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G.R. No.

166714

February 9, 2007

AMELIA S. ROBERTS, Petitioner,


vs.
MARTIN B. PAPIO, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this petition for review on certiorari is the Decision1 of the Court of Appeals
(CA), in CA-G.R. CV No. 69034 which reversed and set aside the Decision 2 of the Regional
Trial Court (RTC), Branch 150, Makati City, in Civil Case No. 01-431. The RTC ruling had
affirmed with modification the Decision3 of the Metropolitan Trial Court (MeTC), Branch
64, Makati City in Civil Case No. 66847. The petition likewise assails the Resolution of the
CA denying the motion for reconsideration of its decision.
The Antecedents
The spouses Martin and Lucina Papio were the owners of a 274-square-meter residential
lot located in Makati (now Makati City) and covered by Transfer Certificate of Title (TCT)
No. S-44980.4 In order to secure aP59,000.00 loan from the Amparo Investments
Corporation, they executed a real estate mortgage on the property. Upon Papios failure
to pay the loan, the corporation filed a petition for the extrajudicial foreclosure of the
mortgage.
Since the couple needed money to redeem the property and to prevent the foreclosure
of the real estate mortgage, they executed a Deed of Absolute Sale over the property on
April 13, 1982 in favor of Martin Papios cousin, Amelia Roberts. Of the P85,000.00
purchase price, P59,000.00 was paid to the Amparo Investments Corporation, while
the P26,000.00 difference was retained by the spouses.5 As soon as the spouses had
settled their obligation, the corporation returned the owners duplicate of TCT No. S44980, which was then delivered to Amelia Roberts.
Thereafter, the parties (Amelia Roberts as lessor and Martin Papio as lessee) executed a
two-year contract of lease dated April 15, 1982, effective May 1, 1982. The contract was
subject to renewal or extension for a like period at the option of the lessor, the lessee
waiving thereby the benefits of an implied new lease. The lessee was obliged to pay
monthly rentals of P800.00 to be deposited in the lessors account at the Bank of
America, Makati City branch.6
On July 6, 1982, TCT No. S-44980 was cancelled, and TCT No. 114478 was issued in the
name of Amelia Roberts as owner.7
Martin Papio paid the rentals from May 1, 1982 to May 1, 1984, and thereafter, for
another year.8 He then failed to pay rentals, but he and his family nevertheless remained
in possession of the property for a period of almost thirteen (13) years.

In a letter dated June 3, 1998, Amelia Roberts, through counsel, reminded Papio that he
failed to pay the monthly rental of P2,500.00 from January 1, 1986 to December 31,
1997, and P10,000.00 from January 1, 1998 to May 31, 1998; thus, his total liability
was P410,000.00. She demanded that Papio vacate the property within 15 days from
receipt of the letter in case he failed to settle the amount.9 Because he refused to pay,
Papio received another letter from Roberts on April 22, 1999, demanding, for the last
time, that he and his family vacate the property.10 Again, Papio refused to leave the
premises.
On June 28, 1999, Amelia Roberts, through her attorney-in-fact, Matilde Aguilar, filed a
Complaint11 for unlawful detainer and damages against Martin Papio before the MeTC,
Branch 64, Makati City. She alleged the following in her complaint:
Sometime in 1982 she purchased from defendant a 274-sq-m residential house
and lot situated at No. 1046 Teresa St., Brgy. Valenzuela, Makati City.12 Upon
Papios pleas to continue staying in the property, they executed a two-year lease
contract13 which commenced on May 1, 1982. The monthly rental was P800.00.
Thereafter, TCT No. 11447814 was issued in her favor and she paid all the realty
taxes due on the property. When the term of the lease expired, she still allowed
Papio and his family to continue leasing the property. However, he took advantage
of her absence and stopped payment beginning January 1986, and refused to pay
despite repeated demands. In June 1998, she sent a demand letter15 through
counsel requiring Papio to pay rentals from January 1986 up to May 1998 and to
vacate the leased property. The accumulated arrears in rental are as follows:
(a)P360,000.00 from January 1, 1986 to December 31, 1997 at P2,500.00 per
month; and (b) P50,000.00, from January 1, 1998 to May 31, 1998 at P10,000.00
per month.16 She came to the Philippines but all efforts at an amicable settlement
proved futile. Thus, in April 1999, she sent the final demand letter to defendant
directing him and his family to pay and immediately vacate the leased premises.17
Roberts appended to her complaint copies of the April 13, 1982 Deed of Absolute
Sale, the April 15, 1982 Contract of Lease, and TCT No. 114478.
In his Answer with counterclaim, Papio alleged the following:
He executed the April 13, 1982 deed of absolute sale and the contract of lease.
Roberts, his cousin who is a resident of California, United States of America (USA),
arrived in the Philippines and offered to redeem the property. Believing that she
had made the offer for the purpose of retaining his ownership over the property,
he accepted. She then remitted P59,000.00 to the mortgagor for his account, after
which the mortgagee cancelled the real estate mortgage. However, he was
alarmed when the plaintiff had a deed of absolute sale over the property prepared
(for P83,000.00 as consideration) and asked him to sign the same. She also
demanded that the defendant turn over the owners duplicate of TCT No. S-44980.
The defendant was in a quandary. He then believed that if he signed the deed of
absolute sale, Roberts would acquire ownership over the property. He asked her to

allow him to redeem or reacquire the property at any time for a reasonable
amount.18 When Roberts agreed, Papio signed the deed of absolute sale.
Pursuant to the right to redeem/repurchase given him by Roberts, Papio purchased
the property for P250,000.00. In July 1985, since Roberts was by then already in
the USA, he remitted to her authorized representative, Perlita Ventura, the amount
of P150,000.00 as partial payment for the property.19 On June 16, 1986, she again
remittedP100,000.00, through Ventura. Both payments were evidenced by receipts
signed by Ventura.20 Roberts then declared that she would execute a deed of
absolute sale and surrender the title to the property. However, Ventura had
apparently misappropriated P39,000.00 out of the P250,000.00 that she had
received; Roberts then demanded that she pay the amount misappropriated
before executing the deed of absolute sale. Thus, the sole reason why Roberts
refused to abide by her promise was the failure of her authorized representative to
remit the full amount of P250,000.00. Despite Papios demands, Roberts refused to
execute a deed of absolute sale. Accordingly, defendant posited that plaintiff had
no cause of action to demand payment of rental and eject him from the property.
Papio appended to his Answer the following: (1) the letter dated July 18, 1986 of Perlita
Ventura to the plaintiff wherein the former admitted having used the money of the
plaintiff to defray the plane fares of Perlitas parents to the USA, and pleaded that she be
allowed to repay the amount within one year; (b) the letter of Eugene Roberts (plaintiffs
husband) to Perlita Ventura dated July 25, 1986 where he accused Ventura of stealing the
money of plaintiff Amelia (thus preventing the latter from paying her loan on her house
and effect the cancellation of the mortgage), and demanded that she deposit the
balance;21 and (c) plaintiffs letter to defendant Papio dated July 25, 1986 requesting the
latter to convince Ventura to remit the balance of P39,000.00 so that the plaintiff could
transfer the title of the property to the defendant.22
Papio asserted that the letters of Roberts and her husband are in themselves admissions
or declarations against interest, hence, admissible to prove that he had reacquired the
property although the title was still in her possession.
In her Affidavit and Position Paper,23 Roberts averred that she had paid the real estate
taxes on the property after she had purchased it; Papios initial right to occupy the
property was terminated when the original lease period expired; and his continued
possession was only by mere tolerance. She further alleged that the Deed of Sale states
on its face that the conveyance of the property was absolute and unconditional. She also
claimed that any right to repurchase the property must appear in a public document
pursuant to Article 1358, Paragraph 1, of the Civil Code of the Phililppines.24 Since no
such document exists, defendants supposed real interest over the property could not be
enforced without violating the Statute of Frauds.25 She stressed that her Torrens title to
the property was an "absolute and indefeasible evidence of her ownership of the
property which is binding and conclusive upon the whole world."

Roberts admitted that she demanded P39,000.00 from the defendant in her letter dated
July 25, 1986. However, she averred that the amount represented his back rentals on the
property.26 She declared that she neither authorized Ventura to sell the property nor to
receive the purchase price therefor. She merely authorized her to receive the rentals
from defendant and to deposit them in her account. She did not know that Ventura had
received P250,000.00 from Papio in July 1985 and on June 16, 1986, and had signed
receipts therefor. It was only on February 11, 1998 that she became aware of the
receipts when she received defendant Papios letter to which were appended the said
receipts. She and her husband offered to sell the property to the defendant in 1984 for
US$15,000.00 on a "take it or leave it" basis when they arrived in the Philippines in May
1984.27However, defendant refused to accept the offer. The spouses then offered to sell
the property anew on December 20, 1997, for P670,000.00 inclusive of back
rentals.28 However, defendant offered to settle his account with the spouses.29 Again, the
offer came on January 11, 1998, but it was rejected. The defendant insisted that he had
already purchased the property in July 1985 for P250,000.00.
Roberts insisted that Papios claim of the right to repurchase the property, as well as his
claim of payment therefor, is belied by his own letter in which he offered to settle
plaintiffs claim for back rentals. Even assuming that the purchase price of the property
had been paid through Ventura, Papio did not adduce any proof to show that Ventura had
been authorized to sell the property or to accept any payment thereon. Any payment to
Ventura could have no binding effect on her since she was not privy to the transaction; if
at all, such agreement would be binding only on Papio and Ventura.
She further alleged that defendants own inaction belies his claim of ownership over the
property: first, he failed to cause any notice or annotation to be made on the Register of
Deeds copy of TCT No. 114478 in order to protect his supposed adverse claim; second,
he did not institute any action against Roberts to compel the execution of the necessary
deed of transfer of title in his favor; and third, the defense of ownership over the
property was raised only after Roberts demanded him to vacate the property.
Based solely on the parties pleadings, the MeTC rendered its January 18, 2001
Decision30 in favor of Roberts. The fallo of the decision reads:
WHEREFORE, premises considered, finding this case for the
plaintiff, the defendant is hereby ordered to:
1. Vacate the leased premises known as 1046 Teresa St.,
Valenzuela, Makati City;
2. Pay plaintiff the reasonable rentals accrual for the period
January 1, 1996 to December 13, 1997 at the rate equivalent to
Php2,500.00 per month and thereafter, Php10,000.00 from
January 1998 until he actually vacates the premises;
3. Pay the plaintiff attorneys fees as Php20,000.00; and

4. Pay the costs


SO ORDERED.31
The MeTC held that Roberts merely tolerated the stay of Papio in the property after the
expiration of the contract of lease on May 1, 1984; hence, she had a cause of action
against him since the only elements in an unlawful detainer action are the fact of lease
and the expiration of its term. The defendant as tenant cannot controvert the title of the
plaintiff or assert any right adverse thereto or set up any inconsistent right to change the
existing relation between them. The plaintiff need not prove her ownership over the
property inasmuch as evidence of ownership can be admitted only for the purpose of
determining the character and extent of possession, and the amount of damages arising
from the detention.
The court further ruled that Papio made no denials as to the existence and authenticity
of Roberts title to the property. It declared that "the certificate of title is indefeasible in
favor of the person whose name appears therein and incontrovertible upon the
expiration of the one-year period from the date of issue," and that a Torrens title, "which
enjoys a strong presumption of regularity and validity, is generally a conclusive evidence
of ownership of the land referred to therein."
As to Papios claim that the transfer of the property was one with right of repurchase, the
MeTC held it to be bereft of merit since the Deed of Sale is termed as "absolute and
unconditional." The court ruled that the right to repurchase is not a right granted to the
seller by the buyer in a subsequent instrument but rather, a right reserved in the same
contract of sale. Once the deed of absolute sale is executed, the seller can no longer
reserve the right to repurchase; any right thereafter granted in a separate document
cannot be a right of repurchase but some other right.
As to the receipts of payment signed by Ventura, the court gave credence to Robertss
declaration in her Affidavit that she authorized Ventura only to collect rentals from Papio,
and not to receive the repurchase price. Papios letter of January 31, 1998, which called
her attention to the fact that she had been sending people without written authority to
collect money since 1985, bolstered the courts finding that the payment, if at all
intended for the supposed repurchase, never redounded to the benefit of the spouses
Roberts.
Papio appealed the decision to the RTC, alleging the following:
I.
THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR
EJECTMENT OUTRIGHT ON THE GROUND OF LACK OF CAUSE OF ACTION.
II.
THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THE DOCUMENTARY
EVIDENCE ADDUCED BY DEFENDANT-APPELLANT WHICH ESTABLISHED THAT A

REPURCHASE TRANSACTION EXISTED BETWEEN THE PARTIES ONLY THAT


PLAINTIFF-APPELLEE WITHHELD THE EXECUTION OF THE ABSOLUTE DEED OF
SALE AND THE TRANSFER OF TITLE OF THE SAME IN DEFENDANT-APPELLANTS
NAME.
III.
THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THAT THE LETTERS
OF PLAINTIFF-[APPELLEE] AND OF HER HUSBAND ADDRESSED TO DEFENDANTAPPELLANT AND HIS WIFE ARE IN THEMSELVES ADMISSION AND/OR
DECLARATION OF THE FACT THAT DEFENDANT-APPELLANT HAD DULY PAID
PLAINTIFF-APPELLEE OF THE PURCHASE AMOUNT COVERING THE SUBJECT
PROPERTY.
IV.
THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR
EJECTMENT OUTRIGHT CONSIDERING THAT PLAINTIFF-APPELLEE WHO IS [AN]
AMERICAN CITIZEN AND RESIDENT THEREIN HAD NOT APPEARED IN COURT
ONCE, NEITHER WAS HER ALLEGED ATTORNEY-IN-FACT, MATILDE AGUILAR NOR
[DID] THE LATTER EVER [FURNISH] THE LOWER COURT A SPECIAL POWER OF
ATTORNEY AUTHORIZING HER TO APPEAR IN COURT IN BEHALF OF HER
PRINCIPAL.32
Papio maintained that Roberts had no cause of action for eviction because she had
already ceded her right thereto when she allowed him to redeem and reacquire the
property upon payment of P250,000.00 to Ventura, her duly authorized representative.
He also contended that Robertss claim that the authority of Ventura is limited only to the
collection of the rentals and not of the purchase price was a mere afterthought, since her
appended Affidavit was executed sometime in October 1999 when the proceedings in the
MeTC had already started.
On March 26, 2001, Roberts filed a Motion for Issuance of Writ of Execution. 33 The court
granted the motion in an Order34 dated June 19, 2001. Subsequently, a Writ of
Execution35 pending appeal was issued on September 28, 2001. On October 29, 2001,
Sheriff Melvin M. Alidon enforced the writ and placed Roberts in possession of the
property.
RTC :
Meanwhile, Papio filed a complaint with the RTC of Makati City, for specific performance
with damages against Roberts. Papio, as plaintiff, claimed that he entered into a contract
of sale with pacto de retro with Roberts, and prayed that the latter be ordered to execute
a Deed of Sale over `the property in his favor and transfer the title over the property to
and in his name. The case was docketed as Civil Case No. 01-851.
On October 24, 2001, the RTC rendered judgment affirming the
appealed decision of the MeTC. The fallo of the decision reads: 36

Being in accordance with law and the circumstances attendant to


the instant case, the court finds merit in plaintiff-appellees claim.
Wherefore, the challenged decision dated January 18, 2001 is
hereby affirmed in toto.
SO ORDERED.37
Both parties filed their respective motions for reconsideration.38 In an Order39 dated
February 26, 2002, the court denied the motion of Papio but modified its decision
declaring that the computation of the accrued rentals should commence from January
1986, not January 1996. The decretal portion of the decision reads:
Wherefore, the challenged decision dated January 18, 2001 is
hereby affirmed with modification that defendant pay plaintiff the
reasonable rentals accrued for the period January 1, 1986 to
December [31, 1997] per month and thereafter and P10,000.00 [per
month] from January 1998 to October 28, 2001 when defendantappellant actually vacated the subject leased premises.
SO ORDERED.40
CA:
On February 28, 2002, Papio filed a petition for review41 in the CA, alleging that the RTC
erred in not finding that he had reacquired the property from Roberts for P250,000.00,
but the latter refused to execute a deed of absolute sale and transfer the title in his
favor. He insisted that the MeTC and the RTC erred in giving credence to petitioners
claim that she did not authorize Ventura to receive his payments for the purchase price
of the property, citing Roberts letter dated July 25, 1986 and the letter of Eugene
Roberts to Ventura of even date. He also averred that the MeTC and the RTC erred in not
considering his documentary evidence in deciding the case.
On August 31, 2004, the CA rendered judgment granting the petition. The appellate
court set aside the decision of the RTC and ordered the RTC to dismiss the complaint. The
decretal portion of the Decision42 reads:
WHEREFORE, the judgment appealed from is hereby REVERSED and
SET ASIDE and a new one entered: (1) rendering an initial
determination that the "Deed of Absolute Sale" dated April 13, 1982
is in fact an equitable mortgage under Article 1603 of the New Civil
Code; and (2) resolving therefore that petitioner Martin B. Papio is
entitled to possession of the property subject of this action; (3) But
such determination of ownership and equitable mortgage are not
clothed with finality and will not constitute a binding and conclusive
adjudication on the merits with respect to the issue of ownership
and such judgment shall not bar an action between the same
parties respecting title to the land, nor shall it be held conclusive of

the facts therein found in the case between the same parties upon a
different cause of action not involving possession. All other
counterclaims for damages are hereby dismissed. Cost against the
respondent.
SO ORDERED.43
According to the appellate court, although the MeTC and RTC were correct in holding that
the MeTC had jurisdiction over the complaint for unlawful detainer, they erred in ignoring
Papios defense of equitable mortgage, and in not finding that the transaction covered by
the deed of absolute sale by and between the parties was one of equitable mortgage
under Article 1602 of the New Civil Code. The appellate court ruled that Papio retained
the ownership of the property and its peaceful possession; hence, the MeTC should have
dismissed the complaint without prejudice to the outcome of Civil Case No. 01-851
relative to his claim of ownership over the property.
Roberts filed a motion for reconsideration of the decision on the following grounds:
I. Petitioner did not allege in his Answer the defense of equitable mortgage; hence, the
lower courts [should] not have discussed the same;
II. Even assuming that Petitioner alleged the defense of equitable mortgage, the MeTC
could not have ruled upon the said defense,
III. The M[e]TC and the RTC were not remiss in the exercise of their jurisdiction. 44
The CA denied the motion.
In this petition for review, Amelia Salvador-Roberts, as petitioner, avers that:
I. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN DECLARING THAT
THE M[e]TC AN(D) THE RTC WERE REMISS IN THE EXERCISE OF THAT JURISDICTION
ACQUIRED BECAUSE IT DID NOT CONSIDER ALL PETITIONERS DEFENSE OF EQUITABLE
MORTGAGE.
II. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN REQUIRING THE
M[e]TC AND RTC TO RULE ON A DEFENSE WHICH WAS NEVER AVAILED OF BY
RESPONDENT.45

Petitioner argues that respondent is barred from raising the issue of equitable mortgage
because his defense in the MeTC and RTC was that he had repurchased the property from
the petitioner; by such representation, he had impliedly admitted the existence and
validity of the deed of absolute sale whereby ownership of the property was transferred
to petitioner but reverted to him upon the exercise of said right. The respondent even

filed a complaint for specific performance with damages, which is now pending in the
RTC of Makati City, docketed as Civil Case No. 01-851 entitled "Martin B. Papio vs. Amelia
Salvador-Roberts." In that case, respondent claimed that his transaction with the
petitioner was a sale with pacto de retro. Petitioner posits that Article 1602 of the Civil
Code applies only when the defendant specifically alleges this defense. Consequently,
the appellate court was proscribed from finding that petitioner and respondent had
entered into an equitable mortgage under the deed of absolute sale.
Petitioner further avers that respondent was ably represented by counsel and was aware
of the difference between a pacto de retro sale and an equitable mortgage; thus, he
could not have been mistaken in declaring that he repurchased the property from her.
As to whether a sale is in fact an equitable mortgage, petitioner claims that the issue
should be properly addressed and resolved by the RTC in an action to enforce ownership,
not in an ejectment case before the MeTC where the main issue involved is
possession de facto. According to her, the obvious import of the CA Decision is that, in
resolving an ejectment case, the lower court must pass upon the issue of ownership (in
this case, by applying the presumptions under Art. 1602) which, in effect, would use the
same yardstick as though it is the main action. The procedure will not only promote
multiplicity of suits but also place the new owner in the absurd position of having to first
seek the declaration of ownership before filing an ejectment suit.
Respondent counters that the defense of equitable mortgage need not be particularly
stated to apprise petitioner of the nature and character of the repurchase agreement. He
contends that he had amply discussed in his pleadings before the trial and appellate
courts all the surrounding circumstances of the case, such as the relative situation of the
parties at the time; their attitude, acts, conduct, and declarations; and the negotiations
between them that led to the repurchase agreement. Thus, he argues that the CA
correctly ruled that the contract was one of equitable mortgage. He insists that petitioner
allowed him to redeem and reacquire the property, and accepted his full payment of the
property through Ventura, the authorized representative, as shown by the signed
receipts.
The threshold issues are the following:
(1) whether the MeTC had jurisdiction in an action for unlawful
detainer to resolve the issue of who between petitioner and
respondent is the owner of the property and entitled to the de facto
possession thereof;
(2) whether the transaction entered into between the parties under
the Deed of Absolute Sale and the Contract of Lease is an equitable
mortgage over the property; and
(3) whether the petitioner is entitled to the material or de facto
possession of the property.

The Ruling of the Court


On the first issue, the CA ruling (which upheld the jurisdiction of the MeTC to resolve the
issue of who between petitioner or respondent is the lawful owner of the property, and is
thus entitled to the material or de facto possession thereof) is correct. Section 18, Rule
70 of the Rules of Court provides that when the defendant raises the defense of
ownership in his pleadings and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession. The judgment rendered in an action for unlawful
detainer shall be conclusive with respect to the possession only and shall in no wise bind
the title or affect the ownership of the land or building. Such judgment would not bar an
action between the same parties respecting title to the land or building.46
The summary nature of the action is not changed by the claim of ownership of the
property of the defendant.47The MeTC is not divested of its jurisdiction over the unlawful
detainer action simply because the defendant asserts ownership over the property.
The sole issue for resolution in an action for unlawful detainer is material or de facto
possession of the property. Even if the defendant claims juridical possession or
ownership over the property based on a claim that his transaction with the plaintiff
relative to the property is merely an equitable mortgage, or that he had repurchased the
property from the plaintiff, the MeTC may still delve into and take cognizance of the case
and make an initial or provisional determination of who between the plaintiff and the
defendant is the owner and, in the process, resolve the issue of who is entitled to the
possession. The MeTC, in unlawful detainer case, decides the question of ownership only
if it is intertwined with and necessary to resolve the issue of possession. 48 The resolution
of the MeTC on the ownership of the property is merely provisional or interlocutory. Any
question involving the issue of ownership should be raised and resolved in a separate
action brought specifically to settle the question with finality, in this case, Civil Case No.
01-851 which respondent filed before the RTC.
The ruling of the CA, that the contract between petitioner and respondent was an
equitable mortgage, is incorrect.
The fact of the matter is that the respondent intransigently alleged in his answer, and
even in his affidavit and position paper, that petitioner had granted him the right to
redeem or repurchase the property at any time and for a reasonable amount; and that,
he had, in fact, repurchased the property in July 1985 for P250,000.00 which he remitted
to petitioner through an authorized representative who signed receipts therefor; he had
reacquired ownership and juridical possession of the property after his repurchase
thereof in 1985; and consequently, petitioner was obliged to execute a deed of absolute
sale over the property in his favor.

Notably, respondent alleged that, as stated in his letter to petitioner, he was given the
right to reacquire the property in 1982 within two years upon the payment
of P53,000.00, plus petitioners airfare for her trip to the Philippines from the USA and
back; petitioner promised to sign the deed
of absolute sale. He even filed a complaint against the petitioner in the RTC, docketed as
Civil Case No. 01-851, for specific performance with damages to compel petitioner to
execute the said deed of absolute sale over the property presumably on the strength of
Articles 1357 and 1358 of the New Civil Code. Certainly then, his claim that petitioner
had given him the right to repurchase the property is antithetical to an equitable
mortgage.
An equitable mortgage is one that, although lacking in some formality, form or
words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to change a real property as security for a debt and
contain nothing impossible or contrary to law.
A contract between the parties is an equitable mortgage if the
following requisites are present:
(a) the parties entered into a contract denominated as a contract of
sale; and
(b) the intention was to secure an existing debt by way of
mortgage. The decisive factor is the intention of the parties.
In an equitable mortgage, the mortgagor retains ownership over the property
but subject to foreclosure and sale at public auction upon failure of the
mortgagor to pay his obligation.
In contrast, in a pacto de retro sale, ownership of the property sold is
immediately transferred to the vendee a retro subject only to the right of the
vendor a retro to repurchase the property upon compliance with legal
requirements for the repurchase. The failure of the vendor a retro to exercise
the right to repurchase within the agreed time vests upon the vendee a retro,
by operation of law, absolute title over the property.
One repurchases only what one has previously sold. The right to repurchase presupposes
a valid contract of sale between the same parties. By insisting that he had repurchased
the property, respondent thereby admitted that the deed of absolute sale executed by
him and petitioner on April 13, 1982 was, in fact and in law, a deed of absolute sale and
not an equitable mortgage; hence, he had acquired ownership over the property based
on said deed. Respondent is, thus, estopped from asserting that the contract under the
deed of absolute sale is an equitable mortgage unless there is allegation and evidence of
palpable mistake on the part of respondent; or a fraud on the part of petitioner.
Respondent made no such allegation in his pleadings and affidavit. On the contrary, he
maintained that petitioner had sold the property to him in July 1985 and acknowledged
receipt of the purchase price thereof except the amount of P39,000.00 retained by Perlita

Ventura. Respondent is thus bound by his admission of petitioners ownership of the


property and is barred from claiming otherwise.
Respondents admission that petitioner acquired ownership over the property under the
April 13, 1982 deed of absolute sale is supported by his admission in the Contract of
Lease dated April 15, 1982 that petitioner was the owner of the property, and that he
had paid the rentals for the duration of the contract of lease and even until 1985 upon its
extension. Respondent was obliged to prove his defense that petitioner had given him
the right to repurchase, and that petitioner obliged herself to resell the property
for P250,000.00 when they executed the April 13, 1982 deed of absolute sale.

We have carefully reviewed the case and find that respondent failed to adduce
competent and credible evidence to prove his claim.
As gleaned from the April 13, 1982 deed, the right of respondent to repurchase the
property is not incorporated therein. The contract is one of absolute sale and not one
with right to repurchase.
The law states that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall
control. When the language of the contract is explicit, leaving no doubt as to the
intention of the drafters, the courts may not read into it any other intention that would
contradict its plain import. The clear terms of the contract should never be the subject
matter of interpretation. Neither abstract justice nor the rule of liberal interpretation
justifies the creation of a contract for the parties which they did not make themselves, or
the imposition upon one party to a contract or obligation to assume simply or merely to
avoid seeming hardships.Their true meaning must be enforced, as it is to be presumed
that the contracting parties know their scope and effects.
As the Court held in Villarica, et al. v. Court of Appeals:60
The right of repurchase is not a right granted the vendor by the vendee in a subsequent
instrument, but is a right reserved by the vendor in the same instrument of sale as one
of the stipulations of the contract. Once the instrument of absolute sale is executed, the
vendor can no longer reserve the right to repurchase, and any right thereafter granted
the vendor by the vendee in a separate instrument cannot be a right of repurchase but
some other right like the option to buy in the instant case.61
In Ramos v. Icasiano,62 we also held that an agreement to repurchase becomes a promise
to sell when made after the sale because when the sale is made without such agreement
the purchaser acquires the thing sold absolutely; and, if he afterwards grants the vendor
the right to repurchase, it is a new contract entered into by the purchaser as absolute

owner. An option to buy or a promise to sell is different and distinct from the right of
repurchase that must be reserved by means of stipulations to that effect in the contract
of sale.63
There is no evidence on record that, on or before July 1985, petitioner agreed to sell her
property to the respondent for P250,000.00. Neither is there any documentary evidence
showing that Ventura was authorized to offer for sale or sell the property for and in
behalf of petitioner for P250,000.00, or to receive the said amount from respondent as
purchase price of the property. The rule is that when a sale of a piece of land or any
interest therein is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void64 and cannot produce any legal effect as to transfer the
property from its lawful owner.65 Being inexistent and void from the very beginning, said
contract cannot be ratified.66 Any contract entered into by Ventura for and in behalf of
petitioner relative to the sale of the property is void and cannot be ratified by the latter.
A void contract produces no effect either against or in favor of anyone. 67
Respondent also failed to prove that the negotiations between him and petitioner has
culminated in his offer to buy the property for P250,000.00, and that they later on
agreed to the sale of the property for the same amount. He likewise failed to prove that
he purchased and reacquired the property in July 1985. The evidence on record shows
that petitioner had offered to sell the property for US$15,000 on a "take it or leave it"
basis in May 1984 upon the expiration of the Contract of Lease68 an offer that was
rejected by respondentwhich is why on December 30, 1997, petitioner and her
husband offered again to sell the property to respondent for P670,000.00 inclusive of
back rentals and the purchase price of the property under the April 13, 1982 Deed of
absolute Sale.69The offer was again rejected by respondent. The final offer appears to
have been made on January 11, 199870but again, like the previous negotiations, no
contract was perfected between the parties.
A contract is a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to
render some service.71 Under Article 1318 of the New Civil Code,
there is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Contracts are perfected by mere consent manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract.\ Once
perfected, they bind the contracting parties and the obligations arising therefrom have
the form of law between the parties which must be complied with in good faith. The
parties are bound not only to the fulfillment of what has been expressly stipulated but
also to the consequences which, according to their nature, may be in keeping with good
faith, usage and law.

There was no contract of sale entered into by the parties based on the Receipts dated
July 1985 and June 16, 1986, signed by Perlita Ventura and the letter of petitioner to
respondent dated July 25, 1986.
By the contract of sale, one of the contracting parties obligates himself to transfer the
ownership of and deliver a determinate thing and the other, to pay therefor a price
certain in money or its equivalent.74 The absence of any of the essential elements will
negate the existence of a perfected contract of sale.
As the Court ruled in Boston Bank of the Philippines v. Manalo:75
A definite agreement as to the price is an essential element of a binding agreement to
sell personal or real property because it seriously affects the rights and obligations of the
parties. Price is an essential element in the formation of a binding and enforceable
contract of sale. The fixing of the price can never be left to the decision of one of the
contracting parties. But a price fixed by one of the contracting parties, if accepted by the
other, gives rise to a perfected sale.76
A contract of sale is consensual in nature and is perfected upon mere meeting of the
minds. When there is merely an offer by one party without acceptance of the other, there
is no contract.77 When the contract of sale is not perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties.78
Respondents reliance on petitioners letter to him dated July 25, 1986 is misplaced. The
letter reads in full:

7-25-86
Dear Martin & Ising,
Enclosed for your information is the letter written by my husband to Perlita. I
hope that you will be able to convince your cousin that its to her best
interest to deposit the balance of your payment to me of P39,000.00 in my
bank acct. per our agreement and send me my bank book right away so that
we can transfer the title of the property.
Regards,
Amie

79

We have carefully considered the letter of Perlita Ventura, dated July 18, 1986, and the
letter of Eugene Roberts, dated July 25, 1986, where Ventura admitted having used the
money of petitioner amounting to P39,000.00 without the latters knowledge for the
plane fare of Venturas parents. Ventura promised to refund the amount ofP39,000.00,

inclusive of interests, within one year.80 Eugene Roberts berated Ventura and called her a
thief for stealing his and petitioners money and that of respondents wife, Ising, who
allegedly told petitioner that she, Ising, loaned the money to her parents for their plane
fare to the USA. Neither Ventura nor Eugene Roberts declared in their letters that
Ventura had used the P250,000.00 which respondent gave to her.
Petitioner in her letter to respondent did not admit, either expressly or impliedly, having
received P211,000.00 from Ventura. Moreover, in her letter to petitioner, only a week
earlier, or on July 18, 1986, Ventura admitted having spent the P39,000.00 and pleaded
that she be allowed to refund the amount within one (1) year, including interests.
Naririto ang total ng pera mo sa bankbook mo, P55,000.00 pati na yong
deposit na sarili mo at bale ang nagalaw ko diyan ay P39,000.00. Huwag
kang mag-alala ibabalik ko rin sa iyo sa loob ng isang taon pati interest.
It is incredible that Ventura was able to remit to petitioner P211,000.00 before July 25,
1986 when only a week earlier, she was pleading to petitioner for a period of one year
within which to refund the P39,000.00 to petitioner.
It would have bolstered his cause if respondent had submitted an affidavit of Ventura
stating that she had remittedP211,000.00 out of the P250,000.00 she received from
respondent in July 1985 and June 20, 1986.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the
Court of Appeals in CA-G.R. CV No. 69034 is REVERSED and SET ASIDE. The Decision of
the Metropolitan Trial Court, affirmed with modification by the Regional Trial Court, is
AFFIRMED.
SO ORDERED.

