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THIRD DIVISION

G.R. No. 52267 January 24, 1996


ENGINEERING & MACHINERY CORPORATION vs. COURT OF APPEALS and PONCIANO L. ALMEDA

DECISION

PANGANIBAN, J.:

Is a contract for the fabrication and installation of a central air-conditioning system in a building, one of "sale" or "for a piece of work"?
What is the prescriptive period for filing actions for breach of the terms of such contract?

These are the legal questions brought before this Court in this Petition for review on certiorari under Rule 45 of the Rules of Court, to
set aside the Decision1 of the Court of Appeals2 in CA-G.R. No. 58276-R promulgated on November 28, 1978 (affirming in toto the
decision3 dated April 15, 1974 of the then Court of First Instance of Rizal, Branch II 4 , in Civil Case No. 14712, which ordered petitioner
to pay private respondent the amount needed to rectify the faults and deficiencies of the air-conditioning system installed by petitioner
in private respondent's building, plus damages, attorney's fees and costs).

By a resolution of the First Division of this Court dated November 13, 1995, this case was transferred to the Third. After deliberating on
the various submissions of the parties, including the petition, record on appeal, private respondent's comment and briefs for the
petitioner and the private respondent, the Court assigned the writing of this Decision to the undersigned, who took his oath as a
member of the Court on October 10, 1995.

The Facts

Pursuant to the contract dated September 10, 1962 between petitioner and private respondent, the former undertook to fabricate,
furnish and install the air-conditioning system in the latter's building along Buendia Avenue, Makati in consideration of P210,000.00.
Petitioner was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The system
was completed in 1963 and accepted by private respondent, who paid in full the contract price.

On September 2, 1965, private respondent sold the building to the National Investment and Development Corporation (NIDC). The
latter took possession of the building but on account of NIDC's noncompliance with the terms and conditions of the deed of sale, private
respondent was able to secure judicial rescission thereof. The ownership of the building having been decreed back to private
respondent, he re-acquired possession sometime in 1971. It was then that he learned from some NIDC, employees of the defects of
the air-conditioning system of the building.

Acting on this information, private respondent commissioned Engineer David R. Sapico to render a technical evaluation of the system in
relation to the contract with petitioner. In his report, Sapico enumerated the defects of the system and concluded that it was "not
capable of maintaining the desired room temperature of 76F - 2F (Exhibit C)"5 .

On the basis of this report, private respondent filed on May 8, 1971 an action for damages against petitioner with the then Court of First
Instance of Rizal (Civil Case No. 14712). The complaint alleged that the air-conditioning system installed by petitioner did not comply
with the agreed plans and specifications. Hence, private respondent prayed for the amount of P210,000.00 representing the
rectification cost, P100,000.00 as damages and P15,000.00 as attorney's fees.

Petitioner moved to dismiss the complaint, alleging that the prescriptive period of six months had set in pursuant to Articles 1566 and
1567, in relation to Article 1571 of the Civil Code, regarding the responsibility of a vendor for any hidden faults or defects in the thing
sold.

Private respondent countered that the contract dated September 10, 1962 was not a contract for sale but a contract for a piece of work
under Article 1713 of the Civil Code. Thus, in accordance with Article 1144 (1) of the same Code, the complaint was timely brought
within the ten-year prescriptive period.

In its reply, petitioner argued that Article 1571 of the Civil Code providing for a six-month prescriptive period is applicable to a contract
for a piece of work by virtue of Article 1714, which provides that such a contract shall be governed by the pertinent provisions on
warranty of title and against hidden defects and the payment of price in a contract of sale6 .

The trial court denied the motion to dismiss. In its answer to the complaint, petitioner reiterated its claim of prescription as an affirmative
defense. It alleged that whatever defects might have been discovered in the air-conditioning system could have been caused by a
variety of factors, including ordinary wear and tear and lack of proper and regular maintenance. It pointed out that during the one-year
period that private respondent withheld final payment, the system was subjected to "very rigid inspection and testing and corrections or
modifications effected" by petitioner. It interposed a compulsory counterclaim suggesting that the complaint was filed "to offset the
adverse effects" of the judgment in Civil Case No. 71494, Court of First Instance of Manila, involving the same parties, wherein private
respondent was adjudged to pay petitioner the balance of the unpaid contract price for the air-conditioning system installed in another
building of private respondent, amounting to P138,482.25.

Thereafter, private respondent filed an ex-parte motion for preliminary attachment on the strength of petitioner's own statement to the
effect that it had sold its business and was no longer doing business in Manila. The trial court granted the motion and, upon private
respondent's posting of a bond of F'50,000.00, ordered the issuance of a writ of attachment.

In due course, the trial court rendered a decision finding that petitioner failed to install certain parts and accessories called for by the
contract, and deviated from the plans of the system, thus reducing its operational effectiveness to the extent that 35 window-type units
had to be installed in the building to achieve a fairly desirable room temperature. On the question of prescription, the trial court ruled
that the complaint was filed within the ten-year court prescriptive period although the contract was one for a piece of work, because it
involved the "installation of an air-conditioning system which the defendant itself manufactured, fabricated, designed and installed."

Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. Hence, it instituted the instant petition.

The Submissions of the Parties

In the instant Petition, petitioner raised three issues. First, it contended that private respondent's acceptance of the work and his
payment of the contract price extinguished any liability with respect to the defects in the air-conditioning system. Second, it claimed that
the Court of Appeals erred when it held that the defects in the installation were not apparent at the time of delivery and acceptance of
the work considering that private respondent was not an expert who could recognize such defects. Third, it insisted that,
assuming arguendo that there were indeed hidden defects, private respondent's complaint was barred by prescription under Article
1571 of the Civil Code, which provides for a six-month prescriptive period.

Private respondent, on the other hand, averred that the issues raised by petitioner, like the question of whether there was an
acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple
inspection, involve questions of fact which have been passed upon by the appellate court.

The Court's Ruling

The Supreme Court reviews only errors of law in petitions for review on certiorari under Rule 45. It is not the function of this Court to re-
examine the findings of fact of the appellate court unless said findings are not supported by the evidence on record or the judgment is
based on a misapprehension of facts7 of Appeals erred when it held that the defects in the installation were not apparent at the time of
delivery and acceptance of the work considering that private respondent was not an expert who could recognize such defects. Third. it
insisted that, assuming arguendo that there were indeed hidden defects, private respondent's complaint was barred by prescription
under Article 1571 of the Civil Code, which provides for a six-month prescriptive period.

Private respondent, on the other hand, averred that the issues raised by petitioner, like the question of whether here was an
acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple
inspection, involve questions of fact which have been passed upon by the appellate court.

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found
by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or conjectures;
when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the
appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings went beyond the
issues of the case and the same are contrary to the admissions of both appellant and appellee. After a careful study of the
case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts
below.8

We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t is not the function of this Court to
assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly where,
such as here, the findings of both the trial court and the appellate court on the matter coincide.9 (Emphasis supplied)

Hence, the first two issues will not be resolved as they raise questions of fact.

Thus, the only question left to be resolved is that of prescription. In their submissions, the parties argued lengthily on the nature of the
contract entered into by them, viz., whether it was one of sale or for a piece of work.

Article 1713 of the Civil Code defines a contract for a piece of work thus:

By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of
a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material.
A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing
transferred is one not in existence and which would never have existed but for the order, of the person desiring it 10 . In such case, the
contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the
subject of a sale to some other person even if the order had not been given, then the contract is one of sale11 .

