION, petitioner, vs. EDUARDA SAMSON GENUINO, JACINTO S. GENUINO, Jr., VICTOR S. GENUINO, HECTOR S. GENUINO, EVELYN S. GENUINO, and The COURT OF APPEALS, respondents. Alcasid, Villanueva & Associates for petitioner. Luna, Puruganan, Sison & Ongkiko for respondents.

b. 20% of the net contract price or P13,200.00 will be due and payable before commencement of delivery. c. The balance of 60% of the net contract price or P39,600.00 with 8% financing charge per annum will be covered by a Promissory Note bearing interest at the rate of 14% per annum and payable in TWELVE (12) equal monthly installment (sic), the first of which will become due thirty (30) days after the completion of delivery. Additional 14% will be charged for all delayed payments. [Exh. "A"; Exh. 1.] The second letter-quotation dated July 18, 1972 provides for the selling price of 150 lengths of black iron pipes schedule 40, 1 1/4" x 20' including delivery at P5,400.00 with the following terms of payment: a. 50% of the net contract price or P 2,700.00 will be due and payable upon signing of the contract papers. b. 50% of the net contract price or P 2,700.00 will be due and payable before commencement of delivery. [Exh. "C"; Exh. "2".]

CORTES, J.: Petitioner, through this petition for review by certiorari, appeals from the decision of respondent appellate court in CA-G.R. No. 59848-R entitled "Eduarda Samson Genuino, et al. v. Delta Motor Corporation" promulgated on October 27, 1980. The facts are as follows: Petitioner Delta Motor Corporation (hereinafter referred to as Delta) is a corporation duly organized and existing under Philippine laws. On the other hand, private respondents are the owners of an iceplant and cold storage located at 1879 E. Rodriguez Sr. Avenue, Quezon City doing business under the name "Espaa Extension Iceplant and Cold Storage." In July 1972, two letter-quotations were submitted by Delta to Hector Genuino offering to sell black iron pipes. T The letter dated July 3, 1972 quoted Delta's selling price for 1,200 length of black iron pipes schedule 40, 2" x 20' including delivery at P66,000.00 with the following terms of payment: a. 20% of the net contract price or P13,200.00 will be due and payable upon signing of the contract papers.

Both letter-quotations also contain the following stipulations as to delivery and price offer: DELIVERY Ex-stock subject to prior sales. xxx xxx xxx Our price offer indicated herein shall remain firm within a period of thirty (30) days from the date hereof. Any order placed after said period will be subject to our review and confirmation. [Exh. "A" and "C"; Exhs. "l" and "2".] Hector Genuino was agreeable to the offers of Delta hence, he manifested his conformity thereto by signing his name in the space provided on July 17, 1972 and July 24, 1972 for the first and second letter-quotations, respectively. It is undisputed that private respondents made initial payments on both contracts for the first contract, P13,200.00 and, for the second, P2,700.00 for a total sum of P15,900.00 on July 28, 1972 (Exhs. "B" and "D"]. Likewise unquestionable are the following. the non-delivery of the iron pipes by Delta; the non-payment of the subsequent installments by the Genuinos; and

the non-execution by the Genuinos of the promissory note called for by the first contract. The evidence presented in the trial court also showed that sometime in July 1972 Delta offered to deliver the iron pipes but the Genuinos did not accept the offer because the construction of the ice plant building where the pipes were to be installed was not yet finished. Almost three years later, on April 15, 1975, Hector Genuino, in behalf of Espaa Extension Ice Plant and Cold Storage, asked Delta to deliver the iron pipes within thirty (30) days from its receipt of the request. At the same time private respondents manifested their preparedness to pay the second installment on both contracts upon notice of Delta's readiness to deliver. Delta countered that the black iron pipes cannot be delivered on the prices quoted as of July 1972. The company called the attention of the Genuinos to the stipulation in their two (2) contracts that the quoted prices were good only within thirty (30) days from date of offer. Whereupon Delta sent new price quotations to the Genuinos based on its current price of black iron pipes, as follows: P241,800.00 for 1,200 lengths of black iron pjpes schedule 40, 2" x 20' [Exh. "G-1".] P17,550.00 for 150 lengths of black iron pipes schedule 40, 1 1/4" x 20' [Exh. "G-2".] The Genuinos rejected the new quoted prices and instead filed a complaint for specific performance with damages seeking to compel Delta to deliver the pipes. Delta, in its answer prayed for rescission of the contracts pursuant to Art. 1191 of the New Civil Code. The case was docketed as Civil Case No. Q-20120 of the then Court of First Instance of Rizal, Branch XVIII, Quezon City. After trial the Court of First Instance ruled in favor of Delta,the dispositive portion of its decision reading as follows: WHEREFORE, premises considered, judgment is rendered: 1. Declaring the contracts, Annexes "A" and "C" of the complaint rescinded; 2. Ordering defendant to refund to plaintiffs the sum of P15,900.00 delivered by the latter as downpayments on the aforesaid contracts;

3. Ordering plaintiffs to pay defendant the sum of P10,000.00 as attorney's fees; and, 4. To pay the costs of suit. [CFI Decision, pp. 13-14; Rollo, pp. 53-54.] On appeal, the Court of Appeals reversed and ordered private respondents to make the payments specified in "Terms of Payment (b)" of the contracts and to execute the promissory note required in the first contract and thereafter, Delta should immediately commence delivery of the black iron pipes.* [CA Decision, p. 20; Rollo, p. 75.] The Court of Appeals cited two main reasons why it reversed the trial court, namely: 1. As Delta was the one who prepared the contracts and admittedly, it had knowledge of the fact that the black iron pipes would be used by the Genuinos in their cold storage plant which was then undergoing construction and therefore, would require sometime before the Genuinos would require delivery, Delta should have included in said contracts a deadline for delivery but it did not. As a matter of fact neither did it insist on delivery when the Genuinos refused to accept its offer of delivery. [CA Decision, pp. 16-17; Rollo, pp. 71-72.] 2. Delta's refusal to make delivery in 1975 unless the Genuinos pay a price very much higher than the prices it previously quoted would mean an amendment of the contracts. It would be too unfair for the plaintiffs if they will be made to bear the increase in prices of the black iron pipes when they had already paid quite an amount for said items and defendant had made use of the advance payments. That would be unjust enrichment on the part of the defendant at the expense of the plaintiffs and is considered an abominable business practice. [CA Decision, pp. 18-19; Rollo, pp. 73-74.] Respondent court denied Delta's motion for reconsideration hence this petition for review praying for the reversal of the Court of Appeals decision and affirmance of that of the trial court. Petitioner argues that its obligation to deliver the goods under both contracts is subject to conditions required of private respondents as vendees. These conditions are: payment of 20% of the net contract price or P13,200.00 and execution of a promissory note called for by the first contract; and payment of 50% of the net contract price or P2,700.00 under the second contract. These, Delta posits, are suspensive conditions and only upon their performance or compliance would its obligation to deliver the pipes arise [Petition, pp. 9-12;

Rollo, pp. 1720.] Thus, when private respondents did not perform their obligations; when they refused to accept petitioner's offer to deliver the goods; and, when it took them three (3) long years before they demanded delivery of the iron pipes that in the meantime, great and sudden fluctuation in market prices have occurred; Delta is entitled to rescind the two (2) contracts. Delta relies on the following provision of law on rescission: Art. 1191. 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. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law. In construing Art. 1191, the Supreme Court has stated that, "[r]escission will be ordered only where the breach complained of is substantial as to defeat the object of the parties in entering into the agreement. It will not be granted where the breach is slight or casual." [Phil. Amusement Enterprises, Inc. v. Natividad, G.R. No. L-21876, September 29, 1967, 21 SCRA 284, 290.] Further, "[t]he question of whether a breach of a contract is substantial depends upon the attendant circumstances." [Universal Food Corporation v. Court of Appeals, G. R. No. L-29155, May 13,1970,33 SCRA 1, 18]. In the case at bar, the conduct of Delta indicates that the Genuinos' nonperformance of its obligations was not a substantial breach, let alone a breach of contract, as would warrant rescission. Firstly, it is undisputed that a month after the execution of the two (2) contracts, Delta's offer to deliver the black iron pipes was rejected by the Genuinos who were "not ready to accept delivery because the cold storage rooms have not been constructed yet. Plaintiffs (private respondents herein) were short-funded, and did not have the space to accommodate the pipes they ordered" [CFI Decision, p. 9; Rollo, p. 49]. Given this answer to its offer, Delta did not do anything. As testified by Crispin Villanueva, manager of the Technical Service department of petitioner:

Q You stated that you sent a certain Evangelista to the Espaa Extension and Cold Storage to offer the delivery subject matter of the contract and then you said that Mr. Evangelista reported (sic) to you that plaintiff would not accept delivery, is that correct, as a summary of your statement? A A Yes, sir. Q Now, what did you do in the premises (sic)? A Yes, well, we take the word of Mr. Evangelista. We could not deliver the said black iron pipes, because as per information the Ice Plant is not yet finished. Q Did you not report that fact to ... any other defendant-officials of the Delta Motor Corporation? A No. Q And you did not do anything after that? A Because taking the word of my Engineer we did not do anything. [TSN, December 8, 1975, pp. 18-19.] xxx xxx xxx And secondly, three (3) years later when the Genuinos offered to make payment Delta did not raise any argument but merely demanded that the quoted prices be increased. Thus, in its answer to private respondents' request for delivery of the pipes, Delta countered: Thank you for your letter dated April 15, 1975, requesting for delivery of Black Iron pipes;. We regret to say, however, that we cannot base our price on our proposals dated July 3 and July 18, 1972 as per the following paragraph quoted on said proposal: Our price offer indicated herein shall remain firm within a period of thirty (30) days from the

date hereof. Any order placed after said period will be subject to our review and confirmation. We are, therefore, enclosing our re-quoted proposal based on our current price. [Exh. "G".] Moreover, the power to rescind under Art. 1191 is not absolute. "[T]he act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court." [University of the Phils. v. De los Angeles, G. R. No. L-28602, September 29, 1970, 35 SCRA 102, 107; Emphasis supplied.] In the instant case, Delta made no manifestation whatsoever that it had opted to rescind its contracts with f-he Genuinos. It only raised rescission as a defense when it was sued for specific performance by private respondents. Further, it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering the fact that not only does it have in its possession and ownership the black iron pipes, but also the P15,900.00 down payments private respondents have paid. And if petitioner Delta claims the right to rescission, at the very least, it should have offered to return the P15,900.00 down payments [See Art. 1385, Civil Code and Hodges v. Granada, 59 Phil. 429 (1934)]. It is for these same reasons that while there is merit in Delta's claim that the sale is subject to suspensive conditions, the Court finds that it has, nevertheless, waived performance of these conditions and opted to go on with the contracts although at a much higher price. Art. 1545 of the Civil Code provides: Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waived performance of the condition. . . . [Emphasis supplied.] Finally, Delta cannot ask for increased prices based on the price offer stipulation in the contracts and in the increase in the cost of goods. Reliance by Delta on the price offer stipulation is misplaced. Said stipulation makes reference to Delta's price offer as remaining firm for thirty (30) days and thereafter, will be subject to its review and confirmation. The offers of Delta, however, were accepted by the private respondents within the thirty (30)-day period. And as stipulated in the two (2) letter-quotations, acceptance of the offer gives rise to a contract between the parties: In the event that this proposal is acceptable to you, please indicate your conformity by signing the space provided herein

below which also serves as a contract of this proposal. [Exhs. "A" and "C"; Exhs. "1" and "2".] And as further provided by the Civil Code: Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon thing which is the object of the contract and upon the price. Thus, the moment private respondents accepted the offer of Delta, the contract of sale between them was perfected and neither party could change the terms thereof. Neither could petitioner Delta rely on the fluctuation in the market price of goods to support its claim for rescission. As testified to by petitioner's Vice-President of Marketing for the Electronics, Airconditioning and Refrigeration division, Marcelino Caja, the stipulation in the two (2) contracts as to delivery, ex-stock subject to prior sales,means that "the goods have not been delivered and that there are no prior commitments other than the sale covered by the contracts.. . once the offer is accepted, the company has no more option to change the price." [CFI Decision, p. 5; Rollo, p. 45; Emphasis supplied.] Thus, petitioner cannot claim for higher prices for the black iron pipes due to the increase in the cost of goods. Based on the foregoing, petitioner Delta and private respondents Genuinos should comply with the original terms of their contracts. WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 107207 November 23, 1995 VIRGILIO R. ROMERO, petitioner, vs. HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG, respondents. VITUG, J.: The parties pose this question: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractuallystipulated period? Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture and exportation of perlite filter aids, permalite insulation and processed perlite ore. In 1988, petitioner and his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000 square meters. 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 square meters. Located in Barangay San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT No. 361402 in the name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner 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 petitioner 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, private respondent would agree to sell the property for only P800.00 per square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional Sale," was executed between petitioner and private respondent. The simplydrawn contract read: DEED OF CONDITIONAL SALE KNOW ALL MEN BY THESE PRESENTS:

This Contract, made and executed in the Municipality of Makati, Philippines this 9th day of June, 1988 by and between: ENRIQUETA CHUA VDA. DE ONGSIONG, of legal age, widow, Filipino and residing at 105 Simoun St., Quezon City, Metro Manila, hereinafter referred to as the VENDOR; -andVIRGILIO R. ROMERO, married to Severina L. Lat, of Legal age, Filipino, and residing at 110 San Miguel St., Plainview Subd., Mandaluyong Metro Manila, hereinafter referred to as the VENDEE: W I T N E S S E T H : That WHEREAS, the VENDOR is the owner of One (1) parcel of land with a total area of ONE THOUSAND NINE HUNDRED FIFTY TWO (1,952) SQUARE METERS, more or less, located in Barrio San Dionisio, Municipality of Paraaque, Province of Rizal, covered by TCT No. 361402 issued by the Registry of Deeds of Pasig and more particularly described as follows: xxx xxx xxx WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land and the VENDOR has accepted the offer, subject to the terms and conditions hereinafter stipulated: NOW, THEREFORE, for and in consideration of the sum of ONE MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS (P1,561,600.00) ONLY, Philippine Currency, payable by VENDEE to in to (sic) manner set forth, the VENDOR agrees to sell to the VENDEE, their heirs, successors, administrators, executors, assign, all her rights, titles and interest in and to the property mentioned in the FIRST WHEREAS CLAUSE, subject to the following terms and conditions: 1. That the sum of FIFTY THOUSAND PESOS (P50,000.00) ONLY Philippine Currency, is to be paid upon signing and execution of this instrument.

2. The balance of the purchase price in the amount of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY shall be paid 45 days after the removal of all squatters from the above described property. 3. Upon full payment of the overall purchase price as aforesaid, VENDOR without necessity of demand shall immediately sign, execute, acknowledged (sic) and deliver the corresponding deed of absolute sale in favor of the VENDEE free from all liens and encumbrances and all Real Estate taxes are all paid and updated. It is hereby agreed, covenanted and stipulated by and between the parties hereto that if after 60 days from the date of the signing of this contract the VENDOR shall not be able to remove the squatters from the property being purchased, the downpayment made by the buyer shall be returned/reimbursed by the VENDOR to the VENDEE. That in the event that the VENDEE shall not be able to pay the VENDOR the balance of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY after 45 days from written notification to the VENDEE of the removal of the squatters from the property being purchased, the FIFTY THOUSAND PESOS (P50,000.00) previously paid as downpayment shall be forfeited in favor of the VENDOR. Expenses for the registration such as registration fees, documentary stamp, transfer fee, assurances and such other fees and expenses as may be necessary to transfer the title to the name of the VENDEE shall be for the account of the VENDEE while capital gains tax shall be paid by the VENDOR. IN WITNESS WHEREOF, the parties hereunto signed those (sic) presents in the City of Makati MM, Philippines on this 9th day of June, 1988. (Sgd.) (Sgd.) VIRGILIO R. ROMERO ENRIQUETA CHUA VDA.

DE ONGSIONG Vendee Vendor SIGNED IN THE PRESENCE OF: (Sgd.) (Sgd.) Rowena C. Ongsiong Jack M. Cruz 1 Alfonso Flores, in behalf of private respondent, forthwith received and acknowledged a check for P50,000.00 2 from petitioner. 3 Pursuant to the agreement, private respondent filed a complaint for ejectment (Civil Case No. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Paraaque. A few months later, or on 21 February 1989, judgment was rendered ordering the defendants to vacate the premises. The decision was handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the contract. The writ of execution of the judgment was issued, still later, on 30 March 1989. In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received from petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol, counsel for petitioner, in his reply of 17 April 1989, refused the tender and stated:. Our client believes that with the exercise of reasonable diligence considering the favorable decision rendered by the Court and the writ of execution issued pursuant thereto, it is now possible to eject the squatters from the premises of the subject property, for which reason, he proposes that he shall take it upon himself to eject the squatters, provided, that expenses which shall be incurred by reason thereof shall be chargeable to the purchase price of the land. 4 Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its Regional Director for Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of Paraaque for a grace period of 45 days from 21 April 1989 within which to relocate and transfer the squatter families. Acting favorably on the request, the court suspended the enforcement of the writ of execution accordingly. On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day grace period and his client's willingness to "underwrite the expenses for the execution of the judgment and ejectment of the occupants." 5

In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent, 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." 6 On 23 June 1989, Atty. Apostol wrote back to explain: The contract of sale between the parties was perfected from the very moment that there was a meeting of the minds of the parties upon the subject lot and the price in the amount of P1,561,600.00. Moreover, the contract had already been partially fulfilled and executed upon receipt of the downpayment of your client. Ms. Ongsiong is precluded from rejecting its binding effects relying upon her inability to eject the squatters from the premises of subject property during the agreed period. Suffice it to state that, the provision of the Deed of Conditional Sale do not grant her the option or prerogative to rescind the contract and to retain the property should she fail to comply with the obligation she has assumed under the contract. In fact, a perusal of the terms and conditions of the contract clearly shows that the right to rescind the contract and to demand the return/reimbursement of the downpayment is granted to our client for his protection. Instead, however, of availing himself of the power to rescind the contract and demand the return, reimbursement of the downpayment, our client had opted to take it upon himself to eject the squatters from the premises. Precisely, we refer you to our letters addressed to your client dated April 17, 1989 and June 8, 1989. Moreover, it is basic under the law on contracts that the power to rescind is given to the injured party. Undoubtedly, under the circumstances, our client is the injured party. Furthermore, your client has not complied with her obligation under their contract in good faith. It is undeniable that Ms. Ongsiong deliberately refused to exert efforts to eject the squatters from the premises of the subject property and her decision to retain the property was brought about by the sudden increase in the value of realties in the surrounding areas. Please consider this letter as a tender of payment to your client and a demand to execute the absolute Deed of Sale. 7

A few days later (or on 27 June 1989), private respondent, prompted by petitioner's continued refusal to accept the return of the P50,000.00 advance payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for rescission of the deed of "conditional" sale, plus damages, and for the consignation of P50,000.00 cash. Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of execution in Civil Case No. 7579 on motion of private respondent but the squatters apparently still stayed on. Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of Makati 8 rendered decision holding that private respondent 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 petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The court ruled that the provisions in the contract relating to (a) the return/reimbursement of the P50,000.00 if the vendor were to fail in her obligation to free the property from squatters within the stipulated period or (b), upon the other hand, the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price, amounted to "penalty clauses". The court added: This Court is not convinced of the ground relied upon by the plaintiff in seeking the rescission, namely: (1) he (sic) is afraid of the squatters; and (2) she has spent so much to eject them from the premises (p. 6, tsn, ses. Jan. 3, 1990). Militating against her profession of good faith is plaintiffs conduct which is not in accord with the rules of fair play and justice. Notably, she caused the issuance of an alias writ of execution on August 25, 1989 (Exh. 6) in the ejectment suit which was almost two months after she filed the complaint before this Court on June 27, 1989. If she were really afraid of the squatters, then she should not have pursued the issuance of an alias writ of execution. Besides, she did not even report to the police the alleged phone threats from the squatters. To the mind of the Court, the so-called squatter factor is simply factuitous (sic). 9 The lower court, accordingly, dismissed the complaint and ordered, instead, private respondent 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 petitioner. Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate court rendered its decision. 10 It opined that the contract entered into by the parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the object of the contract; that private respondent substantially complied with her obligation to evict the squatters; that it was petitioner who was not ready to

pay the purchase price and fulfill his part of the contract, and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the squatters within the 60-day period was not a penal clause. Thus, it concluded. WHEREFORE, the decision appealed from is REVERSED and SET ASIDE, and a new one entered declaring the contract of conditional sale dated June 9, 1988 cancelled and ordering the defendant-appellee to accept the return of the downpayment in the amount of P50,000.00 which was deposited in the court below. No pronouncement as to costs. 11 Failing to obtain a reconsideration, petitioner filed this petition for review on certiorari raising issues that, in fine, center on the nature of the contract adverted to and the P50,000.00 remittance made by petitioner. A perfected contract of sale may either be absolute or conditional 12 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 a 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. 13 In determining the real character of the contract, the title given to it by the parties is not as much 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. 14 The term "condition" in the context of a perfected contract of sale pertains, in reality, to the compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal prestation of the other party. The reciprocal obligations referred to would normally be, in the case of vendee, the payment of the agreed purchase price and, in the case of the vendor, the fulfillment of certain express warranties (which, in the case at bench is the timely eviction of the squatters on the property). It would be futile to challenge the agreement here in question as not being a duly perfected contract. A sale is at once perfected when 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. 15

The object of the sale, in the case before us, was specifically identified to be a 1,952-square meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title No. 361402 of the Registry of Deeds for Pasig and therein technically described. The purchase price was fixed at P1,561,600.00, of which P50,000.00 was to be paid upon the execution of the document of sale and the balance of P1,511,600.00 payable "45 days after the removal of all squatters from the above described property." 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. Under the agreement, private respondent 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 petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. 16This option clearly belongs to petitioner and not to private respondent. We share the opinion of the appellate court that 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 17 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." 18 We must hasten to add, however, that where the so-called "potestative condition" is imposed not on the birth of the obligation but on its fulfillment, only the obligation is avoided, leaving unaffected the obligation itself. 19 In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the obligee to choose between proceeding with the agreement or waiving the performance of the condition. It is this provision which is the pertinent rule in the case at bench. Here, evidently, petitioner has waived the performance of the condition imposed on private respondent to free the property from squatters. 20 In any case, private respondent's action for rescission is not warranted. She is not the injured party. 21 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 that violates the reciprocity between them. 22 It is private respondent who has failed in her obligation under the contract. Petitioner 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 arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to pay, having been made prior to the

demand for rescission, assuming for the sake of argument that such a demand is proper under Article 1592 23 of the Civil Code, would likewise suffice to defeat private respondent's prerogative to rescind thereunder. There is no need to still belabor the question of whether the P50,000.00 advance payment is reimbursable to petitioner or forfeitable by private respondent, since, on the basis of our foregoing conclusions, the matter has ceased to be an issue. Suffice it to say that petitioner having opted to proceed with the sale, neither may petitioner demand its reimbursement from private respondent nor may private respondent subject it to forfeiture. WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED AND SET ASIDE, and another is entered ordering petitioner to pay private respondent the balance of the purchase price and the latter to execute the deed of absolute sale in favor of petitioner. No costs. SO ORDERED. Feliciano, Romero, Melo and Panganiban, JJ., concur.

THIRD DIVISION

[G.R. No. 103577. October 7, 1996]

We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated. On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00. Clearly, the conditions appurtenant to the sale are the following: 1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document aforestated; 2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2). On February 6, 1985, the property originally registered in the name of the Coronels father was transferred in their names under TCT No. 327043 (Exh. D; Exh 4) On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C) For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5). On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG,petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents. DECISION MELO, J.: The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00. The undisputed facts of the case were summarized by respondent court in this wise: On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1,240,000.00 - Total amount 50,000.00 - Down payment -----------------------------------------P1,190,000.00 - Balance Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. G; Exh. 7). On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. H; Exh. 8). (Rollo, pp. 134-136) In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits A through J, inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution. On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows: WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting toP1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the counterclaims of defendants and intervenors are hereby dismissed. No pronouncement as to costs. So Ordered. Macabebe, Pampanga for Quezon City, March 1, 1989.

(Rollo, p. 106) A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly: The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court). Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed. IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED. SO ORDERED. Quezon City, Philippines, July 12, 1989. (Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court. Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned. While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit. The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled Receipt of Down Payment which was offered in evidence by both parties. There is no dispute as to the fact that the said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows: Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. While, it is the position of private respondents that the Receipt of Down Payment embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale. Plainly, such variance in the contending parties contention is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. The Civil Code defines a contract of sale, thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) c) Determinate subject matter; and Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. 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 we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]) , this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was 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. Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: Art. 1479. 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 of the promise is supported by a consideration distinct from the price. A contract to sell may thus 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.

A contract to sell as defined hereinabove, 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. 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. 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. 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, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. 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] ). Thus, when petitioners declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot , covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their property. When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioners father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers herein 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, the Court may safely presume that, 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 in the case at bar 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 change to their names and immediately thereafter, to execute the written deed of absolute sale. Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new

transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract 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 Romulo A. Coronel, et. al., 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, Constancio P. Coronel, to their names. The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz 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. Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus, Art. 1475. 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. Art. 1181. 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. Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer

certificate of title already in their names to private respondent Ramona P. Alcaraz, the 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. It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that: 3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated". The sale was still subject to this suspensive condition. (Emphasis supplied.) (Rollo, p. 16) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend, continuing in the same paragraph, that: . . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there could be no perfected contract of sale. (Emphasis supplied.) (Ibid.) not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that: Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4). The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their fathers name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4). We, therefore, hold that, in accordance with Article 1187 which pertinently provides -

Art. 1187. 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. 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 February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose. Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. 774. 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. Petitioners-sellers in the case at bar 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 point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). Be it also noted that petitioners claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedents name to their names on February 6, 1985. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that: Art. 1431. 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.

Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney ( Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these 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]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale, there being 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]) Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale. Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramonas corresponding obligation to

pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit: Art. 1169. 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. (Emphasis supplied.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the person who presents the oldest title, provided there is good faith. The record of the case shows that the Deed of Absolute Sale dated April 25, 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 June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to pass to the 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. In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains: The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). (J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith. We are not persuaded by such argument. In a case of double sale, what finds relevance and materiality is not whether or not the second 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. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the time of the registration of the property. This Court had occasions to rule that: 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 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below. 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. Thus, We will not touch this issue and no longer disturb the lower courts ruling on this point. WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED. SO ORDERED. Narvasa, C.J. (Chairman), Davide, Jr., and Francisco, JJ., concur. Panganiban, J., no part.

THIRD DIVISION UNITED MUSLIM AND CHRISTIAN URBAN POOR G.R. No. 179653 ASSOCIATION, INC.represented by its President, MANUEL V. BUEN, Present: Petitioner, YNARES-SANTIAGO, J., Chairperson, - versus CHICO-NAZARIO, VELASCO, JR., NACHURA, and BRYC-V DEVELOPMENT CORPORATION represented PERALTA, JJ. by its President, BENJAMIN QUIDILLA; andSEA FOODS CORPORATION,represented by its Executive Vice Promulgated: President,VICENTE T. HERNANDEZ, Respondents. July 31, 2009 x------------------------------------------------------------------------------------x

through its President, Carmen T. Diola, initiated negotiations with SFC for the purchase thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds of its pending loan application with National Home Mortgage Finance Corporation (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent to Purchase by UMCUPAI, providing, in pertinent part: WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No. 300 situated in Lower Calarian, Zamboanga City, consisting of 61,736 square meters, and more particularly described in Transfer Certificate of Title No. 576 of the Registry of Deeds of Zamboanga City; WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No. 403410) and duly accredited with the Presidential Commission for the Urban Poor, has approached [SFC] and negotiated for the ACQUISITION of the above-described property of [SFC]; WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter has taken steps with the proper government authorities particularly the Mayor of Zamboanga City and its City Housing Board which will act as Originator in the acquisition of said property which will enable UMCUPAI to avail of its Community Mortgage Program; WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land; WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a formal manifestation of Intent to Sell from [SFC]; NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree as follows: 1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736 square meters situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of the Registry of Deeds of Zamboanga City to UMCUPAI at the price of P105.00 per square meter, free from all liens, charges and encumbrances; 2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property and shall endeavor to raise the

DECISION NACHURA, J.: This petition for review on certiorari seeks to set aside the Decision[1] of the Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision[2] of the Regional Trial Court (RTC), Branch 16, Zamboanga City in Civil Case No. 467(4544). The facts are simple. Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan, Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T-576). Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No. 300,

necessary funds to acquire same at the abovementioned price of P105.00 per square meter; 3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title and all other pertinent documents upon full payment of the purchase price; 4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration, transfer tax and other expenses shall be paid by the UMCUPAI.[3]

UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew with SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite the extension, the three-month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V Development Corporation (BRYC). A year later, UMCUPAI filed with the RTC a complaint against respondents

However, the intended sale was derailed due to UMCUPAIs inability to secure the loan from NHMF as not all its members occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject property, UMCUPAI, in a series of conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatteroccupants to purchase a smaller portion thereof. Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate titles: 1. 117,448; Lot No. 300-A with an area of 41,460 square meters under TCT No. T-

SFC and BRYC seeking to annul the sale of Lot No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale between the respondents violated its valid and subsisting agreement with SFC embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC in the purchase of Lot No. 300-C. In refutation, BRYC said that UMCUPAIs complaint did not state a cause of action since UMCUPAI had unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a Letter of Intent dated August 18, 1995 imploring BRYC to re-sell the subject lot. In a separate Answer, SFC countered that the Letter of Intent dated October 4,

2. 117,449; and 3. 117,450.

Lot No. 300-B with an area of 1,405 square meters under TCT No. T-

1991 is not, and cannot be considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was drawn and executed merely to accommodate UMCUPAI and enable it to comply with the loan documentation

Lot No. 300-C with an area of 18,872 square meters under TCT No. T-

requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4, 1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI failed to do when it did not obtain the loan from NHMF.

On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58. In turn, Lot No. 300-B was constituted as road right of way and donated by SFC to the local government. After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that the Letter of Intent was executed to facilitate the approval of UMCUPAIs loan from NHMF for its intended purchase of Lot No. 300. According to the RTC, the Letter of Intent was simply SFCs declaration of intention to sell, and not a promise to sell, the

subject lot. On the whole, the RTC concluded that the Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a bilateral contract to sell and buy. As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling. Hence, this recourse by UMCUPAI positing a sole issue for our resolution: IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF THE PHILIPPINES?[4]

UMCUPAI is adamant, however, that the CA erred when it applied the second paragraph of Article 1479 of the Civil Code instead of the first paragraph thereof. UMCUPAI urges us that the first paragraph of Article 1479 contemplates a bilateral reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful not to designate the Letter of Intent as a Contract to Sell. UMCUPAI simply insists that the Letter of Intent is not a unilateral promise to sell or buy which has to be supported by a consideration distinct from the price for it to be binding on the promissor. In short, UMCUPAI claims that the Letter of Intent did not merely grant the parties the option to respectively sell or buy the subject property. Although not stated plainly, UMCUPAI claims that the Letter of Intent is equivalent to a conditional contract of sale subject only to the suspensive condition of payment of the purchase price. UMCUPAI appears to labor under a cloud of confusion. The first paragraph of

The petition deserves scant consideration. We completely agree with the lower courts rulings. Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.[5] A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2) when a lower courts inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, would justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, or are premised on the absence of evidence, or are contradicted by evidence on record.[6] None of the foregoing exceptions necessitating a reversal of the assailed decision obtain in this instance.

Article 1479 contemplates the bilateral relationship of a contract to sell as distinguished from a contract of sale which may be absolute or conditional under Article 1458 [7] of the same code. It reads: Art. 1479. 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.

The case of Coronel v. Court of Appeals[8] is illuminating and explains the distinction between a conditional contract of sale under Article 1458 of the Civil Code and a bilateral contract to sell under Article 1479 of the same code: A contract to sell may thus 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.

A contract to sell as defined hereinabove, 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. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. 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. 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. 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, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.

In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor a conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was executed to accommodate UMCUPAI and facilitate its loan application with NHMF. The 4th and 5th paragraphs of the recitals (whereas clauses) specifically provide: WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land; WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a formal manifestation of Intent to Sell from [SFC].

Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property, subject only to the condition of complete payment of the purchase price; nor, at the least, that SFC, although expressly retaining ownership thereof, binds itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell is just that a manifestation of SFCs intention to sell the property and UMCUPAIs intention to acquire the same. This is quite obvious from the reference to the execution of an Absolute Deed of Sale in paragraph three[9] of the Letter of Intent. As the CA did, we quote with favor the RTCs disquisition: The Decision in this case hinges on the legal interpretation of the Agreement entered into by SFC and UMCUPAI denominated as Letter of Intent to Sell by Landowner and Letter of Intent to Purchase by United Muslim and Christian Urban Poor Association, Inc. Blacks Law Dictionary says that a Letter of Intent is customarily employed to reduce to writing a preliminary understanding of parties who intend to enter into contract. It is a phrase ordinarily used to denote a brief memorandum of the preliminary understanding of parties who intend to enter into a

contract. It is a written statement expressing the intention of the parties to enter into a formal agreement especially a business arrangement or transaction. In their Agreement, SFC expressly declared its intention to sell and UMCUPAI expressly declared its intention to buy subject property. An intention is a mere idea, goal, or plan. It simply signifies a course of action that one proposes to follow. It simply indicates what one proposes to do or accomplish. A mere intention cannot give rise to an obligation to give, to do or not to do (Article 1156, Civil Code). One cannot be bound by what he proposes or plans to do or accomplish. A Letter of Intent is not a contract between the parties thereto because it does not bind one party, with respect to the other, to give something, or to render some service (Art. 1305, Civil Code). xxx xxx xxx

Letter of Intent/Agreement to buy subject land to the exclusion of all others within a fixed period nor was SFC bound under said Agreement to Sell exclusively to UMCUPAI only the said land within the fixed period. Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy contemplated under Article 1479 of the Civil Code which is reciprocally demandable. The Letter of Intent/Agreement does not contain a PROMISE to sell and to buy subject property. There was no promise or commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its intention to buy the land, subject to the condition that UMCUPAI could raise the necessary funds to acquire the same at the price of P105.00 per square meter x x x While UMCUPAI succeeded in raising funds to acquire a portion of Lot No. 300-A, it failed to raise funds to pay for Lot No. 300-C. From October 4, 1991 when the Letter of Intent was signed to June, 1995, UMCUPAI had about three (3) years and eight (8) months within which to pursue its intention to buy subject land from SFC. Within that period, UMCUPAI had ample time within which to acquire Lot No. 300-C, as in fact it had acquired Lot No. 300-A which is much bigger than Lot No. 300-C and occupied by more members of UMCUPAI. The failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V cannot be blamed on SFC because all that UMCUPAI had to do was to raise funds to pay for Lot No. 300C which it did with respect to Lot No. 300-A. SFC had nothing to do with SFCs unilateral action through Mrs. Antonina Graciano to postpone the processing of the acquisition of Lot No. 300-C, which it referred to as Phase II, until after the payment to SFC of the acquisition price for Lot No. 300-A or Phase I x x x

The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding of the parties wherein they declared their intention to enter into a contract of sale. It is subject to the condition that UMCUPAI will apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land. One of the requirements for such loan is a formal manifestation of Intent to Sell from SFC. Thus, the Letter of Intent to Sell fell short of an offer contemplated in Article 1319 of the Civil Code because it is not a certain and definite proposal to make a contract but merely a declaration of SFCs intention to enter into a contract. UMCUPAIs declaration of intention to buy is also not certain and definite as it is subject to the condition that UMCUPAI shall endeavor to raise funds to acquire subject land. The acceptance of the offer must be absolute; it must be plain and unconditional. Moreover, the Letter of Intent/Agreement does not contain a promise or commitment to enter into a contract of sale as it merely declared the intention of the parties to enter into a contract of sale upon fulfillment of a condition that UMCUPAI could secure a loan to pay for the price of a land. The Letter of Intent/Agreement is not an option contract because aside from the fact that it is merely a declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary funds to pay the price of the land, and does not contain a binding promise to sell and buy, it is not supported by a distinct consideration distinct from the price of the land intended to be sold and to be bought x x x No option was granted to UMCUPAI under the

WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against the petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 153820 October 16, 2009

c) That should in case (sic) the BUYER fails to comply with the terms and conditions within the above stated grace period, then the SELLERS shall have the right to forfeit the down payment, and to rescind this conditional sale without need of judicial action; d) That in case, BUYER have complied with the terms and conditions of this contract, then the SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale; Pursuant to the Deed of Conditional Sale, Tan issued and delivered to the coowners/vendors Metrobank Check No. 904407 for P200,000.00 as down payment for the property, for which the vendors issued a corresponding receipt. On November 6, 1992, Lamberto Benolirao died intestate. Erlinda Benolirao (his widow and one of the vendors of the property) and her children, as heirs of the deceased, executed an extrajudicial settlement of Lambertos estate on January 20, 1993. On the basis of the extrajudicial settlement, a new certificate of title over the property, TCT No. 27335, was issued on March 26, 1993 in the names of the Spouses Reynaldo and Norma Taningco and Erlinda Benolirao and her children. Pursuant to Section 4, Rule 74 of the Rules, the following annotation was made on TCT No. 27335: x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao As stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to pay the balance of the purchase price. By agreement of the parties, this period was extended by two months, so Tan had until May 15, 1993 to pay the balance. Tan failed to pay and asked for another extension, which the vendors again granted. Notwithstanding this second extension, Tan still failed to pay the remaining balance due on May 21, 1993. The vendors thus wrote him a letter demanding payment of the balance of the purchase price within five (5) days from notice; otherwise, they would declare the rescission of the conditional sale and the forfeiture of his down payment based on the terms of the contract. Tan refused to comply with the vendors demand and instead wrote them a letter (dated May 28, 1993) claiming that the annotation on the title, made pursuant to Section 4, Rule 74 of the Rules, constituted an encumbrance on the property that would prevent the vendors from delivering a clean title to him. Thus, he alleged that he could no longer be required to pay the balance of the purchase price and demanded the return of his down payment. When the vendors refused to refund the down payment, Tan, through counsel, sent another demand letter to the vendors on June 18, 1993. The vendors still refused to heed Tans demand, prompting Tan to file on June 19, 1993 a complaint with the RTC of Pasay City for specific performance against the

DELFIN TAN, Petitioner, vs. ERLINDA C. BENOLIRAO, ANDREW C. BENOLIRAO, ROMANO C. BENOLIRAO, DION C. BENOLIRAO, SPS. REYNALDO TANINGCO and NORMA D. BENOLIRAO, EVELYN T. MONREAL, and ANN KARINA TANINGCO,Respondents. DECISION Is an annotation made pursuant to Section 4, Rule 74 of the Rules of Court (Rules) on a certificate of title covering real property considered an encumbrance on the property? We resolve this question in the petition for review on certiorari1 filed by Delfin Tan (Tan) to assail the decision of the Court of Appeals (CA) in CA-G.R. CV No. 52033 2and the decision of the Regional Trial Court (RTC)3 that commonly declared the forfeiture of his P200,000.00 down payment as proper, pursuant to the terms of his contract with the respondents. THE ANTECEDENTS The facts are not disputed. Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma Taningco were the co-owners of a 689-square meter parcel of land (property) located in Tagaytay City and covered by Transfer Certificate of Title (TCT) No. 26423. On October 6, 1992, the coowners executed a Deed of Conditional Sale over the property in favor of Tan for the price of P1,378,000.00. The deed stated: a) An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND PESOS, Philippine Currency, upon signing of this contract; then the remaining balance of ONE MILLION ONE HUNDRED SEVENTY EIGHT THOUSAND (P1,178,000.00) PESOS, shall be payable within a period of one hundred fifty (150) days from date hereof without interest; b) That for any reason, BUYER fails to pay the remaining balance within above mentioned period, the BUYER shall have a grace period of sixty (60) days within which to make the payment, provided that there shall be an interest of 15% per annum on the balance amount due from the SELLERS;

vendors, including Andrew Benolirao, Romano Benolirao, Dion Benolirao as heirs of Lamberto Benolirao, together with Evelyn Monreal and Ann Karina Taningco (collectively, the respondents). In his complaint, Tan alleged that there was a novation of the Deed of Conditional Sale done without his consent since the annotation on the title created an encumbrance over the property. Tan prayed for the refund of the down payment and the rescission of the contract. On August 9, 1993, Tan amended his Complaint, contending that if the respondents insist on forfeiting the down payment, he would be willing to pay the balance of the purchase price provided there is reformation of the Deed of Conditional Sale. In the meantime, Tan caused the annotation on the title of a notice of lis pendens. On August 21, 1993, the respondents executed a Deed of Absolute Sale over the property in favor of Hector de Guzman (de Guzman) for the price of P689,000.00. Thereafter, the respondents moved for the cancellation of the notice of lis pendens on the ground that it was inappropriate since the case that Tan filed was a personal action which did not involve either title to, or possession of, real property. The RTC issued an order dated October 22, 1993 granting the respondents motion to cancel the lis pendens annotation on the title. Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman registered the property and TCT No. 28104 was issued in his name. Tan then filed a motion to carry over the lis pendens annotation to TCT No. 28104 registered in de Guzmans name, but the RTC denied the motion. On September 8, 1995, after due proceedings, the RTC rendered judgment ruling that the respondents forfeiture of Tans down payment was proper in accordance with the terms and conditions of the contract between the parties.4 The RTC ordered Tan to pay the respondents the amount of P30,000.00, plus P1,000.00 per court appearance, as attorneys fees, and to pay the cost of suit. On appeal, the CA dismissed the petition and affirmed the ruling of the trial court in toto. Hence, the present petition. THE ISSUES Tan argues that the CA erred in affirming the RTCs ruling to cancel the lis pendens annotation on TCT No. 27335. Due to the unauthorized novation of the agreement, Tan presented before the trial court two alternative remedies in his complaint either the rescission of the contract and the return of the down payment, or the reformation of the contract to adjust the payment period, so that Tan will pay the remaining balance of the purchase price only after the lapse of the required two-year encumbrance on the title. Tan posits that the CA

erroneously disregarded the alternative remedy of reformation of contract when it affirmed the removal of the lis pendens annotation on the title. Tan further contends that the CA erred when it recognized the validity of the forfeiture of the down payment in favor of the vendors. While admitting that the Deed of Conditional Sale contained a forfeiture clause, he insists that this clause applies only if the failure to pay the balance of the purchase price was through his own fault or negligence. In the present case, Tan claims that he was justified in refusing to pay the balance price since the vendors would not have been able to comply with their obligation to deliver a "clean" title covering the property. Lastly, Tan maintains that the CA erred in ordering him to pay the respondents P30,000.00, plus P1,000.00 per court appearance as attorneys fees, since he filed the foregoing action in good faith, believing that he is in the right. The respondents, on the other hand, assert that the petition should be dismissed for raising pure questions of fact, in contravention of the provisions of Rule 45 of the Rules which provides that only questions of law can be raised in petitions for review on certiorari. THE COURTS RULING The petition is granted. No new issues can be raised in the Memorandum At the onset, we note that Tan raised the following additional assignment of errors in his Memorandum: (a) the CA erred in holding that the petitioner could seek reformation of the Deed of Conditional Sale only if he paid the balance of the purchase price and if the vendors refused to execute the deed of absolute sale; and (b) the CA erred in holding that the petitioner was estopped from asking for the reformation of the contract or for specific performance. The Courts September 27, 2004 Resolution expressly stated that "No new issues may be raised by a party in his/its Memorandum." Explaining the reason for this rule, we said that: The raising of additional issues in a memorandum before the Supreme Court is irregular, because said memorandum is supposed to be in support merely of the position taken by the party concerned in his petition, and the raising of new issues amounts to the filing of a petition beyond the reglementary period. The purpose of this rule is to provide all parties to a case a fair opportunity to be heard. No new points of law, theories, issues or arguments may be raised by a party in the Memorandum for the reason that to permit these would be offensive to the basic rules of fair play, justice and due process. 5

Tan contravened the Courts explicit instructions by raising these additional errors. Hence, we disregard them and focus instead on the issues previously raised in the petition and properly included in the Memorandum. Petition raises a question of law Contrary to the respondents claim, the issue raised in the present petition defined in the opening paragraph of this Decision is a pure question of law. Hence, the petition and the issue it presents are properly cognizable by this Court. Lis pendens annotation not proper in personal actions Section 14, Rule 13 of the Rules enumerates the instances when a notice of lis pendens can be validly annotated on the title to real property: Sec. 14. Notice of lis pendens. In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of filing such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names. The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded. The litigation subject of the notice of lis pendens must directly involve a specific property which is necessarily affected by the judgment.6 Tans complaint prayed for either the rescission or the reformation of the Deed of Conditional Sale. While the Deed does have real property for its object, we find that Tans complaint is an in personam action, as Tan asked the court to compel the respondents to do something either to rescind the contract and return the down payment, or to reform the contract by extending the period given to pay the remaining balance of the purchase price. Either way, Tan wants to enforce his personal rights against the respondents, not against the property subject of the Deed. As we explained in Domagas v. Jensen: 7

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him. Furthermore, as will be explained in detail below, the contract between the parties was merely a contract to sell where the vendors retained title and ownership to the property until Tan had fully paid the purchase price. Since Tan had no claim of ownership or title to the property yet, he obviously had no right to ask for the annotation of a lis pendens notice on the title of the property. Contract is a mere contract to sell A contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. 8 Article 1485 of the Civil Code defines a contract of sale as follows: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership 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. The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or promised.9 In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed, i.e., full payment of the purchase price. 10 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.11 In the present case, the true nature of the contract is revealed by paragraph D thereof, which states:

xxx d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale; xxx Jurisprudence has established that where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to sell. 12 Thus, while the contract is denominated as a Deed of Conditional Sale, the presence of the above-quoted provision identifies the contract as being a mere contract to sell. A Section 4, Rule 74 annotation is an encumbrance on the property While Tan admits that he refused to pay the balance of the purchase price, he claims that he had valid reason to do so the sudden appearance of an annotation on the title pursuant to Section 4, Rule 74 of the Rules, which Tan considered an encumbrance on the property. We find Tans argument meritorious. The annotation placed on TCT No. 27335, the new title issued to reflect the extrajudicial partition of Lamberto Benoliraos estate among his heirs, states: x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao [Emphasis supplied.] This annotation was placed on the title pursuant to Section 4, Rule 74 of the Rules, which reads: Sec. 4. Liability of distributees and estate. - If it shall appear at any time within two (2) years after the settlement and distribution of an estate in accordance with the provisions of either of the first two sections of this rule, that an heir or other person has been unduly deprived of his lawful participation in the estate, such heir or such other person may compel the settlement of the estate in the courts in the manner hereinafter provided for the purpose of satisfying such lawful participation. And if withinthe same time of two (2) years, it shall appear that there are debts outstanding against the estate which have not been paid, or that an heir or other person has been unduly deprived of his lawful participation payable in money, the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of such debts or lawful participation and order how much and in what manner each distributee shall contribute in the payment thereof, and may

issue execution, if circumstances require, against the bond provided in the preceding section or against the real estate belonging to the deceased , or both. Such bond and such real estate shall remain charged with a liability to creditors, heirs, or other persons for the full period of two (2) years after such distribution, notwithstanding any transfers of real estate that may have been made. [Emphasis supplied.] Senator Vicente Francisco discusses this provision in his book The Revised Rules of Court in the Philippines,13where he states: The provision of Section 4, Rule 74 prescribes the procedure to be followed if within two years after an extrajudicial partition or summary distribution is made, an heir or other person appears to have been deprived of his lawful participation in the estate, or some outstanding debts which have not been paid are discovered. When the lawful participation of the heir is not payable in money, because, for instance, he is entitled to a part of the real property that has been partitioned, there can be no other procedure than to cancel the partition so made and make a new division, unless, of course, the heir agrees to be paid the value of his participation with interest. But in case the lawful participation of the heir consists in his share in personal property of money left by the decedent, or in case unpaid debts are discovered within the said period of two years, the procedure is not to cancel the partition, nor to appoint an administrator to re-assemble the assets, as was allowed under the old Code, but the court, after hearing, shall fix the amount of such debts or lawful participation in proportion to or to the extent of the assets they have respectively received and, if circumstances require, it may issue execution against the real estate belonging to the decedent, or both. The present procedure is more expedient and less expensive in that it dispenses with the appointment of an administrator and does not disturb the possession enjoyed by the distributees.14 [Emphasis supplied.] An annotation is placed on new certificates of title issued pursuant to the distribution and partition of a decedents real properties to warn third persons on the possible interests of excluded heirs or unpaid creditors in these properties. The annotation, therefore, creates a legal encumbrance or lien on the real property in favor of the excluded heirs or creditors. Where a buyer purchases the real property despite the annotation, he must be ready for the possibility that the title could be subject to the rights of excluded parties. The cancellation of the sale would be the logical consequence where: (a) the annotation clearly appears on the title, warning all would-be buyers; (b) the sale unlawfully interferes with the rights of heirs; and (c) the rightful heirs bring an action to question the transfer within the two-year period provided by law. As we held in Vda. de Francisco v. Carreon:15 And Section 4, Rule 74 xxx expressly authorizes the court to give to every heir his lawful participation in the real estate "notwithstanding any transfers of such real estate" and to "issue execution" thereon. All this implies that, when within

the amendatory period the realty has been alienated, the court in re-dividing it among the heirs has the authority to direct cancellation of such alienation in the same estate proceedings, whenever it becomes necessary to do so. To require the institution of a separate action for such annulment would run counter to the letter of the above rule and the spirit of these summary settlements. [Emphasis supplied.] Similarly, in Sps. Domingo v. Roces,16 we said: The foregoing rule clearly covers transfers of real property to any person, as long as the deprived heir or creditor vindicates his rights within two years from the date of the settlement and distribution of estate. Contrary to petitioners contention, the effects of this provision are not limited to the heirs or original distributees of the estate properties, but shall affect any transferee of the properties. [Emphasis supplied.] Indeed, in David v. Malay,17 although the title of the property had already been registered in the name of the third party buyers, we cancelled the sale and ordered the reconveyance of the property to the estate of the deceased for proper disposal among his rightful heirs. By the time Tans obligation to pay the balance of the purchase price arose on May 21, 1993 (on account of the extensions granted by the respondents), a new certificate of title covering the property had already been issued on March 26, 1993, which contained the encumbrance on the property; the encumbrance would remain so attached until the expiration of the two-year period. Clearly, at this time, the vendors could no longer compel Tan to pay the balance of the purchase since considering they themselves could not fulfill their obligation to transfer a clean title over the property to Tan. Contract to sell is not rescinded but terminated What then happens to the contract? We have held in numerous cases18 that the remedy of rescission under Article 1191 cannot apply to mere contracts to sell. We explained the reason for this in Santos v. Court of Appeals,19 where we said: [I]n a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of

sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. x x x Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property. Neither provision is applicable [to a contract to sell]. [Emphasis supplied.] We, therefore, hold that the contract to sell was terminated when the vendors could no longer legally compel Tan to pay the balance of the purchase price as a result of the legal encumbrance which attached to the title of the property. Since Tans refusal to pay was due to the supervening event of a legal encumbrance on the property and not through his own fault or negligence, we find and so hold that the forfeiture of Tans down payment was clearly unwarranted. Award of Attorneys fees As evident from our previous discussion, Tan had a valid reason for refusing to pay the balance of the purchase price for the property. Consequently, there is no basis for the award of attorneys fees in favor of the respondents. On the other hand, we award attorneys fees in favor of Tan, since he was compelled to litigate due to the respondents refusal to return his down payment despite the fact that they could no longer comply with their obligation under the contract to sell, i.e., to convey a clean title. Given the facts of this case, we find the award ofP50,000.00 as attorneys fees proper. Monetary award is subject to legal interest Undoubtedly, Tan made a clear and unequivocal demand on the vendors to return his down payment as early as May 28, 1993. Pursuant to our definitive ruling in Eastern Shipping Lines, Inc. v. Court of Appeals ,20 we hold that the vendors should return the P200,000.00 down payment to Tan, subject to the legal interest of 6% per annum computed from May 28, 1993, the date of the first demand letter.1avvphi1 Furthermore, after a judgment has become final and executory, the rate of legal interest, whether the obligation was in the form of a loan or forbearance of money or otherwise, shall be 12% per annum from such finality until its satisfaction. Accordingly, the principal obligation of P200,000.00 shall bear 6% interest from the date of first demand or from May 28, 1993. From the date the liability for the principal obligation and attorneys fees has become final and executory, an annual interest of 12% shall be imposed on these obligations until

their final satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. WHEREFORE, premises considered, we hereby GRANT the petition and, accordingly, ANNUL and SET ASIDE the May 30, 2002 decision of the Court of Appeals in CA-G.R. CV No. 52033. Another judgment is rendered declaring the Deed of Conditional Sale terminated and ordering the respondents to return the P200,000.00 down payment to petitioner Delfin Tan, subject to legal interest of 6% per annum, computed from May 28, 1993. The respondents are also ordered to pay, jointly and severally, petitioner Delfin Tan the amount of P50,000.00 as and by way of attorneys fees. Once this decision becomes final and executory, respondents are ordered to pay interest at 12% per annum on the principal obligation as well as the attorneys fees, until full payment of these amounts. Costs against the respondents. SO ORDERED. ARTURO Associate Justice WE CONCUR: LEONARDO Associate Chairperson A. QUISUMBING * Justice D. BRION

ANTONIO EDUARDO CONCHITA CARPIO MORALES NACHURA** Associate Justice Associate Justice ROBERTO Associate Justice CERTIFICATION A.

B.

ABAD

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. LEONARDO Acting Chief Justice A. QUISUMBING

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 170405 February 2, 2010

Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent and release the certificates of title. Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed RSLAI of her agreement with petitioner for her to assume petitioners outstanding loan. RSLAI required her to undergo credit investigation. Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the certificates of title. Respondent persistently contacted petitioner but her efforts proved futile. On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and damages 6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus, petitioner fraudulently deprived her of the properties. Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition ( i.e., that RSLAI approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the properties. Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with gross and evident bad faith. Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was subject to a condition. The perfection of a contract of sale depended on RSLAIs approval of the assumption of mortgage. Since RSLAI did not allow respondent to assume petitioners obligation, the RTC held that the sale was never perfected. In a decision dated August 27, 1999, 7 the RTC dismissed the complaint for lack of cause of action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorneys fees and the cost of suit. Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting that the court a quo erred in dismissing the complaint.

RAYMUNDO S. DE LEON, Petitioner, vs. BENITA T. ONG.1 Respondent. DECISION CORONA, J.: On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage 3 stating: xxx xxx xxx

That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions: 1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of [respondent] without any further cost whatsoever; 2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis supplied) xxx xxx xxx

The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and exemplary damages for fraudulently depriving respondent of the properties. In a decision dated July 22, 2005, 9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to respondent and pay her P50,000 moral damages andP15,000 exemplary damages. Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.10 Hence, this petition,11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell. Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive condition, that is , the approval by RSLAI of respondents assumption of mortgage. Because RSLAI did not allow respondent to assume his (petitioners) obligation, the condition never materialized. Consequently, there was no sale. Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full ownership of the subject properties upon the execution of the deed. We modify the decision of the CA. Contract of Sale or Contract to Sell? The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to sell while the CA held that it was a contract of sale. In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.12 On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller can only sue for damages.13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a manner absolute and irrevocable" for a sum of P1.1 million.14 With regard to the manner of payment, it required respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance15payable directly to RSLAI (on behalf of petitioner) within a reasonable time.16 Nothing in said instrument implied that petitioner reserved ownership of the properties until the full payment of the purchase price. 17 On the contrary, the terms and conditions of the deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the performance of the contract, not the perfection thereof nor the transfer of ownership. Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer. 18In this regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing sold. In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent and release his certificates of title to her. The totality of petitioners acts clearly indicates that he had unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into. Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this connection, Article 1186 of the Civil Code provides: Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Void Sale Or Double Sale? Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate occasions.20 However, the second sale was not void for the sole reason that petitioner had previously sold the same properties to respondent. On this account, the CA erred. This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller to the two different buyers in good faith.

Article 1544 of the Civil Code provides: Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (emphasis supplied) This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith. A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of some other persons claim or interest in the property. 21 The law requires, on the part of the buyer, lack of notice of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any defect in the sellers title. Was respondent a purchaser in good faith? Yes. Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the balance of petitioners outstanding obligation to RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioners obligation. However, because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself rendered respondents obligation to assume petitioners indebtedness to RSLAI impossible to perform. Article 1266 of the Civil Code provides: Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible without the fault of the obligor. Since respondents obligation to assume petitioners outstanding balance with RSLAI became impossible without her fault, she was released from the said obligation. Moreover, because petitioner himself willfully prevented the

condition vis--vis the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is deemed to have fully complied with the condition of the payment of the remainder of the purchase price. Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent. Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable. Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of deeds, the one who took prior possession of the properties shall be the lawful owner thereof. In this instance, petitioner delivered the properties to respondent when he executed the notarized deed22 and handed over to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became the lawful owner of the properties. Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled, respondents obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner. Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is because the provisions, terms and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title to respondent. We likewise affirm the award of damages. WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing the balance of the purchase price as provided in their March 10, 1993 agreement. Costs against petitioner. SO ORDERED. RENATO Associate Chairperson C. CORONA Justice

E. CONTRACT TO SELL Republic of the Philippines Supreme Court Manila FIRST DIVISION LUZON DEVELOPMENT BANK, Petitioner, - versus ANGELES CATHERINE ENRIQUEZ, Respondent. x----------------------------x DELTA DEVELOPMENT and MANAGEMENT SERVICES, INC., Petitioner, G.R. No. 168666 Present: - versus CORONA, C.J., Chairperson, VELASCO, JR., LEONARDO-DE CASTRO, DEL CASTILLO, and PEREZ, JJ. G.R. No. 168646

statute derives its vitality from the purpose for which it is enacted and to construe it in a manner that disregards or defeats such purpose is to nullify or destroy the law.[1] These cases involve the separate appeals of Luzon Development Bank
[2]

(BANK) and Delta Development and Management Services, Inc.[3] (DELTA)

from the November 30, 2004 Decision of the Court of Appeals (CA), as well as its June 22, 2005 Resolution in CA-G.R. SP No. 81280. The dispositive portion of the assailed Decision reads: WHEREFORE, premises considered, the Decision dated June 17, 2003 and Resolution dated November 24, 2003 are AFFIRMED with [m]odification in so far as Delta Development and Management Services, Inc. is liable and directed to pay petitioner Luzon Development Bank the value of the subject lot subject matter of the Contract to Sell between Delta Development and Management Services, Inc. and the private respondent [Catherine Angeles Enriquez]. SO ORDERED.[4]

ANGELES CATHERINE ENRIQUEZ and LUZON DEVELOPMENT BANK, Promulgated: Respondents. January 12, 2011 x--------------------------------------------------------x DECISION

Factual Antecedents The BANK is a domestic financial corporation that extends loans to subdivision developers/owners.[5] Petitioner DELTA is a domestic corporation engaged in the business of

DEL CASTILLO, J.: The protection afforded to a subdivision lot buyer under Presidential Decree (PD) No. 957 or The Subdivision and Condominium Buyers Protective Decree will not be defeated by someone who is not an innocent purchaser for value. The lofty aspirations of PD 957 should be read in every provision of the statute, in every contract that undermines its objects, in every transaction which threatens its fruition. For a

developing and selling real estate properties, particularly Delta Homes I in Cavite. DELTA is owned by Ricardo De Leon (De Leon),[6] who is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. T-637183 [7]of the Registry of Deeds of the Province of Cavite, which corresponds to Lot 4 of Delta Homes I. Said Lot 4 is the subject matter of these cases. On July 3, 1995, De Leon and his spouse obtained a P4 million loan from the BANK for the express purpose of developing Delta Homes I.[8] To secure the loan, the

spouses De Leon executed in favor of the BANK a real estate mortgage (REM) on several of their properties,[9] including Lot 4. Subsequently, this REM was amended[10] by increasing the amount of the secured loan from P4 million to P8 million. Both the REM and the amendment were annotated on TCT No. T-637183.[11] DELTA then obtained a Certificate of Registration [12] and a License to Sell[13] from the Housing and Land Use Regulatory Board (HLURB).

with the building and improvements existing thereon x x x in payment of the total obligation owing to [the Bank] x x x.[16] Unknown to Enriquez, among the properties assigned to the BANK was the house and lot of Lot 4, [17] which is the subject of her Contract to Sell with DELTA. The records do not bear out and the parties are silent on whether the BANK was able to transfer title to its name. It appears, however, that the dacion en pago was not annotated on the TCT of Lot 4.[18] On November 18, 1999, Enriquez filed a complaint against DELTA and the

Sometime in 1997, DELTA executed a Contract to Sell with respondent Angeles Catherine Enriquez (Enriquez)[14] over the house and lot in Lot 4 for the purchase price of P614,950.00. Enriquez made a downpayment of P114,950.00. The Contract to Sell contained the following provisions: That the vendee/s offered to buy and the Owner agreed to sell the above-described property subject to the following terms and conditions to wit: xxxx 6. That the (sic) warning shall be served upon the Vendee/s for failure to pay x x x Provided, however, that for failure to pay three (3) successive monthly installment payments, the Owner may consider this Contract to Sell null and void ab initio without further proceedings or court action and all payments shall be forfeited in favor of the Owner as liquidated damages and expenses for documentations. x x x That upon full payment of the total consideration if payable in cash, the Owner shall execute a final deed of sale in favor of the Vendee/s. However, if the term of the contract is for a certain period of time, only upon full payment of the total consideration that a final deed of sale shall be executed by the Owner in favor of the Vendee/s.
[15]

BANK before the Region IV Office of the HLURB [19] alleging that DELTA violated the terms of its License to Sell by: (a) selling the house and lots for a price exceeding that prescribed in Batas Pambansa (BP) Bilang 220;[20] and (b) failing to get a clearance for the mortgage from the HLURB. Enriquez sought a full refund of the P301,063.42 that she had already paid to DELTA, award of damages, and the imposition of administrative fines on DELTA and the BANK. In his June 1, 2000 Decision,[21] HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase price, but ordered DELTA to accept payment of the balance of P108,013.36 from Enriquez, and (upon such payment) to deliver to Enriquez the title to the house and lot free from liens and encumbrances. The dispositive portion reads: WHEREFORE, premises considered, a decision is hereby rendered as follows: 1. Ordering [DELTA] to accept complainant[]s payments in the amount of P108,013.36 representing her balance based on the maximum selling price of P375,000.00; 2. Upon full payment, ordering Delta to deliver the title in favor of the complainant free from any liens and encumbrances; 3. Ordering [DELTA] to pay complainant the amount of P50,000.00 as and by way of moral damages; 4. Ordering [DELTA] to pay complainant the amount of P50,000.00 as and by way of exemplary damages; 5. Ordering [DELTA] to pay complainant P10,000.00 as costs of suit; and

When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing the REM, agreed to a dation in payment or a dacion en pago. The Deed of Assignment in Payment of Debt was executed on September 30, 1998 and stated that DELTA assigns, transfers, and conveys and sets over [to] the assignee that real estate

6. Respondent DELTA to pay administrative fine of P10,000.00[[22]] for violation of Section 18 of P.D. 957[[23]] and another P10,000.00 for violation of Section 22 of P.D. 957.[[24]] SO ORDERED.[25] DELTA appealed the arbiters Decision to the HLURB Board of Commissioners.[26] DELTA questioned the imposition of an administrative fine for its alleged violation of Section 18 of PD 957. It argued that clearance was not required for mortgages that were constituted on a subdivision project prior to registration. According to DELTA, it did not violate the terms of its license because it did not obtain a new mortgage over the subdivision project. It likewise assailed the award of moral and exemplary damages to Enriquez on the ground that the latter has no cause of action.[27]

The dispositive portion of the Boards Decision reads: Wherefore, in view of the foregoing, the Office belows decision dated June 01, 2000 is hereby modified to read as follows: 1. Ordering [Enriquez] to pay [DELTA] the amount due from the time she suspended payment up to filing of the complaint with 12% interest thereon per annum; thereafter the provisions of the Contract to Sell shall apply until full payment is made; 2. Ordering [DELTA] to pay an [a]dministrative [f]ine of P10,000.00 for violation of its license to sell and for violation of Section 18 of P.D. 957. So ordered. Quezon City.[29]

Enriquez moved for a reconsideration of the Boards Decision[30] upholding the Ruling of the Board of Commissioners (Board)[28] The Board held that all developers should obtain a clearance for mortgage from the HLURB, regardless of the date when the mortgage was secured, because the law does not distinguish. Having violated this legal requirement, DELTA was held liable to pay the administrative fine. The Board upheld the validity of the contract to sell between DELTA and Enriquez despite the alleged violation of the price ceilings in BP 220. The Board held that DELTA and Enriquez were presumed to have had a meeting of the minds on the object of the sale and the purchase price. Absent any circumstance vitiating Enriquezconsent, she was presumed to have willingly and voluntarily agreed to the higher purchase price; hence, she was bound by the terms of the contract. The Board, however, deleted the arbiters award of damages to Enriquez on the ground that the latter was not free from liability herself, given that she was remiss in her monthly amortizations to DELTA. Finding Enriquezs arguments as having already been passed upon in the decision, the Board denied reconsideration. The board, however, modified its decision, with respect to the period for the imposition of interest payments. The Boards resolution[32] reads: WHEREFORE, premises considered, to [sic] directive No. 1 of the dispositive portion of the decision of our decision [sic] is MODIFIED as follows: 1. Ordering complainant to pay respondent DELTA the amount due from the time she suspended (sic) at 12% interest per annum, reckoned from finality of this decision[,] thereafter the provisions of the Contract to Sell shall apply until full payment is made. In all other respects, the decision is AFFIRMED. SO ORDERED.[33] contractual purchase price. She maintained that the price for Lot 4 should not exceed the price ceiling provided in BP 220.[31]

Both Enriquez and the BANK appealed to the Office of the President (OP).
[34]

The BANK disagreed with the ruling upholding Enriquezs Contract to Sell; and

The CA ruled against the validity of the dacion en pago executed in favor of the BANK on the ground that DELTA had earlier relinquished its ownership over Lot 4 in favor of Enriquez via the Contract to Sell.[46] Since the dacion en pago is invalid with respect to Lot 4, the appellate court held that DELTA remained indebted to the BANK to the extent of Lot 4s value. Thus, the CA ordered DELTA to pay the corresponding value of Lot 4 to the BANK.[47] The CA also rejected the BANKs argument that, before DELTA can deliver the

insisted on its ownership over Lot 4. It argued that it has become impossible for DELTA to comply with the terms of the contract to sell and to deliver Lot 4s title to Enriquez given that DELTA had already relinquished all its rights to Lot 4 in favor of the BANK[35] via the dation in payment. Meanwhile, Enriquez insisted that the Board erred in not applying the ceiling price as prescribed in BP 220.[36] Ruling of the Office of the President
[37]

title to Lot 4 to Enriquez, DELTA should first redeem the mortgaged property from the BANK. The CA held that the BANK does not have a first lien on Lot 4 because its real estate mortgage over the same had already been extinguished by thedacion en pago. Without a mortgage, the BANK cannot require DELTA to redeem Lot 4 prior to delivery of title to Enriquez.[48]

The OP adopted by reference the findings of fact and conclusions of law of the HLURB Decisions, which it affirmed in toto. Enriquez filed a motion for reconsideration, insisting that she was entitled to a reduction of the purchase price, in order to conform to the provisions of BP 220. [38] The motion was denied for lack of merit.[39] Only the BANK appealed the OPs Decision to the CA.[40] The BANK reiterated that DELTA can no longer deliver Lot 4 to Enriquez because DELTA had sold the same to the BANK by virtue of the dacion en pago.[41] As an alternative argument, in case the appellate court should find that DELTA retained ownership over Lot 4 and could convey the same to Enriquez, the BANK prayed that its REM over Lot 4 be respected such that DELTA would have to redeem it first before it could convey the same to Enriquez in accordance with Section 25[42] of PD 957.[43]

The CA denied the BANKs prayer for the award of exemplary damages and attorneys fees for lack of factual and legal basis.[49] Both DELTA[50] and the BANK[51] moved for a reconsideration of the CAs Decision, but both were denied.[52] Hence, these separate petitions of the BANK and DELTA. Petitioner Deltas arguments[53] DELTA assails the CA Decision for holding that DELTA conveyed its

The BANK likewise sought an award of exemplary damages and attorneys fees in its favor because of the baseless suit filed by Enriquez against it. Ruling of the Court of Appeals
[45] [44]

ownership over Lot 4 to Enriquez via the Contract to Sell. DELTA points out that the Contract to Sell contained a condition that ownership shall only be transferred to Enriquez upon the latters full payment of the purchase price to DELTA. Since Enriquez has yet to comply with this suspensive condition, ownership is retained by

DELTA.[54] As the owner of Lot 4, DELTA had every right to enter into a dation in payment to extinguish its loan obligation to the BANK. The BANKs acceptance of the assignment, without any reservation or exception, resulted in the extinguishment of the entire loan obligation; hence, DELTA has no more obligation to pay the value of Enriquezs house and lot to the BANK.
[55]

Issues The following are the issues raised by the two petitions: 1. Whether the Contract to Sell conveys ownership; 2. Whether the dacion en pago extinguished the loan obligation, such that DELTA has no more obligations to the BANK;

DELTA prays for the reinstatement of the OP Decision. The BANKs arguments[56] Echoing the argument of DELTA, the BANK argues that the Contract to Sell did not involve a conveyance of DELTAs ownership over Lot 4 to Enriquez. The Contract to Sell expressly provides that DELTA retained ownership over Lot 4 until Enriquez paid the full purchase price. Since Enriquez has not yet made such full payment, DELTA retained ownership over Lot 4 and could validly convey the same to the BANK via dacion en pago.[57]

3. Whether the BANK is entitled to damages and attorneys fees for being compelled to litigate; and 4. What is the effect of Enriquezs failure to appeal the OPs Decision regarding her obligation to pay the balance on the purchase price. Our Ruling Mortgage contract void

Should the dacion en pago over Lot 4 be invalidated and the property ordered to be delivered to Enriquez, the BANK contends that DELTA should pay the corresponding value of Lot 4 to the BANK. It maintains that the loan obligation extinguished by the dacion en pago only extends to the value of the properties delivered; if Lot 4 cannot be delivered to the BANK, then the loan obligation of DELTA remains to the extent of Lot 4s value.[58] The BANK prays to be declared the rightful owner of the subject house and lot and asks for an award of exemplary damages and attorneys fees. Enriquezs waiver Enriquez did not file comments[59] or memoranda in both cases; instead, she manifested that she will just await the outcome of the case.[60] As the HLURB Arbiter and Board of Commissioners both found, DELTA violated Section 18 of PD 957 in mortgaging the properties in Delta Homes I (including Lot 4) to the BANK without prior clearance from the HLURB. This point need not be belabored since the parties have chosen not to appeal the administrative fine imposed on DELTA for violation of Section 18. This violation of Section 18 renders the mortgage executed by DELTA void. We have held before that a mortgage contract executed in breach of Section 18 of [PD 957] is null and void.[61] Considering that PD 957 aims to protect innocent subdivision lot and condominium unit buyers against fraudulent real estate practices, we have construed Section 18 thereof as prohibitory and acts committed contrary to it are void.[62]