BOSTON BANK OF THE G. R. No. 158149


PHILIPPINES, (formerly BANK
OF COMMERCE),
Petitioner, Present:
PANGANIBAN, J., Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR., and

CHICO-NAZARIO, JJ.
PERLA P. MANALO and CARLOS
MANALO, JR.,
Promulgated:
Respondents. February 9, 2006
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the Decision[1] of the Court of Appeals
(CA) in CA-G.R. CV No. 47458 affirming, on appeal, the Decision[2] of the Regional Trial
Court (RTC) of Quezon City, Branch 98, in Civil Case No. Q-89-3905.
The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known
as the Xavierville Estate Subdivision, with an area of 42 hectares. XEI caused the
subdivision of the property into residential lots, which was then offered for sale to
individual lot buyers.[3]
On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor,
and The Overseas Bank of Manila (OBM), as vendee, executed a Deed of Sale of Real
Estate over some residential lots in the subdivision, including Lot 1, Block 2, with an area
of 907.5 square meters, and Lot 2, Block 2, with an area of 832.80 square meters. The
transaction was subject to the approval of the Board of Directors of OBM, and was
covered by real estate mortgages in favor of the Philippine National Bank as security for
its account amounting to P5,187,000.00, and the Central Bank of the Philippines as
security for advances amounting toP22,185,193.74.[4] Nevertheless, XEI continued selling
the residential lots in the subdivision as agent of OBM.[5]
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of
Engr. Carlos Manalo, Jr. who was in business of drilling deep water wells and installing
pumps under the business name Hurricane Commercial, Inc. For P34,887.66, Manalo, Jr.
installed a water pump at Ramos residence at the corner ofAurora
Boulevard and Katipunan Avenue, Quezon City.
Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the Xavierville
subdivision, and offered as part of the downpayment the P34,887.66 Ramos owed
him. XEI, through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested
Manalo, Jr. to choose which lots he wanted to buy so that the price of the lots and the
terms of payment could be fixed and incorporated in the conditional sale. [6] Manalo, Jr.
met with Ramos and informed him that he and his wife Perla had chosen Lots 1 and 2 of
Block 2 with a total area of 1,740.3 square meters.

In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of
the lots. He also pegged the price of the lots at P200.00 per square meter, or a total
of P348,060.00, with a 20% down payment of the purchase price amounting
to P69,612.00 less the P34,887.66 owing from Ramos, payable on or before December
31, 1972; the corresponding Contract of Conditional Sale would then be signed on or
before the same date, but if the selling operations of XEI resumed after December 31,
1972, the balance of the downpayment would fall due then, and the spouses would sign
the aforesaid contract within five (5) days from receipt of the notice of resumption of
such selling operations. It was also stated in the letter that, in the meantime, the
spouses may introduce improvements thereon subject to the rules and regulations
imposed by XEI in the subdivision. Perla Manalo conformed to the letter agreement.[7]
The spouses Manalo took possession of the property on September 2, 1972, constructed
a house thereon, and installed a fence around the perimeter of the lots.
In the meantime, many of the lot buyers refused to pay their monthly installments until
they were assured that they would be issued Torrens titles over the lots they had
purchased.[8] The spouses Manalo were notified of the resumption of the selling
operations of XEI.[9] However, they did not pay the balance of the downpayment on the
lots because Ramos failed to prepare a contract of conditional sale and transmit the
same to Manalo for their signature. On August 14, 1973, Perla Manalo went to the XEI
office and requested that the payment of the amount representing the balance of the
downpayment be deferred, which, however, XEI rejected. On August 10, 1973, XEI
furnished her with a statement of their account as of July 31, 1973, showing that they
had a balance of P34,724.34 on the downpayment of the two lots after deducting the
account of Ramos, plus P3,819.68[10] interest thereon from September 1, 1972 to July 31,
1973, and that the interests on the unpaid balance of the purchase price of P278,448.00
from September 1, 1972 to July 31, 1973 amounted to P30,629.28.[11] The spouses were
informed that they were being billed for said unpaid interests.[12]
On January 25, 1974, the spouses Manalo received another statement of account from
XEI, inclusive of interests on the purchase price of the lots.[13] In a letter dated April 6,
1974 to XEI, Manalo, Jr. stated they had not yet received the notice of resumption of Leis
selling operations, and that there had been no arrangement on the payment of interests;
hence, they should not be charged with interest on the balance of the downpayment on
the property.[14] Further, they demanded that a deed of conditional sale over the two lots
be transmitted to them for their signatures. However, XEI ignored the
demands. Consequently, the spouses refused to pay the balance of the downpayment of
the purchase price.[15]
Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his
house. In a letter dated June 17, 1976, XEI informed Manalo, Jr. that business signs were
not allowed along the sidewalk. It demanded that he remove the same, on the ground,
among others, that the sidewalk was not part of the land which he had purchased on
installment basis from XEI.[16] Manalo, Jr. did not respond. XEI reiterated its demand
on September 15, 1977.[17]

Subsequently, XEI turned over its selling operations to OBM, including the receivables
for lots already contracted and those yet to be sold.[18] On December 8, 1977, OBM
warned Manalo, Jr., that putting up of a business sign is specifically prohibited by their
contract of conditional sale and that his failure to comply with its demand would impel it
to avail of the remedies as provided in their contract of conditional sale.
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of
Title (TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in
favor of the OBM.[20] The lien in favor of the Central Bank of the Philippines was
annotated at the dorsal portion of said title, which was later cancelled on August 4, 1980.
[21]

Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate
from OBM. CBM wrote Edilberto Ng, the president of Xavierville Homeowners Association
that, as of January 31, 1983, Manalo, Jr. was one of the lot buyers in the subdivision.
[22]
CBM reiterated in its letter to Ng that, as ofJanuary 24, 1984, Manalo was a
homeowner in the subdivision.[23]
In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going
construction on the property since it (CBM) was the owner of the lot and she had no
permission for such construction.[24] She agreed to have a conference meeting with CBM
officers where she informed them that her husband had a contract with OBM, through
XEI, to purchase the property. When asked to prove her claim, she promised to send the
documents to CBM. However, she failed to do so.[25] On September 5, 1986, CBM
reiterated its demand that it be furnished with the documents promised,[26] but Perla
Manalo did not respond.
On July 27, 1987, CBM filed a complaint[27] for unlawful detainer against the spouses with
the Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No.
51618. CBM claimed that the spouses had been unlawfully occupying the property
without its consent and that despite its demands, they refused to vacate the
property. The latter alleged that they, as vendors, and XEI, as vendee, had a contract of
sale over the lots which had not yet been rescinded.[28]
While the case was pending, the spouses Manalo wrote CBM to offer an amicable
settlement, promising to abide by the purchase price of the property (P313,172.34), per
agreement with XEI, through Ramos. However, on July 28, 1988, CBM wrote the spouses,
through counsel, proposing that the price of P1,500.00 per square meter of the property
was a reasonable starting point for negotiation of the settlement.[29] The spouses rejected
the counter proposal,[30] emphasizing that they would abide by their original agreement
with XEI. CBM moved to withdraw its complaint[31] because of the issues raised.[32]

In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM
filed its complaint against the spouses Manalo, the latter filed a complaint for specific

performance and damages against the bank before the Regional Trial Court (RTC)
of Quezon City on October 31, 1989.

The plaintiffs alleged therein that they had always been ready, able and willing to pay
the installments on the lots sold to them by the defendants remote predecessor-ininterest, as might be or stipulated in the contract of sale, but no contract was
forthcoming; they constructed their house worth P2,000,000.00 on the property in good
faith; Manalo, Jr., informed the defendant, through its counsel, on October 15, 1988 that
he would abide by the terms and conditions of his original agreement with the
defendants predecessor-in-interest; during the hearing of the ejectment case on October
16, 1988, they offered to pay P313,172.34 representing the balance on the purchase
price of said lots; such tender of payment was rejected, so that the subject lots could be
sold at considerably higher prices to third parties.

Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the
execution and delivery of a Deed of Absolute Sale covering the subject lots, sufficient in
form and substance to transfer title thereto free and clear of any and all liens and
encumbrances of whatever kind and nature.[33] The plaintiffs prayed that, after due
hearing, judgment be rendered in their favor, to wit:

WHEREFORE, it is respectfully prayed that after due hearing:


(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over
subject lots in favor of the plaintiffs after payment of the sum of P313,172.34, sufficient
in form and substance to transfer to them titles thereto free and clear of any and all liens
and encumbrances of whatever kind or nature;
(b) The defendant should be held liable for moral and exemplary damages in the
amounts of P300,000.00 and P30,000.00, respectively, for not promptly executing and
delivering to plaintiff the necessary Contract of Sale, notwithstanding repeated demands
therefor and for having been constrained to engage the services of undersigned counsel
for which they agreed to pay attorneys fees in the sum of P50,000.00 to enforce their
rights in the premises and appearance fee of P500.00;
(c) And for such other and further relief as may be just and equitable in the premises.[34]
In its Answer to the complaint, the defendant interposed the following affirmative
defenses: (a) plaintiffs had no cause of action against it because the August 22, 1972
letter agreement between XEI and the plaintiffs was not binding on it; and (b) it had no
record of any contract to sell executed by it or its predecessor, or of any statement of
accounts from its predecessors, or records of payments of the plaintiffs or of any
documents which entitled them to the possession of the lots.[35] The defendant, likewise,

interposed counterclaims for damages and attorneys fees and prayed for the eviction of
the plaintiffs from the property.[36]

Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an
amicable settlement of the case by paying P942,648.70, representing the balance of the
purchase price of the two lots based on the current market value.[37] However, the
defendant rejected the same and insisted that for the smaller lot, they
pay P4,500,000.00, the current market value of the property.[38] The defendant insisted
that it owned the property since there was no contract or agreement between it and the
plaintiffs relative thereto.
During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional
Sale executed between XEI and Alberto Soller;[39] Alfredo Aguila,[40] and Dra. Elena
Santos-Roque[41] to prove that XEI continued selling residential lots in the subdivision as
agent of OBM after the latter had acquired the said lots.
For its part, defendant presented in evidence the letter dated August 22, 1972, where
XEI proposed to sell the two lots subject to two suspensive conditions: the payment of
the balance of the downpayment of the property, and the execution of the corresponding
contract of conditional sale. Since plaintiffs failed to pay, OBM consequently refused to
execute the corresponding contract of conditional sale and forfeited the P34,877.66
downpayment for the two lots, but did not notify them of said forfeiture.[42] It alleged that
OBM considered the lots unsold because the titles thereto bore no annotation that they
had been sold under a contract of conditional sale, and the plaintiffs were not notified of
XEIs resumption of its selling operations.
On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the
defendant. The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendant
(a) Ordering the latter to execute and deliver a Deed of Absolute Sale
over Lot 1 and 2, Block 2 of the Xavierville Estate Subdivision after
payment of the sum ofP942,978.70 sufficient in form and substance to
transfer to them titles thereto free from any and all liens and
encumbrances of whatever kind and nature.
(b) Ordering the defendant to pay moral and exemplary damages in the
amount of P150,000.00; and
(c) To pay attorneys fees in the sum of P50,000.00 and to pay the costs.
SO ORDERED.[43]

The trial court ruled that under the August 22, 1972 letter agreement of XEI and the
plaintiffs, the parties had a complete contract to sell over the lots, and that they had
already partially consummated the same. It declared that the failure of the defendant to
notify the plaintiffs of the resumption of its selling operations and to execute a deed of
conditional sale did not prevent the defendants obligation to convey titles to the lots
from acquiring binding effect. Consequently, the plaintiffs had a cause of action to
compel the defendant to execute a deed of sale over the lots in their favor.
Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a)
not concluding that the letter of XEI to the spouses Manalo, was at most a mere contract
to sell subject to suspensive conditions, i.e., the payment of the balance of the
downpayment on the property and the execution of a deed of conditional sale (which
were not complied with); and (b) in awarding moral and exemplary damages to the
spouses Manalo despite the absence of testimony providing facts to justify such awards.
[44]

On September 30, 2002, the CA rendered a decision affirming that of the RTC with
modification. The fallo reads:
WHEREFORE, the appealed decision is AFFIRMED with
MODIFICATIONS that (a) the figure P942,978.70 appearing [in] par.
(a) of the dispositive portion thereof is changed to P313,172.34 plus
interest thereon at the rate of 12% per annum from September 1,
1972 until fully paid and (b) the award of moral and exemplary
damages and attorneys fees in favor of plaintiffs-appellees is
DELETED.

SO ORDERED.[45]

The appellate court sustained the ruling of the RTC that the appellant and the appellees
had executed a Contract to Sell over the two lots but declared that the balance of the
purchase price of the property amounting to P278,448.00 was payable in fixed amounts,
inclusive of pre-computed interests, from delivery of the possession of the property to
the appellees on a monthly basis for 120 months, based on the deeds of conditional sale
executed by XEI in favor of other lot buyers.[46]The CA also declared that, while XEI must
have resumed its selling operations before the end of 1972 and the downpayment on the
property remained unpaid as of December 31, 1972, absent a written notice of
cancellation of the contract to sell from the bank or notarial demand therefor as required
by Republic Act No. 6552, the spouses had, at the very least, a 60-day grace period from
January 1, 1973 within which to pay the same.
Boston Bank filed a motion for the reconsideration of the decision alleging that there was
no perfected contract to sell the two lots, as there was no agreement between XEI and

the respondents on the manner of payment as well as the other terms and conditions of
the sale. It further averred that its claim for recovery of possession of the aforesaid lots
in its Memorandum dated February 28, 1994 filed before the trial court constituted a
judicial demand for rescission that satisfied the requirements of the New Civil
Code. However, the appellate court denied the motion.
Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing
the CA rulings. It maintains that, as held by the CA, the records do not reflect any
schedule of payment of the 80% balance of the purchase price, or P278,448.00.
Petitioner insists that unless the parties had agreed on the manner of payment of the
principal amount, including the other terms and conditions of the contract, there would
be no existing contract of sale or contract to sell.[47] Petitioner avers that the letter
agreement to respondent spouses dated August 22, 1972 merely confirmed their
reservation for the purchase of Lot Nos. 1 and 2, consisting of 1,740.3 square meters,
more or less, at the price of P200.00 per square meter (or P348,060.00), the amount of
the downpayment thereon and the application of theP34,887.00 due from Ramos as part
of such downpayment.

Petitioner asserts that there is no factual basis for the CA ruling that the terms and
conditions relating to the payment of the balance of the purchase price of the property
(as agreed upon by XEI and other lot buyers in the same subdivision) were also
applicable to the contract entered into between the petitioner and the respondents. It
insists that such a ruling is contrary to law, as it is tantamount to compelling the parties
to agree to something that was not even discussed, thus, violating their freedom to
contract. Besides, the situation of the respondents cannot be equated with those of the
other lot buyers, as, for one thing, the respondents made a partial payment on the
downpayment for the two lots even before the execution of any contract of conditional
sale.
Petitioner posits that, even on the assumption that there was a perfected contract to sell
between the parties, nevertheless, it cannot be compelled to convey the property to the
respondents because the latter failed to pay the balance of the downpayment of the
property, as well as the balance of 80% of the purchase price, thus resulting in the
extinction of its obligation to convey title to the lots to the respondents.

Another egregious error of the CA, petitioner avers, is the application of Republic Act No.
6552. It insists that such law applies only to a perfected agreement or perfected contract
to sell, not in this case where the downpayment on the purchase price of the property
was not completely paid, and no installment payments were made by the buyers.

Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the
respondents of cancellation or rescission of the contract to sell, or notarial demand
therefor. Petitioner insists that its August 5, 1986 letter requiring respondents to vacate
the property and its complaint for ejectment in Civil Case No. 51618 filed in the
Metropolitan Trial Court amounted to the requisite demand for a rescission of the
contract to sell. Moreover, the action of the respondents below was barred by laches
because despite demands, they failed to pay the balance of the purchase price of the
lots (let alone the downpayment) for a considerable number of years.
For their part, respondents assert that as long as there is a meeting of the minds of the
parties to a contract of sale as to the price, the contract is valid despite the parties
failure to agree on the manner of payment. In such a situation, the balance of the
purchase price would be payable on demand, conformably to Article 1169 of the New
Civil Code. They insist that the law does not require a party to agree on the manner of
payment of the purchase price as a prerequisite to a valid contract to sell. The
respondents cite the ruling of this Court in Buenaventura v. Court of Appeals[48] to
support their submission.
They argue that even if the manner and timeline for the payment of the balance of the
purchase price of the property is an essential requisite of a contract to sell, nevertheless,
as shown by their letter agreement of August 22, 1972 with the OBM, through XEI and
the other letters to them, an agreement was reached as to the manner of payment of the
balance of the purchase price. They point out that such letters referred to the terms of
the terms of the deeds of conditional sale executed by XEI in favor of the other lot buyers
in the subdivision, which contained uniform terms of 120 equal monthly installments
(excluding the downpayment, but inclusive of pre-computed interests). The respondents
assert that XEI was a real estate broker and knew that the contracts involving residential
lots in the subdivision contained uniform terms as to the manner and timeline of the
payment of the purchase price of said lots.
Respondents further posit that the terms and conditions to be incorporated in the
corresponding contract of conditional sale to be executed by the parties would be the
same as those contained in the contracts of conditional sale executed by lot buyers in
the subdivision. After all, they maintain, the contents of the corresponding contract of
conditional sale referred to in the August 22, 1972 letter agreement envisaged those
contained in the contracts of conditional sale that XEI and other lot buyers executed.
Respondents cite the ruling of this Court in Mitsui Bussan Kaisha v. Manila E.R.R. & L. Co.
[49]

The respondents aver that the issues raised by the petitioner are factual, inappropriate
in a petition for review on certiorari under Rule 45 of the Rules of Court. They assert that
petitioner adopted a theory in litigating the case in the trial court, but changed the same
on appeal before the CA, and again in this Court. They argue that the petitioner is
estopped from adopting a new theory contrary to those it had adopted in the trial and

appellate courts. Moreover, the existence of a contract of conditional sale was admitted
in the letters of XEI and OBM. They aver that they became owners of the lots upon
delivery to them by XEI.

ISSUES:
The issues for resolution are the following:
(1) whether the factual issues raised by the petitioner are proper;
(2) whether petitioner or its predecessors-in-interest, the XEI or the OBM,
as seller, and the respondents, as buyers, forged a perfect contract to
sell over the property;
(3) whether petitioner is estopped from contending that no such contract
was forged by the parties; and
(4) whether respondents has a cause of action against the petitioner for
specific performance.

The rule is that before this Court, only legal issues may be raised in a petition for review
on certiorari. The reason is that this Court is not a trier of facts, and is not to review and
calibrate the evidence on record. Moreover, the findings of facts of the trial court, as
affirmed on appeal by the Court of Appeals, are conclusive on this Court unless the case
falls under any of the following exceptions:

(1) when the conclusion is a finding grounded entirely on speculations, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible;
(3) where there is a grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the
Court of Appeals, in making its findings went beyond the issues of the case and the same
is contrary to the admissions of both appellant and appellee; (7) when the findings are
contrary to those of the trial court; (8) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by the
respondents; and (10) when the findings of fact of the Court of Appeals are premised on
the supposed absence of evidence and contradicted by the evidence on record. [50]
We have reviewed the records and we find that, indeed, the ruling of the appellate court
dismissing petitioners appeal is contrary to law and is not supported by evidence. A
careful examination of the factual backdrop of the case, as well as the antecedental
proceedings constrains us to hold that petitioner is not barred from asserting that XEI or

OBM, on one hand, and the respondents, on the other, failed to forge a perfected
contract to sell the subject lots.
It must be stressed that the Court may consider an issue not raised during the trial when
there is plain error.[51] Although a factual issue was not raised in the trial court, such issue
may still be considered and resolved by the Court in the interest of substantial justice, if
it finds that to do so is necessary to arrive at a just decision,[52] or when an issue is
closely related to an issue raised in the trial court and the Court of Appeals and is
necessary for a just and complete resolution of the case.[53] When the trial court decides
a case in favor of a party on certain grounds, the Court may base its decision upon some
other points, which the trial court or appellate court ignored or erroneously decided in
favor of a party.[54]

In this case, the issue of whether XEI had agreed to allow the respondents to pay the
purchase price of the property was raised by the parties. The trial court ruled that the
parties had perfected a contract to sell, as against petitioners claim that no such
contract existed. However, in resolving the issue of whether the petitioner was obliged to
sell the property to the respondents, while the CA declared that XEI or OBM and the
respondents failed to agree on the schedule of payment of the balance of the purchase
price of the property, it ruled that XEI and the respondents had forged a contract to sell;
hence, petitioner is entitled to ventilate the issue before this Court.
We agree with petitioners contention that, for a perfected contract of sale or contract to
sell to exist in law, there must be an agreement of the parties, not only on the price of
the property sold, but also on the manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale,
whether absolute or conditional, one of the contracting parties
obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent. A contract of sale is perfected at the
moment there is a meeting of the minds upon the thing which is the
object of the contract and the price. From the averment of
perfection, the parties are bound, not only to the fulfillment of what
has been expressly stipulated, but also to all the consequences
which, according to their nature, may be in keeping with good faith,
usage and law. On the other hand, when the contract of sale or to
sell is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties.

A definite agreement as to the price is an essential element of a


binding agreement to sell personal or real property because it
seriously affects the rights and obligations of the parties. Price is an

essential element in the formation of a binding and enforceable


contract of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price fixed by one
of the contracting parties, if accepted by the other, gives rise to a
perfected sale.
It is not enough for the parties to agree on the price of the property. The
parties must also agree on the manner of payment of the price of the property
to give rise to a binding and enforceable contract of sale or contract to sell.
This is so because the agreement as to the manner of payment goes into the
price, such that a disagreement on the manner of payment is tantamount to a
failure to agree on the price.
In a contract to sell property by installments, it is not enough that the parties
agree on the price as well as the amount of downpayment. The parties must,
likewise, agree on the manner of payment of the balance of the purchase price
and on the other terms and conditions relative to the sale. Even if the buyer
makes a downpayment or portion thereof, such payment cannot be considered
as sufficient proof of the perfection of any purchase and sale between the
parties.
Indeed, this Court ruled in Velasco v. Court of Appeals[59] that:
It is not difficult to glean from the aforequoted averments that the petitioners
themselves admit that they and the respondent still had to meet and agree on how and
when the down-payment and the installment payments were to be paid. Such being the
situation, it cannot, therefore, be said that a definite and firm sales agreement between
the parties had been perfected over the lot in question. Indeed, this Court has already
ruled before that a definite agreement on the manner of payment of the purchase price
is an essential element in the formation of a binding and enforceable contract of sale.
The fact, therefore, that the petitioners delivered to the respondent the sum
of P10,000.00 as part of the downpayment that they had to pay cannot be considered as
sufficient proof of the perfection of any purchase and sale agreement between the
parties herein under article 1482 of the New Civil Code, as the petitioners themselves
admit that some essential matter the terms of payment still had to be mutually
covenanted.[60]

We agree with the contention of the petitioner that, as held by the CA, there is
no showing, in the records, of the schedule of payment of the balance of the
purchase price on the property amounting to P278,448.00. We have meticulously
reviewed the records, including Ramos February 8, 1972 and August 22, 1972 letters to
respondents,[61] and find that said parties confined themselves to agreeing on the price of
the property (P348,060.00), the 20% downpayment of the purchase price (P69,612.00),
and credited respondents for the P34,887.00 owing from Ramos as part of the 20%
downpayment. The timeline for the payment of the balance of the downpayment

(P34,724.34) was also agreed upon, that is, on or before XEI resumed its selling
operations, on or before December 31, 1972, or within five (5) days from written notice
of such resumption of selling operations. The parties had also agreed to incorporate all
the terms and conditions relating to the sale, inclusive of the terms of payment of the
balance of the purchase price and the other substantial terms and conditions in the
corresponding contract of conditional sale, to be later signed by the parties,
simultaneously with respondents settlement of the balance of the downpayment.
The February 8, 1972 letter of XEI reads:
Mr. Carlos T. Manalo, Jr.
Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City
Dear Mr. Manalo:
We agree with your verbal offer to exchange the proceeds of your contract
with us to form as a down payment for a lot in our Xavierville Estate
Subdivision.
Please let us know your choice lot so that we can fix the price and terms of
payment in our conditional sale.
Sincerely yours,
XAVIERVILLE ESTATE, INC.
(Signed)
EMERITO B. RAMOS, JR.
President
CONFORME:
(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling[62]

The August 22, 1972 letter agreement of XEI and the respondents reads:
Mrs. Perla P. Manalo
1548 Rizal Avenue Extension
Caloocan City
Dear Mrs. Manalo:
This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidationsubdivision plan as amended, consisting of 1,740.3 square meters more or less, at
the price ofP200.00 per square meter or a total price of P348,060.00.

It is agreed that as soon as we resume selling operations, you must pay a down
payment of 20% of the purchase price of the said lots and sign the corresponding
Contract of Conditional Sale, on or before December 31, 1972, provided, however,
that if we resume selling after December 31, 1972, then you must pay the
aforementioned down payment and sign the aforesaid contract within five (5) days
from your receipt of our notice of resumption of selling operations.
In the meanwhile, you may introduce such improvements on the said lots as you
may desire, subject to the rules and regulations of the subdivision.
If the above terms and conditions are acceptable to you, please signify your
conformity by signing on the space herein below provided.
Thank you.
Very truly yours,
XAVIERVILLE ESTATE, INC. CONFORME:
By:
(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO
President Buyer[63]

Based on these two letters, the determination of the terms of payment of


the P278,448.00 had yet to be agreed upon on or before December 31, 1972, or even
afterwards, when the parties sign the corresponding contract of conditional sale.
Jurisprudence is that if a material element of a contemplated contract is left for future
negotiations, the same is too indefinite to be enforceable.[64] And when an essential
element of a contract is reserved for future agreement of the parties, no legal obligation
arises until such future agreement is concluded.[65]
So long as an essential element entering into the proposed obligation of either of the
parties remains to be determined by an agreement which they are to make, the contract
is incomplete and unenforceable.[66] The reason is that such a contract is lacking in the
necessary qualities of definiteness, certainty and mutuality.[67]

There is no evidence on record to prove that XEI or OBM and the respondents
had agreed, after December 31, 1972, on the terms of payment of the balance
of the purchase price of the property and the other substantial terms and
conditions relative to the sale. Indeed, the parties are in agreement that there
had been no contract of conditional sale ever executed by XEI, OBM or
petitioner, as vendor, and the respondents, as vendees. [68]

The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case
because the issue of the manner of payment of the purchase price of the property was
not raised therein.
We reject the submission of respondents that they and Ramos had intended
to incorporate the terms of payment contained in the three contracts of
conditional sale executed by XEI and other lot buyers in the corresponding
contract of conditional sale, which would later be signed by them.[69] We
have meticulously reviewed the respondents complaint and find no such
allegation therein.[70] Indeed, respondents merely alleged in their complaint
that they were bound to pay the balance of the purchase price of the
property in installments. When respondent Manalo, Jr. testified, he was never
asked, on direct examination or even on cross-examination, whether the
terms of payment of the balance of the purchase price of the lots under the
contracts of conditional sale executed by XEI and other lot buyers would
form part of the corresponding contract of conditional sale to be signed by
them simultaneously with the payment of the balance of the downpayment
on the purchase price.

We note that, in its letter to the respondents dated June 17, 1976, or almost three years
from the execution by the parties of their August 22, 1972 letter agreement, XEI stated,
in part, that respondents had purchased the property on installment basis.[71] However, in
the said letter, XEI failed to state a specific amount for each installment, and whether
such payments were to be made monthly, semi-annually, or annually. Also, respondents,
as plaintiffs below, failed to adduce a shred of evidence to prove that they were obliged
to pay the P278,448.00 monthly, semi-annually or annually. The allegation that the
payment of the P278,448.00 was to be paid in installments is, thus, vague and
indefinite. Case law is that, for a contract to be enforceable, its terms must be certain
and explicit, not vague or indefinite.

There is no factual and legal basis for the CA ruling that, based on the terms of payment
of the balance of the purchase price of the lots under the contracts of conditional sale
executed by XEI and the other lot buyers, respondents were obliged to pay
the P278,448.00 with pre-computed interest of 12% per annum in 120-month
installments. As gleaned from the ruling of the appellate court, it failed to justify its use
of the terms of payment under the three contracts of conditional sale as basis for such
ruling, to wit:

On the other hand, the records do not disclose the schedule of payment of the purchase
price, net of the downpayment. Considering, however, the Contracts of Conditional Sale
(Exhs. N, O and P) entered into by XEI with other lot buyers, it would appear that the
subdivision lots sold by XEI, under contracts to sell, were payable in 120 equal monthly
installments (exclusive of the downpayment but including pre-computed interests)
commencing on delivery of the lot to the buyer.[73]

By its ruling, the CA unilaterally supplied an essential element to the letter agreement of
XEI and the respondents. Courts should not undertake to make a contract for the parties,
nor can it enforce one, the terms of which are in doubt.[74] Indeed, the Court emphasized
in Chua v. Court of Appeals[75] that it is not the province of a court to alter a contract by
construction or to make a new contract for the parties; its duty is confined to the
interpretation of the one which they have made for themselves, without regard to its
wisdom or folly, as the court cannot supply material stipulations or read into contract
words which it does not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the terms of
payment of the P278,448.00 to be incorporated in the corresponding contract of
conditional sale were those contained in the contracts of conditional sale executed by
XEI and Soller, Aguila and Roque.[76] They likewise failed to prove such allegation in this
Court.

The bare fact that other lot buyers were allowed to pay the balance of the purchase price
of lots purchased by them in 120 or 180 monthly installments does not constitute
evidence that XEI also agreed to give the respondents the same mode and timeline of
payment of the P278,448.00.

Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain
thing at one time is not admissible to prove that he did the same or similar thing at
another time, although such evidence may be received to prove habit, usage, pattern of
conduct or the intent of the parties.

Similar acts as evidence. Evidence that one did or did not do a certain thing at one time
is not admissible to prove that he did or did not do the same or a similar thing at another
time; but it may be received to prove a specific intent or knowledge, identity, plan,
system, scheme, habit, custom or usage, and the like.

However, respondents failed to allege and prove, in the trial court, that, as a matter of
business usage, habit or pattern of conduct, XEI granted all lot buyers the right to pay
the balance of the purchase price in installments of 120 months of fixed amounts with
pre-computed interests, and that XEI and the respondents had intended to adopt such
terms of payment relative to the sale of the two lots in question. Indeed, respondents
adduced in evidence the three contracts of conditional sale executed by XEI and other lot
buyers merely to prove that XEI continued to sell lots in the subdivision as sales agent
of OBM after it acquired said lots, not to prove usage, habit or pattern of conduct on the
part of XEI to require all lot buyers in the subdivision to pay the balance of the purchase
price of said lots in 120 months. It further failed to prive that the trial court admitted the
said deeds[77] as part of the testimony of respondent Manalo, Jr.[78]
Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts
must contend with the caveat that, before they admit evidence of usage, of habit or
pattern of conduct, the offering party must establish the degree of specificity and
frequency of uniform response that ensures more than a mere tendency to act in a given
manner but rather, conduct that is semi-automatic in nature. The offering party must
allege and prove specific, repetitive conduct that might constitute evidence of habit. The
examples offered in evidence to prove habit, or pattern of evidence must be numerous
enough to base on inference of systematic conduct. Mere similarity of contracts does not
present the kind of sufficiently similar circumstances to outweigh the danger of prejudice
and confusion.