Thus, Mr. Justice Vitug12 explains that -

A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures
or procures for the general market, whether the same is on hand at the time or not is a contract of sale, but if the goods are to
be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a
piece of work (Art. 1467, Civil Code). The mere fact alone that certain articles are made upon previous orders of customers will
not argue against the imposition of the sales tax if such articles are ordinarily manufactured by the taxpayer for sale to the
public (Celestino Co. vs. Collector, 99 Phil. 841).

To Tolentino, the distinction between the two contracts depends on the intention of the parties. Thus, if the parties intended that at some
future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale.
But if one of the parties accepts the undertaking on the basis of some plan, taking into account the work he will employ personally or
through another, there is a contract for a piece of work13 .

Clearly, the contract in question is one for a piece of work. It is not petitioner's line of business to manufacture air-conditioning systems
to be sold "off-the-shelf." Its business and particular field of expertise is the fabrication and installation of such systems as ordered by
customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or
compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with
the customers.

The obligations of a contractor for a piece of work are set forth in Articles 1714 and 1715 of the Civil Code, which provide:

Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to
the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the
pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale.

Art. 1715. The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects
which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the
employer may require that the contractor remove the defect or execute another work. If the contractor fails or refuses to
comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost.

The provisions on warranty against hidden defects, referred to in Art. 1714 above-quoted, are found in Articles 1561 and 1566, which
read as follows:

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they
render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be
answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who,
by reason of his trade or profession, should have known them.

xxx xxx xxx

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not
aware thereof.

This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects
in the thing sold.

The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (redhibitory action) or to
demand a proportionate reduction of the price (accion quanti manoris), with damages in either case14 .

In Villostas vs. Court of Appeals15 , we held that, "while it is true that Article 1571 of the Civil Code provides for a prescriptive period of
six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be
applied only in case of implied warranties"; and where there is an express warranty in the contract, as in the case at bench, the
prescriptive period is the one specified in the express warranty, and in the absence of such period, "the general rule on rescission of
contract, which is four years (Article 1389, Civil Code) shall apply"16 .

Consistent with the above discussion, it would appear that this suit is barred by prescription because the complaint was filed more than
four years after the execution of the contract and the completion of the air-conditioning system.
However, a close scrutiny of the complaint filed in the trial court reveals that the original action is not really for enforcement of the
warranties against hidden defects, but one for breach of the contract itself. It alleged 17 that the petitioner, "in the installation of the air
conditioning system did not comply with the specifications provided" in the written agreement between the parties, "and an evaluation of
the air-conditioning system as installed by the defendant showed the following defects and violations of the specifications of the
agreement, to wit:

GROUND FLOOR:

"A. RIGHT WING:

Equipped with Worthington Compressor, Model 2VC4 directly driven by an Hp Elin electric motor 1750 rmp, 3 phase, 60 cycles,
220 volts, complete with starter evaporative condenser, circulating water pump, air handling unit air ducts.

Defects Noted:

1. Deteriorated evaporative condenser panels, coils are full of scales and heavy corrosion is very evident.
2. Defective gauges of compressors;
3. No belt guard on motor;
4. Main switch has no cover;
5. Desired room temperature not attained;

Aside from the above defects, the following were noted not installed although provided in the specifications.

1. Face by-pass damper of G.I. sheets No. 16. This damper regulates the flow of cooled air depending on room condition.
2. No fresh air intake provision were provided which is very necessary for efficient comfort cooling..
3. No motor to regulate the face and by-pass damper.
4. Liquid level indicator for refrigerant not provided.
5. Suitable heat exchanger is not installed. This is an important component to increase refrigeration efficiency.
6. Modulating thermostat not provided.
7. Water treatment device for evaporative condenser was not provided.
8. Liquid receiver not provided by sight glass.

B. LEFT WING:

Worthington Compressor Model 2VC4 is installed complete with 15 Hp electric motor, 3 phase, 220 volts 60 cycles with starter.

Defects Noted:

Same as right wing. except No. 4, All other defects on right wing are common to the left wing.

SECOND FLOOR: (Common up to EIGHT FLOORS) Compressors installed are MELCO with 7.5 Hp V-belt driven by 1800 RPM,
-220 volts, 60 cycles, 3 phase, Thrige electric motor with starters.

As stated in the specifications under, Section No. IV, the MELCO compressors do not satisfy the conditions stated therein due to
the following:

1. MELCO Compressors are not provided with automatic capacity unloader.


2. Not provided with oil pressure safety control.
3. Particular compressors do not have provision for renewal sleeves.

Out of the total 15 MELCO compressors installed to serve the 2nd floor up to 8th floors, only six (6) units are in operation and the
rest were already replaced. Of the remaining six (6) units, several of them have been replaced with bigger crankshafts.

NINTH FLOOR:

Two (2) Worthington 2VC4 driven by 15 Hp, 3 phase, 220 volts, 60 cycles, 1750 rpm, Higgs motors with starters.
Defects Noted are similar to ground floor.

GENERAL REMARKS:

Under Section III, Design conditions of specification for air conditioning work, and taking into account "A" & "B" same, the present
systems are not capable of maintaining the desired temperature of 76 = 2F (sic). The present tenant have installed 35 window
type air conditioning units distributed among the different floor levels. Temperature measurements conducted on March 29. 1971,
revealed that 78F room (sic) is only maintained due to the additional window type units.

The trial court, after evaluating the evidence presented, held that, indeed, petitioner failed to install items and parts required in the
contract and substituted some other items which were not in accordance with the specifications18 , thus:

From all of the foregoing, the Court is persuaded to believe the plaintiff that not only had the defendant failed to install items
and parts provided for in the specifications of the air-conditioning system be installed, like face and by-pass dampers and
modulating thermostat and many others, but also that there are items, parts and accessories which were used and installed on
the air-conditioning system which were not in full accord with contract specifications. These omissions to install the
equipments, parts and accessories called for in the specifications of the contract, as well as the deviations made in putting into
the air-conditioning system equipments, parts and accessories not in full accord with the contract specification naturally
resulted to adversely affect the operational effectiveness of the air-conditioning system which necessitated the installation of
thirty-five window type of air-conditioning units distributed among the different floor levels in order to be able to obtain a fairly
desirable room temperature for the tenants and actual occupants of the building. The Court opines and so holds that the failure
of the defendant to follow the contract specifications and said omissions and deviations having resulted in the operational
ineffectiveness of the system installed makes the defendant liable to the plaintiff in the amount necessary to rectify to put the
air conditioning system in its proper operational condition to make it serve the purpose for which the plaintiff entered into the
contract with the defendant.

The respondent Court affirmed the trial court's decision thereby making the latter's findings also its own.

Having concluded that the original complaint is one for damages arising from breach of a written contract - and not a suit to enforce
warranties against hidden defects - we here - with declare that the governing law is Article 1715 ( supra). However, inasmuch as this
provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will
apply. Said provision states, inter alia, that actions "upon a written contract" prescribe in ten (10) years. Since the governing contract
was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed.

What about petitioner's contention that "acceptance of the work by the employer relieves the contractor of liability for any defect in the
work"? This was answered by respondent Court19 as follows:

As the breach of contract which gave rise to the instant case consisted in appellant's omission to install the equipments ( sic),
parts and accessories not in accordance with the plan and specifications provided for in the contract and the deviations made
in putting into the air conditioning system parts and accessories not in accordance with the contract specifications, it is evident
that the defect in the installation was not apparent at the time of the delivery and acceptance of the work, considering further
that plaintiff is not an expert to recognize the same. From the very nature of things, it is impossible to determine by the simple
inspection of air conditioning system installed in an 8-floor building whether it has been furnished and installed as per agreed
specifications.