Since the Contract to Sell did not transfer ownership of Lot 4 to Enriquez, said Because of the nullity of the mortgage, neither DELTA nor the BANK could assert any right arising therefrom. The BANKs loan of P8 million to DELTA has effectively become unsecured due to the nullity of the mortgage. The said loan, however, was eventually settled by the two contracting parties via a dation in payment. In the appealed Decision, the CA invalidated this dation in payment on the ground that DELTA, by previously entering into a Contract to Sell, had already conveyed its ownership over Lot 4 to Enriquez and could no longer convey the same to the BANK. This is error, prescinding from a wrong understanding of the nature of a contract to sell. Contract to sell does not transfer ownership Both parties are correct in arguing that the Contract to Sell executed by DELTA in favor of Enriquez did not transfer ownership over Lot 4 to Enriquez. A contract to sell is one where the prospective seller reserves the transfer of title to the prospective buyer until the happening of an event, such as full payment of the purchase price. What the seller obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been 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.[63] It does not, by itself, transfer ownership to the buyer.[64] In the instant case, there is nothing in the provisions of the contract entered into by DELTA and Enriquez that would exempt it from the general definition of a contract to sell. The terms thereof provide for the reservation of DELTAs ownership until full payment of the purchase price; such that DELTA even reserved the right to unilaterally void the contract should Enriquez fail to pay three successive monthly amortizations. The purpose of registration is to protect the buyers from any future unscrupulous transactions involving the object of the sale or contract to sell, whether the purchase price therefor has been fully paid or not. Registration of the sale or contract to sell makes it binding on third parties; it serves as a notice to the whole world that the property is subject to the prior right of the buyer of the property (under a contract to sell or an absolute sale), and anyone who wishes to deal with the said property will be held bound by such prior right. While DELTA, in the instant case, failed to register Enriquezs Contract to Sell with the Register of Deeds, this failure will not prejudice Enriquez or relieve the BANK from its obligation to respect Enriquezs Contract to Sell. Despite the non-registration, the BANK cannot be considered, under the circumstances, an innocent purchaser for value of Lot 4 when it accepted the latter (together with other assigned properties) as payment for DELTAs obligation. The BANK was well aware that the assigned properties, including Lot 4, were subdivision lots and therefore within the purview of PD 957. It knew that the loaned amounts were to be used for the development of DELTAs Section 17. Registration. All contracts to sell, deeds of sale, and other similar instruments relative to the sale or conveyance of the subdivision lots and condominium units , whether or not the purchase price is paid in full, shall be registered by the seller in the Office of the Register of Deeds of the province or city where the property is situated. x x x x (Emphasis supplied.) ownership remained with DELTA. DELTA could then validly transfer such ownership (as it did) to another person (the BANK). However, the transferee BANK is bound by the Contract to Sell and has to respect Enriquezs rights thereunder. This is because the Contract to Sell, involving a subdivision lot, is covered and protected by PD 957. One of the protections afforded by PD 957 to buyers such as Enriquez is the right to have her contract to sell registered with the Register of Deeds in order to make it binding on third parties. Thus, Section 17 of PD 957 provides:

subdivision project, for this was indicated in the corresponding promissory notes. The technical description of Lot 4 indicates its location, which can easily be determined as included within the subdivision development. Under these circumstances, the BANK knew or should have known of the possibility and risk that the assigned properties were already covered by existing contracts to sell in favor of subdivision lot buyers. As observed by the Court in another case involving a bank regarding a subdivision lot that was already subject of a contract to sell with a third party: [The Bank] should have considered that it was dealing with a property subject of a real estate development project. A reasonable person, particularly a financial institution x x x, should have been aware that, to finance the project, funds other than those obtained from the loan could have been used to serve the purpose, albeit partially. Hence, there was a need to verify whether any part of the property was already intended to be the subject of any other contract involving buyers or potential buyers. In granting the loan, [the Bank] should not have been content merely with a clean title, considering the presence of circumstances indicating the need for a thorough investigation of the existence of buyers x x x. Wanting in care and prudence, the [Bank] cannot be deemed to be an innocent mortgagee. x x x[65]

and that a contract to sell existed between [the vendee] and [the developer]. In our view, petitioner was not a purchaser in good faith and we are constrained to rule that petitioner is bound by the contract to sell.[67]

Bound by the terms of the Contract to Sell, the BANK is obliged to respect the same and honor the payments already made by Enriquez for the purchase price of Lot 4. Thus, the BANK can only collect the balance of the purchase price from Enriquez and has the obligation, upon full payment, to deliver to Enriquez a clean title over the subject property.[68] Dacion en pago extinguished the loan obligation The BANK then posits that, if title to Lot 4 is ordered delivered to Enriquez, DELTA has the obligation to pay the BANK the corresponding value of Lot 4. According to the BANK, the dation in payment extinguished the loan only to the extent of the value of the thing delivered. Since Lot 4 would have no value to the BANK if it will be delivered to Enriquez, DELTA would remain indebted to that extent. We are not persuaded. Like in all contracts, the intention of the parties to the dation in payment is paramount and controlling. The contractual intention determines whether the property subject of the dation will be considered as the full equivalent of the debt and will therefore serve as full satisfaction for the debt. The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished.[69] In the case at bar, the Dacion en Pago executed by DELTA and the BANK indicates a clear intention by the parties that the assigned properties would serve as full payment for DELTAs entire obligation: KNOW ALL MEN BY THESE PRESENTS:

Further, as an entity engaged in the banking business, the BANK is required to observe more care and prudence when dealing with registered properties. The Court cannot accept that the BANK was unaware of the Contract to Sell existing in favor of Enriquez. In Keppel Bank Philippines, Inc. v. Adao,
[66]

we held that a bank dealing with

a property that is already subject of a contract to sell and is protected by the provisions of PD 957, is bound by the contract to sell (even if the contract to sell in that case was not registered). In the Courts words: It is true that persons dealing with registered property can rely solely on the certificate of title and need not go beyond it. However, x x x, this rule does not apply to banks. Banks are required to exercise more care and prudence than private individuals in dealing even with registered properties for their business is affected with public interest. As master of its business, petitioner should have sent its representatives to check the assigned properties before signing the compromise agreement and it would have discovered that respondent was already occupying one of the condominium units

This instrument, made and executed by and between: xxxx THAT, the ASSIGNOR acknowledges to be justly indebted to the ASSIGNEE in the sum of ELEVEN MILLION EIGHT HUNDRED SEVENTY-EIGHT THOUSAND EIGHT HUNDRED PESOS (P11,878,800.00), Philippine Currency as of August 25, 1998. Therefore, by virtue of this instrument, ASSIGNOR hereby ASSIGNS, TRANSFERS, and CONVEYS AND SETS OVER [TO] the ASSIGNEE that real estate with the building and improvements existing thereon, more particularly described as follows: xxxx of which the ASSIGNOR is the registered owner being evidenced by TCT No. x x x issued by the Registry of Deeds of Trece Martires City. THAT, the ASSIGNEE does hereby accept this ASSIGNMENT IN PAYMENT OF THE TOTAL OBLIGATION owing to him by the ASSIGNOR as above-stated;[70]

A dacion en pago is governed by the law of sales.[71] Contracts of sale come with warranties, either express (if explicitly stipulated by the parties) or implied (under Article 1547 et seq. of the Civil Code). In this case, however, the BANK does not even point to any breach of warranty by DELTA in connection with the Dation in Payment. To be sure, the Dation in Payment has no express warranties relating to existing contracts to sell over the assigned properties. As to the implied warranty in case of eviction, it is waivable[72] and cannot be invoked if the buyer knew of the risks or danger of eviction and assumed its consequences. [73] As we have noted earlier, the BANK, in accepting the assigned properties as full payment of DELTAs total obligation, has assumed the risk that some of the assigned properties are covered by contracts to sell which must be honored under PD 957. Award of damages There is nothing on record that warrants the award of exemplary

Without any reservation or condition, the Dacion stated that the assigned properties served as full payment of DELTAs total obligation to the BANK. The BANK accepted said properties as equivalent of the loaned amount and as full satisfaction of DELTAs debt. The BANK cannot complain if, as it turned out, some of those assigned properties (such as Lot 4) are covered by existing contracts to sell. As noted earlier, the BANK knew that the assigned properties were subdivision lots and covered by PD 957. It was aware of the nature of DELTAs business, of the location of the assigned properties within DELTAs subdivision development, and the possibility that some of the properties may be subjects of existing contracts to sell which enjoy protection under PD 957. Banks dealing with subdivision properties are expected to conduct a thorough due diligence review to discover the status of the properties they deal with. It may thus be said that the BANK, in accepting the assigned properties as full payment of DELTAs total obligation, has assumed the risk that some of the assigned properties (such as Lot 4) are covered by contracts to sell which it is bound to honor under PD 957.

damages[74] as well as attorneys fees[75] in favor of the BANK. Balance to be paid by Enriquez As already mentioned, the Contract to Sell in favor of Enriquez must be respected by the BANK. Upon Enriquezs full payment of the balance of the purchase price, the BANK is bound to deliver the title over Lot 4 to her. As to the amount of the balance which Enriquez must pay, we adopt the OPs ruling thereon which sustained the amount stipulated in the Contract to Sell. We will not review Enriquezs initial claims about the supposed violation of the price ceiling in BP 220, since this issue was no longer pursued by the parties, not even by Enriquez, who chose not to file the required pleadings[76] before the Court. The parties were informed in the Courts September 5, 2007 Resolution that issues that are not included in their memoranda shall be deemed waived or abandoned. Since Enriquez did not file a memorandum in either petition, she is deemed to have waived the said issue.

WHEREFORE, premises considered, the appealed November 30, 2004 Decision of the Court of Appeals, as well as its June 22, 2005 Resolution in CA-G.R. SP No. 81280 are hereby AFFIRMED with the MODIFICATIONS that Delta Development and Management Services, Inc. is NOT LIABLE TO PAY Luzon Development Bank the value of the subject lot; and respondent Angeles Catherine Enriquez is ordered to PAY the balance of the purchase price and the interests accruing thereon, as decreed by the Court of Appeals, to the Luzon Development Bank, instead of Delta Development and Management Services, Inc., within thirty (30) days from finality of this Decision. The Luzon Development Bank is ordered RENATO C. CORONA Chief Justice to DELIVER a CLEAN TITLE to Angeles Catherine Enriquez upon the latters full payment of the balance of the purchase price and the accrued interests. SO ORDERED. MARIANO C. DEL CASTILLO Associate Justice WE CONCUR: CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice Chairperson

PRESBITERO J. VELASCO, JR. Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice

JOSE PORTUGAL PEREZ Associate Justice

SANDOVAL-GUTIERREZ, J.:

FIRST DIVISION Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision [1] of the Court of SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners, Present: G.R. No. 139173 Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in CAG.R. CV No. 48824.

Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.

PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, - versus *

Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised to pay the balance of the purchase price on or before March 23, 1990, thus:

AZCUNA, and GARCIA, JJ.

GODOFREDO CAGUIAT, Respondent.

Promulgated:

Las Metro Manila March 19, 1990 RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T9905, LAS PIAS, METRO MANILA

Pias,

February 28, 2007 x------------------------------------------------------------------------------------------------------x D E C I S I O N

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS

(P100,000.00) AS PARTIAL PAYMENT OF OUR LOTSITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE. SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M. (SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]

On June 27, 1994, after hearing, the trial court rendered its Decision[7] finding there was a perfected contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held: xxx In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiffs position deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed that there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads as follows, to wit: Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending defendants the letter dated March 25, 1990. (Exh. D) and reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh. C). Defendants mere allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere afterthought.

On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of his readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale.[3]

On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter[4] to respondent stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction. Petitioners also informed respondent that he can recover the earnest money of P100,000.00 anytime.

Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his counsel Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him.

On appeal, the Court of Appeals, in its assailed Decision of January 29, In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067. [6] 1999, affirmed the trial courts judgment. Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its Resolution [8] dated July 14, 1999. Hence, the present recourse.

The basic issue to be resolved is whether the document entitled Receipt for Partial Payment signed by both parties earlier mentioned is a contract to sell or a contract of sale. Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458 [9] in relation to Article 1475[10] of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the perfection of a contract of sale under Article 1482[11]of the same Code since there was no clear agreement between the parties as to the amount of consideration.

to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and upon the price; and (3)consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into by the parties.

Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except for cogent reasons. 14 Indeed, they should not be changed on appeal in the absence of a clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight and significance, which if considered would have altered the result of the case.[12] In the present case, we find that both the trial court and the Court of Appeals interpreted some significant facts resulting in an erroneous resolution of the issue involved.

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.[14] Thus, when petitioners declared in the said Receipt for Partial Payment that they

In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract."

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOTSITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

We are not convinced.

In San Miguel Properties Philippines, Inc. v. Spouses Huang, [13] we held that the stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract

there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price.

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price. [17]

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title 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. The suspensive condition is commonly full payment of the purchase price.[15]

In this case, the Receipt for Partial Payment shows that the true agreement between the parties is a contract to sell.

First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Thus, petitioners need not push through with the sale should respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within the fixed period.[18]

The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that:

Second, the agreement between the parties was not embodied in a deed of sale. x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not to pass until the full payment, of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price. [19]

Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property.
[20]

It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest

money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price.[21] Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. REYNATO S. PUNO Chief Justice Chairperson

As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him. RENATO C. CORONA WHEREFORE, we GRANT the complaint is DISMISSED. instant Petition for Review. The Associate Justice (On official leave) ADOLFO S. AZCUNA Associate Justice

challenged Decision of the Court of Appeals is REVERSED and respondents

CANCIO C. GARCIA SO ORDERED. Associate Justice

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

WE CONCUR:

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 167213 October 31, 2006

4. The title will be transferred by the OWNER to the BUYER upon complete payment of the agreed purchase price. Provided that any obligation by the OWNER brought about by encumbrance or mortgage with any bank shall be settled by the OWNER or by the BUYER which shall be deducted the total purchase price; 5. Provided, the OWNER shall transfer the titles to the BUYER even before the complete payment if the BUYER can provide post dated checks which shall be in accordance with the time frame of payments as above stated and which shall be guaranteed by a reputable bank; 6. Upon the payment of the earnest money and the down payment of 3.5 Million pesos the BUYER can occupy and introduce improvements in the properties as owner while owner is guaranteeing that the properties will have no tenants or squatters in the properties and cooperate in the development of any project or exercise of ownerships by the BUYER; 7. Delay in the payment by the BUYER in the agreed due date will entitle the SELLER for the legal interest.4 Pursuant to the terms and conditions of the contract to sell, respondent paid earnest money in the amount ofP500,000 on October 27, 1994.5 She likewise paid P1,000,000 on June 30, 1995 and another P1,000,000 on July 6, 1995. No further payments were made thereafter. 6 Petitioners thus sent respondent a demand letter dated November 28, 19967 informing her that they were revoking/canceling the contract to sell and were treating the payments already made as payment for damages suffered as a result of the breach of contract, and demanding the payment of the amount of P10 Million Pesos for actual damages suffered due to loss of income by reason thereof. Respondent ignored the demand, however. Hence, on February 21, 1997, petitioner Belen, in her own behalf and as attorney-in-fact of her co-petitioners, filed before the RTC of Paraaque a complaint for rescission of contract with damages 8 alleging that respondent failed to comply with its obligations under the contract to sell, specifically its obligation to pay the downpayment ofP3.5 Million by April 30, 1995, and the balance within 18 months thereafter; and that consequently petitioners are entitled to rescind the contract to sell as well as demand the payment of damages. In its Answer,9 respondent alleged that petitioners have no cause of action considering that they were the first to violate the contract to sell by preventing access to the properties despite payment of P2.5 Million Pesos; petitioners prevented it from complying with its obligation to pay in full by refusing to execute the final contract of sale unless additional payment of legal interest is

DARREL CORDERO, EGMEDIO BAUTISTA, ROSEMAY BAUTISTA, MARION BAUTISTA, DANNY BOY CORDERO, LADYLYN CORDERO and BELEN CORDERO, petitioners, vs. F.S. MANAGEMENT & DEVELOPMENT CORPORATION, respondent. DECISION CARPIO MORALES, J.: Assailed via petition for review are issuances of the Court of Appeals in CAG.R. CV No. 66198, Decision 1 dated April 29, 2004 which set aside the decision of Branch 260 of the Regional Trial Court (RTC) of Paraaque in Civil Case No. 97-067, and Resolution dated February 21, 2005 denying petitioners motion for reconsideration. On or about October 27, 1994,2 petitioner Belen Cordero (Belen), in her own behalf and as attorney-in-fact of her co-petitioners Darrel Cordero, Egmedio Bautista, Rosemay Bautista, Marion Bautista, Danny Boy Cordero and Ladylyn Cordero, entered into a contract to sell 3 with respondent, F.S. Management and Development Corporation, through its chairman Roberto P. Tolentino over five (5) parcels of land located in Nasugbu, Batangas described in and covered by TCT Nos. 62692, 62693, 62694, 62695 and 20987. The contract to sell contained the following terms and conditions: 1. That the BUYER will buy the whole lots above described from the OWNER consisting of 50 hectares more or less at P25/sq.m. or with a total price of P12,500,000.00; 2. That the BUYER will pay the OWNER the sum of P500,000.00 as earnest money which will entitle the latter to enter the property and relocate the same, construct the necessary paths and roads with the help of the necessary parties in the area; 3. The BUYER will pay the OWNER the sum of THREE MILLION FIVE HUNDRED THOUSAND PESOS ONLY (P3,500,000.00) on or before April 30, 1995 and the remaining balance will be paid within 18 mons. (sic) from the date of payment of P3.5 Million pesos in 6 equal quarterly payments or P1,411,000.00 every quarter;

made; and petitioners refusal to execute the final contract of sale was due to the willingness of another buyer to pay a higher price. In its Pre-trial Order10 of June 9, 1997, the trial court set the pre-trial conference on July 8, 1997 during which neither respondents representative nor its counsel failed to appear. And respondent did not submit a pre-trial brief, hence, it was declared as in default by the trial court which allowed the presentation of evidence ex parte by petitioners.11 Petitioners presented as witnesses petitioner Belen and one Ma. Cristina Cleofe. Belen testified on the execution of the contract to sell; the failure of respondent to make the necessary payments in compliance with the contract; the actual and moral damages sustained by petitioners as a result of the breach, including the lost opportunity to sell the properties for a higher price to another buyer, Ma. Cristina Cleofe; and the attorneys fees incurred by petitioners as a result of the suit. 12 Ma. Cristina Cleofe, on the other hand, testified on the offer she made to petitioners to buy the properties at P35.00/sq.m.13 which was, however, turned down in light of the contract to sell executed by petitioners in favor of the respondent. 14 Respondent filed a motion to set aside the order of default 15 which was denied by the trial court by Order dated September 12, 1997. 16 Via petition for certiorari, respondent challenged the said order, but it was denied by the Court of Appeals.17 Meanwhile, the trial court issued its decision 18 on November 18, 1997, finding for petitioners and ordering respondent to pay damages and attorneys fees. The dispositive portion of the decision reads: WHEREFORE, premises considered, the contract to sell between the Plaintiffs and the Defendant is herebydeclared as rescinded and the defendant is likewise ordered to pay the plaintiff: (1) P4,500,000.00 computed as follows: P5,000,000.00 in actual damages and P2,000,000.00 in moral and exemplary damages, less defendants previous payment of P2,500,000.00 under the contract to sell; and (2) P800,000.00 by way of attorneys fees as well as the costs of suit. SO ORDERED. (Underscoring supplied) Before the Court of Appeals to which respondent appealed the trial courts decision, it raised the following errors: 3.01. The Regional Trial Court erred when it awarded plaintiffsappellees Five Million Pesos (P5,000,000.00) as actual damages.

Corollary thereto, the Regional Trial Court erred in declaring defendantappellant to have acted in wanton disregard of its obligations under the Contract to Sell. 3.02. The Regional Trial Court erred when it awarded plaintiffsappellees Two Million Pesos (P2,000,000.00) as moral and exemplary damages. 3.03. The Regional Trial Court erred when it awarded plaintiffsappellees Eight Hundred Thousand Pesos (P800,000.00) as attorneys fees.19 In the assailed decision,20 the Court of Appeals set aside the contract to sell, it finding that petitioners obligation thereunder did not arise for failure of respondent to pay the full purchase price. It also set aside the award to petitioners of damages for not being duly proven. And it ordered petitioners to return "the amount received from [respondent]." Thus the dispositive portion of the appellate courts decision reads: WHEREFORE, the Decision dated 18 November 1997 of the Regional Trial Court, Branch 260 of Paraaque City in Civil Case No. 97-067 is hereby VACATED. A NEW DECISION is ENTERED ordering the SETTING-ASIDE of the Contract to Sell WITHOUT payment of damages. Plaintiffs-appellees are further ORDERED TO RETURN THE AMOUNTS RECEIVED from defendant-appellant. (Underscoring supplied) SO ORDERED. Their motion for reconsideration having been denied, petitioners filed the present petition for review which raises the following issues: 1. Whether the Court of Appeals erred in ruling on the nature of the contract despite the fact that it was not raised on appeal. 2. Whether or not a contract to sell may be subject to rescission under Article 1191 of the Civil Code. 3. Whether or not the Court of Appeals erred in setting aside the award of damages. Petitioners contend that the Court of Appeals erred in ruling on the nature of the contract to sell and the propriety of the remedy of rescission under Article 1191 of the Civil Code, these matters not having been raised by respondents in the assigned errors. In any event, petitioners claim that the contract to sell involves reciprocal obligations, hence, it falls within the ambit of Article 1191. 21

While a party is required to indicate in his brief an assignment of errors and only those assigned shall be considered by the appellate court in deciding the case, appellate courts have ample authority to rule on matters not assigned as errors in an appeal if these are indispensable or necessary to the just resolution of the pleaded issues.22 Thus this Court has allowed the consideration of other grounds or matters not raised or assigned as errors, to wit: 1) grounds affecting jurisdiction over the subject matter; 2) matters which are evidently plain or clerical errors within the contemplation of the law; 3) matters the consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interest of justice or to avoid dispensing piecemeal justice; 4) matters of record which were raised in the trial court and which have some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; 5) matters closely related to an error assigned; and 6) matters upon which the determination of a question properly assigned is dependent.23 In the present case, the nature as well as the characteristics of a contract to sell is determinative of the propriety of the remedy of rescission and the award of damages. As will be discussed shortly, the trial court committed manifest error in applying Article 1191 of the Civil Code to the present case, a fundamental error which "lies at the base and foundation of the proceeding, affecting the judgment necessarily," or, as otherwise expressed, "such manifest error as when removed destroys the foundation of the judgment." 24 Hence, the Court of Appeals correctly ruled on these matters even if they were not raised in the appeal briefs. Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect.25 Since the obligation of petitioners did not arise because of the failure of respondent to fully pay the purchase price, Article 1191 of the Civil Code would have no application. Rayos v. Court of Appeals26 explained: Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. The petitioners retained ownership without further remedies by the respondents until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligations of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code. x x x

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect . The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened . [Emphasis and underscoring supplied; citations omitted] The subject contract to sell clearly states that "title will be transferred by the owner (petitioners) to the buyer (respondent) upon complete payment of the agreed purchase price."27 Since respondent failed to fully pay the purchase price, petitioners obligation to convey title to the properties did not arise. While rescission does not apply in this case, petitioners may nevertheless cancel the contract to sell, their obligation not having arisen. 28This brings this Court to Republic Act No. 6552 (THE REALTY INSTALLMENT BUYER PROTECTION ACT). InRamos v. Heruela29 this Court held: Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals,30 the Court declared: x x x Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon nonpayment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments x x x. [Emphasis supplied] The properties subject of the contract having been intended for commercial, and not for residential, purposes,31petitioners are entitled to retain the payments already made by respondent. RA 6552 expressly recognizes the vendors right to cancel contracts to sell on installment basis industrial and commercial properties with full retention of previous payments. 32 But even assuming that the properties were not intended for commercial or industrial purpose, since respondent paid less than two years of installments, it is not entitled to any refund.33 It is on this score that a modification of the challenged issuances of the appellate court is in order. Respecting petitioners claim for damages, failure to make full payment of the purchase price in a contract to sell is not really a breach, serious or otherwise, but, as priorly stated, an event that prevents the obligation of the vendor to convey title to the property from arising. 34 Consequently, the award of damages is not warranted in this case.

With regard to attorneys fees, Article 2208 35 of the Civil Code provides that subject to certain exceptions, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered in the absence of stipulation. None of the enumerated exceptions in Article 2208 is present in this case. It bears stressing that the policy of the law is to put no premium on the right to litigate. 36 WHEREFORE, the assailed Court of Appeals Decision dated April 29, 2004 and the Resolution dated February 21, 2005 in CA-G.R. CV No. 66198 are AFFIRMED with the MODIFICATION that petitioners are entitled to retain the payments already received from respondent. SO ORDERED. Quisumbing, J., Chairperson, Tinga, J., on leave. Carpio, and Velasco, Jr., JJ., concur.

SECOND DIVISION

affirmed with modifications the decision [4] of the Regional Trial Court ( RTC), Davao City, Branch 13. The RTC ruled in favor of respondents Cuison Lumber Co., Inc. (CLCI) and Josefa Vda. De Cuison ( Mrs. Cuison), collectively referred to as respondents, in the action they commenced for breach of contract, specific performance, damages, and attorneys fees, with prayer for the issuance of a writ of preliminary injunction against petitioner Traders Royal Bank (bank). THE BACKGROUND FACTS

TRADERS ROYAL BANK, Petitioner,

G.R. No. 174286

Present:

- versus -

QUISUMBING, Chairperson, * YNARES-SANTIAGO, VELASCO, JR., ** LEONARDO-DE CASTRO, and BRION, JJ.

On July 14, 1978 and December 9, 1979, respectively, CLCI, through its then president, Roman Cuison Sr., obtained two loans from the bank. The loans were secured by a real estate mortgage over a parcel of land covered by Transfer Certificate of Title No. 10282 ( subject property). CLCI failed to pay the loan, prompting the bank to extrajudicially foreclose the mortgage on the subject property. The bank was declared the highest bidder at the public auction that followed, conducted on August 1, 1985. A Certificate of Sale and a Sheriffs Final Certificate of Sale were subsequently issued in the banks favor.

Promulgated:

June 5, 2009 CUISON LUMBER CO., INC., and JOSEFA CUISON, JERODIAS VDA. DE

In a series of written communications between CLCI and the bank, CLCI manifested its intention to restructure its loan obligations and to repurchase the subject property. On July 31, 1986, Mrs. Cuison, the widow and administratrix of the estate of Roman Cuison Sr., wrote the banks Officer-inCharge, Remedios Calaguas, a letter indicating her offered terms of repurchase. She stated: 1. That I will pay the interest of P115,538.66, plus the additional expenses of P17,293.69, the total amount of which is P132,832.35 on August 8, 1986;

Respondents. x ----------------------------------------------------------------------------------------x

DECISION BRION, J.: 2. That I will pay 20% of the bid price of P949,632.84, plus whatever interest accruing within sixty (60) days from August 8, 1986;

We review in this petition for review on certiorari[1] the decision[2] and resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 49900. The CA

3.

That whatever remaining balance after the above two (2) payments shall be amortized for five (5) years on equal monthly installments including whatever interest accruing lease on diminishing balance.[5]

4. That all the interest and other charges starting from August 8, 1986 to date of approval shall be paid first before implementation of the request; interest as of October 31, 1986 isP65,669.53;

CLCI paid the bank P50,000.00 (on August 8, 1986) and P85,000.00 (on September 3, 1986). The bank received and regarded these amounts as earnest money for the repurchase of the subject property. On October 20, 1986, the bank sent Atty. Roman Cuison, Jr. ( Atty. Cuison), as the president and general manager of CLCI, a letter informing CLCI of the banks board of directors resolution of October 10, 1986 (TRB Repurchase Agreement), laying down the conditions for the repurchase of the subject property: This is to formally inform you that our Board of Directors, in its regular meeting held on October 10, 1986, passed a resolution for the repurchase of your property acquired by the bank, subject to the following terms and conditions, viz:

5. Possession of the property shall be deemed transferred after signing of the Contract to Sell. However, title to the property shall be delivered only upon full payment of the repurchase price via Deed of Absolute Sale;

6. Registration fees, documentary stamps, transfer taxes at the date of sale and other similar government impost shall be for the exclusive account of the buyer;

7. The improvement of the property shall at all times be covered by insurance against loss with a policy to be obtained from a reputable company which designates the bank as beneficiary but premiums shall be paid by the client;

1. That the repurchase price shall be at total banks claim as of the date of implementation;

8. That the sale is good for thirty (30) days from the buyers receipt of notice of approval of the offer; otherwise, sale is automatically cancelled;

2. That client shall initially pay P132,000.00 within fifteen (15) days from the expiration of the redemption period (August 8, 1986) and further payment of P200,632.84, representing 20% of the bid price, to be remitted on or before October 31, 1986;

9. Effective upon signing of the Contract to Sell, all realty taxes which will become due on the property shall be for the account of the buyer;

3. That the balance of P749,000.00 to be paid in three (3) years in twelve (12) quarterly amortizations, with interest rate at 26% computed on diminishing balance;

10. That the first quarterly installment shall be due within ninety (90) days of approval hereof, and the succeeding installment shall be due every three (3) months thereafter;

11. Upon default of the buyer to pay two (2) successive quarterly installments, contract is automatically cancelled at the Banks option and all payments already made shall be treated as rentals or as liquidated damages; and

of P1,221,075.61 (as of July 31, 1987) be reduced to P1 million, and the amount of P221,075.61 be condoned by the bank. To show its commitment to the request, CLCI paid the bank P100,000.00 and P200,000.00 on August 28, 1987. The bank credited both payments as earnest money.

12. Other terms and conditions that the bank may further impose to protect its interest.

A year later, CLCI inquired about the status of its request. The bank responded that the request was still under consideration by the banks Manila office. On September 30, 1988, the bank informed CLCI that it would resell the subject property at an offered price of P3 million, and gave CLCI 15 days to

Should you agree with the above terms and conditions please sign under Conforme on the space provided below.

make a formal offer; otherwise, the bank would sell the subject property to third parties. On October 26, 1988, CLCI offered to repurchase the subject property for P1.5 million, given that it had already tendered the amount of P400,000.00 as earnest money. CLCI subsequently claimed that the bank breached the terms of repurchase, as it had wrongly considered its payments (in the amounts of P140,485.18,P200,000.00 and P100,000.00) as earnest money, instead of applying them to the purchase price. Through its counsel, CLCI demanded that the bank rectify the repurchase agreement to reflect the true consideration agreed upon for which the earnest money had been given. The bank did not act on the demand. Instead, it informed CLCI that the amounts it received were not

We attach herewith your Statement of Account [6] as of October 31, 1986, for your reference.

Thank you.

Very truly yours, (Signed)

earnest money, and that the bank was willing to return these sums, less the amounts forfeited to answer for the unremitted rentals on the subject property.

Conforme: (Not signed)[7] CLCI failed to comply with the above terms notwithstanding the extensions of time given by the bank. Nevertheless, CLCI tendered, on February 3, 1987, a check for P135,091.57 to cover fifty percent (50%) of the twenty percent (20%) bid price. The check, however, was returned for insufficiency of funds. On May 13, 1987, CLCI tendered an additional P50,000.00.[8] On May 29, 1987, the bank sent Atty. Cuison a letter informing him that the P185,000.00 CLCI paid was not a deposit, but formed part of the earnest money under the TRB Repurchase Agreement. On August 28, 1987, Atty. Cuison, by letter, requested that CLCIs outstanding obligation

In view of these developments, CLCI and Mrs. Cuison, on February 10, 1989, filed with the RTC a complaint for breach of contract, specific performance, damages, and attorneys fees against the bank. On April 20, 1989, the bank filed its Answer alleging that the TRB repurchase agreement was already cancelled given CLCIs failure to comply with its provisions; by way of counterclaim, the bank also demanded the payment of the accrued rentals in the subject property as of January 31, 1989, and the award of moral damages and exemplary damages as well as attorneys fees and litigation expenses for the unfounded suit instituted against the bank by CLCI. [9] After trial on the merits, the RTC ruled in respondents favor. The dispositive portion of its November 4, 1994 Decision states:

THE CA DECISION WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against the defendant bank, ordering said defendant bank to: 1. Execute and consummate a Contract to Sell which is reflective of the true consideration indicated in the Resolution of the Board of Directors of Traders Royal Bank held on October 10, 1986 (Exhibit F and Exhibit 13), duly accrediting the amount of P435,000 as earnest money to be part of the price, the mode of payment being on quarterly installment, but the period within which the first quarterly payment being on quarterly payment shall be made to commence upon the execution of said Contract to Sell; 2. Pay to plaintiffs the amounts of P50,000.00 in concept of moral damages, P20,000.00 as exemplary damages; 3. Pay attorneys fees of P20,000.00; and 4. Pay litigation expenses in the amount of P2,000.00. The counterclaim of defendant bank is hereby dismissed. SO ORDERED. On appeal to the CA, the bank pointed out the misappreciation of facts the RTC committed and argued that: first, the repurchase agreement did not ripen into a perfected contract; and second, even assuming that there was a perfected repurchase agreement, the bank had the right to revoke it and apply the payments already made to the rentals due for the use of the subject property, or as liquidated damages under paragraph 11 of the TRB Repurchase Agreement, since CLCI violated its terms and conditions. Further, the bank contended that CLCI had abandoned the TRB Repurchase Agreement in its letters dated August 28, 1987 and October 26, 1988 when it proposed to repurchase the subject property for P1 million and P1.5 million, respectively. Lastly, the bank objected to the award of damages in the plaintiffs favor. On March 31, 2006, the CA issued the challenged Decision and affirmed the RTCs factual findings and legal conclusions. Although it deleted the awards of attorneys fees, moral and exemplary damages, the CA ruled that there was a perfected contract to repurchase the subject property given the banks acceptance (as stated in the letter dated October 20, 1986) of CLCIs proposal contained in Mrs. Cuisons letter of July 31, 1986. The CA distinguished between a condition imposed on the perfection of the contract and a condition imposed on the performance of an obligation, and declared that the conditions laid down in the letter dated October 20, 1986 merely relate to the manner the obligation is to be performed and implemented; failure to comply with the latter obligation does not result in the failure of the contract and only gives the other party the options and/or remedies to protect its interest. The CA held that the same conclusion obtains even if the letter of October 20, 1986 is considered a counter-offer by the bank; CLCIs payment of P135,000.00 operated as an implied acceptance of the banks counter-offer, notwithstanding CLCIs failure to expressly manifest its conforme. In light of these findings, the CA went on to acknowledge the validity of the terms of paragraph 11 of the TRB Repurchase Agreement, but nonetheless held that CLCI has not yet violated its terms given the banks previous acts ( i.e., the grant of extensions to pay), which showed that it had waived the agreements original terms of payment. The CA rejected the theory that CLCI had abandoned the terms of the TRB Repurchase Agreement and found no incompatibility between the agreement and the contents of the August 28, 1987 and October 26, 1988 letters which did not show an implied abandonment by CLCI, nor the latters expressed intent to cancel or abandon the perfected repurchase agreement. In the same manner, the CA struck down the banks position that CLCIs payments were deposits rather than earnest money. The appellate court reasoned that while the amounts tendered cannot be strictly considered as earnest money under Article 1482 of the New Civil Code, [10]they were nevertheless within the concept of earnest money under this Courts ruling

in Spouses Doromal, Sr. v. CA,[11] since they were paid as a guarantee so that the buyer would not back out of the contract. The CA however ruled that the award of moral and exemplary damages, attorneys fees and litigation expenses lacked factual and legal support. The CA found that the bank acted in good faith and based its actions on the erroneous belief that CLCI had already abandoned the repurchase agreement. Likewise, the award of moral damages was not in order as there was no showing that CLCIs reputation was debased or besmirched by the banks action of applying the previous payments made to the interest and rentals due on the subject property; neither is Mrs. Cuison entitled to moral damages without any evidence to justify this award. The CA also ruled that there was nothing in the records to warrant the awards of exemplary damages and attorneys fees. The bank subsequently moved but failed to secure a reconsideration of the CA decision. The bank thus came to us with the following ISSUES

ERRONEOUSLY CONCLUDE THAT THERE WAS A PERFECTED REPURCHASE AGREEMENT BETWEEN RESPONDENTS AND PETITIONER AND WHICH INTERPRETATION IS NOT IN ACCORDANCE WITH THE APPLICABLE LAW AND ESTABLISHED JURISPRUDENCE Reduced to the most basic, the main issue posed is whether or not a perfected contract of repurchase existed and can be enforced between the parties. THE COURTS RULING

We GRANT the petition. The case presents to us as threshold issue the presence or absence of consent as a requisite for a perfected contract to repurchase the subject property. The RTC ruled that a perfected contract existed based mainly on the following facts: first, the existence of the TRB Repurchase Agreement which clearly depicts the repurchase agreement of the subject property under the terms therein embodied; and second, the payment of earnest money in the total amount of P435,000.00 which forms part of the price and, as initial payment, is proof of the perfection of the contract. [12] In concurring with the

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN APPREHENDING THE SIGNIFICATION (SIC) OF THE TERM OFFER ON THE ONE HAND AND ACCEPTANCE ON THE OTHER HAND IN SALES CONTRACT WHICH ERROR LED IT TO ARRIVE AT A WRONG CONCLUSION OF LAW.

foregoing findings on appeal, the CA, in turn, declared that there was a meeting of the minds between the parties on the offer and acceptance

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ITS INTERPRETATION OF THE STIPULATIONS AND TERMS AND CONDITIONS EMBODIED IN THE PROPOSED REPURCHASE AGREEMENT xxx WHICH LED IT TO

for the repurchase of the subject property under the following quoted facts:

Based on these findings, the crucial points that the lower courts apparently considered were Mrs. Cuisons letter of July 31, 1986 to the bank; the banks letter of October 20, 1986 to CLCI; and the parties subsequent conduct showing their acknowledgement of the existence of their agreement,

It may be recalled that it was Mrs. Cuison, through her letter of July 31, 1986, who proposed to repurchase the foreclosed property. She in fact had tendered right away an amount ofP50,000.00 as partial payment of the P132,000.00 she had promised to pay as initial payment. In response, TRB sent a letter dated October 20, 1986 to Atty. Cuison informing him of the resolution passed by the Board of Directors of TRB acknowledging the proposal of Ms. Cuison to repurchase the property. Under the circumstance, the proposal made by Ms. Cuison constituted the offer contemplated by law, and the reply of TRB was the corresponding acceptance of the proposal-offer.

specifically, the respondents payments (designated as earnest money) and the banks acceptance of these payments. However, unlike the RTCs conclusion that relied on CLCIs payment and the banks acceptance of the payment as earnest money, the CA concluded that there was a perfected contract, either because of the banks acceptance of CLCIs offer (made through Mrs. Cuisons letter of July 31, 1986), or by CLCIs implied acceptance indicated by its initial payments in compliance with the terms of the TRB Repurchase Agreement.

