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Acap v.

Felixberto Oruma sold his inherited land to Cosme Pido, which land is rented by
petitioner Teodoro Acap. When Cosme died intestate, his heirs executed a eclaration
o! "eirship and Waiver o! #i$hts% in !avor o! private respondent &dy delos #eyes.
#espondent in!ormed petitioner o! his claim over the land, and petitioner paid the
rental to him in '()*. "owever in subse+uent years, petitioner re!used to pay the rental,
which prompted respondent to !ile a complaint !or the recovery o! possession and
dama$es. Petitioner averred that he continues to reco$ni,e Pido as the owner o! the
land, and that he will pay the accumulated rentals to Pido-s widow upon her return !rom
abroad. The lower court ruled in !avor o! private respondent.
.'/ Whether the eclaration o! "eirship and Waiver o! #i$hts% is a reco$ni,ed mode o!
ac+uirin$ ownership by private respondent
.*/ Whether the said document can be considered a deed o! sale in !avor o! private
An asserted ri$ht or claim to ownership or a real ri$ht over a thin$ arisin$ !rom a
0uridical act, however 0usti!ied, is not per se su!!icient to $ive rise to ownership over
the res. That ri$ht or title must be completed by !ul!illin$ certain conditions imposed by
law. "ence, ownership and real ri$hts are ac+uired only pursuant to a le$al mode or
process. While title is the 0uridical 0usti!ication, mode is the actual process o! ac+uisition
or trans!er o! ownership over a thin$ in +uestion.
1n a Contract o! 2ale, one o! the contractin$ parties obli$ates himsel! to trans!er the
ownership o! and to deliver a determinate thin$, and the other party to pay a price
certain in money or its e+uivalent.3pon the other hand, a declaration o! heirship and
waiver o! ri$hts operates as a public instrument when !iled with the #e$istry o! eeds
whereby the intestate heirs ad0udicate and divide the estate le!t by the decedent amon$
themselves as they see !it. 1t is in e!!ect an extra0udicial settlement between the heirs
under #ule 45 o! the #ules o! Court. "ence, there is a mar6ed di!!erence between
a saleo! hereditary ri$hts and a waiver o! hereditary ri$hts. The !irst presumes the
existence o! a contract or deed o! sale between the parties. The second is, technically
spea6in$, a mode o! extinction o! ownership where there is an abdication or intentional
relin+uishment o! a 6nown ri$ht with 6nowled$e o! its existence and intention to
relin+uish it, in favor of other persons who are co-heirs in the succession. Private
respondent, bein$ then a stran$er to the succession o! Cosme Pido, cannot conclusively
claim ownership over the sub0ect lot on the sole basis o! the waiver document which
neither recites the elements o! either a sale, or a donation, or any other derivative mode
o! ac+uirin$ ownership.
A notice o! adverse claim is nothin$ but a notice o! a claim adverse to the re$istered
owner, the validity o! which is yet to be established in court at some !uture date, and is
no better than a notice o! lis pendens which is a notice o! a case already pendin$ in
court. 1t is to be noted that while the existence o! said adverse claim was duly proven,
there is no evidence whatsoever that a deed o! sale was executed between Cosme Pido7s
heirs and private respondent trans!errin$ the ri$hts o! Pido7s heirs to the land in !avor o!
private respondent. Private respondent7s ri$ht or interest there!ore in the tenanted lot
remains an adverse claim which cannot by itsel! be su!!icient to cancel the OCT to the
land and title the same in private respondent7s name. Conse+uently, while the
transaction between Pido7s heirs and private respondent may be bindin$ on both
parties, the ri$ht o! petitioner as a re$istered tenant to the land cannot be per!unctorily
!or!eited on a mere alle$ation o! private respondent7s ownership without the
correspondin$ proo! thereo!.
Toyota Shaw Inc. vs. Court of Appeals, and Sosa
Toyota Shaw Inc. vs. Court of Appeals, and Sosa
244 SCRA 320
May !!"
%una %. Sosa and h&s son, '&l(ert, went to purchase a yellow Toyota %&te Ace fro) the Toyota off&ce at
Shaw *oulevard, +as&, -pet&t&oner Toyota. on /une 4, !0! where they )et +opon, *ernardo who was
a sales representat&ve of sa&d (ranch. Sosa e)phas&1ed that he needed the car not later than /une 2,
!0! (ecause he, h&s fa)&ly, and a (al&3(ayan ,uest would (e us&n, &t on /une 0 to ,o ho)e to
Mar&ndu4ue where he w&ll cele(rate h&s (&rthday on /une !. *ernardo assured Sosa that a un&t would
(e ready for p&c3 up on /une 2 at 0$00 &n the )orn&n,, and s&,ned the 5A,ree)ents *etween Mr. Sosa
6 +opon, *ernardo of Toyota Shaw, Inc.,7 a docu)ent wh&ch d&d not )ent&on anyth&n, a(out the full
purchase pr&ce and the )anner the &nstall)ents were to (e pa&d. Sosa and '&l(ert del&vered the down
pay)ent of +00,000.00 on /une ", !0! and *ernardo acco)pl&shed a pr&nted 8eh&cle Sales +roposal
-8S+. 9o. !20 wh&ch showed Sosa:s full na)e and ho)e address, that pay)ent &s (y 5&nstall)ent,5 to (e
f&nanced (y 5*.A.,5 and that the 5*A%A9C; T< *; #I9A9C;=5 &s 5+224,32.005, (ut the spaces prov&ded
for 5=el&very Ter)s5 were not f&lled>up.
?hen /une 2 ca)e, however, pet&t&oner Toyota d&d not del&ver the %&te Ace. @ence, Sosa as3ed that
h&s down pay)ent (e refunded and pet&t&oner Toyota &ssued also on /une 2 a #ar ;ast *an3 chec3 for
the full a)ount of +00,000.00, the rece&pt of wh&ch was shown (y a chec3 voucher of Toyota, wh&ch
Sosa s&,ned w&th the reservat&on, 5w&thout preAud&ce to our future cla&)s for da)a,es.5 +et&t&oner
Toyota contended that the *.A. #&nance d&sapproved Sosa:s the cred&t f&nanc&n, appl&cat&on and further
alle,ed that a part&cular un&t had already (een reserved and ear)ar3ed for Sosa (ut could not (e
released due to the uncerta&nty of pay)ent of the (alance of the purchase pr&ce. Toyota then ,ave
Sosa the opt&on to purchase the un&t (y pay&n, the full purchase pr&ce &n cash (ut Sosa refused.
The tr&al court found that there was a val&d perfected contract of sale (etween Sosa and Toyota wh&ch
(ound the latter to del&ver the veh&cle and that Toyota acted &n (ad fa&th &n sell&n, to another the un&t
already reserved for Sosa, and the Court of Appeals aff&r)ed the sa&d dec&s&on.
?as there a perfected contract of sale (etween respondent Sosa and pet&t&oner ToyotaC
The Supre)e Court ,ranted Toyota:s pet&t&on and d&s)&ssed Sosa:s co)pla&nt for da)a,es (ecause the
docu)ent ent&tled DA,ree)ents *etween Mr. Sosa 6 +opon, *ernardo of Toyota Shaw, Inc.,7 was not a
perfected contract of sale, (ut )erely an a,ree)ent (etween Mr. Sosa and *ernardo as pr&vate
&nd&v&duals and not (etween Mr. Sosa and Toyota as part&es to a contract.
There was no &nd&cat&on &n the sa&d docu)ent of any o(l&,at&on on the part of Toyota to transfer
ownersh&p of a deter)&nate th&n, to Sosa and ne&ther was there a correlat&ve o(l&,at&on on the part of
the latter to pay therefor a pr&ce certa&n. The prov&s&on on the downpay)ent of +00,000.00 )ade no
spec&f&c reference to a sale of a veh&cle. If &t was &ntended for a contract of sale, &t could only refer to
a sale on &nstall)ent (as&s, as 8S+ 9o.!20 eEecuted on /une ", !0! conf&r)ed. The 8S+ also created
no de)anda(le r&,ht &n favor of Sosa for the del&very of the veh&cle to h&), and &ts non>del&very d&d not
cause any le,ally &nde)n&f&a(le &nAury
Fu&ro,a vs. +arsons @ardware
Fu&ro,a vs. +arsons @ardware
30 +h&l "0
Au,ust !0
<n /anuary 24, !, pla&nt&ff Andres Fu&ro,a and /. +arsons -to whose r&,hts and o(l&,at&ons the
present defendant +arsons @ardware Co. later su(ro,ated &tself. entered &nto a contract, where &t was
stated a)on, others that Fu&ro,a ,rants &n favor of +arsons the eEclus&ve r&,hts to sell h&s (eds &n the
8&sayan Islands under so)e cond&t&ons. <ne of the sa&d cond&t&ons prov&ded that DMr. +arsons )ay sell,
or esta(l&sh (ranches of h&s a,ency for the sale of 5Fu&ro,a5 (eds &n all the towns of the Arch&pela,o
where there are no eEclus&ve a,ents, and shall &))ed&ately report such act&on to Mr. Fu&ro,a for h&s
approval7 wh&le another one passed on to +arsons the o(l&,at&on to order (y the do1en and &n no other
)anner the (eds fro) Fu&ro,a.
Alle,&n, that the +arsons was h&s a,ent for the sale of h&s (eds &n Ilo&lo, Fu&ro,a f&led a co)pla&nt
a,a&nst the for)er for v&olat&n, the follow&n, o(l&,at&ons &)pl&ed &n what he contended to (e a contract
of co))erc&al a,ency$ not to sell the (eds at h&,her pr&ces than those of the &nvo&cesG to have an open
esta(l&sh)ent &n Ilo&loG &tself to conduct the a,encyG to 3eep the (eds on pu(l&c eEh&(&t&on, and to pay
for the advert&se)ent eEpenses for the sa)eG and to order the (eds (y the do1en and &n no other
Is the defendant, (y reason of the contract, a purchaser or an a,ent of the pla&nt&ff for the sale of the
latter:s (eds &n Ilo&loC
The Supre)e Court declared that the contract (y and (etween the pla&nt&ff and the defendant was one
of purchase and sale, and that the o(l&,at&ons the (reach of wh&ch &s alle,ed as a cause of act&on are
not &)posed upon the defendant, e&ther (y a,ree)ent or (y law.
In order to class&fy a contract, due re,ard )ust (e ,&ven to &ts essent&al clauses. In the contract &n
4uest&on, what was essent&al, as const&tut&n, &ts cause and su(Aect )atter, &s that the pla&nt&ff was to
furn&sh the defendant w&th the (eds wh&ch the latter )&,ht order, at the pr&ce st&pulated, and that the
defendant was to pay the pr&ce &n the )anner st&pulated. There was the o(l&,at&on on the part of the
pla&nt&ff to supply the (eds, and, on the part of the defendant, to pay the&r pr&ce. These features
eEclude the le,al concept&on of an a,ency or order to sell where(y the )andatory or a,ent rece&ved
the th&n, to sell &t, and does not pay &ts pr&ce, (ut del&vers to the pr&nc&pal the pr&ce he o(ta&ns fro)
the sale of the th&n, to a th&rd person, and &f he does not succeed &n sell&n, &t, he returns &t.
Acap v Court of Appeals
<wnersh&p. 8as4ue1>ISon>I+&do>I@e&rs>I ;dy de los Reyyes.
T&tle to%ot 30 of Cadastral Survey -3,220 )eters. of @&n&,ran, 9e,ros <cc&dentalwas &ssued and
re,&stered &n the na)e of spouses Sant&a,o 8as4ue1 and%oren1o <ru)a.They d&ed and the&r only son
#el&E(erto &nher&ted the lot.In !2", #el&E(erto sold the land to Cos)e +&do.
S&nce !J0, Acap was tenant of a port&on of the land -!,"00 )eters..?hen ownersh&p was transferred &n
!2", Acap cont&nued to (e there,&stered tenant and rel&,&ously pa&d h&s rentals to +&do, and after
h&s death,to h&s w&dow %aurenc&a.+&do d&ed &ntestate and h&s surv&v&n, he&rs -w&fe and four ch&ldren.
eEecuted adocu)ent -=eclarat&on of he&rsh&p w&th wa&ver of r&,hts., adAud&cat&n, theland e4ually
a)on,st the)selves, and wa&v&n, all the&r r&,hts &n favor of ;dyde los Santos. ;dy however d&d not s&,n
the docu)ent.
The t&tle cont&nued to (e re,&stered &n the na)e of the 8as4ue1 spouses. Bpon o(ta&n&n, the
=eclarat&on of @e&rsh&p w&th wa&ver of r&,hts, ;dy f&led a &t w&th the Re,&stry of =eeds as part of a
not&ce of adverse cla&) a,a&nst the or&,&nal cert&f&cate of t&tle.
Alle,ed new a,ree)ent.
;dy told Acap personally he was the new ownerof the land and that the lease rentals -0 cavans of
palay per annu). were to (e pa&d to h&). Alle,edly, Acap a,reed and co)pl&ed. In !03 however,Acap
refused to pay any further lease rentals, pro)pt&n, pr&vate respondent to ,et the ass&stant of the
M&n&stry of A,rar&an Refor). A MAR off&cer &nfor)ed Acap:s w&fe a(out ;dy:s ownersh&p, (ut she sa&d she
and her hus(and d&d not reco,n&1e the ownersh&p over the land.
After four years, ;dy f&led a co)pla&nt for recovery of possess&onand da)a,es a,a&nst Acap, as he
refused to pay a,reed rentals.
+et&t&oner:s vers&on.
Cos)e +&do was the owner of the land and after h&sdeath he pa&d to +&do:s w&dow. ?hen she left for
a(road, she &nstructed h&)to pay accu)ulated rentals upon her de)and or return fro) a(road.
@e sa&dhe had no 3nowled,e of transfer or sale of the loat to pr&vate respondent orenter&n, a ver(al
lease tenancy. @e also sa&d assu)&n, the lot was stolen, RA3044 ,ranted h&) the r&,ht to redee) at a
reasona(le pr&ce. ;dy:s eAect)entact&on was also a v&olat&on of h&s secur&ty of tenure.

Trial Court.
Decided in favor of Edy. It forfeited Acaps preferred right underPD 27 and ordered Acap to deliver the
far to Edy. The land !as indeed sold"y heirs of Pido to Edy.
Court of Appeals.
Declaration of heirship and !aiver !as duly notari#ed.
%as the declaration of heirship a recogni#ed ode of ac&uiring o!nership'(o. The Declaration of
)eirship !as not the sae as a contract*deed of sale. In acontract of sale+ one party o"ligates hiself to
transfer o!nership and to delivera deterinate thing+ and the other party to pay a certain price. A
declaration of heirship and !aiver of rights operates as a private instruent !hen filed !iththe ,egistry of
Deeds. It is in effect an e-tra.udicial settleent. There is adifference "et!een
/ale of hereditary rights and!aiver
. The first presues adeed of sale. The seond is a ode of e-tinction of o!nrership.Edy+ "eing a stranger
to the sucession of Cose Pido cannot conclusively claio!nership on the sole "asis of the !aiver
docuent !hich neither recites theeleents of a sale+ donation or any other derivative ode of
ac&uiringo!nership.The fact that the adverse clai !as duly proven does not prove o!nership. It
isnothing "ut a notice of adverse clai. In itself is not sufficient to transfer title toEdy de los ,eyes.
)eld$ Petition granted
G.R. No. L-25926 February 27, 1970
Reyes, .!.L., J.
The transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer
puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the
agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale;
while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the
principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the
proceeds less the agents commission upon sales made.
That the dealer issues his own sales invoice to the customer is neither a means of acquiring ownership nor is it
proof of ownership.
Petitioner Coissioner of Internal ,evenue 0CI,1 assessed against and deanded fro respondent Constantino
the coercial "ro2ers percentage ta- of 34 on his gross copensation for 5673+ as dealer or distri"utor of the
products of International )arvester+ 8acleod+ Inc. 0I)81.
,espondent is designated as the e-clusive dealer of the products I)8 !ithin a prescri"ed territory. In classifying
hiself as an independent erchant instead of a coercial "ro2er+ respondent Constantino cites that he ay "uy
I)8 products for ,esale to his custoers9 that he is granted trade discounts and a cash discount under certain
conditions9 that he ay purchase service parts on open credit account or on a :;<day ter9 and that he sold service
parts to his custoers on cash "asis. Constantino also cited the fact that his purchases are covered "y I)8s sales
invoices+ and !hen he re<sells he issues his o!n sales invoice.
Constantino protested the assessent on the ground that he is not a coercial "ro2er. =n his protest "eing
overruled+ he filed a petition for revie! !ith the Court of Ta- Appeals+ !hich+ after trial+ found for hi. >pon his
reversal "y the ta- court+ the CI, interposed the present appeal.
%hether or not the relationship "et!een the respondent and I)8 is that of a vendor and a vendee
(o. A casual e-aination of respondents evidence ay give the ipression that this relationship !ith the copany is
that of vendor and vendee+ "ut a closer loo2 into the actual legal effect of the ters and conditions e"odied+ rather
than the naes of the contracts used or the terinologies eployed+ in the chain of docuents sho!s that the
relation "et!een the copany and the respondent is one of principal and agent.
,espondent failed to state or notice+ ho!ever+ the condition in his agreeent !ith I)8+ !hich is in sall print+ that the
title of the goods delivered under this order shall reain in I)8 until the full purchase price shall have "een paid in
cash or accepta"le security. That the dealer should issue his o!n sales invoice to the custoer is neither a eans of
ac&uiring o!nership nor is it proof of o!nership.
/ince the copany retained o!nership of the goods+ even as it delivered possession unto the dealer for resale to
custoers+ the price and ters of !hich !ere su".ect to the copanys control+ the relationship "et!een the
copany and the dealer is one of agency+ tested under the follo!ing criterion$
The difficulty in distinguishing "et!een contracts of sale and the creation of an agency to sell has led to the
esta"lishent of rules "y the application of !hich this difficulty ay "e solved. The decisions say the transfer of title
or agreeent to transfer it for a price paid or proised is the essence of sale. If such transfer puts the transferee in
the attitude or position of an o!ner and a2es hi lia"le to the transferor as a de"tor for the agreed price+ and not
erely as an agent !ho ust account for the proceeds of a resale+ the transaction is a sale9 !hile the essence of an
agency to sell is the delivery to an agent+ not as his property+ "ut as the property of the principal+ !ho reains the
o!ner and has the right to control sales+ fi- the price+ and ters+ deand and receive the proceeds less the agents
coission upon sales ade 0alisbury v. !rooks, "# $ %%&, %%'(%%"1.
The control "y the copany of the resale ade+ or agreed upon to "e ade+ "y the dealer is so pervasive as to
e-clude the idea of the latter "eing an independent erchant. As respondent is not an independent erchant+ "ut an
agent+ the discount of 534 that he receives is not a ?trade discount@ "ut a copensation or profit for selling or
"ringing a"out sales or purchases of erchandise for the copany.
&n$ineerin$ &+uipment and 2upply Company
v. C1# and CTA
&n$ineerin$ &+uipment and 2upply Company is en$a$ed in the desi$n and installation
o! central type air conditionin$ system, pumpin$ plants and steel !abrications. 3pon a
letter !rom a certain 8uan dela Cru, denouncin$ the company !or tax evasion and !raud
in obtainin$ its dollar allocations, 91#, C9 and :91 conducted a raid and con!iscated
voluminous documents !rom the !irm. The Commissioner contends that &n$ineerin$ is
a manu!acturer and seller o! air conditionin$ units and parts or accessories thereo! and,
there!ore, it is sub0ect to the ;<= advance sales tax prescribed by 2ection ')>.m/ o! the
Tax Code, in relation to 2ection '(5 o! the same. &n$ineerin$ claims that it is not a
manu!acturer and setter o! air?conditionin$ units and spare parts or accessories thereo!
sub0ect to tax under 2ection ')>.m/ o! the Tax Code, but a contractor en$a$ed in the
desi$n, supply and installation o! the central type o! air?conditionin$ system sub0ect to
the ;= tax imposed by 2ection '(' o! the same Code, which is essentially a tax on the
sale o! services or labor o! a contractor rather than on the sale o! articles sub0ect to the
tax re!erred to in 2ections ')5, ')> and ')@ o! the Code.
Whether or not &n$ineerin$ is a manu!acturer o! air conditionin$ units under 2ection
')>.m/, supra, in relation to 2ections ');.b/ and '(5 o! the Code, or a contractor under
2ection '(' o! the same Code
The distinction between a contract o! sale and one !or wor6, labor and materials is tested
by the in+uiry whether the thin$ trans!erred is one not in existence and which never
would have existed but !or the order o! the party desirin$ to ac+uire it, or a thin$ which
would have existed and has been the sub0ect o! sale to some other persons even i! the
order had not been $iven. 1! the article ordered by the purchaser is exactly such as the
plainti!! ma6es and 6eeps on hand !or sale to anyone, and no chan$e or modi!ication o!
it is made at de!endant7s re+uest, it is a contract o! sale, even thou$h it may be entirely
made a!ter, and in conse+uence o!, the de!endants order !or it.
The word AcontractorA has come to be used with special re!erence to a person who, in
the pursuit o! the independent business, underta6es to do a speci!ic 0ob or piece o! wor6
!or other persons, usin$ his own means and methods without submittin$ himsel! to
control as to the petty details. The true test o! a contractor would seem to be that he
renders service in the course o! an independent occupation, representin$ the will o! his
employer only as to the result o! his wor6, and not as to the means by which it is
&n$ineerin$, in a nutshell, !abricates, assembles, supplies and installs in the buildin$s o!
its various customers the central type air conditionin$ systemB prepares the plans and
speci!ications there!or which are distinct and di!!erent !rom each otherB the air
conditionin$ units and spare parts or accessories thereo! used by petitioner are not the
window type o! air conditioner which are manu!actured, assembled and produced
locally !or sale to the $eneral mar6etB and the imported air conditionin$ units and spare
parts or accessories thereo! are supplied and installed by petitioner upon previous
orders o! its customers con!ormably with their needs and re+uirements. The !acts and
circumstances a!ore+uoted support the theory that &n$ineerin$ is a contractor rather
than a manu!acturer.
"*L +ONT* ,'ILI,,IN*S, INC., petitioner, vs. NA,OL*ON N.
ARAGON*S, respondent.
" * C I S I O N
The decision in the present Petition for ,evie! on )ertiorari hinges on the nature of
the contract denoinated .Su//(y A0ree1e&$2
!hich !as forged "et!een Dyna"loc2
Enterprises+ represented "y its 8anager herein respondent (apoleon (. Aragones
0Aragones1 and 8ega<Engineering /ervices in .oint venture !ith %ACC Construction
/yste Corporation 08EDA<%ACC1 E !hether it !as one of sale or for a piece of !or2.
=n /epte"er 5F+ 56FF+ herein petitioner Del 8onte Philippines Inc. 0D8PI1
entered into an .A0ree1e&$2
!ith 8EDA<%ACC+ represented "y ?8anaging Principal@
Edil"erto Darcia 0Darcia1+ !here"y the latter undertoo2 ?the supply and installation of
odular paveent@ at D8PIs condients !arehouse at Cagayan de =ro City !ithin 3;
calendar days fro signing of the agreeent.
To source its supply of concrete "loc2s to "e installed on the paveent of the D8PI
!arehouse+ 8EDA<%ACC+ as C=(T,ACT=,represented "y Darcia+ entered into
a .Su//(y A0ree1e&$2 !ith Dyna"loc2 Enterprises+ represented "y herein respondent
Aragones+ as/>PPGIE,+ under the follo!ing ters$
The SUPPLIER at its own expense shall provide the COTR!CTOR with la"or and
all #aterials$ e%&ip#ent$ tools and s&pplies ne'essar( and in'ident thereto$ the
re%&ired 'on'rete "lo')s at the 'ontra'tor*s spe'i+ied 'astin, site$ all in a''ordan'e
with the terms and conditions of this agreement, as well as therequirements of the
project specifications and provisions with respe't to the +a"ri'ation o+ 'on'rete
The COTR!CTOR will pa( the s&pplier in 'onsideration +or the +&ll and total
per+or#an'e o+ the a"ove &nderta)in,$ in'l&sive o+ all appli'a"le taxes$ the &nit pri'e
o+ P..// per s&pplied and a''epted pie'e. This pri'e is "ased on the ass&#ption that
the 'ost per "a, o+ pre#i&# 'e#ent is P01.// and a,,re,ate at P20.// per '&. #. !n(
in'rease o+ the a"ove raw #aterials shall "e to the a''o&nt o+ the 'ontra'tor. !ll taxes
shall "e +or the a''o&nt o+ the 'ontra'tor.
3.1 6 The #a'hines +or the +a"ri'ation4'astin, o+ the 'on'rete "lo')s$
in'l&din, all ne'essar( e%&ip#ent and a''essories$ shall "e provided
"( the SUPPLIER. The #a'hines and e%&ip#ent shall "e #o"ili7ed
and #ade operational at the spe'i+ied 'astin, lo'ation4sto')pilin,
(ard desi,nated and provided "( the COTR!CTOR.
3.- 6 The SUPPLIER shall ens&re that all plant +a'ilities4e%&ip#ent
#&st$ at all ti#es$ "e a''essi"le +or inspe'tion "( the representatives
o+ the COTR!CTOR.
3.3 6 The SUPPLIER shall ens&re that the plant4'astin, #a'hines
a't&al operatin, 'apa'ities shall not "e lower than .0$/// pie'es
ever( #onth. I+ at an( ti#e within the li+e o+ this a,ree#ent the
plant4'astin, #a'hines are proven to "e operatin, "elow the re%&ired
#ini#&# 'apa'it( as a+oresaid$ the SUPPLIER shall "e o"li,ed to
ta)e the ne'essar( a'tions to &p,rade the plant4'astin, #a'hines
and4or #a)e the ne'essar( reha"ilitation to in'rease the 'apa'it( to
the re%&ired level.
1.1 : The SUPPLIER ,&arantees that all #aterials s&pplied to the
COTR!CTOR shall #eet the approved spe'i+i'ations ;!tta'hed
!nnex <!=> at 0$/// p'i.
In this 'onne'tion$ the COTR!CTOR shall assi,n an inspe'tor at
the 'astin, site to ens&re that all ite#s s&pplied shall 'on+or# with
the approved standards.
1.- : The COTR!CTOR #a( re?e't an( +inished prod&'t or #aterials
whi'h do not pass the approved standards.
1.3 : There shall "e a s(ste# o+ sa#plin, the o&tp&t o+ the plant and4or
ea'h 'astin, #a'hine +or testin, in a''ordan'e with the %&alit(
standards spe'i+ied. Res&lt o+ s&'h sa#plin, tests shall "e the "asis
+or a''eptan'e or re?e'tion o+ the +inished #aterials.
1.1 : @here the COTR!CTOR has provided #aterials to the
SUPPLIER to "e in'orporated into the SUPPLIER*s prod&'tion$ as
in the 'ase o+ 'e#ent and a,,re,ates$ the 'ost o+ s&'h #aterials
whi'h "e'o#es part o+ the re?e'ted prod&'ts due to faulty
batching/mixing/curing shall "e +or the a''o&nt o+ the SUPPLIER.
0. MATERA!" A#$ %T&ER 'R%("%#" ")''!E$ *+ T&E
0.1 6 !ll the #aterials are +or the a''o&nt o+ the SUPPLIER. The
,%#TRA,T%R shall, howe-er, pro-ide all the cement and
aggregates requirement for the fabrication of the concrete
bloc.s, in whi'h the 'orrespondin, 'ost shall "e ded&'ted +ro# the
periodi'al pro'eeds d&e to the SUPPLIER.
0.-6 The COTR!CTOR shall provide and #a)e availa"le to the
SUPPLIER the +ollowin, provisions4+a'ilities +ree o+ 'har,eA
a> Castin,49a"ri'ation !rea
"> Sto')pile !rea
'> @areho&se +or Ce#ent
d> !n all6weather wor)in, shed +or wor)ers
e> i,ht @at'hers
0.3 : The COTR!CTOR shall arran,e +or the installation o+ ele'tri'al
and water +a'ilities +or the wor) in whi'h the 'ost o+ ele'tri'it( and
water a't&all( 'ons&#ed shall "e "orne "( the SUPPLIER.
0.1 : The SUPPLIER shall "e responsi"le +or all #aterials alread( t&rned
over "( the COTR!CTOR at the 'astin, area. The responsi"ilit($
however$ o+ the SUPPLIER on the +inished prod&'ts 'eases &pon
loadin, o+ the sa#e to the COTR!CTOR*s tr&') on wa( to the
pro?e't site.
B.1 : To fabricate and pro-ide the required bloc. machines in s&'h
n&#"er ade%&ate to 'ope &p with ti#e s'hed&le.
B.- : To provide 'on'rete #ixersA one ;1> &nit o+ two6"a,,er$ and two
;-> &nits o+ one6"a,,er.
B.3 : To provide dr(in, ra')s$ measuring boxes, wheel "orrows and
other ne'essar( hand tools.
B.1 : To s&pervise and provide the re%&ired #anpower +or the operation
and prod&'tion o+ 'on'rete "lo')s.
B.0 : To &nderta)e the +ollowin,A
a> #ixin, and +or#&lation o+ proper #ix.
"> to 'onsolidate$ +or# and 'o#press the "lo')s.
'> to &nload the +or#ed "lo')s into the dr(in, ra')s.
d> a+ter initial settin, o+ "lo')s$ to &nload and arran,e the# to wooden
e> '&rin, o+ "lo')s as per approved standards.
..1 6 To provide tarpa&lin or 'anvas or plasti' sheets to 'over "lo')s
d&rin, the seasonin, sta,e.
..- 6 To provide +or)li+t and wooden pallets.
E.1 6 E++e'tive &pon the exe'&tion o+ this a,ree#ent$ the SUPPLIER
"inds itsel+ to de-ote the entire plant/casting machines and its
accessories for the ,%#TRA,T%R/s exclusi-e use and +&ll
operation and prod&'tion o+ the re%&ired 'on'rete "lo')s +or the
intended pro?e't.
E.- : The SUPPLIER or his a,ents or representatives shall not$ dire'tl(
or indire'tl($ enter into an( 'ontra't$ a,ree#ent$ 'on'essions or
transa'tions o+ whatever nat&re or )ind with the pro?e't owner or o+
its representative whi'h will a++e't the ri,hts$ interest or
parti'ipation o+ the COTR!CTOR in re,ard to the exe'&tion and
a''o#plish#ent o+ the pro?e't.
E.3 : In 'ase o+ violation o+ this ex'l&sivit( 'la&se$ &t#ost +idelit( and
,ood +aith "ein, o+ the essen'e$ the COTR!CTOR shall have the
ri,ht to de#and reasona"le a#o&nt o+ da#a,es or ter#inate this
a,ree#ent &pon d&e noti'e.
2.1 : Upon #o"ili7ation o+ the 'astin, #a'hines$ e%&ip#ents a''essories
and #a)in, so#e operational at the 'astin, area "( the SUPPLIER$
the COTR!CTOR shall advan'e to the s&pplier a downpa(#ent
or #o"ili7ation +&nd o+ TE TDOUS!D ;P1/$///.//> PESOS per
#a'hine. Said #o"ili7ation +ee shall "e ded&'ted +ro# the pro'eeds
o+ the SUPPLIER at two ;-> e%&al install#ents "e,innin, at the +irst
2.- 6 The SUPPLIER shall present its "illin, ever( +i+teen da(s "ased on
the "elow indi'ated pa(#ent s'hed&leA
a> Billin, +ro# 1
4da(4#onth to 10
da( pa(a"le a+ter +i+teen da(s
+ro# the date the "illin, is s&"#itted.
"> Billin, +ro# the 1B
da( o+ the #onth to the 31
da( o+ the
#onth$ pa(a"le a+ter +i+teen da(s +ro# the date the "illin, is
This a,ree#ent shall "e 'o6ter#in&s with the ter#s o+ the 'ontra't +or the pro?e't
and4or &pon 'o#pletion o+ all re%&ire#ents there+orH PROGIDED$ Dowever$ that i+
+or so#e reason or another the prod&'tion o+ the 'on'rete "lo')s is te#poraril(
s&spended$ this a,ree#ent shall re#ain in +or'e and e++e'tive +or a period o+ +i+teen
;10> da(s +ro# the date o+ the 'essation o+ prod&'tion. In 'ase the said ,ra'e period
expires witho&t the prod&'tion havin, res&#ed$ the COTR!CTOR shall "e o"li,ed
to pa( reasona"le 'o#pensation +or the period o+ s&spension 'o&nted +ro# the
expiration o+ the said ,ra'e period.
The SUPPLIER shall post a SURET84PER9ORM!CE BOD in s&'h s&#s whi'h
#a( "e dee#ed ade%&ate to se'&re its +aith+&l 'o#plian'e o+ the ter#s and 'onditions
o+ this a,ree#ent.
In the event the SUPPLIER +ails to #eet the re%&ire#ents de#anded in this
a,ree#ent or when the SUPPLIER is in dela( in the per+or#an'e o+ its o"li,ation to
the pre?&di'e o+ the COTR!CTOR$ the SUPPLIER shall answer +or the
'orrespondin, da#a,es e%&ivalent to one6tenth ;141/> o+ the rated #onthl( prod&'tion

