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SALES CASES PARTIAL LIST

1. Silvestre Dignos and Isabel Lumungsod vs. CA and Atilano Jabil GR No.
L-59266
G.R. No. L-59266 February 29, 1988
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.

BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the: (1)
Decision * of the 9th Division, Court of Appeals dated July 31,1981, affirming
with modification the Decision, dated August 25, 1972 of the Court of First
Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre
T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorneyin-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution
dated December 16, 1981, denying defendant-appellant's (Petitioner's)
motion for reconsideration, for lack of merit.
The undisputed facts as found by the Court of Appeals are as follows:
The Dignos spouses were owners of a parcel of land, known as
Lot No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On
June 7, 1965, appellants (petitioners) Dignos spouses sold the
said parcel of land to plaintiff-appellant (respondent Atilano J.
Jabil) for the sum of P28,000.00, payable in two installments, with
an assumption of indebtedness with the First Insular Bank of
Cebu in the sum of P12,000.00, which was paid and
acknowledged by the vendors in the deed of sale (Exh. C)
executed in favor of plaintiff-appellant, and the next installment
in the sum of P4,000.00 to be paid on or before September 15,
1965.
On November 25, 1965, the Dignos spouses sold the same land
in favor of defendants spouses, Luciano Cabigas and Jovita L. De
Cabigas, who were then U.S. citizens, for the price of P35,000.00.
A deed of absolute sale (Exh. J, also marked Exh. 3) was executed
by the Dignos spouses in favor of the Cabigas spouses, and

which was registered in the Office of the Register of Deeds


pursuant to the provisions of Act No. 3344.
As the Dignos spouses refused to accept from plaintiff-appellant
the balance of the purchase price of the land, and as plaintiffappellant discovered the second sale made by defendantsappellants to the Cabigas spouses, plaintiff-appellant brought the
present suit. (Rollo, pp. 27-28)
After due trial, the Court of first Instance of Cebu rendered its Decision on
August 25,1972, the decretal portion of which reads:
WHEREFORE, the Court hereby declares the deed of sale
executed on November 25, 1965 by defendant Isabela L. de
Dignos in favor of defendant Luciano Cabigas, a citizen of the
United States of America, null and void ab initio, and the deed of
sale executed by defendants Silvestre T. Dignos and Isabela
Lumungsod de Dignos not rescinded. Consequently, the plaintiff
Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen
Thousand Pesos (P16,000.00) to the defendants-spouses upon
the execution of the Deed of absolute Sale of Lot No. 3453, Opon
Cadastre and when the decision of this case becomes final and
executory.
The plaintiff Atilano G. Jabil is ordered to reimburse the
defendants Luciano Cabigas and Jovita L. de Cabigas, through
their attorney-in-fact, Panfilo Jabalde, reasonable amount
corresponding to the expenses or costs of the hollow block fence,
so far constructed.
It is further ordered that defendants-spouses Silvestre T. Dignos
and Isabela Lumungsod de Dignos should return to defendantsspouses Luciano Cabigas and Jovita L. de Cabigas the sum of
P35,000.00, as equity demands that nobody shall enrich himself
at the expense of another.
The writ of preliminary injunction issued on September 23, 1966,
automatically becomes permanent in virtue of this decision.
With costs against the defendants.
From the foregoing, the plaintiff (respondent herein) and defendants-spouss
(petitioners herein) appealed to the Court of Appeals, which appeal was

docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T.


Dignos, et al."
On July 31, 1981, the Court of Appeals affirmed the decision of the lower
court except as to the portion ordering Jabil to pay for the expenses incurred
by the Cabigas spouses for the building of a fence upon the land in question.
The disposive portion of said decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the
modification of the judgment as pertains to plaintiff-appellant
above indicated, the judgment appealed from is hereby
AFFIRMED in all other respects.
With costs against defendants-appellants.
SO ORDERED.
Judgment MODIFIED.
A motion for reconsideration of said decision was filed by the defendantsappellants (petitioners) Dignos spouses, but on December 16, 1981, a
resolution was issued by the Court of Appeals denying the motion for lack of
merit.
Hence, this petition.
In the resolution of February 10, 1982, the Second Division of this Court
denied the petition for lack of merit. A motion for reconsideration of said
resolution was filed on March 16, 1982. In the resolution dated April 26,1982,
respondents were required to comment thereon, which comment was filed on
May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance
with the resolution of June 16,1 982. On August 9,1982, acting on the motion
for reconsideration and on all subsequent pleadings filed, this Court resolved
to reconsider its resolution of February 10, 1982 and to give due course to
the instant petition. On September 6, 1982, respondents filed a rejoinder to
reply of petitioners which was noted on the resolution of September 20,
1982.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY,
INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C,
HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP

OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND NOT MERELY A


CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN
MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT,
EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS
THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL.
II
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY
APPLYING AND OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS
WARRANTING THE ERRONEOUS CONCLUSION THAT THE NOTICE OF
RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY
DEMANDED NOR IS IT A NOTARIAL ACT.
III
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE
APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE
AND ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF
DAMAGES AND ATTORNEY'S FEES TO PETITIONERS.
IV
PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN
DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN HANDS.
V
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN
AFFIRMING WITH MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO
GRAVE MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF
THE TERMS OF THE QUESTIONED CONTRACT AND THE LAW APPLICABLE
THERETO.
The foregoing assignment of errors may be synthesized into two main issues,
to wit:
I. Whether or not subject contract is a deed of absolute sale or a
contract Lot sell.
II. Whether or not there was a valid rescission thereof.
There is no merit in this petition.
It is significant to note that this petition was denied by the Second Division of
this Court in its Resolution dated February 1 0, 1 982 for lack of merit, but on

motion for reconsideration and on the basis of all subsequent pleadings filed,
the petition was given due course.
I.
The contract in question (Exhibit C) is a Deed of Sale, with the following
conditions:
1. That Atilano G..Jabilis to pay the amount of Twelve Thousand
Pesos P12,000.00) Phil. Philippine Currency as advance payment;
2. That Atilano G. Jabil is to assume the balance of Twelve
Thousand Pesos (P12,000.00) Loan from the First Insular Bank of
Cebu;
3. That Atilano G. Jabil is to pay the said spouses the balance of
Four. Thousand Pesos (P4,000.00) on or before September
15,1965;
4. That the said spouses agrees to defend the said Atilano G. Jabil
from other claims on the said property;
5. That the spouses agrees to sign a final deed of absolute sale in
favor of Atilano G. Jabil over the above-mentioned property upon
the payment of the balance of Four Thousand Pesos. (Original
Record, pp. 10-11)
In their motion for reconsideration, petitioners reiterated their contention
that the Deed of Sale (Exhibit "C") is a mere contract to sell and not an
absolute sale; that the same is subject to two (2) positive suspensive
conditions, namely: the payment of the balance of P4,000.00 on or before
September 15,1965 and the immediate assumption of the mortgage of
P12,000.00 with the First Insular Bank of Cebu. It is further contended that in
said contract, title or ownership over the property was expressly reserved in
the vendor, the Dignos spouses until the suspensive condition of full and
punctual payment of the balance of the purchase price shall have been met.
So that there is no actual sale until full payment is made (Rollo, pp. 51-52).
In bolstering their contention that Exhibit "C" is merely a contract to sell,
petitioners aver that there is absolutely nothing in Exhibit "C" that indicates
that the vendors thereby sell, convey or transfer their ownership to the
alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private
instrument and the absence of a formal deed of conveyance is a very strong

indication that the parties did not intend "transfer of ownership and title but
only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners
anchored their contention on the very terms and conditions of the contract,
more particularly paragraph four which reads, "that said spouses has agreed
to sell the herein mentioned property to Atilano G. Jabil ..." and condition
number five which reads, "that the spouses agrees to sign a final deed of
absolute sale over the mentioned property upon the payment of the balance
of four thousand pesos."
Such contention is untenable.
By and large, the issues in this case have already been settled by this Court
in analogous cases.
Thus, it has been held that a deed of sale is absolute in nature although
denominated as a "Deed of Conditional Sale" where nowhere in the contract
in question is a proviso or stipulation to the effect that title to the property
sold is reserved in the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period Taguba v.
Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building
Co., Inc., 86 SCRA 305).
A careful examination of the contract shows that there is no such stipulation
reserving the title of the property on the vendors nor does it give them the
right to unilaterally rescind the contract upon non-payment of the balance
thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article
1458 of the Civil Code, are present, such as: (1) consent or meeting of the
minds; (2) determinate subject matter; and (3) price certain in money or its
equivalent. In addition, Article 1477 of the same Code provides that "The
ownership of the thing sold shall be transferred to the vendee upon actual or
constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental
Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of
stipulation to the contrary, the ownership of the thing sold passes to the
vendee upon actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of the land
sold in the case at bar, as subject Deed of Sale is a private instrument, it is
beyond question that there was actual delivery thereof. As found by the trial
court, the Dignos spouses delivered the possession of the land in question to

Jabil as early as March 27,1965 so that the latter constructed thereon Sally's
Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan
White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on
September 1, 1965. Such facts were admitted by petitioner spouses
(Decision, Civil Case No. 23-L; Record on Appeal, p. 108).
Moreover, the Court of Appeals in its resolution dated December 16,1981
found that the acts of petitioners, contemporaneous with the contract,
clearly show that an absolute deed of sale was intended by the parties and
not a contract to sell.
Be that as it may, it is evident that when petitioners sold said land to the
Cabigas spouses, they were no longer owners of the same and the sale is
null and void.
II.
Petitioners claim that when they sold the land to the Cabigas spouses, the
contract of sale was already rescinded.
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is
on all fours with the case at bar, the contract of sale being absolute in nature
is governed by Article 1592 of the Civil Code. It is undisputed that petitioners
never notified private respondents Jabil by notarial act that they were
rescinding the contract, and neither did they file a suit in court to rescind the
sale. The most that they were able to show is a letter of Cipriano Amistad
who, claiming to be an emissary of Jabil, informed the Dignos spouses not to
go to the house of Jabil because the latter had no money and further advised
petitioners to sell the land in litigation to another party (Record on Appeal, p.
23). As correctly found by the Court of Appeals, there is no showing that
Amistad was properly authorized by Jabil to make such extra-judicial
rescission for the latter who, on the contrary, vigorously denied having sent
Amistad to tell petitioners that he was already waiving his rights to the land
in question. Under Article 1358 of the Civil Code, it is required that acts and
contracts which have for their object the extinguishment of real rights over
immovable property must appear in a public document.
Petitioners laid considerable emphasis on the fact that private respondent
Jabil had no money on the stipulated date of payment on September 15,1965
and was able to raise the necessary amount only by mid-October 1965.

It has been ruled, however, that "where time is not of the essence of the
agreement, a slight delay on the part of one party in the performance of his
obligation is not a sufficient ground for the rescission of the agreement"
(Taguba v. Vda. de Leon, supra). Considering that private respondent has
only a balance of P4,000.00 and was delayed in payment only for one month,
equity and justice mandate as in the aforecited case that Jabil be given an
additional period within which to complete payment of the purchase price.
WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the
assailed decision of the Court of Appeals is Affirmed in toto.
SO ORDERED.
2. Coronel et. al. vs. CA, Alcaraz GR No. 103577
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 Florida 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.

MELO, J.:p
The petition before us has its roots in a complaint for specific performance to
compel herein petitioners (except the last named, Catalina Balais Mabanag)
to consummate the sale of a parcel of land with its improvements located
along Roosevelt Avenue in Quezon City entered into by the parties sometime
in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in
this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et
al. (hereinafter referred to as Coronels) executed a document
entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff

Ramona Patricia Alcaraz (hereinafter referred to as Ramona)


which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 Total amount
50,000 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 abovestated.
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
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 thereof,
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 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 attorney's
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 petitioner before the new presiding
judge of the Quezon City RTC but the same was denied by Judge Estrella T.
Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the
decision and to render anew decision by the undersigned
Presiding Judge should be denied for the following reasons: (1)
The instant case became submitted for decision as of April 14,
1988 when the parties terminated the presentation of their
respective documentary evidence and when the Presiding Judge
at that time was Judge Reynaldo Roura. The fact that they were
allowed to file memoranda at some future date did not change
the fact that the hearing of the case was terminated before Judge
Roura and therefore the same should be submitted to him for
decision; (2) When the defendants and intervenor did not object
to the authority of Judge Reynaldo Roura to decide the case prior
to the rendition of the decision, when they met for the first time
before the undersigned Presiding Judge at the hearing of a
pending incident in Civil Case No. Q-46145 on November 11,
1988, they were deemed to have acquiesced thereto and they
are now estopped from questioning said authority of Judge Roura
after they received the decision in question which happens to be
adverse to them; (3) While it is true that Judge Reynaldo Roura
was merely a Judge-on-detail at this Branch of the Court, he was
in all respects the Presiding Judge with full authority to act on any
pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide or
resolve such 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 court's 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
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 absolute sale.
Plainly, such variance in the contending parties' contentions 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 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 is 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 seller's obligation to
sell the subject property by entering into a contract of sale with the
prospective buyer becomes demandable as provided in Article 1479 of the
Civil Code 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 if 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-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. Applying Article 1544 of the
Civil Code, such second buyer of the property who may have had actual or
constructive knowledge of such defect in the seller's title, or at least was
charged with the obligation to discover such defect, cannot be a registrant in
good faith. Such second buyer cannot defeat the first buyer's title. In case a
title is issued to the second buyer, the first buyer may seek reconveyance of
the property subject of the sale.
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 petitioner's 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 properly to private respondent upon the fulfillment
of the suspensive condition. On the contrary, having already agreed to sell
the subject property, they undertook to have the certificate of title changed

to their names and immediately thereafter, to execute the written deed of


absolute sale.
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 full ownership of the subject house and lot to
the buyer if the documents were then in order. It just 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 one 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 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 Court significantly notes 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 the 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 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 only to the suspensive
condition that the sellers shall effect the issuance of new certificate title from
that of their father's 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 obligation 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 be 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
decedent's 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 breached 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 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 petitioner-sellers' act of
unilaterally and extradicially rescinding the contract of sale, there being no
express stipulation authorizing the sellers to extarjudicially 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, Ramona's mother, who had acted for
and in behalf of her daughter, if not also in her own behalf. Indeed, the down
payment was made by Concepcion D. Alcaraz with her own personal check
(Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no
evidence showing that petitioners ever questioned Concepcion's authority to
represent Ramona P. Alcaraz when they accepted her personal check. Neither
did they raise any objection as regards payment being effected by a third
person. Accordingly, as far as petitioners are concerned, the physical
absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale.

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. Ramona's
corresponding obligation to pay the balance of the purchase price in the
amount of P1,190,000.00 (as buyer) never became due and demandable
and, therefore, she cannot be deemed to have been in default.
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 xxx 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 if be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in
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 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 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 buyer's rights except when the second
buyer first registers in good faith the second sale (Olivares vs.
Gonzales, 159 SCRA 33). Conversely, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first
to register, since knowledge taints his registration with bad faith
(see also Astorga vs. Court of Appeals, G.R. No. 58530, 26
December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June
1984, 129 SCRA 656), it has held that it is essential, to merit the
protection of Art. 1544, second paragraph, that the second realty
buyer must act in good faith in registering his deed of sale (citing
Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA,
G.R.
No.
95843,
02
September
1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993
Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at bar was
annoted 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 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 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.
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 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.
(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.
3. Virgilio Romero vs. CA and Enriqueta Chua Vda. De Ongsiong GR No.
107207
G.R. No. 107207 November 23, 1995
VIRGILIO R. ROMERO, petitioner,
vs.
HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG,
respondents.

VITUG, J.:
The parties pose this question: May the vendor demand the rescission of a
contract for the sale of a parcel of land for a cause traceable to his own
failure to have the squatters on the subject property evicted within the
contractually-stipulated period?
Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of
production, manufacture and exportation of perlite filter aids, permalite
insulation and processed perlite ore. In 1988, petitioner and his foreign
partners decided to put up a central warehouse in Metro Manila on a land
area of approximately 2,000 square meters. The project was made known to
several freelance real estate brokers.
A day or so after the announcement, Alfonso Flores and his wife,
accompanied by a broker, offered a parcel of land measuring 1,952 square
meters. Located in Barangay San Dionisio, Paraaque, Metro Manila, the lot
was covered by TCT No. 361402 in the name of private respondent Enriqueta

Chua vda. de Ongsiong. Petitioner visited the property and, except for the
presence of squatters in the area, he found the place suitable for a central
warehouse.
Later, the Flores spouses called on petitioner with a proposal that should he
advance the amount of P50,000.00 which could be used in taking up an
ejectment case against the squatters, private respondent would agree to sell
the property for only P800.00 per square meter. Petitioner expressed his
concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional
Sale," was executed between petitioner and private respondent. The simplydrawn contract read:
DEED OF CONDITIONAL SALE
KNOW ALL MEN BY THESE PRESENTS:
This Contract, made and executed in the Municipality of Makati,
Philippines this 9th day of June, 1988 by and between:
ENRIQUETA CHUA VDA. DE ONGSIONG, of legal age,
widow, Filipino and residing at 105 Simoun St.,
Quezon City, Metro Manila, hereinafter referred to as
the VENDOR;
-andVIRGILIO R. ROMERO, married to Severina L. Lat, of
Legal age, Filipino, and residing at 110 San Miguel St.,
Plainview
Subd.,
Mandaluyong
Metro
Manila,
hereinafter referred to as the VENDEE:
W I T N E S S E T H : That
WHEREAS, the VENDOR is the owner of One (1) parcel of land
with a total area of ONE THOUSAND NINE HUNDRED FIFTY TWO
(1,952) SQUARE METERS, more or less, located in Barrio San
Dionisio, Municipality of Paraaque, Province of Rizal, covered by
TCT No. 361402 issued by the Registry of Deeds of Pasig and
more particularly described as follows:
xxx xxx xxx
WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of
land and the VENDOR has accepted the offer, subject to the
terms and conditions hereinafter stipulated:

NOW, THEREFORE, for and in consideration of the sum of ONE


MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED
PESOS (P1,561,600.00) ONLY, Philippine Currency, payable by
VENDEE to in to (sic) manner set forth, the VENDOR agrees to
sell to the VENDEE, their heirs, successors, administrators,
executors, assign, all her rights, titles and interest in and to the
property mentioned in the FIRST WHEREAS CLAUSE, subject to
the following terms and conditions:
1. That the sum of FIFTY THOUSAND PESOS
(P50,000.00) ONLY Philippine Currency, is to be paid
upon signing and execution of this instrument.
2. The balance of the purchase price in the amount of
ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX
HUNDRED PESOS (P1,511,600.00) ONLY shall be paid
45 days after the removal of all squatters from the
above described property.
3. Upon full payment of the overall purchase price as
aforesaid, VENDOR without necessity of demand shall
immediately sign, execute, acknowledged (sic) and
deliver the corresponding deed of absolute sale in
favor of the VENDEE free from all liens and
encumbrances and all Real Estate taxes are all paid
and updated.
It is hereby agreed, covenanted and stipulated by and between
the parties hereto that if after 60 days from the date of the
signing of this contract the VENDOR shall not be able to remove
the squatters from the property being purchased, the
downpayment made by the buyer shall be returned/reimbursed
by the VENDOR to the VENDEE.
That in the event that the VENDEE shall not be able to pay the
VENDOR the balance of the purchase price of ONE MILLION FIVE
HUNDRED
ELEVEN
THOUSAND
SIX
HUNDRED
PESOS
(P1,511,600.00) ONLY after 45 days from written notification to
the VENDEE of the removal of the squatters from the property
being purchased, the FIFTY THOUSAND PESOS (P50,000.00)

previously paid as downpayment shall be forfeited in favor of the


VENDOR.
Expenses for the registration such as registration fees,
documentary stamp, transfer fee, assurances and such other
fees and expenses as may be necessary to transfer the title to
the name of the VENDEE shall be for the account of the VENDEE
while capital gains tax shall be paid by the VENDOR.
IN WITNESS WHEREOF, the parties hereunto signed those (sic)
presents in the City of Makati MM, Philippines on this 9th day of
June, 1988.
(Sgd.) (Sgd.)
VIRGILIO R. ROMERO ENRIQUETA CHUA VDA.
DE ONGSIONG
Vendee Vendor
SIGNED IN THE PRESENCE OF:
(Sgd.) (Sgd.)
Rowena C. Ongsiong Jack M. Cruz 1
Alfonso Flores, in behalf of private respondent, forthwith received and
acknowledged a check for P50,000.00 2 from petitioner. 3
Pursuant to the agreement, private respondent filed a complaint for
ejectment (Civil Case No. 7579) against Melchor Musa and 29 other squatter
families with the Metropolitan Trial Court of Paraaque. A few months later,
or on 21 February 1989, judgment was rendered ordering the defendants to
vacate the premises. The decision was handed down beyond the 60-day
period (expiring 09 August 1988) stipulated in the contract. The writ of
execution of the judgment was issued, still later, on 30 March 1989.
In a letter, dated 07 April 1989, private respondent sought to return the
P50,000.00 she received from petitioner since, she said, she could not "get
rid of the squatters" on the lot. Atty. Sergio A.F. Apostol, counsel for
petitioner, in his reply of 17 April 1989, refused the tender and stated:.
Our client believes that with the exercise of reasonable diligence
considering the favorable decision rendered by the Court and the

writ of execution issued pursuant thereto, it is now possible to


eject the squatters from the premises of the subject property, for
which reason, he proposes that he shall take it upon himself to
eject the squatters, provided, that expenses which shall be
incurred by reason thereof shall be chargeable to the purchase
price of the land. 4
Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"),
through its Regional Director for Luzon, Farley O. Viloria, asked the
Metropolitan Trial Court of Paraaque for a grace period of 45 days from 21
April 1989 within which to relocate and transfer the squatter families. Acting
favorably on the request, the court suspended the enforcement of the writ of
execution accordingly.
On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of
the 45-day grace period and his client's willingness to "underwrite the
expenses for the execution of the judgment and ejectment of the occupants."
5
In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private
respondent, advised Atty. Apostol that the Deed of Conditional Sale had been
rendered null and void by virtue of his client's failure to evict the squatters
from the premises within the agreed 60-day period. He added that private
respondent had "decided to retain the property." 6
On 23 June 1989, Atty. Apostol wrote back to explain:
The contract of sale between the parties was perfected from the
very moment that there was a meeting of the minds of the
parties upon the subject lot and the price in the amount of
P1,561,600.00. Moreover, the contract had already been partially
fulfilled and executed upon receipt of the downpayment of your
client. Ms. Ongsiong is precluded from rejecting its binding
effects relying upon her inability to eject the squatters from the
premises of subject property during the agreed period. Suffice it
to state that, the provision of the Deed of Conditional Sale do not
grant her the option or prerogative to rescind the contract and to
retain the property should she fail to comply with the obligation
she has assumed under the contract. In fact, a perusal of the
terms and conditions of the contract clearly shows that the right

to rescind the contract and to demand the return/reimbursement


of the downpayment is granted to our client for his protection.
Instead, however, of availing himself of the power to rescind the
contract and demand the return, reimbursement of the
downpayment, our client had opted to take it upon himself to
eject the squatters from the premises. Precisely, we refer you to
our letters addressed to your client dated April 17, 1989 and June
8, 1989.
Moreover, it is basic under the law on contracts that the power to
rescind is given to the injured party. Undoubtedly, under the
circumstances, our client is the injured party.
Furthermore, your client has not complied with her obligation
under their contract in good faith. It is undeniable that Ms.
Ongsiong deliberately refused to exert efforts to eject the
squatters from the premises of the subject property and her
decision to retain the property was brought about by the sudden
increase in the value of realties in the surrounding areas.
Please consider this letter as a tender of payment to your client
and a demand to execute the absolute Deed of Sale. 7
A few days later (or on 27 June 1989), private respondent, prompted by
petitioner's continued refusal to accept the return of the P50,000.00 advance
payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case
No. 89-4394 for rescission of the deed of "conditional" sale, plus damages,
and for the consignation of P50,000.00 cash.
Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias
writ of execution in Civil Case No. 7579 on motion of private respondent but
the squatters apparently still stayed on.
Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of
Makati 8 rendered decision holding that private respondent had no right to
rescind the contract since it was she who "violated her obligation to eject the
squatters from the subject property" and that petitioner, being the injured
party, was the party who could, under Article 1191 of the Civil Code, rescind
the agreement. The court ruled that the provisions in the contract relating to
(a) the return/reimbursement of the P50,000.00 if the vendor were to fail in
her obligation to free the property from squatters within the stipulated period

or (b), upon the other hand, the sum's forfeiture by the vendor if the vendee
were to fail in paying the agreed purchase price, amounted to "penalty
clauses". The court added:
This Court is not convinced of the ground relied upon by the
plaintiff in seeking the rescission, namely: (1) he (sic) is afraid of
the squatters; and (2) she has spent so much to eject them from
the premises (p. 6, tsn, ses. Jan. 3, 1990). Militating against her
profession of good faith is plaintiffs conduct which is not in
accord with the rules of fair play and justice. Notably, she caused
the issuance of an alias writ of execution on August 25, 1989
(Exh. 6) in the ejectment suit which was almost two months after
she filed the complaint before this Court on June 27, 1989. If she
were really afraid of the squatters, then she should not have
pursued the issuance of an alias writ of execution. Besides, she
did not even report to the police the alleged phone threats from
the squatters. To the mind of the Court, the so-called squatter
factor is simply factuitous (sic). 9
The lower court, accordingly, dismissed the complaint and ordered,
instead, private respondent to eject or cause the ejectment of the
squatters from the property and to execute the absolute deed of
conveyance upon payment of the full purchase price by petitioner.
Private respondent appealed to the Court of Appeals. On 29 May 1992, the
appellate court rendered its decision. 10 It opined that the contract entered
into by the parties was subject to a resolutory condition, i.e., the ejectment
of the squatters from the land, the non-occurrence of which resulted in the
failure of the object of the contract; that private respondent substantially
complied with her obligation to evict the squatters; that it was petitioner who
was not ready to pay the purchase price and fulfill his part of the contract,
and that the provision requiring a mandatory return/reimbursement of the
P50,000.00 in case private respondent would fail to eject the squatters within
the 60-day period was not a penal clause. Thus, it concluded.
WHEREFORE, the decision appealed from is REVERSED and SET
ASIDE, and a new one entered declaring the contract of
conditional sale dated June 9, 1988 cancelled and ordering the
defendant-appellee to accept the return of the downpayment in

the amount of P50,000.00 which was deposited in the court


below. No pronouncement as to costs. 11
Failing to obtain a reconsideration, petitioner filed this petition for review on
certiorari raising issues that, in fine, center on the nature of the contract
adverted to and the P50,000.00 remittance made by petitioner.
A perfected contract of sale may either be absolute or conditional 12
depending on whether the agreement is devoid of, or subject to, any
condition imposed on the passing of title of the thing to be conveyed or on
the obligation of a party thereto. When ownership is retained until the
fulfillment of a positive condition the breach of the condition will simply
prevent the duty to convey title from acquiring an obligatory force. If the
condition is imposed on an obligation of a party which is not complied with,
the other party may either refuse to proceed or waive said condition (Art.
1545, Civil Code). Where, of course, the condition is imposed upon the
perfection of the contract itself, the failure of such condition would prevent
the juridical relation itself from coming into existence. 13
In determining the real character of the contract, the title given to it by the
parties is not as much significant as its substance. For example, a deed of
sale, although denominated as a deed of conditional sale, may be treated as
absolute in nature, if title to the property sold is not reserved in the vendor
or if the vendor is not granted the right to unilaterally rescind the contract
predicated
on the fulfillment or non-fulfillment, as the case may be, of the prescribed
condition. 14
The term "condition" in the context of a perfected contract of sale pertains,
in reality, to the compliance by one party of an undertaking the fulfillment of
which would beckon, in turn, the demandability of the reciprocal prestation of
the other party. The reciprocal obligations referred to would normally be, in
the case of vendee, the payment of the agreed purchase price and, in the
case of the vendor, the fulfillment of certain express warranties (which, in
the case at bench is the timely eviction of the squatters on the property).
It would be futile to challenge the agreement here in question as not being a
duly perfected contract. A sale is at once perfected when a person (the
seller) obligates himself, for a price certain, to deliver and to transfer

ownership of a specified thing or right to another (the buyer) over which the
latter agrees. 15
The object of the sale, in the case before us, was specifically identified to be
a 1,952-square meter lot in San Dionisio, Paraaque, Rizal, covered by
Transfer Certificate of Title No. 361402 of the Registry of Deeds for Pasig and
therein technically described. The purchase price was fixed at P1,561,600.00,
of which P50,000.00 was to be paid upon the execution of the document of
sale and the balance of P1,511,600.00 payable "45 days after the removal of
all squatters from the above described property."
From the moment the contract is perfected, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good
faith, usage and law. Under the agreement, private respondent is obligated
to evict the squatters on the property. The ejectment of the squatters is a
condition the operative act of which sets into motion the period of
compliance by petitioner of his own obligation, i.e., to pay the balance of the
purchase price. Private respondent's failure "to remove the squatters from
the property" within the stipulated period gives petitioner the right to either
refuse to proceed with the agreement or waive that condition in consonance
with Article 1545 of the Civil Code. 16 This option clearly belongs to
petitioner and not to private respondent.
We share the opinion of the appellate court that the undertaking required of
private respondent does not constitute a "potestative condition dependent
solely on his will" that might, otherwise, be void in accordance with Article
1182 of the Civil Code 17 but a "mixed" condition "dependent not on the will
of the vendor alone but also of third persons like the squatters and
government agencies and personnel concerned." 18 We must hasten to add,
however, that where the so-called "potestative condition" is imposed not on
the birth of the obligation but on its fulfillment, only the obligation is avoided,
leaving unaffected the obligation itself. 19
In contracts of sale particularly, Article 1545 of the Civil Code,
aforementioned, allows the obligee to choose between proceeding with the
agreement or waiving the performance of the condition. It is this provision
which is the pertinent rule in the case at bench. Here, evidently, petitioner

has waived the performance of the condition imposed on private respondent


to free the property from squatters. 20
In any case, private respondent's action for rescission is not warranted. She
is not the injured party. 21 The right of resolution of a party to an obligation
under Article 1191 of the Civil Code is predicated on a breach of faith by the
other party that violates the reciprocity between them. 22 It is private
respondent who has failed in her obligation under the contract. Petitioner did
not breach the agreement. He has agreed, in fact, to shoulder the expenses
of the execution of the judgment in the ejectment case and to make
arrangements with the sheriff to effect such execution. In his letter of 23 June
1989, counsel for petitioner has tendered payment and demanded forthwith
the execution of the deed of absolute sale. Parenthetically, this offer to pay,
having been made prior to the demand for rescission, assuming for the sake
of argument that such a demand is proper under Article 1592 23 of the Civil
Code, would likewise suffice to defeat private respondent's prerogative to
rescind thereunder.
There is no need to still belabor the question of whether the P50,000.00
advance payment is reimbursable to petitioner or forfeitable by private
respondent, since, on the basis of our foregoing conclusions, the matter has
ceased to be an issue. Suffice it to say that petitioner having opted to
proceed with the sale, neither may petitioner demand its reimbursement
from private respondent nor may private respondent subject it to forfeiture.
WHEREFORE, the questioned decision of the Court of Appeals is hereby
REVERSED AND SET ASIDE, and another is entered ordering petitioner to pay
private respondent the balance of the purchase price and the latter to
execute the deed of absolute sale in favor of petitioner. No costs.
SO ORDERED.
4. Arra Realty Corp and sps. Arguelles vs. Guarantee Development Corp
GR No. 142310
G.R. No. 142310

September 20, 2004

ARRA REALTY CORPORATION and SPOUSES CARLOS ARGUELLES and


REMEDIOS DELA RAMA ARGUELLES, petitioners,
vs.

GUARANTEE DEVELOPMENT CORPORATION AND INSURANCE AGENCY


and ENGR. ERLINDA EALOZA, respondents.
DECISION
CALLEJO, SR., J.:
Arra Realty Corporation (ARC) was the owner of a parcel of land, located in
Alvarado Street, Legaspi Village, Makati City, covered by Transfer Certificate
of Title (TCT) No. 112269 issued by the Register of Deeds. 1 Through its
president, Architect Carlos D. Arguelles, the ARC decided to construct a fivestory building on its property and engaged the services of Engineer Erlinda
Pealoza as project and structural engineer. In the process, Pealoza and the
ARC, through Carlos Arguelles, agreed on November 18, 1982 that Pealoza
would share the purchase price of one floor of the building, consisting of 552
square meters for the price of P3,105,838: P901,738, payable within sixty
(60) days from November 20, 1982, and the balance payable in twenty (20)
equal quarterly installments of P110,205. The parties further agreed that the
payments of Pealoza would be credited to her account in partial payment of
her stock subscription in the ARCs capital stock. 2 Sometime in May 1983,
Pealoza took possession of the one-half portion of the second floor, with an
area of 552 square meters3 where she put up her office and operated the St.
Michael International Institute of Technology. Unknown to her, ARC had
executed a real estate mortgage over the lot and the entire building in favor
of the China Banking Corporation as security for a loan on May 12, 1983. 4
The deed was annotated at the dorsal portion of TCT No. 112269 on June 3,
1983.5 From February 23, 1983 to May 31, 1984, Pealoza paid
P1,175,124.59 for the portion of the second floor of the building she had
purchased from the ARC.6 She learned that the property had been
mortgaged to the China Banking Corporation sometime in July 1984.
Thereafter, she stopped paying the installments due on the purchase price of
the property.
Pealoza wrote the China Banking Corporation on August 1, 1984 informing
the bank that the ARC had conveyed a portion of the second floor of the
building to her, and that she had paid P1,175,124.59 out of the total price of
P3,105,838. She offered to open an account with the bank in her name in the
amount of P300,000, and to make monthly deposits of P50,000 each, to

serve as payments of the equivalent loan of the ARC upon the execution of
the appropriate documents. She also proposed for the bank to assist her in
requesting the ARC to execute a deed of absolute sale over the portion of the
second floor she had purchased and the issuance of the title in her name
upon the payment of the purchase price. 7 However, the bank rejected her
proposal.8 She then wrote the ARC on August 31, 1984 informing it of China
Banking Corporations rejection of her offer to assume its equivalent loan
from the bank and reminded it that it had conformed to her proposal to
assume the payment of its loan from the bank up to the equivalent amount
of the balance of the purchase price of the second floor of the building as
agreed upon, and the consequent execution by the ARC of a deed of absolute
sale over the property in her favor. 9 Pealoza then sent a copy of a deed of
absolute sale with assumption of mortgage for the ARCs consideration, and
informed the latter that, in the meantime, she was withholding installment
payments.10 On October 3, 1984, Pealoza transferred the school to another
building she had purchased, but retained her office therein. She later
discovered that her office had been padlocked.11 She had the office
reopened and continued holding office thereat. To protect her rights as
purchaser, she executed on November 26, 1984 an affidavit of adverse claim
over the property which was annotated at the dorsal portion of TCT No.
112269 on November 27, 1984.12 However, the adverse claim was cancelled
on February 11, 1985.13
When the ARC failed to pay its loan to China Banking Corporation, the
subject property was foreclosed extrajudicially, and, thereafter, sold at public
auction to China Banking Corporation on August 13, 1986 for
P13,953,171.07.14 On April 29, 1987, the ARC and the Guarantee
Development Corporation and Insurance Agency (GDCIA) executed a deed of
conditional sale covering the building and the lot for P22,000,000, part of
which was to be used to redeem the property from China Banking
Corporation.15 With the money advanced by the GDCIA, the property was
redeemed on May 4, 1987. 16 On May 14, 1987, the petitioner executed a
deed of absolute sale over the lot and building in favor of the GDCIA for
P22,000,000.17 The ARC obliged itself under the deed to deliver possession
of the property without any occupants therein. The Register of Deeds,

thereafter, issued TCT No. 147846 in favor of the GDCIA over the property
without any liens or encumbrances on May 15, 1987. 18 Of the purchase
price of P22,000,000, the GDCIA retained P1,000,000 to answer for any
damages arising from any suits of the occupants of the building.
On May 28, 1987, Pealoza filed a complaint against the ARC, the GDCIA,
and the Spouses Arguelles, with the Regional Trial Court of Makati, Branch
61, for "specific performance or damages" with a prayer for a writ of
preliminary injunction.
Pealoza prayed for the following reliefs:
WHEREFORE, it is most respectfully prayed of this Honorable Court that

1.- Before hearing, a temporary restraining order immediately


issue;
2.- After notice and hearing, and the filing of an injunction bond,
a preliminary injunction be issued forthwith enjoining and
restraining the defendant Register of Deeds for Makati, Metro
Manila, from receiving and registering any document
transferring, conveying, encumbering or, otherwise, alienating
the land and edifice covered by Transfer Certificate of Title No.
112269 of said Registry of Deeds and from issuing a new title
therefor;
3.- After hearing and trial
(a) Ordering defendants ARRA and Arguelles to execute a
deed of sale in favor of plaintiff over the second floor of
that 5-storey edifice built on 119 Alvarado Street, Legaspi
Village, Makati, Metro Manila, simultaneously with the
tender of the remaining balance on the purchase price
thereon;
(b) Ordering defendants ARRA and Arguelles, jointly and
severally, to pay the plaintiff such moral damages as may
be proved during the trial;
(c) Ordering defendants ARRA and Arguelles, jointly and
severally, to pay the plaintiff exemplary damages in such

amount as may be deem (sic) just, sufficient and equitable


as exempary (sic) damages;
(d) Ordering defendants ARRA and Arguelles, jointly and
severally, to pay the plaintiff an amount equivalent to 20%
of whatever she may recover herein as and for attorneys
fees; P500.00 per appearance of counsel in Court; and
miscellaneous litigation expenses and cost of suit;
4.- On the Alternative Cause of Action, in the event that specific
performance cannot be effected for any reason, to render
judgment in favor of the plaintiff and against the defendants
(a) Ordering the defendants, jointly and reveraaly (sic), to
restitute to the plaintiff the sum of P1,444,124.59 with
interest thereon at bank borrowing rate from August 1984
until the same is finally wholly returned;
(b) Ordering the defendants, jointly and severally, to pay
the plaintiff the difference between the selling price on the
second floor of the 5-storey edifice after deducting
P1,444,124.59 therefrom;
(c)
Directing
defendant
Guarantee
Development
Corporation & Insurance Agency to deposit with the
Honorable Court any amount still in its possession on the
purchase price of the land and the 5-storey edifice in
question;
(d) Ordering the defendants, jointly and severally, to pay
the plaintiff moral and exemplary damages as may be
proved during the trial and/or as this Honorable Court may
deem just, adequate and equitable in the premises;
(e) Ordering the defendants, jointly and severally, to pay
the plaintiff an amount equivalent to 20% of whatever she
may recover from the defendants in this suit as and for
attorneys fees, litigation expenses and costs.
PLAINTIFF further prays for such other reliefs and remedies as may be
just and equitable in the premises19
On her first cause of action, Pealoza alleged, inter alia:

2.- That on or about November 18, 1982, the plaintiff and defendant
ARRA represented by its President and General Manager, defendant
Arguelles, entered into an agreement whereby for and in consideration
of the amount of P3,105,828.00 on a deferred payment plan payable in
five (5) years, defendants ARRA and Arguelles agreed to sell to the
plaintiff one (1) whole floor of a prospective 5-storey building which
said defendants planned to build on a 992 square meter lot located at
119 Alvarado Street, Legaspi Village, Makati, Metro Manila, covered by
Transfer Certificate of Title No. 112269 of the Registry of Deeds for
Makati, Metro Manila, copy of which agreement is hereto attached as
Annex "A" and made integral part hereof ;
3.- That consonant with the aforementioned agreement between the
plaintiff and defendants ARRA and Arguelles, the former paid to said
defendants the total amount of P1,377,124.59 as evidenced by
receipts and cash vouchers copies of which are hereto attached as
Annexes "B," "B-1" to "B-10" and made integral parts hereof;
4.- That upon completion of the 5-storey edifice on May 31, 1984, the
plaintiff made her choice of the second floor thereof as the subject
matter or object of the sale in her favor, and with the express
knowledge and consent of defendants ARRA and Arguelles, she
immediately took possession and occupied the same as contained in a
certification to said effect of the defendants, and where they further
certified that the certificate of condominium corresponding to the
second floor "is presently under process," copy of said certification is
hereto attached as Annex "C" hereof;
5.- That sometime in August 1984, the plaintiff learned that the
defendants ARRA and Arguelles, conspiring with one another in a clear
and unmistakeably (sic) scheme to defraud the plaintiff of her
investment on the second floor of the 5-storey edifice, mortgaged the
land and the building covered by Transfer Certificate of Title No.
112269 of the Registry of Deeds for Makati, Metro Manila, with the
China Banking Corporation in order to secure the payment of their loan
in the total sum of P6,500,000.00 without the knowledge and/or
consent of the plaintiff;
6.- That after verifying the fact of mortgage with the China Banking
Corporation and realizing the risk of loss of her investment of
P1,377,124.59 she had so far paid on the purchase price of the second

floor of the 5-storey edifice, the plaintiff wrote the defendants ARRA
and Arguelles on August 31, 1984 proposing to defendants ARRA and
Arguelles the execution of a deed of sale with assumption of mortgage
in her favor of the portion of the loan corresponding to the second floor
of the said edifice and informing them of her resolve to hold further
payments on the purchase price of the second floor until her rights and
interest over the same shall have been adequately and properly
secured, copy of said letter is hereto attached as Annex "D" hereof;
7.- That in order to facilitate the transaction and expeditious execution
of the sale over the second floor in her favor, the plaintiff had a Deed
of Sale with Assumption of Mortgage prepared and forwarded the same
to defendants ARRA and Arguelles for their consideration and signature
with an accompanying letter therefor dated September 25, 1984, copy
of said draft of a deed of sale with assumption of mortgage and the
accompanying letter therefor are hereto attached as Annexes "E"
and"E-1," respectively;
8.- That by reason of the unjustified, unwarranted and malicious
inaction and/or refusal and failure of the defendants ARRA and
Arguelles to comply with plaintiffs perfectly valid and legal demand for
the execution of a document of sale over the second floor of the 5storey edifice, and in order to protect her rights and interest in said
transaction, the plaintiff caused to be prepared and executed an
affidavit of Adverse Claim and effected the annotation thereof on
Transfer Certificate of Title No. 112269 of the Registry of Deeds for
Makati, M.M., copy of said Adverse Claim is hereto attached as Annex
"F" hereof.20
On her second cause of action, Pealoza alleged, as follows:
9.- That after her occupation and taking possession of the second floor
of the said 5-storey edifice, the plaintiff caused the installation of a
water tank and water pumps thereto;
10.- That the water tank installed on the second floor of the 5-storey
edifice involved an outlay of P15,000.00 as evidenced by Cash
Vouchers, copies of which are hereto attached as Annexes "G" and "G1," while the water pumps involved the disbursement of P52,000.00
from the funds of the plaintiff as evidenced by Cash Vouchers, copies of
which are hereto attached as Annexes "H," "H-1" hereof;

11.- That when the defendants ARRA and Arguelles mortgaged with
(sic) land and the 5-storey edifice to the China Banking Corporation,
the mortgage included the water tank and water pumps servicing the
second floor thereof installed by the plaintiff;21
Pealoza caused the annotation of the notice of lis pendens at the dorsal
portion of TCT No. 112269.
The GDCIA interposed the following affirmative and special defenses in its
answer to the complaint:
26. Guarantee acquired clean title to the Property, as evidenced by the
transfer certificate of title attached as Annex 4 hereof.
27. Guarantee was an innocent purchaser for value and in good faith of
the Property who: (i) verified that the title to the Property in the
Registry of Deeds of Makati was absolutely free and clear of any
encumbrances, liens or claims other than the mortgage to China
Banking Corporation; and, (ii) even obtained explicit confirmation of
that fact from Arra and Arguelles.

30. Consequently, Guarantee could rely, as it did, on the absence of


any annotation of encumbrance on the title to the Property. By clear
provision of law, the present action, which is a collateral attack on the
title to the Property in question, cannot be allowed by the Court.
31. The complaint (para. 6) admits that plaintiff was unable to pay the
purchase price for the portion of the building which she allegedly
bought under the letter agreement with Arra dated November 18, 1982
(Annex "A," Complaint). Assuming plaintiffs agreement with Arra to be
valid and enforceable, her failure to discharge her part of the
agreement bars her from now attempting to compel performance from
Arra and Arguelles.
32. Plaintiffs remedy, should her claim, indeed, be meritorious, is a
personal action for damages against Arra and Arguelles.22
The GDCIA prayed that, after due proceedings, judgment be rendered in its
favor, thus:

WHEREFORE, it is respectfully prayed that, after due hearing, judgment


be rendered:
(i) Dismissing the complaint for lack of merit;
(ii) Ordering plaintiff to pay attorneys fees in such amount as
may be proven in the course of trial;
(iii) Ordering plaintiff to pay to Guarantee the amount of
P500,000.00 as moral damages;
or, in the alternative, should plaintiffs claim be adjudged
meritorious,
(iv) Ordering defendants Arra and Arguelles, solidarily, to return
the purchase price of the Property with interest as stated in the
Deed of Conditional Sale;
(v) Ordering defendants Arra and Arguelles, solidarily, to pay to
Guarantee the amount of P1,000,000.00 as punitive and
exemplary damages;
(vi) Ordering defendants Arra and Arguelles to pay attorneys
fees in such amount as may be proven in the course of trial;
(vii) Ordering defendants Arra and Arguelles to pay to Guarantee
the amount of P500,000.00 as moral damages.
Other just and equitable reliefs are prayed for.23
The ARC and the Spouses Arguelles interposed the following special and
affirmative defenses:
10. Plaintiff has no cause of action against answering defendants; her
complaint is definitely a nuisance suit;
11. When answering defendants decided to erect a 5-storey building on
their lot in 1982, plaintiff and answering defendants agree that plaintiff
will share in the construction of any one (1) floor thereof; hence, the
agreement between them (Annex "A");
12. Plaintiff not only refused and failed to comply with her Agreement
despite repeated demands but also grossly violated said agreement as
she paid only an initial amount of P200,000.00 on February 7, 1982 in
contrary to the specific, express decisive stipulation in Annex "A" which

was synchronized with the agreement of Answering Defendants with


the contractor of the building, Pyramid Construction & Engineering
Corp., who was committed to finish the building in a period of five (5)
months;
13. Having committed to construct the 5-storey edifice on their lot,
answering defendants has (sic) to raise the required initial amount to
start the construction and for this reason, they were constrained to
borrow the rest of the amount necessary for the completion of the
building and they used their own land and the building itself as
collateral to enable defendant Arguelles to finish the building plus his
own funding in the amount of P7,000,000.00;
14. Despite her non-compliance with her agreement, plaintiff, on her
own and without the consent of answering defendants, occupied the
second floor of the building and converted the same into a school the
St. Michael International School and other business establishments
whereby she earned no less than P3,000,000.00 in a period of four (4)
years of her occupancy as a squatter thereof without paying the rentals
to answering defendants;
15. Due to plaintiffs persistent requests for the issuance in her favor of
a certification of her occupancy of the second floor to enable her to
secure a loan in the amount of P3,105,838.00 to complete payment of
her obligation, defendant Carlos Arguelles, always a kind and
understanding person, issued Annex "C" with the expectation that
plaintiff could, indeed, comply with her agreement within a period of
three (3) months as she promised;
16. Having failed to fulfill her promise and to comply with her
obligation as mentioned in the immediately preceding paragraph
hereof, plaintiff voluntarily vacated the second floor of the said building
on (sic) May 1986;
17. As a consequence of plaintiffs violation of her written agreement,
answering defendants naturally defaulted in their mortgage obligation
with China Banking Corporation and answering defendants lot and
building were, therefore, foreclosed by said bank and having no means
of redeeming the mortgaged properties within the redemption period,
answering defendants were compelled to negotiate for the sale of the

foreclosed properties which sale was monitored to the plaintiff together


with her statement of account;
18. That the negotiation for the sale of the building took almost a year
and during such period, plaintiff was cooperative in showing the second
floor which she was then occupying to prospective buyers;
19. Whatever right plaintiff may have acquired over the second floor of
the subject 5-storey building has been extinguished upon her failure to
comply with her obligation, which was the payment of the total amount
of P3,105,838.00 within the specific period expressly provided as the
essence of the agreement.24
The ARC and the Spouses Arguelles also interposed counterclaims against
the GDCIA, while the latter secured a writ of preliminary attachment against
its co-defendants and garnished their funds. On April 17, 1995, the trial court
rendered judgment in favor of Pealoza and the GDCIA, and against the ARC
and the Spouses Arguelles, thus:
WHEREFORE, premises above considered, judgment is hereby rendered
as prayed for by plaintiff PEALOZA in the case for SUM OF MONEY as
against defendants ARRA and SPOUSES CARLOS D. ARGUELLES and
REMEDIOS DELA RAMA-ARGUELLES, who are hereby ORDERED as
follows:
1. TO PAY plaintiff the amount of P1,444,124.59 with interest of
12 per centum per annum from August 1984 until fully paid;
2. TO PAY the amount of P150,000.00 for and as attorneys fees;
and
3. TO PAY the Costs of the proceedings.
The case for SPECIFIC PERFORMANCE and prayer for PRELIMINARY
INJUNCTION are considered as DISMISSED on grounds that this case for
this alternative relief was filed after the Transfer Certificate of Title of
the property was already issued by defendant Register of Deeds in the
name of GUARANTEE.
The case as against DEFENDANT Guarantee Development Corporation
& Insurance Agency (GUARANTEE) is hereby DISMISSED for
insufficiency of evidence.

