G.R. No.

175483, October 14, 2015

VALENTINA S. CLEMENTE, PETITIONER, VS. THE COURT OF APPEALS, ANNIE SHOTWELL

JALANDOON, ET AL., RESPONDENTS.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari[1] under Rule 45 of the Revised Rules of Court filed by Valentina
S. Clemente ("petitioner") from the Decision[2] of August 23, 2005 and the Resolution[3] dated November
15, 2006 of the Court of Appeals (CA) Eighth Division in CA-G.R. CV No. 70918.

Petitioner assails the Decision of the CA which ruled that two (2) deeds of absolute sale executed
between petitioner and Adela de Guzman Shotwell ("Adela"), her grandmother, are void and inexistent
for being simulated and lacking consideration. The CA affirmed the Decision of the Regional Trial Court
(RTC) of Quezon City, Branch 89, but deleted the holding of the latter that an implied trust existed.

The Facts

Adela owned three (3) adjoining parcels of land in Scout Ojeda Street, Diliman, Quezon City, subdivided
as Lots 32, 34 and 35-B (the "Properties"). Among the improvements on the Properties was Adela's
house (also referred to as the "big house"). During her lifetime, Adela allowed her children, namely,
Annie Shotwell Jalandoon, Carlos G. Shotwell ("Carlos Sr."), Anselmo G. Shotwell and Corazon S. Basset,
and her grandchildren,[4] the use and possession of the Properties and its improvements. [5]

Sometime in 1985 and 1987, Adela simulated the transfer of Lots 32 and Lot 34 to her two grandsons
from Carlos Sr., namely, Carlos V. Shotwell, Jr. ("Carlos Jr.") and Dennis V. Shotwell.[6] As a
consequence, Transfer Certificate of Title (TCT) No. 338708/PR 9421 was issued over Lot 32 under the
name of Carlos Jr., while TCT No. 366256/PR 9422 was issued over Lot 34 under the name of Dennis.[7]
On the other hand, Lot 35-B remained with Adela and was covered by TCT No. 374531. It is undisputed
that the transfers were never intended to vest title to Carlos Jr. and Dennis who both will return the lots
to Adela when requested.[8]

On April 18, 1989, prior to Adela and petitioner's departure for the United States, Adela requested Carlos
Jr. and Dennis to execute a deed of reconveyance[9] over Lots 32 and 34. The deed of reconveyance was
executed on the same day and was registered with the Registry of Deeds on April 24, 1989.[10]

On April 25, 1989, Adela executed a deed of absolute sale [11] over Lots 32 and 34, and their
improvements, in favor of petitioner, bearing on its face the price of P250,000.00. On the same day,
Adela also executed a special power of attorney[12] (SPA) in favor of petitioner. Petitioner's authority
under the SPA included the power to administer, take charge and manage, for Adela's benefit, the
Properties and all her other real and personal properties in the Philippines.[13] The deed of absolute sale
and the SPA were notarized on the same day by Atty. Dionilo D. Marfil in Quezon City.[14]

On April 29, 1989, Adela and petitioner left for the United States. [15] When petitioner returned to the
Philippines, she registered the sale over Lots 32 and 34 with the Registry of Deeds on September 25,
1989. TCT No. 19811 and TCT No. 19809 were then issued in the name of petitioner over Lots 32 and
34, respectively.[16]

On January 14, 1990, Adela died in the United States and was succeeded by her four children. [17]

Soon thereafter, petitioner sought to eject Annie and Carlos Sr., who were then staying on the Properties.
Only then did Annie and Carlos Sr. learn of the transfer of titles to petitioner. Thus, on July 9, 1990,
Annie, Carlos Sr. and Anselmo, represented by Annie, ("private respondents") filed a complaint for
reconveyance of property[18] against petitioner before Branch 89 of the RTC of Quezon City. It was
docketed as Civil Case No. Q-90-6035 and titled "Annie S. Jalandoon, et al. v. Valentino. Clemente "[19]

In the course of the trial, private respondents discovered that Adela and petitioner executed another
deed of absolute sale[20] over Lot 35-B on April 25, 1989 (collectively with the deed of absolute sale over
Lots 32 and 34, "Deeds of Absolute Sale"), bearing on its face the price of F60,000.00. [21] This was
notarized on the same date by one Orancio Generoso in Manila, but it was registered with the Registry of
Deeds only on October 5, 1990.[22] Thus, private respondents amended their complaint to include Lot 35-
B.[23]

In their amended complaint, private respondents sought nullification of the Deeds of Absolute Sale. They
alleged that Adela only wanted to help petitioner travel to the United States, by making it appear that
petitioner has ownership of the Properties. They further alleged that similar to the previous simulated
transfers to Carlos Jr. and Dennis, petitioner also undertook and warranted to execute a deed of
reconveyance in favor of the deceased over the Properties, if and when Adela should demand the same.
They finally alleged that no consideration was given by petitioner to Adela in exchange for the simulated
conveyances.[24]

On October 3, 1997, Carlos Sr. died and was substituted only by Dennis.[25] In an order dated June 18,
1999, the case was dismissed with respect to Annie after she manifested her intention to withdraw as a
party-plaintiff.[26] Anselmo Shotwell also died without any compulsory heir on September 7, 2000.

On February 26, 2001, the trial court promulgated a Decision[27] in favor of private respondents. Its
decretal portion reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring null and void the Deeds of Absolute Sale both dated April 25, 1989
between the late Adela De Guzman Shotwell and the defendant;
 2. Ordering the cancellation of Transfer Certificates of Title Nos. 19809, 19811 and
26558, all of the Registry of Deeds of Quezon City and in the name of defendant
Valentina Clemente; and

3. Ordering the defendant to execute a Deed of Reconveyance in favor of the

estate of the late Adela de Guzman Shotwell over the three (3) subject lots,
respectively covered by Transfer Certificates of Title Nos. 19809, 19811 and
26558 of the Registry of Deeds of Quezon City;

With costs against defendant.

SO ORDERED.[28]

On appeal, the CA affirmed with modification the Decision. The CA ruled that the Deeds of Absolute Sale
were simulated. It also ruled that the conveyances of the Properties to petitioner were made without
consideration and with no intention to have legal effect. [29]

The CA agreed with the trial court that the contemporaneous and subsequent acts of petitioner and her
grandmother are enough to render the conveyances null and void on the ground of being simulated.[30]
The CA found that Adela retained and continued to exercise dominion over the Properties even after she
executed the conveyances to petitioner.[31] By contrast, petitioner did not exercise control over the
properties because she continued to honor the decisions of Adela. The CA also affirmed the court a quo's
finding that the conveyances were not supported by any consideration. [32]

Petitioner filed a Motion for Reconsideration[33] dated September 12, 2005 but this was denied by the CA
in its Resolution[34] dated November 15, 2006.

Hence, this petition. The petition raises the principal issue of whether or not the CA erred in affirming the
decision of the trial court, that the Deeds of Absolute Sale between petitioner and her late grandmother
over the Properties are simulated and without consideration, and hence, void and inexistent. [35]

Ruling of the Court

We deny the petition.

In a Petition for Review on Certiorari

under Rule 45, only questions of law
may be entertained.

Whether or not the CA erred in affirming the decision of the RTC that the Deeds of Absolute Sale
between petitioner and her late grandmother are simulated and without consideration, and hence, void
and inexistent, is a question of fact which is not within the province of a petition for review on certiorari
under Rule 45 of the Revised Rules of Court.

Section 1, Rule 45 of the Revised Rules of Court states that the petition filed shall raise only questions of
law, which must be distinctly set forth. We have explained the difference between a question of fact and
a question of law, to wit:

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there
is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to
be one of law, the same must not involve an examination of the probative value of the evidence
presented by the litigants or any of them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact.[36]

Most of the issues raised by petitioner are questions of fact that invite a review of the evidence presented
by the parties below. We have repeatedly ruled that the issue on the genuineness of a deed of sale is
essentially a question of fact.[37] We are not a trier of facts and do not normally undertake the re-
examination of the evidence presented by the contending parties during the trial of the case.[38] This is
especially true where the trial court's factual findings are adopted and affirmed by the CA as in the
present case.[39] Factual findings of the trial court affirmed by the CA are final and conclusive and may
not be reviewed on appeal.[40] While it is true that there are recognized exceptions[41] to the general rule
that only questions of law may be entertained in a Rule 45 petition, we find that there is none obtaining
in this case.

Nevertheless, and to erase any doubt on the correctness of the assailed ruling, we examined the records
below and have arrived at the same conclusion. Petitioner has not been able to show that the lower
courts committed error in appreciating the evidence of record.

The Deeds of Absolute Sale between

petitioner and the late Adela Shotwell
are null and void for lack of consent
and consideration.

While the Deeds of Absolute Sale appear to be valid on their face, the courts are not completely
precluded to consider evidence aliunde in determining the real intent of the parties. This is especially true
when the validity of the contracts was put in issue by one of the parties in his pleadings. [42] Here, private
respondents assail the validity of the Deeds of Absolute Sale by alleging that they were simulated and
lacked consideration.

A. Simulated contract

The Civil Code defines a contract as a meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service.[43] Article 1318 provides that
there is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract; and
(3) Cause of the obligation which is established.

All these elements must be present to constitute a valid contract; the absence of one renders the
contract void. As one of the essential elements, consent when wanting makes the contract non-existent.
Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause, which
are to constitute the contract.[44] A contract of sale is perfected at the moment there is a meeting of the
minds upon the thing that is the object of the contract, and upon the price.[45]

Here, there was no valid contract of sale between petitioner and Adela because their consent was absent.
The contract of sale was a mere simulation.