;E#phasis and &nders'orin, s&pplied>.
Aragones thereupon started asse"ling the achines for the fa"rication*casting of
the concrete "loc2s !hich 8EDA<%ACC specified to "ehe-agonal shaped. 8EDA<
%ACC+ through Darcia+ later directed Aragones to instead fa"ricate achines for /
shaped "loc2s.
As stated in the .A0ree1e&$2 "et!een D8PI and 8EDA<%ACC+ the deadline for
the installation of the paveent of the !arehouse !as (ove"er 5F+ 56FF+ "ut it !as
not et. As e-tended+ the installation !as finished on or a"out Ce"ruary 2F+ 56F6+ "ut
8EDA<%ACC !as+ in accordance !ith its agreeent !ith D8PI+ penali#ed for the delay+
al"eit at a reduced aount.
Aragones+ having in the eantie gotten !ind of 8EDA<%ACC H
D8PIs .A0ree1e&$,2 ore particularly the iposition of a penalty "y D8PI for the
delay in the copletion of the installation of the !arehouse paveent+ appealed to
D8PI+ "y letter of 8arch I+ 56F6+
for leniency in the iposition of the penalty !hich
?!ould affect AhiB also although AheB !as not a direct party to the contract+@ he inviting
attention to the ?intricacy and enority of the .o" involved.@
Aragones later failed to collect fro 8EDA<%ACC the full payent of the concrete
"loc2s. )e thus sent D8PI a letter dated 8arch 5;+ 56F6+
received "y the latter on
8arch 5:+ 56F6+
advising it of 8EDA<%ACCs unpaid o"ligation and re&uesting it to
earar2 and !ithhold the aount of P5FF+372.37 ?fro A8EDA<%ACCsB "illing@ to "e
paid directly to hi ?AlBest Darcia collects and fails to pay AhiB.@
D8PI+ in the eantie+ ver"ally advised Aragones to secure a court order directing
it to !ithhold payent of the aount due 8EDA<%ACC for+ in the a"sence of such court
order+ D8PI !as under its agreeent !ith 8EDA<%ACC o"liged to release full payent
!ithin :; days fro acceptance of the copleted !or2.
It appears that Aragones reiterated his re&uest to D8PI for direct payent to hi+
"y letter of 8arch 2F+ 56F6.
This !as follo!ed "y another letter dated April 3+
!hich !as received on April F+ 56F6
"y D8PI+ copy of !hich it referred to
Darcia+ "y letter of April 27+ 56F6+
for his coent.
Jy letter of 8ay :+ 56F6
addressed to D8PI+ Darcia+ coenting on Aragones
April 3+ 56F6 letter+ stated$
x x x
I+ there is so#e"od( who have ;sic> ?&sti+ia"le ,ro&nd to 'o#plain$ it is MEC!6
@!99 a,ainst !tt(. !ra,ones +or all the #iseries and e#"arrass#ent we had s&++ered
d&e to the +a'tors attri"&ta"le to !tt(. !ra,ones D(na"lo') Enterprises.
9or proper eval&ation o+ thin,s and to ,ive "oth parties a +air 'han'e$ we en'losed
;sic> pertinent papers +or (o&r per&sal.
!s 'ontra'tor and "&siness#an$ it is o&r +ir# poli'( not to ta)e advanta,e o+ other
people and de+initel( not to rene,ade ;sic> +ro# 'o##it#ents4o"li,ations.
@e are willin, to pa( !tt(. !ra,ones "&t "ased on the a't&al a''o#plish#ent and
a#o&nt onl( d&e to hi# as per re'on'iliation +&rnished to hi#. ;atta'hed>
@e sin'erel( hope that the +a'ts we had presented will s&++i'e$ and please a''ept o&r
apolo,( +or whatever in'onvenien'e it has 'a&sed (o& and we pra( that this #atter o+
pa(#ents "e settled soon +or the ,eneral "ene+it o+ all 'on'erned.
x x x ;Unders'orin, s&pplied>.
It turned out that D8PI had+ on or a"out April 3+ 56F6+ released to 8EDA<%ACC a
chec2 dated April I+ 56F6 in the aount of P577+F3:.77 representing D8PIs "alance of
its o"ligation to 8EDA<%ACC.
Aragones !as thus propted to file on 8ay 27+ 56F6 a coplaint
for su of
oney 0P5FF+372.371 !ith daages against Darcia and*or 8EDA<%ACC and D8PI
"efore the ,egional Trial Court 0,TC1 of Ganao del (orte !hich !as raffled to Jranch 7
Aragones ipleaded D8PI on the strength of Articles 5726 and 5I37 of the Civil
Code+ he contending that it !as lia"le to hi !ho put la"or upon or furnished aterials
for a piece of !or2.
Jy his Kuly 5I+ 56F6 Ans!er+
Darcia+ !ithout disputing the aount "eing collected
"y Aragones+ .ustified his ?refusal to satisfy AAragonesB deand@ "y claiing that
Aragones defaulted in his o"ligation under the .Su//(y A0ree1e&$2.
D8PI+ "y its Ans!er
of Kune 27+ 56F6+ pleaded that Aragones had no cause of
action against it as it had no privity of contract !ith hi9 that it had already paid 8EDA<
%ACC the full aount due it9 and that it had not coitted any actiona"le !rong
against Aragones.
Aragones later filed an Aended Coplaint+
!ith leave of court+ ?to cure certain
foral defects in the original coplaint as to the designation of parties . . .@
D8PI also later filed a 8otion for Geave to Cile an Aended Ans!er !ith Cross<
Clai against Darcia and %ACC President Crancisco Castro
!hich the trial court
granted. In the Aended Ans!er !ith Cross Clai+
D8PI alleged+ inter alia+ that ?AiBn
the event AAragonesB succeeds in o"taining a .udgent AagainstB D8PI+ that said
.udgent should "e charged to and paid "y the cross<defendants !ho have collected
the full contract price of the Agreeent !herein AAragonesB clais the rights of a
su"contractor+ plus conse&uential daages@ 0underscoring in the original1.
The trial court+ upon the follo!ing issues$
a. @hether or not I!ra,onesJ has still a 'olle'ti"le a#o&nt o+ P1EE$B0-.B0 +ro#
de+endants Car'ia and CastroH
". @hether or not de+endant DMPI #a( also "e held a''o&nta"le +or this &npaid
o"li,ation o+ de+endant Car'ia4MEC!6@!99H
'. @hether or not the re#ainin, "alan'e o+ de+endant DMPI a''o&nt pa(a"le
is P1EE$B0-.B0 insisted "( de+endant Car'ia4MEC!6@!99 or onl( P10.$EB3...
insisted "( de+endant DMPIH
d. @hether or not the parties are entitled to da#a,es pleadedH
e. @hether or not there was dela( in the per+or#an'e o+ the respe'tive o"li,ations
o+ either part( or "othH
+. !ss&#in, that de+endant DMPI is lia"le to plainti++$ whether or not 'ross
de+endant Car'ia4MEC!6@!99 shall "e lia"le to DMPI +or rei#"&rse#ent.
found for the plaintiff Aragones in light of the follo!ing considerations$
Those who p&t their labor &pon or +&rnish materials +or a pie'e o+ wor) &nderta)en
"( the 'ontra'tor have an a'tion a,ainst the owner &p to the a#o&nt owin, +ro# the
latter to the 'ontra'tor at the ti#e the 'lai# is #ade. Dowever$ the +ollowin, shall not
pre?&di'e the la"orers$ e#plo(ees and +&rnishers o+ #aterialsA
;1> Pa(#ents #ade "( the owner o+ the 'ontra'tor "e+ore the( are d&eH
;-> Ren&n'iation "( the 'ontra'tor o+ an( a#o&nt d&e hi# +ro# the owner.
This arti'le is s&"?e't to the provisions o+ spe'ial laws ;102.a>
0Article 1234, #ew ,i-il ,ode, Ie#phasis s&ppliedJ>.
In interpretin, the +ore,oin, provision$ the S&pre#e Co&rt #ade the +ollowin,
pertinent prono&n'e#entA
<!rti'le 1.-2 is pro#&l,ated to prote't the la"orers and the #aterial#en +ro# "ein,
ta)en advanta,e o+ "( &ns'r&p&lo&s 'ontra'tors and +ro# possible
conni-ance "etween owners and 'ontra'tors.= ;Gelas'o vs. C.!. 20 Phils. ;sic> ;B1B6
<The le,al iss&e that arises is whether or not CSIS is lia"le to the petitioners +or the
'ost o+ the #aterials and la"or +&rnished "( the# in 'onstr&'tion o+ the B3 ho&ses now
owned "( the CSIS and +or the 'onstr&'tion o+ whi'h no pa(#ent has "een #ade on
the "alan'e d&e to petitioners. O&r 'onsidered view is and we so hold that even
in equity alone$ CSIS sho&ld pa( the petitioners$ witho&t pre?&di'e to its se'&rin,
inde#nit( +ro# Lai,o Realt( Corp.= ;Gelaso vs. C.!.$ 20 Phils. ;sic> B1B6B11
Ie#phasis and &nders'orin, s&ppliedJ>.
Moreover$ anent this #atter another de'isional r&le$ sa(sA
<!ltho&,h there was no privit( o+ 'ontra't "etween plainti++ and de+endant Koven$
In'.$ there is s&++i'ient eviden'e showin, that he had reall( s&pplied stones and sands
to said de+endant and also re#oved dirt and soil +ro# its 'onstr&'tion site. !nd it is
this #ain point whi'h 'alls +or resol&tion in the li,ht o+ the provisions o+ !rt. 1.-2 o+
the ew Civil Code$ to deter#ine whether or not de+endant 'orporation is lia"le +or
#aterials s&pplied and servi'es rendered "( the plainti++. It is %&ite 'lear that the
owner o+ the "&ildin,$ Koven In'. is lia"le +or #aterials and la"or +&rnished to the
'ontra'tor <&p to the a#o&nt owin, +ro# the latter to the 'ontra'tor= and to en+or'e
s&'h lia"ilit($ the law allows the person furnishing labor or materials to bring his
right of action directly against the owner56 ;9lores vs. R&elo$ C! 0- OC E0/$
Ie#phasis and &nders'orin, s&ppliedJ>.
O+ 'o&rse$ while de+endant DMPI is indeed dire'tl( lia"le to pa( plainti++ the 'ost o+
the 'onstr&'tion #aterial ;#od&lar pavin, "lo')s> so&,ht to "e 'olle'ted$ this
de+endant has also a ri,ht o+ re'o&rse a,ainst 'ross de+endant Car'ia4MEC!6@!99
+or rei#"&rse#ent o+ whatever a#o&nt it will "e re%&ired here to pa( plainti++$
otherwise it wo&ld res&lt in #a)in, de+endant Car'ia4MEC!6@!99 enri'h itsel+ at
the expense o+ de+endant DMPI. !dditionall( sin'e the eviden'e on re'ord shows
that plainti++ was 'o#pelled to liti,ate this #atter i+ onl( to 'olle't a ?&st and
de#anda"le o"li,ation$ the re+&sal o+ these de+endants to pa( their o"li,ation &pon
de#and 'o&ld not "e ?&sti+ied in law$ th&s "oth de+endants sho&ld "e 'onde#ned to
pa( exe#plar( da#a,es in the a#o&nt o+ P-/$///.// ea'h and attorne(*s +ees in the
a#o&nt o+ P1/$///.// ea'h$ in'l&din, the 'ost o+ this s&it. ;Unders'orin, s&pplied>
The trial court accordingly rendered .udgent in favor of Aragones "y decision
/epte"er 55+ 5662+ the dispositive portion of !hich reads$
@DERE9ORE$ the +ore,oin, pre#ises 'onsidered$ the Co&rt +inds that there is a#ple
reason in law and preponderant eviden'e on re'ord to s&stain the 'a&se o+ a'tion o+
plainti++ asserted a,ainst "oth de+endants$ th&s ?&d,#ent is now rendered ,rantin, the
+ollowin, relie+A
a. That the de+endants Car'ia4MEC!6@!99 and DMPI shall "e lia"le to
?ointl( and severall( pa( plainti++ the &npaid 'ost o+ the #od&lar pavin,
"lo')s 'onstr&'tion #aterial whi'h he delivered to de+endant DMPI pri'ed
at P1EE$B0-.B0 and in the e-ent that de+endant DMPI will "e #ade to pa(
the +&ll a#o&nt o+ this parti'&lar o"li,ation$ the de+endant Car'ia MEC!6
@!99 #&st rei#"&rse said de+endant s&'h a#o&ntH
". That this &npaid o"li,ation so&,ht to "e 'olle'ted #&st "ear le,al interest
o+ 1-L per ann&# +ro# the ti#e there was an extra?&di'ial de#and #ade
"( plainti++ last Mar'h /1$ 12E2H and
'. Lastl($ these de+endants are 'onde#ned that each pa( plainti++ P-/$///.//
+or exe#plar( da#a,es and P1/$///.// +or attorne(*s +ees$ in'l&din, the
'ost o+ this s&it.
SO ORDERED. ;E#phasis and &nders'orin, s&pplied>.
=n appeal to the Court of Appeals 0CA1 "y only D8PI+ upon the follo!ing assigned
PL!ITI99 !D DE9ED!T MEC!6@!99$ ;Unders'orin, s&pplied>$
the CA+ "y decision of /epte"er 56+ 2;;5
su".ect of the petition at "ar+ affired the
trial courts decision in this !ise$
!t this ?&n't&re it is well to note that the S&ppl( !,ree#ent was in the nat&re o+ a
'ontra't +or a pie'e o+ wor). The distin'tion "etween a 'ontra't o+ sale and one +or
wor)$ la"or and #aterials is tested "( in%&ir( whether the thin, trans+erred is one not
in existen'e and whi'h never wo&ld have existed "&t +or the order o+ the part(
desirin, to a'%&ire it$ or a thin, whi'h wo&ld have existed "&t has "een the s&"?e't o+
sale to so#e other persons even i+ the order had not "een ,iven. I+ the arti'le ordered
"( the p&r'haser is exa'tl( s&'h as the seller #a)es and )eeps on hand +or sale to
an(one$ and no 'han,e or #odi+i'ation o+ it is #ade at p&r'haser*s re%&est$ it is a
'ontra't o+ sale even tho&,h it #a( "e entirel( #ade a+ter$ and in 'onse%&en'e o+ the
p&r'haser*s order +or it. ICo##issioner o+ Internal Reven&e vs. En,ineerin,
E%&ip#ent and S&ppl( Co#pan($ C.R. o. L6-./11$ K&ne 3/$ 12.0J
In the 'ase at "en'h$ the #od&lar pavin, "lo')s are not exa'tl( what the plainti++6
appellee #a)es and )eeps on hand +or sale to an(one$ "&t with a modification that the
sa#e "e <S= in shape. Den'e$ the a,ree#ent +alls within the a#"it o+ !rti'le 11B.
#a)in, !rti'le 1.-2 li)ewise appli'a"le in the instant 'ase.
!s re,ard the iss&e o+ privit( o+ 'ontra'ts$ @e need to add onl( that !rti'le 1311 o+
the ew Civil Code whi'h DMPI invo)es is not appli'a"le where the sit&ation
'onte#plated in !rti'le 1.-2 o"tains. The intention o+ the latter provision is to
prote't the la"orers and the #aterial#en +ro# "ein, ta)en advanta,e o+ "(
&ns'r&p&lo&s 'ontra'tors and +ro# possi"le 'onnivan'e "etween owners and
'ontra'tors. Th&s$ a 'onstr&'tive vin'&l&# or 'ontra't&al privit( is 'reated "( this
provision$ "( wa( o+ ex'eption to the prin'iple &nderl(in, !rti'le 1311 "etween the
owner$ on the one hand$ and those who +&rnish la"or and4or #aterials$ on the other.
IGelas'o vs. Co&rt o+ !ppeals$ C.R. o. L61.011$ Kan&ar( -E$ 12E/J
!s a #atter o+ +a't$ inso+ar as the la"orers are 'on'erned$ "( a spe'ial law$ !'t no.
3202$ otherwise )nown as <An Act making it obligatory for any person, company, firm
or corporation owning any work of any kind executed by contract to require the
contractor to furnish a bond guaranteeing the payment of the laborers.= the( are
,iven added prote'tion "( re%&irin, 'ontra'tors to +ile "onds ,&aranteein, pa(#ent to
It is tr&e that de+endant6appellant had alread( +&ll( paid its o"li,ation to de+endant
Car'ia however$ the +or#er*s pa(#ent to the latter does not extin,&ish its le,al
o"li,ation to plainti++6appellee "e'a&se s&'h pa(#ent was irre,&lar. The +or#er
sho&ld have ta)en 'are not to pa( to s&'h 'ontra'tor the +&ll a#o&nt whi'h he is
entitled to re'eive "( virt&e o+ the 'ontra't$ &ntil he shall have shown that he +irst paid
the wa,es o+ the la"orer e#plo(ed in said wor)$ "( #eans o+ an a++idavit #ade and
s&"s'ri"ed "( said 'ontra'tor "e+ore a notar( p&"li' or other o++i'er a&thori7ed "( law
to ad#inister oaths. There is no showin, that de+endant appellant DMPI$ as owner o+
the "&ildin,$ 'o#plied with this re%&ire#ent paid down in !'t o. 3202. Den'e$
&nder Se'tion - o+ said law$ said de+endant6appellant is responsi"le$ ?ointl( and
severall( with the ,eneral 'ontra'tor$ +or the pa(#ent to plainti++6appellee as s&"6
In this 'onne'tion$ while$ indeed$ !rti'le 1.-2 re+ers to the la"orers and #aterial#en
the#selves$ &nder the pe'&liar 'ir'&#stan'es o+ this 'ase$ it is "&t +air and ?&st that
plainti++6appellee "e dee#ed as s&in, +or the rei#"&rse#ent o+ what the( have alread(
paid the la"orers and #aterial#en$ as otherwise he wo&ld "e &nd&l( pre?&di'ed while
either de+endant6appellant DMPI or de+endant Car'ia wo&ld enri'h the#selves at
plainti++6appellee*s expense.
Be that as it #a($ @e so hold that plainti++6appellee has a law+&l 'lai# a,ainst
de+endant6appellant DMPI$ owner o+ the 'onstr&'ted wareho&se sin'e it disre,arded
the noti'e o+ 'lai# o+ plainti++6appellee$ at a ti#e when the a#o&nts owin, +ro#
de+endant6appellant DMPI to de+endant C!RCI! were #ore than s&++i'ient to pa( +or
plainti++6appellee*s 'lai#. The least that de+endant6appellant sho&ld have done was to
withhold pa(#ent o+ the "alan'e still owin, to de+endant Car'ia as &ntil the 'lai# o+
plainti++6appellee was 'lari+ied. ;Itali's in the ori,inalH e#phasis and &nders'orin,
Its 8otion for ,econsideration having "een denied "y the CA+ D8PI 0hereinafter
referred to as petitioner1 lodged the present Petition for ,evie! on )ertiorari+ faulting
the CA$
. . . I 9!ILIC TO !@!RD MOR!L D!M!CES$ !TTORE8*S 9EES$ !D
As reflected a"ove+ only petitioner appealed the trial courts decision. 8EDA<
%ACC did not appeal. The decision as to it then is final and e-ecutory.
Petitioner+ in the ain+ contends that !hile the CA correctly stated the test in
deterining !hether a transfer is a sale or one for a piece of !or2+ it failed to properly
apply the sae.
Applying the ?nature of the o".ect@ test+ petitioner insists that the concrete "loc2 to
"e produced "y Aragones under the .Su//(y A0ree1e&$2 represented "y Darcia
clearly sho!s that the contract !as one of sale+ advancing the follo!ing reasons$
1.1.1 9irst$ the 'on'rete pavin, "lo')s were . . . 'apa"le o+ "ein, #ass6prod&'ed
1.1.- Se'ond$ save +or the shape$ there was here no 'onsideration o+ an( spe'ial needs
or re%&ire#ents o+ DMPI ta)en into a''o&nt in the desi,n or #an&+a't&re o+ the
'on'rete pavin, "lo')s.
Petitioner cites the follo!ing ruling in )ommissioner of Internal *evenue v. +rnoldus
)arpentry hop, Inc.$
x x x !s 'an "e 'learl( seen +ro# the wordin,s o+ !rt. 11B.$ what deter#ines whether
the 'ontra't is one o+ wor) or o+ sale is whether the thing has been manufactured
specially for the customer and upon his special order.= Th&s$ i+ the thin, is spe'iall(
done on the order o+ another$ this is a 'ontra't +or a pie'e o+ wor). f$ on the other
hand$ the thing is manufactured or procured for the general in the
ordinary course of one/s business, it is a contract of sale56 ;Itali's and e#phasis in
the ori,inalH &nders'orin, s&pplied>$
and argues that ?given ha"ituality of "usiness and the a"ility to ass<produce the article
ordered+ that custoers re&uires 0sic1 certain specifications is of no oent+ the
transaction reains one of sale.@
Petitioner further cites+ aong other authorities+ the follo!ing ruling in )elestino )o.
v. )ollector of Internal *evenue$
x x x The important thing to remember is that ,elestino 7 ,o5 habitually
sash, windows and doors, as it has represented in its stationery and
ad-ertisements to the public. That it <#an&+a't&res= the sa#e is pra'ti'all(
ad#itted "( appellant itsel+. The +a't that windows and doors are #ade "( it onl(
when '&sto#ers pla'e their orders$ does not alter the nat&re o+ the esta"lish#ent o+
s&'h #aterials6#o&ldin,$ +ra#es$ panels : as it ordinaril( #an&+a't&red or was in a
position ha"it&all( to #an&+a't&re.
- - -
That the doors and windows must meet desired specifications is neither here nor
there5 I+ these spe'i+i'ations do not happen to "e o+ the )ind ha"it&all( #an&+a't&red
"( appellant : spe'ial +or#s o+ sash$ #o&ldin,s$ panels : it wo&ld not a''ept the order
: and no sale is #ade. I+ the( do$ the transa'tion wo&ld "e no di++erent +ro#
p&r'haser o+ #an&+a't&red ,oods held in sto') +or saleH the( are "o&,ht "e'a&se the(
#eet spe'i+i'ations desired "( the p&r'haser.
o"od( will sa( that when a saw#ill '&ts l&#"er in a''ordan'e with the pe'&liar
spe'i+i'ations o+ a '&sto#er : si7es not previo&sl( held in sto') +or sale to the p&"li'
: it there"( "e'o#es an e#plo(ee or servant o+ the '&sto#er$ not the seller o+ l&#"er.
The sa#e 'onsideration applies to this sash #an&+a't&rer.
The %riental "ash 8actory does nothing more than sell the goods that it mass9
produces or habitually : sash$ panels$ #o&ldin,s$ +ra#es : cutting them to
such si:es and combining them in such forms as its customers may desire.
- - -
x x x "uch new form does not di-est the %riental "ash 8actory of its character as
manufacturer5 #either does it ta.e the transaction out of the category of sales
under Article 1;<2 abo-e quoted, because although the 8actory does not, in the
ordinary course of its business, manufacture and .eep on stoc. doors of the .ind
sold to Teodoro, it could and/or probably had in stoc. the sash, mouldings and
panels it used therefor 0some of them at least=. ;E#phasis in the ori,inalH
&nders'orin, s&pplied>.
Petitioner concludes that as the .Su//(y A0ree1e&$2 "et!een Aragones and
8EDA<%ACC !as one of sale to !hich it 0petitioner1 !as not privy+ it cannot "e held
lia"le for any o"ligation arising therefro.
Dodging lia"ility for the daages 0?e-eplary and . . . attorneys fees including the
cost of this suit@1 a!arded to Aragones+ petitioner clais that it !as in fact the one !hich
!as in.ured "y Aragones filing in "ad faith of a coplaint "ereft of cause of action and
?at "est+ AoneB "arred "y full payent of the aount due to 8EDA<%ACC+@ on account of
!hich it is entitled to oral daages in the aount of P7;+;;;.;; pursuant to Article
2257 of the Civil Code+ and to attorneys fees and e-penses of litigation in the aount of
at least P:;+;;;.;; plus P2+7;;.;; per hearing pursuant to Article 22;F of the Civil
The petition fails.
The authorities petitioner cited in fact sho! that the nature of the .Su//(y
A0ree1e&$2 "et!een Aragones and 8EDA<%ACC !as one for a piece of !or2.
Contrary to petitioners clai that ?save for the shape+ there !as no consideration of
any special needs or re&uireents of D8PI ta2en into account in the design or
anufacture of the concrete paving "loc2s+@ the .Su//(y A0ree1e&$2 is replete !ith
specifications+ ters or conditions sho!ing that it !as one for a piece of !or2.
As reflected in the highlighted and underscored a"ove<&uoted provisions of
the .Su//(y A0ree1e&$,2 as !ell as other evidence on record+ the achines Aragones
!as o"liged to fa"ricate !ere those for casting the concrete "loc2s specified "y Darcia.
Aragones did not have those 2ind of achines in his usual "usiness+ hence+ the special
%hile initially Darcia specified that the achines to "e fa"ricated should "e for
he-agon shaped "loc2s+ he later as2ed Aragones to instead fa"ricate achines for
casting / shaped "loc2s.
In accordance !ith the ?/upply Agreeent+@ Darcia furnished the ceent and
aggregates for the fa"rication of the "loc2s and Aragones fa"ricated three 0:1 achines
for / shaped "loc2s !hich !ere delivered at the casting site on different dates. And the
?entire plant*casting achines and . . . . accessories@ !ere+ as dictated under the
?Su//(y A0ree1e&$+@ devoted "y Aragones ?for A8EDA<%ACCBs e-clusive use.
There can "e no gainsaying that the specifications*conditions in the ?Su//(y
A0ree1e&$@ and the aditted su"se&uent directive of Darcia for Aragones to fa"ricate
achines for casting / shaped+ instead of he-agon shaped "loc2s+ sho! that the
concrete "loc2s !ere ?anufactured specifically for+ and upon the special order@ of
That Darcia supplied the ceent and aggregates and that the entire ade<to<order
casting achines and accessories used in the anufacture of those unusual shaped
"loc2s !ere agreed upon to "e devoted only ?for the e-clusive use@ of 8EDA<%ACC
should "elie petitioners contention that the concrete "loc2s !ere ass<produced and
catered to the general ar2et in the ordinary course of Aragones "usiness.
>nder Art. 5I37 then of the Civil Code !hich provides$
!RT. 11B.. ! 'ontra't +or the deliver( at a 'ertain pri'e o+ an arti'le whi'h the
vendor in the ordinar( 'o&rse o+ his "&siness #an&+a't&res or pro'&res +or the ,eneral
#ar)et$ whether the sa#e is on hand at the ti#e or not$ is a 'ontra't o+ sale$ "&t i+ the
,oods are to "e #an&+a't&red specially +or the '&sto#er and upon his special
order, and not +or the ,eneral #ar)et$ it is a 'ontra't +or a pie'e o+ wor). ;E#phasis
and &nders'orin, s&pplied>$
the .Su//(y A0ree1e&$2 !as decidedly a contract for a piece of !or2.
Collo!ing Art. 5726 of the Civil Code !hich provides$
!RT. 1.-2. Those who p&t their la"or &pon or +&rnish #aterials +or a pie'e o+ wor)
&nderta)en "( the 'ontra'tor have an a'tion a,ainst the owner &p to the a#o&nt owin,
+ro# the latter to the 'ontra'tor at the ti#e the 'lai# is #ade. x x x
x x x ;Unders'orin, s&pplied>$
Aragones having specially fa"ricated three casting achines and furnished soe
aterials for the production of the concrete "loc2s specially ordered and specified "y
8EDA<%ACC !hich !ere to "e and indeed they !ere for the e-clusive use of 8EDA<
%ACC+ he has a cause of action upon petitioner up to the aount it o!ed 8EDA<%ACC
at the tie Aragones ade his clai to petitioner.
As ,elasco v. )+
e-plains+ the intention of Art. 5726 is
to prote't the la"orers and #aterial#en +ro# "ein, ta)en advanta,e o+ "(
&ns'r&p&lo&s 'ontra'tors and +ro# possi"le 'onnivan'e "etween owners and
'ontra'tors. Th&s$ a 'onstr&'tive vin'&l&# or 'ontra't&al privit( is 'reated "( this
provision$ "( wa( o+ ex'eption to the prin'iple &nderl(in, !rti'le 1311 "etween the
owner$ on the one hand$ and those who +&rnish la"or and4or #aterials$ on the other.
In fine+ a constructive vinculu or contractual privity !as created "et!een petitioner
and Aragones.
,especting petitioners disclaier of lia"ility for daages and its clai for oral
daages+ attorneys fees and e-penses of litigation+ the trial courts disposition thereof+
to !it$
. . . sin'e the eviden'e on re'ord shows that I!ra,onesJ was 'o#pelled to liti,ate this
#atter i+ onl( to 'olle't a ?&st and de#anda"le o"li,ation$ the re+&sal o+ IDMPI and
MEC!6@!99J to pa( their o"li,ation &pon de#and 'o&ld not "e ?&sti+ied "(
law$ th&s "othO sho&ld "e 'onde#ned to pa( exe#plar( da#a,es in the a#o&nt
o+ P-/$///.// ea'h and attorne(*s +ees in the a#o&nt o+ P1/$///.// ea'h in'l&din,O
'osts o+ this s&it= ;&nders'orin, s&pplied>$
erits this Courts approval.
%hy should not petitioner "e lia"le for daages. Aragones re&uest+ "ased on a
provision of la!+ to petitioner for it to pay directly to hi his account receiva"le fro
8EDA<%ACC*Darcia out of petitioners account paya"le to 8EDA<%ACC !as
ade "efore petitioners o"ligation to it !as due. Met petitioner settled such o"ligation
to 8EDA<%ACC on or a"out April 3+ 56F6 !hen it released to it its chec2<payent. Cor
petitioner to harp on its underta2ing under its .A0ree1e&$2 !ith 8EDA<%ACC to pay its
full o"ligation thereunder !ithin :; days fro coplete installation of the paveent "y
8EDA<%ACC unless a court in.unction could "e produced "y Aragones is too shallo!+
under the facts and circustances surrounding the case+ to erit consideration.
Petitioners referral for coent of Darcia+ "y letter of April 27+ 56F6+ on Aragones
April 3+ 56F6 reiterative letter for the !ithholding of the release of so uch aount to
8EDA<%ACC even after it 0petitioner1 had already released on or a"out April 3+ 56F6 its
chec2<full payent to 8EDA<%ACC reflects a futile attept to cover<up the apparent
?connivance@ "et!een it and contractor 8EDA<%ACC to the pre.udice of Aragones+
leaving hi no option "ut to litigate.
As for the assailed citation "y the appellate court of Act (o. :676 0!hich re&uires a
person or fir o!ning any !or2 of any 2ind e-ecuted "y contract to put up a "ond
guaranteeing the payent of the la"orers1 as additional .ustification to hold petitioner
lia"le to Aragones+ indeed+ said Act had "een repealed in 567I "y P.D. (o. II2 0The
Ga"or Code of the Philippines1.
3'*R*FOR*+ in light of the foregoing discussions+ the petition is here"y DE(IED.
Costs against petitioner.
SO OR"*R*".
-anganiban, .)hairman/, andoval(0utierre1, )orona, and 0arcia, 22., concur.
Villamor vs CA
Oct. 10, 1991Medialdea, J.Facts:
On July 1971, Macaria Labingisa Reyes sold a portion of 300 square meters of te
lot to te !pouses Julio andMarina and "illamor for te total amount of #$1,000% 00%
On &o'ember 11, 1971, Macaria e(ecuted a )*eed of Option) in fa'or of "illamor in +ic
te remaining 300 square meter portion ,-.- &o% 3993/0 of te lot +ouldbe sold to "illamor under
certain conditions, one of +ic1-at te only reason +y te !pouses2'endees Julio "illamor and
Marina "% "illamor, agreed to buyte said one2alf portion at te abo'e2stated price of about
#70%00 per square meter, is because 3,and my usband Roberto Reyes, a'e agreed to sell and
con'ey to tem te remaining one2alf portion still o+ned by me ((( , +ene'er te need of suc
sale arises, eiter on our part or on tepart of te spouses ,Julio0 "illamor and Marina "% "illamor,
at te same price of #70%00 per squaremeter, e(cluding +ate'er impro'ement may be found te
tereon%4ccording to Macaria, +en er usband, Roberto Reyes, retired in 195/, tey offered to
repurcase te lotsold by tem to te "illamor spouses but Marina "illamor refused and reminded
tem instead tat te *eedof Option in fact ga'e tem te option to purcase te remaining
portion of te lot%-e "illamors, on te oter and, claimed tat tey ad e(pressed teir desire to
purcase te remaining 300square meter portion of te lot but te Reyeses ad been ignoring tem%
-us, on July 13, 1957, afterconciliation proceedings in te barangay le'el failed, tey filed a
complaint for specific performance againstte Reyeses%-rial .ourt decided in fa'our of te
"illamors, but tis +as re'ersed by te .4% #resent case is a petition forre'ie+ on certiorari of te
.4 s decision%
67& tere +as a "4L3* *eed of Option +ereby te pri'ate respondents agreed to sell teir lot
to petitioners)+ene'er te need of suc sale arises, eiter on our part ,pri'ate respondents0 or on
te part of Julio"illamor and Marina "illamor%
6ile te *eed of Option +as 'alid, it already lapsed% 3t is of 8udicial notice tat te price of real
estate inMetro Manila is continuously on te rise% -o allo+ te petitioner to demand te deli'ery of
te propertysub8ect of tis case tirteen ,130 years or se'enteen ,170 years after te e(ecution of
te deed at te price of only #70%00 per square meter is inequitous% 9or reasons also
of equity and in consideration of te fact tat tepri'ate respondents a'e no oter
decent place to li'e, tis .ourt, in te e(ercise of its equity 8urisdiction isnot inclined to grant
petitioners: prayer%
-e *eed of Option did not pro'ide for te period +itin +ic te parties may demand te
performance of teir respecti'e underta;ings in te instrument% -e parties could not a'e
contemplated tat te deli'ery of te property and te payment tereof could be made indefinitely
and render uncertain te status of te land%-e failure of eiter parties to demand performance of
te obligation of te oter for an unreasonable lengtof time renders te contract
ineffecti'e%<nder 4rticle 11// ,10 of te .i'il .ode, actions upon +ritten contract must be brougt
+itin ten ,100 years%-e *eed of Option +as e(ecuted on &o'ember 11, 1971% -e
acceptance, as already mentioned, +as alsoaccepted in te same instrument% -e complaint in
tis case +as filed by te petitioners on July 13, 1957,se'enteen ,170 years from te time of te
e(ecution of te contract% =ence, te rigt of action ad prescribed%
-ere +ere allegations by te petitioners tat tey demanded from te pri'ate respondents as
early as 195/te enforcement of teir rigts under te contract% !till, it +as beyond te ten ,100
years period prescribed by te .i'il .ode%
#etition is *>&3>*% -e decision of respondent appellate court is 4993RM>* for reasons cited in
tis decision%Judgement is rendered dismissing te complaint in .i'il .ase &o% .21$9/$ on te
ground of prescription and laces%
G.R. No. 167445 a&uary 20, 2009
*NRICO S. *6LOGIO, Petitioner+
S,O6S*S CL*+*NT* A,*L*S
a&) L67 A,*L*S, ,espondents.
D E C I / I = (
Petitioner Enrico /. Eulogio 0Enrico1 filed this instant Petition for ,evie! on Certiorari under ,ule I7
of the ,evised ,ules of Court assailing the Decision
dated 2; Dece"er 2;;I of the Court of
Appeals in CA<D.,. CL (o. 736:: !hich reversed the Decision
dated F =cto"er 2;;2 of the
,egional Trial Court 0,TC1 of Nue#on City+ Jranch 257+ in Civil Case (o. N<66<:3F:I. The ,TC
directed respondents+ spouses Cleente and Gu# Apeles 0spouses Apeles1 to e-ecute a Deed of
/ale over a piece of real property in favor of Enrico after the latters payent of full consideration
The factual and procedural antecedents of the present case are as follo!s$
The real property in &uestion consists of a house and lot situated at (o. F7 Tiog Avenue+ Nue#on
City 0su".ect property1. The lot has an area of :3;.3; s&uare eters+ covered "y Transfer Certificate
of Title (o. 27:66; issued "y the ,egistry of Deeds of Nue#on City in the naes of the spouses
In 5676+ the spouses Apeles leased the su".ect property to Arturo Eulogio 0Arturo1+ Enricos father.
>pon Arturos death+ his son Enrico succeeded as lessor of the su".ect property. Enrico used the
su".ect property as his residence and place of "usiness. Enrico !as engaged in the "usiness of
"uying and selling iported cars.
=n 3 Kanuary 56F7+ the spouses Apeles and Enrico allegedly entered into a Contract of Gease
=ption to Purchase involving the su".ect property. According to the said lease contract+ Gu# Apeles
!as authori#ed to enter into the sae as the attorney<in<fact of her hus"and+ Cleente+ pursuant to
a /pecial Po!er of Attorney e-ecuted "y the latter in favor of the forer on 2I Kanuary 5676. The
contract purportedly afforded Enrico+ "efore the e-piration of the three<year lease period+ the option
to purchase the su".ect property for a price not e-ceedingP5.7 8illion. The pertinent provisions of
the Contract of Gease are reproduced "elo!$
:. That this Contract shall "e effective coencing fro Kanuary 23+ 56F7 and shall reain
valid and "inding for T),EE 0:1 MEA,/ fro the said date. The GE//=, here"y gives the
GE//EE under this Contract of Gease the right and option to "uy the su".ect house and lot
!ithin the said :<year lease period.
I. That the purchase price or total consideration of the house and lot su".ect of this Contract
of Gease shall+ should the GE//EE e-ercise his option to "uy it on or "efore the e-piration of
the :<year lease period+ "e fi-ed or agreed upon "y the GE//=, and the GE//EE+
Provided+ that the said purchase price+ as it is here"y agreed+ shall not "e ore than =(E
8IGGI=( CILE )>(D,ED T)=>/A(D PE/=/ 0P5+7;;+;;;.;;1 and+ provided further+ that
the onthly rentals paid "y the GE//EE to the GE//=, during the :<year lease period shall
for part of or "e deducted fro the purchase price or total consideration as ay hereafter
"e utually fi-ed or agreed upon "y the GE//=, and the GE//EE.
7. That if the GE//EE shall give oral or !ritten notice to the GE//=, on or "efore the e-piry
date of the :<year lease period stipulated herein of his desire to e-ercise his option to "uy or
purchase the house and lot herein leased+ the GE//=, upon receipt of the purchase
price*total consideration as fi-ed or agreed upon less the total aount of onthly rentals
paid the GE//EE during the :<year lease period shall e-ecute the appropriate Deed to
/EGG+ T,A(/CE, and C=(LEM the house and lot su".ect of this Contract in favor of the
GE//EE+ his heirs+ successors and assigns+ together !ith all the fi-tures and accessories
therein+ free fro all liens and encu"rances.
Jefore the e-piration of the three<year lease period provided in the lease contract+ Enrico e-ercised
his option to purchase the su".ect property "y counicating ver"ally and in !riting to Gu# his
!illingness to pay the agreed purchase price+ "ut the spouses Apeles supposedly ignored Enricos
anifestation. This propted Enrico to see2 recourse fro the barangay for the enforceent of his
right to purchase the su".ect property+ "ut despite several notices+ the spouses Apeles failed to
appear "efore the barangay for settleent proceedings. )ence+ thebarangay issued to Enrico a
Certificate to Cile Action.
In a letter dated 23 Kanuary 5667 to Enrico+ the spouses Apeles deanded that he pay his rental
arrears fro Kanuary 5665 to Dece"er 5663 and he vacate the su".ect property since it !ould "e
needed "y the spouses Apeles theselves.
%ithout heeding the deand of the spouses Apeles+ Enrico instituted on 2: Ce"ruary 5666 a
Coplaint for /pecific Perforance !ith Daages against the spouses Apeles "efore the ,TC+
doc2eted as Civil Case (o. N<66<:3F:I. Enricos cause of action is founded on paragraph 7 of the
Contract of Gease !ith =ption to Purchase vesting hi !ith the right to ac&uire o!nership of the
su".ect property after paying the agreed aount of consideration.
Collo!ing the pre<trial conference+ trial on the erits ensued "efore the ,TC.
Enrico hiself testified as the sole !itness for his side. )e narrated that he and Gu# entered into the
Contract of Gease !ith =ption to Purchase on 23 Kanuary 56F7+ !ith Gu# signing the said Contract at
Enricos office in Tiog Avenue+ Nue#on City. The Contract !as notari#ed on the sae day as
evidenced "y the Certification on the (otary Pu"lics ,eport issued "y the Cler2 of Court of the ,TC
of 8anila.
=n the other hand+ the spouses Apeles denied that Gu# signed the Contract of Gease !ith =ption to
Purchase+ and posited that Gu#s signature thereon !as a forgery. To "uttress their contention+ the
spouses Apeles offered as evidence Gu#s Philippine Passport !hich sho!ed that on 23 Kanuary
56F7+ the date !hen Gu# allegedly signed the said Contract+ she !as in the >nited /tates of
Aerica. The spouses Apeles li2e!ise presented several official docuents "earing her genuine
signatures to reveal their rear2a"le discrepancy fro the signature appearing in the disputed lease
contract. The spouses Apeles aintained that they did not intend to sell the su".ect property.
After the spouses Apeles esta"lished "y docuentary evidence that Gu# !as not in the country at
the tie the Contract of Gease !ith =ption to Purchase !as e-ecuted+ Enrico+ in re"uttal+ retracted
his prior declaration that the said Contract !as signed "y Gu# on 23 Kanuary 5663. Instead+ Enrico
averred that Gu# signed the Contract after she arrived in the Philippines on :; 8ay 56F7. Enrico
further related that after Gu# signed the lease contract+ she too2 it !ith her for notari#ation+ and "y
the tie the docuent !as returned to hi+ it !as already notari#ed.
=n F =cto"er 2;;2+ the ,TC rendered a Decision in Civil Case (o. N<66<:3F:I in favor of Enrico.
/ince none of the parties presented a hand!riting e-pert+ the ,TC relied on its o!n e-aination of
the specien signatures su"itted to resolve the issue of forgery. The ,TC found stri2ing siilarity
"et!een Gu#s genuine signatures in the docuents presented "y the spouses Apeles theselves
and her purportedly forged signature in the Contract of Gease !ith =ption to Purchase. A"sent any
finding of forgery+ the ,TC "ound the parties to the clear and une&uivocal stipulations they ade in
the lease contract. Accordingly+ the ,TC ordered the spouses Apeles to e-ecute a Deed of /ale in
favor of Enrico upon the latters payent of the agreed aount of consideration. Thefallo of the ,TC
Decision reads$
%)E,EC=,E+ this Court finds AEnricosB coplaint to "e su"stantiated "y preponderance of
evidence and accordingly orders O
051 AThe spouses ApelesB to coply !ith the provisions of the Contract of Gease !ith =ption
to Purchase9 and upon payent of total consideration as stipulated in the said C=(T,ACT
for Athe spouses ApelesB to e-ecute a Deed of A"solute /ale in favor of AEnricoB+ over the
parcel of land and the iproveents e-isting thereon located at (o. F7 Tiog Avenue+
Nue#on City.
021 AThe spouses ApelesB to pay AEnricoB oral and e-eplary daages in the respective
aounts ofP5;;+;;;.;; and P7;+;;;.;;.
0:1 AThe spouses ApelesB to pay attorneys fees of P7;+;;;.;; and costs of the suit.
The spouses Apeles challenged the adverse ,TC Decision "efore the Court of Appeals and urged
the appellate court to nullify the assailed Contract of Gease !ith =ption to Purchase since Gu#s
signature thereon !as clearly a forgery. The spouses Apeles argued that it !as physically ipossi"le
for Gu# to sign the said Contract on 23 Kanuary 56F7 since she !as not in the Philippines on that
date and returned five onths thereafter. The spouses Apeles called attention to Enricos
inconsistent declarations as to aterial details involving the e-ecution of the lease contract+ there"y
casting dou"t on Enricos credi"ility+ as !ell as on the presued regularity of the contract as a
notari#ed docuent.
=n 2; Dece"er 2;;I+ the Court of Appeals rendered a Decision in CA<D.,. CL (o. 736:: granting
the appeal of the spouses Apeles and overturning the .udgent of the ,TC. In arriving at its assailed
decision+ the appellate court noted that the (otary Pu"lic did not o"serve utost care in certifying
the due e-ecution of the Contract of Gease !ith =ption to Purchase. The Court of Appeals chose not
to accord the disputed Contract full faith and credence. The Court of Appeals held+ thus$
%)E,EC=,E+ the foregoing preises considered+ the appealed decision dated =cto"er F+ 2;;2 of
the ,egional Trial Court of Nue#on City+ Jranch 257 in Civil Case (o. N<66<:3F:I for specific
perforance !ith daages is here"y ,ELE,/ED and a ne! is one entered disissing AEnricosB
Enricos 8otion for ,econsideration !as denied "y the Court of Appeals in a ,esolution
dated 27
April 2;;7.
Enrico is presently "efore this Court see2ing the reversal of the unfavora"le .udgent of the Court of
Appeals+ assigning the follo!ing errors thereto$
T)E C=>,T =C APPEAG/ C=88ITTED 0sic1 ,ELE,/IJGE E,,=, %)E( IT J,>/)ED A/IDE
C=(T,ACT =C GEA/E %A/ A C=,DE,M A(D T)>/+ (>GG A(D L=ID.
T)E C=>,T =C APPEAG/ C=88ITTED 0sic1 ,ELE,/IJGE E,,=, %)E( C=(T,A,M T= T)E
CI(DI(D/ =C T)E C=>,T A N>= IT ,>GED T)AT T)E DECE(/E =C C=,DE,M %A/
/iply+ Enrico faults the Court of Appeals for distur"ing the factual findings of the ,TC in disregard
of the legal aphoris that the factual findings of the trial court should "e accorded great !eight and
respect on appeal.
%e do not agree.
Enricos insistence on the infalli"ility of the findings of the ,TC seriously ipairs the discretion of the
appellate tri"unal to a2e independent deterination of the erits of the case appealed "efore it.
Certainly+ the Court of Appeals cannot s!allo! hoo2+ line+ and sin2er the factual conclusions of the
trial court !ithout crippling the very office of revie!. Although !e have indeed held that the factual
findings of the trial courts are to "e accorded great !eight and respect+ they are not a"solutely
conclusive upon the appellate court.
The reliance of appellate tri"unals on the factual findings of the trial court is "ased on the postulate
that the latter had firsthand opportunity to hear the !itnesses and to o"serve their conduct and
deeanor during the proceedings. )o!ever+ !hen such findings are not anchored on their credi"ility
and their testionies+ "ut on the assessent of docuents that are availa"le to appellate
agistrates and su".ect to their scrutiny+ reliance on the trial court finds no application.
8oreover+ appeal "y !rit of error to the Court of Appeals under ,ule I5 of the ,evised ,ules of
Court+ the parties ay raise "oth &uestions of fact and*or of la!. In fact+ it is iperative for the Court
of Appeals to revie! the findings of fact ade "y the trial court. The Court of Appeals even has the
po!er to try cases and conduct hearings+ receive evidence and perfor any and all acts necessary
to resolve factual issues raised in cases falling !ithin its original and appellate .urisdiction.
Enrico assiduously prays "efore this Court to sustain the validity of the Contract of Gease !ith =ption
to Purchase. Enrico asserts that the said Contract !as voluntarily entered into and signed "y Gu#
!ho had it notari#ed herself. The spouses Apeles should "e o"liged to respect the ters of the
agreeent+ and not "e allo!ed to renege on their coitent thereunder and frustrate the sanctity
of contracts.
Again+ !e are not persuaded. %e agree !ith the Court of Appeals that in ruling out forgery+ the ,TC
heavily relied on the testiony proffered "y Enrico during the trial+ ignoring "latant contradictions
that destroy his credi"ility and the veracity of his clais. =n direct e-aination+ Enrico testified that
Gu# signed the Contract of Gease !ith =ption to Purchase on 23 Kanuary 56F7 in his presence+
he recanted his testiony on the atter after the spouses Apeles esta"lished "y clear and
convincing evidence that Gu# !as not in the Philippines on that date.
In re"uttal+ Enrico ade a
coplete turna"out and claied that Gu# signed the Contract in &uestion on :; 8ay 56F7 after her
arrival in the country.
The inconsistencies in Enricos version of events have seriously ipaired the
pro"ative value of his testiony and cast serious dou"t on his credi"ility. )is contradictory
stateents on iportant details siply eroded the integrity of his testiony.
%hile it is true that a notari#ed docuent carries the evidentiary !eight conferred upon it !ith
respect to its due e-ecution+ and has in its favor the presuption of regularity+ this presuption+
ho!ever+ is not a"solute. It ay "e re"utted "y clear and convincing evidence to the
Enrico hiself aditted that Gu# too2 the docuent and had it notari#ed !ithout his
presence. /uch fact alone overcoes the presuption of regularity since a notary pu"lic is en.oined
not to notari#e a docuent unless the persons !ho signed the sae are the very sae persons !ho
e-ecuted and personally appeared "efore the said notary pu"lic to attest to the contents and truth of
!hat are stated therein.
Although there is no direct evidence to prove forgery+ preponderance of evidence inargua"ly favors
the spouses Apeles. In civil cases+ the party having the "urden of proof ust esta"lish his case "y a
preponderance of evidence. Preponderance of evidence is the !eight+ credit+ and value of the
aggregate evidence on either side and is usually considered to "e synonyous !ith the ter
Pgreater !eight of the evidenceP or Pgreater !eight of the credi"le evidence.P Preponderance of
evidence is a phrase !hich+ in the last analysis+ eans pro"a"ility of the truth. It is evidence !hich is
ore convincing to the court as !orthier of "elief than that !hich is offered in opposition thereto.
the case at "ar+ the spouses Apeles !ere a"le to overcoe the "urden of proof and prove "y
preponderant evidence in disputing the authenticity and due e-ecution of the Contract of Gease !ith
=ption to Purchase. In contrast+ Enrico seeed to rely only on his o!n self<serving declarations+
!ithout asserting any proof of corro"orating testiony or circustantial evidence to "uttress his
Even assuing for the sa2e of arguent that !e agree !ith Enrico that Gu# voluntarily entered into
the Contract of Gease !ith =ption to Purchase and personally affi-ed her signature to the said
docuent+ the provision on the option to purchase the su".ect property incorporated in said Contract
still reains unenforcea"le.
There is no dispute that !hat Enrico sought to enforce in Civil Case (o. N<66<:3F:I !as his
purported right to ac&uire o!nership of the su".ect property in the e-ercise of his option to purchase
the sae under the Contract of Gease !ith =ption to Purchase. )e ultiately !ants to copel the
spouses Apeles to already e-ecute the Deed of /ale over the su".ect property in his favor.
An option is a contract "y !hich the o!ner of the property agrees !ith another person that the latter
shall have the right to "uy the forers property at a fi-ed price !ithin a certain tie. It is a condition
offered or contract "y !hich the o!ner stipulates !ith another that the latter shall have the right to
"uy the property at a fi-ed price !ithin a certain tie+ or under+ or in copliance !ith certain ters
and conditions9 or !hich gives to the o!ner of the property the right to sell or deand a sale.
option is not of itself a purchase+ "ut erely secures the privilege to "uy. It is not a sale of property
"ut a sale of the right to purchase. It is siply a contract "y !hich the o!ner of the property agrees
!ith another person that he shall have the right to "uy his property at a fi-ed price !ithin a certain
tie. )e does not sell his land9 he does not then agree to sell it9 "ut he does sell soething+ i.e.+ the
right or privilege to "uy at the election or option of the other party. Its distinguishing characteristic is
that it iposes no "inding o"ligation on the person holding the option+ aside fro the consideration
for the offer.
It is also soeties called an Punaccepted offerP and is sanctioned "y Article 5I76 of the Civil Code$
Art. 5I76. A proise to "uy and sell a deterinate thing for a price certain is reciprocally
An accepted unilateral proise to "uy or to sell a deterinate thing for a price certain is "inding
upon the proissor if the proise is supported "y a consideration distinct fro the price.
The second paragraph of Article 5I76 provides for the definition and conse&uent rights and
o"ligations under an option contract. Cor an option contract to "e valid and enforcea"le against the
proissor+ there ust "e a separate and distinct consideration that supports it.
In the landar2 case of /outh!estern /ugar and 8olasses Copany v. Atlantic Dulf and Pacific
!e declared that for an option contract to "ind the proissor+ it ust "e supported "y
There is no &uestion that under Article 5I76 of the ne! Civil Code Pan option to sell+P or Pa proise
to "uy or to sell+P as used in said article+ to "e valid ust "e Psupported "y a consideration distinct
fro the price.P This is clearly inferred fro the conte-t of said article that a unilateral proise to "uy
or to sell+ even if accepted+ is only "inding if supported "y a consideration. I& o$8er 9or)s, :a&
a##e/$e) u&%(a$era( /ro1%se: #a& o&(y 8ave a b%&)%&0 e;;e#$ %; su//or$e) by a #o&s%)era$%o&,
98%#8 1ea&s $8a$ $8e o/$%o& #a& s$%(( be 9%$8)ra9&, eve& %; a##e/$e), %; $8e sa1e %s &o$
su//or$e) by a&y #o&s%)era$%o&. 'ere %$ %s &o$ )%s/u$e) $8a$ $8e o/$%o& %s 9%$8ou$
#o&s%)era$%o&. I$ #a& $8ere;ore be 9%$8)ra9& &o$9%$8s$a&)%&0 $8e a##e/$a&#e 1a)e o; %$ by
a//e((ee. 0Ephasis supplied.1
The doctrine re&uiring the payent of consideration in an option contract enunciated in
/outh!estern /ugar is resonated in su"se&uent cases and reains controlling to this day. %ithout
consideration that is separate and distinct fro the purchase price+ an option contract cannot "e
enforced9 that holds true even if the unilateral proise is already accepted "y the optionee.
The consideration is Pthe !hy of the contracts+ the essential reason !hich oves the contracting
parties to enter into the contract.P This definition illustrates that the consideration conteplated to
support an option contract need not "e onetary. Actual cash need not "e e-changed for the option.
)o!ever+ "y the very nature of an option contract+ as defined in Article 5I76+ the sae is an onerous
contract for !hich the consideration ust "e soething of value+ although its 2ind ay vary.
%e have painsta2ingly e-ained the Contract of Gease !ith =ption to Purchase+ as !ell as the
pleadings su"itted "y the parties+ and their testionies in open court+ for any direct evidence or
evidence aliunde to prove the e-istence of consideration for the option contract+ "ut !e have found
none. The only consideration agreed upon "y the parties in the said Contract is the supposed
purchase price for the su".ect property in the aount not e-ceeding P5.7 8illion+ !hich could not "e
deeed to "e the sae consideration for the option contract since the la! and .urisprudence
e-plicitly dictate that for the option contract to "e valid+ it 1us$ be su//or$e) by a #o&s%)era$%o&
se/ara$e a&) )%s$%&#$ ;ro1 $8e /r%#e.
In Ji"le Japtist Church v. Court of Appeals+
!e stressed that an option contract needs to "e
supported "y a separate consideration. The consideration need not "e onetary "ut could consist of
other things or underta2ings. )o!ever+ if the consideration is not onetary+ these ust "e things or
underta2ings of value+ in vie! of the onerous nature of the option contract. Curtherore+ !hen a
consideration for an option contract is not onetary+ said consideration ust "e clearly specified as
such in the option contract or clause.
In the present case+ it is indu"ita"le that no consideration !as given "y Enrico to the spouses Apeles
for the option contract. The a"sence of onetary or any aterial consideration 2eeps this Court fro
enforcing the rights of the parties under said option contract.
3'*R*FOR*+ in vie! of the foregoing+ the instant Petition is DE(IED. The Decision dated 2;
Dece"er 2;;I and ,esolution dated 27 April 2;;7 of the Court of Appeals in CA<D.,. CL (o.
736:: are here"y AFFIR+*". (o costs.
/= =,DE,ED.
Associate Kustice
G.R. No. 126454. November 26, 2004
an "R. $ "RS. EL"ER TIT! "E%INA &ILLANUE&A, Respondents.
% E C I S I ! N
This petition for review on certiorari seeks to annul the Decision
dated August 7, 1996, of the Court of
Appeals in CA-.!. C" #o. $%9%6, and its !esolution
dated 'epte()er 1&, 1996, den*ing
reconsideration of the decision. +n the ,uestioned issuances, the Court of Appeals affir(ed the
dated .une /, 199-, of the !egional Trial Court of 0anila, 1ranch -, in Civil Case #o. 92-
The antecedents are3
4n .une 7, 19/%, the 1i)le 1aptist Church 5petitioner 1aptist Church6 entered into a contract of
with 0r. 7 0rs. 8l(er Tito 0edina "illanueva 5respondent spouses "illanueva6. The latter are
the registered owners of a propert* located at #o. &$-6 5for(erl* &$&$6 9eon uinto 't., 0alate,
0anila. The pertinent stipulations in the lease contract were3
1. That the 98''4! lets and leases to the 98''88 a store space known as &$&$ 9eon uinto 'r. 't.,
0alate, 0anila, of which propert* the 98''4! is the registered owner in accordance with the 9and
!egistration Act.
&. That the lease shall take effect on .une 7, 19/% and shall )e for the period of :ifteen 51%6 *ears.
-. That 98''88 shall pa* the 98''4! within five 5%6 da*s of each calendar (onth, )eginning Twelve
51&6 (onths fro( the date of this agree(ent, a (onthl* rental of Ten Thousand ;esos 5;12,222.226
;hilippine Currenc*, plus 12< escalation clause per *ear starting on .une 7, 19//.
4. T)a* +,on -./n.n/ o0 *)e LEASE AGREE"ENT, *)e LESSEE -)a11 ,a2 *)e -+m o0 E./)*2 #o+r
T)o+-an Pe-o- 3P44,000.005 P).1.,,.ne C+rren62. Sa. -+m .- *o be ,a. .re6*12 *o *)e
R+ra1 Ban7, &a1en8+e1a, B+1a6an 0or *)e ,+r,o-e o0 reem,*.on o0 -a. ,ro,er*2 9).6) .-
mor*/a/e b2 *)e LESS!R.
%. That the title will re(ain in the safe keeping of the 1i)le 1aptist Church, 0alate, 0etro 0anila until
the e=piration of the lease agree(ent or the leased pre(ises )e purchased )* the 98''88, whichever
co(es first. +n the event that the said title will )e lost or destro*ed while in the possession of the
98''88, the 98''88 agrees to pa* all costs involved for the re-issuance of the title.
6. That the leased pre(ises (a* )e renovated )* the 98''88, to the satisfaction of the 98''88 to )e
fit and usa)le as a Church.
7. That the 98''4! will re(ove all other tenants fro( the leased pre(ises no later than 0arch 1%,
19/6. +t is further agreed that if those tenants are not vacated )* .une 1, 19/6, the rental will )e
lowered )* the su( of Three Thousand ;esos 5;-,222.226 per (onth until said tenants have left the
leased pre(ises.
4. T)a* *)e LESSEE )a- *)e o,*.on *o b+2 *)e 1ea-e ,rem.-e- +r.n/ *)e #.0*een 3155 2ear-
o0 *)e 1ea-e. I0 *)e LESSEE e6.e- *o ,+r6)a-e *)e ,rem.-e- *)e *erm- 9.11 be( A5 A -e11.n/
Pr.6e o0 !ne ".11.on E./)* H+nre T)o+-an Pe-o- 3P1.4 m.11.on5, P).1.,,.ne C+rren62. B5 A
o9n ,a2men* a/ree +,on b2 bo*) ,ar*.e-. C5 T)e ba1an6e o0 *)e -e11.n/ ,r.6e ma2 be ,a.
a* *)e ra*e o0 !ne H+nre T9en*2 T)o+-an Pe-o- 3P120,000.005, P).1.,,.ne C+rren62, ,er
= = =.
The foregoing stipulations of the lease contract are the su)>ect of the present controvers*.
Although the sa(e lease contract resulted in several cases
filed )etween the sa(e parties herein,
petitioner su)(its, for this Courts review, onl* the following errors allegedl* co((itted )* the Court
of Appeals3
a6 !espondent Court of Appeals erred in finding that the option to )u* granted the petitioner 1aptist
Church under its contract of lease with the "illanuevas did not have a consideration and, therefore, did
not )ind the latter?
)6 @!Aespondent court again also erred in finding that the option to )u* did not have a fi=ed price
agreed upon )* the parties for the purchase of the propert*? and
c6 @:Ainall*, respondent court erred in not awarding petitioners 1aptist Church and its pastor attorne*s
+n su(, this Court has three issues to resolve3 16 Bhether or not the option to )u* given to the
1aptist Church is founded upon a consideration? &6 Bhether or not )* the ter(s of the lease
agree(ent, a price certain for the purchase of the land had )een fi=ed? and -6 Bhether or not the
1aptist Church is entitled to an award for attorne*s fees.
The stipulation in the lease contract which purportedl* gives the lessee an option to )u* the leased
pre(ises at an* ti(e within the duration of the lease, is found in paragraph / of the lease
contract, viz3
/. That the 98''88 has the option to )u* the leased pre(ises during the :ifteen 51%6 *ears of the
lease. +f the 98''88 decides to purchase the pre(ises the ter(s will )e3 A6 A selling ;rice of 4ne
0illion 8ight Cundred Thousand ;esos 5;1./ (illion6, ;hilippine Currenc*. 16 A down pa*(ent agreed
upon )* )oth parties. C6 The )alance of the selling price (a* )e paid at the rate of 4ne Cundred
Twent* Thousand ;esos 5;1&2,222.226, ;hilippine Currenc*, per *ear.
Dnder Article 1$79 of the Civil Code, it is provided3
Art. 1$79. A pro(ise to )u* and sell a deter(inate thing for a price certain is reciprocall* de(anda)le.
An accepted unilateral pro(ise to )u* or to sell a deter(inate thing for a price certain is )inding upon
the pro(issor if the pro(ise is supported )* a consideration distinct fro( the price.
The second paragraph of Article 1$79 provides for the definition and conse,uent rights and o)ligations
under an option contract. :or an option contract to )e valid and enforcea)le against the pro(issor,
there (ust )e a separate and distinct consideration that supports it.
+n this case, petitioner 1aptist Church seeks to )u* the leased pre(ises fro( the spouses "illanueva,
under the option given to the(. ;etitioners clai( that the 1aptist Church agreed to advance the large
a(ount needed for the rescue of the propert* )ut, in exchange, it asked the "illanuevas to grant it a
long ter( lease and an option to )u* the propert* for ;1./ (illion.
The* argue that the consideration
supporting the option was their agree(ent to pa* off the "illanuevas ;/$,222 loan with the )ank,
there)* freeing the su)>ect propert* fro( the (ortgage encu()rance. The* state further that the
1aptist Church would not have agreed to advance such a large a(ount as it did to rescue the propert*
fro( )ank foreclosure had it not )een given an enforcea)le option to )u* that went with the lease
+n the petition, the 1aptist Church states that @tArue, the 1aptist Church did not pa* a separate and
specific su( of (one* to cover the option alone. 1ut the ;/$,222 it paid the "illanuevas in advance
should )e dee(ed consideration for the one contract the* entered into the lease with option to
The* rel* on the case of Teodoro v. Court of Appeals
to support their stand.
This Court finds no (erit in these contentions.
:irst, petitioners cannot insist that the ;/$,222 the* paid in order to release the "illanuevas propert*
fro( the (ortgage should )e dee(ed the separate consideration to support the contract of option. +t
(ust )e pointed out that said a(ount was in fact apportioned into (onthl* rentals spread over a
period of one *ear, at ;7,222 per (onth. Thus, for the entire period of .une 19/% to 0a* 19/6,
petitioner 1aptist Churchs (onthl* rent had alread* )een paid for, such that it onl* again co((enced
pa*ing the rentals in .une 19/6. This is shown )* the testi(on* of petitioner ;astor 1el(onte where
he states that the ;/$,222 was advance rental e,uivalent to (onthl* rent of;7,222 for one *ear, such
that for the entire *ear fro( 19/% to 19/6 the 1aptist Church did not pa* (onthl* rent.
This Court agrees with respondents that the a(ount of ;/$,222 has )een full* e=hausted and utiliEed
)* their occupation of the pre(ises and there is no separate consideration to speak of which could
support the option.
'econd, petitioners reliance on the case of Teodoro v. Court of Appeals
is (isplaced. The facts of
the Teodoro case reveal that therein respondent Ariola was the registered lessee of a propert* owned
)* the 0anila !ailroad Co. 'he entered into an agree(ent where)* she allowed Teodoro to occup* a
portion of the rented propert* and gave Teodoro an option to )u* the sa(e, should 0anila !ailroad
Co. decide to sell the propert* to Ariola. +n addition, Teodoro, who was occup*ing onl* a portion of the
su)>ect rented propert*, also undertook to pa* the 0anila !ailroad Co., the full a(ount of the rent
supposed to )e paid )* the registered lessor Ariola. Conse,uentl*, unlike this case, Teodoro paid over
and above the a(ount due for her own occupation of a portion of the propert*. That a(ount, which
should have )een paid )* Ariola as lessor, and for her own occupation of the propert*, was dee(ed )*
the Court as sufficient consideration for the option to )u* which Ariola gave to Teodoro upon Ariolas
ac,uiring the propert*.
Cence, in Teodoro, this Court was a)le to find that a separate consideration supported the option
contract and thus, its enforce(ent (a* )e de(anded. ;etitioners, therefore, cannot rel* on Teodoro,
for the case even supports the respondents stand that a consideration that is separate and distinct
fro( the purchase price is re,uired to support an option contract.
;etitioners further insist that a consideration need not )e a separate su( of (one*. The* posit that
their act of advancing the (one* to rescue the propert* fro( (ortgage and i(pending foreclosure,
should )e enough consideration to support the option.
+n Villamor v. Court of Appeals,
this Court defined consideration as the wh* of the contracts, the
essential reason which (oves the contracting parties to enter into the contract.
This definition
illustrates that the consideration conte(plated to support an option contract need not )e (onetar*.
Actual cash need not )e e=changed for the option. Cowever, )* the ver* nature of an option contract,
as defined in Article 1$79, the sa(e is an onerous contract for which the consideration (ust )e
so(ething of value, although its kind (a* var*.
'pecificall*, in Villamor v. Court of Appeals,
half of a parcel of land was sold to the spouses "illa(or
for ;72 per s,uare (eter, an a(ount (uch higher than the reasona)le prevailing price. Thereafter, a
deed of option was e=ecuted where)* the sellers undertook to sell the other half to the sa(e spouses.
+t was -*a*e in the deed that the onl* reason the spouses )ought the first half of the parcel of land
at a (uch higher price, was the undertaking of the sellers to sell the second half of the land, also at
the sa(e price. This Court held that the cause or consideration for the option, on the part of the
spouses-)u*ers, was the undertaking of the sellers to sell the other half of the propert*. 4n the part of
the sellers, the consideration supporting the option was the (uch higher a(ount at which the )u*ers
agreed to )u* the propert*. +t was e:,1.6.* fro( the deed therein that for the parties, this was the
consideration for their entering into the contract.
+t can )e seen that the Court found that the )u*erFoptionee had parted with so(ething of value,
which was the a(ount he paid over and a)ove the actual prevailing price of the land. 'uch a(ount,
different fro( the price of the land su)>ect of the option, was dee(ed sufficient and distinct
consideration supporting the option contract. 0oreover, the parties stated the sa(e in their contract.
Villamor is distinct fro( the present case )ecause, First, this Court cannot find that petitioner 1aptist
Church parted with an*thing of value, aside fro( the a(ount of ;/$,222 which was in fact eventuall*
utiliEed as rental pa*(ents.Second, there is no docu(ent that contains an agree(ent )etween the
parties that petitioner 1aptist Churchs supposed rescue of the (ortgaged propert* was the
consideration which the parties conte(plated in support of the option clause in the contract. As
previousl* stated, the a(ount advanced had )een full* utiliEed as rental pa*(ents over a period of
one *ear. Bhile the "illanuevas (a* have the( to thank for e=tending the pa*(ent at a ti(e of need,
this is not the separate consideration conte(plated )* law.
#oting that the option clause was part of a lease contract, this Court looked into its previous ruling in
the earl* case of Vda. e !uirino v. Palarca,
where the Court did sa* that in reciprocal contracts, like
the one in ,uestion,
the o)ligation or pro(ise of each part* is the consideration for that of the
Cowever, it (ust )e noted that in that case, it was also e=pressl* stated in the deed that
should there )e failure to e=ercise the option to )u* the propert*, the optionee undertakes to sell the
)uilding andFor i(prove(ents he has (ade on the pre(ises. +n addition, the optionee had also )een
pa*ing an a(ount of rent that was ,uite high and in fact turned out to )e too )urdenso(e that there
was a su)se,uent agree(ent to reduce said rentals. The Court found that the a(ount of rentals
agreed upon = = = which a(ount turned out to )e so )urdenso(e upon the lessee, that the lessor
agreed, five *ears later, to reduce it as well as the )uilding andFor i(prove(ents conte(plated to )e
constructed andFor introduced )* the lessee, were, undou)tedl*, part of the consideration for his
option to purchase the leased pre(ises.
Again, this Court notes that the parties therein clearl* stipulated in their contract that there was an
undertaking on the part of the optionee to sell the i(prove(ents (ade on the propert* if the option
was not e=ercised. 'uch is a valua)le consideration that could support the option contract. 0oreover,
there was the e=cessive rental pa*(ents that the optionee paid for five *ears, which the Court also
took into account in deciding that there was a separate consideration supporting the option.
To su((ariEe the rules, an option contract needs to )e supported )* a separate consideration. The
consideration need not )e (onetar* )ut could consist of other things or undertakings. Cowever, if the
consideration is not (onetar*, these (ust )e things or undertakings of value, in view of the onerous
nature of the contract of option. :urther(ore, when a consideration for an option contract is not
(onetar*, said consideration (ust )e clearl* specified as such in the option contract or clause.
This Court also notes that in the present case )oth the !egional Trial Court and the Court of Appeals
agree that the option was not founded upon a separate and distinct consideration and that, hence,
respondents "illanuevas cannot )e co(pelled to sell their propert* to petitioner 1aptist Church.
The !egional Trial Court found that @aAll pa*(ents (ade under the contract of lease were for rentals.
#o (one* @wasA ever e=changed for and in consideration of the option. Cence, the !egional Trial Court
found the action of the 1aptist Church to )e pre(ature and without )asis to co(pel the defendant to
sell the leased pre(ises. The !egional Trial Court conse,uentl* ruled3
BC8!8:4!8, >udg(ent is rendered3
16 Den*ing plaintiffs application for writ of in>unction?
&6 That defendant cannot )e co(pelled to sell to plaintiffs the leased pre(ises in accordance with par.
/ of the contract of lease?
-6 Defendant is here)* ordered to rei()urse plaintiffs the su( of ;1%, 919.7% plus 1&< interest
representing real estate ta=es, plaintiffs paid the Cit* Treasurers 4ffice of 0anila?
$6 Declaring that plaintiff (ade a valid and legal consignation to the Court of the initial a(ount
of ;1/,6-$.22 for the (onth of #ove()er and Dece()er 1992 and ever* (onth thereafter.
All other clai(s of the plaintiffs are here)* dis(issed for lack of (erit.
#o pronounce(ent as to costs.
'4 4!D8!8D.
4n appeal, the Court of Appeals agreed with the !egional Trial Court and found that the option to )u*
the leased pre(ises was not )inding upon the "illanuevas for non-co(pliance with Article 1$79. +t
found that said option was not supported )* a consideration as no (one* was ever reall* e=changed
for and in consideration of the option. +n addition, the appellate court deter(ined that in the instant
case, the price for the o)>ect is not *et certain. Thus, the Court of Appeals affir(ed the !egional Trial
Court decision and dis(issed the appeal for lack of (erit.
Caving found that the option to )u* granted to the petitioner 1aptist Church was not founded upon a
separate consideration, and hence, not enforcea)le against respondents, this Court finds no need to
discuss whether a price certain had )een fi=ed as the purchase price.
Anent the clai( for attorne*s fees, it is stipulated in paragraph 1- of the lease agree(ent that in the
event of failure of either of the parties to co(pl* with an* of the conditions of the agree(ent, the
aggrieved part* can collect reasona)le attorne*s fees.
+n view of this Courts finding that the option contract is not enforcea)le for )eing without
consideration, the respondents "illanueva spouses refusal to co(pl* with it cannot )e the )asis of a
clai( for attorne*s fees.
Cence, this Court agrees with as the Court of Appeals, which affir(ed the findings of the !egional Trial
Court, that such clai( is to )e dis(issed for lack of factual and legal )asis.
;HERE#!RE, the Decision and !esolution of the Court of Appeals su)>ect of the petition are here)*
#o costs.
S! !R%ERE%.
%av.e, <r., C.J., (Chairman), =+.-+mb.n/, >nare-?San*.a/o, an Car,.o, JJ., 6on6+r.
:ational Crains Authority v. 1AC
On Au$ust *;, '(4(, private respondent Deon 2oriano o!!ered to sell palay $rains to :FA
throu$h William Cabal, the provincial mana$er in Tu$ue$arao. The documents
submitted were processed, and he was $iven a +uota o! *,@5< cavans, which is the
maximum number o! cavans he may sell to :FA. On the same day and on the !ollowin$
day, 2oriano delivered @;< cavans, which were no reba$$ed, classi!ied and wei$hed.
When he demanded payment, he was told that payment will be held in abeyance since
Er. Cabal was still investi$atin$ on an in!ormation received that 2oriano was not a bona
!ide !armer. 1nstead o! withdrawin$ the palay, 2oriano insisted that the palay $rains be
delivered and paid. "e !iled a complaint !or speci!ic per!ormance. Petitioners contend
that the delivery was merely made !or the purpose o! o!!erin$ it !or sale because until the
$rains were reba$$ed, classi!ied and wei$hed, they are not considered sold.
Whether there was a per!ected sale
2oriano initially o!!ered to sell palay $rains produced in his !armland to :FA. When the
latter accepted the o!!er by notin$ in 2oriano7s Farmer7s 1n!ormation 2heet a +uota o!
*,@5< cavans, there was already a meetin$ o! the minds between the parties. The ob0ect
o! the contract, bein$ the palay $rains produced in 2oriano7s !armland and the :FA was
to pay the same dependin$ upon its +uality. The !act that the exact number o! cavans o!
palay to be delivered has not been determined does not a!!ect the per!ection o! the
contract. Article ';5( o! the :ew Civil Code providesF A. . .. The !act that the +uantity is
not determinate shall not be an obstacle to the existence o! the contract, provided it is
possible to determine the same, without the need o! a new contract between the parties.A
1n this case, there was no need !or :FA and 2oriano to enter into a new contract to
determine the exact number o! cavans o! palay to be sold. 2oriano can deliver so much
o! his produce as lon$ as it does not exceed *,@5< cavans. From the moment the contract
o! sale is per!ected, it is incumbent upon the parties to comply with their mutual
obli$ations or Athe parties may reciprocally demand per!ormanceA thereo!
8R"T $("%#