The counterclaims of DEFENDANTS


insufficiency of evidence.

are

hereby

DISMISSED

for

SO ORDERED.25
Pealoza, as well as the ARC and the Spouses Arguelles, appealed the
decision to the Court of Appeals (CA). The ARC and the Spouses Arguelles
alleged that the Regional Trial Court (RTC) erred as follows:
I IN NOT ANNULLING OR RESCINDING THE CONDITIONAL DEED OF SALE
OF REALTY DATED APRIL 29, 1987 AND DEED OF ABSOLUTE SALE
DATED MAY 14, 1999;
II IN NOT ORDERING THE DEFENDANT GUARANTEE DEVELOPMENT AND
INSURANCE AGENCY TO PAY DEFENDANTS-APPELLANTS FOR THE
MALICIOUS AND UNFOUNDED FILING OF WRIT OF ATTACHMENT AND
GARNISHMENT; AND
III IN NOT DIRECTING PACES TO PAY ARRA REALTY AND SPOUSES
ARGUELLES ARREARS IN RENTALS PLUS INTERESTS AND DISMISSING
THE ORIGINAL AND AMENDED COMPLAINTS.26
The CA rendered judgment, on September 30, 1998, affirming with
modification the appealed decision. The fallo reads:
WHEREFORE, the appeals of both ARRA Realty Corporation and plaintiff
Engineer Erlinda Pealoza are hereby DISMISSED, and the Decision of
the lower court is hereby AFFIRMED but the award of P150,000.00 as
attorneys fees in favor of said plaintiff is deleted. The Register of
Deeds of Makati City is hereby ordered to cancel the Notice of Lis
Pendens annotated on Transfer Certificate of Title No. 147845
registered in the name of Guarantee Development Corporation and
Insurance Agency.27
The ARC and the Spouses Arguelles filed a motion for reconsideration of the
decision of the CA on the following grounds:
1.) THIS HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT
PEALOZAS ACTION WAS TANTAMOUNT TO FORFEITURE OR WAIVER
OF HER RIGHTS.
2.) THIS HONORABLE COURT OF APPEALS ERRED IN NOT APPRECIATING
THE EVIDENCE OF CO-DEFENDANTS ARRA/ARGUELLES ESPECIALLY THE

ARREARS

IN

RENTALS/OUT

OF

POCKET

ADVANCES

WITH
RESULTANT UNJUST ENRICHMENT ON THE PART OF PEALOZA.28

THE

However, the appellate court denied the said motion. Pealoza filed a
petition for review on certiorari with this Court docketed as G.R. No. 136876,
wherein she made the following assignment of errors:
I
The Court of Appeals gravely erred in finding respondent Guarantee an
innocent purchaser for value and in good faith contrary to settled
jurisprudence that a buyer of a parcel of land who did not pay the
purchase price in full and who could not have failed to know or
discover that the land sold to him was in the adverse possession of
another is a buyer in bad faith.
II
The Court of Appeals gravely erred in finding that petitioner, who had
established her legal right for sum of money against respondents Arra
and the Arguelles spouses, may be effectively barred from pursuing her
alternative remedy for recovery of title against respondent Guarantee
contrary to Section 2, Rule 8 of the Rules of Court.
III
The Court of Appeals gravely erred in not awarding damages and
attorneys fees despite violation of the rights of the petitioner on the
wrongful or fraudulent action on the part of the respondents.29

WHEREFORE, premises considered, it is respectfully prayed that the


Decision of the Court of Appeals in CA-G.R. CV No. 52911 dated
September 30, 1998 as well as its Resolution dated December 23, 1998
be reversed and set aside and that a Decision be rendered:
1. Declaring as null and void the title of Guarantee (TCT No.
147845) over the subject property located at No. 119 Alvarado
St., Legaspi Village, Makati, Metro Manila.
2. Ordering respondents to execute a Deed of Sale in favor of the
petitioner covering the subject second floor of the subject

property simultaneously with the tender of the remaining balance


on the purchase price.
3. Ordering respondents, jointly and severally, to pay petitioner
moral and exemplary damages of One Million Pesos
(P1,000,000.00).
4. Ordering respondents, jointly and severally, to pay petitioner
attorneys fees of ten (10%) percent of the amount involved.
On the alternative cause of action, in the event that specific
performance cannot be affected, to render judgment:
1. Ordering respondents, jointly and severally, to pay petitioner
the sum of P1,944,124.59 with interest of twelve (12%) percent
from August 1984 until fully paid.
2. Ordering respondents, jointly and severally, to pay moral and
exemplary damages of One Million Pesos (P1,000,000.00).
3. Ordering respondents, jointly and severally, to pay attorneys
fees of ten (10%) percent of the amount involved.
Such other reliefs just and proper are, likewise, prayed for.30
On March 15, 1999, the Court resolved to deny due course to the petition for
failure of the petitioner therein to show any reversible error committed by
the CA in its decision. Entry of judgment was made of record on April 14,
1999.31
For their part, the ARC and the Spouses Arguelles, now the petitioner, filed
their petition for review with this Court, contending that:
I
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR
OF LAW IN NOT HOLDING THAT NO PERFECTED CONTRACT EXISTS
BETWEEN ARRA REALTY CORPORATION AND ENGINEER ERLINDA
PEALOZA.
II
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR
OF LAW IN NOT HOLDING THAT GUARANTEE DEVELOPMENT

CORPORATION IS NOT AN INNOCENT PURCHASER FOR VALUE AND THAT


AUTOMATIC RESCISSION IS PRESENT.32
III
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR
OF LAW IN NOT HOLDING THAT ENGINEER ERLINDA PEALOZA IS
GUILTY OF FRAUD AND IS IN BAD FAITH. HENCE, LIABLE FOR DAMAGES.
At the outset, it must be pointed out that the issues raised by the parties in
their respective pleadings in this Court have already been resolved in G.R.
No. 136876, where we denied due course to Pealozas petition for review.
Nonetheless, considering that the sole petitioner in the said case was
Pealoza, whereas the petitioners in the petition at bar are the ARC and the
Spouses Arguelles, we shall resolve the petition on its merits. Furthermore,
since the issues raised by the petitioners in their assignment of errors are
interrelated, the Court shall delve into and resolve the same simultaneously.
The petitioners posit that no contract of sale over the subject property was
perfected between the petitioner ARC, on the one hand, and respondent
Pealoza, on the other, because the latter failed to pay the balance of the
total purchase price of a portion of the second floor of the building as
provided in their November 18, 1982 agreement. They aver that respondent
Pealoza bound and obliged herself to pay the downpayment of P901,738 on
or before January 1983, and the balance in twenty (20) equal quarterly
payments of P110,205. However, the petitioners aver, respondent Pealoza
was able to complete the downpayment only on March 4, 1983 and managed
to pay only three quarterly installments, and part of the fourth quarterly
installment. They assert that, in violation of the November 18, 1982
agreement, respondent Pealoza used the property as a school instead of an
office, and later abandoned the same without prior notice to the petitioner
ARC. The petitioners assert that respondent Pealoza failed to pay for the
advances extended to her, amounting to P302,753.06 inclusive of interests,
as well as rentals for her occupancy of the property in the total amount of
P2,177,935. The petitioners contend that, even if the payments of
respondent Pealoza amounting to P1,735,500 would be deducted from the
agreed purchase price, she would still end up owing the petitioner ARC the
net amount of P930,815.56, excluding interests. They aver that respondent
Pealoza should be ordered to pay damages under Article 19 of the New Civil
Code because she acted in bad faith, and pray that the payments she made

to the petitioner ARC for the purchase of the said portion of the building be
forfeited in its favor.
The petitioners further contend that respondent GDCIA was a purchaser of
the property in bad faith because it purchased the lot and building despite its
presumed knowledge of the claims of respondent Pealoza and the fact that
the building was occupied by private individuals and/or corporations. The
petitioners aver that they even offered to return the P21,000,000 paid by the
respondent GDCIA for the property, less the retained P1,000,000, but that
the latter rejected the offer. Hence, the deed of absolute sale executed by
the petitioner ARC and the respondent GDCIA over the property was
automatically rescinded.
In her comment on the petition, respondent Pealoza averred that her
November 18, 1982 agreement with the petitioner ARC is a perfected
contract of sale. She asserts that the CA erred in holding that she was barred
from recovering the property from the respondent GDCIA and in not finding
that the latter is not an innocent purchaser in good faith because, by its own
admission, it purchased the building although it was still occupied. In fact,
she notes, the respondent GDCIA retained P1,000,000 of the purchase price
of the property to answer for any claims for damages of the said occupants.
She prayed, thus:
WHEREFORE, premises considered, it is respectfully prayed that the
petition be denied and that the Decision of the Court of Appeals in CAG.R. CV No. 52911 dated September 30, 1998 as well as its Resolution
dated February 21, 2000 be modified in that:
1. Declaring as null and void the title of Guarantee (TCT No.
147845) over the subject property located at No. 119 Alvarado
St., Legaspi Village, Makati, Metro Manila.
2. Ordering petitioners and respondent Guarantee to execute a
Deed of Sale in favor of the petitioner covering the subject
second floor of the subject property simultaneously with the
tender of the remaining balance on the purchase price.
3. Ordering petitioners and respondent Guarantee, jointly and
severally, to pay Pealoza moral and exemplary damages of One
Million Pesos (P1,000,000.00).

4. Ordering petitioners and respondent Guarantee, jointly and


severally, to pay Pealoza attorneys fees of ten (10%) percent of
the amount involved.
In the alternative, in the event that specific performance cannot be
affected, to render judgment:
1. Ordering petitioners and respondent Guarantee, jointly and
severally, to pay petitioner the sum of P1,944,124.59 with
interest of twelve (12%) percent from August 1984 until fully
paid.
2. Ordering petitioners and respondent Guarantee, jointly and
severally, to pay moral and exemplary damages of One Million
Pesos (P1,000,000.00).
3. Ordering petitioners and respondent Guarantee, jointly and
severally, to pay attorneys fees of ten (10%) percent of the
amount involved.
Such other reliefs just and proper are, likewise, prayed for.33
In its comment on the petition, the respondent GDCIA avers that the issues
raised by the petitioners and respondent Pealoza in her Comment had
already been resolved by this Court in G.R. No. 136876, when the petition
therein was denied due course.
We rule against the petitioners.
Central to the issue is the November 18, 1982 letter-agreement of the
parties, which reads:
Ms.
5th
Flr.
Salcedo
Makati, Metro Manila

Erlinda
ODC
St.,

Intl.
Legaspi

Plaza

Pealoza
Bldg.
Village

Dear Linda:
I would like to review the arrangement arrived at our meeting
yesterday afternoon. You shall share one (1) floor of the proposed 5storey office building to be constructed on a 992 sq. mt. lot owned by
ARRA Realty Corporation located at Alvarado St., Legaspi Village,
Makati, Metro Mla. The consideration for which you shall own one (1)

floor is THREE MILLION ONE HUNDRED FIVE THOUSAND EIGHT


HUNDRED THIRTY-EIGHT PESOS (P3,105,838.00) on a deferred payment
plan. The initial payment of NINE HUNDRED ONE THOUSAND SEVEN
HUNDRED THIRTY-EIGHT PESOS (P901,738.00) shall be paid within sixty
(60) days from November 20, 1982 and the balance payable in 20
equal quarterly payments of ONE HUNDRED TEN THOUSAND TWO
HUNDRED FIVE PESOS (P110,205.00). Every payment that you make,
ARRA shall credit your account by way of partial payment to your stock
subscriptions of ARRAs capital stock. As soon as our contractor,
Pyramid Construction and Engineering Corporation, complete its
commitment with us, which is not more than five (5) months, you shall
immediately take possession of the floor of your choice. Further, as
soon as practicable, the Title corresponding to the floor that you own
shall be transferred to your name.
However, should you pay in full at the end of the fourth quarter or at
any time prior to the 5-year arrangement, the price shall be adjusted
accordingly.
I believe that this accurately summarizes our understanding. If you
have any questions or if I have not properly stated our agreement,
please let me know, otherwise, you may signify your conformity by
signing the duplicate copy of this letter.
Very truly yours,
(Sgd.)
CARLOS D. ARGUELLES
President & General Manager

CONFORME:
(Sgd.)

PL:FP:ccr

ERLINDA PEALOZA
Date: __________34

As gleaned from the agreement, the petitioner ARC, as vendor, and


respondent Pealoza, as vendee, entered into a contract of sale over a
portion of the second floor of the building yet to be constructed for the price
of P3,105,838 payable in installments, the first installment of P901,738 to be
paid within sixty (60) days from November 20, 1982 or on or before January

20, 1983, and the balance payable in twenty (20) equal quarterly payments
of P110,205. As soon as the second floor was constructed within five (5)
months, respondent Pealoza would take possession of the property, and
title thereto would be transferred to her name. The parties had agreed on the
three elements of subject matter, price, and terms of payment. Hence, the
contract of sale was perfected, it being consensual in nature, perfected by
mere consent, which, in turn, was manifested the moment there was a
meeting of the minds as to the offer and the acceptance thereof. 35 The
perfection of the sale is not negated by the fact that the property subject of
the sale was not yet in existence. This is so because the ownership by the
seller of the thing sold at the time of the perfection of the contract of sale is
not an element of its perfection. A perfected contract of sale cannot be
challenged on the ground of non-ownership on the part of the seller at the
time of its perfection. What the law requires is that the seller has the right to
transfer ownership at the time the thing is delivered. Perfection per se does
not transfer ownership which occurs upon the actual or constructive delivery
of the thing sold.36
In May 1983, respondent Pealoza took possession of a portion of the second
floor of the building sold to her with an area of 552 square meters. She put
up her office and operated the St. Michael International Institute of
Technology. Thenceforth, respondent Pealoza became the owner of the
property, conformably to Article 1477 of the New Civil Code which reads:
Art. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.
In a contract of sale, until and unless the contract is resolved or rescinded in
accordance with law, the vendor cannot recover the thing sold even if the
vendee failed to pay in full the initial payment for the property. The failure of
the buyer to pay the purchase price within the stipulated period does not by
itself bar the transfer of ownership or possession of the property sold, nor
ipso facto rescind the contract.37 Such failure will merely give the vendor
the option to rescind the contract of sale judicially or by notarial demand as
provided for by Article 1592 of the New Civil Code:
Art. 1592. In the sale of immovable property, even though it may have
been stipulated that upon failure to pay the price at the time agreed
upon the rescission of the contract shall of right take place, the vendee

may pay, even after the expiration of the period, as long as no demand
for rescission of the contract has been made upon him either judicially
or by a notarial act. After the demand, the court may not grant him a
new term.
Admittedly, respondent Pealoza failed to pay the downpayment on time.
But then, the petitioner ARC accepted, without any objections, the delayed
payments of the respondent; hence, as provided in Article 1235 of the New
Civil Code, the obligation of the respondent is deemed complied with:
Art. 1235. When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
The respondent cannot be blamed for suspending further remittances of
payment to the petitioner ARC because when she pushed for the issuance of
her title to the property after taking possession thereof, the ARC failed to
comply. She was aghast when she discovered that in July 1984, even before
she took possession of the property, the petitioner ARC had already
mortgaged the lot and the building to the China Banking Corporation; when
she offered to pay the balance of the purchase price of the property to
enable her to secure her title thereon, the petitioner ARC ignored her offer.
Under Article 1590 of the New Civil Code, a vendee may suspend the
payment of the price of the property sold:
Art. 1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable grounds
to fear such disturbance, by a vindicatory action or a foreclosure of
mortgage, he may suspend the payment of the price until the vendor
has caused the disturbance or danger to cease, unless the latter gives
security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee
shall be bound to make the payment. A mere act of trespass shall not
authorize the suspension of the payment of the price.
Respondent Pealoza was impelled to cause the annotation of an adverse
claim at the dorsal portion of TCT No. 112269. Her testimony is quoted, thus:
Q: And did you finally acquire the certificate of title to the 2nd floor of
the said building?
A: No, Sir.

Q: Why not?
A: Because the said building was mortgaged by ARRA Realty and
Architect Arguelles with China Banking Corporation and subsequently
sold to Guaranty (sic) Development Corporation.
Q: When, for the first time, did you learn about the mortgage of the
building to China Banking Corp.?
A: It was sometime in July of 1984.
Q: How did you learn about it?
A: Since I took possession of the 2nd floor and made payments
thereon, I asked Architect Arguelles every now and then about the
execution of a Deed of Sale to the 2nd floor.
Q: What was the reply of Arguelles?
A: He told me that he had to work out yet the titling of the 2nd floor as
a condominium unit.
Q: Was Arguelles able to have the 2nd floor titled as a condominium
unit?
A: No, Sir.
Q: Why not?
A: Because he did not take any steps about it.
Q: When Arguelles did not take steps about it, what did you do?
A: I inquired why Arguelles was not doing anything about the titling of
the 2nd floor and the sale thereof to me. That was how I discovered
that Arguelles mortgaged the same to the China Banking Corp.38

Q: With those letters, what did you do?


A: On August 31, 1984, I wrote a letter to ARRA requesting them to
execute a deed of sale with the assumption of mortgage in my favor. I
attached a copy of the deed of sale and assumption of mortgage to the
said letter, may I request this letter be marked as Exh. "U" and the
deed of sale attached to it with the assumption of mortgage as Exh. "U1."

Q: Did ARRA reply to your letter?


A: ARRA and Arguelles ignored the said letter.
Q: What did you do then?
A: On September 25, 1984, I wrote a letter to ARRA which I request to
be marked as Exh. "V" reiterating the signing of the deed of sale and at
the same time telling him that I was suspending my payments on the
2nd floor unless and until he signs that Deed of Sale. I offered to pay
the full amount so I can get the certificate of title, because I had more
than sufficient money to pay him at the time. Here are copies of my
bank deposits from 1982 to 1986 which show my liquidity. I request
that they be marked as Exh. "W" and "W-1" to "W-59" inclusive.
Q: What did ARRA do with that letter?
A: ARRA and Arguelles ignored the said letter.
Q: What steps did you take?
A: Upon [the] advise of my lawyer, I filed a Notice of Adverse Claim
dated November 26, 1984, which I request to be marked as Exh. "X"
which was inscribed the next day, November 7, 1984, at the back of
the Certificate of Title No. 112269, which I request to be marked as
Exh. "Y" and the inscription of the Notice of Adverse Claim to be
bracketed and marked as Exh. "Y-1."39
Contrary to the claim of the petitioners, respondent Pealoza did not waive
her right to enforce the letter-agreement or abandon the property she had
purchased from the petitioner ARC. While she transferred the school to
another location, the respondent maintained her office in the subject
property, only to discover that the petitioner had had her office padlocked.
Nevertheless, she had her office reopened and continued holding office
thereat for a year or so, thereafter:
Q: In the meantime, did you continue holding office and holding classes
for St. Michael on the 2nd floor?
A: Sometime in April of 1986 when classes ended I transferred the St.
Michael School to a building which I purchased at Yakal St. also in
Makati.

Q: Why did you transfer the St. Michael School at that building in Yakal
St.?
A: Because after three years of operation the St. Michael School has
grown too big for the 2nd floor of that building at 119 Alvarado.
Q: How about your Engineering Office?
A: My Engineering Office has also grown bigger, just right for that
space at the 2nd floor, so it remained there.
Q: So the office of Pealoza Engineering retained the Alvarado office?
A: Yes, Sir.
Q: After St. Michael left it, were you able to hold office there
peacefully?
A: No, Sir.
Q: Why not?
A: One Monday, I went to our office at the 2nd floor at 119 Alvarado for
work.
Q: Were you able to enter the office?
A: No, Sir.
Q: Why not?
A: Because the padlock that I placed there had been changed.
Q: How did you discover that?
A: Because when I was using my key to my padlock, it would not fit.
Q: What did you do?
A: I went to the office of Engr. Arguelles at ARRA Realty Corp. at the
upper floor and asked them why they changed the padlock. Nobody
wanted to explain to me why the padlock was changed but they gave
me the key and I had it duplicated for my use, so I continued holding
office there. I held office in the said premises continuously for about a
year. Later on, it was padlocked.40
Respondent Pealoza turned over the possession of the property to the
petitioner ARC on October 7, 1986 and, shortly thereafter, filed her complaint

against the petitioner ARC. The bare fact that the respondent filed her
complaint shortly after vacating the property is evidence of her
determination to pursue her claims against the petitioners.
In view of the failure of the petitioner ARC to transfer the title of the property
to her name because of the mortgage thereof to China Banking Corporation
and the subsequent sale thereof to the GDCIA, respondent Pealoza is
entitled to the refund of the amount she paid to the petitioner ARC,
conformably to Article 1398 of the New Civil Code, which reads:
Art. 1398. An obligation having been annulled, the contracting parties
shall restore to each other the things which have been the subject
matter of the contract, with their fruits, and the price with its interest,
except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for
damages.
We reject the petitioners claim that respondent Pealoza is liable for
P2,177,935 by way of advances and unpaid rentals. We note that in
their answer to the amended complaint of respondent Pealoza, the
petitioners did not interpose any counterclaims for actual damages in
the form of unpaid rentals. Neither did the petitioners assign as error in
their brief in the CA the failure of the trial court to award P302,753.06
to them for advances. It was only when they moved for the
reconsideration of the decision of the CA did they claim, for the first
time on appeal, their entitlement to P302,753.06 as refund for
advances. The petitioner ARC is, thus, barred from raising the said
issue in this Court.41
Likewise barren of factual and legal basis is the petitioners claim for
damages against the respondent based on Article 19 of the New Civil Code,
which reads:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
In this case, respondent Pealoza suspended the payment of the balance of
the purchase price of the property because she had the right to do so. While
she failed to pay the purchase price on time, the petitioner ARC nevertheless
accepted such delayed payments. The respondent even proposed to assume

the loan account of the petitioner ARC with the China Banking Corporation in
an amount equivalent to the balance of the purchase price of the subject
property, which the petitioner ARC rejected. In fine, respondent Pealoza
acted in accord with law and in utmost good faith. Hence, she is not liable for
damages to the petitioners under Article 19 of the New Civil Code.
The law is that men, singly or in combination, may use any lawful means to
accomplish a lawful purpose, although the means adopted may cause injury
to another.42 When a person is doing a lawful thing in a lawful way, his
conduct is not actionable though it may result in damages to another; for,
though the damage caused is undoubted, no legal right of another is
invaded; hence, it is said to be damnum absque injuria.43
The elements of abuse of rights are the following: (a) the existence of a legal
right or duty, (b) which is exercised in bad faith; and (c) for the sole intent of
prejudicing or injuring another. Malice or bad faith is at the core of said
provision.44 Good faith is presumed and he who alleges bad faith has the
duty to prove the same.45 Good faith refers to the state of the mind which is
manifested by the acts of the individual concerned. It consists of the
intention to abstain from taking an unconscionable and unscrupulous
advantage of another.46 Bad faith, on the other hand, does not simply
connote bad judgment to simple negligence. It imports a dishonest purpose
or some moral obliquity and conscious doing of a wrong, a breach of known
duty due to some motive or interest or ill-will that partakes of the nature of
fraud.47 Malice connotes ill-will or spite and speaks not in response to duty.
It implies an intention to do ulterior and unjustifiable harm. The petitioners
failed to adduce evidence of bad faith or malice on the part of respondent
Pealoza. This cannot be said of the petitioner ARC. It mortgaged the
property to China Banking Corporation even after having sold the same to
respondent Pealoza, and, thereafter, sold the same anew to GDCIA;
respondent Pealoza was, thus, left holding the proverbial bag.
On the last issue, the petitioners contend that the deed of conditional sale
and deed of absolute sale executed by them and the respondent GDCIA were
automatically nullified because the latter had actual or personal knowledge
that the property sold had tenants. Furthermore, the respondent GDCIA
retained P1,000,000 on account of the claims of respondent Pealoza, Paces

Industrial Development Corporation, and Emeterio Samson over the portions


of the property.
The contention of the petitioners has no merit.
First. The petitioners did not file a counterclaim against the respondent
GDCIA for the rescission of the aforesaid decision. 48 Moreover, the
petitioners did not adduce evidence to prove bad faith on the part of the
respondent GDCIA. Additionally, the petitioners warranted in the aforesaid
deeds in favor of the said respondent, that:
d) It is hereby agreed, convenanted and stipulated by and between the
parties hereto that the VENDOR will execute and deliver to the VENDEE
a definite or absolute Deed of Sale upon the full payment by the
VENDEE of the unpaid balance of the purchase price hereinabove
stipulated.
1. The VENDOR undertakes and commits to deliver the Property,
including all floors of the building, as entirely vacant to the VENDEE not
later than May 15, 1987. Physical possession, however, of the first and
second floors of the Building can be turned over to the VENDEE at any
time convenient to them.49

The VENDOR undertakes to perform, fulfill and comply with the


representations, warranties and undertaking stated in the Deed of
Conditional Sale. Should the VENDOR fail to do so, this agreement shall
become null and void and the VENDEE shall be entitled to enforce its
right under Section 8 of the Deed of Conditional Sale.50
Second. The respondent GDCIA relied on the representations of the
petitioners. However, the respondent received claims for ownership of
portions of the property from tenants of the building, including respondent
Pealoza, which impelled it to retain P1,000,000 of the purchase price to
answer for said claims. There is, thus, no factual and legal basis for the plea
of the petitioners that the trial court and the CA erred in not rendering
judgment in their favor declaring the said deeds rescinded.
On the claim of respondent Pealoza against the petitioners and her corespondent GDCIA, we agree with the latter that the same is barred by the
resolution of this Court in G.R. No. 136876, denying due course to her

petition for review of the decision of the CA on the ground that no reversible
error was committed by the said court, which resolution has become final
and executory.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed
decision and resolution of the Court of Appeals are AFFIRMED. Costs against
the petitioners.
SO ORDERED.
5. Raymundo De Leon vs. Benita Ong GR No. 170405
G.R. No. 170405

February 2, 2010

RAYMUNDO S. DE LEON, Petitioner,


vs.
BENITA T. ONG.1 Respondent.
DECISION
CORONA, J.:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of
land2 with improvements situated in Antipolo, Rizal to respondent Benita T.
Ong. As these properties were mortgaged to Real Savings and Loan
Association, Incorporated (RSLAI), petitioner and respondent executed a
notarized deed of absolute sale with assumption of mortgage3 stating:
xxx

xxx

xxx

That for and in consideration of the sum of ONE MILLION ONE HUNDRED
THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is
hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and
convey in a manner absolute and irrevocable, unto said
[RESPONDENT], his heirs and assigns that certain real estate together with
the buildings and other improvements existing thereon, situated in [Barrio]
Mayamot, Antipolo, Rizal under the following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR
HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner]

shall execute and sign a deed of assumption of mortgage in favor of


[respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of
SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS
(P684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis
supplied)
xxx

xxx

xxx

Pursuant to this deed, respondent gave petitioner P415,500 as partial


payment. Petitioner, on the other hand, handed the keys to the properties
and wrote a letter informing RSLAI of the sale and authorizing it to accept
payment from respondent and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the
properties.5 Respondent likewise informed RSLAI of her agreement with
petitioner for her to assume petitioners outstanding loan. RSLAI required her
to undergo credit investigation.
Subsequently, respondent learned that petitioner again sold the same
properties to one Leona Viloria after March 10, 1993 and changed the locks,
rendering the keys he gave her useless. Respondent thus proceeded to RSLAI
to inquire about the credit investigation. However, she was informed that
petitioner had already paid the amount due and had taken back the
certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance,
declaration of nullity of the second sale and damages 6 against petitioner and
Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She
claimed that since petitioner had previously sold the properties to her on
March 10, 1993, he no longer had the right to sell the same to Viloria. Thus,
petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause
of action against him and consequently prayed for the dismissal of the
complaint. He claimed that since the transaction was subject to a condition
(i.e., that RSLAI approve the assumption of mortgage), they only entered into
a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI,
the condition did not arise. Consequently, the sale was not perfected and he

could freely dispose of the properties. Furthermore, he made a counter-claim


for damages as respondent filed the complaint allegedly with gross and
evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded
that she knew that the validity of the sale was subject to a condition. The
perfection of a contract of sale depended on RSLAIs approval of the
assumption of mortgage. Since RSLAI did not allow respondent to assume
petitioners obligation, the RTC held that the sale was never perfected.
In a decision dated August 27, 1999, 7 the RTC dismissed the complaint for
lack of cause of action and ordered respondent to pay petitioner P100,000
moral damages, P20,000 attorneys fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting
that the court a quo erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did
not impose any condition on the sale and held that the parties entered into a
contract of sale. Consequently, because petitioner no longer owned the
properties when he sold them to Viloria, it declared the second sale void.
Moreover, it found petitioner liable for moral and exemplary damages for
fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and
nullified the sale to Viloria. It likewise ordered respondent to reimburse
petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the
other hand, was ordered to deliver the certificates of titles to respondent and
pay her P50,000 moral damages and P15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated
November 11, 2005.10 Hence, this petition,11 with the sole issue being
whether the parties entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of
the transaction was subject to a suspensive condition, that is, the approval
by RSLAI of respondents assumption of mortgage. Because RSLAI did not
allow respondent to assume his (petitioners) obligation, the condition never
materialized. Consequently, there was no sale.

Respondent, on the other hand, asserts that they entered into a contract of
sale as petitioner already conveyed full ownership of the subject properties
upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993
deed. The RTC ruled that it was a contract to sell while the CA held that it
was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the
buyer upon the perfection of the contract. Should the buyer default in the
payment of the purchase price, the seller may either sue for the collection
thereof or have the contract judicially resolved and set aside. The nonpayment of the price is therefore a negative resolutory condition.12
On the other hand, a contract to sell is subject to a positive suspensive
condition. The buyer does not acquire ownership of the property until he fully
pays the purchase price. For this reason, if the buyer defaults in the payment
thereof, the seller can only sue for damages.13
The deed executed by the parties (as previously quoted) stated that
petitioner sold the properties to respondent "in a manner absolute and
irrevocable" for a sum of P1.1 million.14 With regard to the manner of
payment, it required respondent to pay P415,500 in cash to petitioner upon
the execution of the deed, with the balance 15 payable directly to RSLAI (on
behalf of petitioner) within a reasonable time.16 Nothing in said instrument
implied that petitioner reserved ownership of the properties until the full
payment of the purchase price.17 On the contrary, the terms and conditions
of the deed only affected the manner of payment, not the immediate
transfer of ownership (upon the execution of the notarized contract) from
petitioner as seller to respondent as buyer. Otherwise stated, the said terms
and conditions pertained to the performance of the contract, not the
perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the
properties and deliver the same to the buyer. 18 In this regard, Article 1498

of the Civil Code19 provides that, as a rule, the execution of a notarized deed
of sale is equivalent to the delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in
favor of respondent. Moreover, not only did petitioner turn over the keys to
the properties to respondent, he also authorized RSLAI to receive payment
from respondent and release his certificates of title to her. The totality of
petitioners acts clearly indicates that he had unqualifiedly delivered and
transferred ownership of the properties to respondent. Clearly, it was a
contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was
subject to the condition that RSLAI had to approve the assumption of
mortgage, the said condition was considered fulfilled as petitioner prevented
its fulfillment by paying his outstanding obligation and taking back the
certificates of title without even notifying respondent. In this connection,
Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and
then to Viloria on two separate occasions. 20 However, the second sale was
not void for the sole reason that petitioner had previously sold the same
properties to respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties were sold
validly on two separate occasions by the same seller to the two different
buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry
of Property.

Should there be no inscription, the ownership shall pertain to the


person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title,
provided there is good faith. (emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply
only to purchasers in good faith. Needless to say, it disqualifies any
purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without
notice that some other person has a right to, or an interest in, such property
and pays a full and fair price for the same at the time of such purchase, or
before he has notice of some other persons claim or interest in the
property.21 The law requires, on the part of the buyer, lack of notice of a
defect in the title of the seller and payment in full of the fair price at the time
of the sale or prior to having notice of any defect in the sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only
by the mortgage to RSLAI. According to her agreement with petitioner,
respondent had the obligation to assume the balance of petitioners
outstanding obligation to RSLAI. Consequently, respondent informed RSLAI of
the sale and of her assumption of petitioners obligation. However, because
petitioner surreptitiously paid his outstanding obligation and took back her
certificates of title, petitioner himself rendered respondents obligation to
assume petitioners indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the
prestation become legally or physically impossible without the fault of the
obligor.
Since respondents obligation to assume petitioners outstanding balance
with RSLAI became impossible without her fault, she was released from the
said obligation. Moreover, because petitioner himself willfully prevented the
condition vis--vis the payment of the remainder of the purchase price, the
said condition is considered fulfilled pursuant to Article 1186 of the Civil
Code. For purposes, therefore, of determining whether respondent was a
purchaser in good faith, she is deemed to have fully complied with the
condition of the payment of the remainder of the purchase price.

Respondent was not aware of any interest in or a claim on the properties


other than the mortgage to RSLAI which she undertook to assume. Moreover,
Viloria bought the properties from petitioner after the latter sold them to
respondent. Respondent was therefore a purchaser in good faith. Hence, the
rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered
the sale of the properties with the registrar of deeds, the one who took prior
possession of the properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he
executed the notarized deed22 and handed over to respondent the keys to
the properties. For this reason, respondent took actual possession and
exercised control thereof by making repairs and improvements thereon.
Clearly, the sale was perfected and consummated on March 10, 1993. Thus,
respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the
purchase price was deemed fulfilled, respondents obligation to pay it
subsisted. Otherwise, she would be unjustly enriched at the expense of
petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in
the deed. This is because the provisions, terms and conditions of the
contract constitute the law between the parties. Moreover, the deed itself
provided that the assumption of mortgage "was without any further cost
whatsoever." Petitioner, on the other hand, must deliver the certificates of
title to respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution
of the Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with
MODIFICATION insofar as respondent Benita T. Ong is ordered to pay
petitioner Raymundo de Leon P684,500 representing the balance of the
purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.
6. Tongson vs. Emergency Pawnshop Bula Inc and Napala
167874

GR

No.

G.R. No. 167874

January 15, 2010

SPOUSES CARMEN S. TONGSON and JOSE C. TONGSON substituted


by his children namely: JOSE TONGSON, JR., RAUL TONGSON, TITA
TONGSON, GLORIA TONGSON ALMA TONGSON, Petitioners,
vs.
EMERGENCY PAWNSHOP BULA, INC. and DANILO R. NAPALA,
Respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review 1 of the 31 August 2004 Decision 2
and 10 March 2005 Resolution3 of the Court of Appeals in CA-G.R. CV No.
58242. In the 31 August 2004 Decision, the Court of Appeals partially
granted the appeal filed by Emergency Pawnshop Bula, Inc. (EPBI) and Danilo
R. Napala (Napala) by modifying the decision of the trial court. In the 10
March 2005 Resolution, the Court of Appeals denied the motion for partial
reconsideration filed by the Spouses Jose C. Tongson and Carmen S. Tongson
(Spouses Tongson).
The Facts
In May 1992, Napala offered to purchase from the Spouses Tongson their
364-square meter parcel of land, situated in Davao City and covered by
Transfer Certificate of Title (TCT) No. 143020, for P3,000,000. Finding the
offer acceptable, the Spouses Tongson executed with Napala a Memorandum
of Agreement4 dated 8 May 1992.
On 2 December 1992, respondents lawyer Atty. Petronilo A. Raganas, Jr.
prepared a Deed of Absolute Sale5 indicating the consideration as only
P400,000. When Carmen Tongson "noticed that the consideration was very
low, she [complained] and called the attention of Napala but the latter told
her not to worry as he would be the one to pay for the taxes and she would
receive the net amount of P3,000,000."6
To conform with the consideration stated in the Deed of Absolute Sale, the
parties executed another Memorandum of Agreement, which allegedly

replaced the first Memorandum of Agreement, 7 showing that the selling


price of the land was only P400,000.8
Upon signing the Deed of Absolute Sale, Napala paid P200,000 in cash to the
Spouses Tongson and issued a postdated Philippine National Bank (PNB)
check in the amount of P2,800,000,9 representing the remaining balance of
the purchase price of the subject property. Thereafter, TCT No. 143020 was
cancelled and TCT No. T-186128 was issued in the name of EPBI.10
When presented for payment, the PNB check was dishonored for the reason
"Drawn Against Insufficient Funds." Despite the Spouses Tongson's repeated
demands to either pay the full value of the check or to return the subject
parcel of land, Napala failed to do either. Left with no other recourse, the
Spouses Tongson filed with the Regional Trial Court, Branch 16, Davao City a
Complaint for Annulment of Contract and Damages with a Prayer for the
Issuance of a Temporary Restraining Order and a Writ of Preliminary
Injunction.11
In their Answer, respondents countered that Napala had already delivered to
the Spouses Tongson the amount of P2,800,000 representing the face value
of the PNB check, as evidenced by a receipt issued by the Spouses Tongson.
Respondents pointed out that the Spouses Tongson never returned the PNB
check claiming that it was misplaced. Respondents asserted that the
payment they made rendered the filing of the complaint baseless.12
At the pre-trial, Napala admitted, among others, issuing the postdated PNB
check in the sum of P2,800,000.13 The Spouses Tongson, on the other hand,
admitted issuing a receipt which showed that they received the PNB check
from Napala. Thereafter, trial ensued.
The Ruling of the Trial Court
The trial court found that the purchase price of the subject property has not
been fully paid and that Napalas assurance to the Spouses Tongson that the
PNB check would not bounce constituted fraud that induced the Spouses
Tongson to enter into the sale. Without such assurance, the Spouses Tongson
would not have agreed to the contract of sale. Accordingly, there was fraud
within the ambit of Article 1338 of the Civil Code, 14 justifying the annulment

of the contract of sale, the award of damages and attorneys fees, and
payment of costs.
The dispositive portion of the 9 December 1996 Decision of the trial court
reads:
WHEREFORE, judgment is hereby rendered
I Annulling the contract entered into by the plaintiffs with the
defendants;
II Declaring the writs of preliminary injunctions issued permanent;
III Ordering defendants to:
1) reconvey the property subject matter of the case to the
plaintiffs;
2) pay plaintiffs:
a) P100,000 as moral damages;
b) P50,000 as exemplary damages;
c) P20,000 as attorneys fees; and
d) P35,602.50 cost of suit broken down as follows:
P70.00 bond fee
P60.00 lis pendens fee
P902.00 docket fee
P390.00 docket fee
P8.00 summons fee
P12.00 SDF
P178.50 Xerox
P9,000 Sidcor Insurance Bond fee
P25,000 Sidcor Insurance Bond fee
or the total sum of P205,602.50.
It is further ordered that the monetary award be offsetted [sic] to
defendants downpayment of P200,000 thereby leaving a balance of
P5,602.50.15

Respondents appealed to the Court of Appeals.


The Ruling of the Court of Appeals
The Court of Appeals agreed with the trial courts finding that Napala
employed fraud when he misrepresented to the Spouses Tongson that the
PNB check in the amount of P2,800,000 would be properly funded at its
maturity. However, the Court of Appeals found that the issuance and delivery
of the PNB check and fraudulent representation made by Napala could not be
considered as the determining cause for the sale of the subject parcel of
land. Hence, such fraud could not be made the basis for annulling the
contract of sale. Nevertheless, the fraud employed by Napala is a proper and
valid basis for the entitlement of the Spouses Tongson to the balance of the
purchase price in the amount of P2,800,000 plus interest at the legal rate of
6% per annum computed from the date of filing of the complaint on 11
February 1993.
Finding the trial courts award of damages unconscionable, the Court of
Appeals reduced the moral damages from P100,000 to P50,000 and the
exemplary damages from P50,000 to P25,000.
The dispositive portion of the 31 August 2004 Decision of the Court of
Appeals reads:
WHEREFORE, the instant appeal is PARTIALLY GRANTED. The assailed
decision of the Regional Trial Court, 11th Judicial Region, Branch 16, Davao
City, in Civil Case No. 21,858-93, is hereby MODIFIED, to read:
WHEREFORE, judgment is hereby rendered ordering defendants to pay
plaintiffs:
a) the sum of P2,800,000.00 representing the balance of the purchase
price of the subject parcel of land, plus interest at the legal rate of 6%
per annum computed from the date of filing of the complaint on 11
February 1993, until the finality of the assailed decision; thereafter, the
interest due shall be at the legal rate of 12% per annum until fully paid;
b) P50,000 as moral damages;
c) P25,000 as exemplary damages;
d) P20,000 as attorneys fees; and
e) The costs of suit in the total amount of P35,602.50.

It is understood, however, that plaintiffs entitlement to items a to d, is


subject to the condition that they have not received the same or equivalent
amounts in criminal case for Violation of Batas Pambansa Bilang 22,
docketed as Criminal Case No. 30508-93, before the Regional Trial Court of
Davao City, Branch 12, instituted against the defendant Danilo R. Napala by
plaintiff Carmen S. Tongson.
SO ORDERED.16
The Spouses Tongson filed a partial motion for reconsideration which was
denied by the Court of Appeals in its Resolution dated 10 March 2005.
The Issues
The Spouses Tongson raise the following issues:
1. WHETHER THE CONTRACT OF SALE CAN BE ANNULLED BASED ON
THE FRAUD EMPLOYED BY NAPALA; and
2. WHETHER THE COURT OF APPEALS ERRED IN REDUCING THE
AMOUNT OF DAMAGES AWARDED BY THE TRIAL COURT.
The Ruling of the Court
The petition has merit.
On the existence of fraud
A contract is a meeting of the minds between two persons, whereby one is
bound to give something or to render some service to the other. 17 A valid
contract requires the concurrence of the following essential elements: (1)
consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price; (2) determinate subject matter; and (3) price certain
in money or its equivalent.18
In the present case, there is no question that the subject matter of the sale
is the 364-square meter Davao lot owned by the Spouses Tongson and the
selling price agreed upon by the parties is P3,000,000. Thus, there is no
dispute as regards the presence of the two requisites for a valid sales
contract, namely, (1) a determinate subject matter and (2) a price certain in
money.
The problem lies with the existence of the remaining element, which is
consent of the contracting parties, specifically, the consent of the Spouses

Tongson to sell the property to Napala. Claiming that their consent was
vitiated, the Spouses Tongson point out that Napalas fraudulent
representations of sufficient funds to pay for the property induced them into
signing the contract of sale. Such fraud, according to the Spouses Tongson,
renders the contract of sale void.
On the contrary, Napala insists that the Spouses Tongson willingly consented
to the sale of the subject property making the contract of sale valid. Napala
maintains that no fraud attended the execution of the sales contract.
The trial and appellate courts had conflicting findings on the question of
whether the consent of the Spouses Tongson was vitiated by fraud. While the
Court of Appeals agreed with the trial courts finding that Napala employed
fraud when he assured the Spouses Tongson that the postdated PNB check
was fully funded when it fact it was not, the Court of Appeals disagreed with
the trial courts ruling that such fraud could be the basis for the annulment of
the contract of sale between the parties.
Under Article 1338 of the Civil Code, there is fraud when, through insidious
words or machinations of one of the contracting parties, the other is induced
to enter into a contract which, without them, he would not have agreed to. In
order that fraud may vitiate consent, it must be the causal (dolo causante),
not merely the incidental (dolo incidente), inducement to the making of the
contract.19 Additionally, the fraud must be serious.20
We find no causal fraud in this case to justify the annulment of the contract
of sale between the parties. It is clear from the records that the Spouses
Tongson agreed to sell their 364-square meter Davao property to Napala who
offered to pay P3,000,000 as purchase price therefor. Contrary to the
Spouses Tongsons belief that the fraud employed by Napala was "already
operational at the time of the perfection of the contract of sale," the
misrepresentation by Napala that the postdated PNB check would not bounce
on its maturity hardly equates to dolo causante. Napalas assurance that the
check he issued was fully funded was not the principal inducement for the
Spouses Tongson to sign the Deed of Absolute Sale. Even before Napala
issued the check, the parties had already consented and agreed to the sale
transaction. The Spouses Tongson were never tricked into selling their
property to Napala. On the contrary, they willingly accepted Napalas offer to
purchase the property at P3,000,000. In short, there was a meeting of the
minds as to the object of the sale as well as the consideration therefor.

Some of the instances where this Court found the existence of causal fraud
include: (1) when the seller, who had no intention to part with her property,
was "tricked into believing" that what she signed were papers pertinent to
her application for the reconstitution of her burned certificate of title, not a
deed of sale;21 (2) when the signature of the authorized corporate officer
was forged;22 or (3) when the seller was seriously ill, and died a week after
signing the deed of sale raising doubts on whether the seller could have
read, or fully understood, the contents of the documents he signed or of the
consequences of his act.23 Suffice it to state that nothing analogous to these
badges of causal fraud exists in this case.
However, while no causal fraud attended the execution of the sales contract,
there is fraud in its general sense, which involves a false representation of a
fact,24 when Napala inveigled the Spouses Tongson to accept the postdated
PNB check on the representation that the check would be sufficiently funded
at its maturity. In other words, the fraud surfaced when Napala issued the
worthless check to the Spouses Tongson, which is definitely not during the
negotiation and perfection stages of the sale. Rather, the fraud existed in the
consummation stage of the sale when the parties are in the process of
performing their respective obligations under the perfected contract of sale.
In Swedish Match, AB v. Court of Appeals,25 the Court explained the three
stages of a contract, thus:
I n general, contracts undergo three distinct stages, to wit: negotiation;
perfection or birth; and consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and
ends at the moment of agreement of the parties. Perfection or birth of the
contract takes place when the parties agree upon the essential elements of
the contract. Consummation occurs when the parties fulfill or perform the
terms agreed upon in the contract, culminating in the extinguishment
thereof.
Indisputably, the Spouses Tongson as the sellers had already performed their
obligation of executing the Deed of Sale, which led to the cancellation of
their title in favor of EPBI. Respondents as the buyers, on the other hand,
failed to perform their correlative obligation of paying the full amount of the
contract price. While Napala paid P200,000 cash to the Spouses Tongson as
partial payment, Napala issued an insufficiently funded PNB check to pay the

remaining balance of P2.8 million. Despite repeated demands and the filing
of the complaint, Napala failed to pay the P2.8 million until the present.
Clearly, respondents committed a substantial breach of their reciprocal
obligation, entitling the Spouses Tongson to the rescission of the sales
contract. The law grants this relief to the aggrieved party, thus:
Article 1191 of the Civil Code provides:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of
the obligation, with payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
Article 1385 of the Civil Code provides the effects of rescission, viz:
ART. 1385. Rescission creates the obligation to return the things which were
the object of the contract, together with their fruits, and the price with its
interest; consequently, it can be carried out only when he who demands
rescission can return whatever he may be obliged to restore.
Neither shall rescission take place when the things which are the object of
the contract are legally in the possession of third persons who did not act in
bad faith.
While they did not file an action for the rescission of the sales contract, the
Spouses Tongson specifically prayed in their complaint for the annulment of
the sales contract, for the immediate execution of a deed of reconveyance,
and for the return of the subject property to them. 26 The Spouses Tongson
likewise prayed "for such other reliefs which may be deemed just and
equitable in the premises." In view of such prayer, and considering
respondents substantial breach of their obligation under the sales contract,
the rescission of the sales contract is but proper and justified. Accordingly,
respondents must reconvey the subject property to the Spouses Tongson,
who in turn shall refund the initial payment of P200,000 less the costs of suit.
Napalas claims that rescission is not proper and that he should be given
more time to pay for the unpaid remaining balance of P2,800,000 cannot be
countenanced. Having acted fraudulently in performing his obligation,
Napala is not entitled to more time to pay the remaining balance of
P2,800,000, and thereby erase the default or breach that he had deliberately

incurred.27 To do otherwise would be to sanction a deliberate and reiterated


infringement of the contractual obligations incurred by Napala, an attitude
repugnant to the stability and obligatory force of contracts.28
The Court notes that the selling price indicated in the Deed of Absolute Sale
was only P400,000, instead of the true purchase price of P3,000,000. The
undervaluation of the selling price operates to defraud the government of
the taxes due on the basis of the correct purchase price. Under the law, 29
the sellers have the obligation to pay the capital gains tax. In this case,
Napala undertook to "advance" the capital gains tax, among other fees,
under the Memorandum of Agreement, thus:
ATTY. ALABASTRO:
Q Is it not a fact that you were the one who paid for the capital gains
tax?
A No, I only advanced the money.
Q To whom?
A To BIR.
COURT:
Q You were the one who went to the BIR to pay the capital gains tax?
A It is embodied in the memorandum agreement.30
While Carmen Tongson protested against the "very low consideration,"
she eventually agreed to the "reduced" selling price indicated in the
Deed of Absolute since Napala assured her not to worry about the
taxes and expenses, as he had allegedly made arrangements with the
Bureau of Internal Revenue (BIR) regarding the payment of the taxes,
thus:
Q What is the amount in the Deed of Absolute Sale?
A It was only Four Hundred Thousand. And he told me not to worry
because x x x the BIR and not to worry because he will pay me what
was agreed the amount of Three Million and he will be paying all
these expenses so I was thinking, if that is the case, anyway he paid
me the Two Hundred Thousand cash and a subsequent Two Point Eight

Million downpayment check so I really thought that he was paying the


whole amount.
COURT:
Proceed.
ATTY. LIZA:
Q So you eventually agreed that this consideration be reduced to Four
Hundred Thousand Pesos and to be reflected in the Deed of Absolute
Sale?
A Yes, but when I was complaining to him why it is so because I was
worried why that was like that but Mr. Napala told me dont worry
because [he] can remedy this. And I asked him how can [he] remedy
this? And he told me we can make another Memorandum of
Agreement.
COURT:
Q Before you signed the Deed of Absolute Sale, you found out the
amount?
A Yes, sir.
Q And you complained?
A Yes.31
Considering that the undervaluation of the selling price of the subject
property, initiated by Napala, operates to defraud the government of the
correct amount of taxes due on the sale, the BIR must therefore be informed
of this Decision for its appropriate action.
On the award of damages
Citing Article 1338 of the Civil Code, the trial court awarded P100,000 moral
damages and P50,000 exemplary damages to the Spouses Tongson. While
agreeing with the trial court on the Spouses Tongsons entitlement to moral
and exemplary damages, the Court of Appeals reduced such awards for
being unconscionable. Thus, the moral damages was reduced from P100,000
to P50,000, and the exemplary damages was reduced from P50,000 to
P25,000.