Verily, the mere fact that the private respondent accepted the work does not, ipso facto, relieve the petitioner from liability for deviations
from and violations of the written contract, as the law gives him ten (10) years within which to file an action based on breach thereof.
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. No costs. SO ORDERED. Narvasa, C.J.,
Davide Jr., Melo and Francisco, JJ., concur.

Footnotes

1
Rollo, pp. 36-51.
2
Special Tenth Decision, composed of J. Porfirio V. Sison, ponente, and JJ. Mariano Serrano and Rodolfo A. Nocon, members.
3
Record on Appeal, pp. 497-510.
4
Judge Pedro C. Navarro presiding.
5
CA Decision, p. 6; rollo, p. 40.
6
Record on Appeal, p. 94.
7
Navarro vs. Court of Appeals., 209 SCRA 612 (June 8, 1992), citing Remalante vs. Tibe, et al., 158 SCRA 138 (February 25, 1988).
8
Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp., G.R. No. 112130, March 31, 1995; J. Flerida Ruth P.
Romero, ponente.
9
South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals, et al., G.R. No. 102253, June 2, 1995; J. Jose C. Vitug, ponente.
10
Aquino and Aquino, The Civil Code of the Philippines, 1990 ed., vol. 3, p. 246.
11
Comissioner of Internal Revenue vs. Engineering Equipment and Supply Co., 64 SCRA 590 (June 30, 1975); Inchausti & Co. vs. Ellis Cromwell, 20
Phil. (October 16, 1911).
12
Vitug, Compendium on Civil Law and Jurisprudence, 1993 ed., p. 581.
13
Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 1992 ed., vol. 5, p. 286, citing 4 Colin & Capitant 477.
14
Art. 1567, Civil Code.
15
210 SCRA 490 (June 26, 1992).
16
Id., citing Moles vs. Intermediate Appellate Court, 169 SCRA 777 (January 31, 1989).
17
Record on Appeal, pp. 3-8.
18
Record on Appeal, pp. 508-509.
19
Rollo, p. 48-49.
FIRST DIVISION
[G.R. No. 126376. November 20, 2003]
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO
EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and
NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO
JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA
BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES
ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and
CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN,
SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and
LEA ASIS, respondents.

DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of
Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3]dated 18 February
1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 89-5174. The
trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid
consideration and that the plaintiffs did not have a cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora,
Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all
surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective spouses.

Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the
corresponding certificates of title issued in their names, to wit:

1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on
11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. C),
pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7
June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. D),
pursuant to which TCT No. S-109772 was issued in her name (Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12
May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a
consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to them
(Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on
12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a
consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued to them
(Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395
executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00
(Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh. G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed on
7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. K), pursuant
to which TCT No. 157779 was issued in his name (Exh. K-1).]

In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their
complaint, aver:

- XX-

The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND VOID AB
INITIO because

a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in
litis;

b) Secondly, assuming that there was consideration in the sums reflected in the questioned deeds,
the properties are more than three-fold times more valuable than the measly sums
appearing therein;

c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and
vendees); and

d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their
legitime.

- XXI -

Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772,
155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties in litisxxx are
NULL AND VOID AB INITIO.

Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as
the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were
with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full
knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were issued with
sufficient factual and legal basis.[4] (Emphasis in the original)

The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino
Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis
filed a Motion to Dismiss. [6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted
that compulsory heirs have the right to a legitime but such right is contingent since said right commences
only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines.
[7]

After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court
stated:

In the first place, the testimony of the defendants, particularly that of the xxx father will show that the
Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the negative
allegation of plaintiffs.

And then there is the argument that plaintiffs do not have a valid cause of action against defendants since
there can be no legitime to speak of prior to the death of their parents. The court finds this contention
tenable. In determining the legitime, the value of the property left at the death of the testator shall be
considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the
time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while
their parents live.

All the foregoing considered, this case is DISMISSED.

In order to preserve whatever is left of the ties that should bind families together, the counterclaim is
likewise DISMISSED. No costs. SO ORDERED. [8]

The Ruling of the Court of Appeals

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:

To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether
xxx they have a cause of action against appellees.

Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are
compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their
parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely
inchoate and vests only upon the latters death. While still alive, defendant parents are free to dispose of
their properties, provided that such dispositions are not made in fraud of creditors.

Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be
creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to
assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express
the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al.,
101 SCRA 376, thus:

The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound
thereby; hence, they have no legal capacity to challenge their validity.

Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions
made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by
the court a quo, the legitime of a compulsory heir is computed as of the time of the death of the
decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.

With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is
inconsequential.

WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.

SO ORDERED.[9]

Hence, the instant petition.


Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION HAD NO
VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A
CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS
THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND
PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE
SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE
SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT
AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS. [10]
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the
Deeds of Sale.

Whether Petitioners have a legal interest


over the properties subject of the Deeds of Sale

Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted
that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners strategy
was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their
respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will
then co-own their parents estate by hereditary succession. [11]
It is evident from the records that petitioners are interested in the properties subject of the Deeds of
Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should
have dismissed the action for this reason alone. An action must be prosecuted in the name of the real
party-in-interest.[12]

[T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured by
the judgment, or the party entitled to the avails of the suit.

xxx

In actions for the annulment of contracts, such as this action, the real parties are those who are parties to
the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to
one of the contracting parties and can show the detriment which would positively result to them from the
contract even though they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912])
xxx.

These are parties with a present substantial interest, as distinguished from a mere expectancy or future,
contingent, subordinate, or consequential interest. The phrase present substantial interest more concretely
is meant such interest of a party in the subject matter of the action as will entitle him, under the
substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and the
defendant will be protected in a payment to or recovery by him. [13]

Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the
appellate court stated, petitioners right to their parents properties is merely inchoate and vests only upon
their parents death. While still living, the parents of petitioners are free to dispose of their properties. In
their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of
the lots to their siblings does not affect the value of their parents estate. While the sale of the lots reduced
the estate, cash of equivalent value replaced the lots taken from the estate.

Whether the Deeds of Sale are void


for lack of consideration

Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of
Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is
a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then
the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as
to the price, because the price stipulated in the contract is simulated, then the contract is void. [14] Article
1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract. Payment of the price goes into the performance
of the contract. Failure to pay the consideration is different from lack of consideration. The former results in
a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the
latter prevents the existence of a valid contract. [15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove
simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent
Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her
payment of the purchase price.[16] The trial court did not find the allegation of absolute simulation of price
credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of
their respondent siblings financial capacity to buy the questioned lots. [17] On the other hand, the Deeds of
Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of
Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent
father.[18]

Whether the Deeds of Sale are void for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)

Article 1470 of the Civil Code further provides:

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract. (Emphasis supplied)

Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code
which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be
equal to the exact value of the subject matter of sale. All the respondents believed that they received the
commutative value of what they gave. As we stated inVales v. Villa:[19]

Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from
unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts
cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not
because one person has been defeated or overcome by another, but because he has been defeated or
overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and
lose money by them indeed, all they have in the world; but not for that alone can the law intervene and
restore. There must be, in addition, a violation of the law, the commission of what the law knows as
an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it. (Emphasis
in the original)

Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater
weight when they coincide with the factual findings of the trial court. This Court will not weigh the
evidence all over again unless there has been a showing that the findings of the lower court are totally
devoid of support or are clearly erroneous so as to constitute serious abuse of discretion. [20] In the instant
case, the trial court found that the lots were sold for a valid consideration, and that the defendant children
actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the
purchase price by the buyer to the seller is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

SPOUSES ONNIE SERRANO AND AMPARO HERRERA - versus - GODOFREDO CAGUIAT,


G.R. No. 139173, February 28, 2007
D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision[1] of the Court of Appeals datedJanuary 29, 1999 and its Resolution
dated July 14, 1999 in CA-G.R. CV No. 48824.

