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SALES AND LEASE

1. Dignos v. CA After due trial, the Court of first Instance of Cebu rendered its Decision on
August 25,1972, the decretal portion of which reads:
G.R. No. L-59266 February 29, 1988
WHEREFORE, the Court hereby declares the deed of sale executed on
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, November 25, 1965 by defendant Isabela L. de Dignos in favor of defendant
vs. Luciano Cabigas, a citizen of the United States of America, null and void ab
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents. initio, and the deed of sale executed by defendants Silvestre T. Dignos and
Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff
Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen Thousand Pesos
BIDIN, J.: (P16,000.00) to the defendants-spouses upon the execution of the Deed of
absolute Sale of Lot No. 3453, Opon Cadastre and when the decision of this
This is a petition for review on certiorari seeking the reversal of the: (1) case becomes final and executory.
Decision * of the 9th Division, Court of Appeals dated July 31,1981, affirming
with modification the Decision, dated August 25, 1972 of the Court of First The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano
Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre Cabigas and Jovita L. de Cabigas, through their attorney-in-fact, Panfilo
T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Jabalde, reasonable amount corresponding to the expenses or costs of the
Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its hollow block fence, so far constructed.
Resolution dated December 16, 1981, denying defendant-appellant's
(Petitioner's) motion for reconsideration, for lack of merit. It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela
Lumungsod de Dignos should return to defendants-spouses Luciano Cabigas
The undisputed facts as found by the Court of Appeals are as follows: and Jovita L. de Cabigas the sum of P35,000.00, as equity demands that
nobody shall enrich himself at the expense of another.
The Dignos spouses were owners of a parcel of land, known as Lot No. 3453,
of the cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants The writ of preliminary injunction issued on September 23, 1966, automatically
(petitioners) Dignos spouses sold the said parcel of land to plaintiff-appellant becomes permanent in virtue of this decision.
(respondent Atilano J. Jabil) for the sum of P28,000.00, payable in two
installments, with an assumption of indebtedness with the First Insular Bank With costs against the defendants.
of Cebu in the sum of P12,000.00, which was paid and acknowledged by the
vendors in the deed of sale (Exh. C) executed in favor of plaintiff-appellant, From the foregoing, the plaintiff (respondent herein) and defendants-spouss
and the next installment in the sum of P4,000.00 to be paid on or before (petitioners herein) appealed to the Court of Appeals, which appeal was
September 15, 1965. docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T.
Dignos, et al."
On November 25, 1965, the Dignos spouses sold the same land in favor of
defendants spouses, Luciano Cabigas and Jovita L. De Cabigas, who were On July 31, 1981, the Court of Appeals affirmed the decision of the lower court
then U.S. citizens, for the price of P35,000.00. A deed of absolute sale (Exh. except as to the portion ordering Jabil to pay for the expenses incurred by the
J, also marked Exh. 3) was executed by the Dignos spouses in favor of the Cabigas spouses for the building of a fence upon the land in question. The
Cabigas spouses, and which was registered in the Office of the Register of disposive portion of said decision of the Court of Appeals reads:
Deeds pursuant to the provisions of Act No. 3344.
IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the
As the Dignos spouses refused to accept from plaintiff-appellant the balance modification of the judgment as pertains to plaintiff-appellant above indicated,
of the purchase price of the land, and as plaintiff- appellant discovered the the judgment appealed from is hereby AFFIRMED in all other respects.
second sale made by defendants-appellants to the Cabigas spouses, plaintiff-
appellant brought the present suit. (Rollo, pp. 27-28) With costs against defendants-appellants.
SALES AND LEASE

SO ORDERED. INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS
IT A NOTARIAL ACT.
Judgment MODIFIED.
III
A motion for reconsideration of said decision was filed by the defendants-
appellants (petitioners) Dignos spouses, but on December 16, 1981, a THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
resolution was issued by the Court of Appeals denying the motion for lack of REJECTING THE APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF
merit. THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS TO
WARRANT THE AWARD OF DAMAGES AND ATTORNEY'S FEES TO
Hence, this petition. PETITIONERS.

In the resolution of February 10, 1982, the Second Division of this Court denied IV
the petition for lack of merit. A motion for reconsideration of said resolution
was filed on March 16, 1982. In the resolution dated April 26,1982, PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD
respondents were required to comment thereon, which comment was filed on HAVE BEEN DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN
May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with HANDS.
the resolution of June 16,1 982. On August 9,1982, acting on the motion for
reconsideration and on all subsequent pleadings filed, this Court resolved to V
reconsider its resolution of February 10, 1982 and to give due course to the
instant petition. On September 6, 1982, respondents filed a rejoinder to reply BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN
of petitioners which was noted on the resolution of September 20, 1982. AFFIRMING WITH MODIFICATION THE DECISION OF THE TRIAL COURT
DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND
Petitioners raised the following assignment of errors: MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT
AND THE LAW APPLICABLE THERETO.
I
The foregoing assignment of errors may be synthesized into two main issues,
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN to wit:
GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF THE
CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, I. Whether or not subject contract is a deed of absolute sale or a contract
EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN Lot sell.
QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO
SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN II. Whether or not there was a valid rescission thereof.
MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE
AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE There is no merit in this petition.
CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF
PROMISE TO SELL. It is significant to note that this petition was denied by the Second Division of
this Court in its Resolution dated February 1 0, 1 982 for lack of merit, but on
II motion for reconsideration and on the basis of all subsequent pleadings filed,
the petition was given due course.
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE 1592 OF I.
THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS
CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS The contract in question (Exhibit C) is a Deed of Sale, with the following
conditions:
SALES AND LEASE

By and large, the issues in this case have already been settled by this Court
1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos in analogous cases.
P12,000.00) Phil. Philippine Currency as advance payment;
Thus, it has been held that a deed of sale is absolute in nature although
2. That Atilano G. Jabil is to assume the balance of Twelve Thousand denominated as a "Deed of Conditional Sale" where nowhere in the contract
Pesos (P12,000.00) Loan from the First Insular Bank of Cebu; in question is a proviso or stipulation to the effect that title to the property sold
is reserved in the vendor until full payment of the purchase price, nor is there
3. That Atilano G. Jabil is to pay the said spouses the balance of Four. a stipulation giving the vendor the right to unilaterally rescind the contract the
Thousand Pesos (P4,000.00) on or before September 15,1965; moment the vendee fails to pay within a fixed period Taguba v. Vda. de Leon,
132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86
4. That the said spouses agrees to defend the said Atilano G. Jabil from SCRA 305).
other claims on the said property;
A careful examination of the contract shows that there is no such stipulation
5. That the spouses agrees to sign a final deed of absolute sale in favor reserving the title of the property on the vendors nor does it give them the right
of Atilano G. Jabil over the above-mentioned property upon the payment of the to unilaterally rescind the contract upon non-payment of the balance thereof
balance of Four Thousand Pesos. (Original Record, pp. 10-11) within a fixed period.

In their motion for reconsideration, petitioners reiterated their contention that On the contrary, all the elements of a valid contract of sale under Article 1458
the Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute of the Civil Code, are present, such as: (1) consent or meeting of the minds;
sale; that the same is subject to two (2) positive suspensive conditions, (2) determinate subject matter; and (3) price certain in money or its equivalent.
namely: the payment of the balance of P4,000.00 on or before September In addition, Article 1477 of the same Code provides that "The ownership of the
15,1965 and the immediate assumption of the mortgage of P12,000.00 with thing sold shall be transferred to the vendee upon actual or constructive
the First Insular Bank of Cebu. It is further contended that in said contract, title delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping
or ownership over the property was expressly reserved in the vendor, the Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to
Dignos spouses until the suspensive condition of full and punctual payment of the contrary, the ownership of the thing sold passes to the vendee upon actual
the balance of the purchase price shall have been met. So that there is no or constructive delivery thereof.
actual sale until full payment is made (Rollo, pp. 51-52).
While it may be conceded that there was no constructive delivery of the land
In bolstering their contention that Exhibit "C" is merely a contract to sell, sold in the case at bar, as subject Deed of Sale is a private instrument, it is
petitioners aver that there is absolutely nothing in Exhibit "C" that indicates that beyond question that there was actual delivery thereof. As found by the trial
the vendors thereby sell, convey or transfer their ownership to the alleged court, the Dignos spouses delivered the possession of the land in question to
vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the Jabil as early as March 27,1965 so that the latter constructed thereon Sally's
absence of a formal deed of conveyance is a very strong indication that the Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan
parties did not intend "transfer of ownership and title but only a transfer after White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on
full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on September 1, 1965. Such facts were admitted by petitioner spouses (Decision,
the very terms and conditions of the contract, more particularly paragraph four Civil Case No. 23-L; Record on Appeal, p. 108).
which reads, "that said spouses has agreed to sell the herein mentioned
property to Atilano G. Jabil ..." and condition number five which reads, "that Moreover, the Court of Appeals in its resolution dated December 16,1981
the spouses agrees to sign a final deed of absolute sale over the mentioned found that the acts of petitioners, contemporaneous with the contract, clearly
property upon the payment of the balance of four thousand pesos." show that an absolute deed of sale was intended by the parties and not a
contract to sell.
Such contention is untenable.
SALES AND LEASE

Be that as it may, it is evident that when petitioners sold said land to the 2. Tan v. Benorilao
Cabigas spouses, they were no longer owners of the same and the sale is null
and void. DELFIN TAN,
Petitioner,
II.

Petitioners claim that when they sold the land to the Cabigas spouses, the
contract of sale was already rescinded.
- versus -
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is
on all fours with the case at bar, the contract of sale being absolute in nature
is governed by Article 1592 of the Civil Code. It is undisputed that petitioners
never notified private respondents Jabil by notarial act that they were
rescinding the contract, and neither did they file a suit in court to rescind the ERLINDA C. BENOLIRAO,
sale. The most that they were able to show is a letter of Cipriano Amistad who, ANDREW C. BENOLIRAO,
claiming to be an emissary of Jabil, informed the Dignos spouses not to go to ROMANO C. BENOLIRAO,
the house of Jabil because the latter had no money and further advised DION C. BENOLIRAO,
petitioners to sell the land in litigation to another party (Record on Appeal, p. SPS. REYNALDO TANINGCO
23). As correctly found by the Court of Appeals, there is no showing that and NORMA D. BENOLIRAO,
Amistad was properly authorized by Jabil to make such extra-judicial EVELYN T. MONREAL, and
rescission for the latter who, on the contrary, vigorously denied having sent ANN KARINA TANINGCO,
Amistad to tell petitioners that he was already waiving his rights to the land in Respondents.
question. Under Article 1358 of the Civil Code, it is required that acts and
contracts which have for their object the extinguishment of real rights over G.R. No. 153820
immovable property must appear in a public document.
Present:
Petitioners laid considerable emphasis on the fact that private respondent Jabil *QUISUMBING, J.,
had no money on the stipulated date of payment on September 15,1965 and CARPIO-MORALES,
was able to raise the necessary amount only by mid-October 1965. **NACHURA,
BRION, and
It has been ruled, however, that "where time is not of the essence of the ABAD, JJ.
agreement, a slight delay on the part of one party in the performance of his
obligation is not a sufficient ground for the rescission of the agreement"
(Taguba v. Vda. de Leon, supra). Considering that private respondent has only
a balance of P4,000.00 and was delayed in payment only for one month, equity
and justice mandate as in the aforecited case that Jabil be given an additional
period within which to complete payment of the purchase price.

WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the Promulgated:
assailed decision of the Court of Appeals is Affirmed in toto.

SO ORDERED. October 16, 2009

x-------------------------------------------------------------------------------------- x
SALES AND LEASE

Pursuant to the Deed of Conditional Sale, Tan issued and delivered to the co-
DECISION owners/vendors Metrobank Check No. 904407 for P200,000.00 as down
payment for the property, for which the vendors issued a corresponding
BRION, J.: receipt.