As discussed above, Napala defrauded the Spouses Tongson in his acts of


issuing a worthless check and representing to the Spouses Tongson that the
check was funded, committing in the process a substantial breach of his
obligation as a buyer. For such fraudulent acts, the law, specifically the Civil
Code, awards moral damages to the injured party, thus:
ART. 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract where
the defendant acted fraudulently or in bad faith. (Emphasis supplied)
Considering that the Spouses Tongson are entitled to moral damages, the
Court may also award exemplary damages, thus:
ART. 2232. In contracts and quasi-contracts, the court may award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
Article 2234. When the amount of the exemplary damages need not be
proved, the plaintiff must show that he is entitled to moral, temperate or
compensatory damages before the court may consider the question of
whether or not exemplary damages would be awarded. In case liquidated
damages have been agreed upon, although no proof of loss is necessary in
order that such liquidated damages may be recovered, nevertheless, before
the court may consider the question of granting exemplary in addition to the
liquidated damages, the plaintiff must show that he would be entitled to
moral, temperate or compensatory damages were it not for the stipulation
for liquidated damages. (Emphasis supplied)
Accordingly, we affirm the Court of Appeals awards of moral and exemplary
damages, which we find equitable under the circumstances in this case.
WHEREFORE, we PARTIALLY GRANT the petition. We SET ASIDE the 31 August
2004 Decision and 10 March 2005 Resolution of the Court of Appeals in CAG.R. CV No. 58242, except as to the award of moral and exemplary damages,
and ORDER the rescission of the contract of sale between the Spouses
Tongson and Emergency Pawnshop Bula, Inc.
Let a copy of this Decision be forwarded to the Bureau of Internal Revenue
for its appropriate action.
SO ORDERED

7. EDCA Publishing vs. Sps. Santos and CA GR No. 80298


G.R. No. 80298

April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,


vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under
the name and style of "SANTOS BOOKSTORE," and THE COURT OF
APPEALS, respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for
petitioner.
Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J.:
The case before us calls for the interpretation of Article 559 of the Civil Code
and raises the particular question of when a person may be deemed to have
been "unlawfully deprived" of movable property in the hands of another. The
article runs in full as follows:
Art. 559. The possession of movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any movable or
has been unlawfully deprived thereof, may recover it from the person
in possession of the same.
If the possessor of a movable lost or of which the owner has been
unlawfully deprived has acquired it in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid
therefor.
The movable property in this case consists of books, which were bought from
the petitioner by an impostor who sold it to the private respondents.
Ownership of the books was recognized in the private respondents by the
Municipal Trial Court, 1 which was sustained by the Regional Trial Court, 2
which was in turn sustained by the Court of Appeals. 3 The petitioner asks us
to declare that all these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person identifying himself as
Professor Jose Cruz placed an order by telephone with the petitioner
company for 406 books, payable on delivery. 4 EDCA prepared the

corresponding invoice and delivered the books as ordered, for which Cruz
issued a personal check covering the purchase price of P8,995.65. 5 On
October 7, 1981, Cruz sold 120 of the books to private respondent Leonor
Santos who, after verifying the seller's ownership from the invoice he showed
her, paid him P1,700.00. 6
Meanwhile, EDCA having become suspicious over a second order placed by
Cruz even before clearing of his first check, made inquiries with the De la
Salle College where he had claimed to be a dean and was informed that
there was no such person in its employ. Further verification revealed that
Cruz had no more account or deposit with the Philippine Amanah Bank,
against which he had drawn the payment check. 7 EDCA then went to the
police, which set a trap and arrested Cruz on October 7, 1981. Investigation
disclosed his real name as Tomas de la Pea and his sale of 120 of the books
he had ordered from EDCA to the private respondents. 8
On the night of the same date, EDCA sought the assistance of the police in
Precinct 5 at the UN Avenue, which forced their way into the store of the
private respondents and threatened Leonor Santos with prosecution for
buying stolen property. They seized the 120 books without warrant, loading
them in a van belonging to EDCA, and thereafter turned them over to the
petitioner. 9
Protesting this high-handed action, the private respondents sued for recovery
of the books after demand for their return was rejected by EDCA. A writ of
preliminary attachment was issued and the petitioner, after initial refusal,
finally surrendered the books to the private respondents. 10 As previously
stated, the petitioner was successively rebuffed in the three courts below
and now hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of
the petitioner in taking the law into its own hands and forcibly recovering the
disputed books from the private respondents. The circumstance that it did so
with the assistance of the police, which should have been the first to uphold
legal and peaceful processes, has compounded the wrong even more
deplorably. Questions like the one at bar are decided not by policemen but
by judges and with the use not of brute force but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private respondents have not
established their ownership of the disputed books because they have not

even produced a receipt to prove they had bought the stock. This is
unacceptable. Precisely, the first sentence of Article 559 provides that "the
possession of movable property acquired in good faith is equivalent to a
title," thus dispensing with further proof.
The argument that the private respondents did not acquire the books in good
faith has been dismissed by the lower courts, and we agree. Leonor Santos
first ascertained the ownership of the books from the EDCA invoice showing
that they had been sold to Cruz, who said he was selling them for a discount
because he was in financial need. Private respondents are in the business of
buying and selling books and often deal with hard-up sellers who urgently
have to part with their books at reduced prices. To Leonor Santos, Cruz must
have been only one of the many such sellers she was accustomed to dealing
with. It is hardly bad faith for any one in the business of buying and selling
books to buy them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has been unlawfully
deprived of the books because the check issued by the impostor in payment
therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the
owner who has been unlawfully deprived of personal property is entitled to
its recovery except only where the property was purchased at a public sale,
in which event its return is subject to reimbursement of the purchase price.
The petitioner is begging the question. It is putting the cart before the horse.
Unlike in the cases invoked, it has yet to be established in the case at bar
that EDCA has been unlawfully deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to
the books that he could have validly transferred to the private respondents.
Its reason is that as the payment check bounced for lack of funds, there was
a failure of consideration that nullified the contract of sale between it and
Cruz.
The contract of sale is consensual and is perfected once agreement is
reached between the parties on the subject matter and the consideration.
According to the Civil Code:
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.
xxx

xxx

xxx

Art. 1477. The ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall
not pass to the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that
ownership in the thing sold shall not pass to the buyer until full payment of
the purchase only if there is a stipulation to that effect. Otherwise, the rule is
that such ownership shall pass from the vendor to the vendee upon the
actual or constructive delivery of the thing sold even if the purchase price
has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the
contract, or to criminal prosecution in the case of bouncing checks. But
absent the stipulation above noted, delivery of the thing sold will effectively
transfer ownership to the buyer who can in turn transfer it to another.
In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some cosmetics
to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having
been paid by Ang, it sued for the recovery of the articles from Tan, who
claimed he had validly bought them from Ang, paying for the same in cash.
Finding that there was no conspiracy between Tan and Ang to deceive Asiatic
the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil Code providing,
among other things that "one who has been unlawfully deprived of
personal property may recover it from any person possessing it." We do
not believe that the plaintiff has been unlawfully deprived of the
cartons of Gloco Tonic within the scope of this legal provision. It has
voluntarily parted with them pursuant to a contract of purchase and
sale. The circumstance that the price was not subsequently paid did
not render illegal a transaction which was valid and legal at the
beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to
Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac
by Feist was dishonored, the plaintiff sued to recover the vehicle from

Jimenez on the ground that she had been unlawfully deprived of it by reason
of Feist's deception. In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac
has been unlawfully deprived of her car. At first blush, it would seem
that she was unlawfully deprived thereof, considering that she was
induced to part with it by reason of the chicanery practiced on her by
Warner L. Feist. Certainly, swindling, like robbery, is an illegal method
of deprivation of property. In a manner of speaking, plaintiff-appellant
was "illegally deprived" of her car, for the way by which Warner L. Feist
induced her to part with it is illegal and is punished by law. But does
this "unlawful deprivation" come within the scope of Article 559 of the
New Civil Code?
xxx

xxx

xxx

. . . The fraud and deceit practiced by Warner L. Feist earmarks this


sale as a voidable contract (Article 1390 N.C.C.). Being a voidable
contract, it is susceptible of either ratification or annulment. If the
contract is ratified, the action to annul it is extinguished (Article 1392,
N.C.C.) and the contract is cleansed from all its defects (Article 1396,
N.C.C.); if the contract is annulled, the contracting parties are restored
to their respective situations before the contract and mutual restitution
follows as a consequence (Article 1398, N.C.C.).
However, as long as no action is taken by the party entitled, either that
of annulment or of ratification, the contract of sale remains valid and
binding. When plaintiff-appellant Trinidad C. Tagatac delivered the car
to Feist by virtue of said voidable contract of sale, the title to the car
passed to Feist. Of course, the title that Feist acquired was defective
and voidable. Nevertheless, at the time he sold the car to Felix
Sanchez, his title thereto had not been avoided and he therefore
conferred a good title on the latter, provided he bought the car in good
faith, for value and without notice of the defect in Feist's title (Article
1506, N.C.C.). There being no proof on record that Felix Sanchez acted
in bad faith, it is safe to assume that he acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation of
Article 559 as applied to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership
over the books which he could then validly transfer to the private

respondents. The fact that he had not yet paid for them to EDCA was a
matter between him and EDCA and did not impair the title acquired by the
private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully
deprived" were to be interpreted in the manner suggested by the petitioner.
A person relying on the seller's title who buys a movable property from him
would have to surrender it to another person claiming to be the original
owner who had not yet been paid the purchase price therefor. The buyer in
the second sale would be left holding the bag, so to speak, and would be
compelled to return the thing bought by him in good faith without even the
right to reimbursement of the amount he had paid for it.
It bears repeating that in the case before us, Leonor Santos took care to
ascertain first that the books belonged to Cruz before she agreed to
purchase them. The EDCA invoice Cruz showed her assured her that the
books had been paid for on delivery. By contrast, EDCA was less than
cautious in fact, too trusting in dealing with the impostor. Although it had
never transacted with him before, it readily delivered the books he had
ordered (by telephone) and as readily accepted his personal check in
payment. It did not verify his identity although it was easy enough to do this.
It did not wait to clear the check of this unknown drawer. Worse, it indicated
in the sales invoice issued to him, by the printed terms thereon, that the
books had been paid for on delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go beyond that invoice to
satisfy herself that the books being offered for sale by Cruz belonged to him;
yet she did. Although the title of Cruz was presumed under Article 559 by his
mere possession of the books, these being movable property, Leonor Santos
nevertheless demanded more proof before deciding to buy them.
It would certainly be unfair now to make the private respondents bear the
prejudice sustained by EDCA as a result of its own negligence.1wphi1 We
cannot see the justice in transferring EDCA's loss to the Santoses who had
acted in good faith, and with proper care, when they bought the books from
Cruz.
While we sympathize with the petitioner for its plight, it is clear that its
remedy is not against the private respondents but against Tomas de la Pea,
who has apparently caused all this trouble. The private respondents have
themselves been unduly inconvenienced, and for merely transacting a

customary deal not really unusual in their kind of business. It is they and not
EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is
DENIED, with costs against the petitioner.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
8. Yamane vs. BA Lepanto Condominium Corp GR No. 154993
G.R. No. 174617

December 27, 2007

ROMULO D. SAN JUAN, Petitioner,


vs.
RICARDO L. CASTRO, in his capacity as City Treasurer of Marikina
City, Respondent.
DECISION
CARPIO MORALES, J.:
Romulo D. San Juan (petitioner), registered owner of real properties in
Rancho Estate I, Concepcion II, Marikina City covered by Transfer Certificates
of Title Nos. 160435, 236658, and 233877,1 with the consent of his wife,
conveyed on August 24, 2004, by Deed of Assignment, 2 the properties to the
Saints and Angels Realty Corporation (SARC), then under the process of
incorporation, in exchange for 258,434 shares of stock therein with a total
par value of P2,584,340. Two hundred thousand (200,000) of the said shares
of stock with a par value of P2,000,000 were placed in San Juans name while
the remaining 58,434 shares of stock with a par value of P584,340 were
placed in the name of his wife.
On June 24, 2005, the Securities and Exchange Commission approved the
Articles of Incorporation of SARC.3
Respondents representative thereafter went to the Office of the Marikina
City Treasurer to pay the transfer tax based on the consideration stated in
the Deed of Assignment.4 Ricardo L. Castro (respondent), the City Treasurer,
informed him, however, that the tax due is based on the fair market value of
the property.5

Petitioner in writing protested the basis of the tax due in reply to which
respondent wrote:
In your letter, you asserted that there is no monetary consideration involved
in the afore-mentioned transfer of the properties inasmuch as what you
received as transferor thereof, are shares of stock of said realty company in
exchange of the properties transferred.
In reply, we wish to inform you that in cases of transfer of real property not
involving monetary consideration, it is certain that the fair market value or
zonal value of the property is the basis of the tax rate. As provided for under
the Local [G]overnment Code, fair market value is defined as the price at
which a property may be sold by a seller who is not compelled to sell and
bought by the buyer who is not compelled to buy. Hence, the preliminary
computation based on the fair market value of the property made by the
revenue collector is correct.6 (Underscoring supplied)
Petitioner thus filed before the Regional Trial Court (RTC) of Marikina City a
Petition7 for mandamus and damages against respondent in his capacity as
Marikina City Treasurer praying that respondent be compelled to "perform a
ministerial duty, that is, to accept the payment of transfer tax based on the
actual consideration of the transfer/assignment."8
Citing Section 135 of the Local Government Code which provides:
Sec. 135. Tax on Transfer of Real Property Ownership. (a) The province [or
the city pursuant to Section 151 of the Local Government Code] may impose
a tax on the sale, donation, barter, or on any other mode of transferring
ownership or title of real property at the rate of not more than fifty percent
(50%) of the one percent (1%) of the total consideration involved in the
acquisition of the property or the fair market value in case the monetary
consideration involved in the transfer is not substantial, whichever is higher.
The sale, transfer or other disposition of real property pursuant to R.A. 6657
shall be exempt from this tax. (Emphasis supplied),
petitioner contended:
It is beyond dispute that under the abovementioned provision of the law,
transfer tax is computed on the total consideration involved. The intention of
the law is not to automatically apply the "whichever is higher" rule. Clearly,
from a reading of the above-quoted provision, it is only when there is a

monetary consideration involved and the monetary consideration is


not substantial that the tax rate is based on the higher fair market
value . . . 9 (Emphasis, underscoring, and italics in original)
In his Comment on petitioners petition before the RTC, respondent stated:
xxxx
"[M]onetary consideration" as used in Section 135 of R.A. 7160 does not only
pertain to the price or money involved but likewise, as in the case of
donations or barters, this refers to the value or monetary equivalent of what
is received by the transferor.
In the case at hand, the monetary consideration involved is the par value of
shares of stocks acquired by the petitioner in exchange for his real
properties. As admitted by the petitioner himself, the fair market value of the
properties transferred is more than seven million pesos. It is undeniable
therefore that the actual consideration for the assignment in the amount of
two million five hundred eighty four thousand and three hundred forty pesos
(P2,584,340.00) is far less substantial than the aforesaid fair market value.
Thus, the City Treasurer is constrained to assess the transfer tax on the
higher base.10
xxxx
The respondent did not refuse to accept payment, it is the
petitioner that refuses to pay the correct amount of transfer tax.
xxxx
The petitioner did not exhaust the available administrative
remedies. Under the Local Government Code, the petitioner should have
filed an appeal on the tax assessment and made a payment under protest
pending the resolution thereof. The issues raised in the case therein, being
matters of facts and law, the petitioner should have availed of the aforesaid
relief before resorting to a court action. x x x
xxxx
The subject of this Petition is the performance of a duty which is not
ministerial in character. Assessment of tax liabilities or obligations and
the corresponding duty to collect the same involves a degree of discretion. It

is erroneous to assume that the City Treasurer is powerless to ascertain if the


payment of the tax obligation is proper or correct.
xxxx
Mandamus cannot lie to compel the City Treasurer to accept as full
compliance a tax payment which in his reasoning and assessment is
deficient and incorrect.11 (Emphasis in the original)
Finding for respondent, Branch 272 of the Marikina City RTC dismissed the
petition by Decision of August 22, 2006.
Hence, the present Petition for Review on Certiorari, 12 petitioner faulting the
RTC with having committed serious errors of law in dismissing the petition for
mandamus with damages.13
For mandamus to lie, petitioner must comply with Section 3 of Rule 65 of the
Rules of Court which provides:
SEC. 3. Petition for Mandamus. -- When any tribunal, corporation, board,
officer or person unlawfully neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use and enjoyment of a right or office
to which such other is entitled, and there is no other plain, speedy and
adequate remedy in the ordinary course of law, the person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the
respondent, immediately or at some other time to be specified by the court,
to do the act required to be done to protect the rights of the petitioner and to
pay the damages sustained by the petitioner by reason of the wrongful acts
of the respondent.
x x x x (Underscoring supplied)
In the case at bar, the condition that "there is no other plain, speedy and
adequate remedy in the ordinary course of law" is absent.
Under Section 195 of the Local Government Code which is quoted
immediately below, a taxpayer who disagrees with a tax assessment made
by a local treasurer may file a written protest thereof:14

SECTION 195. Protest of Assessment. When the local treasurer or his duly
authorized representative finds that the correct taxes, fees, or charges have
not been paid, he shall issue a notice of assessment stating the nature of the
tax, fee, or charge, the amount of deficiency, the surcharges, interests and
penalties. Within sixty (60) days from the receipt of the notice of
assessment, the taxpayer may file a written protest with the local treasurer
contesting the assessment; otherwise, the assessment shall become final
and executory. The local treasurer shall decide the protest within sixty (60)
days from the time of its filing. If the local treasurer finds the protest to be
wholly or partly meritorious, he shall issue a notice cancelling wholly or
partially the assessment. However, if the local treasurer finds the
assessment to be wholly or partly correct, he shall deny the protest wholly or
partly with notice to the taxpayer. The taxpayer shall have thirty (30)
days from the receipt of the denial of the protest or from the lapse
of the sixty-day (60) period prescribed herein within which to appeal
with the court of competent jurisdiction, otherwise the assessment
becomes conclusive and unappealable. (Emphasis and underscoring
supplied)
That petitioner protested in writing against the assessment of tax due and
the basis thereof is on record as in fact it was on that account that
respondent sent him the above-quoted July 15, 2005 letter which operated
as a denial of petitioners written protest.1awphi1
Petitioner should thus have, following the earlier above-quoted Section 195
of the Local Government Code, either appealed the assessment before the
court of competent jurisdiction15 or paid the tax and then sought a
refund.16
Petitioner did not observe any of these remedies available to him, however.
He instead opted to file a petition for mandamus to compel respondent to
accept payment of transfer tax as computed by him.
Mandamus lies only to compel an officer to perform a ministerial duty (one
which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by
its nature requires the exercise of judgment).17 Respondents argument that
"[m]andamus cannot lie to compel the City Treasurer to accept as full

compliance a tax payment which in his reasoning and assessment is


deficient and incorrect" is thus persuasive.
WHEREFORE, the petition is DENIED.
9. Carabeo vs. Sps. Dingco
G.R. No. 190823

GR No. 190823

April 4, 2011

DOMINGO CARABEO, Petitioner,


vs.
SPOUSES NORBERTO and SUSAN DINGCO, Respondents.
DECISION
CARPIO MORALES, J.:
On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract
denominated as "Kasunduan sa Bilihan ng Karapatan sa Lupa" 1 (kasunduan)
with Spouses Norberto and Susan Dingco (respondents) whereby petitioner
agreed to sell his rights over a 648 square meter parcel of unregistered land
situated in Purok III, Tugatog, Orani, Bataan to respondents for P38,000.
Respondents tendered their initial payment of P10,000 upon signing of the
contract, the remaining balance to be paid on September 1990.
Respondents were later to claim that when they were about to hand in the
balance of the purchase price, petitioner requested them to keep it first as
he was yet to settle an on-going "squabble" over the land.
Nevertheless, respondents gave petitioner small sums of money from time to
time which totaled P9,100, on petitioners request according to them; due to
respondents inability to pay the amount of the remaining balance in full,
according to petitioner.
By respondents claim, despite the alleged problem over the land, they
insisted on petitioners acceptance of the remaining balance of P18,900 but
petitioner remained firm in his refusal, proffering as reason therefor that he
would register the land first.
Sometime in 1994, respondents learned that the alleged problem over the
land had been settled and that petitioner had caused its registration in his
name on December 21, 1993 under Transfer Certificate of Title No. 161806.
They thereupon offered to pay the balance but petitioner declined, drawing

them to file a complaint before the Katarungan Pambarangay. No settlement


was reached, however, hence, respondent filed a complaint for specific
performance before the Regional Trial Court (RTC) of Balanga, Bataan.
Petitioner countered in his Answer to the Complaint that the sale was void for
lack of object certain, the kasunduan not having specified the metes and
bounds of the land. In any event, petitioner alleged that if the validity of the
kasunduan is upheld, respondents failure to comply with their reciprocal
obligation to pay the balance of the purchase price would render the action
premature. For, contrary to respondents claim, petitioner maintained that
they failed to pay the balance of P28,000 on September 1990 to thus
constrain him to accept installment payments totaling P9,100.
After the case was submitted for decision or on January 31, 2001, 2 petitioner
passed away. The records do not show that petitioners counsel informed
Branch 1 of the Bataan RTC, where the complaint was lodged, of his death
and that proper substitution was effected in accordance with Section 16, Rule
3, Rules of Court.3
By Decision of February 25, 2001,4 the trial court ruled in favor of
respondents, disposing as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering:
1. The defendant to sell his right over 648 square meters of land
pursuant to the contract dated July 10, 1990 by executing a Deed of
Sale thereof after the payment of P18,900 by the plaintiffs;
2. The defendant to pay the costs of the suit.
SO ORDERED.5
Petitioners counsel filed a Notice of Appeal on March 20, 2001.
By the herein challenged Decision dated July 20, 2009, 6 the Court of Appeals
affirmed that of the trial court.
Petitioners motion for reconsideration having been denied by Resolution of
January 8, 2010, the present petition for review was filed by Antonio
Carabeo, petitioners son,7 faulting the appellate court:
(A)

in holding that the element of a contract, i.e., an object certain is


present in this case.
(B)
in considering it unfair to expect respondents who are not lawyers to
make judicial consignation after herein petitioner allegedly refused to
accept payment of the balance of the purchase price.
(C)
in upholding the validity of the contract, "Kasunduan sa Bilihan ng
Karapatan sa Lupa," despite the lack of spousal consent, (underscoring
supplied)
and proffering that
(D)
[t]he death of herein petitioner causes the dismissal of the action filed
by respondents; respondents cause of action being an action in
personam. (underscoring supplied)
The petition fails.
The pertinent portion of the kasunduan reads:8
xxxx
Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog,
Orani Bataan, na may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa
ay may sakop na dalawang punong santol at isang punong mangga, kayat
ako ay nakipagkasundo sa mag-asawang Norby Dingco at Susan Dingco na
ipagbili sa kanila ang karapatan ng nasabing lupa sa halagang P38,000.00.
x x x x (underscoring supplied)
That the kasunduan did not specify the technical boundaries of the property
did not render the sale a nullity. The requirement that a sale must have for
its object a determinate thing is satisfied as long as, at the time the contract
is entered into, the object of the sale is capable of being made determinate
without the necessity of a new or further agreement between the parties. 9
As the above-quoted portion of the kasunduan shows, there is no doubt that
the object of the sale is determinate.

Clutching at straws, petitioner proffers lack of spousal consent. This was


raised only on appeal, hence, will not be considered, in the present case, in
the interest of fair play, justice and due process.10
Respecting the argument that petitioners death rendered respondents
complaint against him dismissible, Bonilla v. Barcena11 enlightens:
The question as to whether an action survives or not depends on the nature
of the action and the damage sued for. In the causes of action which survive,
the wrong complained [of] affects primarily and principally property and
property rights, the injuries to the person being merely incidental, while in
the causes of action which do not survive, the injury complained of is to the
person, the property and rights of property affected being incidental.
(emphasis and underscoring supplied)
In the present case, respondents are pursuing a property right arising from
the kasunduan, whereas petitioner is invoking nullity of the kasunduan to
protect his proprietary interest. Assuming arguendo, however, that the
kasunduan is deemed void, there is a corollary obligation of petitioner to
return the money paid by respondents, and since the action involves
property rights,12 it survives.1avvphi1
It bears noting that trial on the merits was already concluded before
petitioner died. Since the trial court was not informed of petitioners death, it
may not be faulted for proceeding to render judgment without ordering his
substitution. Its judgment is thus valid and binding upon petitioners legal
representatives or successors-in-interest, insofar as his interest in the
property subject of the action is concerned.13
In another vein, the death of a client immediately divests the counsel of
authority.14 Thus, in filing a Notice of Appeal, petitioners counsel of record
had no personality to act on behalf of the already deceased client who, it
bears reiteration, had not been substituted as a party after his death. The
trial courts decision had thereby become final and executory, no appeal
having been perfected.
WHEREFORE, the petition is DENIED.
SO ORDERED.

10.

Paragas vs. Balacano GR No. 168220

G.R. No. 168220. August 31, 2005


SPS. rudy Paragas and Corazon B. Paragas, Petitioners,
vs.
Hrs. of Dominador Balacano, namely: Dominic, Rodolfo, Nanette and
Cyric, all surnamed Balacano, represented by NANETTE BALACANO
and ALFREDO BALACANO, Respondent.
RESOLUTION
CHICO-NAZARIO, J.:
This petition for review seeks to annul the Decision 1 dated 15 February 2005
of the Court of Appeals in CA-G.R. CV No. 64048, affirming with modification
the 8 March 1999 Decision 2 of the Regional Trial Court (RTC), Branch 21, of
Santiago City, Isabela, in Civil Case No. 21-2313. The petition likewise seeks
to annul the Resolution3 dated 17 May 2005 denying petitioners motion for
reconsideration.
The factual antecedents were synthesized by the Court of Appeals in its
decision.
Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner
of Lot 1175-E and Lot 1175-F of the Subd. Plan Psd-38042 [located at
Baluarte, Santiago City, Isabela] covered by TCT No. T-103297 and TCT No. T103298 of the Registry of Deeds of the Province of Isabela.
Gregorio and Lorenza had three children, namely: Domingo, Catalino and
Alfredo, all surnamed Balacano. Lorenza died on December 11, 1991.
Gregorio, on the other hand, died on July 28, 1996.
Prior to his death, Gregorio was admitted at the Veterans General Hospital in
Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until July 19,
1996. He was transferred in the afternoon of July 19, 1996 to the Veterans
Memorial Hospital in Quezon City where he was confined until his death.
Gregorio purportedly sold on July 22, 1996, or barely a week prior to his
death, a portion of Lot 1175-E (specifically consisting of 15,925 square
meters from its total area of 22,341 square meters) and the whole Lot 1175-F
to the Spouses Rudy ("Rudy") and Corazon Paragas (collectively, "the
Spouses Paragas") for the total consideration of P500,000.00. This sale

appeared in a deed of absolute sale notarized by Atty. Alexander V. de


Guzman, Notary Public for Santiago City, on the same date July 22, 1996
and witnessed by Antonio Agcaoili ("Antonio") and Julia Garabiles ("Julia").
Gregorios certificates of title over Lots 1175-E and 1175-F were
consequently cancelled and new certificates of title were issued in favor of
the Spouses Paragas.
The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E
consisting of 6,416 square meters to Catalino for the total consideration of
P60,000.00.
Domingos children (Dominic, Rodolfo, Nanette and Cyric, all surnamed
Balacano;) filed on October 22, 1996 a complaint for annulment of sale and
partition against Catalino and the Spouses Paragas. They essentially alleged
in asking for the nullification of the deed of sale that: (1) their grandfather
Gregorio could not have appeared before the notary public on July 22, 1996
at Santiago City because he was then confined at the Veterans Memorial
Hospital in Quezon City; (2) at the time of the alleged execution of the deed
of sale, Gregorio was seriously ill, in fact dying at that time, which vitiated his
consent to the disposal of the property; and (3) Catalino manipulated the
execution of the deed and prevailed upon the dying Gregorio to sign his
name on a paper the contents of which he never understood because of his
serious condition. Alternatively, they alleged that assuming Gregorio was of
sound and disposing mind, he could only transfer a half portion of Lots 1175E and 1175-F as the other half belongs to their grandmother Lorenza who
predeceased Gregorio they claimed that Lots 1175-E and 1175-F form part
of the conjugal partnership properties of Gregorio and Lorenza. Finally, they
alleged that the sale to the Spouses Paragas covers only a 5-hectare portion
of Lots 1175-E and 1175-F leaving a portion of 6,416 square meters that
Catalino is threatening to dispose. They asked for the nullification of the
deed of sale executed by Gregorio and the partition of Lots 1175-E and 1175F. They likewise asked for damages.
Instead of filing their Answer, the defendants Catalino and the Spouses
Paragas moved to dismiss the complaint on the following grounds: (1) the
plaintiffs have no legal capacity - the Domingos children cannot file the case
because Domingo is still alive, although he has been absent for a long time;
(2) an indispensable party is not impleaded that Gregorios other son,
Alfredo was not made a party to the suit; and (3) the complaint states no
cause of action that Domingos children failed to allege a ground for the

annulment of the deed of sale; they did not cite any mistake, violence,
intimidation, undue influence or fraud, but merely alleged that Gregorio was
seriously ill. Domingos children opposed this motion.
The lower court denied the motion to dismiss, but directed the plaintiffsappellees to amend the complaint to include Alfredo as a party. Alfredo was
subsequently declared as in default for his failure to file his Answer to the
Complaint.
The defendants-appellees filed their Answer with Counterclaim on May 7,
1997, denying the material allegations of the complaint. Additionally, they
claimed that: (1) the deed of sale was actually executed by Gregorio on July
19 (or 18), 1996 and not July 22, 1996; (2) the Notary Public personally went
to the Hospital in Bayombong, Nueva Vizcaya on July 18, 1996 to notarize
the deed of sale already subject of a previously concluded covenant between
Gregorio and the Spouses Paragas; (3) at the time Gregorio signed the deed,
he was strong and of sound and disposing mind; (4) Lots 1175-E and 1175-F
were Gregorios separate capital and the inscription of Lorenzas name in the
titles was just a description of Gregorios marital status; (5) the entire area of
Lots 1175-E and 1175-F were sold to the Spouses Paragas. They interposed a
counterclaim for damages.
At the trial, the parties proceeded to prove their respective contentions.
Plaintiff-appellant Nanette Balacano testified to prove the material
allegations of their complaint. On Gregorios medical condition, she declared
that: (1) Gregorio, who was then 81 years old, weak and sick, was brought to
the hospital in Bayombong, Nueva Vizcaya on June 28, 1996 and stayed
there until the afternoon on July 19, 1996; (2) thereafter, Gregorio, who by
then was weak and could no longer talk and whose condition had worsened,
was transferred in the afternoon of July 19, 1996 to the Veterans Memorial
Hospital in Quezon City where Gregorio died. She claimed that Gregorio
could not have signed a deed of sale on July 19, 1996 because she stayed at
the hospital the whole of that day and saw no visitors. She likewise testified
on their agreement for attorneys fees with their counsel and the litigation
expenses they incurred.
Additionally, the plaintiffs-appellees presented
medical records and his death certificate.

in evidence

Gregorios

Defendants-appellees, on the other hand, presented as witnesses Notary


Public de Guzman and instrumental witness Antonio to prove Gregorios

execution of the sale and the circumstances under the deed was executed.
They uniformly declared that: (1) on July 18, 1996, they went to the hospital
in Bayombong, Nueva Vizcaya where Gregorio was confined with Rudy;
(2) Atty. De Guzman read and explained the contents of the deed to
Gregorio; (3) Gregorio signed the deed after receiving the money from Rudy;
(4) Julia and Antonio signed the deed as witnesses. Additionally, Atty. De
Guzman explained that the execution of the deed was merely a confirmation
of a previous agreement between the Spouses Paragas and Gregorio that
was concluded at least a month prior to Gregorios death; that, in fact,
Gregorio had previously asked him to prepare a deed that Gregorio
eventually signed on July 18, 1996. He also explained that the deed, which
appeared to have been executed on July 22, 1996, was actually executed on
July 18, 1996; he notarized the deed and entered it in his register only on July
22, 1996. He claimed that he did not find it necessary to state the precise
date and place of execution (Bayombong, Nueva Vizcaya, instead of Santiago
City) of the deed of sale because the deed is merely a confirmation of a
previously agreed contract between Gregorio and the Spouses Paragas. He
likewise stated that of the stated P500,000.00 consideration in the deed,
Rudy paid Gregorio P450,000.00 in the hospital because Rudy had previously
paid Gregorio P50,000.00. For his part, Antonio added that he was asked by
Rudy to take pictures of Gregorio signing the deed. He also claimed that
there was no entry on the date when he signed; nor did he remember
reading Santiago City as the place of execution of the deed. He described
Gregorio as still strong but sickly, who got up from the bed with Julias help.
Witness for defendants-appellants Luisa Agsalda testified to prove that Lot
1175-E was Gregorios separate property. She claimed that Gregorios father
(Leon) purchased a two-hectare lot from them in 1972 while the other lot
was purchased from her neighbor. She also declared that Gregorio inherited
these lands from his father Leon; she does not know, however, Gregorios
brothers share in the inheritance. Defendant-appellant Catalino also testified
to corroborate the testimony of witness Luisa Agsalda; he said that Gregorio
told him that he (Gregorio) inherited Lots 1175-E and 1175-F from his father
Leon. He also stated that a portion of Lot 1175-E consisting of 6,416 square
meters was sold to him by the Spouses Paragas and that he will pay the
Spouses Paragas P50,000.00, not as consideration for the return of the land
but for the transfer of the title to his name.

Additionally, the defendants-appellants presented in evidence the pictures


taken by Antonio when Gregorio allegedly signed the deed.4
The lower court, after trial, rendered the decision declaring null and void the
deed of sale purportedly executed by Gregorio Balacano in favor of the
spouses Rudy Paragas and Corazon Paragas. In nullifying the deed of sale
executed by Gregorio, the lower court initially noted that at the time
Gregorio executed the deed, Gregorio was ill. The lower courts reasoning in
declaring the deed of sale null and void and this reasonings premises may
be summarized as follows: (1) the deed of sale was improperly notarized;
thus it cannot be considered a public document that is usually accorded the
presumption of regularity; (2) as a private document, the deed of sales due
execution must be proved in accordance with Section 20, Rule 132 of the
Revised Rules on Evidence either: (a) by anyone who saw the document
executed or written; or (b) by evidence of the genuineness of the signature
or handwriting of the maker; and (3) it was incumbent upon the Spouses
Paragas to prove the deed of sales due execution but failed to do so the
lower court said that witness Antonio Agcaoili is not credible while Atty.
Alexander De Guzman is not reliable.5
The lower court found the explanations of Atty. De Guzman regarding the
erroneous entries on the actual place and date of execution of the deed of
sale as justifications for a lie. The lower court said
The Court cannot imagine an attorney to undertake to travel to another
province to notarize a document when he must certainly know, being a
lawyer and by all means, not stupid, that he has no authority to notarize a
document in that province. The only logical thing that happened was that
Rudy Paragas brought the deed of sale to him on July 22, 1996 already
signed and requested him to notarize the same which he did, not knowing
that at that time the vendor was already in a hospital and [sic] Quezon City.
Of course had he known, Atty. De Guzman would not have notarized the
document. But he trusted Rudy Paragas and moreover, Gregorio Balacano
already informed him previously in June that he will sell his lands to Paragas.
In addition [sic, (,) was omitted] Rudy Paragas also told him that Balacano
received an advance of P50,000.00.
The intention to sell is not actual selling. From the first week of June when,
according to Atty. De Guzman, Gregorio Balacano informed him that he will
sell his land to Rudy Paragas, enough time elapsed to the time he was

brought to the hospital on June 28, 1996. Had there been a meeting of the
minds between Gregorio Balacano and Rudy Paragas regarding the sale,
surely Gregorio Balacano would have immediately returned to the office of
Atty. De Guzman to execute the deed of sale. He did not until he was brought
to the hospital and diagnosed to have liver cirrhosis. Because of the
seriousness of his illness, it is not expected that Gregorio Balacano
would be negotiating a contract of sale. Thus, Rudy Paragas negotiated
with Catalino Balacano, the son of Gregorio Balacano with whom the latter
was staying.6
The lower court also did not consider Antonio Agcaoili, petitioner Rudy
Paragass driver, a convincing witness, concluding that he was telling a
rehearsed story. The lower court said
The only portion of his testimony that is true is that he signed the document.
How could the Court believe that he brought a camera with him just to take
pictures of the signing? If the purpose was to record the proceeding for
posterity, why did he not take the picture of Atty. De Guzman when the latter
was reading and explaining the document to Gregorio Balacano? Why did he
not take the picture of both Gregorio Balacano and Atty. de Guzman while the
old man was signing the document instead of taking a picture of Gregorio
Balacano alone holding a ball pen without even showing the document being
signed? Verily there is a picture of a document but only a hand with a ball
pen is shown with it. Why? Clearly the driver Antonio Agcaoili must have only
been asked by Rudy Paragas to tell a concocted story which he himself would
not dare tell in Court under oath.7
The lower court likewise noted that petitioner Rudy Paragas did not testify
about the signing of the deed of sale. To the lower court, Rudys refusal or
failure to testify raises a lot of questions, such as: (1) was he (Rudy) afraid to
divulge the circumstances of how he obtained the signature of Gregorio
Balacano, and (2) was he (Rudy) afraid to admit that he did not actually pay
the P500,000.00 indicated in the deed of sale as the price of the land?8
The lower court also ruled that Lots 1175-E and 1175-F were Gregorios and
Lorenzas conjugal partnership properties. The lower court found that these
lots were acquired during the marriage because the certificates of title of
these lots clearly stated that the lots are registered in the name Gregorio,
"married to Lorenza Sumigcay." Thus, the lower court concluded that the

presumption of law (under Article 160 of the Civil Code of the Philippines)
that property acquired during the marriage is presumed to belong to the
conjugal partnership fully applies to Lots 1175-E and 1175-F.9
Thus, on 8 March 1999, the RTC, Branch 21, of Santiago City, Isabela,
rendered a Decision10 in Civil Case No. 21-2313, the dispositive portion of
which reads as follows:
WHEREFORE in the light of the foregoing considerations judgment is hereby
rendered:
1. DECLARING as NULL and VOID the deed of sale purportedly executed by
Gregorio Balacano in favor of the spouses Rudy Paragas and Corazon Paragas
over lots 1175-E and 1175-F covered by TCT Nos. T-103297 and T-103298,
respectively;
2. ORDERING the cancellation of TCT Nos. T-258042 and T-258041 issued in
the name of the spouses Rudy and Corazon Paragas by virtue of the deed of
sale; and
Declaring the parcel of lands, lots 1175-E and 1175-F as part of the estate of
the deceased spouses Gregorio Balacano and Lorenza Balacano. 11
In the assailed Decision dated 15 February 2005, the Court of Appeals
affirmed the Decision of the trial court, with the modification that Lots 1175E and 1175-F were adjudged as belonging to the estate of Gregorio Balacano.
The appellate court disposed as follows:
Wherefore, premises considered, the appeal is hereby dismissed. We AFFIRM
the appealed Decision for the reasons discussed above, with the
MODIFICATION that Lots 1175-E and 1175-F belong to the estate of Gregorio
Balacano.
Let a copy of this Decision be furnished the Office of the Bar Confidant for
whatever action her Office may take against Atty. De Guzman. 12 (Emphasis
in the original.)
Herein petitioners motion for reconsideration was met with similar lack of
success when it was denied for lack of merit by the Court of Appeals in its
Resolution13 dated 17 May 2005.

Hence, this appeal via a petition for review where petitioners assign the
following errors to the Court of Appeals, viz:
A. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY ERRED IN FINDING THAT THERE WAS NO
PERFECTED AND PARTIALLY EXECUTED CONTRACT OF SALE OVER LOTS 1175E AND 1175-F PRIOR TO THE SIGNING OF THE DEED OF SALE.
B. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY FAILED TO APPRECIATE THE SIGNIFICANCE OF THE
JUDICIAL ADMISSION ON THE AUTHENTICITY AND DUE EXECUTION OF THE
DEED OF SALE MADE BY THE RESPONDENTS DURING THE PRE-TRIAL
CONFERENCE.
C. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, BASED ITS CONCLUSION THAT GREGORIOS CONSENT TO THE
SALE OF THE LOTS WAS ABSENT MERELY ON SPECULATIONS AND SURMISES.
D. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY ERRED IN NOT RULING ON THE ISSUE OF
RESPONDENTS LACK OF LEGAL CAPACITY TO SUE FOR NOT BEING THE
PROPER PARTIES IN INTEREST.
E. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY ERRED IN DISMISSING ATTY. ALEXANDER DE
GUZMAN AND ANTONIO AGCAOILI AS NOT CREDIBLE WITNESSES. 14
At bottom is the issue of whether or not the Court of Appeals committed
reversible error in upholding the findings and conclusions of the trial court on
the nullity of the Deed of Sale purportedly executed between petitioners and
the late Gregorio Balacano.
To start, we held in Blanco v. Quasha15 that this Court is not a trier of facts.
As such, it is not its function to examine and determine the weight of the
evidence supporting the assailed decision. Factual findings of the Court of
Appeals, which are supported by substantial evidence, are binding, final and
conclusive upon the Supreme Court,16 and carry even more weight when the
said court affirms the factual findings of the trial court. Moreover, wellentrenched is the prevailing jurisprudence that only errors of law and not of
facts are reviewable by this Court in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court.

The foregoing tenets in the case at bar apply with greater force to the
petition under consideration because the factual findings by the Court of
Appeals are in full agreement with that of the trial court.
Specifically, the Court of Appeals, in affirming the trial court, found that there
was no prior and perfected contract of sale that remained to be fully
consummated. The appellate court explained In support of their position, the defendants-appellants argue that at least a
month prior to Gregorios signing of the deed, Gregorio and the Spouses
Paragas already agreed on the sale of Lots 1175-E and 1175-F; and that, in
fact, this agreement was partially executed by Rudys payment to Gregorio of
P50,000.00 before Gregorio signed the deed at the hospital. In line with this
position, defendants-appellants posit that Gregorios consent to the sale
should be determined, not at the time Gregorio signed the deed of sale on
July 18, 1996, but at the time when he agreed to sell the property in June
1996 or a month prior to the deeds signing; and in June 1996, Gregorio was
of sound and disposing mind and his consent to the sale was in no wise
vitiated at that time. The defendants-appellants further argue that the
execution or signing of the deed of sale, however, irregular it might have
been, does not affect the validity of the previously agreed sale of the lots, as
the execution or signing of the deed is merely a formalization of a previously
agreed oral contract.
...
In the absence of any note, memorandum or any other written instrument
evidencing the alleged perfected contract of sale, we have to rely on oral
testimonies, which in this case is that of Atty. de Guzman whose testimony
on the alleged oral agreement may be summarized as follows: (1) that
sometime in the first week of June 1996, Gregorio requested him (Atty. de
Guzman) to prepare a deed of sale of two lots; (2) Gregorio came to his
firms office in the morning with a certain Doming Balacano, then returned in
the afternoon with Rudy; (3) he (Atty. de Guzman) asked Gregorio whether he
really intends to sell the lots; Gregorio confirmed his intention; (4) Gregorio
and Rudy left the law office at 5:00 p.m., leaving the certificates of title; (5)
he prepared the deed a day after Rudy and Gregorio came. With regard to
the alleged partial execution of this agreement, Atty. de Guzman said that he
was told by Rudy that there was already a partial payment of P50,000.00.

We do not consider Atty. de Guzmans testimony sufficient evidence to


establish the fact that there was a prior agreement between Gregorio and
the Spouses Paragas on the sale of Lots 1175-E and 1175-F. This testimony
does not conclusively establish the meeting of the minds between Gregorio
and the Spouses Paragas on the price or consideration for the sale of Lots
1175-E and 1175-F Atty. de Guzman merely declared that he was asked by
Gregorio to prepare a deed; he did not clearly narrate the details of this
agreement. We cannot assume that Gregorio and the Spouses Paragas
agreed to a P500,000.00 consideration based on Atty. de Guzmans bare
assertion that Gregorio asked him to prepare a deed, as Atty. de Guzman was
not personally aware of the agreed consideration in the sale of the lots, not
being privy to the parties agreement. To us, Rudy could have been a
competent witness to testify on the perfection of this prior contract;
unfortunately, the defendants-appellants did not present Rudy as their
witness.
We seriously doubt too the credibility of Atty. de Guzman as a witness. We
cannot rely on his testimony because of his tendency to commit falsity. He
admitted in open court that while Gregorio signed the deed on July 18, 1996
at Bayombong, Nueva Vizcaya, he nevertheless did not reflect these matters
when he notarized the deed; instead he entered Santiago City and July 22,
1996, as place and date of execution, respectively. To us, Atty. de Guzmans
propensity to distort facts in the performance of his public functions as a
notary public, in utter disregard of the significance of the act of notarization,
seriously affects his credibility as a witness in the present case. In fact, Atty.
de Guzmans act in falsifying the entries in his acknowledgment of the deed
of sale could be the subject of administrative and disciplinary action, a
matter that we however do not here decide.
Similarly, there is no conclusive proof of the partial execution of the contract
because the only evidence the plaintiffs-appellants presented to prove this
claim was Atty. de Guzmans testimony, which is hearsay and thus, has no
probative value. Atty. de Guzman merely stated that Rudy told him that Rudy
already gave P50,000.00 to Gregorio as partial payment of the purchase
price; Atty. de Guzman did not personally see the payment being made. 17
But, did Gregorio give an intelligent consent to the sale of Lots 1175-E and
1175-F when he signed the deed of sale? The trial court as well as the
appellate court found in the negative. In the Court of Appeals rationale-

It is not disputed that when Gregorio signed the deed of sale, Gregorio was
seriously ill, as he in fact died a week after the deeds signing. Gregorio died
of complications caused by cirrhosis of the liver. Gregorios death was neither
sudden nor immediate; he fought at least a month-long battle against the
disease until he succumbed to death on July 22, 1996. Given that Gregorio
purportedly executed a deed during the last stages of his battle against his
disease, we seriously doubt whether Gregorio could have read, or fully
understood, the contents of the documents he signed or of the
consequences of his act. We note in this regard that Gregorio was brought to
the Veterans Hospital at Quezon City because his condition had worsened on
or about the time the deed was allegedly signed. This transfer and fact of
death not long after speak volumes about Gregorios condition at that time.
We likewise see no conclusive evidence that the contents of the deed were
sufficiently explained to Gregorio before he affixed his signature. The
evidence the defendants-appellants offered to prove Gregorios consent to
the sale consists of the testimonies of Atty. de Guzman and Antonio. As
discussed above, we do not find Atty. de Guzman a credible witness. Thus,
we fully concur with the heretofore-quoted lower courts evaluation of the
testimonies given by Atty. de Guzman and Antonio because this is an
evaluation that the lower court was in a better position to make.
Additionally, the irregular and invalid notarization of the deed is a falsity that
raises doubts on the regularity of the transaction itself. While the deed was
indeed signed on July 18, 1996 at Bayombong, Nueva Vizcaya, the deed
states otherwise, as it shows that the deed was executed on July 22, 1996 at
Santiago City. Why such falsity was committed, and the circumstances under
which this falsity was committed, speaks volume about the regularity and
the validity of the sale. We cannot but consider the commission of this
falsity, with the indispensable aid of Atty. de Guzman, an orchestrated
attempt to legitimize a transaction that Gregorio did not intend to be binding
upon him nor on his bounty.
Article 24 of the Civil Code tells us that in all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his
moral dependence, ignorance, indigence, mental weakness, tender age or
other handicap, the courts must be vigilant for his protection.18
Based on the foregoing, the court of Appeals concluded that Gregorios
consent to the sale of the lots was absent, making the contract null and void.
Consequently, the spouses Paragas could not have made a subsequent

transfer of the property to Catalino Balacano. Indeed, nemo dat quod non
habet. Nobody can dispose of that which does not belong to him.19
We likewise find to be in accord with the evidence on record the ruling of the
Court of Appeals declaring the properties in controversy as paraphernal
properties of Gregorio in the absence of competent evidence on the exact
date of Gregorios acquisition of ownership of these lots.
On the credibility of witnesses, it is in rhyme with reason to believe the
testimonies of the witnesses for the complainants vis--vis those of the
defendants. In the assessment of the credibility of witnesses, we are guided
by the following well-entrenched rules: (1) that evidence to be believed must
not only spring from the mouth of a credible witness but must itself be
credible, and (2) findings of facts and assessment of credibility of witness are
matters best left to the trial court who had the front-line opportunity to
personally evaluate the witnesses demeanor, conduct, and behavior while
testifying.20
In the case at bar, we agree in the trial courts conclusion that petitioners
star witness, Atty. De Guzman is far from being a credible witness. Unlike this
Court, the trial court had the unique opportunity of observing the demeanor
of said witness. Thus, we affirm the trial court and the Court of Appeals
uniform decision based on the whole evidence in record holding the Deed of
Sale in question to be null and void.
In Domingo v. Court of Appeals,21 the Court declared as null and void the
deed of sale therein inasmuch as the seller, at the time of the execution of
the alleged contract, was already of advanced age and senile. We held
. . . She died an octogenarian on March 20, 1966, barely over a year when
the deed was allegedly executed on January 28, 1965, but before copies of
the deed were entered in the registry allegedly on May 16 and June 10, 1966.
The general rule is that a person is not incompetent to contract merely
because of advanced years or by reason of physical infirmities. However,
when such age or infirmities have impaired the mental faculties so as to
prevent the person from properly, intelligently, and firmly protecting her
property rights then she is undeniably incapacitated. The unrebutted
testimony of Zosima Domingo shows that at the time of the alleged
execution of the deed, Paulina was already incapacitated physically and
mentally. She narrated that Paulina played with her waste and urinated in

bed. Given these circumstances, there is in our view sufficient reason to


seriously doubt that she consented to the sale of and the price for her
parcels of land. Moreover, there is no receipt to show that said price was paid
to and received by her. Thus, we are in agreement with the trial courts
finding and conclusion on the matter: . . .
In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his
death bed in the hospital. Gregorio was an octogenarian at the time of the
alleged execution of the contract and suffering from liver cirrhosis at that
circumstances which raise grave doubts on his physical and mental capacity
to freely consent to the contract. Adding to the dubiety of the purported sale
and further bolstering respondents claim that their uncle Catalino, one of
the children of the decedent, had a hand in the execution of the deed is the
fact that on 17 October 1996, petitioners sold a portion of Lot 1175-E
consisting of 6,416 square meters to Catalino for P60,000.00.22 One need
not stretch his imagination to surmise that Catalino was in cahoots with
petitioners in maneuvering the alleged sale.
On the whole, we find no reversible error on the part of the appellate court in
CA-G.R. CV No. 64048 that would warrant the reversal thereof.
WHEREFORE, the present petition is hereby DENIED. Accordingly, the
Decision23 and the Resolution,24 dated 15 February 2005 and 17 May 2005,
respectively, of the Court of Appeals in CA-G.R. CV No. 64048 are hereby
AFFIRMED. No costs.
SO ORDERED.
11.