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

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

Las Pias, Metro Manila

March 19, 1990

RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905,
LAS PIAS, METRO MANILA

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED


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

SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.

(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]

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

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

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

In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court,
Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil
Case No. 90-1067.[6]

On June 27, 1994, after hearing, the trial court rendered its Decision [7] finding there was a perfected
contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of
respondent. The trial court held:

xxx

In the evaluation of the evidence presented by the parties as to the issue as to who
was ready to comply with his obligation on the verbal agreement to sell on March 23, 1990,
shows that plaintiffs position deserves more weight and credibility. First, the P100,000.00
that plaintiff paid whether as downpayment or earnest money showed that there was
already a perfected contract.Art. 1482 of the Civil Code of the Philippines, reads as follows,
to wit:

Art. 1482. Whenever earnest money is given in a contract of sale, it shall be


considered as part of the price and as proof of the perfection of the contract.

Second, plaintiff was the first to react to show his eagerness to push through with the
sale by sending defendants the letter dated March 25, 1990. (Exh. D) and reiterated the
same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the balance
of the purchase price ready for payment (Exh. C). Defendants mere allegation that it
was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants letters
(Exhs. 2 and 5) appear to be mere afterthought.

On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed
the trial courts judgment.

Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court
in its Resolution[8] dated July 14, 1999.

Hence, the present recourse.


The basic issue to be resolved is whether the document entitled Receipt for
Partial Payment signed by both parties earlier mentioned is a contract to sell or a
contract of sale.

Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article
1458[9] in relation to Article 1475 [10] of the Civil Code. The delivery to them of P100,000.00 as down
payment cannot be considered as proof of the perfection of a contract of sale under Article 1482 [11] of the
same Code since there was no clear agreement between the parties as to the amount of
consideration.

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

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

We are not convinced.

In San Miguel Properties Philippines, Inc. v. Spouses Huang, [13] we held that the stages of a contract
of sale are: (1) negotiation, covering the period from the time the prospective contracting parties indicate
interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to
the object of the contract and upon the price; and (3) consummation, which begins when the parties
perform their respective undertakings under the contract of sale, culminating in the extinguishment
thereof.
With the above postulates as guidelines, we now proceed to determine the real nature of the
contract entered into by the parties.
It is a canon in the interpretation of contracts that the words used therein should be given their
natural and ordinary meaning unless a technical meaning was intended. [14] Thus, when petitioners declared
in the said Receipt for Partial Payment that they RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT
OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS
PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT
PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE
WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

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

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's
obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the
suspensive condition does not take place, the parties would stand as if the conditional obligation had never
existed. The suspensive condition is commonly full payment of the purchase price.[15]

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

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

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the
buyer until full payment of the price.[17]
In this case, the Receipt for Partial Payment shows that the true agreement between the parties is
a contract to sell.

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

Second, the agreement between the parties was not embodied in a deed of sale. The absence of a
formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of
ownership, but only a transfer after full payment of the purchase price. [19]

Third, petitioners retained possession of the certificate of title of the lot. This is an additional
indication that the agreement did not transfer to respondent, either by actual or constructive delivery,
ownership of the property.[20]
It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and proof of the perfection of the
contract. However, this article speaks of earnest money given in a contract of sale. In this case,
the earnest money was given in a contract to sell.The earnest money forms part of the consideration
only if the sale is consummated upon full payment of the purchase price. [21] Now, since the earnest money
was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by respondent) did not
take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of
Appeals is REVERSED and respondents complaint is DISMISSED. SO ORDERED.

THIRD DIVISION

G.R. No. 157493 February 5, 2007

RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO, ERNESTO, LEONORA, BIBIANO, JR., LIBRADO
and ENRIQUETA, all surnamed OESMER, Petitioners, vs. PARAISO DEVELOPMENT CORPORATION, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to reverse
and set aside the Court of Appeals Decision1 dated 26 April 2002 in CA-G.R. CV No. 53130 entitled, Rizalino, Ernesto, Leonora,
Bibiano, Jr., Librado, Enriqueta, Adolfo, and Jesus, all surnamed Oesmer vs. Paraiso Development Corporation, as modified by its
Resolution2 dated 4 March 2003, declaring the Contract to Sell valid and binding with respect to the undivided proportionate shares of
the six signatories of the said document, herein petitioners, namely: Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all
surnamed Oesmer); and ordering them to execute the Deed of Absolute Sale concerning their 6/8 share over the subject parcels of
land in favor of herein respondent Paraiso Development Corporation, and to pay the latter the attorneys fees plus costs of the suit. The
assailed Decision, as modified, likewise ordered the respondent to tender payment to the petitioners in the amount of P3,216,560.00
representing the balance of the purchase price of the subject parcels of land.
The facts of the case are as follows:

Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed Oesmer, together with Adolfo Oesmer (Adolfo)
and Jesus Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided shares of two parcels of agricultural and tenanted
land situated in Barangay Ulong Tubig, Carmona, Cavite, identified as Lot 720 with an area of 40,507 square meters (sq. m.) and Lot
834 containing an area of 14,769 sq. m., or a total land area of 55,276 sq. m. Both lots are unregistered and originally owned by their
parents, Bibiano Oesmer and Encarnacion Durumpili, who declared the lots for taxation purposes under Tax Declaration No.
34383(cancelled by I.D. No. 6064-A) for Lot 720 and Tax Declaration No. 34374 (cancelled by I.D. No. 5629) for Lot 834. When the
spouses Oesmer died, petitioners, together with Adolfo and Jesus, acquired the lots as heirs of the former by right of succession.

Respondent Paraiso Development Corporation is known to be engaged in the real estate business.

Sometime in March 1989, Rogelio Paular, a resident and former Municipal Secretary of Carmona, Cavite, brought along petitioner
Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation, at Otani Hotel in Manila. The
said meeting was for the purpose of brokering the sale of petitioners properties to respondent corporation.

Pursuant to the said meeting, a Contract to Sell5 was drafted by the Executive Assistant of Sotero Lee, Inocencia Almo. On 1 April 1989,
petitioners Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the amount of P100,000.00, payable to Ernesto, was
given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said Contract to Sell.
However, two of the brothers, Adolfo and Jesus, did not sign the document.

On 5 April 1989, a duplicate copy of the instrument was returned to respondent corporation. On 21 April 1989, respondent brought the
same to a notary public for notarization.

In a letter6 dated 1 November 1989, addressed to respondent corporation, petitioners informed the former of their intention to rescind
the Contract to Sell and to return the amount of P100,000.00 given by respondent as option money.

Respondent did not respond to the aforesaid letter. On 30 May 1991, herein petitioners, together with Adolfo and Jesus, filed a
Complaint7 for Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with Damages before the Regional Trial
Court (RTC) of Bacoor, Cavite. The said case was docketed as Civil Case No. BCV-91-49.

During trial, petitioner Rizalino died. Upon motion of petitioners, the trial court issued an Order,8 dated 16 September 1992, to the effect
that the deceased petitioner be substituted by his surviving spouse, Josefina O. Oesmer, and his children, Rolando O. Oesmer and
Fernando O. Oesmer. However, the name of Rizalino was retained in the title of the case both in the RTC and the Court of Appeals.

After trial on the merits, the lower court rendered a Decision9 dated 27 March 1996 in favor of the respondent, the dispositive portion of
which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of herein [respondent] Paraiso Development Corporation.
The assailed Contract to Sell is valid and binding only to the undivided proportionate share of the signatory of this document and
recipient of the check, [herein petitioner] co-owner Ernesto Durumpili Oesmer. The latter is hereby ordered to execute the Contract of
Absolute Sale concerning his 1/8 share over the subject two parcels of land in favor of herein [respondent] corporation, and to pay the
latter the attorneys fees in the sum of Ten Thousand (P10,000.00) Pesos plus costs of suit.