The petitioner bank, of course, argues differently and concludes that the undisputed facts of the case show that there was no meeting of the minds x x x between the parties given CLCIs failure to give its consent and conformity to the banks letter of October 20, 1986, confirmed by the testimony of Atty. Cuison, no less, when he denied that CLCI consented to the agreements terms Conceding arguendo that TRBs letter-response October 20, 1986 constituted a counter-offer or politacion, CLCIs ensuing remittance of P135,000.00 as initial payment of the price, operates effectively as an implied acceptance of TRBs counter-offer. The absence of a signature to signify plaintiffs conforme to the repurchase agreement is of no moment. While theconforme portion of the subject repurchase agreement indeed bears no signature at all, this fact, however, does not detract from the accomplished fact that plaintiffs had acquiesced or assented to the standing conditional counteroffer of TRB. Plaintiffs conforme would at best be a mere formality considering that the repurchase agreement had already been perfected, if impliedly.[13] of implementation.

Our task in this petition for review on certiorari is not to review the factual findings of the CA and the RTC, but to determine whether or not, on the basis of the said findings, the conclusions of law reached by the said courts are correct.

Under the law, a contract is perfected by mere consent, that is, from the moment that there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. [14] The law requires that the offer must be certain and the acceptance absolute and unqualified. [15] An acceptance of an offer may be express and implied; a qualified offer constitutes a counteroffer.[16] Case law holds that an offer, to be considered certain, must be definite,

[17]

while an acceptance is considered absolute and unqualified when it is


[18]

Yuviengco v. Dacuycuy[22] yielded a different result, as we considered that the letter and telegrams sent by the parties to each other showed that there was no meeting of minds in the absence of an unconditional acceptance to the terms of the contract of sale; otherwise, the buyers would not have included the phrase to negotiate details when they agreed to the property that was subject of the proposed contract.

identical in all respects with that of the offer so as to produce consent or a meeting of the minds. We have also previously held that the ascertainment
[19]

of whether there is a meeting of minds on the offer and acceptance depends on the circumstances surrounding the case.

In Villonco Realty Co. v. Bormacheco,[20] the Court found a perfected contract of sale between the parties after considering the parties written communications showing the offer (counter-offer) and acceptance by the seller who formally manifested his conformity with the offer in the buyers letter. We took note of the acts of the parties the payment of the buyer of an amount representing the partial payment under the contract; the acceptance of the partial payment by the seller; the allowance of the buyer for the seller to encash the check containing the partial payment; the subsequent return of the amount representing the partial payment by the buyer with the corresponding interest stated in the buyers letter (offer) and considered them evidence of the perfection of the sale. Under these circumstances, we also declared that a change in a phrase in the offer to purchase, that does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender of a counter-offer. The incomplete details of the agreement led us to conclude in Insular Life Assurance Co. Ltd. v. Assets Builders Corp .[24] that no perfected contract existed; there were other matters or details in addition to the subject matter and the consideration [that] would be stipulated and agreed. We likewise considered the subsequent acts between the parties and the existence of a In Schuback & Sons Philippine Trading Corp. v. CA ,
[21]

Similarly, in Philippine National Bank v. CA ,[23] we ruled that there was no perfected contract of sale because the specified terms and conditions imposed under the facts of the case constituted counter-offers against each other that were not accepted by either of the parties. This case involved a first contract, involving the same property, which the parties mutually cancelled; we said that the terms of this earlier contract cannot be considered in determining the acceptance and compliance with the terms of a proposed second contract a distinct and separate contract from the one earlier aborted.

we declared a

second proposal which belied the perfection of any initial contract.

meeting of minds between the vendor and the vendee even though the quantity of goods purchased had not been fully determined. We noted that the vendee, after expressing his intention to purchase the merchandise, simultaneously enclosed a purchase order whose receipt prompted the vendor to immediately order the merchandise. We also took into account the act of the vendee in requesting for a discount as proof of his acceptance of the quoted price. The recent Navarra v. Planters Development Bank[25] is another case where we saw no perfected contract, as the offer was incomplete for lack of agreed details on the manner of paying the purchase price; there was also no acceptance as the letter of Planters Development Bank indicated the need to discuss other details of the transaction.

All these cases illustrate the rule that the concurrence of the offer and acceptance is vital to the birth and the perfection of a contract. The clear and neat principle is that the offer must be certain and definite with respect to the cause or consideration and object of the proposed contract, while the acceptance of this offer express or implied must be

counter-offer under the TRB Repurchase Agreement and, in fact, partially executed the agreement, as shown from the following undisputed evidence:

(a)

unmistakable, unqualified, and identical in all respects to the offer. The required concurrence, however, may not always be immediately clear and may have to be read from the attendant circumstances; in fact, a binding contract may exist between the parties whose minds have met, although they did not affix their signatures to any written document.[26] (b)

The letter-reply dated November 29, 1986 of Atty. Cuison, as president and general manager of CLCI, to the bank (in response to the banks demand letter dated November 27, 1986 to pay 20% of the bid price); CLCI requested an extension of time, until the end of December 1986, to pay its due obligation; [28]

The facts of the present case, although ambivalent in some respects, point on the whole to the conclusion that both parties agreed to the repurchase of the subject property.

Mrs. Cuisons letter-reply of February 3, 1987 (to the banks letter of January 13, 1987) showed that she acknowledged CLCIs failure to comply with its requested extension and proposed a new payment scheme that would be reasonable given CLCIs critical economic difficulties; Mrs. Cuizon tendered a check for P135,091.57, which represented 50% of the 20% bid price;[29]

A reading of the petitioners letter of October 20, 1986 informing CLCI that the banks board of directors passed a resolution for the repurchase of [your] property shows that the tenor of acceptance, except for the repurchase price, was subject to conditions not identical in all respects with the CLCIs letter-offer of July 31, 1986. In this sense, the banks October 20, 1986 letter was effectively a counter-offer that CLCI must be shown to have accepted absolutely and unqualifiedly in order to give birth to a perfected contract. Evidence exists showing that CLCI did not sign any document to show its conformity with the banks counter-offer. Testimony also exists explaining why CLCI did not sign; Atty. Cuison testified that CLCI did not agree with the implementation of the repurchase transaction since the bank made a wrong computation.[27]

(c)

The CLCIs continuous payments of the repurchase price after their receipt of the banks letter of October 20, 1986;

(d)

CLCIs possession of the subject property pursuant to paragraph 5 of the TRB Repurchase Agreement, notwithstanding the absence of a signed contract to sell between the parties;

x x x

We counted the following facts, too, as indicators leading to the conclusion that a perfected contract existed: CLCI did not raise any objection to the terms and conditions of the TRB Repurchase Agreement, and instead, unconditionally

These indicators notwithstanding, we find that CLCI accepted the terms of the TRC Repurchase Agreement and thus unqualifiedly accepted the banks

paid without protests or objections [30]; CLCIs acknowledgment of their obligations under the TRB Repurchase Agreement (as shown by Atty. Cuisons

letter of November 29, 1986); and Atty. Cuisons admission that the TRB Repurchase Agreement was already a negotiated agreement between CLCI and the bank, as shown by the following testimony:

(a)

The letter dated November 27, 1986 of the bank, reminding CLCI that it was remiss in its commitments to pay 20% of the bid price under the terms of the TRB Repurchase Agreement;

When you received this document, this Exh. F from the defendant bank, did you already consider this as an agreement? We consider that as a negotiated agreement pending the documentation of the formal contract to sell which is stated under the repurchase agreement.

(b)

In the same letter, the bank gave CLCI an extension of time (until November 30, 1986) to comply with its past due obligations under the agreement;

(c)

The banks acceptance of CLCIs payments money for the repurchase of the property;

as earnest

In other words, at the time you received this document Exh. F, which was on October 23, 1986 date of receipt, was there already a meeting of the minds between the parties? That is precisely we put [sic] the earnest money because we were of the opinion that the bank is already agreeable to the implementation of the repurchase agreement. x x x

(d)

CLCIs continued possession of the subject property with the banks consent;

(e)

The banks grant of extensions to CLCI for the payment of its obligations under the contract;

(f)

COURT

The Statement of Account dated July 31, 1987 showing that the bank applied CLCIs payments according to the terms of the TRB Repurchase Agreement;

Q A

Insofar as Exh. F is concerned? There was initially, that is precisely we [sic] deposited in consideration of the repurchase agreement.[31]

(g)

The letter of January 26, 1989 of the banks counsel, Atty. Abarquez, addressed to CLCIs counsel, showing the banks recognition that there was an agreement between the bank and CLCI, which the latter failed to honor; and

(h) The bank, for its part, showed its recognition of the existence of a repurchase agreement between itself and CLCI by the following acts:

The testimonies of the banks witnesses Mr. Eulogio Giramis[32] and Ms. Arlene Aportadera,[33] the banks employees who handled the CLCI transactions who admitted the existence of the repurchase agreement with CLCI and the latters failure to comply with the agreements terms.

Admittedly, some evidence on record may be argued to point to the absence of a meeting of the minds (more particularly , the previous offers made by CLCI to change the payment scheme of the repurchase of the subject property which was not accepted; the banks expressed intent to offer the subject property for sale to third persons at a higher price; and the unaccepted counter-offer by the respondents after the bank increased the purchase price).
[34]

11. Upon default of the buyer to pay two (2) successive quarterly installments, contract is automatically cancelled at the Banks option and all payments already made shall be treated as rentals or as liquidated damages;

We note, additionally, that the TRB Repurchase Agreement is in the nature of a contract to sell where the title to the subject property remains in the banks name, as the vendor, and shall only pass to the respondents, as vendees, upon the full payment of the repurchase price. [36] The settled rule for contracts to sell is that the full payment of the purchase price is a positive suspensive condition; the failure to pay in full is not to be considered a breach, casual or serious, but simply an event that prevents the obligation of the vendor to convey title from acquiring any obligatory force. [37] Viewed in this light, the bank cannot be compelled to perform its obligations under the TRB Repurchase Agreement that has been rendered ineffective by the respondents non-performance of their own obligations.

These incidents, however, were the results of CLCIs failure to comply with

its obligations to pay the amounts due on the stipulated time and were made after the parties minds had met on the terms of the contract. The seemingly contrary indications, therefore, do not go into and affect the perfection of the contract; they came after the contract had been perfected and, as discussed below, were indicative of the banks cancellation of the repurchase agreement.

In light of this conclusion, we now determine the consequential rights, obligations and liabilities of the parties. It is at this point that we diverge from the conclusions of the CA and the RTC, as we conclude that while there was a perfected contract between the parties, the bank effectively cancelled the contract when it communicated with CLCI that it would sell the subject property at a higher price to third parties, giving CLCI 15 days to make a formal offer, and disregarding CLCIs counter-offer to buy the subject property for P1.5 million. We arrive at this conclusion after considering the following reasons:

Second, the respondents violated the terms and conditions of the TRB Repurchase Agreement when they failed to pay their obligations under the agreement as these obligations fell due. Paragraphs 2 and 10 of the TRB Repurchase Agreement are clear on the respondents obligation to pay the bid price and the quarterly installments. Paragraphs 2 and 10 state:

First, the bank communicated its intent not to proceed with the repurchase as above outlined and formally cancelled the TRB Repurchase Agreement in its letters dated January 11 and 30, 1989 to CLCI. [35] Thus, CLCIs rights acquired under the TRB Repurchase Agreement to repurchase the subject property have been defeated by its own failure to comply with its obligations under the agreement. The right to cancel for breach is provided under paragraph 11 of the TRB Repurchase Agreement, as follows: xxx

2.

That client shall initially pay P132,000.00 within fifteen (15) days from the expiration of the redemption period (August 8, 1986) and further payment of P200,632.84 representing 20% of the bid price to be remitted on or before October 31, 1986;

xxx

xxx

Under these terms, the bank cannot be faulted for the application of payments it 10. That the first quarterly installment shall be due within ninety (90) days of approval hereof, and the succeeding installment shall be due every three (3) months thereafter; made. Likewise, the bank cannot be faulted for the application of other amounts paid as rentals as this is allowed under paragraph 11, quoted above, of the agreement.

Fourth, the petitioner bank cannot be said, as the CA ruled, to have The approval referred to under paragraph 10 is the approval by the bank of the repurchase of the subject property, as indicated in the banks letter of October 20, 1986 which states, This is to formally inform you that our Board of Directors in its regular meeting held on October 10, 1986, passed a resolution for the repurchase of your property acquired by the bank. It was on the basis of this approval and the quoted terms of the agreement that the bank issued its Statement of Account dated July 31, 1987 indicating that the respondents were already in default, not only with respect to the 20% of the bid price, but also with the three quarterly installments. already waived the terms of the TRB Repurchase Agreement by extending the time to pay and subsequently accepting late payments. The CAs conclusion lacks factual and legal basis taking into account that the Statement of Account of July 31, 1987, heretofore cited, which shows that the bank considered the respondents already in default. At this point, Atty. Cuison, by letter, requested that as part of its outstanding one obligation whole be year condoned thereafter, by the bank, party paying P300,000.00 as of August 31, 1987, which amount the bank accepted earnest money. For neither moved. Significantly, the respondents, who had continuing payments to make and who had the burden of complying with the terms of the agreement, failed to act except to ask the bank for the status of its requested condonation. Under Third, the respondents themselves claim that the bank violated the agreement when it applied the respondents payments to the interest and penalties due without the respondents consent, instead of applying these to the repurchase price for the subject property. [38] An examination of the provisions of the TRB Repurchase Agreement reveals that the bank is allowed to apply the respondents payments first to the amounts due as interests and other charges, before applying any payment to the repurchase price. Paragraph 4 of the agreement provides: these facts, a continuing breach of the agreement took place, even granting that a waiver had intervened as of August 31, 1987. Thus, the bank was well within its right to consider the agreement cancelled when, in September 1988, it changed the repurchase terms to P3.0 million. We find it significant that the respondents, instead of asserting its rights under the TRB Repurchase Agreement, counter-offered P1.5 million with the P400,000.00 already paid as part of the purchase price. At that point, it was clear that even the respondents themselves considered the TRB Repurchase Agreement cancelled.

4. That all the interest and other charges starting from August 8, 1986 to date of approval shall be paid first before implementation of the request; interest as of October 31, 1986 isP65,669.53;

Lastly, the perfected repurchase agreement itself provides for the respondents possession of the subject property; in fact, the respondents have been in continuous possession of the subject property since October 1986, despite the absence of a contract to sell apparently with the banks consent. The agreement also provides under its paragraph 11 that upon the

respondents default and the cancellation of the agreement, all payments already made shall be treated as rentals or as liquidated damages.

In National Power Corporation v. CA,[46] we held that where there is a variance in the defendants pleadings and the evidence adduced by it at the trial, the Court may treat the pleading as amended to conform to the evidence.

The undisputed facts show that the bank has been deprived of the use and benefit of its property that has been in the possession of the respondents for the latters use and benefit without paying any rentals thereon. The records reveal that until now, the respondents are still in possession of the subject property.[39] Additionally, the respondents are also liable to pay interest by way of damages for their failure to pay the rentals due for the use of the subject property. InEastern Shipping Lines v. CA ,[47] we laid down the following guidelines with respect to the award and the computation of legal interest, as follows: II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169 Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether

We note that subsequent to the banks counterclaim for the payment of rentals due as of January 31, 1989, the bank also seeks to recover the rentals that accrued after January 31, 1989, which as of August 8, 1993 amounted to P1,123,500.00 as shown by the evidence presented by the bank before the RTC and in the pleadings it had filed before the RTC, CA, and the Court.
[40]

Although this claim was not alleged in the banks Answer being an after-

acquired claim which was only raised during the trial proper through the testimony dated August 17, 1993 of Ms. Arlene Aportadera, [41] the bank is not barred from recovering these rentals. As we explained in Banco de Oro Universal Bank v. CA,[42] a party is not barred from setting up a claim even after the filing of the answer if the claim did not exist or had not matured at the time said party filed its answer. Moreover, we note that the respondents did not object to the presentation of this evidence, hence, the issue of rentals from August 8, 1993 and onwards was tried with the implied consent of the parties; applying Section 5, Rule 10 of the 1997 Rules of Civil Procedure, [43] the issue should be treated in all respects as if it had been raised in the pleadings.
[44]

Given the implied consent, judgment may be validly rendered on this issue

even if no motion had been filed and no amendment had been ordered. [45]

the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. [Emphasis supplied]

As there is no basis for an award of exemplary damages, the awards of attorneys fees and litigation expenses to the bank are not justified under Article 2208 of the Civil Code.

The records are unclear on when the bank made a demand outside of the judicial proceedings for the rentals on the subject property. [48] However, the records show that the bank made a counterclaim for the payments of the rentals due as of January 31, 1989 in its Answer and subsequently, a claim for the after-acquired rentals was made by the bank through the testimony of Ms. Arlene Aportadera. Applying Eastern Shipping Lines, the payment of interest for the rentals shall be reckoned from the date the judicial demand was made by the bank or on April 20, 1989 when the bank set up its counterclaim for rentals in the subject property.

WHEREFORE, premises considered, we hereby GRANT the petition. The Decision dated March 31, 2006 and Resolution dated August 11, 2006 of the Court of Appeals in CA-G.R. CV No. 49900 are hereby REVERSED and SET ASIDE.

The complaint in Civil Case No. 19416-89 for breach of contract, specific performance, damages, and attorneys fees, with preliminary injunction filed by Cuison Lumber Co., Inc. and Mrs. Cuison against Traders Royal Bank is hereby DISMISSED. The respondents are ordered to vacate the subject property and to restore its possession to the petitioner bank. The respondents are further ordered to pay reasonable compensation, for the use and occupation of the subject property in the amount of P1,123,500.00, representing the accrued rentals as of August 8, 1993, less the amount of P485,000.00 representing deposits paid by the respondents. In additiodn, respondents are also ordered to pay the amount of P13,700.00 a month by way of rentals starting from August 8, 1993 until they vacate the subject property. The rentals shall earn a corresponding legal interest of six percent (6%) per annum to be computed from April 20, 1989 until the finality of this decision. After this decision becomes final and executory, the rate of legal interest shall be computed at twelve percent (12%) per annum from such finality until its satisfaction. Costs against the respondents.

Under the circumstances, we can impose a 6% interest on the rentals from April 20, 1989 up to the finality of this decision. Thereafter, the interest shall be computed at 12% per annum from such finality up to full satisfaction. We find no basis for the award of exemplary damages. Article 2232 of the Civil Code declares: Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Considering the factual circumstances we have discussed above, we can hardly characterize respondents act of insisting on the enforcement of the repurchase agreement as wanton, fraudulent, reckless, oppressive, or malevolent.

SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 155043 September 30, 2004

ARTURO R. ABALOS, petitioner, vs. DR. GALICANO S. MACATANGAY, JR., respondent. DECISION TINGA, J.: The instant petition seeks a reversal of the Decision of the Court of Appeals in CA-G.R. CV No. 48355 entitled "Dr. Galicano S. Macatangay, Jr. v. Arturo R. Abalos and Esther Palisoc-Abalos," promulgated on March 14, 2002. The appellate court reversed the trial courts decision which dismissed the action for specific performance filed by respondent, and ordered petitioner and his wife to execute in favor of herein respondent a deed of sale over the subject property. Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with improvements located at Azucena St., Makati City consisting of about three hundred twenty-seven (327) square meters, covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of Deeds of Makati. Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of respondent, binding himself to sell to respondent the subject property and not to offer the same to any other party within thirty (30) days from date. Arturo acknowledged receipt of a check from respondent in the amount of Five Thousand Pesos (P5,000.00), representing earnest money for the subject property, the amount of which would be deducted from the purchase price of One Million Three Hundred Three Hundred Thousand Pesos (P1,300,000.00). Further, the RMOA stated that full payment would be effected as soon as possession of the property shall have been turned over to respondent. Subsequently, Arturos wife, Esther, executed a Special Power of Attorney dated October 25, 1989, appointing her sister, Bernadette Ramos, to act for and in her behalf relative to the transfer of the property to respondent. Ostensibly, a marital squabble was brewing between Arturo and Esther at the time and to protect his interest, respondent caused the annotation of his adverse claim on the title of the spouses to the property on November 14, 1989.

On November 16, 1989, respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price. The letter contained a demand upon the spouses to comply with their obligation to turn over possession of the property to him. On the same date, Esther, through her attorney-in-fact, executed in favor of respondent, a Contract to Sell the property to the extent of her conjugal interest therein for the sum of six hundred fifty thousand pesos (P650,000.00) less the sum already received by her and Arturo. Esther agreed to surrender possession of the property to respondent within twenty (20) days from November 16, 1989, while the latter promised to pay the balance of the purchase price in the amount of one million two hundred ninety thousand pesos (P1,290,000.00) after being placed in possession of the property. Esther also obligated herself to execute and deliver to respondent a deed of absolute sale upon full payment. In a letter dated December 7, 1989, respondent informed the spouses that he had set aside the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) as evidenced by Citibank Check No. 278107 as full payment of the purchase price. He reiterated his demand upon them to comply with their obligation to turn over possession of the property. Arturo and Esther failed to deliver the property which prompted respondent to cause the annotation of another adverse claim on TCT No. 145316. On January 12, 1990, respondent filed a complaint for specific performance with damages against petitioners. Arturo filed his answer to the complaint while his wife was declared in default. The Regional Trial Court (RTC) dismissed the complaint for specific performance. It ruled that the Special Power of Attorney (SPA) ostensibly issued by Esther in favor of Arturo was void as it was falsified. Hence, the court concluded that the SPA could not have authorized Arturo to sell the property to respondent. The trial court also noted that the check issued by respondent to cover the earnest money was dishonored due to insufficiency of funds and while it was replaced with another check by respondent, there is no showing that the second check was issued as payment for the earnest money on the property. On appeal taken by respondent, the Court of Appeals reversed the decision of the trial court. It ruled that the SPA in favor of Arturo, assuming that it was void, cannot affect the transaction between Esther and respondent. The appellate court ratiocinated that it was by virtue of the SPA executed by Esther, in favor of her sister, that the sale of the property to respondent was effected. On the other hand, the appellate court considered the RMOA executed by Arturo in favor of respondent valid to effect the sale of Arturos conjugal share in the property. Dissatisfied with the appellate courts disposition of the case, petitioner seeks a reversal of its decision alleging that: I.

The Court of Appeals committed serious and manifest error when it decided on the appeal without affording petitioner his right to due process. II. The Court of Appeals committed serious and manifest error in reversing and setting aside the findings of fact by the trial court. III. The Court of Appeals erred in ruling that a contract to sell is a contract of sale, and in ordering petitioner to execute a registrable form of deed of sale over the property in favor of respondent. 1 Petitioner contends that he was not personally served with copies of summons, pleadings, and processes in the appeal proceedings nor was he given an opportunity to submit an appellees brief. He alleges that his counsel was in the United States from 1994 to June 2000, and he never received any news or communication from him after the proceedings in the trial court were terminated. Petitioner submits that he was denied due process because he was not informed of the appeal proceedings, nor given the chance to have legal representation before the appellate court. We are not convinced. The essence of due process is an opportunity to be heard. Petitioners failure to participate in the appeal proceedings is not due to a cause imputable to the appellate court but because of petitioners own neglect in ascertaining the status of his case. Petitioners counsel is equally negligent in failing to inform his client about the recent developments in the appeal proceedings. Settled is the rule that a party is bound by the conduct, negligence and mistakes of his counsel. 2 Thus, petitioners plea of denial of due process is downright baseless. Petitioner also blames the appellate court for setting aside the factual findings of the trial court and argues that factual findings of the trial court are given much weight and respect when supported by substantial evidence. He asserts that the sale between him and respondent is void for lack of consent because the SPA purportedly executed by his wife Esther is a forgery and therefore, he could not have validly sold the subject property to respondent. Next, petitioner theorizes that the RMOA he executed in favor of respondent was not perfected because the check representing the earnest money was dishonored. He adds that there is no evidence on record that the second check issued by respondent was intended to replace the first check representing payment of earnest money.

Respondent admits that the subject property is co-owned by petitioner and his wife, but he objects to the allegations in the petition bearing a relation to the supposed date of the marriage of the vendors. He contends that the alleged date of marriage between petitioner and his wife is a new factual issue which was not raised nor established in the court a quo. Respondent claims that there is no basis to annul the sale freely and voluntarily entered into by the husband and the wife. The focal issue in the instant petition is whether petitioner may be compelled to convey the property to respondent under the terms of the RMOA and the Contract to Sell. At bottom, the resolution of the issue entails the ascertainment of the contractual nature of the two documents and the status of the contracts contained therein. Contracts, in general, require the presence of three essential elements: (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. 3 Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. 4 In a contract of sale, the seller must consent to transfer ownership in exchange for the price, the subject matter must be determinate, and the price must be certain in money or its equivalent. 5 Being essentially consensual, 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.6 However, ownership of the thing sold shall not be transferred to the vendee until actual or constructive delivery of the property. 7 On the other hand, an accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option.8 An option merely grants a privilege to buy or sell within an agreed time and at a determined price. It is separate and distinct from that which the parties may enter into upon the consummation of the option. 9 A perfected contract of option does not result in the perfection or consummation of the sale; only when the option is exercised may a sale be perfected. 10 The option must, however, be supported by a consideration distinct from the price. 11 Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to respondent for a price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to buy petitioners property, as in fact it does not even bear his signature thereon. It is quite clear that after the lapse of the thirty-day period, without respondent having exercised his option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege to buy the property within the period therein stated. There is nothing in the RMOA which indicates that Arturo agreed therein to transfer ownership of the land which is an essential element in a contract of sale. Unfortunately, the option is not binding upon the promissory since it is not supported by a consideration distinct from the price. 12

As a rule, the holder of the option, after accepting the promise and before he exercises his option, is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos13 we ruled that in an accepted unilateral promise to sell, the promissor is not bound by his promise and may, accordingly, withdraw it, since there may be no valid contract without a cause or consideration. Pending notice of its withdrawal, his accepted promise partakes of the nature of an offer to sell which, if acceded or consented to, results in a perfected contract of sale. Even conceding for the nonce that respondent had accepted the offer within the period stated and, as a consequence, a bilateral contract of purchase and sale was perfected, the outcome would be the same. To benefit from such situation, respondent would have to pay or at least make a valid tender of payment of the price for only then could he exact compliance with the undertaking of the other party.14 This respondent failed to do. By his own admission, he merely informed respondent spouses of his readiness and willingness to pay. The fact that he had set aside a check in the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) representing the balance of the purchase price could not help his cause. Settled is the rule that tender of payment must be made in legal tender. A check is not legal tender, and therefore cannot constitute a valid tender of payment. 15 Not having made a valid tender of payment, respondents action for specific performance must fail. With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view that the amount is not earnest money as the term is understood in Article 1482 which signifies proof of the perfection of the contract of sale, but merely a guarantee that respondent is really interested to buy the property. It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.16 No reservation of ownership on the part of Arturo is necessary since, as previously stated, he has never agreed to transfer ownership of the property to respondent. Granting for the sake of argument that the RMOA is a contract of sale, the same would still be void not only for want of consideration and absence of respondents signature thereon, but also for lack of Esthers conformity thereto. Quite glaring is the absence of the signature of Esther in the RMOA, which proves that she did not give her consent to the transaction initiated by Arturo. The husband cannot alienate any real property of the conjugal partnership without the wifes consent.17 However, it was the Contract to Sell executed by Esther through her attorneyin-fact which the Court of Appeals made full use of. Holding that the contract is valid, the appellate court explained that while Esther did not authorize Arturo to sell the property, her execution of the SPA authorizing her sister to sell the land to respondent clearly shows her intention to convey her interest in favor of respondent. In effect, the court declared that the lack of Esthers consent to the

sale made by Arturo was cured by her subsequent conveyance of her interest in the property through her attorney-in-fact. We do not share the ruling. The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers consent thereto but also from want of consideration and absence of respondents signature thereon. Such nullity cannot be obliterated by Esthers subsequent confirmation of the putative transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be ratified 18 and the action or defense for the declaration of the inexistence of a contract does not prescribe.19 A void contract produces no effect either against or in favor of anyoneit cannot create, modify or extinguish the juridical relation to which it refers.20 True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in favor of respondent. However, the RMOA which Arturo signed is different from the deed which Esther executed through her attorneyin-fact. For one, the first is sought to be enforced as a contract of sale while the second is purportedly a contract to sell only. For another, the terms and conditions as to the issuance of title and delivery of possession are divergent. The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. Where the conveyance is contained in the same document which bears the conformity of both husband and wife, there could be no question on the validity of the transaction. But when there are two (2) documents on which the signatures of the spouses separately appear, textual concordance of the documents is indispensable. Hence, in this case where the wifes putative consent to the sale of conjugal property appears in a separate document which does not, however, contain the same terms and conditions as in the first document signed by the husband, a valid transaction could not have arisen. Quite a bit of elucidation on the conjugal partnership of gains is in order. Arturo and Esther appear to have been married before the effectivity of the Family Code. There being no indication that they have adopted a different property regime, their property relations would automatically be governed by the regime of conjugal partnership of gains.21 The subject land which had been admittedly acquired during the marriage of the spouses forms part of their conjugal partnership. 22 Under the Civil Code, the husband is the administrator of the conjugal partnership. This right is clearly granted to him by law. 23 More, the husband is the sole administrator. The wife is not entitled as of right to joint administration.24

The husband, even if he is statutorily designated as administrator of the conjugal partnership, cannot validly alienate or encumber any real property of the conjugal partnership without the wifes consent. 25 Similarly, the wife cannot dispose of any property belonging to the conjugal partnership without the conformity of the husband. The law is explicit that the wife cannot bind the conjugal partnership without the husbands consent, except in cases provided by law.26 More significantly, it has been held that prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears that there are assets in the community as a result of the liquidation and settlement. The interest of each spouse is limited to the net remainder or " remanente liquido" (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution. 27 Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.28 In not a few cases, we ruled that the sale by the husband of property belonging to the conjugal partnership without the consent of the wife when there is no showing that the latter is incapacitated is void ab initio because it is in contravention of the mandatory requirements of Article 166 of the Civil Code. 29 Since Article 166 of the Civil Code requires the consent of the wife before the husband may alienate or encumber any real property of the conjugal partnership, it follows that acts or transactions executed against this mandatory provision are void except when the law itself authorizes their validity.30 Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,31 we ruled that neither spouse could alienate in favor of another, his or her interest in the partnership or in any property belonging to it, or ask for partition of the properties before the partnership itself had been legally dissolved. Nonetheless, alienation of the share of each spouse in the conjugal partnership could be had after separation of property of the spouses during the marriage had been judicially decreed, upon their petition for any of the causes specified in Article 19132 of the Civil Code in relation to Article 21433 thereof. As an exception, the husband may dispose of conjugal property without the wifes consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162 of the Civil Code. 34 In Tinitigan v. Tinitigan, Sr.,35 the Court ruled that the husband may sell property belonging to the conjugal partnership even without the consent of the wife if the sale is necessary to answer for a big conjugal liability which might endanger the

familys economic standing. This is one instance where the wifes consent is not required and, impliedly, no judicial intervention is necessary. Significantly, the Family Code has introduced some changes particularly on the aspect of the administration of the conjugal partnership. The new law provides that the administration of the conjugal partnership is now a joint undertaking of the husband and the wife. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal partnership, the other spouse may assume sole powers of administration. However, the power of administration does not include the power to dispose or encumber property belonging to the conjugal partnership. 36 In all instances, the present law specifically requires the written consent of the other spouse, or authority of the court for the disposition or encumbrance of conjugal partnership property without which, the disposition or encumbrance shall be void. 37 Inescapably, herein petitioners action for specific performance must fail. Even on the supposition that the parties only disposed of their respective shares in the property, the sale, assuming that it exists, is still void for as previously stated, the right of the husband or the wife to one-half of the conjugal assets does not vest until the liquidation of the conjugal partnership. Nemo dat qui non habet. No one can give what he has not. WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. The complaint in Civil Case No. 90-106 of the Regional Trial Court of Makati is ordered DISMISSED. No pronouncement as to costs. SO ORDERED. Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 171968 July 31, 2009

Gross Floor Area Net Saleable Area Net Usable Area Selling Price Total Price Parking Slots

: : : : : :

2,034 sq m 1,866 sq m 1,678 sq m P53,500/ - psm of saleable area P99,831,000/-* 22

XYST CORPORATION, Petitioner, vs. DMC URBAN PROPERTIES DEVELOPMENT INC., Respondent, FE AURORA C. CASTRO, Intervenor. DECISION QUISUMBING, J.: Before us is a petition for review assailing the September 26, 2005 Decision1 and the March 13, 2006 Order2 of the Regional Trial Court (RTC) of Makati City, Branch 64 in Civil Case No. 95-063. The facts are as follows: DMC Urban Properties Development, Inc. and Citibank N.A. entered into an agreement whereby they agreed to take part in the construction of the Citibank Tower, an office condominium building located at Villar corner Valero Streets, Makati City. In said agreement, DMC was allocated the 18th floor of the Citibank Tower subject to the condition that DMC shall not transfer any portion of its allocated floor or rights or interests thereto prior to the completion of the building without the written consent of Citibank N.A. Subsequently, DMC gave authority to sell to several brokers, one of which is herein intervenor, Fe Aurora Castro. Through her effort, Castro found a prospective buyer, Saint Agen Et Fils Limited (SAEFL for brevity), a foreign corporation represented by William Seitz. Notwithstanding the fact that the construction of the Citibank Tower was not yet completed, DMC negotiated with Seitz for the sale of its allocated floor to SAEFL. In a letter dated September 14, 1994, 3 SAEFL accepted DMCs offer to sell. The terms of said letter are reproduced below: (1) Property Description Location : 18th Floor, Citibank Paseo de Roxas, Metro Manila18th Floor,

* VAT tax for the account of the buyer, except that if payment of 26% of the total price is made before 30 September 1994, then VAT, if any, shall be for the account of the seller. The balance of P6,822,552.97 due to Citibank is included and, hence, is to be deducted from the amount due to DMC-UPDI. (2) Payment Terms Reservation Fee : P1,000,000/ - good [until] 26 September 1994 Non-refundable but applicable to the down payment. : P24,956,060/ -

26% -

Upon signing of agreement but not later than first banking hour of the 28th of September 1994. Due on 31 October 1994 (via post-dated check) Due on 30 November 1994 (via post-dated check)

24% 50% -

: P23,959,440/ : P43,092,947.03

* For the Account of the Seller

: Expanded Withholding Tax with BIR clearance to the buyer stating that the seller has paid capital gains tax. : Doc stamps; registration; and notarial and all other [similar] fees.