Mercado vs. Espiritu GR No. L-11872

G.R. No. L-11872

December 1, 1917

DOMINGO MERCADO and JOSEFA MERCADO, plaintiffs-appellants,


vs.
JOSE ESPIRITU, administrator of the estate of the deceased Luis
Espiritu, defendant-appellee.
Perfecto Salas Rodriguez for appellants.
Vicente Foz for appellee.

TORRES, J.:
This is an appeal by bill of exceptions, filed by the counsel for the plaintiffs
from the judgment of September 22, 1914, in which the judge of the Seventh
Judicial District dismissed the complaint filed by the plaintiffs and ordered
them to keep perpetual silence in regard to the litigated land, and to pay the
costs of the suit.
By a complaint dated April 9, 1913, counsel for Domingo and Josefa Mercado
brought suit in the Court of First Instance of Bulacan, against Luis Espiritu,
but, as the latter died soon thereafter, the complaint was amended by being
directed against Jose Espiritu in his capacity of his administrator of the estate
of the deceased Luis Espiritu. The plaintiffs alleged that they and their sisters
Concepcion and Paz, all surnamed Mercado, were the children and sole heirs
of Margarita Espiritu, a sister of the deceased Luis Espiritu; that Margarita
Espiritu died in 1897, leaving as her paraphernal property a tract of land of
48 hectares in area situated in the barrio of Panducot, municipality of
Calumpit, Bulacan, and bounded as described in paragraph 4 of the
amended complaint, which hereditary portion had since then been held by
the plaintiffs and their sisters, through their father Wenceslao Mercado,
husband of Margarita Espiritu; that, about the year 1910, said Luis Espiritu,
by means of cajolery, induced, and fraudulently succeeded in getting the
plaintiffs Domingo and Josefa Mercado to sign a deed of sale of the land left
by their mother, for the sum of P400, which amount was divided among the
two plaintiffs and their sisters Concepcion and Paz, notwithstanding the fact
that said land, according to its assessment, was valued at P3,795; that onehalf of the land in question belonged to Margarita Espiritu, and one-half of
this share, that is, one-fourth of said land , to the plaintiffs, and the other
one-fourth, to their two sisters Concepcion and Paz; that the part of the land
belonging to the two plaintiffs could produce 180 cavanes of rice per annum,
at P2.50 per cavan, was equivalent to P450 per annum; and that Luis Espiritu
had received said products from 1901 until the time of his death. Said
counsel therefore asked that judgment be rendered in plaintiffs' favor by
holding to be null and void the sale they made of their respective shares of
their land, to Luis Espiritu, and that the defendant be ordered to deliver and
restore to the plaintiffs the shares of the land that fell to the latter in the
partition of the estate of their deceased mother Margarita Espiritu, together
with the products thereof, uncollected since 1901, or their equivalent, to wit,
P450 per annum, and to pay the costs of the suit.

In due season the defendant administrator answered the aforementioned


complaint, denying each and all of the allegations therein contained, and in
special defense alleged that the land, the subject-matter of the complaint,
had an area of only 21 cavanes of seed rice; that, on May 25, 1894, its
owner, the deceased Margarita Espiritu y Yutoc, the plaintiffs' mother, with
the due authorization of her husband Wenceslao Mercado y Arnedo Cruz sold
to Luis Espiritu for the sum of P2,000 a portion of said land, to wit, an area
such as is usually required for fifteen cavanes of seed; that subsequently, on
May 14, 1901, Wenceslao Mercado y Arnedo Cruz, the plaintiffs' father, in his
capacity as administrator of the property of his children sold under pacto de
retro to the same Luis Espiritu at the price of P375 the remainder of the said
land, to wit, an area covered by six cavanes of seed to meet the expenses of
the maintenance of his (Wenceslao's) children, and this amount being still
insufficient the successively borrowed from said Luis Espiritu other sums of
money aggregating a total of P600; but that later, on May 17,1910, the
plaintiffs, alleging themselves to be of legal age, executed, with their sisters
Maria del Consejo and Maria dela Paz, the notarial instrument inserted
integrally in the 5th paragraph of the answer, by which instrument, ratifying
said sale under pacto de retro of the land that had belonged to their mother
Margarita Espiritu, effected by their father Wenceslao Mercado in favor of
Luis Espiritu for the sum of P2,600, they sold absolutely and perpetually to
said Luis Espiritu, in consideration of P400, the property that had belonged to
their deceased mother and which they acknowledged having received from
the aforementioned purchaser. In this cross-complaint the defendant alleged
that the complaint filed by the plaintiffs was unfounded and malicious, and
that thereby losses and damages in the sum of P1,000 had been caused to
the intestate estate of the said Luis Espiritu. He therefore asked that
judgment be rendered by ordering the plaintiffs to keep perpetual silence
with respect to the land in litigation and, besides, to pay said intestate estate
P1,000 for losses and damages, and that the costs of the trial be charged
against them.
In reply to the cross-complaint, the plaintiffs denied each and all of the facts
therein set forth, and in special defense alleged that at the time of the
execution of the deed of sale inserted in the cross-complaint the plaintiffs
were still minors, and that since they reached their majority the four years
fixed by law for the annulment of said contract had not yet elapsed. They
therefore asked that they be absolved from the defendant's cross-complaint.

After trial and the introduction of evidence by both parties, the court
rendered the judgment aforementioned, to which the plaintiffs excepted and
in writing moved for a reopening of the case and a new trial. This motion was
overruled, exception was taken by the petitioners, and the proper bill of
exceptions having been presented, the same was approved and transmitted
to the clerk of this court.
As the plaintiffs assailed the validity of the deed of sale, Exhibit 3, executed
by them on May 17, 1910, on the ground that they were minors when they
executed it, the questions submitted to the decision of this court consist in
determining whether it is true that the plaintiffs were then minors and
therefore incapable of selling their property on the date borne by the
instrument Exhibit 3; and in case they then were such, whether a person who
is really and truly a minor and, notwithstanding, attests that he is of legal
age, can, after the execution of the deed and within legal period, ask for the
annulment of the instrument executed by him, because of some defect that
invalidates the contract, in accordance with the law (Civ. Code, arts. 1263
and 1300), so that he may obtain the restitution of the land sold.
The records shows it to have been fully proven that in 1891 Lucas Espiritu
obtained title by composition with the State, to three parcels of land,
adjoining each other, in the sitio of Panducot of the pueblo of Calumpit,
Bulacan, containing altogether an area of 75 hectares, 25 ares, and 59
centares, which facts appear in the title Exhibit D; that, upon Luis Espiritu's
death, his said lands passed by inheritance to his four children named
Victoria, Ines, Margarita, and Luis; and that, in the partition of said
decedent's estate, the parcel of land described in the complaint as
containing forty-seven and odd hectares was allotted to the brother and
sister Luis and Margarita, in equal shares. Margarita Espiritu, married to
Wenceslao Mercado y Ardeno Cruz, had by this husband five children, Maria
Consejo, Maria de la Paz, Domingo, Josefa, and Amalia, all surnamed Mercado
y Espiritu, who, at the death of their mother in 1896 inherited, by operation
of law, one-half of the land described in the complaint.
The plaintiffs' petition for annulment of the sale and the consequent
restitution to them of two-fourths of the land left by their mother, that is, of
one-fourth of all the land described in the complaint, and which, they stated,
amounts to 11 hectares, 86 ares and 37 centares. To this claim the defendant
excepted, alleging that the land in question comprised only an area such as
is customarily covered by 21 cavanes of seed.

It was also duly proven that, by a notarial instrument of May 25, 1894, the
plaintiffs' mother conveyed by actual and absolute sale for the sum of
P2,000, to her brother Luis Espiritu a portion of the land now on litigation, or
an area such as is usually covered by about 15 cavanes of seed; and that, on
account of the loss of the original of said instrument, which was on the
possession of the purchaser Luis Espiritu, and furthermore because, during
the revolution, the protocols or registers of public documents of the Province
of Bulacan were burned, Wenceslao Mercado y Arnedo Cruz, the widower of
the vendor and father of the plaintiffs, executed, at the instance of the
interested party Luis Espiritu, the notarial instrument Exhibit 1, of the date of
May 20, 1901, in his own name and those of his minor children Maria
Consejo, Maria de la Paz, Domingo, Josefa, and Amalia, and therein set forth
that it was true that the sale of said portion of land had been made by his
aforementioned wife, then deceased, to Luis Espiritu in 1894.
However, even prior to said date, to wit, on May 14th of the same year,
1901, the widower Wenceslao Mercado, according to the private document
Exhibit 2, pledged or mortgaged to the same man, Luis Espiritu, for P375, a
part, or an area covered by six cavanes of seed, of the land that had
belonged to this vendor's deceased wife, to the said Luis Espiritu and which
now forms a part of the land in question a transaction which Mercado was
obliged to make in order to obtain funds with which "to cover his children's
needs." Wenceslao Mercado, the plaintiffs' father, having died, about the
year 1904, the plaintiffs Domingo and Josefa Mercado, together with their
sisters Consejo and Paz, declaring themselves to be of legal age and in
possession of the required legal status to contract, executed and subscribed
before a notary the document Exhibit 3, on May 17, 1910, in which referring
to the previous sale of the land, effected by their deceased mother for the
sum of P2,600 and with her husband's permission and authorization, they
sold absolutely and in perpetuity to Luis Espiritu, for the sum of P400 "as an
increase" of the previous purchase price, the land described in said
instrument and situated in Panducot, pueblo of Calumpit, Bulacan, of an area
equal to that usually sown with 21 cavanes of seed bounded on the north by
the lands of Flaviano Abreu and the heirs of Pedro Espiritu, on the east by
those of Victoria Espiritu and Ines Espiritu, on the south by those of Luis
Espiritu, and on the west by those of Hermogenes Tan-Toco and by the
Sapang-Maitu stream.

In this status of the case the plaintiffs seek the annulment of the deed
Exhibit 3, on the ground that on the date of its execution they were minors
without legal capacity to contract, and for the further reason that the
deceased purchaser Luis Espiritu availed himself of deceit and fraud in
obtaining their consent for the execution of said deed.
As it was proven by the testimony of the clerk of the parochial church of
Apalit (plaintiffs were born in Apalit) that the baptismal register books of that
parish pertaining to the years 1890-1891, were lost or burned, the witness
Maria Consejo Mercado recognized and identified the book Exhibit A, which
she testified had been kept and taken care of by her deceased father
Wenceslao Mercado, pages 396 and 397 of which bear the attestation that
the plaintiff Domingo Mercado was born on August 4, 1890, and Josefa
Mercado, on July 14, 1891. Furthermore, this witness corroborated the
averment of the plaintiffs' minority, by the personal registration certificate of
said Domingo Mercado, of the year 1914, Exhibit C, by which it appears that
in 1910 he was only 23 years old, whereby it would also be appear that
Josefa Mercado was 22 years of age in 1910, and therefore, on May 17,1910,
when the instrument of purchase and sale, Exhibit 3, was executed, the
plaintiffs must have been, respectively, 19 and 18 years of age.
The witness Maria Consejo Mercado also testified that after her father's
death her brother and sisters removed to Manila to live there, although her
brother Domingo used to reside with his uncle Luis Espiritu, who took charge
of the administration of the property left by his predecessors in interest; that
it was her uncle Luis who got for her brother Domingo the other cedula,
Exhibit B, pertaining to the year 1910, where in it appears that the latter was
then already 23 years of age; that she did not know why her uncle did so;
that she and her brother and sisters merely signed the deed of May 17,
1910; and that her father Wenceslao Mercado, prior to his death had pledged
the land to her uncle Luis Espiritu.
The witness Ines Espiritu testified that after the death of the plaintiffs' father,
it was Luis Espiritu who directed the cultivation of the land in litigation. This
testimony was corroborated by her sister Victoria Espiritu, who added that
her nephew, the plaintiff Domingo, had lived for some time, she did not know
just how long, under the control of Luis Espiritu.
Roque Galang, married to a sister of Luis Espiritu, stated that the land that
fell to his wife and to his sister-in-law Victoria, and which had an area of
about 8 hectares less than that of the land allotted to the aforementioned

Luis and Margarita produced for his wife and his sister-in-law Victoria a net
and minimum yield of 507 cavanes in 1907, in spite of its being high land
and of inferior quality, as compared with the land in dispute, and that its
yield was still larger in 1914, when the said two sisters' share was 764
cavanes.
Patricio Tanjucto, the notary before whom the deed Exhibit 3 was ratified,
was a witness for the defendant. He testified that this deed was drawn up by
him at the request of the plaintiff Josefa Mercado; that the grantors of the
instrument assured him that they were all of legal age; that said document
was signed by the plaintiffs and the other contracting parties, after it had
been read to them and had been translated into the Pampangan dialect for
those of them who did not understand Spanish. On cross-examination,
witness added that ever since he was 18 years of age and began to court, he
had known the plaintiff Josefa Mercado, who was then a young maiden,
although she had not yet commenced to attend social gatherings, and that
all this took place about the year 1898, for witness said that he was then [at
the time of his testimony, 1914,] 34 years of age.
Antonio Espiritu, 60 years of age, who knew Lucas Espiritu and the properties
owned by the latter, testified that Espiritu's land contained an area of 84
cavanes, and after its owner's death, was under witness' administration
during to harvest two harvest seasons; that the products yielded by a portion
of this land, to wit, an area such as is sown by about 15 cavanes of seed, had
been, since 1894, utilized by Luis Espiritu, by reason of his having acquired
the land; and that, after Margarita Espiritu's death, her husband Wenceslao
Mercado took possession of another portion of the land, containing an area of
six cavanes of seed and which had been left by this deceased, and that he
held same until 1901, when he conveyed it to Luis Espiritu. lawphi1.net
The defendant-administrator, Jose Espiritu, son of the deceased Luis Espiritu,
testified that the plaintiff Domingo Mercado used to live off and on in the
house of his deceased father, about the year 1909 or 1910, and used to go
back and forth between his father's house and those of his other relatives.
He denied that his father had at any time administered the property
belonging to the Mercado brother and sisters.
In rebuttal, Antonio Mercado, a cousin of Wenceslao, father of the plaintiffs,
testified that he mediate in several transactions in connection with a piece of
land belonging to Margarita Espiritu. When shown the deed of purchase and
sale Exhibit 1, he stated that he was not acquainted with its contents. This

same witness also testified that he mediated in a transaction had between


Wenceslao Mercado and Luis Espiritu (he did not remember the year), in
which the former sold to the latter a parcel of land situated in Panducot. He
stated that as he was a witness of the deed of sale he could identify this
instrument were it exhibited to him; but he did not do so, for no instrument
whatever was presented to him for identification. The transaction mentioned
must have concerned either the ratification of the sale of the land of 15
cavanes, in 1901, attested in Exhibit 1, or the mortgage or pledge of the
other parcel of 6 cavanes, given on May 14, 1901, by Wenceslao Mercado to
Luis Espiritu, as may be seen by the private document Exhibit 2. In rebuttal,
the plaintiff Josefa Mercado denied having gone to the house of the notary
Tanjutco for the purpose of requesting him to draw up any document
whatever. She stated that she saw the document Exhibit 3 for the first time
in the house of her uncle Luis Espiritu on the day she signed it, on which
occasion and while said document was being signed said notary was not
present, nor were the witnesses thereto whose names appear therein; and
that she went to her said uncle's house, because he had sent for her, as well
as her brother and sisters, sending a carromata to fetch them. Victoria
Espiritu denied ever having been in the house of her brother. Luis Espiritu in
company with the plaintiffs, for the purpose of giving her consent to the
execution of any deed in behalf of her brother.
The evidence adduced at the trial does not show, even circumstantially, that
the purchaser Luis Espiritu employed fraud, deceit, violence, or intimidation,
in order to effect the sale mentioned in the document Exhibit 3, executed on
May 17, 1910. In this document the vendors, the brother and the sisters
Domingo, Maria del Consejo, Paz and, Josefa surnamed Mercado y Espiritu,
attested the certainty of the previous sale which their mother, during her
lifetime, had made in behalf of said purchaser Luis Espiritu, her brother with
the consent of her husband Wenceslao Mercado, father of the vendors of the
portion of land situated in the barrio of Panducot, pueblo of Calumpit,
Bulacan; and in consideration of the fact that the said vendor Luis Espiritu
paid them, as an increase, the sum of P400, by virtue of the contract made
with him, they declare having sold to him absolutely and in perpetuity said
parcel of the land, waive and thenceforth any and all rights they may have,
inasmuch as said sum constitutes the just price of the property.
So that said document Exhibit 3 is virtually an acknowledgment of the
contract of sale of the parcel or portion of land that would contain 15

cavanes of seed rice made by the vendors' mother in favor of the purchaser
Luis Espiritu, their uncle, and likewise an acknowledgment of the contract of
pledge or mortgage of the remainder of said land, an area of six cavanes,
made with the same purchaser, at an increase of P400 over the price of
P2,600, making an aggregate sum of P3,000, decomposed as follows:
P2,000, collected during her lifetime, by the vendors' father; and the said
increase of P400, collected by the plaintiffs.
In the aforementioned sale, according to the deed of May 25, 1894,
Margarita Espiritu conveyed to her brother Luis the parcel of 15 cavanes of
seed, Exhibit 1, and after her death the plaintiffs' widowed father mortgaged
or pledged the remaining parcel or portion of 6 cavanes of seed to her
brother-in-law, Luis Espiritu, in May, 1901 (Exhibit 2). So it is that the notarial
instrument Exhibit 3, which was assailed by the plaintiffs, recognized the
validity of the previous contracts, and the totality of the land, consisting of
an area containing 21 cavanes of seed rice, was sold absolutely and in
perpetuity, the vendors receiving in exchange P400 more; and there is no
conclusive proof in the record that this last document was false and
simulated on account of the employment of any violence, intimidation, fraud,
or deceit, in the procuring of the consent of the vendors who executed it.
Considering the relation that exists between the document Exhibit 3 and
those of previous dates, Exhibits 1 and 2, and taking into the account the
relationship between the contracting parties, and also the general custom
that prevails in many provinces of these Islands for the vendor or debtor to
obtain an increase in the price of the sale or of the pledge, or an increase in
the amount loaned, without proof to the contrary, it would be improper and
illegal to hold, in view of the facts hereinabove set forth, that the purchaser
Luis Espiritu, now deceased, had any need to forge or simulate the document
Exhibit 3 inasmuch as, since May, 1894, he has held in the capacity of owner
by virtue of a prior acquisition, the parcel of land of 15 cavanes of seed, and
likewise, since May, 1901, according to the contract of mortgage or pledge,
the parcel of 6 cavanes, or the remainder of the total area of 21 cavanes.
So that Luis Espiritu was, during his lifetime, and now, after his death, his
testate or intestate estate is in lawful possession of the parcel of land
situated in Panducot that contains 21 cavanes of seed, by virtue of the title
of conveyance of ownership of the land measuring 15 cavanes, and, in
consequence of the contract of pledge or mortgage in security for the sum of

P600, is likewise in lawful possession of the remainder of the land, or an area


containing 6 cavanes of seed.
The plaintiffs have absolutely no right whatever to recover said first parcel of
land, as its ownership was conveyed to the purchaser by means of a singular
title of purchase and sale; and as to the other portion of 6 cavanes of seed,
they could have redeemed it before May 17, 1910, upon the payment or the
return of the sum which their deceased father Wenceslao Mercado had,
during his lifetime, received as a loan under security of the pledged property;
but, after the execution of the document Exhibit 3, the creditor Luis Espiritu
definitely acquired the ownership of said parcel of 6 cavanes. It is therefore a
rash venture to attempt to recover this latter parcel by means of the contract
of final and absolute sale, set forth in the deed Exhibit 3.
Moreover, the notarial document Exhibit 1, are regards the statements made
therein, is of the nature of a public document and is evidence of the fact
which gave rise to its execution and of the date of the latter, even against a
third person and his predecessors in interest such as are the plaintiffs. (Civ.
Code, art. 1218.)
The plaintiffs' father, Wenceslao Mercado, recognizing it to be perfectly true
that his wife Margarita Espiritu sold said parcel of land which she inherited
from her father, of an area of about "15 cavanes of seed," to her brother Luis
Espiritu, by means of an instrument executed by her on May 25,1894 an
instrument that disappeared or was burned and likewise recognizing that
the protocols and register books belonging to the Province of Bulacan were
destroyed as a result of the past revolution, at the request of his brother-inlaw Luis Espiritu he had no objection to give the testimony recorded in said
notarial instrument, as it was the truth regarding what had occurred, and in
so doing he acted as the plaintiffs' legitimate father in the exercise of his
parental authority, inasmuch as he had personal knowledge of said sale, he
himself being the husband who authorized said conveyance, notwithstanding
that his testimony affected his children's interest and prejudiced his own, as
the owner of any fruits that might be produced by said real property.
The signature and handwriting of the document Exhibit 2 were identified as
authentic by one of the plaintiffs, Consejo Mercado, and as the record shows
no evidence whatever that this document is false, and it does not appear to
have been assailed as such, and as it was signed by the plaintiffs' father,
there is no legal ground or well-founded reason why it should be rejected. It

was therefore properly admitted as evidence of the certainty of the facts


therein set forth.
The principal defect attributed by the plaintiffs to the document Exhibit 3
consists in that, on the date of May 17, 1910, when it was executed that they
signed it, they were minors, that is, they had not yet attained the age of 21
years fixed by Act No. 1891, though no evidence appears in the record that
the plaintiffs Josefa and Domingo Mercado were in fact minors, for no
certified copies were presented of their baptismal certificates, nor did the
plaintiffs adduce any supplemental evidence whatever to prove that
Domingo was actually 19 and Josefa 18 years of age when they signed the
document Exhibit 3, on May 17, 1910, inasmuch as the copybook, Exhibit A,
notwithstanding the testimony of the plaintiff Consejo Mercado, does not
constitute sufficient proof of the dates of births of the said Domingo and
Josefa.
However, even in the doubt whether they certainly were of legal age on the
date referred to, it cannot be gainsaid that in the document Exhibit 3 they
stated that they were of legal age at the time they executed and signed it,
and on that account the sale mentioned in said notarial deed Exhibit 3 is
perfectly valid a sale that is considered as limited solely to the parcel of
land of 6 cavanes of seed, pledged by the deceased father of the plaintiffs in
security for P600 received by him as a loan from his brother-in-law Luis
Espiritu, for the reason that the parcel of 15 cavanes had been lawfully sold
by its original owner, the plaintiffs' mother.
The courts, in their interpretation of the law, have laid down the rule that the
sale of real estate, made by minors who pretend to be of legal age, when in
fact they are not, is valid, and they will not be permitted to excuse
themselves from the fulfillment of the obligations contracted by them, or to
have them annulled in pursuance of the provisions of Law 6, title 19, of the
6th Partida; and the judgment that holds such a sale to be valid and absolves
the purchaser from the complaint filed against him does not violate the laws
relative to the sale of minors' property, nor the juridical rules established in
consonance therewith. (Decisions of the supreme court of Spain, of April 27,
1860, July 11, 1868, and March 1, 1875.) itc@alf
With respect to the true age of the plaintiffs, no proof was adduced of the
fact that it was Luis Espiritu who took out Domingo Mercado's personal
registration certificate on April 13, 1910, causing the age of 23 years to be
entered therein in order to corroborate the date of the notarial instrument of

May 17th of the same year; and the supposition that he did, would also allow
it to be supposed, in order to show the propriety of the claim, that the cedula
Exhibit C was taken out on February 14, 1914, where in it is recorded that
Domingo Mercado was on that date 23 years of age, for both these facts are
not proved; neither was any proof adduced against the statement made by
the plaintiffs Domingo and Josefa in the notarial instrument Exhibit 3, that,
on the date when they executed it, they were already of legal age, and,
besides the annotation contained in the copybook Exhibit A, no supplemental
proof of their true ages was introduced.
Aside from the foregoing, from a careful examination of the record in this
case, it cannot be concluded that the plaintiffs, who claim to have minors
when they executed the notarial instrument Exhibit 3, have suffered positive
and actual losses and damages in their rights and interests as a result of the
execution of said document, inasmuch as the sale effected by the plaintiffs'
mother, Margarita Espiritu, in May, 1894, of the greater part of the land of 21
cavanes of seed, did not occasion any damage or prejudice to the plaintiffs,
inasmuch as their father stated in the document Exhibit 2 that he was
obliged to mortgage or pledge said remaining portion of the land in order to
secure the loan of the P375 furnished by Luis Espiritu and which was
subsequently increased to P600 so as to provide for certain engagements or
perhaps to meet the needs of his children, the plaintiff; and therefore, to
judge from the statements made by their father himself, they received
through him, in exchange for the land of 6 cavanes of seed, which passed
into the possession of the creditor Luis Espiritu, the benefit which must have
accrued to them from the sums of money received as loans; and, finally, on
the execution of the impugned document Exhibit 3, the plaintiffs received
and divided between themselves the sum of P400, which sum, added to that
P2,000 received by Margarita Espiritu, and to that of the P600 collected by
Wenceslao Mercado, widower of the latter and father of the plaintiffs, makes
all together the sum of P3,000, the amount paid by the purchaser as the
price of all the land containing 21 cavanes of seed, and is the just price of
the property, was not impugned, and, consequently, should be considered as
equivalent to, and compensatory for, the true value of said land.
For the foregoing reasons, whereby the errors assigned to the judgment
appealed from have been refuted, and deeming said judgment to be in
accordance with law and the evidence of record, we should, and do hereby,
affirm the same, with costs against the appellants. So ordered.

12.

Jerty Pascual vs. CA and Sps. Alcantara GR No. 164819

G.R. No. 164819

March 9, 2007

JERTY PASCUAL CONTRERAS (deceased), represented by her mother,


LOURDES PASCUAL, Petitioner,
vs.
THE HONORABLE COURT OF APPEALS, Former Twelfth Division, and
SPOUSES DANILO ALCANTARA and ISABELITA ALCANTARA,
Respondents.
DECISION
TINGA, J.:
The antecedents that have given rise to this petition for review allude to
several potentially interesting questions of law borne out of a complicated
factual milieu. Yet the issues actually raised by this petition are relatively
trivial, and can be disposed of against petitioner with ease.
It is established that years before the emergence of the present controversy,
a house (subject house) owned by Eulalia Leis (Leis) was constructed on a
parcel of land (subject land) owned by Filomena Gatchalian (Gatchalian). This
segregate ownership of land and improvement, unreconciled to date, has
ultimately spawned the present dispute.
As early as 1949, Leis openly manifested her rights to the subject house
which was constructed on the subject land situated on San Jose Street,
Antipolo, Rizal through a Tax Declaration she had secured that year. 1 While
the house had been initially constructed with light materials, and covering an
area of 25.25 square meters,2 it appears that by 1974, the house had been
renovated and built out of strong materials and with an expanded floor
space.3 By this time, the house had been mortgaged to the Rural Bank of
Teresa (Rizal), Inc. (RBTRI), which would eventually acquire ownership over
the house after the mortgagor had failed to pay the loan and redeem the
house. However, in 1980, respondent Isabelita Bumatay (Isabelita), the
daughter of Leis, purchased the house back from the bank, as evidenced by
a deed of sale.
A different trail of ownership attaches to the subject land. It was owned by
Gatchalian when the house was first constructed thereon by Leis by around

1949. Eventually, ownership of the land passed to the spouses Felipe


Matawaran and Ofelia Oliveros (spouses Matawaran), though the records do
not bear how they acquired such property. In 1980, the spouses Matawaran
executed two real estate mortgage contracts with the Capitol City
Development Bank (CCDB), covering the land, together with the house, as
security for a loan of P200,000.00. Specifically, the mortgage deeds stated
that the mortgaged property includes a two-storey residential building with a
floor area of 220 sq. meters.4
After the spouses had failed to pay the loan, CCDB foreclosed on the
mortgage and acquired the mortgaged property in 1984. 5 After no
redemption was made, CCDB consolidated title to the property with Transfer
Certificate of Title (TCT) No. 115486 issued in its name.6
In the meantime, Isabelita, who had since married respondent Danilo
Alcantara, had purchased in July of 1983, from Florencio Oliveros, a 76
square meter lot adjacent to the house which she earlier bought from
RBTRI.7 It is not clear whether the spouses Alcantara had resided in the
house, but beginning in 1987 they rented out the lower floors of the house to
petitioner Jerty Contreras (Contreras), who resided therein.
CCDB advertised its intention to sell the subject land, but there were no
buyers from 1986 until 1990. In March 1990, CCDB and Contreras entered
into a Contract to Sell involving the subject land, "together with the
improvements existing thereon."8 This was followed by a Deed of Absolute
Sale dated 13 November 1990 wherein Contreras purchased from CCDB, for
the amount of P212,400.00, the subject land "together with the
improvements existing thereon."9
Even before the Deed of Absolute Sale was executed, the Alcantaras wrote
CCDB concerning the Contract to Sell between it and Contreras. Therein,
they informed the bank that they were the owners of the adjacent lot; that
they had not been made aware of the Contract to Sell until after its
execution; and that they were willing to avail of their preferential right to
purchase as provided by the Civil Code.10
In 1991, the Alcantaras filed a Complaint with the Regional Trial Court (RTC)
of Antipolo, Rizal, seeking the annulment of the Deed of Absolute Sale

between Contreras and CCDB.11 Impleaded as defendants were Contreras


and her husband Renato, CCDB, and the spouses Matawaran. The case was
docketed as Civil Case No. 91-222 and raffled to Branch 71 of the Antipolo
RTC.
In their complaint, the Alcantaras identified the lot on which the house stood
as Lot A-4 of the subdivision plan (LRC) Psd-282785, as identified in TCT No.
N-37840 in the name of the spouses Matawaran, and its replacement in TCT
No. 115486, which was issued in the name of CCDB. The Alcantaras asserted
their ownership over the house even as the land on which it stood belonged
to a different party. As such, they argued that the Matawaran spouses had no
capacity to include the house as part of the property mortgaged to CCDB, as
they were not the owners of the structure. In turn, CCDB could not have
acquired ownership of the house when it foreclosed on the mortgage and,
consequently too, the sale between CCDB and Contreras could not have
included the house either.
Still, the Alcantaras prayed for the annulment of the Deed of Absolute Sale
between CCDB and Contreras. Reiterating their ownership of the lot adjacent
to the subject land, the Alcantaras claimed that they are entitled to exercise
their right of pre-emption and redemption under Article 1622 of the Civil
Code, and thus specifically prayed that the trial court "[allow] the plaintiffs to
exercise their right of pre-emption and redemption under Article 1622 of the
Civil Code of the Philippines." A claim for damages was also posed in the
complaint.
An attempt by Contreras to move for the dismissal of the case was initially
successful but the victory proved to be short-lived as the RTC reconsidered
its earlier order of dismissal. She then filed her answer with a counterclaim
for damages, wherein she asserted that the subject house was included in
the sale between the CCDB and herself. This answer was filed by Atty.
Melanio Zoreta in behalf not only of Contreras, but of all defendants, "save
Matawaran and Oliveros."12
CCDB, through a different counsel, would eventually file its own answer
independent of the Contreras spouses. An accompanying motion manifested
that CCDB had not been aware that Atty. Zoreta, who had represented the
bank in all of its court cases, was also acting as counsel for Contreras. 13
While CCDBs new answer also prayed for the dismissal of the complaint, it

also lodged a cross-claim against the Contreras and the Matawaran spouses,
seeking to hold them liable to CCDB "in the remote event that judgment is
rendered against" the bank.
The Matawaran spouses also filed their own Answer, 14 wherein they
admitted that the Alcantaras are the owners of the subject house, even as it
was built on their former property. The Matawarans further claimed that they
never misrepresented to CCDB that they had owned the subject house, and
that the bank had very well known that the house was actually owned by the
Alcantaras.15
In the midst of the trial that ensued, Contreras died and was substituted by
her parents, Francisco and Lourdes Pascual. 16 On 15 April 1997, the RTC
rendered a Decision17 that affirmed the Alcantaras ownership over the
subject house; ordered the surrender of possession of the house to the
Alcantaras; declared the Deed of Absolute Sale dated 13 November 1990 as
null and void; and ordered the conveyance by CCDB to the Alcantaras of "the
subject property described as Lot A-4 covered by TCT No. 115486 upon
payment by [the Alcantaras] to [CCDB] the amount of P212,400.00, but
which amount should be returned to defendant spouses Francisco and
Lourdes Pascual by the defendant bank."18
In ruling in this manner, the RTC found that the evidence clearly established
the Alcantaras ownership of the subject house, as evidenced by the Deed of
Sale between RBTRI and Isabelita, the various tax declarations, the
testimony of Lourdes Pascual that petitioner had rented the house from the
Alcantaras beginning in 1987, and the declaration of the Matawarans that
they were not the owners of the house. These facts, found by the RTC, were
sufficient to "negate the general presumption that the accessory follows the
principal." From this finding, the RTC held that it was error on the part of
CCDB to have included the subject house in the deed of sale it executed with
Contreras when in fact the said house was never included in the mortgage
executed by the spouses Matawaran, who had no capacity anyway to
mortgage such house.
The RTC further held that the Alcantaras were entitled to exercise the right of
pre-emption:

It is [a] well-settled rule that the owner of an adjoining land is given the right
of pre-emption when the said land is to be sold.
The situation in the instant case may not be exactly the case called for under
Article 1622 of the New Civil Code, but the principle laid down under the said
rule may be applied in this case in the absence of a particular law.
It is only but just and fair that the owner of the adjoining lot is given the right
of pre-emption as it would be more beneficial to him. In the instant case, the
Court honestly believes that the plaintiffs, who are not only the owners of the
lot adjoining the property foreclosed by the defendant bank, but also owners
of the house erected on a portion of the said property, be given the
preferential right to buy the property.19
Petitioner appealed the RTC decision to the Court of Appeals. 20 On 30
August 2002, the Court of Appeals rendered a decision affirming in toto the
RTC.21 The appellate court affirmed the findings that the Alcantaras were
then, and still are, the owners of the subject house, and thus the Matawarans
could not have included the same in their mortgage agreement with CCDB.
The Court of Appeals also held that since the ownership by the Alcantaras of
the adjacent lot was never controverted, the RTC had validly applied Articles
1621 and 1622 of the Civil Code, which allow the adjoining owner to exercise
the right of pre-emption.
The present petition raises only two issues. The first issue deserves scant
consideration.
Concerning the first issue, petitioner alleges that the copy they had received
of the Court of Appeals decision dated 30 August 2002 was not signed by the
ponente and the members of the Twelfth Division which had rendered the
decision. That said, she points to Section 1, Rule 36 of the Rules of Civil
Procedure, which requires that a judgment or final order determining the
merits of the case be signed by the judge who prepared the decision. Proof of
this allegation is supported by the Petitions Annex "A," which is represented
as the copy of the seven (7)-page decision received by petitioner. 22 A
cursory look at this Annex indicates that page 6, which is supposed to
contain the signatures of the ponente and the concurring justices, is
unsigned.23 However, the first five pages bear the initials of the ponente,
Associate Justice Elvi John Asuncion,24 while the seventh page bears the

signed Certification of the Chairperson of the Twelfth Division, Associate


Justice Portia Alio-Hormachuelos. The first page of the decision attached as
Annex "A" also bears the signature of the Division Clerk of Court, Marie Claire
Victoria Mabutas-Sordan.25
Petitioners contention could have been a source of worry had the decision,
as filed with the official records of the Court of Appeals, failed to bear the
signatures of the members of the Twelfth Division. But that is not the case.
The decision, as attached to the rollo of the Court of Appeals, does bear the
signature of the ponente and the two concurring Justices from the Twelfth
Division. Petitioner further admits that the certified photocopy of the decision
she secured from the Court of Appeals prior to the filing of this petition
reflects the complete signatures of the three members of the Twelfth
Division.
The signature requirement under Section 1 of Rule 36, which is rooted in the
most common of senses, is necessitated as indubitable proof that the judges
who prepared and concurred in the decision actually did so. Such proof, in
this case, is reflected in the copy of the decision that appears in the official
records of the Court of Appeals. Moreover, in this case, there is no difference
at all between the unsigned page 6 attached by petitioner, and the signed
page 6 that appears on the record. There is no alteration or intercalation in
either copy that may have indicated a difference between the decision the
justices were actually signing and the decision actually sent to the parties.
Considering that the copy sent to petitioner does bear, in all other pages
save for the sixth, the initials of the ponente, and the certifications of the
clerk of court and the division chairperson, we are wont to believe that the
transmission of the unsigned page six to petitioner is nothing more than a
clerical error. Insofar as such clerical error may give rise to suspicions of
untoward behavior, the Court of Appeals may be faulted. Yet it cannot give
rise to the nullification of the decision which, as recorded in the official files
of the Court of Appeals, has no such formal infirmity.
The second issue raised by petitioner is the claim that the RTC, in ordering
the bank to convey the subject land to the Alcantaras upon payment of the
amount of P212,400.00, exceeded its jurisdiction by "award[ing] reliefs not
asked for by [the Alcantaras]."26 Petitioner alleges that "nowhere in the
whole complaint, in the reliefs prayed for or in the evidence presented did
[the Alcantaras] ever demand from [petitioner] that the house and lot

containing an area of [354] square meters with a residential house erected


thereon be sold to them at a measly sum of [P214,400.00].27
As it happens, that "measly sum" happens to be the exact amount for which
CCDB had sold the subject property to petitioner, as evidenced by the Deed
of Absolute Sale which petitioner herself had attached to her Answer before
the RTC.28 It is hardly the case of the trial court pulling a rabbit out of the
hat, for the precise relief granted by the RTC is drawn from the Alcantaras
specific prayer in their complaint that sought a judgment "allowing the
plaintiffs to exercise their right of pre-emption and redemption under Article
1622 of the Civil Code of the Philippines, and directing [CCDB] to instead
convey Lot A-4 registered under Transfer Certificate of Title No. N-115486 of
the Register of Deeds of Rizal in favor of the plaintiffs."29
Petitioner has taken the effort of reproducing the entire complaint in the text
of the present petition30 to stress that what the Alcantaras were merely
claiming was "a portion of the house, but never the whole house and lot as
what the Regional Trial Court illegally ruled." 31 This is erroneous. For one,
the complaint proceeded from the premise that the Alcantaras were still the
owners of the whole house, and thus sought a judicial affirmation of such
ownership. In paragraph 20 of the complaint the Alcantaras further explained
that they are also the owners of the adjacent lot, while in paragraph 23 they
manifested that they "are now actively asserting their right of ownership
over the HOUSE in question and their pre-emptive right over the lot whereon
it stands." Finally, in paragraph 29 they asserted that they "should therefore
be allowed to exercise their right of pre-emption and redemption under
Article 1622 of the Civil Code of the Philippines."
Clearly, it is sufficiently alleged in the complaint that the Alcantaras are
entitled to exercise their right of pre-emption and redemption under Article
1622 of the Civil Code. They specifically prayed that judgment be rendered
entitling them to exercise such right, which under Article 1622 entails the
following:
Art. 1622. Whenever a piece of urban land which is so small and so situated
that a major portion thereof cannot be used for any practical purpose within
a reasonable time, having been bought merely for speculation, is about to be
re-sold, the owner of the adjoining land has a right of pre-emption at a
reasonable price.

If the re-sale has been perfected, the owner of the adjoining land shall have
a right of redemption, also at a reasonable price.
xxxx
The petition betrays a lack of understanding on petitioners part that the
exercise of the right of redemption would entail the reconveyance to
petitioner of the subject land on which the house stands. This relief stands
apart from the judicial affirmation in the same RTC decision that the
Alcantaras are also the owners of the house. It was not the case, as
petitioner says, of the Alcantaras lodging a claim only as against the house,
as they had also lodged a claim against the subject land proceeding from
their right of redemption under Article 1622. In the case at bar, the trial court
found that the Alcantaras were entitled to exercise their rights under Article
1622, but it would not have been sufficient nor correct for it to just make the
corresponding pronouncement in the decision and then stop. The relief
assailed by petitioner as unwarranted is nothing more but the affordance of
the right of redemption to the Alcantaras at the same reasonable price the
bank had sold the property to petitioner. We see no error in granting such
relief.
We are somewhat mystified why petitioner, through this petition, has
confined herself to issues that are utterly formalistic in nature, yet ultimately
unmeritorious. The decision of the RTC raises a host of potential
controversies, such as whether Article 1622 should apply in this case or
whether the ownership of the Alcantaras of the house in question was indeed
sufficiently proven considering that the main basis of such ownership
appears to have been the long-standing regard that her predecessor-ininterest, Leis, was unquestionably the owner of the house. Given the
unequivocal rulings of the RTC and the Court of Appeals on the points, it
would be expected of petitioner to squarely argue that there was no
sufficient proof establishing that the Alcantaras are the owners of the house
or that the requisites for applying Article 1622 are present. That petitioner
has not couched her arguments clearly to that effect can only lead to the
conclusion that she agrees with the findings of the lower courts that the
Alcantaras are the owners of the house and that the requisites under Article
1622 have been met. Considering that such questions are ultimately rooted
in findings of fact, which the Court is not wont to review, there is no cause for
us to deeply inquire into such issues. Since the arguments which are actually

raised in the petition lack merit, the expedient dismissal of the petition is in
order.
WHEREFORE, the petition is DISMISSED. Costs against petitioner.
SO ORDERED.
13.

Lawyers Coop Publishing Company vs. Tabora

G.R. No. L-21263

GR No. L-21263

April 30, 1965

LAWYERS COOPERATIVE PUBLISHING COMPANY, plaintiff-appellee,


vs.
PERFECTO A. TABORA, defendant-appellant.
Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.
Tabora and Concon for defendant-appellant.
BAUTISTA ANGELO, J.:
On May 3, 1955, Perfecto A. Tabora bought from the Lawyers Cooperative
Publishing Company one complete set of American Jurisprudence consisting
of 48 volumes with 1954 pocket parts, plus one set of American
Jurisprudence, General Index, consisting of 4 volumes, for a total price of
P1,675.50 which, in addition to the cost of freight of P6.90, makes a total of
P1,682.40. Tabora made a partial payment of P300.00, leaving a balance of
P1,382.40. The books were duly delivered and receipted for by Tabora on
May 15, 1955 in his law office Ignacio Building, Naga City.
In the midnight of the same date, however, a big fire broke out in that
locality which destroyed and burned all the buildings standing on one whole
block including at the law office and library of Tabora As a result, the books
bought from the company as above stated, together with Tabora's important
documents and papers, were burned during the conflagration. This
unfortunate event was immediately reported by Tabora to the company in a
letter he sent on May 20, 1955. On May 23, the company replied and as a
token of goodwill it sent to Tabora free of charge volumes 75, 76, 77 and 78
of the Philippine Reports. As Tabora failed to pay he monthly installments
agreed upon on the balance of the purchase price notwithstanding the long
time that had elapsed, the company demanded payment of the installments
due, and having failed, to pay the same, it commenced the present action
before the Court of First Instance of Manila for the recovery of the balance of

the obligation. Plaintiff also prayed that defendant be ordered to pay 25% of
the amount due as liquidated damages, and the cost of action.
Defendant, in his answer, pleaded force majeure as a defense. He alleged
that the books bought from the plaintiff were burned during the fire that
broke out in Naga City on May 15, 1955, and since the loss was due to force
majeure he cannot be held responsible for the loss. He prayed that the
complaint be dismissed and that he be awarded moral damages in the
amount of P15,000.00.
After due hearing, the court a quo rendered judgment for the plaintiff. It
ordered the defendant to pay the sum of P1,382.40, with legal interest
thereon from the filing of the complaint, plus a sum equivalent to 25% of the
total amount due as liquidated damages, and the cost of action.
Defendant took the case to the Court of Appeals, but the same is now before
us by virtue of a certification issued by that Court that the case involves only
questions of law.
Appellant bought from appellee one set of American Jurisprudence, including
one set of general index, payable on installment plan. It was provided in the
contract that "title to and ownership of the books shall remain with the seller
until the purchase price shall have been fully paid. Loss or damage to the
books after delivery to the buyer shall be borne by the buyer." The total price
of the books, including the cost of freight, amounts to P1,682.40. Appellant
only made a down payment of P300.00 thereby leaving a balance of
P1,382.40. This is now the import of the present action aside from liquidated
damages.
Appellant now contends that since it was agreed that the title to and the
ownership of the books shall remain with the seller until the purchase price
shall have been fully paid, and the books were burned or destroyed
immediately after the transaction, appellee should be the one to bear the
loss for, as a result, the loss is always borne by the owner. Moreover, even
assuming that the ownership of the books were transferred to the buyer after
the perfection of the contract the latter should not answer for the loss since
the same occurred through force majeure. Here, there is no evidence that
appellant has contributed in any way to the occurrence of the
conflagration.1wph1.t
This contention cannot be sustained. While as a rule the loss of the object of
the contract of sale is borne by the owner or in case of force majeure the one

under obligation to deliver the object is exempt from liability, the application
of that rule does not here obtain because the law on the contract entered
into on the matter argues against it. It is true that in the contract entered
into between the parties the seller agreed that the ownership of the books
shall remain with it until the purchase price shall have been fully paid, but
such stipulation cannot make the seller liable in case of loss not only
because such was agreed merely to secure the performance by the buyer of
his obligation but in the very contract it was expressly agreed that the "loss
or damage to the books after delivery to the buyer shall be borne by the
buyer." Any such stipulation is sanctioned by Article 1504 of our Civil Code,
which in part provides:
(1) Where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership in
the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the
goods are at the buyer's risk from the time of such delivery.
Neither can appellant find comfort in the claim that since the books were
destroyed by fire without any fault on his part he should be relieved from the
resultant obligation under the rule that an obligor should be held exempt
from liability when the loss occurs thru a fortuitous event. This is because
this rule only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case
of fortuitous event. Here these qualifications are not present. The obligation
does not refer to a determinate thing, but is pecuniary in nature, and the
obligor bound himself to assume the loss after the delivery of the goods to
him. In other words, the obligor agreed to assume any risk concerning the
goods from the time of their delivery, which is an exception to the rule
provided for in Article 1262 of our Civil Code.
Appellant likewise contends that the court a quo erred in sentencing him to
pay attorney's fees. This is merely the result of a misapprehension for what
the court a quo ordered appellant to pay is not 25% of the amount due as
attorney's fees, but as liquidated damages, which is in line with an express
stipulation of the contract. We believe, however, that the appellant should
not be made to pay any damages because his denial to pay the balance of
the account is not due to bad faith.
WHEREFORE, the decision appealed from is modified by eliminating that
portion which refers to liquidated damages. No costs.

14.