"'%)"E" >%MER and >5R5 #o5 1;?@@A
!E%#%R RAM%",
Petitioners$ PresentA
Davide$ Kr.$ C.J.$
6 vers&s 6 8nares6Santia,o$
Carpio$ and
!7'&na$ JJ.

"'%)"E" "A#TA>% and
M#$A &ER)E!A, and Pro#&l,atedA
"'%)"E" ,&ERR+ and
RA+M%#$ 'A!!%R,
Respondents. O'to"er 11$ -//0

x66 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6x



The ,ase

Be+ore the Co&rt is a petition +or review
assailin, the De'ision
dated -3
!&,&st -/// and the Order dated -/ Septe#"er -/// o+ the Re,ional Trial Co&rt
;<trial 'o&rt=> o+ Misa#is Oriental$ Bran'h -1$ in Civil Case o. 2E6/B/. The
trial 'o&rt dis#issed the plainti++s* a'tion +or re'over( o+ ownership with da#a,es.

The Antecedent 8acts

The spo&ses Co#er and Leonor Ra#os ;<spo&ses Ra#os=> own a par'el o+
land$ 'onsistin, o+ 1$EE3 s%&are #eters$ 'overed "( Trans+er Certi+i'ate o+ Title
;<TCT=> o. 1B030 o+ the Re,ister o+ Deeds o+ Ca,a(an de Oro Cit(. On 1E
9e"r&ar( 12E/$ the spo&ses Ra#os #ade an a,ree#ent with the spo&ses Santia,o
and Minda Der&ela ;<spo&ses Der&ela=>
'overin, 3/B s%&are #eters o+ the land
;<land=>. !''ordin, to the spo&ses Ra#os$ the a,ree#ent is a 'ontra't o+
'onditional sale. The spo&ses Der&ela alle,e that the 'ontra't is a sale on
install#ent "asis.

On -. Kan&ar( 122E$ the spo&ses Ra#os +iled a 'o#plaint +or Re'over( o+
Ownership with Da#a,es a,ainst the spo&ses Der&ela. The 'ase was do')eted as
Civil Case o. 2E6/B/. The spo&ses Ra#os alle,e that o&t o+
the P10$3//
'onsideration +or the sale o+ the land$ the spo&ses Der&ela paid
onl( P1$///. The last install#ent that the spo&ses Der&ela paid was on 1E
De'e#"er 12E1. The spo&ses Ra#os assert that the spo&ses Der&ela*s &n?&st
re+&sal to pa( the "alan'e o+ the p&r'hase pri'e 'a&sed the 'an'ellation o+ the Deed
o+ Conditional Sale. In K&ne 12E-$ the spo&ses Ra#os dis'overed that the spo&ses
Der&ela were alread( o''&p(in, a portion o+ the land. Cherr( and Ra(#ond
Pallori ;<spo&ses Pallori=>$ da&,hter and son6in6law$ respe'tivel($ o+ the spo&ses
Der&ela$ ere'ted another ho&se on the land. The spo&ses Der&ela and the spo&ses
Pallori re+&sed to va'ate the land despite de#and "( the spo&ses Ra#os.

The spo&ses Der&ela alle,e that the 'ontra't is a sale on install#ent "asis.
The( paid P-$/// as down pa(#ent and #ade the +ollowin, install#ent pa(#entsA

31 Mar'h 12E/ P-//
- Ma( 12E/ P1// ;+or !pril and Ma( 12E/>
-/ K&ne 12E/ P-// ;+or K&ne 12E/>
E O'to"er 12E/ P0// ;+or K&l($ !&,&st and part
o+ Septe#"er 12E/>
0 Mar'h 12E1 P1// ;+or O'to"er and ove#"er
1E De'e#"er 12E1 P3// ;+or De'e#"er 12E/ and
part o+ Kan&ar( 12E1>

The spo&ses Der&ela +&rther alle,e that the 3/B s%&are #eters spe'i+ied in
the 'ontra't was red&'ed to -E- s%&are #eters "e'a&se &pon s&"division o+ the
land$ -1 s%&are #eters "e'a#e part o+ the road. The spo&ses Der&ela 'lai# that in
Mar'h 12E-$ the( expressed their willin,ness to pa( the "alan'e o+ P11$3// "&t the
spo&ses Ra#os re+&sed their o++er.

The Ruling of the Trial ,ourt

In its De'ision
dated -3 !&,&st -///$ the trial 'o&rt r&led that the
'ontra't is a sale "( install#ent. The trial 'o&rt r&led that the spo&ses Ra#os
+ailed to 'o#pl( with Se'tion 1 o+ Rep&"li' !'t o. B00- ;<R! B00-=>$

SEC. 1. In 'ase where less than two (ears o+ install#ents were paid$ the
seller shall ,ive the "&(er a ,ra'e period o+ not less than sixt( da(s +ro# the date
the install#ent "e'a#e d&e. I+ the "&(er +ails to pa( the install#ents d&e at the
expiration o+ the ,ra'e period$ the seller #a( 'an'el the 'ontra't a+ter thirt( da(s
+ro# re'eipt "( the "&(er o+ the noti'e o+ 'an'ellation or the de#and +or
res'ission o+ the 'ontra't "( a notarial a't.