For the Account of the Buyer Tower Makati

On September 16, 1994,4 SAEFL, knowing that the consent of Citibank N.A. must first be obtained, sent another letter obliging DMC to cause Citibank N.A. to enter into a Contract to Sell with SAEFL as an additional condition to the payment of the P1,000,000.00 reservation fee. Soon after, Seitz was informed that the 18th floor is not available for foreign acquisition, so Seitz told DMC that he would instead use XYST Corporation, a domestic corporation of which he is a director and shareholder, to purchase the subject property. XYST then paid the reservation fee. However, DMC advised XYST that the signing of the formal document will not take place since Citibank N.A. opted to exercise its right of first refusal. Hence, the parties agreed that should Citibank N.A. fail to purchase the 18th floor on the agreed date, the same should be sold to XYST. Eventually, Citibank N.A. did not exercise its right of first refusal, but it reminded DMC that should the sale of the floor to any party materialize, it should be consistent with the documents adopted by the co-founders of the project. Hence, a copy of a pro-forma Contract to Sell was given to DMC, a copy of which was then forwarded to XYST. DMC then undertook to obtain the conformity of Citibank N.A. to the intended sale but DMC encountered problems getting Citibank N.A. to accept the amendments that XYST wanted on the pro-forma contract. lawph!l For such failure, DMC allowed XYST and Citibank N.A. to negotiate directly with one another to facilitate the transaction, but to no avail. Citibank N.A. refused to concur with the amendments imposed by XYST on the pro-forma contract. Hence, DMC decided to call off the deal and return the reservation fee of P1,000,000.00 to XYST. A complaint for specific performance with damages was then filed by XYST against DMC. Trial ensued and on September 26, 2005, the RTC dismissed XYSTs complaint. The dispositive portion of said decision reads: WHEREFORE, in view of the foregoing, judgment is rendered as follows: 1. The Complaint for Specific Performance and Damages filed by plaintiff XYST CORPORATION against defendant DMC-URBAN PROPERTIES DEVELOPMENT, INC., is DISMISSED. Plaintiff XYST CORPORATION is hereby ordered to pay defendant DMC-URBAN PROPERTIES DEVELOPMENT, INC. the amount ofP1,000,000.00 as attorneys fees; and 2. The counterclaim of defendant DMC-URBAN PROPERTIES DEVELOPMENT, INC. against the Intervenor Fe Aurora Castro is DISMISSED. SO ORDERED.5

XYSTs motion for reconsideration was likewise denied. Hence, the instant petition where XYST raises the following issues: I. DID THE TRIAL COURT ERR IN FINDING THAT THERE WAS NO PERFECTED CONTRACT TO SELL BETWEEN XYST AND DEFENDANT DMC BASED ON THE SEPTEMBER 14 AND 16, 1994 LETTER AGREEMENTS, AND THAT DMC CANNOT BE COMPELLED TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT? II. DID THE TRIAL COURT ERR IN ORDERING XYST TO PAY DMC ATTORNEYS FEES? III. IS XYST ENTITLED TO ATTORNEYS FEES AND EXEMPLARY DAMAGES. 6 Simply stated, in our view, there is one major legal issue for our resolution: whether there is a perfected contract between DMC and XYST. This issue of a legal nature assumes primordial significance because it justified direct resort by petitioner to this Court in a petition for review. XYST argues that there exists a perfected contract of sale between the parties. This was perfected from the moment there was a meeting of the minds upon the thing which is object of the contract and upon the price as manifested by the September 14, 1994 letter. Hence, upon the perfection of the contract, the parties may reciprocally demand performance. Further, XYST avers that the P1,000,000.00 reservation fee it paid is actually in the nature of earnest money or down payment and shall be considered as part of the price and as proof of the perfection of the contract. Conversely, DMC insists that a contract to sell was entered into by the parties. It avers that in the contract to sell, the element of consent is lacking, and since the acceptance made by XYST is not absolute, no contract of sale existed between the parties. It claims that the terms, conditions and amendments which XYST tried to impose upon DMC and Citibank N.A. were proof that indeed XYST had qualifiedly accepted DMCs offer. We find the petition of XYST Corporation bereft of merit. It is a fundamental rule that, being consensual, a contract is perfected by mere consent.7 From the moment of a meeting of the offer and the acceptance upon the object and the cause that would constitute the contract, consent

arises.8 The essence of consent is the conformity of the parties on the terms of the contract, that is, the acceptance by one of the offer made by the other.9 However, the acceptance must be absolute; otherwise, the same constitutes a counter-offer10 and has the effect of rejecting the offer.11 Equally important are the three stages of a contract: (1) preparation or negotiation, (2) perfection, and (3) consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. The perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. The last stage is the consummation of the contract wherein the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof.12 XYST and DMC were still in the negotiation stage of the contract when the latter called off the deal. The facts show that DMC as agreed undertook to obtain the conformity of Citibank N.A. However, Citibank N.A.s consent to the intended sale cannot be obtained since it does not conform to the amendments made by XYST on the pro-forma Contract to Sell. By introducing amendments to the contract, XYST presented a counter-offer to which DMC did not agree. Clearly, there was only an offer and a counter-offer that did not sum up to any final arrangement containing the elements of a contract. No meeting of the minds was established. The rule on the concurrence of the offer and its acceptance did not apply because other matters or detailsin addition to the subject matter and the considerationwould still be stipulated and agreed upon by the parties.13 Therefore, since the element of consent is absent, there is no contract to speak of. Where the parties merely exchanged offers and counter-offers, no agreement or contract is perfected.lavvphil As to XYSTs claim that the P1,000,000.00 reservation fee it paid is earnest money, we hold that it is not. Earnest money applies to a perfected sale. Here, no contract whatsoever was perfected since the element of consent was lacking. Therefore, the reservation fee paid by XYST could not be earnest money. Coming now to the issue of whether DMC is entitled to attorneys fees, the Court finds that the award of attorneys fees to DMC is not proper. Article 2208 of the Civil Code states that in the absence of a stipulation, attorneys fees cannot be recovered, except in any of the following circumstances: (1) When exemplary damages are awarded; (2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmens compensation and employers liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In the instant case, none of the enumerated grounds for recovery of attorneys fees is present. WHEREFORE, this petition is DENIED. The September 26, 2005 Decision and March 13, 2006 Order of the Regional Trial Court of Makati City, Branch 64 in Civil Case No. 95-063 are hereby AFFIRMED with themodification that the award of attorneys fees in favor of DMC is deleted. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-2412 April 11, 1906

defendant failed to pay. Plaintiff finally prayed that judgment be rendered in accordance with the prayer of his previous complaint. Defendant in his answer asked that the complaint be dismissed with costs to the plaintiff, alleging that on or about June 13 both parties met in a public establishment of this city and the plaintiff personally proposed to the defendant the sale of the said vessel, the plaintiff stating that the vessel belonged to him and that it was then in a sea worthy condition; that defendant accepted the offer of sale on condition that the title papers were found to be satisfactory, also that the vessel was in a seaworthy condition; that both parties then called on Calixto Reyes, a notary public, who, after examining the documents, informed them that they were insufficient to show the ownership of the vessel and to transfer title thereto; that plaintiff then promised to perfect his title and about June 23 called on defendant to close the sale, and the defendant believing that plaintiff had perfected his title, wrote to him on the 23d of June and set the following day for the execution of the contract, but, upon being informed that plaintiff had done nothing to perfect his title, he insisted that he would buy the vessel only when the title papers were perfected and the vessel duly inspected. Defendant also denied the other allegations of the complaint inconsistent with his own allegations and further denied the statement contained in paragraph 4 of the complaint to the effect that the contract was completed as to the vessel; that the purchase price and method of payment had been agreed upon; that the vessel was ready for delivery to the purchaser and that an attempt had been made to deliver the same, but admitted, however, the allegations contained in the last part of the said paragraph. 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. 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. (Art. 1462 of the Civil Code.) Pedro Roman, the owner, and Andres Grimalt, the purchaser, had been for several days negotiating for the purchase of the schooner Santa Marina from the 13th to the 23d of June, 1904. They agreed upon the sale of the vessel for

PEDRO ROMAN, plaintiff-appellant, vs. ANDRES GRIMALT, defendant-appellee. Alberto Barretto, for appellant. Chicote, Miranda and Sierra, for appellee. TORRES, J.: On July 2, 1904, counsel for Pedro Roman filed a complaint in the Court of First Instance of this city against Andres Grimalt, praying that judgment be entered in his favor and against the defendant (1) for the purchase price of the schooner Santa Marina, to wit, 1,500 pesos or its equivalent in Philippine currency, payable by installments in the manner stipulated; (2) for legal interest on the installments due on the dates set forth in the complaint; (3) for costs of proceedings; and (4) for such other and further remedy as might be considered just and equitable. On October 24 of the same year the court made an order sustaining the demurer filed by defendant to the complaint and allowing plaintiff ten days within which to amend his complaint. To this order the plaintiff duly excepted. Counsel for plaintiff on November 5 amended his complaint and alleged that between the 13th and the 23rd day of June, 1904, both parties, through one Fernando Agustin Pastor, verbally agreed upon the sale of the said schooner; that the defendant in a letter dated June 23 had agreed to purchase the said schooner and of offered to pay therefor in three installment of 500 pesos each, to wit, on July 15, September 15, and November 15, adding in his letter that if the plaintiff accepted the plan of payment suggested by him the sale would become effective on the following day; that plaintiff on or about the 24th of the same month had notified the defendant through Agustin Pastor that he accepted the plan of payment suggested by him and that from that date the vessel was at his disposal, and offered to deliver the same at once to defendant if he so desired; that the contract having been closed and the vessel being ready for delivery to the purchaser, it was sunk about 3 o'clock p. m., June 25, in the harbor of Manila and is a total loss, as a result of a severe storm; and that on the 30th of the same month demand was made upon the defendant for the payment of the purchase price of the vessel in the manner stipulated and

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. 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. 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. The first paragraph of article 1460 of the Civil Code and section 335 of the Code of Civil Procedure are not applicable. These provisions contemplate the existence of a perfected contract which can not, however, be enforced on account of the entire loss of the thing or made the basis of an action in court through failure to conform to the requisites provided by law. The judgment of the court below is affirmed and the complaint is dismissed with costs against the plaintiff. After the expiration of twenty days from the date hereof let judgment be entered in accordance herewith and ten days thereafter let the case be remanded to the Court of First Instance for proper action. So ordered. Arellano, C.J., Mapa, Johnson, Carson and Willard, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-23351 March 13, 1968

Dear Mr. Paredes: So far I received two letters from you, one dated April 17 and the other April 29, both 1964. In reply thereto, please be informed that after consulting with my wife, we both decided to accept your last offer of Four (P4.00) pesos per square meter of the lot which contains 1826 square meters and on cash basis. In order that we can facilitate the transaction of the sale in question, we (Mrs. Espino and I), are going there (Puerto Princess, Pal.) to be there during the last week of the month, May. I will send you a telegram, as per your request, when I will reach Manila before taking the boat for Pto. Princess. As it is now, there is no schedule yet of the boats plying between Manila and Pto. Princess for next week. Plaintiff also appended as Annex "A-1", a telegram apparently from defendant advising plaintiff of his arrival by boat about the last week of May 1964 (Annex "A-1" Record on Appeal, p. 21), as well as a previous letter of defendant (Appendix B, Record on Appeal, p. 35) referring to the lot as the one covered by Certificate of Title No. 62. These allegations and documents notwithstanding, the Court below dismissed the complaint on the ground that there being no written contract, under Article 1403 of the Civil Code of the Philippines Although the contract is valid in itself, the same can not be enforced by virtue of the Statute of Frauds. (Record on Appeal, p. 37).1wph1.t Plaintiff duly appealed to this Court. The sole issue here is whether enforcement of the contract pleaded in the complaint is barred by the Statute of Frauds; and the Court a quo plainly erred in holding that it was unenforceable. The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not require that the contract itself be in writing. The plain text of Article 1403, paragraph (2) is clear that a written note or memorandum, embodying the essentials of the contract and signed by the party charged, or his agent, suffices to make the verbal agreement enforceable, taking it out of the operation of the statute. Art. 1403. The following contracts are unenforceable, unless they are ratified:

CIRILO PAREDES, plaintiff-appellant, vs. JOSE L. ESPINO, defendant-appellee. Simeon Capule for plaintiff-appellant. Iigo R. Pea for defendant-appellee. REYES, J.B.L., Actg. C.J.: Appeal from an order of the Court of First Instance of Palawan in its Civil Case No. 453, granting a motion to dismiss the complaint. Appellant Cirilo Parades had filed an action to compel defendantappellee Jose L. Espino to execute a deed of sale and to pay damages. The complaint alleged that the defendant "had entered into the sale" to plaintiff of Lot No. 67 of the Puerto Princesa Cadastre at P4.00 a square meter; that the deal had been "closed by letter and telegram" but the actual execution of the deed of sale and payment of the price were deferred to the arrival of defendant at Puerto Princesa; that defendant upon arrival had refused to execute the deed of sale altho plaintiff was able and willing to pay the price, and continued to refuse despite written demands of plaintiff; that as a result, plaintiff had lost expected profits from a resale of the property, and caused plaintiff mental anguish and suffering, for which reason the complaint prayed for specific performance and damages. Defendant filed a motion to dismiss upon the ground that the complaint stated no cause of action, and that the plaintiff's claim upon which the action was founded was unenforceable under the Statute of Frauds. Plaintiff opposed in writing the motion to dismiss and annexed to his opposition a copy of a letter purportedly signed by defendant (Annex "A"), wherein it was stated (Record on Appeal, pp. 19-20) 106 Tuguegarao,Cagayan May18,1964 Mr.CiriloParedes Pto.Princesa,Palawan GonzagaSt.

(1) . . . (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: xxx xxx xxx

Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein.1wph1.t xxx xxx xxx

In the case at bar, the complaint in its paragraph 3 pleads that the deal had been closed by letter and telegram" (Record on Appeal, p. 2), and the letter referred to was evidently the one copy of which was appended as Exhibit A to plaintiff's opposition to the motion dismiss. This letter, transcribed above in part, together with that one marked as Appendix B, constitute an adequate memorandum of the transaction. They are signed by the defendant-appellee; refer to the property sold as a lot in Puerto Princesa, Palawan, covered, by TCT No. 62; give its area as 1826 square meters and the purchase price of four (P4.00) pesos per square meter payable in cash. We have in them therefore, all the essential terms of the contract, and they satisfy the requirements of the Statute of Frauds. We have ruled in Berg vs. Magdalena Estate, Inc., 92 Phil. 110, 115, that a sufficient memorandum may be contained in two or more documents. Defendant-appellee argues that the authenticity of the letters has not been established. That is not necessary for the purpose of showing prima facie that the contract is enforceable. For as ruled by us in Shaffer vs. Palma, L24115, March 1, 1968, whether the agreement is in writing or not, is a question of evidence; and the authenticity of the writing need not be established until the trial is held. The plaintiff having alleged that the contract is backed by letter and telegram, and the same being a sufficient memorandum, his cause of action is thereby established, especially since the defendant has not denied the letters in question. At any rate, if the Court below entertained any doubts about the existence of the written memorandum, it should have called for a preliminary hearing on that point, and not dismissed the complaint. WHEREFORE, the appealed order is hereby set aside, and the case remanded to the Court of origin for trial and decision. Costs against defendantappellee Jose L. Espino. So ordered.

Republic of the Philippines SUPREME COURT Manila SPECIAL FIRST DIVISION G.R. No. 122544 January 28, 2003

However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through Alice A. Dizon on June 20, 1975. SO ORDERED. Private respondent filed a Motion for Reconsideration, Second Motion for Reconsideration, and Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice, all of which have been denied by this Court. This notwithstanding, the cases were set for oral argument on March 21, 2001, on the following issues: 1. WHETHER THERE ARE CIRCUMSTANCES THAT WOULD JUSTIFY SUSPENSION OF THE RULES OF COURT; 2. WHETHER THE SUM OF P300,000.00 RECEIVED BY ALICE DIZON FROM PRIVATE RESPONDENT WAS INTENDED AS PARTIAL PAYMENT OF THE PURCHASE PRICE OF THE PROPERTY, OR AS PAYMENT OF BACK RENTALS ON THE PROPERTY; 3. WHETHER ALICE DIZON WAS AUTHORIZED TO RECEIVE THE SUM OF P300,000.00 ON BEHALF OF PETITIONERS; 4. (A) IF SO, WHETHER PETITIONERS ARE ESTOPPED FROM QUESTIONING THE BELATED EXERCISE BY PRIVATE RESPONDENT OF ITS OPTION TO BUY WHEN THEY ACCEPTED THE SAID PARTIAL PAYMENT; (B) IF SO, WHETHER ALICE DIZON CAN VALIDLY BIND PETITIONERS IN THE ABSENCE OF A WRITTEN POWER OF ATTORNEY; 5. (A) WHETHER THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES; (B) WHETHER THERE WAS A CONTRACT OF SALE AT LEAST WITH RESPECT TO THE SHARES OF FIDELA AND ALICE DIZON; AND 6. WHETHER PRIVATE RESPONDENT'S ACTION FOR SPECIFIC PERFORMANCE HAS PRESCRIBED. In order to resolve the first issue, it is necessary to pass upon the other questions which relate to the merits of the case. It is only where there exist

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners, vs. COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents. x---------------------------------------------------------x G.R. No. 124741 January 28, 2003 REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners, vs. COURT OF APPEALS HON. MAXIMIANO C. ASUNCION and OVERLAND EXPRESS LINES, INC., respondents. RESOLUTION YNARES-SANTIAGO, J.: On January 28, 1999, this Court rendered judgment in these consolidated cases as follows: WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the resolution dated October 19, 1995 in CA-G.R. CV Nos. 25153-54, as well as the decision dated December 11, 1995 and the resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE. Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22, 1982 in Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch III as affirmed in the decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court of Appeals) and in the resolution dated June 19, 1985 of this Court.

strong compelling reasons, such as serving the ends of justice and preventing a miscarriage thereof, that this Court can suspend the rules. 1 After reviewing the records, we find that, despite all of private respondent's protestations, there is absolutely no written proof of Alice Dizon's authority to bind petitioners. First of all, she was not even a co-owner of the property. Neither was she empowered by the co-owners to act on their behalf. The acceptance of the amount of P300,000.00, purportedly as partial payment of the purchase price of the land, was an act integral to the sale of the land. As a matter of fact, private respondent invokes such receipt of payment as giving rise to a perfected contract of sale. In this connection, Article 1874 of the Civil Code is explicit that: "When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void." When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document.2
It necessarily follows, therefore, that petitioners cannot be deemed to have received partial payment of the supposed purchase price for the land through Alice Dizon. It cannot even be said that Alice Dizon's acceptance of the money bound at least the share of Fidela Dizon, in the absence of a written power of attorney from the latter. It should be borne in mind that the Receipt dated June 20, 1975, while made out in the name of Fidela Dizon, was signed by Alice Dizon alone.

In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the private respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an implicit renewal of the contract of lease on a monthly basis. The other terms of the original contract of lease which are revived in the implied new lease under Article 1670 of the New Civil Code are only those terms which are germane to the lessee's right of continued enjoyment of the property leased. Therefore, an implied new lease does not ipso facto carry with it any implied revival of private respondent's option to purchase (as lessee thereof) the leased premises. The provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien to the possession of the lessee. Private respondent's right to exercise the option to purchase expired with the termination of the original contract of lease for one year. The rationale of this Court is that:

"This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the lessee to continue enjoying possession of the property for fifteen days after the expiration of the contract he is willing that such enjoyment shall be for the entire period corresponding to the rent which is customarily paid in this case up to the end of the month because the rent was paid monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of possession the presumption covers the other terms of the contract related to such possession, such as the amount of rental, the date when it must be paid, the care of the property, the responsibility for repairs, etc. But no such presumption may be indulged in with respect to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in a contract of lease."3
There being no merit in the arguments advanced by private respondent, there is no need to suspend the Rules of Court and to admit the motion for reconsideration. While it is within the power of the Court to suspend its own rules, or to except a particular case from its operation, whenever the interest of justice require it, however, the movant must show strong compelling reasons such as serving the ends of justice and preventing a

grave miscarriage thereof,4 none of which obtains in this case.


Litigation must end sometime and somewhere. An effective and efficient administration of justice requires that, once a judgment has become final, the winning party be not, through a mere subterfuge, deprived of the fruits of the verdict. Courts must, therefore, guard against any scheme calculated to bring about that result. Constituted as they are to put an end to controversies, courts should frown upon any attempt to prolong them.5 ACCORDINGLY, the Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice filed by private respondent is DENIED WITH FINALITY. No further pleadings will be entertained in these cases.

Moreover, there could not have been a perfected contract of sale. As we held in
our Decision dated January 28, 1999, the implied renewal of the contract of lease between the parties affected only those terms and conditions which are germane to the lessee's right of continued enjoyment of the property. The option to purchase afforded private respondent expired after the one-year period granted in the contract. Otherwise stated, the implied renewal of the lease did not include the option to purchase. We

see no reason to disturb our ruling on this point, viz:

SO

ORDERED.

Davide,

Jr.,

.J

., see

separate

opinion.

Puno, J., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-116650 May 23, 1995 TOYOTA SHAW, vs. COURT OF APPEALS and LUNA L. SOSA, respondents. INC., petitioner,

The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of 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 contacting 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 office at Shaw Boulevard, Pasig, Metro Manila. There 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 to Marinduque, his home province, where he would celebrate his birthday on the 19th of 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 the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." 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, 15 June 1989, 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) No. 928, 2 on which Gilbert signed under the subheading CONFORME. This document shows that the customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo Street, United Paraaque II; that the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that payment is by "installment," to be financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down as follows: a) b) c) downpayment insurance BLT registration fee CHMO fee service fee accessories P 53,148.00 P 13,970.00 P 1,067.00 P 2,715.00 P 500.00 P 29,000.00

DAVIDE, JR., J.: At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent, which was signed by a sales representative of Toyota Shaw, Inc. named Popong Bernardo. The document reads as follows: 9 AGREEMENTS & POPONG SHAW, INC. BETWEEN BERNARDO MR. OF SOSA TOYOTA

1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from the Province (Marinduque) where the unit will be used on the 19th of June. 2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989. 3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m. Very, Was this document, executed and signed by the petitioner's sales representative, a perfected contract of sale, binding upon the petitioner, breach of which would entitle the private respondent to damages and attorney's fees? The trial court and the Court of Appeals took the affirmative view. The petitioner disagrees. Hence, this petition for review oncertiorari.

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" were not filled-up. It also contains the following pertinent provisions: CONDITIONS OF SALES

1. This sale is subject to availability of unit. 2. Stated Price is subject to change without prior notice, 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 1989, at around 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 " nasulot ang unit ng ibang malakas." Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged that a particular unit had already been reserved 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, 4 the receipt of which was shown by a check voucher of Toyota, 5 which Sosa signed with the reservation, "without prejudice to our future claims for damages." Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, he demanded the refund, within five 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. 6 The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded one million pesos representing interest and damages, again, with a warning that legal action would be taken if payment was not made within three days. 7 Toyota's counsel answered through a letter dated 27 November 1989 8 refusing to accede to the demands of Sosa. But even before this answer was made and received by Sosa, the latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. 9 He alleges, inter alia, that: 9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff suffered embarrassment, humiliation, ridicule, mental anguish and sleepless nights because: (i) he

and his family were constrained to take the public transportation from Manila to Lucena City on their way to Marinduque; (ii) his balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid the inconvenience of taking public transportation; and (iii) his relatives, friends, neighbors and other provincemates, continuously irked him about "his Brand-New Toyota Lite Ace that never was." Under the circumstances, defendant should be made liable to the plaintiff for moral damages in the amount of One Million Pesos (P1,000,000.00). 10 In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of delivery; Sosa had not completed the documents required by the financing company, and as a matter of policy, the vehicle could not and would not be released prior to full compliance with financing requirements, submission of all documents, and execution of the sales agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue was improperly laid; and Sosa did not have a sufficient cause of action against it. It also interposed compulsory counterclaims. After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid perfected 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. As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held that the extent of Bernardo's authority "was not made known to plaintiff," for as testified to by Quirante, "they do not volunteer any information as to the company's sales policy and guidelines because they are internal matters." 13 Moreover, "[f]rom the beginning of the transaction up to its consummation when the downpayment was made by the plaintiff, the defendants had made known to the plaintiff the impression that Popong Bernardo is an authorized sales executive as it permitted the latter to do acts within the scope of an apparent authority holding him out to the public as possessing power to do these acts." 14 Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15 The court further declared 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." 16 Accordingly, it disposed as follows:

WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor of the plaintiff and against the defendant: 1. ordering the defendant to pay to the plaintiff the sum of P75,000.00 for moral damages; 2. ordering the defendant to pay the plaintiff the sum of P10,000.00 for exemplary damages; 3. ordering the defendant to pay the sum of P30,000.00 attorney's fees plus P2,000.00 lawyer's transportation fare per trip in attending to the hearing of this case; 4. ordering the defendant to pay the plaintiff the sum of P2,000.00 transportation fare per trip of the plaintiff in attending the hearing of this case; and 5. ordering the defendant to pay the cost of suit. SO ORDERED. Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994, 17 the Court of Appeals affirmed in toto the appealed decision. Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of the ponenciaand also the following related issues: (a) whether or not the standard VSP was the true and documented understanding of the parties which would have led to the ultimate contract of sale, (b) whether or not Sosa has any legal and demandable right to the delivery of the vehicle despite the non-payment of the consideration and the non-approval of his credit application by B.A. Finance, (c) whether or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) whether or not Toyota may be held liable for damages. We find merit in the petition. Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract of sale.

Article 1458 of the Civil Code defines a contract of sale as follows: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. and Article 1475 specifically provides when it is deemed perfected: Art. 1475. 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. 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 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. 18 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. 19 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, viz., AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC. 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 20 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. 21 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. 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 or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. 22 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. Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commission 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 receivables, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property." 23 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. 24 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. However, in paragraph 7 of his complaint, Sosa solemnly states: On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales representative, Mr. Popong Bernardo, called plaintiff's house and informed the plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to defendant's office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant 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; . . . (Emphasis supplied). 25 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. The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal basis. Besides, 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. At the bottom of this claim is nothing but misplaced pride and ego. He should not have announced his plan to buy a 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. 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.

Also, it is settled that 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. 26 No such explicit determination thereon was made in the body of the decision of the trial court. No reason thus exists for such an award. WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The counterclaim therein is likewise DISMISSED. No pronouncement as to costs. SO ORDERED. Padilla, Bellosillo and Kapunan, JJ., concur. Quiason, J., is on leave.

Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION

(8) Angelina (9) Gaudencio (10) Benjamin (11) Victor Maguad 45.00

Molina Pagco Aguilar

43.92 48.31 45.00

G.R. No. L-109236 March 18, 1994 VIRGINIA D. PAGCO and GAUDENCIO PAGCO, petitioners, vs. THE HONORABLE COURT OF APPEALS and PETER NG QUIMSON, respondents. Candido P. Gutierrez for petitioners. Rosendo G. Tansinsin, Jr. for private respondent.

(d) Ordering the defendants to pay their proportionate shares in the costs. (e) Remand the records of this case to the court of origin for immediate execution. SO ORDERED. 2 Private respondent Peter Quimson is the owner of a parcel if land situated at San Isidro Street, Singalong, Manila, with an area of 1,000 square meters and covered by TCT No. 173114. When private respondent acquired the property on March 17, 1987 through sale at public auction, eleven (11) occupants were in possession of the property with their respective residential houses built thereon, among whom are herein petitioners. Private respondent had earlier negotiated with petitioners for the latter to buy the portions they occupy but petitioners backed off. Private respondent subsequently informed the lessees to pay their back rentals and to remove their houses because he needed the property for his own use and that of the immediate member of his family. For failure of petitioners to heed private respondent's demand, a complaint for ejectment was filed against petitioners and the other occupants of the property in the Metropolitan Trial Court of Manila, Branch 6, docketed as Civil Case No. 125830. 3 Petitioners and the other defendants filed their answer denying that there were negotiations for them to buy the property and alleging as affirmative defense that private respondent has no cause of action as the property is within the area for priority development, hence, eviction of the occupant families is prohibited under P.D. 2016. During the trial of the case, only petitioners adduced their evidence. The other defendants waived their right to present evidence for failure to appear at the trial. After trial, the Metropolitan Trial Court rendered 4 judgment dismissing the complaint for ejectment on the ground that there was a perfected sale over the property between private respondent and its occupants and, consequently, said court had no jurisdiction over the case because the rights of the parties should

KAPUNAN, J.: Petitioners seek to review the decision of the Court of Appeals dismissing their petition to reverse the decision 1 of the Regional Trial Court of Manila, the dispositive portion of which reads: WHEREFORE, judgment is rendered: (a) Vacating and setting aside the appealed judgment of the lower court; (b) Ordering the defendants to vacate the premises under their respective occupation and surrender possession thereof to the plaintiff; (c) Ordering said defendants to pay to the plaintiff their rental in arrears computed from March 1987 and their current rentals until they vacate the premises leased to them at the following month rates: NAMES RENTAL (1) (2) (3) (4) (5) (6) (7) Francisco Angelina Luz A. Ramon Virginia Asuncion Apolonia Vda. Merdeja Villarin Mondejar Mondejar Pagco Bandung de Glory P45.00 53.40 53.14 48.31 62.76 45.00 3.14

be governed not by the law on lease but by the law on sales, more specifically Article 1475 of the Civil Code. Private respondent appealed the MTC's decision to the Regional Trial Court, Branch 35, where the case was docketed as Civil Case No. 91-58880. Thereafter, the RTC rendered its decision, reversing that of the Metropolitan Trial Court. Not satisfied with the RTC's decision, petitioners filed a petition for review with the Court of Appeals on the following grounds: I THE LOWER COURT ERRED WHEN IT DISREGARDED THE PERFECTED SALE BETWEEN THE PARTIES AND ORDERED THE EJECTMENT OF DEFENDANTS. II THE DECISION IS IN ERROR WHEN THE FATAL DEFECT OF MISJOINDER OF PARTIES WAS IGNORED. The Court of Appeals in dismissing the petition ratiocinated: A contract of sale is perfected from the time there exists and agreement upon the thing which is the object of the contract and upon the price (Article 1475, Civil Code). Here, the price fixed by respondent Quimson as alleged in paragraph 8 of the complaint is P970.00 per square meter, although respondent testified that the exact price is P980.00 per square meter (page 6, RTC decision). According to petitioners, however, all the defendants agreed to pay the price of P850.00 only per square meter (page 5, RTC decision). Clearly, therefore, there was no agreement reached between the parties as to the price of the lot in question. Consequently, as no price was agreed upon, there can be no perfected contract of sale within the contemplation of Article 1475 of the Civil Code. That there indeed was no perfected contract of sale is further bolstered by the letter of petitioners' lawyer to respondent Quimson dated June 24, 1988 (Exhibit "C", also Exhibit "1", page 19, MRT record), the relevant portions of which state: Our clients revealed to us that they have not consented much less entered into any agreement on a direct purchase from you of

their respective occupied lots especially on the price you mentioned. There is yet another factor that militates against petitioners' pretended perfected sale of the property. In their answer to the complaint, (page 45, MTC record), defendants (including the petitioners herein) never alleged that there was a perfected contract of sale of the portion they were occupying. Paragraphs 4 & 5 of defendants' answer aver: 4. The allegations contained in paragraphs 6, 7 and 8 are vehemently denied, the truth of the matter being, that plaintiff on several occasions demands exhorbitant rentals or payments for the property and harassed them with threats to eject them for their occupied spaces if they refuse to accept and oblige with his terms. 5. Paragraphs 9 and 10 of the complaint, are likewise denied on the ground that defendants never recognized plaintiff as the owner of the property in issue and most of all advised the latter that the same was covered by a proclamation placing it under Area priority development pursuant to the Urban Reform Law. All these established facts debunk petitioners' claim or a perfected contract of sale between them and respondent Peter Quimson. On the second ground, petitioners vehemently assail the RTC decision which allegedly ignored the misjoinder of parties. Citing the case of Flores vs. Mallare-Philipps, 144 SCRA 377, petitioners contend that there is misjoinder of parties because the claim against the defendants are separate and distinct. The Flores decision, supra, finds no application in this case. The Supreme Court dismissed the complaint because the claim against Ignacio Binongcal for P11,643.00 on the first cause of action and the claim against Fernando Calion for P10,212.00 on the second cause of action, are separate and distinct and neither of which falls within the original exclusive jurisdiction of the Regional Trial Court under Section 19(8) of B.P. 129 where the amount of the demand is more than P20,000.00.

In the case at bar, the cause of action for the ejectment against all the defendants, including the petitioners, is for non-payment of rentals from 1987 to the present. The relief sought against all the defendants is the same, i.e., to vacate the premises and to pay the rentals in arrears. We thus agree with the trial court that Arrears in payment of rentals for a total of three months is a ground for judicial ejectment (Sec. 5-b, Batas Pambansa Blg. 877, as amended and extended by Rep. Act. No. 6828). In this case, the defendants admitted among others, during the pre-trial, the respective rates of rental they have been paying to the previous owners; that the title to the land in question has been transferred to the plaintiff in March 1987; that they have not been paying their rentals since June 1985; and that they received the letters of demand of the plaintiff (Record, p. 178). However, the plaintiff is entitled to recover the unpaid rentals only from March 1987 when he became the ownerlessor of the land in question. This is a good example of how persons who have failed to adduce any legal grounds for their continued stay on property belonging to another have nonetheless managed to stave off eviction for more than four years although with respect to the other defendants in the case, writs of execution had already been issued against them. 5 In the instant recourse, petitioners assail the Court of Appeals' decision alleging as their lone assigned error that I THE LOWER COURT ERRED WHEN IT DID NOT CONSIDER AGAINST PLAINTIFF FATAL ALLEGATIONS IN THE COMPLAINT WHICH CLEARLY INDICATES LACK OF CAUSE OF ACTION BUT RATHER CURED THE SAME THROUGH DEFENDANTS ANSWER. The petition is devoid of merit.