Del Prado vs. Sps. Caballero GR No. 148225

G.R. No. 148225

March 3, 2010

CARMEN DEL PRADO, Petitioner,


vs.
SPOUSES ANTONIO L. CABALLERO and LEONARDA CABALLERO,
Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the decision 1 of the Court of
Appeals (CA) dated September 26, 2000 and its resolution denying the
motion for reconsideration thereof.
The facts are as follows:
In a judgment rendered on February 1, 1985 in Cadastral Case No. N-6 (LRC
Rec. No. N-611), Judge Juan Y. Reyes of the Regional Trial Court (RTC) of Cebu
City, Branch 14, adjudicated in favor of Spouses Antonio L. Caballero and
Leonarda B. Caballero several parcels of land situated in Guba, Cebu City,
one of which was Cadastral Lot No. 11909, the subject of this controversy. 2
On May 21, 1987, Antonio Caballero moved for the issuance of the final
decree of registration for their lots.3 Consequently, on May 25, 1987, the
same court, through then Presiding Judge Renato C. Dacudao, ordered the
National Land Titles and Deeds Registration Administration to issue the
decree of registration and the corresponding titles of the lots in favor of the
Caballeros.4
On June 11, 1990, respondents sold to petitioner, Carmen del Prado, Lot No.
11909 on the basis of the tax declaration covering the property. The
pertinent portion of the deed of sale reads as follows:
That we, Spouses ANTONIO L. CABALLERO and LEONARDA B. CABALLERO,
Filipinos, both of legal age and residents of Talamban, Cebu City, Philippines,
for and in consideration of the sum of FORTY THOUSAND PESOS
(P40,000.00), Philippine Currency, paid by CARMEN DEL PRADO, Filipino, of
legal age, single and a resident of Sikatuna St., Cebu City, Philippines, the
receipt of which is full is hereby acknowledged, do by these presents SELL,

CEDE, TRANSFER, ASSIGN & CONVEY unto the said CARMEN DEL PRADO, her
heirs, assigns and/or successors-in-interest, one (1) unregistered parcel of
land, situated at Guba, Cebu City, Philippines, and more particularly
described and bounded, as follows:
"A parcel of land known as Cad. Lot No. 11909, bounded as follows:
North : Lot 11903
East : Lot 11908
West : Lot 11910
South : Lot 11858 & 11912
containing an area of 4,000 square meters, more or less, covered by Tax Dec.
No. 00787 of the Cebu City Assessors Office, Cebu City." of which parcel of
land we are the absolute and lawful owners.
Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909, was
issued only on November 15, 1990, and entered in the "Registration Book" of
the City of Cebu on December 19, 1990. 5 Therein, the technical description
of Lot No. 11909 states that said lot measures about 14,457 square meters,
more or less.6
On March 20, 1991, petitioner filed in the same cadastral proceedings a
"Petition for Registration of Document Under Presidential Decree (P.D.)
1529"7 in order that a certificate of title be issued in her name, covering the
whole Lot No. 11909. In the petition, petitioner alleged that the tenor of the
instrument of sale indicated that the sale was for a lump sum or cuerpo
cierto, in which case, the vendor was bound to deliver all that was included
within said boundaries even when it exceeded the area specified in the
contract. Respondents opposed, on the main ground that only 4,000 sq m of
Lot No. 11909 was sold to petitioner. They claimed that the sale was not for a
cuerpo cierto. They moved for the outright dismissal of the petition on
grounds of prescription and lack of jurisdiction.
After trial on the merits, the court found that petitioner had established a
clear and positive right to Lot No. 11909. The intended sale between the
parties was for a lump sum, since there was no evidence presented that the
property was sold for a price per unit. It was apparent that the subject matter

of the sale was the parcel of land, known as Cadastral Lot No. 11909, and not
only a portion thereof.8
Thus, on August 2, 1993, the court a quo rendered its decision with the
following dispositive portion:
WHEREFORE, premises considered, the petition is hereby granted and
judgment is hereby rendered in favor of herein petitioner. The Register of
Deeds of the City of Cebu is hereby ordered and directed to effect the
registration in his office of the Deed of Absolute Sale between Spouses
Antonio Caballero and Leonarda Caballero and Petitioner, Carmen del Prado
dated June 11, 1990 covering Lot No. 11909 after payment of all fees
prescribed by law. Additionally, the Register of Deeds of the City of Cebu is
hereby ordered to cancel Original Certificate No. 1305 in the name of Antonio
Caballero and Leonarda Caballero and the Transfer Certificate of Title be
issued in the name of Petitioner Carmen del Prado covering the entire parcel
of land known as Cadastral Lot No. 11909.9
An appeal was duly filed. On September 26, 2000, the CA promulgated the
assailed decision, reversing and setting aside the decision of the RTC.
The CA no longer touched on the character of the sale, because it found that
petitioner availed herself of an improper remedy. The "petition for
registration of document" is not one of the remedies provided under P.D. No.
1529, after the original registration has been effected. Thus, the CA ruled
that the lower court committed an error when it assumed jurisdiction over
the petition, which prayed for a remedy not sanctioned under the Property
Registration Decree. Accordingly, the CA disposed, as follows:
IN VIEW OF ALL THE FOREGOING, the appealed decision is REVERSED and
SET ASIDE and a new one entered dismissing the petition for lack of
jurisdiction. No pronouncement as to costs.10
Aggrieved, petitioner filed the instant petition, raising the following issues:
I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN
MAKING FINDINGS OF FACT CONTRARY TO THAT OF THE TRIAL COURT[;]
II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN
FAILING TO RULE THAT THE SALE OF THE LOT IS FOR A LUMP SUM OR
CUERPO CIERTO[;]

III. WHETHER OR NOT THE COURT A QUO HAS JURISDICTION OVER THE
PETITION FOR REGISTRATION OF THE DEED OF ABSOLUTE SALE DATED 11
JUNE
1990
EXECUTED
BETWEEN
HEREIN
PETITIONER
AND
RESPONDENTS[.]11
The core issue in this case is whether or not the sale of the land was for a
lump sum or not.
Petitioner asserts that the plain language of the Deed of Sale shows that it is
a sale of a real estate for a lump sum, governed under Article 1542 of the
Civil Code.12 In the contract, it was stated that the land contains an area of
4,000 sq m more or less, bounded on the North by Lot No. 11903, on the
East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the
West by Lot No. 11910. When the OCT was issued, the area of Lot No. 11909
was declared to be 14,475 sq m, with an excess of 10,475 sq m. In
accordance with Article 1542, respondents are, therefore, duty-bound to
deliver the whole area within the boundaries stated, without any
corresponding increase in the price. Thus, petitioner concludes that she is
entitled to have the certificate of title, covering the whole Lot No. 11909,
which was originally issued in the names of respondents, transferred to her
name.
We do not agree.
In Esguerra v. Trinidad,13 the Court had occasion to discuss the matter of
sales involving real estates. The Courts pronouncement is quite instructive:
In sales involving real estate, the parties may choose between two types of
pricing agreement: a unit price contract wherein the purchase price is
determined by way of reference to a stated rate per unit area (e.g., P1,000
per square meter), or a lump sum contract which states a full purchase price
for an immovable the area of which may be declared based on the estimate
or where both the area and boundaries are stated (e.g., P1 million for 1,000
square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals (478 SCRA 451),
the Court discussed the distinction:
"In a unit price contract, the statement of area of immovable is not
conclusive and the price may be reduced or increased depending on the area
actually delivered. If the vendor delivers less than the area agreed upon, the
vendee may oblige the vendor to deliver all that may be stated in the
contract or demand for the proportionate reduction of the purchase price if

delivery is not possible. If the vendor delivers more than the area stated in
the contract, the vendee has the option to accept only the amount agreed
upon or to accept the whole area, provided he pays for the additional area at
the contract rate.
xxxx
In the case where the area of an immovable is stated in the contract based
on an estimate, the actual area delivered may not measure up exactly with
the area stated in the contract. According to Article 1542 of the Civil Code, in
the sale of real estate, made for a lump sum and not at the rate of a certain
sum for a unit of measure or number, there shall be no increase or decrease
of the price, although there be a greater or less areas or number than that
stated in the contract. . . .
xxxx
Where both the area and the boundaries of the immovable are declared, the
area covered within the boundaries of the immovable prevails over the
stated area. In cases of conflict between areas and boundaries, it is the latter
which should prevail. What really defines a piece of ground is not the area,
calculated with more or less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and indicating its limits.
In a contract of sale of land in a mass, it is well established that the specific
boundaries stated in the contract must control over any statement with
respect to the area contained within its boundaries. It is not of vital
consequence that a deed or contract of sale of land should disclose the area
with mathematical accuracy. It is sufficient if its extent is objectively
indicated with sufficient precision to enable one to identify it. An error as to
the superficial area is immaterial. Thus, the obligation of the vendor is to
deliver everything within the boundaries, inasmuch as it is the entirety
thereof that distinguishes the determinate object.14
The Court, however, clarified that the rule laid down in Article 1542 is not
hard and fast and admits of an exception. It held:
A caveat is in order, however. The use of "more or less" or similar words in
designating quantity covers only a reasonable excess or deficiency. A vendee
of land sold in gross or with the description "more or less" with reference to
its area does not thereby ipso facto take all risk of quantity in the land..

Numerical data are not of course the sole gauge of unreasonableness of the
excess or deficiency in area. Courts must consider a host of other factors. In
one case (see Roble v. Arbasa, 414 Phil. 343 [2001]), the Court found
substantial discrepancy in area due to contemporaneous circumstances.
Citing change in the physical nature of the property, it was therein
established that the excess area at the southern portion was a product of
reclamation, which explained why the lands technical description in the
deed of sale indicated the seashore as its southern boundary, hence, the
inclusion of the reclaimed area was declared unreasonable.15
In the instant case, the deed of sale is not one of a unit price contract. The
parties agreed on the purchase price of P40,000.00 for a predetermined area
of 4,000 sq m, more or less, bounded on the North by Lot No. 11903, on the
East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the
West by Lot No. 11910. In a contract of sale of land in a mass, the specific
boundaries stated in the contract must control over any other statement,
with respect to the area contained within its boundaries.161avvphi1
Blacks Law Dictionary17 defines the phrase "more or less" to mean:
About; substantially; or approximately; implying that both parties assume
the risk of any ordinary discrepancy. The words are intended to cover slight
or unimportant inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57
S.W.2d 408; and are ordinarily to be interpreted as taking care of
unsubstantial differences or differences of small importance compared to the
whole number of items transferred.
Clearly, the discrepancy of 10,475 sq m cannot be considered a slight
difference in quantity. The difference in the area is obviously sizeable and too
substantial to be overlooked. It is not a reasonable excess or deficiency that
should be deemed included in the deed of sale.
We take exception to the avowed rule that this Court is not a trier of facts.
After an assiduous scrutiny of the records, we lend credence to respondents
claim that they intended to sell only 4,000 sq m of the whole Lot No. 11909,
contrary to the findings of the lower court. The records reveal that when the
parties made an ocular inspection, petitioner specifically pointed to that
portion of the lot, which she preferred to purchase, since there were mango
trees planted and a deep well thereon. After the sale, respondents delivered

and segregated the area of 4,000 sq m in favor of petitioner by fencing off


the area of 10,475 sq m belonging to them.18
Contracts are the law between the contracting parties. 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. All these elements are present in the instant case.19
More importantly, we find no reversible error in the decision of the CA.
Petitioners recourse, by filing the petition for registration in the same
cadastral case, was improper. It is a fundamental principle in land
registration that a certificate of title serves as evidence of an indefeasible
and incontrovertible title to the property in favor of the person whose name
appears therein. Such indefeasibility commences after one year from the
date of entry of the decree of registration. 20 Inasmuch as the petition for
registration of document did not interrupt the running of the period to file the
appropriate petition for review and considering that the prescribed one-year
period had long since expired, the decree of registration, as well as the
certificate of title issued in favor of respondents, had become
incontrovertible.21
WHEREFORE, the petition is DENIED.
SO ORDERED.
15.

Lietz Inc. Vs. CA GR No. 122463

G.R. No. 122463 December 19, 2005


RUDOLF
LIETZ,
INC.,
Petitioner,
vs.
THE COURT OF APPEALS, AGAPITO BURIOL, TIZIANA TURATELLO &
PAOLA SANI, Respondents.
DECISION
Tinga, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court, praying for the annulment of the Decision1 dated April 17, 1995
and the Resolution2 dated October 25, 1995 of the Court of Appeals in CAG.R. CV No. 38854. The Court of Appeals affirmed the Decision3 in Civil Case
No. 2164 of the Regional Trial Court (RTC), Branch 48, of Palawan and Puerto
Princesa City with the modification that herein respondents Tiziana Turatello
and Paola Sani are entitled to damages, attorneys fees, and litigation
expenses.
The dispositive portion of the RTC Decision reads:
WHEREFORE, in view of the foregoing and as prayed for by the defendants,
the instant complaint is hereby DISMISSED. Defendants counterclaim is
likewise DISMISSED. Plaintiff, however, is ordered to pay defendant Turatello
and Sanis counsel the sum of P3,010.38 from August 9, 1990 until fully paid
representing the expenses incurred by said counsel when the trial was
cancelled due to the non-appearance of plaintiffs witnesses. With costs
against the plaintiff.
SO ORDERED.4
As culled from the records, the following antecedents appear:
Respondent Agapito Buriol previously owned a parcel of unregistered land
situated at Capsalay Island, Port Barton, San Vicente, Palawan. On August 15,
1986, respondent Buriol entered into a lease agreement with Flavia Turatello
and respondents Turatello and Sani, all Italian citizens, involving one (1)
hectare of respondent Buriols property. The lease agreement was for a
period of 25 years, renewable for another 25 years. The lessees took
possession of the land after paying respondent Buriol a down payment of
P10,000.00.5 The lease agreement, however, was reduced into writing only
in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc.
the same parcel of land for the amount of P30,000.00. The Deed of Absolute
Sale embodying the agreement described the land as follows:
A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of
that parcel of land declared in the name of Agapito Buriol, under Tax
Declaration No. 0021, revised in the year 1985, together with all

improvements thereon, situated at the Island of Capsalay, Barangay Port


Barton, municipality of San Vicente, province of Palawan which segregated
from the whole parcel described in said tax declaration, has the following
superficial boundaries: NORTH, Sec. 01-017; and remaining property of the
vendor; EAST, by Seashore; SOUTH, 01-020; and WEST, by 01-018 (now
Elizabeth Lietz).6
Petitioner later discovered that respondent Buriol owned only four (4)
hectares, and with one more hectare covered by lease, only three (3)
hectares were actually delivered to petitioner. Thus, petitioner instituted on
April 3, 1989 a complaint for Annulment of Lease with Recovery of
Possession with Injunction and Damages against respondents and Flavia
Turatello before the RTC. The complaint alleged that with evident bad faith
and malice, respondent Buriol sold to petitioner five (5) hectares of land
when respondent Buriol knew for a fact that he owned only four (4) hectares
and managed to lease one more hectare to Flavia Turatello and respondents
Tiziana Turatello and Paola Sani. The complaint sought the issuance of a
restraining order and a writ of preliminary injunction to prevent Flavia
Turatello and respondents Turatello and Sani from introducing improvements
on the property, the annulment of the lease agreement between
respondents, and the restoration of the amount paid by petitioner in excess
of the value of the property sold to him. Except for Flavia Turatello,
respondents filed separate answers raising similar defenses of lack of cause
of action and lack of jurisdiction over the action for recovery of possession.
Respondents Turatello and Sani also prayed for the award of damages and
attorneys fees.7
After trial on the merits, the trial court rendered judgment on May 27, 1992,
dismissing both petitioners complaint and respondents counterclaim for
damages. Petitioner and respondents Turatello and Sani separately appealed
the RTC Decision to the Court of Appeals, which affirmed the dismissal of
petitioners complaint and awarded respondents Turatello and Sani damages
and attorneys fees. The dispositive portion of the Court of Appeals Decision
reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, with the
following modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendantsappellants Turatello and Sani, the sum of P100,000.00 as moral damages; (2)

P100,000.00 as exemplary damages; (3) P135,728.73 as attorneys fees; and


(4) P10,000.00 as litigation expenses.
SO ORDERED.8
Petitioner brought to this Court the instant petition after the denial of its
motion for reconsideration of the Court of Appeal Decision. The instant
petition imputes the following errors to the Court of Appeals.
I. IN DEFENDING AGAPITO BURIOLS GOOD FAITH AND IN STATING THAT
ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY
RESPONSIBLE FOR ITS INEXCUSABLE CREDULOUSNESS.
II. IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE
ARE, RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR.
III. IN NOT GRANTING PETITIONERS CLAIM FOR ACTUAL AND EXEMPLARY
DAMAGES.
IV. IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI
EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF
EVIDENTIARY BASIS.9
Essentially, only two main issues confront this Court, namely: (i) whether or
not petitioner is entitled to the delivery of the entire five hectares or its
equivalent, and (ii) whether or not damages may be awarded to either party.
Petitioner contends that it is entitled to the corresponding reduction of the
purchase price because the agreement was for the sale of five (5) hectares
although respondent Buriol owned only four (4) hectares. As in its appeal to
the Court of Appeals, petitioner anchors its argument on the second
paragraph of Article 1539 of the Civil Code, which provides:
Art. 1539. The obligation to deliver the thing sold includes that of placing in
the control of the vendee all that is mentioned in the contract, in conformity
with the following rules:
If the sale of real estate should be made with a statement of its area, at the
rate of a certain price for a unit of measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter should demand it, all that may
have been stated in the contract; but, should this be not possible, the
vendee may choose between a proportional reduction of the price and the

rescission of the contract, provided that, in the latter case, the lack in the
area be not less than one-tenth of that stated.
....
The Court of Appeals Decision, however, declared as inapplicable the
abovequoted provision and instead ruled that petitioner is no longer entitled
to a reduction in price based on the provisions of Article 1542 of the Civil
Code, which read:
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate
of a certain sum for a unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or lesser area or
number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a
single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number should
be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer
a reduction in the price, in proportion to what is lacking in the area or
number, unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated.
Article 1539 governs a sale of immovable by the unit, that is, at a stated rate
per unit area. In a unit price contract, the statement of area of immovable is
not conclusive and the price may be reduced or increased depending on the
area actually delivered. If the vendor delivers less than the area agreed
upon, the vendee may oblige the vendor to deliver all that may be stated in
the contract or demand for the proportionate reduction of the purchase price
if delivery is not possible. If the vendor delivers more than the area stated in
the contract, the vendee has the option to accept only the amount agreed
upon or to accept the whole area, provided he pays for the additional area at
the contract rate.10
In some instances, a sale of an immovable may be made for a lump sum and
not at a rate per unit. The parties agree on a stated purchase price for an
immovable the area of which may be declared based on an estimate or
where both the area and boundaries are stated.

In the case where the area of the immovable is stated in the contract based
on an estimate, the actual area delivered may not measure up exactly with
the area stated in the contract. According to Article 1542 11 of the Civil Code,
in the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or
decrease of the price although there be a greater or lesser area or number
than that stated in the contract. However, the discrepancy must not be
substantial. A vendee of land, when sold in gross or with the description
"more or less" with reference to its area, does not thereby ipso facto take all
risk of quantity in the land. The use of "more or less" or similar words in
designating quantity covers only a reasonable excess or deficiency.12
Where both the area and the boundaries of the immovable are declared, the
area covered within the boundaries of the immovable prevails over the
stated area. In cases of conflict between areas and boundaries, it is the latter
which should prevail. What really defines a piece of ground is not the area,
calculated with more or less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and indicating its limits.
In a contract of sale of land in a mass, it is well established that the specific
boundaries stated in the contract must control over any statement with
respect to the area contained within its boundaries. It is not of vital
consequence that a deed or contract of sale of land should disclose the area
with mathematical accuracy. It is sufficient if its extent is objectively
indicated with sufficient precision to enable one to identify it. An error as to
the superficial area is immaterial.13 Thus, the obligation of the vendor is to
deliver everything within the boundaries, inasmuch as it is the entirety
thereof that distinguishes the determinate object.14
As correctly noted by the trial court and the Court of Appeals, the sale
between petitioner and respondent Buriol involving the latters property is
one made for a lump sum. The Deed of Absolute Sale shows that the parties
agreed on the purchase price on a predetermined area of five hectares within
the specified boundaries and not based on a particular rate per area. In
accordance with Article 1542, there shall be no reduction in the purchase
price even if the area delivered to petitioner is less than that stated in the
contract. In the instant case, the area within the boundaries as stated in the
contract shall control over the area agreed upon in the contract.

The Court rejects petitioners contention that the propertys boundaries as


stated in the Deed of Absolute Sale are superficial and unintelligible and,
therefore, cannot prevail over the area stated in the contract. First, as
pointed out by the Court of Appeals, at an ocular inspection prior to the
perfection of the contract of sale, respondent Buriol pointed to petitioner the
boundaries of the property. Hence, petitioner gained a fair estimate of the
area of the property sold to him. Second, petitioner cannot now assail the
contents of the Deed of Absolute Sale, particularly the description of the
boundaries of the property, because petitioners subscription to the Deed of
Absolute Sale indicates his assent to the correct description of the
boundaries of the property.
Petitioner also asserts that respondent Buriol is guilty of misleading
petitioner into believing that the latter was buying five hectares when he
knew prior to the sale that he owned only four hectares. The review of the
circumstances of the alleged misrepresentation is factual and, therefore,
beyond the province of the Court. Besides, this issue had already been raised
before and passed upon by the trial court and the Court of Appeals. The
factual finding of the courts below that no sufficient evidence supports
petitioners allegation of misrepresentation is binding on the Court.
The Court of Appeals reversed the trial courts dismissal of respondents
Turatello and Sanis counterclaim for moral and exemplary damages,
attorneys fees and litigation expenses. In awarding moral damages in the
amount of P100,000 in favor of Turatello and Sani, the Court of Appeals
justified the award to alleviate the suffering caused by petitioners
unfounded civil action. The filing alone of a civil action should not be a
ground for an award of moral damages in the same way that a clearly
unfounded civil action is not among the grounds for moral damages.15
Exemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated
or compensatory damages.16 With the deletion of the award for moral
damages, there is no basis for the award of exemplary damages.
WHEREFORE, the instant petition for review on certiorari is GRANTED in PART.
The Court of Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED with the
MODIFICATION that the award of moral and exemplary damages is DELETED.
SO ORDERED.

16.
Quirong vs. Development Bank of the Philippines
173441
G.R. No. 173441

GR

No.

December 3, 2009

HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG,


Petitioners,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, Respondent.
DECISION
ABAD, J.:
This case is about the prescriptive period of an action for rescission of a
contract of sale where the buyer is evicted from the thing sold by a
subsequent judicial order in favor of a third party.
The Facts and the Case
The facts are not disputed. When the late Emilio Dalope died, he left a 589square meter untitled lot1 in Sta. Barbara, Pangasinan, to his wife, Felisa
Dalope (Felisa) and their nine children, one of whom was Rosa DalopeFuncion.2 To enable Rosa and her husband Antonio Funcion (the Funcions)
get a loan from respondent Development Bank of the Philippines (DBP),
Felisa sold the whole lot to the Funcions. With the deed of sale in their favor
and the tax declaration transferred in their names, the Funcions mortgaged
the lot with the DBP.
On February 12, 1979, after the Funcions failed to pay their loan, the DBP
foreclosed the mortgage on the lot and consolidated ownership in its name
on June 17, 1981.3
Four years later or on September 20, 1983 the DBP conditionally sold the lot
to Sofia Quirong4 for the price of P78,000.00. In their contract of sale, Sofia
Quirong waived any warranty against eviction. The contract provided that
the DBP did not guarantee possession of the property and that it would not
be liable for any lien or encumbrance on the same. Quirong gave a down
payment of P14,000.00.

Two months after that sale or on November 28, 1983 Felisa and her eight
children (collectively, the Dalopes)5 filed an action for partition and
declaration of nullity of documents with damages against the DBP and the
Funcions before the Regional Trial Court (RTC) of Dagupan City, Branch 42, in
Civil Case D-7159.
On December 27, 1984, notwithstanding the suit, the DBP executed a deed
of absolute sale of the subject lot in Sofia Quirongs favor. The deed of sale
carried substantially the same waiver of warranty against eviction and of any
adverse lien or encumbrance.
On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner
Quirong heirs) filed an answer in intervention 6 in Civil Case D-7159 in which
they asked the RTC to award the lot to them and, should it instead be given
to the Dalopes, to allow the Quirong heirs to recover the lots value from the
DBP. But, because the heirs failed to file a formal offer of evidence, the trial
court did not rule on the merits of their claim to the lot and, alternatively, to
relief from the DBP.7
On December 16, 1992 the RTC rendered a decision, declaring the DBPs sale
to Sofia Quirong valid only with respect to the shares of Felisa and Rosa
Funcion in the property. It declared Felisas sale to the Funcions, the latters
mortgage to the DBP, and the latters sale to Sofia Quirong void insofar as
they prejudiced the shares of the eight other children of Emilio and Felisa
who were each entitled to a tenth share in the subject lot.
The DBP received a copy of the decision on January 13, 1993 and, therefore,
it had until January 28, 1993 within which to file a motion for its
reconsideration or a notice of appeal from it. But the DBP failed to appeal
supposedly because of excusable negligence and the withdrawal of its
previous counsel of record.8
When the RTC judgment became final and the court issued a writ of
execution, the DBP resisted the writ by motion to quash, claiming that the
decision could not be enforced because it failed to state by metes and
bounds the particular portions of the lot that would be assigned to the
different parties in the case. The RTC denied the DBPs motion, prompting
the latter to seek recourse by special civil action of certiorari directly with
this Court in G.R. 116575, Development Bank of the Philippines v. Fontanilla.
On September 7, 1994 the Court issued a resolution, denying the petition for

failure of the DBP to pay the prescribed fees. This resolution became final
and executory on January 17, 1995.9
On June 10, 1998 the Quirong heirs filed the present action 10 against the
DBP before the RTC of Dagupan City, Branch 44, in Civil Case CV-98-02399-D
for rescission of the contract of sale between Sofia Quirong, their
predecessor, and the DBP and praying for the reimbursement of the price of
P78,000.00 that she paid the bank plus damages. The heirs alleged that they
were entitled to the rescission of the sale because the decision in Civil Case
D-7159 stripped them of nearly the whole of the lot that Sofia Quirong, their
predecessor, bought from the DBP. The DBP filed a motion to dismiss the
action on ground of prescription and res judicata but the RTC denied their
motion.
On June 14, 2004, after hearing the case, the RTC rendered a decision, 11
rescinding the sale between Sofia Quirong and the DBP and ordering the
latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid the
bank.12 On appeal by the DBP, the Court of Appeals (CA) reversed the RTC
decision and dismissed the heirs action on the ground of prescription. The
CA concluded that, reckoned from the finality of the December 16, 1992
decision in Civil Case D-7159, the complaint filed on June 10, 1998 was
already barred by the four-year prescriptive period under Article 1389 of the
Civil Code.13 The Quirong heirs filed a motion for reconsideration of the
decision but the appellate court denied it,14 thus, this petition.
The Issues Presented
The issues presented in this case are:
1. Whether or not the Quirong heirs action for rescission of respondent
DBPs sale of the subject property to Sofia Quirong was already barred by
prescription; and
2. In the negative, whether or not the heirs of Quirong were entitled to the
rescission of the DBPs sale of the subject lot to the late Sofia Quirong as a
consequence of her heirs having been evicted from it.
The Courts Rulings
The CA held that the Quirong heirs action for rescission of the sale between
DBP and their predecessor, Sofia Quirong, is barred by prescription reckoned

from the date of finality of the December 16, 1992 RTC decision in Civil Case
D-7159 and applying the prescriptive period of four years set by Article 1389
of the Civil Code.
Unfortunately, the CA did not state in its decision the date when the RTC
decision in Civil Case D-7159 became final and executory, which decision
resulted in the Quirong heirs loss of 80% of the lot that the DBP sold to Sofia
Quirong. Petitioner heirs claim that the prescriptive period should be
reckoned from January 17, 1995, the date this Courts resolution in G.R.
116575 became final and executory.15
But the incident before this Court in G.R. 116575 did not deal with the merit
of the RTC decision in Civil Case D-7159. That decision became final and
executory on January 28, 1993 when the DBP failed to appeal from it within
the time set for such appeal. The incident before this Court in G.R. 116575
involved the issuance of the writ of execution in that case. The DBP
contested such issuance supposedly because the dispositive portion of the
decision failed to specify details that were needed for its implementation.
Since this incident did not affect the finality of the decision in Civil Case D7159, the prescriptive period remained to be reckoned from January 28,
1993, the date of such finality.
The next question that needs to be resolved is the applicable period of
prescription. The DBP claims that it should be four years as provided under
Article 1389 of the Civil Code.16 Article 1389 provides that "the action to
claim rescission must be commenced within four years." The Quirong heirs,
on the other hand, claim that it should be 10 years as provided under Article
1144 which states that actions "upon a written contract" must be brought
"within 10 years from the date the right of action accrues."
Now, was the action of the Quirong heirs "for rescission" or "upon a written
contract"? There is no question that their action was for rescission, since
their complaint in Civil Case CV-98-02399-D asked for the rescission of the
contract of sale between Sofia Quirong, their predecessor, and the DBP and
the reimbursement of the price of P78,000.00 that Sofia Quirong paid the
bank plus damages. The prescriptive period for rescission is four years.
But it is not that simple. The remedy of "rescission" is not confined to the
rescissible contracts enumerated under Article 1381. 17 Article 1191 of the
Civil Code gives the injured party in reciprocal obligations, such as what

contracts are about, the option to choose between fulfillment and


"rescission." Arturo M. Tolentino, a well-known authority in civil law, is quick
to note, however, that the equivalent of Article 1191 in the old code actually
uses the term "resolution" rather than the present "rescission." 18 The
calibrated meanings of these terms are distinct.
"Rescission" is a subsidiary action based on injury to the plaintiffs economic
interests as described in Articles 1380 and 1381. "Resolution," the action
referred to in Article 1191, on the other hand, is based on the defendants
breach of faith, a violation of the reciprocity between the parties. As an
action based on the binding force of a written contract, therefore, rescission
(resolution) under Article 1191 prescribes in 10 years. Ten years is the period
of prescription of actions based on a written contract under Article 1144.
The distinction makes sense. Article 1191 gives the injured party an option to
choose between, first, fulfillment of the contract and, second, its rescission.
An action to enforce a written contract (fulfillment) is definitely an "action
upon a written contract," which prescribes in 10 years (Article 1144). It will
not be logical to make the remedy of fulfillment prescribe in 10 years while
the alternative remedy of rescission (or resolution) is made to prescribe after
only four years as provided in Article 1389 when the injury from which the
two kinds of actions derive is the same.
Here, the Quirong heirs alleged in their complaint that they were entitled to
the rescission of the contract of sale of the lot between the DBP and Sofia
Quirong because the decision in Civil Case D-7159 deprived her heirs of
nearly the whole of that lot. But what was the status of that contract at the
time of the filing of the action for rescission? Apparently, that contract of sale
had already been fully performed when Sofia Quirong paid the full price for
the lot and when, in exchange, the DBP executed the deed of absolute sale
in her favor. There was a turnover of control of the property from DBP to
Sofia Quirong since she assumed under their contract, "the ejectment of
squatters and/or occupants" on the lot, at her own expense.19
Actually, the cause of action of the Quirong heirs stems from their having
been ousted by final judgment from the ownership of the lot that the DBP
sold to Sofia Quirong, their predecessor, in violation of the warranty against
eviction that comes with every sale of property or thing. Article 1548 of the
Civil Code provides:

Article 1548. Eviction shall take place whenever by a final judgment based
on a right prior to the sale or an act imputable to the vendor, the vendee is
deprived of the whole or of a part of thing purchased.
xxxx
With the loss of 80% of the subject lot to the Dalopes by reason of the
judgment of the RTC in Civil Case D-7159, the Quirong heirs had the right to
file an action for rescission against the DBP pursuant to the provision of
Article 1556 of the Civil Code which provides:
Article 1556. Should the vendee lose, by reason of the eviction, a part of the
thing sold of such importance, in relation to the whole, that he would not
have bought it without said part, he may demand the rescission of the
contract; but with the obligation to return the thing without other
encumbrances than those which it had when he acquired it. x x x
And that action for rescission, which is based on a subsequent economic loss
suffered by the buyer, was precisely the action that the Quirong heirs took
against the DBP. Consequently, it prescribed as Article 1389 provides in four
years from the time the action accrued. Since it accrued on January 28, 1993
when the decision in Civil Case D-7159 became final and executory and
ousted the heirs from a substantial portion of the lot, the latter had only until
January 28, 1997 within which to file their action for rescission. Given that
they filed their action on June 10, 1998, they did so beyond the four-year
period.
With the conclusion that the Court has reached respecting the first issue
presented in this case, it would serve no useful purpose for it to further
consider the issue of whether or not the heirs of Quirong would have been
entitled to the rescission of the DBPs sale of the subject lot to Sofia Quirong
as a consequence of her heirs having been evicted from it. As the Court has
ruled above, their action was barred by prescription. The CA acted correctly
in reversing the RTC decision and dismissing their action.
Parenthetically, the Quirong heirs were allowed by the RTC to intervene in
the original action for annulment of sale in Civil Case D-7159 that the
Dalopes filed against the DBP and the Funcions. Not only did the heirs
intervene in defense of the sale, they likewise filed a cross claim against the
DBP. And they were apparently heard on their defense and cross claim but
the RTC did not adjudicate their claim for the reason that they failed to make
a formal offer of their documentary exhibits. Yet, they did not appeal from

this omission or from the judgment of the RTC, annulling the DBPs sale of
the subject lot to Sofia Quirong. This point is of course entirely academic but
it shows that the Quirong heirs have themselves to blame for the loss of
whatever right they may have in the case.
WHEREFORE, the Court DENIES the petition and AFFIRMS the November
30, 2005 decision of the Court of Appeals in CA-G.R. CV 83897.
SO ORDERED.
17.

BPI Investment Corp vs. CA

G.R. No. 133632

GR No. 133632

February 15, 2002

BPI INVESTMENT CORPORATION, petitioner,


vs.
HON. COURT OF APPEALS and ALS MANAGEMENT & DEVELOPMENT
CORPORATION, respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari assails the decision dated February 28, 1997, of
the Court of Appeals and its resolution dated April 21, 1998, in CA-G.R. CV
No. 38887. The appellate court affirmed the judgment of the Regional Trial
Court of Pasig City, Branch 151, in (a) Civil Case No. 11831, for foreclosure of
mortgage by petitioner BPI Investment Corporation (BPIIC for brevity) against
private respondents ALS Management and Development Corporation and
Antonio K. Litonjua,1 consolidated with (b) Civil Case No. 52093, for damages
with prayer for the issuance of a writ of preliminary injunction by the private
respondents against said petitioner.
The trial court had held that private respondents were not in default in the
payment of their monthly amortization, hence, the extrajudicial foreclosure
conducted by BPIIC was premature and made in bad faith. It awarded private
respondents the amount of P300,000 for moral damages, P50,000 for
exemplary damages, and P50,000 for attorneys fees and expenses for
litigation. It likewise dismissed the foreclosure suit for being premature.
The facts are as follows:

Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from
Ayala Investment and Development Corporation (AIDC), the predecessor of
petitioner BPIIC, for the construction of a house on his lot in New Alabang
Village, Muntinlupa. Said house and lot were mortgaged to AIDC to secure
the loan. Sometime in 1980, Roa sold the house and lot to private
respondents ALS and Antonio Litonjua for P850,000. They paid P350,000 in
cash and assumed the P500,000 balance of Roas indebtedness with AIDC.
The latter, however, was not willing to extend the old interest rate to private
respondents and proposed to grant them a new loan of P500,000 to be
applied to Roas debt and secured by the same property, at an interest rate
of 20% per annum and service fee of 1% per annum on the outstanding
principal balance payable within ten years in equal monthly amortization of
P9,996.58 and penalty interest at the rate of 21% per annum per day from
the date the amortization became due and payable.
Consequently, in March 1981, private respondents executed a mortgage
deed containing the above stipulations with the provision that payment of
the monthly amortization shall commence on May 1, 1981.
On August 13, 1982, ALS and Litonjua updated Roas arrearages by paying
BPIIC the sum of P190,601.35. This reduced Roas principal balance to
P457,204.90 which, in turn, was liquidated when BPIIC applied thereto the
proceeds of private respondents loan of P500,000.
On September 13, 1982, BPIIC released to private respondents P7,146.87,
purporting to be what was left of their loan after full payment of Roas loan.
In June 1984, BPIIC instituted foreclosure proceedings against private
respondents on the ground that they failed to pay the mortgage
indebtedness which from May 1, 1981 to June 30, 1984, amounted to Four
Hundred Seventy Five Thousand Five Hundred Eighty Five and 31/100 Pesos
(P475,585.31). A notice of sheriffs sale was published on August 13, 1984.
On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093 against
BPIIC. They alleged, among others, that they were not in arrears in their
payment, but in fact made an overpayment as of June 30, 1984. They
maintained that they should not be made to pay amortization before the
actual release of the P500,000 loan in August and September 1982. Further,
out of the P500,000 loan, only the total amount of P464,351.77 was released
to private respondents. Hence, applying the effects of legal compensation,

the balance of P35,648.23 should be applied to the initial monthly


amortization for the loan.
On August 31, 1988, the trial court rendered its judgment in Civil Case Nos.
11831 and 52093, thus:
WHEREFORE, judgment is hereby rendered in favor of ALS Management and
Development Corporation and Antonio K. Litonjua and against BPI
Investment Corporation, holding that the amount of loan granted by BPI to
ALS and Litonjua was only in the principal sum of P464,351.77, with interest
at 20% plus service charge of 1% per annum, payable on equal monthly and
successive amortizations at P9,283.83 for ten (10) years or one hundred
twenty (120) months. The amortization schedule attached as Annex "A" to
the "Deed of Mortgage" is correspondingly reformed as aforestated.
The Court further finds that ALS and Litonjua suffered compensable damages
when BPI caused their publication in a newspaper of general circulation as
defaulting debtors, and therefore orders BPI to pay ALS and Litonjua the
following sums:
a) P300,000.00 for and as moral damages;
b) P50,000.00 as and for exemplary damages;
c) P50,000.00 as and for attorneys fees and expenses of litigation.
The foreclosure suit (Civil Case No. 11831) is hereby DISMISSED for being
premature.
Costs against BPI.
SO ORDERED.2
Both parties appealed to the Court of Appeals. However,
respondents appeal was dismissed for non-payment of docket fees.

private

On February 28, 1997, the Court of Appeals promulgated its decision, the
dispositive portion reads:
WHEREFORE, finding no error in the appealed decision the same is hereby
AFFIRMED in toto.
SO ORDERED.3
In its decision, the Court of Appeals reasoned that a simple loan is perfected
only upon the delivery of the object of the contract. The contract of loan

between BPIIC and ALS & Litonjua was perfected only on September 13,
1982, the date when BPIIC released the purported balance of the P500,000
loan after deducting therefrom the value of Roas indebtedness. Thus,
payment of the monthly amortization should commence only a month after
the said date, as can be inferred from the stipulations in the contract. This,
despite the express agreement of the parties that payment shall commence
on May 1, 1981. From October 1982 to June 1984, the total amortization due
was only P194,960.43. Evidence showed that private respondents had an
overpayment, because as of June 1984, they already paid a total amount of
P201,791.96. Therefore, there was no basis for BPIIC to extrajudicially
foreclose the mortgage and cause the publication in newspapers concerning
private respondents delinquency in the payment of their loan. This fact
constituted sufficient ground for moral damages in favor of private
respondents.
The motion for reconsideration filed by petitioner BPIIC was likewise denied,
hence this petition, where BPIIC submits for resolution the following issues:
I. WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL
CONTRACT IN THE LIGHT OF THE RULE LAID DOWN IN BONNEVIE VS.
COURT OF APPEALS, 125 SCRA 122.
II. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR MORAL AND
EXEMPLARY DAMAGES AND ATTORNEYS FEES IN THE FACE OF
IRREGULAR PAYMENTS MADE BY ALS AND OPPOSED TO THE RULE LAID
DOWN IN SOCIAL SECURITY SYSTEM VS. COURT OF APPEALS, 120 SCRA
707.
On the first issue, petitioner contends that the Court of Appeals erred in
ruling that because a simple loan is perfected upon the delivery of the object
of the contract, the loan contract in this case was perfected only on
September 13, 1982. Petitioner claims that a contract of loan is a consensual
contract, and a loan contract is perfected at the time the contract of
mortgage is executed conformably with our ruling in Bonnevie v. Court of
Appeals, 125 SCRA 122. In the present case, the loan contract was perfected
on March 31, 1981, the date when the mortgage deed was executed, hence,
the amortization and interests on the loan should be computed from said
date.
Petitioner also argues that while the documents showed that the loan was
released only on August 1982, the loan was actually released on March 31,

1981, when BPIIC issued a cancellation of mortgage of Frank Roas loan. This
finds support in the registration on March 31, 1981 of the Deed of Absolute
Sale executed by Roa in favor of ALS, transferring the title of the property to
ALS, and ALS executing the Mortgage Deed in favor of BPIIC. Moreover,
petitioner claims, the delay in the release of the loan should be attributed to
private respondents. As BPIIC only agreed to extend a P500,000 loan, private
respondents were required to reduce Frank Roas loan below said amount.
According to petitioner, private respondents were only able to do so in
August 1982.
In their comment, private respondents assert that based on Article 1934 of
the Civil Code,4 a simple loan is perfected upon the delivery of the object of
the contract, hence a real contract. In this case, even though the loan
contract was signed on March 31, 1981, it was perfected only on September
13, 1982, when the full loan was released to private respondents. They
submit that petitioner misread Bonnevie. To give meaning to Article 1934,
according to private respondents, Bonnevie must be construed to mean that
the contract to extend the loan was perfected on March 31, 1981 but the
contract of loan itself was only perfected upon the delivery of the full loan to
private respondents on September 13, 1982.
Private respondents further maintain that even granting, arguendo, that the
loan contract was perfected on March 31, 1981, and their payment did not
start a month thereafter, still no default took place. According to private
respondents, a perfected loan agreement imposes reciprocal obligations,
where the obligation or promise of each party is the consideration of the
other party. In this case, the consideration for BPIIC in entering into the loan
contract is the promise of private respondents to pay the monthly
amortization. For the latter, it is the promise of BPIIC to deliver the money. 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. Therefore, private respondents conclude, they did not incur in
delay when they did not commence paying the monthly amortization on May
1, 1981, as it was only on September 13, 1982 when petitioner fully
complied with its obligation under the loan contract.
We agree with private respondents. A loan contract is not a consensual
contract but a real contract. It is perfected only upon the delivery of the
object of the contract.5 Petitioner misapplied Bonnevie. The contract in

Bonnevie declared by this Court as a perfected consensual contract falls


under the first clause of Article 1934, Civil Code. It is an accepted promise to
deliver something by way of simple loan.
In Saura Import and Export Co. Inc. vs. Development Bank of the Philippines,
44 SCRA 445, petitioner applied for a loan of P500,000 with respondent bank.
The latter approved the application through a board resolution. Thereafter,
the corresponding mortgage was executed and registered. However, because
of acts attributable to petitioner, the loan was not released. Later, petitioner
instituted an action for damages. We recognized in this case, a perfected
consensual contract which under normal circumstances could have made the
bank liable for not releasing the loan. However, since the fault was
attributable to petitioner therein, the court did not award it damages.
A perfected consensual contract, as shown above, can give rise to an action
for damages. However, said contract does not constitute the real contract of
loan which requires the delivery of the object of the contract for its
perfection and which gives rise to obligations only on the part of the
borrower.6
In the present case, the loan contract between BPI, on the one hand, and ALS
and Litonjua, on the other, was perfected only on September 13, 1982, the
date of the second release of the loan. Following the intentions of the parties
on the commencement of the monthly amortization, as found by the Court of
Appeals, private respondents obligation to pay commenced only on October
13, 1982, a month after the perfection of the contract.7
We also agree with private respondents that a contract of loan involves a
reciprocal obligation, wherein the obligation or promise of each party is the
consideration for that of the other.8 As averred by private respondents, the
promise of BPIIC to extend and deliver the loan is upon the consideration
that ALS and Litonjua shall pay the monthly amortization commencing on
May 1, 1981, one month after the supposed release of the loan. It is a basic
principle in reciprocal obligations that 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.9 Only when a party has performed his part of
the contract can he demand that the other party also fulfills his own
obligation and if the latter fails, default sets in. Consequently, petitioner
could only demand for the payment of the monthly amortization after

September 13, 1982 for it was only then when it complied with its obligation
under the loan contract. Therefore, in computing the amount due as of the
date when BPIIC extrajudicially caused the foreclosure of the mortgage, the
starting date is October 13, 1982 and not May 1, 1981.
Other points raised by petitioner in connection with the first issue, such as
the date of actual release of the loan and whether private respondents were
the cause of the delay in the release of the loan, are factual. Since petitioner
has not shown that the instant case is one of the exceptions to the basic rule
that only questions of law can be raised in a petition for review under Rule 45
of the Rules of Court,10 factual matters need not tarry us now. On these
points we are bound by the findings of the appellate and trial courts.
On the second issue, petitioner claims that it should not be held liable for
moral and exemplary damages for it did not act maliciously when it initiated
the foreclosure proceedings. It merely exercised its right under the mortgage
contract because private respondents were irregular in their monthly
amortization.1wphi1 It invoked our ruling in Social Security System vs.
Court of Appeals, 120 SCRA 707, where we said:
Nor can the SSS be held liable for moral and temperate damages. As
concluded by the Court of Appeals "the negligence of the appellant is not so
gross as to warrant moral and temperate damages," except that, said Court
reduced those damages by only P5,000.00 instead of eliminating them.
Neither can we agree with the findings of both the Trial Court and respondent
Court that the SSS had acted maliciously or in bad faith. The SSS was of the
belief that it was acting in the legitimate exercise of its right under the
mortgage contract in the face of irregular payments made by private
respondents and placed reliance on the automatic acceleration clause in the
contract. The filing alone of the foreclosure application should not be a
ground for an award of moral damages in the same way that a clearly
unfounded civil action is not among the grounds for moral damages.
Private respondents counter that BPIIC was guilty of bad faith and should be
liable for said damages because it insisted on the payment of amortization
on the loan even before it was released. Further, it did not make the
corresponding deduction in the monthly amortization to conform to the
actual amount of loan released, and it immediately initiated foreclosure
proceedings when private respondents failed to make timely payment.

But as admitted by private respondents themselves, they were irregular in


their payment of monthly amortization. Conformably with our ruling in SSS,
we can not properly declare BPIIC in bad faith. Consequently, we should rule
out the award of moral and exemplary damages.11
However, in our view, BPIIC was negligent in relying merely on the entries
found in the deed of mortgage, without checking and correspondingly
adjusting its records on the amount actually released to private respondents
and the date when it was released. Such negligence resulted in damage to
private respondents, for which an award of nominal damages should be
given in recognition of their rights which were violated by BPIIC. 12 For this
purpose, the amount of P25,000 is sufficient.
Lastly, as in SSS where we awarded attorneys fees because private
respondents were compelled to litigate, we sustain the award of P50,000 in
favor of private respondents as attorneys fees.
WHEREFORE, the decision dated February 28, 1997, of the Court of Appeals
and its resolution dated April 21, 1998, are AFFIRMED WITH MODIFICATION as
to the award of damages. The award of moral and exemplary damages in
favor of private respondents is DELETED, but the award to them of attorneys
fees in the amount of P50,000 is UPHELD. Additionally, petitioner is
ORDERED to pay private respondents P25,000 as nominal damages. Costs
against petitioner.
SO ORDERED.
18.

Ramos vs. Sarao GR No. 149756

G.R. No. 149756

February 11, 2005

MYRNA RAMOS, petitioner,


vs.
SUSANA S. SARAO and JONAS RAMOS, respondents.
DECISION
PANGANIBAN, J.:
Although the parties in the instant case denominated their contract as a
"DEED OF SALE UNDER PACTO DE RETRO," the "sellers" have continued to
possess and to reside at the subject house and lot up to the present. This

evident factual circumstance was plainly overlooked by the trial and the
appellate courts, thereby justifying a review of this case. This overlooked fact
clearly shows that the petitioner intended merely to secure a loan, not to sell
the property. Thus, the contract should be deemed an equitable mortgage.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court,
assailing the August 31, 2001 Decision 2 of the Court of Appeals (CA) in CAGR CV No. 50095, which disposed as follows:
"WHEREFORE, the instant appeal is DISMISSED for lack of merit. The
decision dated January 19, 1995 of the Regional Trial Court, Branch 145,
Makati City is AFFIRMEDin toto."3
The Facts
On February 21, 1991, Spouses Jonas Ramos and Myrna Ramos executed a
contract over their conjugal house and lot in favor of Susana S. Sarao for and
in consideration of P1,310,430.4 Entitled "DEED OF SALE UNDER PACTO DE
RETRO," the contract, inter alia, granted the Ramos spouses the option to
repurchase the property within six months from February 21, 1991, for
P1,310,430 plus an interest of 4.5 percent a month.5 It was further agreed
that should the spouses fail to pay the monthly interest or to exercise the
right to repurchase within the stipulated period, the conveyance would be
deemed an absolute sale.6
On July 30, 1991, Myrna Ramos tendered to Sarao the amount of
P1,633,034.20 in the form of two managers checks, which the latter refused
to accept for being allegedly insufficient.7 On August 8, 1991, Myrna filed a
Complaint for the redemption of the property and moral damages plus
attorneys fees.8 The suit was docketed as Civil Case No. 91-2188 and raffled
to Branch 145 of the Regional Trial Court (RTC) of Makati City. On August 13,
1991, she deposited with the RTC two checks that Sarao refused to accept.9
On December 21, 1991, Sarao filed against the Ramos spouses a Petition "for
consolidation of ownership in pacto de retro sale" docketed as Civil Case No.
91-3434 and raffled to Branch 61 of the RTC of Makati City. 10 Civil Case Nos.