Is an annotation made pursuant to Section 4, Rule 74 of the Rules of Court On November 6, 1992, Lamberto Benolirao died intestate. Erlinda Benolirao
(Rules) on a certificate of title covering real property considered an (his widow and one of the vendors of the property) and her children, as heirs
encumbrance on the property? We resolve this question in the petition for of the deceased, executed an extrajudicial settlement of Lambertos estate on
review on certiorari[1] filed by Delfin Tan (Tan) to assail the decision of the January 20, 1993. On the basis of the extrajudicial settlement, a new certificate
Court of Appeals (CA) in CA-G.R. CV No. 52033[2] and the decision of the of title over the property, TCT No. 27335, was issued on March 26, 1993 in the
Regional Trial Court (RTC)[3] that commonly declared the forfeiture of his names of the Spouses Reynaldo and Norma Taningco and Erlinda Benolirao
P200,000.00 down payment as proper, pursuant to the terms of his contract and her children. Pursuant to Section 4, Rule 74 of the Rules, the following
with the respondents. annotation was made on TCT No. 27335:

THE ANTECEDENTS x x x any liability to credirots (sic), excluded heirs and other persons having
right to the property, for a period of two (2) years, with respect only to the share
The facts are not disputed. Spouses Lamberto and Erlinda Benolirao and the of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao
Spouses Reynaldo and Norma Taningco were the co-owners of a 689-square
meter parcel of land (property) located in Tagaytay City and covered by
Transfer Certificate of Title (TCT) No. 26423. On October 6, 1992, the co- As stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to pay
owners executed a Deed of Conditional Sale over the property in favor of Tan the balance of the purchase price. By agreement of the parties, this period was
for the price of P1,378,000.00. The deed stated: extended by two months, so Tan had until May 15, 1993 to pay the balance.
Tan failed to pay and asked for another extension, which the vendors again
a) An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND granted. Notwithstanding this second extension, Tan still failed to pay the
PESOS, Philippine Currency, upon signing of this contract; then the remaining remaining balance due on May 21, 1993. The vendors thus wrote him a letter
balance of ONE MILLION ONE HUNDRED SEVENTY EIGHT THOUSAND demanding payment of the balance of the purchase price within five (5) days
(P1,178,000.00) PESOS, shall be payable within a period of one hundred fifty from notice; otherwise, they would declare the rescission of the conditional
(150) days from date hereof without interest; sale and the forfeiture of his down payment based on the terms of the contract.

b) That for any reason, BUYER fails to pay the remaining balance within Tan refused to comply with the vendors demand and instead wrote them a
above mentioned period, the BUYER shall have a grace period of sixty (60) letter (dated May 28, 1993) claiming that the annotation on the title, made
days within which to make the payment, provided that there shall be an interest pursuant to Section 4, Rule 74 of the Rules, constituted an encumbrance on
of 15% per annum on the balance amount due from the SELLERS; the property that would prevent the vendors from delivering a clean title to him.
Thus, he alleged that he could no longer be required to pay the balance of the
c) That should in case (sic) the BUYER fails to comply with the terms and purchase price and demanded the return of his down payment.
conditions within the above stated grace period, then the SELLERS shall have
the right to forfeit the down payment, and to rescind this conditional sale When the vendors refused to refund the down payment, Tan, through counsel,
without need of judicial action; sent another demand letter to the vendors on June 18, 1993. The vendors still
refused to heed Tans demand, prompting Tan to file on June 19, 1993 a
d) That in case, BUYER have complied with the terms and conditions of this complaint with the RTC of Pasay City for specific performance against the
contract, then the SELLERS shall execute and deliver to the BUYER the vendors, including Andrew Benolirao, Romano Benolirao, Dion Benolirao as
appropriate Deed of Absolute Sale; heirs of Lamberto Benolirao, together with Evelyn Monreal and Ann Karina
Taningco (collectively, the respondents). In his complaint, Tan alleged that
there was a novation of the Deed of Conditional Sale done without his consent
SALES AND LEASE

since the annotation on the title created an encumbrance over the property. CA erroneously disregarded the alternative remedy of reformation of contract
Tan prayed for the refund of the down payment and the rescission of the when it affirmed the removal of the lis pendens annotation on the title.
contract.
Tan further contends that the CA erred when it recognized the validity of the
On August 9, 1993, Tan amended his Complaint, contending that if the forfeiture of the down payment in favor of the vendors. While admitting that the
respondents insist on forfeiting the down payment, he would be willing to pay Deed of Conditional Sale contained a forfeiture clause, he insists that this
the balance of the purchase price provided there is reformation of the Deed of clause applies only if the failure to pay the balance of the purchase price was
Conditional Sale. In the meantime, Tan caused the annotation on the title of a through his own fault or negligence. In the present case, Tan claims that he
notice of lis pendens. was justified in refusing to pay the balance price since the vendors would not
have been able to comply with their obligation to deliver a clean title covering
On August 21, 1993, the respondents executed a Deed of Absolute Sale over the property.
the property in favor of Hector de Guzman (de Guzman) for the price of
P689,000.00. Lastly, Tan maintains that the CA erred in ordering him to pay the respondents
P30,000.00, plus P1,000.00 per court appearance as attorneys fees, since he
Thereafter, the respondents moved for the cancellation of the notice of lis filed the foregoing action in good faith, believing that he is in the right.
pendens on the ground that it was inappropriate since the case that Tan filed
was a personal action which did not involve either title to, or possession of, The respondents, on the other hand, assert that the petition should be
real property. The RTC issued an order dated October 22, 1993 granting the dismissed for raising pure questions of fact, in contravention of the provisions
respondents motion to cancel the lis pendens annotation on the title. of Rule 45 of the Rules which provides that only questions of law can be raised
in petitions for review on certiorari.
Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman
registered the property and TCT No. 28104 was issued in his name. Tan then THE COURTS RULING
filed a motion to carry over the lis pendens annotation to TCT No. 28104
registered in de Guzmans name, but the RTC denied the motion. The petition is granted.

On September 8, 1995, after due proceedings, the RTC rendered judgment No new issues can be raised in the Memorandum
ruling that the respondents forfeiture of Tans down payment was proper in
accordance with the terms and conditions of the contract between the
parties.[4] The RTC ordered Tan to pay the respondents the amount of At the onset, we note that Tan raised the following additional assignment of
P30,000.00, plus P1,000.00 per court appearance, as attorneys fees, and to errors in his Memorandum: (a) the CA erred in holding that the petitioner could
pay the cost of suit. seek reformation of the Deed of Conditional Sale only if he paid the balance of
the purchase price and if the vendors refused to execute the deed of absolute
On appeal, the CA dismissed the petition and affirmed the ruling of the trial sale; and (b) the CA erred in holding that the petitioner was estopped from
court in toto. Hence, the present petition. asking for the reformation of the contract or for specific performance.

THE ISSUES The Courts September 27, 2004 Resolution expressly stated that No new
issues may be raised by a party in his/its Memorandum. Explaining the reason
Tan argues that the CA erred in affirming the RTCs ruling to cancel the lis for this rule, we said that:
pendens annotation on TCT No. 27335. Due to the unauthorized novation of
the agreement, Tan presented before the trial court two alternative remedies The raising of additional issues in a memorandum before the Supreme Court
in his complaint either the rescission of the contract and the return of the down is irregular, because said memorandum is supposed to be in support merely
payment, or the reformation of the contract to adjust the payment period, so of the position taken by the party concerned in his petition, and the raising of
that Tan will pay the remaining balance of the purchase price only after the new issues amounts to the filing of a petition beyond the reglementary period.
lapse of the required two-year encumbrance on the title. Tan posits that the The purpose of this rule is to provide all parties to a case a fair opportunity to
SALES AND LEASE

be heard. No new points of law, theories, issues or arguments may be raised compel the respondents to do something either to rescind the contract and
by a party in the Memorandum for the reason that to permit these would be return the down payment, or to reform the contract by extending the period
offensive to the basic rules of fair play, justice and due process.[5] given to pay the remaining balance of the purchase price. Either way, Tan
wants to enforce his personal rights against the respondents, not against the
property subject of the Deed. As we explained in Domagas v. Jensen:[7]
Tan contravened the Courts explicit instructions by raising these additional
errors. Hence, we disregard them and focus instead on the issues previously The settled rule is that the aim and object of an action determine its character.
raised in the petition and properly included in the Memorandum. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter,
is determined by its nature and purpose, and by these only. A proceeding in
Petition raises a question of law personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it
Contrary to the respondents claim, the issue raised in the present petition may involve his right to, or the exercise of ownership of, specific property, or
defined in the opening paragraph of this Decision is a pure question of law. seek to compel him to control or dispose of it in accordance with the mandate
Hence, the petition and the issue it presents are properly cognizable by this of the court. The purpose of a proceeding in personam is to impose, through
Court. the judgment of a court, some responsibility or liability directly upon the person
of the defendant. Of this character are suits to compel a defendant to
Lis pendens annotation not proper in personal actions specifically perform some act or actions to fasten a pecuniary liability on him.

Section 14, Rule 13 of the Rules enumerates the instances when a notice of
lis pendens can be validly annotated on the title to real property: Furthermore, as will be explained in detail below, the contract between the
parties was merely a contract to sell where the vendors retained title and
Sec. 14. Notice of lis pendens. ownership to the property until Tan had fully paid the purchase price. Since
In an action affecting the title or the right of possession of real property, the Tan had no claim of ownership or title to the property yet, he obviously had no
plaintiff and the defendant, when affirmative relief is claimed in his answer, right to ask for the annotation of a lis pendens notice on the title of the property.
may record in the office of the registry of deeds of the province in which the
property is situated a notice of the pendency of the action. Said notice shall Contract is a mere contract to sell
contain the names of the parties and the object of the action or defense, and
a description of the property in that province affected thereby. Only from the A contract is what the law defines it to be, taking into consideration its essential
time of filing such notice for record shall a purchaser, or encumbrancer of the elements, and not what the contracting parties call it.[8] Article 1485 of the Civil
property affected thereby, be deemed to have constructive notice of the Code defines a contract of sale as follows:
pendency of the action, and only of its pendency against the parties designated
by their real names. Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership and to deliver a determinate thing, and the
The notice of lis pendens hereinabove mentioned may be cancelled only upon other to pay therefor a price certain in money or its equivalent.
order of the court, after proper showing that the notice is for the purpose of
molesting the adverse party, or that it is not necessary to protect the rights of A contract of sale may be absolute or conditional.
the party who caused it to be recorded.
The very essence of a contract of sale is the transfer of ownership in exchange
The litigation subject of the notice of lis pendens must directly involve a specific for a price paid or promised.[9]
property which is necessarily affected by the judgment.[6]
In contrast, a contract to sell is defined as a bilateral contract whereby the
Tans complaint prayed for either the rescission or the reformation of the Deed prospective seller, while expressly reserving the ownership of the property
of Conditional Sale. While the Deed does have real property for its object, we despite delivery thereof to the prospective buyer, binds himself to sell the
find that Tans complaint is an in personam action, as Tan asked the court to property exclusively to the prospective buyer upon fulfillment of the condition
SALES AND LEASE

agreed, i.e., full payment of the purchase price.[10] A contract to sell may not Sec. 4. Liability of distributees and estate. - If it shall appear at any time within
even be considered as a conditional contract of sale where the seller may two (2) years after the settlement and distribution of an estate in accordance
likewise reserve title to the property subject of the sale until the fulfillment of a with the provisions of either of the first two sections of this rule, that an heir or
suspensive condition, because in a conditional contract of sale, the first other person has been unduly deprived of his lawful participation in the estate,
element of consent is present, although it is conditioned upon the happening such heir or such other person may compel the settlement of the estate in the
of a contingent event which may or may not occur.[11] courts in the manner hereinafter provided for the purpose of satisfying such
lawful participation. And if within the same time of two (2) years, it shall appear
In the present case, the true nature of the contract is revealed by paragraph D that there are debts outstanding against the estate which have not been paid,
thereof, which states: or that an heir or other person has been unduly deprived of his lawful
xxx participation payable in money, the court having jurisdiction of the estate may,
d) That in case, BUYER has complied with the terms and conditions of this by order for that purpose, after hearing, settle the amount of such debts or
contract, then the SELLERS shall execute and deliver to the BUYER the lawful participation and order how much and in what manner each distributee
appropriate Deed of Absolute Sale; shall contribute in the payment thereof, and may issue execution, if
circumstances require, against the bond provided in the preceding section or
xxx against the real estate belonging to the deceased, or both. Such bond and
such real estate shall remain charged with a liability to creditors, heirs, or other
persons for the full period of two (2) years after such distribution,
Jurisprudence has established that where the seller promises to execute a notwithstanding any transfers of real estate that may have been made.
deed of absolute sale upon the completion by the buyer of the payment of the [Emphasis supplied.]
price, the contract is only a contract to sell.[12] Thus, while the contract is
denominated as a Deed of Conditional Sale, the presence of the above-quoted
provision identifies the contract as being a mere contract to sell. Senator Vicente Francisco discusses this provision in his book The Revised
Rules of Court in the Philippines,[13] where he states:
A Section 4, Rule 74 annotation is an encumbrance on the property
The provision of Section 4, Rule 74 prescribes the procedure to be followed if
While Tan admits that he refused to pay the balance of the purchase price, he within two years after an extrajudicial partition or summary distribution is made,
claims that he had valid reason to do so the sudden appearance of an an heir or other person appears to have been deprived of his lawful
annotation on the title pursuant to Section 4, Rule 74 of the Rules, which Tan participation in the estate, or some outstanding debts which have not been
considered an encumbrance on the property. paid are discovered. When the lawful participation of the heir is not payable in
money, because, for instance, he is entitled to a part of the real property that
We find Tans argument meritorious. has been partitioned, there can be no other procedure than to cancel the
partition so made and make a new division, unless, of course, the heir agrees
The annotation placed on TCT No. 27335, the new title issued to reflect the to be paid the value of his participation with interest. But in case the lawful
extrajudicial partition of Lamberto Benoliraos estate among his heirs, states: participation of the heir consists in his share in personal property of money left
by the decedent, or in case unpaid debts are discovered within the said period
x x x any liability to credirots (sic), excluded heirs and other persons having of two years, the procedure is not to cancel the partition, nor to appoint an
right to the property, for a period of two (2) years, with respect only to the share administrator to re-assemble the assets, as was allowed under the old Code,
of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao [Emphasis but the court, after hearing, shall fix the amount of such debts or lawful
supplied.] participation in proportion to or to the extent of the assets they have
respectively received and, if circumstances require, it may issue execution
This annotation was placed on the title pursuant to Section 4, Rule 74 of the against the real estate belonging to the decedent, or both. The present
Rules, which reads: procedure is more expedient and less expensive in that it dispenses with the
appointment of an administrator and does not disturb the possession enjoyed
by the distributees.[14] [Emphasis supplied.]
SALES AND LEASE