Simulation takes place when the parties do not really want the contract they have executed to produce
the legal effects expressed by its wordings.[46] Article 1345 of the Civil Code provides that the simulation
of a contract may either be absolute or relative. The former takes place when the parties do not intend to
be bound at all; the latter, when the parties conceal their true agreement. The case of Heirs of Policronio
M. Ureta, Sr. v. Heirs of Liberate M. Ureta[47] is instructive on the matter of absolute simulation of
contracts, viz:

In absolute simulation, there is a colorable contract but it has no substance as the parties have no
intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical situation
of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties
may recover from each other what they may have given under the contract... [48] (Emphasis supplied)

In short, in absolute simulation there appears to be a valid contract but there is actually none because
the element of consent is lacking.[49] This is so because the parties do not actually intend to be bound by
the terms of the contract.

In determining the true nature of a contract, the primary test is the intention of the parties. If the words
of a contract appear to contravene the evident intention of the parties, the latter shall prevail. Such
intention is determined not only from the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties.[50] This is especially true in a claim of absolute
simulation where a colorable contract is executed.

In ruling that the Deeds of Absolute Sale were absolutely simulated, the lower courts considered the
totality of the prior, contemporaneous and subsequent acts of the parties. The following circumstances
led the RTC and the CA to conclude that the Deeds of Absolute Sale are simulated, and that the transfers
were never intended to affect the juridical relation of the parties:

a) There was no indication that Adela intended to alienate her properties in favor of petitioner. In fact,
the letter of Adela to Dennis dated April 18, 1989[51] reveals that she has reserved the ownership of the
Properties in favor of Dennis.

b) Adela continued exercising acts of dominion and control over the properties, even after the execution
of the Deeds of Absolute Sale, and though she lived abroad for a time. In Adela's letter dated August 25,
1989[52] to a certain Candy, she advised the latter to stay in the big house. Also, in petitioner's letter to
her cousin Dennis dated July 3, 1989,[53] she admitted that Adela continued to be in charge of the
Properties; that she has no "say" when it comes to the Properties; that she does not intend to claim
exclusive ownership of Lot 35-B; and that she is aware that the ownership and control of the Properties
are intended to be consolidated in Dennis.

c) The SPA executed on the same day as the Deeds of Absolute Sale appointing petitioner as
administratrix of Adela's properties, including the Properties, is repugnant to petitioner's claim that the
ownership of the same had been transferred to her.

d) The previous sales of the Properties to Dennis and Carlos, Jr. were simulated. This history, coupled
with Adela's treatment of petitioner, and the surrounding circumstances of the sales, strongly show that
Adela only granted petitioner the same favor she had granted to Dennis and Carlos Jr.

The April 18, 1989 letter to Dennis convincingly shows Adela's intention to give him the Properties. Part
of the letter reads: "Dennis, the two lot [sic] 32-34 at your said lower house will be at name yours [sic]
plus the 35 part of Cora or Teens [sic] house are all under your name"[54] Petitioner claims this letter was
not properly identified and is thus, hearsay evidence. The records, however, show that the letter was
admitted by the trial court in its Order dated February 24, 1993.[55] While it is true that the letter is dated
prior (or six days before to be exact) to the execution of the Deeds of Absolute Sale and is not conclusive
that Adela did not change her mind, we find that the language of the letter is more consistent with the
other pieces of evidence that show Adela never intended to relinquish ownership of the Properties to
petitioner. In this regard, we see no compelling reason to depart from the findings of the trial court as
there appears no grave abuse of discretion in its admission and consideration of the letter.

Petitioner's letter to her cousin Dennis dated July 3, 1989 also sufficiently establishes that Adela retained
control over the Properties, even after the execution of the Deeds of Absolute Sale. Petitioner herself
admitted that she was only following the orders of Adela, and that she has no claim over the Properties.
We quote in verbatim the relevant part of the letter:

...Now, before I left going back here in Mla. Mommy Dela ask me to read your letter about the big
house and lot, and I explained it to her. Now Mommy and Mommy Dela wants that the house is for
everyone who will need to stay, well that is what they say. Alam mo naman, I have no "say" esp.
when it comes with properties & you know that. Now kung ano gusto nila that goes. Now, to
be honest Mommy was surprise [sic] bakit daw kailangan mawalan ng karapatan sa bahay eh Nanay daw
nila iyon at tayo apo lang, Eh wala akong masasabi dyan, to be truthful to you, I only get the
orders... Tapos, sinisingil pa ako ng P1,000 --para sa gate napinapagawa nya sa lot 35-B, eh hindi na
lang ako kiimibo pero nagdamdam ako, imagine minsan na lang sya nakagawa ng bien sa akin at wala sa
intention ko na suluhin ang 35-B, ganyan pa sya... Now tungkol sa iyo, alam ko meron ka rin lupa tapos
yung bahay na malaki ikaw rin ang titira at magmamahala sa lahat. Anyway, itong bahay ko
sa iyo rin, alam mo naman na I'm just making the kids grow a little older then we have to home in the
states...[56] (Emphasis supplied)

Moreover, Adela's letter to petitioner's cousin Candy dated August 25, 1989 shows Adela's retention of
dominion over the Properties even after the sales. In the letter, Adela even requested her granddaughter
Candy to stay in the house rent and expense free.[57] Petitioner claims that Candy and the house referred
to in the letter were not identified. Records show, however, that petitioner has testified she has a cousin
named Candy Shotwell who stayed at the "big house" since February 1989. [58]

Clearly, the submission of petitioner to the orders of Adela does not only show that the latter retained
dominion over the Properties, but also that petitioner did not exercise acts of ownership over it. If at all,
her actions only affirm the conclusion that she was merely an administratrix of the Properties by virtue of
the SPA.

On the SPA, petitioner claims the lower courts erred in holding that it is inconsistent with her claim of
ownership. Petitioner claims that she has sufficiently explained that the SPA is not for the administration
of the Properties, but for the reconstitution of their titles.

We agree with the lower courts that the execution of an SPA for the administration of the Properties, on
the same day the Deeds of Absolute Sale were executed, is antithetical to the relinquishment of
ownership. The SPA shows that it is so worded as to leave no doubt that Adela is appointing petitioner as
the administratrix of her properties in Scout Ojeda. Had the SPA been intended only to facilitate the
processing of the reconstitution of the titles, there would have been no need to confer other powers of
administration, such as the collection of debts, filing of suit, etc., to petitioner.[59] In any case, the
explanation given by petitioner that the SPA was executed so as only to facilitate the reconstitution of the
titles of the Properties is not inconsistent with the idea of her being the administratrix of the Properties.
On the other hand, the idea of assigning her as administratrix is not only inconsistent, but also
repugnant, to the intention of selling and relinquishing ownership of the Properties.

Petitioner next questions the lower courts' findings that the Deeds of Absolute Sale are simulated because
the previous transfers to Adela's other grandchildren were also simulated. It may be true that, taken by
itself, the fact that Adela had previously feigned the transfer of ownership of Lots 32 and 34 to her other
grandchildren would not automatically mean that the subject Deeds of Absolute Sale are likewise void.
The lower courts, however, did not rely solely on this fact, but considered it with the rest of the evidence,
the totality of which reveals that Adela's intention was merely to feign the transfer to petitioner.

The fact that unlike in the case of Dennis and Carlos, Jr., she was not asked by Adela to execute a deed
of reconveyance, is of no moment. There was a considerable lapse of time from the moment of the
transfer to Dennis and Carlos, Jr. of Lots 32 and 34 in 1985 and in 1987, respectively, and until the
execution of the deed of reconveyance in 1989. Here, the alleged Deeds of Absolute Sale were executed
in April 1989. Adela died in January 1990 in the United States. Given the short period of time between
the alleged execution of the Deeds of Absolute Sale and the sudden demise of Adela, the fact that
petitioner was not asked to execute a deed of reconveyance is understandable. This is because there was
no chance at all to do so. Thus, the fact that she did not execute a deed of reconveyance does not help
her case.

We affirm the conclusion reached by the RTC and the CA that the evidence presented below prove that
Adela did not intend to alienate the Properties in favor of petitioner, and that the transfers were merely a
sham to accommodate petitioner in her travel abroad.

Petitioner claims that we should consider that there is only one heir of the late Adela who is contesting
the sale, and that out of the many transactions involving the decedent's other properties, the sale to
petitioner is the only one being questioned. We are not convinced that these are material to the
resolution of the case. As aptly passed upon by the CA in its assailed Resolution:

In a contest for the declaration of nullity of an instrument for being simulated, the number of contestants
is not determinative of the propriety of the cause. Any person who is prejudiced by a simulated
contract may set up its inexistence. In this instant case, it does not matter if the contest is made by
one, some or all of the heirs.

Neither would the existence of other contracts which remain unquestioned deter an action for the nullity
of an instrument. A contract is rendered meaningful and forceful by the intention of the parties relative
thereto, and such intention can only be relevant to that particular contract which is produced or, as in
this case, to that which is not produced. That the deed of sale in [petitioner's] favor has been held to be
simulated is not indicative of the simulation of any other contract executed by the deceased Adela de
Guzman Shotwell during her lifetime.[60]

To this we add that other alleged transactions made by Adela cannot be used as evidence to prove the
validity of the conveyances to petitioner. For one, we are not aware of any of these transactions or
whether there are indeed other transactions. More importantly, the validity of these transactions does not
prove directly or indirectly the validity of the conveyances in question.

B. No consideration for the sale

We also find no compelling reason to depart from the court a quo's finding that Adela never received the
consideration stipulated in the simulated Deeds of Absolute Sale.

Although on their face, the Deeds of Absolute Sale appear to be supported by valuable consideration, the
RTC and the CA found that there was no money involved in the sale. The consideration in the Deeds of
Absolute Sale was superimposed on the spaces therein, bearing a font type different from that used in
the rest of the document.[61] The lower courts also found that the duplicate originals of the Deeds of
Absolute Sale bear a different entry with regard to the price.[62]

Article 1471 of the Civil Code provides that "if the price is simulated, the sale is void." Where a deed of
sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null
and void for lack of consideration.[63] Thus, although the contracts state that the purchase price of
P250,000.00 and P60,000.00 were paid by petitioner to Adela for the Properties, the evidence shows that
the contrary is true, because no money changed hands. Apart from her testimony, petitioner did not
present proof that she paid for the Properties.