The dispositive portion o+ the De'ision readsA

@DERE9ORE$ the 'o#plaint is here"( dis#issed and plainti++IsJ are
ordered to exe'&te the 'orrespondin, Deed o+ Sale in +avor o+ de+endants a+ter the
latter have paid the re#ainin, "alan'e o+ Eleven Tho&sand and Three D&ndred
Pesos ;P11$3//.//>.

Plainti++s are +&rther ordered to pa( de+endants the s&# o+ P-/$///.//$ as
!ttorne(*s +ees and P1/$///.// as liti,ation expenses.


In an Order
dated -/ Septe#"er -///$ the trial 'o&rt denied the spo&ses
Ra#os* #otion +or re'onsideration.
Den'e$ this petition.

The ssues

The spo&ses Ra#os raise the +ollowin, iss&esA

I. @hether R! B00- is appli'a"le to an a"sol&te sale o+ landH

II. @hether !rti'les 1121 and 102- o+ the Civil Code are
appli'a"le to the present 'aseH

III. @hether the spo&ses Ra#os have a ri,ht to 'an'el the saleH

IG. @hether the spo&ses Der&ela have a ri,ht to da#a,es.

The Ruling of the ,ourt

The petition is partl( #eritorio&s.

The Agreement is a Contract to Sell

In its De'ision$ the trial 'o&rt r&led on whether the 'ontra't #ade "( the
parties is a 'onditional sale or a sale on install#ent. The spo&ses Ra#os* pre#ise is
that sin'e the trial 'o&rt r&led that the 'ontra't is a sale on install#ent$ the trial
'o&rt also in e++e't de'lared that the sale is an a"sol&te sale. The spo&ses Ra#os
alle,e that R! B00- is not appli'a"le to an a"sol&te sale.

!rti'le 110E o+ the Civil Code provides that a 'ontra't o+ sale #a( "e
a"sol&te or 'onditional. ! 'ontra't o+ sale is a"sol&te when title to the propert(
passes to the vendee &pon deliver( o+ the thin, sold.
! deed o+ sale is a"sol&te
when there is no stip&lation in the 'ontra't that title to the propert( re#ains with
the seller &ntil +&ll pa(#ent o+ the p&r'hase pri'e.
The sale is also a"sol&te i+
there is no stip&lation ,ivin, the vendor the ri,ht to 'an'el &nilaterall( the 'ontra't
the #o#ent the vendee +ails to pa( within a +ixed period.
In a 'onditional sale$
as in a 'ontra't to sell$ ownership re#ains with the vendor and does not pass to the
vendee &ntil +&ll pa(#ent o+ the p&r'hase pri'e.
The +&ll pa(#ent o+ the
p&r'hase pri'e parta)es o+ a s&spensive 'ondition$ and non6+&l+ill#ent o+ the
'ondition prevents the o"li,ation to sell +ro# arisin,.

In this 'ase$ the a,ree#ent o+ the parties is e#"odied in a one6pa,e$
handwritten do'&#ent.
The do'&#ent does not 'ontain the &s&al ter#s and
'onditions o+ a +or#al deed o+ sale. The ori,inal do'&#ent$ elevated to this Co&rt
as part o+ the Re'ords$ is torn in part. Onl( the words <LMET B!SIS= is le,i"le
on the title. The na#es and addresses o+ the parties and the identit( o+ the propert(
'annot "e as'ertained. The a,ree#ent onl( provides +or the +ollowin, ter#s o+ the


PRICE PER S5M P0/.// F 3/B S5M P 10$3//.//
DO@ P!8MET ;T@O TDOUS!D PESOS> : -$///.//
B!L!CE P!8!BLE !T MIIMUM O9 P-//.// P 13$3//.//

In Manuel v. Rodriguez, et al.$
the Co&rt r&led that to "e a written
'ontra't$ all the ter#s #&st "e in writin,$ so that a 'ontra't partl( in writin, and
partl( oral is in le,al e++e't an oral 'ontra't. The Co&rt reiterated
the Manuel r&lin, in Alonso v. Court o A!!ealsA

xxx In Manuel$ <onl( the pri'e and the ter#s o+ pa(#ent were in writin,$=
"&t the #ost i#portant #atter in the 'ontrovers($ the alle,ed trans+er o+ title was
never <red&'ed to an( written do'&#ent.I=J It was held that the 'ontra't sho&ld
not "e 'onsidered as a written "&t an oral oneH not a sale "&t a pro#ise to sellH and
that <the a"sen'e o+ a +or#al deed o+ 'onve(an'e= was a stron, indi'ation <that
the parties did not intend i##ediate trans+er o+ title$ "&t onl( a trans+er a+ter +&ll
pa(#ent o+ the pri'e.= Under these 'ir'&#stan'es$ the Co&rt r&led !rti'le 10/1
o+ the Civil Code o+ 1EE2 ;!rt. 102- o+ the present Code> to "e inappli'a"le to the
'ontra't in 'ontrovers( : a 'ontra't to sell or pro#ise to sell : <where title
re#ains with the vendor &ntil +&l+ill#ent o+ a positive s&spensive 'ondition$ s&'h
as +&ll pa(#ent o+ the pri'e x x IxJ.

The re'ords show that the spo&ses Der&ela did not i##ediatel( ta)e a't&al$
ph(si'al possession o+ the land. !''ordin, to the spo&ses Ra#os$ in Mar'h 12E1$
the( allowed the nie'e o+ the spo&ses Der&ela to o''&p( a portion o+ the land.
Indeed$ the spo&ses Ra#os alle,ed that the( onl( dis'overed in K&ne 12E- that the
spo&ses Der&ela were alread( o''&p(in, the land. In their answer to the
'o#plaint$ the spo&ses Der&ela and the spo&ses Pallori alle,ed that their
o''&pation o+ the land is law+&l "e'a&se havin, #ade partial pa(#ents o+ the
p&r'hase pri'e$ <the( alread( 'onsidered the#selves owners= o+ the land.

Clearl($ there was no trans+er o+ title to the spo&ses Der&ela. The spo&ses Ra#os
retained their ownership o+ the land. This onl( shows that the parties did not
intend the trans+er o+ ownership &ntil +&ll pa(#ent o+ the p&r'hase pri'e.

RA "##$ is the A!!lica%le &a'

The trial 'o&rt did not err in appl(in, R! B00- to the present 'ase.

!rti'les 1121
and 102-
o+ the Civil Code are appli'a"le to 'ontra'ts o+
sale. In 'ontra'ts to sell$ R! B00- applies. InRillo v. Court o A!!eals$
Co&rt de'laredA

xxx Mnown as the Ma'eda Law$ R.!. o. B00- re'o,ni7es in 'onditional sales o+
all )inds o+ real estate ;ind&strial$ 'o##er'ial$ residential> the ri,ht o+ the seller to
'an'el the 'ontra't &pon non6pa(#ent o+ an install#ent "( the "&(er$ whi'h is
si#pl( an event that prevents the o"li,ation o+ the vendor to 'onve( title +ro#
a'%&irin, "indin, +or'e. It also provides the ri,ht o+ the "&(er on install#ents in
'ase he de+a&lts in the pa(#ent o+ s&''eedin, install#ents xxx.

Se'tions 3 and 1 o+ R! B00- provideA

Se'. 3. In all transa'tions or 'ontra'ts involvin, the sale or +inan'in, o+
real estate on install#ent pa(#ents$ in'l&din, residential 'ondo#ini&#
apart#ents "&t ex'l&din, ind&strial lots$ 'o##er'ial "&ildin,s and sales to
tenants &nder Rep&"li' !'t &#"ered Thirt(6ei,ht h&ndred +ort(6+o&r as
a#ended "( Rep&"li' !'t &#"ered Sixt(6three h&ndred ei,ht(6nine$ where the
"&(er has paid at least two (ears o+ install#ents$ the "&(er is entitled to the
+ollowin, ri,hts in 'ase he de+a&lts in the pa(#ent o+ s&''eedin, install#entsA

;a> To pa($ witho&t additional interest$ the &npaid install#ents
d&e within the total ,ra'e period earned "( hi#$ whi'h is
here"( +ixed at the rate o+ one #onth ,ra'e period +or ever(
one (ear o+ install#ent pa(#ents #adeA ro!ided, That this
ri,ht shall "e exer'ised "( the "&(er onl( on'e in ever( +ive
(ears o+ the li+e o+ the 'ontra't and its extensions$ i+ an(.

;"> I+ the 'ontra't is 'an'elled$ the seller shall re+&nd to the
"&(er the 'ash s&rrender val&e o+ the pa(#ents on the
propert( e%&ivalent to +i+t( per 'ent o+ the total pa(#ents
#ade and$ a+ter +ive (ears o+ install#ents$ an additional +ive
per 'ent ever( (ear "&t not to ex'eed ninet( per 'ent o+ the
total pa(#ents #adeA ro!ided, That the a't&al 'an'ellation
o+ the 'ontra't shall ta)e pla'e a+ter thirt( da(s +ro# re'eipt
"( the "&(er o+ the noti'e o+ 'an'ellation or the de#and +or
res'ission o+ the 'ontra't "( a notarial a't and &pon +&ll
pa(#ent o+ the 'ash s&rrender val&e to the "&(er.

Down pa(#ents$ deposits or options on the 'ontra't shall "e in'l&ded in
the 'o#p&tation o+ the total n&#"er o+ install#ents #ade.

Se'. 1. In 'ase where less than two (ears o+ install#ents were paid$ the
seller shall ,ive the "&(er a ,ra'e period o+ not less than sixt( da(s +ro# the date
the install#ent "e'a#e d&e. I+ the "&(er +ails to pa( the install#ents d&e at the
expiration o+ the ,ra'e period$ the seller #a( 'an'el the 'ontra't a+ter thirt( da(s
+ro# re'eipt "( the "&(er o+ the noti'e o+ 'an'ellation or the de#and +or
res'ission o+ the 'ontra't "( a notarial a't.

In this 'ase$ the spo&ses Der&ela paid less than two (ears o+ install#ents.
Th&s$ Se'tion 1 o+ R! B00- applies. Dowever$ there was neither a noti'e o+
'an'ellation nor de#and +or res'ission "( notarial a't to the spo&ses Der&ela.
In Ol(m!ia )ousing, Inc. v. Panasiatic Travel Cor!.$
the Co&rt r&led that the
vendor 'o&ld ,o to 'o&rt to de#and ?&di'ial res'ission in lie& o+ a notarial a't o+
res'ission. Dowever$ an a'tion +or re'onve(an'e is not an a'tion +or res'ission.
The Co&rt explained in Ol(m!iaA

The a'tion +or re'onve(an'e +iled "( petitioner was predi'ated on an
ass&#ption that its 'ontra't to sell exe'&ted in +avor o+ respondent "&(er had "een
validl( 'an'elled or res'inded. The re'ords wo&ld show that$ indeed$ no s&'h
'an'ellation too) pla'e at an( ti#e prior to the instit&tion o+ the a'tion +or
re'onve(an'e. xxx


xxx ot onl( is an a'tion +or re'onve(an'e 'on'ept&all( di++erent +ro# an a'tion
+or res'ission "&t that$ also$ the e++e'ts that +low +ro# an a++ir#ative ?&d,#ent in
either 'ase wo&ld "e #ateriall( dissi#ilar in vario&s respe'ts. The ?&di'ial
resol&tion o+ a 'ontra't ,ives rise to #&t&al restit&tion whi'h is not ne'essaril( the
sit&ation that 'an arise in an a'tion +or re'onve(an'e. !dditionall($ in an a'tion
+or res'ission ;also o+ten ter#ed as resol&tion>$ &nli)e in an a'tion +or
re'onve(an'e predi'ated on an extra?&di'ial res'ission ;res'ission "( notarial a't>$
the Co&rt$ instead o+ de'reein, res'ission$ #a( a&thori7e +or a ?&st 'a&se the
+ixin, o+ a period.

In the present 'ase$ there "ein, no valid res'ission o+ the 'ontra't to sell$ the
a'tion +or re'onve(an'e is pre#at&re. Den'e$ the spo&ses Der&ela have not lost
the stat&tor( ,ra'e period within whi'h to pa(. The trial 'o&rt sho&ld have +ixed
the ,ra'e period to sixt( da(s 'on+or#a"l( with Se'tion 1 o+ R! B00-.

The spo&ses Der&ela are not entirel( +a&lt6+ree. The( have "een re#iss in
per+or#in, their o"li,ation. The trial 'o&rt +o&nd that the spo&ses Der&ela o++ered
on'e to pa( the "alan'e o+ the p&r'hase pri'e. Dowever$ the spo&ses Der&ela did
not 'onsi,n the pa(#ent d&rin, the penden'( o+ the 'ase. In the #eanwhile$ the
spo&ses Der&ela en?o(ed the &se o+ the land.

9or the "rea'h o+ o"li,ation$ the 'o&rt$ in its dis'retion$ and appl(in, !rti'le
--/2 o+ the Civil Code$
#a( award interest at the rate o+ BL per ann&# on the
a#o&nt o+ da#a,es.
The spo&ses Der&ela have "een en?o(in, the &se o+ the
land sin'e 12E-. In 1220$ the( allowed their da&,hter and son6in6law$ the spo&ses
Pallori$ to 'onstr&'t a ho&se on the land. Under the 'ir'&#stan'es$ the Co&rt
dee#s it proper to award interest at BL per ann&# on the "alan'e o+ the p&r'hase

The re'ords do not show when the spo&ses Ra#os #ade a de#and +ro# the
spo&ses Der&ela +or pa(#ent o+ the "alan'e o+ the p&r'hase pri'e. The 'o#plaint
onl( alle,ed that the spo&ses Der&ela*s <&n?&st re+&sal to pa( in +&ll the p&r'hase
pri'e xxx has 'a&sed the Deed o+ Conditional Sale to "e res'inded$ revo)ed and
The 'o#plaint did not spe'i+( when the spo&ses Ra#os #ade the
de#and +or pa(#ent. 9or p&rposes o+ 'o#p&tin, the le,al interest$ the re')onin,
period sho&ld "e the +ilin, on -. Kan&ar( 122E o+ the 'o#plaint +or re'onve(an'e$
whi'h the spo&ses Ra#os erroneo&sl( 'onsidered an a'tion +or res'ission o+ the

The Co&rt notes the red&'tion o+ the land area +ro# 3/B s%&are #eters to
-E- s%&are #eters. Upon s&"division o+ the land$ -1 s%&are #eters "e'a#e part o+
the road. Dowever$ Santia,o Der&ela expressed his willin,ness to pa( +or the 3/B
s%&are #eters a,reed &pon despite the red&'tion o+ the land area.
Th&s$ there is
no disp&te on the a#o&nt o+ the p&r'hase pri'e even with the red&'tion o+ the land

On the A'ard o Attorne(*s +ees and &itigation ,-!enses

The trial 'o&rt ordered the spo&ses Ra#os to pa( the spo&ses Der&ela
and the spo&ses Pallori the a#o&nt o+ P-/$/// as attorne(*s +ees
and P1/$/// as liti,ation expenses. !rti'le --/E
o+ the Civil Code provides that
s&"?e't to 'ertain ex'eptions$ attorne(*s +ees and expenses o+ liti,ation$ other than
?&di'ial 'osts$ 'annot "e re'overed in the a"sen'e o+ stip&lation. one o+ the
en&#erated ex'eptions applies to this 'ase. 9&rther$ the poli'( o+ the law is to p&t
no pre#i&# on the ri,ht to liti,ate.
Den'e$ the award o+ attorne(*s +ees and
liti,ation expenses sho&ld "e deleted.

B&ERE8%RE$ we A88RM the De'ision dated -3 !&,&st -/// o+ the
Re,ional Trial Co&rt o+ Misa#is Oriental$ Bran'h -1$ dis#issin, the 'o#plaint +or
Re'over( o+ Ownership with Da#a,es$ with the +ollowin, M%$8,AT%#A

1. The spo&ses Der&ela shall pa( the spo&ses Ra#os P11$3// as "alan'e o+
the p&r'hase pri'e pl&s interest at BL per ann&# +ro# -. Kan&ar( 122E.
The spo&ses Der&ela shall pa( within B/ da(s +ro# +inalit( o+ this
-. Upon pa(#ent$ the spo&ses Ra#os shall exe'&te a deed o+ a"sol&te sale
o+ the land and deliver the 'erti+i'ate o+ title in +avor o+ the spo&ses
3. In 'ase o+ +ail&re to th&s pa( within B/ da(s +ro# +inalit( o+ this
De'ision$ the spo&ses Der&ela and the spo&ses Pallori shall i##ediatel(
va'ate the pre#ises witho&t need o+ +&rther de#and$ and the down
pa(#ent and install#ent pa(#ents o+P1$/// paid "( the spo&ses Der&ela
shall 'onstit&te rental +or the landH
1. The award o+ P-/$/// as attorne(*s +ees and P1/$/// as liti,ation
expenses in +avor o+ the spo&ses Der&ela and the spo&ses Pallori is