In determining whether the examples are numerous enough, and sufficiently regular, the
key criteria are adequacy of sampling and uniformity of response. After all, habit means
a course of behavior of a person regularly represented in like circumstances. [79] It is only
when examples offered to establish pattern of conduct or habit are numerous enough to
lose an inference of systematic conduct that examples are admissible. The key criteria
are adequacy of sampling and uniformity of response or ratio of reaction to situations.[80]

There are cases where the course of dealings to be followed is defined by the usage of a
particular trade or market or profession. As expostulated by Justice Benjamin Cardozo of
the United States Supreme Court: Life casts the moulds of conduct, which will someday
become fixed as law. Law preserves the moulds which have taken form and shape from
life.[81] Usage furnishes a standard for the measurement of many of the rights and acts of
men.[82] It is also well-settled that parties who contract on a subject matter concerning
which known usage prevail, incorporate such usage by implication into their agreement,
if nothing is said to be contrary.[83]

However, the respondents inexplicably failed to adduce sufficient competent evidence to


prove usage, habit or pattern of conduct of XEI to justify the use of the terms of payment
in the contracts of the other lot buyers, and thus grant respondents the right to pay
the P278,448.00 in 120 months, presumably because of respondents belief that the
manner of payment of the said amount is not an essential element of a contract to
sell. There is no evidence that XEI or OBM and all the lot buyers in the subdivision,
including lot buyers who pay part of the downpayment of the property purchased by
them in the form of service, had executed contracts of conditional sale containing
uniform terms and conditions. Moreover, under the terms of the contracts of conditional
sale executed by XEI and three lot buyers in the subdivision, XEI agreed to grant 120
months within which to pay the balance of the purchase price to two of them, but
granted one 180 months to do so.[84] There is no evidence on record that XEI granted the
same right to buyers of two or more lots.
Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may
be considered certain if it be so with reference to another thing certain. It is sufficient if it
can be determined by the stipulations of the contract made by the parties thereto [85] or
by reference to an agreement incorporated in the contract of sale or contract to sell or if
it is capable of being ascertained with certainty in said contract;[86] or if the contract
contains express or implied provisions by which it may be rendered certain;[87] or if it
provides some method or criterion by which it can be definitely ascertained.[88] As this
Court held in Villaraza v. Court of Appeals,[89] the price is considered certain if, by its
terms, the contract furnishes a basis or measure for ascertaining the amount agreed
upon.
We have carefully reviewed the August 22, 1972 letter agreement of the parties and find
no direct or implied reference to the manner and schedule of payment of the balance of
the purchase price of the lots covered by the deeds of conditional sale executed by XEI
and that of the other lot buyers as basis for or mode of determination of the schedule of
the payment by the respondents of the P278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light
Company[91] is not applicable in this case because the basic price fixed in the contract
was P9.45 per long ton, but it was stipulated that the price was subject to modification in
proportion to variations in calories and ash content, and not otherwise. In this case, the
parties did not fix in their letters-agreement, any method or mode of determining the
terms of payment of the balance of the purchase price of the property amounting
to P278,448.00.
It bears stressing that the respondents failed and refused to pay the balance of the
downpayment and of the purchase price of the property amounting toP278,448.00
despite notice to them of the resumption by XEI of its selling operations. The
respondents enjoyed possession of the property without paying a centavo. On the other
hand, XEI and OBM failed and refused to transmit a contract of conditional sale to the
respondents. The respondents could have at least consigned the balance of the
downpayment after notice of the resumption of the selling operations of XEI and filed an

action to compel XEI or OBM to transmit to them the said contract; however, they failed
to do so.
As a consequence, respondents and XEI (or OBM for that matter) failed to forge a
perfected contract to sell the two lots; hence, respondents have no cause of action for
specific performance against petitioner. Republic Act No. 6552 applies only to a
perfected contract to sell and not to a contract with no binding and enforceable effect.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the
Court of Appeals in CA-G.R. CV No. 47458 is REVERSED andSET ASIDE. The Regional
Trial Court of Quezon City, Branch 98 is ordered to dismiss the complaint. Costs against
the respondents.
SO ORDERED.
Gr. No. 158149
Boston bank (formerly Bank of Commerce) v. Perla Manalo and Carlos Manalo.
Facts:
Xavierville Estate, Inc. (XEI) sold to The Overseas Bank of Manila (OBM) some residential
lots in Xavierville subdivision. Nevertheless, XEI continued selling the residential lots in
the subdivision as agent of OBM. Carlos Manalo, Jr. proposed to XEI, through its President
Emerito Ramos, to purchase two lots in the Xavierville subdivision and offered as part of
the downpayment the P34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a
letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the
lots. In the letter he also pegged the price of the lots at P348,060 with a 20% down
payment of the purchase price amounting to P69,612.00 (less the P34,887.66 owing
from Ramos), payable as soon as XEI resumes its selling operations; the corresponding
Contract of Conditional Sale would then be signed on or before the same date. Perla
Manalo conformed to the letter agreement. Thereafter, the spouses constructed a house
on the property. The spouses were notified of XEIs resumption of selling operations.
However, they did not pay the balance of the downpayment because XEI failed to
prepare a contract of conditional sale and transmit the same to them. XEI also billed
them for unpaid interests which they also refused to pay.
XEI turned over its selling operations to OBM. Subsequently, Commercial Bank of Manila
(CBM) acquired the Xavierville Estate from OBM. CBM requested Perla Manalo to stop any
on-going construction on the property since it (CBM) was the owner of the lot and she
had no permission for such construction.
Perla informed them that her husband had a contract with OBM, through XEI, to purchase
the property. She promised to send CBM the documents. However, she failed to do so.
Thus, CBM filed a complaint for unlawful detainer against the spouses. But later on, CBM
moved to withdraw its complaint because of the issues raised. In the meantime, CBM
was renamed the Boston Bank of the Philippines.

Then, the spouses filed a complaint for specific performance and damages against the
bank before the RTC. The spouses alleged that they had always been ready and willing to
pay the installments on the lots sold to them but no contract was forthcoming. The
spouses further alleged that upon their partial payment of the downpayment, they were
entitled to the execution and delivery of a Deed of Absolute Sale covering the subject
lots. During the trial, the spouses adduced in evidence the separate Contracts
of Conditional Sale executed between XEI and 3 other buyers to prove that XEI continued
selling residential lots in the subdivision as agent of OBM after the latter had acquired
the said lots.
The trial court ordered the petitioner to execute a Deed of Absolute Sale in favor of the
spouses upon the payment of the spouses of the balance of the purchase price. It ruled
that under the August 22,1972 letter agreement of XEI and the spouses, the parties had
a "complete contract to sell" over the lots, and that they had already partially
consummated the same.
The Court of Appeals sustained the ruling of the RTC, but declared that the balance of the
purchase price of the property was payable in fixed amounts on a monthly basis for 120
months, based on the deeds of conditional sale executed by XEI in favor of other lot
buyers. Boston Bank filed a Motion for the Reconsideration of the decision alleging that
there was no perfected contract to sell the two lots, as there was no agreement between
XEI and the respondents on the manner of payment as well as the other terms and
conditions of the sale. Boston Bank also asserts that there is no factual basis for the CA
ruling that the terms and conditions relating to the payment of the balance of the
purchase price of the property (as agreed upon by XEI and other lot buyers in the same
subdivision) were also applicable to the contract entered into between the petitioner and
the respondents.
CA denied the MR.
ISSUES:
1.) Whether or not the factual issues raised by the petitioner are proper (Appeals
Evidence)
2.) Whether or not there was a perfected contract to sell the property
3.) Whether or not the CA correctly held that the terms of the deeds of conditional sale
executed by XEI in favor of the other lot buyers in the subdivision, which contained
uniform terms of 120 equal monthly installments, constitute evidence that XEI also
agreed to give the Manalo spouses the same mode and timeline of payment.

HELD:
1.)YES. The rule is that before this Court, only legal issues may be raised in a petition for
review on certiorari. The reason is that this Court is not a trier of facts, and is not to

review and calibrate the evidence on record. Moreover, the findings of facts of the trial
court, as affirmed on appeal by the Court of Appeals, are conclusive on this Court unless
the case falls under any of the following exceptions:
(1) when the conclusion is a finding grounded entirely on speculations, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible;
(3) where there is a grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the
Court of Appeals, in making its findings went beyond the issues of the case and the same
is contrary to the admissions of both appellant and appellee; (7) when the findings are
contrary to those of the trial court; (8) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by the
respondents; and (10) when the findings of fact of the Court of Appeals are premised on
the supposed absence of evidence and contradicted by the evidence on record.
We have reviewed the records and we find that, indeed, the ruling of the appellate court
dismissing petitioners appeal is contrary to law and is not supported by evidence. A
careful examination of the
factual backdrop of the case, as well as the antecedental proceedings constrains us to
hold that petitioner is not barred from asserting that XEI or OBM, on one hand, and the
respondents, on the other, failed to forge a perfected contract to sell the subject lots.

2.)NO. In a contract to sell property by installments, it is not enough that the parties
agree on the price as well as the amount of down payment. The parties must, likewise,
agree on the manner of payment of the balance of the purchase price and on the other
terms and conditions relative to the sale. Even if the buyer makes a downpayment or
portion thereof, such payment cannot be considered as sufficient proof of the perfection
of any purchase and sale between the parties.
A contract of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and the price. The agreement as to the manner
of payment goes into the price, such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.
We have meticulously reviewed the records, including Ramos February 8, 1972 and
August 22,1972 letters to respondents and find that said parties confined themselves to
agreeing on the price of the property (P348,060.00), the 20% downpayment of the
purchase price (P69,612.00), and credited respondents for the P34,887.00 owing from
Ramos as part of the 20% downpayment. Based on these two letters, the determination
of the terms of payment of the P278,448.00 had yet to be agreed upon on or before
December 31, 1972, or even afterwards, when the parties sign the contract of
conditional sale.

So long as an essential element entering into the proposed obligation of either of the
parties remains to be determined by an agreement which they are to make, the contract
is incomplete and unenforceable.
3.)NO. The bare fact that other lot buyers were allowed to pay the balance of the
purchase price of lots purchased by them in 120 or 180 monthly installments does not
constitute evidence that XEI also agreed to give the respondents the same mode and
timeline of payment.
Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain
thing at one time is not admissible to prove that he did the same or similar thing at
another time, although such evidence may be received to prove habit, usage, pattern of
conduct or the intent of the parties. Habit, custom, usage or pattern of conduct must be
proved like any other facts. The offering party must establish the degree of specificity
and frequency of uniform response that ensures more than a
mere tendency to act in a given manner but rather, conduct that is semi-automatic in
nature. The offering party must allege and prove specific, repetitive conduct that might
constitute evidence of habit. The examples offered in evidence to prove habit, or pattern
of evidence must be numerous enough to base on inference of systematic conduct. Mere
similarity of contracts does not present the kind of sufficiently similar circumstances to
outweigh the danger of prejudice and confusion. In determining whether the examples
are numerous enough, and sufficiently regular, the key criteria are adequacy of sampling
and uniformity of response. It is only when examples offered to establish pattern of
conduct or habit are numerous enough to lose an inference of systematic conduct that
examples are admissible.
Respondents failed to allege and prove that, as a matter of business usage, habit or
pattern of conduct, XEI granted all lot buyers the right to pay the balance of the
purchase price in installments of 120 months of fixed amounts with pre-computed
interests, and that XEI and the respondents had intended to adopt such terms of
payment relative to the sale of the two lots in question. Indeed, respondents adduced in
evidence the three contracts of conditional sale executed by XEI and other lot buyers
merely to prove that XEI continued to sell lots in the subdivision as sales agent of OBM
after it acquired said lots, not to prove usage, habit or pattern of conduct on the part of
XEI to require all lot buyers in the subdivision to pay the balance of the purchase price of
said lots in 120 months.

G.R. NO. 145470 December 9, 2005


SPS. LUIS V. CRUZ and AIDA CRUZ, Petitioners,
vs.
SPS. ALEJANDRO FERNANDO, SR., and RITA FERNANDO, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For resolution is a petition for review on certiorari under Rule 45 of the Rules of Court,
assailing the Decision1dated October 3, 2000 of the Court of Appeals (CA) in CA-G.R. CV
No. 61247, dismissing petitioners appeal and affirming the decision of the Regional Trial
Court (RTC) of Malolos, Bulacan, Branch 79, in Civil Case No. 877-M-94.
The antecedent facts are as follows:
Luis V. Cruz and Aida Cruz (petitioners) are occupants of the front portion of a 710-square
meter property located in Sto. Cristo, Baliuag, Bulacan. On October 21, 1994, spouses
Alejandro Fernando, Sr. and Rita Fernando (respondents) filed before the RTC a complaint
for accion publiciana against petitioners, demanding the latter to vacate the premises
and to pay the amount of P500.00 a month as reasonable rental for the use thereof.
Respondents alleged in their complaint that:
(1) they are owners of the property, having bought the same from the spouses Clodualdo
and Teresita Glorioso (Gloriosos) per Deed of Sale dated March 9, 1987;
(2) prior to their acquisition of the property, the Gloriosos offered to sell to petitioners
the rear portion of the property but the transaction did not materialize due to petitioners
failure to exercise their option;
(3) the offer to sell is embodied in a Kasunduan dated August 6, 1983 executed before
the Barangay Captain;
(4) due to petitioners failure to buy the allotted portion, respondents bought the whole
property from the Gloriosos; and
(5) despite repeated demands, petitioners refused to vacate the property. 2
Petitioners filed a Motion to Dismiss but the RTC dismissed it for lack of merit in its Order
dated March 6, 1995.3Petitioners then filed their Answer setting forth the affirmative
defenses that: (1) the Kasunduan is a perfected contract of sale; (2) the agreement has
already been "partially consummated" as they already relocated their house from the
rear portion of the lot to the front portion that was sold to them; (3) Mrs. Glorioso
prevented the complete consummation of the sale when she refused to have the exact
boundaries of the lot bought by petitioners surveyed, and the existing survey was made

without their knowledge and participation; and (4) respondents are buyers in bad faith
having bought that portion of the lot occupied by them (petitioners) with full knowledge
of the prior sale to them by the Gloriosos.4
After due proceedings, the RTC rendered a Decision on April 3, 1998 in favor of
respondents. The decretal portion of the decision provides:
PREMISES CONSIDERED, the herein plaintiffs was able to prove by
preponderance of evidence the case ofaccion publiciana, against the
defendants and judgment is hereby rendered as follows:
1. Ordering defendants and all persons claiming under them to vacate
placefully (sic) the premises in question and to remove their house therefore
(sic);
2. Ordering defendants to pay plaintiff the sum of P500.00 as reasonable
rental per month beginning October 21, 1994 when the case was filed before
this Court and every month thereafter until they vacate the subject premises
and to pay the costs of suit.
The counter claim is hereby DISMISSED for lack of merit.
SO ORDERED.5
Petitioners appealed the RTC decision but it was affirmed by the CA per its Decision
dated October 3, 2000.
Hence, the present petition raising the following issues:
1. Whether the Honorable Court of Appeals committed an error of law in holding that the
Agreement (Kasunduan) between the parties was a "mere offer to sell," and not a
perfected "Contract of Purchase and Sale"?
2. Whether the Honorable Court of Appeals committed an error of law in not holding that
where the parties clearly gave the petitioners a period of time within which to pay the
price, but did not fix said period, the remedy of the vendors is to ask the Court to fix the
period for the payment of the price, and not an "accion publiciana"?
3. Whether the Honorable Court of Appeals committed an error of law in not ordering
respondents to at least deliver the "back portion" of the lot in question upon payment of
the agreed price thereof by petitioners, assuming that the Regional Trial Court was
correct in finding that the subject matter of the sale was said "back portion", and not the
"front" portion of the property?
4. Whether the Honorable Court of Appeals committed an error of law in affirming the
decision of the trial court ordering the petitioners, who are possessors in good faith, to
pay rentals for the portion of the lot possessed by them?6

The RTC dwelt on the issue of which portion was being sold by the Gloriosos to
petitioners, finding that it was the rear portion and not the front portion that was being
sold; while the CA construed the Kasunduan as a mere contract to sell and due to
petitioners failure to pay the purchase price, the Gloriosos were not obliged to deliver to
them (petitioners) the portion being sold.
Petitioners, however, insist that the agreement was a perfected contract of sale, and
their failure to pay the purchase price is immaterial. They also contend that respondents
have no cause of action against them, as the obligation set in the Kasunduan did not set
a period, consequently, there is no breach of any obligation by petitioners.
The resolution of the issues in this case principally is dependent on the interpretation of
the Kasunduan dated August 6, 1983 executed by petitioners and the Gloriosos.
The Kasunduan provided the following pertinent stipulations:
a. Na pumayag ang mga maysumbong (referring to the Gloriosos) na
pagbilhan ang mga ipinagsumbong (referring to petitioners) na
bahagi ng lupa at ang ipagbibili ay may sukat na 213 metrong
parisukat humigit kumulang sa halagang P40.00 bawat metrong
parisukat;
b. Na sa titulong papapanaugin ang magiging kabuuang sukat na
mauukol sa mga ipinagsusumbong ay 223 metrong parisukat at ang
10 metro nito ay bilang kaloob ng mga maysumbong sa mga
Ipinagsusumbong na bahagi ng right of way;
c. Na ang right of way ay may luwang na 1.75 meters magmula sa
daang Lopez Jaena patungo sa likuran ng lote na pagtatayuan ng
bahay ng mga Ipinagsusumbong na kanyang bibilhin;
d. Na ang gugol sa pagpapasukat at pagpapanaog ng titulo ay
paghahatian ng magkabilang panig na ang panig ay magbibigay ng
halagang hindi kukulanging sa halagang tig-AAPAT NA DAANG PISO
(P400.00);
e. Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa
bahaging kanilang nabili o mabibili sa buwan ng Enero 31,
1984;7 (Emphasis supplied)
Article 1458 of the Civil Code, a contract of sale is a contract by which one
of the contracting parties obligates himself to transfer the ownership and
to deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.
Article 1475 of the Code further provides that the contract of sale is
perfected at the moment there is meeting of the minds upon the thing
which is the object of the contract and upon the price. From that moment

the parties may reciprocally demand performance subject to the


provisions of the law governing the form of contracts.
CONTRACT OF SALE, as distinguished from CONTRACT TO SELL:
In a contract of sale, the title to the property passes to the vendee upon
the delivery of the thing sold, as distinguished from a contract to sell
where ownership is, by agreement, reserved in the vendor and is not to
pass to the vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses ownership over
the property and cannot recover it until and unless the contract is
resolved or rescinded; whereas, in a contract to sell, title is retained by
the vendor until full payment of the price. In the latter contract, payment
of the price is a positive suspensive condition, failure of which is not a
breach but an event that prevents the obligation of the vendor to convey
title from becoming effective.

The Kasunduan provides for the following terms and conditions:


(a) that the Gloriosos agreed to sell to petitioners a portion of the property with
an area of 213 meters at the price of P40.00 per square meter; (b) that in the title that
will be caused to be issued, the aggregate area is 223 square meters with 10 meters
thereof serving as right of way; (c) that the right of way shall have a width of 1.75
meters from Lopez Jaena road going towards the back of the lot where petitioners will
build their house on the portion of the lot that they will buy; (d) that the expenses for the
survey and for the issuance of the title will be divided between the parties with each
party giving an amount of no less than P400.00; and (e) that petitioners will definitely
relocate their house to the portion they bought or will buy by January 31, 1984.
The foregoing terms and conditions show that it is a contract to sell and not a
contract of sale. For one, the conspicuous absence of a definite manner of
payment of the purchase price in the agreement confirms the conclusion that
it is a contract to sell. This is because the manner of payment of the purchase
price is an essential element before a valid and binding contract of sale can
exist. Although the Civil Code does not expressly state that the minds of the
parties must also meet on the terms or manner of payment of the price, the
same is needed, otherwise there is no sale.
As held in Toyota Shaw, Inc. vs. Court of Appeals,11 a definite agreement on the manner
of payment of the price is an essential element in the formation of a binding and
enforceable contract of sale.

The Kasunduan does not establish any definite agreement between the parties
concerning the terms of payment. What it merely provides is the purchase price for the
213-square meter property at P40.00 per square meter.
For another, the telltale provision in the Kasunduan that: "Na pumayag ang mga
maysumbong na pagbilhan ang mga ipinagsumbong na bahagi ng lupa at
ang ipagbibili ay may sukat na 213 metrong parisukat humigit kumulang sa
halagang P40.00 bawat metrong parisukat," simply means that the Gloriosos only agreed
to sell a portion of the property and that the portion to be sold measures 213 square
meters.
Another significant provision is that which reads: "Na ang ipinagsusumbong ay tiyakang
ililipat ang bahay sa bahaging kanilang nabili o mabibili sa buwan ng Enero 31, 1984."
The foregoing indicates that a contract of sale is yet to be consummated and ownership
of the property remained in the Gloriosos. Otherwise, why would the alternative term
"mabibili" be used if indeed the property had already been sold to petitioners.
In addition, the absence of any formal deed of conveyance is a strong indication that the
parties did not intend immediate transfer of ownership.12
Normally, in a contract to sell, the payment of the purchase price is the positive
suspensive condition upon which the transfer of ownership depends. The parties,
however, are not prohibited from stipulating other lawful conditions that must be fulfilled
in order for the contract to be converted from a contract to sell or at the most an
executory sale into an executed one.
In the present case, aside from the payment of the purchase price, there existed another
suspensive condition,i.e.: that petitioners will relocate their house to the portion they
bought or will buy by January 31, 1984.
Petitioners failed to abide by the express condition that they should relocate to the rear
portion of the property being bought by January 31, 1984. Indeed,
the Kasunduan discloses that it is the rear portion that was being sold by the Gloriosos,
and not the front portion as petitioners stubbornly claim. This is evident from the
provisions establishing a right of way from Lopez Jaena road going towards the back of
the lot, and requiring them to relocate their house to the portion being sold by January
31, 1984. Petitioners are presently occupying the front portion of the property. Why the
need for a right of way and for petitioners to relocate if the front portion on which their
house stands is the portion being sold?
This condition is a suspensive condition noncompliance of which prevented the Gloriosos
from proceeding with the sale and ultimately transferring title to petitioners; and
the Kasunduan from having obligatory force. It is established by evidence that the
petitioners did not transfer their house located in the front portion of the subject
property to the rear portion which, under the Kasunduan, they intended to buy. Thus, no
obligation arose on the part of the Gloriosos to consider the subject property as having

been sold to petitioners because the latters non-fulfillment of the suspensive condition
rendered the contract to sell ineffective and unperfected.
Petitioners admit that they have not paid a single centavo to the Gloriosos. However,
petitioners argue that their nonpayment of the purchase price was due to the fact that
there is yet to be a survey made of the property. But evidence shows, and petitioners do
not dispute, that as early as August 12, 1983, or six days after the execution of
the Kasunduan, a survey has already been made and the property was subdivided into
Lot Nos. 565-B-1 (front portion) and 565-B-2 (rear portion), with Lot No. 565-B-2
measuring 223 square meters as the portion to be bought by petitioners.
Petitioners question the survey made, asserting that it is a "table survey" made without
their knowledge and participation. It should be pointed out that the Kasunduan merely
provides that the expenses for the survey will be divided between them and that each
party should give an amount of no less than P400.00. Nowhere is it stated that the
survey is a condition precedent for the payment of the purchase price.
Petitioners further claim that respondents have no cause of action against them because
their obligation to pay the purchase price did not yet arise, as the agreement did not
provide for a period within which to pay the purchase price. They argue that respondents
should have filed an action for specific performance or judicial rescission before they can
avail of accion publiciana.
Notably, petitioners never raised these arguments during the proceedings before the
RTC. Suffice it to say that issues raised for the first time on appeal and not raised timely
in the proceedings in the lower court are barred by estoppel.16 Matters, theories or
arguments not brought out in the original proceedings cannot be considered on review or
appeal where they are raised for the first time. To consider the alleged facts and
arguments raised belatedly would amount to trampling on the basic principles of fair
play, justice and due process.17
Moreover, it would be inutile for respondents to first petition the court to fix a period for
the performance of the contract. In the first place, respondents are not parties to
the Kasunduan between petitioners and the Gloriosos, and they have no standing
whatsoever to seek such recourse. In the second place, such recourse properly pertains
to petitioners. It was they who should have sought the courts intercession. If petitioners
believed that they have an actionable contract for the sale of the property, prudence and
common sense dictate that they should have sought its enforcement forthwith. Instead,
petitioners whiled away their time.
Furthermore, there is no need for a judicial rescission of the Kasunduan for the simple
reason that the obligation of the Gloriosos to transfer the property to petitioners has not
yet arisen. There can be no rescission of an obligation that is nonexistent, considering
that the suspensive conditions therefor have not yet happened.18
Hence, petitioners have no superior right of ownership or possession to speak of. Their
occupation of the property was merely through the tolerance of the owners. Evidence on

record shows that petitioners and their predecessors were able to live and build their
house on the property through the permission and kindness of the previous owner, Pedro
Hipolito, who was their relative,19 and subsequently, Teresita Glorioso, who is also their
relative. They have no title or, at the very least, a contract of lease over the property.
Based as it was on mere tolerance, petitioners possession could neither ripen into
ownership nor operate to bar any action by respondents to recover absolute possession
thereof.20
There is also no merit to petitioners contention that respondents are buyers in bad faith.
As explained in Coronel vs. Court of Appeals:
In a contract to sell, there being no previous sale of the property, a third person
buying such property despite the fulfillment of the suspensive condition such
as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of
the property. There is no double sale in such case. Title to the property will transfer
to the buyer after registration because there is no defect in the owner-sellers title per
se, but the latter, of course, may be sued for damages by the intending
buyer.21 (Emphasis supplied)
A person who occupies the land of another at the latter's forbearance or permission
without any contract between them is necessarily bound by an implied promise that he
will vacate upon demand.22
Considering that petitioners continued possession of the property has already been
rendered unlawful, they are bound to pay reasonable rental for the use and occupation
thereof, which in this case was appropriately pegged by the RTC at P500.00 per month
beginning October 21, 1994 when respondents filed the case against them until they
vacate the premises.
Finally, petitioners seek compensation for the value of the improvements introduced on
the property. Again, this is the first time that they are raising this point. As such,
petitioners are now barred from seeking such relief.23
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
October 3, 2000 in CA-G.R. CV No. 61247 is AFFIRMED.
SO ORDERED.
Spouses Luis and Aida Cruz vs Spouses Alejandro and Rita Fernando
In 1983, Cruz executed a Kasunduan with the Gloriosos for the consideration of the rear
portion of a 223 sq m lot. The Kasunduanprovides that the lot will be sold at a P40 per sq
m. That the portion of the lot to be sold is the rear portion of it. That upon selling, the
Cruz will transfer their house from the front portion to the rear portion of the land once it
is bought. That they will have a right of way from the front portion going to the back end
of the lot. The Cruz never gave anything to the Gloriosos for there was an alleged failure

to have the land surveyed. Due to non payment, the Gloriosos instead sold the whole lot
(back and rear portion) to the Fernandos.
In 1994, after repeated demands, the Fernandos filed a case in court for accion
publiciana demanding the Cruz to vacate the lot and to pay a rental of P500.00. The RTC
ruled in favor of the Fernandos. The CA affirmed the RTC ruling.
ISSUE: Whether or not what transpired between the Cruzes and the Gloriosos was a
contract of sale.
HELD: No. The absence of a specific manner of payment in the terms and conditions of
the contract makes it a contract to sell. Ownership was never transferred to the Cruzes.
This is because the manner of payment of the purchase price is an essential element
before a valid and binding contract of sale can exist. Although the Civil Code does not
expressly state that the minds of the parties must also meet on the terms or manner of
payment of the price, the same is needed, otherwise there is no sale. Also, the Cruzes
never transferred their house from the front portion to the rear portion of the lot. It was
evident in the contract that they will transfer the house to the rear portion once they
were able to buy it.
The SC also ruled that the Fernandos were not buyers in bad faith. There was no
consummated sale between the Cruzes and the Gloriosos. In a contract to sell, there
being no previous sale of the property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek
the relief of reconveyance of the property. There is no double sale in such case. Title to
the property will transfer to the buyer after registration because there is no defect in the
owner-sellers title per se, but the latter, of course, may be sued for damages by the
intending buyer.

[G.R. No. 146997. April 26, 2005]

SPOUSES GODOFREDO & DOMINICA FLANCIA, petitioners, vs. COURT OF


APPEALS & WILLIAM ONG GENATO, respondents.
DECISION
CORONA, J.:

Before us is a petition for review under Rule 45 of the Rules of Court, seeking to set aside
the October 6, 2000 decision[1] of the Court of Appeals in CA-G.R. CV No. 56035.

The facts as outlined by the trial court[2] follow.

This is an action to declare null and void the mortgage executed by defendant Oakland
Development Resources Corp. xxx in favor of defendant William Ong Genato over the
house and lot plaintiffs spouses Godofredo and Dominica Flancia purchased from
defendant corporation.

In the complaint, plaintiffs allege that they purchased from defendant corporation a
parcel of land known as Lot 12, Blk. 3, Phase III-A containing an area of 128.75 square
meters situated in Prater Village Subd. II located at Brgy. Old Balara, Quezon City; that by
virtue of the contract of sale, defendant corporation authorized plaintiffs to transport all
their personal belongings to their house at the aforesaid lot; that on December 24, 1992,
plaintiffs received a copy of the execution foreclosing [the] mortgage issued by the RTC,
Branch 98 ordering defendant Sheriff Sula to sell at public auction several lots formerly
owned by defendant corporation including subject lot of plaintiffs; that the alleged
mortgage of subject lot is null and void as it is not authorized by plaintiffs pursuant to
Art. 2085 of the Civil Code which requires that the mortgagor must be the absolute
owner of the mortgaged property; that as a consequence of the nullity of said mortgage,
the execution foreclosing [the] mortgage is likewise null and void; that plaintiffs advised
defendants to exclude subject lot from the auction sale but the latter refused. Plaintiffs
likewise prayed for damages in the sum of P50,000.00.
Defendant William Ong Genato filed a motion to dismiss the complaint which was
opposed by the plaintiffs and denied by the Court in its Order dated February 16, 1993.
Defendant Genato, then filed his answer averring that on May 19, 1989 co-defendant
Oakland Development Resources Corporation mortgaged to Genato two (2) parcels of
land covered by TCT Nos. 356315 and 366380 as security and guaranty for the payment

of a loan in the sum of P2,000,000.00; that it appears in the complaint that the subject
parcel of land is an unsubdivided portion of the aforesaid TCT No. 366380 which covers
an area of 4,334 square meters more or less; that said real estate mortgage has been
duly annotated at the back of TCT No. 366380 on May 22, 1989; that for non-payment of
the loan of P2,000,000.00 defendant Genato filed an action for foreclosure of real estate
mortgage against co-defendant corporation; that after [trial], a decision was rendered by
the Regional Trial Court of Quezon City, Branch 98 against defendant corporation which
decision was affirmed by the Honorable Court of Appeals; that the decision of the Court
of Appeals has long become final and thus, the Regional Trial Court, Brach 98 of Quezon
City issued an Order dated December 7, 1992 ordering defendant Sheriff Ernesto Sula to
cause the sale at public auction of the properties covered by TCT No. 366380 for failure
of defendant corporation to deposit in Court the money judgment within ninety (90) days
from receipt of the decision of the Court of Appeals; that plaintiffs have no cause of
action against defendant Genato; that the alleged plaintiffs Contract to Sell does not
appear to have been registered with the Register of Deeds of Quezon City to affect
defendant Genato and the latter is thus not bound by the plaintiffs Contract to Sell; that
the registered mortgage is superior to plaintiffs alleged Contract to Sell and it is
sufficient for defendant Genato as mortgagee to know that the subject TCT No. 366380
was clean at the time of the execution of the mortgage contract with defendant
corporation and defendant Genato is not bound to go beyond the title to look for flaws in
the mortgagors title; that plaintiffs alleged Contract to Sell is neither a mutual promise to
buy and sell nor a Contract of Sale. Ownership is retained by the seller, regardless of
delivery and is not to pass until full payment of the price; that defendant Genato has not
received any advice from plaintiffs to exclude the subject lot from the auction sale, and
by way of counterclaim, defendant Genato prays for P150,000.00 moral damages and
P20,000.00 for attorneys fees.
On the other hand, defendant Oakland Development Resources Corporation likewise filed
its answer and alleged that the complaint states no cause of action; xxx Defendant
corporation also prays for attorneys fees of P20,000.00 in its counterclaim.[3]
After trial, the assisting judge[4] of the trial court rendered a decision dated August 16,
1996, the decretal portion of which provided:
Wherefore, premises considered, judgment is hereby rendered.
1) Ordering defendant Oakland Devt. Resources Corporation to pay plaintiffs:
a) the amount of P10,000.00 representing payment for the option to purchase lot;
b) the amount of P140,000.00 representing the first downpayment of the contract
price;
c) the amount of P20,520.80 representing five monthly amortizations for February,
March, April, May and June 1990;

d) the amount of P3,000.00 representing amortization for November 1990; all plus
legal interest from the constitution of the mortgage up to the time the instant case
was filed.
2) Ordering said defendant corporation to pay further to plaintiffs the sum of
P30,000.00 for moral damages, P10,000.00 for exemplary damages and
P20,000.00 for and as reasonable attorneys fees plus cost;
3) Dismissing defendant corporations counterclaim;

4) Dismissing defendant Genatos counterclaim.[5]


On motion for reconsideration, the regular presiding judge set aside the judgment of the
assisting judge and rendered a new one on November 27, 1996, the decretal portion of
which read:
WHEREFORE, premises considered, the Motion for Reconsideration is hereby
GRANTED. The decision dated August 16, 1996 is hereby set aside and a new one
entered in favor of the plaintiffs, declaring the subject mortgage and the
foreclosure proceedings held thereunder as null and void insofar as they affect the
superior right of the plaintiffs over the subject lot, and ordering as follows:

1. Defendant Oakland Development Resources to pay to plaintiffs the amount of


P20,000.00 for litigation-related expenses;
2. Ordering defendant Sheriff Ernesto L. Sula to desist from conducting further
proceedings in the extra-judicial foreclosure insofar as they affect the plaintiffs, or, in the
event that title has been consolidated in the name of defendant William O. Genato,
ordering said defendant to reconvey to plaintiffs the title corresponding to Lot 12, Blk. 3,
Phase III-A of Prater Village [Subd. II], located in Old Balara, Quezon City, containing an
area of 128.75 square meters; and
3. Dismissing the counterclaims of defendants Oakland and Genato and with costs
against them.[6]
On appeal, the Court of Appeals issued the assailed order:
Wherefore, foregoing premises considered, the appeal having merit in fact and in
law is hereby GRANTED and the decision of the Trial Court dated 27 November
1996 hereby SET ASIDE and REVERSED, and its judgment dated August 16, 1996
REINSTATED and AFFIRMED IN TOTO. No Costs.
SO ORDERED.[7]
Hence, this petition.