The counterclaim of [respondent] corporation is hereby Dismissed for lack of merit.10

Unsatisfied, respondent appealed the said Decision before the Court of Appeals. On 26 April 2002, the appellate court rendered a
Decision modifying the Decision of the court a quo by declaring that the Contract to Sell is valid and binding with respect to the
undivided proportionate shares of the six signatories of the said document, herein petitioners, namely: Ernesto, Enriqueta, Librado,
Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The decretal portion of the said Decision states that:

WHEREFORE, premises considered, the Decision of the court a quo is hereby MODIFIED. Judgment is hereby rendered in favor of
herein [respondent] Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to the undivided
proportionate share of the six (6) signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino,
Bibiano, Jr., and Leonora (all surnamed Oesmer). The said [petitioners] are hereby ordered to execute the Deed of Absolute Sale
concerning their 6/8 share over the subject two parcels of land and in favor of herein [respondent] corporation, and to pay the latter the
attorneys fees in the sum of Ten Thousand Pesos (P10,000.00) plus costs of suit.11
Aggrieved by the above-mentioned Decision, petitioners filed a Motion for Reconsideration of the same on 2 July 2002. Acting on
petitioners Motion for Reconsideration, the Court of Appeals issued a Resolution dated 4 March 2003, maintaining its Decision dated
26 April 2002, with the modification that respondent tender payment to petitioners in the amount of P3,216,560.00, representing the
balance of the purchase price of the subject parcels of land. The dispositive portion of the said Resolution reads:

WHEREFORE, premises considered, the assailed Decision is hereby modified. Judgment is hereby rendered in favor of herein
1awphi1.net

[respondent] Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to the undivided
proportionate shares of the six (6) signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino,
Bibiano, Jr., and Leonora (all surnamed Oesmer). The said [petitioners] are hereby ordered to execute the Deed of Absolute Sale
concerning their 6/8 share over the subject two parcels of land in favor of herein [respondent] corporation, and to pay the latter
attorneys fees in the sum of Ten Thousand Pesos (P10,000.00) plus costs of suit. Respondent is likewise ordered to tender payment to
the above-named [petitioners] in the amount of Three Million Two Hundred Sixteen Thousand Five Hundred Sixty Pesos
(P3,216,560.00) representing the balance of the purchase price of the subject two parcels of land. 12

Hence, this Petition for Review on Certiorari.

Petitioners come before this Court arguing that the Court of Appeals erred:

I. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is not binding upon petitioner Ernesto
Oesmers co-owners (herein petitioners Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora).

II. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is void altogether considering that
respondent itself did not sign it as to indicate its consent to be bound by its terms. Moreover, Exhibit D is really a unilateral
promise to sell without consideration distinct from the price, and hence, void.

Petitioners assert that the signatures of five of them namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the margins of
the supposed Contract to Sell did not confer authority on petitioner Ernesto as agent to sell their respective shares in the questioned
properties, and hence, for lack of written authority from the above-named petitioners to sell their respective shares in the subject
parcels of land, the supposed Contract to Sell is void as to them. Neither do their signatures signify their consent to directly sell their
shares in the questioned properties. Assuming that the signatures indicate consent, such consent was merely conditional. The
effectivity of the alleged Contract to Sell was subject to a suspensive condition, which is the approval of the sale by all the co-owners.

Petitioners also assert that the supposed Contract to Sell (Exhibit D), contrary to the findings of the Court of Appeals, is not couched in
simple language.

They further claim that the supposed Contract to Sell does not bind the respondent because the latter did not sign the said contract as
to indicate its consent to be bound by its terms. Furthermore, they maintain that the supposed Contract to Sell is really a unilateral
promise to sell and the option money does not bind petitioners for lack of cause or consideration distinct from the purchase price.

The Petition is bereft of merit.

It is true that the signatures of the five petitioners, namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the Contract to
Sell did not confer authority on petitioner Ernesto as agent authorized to sell their respective shares in the questioned properties
because of Article 1874 of the Civil Code, which expressly provides that:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void.

The law itself explicitly requires a written authority before an agent can sell an immovable. The conferment of such an authority should
be in writing, in as clear and precise terms as possible. It is worth noting that petitioners signatures are found in the Contract to Sell.
The Contract is absolutely silent on the establishment of any principal-agent relationship between the five petitioners and their brother
and co-petitioner Ernesto as to the sale of the subject parcels of land. Thus, the Contract to Sell, although signed on the margin by the
five petitioners, is not sufficient to confer authority on petitioner Ernesto to act as their agent in selling their shares in the properties in
question.

However, despite petitioner Ernestos lack of written authority from the five petitioners to sell their shares in the subject parcels of land,
the supposed Contract to Sell remains valid and binding upon the latter.
As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed the said Contract to Sell; the other five
petitioners also personally affixed their signatures thereon. Therefore, a written authority is no longer necessary in order to sell their
shares in the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were not selling their shares
through an agent but, rather, they were selling the same directly and in their own right.

The Court also finds untenable the following arguments raised by petitioners to the effect that the Contract to Sell is not binding upon
them, except to Ernesto, because: (1) the signatures of five of the petitioners do not signify their consent to sell their shares in the
questioned properties since petitioner Enriqueta merely signed as a witness to the said Contract to Sell, and that the other petitioners,
namely: Librado, Rizalino, Leonora, and Bibiano, Jr., did not understand the importance and consequences of their action because of
their low degree of education and the contents of the aforesaid contract were not read nor explained to them; and (2) assuming that the
signatures indicate consent, such consent was merely conditional, thus, the effectivity of the alleged Contract to Sell was subject to a
suspensive condition, which is the approval by all the co-owners of the sale.

It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror.
From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the
acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the
acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to
the offeror.13

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in the
subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been
stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the duplicate copy of the
Contract to Sell was returned to the latter bearing petitioners signatures.

As to petitioner Enriquetas claim that she merely signed as a witness to the said contract, the contract itself does not say so. There
was no single indication in the said contract that she signed the same merely as a witness. The fact that her signature appears on the
right-hand margin of the Contract to Sell is insignificant. The contract indisputably referred to the "Heirs of Bibiano and Encarnacion
Oesmer," and since there is no showing that Enriqueta signed the document in some other capacity, it can be safely assumed that she
did so as one of the parties to the sale.

Emphasis should also be given to the fact that petitioners Ernesto and Enriqueta concurrently signed the Contract to Sell. As the Court
of Appeals mentioned in its Decision,14 the records of the case speak of the fact that petitioner Ernesto, together with petitioner
Enriqueta, met with the representatives of the respondent in order to finalize the terms and conditions of the Contract to Sell. Enriqueta
affixed her signature on the said contract when the same was drafted. She even admitted that she understood the undertaking that she
and petitioner Ernesto made in connection with the contract. She likewise disclosed that pursuant to the terms embodied in the
Contract to Sell, she updated the payment of the real property taxes and transferred the Tax Declarations of the questioned properties
in her name.15 Hence, it cannot be gainsaid that she merely signed the Contract to Sell as a witness because she did not only actively
participate in the negotiation and execution of the same, but her subsequent actions also reveal an attempt to comply with the
conditions in the said contract.

With respect to the other petitioners assertion that they did not understand the importance and consequences of their action because
of their low degree of education and because the contents of the aforesaid contract were not read nor explained to them, the same
cannot be sustained.