new certificate of title covering the property had already been issued on March
26, 1993, which contained the encumbrance on the property; the encumbrance
An annotation is placed on new certificates of title issued pursuant to the would remain so attached until the expiration of the two-year period. Clearly,
distribution and partition of a decedents real properties to warn third persons at this time, the vendors could no longer compel Tan to pay the balance of the
on the possible interests of excluded heirs or unpaid creditors in these purchase since considering they themselves could not fulfill their obligation to
properties. The annotation, therefore, creates a legal encumbrance or lien on transfer a clean title over the property to Tan.
the real property in favor of the excluded heirs or creditors. Where a buyer
purchases the real property despite the annotation, he must be ready for the Contract to sell is not rescinded but terminated
possibility that the title could be subject to the rights of excluded parties. The
cancellation of the sale would be the logical consequence where: (a) the What then happens to the contract?
annotation clearly appears on the title, warning all would-be buyers; (b) the
sale unlawfully interferes with the rights of heirs; and (c) the rightful heirs bring We have held in numerous cases[18] that the remedy of rescission under
an action to question the transfer within the two-year period provided by law. Article 1191 cannot apply to mere contracts to sell. We explained the reason
for this in Santos v. Court of Appeals,[19] where we said:
As we held in Vda. de Francisco v. Carreon:[15] [I]n a contract to sell, title remains with the vendor and does not pass on to the
vendee until the purchase price is paid in full. Thus, in a contract to sell, the
And Section 4, Rule 74 xxx expressly authorizes the court to give to every heir payment of the purchase price is a positive suspensive condition. Failure to
his lawful participation in the real estate notwithstanding any transfers of such pay the price agreed upon is not a mere breach, casual or serious, but a
real estate and to issue execution thereon. All this implies that, when within situation that prevents the obligation of the vendor to convey title from
the amendatory period the realty has been alienated, the court in re-dividing it acquiring an obligatory force. This is entirely different from the situation in a
among the heirs has the authority to direct cancellation of such alienation in contract of sale, where non-payment of the price is a negative resolutory
the same estate proceedings, whenever it becomes necessary to do so. To condition. The effects in law are not identical. In a contract of sale, the vendor
require the institution of a separate action for such annulment would run has lost ownership of the thing sold and cannot recover it, unless the contract
counter to the letter of the above rule and the spirit of these summary of sale is rescinded and set aside. In a contract to sell, however, the vendor
settlements. [Emphasis supplied.] remains the owner for as long as the vendee has not complied fully with the
condition of paying the purchase price. If the vendor should eject the vendee
for failure to meet the condition precedent, he is enforcing the contract and not
Similarly, in Sps. Domingo v. Roces,[16] we said: rescinding it. x x x Article 1592 speaks of non-payment of the purchase price
as a resolutory condition. It does not apply to a contract to sell. As to Article
The foregoing rule clearly covers transfers of real property to any person, as 1191, it is subordinated to the provisions of Article 1592 when applied to sales
long as the deprived heir or creditor vindicates his rights within two years from of immovable property. Neither provision is applicable [to a contract to sell].
the date of the settlement and distribution of estate. Contrary to petitioners [Emphasis supplied.]
contention, the effects of this provision are not limited to the heirs or original
distributees of the estate properties, but shall affect any transferee of the
properties. [Emphasis supplied.] We, therefore, hold that the contract to sell was terminated when the vendors
could no longer legally compel Tan to pay the balance of the purchase price
as a result of the legal encumbrance which attached to the title of the property.
Indeed, in David v. Malay,[17] although the title of the property had already Since Tans refusal to pay was due to the supervening event of a legal
been registered in the name of the third party buyers, we cancelled the sale encumbrance on the property and not through his own fault or negligence, we
and ordered the reconveyance of the property to the estate of the deceased find and so hold that the forfeiture of Tans down payment was clearly
for proper disposal among his rightful heirs. unwarranted.

By the time Tans obligation to pay the balance of the purchase price arose on Award of Attorneys fees
May 21, 1993 (on account of the extensions granted by the respondents), a
SALES AND LEASE

As evident from our previous discussion, Tan had a valid reason for refusing SO ORDERED.
to pay the balance of the purchase price for the property. Consequently, there
is no basis for the award of attorneys fees in favor of the respondents. 3. Artates v. Urbi

On the other hand, we award attorneys fees in favor of Tan, since he was G.R. No. L-29421 January 30, 1971
compelled to litigate due to the respondents refusal to return his down payment
despite the fact that they could no longer comply with their obligation under the LINO ARTATES and MANUELA POJAS, plaintiffs-appellants,
contract to sell, i.e., to convey a clean title. Given the facts of this case, we find vs.
the award of P50,000.00 as attorneys fees proper. DANIEL URBI, CRISANTO SOLIVEN, assisted by his Guardian 'ad litem,'
MARCELA B. SOLIVEN, REMEGIO BUTACAN and NEMESIO OATE, in
Monetary award is subject to legal interest their private capacities and/or as Ex-Oficio Provincial Sheriff and Deputy
Sheriff of Cagayan, respectively, and BIENVENIDO CACATIAN, as Deputy
Undoubtedly, Tan made a clear and unequivocal demand on the vendors to Register of Deeds of Cagayan, defendants-appellees.
return his down payment as early as May 28, 1993. Pursuant to
Bienvenido J. Jimenez for plaintiffs-appellants.
our definitive ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,[20] we
hold that the vendors should return the P200,000.00 down payment to Tan, Rogelio Re. Ubarde for defendants-appellees Daniel Urbi and Crisanto
subject to the legal interest of 6% per annum computed from May 28, 1993, Soliven.
the date of the first demand letter.
Alfredo J. Donato for defendant-appellant Nemesio Oate.

Furthermore, after a judgment has become final and executory, the rate of The Provincial Fiscal (Cagayan) for defendants-appellees Provincial Sheriff
legal interest, whether the obligation was in the form of a loan or forbearance and Deputy Register of Deeds.
of money or otherwise, shall be 12% per annum from such finality until its
satisfaction. Accordingly, the principal obligation of P200,000.00 shall bear 6%
interest from the date of first demand or from May 28, 1993. From the date the REYES, J.B.L., J.:
liability for the principal obligation and attorneys fees has become final and
executory, an annual interest of 12% shall be imposed on these obligations This is an appeal from the decision of the Court of First Instance of Cagayan
until their final satisfaction, this interim period being deemed to be by then an (Civil Case No. 116-T), involving the public sale of a homestead to satisfy a
equivalent to a forbearance of credit. civil judgment against the grantee.

The records show that in an action filed in the Court of First Instance of
WHEREFORE, premises considered, we hereby GRANT the petition and, Cagayan, the spouses Lino Artates and Manuela Pojas sought annulment of
accordingly, ANNUL and SET ASIDE the May 30, 2002 decision of the Court the execution of a homestead1 covered by Patent No. V-12775 issued to them
of Appeals in CA-G.R. CV No. 52033. Another judgment is rendered declaring by the proper land authorities on 23 September 1952, and duly registered in
the Deed of Conditional Sale terminated and ordering the respondents to their names (OCT No. P-572). The public sale, conducted by the Provincial
return the P200,000.00 down payment to petitioner Delfin Tan, subject to legal Sheriff of Cagayan on 2 June 1962, was made to satisfy a judgment against
interest of 6% per annum, computed from May 28, 1993. The respondents are Lino Artates in the amount of P1,476.35, and awarded to Daniel Urbi by the
also ordered to pay, jointly and severally, petitioner Delfin Tan the amount of Justice of the Peace Court of Camilaniugan, Cagayan, in its Civil Case No. 40,
P50,000.00 as and by way of attorneys fees. Once this decision becomes final for physical injuries inflicted by Artates upon Urbi on 21 October 1955. In the
and executory, respondents are ordered to pay interest at 12% per annum on execution sale, the property was sold to the judgment creditor, the only bidder,
the principal obligation as well as the attorneys fees, until full payment of these for P1,476.35. In their complaint, the plaintiffs spouses alleged that the sale of
amounts. Costs against the respondents. the homestead to satisfy an indebtedness of Lino Artates that accrued on 21
October 1955, violated the provision of the Public Land law exempting said
SALES AND LEASE

property from execution for any debt contracted within five years from the date encumbrance or alienation from the date of the approval of the application and
of the issuance of the patent; that defendant Urbi, with the intention of for a term of five years from and after the date of issuance of the patent or
defrauding the plaintiffs, executed on 26 June 1961 a deed for the sale of the grant, nor shall they become liable to the satisfaction of any debt contracted
same parcel of land to defendant Crisanto Soliven, a minor, supposedly for the prior to the expiration of said period, but the improvements or crops on the land
sum of P2,676.35; that as a result of the aforementioned transactions, may be mortgaged or pledged to qualified persons, associations or
defendants Urbi and Soliven entered into the possession of the land and corporations.
deprived plaintiffs of the owners' share in the rice crops harvested during the
agricultural year 1961-1962. Plaintiffs, therefore, prayed that the public sale of xxx xxx xxx
the land to defendant Urbi, as well as the deed of sale executed by the latter
in favor of defendant Soliven, be declared null and void; that defendants be As thus prescribed by law, for a period of five years from the date of the
ordered to deliver to plaintiffs possession of the land; and to pay to plaintiffs government grant, lands acquired by free or homestead patent shall not only
compensatory damages at the rate of P1,000.00 per agricultural year until be incapable of being encumbered or alienated except in favor of the
possession is finally restored to them, the sum of P2,000.00 as damages for government itself or any of its institutions or of duly constituted banking
maliciously casting cloud upon plaintiffs' title on the land, plus attorneys' fees corporations, but also, they shall not be liable to the satisfaction of any debt
and costs. contracted within the said period,3 whether or not the indebtedness shall
mature during or after the prohibited time.4 This provision against the
The defendants2 filed separate answers disputing the averments of the alienation or encumbrance of public lands granted within five years from the
complaint. On 29 March 1953, the court rendered judgment upholding the issuance of the patent, it has been held, is mandatory;5 a sale made in
regularity and validity of the execution conducted by the defendant Provincial violation thereof is null and void6 and produces no effect whatsoever. Though
Sheriff, but finding that the sale of the lands by defendant Urbi to the minor it may be a limitation on the right of ownership of the grantee, the salutary
Soliven was simulated, intended to place the property beyond the reach of the purpose of the provision cannot be denied: it is to preserve and keep for the
judgment debtor, and that plaintiffs had offered to redeem the land within the homesteader or his family the land given to him gratuitously by the State,7 so
5-year period allowed by Section 119 of the Public Land law for reacquisition that being a property owner, he may become and remain a contented and
thereof by the grantee. Consequently, the court declared the sale of the land useful member of our society.8
by defendant Daniel Urbi to defendant Crisanto Soliven null and void; and
Daniel Urbi was ordered to reconvey the property to the plaintiffs upon the In the case at bar, the homestead patent covering the land in question (No.
latter's payment (to Urbi) of the sum of P1,476.35 plus the sheriff's fee incident V-12775) was issued to appellants on 23 September 1952, and it was sold at
to the sale at public auction, with interest thereon at the rate of 12% per annum public auction to satisfy the civil liability of appellant Lino Artates to Daniel Urbi,
from 2 June 1961 until said amount shall have been fully paid, and the further adjudged in the 14 March 1956 decision of the Justice of the Peace Court of
sum of P783.45 representing the amount paid by defendant Daniel Urbi to the Camalaniugan, Cagayan.lwph1.t There can be no doubt that the award of
Philippine National Bank for the release of the real estate mortgage on the damages to Urbi created for Artates a civil obligation, an indebtedness, that
land, contracted by Lino Artates, with legal rate of interest thereon from 29 commenced from the date such obligation was decreed on 14 March 1956.
June 1961. Consequently, it is evident that it can not be enforced against, or satisfied out
of, the sale of the homestead lot acquired by appellants less than 5 years
From this decision, the plaintiffs interposed the present appeal assigning before the obligation accrued. And this is true even if the sale involved here is
several errors allegedly committed by the court below, all hinged on the validity not voluntary. For purposes of complying with the law, it is immaterial that the
or invalidity of the public sale of the lot involved herein. satisfaction of the debt by the encumbrancing or alienation of the land grant
made voluntarily, as in the case of an ordinary sale, or involuntarily, such as
Section 118 of the Public Land law (Commonwealth Act 141) provides as that effected through levy on the property and consequent sale at public
follows: auction. In both instances, the spirit of the law would have been violated.9