91-2188 and 91-3434 were later consolidated and jointly tried before Branch
145 of the said Makati RTC.11
The two lower courts narrated the trial in this manner:
"x x x Myrna [Ramos] testified as follows: On February 21, 1991, she and her
husband borrowed from Sarao the amount of P1,234,000.00, payable within
six (6) months, with an interest thereon at 4.5% compounded monthly from
said date until August 21, 1991, in order for them to pay [the] mortgage on
their house. For and in consideration of the said amount, they executed a
deed of sale under a [pacto de retro] in favor of Sarao over their conjugal
house and lot registered under TCT No. 151784 of the Registry of Deeds of
Makati (Exhibit A). She further claimed that Sarao will keep the torrens title
until the lapse of the 6-month period, in which case she will redeem [the]
subject property and the torrens title covering it. When asked why it was the
amount of P1,310,430 instead of the aforestated amount which appeared in
the deed, she explained that upon signing of the deed in question, the sum
of P20,000.00 representing attorneys fees was added, and its total amount
was multiplied with 4.5% interest rate, so that they could pay in advance the
compounded interest. She also stated that although the market value of the
subject property as of February 1991 [was] calculated to [be] more or less
P10 million, it was offered [for] only P1,310,430.00 for the reason that they
intended nothing but to redeem the same. In May 1991, she wrote a letter to
Atty. Mario Aguinaldo requesting him to give a computation of the loan
obligation, and [expressed] her intention to redeem the subject property, but
she received no reply to her letter. Instead, she, through her husband,
secured directly from Sarao a handwritten computation of their loan
obligation, the total of which amount[ed] to P1,562,712.14. Later, she sent
several letters to Sarao, [furnishing] Atty. Aguinaldo with copies, asking them
for the updated computation of their loan obligation as of July 1991, but [no
reply was again received]. During the hearing of February 17, 1992, she
admitted receiving a letter dated July 23, 1991 from Atty. Aguinaldo which
show[ed] the computation of their loan obligation [totaling] to P2,911,579.22
(Exhs. 6, 6-A). On July 30, 1991, she claimed that she offered the redemption
price in the form of two (2) managers checks amounting to P1,633,034.20
(Exhs. H-1 & H-2) to Atty. Aguinaldo, but the latter refused to accept them
because they [were] not enough to pay the loan obligation. Having refused
acceptance of the said checks covering the redemption price, on August 13,
1991 she came to Court to consign the checks (Exhs. L-4 and L-5).

Subsequently, she proceeded to the Register of Deeds to cause the


annotation of lis pendens on TCT No. 151784 (Exh. B-1-A). Hence, she filed
the x x x civil case against Sarao.
"On the other hand, Sarao testified as follows: On February 21, 1991,
spouses Ramos together with a certain Linda Tolentino and her husband,
Nestor Tolentino approached her and offered transaction involv[ing a] sale of
property[. S]he consulted her lawyer, Atty. Aguinaldo, and on the same date
a corresponding deed of sale under pacto de retro was executed and signed
(Exh. 1 ). Later on, she sent, through her lawyer, a demand letter dated June
10, 1991 (Exh. 6) in view of Myrnas failure to pay the monthly interest of
4.5% as agreed upon under the deed[. O]n June 14, 1991 Jonas replied to
said demand letter (Exh. 8); in the reply Jonas admitted that he no longer
ha[d] the capacity to redeem the property and to pay the interest. In view of
the said reply of Jonas, [Sarao] filed the corresponding consolidation
proceedings. She [further claimed] that before filing said action she incurred
expenses including payment of real estate taxes in arrears, x x x transfer tax
and capital [gains] tax, and [expenses] for [the] consolidated proceedings,
for which these expenses were accordingly receipted (Exhs. 6, 6-1 to 6-0).
She also presented a modified computation of the expenses she had incurred
in connection with the execution of the subject deed (Exh. 9). She also
testified that Myrna did not tender payment of the correct and sufficient
price for said real property within the 6-month period as stipulated in the
contract, despite her having been shown the computation of the loan
obligation, inclusive of capital gains tax, real estate tax, transfer tax and
other expenses. She admitted though that Myrna has tendered payment
amounting to P1,633,034.20 in the form of two managers checks, but these
were refused acceptance for being insufficient. She also claimed that several
letters (Exhs. 2, 4 and 5) were sent to Myrna and her lawyer, informing them
of the computation of the loan obligation inclusive of said expenses. Finally,
she denied the allegations made in the complaint that she allied herself with
Jonas, and claimed that she ha[d] no knowledge about said allegation."12
After trial, the RTC dismissed the Complaint and granted the prayer of Sarao
to consolidate the title of the property in her favor.13 Aggrieved, Myrna
elevated the case to the CA.
Ruling of the Court of Appeals

The appellate court sustained the RTCs finding that the disputed contract
was a bonafide pacto de retro sale, not a mortgage to secure a loan.14 It
ruled that Myrna Ramos had failed to exercise the right of repurchase, as the
consignation of the two managers checks was deemed invalid. She allegedly
failed (1) to deposit the correct repurchase price and (2) to comply with the
required notice of consignation.15
Hence, this Petition.16
The Issues
Petitioner raises the following issues for our consideration:
"1. Whether or not the honorable appellate court erred in ruling the subject
Deed of Sale under Pacto de Retro was, and is in reality and under the law an
equitable mortgage;
"2. Whether or not the honorable appellate court erred in affirming the ruling
of the court a quo that there was no valid tender of payment of the
redemption price neither [sic] a valid consignation in the instant case; and
"3. Whether or not [the] honorable appellate court erred in affirming the
ruling of the court a quo denying the claim of petitioner for damages and
attorneys fees."17
The Courts Ruling
The Petition is meritorious in regard to Issues 1 and 2.
First Issue:
A Pacto de Retro Sale
or an Equitable Mortgage?
Respondent Sarao avers that the herein Petition should have been dismissed
outright, because petitioner (1) failed to show proof that she had served a
copy of it to the Court of Appeals and (2) raised questions of fact that were
not proper issues in a petition under Rule 45 of the Rules of Court. 18 This
Court, however, disregarded the first ground; otherwise, substantial injustice
would have been inflicted on petitioner. Since the Court of Appeals is not a
party here, failure to serve it a copy of the Petition would not violate any

right of respondent. Service to the CA is indeed mentioned in the Rules, but


only to inform it of the pendency of the appeal before this Court.
As regards Item 2, there are exceptions to the general rule barring a review
of questions of fact.19 The Court reviewed the factual findings in the present
case, because the CA had manifestly overlooked certain relevant and
undisputed facts which, after being considered, justified a different
conclusion.20
Pacto de Retro Sale Distinguished
from Equitable Mortgage
The pivotal issue in the instant case is whether the parties intended the
contract to be a bona fide pacto de retro sale or an equitable mortgage.
In a pacto de retro, ownership of the property sold is immediately transferred
to the vendee a retro, subject only to the repurchase by the vendor a retro
within the stipulated period.21 The vendor a retros failure to exercise the
right of repurchase within the agreed time vests upon the vendee a retro, by
operation of law, absolute title to the property. 22 Such title is not impaired
even if the vendee a retro fails to consolidate title under Article 1607 of the
Civil Code.23
On the other hand, an equitable mortgage is a contract that -- although
lacking the formality, the form or words, or other requisites demanded by a
statute -- nevertheless reveals the intention of the parties to burden a piece
or pieces of real property as security for a debt. 24 The essential requisites of
such a contract are as follows: (1) the parties enter into what appears to be a
contract of sale, but (2) their intention is to secure an existing debt by way of
a mortgage.25 The nonpayment of the debt when due gives the mortgagee
the right to foreclose the mortgage, sell the property, and apply the proceeds
of the sale to the satisfaction of the loan obligation.26
This Court has consistently decreed that the nomenclature used by the
contracting parties to describe a contract does not determine its nature. 27
The decisive factor is their intention -- as shown by their conduct, words,

actions and deeds -- prior to, during, and after executing the agreement. 28
This juristic principle is supported by the following provision of law:
Article 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. 29
Even if a contract is denominated as a pacto de retro, the owner of the
property may still disprove it by means of parol evidence, 30 provided that
the nature of the agreement is placed in issue by the pleadings filed with the
trial court.31
There is no single conclusive test to determine whether a deed absolute on
its face is really a simple loan accommodation secured by a mortgage. 32
However, the law enumerates several instances that show when a contract is
presumed to be an equitable mortgage, as follows:
Article 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
(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 to 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.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest
which shall be subject to the usury laws.33
Furthermore, a contract purporting to be a pacto de retro is construed as an
equitable mortgage when the terms of the document and the surrounding
circumstances so require.34 The law discourages the use of a pacto de retro,
because this scheme is frequently used to circumvent a contract known as a

pactum commissorium. The Court has frequently noted that a pacto de retro
is used to conceal a contract of loan secured by a mortgage. 35 Such
construction is consistent with the doctrine that the law favors the least
transmission of rights.36
Equitable Mortgage Presumed
to be Favored by Law
Jurisprudence has consistently declared that the presence of even just one of
the circumstances set forth in the forgoing Civil Code provision suffices to
convert a contract to an equitable mortgage.37 Article 1602 specifically
states that the equitable presumption applies to any of the cases therein
enumerated.
In the present factual milieu, the vendor retained possession of the property
allegedly sold.38 Petitioner and her children continued to use it as their
residence, even after Jonas Ramos had abandoned them. 39 In fact, it
remained as her address for the service of court orders and copies of
Respondent Saraos pleadings.40
The presumption of equitable mortgage imposes a burden on Sarao to
present clear evidence to rebut it. Corollary to this principle, the favored
party need not introduce proof to establish such presumption; the party
challenging it must overthrow it, lest it persist. 41 To overturn that prima facie
fact that operated against her, Sarao needed to adduce substantial and
credible evidence to prove that the contract was a bona fide pacto de retro.
This evidentiary burden she miserably failed to discharge.
Contrary to Saraos bare assertions, a meticulous review of the evidence
reveals that the alleged contract was executed merely as security for a loan.
The July 23, 1991 letter of Respondent Saraos lawyer had required petitioner
to pay a computed amount -- under the heading "House and Lot Loan" 42 -to enable the latter to repurchase the property. In effect, respondent would
resell the property to petitioner, once the latters loan obligation would have
been paid. This explicit requirement was a clear indication that the property
was to be used as security for a loan.

The loan obligation was clear from Saraos evidence as found by the trial
court, which we quote:
"x x x [Sarao] also testified that Myrna did not tender payment of the correct
and sufficient price for said real property within the 6-month period as
stipulated in the contract, despite her having been shown the computation of
the loan obligation, inclusive of capital gains tax, real estate tax, transfer
tax and other expenses. She admitted though that Myrna has tendered
payment amounting to P1,633,034.20 in the form of two managers checks,
but these were refused acceptance for being insufficient. She also claimed
that several letters (Exhs. 2, 4 and 5) were sent to Myrna and her lawyer,
informing them of the computation of the loan obligation inclusive of said
expenses. x x x."43
Respondent herself stressed that the pacto de retro had been entered into on
the very same day that the property was to be foreclosed by a commercial
bank.44 Such circumstance proves that the spouses direly needed funds to
avert a foreclosure sale. Had they intended to sell the property just to realize
some profit, as Sarao suggests, 45 they would not have retained possession
of the house and continued to live there. Clearly, the spouses had entered
into the alleged pacto de retro sale to secure a loan obligation, not to
transfer ownership of the property.
Sarao contends that Jonas Ramos admitted in his June 14, 1991 letter to her
lawyer that the contract was a pacto de retro.46 That letter, however, cannot
override the finding that the pacto de retro was executed merely as security
for a loan obligation. Moreover, on May 17, 1991, prior to the transmittal of
the letter, petitioner had already sent a letter to Saraos lawyer expressing
the formers desire to settle the mortgage on the property. 47 Considering
that she had already denominated the transaction with Sarao as a mortgage,
petitioner cannot be prejudiced by her husbands alleged admission,
especially at a time when they were already estranged.48
Inasmuch as the contract between the parties was an equitable mortgage,
Respondent Saraos remedy was to recover the loan amount from petitioner
by filing an action for the amount due or by foreclosing the property.49
Second Issue:

Propriety of Tender of
Payment and Consignation
Tender of payment is the manifestation by debtors of their desire to comply
with or to pay their obligation. 50 If the creditor refuses the tender of
payment without just cause, the debtors are discharged from the obligation
by the consignation of the sum due.51 Consignation is made by depositing
the proper amount to the judicial authority, before whom the tender of
payment and the announcement of the consignation shall be proved. 52 All
interested parties are to be notified of the consignation. 53 Compliance with
these requisites is mandatory.54
The trial and the appellate courts held that there was no valid consignation,
because petitioner had failed to offer the correct amount and to provide
ample consignation notice to Sarao.55 This conclusion is incorrect.
Note that the principal loan was P1,310,430 plus 4.5 per cent monthly
interest compounded for six months. Expressing her desire to pay in the fifth
month, petitioner averred that the total amount due was P1,633,034.19,
based on the computation of Sarao herself.56 The amount of P2,911,579.22
that the latter demanded from her to settle the loan obligation was plainly
exorbitant, since this sum included other items not covered by the
agreement. The property had been used solely as secure ty for the
P1,310,430 loan; it was therefore improper to include in that amount
payments for gasoline and miscellaneous expenses, taxes, attorneys fees,
and other alleged loans. When Sarao unjustly refused the tender of payment
in the amount of P1,633,034.20, petitioner correctly filed suit and consigned
the amount in order to be released from the latters obligation.
The two lower courts cited Article 1257 of the Civil Code to justify their ruling
that petitioner had failed to notify Respondent Sarao of the consignation.
This provision of law states that the obligor may be released, provided the
consignation is first announced to the parties interested in the fulfillment of
the obligation.
The facts show that the notice requirement was complied with. In her August
1, 1991 letter, petitioner said that should the respondent fail to accept
payment, the former would consign the amount. 57 This statement was an

unequivocal announcement of consignation. Concededly, sending to the


creditor a tender of payment and notice of consignation -- which was
precisely what petitioner did -- may be done in the same act.58
Because petitioners consignation of the amount of P1,633,034.20 was valid,
it produced the effect of payment. 59 "The consignation, however, has a
retroactive effect, and the payment is deemed to have been made at the
time of the deposit of the thing in court or when it was placed at the disposal
of the judicial authority."60 "The rationale for consignation is to avoid making
the performance of an obligation more onerous to the debtor by reason of
causes not imputable to him."61
Third Issue:
Moral Damages and Attorneys Fees
Petitioner seeks moral damages in the amount of P500,000 for alleged
sleepless nights and anxiety over being homeless.62 Her bare assertions are
insufficient to prove the legal basis for granting any award under Article 2219
of the Civil Code.63 Verily, an award of moral damages is uncalled for,
considering that it was Respondent Saraos accommodation that settled the
earlier obligation of the spouses with the commercial bank and allowed them
to retain ownership of the property.
Neither have attorneys fees been shown to be proper. 64 As a general rule,
in the absence of a contractual or statutory liability therefor, sound public
policy frowns on penalizing the right to litigate. 65 This policy applies
especially to the present case, because there is a need to determine whether
the disputed contract was a pacto de retro sale or an equitable mortgage.
Other Matters
In a belated Manifestation filed on October 19, 2004, Sarao declared that she
was the "owner of the one-half share of Jonas Ramos in the conjugal
property," because of his alleged failure to file a timely appeal with the CA. 66
Such declaration of ownership has no basis in law, considering that the
present suit being pursued by petitioner pertains to a mortgage covering the
whole property.

Besides, it is basic that defenses and issues not raised below cannot be
considered on appeal.67
The Court, however, observes that Respondent Sarao paid real property
taxes amounting to P67,567.10 to halt the auction sale scheduled for
October 8, 2004, by the City of Muntinlupa.68 Her payment was made in
good faith and benefited petitioner. Accordingly, Sarao should be reimbursed;
otherwise, petitioner would be unjustly enriched, 69 under Article 2175 of the
Civil Code which provides:
Art. 2175. Any person who is constrained to pay the taxes of another shall be
entitled to reimbursement from the latter.
WHEREFORE, the Petition is partly GRANTED and the assailed Decision SET
ASIDE. Judgment is hereby rendered:
(1) DECLARING (a) the disputed contract as an equitable mortgage, (b)
petitioners loan to Respondent Sarao to be in the amount of P1,633,034.19
as of July 30, 1991; and (c) the mortgage on the property -- covered by TCT
No. 151784 in the name of the Ramos spouses and issued by the Register of
Deeds of Makati City --as discharged
(2) ORDERING the RTC to release to Sarao the consigned amount of
P1,633,034.19
(3) COMMANDING Respondent Sarao to return to petitioner the owners
copy of TCT No. 151784 in the name of the Ramos spouses and issued by the
Register of Deeds of Makati City
(4) DIRECTING the Register of Deeds of Makati City to cancel Entry No.
24057, the annotation appearing on TCT No. 151784
(5) ORDERING petitioner to pay Sarao in the amount of P67,567.10 as
reimbursement for real property taxes
No pronouncement as to costs.
SO ORDERED.
19.

Roberts vs. Papio GR No. 166714

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 Decision 1 of the Court
of Appeals (CA), in CA-G.R. CV No. 69034 which reversed and set aside the
Decision2 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 a P59,000.00 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 letter 15 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 remitted P100,000.00, 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. 27 However,
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
DEFENDANT-APPELLANT 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 Order 34 dated June 19,
2001. Subsequently, a Writ of Execution 35 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.
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 defendant-appellant actually vacated the subject leased
premises.
SO ORDERED.40
On February 28, 2002, Papio filed a petition for review 41 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.47 The 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. 01851 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. 49 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. 50 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.51 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.52

One repurchases only what one has previously sold. The right to repurchase
presupposes a valid contract of sale between the same parties. 53 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; 54 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.55
Respondents admission that petitioner acquired ownership over the property
under the April 13, 1982 deed of absolute sale is buttressed 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. 56
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. 57 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.58 Their true meaning must be enforced, as it is to be
presumed that the contracting parties know their scope and effects. 59 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 Lease 68 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.69 The offer was again rejected by
respondent. The final offer appears to have been made on January 11,
199870 but 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.72 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.73
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 of P39,000.00, 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.
Ate Per81 1awphi1.net
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 remitted P211,000.00 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.
20.

Cadungog v. Yap 469 SCRA 561

G.R. No. 161223 September 12, 2005


VIRGILIO
A.
CADUNGOG,
vs.
JOCELYN O. YAP, Respondent.

Petitioners,

DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 72761 which reversed and set aside the
Decision of the Regional Trial Court (RTC) of Oslob, Cebu, Branch 62, in Civil
Case No. OS-96-46.
The Antecedents
Franklin Ong and his sister, Jocelyn Ong-Yap, are first cousins of Virgilio
Cadungog. Cresenciano Ong Aranas, the Municipal Mayor of Ginatilan, Cebu,
from 1955 to 1978,2 is their uncle.
On August 17, 1979, Virgilio executed a Deed of Sale with Right of
Repurchase3 in which he sold to his cousin, Franklin Ong, the following six
parcels of land located in Ginatilan, Cebu for P7,144.28:
Parcel Number Tax Dec. No. Area
1

000821

1,170 square meters

4978

1,444 square meters

29586

4,257 square meters

5478

1,140 square meters

5486

980 square meters

5486

1,020 square meters

Parcel Nos. 5 and 6 are located in Sitio Cayam, Ginatilan, Cebu.4


Under the deed, Virgilio had the right to repurchase the property within 10
years from the said date.5
Virgilio failed to redeem the property. Nevertheless, upon the prodding of
Franklin, Virgilio, who was merely a letter-carrier, executed a Deed of
Absolute Sale6 in favor of Jocelyn in which it appears that he sold Parcel Nos.
1, 2 and 3 for the price of P5,000.00. Virgilio declared therein that he
inherited Parcel Nos. 2 and 3 from his mother, Soledad, who inherited the

same from her parents, Jose Aranas and Basilia Rocaberte, under a Deed of
Partition executed by their heirs. Franklin signed as one of the witnesses to
the deed.7
On December 23, 1996, Cresenciano Ong executed a Deed of Absolute Sale
of Parcel No. 2 in favor of the APC Group, Inc. for P32,380.00. Cresenciano
declared that he was the sole and absolute owner, in fee simple, of the said
lot.8 On January 23, 1997, Virgilio executed a Deed of Absolute Sale of Parcel
No. 1 in favor of the APC Group, Inc. for P35,400.00, alleging therein that he
was the sole and exclusive owner of the property.9
When Franklin learned of the said sales, he objected. Virgilio, thus, delivered
to Franklin Check No. 000099710 dated May 24, 1997, drawn and issued by
Cresenciano against his account with the Prudential Bank, in the amount of
P25,000.00. Virgilio also delivered to Franklin Check No. 0000999 11 drawn
and issued by Cresenciano against his account with the same bank in the
amount of P25,000.00. On May 26, 1997, Franklin signed Receipts dated May
25 and 26, 1997, embodied in a piece of paper. 12 In the Receipt dated May
26, 1997, Franklin acknowledged to have received the P25,000.00 check
"representing full payment for the refund of the lot sold in Ginatilan."13
When Jocelyn learned that Virgilio had sold Parcel No. 1 to the APC Group,
Inc., she filed a criminal complaint for estafa against him. After the requisite
preliminary investigation, an Information for estafa was filed against Virgilio
with the RTC.
By way of riposte, Virgilio filed a Complaint before the RTC, on December 8,
1998, against Jocelyn for the declaration of nullity of the September 30, 1991
Deed of Absolute Sale. He alleged therein that he had executed the subject
deed in favor of Jocelyn only because her brother, Franklin, had requested
him to do so "to lessen Jocelyns tax liability in Canada." He also alleged that
he agreed to execute the deed on the belief that it would not be notarized,
as no consideration was involved. He further claimed that he informed
Franklins emissary (who brought the deed for his signature) that he owned
Parcel No. 1, Cresenciano owned Parcel No. 2, and he did not know who
owned Parcel No. 3. To his surprise, Jocelyn filed a criminal complaint for
estafa against him before the Provincial Prosecutors Office, and later an
Information before the RTC of Oslob, Cebu. He further claimed that he and

his wife signed a one-page document; the acknowledgment page was merely
added to it, as it, in fact, did not contain their signatures.
Virgilio further stated that his uncle, Cresenciano Ong, sold Parcel No. 2, one
of the lots included in the Deed of Sale dated September 30, 1991, to the
APC Group, Inc. He himself then sold Parcel No. 1, with an area of 1,770
square meters, to the same vendee for P35,400.00.
Virgilio prayed for the following reliefs:
WHEREFORE, in view of the foregoing premises, it is most respectfully prayed
of this Honorable Court that after notice and hearing judgment be rendered
in favor of plaintiff and against the defendant declaring the aforesaid Deed of
Absolute Sale as null and void from the very beginning for being without
consideration and the defendant be ordered to pay the plaintiff the following:
P200,000.00 as moral damages;
100,000.00 as exemplary damages;
20,000.00 as attorneys fee plus P1,500.00 per court
appearance;
10,000.00 as litigation expenses;
Other reliefs and remedies consistent with justice and equity are likewise
prayed for.14
In her answer with special and affirmative defenses, Jocelyn averred that the
Deed of Absolute Sale dated September 30, 1991 was genuine, and reflected
the true and correct intention of Virgilio as the vendor. She pointed out that
the document was notarized, a public document which carried evidentiary
weight. She further alleged that Virgilio had, in fact, previously sold the
questioned lots through a Deed of Sale with Right of Repurchase in favor of
her brother Franklin. Her brother then told her that, since Virgilio could no
longer repurchase the subject properties, "it would be better for him to
execute a Deed of Absolute Sale in her favor." She denied Virgilios
allegations that the subject deed was fictitious, and averred that it was
genuine in all respects and amply supported by valuable consideration.
Jocelyn further averred that the filing of the instant case was a subterfuge or
a mere afterthought on the part of Virgilio, as a defense in the criminal case
for estafa she had filed against him. Moreover, Virgilio was in estoppel, and

could not now be heard to negate the contents of the deed of absolute sale
which he had previously executed in her favor.
Alleging that the complaint was filed in evident gross bad faith and that she
suffered untold mental anguish, sleepless nights, anxiety and besmirched
reputation, Jocelyn prayed that the case be dismissed, and that the following
amounts in damages be awarded to her: P500,000.00 as moral damages;
P100,000.00 as exemplary damage; P50,000.00 as attorneys fees; and
P100,000.00 as actual litigation expenses.15
The Testimonies of the Witnesses
Cresenciano Ong Aranas testified that he was the owner of Parcel No. 2,
which Virgilio had sold to Jocelyn. The said lot was part of a bigger parcel,
with an area of 1,619 square meters situated in Malatbo, Ginatilan Cebu. He
sold the said lot on December 23, 1996 to the APC Group, Inc., a mining
company, for P32,380.00 as evidenced by a Deed of Absolute Sale. 16 He
admitted that he allowed Virgilio to include the said lot in the Deed of Sale
with Right of Repurchase which Virgilio executed in favor of Franklin on
August 17, 1979. He, however, admitted that he did not execute any
document authorizing Virgilio to sell Parcel No. 2 since the latter was his
nephew.17
Upon Virgilios prodding, he issued two checks: Check No. 0000997 18 for
P25,000.00 on May 24, 1997, and Check No. 0000999 19 for P25,000.00 on
May 26, 1997. These checks were issued to redeem Parcel Nos. 1, 2 and 3,
the lots subject of the Deed of Sale dated September 30, 1991. 20 Franklin
signed receipts for said checks.21
Ricardo Acojedo, caretaker of Virgilios properties and that of the Yap siblings,
testified that he was in Virgilios house when a certain Emok Dacillo brought
a deed of sale to be signed by Virgilio and his wife. He saw the couple sign
the document, but did not get to read it. There was no other person who
signed the document. After Virgilio said "the document should not be
notarized," he immediately handed it over to Emok.22
Virgilio testified that he and his wife, Rebecca, were in their house on the last
week of September 1991, when Emok, an emissary of Franklin, arrived. Emok
showed him the Deed of Absolute Sale dated September 30, 1991, and told

him that Franklin wanted him and Rebecca to sign the deed. He read the
document and was sure that it consisted of only one page. He told the
emissary that he was the owner of Parcel No. 1; Parcel No. 2 was in the name
of his uncle, Cresenciano; while the records of Parcel No. 3 could no longer
be found at the Municipal Assessors Office. Nevertheless, he and his wife
signed the deed. He also claimed that he was able to repurchase the lots
subject of the Deed of Sale with Right of Repurchase on May 26, 1997 for
P50,000.00 at the house of his aunt, Tasiana Belarmino.
Virgilio admitted, however, that at the time he made the two payments, the
period to repurchase the subject parcels of land had already expired. 23
The defendant did not testify in her behalf. Atty. Emmanuel P. Rama testified
for the defendant and declared that he notarized the subject deed, which to
his knowledge was prepared by Franklin Ong. He was then in the office of his
brother, who was the Vice-Governor of Cebu, when Franklin and Virgilio and
his wife, Rebecca, arrived to have the deed notarized. 24 However, Virgilio,
his wife, and the witnesses to the deed failed to sign on the left margin of its
second page.
Franklin, a bachelor of laws graduate, testified that he was employed as an
Interpreter in Branch 14 of the Court of First Instance of Cebu; 25 he prepared
the deed of sale with right of repurchase which Virgilio executed on August
17, 1979 and the September 30, 1991 Deed of Absolute Sale which Virgilio
and his wife executed.26 According to him, the lots subject of the complaint,
together with the other lots sold under the first deed of sale, were not
repurchased by Virgilio.27
Franklin further narrated that sometime in 1991, Virgilio sought financial help
because his house was about to be foreclosed by the Development Bank of
the Philippines. He then gave P7,000.00 to Virgilio,
and suggested that Parcel Nos. 1, 2 and 3 be sold to Jocelyn to augment his
contribution. Franklin, however, agreed to buy Parcel Nos. 5 and 6 and
inquired from Jocelyn if she was interested to buy Parcel Nos. 1, 2 and 3;
Jocelyn replied that she was.28 He then prepared a Deed of Absolute Sale
over Parcel Nos. 1, 2 and 3, which Virgilio and his wife signed on September

30, 1991 before Notary Public Emmanuel P. Rama. 29 Virgilio agreed to sell
the three lots for P5,000.00 only because the said amount was in addition to
the P7,144.28 paid for the six parcels of land earlier sold to Franklin in
1979.30 Franklin claimed he gave the P5,000.00 purchase price of the
property to Virgilio on September 30, 1991.31
Franklin declared that the receipts 32 for P50,000.00 which he signed (and
which Virgilio adduced in evidence) were refunds for Parcel Nos. 5 and 6
which he bought from Virgilio and later sold by the latter to the APC Group,
Inc.; they were not payments for the repurchase of the six parcels of land
subject of the first sale as Virgilio claimed. 33 After Jocelyn purchased Parcel
Nos. 1, 2 and 3, their sister Loreta and their mother took charge and
administered the property, and paid the realty taxes thereon.34
Taciana Aranas Belarmino, an aunt of Virgilio, Franklin and Jocelyn, testified
that she and her son, Fermin Belarmino, as well as her brother Cresenciano,
witnessed Franklin sign the receipts dated May 25 and 26, 1997, for the total
amount of P50,000.00, in their house. The payment was made to redeem
Parcel Nos. 5 and 6, which Virgilio sold to the APC Group, Inc. 35 Franklin
demanded P200,000.00, but Virgilio had only P50,000.00, (inclusive of the
P25,000.00 Virgilio borrowed from Cresenciano).36
By way of rebuttal, Virgilio presented Federico Erac, the Postmaster of
Ginatilan, who testified that he (Virgilio) was a letter-carrier and was at his
place of work at the post office on September 30, 1991; hence, he could not
have signed the Deed of Absolute Sale of Parcel Nos. 1, 2 and 3 in favor of
Jocelyn in the Office of the Vice-Governor on the said date before Notary
Public Emmanuel Rama.37 He adduced in evidence his daily time record for
September 30, 1991.38
After the trial, the court rendered judgment in favor of Virgilio. The fallo of
the decision reads:
WHEREFORE, the Deed of Absolute Sale dated September 30, 1991 allegedly
executed by plaintiff in favor of defendant is declared NULL and VOID.
SO ORDERED.39

The trial court held that, since Franklin failed to consolidate his title to the
parcels of land following the lapse of the 10-year period for Virgilio to redeem
the same, the period for redemption was deemed extended until the said lots
were repurchased on May 25 and 26, 1997, upon payment of P50,000.00 to
Franklin. The trial court ruled that there was a need for Franklin to
consolidate the title over the parcels of land by court proceedings. It also
held that the Deed of Absolute Sale dated September 30, 1991 had no
consideration because the P5,000.00 stated therein, as the price of the
property, was insufficient. Since the deed was not supported by any
consideration, it was null and void.
Jocelyn appealed the decision to the CA, assailing the trial courts ruling on
the following grounds:
-IThe Honorable Trial Court erred in ruling that there was no action on the part
of the defendant-appellant to consolidate the title in her name when plaintiffappellee failed to repurchase the properties subject matter of the deed of
sale with right to repurchase executed on August 17, 1979.
-IIThe Honorable Trial Court erred in ruling that on May 25 and 26, 1997 the
amount of P50,000.00 was paid to the defendant-appellant through Franklin
Ong and upon acceptance of the latter the real properties subject matter of
the deed of sale with right to repurchase was deemed repurchased.
- III The Honorable Trial Court erred in ruling that the amount of P5,000.00 is not
sufficient consideration for the purchase of three parcels of land. 40
The CA reversed the ruling of the trial court. The dispositive portion reads:
WHEREFORE, the foregoing considered, the May 4, 2001 Decision of the
Regional Trial Court of Oslob, Cebu is REVERSED AND SET ASIDE. A new
one is entered declaring the Deed of Absolute Sale dated September 30,
1991 executed by Virgilio Cadungog in favor of Jocelyn Yap, valid and
binding.
SO ORDERED.41

The appellate court held that the period to redeem the subject properties
had already elapsed as early as 1989, or 10 years after the execution of the
Deed of Sale with Right of Repurchase on August 17, 1979. In view of
Virgilios failure to redeem the same, he lost ownership over the disputed
lots. Jocelyn acquired ownership over the property when she purchased the
same from Virgilio on September 30, 1991 under the Deed of Absolute Sale.
Citing Cruz v. Leis,42 the CA ruled that Jocelyn could not be faulted for not
consolidating the title over the subject lots, as the act of consolidating title is
not a condition sine qua non to the transfer of ownership. The appellate court
declared that the P50,000.00 Franklin received from Virgilio on May 25 and
26, 1997 was the refund of the cost of Parcel Nos. 5 and 6 which Virgilio sold
to the APC Group, Inc., the same lots sold to Franklin in 1999.
The CA further stated that the inadequacy of the purchase price does not per
se support the conclusion that the contract was a loan, or that the property
was not at all sold. Citing Abapo v. Court of Appeals43 and Article 1355 of
the Civil Code, the CA ruled that such inadequacy of price is not sufficient to
set aside the sale, unless it is grossly inadequate or purely shocking to the
conscience. Moreover, except for his own self-serving testimony, Virgilio did
not submit any other testimony to refute the said sale.
Finally, the CA ruled that the subject deed of sale is a public document,
having been executed and attested through the intervention of a notary
public; as such, it is evidence of the facts therein expressed. While Virgilios
officemate testified that he could not have been present for the notarization
of the said document because he was at work on the said date, such
testimony could not negate the existence of the said deed.
Virgilio filed a motion for reconsideration, which the CA denied.
Virgilio, now the petitioner, assails the said ruling and ascribes to the
appellate court the following errors:
GROUND I
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN
REVERSING THE DECISION OF THE RTC BRANCH 62 OF OSLOB, CEBU,
DECLARING THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991,
COVERING THREE (3) PARCELS OF LAND VALID AND BINDING AND IN NOT
TAKING INTO ACCOUNT ITS FINDINGS WHICH CONSIDERED THAT THE DEED
OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3)

PARCELS OF LAND IS NOT SUPPORTED BY ANY CONSIDERATION AND DID NOT


REFLECT THE TRUE INTENTION OF THE PARTIES, A FICTITIOUS AND
SIMULATED ONE, HENCE NON-EXISTENT AND VOID AB INITIO.
GROUND II
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ALSO
ERRED IN NOT TAKING INTO CONSIDERATION THAT THE DEED OF ABSOLUTE
SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND
WAS TAINTED WITH DECEPTION AS THE CONSENT WAS OBTAINED THROUGH
DECEIT AND DISHONEST MEANS.
GROUND III
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN
NOT TAKING INTO CONSIDERATION THAT SINCE THE DEED OF ABSOLUTE
SALE DATED SEPTEMBER 30, 1991, COVERING THREE PARCELS OF LAND,
WHICH WAS COMPOSED ORIGINALLY OF ONLY ONE (1) PAGE, WAS NOT
INTENDED TO BE ACKNOWLEDGED AND NOTARIZED BY A NOTARY PUBLIC,
WAS ALREADY COMPOSED OF TWO (2) PAGES AND ACKNOWLEDGED AND
NOTARIZED BY A NOTARY PUBLIC, THE SECOND PAGE OF WHICH DID NOT
CONTAIN THE SIGNATURES OF THE PARTIES AND THEIR INSTRUMENTAL
WITNESSES. APPARENTLY, THIS INDICATES A FRAUDULENT ACT WORTHY OF
CONSIDERATION OF THE HONORABLE COURT OF APPEALS.
GROUND IV
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN
NOT TAKING INTO ACCOUNT OVER THE FACT THAT RESPONDENT FAILED TO
CONSOLIDATE HER OWNERSHIP OVER THE DISPUTED LAND SUBJECT TO THE
FICTITIOUS AND SIMULATED SALE DATED SEPTEMBER 30, 1991, COVERING
THREE (3) PARCELS OF LAND. APPARENTLY, INDICATING AN ACT
CONTRADICTORY TO WHAT A NORMAL PERSON MIGHT HAVE ACTED UNDER
SIMILAR CIRCUMSTANCE.
GROUND V
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN
FAILING TO UPHOLD THE FACTUAL FINDINGS OF THE RTC BRANCH 62 OF
OSLOB, CEBU WHICH WAS IN THE POSITION TO EVALUATE AND APPRECIATE
THE MERITS OF THE CASE AND HAD THE OPPORTUNITY OF OBSERVING THE
DEMEANOR AND SINCERITY OF THE WITNESSES.44

The petitioner reiterates that the subject deed is fictitious and simulated,
having been executed merely to afford respondent Jocelyn Yap a claim for
the reduction of her tax liabilities in Canada. The petitioner points out that
the true intention of the parties was never that of sale, but only for
accommodation purposes.
The petitioner, likewise, points out that his cousin Franklin added a second
page to the one-page agreement and had it notarized; the second page of
the deed bore the acknowledgment of the notary public, which, however, did
not contain the signatures of the supposed parties and their instrumental
witnesses. According to the petitioner, Franklin, through false pretenses,
succeeded in obtaining his consent in executing a simulated deed of sale
over the subject parcel of land. Moreover, considering the clear and
convincing evidence that he was at work on the date the deed of sale was
purportedly executed, the notary public could not have notarized the
document in his presence and the other parties concerned. The petitioner
insists that the transaction subject of the dispute is "wantonly devoid of any
consideration, did not reflect the true intention of the parties, and was
obtained through fraudulent means, fictitious and simulated; hence, void
from the very beginning."
The petitioner further points out that after the supposed sale, the respondent
made no move to consolidate her ownership over the property, or other
similar behavior or acts of dominion.
Finally, the petitioner contends that it is the findings of the trial court which
should prevail, considering that it was in a better position to evaluate and
appreciate the merits of the case and had the opportunity to observe the
demeanor and sincerity of the witnesses presented.
The respondent, for her part, avers that the petitioner and his wife appeared
before Notary Public Emmanuel P. Rama and acknowledged the Deed of
Absolute Sale dated September 30, 1991. Such notarized deed enjoys the
presumption of regularity; there must be clear and convincing evidence to
contradict the same. The respondent insists that the petitioner failed to
overturn the testimony of Atty. Rama, and that his bare denial will not suffice
to overcome the positive value of the notarized document. The respondent
further posits that the appellate court correctly ruled that the consideration
of the three lots was P5,000.00, and that mere inadequacy of price is not
sufficient to set aside a contract of sale.

The respondent further alleges that the petition is one under Rule 45 of the
Rules of Court. Only errors of law, not of facts, are reviewable under the said
rule, and in this case, no error of law was alleged by the petitioner. Moreover,
the CA correctly held that the P50,000.00 was not a redemption price, but a
refund of the costs of Parcel Nos. 5 and 6, which the petitioner sold to APC
Group, Inc.
The petition is meritorious.
We note that the issues raised by the petitioner are factual. Under Rule 45 of
the Rules of Court, only questions of law may be raised in a petition for
review on certiorari. However, the Court may delve into and resolve factual
issues in exceptional cases, such as when the finding of facts and the
conclusions based therein by the trial court are frontally inconsistent with
those of the appellate court, or that the factual findings of the trial court and
appellate court are not based on the evidence on record, or arbitrary or
capricious.45
In the present case, the trial court held that the petitioner was able to
repurchase the 6 parcels of land on May 25 and 26, 1997, after the lapse of
18 years from the execution of the deed of sale with right of repurchase
(August 17, 1979) when he paid to Franklin the total amount of P50,000.00.
The court held that the 10-year period fixed in the deed for the petitioner to
repurchase the property was deemed extended because Franklin failed to
consolidate his title over the property. On the other hand, the CA held that
the petitioner failed to repurchase the property, and that the respondent
acquired ownership over Parcel Nos. 1, 2 and 3 when the petitioner sold the
same to her under the September 30, 1991 Deed of Absolute Sale.
We agree with the CA that the petitioner, as vendor a retro, failed to
repurchase the property within the 10-year period fixed by the parties in the
Deed of Sale with Right of Repurchase. Consequently, Franklin Ong, the
vendee a retro, had acquired absolute title and ownership over the six
parcels of land after August 17, 1979 when the petitioner, as vendor a retro,
failed to repurchase the same within the stipulated period.
A sale with pacto de retro transfers the legal title to the vendee a retro.46
The essence of a pacto de retro sale is that the title and ownership of the
property sold are immediately vested in the vendee a retro, subject to the
resolutory condition of repurchase by a vendor a retro within the stipulated

period.47 Failure on the part of a vendor a retro to repurchase the property


within the period agreed upon by them, or, in the absence thereof, as
provided for by law, vests upon the vendee a retro absolute title and
ownership over the property sold by operation of law. 48 The failure of the
vendee a retro to consolidate his title under Art. 1607 of the New Civil Code
does not impair such title and ownership because the method prescribed
thereunder is merely for the purpose of registering and consolidating titles to
the property.49 Franklin Ong, and not the petitioner, was the lawful owner of
the six parcels of land. The petitioner, thus, had no right to mortgage or sell
the same to the respondent on September 30, 1991 under the deed of
absolute sale. As the Latin adage goes: NEMO DAT QUOD NON HABET.50
Hence, the ruling of the CA that the respondent acquired ownership over the
three parcels of land from the petitioner under the Deed of Absolute Sale
dated September 30, 1991 is erroneous. Not being the owner of the parcels
of land, the petitioner could not have lawfully sold the same to the
respondent.
We are not convinced that the petitioner and the respondent had agreed to
the sale of Parcel Nos. 1, 2 and 3 for P5,000.00. The respondent was a
resident of Canada on September 30, 1991. There is no evidence that on or
before said date, the petitioner had talked to the respondent relative to the
sale of the said lots. Although Franklin testified that he talked to the
respondent relative to the sale and that the latter had agreed, no evidence
was adduced to show a special power of attorney authorizing him (Franklin)
to agree to the purchase of the property for P5,000.00. The declaration in the
September 30, 1991 Deed of Absolute Sale with Right of Repurchase, that
the petitioner received P5,000.00 from the respondent on September 30,
1991, or prior thereto, is negated by the fact that the respondent was then in
Canada.
What is so worrisome is that Franklin, a law graduate, even induced the
petitioner to execute the deed of sale in favor of his sister, the respondent
herein, despite the fact that he, and not the petitioner, was the owner of the
three parcels of land. Franklin even falsely declared in the September 30,
1991 deed, which he prepared for the petitioner, that the latter was the
owner of the parcels of land, when he knew, for a fact, that he was the lawful
owner of the property. In fact, when he learned that Cresenciano Ong Aranas
had sold Parcel No. 2 to the APC Group, Inc. and that the petitioner had also

sold Parcel No. 1, Franklin vehemently objected. He relented only when the
petitioner gave the P50,000.00 to him in consideration for his agreement to
the said sale of Parcel Nos. 1 and 2 to the APC Group, Inc. There is no
evidence on record that the P50,000.00 which the petitioner paid was a
refund of the purchase price of Parcel Nos. 5 and 6 as regards the sale to APC
Group, Inc. In fact, there is no evidence on record to show that the petitioner
had sold Parcel Nos. 5 and 6 to the APC Group, Inc.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision
of the Court of Appeals in CA-G.R. CV No. 72761 is REVERSED and SET
ASIDE. The decision of the Regional Trial Court nullifying the September 30,
1991 Deed of Absolute Sale executed by the petitioner in favor of the
respondent is REINSTATED. No costs.
SO ORDERED.

21.

Lustan vs. Court of Appeals G.R. No. 111924

G.R. No. 111924 January 27, 1997


ADORACION LUSTAN, petitioner,
vs.
COURT OF APPEALS, NICOLAS PARANGAN and SOLEDAD PARANGAN,
PHILIPPINE NATIONAL BANK, respondents.

FRANCISCO, J.:
Petitioner Adoracion Lustan is the registered owner of a parcel of land
otherwise known as Lot 8069 of the Cadastral Survey of Calinog, Iloilo
containing an area of 10.0057 hectares and covered by TCT No. T-561. On
February 25, 1969, petitioner leased the above described property to private
respondent Nicolas Parangan for a term of ten (10) years and an annual rent
of One Thousand (P1,000.00) Pesos. During the period of lease, Parangan
was regularly extending loans in small amounts to petitioner to defray her
daily expenses and to finance her daughter's education. On July 29, 1970,
petitioner executed a Special Power of Attorney in favor of Parangan to
secure an agricultural loan from private respondent Philippine National Bank
(PNB) with the aforesaid lot as collateral. On February 18, 1972, a second
Special Power of Attorney was executed by petitioner, by virtue of which,
Parangan was able to secure four (4) additional loans, to wit: the sums of

P24,000.00, P38,000.00, P38,600.00 and P25,000.00 on December 15, 1975,


September 6, 1976, July 2, 1979 and June 2, 1980, respectively. The last
three loans were without the knowledge of herein petitioner and all the
proceeds therefrom were used by Parangan for his own benefit. 1 These
encumbrances were duly annotated on the certificate of title. On April 16,
1973, petitioner signed a Deed of Pacto de Retro Sale 2 in favor of Parangan
which was superseded by the Deed of Definite Sale 3 dated May 4, 1979
which petitioner signed upon Parangan's representation that the same
merely evidences the loans extended by him unto the former.
For fear that her property might be prejudiced by the continued borrowing of
Parangan, petitioner demanded the return of her certificate of title. Instead
of complying with the request, Parangan asserted his rights over the
property which allegedly had become his by virtue of the aforementioned
Deed of Definite Sale. Under said document, petitioner conveyed the subject
property and all the improvements thereon unto Parangan absolutely for and
in consideration of the sum of Seventy Five Thousand (P75,000.00) Pesos.
Aggrieved, petitioner filed an action for cancellation of liens, quieting of title,
recovery of possession and damages against Parangan and PNB in the
Regional Trial Court of Iloilo City. After trial, the lower court rendered
judgment, disposing as follows:
WHEREFORE and in view of the foregoing, a decision is rendered
as follows:
1. Ordering cancellation by the Register of Deeds of the Province
of Iloilo, of the unauthorized loans, the liens and encumbrances
appearing in the Transfer Certificate of Title No. T-561, especially
entries nos. 286231; 338638; and 352794;
2. Declaring the Deed of Pacto de Retro Sale dated April 25, 1978
and the Deed of Definite Sale dated May 6, 1979, both
documents executed by Adoracion Lustan in favor of Nicolas
Parangan over Lot 8069 in TCT No. T-561 of the Register of Deeds
of Iloilo, as null and void, declaring the same to be Deeds of
Equitable Mortgage;
3. Ordering defendant Nicolas Parangan to pay all the loans he
secured from defendant PNB using thereto as security TCT No. T-

561 of plaintiff and defendant PNB to return TCT No. T-561 to


plaintiff;
4. Ordering defendant Nicolas Parangan to return possession of
the land in question, Lot 8069 of the Calinog Cadastre, described
in TCT No. T-561 of the Register of Deeds of Iloilo, to plaintiff
upon payment of the sum of P75,000.00 by plaintiff to defendant
Parangan which payment by plaintiff must be made within ninety
(90) days from receipt of this decision; otherwise, sale of the land
will be ordered by the court to satisfy payment of the amount;
5. Ordering defendant Nicolas Parangan to pay plaintiff attorney's
fees in the sum of P15,000.00 and to pay the costs of the suit.
SO ORDERED. 4
Upon appeal to the Court of Appeals (CA), respondent court reversed the trial
court's decision. Hence this petition contending that the CA committed the
following errors:
IN ARRIVING AT THE CONCLUSION THAT NONE OF THE
CONDITIONS STATED IN ART. 1602 OF THE NEW CIVIL CODE HAS
BEEN PROVEN TO EXIST BY PREPONDERANCE OF EVIDENCE;
IN CONCLUDING THAT PETITIONER SIGNED THE DEED OF SALE
WITH KNOWLEDGE AS TO THE CONTENTS THEREOF;
IN ARRIVING AT THE CONCLUSION THAT THE TESTIMONY OF
WITNESS DELIA CABIAL DESERVES FULL FAITH AND CREDIT;
IN FINDING THAT THE SPECIAL POWER OF ATTORNEY
AUTHORIZING MORTGAGE FOR "UNLIMITED" LOANS AS
RELEVANT.
Two main issues confront us in this case, to wit: whether or not the Deed of
Definite Sale is in reality an equitable mortgage and whether or not
petitioner's property is liable to PNB for the loans contracted by Parangan by
virtue of the special power of attorney. The lower court and the CA arrived at
different factual findings thus necessitating a review of the evidence on
record. 5 After a thorough examination, we note some errors, both in fact
and in law, committed by public respondent CA.