We only have to quote the pertinent portions of the Court of Appeals Decision, clear and concise, to dispose of this issue. Thus,

First, the Contract to Sell is couched in such a simple language which is undoubtedly easy to read and understand. The terms of the
Contract, specifically the amount of P100,000.00 representing the option money paid by [respondent] corporation, the purchase price
of P60.00 per square meter or the total amount ofP3,316,560.00 and a brief description of the subject properties are well-indicated
thereon that any prudent and mature man would have known the nature and extent of the transaction encapsulated in the document
that he was signing.

Second, the following circumstances, as testified by the witnesses and as can be gleaned from the records of the case clearly indicate
the [petitioners] intention to be bound by the stipulations chronicled in the said Contract to Sell.
As to [petitioner] Ernesto, there is no dispute as to his intention to effect the alienation of the subject property as he in fact was the one
who initiated the negotiation process and culminated the same by affixing his signature on the Contract to Sell and by taking receipt of
the amount of P100,000.00 which formed part of the purchase price.

xxxx

As to [petitioner] Librado, the [appellate court] finds it preposterous that he willingly affixed his signature on a document written in a
language (English) that he purportedly does not understand. He testified that the document was just brought to him by an 18 year old
niece named Baby and he was told that the document was for a check to be paid to him. He readily signed the Contract to Sell without
consulting his other siblings. Thereafter, he exerted no effort in communicating with his brothers and sisters regarding the document
which he had signed, did not inquire what the check was for and did not thereafter ask for the check which is purportedly due to him as
a result of his signing the said Contract to Sell. (TSN, 28 September 1993, pp. 22-23)

The [appellate court] notes that Librado is a 43 year old family man (TSN, 28 September 1993, p. 19). As such, he is expected to act
with that ordinary degree of care and prudence expected of a good father of a family. His unwitting testimony is just divinely
disbelieving.

The other [petitioners] (Rizalino, Leonora and Bibiano Jr.) are likewise bound by the said Contract to Sell. The theory adopted by the
[petitioners] that because of their low degree of education, they did not understand the contents of the said Contract to Sell is devoid of
merit. The [appellate court] also notes that Adolfo (one of the co-heirs who did not sign) also possess the same degree of education as
that of the signing co-heirs (TSN, 15 October 1991, p. 19). He, however, is employed at the Provincial Treasury Office at Trece Martirez,
Cavite and has even accompanied Rogelio Paular to the Assessors Office to locate certain missing documents which were needed to
transfer the titles of the subject properties. (TSN, 28 January 1994, pp. 26 & 35) Similarly, the other co-heirs [petitioners], like Adolfo,
are far from ignorant, more so, illiterate that they can be extricated from their obligations under the Contract to Sell which they
voluntarily and knowingly entered into with the [respondent] corporation.

The Supreme Court in the case of Cecilia Mata v. Court of Appeals (207 SCRA 753 [1992]), citing the case of Tan Sua Sia v. Yu Baio
Sontua (56 Phil. 711), instructively ruled as follows:

"The Court does not accept the petitioners claim that she did not understand the terms and conditions of the transactions because she
only reached Grade Three and was already 63 years of age when she signed the documents. She was literate, to begin with, and her
age did not make her senile or incompetent. x x x.

At any rate, Metrobank had no obligation to explain the documents to the petitioner as nowhere has it been proven that she is unable to
read or that the contracts were written in a language not known to her. It was her responsibility to inform herself of the meaning and
consequence of the contracts she was signing and, if she found them difficult to comprehend, to consult other persons, preferably
lawyers, to explain them to her. After all, the transactions involved not only a few hundred or thousand pesos but, indeed, hundreds of
thousands of pesos.

As the Court has held:

x x x The rule that one who signs a contract is presumed to know its contents has been applied even to contracts of illiterate persons on
the ground that if such persons are unable to read, they are negligent if they fail to have the contract read to them. If a person cannot
read the instrument, it is as much his duty to procure some reliable persons to read and explain it to him, before he signs it, as it would
be to read it before he signed it if he were able to do and his failure to obtain a reading and explanation of it is such gross negligence as
will estop from avoiding it on the ground that he was ignorant of its contents."16

That the petitioners really had the intention to dispose of their shares in the subject parcels of land, irrespective of whether or not all of
the heirs consented to the said Contract to Sell, was unveiled by Adolfos testimony as follows:

ATTY. GAMO: This alleged agreement between you and your other brothers and sisters that unless everybody will agree, the properties
would not be sold, was that agreement in writing?

WITNESS: No sir.

ATTY. GAMO: What you are saying is that when your brothers and sisters except Jesus and you did not sign that agreement which had
been marked as [Exhibit] "D", your brothers and sisters were grossly violating your agreement.
WITNESS: Yes, sir, they violated what we have agreed upon.17

We also cannot sustain the allegation of the petitioners that assuming the signatures indicate consent, such consent was merely
conditional, and that, the effectivity of the alleged Contract to Sell was subject to the suspensive condition that the sale be approved by
all the co-owners. The Contract to Sell is clear enough. It is a cardinal rule in the interpretation of contracts 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 stipulation shall control.18 The terms
of the Contract to Sell made no mention of the condition that before it can become valid and binding, a unanimous consent of all the
heirs is necessary. Thus, when the language of the contract is explicit, as in the present case, leaving no doubt as to the intention of the
parties thereto, the literal meaning of its stipulation is controlling.

In addition, the petitioners, being owners of their respective undivided shares in the subject properties, can dispose of their shares even
without the consent of all the co-heirs. Article 493 of the Civil Code expressly provides:

Article 493. Each 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. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership. [Emphases supplied.]

Consequently, even without the consent of the two co-heirs, Adolfo and Jesus, the Contract to Sell is still valid and binding with respect
to the 6/8 proportionate shares of the petitioners, as properly held by the appellate court.

Therefore, this Court finds no error in the findings of the Court of Appeals that all the petitioners who were signatories in the Contract to
Sell are bound thereby.

The final arguments of petitioners state that the Contract to Sell is void altogether considering that respondent itself did not sign it as to
indicate its consent to be bound by its terms; and moreover, the Contract to Sell is really a unilateral promise to sell without
consideration distinct from the price, and hence, again, void. Said arguments must necessarily fail.

The Contract to Sell is not void merely because it does not bear the signature of the respondent corporation. Respondent corporations
consent to be bound by the terms of the contract is shown in the uncontroverted facts which established that there was partial
performance by respondent of its obligation in the said Contract to Sell when it tendered the amount of P100,000.00 to form part of the
purchase price, which was accepted and acknowledged expressly by petitioners. Therefore, by force of law, respondent is required to
complete the payment to enforce the terms of the contract. Accordingly, despite the absence of respondents signature in the Contract
to Sell, the former cannot evade its obligation to pay the balance of the purchase price.

As a final point, the Contract to Sell entered into by the parties is not a unilateral promise to sell merely because it used the word option
money when it referred to the amount of P100,000.00, which also form part of the purchase price.

Settled is the rule that in the interpretation of contracts, the ascertainment of the intention of the contracting parties is to be discharged
by looking to the words they used to project that intention in their contract, all the words, not just a particular word or two, and words in
context, not words standing alone.19

In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was referred to as "option money." However, a
careful examination of the words used in the contract indicates that the money is not option money but earnest money. "Earnest
money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option
money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a
sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the
balance, while when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of
the option.20

The sum of P100,000.00 was part of the purchase price. Although the same was denominated as "option money," it is actually in the
nature of earnest money or down payment when considered with the other terms of the contract. Doubtless, the agreement is not a
mere unilateral promise to sell, but, indeed, it is a Contract to Sell as both the trial court and the appellate court declared in their
Decisions.