For resolution before us now are the following issues:


ISSUES:
(1) whether or not the registered mortgage constituted over the property was valid;
(2) whether or not the registered mortgage was superior to the contract to sell; and
(3) whether or not the mortgagee was in good faith.
Under the Art. 2085 of the Civil Code, the essential requisites of a contract of
mortgage are: (a) that it be constituted to secure the fulfillment of a principal
obligation; (b) that the mortgagor be the absolute owner of the thing
mortgaged; and (c) that the persons constituting the mortgage have the free
disposal of their property, and in the absence thereof, that they be legally
authorized for the purpose.

All these requirements are present in this case.


FIRST ISSUE: WAS THE REGISTERED MORTGAGE VALID?
As to the first essential requisite of a mortgage, it is undisputed that the mortgage was
executed on May 15, 1989 as security for a loan obtained by Oakland from Genato.
As to the second and third requisites, we need to discuss the difference between a
contract of sale and a contract to sell.
In a contract of sale, title to the property passes to the vendee upon
the delivery of the thing sold; in a contract to sell, ownership is, by
agreement, reserved by the vendor and is not to pass to the vendee
until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses ownership
over the property and cannot recover it unless and until the
contract is resolved or rescinded; in a contract to sell, title is
retained by the vendor until full payment of the price.[8]
In the contract between petitioners and Oakland, aside from the fact that it was
denominated as a contract to sell, the intention of Oakland not to transfer ownership to
petitioners until full payment of the purchase price was very clear. Acts of ownership
over the property were expressly withheld/suspended by Oakland from petitioner. All that
was granted to them by the occupancy permit was the right to possess it.
Specifically, the contract between Oakland and petitioners stated:
xxx xxx xxx

7. That the BUYER/S may be allowed to enter into and take possession of the
property upon issuance of Occupancy Permit by the OWNER/DEVELOPER
exclusively, although title has not yet passed to the BUYER/S, in which case
his possession shall be that of a possessor by mere tolerance Lessee, subject
to certain restrictions contained in this deed.
xxx xxx xxx
13. That the BUYER/S cannot sell, mortgage, cede, transfer, assign or in any
manner alienate or dispose of, in whole or in part, the rights acquired by and
the obligations imposed on the BUYER/S by virtue of this contract, without
the express written consent of the OWNER/DEVELOPER.
xxx xxx xxx
24. That this Contract to Sell shall not in any way [authorize] the BUYER/S to
occupy the assigned house and lot to them.[9]
xxx xxx xxx

Clearly, when the property was mortgaged to Genato in May 1989, what was in effect
between Oakland and petitioners was a contract to sell, not a contract of sale. Oakland
retained absolute ownership over the property.
Ownership is the independent and general power of a person over a
thing for purposes recognized by law and within the limits
established thereby. According to Art. 428 of the Civil Code, this
means that:
The owner has the right to enjoy and dispose of a thing, without
other limitations than those established by law.
xxx xxx xxx
Aside from the jus utendi and the jus abutendi inherent in the right
to enjoy the thing, the right to dispose, or the jus disponendi, is the
power of the owner to alienate, encumber, transform and even
destroy the thing owned.
Because Oakland retained all the foregoing rights as owner of the property, it was
entitled absolutely to mortgage it to Genato. Hence, the mortgage was valid.
SECOND ISSUE: WAS THE REGISTERED MORTGAGE SUPERIOR TO THE
CONTRACT TO SELL?
In their memorandum, petitioners cite our ruling in StateInvestment House, Inc. v. Court
of Appeals [13] to the effect that an unregistered sale is preferred over a registered
mortgage over the same property. The citation is misplaced.

This Court in that case explained the rationale behind the rule:
The unrecorded sale between respondents-spouses and SOLID is preferred for the reason
that if the original owner xxx had parted with his ownership of the thing sold then he no
longer had ownership and free disposal of that thing as to be able to mortgage it again.
State Investment House is completely inapplicable to the case at bar. A contract of sale
and a contract to sell are worlds apart. State Investment House clearly pertained to a
contract of sale, not to a contract to sell which was what Oakland and petitioners had. In
State Investment House, ownership had passed completely to the buyers and therefore,
the former owner no longer had any legal right to mortgage the property,
notwithstanding the fact that the new owner-buyers had not registered the sale. In the
case before us, Oakland retained absolute ownership over the property under the
contract to sell and therefore had every right to mortgage it.
In sum, we rule that Genatos registered mortgage was superior to petitioners contract to
sell, subject to any liabilities Oakland may have incurred in favor of petitioners by
irresponsibly mortgaging the property to Genato despite its commitments to petitioners
under their contract to sell.

THIRD ISSUE: WAS THE MORTGAGE IN GOOD FAITH?


The third issue involves a factual matter which should not be raised in this petition. Only
questions of law may be raised in a Rule 45 petition. This Court is not a trier of facts. The
resolution of factual issues is the function of the lower courts. We therefore adopt the
factual findings of the Court of Appeals and uphold the good faith of the mortgagee
Genato.
RELIANCE ON WHAT APPEARS IN THE TITLE
Just as an innocent purchaser for value may rightfully rely on what appears in the
certificate of title, a mortgagee has the right to rely on what appears in the title
presented to him. In the absence of anything to arouse suspicion, he is under no
obligation to look beyond the certificate and investigate the title of the mortgagor
appearing on the face of the said certificate. [14]
We agree with the findings and conclusions of the trial court regarding the liabilities of
Oakland in its August 16, 1996 decision, as affirmed by the Court of Appeals:
Anent [plaintiffs] prayer for damages, the Court finds that defendant corporation is
liable to return to plaintiffs all the installments/payments made by plaintiffs
consisting of the amount of P10,000.00 representing payment for the option to
purchase lot; the amount of P140,000.00 which was the first downpayment; the
sum of P20,520.80 representing five monthly amortizations for February, March,
April, May and June 1990 and the amount of P3,000.00 representing amortization

for November 1990 plus legal interest from the time of the mortgage up to the
time this instant case was filed. Further, considering that defendant corporation
wantonly and fraudulently mortgaged the subject property without regard to
[plaintiffs] rights over the same, said defendant should pay plaintiffs moral
damages in the reasonable amount of P30,000.00. xxx Furthermore, since
defendant [corporations] acts have compelled the plaintiffs to litigate and incur
expenses to protect their interest, it should likewise be adjudged to pay plaintiffs
attorneys fees of P20,000.00 under Article 2208 paragraph two (2) of the Civil
Code.
WHEREFORE, the petition for review is hereby DENIED. The decision of the Court of
Appeals reinstating the August 16, 1996 decision of the trial court is hereby AFFIRMED.
SO ORDERED.

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


ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as
attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA
BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D.
ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel
herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the
sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon
City entered into by the parties sometime in January 1985 for the price ofP1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred
to as Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor
of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is
reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
-----------------------------------------P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the
down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the
deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall
immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon
execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the Fifty Thousand
(P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the
deed of absolute sale in favor of Ramona and the latter will pay the former the whole
balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz
(hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of
Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels
father was transferred in their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One

Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona
Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the back of
TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering
the same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina
under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the
parties agreed to submit the case for decision solely on the basis of documentary
exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary
evidence accordingly marked as Exhibits A through J, inclusive of their corresponding
submarkings. Adopting these same exhibits as their own, then defendants (now
petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise
inclusive of their corresponding submarkings. Upon motion of the parties, the trial court
gave them thirty (30) days within which to simultaneously submit their respective
memoranda, and an additional 15 days within which to submit their corresponding
comment or reply thereto, after which, the case would be deemed submitted for
resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura,
who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon
City. On March 1, 1989, judgment was handed down by Judge Roura from his regular
bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant
to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land
embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon City, together with all the improvements
existing thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the
plaintiffs are ordered to pay defendants the whole balance of the purchase price
amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the
Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and

declared to be without force and effect. Defendants and intervenor and all other persons
claiming under them are hereby ordered to vacate the subject property and deliver
possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well
as the counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of
the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew
decision by the undersigned Presiding Judge should be denied for the following
reasons: (1) The instant case became submitted for decision as of April 14, 1988 when
the parties terminated the presentation of their respective documentary evidence and
when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were
allowed to file memoranda at some future date did not change the fact that the hearing
of the case was terminated before Judge Roura and therefore the same should be
submitted to him for decision; (2) When the defendants and intervenor did not object to
the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the
decision, when they met for the first time before the undersigned Presiding Judge at the
hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they
were deemed to have acquiesced thereto and they are now estopped from questioning
said authority of Judge Roura after they received the decision in question which happens
to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judgeon-detail at this Branch of the Court, he was in all respects the Presiding Judge with full
authority to act on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not
lose his authority to decide or resolve cases submitted to him for decision or resolution
because he continued as Judge of the Regional Trial Court and is of co-equal rank with
the undersigned Presiding Judge. The standing rule and supported by jurisprudence is
that a Judge to whom a case is submitted for decision has the authority to decide the
case notwithstanding his transfer to another branch or region of the same court (Sec. 9,
Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned
Presiding Judge, after a meticulous examination of the documentary evidence presented
by the parties, she is convinced that the Decision of March 1, 1989 is supported by
evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision
and Render Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is
hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of
Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing
with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private
respondents Reply Memorandum, was filed on September 15, 1993. The case was,
however, re-raffled to undersigned ponente only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of
respondent court in the affirmance of the trial courts decision, we definitely find the
instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other
issues in the case at bar is the precise determination of the legal significance of the
document entitled Receipt of Down Payment which was offered in evidence by both
parties. There is no dispute as to the fact that the said document embodied the binding
contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio
P. Coronel on the other, pertaining to a particular house and lot covered by TCT No.
119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as
follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.
While, it is the position of private respondents that the Receipt of Down Payment
embodied a perfected contract of sale, which perforce, they seek to enforce by means of
an action for specific performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who left for the United
States of America, said contract could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is brought about by the way
each interprets the terms and/or conditions set forth in said private instrument.Withal,
based on whatever relevant and admissible evidence may be available on record, this
Court, as were the courts below, is now called upon to adjudge what the real intent of
the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange
for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a contract to sell, the
prospective seller explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or consent to transfer ownership
of the property subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase price. What the seller
agrees or obliges himself to do is to fulfill his promise to sell the subject property when
the entire amount of the purchase price is delivered to him. In other words the full
payment of the purchase price partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and thus, ownership is retained by the
prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz
(96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass
until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, the prospective sellers obligation to sell the subject
property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor of the promise is supported by a consideration distinct from
the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to the

prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of
the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract of
sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition
is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite
and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if
there had already been previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The prospective seller
still has to convey title to the prospective buyer by entering into a contract of absolute
sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not to the party the
seller contracted with, but to a third person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third person buying such property despite
the fulfillment of the suspensive condition such as the full payment of the purchase
price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer
cannot seek the relief of reconveyance of the property. There is no double sale in such
case. Title to the property will transfer to the buyer after registration because there is no
defect in the owner-sellers title per se, but the latter, of course, may be sued for
damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the sellers title
thereto. In fact, if there had been previous delivery of the subject property, the sellers
ownership or title to the property is automatically transferred to the buyer such that, the
seller will no longer have any title to transfer to any third person. Applying Article 1544
of the Civil Code, such second buyer of the property who may have had actual or
constructive knowledge of such defect in the sellers title, or at least was charged with
the obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyers title. In case a title is issued to the second buyer,
the first buyer may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the
real nature of the contract entered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be
given their natural and ordinary meaning unless a technical meaning was intended (Tan
vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said
Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural
and ordinary idea conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more
manifest that there was a clear intent on the part of petitioners to transfer title to the
buyer, but since the transfer certificate of title was still in the name of petitioners father,
they could not fully effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers undertook upon
receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the
issuance of a new certificate of title in their names from that of their father, after which,
they promised to present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the
purchase price.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of
land.Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title was
not in their names) and not the full payment of the purchase price. Under the established
facts and circumstances of the case, the Court may safely presume that, had the
certificate of title been in the names of petitioners-sellers at that time, there would have
been no reason why an absolute contract of sale could not have been executed and
consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely
promise to sell the property to private respondent upon the fulfillment of the suspensive
condition. On the contrary, having already agreed to sell the subject property, they
undertook to have the certificate of title change to their names and immediately
thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after
compliance by the buyer with certain terms and conditions, promised to sell the property
to the latter. What may be perceived from the respective undertakings of the parties to
the contract is that petitioners had already agreed to sell the house and lot they
inherited from their father, completely willing to transfer ownership of the subject house
and lot to the buyer if the documents were then in order. It just so happened, however,
that the transfer certificate of title was then still in the name of their father. It was more
expedient to first effect the change in the certificate of title so as to bear their

names. That is why they undertook to cause the issuance of a new transfer of the
certificate of title in their names upon receipt of the down payment in the amount
of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners
were committed to immediately execute the deed of absolute sale. Only then will the
obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so
as to protect the seller against a buyer who intends to buy the property in installment by
withholding ownership over the property until the buyer effects full payment therefor, in
the contract entered into in the case at bar, the sellers were the ones who were unable
to enter into a contract of absolute sale by reason of the fact that the certificate of title
to the property was still in the name of their father. It was the sellers in this case who, as
it were, had the impediment which prevented, so to speak, the execution of an contract
of absolute sale.
What is clearly established by the plain language of the subject document is that when
the said Receipt of Down Payment was prepared and signed by petitioners Romulo A.
Coronel, et. al., the parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title from the name of
petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on
February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale
between petitioners and private respondent Ramona P. Alcaraz became obligatory, the
only act required for the consummation thereof being the delivery of the property by
means of the execution of the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as evidenced by the Receipt of
Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the
case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of
title in petitioners names was fulfilled on February 6, 1985, the respective obligations of
the parties under the contract of sale became mutually demandable, that is, petitioners,
as sellers, were obliged to present the transfer certificate of title already in their names
to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the

deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the
balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition,
petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names
from our deceased father Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the downpayment above-stated". The sale was still
subject to this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a
suspensive condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title
to the property under their names, there could be no perfected contract of
sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil
Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents
its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these
mere hypothetical arguments is the fact that the condition herein referred to was
actually and indisputably fulfilled on February 6, 1985, when a new title was
issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document
denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a
contract of sale subject to the suspensive condition that the sellers shall effect the
issuance of new certificate title from that of their fathers name to their names and that,
on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale
became mutually due and demandable as of the time of fulfillment or occurrence of the

suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations


of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985
because they were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as
follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent and value of the inheritance of a person are transmitted
through his death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent
Constancio P. Coronel are compulsory heirs who were called to succession by operation
of law. Thus, at the point their father drew his last breath, petitioners stepped into his
shoes insofar as the subject property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon them. It is expressly provided
that rights to the succession are transmitted from the moment of death of the decedent
(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be declared unless the
creditors have been paid is rendered moot by the fact that they were able to effect the
transfer of the title to the property from the decedents name to their names on February
6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to
enter into an agreement at that time and they cannot be allowed to now take a posture
contrary to that which they took when they entered into the agreement with private
respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying
thereon.
Having represented themselves as the true owners of the subject property at the time of
sale, petitioners cannot claim now that they were not yet the absolute owners thereof at
that time.
Petitioners also contend that although there was in fact a perfected contract of sale
between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation when
she rendered impossible the consummation thereof by going to the United States of
America, without leaving her address, telephone number, and Special Power of Attorney
(Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended
Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were
correct in unilaterally rescinding the contract of sale.

We do not agree with petitioners that there was a valid rescission of the contract of sale
in the instant case. We note that these supposed grounds for petitioners rescission, are
mere allegations found only in their responsive pleadings, which by express provision of
the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11,
Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting
evidence to substantiate petitioners allegations. We have stressed time and again that
allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil.
882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence
(Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on
February 6, 1985, we cannot justify petitioners-sellers act of unilaterally and
extrajudicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA,
158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P.
Alcaraz because although the evidence on record shows that the sale was in the name of
Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz,
Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own
personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no
evidence showing that petitioners ever questioned Concepcions authority to represent
Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any
objection as regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to
rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her
obligation to pay the full purchase price is concerned. Petitioners who are precluded from
setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained
offered no proof whatsoever to show that they actually presented the new transfer
certificate of title in their names and signified their willingness and readiness to execute
the deed of absolute sale in accordance with their agreement. Ramonas corresponding
obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot be deemed to
have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx

In reciprocal obligations, neither party incurs in delay if the other does not comply or
is not ready to comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between
petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag,
gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof to the person who presents
the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as
proof of the second contract of sale was registered with the Registry of Deeds of Quezon
City giving rise to the issuance of a new certificate of title in the name of Catalina B.
Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the
buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale
ahead of the first buyer, and (b) should there be no inscription by either of the two
buyers, when the second buyer, in good faith, acquires possession of the property ahead
of the first buyer. Unless, the second buyer satisfies these requirements, title or
ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a
distinguished member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in
right). Knowledge by the first buyer of the second sale cannot defeat the first buyers
rights except when the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second
buyer of the first sale defeats his rights even if he is first to register, since knowledge
taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No.
58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129
SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in registering his deed of
sale (citingCarbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992).

(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on
the title of the subject property only on February 22, 1985, whereas, the second sale
between petitioners Coronels and petitioner Mabanag was supposedly perfected prior
thereto or on February 18, 1985. The idea conveyed is that at the time petitioner
Mabanag, the second buyer, bought the property under a clean title, she was unaware of
any adverse claim or previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the
second buyer in good faith but whether or not said second buyer registers such second
sale in good faith, that is, without knowledge of any defect in the title of the property
sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in
good faith, registered the sale entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate
of title in the names of petitioners, whereas petitioner Mabanag registered the said sale
sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew
that the same property had already been previously sold to private respondents, or, at
least, she was charged with knowledge that a previous buyer is claiming title to the
same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title
to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there
was a previous sale of the same property to a third party or that another person claims
said property in a previous sale, the registration will constitute a registration in bad faith
and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez
vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz,
perfected on February 6, 1985, prior to that between petitioners and Catalina B.
Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between
Ramona as principal and Concepcion, her mother, as agent insofar as the subject
contract of sale is concerned, the issue of whether or not Concepcion was also acting in
her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not touch this issue
and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the
appealed judgment AFFIRMED.

SO ORDERED.

Coronel v. CA
Facts:
The case arose from a complaint for specific performance filed by private respondent
Alcaraz against petitioners to consummate the sale of a parcel of land in Quezon City.
On January 19, 1985, petitioners executed a Receipt of Down Payment of P50,000 in
favor of plaintiff Ramona Alcaraz, binding themselves to transfer the ownership of the
land in their name from their deceased father, afterwhich the balance of P1,190,000 shall
be paid in full by Alcaraz. On February 6, 1985, the property was transferred to
petitioners. On February 18, 1985, petitioners sold the property to Mabanag. For this
reason, Concepcion, Ramonas mother, filed an action for specific performance.
Issue:
Whether the contract between petitioners and private respondent was that of a
conditional sale or a mere contract to sell
Held:
Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following: a) Consent or
meeting of the minds, that is, consent to transfer ownership in exchange for the price; b)
Determinate subject matter; and c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective seller
explicity reserves the transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the property subject of
the contract to sell until the happening of an event, which for present purposes we shall
take as the full payment of the purchase price. What the seller agrees or obliges himself
to do is to fulfill his promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of which prevents the obligation
to sell from arising and thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer. A contract to sell may thus be defined as a
bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the purchase price.

A contract to sell may not even be considered as a conditional contract of sale where the
seller may likewise reserve title to the property subject of the sale until the fulfillment of
a suspensive condition, because in a conditional contract of sale, the first element of
consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur. If the suspensive condition is not fulfilled, the perfection of
the contract of sale is completely abated. However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to
be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, ownership will not
automatically transfer to the buyer although the property may have been previously
delivered to him. The prospective seller still has to convey title to the prospective buyer
by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not to the party the
seller contracted with, but to a third person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third person buying such property despite
the fulfillment of the suspensive condition such as the full payment of the purchase
price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer
cannot seek the relief of reconveyance of the property. There is no double sale in such
case. Title to the property will transfer to the buyer after registration because there is no
defect in the owner-seller's title per se, but the latter, of course, may be used for
damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the seller's title
thereto. In fact, if there had been previous delivery of the subject property, the seller's
ownership or title to the property is automatically transferred to the buyer such that, the
seller will no longer have any title to transfer to any third person. Such second buyer of
the property who may have had actual or constructive knowledge of such defect in the
seller's title, or at least was charged with the obligation to discover such defect, cannot
be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In
case a title is issued to the second buyer, the first buyer may seek reconveyance of the
property subject of the sale.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of land.
Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title was
not in their names) and not the full payment of the purchase price. Under the established
facts and circumstances of the case, the Court may safely presume that, had the
certificate of title been in the names of petitioners-sellers at that time, there would have

been no reason why an absolute contract of sale could not have been executed and
consummated right there and then.

What is clearly established by the plain language of the subject document is that when
the said "Receipt of Down Payment" was prepared and signed by petitioners Romeo A.
Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title from the name of
petitioners' father, Constancio P. Coronel, to their names.
The provision on double sale presumes title or ownership to pass to the first buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of
the first buyer, and (b) should there be no inscription by either of the two buyers, when
the second buyer, in good faith, acquires possession of the property ahead of the first
buyer. Unless, the second buyer satisfies these requirements, title or ownership will not
transfer to him to the prejudice of the first buyer. In a case of double sale, what finds
relevance and materiality is not whether or not the second buyer was a buyer in good
faith but whether or not said second buyer registers such second sale in good faith, that
is, without knowledge of any defect in the title of the property sold. If a vendee in a
double sale registers that sale after he has acquired knowledge that there was a previous
sale of the same property to a third party or that another person claims said property in
a pervious sale, the registration will constitute a registration in bad faith and will not
confer upon him any right.
G.R. No. 125531 February 12, 1997
JOVAN LAND, petitioner,
vs.
COURT OF APPEALS and EUGENIO QUESADA INC., respondents.
HERMOSISIMA, JR., J.:
This is a petition for review on certiorari to reverse and set aside the decision of the
Court of Appeals in C.A.-G.R. CV No. 47515.
Petitioner Jovan Land, Inc. is a corporation engaged in the real estate business. Its
President and Chairman of the Board of Directors is one Joseph Sy.
Private respondent Eugenio Quesada is the owner of the Q Building located on an 801 sq.
m. lot at the corner of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. The
property is covered by TCT No. 77796 of the Registry of Deeds of Manila.
Petitioner learned from co-petitioner Consolacion P. Mendoza that private respondent was
selling the aforesaid Mayhaligue property. Thus, petitioner through Joseph Sy made a
written offer, dated July 27, 1987 for P10.25 million. This first offer was not accepted by
Conrado Quesada, the General Manager of private respondent. Joseph Sy sent a second
written offer dated July 31, 1989 for the same price but inclusive of an undertaking to

pay the documentary stamp tax, transfer tax, registration fees and notarial charges.
Check No. 247048, dated July 31, 1989, for one million pesos drawn against the
Philippine Commercial and Industrial Bank (PCIB) was enclosed therewith as earnest
money. This second offer, with earnest money, was again rejected by Conrado Quesada.
Undaunted, Joseph Sy, on August 10, 1989, sent a third written offer for twelve million
pesos with a similar check for one million pesos as earnest money. Annotated on this
third letter-offer was the phrase "Received original, 9-4-89" beside which appears the
signature of Conrado Quesada.
On the basis of this annotation which petitioner insists is the proof that there already
exists a valid, perfected agreement to sell the Mayhaligue property, petitioner filed with
the trial court, a complaint for specific performance and collection of sum of money with
damages.
However, the trial court held that:
. . . the business encounters between Joseph Sy and Conrado Quesada had not
passed the negotiation stage relating to the intended sale by the defendant
corporation of the property in question. . . . As the court finds, there is nothing in
the record to point that a contract was ever perfected. In fact, there is nothing in
writing which is indispensably necessary in order that the perfected contract could
be enforced under the Statute of Frauds. 1
Since the trial court dismissed petitioner's complaint for lack of cause of action,
petitioner appealed 2 to respondent Court of Appeals before which it assigned the
following errors:
1. The Court a quo failed to appreciate that there was already a perfected contract of
sale between Jovan Land, Inc. and the private respondent];
2. The Court a quo erred in its conclusion that there was no implied acceptance of the
offer by appellants to appellee [private respondent];
3. The Court a quo was in error where it concluded that the contract of sale was
unenforceable;
4. The Court a quo failed to rule that appellant [petitioner] Mendoza is entitled to her
broker's commission. 3
Respondent court placed petitioner to task on their assignment of errors and concluded
that not any of them justifies a reversal of the trial court decision.
We agree.
In the case of Ang Yu Asuncion v. Court of Appeals, 4 we held that:
. . . [A] contract (Art. 1157, Civil Code), . . . is a meeting of minds
between two persons whereby one binds himself, with respect to the
other, to give something or to render some service. . . . A contract

undergoes various stages that include its negotiation or preparation, its


perfection and, finally, its consummation. Negotiation covers the period
from the time the prospective contracting parties indicate interest in the
contract to the time the contract is concluded . . . . The perfection of the
contract takes place upon the concurrence of the essential elements
thereof.
Moreover, it is a fundamental principle that before contract of sale can be
valid, the following elements must be present, viz: (a) consent or
meeting of the minds; (b) determinate subject matter; (3) price certain in
money or its equivalent. Until the contract of sale is perfected, it cannot,
as an independent source of obligation, serve as a binding juridical
relation between the parties.
In the case at bench, petitioner, anchors its main argument on the annotation on its third
letter-offer of the phrase "Received original, 9-4-89," beside which appears the signature
of Conrado Quesada. It also contends that the said annotation is evidence to show that
there was already a perfected agreement to sell as respondent can be said to have
accepted petitioner's payment in the form of a check which was enclosed in the third
letter.
However, as correctly elucidated by the Court of Appeals:
Sy insisted in his testimony that this offer of P12M was accepted by Conrado Quesada
but there is nothing written or documentary to show that such offer was accepted by
Conrado Quesada. While Sy claimed that the acceptance could be gleaned from the
notation in the third written offer, the court is not impressed thereon however because
the notation merely states as follows: "Received Original, (S) Conrado Quesada" and
below this signature is "9-4-89". As explained by Conrado Quesada in his testimony what
was received by him was the original of the written offer.

The court cannot believe that this notation marked as Exhibit D-2 would signify the
acceptance of the offer. Neither does it signify, as Sy had testified that the check was
duly received on said date. If this were true Sy, who appears to be an intelligent
businessman could have easily asked Conrado Quesada to indicate on Exhibit D the
alleged fact of acceptance of said check. And better still, Sy could have asked Quesada
the acceptance in writing separate of the written offer if indeed there was an agreement
as to the price of the proposed sale of the property in question. 5
Clearly then, a punctilious examination of the receipt reveals that the same can neither
be regarded as a contract of sale nor a promise to sell. Such an annotation by Conrado
Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph
Sy. It is merely a memorandum of the receipt by the former of the latter's offer. The

requisites of a valid contract of sale are lacking in said receipt and therefore the "sale" is
neither valid nor enforceable.
Although there was a series of communications through letter-offers and rejections as
evident from the facts of this case, still it is undeniable that no written agreement was
reached between petitioner and private respondent with regard to the sale of the realty.
Hence, the alleged transaction is unenforceable as the requirements under the Statute of
Frauds have not been complied with. Under the said provision, an agreement for the sale
of real property or of an interest therein, to be enforceable, must be in writing and
subscribed by the party charged or by an agent thereof.
Petitioner also asseverates that the failure of Conrado Quesada to return the check for
one million pesos, translates to implied acceptance of its third letter-offer. It, however,
does not rebut the finding of the trial court that private respondent was returning the
check but petitioner refused to accept the same and that when Conrado Quesada
subsequently sent it back to petitioner through registered mail, the latter failed to claim
its mail from the post office.
Finally, we fittingly apply here the oft-repeated doctrine that the factual findings of the
trial court, especially as regards the credibility of witnesses, are conclusive upon this
court, unless the case falls under the jurisprudentially established exceptions. But this is
a case that tenders no exceptional circumstance; rather, we find the observations of the
trial court to be legally sound and valid:
. . . Joseph Sy's testimony is not impressive because of several inconsistencies herein
pointed out. On the matter of earnest money, the same appears to be the idea solely of
the [petitioner], assuming that he had intended to bind the [petitioner] corporation. In
the written second offer . . . he had stated that the check of P1M had been enclosed
(attached) therewith. The same check . . . was again mentioned to be enclosed
(attached) in the third written offer under date August 10, 1989 . . . . Sy testified in his
direct examination that he had personally given this check to Conrado Quesada. But on
cross examination, he reversed himself by saying that the check was given thru his [copetitioner] Mendoza. Examining the third written offer, it appears that when it was first
typewritten, this P11M was noted to have been corrected, and that as per his testimony,
Sy had increased it to P12M. This is the reason according to Sy why there was a
superimposition of the number "12" over the number "11" to mean P12M as the revised
consideration for the sale of the property in question. 6
Respondent court thus concluded that:
. . . [since] the matter of evaluation of the credibility of witness[es] is addressed to the
trial court and unless clearly contrary to the records before Us, the findings of the said
court are entitled to great respondent on appeal, . . . it was Joseph Sy's idea to offer the
earnest money, and the evidence to show that Joseph Sy accepted the same, is
wanting. . . . 7
and accordingly affirmed the trial court judgment appealed from.

As shown elucidated above, we agree with the findings and conclusions of the trial court
and the respondent court. Neither has petitioner posited any new issues in the instant
petition that warrant the further exercise by this court of its review powers.
WHEREFORE, premises considered, this petition is DENIED.
Costs against petitioner.
Jovan Land vs CA, 267 SCRA 160
Facts: Petitioner is a corporation engaged in the real estate business and made an
offer to private respondent QuesadaInc. of P10.25 million for a property in Sta. Cruz,
Manila. This offer was not accepted by Quesada and so it sent a second written offer for
the same price but inclusive of an undertaking to pay the documentary stamp tax,
transfer tax, registration fees and notarial charges. A check for P1 million as earnest
money was included. This second offer was alsor ejected by private respondent. A third
written offer of P12 million was sent with a check for P1 million as earnest money. The
document was annotated with the phrase received original, 9-4-89 with the signature
of Conrado Quesada next to it. On the basis of the annotation, petitioner argues that the
offer was accepted and thereby a contract of sale for theproperty was perfected, filing an
action for specific performance to turn over the property.The lower court said that the
annotation did not signify acceptance of the offer; therefore, the contract was
notperfected. Hence, this petition.
Issue: WON there was a Perfected Contract between the parties NONE.
Held: The annotation merely served as memorandum that the document was received
by respondent. It did not signify a meeting of the mind and so, consent, an elemental
requisite for a contract of sale, was not established. The SC said: Although there was a
series of communications through letter offers and rejections as evident from the facts
of this case, still it is undeniable that no written agreement was reached between
petitioner and private respondent withregard to the sale of the realty. Hence, the alleged
transaction is unenforceable as the requirements under the Statuteof Frauds have not
been complied with. Under the said provision, an agreement for the sale of real property
or of an interest therein, to be enforceable, must be in writing and subscribed by the
party charged or by an agent thereof.At this point, the negotiation phase was not yet
completed.