As correctly found by both the Court of Appeals and the Regional Trial Court on the basis of the evidence, there was no meeting of the minds between the parties regarding the offer by private respondent to sell his property to the occupants. Private respondent wanted P980.00 per square meter, but the occupants were willing to pay only P850.00. In arguing that there was a perfected contract of sale, petitioners wrongly capitalize on the allegations in the complaint, to wit: 8. That this time, upon receipt of Annex "D", defendants negotiated with the plaintiff's offer to buy the area actually occupied by their houses at P970.00 a square meter on easy monthly installment for five (5) years. 9. To consumate the agreement, plaintiff engaged the services of a Geodetic Engineer who prepared a subdivision plan delineating the boundaries of the area to be assigned to each of the defendants. 10. That however, after approving the proposed subdivision plan, the defendants suddenly and abruptly changed their minds and repudiated the agreement which is already a perfected contract, and deliberately and maliciously refused to continue negotiating with the plaintiff as expressed in the attached letter of their counsel marked as ANNEX "E" and made an integral part hereof. 6 However, as the Court of Appeals had appointed out in its decision, petitioners categorically denied in paragraphs 4 and 5 of their answer whatever imputations there are in paragraphs 8 to 10 of the Complaint of the alleged existence of a perfected contract. In other words, petitioners in their answer never claimed ownership of the lot; they only put up the defense that the property is within one of the areas proclaimed for priority development and, therefore, their eviction is prohibited pursuant to P.D. 2016. The phrase "perfected contract" in paragraph 10 of the complaint is used in its loose sense and does not connote that there was a meeting of the minds between the parties. Observe that after the statement in said paragraph that "after approving the proposed subdivision plan, the defendants suddenly and abruptly changed their minds and repudiated the agreement which is already a perfected contract," there immediately follows the qualifying allegation that "[defendants] deliberately and maliciously refused to continue negotiating with the plaintiff as expressed in the attached letter of their counsel marked as Annex 'E' and made an integral part thereof. The words "refused to continue negotiating with the plaintiff" have no other meaning except that there was a negotiation regarding the offer to sell, but the

negotiation fell through because of the refusal of petitioners and the other occupants to talk further as evidenced by the letter of their counsel, which is Annex "C" of the complaint. The letter referred to, which is dated June 24, 1988, states in part: Our client revealed to us that the have not consented much less entered into by agreement on a direct purchase from you of their respective occupied lots especially on the price you mentioned. 7 Finally, even granting that there was a perfected contract of sale, it can be implied that there was subsequently a mutual withdrawal or "mutual backing out" from the contract. 8 This conclusion may be drawn from the fact of the filing by private respondent of the complaint for ejectment, in which he alleged ownership of the property in question and from the averments in petitioners' answer wherein they never claimed ownership of the property by purchase from private respondent. In Aquino vs. Taedo, 9 involving a sale of land mutually cancelled by both contracting parties, this Court emphasized that the rescission of the contract between the plaintiff and the defendant was not originated by any of the causes specified in Arts. 1291 and 1292 (now Arts. 1381 and 1832 of the New Civil Code), nor is it a relief for the purposes sought by these articles; it is simply another contract for the dissolution of the previous one, and its effects, in relation to the contract so dissolved, should be determined by the agreement of the parties, or by the application of other legal provisions, not by Article 1295 (now Art. 1385 of the Civil Code). WHEREFORE, the petition is DENIED for lack of merit. No pronouncement as to costs. Cruz, Jr., Davide, Jr., Bellosillo and Quiason, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

It appears, however, that the GSIS disapproved the loan applications of petitioners. 11 For this reason, they were advised by private respondent PVDHC to seek other sources of financing. In the meantime, they were allowed to remain in the subject premises. Upon complaint of petitioner Elvira Raet, the Office of the Provincial Prosecutor, Bulacan, charged Amparo Gatus with estafa in the Regional Trial Court of Malolos, Bulacan. However, the case was dismissed. The Regional Trial Court found that Gatus never misrepresented herself as an agent of private respondent PVDHC and accordingly acquitted her in a decision dated August 25, 1989. Owing to the failure of petitioners to raise money, private respondent PVDHC asked them, in separate demand letters, dated November 10, 1988, to vacate the units they were occupying. As petitioners refused to do so, it filed ejectment cases against them before the Municipal Trial Court of Meycauayan, Bulacan, which eventually ordered them on May 24, 1991 to surrender the possession of the subject units and to pay the fees, litigation expenses, and costs of suit. The decision of the Municipal Trial Court of Meycauayan, Bulacan was affirmed, first by the Regional Trial Court of Malolos, Bulacan and then by the Court of Appeals. 12 Petitioners tried to appeal to this Court but their appeal was dismissed on December 2, 1992. On May 18, 1988 and November 24, 1988, respectively, the spouses Raet and the spouses Mitra had earlier filed complaints against private respondent PVDHC with the Regional Trial Court of Malolos, Bulacan for the recovery of the supplemental costs they had paid to private respondent PVDHC. However, the complaint of the spouses Raet was dismissed on the ground that the Regional Trial Court did not have jurisdiction over cases involving disputes between subdivision buyers and developers which fall within the exclusive competence of the Housing and Land Use Regulatory Board (HLURB). On the other hand, the complaint of the spouses Mitra was withdrawn by them on April 17, 1990. The spouses Raet and the spouses Mitra then filed on April 15, 1991 a complaint for specific performance and damages against Amparo Gatus and private respondent PVDHC with the HLURB which gave judgment in petitioners' favor. In a decision, dated October 8, 1991, Housing and Land Use Arbiter Arturo M. Dublado ruled: Against this factual backdrop, . . . the following observations could be made, to wit: 1. Respondents Phil-Ville and Gatus transacted with complainant for the sale of the subject housing units despite knowing fully well that they are not qualified to buy under the GSIS financing scheme. This is a fact which

G.R. No. 128016 September 17, 1998 SPOUSES CESAR AND ELVIRA RAET AND SPOUSES REX AND EDNA MITRA, petitioners, vs. COURT OF APPEALS, PHIL-VILLE DEVELOPMENT & HOUSING CORPORATION, GERONIMA G. QUE AND CAROLINA Q. VILLONGCO, respondents.

MENDOZA, J.: In 1984, petitioners Cesar and Elvira Raet (the spouses Raet) and petitioners Rex and Edna Mitra (the spouses Mitra) negotiated with Amparo Gatus concerning the possibility of buying the rights of the latter to certain units at the Las Villas de Sto. Nio Subdivision in Meycauayan, Bulacan. 1 This subdivision was developed by private respondent Phil-Ville Development and Housing Corporation (PVDHC) primarily for parties qualified to obtain loans from the Government Service Insurance System (GSIS). 2 The spouses Raet and the spouses Mitra paid Gatus the total amounts of P40,000.00 and P35,000.00, respectively, 3 for which they were issued receipts by Gatus in her own name. 4 In early 1985 the spouses Raet and the spouses Mitra applied directly with private respondent PVDHC for the purchase of units in the said subdivision. As they were not GSIS members, they looked for members who could act as accommodation parties by allowing them to use their policies. 5 Private respondent PVDHC would process the applications for the purchase of the units upon the approval by the GSIS of petitioners' loan applications. 6 The spouses Raet presented the GSIS policy of Ernesto Casidsid, while the spouses Mitra that of Edna Lim. 7 The spouses Raet paid P32,653.00, while the spouses Mitra paid P27,000.00, to private respondent PVDHC, 8 on the understanding that these amounts would be credited to the purchase prices of the units which will be determined after the approval of their loan applications with the GSIS. Meanwhile, the spouses Raet were allowed to occupy the unit built on Lot 4, Block 67, Phase 4A of the Las Villas de Sto. Nio Subdivision, 9 while the spouses Mitra were given the unit on Lot 7, Block 61, Phase 4A thereof. 10

respondents could have readily known even before proceeding to transact with complainants. Respondents even allowed complainants to use the GSIS policies of other persons in order that complainants can avail of the GSIS loan facility to pay respondent PhilVille which is irregular. 2. Respondent Phil-Ville accepted payments and allowed complainants to occupy the subject premises despite knowing that they are not qualified to buy under the GSIS financing scheme and without executing a written instrument modifying the terms and conditions agreed upon between complainants and respondent Gatus. 3. It was only after several years of occupation of the subject premises by complainants that respondent Phil-Ville informed complainants that they are not qualified to purchase the subject premises. 4. Respondent Gatus did not unequivocally inform complainants in her transactions with them that she was merely selling her interests over the subject properties to complainants. Respondent Phil-Ville could have made its relation with respondent Gatus a lot clearer by altogether ignoring the transaction entered into by respondent Gatus with complainants but it chose to transact with complainants and accept payments from the latter. From the foregoing, the conclusion that thus can be drawn is that respondent Gatus is an agent of respondent Phil-Ville with respect to the sale of the subject properties to complainants. Respondent Gatus is thus duty bound to remit to respondent Phil-Ville all payments made by complainants in connection with the purchase of the subject properties. Respondent PhilVille on the other hand is bound to respect the terms and conditions for the purchase of the subject premises as agreed upon by the respondent Gatus and complainants. Accordingly, he ordered Amparo Gatus and private respondent PVDHC as follows:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered directing respondent Amparo Gatus to remit to respondent Phil-Ville Development and Housing Corporation the amounts of P40,000.00 and P35,000.00 representing the amounts respectively paid by complainants spouses Raet and Mitra pursuant to the purchase of their respective housing units or in the alternative respondent Gatus is hereby directed to refund the said amounts of P40,000.00 and P35,000.00 to complainants at 12% interest per annum from the time of the filing of the complaint on April 15, 1991. Respondents are further directed to allow complainants reasonable time to look for sources of financing or to pay the balance on the purchase price of P171,994.50 for complainants spouses Mitra and the purchase price of P213,998.00 for complainants spouses Raet. Finally, for compelling complainants to engage the services of counsel, respondents are jointly and severally directed to pay P5,000.00 as and by way of attorney's fees. 13 On appeal, the Board of Commissioners of the HLURB reversed on April 20, 1992 the Housing and Land Use Arbiter on the ground that the issues involved in the case had already been determined by the Municipal Trial Court of Meycauayan, Bulacan in the ejectment suit between the parties. Petitioners moved for a reconsideration, but their motion was denied on January 18, 1993. Petitioners elevated the case to the Office of the President which sustained the ruling of the Housing and Land Use Arbiter in a decision, dated June 29, 1995. The Office of the President held that the HLURB has jurisdiction over cases involving disputes between subdivision buyers and developers to the exclusion of the regular courts. Therefore, the decision in the ejectment case cannot be conclusive on the question whether there were perfected contracts of sale between the petitioners and private respondent PVDHC. Private respondent PVDHC filed a motion for reconsideration which the Office of the President denied in its resolution of December 20, 1995. The case was elevated to the Court of Appeals by private respondent PVDHC. In its decision, dated July 2, 1996, 14 the Court of Appeals set aside the decision of the Office of the President and dismissed the petitioners' action without prejudice to their right to proceed against Amparo Gatus. Petitioners' subsequent motion for reconsideration was denied by the appellate court on January 6, 1997. This is a petition for review on certiorari by the spouses Raet and the spouses Mitra. Petitioners first contend that

RESPONDENT COURT COMMITTED A REVERSIBLE ERROR IN CONCLUDING THAT THE FACTS AND JUDGMENT RENDERED IN THE UNLAWFUL DETAINER CASE BY THE MUNICIPAL TRIAL COURT OF MEYCAUAYAN, BULACAN, AGAINST THE HEREIN PETITIONERS, WHICH WAS AFFIRMED BY THE APPELLATE COURTS, WAS A BAR TO THE ACTION OF PETITIONERS FOR SPECIFIC PERFORMANCE WHICH IS EXCLUSIVELY COGNIZABLE BY THE HOUSING AND LAND USE REGULATORY BOARD CONTRARY TO THE PROVISION OF SECTION 7, RULE 70, RULES OF COURT AND THE SETTLED JURISPRUDENCE THAT A JUDGMENT THEREIN IS CONCLUSIVE ONLY WITH RESPECT TO POSSESSION DE FACTO AND THE FACTS THEREIN FOUND ARE NOT CONCLUSIVE WITH RESPECT TO THE SAME PARTIES IN A DIFFERENT CAUSE OF ACTION NOT INVOLVING POSSESSION. The contention has merit. The decision in the ejectment suit is conclusive only on the question of possession of the subject premises. It does not settle the principal question involved in the present case, namely, whether there were perfected contracts of sale between petitioners and private respondent PVDHC involving the units in question. Under 8(11) of E.O. No. 648 dated February 7, 1981, as amended by E.O. No. 90 dated December 17, 1986, this question is for the HLURB to decide. The said provision of law gives that agency the power to Hear and decide cases of unsound real estate business practices; claims involving refund filed against project owners, developers, dealers, brokers, or salesmen; and cases of specific performance. This jurisdiction of the HLURB is exclusive. It has been held to extend to the determination of the question whether there is a perfected contract of sale between a condominium buyer and developer. 15 As the Office of the President correctly pointed out in its decision, dated June 29, 1995: Unquestionably, the instant case stemmed from an action for specific performance regarding agreements or contracts to purchase houses and lots located in the subdivision owned, developed and/or marketed by respondent Phil-Ville Development Corporation. As such, it is within the exclusive province of the HLURB to take cognizance of the instant case, involving, as it does, a demand for specific performance of contractual and statutory obligations by buyers of subdivision lots against a developer, dealer, broker or salesman.

As mentioned earlier, the principal question, however, is whether there were perfected contracts of sale between petitioners and private respondent PVDHC over the subject units. Petitioners also contend that RESPONDENT COURT COMMITTED A REVERSIBLE ERROR IN CONCLUDING THAT, UNDER THE UNDISPUTED FACTS OF THE CASE, THERE WERE NO PERFECTED CONTRACTS OF PURCHASE AND SALE BETWEEN PETITIONERS AND PRIVATE RESPONDENT WITH RESPECT TO THE LOTS AND HOUSES WHICH WERE THE SUBJECT MATTER OF THE COMPLAINT FOR SPECIFIC PERFORMANCE BEFORE THE HOUSING AND LAND USE REGULATORY BOARD. We agree with the conclusion of the Court of Appeals that the parties in this case had not reached any agreement with regard to the sale of the units in question. First, the records do not show the total costs of the units in question and the payment schemes therefor. In his decision of October 8, 1991, the Housing and Land Use Arbiter gave credence to the allegations of petitioners that there were agreements between them and private respondent PVDHC as to the prices of the disputed units. 16 However, as pointed out by private respondent PVDHC, the figures referred to by petitioners were mere estimates given to them by Amparo Gatus. 17The parties' transactions, therefore, lacked the requisites essential for the perfection of contracts. Second, petitioners dealt with Gatus. But Gatus was not the agent of private respondent PVDHC. Indeed, the criminal case for estafa against her was dismissed because it was found that she never represented herself to be an agent of private respondent PVDHC. Moreover, Art. 1874 of the Civil Code requires for the validity of a sale involving land that the agent should have an authorization in writing, which Gatus did not possess. Petitioners knew from the beginning that Gatus was negotiating with them in her own behalf, and not as an agent of private respondent PVDHC. There is, therefore, no basis in fact for the finding of the Housing and Land Use Arbiter that Gatus was the agent of private respondent PVDHC with respect to the transactions in question. 18 Third, since private respondent PVDHC had no knowledge of the figures Amparo Gatus gave to petitioners as estimates of the costs of the units in question, it could not have ratified the same at the time the latter applied for the purchase of the units. At any rate, private respondent PVDHC was to enter into agreements concerning the subject units with petitioners only upon the approval of the latter's loan applications with the GSIS which, as mentioned earlier, failed to materialize. Fourth, there are no written contracts to evidence the alleged sales. If petitioners and private respondent PVDHC had indeed entered into contracts

involving the subject units, it is rather strange that contracts of such importance have not been reduced to writing. As the Court ofAppeals correctly held: To our mind, the determinative issue in this case is whether or not petitioners and private respondents have a perfected and enforceable contract of sale or at least an agreement to sell over the disputed housing units. For, without a perfected contract as an independent source of obligation, the binding prestation to do or give and the corollary right to exact compliance do not arise. There can be no specific performance of a contractual obligation as yet non-existent. Without dispute, no written deed of conveyance has been executed by PHIL-VILLE in favor of private respondents involving the units in question. As this Court sees it, there was no contract of sale perfected between the private parties over the said property, there being no meeting of the minds as to terms, especially on the price thereof. At best, only a proposed contract to sell obtained which did not even ripen into a perfected contract due at the first instance to private respondents' inability to secure approval of their GSIS housing loans. As it were, petitioners and private respondents have not hurdled the negotiation phase of a contract, which is the period from the time the prospective contracting parties indicate interest on the contract to the time the contract comes into existence the perfection stage upon the concurrence of the essential elements thereof. 19 Finally, the occupation by petitioners of the units in question for more than three years prior to the ejectment case was merely by virtue of the forbearance of private respondent PVDHC. Since this pertains to the issue of possession of the subject premises, the ruling on this point of the Municipal Trial Court of Meycauayan, Bulacan in the ejectment case is conclusive. No presumption as to the existence of any right that may have been acquired by virtue of such occupation can arise from this circumstance. Petitioners finally contend that RESPONDENT COURT COMMTTED A REVERSIBLE ERROR IN NOT CONSIDERING THE FINDINGS OF FACTS OF THE OFFICE OF THE PRESIDENT WHICH WERE DULY SUPPORTED BY SUBSTANTIAL EVIDENCE AND NOT

CONTRARY TO LAW AS FINAL AND BINDING UPON THE AFORESAID APPELLATE COURT. We generally accord great, respect to the factual findings of administrative agencies. However, as we have also held, this rule does not apply when the evidence on record calls for a reversal or a modification thereof. 20 As the evidence on record points to factual conclusions opposite those reached by the Office of the President, the Court of Appeals correctly refused to give conclusive effect to such administrative findings. WHEREFORE, the petition is DISMISSED. SO ORDERED. Melo, Puno and Martinez, JJ., concur. Regalado, J., is on leave.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-61623 December 26, 1984 PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant, vs. COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. MENDOZA, respondents-appellees. Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner PHHC. Tolentino, Cruz, Reyes, Lava and Manuel for private respondents.

On October 18, 1965 the PHHC board of directors passed Resolution No. 218, withdrawing the tentative award of Lot 4 to the Mendoza -spouses under Resolution No. 513 and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, subject to existing PHHC rules and regulations. The prices would be the same as those of the adjoining lots. The awardees were required to deposit an amount equivalent to 20% of the total selling price (Exh. F). The five awardees made the initial deposit. The corresponding deeds of sale were executed in their favor. The subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands. On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of the previous award to them of Lot 4 and for the cancellation of the re-award of said lot to Sto. Domingo and four others. Before the request could be acted upon, the spouses filed the instant action for specific performance and damages. The trial court sustained the withdrawal of the award. The Mendozas appealed. The Appellate Court reversed that decision and declared void the re-award of Lot 4 and the deeds of sale and directed the PHHC to sell to the Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's fees and litigation expenses. The PHHC appealed to this Court. The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which they can enforce against the PHHC by an action for specific performance. We hold that there was no perfected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities. The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its purchase although the area was reduced and to obviate ally doubt on the matter. They did not do so. The PHHC board of directors acted within its rights in withdrawing the tentative award. "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 law governing the form of contracts." (Art. 1475, Civil Code).

AQUINO, J.: The question in this case is whether the People's Homesite & Housing Corporation bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised consolidation subdivision plan with an area of 2,6,08.7 (2,503.7) square meters located at Diliman, Quezon City. The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein it stated "that subject to the approval of the Quezon City Council of the above-mentioned Consolidation Subdivision Plan, Lot 4. containing 4,182.2 square meters be, as it is hereby awarded to Spouses Rizalino Mendoza and Adelaida Mendoza, at a price of twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to the approval of the OEC (PHHC) Valuation Committee and higher authorities". The city council disapproved the proposed consolidation subdivision plan on August 20, 1961 (Exh. 2). The said spouses were advised by registered mail of the disapproval of the plan (Exh. 2-PHHC). Another subdivision plan was prepared and submitted to the city council for approval. The revised plan, which included Lot 4, with a reduced area of 2,608.7, was approved by the city council on February 25, 1964 (Exh. H). On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of lots to persons who failed to pay the deposit or down payment for the lots awarded to them (Exh. 5). The Mendozas never paid the price of the lot nor made the 20% initial deposit.

"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de las partes o de la ley, se celebra la venta bajo una condicion suspensiva, y en los cuales no se perfecciona la venta hasta el cumplimiento de la condicion" (4 Castan Tobenas, Derecho Civil Espaol 8th ed. p. 81). "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. (Art. 1181, Civil Code). "Se llama suspensive la condicion de la que depende la perfeccion, o sea el principio del contrato". (9 Giorgi, Teoria de las Obligaciones, p. 57). Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter. The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the awardee in that case applied for the purchase of the lot, paid the 10% deposit and a conditional contract to sell was executed in his favor. The PHHC could not re-award that lot to another person. WHEREFORE, the decision of the Appellate Court is reversed and set aside and the judgment of the trial court is affirmed. No costs. SO ORDERED. Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-29421 January 30, 1971 LINO ARTATES and MANUELA POJAS, plaintiffs-appellants, vs. DANIEL URBI, CRISANTO SOLIVEN, assisted by his Guardian 'ad litem,' MARCELA B. SOLIVEN, REMEGIO BUTACAN and NEMESIO OATE, in their private capacities and/or as Ex-Oficio Provincial Sheriff and Deputy Sheriff of Cagayan, respectively, and BIENVENIDO CACATIAN, as Deputy Register of Deeds of Cagayan, defendants-appellees. Bienvenido J. Jimenez for plaintiffs-appellants. Rogelio Re. Ubarde for defendants-appellees Daniel Urbi and Crisanto Soliven. Alfredo J. Donato for defendant-appellant Nemesio Oate. The Provincial Fiscal (Cagayan) for defendants-appellees Provincial Sheriff and Deputy Register of Deeds.

the homestead to satisfy an indebtedness of Lino Artates that accrued on 21 October 1955, violated the provision of the Public Land law exempting said property from execution for any debt contracted within five years from the date of the issuance of the patent; that defendant Urbi, with the intention of defrauding the plaintiffs, executed on 26 June 1961 a deed for the sale of the same parcel of land to defendant Crisanto Soliven, a minor, supposedly for the sum of P2,676.35; that as a result of the aforementioned transactions, defendants Urbi and Soliven entered into the possession of the land and deprived plaintiffs of the owners' share in the rice crops harvested during the agricultural year 1961-1962. Plaintiffs, therefore, prayed that the public sale of the land to defendant Urbi, as well as the deed of sale executed by the latter in favor of defendant Soliven, be declared null and void; that defendants be ordered to deliver to plaintiffs possession of the land; and to pay to plaintiffs compensatory damages at the rate of P1,000.00 per agricultural year until possession is finally restored to them, the sum of P2,000.00 as damages for maliciously casting cloud upon plaintiffs' title on the land, plus attorneys' fees and costs. The defendants2 filed separate answers disputing the averments of the complaint. On 29 March 1953, the court rendered judgment upholding the regularity and validity of the execution conducted by the defendant Provincial Sheriff, but finding that the sale of the lands by defendant Urbi to the minor Soliven was simulated, intended to place the property beyond the reach of the judgment debtor, and that plaintiffs had offered to redeem the land within the 5year period allowed by Section 119 of the Public Land law for reacquisition thereof by the grantee. Consequently, the court declared the sale of the land by defendant Daniel Urbi to defendant Crisanto Soliven null and void; and Daniel Urbi was ordered to reconvey the property to the plaintiffs upon the latter's payment (to Urbi) of the sum of P1,476.35 plus the sheriff's fee incident to the sale at public auction, with interest thereon at the rate of 12% per annum from 2 June 1961 until said amount shall have been fully paid, and the further sum of P783.45 representing the amount paid by defendant Daniel Urbi to the Philippine National Bank for the release of the real estate mortgage on the land, contracted by Lino Artates, with legal rate of interest thereon from 29 June 1961. From this decision, the plaintiffs interposed the present appeal assigning several errors allegedly committed by the court below, all hinged on the validity or invalidity of the public sale of the lot involved herein. Section 118 of the Public Land law (Commonwealth Act 141) provides as follows: SEC. 118. Except in favor of the Government or any of its branches, units, or institution, or legally constituted banking corporations, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term

REYES, J.B.L., J.: This is an appeal from the decision of the Court of First Instance of Cagayan (Civil Case No. 116-T), involving the public sale of a homestead to satisfy a civil judgment against the grantee. The records show that in an action filed in the Court of First Instance of Cagayan, the spouses Lino Artates and Manuela Pojas sought annulment of the execution of a homestead1 covered by Patent No. V-12775 issued to them by the proper land authorities on 23 September 1952, and duly registered in their names (OCT No. P-572). The public sale, conducted by the Provincial Sheriff of Cagayan on 2 June 1962, was made to satisfy a judgment against Lino Artates in the amount of P1,476.35, and awarded to Daniel Urbi by the Justice of the Peace Court of Camilaniugan, Cagayan, in its Civil Case No. 40, for physical injuries inflicted by Artates upon Urbi on 21 October 1955. In the execution sale, the property was sold to the judgment creditor, the only bidder, for P1,476.35. In their complaint, the plaintiffs spouses alleged that the sale of

of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations or corporations. xxx xxx xxx As thus prescribed by law, for a period of five years from the date of the government grant, lands acquired by free or homestead patent shall not only be incapable of being encumbered or alienated except in favor of the government itself or any of its institutions or of duly constituted banking corporations, but also, they shall not be liable to the satisfaction of any debt contracted within the said period,3 whether or not the indebtedness shall mature during or after the prohibited time.4 This provision against the alienation or encumbrance of public lands granted within five years from the issuance of the patent, it has been held, is mandatory;5 a sale made in violation thereof is null and void 6 and produces no effect whatsoever. Though it may be a limitation on the right of ownership of the grantee, the salutary purpose of the provision cannot be denied: it is to preserve and keep for the homesteader or his family the land given to him gratuitously by the State,7 so that being a property owner, he may become and remain a contented and useful member of our society. 8 In the case at bar, the homestead patent covering the land in question (No. V-12775) was issued to appellants on 23 September 1952, and it was sold at public auction to satisfy the civil liability of appellant Lino Artates to Daniel Urbi, adjudged in the 14 March 1956 decision of the Justice of the Peace Court of Camalaniugan, Cagayan.lwph1.t There can be no doubt that the award of damages to Urbi created for Artates a civil obligation, an indebtedness, that commenced from the date such obligation was decreed on 14 March 1956. Consequently, it is evident that it can not be enforced against, or satisfied out of, the sale of the homestead lot acquired by appellants less than 5 years before the obligation accrued. And this is true even if the sale involved here is not voluntary. For purposes of complying with the law, it is immaterial that the satisfaction of the debt by the encumbrancing or alienation of the land grant made voluntarily, as in the case of an ordinary sale, or involuntarily, such as that effected through levy on the property and consequent sale at public auction. In both instances, the spirit of the law would have been violated. 9 Doubts have been expressed as to whether the words "debt contracted prior to the expiration of said period" (of 5 years from and after the grant) would include the civil liability arising from a crime committed by the homesteader. While there is no direct Philippine precedent on this point, there are various reasons why the non-liability of the homestead grant should be extended to extra-contractual obligations. First and foremost, whether it be viewed as an exemption or as a condition attached to the grant to encourage people to settle and cultivate public land, the immunity in question is in consonance with the definite public policy underlying these grants, which is to "preserve and keep in the family of

the homesteader that portion of public land which the State has given to him" so he may have a place to live with his family and become a happy citizen and a useful member of society, 10 and the exemption should not be given restrictive application. 11 A levy and sale of the homestead on account of extra-contractual liability incurred would uproot the homesteader and his family and turn them into homeless waifs as effectively as a levy for non-payment of a contractual debt. Secondly, the word "debt" in exemption statutes, in its wider sense, (it) includes all that is due to a man under any form or obligation or promise, and covers not only obligations arising under contract, but also those imposed by law without contract. 12 Considering the protective policy of the law, it becomes apparent that "debt contracted" was used in it in the sense of "obligation incurred," since Webster gives the verb to "contract" the meaning of "to bring on; incur; acquire." Finally, our public land laws being copied from American legislation, 13 resort to American precedents reveals that, under the weight of authority, exemption from "debts contracted" by a homesteader has been held to include freedom from money liabilities, from torts or crimes committed by him, such as from bigamy (State vs. O'Neil, 7 Ore. 141, 11 Words and Phrases 318) or slander (Conway vs. Sullivan, 44 Ill. 451, 452), breach of contract (Flanagan vs. Forsythe, 50 Pac. 152, 153) or other torts (In Re Radway, 20 Fed. Cas. 154, 162).
The execution sale in this case being null and void, the possession of the land should be returned to the owners, the herein appellants. There would even be no need to order appellee Urbi to execute a deed of reconveyance thereof to the owners. It appears that what was issued here to the judgment creditor/purchaser was only the sheriff's provisional certificate, under which he derived no definite title or right until the period for redemption has expired, without a redemption having been made, 14 or issuance of a final deed or certificate of sale. In other words, the purchaser herein has not acquired an absolute ownership or title in fee over the land that would necessitate a deed of reconveyance to revert ownership back to the appellant spouses. As things now stand, title to the property covered by OCT No. P-572 remains with the appellants, but Lino Artates shall continue to be under obligation to satisfy the judgment debt to Daniel Urbi in the sum of P1,476.35, with legal interest thereon accruing from the date the writ of execution was first returned unsatisfied. It appearing also that appellee Daniel Urbi paid to the Philippine National Bank the sum of P783.45 to release the mortgage on the land, appellants should reimburse him of said amount or of whatever amount appellants have actually been benefited by the said payment. FOR THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby reversed, and appellants are declared entitled to the return and possession of the lot covered by Original Certificate of Title No. P-572, without prejudice to their continuing obligation to pay the judgment debt, and expenses connected therewith. No costs. Concepcion, C.J., Dizon, Zaldivar, Fernando and Makasiar, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 131679 February 1, 2000

(3) Provided that the property shall be cleared of illegal occupants or tenants. Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB. However, after some time following up the sale, Lim discovered that the subject property was originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing, under TCT No. 91148. Rodolfo succeeded in having the property registered in his name under TCT No. 300809, the same title he mortgaged to CDB and from which the latter's title (TCT No. 355588) was derived. It appears, however, that the father, Perfecto, instituted Civil Case No. Q-39732 in the Regional Trial Court, Branch 83, Quezon City, for the cancellation of his son's title. On March 23, 1984, the trial court rendered a decision 2 restoring Perfecto's previous title (TCT No. 91148) and cancelling TCT No. 300809 on the ground that the latter was fraudulently secured by Rodolfo. This decision has since become final and executory. Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company, FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August 29, 1989 an action for specific performance and damages against petitioners in the Regional Trial Court, Branch 96, Quezon City, where it was docketed as Civil Case No. Q-89-2863. On April 20, 1990, the complaint was amended by impleading the Register of Deeds of Quezon City as an additional defendant. On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that: (1) there was a perfected contract of sale between Lim and CDB, contrary to the latter's contention that the written offer to purchase and the payment of P30,000.00 were merely pre-conditions to the sale and still subject to the approval of FEBTC; (2) performance by CDB of its obligation under the perfected contract of sale had become impossible on account of the 1984 decision in Civil Case No. Q-39732 cancelling the title in the name of mortgagor Rodolfo Guansing; (3) CDB and FEBTC were not exempt from liability despite the impossibility of performance, because they could not credibly disclaim knowledge of the cancellation of Rodolfo Guansing's title without the admitting their failure to discharge their duties to the public as reputable banking institutions; and (4) CDB and FEBTC are liable for damages for the prejudice caused against the Lims. 3 Based on the foregoing findings, the trial court ordered CDB and FEBTC to pay private respondents, jointly and severally, the amount of P30,000.00 plus interest at the legal rate computed from June 17, 1988 until full payment. It also ordered petitioners to pay private respondents, jointly and severally, the amounts of P250,000.00 as moral damages, P50,000.00 as exemplary damages, P30,000.00 as attorney's fees, and the costs of the suit.4 Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in toto the decision of the Regional Trial Court. Petitioners

CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST COMPANY, petitioners, vs. SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS, respondents. MENDOZA, J.: This is a petition for review on certiorari of the decision1 of the Court of Appeals in C.A. GR CV No. 42315 and the order dated December 9, 1997 denying petitioners' motion for reconsideration. The following facts are not in dispute. Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are banking institutions duly organized and existing under Philippine laws. On or about June 15, 1983, a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon City and covered by TCT No. 300809 registered in his name. As Guansing defaulted in the payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15, 1984, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem, and on March 2, 1987, CDB consolidated title to the property in its name. TCT No. 300809 in the name of Guansing was cancelled and, in lieu thereof, TCT No. 355588 was issued in the name of CDB.1wphi1.nt On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios Gatpandan, offered to purchase the property from CDB. The written Offer to Purchase, signed by Lim and Gatpandan, states in part: We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma, Quezon City for P300,000.00 under the following terms and conditions: (1) 10% Option Money; (2) Balance payable in cash;

moved for reconsideration, but their motion was denied by the appellate court on December 9, 1997. Hence, this petition. Petitioners contend that 1. The Honorable Court of Appeals erred when it held that petitioners CDB and FEBTC were aware of the decision dated March 23, 1984 of the Regional Trial Court of Quezon City in Civil Case No. Q-39732. 2. The Honorable Court of Appeals erred in ordering petitioners to pay interest on the deposit of THIRTY THOUSAND PESOS (P30,000.00) by applying Article 2209 of the New Civil Code. 3. The Honorable Court of Appeals erred in ordering petitioners to pay moral damages, exemplary damages, attorney's fees and costs of suit. I. At the outset, it is necessary to determine the legal relation, if any, of the parties. Petitioners deny that a contract of sale was ever perfected between them and private respondent Lolita Chan Lim. They contend that Lim's letter-offer clearly states that the sum of P30,000,00 was given as option money, not as earnest money.5 They thus conclude that the contract between CDB and Lim was merely an option contract, not a contract of sale. The contention has no merit. Contracts are not defined by the parries thereto but by principles of law. 6 In determining the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties. 7 In the case at bar, the sum of P30,000.00, although denominated in the offer to purchase as "option money," is actually in the nature of earnest money or down payment when considered with the other terms of the offer. In Carceler v. Court of Appeals,8 we explained the nature of an option contract, viz. An option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract, it binds the party who has given the option not to enter into the principal contract with any other person during the period; designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract to which the parties may enter upon the consummation of the option. An option contract is therefore a contract separate from and preparatory to a contract of sale which, if perfected, does not result in the perfection or consummation of the sale. Only when the option is exercised may a sale be perfected.

In this case, however, after the payment of the 10% option money, the Offer to Purchase provides for the payment only of the balance of the purchase price, implying that the "option money" forms part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price. Moreover, the following findings of the trial court based on the testimony of the witnesses establish that CDB accepted Lim's offer to purchase: It is further to be noted that CDB and FEBTC already considered plaintiffs' offer as good and no longer subject to a final approval. In his testimony for the defendants on February 13, 1992, FEBTC's Leomar Guzman stated that he was then in the Acquired Assets Department of FEBTC wherein plaintiffs' offer to purchase was endorsed thereto by Myoresco Abadilla, CDB's senior vice-president, with a recommendation that the necessary petition for writ of possession be filed in the proper court; that the recommendation was in accord with one of the conditions of the offer, i.e., the clearing of the property of illegal occupants or tenants (tsn, p. 12); that, in compliance with the request, a petition for writ of possession was thereafter filed on July 22, 1988 (Exhs. 1 and 1-A); that the offer met the requirements of the banks; and that no rejection of the offer was thereafter relayed to the plaintiffs (p. 17); which was not a normal procedure, and neither did the banks return the amount of P30,000.00 to the plaintiffs. 9 Given CDB's acceptance of Lim's offer to purchase, it appears that a contract of sale was perfected and, indeed, partially executed because of the partial payment of the purchase price. There is, however, a serious legal obstacle to such sale, rendering it impossible for CDB to perform its obligation as seller to deliver and transfer ownership of the property. Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not have. In applying this precept to a contract of sale, a distinction must be kept in mind between the "perfection" and "consummation" stages of the contract. 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. 10 It is, therefore, not required that, at the perfection stage, the seller be the owner of the thing sold or even that such subject matter of the sale exists at that point in time.11 Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a thing which, at that time, was not his, but later acquires title thereto, such title passes by operation of law to the buyer or grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of the Civil Code. However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his obligation to transfer ownership to the buyer. It is at the consummation stage where the principle of nemo dat quod non habet applies.