WHEREFORE, premises considered, the Petition is DENIED, and the Decision and Resolution of the Court of Appeals dated 26 April
2002 and 4 March 2003, respectively, are AFFIRMED, thus, (a) the Contract to Sell is DECLARED valid and binding with respect to the
undivided proportionate shares in the subject parcels of land of the six signatories of the said document, herein petitioners Ernesto,
Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); (b) respondent is ORDERED to tender payment to
petitioners in the amount ofP3,216,560.00 representing the balance of the purchase price for the latters shares in the subject parcels of
land; and (c) petitioners are further ORDERED to execute in favor of respondent the Deed of Absolute Sale covering their shares in the
subject parcels of land after receipt of the balance of the purchase price, and to pay respondent attorneys fees plus costs of the suit.
Costs against petitioners.

SO ORDERED.

SECOND DIVISION

G.R. No. 124242 January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL
LU and PACITA ZAVALLA LU, respondents.

DECISION

TINGA, J.:

From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter, the Spouses Lu)
owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808
square meters or a total of 3.1616 hectares.

On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta, (hereinafter, Babasanta)
for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as
evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two hundred thousand
pesos (P200,000.00) were made by Babasanta.

Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor so that he
could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about having received information
that the spouses sold the same property to another without his knowledge and consent. He demanded that the second sale be
cancelled and that a final deed of sale be issued in his favor.

In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him at fifteen pesos
(P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price became due, he requested
for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added that she returned the sum of fifty
thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.

On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San Pedro, Laguna,
a Complaint for Specific Performance and Damages1 against his co-respondents herein, the Spouses Lu. Babasanta alleged that the
lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at fifteen pesos (P15.00) per square meter.
Despite his repeated demands for the execution of a final deed of sale in his favor, respondents allegedly refused.

In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances of Pacita reached
fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to
transform the transaction into a contract to sell the two parcels of land to Babasanta with the fifty thousand pesos (P50,000.00) to be
considered as the downpayment for the property and the balance to be paid on or before 31 December 1987. Respondents Lu added
that as of November 1987, total payments made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and the
latter allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00) despite repeated demands. Babasanta
had purportedly asked Pacita for a reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and
when the Spouses Lu refused to grant Babasantas request, the latter rescinded the contract to sell and declared that the original loan
transaction just be carried out in that the spouses would be indebted to him in the amount of two hundred thousand pesos
(P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in the amount of two hundred
thousand pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the balance of her loan
obligation.

Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he prayed for the issuance of a writ of preliminary
injunction with temporary restraining order and the inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He
contended that the issuance of a preliminary injunction was necessary to restrain the transfer or conveyance by the Spouses Lu of the
subject property to other persons.

The Spouses Lu filed their Opposition4 to the amended complaint contending that it raised new matters which seriously affect their
substantive rights under the original complaint. However, the trial court in its Order dated 17 January 19905 admitted the amended
complaint.

On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention6 before the trial
court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3 May 1989, the two parcels of land
involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage.7 It alleged that it was a buyer in
good faith and for value and therefore it had a better right over the property in litigation.

In his Opposition to SLDCs motion for intervention,8 respondent Babasanta demurred and argued that the latter had no legal interest in
the case because the two parcels of land involved herein had already been conveyed to him by the Spouses Lu and hence, the
vendors were without legal capacity to transfer or dispose of the two parcels of land to the intervenor.

Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-in-Intervention on 19
April 1990.9 Respondent Babasantas motion for the issuance of a preliminary injunction was likewise granted by the trial court in
its Order dated 11 January 199110 conditioned upon his filing of a bond in the amount of fifty thousand pesos (P50,000.00).

SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor anOption to Buy the lots
subject of the complaint. Accordingly, it paid an option money in the amount of three hundred sixteen thousand one hundred sixty pesos
(P316,160.00) out of the total consideration for the purchase of the two lots of one million two hundred sixty-four thousand six hundred
forty pesos (P1,264,640.00). After the Spouses Lu received a total amount of six hundred thirty-two thousand three hundred twenty
pesos (P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor. SLDC added that the
certificates of title over the property were delivered to it by the spouses clean and free from any adverse claims and/or notice of lis
pendens. SLDC further alleged that it only learned of the filing of the complaint sometime in the early part of January 1990 which
prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation
to look beyond the titles submitted to it by the Spouses Lu particularly because Babasantas claims were not annotated on the
certificates of title at the time the lands were sold to it.

After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. It ordered the
Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus the further sum of fifty
thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-in-intervention, the trial court ordered the Register of Deeds
of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the original of the TCT No. T-39022 (T-7218) and No. T-
39023 (T-7219).

Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the respective sales in
their favor, ownership of the property should pertain to the buyer who first acquired possession of the property. The trial court equated
the execution of a public instrument in favor of SLDC as sufficient delivery of the property to the latter. It concluded that symbolic
possession could be considered to have been first transferred to SLDC and consequently ownership of the property pertained to SLDC
who purchased the property in good faith.

Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the main that the trial court erred in
concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the Spouses Lu in favor of SLDC.

Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in failing to consider that
the contract to sell between them and Babasanta had been novated when the latter abandoned the verbal contract of sale and declared
that the original loan transaction just be carried out. The Spouses Lu argued that since the properties involved were conjugal, the trial
court should have declared the verbal contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for lack of
knowledge and consent of Miguel Lu. They further averred that the trial court erred in not dismissing the complaint filed by Babasanta;
in awarding damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the judgment of the trial court. It declared that the sale
between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute the necessary deed of
conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred sixty thousand
pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void on the
ground that SLDC was a purchaser in bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal
interest and to pay attorneys fees to Babasanta.

SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.12 However, in aManifestation dated 20
December 1995,13 the Spouses Lu informed the appellate court that they are no longer contesting the decision dated 4 October 1995.

In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the motion for reconsideration filed by the
Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDCs motion for reconsideration on the
ground that no new or substantial arguments were raised therein which would warrant modification or reversal of the courts decision
dated 4 October 1995.

Hence, this petition.

SLDC assigns the following errors allegedly committed by the appellate court:

THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN
THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT ON
INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS
ANNOTATED ON THE TITLES.

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT BABASANTA HAS SUBMITTED
NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.

THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF
FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF
SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. 15

SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas claim over the property merely on
the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latters
representation that she needed the money to pay her obligation to Babasanta. It argued that it had no reason to suspect that Pacita
was not telling the truth that the money would be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the
amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as notice of the prior sale of the land to Babasanta. It added that at no
instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.

Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the property and asserted its
rights as new owner as opposed to Babasanta who has never exercised acts of ownership. Since the titles bore no adverse claim,
encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to rely on the correctness of the certificate of
title and it was not obliged to go beyond the certificate to determine the condition of the property. Invoking the presumption of good
faith, it added that the burden rests on Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so. SLDC
pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after the sale of the property to it was consummated
on 3 May 1989. 1awphi1.nt

Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court that due to financial
constraints they have no more interest to pursue their rights in the instant case and submit themselves to the decision of the Court of
Appeals.16

On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property because it failed to
comply with the requirement of registration of the sale in good faith. He emphasized that at the time SLDC registered the sale in its
favor on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the property made as early as 2 June 1989.
Hence, petitioners registration of the sale did not confer upon it any right. Babasanta further asserted that petitioners bad faith in the
acquisition of the property is evident from the fact that it failed to make necessary inquiry regarding the purpose of the issuance of the
two hundred thousand pesos (P200,000.00) managers check in his favor.

The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right over the two
parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.