G. R. No. 136773

June 25, 2003

MILAGROS MANONGSONG, joined by her husband, CARLITO


MANONGSONG, Petitioners,
vs.
FELOMENA JUMAQUIO ESTIMO, EMILIANA JUMAQUIO, NARCISO ORTIZ,
CELESTINO ORTIZ, RODOLFO ORTIZ, ERLINDA O. OCAMPO, PASTOR ORTIZ, JR.,
ROMEO ORTIZ BENJAMIN DELA CRUZ, SR., BENJAMIN DELA CRUZ, JR., AURORA
NICOLAS, GLORIA RACADIO, ROBERTO DELA CRUZ, JOSELITO DELA CRUZ and
LEONCIA S. LOPEZ, Respondents.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review1 assailing the Decision2 of 26 June 1998 and the
Resolution of 21 December 1998 of the Court of Appeals in CA-G.R. CV No. 51643. The
Court of Appeals reversed the Decision dated 10 April 1995 of the Regional Trial Court of
Makati City, Branch 135, in Civil Case No. 92-1685, partitioning the property in
controversy and awarding to petitioners a portion of the property.
Antecedent Facts
Spouses Agatona Guevarra ("Guevarra") and Ciriaco Lopez had six (6) children, namely:
(1) Dominador Lopez; (2) Enriqueta Lopez-Jumaquio, the mother of respondents Emiliana
Jumaquio Rodriguez and Felomena Jumaquio Estimo ("Jumaquio sisters"); (3) Victor
Lopez, married to respondent Leoncia Lopez; (4) Benigna Lopez-Ortiz, the mother of
respondents Narciso, Celestino, Rodolfo, Pastor Jr. and Romeo Ortiz, and Erlinda Ortiz
Ocampo; (5) Rosario Lopez-dela Cruz, married to respondent Benjamin dela Cruz, Sr. and
the mother of respondents Benjamin Jr., Roberto, and Joselito, all surnamed dela Cruz,
and of Gloria dela Cruz Racadio and Aurora dela Cruz Nicolas; and (6) Vicente Lopez, the
father of petitioner Milagros Lopez Manongsong ("Manongsong").
The contested property is a parcel of land on San Jose Street, Manuyo Uno, Las Pias,
Metro Manila with an area of approximately 152 square meters ("Property").
The records do not show that the Property is registered under the Torrens system. The
Property is particularly described in Tax Declaration No. B-001-003903 as bounded in the
north by Juan Gallardo, south by Calle Velay, east by Domingo Lavana and west by San
Jose Street. Tax Declaration No. B-001-00390 was registered with the Office of the
Municipal Assessor of Las Pias on 30 September 1984 in the name of "Benigna Lopez, et
al".4 However, the improvements on the portion of the Property denominated as No. 831
San Jose St., Manuyo Uno, Las Pias were separately declared in the name of "Filomena J.
Estimo" under Tax Declaration No. 90-001-02145 dated 14 October 1991. 5
Milagros and Carlito Manongsong ("petitioners") filed a Complaint6 on 19 June 1992,
alleging that Manongsong and respondents are the owners pro indiviso of the Property.
Invoking Article 494 of the Civil Code,7 petitioners prayed for the partition and award to

them of an area equivalent to one-fifth (1/5) of the Property or its prevailing market
value, and for damages.
Petitioners alleged that Guevarra was the original owner of the Property. Upon
Guevarras death, her children inherited the Property. Since Dominador Lopez died
without offspring, there were only five children left as heirs of Guevarra. Each of the five
children, including Vicente Lopez, the father of Manongsong, was entitled to a fifth of the
Property. As Vicente Lopez sole surviving heir, Manongsong claims her fathers 1/5 share
in the Property by right of representation.
There is no dispute that respondents, who are the surviving spouses of Guevarras
children and their offspring, have been in possession of the Property for as long as they
can remember. The area actually occupied by each respondent family differs, ranging in
size from approximately 25 to 50 square meters. Petitioners are the only descendants
not occupying any portion of the Property.
Most respondents, specifically Narciso, Rodolfo, Pastor Jr., and Celestino Ortiz, and Erlinda
Ortiz Ocampo ("Ortiz family"), as well as Benjamin Sr., Benjamin Jr., and Roberto dela
Cruz, Aurora dela Cruz Nicolas and Gloria Dela Cruz Racadio ("Dela Cruz family"), entered
into a compromise agreement with petitioners. Under the Stipulation of Facts and
Compromise Agreement8 dated 12 September 1992 ("Agreement"), petitioners and the
Ortiz and Dela Cruz families agreed that each group of heirs would receive an equal
share in the Property. The signatories to the Agreement asked the trial court to issue an
order of partition to this effect and prayed further that "those who have exceeded said
one-fifth (1/5) must be reduced so that those who have less and those who have none
shall get the correct and proper portion."9
Among the respondents, the Jumaquio sisters and Leoncia Lopez who each occupy 50
square meter portions of the Property and Joselito dela Cruz, did not sign the
Agreement.10 However, only the Jumaquio sisters actively opposed petitioners claim. The
Jumaquio sisters contended that Justina Navarro ("Navarro"), supposedly the mother of
Guevarra, sold the Property to Guevarras daughter Enriqueta Lopez Jumaquio.
The Jumaquio sisters presented provincial Tax Declaration No. 91111 for the year 1949 in
the sole name of Navarro. Tax Declaration No. 911 described a residential parcel of land
with an area of 172.51 square meters, located on San Jose St., Manuyo, Las Pias, Rizal
with the following boundaries: Juan Gallardo to the north, I. Guevarra Street to the south,
Rizal Street to the east and San Jose Street to the west. In addition, Tax Declaration No.
911 stated that the houses of "Agatona Lopez" and "Enriquita Lopez" stood on the
Property as improvements.
The Jumaquio sisters also presented a notarized KASULATAN SA BILIHAN NG
LUPA12 ("Kasulatan") dated 11 October 1957, the relevant portion of which states:
AKO SI JUSTINA NAVARRO, sapat ang gulang, may asawa, Pilipino at naninirahan sa LAS
PIAS, ay siyang nagma-may-ari at nagtatangkilik ng isang lagay na lupa na

matatagpuan sa Manuyo, Las Pias, Rizal, lihis sa anomang pagkakautang lalong


napagkikilala sa pamamagitan ng mga sumusunod na palatandaan:
BOUNDARIES:
NORTH: JUAN GALLARDO SOUTH: I. GUEVARRA ST. EAST: RIZAL ST., WEST: SAN JOSE ST.,
na may sukat na 172.51 metros cuadrados na may TAX DECLARATION BILANG 911.
NA DAHIL AT ALANG ALANG sa halagang DALAWANG DAAN LIMANGPUNG PISO (P250.00),
SALAPING PILIPINO, na sa akin ay kaliwang iniabot at ibinayad ni ENRIQUETA LOPEZ, may
sapat na gulang, Pilipino, may asawa at naninirahan sa Las Pias, Rizal, at sa karapatang
ito ay aking pinatutunayan ng pagkakatanggap ng nasabing halaga na buong kasiyahan
ng aking kalooban ay aking IPINAGBILI, ISINALIN AT INILIPAT sa nasabing, ENRIQUETA
LOPEZ, sa kanyang mga tagapagmana at kahalili, ang kabuuang sukat ng lupang
nabanggit sa itaas nito sa pamamagitan ng bilihang walang anomang pasubali. Ang
lupang ito ay walang kasama at hindi taniman ng palay o mais.
Simula sa araw na ito ay aking ililipat ang pagmamay-ari at pagtatangkilik ng nasabing
lupa kay ENRIQUETA LOPEZ sa kanilang/kanyang tagapagmana at kahalili x x x.
The Clerk of Court of the Regional Trial Court of Manila certified on 1 June 1994 that the
"KASULATAN SA BILIHAN NG LUPA, between Justina Navarro (Nagbili) and Enriqueta
Lopez (Bumili), was notarized by Atty. Ruperto Q. Andrada on 11 October 1957 and
entered in his Notarial Register xxx."13 The certification further stated that Atty. Andrada
was a duly appointed notary public for the City of Manila in 1957.
Because the Jumaquio sisters were in peaceful possession of their portion of the Property
for more than thirty years, they also invoked the defense of acquisitive prescription
against petitioners, and charged that petitioners were guilty of laches. The Jumaquio
sisters argued that the present action should have been filed years earlier, either by
Vicente Lopez when he was alive or by Manongsong when the latter reached legal age.
Instead, petitioners filed this action for partition only in 1992 when Manongsong was
already 33 years old.
The Ruling of the Trial Court
After trial on the merits, the trial court in its Decision14 of 10 April 1995 ruled in favor of
petitioners. The trial court held that the Kasulatan was void, even absent evidence
attacking its validity. The trial court declared:
It appears that the ownership of the estate in question is controverted. According to
defendants Jumaquios, it pertains to them through conveyance by means of a Deed of
Sale executed by their common ancestor Justina Navarro to their mother Enriqueta,
which deed was presented in evidence as Exhs. "4" to "4-A". Plaintiff Milagros
Manongsong debunks the evidence as fake. The document of sale, in the observance of
the Court, is however duly authenticated by means of a certificate issued by the RTC of
the Manila Clerk of Court as duly notarized public document (Exh. "5"). No countervailing

proof was adduced by plaintiffs to overcome or impugn the documents legality or its
validity.
xxx The conveyance made by Justina Navarro is subject to nullity because the property
conveyed had a conjugal character. No positive evidence had been introduced that it was
solely a paraphernal property. The name of Justina Navarros spouse/husband was not
mentioned and/or whether the husband was still alive at the time the conveyance was
made to Justina Navarro. Agatona Guevarra as her compulsory heir should have the legal
right to participate with the distribution of the estate under question to the exclusion of
others. She is entitled to herlegitime. The Deed of Sale [Exhs "4" & "4-1"(sic)] did not at
all provide for the reserved legitime or the heirs, and, therefore it has no force and effect
against Agatona Guevarra and her six (6) legitimate children including the grandchildren,
by right of representation, as described in the order of intestate succession. The same
Deed of Sale should be declared a nullity ab initio. The law on the matter is clear. The
compulsory heirs cannot be deprived of their legitime, except on (sic) cases expressly
specified by law like for instance disinheritance for cause. xxx (Emphasis supplied)
Since the other respondents had entered into a compromise agreement with petitioners,
the dispositive portion of the trial courts decision was directed against the Jumaquio
sisters only, as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and
against the remaining active defendants, Emiliana Jumaquio and Felomena J. Estimo,
jointly and severally, ordering:
1. That the property consisting of 152 square meters referred to above be immediately
partitioned giving plaintiff Milagros Lopez-Manongsong her lawful share of 1/5 of the area
in square meters, or the prevailing market value on the date of the decision;
2. Defendants to pay plaintiffs the sum of P10,000.00 as compensatory damages for
having deprived the latter the use and enjoyment of the fruits of her 1/5 share;
3. Defendants to pay plaintiffs litigation expenses and attorneys fee in the sum
of P10,000.00; and
4. Defendants to pay the costs of suit.
SO ORDERED.15 (Emphasis supplied)
When the trial court denied their motion for reconsideration, the Jumaquio sisters
appealed to the Court of Appeals.
The Ruling of the Court of Appeals
Petitioners, in their appellees brief before the Court of Appeals, presented for the first
time a supposed photocopy of the death certificate16 of Guevarra, which stated that
Guevarras mother was a certain Juliana Gallardo. Petitioner also attached an
affidavit17 from Benjamin dela Cruz, Sr. attesting that he knew Justina Navarro only by
name and had never met her personally, although he had lived for some years with

Agatona Guevarra after his marriage with Rosario Lopez. On the basis of these
documents, petitioners assailed the genuineness and authenticity of the Kasulatan.
The Court of Appeals refused to take cognizance of the death certificate and affidavit
presented by petitioners on the ground that petitioners never formally offered these
documents in evidence.
The appellate court further held that the petitioners were bound by their admission that
Navarro was the original owner of the Property, as follows:
Moreover, plaintiffs-appellees themselves admitted before the trial court that Justina
Navarro and not Juliana Gallardo was the original owner of the subject property and was
the mother of Agatona Navarro (sic). Plaintiffs-appellees in their Reply-Memorandum
averred:
"As regards the existence of common ownership, the defendants clearly admit as follows:
xxx

xxx

xxx

History of this case tells us that originally the property was owned by JUSTINA NAVARRO
who has a daughter by the name of AGATONA GUEVARRA who on the other hand has six
children namely: xxx xxx xxx.
which point-out that co-ownership exists on the property between the parties. Since this
is the admitted history, facts of the case, it follows that there should have been proper
document to extinguish this status of co-ownership between the common owners either
by (1) Court action or proper deed of tradition, xxx xxx xxx."
The trial court confirms these admissions of plaintiffs-appellees. The trial court held:
"x x x

xxx

xxx

With the parties admissions and their conformity to a factual common line of
relationship of the heirs with one another, it has been elicited ascendant Justina Navarro
is the common ancestor of the heirs herein mentioned, however, it must be noted that
the parties failed to amplify who was the husband and the number of compulsory heirs of
Justina Navarro. xxx xxx xxx"
Therefore, plaintiffs-appellees cannot now be heard contesting the fact that Justina
Navarro was their common ancestor and was the original owner of the subject property.
The Court of Appeals further held that the trial court erred in assuming that the Property
was conjugal in nature when Navarro sold it. The appellate court reasoned as follows:
However, it is a settled rule that the party who invokes the presumption that all property
of marriage belongs to the conjugal partnership, must first prove that the property was
acquired during the marriage. Proof of acquisition during the coveture is a condition sine
qua non for the operation of the presumption in favor of conjugal ownership.

In this case, not a single iota of evidence was submitted to prove that the subject
property was acquired by Justina Navarro during her marriage. xxx
The findings of the trial court that the subject property is conjugal in nature is not
supported by any evidence.
To the contrary, records show that in 1949 the subject property was declared, for
taxation purposes under the name of Justina Navarro alone. This indicates that the land
is the paraphernal property of Justina Navarro.
For these reasons, the Court of Appeals reversed the decision of the trial court, thus:
WHEREFORE, foregoing considered, the appealed decision is hereby REVERSED and SET
ASIDE. A new one is hereby rendered DISMISSING plaintiffs-appellees complaint in so far
as defendants-appellants are concerned.
Costs against plaintiffs-appellees.
SO ORDERED.18
Petitioners filed a motion for reconsideration, but the Court of Appeals denied the same
in its Resolution of 21 December 1998.19
On 28 January 1999, petitioners appealed the appellate courts decision and resolution to
this Court. The Court initially denied the petition for review due to certain procedural
defects. The Court, however, gave due course to the petition in its Resolution of 31
January 2000.20
The Issues
Petitioners raise the following issues before this Court:
1. WHETHER PETITIONER HAS NO COUNTERVAILING EVIDENCE ON THE ALLEGED SALE BY
ONE JUSTINA NAVARRO;
2. WHETHER THERE IS PRETERITION AND THE ISSUES RAISED ARE REVIEWABLE;
3. WHETHER THERE IS CO-OWNERSHIP PRO INDIVISO;
4. WHETHER THE RULE OF THE MAJORITY CO-OWNERS ON THE LAND SHOULD PREVAIL;
5. WHETHER THE ALLEGED SALE IS VALID AND BINDS THE OTHER CO-HEIRS;
6. WHETHER PRESCRIPTION APPLIES AGAINST THE SHARE OF PETITIONERS. 21
The fundamental question for resolution is whether petitioners were able to prove, by the
requisite quantum of evidence, that Manongsong is a co-owner of the Property and
therefore entitled to demand for its partition.
The Ruling of the Court
The petition lacks merit.

The issues raised by petitioners are mainly factual in nature. In general, only questions of
law are appealable to this Court under Rule 45. However, where the factual findings of
the trial court and Court of Appeals conflict, this Court has the authority to review and, if
necessary, reverse the findings of fact of the lower courts.22 This is precisely the situation
in this case.
We review the factual and legal issues of this case in light of the general rules of
evidence and the burden of proof in civil cases, as explained by this Court in Jison v.
Court of Appeals :23
xxx Simply put, he who alleges the affirmative of the issue has the burden of proof, and
upon the plaintiff in a civil case, the burden of proof never parts. However, in the course
of trial in a civil case, once plaintiff makes out a prima facie case in his favor, the duty or
the burden of evidence shifts to defendant to controvert plaintiff's prima facie case,
otherwise, a verdict must be returned in favor of plaintiff. Moreover, in civil cases, the
party having the burden of proof must produce a preponderance of evidence thereon,
with plaintiff having to rely on the strength of his own evidence and not upon the
weakness of the defendants. The concept of "preponderance of evidence" refers to
evidence which is of greater weight, or more convincing, that which is offered in
opposition to it; at bottom, it means probability of truth.
Whether the Court of Appeals erred in affirming the validity of the Kasulatan sa Bilihan
ng Lupa
Petitioners anchor their action for partition on the claim that Manongsong is a co-owner
or co-heir of the Property by inheritance, more specifically, as the heir of her father,
Vicente Lopez. Petitioners likewise allege that the Property originally belonged to
Guevarra, and that Vicente Lopez inherited from Guevarra a 1/5 interest in the Property.
As the parties claiming the affirmative of these issues, petitioners had the burden of
proof to establish their case by preponderance of evidence.
To trace the ownership of the Property, both contending parties presented tax
declarations and the testimonies of witnesses. However, the Jumaquio sisters also
presented a notarized KASULATAN SA BILIHAN NG LUPA which controverted petitioners
claim of co-ownership.
The Kasulatan, being a document acknowledged before a notary public, is a public
document and prima facie evidence of its authenticity and due execution. To assail the
authenticity and due execution of a notarized document, the evidence must be clear,
convincing and more than merely preponderant.24 Otherwise the authenticity and due
execution of the document should be upheld.25 The trial court itself held that "(n)o
countervailing proof was adduced by plaintiffs to overcome or impugn the documents
legality or its validity."26
Even if the Kasulatan was not notarized, it would be deemed an ancient document and
thus still presumed to be authentic. The Kasulatan is: (1) more than 30 years old, (2)

found in the proper custody, and (3) unblemished by any alteration or by any
circumstance of suspicion. It appears, on its face, to be genuine.27
Nevertheless, the trial court held that the Kasulatan was void because the Property was
conjugal at the time Navarro sold it to Enriqueta Lopez Jumaquio. We do not agree. The
trial courts conclusion that the Property was conjugal was not based on evidence, but
rather on a misapprehension of Article 160 of the Civil Code, which provides:
All property of the marriage is presumed to belong to the conjugal partnership, unless it
be proved that it pertains exclusively to the husband or to the wife.
As the Court of Appeals correctly pointed out, the presumption under Article 160 of the
Civil Code applies only when there is proof that the property was acquired during the
marriage. Proof of acquisition during the marriage is an essential condition for the
operation of the presumption in favor of the conjugal partnership.28
There was no evidence presented to establish that Navarro acquired the Property during
her marriage. There is no basis for applying the presumption under Article 160 of the
Civil Code to the present case. On the contrary, Tax Declaration No. 911 showed that, as
far back as in 1949, the Property was declared solely in Navarros name.29 This tends to
support the argument that the Property was not conjugal.
We likewise find no basis for the trial courts declaration that the sale embodied in the
Kasulatan deprived the compulsory heirs of Guevarra of their legitimes. As opposed to a
disposition inter vivos by lucrative or gratuitous title, a valid sale for valuable
consideration does not diminish the estate of the seller. When the disposition is for
valuable consideration, there is no diminution of the estate but merely a substitution of
values,30 that is, the property sold is replaced by the equivalent monetary
consideration.1wphi1
Under Article 1458 of the Civil Code, the elements of a valid contract of sale are: (1)
consent or meeting of the minds; (2) determinate subject matter and (3) price certain in
money or its equivalent.31 The presence of these elements is apparent on the face of the
Kasulatan itself. The Property was sold in 1957 for P250.00.32
Whether the Court of Appeals erred in not admitting the documents presented by
petitioners for the first time on appeal
We find no error in the Court of Appeals refusal to give any probative value to the
alleged birth certificate of Guevarra and the affidavit of Benjamin dela Cruz, Sr.
Petitioners belatedly attached these documents to their appellees brief. Petitioners could
easily have offered these documents during the proceedings before the trial court.
Instead, petitioners presented these documents for the first time on appeal without any
explanation. For reasons of their own, petitioners did not formally offer in evidence these
documents before the trial court as required by Section 34, Rule 132 of the Rules of
Court.33 To admit these documents now is contrary to due process, as it deprives
respondents of the opportunity to examine and controvert them.

Moreover, even if these documents were admitted, they would not controvert Navarros
ownership of the Property. Benjamin dela Cruz, Sr.s affidavit stated merely that,
although he knew Navarro by name, he was not personally acquainted with
her.34 Guevarras alleged birth certificate casts doubt only as to whether Navarro was
indeed the mother of Guevarra. These documents do not prove that Guevarra owned the
Property or that Navarro did not own the Property.
Petitioners admitted before the trial court that Navarro was the mother of Guevarra.
However, petitioners denied before the Court of Appeals that Navarro was the mother of
Guevarra. We agree with the appellate court that this constitutes an impermissible
change of theory. When a party adopts a certain theory in the court below, he cannot
change his theory on appeal. To allow him to do so is not only unfair to the other party, it
is also offensive to the basic rules of fair play, justice and due process.35
If Navarro were not the mother of Guevarra, it would only further undermine petitioners
case. Absent any hereditary relationship between Guevarra and Navarro, the Property
would not have passed from Navarro to Guevarra, and then to the latters children,
including petitioners, by succession. There would then be no basis for petitioners claim
of co-ownership by virtue of inheritance from Guevarra. On the other hand, this would
not undermine respondents position since they anchor their claim on the sale under the
Kasulatan and not on inheritance from Guevarra.
Since the notarized Kasulatan is evidence of greater weight which petitioners failed to
refute by clear and convincing evidence, this Court holds that petitioners were not able
to prove by preponderance of evidence that the Property belonged to Guevarras estate.
There is therefore no legal basis for petitioners complaint for partition of the Property.
WHEREFORE, the Decision of 26 June 1998 of the Court of Appeals in CA-G.R. CV No.
51643, dismissing the complaint of petitioners against Felomena Jumaquio Estimo and
Emiliana Jumaquio, is AFFIRMED.
SO ORDERED.

Milagros Manongsong v. FelomenaJumaquio Estimo


G. R. No. 136773. June 25, 2003
FACTS:
Allegedly, AgatonaGuevarra (Guevarra) inherited a property from Justina Navarro,
which is now under possession of the heirs of Guevarra. Guevarra had six children, one
of them is Vicente Lopez, the father of petitioner Milagros Lopez Manongsong
(Manongsong). The respondents, the Jumaquio sisters and Leoncia Lopez claimed that
the property was actually sold to them by Justina Navarro prior to her death. The

respondents presented deed of sale dated October 11, 1957. Milagros and
CarlitoManongsong (petitioners) filed a Complaint on June 19, 1992 praying for the
partition and award to them of an area equivalent to one-fifth (1/5), by right
of representation. The RTC ruled that the conveyance made by Justina Navarro is
subject to nullity because the property conveyed had a conjugal character and
that AgatonaGuevarra as her compulsory heir should have the legal right to participate
with the distribution of the estate under question to the exclusion of others. The Deed
of Sale did not at all provide for the reserved legitime or the heirs, and, therefore it has
no force and effect against AgatonaGuevarra and should be declared a nullity ab initio.
ISSUE:
Whether or not the rights of the compulsory heirs were impaired by the alleged sale of
the property by Justina.
RULING:
No. The Kasulatan, being a document acknowledged before a notary public, is a public
document and prima facie evidence of its authenticity and due execution. There is no
basis for the trial courts declaration that the sale embodied in the Kasulatan deprived
the compulsory heirs of Guevarra of their legitimes. As opposed to a disposition inter
vivos by lucrative or gratuitous title, a valid sale forvaluable consideration does not
diminish the estate of the seller. When the disposition is for valuable consideration, there
is no diminution of the estate but merely a substitution of values, that is,
the property sold is replaced by the equivalent
monetary consideration. The Property was sold in 1957 for P250.00.
The trial courts conclusion that the Property was conjugal, hence the sale is void ab
initio was not based on evidence, but rather on a misapprehension of Article 160 of the
Civil Code, which provides: All property of the marriage is presumed to belong to the
conjugal partnership; unless it be proved that it pertains exclusively to the husband or to
the wife. The presumption under Article 160 of the Civil Code applies only when there is
proof that the property was acquired during the marriage. Proof of acquisition during the
marriage is an essential condition for the operation of the presumption in favor of the
conjugal partnership. There was no evidence presented to establish that Navarro
acquired the Property during her marriage

G.R. No. 124242

January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION, petitioner,


vs.

COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA


ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and
Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in
Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring
15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos
(P15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos
(P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same
date. Several other payments totaling two hundred thousand pesos (P200,000.00) were
made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of
a final deed of sale in his favor so that he could effect full payment of the purchase price.
In the same letter, Babasanta notified the spouses about having received information
that the spouses sold the same property to another without his knowledge and consent.
He demanded that the second sale be cancelled and that a final deed of sale be issued in
his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having
agreed to sell the property to him at fifteen pesos (P15.00) per square meter. She,
however, reminded Babasanta that when the balance of the purchase price became due,
he requested for a reduction of the price and when she refused, Babasanta backed out of
the sale. Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to
Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court
(RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and
Damages1 against his co-respondents herein, the Spouses Lu. Babasanta alleged that the
lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at
fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution
of a final deed of sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta
and when the total advances of Pacita reached fifty thousand pesos (P50,000.00), the
latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally
agreed to transform the transaction into a contract to sell the two parcels of land to
Babasanta with the fifty thousand pesos (P50,000.00) to be considered as the
downpayment for the property and the balance to be paid on or before 31 December
1987. Respondents Lu added that as of November 1987, total payments made by

Babasanta amounted to only two hundred thousand pesos (P200,000.00) and the latter
allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00)
despite repeated demands.
Babasanta had purportedly asked Pacita for a reduction of the price from fifteen pesos
(P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu refused to
grant Babasantas request, the latter rescinded the contract to sell and declared that the
original loan transaction just be carried out in that the spouses would be indebted to him
in the amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July
1989, they purchased Interbank Managers Check No. 05020269 in the amount of two
hundred thousand pesos (P200,000.00) in the name of Babasanta to show that she was
able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he prayed
for the issuance of a writ of preliminary injunction with temporary restraining order and
the inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He
contended that the issuance of a preliminary injunction was necessary to restrain the
transfer or conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint contending that it
raised new matters which seriously affect their substantive rights under the original
complaint. However, the trial court in its Order dated 17 January 19905 admitted the
amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed
a Motion for Intervention6 before the trial court. SLDC alleged that it had legal interest in
the subject matter under litigation because on 3 May 1989, the two parcels of land
involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale
with Mortgage.7 It alleged that it was a buyer in good faith and for value and therefore it
had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention,8 respondent Babasanta demurred
and argued that the latter had no legal interest in the case because the two parcels of
land involved herein had already been conveyed to him by the Spouses Lu and hence,
the vendors were without legal capacity to transfer or dispose of the two parcels of land
to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene.
SLDC filed its Complaint-in-Intervention on 19 April 1990.9 Respondent Babasantas
motion for the issuance of a preliminary injunction was likewise granted by the trial court
in its Order dated 11 January 199110 conditioned upon his filing of a bond in the amount
of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it
paid an option money in the amount of three hundred sixteen thousand one hundred
sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots

of one million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00).
After the Spouses Lu received a total amount of six hundred thirty-two thousand three
hundred twenty pesos (P632,320.00) they executed on 3 May 1989 a Deed of Absolute
Sale with Mortgage in its favor. SLDC added that the certificates of title over the property
were delivered to it by the spouses clean and free from any adverse claims and/or notice
of lis pendens. SLDC further alleged that it only learned of the filing of the complaint
sometime in the early part of January 1990 which prompted it to file the motion to
intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it
had no obligation to look beyond the titles submitted to it by the Spouses Lu particularly
because Babasantas claims were not annotated on the certificates of title at the time
the lands were sold to it.
TRIAL COURTS RULING:
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale
of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two
hundred thousand pesos (P200,000.00) with legal interest plus the further sum of fifty
thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-inintervention, the trial court ordered the Register of Deeds of Laguna, Calamba Branch to
cancel the notice of lis pendens annotated on the original of the TCT No. T-39022 (T7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta
and SLDC did not register the respective sales in their favor, ownership of the property
should pertain to the buyer who first acquired possession of the property. The trial court
equated the execution of a public instrument in favor of SLDC as sufficient delivery of the
property to the latter. It concluded that symbolic possession could be considered to have
been first transferred to SLDC and consequently ownership of the property pertained to
SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals
alleging in the main that the trial court erred in concluding that SLDC is a purchaser in
good faith and in upholding the validity of the sale made by the Spouses Lu in favor of
SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended
that the trial court erred in failing to consider that the contract to sell between them and
Babasanta had been novated when the latter abandoned the verbal contract of sale and
declared that the original loan transaction just be carried out. The Spouses Lu argued
that since the properties involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for
lack of knowledge and consent of Miguel Lu. They further averred that the trial court
erred in not dismissing the complaint filed by Babasanta; in awarding damages in his
favor and in refusing to grant the reliefs prayed for in their answer.
COURT OF APPEALS RULING:

On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the
judgment of the trial court. It declared that the sale between Babasanta and the Spouses
Lu was valid and subsisting and ordered the spouses to execute the necessary deed of
conveyance in favor of Babasanta, and the latter to pay the balance of the purchase
price in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate
court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and
void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were further
ordered to return all payments made by SLDC with legal interest and to pay attorneys
fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court.12 However, in a Manifestation dated 20 December 1995,13 the Spouses Lu informed
the appellate court that they are no longer contesting the decision dated 4 October
1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the
motion for reconsideration filed by the Spouses Lu in view of their manifestation of 20
December 1995. The appellate court denied SLDCs motion for reconsideration on the
ground that no new or substantial arguments were raised therein which would warrant
modification or reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO
WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT
BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN
SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO
ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED
ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT
SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS
FULL CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT
REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING
THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD
FAITH. 15

SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasantas claim over the property merely on the basis of its having advanced the
amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latters
representation that she needed the money to pay her obligation to Babasanta. It argued
that it had no reason to suspect that Pacita was not telling the truth that the money
would be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the
amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu
would be deducted from the balance of the purchase price still due from it and should
not be construed as notice of the prior sale of the land to Babasanta. It added that at no
instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately
took possession of the property and asserted its rights as new owner as opposed to
Babasanta who has never exercised acts of ownership. Since the titles bore no adverse
claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every
reason to rely on the correctness of the certificate of title and it was not obliged to go
beyond the certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on Babasanta to prove that it
was aware of the prior sale to him but the latter failed to do so. SLDC pointed out that
the notice of lis pendens was annotated only on 2 June 1989 long after the sale of the
property to it was consummated on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue
their rights in the instant case and submit themselves to the decision of the Court of
Appeals.16
On the other hand, respondent Babasanta argued that SLDC could not have acquired
ownership of the property because it failed to comply with the requirement of
registration of the sale in good faith. He emphasized that at the time SLDC registered the
sale in its favor on 30 June 1990, there was already a notice of lis pendens annotated on
the titles of the property made as early as 2 June 1989. Hence, petitioners registration of
the sale did not confer upon it any right. Babasanta further asserted that petitioners bad
faith in the acquisition of the property is evident from the fact that it failed to make
necessary inquiry regarding the purpose of the issuance of the two hundred thousand
pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in
view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a
document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos
(P50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong,
Sta. Cruz, Sta. Rosa, Laguna. While the receipt signed by Pacita did not mention the price
for which the property was being sold, this deficiency was supplied by Pacita Lus letter

wherein she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for
fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and
the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,19 which is manifested by the
meeting of the offer and the acceptance upon the thing which are to constitute the
contract. The offer must be certain and the acceptance absolute. 20 Moreover, contracts
shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm
lot situated in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the
ownership of the property until full payment of the price which is a distinguishing feature
of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu
never intended to transfer ownership to Babasanta except upon full payment of the
purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite
his repeated requests for the execution of the final deed of sale in his favor so that he
could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect,
Babasanta himself recognized that ownership of the property would not be transferred to
him until such time as he shall have effected full payment of the price. Moreover, had
the sellers intended to transfer title, they could have easily executed the document of
sale in its required form simultaneously with their acceptance of the partial payment, but
they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as
a perfected contract to sell.