There is no implied trust.

We also affirm the CA's deletion of the pronouncement of the trial court as to the existence of an implied
trust. The trial court found that a resulting trust, a form of implied trust based on Article 1453[64] of the
Civil Code, was created between Adela and petitioner.

Resulting trusts[65] arise from the nature or circumstances of the consideration involved in a transaction
whereby one person becomes invested with legal title but is obligated in equity to hold his title for the
benefit of another.[66] It is founded on the equitable doctrine that valuable consideration and not legal
title is determinative of equitable title or interest and is always presumed to have been contemplated by
the parties.[67] Since the intent is not expressed in the instrument or deed of conveyance, it is to be found
in the nature of the parties' transaction.[68] Resulting trusts are thus describable as intention-enforcing
trusts.[69] An example of a resulting trust is Article 1453 of the Civil Code.

We, however, agree with the CA that no implied trust can be generated by the simulated transfers
because being fictitious or simulated, the transfers were null and void ab initio from the very beginning
and thus vested no rights whatsoever in favor of petitioner. That which is inexistent cannot give life to
anything at all.[70]

Article 1453 contemplates that legal titles were validly vested in petitioner. Considering, however, that
the sales lack not only the element of consent for being absolutely simulated, but also the element of
consideration, these transactions are void and inexistent and produce no effect. Being null and void from
the beginning, no transfer of title, both legal and beneficial, was ever effected to petitioner.

In any case, regardless of the presence of an implied trust, this will not affect the disposition of the case.
As void contracts do not produce any effect, the result will be the same in that the Properties will be
reeonveyed to the estate of the late Adela de Guzman Shotwell.

WHEREFORE, the petition is DENIED.,

SO ORDERED.
Velasco, Jr., (Chairperson), De Castro,* Villarama, Jr., and Mendoza,** JJ., concur.

G.R. NO. 139173, February 28, 2007

SPOUSES ONNIE SERRANO AND AMPARO HERRERA, PETITIONERS, VS. GODOFREDO

CAGUIAT, RESPONDENT.

DECISION

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 dated January 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 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.

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 Manager's Check No. 790537 dated April 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 plaintiff's 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 court's
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 respondent's complaint is DISMISSED.

SO ORDERED.

Puno, C. J., (Chairperson), Corona, and Garcia, JJ., concur.

Azcuna, J., on official leave.

[9]
Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other himself to pay therefore a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
[10]
Article 1475. The contract of sale is perfected at the moment there is a meeting of the minds upon
the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts.

[11]
Article 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.

Copyright 2016 - Batas.org

G.R. No. 157493, February 05, 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 Decision[1] 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 Resolution[2] 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 attorney's 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. 3438[3] (cancelled by I.D. No. 6064-A) for Lot 720 and Tax
Declaration No. 3437[4] (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 Sell[5] 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 letter[6] 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 Complaint[7] 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 Decision[9] 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 attorney's 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 attorney's 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 [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 attorney's 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 Oesmer's 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 Ernesto's 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 Enriqueta's 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 of P3,316,560.00 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 Assessor's 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 petitioner's 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
Adolfo's 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 corporation's 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 respondent's 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 of P3,216,560.00 representing the balance of the purchase
price for the latter's 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 attorney's fees plus costs
of the suit. Costs against petitioners.

SO ORDERED.

Copyright 2016 - Batas.org

FIRST DIVISION

G.R. No. 176841, June 29, 2010

ANTHONY ORDUA, DENNIS ORDUA, AND ANTONITA ORDUA, PETITIONERS, VS.

EDUARDO J. FUENTEBELLA, MARCOS S. CID, BENJAMIN F. CID, BERNARD G. BANTA, AND
ARMANDO GABRIEL, JR., RESPONDENTS.

DECISION

VELASCO JR., J.:

In this Petition for Review[1] under Rule 45 of the Rules of Court, Anthony Ordua, Dennis Ordua and
Antonita Ordua assail and seek to set aside the Decision[2] of the Court of Appeals (CA) dated December
4, 2006 in CA-G.R. CV No. 79680, as reiterated in its Resolution of March 6, 2007, which affirmed the
May 26, 2003 Decision[3] of the Regional Trial Court (RTC), Branch 3 in Baguio City, in Civil Case No.
4984-R, a suit for annulment of title and reconveyance commenced by herein petitioners against herein
respondents.

Central to the case is a residential lot with an area of 74 square meters located at Fairview Subdivision,
Baguio City, originally registered in the name of Armando Gabriel, Sr. (Gabriel Sr.) under Transfer
Certificate of Title (TCT) No. 67181 of the Registry of Deeds of Baguio City.[4]

As gathered from the petition, with its enclosures, and the comments thereon of four of the five
respondents,[5] the Court gathers the following relevant facts:

Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner Antonita Ordua
(Antonita), but no formal deed was executed to document the sale. The contract price was apparently
payable in installments as Antonita remitted from time to time and Gabriel Sr. accepted partial payments.
One of the Orduas would later testify that Gabriel Sr. agreed to execute a final deed of sale upon full
payment of the purchase price.[6]

As early as 1979, however, Antonita and her sons, Dennis and Anthony Ordua, were already occupying
the subject lot on the basis of some arrangement undisclosed in the records and even constructed their
house thereon. They also paid real property taxes for the house and declared it for tax purposes, as
evidenced by Tax Declaration No. (TD) 96-04012-111087[7] in which they place the assessed value of the
structure at PhP 20,090.

After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT No. T-71499[8]
over the subject lot and continued accepting payments from the petitioners. On December 12, 1996,
Gabriel Jr. wrote Antonita authorizing her to fence off the said lot and to construct a road in the adjacent
lot.[9] On December 13, 1996, Gabriel Jr. acknowledged receipt of a PhP 40,000 payment from
petitioners.[10] Through a letter[11] dated May 1, 1997, Gabriel Jr. acknowledged that petitioner had so far
made an aggregate payment of PhP 65,000, leaving an outstanding balance of PhP 60,000. A receipt
Gabriel Jr. issued dated November 24, 1997 reflected a PhP 10,000 payment.

Despite all those payments made for the subject lot, Gabriel Jr. would later sell it to Bernard Banta
(Bernard) obviously without the knowledge of petitioners, as later developments would show.

As narrated by the RTC, the lot conveyance from Gabriel Jr. to Bernard was effected against the following
backdrop: Badly in need of money, Gabriel Jr. borrowed from Bernard the amount of PhP 50,000, payable
in two weeks at a fixed interest rate, with the further condition that the subject lot would answer for the
loan in case of default. Gabriel Jr. failed to pay the loan and this led to the execution of a Deed of Sale [12]
dated June 30, 1999 and the issuance later of TCT No. T-72782[13] for subject lot in the name of Bernard
upon cancellation of TCT No. 71499 in the name of Gabriel, Jr. As the RTC decision indicated, the
reluctant Bernard agreed to acquire the lot, since he had by then ready buyers in respondents Marcos Cid
and Benjamin F. Cid (Marcos and Benjamin or the Cids).

Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed with a Deed of Absolute
Sale of a Registered Land[14] dated January 19, 2000, the Cids were able to cancel TCT No. T-72782 and
secure TCT No. 72783[15] covering the subject lot. Just like in the immediately preceding transaction, the
deed of sale between Bernard and the Cids had respondent Eduardo J. Fuentebella (Eduardo) as one of
the instrumental witnesses.
Marcos and Benjamin, in turn, ceded the subject lot to Eduardo through a Deed of Absolute Sale [16] dated
May 11, 2000. Thus, the consequent cancellation of TCT No. T-72782 and issuance on May 16, 2000 of
TCT No. T-3276[17] over subject lot in the name of Eduardo.

As successive buyers of the subject lot, Bernard, then Marcos and Benjamin, and finally Eduardo,
checked, so each claimed, the title of their respective predecessors-in-interest with the Baguio Registry
and discovered said title to be free and unencumbered at the time each purchased the property.
Furthermore, respondent Eduardo, before buying the property, was said to have inspected the same and
found it unoccupied by the Orduas.[18]

Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo, through his lawyer, sent
a letter addressed to the residence of Gabriel Jr. demanding that all persons residing on or physically
occupying the subject lot vacate the premises or face the prospect of being ejected. [19]

Learning of Eduardo's threat, petitioners went to the residence of Gabriel Jr. at No. 34 Dominican Hill,
Baguio City. There, they met Gabriel Jr.'s estranged wife, Teresita, who informed them about her having
filed an affidavit-complaint against her husband and the Cids for falsification of public documents on
March 30, 2000. According to Teresita, her signature on the June 30, 1999 Gabriel Jr.-Bernard deed of
sale was a forgery. Teresita further informed the petitioners of her intent to honor the aforementioned
1996 verbal agreement between Gabriel Sr. and Antonita and the partial payments they gave her father-
in-law and her husband for the subject lot.

On July 3, 2001, petitioners, joined by Teresita, filed a Complaint [20] for Annulment of Title,
Reconveyance with Damages against the respondents before the RTC, docketed as Civil Case No. 4984-
R, specifically praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be annulled.
Corollary to this prayer, petitioners pleaded that Gabriel Jr.'s title to the lot be reinstated and that
petitioners be declared as entitled to acquire ownership of the same upon payment of the remaining
balance of the purchase price therefor agreed upon by Gabriel Sr. and Antonita.

While impleaded and served with summons, Gabriel Jr. opted not to submit an answer.