To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu acknowledging receipt
of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz,
Sta. Rosa, Laguna.17 While the receipt signed by Pacita did not mention the price for which the property was being sold, this deficiency
was supplied by Pacita Lus letter dated 29 May 198918 wherein she admitted that she agreed to sell the 3.6 hectares of land to
Babasanta for fifteen pesos (P15.00) per square meter.

An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion that
the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.

Contracts, in general, are perfected by mere consent,19 which is manifested by the meeting of the offer and the acceptance upon the
thing which are to constitute the contract. The offer must be certain and the acceptance absolute.20 Moreover, contracts shall be
obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present.21

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from Babasanta as
partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the
ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the
parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase
price.

Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the execution of the
final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta
himself recognized that ownership of the property would not be transferred to him until such time as he shall have effected full payment
of the price. Moreover, had the sellers intended to transfer title, they could have easily executed the document of sale in its required
form simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should
legally be considered as a perfected contract to sell.

The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the vendee upon
the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass
until the full payment of the price.22 In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract
is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment
being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective.23

The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There being an
obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the price in court as
required by law. Mere sending of a letter by the vendee expressing the intention to pay without the accompanying payment is not
considered a valid tender of payment.24 Consignation of the amounts due in court is essential in order to extinguish Babasantas
obligation to pay the balance of the purchase price. Glaringly absent from the records is any indication that Babasanta even attempted
to make the proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never acquired
obligatory force.

On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasantas claim of
ownership should nevertheless fail.

Sale, being a consensual contract, is perfected by mere consent25 and from that moment, the parties may reciprocally demand
performance.26 The essential elements of a contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in
exchange for the price; (2) object certain which is the subject matter of the contract; (3) cause of the obligation which is established. 27

The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the acquisition and transfer
of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership
is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership.28 Under Article 712 of the
Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by tradition." Contracts only constitute titles or rights to the transfer or acquisition
of ownership, while delivery or tradition is the mode of accomplishing the same.29 Therefore, sale by itself does not transfer or affect
ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale,
that actually transfers ownership.

Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any
of the ways specified in Article 1497 to 1501.30 The word "delivered" should not be taken restrictively to mean transfer of actual physical
possession of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive
delivery.

Actual delivery consists in placing the thing sold in the control and possession of the vendee.31 Legal or constructive delivery, on the
other hand, may be had through any of the following ways: the execution of a public instrument evidencing the sale;32 symbolical
tradition such as the delivery of the keys of the place where the movable sold is being kept;33 traditio longa manu or by mere consent or
agreement if the movable sold cannot yet be transferred to the possession of the buyer at the time of the sale;34 traditio brevi manu if
the buyer already had possession of the object even before the sale;35 and traditio constitutum possessorium, where the seller remains
in possession of the property in a different capacity.36

Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of the receipt by Pacita Lu
acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the Spouses Lu, though
valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could have been effected. For another,
Babasanta had not taken possession of the property at any time after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful owner of the lands. Simply stated, there was no delivery to Babasanta,
whether actual or constructive, which is essential to transfer ownership of the property. Thus, even on the assumption that the perfected
contract between the parties was a sale, ownership could not have passed to Babasanta in the absence of delivery, since in a contract
of sale ownership is transferred to the vendee only upon the delivery of the thing sold.37

However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed by Article 1544
which lays down the rules of preference between the two purchasers of the same property. It provides:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have
first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry
of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title, provided there is good faith.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of double sale of
immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the Registry of Property,
both made in good faith, shall be deemed the owner.38 Verily, the act of registration must be coupled with good faith that is, the
registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should have
put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.39

Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas claim. Babasanta,
however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter any title to the property
since the registration was attended by bad faith. Specifically, he points out that at the time SLDC registered the sale on 30 June 1990,
there was already a notice of lis pendens on the file with the Register of Deeds, the same having been filed one year before on 2 June
1989.

Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and possession in good
faith which admittedly had occurred prior to SLDCs knowledge of the transaction in favor of Babasanta?

We do not hold so.

It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon
receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase price
of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time both
deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated, from the time
of execution of the first deed up to the moment of transfer and delivery of possession of the lands to SLDC, it had acted in good faith
and the subsequent annotation of lis pendens has no effect at all on the consummated sale between SLDC and the Spouses Lu.

A purchaser in good faith is one who buys property of another without notice that some other person has a right to, or interest in, such
property and pays a full and fair price for the same at the time of such purchase, or beforehe has notice of the claim or interest of some
other person in the property.40 Following the foregoing definition, we rule that SLDC qualifies as a buyer in good faith since there is no
evidence extant in the records that it had knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property
to SLDC, the vendors were still the registered owners of the property and were in fact in possession of the lands. Time and again, this
l^vvphi1.net

Court has ruled that a person dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged
with notice of burdens on the property which are noted on the face of the register or on the certificate of title.41 In assailing knowledge of
the transaction between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice incorporated in
Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:

Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or
entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the province or city where
the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing, or entering.

However, the constructive notice operates as suchby the express wording of Section 52from the time of the registration of the notice
of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.

More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice of lis
pendens cannot help Babasantas position a bit and it is irrelevant to the good or bad faith characterization of SLDC as a purchaser. A
notice of lis pendens, as the Court held in Natao v. Esteban,42serves as a warning to a prospective purchaser or incumbrancer that the
particular property is in litigation; and that he should keep his hands off the same, unless he intends to gamble on the results of the
litigation." Precisely, in this case SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDCs faith in the merit
of its cause has been vindicated with the Courts present decision which is the ultimate denouement on the controversy.

The Court of Appeals has made capital43 of SLDCs averment in its Complaint-in-Intervention44 that at the instance of Pacita Lu it issued
a check for P200,000.00 payable to Babasanta and the confirmatory testimony of Pacita Lu herself on cross-examination.45 However,
there is nothing in the said pleading and the testimony which explicitly relates the amount to the transaction between the Spouses Lu
and Babasanta for what they attest to is that the amount was supposed to pay off the advances made by Babasanta to Pacita Lu. In
any event, the incident took place after the Spouses Lu had already executed the Deed of Absolute Sale with Mortgage in favor of
SLDC and therefore, as previously explained, it has no effect on the legal position of SLDC.

Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior notice of lis pendens and assuming
further for the same nonce that this is a case of double sale, still Babasantas claim could not prevail over that of SLDCs. In Abarquez
v. Court of Appeals,46 this Court had the occasion to rule that if a vendee in a double sale registers the sale after he has acquired
knowledge of a previous sale, the registration constitutes a registration in bad faith and does not confer upon him any right. If the
registration is done in bad faith, it is as if there is no registration at all, and the buyer who has taken possession first of the property in
good faith shall be preferred.

In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez, registered their
deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the property to the Israels because
registration of the property by Abarquez lacked the element of good faith. While the facts in the instant case substantially differ from that
in Abarquez, we would not hesitate to rule in favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted
that delivery of the property to SLDC was immediately effected after the execution of the deed in its favor, at which time SLDC had no
knowledge at all of the prior transaction by the Spouses Lu in favor of Babasanta. 1a\^/phi1.net

The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no priority of such
entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of the date of title, with good faith
as the common critical element. Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who neither
registered nor possessed the property at any time, SLDCs right is definitely superior to that of Babasantas.

At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this decision, the
contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell. In Dichoso v. Roxas,47 we had
the occasion to rule that Article 1544 does not apply to a case where there was a sale to one party of the land itself while the other
contract was a mere promise to sell the land or at most an actual assignment of the right to repurchase the same land. Accordingly,
there was no double sale of the same land in that case.

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is REVERSED and SET
ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.

SO ORDERED.