SEC. 118. Except in favor of the Government or any of its branches, Doubts have been expressed as to whether the words "debt contracted prior
units, or institution, or legally constituted banking corporations, lands acquired to the expiration of said period" (of 5 years from and after the grant) would
under free patent or homestead provisions shall not be subject to include the civil liability arising from a crime committed by the homesteader.
SALES AND LEASE

While there is no direct Philippine precedent on this point, there are various thereon accruing from the date the writ of execution was first returned
reasons why the non-liability of the homestead grant should be extended to unsatisfied. It appearing also that appellee Daniel Urbi paid to the Philippine
extra-contractual obligations. First and foremost, whether it be viewed as an National Bank the sum of P783.45 to release the mortgage on the land,
exemption or as a condition attached to the grant to encourage people to settle appellants should reimburse him of said amount or of whatever amount
and cultivate public land, the immunity in question is in consonance with the appellants have actually been benefited by the said payment.
definite public policy underlying these grants, which is to "preserve and keep
in the family of the homesteader that portion of public land which the State has FOR THE FOREGOING CONSIDERATIONS, the decision appealed from is
given to him" so he may have a place to live with his family and become a hereby reversed, and appellants are declared entitled to the return and
happy citizen and a useful member of society, 10 and the exemption should possession of the lot covered by Original Certificate of Title No. P-572, without
not be given restrictive application. 11 A levy and sale of the homestead on prejudice to their continuing obligation to pay the judgment debt, and expenses
account of extra-contractual liability incurred would uproot the homesteader connected therewith. No costs.
and his family and turn them into homeless waifs as effectively as a levy for
non-payment of a contractual debt. Secondly, the word "debt" in exemption Concepcion, C.J., Dizon, Zaldivar, Fernando and Makasiar, JJ., concur.
statutes,
4. Heirs of Zambales v. CA
in its wider sense, (it) includes all that is due to a man under any form or
obligation or promise, and covers not only obligations arising under contract, G.R. No. L-54070 February 28, 1983
but also those imposed by law without contract. 12
HEIRS OF ENRIQUE ZAMBALES and JOAQUINA ZAMBALES, petitioners,
Considering the protective policy of the law, it becomes apparent that "debt vs.
contracted" was used in it in the sense of "obligation incurred," since Webster COURT OF APPEALS, NIN BAY MINING CORPORATION, ANGELA C.
gives the verb to "contract" the meaning of "to bring on; incur; acquire." Finally, PREYSLER and JOAQUIN B. PREYSLER, respondents.
our public land laws being copied from American legislation, 13 resort to
American precedents reveals that, under the weight of authority, exemption
from "debts contracted" by a homesteader has been held to include freedom MELENCIO-HERRERA, J.:
from money liabilities, from torts or crimes committed by him, such as from
bigamy (State vs. O'Neil, 7 Ore. 141, 11 Words and Phrases 318) or slander The Decision of respondent Court of Appeals in the case entitled "Enrique
(Conway vs. Sullivan, 44 Ill. 451, 452), breach of contract (Flanagan vs. Zambales and Joaquina Zambales, Plaintiffs-appellees vs. Atty. Perfecto de
Forsythe, 50 Pac. 152, 153) or other torts (In Re Radway, 20 Fed. Cas. 154, los Reyes, Nin Bay Mining Corporation and Joaquin B. Preysler, Defendants-
162). appellants" (CA-G.R. No. 59386-R), setting aside the judgment of the Court of
First Instance of Palawan in Civil Case No. 678 for Annulment of a Deed of
The execution sale in this case being null and void, the possession of the land Sale with Recovery of Possession and Ownership with Damages", is the
should be returned to the owners, the herein appellants. There would even be subject of this Petition for Review on Certiorari.
no need to order appellee Urbi to execute a deed of reconveyance thereof to
the owners. It appears that what was issued here to the judgment Joaquin B. Preysler is now deceased and was substituted by Angela C.
creditor/purchaser was only the sheriff's provisional certificate, under which he Preysler, his widow.
derived no definite title or right until the period for redemption has expired,
without a redemption having been made, 14 or issuance of a final deed or Atty. Perfecto de los Reyes was originally a defendant in Civil Case No. 678
certificate of sale. In other words, the purchaser herein has not acquired an but he did not appeal from the Decision of the lower Court.
absolute ownership or title in fee over the land that would necessitate a deed
of reconveyance to revert ownership back to the appellant spouses. As things The Zambales spouses (Zambaleses, for brevity) were the homestead
now stand, title to the property covered by OCT No. P-572 remains with the patentees of a parcel of land with an area of 17,8474 hectares situated in the
appellants, but Lino Artates shall continue to be under obligation to satisfy the Municipality of Del Pilar, Roxas, Palawan, covered by Original Certificate of
judgment debt to Daniel Urbi in the sum of P1,476.35, with legal interest
SALES AND LEASE

Title No. G 1193 of the Registry of Deeds for the Province of Palawan, issued successors and/or assigns their true and lawful attorney-in-fact with full power
pursuant to Homestead Patent No. V-59502 dated September 6, 1955. and authority to sell, transfer and convey on September 10, 1960 or at any
time thereafter the whole or any part of PLAINTIFFS' property hereinabove
Claiming that the Nin Bay Mining Corporation (Corporation, for short) had mentioned to the DEFENDANT, its successors and/or assigns, or to any third
removed silica sand from their land and destroyed the plants and others party, and to execute and deliver all instruments and documents whatsoever
improvements thereon, the Zambaleses instituted, on November 10, 1958, necessary for the purpose, and all acts done and to be done by DEFENDANT,
Civil Case No. 316 before the Court of First Instance of Palawan claiming its successors and/or assigns in conformity with the powers herein granted are
damages in the total sum of P48,000.00. hereby ratified and confirmed by the PLAINTIFFS. ...

The Corporation denied having caused any damages and claimed that it had 4. In consideration of the payment of the amount of P1,784.74 by
excavated and extracted silica sand only from its own mining claims and on DEFENDANT, and of other good and valuable consideration, PLAINTIFFS,
which it had mining lease contracts with the Philippine Government. jointly and severally, hereby forever release, fully and completely, said
DEFENDANT, its successors and/or assigns in interest, from any and all
On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. liabilities, whether arising from past, present or future excavation or removal
Perfecto de los Reyes, and the Corporation, entered into a Compromise of silica sand from the property in question or otherwise, and from all the other
Agreement, the portions of which, pertinent to this case, read: claims against the DEFENDANT contained in their Complaint in Civil Case No.
316 of the Court of First Instance of Palawan. 1
1. DEFENDANT shall pay the PLAINTIFFS a rental of TWENTY
(P20.00) PESOS per hectare per year from September 9, 1955 to September The Trial Court rendered judgment on October 29, 1959 based on the
30, 1960, or a total rental price of ONE THOUSAND SEVEN HUNDRED Compromise Agreement. The document was duly annotated an OCT No. G -
EIGHTY-FOUR PESOS AND SEVENTY- FOUR CENTAVOS (P1,784.74), 1193 (Exhibit " A ") the day after, or on October 30, 1959 (Exhibit " 10 A ").
Philippine currency, in lieu of all damages...
On September 10, 1960, the Corporation, as attorney-in-fact for the
2. The payment to the PLAINTIFFS of the above-mentioned rental price Zambaleses, as Vendors, sold the disputed property to Joaquin B. Preysler for
shall be considered full, absolute and final payment and indemnity for all the the sum of P8,923.70 fixed in the Compromise Agreement (Exhibit " 11 ").
alleged damages to PLAINTIFFS' property and its improvements, or any other Transfer Certificate of Title No. T-970 was issued in the vendee's name on
actual, moral, exemplary or other damages that PLAINTIFFS may have December 19, 1960 (Exhibit " 2 ").
suffered or will suffer in connection with the mining operations of DEFENDANT
on the property in question, which property, by virtue of the terms of this The Deed of Sale to Preysler contained the following proviso:
Agreement shall be used by DEFENDANT as occupant thereof until
September 30, 1960. The VENDORS hereby represent and warrant that the five-year restrictive
period on alienation of lands acquired under the homestead provisions of
3. PLAINTIFFS hereby agree and bind themselves to sell, transfer and Commonwealth Act No. 141, as amended, otherwise known as the Public
convey, and DEFENDANT or its assigns, qualified to acquire or hold lands of Land Act, has already expired, the date of issuance of the herein homestead
the public domain, hereby agrees to purchase and pay for, the aforesaid patent to the VENDORS as aforesaid being September 6, 1955 as shown in
property of the PLAINTIFFS, containing an area of 17.8474 hectares, situated Original Certificate of Title No. G-1193.
in the Municipality of Del Pilar, Roxas, Palawan, and covered by Original
Certificate of Title No. G1193 of the Registry of Deeds of Palawan, at the fixed On October 18, 1960, the Secretary of Agriculture and Natural Resources
selling price of FIVE HUNDRED (P500.00) PESOS per hectare or a total approved the sale to Preysler of the subject property (Exhibit "13 ").
purchase price of EIGHT THOUSAND NINE HUNDRED TWENTY THREE
PESOS and SEVENTY CENTAVOS (P8,923.70), Philippine currency. The On. December 6, 1969, or ten (10) years after the Trial Court's Decision based
contract to purchase and sell herein provided for, shall be reciprocally on the Compromise Agreement, and nine (9) years after the sale to Preysler,
demandable and enforceable by the parties hereto on September 10, 1960. the Zambaleses filed Civil Case No. 678 before the Court of First Instance of
PLAINTIFFS hereby irrevocably constitute and appoint DEFENDANT, its Palawan for "Annulment of a Deed of Sale with Recovery of Possession and
SALES AND LEASE

Ownership with Damages". They contended that it was their lawyer who
prevailed upon them to sign the Compromise Agreement; that they are On appeal by the Corporation, the Court of Appeals reversed the Trial Court,
unschooled and did not understand the contents thereof; that they were made after finding that the alleged fraud or misrepresentation in the execution of the
to understand that they would receive the sum of P10,700.00, only as payment Compromise Agreement had not been substantiated by evidence.
for damages sustained by the land from 1955 to 1960; that through fraud,
deceit and manipulation by their lawyer and the Corporation, they were made The case is now before us on review.
to agree to appoint the Corporation as their attorney-in-fact with full power and
authority to sell; that it was never their intention to sell the land; that in The controversy revolves around the issue of due execution and validity of the
September 1969, they were surprised to learn that the land was already titled Compromise Agreement (Exhibit "8") dated October 29; 1959, and of the
in the name of Joaquin B. Preysler; that the land was acquired and registered subsequent Deed of Sale (Exhibit "11 "), dated 10 September 1960.
in the latter's name through fraud and deceit. The Zambaleses then prayed
that the deed of sale and the title in Preysler's name be annulled on the ground I
of fraud and that the property be reconveyed to them.
The general rule is that whoever alleges fraud or mistake must substantiate
In their Answer, the Corporation denied all allegations that the Zambaleses his allegation, since the presumption is that a person takes ordinary care of his
had signed the Compromise Agreement without understanding the contents concerns and that private transactions have been fair and regular. The rule
thereof, the truth being that it was read to them by their counsel, Atty. Perfecto admits of an exception in Article 1332 of the Civil Code which provides:
de los Reyes, who explained thoroughly the full implication and legal
consequence of each and every provision, which was then submitted and When one of the parties is unable to read, or if the contract is in a language
approved by then Presiding Judge Juan L. Bocar; and that the Corporation had not understood by him, and mistake or fraud is alleged, the person enforcing
sold the property to Preysler as a duly constituted attorney-in-fact pursuant to the contract must show that the terms thereof have been fully explained to the
the Compromise Agreement. former.