"% %R$ERE$.
=G.R. No. 154656. u&e 2>, 2005?
'*IRS OF *S6S +. +ASC6@ANA, re/rese&$e) by OS* +A. R.
+ASC6@ANA, petitioners, vs. CO6RT OF A,,*ALS, AA6ILINO
!ART*, a&) S,O6S*S RO"OLFO a&) CORA7ON
LAB6+AS, respondents.
" * C I S I O N
CALL*O, SR., J.-
This is a petition for revie! on certiorari of the Decision
of the Court of Appeals
0CA1 in CA<D.,. CL (o. 7:557 affiring the Decision
of the ,egional Trial Court 0,TC1
of /an Carlos City+ (egros =ccidental+ !hich ordered the disissal of the petitioners
coplaint for recovery of possession and daages.
T8e A&$e#e)e&$s
Dertrudis %uthrich and her si- other si"lings !ere the co<o!ners of a parcel of land
identified as Got (o. 52I of the /an Carlos City+ (egros =ccidental Cadastre+ !ith an
area of 5+726 s&uare eters and covered "y Transfer Certificate of Title 0TCT1 (o.
5I7:<, 0T<266:71<:F.
=ver tie+ Dertrudis and t!o other co<o!ners sold each of their
one<seventh 05*71 shares+ or a total area of 7I5 s&uare eters+ to Kesus 8ascuQana.
The latter then sold a portion of his 5I;<s&uare<eter undivided share of the property to
Diosdado /uilhig. 8ascuQana later sold an additional 53;<s&uare<eter portion to
/uilhig on April 7+ 5635. )o!ever+ the parties agreed to revo2e the said deed of sale
and+ in lieu thereof+ e-ecuted a Deed of A"solute /ale on August 52+ 5635. In the said
deed+ 8ascuQana+ as vendor+ sold an undivided I36<s&uare<eter portion of the
property for PI+36;.;;+ !ith P:+36;.;; as do!n payent+ and under the follo!ing ters
of payent$
That the "alan'e o+ OE TDOUS!D PESOS ;P1$///.//> shall "e paid "( the
GEDEE &nto the GEDOR as soon as the a"ove6portions o+ Lot 1-1 shall have
"een s&rve(ed in the na#e o+ the GEDEE and all papers pertinent and ne'essar( to
the iss&an'e o+ a separate Certi+i'ate o+ Title in the na#e o+ the GEDEE shall have
"een prepared.
=n Dece"er :5+ 5635+ 8ascuQana and Kose D. Esta"illo e-ecuted a Deed of
E-change and A"solute /ale of ,eal Estate+
in !hich Esta"illo deeded to 8ascuQana
a portion of his property a"utting that of /uilhig on the southeast.
In the eantie+ a survey !as conducted for the co<o!ners of Got (o. 52I on Kuly
6+ 5632. The su"division plan of the said lot !as approved "y the Director of Gands on
August 2+ 5632. The portion of the property deeded to /uilhig !as identified in the
said plan as Got (o. 52I<J.
8ean!hile+ 8ascuQana died intestate on April 2;+ 5637 and !as survived "y his
heirs+ Eva 8. Ellisin+ ,enee )e!lett+ Caren Lda. de =peQa+ 8arilou Dy and Kose 8a.
,. 8ascuQana.
=n April 2I+ 563F+ /uilhig e-ecuted a Deed of /ale of ,eal Property
on a portion
of Got (o. 52I<J !ith an area of I36 s&uare eters and the iproveents thereon+ in
favor of Cora#on Gayuas+ the !ife of Kudge ,odolfo Gayuas+ for the price
of P55+;;;.;;. The spouses Gayuas then had the property su"divided into t!o lots$
Got (o. 52I<J<2 !ith an area of 75 s&uare eters under the nae of Kesus 8ascuQana+
and Got (o. 52I<J<5+ !ith an area of I36 s&uare eters under their naes.
spouses Gayuas too2 possession of the property and caused the cutting of tall
grasses thereon. >pon the plea of a religious organi#ation+ they allo!ed a chapel to "e
constructed on a portion of the property.
In Kanuary 56F7+ the spouses Gayuas
allo!ed A&uilino Jarte to stay on a portion of the property to !ard off s&uatters.
and his 2in+ ,osto Jarte+ then had their houses constructed on the property.
=n =cto"er 5+ 56F7+ the spouses Gayuas received a Getter
fro the counsel of
,enee Tedre!+ offering to "uy their share of the property for >/R5+;;;.;;. Cor her part+
Cora#on Gayuas !rote Pepito 8ascuQana+ offering to pay the aount of P5+;;;.;;+
the "alance of the purchase price of the property under the deed of a"solute sale
e-ecuted "y 8ascuQana and /uilhig on August 52+ 5635.
)o!ever+ the addressee
refused to receive the ail atter.
>n2no!n to the spouses Gayuas+ TCT (o. F6F3
!as issued over Got (o. 52I<J
in the nae of Kesus 8ascuQana on 8arch 57+ 56F3.
=n (ove"er 57+ 56F3+ the heirs of 8ascuQana filed a Coplaint
for recovery of
possession of Got (o. 52I<J and daages !ith a !rit of preliinary in.unction+ alleging
that they o!ned the su".ect lot "y virtue of successional rights fro their deceased
father. They averred that Jarte surreptitiously entered the preises+ fenced the area
and constructed a house thereon !ithout their consent. Attached as anne-es to the
coplaint !ere TCT (o. F6F3 and a certification
fro the =ffice of the City Treasurer+
Gand Ta- Division+ vouching that the property in &uestion !as o!ned "y the petitioners
and that they had paid the ta-es thereon until 5662.
In his ans!er to the coplaint+ Jarte aditted having occupied a portion of Got (o.
52I<J+ "ut claied that he secured the perission of ,odolfo Gayuas+ the o!ner of
the su".ect property. )e added that he did not fence the property+ and that the
petitioners did not use the sae as a passage!ay in going to Jroce /treet fro their
house. Jarte raised the follo!ing special defenses$ 0a1 the petitioners !ere estopped
fro asserting o!nership over the lot in &uestion "ecause they did not o".ect !hen he
occupied the said portion of the lot9 0"1 neither did the petitioners protest !hen a church
!as "uilt on the property+ or !hen residential houses !ere constructed thereon9 0c1 the
petitioners still as2ed Jarte and the other occupants !hether they had notified ,odolfo
Gayuas of the constructions on the property9 and 0d1 the heirs of 8ascuQana+ through
the la!yer of 8rs. ,enee 8. Tedre!+ even !rote a letter
to ,odolfo Gayuas on
=cto"er 5+ 56F7+ e-pressing her !illingness to "uy the su".ect property for
=n April F+ 5665+ the spouses Gayuas filed a 8otion for Geave to Intervene+
alleging therein that they had a legal interest in Got (o. 52I<J<5 as its "uyers fro
/uilhig+ !ho in turn purchased the sae fro 8ascuQana. In their ans!er in
the spouses Gayuas alleged that they !ere the true o!ners of the
su".ect property and that they had !anted to pay the ta-es thereon+ "ut the Gand Ta-
cler2 refused to receive their payents on account that the petitioners had already
ade such payent. The spouses Gayuas further aintained that the petitioners had
no cause of action against Jarte+ as they had authori#ed hi to occupy a portion of Got
(o. 52I<J<5. The spouses Gayuas also averred that the petitioners !ere estopped
fro denying their right of o!nership and possession of the su".ect lot+ as one of the
had even offered to repurchase a portion of Got (o. 52I<J via letter. The said spouses
interposed a counterclai for daages+ claiing o!nership over the property+ and
prayed+ thus$
@DERE9ORE$ it is #ost respe't+&ll( pra(ed that this DOOR!BLE COURT render
?&d,#ent in +avor o+ the Intervenors and the de+endant !%&ilino Barte$ orderin,A
5. That the coplaint against A&uilino Jarte "e disissed !ith costs against the
2. That the Intervenors spouses Kudge ,odolfo /. Gayuas and Cora#on A. Gayuas
"e declared as the legal and true o!ners of Got 52I<J9
:. That the plaintiffs should deliver iediately to the Intervenors+ TCT (o. F6F3
!hich is in their possession9
I. That the plaintiffs "e ade to pay to the Intervenors the su of T)I,TM
T)=>/A(D 0P:;+;;;.;;1 PE/=/ oral daages9 TE( T)=>/A(D 0P5;+;;;.;;1
PE/=/ attorneys fees plus T),EE )>(D,ED 0P:;;.;;1 PE/=/ as appearance
fee per hearing.
Intervenors pra( +or s&'h other relie+ and re#edies as #a( "e dee#ed "( this
Donora"le Co&rt as ?&st and e%&ita"le in the pre#ises.
At the trial+ intervenor ,odolfo Gayuas testified that he and his !ife "ought the
su".ect property in 563F+ and that no"ody o".ected to their possession of the land+
including the petitioners. In 567;+ a religious organi#ation as2ed his perission to
construct a chapel on the disputed lot9 he allo!ed the construction since the sae
!ould "e used for the fiesta. )e further declared that part of the chapel still stood on
the property. In 56F7+ a fire ra#ed the to!ns pu"lic ar2et+ there"y dislocating
nuerous people. Jarte !as one of the fire victis+ !ho also happened to "e a good
friend and political supporter of ,odolfo. =ut of good!ill+ Jarte !as allo!ed to occupy a
portion of the said lot+ along !ith soe other fire victis. ,odolfo clarified that the
others !ere to stay there only on a teporary "asis+ "ut aditted that Jartes children
also stayed in the su".ect property.
,odolfo Gayuas further narrated that in 56F7+ Cora#on !rote one of the
petitioners<heirs+ Pepito 8ascuQana+ re&uesting that the title of the lot "e transferred in
/uilhigs nae so that they could li2e!ise arrange for the conveyance of the title in
their naes. Pepito failed to clai the letter+ and thereafter+ filed a case of e.ectent
against Jarte and ,odolfo Gayuas "rother<in<la!+ Pepito Antonio. The case+ the
!itness added+ !as disissed as against the t!o parties. =ffered in evidence !ere the
follo!ing$ a /!orn /tateent on the Current and Cair 8ar2et Lalue of the ,eal Property
issued in 567: as re&uired "y Presidential Decree (o. 73+ and ta- receipts.
,odolfo Gayuas aditted on cross<e-aination that at the tie they "ought the
property fro /uilhig+ the title !as still in the possession of the %uthrich faily. )e
added that he filed an adverse clai "efore the ,egister of Deeds of /an Carlos City+
(egros =ccidental+ on Got (o. 52I<J in Kanuary 56F3+ or after the case had already
"een filed in court. Gastly+ the !itness deposed that he did not fence the property after
"uying the sae+ "ut that his "rother<in<la! constructed a coco<lu"er yard thereon
upon his authority.
=n Kanuary :;+ 5663+ the trial court rendered .udgent in favor of Jarte and the
spouses Gayuas. The fallo of the decision reads$
@DERE9ORE$ pre#ises 'onsidered$ ?&d,#ent is here"( rendered in +avor o+
Intervenors6'o&nter'lai#ants and de+endant and a,ainst plainti++s6'o&nter'lai#
de+endants orderin, as +ollowsA
5. The disissal of the plaintiffs coplaint !ith costs against the9
2. The plaintiffs to .ointly pay Intervenors<counterclaiants no! ,TC Kudge ,odolfo /.
Gayuas and Cora#on A. Gayuas$
0a1 P5;+;;;.;; for attorneys fees9 and
0"1 P:;+;;;.;; as oral daages9
:. The plaintiffs+ as counterclai defendants+ to coply !ith the a"ove<stated
o"ligation of their late father+ 8r. Kesus 8ascuQana+ under the Deed of A"solute
/ale+ E-h. ?:@+ pp. 62<6:+ E-p.+ thru plaintiff 8r. Kose 8ascuQana+ including the
desegragation 0sic1 survey to desegregate the I36<s&uare<eter portion of said Got
(o. 52I<J+ /an Carlos Cadastre+ this province+ sold to the late Diosdado /uilhig+ if
the sae has not yet "een done despite !hat has "een said herein earlier to said
effect+ and the e-ecution of the Cinal Deed of /ale in their capacity as the heirs and
successors<in<interest of the late 8r. Kesus 8ascuQana+ thru 8r. Kose 8ascuQana+
covering the I36<s&uare<eter desegregated portion of said Got (o. 52I<J+ !ithin
si-ty 03;1 days counted fro the finality of this Decision+ in favor of the Intervenors<
spouses+ after !hich the said Intervenors<spouses shall pay the+ thru 8r. Kose
8ascuQana+ the P5+;;;.;; "alance due to the as successors<in<interest of the late
8r. Kesus 8ascuQana9
I. In case plaintiffs fail to coply !ith !hat are herein ordered for the to do+ the Cler2
of Court L of this Court to do all that they !ere to do as herein ordered in the te-t
and dispositive portion hereof+ at the e-pense of Intervenors spouses to "e later
rei"ursed "y plaintiffs+ including the desegragation 0sic1 survey of said I36<
s&uare<eter portion of said Got A(o.B 52I<J+ /an Carlos Cadastre+ (egros
=ccidental+ if the sae has not yet "een done and the e-ecution of the Cinal Deed
of /ale on "ehalf of all the plaintiffs as heirs and successors<in<interest of the late
8r. Kesus 8ascuQana covering the said desegregated portion of I36 s&uare eters
of the aforesaid lot+ in favor of Intervenors spouses+ to the end that separate title
therefor ay "e issued in their naes+ after they shall have paid the P5+;;;.;;
"alance due plaintiffs under said Deed of A"solute /ale+ E-h. ?:.@
Corth!ith+ the petitioners appealed the case to the CA+ raising the follo!ing issues
of fact and la!$
a. %hether or not the contract of alienation of Got (o. 52I<J in favor of Diosdado
/uilhig in 5635 !as a contract to sell or a contract of sale9
". %hether or not Diosdado /uilhig had any right to sell Got (o. 52I<J in favor of
intervenor Cora#on Gayuas in 563F.
=n 8ay 7+ 2;;:+ the CA affired the decision of the trial court. It ruled that the
contract "et!een the petitioners father and /uilhig !as one of sale. Coreost+ the CA
e-plained+ the contract !as denoinated as a ?Deed of A"solute /ale.@ The stipulations
in the contract li2e!ise revealed the clear intention on the part of the vendor
08ascuQana1 to alienate the property in favor of the vendee 0/uilhig1. In three various
docuents+ the late 8ascuQana even ade declarations that /uilhig !as already the
o!ner of the disputed land. The CA added that the adission ay "e given in evidence
against 8ascuQana and his predecessors<in<interest under /ection 23+ ,ule 5:; of the
,evised ,ules on Evidence. As to the arguent that the contract "et!een 8ascuQana
and /uilhig !as not effective "ecause it !as su".ect to a suspensive condition that did
not occur+ the CA ruled that the condition referred to "y the petitioners refers only to the
payent of the "alance of the purchase price and not to the effectivity of the contract.
As to the petitioners contention that even if the contract !ere one of sale+
o!nership cannot "e transferred to /uilhig "ecause 8ascuQana !as not yet the
o!ner of the lot at the tie of the alleged sale+ the appellate court ruled that the
registration of the land to "e sold is not a prere&uisite to a contract of sale.
T8e ,rese&$ ,e$%$%o&
Aggrieved+ the petitioners filed the instant petition for revie! on certiorari !ith this
Court+ !here the follo!ing lone legal issue !as raised$
%e note that the original action of the petitioners against A&uilino Jarte !as one for
recovery of possession of Got (o. 52I<J. %ith the intervention of the respondents
,odolfo and Cora#on Gayuas !ho claied o!nership over the property+ and the
ac&uiescence of the parties+ evidence !as adduced to prove !ho+ "et!een the
petitioners 0as plaintiffs1 and the respondents 0as defendants<intervenors1 !ere the
la!ful o!ners of the su".ect property and entitled to its possession.
The petitioners resolutely contend that the Deed of A"solute /ale dated August 52+
5635 "et!een their father and /uilhig !as a ere contract to sell "ecause at the tie
of the said sale+ the late 8ascuQana !as not yet the registered o!ner of Got (o. 52I or
any of its portions. They assert that /uilhig could not have ac&uired any rights over
the lot due to the fact that a person can only sell !hat he o!ns or is authori#ed to sell+
and the "uyer can ac&uire no ore than !hat the seller can transfer legally. Cinally+ the
petitioners insist that the docuent in controversy !as su".ect to a suspensive
condition+ not a resolutory condition+ !hich is a typical attri"ute of a contract of sale.
The petition is denied for lac2 of erit.
The issues raised "y the petitioners in this case are factual+ and under ,ule I7 of
the ,ules of Court+ only &uestions of la! ay "e raised in this Court+ the reason "eing
that this Court is not a trier of facts. It is not to re<e-aine the evidence on record and
to cali"rate the sae. 8oreover+ the findings and conclusions of the trial court as
affired "y the CA are conclusive on the Court+ a"sent of any evidence that the trial
court+ as !ell as the CA ignored+ isinterpreted and isconstrued facts and
circustances of su"stance !hich+ if considered+ !ould alter or reverse the outcoe of
the case.
%e have revie!ed the records and find no .ustification for a reversal or even a
odification of the assailed decision of the CA.
Even on the erits of the petition+ the Court finds that the decision of the trial court
as !ell as the ruling of the CA are "ased on the evidence on record and the applica"le
The petitioners reiterated their pose that the deed of a"solute sale over the property
e-ecuted "y their father+ Kesus 8ascuQana+ as vendor+ and Diosdado /uilhig as
vendee+ !as a contract to sell and not a contract of sale. They assert that on its face+
the contract appears to "e a contract to sell+ "ecause the payent of the P5+;;;.;;
"alance of the purchase price !as su".ect to a suspensive condition$ the survey of the
property+ the segregation of the portion thereof su".ect of the sale+ and the copletion
of the docuents necessary for the issuance of a Torrens title over the property to and
in the nae of /uilhig !ho !as the vendee. The petitioners assert that /uilhig
never paid the aforesaid aount to the vendor9 hence+ the o"ligation of the latter and
his predecessors<in<interest 0herein petitioners1 to e-ecute a final deed of sale never
arose. As such+ they aver+ title to the property reained reserved in the vendor and his
heirs even after his death. There !as no need for the vendor to rescind the deed or
collect the said aount of P5+;;;.;; under Article 5565 of the (e! Civil Code "ecause
such a reedy applies only to contracts of sale. The petitioners insist that /uilhig
never ac&uired title over the property9 he could not have transferred any title to the
respondents. /uilhig could not have transferred that !hich he did not o!n.
The petitioners contention has no factual and legal "ases.
The deed of a"solute sale e-ecuted "y Kesus 8ascuQana and /uilhig+ provides+
That the GEDOR is the tr&e and a"sol&te owner o+ a par'el o+ land )nown as Lot
o. 1-1 o+ the Cadastral S&rve( o+ San Carlos$ sit&ated at Bro'e Street and is +ree
+ro# liens and en'&#"ran'es$ and 'overed "( O.C.T. o. T6-22I3J. ;R61103> o+ Re,.
o+ Deeds$ e,ros O''.
That +or and in 'onsideration o+ the s&# o+ 9OUR TDOUS!D SIF DUDRED
IET8 PESOS ;P1$B2/.//>$ Philippine C&rren'($ to "e paid "( the GEDEE in the
#anner hereina+ter stated$ the GEDOR does here"( sell$ trans+er$ 'ede and 'onve($ a
portion o+ the a"ove6des'ri"ed propert( 'ontainin, an area o+ 1B2 s%&are #eters$ the
s)et'h o+ whi'h 'an "e +o&nd at the "a') o+ this do'&#ent and havin, a +ronta,e at
Bro'e Street o+ aro&nd 11 #eters$ and +ro# the Bro'e Street to the interior on its
So&thwest side with a len,th o+ 3/.2 #eters$ with a len,th o+ -1.E #eters on its
ortheast side where it t&rned to the ri,ht with a len,th o+ -.E #eters and 'ontin&in,
to orthwest with a len,th o+ B..- #eters$ the "a')(ard di#ension is 1..0 #eters to
the orthwest$ &nto the GEDEE$ his heirs and assi,ns$ "( wa( o+ !"sol&te Sale$
&pon the re'eipt o+ the down pa(#ent o+ TDREE TDOUS!D SIF DUDRED
IET8 PESOS ;P3$B2/.//>$ whi'h is here"( a')nowled,ed "( the GEDOR as
re'eived "( hi#.
That the "alan'e o+ OE TDOUS!D PESOS ;P1$///.//> shall "e paid "( the
GEDEE &nto the GEDOR as soon as the a"ove6portions o+ Lot 1-1 shall have
"een s&rve(ed in the na#e o+ the GEDEE and all papers pertinent and ne'essar( to
the iss&an'e o+ a separate Certi+i'ate o+ Title in the na#e o+ the GEDEE shall have
"een prepared.
The evidence on record sho!s that during the lifetie of vendor Kesus 8ascuQana+
and even after his death+ his heirs+ the petitioners herein+ une&uivoca"ly declared that
Diosdado /uilhig !as the o!ner of the property su".ect of this case+ and that the
respondents ac&uired title over the property+ having purchased the sae via a deed of
a"solute sale fro Diosdado /uilhig. Thus+ on Dece"er :5+ 5635+ Kesus
8ascuQana and Kose Esta"illo e-ecuted a Deed of E-change and A"solute /ale of
,eal Estate+ in !hich "oth parties declared that they !ere co<o!ners of portions of Got
(o. 52I a"utted "y the property o!ned "y Diosdado /uilhig.
In the su"division plan of Got (o. 52I+ signed "y ,icardo Nuilop+ Private Gand
/urveyor+ follo!ing his survey of Got (o. 52I on Kuly 6+ 5632 for and in "ehalf of Kesus
8ascuQana+ et al.+ it appears that Got (o. 52I<J !ith an area of 7I; s&uare eters
"elonged to Diosdado /uilhig+
!hich is a"utted "y Got (o. 52I<C+ o!ned "y Kesus
=n =cto"er 5+ 56F7+ long after the death of Kesus 8ascuQana+ one of his heirs+
petitioner ,enee Tedre!+ through counsel+ !rote respondent ,odolfo Gayuas offering
to "uy the property occupied "y his overseer A&uilino Jarte for >/R5+;;;.;;$
San Carlos Cit(
e,ros O''idental
Dear !tt(. La(&#asA
This has re+eren'e to the lot lo'ated at Bro'e Street$ portions o+ whi'h are presentl(
o''&pied "( Mr. Barte.
Mrs. Renee Tedrew ;nee !,ap&(an>$ who is now in the United States$ wo&ld li)e to
o++er the a#o&nt o+ S1$///.// to "&( (o&r share o+ the said lot.
I+ (o& are a#ena"le$ )indl( in+or# the &ndersi,ned +or hi# to 'o##&ni'ate IwithJ
Mrs. Tedrew in Cali+ornia.
Ger( tr&l( (o&rs$
It !as only after the respondents re.ected the proposal of petitioner ,enee Tedre!
that the petitioners secured title over the property on 8arch 57+ 56F3 in the nae of
Kesus 8ascuQana 0already deceased at the tie1+ canceling TCT (o. 637 issued on
Kuly 3+ 5632 under the nae of Kesus 8ascuQana+ !ho appears to "e a co<o!ner of Got
(o. 52I !ith an undivided t!o<seventh 02*71 portion thereof.
%hile it is true that Kesus 8ascuQana e-ecuted the deed of a"solute sale over the
property on August 52+ 5635 in favor of Diosdado /uilhig for PI+36;.;;+ and that it
!as only on Kuly 3+ 5632 that TCT (o. 637 !as issued in his nae as one of the co<
o!ners of Got (o. 52I+ Diosdado /uilhig and the respondents nevertheless ac&uired
o!nership over the property. The deed of sale e-ecuted "y Kesus 8ascuQana in favor
of Diosdado /uilhig on August 52+ 5635 !as a perfected contract of sale over the
property. It is settled that a perfected contract of sale cannot "e challenged on the
ground of the non<transfer of o!nership of the property sold at that tie of the
perfection of the contract+ since it is consuated upon delivery of the property to the
vendee. It is through tradition or delivery that the "uyer ac&uires o!nership of the
property sold. As provided in Article 5I7F of the (e! Civil Code+ !hen the sale is ade
through a pu"lic instruent+ the e-ecution thereof is e&uivalent to the delivery of the
thing !hich is the o".ect of the contract+ unless the contrary appears or can "e inferred.
The record of the sale !ith the ,egister of Deeds and the issuance of the certificate of
title in the nae of the "uyer over the property erely "ind third parties to the sale. As
"et!een the seller and the "uyer+ the transfer of o!nership ta2es effect upon the
e-ecution of a pu"lic instruent covering the real property.
Gong "efore the petitioners
secured a Torrens title over the property+ the respondents had "een in actual
possession of the property and had designated Jarte as their overseer.
Article 5I7F of the (e! Civil Code provides$
B( the 'ontra't o+ sale$ one o+ the 'ontra'tin, parties o"li,ates hi#sel+ to trans+er the
ownership o+ and to deliver a deter#inate thin,$ and the other to pa( there+or a pri'e
'ertain in #one( or its e%&ivalent.
! 'ontra't o+ sale #a( "e a"sol&te or 'onditional.
Thus+ there are three essential eleents of sale+ to !it$
a1 Consent or eeting of the inds+ that is+ consent to transfer o!nership in e-change
for the price9
"1 Deterinate su".ect atter9 and
c1 Price certain in oney or its e&uivalent.
In this case+ there !as a eeting of the inds "et!een the vendor and the vendee+
!hen the vendor undertoo2 to deliver and transfer o!nership over the property covered
"y the deed of a"solute sale to the vendee for the price of PI+36;.;; of
!hich P:+36;.;; !as paid "y the vendee to the vendor as do!n payent. The vendor
undertoo2 to have the property sold+ surveyed and segregated and a separate title
therefor issued in the nae of the vendee+ upon !hich the latter !ould "e o"liged to
pay the "alance of P5+;;;.;;. There !as no stipulation in the deed that the title to the
property reained !ith the vendor+ or that the right to unilaterally resolve the contract
upon the "uyers failure to pay !ithin a fi-ed period !as given to such vendor. Patently+
the contract e-ecuted "y the parties is a deed of sale and not a contract to sell. As the
Court ruled in a recent case$
In "ignos !. Court of Appeals ;10E SCR! 3.0>$ we have said that$ altho&,h
deno#inated a <Deed o+ Conditional Sale$= a sale is still a"sol&te where the 'ontra't
is devoid o+ an( pro!iso that title is reserved or the ri,ht to &nilaterall( res'ind is
stip&lated$ e.g., &ntil or &nless the pri'e is paid. Ownership will then "e trans+erred to
the "&(er &pon a't&al or 'onstr&'tive deliver( ;e.g. "( the exe'&tion o+ a p&"li'
do'&#ent> o+ the propert( sold. @here the 'ondition is i#posed &pon the per+e'tion
o+ the 'ontra't itsel+$ the +ail&re o+ the 'ondition wo&ld prevent s&'h per+e'tion. I+ the
'ondition is i#posed on the o"li,ation o+ a part( whi'h is not +&l+illed$ the other part(
#a( either waive the 'ondition or re+&se to pro'eed with the sale. ;!rt. 1010$ Civil
Th&s$ in one 'ase$ when the sellers de'lared in a <Re'eipt o+ Down Pa(#ent= that
the( re'eived an a#o&nt as p&r'hase pri'e +or a ho&se and lot witho&t an( reservation
o+ title &ntil +&ll pa(#ent o+ the entire p&r'hase pri'e$ the i#pli'ation was that the(
sold their propert(. In eople#s $ndustrial and Commercial Corporation !. Court of
Appeals, it was statedA
! deed o+ sale is 'onsidered a"sol&te in nat&re where there is neither a stip&lation in
the deed that title to the propert( sold is reserved in the seller &ntil +&ll pa(#ent o+ the
pri'e$ nor one ,ivin, the vendor the ri,ht to &nilaterall( resolve the 'ontra't the
#o#ent the "&(er +ails to pa( within a +ixed period.
!ppl(in, these prin'iples to this 'ase$ it 'annot "e ,ainsaid that the 'ontra't o+ sale
"etween the parties is a"sol&te$ not 'onditional. There is no reservation o+ ownership
nor a stip&lation providin, +or a &nilateral res'ission "( either part(. In +a't$ the sale
was 'ons&##ated &pon the deliver( o+ the lot to respondent. Th&s$ !rt. 11..
provides that the ownership o+ the thin, sold shall "e trans+erred to the vendee &pon
the a't&al or 'onstr&'tive deliver( thereo+.
The condition in the deed that the "alance of P5+;;;.;; shall "e paid to the vendor
"y the vendee as soon as the property sold shall have "een surveyed in the nae of
the vendee and all papers pertinent and necessary to the issuance of a separate
certificate of title in the nae of the vendee shall have "een prepared is not a condition
!hich prevented the efficacy of the contract of sale. It erely provides the anner "y
!hich the total purchase price of the property is to "e paid. The condition did not
prevent the contract fro "eing in full force and effect$
The stip&lation that the <pa(#ent o+ the +&ll 'onsideration "ased on a s&rve( shall "e
d&e and pa(a"le in +ive ;0> (ears +ro# the exe'&tion o+ a +or#al deed o+ sale= is not a
'ondition whi'h a++e'ts the e++i'a'( o+ the 'ontra't o+ sale. It #erel( provides the
#anner "( whi'h the +&ll 'onsideration is to "e 'o#p&ted and the ti#e within whi'h
the sa#e is to "e paid. B&t it does not a++e't in an( #anner the e++e'tivit( o+ the
'ontra't. O
In a contract to sell+ o!nership is retained "y a seller and is not to "e transferred to
the vendee until full payent of the price. /uch payent is a positive suspensive
condition+ the failure of !hich is not a "reach of contract "ut siply an event that
prevented the o"ligation fro ac&uiring "inding force.
It "ears stressing that in a contract of sale+ the non<payent of the price is a
resolutory condition !hich e-tinguishes the transaction that+ for a tie+ e-isted and
discharges the o"ligation created under the transaction.
A seller cannot unilaterally
and e-tra.udicially rescind a contract of sale unless there is an e-press stipulation
authori#ing it. In such case+ the vendor ay file an action for specific perforance or
.udicial rescission.
Article 5536 of the (e! Civil Code provides that in reciprocal o"ligations+ neither
party incurs in delay if the other does not coply or is not ready to coply in a proper
anner !ith !hat is incu"ent upon hi9 fro the oent one of the parties fulfills his
o"ligation+ delay "y the other "egins. In this case+ the vendor 0Kesus 8ascuQana1 failed
to coply !ith his o"ligation of segregating Got (o. 52I<J and the issuance of a Torrens
title over the property in favor of the vendee+ or the latters successors<in<interest+ the
respondents herein. %orse+ petitioner Kose 8ascuQana !as a"le to secure title over
the property under the nae of his deceased father.
IN LIG'T OF ALL T'* FOR*GOING, the petition is DE(IED for lac2 of erit.
Costs against the petitioners.
SO OR"*R*".
-uno, .)hairman/, +ustria(3artine1, Tinga, and )hico(4a1ario, 22., concur.
C>5R5 #o5 42@;25 Duly <, 1444E
DAME >5 %#>, !etitioner, vs. T&E &%#%RA*!E ,%)RT %8 A''EA!",
"'%)"E" M>)E! F5 R%*!E" and A!EDA#$R% M5
R%*!E", res!ondents5
$ E , " % #
+#ARE"9"A#TA>%, J5G
Be+ore &s is a petition +or review on certiorari +ro# the ?&d,#ent rendered "( the Co&rt o+
!ppeals whi'h$ ex'ept as to the award o+ exe#plar( da#a,es$ a++ir#ed the de'ision o+ the
Re,ional Trial Co&rt o+ L&'ena Cit($ Bran'h B/$ settin, aside the <!,ree#ent o+ P&r'hase and
Sale= entered into "( herein petitioner and private respondent spo&ses in Civil Case o. E06E0.
On Ma( 1/$ 12E3$ petitioner Kai#e On,$ on the one hand$ and respondent spo&ses Mi,&el M.
Ro"les and !le?andra Ro"les$ on the other hand$ exe'&ted an <!,ree#ent o+ P&r'hase and Sale=
respe'tin, two par'els o+ land sit&ated at Barrio P&ri$ San !ntonio$ 5&e7on. The ter#s and
'onditions o+ the 'ontra't readA
<1. That +or and in 'onsideration o+ the a,reed p&r'hase pri'e o+ T@O MILLIO
PESOS ;P-$///$///.//>$ Philippine '&rren'($ the #ode and #anner o+ pa(#ent is as
!. The initial pa(#ent o+ SIF DUDRED TDOUS!D PESOS ;PB//$///.//> as
ver"all( a,reed "( the parties$ shall "e "ro)en down as +ollowsA
1. P1/3$122.21 shall "e paid$ and as alread( paid "( the BU8ER to
the SELLERS on Mar'h --$ 12E3$ as stip&lated &nder the Certi+i'ation o+
&nderta)in,dated Mar'h --$ 12E3 and 'overed "( a 'he') vo&'her o+ even date.
-. That the s&# o+ P12B$0//./2 shall "e paid dire'tl( "( the BU8ER to the
Ban) o+ Philippine Islands to answer +or the loan o+ the SELLERS whi'h as o+ Mar'h
10$ 12E3 a#o&nted to P03.$31/.1/$ and +or the interest that #a( a''r&ed %sic& +ro#
Mar'h 10$ 12E3$ &p to the ti#e said o"li,ation o+ the SELLERS with the said "an)
has "een settled$ provided however that the a#o&nt in ex'ess o+ P12B$0//./2$ shall "e
'har,ea"le +ro# the ti#e deposit o+ the SELLERS with the a+oresaid "an).
B. That the "alan'e o+ OE MILLIO 9OUR DUDRED TDOUS!D
;P1$1//$///.//> PESOS shall "e paid "( the BU8ER to the SELLERS in +o&r ;1>
e%&al %&arterl( install#ents o+ TDREE DUDRED 9I9T8 TDOUS!D PESOS
;P30/$///.//>$ the +irst to "e d&e and pa(a"le on K&ne 10$ 12E3$ and ever( %&arter
therea+ter$ &ntil the whole a#o&nt is +&ll( paid$ "( these presents pro#ise to sell to
said BU8ER the two ;-> par'els o+ a,ri'&lt&ral land in'l&din, the ri'e #ill and the
pi,,er( whi'h are the #ost nota"le i#prove#ents thereon$ sit&ated at Baran,a( P&ri$
San !ntonio 5&e7on$ x x x.
<-. That &pon the pa(#ent o+ the total p&r'hase pri'e "(
the BU8ER the SELLERS "ind the#selves to deliver to the +or#er a ,ood and
s&++i'ient deed o+ sale and 'onve(an'e +or the des'ri"ed two ;-> par'els o+ land$ +ree
and 'lear +ro# all liens and en'&#"ran'es.
<3. That i##ediatel( &pon the exe'&tion o+ this do'&#ent$ the SELLERS shall
deliver$ s&rrender and trans+er possession o+ the said par'els o+ land in'l&din, all the
i#prove#ents that #a( "e +o&nd thereon$ to the BU8ER$ and the latter shall ta)e over
+ro# the SELLER the possession$ operation$ 'ontrol and #ana,e#ent o+ the
RICEMILL and PICCER8 +o&nd on the a+oresaid par'els o+ land.
<1. That all pa(#ents d&e and pa(a"le &nder this 'ontra't shall "e e++e'ted in the
residen'e o+ the SELLERS lo'ated at Baran,a( P&ri$ San !ntonio$ 5&e7on &nless
another pla'e shall have "een s&"se%&entl( desi,nated "( "oth parties in writin,.
x x x x x x x x x.=
On Ma( 10$ 12E3$ petitioner On, too) possession o+ the s&"?e't par'els o+ land to,ether
with the pi,,er($ "&ildin,$ ri'e#ill$ residential ho&se and other i#prove#ents thereon.
P&rs&ant to the 'ontra't the( exe'&ted$ petitioner paid respondent spo&ses the s&# o+
"( depositin, it with the United Co'on&t Planters Ban). S&"se%&entl($ petitioner
deposited s&#s o+ #one( with the Ban) o+ Philippine Islands ;BPI>$
in a''ordan'e with their
stip&lation that petitioner pa( the loan o+ respondents with BPI.
To answer +or his "alan'e o+ P1$1//$///.// petitioner iss&ed +o&r ;1> post6dated Metro Ban)
'he')s pa(a"le to respondent spo&ses in the a#o&nt o+ P30/$////.// ea'h$ na#el(A Che') o.
10../E dated K&ne 10$ 12E3$
Che') o. 10../2 dated Septe#"er 10$12E3$
Che') o. 10..1/
dated De'e#"er 10$ 12E3
and Che') o. 10..11 dated Mar'h 10$ 12E1.
@hen presented +or
pa(#ent$ however$ the 'he')s were dishonored d&e to ins&++i'ient +&nds. Petitioner pro#ised to
repla'e the 'he')s "&t +ailed to do so. To #a)e #atters worse$ o&t o+ the P12B$0//.// loan o+
respondent spo&ses with the Ban) o+ the Philippine Islands$ whi'h petitioner$ as per a,ree#ent$
sho&ld have paid$ petitioner onl( #ana,ed to dole o&t no #ore than P323$B.2.B/. @hen the
"an) threatened to +ore'lose the respondent spo&ses* #ort,a,e$ the( sold three trans+or#ers o+
the ri'e #ill worth P01$111.// to pa( o++ their o&tstandin, o"li,ation with said "an)$ with the
)nowled,e and 'on+or#it( o+ petitioner.
Petitioner$ in ret&rn$ vol&ntaril( ,ave the spo&ses
a&thorit( to operate the ri'e #ill.
De$ however$ 'ontin&ed to "e in possession o+ the two par'els
o+ land while private respondents were +or'ed to &se the ri'e #ill +or residential p&rposes.
On !&,&st -$ 12E0$ respondent spo&ses$ thro&,h 'o&nsel$ sent petitioner a de#and letter
as)in, +or the ret&rn o+ the properties. Their de#and was le+t &nheeded$ so$ on Septe#"er -$
12E0$ the( +iled with the Re,ional Trial Co&rt o+ L&'ena Cit($ Bran'h B/$ a 'o#plaint +or
res'ission o+ 'ontra't and re'over( o+ properties with da#a,es. Later$ while the 'ase was still
pendin, with the trial 'o&rt$ petitioner introd&'ed #a?or i#prove#ents on the s&"?e't properties
"( 'onstr&'tin, a 'o#plete +en'e #ade o+ hollow "lo')s and expandin, the pi,,er(. These
pro#pted the respondent spo&ses to as) +or a writ o+ preli#inar( in?&n'tion.
The trial 'o&rt
,ranted the appli'ation and en?oined petitioner +ro# introd&'in, i#prove#ents on the properties
ex'ept +or repairs.
On K&ne 1$ 12E2 the trial 'o&rt rendered a de'ision$ the dispositive portion o+ whi'h reads as
<I GIE@ O9 TDE 9ORECOIC$ ?&d,#ent is here"( renderedA
a> Orderin, that the 'ontra't entered into "( plainti++ spo&ses Mi,&el M. Ro"les and
!le?andra M. Ro"les and the de+endant$ Kai#e On, 'aptioned U!,ree#ent o+ P&r'hase
and Sale$* #ar)ed as Exhi"it U!* set asideH
"> Orderin, de+endant$ Kai#e On, to deliver the two ;-> par'els o+ land whi'h are the
s&"?e't #atter o+ Exhi"it U!* to,ether with the i#prove#ents thereon to the spo&ses
Mi,&el M. Ro"les and !le?andro M. Ro"lesH
'> Orderin, plainti++ spo&ses$ Mi,&el Ro"les and !le?andra Ro"les to ret&rn to Kai#e
On, the s&# o+ P12.$1.2.01H
d> Orderin, de+endant Kai#e On, to pa( the plainti++s the s&# o+ P1//$///.// as
exe#plar( da#a,esH and
e> Orderin, de+endant Kai#e On, to pa( the plainti++s spo&ses Mi,&el M. Ro"les and
!le?andra Ro"les the s&# o+ P-/$///.// as attorne(*s +ees and liti,ation expenses.
<The #otion o+ the plainti++ spo&ses Mi,&el M. Roles and !le?andra Ro"les +or the
appoint#ent o+ re'eivership is rendered #oot and a'ade#i'.
9ro# this de'ision$ petitioner appealed to the Co&rt o+ !ppeals$ whi'h a++ir#ed the de'ision
o+ the Re,ional Trial Co&rt "&t deleted the award o+ exe#plar( da#a,es. In a++ir#in, the
de'ision o+ the trial 'o&rt$ the Co&rt o+ !ppeals noted that the +ail&re o+ petitioner to 'o#pletel(
pa( the p&r'hase pri'e is a s&"stantial "rea'h o+ his o"li,ation whi'h entitles the private
respondents to res'ind their 'ontra't &nder !rti'le 1121 o+ the ew Civil Code. Den'e$ the
instant petition.
!t the o&tset$ it #&st "e stated that the iss&es raised "( the petitioner are ,enerall( +a't&al in
nat&re and were alread( passed &pon "( the Co&rt o+ !ppeals and the trial 'o&rt. Ti#e and
a,ain$ we have stated that it is not the +&n'tion o+ the S&pre#e Co&rt to assess and eval&ate all
over a,ain the eviden'e$ testi#onial and do'&#entar($ add&'ed "( the parties to an appeal$
parti'&larl( where$ s&'h as in the 'ase at "en'h$ the +indin,s o+ "oth the trial 'o&rt and the
appellate 'o&rt on the #atter 'oin'ide. There is no 'o,ent reason shown that wo&ld ?&sti+( the
'o&rt to dis'ard the +a't&al +indin,s o+ the two 'o&rts "elow and to s&peri#pose its own.
The onl( pertinent le,al iss&es raised whi'h are worth( o+ dis'&ssion areA ;1> whether the
'ontra't entered into "( the parties #a( "e validl( res'inded &nder !rti'le 1121 o+ the ew Civil
CodeH and ;-> whether the parties had novated their ori,inal 'ontra't as to the ti#e and #anner
o+ pa(#ent.
Petitioner 'ontends that !rti'le 1121 o+ the ew Civil Code is not appli'a"le sin'e he has
alread( paid respondent spo&ses a 'onsidera"le s&# and has there+ore s&"stantiall( 'o#plied
with his o"li,ation. De 'ites !rti'le 13E3 instead$ to the e++e't that where spe'i+i' per+or#an'e
is availa"le as a re#ed($ res'ission #a( not "e resorted to.
! dis'&ssion o+ the a+oresaid arti'les is in order.
Res'ission$ as 'onte#plated in !rti'les 13E/$ et seq.$ o+ the ew Civil Code$ is a re#ed(
,ranted "( law to the 'ontra'tin, parties and even to third persons$ to se'&re the reparation o+
da#a,es 'a&sed to the# "( a 'ontra't$ even i+ this sho&ld "e valid$ "( restoration o+ thin,s to
their 'ondition at the #o#ent prior to the 'ele"ration o+ the 'ontra't.
It i#plies a 'ontra't$
whi'h even i+ initiall( valid$ prod&'es a lesion or a pe'&niar( da#a,e to so#eone.
On the other hand$ !rti'le 1121 o+ the ew Civil Code re+ers to res'ission appli'a"le to
re'ipro'al o"li,ations. Re'ipro'al o"li,ations are those whi'h arise +ro# the sa#e 'a&se$ and in
whi'h ea'h part( is a de"tor and a 'reditor o+ the other$ s&'h that the o"li,ation o+ one is
dependent &pon the o"li,ation o+ the other.
The( are to "e per+or#ed si#&ltaneo&sl( s&'h that
the per+or#an'e o+ one is 'onditioned &pon the si#&ltaneo&s +&l+ill#ent o+ the other. Res'ission
o+ re'ipro'al o"li,ations &nder !rti'le 1121 o+ the ew Civil Code sho&ld "e distin,&ished +ro#
res'ission o+ 'ontra'ts &nder !rti'le 13E3. !ltho&,h "oth pres&ppose 'ontra'ts validl( entered
into and s&"sistin, and "oth re%&ire #&t&al restit&tion when proper$ the( are not entirel(
@hile !rti'le 1121 &ses the ter# <res'ission$= the ori,inal ter# whi'h was &sed in the old
Civil Code$ +ro# whi'h the arti'le was "ased$ was <resol&tion.=
Resol&tion is a prin'ipal a'tion
whi'h is "ased on "rea'h o+ a part($ while res'ission &nder !rti'le 13E3 is a s&"sidiar( a'tion
li#ited to 'ases o+ res'ission +or lesion &nder !rti'le 13E1 o+ the ew Civil Code$ whi'h
expressl( en&#erates the +ollowin, res'issi"le 'ontra'tsA
1. Those whi'h are entered into "( ,&ardians whenever the wards who# the( represent s&++er
lesion "( #ore than one +o&rth o+ the val&e o+ the thin,s whi'h are the o"?e't thereo+H
-. Those a,reed &pon in representation o+ a"sentees$ i+ the latter s&++er the lesion stated in the
pre'edin, n&#"erH
3. Those &nderta)en in +ra&d o+ 'reditors when the latter 'annot in an( #anner 'olle't the
'lai#s d&e the#H
1. Those whi'h re+er to thin,s &nder liti,ation i+ the( have "een entered into "( the de+endant
witho&t the )nowled,e and approval o+ the liti,ants or o+ 'o#petent ?&di'ial a&thorit(H
0. !ll other 'ontra'ts spe'iall( de'lared "( law to "e s&"?e't to res'ission.
O"vio&sl($ the 'ontra't entered into "( the parties in the 'ase at "ar does not +all &nder an(
o+ those #entioned "( !rti'le 13E1. Conse%&entl($ !rti'le 13E3 is inappli'a"le.
Ma( the 'ontra't entered into "etween the parties$ however$ "e res'inded "ased on !rti'le
! 'are+&l readin, o+ the parties* <!,ree#ent o+ P&r'hase and Sale= shows that it is in the
nat&re o+ a 'ontra't to sell$ as distin,&ished +ro# a 'ontra't o+ sale. In a 'ontra't o+ sale$ the title
to the propert( passes to the vendee &pon the deliver( o+ the thin, soldH while in a 'ontra't to
sell$ ownership is$ "( a,ree#ent$ reserved in the vendor and is not to pass to the vendee &ntil +&ll
pa(#ent o+ the p&r'hase pri'e.
In a 'ontra't to sell$ the pa(#ent o+ the p&r'hase pri'e is a
positive s&spensive 'ondition$ the +ail&re o+ whi'h is not a "rea'h$ 'as&al or serio&s$ "&t a
sit&ation that prevents the o"li,ation o+ the vendor to 'onve( title +ro# a'%&irin, an o"li,ator(
Respondents in the 'ase at "ar "o&nd the#selves to deliver a deed o+ a"sol&te sale and 'lean
title 'overin, the two par'els o+ land &pon +&ll pa(#ent "( the "&(er o+ the p&r'hase pri'e o+
P-$///$///.//. This pro#ise to sell was s&"?e't to the +&l+ill#ent o+ the s&spensive 'ondition o+
+&ll pa(#ent o+ the p&r'hase pri'e "( the petitioner. Petitioner$ however$ +ailed to 'o#plete
pa(#ent o+ the p&r'hase pri'e. The non6+&l+ill#ent o+ the 'ondition o+ +&ll pa(#ent rendered the
'ontra't to sell ine++e'tive and witho&t +or'e and e++e't. It #&st "e stressed that the "rea'h
'onte#plated in !rti'le 1121 o+ the ew Civil Code is the o"li,or*s +ail&re to 'o#pl( with an
o"li,ation alread( extant$ not a +ail&re o+ a 'ondition to render "indin, that o"li,ation.
to pa($ in this instan'e$ is not even a "rea'h "&t #erel( an event whi'h prevents the vendor*s
o"li,ation to 'onve( title +ro# a'%&irin, "indin, +or'e.
Den'e$ the a,ree#ent o+ the parties in
the 'ase at "en'h #a( "e set aside$ "&t not "e'a&se o+ a "rea'h on the part o+ petitioner +or
+ail&re to 'o#plete pa(#ent o+ the p&r'hase pri'e. Rather$ his +ail&re to do so "ro&,ht a"o&t a
sit&ation whi'h prevented the o"li,ation o+ respondent spo&ses to 'onve( title +ro# a'%&irin, an
o"li,ator( +or'e.
Petitioner insists$ however$ that the 'ontra't was novated as to the #anner and ti#e o+
@e are not pers&aded. !rti'le 1-2- o+ the ew Civil Code states that$ <In order that an
o"li,ation #a( "e extin,&ished "( another whi'h s&"stit&tes the sa#e$ it is i#perative that it "e
so de'lared in &ne%&ivo'al ter#s$ or that the old and the new o"li,ations "e on ever( point
in'o#pati"le with ea'h other.=
ovation is never pres&#ed$ it #&st "e proven as a +a't either "( express stip&lation o+ the
parties or "( i#pli'ation derived +ro# an irre'on'ila"le in'o#pati"ilit( "etween the old and the
new o"li,ation.
Petitioner 'ites the +ollowin, instan'es as proo+ that the 'ontra't was novatedA
the retrieval o+ the trans+or#ers +ro# petitioner*s '&stod( and their sale "( the respondents to
MER!LCO on the 'ondition that the pro'eeds thereo+ "e a''o&nted +or "( the respondents and
ded&'ted +ro# the pri'e o+ the 'ontra'tH the ta)e6over "( the respondents o+ the '&stod( and
operation o+ the ri'e #illH and the 'ontin&o&s and re,&lar withdrawals "( respondent Mi,&el
Ro"les o+ install#ent s&#s per vo&'hers ;Exhs. <E= to <1.=> on the 'ondition that these
install#ents "e 'redited to petitioner*s a''o&nt and ded&'ted +ro# the "alan'e o+ the p&r'hase
Contrar( to petitioner*s 'lai#$ re'ords show that the parties never even intended to novate
their previo&s a,ree#ent. It is tr&e that petitioner paid respondents s#all s&#s o+ #one(
a#o&ntin, to P1E$BE/.//$ in 'ontravention o+ the #anner o+ pa(#ent stip&lated in their
'ontra't. These install#ents were$ however$ o"?e'ted to "( respondent spo&ses$ and petitioner
replied that these represented the interest o+ the prin'ipal a#o&nt whi'h he owed the#.
Re'ords +&rther show that petitioner a,reed to the sale o+ MER!LCO trans+or#ers "( private
respondents to pa( +or the "alan'e o+ their s&"sistin, loan with the Ban) o+ Philippine
Islands. Petitioner*s letter o+ a&thori7ation readsA
<x x x x x x x x x
<Under this a&thorit($ it is #&t&all( &nderstood that whatever pa(#ent re'eived +ro#
MER!LCO as pa(#ent to the trans+or#ers will "e 'onsidered as partial pa(#ent o+
the &ndersi,ned*s o"li,ation to Mr. and Mrs. Mi,&el M. Ro"les.
<The sa#e will "e &tili7ed as partial pa(#ent to existin, loan with the Ban) o+
Philippine Islands.
$t is also mutually understood that this payment to the 'ank of hilippine $slands will be
reimbursed to Mr. and Mrs. Miguel (. )obles by the undersigned.= IUnders'orin, s&ppliedJ
It sho&ld "e noted that while it was a,reed that part o+ the p&r'hase pri'e in the s&# o+
P12B$0//.// wo&ld "e dire'tl( deposited "( petitioner to the Ban) o+ Philippine Islands to
answer +or the loan o+ respondent spo&ses$ petitioner onl( #ana,ed to deposit
P323$B.2.B/. @hen the "an) threatened to +ore'lose the properties$ petitioner apparentl( 'o&ld
not even raise the s&# needed to +orestall an( a'tion on the part o+ the "an). Conse%&entl($ he
a&thori7ed respondent spo&ses to sell the three ;3> trans+or#ers. Dowever$ altho&,h the parties
a,reed to 'redit the pro'eeds +ro# the sale o+ the trans+or#ers to petitioner*s o"li,ation$ he was
s&pposed to rei#"&rse the sa#e later to respondent spo&ses. This 'an onl( #ean that there was
never an intention on the part o+ either o+ the parties to novate petitioner*s #anner o+ pa(#ent.
Petitioner 'ontends that the parties ver"all( a,reed to novate the #anner o+ pa(#ent when
respondent spo&ses proposed to operate the ri'e #ill on the 'ondition that the( will a''o&nt +or
its earnin,s. @e +ind that this is &ns&"stantiated "( the eviden'e on re'ord. The tenor o+ his
letter dated !&,&st 1-$ 12E1 to respondent spo&ses$ in +a't$ shows that petitioner had a <little
#is&nderstandin,= with respondent spo&ses who# he was evidentl( tr(in, to appease "(
a&thori7in, the# to 'ontin&e te#poraril( with the operation o+ the ri'e #ill. Clearl($ while
petitioner #i,ht have wanted to novate the ori,inal a,ree#ent as to his #anner o+ pa(#ent$ the
re'ords are "ere+t o+ eviden'e that respondent spo&ses willin,l( a,reed to #odi+( their previo&s
In order +or novation to ta)e pla'e$ the 'on'&rren'e o+ the +ollowin, re%&isites is
indispensa"leA ;1> there #&st "e a previo&s valid o"li,ationH ;-> there #&st "e an a,ree#ent o+
the parties 'on'erned to a new 'ontra'tH ;3> there #&st "e the extin,&ish#ent o+ the old 'ontra'tH
and ;1> there #&st "e the validit( o+ the new 'ontra't.
The a+oresaid re%&isites are not +o&nd in
the 'ase at "en'h. The s&"se%&ent a'ts o+ the parties hardl( de#onstrate their intent to dissolve
the old o"li,ation as a 'onsideration +or the e#er,en'e o+ the new one. @e repeat to the point o+
triteness$ novation is never pres&#ed$ there #&st "e an express intention to novate.
!s re,ards the i#prove#ents introd&'ed "( petitioner to the pre#ises and +or whi'h he
'lai#s rei#"&rse#ent$ we see no reason to depart +ro# the r&lin, o+ the trial 'o&rt and the
appellate 'o&rt that petitioner is a "&ilder in "ad +aith. De introd&'ed the i#prove#ents on the
pre#ises )nowin, +&ll( well that he has not paid the 'onsideration o+ the 'ontra't in +&ll and over
the vi,oro&s o"?e'tions o+ respondent spo&ses. Moreover$ petitioner introd&'ed #a?or
i#prove#ents on the pre#ises even while the 'ase a,ainst hi# was pendin, "e+ore the trial
The award o+ exe#plar( da#a,es was 'orre'tl( deleted "( the Co&rt o+ !ppeals inas#&'h
as no #oral$ te#perate$ li%&idated or 'o#pensator( da#a,es in addition to exe#plar( da#a,es
were awarded.
B&ERE8%RE$ the de'ision rendered "( the Co&rt o+ !ppeals is here"( !99IRMED with
the MODI9IC!TIO that respondent spo&ses are ordered to ret&rn to petitioner the s&# o+
P1E$BE/.// in addition to the a#o&nts alread( awarded. Costs a,ainst petitioner.
"% %R$ERE$5
"a!ide, Jr., C.J., %Chairman&, Melo, (apunan, and ardo, JJ., 'on'&r.
Coronel v. CA
The case arose !rom a complaint !or speci!ic per!ormance !iled by private respondent
Alcara, a$ainst petitioners to consummate the sale o! a parcel o! land in Gue,on City.
On 8anuary '(, '()>, petitioners executed a #eceipt o! own Payment% o! P><,<<< in
!avor o! plainti!! #amona Alcara,, bindin$ themselves to trans!er the ownership o! the
land in their name !rom their deceased !ather, a!terwhich the balance o! P','(<,<<<
shall be paid in !ull by Alcara,. On February @, '()>, the property was trans!erred to
petitioners. On February '), '()>, petitioners sold the property to Eabana$. For this
reason, Concepcion, #amona-s mother, !iled an action !or speci!ic per!ormance.
Whether the contract between petitioners and private respondent was that o! a
conditional sale or a mere contract to sell
2ale, by its very nature, is a consensual contract because it is per!ected by mere consent.
The essential elements o! a contract o! sale are the !ollowin$F a/ Consent or meetin$ o!
the minds, that is, consent to trans!er ownership in exchan$e !or the priceB b/
eterminate sub0ect matterB and c/ Price certain in money or its e+uivalent.
3nder this de!inition, a Contract to 2ell may not be considered as a Contract of 2ale
because the !irst essential element is lac6in$. 1n a contract to sell, the prospective seller
explicity reserves the trans!er o! title to the prospective buyer, meanin$, the prospective
seller does not as yet a$ree or consent to trans!er ownership o! the property sub0ect o!
the contract to sell until the happenin$ o! an event, which !or present purposes we shall
ta6e as the !ull payment o! the purchase price. What the seller a$rees or obli$es himsel!
to do is to !ul!ill his promise to sell the sub0ect property when the entire amount o! the
purchase price is delivered to him. 1n other words the !ull payment o! the purchase price
parta6es o! a suspensive condition, the non?!ul!illment o! which prevents the obli$ation
to sell !rom arisin$ and thus, ownership is retained by the prospective seller without
!urther remedies by the prospective buyer. A contract to sell may thus be de!ined as a
bilateral contract whereby the prospective seller, while expressly reservin$ the
ownership o! the sub0ect property despite delivery thereo! to the prospective buyer,
binds himsel! to sell the said property exclusively to the prospective buyer upon
!ul!illment o! the condition a$reed upon, that is, !ull payment o! the purchase price.
A contract to sell may not even be considered as a conditional contract o! sale where the
seller may li6ewise reserve title to the property sub0ect o! the sale until the !ul!illment o!
a suspensive condition, because in a conditional contract o! sale, the !irst element o!
consent is present, althou$h it is conditioned upon the happenin$ o! a contin$ent event
which may or may not occur. 1! the suspensive condition is not !ul!illed, the per!ection o!
the contract o! sale is completely abated. "owever, i! the suspensive condition is
!ul!illed, the contract o! sale is thereby per!ected, such that i! there had already been
previous delivery o! the property sub0ect o! the sale to the buyer, ownership thereto
automatically trans!ers to the buyer by operation o! law without any !urther act havin$
to be per!ormed by the seller. 1n a contract to sell, upon the !ul!illment o! the suspensive
condition which is the !ull payment o! the purchase price, ownership will not
automatically trans!er to the buyer althou$h the property may have been previously
delivered to him. The prospective seller still has to convey title to the prospective buyer
by enterin$ into a contract o! absolute sale.
1t is essential to distin$uish between a contract to sell and a conditional contract o! sale
specially in cases where the sub0ect property is sold by the owner not to the party the
seller contracted with, but to a third person, as in the case at bench. 1n a contract to sell,
there bein$ no previous sale o! the property, a third person buyin$ such property despite
the !ul!illment o! the suspensive condition such as the !ull payment o! the purchase
price, !or instance, cannot be deemed a buyer in bad !aith and the prospective buyer
cannot see6 the relie! o! reconveyance o! the property. There is no double sale in such
case. Title to the property will trans!er to the buyer a!ter re$istration because there is no
de!ect in the owner?seller7s title per se, but the latter, o! course, may be used !or
dama$es by the intendin$ buyer.
1n a conditional contract o! sale, however, upon the !ul!illment o! the suspensive
condition, the sale becomes absolute and this will de!initely a!!ect the seller7s title
thereto. 1n !act, i! there had been previous delivery o! the sub0ect property, the seller7s
ownership or title to the property is automatically trans!erred to the buyer such that, the
seller will no lon$er have any title to trans!er to any third person. 2uch second buyer o!
the property who may have had actual or constructive 6nowled$e o! such de!ect in the
seller7s title, or at least was char$ed with the obli$ation to discover such de!ect, cannot
be a re$istrant in $ood !aith. 2uch second buyer cannot de!eat the !irst buyer7s title. 1n
case a title is issued to the second buyer, the !irst buyer may see6 reconveyance o! the
property sub0ect o! the sale.
The a$reement 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 !rom enterin$ into an absolute contract o! sale
pertained to the sellers themselves .the certi!icate o! title was not in their names/ and
not the !ull payment o! the purchase price. 3nder the established !acts and
circumstances o! the case, the Court may sa!ely presume that, had the certi!icate o! title
been in the names o! petitioners?sellers at that time, there would have been no reason
why an absolute contract o! sale could not have been executed and consummated ri$ht
there and then.
What is clearly established by the plain lan$ua$e o! the sub0ect document is that when
the said A#eceipt o! own PaymentA was prepared and si$ned by petitioners #omeo A.
Coronel, et al., the parties had a$reed to a conditional contract o! sale, consummation o!
which is sub0ect only to the success!ul trans!er o! the certi!icate o! title !rom the name o!
petitioners7 !ather, Constancio P. Coronel, to their names.
The provision on double sale presumes title or ownership to pass to the !irst buyer, the
exceptions bein$F .a/ when the second buyer, in $ood !aith, re$isters the sale ahead o!
the !irst buyer, and .b/ should there be no inscription by either o! the two buyers, when
the second buyer, in $ood !aith, ac+uires possession o! the property ahead o! the !irst
buyer. 3nless, the second buyer satis!ies these re+uirements, title or ownership will not
trans!er to him to the pre0udice o! the !irst buyer. 1n a case o! double sale, what !inds
relevance and materiality is not whether or not the second buyer was a buyer in $ood
!aith but whether or not said second buyer re$isters such second sale in $ood !aith, that
is, without 6nowled$e o! any de!ect in the title o! the property sold. 1! a vendee in a
double sale re$isters that sale a!ter he has ac+uired 6nowled$e that there was a previous
sale o! the same property to a third party or that another person claims said property in
a pervious sale, the re$istration will constitute a re$istration in bad !aith and will not
con!er upon him any ri$ht.
G.R. No. L-56955 February 27, 1949
CONSORCIA, T*O"ORO a&) *RN*STO, a(( sur&a1e) AG6STINO, a&) S,O6S*S !*NITO
T'* 'ONORA!L* CO6RT OF A,,*ALS DT8%r) "%v%s%o&E a&) S*<*RINO +OL"OGO a&)
CATALINA +*RC*N*, respondents.
*io esinando $. ,enturan1a and 2.,. !alili for petitioners.
*eynaldo 3agalang 3ambil and *amon 5 -ardo for private respondents.