The court a quo ruled that the Deed of Definite Sale is in reality an equitable
mortgage as it was shown beyond doubt that the intention of the parties was
one of a loan secured by petitioner's land. 6 We agree.
A contract is perfected by mere consent. 7 More particularly, a contract of
sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. 8 This meeting of the
minds speaks of the intent of the parties in entering into the contract
respecting the subject matter and the consideration thereof. If the words of
the contract appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former. 9 In the case at bench, the evidence is
sufficient to warrant a finding that petitioner and Parangan merely intended
to consolidate the former's indebtedness to the latter in a single instrument
and to secure the same with the subject property. Even when a document
appears on its face to be a sale, the owner of the property may prove that
the contract is really a loan with mortgage by raising as an issue the fact
that the document does not express the true intent of the parties. In this
case, parol evidence then becomes competent and admissible to prove that
the instrument was in truth and in fact given merely as a security for the
repayment of a loan. And upon proof of the truth of such allegations, the
court will enforce the agreement or understanding in consonance with the
true intent of the parties at the time of the execution of the contract. 10
Articles 1602 and 1604 of the Civil Code respectively provide:
The contract shall be presumed to be an equitable mortgage in
any of the following cases:
1) When the price of a sale with right to repurchase is unusually
inadequate;
2) When the vendor remains in possession as lessor or otherwise;
3) When upon or after the expiration of the right to repurchase,
another instrument extending the period of redemption or
granting a new period is executed;
4) When the vendor binds himself to pay the taxes on the thing
sold;

5) When the purchaser retains for himself a part of the purchase


price;
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.
Art. 1604. The provisions of Article 1602 shall also apply to a
contract purporting to be an absolute sale.
From a reading of the above-quoted provisions, for a presumption of an
equitable mortgage to arise, we must first satisfy two requisites namely: that
the parties entered into a contract denominated as a contract of sale and
that their intention was to secure an existing debt by way of mortgage.
Under Art. 1604 of the Civil Code, a contract purporting to be an absolute
sale shall be presumed to be an equitable mortgage should any of the
conditions in Art. 1602 be present. The existence of any of the circumstances
therein, not a concurrence nor an overwhelming number of such
circumstances, suffices to give rise to the presumption that the contract is an
equitable mortgage. 11
Art. 1602, (6), in relation to Art 1604 provides that a contract of sale is
presumed to be an equitable mortgage 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. That the case clearly falls under this category can be inferred
from the circumstances surrounding the transaction as herein set forth:
Petitioner had no knowledge that the contract 12 she signed is a deed of
sale. The contents of the same were not read nor explained to her so that
she may intelligibly formulate in her mind the consequences of her conduct
and the nature of the rights she was ceding in favor of Parangan. Petitioner is
illiterate and her condition constrained her to merely rely on Parangan's
assurance that the contract only evidences her indebtedness to the latter.
When one of the contracting parties is unable to read, or if the contract is in
a language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been
fully explained to the former. 13 Settled is the rule that where a party to a
contract is illiterate or cannot read or cannot understand the language in
which the contract is written, the burden is on the party interested in

enforcing the contract to prove that the terms thereof are fully explained to
the former in a language understood by him. 14 To our mind, this burden has
not been satisfactorily discharged.
We do not find the testimony of Parangan and Delia Cabial that the contract
was duly read and explained to petitioner worthy of credit. The assessment
by the trial court of the credibility of witnesses is entitled to great respect
and weight for having had the opportunity of observing the conduct and
demeanor of the witnesses while testifying. 15 The lower court may not have
categorically declared Cabial's testimony as doubtful but this fact is readily
apparent when it ruled on the basis of petitioner's evidence in total disregard
of the positive testimony on Parangan's side. We have subjected the records
to a thorough examination, and a reading of the transcript of stenographic
notes would bear out that the court a quo is correct in its assessment. The
CA committed a reversible error when it relied on the testimony of Cabial in
upholding the validity of the Deed of Definite Sale. For one, there are noted
major contradictions between the testimonies of Cabial and Judge Lebaquin,
who notarized the purported Deed of Definite Sale. While the former testified
that receipts were presented before Judge Lebaquin, who in turn made an
accounting to determine the price of the land 16, the latter categorically
denied the allegation. 17 This contradiction casts doubt on the credibility of
Cabial as it is ostensible that her version of the story is concocted.
On the other hand, petitioner's witness Celso Pamplona, testified that the
contract was not read nor explained to petitioner. We believe that this
witness gave a more accurate account of the circumstances surrounding the
transaction. He has no motive to prevaricate or concoct a story as he
witnessed the execution of the document at the behest of Parangan himself
who, at the outset, informed him that he will witness a document
consolidating petitioner's debts. He thus testified:
Q: In (sic) May 4, 1979, you remember having went
(sic) to the Municipality of Calinog?
A: Yes, sir.
Q: Who invited you to go there?
A: Parangan.
Q: You mean Nicolas Parangan?

A: Yes, sir.
Q: What did Nicolas tell you why he invited you to go
there?
A: He told me that I will witness on the indebtedness
of Adoracion to Parangan.
Q: Before Adoracion Lustan signed her name in this
Exh. "4", was this document read to her?
A: No, sir.
Q: Did Nicolas Parangan right in that very room tell
Adoracion what she was signing?
A: No, sir.
xxx xxx xxx
Q: What did you have in mind when you were signing
this document, Exh. "4"?
A: To show that Adoracion Lustan has debts with
Nicolas
Parangan. 18
Furthermore, we note the absence of any question propounded to Judge
Lebaquin to establish that the deed of sale was read and explained by him to
petitioner. When asked if witness has any knowledge whether petitioner
knows how to read or write, he answered in the negative. 19 This latter
admission impresses upon us that the contract was not at all read or
explained to petitioner for had he known that petitioner is illiterate, his
assistance would not have been necessary.
The foregoing squares with the sixth instance when a presumption of
equitable mortgage prevails. The contract of definite sale, where petitioner
purportedly ceded all her rights to the subject lot in favor of Parangan, did
not embody the true intention of the parties. The evidence speaks clearly of
the nature of the agreement it was one executed to secure some loans.
Anent the issue of whether the outstanding mortgages on the subject
property can be enforced against petitioner, we rule in the affirmative.

Third persons who are not parties to a loan may secure the latter by pledging
or mortgaging their own property. 20 So long as valid consent was given, the
fact that the loans were solely for the benefit of Parangan would not
invalidate the mortgage with respect to petitioner's property. In consenting
thereto, even granting that petitioner may not be assuming personal liability
for the debt, her property shall nevertheless secure and respond for the
performance of the principal obligation. 21 It is admitted that petitioner is
the owner of the parcel of land mortgaged to PNB on five (5) occasions by
virtue of the Special Powers of Attorney executed by petitioner in favor of
Parangan. Petitioner argues that the last three mortgages were void for lack
of authority. She totally failed to consider that said Special Powers of
Attorney are a continuing one and absent a valid revocation duly furnished to
the mortgagee, the same continues to have force and effect as against third
persons who had no knowledge of such lack of authority. Article 1921 of the
Civil Code provides:
Art. 1921. If the agency has been entrusted for the purpose of
contracting with specified persons, its revocation shall not
prejudice the latter if they were not given notice thereof.
The Special Power of Attorney executed by petitioner in favor of Parangan
duly authorized the latter to represent and act on behalf of the former.
Having done so, petitioner clothed Parangan with authority to deal with PNB
on her behalf and in the absence of any proof that the bank had knowledge
that the last three loans were without the express authority of petitioner, it
cannot be prejudiced thereby. As far as third persons are concerned, an act is
deemed to have been performed within the scope of the agent's authority if
such is within the terms of the power of attorney as written even if the agent
has in fact exceeded the limits of his authority according to the
understanding between the principal and the agent. 22 The Special Power of
Attorney particularly provides that the same is good not only for the principal
loan but also for subsequent commercial, industrial, agricultural loan or
credit accommodation that the attorney-in-fact may obtain and until the
power of attorney is revoked in a public instrument and a copy of which is
furnished to PNB. 23 Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the latter to
act as though he had full powers (Article 1911, Civil Code). 24 The mortgage

directly and immediately subjects the property upon which it is imposed. 25


The property of third persons which has been expressly mortgaged to
guarantee an obligation to which the said persons are foreign, is directly and
jointly liable for the fulfillment thereof; it is therefore subject to execution
and sale for the purpose of paying the amount of the debt for which it is
liable. 26 However, petitioner has an unquestionable right to demand
proportional indemnification from Parangan with respect to the sum paid to
PNB from the proceeds of the sale of her property 27 in case the same is
sold to satisfy the unpaid debts.
WHEREFORE, premises considered, the judgment of the lower court is hereby
REINSTATED with the following MODIFICATIONS:
1. DECLARING THE DEED OF DEFINITE SALE AS AN EQUITABLE MORTGAGE;
2. ORDERING PRIVATE RESPONDENT NICOLAS PARANGAN TO RETURN THE
POSSESSION OF THE SUBJECT LAND UNTO PETITIONER UPON THE LATTER'S
PAYMENT OF THE SUM OF P75,000.00 WITHIN NINETY (90) DAYS FROM
RECEIPT OF THIS DECISION;
3. DECLARING THE MORTGAGES IN FAVOR OF PNB AS VALID AND SUBSISTING
AND MAY THEREFORE BE SUBJECTED TO EXECUTION SALE.
4. ORDERING PRIVATE RESPONDENT PARANGAN TO PAY PETITIONER THE
AMOUNT OF P15,000.00 BY WAY OF ATTORNEY'S FEES AND TO PAY THE
COSTS OF THE SUIT.
SO ORDERED.
22.

San Pedro vs. Lee GR No. 156552

ERLINDA SAN PEDRO, petitioner, vs. RUBEN LEE and LILIAN SISON,
respondents.
DECISION
YNARES-SANTIAGO, J.:
In this petition for review, we are tasked with determining whether a
document denominated as a Kasulatan ng Ganap na Bilihan ng Lupa is a
deed of absolute sale as it appears to be on the surface or merely an
equitable mortgage.

Petitioner Erlinda San Pedro initiated this suit against the spouses Ruben[1]
Lee and Lilian Sison on November 23, 1994, praying for: (1) a declaration
that the document entitled Kasulatan ng Ganap na Bilihan ng Lupa is an
equitable mortgage and not a sale; (2) the reconveyance of the property
subject of the Kasulatan ng Ganap na Bilihan ng Lupa; and (3) damages.
The Kasulatan ng Ganap na Bilihan ng Lupa, which the parties executed on
May 23, 1985 provides as follows:
NA AKONG SI, ERLINDA SAN PEDRO, may sapat na gulang, Pilipino, balo at
naninirahan sa 374 Herbosa Street, Tondo, Manila, sa bisa ng kasulatang ito
ay nagpapatunay
Na ako ang tunay at ganap na may-ari at namumusesyon sa isang (1) lagay
ng lupa na nakatala sa aking pangalan sa ilalim ng Transfer Certificate of
Title No. T-290387 ng Patalaan ng Kasulatan ng Lalawigang Bulakan, na
lalong makikilala sa mga sumusunod na palatandaan:
[Technical description follows.]
Na dahil at alang-alang sa halagang ISANG DAAN AT LIMAMPUNG LIBONG
PISO (P150,000.00), Salaping Pilipino, na ngayong araw na ito ay ibinayad sa
akin at tinanggap ko naman ng buong kasiyahang-loob bilang husto at ganap
na kabayaran ni RUBIN T. LEE, may sapat na gulang, Pilipino, kasal kay Lilian
Sison at naninirahan sa 230 MacArthur Highway, Karuhatan, Valenzuela,
Metro Manila, aking IPINAGBIBILI, ISINASALIN at INILILIPAT ng ganap at
patuluyan at walang anumang pasusubali o pananagutan, ang lahat at boo
[sic] kong karapatan at pagmamay-ari at pamumusesyon sa nabanggit na
lagay ng lupa at mga kaunlaran o mejoras na dito ay makikita o nakatirik o
matatagpuan sa nasabing RUBIN T. LEE at sa kanyang mga tagapamana o
kahalili.[2]
The document bears two signatures above the typewritten words ERLINDA
SAN PEDRO, Nagbibili. It contains the signatures of two witnesses, one of
whom was Philip dela Torre, and was notarized by a certain Venustiano S.
Roxas.[3]
San Pedros version of events paints a portrait of an unscrupulous couple,
usuriously taking advantage of her financial straits to enrich themselves.
Petitioner claims that she desperately needed money to support her
childrens college education,[4] and approached one Philip dela Torre, who
introduced her to respondent Ruben Lee.[5] From Lee and his wife Lilian

Sison, San Pedro was able to secure a loan in the amount of P105,000.00,
with interest of P45,000.00, or a total indebtedness of P150,000.00.[6] As
security for this loan, she agreed to mortgage a 17,235-square meter parcel
of agricultural land located at San Juan, Balagtas, Bulacan, covered by
Transfer Certificate of Title (TCT) No. T-290387.[7] This transaction took place
in the office of Atty. Venustiano Roxas, where she met Lee for the first time.
[8]
San Pedro claims that Atty. Roxas and Lee coerced her to sign the Kasulatan
ng Ganap na Bilihan ng Lupa and that the document was executed merely as
written evidence of the loan and mortgage. She alleges that Atty. Venustiano
Roxas and Ruben Lee told her that the document was just a formality,[9] with
the assurance from Atty. Roxas and Lee that respondents would never
enforce the contract against her.[10] She readily agreed because she
believed in good faith that the spouses were tunay na tao.[11] She further
claims that she continued in possession of the parcel of land through her
tenant, Federico Santos, and continued to receive her landowners share of
the harvest from 1985 until 1995.[12]
In 1986,[13] petitioner attempted to pay the real property tax on the subject
agricultural land.[14] To her surprise, she learned that the property had
already been transferred to the names of respondents.[15] She also learned
that TCT No. T-290387 had been cancelled and TCT No. RT-41717 (T-305595)
had been issued in the name of Ruben Lee.[16]
After saving enough money to pay her indebtedness, San Pedro attempted to
redeem her mortgage. She approached Ruben Lees brother, Carlito, offering
to pay her debt, but she was continually rebuffed.[17] Nine years after the
contract was executed, she initiated this suit to recover title to the subject
property.
Respondents, on the other hand, present an entirely different version of
events. They claim that the sale of the property in question was brokered by
their mutual acquaintance and broker, Philip dela Torre.[18] Spouses Lee and
Sison are engaged in the real estate business, and believed that San Pedros
agricultural property would be a good investment. It was disclosed to them
that the property had no existing right of way, that it was not tenanted,[19]
and that it was low-lying real estate which was prone to flooding during the
rainy season.[20] They thus negotiated for the purchase of the property,
which had an initial asking price of P200,000.00,[21] and offered to pay

P150,000.00 therefor. San Pedro accepted their offer and agreed to sell the
land.[22]
Respondents requested that petitioner execute an affidavit of nontenancy[23] and a written power of attorney authorizing respondents to pay
the capital gains taxes and expenses on the registration of the property in
their name.[24]
During the trial, petitioner presented four witnesses. The first, Federico
Santos, a 61-year-old farmer, testified that he was San Pedros tenant and
had been tilling her land since 1975,[25] which his parents had been tilling
before him.[26] He further claimed that this tenancy relation was
uninterrupted until the time of his testimony in 1995, and that he paid San
Pedro her owners share of the harvest every year.[27] Introduced in evidence
were a tenancy agreement between Santos and San Pedros mother,[28] and
trust receipts dated from 1981 to 1991, all showing payment to San Pedro of
18 cavans of palay.[29]
Petitioners second witness, Adela Ortega, claimed to be an experienced
broker, engaged in the real estate business since after the Second World War.
[30] She testified that the parcel of land which was the subject of the
contract in question was grossly undervalued, since she sold similarly
located parcels of land in 1985 for around P60.00 per square meter.[31] She
also claimed that, in 1995, she sold a piece of agricultural land adjacent to
the subject property for P350.00 per square meter.[32]
Juanito Angeles, the third witness for the petitioner, was a Supervising
Revenue Examiner in Revenue District 25.[33] He produced Department
Order No. 83-94, effective September 25, 1994, which contains zonal
valuations of several municipalities in Bulacan.[34] Based on these zonal
valuations, he testified that the price of agricultural lots located in Barangay
San Juan, Balagtas, Bulacan ranges from P60.00 per square meter (for lots
along the barangay road)[35] to P20.00 per square meter (for interior lots).
[36] He also stated that prior to the effectivity of Department Order No. 8394, the capital gains tax was determined from the consideration or the zonal
valuation, whichever was higher.[37]
For their part, respondents presented Carlito Lee, Jose Samaniego, Atty.
Amando Tetangco, Philip dela Torre, and Atty. Venustiano Roxas, in addition to
respondent Ruben Lee.

Carlito Lee, Rubens brother, testified that Philip dela Torre introduced him
and Ruben to Erlinda San Pedro, who wanted to sell her property.[38] The
sale price was originally P200,000.00, which was reduced to P150,000.00
because the agricultural lot in question had no existing right of way and was
frequently flooded during the rainy season.[39] Carlito also testified that
although the contract of sale was entered into between San Pedro and Ruben
Lee, the money for the purchase of the property came from Cenica
Hardware, a corporation of which he is a part owner.[40]
Carlito alleged that he and Ruben met with San Pedro on several occasions,
in order to negotiate the purchase price and terms of payment.[41] On their
second meeting, they requested San Pedro to execute an affidavit of nontenancy to prove that the property was not occupied.[42] On their third
meeting, San Pedro produced the requested affidavit, which was notarized by
a certain Atty. Amando Tetangco.[43] They set another meeting, for May 23,
1985, at which San Pedro arrived at the Cenica Hardware store with the
affidavit of non-tenancy and the original title of the property.[44] That same
day, Carlito and his brother withdrew the amount of P150,000.00 from Solid
Bank, and paid San Pedro, for which she signed a receipt.[45] They then
proceeded to the office of Atty. Venustiano Roxas for the execution of the
contract of sale.[46]
Jose Samaniego, the Municipal Assessor of Balagtas, Bulacan, produced,
inter alia, the Declaration of Real Property No. 10786[47] and Declaration of
Real Property No. 01846,[48] both in the name of Ruben Lee. Declaration of
Real Property No. 10786, for the year 1987, covers the property identified by
TCT No. T-305595, and proclaims the market value of this property to be
P34,470.00. Declaration of Real Property No. 01846, for the year 1994, is for
the property covered by TCT No. T-305595, and identifies the market value of
the property to be P137,880.00.
Samaniego explained that the amount appearing on the declaration of real
property stands for the value of a certain parcel of land per square meter if
the land is residential, commercial or industrial, and per hectare if it is
agricultural. The unit value is based on the schedule of market value
prepared during the revision, which is approved by the Provincial Assessor
and submitted to the Sangguniang Panlalawigan for approval. Thus, the
bases for determining unit value are the deed of sale, the payment value and
the production cost of the land.[49]

The next witness, Atty. Amando Tetangco, testified that he notarized an


affidavit of non-tenancy executed by Erlinda San Pedro sometime in May
1985.[50] He identified his signature on the said affidavit, which he drafted.
[51] He also identified the signature of San Pedro, alleging that she caused
the preparation of the affidavit,[52] although he admitted that he had never
met San Pedro prior to May 17, 1985, the date of execution of the affidavit.
[53]
Philip dela Torre, a real estate broker, testified as to the negotiations
between San Pedro and Lee regarding the purchase price of the property.[54]
The sum of P150,000.00 was finally agreed upon,[55] with the capital gains
tax to be paid by Lee.[56] The agreement between the parties was reduced
in writing as the Kasulatan ng Ganap na Bilihan ng Lupa.[57] For his
participation in the transaction, dela Torre received a commission of 3%, or
P4,500.00.[58] Dela Torre was one of the witnesses to this contract, and
identified his signature thereon.[59] He also identified (1) the signature of
San Pedro, who signed the document in his presence,[60] and (2) the
document embodying the agreement that Ruben Lee would pay the capital
gains tax on the transaction.[61]
Finally, Atty. Venustiano Roxas testified for the respondents. He recalls having
prepared and notarized the Kasulatan ng Ganap na Bilihan ng Lupa, and
identified his signature thereon.[62]
On June 22, 1998, the trial court rendered a decision in favor of petitioner,
declaring the contract between petitioner and respondents as one of
mortgage and not of sale, and ordering the reconveyance of the property
and the payment of damages.
On appeal, the Court of Appeals reversed the trial court, and rendered a
decision in favor of respondents, the dispositive portion of which reads:
WHEREFORE, premises considered, the assailed Decision dated 22 June 1998
of the Regional Trial Court of Malolos, Bulacan, Branch 17 is hereby
REVERSED and SET ASIDE, and a new one is hereby entered dismissing the
Complaint for lack of merit. No pronouncement as to costs.
SO ORDERED.
Hence, this appeal, which raises the sole issue of whether the contract in
question is an equitable mortgage or a deed of absolute sale.

The document appears on its face to be a contract of sale, and contains the
following clause:
Na dahil at alang-alang sa halagang ISANG DAAN AT LIMAMPUNG LIBONG
PISO (P150,000.00), Salaping Pilipino, na ngayong araw na ito ay ibinayad sa
akin at tinanggap ko naman ng buong kasiyahang-loob bilang husto at ganap
na kabayaran ni RUBIN T. LEE, may sapat na gulang, Pilipino, kasal kay Lilian
Sison at naninirahan sa 230 MacArthur Highway, Karuhatan, Valenzuela,
Metro Manila, aking IPINAGBIBILI, ISINASALIN at INILILIPAT ng ganap at
patuluyan at walang anumang pasusubali o pananagutan, ang lahat at boo
[sic] kong karapatan at pagmamay-ari at pamumusesyon sa nabanggit na
lagay ng lupa at mga kaunlaran o mejoras na dito ay makikita o nakatirik o
matatagpuan sa nasabing RUBIN T. LEE at sa kanyang mga tagapamana o
kahalili.[63]
Its nomenclature notwithstanding, we are called upon to decide whether the
contract is really one of equitable mortgage, in accordance with the statutory
presumptions set forth in Article 1602 of the Civil Code, which are applicable
to documents purporting to be contracts of absolute sale.[64]
Article 1602 provides:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
(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 to 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.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest
which shall be subject to the usury laws.

It is well-settled that the presence of even one of the foregoing


circumstances is sufficient to declare a contract as an equitable mortgage,
[65] in consonance with the rule that the law favors the least transmission of
property rights.[66] For the presumption of an equitable mortgage to arise
under Article 1602, two requisites must concur: (1) that the parties entered
into a contract denominated as a sale; and (2) that their intention was to
secure an existing debt by way of a mortgage.[67]
After a careful review of the records of the case, we find no cogent reason to
disturb the ruling of the Court of Appeals.
Actori incumbit onus probandi.[68] Upon the plaintiff in a civil case, the
burden of proof never parts.[69] Plaintiff must therefore establish her case by
a preponderance of evidence.[70] She has the burden of presenting evidence
required to obtain a favorable judgment,[71] and she, having the burden of
proof, will be defeated if no evidence were given on either side.[72]
In this case, it was incumbent upon San Pedro to adduce sufficient evidence
to support her claim of an equitable mortgage. Petitioner relies on
paragraphs 1, 2, 5 and 6 of Article 1602.[73] Upon an examination of the
evidence, we find insufficient basis to conclude the existence of any of the
grounds she relied upon.
Anent alleged inadequacy of the purchase price, petitioner presented two
witnesses who testified as to the market values of real estate in the subject
locale. Neither of these witnesses, however, was able to conclusively
demonstrate that the purchase price of the property was grossly inadequate.
The testimony of the purported broker, Adela Ortega, was not given any
credence by the Court of Appeals. We quote with approval the ruling of the
Court of Appeals on this point:
Plaintiff-appellees witness Adela Ortega failed to substantiate her allegation
that the prevailing price of the subject property at the time of the sale (1985)
was P60.00 per square meter. Although Adela Ortega claimed that she was
able to sell lots adjacent to the subject property at the said prevailing price,
she failed to present proof of such claim despite her reservation to do so.
Moreover, Adela Ortegas competency and credibility as an experienced real
estate broker is also suspect or questionable. She admitted that she was not
aware or familiar with the factors or bases that affect the increase in the
value of realty, or how does it influence the zonal valuation made by the
local government, which should be very basic to a real estate broker.

The second witness, BIR Revenue Supervisor Juanito Angeles, testified as to


the market value of properties in the subject locale as of the effectivity of
Department Order No. 83-94, on September 25, 1994. However, it must be
noted that Angeles did not testify as to the market value of the locale as of
May 23, 1985, the date of the contract in question. Neither did petitioner
present any other evidence of the real estate market values as of that date.
Absent any evidence of the market value of the locale as of the date of the
contract, it cannot be concluded that the price at which the property was
sold, or about P8.70 per square meter, was grossly inadequate. Mere
inadequacy of price would not be sufficient. The price must be grossly
inadequate,[74] or purely shocking to the conscience.[75] Since the property
in question could have been worth as little as P20.00 per square meter in
1994, the price of P8.70 per square meter nine years earlier, in 1985, does
not seem to be grossly inadequate. Indeed, respondents Declaration of Real
Property No. 10786, for the year 1987, shows the market value of the
property to be only P34,470.00 for that year.
As regards the alleged continuous possession of the property in question,
San Pedro presented Federico Santos, who testified that he is a farmer by
occupation, currently tilling a farmholding of less than two hectares located
at San Juan, Balagtas, Bulacan,[76] owned by Erlinda San Pedro, to whom he
has been paying lease rentals of 18 cavans a year.[77] The testimony of the
witness was offered to prove that he was the agricultural leasehold tenant of
the petitioner on the parcel of land which was described in the complaint.
[78]
However, while the witness may have established that he was, indeed, the
agricultural tenant of the petitioner, the identity of the parcel of land which
he tills and the parcel of land described in the complaint was not established.
The Kasunduan sa Buwisan[79] entered into between Federico J. Santos and
Lourdes Manalo Vda. De San Pedro dated May 14, 1975 reiterates the
tenancy relation between witness Santos and the San Pedro family. The
parcel of land described therein has an area of 1.5 hectares,[80] while the
property subject of the contract in question has an area of 17,235 square
meters, or 1.72 hectares. There is therefore no clear indicator that the parcel
of land being tilled by Santos is, indeed, the parcel of land subject of the
contract between San Pedro and Lee. Although a landowner-tenant relation
has been established between San Pedro and Santos, we cannot conclude

therefrom that San Pedro was in possession of the property subject of the
Kasulatan ng Ganap na Bilihan ng Lupa through her tenant Federico Santos.
Petitioner argues that the direct connection between the parcel of land tilled
by Santos and the land in question needs no proof, in view of the purported
admission by respondents in the course of the proceedings.[81] Specifically,
petitioner points to (1) an alleged admission made by respondents counsel
during the cross-examination of witness Federico Santos on July 3, 1995,[82]
and (2) a statement made in respondents Comment/Opposition to Plaintiffs
Formal Offer of Evidence, to the effect that petitioners exercise of rights of
ownership over the parcel of land in question amounts to a usurpation of
respondents rights as owner of the property.[83] Petitioner relies on Rule
129, Section 4 of the Revised Rules of Court, which provides in part that [a]n
admission, verbal or written, made by a party in the course of the
proceedings in the same case, does not require proof.
An examination of the records of the case, however, will readily disclose that
no such admission was made either by respondents or by respondents
counsel. The question propounded by respondents counsel on July 3, 1995, is
as follows:
Q Mr. Witness, are you aware of the fact that since 1985 the land you have
been cultivating has been transferred in the name of Sps. Ruben Lee and
Lilian Sison?
A No, maam.[84]
In the assessment of this Court, said question contains absolutely no
admission that the parcel of land tilled by Santos is in fact the parcel of land
subject of the contract in question.
We likewise find no admission made in respondents Comment/Opposition to
Plaintiffs Formal Offer of Evidence. The alleged admission was made in the
comment/objection to petitioners Exhibits F to F-14, the Receipts of
Payments of Rentals by Federico Santos to Erlinda San Pedro, and reads:
These receipts do not prove rights of ownership. The same even show acts of
USURPATION of the Rights of Ownership of the defendants by the plaintiff
and her alleged tenant since Title to the property in question is now in the
name of Defendant spouses as Evidenced by TCT No. T-305595. (Ehx. B of
the Plaintiff)[85]

On the contrary, what the foregoing portion of the Comment/Objection


reveals is that: if Santos was indeed tilling the parcel of land covered by TCT
No. T-305595 as a tenant of San Pedro, San Pedro would be guilty of
usurpation.
Rule 129, Section 4 of the Revised Rules of Court provides that a judicial
admission may be contradicted by showing that it was made through
palpable mistake, or that no such admission was made. Petitioners theory as
regards the purported judicial admission is readily contradicted by a perusal
of the records, which show that in fact no such admission was made by
respondents. We thus find no adequate proof for petitioners contention that
she was exercising possessory rights over the parcel of land covered by TCT
No. T-305595.
As a third ground for the establishment of the purported equitable mortgage,
petitioner argues that paragraph 5 of Article 1602 is present.[86] Again,
petitioner presented no proof that she, as vendor of property, bound herself
to pay taxes on the thing sold.
Finally, petitioner relies on Article 1602, paragraph 6, which applies to 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.
In contrast, respondents witnesses all testified as to the existence of a
contract of sale between her and respondent Ruben Lee. Pertinently, Philip
dela Torre, who brokered the sale, and Atty. Venustiano Roxas, who prepared
the contract in question, were both unequivocal as to the nature of the
contract. These two witnesses, whose impartiality was not impugned, both
affirmed the sale of the subject property.
Respondents presented documentary evidence which shows that the
contract was indeed a sale: (1) a receipt for P150,000.00 dated May 23,
1985, issued by Erlinda San Pedro, attesting full receipt of the amount in
question;[87] (2) an authority to pay capital gains tax, executed by Erlinda
San Pedro in favor of Ruben Lee;[88] and (3) an affidavit of non-tenancy
executed by Erlinda San Pedro.[89]
The Kasulatan ng Ganap na Bilihan ng Lupa unequivocally states the
absolute sale of the property covered by Transfer Certificate of Title No. T290387. Being a notarized document, it carries the evidentiary weight

conferred upon duly executed instruments provided by law,[90] and is


entitled to full faith and credit upon its face.
WHEREFORE, premises considered, the decision of the Court of Appeals
dated November 20, 2002, which dismissed the complaint filed by petitioner
for lack of merit, is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
23.

Dalion vs. CA and Sabesaje GR No. 78903

G.R. No. 78903 February 28, 1990


SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners,
vs.
THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR.,
respondents.
Francisco A. Puray, Sr. for petitioners.
Gabriel N. Duazo for private respondent.

MEDIALDEA, J.:
This is a petition to annul and set aside the decision of the Court of Appeals
rendered on May 26, 1987, upholding the validity of the sale of a parcel of
land by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private
respondent Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:
A parcel of land located at Panyawan, Sogod, Southern Leyte,
declared in the name of Segundo Dalion, under Tax Declaration
No. 11148, with an area of 8947 hectares, assessed at P 180.00,
and bounded on the North, by Sergio Destriza and Titon Veloso,
East, by Feliciano Destriza, by Barbara Bonesa (sic); and West, by
Catalino Espina. (pp. 36-37, Rollo)
The decision affirms in toto the ruling of the trial court 1 issued on January
17, 1984, the dispositive portion of which provides as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby
renders judgment.

(a) Ordering the defendants to deliver to the plaintiff the parcel


of land subject of this case, declared in the name of Segundo
Dalion previously under Tax Declaration No. 11148 and lately
under Tax Declaration No. 2297 (1974) and to execute the
corresponding formal deed of conveyance in a public document
in favor of the plaintiff of the said property subject of this case,
otherwise, should defendants for any reason fail to do so, the
deed shall be executed in their behalf by the Provincial Sheriff or
his Deputy;
(b) Ordering the defendants to pay plaintiff the amount of
P2,000.00 as attorney's fees and P 500.00 as litigation expenses,
and to pay the costs; and
(c) Dismissing the counter-claim. (p. 38, Rollo)
The facts of the case are as follows:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land,
based on a private document of absolute sale, dated July 1, 1965 (Exhibit
"A"), allegedly executed by Dalion, who, however denied the fact of sale,
contending that the document sued upon is fictitious, his signature thereon,
a forgery, and that subject land is conjugal property, which he and his wife
acquired in 1960 from Saturnina Sabesaje as evidenced by the "Escritura de
Venta Absoluta" (Exhibit "B"). The spouses denied claims of Sabesaje that
after executing a deed of sale over the parcel of land, they had pleaded with
Sabesaje, their relative, to be allowed to administer the land because Dalion
did not have any means of livelihood. They admitted, however, administering
since 1958, five (5) parcels of land in Sogod, Southern Leyte, which belonged
to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They
never received their agreed 10% and 15% commission on the sales of copra
and abaca, respectively. Sabesaje's suit, they countered, was intended
merely to harass, preempt and forestall Dalion's threat to sue for these
unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning
errors some of which, however, were disregarded by the appellate court, not
having been raised in the court below. While the Court of Appeals duly
recognizes Our authority to review matters even if not assigned as errors in
the appeal, We are not inclined to do so since a review of the case at bar
reveals that the lower court has judicially decided the case on its merits.

As to the controversy regarding the identity of the land, We have no reason


to dispute the Court of Appeals' findings as follows:
To be sure, the parcel of land described in Exhibit "A" is the same
property deeded out in Exhibit "B". The boundaries delineating it
from adjacent lots are identical. Both documents detail out the
following boundaries, to wit:
On the North-property of Sergio Destriza and Titon Veloso;
On the East-property of Feliciano Destriza;
On the South-property of Barbara Boniza and
On the West-Catalino Espina.
(pp. 41-42, Rollo)
The issues in this case may thus be limited to: a) the validity of the contract
of sale of a parcel of land and b) the necessity of a public document for
transfer of ownership thereto.
The appellate court upheld the validity of the sale on the basis of Secs. 21
and 23 of Rule 132 of the Revised Rules of Court.
SEC. 21. Private writing, its execution and authenticity, how
proved.-Before any private writing may be received in evidence,
its due execution and authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the
maker; or
(c) By a subscribing witness
xxx xxx xxx
SEC. 23. Handwriting, how proved. The handwriting of a
person may be proved by any witness who believes it to be the
handwriting of such person, and has seen the person write, or
has seen writing purporting to be his upon which the witness has
acted or been charged, and has thus acquired knowledge of the
handwriting of such person. Evidence respecting the handwriting
may also be given by a comparison, made by the witness or the
court, with writings admitted or treated as genuine by the party

against whom the evidence is offered, or proved to be genuine to


the satisfaction of the judge. (Rule 132, Revised Rules of Court)
And on the basis of the findings of fact of the trial court as follows:
Here, people who witnessed the execution of subject deed
positively testified on the authenticity thereof. They categorically
stated that it had been executed and signed by the signatories
thereto. In fact, one of such witnesses, Gerardo M. Ogsoc,
declared on the witness stand that he was the one who prepared
said deed of sale and had copied parts thereof from the
"Escritura De Venta Absoluta" (Exhibit B) by which one Saturnina
Sabesaje sold the same parcel of land to appellant Segundo
Dalion. Ogsoc copied the bounderies thereof and the name of
appellant Segundo Dalion's wife, erroneously written as
"Esmenia" in Exhibit "A" and "Esmenia" in Exhibit "B". (p. 41,
Rollo)
xxx xxx xxx
Against defendant's mere denial that he signed the document,
the positive testimonies of the instrumental Witnesses Ogsoc and
Espina, aside from the testimony of the plaintiff, must prevail.
Defendant has affirmatively alleged forgery, but he never
presented any witness or evidence to prove his claim of forgery.
Each party must prove his own affirmative allegations (Section 1,
Rule 131, Rules of Court). Furthermore, it is presumed that a
person is innocent of a crime or wrong (Section 5 (a), Idem), and
defense should have come forward with clear and convincing
evidence to show that plaintiff committed forgery or caused said
forgery to be committed, to overcome the presumption of
innocence. Mere denial of having signed, does not suffice to show
forgery.
In addition, a comparison of the questioned signatories or
specimens (Exhs. A-2 and A-3) with the admitted signatures or
specimens (Exhs. X and Y or 3-C) convinces the court that Exhs.
A-2 or Z and A-3 were written by defendant Segundo Dalion who
admitted that Exhs. X and Y or 3-C are his signatures. The
questioned signatures and the specimens are very similar to
each other and appear to be written by one person.

Further comparison of the questioned signatures and the


specimens with the signatures Segundo D. Dalion appeared at
the back of the summons (p. 9, Record); on the return card (p.
25, Ibid.); back of the Court Orders dated December 17, 1973
and July 30, 1974 and for October 7, 1974 (p. 54 & p. 56,
respectively, Ibid.), and on the open court notice of April 13, 1983
(p. 235, Ibid.) readily reveal that the questioned signatures are
the signatures of defendant Segundo Dalion.
It may be noted that two signatures of Segundo D. Dalion appear
on the face of the questioned document (Exh. A), one at the right
corner bottom of the document (Exh. A-2) and the other at the
left hand margin thereof (Exh. A-3). The second signature is
already a surplusage. A forger would not attempt to forge
another signature, an unnecessary one, for fear he may commit a
revealing error or an erroneous stroke. (Decision, p. 10) (pp. 4243, Rollo)
We see no reason for deviating from the appellate court's ruling (p. 44, Rollo)
as we reiterate that
Appellate courts have consistently subscribed to the principle
that conclusions and findings of fact by the trial courts are
entitled to great weight on appeal and should not be disturbed
unless for strong and cogent reasons, since it is undeniable that
the trial court is in a more advantageous position to examine real
evidence, as well as to observe the demeanor of the witnesses
while testifying in the case (Chase v. Buencamino, Sr., G.R. No. L20395, May 13, 1985, 136 SCRA 365; Pring v. Court of Appeals,
G.R. No. L-41605, August 19, 1985, 138 SCRA 185)
Assuming authenticity of his signature and the genuineness of the
document, Dalion nonetheless still impugns the validity of the sale on the
ground that the same is embodied in a private document, and did not thus
convey title or right to the lot in question since "acts and contracts which
have for their object the creation, transmission, modification or extinction of
real rights over immovable property must appear in a public instrument"
(Art. 1358, par 1, NCC).
This argument is misplaced. The provision of Art. 1358 on the necessity of a
public document is only for convenience, not for validity or enforceability. It is

not a requirement for the validity of a contract of sale of a parcel of land that
this be embodied in a public instrument.
A contract of sale is a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity.
Upon perfection of the contract, the parties may reciprocally demand
performance (Art. 1475, NCC), i.e., the vendee may compel transfer of
ownership of the object of the sale, and the vendor may require the vendee
to pay the thing sold (Art. 1458, NCC).
The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje
the parcel of land and to execute corresponding formal deed of conveyance
in a public document. Under Art. 1498, NCC, when the sale is made through
a public instrument, the execution thereof is equivalent to the delivery of the
thing. Delivery may either be actual (real) or constructive. Thus delivery of a
parcel of land may be done by placing the vendee in control and possession
of the land (real) or by embodying the sale in a public instrument
(constructive).
As regards petitioners' contention that the proper action should have been
one for specific performance, We believe that the suit for recovery of
ownership is proper. As earlier stated, Art. 1475 of the Civil Code gives the
parties to a perfected contract of sale the right to reciprocally demand
performance, and to observe a particular form, if warranted, (Art. 1357). The
trial court, aptly observed that Sabesaje's complaint sufficiently alleged a
cause of action to compel Dalion to execute a formal deed of sale, and the
suit for recovery of ownership, which is premised on the binding effect and
validity inter partes of the contract of sale, merely seeks consummation of
said contract.
... . A sale of a real property may be in a private instrument but
that contract is valid and binding between the parties upon its
perfection. And a party may compel the other party to execute a
public instrument embodying their contract affecting real rights
once the contract appearing in a private instrument hag been
perfected (See Art. 1357).
... . (p. 12, Decision, p. 272, Records)
ACCORDINGLY, the petition is DENIED and the decision of the Court of
Appeals upholding the ruling of the trial court is hereby AFFIRMED. No costs.

SO ORDERED.
24.

Si vs. CA

G.R. No. 122047

GR No. 122047
October 12, 2000

SPOUSES SERAFIN SI AND ANITA BONODE SI, petitioners,


vs.
COURT OF APPEALS, SPOUSES JOSE ARMADA and REMEDIOS
ALMANZOR (deceased, and substituted by heirs: Cynthia Armada,
Danilo Armada and Vicente Armada) respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari under Rule 45 assails the Decision 1 dated March
25, 1994, of the Court of Appeals and its Resolutions 2 dated March 24, 1995
and September 6, 1995 in CA-G.R. CV No. 30727. The Court of Appeals
reversed the decision of the Regional Trial Court of Pasig City, Branch 113,
and nullified the sale of the subject lot by the spouses Crisostomo and
Cresenciana Armada to spouses Serafin and Anita Si. The dispositive portion
of the respondent court's decision reads:
"WHEREFORE, in view of the foregoing, the decision appealed from is hereby
REVERSED, and a new one is rendered:
1) Annulling and declaring as invalid the registration of the Deed of
Absolute Sale dated March 27, 1979 executed by Cresenciana V. Alejo
in favor of Anita Bonode Si.
2) Ordering the Register of Deeds of Pasay City to annul and cancel
Transfer Certificate of Title No. 24751, issued in the name of Anita
Bonode Si, married to Serafin D. Si., Jose R. Armada, married to
Remedios Almanzor and Dr. Severo R. Armada Jr., single.
3) Ordering the Register of Deeds of Pasay City to reconstitute and
revive Transfer Certificate of Title No. 16007 in the names of Jose,
Crisostomo and Severo, Jr.
4) That plaintiffs be allowed to repurchase or redeem the share
corresponding to the share of Crisostomo Armada within thirty (30)
days from notice in writing by Crisostomo Armada.

5) The defendants-appellees are jointly and severally ordered to pay


the plaintiffs-appellants the sum of P10,000.00 as moral damages.
6) The defendants-appellees are jointly and severally ordered to pay
the plaintiff-appellants the sum of P10,000.00 as attorney's fees and
litigation expenses and costs of suit.
SO ORDERED."3
The factual background of the case is as follows:
The 340 square meters of land, situated in San Jose District, Pasay City, the
property in dispute, originally belonged to Escolastica, wife of Severo
Armada, Sr. This was covered by Transfer Certificate of Title (TCT) No.
(17345) 2460. During the lifetime of the spouses, the property was
transferred to their children and the Registry of Deeds, Pasay City, issued
TCT No. 16007 in the names of the three sons, as follows : "DR. CRISOSTOMO
R. ARMADA, married to Cresenciana V. Alejo, 113.34 Square Meters; JOSE R.
ARMADA, married to Remedios Almanzor, 113.33 Square Meters; and DR.
SEVERO R. ARMADA, Jr., single, all of legal age, Filipinos." 4 Annotated also in
the title is the total cancellation of said title "... by virtue of the Deed of Sale,
(P.E. 77952/T-24751), dated March 28, 1979, executed by CRESENCIANA V.
ALEJO, as attorney-in-fact of CRISOSTOMO R. ARMADA, conveying 113.34
square meters of the property herein, in favor of ANITA BONODE SI, married
to Serafin D. Si, for the sum of P75,000.00, issuing in lieu thereof Transfer
Certificate of Title No. 24751, Reg. Book T-102. (Doc. No. 17, Page No. 5,
Book No. 253 of Notary Public of Pasay City, Manila, Julian Florentino)." 5
On April 15, 1980, herein spouses Jose Armada and Remedios Almanzor, filed
a complaint for Annulment of Deed of Sale and Reconveyance of Title with
Damages, against herein petitioners Anita and Serafin Si and Conrado Isada,
brother-in-law of Cresenciana. Isada brokered the sale.
The complaint alleged that Conrado Isada sold Crisostomo's share by making
it appear that Cresenciana, the attorney-in-fact of her husband, is a Filipino
citizen, residing with Isada at No. 13-4th Camarilla Street, Murphy, Cubao,
Quezon City. By this time, Crisostomo and Cresenciana had migrated and
were already citizens of the United States of America. It also stated that
when petitioners registered the deed of absolute sale they inserted the
phrase "... and that the co-owners are not interested in buying the same in
spite of notice to them.", and that petitioners knew of the misrepresentations

of Conrado. Further, the complaint alleged that the other owners, Jose and
Severo, Jr., had no written notice of the sale; and that all upon learning of the
sale to the spouses Si, private respondents filed a complaint for annulment of
sale and reconveyance of title with damages, claiming they had a right of
redemption.
Petitioners, on the other hand, alleged that on October 2, 1954, Escolastica,
with the consent of her husband executed three separate deeds of sale
(Exhibits 1, 2, and 3)6 conveying 113.34 square meters of the property to
Severo, and 113.33 square meters each to Crisostomo and Jose. The three
deeds of sale particularly described the portion conveyed to each son in
metes and bounds. Petitioners contend that since the property was already
three distinct parcels of land, there was no longer co-ownership among the
brothers. Hence, Jose and Severo, Jr. had no right of redemption when
Crisostomo sold his share to the spouses Si. Petitioners point out that it was
only because the Armada brothers failed to submit the necessary subdivision
plan to the Office of the Register of Deeds in Pasay City that separate titles
were not issued and TCT No. 16007 was issued and registered in the names
of Jose, Crisostomo, and Severo, Jr.
After trial on the merits, the court ruled for petitioners:
"IN VIEW OF ALL THE FOREGOING, the complaint is hereby DISMISSED. With
costs against the plaintiffs."7
Private respondents appealed to the Court of Appeals. On March 25, 1994,
the appellate court issued the decision now assailed by petitioners. In
reversing the decision of the trial court and ruling for private respondents,
the Court of Appeals found that:
"A careful examination of TCT No. 16007 (Exh. 'A') shows that the portion
sold by virtue of the Deeds of Sale (Exh. 1, 2, & 3) to the Armada brothers do
not appear in the said title, neither does it indicate the particular area sold.
Moreover, no evidence was presented to show that the Register of Deeds
issued TCT No. 16007 (Exh. 'A') on the basis of the said deeds of Sale. In fact,
TCT No. 16007 (Exh. 'A') shows that the lot is co-owned by Jose, Crisostomo
and Severo, Jr. in the proportion of 113.33, 113.34 and 113.33 sq. m.
respectively.
Furthermore, the evidence on record shows that the Deed of Absolute Sale
(Exh. 'B'), executed by Cresencia Armada in favor of defendants Si, stated

that the portion sold was the 'undivided one hundred thirteen & 34/100
(113.34) square meters' of the parcel of land covered by TCT NO. 16007 of
the Registry of Deeds for Pasay City, which means that what was sold to
defendants are still undetermined and unidentifiable, as the area sold
remains a portion of the whole.
Moreover, plaintiff Remedi[o]s Armada testified that on March 27, 1979,
Crisostomo Armada, thru his attorney-in-fact and co-defendant, Cresenciana
Alejo, sold his undivided 113.34 share to defendants, Sps. Si as evidenced by
a Deed of Absolute Sale (Exh. 'B'), and presented for registration with the
Register of Deeds (Exh. 'B-1') without notifying plaintiffs of the sale (TSN, pp.
6-8, December 20, 1988). Instead, it appears that the phrase 'and that the
co-owners are not interested in buying the same inspite of notice to them',
was inserted in the Deed of Sale (Exh. 'B').
xxx
Otherwise stated, the sale by a (sic) co-owner of his share in the undivided
property is not invalid, but shall not be recorded in the Registry Property,
unless accompanied by an affidavit of the Vendor that he has given written
notice thereof to all possible redemptioners."8
On August 29, 1994, petitioners' counsel on record, Atty. Roberto B. Yam
received a copy of the CA decision. On October 14, 1994, he filed a motion
for reconsideration, but it was denied by the Court of Appeals on November
21, 1994, for being filed out of time.
On December 5, 1994, petitioners filed their motion for new trial under
Section 1, Rule 53 of the Revised Rules of Court. 9 Petitioners presented new
evidence, TCT No. (17345) 2460, registered in the name of Escolastica de la
Rosa, married to Severo Armada, Sr., with annotation at the back stating that
the cancellation was by virtue of three deeds of sale in favor of Escolastica's
sons. On March 24, 1995, respondent court denied the motion, reasoning
that when the motion was filed, the reglementary period had lapsed and the
decision had become final and executory. Petitioners' motion for
reconsideration of said resolution was denied.
Hence, the present petition, alleging that:
"1. Respondent Court of Appeals committed a reversible error in ruling
that a co-ownership still existed.

"2. Respondent Court of Appeals committed a reversible error in


denying the Motion for Reconsideration of its Decision of 25 March
1994 on purely technical grounds.
"3. Respondent Court of Appeals committed a reversible error in
denying the Motion for New Trial.
"4. Respondent Court of Appeals committed a reversible error in
ordering petitioners to pay moral damages, attorney's fees, litigation
expenses and the costs of the suit."10
In essence, this Court is asked to resolve: (1) whether respondent court erred
in denying petitioners' motion for reconsideration and/or the Motion for New
Trial; (2) whether private respondents are co-owners who are legally entitled
to redeem the lot under Article 1623 of the Civil Code; 11 and (3) whether the
award of moral damages, attorney's fees and costs of suit is correct.
The pivotal issue is whether private respondents may claim the right of
redemption under Art. 1623 of the Civil Code. The trial court found that the
disputed land was not part of an undivided estate. It held that the three
deeds of absolute sale12 technically described the portion sold to each son.
The portions belonging to the three sons were separately declared for
taxation purposes with the Assessor's Office of Pasay City on September 21,
1970.13 Jose's testimony that the land was undivided was contradicted by
his wife when she said they had been receiving rent from the property
specifically allotted to Jose.14 More significantly, on January 9, 1995, the
Registry of Deeds of Pasay City cancelled TCT 24751 and issued three new
titles as follows: (1) TCT 13459415 in favor of Severo Armada, Jr.; (2) TCT
13459516 under the name of Anita Bonode Si, married to Serafin Si; and (3)
TCT 13459617 owned by Jose Armada, married to Remedios Almanzor. All
these are on record.
However, the Court of Appeals' decision contradicted the trial court's
findings.18
In instances when the findings of fact of the Court of Appeals are at variance
with those of the trial court, or when the inference drawn by the Court of
Appeals from the facts is manifestly mistaken, this Court will not hesitate to

review the evidence in order to arrive at the correct factual conclusion. 19


This we have done in this case. It is our considered view now, that the trial
court is correct when it found that:
"Rightfully, as early as October 2, 1954, the lot in question had already been
partitioned when their parents executed three (3) deed of sales (sic) in favor
of Jose, Crisostomo and Severo, all surnamed Armada (Exh. 1, 2, & 3), which
documents purports to have been registered with the Register of Deeds of
Pasay City, on September 18, 1970, and as a consequence TCT No. 16007
(Exh. A) was issued. Notably, every portion conveyed and transferred to the
three sons was definitely described and segregated and with the
corresponding technical description (sic). In short, this is what we call
extrajudicial partition. Moreover, every portion belonging to the three sons
has been declared for taxation purposes with the Assessor's Office of Pasay
City on September 21, 1970. These are the unblinkable facts that the portion
sold to defendant spouses Si by defendants Crisostomo Armada and
Cresenciana Armada was concretely determined and identifiable. The fact
that the three portions are embraced in one certificate of title does not make
said portions less determinable or identifiable or distinguishable, one from
the other, nor that dominion over each portion less exclusive, in their
respective owners. Hence, no right of redemption among co-owners
exists."20 (citation omitted)
". . . [T]he herein plaintiffs cannot deny the fact that they did not have
knowledge about the impending sale of this portion. The truth of the matter
is that they were properly notified. Reacting to such knowledge and
notification they wrote defendant Dr. Crisostomo Armada on February 22,
1979, a portion of said letter is revealing: 'Well you are the king of
yourselves, and you can sell your share of Levereza."21 (emphasis omitted)
After the physical division of the lot among the brothers, the community
ownership terminated, and the right of preemption or redemption for each
brother was no longer available.22
Under Art. 484 of the Civil Code, 23 there is co-ownership whenever the
ownership of an undivided thing or right belongs to different persons. There
is no co-ownership when the different portions owned by different people are
already concretely determined and separately identifiable, even if not yet

technically described.24 This situation makes inapplicable the provision on


the right of redemption of a co-owner in the Civil Code, as follows:
"Art. 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale
shall not be recorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining owners."
Moreover, we note that private respondent Jose Armada was well informed of
the impending sale of Crisostomo's share in the land. In a letter dated
February 22, 1979, Jose told his brother Crisostomo: "Well you are the king of
yourselves, and you can sell your share of Leveriza." 25 Co-owners with
actual notice of the sale are not entitled to written notice. A written notice is
a formal requisite to make certain that the co-owners have actual notice of
the sale to enable them to exercise their right of redemption within the
limited period of thirty days. But where the co-owners had actual notice of
the sale at the time thereof and/or afterwards, a written notice of a fact
already known to them, would be superfluous. The statute does not demand
what is unnecessary.26
Considering that respondent Court of Appeals erred in holding that herein
private respondent could redeem the lot bought by petitioners, the issue of
whether the appellate court erred in denying petitioners' motions for
reconsideration and new trial need not be delved into.1wphi1 The same is
true with respect to the questioned award of damages and attorney's fees.
Petitioners filed their complaint in good faith and as repeatedly held, we
cannot put a premium on the right to litigate.
WHEREFORE, the petition is GRANTED, the Decision of the Court of Appeals
dated March 25, 1994 and its Resolutions dated March 24, 1995 and
September 6, 1995 in CA-G.R. CV No. 30727 are ANNULLED and SET ASIDE.
Civil Case No. 8023-P is DISMISSED for lack of merit. The decision of the
Regional Trial Court of Pasay City, Branch 113, promulgated on August 29,
1989, is REINSTATED.
SO ORDERED.