After trial, the lower Court rendered judgment in favor of the Zambaleses, the For the proper application of said provision, it has first to be established
dispositive part of which reads: convincingly that the illiterate or the party at a disadvantage could not read or
understand the language in which the contract was written. 2 The evidence
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and discloses that the spouses Zambales are unschooled. They cannot read,
against the defendants as follows: speak, much less understand English or write, except to sign their names. 3
The Zambaleses alleged in their Complaint that the Compromise Agreement
1) That the deed of sale executed by Nin Bay Mining Corporation through (Exhibit "8") was executed through fraud by the Corporation and by their
its president, to Joaquin B. Preysler is hereby declared null and void; counsel Atty. Perfecto de los Reyes, whom they included as a defendant. The
burden of proof, therefore, shifted to the Corporation to show that the
2) That the defendant Joaquin B. Preysler is hereby ordered to reconvey compromise agreement had been fully explained to the plaintiffs.
the land subject matter of this litigation to the plaintiffs;
In refuting the allegation that plaintiffs were misled into signing the compromise
3) That the defendants Nin Bay Mining Corporation and Joaquin B. agreement, their former counsel, Atty. Perfecto de los Reyes, and the notary,
Preysler shall pay the plaintiffs the sum of P85,000.00 as actual damages plus Atty. Salomon Reyes, a lawyer for Nin Bay Mining Corporation, established
the legal rate of interest from September 30, 1960 up to the time the amount that the terms and conditions of the Compromise Agreement were thoroughly
is fully paid; explained and fully understood by the spouses Zambales in accordance with
their proposal to sell the land at P500.00 a hectare; that before the signing of
4) That the defendants to pay the sum of FIVE THOUSAND (P5,000.00) the Compromise Agreement, the notary requested Atty. de los Reyes to read
PESOS as attorneys fees; and and explain each and every provision to the spouses, and with the help of
Ricardo Nunala, Atty. de los Reyes did so in their dialect (Cuyuno). Thereafter,
5) The defendants to pay the costs.
SALES AND LEASE

the parties went to Judge Juan Bocar, who was assured that the spouses
Zambales understood and signed the Compromise Agreement. 4 xxx xxx xxx

We sustain the finding of the Court of Appeals that fraud and misrepresentation Q. So these people never gave their services to you?
did not vitiate petitioners' consent to the Agreement when it observed:
A. Nobody was able to help us except Atty. de los Reyes. (Tsn., pp. 29,
Taking into account the foregoing observations, this Court is not convinced 31 & 32, June 19, 1974)
that indeed appellees were victims of a fraudulent scheme employed upon
them by their former counsel by reason of their alleged illiteracy and ignorance. ... Thus, it having been established that appellees could not have been misled
The evidence discloses that appellees, although unschooled, are intelligent, by their former counsel into signing the compromise agreement and taking into
well-informed and intelligent people. They are not the kind of persons who account the acts of the appellees and their children subsequent to the
could easily be fooled of their rights and interests. Even as commented by the execution of the compromise agreement perforce the court a quo erred in not
court a quo, which had a chance to observe the demeanor of the witness, it giving credence to the clear and convincing testimonies of Atty. Perfecto de
had no observation that the witness, Joaquina Zambales, is ignorant. As los Reyes and Atty. Salomon Reyes anent the execution of the compromise
correctly observed by appellants, appellees 'are political leaders and chief agreement. 5
campaigners; they speak in the platform during political rallies; and they are
widely travelled' (p. 28, Appellants' Brief). As a matter of fact they are However, although we find that the Zambaleses were not misled into signing
knowledgeable of the right connections in the government. They had the Compromise Agreement, we hold that there has been violation of the
approached former Sen. Rogelio de la Rosa, no less, the congressman and Public Land Act. The evidence on record shows that the land in question was
the governor. Even the lawyers they have retained previous to their present awarded t the Zambaleses as a homestead on September 6, 1955 (Exhibit
counsel are the Padilla Law Office and the Diokno Law Office, It is common "A"). Before us, the Zambaleses now argue that the Compromise Agreement
knowledge that these law offices are among the established law offices in executed on October 29, 1959 is in violation of the Public Land Act, which
Manila. It is far convincing that an ignorant couple would have knowledge of prohibits alienation and encumbrance of a homestead lot within five years from
these law firms. All these are obvious manifestations of their being well- the issuance of the patent. 6
informed and the way they have conducted their way of living apparently is
inconsistent with the plea of being illiterate and/or ignorant. They cannot We sustain that contention. The fact that the issue was not raised in the Courts
capitalize on the fact that they are uneducated only because they had no below is not a deterrent factor considering that the question affects the validity
formal schooling inasmuch as one's knowledge of the facts of life is not of the agreement between the parties. The Supreme Court has the authority
dependent on whether one had formal schooling or not and it does not to review matters even if they are not assigned as errors in the appeal, if it is
necessarily follow always that if one is unschooled he is ignorant. found that their consideration is necessary in arriving at a just decision of the
case. 7 Moreover, a party may change his legal theory on appeal only when
Furthermore, when plaintiffs-appellees signed the questioned compromise the factual bases thereof would not require presentation of any further
agreement they were duly assisted and represented by their counsel, Atty. de evidence by the adverse party in order to enable it to properly meet the issue
los Reyes. When Atty. de los Reyes testified in court he categorically declared raised in the new theory. 8 In the case at bar it is indisputable that Homestead
that it was to the best interest of his clients that they compromise Civil Case Patent No. V-59502 was issued on September 6, 1955 as shown in Original
No. 316. This declaration finds support in Joaquina Zambales' testimony Certificate of Title No. 1193 (Exhibit "A ").
wherein she stated thus:
The sale of a homestead lot within the five-year prohibitory period is illegal and
ATTY. SEMBRANO: void. The law does not distinguish between executory and consummated
sales.
Q. Except for this present case, would you say to the Court that Atty. de
los Reyes extended to you legal assistance to your satisfaction? The law prohibiting any transfer or alienation of homestead land within five
years from the issuance of the patent does not distinguish between executory
A. Yes, sir, he is good to us. and consummated sales; and it would hardly be in keeping with the primordial
SALES AND LEASE

aim of this prohibition to preserve and keep in the family of the homesteader by the Secretary of Agriculture and Natural Resources after the lapse of five
the piece of land that the state had gratuitously given to them, to hold valid a years from the date of the patent would neither legalize the sale. 15
homestead sale actually perfected during the period of prohibition but with the
execution of the formal deed of conveyance and the delivery of possession of The homestead in question should be returned to the Zambaleses, petitioners
the land sold to the buyer deferred until after the expiration of the prohibitory herein, who are, in turn, bound to restore to the Corporation the sum of
period, purposely to circumvent the very law that prohibits and declares invalid P8,923.70 as the price thereof. The actual damages awarded by the Trial
such transaction to protect the homesteader and his family. 9 Court of P85,000.00 have not been adequately substantiated. Moreover,
under the agreement, the total rental price of P1,784.74 was intended to be "in
In the compromise agreement executed between the parties, (1) the lieu of all damages, or any other actual, moral, exemplary or other damages.
Zambaleses promised to sell and the Corporation agreed to buy the disputed
lot at P500.00 per hectare, the contract to be reciprocally demandable and This is without prejudice to the corresponding action on the part of the State
enforceable on September 10, 1960; and as a substitute procedure, (2) an for reversion of the property and its improvements, if any, under Section 124
irrevocable agency was constituted in favor of the Corporation as attorney- in- of the Public Land Act. 16
fact to sell the land to any third person on September 10, 1960 or any time
thereafter. WHEREFORE, the judgment under review is hereby REVERSED, and another
one entered (1) declaring null and void a) the bilateral promise to buy and sell
Clearly, the bilateral promise to buy and sell the homestead lot at a price entered into between Enrique Zambales and Joaquina Zambales, on the one
certain, which was reciprocally demandable 10, was entered into within the hand, and the Nin Bay Mining Corporation on the other, and b) the sale
five-year prohibitory period and is therefore, illegal and void. Further, the executed by Nin Bay Mining Corporation in favor of Joaquin B. Preysler; (2)
agency to sell the homestead lot to a third party was coupled with an interest ordering Angela C. Preysler to reconvey the land subject matter of this litigation
inasmuch as a bilateral contract was dependent on it and was not revocable to petitioners upon refund by the latter to the Nin Bay Mining Corporation of
at will by any of the parties.11 To all intents and purposes, therefore, there was the sum of P8,923.70, all expenses for the reconveyance to be borne by
an actual executory sale perfected during the period of prohibition except that private respondents; (3) ordering Nin Bay Mining Corporation to pay rentals to
it was reciprocally demandable thereafter and the agency to sell to any third petitioners at the price of P20.00 per hectare per year from December 6, 1969,
party was deferred until after the expiration of the prohibitory period. That the date of the institution of the Complaint, till the date that possession is turned
"rentals" were ostensibly to be paid during the five-year prohibitory period, and over to petitioners; and (4) ordering the Register of Deeds for the Province of
the agency to sell made effective only after the lapse of the said period, was Palawan to cancel Transfer Certificate of Title No. T-970 of his Registry, and
merely a devise to circumvent the prohibition. reissue to the Heirs of Enrique Zambales and Joaquina Zambales the title to
the homestead in question.
To hold valid such an arrangement would be to throw the door wide open to
all possible subterfuges that persons interested in homesteads may devise to Let a copy of this Decision be served on the Solicitor General.
defeat the legal prohibition against alienation within five years from the
issuance of the patent. No costs.

We hold, therefore, that the bilateral promise to buy and sell, and the agency SO ORDERED.
to sell, entered into within five years from the date of the homestead patent,
was in violation of section 118 of the Public Land Law, although the executed 5. Quiroga v. Parsons
sale was deferred until after the expiration of the five-year- prohibitory period.
G.R. No. L-11491 August 23, 1918
As the contract is void from the beginning, for being expressly prohibited by
law 12 the action for the declaration of its inexistence does not prescribe. 13 ANDRES QUIROGA, plaintiff-appellant,
Being absolutely void, it is entitled to no authority or respect, the sale may be vs.
impeached in a collateral proceeding by any one with whose rights and interest PARSONS HARDWARE CO., defendant-appellee.
it conflicts. There is no presumption of its validity. 14 The approval of the sale
SALES AND LEASE

Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. case, Mr. Quiroga assumed the obligation to invoice the beds at the price at
Crossfield & O'Brien for appellee. which the order was given.

AVANCEA, J.: (F) Mr. Parsons binds himself not to sell any other kind except the
"Quiroga" beds.
On January 24, 1911, in this city of manila, a contract in the following tenor
was entered into by and between the plaintiff, as party of the first part, and J. ART. 2. In compensation for the expenses of advertisement which, for the
Parsons (to whose rights and obligations the present defendant later benefit of both contracting parties, Mr. Parsons may find himself obliged to
subrogated itself), as party of the second part: make, Mr. Quiroga assumes the obligation to offer and give the preference to
Mr. Parsons in case anyone should apply for the exclusive agency for any
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. island not comprised with the Visayan group.
PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS. ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale
of "Quiroga" beds in all the towns of the Archipelago where there are no
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds exclusive agents, and shall immediately report such action to Mr. Quiroga for
in the Visayan Islands to J. Parsons under the following conditions: his approval.

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for ART. 4. This contract is made for an unlimited period, and may be terminated
the latter's establishment in Iloilo, and shall invoice them at the same price he by either of the contracting parties on a previous notice of ninety days to the
has fixed for sales, in Manila, and, in the invoices, shall make and allowance other party.
of a discount of 25 per cent of the invoiced prices, as commission on the sale;
and Mr. Parsons shall order the beds by the dozen, whether of the same or of Of the three causes of action alleged by the plaintiff in his complaint, only two
different styles. of them constitute the subject matter of this appeal and both substantially
amount to the averment that the defendant violated the following obligations:
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, not to sell the beds at higher prices than those of the invoices; to have an open
within a period of sixty days from the date of their shipment. establishment in Iloilo; itself to conduct the agency; to keep the beds on public
exhibition, and to pay for the advertisement expenses for the same; and to
(C) The expenses for transportation and shipment shall be borne by M. order the beds by the dozen and in no other manner. As may be seen, with the
Quiroga, and the freight, insurance, and cost of unloading from the vessel at exception of the obligation on the part of the defendant to order the beds by
the point where the beds are received, shall be paid by Mr. Parsons. the dozen and in no other manner, none of the obligations imputed to the
defendant in the two causes of action are expressly set forth in the contract.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, But the plaintiff alleged that the defendant was his agent for the sale of his
said payment when made shall be considered as a prompt payment, and as beds in Iloilo, and that said obligations are implied in a contract of commercial
such a deduction of 2 per cent shall be made from the amount of the invoice. agency. The whole question, therefore, reduced itself to a determination as to
whether the defendant, by reason of the contract hereinbefore transcribed,
The same discount shall be made on the amount of any invoice which Mr. was a purchaser or an agent of the plaintiff for the sale of his beds.
Parsons may deem convenient to pay in cash.
In order to classify a contract, due regard must be given to its essential
(E) Mr. Quiroga binds himself to give notice at least fifteen days before clauses. In the contract in question, what was essential, as constituting its
hand of any alteration in price which he may plan to make in respect to his cause and subject matter, is that the plaintiff was to furnish the defendant with
beds, and agrees that if on the date when such alteration takes effect he should the beds which the latter might order, at the price stipulated, and that the
have any order pending to be served to Mr. Parsons, such order shall enjoy defendant was to pay the price in the manner stipulated. The price agreed
the advantage of the alteration if the price thereby be lowered, but shall not be upon was the one determined by the plaintiff for the sale of these beds in
affected by said alteration if the price thereby be increased, for, in this latter Manila, with a discount of from 20 to 25 per cent, according to their class.
SALES AND LEASE