In Dignos v. Court of Appeals,12 the subject contract of sale was held void as the sellers of the subject land were no longer the owners of the same because of a prior sale.13 Again, in Nool v. Court of Appeals,14 we ruled that a contract of repurchase, in which the seller does not have any title to the property sold, is invalid: We cannot sustain petitioners' view. Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. The Regional Trial Court and the Court of Appeals rules that the principal contract of sale contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find support in Dignos v. Court of Appeals, where the Court held: Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void. In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one. Verily, 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. We should however add that Dignos 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. In the present case, however, it is likewise clear that 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 No. 5 of Article 1409 of the Civil Code: Those which contemplate an impossible service. Article 1459 of the Civil Code provides that "the vendor must have a right to transfer the ownership thereof [subject of the sale] at the time it is delivered." Here, delivery of ownership is no longer possible. It has become impossible.15 In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be sure, CDB never acquired a valid title to

the property because the foreclosure sale, by virtue of which, the property had been awarded to CDB as highest bidder, is likewise void since the mortgagor was not the owner of the property foreclosed. A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of the Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to transfer the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay therefor the bid price in money or its equivalent. Being a sale, the rule that the seller must be the owner of the thing sold also applies in a foreclosure sale. This is the reason Art. 208516 of the Civil Code, in providing for the essential requisites of the contract of mortgage and pledge, requires, among other things, that the mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default in the payment of the loan. There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. 17 The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title. This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to make a detailed investigation of the history of the title of the property given as security before accepting a mortgage. We are not convinced, however, that under the circumstances of this case, CDB can be considered a mortgagee in good faith. While petitioners are not expected to conduct an exhaustive investigation on the history of the mortgagor's title, they cannot be excused from the duty of exercising the due diligence required of banking institutions. In Tomas v. Tomas,18 we noted that it is standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who are real owners thereof, noting that banks are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands, for their business is affected with public interest. We held thus: We, indeed, find more weight and vigor in a doctrine which recognizes a better right for the innocent original registered owner who obtained his certificate of title through perfectly legal and regular proceedings, than one who obtains his certificate from a totally void one, as to prevail over judicial pronouncements to the effect that one dealing with a registered land, such as a purchaser, is under no obligation to look

beyond the certificate of title of the vendor, for in the latter case, good faith has yet to be established by the vendee or transferee, being the most essential condition, coupled with valuable consideration, to entitle him to respect for his newly acquired title even as against the holder of an earlier and perfectly valid title. There might be circumstances apparent on the face of the certificate of title which could excite suspicion as to prompt inquiry, such as when the transfer is not by virtue of a voluntary act of the original registered owner, as in the instant case, where it was by means of a self-executed deed of extrajudicial settlement, a fact which should be noted on the face of Eusebia Tomas certificate of title. Failing to make such inquiry would hardly be consistent with any pretense of good faith, which the appellant bank invokes to claim the right to be protected as a mortgagee, and for the reversal of the judgment rendered against it by the lower court. 19 In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the validity of Rodolfo Guansing's title. It appears that Rodolfo Guansing obtained his fraudulent title by executing an Extra-Judicial Settlement of the Estate With Waiver where he made it appear that he and Perfecto Guansing were the only surviving heirs entitled to the property, and that Perfecto had waived all his rights thereto. This self-executed deed should have placed CDB on guard against any possible defect in or question as to the mortgagor's title. Moreover, the alleged ocular inspection report 20 by CDB's representative was never formally offered in evidence. Indeed, petitioners admit that they are aware that the subject land was being occupied by persons other than Rodolfo Guansing and that said persons, who are the heirs of Perfecto Guansing, contest the title of Rodolfo.21 II. The sale by CDB to Lim being void, the question now arises as to who, if any, among the parties was at fault for the nullity of the contract. Both the trial court and the appellate court found petitioners guilty of fraud, because on June 16, 1988, when Lim was asked by CDB to pay the 10% option money, CDB already knew that it was no longer the owner of the said property, its title having been cancelled.22 Petitioners contend that: (1) such finding of the appellate court is founded entirely on speculation and conjecture; (2) neither CDB nor FEBTC was a party in the case where the mortgagor's title was cancelled; (3) CDB is not privy to any problem among the Guansings; and (4) the final decision cancelling the mortgagor's title was not annotated in the latter's title. As a rule, only questions of law may be raised in a petition for review, except in circumstances where questions of fact may be properly raised. 23 Here, while petitioners raise these factual issues, they have not sufficiently shown that the instant case falls under any of the exceptions to the above rule. We are thus bound by the findings of fact of the appellate court. In any case, we are convinced of petitioners' negligence in approving the mortgage application of Rodolfo Guansing.

III. We now come to the civil effects of the void contract of sale between the parties. Article 1412(2) of the Civil Code provides: If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: xxx xxx xxx

(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise. Private respondents are thus entitled to recover the P30,000,00 option money paid by them. Moreover, since the filing of the action for damages against petitioners amounted to a demand by respondents for the return of their money, interest thereon at the legal rate should be computed from August 29, 1989, the date of filing of Civil Case No. Q-89-2863, not June 17, 1988, when petitioners accepted the payment. This is in accord with our ruling in Castillo v. Abalayan24 that in case of avoid sale, the seller has no right whatsoever to keep the money paid by virtue thereof and should refund it, with interest at the legal rate, computed from the date of filing of the complaint until fully paid. Indeed, Art. 1412(2) which provides that the non-guilty party "may demand the return of what he has given" clearly implies that without such prior demand, the obligation to return what was given does not become legally demandable. Considering CDB's negligence, we sustain the award of moral damages on the basis of Arts. 21 and 2219 of the Civil Code and our ruling in Tan v. Court of Appeals25 that moral damages may be recovered even if a bank's negligence is not attended with malice and bad faith. We find, however, that the sum of P250,000.00 awarded by the trial court is excessive. Moral damages are only intended to alleviate the moral suffering undergone by private respondent, not to enrich them at the expenses of the petitioners. 26 Accordingly, the award of moral damages must be reduced to P50,000.00.
Likewise, the award of P50,000.00 as exemplary damages, although justified under Art. 2232 of the Civil Code, is excessive and should be reduced to P30,000.00. The award of P30,000.00 attorney's fees based on Art. 2208, pars. 1, 2, 5 and 11 of the Civil Code should similarly be reduced to P20,000.00. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION as to the award of damages as above stated.1wphi1.nt SO ORDERED. Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

paragraph 7 of the complaint and in paragraph 31 of defendants' answer (counterclaim); 4. Ordering the plaintiffs to pay reasonable rents on said two hectares at P5,000.00 per annum or at P2,500.00 per cropping from the time of judicial demand mentioned in paragraph 2 of the dispositive portion of this decision, until the said two hectares shall have been delivered to the defendants; and 5. To pay the costs. SO ORDERED. The Antecedent Facts

G.R. No. 116635 July 24, 1997 CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner, vs. COURT OF APPEALS, ANACLETO NOOL and EMILIA NEBRE, respondents.

PANGANIBAN, J.: 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. Statement of the Case This postulate is explained by this Court as it resolves this petition for review on certiorari assailing the January 20, 1993 Decision 1 of Respondent Court of Appeals 2 in CA-G.R. CV No. 36473, affirming the decision 3 of the trial court 4 which disposed as follows: 5 WHEREFORE, judgment is hereby rendered dismissing the complaint for no cause of action, and hereby: 1. Declaring the private writing, Exhibit "C", to be an option to sell, not binding and considered validly withdrawn by the defendants for want of consideration; 2. 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; 3. Ordering the plaintiffs to deliver peaceful possession of the two hectares mentioned in

The facts, which appear undisputed by the parties, are narrated by the Court of Appeals as follows: Two (2) parcels of land are in dispute and litigated upon here. The first has an area of 1 hectare. It was formerly owned by Victorino Nool and covered by Transfer Certificate of Title No. T-74950. With an area of 3.0880 hectares, the other parcel was previously owned by Francisco Nool under Transfer Certificate of Title No. T-100945. Both parcel's are situated in San Manuel, Isabela. The plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the appellants, seek recovery of the aforementioned parcels of land from the defendants, Anacleto Nool, a younger brother of Conchita, and Emilia Nebre, now the appellees. In their complaint, plaintiff-appellants alleged inter alia that they are the owners of subject parcels of land, and they bought the same from Conchita's other brothers, Victorino Nool and Francisco Nool; that as plaintiffs were in dire need of money, they obtained a loan from the Ilagan Branch of the Development Bank of the Philippines, in Ilagan, Isabela, secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino Nool and Francisco Nool, at the time, and for the failure of plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the period of redemption, plaintiffs contacted defendant Anacleto Nool for the latter to redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of the two (2) parcels of land in question were transferred to Anacleto

Nool; that as part of their arrangement or understanding, Anacleto Nool agreed to buy from plaintiff Conchita Nool the two (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, plaintiffs were to regain possession of the two (2) hectares of land, which amounts defendants failed to pay, and the same day the said arrangement 6 was made; another covenant 7 was entered into by the parties, whereby defendants agreed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that plaintiffs 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 them (plaintiffs) to come to court for relief. In their Answer, defendants-appellees theorized that they acquired the lands in question from the Development Bank of the Philippines, 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. The pivot of inquiry here, as aptly observed below, is the nature and significance of the private document, marked Exhibit "D" for plaintiffs, which document has not been denied by the defendants, as defendants even averred in their Answer that they gave an advance payment of P30,000.00 therefor, and acknowledged that they had a balance of P14,000.00 to complete their payment. On this crucial issue, the lower court adjudged the said private writing (Exhibit "D") as an option to sell not binding upon and considered the same validly withdrawn by defendants for want of consideration; and decided the case in the manner above-mentioned. There is no quibble over the fact that the two (2) parcels of land in dispute were mortgaged to the Development Bank of the Philippines, to secure a loan obtained by plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For the non-payment of said loan, the mortgage was foreclosed and in the process, ownership of the mortgaged lands was consolidated in DBP (Exhibits 3 and 4 for defendants). After DBP became the absolute owner of the two parcels of land, defendants negotiated with DBP and succeeded in buying the same. By virtue of such sale by DBP in favor of defendants, the titles of DBP were cancelled and the corresponding Transfer

Certificates of Title (Annexes "C" and "D" to the Complaint) issued to the defendants. 8 It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the one-year redemption period was from March 16, 1982 up to March 15, 1983 and that the mortgagors' right of redemption was not exercised within this period. 9 Hence, DBP became the absolute owner of said parcels of land for which it was issued new certificates of title, both entered on May 23, 1983 by the Registry of Deeds for the Province of Isabela. 10 About two years thereafter, on April 1, 1985, DBP entered into a Deed of Conditional Sale 11 involving the same parcels of land with Private Respondent Anacleto Nool as vendee. Subsequently, the latter was issued new certificates of title on February 8, 1988. 12 The Court of Appeals ruled: 13 WHEREFORE, finding no reversible error infirming it, the appealed Judgment is hereby AFFIRMED in toto. No pronouncement as to costs. The Issues Petitioners impute to Respondent Court the following alleged "errors": 1. The Honorable Court of Appeals, Second Division has misapplied the legal import or meaning of Exhibit "C" in a way contrary to law and existing jurisprudence in stating that it has no binding effect between the parties and considered validly withdrawn by defendants-appellees for want of consideration. 2. The Honorable Court of Appeals, Second Division has miserably failed to give legal significance to the actual possession and cultivation and appropriating exclusively the palay harvest of the two (2) hectares land pending the payment of the remaining balance of fourteen thousand pesos (P14,000.00) by defendants-appellees as indicated in Exhibit "C". 3. The Honorable Court of Appeals has seriously erred in affirming the decision of the lower court by awarding the payment of rents per annum and the return of P30,000.00 and not allowing the plaintiffs-appellants to re-acquire the four (4) hectares, more or less upon payment of one hundred thousand pesos (P100,000.00) as shown in Exhibit "D". 14 The Court's Ruling

The petition is bereft of merit. First Issue: Are Exhibits "C" and "D" Valid and Enforceable? The petitioner-spouses plead for the enforcement of their agreement with private respondents as contained in Exhibits "C" and "D," and seek damages for the latter's alleged breach thereof. In Exhibit C, which was a private handwritten document labeled by the parties as Resibo ti Katulagan or Receipt of Agreement, the petitioners appear to have "sold" to private respondents the parcels of land in controversy covered by TCT No. T-74950 and TCT No. T100945. On the other hand, Exhibit D, which was also a private handwritten document in Ilocano and labeled as Kasuratan, private respondents agreed that Conchita Nool "can acquire back or repurchase later on said land when she has the money." 15 In seeking to enforce her alleged right to repurchase the parcels of land, Conchita (joined by her co-petitioner-husband) invokes Article 1370 of the Civil Code which mandates that "(i)f 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." Hence, petitioners contend that the Court of Appeals erred in affirming the trial court's finding and conclusion that said Exhibits C and D were "not merely voidable but utterly void and inexistent." We cannot sustain petitioners' view. Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. The Regional Trial Court and the Court of Appeals ruled that the principal contract of sale contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find support in Dignos vs. Court of Appeals, 16 where the Court held: Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void. In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one. 17 Verily, 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." We should however add that Dignos 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. 18 Moreover, the Civil Code19 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. In the present case however, it is likewise clear that 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 20 and may thus fall, by analogy, under item no. 5 of Article 1409 of the Civil Code: "Those which contemplate 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. It has become impossible. Furthermore, 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." Here, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. 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." 21 No one can give what he does not have nono dat quod non habet. On the other hand, Exhibit D 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. Nothing sold, nothing to repurchase. In this light, the contract of repurchase is also inoperative and by the same analogy, void. Contract Dependent on Validity of Sale of Repurchase

As borne out by the evidence on record, the private respondents bought the two parcels of land directly from DBP on April 1, 1985 after discovering that petitioners did not own said property, the subject of Exhibits C and D executed on November 30, 1984. Petitioners, however, claim that they can exercise their alleged right to "repurchase" the property, after private respondents had acquired the same from DBP. 22 We cannot accede to this, for it clearly contravenes the intention of the parties and the nature of their agreement. Exhibit D reads: WRITING

Nov. 3 That I, Anacleto Nool have bought from my sister Conchita Nool a land an area of four hectares (4 has.) in the value of One Hundred Thousand (100,000.00)

Pesos. It is our agreement as brother and sister that she can acquire back or repurchase later on said land when she has the money. [Emphasis supplied]. As proof of this agreement we sign as brother and sister this written document this day of Nov. 30, 1984, at District 4, San Manuel, Isabela.

sale is executed, the vendor can not 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 in the instant case. . . . In the earlier case of Ramos, et al. vs. Icasiano, et al., decided in 1927, this Court had already ruled that " an agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is made without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants the vendor the right to purchase, it is a new contract entered into by the purchaser, as absolute owner already of the object . In that case the vendor has nor reserved to himself the right to repurchase. In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found another occasion to apply the foregoing principle. Hence, 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 reads as follows: Art. 1479. 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. Right to Repurchase Homestead or Trust Non-Existent Based on

Sgd Emilio Paron Witness 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. Assuming arguendo that Exhibit D is separate and distinct from Exhibit C 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, Exhibit D 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 contained in Exhibit D is bereft of any consideration distinct from the price. Accordingly, as an independent contract, it cannot bind private respondents. The ruling in Diamante vs. CA 24 supports this. In that case, the Court through Mr. Justice Hilario G. Davide, Jr. explained: Article 1601 of the Civil Code provides: 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. In Villarica, et al. Vs. Court of Appeals, et al., decided on 29 November 1968, or barely seven (7) days before the respondent Court promulgated its decisions in this case, this Court, interpreting the above Article, held: The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute

Petitioners also base their alleged right to repurchase on (1) Sec. 119 of the Public Land Act 25 and (2) an implied trust relation as "brother and sister." 26 The Court notes that Victorino Nool and Francisco Nool mortgaged the land to DBP. The brothers, together with Conchita Nool and Anacleto Nool, were all siblings and heirs qualified to repurchase the two parcels of land under Sec. 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 five years from the date of conveyance." Assuming the applicability of this statutory provision to the case at bar, it is indisputable that Private Respondent 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. 27 The claim of a trust relation is likewise without merit. The records show that private respondents did not purchase the contested properties from DBP in trust for petitioners. The former, as previously mentioned, in fact bought the land from DBP upon realization that the latter could not validly sell the same. Obviously, petitioners bought it for themselves. There is no evidence at all in the records that they bought the land in trust for private respondents. The fact that Anacleto Nool was the younger brother of Conchita Nool and that they signed a contract of repurchase, which as discussed earlier was void, does not prove the existence of an implied trust in favor of petitioners. Second Issue: No Validity of Void Contracts Estoppel in Impugning the

title to what they "sold," they cannot keep the money paid for the object of the sale. It is basic that "(e)very 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." 32 Thus, if a void contract has already "been performed, the restoration of what has been given is in order." 33 Corollarily and as aptly ordered by respondent appellate court, interest thereon will run only from the time of private respondents' demand for the return of this amount in their counterclaim. 34 In the same vein, petitioners' possession and cultivation of the two hectares are anchored on private respondents' tolerance. Clearly, the latter's tolerance ceased upon their counterclaim and demand on the former to vacate. Hence, their right to possess and cultivate the land ipso facto ceased. WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals affirming that of the trial court is hereby AFFIRMED. SO ORDERED.

Petitioners argue that "when Anacleto Nool took the possession of the two hectares, more or less, and let the other two hectares to be occupied and cultivated by plaintiffs-appellant, Anacleto Nool cannot later on disclaim the terms or contions (sic) agreed upon and his actuation is within the ambit of estoppel . . . 28 We disagree. 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 "(t)he 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 (19 Am. Jur. 802). It is not within the competence of any citizen to barter away what public policy by law seeks to preserve." 29 Thus, it is immaterial that private respondents initially acted to implement the contract of sale, believing in good faith that the same was valid. We stress that a contract void at inception cannot be validated by ratification or prescription and certainly cannot be binding on or enforceable against private respondents. 30 Third Issue: Return and Payment of Rent of P30,000.00 with Interest

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Petitioners further argue that it would be a "miscarriage of justice" to order them (1) to return the sum of P30,000.00 to private respondents when allegedly it was Private Respondent Anacleto Nool who owed the former a balance of P14,000.00 and (2) to order petitioners to pay rent when they "were allowed to cultivate the said two hectares." 31 We are not persuaded. Based on the previous discussion, 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

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 136054 September 5, 2001

HEIRS OF SEVERINA SAN MIGUEL, namely: MAGNO LAPINA, PACENCIA LAPINA, MARCELO LAPINA, SEVERINO LAPINA, ROSARIO LAPINA, FRANCISCO LAPINA, CELIA LAPINA assisted by husband RODOLFO TOLEDO, petitioners, vs. THE HONORABLE COURT OF APPEALS, DOMINADOR SAN MIGUEL, GUILLERMO F. SAN ARTEMIO F. SAN MIGUEL, PACIENCIA F. SAN MIGUEL, CELESTINO, assisted by husband, ANTERO CELESTINO, represented by their Attorney-in-Fact ENRICO CELESTINO, AUGUSTO SAN MIGUEL, ANTONIO SAN MIGUEL, RODOLFO SAN MIGUEL, CONRADO SAN MIGUEL and LUCITA SAN MIGUEL, respondents. PARDO, J.: The Case The case is a petition for review on certiorari1 of the decision of the Court of Appeals,2 affirming that of the Regional Trial Court, Cavite, Branch 19, Bacoor3 ordering petitioners, Heirs of Severina San Miguel (hereafter, "Severina's heirs") to surrender to respondents Dominador San Miguel, et al. (hereafter, "Dominador, et al."), Transfer Certificate of Title No. 223511 and further directing Severina's heirs to pay for the capital gains and related expenses for the transfer of the two (2) lots to Dominador, et al. The Facts This case involves a parcel of land originally claimed by Severina San Miguel (petitioners' predecessor-in-interest, hereafter, "Severina"). The land is situated in Panapan, Bacoor, Cavite with an area of six hundred thirty two square meters (632 sq. m.), more or less. Without Severina's knowledge, Dominador managed to cause the subdivision of the land into three (3) lots, to wit:4 "LRC Psu-1312 - with an area of 108 square meters; "LRC Psu-1313 - Lot 1, with an area of 299 square meters; "LRC Psu-1313 - Lot 2, with an area of 225 square meters." On September 25, 1974, Dominador, et al. filed a petition with the Court of First Instance, Cavite, as a land registration court, to issue title over Lots 1 and 2 of LRC Psu-1313, in their names.5

On July 19, 1977, the Land Registration Commission (hereafter "LRC") rendered a decision directing the issuance of Original Certificate of Title No. 01816 in the names of Dominador, et al. On or about August 22, 1978, Severina filed with the Court of First Instance of Cavite a petition for review of the decision alleging that the land registration proceedings were fraudulently concealed by Dominador from her. 6 On December 27, 1982, the court resolved to set aside the decision of July 19, 1977, and declared Original Certificate of Title No. 0-1816 as null and void. On July 13, 1987, the Register of Deeds of Cavite issued Transfer Certificate of Title No. T-223511 in the names of Severina and her heirs. 7 On February 15, 1990, the trial court issued an order in favor of Severina's heirs, to wit:8 "WHEREFORE, as prayed for, let the writ of possession previously issued in favor of petitioner Severina San Miguel be implemented." However, the writ was returned unsatisfied. On November 28, 1991, the trial court ordered:9 "WHEREFORE, as prayed for, let an alias writ of demolition be issued in favor of petitioners, Severina San Miguel." Again, the writ was not satisfied. On August 6, 1993, Severina's heirs, decided not to pursue the writs of possession and demolition and entered into a compromise with Dominador, et al. According to the compromise, Severina's heirs were to sell the subject lots10 to Dominador, et al. for one and a half million pesos (P1.5 M) with the delivery of Transfer Certificate of Title No. T-2235 11 (hereafter, "the certificate of title") conditioned upon the purchase of another lot 11 which was not yet titled at an additional sum of three hundred thousand pesos (P300,000.00). The salient features of the compromise (hereafter "kasunduan") are:12 "5. Na ang Lot 1 at Lot 2, plano LRC Psu-1313 na binabanggit sa itaas na ipinagkasundo ng mga tagapagmana ni Severina San Miguel na kilala sa kasulatang ito sa taguring LAPINA (representing Severina's heirs), na ilipat sa pangalan nina SAN MIGUEL (representing Dominador's heirs) alang alang sa halagang ISANG MILYON AT LIMANG DAANG LIBONG PISO (P1,500,000.00) na babayaran nina SAN MIGUEL kina LAPINA;

"6. Na si LAPINA at SAN MIGUEL ay nagkakasundo na ang lote na sakop ng plano LRC-Psu-1312, may sukat na 108 metro cuadrado ay ipagbibili na rin kina SAN MIGUEL sa halagang TATLONG DAANG LIBONG PISO (P300,000.00); "7. Na kinikilala ni SAN MIGUEL na ang tunay na may-ari ng nasabing lote na sakop ng plano LRC Psu-1312 ay sina LAPINA at sila na ang magpapatitulo nito at sina LAPINA ay walang pananagutan sa pagpapatitulo nito at sa paghahabol ng sino mang tao; "8. Na ang nasabing halaga na TATLONG DAANG LIBONG PISO (P300,000.00) ay babayaran nina SAN MIGUEL kina LAPINA sa loob ng dalawang (2) buwan mula sa petsa ng kasulatang ito at kung hindi mabayaran nina SAN MIGUEL ang nasabing halaga sa takdang panahon ay mawawalan ng kabuluhan ang kasulatang ito; "9. Na sina LAPINA at SAN MIGUEL ay nagkakadunso (sic) rin na ang owner's copy ng Transfer Certificate of Title No. T-223511 na sumasakop sa Lots 1 at 2, plano LRC Psu-1313 ay ilalagay lamang nina LAPINA kina SAN MIGUEL pagkatapos mabayaran ang nabanggit na P300,000.00" On the same day, on August 6, 1993, pursuant to the kasunduan, Severina's heirs and Dominador, et al. executed a deed of sale designated as " kasulatan sa bilihan ng lupa."13 On November 16, 1993, Dominador, et al. filed with the trial court, 14 Branch 19, Bacoor, Cavite, a motion praying that Severina's heirs deliver the owner's copy of the certificate of title to them.15 In time, Severina's heirs opposed the motion stressing that under the kasunduan, the certificate of title would only be surrendered upon Dominador, et al.'s payment of the amount of three hundred thousand pesos (P300,000.00) within two months from August 6, 1993, which was not complied with.16 Dominador, et al. admitted non-payment of three hundred thousand pesos (P300,000.00) for the reason that Severina's heirs have not presented any proof of ownership over the untitled parcel of land covered by LRC-Psu-1312. Apparently, the parcel of land is declared in the name of a third party, a certain Emiliano Eugenio.17 Dominador, et al. prayed that compliance with the kasunduan be deferred until such time that Severina's heirs could produce proof of ownership over the parcel of land.18

Severina's heirs countered that the arguments of Dominador, et al. were untenable in light of the provision in thekasunduan where Dominador, et al. admitted their ownership over the parcel of land, hence dispensing with the requirement that they produce actual proof of title over it. 19 Specifically, they called the trial court's attention to the following statement in the kasunduan:20 "7. Na kinikilala ni SAN MIGUEL na ang tunay na may-ari ng nasabing lote na sakop ng plano LRC Psu-1312 ay sina LAPINA at sila na ang magpapatitulo nito at sina LAPINA ay walang pananagutan sa pagpapatitulo nito at sa paghahabol ng sino mang tao;" According to Severina's heirs, since Dominador, et al. have not paid the amount of three hundred thousand pesos (P300,000.00), then they were justified in withholding release of the certificate of title.21 The trial court conducted no hearing and then rendered judgment based on the pleadings and memoranda submitted by the parties. The Trial Court's Ruling On June 27, 1994, the trial court issued an order to wit: 22 "WHEREFORE, finding the Motion to Order to be impressed with merit, the defendants-oppositors-vendors Heirs of Severina San Miguel are hereby ordered to surrender to the movant-plaintiffs-vendees-Heirs of Dominador San Miguel the Transfer Certificates of Title No. 223511 and for herein defendants-oppositors-vendors to pay for the capital gains and related expenses for the transfer of the two lots subject of the sale to herein movants-plaintiffs-vendees-Heirs of Dominador San Miguel." "SO ORDERED." On July 25, 1994, Severina's heirs filed with the trial court a motion for reconsideration of the afore-quoted order.23 On January 23, 1995, the trial court denied the motion for reconsideration for lack of merit and further ordered:24 "x x x . . . Considering that the Lots 1 and 2 covered by TCT No. T223511 had already been paid since August 6, 1993 by the plaintiffsvendees Dominador San Miguel, et al. (Vide, Kasulatan sa Bilihan ng Lupa, Rollo, pp. 174-176), herein defendants-vendors-Heirs of Severina San Miguel is hereby ordered (sic) to deliver the aforesaid title to the former (Dominador San Miguel, et al.) within thirty (30) days from receipt of this order. In case the defendants-vendors-Heirs of Severina San Miguel fail and refuse to do the same, then the Register of Deeds

of Cavite is ordered to immediately cancel TCT No. T-223511 in the name of Severina San Miguel and issue another one in the name of plaintiffs Dominador San Miguel, et al. "Also send a copy of this Order to the Register of Deeds of the Province of Cavite, Trece Martires City, for her information and guidance. "SO ORDERED." On February 7, 1995, Severina's heirs appealed the orders to the Court of Appeals.25 The Court of Appeals' Ruling On June 29, 1998, the Court of Appeals promulgated a decision denying the appeal, and affirming the decision of the trial court. The Court of Appeals added that the other matters raised in the petition were "extraneous" to thekasunduan.26 The Court of Appeals upheld the validity of the contract of sale and sustained the parties' freedom to contract. The Court of Appeals decided, thus:27 "WHEREFORE, the decision appealed from is hereby AFFIRMED. "SO ORDERED." On August 4, 1998, Severina's heirs filed with the Court of Appeals a motion for reconsideration of the above decision.28 On October 14, 1998, the Court of Appeals denied the motion for reconsideration for lack of merit. 29 Hence, this appeal. The Issues Severina's heirs submit that the Court of Appeals erred and committed grave abuse of discretion: First, when it held that the kasunduan had no effect on the "kasulatan sa bilihan ng lupa ." Second, when it ordered them to surrender the certificate of title to Dominador, et al., despite non-compliance with their prior obligations stipulated under the kasunduan. Third, when it did not find that the kasunduan was null and void for having been entered into by Dominador, et al. fraudulently and in bad faith.31 We find the above issues raised by Severina's heirs to be factual. The question whether the prerequisites to justify release of the certificate of title to Dominador, et al. have been complied with is a question of fact. 32
30

However, we sift through the arguments and identify the main legal issue, which is whether Dominador, et al. may be compelled to pay the three hundred thousand pesos (P300,000.00) as agreed upon in the kasunduan (as a prerequisite for the release of the certificate of title), despite Severina's heirs' lack of evidence of ownership over the parcel of land covered by LRC Psu-1312. The Court's Ruling We resolve the issue in the negative, and find the petition without merit. Severina's heirs anchor their claim on the kasunduan, stressing on their freedom to stipulate and the binding effect of contracts. This argument is misplaced.33 The Civil Code provides: ARTICLE 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient provided they are not contrary to law , morals, good customs, public order or public policy (italics ours). It is basic that the law is deemed written into every contract. 34 Although a contract is the law between the parties, the provisions of positive law which regulate contracts are deemed written therein and shall limit and govern the relations between the parties.35 The Civil Code provisions on "sales" state: ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay a price certain in money or its equivalent. . . . ARTICLE 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of sale (emphasis ours). True, in contracts of sale, the vendor need not possess title to the thing sold at the perfection of the contract.36However, the vendor must possess title and must be able to transfer title at the time of delivery. In a contract of sale, title only passes to the vendee upon full payment of the stipulated consideration, or upon delivery of the thing sold.37 Under the facts of the case, Severina's heirs are not in a position to transfer title. Without passing on the question of who actually owned the land covered by LRC Psu -1312, we note that there is no proof of ownership in favor of Severina's heirs. In fact, it is a certain Emiliano Eugenio, who holds a tax declaration over the said land in his name. 38 Though tax declarations do not

prove ownership of the property of the declarant, tax declarations and receipts can be strong evidence of ownership of land when accompanied by possession for a period sufficient for prescription.39 Severina's heirs have nothing to counter this document. Therefore, to insist that Dominador, et al. pay the price under such circumstances would result in Severina's heirs' unjust enrichment. 40 Basic is the principle in law, "Niguno non deue enriquecerse tortizamente condano de otro."41 The essence of a sale is the transfer of title or an agreement to transfer it for a price actually paid or promised.42 In Nool v. Court of Appeals,43 we held that if the sellers cannot deliver the object of the sale to the buyers, such contract may be deemed to be inoperative. By analogy, such a contract may fall under Article 1405, No. 5 of the Civil Code, to wit: ARTICLE 1405. The following contracts are inexistent and void from the beginning: . . . (5) Those which contemplate an impossible service. xxx xxx xxx

SO ORDERED. Davide, Jr., C .J ., Puno, Kapunan, and Ynares-Santiago, JJ., concur.