25.

Calma v. Santos G.R. No. 161027

G.R. No. 161027

June 22, 2009

FRANCISCO G. CALMA, Petitioner,


vs.
ARSENIO SANTOS, LEONARDO SANTOS, DOMINADOR SANTOS,
ALFREDO SANTOS, LETICIA SANTOS, NATIVIDAD SANTOS, LIGAYA
SANTOS, ERLINDA SANTOS; the heirs of the deceased JOSE SANTOS,
namely, FELICIDAD SANTOS, AURELIA SANTOS, CONRADO SANTOS,
LOLITA SANTOS, FLORIDA SANTOS, and DANILO SANTOS; the heirs of
the deceased RUBEN SANTOS, namely, THELMA SANTOS, MAURO
SANTOS, BIMBO SANTOS, FELY SANTOS, PETER SANTOS, BABY
SANTOS, and ANTONIO SANTOS; and the heirs of the deceased
FEDERICO SANTOS, namely, ZENAIDA S. ALVIAR, ROMULO SANTOS,
JUDY S. AQUINO, MILA S. FULGENCIO and ERNESTO SANTOS,
Respondents.
DECISION
NACHURA, J.:
This is a Petition1 for review on certiorari under Rule 45 of the Rules of Court
of the Decision2 dated November 28, 2003 of the Court of Appeals in CA-G.R.
CV No. 57786.
The subject of this controversy is a property known as "Calangain Fishpond"
(Fishpond), with a total area of 480,229 square meters, located in Calangain,
Lubao, Pampanga. It is composed of Lot No. 1094, with an area of 297,605
square meters; Lot No. 7858, with an area of 7,952 square meters; Lot No.
7859, with an area of 6,011 square meters; and 135,350 square-meter
portion of Lot No. 1093, with an area of 300,384 square meters; all of the
Cadastral Survey of Lubao, and covered by Transfer Certificate of Title (TCT)
No. 32391-R3 of the Registry of Deeds of the Province of Pampanga. 4 The
Fishpond also comprises Lot No. 7860, with an area of 19,681 square meters;
and Lot No. 7862, with an area of 13,630 square meters, both of the
Cadastral Survey of Lubao, and covered by TCT No. 32392-R, 5 also of the
Registry of Deeds of Pampanga. Both TCTs are registered in the names of
CELESTINO Santos, a widower, with 1/2 share, and of his children, namely:

JOSE, married to Felicidad Cruz; ENCARNACION, married to German Escueta;


ARCADIO, married to Rosario Cruz; FELIZA, married to Bienvenido Garcia;
LEONARDO, widower; ARSENIO, married to Apolonia dela Cruz; DOMINADOR,
married to Marieta Suarez; LETICIA, married to Marcial Santos; NATIVIDAD,
single; LIGAYA, married to Rogelio Martin; ALFREDO and ERLINDA, both
single.
On April 11, 1975, Celestino Santos died. Aside from his heirs named in the
two certificates of title, Celestino had two other children, RUBEN and
FEDERICO, who are now both deceased.
On various dates, petitioner Francisco Calma purchased the following shares
from the Fishpond,6 to wit:
1. The 1/12 share of Encarnacion Santos-Escueta, owned by her in her
own right, to the 1/2 pro indiviso portion of the fishpond, and her 1/14
share, which she inherited from her deceased father, Celestino Santos,
to the other 1/2 pro indiviso portion of the fishpond, with an aggregate
area of 37,160.57 square meters;7
2. The 1/12 share of the deceased Arcadio Santos, owned by him in his
own right, to the 1/2 pro-indiviso portion of the fishpond, and his 1/14
share, which he inherited from his deceased father, Celestino Santos,
to the other one-half (1/2) pro-indiviso portion of the fishpond, with an
aggregate area of 37,160.57 square meters;8
3. The 1/12 share of Feliza Santos, owned by her in her own right, to
the 1/2 pro-indiviso portion of the fishpond, and her 1/14 share, which
she inherited from her deceased father, Celestino Santos, to the other
1/2 pro-indiviso portion of the fishpond, minus a portion of 5,000
square meters, which was previously sold to a certain Orlando Yamat,
with an aggregate area of 32,160.57 square meters;9
4. Ten Thousand (10,000) square meters (one (1) hectare) of the 1/14
share of the herein respondents heirs of the deceased Federico Santos,
which they inherited from the deceased Celestino Santos, to the 1/2
pro-indiviso portion of the fishpond owned by the said
deceased;10lavvphil

5. The 1/12 share of the respondent Leonardo Santos, owned by him in


his own right, to the 1/2 pro-indiviso portion of the fishpond with an
area of 20,009.54 square meters;11
6. The 1/12 share of the herein respondent Alfredo Santos, owned by
him in his own right, to the 1/2 pro-indiviso portion of the portion of
135,350 square meters on the southeastern part of Lot 1093 of the
Cadastral Survey of Lubao, which portion of 135,350 square meters is
included in and forms part of the Calangain Fishpond, with an area of
5,639 square meters;12
7. The 1/12 of the herein respondent Dominador Santos (substituted by
his heirs), owned by him in his own right, to the 1/2 pro-indiviso portion
of the fishpond, and his 1/14 share, which he inherited from his
deceased father, Celestino Santos, to the other 1/2 pro-indiviso portion
of the fishpond with an aggregate area of 37,160.57 square meters;13
8. The 1/12 share of the herein respondent Leticia Santos, owned by
her in her own right, to the 1/2 pro-indiviso portion of the fishpond, and
her 1/14 share, which she inherited from her deceased father,
Celestino Santos, to the other pro-indiviso portion of the fishpond, with
an aggregate area of 37,160.57 square meters;14 and
9. The 1/14 share of the herein respondent Leonardo Santos, which he
inherited from his deceased father, Celestino Santos, to the 1/2 proindiviso portion of the fishpond with an area of 17,151.03 square
meters.15 (Emphasis supplied.)
Petitioner then demanded from the other co-owners of the property the
identification and segregation of the shares he purchased from the rest of
the Fishpond. Due to the failure of respondents to cause the division as
demanded, petitioner filed a complaint for specific performance and
partition. The case was docketed as Special (SP) Civil Case No. G-63, and was
raffled to Branch 50 of the Regional Trial Court of Guagua, Pampanga.
Subsequently, the complaint was amended in order to identify the heirs of
the deceased Jose, Ruben, and Federico.16
Respondents Arsenio, Leonardo, Dominador, Leticia, Natividad, Ligaya,
Alfredo and Erlinda jointly filed an answer17 with compulsory counterclaim.

The respondent heirs of deceased Jose (Felicidad, Aurelia, Conrado, Lolita,


Florida, and Danilo), the respondent heirs of deceased Federico (Zenaida,
Romulo, Judy, and Ernesto), and the respondent heir of the deceased Ruben
(Antonio) filed a separate answer with compulsory counterclaim.
In their answers, respondents, in effect, admitted the existence of the deeds
of absolute sale and the other agreements covering the sale and transfer of
the undivided shares to the Fishpond in favor of petitioner, but alleged as
follows:
1. The said deeds of sale and agreements were all suffering from
insidious, grave and vital defects, vitiating their validity and
effectiveness;
2. The deceased Celestino Santos and the deceased Jose Santos have
already sold during their lifetime, to the herein respondent Arsenio
Santos their respective 1/2 and 1/12 of 1/2 undivided shares to the
Calangain Fishpond, and upon their death their said undivided shares
were not inherited and transmitted to their children and other heirs;
3. The herein petitioner as lessee of the Calangain Fishpond has been
delinquent for many years in the payment of the lease rentals thereon;
4. The herein petitioner has abused his rights as lessee by subleasing
portions of the Calangain Fishpond to other persons;
5. The herein petitioners rights as lessee over the Calangain Fishpond
had already expired;
6. The herein petitioner has no cause of action for partition against the
herein respondents, as not all the persons who have an interest in the
Calangain Fishpond were impleaded as parties in this action;
7. With respect to the shares of Celestino Santos, Jose Santos and
Leonardo Santos, the herein respondent Arsenio Santos has prior right
thereto superior to that of the herein petitioner; and
8. The herein respondents Arsenio Santos, Natividad Santos, Ligaya
Santos and Erlinda Santos have a right of legal redemption over the
undivided shares of the Calangain Fishpond sold to the herein
petitioner.18
Petitioner then filed his answer denying the compulsory counterclaims
denying the same.

After pre-trial and trial on the merits, the RTC rendered a Decision 19 dated
September 29, 1997 in favor of petitioner, disposing, as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in
favor of the plaintiff and against the defendants as follows:
a.) Ordering the defendant Leonardo Santos to execute in favor of the
plaintiff the corresponding deed of absolute sale and/or whatever other
documents which may be necessary to properly transfer and vest title
and ownership to the plaintiff over his one-fourteenth (1/14) share with
a total area of 17,151.03 square meters pro-indiviso portion of the
Calangain fishpond inherited from his deceased father, Celestino
Santos, which he had sold to the plaintiff;
b.) Ordering the defendant Dominador Santos (now his substituted
heirs) to execute in favor of the plaintiff the other corresponding deed
of absolute sale and/or whatever other documents which may be
necessary to properly transfer and vest title and ownership to the
plaintiff over all his shares, consisting of his 1/12 share, belonging to
him in his own right, to the pro-indiviso portion, and his 1/14 share,
inherited from his deceased father, Celestino Santos, to the other 1/2
pro-indiviso portion of the Calangain Fishpond, with a total area of 37,
160.57 square meters, more or less, which he had sold to the plaintiff;
c.) Ordering the defendant Leticia Santos to execute in favor of the
plaintiff the corresponding deed of absolute sale and/or whatever other
documents which may be necessary to properly transfer and vest title
and ownership to the plaintiff over all her shares, consisting of her 1/12
share, belonging to her in her own right, to the 1/2 pro-indiviso portion,
and her 1/14 share, inherited from her deceased father, Celestino
Santos, to the other, pro-indiviso portion of the Calangain Fishpond,
with a total area of 37,160.57 square meters, more or less, which she
had sold to the plaintiff;
d.) Ordering the defendants who still own pro-indiviso shares to the
Calangain Fishpond to partition and divide the said fishpond among
themselves and the plaintiff and have all the portions thereof sold to
and now owned by the plaintiff with a total area of 213,594.88 square
meters, more or less, segregated and awarded to the plaintiff and to
execute whatever document or documents as may be necessary to
properly effect such partition, division and segregation and the

issuance of the corresponding certificate of title in the name of the


plaintiff over the said portion of 213,594.88 square meters, more or
less;
e.) Ordering the defendants, jointly and severally to pay unto the
plaintiff the amount of P30,000.00 for and as attorneys fees;
f.) Ordering the defendants, jointly and severally, to pay unto the
plaintiff the amount of P10,000.00 as litigation expenses;
g.) Ordering the defendants, jointly and severally to pay the costs of
suit.
SO ORDERED.20
Respondents appealed the said RTC Decision to the Court of Appeals. In its
assailed Decision dated November 28, 2003, the Court of Appeals reversed
and set aside the RTC Decision. The dispositive portion of the CA decision
reads:
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and
another one entered as follows:
1. Declaring the deed of absolute sale dated March 11, 1975 executed
by Celestino Santos in favor of defendant-appellant Arsenio Santos as
valid;
2. Declaring that defendants-appellants Arsenio Santos, Natividad
Santos, Erlinda Santos and Ligaya Santos are entitled to exercise their
right of legal redemption under Article 1623 of the Civil Code with
respect to the shares of Encarnacion Santos-Escueta, Arcadio Santos,
Felisa Santos, Federico Santos, Leonardo Santos, Dominador Santos,
Leticia Santos and Alfredo Santos in the Calangain fishpond which were
sold by them to plaintiff-appellee, by returning to the latter the
consideration stated in their respective deeds of sale within the period
of thirty (30) days from the date of finality of this judgment;
3. Ordering plaintiff-appellee to execute the necessary deeds of
reconveyance of the aforesaid shares sold to him in the Calangain
fishpond, to and in favor of the defendants Arsenio Santos, Natividad
Santos, Ligaya Santos and Erlinda Santos upon their exercise of their
right of legal redemption; and

4. Ordering plaintiff-appellee to pay to defendant-appellant Arsenio


Santos the amount of P420,000.00, representing the balance of the
unpaid rentals due on the thirty (30) hectare undivided share of the
latter in the Calangain fishpond, plus the legal rate of interest thereon
from October 25, 1989, the date of the filing of the answer, until said
amount shall have been fully paid.
SO ORDERED.21
Hence, this petition raising the following issues:
1. The due execution and validity of the deed of absolute sale dated
March 11, 1975, executed by the deceased Celestino Santos over his
one-half (1/2) pro-indiviso share to the Calangain Fishpond in favor of
the herein respondent Arsenio Santos was upheld in the said decision
solely for the reason that the said deed of absolute sale is a notarized
document duly acknowledged before a notary public and the same has
in its favor the presumption of regularity, despite the fact that
sufficient proof has been adduced by the herein petitioner during the
trial to overcome such presumption of regularity, and, other than the
biased, flimsy, self-serving and incredible testimony of the herein
respondent Arsenio Santos, no other evidence, oral or documentary,
was presented by the herein respondents to sustain the validity and
the genuineness and due execution of the said deed of absolute sale;
2. The herein respondents Arsenio Santos, Natividad Santos, Erlinda
Santos and Ligaya Santos were declared entitled to exercise their right
of legal redemption under Article 1623 of the Civil Code with respect to
the shares of Encarnacion Santos-Escueta, Arcadio Santos, Feliza
Santos, Federico Santos, Leonardo Santos, Leticia Santos and Alfredo
Santos, in the Calangain Fishpond which were sold by them to the
herein petitioner, and the latter was ordered to execute the necessary
deeds of reconveyance to the said respondents upon their exercise of
their right to legal redemption, despite the fact that sufficient evidence
exists on record conclusively showing that the said respondents and all
the other respondents have actual notice of the said sales and they
made the herein petitioner believe that they all approve of the said
sales starting from the first sale up to the last sale, so much so, that
their right to redeem the shares covered by the said sales is now
barred by estoppel and or laches, because the said respondents slept

on their right to redeem the said shares covered by the said sales for a
long time, and it was only when they filed their answer to the amended
complaint when the said respondents claimed their right of legal
redemption;
3. The herein petitioner was ordered to pay the herein respondent
Arsenio Santos the amount of P420,000.00, representing the alleged
balance of the unpaid rentals due on the alleged thirty (30) hectare
undivided share of the said respondent in the Calangain Fishpond, plus
interests thereon, at the legal rate from October 25, 1989, until the
said amount is fully paid, despite the fact that it is very clear from the
evidence on record that the said respondent does not own thirty (30)
hectares pro-indiviso share to the Calangain Fishpond, but only a small
portion thereof, as he has not validly acquired ownership of the onehalf (1/2) pro-indiviso share of the deceased Celestino Santos to the
said fishpond, and that the herein petitioner has already paid to the
said respondent more rentals than what is actually due to the said
respondents;
4. The reversal
1997, rendered
CIVIL CASE NO.
respondents, is

and setting aside of the decision dated September 29,


in favor of the herein petitioner by the trial court in SP.
G-63, and the entry of a new one in favor of the herein
contrary to applicable laws and the evidence adduced
during the trial.22
While, admittedly, petitioner purchased several undivided shares to the
Fishpond, as shown by the various deeds of sale and receipts of payments he
presented in court, one critical question that we must resolve is whether or
not these shares include that portion pertaining to the 1/2 share of Celestino
Santos.
Respondent Arsenio claimed that the share of Celestino Santos, his father,
was sold to him on March 11, 1975, one month before Celestino died. As
proof, he presented before the court a Deed of Absolute Sale 23 of even date,
with a consideration of P24,000.00. The Deed was duly notarized.
It is a settled rule that a notarial document is evidence of the facts in the
clear unequivocal manner therein expressed; and has in its favor the
presumption of regularity.24 Notarization converts a private document into a
public document, thus making that document admissible in evidence without

further proof of its authenticity.25 A notarial document is, by law, entitled to


full faith and credit upon its face. Courts, administrative agencies, and the
public at large must be able to rely upon the acknowledgment executed by a
notary public and appended to a private instrument. 26 Indeed, a notarized
deed of absolute sale, being a public document, has in its favor the
presumption of regularity, which may only be rebutted by evidence so clear,
strong, and convincing as to exclude all controversy as to the falsity of the
certificate. Thus, the burden of proof to overcome the presumption of due
execution of a notarized document lies on the party contesting such
execution.27
In this case, it is the petitioner who has the onus of overcoming the
presumed regularity of the Deed of Absolute Sale, dated March 11, 1975, in
favor of respondent Arsenio. Petitioner, in attempting to discharge this
burden, cited the following circumstances:
1. The alleged deed of sale was executed on March 11, 1975, exactly
one (1) month before the deceased Celestino Santos died on April 11,
1975, at the ripe age of more than 75 years;
2. The deceased Celestino Santos was bedridden for a number of
weeks before he died;
3. The deceased Celestino could not read and write;
4. The respondent Arsenio Santos, who is a lawyer, was the one who
prepared the deed of sale;
5. Despite the fact that the respondents, who are the children and
grandchildren of the deceased Celestino Santos, claim in their answers
to the amended complaint filed in this case that the sale made by the
deceased Celestino Santos of his 1/2 pro-indiviso share to the
Calangain Fishpond to the respondent Arsenio Santos, was duly
executed and valid, with the exception of the respondent Arsenio
Santos, none of them, including the respondent Alfredo Santos, who
signed as witness to the deed of sale, and the respondent Natividad
Santos, who, according to the testimony of respondent Arsenio Santos,
accompanied the deceased Celestino Santos, were presented as
witnesses in court to testify and confirm the said sale and the due
execution and validity of the said deed of sale, when it could have been
very easy for them to do so, if the said sale was indeed true and real;

6. In the meeting with regards to the said sale called at the residence
of the counsel, Atty. Melquiades de Leon, of the respondents, where the
respondents Arsenio Santos, Natividad Santos and Ligaya Santos,
together with their said counsel, and the petitioner and his counsel,
Atty. Avelino Liangco, were present, the respondent Arsenio Santos, on
one hand, and the respondents Natividad Santos and Ligaya Santos, on
the other, quarreled, because the respondents Natividad Santos and
Ligaya Santos were questioning the validity of the said sale, claiming
that the same was not a true and real sale, but the respondent Arsenio
Santos was insisting that the said sale was true and real;
7. Despite the fact that the alleged deed of sale (Exhibit "4") over the
1/2 pro-indiviso share of the deceased Celestino Santos to the
Calangain Fishpond appears to have been executed as early as March
11, 1975, the same deed of sale was registered by the respondent
Arsenio Santos with the Registry of Deeds for the Province of
Pampanga only on September 4, 1989, or after more than fourteen (14)
years from its execution, and barely a month before the filing of the
complaint in this case on October 2, 1989, and only after a demand
letter for the segregation of the shares to the Calangain Fishpond sold
to the petitioner was sent to the said respondent; and
8. The insertion of the phrase "number of hectares to be determined"
in the receipt marked as Exhibit "6", which was prepared by the
respondent Arsenio Santos himself, indicating that he, himself, was not
sure of the number of hectares he owns of the Calangain Fishpond, and
this clearly shows that he was not yet certain at the time he prepared
the said receipt that the 1/2 pro-indiviso share of his deceased father,
Celestino Santos, to the Calangain Fishpond which was allegedly sold
to him on March 11, 1975, could be included the share that he owns to
the said fishpond.28
After evaluating the foregoing circumstances, we are of the opinion that they
are not sufficient to overcome the presumption of regularity in favor of the
validity of the questioned Deed. First, notwithstanding the first three
circumstances mentioned, petitioner failed to clearly establish that, at the
time the Deed was executed, Celestino was no longer capable of entering
into any transaction regarding his share of the Fishpond. Even if it is true that
Celestino did not personally appear before the notary public in Quezon City,
as claimed by petitioner, this alone does not nullify or render the parties

transaction void ab initio. It does not overcome the presumption of


truthfulness of the statements contained in the notarized document. 29
Second, there was no need to present the testimonies of the other heirs of
Celestino to confirm the sale, the Deed being a notarized document. Third,
the fact that it was respondent Arsenio, a lawyer, who prepared the Deed
does not affect the validity of the sale. Fourth, the fact that the siblings of
Arsenio quarreled with him regarding the authenticity of the sale of their
fathers share to him does not operate to invalidate the sale, especially
because petitioner admitted on cross-examination that, in that same
meeting, he already saw the assailed Deed. 30 Fifth, respondent Arsenio was
able to explain in court that the delay in registering the Deed was caused by
his having to negotiate with the other heirs to buy their respective shares,
and that he was still raising the money to pay for them. He testified that he
wanted to register together the deeds of sale in his favor, but his siblings
changed their minds. He further said that the deeds executed in his favor by
Celestino and his brothers Jose and Leonardo were misplaced, and he was
able to locate them only in August 1989. 31 On the other hand, petitioner
himself could not amply justify why he never registered the deeds of sale in
his favor executed by some of the Santos siblings. And sixth, the inclusion in
the receipt of the phrase "exact number of hectares still to be determined"
notwithstanding, the fact remains that petitioner acknowledged in the said
receipt32 the amount of rent that he was still obliged to pay respondent
Arsenio covering the period up to April 30, 1989. Petitioners admission that
he had to pay rentals up to April 30, 1989 strengthens our view that
Celestinos 1/2 share in the Fishpond could not have been validly sold to
petitioner.
However, the other conveyances covered by the deeds of absolute sale and
the receipts of payment in favor of petitioner involving the shares of the
Santos siblings in their own right cannot be voided. Article 493 of the Civil
Code provides that "(e)ach co-owner shall have the full ownership of his part
and of the fruits and benefits pertaining thereto, and he may therefore
alienate, assign or mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved." Thus, the coowners, being owners of their respective aliquots or undivided shares in the
subject property, can validly and legally dispose of their shares even

without the consent of all the other co-heirs.33 Accordingly, the vendors, coheirs of respondents, should return whatever amount they received from
petitioner corresponding to the 1/2 share of Celestino, which they were
supposed to have inherited and sold to petitioner, had Celestino not disposed
of this 1/2 share to respondent Arsenio. Moreover, Dominador and Leticia,
who both have not yet executed the appropriate deeds of absolute sale
despite receipt of the purchase price for their respective shares, must now
execute the proper deeds of absolute sale, but only with respect to the
shares they own in their own right.
With particular reference to the share of Leonardo, this Court notes that the
Deed of Absolute Sale34 in favor of respondent Arsenio was executed on May
10, 1977, while the Deeds of Absolute Sale 35 in favor of petitioner were
executed on December 29, 1977. All the deeds are notarized documents and,
thus, are presumed valid and regular until the contrary is sufficiently and
clearly shown. It appears that Leonardo sold the same property twice. The
governing principle in cases of double sale is primus tempore, potior jure
(first in time, stronger in right), as specifically provided in Article 1544 36 of
the Civil Code. Thus, the one who acquires it and first records it, in good
faith, in the Registry of Property shall be deemed the owner of the property
subject of the controversy. In this case, the rightful owner is respondent
Arsenio, because he registered the Deed of Absolute Sale in his favor with
the Registry of Deeds of Pampanga on September 4, 1989, as evidenced by
Entry No. 7587 found in both TCT Nos. 32391-R and 32392-R, while petitioner
did not cause the registration of the deeds in his favor. However, Leonardo
should reimburse the amount of P21,002.00 which he received from
petitioner, as evidenced by the 12 receipts37 executed by him.
On the issue of legal redemption, Article 1623 of the Civil Code provides
ART. 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale
shall not be recorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.

Interpreting this provision, we have enumerated the requisites for the


exercise of legal redemption, as follows: (1) there must be co-ownership; (2)
one of the co-owners sold his right to a stranger; (3) the sale was made
before the partition of the co-owned property; (4) the right of redemption
must be exercised by one or more co-owners within a period of thirty days to
be counted from the time he or they were notified in writing by the co-owner
vendor; and (5) the vendee must be reimbursed the price of the sale. 38 With
respect to the written notice, the exception is when a co-owner has actual
notice of the sale.39
Petitioner argues that his situation falls within the exception; that
respondents had actual notice of the sale of the several shares in the
Fishpond, and that they are estopped from questioning the lack of written
notice to them. We disagree.
We note that petitioners testimony that he verbally notified respondent
Arsenio of the sale to him of some undivided portions of the Fishpond was
corroborated by another witness, Atty. Avelino Liangco. Thus, petitioner
claims that it should be given more weight than the uncorroborated and lone
testimony of respondent Arsenio to the contrary. However, it should be
remembered that Atty. Liangco is the counsel of petitioner and, being the
agent of the latter, cannot really qualify as an independent witness.
Accordingly, we are still confronted with the contradicting claims of petitioner
and respondents. On this particular point, we rule in favor of respondents,
because of petitioners admission of the existence of a lease, and of the
admitted obligation to pay rent on the subject property. 40 We find such an
admission antithetical to the claim that petitioner notified respondents of his
purchase of portions of the Fishpond. In this light, we must sustain
respondents entitlement to redeem the portions sold to petitioner upon the
finality of judgment in this case. As a necessary consequence, petitioners
action for partition will not prosper, unless respondents fail to redeem the
property sold.
Finally, there is the matter of petitioners acknowledgment of rentals due
Arsenio up to April 30, 1989 for the latters share in the Fishpond, although
the receipt stated that the exact number of hectares is still to be determined.
By acknowledging his obligation to pay rentals, he also impliedly admitted
the ownership of Arsenio over the 1/2 share of Celestino. Receipt of the two

letters, dated July 18, 198841 and March 14, 1989,42 sent by respondent
Arsenio to petitioner demanding the payment of his outstanding obligation in
the amount of P300,000.00 was admitted by petitioner. There is nothing on
record showing that he ever replied to these letters, much less, question the
amount being demanded therein. Not having sufficiently denied the
existence of the lease, petitioner is, thus, bound to pay the proper rent in the
amount that appears in the receipt and the demand letters. Furthermore,
petitioner is still liable for the additional amount of P120,000.00,
representing the unpaid rentals from April 30, 1989 to October 30, 1989,
since it was only on November 1, 1989 that respondent Arsenio was able to
take possession of the Fishpond upon the expiration of petitioners contract
of sub-lease with a certain Buenaventura Bautista,43 which fact was not
rebutted by petitioner. In sum, the CA was correct in declaring petitioner
liable to pay unpaid rentals on the Fishpond in the total amount of
P420,000.00.
WHEREFORE, the assailed Decision dated November 28, 2003 of the Court of
Appeals is AFFIRMED with the MODIFICATION that:
1. Dominador Santos and Leticia Santos, or their heirs, are ordered to
execute the proper Deeds of Absolute Sale pertaining to their own
shares in the Calangain Fishpond in favor of petitioner;
2. Encarnacion Santos-Escueta, Arcadio Santos, Feliza Santos, Federico
Santos, Alfredo Santos, Dominador Santos, and Leticia Santos, or their
heirs, are ordered to reimburse petitioner the purchase price pertaining
to the share of Celestino Santos, with legal interest thereon from
October 25, 1989, the date of the filing of the answer, until said
amount shall have been fully paid;
3. Leonardo Santos, or his heirs, are ordered to reimburse petitioner
the amount of P21,002.00 paid by the latter as purchase price for
Leonardos share of the Calangain Fishpond, with legal interest thereon
from October 25, 1989, the date of the filing of the answer, until the
said amount shall have been fully paid.
Costs against petitioner.
SO ORDERED.
26.

Salatandol vs. Retes

G.R. No. L-38120 June 27, 1988


FLAVIA SALATANDOL, assisted by her husband Jose Binondo,
MANUELA SALATANDOL, assisted by her husband Eliseo Repollo,
FAUSTA SALATANDOL, assisted by her husband Roberto Bacarra,
DEMETRIO SALATANDOL, AGAPITO SALATANDOL, and GLICERIA
SALATANDOL, assisted by her husband Dioscoro Oca, plaintiffsappellees,
vs.
CATALINA RETES defendant-appellant.
Victoriano B. De la Cruz for plaintiffs-appellees.
Lenin R. Victoriano for defendant-appellant.

PADILLA, J.:
This is an appeal interposed by the defendant from the decision * of the
Court of First Instance of Negros Oriental, dated 31 May 1966, in Civil Case
No. 4367, which allowed the plaintiffs, as co- owners, to exercise the right of
legal pre-emption, provided for in Art. 1623 of the Civil Code, and ordered
the defendant to accept the pre-emption price, plus expenses of sale, to
execute the corresponding deed of conveyance or quitclaim in favor of the
plaintiffs, to pay said plaintiffs the amount of P300.00 as attorney's fees, and
to pay the costs of suit.
The decision is based upon facts stipulated by the parties, which are as
follows:
1. That the parties have agreed or admitted that the late
EUFEMIA OMOLE was the registered owner of one-third (1/3)
share of Lot No. 513 of the Cadastral Survey of Ayuquitan as
evidenced by Original Certificate of Title No. O-V 9307;
2. That plaintiffs are likewise the registered owners of one-third
(1/3) share of Id Lot No. 513 of the Cadastral Survey of Ayuquitan
and the co-owners of said Eufemia Omole;
3. That on January 17,1965, EUFEMIA OMOLE sold her one-third
(1/3) share of said Lot No. 513 for P l,000.00 to defendant
CATALINA RETES as evidenced by a Deed of Sale ratified by
Notary Public Gumersindo B. Silorio and entered in his Notarial

Register as Doc. No. 7; Page No. 49; Book No. II; Series of 1965
(Annex 'A' of the complaint);
4. That on January l8, 1965 theRegister of Deeds or the Province
of Negros Oriental wrote to plaintiff Flavia Salatandol which letter
was received on January 21, 1965 informing her about the
document presented for registration affecting the one-third (1/3)
share of Lot No. 513 in favor of Defendant Catalina Salatandol to
surrender the owner's Duplicate Certificate of Title (bearing No.
0-V-9307 (Annex 'B');
5. That Plaintiffs were never notified by the late EUFEMIA OMOLE
nor by Defendant Catalina Retes about the proposed sale;
6. That on January 30, 1965, Plaintiffs wrote to Defendant
CATALINA RETES informing her of their desire to repurchase the
said one-third (1/3) share of Lot No. 513 which the late Eufemia
Omole sold to her and failing to get a favorable action from
Defendant Catalina Retes, Plaintiffs on February 5, 1965
deposited the amount of Pl,000.00 with the Clerk of the Court of
First Instance of Negros Oriental and who, on February 13, 1965
wrote Defendant Catalina Retes informing the latter about the
deposit and of Plaintiffs' desire to exercise their right of preemption as co-owners of Eufemia Omole (See Annexes 'c,' and
'D');
7. That when Defendant Catalina Retes failed to get the deposit
with the Clerk of Court, on February 16, 1965 (plaintiffs) filed the
instant action for Legal Pre-emption;
8. That on February 22, 1965 while this case was still pending,
Defendant Catalina Retes resold the said one-third (1/3) share of
Lot No. 513 back to EUFEMIA OMOLE which sale is evidenced by a
public instrument ratified by Notary Public Alfonso B. Arrieta and
entered in his Notarial Register as Doc. No. 234; Page 60; Book
No. VIII; Series of 1965;
9. That on March 11, 1965 Eufemia Omole donated the said onethird (1/3) share of Lot No. 513 to Defendant Catalina Retes as
evidenced by a Deed of Donation ratified by Notary Public
Alfonso B. Arrieta and entered in his Notarial Register as Doc. No.

258; Page No. 65; Book No. VIII; Series of 1965, a copy of which is
hereto attached and made integral parts hereof;
10. That Plaintiffs incurred the amount of P 500.00 as attorney's
fees by reason of this case and other legal expenses;
11. That both the Plaintiffs and Defendant have agreed that the
foregoing facts are admitted and shall require no further
evidence to prove the same;
12. That Plaintiffs and Defendant have agreed that the Court
shall consider the foregoing facts in addition to the facts already
admitted in the pleadings; and
13. That Plaintiffs and Defendant have agreed to submit this case
for the decision of this Court with the admission of the foregoing
stipulation of facts. 1
In certifying this case to the Court, the Court of Appeals, to which the appeal
was originally addressed, found that the issue raised is one of law and is:
It is the posture of the appellant that under the provisions of Art.
1623 Civil Code 'the right of legal pre-emption or redemption
shall not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as the case
may be ... and since it is admitted that no notice was given to the
appellees or by the vendor, Eufemia Omole, no right of legal
preemption accrued in favor of the appellees. 2
The appeal is impressed with merit. In Butte vs. Manuel Uy and Sons, Inc., 3
the Court ruled that Art. 1623 of the Civil Code clearly and expressly
prescribes that the thirty (30) days for making the pre-emption or
redemption are to be counted from notice in writing by the vendor. The Court
said:
... The text of Article 1623 clearly and expressly prescribes that
the thirty days for making the redemption are to be counted from
notice in writing by the vendor. Under the old law (Civil Code of
1889, Art. 1524), it was immaterial who gave the notice; so long
as the redeeming co-owner leamed of the alienation in favor of
the stranger, the redemption period began to run. It is thus
apparent that the Philippine legislature in Article 1623

deliberately selected a particular method of giving notice, and


that method must be deemed exclusive (39 Am. Jur., 237; Payne
vs. State, 12 S.W. (2d) 528). As ruled in Wampler vs. Lecompte,
150 Atl. 458(aff'd in 76 Law Ed. [U.S.] 275)
Why these provisions were inserted in the statute we
are not informed, but we may assume until the
contrary is shown, that a state of facts in respect
thereto existed, which warranted the legislature in so
legislating.'
The reasons for requiring that the notice should be given by the
seller, and not by the buyer, are easily divined. The seller of an
undivided interest is in the best position to know who are his coowners that under the law must be notified of the sale. Also, the
notice by the seller removes all doubts as to fact of the sale, its
perfection, and its validity, the notice being a reaffirmation
thereof; so that the party notified need not entertain doubt that
the seller may still contest the alienation. This assurance would
not exist if the notice should be given by the buyer.
In the case at bar, the plaintiffs have not been furnished any written notice of
sale or a copy thereof 4 by Eufemia Omole, the vendor. Said plaintiffs' right
to exercise the legal right of preemption or redemption, given to a co-owner
when any one of the other co-owners sells his share in the thing owned in
common to a third person, as provided for in Article 1623 of the Civil Code,
has not yet accrued. 5
But, even assuming ex gratia argurmenti, that the notice from the Register of
Deeds of Negros Oriental to co-plaintiff Flavia Salatandol of the document
transferring the one-third (1/3) share of Eufemia Omole to defendant, was
equivalent to notice from the vendor, still, it appears that, while the disputed
one-third (1/3) portion of Eufemia Omole and the one-third (1/3) share of the
plaintiffs, (there is no mention of the other third portion) are embraced in one
certificate of title, there had been an actual partition of the land described in
the certificate of title and each co-owner is in possession of his respective
share. This is deduced from the order of the trial court, dated 30 July 1966,
where the court restrained the parties from harvesting the nuts on the "and
in question," 6 referring to the one-third (1/3) share of Eufemia Omole. As
expressed in Article 484 of the Civil Code, a co-ownership exists whenever

the ownership of an undivided thing or right belongs to different persons.


Under such concept, a co-owner cannot point to a particular portion of the
property owned in common as his own, because his portion thereof is
intangible rather than identifiable. Here, the portion of Eufemia Omole as
well as those of the plaintiffs had been identified and localized, so that coownership, in its real sense, no longer exists. Hence, the right of redemption
or pre-emption under Article 1620 of the Civil Code can no longer be invoked
by the plaintiffs over the portion appertaining to Eufemia Omole. 7
WHEREFORE, the judgment appealed from is hereby REVERSED and SET
ASIDE and another one entered dismissing the complaint. Without costs. SO
ORDERED.

27.

Cabrera vs. Villanueva GR No. 75069

G.R. No. 75069 April 15, 1988


ERLINDA O. CABRERA, petitioner,
vs.
VICTORIANA E. VILLANUEVA and INTERMEDIATE APPELLATE COURT,
respondents.
Antonio B. Abinoja & Associates for petitioner.
Severo C. Oebanda, Jr. for respondents.

PARAS, J.:
This is a petition for review by way of appeal by certiorari of the judgment 1
of the Intermediate Appellate Court (now known as the Court of Appeals),
dated June 20, 1986, reversing the judgment 2 of the Regional Trial Court of
Manila dated January 25, 1985 in a civil action for Legal Redemption of real
property entitled "Erlinda O. Cabrera vs. Victoriana E. Villanueva."
Petitioner is a co-owner of a real property situated in Manila, originally
covered by TCT No. 64950 of the Registry of Deeds of Manila. On March 12,
1968, by way of a Deed of Absolute Sale, Feliciano Oropesa and Antonio
Oropesa, co-owners of said property, sold their shares of 14/112 each pro
indiviso or 28/112 share, for and in consideration of the sum of P6,000.00
each or a total of P12,000.00 to Victoriana E. Villanueva (private respondent

herein). The following year, in 1969, by reason of said sale TCT No. 64950
was cancelled and in lieu thereof, TCT No. 96437, was issued by the Registry
of Deeds of Manila wherein the buyer was constituted as a co-owner pro
indiviso of the entire parcel, to the extent of the 28/112 share. This was after
the former owners Feliciano and Antonio, both surnamed Oropesa, had
executed a Joint Affidavit dated April 1, 1968 attesting to the fact that they
had notified in writing the co-owners of the property in question and said coowners did not and could not offer any objection thereto. Several years after,
the buyer Victoriana E. Villanueva as the new co-owner, sent a letter dated
September 23, 1980 thru her counsel, to Erlinda 0. Cabrera, the other coowner, proposing to her the partition of the property in question. The latter
did not agree to such proposal; instead, in her letter, dated October 30,
1980, addressed to Villanueva, she offered to redeem the 28/112 share of
the latter in the property. Villanueva refused such proposal, hence the filing
of an action for legal redemption by the former. Both parties admitted the
aforementioned facts by stating them in their Stipulation of Facts submitted
to the trial court.
After due trial, the lower court rendered judgment in favor of plaintiff, its
dispositive portion reading as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
3 ordering the defendant 4 to re-sell to plaintiff by way of legal
redemption the 28/112 share pro indiviso of the property
described in Transfer Certificate of Title No. 964557 of the
Registry of Deeds of Manila, upon the plaintiff paying the
defendant the sum of P12,000.00, the defendant to execute
necessary Deed of Conveyance and the Register of Deeds of the
City of Manila to register said Deed of Conveyance in said
transfer certificate of title; ordering defendant to pay to plaintiff
the sum of P5,000.00 for and as attorney's fees. No
pronouncement as to costs. (Rollo, p. 17)
Defendant appealed from said decision to the respondent appellate court
assigning the following errors:
I. The trial court committed grave and reversible error in holding
that there was no written notice to the co-owners regarding the
sale of the subject property to herein defendant-appellant;

II. The trial court committed an error in holding that plaintiffappellee has tendered redemption within the reglementary
period.
Ruling on these issues, the respondent appellate court held that the plaintiffappellee was duly notified in Writing of the sale to defendant-appellant and
that the former failed to exercise this right of redemption within the period
provided by law as its basis in reversing the judgment of the lower court and
in entering a new judgment declaring defendant-appellant the lawful coowner of the 28/112 share of the property in question barring any right of the
plaintiff-appellee to redeem.
Plaintiff-appellee now appeals to Us by way of a petition for certiorari
submitting the following issues:
1. Did the Intermediate Appellate Court resolve the issue on whether or not
the petitioner was legally and duly notified of the sale of the 28/112 share of
the property in question in the light of Art. 1623 of the New Civil Code?
2. If such notice was served on the petitioner, whether she has exercised her
right of legal redemption within the prescribed 30-day period.
Petitioner's contention holds no water. Petitioner anchors her claim on Art.
1623 of the Civil Code which reads:
The right of legal pre-emption or redemption shall not be
exercised except within 30 days from the notice in writing by the
prospective vendor, or by the vendor as the case may be. The
deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has
given written notice thereof to all possible redemptioners.
xxx xxx xxx
For the legal and effective exercise of the right of legal redemption one must
make the offer within the period set down in Art. 1623. In other words, if no
claim or offer is made within said period, no action win be allowed to enforce
the right of redemption. It is necessary however to determine first if and
when the written notice of sale was duly served by the vendors to their coowner.
Petitioner alleges that she never received any written notice of the sale from
her co-owners or the vendors of their respective shares to the private

respondent herein. Petitioner claims that she came to know only of such sale
when she received on September 30, 1980 a letter from the private
respondent, dated September 23, 1980, proposing the partition of the
property in question. She rejected the proposal and offered instead to
redeem the property in her letter, dated and posted on October 30, 1980 and
received by the private respondent through registered mail on November 6,
1980.
We have no doubt that petitioner had actual knowledge of the sale, she
having been informed verbally by the private respondent herself as they
were neighbors (t.s.n. Umali-Ozaeta, p. 14, June 25, 1984). It may be also
inferred from the fact that private respondent, as the present co-owner,
receives her monthly share of the rentals collected from the tenants of the
property owned in common and that her share of the real estate tax is also
being deducted from said rentals every 3 months from and by the game
person, Mrs. Rosita Oropesa Panopio, an aunt of the petitioner who is the
collector of the rentals due and who was also a witness to the deed of
absolute sale executed by the previous co-owners in favor of private
respondent. But We have adhered to the principle that notwithstanding the
actual knowledge of a owner, he or she is still entitled to a written notice
from the vendor-co-owner in order to remove all uncertainty as to the sale,
its terms and validity and to quiet any doubts that the alienation is not
definitive (Conejero v. Court of Appeals, 16 SCRA 775).
The law however does not require a specific form of written notice to the
redemptioner. A reading of the Joint Affidavit, (Exhs. "A" & "4") executed by
the vendors Feliciano and Antonio both surnamed Oropesa, affirms the fact
that a written notice of the sale was really sent by them to their co-owner
petitioner herein, to wit:
That sometime ago we notified in writting our co-owners that we
are selling our respective shares to Miss Victoria Villanueva and
that we further informed them that they have the preference to
purchase our shares;
That our co-owners offered no objection in selling our respective
shares to Miss Victorians Villanueva.
When confronted with the affidavit in open court affiant Feliciano Oropesa
repudiated it stating that the signature appearing at the bottom appears like
his signature but that he did not sign it. As he is impugning a notarial

document mere denial is not enough. A notarial document is evidence of the


facts in clear unequivocal manner therein expressed. It has in its favor the
presumption of regularity. To contradict all these, there must be evidence
that is clear, convincing and more than merely preponderant (Yturralde v.
Aganon, 28 SCRA 407). Their denial of having allegedly executed said Joint
Affidavit is belied by their own Deed of Absolute Sale in favor of private
respondent (p. 71, Records CFI, CC#136506, Exhibits "A" & "I"), a document
both parties admit as genuine and true, acknowledged before the same
notary public before the execution of the Joint Affidavit. A comparison of the
2 deeds shows that the signatories in both are one and the game persons.
His denial is belied by his having signed the deed of sale, the authenticity of
which is admitted by both parties in this case.
Another important consideration is the fact that previous to this denial both
parties submitted in court their Stipulation of Facts, the pertinent portion of
which reads as follows:
That on 1 April 1968 Feliciano and Antonio, both surnamed
Oropesa, have executed an affidavit an attesting to the fact that
they have notified in writing the other co-owner of the property in
question that they were selling their respective shares on the
said property to the defendant and said co-owner did not offer
any objection thereto.
On appeal to Us, petitioner now argues that though it was stipulated (par. 3,
Stipulation of Facts) that the vendors executed the Joint Affidavit in question,
the same was only made to admit its existence as an instrument to be used
by private respondent and thereby allow it to be put in argument or as an
evidence to be evaluated in the trial itself but never an admission of its
probative value per se that it amounted to an actual notice or written notice
to petitioner of the sale of the shares of her co-owners in the property under
co-ownership and that the said Joint Affidavit was executed merely and solely
for the purpose of meeting and satisfying the legal requirements under Art.
1623 New Civil Code but not the substantial spirit of the law of notifying or
giving notice to the other co-owner as a possible redemptioner, like
petitioner herein, so as to apprise them of their right under Art. 1623 of legal
pre-emption or redemption. (pp. 3 & 4, Memorandum for Petitioner,
Emphasis Ours).
We agree with petitioner that the Joint Affidavit does not amount to that
written notice required by law. However, it is clearly a written affirmation

under oath that the required written notice of sale was given to the other coowner. Against affiants' own sworn written admission that indeed the
required written notice of sale was duly served upon their co-owners, the oral
denials thereof should not be given much credence. Written admissions,
especially those stipulated in court and certified to by the seal of a notary
public, have always been considered as evidence of the highest order
against those making them (Valencia v. Tantoco, 99 Phil. 824, Adiso v.
Guzman, 37 Phil. 652). No person in his right senses or in the full possession
of his faculties would make an admission unless the same were true. "A
man's acts, conduct and declarations, Whenever made, and provided they
are voluntary, are admissible against him, for the reason that it is fair to
presume that they correspond to the truth, and it is his fault if they do not.
(U.S. vs. Ching Po, 23 Phil. 578). One can only guess what impelled them to
do so, but Feliciano and Antonio Oropesa, could not just simply testify away
what both had, way back in 1968, solemnly sworn to as true in said Joint
Affidavit; that they had first offered in writing their shares in the property to
petitioner who, apparently not interested therein, did not object to their
selling the same to private respondent thereafter. Said written sworn
statement was executed by them ante litem motam, (the original case
having been filed only in 1980) when no motive for them to falsify the same
existed. On the other hand, their credibility in disowning said statement
several years later, with the controversy on the matter already raging in
court, is open to serious question. And the fact that they are the uncles of
the petitioner cannot but create doubts as to their present veracity. Since
there is no evidence on record as to when the written notice of the sale
referred to in the Joint Affidavit was given to petitioner, We can only assume
that it was made before April 1, 1968, the date of the Joint Affidavit. Counting
therefore from this date, petitioner has already lost her right to redeem the
property under Art. 1623 when she made her offer to redeem from private
respondent in her letter dated October 30, 1980.
Furthermore, on April 21, 1969, T.C.T. No. 96437 was issued by the Registry
of Deeds of Manila. In said title it is already reflected that private respondent
Victoriana Villanueva is a co-owner (to the extent of a 28/112 portion) of the
property in question. It can be safely assumed that copy of the title reflecting
private respondent as a co-owner was also issued to petitioner on 1969.
Moreover Section 50 of the LRC expressly provides that the registration of
the deed is the only operational act to bind or affect the property. From that
time on, petitioner was already in full and actual knowledge of the fact that

private respondent had acquired the shares of Antonio and Feliciano


Oropesa. For more than ten years, petitioner remained unperturbed by the
fact that private respondent was already registered as a co-owner and her
uncles were no longer co-owners. It was only several years later when the
value of the property considerably increased that petitioner asserted her
claim re the right to redeem under Art. 1623. Petitioner has thus slept on her
rights and is now estopped from questioning the validity of the sale. We may
even regard the receipt of a copy of the transfer certificate of title, indicating
private respondent as one of the co-owners, as service of the written notice
required by Art. 1623. Clearly, petitioner's right to redeem expired a long
time ago.
Finally, We should not lose sight of the fact that the letter of private
respondent (thru counsel) dated September 23, 1980 to petitioner informing
the latter of the acquisition of a portion of the property is by ITSELF a written
notice of the purchase. Since the 30-day period expired by October 30, 1980
without redemption being exercised it follows that the right to redeem has
already been lost.
WHEREFORE, premises considered, the assailed decision of the appellate
court is AFFIRMED, in all respects and the instant petition is DENIED.
SO ORDERED.