Ruling of the RTC

By Decision dated May 26, 2003, the RTC ruled for the respondents, as defendants a quo, and against
the petitioners, as plaintiffs therein, the dispositive portion of which reads:

WHEREFORE, the instant complaint is hereby DISMISSED for lack of merit. The four (4) plaintiffs are
hereby ordered by this Court to pay each defendant (except Armando Gabriel, Jr., Benjamin F. Cid, and
Eduardo J. Fuentebella who did not testify on these damages), Moral Damages of Twenty Thousand
(P20,000.00) Pesos, so that each defendant shall receive Moral Damages of Eighty Thousand
(P80,000.00) Pesos each. Plaintiffs shall also pay all defendants (except Armando Gabriel, Jr., Benjamin
F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Exemplary Damages of Ten
Thousand (P10,000.00) Pesos each so that each defendant shall receive Forty Thousand (P40,000.00)
Pesos as Exemplary Damages. Also, plaintiffs are ordered to pay each defendant (except Armando
Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Fifty
Thousand (P50,000.00) Pesos as Attorney's Fees, jointly and solidarily.

Cost of suit against the plaintiffs.[21]

On the main, the RTC predicated its dismissal action on the basis of the following grounds and/or
premises:

1. Eduardo was a purchaser in good faith and, hence, may avail himself of the provision of Article 1544 [22]
of the Civil Code, which provides that in case of double sale, the party in good faith who is able to
register the property has better right over the property;

2. Under Arts. 1356[23] and 1358[24] of the Code, conveyance of real property must be in the proper form,
else it is unenforceable;

3. The verbal sale had no adequate consideration; and

4. Petitioners' right of action to assail Eduardo's title prescribes in one year from date of the issuance of
such title and the one-year period has already lapsed.

From the above decision, only petitioners appealed to the CA, their appeal docketed as CA-G.R. CV No.
79680.

The CA Ruling

On December 4, 2006, the appellate court rendered the assailed Decision affirming the RTC decision. The
fallo reads:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED and the 26 May 2003
Decision of the Regional Trial Court, Branch 3 of Baguio City in Civil Case No. 4989-R is hereby
AFFIRMED.

SO ORDERED.[25]

Hence, the instant petition on the submission that the appellate court committed reversible error of law:

1. xxx WHEN IT HELD THAT THE SALE OF THE SUBJECT LOT BY ARMANDO GABRIEL, SR. AND
RESPONDENT ARMANDO GABRIEL, JR. TO THE PETITIONERS IS UNENFORCEABLE.

2. xxx IN NOT FINDING THAT THE SALE OF THE SUBJECT LOT BY RESPONDENT ARMANDO GABRIEL,
JR. TO RESPONDENT BERNARD BANTA AND ITS SUBSEQUENT SALE BY THE LATTER TO HIS CO-
RESPONDENTS ARE NULL AND VOID.
3. xxx IN NOT FINDING THAT THE RESPONDENTS ARE BUYERS IN BAD FAITH

4. xxx IN FINDING THAT THE SALE OF THE SUBJECT LOT BETWEEN GABRIEL, SR. AND RESPONDENT
GABRIEL, JR. AND THE PETITIONERS HAS NO ADEQUATE CONSIDERATION.

5. xxx IN RULING THAT THE INSTANT ACTION HAD ALREADY PRESCRIBED.

6. xxx IN FINDING THAT THE PLAINTIFFS-APPELLANTS ARE LIABLE FOR MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY'S FEES.[26]

The Court's Ruling

The core issues tendered in this appeal may be reduced to four and formulated as follows, to wit: first,
whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable under the Statute of
Frauds; second, whether or not such sale has adequate consideration; third, whether the instant action
has already prescribed; and, fourth, whether or not respondents are purchasers in good faith.

The petition is meritorious.

Statute of Frauds Inapplicable

to Partially Executed Contracts

It is undisputed that Gabriel Sr., during his lifetime, sold the subject property to Antonita, the purchase
price payable on installment basis. Gabriel Sr. appeared to have been a recipient of some partial
payments. After his death, his son duly recognized the sale by accepting payments and issuing what may
be considered as receipts therefor. Gabriel Jr., in a gesture virtually acknowledging the petitioners'
dominion of the property, authorized them to construct a fence around it. And no less than his wife,
Teresita, testified as to the fact of sale and of payments received.

Pursuant to such sale, Antonita and her two sons established their residence on the lot, occupying the
house they earlier constructed thereon. They later declared the property for tax purposes, as evidenced
by the issuance of TD 96-04012-111087 in their or Antonita's name, and paid the real estates due
thereon, obviously as sign that they are occupying the lot in the concept of owners.

Given the foregoing perspective, Eduardo's assertion in his Answer that "persons appeared in the
property"[27] only after "he initiated ejectment proceedings"[28] is clearly baseless. If indeed petitioners
entered and took possession of the property after he (Eduardo) instituted the ejectment suit, how could
they explain the fact that he sent a demand letter to vacate sometime in May 2000?

With the foregoing factual antecedents, the question to be resolved is whether or not the Statute of
Frauds bars the enforcement of the verbal sale contract between Gabriel Sr. and Antonita.
The CA, just as the RTC, ruled that the contract is unenforceable for non-compliance with the Statute of
Frauds.

We disagree for several reasons. Foremost of these is that the Statute of Frauds expressed in Article
1403, par. (2),[29] of the Civil Code applies only to executory contracts, i.e., those where no performance
has yet been made. Stated a bit differently, the legal consequence of non-compliance with the Statute
does not come into play where the contract in question is completed, executed, or partially
consummated.[30]

The Statute of Frauds, in context, provides that a contract for the sale of real property or of an interest
therein shall be unenforceable unless the sale or some note or memorandum thereof is in writing and
subscribed by the party or his agent. However, where the verbal contract of sale has been partially
executed through the partial payments made by one party duly received by the vendor, as in the
present case, the contract is taken out of the scope of the Statute.

The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending
for their evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the party to be charged.[31] The Statute requires
certain contracts to be evidenced by some note or memorandum in order to be enforceable. The term
"Statute of Frauds" is descriptive of statutes that require certain classes of contracts to be in writing. The
Statute does not deprive the parties of the right to contract with respect to the matters therein involved,
but merely regulates the formalities of the contract necessary to render it enforceable.[32]

Since contracts are generally obligatory in whatever form they may have been entered into, provided all
the essential requisites for their validity are present,[33] the Statute simply provides the method by which
the contracts enumerated in Art. 1403 (2) may be proved but does not declare them invalid because they
are not reduced to writing. In fine, the form required under the Statute is for convenience or evidentiary
purposes only.

There can be no serious argument about the partial execution of the sale in question. The records show
that petitioners had, on separate occasions, given Gabriel Sr. and Gabriel Jr. sums of money as partial
payments of the purchase price. These payments were duly receipted by Gabriel Jr. To recall, in his letter
of May 1, 1997, Gabriel, Jr. acknowledged having received the aggregate payment of PhP 65,000 from
petitioners with the balance of PhP 60,000 still remaining unpaid. But on top of the partial payments thus
made, possession of the subject of the sale had been transferred to Antonita as buyer. Owing thus to its
partial execution, the subject sale is no longer within the purview of the Statute of Frauds.

Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by the acceptance of
benefits under the contract.[34] Evidently, Gabriel, Jr., as his father earlier, had benefited from the partial
payments made by the petitioners. Thus, neither Gabriel Jr. nor the other respondents--successive
purchasers of subject lots--could plausibly set up the Statute of Frauds to thwart petitioners' efforts
towards establishing their lawful right over the subject lot and removing any cloud in their title. As it
were, petitioners need only to pay the outstanding balance of the purchase price and that would
complete the execution of the oral sale.

There was Adequate Consideration

Without directly saying so, the trial court held that the petitioners cannot sue upon the oral sale since in
its own words: "x x x for more than a decade, [petitioners] have not paid in full Armando Gabriel, Sr. or
his estate, so that the sale transaction between Armando Gabriel Sr. and [petitioners] [has] no adequate
consideration."

The trial court's posture, with which the CA effectively concurred, is patently flawed. For starters, they
equated incomplete payment of the purchase price with inadequacy of price or what passes as lesion,
when both are different civil law concepts with differing legal consequences, the first being a ground to
rescind an otherwise valid and enforceable contract. Perceived inadequacy of price, on the other hand, is
not a sufficient ground for setting aside a sale freely entered into, save perhaps when the inadequacy is
shocking to the conscience.[35]

The Court to be sure takes stock of the fact that the contracting parties to the 1995 or 1996 sale agreed
to a purchase price of PhP 125,000 payable on installments. But the original lot owner, Gabriel Sr., died
before full payment can be effected. Nevertheless, petitioners continued remitting payments to Gabriel,
Jr., who sold the subject lot to Bernard on June 30, 1999. Gabriel, Jr., as may be noted, parted with the
property only for PhP 50,000. On the other hand, Bernard sold it for PhP 80,000 to Marcos and Benjamin.
From the foregoing price figures, what is abundantly clear is that what Antonita agreed to pay Gabriel,
Sr., albeit in installment, was very much more than what his son, for the same lot, received from his
buyer and the latter's buyer later. The Court, therefore, cannot see its way clear as to how the RTC
arrived at its simplistic conclusion about the transaction between Gabriel Sr. and Antonita being without
"adequate consideration."

The Issues of Prescription and the Bona

Fides of the Respondents as Purchasers

Considering the interrelation of these two issues, we will discuss them jointly.

There can be no quibbling about the fraudulent nature of the conveyance of the subject lot effected by
Gabriel Jr. in favor of Bernard. It is understandable that after his father's death, Gabriel Jr. inherited
subject lot and for which he was issued TCT No. No. T-71499. Since the Gabriel Sr. - Antonita sales
transaction called for payment of the contract price in installments, it is also understandable why the title
to the property remained with the Gabriels. And after the demise of his father, Gabriel Jr. received
payments from the Orduas and even authorized them to enclose the subject lot with a fence. In sum,
Gabriel Jr. knew fully well about the sale and is bound by the contract as predecessor-in-interest of
Gabriel Sr. over the property thus sold.