The distinction between a contract to sell and a contract of sale is


quite germane. In a contract of sale, title passes to the vendee upon
the delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is not to
pass until the full payment of the price.
In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the
full payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach but an event that

prevents the obligation of the vendor to convey title from becoming


effective.
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance
of the purchase price. There being an obligation to pay the price, Babasanta should have
made the proper tender of payment and consignation of the price in court as required by
law. Mere sending of a letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of payment. Consignation of the
amounts due in court is essential in order to extinguish Babasantas obligation to pay the
balance of the purchase price. Glaringly absent from the records is any indication that
Babasanta even attempted to make the proper consignation of the amounts due, thus,
the obligation on the part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not
a contract to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that moment,
the parties may reciprocally demand performance.26 The essential elements of a contract
of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in
exchange for the price; (2) object certain which is the subject matter of the contract; (3)
cause of the obligation which is established.27
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be
noted that sale is not a mode, but merely a title. A mode is the legal means by which
dominion or ownership is created, transferred or destroyed, but title is only the legal
basis by which to affect dominion or ownership.28 Under Article 712 of the Civil Code,
"ownership and other real rights over property are acquired and transmitted by law, by
donation, by testate and intestate succession, and in consequence of certain contracts,
by tradition." Contracts only constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of accomplishing the
same.29 Therefore, sale by itself does not transfer or affect ownership; the most that sale
does is to create the obligation to transfer ownership. It is tradition or delivery, as a
consequence of sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Article 1497 to
1501. The word "delivered" should not be taken restrictively to mean transfer of actual
physical possession of the property. The law recognizes two principal modes of delivery,
to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and
possession of the vendee.31 Legal or constructive delivery, on the other hand,
may be had through any of the following ways: the execution of a public
instrument evidencing the sale;32 symbolical tradition such as the delivery of
the keys of the place where the movable sold is being kept;33 traditio longa
manu or by mere consent or agreement if the movable sold cannot yet be

transferred to the possession of the buyer at the time of the sale;34 traditio
brevi manu if the buyer already had possession of the object even before the
sale;35 and traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity.36
Following the above disquisition, respondent Babasanta did not acquire ownership by the
mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for
the property. For one, the agreement between Babasanta and the Spouses Lu, though
valid, was not embodied in a public instrument. Hence, no constructive delivery of the
lands could have been effected. For another, Babasanta had not taken possession of the
property at any time after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful owner of the lands.
Simply stated, there was no delivery to Babasanta, whether actual or constructive, which
is essential to transfer ownership of the property. Thus, even on the assumption that the
perfected contract between the parties was a sale, ownership could not have passed to
Babasanta in the absence of delivery, since in a contract of sale ownership is transferred
to the vendee only upon the delivery of the thing sold.
However, it must be stressed that the juridical relationship between the parties in a
double sale is primarily governed by Article 1544 which lays down the rules of preference
between the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry
of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title,
provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is
an immovable, the one who acquires it and first records it in the Registry of Property,
both made in good faith, shall be deemed the owner. Verily, the act of registration must
be coupled with good faith that is, the registrant must have no knowledge of the defect
or lack of title of his vendor or must not have been aware of facts which should have put
him upon such inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor.
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired
knowledge of Babasantas claim. Babasanta, however, strongly argues that the

registration of the sale by SLDC was not sufficient to confer upon the latter any title to
the property since the registration was attended by bad faith. Specifically, he points out
that at the time SLDC registered the sale on 30 June 1990, there was already a notice
of lis pendens on the file with the Register of Deeds, the same having been filed one year
before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens destroy
the effects of delivery and possession in good faith which admittedly had occurred prior
to SLDCs knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed
the Option to Buy in favor of SLDC upon receiving P316,160.00 as option money from
SLDC. After SLDC had paid more than one half of the agreed purchase price
of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of
Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no
knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated,
from the time of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the subsequent
annotation of lis pendens has no effect at all on the consummated sale between SLDC
and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some
other person has a right to, or interest in, such property and pays a full and fair price for
the same at the time of such purchase, or beforehe has notice of the claim or interest of
some other person in the property.
We rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in
the records that it had knowledge of the prior transaction in favor of Babasanta. At the
time of the sale of the property to SLDC, the vendors were still the registered owners of
the property and were in fact in possession of the lands.
Time and again, this Court has ruled that a person dealing with the owner of registered
land is not bound to go beyond the certificate of title as he is charged with notice of
burdens on the property which are noted on the face of the register or on the certificate
of title. In assailing knowledge of the transaction between him and the Spouses Lu,
Babasanta apparently relies on the principle of constructive notice incorporated in
Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance,
mortgage, lease, lien, attachment, order, judgment, instrument or entry
affecting registered land shall, if registered, filed, or entered in the office of
the Register of Deeds for the province or city where the land to which it
relates lies, be constructive notice to all persons from the time of such
registering, filing, or entering.

However, the constructive notice operates as suchby the express wording of Section
52from the time of the registration of the notice of lis pendens which in this case was
effected only on 2 June 1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta
the annotation of the notice of lis pendens cannot help Babasantas position a bit and it
is irrelevant to the good or bad faith characterization of SLDC as a purchaser. A notice
of lis pendens, as the Court held in Natao v. Esteban,42serves as a warning to a
prospective purchaser or incumbrancer that the particular property is in litigation; and
that he should keep his hands off the same, unless he intends to gamble on the results of
the litigation." Precisely, in this case SLDC has intervened in the pending litigation to
protect its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated
with the Courts present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital43 of SLDCs averment in its Complaint-inIntervention44 that at the instance of Pacita Lu it issued a check for P200,000.00 payable
to Babasanta and the confirmatory testimony of Pacita Lu herself on crossexamination.45 However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta
for what they attest to is that the amount was supposed to pay off the advances made
by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had
already executed the Deed of Absolute Sale with Mortgage in favor of SLDC and
therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by
the prior notice of lis pendens and assuming further for the same nonce that this is a
case of double sale, still Babasantas claim could not prevail over that of SLDCs.
In Abarquez v. Court of Appeals,46 this Court had the occasion to rule that if a vendee in a
double sale registers the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon him any
right. If the registration is done in bad faith, it is as if there is no registration at all, and
the buyer who has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after
the second vendee, Abarquez, registered their deed of sale with the Registry of Deeds,
but the Israels were first in possession. This Court awarded the property to the Israels
because registration of the property by Abarquez lacked the element of good faith. While
the facts in the instant case substantially differ from that in Abarquez, we would not
hesitate to rule in favor of SLDC on the basis of its prior possession of the property in
good faith. Be it noted that delivery of the property to SLDC was immediately effected
after the execution of the deed in its favor, at which time SLDC had no knowledge at all
of the prior transaction by the Spouses Lu in favor of Babasanta.1a\^/phi1.net

The law speaks not only of one criterion. The first criterion is priority of entry in the
registry of property; there being no priority of such entry, the second is priority of
possession; and, in the absence of the two priorities, the third priority is of the date of
title, with good faith as the common critical element. Since SLDC acquired possession of
the property in good faith in contrast to Babasanta, who neither registered nor possessed
the property at any time, SLDCs right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic
for as earlier stated in this decision, the contract between Babasanta and the Spouses Lu
is not a contract of sale but merely a contract to sell. In Dichoso v. Roxas,47 we had the
occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at
most an actual assignment of the right to repurchase the same land. Accordingly, there
was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of
Appeals appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial
Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.
[G.R. No. 137290. July 31, 2000]
SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner, vs. SPOUSES ALFREDO
HUANG and GRACE HUANG, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated April 8, 1997, of the Court of Appeals
which reversed the decision of the Regional Trial Court, Branch 153, Pasig City dismissing
the complaint brought by respondents against petitioner for enforcement of a contract of
sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in
the purchase and sale of real properties. Part of its inventory are two parcels of land
totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin
Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT-82396
of the Register of Deeds of Pasig City.
On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash.
The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as
undisclosed principals. In a letter[2] dated March 24, 1994, Atty. Dauz signified her clients
interest in purchasing the properties for the amount for which they were offered by
petitioner, under the following terms: the sum of P500,000.00 would be given as earnest

money and the balance would be paid in eight equal monthly installments from May to
December, 1994. However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the following terms for
the purchase of the properties, viz:
This is to express our interest to buy your-above-mentioned property with an
area of 1, 738 sq. meters. For this purpose, we are enclosing herewith the
sum ofP1,000,000.00 representing earnest-deposit money, subject to the
following conditions.
1. We will be given the exclusive option to purchase the property within the
30 days from date of your acceptance of this offer.
2. During said period, we will negotiate on the terms and conditions of the
purchase; SMPPI will secure the necessary Management and Board
approvals; and we initiate the documentation if there is mutual agreement
between us.
3. In the event that we do not come to an agreement on this transaction, the
said amount of P1,000,000.00 shall be refundable to us in full upon
demand. . . .
Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate
real estate, indicated his conformity to the offer by affixing his signature to the letter and
accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses,
Sobrecarey ordered the removal of the "FOR SALE" sign from the properties.
Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April
8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject
properties on a 90-day term. Atty. Dauz countered with an offer of six months within
which to pay.
On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz
that petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to
propose a four-month period of amortization.
On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to
June 13, 1994 within which to exercise her option to purchase the property, adding that
within that period, "[we] hope to finalize [our] agreement on the matter."[4] Her request
was granted.
On July 7, 1994, petitioner, through its president and chief executive officer, Federico
Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the
terms and conditions of the sale despite the extension granted by petitioner, the latter
was returning the amount of P1 million given as "earnest-deposit."[5]
On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the
execution within five days of a deed of sale covering the properties. Respondents

attempted to return the "earnest-deposit" but petitioner refused on the ground that
respondents option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific performance
against petitioner before the Regional Trial Court, Branch 133, Pasig City where it was
docketed as Civil Case No. 64660.
Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the
complaint alleging that (1) the alleged "exclusive option" of respondent spouses lacked a
consideration separate and distinct from the purchase price and was thus unenforceable
and (2) the complaint did not allege a cause of action because there was no "meeting of
the minds" between the parties and, therefore, no perfected contract of sale. The motion
was opposed by respondents.
On December 12, 1994, the trial court granted petitioners motion and dismissed the
action.
Respondents filed a motion for reconsideration, but it was denied by the trial court.
They then appealed to the Court of Appeals which, on April 8, 1997, rendered a
decision[6] reversing the judgment of the trial court. The appellate court held that all the
requisites of a perfected contract of sale had been complied with as the offer made on
March 29, 1994, in connection with which the earnest money in the amount of P1 million
was tendered by respondents, had already been accepted by petitioner. The court cited
Art. 1482 of the Civil Code which provides that "[w]henever earnest money is given in a
contract of sale, it shall be considered as part of the price and as proof of the perfection
of the contract." The fact the parties had not agreed on the mode of payment did not
affect the contract as such is not an essential element for its validity. In addition, the
court found that Sobrecarey had authority to act in behalf of petitioner for the sale of the
properties.[7]
Petitioner moved for reconsideration of the trial courts decision, but its motion was
denied. Hence, this petition.
Petitioner contends that the Court of Appeals erred in finding that there was a perfected
contract of sale between the parties because the March 29, 1994 letter of respondents,
which petitioner accepted, merely resulted in an option contract, albeit it was
unenforceable for lack of a distinct consideration. Petitioner argues that the absence of
agreement as to the mode of payment was fatal to the perfection of the contract of sale.
Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority
to sell the subject real properties.[8]
Respondents were required to comment within ten (10) days from notice. However,
despite 13 extensions totalling 142 days which the Court had given to them, respondents
failed to file their comment. They were thus considered to have waived the filing of a
comment.
The petition is meritorious.

In holding that there is a perfected contract of sale, the Court of Appeals relied on the
following findings: (1) earnest money was allegedly given by respondents and accepted
by petitioner through its vice-president and operations manager, Isidro A. Sobrecarey;
and (2) the documentary evidence in the records show that there was a perfected
contract of sale.
With regard to the alleged payment and acceptance of earnest money, the Court holds
that respondents did not give the P1 million as "earnest money" as provided by Art. 1482
of the Civil Code. They presented the amount merely as a deposit of what would
eventually become the earnest money or downpayment should a contract of sale be
made by them. The amount was thus given not as a part of the purchase price and as
proof of the perfection of the contract of sale but only as a guarantee that respondents
would not back out of the sale.
Respondents in fact described the amount as an "earnest-deposit." In Spouses Doromal,
Sr. v. Court of Appeals,[9] it was held:
. . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is
nothing to show that the same was in the concept of the earnest money contemplated in
Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the
sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are
more inclined to believe that the said P5,000.00 were paid in the concept of earnest
money as the term was understood under the Old Civil Code, that is, as a guarantee that
the buyer would not back out, considering that it is not clear that there was already a
definite agreement as to the price then and that petitioners were decided to buy 6/7 only
of the property should respondent Javellana refuse to agree to part with her 1/7 share. [10]
In the present case, the P1 million "earnest-deposit" could not have been given as
earnest money as contemplated in Art. 1482 because, at the time when petitioner
accepted the terms of respondents offer of March 29, 1994, their contract had not yet
been perfected. This is evident from the following conditions attached by respondents to
their letter, to wit: (1) that they be given the exclusive option to purchase the property
within 30 days from acceptance of the offer; (2) that during the option period, the parties
would negotiate the terms and conditions of the purchase; and (3) petitioner would
secure the necessary approvals while respondents would handle the documentation.
The first condition for an option period of 30 days sufficiently shows that a sale was
never perfected. As petitioner correctly points out, acceptance of this condition did not
give rise to a perfected sale but merely to an option or an accepted unilateral promise on
the part of respondents to buy the subject properties within 30 days from the date of
acceptance of the offer. Such option giving respondents the exclusive right to buy the
properties within the period agreed upon is separate and distinct from the contract of
sale which the parties may enter.[11] All that respondents had was just the option to buy
the properties which privilege was not, however, exercised by them because there was a
failure to agree on the terms of payment. No contract of sale may thus be enforced by
respondents.

Furthermore, even the option secured by respondents from petitioner was fatally
defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to
buy or sell a determinate thing for a price certain is binding upon the promisor only if the
promise is supported by a distinct consideration. Consideration in an option contract may
be anything of value, unlike in sale where it must be the price certain in money or its
equivalent. There is no showing here of any consideration for the option. Lacking any
proof of such consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition
that, during the option period, the parties would negotiate the terms and conditions of
the purchase.
The stages of a contract of sale are as follows:
(1) negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the contract
is perfected;
(2) perfection, which takes place upon the concurrence of the essential
elements of the sale which are the meeting of the minds of the parties as to
the object of the contract and upon the price; and
(3) consummation, which begins when the parties perform their respective
undertakings under the contract of sale, culminating in the extinguishment
thereof.
In the present case, the parties never got past the negotiation stage. The alleged
"indubitable evidence"[13] of a perfected sale cited by the appellate court was nothing
more than offers and counter-offers which did not amount to any final arrangement
containing the essential elements of a contract of sale. While the parties already agreed
on the real properties which were the objects of the sale and on the purchase price, the
fact remains that they failed to arrive at mutually acceptable terms of payment, despite
the 45-day extension given by petitioner.
The appellate court opined that the failure to agree on the terms of payment was no bar
to the perfection of the sale because Art. 1475 only requires agreement by the parties as
to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative
Marketing Association, Inc.,[14] we laid down the rule that the manner of payment of the
purchase price is an essential element before a valid and binding contract of sale can
exist. Although the Civil Code does not expressly state that the minds of the parties must
also meet on the terms or manner of payment of the price, the same is needed,
otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals,[15] agreement
on the manner of payment goes into the price such that a disagreement on the manner
of payment is tantamount to a failure to agree on the price.[16] In Velasco v. Court of
Appeals,[17] the parties to a proposed sale had already agreed on the object of sale and
on the purchase price. By the buyers own admission, however, the parties still had to

agree on how and when the downpayment and the installments were to be paid. It was
held:
. . . Such being the situation, it can not, therefore, be said that a definite and firm sales
agreement between the parties had been perfected over the lot in question.Indeed, this
Court has already ruled before that a definite agreement on the manner of payment of
the purchase price is an essential element in the formation of a binding and enforceable
contract of sale. The fact, therefore, that the petitioners delivered to the respondent the
sum of P10,000 as part of the down-payment that they had to pay cannot be considered
as sufficient proof of the perfection of any purchase and sale agreement between the
parties herein under Art. 1482 of the new Civil Code, as the petitioners themselves admit
that some essential matter - the terms of the payment - still had to be mutually
covenanted.[18]
Thus, it is not the giving of earnest money, but the proof of the concurrence of all the
essential elements of the contract of sale which establishes the existence of a perfected
sale.
In the absence of a perfected contract of sale, it is immaterial whether Isidro A.
Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This
issue, therefore, needs no further discussion.
WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents
complaint is DISMISSED.
SO ORDERED.
SAN MIGUEL PROPERTIES PHILIPPINES, INC., PETITIONER, VS. SPOUSES
ALFREDO HUANG AND GRACE HUANG, RESPONDENTS.
[GRN 137290 July 31, 2000]
First Division
Facts:
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in
the purchase and sale of real properties. Parts of its inventory are two parcels of land
totaling to 1, 738 square meters at the corner of Meralco Avenue and Gen. Capinpin St.,
Barrio Oranbo, Pasig City.
On February 21, 1994, the properties were offered for sale for 52,140,000 in cash.
The offer was made to Atty. Helena Dauz who was acting for respondent spouses as
undisclosed principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients
interest in purchasing the properties for the amount for which they were offered by
petitioner, under the following terms: the sum of 500,000 would be given as earnest
money and the balance would be paid in 8 equal monthly installments from May to
December 1994. However, petitioner refused the counter-offer.

Atty. Dauz thus wrote San Miguel expressing the interest of respondent spouses,
subject to the following conditions:
1. We will be given the exclusive option to purchase the property within 30 days from
date of your acceptance of this offer;
2. During said period, we will negotiate on the terms and conditions of the purchase;
SMPPI will secure the necessary management and board approvals; and we initiate the
documentation if there is mutual agreement between us;
3. In the event that we do not come to an agreement on this transaction, the said
amount of 1,000,000 shall be refundable to us in full upon demand.
On July 7, 1994, San Miguel, through its president, Federico Gonzales, wrote Atty.
Dauz informing her that because the parties failed to agree on the terms and conditions
of the sale despite the extension granted by San Miguel, it is already returning the
amount of 1 Million given as earnest-deposit.
Respondent spouses, through their counsel, demanded the execution of the Deed
of Sale and attempted to return the earnest-deposit but SMPPI refused to accept it on the
ground that the option to purchase had already expired.
Thus on August 16, 1994, respondent spouses filed a complaint for specific
performance against SMPPI but the latter moved to dismiss said complaint alleging that:
1. the alleged exclusive option of respondent spouses lacked a consideration separate
and distinct from the purchase price and was thus unenforceable; and 2. the complaint
did not allege a cause of action because there was no meeting of the minds between the
parties and therefore, no perfected contract of sale. This motion was opposed by
respondent spouses.
RTC granted the motion to dismiss but the CA reversed it on appeal and held that
all the requisites of a perfected contract of sale had been complied with as the offer
made in connection with which the earnest money in the amount of 1 Million was
tendered by respondent spouses had already been accepted by SMPPI. The court cited
Art. 1482 of the Civil Code which provides that whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and proof of the perfection of
the contract.

Issue: Whether or not the contract of sale was perfected.

Ruling:
The contract of sale was not perfected. In holding that there is perfected contract of sale,
the CA relied on the following findings: (1) earnest money was allegedly given by
respondents and accepted by SMPPI through its vice-president and operations manager,

Isidro Sobrecarey; and (2) the documentary evidence in the records show that there was
perfected contract of sale.
With regard to the alleged payment and acceptance of the earnest money, the SC
holds that respondents did not give the 1 Million as earnest money as contemplated in
Art. 1482. Respondents presented the amount merely as deposit of what would
eventually become earnest money or down payment should a contract of sale be made
by them. The amount was thus given not as part of the purchase price and proof of the
perfection of the contract of sale but only as guarantee that respondents would not back
out of the sale. They even described it as earnest-deposit.
All that respondents had was just an option to buy the properties which privilege
was not exercised by them because there was a failure to agree on the terms of
payment. No contract of sale may thus be enforced by respondents.
G.R. No. 115307 July 8, 1997
MANUEL LAO, petitioner,
vs.
COURT OF APPEALS and BETTER HOMES REALTY & HOUSING
CORPORATION, respondents.
PANGANIBAN, J.:
As a general rule, the main issue in an ejectment suit is possession de facto, not
possession de jure. In the event the issue of ownership is raised in the pleadings, such
issue shall be taken up only for the limited purpose of determining who between the
contending parties has the better right to possession. However, where neither of the
parties objects to the allegation of the question of ownership which may be initially
improvident or improper in an ejectment suit and, instead, both present evidence
thereon, argue the question in their various submissions and participate in all aspects of
the trial without objecting to the Metropolitan (or Municipal) Trial Court's jurisdiction to
decide the question of ownership, the Regional Trial Court in the exercise of its original
jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court may rule on the
issue and the corollary question of whether the subject deed is one of sale or of
equitable mortgage.
These postulates are discussed by the Court as it resolves this petition under Rule 45
seeking a reversal of the December 21, 1993 Decision 1 and April 28, 1994 Resolution 2 of
the Court of Appeals in CA-G.R. SP No. 92-14293.
The Antecedent Facts
The facts of this case are narrated by Respondent Court of Appeals as follows: 3
On June 24, 1992, (herein Private Respondent Better Homes Realty and Housing
Corporation) filed with the Metropolitan Trial Court of Quezon City, a complaint for
unlawful detainer, on the ground that (said private respondent) is the owner of the

premises situated at Unit I, No. 21 N. Domingo Street, Quezon City, evidenced by


Transfer Certificate of Title No. 22184 of the Registry of Deeds of Quezon City; that
(herein Petitioner Manuel Lao) occupied the property without rent, but on (private
respondent's) pure liberality with the understanding that he would vacate the property
upon demand, but despite demand to vacate made by letter received by (herein
petitioner) on February 5, 1992, the (herein petitioner) refused to vacate the premises.
In his answer to the complaint, (herein petitioner) claimed that he is the true owner of
the house and lot located at Unit I, No. 21 N. Domingo Street, Quezon City; that the
(herein private respondent) purchased the same from N. Domingo Realty and
Development Corporation but the agreement was actually a loan secured by mortgage;
and that plaintiff's cause of action is for accion publiciana, outside the jurisdiction of an
inferior court.
On October 9, 1992, the Metropolitan Trial Court of Quezon City rendered judgment
ordering the (petitioner) to vacate the premises located at Unit I, No. 21 N.
Domingo Street, Quezon City; to pay (private respondent) the sum of P300.00 a
day starting on January 31, 1992, as reasonable rent for the use and occupation of
the premises; to pay plaintiff P5,000.00, as attorney's fees, and costs.
On appeal to the Regional Trial Court of Quezon City, 4 on March 30, 1993, the
latter court rendered a decision reversing that of the Metropolitan Trial Court, and
ordering the dismissal of the (private respondent's) complaint for lack of merit,
with costs taxed against (private respondent).
In its decision, the Regional Trial Court held that the subject property was acquired by
(private respondent) from N. Domingo Realty and Development Corporation, by a deed
of sale, and (private respondent) is now the registered owner under Transfer Certificate
of Title No. 316634 of the Registry of Deeds of Quezon City, but in truth the (petitioner) is
the beneficial owner of the property because the real transaction over the subject
property was not a sale but a loan secured by a mortgage thereon.
The dispositive portion of the Regional Trial Court's decision is quoted below: 5
WHEREFORE, judgment is hereby rendered reversing the appealed decision
and ordering the dismissal of plaintiffs complaint for lack of merit, with the
costs taxed against it.
IT IS SO ORDERED.
On April 28, 1993, private respondent filed an appeal with the Court of Appeals which
reversed the decision of the Regional Trial Court. The Respondent Court ruled:
The Metropolitan Trial Court has no jurisdiction to resolve the issue of
ownership in an action for unlawful detainer (B.P. 129, Sec. 33 [2]; Cf. Alvir
vs. Vera, 130 SCRA 357). The jurisdiction of a court is determined by the
nature of the action alleged in the complaint (Ching vs. Malaya, l53 SCRA
412). In its complaint in the inferior court, the plaintiff alleged that it is the

owner of the premises located at Unit I, No. 21 N. Domingo Street, Quezon


City, and that defendant's occupation is rent free and based on plaintiffs
pure liberality coupled with defendant's undertaking to vacate the premises
upon demand, but despite demands, defendant has refused to vacate. The
foregoing allegations suffice to constitute a cause of action for ejectment
(Banco de Oro vs. Court of Appeals, 182 SCRA 464).
The Metropolitan Trial Court is not ousted of jurisdiction simply because the
defendant raised the question ownership (Bolus vs. Court of Appeals, 218
SCRA 798). The inferior court shall resolve the issue of ownership only to
determine who is entitled to the possession of the premises (B.P. 129, Sec.
33[2]; Bolus vs. Court of Appeals, supra).
Here, the Metropolitan Trial Court ruled that as owner, plaintiff (herein
private respondent Better Homes Realty and Housing Corporation) is entitled
to the possession of the premises because the defendant's stay is by mere
tolerance of the plaintiff (herein private respondent).
On the other hand, the Regional Trial Court ruled that the subject property is
owned by the defendant, (herein petitioner Manuel Lao) and, consequently,
dismissed the complaint for unlawful detainer. Thus, the Regional Trial Court
resolved the issue of ownership, as if the case were originally before it as an
action for recovery of possession, or accion publiciana, within its original
jurisdiction. In an appeal from a decision of the Municipal Trial Court, or
Metropolitan Trial Court, in an unlawful detainer case, the Regional Trial
Court is simply to determine whether the inferior court correctly resolved the
issue of possession; it shall not delve into the issue of ownership (Manuel vs.
Court of Appeals, 199 SCRA 603). What the Regional Trial Court did was to
rule that the real agreement between the plaintiff and the previous owner of
the property was not a sale, but an equitable mortgage. Defendant was only
a director of the seller corporation, and his claim of ownership could not be
true. This question could not be determined summarily. It was not properly in
issue before the inferior court because, as aforesaid, the only issue was
possession de facto(Manlapaz vs. Court of Appeals, 191 SCRA 795), or who
has a better right to physical possession (Dalida vs. Court of Appeals, 117
SCRA 480). Consequently, the Regional Trial Court erred in reversing the
decision of the Metropolitan Trial Court.
WHEREFORE, the Court hereby REVERSES the decision of the Regional Trial
Court. In lieu thereof, We affirm the decision of the Metropolitan Trial Court
of Quezon City sentencing the defendant and all persons claiming right
under him to vacate the premises situated at Unit I, No. 21 N. Domingo
Street, Quezon City, and to surrender possession to the plaintiff; to pay
plaintiff the sum of P300.00, a day starting on January 31, 1992, until
defendant shall have vacated the premises; to pay plaintiff P5,000.00 as
attorneys fees, and costs.

SO ORDERED. 6
Manuel Lao's motion for reconsideration dated January 24, 1994 was denied by the Court
of Appeals in its Resolution promulgated on April 28, 1994. Hence, this petition for review
before this Court. 7
The Issues
Petitioner Manuel Lao raises three issues:
3.1 Whether or not the lower court can decide on the issue of ownership in the present
ejectment case.
3.2 Whether or not private respondent had acquired ownership over the property in
question.
3.3 Whether or not petitioner should be ejected from the premises in question 8
The Court's Ruling
The petition for review is meritorious.
First Issue: Jurisdiction to Decide the Issue of Ownership
The Court of Appeals held that as a general rule, the issue in an ejectment suit is
possession de facto, not possession de jure, and that in the event the issue of ownership
is raised as a defense, the issue is taken up for the limited purpose of determining who
between the contending parties has the better right to possession. Beyond this, the MTC
acts in excess of its jurisdiction. However, we hold that this is not a hard and fast rule
that can be applied automatically to all unlawful detainer cases.
Section 11, Rule 40 of the Rules of Court provides that "[a] case tried by an inferior court
without jurisdiction over the subject matter shall be dismissed on appeal by the Court of
First Instance. But instead of dismissing the case, the Court of First Instance, in the
exercise of its original jurisdiction, may try the case on the merits if the parties therein
file their pleadings and go to the trial without any objection to such jurisdiction." After a
thorough review of the records of this case, the Court finds that the respondent appellate
court failed to apply this Rule and erroneously reversed the RTC Decision.
Respondent Court cites Alvir vs. Vera to support its Decision. On the contrary, we believe
such case buttresses instead the Regional Trial Court's decision. The cited case involves
an unlawful detainer suit where the issue of possession was inseparable from the issue of
transfer of ownership, and the latter was determinable only after an examination of a
contract of sale involving the property in question. The Court ruled that where a "case
was tried and heard by the lower court in the exercise of its original jurisdiction by
common assent of the parties by virtue of the issues raised . . . and the proofs presented
by them," any dismissal on the ground of lack of jurisdiction "would only lead to needless
delays and multiplicity of suits." The Court held:

In actions of forcible entry and detainer, the main issue is possession de facto,
independently of any claim of ownership or possession de jure that either party may set
forth in his pleading. . . . Defendant's claim of ownership of the property from which
plaintiff seeks to eject him is not sufficient to divest the inferior court of its jurisdiction
over the action of forcible entry and detainer. However, if it appears during the trial that
the principal issue relates to the ownership of the property in dispute and any question
of possession which maybe involved necessarily depends upon the result of the inquiry
into the title, previous rulings of this Court are that the jurisdiction of the municipal or
city court is lost and the action should be dismissed.
We have at bar a case where, in effect, the question of physical possession could not
properly be determined without settling that of lawful or de jure possession and of
ownership and hence, following early doctrine, the jurisdiction of the municipal court
over the ejectment case was lost and the action should have been dismissed. As a
consequence, respondent court would have no jurisdiction over the case on appeal and it
should have dismissed the case on appeal from the municipal trial court. However, in line
with Section 11, Rule 40 of the Revised Rules of Court, which
reads
Sec. 11. Lack of Jurisdiction. A case tried by an inferior court without jurisdiction over
the subject matter shall be dismissed on appeal by the Court of First Instance. But
instead of dismissing the case, the Court of First Instance in the exercise of its original
jurisdiction, may try the case on the merits if the parties therein file their pleadings and
go to trial without objection to such jurisdiction.
this Court held in Saliwan vs. Amores, 51 SCRA 329, 337, that dismissal "on the said
ground of lack of appellate jurisdiction on the part of the lower court flowing from the
municipal court's loss of jurisdiction would lead only to needless delay and multiplicity of
suits in the attainment of the same result and ignores, as above stated, that the case
was tried and heard by the lower court in the exercise of its original jurisdiction by
common assent of the parties by virtue of the issues raised by the parties and the proof
presented by them thereon." 9
This pronouncement was reiterated by this Court through Mr. Justice Teodoro R. Padilla
in Consignado vs. Court of Appeals 10 as follows:
As the MTC of Laguna had no jurisdiction over the unlawful detainer case in view of the
raised question of title or ownership over the property in dispute, the RTC of Laguna also
had no appellatejurisdiction to decide the case on the merits. It should have dismissed
the appeal. However, it hadoriginal jurisdiction to pass upon the controversy. It is to be
noted, in this connection, that in their respective memoranda filed with the RTC of
Laguna, the petitioners and private respondents did not object to the said court
exercising its original jurisdiction pursuant to the aforequoted provisions of Section 11,
Rule 40 of the Rules of Court.
xxx xxx xxx

Petitioners now contend, among others, that the Court of Appeals erred in resolving the
question of ownership as if actual title, not mere possession of subject premises, is
involved in the instant case.
The petitioner's contention is untenable. Since the MTC and RTC of Laguna decided the
question of ownership over the property in dispute, on appeal the Court of Appeals had
to review and resolve also the issue of ownership. . . .
It is clear, therefore, that although an action for unlawful detainer "is inadequate for the
ventilation of issues involving title or ownership of controverted real property, [i]t is more
in keeping with procedural due process that where issues of title or ownership are raised
in the summary proceedings for unlawful detainer, said proceeding should be dismissed
for lack of jurisdiction, unless, in the case of an appeal from the inferior court to the
Court of First Instance, the parties agree to the latter Court hearing the case in its
original jurisdiction in accordance with Section 11, Rule 40 . . ." 11
In the case at bar, a determination of the issue of ownership is indispensable to resolving
the rights of both parties over the property in controversy, and is inseparable from a
determination of who between them has the right to possess the same. Indeed, the very
complaint for unlawful detainer filed in the Metropolitan Trial Court of Quezon City is
anchored on the alleged ownership of private respondent over the subject
premises. 12 The parties did not object to the incongruity of a question of ownership
being brought in an ejectment suit. Instead they both submitted evidence on such
question, and the Metropolitan Trial Court decided on the issue. These facts are evident
in the Metropolitan Trial Court's decision:
From the records of the case, the evidence presented and the various arguments
advanced by the parties, the Court finds that the property subject matter of this case is
in the name of (herein private respondent) Better Homes and Realty Housing
Corporation; that the Deed of Absolute Sale which was the basis for the issuance of said
TCT No. 22184 is between N. Domingo Realty and Development Corporation and Better
Homes Realty and Housing Corporation which was signed by Artemio S. Lao representing
the seller N. Domingo and Realty Development Corporation; that a Board Resolution of N.
Domingo and Realty and Development Corporation (Exhibit "D" position paper) shows
that the Directors of the Board of the N. Domingo Realty and Development Corporation
passed a resolution selling apartment units I and F located at No. 21 N. Domingo St.,
Quezon City and designating the (herein petitioner) with his brother Artemio S. Lao as
signatories to the Deed of Sale. The claim therefore of the (herein petitioner) that he
owns the property is not true . . . 13
When the MTC decision was appealed to the Regional Trial Court, not one of the parties
questioned the Metropolitan Trial Court's jurisdiction to decide the issue of ownership. In
fact, the records show that both petitioner and private respondent discussed the issue in
their respective pleadings before the Regional Trial Court. 14 They participated in all
aspects of the trial without objection to its jurisdiction to decide the issue of ownership.