G6TI*RR*7, JR. J.:
This petition involves a three hectare parcel of land foring part of a si-teen hectare hoestead
!hich !as originally covered "y =riginal Certificate of Title 0=CT1 (o. 767 issued in accordance !ith
the provisions of Coon!ealth Act (o. 5I5 on )oesteads in favor of one+ A"rocio Goren+ !ay
"ac2 in 5627. It !as only in 567F or a"out :2 years after GorenSs death that his heirs+ herein
petitioners 0!ho are all surnaed Agustino1 e-ecuted an affidavit of ad.udication over the said parcel
of land and o"tained Transfer Certificate of Title 0TCT1 (o. 7F6I in their favor. )o!ever+ in 56:7+ the
private respondents had ac&uired the sae parcel of land fro a certain Davino Guarca+ !ho in turn
ac&uired the sae fro Goren in 5623.
The appellate court a!arded the parcel of land to the private respondents. It also ordered the
cancellation of the titles of the petitioners and their co<petitioners+ the vendees of the said land.
)ence+ this petition.
The records sho! that in 5623 A"rocio Goren e-ecuted a deed of sale over the parcel of land for a
consideration of P57;.;; in favor of Davino Guarca. Adittedly+ GorenSs original certificate of title
!hich covered the land !as "arely one year old at the tie so there is no &uestion that the sale !as
!ithin the 7<year prohi"ition against alienation of hoesteads under Co. Act 5I5. Guarca
iediately too2 possession of the land consisting of three 0:1 hectares and reained there until
56:7+ !hen he sold the sae land to the private respondents for P5F;.;;. /ince then+ the private
respondents have "een in possession of the land. The deed of sale+ "et!een Goren and Guarca and
"et!een Guarca and the private respondents !ere "oth unregistered.
8ean!hile+ in 567F+ the heirs of Kuana Goren !ho !as the only child of A"rocio Goren+ e-ecuted
an affidavit of ad.udication+ there"y succeeding to the land covered "y =CT (o. 767 !hich included
the three hectare parcel in dispute. =CT (o. 767 !as cancelled and TCT (o. 7F6I !as issued in the
petitionerSs favor. According to the private respondents+ prior to e-ecution of the affidavit and the
issuance of TCT (o. 7F6I+ the petitioners approached the and as2ed the to pay P7;;.;; a
hectare for the land they !ere occupying in consideration of a ne! docuent to "e signed "y the
petitioners "ut the respondents failed to pay so they !ere left out of the pro.ect of partition.
As alleged "y the private respondents and as it appears fro the records+ the other areas covered
"y =CT (o. 767 !ere also previously sold to different persons. Apparently+ these people !ere a"le
to pay the petitioners the corresponding aounts that the latter deanded "ecause !hen TCT (o.
7F6I !as issued+ four 0I1 partial sales !ere annotated on the 8eorandu of Encu"rances of the
title9 then+ another one in 5632 and another in 5637. In 5632+ ho!ever+ the private respondents+
!ere a"le to annotate their adverse clai on the petitionersS title. The respondents reained in
possession of the land up to the events leading to the filing of the case.
In 5637+ the petitioners sold a portion of the land covered "y TCT (o. 7F6I to their co<petitioners+
Lillavicencio and /otto. This portion is the land occupied "y the private respondents. The sale
covered four 0I1 hectares9 5 hectare !as designated as Parcel J !hich the private respondents
"ought fro a certain Ines Pastrana+ !ho in turn+ "ought the sae fro the deceased Kuana Goren
after the 7<year prohi"ition period in the )oestead Ga! and : hectares designated as Parcel A+
!hich is the su".ect of this present petition+ TCT (o. :5373 !as issued in favor of Lillavicencio and
/otto. The ne! o!ners succeeded in ousting the private respondents fro the land. )ence+ the
private respondents instituted an action for recovery of possession !ith daages.
The trial court ad.udicated Parcel J to the private respondents. Parcel A !as a!arded to the
petitioners on the ground that the sale "et!een A"rocio Goren to Davino Guarca and that "et!een
Guarca and the private respondents !ere null and void as the first sale !as e-ecuted !ithin the 7<
year prohi"itive period under the )oestead la!.
The private respondents appealed the decision as regards Parcel A.
=n April 2F+ 5677+ the Court of Appeals rendered the &uestioned decision+ ad.udicating Parcel A to
the private respondents on the ground that the petitioners+ heirs of A"rocio Goren+ "y their inaction
fro 5623 to 567F+ have lost their right to clai the land "ecause of the e&uita"le principle of laches.
In this petition+ therefore+ the petitioners raise the issue of !hether or not the Court of Appeals
coitted grave a"use of discretion in holding that the defense of laches can "e set up against the
petitioner<heirs !ho are presued "y la! to have continued possession of the land fro the tie
their grandfather+ A"rocio Goren+ ac&uired the sae in 5623 until the tie !hen they+ theselves+
ac&uired title thereto "y virtue of succession. 8ay it also "e set up against the other petitioners !ho
ac&uired the said land as innocent purchasers for value+ especially since the original sale "y
A"rocio Goren to Davino Guarca fro !ho the private respondents ac&uired the land !as void ab
initio "eing contrary to pu"lic policy'
If the sale "y A"rocio Goren to Davino Guarca had "een outside the 7<year prohi"itory period
pursuant to Coon!ealth Act (o. 5I5 and the sale had "een void on soe other grounds+ there
!ould "e no &uestion a"out the application of the e&uita"le principle of laches. )o!ever+ it is an
esta"lished rule that e&uity cannot "e set up against clear provisions of la! "ased on pu"lic policy.
Thus+ in a nu"er of cases+ !e have consistently ruled that a sale of a hoestead !ithin the 7<year
prohi"itive period is void ab initio and the sae cannot "e ratified nor can it ac&uire validity through
the passage of tie. In the case of +rsenal v. Intermediate +ppellate )ourt 05I: /C,A I6+7: A56F3B
!e said$
The a"ove provisions of la! are clear and e-plicit. A contract !hich purports to
alienate+ transfer+ convey or encu"er any hoestead !ithin the prohi"itory period
of five years fro the date of the issuance of the patent is void fro its e-ecution. In
a nu"er of cases+ this Court has held that such provision is andatory 0De Gos
/antos v. ,oan Catholic Church of 8idsayap+ 6I Phil. I;71.
>nder the provision of the Civil Code+ a void contract is ine-istent fro the "eginning.
It cannot "e ratified neither can the right to set up the defense of its illegality "e
!aived. 0Art. 5I;6+ Civil Code1.
--- --- ---
--- --- ---
Concededly+ the contract of sale e-ecuted "et!een the respondents Palaos and
/uralta in 5677 is void. It !as entered into three 0:1 years and eight 0F1 onths after
the grant of the hoestead patent to the respondent Palaos in 567I.
--- --- ---
--- --- ---
At first "lush+ the e&uities of the case see to lean in favor of the respondent /uralta
!ho+ since 5677+ has "een in possession of the land !hich !as alost ac&uired in
an underhanded anner "y the petitioners. %e cannot+ ho!ever+ gloss over the fact
that the respondent /uralta !as hiself guilty of transgressing the la! "y entering+ in
5677+ into a transaction clearly prohi"ited "y la!. It is a long standing principle that
e&uity follo!s the la!. Court e-ercising e&uity .urisdiction are "ound "y rules of la!
and have no ar"itrary discretion to disregard the. E&uita"le reasons !ill not control
against any !ell<settled rule of la! or pu"lic policy 08cCurdy v. County of
/hia!assee 55F (.%. 3271. Thus+ e&uity cannot give validity to a void contract. If+ on
the "asis of e&uity+ !e uphold the respondent /uraltaSs clai over the land !hich is
anchored on the contracts previously e-ecuted !e !ould in effect "e giving life to a
void contract.
(either can the doctrine of pari delicto !hich could have effectively "arred GorenSs heirs fro
recovering the property+ "e set up against the "y the ere fact that Goren+ hiself+ !as guilty of
violating the 7<year prohi"ition. In the case of antos v. *oman )atholic )hurch of 3idsayap, et
al., 06I Phil. I;7+ I551 !e ruled$
... =rdinarily the principle of pari delicto !ould apply to her "ecause her predecessor<
in<interest has carried out the sale !ith the presued 2no!ledge of its illegality 0F
8anresa Ith Ed.+ pp. 75775F1+ "ut "ecause the su".ect of the transaction is a piece
of pu"lic land+ pu"lic policy re&uires that she+ as heir+ "e not prevented fro re<
ac&uiring it "ecause it !as given "y la! to her faily for her hoe and cultivation.
This is the policy on !hich our hoestead la! is predicated 0Pascua v. Talens+ F;
Phil. 7621. This right cannot "e !aived. SIt is not !ithin the copetence of any citi#en
to "arter a!ay !hat pu"lic policy "y la! see2s to preserve 0Don#alo Puyat and /ons+
Inc. v. Pantaleon de las Aa+ et al.+ 7I Phil. :1. ...
It is+ ho!ever+ note!orthy to ention that the petitionersS interest in the land in &uestion hardly
e-eplifies the "eneficent purpose for !hich the provisions on hoesteads !ere enacted and the
spirit "ehind the hoestead la!. %e should also stress that the petitioner<vendees are not+ as they
clai to "e+ innocent purchasers for value "ecause at the tie they "ought the land+ the private
respondents had already caused the annotation of their adverse clai on the title of the land. Je that
as it ay+ it is not !ithin the po!er of this Court to pass .udgent on !ho is ore deserving of the
land in &uestion. %e only decide !ho+ under the la!+ is entitled to the disputed property. It is up to
the governent to decide !hether or not the petitioners should retain o!nership of the land. =ur
decision+ therefore+ in this present petition is !ithout pre.udice to the DovernentSs institution of
reversion proceedings as provided "y la!.
%)E,EC=,E+ the petition is here"y D,A(TED. The appealed decision and resolution of the Court
of Appeals are A((>GGED and /ET A/IDE. The decision of the then Court of Cirst Instance of
=riental 8indoro is ,EI(/TATED !ith the odification that the petitioner !ho are heirs are ordered
to rei"urse the private respondents the aount of P57;.;;+ !hich represents the purchase price
received "y the late A"rocio Goren in consideration for the sale of the land.
Get a copy of this decision "e furnished the /olicitor Deneral and the Director of Gands for
appropriate action.
/= =,DE,ED.

6ernan, ).2., 6eliciano, !idin and )ortes, 22., concur.
C8+!' 4: 8DDA!D4 0A#9A;AT, .!. #o. 1&%%/%
represented )* 94!+A 0A#9A;AT-
1A#AA and 984# 0. 1A#AA, .!., G Petitioners" ;resent3

;D#4, #."$
- versusG - AD'T!+A-0A!T+#8H,
Acting Chairman"
CA998.4, '!.,
T+#A, and
CC+C4-#AHA!+4, ##.
C4#. C4D!T 4: A;;8A9', G
!D!A9 1A#I 4: 'A# ;A'CDA9,
+#C., and .4'8 1. 'A9AHA!,
C4#'D894 C!DH and ;ro(ulgated3
!4'A9+#A C!DH-1ADT+'TA,
and the !8+'T8! 4: D88D' of
0e*caua*an, 1ulacan, G .une /, &22%


% E C I S I ! N

T+#A, #.3

1efore this Court is a !ule $% petition assailing the ecision@1A dated &9 'epte()er
199$ of the Court of Appeals that reversed the ecision@&A dated -2 April 1991 of
the !egional Trial Court 5!TC6 of 1ulacan, 1ranch 6, 0alolos. The trial court
declared Transfer Certificates of Title 5TCTs6 #o. T-9-&6-;506 and #o. T-9-&7-;506
as void ab initio and ordered the restoration of 4riginal Certificate of Title 54CT6 #o.
;-1%-506 in the na(e of 8duardo 0anlapat 58duardo6, petitionersG predecessor-in-

The controvers* involves 9ot #o. &&2$, a parcel of land with an area of 1,2%/
s,uare (eters, located at ;anghulo, 4)ando, 1ulacan. The propert* had )een
originall* in the possession of .ose AlvareE, 8duardoGs grandfather, until his de(ise
in 1916. +t re(ained unregistered until / 4cto)er 1976 when 4CT #o. ;-1%-506
was issued in the na(e of 8duardo pursuant to a free patent issued in 8duardoGs
na(e@-A that was entered in the !egistr* of Deeds of 0e*caua*an, 1ulacan.@$AThe
su)>ect lot is ad>acent to a fishpond owned )* one

!icardo CruE 5!icardo6, predecessor-in-interest of respondents Consuelo CruE and
!osalina CruE-1autista 5CruEes6.@%A

4n 19 Dece()er 19%$, )efore the su)>ect lot was titled, 8duardo sold a portion
thereof with an area of %%- s,uare (eters to !icardo. The sale is evidenced )* a
deed of sale entitled G%asulatan ng &ilihang Tulu'an ng (upang )alang Titulo
*%asulatan+@6A which was signed )* 8duardo hi(self as vendor and his wife
8ngracia Aniceto with a certain 'antiago 8nri,ueE signing as witness. The deed was
notariEed )* #otar* ;u)lic 0anolo CruE.@7A 4n $ April 196-, the %asulatan was
registered with the !egister of Deeds of 1ulacan.@/A

4n 1/ 0arch 19/1, another eed of Sale@9A conve*ing another portion of the
su)>ect lot consisting of %2 s,uare (eters as right of wa* was e=ecuted )* 8duardo
in favor of !icardo in order to reach the portion covered )* the first sale e=ecuted in
19%$ and to have access to his fishpond fro( the provincial road.@12A The deed was
signed )* 8duardo hi(self and his wife 8ngracia Aniceto, together with 8duardo
0anlapat, .r. and ;atricio 0anlapat. The sa(e was also dul* notariEed on 1/ .ul*
19/1 )* #otar* ;u)lic Arsenio uevarra.@11A

+n Dece()er 19/1, 9eon 1anaag, .r. 51anaag6, as attorne*-in-fact of his father-in-
law 8duardo, e=ecuted a (ortgage with the !ural 1ank of 'an ;ascual, 4)ando
1ranch 5!1';6, for;122,222.22 with the su)>ect lot as collateral. 1anaag deposited
the ownerGs duplicate certificate of 4CT #o. ;-1%-506 with the )ank.

4n -1 August 19/6, !icardo died without learning of the prior issuance of 4CT #o.
;-1%-506 in the na(e of 8duardo.@1&A Cis heirs, the CruEes, were not i((ediatel*
aware of the consu((ated sale )etween 8duardo and !icardo.

8duardo hi(self died on $ April 19/7. Ce was survived )* his heirs, 8ngracia
Aniceto, his spouse? and children, ;atricio, 1onifacio, 8duardo, CoraEon, Ansel(o,
Teresita and loria, all surna(ed 0anlapat.@1-A #either did the heirs of 8duardo
5petitioners6 infor( the CruEes of the prior sale in favor of their predecessor-in-
interest, !icardo. Jet su)se,uentl*, the CruEes ca(e to learn a)out the sale and the
issuance of the 4CT in the na(e of 8duardo.

Dpon learning of their right to the su)>ect lot, the CruEes i((ediatel* tried to
confront petitioners on the (ortgage and o)tain the surrender of the 4CT. The
CruEes, however, were thwarted in their )id to see the heirs. 4n the advice of the
1ureau of 9ands, #C! 4ffice, the* )rought the (atter to the baranga' captain
of &aranga' ;anghulo, 4)ando, 1ulacan. During the hearing, petitioners were
infor(ed that the CruEes had a legal right to the propert* covered )* 4CT and
needed the 4CT for the purpose of securing a separate title to cover the interest of
!icardo. ;etitioners, however, were unwilling to surrender the 4CT.@1$A

Caving failed to ph*sicall* o)tain the title fro( petitioners, in .ul* 19/9, the CruEes
instead went to !1'; which had custod* of the ownerGs duplicate certificate of the
4CT, earlier surrendered as a conse,uence of the (ortgage. Transacting with
!1';Gs (anager, .ose 'alaEar 5'alaEar6, the CruEes sought to )orrow the ownerGs
duplicate certificate for the purpose of photocop*ing the sa(e and thereafter
showing a cop* thereof to the !egister of Deeds. 'alaEar allowed the CruEes to
)ring the ownerGs duplicate certificate outside the )ank pre(ises when the latter
showed the%asulatan.@1%A The CruEes returned the ownerGs duplicate certificate on
the sa(e da* after having copied the sa(e. The* then )rought the cop* of the 4CT
to !egister of Deeds .ose :lores 5:lores6 of 0e*caua*an and showed the sa(e to
hi( to secure his legal opinion as to how the CruEes could legall* protect their
interest in the propert* and register the sa(e.@16A :lores suggested the preparation
of a su)division plan to )e a)le to segregate the area purchased )* !icardo fro(
8duardo and have the sa(e covered )* a separate title.@17A

Thereafter, the CruEes solicited the opinion of !icardo Arandilla 5Arandilla6, 9and
!egistration 4fficer, Director +++, 9egal Affairs Depart(ent, 9and !egistration
Authorit* at KueEon Cit*, who agreed with the advice given )* :lores.@1/A !el*ing
on the suggestions of :lores and Arandilla, the CruEes hired two geodetic engineers
to prepare the corresponding su)division plan. The su)division plan was presented
to the 9and 0anage(ent 1ureau, !egion +++, and there it was approved )* a certain
0r. ;a()id of said office on &1 .ul* 19/9.

After securing the approval of the su)division plan, the CruEes went )ack to !1';
and again asked for the ownerGs duplicate certificate fro( 'alaEar. The CruEes
infor(ed hi( that the presentation of the ownerGs duplicate certificate was
necessar*, per advise of the !egister of Deeds, for the cancellation of the 4CT and
the issuance in lieu thereof of two separate titles in the na(es of !icardo and
8duardo in accordance with the approved su)division plan.@19A 1efore giving the
ownerGs duplicate certificate, 'alaEar re,uired the CruEes to see Att*. !enato
'antiago 5Att*. 'antiago6, legal counsel of !1';, to secure fro( the latter a
clearance to )orrow the title. Att*. 'antiago would give the clearance on the
condition that onl* CruEes put up a su)stitute collateral, which the* did.@&2A As a
result, the CruEes got hold again of the ownerGs duplicate certificate.

After the CruEes presented the ownerGs duplicate certificate, along with the deeds of
sale and the su)division plan, the !egister of Deeds cancelled the 4CT and issued in
lieu thereof TCT #o. T-9-&6-;506 covering 62- s,uare (eters of 9ot #o. &&2$ in
the na(e of !icardo and TCT #o. T-9-&7-;506 covering the re(aining $%% s,uare
(eters in the na(e of 8duardo.@&1A

4n 9 August 19/9, the CruEes went )ack to the )ank and surrendered to 'alaEar
TCT #o. 9-&7-;506 in the na(e of 8duardo and retrieved the title the* had earlier
given as su)stitute collateral. After securing the new separate titles, the CruEes
furnished petitioners with a cop* of TCT #o. 9-&7-;506 through
the baranga' captain and paid the real propert* ta= for 19/9.@&&A

The CruEes also sent a for(al letter to uiller(o !e*es, .r., Director, 'upervision
'ector, Depart(ent +++ of the Central 1ank of the ;hilippines, in,uiring whether
the* co((itted an* violation of e=isting )ank laws under the circu(stances. A
certain Hosi(o Topacio, .r. of the 'upervision 'ector sent a repl* letter advising the
CruEes, since the (atter is )etween the( and the )ank, to get in touch with the
)ank for the final settle(ent of the case.@&-A

+n 4cto)er of 19/9, 1anaag went to !1';, intending to tender full pa*(ent of the
(ortgage o)ligation. +t was onl* then that he learned of the dealings of the CruEes
with the )ank which eventuall* led to the su)division of the su)>ect lot and the
issuance of two separate titles thereon. +n e=change for the full pa*(ent of the
loan, !1'; tried to persuade petitioners to accept TCT #o. T-9-&7-;506 in the na(e
of 8duardo.@&$A

As a result, three 5-6 cases were lodged, later consolidated, with the trial court, all
involving the issuance of the TCTs, to wit3

516 Civil Case #o. 6%2-0-/9, for reconve*ance with da(ages filed )*
the heirs of 8duardo 0anlapat against Consuelo CruE, !osalina CruE-
1autista, !ural 1ank of 'an ;ascual, .ose 'alaEar and .ose :lores, in
his capacit* as Deput* !egistrar, 0e*caua*an 1ranch of the !egistr* of
Deeds of 1ulacan?

5&6 Civil Case #o. 1$1-0-92 for da(ages filed )* .ose 'alaEar against
Consuelo CruE, et. @sicA al.? and

5-6 Civil Case #o. 6$$-0-/9, for declaration of nullit* of title with
da(ages filed )* !ural 1ank of 'an ;ascual, +nc. against the spouses
!icardo CruE and Consuelo CruE, et al.@&%A

After trial of the consolidated cases, the !TC of 0alolos rendered a decision in favor
of the heirs of 8duardo, the dispositive portion of which reads3

BC8!8:4!8, pre(ised fro( the foregoing, >udg(ent is here)*

1.Declaring Transfer Certificates of Title #os. T-9-&6-;506 and
T-9-&7-;506 as void ab initio and ordering the !egister of
Deeds, 0e*caua*an 1ranch to cancel said titles and to restore
4riginal Certificate of Title #o. ;-1%-506 in the na(e of
plaintiffsG predecessor-in-interest 8duardo 0anlapat?

&.-4rdering the defendants !ural 1ank of 'an ;ascual, .ose
'alaEar, Consuelo CruE and !osalina CruE-1autista, to pa* the
plaintiffs Ceirs of 8duardo 0anlapat, >ointl* and severall*, the

a6;&22,222.22 as (oral da(ages?
)6;%2,222.22 as e=e(plar* da(ages?
c6;&2,222.22 as attorne*Gs fees? and
d6the costs of the suit.

-.Dis(issing the counterclai(s.

'4 4!D8!8D.@&6A

The trial court found that petitioners were entitled to the reliefs of reconve*ance
and da(ages. 4n this (atter, it ruled that petitioners were bona fide (ortgagors of
an unclouded title )earing no annotation of an* lien andFor encu()rance. This fact,
according to the trial court, was confir(ed )* the )ank when it accepted the
(ortgage unconditionall* on &% #ove()er 19/1. +t found that petitioners were
co(placent and unpertur)ed, )elieving that the title to their propert*, while serving
as securit* for a loan, was safel* vaulted in the i(per(ea)le confines of !1';. To
their surprise and pre>udice, said title was su)divided into two portions, leaving
the( a portion of $%% s,uare (eters fro( the original total area of 1,2%/ s,uare
(eters, all )ecause of the fraudulent and negligent acts of respondents and !1';.
The trial court ratiocinated that even assu(ing that a portion of the su)>ect lot was
sold )* 8duardo to !icardo, petitioners were still not priv* to the transaction
)etween the )ank and the CruEes which eventuall* led to the su)division of the 4CT
into TCTs #o. T-9-&6-;506 and #o. T-9-&7-;506, clearl* to the da(age and
pre>udice of petitioners.@&7A

Concerning the clai(s for da(ages, the trial court found the sa(e to )e )ereft of
(erit. +t ruled that although the act of the CruEes could )e dee(ed fraudulent, still
it would not constitute intrinsic fraud. 'alaEar, nonetheless, was clearl* guilt* of
negligence in letting the CruEes )orrow the ownerGs duplicate certificate of the 4CT.
#either the )ank nor its (anager had )usiness entrusting to strangers titles
(ortgaged to it )* other persons for whatever reason. +t was a clear violation of
the (ortgage and )anking laws, the trial court concluded.

The trial court also ruled that although 'alaEar was personall* responsi)le for
allowing the title to )e )orrowed, the )ank could not escape lia)ilit* for it was guilt*
of contri)utor* negligence. The evidence showed that !1';Gs legal counsel was
sought for advice regarding respondentsG re,uest. This could onl* (ean that !1';
through its law*er if not through its (anager had known in advance of the CruEesG
intention and still it did nothing to prevent the eventualit*. 'alaEar was not even
su((aril* dis(issed )* the )ank if he was indeed the sole person to )la(e. Cence,
the )ankGs clai( for da(ages (ust necessaril* fail.@&/A

The trial court granted the pra*er for the annul(ent of the TCTs as a necessar*
conse,uence of its declaration that reconve*ance was in order. As to :lores, his
work )eing (inisterial as Deput* !egister of the 1ulacan !egistr* of Deeds, the trial
court a)solved hi( of an* lia)ilit* with a stern warning that he should deal with his
future transactions (ore carefull* and in the strictest sense as a responsi)le
govern(ent official.@&9A

Aggrieved )* the decision of the trial court, !1';, 'alaEar and the CruEes appealed
to the Court of Appeals. The appellate court, however, reversed the decision of the
!TC. The decretal te=t of the decision reads3

TC8 :4!84+# C4#'+D8!8D, the appealed decision is here)*
reversed and set aside, with costs against the appellees.

'4 4!D8!8D.@-2A

The appellate court ruled that petitioners were not bona fide (ortgagors since as
earl* as 19%$ or )efore the 19/1 (ortgage, 8duardo alread* sold to !icardo a
portion of the su)>ect lot with an area of %%- s,uare (eters. This fact, the Court of
Appeals noted, is even supported )* a docu(ent of sale signed )* 8duardo .r. and
8ngracia Aniceto, the surviving spouse of 8duardo, and registered with the !egister
of Deeds of 1ulacan. The appellate court also found that on 1/ 0arch 19/1, for the
second ti(e, 8duardo sold to !icardo a separate area containing %2 s,uare (eters,
as a road right-of-wa*.@-1A Clearl*, the 4CT was issued onl* after the first sale. +t
also noted that the title was given to the CruEes )* !1'; voluntaril*, with
knowledge even of the )ankGs counsel.@-&A Cence, the i(position of da(ages
cannot )e >ustified, the CruEes the(selves )eing the owners of the propert*.
Certainl*, 8duardo (isled the )ank into accepting the entire area as a collateral
since the 62--s,uare (eter portion did not an*(ore )elong to hi(. The appellate
court, however, concluded that there was no conspirac* )etween the )ank and

Cence, this petition for review on certiorari.

;etitioners ascri)e errors to the appellate court )* asking the following ,uestions,
to wit3 5a6 can a (ortgagor )e co(pelled to receive fro( the (ortgagee a s(aller
portion of the originall* encu()ered title partitioned during the su)sistence of the
(ortgage, without the knowledge of, or authorit* derived fro(, the registered
owner? 5)6 can the (ortgagee ,uestion the veracit* of the registered title of the
(ortgagor, as noted in the ownerGs duplicate certificate, and thus, deliver the
certificate to such third persons, invoking an adverse, prior, and unregistered clai(
against the registered title of the (ortgagor? 5c6 can an adverse prior clai( against
a registered title )e noted, registered and entered without a co(petent court order?
and 5d6 can )elief of ownership >ustif* the taking of propert* without due process of

The kernel of the controvers* )oils down to the issue of whether the cancellation of
the 4CT in the na(e of the petitionersG predecessor-in-interest and its splitting into
two separate titles, one for the petitioners and the other for the CruEes, (a* )e
accorded legal recognition given the peculiar factual )ackdrop of the case. Be rule
in the affir(ative.

Private respondents *Cruzes+ o,n
the portion titled in their names

Consonant with law and >ustice, the ulti(ate denoue(ent of the propert* dispute
lies in the deter(ination of the respective )ases of the warring clai(s. Cere, as in
other legal disputes, what is written generall* deserves credence.

A careful perusal of the evidence on record reveals that the CruEes have sufficientl*
proven their clai( of ownership over the portion of 9ot #o. &&2$ with an area of
%%- s,uare (eters. The dul* notariEed instru(ent of conve*ance was e=ecuted in
19%$ to which no less than 8duardo was a signator*. The e=ecution of the deed of
sale was rendered )e*ond dou)t )* 8duardoGs ad(ission in his Sinumpaang
Sala'sa' dated &$ April 196-.@-%A These docu(ents (ake the affir(ance of the
right of the CruEes inelucta)le. The apparent irregularit*, however, in the o)tention
of the ownerGs duplicate certificate fro( the )ank, later to )e presented to the
!egister of Deeds to secure the issuance of two new TCTs in place of the 4CT, is
another (atter.

;etitioners argue that the 19%$ deed of sale was not annotated on the 4CT which
was issued in 1976 in favor of 8duardo? thus, the CruEesG clai( of ownership )ased
on the sale would not hold water. The Court is not persuaded.

!egistration is not a re,uire(ent for validit* of the contract as )etween the parties,
for the effect of registration serves chiefl* to )ind third persons.@-6A The principal
purpose of registration is (erel* to notif* other persons not parties to a contract
that a transaction involving the propert* had )een entered into. Bhere the part*
has knowledge of a prior e=isting interest which is unregistered at the ti(e he
ac,uired a right to the sa(e land, his knowledge of that prior unregistered interest
has the effect of registration as to hi(.@-7A

:urther, the heirs of 8duardo cannot )e considered third persons for purposes of
appl*ing the rule. The conve*ance shall not )e valid against an* person unless
registered, e=cept 516 the grantor, 5&6 his heirs and devisees, and 5-6 third persons
having actual notice or knowledge thereof.@-/A #ot onl* are petitioners the heirs of
8duardo, so(e of the( were actuall* parties to the %asulatane=ecuted in favor of
!icardo. Thus, the annotation of the adverse clai( of the CruEes on the 4CT is no
longer re,uired to )ind the heirs of 8duardo, petitioners herein.

Petitioners had no right to constitute
mortgage over disputed portion

The re,uire(ents of a valid (ortgage are clearl* laid down in Article &2/% of the
#ew Civil Code,viz-

A!T. &2/%. The following re,uisites are essential to the
contracts of pledge and (ortgage3

516 That the* )e constituted to secure the fulfill(ent of a
principal o)ligation?
5&6 That the pledgor or (ortgagor )e the absolute
owner of the thing pledged or (ortgaged?
5-6 That the persons constituting the pledge or (ortgage
have the free disposal of their property, and in the
absence thereof, that they be legally authorized for
the purpose.

Third persons who are not parties to the principal o)ligation
(a* secure the latter )* pledging or (ortgaging their own
propert*. 5e(phasis supplied6

:or a person to validl* constitute a valid (ortgage on real estate, he (ust )e the
a)solute owner thereof as re,uired )* Article &2/% of the #ew Civil Code.@-9A The
(ortgagor (ust )e the owner, otherwise the (ortgage is void.@$2A +n a contract of
(ortgage, the (ortgagor re(ains to )e the owner of the propert* although the
propert* is su)>ected to a lien.@$1A A (ortgage is regarded as nothing (ore than a
(ere lien, encu()rance, or securit* for a de)t, and passes no title or estate to the
(ortgagee and gives hi( no right or clai( to the possession of the propert*.@$&A +n
this kind of contract, the propert* (ortgaged is (erel* delivered to the (ortgagee
to secure the fulfill(ent of the principal o)ligation.@$-A 'uch deliver* does not
e(power the (ortgagee to conve* an* portion thereof in favor of another person
as the right to dispose is an attri)ute of ownership.@$$AThe right to dispose includes
the right to donate, to sell, to pledge or (ortgage. Thus, the (ortgagee, not )eing
the owner of the propert*, cannot dispose of the whole or part thereof nor cause
the i(pair(ent of the securit* in an* (anner without violating the foregoing rule.
@$%A The (ortgagee onl* owns the (ortgage credit, not the propert* itself.@$6A

;etitioners su)(it as an issue whether a (ortgagor (a* )e co(pelled to receive
fro( the (ortgagee a s(aller portion of the lot covered )* the originall*
encu()ered title, which lot wasG partitioned during the su)sistence of the (ortgage
without the knowledge or authorit* of the (ortgagor as registered owner. This
for(ulation is disingenuous, )aselessl* assu(ing, as it does, as an ad(itted fact
that the (ortgagor is the owner of the (ortgaged propert* in its entiret*. +ndeed, it
has not )eco(e a salient issue in this case since the (ortgagor was not the owner
of the entire (ortgaged propert* in the first place.

.ssuance of /CT 0o. P1234*5+" improper

+t is a glaring fact that 4CT #o. ;-1%-506 covering the propert* (ortgaged was in
the na(e of 8duardo, without an* annotation of an* prior disposition or
encu()rance. Cowever, the propert* was sufficientl* shown to )e not entirel*
owned )* 8duardo as evidenced )* the %asulatan. !eadil* apparent upon perusal of
the records is that the 4CT was issued in 1976, long after the %asulatanwas
e=ecuted wa* )ack in 19%$. Thus, a portion of the propert* registered in 8duardoGs
na(e arising fro( the grant of free patent did not actuall* )elong to hi(. The
utiliEation of the Torrens s*ste( to perpetrate fraud cannot )e accorded >udicial

Ti(e and again, this Court has ruled that the principle of indefeasi)ilit* of a Torrens
title does not appl* where fraud attended the issuance of the title, as was
conclusivel* esta)lished in this case. The Torrens title does not furnish a shied for
fraud.@$7A !egistration does not vest title. +t is not a (ode of ac,uiring ownership
)ut is (erel* evidence of such title over a particular propert*. +t does not give the
holder an* )etter right than what he actuall* has, especiall* if the registration was
done in )ad faith. The effect is that it is as if no registration was (ade at all. @$/A +n
fact, this Court has ruled that a decree of registration cut off or e=tinguished a right
ac,uired )* a person when such right refers to a lien or encu()rance on the
landnot to the right of ownership thereofwhich was not annotated on the certificate
of title issued thereon.@$9A

.ssuance of TCT 0os. T164781P*5+
and T164791P*5+" Valid

The validit* of the issuance of two TCTs, one for the portion sold to the
predecessor-in-interest of the CruEes and the other for the portion retained )*
petitioners, is readil* apparent fro( 'ection %- of the ;residential Decree 5;.D.6 #o.
1%&9 or the Propert' Registration ecree. +t provides3

'8C %-. Presentation of o,ner:s duplicate upon entr' of ne,
certificate. G #o voluntar* instru(ent shall )e registered )* the
!egister of Deeds, unless the ownerGs duplicate certificate is presented
with such instru(ent, e=cept in cases e=pressl* provided for in this
Decree or upon order of the court, for cause shown.