Yet, the other respondents (purchasers of subject lot) still maintain that they are innocent purchasers for
value whose rights are protected by law and besides which prescription has set in against petitioners'
action for annulment of title and reconveyance.

The RTC and necessarily the CA found the purchaser-respondents' thesis on prescription correct stating in
this regard that Eduardo's TCT No. T-3276 was issued on May 16, 2000 while petitioners filed their
complaint for annulment only on July 3, 2001. To the courts below, the one-year prescriptive period to
assail the issuance of a certificate of title had already elapsed.

We are not persuaded.

The basic complaint, as couched, ultimately seeks the reconveyance of a fraudulently registered piece of
residential land. Having possession of the subject lot, petitioners' right to the reconveyance thereof, and
the annulment of the covering title, has not prescribed or is not time-barred. This is so for an action for
annulment of title or reconveyance based on fraud is imprescriptible where the suitor is in possession of
the property subject of the acts,[36] the action partaking as it does of a suit for quieting of title which is
imprescriptible.[37] Such is the case in this instance. Petitioners have possession of subject lots as owners
having purchased the same from Gabriel, Sr. subject only to the full payment of the agreed price.

The prescriptive period for the reconveyance of fraudulently registered real property is 10 years,
reckoned from the date of the issuance of the certificate of title, if the plaintiff is not in possession, but
imprescriptible if he is in possession of the property.[38] Thus, one who is in actual possession of a piece
of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked
before taking steps to vindicate his right.[39] As it is, petitioners' action for reconveyance is
imprescriptible.

This brings us to the question of whether or not the respondent-purchasers, i.e., Bernard, Marcos and
Benjamin, and Eduardo, have the status of innocent purchasers for value, as was the thrust of the trial
court's disquisition and disposition.

We are unable to agree with the RTC.

It is the common defense of the respondent-purchasers that they each checked the title of the subject lot
when it was his turn to acquire the same and found it clean, meaning without annotation of any
encumbrance or adverse third party interest. And it is upon this postulate that each claims to be an
innocent purchaser for value, or one who buys the property of another without notice that some other
person has a right to or interest in it, and who pays therefor a full and fair price at the time of the
purchase or before receiving such notice.[40]

The general rule is that one dealing with a parcel of land registered under the Torrens System may safely
rely on the correctness of the certificate of title issued therefor and is not obliged to go beyond the
certificate.[41] Where, in other words, the certificate of title is in the name of the seller, the innocent
purchaser for value has the right to rely on what appears on the certificate, as he is charged with notice
only of burdens or claims on the res as noted in the certificate. Another formulation of the rule is that (a)
in the absence of anything to arouse suspicion or (b) except where the party has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to make such inquiry or (c) when
the purchaser has knowledge of a defect of title in his vendor or of sufficient facts to induce a reasonably
prudent man to inquire into the status of the title of the property, [42] said purchaser is without obligation
to look beyond the certificate and investigate the title of the seller.

Eduardo and, for that matter, Bernard and Marcos and Benjamin, can hardly claim to be innocent
purchasers for value or purchasers in good faith. For each knew or was at least expected to know that
somebody else other than Gabriel, Jr. has a right or interest over the lot. This is borne by the fact that
the initial seller, Gabriel Jr., was not in possession of subject property. With respect to Marcos and
Benjamin, they knew as buyers that Bernard, the seller, was not also in possession of the same property.
The same goes with Eduardo, as buyer, with respect to Marcos and Benjamin.

Basic is the rule that a buyer of a piece of land which is in the actual possession of persons other than
the seller must be wary and should investigate the rights of those in possession. Otherwise, without such
inquiry, the buyer can hardly be regarded as a buyer in good faith. When a man proposes to buy or deal
with realty, his duty is to read the public manuscript, i.e., to look and see who is there upon it and what
his rights are. A want of caution and diligence which an honest man of ordinary prudence is accustomed
to exercise in making purchases is, in contemplation of law, a want of good faith. The buyer who has
failed to know or discover that the land sold to him is in adverse possession of another is a buyer in bad
faith.[43]

Where the land sold is in the possession of a person other than the vendor, the purchaser must go
beyond the certificates of title and make inquiries concerning the rights of the actual possessor.[44] And
where, as in the instant case, Gabriel Jr. and the subsequent vendors were not in possession of the
property, the prospective vendees are obliged to investigate the rights of the one in possession.
Evidently, Bernard, Marcos and Benjamin, and Eduardo did not investigate the rights over the subject lot
of the petitioners who, during the period material to this case, were in actual possession thereof.
Bernard, et al. are, thus, not purchasers in good faith and, as such, cannot be accorded the protection
extended by the law to such purchasers.[45] Moreover, not being purchasers in good faith, their having
registered the sale, will not, as against the petitioners, carry the day for any of them under Art. 1544 of
the Civil Code prescribing rules on preference in case of double sales of immovable property. Occea v.
Esponilla[46] laid down the following rules in the application of Art. 1544: (1) knowledge by the first buyer
of the second sale cannot defeat the first buyer's rights except when the second buyer first register in
good faith the second sale; and (2) knowledge gained by the second buyer of the first sale defeats his
rights even if he is first to register, since such knowledge taints his registration with bad faith.

Upon the facts obtaining in this case, the act of registration by any of the three respondent-purchasers
was not coupled with good faith. At the minimum, each was aware or is at least presumed to be aware of
facts which should put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor.

The award by the lower courts of damages and attorney's fees to some of the herein respondents was
predicated on the filing by the original plaintiffs of what the RTC characterized as an unwarranted suit.
The basis of the award, needless to stress, no longer obtains and, hence, the same is set aside.

WHEREFORE, the petition is hereby GRANTED. The appealed December 4, 2006 Decision and the
March 6, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 79680 affirming the May 26, 2003
Decision of the Regional Trial Court, Branch 3 in Baguio City are hereby REVERSED and SET ASIDE.
Accordingly, petitioner Antonita Ordua is hereby recognized to have the right of ownership over subject
lot covered by TCT No. T-3276 of the Baguio Registry registered in the name of Eduardo J. Fuentebella.
The Register of Deeds of Baguio City is hereby ORDERED to cancel said TCT No. T-3276 and to issue a
new one in the name of Armando Gabriel, Jr. with the proper annotation of the conditional sale of the lot
covered by said title in favor of Antonita Ordua subject to the payment of the PhP 50,000 outstanding
balance. Upon full payment of the purchase price by Antonita Ordua, Armando Gabriel, Jr. is ORDERED
to execute a Deed of Absolute Sale for the transfer of title of subject lot to the name of Antonita Ordua,
within three (3) days from receipt of said payment.

No pronouncement as to costs.

SO ORDERED.

Corona, C.J., (Chairperson), Leonardo-De Castro, Del Castillo, and Perez, JJ., concur.

[22]
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.

[23]
Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided
all the essential requisites for their validity are present. However, when the law requires that a contract
be in some form in order that it may be valid or enforceable, or that a contract to be proved in a certain
way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the
following article cannot be exercised.

[24]
Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; sales of real property or of an interest therein are
governed by Articles 1403, No. 2, and 1405;

xxxx

(4) The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds Five hundred pesos must appear in writing even a
private one. But sales of goods, chattels or things in action are governed by Articles 1403, No. 2 and
1405.
[29]
Art. 1403. The following contracts are unenforceable, unless they are ratified:

xxx

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

xxxx

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or
of an interest therein;

xxx

[34]
Article 1405, Civil Code, which states:

Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure
to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits
under them.

[45]
Sec. 32 of Presidential Decree No. 1529, which provides:

Section 32. Review of decree of registration; Innocent purchaser for value.--The decree of registration
shall not be reopened or revised by reason of absence, minority, or other disability of any person
adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject,
however, to the right of any person, x x x deprived of land or of any estate or interest therein by such
adjudication or confirmation of title obtained by actual fraud, to file in the proper [RTC] a petition for
reopening and review of the decree of registration not later than one year from and after the date of the
entry of such decree of registration, but in no case shall such petition be entertained by the court where
an innocent purchaser for value has acquired the land or an interest therein, whose rights may be
prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this
Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrance for value.

Upon the expiration of said period of one year, the decree of registration and the certificate of title issued
shall become incontrovertible. Any person aggrieved by such decree of registration in any case may
pursue his remedy by action for damages against the applicant or any other persons responsible for the
fraud.

Copyright 2016 - Batas.org

G.R. No. 137290, July 31, 2000

SAN MIGUEL PROPERTIES PHILIPPINES, INC., PETITIONER, VS. SPOUSES ALFREDO HUANG
AND GRACE HUANG, RESPONDENTS.

DECISION

MENDOZA, J.:

This is a petition for review of the decision,[1] dated April 8, 1997, of the Court of Appeals which reversed
the decision of the Regional Trial Court, Branch 153, Pasig City dismissing the complaint brought by
respondents against petitioner for enforcement of a contract of sale.

The facts are not in dispute.

Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and
sale of real properties. Part of its inventory are two parcels of land totalling 1, 738 square meters at the
corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City, which are covered by
TCT Nos. PT-82395 and PT-82396 of the Register of Deeds of Pasig City.

On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was
made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a
letter[2] dated March 24, 1994, Atty. Dauz signified her clients' interest in purchasing the properties for
the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00
would be given as earnest money and the balance would be paid in eight equal monthly installments
from May to December, 1994. However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the following terms for the purchase of
the properties, viz:
This is to express our interest to buy your-above-mentioned property with an area of 1, 738 sq. meters.
For this purpose, we are enclosing herewith the sum of P1,000,000.00 representing earnest-deposit
money, subject to the following conditions.

1. We will be given the exclusive option to purchase the property within the 30
days from date of your acceptance of this offer.

2. During said period, we will negotiate on the terms and conditions of the
purchase; SMPPI will secure the necessary Management and Board approvals;
and we initiate the documentation if there is mutual agreement between us.

3. In the event that we do not come to an agreement on this transaction, the said
amount of P1,000,000.00 shall be refundable to us in full upon demand. . . .