Consequently, the Regional Trial Court aptly decided the issue based on the exercise of
its original jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court.
This Court further notes that in both of the contending parties' pleadings filed on appeal
before the Court of Appeals, the issue of ownership was likewise amply discussed. 15 The
totality of evidence presented was sufficient to decide categorically the issue of
ownership.
These considerations, taken together with the fact that both the Metropolitan Trial Court
and the Regional Trial Court decided the issue of ownership, justify the review of the
lower courts' findings of fact and decision on the issue of ownership. This we now do, as
we dispose of the second issue and decide the case with finality to spare the parties the
time, trouble and expense of undergoing the rigors of another suit where they will have
to present the same evidence all over again and where, in all probability, the same
ultimate issue of ownership will be brought up on appeal.
Second Issue: Absolute Sale or Equitable Mortgage?
Private Respondent Better Homes Realty and Housing Corporation anchored its right in
the ejectment suit on a contract of sale in which petitioner (through their family
corporation) transferred the title of the property in question. Petitioner contends,
however that their transaction was not an absolute sale, but an equitable mortgage.
In determining the nature of a contract, the Court looks at the intent of the parties and
not at the nomenclature used to describe it. Pivotal to deciding this issue is the true aim
and purpose of the contracting parties as shown by the terminology used in the
covenant, as well as "by their conduct, words, actions and deeds prior to, during and
immediately after executing the agreement." 16 In this regard, parol evidence becomes
admissible to prove the true intent and agreement of the parties which the Court will
enforce even if the title of the property in question has already been registered and a
new transfer certificate of title issued in the name of the transferee. In Macapinlac
vs. Gutierrez Repide, which involved an identical question, the Court succintly stated:
. . . This conclusion is fully supported by the decision in Cuyugan vs. Santos (34 Phil.,
100), where this court held that a conveyance in the form of a contract of sale with
pacto de retro will be treated as a mere mortgage, if really executed as
security for a debt, and that this fact can be shown by oral evidence apart
from the instrument of conveyance, a doctrine which has been followed in the later
cases of Villa vs. Santiago (38 Phil., 157), and Cuyugan vs. Santos (39 Phil., 970).
xxx xxx xxx
In the first place, it must be borne in mind that the equitable
doctrine which has been so fully stated above, to the effect that any
conveyance intended as security for a debt will be held in effect to
be a mortgage, whether so actually expressed in the instrument or
not, operates regardless of the form of the agreement chosen by

the contracting parties as the repository of their will. Equity looks


through the form and considers the substance; and no kind of
engagement can be adopted which will enable the parties to escape
from the equitable doctrine to which reference is made. In other
words, a conveyance of land, accompanied by registration in the
name of the transferee and the issuance of a new certificate, is no
more secured from the operation of this equitable doctrine than the
most informal conveyance that could be devised. 17
The law enumerates when a contract may be presumed to be an
equitable mortgage:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right repurchase
another instrument extending the period of redemption or granting
a new period is executed;
(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
xxx xxx xxx

18

The foregoing presumption applies also to a "contract purporting to be an absolute


sale." 19
Applying the preceding principles to the factual milieu of this case, we find the
agreement between the private respondent and N. Domingo Realty & Housing
Corporation, as represented by petitioner, manifestly one of equitable mortgage.
First, possession of the property in the controversy remained with Petitioner Manuel Lao
who was the beneficial owner of the property, before, during and after the alleged
sale. It is settled that a "pacto de retro sale should be treated as a mortgage where the
(property) sold never left the possession of the vendors."
Second, the option given to Manuel Lao to purchase the property in controversy had
been extended twice through documents executed by Mr. Tan Bun Uy, President and
Chairman of the Board of Better Homes Realty & Housing Corporation.

Third, unquestionably, Manuel Lao and his brother were in such "terrible/dire need of
money" that they mortgaged their townhouse units registered under the name of N.
Domingo Realty Corporation, the family corporation put up by their parents, to Private
Respondent Better Homes Realty & Housing Corporation. In retrospect, it is easy to
blame Petitioner Manuel Lao for not demanding a reformation of the contract to reflect
the true intent of the parties. But this seeming inaction is sufficiently explained by the
Lao brothers' desperate need for money, compelling them to sign the document
purporting to be a sale after they were told that the same was just for
"formality." Moreover, since the borrower's urgent need for money places the latter at a
disadvantage vis-a-vis the lender who can thus dictate the terms of their contract, the
Court, in case of an ambiguity, deems the contract to be one which involves the lesser
transmission of rights and interest over the property in controversy.
In fact, this Court, in various cases involving the same situation, had occasion to state:
. . . In Jayme, et al. v. Salvador, et al., this Court upheld a judgment of the Court of First
Instance of Iloilo which found the transaction between the parties to be a loan instead of
a sale of real propertynotwithstanding the terminology used in the document, after
taking into account the surrounding circumstances of the transaction. The Court through
Justice Norberto Romualdez stated that while it was true that plaintiffs were aware of the
contents of the contracts, the preponderance of the evidence showed however that they
signed knowing that said contracts did not express their real intention, and if they did so
notwithstanding this, it was due to the urgent necessity of obtaining fund."Necessitous
men are not, truly speaking, free men; but to answer a present emergency, will submit
to any terms that the crafty may impose upon them." 25
Moreover, since the borrower's urgent need for money places the latter at a
disadvantage vis-a-vis the lender who can thus dictate the terms of their contract, the
Court, in case of an ambiguity, deems the contract to be one which involves the lesser
transmission of rights and interest over the property in controversy. 26
As aptly found and concluded by the regional trial court:
The evidence of record indicates that while as of April 4, 1988 (the date of execution of
the Deed of Absolute Sale whereby the N. Domingo and Realty & Development
Corporation purportedly sold the townhouse and lot subject of this suit to [herein private
respondent Better Homes Realty & Housing Corporation] for P100,000.000) said N.
Domingo Realty & Development Corporation (NDRDC, for short) was the registered
owner of the subject property under Transfer Certificate of Title (TCT) No. 316634 of the
Registry of Deeds for Quezon City, (herein petitioner Manuel Lao) in fact was and has
been since 1975 the beneficial owner of the subject property and, thus, the same was
assigned to him by the NDRDC, the family corporation set up by his parents and of which
(herein petitioner) and his siblings are directors. That the parties' real transaction or
contract over the subject property was not one of sale but, rather, one of loan secured,
by a mortgage thereon is unavoidably inferrable from the following facts of record, to
(herein petitioner's) possession of the subject property, which started in 1975 yet,

continued and remained even after the alleged sale of April 4, 1988; (herein private
respondent) executed an option to purchase in favor (herein petitioner) as early as April
2, 1988 or two days before (herein private respondent) supposedly acquired ownership
of the property; the said option was renewed several times and the price was increased
with each renewal (thus, the original period for the exercise of the option was up to June
11, 1988 and the price was P109,000.00; then, on June 10, 1988, the option was
extended for 60 days or until August 11, 1988 and the price was increased to
P137,000.00; and then on August 11, 1988, the option was again extended until
November 11,1988 and the price was increased to P158,840.00); and, the Deed of
Absolute Sale of April 4, 1988 was registered and the property transferred in the name of
(private respondent) only on May 10, 1989, per TCT No. 22184 of the Registry of Deeds
for Quezon City (Arts. 1602, nos. 2, 3, & 6, & 1604, Civil Code). Indeed, if it were true, as
it would have the Court believe, that (private respondent) was so appreciative of
(petitioner's) alleged facilitation of the subject property's sale to it, it is quite strange
why (private respondent) some two days before such supposed sale would have been
minded and inclined to execute an option to purchase allowing (petitioner) to acquire the
property the very same property it was still hoping to acquire at the time. Certainly,
what is more likely and thus credible is that, if (private respondent) was indeed thankful
that it was able to purchase the property, it would not given (petitioner) any option to
purchase at all . . . 27
Based on the conduct of the petitioner and private respondent and even the terminology
of the second option to purchase, we rule that the intent and agreement between them
was undoubtedly one of equitable mortgage and not of sale.
Third Issue: Should Petitioner Be Ejected?
We answer in the negative. An action for unlawful detainer is grounded on Section 1,
Rule 70 of the Rules of Court which provides that:
. . . a landlord, vendor, vendee, or other person against whom the possession of any land
or building is unlawfully withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied, or the legal representatives or
assigns of any such landlord, vendor, vendee, or other person, may, at any time within
one (1) year after such unlawful deprivation or withholding of possession, bring an action
in the proper inferior court against the person or persons unlawfully withholding or
depriving of possession, or any person or persons claiming under them, for the
restitution of such possession, together with damages and costs . . . .
Based on the previous discussion, there was no sale of the disputed property. Hence, it
still belongs to petitioner's family corporation, N. Domingo Realty & Development
Corporation. Private respondent, being a mere mortgagee, has no right to eject
petitioner. Private respondent, as a creditor and mortgagee, " . . . cannot appropriate the
things given by way of pledge
or mortgage, or dispose of them. Any stipulation to the contrary is null and void." 28
Other Matters

Private respondent in his memorandum also contends that (1) petitioner is not the real
party in interest and (2) the petition should be dismissed for "raising/stating facts not so
found by the Court of Appeals." These deserve scant consideration. Petitioner was
impleaded as party defendant in the ejectment suit by private respondent itself. Thus,
private respondent cannot question his standing as a party. As such party, petitioner
should be allowed to raise defenses which negate private respondent's right to the
property in question. The second point is really academic. This ponencia relies on the
factual narration of the Court of Appeals and not on the "facts" supplied by petitioner.
WHEREFORE, the petition is hereby GRANTED. The challenged Decision of the Court of
Appeals is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Quezon
City ordering the dismissal of the complaint for ejectment is REINSTATED and AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
[G.R. No. 112212. March 2, 1998]
GREGORIO FULE, petitioner, vs. COURT OF APPEALS, NINEVETCH CRUZ and
JUAN BELARMINO, respondents.
DECISION
ROMERO, J.:
This petition for review on certiorari questions the affirmance by the Court of Appeals of
the decision[1] of the Regional Trial Court of San Pablo City, Branch 30, dismissing the
complaint that prayed for the nullification of a contract of sale of a 10-hectare property
in Tanay, Rizal in consideration of the amount of P40,000.00 and a 2.5 carat emerald-cut
diamond (Civil Case No. SP-2455). The lower courts decision disposed of the case as
follows:
WHEREFORE, premises considered, the Court hereby renders judgment dismissing the
complaint for lack of merit and ordering plaintiff to pay:
1. Defendant Dra. Ninevetch M. Cruz the sum of P300,000.00 as and for moral damages
and the sum of P100,000.00 as and for exemplary damages;
2. Defendant Atty. Juan Belarmino the sum of P250,000.00 as and for moral damages and
the sum of P150,000.00 as and for exemplary damages;
3. Defendant Dra. Cruz and Atty. Belarmino the sum of P25,000.00 each as and for
attorneys fees and litigation expenses; and
4. The costs of suit.
SO ORDERED.
As found by the Court of Appeals and the lower court, the antecedent facts of this case
are as follows:

Petitioner Gregorio Fule, a banker by profession and a jeweler at the same time, acquired
a 10-hectare property in Tanay, Rizal (hereinafter Tanay property), covered by Transfer
Certificate of Title No. 320725 which used to be under the name of Fr. Antonio
Jacobe. The latter had mortgaged it earlier to the Rural Bank of Alaminos (the Bank),
Laguna, Inc. to secure a loan in the amount of P10,000.00, but the mortgage was later
foreclosed and the property offered for public auction upon his default.
In July 1984, petitioner, as corporate secretary of the bank, asked Remelia Dichoso and
Oliva Mendoza to look for a buyer who might be interested in the Tanay property.The two
found one in the person of herein private respondent Dr. Ninevetch Cruz. It so happened
that at the time, petitioner had shown interest in buying a pair of emerald-cut diamond
earrings owned by Dr. Cruz which he had seen in January of the same year when his
mother examined and appraised them as genuine. Dr. Cruz, however, declined
petitioners offer to buy the jewelry for P100,000.00. Petitioner then made another bid to
buy them for US$6,000.00 at the exchange rate of $1.00 to P25.00. At this point,
petitioner inspected said jewelry at the lobby of the Prudential Bank branch in San Pablo
City and then made a sketch thereof. Having sketched the jewelry for twenty to thirty
minutes, petitioner gave them back to Dr. Cruz who again refused to sell them since the
exchange rate of the peso at the time appreciated to P19.00 to a dollar.
Subsequently, however, negotiations for the barter of the jewelry and the Tanay property
ensued. Dr. Cruz requested herein private respondent Atty. Juan Belarmino to check the
property who, in turn, found out that no sale or barter was feasible because the one-year
period for redemption of the said property had not yet expired at the time.
In an effort to cut through any legal impediment, petitioner executed on October 19,
1984, a deed of redemption on behalf of Fr. Jacobe purportedly in the amount
ofP15,987.78, and on even date, Fr. Jacobe sold the property to petitioner
for P75,000.00. The haste with which the two deeds were executed is shown by the fact
that the deed of sale was notarized ahead of the deed of redemption. As Dr. Cruz had
already agreed to the proposed barter, petitioner went to Prudential Bank once again to
take a look at the jewelry.
In the afternoon of October 23, 1984, petitioner met Atty. Belarmino at the latters
residence to prepare the documents of sale.[2] Dr. Cruz herself was not around but Atty.
Belarmino was aware that she and petitioner had previously agreed to exchange a pair of
emerald-cut diamond earrings for the Tanay property. Atty. Belarmino accordingly caused
the preparation of a deed of absolute sale while petitioner and Dr. Cruz attended to the
safekeeping of the jewelry.
The following day, petitioner, together with Dichoso and Mendoza, arrived at the
residence of Atty. Belarmino to finally execute a deed of absolute sale. Petitioner signed
the deed and gave Atty. Belarmino the amount of P13,700.00 for necessary expenses in
the transfer of title over the Tanay property. Petitioner also issued a certification to the
effect that the actual consideration of the sale was P200,000.00 and not P80,000.00 as
indicated in the deed of absolute sale. The disparity between the actual contract price

and the one indicated on the deed of absolute sale was purportedly aimed at minimizing
the amount of the capital gains tax that petitioner would have to shoulder. Since the
jewelry was appraised only at P160,000.00, the parties agreed that the balance
of P40,000.00 would just be paid later in cash.
As pre-arranged, petitioner left Atty. Belarminos residence with Dichoso and Mendoza
and headed for the bank, arriving there at past 5:00 p.m. Dr. Cruz also arrived shortly
thereafter, but the cashier who kept the other key to the deposit box had already left the
bank. Dr. Cruz and Dichoso, therefore, looked for said cashier and found him having a
haircut. As soon as his haircut was finished, the cashier returned to the bank and arrived
there at 5:48 p.m., ahead of Dr. Cruz and Dichoso who arrived at 5:55 p.m. Dr. Cruz and
the cashier then opened the safety deposit box, the former retrieving a transparent
plastic or cellophane bag with the jewelry inside and handing over the same to
petitioner.The latter took the jewelry from the bag, went near the electric light at the
banks lobby, held the jewelry against the light and examined it for ten to
fifteen minutes. After a while, Dr. Cruz asked, Okay na ba iyan? Petitioner expressed his
satisfaction by nodding his head.
For services rendered, petitioner paid the agents, Dichoso and Mendoza, the amount of
US$300.00 and some pieces of jewelry. He did not, however, give them half of the pair of
earrings in question which he had earlier promised.
Later, at about 8:00 oclock in the evening of the same day, petitioner arrived at the
residence of Atty. Belarmino complaining that the jewelry given to him was fake. He then
used a tester to prove the alleged fakery. Meanwhile, at 8:30 p.m., Dichoso and Mendoza
went to the residence of Dr. Cruz to borrow her car so that, with Atty. Belarmino, they
could register the Tanay property. After Dr. Cruz had agreed to lend her car, Dichoso
called up Atty. Belarmino. The latter, however, instructed Dichoso to proceed
immediately to his residence because petitioner was there. Believing that petitioner had
finally agreed to give them half of the pair of earrings, Dichoso went posthaste to the
residence of Atty. Belarmino only to find petitioner already demonstrating with a tester
that the earrings were fake. Petitioner then accused Dichoso and Mendoza of deceiving
him which they, however, denied. They countered that petitioner could not have been
fooled because he had vast experience regarding jewelry. Petitioner nonetheless took
back the US$300.00 and jewelry he had given them.
Thereafter, the group decided to go to the house of a certain Macario Dimayuga, a
jeweler, to have the earrings tested. Dimayuga, after taking one look at the earrings,
immediately declared them counterfeit. At around 9:30 p.m., petitioner went to one Atty.
Reynaldo Alcantara residing at Lakeside Subdivision in San Pablo City, complaining about
the fake jewelry. Upon being advised by the latter, petitioner reported the matter to the
police station where Dichoso and Mendoza likewise executed sworn statements.
On October 26, 1984, petitioner filed a complaint before the Regional Trial Court of San
Pablo City against private respondents praying, among other things, that the contract of
sale over the Tanay property be declared null and void on the ground of fraud and deceit.

On October 30, 1984, the lower court issued a temporary restraining order directing the
Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in
the transaction. On November 20, 1984, however, the same court lifted its previous
order and denied the prayer for a writ of preliminary injunction.
After trial, the lower court rendered its decision on March 7, 1989. Confronting the issue
of whether or not the genuine pair of earrings used as consideration for the sale was
delivered by Dr. Cruz to petitioner, the lower court said:
The Court finds that the answer is definitely in the affirmative. Indeed, Dra. Cruz
delivered (the) subject jewelries (sic) into the hands of plaintiff who even raised the
same nearer to the lights of the lobby of the bank near the door. When asked by Dra.
Cruz if everything was in order, plaintiff even nodded his satisfaction (Hearing of Feb. 24,
1988). At that instance, plaintiff did not protest, complain or beg for additional time to
examine further the jewelries (sic). Being a professional banker and engaged in the
jewelry business plaintiff is conversant and competent to detect a fake diamond from the
real thing. Plaintiff was accorded the reasonable time and opportunity to ascertain and
inspect the jewelries (sic) in accordance with Article 1584 of the Civil Code. Plaintiff took
delivery of the subject jewelries (sic) before 6:00 p.m. of October 24, 1984. When he
went at 8:00 p.m. that same day to the residence of Atty. Belarmino already with a tester
complaining about some fake jewelries (sic), there was already undue delay because of
the lapse of a considerable length of time since he got hold of subject jewelries (sic). The
lapse of two (2) hours more or less before plaintiff complained is considered by the Court
as unreasonable delay.[3]
The lower court further ruled that all the elements of a valid contract under Article 1458
of the Civil Code were present, namely: (a) consent or meeting of the minds; (b)
determinate subject matter, and (c) price certain in money or its equivalent. The same
elements, according to the lower court, were present despite the fact that the agreement
between petitioner and Dr. Cruz was principally a barter contract. The lower court
explained thus:
x x x. Plaintiffs ownership over the Tanay property passed unto Dra. Cruz upon the
constructive delivery thereof by virtue of the Deed of Absolute Sale (Exh. D). On the
other hand, the ownership of Dra. Cruz over the subject jewelries (sic) transferred to the
plaintiff upon her actual personal delivery to him at the lobby of the Prudential Bank. It is
expressly provided by law that the thing sold shall be understood as delivered, when it is
placed in the control and possession of the vendee (Art. 1497, Civil Code; Kuenzle &
Straff vs. Watson & Co. 13 Phil. 26). The ownership and/or title over the jewelries (sic)
was transmitted immediately before 6:00 p.m. of October 24, 1984. Plaintiff signified his
approval by nodding his head. Delivery or tradition, is one of the modes of acquiring
ownership (Art. 712, Civil Code).
Similarly, when Exhibit D was executed, it was equivalent to the delivery of the Tanay
property in favor of Dra. Cruz. The execution of the public instrument (Exh. D) operates
as a formal or symbolic delivery of the Tanay property and authorizes the buyer, Dra.

Cruz to use the document as proof of ownership (Florendo v. Foz, 20 Phil. 399).More so,
since Exhibit D does not contain any proviso or stipulation to the effect that title to the
property is reserved with the vendor until full payment of the purchase price, nor is there
a stipulation giving the vendor the right to unilaterally rescind the contract the moment
the vendee fails to pay within a fixed period (Taguba v. Vda. De Leon, 132 SCRA 722;
Luzon Brokerage Co. Inc. vs. Maritime Building Co. Inc. 86 SCRA 305; Froilan v. Pan
Oriental Shipping Co. et al. 12 SCRA 276).[4]
Aside from concluding that the contract of barter or sale had in fact been consummated
when petitioner and Dr. Cruz parted ways at the bank, the trial court likewise dwelt on
the unexplained delay with which petitioner complained about the alleged fakery. Thus:
x x x. Verily, plaintiff is already estopped to come back after the lapse of considerable
length of time to claim that what he got was fake. He is a Business Management
graduate of La Salle University, Class 1978-79, a professional banker as well as a jeweler
in his own right. Two hours is more than enough time to make a switch of a Russian
diamond with the real diamond. It must be remembered that in July 1984 plaintiff made a
sketch of the subject jewelries (sic) at the Prudential Bank. Plaintiff had a tester at 8:00
p.m. at the residence of Atty. Belarmino. Why then did he not bring it out when he was
examining the subject jewelries (sic) at about 6:00 p.m. in the banks lobby? Obviously,
he had no need for it after being satisfied of the genuineness of the subject jewelries
(sic). When Dra. Cruz and plaintiff left the bank both of them had fully performed their
respective prestations. Once a contract is shown to have been consummated or fully
performed by the parties thereto, its existence and binding effect can no longer be
disputed. It is irrelevant and immaterial to dispute the due execution of a contract if both
of them have in fact performed their obligations thereunder and their respective
signatures and those of their witnesses appear upon the face of the document (Weldon
Construction v. CA G.R. No. L-35721, Oct. 12, 1987).[5]
Finally, in awarding damages to the defendants, the lower court remarked:
The Court finds that plaintiff acted in wanton bad faith. Exhibit 2-Belarmino purports to
show that the Tanay property is worth P25,000.00. However, also on that same day it
was executed, the propertys worth was magnified at P75,000.00 (Exh. 3-Belarmino). How
could in less than a day (Oct. 19, 1984) the value would (sic) triple under normal
circumstances? Plaintiff, with the assistance of his agents, was able to exchange the
Tanay property which his bank valued only at P25,000.00 in exchange for a genuine pair
of emerald cut diamond worth P200,000.00 belonging to Dra. Cruz. He also retrieved the
US$300.00 and jewelries (sic) from his agents. But he was not satisfied in being able to
get subject jewelries for a song. He had to file a malicious and unfounded case against
Dra. Cruz and Atty. Belarmino who are well known, respected and held in high esteem in
San Pablo City where everybody practically knows everybody. Plaintiff came to Court with
unclean hands dragging the defendants and soiling their clean and good name in the
process. Both of them are near the twilight of their lives after maintaining and nurturing
their good reputation in the community only to be stunned with a court case. Since the
filing of this case on October 26, 1984 up to the present they were living under a pall of

doubt. Surely, this affected not only their earning capacity in their practice of their
respective professions, but also they suffered besmirched reputations. Dra. Cruz runs her
own hospital and defendant Belarmino is a well respected legal practitioner.
The length of time this case dragged on during which period their reputation were (sic)
tarnished and their names maligned by the pendency of the case, the Court is of the
belief that some of the damages they prayed for in their answers to the complaint are
reasonably proportionate to the sufferings they underwent (Art. 2219, New Civil
Code).Moreover, because of the falsity, malice and baseless nature of the complaint
defendants were compelled to litigate. Hence, the award of attorneys fees is warranted
under the circumstances (Art. 2208, New Civil Code).[6]
From the trial courts adverse decision, petitioner elevated the matter to the Court of
Appeals. On October 20, 1992, the Court of Appeals, however, rendered a
decision[7]affirming in toto the lower courts decision. His motion for reconsideration
having been denied on October 19, 1993, petitioner now files the instant petition
alleging that:
I. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS COMPLAINT AND IN HOLDING
THAT THE PLAINTIFF ACTUALLY RECEIVED A GENUINE PAIR OF EMERALD CUT DIAMOND
EARRING(S) FROM DEFENDANT CRUZ x x x;
II. THE TRIAL COURT ERRED IN AWARDING MORAL AND EXEMPLARY DAMAGES AND
ATTORNEYS FEES IN FAVOR OF DEFENDANTS AND AGAINST THE PLAINTIFF IN THIS CASE;
and
III.THE TRIAL COURT ERRED IN NOT DECLARING THE DEED OF SALE OF THE TANAY
PROPERTY (EXH. `D) AS NULL AND VOID OR IN NOT ANNULLING THE SAME, AND IN
FAILING TO GRANT REASONABLE DAMAGES IN FAVOR OF THE PLAINTIFF. [8]
As to the first allegation, the Court observes that petitioner is essentially raising a factual
issue as it invites us to examine and weigh anew the facts regarding the genuineness of
the earrings bartered in exchange for the Tanay property. This, of course, we cannot do
without unduly transcending the limits of our review power in petitions of this nature
which are confined merely to pure questions of law. We accord, as a general rule,
conclusiveness to a lower courts findings of fact unless it is shown, inter alia, that:
(1) the conclusion is a finding grounded on speculations, surmises or conjectures;
(2) the inference is manifestly mistaken, absurd and impossible; (3) when there is a
grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; and (6) when the Court of Appeals, in
making its findings, went beyond the issues of the case and the same is contrary to the
admission of both parties.[9] We find nothing, however, that warrants the application of
any of these exceptions.
Consequently, this Court upholds the appellate courts findings of fact especially because
these concur with those of the trial court which, upon a thorough scrutiny of the records,
are firmly grounded on evidence presented at the trial.[10] To reiterate, this Courts

jurisdiction is only limited to reviewing errors of law in the absence of any showing that
the findings complained of are totally devoid of support in the record or that they are
glaringly erroneous as to constitute serious abuse of discretion.[11]
Nonetheless, this Court has to closely delve into petitioners allegation that the lower
courts decision of March 7, 1989 is a ready-made one because it was handed down a day
after the last date of the trial of the case.[12] Petitioner, in this
regard, finds it incredible that Judge J. Ausberto Jaramillo was able to write a 12-page
single-spaced decision, type it and release it on March 7, 1989, less than a day after the
last hearing on March 6, 1989. He stressed that Judge Jaramillo replaced Judge Salvador
de Guzman and heard only his rebuttal testimony.
This allegation is obviously no more than a desperate effort on the part of petitioner to
disparage the lower courts findings of fact in order to convince this Court to review the
same. It is noteworthy that Atty. Belarmino clarified that Judge Jaramillo had issued the
first order in the case as early as March 9, 1987 or two years before the rendition of the
decision. In fact, Atty. Belarmino terminated presentation of evidence on October 13,
1987, while Dr. Cruz finished hers on February 4, 1989, or more than a month prior to the
rendition of the judgment. The March 6, 1989 hearing was conducted solely for the
presentation of petitioner's rebuttal testimony.[13] In other words, Judge Jaramillo had
ample time to study the case and write the decision because the rebuttal evidence would
only serve to confirm or verify the facts already presented by the parties.
The Court finds nothing anomalous in the said situation. No proof has been adduced that
Judge Jaramillo was motivated by a malicious or sinister intent in disposing of the case
with dispatch. Neither is there proof that someone else wrote the decision for him. The
immediate rendition of the decision was no more than Judge Jaramillos compliance with
his duty as a judge to dispose of the courts business promptly and decide cases within
the required periods.[14] The two-year period within which Judge Jaramillo handled the
case provided him with all the time to study it and even write down its facts as soon as
these were presented to court. In fact, this Court does not see anything wrong in the
practice of writing a decision days before the scheduled promulgation of judgment and
leaving the dispositive portion for typing at a time close to the date of promulgation,
provided that no malice or any wrongful conduct attends its adoption. [15] The practice
serves the dual purposes of safeguarding the confidentiality of draft decisions and
rendering decisions with promptness. Neither can Judge Jaramillo be made
administratively answerable for the immediate rendition of the decision. The acts of a
judge which pertain to his judicial functions are not subject to disciplinary power unless
they are committed with fraud, dishonesty, corruption or bad faith. [16] Hence, in the
absence of sufficient proof to the contrary, Judge Jaramillo is presumed to have
performed his job in accordance with law and should instead be commended for his close
attention to duty.
Having disposed of petitioners first contention, we now come to the core issue of this
petition which is whether the Court of Appeals erred in upholding the validity of the
contract of barter or sale under the circumstances of this case.

The Civil Code provides that contracts are perfected by mere consent. From this
moment, the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law.[17] A contract of sale is perfected at the moment
there is a meeting of the minds upon the thing which is the object of the contract and
upon the price.[18] Being consensual, a contract of sale has the force of law between the
contracting parties and they are expected to abide in good faith by their respective
contractual commitments. Article 1358 of the Civil Code which requires the embodiment
of certain contracts in a public instrument, is only for convenience, [19] and registration of
the instrument only adversely affects third parties.[20] Formal requirements are, therefore,
for the benefit of third parties. Non-compliance therewith does not adversely affect the
validity of the contract nor the contractual rights and obligations of the parties
thereunder.
It is evident from the facts of the case that there was a meeting of the minds between
petitioner and Dr. Cruz. As such, they are bound by the contract unless there are reasons
or circumstances that warrant its nullification. Hence, the problem that should be
addressed in this case is whether or not under the facts duly established herein, the
contract can be voided in accordance with law so as to compel the parties to restore to
each other the things that have been the subject of the contract with their fruits, and the
price with interest.[21]
Contracts that are voidable or annullable, even though there may have been no damage
to the contracting parties are: (1) those where one of the parties is incapable of giving
consent to a contract; and (2) those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.[22] Accordingly, petitioner now stresses before this
Court that he entered into the contract in the belief that the pair of emerald-cut diamond
earrings was genuine. On the pretext that those pieces of jewelry turned out to be
counterfeit, however, petitioner subsequently sought the nullification of said contract on
the ground that it was, in fact, tainted with fraud[23] such that his consent was vitiated.
There is fraud when, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he
would not have agreed to.[24] The records, however, are bare of any evidence manifesting
that private respondents employed such insidious words or machinations to entice
petitioner into entering the contract of barter. Neither is there any evidence showing that
Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the
earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede
to petitioners proposal to buy the said jewelry. Rather, it appears that it was petitioner,
through his agents, who led Dr. Cruz to believe that the Tanay property was worth
exchanging for her jewelry as he represented that its value was P400,000.00 or more
than double that of the jewelry which was valued only at P160,000.00. If indeed
petitioners property was truly worth that much, it was certainly contrary to the nature of
a businessman-banker like him to have parted with his real estate for half its price. In

short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to
exchange her jewelry for the Tanay property.
Moreover, petitioner did not clearly allege mistake as a ground for nullification of the
contract of sale. Even assuming that he did, petitioner cannot successfully invoke the
same. To invalidate a contract, mistake must refer to the substance of the thing that is
the object of the contract, or to those conditions which have principally moved one or
both parties to enter into the contract.[25] An example of mistake as to the object of the
contract is the substitution of a specific thing contemplated by the parties with another.
[26]
In his allegations in the complaint, petitioner insinuated that an inferior one or one
that had only Russian diamonds was substituted for the jewelry he wanted to exchange
with his 10-hectare land. He, however, failed to prove the fact that prior to the delivery
of the jewelry to him, private respondents endeavored to make such substitution.
Likewise, the facts as proven do not support the allegation that petitioner himself could
be excused for the mistake. On account of his work as a banker-jeweler, it can be
rightfully assumed that he was an expert on matters regarding gems. He had the
intellectual capacity and the business acumen as a banker to take precautionary
measures to avert such a mistake, considering the value of both the jewelry and his
land. The fact that he had seen the jewelry before October 24, 1984 should not have
precluded him from having its genuineness tested in the presence of Dr. Cruz. Had he
done so, he could have avoided the present situation that he himself brought
about. Indeed, the finger of suspicion of switching the genuine jewelry for a fake
inevitably points to him. Such a mistake caused by manifest negligence cannot
invalidate a juridical act.[27] As the Civil Code provides, (t)here is no mistake if the party
alleging it knew the doubt, contingency or risk affecting the object of the contract. [28]
Furthermore, petitioner was afforded the reasonable opportunity required in Article 1584
of the Civil Code within which to examine the jewelry as he in fact accepted them when
asked by Dr. Cruz if he was satisfied with the same.[29] By taking the jewelry outside the
bank, petitioner executed an act which was more consistent with his exercise of
ownership over it. This gains credence when it is borne in mind that he himself had
earlier delivered the Tanay property to Dr. Cruz by affixing his signature to the contract of
sale. That after two hours he later claimed that the jewelry was not the one he intended
in exchange for his Tanay property, could not sever the juridical tie that now bound him
and Dr. Cruz. The nature and value of the thing he had taken preclude its return after
that supervening period within which anything could have happened, not excluding the
alteration of the jewelry or its being switched with an inferior kind.
Both the trial and appellate courts, therefore, correctly ruled that there were no legal
bases for the nullification of the contract of sale. Ownership over the parcel of land and
the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and petitioner,
respectively, upon the actual and constructive delivery thereof.[30] Said contract of sale
being absolute in nature, title passed to the vendee upon delivery of the thing sold since
there was no stipulation in the contract that title to the property sold has been reserved
in the seller until full payment of the price or that the vendor has the right to unilaterally