T)e ,ro+6*.on o0 *)e o9ner@- +,1.6a*e 6er*.0.6a*e, 9)enever
an2 vo1+n*ar2 .n-*r+men* .- ,re-en*e 0or re/.-*ra*.on, -)a11 be a+*)or.*2 0rom *)e re/.-*ere o9ner *o *)e Re/.-*er
o0 %ee- *o en*er a ne9 6er*.0.6a*e or *o ma7e a memoran+m
o0 re/.-*ra*.on .n a66oran6e 9.*) -+6) .n-*r+men*, and the new
certificate or (e(orandu( shall )e )inding upon the registered owner
and upon all persons clai(ing under hi(, in favor of ever* purchaser
for value and in good faith.

+n all cases of registration procured )* fraud, the owner (a* pursue all
his legal and e,uita)le re(edies against the parties to such fraud
without pre>udice, however, to the rights of an* innocent holder of the
decree of registration on the original petition or application, an*
su)se,uent registration procured )* the presentation of a forged
duplicate certificate of title, or a forged deed or instru(ent, shall )e
null and void. 5e(phasis supplied6

;etitioners argue that the issuance of the TCTs violated the third paragraph of
'ection %- of ;.D. #o. 1%&9. The argu(ent is )aseless. +t (ust )e noted that the
provision speaks of forged duplicate certificate of title and forged deed or
instrument. #either instance o)tains in this case. Bhat the CruEes presented )efore
the !egister of Deeds was the ver* genuine ownerGs duplicate certificate earlier
deposited )* 1anaag, 8duardoGs attorne*-in-fact, with !1';. 9ikewise, the
instru(ents of conve*ance are authentic, not forged. 'ection %- has never )een
clearer on the point that as long as the ownerGs duplicate certificate is presented to
the !egister of Deeds together with the instru(ent of conve*ance, such
presentation serves as conclusive authorit* to the !egister of Deeds to issue a
transfer certificate or (ake a (e(orandu( of registration in accordance with the

The records of the case show that despite the efforts (ade )* the CruEes in
persuading the heirs of 8duardo to allow the( to secure a separate TCT on the
clai(ed portion, their ownership )eing a(pl* evidenced )*
the %asulatan and Sinumpaang Sala'sa' where 8duardo hi(self acknowledged the
sales in favor of !icardo, the heirs ada(antl* re>ected the notion of separate titling.
This pro(pted the CruEes to approach the )ank (anager of !1'; for the purpose
of protecting their propert* right. The* succeeded in persuading the latter to lend
the ownerGs duplicate certificate. Despite the apparent irregularit* in allowing the
CruEes to get hold of the ownerGs duplicate certificate, the )ank officers consented
to the CruEesG plan to register the deeds of sale and secure two new separate titles,
without notif*ing the heirs of 8duardo a)out it.

:urther, the law on the (atter, specificall* ;.D. #o. 1%&9, has no e=plicit
re,uire(ent as to the (anner of ac,uiring the ownerGs duplicate for purposes of
issuing a TCT. This led the !egister of Deeds of 0e*caua*an as well as the Central
1ank officer, in rendering an opinion on the legal feasi)ilit* of the process resorted
to )* the CruEes. 'ection %- of ;.D. #o. 1%&9 si(pl* re,uires the production of the
ownerGs duplicate certificate, whenever an* voluntar* instru(ent is presented for
registration, and the sa(e shall )e conclusive authorit* fro( the registered owner
to the !egister of Deeds to enter a new certificate or to (ake a (e(orandu( of
registration in accordance with such instru(ent, and the new certificate or
(e(orandu( shall )e )inding upon the registered owner and upon all persons
clai(ing under hi(, in favor of ever* purchaser for value and in good faith.
Kuite interesting, however, is the contention of the heirs of 8duardo that the
surreptitious lending of the ownerGs duplicate certificate constitutes fraud within the
a()it of the third paragraph of 'ection %- which could nullif* the eventual issuance
of the TCTs. Jet we cannot su)scri)e to their position.
+(pelled )* the inaction of the heirs of 8duardo as to their clai(, the CruEes went
to the )ank where the propert* was (ortgaged. Through its (anager and legal
officer, the* were assured of recover* of the clai(ed parcel of land since the* are
the successors-in-interest of the real owner thereof. !el*ing on the )ank officersG
opinion as to the legalit* of the (eans sought to )e e(plo*ed )* the( and the
suggestion of the Central 1ank officer that the (atter could )e )est settled )etween
the( and the )ank, the CruEes pursued the titling of the clai(ed portion in the
na(e of !icardo. The !egister of Deeds eventuall* issued the disputed TCTs.

The CruEes resorted to such (eans to protect their interest in the propert* that
rightfull* )elongs to the( onl* )ecause of the )ank officersG ac,uiescence thereto.
The CruEes could not have secured a separate TCT in the na(e of !icardo without
the )ankGs approval. 1anks, their )usiness )eing i(pressed with pu)lic interest, are
e=pected to e=ercise (ore care and prudence than private individuals in their
dealings, even those involving registered lands.@%2A The highest degree of diligence
is e=pected, and high standards of integrit* and perfor(ance are even re,uired of

+ndeed, petitioners contend that the (ortgagee cannot ,uestion the veracit* of the
registered title of the (ortgagor as noted in the ownerGs duplicate certificate, and,
thus, he cannot deliver the certificate to such third persons invoking an adverse,
prior, and unregistered clai( against the registered title of the (ortgagor. The
strength of this argu(ent is diluted )* the peculiar factual (ilieu of the case.

A (ortgagee can rel* on what appears on the certificate of title presented )* the
(ortgagor and an innocent (ortgagee is not e=pected to conduct an e=haustive
investigation on the histor* of the (ortgagorGs title. This rule is strictl* applied to
)anking institutions. A (ortgagee-)ank (ust e=ercise due diligence )efore entering
into said contract. .udicial notice is taken of the standard practice for )anks, )efore
approving a loan, to send representatives to the pre(ises of the land offered as
collateral and to investigate who the real owners thereof are.@%&A

1anks, indeed, should e=ercise (ore care and prudence in dealing even with
registered lands, than private individuals, as their )usiness is one affected with
pu)lic interest. 1anksG keep in trust (one* )elonging to their depositors, which
the* should guard against loss )* not co((itting an* act of negligence that
a(ounts to lack of good faith. A)sent good faith, )anks would )e denied the
protective (antle of the land registration statute, Act $96, which e=tends onl* to
purchasers for value and good faith, as well as to (ortgagees of the sa(e
character and description.@%-A Thus, this Court clarified that the rule that persons
dealing with registered lands can rel* solel* on the certificate of title does not appl*
to )anks.@%$A

&an; (iable for 0ominal amages

4f deep concern to this Court, however, is the fact that the )ank lent the ownerGs
duplicate of the 4CT to the CruEes when the latter presented the instru(ents of
conve*ance as )asis of their clai( of ownership over a portion of land covered )*
the title. 'i(ple rationaliEation would dictate that a (ortgagee-)ank has no right to
deliver to an* stranger an* propert* entrusted to it other than to those
contractuall* and legall* entitled to its possession. Although we cannot dis(iss the
)ankGs acknowledg(ent of the CruEesG clai( as legiti(iEed )* instru(ents of
conve*ance in their possession, we nonetheless cannot sanction how the )ank was
inveigled to do the )idding of virtual strangers. Dndou)tedl*, the )ankGs cooperative
stance facilitated the issuance of the TCTs. To (ake (atters worse, the )ank did
not even notif* the heirs of 8duardo. The conduct of the )ank is as dangerous as it
is unthinka)l* negligent. Cowever, the aspect does not i(pair the right of the
CruEes to )e recogniEed as legiti(ate owners of their portion of the propert*.

Dndou)tedl*, in the a)sence of the )ankGs participation, the !egister of Deeds could
not have issued the disputed TCTs. Be cannot find fault on the part of the !egister
of Deeds in issuing the TCTs as his authorit* to issue the sa(e is clearl* sanctioned
)* law. +t is thus (inisterial on the part of the !egister of Deeds to issue TCT if the
deed of conve*ance and the original ownerGs duplicate are presented to hi( as
there appears on theface of the instru(entsG no )adge of irregularit* or
nullit*.@%%A +f there is so(eone to )la(e for the shortcut resorted to )* the CruEes,
it would )e the )ank itself whose (anager and legal officer helped the CruEes to
facilitate the issuance of the TCTs.

The )ank should not have allowed co(plete strangers to take possession of the
ownerGs duplicate certificate even if the purpose is (erel* for photocop*ing for a
danger of losing the sa(e is (ore than i((inent. The* should )e aware of the
conclusive presu(ption in
'ection %-. 'uch act constitutes (anifest negligence on the part of the )ank which
would necessaril* hold it lia)le for da(ages under Article 1172 and other relevant
provisions of the Civil Code.@%6A

+n the a)sence of evidence, the da(ages that (a* )e awarded (a* )e in the for(
of no(inal da(ages. #o(inal da(ages are ad>udicated in order that a right of the
plaintiff, which has )een violated or invaded )* the defendant, (a* )e vindicated or
recogniEed, and not for the purpose of inde(nif*ing the plaintiff for an* loss
suffered )* hi(.@%7A This award rests on the (ortgagorGs right to rel* on the )ankGs
o)servance of the highest diligence in the conduct of its )usiness. The act of !1';
of entrusting to respondents the ownerGs duplicate certificate entrusted to it )* the
(ortgagor without even notif*ing the (ortgagor and a)sent an* prior investigation
on the veracit* of respondentsG clai( and
character is a patent failure to foresee the risk created )* the act in view of the
provisions of 'ection %- of ;.D. #o. 1%&9. This act runs afoul of ever* )ankGs
(andate to o)serve the highest degree of diligence in dealing with its clients.
0oreover, a (ortgagor has also the right to )e afforded due process )efore
deprivation or di(inution of his propert* is effected as the 4CT was still in the
na(e of 8duardo. #otice and hearing are indispensa)le ele(ents of this right which
the )ank (isera)l* ignored.

Dnder the circu(stances, the Court )elieves the award of ;%2,222.22 as no(inal
da(ages is appropriate.

Five1<ear Prohibition against alienation
or encumbrance under the Public (and Act

4ne vital point. Apparentl* glossed over )* the courts )elow and the parties is an
aspect which is essential, spread as it is all over the record and intertwined with the
cru= of the controvers*, relating as it does to the validit* of the dispositions of the
su)>ect propert* and the (ortgage thereon. 8duardo was issued a title in 1976 on
the )asis of his free patent application. 'uch application i(plies the recognition of
the pu)lic do(inion character of the land and, hence, the five 5%6-*ear prohi)ition
i(posed )* the ;u)lic 9and Act against alienation or encu()rance of the land
covered )* a free patent or ho(estead@%/A should have )een considered.

The deed of sale covering the fift* 5%26-s,uare (eter right of wa* e=ecuted )*
8duardo on 1/ 0arch 19/1 is o)viousl* covered )* the proscription, the free patent
having )een issued on / 4cto)er 1976. Cowever, petitioners (a* recover the
portion sold since the prohi)ition was i(posed in favor of the free patent holder.
+n Philippine 0ational &an; v. e los Re'es,@%9A this Court ruled s,uarel* on the
point, thus3

Bhile the law )ars recover* in a case where the o)>ect of the contract
is contrar* to law and one or )oth parties acted in )ad faith, we cannot
here appl* the doctrine of in pari delicto which ad(its of an e=ception,
na(el*, that when the contract is (erel* prohi)ited )* law, not
illegal per se, and the prohi)ition is designed for the protection of the
part* seeking to recover, he is entitled to the relief pra*ed for
whenever pu)lic polic* is enhanced there)*. Dnder the ;u)lic 9and Act,
the prohi)ition to alienate is predicated on the funda(ental polic* of
the 'tate to preserve and keep in the fa(il* of the ho(esteader that
portion of pu)lic land which the 'tate has gratuitousl* given to hi(,
and recover* is allowed even where the land ac,uired under the ;u)lic
9and Act was sold and not (erel* encu()ered, within the prohi)ited

The sale of the %%- s,uare (eter portion is a different stor*. +t was e=ecuted in
19%$, twent*-two 5&&6 *ears )efore the issuance of the patent in 1976. Apparentl*,
8duardo disposed of the portion even )efore he thought of appl*ing for a free
patent. Bhere the sale or transfer took place )efore the filing of the free patent
application, whether )* the vendor or the vendee, the prohi)ition should not )e
applied. +n such situation, neither the prohi)ition nor the rationale therefor which is
to keep in the fa(il* of the patentee that portion of the pu)lic land which the
govern(ent has gratuitousl* given hi(, )* shielding hi( fro( the te(ptation to
dispose of his landholding, could )e relevant. ;recisel*, he had disposed of his
rights to the lot even )efore the govern(ent could give the title to hi(.

The (ortgage e=ecuted in favor of !1'; is also )e*ond the pale of the prohi)ition,
as it was forged in Dece()er 19/1 a few (onths past the period of prohi)ition.

BC8!8:4!8, the ecision of the Court of Appeals is A::+!08D, su)>ect to the
(odifications herein. !espondent !ural 1ank of 'an ;ascual is here)* 4!D8!8D to
;AJ petitioners :ift* Thousand ;esos 5;%2,222.226 )* wa* of no(inal da(ages.
!espondents Consuelo CruE and !osalina CruE-1autista are here)* D+"8'T8D of
title to, and respondent !egister of Deeds of 0e*caua*an, 1ulacan is accordingl*
4!D8!8D to segregate, the portion of fift* 5%26 s,uare (eters of the su)>ect 9ot
#o. &&2$, as depicted in the approved plan covering the lot, (arked as 8=hi)it GAG,
and to issue a new title covering the said portion in the na(e of the petitioners at
the e=pense of the petitioners. #o costs.

'4 4!D8!8D.