Isidro A. Sobrecarey, petitioner's vice-president and operations manager for corporate real estate,
indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnest-
deposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR
SALE" sign from the properties.

Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April 8, 1994,
Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day
term. Atty. Dauz countered with an offer of six months within which to pay.

On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had
not yet acted on her counter-offer. This prompted Atty. Dauz to propose a four-month period of
amortization.

On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994
within which to exercise her option to purchase the property, adding that within that period, "[we] hope
to finalize [our] agreement on the matter."[4] Her request was granted.

On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote
Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale
despite the extension granted by petitioner, the latter was returning the amount of P1 million given as
"earnest-deposit."[5]

On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within
five days of a deed of sale covering the properties. Respondents attempted to return the "earnest-
deposit" but petitioner refused on the ground that respondents' option to purchase had already expired.

On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner
before the Regional Trial Court, Branch 133, Pasig City where it was docketed as Civil Case No. 64660.

Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the complaint
alleging that (1) the alleged "exclusive option" of respondent spouses lacked a consideration separate
and distinct from the purchase price and was thus unenforceable and (2) the complaint did not allege a
cause of action because there was no "meeting of the minds" between the parties and, therefore, no
perfected contract of sale. The motion was opposed by respondents.

On December 12, 1994, the trial court granted petitioner's motion and dismissed the action. Respondents
filed a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of
Appeals which, on April 8, 1997, rendered a decision[6] reversing the judgment of the trial court. The
appellate court held that all the requisites of a perfected contract of sale had been complied with as the
offer made on March 29, 1994, in connection with which the earnest money in the amount of P1 million
was tendered by respondents, had already been accepted by petitioner. The court cited Art. 1482 of the
Civil Code which provides that "[w]henever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract." The fact the parties had
not agreed on the mode of payment did not affect the contract as such is not an essential element for its
validity. In addition, the court found that Sobrecarey had authority to act in behalf of petitioner for the
sale of the properties.[7]

Petitioner moved for reconsideration of the trial court's decision, but its motion was denied. Hence, this
petition.

Petitioner contends that the Court of Appeals erred in finding that there was a perfected contract of sale
between the parties because the March 29, 1994 letter of respondents, which petitioner accepted, merely
resulted in an option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner
argues that the absence of agreement as to the mode of payment was fatal to the perfection of the
contract of sale. Petitioner also disputes the appellate court's ruling that Isidro A. Sobrecarey had
authority to sell the subject real properties.[8]

Respondents were required to comment within ten (10) days from notice. However, despite 13
extensions totalling 142 days which the Court had given to them, respondents failed to file their
comment. They were thus considered to have waived the filing of a comment.

The petition is meritorious.

In holding that there is a perfected contract of sale, the Court of Appeals relied on the following findings:
(1) earnest money was allegedly given by respondents and accepted by petitioner through its vice-
president and operations manager, Isidro A. Sobrecarey; and (2) the documentary evidence in the
records show that there was a perfected contract of sale.

With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents
did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented
the amount merely as a deposit of what would eventually become the earnest money or downpayment
should a contract of sale be made by them. The amount was thus given not as a part of the purchase
price and as proof of the perfection of the contract of sale but only as a guarantee that respondents
would not back out of the sale. Respondents in fact described the amount as an "earnest-deposit." In
Spouses Doromal, Sr. v. Court of Appeals,[9] it was held:
. . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show
that the same was in the concept of the earnest money contemplated in Art. 1482 of the Civil Code,
invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual milieu
thereof extant in the record, We are more inclined to believe that the said P5,000.00 were paid in the
concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee
that the buyer would not back out, considering that it is not clear that there was already a definite
agreement as to the price then and that petitioners were decided to buy 6/7 only of the property should
respondent Javellana refuse to agree to part with her 1/7 share.[10]

In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as
contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents' offer
of March 29, 1994, their contract had not yet been perfected. This is evident from the following
conditions attached by respondents to their letter, to wit: (1) that they be given the exclusive option to
purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the
parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the
necessary approvals while respondents would handle the documentation.

The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As
petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but
merely to an option or an accepted unilateral promise on the part of respondents to buy the subject
properties within 30 days from the date of acceptance of the offer. Such option giving respondents the
exclusive right to buy the properties within the period agreed upon is separate and distinct from the
contract of sale which the parties may enter.[11] All that respondents had was just the option to buy the
properties which privilege was not, however, exercised by them because there was a failure to agree on
the terms of payment. No contract of sale may thus be enforced by respondents.

Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the
second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a
price certain is binding upon the promisor only if the promise is supported by a distinct consideration.
Consideration in an option contract may be anything of value, unlike in sale where it must be the price
certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking
any proof of such consideration, the option is unenforceable.

Equally compelling as proof of the absence of a perfected sale is the second condition that, during the
option period, the parties would negotiate the terms and conditions of the purchase. The stages of a
contract of sale are as follows: (1) negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection,
which takes place upon the concurrence of the essential elements of the sale which are the meeting of
the minds of the parties as to the object of the contract and upon the price; and (3) consummation,
which begins when the parties perform their respective undertakings under the contract of sale,
culminating in the extinguishment thereof.[12] In the present case, the parties never got past the
negotiation stage. The alleged "indubitable evidence"[13] of a perfected sale cited by the appellate court
was nothing more than offers and counter-offers which did not amount to any final arrangement
containing the essential elements of a contract of sale. While the parties already agreed on the real
properties which were the objects of the sale and on the purchase price, the fact remains that they failed
to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner.

The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection
of the sale because Art. 1475 only requires agreement by the parties as to the price of the object. This is
error. In Navarro v. Sugar Producers Cooperative Marketing Association, Inc.,[14] we laid down the rule
that the manner of payment of the purchase price is an essential element before a valid and binding
contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties
must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is
no sale. As held in Toyota Shaw, Inc. v. Court of Appeals,[15] agreement on the manner of payment goes
into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on
the price.[16] In Velasco v. Court of Appeals,[17] the parties to a proposed sale had already agreed on the
object of sale and on the purchase price. By the buyer's own admission, however, the parties still had to
agree on how and when the downpayment and the installments were to be paid. It was held:
. . . Such being the situation, it can not, therefore, be said that a definite and firm sales agreement
between the parties had been perfected over the lot in question. Indeed, this Court has already ruled
before that a definite agreement on the manner of payment of the purchase price is an essential element
in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners
delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay
cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between
the parties herein under Art. 1482 of the new Civil Code, as the petitioners themselves admit that some
essential matter - the terms of the payment - still had to be mutually covenanted.[18]

Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements
of the contract of sale which establishes the existence of a perfected sale.

In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the
authority to enter into a contract of sale in behalf of petitioner. This issue, therefore, needs no further
discussion.

WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents' complaint is
DISMISSED.

SO ORDERED.
 Copyright 2016 - Batas.org

G.R. No. 204160, September 22, 2014

SPOUSES MICHELLE M. NOYNAY AND NOEL S. NOYNAY, PETITIONERS, VS. CITIHOMES

BUILDER AND DEVELOPMENT, INC., RESPONDENT.

DECISION

MENDOZA, J.:

In this petition for review on certiorari[1] under Rule 45 of the Rules of Court, Spouses Noel and Michelle
Noynay (Spouses Noynay) assail the July 16, 2012 Decision[2] of the Court of Appeals (CA) and October
15, 2012 Resolution,[3] which affirmed with modification the September 17, 2010 Decision[4] of the
Regional Trial Court, Branch 21, Malolos, Bulacan (RTC). Earlier, the RTC reversed the March 26, 2010
Decision[5] of the Municipal Trial Court for Cities, San Jose Del Monte, Bulacan (MTCC), which dismissed
the complaint[6] for unlawful detainer filed by Citihomes Builder and Development, Inc. ( Citihomes)
against Spouses Noynay for lack of cause of action.

The Facts:

On December 29, 2004, Citihomes and Spouses Noynay executed a contract to sell[7] covering the sale of
a house and lot located in San Jose Del Monte, Bulacan, and covered by Transfer Certificate of Title
(TCT) No. T-43469. Under the terms of the contract, the price of the property was fixed at P915,895.00,
with a downpayment of P183,179.00, and the remaining balance to be paid in 120 equal monthly
installments with an annual interest rate of 21% commencing on February 8, 2005 and every 8th day of
the month thereafter.

Subsequently, on May 12, 2005, Citihomes executed the Deed of Assignment of Claims and Accounts[8]
(Assignment) in favor of United Coconut Planters Bank (UCPB) on May 12, 2005. Under the said
agreement, UCPB purchased from Citihomes various accounts, including the account of Spouses Noynay,
for a consideration of P100,000,000.00. In turn, Citihomes assigned its rights, titles, interests, and
participation in various contracts to sell with its buyers to UCPB.

In February of 2007, Spouses Noynay allegedly started to default in their payments. Months later,
Citihomes decided to declare Spouses Noynay delinquent and to cancel the contract considering that nine
months of agreed amortizations were left unpaid. On December 8, 2007, the notarized Notice of
Delinquency and Cancellation of the Contract To Sell,[9] dated November 21, 2007, was received by
Spouses Noynay. They were given 30 days within which to pay the arrears and failure to do so would
authorize Citihomes to consider the contract as cancelled.

On June 15, 2009, Citihomes sent its final demand letter asking Spouses Noynay to vacate the premises
due to their continued failure to pay the arrears. Spouses Noynay did not heed the demand, forcing
Citihomes to file the complaint for unlawful detainer before the MTCC on July 29, 2009.

In the said complaint, Citihomes alleged that as per Statement of Account as of March 18, 2009, Spouses
Noynay had a total arrears in the amount of P272,477.00, inclusive of penalties. Thus, Citihomes prayed
that Spouses Noynay be ordered to vacate the subject property and pay the amount of P8,715.97 a
month as a reasonable compensation for the use and occupancy to commence from January 8, 2007 until
Spouses Noynay vacate the same.