resolve the contract the moment the buyer fails to pay within a fixed period.[31] Such
stipulations are not manifest in the contract of sale.
While it is true that the amount of P40,000.00 forming part of the consideration was still
payable to petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate
the contract or bar the transfer of ownership and possession of the things exchanged
considering the fact that their contract is silent as to when it becomes due and
demandable.[32]
Neither may such failure to pay the balance of the purchase price result in the payment
of interest thereon. Article 1589 of the Civil Code prescribes the payment of interest by
the vendee for the period between the delivery of the thing and the payment of the price
in the following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand for the
payment of the price.
Not one of these cases obtains here. This case should, of course, be distinguished
from De la Cruz v. Legaspi,[33] where the court held that failure to pay the consideration
after the notarization of the contract as previously promised resulted in the vendees
liability for payment of interest. In the case at bar, there is no stipulation for the payment
of interest in the contract of sale nor proof that the Tanay property produced fruits or
income. Neither did petitioner demand payment of the price as in fact he filed an action
to nullify the contract of sale.
All told, petitioner appears to have elevated this case to this Court for the principal
reason of mitigating the amount of damages awarded to both private respondents which
petitioner considers as exorbitant. He contends that private respondents do not deserve
at all the award of damages. In fact, he pleads for the total deletion of the award as
regards private respondent Belarmino whom he considers a mere nominal party because
no specific claim for damages against him was alleged in the complaint. When he filed
the case, all that petitioner wanted was that Atty. Belarmino should return to him the
owners duplicate copy of TCT No. 320725, the deed of sale executed by Fr. Antonio
Jacobe, the deed of redemption and the check alloted for expenses. Petitioner alleges
further that Atty. Belarmino should not have delivered all those documents to Dr. Cruz
because as the lawyer for both the seller and the buyer in the sale contract, he should
have protected the rights of both parties. Moreover, petitioner asserts that there was no
firm basis for damages except for Atty. Belarminos uncorroborated testimony. [34]
Moral and exemplary damages may be awarded without proof of pecuniary loss. In
awarding such damages, the court shall take into account the circumstances obtaining in
the case and assess damages according to its discretion. [35] To warrant the award of
damages, it must be shown that the person to whom these are awarded has sustained

injury. He must likewise establish sufficient data upon which the court can properly base
its estimate of the amount of damages.[36] Statements of facts should establish such data
rather than mere conclusions or opinions of witnesses.[37] Thus:
x x x. For moral damages to be awarded, it is essential that the claimant must have
satisfactorily proved during the trial the existence of the factual basis of the damages
and its causal connection with the adverse partys acts. If the court has no proof or
evidence upon which the claim for moral damages could be based, such indemnity could
not be outrightly awarded. The same holds true with respect to the award of exemplary
damages where it must be shown that the party acted in a wanton, oppressive or
malevolent manner.[38]
In this regard, the lower court appeared to have awarded damages on a ground
analogous to malicious prosecution under Article 2219(8) of the Civil Code[39] as shown
by (1) petitioners wanton bad faith in bloating the value of the Tanay property which he
exchanged for a genuine pair of emerald-cut diamond worth P200,000.00; and (2) his
filing of a malicious and unfounded case against private respondents who were well
known, respected and held in high esteem in San Pablo City where everybody practically
knows everybody and whose good names in the twilight of their lives were soiled by
petitioners coming to court with unclean hands, thereby affecting their earning capacity
in the exercise of their respective professions and besmirching their reputation.
For its part, the Court of Appeals affirmed the award of damages to private respondents
for these reasons:
The malice with which Fule filed this case is apparent. Having taken possession of the
genuine jewelry of Dra. Cruz, Fule now wishes to return a fake jewelry to Dra. Cruz and,
more than that, get back the real property, which his bank owns. Fule has obtained a
genuine jewelry which he could sell anytime, anywhere and to anybody, without the
same being traced to the original owner for practically nothing. This is plain and simple,
unjust enrichment.[40]
While, as a rule, moral damages cannot be recovered from a person who has filed a
complaint against another in good faith because it is not sound policy to place a penalty
on the right to litigate,[41] the same, however, cannot apply in the case at bar. The factual
findings of the courts a quo to the effect that petitioner filed this case because he was
the victim of fraud; that he could not have been such a victim because he should have
examined the jewelry in question before accepting delivery thereof, considering his
exposure to the banking and jewelry businesses; and that he filed the action for the
nullification of the contract of sale with unclean hands, all deserve full faith and credit to
support the conclusion that petitioner was motivated more by ill will than a sincere
attempt to protect his rights in commencing suit against respondents.
As pointed out earlier, a closer scrutiny of the chain of events immediately prior to and
on October 24, 1984 itself would amply demonstrate that petitioner was not simply
negligent in failing to exercise due diligence to assure himself that what he was taking in
exchange for his property were genuine diamonds. He had rather placed himself in a

situation from which it preponderantly appears that his seeming ignorance was actually
just a ruse. Indeed, he had unnecessarily dragged respondents to face the travails of
litigation in speculating at the possible favorable outcome of his complaint when he
should have realized that his supposed predicament was his own making. We, therefore,
see here no semblance of an honest and sincere belief on his part that he was swindled
by respondents which would entitle him to redress in court. It must be noted that before
petitioner was able to convince Dr. Cruz to exchange her jewelry for the Tanay property,
petitioner took pains to thoroughly examine said jewelry, even going to the extent of
sketching their appearance. Why at the precise moment when he was about to take
physical possession thereof he failed to exert extra efforts to check their genuineness
despite the large consideration involved has never been explained at all by
petitioner. His acts thus failed to accord with what an ordinary prudent man would have
done in the same situation. Being an experienced banker and a businessman himself
who deliberately skirted a legal impediment in the sale of the Tanay property and to
minimize the capital gains tax for its exchange, it was actually gross recklessness for him
to have merely conducted a cursory examination of the jewelry when every opportunity
for doing so was not denied him. Apparently, he carried on his person a tester which he
later used to prove the alleged fakery but which he did not use at the time when it was
most needed. Furthermore, it took him two more hours of unexplained delay before he
complained that the jewelry he received were counterfeit. Hence, we stated earlier that
anything could have happened during all the time that petitioner was in complete
possession and control of the jewelry, including the possibility of substituting them with
fake ones, against which respondents would have a great deal of difficulty defending
themselves. The truth is that petitioner even failed to successfully prove during trial that
the jewelry he received from Dr. Cruz were not genuine. Add to that the fact that he had
been shrewd enough to bloat the Tanay propertys price only a few days after he
purchased it at a much lower value. Thus, it is our considered view that if this slew of
circumstances were connected, like pieces of fabric sewn into a quilt, they would
sufficiently demonstrate that his acts were not merely negligent but rather studied and
deliberate.
We do not have here, therefore, a situation where petitioners complaint was simply
found later to be based on an erroneous ground which, under settled jurisprudence,
would not have been a reason for awarding moral and exemplary damages.[42] Instead,
the cause of action of the instant case appears to have been contrived by petitioner
himself. In other words, he was placed in a situation where he could not honestly
evaluate whether his cause of action has a semblance of merit, such that it would require
the expertise of the courts to put it to a test. His insistent pursuit of such case then
coupled with circumstances showing that he himself was guilty in bringing about the
supposed wrongdoing on which he anchored his cause of action would render him
answerable for all damages the defendant may suffer because of it. This is precisely
what took place in the petition at bar and we find no cogent reason to disturb the
findings of the courts below that respondents in this case suffered considerable damages
due to petitioners unwarranted action.

WHEREFORE, the decision of the Court of Appeals dated October 20, 1992 is hereby
AFFIRMED in toto. Dr. Cruz, however, is ordered to pay petitioner the balance of the
purchase price of P40,000.00 within ten (10) days from the finality of this decision. Costs
against petitioner.
SO ORDERED.
GREGORIO FULE vs. COURT OF APPEALS, NINEVETCH CRUZ and
JUAN BELARMINO
[G.R. No. 112212. March 2, 1998]
Facts: Petitioner Gregorio Fule, a banker by profession and a jeweler at the same time,
acquired a 10-hectare property in Tanay, Rizal, which used to be under the name of Fr.
Antonio Jacobe. Petitioner, as corporate secretary of the bank, looked and found a buyer
who might be interested in the Tanay property, herein private respondent Dr. Ninevetch
Cruz. It so happened that at the time, petitioner had shown interest in buying a pair of
emerald-cut diamond earrings owned by Dr. Cruz which he had seen in January of the
same year when his mother examined and appraised them as genuine. Dr. Cruz,
however declined petitioners offer to buy the jewelry.
Subsequently, however, negotiations for the barter of the jewelry and the Tanay property
ensued. Dr. Cruz requested herein private respondent Atty. Juan Belarmino to check the
property who, in turn, found out that no sale or barter was feasible because the one-year
period for redemption of the said property had not yet expired at the time.
In an effort to cut through any legal impediment, petitioner executed, a deed of
redemption on behalf of Fr. Jacobe purportedly in the amount of P15,987.78, and on even
date, Fr. Jacobe sold the property to petitioner for P75,000.00.
As Dr. Cruz had already agreed to the proposed barter, petitioner went to Prudential
Bank once again to take a look at the jewelry. Petitioner, arrived at the residence of Atty.
Belarmino to finally execute a deed of absolute sale. Since the jewelry was appraised
only at P160,000.00, the parties agreed that the balance of P40,000.00 would just be
paid later in cash. Dr. Cruz opened the safety deposit box at around 6:00PM, retrieving a
transparent plastic or cellophane bag with the jewelry inside and handing over the same
to petitioner. The latter took the jewelry from the bag, went near the electric light at the
banks lobby, held the jewelry against the light and examined it for ten to fifteen
minutes. After a while, Dr. Cruz asked, Okay na ba iyan? Petitioner expressed his
satisfaction by nodding his head. Later, at about 8:00 oclock in the evening of the same
day, petitioner arrived at the residence of Atty. Belarmino complaining that the jewelry
given to him was fake. He then used a tester to prove the alleged fakery. Thereafter, the
group decided to go to the house of a certain Macario Dimayuga, a jeweler, to have the
earrings tested. Dimayuga, after taking one look at the earrings, immediately declared
them counterfeit.
Petitioner filed a complaint before the RTC against private respondents praying, among
other things, that the contract of sale over the Tanay property be declared null and void
on the ground of fraud and deceit.

Trial Court ruled in favour of Dr Cruz and that the contract of sale was valid. Moreover,
the trial court considered the lapse of two (2) hours (6:00 to 8:00) more or less before
plaintiff complained as unreasonable delay. The CA affirmed the decision in toto.
Issue: Whether or not under the facts duly established herein, the contract can be voided
in accordance with law so as to compel the parties to restore to each other the things
that have been the subject of the contract with their fruits, and the price with interest.
Held: NO. The Civil Code provides that contracts are perfected by mere consent. From
this moment, the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law.[17] A contract of sale is perfected at the
moment there is a meeting of the minds upon the thing which is the object of the
contract and upon the price. Being consensual, a contract of sale has the force of law
between the contracting parties and they are expected to abide in good faith by their
respective contractual commitments. Article 1358 of the Civil Code which requires the
embodiment of certain contracts in a public instrument, is only for convenience,[19] and
registration of the instrument only adversely affects third parties. Formal requirements
are, therefore, for the benefit of third parties. Non-compliance therewith does not
adversely affect the validity of the contract nor the contractual rights and obligations of
the parties thereunder.
Contracts that are voidable or annullable, even though there may have been no damage
to the contracting parties are: (1) those where one of the parties is incapable of giving
consent to a contract; and (2) those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud. Accordingly, petitioner now stresses before this
Court that he entered into the contract in the belief that the pair of emerald-cut diamond
earrings was genuine. On the pretext that those pieces of jewelry turned out to be
counterfeit, however, petitioner subsequently sought the nullification of said contract on
the ground that it was, in fact, tainted with fraud such that his consent was vitiated.
There is fraud when, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he
would not have agreed to. The records, however, are bare of any evidence manifesting
that private respondents employed such insidious words or machinations to entice
petitioner into entering the contract of barter. Neither is there any evidence showing that
Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the
earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede
to petitioners proposal to buy the said jewelry. Rather, it appears that it was petitioner,
through his agents, who led Dr. Cruz to believe that the Tanay property was worth
exchanging for her jewelry as he represented that its value was P400,000.00 or more
than double that of the jewelry which was valued only at P160,000.00. If indeed
petitioners property was truly worth that much, it was certainly contrary to the nature of
a businessman-banker like him to have parted with his real estate for half its price. In
short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to
exchange her jewelry for the Tanay property.

Moreover, petitioner did not clearly allege mistake as a ground for nullification of the
contract of sale. Even assuming that he did, petitioner cannot successfully invoke the
same. To invalidate a contract, mistake must refer to the substance of the thing that is
the object of the contract, or to those conditions which have principally moved one or
both parties to enter into the contract.[25] An example of mistake as to the object of
the contract is the substitution of a specific thing contemplated by the parties with
another. In his allegations in the complaint, petitioner insinuated that an inferior one or
one that had only Russian diamonds was substituted for the jewelry he wanted to
exchange with his 10-hectare land. He, however, failed to prove the fact that prior to the
delivery of the jewelry to him, private respondents endeavored to make such
substitution.
Likewise, the facts as proven do not support the allegation that petitioner himself could
be excused for the mistake. On account of his work as a banker-jeweler, it can be
rightfully assumed that he was an expert on matters regarding gems. Indeed, the finger
of suspicion of switching the genuine jewelry for a fake inevitably points to him. Such a
mistake caused by manifest negligence cannot invalidate a juridical act. As the Civil
Code provides, (t)here is no mistake if the party alleging it knew the doubt, contingency
or risk affecting the object of the contract.
Both the trial and appellate courts, therefore, correctly ruled that there were no legal
bases for the nullification of the contract of sale. Ownership over the parcel of land and
the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and petitioner,
respectively, upon the actual and constructive delivery thereof. Said contract of sale
being absolute in nature, title passed to the vendee upon delivery of the thing sold since
there was no stipulation in the contract that title to the property sold has been reserved
in the seller until full payment of the price or that the vendor has the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed period. Such
stipulations are not manifest in the contract of sale.

G.R. No. L-11827

July 31, 1961

FERNANDO A. GAITE, plaintiff-appellee,


vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO., INC.,
SEGUNDINA VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR and FERNANDO
TY, defendants-appellants.

Alejo Mabanag for plaintiff-appellee.


Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance because the claims
involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself or
in a representative capacity, of 11 iron lode mineral claims, known as the Dawahan
Group, situated in the municipality of Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier constituted
and appointed plaintiff-appellee Fernando A. Gaite as his true and lawful attorney-in-fact
to enter into a contract with any individual or juridical person for the exploration and
development of the mining claims aforementioned on a royalty basis of not less than
P0.50 per ton of ore that might be extracted therefrom. On March 19, 1954, Gaite in turn
executed a general assignment (Record on Appeal, pp. 17-19) conveying the
development and exploitation of said mining claims into the Larap Iron Mines, a single
proprietorship owned solely by and belonging to him, on the same royalty basis provided
for in Exhibit "3". Thereafter, Gaite embarked upon the development and exploitation of
the mining claims in question, opening and paving roads within and outside their
boundaries, making other improvements and installing facilities therein for use in the
development of the mines, and in time extracted therefrom what he claim and estimated
to be approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted by
him to Gaite to exploit and develop the mining claims in question, and Gaite assented
thereto subject to certain conditions. As a result, a document entitled "Revocation of
Power of Attorney and Contract" was executed on December 8, 1954 (Exhibit
"A"),wherein Gaite transferred to Fonacier, for the consideration of P20,000.00, plus 10%
of the royalties that Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or outside said claims, the right
to use the business name "Larap Iron Mines" and its goodwill, and all the records and
documents relative to the mines. In the same document, Gaite transferred to Fonacier all
his rights and interests over the "24,000 tons of iron ore, more or less" that the former
had already extracted from the mineral claims, in consideration of the sum of
P75,000.00, P10,000.00 of which was paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from and out of
the first letter of credit covering the first shipment of iron ores and of the first amount
derived from the local sale of iron ore made by the Larap Mines & Smelting Co. Inc., its
assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to execute
in favor of Gaite a surety bond, and pursuant to the promise, Fonacier delivered to Gaite
a surety bond dated December 8, 1954 with himself (Fonacier) as principal and the Larap

Mines and Smelting Co. and its stockholders George Krakower, Segundina Vivas, Pacifico
Escandor, Francisco Dante, and Fernando Ty as sureties (Exhibit "A-1"). Gaite testified,
however, that when this bond was presented to him by Fonacier together with the
"Revocation of Power of Attorney and Contract", Exhibit "A", on December 8, 1954, he
refused to sign said Exhibit "A" unless another bond under written by a bonding company
was put up by defendants to secure the payment of the P65,000.00 balance of their price
of the iron ore in the stockpiles in the mining claims. Hence, a second bond, also dated
December 8, 1954 (Exhibit "B"),was executed by the same parties to the first bond
Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as additional surety, but it
provided that the liability of the surety company would attach only when there had been
an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less
then P65,000.00, and that, furthermore, the liability of said surety company would
automatically expire on December 8, 1955. Both bonds were attached to the "Revocation
of Power of Attorney and Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite and the
two executed and signed the "Revocation of Power of Attorney and Contract", Exhibit "A",
Fonacier entered into a "Contract of Mining Operation", ceding, transferring, and
conveying unto the Larap Mines and Smelting Co., Inc. the right to develop, exploit, and
explore the mining claims in question, together with the improvements therein and the
use of the name "Larap Iron Mines" and its good will, in consideration of certain royalties.
Fonacier likewise transferred, in the same document, the complete title to the
approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap &
Smelting Co., in consideration for the signing by the company and its stockholders of the
surety bonds delivered by Fonacier to Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far
Eastern Surety and Insurance Company, no sale of the approximately 24,000 tons of iron
ore had been made by the Larap Mines & Smelting Co., Inc., nor had the P65,000.00
balance of the price of said ore been paid to Gaite by Fonacier and his sureties payment
of said amount, on the theory that they had lost right to make use of the period given
them when their bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24"). And
when Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the
present complaint against them in the Court of First Instance of Manila (Civil Case No.
29310) for the payment of the P65,000.00 balance of the price of the ore, consequential
damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform defense that the obligation
sued upon by Gaite was subject to a condition that the amount of P65,000.00 would be
payable out of the first letter of credit covering the first shipment of iron ore and/or the
first amount derived from the local sale of the iron ore by the Larap Mines & Smelting
Co., Inc.; that up to the time of the filing of the complaint, no sale of the iron ore had
been made, hence the condition had not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable. Defendant Fonacier also contended that

only 7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite was
actually delivered, and counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of evidence to two
issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00
become due and demandable when the defendants failed to renew the surety bond
underwritten by the Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which
expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant
Fonacier were actually in existence in the mining claims when these parties executed the
"Revocation of Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to pay
plaintiff the P65,000.00 balance of the price of the approximately 24,000 tons of iron ore
was one with a term: i.e., that it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or before December 8, 1955; that
the giving of security was a condition precedent to Gait's giving of credit to defendants;
and that as the latter failed to put up a good and sufficient security in lieu of the Far
Eastern Surety bond (Exhibit "B") which expired on December 8, 1955, the obligation
became due and demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have
approximately 24,000 tons of iron ore at the mining claims in question at the time of the
execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to
pay him, jointly and severally, P65,000.00 with interest at 6% per annum from December
9, 1955 until payment, plus costs. From this judgment, defendants jointly appealed to
this Court.
During the pendency of this appeal, several incidental motions were presented for
resolution: a motion to declare the appellants Larap Mines & Smelting Co., Inc. and
George Krakower in contempt, filed by appellant Fonacier, and two motions to dismiss
the appeal as having become academic and a motion for new trial and/or to take judicial
notice of certain documents, filed by appellee Gaite. The motion for contempt is
unmeritorious because the main allegation therein that the appellants Larap Mines &
Smelting Co., Inc. and Krakower had sold the iron ore here in question, which allegedly is
"property in litigation", has not been substantiated; and even if true, does not make
these appellants guilty of contempt, because what is under litigation in this appeal is
appellee Gaite's right to the payment of the balance of the price of the ore, and not the
iron ore itself. As for the several motions presented by appellee Gaite, it is unnecessary
to resolve these motions in view of the results that we have reached in this case, which
we shall hereafter discuss.

The main issues presented by appellants in this appeal are:


(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay
appellee Gaite the P65,000.00 (balance of the price of the iron ore in question)is one
with a period or term and not one with a suspensive condition, and that the term expired
on December 8, 1955; and
(2) that the lower court erred in not holding that there were only 10,954.5 tons in the
stockpiles of iron ore sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the contract Exhibit
"A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his
rights and interests over the 24,000 tons of iron ore, more or less, above-referred to
together with all his rights and interests to operate the mine in consideration of the sum
of SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which the latter binds to pay as
follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from and out of
the first letter of credit covering the first shipment of iron ore made by the Larap Mines &
Smelting Co., Inc., its assigns, administrators, or successors in interest.
We find the court below to be legally correct in holding that the shipment or local sale of
the iron ore is not a condition precedent (or suspensive) to the payment of the balance of
P65,000.00, but was only a suspensive period or term. What characterizes a conditional
obligation is the fact that its efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and uncertain event; so that
if the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed. That the parties to the contract Exhibit "A" did
not intend any such state of things to prevail is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's obligation to pay:
"The balance of Sixty-Five Thousand Pesos (P65,000.00) will be paid out of the first letter
of credit covering the first shipment of iron ores . . ." etc. There is no uncertainty that the
payment will have to be made sooner or later; what is undetermined is merely the exact
date at which it will be made. By the very terms of the contract, therefore, the existence
of the obligation to pay is recognized; only its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not only does each one of the
parties assume a correlative obligation (the seller to deliver and transfer ownership of
the thing sold and the buyer to pay the price),but each party anticipates performance by
the other from the very start. While in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other understands that he assumes the
risk of receiving nothing for what he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course of business to do so; hence, the

contingent character of the obligation must clearly appear. Nothing is found in the record
to evidence that Gaite desired or assumed to run the risk of losing his right over the ore
without getting paid for it, or that Fonacier understood that Gaite assumed any such risk.
This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the
P65,000.00, an not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and
the company's stockholders, but also on one by a surety company; and the fact that
appellants did put up such bonds indicates that they admitted the definite existence of
their obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or shipment
of the ore as a condition precedent, would be tantamount to leaving the payment at the
discretion of the debtor, for the sale or shipment could not be made unless the
appellants took steps to sell the ore. Appellants would thus be able to postpone payment
indefinitely. The desireability of avoiding such a construction of the contract Exhibit "A"
needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the
parties indented a suspensive condition or a suspensive period (dies ad quem) for the
payment of the P65,000.00, the rules of interpretation would incline the scales in favor of
"the greater reciprocity of interests", since sale is essentially onerous. The Civil Code of
the Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of
interests.
and there can be no question that greater reciprocity obtains if the buyer' obligation is
deemed to be actually existing, with only its maturity (due date) postponed or deferred,
that if such obligation were viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was a sale
on credit, and not an aleatory contract where the transferor, Gaite, would assume the
risk of not being paid at all; and that the previous sale or shipment of the ore was not a
suspensive condition for the payment of the balance of the agreed price, but was
intended merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his
sureties, still have the right to insist that Gaite should wait for the sale or shipment of the
ore before receiving payment; or, in other words, whether or not they are entitled to take
full advantage of the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the right court below
that the appellants have forfeited the right to compel Gaite to wait for the sale of the ore
before receiving payment of the balance of P65,000.00, because of their failure to renew
the bond of the Far Eastern Surety Company or else replace it with an equivalent
guarantee. The expiration of the bonding company's undertaking on December 8, 1955
substantially reduced the security of the vendor's rights as creditor for the unpaid
P65,000.00, a security that Gaite considered essential and upon which he had insisted

when he executed the deed of sale of the ore to Fonacier (Exhibit "A"). The case squarely
comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has
promised.
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration
plainly impaired the securities given to the creditor (appellee Gaite), unless immediately
renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety
company's bond with full knowledge that on its face it would automatically expire within
one year was a waiver of its renewal after the expiration date. No such waiver could have
been intended, for Gaite stood to lose and had nothing to gain barely; and if there was
any, it could be rationally explained only if the appellants had agreed to sell the ore and
pay Gaite before the surety company's bond expired on December 8, 1955. But in the
latter case the defendants-appellants' obligation to pay became absolute after one year
from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his rights
in demanding payment and instituting this action one year from and after the contract
(Exhibit "A") was executed, either because the appellant debtors had impaired the
securities originally given and thereby forfeited any further time within which to pay; or
because the term of payment was originally of no more than one year, and the balance
of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really
24,000 tons of iron ore in the stockpiles sold by appellee Gaite to appellant Fonacier, and
whether, if there had been a short-delivery as claimed by appellants, they are entitled to
the payment of damages, we must, at the outset, stress two things:first, that this is a
case of a sale of a specific mass of fungible goods for a single price or a lump sum, the
quantity of "24,000 tons of iron ore, more or less," stated in the contract Exhibit "A,"
being a mere estimate by the parties of the total tonnage weight of the mass;
and second, that the evidence shows that neither of the parties had actually measured
of weighed the mass, so that they both tried to arrive at the total quantity by making an
estimate of the volume thereof in cubic meters and then multiplying it by the estimated
weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore because no provision
was made in their contract for the measuring or weighing of the ore sold in order to

complete or perfect the sale, nor was the price of P75,000,00 agreed upon by the parties
based upon any such measurement.(see Art. 1480, second par., New Civil Code). The
subject matter of the sale is, therefore, a determinate object, the mass, and not the
actual number of units or tons contained therein, so that all that was required of the
seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass,
notwithstanding that the quantity delivered is less than the amount estimated by them
(Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. 171 So. 872,
applying art. 2459 of the Louisiana Civil Code). There is no charge in this case that Gaite
did not deliver to appellants all the ore found in the stockpiles in the mining claims in
questions; Gaite had, therefore, complied with his promise to deliver, and appellants in
turn are bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy, not a
definite mass, but approximately 24,000 tons of ore, so that any substantial difference in
this quantity delivered would entitle the buyers to recover damages for the shortdelivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or weighed
the whole mass of ore cubic meter by cubic meter, or ton by ton. Both parties predicate
their respective claims only upon an estimated number of cubic meters of ore multiplied
by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the stockpiles
of ore that he sold to Fonacier, while appellants contend that by actual measurement,
their witness Cirpriano Manlagit found the total volume of ore in the stockpiles to be
only 6.609 cubic meters. As to the average weight in tons per cubic meter, the parties
are again in disagreement, with appellants claiming the correct tonnage factor to be 2.18
tons to a cubic meter, while appellee Gaite claims that the correct tonnage factor is
about 3.7.
In the face of the conflict of evidence, we take as the most reliable estimate of the
tonnage factor of iron ore in this case to be that made by Leopoldo F. Abad, chief of the
Mines and Metallurgical Division of the Bureau of Mines, a government pensionado to the
States and a mining engineering graduate of the Universities of Nevada and California,
with almost 22 years of experience in the Bureau of Mines. This witness placed the
tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to
5 metric tons as maximum. This estimate, in turn, closely corresponds to the average
tonnage factor of 3.3 adopted in his corrected report (Exhibits "FF" and FF-1") by
engineer Nemesio Gamatero, who was sent by the Bureau of Mines to the mining claims
involved at the request of appellant Krakower, precisely to make an official estimate of
the amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles
made by appellant's witness Cipriano Manlagit is correct, if we multiply it by the
average tonnage factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons, which
is not very far from the estimate of 24,000 tons made by appellee Gaite, considering that

actual weighing of each unit of the mass was practically impossible, so that a reasonable
percentage of error should be allowed anyone making an estimate of the exact quantity
in tons found in the mass. It must not be forgotten that the contract Exhibit "A" expressly
stated the amount to be 24,000 tons, more or less. (ch. Pine River Logging &
Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would entitle appellants to the
payment of damages, nor could Gaite have been guilty of any fraud in making any
misrepresentation to appellants as to the total quantity of ore in the stockpiles of the
mining claims in question, as charged by appellants, since Gaite's estimate appears to
be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we hereby affirm the same,
with costs against appellants.
Gaite vs. Fonacier, [G.R. No. L-11827, July 31, 1961]
Facts: Defendant-appellant Fonacier was the owner/holder of 11 iron lode mineral
claims, known as the Dawahan Group, situated in Camrines Norte.

By Deed of Assignment, Respondent constituted and appointed plaintiff-appellee Gaite


as attorney-in-fact to enter into contract for the exploration and development of the said
mining claims on. On March 1954, petitioner executed a general assignment conveying
the claims into the Larap Iron Mines, which owned solely and belonging to him.
Thereafter, he underwent development and the exploitation for the mining claims which
he estimates to be approximately 24 metric tons of iron ore.

However, Fonacier decide to revoke the authority given to Gaite, whereas respondent
assented subject to certain conditions. Consequently a revocation of Power of Attorney
and Contract was executed transferring P20k plus royalties from the mining claims, all
rights and interest on the road and other developments done, as well as , the right to use
of the business name, goodwill, records, documents related to the mines. Furthermore,
included in the transfer was the rights and interest over the 24K+ tons of iron ore that
had been extracted. Lastly the balance of P65K was to be paid for covering the first
shipment of iron ores.

To secure the payment of P65k, respondent executed a surety bond with himself as
principal, the Larap Mines and Smelting Co. and its stockholder as sureties. Yet, this was
refused by petitioner. Appellefurther required another bond underwritten by a bonding
company to secure the payment of the balance. Hence a second bond was produced with
Far Eastern Surety as an additional surety, provided the liability of Far Eastern would only

prosper when there had been an actual sale of the iron ores of not less than the agreed
amount of P65k, moreover, its liability was to automatically expire on December 1955.

On December 1955, the second bond had expired and no sale amounting to the
stipulation as prior agreed nor had the balance been paid to petitioner by respondent.
Thus such failure, prompted petitioner to file a complaint in the CFI of Manila for the
payment of the balance and other damages.

The Trial Court ruled in favor of plaintiff ordering defendant to pay the balance of P65k
with interest. Afterwards an appeal was affected by the respondent where several
motions were presented for resolution: a motion for contempt; two motions to dismiss
the appeal for becoming moot and academic; motion for a new trial, filed by appellee
Gaite. The motion for contempt was held unmeritorious, while the rest of the motions
were held unnecessary to resolve

Issue: Whether or not the Lower Court erred in holding the obligation
of appellant Fonacier to pay appelle Gaite the balance of P65k, as one with a period
or term and not one with a suspensive condition; and that the term expired on December
1955

Held: No error was found, affirming the decision of the lower court. Gaite acted within
his rights in demanding payment and instituting this action one year from and after the
contract was executed, either because the appellant debtors had impaired the securities
originally given and thereby forfeited any further time within which to pay; or because
the term of payment was originally of no more than one year, and the balance of P65k,
became due and payable thereafter.

The Lower Court was legally correct in holding the shipment or sale of the iron ore is not
a condition or suspensive to the payment of the balance of P65k, but was only a
suspensive period or term. What characterizes a conditional obligation is the fact that its
efficacy or obligatory force as distinguished from its demandability, is subordinated to
the happening of a future and uncertain event; so that if the suspensive condition does
not take place, the parties would stand as if the conditional obligation had never
existed.

The sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where
the transferor, Gaite, would assume the risk of not being paid at all; and that

the previous sale or shipment of the ore was not a suspensive condition for the payment
of the balance of the agreed price, but was intended merely to fix the future date of the
payment.

While as to the right of Fonacier to insist that Gaite should wait for the sale or shipment
of the ore before receiving payment; or, in other words, whether or not they are entitled
to take full advantage of the period granted them for making the payment.
The appellant had indeed have forfeited the right to compel Gaite to wait for the sale of
the ore before receiving payment of the balance of P65,000.00, because of their failure
to renew the bond of the Far Eastern Surety Company or else replace it with an
equivalent guarantee. The expiration of the bonding company's undertaking on
December 8, 1955 substantially reduced the security of the vendor's rights as creditor
for the unpaid P65,000.00, a security that Gaite considered essential and upon which he
had insisted when he executed thedeed of sale of the ore to Fonacier (first bond).

Under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: ART. 1198.
The debtor shall lose every right to make use of the period: (2) When he does not
furnish to the creditor the guaranties or securities which he has promised. (3) When by
his own acts he has impaired said guaranties or securities after their establishment, and
when through fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory.

Appellants' failure to renew or extend the surety company's bond upon its expiration
plainly impaired the securities given to the creditor (appellee Gaite), unless immediately
renewed or replaced.

Nevertheless, there is no merit in appellants' argument that Gaite's acceptance of the


surety company's bond with full knowledge that on its face it would automatically expire
within one year was a waiver of its renewal after the expiration date. No such waiver
could have been intended, for Gaite stood to lose and had nothing to gain barely; and if
there was any, it could be rationally explained only if the appellants had agreed to sell
the ore and pay Gaite before the surety company's bond expired on December 8, 1955.
But in the latter case the defendants-appellants' obligation to pay became absolute after
one year from the transfer of the ore to Fonacier by virtue of the deed, first bond.