G.R. No. 105542. a&uary 22, 1996?
!*LIN"A TAR*"O, ;or 8erse(; a&) %& re/rese&$a$%o& o; 8er bro$8ers
a&) s%s$ers, a&) T*OFILA COR,67 TAN*"O, re/rese&$%&0 8er
1%&or )au08$er <*RNA TAN*"O, petitioners, vs. T'* CO6RT
!AR*RA TAR*"O, respondents.
" * C I S I O N
Is a sale of future inheritance valid' In ultiple sales of the sae real property+ !ho
has preference in o!nership' %hat is the pro"ative value of the lo!er courts finding of
good faith in registration of such sales in the registry of property' These are the ain
&uestions raised in this Petition for revie! on certiorari under ,ule I7 of the ,ules of
Court to set aside and reverse the Decision
of the Court of Appeals
in CA<D.,. CL
(=. 2I6F7 proulgated on /epte"er 23+ 5665 affiring the decision of the ,egional
Trial Court+ Jranch 3:+ Third Kudicial ,egion+ Tarlac+ Tarlac in Civil Case (o. 3:2F+ and
its ,esolution denying reconsideration thereof+ proulgated on 8ay 27+ 5662.
Jy the Courts ,esolution on =cto"er 27+ 5667, this case 0along !ith several others1
!as transferred fro the Cirst to the Third Division and after due deli"eration+ the Court
assigned it to the undersigned ponenle for the !riting of this Decision.
T8e Fa#$s
=n =cto"er 2;+ 5632+ Ga#ardo TaQedo e-ecuted a notari#ed deed of a"solute sale
in favor of his eldest "rother+ ,icardo TaQedo+ and the latters !ife+ Teresita Jarera+
private respondents herein+ !here"y he conveyed to the latter in consideration of
P5+7;;.;;+ ?one hectare of !hatever share I shall have over Got (o. 565 of the
cadastral survey of Derona+ Province of Tarlac and covered "y Title T<l:F26 of the
,egister of Deeds of Tarlac+@ the said property "eing his ?future inheritance@ fro his
parents 0E-h. 51. >pon the death of his father 8atias+ Ga#aro e-ecuted an ?Affidavit of
Confority@ dated Ce"ruary 2F+ 56F; 0E-h. :1 to ?re<affir+ respect. ac2no!ledge and
validate the sale I ade in 5632.@ =nKanuary 5:+ 56F5+ Ga#aro e-ecuted another
notari#ed deed of sale in favor of private respondents covering his ?undivided =(E
T%EGLE 05*521 of a parcel of land 2no!n as Got 565 - - 0E-h. I1. )e ac2no!ledged
therein his receipt of P 5;+;;;.;; as consideration therefor. In Ce"ruary 56F5+ ,icardo
learned that Ga#aro sold the sae property to his children+ petitioners herein+ through a
deed of sale dated Dece"er 26+ 56F;0E-h. E1. =n Kune 7+ 56F2+ private respondents
recorded the Deed of /ale 0E-h. I1 in their favor in the ,egistry of Deeds and the
corresponding entry !as ade in Transfer Certificate of Title (o. 533I75 0E-h. 7/.
Petitioners on Kuly 53+ 56F2 filed a coplaint for rescission 0plus daages1 of the
deeds of sale e-ecuted "y Ga#aro in favor of private respondents covering the property
inherited "y Ga#aro fro his father.
Petitioners claied that their father+ Ga#aro+ e-ecuted an ?A"solute Deed of /ale@
dated Dece"er 26+ 56F; 0E-it. E1+ conveying to his ten children his allotted portion
under the e-tra.udicial partition e-ecuted "y the heirs of 8atias+ !hich deed included
the land in litigation 0Got 5651.
Petitioners also presented in evidence$ 051 a private !riting purportedly prepared
and signed "y 8atias dated Dece"er 2F+ 567F+ stating that it !as his desire that
!hatever inheritance Ga#aro !ould receive fro hi should "e given to his 0Ga#aros1
children 0E-h. A19 021 a type!ritten docuent dated 8arch 5;+ 5676 signed "y Ga#aro in
the presence of t!o !itnesses+ !herein he confired that he !ould voluntarily a"ide "y
the !ishes of his father+ 8atias+ to give to his 0Ga#aros1 children all the property he
!ould inherit fro the latter 0E-h. J19 and 0:1 a letter dated Kanuary 5+ 56F; of Ga#aro to
his daughter+ Carela+ stating that his share in the e-tra.udicial settleent of the estate
of his father !as intended for his children+ petitioners herein 0E-h. C1.
Private respondents+ ho!ever presented in evidence a ?Deed of ,evocation of a
Deed of /ale@ dated 8arch 52+ 56F5 0E-h. 31+ !herein Ga#aro revo2ed the sale in favor
of petitioners for the reason that it !as ?siulated or fictitious < !ithout any
consideration !hatsoever.@
/hortly after the case a quo !as filed+ Ga#aro e-ecuted a s!orn stateent 0E-h. D1
!hich virtually repudiated the contents of the Deed of ,evocation of a Deed of /ale
0E-h. 31 and the Deed of /ale 0E-h. I1 in favor of private respondents. )o!ever+ Ga#aro
testified that he sold the property to ,icardo+ and that it !as a la!yer !ho induced hi
to e-ecute a deed of sale in favor of his children after giving hi five pesos 0P7.;;1 to
"uy a ?drin2@ 0T/( /epte"er 5F+ 56F7+ pp. 2;I<2;71.
The trial court decided in favor of private respondents+ holding that petitioners failed
?to adduce a preponderance of evidence to support 0their1 clai.@ =n appeal+ the Court
of Appeals affired the decision of the trial court+ ruling that the Deed of /ale
dated Kanuary 5:+ 56F5 0E-h. 61 !as valid and that its registration in good faith vested
title in said respondents.
T8e Issues
Petitioners raised the follo!ing ?errors@ in the respondent Court+ !hich they also
no! allege in the instant Petition$
<I. The trial 'o&rt erred in 'on'l&din, that the Contra't o+ Sale o+ O'to"er -/$ 12B-
;Exhi"it .$ !nswer> is #erel( voida"le or ann&la"le and not void ab initiop&rs&ant to
para,raph - o+ !rti'le 131. o+ the ew Civil Code involvin, as it does a U+&t&re
<II. The trial 'o&rt erred in holdin, that de+endants6appellees a'ted in ,ood +aith in
re,isterin, the deed o+ sale o+ Kan&ar( 13$ 12E1 ;Exhi"it 2> with the Re,ister o+ Deeds
o+ Tarla' and there+ore ownership o+ the land in %&estion passed on to de+endants6
<III. The trial 'o&rt erred in i,norin, and +ailin, to 'onsider the testi#onial and
do'&#entar( eviden'e o+ plainti++s6appellants whi'h 'learl( esta"lished "(
preponderan'e o+ eviden'e that the( are indeed the le,iti#ate and law+&l owners o+
the propert( in %&estion.
<IG. The de'ision is 'ontrar( to law and the +a'ts o+ the 'ase and the 'on'l&sions
drawn +ro# the esta"lished +a'ts are illo,i'al and o++6tan,ent.=
Cro the foregoing+ the issues ay "e restated as follo!s$
5. Is the sale of a future inheritance valid'
2. %as the su"se&uent e-ecution on Kanuary 5:+ 56F5 0and registration !ith the
,egistry of Property1 of a deed of sale covering the sae property to the sae
"uyers valid'
:. 8ay this Court revie! the findings of the respondent Court 0a1 holding that the
"uyers acted in good faith in registering the said su"se&uent deed of sale and 0"1 in
?failing to consider petitioners evidence@' Are the conclusions of the respondent
Court ?illogical and off<tangent@'
T8e Cour$Fs Ru(%&0
At the outset+ let it "e clear that the ?errors@ !hich are revie!a"le "y this Court in
this petition for revie! on certiorari are only those allegedly coitted "y the
respondent Court of Appeals and not directly those of the trial court+ !hich is not a party
here. The ?assignent of errors@ in the petition &uoted a"ove are therefore totally
isplaced+ and for that reason+ the petition should "e disissed. Jut in order to give the
parties su"stantial .ustice !e have decided to delve into the issues as a"ove re<stated.
The errors attri"uted "y petitioners to the latter 0trial1 court !ill "e discussed only insofar
as they are relevant to the appellate courts assailed Decision and ,esolution.
The sale ade in 5632 involving future inheritance is not really at issue here. In
conte-t+ the assailed Decision conceded ?it ay "e legally correct that a contract of sale
of anticipated future inheritance is null and void.@
Jut to reove all dou"ts+ !e here"y categorically rule that+ pursuant to Article 5:I7
of the Civil Code+ ?0n1o contract ay "e entered into upon a future inheritance e-cept in
cases e-pressly authori#ed "y la!.@
Conse&uently+ said contract ade in 5632 is not valid and cannot "e the source of
any right nor the creator of any o"ligation "et!een the parties.
)ence+ the ?affidavit of confority@ dated Ce"ruary 2F+ 56F;+ insofar as it sought to
validate or ratify the 5632 sale+ is also useless and+ in the !ords of the respondent
Court+ ?suffers fro the sae infirity.@ Even private respondents in their
concede this.
)o!ever+ the docuents that are critical to the resolution of this case are$ 0a1 the
deed of sale of Kanuary 5:+ 56F5 in favor of private respondents covering Ga#aros
undivided inheritance of one<t!elfth 05*521 share in Got (o. 565+ !hich !as
su"se&uently registered on Kune 7+ 56F29 and 0"1 the deed of sale dated Dece"er 26+
56F; in favor of petitioners covering the sae property. These t!o docuents !ere
e-ecuted after the death of 8atias 0and his spouse1 and after a deed of e-tra.udicial
settleent of his 08atias1 estate !as e-ecuted+ thus vesting in Ga#aro actual title over
said property. In other !ords+ these dispositions+ though conflicting+ !ere no longer
infected !ith the infirities of the 5632 sale.
Petitioners contend that !hat !as sold on Kanuary 5:+ 56F5 !as only one<half
hectare out of Got (o. 565+ citing as authority the trial courts decision. As earlier pointed
out+ !hat is on revie! in these proceedings "y this Court is the Court of Appeals
decision < !hich correctly identified the su".ect atter of the Kanuary 5:+ 56F5 sale to
"e the entire undivided 5*52 share of Ga#aro in Got (o. 565 and !hich is the sae
property disposed of on Dece"er 26+ 56F; in favor of petitioners.
Critical in deterining !hich of these t!o deeds should "e given effect is the
registration of the sale in favor of private respondents !ith the register of deeds on Kune
7+ 56F2.
Article 57II of the Civil Code governs the preferential rights of vendees in cases of
ultiple sales+ as follo!s$
<!rt. 1011. I+ the sa#e thin, sho&ld have "een sold to di++erent vendees$ the
ownership shall "e trans+erred to the person who #a( have +irst ta)en possession
thereo+ in ,ood +aith$ i+ it sho&ld "e #ova"le propert(.
Sho&ld it "e i##ova"le propert($ the ownership shall "elon, to the person a'%&irin, it
who in ,ood +aith +irst re'orded it in the Re,istr( o+ Propert(.
Sho&ld there "e no ins'ription$ the ownership shall pertain to the person who in ,ood
+aith was +irst in the possessionH and$ in the a"sen'e thereo+$ to the person who
presents the oldest title$ provided there is ,ood +aith.=
The property in &uestion is land+ an iova"le+ and follo!ing the a"ove<&uoted la!+
o!nership shall "elong to the "uyer !ho in good faith registers it first in the registry of
property. Thus+ although the deed of sale in favor of private respondents !as later than
the one in favor of petitioners+ o!nership !ould vest in the forer "ecause of the
undisputed fact of registration. =n the other hand+ petitioners have not registered the
sale to the at all.
Petitioners contend that they !ere in possession of the property and that private
respondents never too2 possession thereof. As "et!een t!o purchasers+ the one !ho
registered the sale in his favor has a preferred right over the other !ho has not
registered his title+ even if the latter is in actual possession of the iova"le property.
As to third issue+ !hile petitioners conceded the fact of registration+ they
nevertheless contended that it !as done in "ad faith. =n this issue+ the respondent
Court ruled$
<Under the se'ond assi,n#ent o+ error$ plainti++s6appellants 'ontend that de+endants6
appellees a'ted in "ad +aith when the( re,istered the Deed o+ Sale in their +avor as
appellee Ri'ardo alread( )new o+ the exe'&tion o+ the deed o+ sale in +avor o+ the
plainti++sH appellants 'ite the testi#on( o+ plainti++ Belinda Ta+ledo to the e++e't that
de+endant Ri'ardo TaVedo 'alled her &p on Kan&ar( 1 or *, 12E1 to tell her that he was
alread( the owner o+ the land in %&estion U"&t the 'ontra't o+ sale "etween o&r +ather
and &s were ;si'> alread( 'ons&#ated* ;pp. 261/$ tsn$ Kan&ar( B$ 12E1>. This testi#on(
is o"vio&sl( sel+6servin,$ and "e'a&se it was a telephone 'onversation$ the deed o+
sale dated De'e#"er -2$ 12E/ was not shownH Belinda #erel( told her &n'le that
there was alread( a do'&#ent showin, that plainti++s are the owners ;p. E/>. Ri'ardo
TaVedo 'ontroverted this and testi+ied that he learned +or the +irst ti#e o+ the deed o+
sale exe'&ted "( La7aro in +avor o+ his 'hildren Ua"o&t a #onth or so#eti#e in
9e"r&ar( 12E1* ;p. 111$ tsn$ ov. -E$ 12E1>. x x x=
The respondent Court+ revie!ing the trial courts findings+ refused to overturn the latters
assessent of the testionial evidence+ as follo!s$
<@e are not prepared to set aside the +indin, o+ the lower 'o&rt &pholdin, Ri'ardo
Tanedo*s testi#on($ as it involves a #atter o+ 'redi"ilit( o+ witnesses whi'h the trial
?&d,e$ who presided at the hearin,$ was in a "etter position to resolve.= ;Co&rt o+
!ppeals* De'ision$ p. B.>
In this connection+ !e note the tenacious allegations ade "y petitioners+ "oth in
their "asic petition and in their eorandu+ as follo!s$
5. The respondent Court allegedly ignored the claied fact that respondent ,icardo
?"y fraud and deceit and !ith fore2no!ledge@ that the property in &uestion had
already "een sold to petitioners+ ade Ga#aro e-ecute the deed of Kanuary 5:+
2. There is allegedly ade&uate evidence to sho! that only 5*2 of the purchase price of
P5;+;;;.;; !as paid at the tie of the e-ecution of the deed of sale+ contrary to the
!ritten ac2no!ledgent+ thus sho!ing "ad faith9
:. There is allegedly sufficient evidence sho!ing that the deed of revocation of the
sale in favor of petitioners ?!as tainted !ith fraud or deceit.@
I. There is allegedly enough evidence to sho! that private respondents ?too2 undue
advantage over the !ea2ness and unschooled and pitiful situation of Ga#aro Tafledo
. . .@ and that respondent ,icardo TaQedo ?e-ercised oral ascendancy over his
younger "rother he "eing the eldest "rother and !ho reached fourth year college of
la! and at one tie a forer Lice<Dovernor of Tarlac+ !hile his younger "rother only
attained first year high school - - - ?9
7. The respondent Court erred in not giving credence to petitioners evidence+
especially Ga#aro TaQedos inumpaang alaysay dated Kuly 27+ 56F2 stating that
,icardo TaQedo deceived the forer in e-ecuting the deed of sale in favor of private
To "e sure+ there are indeed any conflicting docuents and testionies as !ell as
arguents over their pro"ative value and significance. /uffice it to say+ ho!ever+ that all
the a"ove contentions involve &uestions of fact+ appreciation of evidence and credi"ility
of !itnesses+ !hich are not proper in this revie!. It is !ell<settled that the /upree
Court is not a trier of facts. In petitions for revie! under ,ule I7 of the ,evised ,ules of
Court+ only &uestions of la! ay "e raised and passed upon. A"sent any !hisical or
capricious e-ercise of .udgent+ and unless the lac2 of any "asis for the conclusions
ade "y the lo!er courts "e aply deonstrated+ the /upree Court !ill not distur"
their findings. At ost+ it appears that petitioners have sho!n that their evidence !as
not "elieved "y "oth the trial and the appellate courts+ and that the said courts tended to
give ore credence to the evidence presented "y private respondents. Jut this in itself
is not a reason for setting aside such findings. %e are far fro convinced that "oth
courts gravely a"used their respective authorities and .udicial prerogatives.
As held in the recent case of )hua Tiong Tay vs. )ourt of +ppeals and 0oidrock
)onstruction and 8evelopment )orp.9
<The Co&rt has 'onsistentl( held that the +a't&al +indin,s o+ the trial 'o&rt$ as well as
the Co&rt o+ !ppeals$ are +inal and 'on'l&sive and #a( not "e reviewed on appeal.
!#on, the ex'eptional 'ir'&#stan'es where a reassess#ent o+ +a'ts +o&nd "( the
lower 'o&rts is allowed are when the 'on'l&sion is a +indin, ,ro&nded entirel( on
spe'&lation$ s&r#ises or 'on?e't&resH when the in+eren'e #ade is #ani+estl( a"s&rd$
#ista)en or I#possi"leH when there is ,rave a"&se o+ dis'retion in the appre'iation o+
+a'tsH when the ?&d,#ent is pre#ised on a #isapprehension o+ +a'tsH when the
+indin,s went "e(ond the iss&es o+ the 'ase and the sa#e are 'ontrar( to the
ad#issions o+ "oth appellant and appellee. !+ter a 'are+&l st&d( o+ the 'ase at "en'h$
we +ind none o+ the a"ove ,ro&nds present to ?&sti+( the re6eval&ation o+ the +indin,s
o+ +a't #ade "( the 'o&rts "elow.=
In the sae vein+ the ruling in the recent case of outh ea urety and Insurance
)ompany, Inc. vs. :on. )ourt of +ppeals, et al.
is e&ually applica"le to the present
<@e see no valid reason to dis'ard the +a't&al 'on'l&sions o+ the appellate 'o&rt. x x x
;I>t is not the +&n'tion o+ this Co&rt to assess and eval&ate all over a,ain the eviden'e$
testi#onial and do'&#entar($ add&'ed "( the parties$ parti'&larl( where$ s&'h as
here$ the findings of both the trial court and the appellate court on the matter
coincide.+ ;itali's s&pplied>
3'*R*FOR*+ the petition is "*NI*" and the assailed Decision of the Court of
Appeals is AFFIR+*". (o Costs.
SO OR"*R*".
4arvasa, ).2. .)hairman/, 8avide, 2r., 3elo, and 6rancisco, 22., concur.
AG.R. No. 1B16CD. #ebr+ar2 1, 2000E
an L!LITA CHAN LI" an C!URT !# APPEALS, Respondents.
" * C I S I O N
"EN%!'A, J.(
This is a petition for review on certiorari of the decision
of the Court of Appeals in C.A. ! C" #o. $&-1% and the order
dated Dece()er 9, 1997 den*ing petitioners (otion for reconsideration.
The following facts are not in dispute.
;etitioners Cavite Develop(ent 1ank 5CD16 and :ar 8ast 1ank and Trust Co(pan* 5:81TC6 are )anking institutions dul*
organiEed and e=isting under ;hilippine laws. 4n or a)out .une 1%, 19/-, a certain !odolfo uansing o)tained a loan in the
a(ount of ;92,222.22 fro( CD1, to secure which he (ortgaged a parcel of land situated at #o. 6- Calavite 'treet, 9a
9o(a, KueEon Cit* and covered )* TCT #o. -22/29 registered in his na(e. As uansing defaulted in the pa*(ent of his
loan, CD1 foreclosed the (ortgage. At the foreclosure sale held on 0arch 1%, 19/$, the (ortgaged propert* was sold to
CD1 as the highest )idder. uansing failed to redee(, and on 0arch &, 19/7, CD1 consolidated title to the propert* in its
na(e. TCT #o. -22/29 in the na(e of uansing was cancelled and, in lieu thereof, TCT #o. -%%%// was issued in the
na(e of CD1.
4n .une 16, 19//, private respondent 9olita Chan 9i(, assisted )* a )roker na(ed !e(edios atpandan, offered to
purchase the propert* fro( CD1. The written 4ffer to ;urchase, signed )* 9i( and atpandan, states in part3
Be here)* offer to purchase *our propert* at M6- Calavite and !etiro 'ts., 9a 9o(a, KueEon Cit* for
;-22,222.22 under the following ter(s and conditions3
516 12< 4ption 0one*?
5&6 1alance pa*a)le in cash?
5-6 ;rovided that the propert* shall )e cleared of illegal occupants or tenants. 'c>uris
;ursuant to the foregoing ter(s and conditions of the offer, 9i( paid CD1 ;-2,222.22 as 4ption 0one*, for which she was
issued 4fficial !eceipt #o. -162, dated .une 17, 19//, )* CD1. Cowever, after so(e ti(e following up the sale, 9i(
discovered that the su)>ect propert* was originall* registered in the na(e of ;erfecto uansing, father of (ortgagor
!odolfo uansing, under TCT #o. 911$/. !odolfo succeeded in having the propert* registered in his na(e under TCT #o.
-22/29, the sa(e title he (ortgaged to CD1 and fro( which the latters title 5TCT #o. -%%%//6 was derived. +t appears,
however, that the father, ;erfecto, instituted Civil Case #o. K--97-& in the !egional Trial Court, 1ranch /-, KueEon Cit*, for
the cancellation of his sons title. 4n 0arch &-, 19/$, the trial court rendered a decision
restoring ;erfectos previous title
5TCT #o. 911$/6 and cancelling TCT #o. -22/29 on the ground that the latter was fraudulentl* secured )* !odolfo. This
decision has since )eco(e final and e=ecutor*.
Aggrieved )* what she considered a serious (isrepresentation )* CD1 and its (other-co(pan*, :81TC, on their a)ilit* to
sell the su)>ect propert*, 9i(, >oined )* her hus)and, filed on August &9, 19/9 an action for specific perfor(ance and
da(ages against petitioners in the !egional Trial Court, 1ranch 96, KueEon Cit*, where it was docketed as Civil Case #o.
K-/9-&/6-. 4n April &2, 1992, the co(plaint was a(ended )* i(pleading the !egister of Deeds of KueEon Cit* as an
additional defendant.
4n 0arch 12, 199-, the trial court rendered a decision in favor of the 9i( spouses. +t ruled that3 516 there was a perfected
contract of sale )etween 9i( and CD1, contrar* to the latters contention that the written offer to purchase and the
pa*(ent of ;-2,222.22 were (erel* pre-conditions to the sale and still su)>ect to the approval of :81TC? 5&6 perfor(ance
)* CD1 of its o)ligation under the perfected contract of sale had )eco(e i(possi)le on account of the 19/$ decision in
Civil Case #o. K--97-& cancelling the title in the na(e of (ortgagor !odolfo uansing? 5-6 CD1 and :81TC were not
e=e(pt fro( lia)ilit* despite the i(possi)ilit* of perfor(ance, )ecause the* could not credi)l* disclai( knowledge of the
cancellation of !odolfo uansings title without ad(itting their failure to discharge their duties to the pu)lic as reputa)le
)anking institutions? and 5$6 CD1 and :81TC are lia)le for da(ages for the pre>udice caused against the 9i(s.
1ased on
the foregoing findings, the trial court ordered CD1 and :81TC to pa* private respondents, >ointl* and severall*, the a(ount
of ;-2,222.22 plus interest at the legal rate co(puted fro( .une 17, 19// until full pa*(ent. +t also ordered petitioners to
pa* private respondents, >ointl* and severall*, the a(ounts of ;&%2,222.22 as (oral da(ages, ;%2,222.22 as e=e(plar*
da(ages, ;-2,222.22 as attorne*s fees, and the costs of the suit.
;etitioners )rought the (atter to the Court of Appeals, which, on 4cto)er 1$, 1997, affir(ed in toto the decision of the
!egional Trial Court. ;etitioners (oved for reconsideration, )ut their (otion was denied )* the appellate court on
Dece()er 9, 1997. Cence, this petition. ;etitioners contend that - .>le=
1. The Conora)le Court of Appeals erred when it held that petitioners CD1 and :81TC were aware of the
decision dated 0arch &-, 19/$ of the !egional Trial Court of KueEon Cit* in Civil Case #o. K--97-&.
&. The Conora)le Court of Appeals erred in ordering petitioners to pa* interest on the deposit of TC+!TJ
TC4D'A#D ;8'4' 5;-2,222.226 )* appl*ing Article &&29 of the #ew Civil Code.
-. The Conora)le Court of Appeals erred in ordering petitioners to pa* (oral da(ages, e=e(plar*
da(ages, attorne*s fees and costs of suit.
At the outset, it is necessar* to deter(ine the legal relation, if an*, of the parties.
;etitioners den* that a contract of sale was ever perfected )etween the( and private respondent 9olita Chan 9i(. The*
contend that 9i(s letter-offer clearl* states that the su( of ;-2,222.22 was given as option (one*, not as earnest
The* thus conclude that the contract )etween CD1 and 9i( was (erel* an option contract, not a contract of sale.
The contention has no (erit. Contracts are not defined )* the parties thereto )ut )* principles of law.
+n deter(ining the
nature of a contract, the courts are not )ound )* the na(e or title given to it )* the contracting parties.
+n the case at
)ar, the su( of ;-2,222.22, although deno(inated in the offer to purchase as Noption (one*,N is actuall* in the nature of
earnest (one* or down pa*(ent when considered with the other ter(s of the offer. +n Carceler v. Court of Appeals,
e=plained the nature of an option contract, viz. -
An option contract is a preparator* contract in which one part* grants to the other, for a fi=ed period
and under specified conditions, the power to decide, whether or not to enter into a principal contract, it
)inds the part* who has given the option not to enter into the principal contract with an* other person
during the period designated, and within that period, to enter into such contract with the one to who(
the option was granted, if the latter should decide to use the option. +t is a separate agree(ent distinct
fro( the contract to which the parties (a* enter upon the consu((ation of the option. #ew(iso
An option contract is therefore a contract separate fro( and preparator* to a contract of sale which, if perfected, does not
result in the perfection or consu((ation of the sale. 4nl* when the option is e=ercised (a* a sale )e perfected.
+n this case, however, after the pa*(ent of the 12< option (one*, the 4ffer to ;urchase provides for the pa*(ent onl* of
the )alance of the purchase price, i(pl*ing that the Noption (one*N for(s part of the purchase price. This is precisel* the
result of pa*ing earnest (one* under Art. 1$/& of the Civil Code. +t is clear then that the parties in this case actuall*
entered into a contract of sale, partiall* consu((ated as to the pa*(ent of the price. 0oreover, the following findings of
the trial court )ased on the testi(on* of the witnesses esta)lish that CD1 accepted 9i(s offer to purchase3
+t is further to )e noted that CD1 and :81TC alread* considered plaintiffs offer as good and no longer
su)>ect to a final approval. +n his testi(on* for the defendants on :e)ruar* 1-, 199&, :81TCs 9eo(ar
uE(an stated that he was then in the Ac,uired Assets Depart(ent of :81TC wherein plaintiffs offer to
purchase was endorsed thereto )* 0*oresco A)adilla, CD1s senior vice-president, with a
reco((endation that the necessar* petition for writ of possession )e filed in the proper court? that the
reco((endation was in accord with one of the conditions of the offer, i.e., the clearing of the propert*
of illegal occupants or tenants 5tsn, p. 1&6? that, in co(pliance with the re,uest, a petition for writ of
possession was thereafter filed on .ul* &&, 19// 58=hs. 1 and 1-A6? that the offer (et the re,uire(ents
of the )anks? and that no re>ection of the offer was thereafter rela*ed to the plaintiffs 5p. 176? which
was not a nor(al procedure, and neither did the )anks return the a(ount of ;-2,222.22 to the
iven CD1s acceptance of 9i(s offer to purchase, it appears that a contract of sale was perfected and, indeed, partiall*
e=ecuted )ecause of the partial pa*(ent of the purchase price. There is, however, a serious legal o)stacle to such sale,
rendering it i(possi)le for CD1 to perfor( its o)ligation as seller to deliver and transfer ownership of the propert*. Acct(is
0emo dat =uod non habet" as an ancient 9atin (a=i( sa*s. 4ne cannot give what one does not have. +n appl*ing this
precept to a contract of sale, a distinction (ust )e kept in (ind )etween the NperfectionN and Nconsu((ationN stages of
the contract.
A contract of sale is perfected at the (o(ent there is a (eeting of (inds upon the thing which is the o)>ect of the contract
and upon the price.
+t is, therefore, not re,uired that, at the perfection stage, the seller )e the owner of the thing sold or
even that such su)>ect (atter of the sale e=ists at that point in ti(e.
Thus, under Art. 1$-$ of the Civil Code, when a
person sells or alienates a thing which, at that ti(e, was not his, )ut later ac,uires title thereto, such title passes )*
operation of law to the )u*er or grantee. This is the sa(e principle )ehind the sale of Nfuture goodsN under Art. 1$6& of the
Civil Code. Cowever, under Art. 1$%9, at the ti(e of deliver* or consu((ation stage of the sale, it is re,uired that the
seller )e the owner of the thing sold. 4therwise, he will not )e a)le to co(pl* with his o)ligation to transfer ownership to
the )u*er. +t is at the consu((ation stage where the principle ofnemo dat =uod non habet applies.
+n ignos v. Court of Appeals,
the su)>ect contract of sale was held void as the sellers of the su)>ect land were no longer
the owners of the sa(e )ecause of a prior sale.
Again, in 0ool v. Court of Appeals,
we ruled that a contract of
repurchase, in which the seller does not have an* title to the propert* sold, is invalid3
Be cannot sustain petitioners view. Article 1-72 of the Civil Code is applica)le onl* to valid and
enforcea)le contracts. The !egional Trial Court and the Court of Appeals ruled that the principal contract
of sale contained in 8=hi)it C and the au=iliar* contract of repurchase in 8=hi)it D are )oth void. This
conclusion of the two lower courts appears to find support in ignos v. Court of Appeals, where the
Court held3
N1e that as it (a*, it is evident that when petitioners sold said land to the Ca)igas
spouses, the* were no longer owners of the sa(e and the sale is null and void.N
+n the present case, it is clear that the sellers no longer had an* title to the parcels of land at the ti(e
of sale. 'ince 8=hi)it D, the alleged contract of repurchase, was dependent on the validit* of 8=hi)it C,
it is itself void. A void contract cannot give rise to a valid one. "eril*, Article 1$&& of the Civil Code
provides that 5a6 contract which is the direct result of a previous illegal contract, is also void and
Be should however add that Dignos did not cite its )asis for ruling that a Nsale is null and voidN where
the sellers Nwere no longer the ownersN of the propert*. 'uch a situation 5where the sellers were no
longer owners6 does not appear to )e one of the void contracts enu(erated in Article 1$29 of the Civil
Code. 0oreover, the Civil Code itself recogniEes a sale where the goods are to )e ac,uired = = = )* the
seller after the perfection of the contract of sale, clearl* i(pl*ing that a sale is possi)le even if the seller
was not the owner at the ti(e of sale, provided he ac,uires title to the propert* later on. 0isact
+n the present case, however, it is likewise clear that the sellers can no longer deliver the o)>ect of the
sale to the )u*ers, as the )u*ers the(selves have alread* ac,uired title and deliver* thereof fro( the
rightful owner, the D1;. Thus, such contract (a* )e dee(ed to )e inoperative and (a* thus fall, )*
analog*, under ite( #o. % of Article 1$29 of the Civil Code3 Those which conte(plate an i(possi)le
service. Article 1$%9 of the Civil Code provides that Nthe vendor (ust have a right to transfer the
ownership thereof @su)>ect of the saleA at the ti(e it is delivered.N Cere, deliver* of ownership is no
longer possi)le. +t has )eco(e i(possi)le.
+n this case, the sale )* CD1 to 9i( of the propert* (ortgaged in 19/- )* !odolfo uansing (ust, therefore, )e dee(ed a
nullit* for CD1 did not have a valid title to the said propert*. To )e sure, CD1 never ac,uired a valid title to the propert*
)ecause the foreclosure sale, )* virtue of which the propert* had )een awarded to CD1 as highest )idder, is likewise void
since the (ortgagor was not the owner of the propert* foreclosed.
A foreclosure sale, though essentiall* a Nforced sale,N is still a sale in accordance with Art. 1$%/ of the Civil Code, under
which the (ortgagor in default, the forced seller, )eco(es o)liged to transfer the ownership of the thing sold to the highest
)idder who, in turn, is o)liged to pa* therefor the )id price in (one* or its e,uivalent. 1eing a sale, the rule that the seller
(ust )e the owner of the thing sold also applies in a foreclosure sale. This is the reason Art. &2/%
of the Civil Code, in
providing for the essential re,uisites of the contract of (ortgage and pledge, re,uires, a(ong other things, that the
(ortgagor or pledgor )e the a)solute owner of the thing pledged or (ortgaged, in anticipation of a possi)le foreclosure
sale should the (ortgagor default in the pa*(ent of the loan.
There is, however, a situation where, despite the fact that the (ortgagor is not the owner of the (ortgaged propert*, his
title )eing fraudulent, the (ortgage contract and an* foreclosure sale arising therefro( are given effect )* reason of pu)lic
polic*. This is the doctrine of Nthe (ortgagee in good faithN )ased on the rule that all persons dealing with propert*
covered )* a Torrens Certificate of Title, as )u*ers or (ortgagees, are not re,uired to go )e*ond what appears on the face
of the title.
The pu)lic interest in upholding the indefeasi)ilit* of a certificate of title, as evidence of the lawful ownership
of the land or of an* encu()rance thereon, protects a )u*er or (ortgagee who, in good faith, relied upon what appears on
the face of the certificate of title. 'd>ad
This principle is cited )* petitioners in clai(ing that, as a (ortgagee )ank, it is not re,uired to (ake a detailed
investigation of the histor* of the title of the propert* given as securit* )efore accepting a (ortgage.
Be are not convinced, however, that under the circu(stances of this case, CD1 can )e considered a (ortgagee in good
faith. Bhile petitioners are not e=pected to conduct an e=haustive investigation on the histor* of the (ortgagors title, the*
cannot )e e=cused fro( the dut* of e=ercising the due diligence re,uired of )anking institutions. +n Tomas v. Tomas,
noted that it is standard practice for )anks, )efore approving a loan, to send representatives to the pre(ises of the land
offered as collateral and to investigate who are the real owners thereof, noting that )anks are e=pected to e=ercise (ore
care and prudence than private individuals in their dealings, even those involving registered lands, for their )usiness is
affected with pu)lic interest. Be held thus3
Be, indeed, find (ore weight and vigor in a doctrine which recogniEes a )etter right for the innocent
original registered owner who o)tained his certificate of title through perfectl* legal and regular
proceedings, than one who o)tains his certificate fro( a totall* void one, as to prevail over >udicial
pronounce(ents to the effect that one dealing with a registered land, such as a purchaser, is under no
o)ligation to look )e*ond the certificate of title of the vendor, for in the latter case, good faith has *et to
)e esta)lished )* the vendee or transferee, )eing the (ost essential condition, coupled with valua)le
consideration, to entitle hi( to respect for his newl* ac,uired title even as against the holder of an
earlier and perfectl* valid title. There (ight )e circu(stances apparent on the face of the certificate of
title which could e=cite suspicion as to pro(pt in,uir*, such as when the transfer is not )* virtue of a
voluntar* act of the original registered owner, as in the instant case, where it was )* (eans of a self-
e=ecuted deed of e=tra->udicial settle(ent, a fact which should )e noted on the face of 8use)ia To(as
certificate of title. :ailing to (ake such in,uir* would hardl* )e consistent with an* pretense of good
faith, which the appellant )ank invokes to clai( the right to )e protected as a (ortgagee, and for the
reversal of the >udg(ent rendered against it )* the lower court.
+n this case, there is no evidence that CD1 o)served its dut* of diligence in ascertaining the validit* of !odolfo uansings
title. +t appears that !odolfo uansing o)tained his fraudulent title )* e=ecuting an 8=tra-.udicial 'ettle(ent of the 8state
Bith Baiver where he (ade it appear that he and ;erfecto uansing were the onl* surviving heirs entitled to the propert*,
and that ;erfecto had waived all his rights thereto. This self-e=ecuted deed should have placed CD1 on guard against an*
possi)le defect in or ,uestion as to the (ortgagors title. 0oreover, the alleged ocular inspection report
)* CD1s
representative was never for(all* offered in evidence. +ndeed, petitioners ad(it that the* are aware that the su)>ect land
was )eing occupied )* persons other than !odolfo uansing and that said persons, who are the heirs of ;erfecto uansing,
contest the title of !odolfo.
The sale )* CD1 to 9i( )eing void, the ,uestion now arises as to who, if an*, a(ong the parties was at fault for the nullit*
of the contract. 1oth the trial court and the appellate court found petitioners guilt* of fraud, )ecause on .une 16, 19//,
when 9i( was asked )* CD1 to pa* the 12< option (one*, CD1 alread* knew that it was no longer the owner of the said
propert*, its title having )een cancelled.
;etitioners contend that3 516 such finding of the appellate court is founded
entirel* on speculation and con>ecture? 5&6 neither CD1 nor :81TC was a part* in the case where the (ortgagors title was
cancelled? 5-6 CD1 is not priv* to an* pro)le( a(ong the uansings? and 5$6 the final decision cancelling the (ortgagors
title was not annotated in the latters title.
As a rule, onl* ,uestions of law (a* )e raised in a petition for review, e=cept in circu(stances where ,uestions of fact (a*
)e properl* raised.
Cere, while petitioners raise these factual issues, the* have not sufficientl* shown that the instant
case falls under an* of the e=ceptions to the a)ove rule. Be are thus )ound )* the findings of fact of the appellate court.
+n an* case, we are convinced of petitioners negligence in approving the (ortgage application of !odolfo uansing.
Be now co(e to the civil effects of the void contract of sale )etween the parties. Article 1$1&5&6 of the Civil Code
+f the act in which the unlawful or for)idden cause consists does not constitute a cri(inal offense, the
following rules shall )e o)served3
. . . .
5&6.......Bhen onl* one of the contracting parties is at fault, he cannot recover what
he has given )* reason of the contract, or ask for the fulfill(ent of what has )een
pro(ised hi(. The other, who is not at fault, (a* de(and the return of what he has
given without an* o)ligation to co(pl* with his pro(ise.
;rivate respondents are thus entitled to recover the ;-2,222.22 option (one* paid )* the(. 0oreover, since the filing of
the action for da(ages against petitioners a(ounted to a de(and )* respondents for the return of their (one*, interest
thereon at the legal rate should )e co(puted fro( August &9, 19/9, the date of filing of Civil Case #o. K-/9-&/6-, not
.une 17, 19//, when petitioners accepted the pa*(ent. This is in accord with our ruling inCastillo v. Abala'an
that in
case of a void sale, the seller has no right whatsoever to keep the (one* paid )* virtue thereof and should refund it, with
interest at the legal rate, co(puted fro( the date of filing of the co(plaint until full* paid. +ndeed, Art. 1$1&5&6 which
provides that the non-guilt* part* N(a* de(and the return of what he has givenN clearl* i(plies that without such prior
de(and, the o)ligation to return what was given does not )eco(e legall* de(anda)le. 'ccalr
Considering CD1s negligence, we sustain the award of (oral da(ages on the )asis of Arts. &1 and &&19 of the Civil Code
and our ruling in Tan v. Court of Appeals
that (oral da(ages (a* )e recovered even if a )anks negligence is not
attended with (alice and )ad faith. Be find, however, that the su( of ;&%2,222.22 awarded )* the trial court is e=cessive.
0oral da(ages are onl* intended to alleviate the (oral suffering undergone )* private respondents, not to enrich the( at
the e=pense of the petitioners.
Accordingl*, the award of (oral da(ages (ust )e reduced to ;%2,222.22.
9ikewise, the award of ;%2,222.22 as e=e(plar* da(ages, although >ustified under Art. &&-& of the Civil Code, is
e=cessive and should )e reduced to ;-2,222.22. The award of ;-2,222.22 attorne*s fees )ased on Art. &&2/, pars. 1, &, %
and 11 of the Civil Code should si(ilarl* )e reduced to ;&2,222.22.
;HERE#!RE , the decision of the Court of Appeals is A::+!08D with the 04D+:+CAT+4# as to the award of da(ages as
a)ove stated.
S! !R%ERE%.&F&9F22 &319 ;0
&ellosillo" *Chairman+" !uisumbing" &uena" and e (eon" #r." ##." concur.
AG.R. No. 1C64C4, November 2C, 2004E
% E C I S I ! N
CHIC!?NA'ARI!, <.(
This is a ;etition for !eview on Certiorari under !ule $% of the !ules of Court, assailing the Decision
dated -1 .anuar* &226 rendered )* the
Court of Appeals in CA-.!. '; #o. /7266, which affir(ed the Decision
dated -2 .une &22- of the 4ffice of the ;resident, in 4.;. Case #o.
2&-A-227, approving the application of respondent 8lena 'occo-1eltran to purchase the su)>ect propert*.
The su)>ect propert* in this case is a parcel of land originall* identified as 9ot #o. 6-1, situated in Ha(ora 'treet, Dinalupihan, 1ataan, with a
total area of -62 s,uare (eters. +t was originall* part of a larger parcel of land, (easuring 1,2&& s,uare (eters, allocated to the 'pouses
0arcelo 9a,uian and Constancia 'occo 5'pouses 9a,uian6, who paid for the sa(e with .apanese (one*. Bhen 0arcelo died, the propert* was
left to his wife Constancia. Dpon ConstanciaGs su)se,uent death, she left the original parcel of land, along with her other propert*, with her
heirs - her si)lings, na(el*3 :ilo(ena 8liEa 'occo, +sa)el 'occo de Cipolito, 0iguel !. 'occo, and 8lena 'occo-1eltran.
;ursuant to an
unnotariEed docu(ent entitled N8=tra>udicial 'ettle(ent of the 8state of the Deceased Constancia !. 'occo,N e=ecuted )* ConstanciaGs heirs
so(eti(e in 196%, the parcel of land was partitioned into three lots--9ot #o. 6-A, 9ot #o. 6-1, and 9ot #o. 6-C.
The su)>ect propert*, 9ot
#o. 6-1, was ad>udicated to respondent, )ut no title had )een issued in her na(e.
4n &% .une 199/, respondent 8lena 'occo-1eltran filed an application for the purchase of 9ot #o. 6-1 )efore the Depart(ent of Agrarian
!efor( 5DA!6, alleging that it was ad>udicated in her favor in the e=tra->udicial settle(ent of Constancia 'occoGs estate.
;etitioners herein, the heirs of the late Arturo !e*es, filed their protest to respondentGs petition )efore the DA! on the ground that the su)>ect
propert* was sold )* respondentGs )rother, 0iguel !. 'occo, in favor of their father, Arturo !e*es, as evidenced )* the Contract to 'ell, dated
% 'epte()er 19%$, stipulating that3
That + a( one of the co-heirs of the 8state of the deceased Constancia 'occo? and that I am *o .n)er.* as such a portion of her lot consisting
of :our Cundred ',uare 0eters 5$226 (ore or less located on the 5sic6 Ha(ora 't., 0unicipalit* of Dinalupihan, ;rovince of 1ataan, )ounded
as follows3
= = = =
That for or in consideration of the su( of :+"8 ;8'4' 5;%.226 per s,uare (eter, here)* sell, conve* and transfer )* wa* of this6on.*.ona1
-a1e the said $22 s,.(. (ore or less unto Att*. Arturo C. !e*es, his heirs, ad(inistrator and assigns = = =. 58(phasis supplied.6
;etitioners averred that the* took ph*sical possession of the su)>ect propert* in 19%$ and had )een uninterrupted in their possession of the
said propert* since then.
9egal 4fficer 1rigida ;inlac of the DA! 1ataan ;rovincial Agrarian !efor( 4ffice conducted an investigation, the results of which were
contained in her !eportF !eco((endation dated 1% April 1999. 4ther than recounting the afore-(entioned facts, 9egal 4fficer ;inlac also
(ade the following findings in her !eportF!eco((endation3
:urther investigation was conducted )* the undersigned and )ased on the docu(entar* evidence presented )* )oth parties, the following
facts were gathered3 that the house of @theA !e*es fa(il* is ad>acent to the landholding in ,uestion and portion of the su)>ect propert*
consisting of a)out 1% (eters @wereA occupied )* the heirs of Arturo !e*es were a kitchen and )athroo( @wereA constructed therein? on the
re(aining portion a skeletal for( (ade of hollow )lock@sA is erected and according to the heirs of late Arturo !e*es, this was constructed
since the *ear 5sic6 72Gs at their e=pense? that construction of the said skeletal )uilding was not continued and left unfinished which according
to the affidavit of ;atricia Cipolito the !e*es fa(il* where 5sic6 prevented )* 8lena 'occo in their atte(pt of occupanc* of the su)>ect
landholding? 5affidavit of ;atricia Cipolito is hereto attached as Anne= N:N6? that 8lena 'occo cannot ph*sicall* and personall* occup* the
su)>ect propert* )ecause of the skeletal )uilding (ade )* the !e*es fa(il* who have )een re,uesting that the* )e paid for the cost of the
construction and the sa(e )e de(olished at the e=pense of 8lena 'occo? that according to 8lena 'occo, @sheA is willing to waive her right on
the portion where @theA kitchen and )athroo( is 5sic6 constructed )ut not the whole of 9ot @#o.A 6-1 ad>udicated to her? that the !e*es fa(il*
included the su)>ect propert* to the sworn state(ent of value of real properties filed )efore the (unicipalit* of Dinalupihan, 1ataan, copies of
the docu(ents are hereto attached as Anne=es NN and NCN? that likewise 8lena 'occo has )een continuousl* and religiousl* pa*ing the realt*
ta= due on the said propert*.
+n the end, 9egal 4fficer ;inlac reco((ended the approval of respondentGs petition for issuance of title over the su)>ect propert*, ruling that
respondent was ,ualified to own the su)>ect propert* pursuant to Article 1291 of the #ew Civil Code.
;rovincial Agrarian !efor( 4fficer
5;A!46 !a*nor Taro* concurred in the said reco((endation in his +ndorse(ent dated && April 1999.
+n an 4rder dated 1% 'epte()er 1999, DA! !egional Director #estor !. Acosta, however, dis(issed respondentGs petition for issuance of title
over the su)>ect propert* on the ground that respondent was not an actual tiller and had a)andoned the said propert* for $2 *ears? hence,
she had alread* renounced her right to recover the sa(e.
The dispositive part of the 4rder reads3
D+'0+''+# the clai(s of 8lena 'occo-1eltran, dul* represented )* 0*rna 'occo for lack of (erit?
A994CAT+# 9ot #o. 6-1 under ;sd-22--22/%6% with an area of -62 s,uare (eters, (ore or less, situated Ha(ora 'treet,
Dinalupihan, 1ataan, in favor of the heirs of Arturo !e*es.
4!D8!+# the co(plainant to refrain fro( an* act tending to distur) the peaceful possession of herein respondents.
D+!8CT+# the 0A!4 of Dinalupihan, 1ataan to process the pertinent docu(ents for the issuance of C94A in favor of the heirs of
Arturo !e*es.
!espondent filed a 0otion for !econsideration of the foregoing 4rder, which was denied )* DA! !egional Director Acosta in another 4rder
dated 1% 'epte()er 1999.
!espondent then appealed to the 4ffice of the DA! 'ecretar*. +n an 4rder, dated 9 #ove()er &221, the DA! 'ecretar* reversed the Decision
of DA! !egional Director Acosta after finding that neither petitionersG predecessor-in-interest, Arturo !e*es, nor respondent was an actual
occupant of the su)>ect propert*. Cowever, since it was respondent who applied to purchase the su)>ect propert*, she was )etter ,ualified to
own said propert* as opposed to petitioners, who did not at all appl* to purchase the sa(e. ;etitioners were further dis,ualified fro(
purchasing the su)>ect propert* )ecause the* were not landless. :inall*, during the investigation of 9egal 4fficer ;inlac, petitioners re,uested
that respondent pa* the( the cost of the construction of the skeletal house the* )uilt on the su)>ect propert*. This was construed )* the DA!
'ecretar* as a waiver )* petitioners of their right over the su)>ect propert*.
+n the said 4rder, the DA! 'ecretar* ordered that3
;HERE#!RE, pre(ises considered, the 'epte()er 1%, 1999 4rder is here)* '8T A'+D8 and a new 4rder is here)* issued A;;!4"+# the
application to purchase 9ot @#o.A 6-1 of 8lena 'occo-1eltran.
;etitioners sought re(ed* fro( the 4ffice of the ;resident )* appealing the 9 #ove()er &221 Decision of the DA! 'ecretar*. Their appeal
was docketed as 4.;. Case #o. 2&-A-227. 4n -2 .une &22-, the 4ffice of the ;resident rendered its Decision den*ing petitionersG appeal and
affir(ing the DA! 'ecretar*Gs Decision.
The falloof the Decision reads3
;HERE#!RE, pre(ises considered, >udg(ent appealed fro( isA##IR"E% and the instant appeal %IS"ISSE%.
;etitionersG 0otion for !econsideration was likewise denied )* the 4ffice of the ;resident in a !esolution dated -2 'epte()er &22$.
+n the
said !esolution, the 4ffice of the ;resident noted that petitioners failed to allege in their (otion the date when the* received the Decision
dated -2 .une &22-. 'uch date was (aterial considering that the petitionersG 0otion for !econsideration was filed onl* on 1$ April &22$, or
al(ost nine (onths after the pro(ulgation of the decision sought to )e reconsidered. Thus, it ruled that petitionersG 0otion for
!econsideration, filed )e*ond fifteen da*s fro( receipt of the decision to )e reconsidered, rendered the said decision final and e=ecutor*.
Conse,uentl*, petitioners filed an appeal )efore the Court of Appeals, docketed as CA-.!. '; #o. /7266. ;ending the resolution of this case,
the DA! alread* issued on / .ul* &22% a Certificate of 9and 4wnership Award 5C94A6 over the su)>ect propert* in favor of the respondentGs
niece and representative, 0*rna 'occo-1eltran.
!espondent passed awa* on &1 0arch &221,
)ut the records do not ascertain the identit*
of her legal heirs and her legatees.
Acting on CA-.!. '; #o. /7266, the Court of Appeals su)se,uentl* pro(ulgated its Decision, dated -1 .anuar* &226, affir(ing the Decision
dated -2 .une &22- of the 4ffice of the ;resident. +t held that petitioners could not have )een actual occupants of the su)>ect propert*, since
actual occupanc* re,uires the positive act of occup*ing and tilling the land, not >ust the introduction of an unfinished skeletal structure
thereon. The Contract to 'ell on which petitioners )ased their clai( over the su)>ect propert* was e=ecuted )* 0iguel 'occo, who was not the
owner of the said propert* and, therefore, had no right to transfer the sa(e. Accordingl*, the Court of Appeals affir(ed respondentGs right
over the su)>ect propert*, which was derived for( the original allocatees thereof.
The fallo of the said Decision reads3
;HERE#!RE, pre(ises considered, the instant PETITI!N #!R RE&IE; is %IS"ISSE%. Accordingl*, the Decision dated -2 .une &22- and
the !esolution dated -2 Dece()er &22$ )oth issued )* the 4ffice of the ;resident are here)* A##IR"E% in toto.
The Court of Appeals denied petitionersG 0otion for !econsideration of its Decision in a !esolution dated 16 August &226.
Cence, the present ;etition, wherein petitioners raise the following issues3
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The (ain issue in this case is whether or not petitioners have a )etter right to the su)>ect propert* over the respondent. ;etitionerGs clai(
over the su)>ect propert* is anchored on the Contract to 'ell e=ecuted )etween 0iguel 'occo and Arturo !e*es on % 'epte()er 19%$.
;etitioners additionall* allege that the* and their predecessor-in-interest, Arturo !e*es, have )een in possession of the su)>ect lot since 19%$
for an uninterrupted period of (ore than $2 *ears.
The Court is unconvinced.
;etitioners cannot derive title to the su)>ect propert* )* virtue of the Contract to 'ell. +t was un(istaka)l* stated in the Contract and (ade
clear to )oth parties thereto that the vendor, 0iguel !. 'occo, was not *et the owner of the su)>ect propert* and was (erel* e=pecting to
inherit the sa(e as his share as a co-heir of ConstanciaGs estate.
+t was also declared in the Contract itself that 0iguel !. 'occoGs
conve*ance of the su)>ect to the )u*er, Arturo !e*es, was a conditional sale. +t is, therefore, apparent that the sale of the su)>ect propert* in
favor of Arturo !e*es was conditioned upon the event that 0iguel 'occo would actuall* inherit and )eco(e the owner of the said propert*.
A)sent such occurrence, 0iguel !. 'occo never ac,uired ownership of the su)>ect propert* which he could validl* transfer to Arturo !e*es.
Dnder Article 1$%9 of the Civil Code on contracts of sale, NThe thing (ust )e licit and the vendor (ust have a right to transfer ownership
thereof at the ti(e it is delivered.N The law specificall* re,uires that the vendor (ust have ownership of the propert* at the ti(e it is
delivered. ;etitioners clai( that the propert* was constructivel* delivered to the( in 19%$ )* virtue of the Contract to 'ell. Cowever, as
alread* pointed out )* this Court, it was e=plicit in the Contract itself that, at the ti(e it was e=ecuted, 0iguel !. 'occo was not *et the owner
of the propert* and was onl* e=pecting to inherit it. Cence, there was no valid sale fro( which ownership of the su)>ect propert* could have
transferred fro( 0iguel 'occo to Arturo !e*es. Bithout ac,uiring ownership of the su)>ect propert*, Arturo !e*es also could not have
conve*ed the sa(e to his heirs, herein petitioners.
;etitioners, nevertheless, insist that the* ph*sicall* occupied the su)>ect lot for (ore than -2 *ears and, thus, the* gained ownership of the
propert* through ac,uisitive prescription, citing Sandoval v. .nsular >overnment
and San 5iguel Corporation v. Court of Appeals.
+n Sandoval, petitioners therein sought the enforce(ent of 'ection %$, paragraph 6 of Act #o. 9&6, otherwise known as the 9and !egistration
Act, which re,uired -- for the issuance of a certificate of title to agricultural pu)lic lands -- the open, continuous, e=clusive, and notorious
possession and occupation of the sa(e in good faith and under clai( of ownership for (ore than ten *ears. After evaluating the evidence
presented, consisting of the testi(onies of several witnesses and proof that fences were constructed around the propert*, the Court in the
afore-stated case denied the petition on the ground that petitioners failed to prove that the* e=ercised acts of ownership or were in open,
continuous, and peaceful possession of the whole land, and had caused it to )e enclosed to the e=clusion of other persons. +t further decreed
that whoever clai(s such possession shall e=ercise acts of do(inion and ownership which cannot )e (istaken for the (o(entar* and
accidental en>o*(ent of the propert*.
+n San 5iguel Corporation, the Court reiterated the rule that the open, e=clusive, and undisputed possession of aliena)le pu)lic land for the
period prescri)ed )* law creates the legal fiction where)* land ceases to )e pu)lic land and is, therefore, private propert*. +t stressed,
however, that the occupation of the land for -2 *ears (ust )econclusivel' esta)lished. Thus, the evidence offered )* petitioner therein - ta=
declarations, receipts, and the sole testi(on* of the applicant for registration, petitionerGs predecessor-in-interest who clai(ed to have
occupied the land )efore selling it to the petitioner - were considered insufficient to satisf* the ,uantu( of proof re,uired to esta)lish the
clai( of possession re,uired for ac,uiring aliena)le pu)lic land.
As in the two aforecited cases, petitioners herein were una)le to prove actual possession of the su)>ect propert* for the period re,uired )*
law. +t was underscored in San 5iguel Corporation that the open, continuous, e=clusive, and notorious occupation of propert* for (ore than
-2 *ears (ust )e no less than, such ,uantu( of proof )eing necessar* to avoid the erroneous validation of actual fictitious clai(s
of possession over the propert* that is )eing clai(ed.
+n the present case, the evidence presented )* the petitioners falls short of )eing conclusive. Apart fro( their self-serving state(ent that
the* took possession of the su)>ect propert*, the onl* proof offered to support their clai( was a general state(ent (ade in the letter
$ :e)ruar* &22& of &aranga' Captain Carlos apero, certif*ing that Arturo !e*es was the occupant of the su)>ect propert* Nsince peace ti(e
and at present.N The state(ent is rendered dou)tful )* the fact that as earl* as 1997, when respondent filed her petition for issuance of title
)efore the DA!, Arturo !e*es had alread* died and was alread* represented )* his heirs, petitioners herein.
0oreover, the certification given )* &aranga' Captain apero that Arturo !e*es occupied the pre(ises for an unspecified period of ti(e, i.e.,
since peace ti(e until the present, cannot prevail over 9egal 4fficer ;inlacGs (ore particular findings in her !eportF!eco((endation. 9egal
4fficer ;inlac reported that petitioners ad(itted that it was onl* in the 1972s that the* )uilt the skeletal structure found on the su)>ect
propert*. 'he also referred to the aver(ents (ade )* ;atricia Cipolito in an Affidavit,
dated &6 :e)ruar* 1999, that the structure was left
unfinished )ecause respondent prevented petitioners fro( occup*ing the su)>ect propert*. 'uch findings disprove petitionersG clai(s that their
predecessor-in-interest, Arturo !e*es, had )een in open, e=clusive, and continuous possession of the propert* since 19%$. The adverted
findings were the result of 9egal 4fficer ;inlacGs investigation in the course of her official duties, of (atters within her e=pertise which were
later affir(ed )* the DA! 'ecretar*, the 4ffice of the ;resident, and the Court of Appeals. The factual findings of such ad(inistrative officer, if
supported )* evidence, are entitled to great respect.

+n contrast, respondentGs clai( over the su)>ect propert* is )acked )* sufficient evidence. Cer predecessors-in-interest, the spouses 9a,uian,
have )een identified as the original allocatees who have full* paid for the su)>ect propert*. The su)>ect propert* was allocated to respondent
in the e=tra>udicial settle(ent )* the heirs of ConstanciaGs estate. The docu(ent entitled N8=tra->udicial 'ettle(ent of the 8state of the
Deceased Constancia 'occoN was not notariEed and, as a private docu(ent, can onl* )ind the parties thereto. Cowever, its authenticit* was
never put into ,uestion, nor was its legalit* i(pugned. 0oreover, e=ecuted in 196% )* the heirs of Constancia 'occo, or (ore than -2 *ears
ago, it is an ancient docu(ent which appears to )e genuine on its face and therefore its authenticit* (ust )e upheld.
!espondent has
continuousl* paid for the realt* ta= due on the su)>ect propert*, a fact which, though not conclusive, served to strengthen her clai( over the
:ro( the foregoing, it is onl* proper that respondentGs clai( over the su)>ect propert* )e upheld. This Court (ust, however, note that the
4rder of the DA! 'ecretar*, dated 9 #ove()er &221, which granted the petitionerGs right to purchase the propert*, is flawed and (a* )e
assailed in the proper proceedings. !ecords show that the DA! affir(ed that respondentGs predecessors-in-interest, 0arcelo 9a,uian and
Constancia 'occo, having )een identified as the original allocatee, have full* paid for the su)>ect propert* as provided under an agree(ent to
sell. 1* the nature of a contract or agree(ent to sell, the title over the su)>ect propert* is transferred to the vendee upon the full pa*(ent of
the stipulated consideration. Dpon the full pa*(ent of the purchase price, and a)sent an* showing that the allocatee violated the conditions of
the agree(ent, ownership of the su)>ect land should )e conferred upon the allocatee.
'ince the e=tra>udicial partition transferring
Constancia 'occoGs interest in the su)>ect land to the respondent is valid, there is clearl* no need for the respondent to purchase the su)>ect
propert*, despite the application for the purchase of the propert* erroneousl* filed )* respondent. The onl* act which re(ains to )e
perfor(ed is the issuance of a title in the na(e of her legal heirs, now that she is deceased.
0oreover, the Court notes that the records have not clearl* esta)lished the right of respondentGs representative, 0*rna 'occo-AriEo, over the
su)>ect propert*. Thus, it is not clear to this Court wh* the DA! issued on / .ul* &22% a C94A
over the su)>ect propert* in favor of 0*rna
'occo-AriEo. !espondentGs death does not auto(aticall* trans(it her rights to the propert* to 0*rna 'occo-1eltran. !espondent onl*
authoriEed 0*rna 'occo-AriEo, through a 'pecial ;ower of Attorne*
dated 12 0arch 1999, to represent her in the present case and to
ad(inister the su)>ect propert* for her )enefit. There is nothing in the 'pecial ;ower of Attorne* to the effect that 0*rna 'occo-AriEo can take
over the su)>ect propert* as owner thereof upon respondentGs death. That 0iguel ". 'occo, respondentGs onl* nephew, the son of the late
0iguel !. 'occo, and 0*rna 'occo-AriEoGs )rother, e=ecuted a waiver of his right to inherit fro( respondent, does not auto(aticall* (ean that
the su)>ect propert* will go to 0*rna 'occo-AriEo, a)sent an* proof that there is no other ,ualified heir to respondentGs estate. Thus, this
Decision does not in an* wa* confir( the issuance of the C94A in favor of 0*rna 'occo-AriEo, which (a* )e assailed in appropriate
IN &IE; !# THE #!REG!ING, the instant ;etition is %ENIE%. The assailed Decision of the Court of Appeals in CA-.!. '; #o. /7266,
pro(ulgated on -1 .anuar* &226, isA##IR"E% with "!%I#ICATI!N. This Court withholds the confir(ation of the validit* of title over the
su)>ect propert* in the na(e of 0*rna 'occo-AriEo pending deter(ination of respondentGs legal heirs in appropriate proceedings. #o costs.
S! !R%ERE%.
<nares1Santiago" *Chairperson+" Austria15artinez" 0achura" and Re'es" ##." concur.