Payment was to be made at the end of sixty days, or before, at the plaintiff's classification of the contract. But it must be understood that a contract is what
request, or in cash, if the defendant so preferred, and in these last two cases the law defines it to be, and not what it is called by the contracting parties.
an additional discount was to be allowed for prompt payment. These are
precisely the essential features of a contract of purchase and sale. There was The plaintiff also endeavored to prove that the defendant had returned beds
the obligation on the part of the plaintiff to supply the beds, and, on the part of that it could not sell; that, without previous notice, it forwarded to the defendant
the defendant, to pay their price. These features exclude the legal conception the beds that it wanted; and that the defendant received its commission for the
of an agency or order to sell whereby the mandatory or agent received the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most
thing to sell it, and does not pay its price, but delivers to the principal the price only shows that, on the part of both of them, there was mutual tolerance in the
he obtains from the sale of the thing to a third person, and if he does not performance of the contract in disregard of its terms; and it gives no right to
succeed in selling it, he returns it. By virtue of the contract between the plaintiff have the contract considered, not as the parties stipulated it, but as they
and the defendant, the latter, on receiving the beds, was necessarily obliged performed it. Only the acts of the contracting parties, subsequent to, and in
to pay their price within the term fixed, without any other consideration and connection with, the execution of the contract, must be considered for the
regardless as to whether he had or had not sold the beds. purpose of interpreting the contract, when such interpretation is necessary, but
not when, as in the instant case, its essential agreements are clearly set forth
It would be enough to hold, as we do, that the contract by and between the and plainly show that the contract belongs to a certain kind and not to another.
defendant and the plaintiff is one of purchase and sale, in order to show that it Furthermore, the return made was of certain brass beds, and was not effected
was not one made on the basis of a commission on sales, as the plaintiff claims in exchange for the price paid for them, but was for other beds of another kind;
it was, for these contracts are incompatible with each other. But, besides, and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect
examining the clauses of this contract, none of them is found that substantially to said beds, which shows that it was not considered that the defendant had a
supports the plaintiff's contention. Not a single one of these clauses right, by virtue of the contract, to make this return. As regards the shipment of
necessarily conveys the idea of an agency. The words commission on sales beds without previous notice, it is insinuated in the record that these brass
used in clause (A) of article 1 mean nothing else, as stated in the contract itself, beds were precisely the ones so shipped, and that, for this very reason, the
than a mere discount on the invoice price. The word agency, also used in plaintiff agreed to their return. And with respect to the so-called commissions,
articles 2 and 3, only expresses that the defendant was the only one that could we have said that they merely constituted a discount on the invoice price, and
sell the plaintiff's beds in the Visayan Islands. With regard to the remaining the reason for applying this benefit to the beds sold directly by the plaintiff to
clauses, the least that can be said is that they are not incompatible with the persons in Iloilo was because, as the defendant obligated itself in the contract
contract of purchase and sale. to incur the expenses of advertisement of the plaintiff's beds, such sales were
to be considered as a result of that advertisement.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-
president of the defendant corporation and who established and managed the In respect to the defendant's obligation to order by the dozen, the only one
latter's business in Iloilo. It appears that this witness, prior to the time of his expressly imposed by the contract, the effect of its breach would only entitle
testimony, had serious trouble with the defendant, had maintained a civil suit the plaintiff to disregard the orders which the defendant might place under
against it, and had even accused one of its partners, Guillermo Parsons, of other conditions; but if the plaintiff consents to fill them, he waives his right and
falsification. He testified that it was he who drafted the contract Exhibit A, and, cannot complain for having acted thus at his own free will.
when questioned as to what was his purpose in contracting with the plaintiff,
replied that it was to be an agent for his beds and to collect a commission on For the foregoing reasons, we are of opinion that the contract by and between
sales. However, according to the defendant's evidence, it was Mariano Lopez the plaintiff and the defendant was one of purchase and sale, and that the
Santos, a director of the corporation, who prepared Exhibit A. But, even obligations the breach of which is alleged as a cause of action are not imposed
supposing that Ernesto Vidal has stated the truth, his statement as to what upon the defendant, either by agreement or by law.
was his idea in contracting with the plaintiff is of no importance, inasmuch as
the agreements contained in Exhibit A which he claims to have drafted, The judgment appealed from is affirmed, with costs against the appellant. So
constitute, as we have said, a contract of purchase and sale, and not one of ordered.
commercial agency. This only means that Ernesto Vidal was mistaken in his
SALES AND LEASE

6. Concrete Aggregates Inc. v. CTA
On 8 October 1993 petitioner filed a Motion for Summary Judgment positing
[G.R. No. 117574. January 2, 1997] that private respondent impliedly admitted the matters set forth in the Request
for Admission by failing to respond under oath as required under Sec. 2, Rule
CONCRETE AGGREGATES CORPORATION, petitioner, vs. THE 26, of the Rules of Court.[4] Petitioner contended that the manifestation and
HONORABLE COURT OF APPEALS, HON. PRISCILA S. AGANA, Regional reply not being verified was ineffectual and thus should be stricken off the
Trial Court of Cebu City, Branch 24, and VIVIEN S. SORIGUEZ, respondents. records. Private respondent countered that her reply although not under oath
DECISION effectively denied the matters set forth in the request.
BELLOSILLO, J.:
Public respondents ruled in favor of private respondent holding that the
Does Rule 26 of the Revised Rules of Court require a party to respond to a circumstances warranted a relaxation of the rules in the interest of justice.[5]
Request for Admission of matters raised in his pleadings? Will his failure to The trial court rationalized that -
place under oath his denials in his response to the request be deemed an
admission of the matters sought to be admitted? While it is desirable that the Rules of Court be faithfully and even meticulously
observed, courts should not be so strict about procedural lapses as in this case
Petitioner is a domestic corporation engaged in the business of manufacturing which do not really impair the proper administration of justice. Considering that
and selling Bituminous Concrete Mix, Ready Mix Concrete and other the protection of the substantive rights of the parties is paramount over mere
construction materials. It has several plant sites in the country one of which is technicalities, the court elects to deny defendant's motion for summary
the Cebu plant site situated in Tuyan, Naga, Cebu. Private respondent on the judgment.[6]
other hand is engaged in the business of providing security services to various
establishments under the name and style 101 Security and Detective Services. Respondent courts further ruled that a summary judgment was improper
because the dispute involved factual issues which could only be resolved in a
Sometime in October 1990 petitioner retained the services of private full-blown hearing.[7]
respondent for its Cebu plant site. On 8 November 1991 it terminated the
services of private respondent alleging that it was dissatisfied with the latter's After the trial court denied its motion for reconsideration petitioner elevated the
services because she failed to prevent and promptly investigate a theft case matter to the Court of Appeals in a special civil action for certiorari but the latter
which occurred in its Cebu plant site. likewise denied the petition for lack of merit; hence, the instant petition.

On 6 October 1992 private respondent Vivien S. Soriguez instituted an action The pivotal issue in this case is the effect of the Request for Admission filed
with the Regional Trial Court of Cebu[1] for collection of unpaid fees for her by petitioner and, consequently, whether private respondent may be
security services rendered to petitioner. She also claimed that the termination considered to have impliedly admitted the matters referred to in the request
of her services was unlawful so that she should be awarded moral damages. when she filed a manifestation and reply that was not under oath.[8]

Petitioner contended that its refusal to pay was justified because private We deny the petition.
respondent was answerable for the losses it incurred arising from the theft
attributable to her fault. Petitioner thus claimed that there was legal set-off or The Request for Admission of petitioner does not fall under Rule 26 of the
compensation regarding the unpaid fees due private respondent and the Rules of Court. As we held in Po v. Court of Appeals[9] and Briboneria v. Court
amount of the stolen articles owned by petitioner. of Appeals,[10] Rule 26 as a mode of discovery contemplates of interrogatories
that would clarify and tend to shed light on the truth or falsity of the allegations
On 30 August 1993 petitioner sent private respondent a Request for Admission in a pleading. That is its primary function. It does not refer to a mere reiteration
by the latter of her responsibility of the theft that occurred on 5 June 1991 at of what has already been alleged in the pleadings.
the Cebu plant site.[2] Thereafter private respondent through counsel filed a
Manifestation and Reply to the Request for Admission.[3] It was not under A cursory reading of petitioner's Request for Admission clearly shows that it
oath. contains the same material averments in his Answer to respondent's
SALES AND LEASE

Complaint in the trial court. Petitioner merely recopied or reproduced in its
Request for Admission its affirmative defenses and counterclaims alleged in A request for admission is not intended to merely reproduce or reiterate the
its Answer. As we held in Po v. CA,[11] petitioner's request constitutes an utter allegations of the requesting party's pleading but should set forth relevant
redundancy and a useless, pointless process which the respondent should not evidentiary matters of fact, or documents described in and exhibited with the
be subjected to. In the first place, what the petitioner seeks to be admitted by request, whose purpose is to establish said party's cause of action or
private respondent is the very subject matter of the complaint. In effect, defense.[15]
petitioner would want private respondent to deny her allegations in her verified
Complaint and admit the allegations in the Answer of petitioner (Manifestation Since the answer of private respondent to the request is no longer required in
and Reply to Request for Admission). Plainly, this is illogical if not the instant case, it therefore becomes unnecessary to dwell on the issue of the
preposterous. Respondent cannot be said to have admitted the averments in propriety of an answer that is not under oath. Even assuming that a response
the Answer of petitioner just because she failed to have her response to the to the request is needed, private respondent had already substantially
request placed under oath since these are the very matters she raises in her complied with the requirement of the law when she specifically denied the
verified Complaint in the court below. The following allegations specifically material allegations of the petitioner in her Manifestation and Reply to the
contained therein are self-evident Request for Admission. Although not under oath the reply to the request readily
showed that the intent of private respondent was to deny the matters set forth
9. That, in compliance thereto (sic) (referring to the request for investigation), in the Request for Admission. That the reply is not under oath is merely a
herein plaintiff, through her authorized representative, went at (sic) the place formal and not a substantive defect. This procedural lapse may be dispensed
and conducted the necessary investigation and found out that the herein with if the circumstances call for the dispensing of the rule in the interest of
plaintiff was not responsible for those alleged losses simply because of the justice. While we commend petitioner's zeal in promoting faithful adherence to
following, to wit: the rules of procedure we cannot ignore the well-entrenched doctrine that all
pleadings should be liberally construed as to do substantial justice.[16]
a. Those alleged losses like Blower, Oil Filter, transmission and others were
taken and brought outside the guarded place by certain Danny Baterna, driver There being genuine issues of fact between the private parties, public
of defendant, as reflected in the Log Book of the plaintiff .x x x x [12] respondents correctly denied the motion of petitioner for summary judgment.
Where facts pleaded by the parties are disputed or contested proceedings for
Clearly, therefore, private respondent need not reply to the Request for summary judgment cannot take the place of trial.[17] Trial courts have limited
Admission because her Complaint itself controverts the matters set forth in the authority to render summary judgments and may do so only when there is
Answer of petitioner which were merely reproduced in the request. In Uy Chao clearly no genuine issue as to any material fact.[18] Verily, there is a need to
v. De la Rama Steamship[13] we observed that the purpose of the rule determine by presentation of evidence if respondent is really liable for the
governing requests for admission of facts and genuineness of documents is to stolen articles and for violating its contract for security services with petitioner.
expedite trial and to relieve parties of the costs of proving facts which will not Until these issues are determined no legal compensation can take place
be disputed on trial and the truth of which can be ascertained by reasonable between the parties. This factual dispute can only be resolved by trying the
inquiry. case on the merits, a process which need not take long to conclude.[19]

In the aforesaid cases of Po and Briboneria we held that WHEREFORE, finding no reversible error committed by the respondent Court
of Appeals, as well as by the Regional Trial Court of Cebu, the instant petition
A party should not be compelled to admit matters of fact already admitted by is DENIED and the records of this case are remanded to the court of origin for
his pleading and concerning which there is no issue, nor should he be required further proceedings.
to make a second denial of those already denied in his answer to the
complaint.[14] Costs against petitioner.

To this we add that a party should not be made to deny matters already averred SO ORDERED.
in his complaint. At this point, it is necessary to emphasize what this Court laid
down in the same Po and Briboneria cases
SALES AND LEASE

7. Peoples Homesite v. CA Resolution No. 513 and re-awarding said lot jointly and in equal shares to
Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo
G.R. No. L-61623 December 26, 1984 and Jose Fernandez, subject to existing PHHC rules and regulations. The
prices would be the same as those of the adjoining lots. The awardees were
PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant, required to deposit an amount equivalent to 20% of the total selling price (Exh.
vs. F).
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R.
MENDOZA, respondents-appellees. The five awardees made the initial deposit. The corresponding deeds of sale
were executed in their favor. The subdivision of Lot 4 into five lots was
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for approved by the city council and the Bureau of Lands.
petitioner PHHC.
On March 16, 1966 the Mendoza spouses asked for reconsideration of the
Tolentino, Cruz, Reyes, Lava and Manuel for private respondents. withdrawal of the previous award to them of Lot 4 and for the cancellation of
the re-award of said lot to Sto. Domingo and four others. Before the request
could be acted upon, the spouses filed the instant action for specific
AQUINO, J.: performance and damages.