Severina's heirs insist that delivery of the certificate of title is predicated on a condition payment of three hundred thousand pesos (P300,000.00) to cover the sale of Lot 3 of LRO Psu 1312. We find this argument not meritorious. The condition cannot be honored for reasons afore-discussed. Article 1183 of the Civil Code provides that, "Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid, x x x" Hence, the non-payment of the three hundred thousand pesos (P300,000.00) is not a valid justification for refusal to deliver the certificate of title. Besides, we note that the certificate of title covers Lots 1 and 2 of LRC Psu1313, which were fully paid for by Dominador, et al. Therefore, Severina's heirs are bound to deliver the certificate of title covering the lots. The Fallo WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 48430 is AFFIRMED in toto. No costs. SECOND DIVISION Republic of the Philippines SUPREME COURT Manila

G.R. No. 137845

September 9, 2004

The Evidence of The Respondent On June 4, 1987, the respondent and petitioner Angel Clemeno, Jr., relatives by consanguinity, entered into a verbal contract of sale over the property covered by TCT No. 277244 under the following terms and conditions: (a) the respondent would pay the purchase price of the property in the amount of P270,000.00, inclusive of the balance of the loan of the petitioners, the Spouses Clemeno with the SSS6 within two years from June 4, 1987; 7(b) the respondent would pay the monthly amortizations of the vendors loan with the SSS; and (c) upon the payment of the purchase price of the property, the Spouses Clemeno would execute a deed of sale in favor of the respondent.8 The respondent made a down payment of P25,000.00 for which petitioner Clemeno, Jr. issued a receipt dated June 4, 1987. 9 He then made a partial payment of P5,000.00 to petitioner Clemeno, Jr. on July 8, 1987, 10 and another partial payment of P50,000.00 on February 9, 1988.11 The respondent paid the realty taxes due on the property for 1987 and 1988. 12 In the meantime, petitioner Clemeno, Jr. read a press release from the SSS in the newspapers allowing delinquent borrowers to restructure the balance of their loans as of March 31, 1988 with no arrearages on the balance of their account under certain terms and conditions. 13 On February 26, 1988, he paid the amount of P6,692.63 to the SSS, in partial payment of his loan account.14 He also made a written request to the SSS for a restructuring of his loan.15 Thereafter, the SSS Loans Collection Department issued on March 15, 1988, addressed to the borrower on record, that effective March 15, 1988, the monthly amortization on the loan was P841.84.16 Petitioner Clemeno, Jr., as mortgagor, affixed his conformity thereto. 17 He then wrote a letter authorizing the respondent to pay the balance of his restructured loan with the SSS, which payments would be considered as partial payment of the house and lot.18 Conformably, the respondent remitted to the SSS the monthly amortization payments for the account of petitioner Clemeno, Jr. However, the receipts issued by the SSS were in the name of petitioners Nilus Sacramento or Clemeno, Jr.19 The respondent made additional partial payments for the sale of the property to petitioner Clemeno, Jr. on January 17, 1989, and, March 20, 1989, in the total amount of P10,000.00.20 He also continued remitting to the SSS the monthly amortizations due for the account of petitioner Clemeno, Jr. 21 The respondent was able to secure a loan of P160,000.00 on April 1, 1989, which was more than sufficient to cover his balance of the purchase of the property. He then offered to pay the said balance to petitioner Clemeno, Jr.,22 but the latter told him to keep the money because the owners duplicate copy of the title was still with the SSS and to instead continue paying the monthly amortizations due. The respondent did so and made payments until March 1990.23 He no longer paid after this date because the SSS informed him that petitioner Clemeno, Jr. had already paid the balance of his account in full on March 23, 1990. Indeed, on May 9, 1990, the SSS had executed a Release

ANGEL CLEMENO, JR., MALYN CLEMENO, and NILUS SACRAMENTO, petitioners, vs. ROMEO R. LOBREGAT, respondent. DECISION CALLEJO, SR., J.: This is a petition for review of the Decision 1 of the Court of Appeals in CA-G.R. CV No. 53655 reversing the decision of the Regional Trial Court of Quezon City, Branch 224, in Civil Case Nos. 92-12620 and 93-17268. The Antecedents The Spouses Nilus and Teresita Sacramento were the owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. 158728 and the house constructed thereon located at No. 68 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City. The Spouses Sacramento mortgaged the property with the Social Security System (SSS) as security for their housing loan and, likewise, surrendered the owners and duplicate copies of the certificate of title. On September 2, 1980, the spouses executed a Deed of Sale with Assumption of Mortgage in favor of Maria Linda Clemeno and her husband Angel C. Clemeno, Jr., with the conformity of the SSS. 2 On March 6, 1981, the Register of Deeds issued TCT No. 277244 over the property in the name of the vendees,3 who, in turn, executed a Real Estate Mortgage Contract over the property in favor of the SSS to secure the payment of the amount of P22,900.00, the balance of the loan. 4 The Spouses Clemeno also surrendered the owners duplicate copy of the said title to the SSS. However, per the records of the SSS Loans Department, the vendors (the Spouses Sacramento) remained to be the debtors. On July 1, 1992, respondent Romeo R. Lobregat, a lawyer and an Election Registrar in the Commission on Elections, filed a Complaint against the petitioners, the Spouses Clemeno, and Nilus Sacramento for breach of contract, specific performance with damages with the RTC of Quezon City. The case was docketed as Civil Case No. 92-12620 and raffled to Branch 100. On May 7, 1993, the trial court dismissed the case without prejudice for lack of interest on the part of the plaintiff to prosecute. 5 The petitioners, for their part, filed a Complaint against the respondent for recovery of possession of property with damages, docketed as Civil Case No. 93-17268 and raffled to Branch 93 of the court. In the meantime, the RTC, Branch 100 set aside its Order in Civil Case No. 92-12620 and reinstated the case. The two (2) cases were then consolidated in the RTC, Branch 100.

of Real Estate Mortgage in favor of petitioner Clemeno, Jr. and released the owners duplicate of TCT No. 277244.24 The respondent offered to pay the balance of the purchase price of the property to petitioner Clemeno, Jr. and asked the latter to execute the deed of sale over the property and deliver the title over the property under his name, but petitioner Clemeno, Jr. refused to do so unless the respondent agreed to buy the property at the price prevailing in 1992. The respondent refused. On June 12, 1992, the respondents counsel wrote petitioner Clemeno, Jr., informing the latter that he (the respondent) had already paid P113,049.96 of the purchase price of the property and that he was ready to pay the balance thereof in the amount of P156,970.04. He demanded that petitioner Clemeno, Jr. execute a deed of absolute sale over the property and deliver the title thereto in his name upon his receipt of the amount ofP156,970.04.25 In his reply-letter, petitioner Clemeno, Jr. stated that he never sold the property to the respondent; that he merely tolerated the respondents possession of the property for one year or until 1987, after which the latter offered to buy the property, which offer was rejected; and that he instead consented to lease the property to the respondent. The petitioner also declared in the said letter that even if the respondent wanted to buy the property, the same was unenforceable as there was no document executed by them to evince the sale.26 In their Answer to the complaint, the petitioners alleged that they entered into a verbal lease-purchase agreement over the house and lot with the respondent under the following terms and conditions: (a) The purchase price will be P270,000.00 to be paid in full not later than June 1, 1988; (b) The rental is P1,500.00 a month, for the whole period from June 1987 to June 1, 1988; (c) If the whole purchase price is not paid on the agreed date, the total amount equivalent to one-year rental shall be deducted from the amount already paid by the plaintiff, who shall peacefully vacate the premises and surrender possession of the house and lot to the defendants. (d) The purchase price of P270,000.00 shall be payable: P90,000.00 upon taking possession of the property, P90,000.00 payable within six (6) months thereafter, and P90,000.00 not later than June 1, 1988.27 The petitioners further alleged that despite the respondents failure to comply with the conditions of their agreement, the latter was still granted an extension

of until September 1989 to pay the purchase price of the property, but managed to pay only P113,049.96, including the monthly amortizations of their loan account with the SSS and realty tax payments. The petitioners further alleged that the respondent even failed to pay any rental for the property from June 1987 to June 1, 1988. They posited that the contract between the parties was unenforceable under Article 1403(2) of the New Civil Code, and prayed that judgment be rendered in their favor as prayed for by them in their complaint in Civil Case No. 93-17268, thus: WHEREFORE, it is most respectfully prayed that after due hearing, a decision in favor of plaintiff be rendered, ordering Defendant (a) And all other persons claiming under him to vacate the premises located at 86 Madaling Araw St., Teresa Heights Subdivision, Novaliches, Quezon City; (b) To pay plaintiff a balance of P64,349.14 for the use and occupancy of the premises until May 31, 1993, and at the rate of P3,628.80 a month from June 1, 1993 until the premises shall have been finally vacated; (c) To pay P50,000.00 plus P2,000.00 per appearance as and for attorneys fees; and (d) To pay the costs of suit. Plaintiff further prays for such other relief reasonable and conscionable in the premises.28 The Evidence for the Petitioners Petitioner Clemeno, Jr. and the respondent were townmates. Sometime in June 1987, petitioner Clemeno, Jr. agreed to sell the property for P270,000.00 payable in three (3) installments: (a) P90,000.00 upon the respondents taking possession of the property; (b) P90,000.00 payable within six (6) months thereafter; and (c)P90,000.00 not later than June 1, 1988. The respondent assured petitioner Clemeno, Jr. that there would be nothing to worry about the documentation of the sale; being a lawyer, he would take care of everything. However, the respondent failed to pay the balance of the purchase price of the property in the amount of P156,970.04 despite promises to do so. On September 16, 1989, petitioner Clemeno, Jr. went to the respondents house to talk to him anew, but the latter was nowhere to be found. He made a typewritten letter to the respondent, stating that the latter had been given more than enough time to exercise the option to buy the property but failed to do so; hence, the offer was deemed cancelled. The petitioner left the letter with the respondents daughter, Michelle Lobregat.

The trial court rendered judgment in favor of the petitioners, as follows: Accordingly, therefore, the Court hereby renders judgment in favor of Angel Clemeno, [Jr.] as against Romeo Lobregat and orders the latter and other persons claiming under him to: 1. Vacate the premises located at No. 86 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City; 2. Pay Angel Clemeno, Jr. the amount of P64,349.14 for the use and occupancy of the premises until May 31, 1993 and at the rate of P3,628.80 a month from June 1, 1993 until the premises have been finally vacated; 3. Pay the amount of P50,000.00 as attorneys fees and other legal expenses, and 4. To pay the costs of suit. IT IS SO ORDERED.29 The trial court ruled that since both the sale and lease agreements were not reduced to writing, both contracts were unenforceable under Article 1403(2) of the New Civil Code, and had decided the case based on justice and equity. The respondent appealed the decision to the Court of Appeals and raised the following assignment of errors: 1. THE LOWER COURT, AFTER THE COMPLETE, MERITORIOUS AND WRITTEN PIECES OF EVIDENCE SUBMITTED BY PLAINTIFFAPPELLANT LOBREGAT, FAILED/REFUSED TO CONSIDER THE SAME. INSTEAD, DECIDED ONLY THE CASE OF ACCION PUBLICIANA FILED BY DEFENDANT-APPELLEE A. CLEMENO, JR. 2. THE LOWER COURT FAILED TO CONSIDER THAT RECEIPTS ARE NOT CONTRACT OF SALE BUT EVIDENCE FOR CONTRACT OF SALE AS EVEN NOTED BY THE LOWER COURT. 3. THAT THE LOWER COURT FAILED TO CONSIDER THAT THE PIECES OF EVIDENCE OF LOBREGAT CLEARLY SHOW THAT [THE] SALE WAS THE TRANSACTION BETWEEN HEREIN PARTIES AS ADMITTED BY DEFENDANT-APPELLEE A. CLEMENO, JR. (T.S.N., p. 16, Nov. 20, 1995) (T.S.N., pp. 26 & 27, April 19, 1996)

3. THAT THE HONORABLE LOWER COURT DISREGARDED ITS OWN RULING AS TO THE APPELLEES INTENTIONAL FAILURE TO FOLLOW/COMPLY WITH ITS ORDER DATED MAY 31, 1996. 4. THAT THE LOWER COURT FAILED TO CONSIDER THE DELIBERATE OMISSION OF DEFENDANTS-APPELLEES TO OBSERVE THE NON-FORUM SHOPPING REQUIREMENT. 5. THAT THE LOWER COURT MISAPPLIED THE PRINCIPLE OF STATUTE OF FRAUDS.30 On February 23, 1999, the Court of Appeals rendered judgment reversing the decision of the trial court. The fallo of the decision reads: WHEREFORE, the decision appealed from is REVERSED, and judgment is hereby rendered: 1. In Civil Case No. Q-92-12620 (a) Ordering defendants-appellees to accept the remaining balance of the purchase price of the house and lot subject of sale in the amount of P156,109.00 and, thereafter, execute in favor of plaintiff-appellant the corresponding deed of sale or proper mode of conveyance; and (b) Ordering defendants-appellees to pay, jointly and severally, plaintiff-appellant P50,000.00 by way of moral damages, P25,000.00 by way of exemplary damages, and P15,000.00 as attorneys fees. 2. In Civil Case No. Q-93-17268 dismissing the complaint therein. Costs against defendants-appellees. SO ORDERED.31 The Court of Appeals ruled that the contract entered into between the parties was a contract of sale, not a contract to sell. The appellate court also ruled that Article 1403(2) was not applicable because the contract was already partly performed, since partial payments had been made by the respondent as evidenced by receipts signed by the petitioners. The petitioners now come to this Court, contending that:

I The Honorable Court of Appeals grossly erred in holding that the contract entered by the parties is a contract of sale and not a contract to sell.32 II The Court of Appeals erred seriously when it held that "Under Article 1356 of the Civil Code, contract shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present and that the contract of sale of a piece of land may be proved orally, totally ignoring the positive mandate of Article 1358 of the Civil Code, "33 III The Honorable Court of Appeals erred in holding that the Statute of Frauds cannot be raised as a defense against specific performance, there being partial performance of the down-payment and subsequent installments, even if short of the full price and after the expiry of the agreed dates of payment.34 The Court shall resolve these issues simultaneously as they are interrelated. The petitioners posit that the respondent failed to prove the essential elements of a contract of sale over the subject property. They contend that the receipts wherein they acknowledged the receipt of the amounts therein specified do not conform to the legal requirements of a contract of sale, and cited the ruling of this Court in Manotok Realty, Inc. vs. Court of Appeal. 35 They also posit that even by his own admission, the respondent defaulted in the payment of the purchase price of the property; hence, they are not obliged to execute a deed of absolute sale over the property and deliver the title to him. The petitioners assert that even if they had entered into an agreement with the respondent, such agreement was a mere contract to sell, not a contract of sale. They further assert that even if, indeed, the parties had entered into a contract of sale, the same is unenforceable under paragraph 2, Article 1403 of the New Civil Code, which provides that such contract must be in writing; and Article 1358 of the New Civil Code which requires that such contract must appear in a public document. On the other hand, the appellate court held that the petitioners and the respondent entered into a verbal contract of sale and not a contract to sell over the subject property, thus: In the case at bench, Clemeno had agreed to sell his house and lot to Lobregat for a total consideration ofP270,000.00 payable in

installments within a period of two (2) years. The receipt, Exhibit "A", is self-explanatory: it speaks of the receipt by Clemeno of the sum of P25,000.00 from Lobregat as advance payment of the subject house and lot, the total purchase price of which is P270,000.00. Significantly, upon his receipt of the advance payment, Clemeno delivered the possession of the premises to Lobregat who is now the present possessor thereof. Subsequent payments were made by Lobregat on the purchase price, all of which were duly receipted for by Clemeno. The receipts Exhibits "A-1", "A-2" and "A-3", for example, speak uniformly of "additional part payment" for the house and lot subject of this case. Moreover, as suggested by Clemeno himself, Lobregat had been religiously remitting the monthly payments on Clemenos loan obligation with the SSS. Note, for instance, Exhibit "A-4" one of the many receipts of payment to SSS where it is indicated that the real estate loan is in the name of Angel C. Clemeno, Jr., as borrower, but bears the name of Romeo Lobregat, as payor, on behalf of Clemeno. It is as clear as sunlight that the parties had entered into a contract of sale and not merely a contract to sell. 36 The petition has no merit. We find and so hold that the contract between the parties was a perfected verbal contract of sale, not a contract to sell over the subject property, with the petitioner as vendor and the respondent as vendee. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on three elements: subject matter, price and terms of payment of the price. 37 The petitioners sold their property to the respondent for P270,000.00, payable on installments, and upon the payment of the purchase price thereof, the petitioners were bound to execute a deed of sale in favor of the respondent and deliver to him the certificate of title over the property in his name. The parties later agreed for the respondent to assume the payment of the petitioners loan amortization to the SSS, which payments formed part of the purchase price of the property. The evidence shows that upon the payment made by the respondent of the amount ofP27,000.00 on June 4, 1987, the petitioners vacated their house and delivered possession thereof to the respondent. Conformably to Article 1477 of the New Civil Code, the ownership of the property was transferred to the respondent upon such delivery. The petitioners cannot re-acquire ownership and recover possession thereof unless the contract is rescinded in accordance with law.38 The failure of the respondent to complete the payment of the purchase price of the property within the stipulated period merely accorded the petitioners the option to rescind the contract of sale as provided for in Article 1592 of the New Civil Code.39 The contract entered into by the parties was not a contract to sell because there was no agreement for the petitioners to retain ownership over the property until after the respondent shall have paid the purchase price in full, nor an agreement reserving to the petitioners the right to unilaterally resolve the

contract upon the buyers failure to pay within a fixed period. 40 Unlike in a contract of sale, the payment of the price is a positive suspensive condition in a contract to sell, failure of which is not a breach but an event that prevents the obligation of the vendor to convey the title from becoming effective. 41 The fact that the receipts issued by the SSS evidencing the respondents remittances of the monthly amortization payments of the petitioners loan, and that the receipts issued to the respondent for the payment of realty taxes for 1987 and 1988 were in the name of Nilus Sacramento and/or the petitioner Clemeno, Jr., does not negate the fact of the transfer of the ownership over the property to the respondent on June 4, 1987. Moreover, the deed of sale over the property in favor of the respondent had not yet been executed by the petitioners. The Spouses Sacramento and later, the petitioners, were the borrowers, as per the records of the SSS. The contract of sale of the parties is enforceable notwithstanding the fact that it was an oral agreement and not reduced in writing as required by Article 1403(2) of the New Civil Code, which reads: Art. 1403. The following contracts are unenforceable, unless they are ratified: "(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the parties charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accepts and receives part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money: but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; "

This is so because the provision applies only to executory, and not to completed, executed or partially executed contracts. 42 In this case, the contract of sale had been partially executed by the parties, with the transfer of the possession of the property to the respondent and the partial payments made by the latter of the purchase price thereof. We agree with the petitioners contention that the respondent did not pay the total purchase price of the property within the stipulated period. Moreover, the respondent did not pay the balance of the purchase price of the property. However, such failure to pay on the part of the respondent was not because he could not pay, but because petitioner Angel Clemeno, Jr. told him not to do so. The latter instructed the respondent to continue paying the monthly amortizations due to the SSS on the loan. Unknown to the respondent, petitioner Angel Clemeno, Jr. wanted to increase the purchase price of the property at the prevailing market value in 1992, and not its value in 1987 when the contract of sale was perfected. The petitioners failed to prove their claim that a lease purchase agreement over the property was entered into. Except for their bare claim, they failed to adduce a morsel of documentary evidence to prove the same. On the other hand, all the receipts issued by them on the partial payments made by the respondent were for the purchase price of the property, and not as rentals thereof. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners. SO ORDERED. Puno, Austria-Martinez*, Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-9871

January 31, 1958

Durig September/October from US Ports. Supplier: Atkins, Kroll & Co., Sa Frasisco, Cal. U.S.A. We are looking forward to receive your valued order and remain . Very truly yours, The Court of first instance and the Court of Appeals 1 found that B. Cua Hian Tek accepted the offer unconditionally and delivered his letter of acceptance Exh. B on September 21, 1951. However, due to shortage of catch of sardines by the packers in California, Atkins Kroll & Co., failed to deliver the commodities it had offered for sale. There are other details to which reference shall not be made, as they touch the question whether the acceptance had been handed on time; and on that issue of Court of Appeals definitely found for plaintiff. Ayway, in presenting its case before this Court petitioner does not dispute such timely acceptance. It merely raises the point that the acceptance only created an option, which, lacking consideration, had no obligatory force. The offer Exh. A, petitioner argues, "was a promise to sell a determinate thing for a price certain. Upon its acceptance by respondent, the offer became an accepted unilateral promise to sell a determinate thing for price certain. Inasmuch as there was no consideration to support the promise to sell distinct from the price, it follows that under Art. 1479 aforequoted, the promise is not binding on the petitioner even if it was accepted by respondent." (p. 12 brief of petitioner.). The argument, maifestly assumes that only a unilateral promise arose when the offeree accepted. Such assumption is a mistake, because a bilateral cotract to sell and to buy was created upon acceptance. So much so that B. Cua Hian Tek could be sued, he had backed out after accepting, by refusing to get the sardines and/or to pay for their price. Indeed, the word "option" is found neither in the offer nor in the acceptance. On the copntrary Exh. B accepted "the firm offer for the sale" and adds, "the undersigned buyer has immediately filed an application for import license . . ." (Emphasis Ours.). Petitioner, however, insists the offer was a mere offer of option, because the "firm offer" Exh. A. was a continuing offer to sell until September 23, "an option is nothing more than a continuing offer" for a specified time. In our opinion implies more than that: it implies the legal obligation to keep open for the time specified.2 Yet the letter Exh. A did not by itself produce the legal obligation of keeping the offer open up ot Septmber 23. It could be withdrawn before acceptance, because it is admitted, there was no consideration for it.

ATKINS, KROLL and CO., INC., petitioner, vs. B. CUA HIAN TEK, respondent. Ross Selph, Carrascoso and Janda for petitioner. Ponciano T. Castro for respondent. BENGZON, J.: Review of a Court of Appeals' decision. For its failure to deliver one thousand cartons of sardines, which it had sold to B. Cua Hian Tek, petitioner was sued, and after trial was ordered by the Manila court of first instance to Pay damages, which on appeal was reduced by the Court of Appeals to P3,240.15 representing unrealized profits. There was no such contract of sale, says petitioner, but only an option to buy, which was not enforceable for lack of consideration because in accordance with Art. 1479 of the New Civil Code "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. Simple are the facts of this case: Dated September 13, 1951, petitioner sent to respondent a letter of the following tenor: Sir (s) /Madam: We are pleased to make you herewith the following firm offer, subject to reply by September 23, 1951: Quantity and Commodity: 400 Ctns. Luneta brand Sardines in Tomato Sauce 48/15-oz. Ovals at $8.25 Ctn. 300 Ctns. Luntea brand Sardines Natural 48/15 oz. talls at $6.25 Ct. 300 Ctns. Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 Ct. Price(s): All prices C ad F Manila Cosular Fees of $6.00 to be added. Shipmet:

ART. 1324. When the offerer has showed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as somnething paid or promissed. (n) (New Civil Code.). Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce, even though the offer provides that it will not be withdrawn or countermanded, or allows the offeree a certain time within which to accept it, unless such provision or agreement is supported by an independent consideration. . . (77 Corpus Juris Secundum p. 636.). Furthermore, an option is unilateral: a promise to sell3 at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to later. In this case, however, upon accepeting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligations of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilalteral contract of sale. Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that . If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.). It can be taken for granted, as contended by the defendants, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of this acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both actsthe offer and the acceptancecould at all events have generated a contract, if none there was before (atrs. 1254 and 1262 of the Civil Code). (Zayco vs. Serra, 44 Phil. 331.). One additional observation should be made before the closing this opinion. The defense in the court of first instance rested on the proposition or propositions that the offer had not been precedent had not been fulfilled. This option-withoutconsideration idea was never mentioned in the answer. A Change of theory in the appellate courts is not permitted. In order that a question may be raised on appeal, it is essential that it be within the issues made by the parties in their pleadings.

Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal because, to permit him to do so, would be unfair to the adverse party. (Rules of Court by Moran1957 Ed. Vol. I p.715 citing Agoncillo vs. Javier, 38 Phil. 424; American Express Company vs. Natividad, 46 Phil. 207; San Agustin vs. Barrios, 68 Phil. 465, 480; Toribio vs. Dacasa, 55 Phil. 461.) . We must therefore hold, as the lower courts have held that there was a contract of sale between the parties. And as no legal excuse has been proven, the seller's failure to comply therewith gave around to an award for damages, which has been fixed by the Court of Appeals at P3,240.15-amount which petitioner does not dispute in this final instance. Consequently, the decision under review should be, and it is hereby affirmed, with cost against petitioner. Paras, C.J., Padilla, Montemayor, Reyes, A., Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ., concur. Bautista Angelo, J., concurs in the result.

Republic SUPREME Manila THIRD DIVISION

of

the

Philippines COURT

G.R. No. 106435 July 14, 1999

PAMECA WOOD TREATMENT PLANT, INC., HERMINIO G. TEVES, VICTORIA V. TEVES and HIRAM DIDAY R. PULIDO, petitioners, vs. HON. COURT OF APPEALS and DEVELOPMENT BANK OF THE PHILIPPINES, respondents.

The petition raises the following grounds: 1. Respondent appellate court gravely erred in not reversing the decision of the trial court, and in not holding that the public auction sale of petitioner PAMECA's chattels were tainted with fraud, as the chattels of the said petitioner were bought by private respondent as sole bidder in only 1/6 of the market value of the property, hence unconscionable and inequitable, and therefore null and void. 2. Respondent appellate court gravely erred in not applying by analogy Article 1484 and Article 2115 of the Civil Code by reading the spirit of the law, and taking into consideration the fact that the contract of loan was a contract of adhesion. 3. The appellate court gravely erred in holding the petitioners Herminio Teves, Victoria Teves and Hiram Diday R. Pulido solidarily liable with PAMECA Wood Treatment Plant, Inc. when the intention of the parties was that the loan is only for the corporation's benefit. Relative to the first ground, petitioners contend that the amount of P322,350.00 at which respondent bank bid for and purchased the mortgaged properties was unconscionable and inequitable considering that, at the time of the public sale, the mortgaged properties had a total value of more than P2,000,000.00. According to petitioners, this is evident from an inventory dated March 31, 1980 5, which valued the properties at P2,518,621.00, in accordance with the terms of the chattel mortgage contract 6 between the parties that required that the inventories "be maintained at a level no less than P2 million". Petitioners argue that respondent bank's act of bidding and purchasing the mortgaged properties for P322,350.00 or only about 1/6 of their actual value in a public sale in which it was the sole bidder was fraudulent, unconscionable and inequitable, and constitutes sufficient ground for the annulment of the auction sale. To this, respondent bank contends that the above-cited inventory and chattel mortgage contract were not in fact submitted as evidence before the RTC of Makati, and that these documents were first produced by petitioners only when the case was brought to the Court of Appeals. 7 The Court of Appeals, in turn, disregarded these documents for petitioners' failure to present them in evidence, or to even allude to them in their testimonies before the lower courtr. 8 Instead, respondent court declared that it is not at all unlikely for the chattels to have sufficiently deteriorated as to have fetched such a low price at the time of the auction sale. 9 Neither did respondent court find anything irregular or fraudulent in the circumstance that respondent bank was the sole bidder in the sale, as all the legal procedures for the conduct of a foreclosure sale have been complied with, thus giving rise to the presumption of regularity in the performance of public duties. 10

GONZAGA-REYES, J.: Before Us for review on certiorari is the decision of the respondent Court of Appeals in C.A. G.R. C.V. No. 27861, promulgated on April 23, 1992, 1 affirming in toto the decision of the Regional Trial Court of Makati 2 to a award respondent bank's deficiency claim, arising from a loan secured by chattel mortgage. The antecedents of the case are as follows: On April 17, 1980, petitioner PAMECA Wood Treatment Plant, Inc. (PAMECA) obtained a loan of US$267,881.67, or the equivalent of P2,000,000.00 from respondent Bank. By virtue of this loan, petitioner PAMECA, through its President, petitioner Herminio C. Teves, executed a promissory note for the said amount, promising to pay the loan by installment. As security for the said loan, a chattel mortgage was also executed over PAMECA's properties in Dumaguete City, consisting of inventories, furniture and equipment, to cover the whole value of the loan. On January 18, 1984, and upon petitioner PAMECA's failure to pay, respondent bank extrajudicially foreclosed the chattel mortgage, and, as sole bidder in the public auction, purchased the foreclosed properties for a sum of P322,350.00. On June 29, 1984, respondent bank filed a complaint for the collection of the balance of P4,366,332.46 3 with Branch 132 of the Regional Trial Court of Makati City against petitioner PAMECA and private petitioners herein, as solidary debtors with PAMECA under the promissory note. On February 8, 1990, the RTC of Makati rendered a decision on the case, the dispositive portion of which we reproduce as follows: WHEREFORE, judgment is hereby rendered ordering the defendants to pay jointly and severally plaintiff the (1) sum of P4,366,332.46 representing the deficiency claim of the latter as of March 31, 1984, plus 21% interest per annum and other charges from April 1, 1984 until the whole amount is fully paid and (2) the costs of the suit. SO ORDERED." 4 The Court of Appeals affirmed the RTC decision. Hence, this Petition.

Petitioners also question the ruling of respondent court, affirming the RTC, to hold private petitioners, officers and stockholders of petitioner PAMECA, liable with PAMECA for the obligation under the loan obtained from respondent bank, contrary to the doctrine of separate and distinct corporate personality. 11 Private petitioners contend that they became signatories to the promissory note "only as a matter of practice by the respondent bank", that the promissory note was in the nature of a contract of adhesion, and that the loan was for the benefit of the corporation, PAMECA, alone. 12 Lastly, invoking the equity jurisdiction of the Supreme Court, petitioners submit that Articles 1484 13 and 2115 14of the Civil Code be applied in analogy to the instant case to preclude the recovery of a deficiency claim. 15 Petitioners are not the first to posit the theory of the applicability of Article 2115 to foreclosures of chattel mortgage. In the leading case of Ablaza vs. Ignacio 16, the lower court dismissed the complaint for collection of deficiency judgment in view of Article 2141 of the Civil Code, which provides that the provisions of the Civil Code on pledge shall also apply to chattel mortgages, insofar as they are not in conflict with the Chattel Mortgage Law. It was the lower court's opinion that, by virtue of Article 2141, the provisions of Article 2115 which deny the creditor-pledgee the right to recover deficiency in case the proceeds of the foreclosire sale are less than the amount of the principal obligation, will apply. This Court reversed the ruling of the lower court and held that the provisions of the Chattel Mortgage Law regarding the effects of foreclosure of chattel mortgage, being contrary to the provisions of Article 2115, Article 2115, in relation to Article 2141, may not be applied to the case. Sec. 14 of Act No. 1508, as amended, or the chattel Mortgage Law, states: xxx xxx xxx The officer making the sale shall, within thirty days thereafter, make in writing a return of his doings and file the same in the office of the Registry of Deeds where the mortgage is recorded, and the Register of Deeds shall record the same. The fees of the officer for selling the property shall be the same as the case of sale on execution as provided in Act Numbered One Hundred and Ninety, and the amendments thereto, and the fees of the Register of Deeds for registering the officer's return shall be taxed as a part of the costs of sale, which the officer shall pay to the Register of Deeds. The return shall particularly describe the articles sold, and state the amount received for each article, and shall operate as a discharge of the lien thereon created by the mortgage. The proceeds of such sale shall be applied to the payment, first, of the costs and expenses of keeping and sale, and then to the payment of the demand or obligation secured by such mortgage, and the

residue shall be paid to persons holding subsequent mortgages in their order, and the balance, after paying the mortgage, shall be paid to the mortgagor or persons holding under him on demand. (Emphasis supplied). It is clear from the above provision that the effects of foreclosure under the Chattel Mortgage Law run inconsistent with those of pledge under Article 2115. Whereas, in pledge, the sale of the thing pledged extinguishes the entire principal obligation, such that the pledgor may no longer recover proceeds of the sale in excess of the amount of the principal obligation, Section 14 of the Chattel Mortgage Law expressly entitles the mortgagor to the balance of the proceeds, upon satisfaction of the principal obligation and costs. Since the Chattel Mortgage Law bars the creditor-mortgagee from retaining the excess of the sale proceeds there is a corollary obligation on the part of the debtor-mortgagee to pay the deficiency in case of a reduction in the price at public auction. As explained in Manila Trading and Supply Co. vs. Tamaraw Plantation Co. 17, cited inAblaza vs. Ignacio, supra: While it is true that section 3 of Act No. 1508 provides that "a chattel mortgage is a conditional sale", it further provides that it "is a conditional sale of personal property as security for the payment of a debt, or for the performance of some other obligation specified therein." The lower court overlooked the fact that the chattels included in the chattel mortgage are only given as security and not as a payment of the debt, in case of a failure of payment. The theory of the lower court would lead to the absurd conclusion that if the chattels mentioned in the mortgage, given as security, should sell for more than the amount of the indebtedness secured, that the creditor would be entitled to the full amount for which it might be sold, even though that amount was greatly in excess of the indebtedness. Such a result certainly was not contemplated by the legislature when it adopted Act No. 1508. There seems to be no reason supporting that theory under the provision of the law. The value of the chattels changes greatly from time to time, and sometimes very rapidly. If for example, the chattels should greatly increase in value and a sale under that condition should result in largely overpaying the indebtedness, and if the creditor is not permitted to retain the excess, then the same token would require the debtor to pay the deficiency in case of a reduction in the price of the chattels between the date of the contract and a breach of the condition. Mr. Justice Kent, in the 12th Edition of his Commentaries, as well as other authors on the question of chattel mortgages,

have said, that "in case of a sale under a foreclosure of a chattel mortgage, there is no question that the mortgagee or creditor may maintain an action for the deficiency, if any should occur." And the. fact that Act No. 1508 permits a private sale, such sale is not, in fact, a satisfaction of the debt, to any greater extent than the value of the property at the time of the sale. The amount received at the time of the sale, of course, always requiring good faith and honesty in the sale, is only a payment, pro tanto, and an action may be maintained for a deficiency in the debt. We find no reason to disturb the ruling in Ablaza vs Ignacio, and the cases reiterating it. 18 Neither do We find tenable the application by analogy of Article 1484 of the Civil Code to the instant case. As correctly pointed out by the trial court, the said article applies clearly and solely to the sale of personal property the price of which is payable in installments. Although Article 1484, paragraph (3) expressly bars any further action against the purchaser to recover an unpaid balance of the price, where the vendor opts to foreclose the chattel mortgage on the thing sold, should the vendee's failure to pay cover two or more installments, this provision is specifically applicable to a sale on installments. To accommodate petitioners' prayer even on the basis of equity would be to expand the application of the provisions of Article 1484 to situations beyond its specific purview, and ignore the language and intent of the Chattel Mortgage Law. Equity, which has been aptly described as "justice outside legality", is applied only in the absence of, and never against, statutory law or judicial rules of procedure. 19 We are also unable to find merit in petitioners' submission that the public auction sale is void on grounds of fraud and inadequacy of price. Petitioners never assailed the validity of the sale in the RTC, and only in the Court of Appeals did they attempt to prove inadequacy of price through the documents, i.e., the "Open-End Mortgage on Inventory" and inventory dated March 31, 1980, likewise attached to their Petition before this Court. Basic is the rule that parties may not bring on appeal issues that were not raised on trial. Having nonetheless examined the inventory and chattel mortgage document as part of the records, We are not convinced that they effectively prove that the mortgaged properties had a market value of at least P2,000,000.00 on January 18, 1984, the date of the foreclosure sale. At best, the chattel mortgage contract only indicates the obligation of the mortgagor to maintain the inventory at a value of at least P2,000,000.00, but does not evidence compliance therewith. The inventory, in turn, was as of March 31, 1980, or even prior to April 17, 1980, the date when the parties entered into the contracts of loan and chattel mortgage, and is far from being an accurate estimate of the market value of the properties at the time of the foreclosure sale four years thereafter.

Thus, even assuming that the inventory and chattel mortgage contract were duly submitted as evidence before the trial court, it is clear that they cannot suffice to substantiate petitioners' allegation of inadequacy of price. 1wphi1.nt Furthermore, the mere fact that respondent bank was the sole bidder for the mortgaged properties in the public sale does not warrant the conclusion that the transaction was attended with fraud. Fraud is a serious allegation that requires full and convincing evidence, 20 and may not be inferred from the lone circumstance that it was only respondent bank that bid in the sale of the foreclosed properties. The sparseness of petitioners' evidence in this regard leaves Us no discretion but to uphold the presumption of regularity in the conduct of the public sale. We likewise affirm private petitioners' joint and several liability with petitioner corporation in the loan. As found by the trial court and the Court of Appeals, the terms of the promissory note unmistakably set forth the solidary nature of private petitioners' commitment. Thus: On or before May 12, 1980, for value received, PAMECA WOOD TREATMENT PLANT, INC., a corporation organized and existing under the laws of the Philippines, with principal office at 304 El Hogar Filipina Building, San Juan, Manila, promise to pay to the order of DEVELOPMENT BANK OF THE PHILIPPINES at its office located at corner Buendia and Makati Avenues, Makati, Metro Manila, the principal sum of TWO HUNDRED SIXTY SEVEN THOUSAND EIGHT HUNDRED AND EIGHTY ONE & 67/100 US DOLLARS (US$ 267,881.67) with interest at the rate of three per cent (3%) per annum over DBP's borrowing rate for these funds. Before the date of maturity, we hereby bind ourselves, jointly and severally, to make partial payments as follows: xxx xxx xxx In case of default in the payment of any installment above, we bind ourselves to pay DBP for advances . . . xxx xxx xxx We further bind ourselves to pay additional interest and penalty charges on loan amortizations or portion thereof in arrears as follows: xxx xxx xxx In addition to the above, we also bind ourselves to pay for bank advances for insurance premiums, taxes . . .

xxx xxx xxx We further bind ourselves to reimburse DBP on a prorata basis for all costs incurred by DBP on the foreign currency borrowings from where the loan shall be drawn . . . xxx xxx xxx In case of non-payment of the amount of this note or any portion of it on demand, when due, or any other amount or amounts due on account of this note, the entire obligation shall become due and demandable, and if, for the enforcement of the payment thereof, the DEVELOPMENT BANK OF THE PHILIPPINES is constrained to entrust the case to its attorneys, we jointly and severally bind ourselves to pay for attorney's fees as provided for in the mortgage contract, in addition to the legal fees and other incidental expenses. In the event of foreclosure of the mortgage securing this note, we further bind ourselves jointly and severally to pay the deficiency, if any. (Emphasis supplied) 21 The promissory note was signed by private petitioners in the following manner: PAMECA WOOD TREATMENT PLANT, INC. By: (Sgd) HERMINIO G. TEVES (For himself & as President of above-named corporation) (Sgd) HIRAM DIDAY PULIDO (Sgd) VICTORIA V. TEVES 22 From the foregoing, it is clear that private petitioners intended to bind themselves solidarily with petitioner PAMECA in the loan. As correctly submitted by respondent bank, private petitioners are not made to answer for the corporate act of petitioner PAMECA, but are made liable because they made themselves co-makers with PAMECA under the promissory note. IN VIEW OF THE FOREGOING, the Petition is DENIED and the Decision of the Court of Appeals dated April 23, 1992 in CA G.R. CV No. 27861 is hereby AFFIRMED. Costs against petitioners. SO ORDERED.

Romero, Vitug Pananganiban and Purisima, JJ., concur.