In its March 26, 2010 Decision,[10] the MTCC dismissed the complaint. It considered the annotation in the
certificate of title, which was dated prior to the filing of the complaint, which showed that Citihomes had
executed the Assignment favor of UCPB, as having the legal effect of divesting Citihomes of its interest
and right over the subject property. As far as the MTCC was concerned, Citihomes did not have a cause
of action against Spouses Noynay.

The RTC, however, reversed the ruling of the MTCC. In its September 17, 2010 Decision,[11] the RTC
stated that the MTCC erred in interpreting the deed of assignment as having the effect of relinquishing all
of Citihomes rights over the subject property. The RTC explained that the assignment was limited only
to the installment accounts receivables due from Spouses Noynay and did not include the transfer of title
or ownership over the property. It pointed out that Citihomes remained as the registered owner of the
subject property, and so it had the right to ask for the eviction of Spouses Noynay. As to the issue of who
had the better right of possession, the RTC ordered that the records be remanded to the MTCC for the
proper determination.

Spouses Noynay then went to the CA. On July 16, 2012, the CA affirmed the conclusion of the RTC that
Citihomes still had the right and interest over the property in its capacity as the registered owner.
Moreover, the issue on who, between the parties had a better possessory right over the property, was
resolved in favor of Citihomes.

In disposing the issue of possession, the CA primarily recognized the relevance of Republic Act (R.A.) No.
6552, otherwise known as the Realty Installment Buyer Act ( Maceda Law), in determining the limits of
the right to possess of Spouses Noynay in their capacity as defaulting buyers in a realty installment
scheme. Under the said law, the cancellation of a contract would only follow if the requirements set forth
therein had been complied with, particularly the giving of a notice of delinquency and cancellation of the
contract to the defaulting party and, in some cases, the payment to the buyer of the cash surrender
value if at least two years of installments had been paid. The CA noted that Spouses Noynay failed to
complete the minimum two (2) years of installment, despite the allegation that three (3) years of
amortizations had already been paid. As an effect, the CA pronounced that the termination of the
contract was validly effected by the expiration of the 30-day period from the time the notice of
cancellation was received by Spouses Noynay. From that moment, the CA treated Spouses Noynay to
have lost the right to possess the property. In addition, the CA made Spouses Noynay liable for the
payment of monthly rentals from the time their possession became illegal.
Spouses Noynay moved for reconsideration, but the CA denied their motion.

Hence, this petition.

ISSUE

The lone issue presented for resolution is whether Citihomes has a cause of action for ejectment against
Spouses Noynay. In effect, Spouses Noynay would have this Court determine whether Citihomes may
rightfully evict them.

Position of Spouses Noynay

Spouses Noynay insist that by virtue of the assignment of rights which Citihomes executed in favor of
UCPB, Citihomes did not have a cause of action against them because it no longer had an interest over
the subject property. Contrary to the findings of the CA, the monthly installments amounting to three
years were already paid, by reason of which, Section 3(b) of the Maceda Law should apply. This means
that for the cancellation to be effective, the cash surrender value should have been paid first to them by
Citihomes; and that because no payment was made, it follows that no valid cancellation could also be
effected. This allegedly strengthened their right to the possession of the property even to this day.

Position of Citihomes

Citihomes counters that it has the right to ask for the eviction of the petitioners in its capacity as the
registered owner despite the assignment of rights it made to UCPB. It believes that because Spouses
Noynay failed to pay at least two (2) years of installments, the cancellation became effective upon the
expiration of the 30-day period following the receipt of the notice of delinquency and cancellation notice
and without the need for the payment of the cash surrender value under Section 3(b) of the Maceda
Law.

Ruling of the Court

Cause of action has been defined as an act or omission by which a party violates a right of another. [12] It
requires the existence of a legal right on the part of the plaintiff, a correlative obligation of the defendant
to respect such right, and an act or omission of such defendant in violation of the plaintiffs rights. [13] A
complaint should not be dismissed for insufficiency of cause of action if it appears clearly from the
complaint and its attachments that the plaintiff is entitled to relief. [14]
The complaint, however, may be
dismissed for lack of cause of action later after questions of fact have been resolved on the basis of
stipulations, admissions or evidence presented.[15]

Relative thereto, a plaintiff in an unlawful detainer case which seeks recovery of the property must prove
ones legal right to evict the defendant, a correlative obligation on the part of such defendant to respect
the plaintiffs right to evict, and the defendants act or omission in the form of refusal to vacate upon
demand when his possession ultimately becomes illegal.
At first glance, the main thrust of the discussion in the lower courts is the issue on whether Citihomes
had such right to evict Spouses Noynay. At its core is the ruling of the MTCC that the right to demand the
eviction of Spouses Noynay was already transferred to UCPB from the moment the Assignment was
executed by Citihomes, which was done prior to the institution of the unlawful detainer case. Thus,
based on the evidence presented during the trial, the MTCC held that Citihomes did not have a cause of
action against Spouses Noynay. The RTC held otherwise justifying that Citihomes may still be the right
party to evict Spouses Noynay in its capacity as the registered owner of the property. The CA affirmed
the RTC on this point.

The Court, however, agrees with the MTCC.

The determination of whether Citihomes has a right to ask for the eviction of Spouses Noynay entirely
depends on the review of the Assignment of Claims and Accounts it executed in favor of UCPB. If it turns
out that what was assigned merely covered the collectible amounts or receivables due from Spouses
Noynay, Citihomes would necessarily have the right to demand the latters eviction as only an aspect of
the contract to sell passed on to UCPB. Simply put, because an assignment covered only credit dues, the
relation between Citihomes as the seller and Spouses Noynay as the buyer under their Contract to Sell
remained. If on the other hand, it appears that the assignment covered all of Citihomes rights,
obligations and benefits in favor of UCPB, the conclusion would certainly be different.

Under the provisions of the Assignment, it was stipulated that:

NOW, THEREFORE, for and in consideration of the foregoing premises, the ASSIGNOR hereby agrees as
follows:

1. The ASSIGNOR hereby assigns, transfers and sets over unto the
ASSIGNEE all its rights, titles and interest in and to, excluding its
obligations under the Contract/s to Sell enumerated and described
in the List of Assigned Receivables which is hereto attached and marked
as Annex A hereof, including any and all sum of money due and
payable to the ASSIGNOR, the properties pertaining thereto, all
replacements, substitution, increases and accretion thereof and thereto
which the ASSIGNOR has executed with the Buyers, as defined in the
Agreement, and all moneys due, or which may grow upon the sales
therein set forth.

2. For purposes of this ASSIGNMENT, the ASSIGNOR hereby delivers to the

ASSIGNEE, which hereby acknowledges receipt of the following
documents evidencing the ASSIGNORs title, right, interest, participation
and benefit in the assigned Installment Account Receivables listed in
Annex A and made as integral part hereof.
 a) Original Contracts to Sell
b) Transfer Certificates of Title

3. The ASSIGNOR, hereby irrevocably appoints the ASSIGNEE to be its

true and lawful agent or representative for it and in its name and
stead, but for such ASSIGNEEs own benefit: (1) to sell, assign,
transfer, set over, pledge, compromise or discharge the whole, or any
part, of said assignment; (2) to do all acts and things necessary, or
proper, for any such purpose; (3) to ask, collect, receive and sue for
the moneys due, or which may grow due, upon the said
Assignment; and (4) to substitute one person, or more, with like
powers; hereby ratifying and confirming all that said agent or
representative, or his substitute, or substitutes, shall lawfully do, by
virtue hereof.[16]

[Emphases supplied]

Clearly, the conclusion of the MTCC had factual and legal bases. Evident from the tenor of the agreement
was the intent on the part of Citihomes, as assignor, to assign all of its rights and benefits in favor of
UCPB. Specifically, what Citihomes did was an assignment or transfer of all contractual rights arising
from various contracts to sell, including the subject contract to sell, with all the rights, obligations and
benefits appurtenant thereto in favor of UCPB for a consideration of P100,000,000.00. Indeed, the intent
was more than just an assignment of credit. This intent to assign all rights under the contract to sell was
even fortified by the delivery of documents such as the pertinent contracts to sell and the TCTs. Had it
been the intent of Citihomes to assign merely its interest in the receivables due from Spouses Noynay,
the tenor of the deed of assignment would have been couched in very specific terms.

Included in those matters which were handed over to UCPB were the provisions outlined in Section 6 of
the Contract to Sell. In the said provision, Citihomes, as the seller has been given the right to cancel the
contract to sell in cases of continuing default by Spouses Noynay, to wit:

SECTION 6. If for any reason, whatsoever, the BUYER fails to pay three (3) consecutive monthly
installments, the provision of RA No. 6552 shall apply.

Where the BUYER has paid less than two (2) years of installments and defaults in the payment of three
(3) consecutive monthly installment, he shall be given a grace period of not less than sixty (60) days
from the date the installment payments became due and payable within which to pay the installments
and/or make payments in arrears together with the installments corresponding to the months of the
grace period. In the event the BUYER continues to default in the payment of the installments
within or at the expiration of the grace period herein provided, the SELLER shall have the
right to cancel this agreement thirty (30) days from the BUYERs receipt of the notice of
cancellation or demand for rescission by a notarial act. Thereafter, the SELLER may dispose of the
residential house and lot subject of this agreement in favor of other persons as if this agreement had
never been entered into.