The question in this case is whether the People's Homesite & Housing The trial court sustained the withdrawal of the award. The Mendozas appealed.
Corporation bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs- The Appellate Court reversed that decision and declared void the re-award of
4564 of the revised consolidation subdivision plan with an area of 2,6,08.7 Lot 4 and the deeds of sale and directed the PHHC to sell to the Mendozas
(2,503.7) square meters located at Diliman, Quezon City. Lot 4 with an area of 2,603.7 square meters at P21 a square meter and pay to
them P4,000 as attorney's fees and litigation expenses. The PHHC appealed
The PHHC board of directors on February 18, 1960 passed Resolution No. to this Court.
513 wherein it stated "that subject to the approval of the Quezon City Council
of the above-mentioned Consolidation Subdivision Plan, Lot 4. containing The issue is whether there was a perfected sale of Lot 4, with the reduced
4,182.2 square meters be, as it is hereby awarded to Spouses Rizalino area, to the Mendozas which they can enforce against the PHHC by an action
Mendoza and Adelaida Mendoza, at a price of twenty-one pesos (P21.00) per for specific performance.
square meter" and "that this award shall be subject to the approval of the OEC
(PHHC) Valuation Committee and higher authorities". We hold that there was no perfected sale of Lot 4. It was conditionally or
contingently awarded to the Mendozas subject to the approval by the city
The city council disapproved the proposed consolidation subdivision plan on council of the proposed consolidation subdivision plan and the approval of the
August 20, 1961 (Exh. 2). The said spouses were advised by registered mail award by the valuation committee and higher authorities.
of the disapproval of the plan (Exh. 2-PHHC). Another subdivision plan was
prepared and submitted to the city council for approval. The revised plan, The city council did not approve the subdivision plan. The Mendozas were
which included Lot 4, with a reduced area of 2,608.7, was approved by the city advised in 1961 of the disapproval. In 1964, when the plan with the area of Lot
council on February 25, 1964 (Exh. H). 4 reduced to 2,608.7 square meters was approved, the Mendozas should have
manifested in writing their acceptance of the award for the purchase of Lot 4
On April 26, 1965 the PHHC board of directors passed a resolution recalling just to show that they were still interested in its purchase although the area
all awards of lots to persons who failed to pay the deposit or down payment was reduced and to obviate ally doubt on the matter. They did not do so. The
for the lots awarded to them (Exh. 5). The Mendozas never paid the price of PHHC board of directors acted within its rights in withdrawing the tentative
the lot nor made the 20% initial deposit. award.

On October 18, 1965 the PHHC board of directors passed Resolution No. 218, "The contract of sale is perfected at the moment there is a meeting of minds
withdrawing the tentative award of Lot 4 to the Mendoza -spouses under upon the thing which is the object of the contract and upon the price. From that
SALES AND LEASE

moment, the parties may reciprocally demand performance, subject to the law
governing the form of contracts." (Art. 1475, Civil Code). AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la SHAW, INC.
voluntad de las partes o de la ley, se celebra la venta bajo una condicion
suspensiva, y en los cuales no se perfecciona la venta hasta el cumplimiento 1. all necessary documents will be submitted to TOYOTA SHAW, INC.
de la condicion" (4 Castan Tobenas, Derecho Civil Espaol 8th ed. p. 81). (POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from the
Province (Marinduque) where the unit will be used on the 19th of June.
"In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the 2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June
happening of the event which constitutes the condition. (Art. 1181, Civil Code). 15, 1989.
"Se llama suspensive la condicion de la que depende la perfeccion, o sea el
principio del contrato". (9 Giorgi, Teoria de las Obligaciones, p. 57). 3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and
released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m.
Under the facts of this case, we cannot say there was a meeting of minds on
the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square Very truly yours,
meter.
(Sgd.) POPONG BERNARDO.
The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point
because the awardee in that case applied for the purchase of the lot, paid the Was this document, executed and signed by the petitioner's sales
10% deposit and a conditional contract to sell was executed in his favor. The representative, a perfected contract of sale, binding upon the petitioner, breach
PHHC could not re-award that lot to another person. of which would entitle the private respondent to damages and attorney's fees?
The trial court and the Court of Appeals took the affirmative view. The petitioner
WHEREFORE, the decision of the Appellate Court is reversed and set aside disagrees. Hence, this petition for review on certiorari.
and the judgment of the trial court is affirmed. No costs.
The antecedents as disclosed in the decisions of both the trial court and the
SO ORDERED. Court of Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc.
(hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as
8. Toyota Shaw v. CA follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota
Lite Ace. It was then a seller's market and Sosa had difficulty finding a dealer
G.R. No. L-116650 May 23, 1995 with an available unit for sale. But upon contacting Toyota Shaw, Inc., he was
told that there was an available unit. So on 14 June 1989, Sosa and his son,
TOYOTA SHAW, INC., petitioner, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro Manila.
vs. There they met Popong Bernardo, a sales representative of Toyota.
COURT OF APPEALS and LUNA L. SOSA, respondents.
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17
June 1989 because he, his family, and a balikbayan guest would use it on 18
DAVIDE, JR., J.: June 1989 to go to Marinduque, his home province, where he would celebrate
his birthday on the 19th of June. He added that if he does not arrive in his
At the heart of the present controversy is the document marked Exhibit "A" 1 hometown with the new car, he would become a "laughing stock." Bernardo
for the private respondent, which was signed by a sales representative of assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June
Toyota Shaw, Inc. named Popong Bernardo. The document reads as follows: 1989. Bernardo then signed the aforequoted "Agreements Between Mr. Sosa
& Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the
4 June 1989 parties that the balance of the purchase price would be paid by credit financing
SALES AND LEASE

through B.A. Finance, and for this Gilbert, on behalf of his father, signed the
documents of Toyota and B.A. Finance pertaining to the application for
financing.
P 500.00
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the
downpayment of P100,000.00. They met Bernardo who then accomplished a accessories
printed Vehicle Sales Proposal (VSP) No. 928,2 on which Gilbert signed under
the subheading CONFORME. This document shows that the customer's name
is "MR. LUNA SOSA" with home address at No. 2316 Guijo Street, United
Paraaque II; that the model series of the vehicle is a "Lite Ace 1500" P 29,000.00
described as "4 Dr minibus"; that payment is by "installment," to be financed
by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down as follows:

a) and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces


provided for "Delivery Terms" were not filled-up. It also contains the following
downpayment pertinent provisions:

CONDITIONS OF SALES

P 53,148.00 1. This sale is subject to availability of unit.

b) 2. Stated Price is subject to change without prior notice, Price prevailing


and in effect at time of selling will apply. . . .
insurance
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved
the VSP.

P 13,970.00 On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him
that the vehicle would not be ready for pick up at 10:00 a.m. as previously
c) agreed upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert
met Bernardo at the latter's office. According to Sosa, Bernardo informed them
BLT registration fee that the Lite Ace was being readied for delivery. After waiting for about an hour,
Bernardo told them that the car could not be delivered because "nasulot ang
unit ng ibang malakas."

P 1,067.00 Toyota contends, however, that the Lite Ace was not delivered to Sosa
because of the disapproval by B.A. Finance of the credit financing application
CHMO fee of Sosa. It further alleged that a particular unit had already been reserved and
earmarked for Sosa but could not be released due to the uncertainty of
payment of the balance of the purchase price. Toyota then gave Sosa the
option to purchase the unit by paying the full purchase price in cash but Sosa
P 2,715.00 refused.

service fee
SALES AND LEASE

After it became clear that the Lite Ace would not be delivered to him, Sosa After trial on the issues agreed upon during the pre-trial session, 11 the trial
asked that his downpayment be refunded. Toyota did so on the very same day court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled
by issuing a Far East Bank check for the full amount of P100,000.00, 4 the that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG
receipt of which was shown by a check voucher of Toyota,5 which Sosa signed BERNARDO," was a valid perfected contract of sale between Sosa and Toyota
with the reservation, "without prejudice to our future claims for damages." which bound Toyota to deliver the vehicle to Sosa, and further agreed with
Sosa that Toyota acted in bad faith in selling to another the unit already
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June reserved for him.
1989 and signed by him, he demanded the refund, within five days from
receipt, of the downpayment of P100,000.00 plus interest from the time he paid As to Toyota's contention that Bernardo had no authority to bind it through
it and the payment of damages with a warning that in case of Toyota's failure Exhibit "A," the trial court held that the extent of Bernardo's authority "was not
to do so he would be constrained to take legal action. 6 The second, dated 4 made known to plaintiff," for as testified to by Quirante, "they do not volunteer
November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded any information as to the company's sales policy and guidelines because they
one million pesos representing interest and damages, again, with a warning are internal matters." 13 Moreover, "[f]rom the beginning of the transaction up
that legal action would be taken if payment was not made within three days.7 to its consummation when the downpayment was made by the plaintiff, the
Toyota's counsel answered through a letter dated 27 November 1989 8 defendants had made known to the plaintiff the impression that Popong
refusing to accede to the demands of Sosa. But even before this answer was Bernardo is an authorized sales executive as it permitted the latter to do acts
made and received by Sosa, the latter filed on 20 November 1989 with Branch within the scope of an apparent authority holding him out to the public as
38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota possessing power to do these acts." 14 Bernardo then "was an agent of the
for damages under Articles 19 and 21 of the Civil Code in the total amount of defendant Toyota Shaw, Inc. and hence bound the defendants." 15
P1,230,000.00.9 He alleges, inter alia, that:
The court further declared that "Luna Sosa proved his social standing in the
9. As a result of defendant's failure and/or refusal to deliver the vehicle community and suffered besmirched reputation, wounded feelings and
to plaintiff, plaintiff suffered embarrassment, humiliation, ridicule, mental sleepless nights for which he ought to be compensated." 16 Accordingly, it
anguish and sleepless nights because: (i) he and his family were constrained disposed as follows:
to take the public transportation from Manila to Lucena City on their way to
Marinduque; (ii) his balikbayan-guest canceled his scheduled first visit to WHEREFORE, viewed from the above findings, judgment is hereby rendered
Marinduque in order to avoid the inconvenience of taking public transportation; in favor of the plaintiff and against the defendant:
and (iii) his relatives, friends, neighbors and other provincemates, continuously
irked him about "his Brand-New Toyota Lite Ace that never was." Under the 1. ordering the defendant to pay to the plaintiff the sum of P75,000.00 for
circumstances, defendant should be made liable to the plaintiff for moral moral damages;
damages in the amount of One Million Pesos (P1,000,000.00). 10
2. ordering the defendant to pay the plaintiff the sum of P10,000.00 for
In its answer to the complaint, Toyota alleged that no sale was entered into exemplary damages;
between it and Sosa, that Bernardo had no authority to sign Exhibit "A" for and
in its behalf, and that Bernardo signed Exhibit "A" in his personal capacity. As 3. ordering the defendant to pay the sum of P30,000.00 attorney's fees
special and affirmative defenses, it alleged that: the VSP did not state date of plus P2,000.00 lawyer's transportation fare per trip in attending to the hearing
delivery; Sosa had not completed the documents required by the financing of this case;
company, and as a matter of policy, the vehicle could not and would not be
released prior to full compliance with financing requirements, submission of all 4. ordering the defendant to pay the plaintiff the sum of P2,000.00
documents, and execution of the sales agreement/invoice; the P100,000.00 transportation fare per trip of the plaintiff in attending the hearing of this case;
was returned to and received by Sosa; the venue was improperly laid; and and
Sosa did not have a sufficient cause of action against it. It also interposed
compulsory counterclaims. 5. ordering the defendant to pay the cost of suit.
SALES AND LEASE

SO ORDERED. reference to a sale of a vehicle. If it was intended for a contract of sale, it could
only refer to a sale on installment basis, as the VSP executed the following
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of day confirmed. But nothing was mentioned about the full purchase price and
Appeals. The case was docketed as CA-G.R. CV No. 40043. In its decision the manner the installments were to be paid.
promulgated on 29 July 1994,17 the Court of Appeals affirmed in toto the
appealed decision. This Court had already ruled that a definite agreement on the manner of
payment of the price is an essential element in the formation of a binding and
Toyota now comes before this Court via this petition and raises the core issue enforceable contract of sale. 18 This is so because the agreement as to the
stated at the beginning of the ponencia and also the following related issues: manner of payment goes into the price such that a disagreement on the
(a) whether or not the standard VSP was the true and documented manner of payment is tantamount to a failure to agree on the price.
understanding of the parties which would have led to the ultimate contract of Definiteness as to the price is an essential element of a binding agreement to
sale, (b) whether or not Sosa has any legal and demandable right to the sell personal property. 19
delivery of the vehicle despite the non-payment of the consideration and the
non-approval of his credit application by B.A. Finance, (c) whether or not Moreover, Exhibit "A" shows the absence of a meeting of minds between
Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa
whether or not Toyota may be held liable for damages. was well aware from its title, written in bold letters, viz.,