WHERE the BUYER has paid at least two (2) years of installments and he defaults in the payment of
three (3) consecutive monthly installments, the SELLER shall be entitled:

a. To pay, without additional interest, the unpaid installment due within the total
grace period earned by the BUYER which is fixed at the rate of one (1) month
grace period for every one (1) year of installment payment made; Provided, that
this right shall be exercised by the BUYER only once for every five (5) years of
the life of this agreement.

b. If this agreement is cancelled, the SELLER shall refund to the BUYER the cash
surrender value of the payments equivalent to fifty percent thereof and, after
five years of installments, an additional five percent (5%) for every year but not
to exceed ninety (90%) of the total payments made; Provided, that the actual
cancellation of this agreement shall take place after thirty (30) days from receipt
by the BUYER of the notice of cancellation or demand for rescission by a notarial
act and upon full payment of the cash surrender value to the BUYER.

xxx xxx xxx

The BUYER, at the termination of the contract, shall promptly surrender the said property to the SELLER,
and should the former fail to comply with the provision, on top of the remedy provided for above, the
BUYER hereby expressly appoints the SELLER as their duly authorized attorney-in-fact with power and
authority to open, enter and take full possession of the property in the presence of any peace officer and
to take an inventory of the equipment, furniture, merchandise and effect. In case the BUYER fails to
claim the said equipment, furniture, merchandise and effects and/or liquidate their liabilities with the
SELLER within thirty (30) days from the date of transfer of possession of the property to the latter, the
SELLER is hereby given the right to dispose of said property in a private or public sale and to apply the
proceeds to whatever expenses it may have incurred in line with the warehousing of the equipment,
furniture, merchandise and effects.[17]

The exercise of such right to cancel necessarily determines the existence of the right to evict Spouses
Noynay. The existence of the right to evict is the first constitutive element of the cause of action in this
unlawful detainer case. Considering, however, that the right to cancel was already assigned prior to the
commencement of this controversy with the execution of the Assignment, its legal consequences cannot
be avoided.

Well-established is the rule that the assignee is deemed subrogated to the rights as well as to the
obligations of the seller/assignor. By virtue of the deed of assignment, the assignee is deemed
subrogated to the rights and obligations of the assignor and is bound by exactly the same conditions as
those which bound the assignor.[18] What can be inferred from here is the effect on the status of the
assignor relative to the relations established by a contract which has been subsequently assigned; that is,
the assignor becomes a complete stranger to all the matters that have been conferred to the assignee.

In this case, the execution of the Assignment in favor of UCPB relegated Citihomes to the status of a
mere stranger to the jural relations established under the contract to sell. With UCPB as the assignee, it is
clear that Citihomes has ceased to have any right to cancel the contract to sell with Spouses
Noynay. Without this right, which has been vested in UCPB, Citihomes undoubtedly had no cause of
action against Spouses Noynay.

This is not to say that Citihomes lost all interest over the property. To be clear, what were assigned
covered only the rights in the Contract to Sell and not the property rights over the house and lot, which
remained registered under Citihomes name. Considering, however, that the unlawful detainer case
involves mere physical or material possession of the property and is independent of any claim of
ownership by any of the parties,[19] the invocation of ownership by Citihomes is immaterial in the just
determination of the case.

Granting that the MTCC erred in ruling that Citihomes had no cause of action by reason of the
Assignment it made in favor of UCPB, the Court still upholds the right of the Spouses Noynay to remain
undisturbed in the possession of the subject property. The reason is simple Citihomes failed to comply
with the procedures for the proper cancellation of the contract to sell as prescribed by Maceda Law.

In Pagtalunan v. Manzano,[20] the Court stressed the importance of complying with the provisions of the
Maceda Law as to the cancellation of contracts to sell involving realty installment schemes. There it was
held that the cancellation of the contract by the seller must be in accordance with Section 3 (b) of the
Maceda Law, which requires the notarial act of rescission and the refund to the buyer of the full payment
of the cash surrender value of the payments made on the property. The actual cancellation of the
contract takes place after thirty (30) days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value
to the buyer, to wit:

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty percent of the total payments made and,
after five years of installments, an additional five percent every year but not to exceed ninety
percent of the total payments made: Provided, That the actual cancellation of the contract
shall take place after thirty days from receipt by the buyer of the notice of cancellation
or the demand for rescission of the contract by a notarial act and upon full payment of
the cash surrender value to the buyer.

[Emphases supplied]

According to the lower courts, Spouses Noynay failed to complete the two-year minimum period of paid
amortizations, thus, the cancellation of the contract to sell no longer required the payment of the cash
surrender value. This conclusion rests on the allegation that the amortization payments commenced only
on May 31, 2005. If indeed it were true that the payments started only on that date, Spouses Noynay
would not have completed the required two-year period to be entitled to the payment of cash surrender
value. Records, however, show otherwise. The Contract to Sell, dated December 29, 2004, was very
particular on the matter. It stipulated as follows:

SECTION 1. NOW, THEREFORE, for and in consideration of the sume of NINE HUNDRED FIFTEEN
THOUSAND EIGHT HUNDRED NINETY FIVE PESOS ONLY, (?915,895.00) Philippine Currency, inclusive of
miscellaneous charges hereunder set forth, and of the foregoing premises, the SELLER hereby agrees to
sell, cede and convey to the BUYER, their heirs, administrators, and successors-in-interest, the
aforedescribed residential house and lot or lot only under the following terms and conditions:

a. The amount of ONE HUNDRED EIGHTY THREE THOUSAND ONE HUNDRED SEVENTY NINE PESOS
ONLY (P183,179.00), Philippine Currency, representing full downpayment shall be paid upon signing of
this contract.

b. The balance of the total purchase price in the amount of SEVEN HUNDRED THIRTY TWO THOUSAND
SEVEN HUNDRED SIXTEEN PESOS ONLY, (P732,716..00), Philippine Currency shall be paid by the BUYER
in 120 equal monthly installments in the amount of P14,649.31 per month with an interest of 21% per
annum to commence on 02.08.05 and every 8th day of the month thereafter.[21]

Citihomes claimed that the period of the payment of the amortizations started from May 31, 2005. [22] As
can be gleaned from the contract to sell, however, it appears that the payment of the downpayment
started from the signing thereof on December 29, 2004.

To this end, the factual admissions made by the parties during the preliminary conference would shed
light on the matter. It must be remembered that these judicial admissions are legally binding on the party
making the admissions. Similar to pre-trial admissions in a pre-trial order in ordinary civil cases, the
contents of the record of a preliminary conference control the subsequent course of the action, thereby,
defining and limiting the issues to be tried. A contrary ruling would render useless the proceedings during
the preliminary conference and would, in fact, be antithetical to the very purpose of a preliminary
conference, which is, among others, to allow the parties to admit and stipulate on a given set of facts
and to simplify the issues involved.[23]

The fairly recent case of Oscar Constantino v. Heirs of Oscar Constantino,[24] is most instructive:

In Bayas, et al. v. Sandiganbayan, et al., this Court emphasized that:

Once the stipulations are reduced into writing and signed by the parties and their counsels, they
become binding on the parties who made them. They become judicial admissions of the fact or facts
stipulated. Even if placed at a disadvantageous position, a party may not be allowed to rescind them
unilaterally, it must assume the consequences of the disadvantage.(citations omitted)
Moreover, in Alfelor v. Halasan, this Court declared that:

A party who judicially admits a fact cannot later challenge the fact as judicial admissions are a waiver of
proof; production of evidence is dispensed with. A judicial admission also removes an admitted fact
from the field of controversy. Consequently, an admission made in the pleadings cannot be controverted
by the party making such admission and are conclusive as to such party, and all proofs to the contrary or
inconsistent therewith should be ignored, whether objection is interposed by the party or not. The
allegations, statements or admissions contained in a pleading are conclusive as against the pleader. A
party cannot subsequently take a position contrary of or inconsistent with what was pleaded. (Citations
omitted)

[Emphases supplied]

Here, Spouses Noynay proposed for stipulation the factual allegation that they had been paying
Citihomes the monthly amortization of the property for more than three (3) years and only stopped
payment by January 8, 2008. In the Preliminary Conference Order, [25] dated January 28, 2010, the MTCC
noted the said fact as admitted, to wit:

The defendants proposed the following matters for stipulations:

1. That the defendants had already paid the plaintiff the total amount of Php
633,000.00 Not Admitted

2. That the defendants have been paying the plaintiff the monthly
amortization of the property for more than three years and only
stopped payment by January 8, 2008 Admitted.[26]

xxx xxx xxx [Emphasis supplied]

Moreover, based on the Statement of Account,[27] dated March 18, 2009, Spouses Noynay started
defaulting from January 8, 2008. This shows that prior to that date, amortizations covering the 3-year
period, which started with the downpayment, had been paid. This is consistent with the admission of
Citihomes during the preliminary conference. By its admission that Spouses Noynay had been paying the
amortizations for three (3) years, there is no reason to doubt Spouses Noynays compliance with the
minimum requirement of two years payment of amortization, entitling them to the payment of the cash
surrender value provided for by law and by the contract to sell. To reiterate, Section 3(b) of the Maceda
Law requires that for an actual cancellation to take place, the notice of cancellation by notarial act and
the full payment of the cash surrender value must be first received by the buyer. Clearly, no payment of
the cash surrender value was made to Spouses Noynay. Necessarily, no cancellation of the contract to
sell could be considered as validly effected.
Without the valid cancellation of the contract, there is no basis to treat the possession of the property by
Spouses Noynay as illegal. In AMOSUP-PTGWO-ITF v. Decena, [28]
the Court essentially held that such
similar failure to validly cancel the contract, meant that the possessor therein, similar to Spouses Noynay
in this case, remained entitled to the possession of the property. In the said case, the Court stated:

In the parallel case of Pagtalunan v. Dela Cruz Vda. De Manzano, which likewise originated as an action
for unlawful detainer, we affirmed the finding of the appellate court that, since the contract to sell was
not validly cancelled or rescinded under Section 3(b) of R.A. No. 6552, the respondent therein had the
right to continue occupying unmolested the property subject thereof.

WHEREFORE, the petition is GRANTED. The July 16, 2012 Decision and October 15, 2012 Resolution
of the Court of Appeals are hereby REVERSED and SET ASIDE. The March 26, 2010 Decision of the
Municipal Trial Court for Cities is REINSTATED.

SO ORDERED.

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