We find merit in the petition. AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF
TOYOTA SHAW, INC.
Neither logic nor recourse to one's imagination can lead to the conclusion that
Exhibit "A" is a perfected contract of sale. that he was not dealing with Toyota but with Popong Bernardo and that the
latter did not misrepresent that he had the authority to sell any Toyota vehicle.
Article 1458 of the Civil Code defines a contract of sale as follows: He knew that Bernardo was only a sales representative of Toyota and hence
a mere agent of the latter. It was incumbent upon Sosa to act with ordinary
Art. 1458. By the contract of sale one of the contracting parties obligates prudence and reasonable diligence to know the extent of Bernardo's authority
himself to transfer the ownership of and to deliver a determinate thing, and the as an
other to pay therefor a price certain in money or its equivalent. agent20 in respect of contracts to sell Toyota's vehicles. A person dealing with
an agent is put upon inquiry and must discover upon his peril the authority of
A contract of sale may be absolute or conditional. the agent.21

and Article 1475 specifically provides when it is deemed perfected: At the most, Exhibit "A" may be considered as part of the initial phase of the
generation or negotiation stage of a contract of sale. There are three stages in
Art. 1475. The contract of sale is perfected at the moment there is a the contract of sale, namely:
meeting of minds upon the thing which is the object of the contract and upon
the price. (a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of the parties;
From that moment, the parties may reciprocally demand performance, subject
to the provisions of the law governing the form of contracts. (b) perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and
What is clear from Exhibit "A" is not what the trial court and the Court of
Appeals appear to see. It is not a contract of sale. No obligation on the part of (c) consummation or death, which is the fulfillment or performance of the
Toyota to transfer ownership of a determinate thing to Sosa and no correlative terms agreed upon in the contract.22
obligation on the part of the latter to pay therefor a price certain appears
therein. The provision on the downpayment of P100,000.00 made no specific
SALES AND LEASE

The second phase of the generation or negotiation stage in this case was the but the defendant for reasons known only to its representatives, refused and/or
execution of the VSP. It must be emphasized that thereunder, the failed to release the vehicle to the plaintiff. Plaintiff demanded for an
downpayment of the purchase price was P53,148.00 while the balance to be explanation, but nothing was given; . . . (Emphasis supplied). 25
paid on installment should be financed by B.A. Finance Corporation. It is, of
course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, The VSP was a mere proposal which was aborted in lieu of subsequent events.
otherwise it should not have mentioned B.A. Finance in the VSP. It follows that the VSP created no demandable right in favor of Sosa for the
delivery of the vehicle to him, and its non-delivery did not cause any legally
Financing companies are defined in Section 3(a) of R.A. No. 5980, as indemnifiable injury.
amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or
partnerships, except those regulated by the Central Bank of the Philippines, The award then of moral and exemplary damages and attorney's fees and
the Insurance Commission and the Cooperatives Administration Office, which costs of suit is without legal basis. Besides, the only ground upon which Sosa
are primarily organized for the purpose of extending credit facilities to claimed moral damages is that since it was known to his friends, townmates,
consumers and to industrial, commercial, or agricultural enterprises, either by and relatives that he was buying a Toyota Lite Ace which they expected to see
discounting or factoring commercial papers or accounts receivables, or by on his birthday, he suffered humiliation, shame, and sleepless nights when the
buying and selling contracts, leases, chattel mortgages, or other evidence of van was not delivered. The van became the subject matter of talks during his
indebtedness, or by leasing of motor vehicles, heavy equipment and industrial celebration that he may not have paid for it, and this created an impression
machinery, business and office machines and equipment, appliances and against his business standing and reputation. At the bottom of this claim is
other movable property." 23 nothing but misplaced pride and ego. He should not have announced his plan
to buy a Toyota Lite Ace knowing that he might not be able to pay the full
Accordingly, in a sale on installment basis which is financed by a financing purchase price. It was he who brought embarrassment upon himself by
company, three parties are thus involved: the buyer who executes a note or bragging about a thing which he did not own yet.
notes for the unpaid balance of the price of the thing purchased on installment,
the seller who assigns the notes or discounts them with a financing company, Since Sosa is not entitled to moral damages and there being no award for
and the financing company which is subrogated in the place of the seller, as temperate, liquidated, or compensatory damages, he is likewise not entitled to
the creditor of the installment buyer. 24 Since B.A. Finance did not approve exemplary damages. Under Article 2229 of the Civil Code, exemplary or
Sosa's application, there was then no meeting of minds on the sale on corrective damages are imposed by way of example or correction for the public
installment basis. good, in addition to moral, temperate, liquidated, or compensatory damages.

We are inclined to believe Toyota's version that B.A. Finance disapproved Also, it is settled that for attorney's fees to be granted, the court must explicitly
Sosa's application for which reason it suggested to Sosa that he pay the full state in the body of the decision, and not only in the dispositive portion thereof,
purchase price. When the latter refused, Toyota cancelled the VSP and the legal reason for the award of attorney's fees. 26 No such explicit
returned to him his P100,000.00. Sosa's version that the VSP was cancelled determination thereon was made in the body of the decision of the trial court.
because, according to Bernardo, the vehicle was delivered to another who was No reason thus exists for such an award.
"mas malakas" does not inspire belief and was obviously a delayed
afterthought. It is claimed that Bernardo said, "Pasensiya kayo, nasulot ang WHEREFORE, the instant petition is GRANTED. The challenged decision of
unit ng ibang malakas," while the Sosas had already been waiting for an hour the Court of Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38
for the delivery of the vehicle in the afternoon of 17 June 1989. However, in of the Regional Trial Court of Marinduque in Civil Case No. 89-14 are
paragraph 7 of his complaint, Sosa solemnly states: REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is
DISMISSED. The counterclaim therein is likewise DISMISSED.
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales
representative, Mr. Popong Bernardo, called plaintiff's house and informed the No pronouncement as to costs.
plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m. of June
17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to SO ORDERED.
defendant's office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle
SALES AND LEASE

9. Sampaguita Pictures v. Jalwindor Manufacturers
In the meantime, Capitol "300" was not able to pay rentals to Sampaguita from
G.R. No. L-43059 October 11, 1979 March 1, 1964 to April 30, 1965, water, electric and telephone services.
Sampaguita filed a complaint for ejectment and for collection of a sum of
SAMPAGUITA PICTURES, INC., plaintiff-appellant, money against Capitol and on June 8, 1965, the City Court of Quezon City
vs. rendered judgment ordering Capitol to vacate the premises and to pay
JALWINDOR MANUFACTURERS, INC., defendant-appellee. Sampaguita.

DE CASTRO, J: On the other hand, Capitol likewise failed to comply with the terms of the
Compromise Agreement, and on July 31, 1965, the Sheriff of Quezon City
This case was certified to this Court by the Court of Appeals pursuant to the made levy on the glass and wooden jalousies in question. Sampaguita filed a
provisions of Section 17, paragraph (6) in relation to Section 31 of the Judiciary third party claim alleging that it is the owner of said materials and not Capitol,
Act of 1948. Jalwindor however, filed an indemnity bond in favor of the Sheriff and the items
were sold et public auction on August 30, 1965 with Jalwindor as the highest
Plaintiff-appellant Sampaguita Pictures, Inc. (hereinafter referred to as bidder for P6,000.00.
Sampaguita) is the owner of the Sampaguita Pictures Building located at the
corner of General Araneta and General Roxas Streets, Cubao, Quezon City. Sampaguita filed with the Court of First Instance of Rizal, Branch IV of Quezon
The roofdeck of the building and all existing improvements thereon were City, an action to nullify the Sheriff's Sale and for the issuance of a writ of
leased by Sampaguita to Capitol "300" Inc. (Capitol for short), and it was preliminary injunction against Jalwindor from detaching the glass and wooden
agreed, among other things, that the premises shall be used by said club for jalousies. Jalwindor was ordered to maintain the status quo pending final
social purposes exclusively for its members and guests; that all permanent determination of the case. No actual hearing was held and the parties
improvements made by the lessee on the leased premises shall belong to the submitted the following stipulation of facts for the consideration of the court.
lessor without any obligation on the part of the lessor to reimburse the lessee
for the sum spent for said improvements; that the improvements made by 1. That plaintiff and defendant are both domestic corporations duly
lessee have been considered as part of the consideration of the monthly rental organized and existing by and under the laws of the Philippines:
and said improvements belong to the lessor; that any remodelling, alterations
and/or addition to the premises shall be at the expense of the lessee and such 2. That plaintiff leased to the CAPITOL "300", Inc. the roofdeck of the
improvements belong to the lessor, without any obligation to reimburse the Sampaguita building and all the existing improvements thereon for a monthly,
lessee of any sum spent for said improvements. (pp. 29-32, Record on rental of P650.00; that the parties to the lease contract agreed that all
Appeal). permanent improvements made by the lessee on the leased premises shall
belong to the lessor without any obligation on the part of the lessor to
Capitol "300" purchased on credit from defendant-appellee Jalwindor reimburse the lessee for the sum spent for said improvements; that it was
Manufacturers, Inc. (hereinafter referred to as Jalwindor) glass and wooden agreed upon by the parties that the improvements made by the lessee have
jalousies which were delivered and installed in the leased premises by been considered as part of the consideration of the monthly rental;
Jalwindor replacing the existing windows. On June 1, 1964, Jalwindor filed with
the Court of First Instance of Rizal, Quezon City, an action for collection of a 3. That CAPITOL "300", Inc. made alterations on the leased premises;
sum of money with a petition for preliminary attachment against Capitol for its that it removed the then existing windows and replaced 'them with the following
failure to pay its purchases. The parties submitted to the trial court a items bought on credit from the JALWINDOR MANUFACTURERS INC..
Compromise Agreement wherein Capitol acknowledged its indebtedness to valued at P9,531.09, to wit:
Jalwindor in the amount of P9,531.09, exclusive of attorney's fees and interest,
payable in monthly installments of at least P300.00 a month beginning J-21(lever-type) Solex Bluepane
December 15, 1964; and pending liquidation of the said obligation, all the
materials purchased by Capitol will be considered as security for such Glass Jaluosies
undertaking. (p. 13, Record on Appeal).
SALES AND LEASE

11 Sets 15'-1 3/4" x 47-7/8" (5 units) 1965, ordering the CAPITOL "300", Inc. to vacate the premises located at the
Sampaguita Building and to pay the Sampaguita Pictures, Inc.;
4 Sets 13'-5 3/4" x 47-7/8" (5 units)
7. That after the Sheriff of Quezon City made levy on the items above-
3 Sets 10'-9 3/4" x 47-7/7" (4 units) stated in paragraph 3 hereof situated on the roofdeck of the Sampaguita
Building, plaintiff filed a Third Party Claim stated in its affidavit on the ground
2 Sets 18'-1 3/3" x 56-3/8" (6 units) of its right and title to the possession of the items and that CAPITOL "300",
Inc. has no right or title whatsoever to the possession over said items; that
1 Set 9'-1 3/4" x 65-3/8" (3 units) defendant filed a bond to indemnify the Sheriff against the claim, and the
Sheriff sold the items to the defendant; that the JALWINDOR
115 Pcs. Roto Operators for J-21 MANUFACTURERS, Inc., being the highest bidder and the execution creditor,
considered itself paid to the amount of P6,000.00;
MODEL J-21 (Roto-type) Glass
8. That the parties herein agree that the matter of attorney's fees be left
and Wood Jalousies to the sound discretion of the Court, which shall not be less than P500.00.
(Record on Appeal, pp. 11-14).
8 Sets 32-1/2" x 60" Solex Bluepane
On October 20, 1967, based on said Stipulation of Facts, the lower court
19 Sets 31-1/4" x 48" Solex Bluepane dismissed the complaint and ordered Sampaguita to pay Jalwindor the amount
of P500.00 as attorney's fees. Sampaguita filed a motion for reconsideration
18 Sets 34" x 48" Wood which was likewise denied, hence, the instant appeal.

4. That after the CAPITOL "300", Inc. failed to pay the price of the items Petitioner-appellant raised the following assignment of errors:
mentioned in the preceding paragraph, JALWINDOR MANUFACTURERS,
Inc, filed a case for collection of a sum of money against CAPITOL "300", Inc. I
with the Court of First Instance of Rizal (Branch IV Quezon City), Civil Case
No. Q-8040; that by virtue of a Compromise Agreement, CAPITOL "300", Inc. The lower court erred in holding that Capitol "300" Inc. could not legally transfer
acknowledged indebtedness in favor of JALWINDOR in the amount of or assign the glass and wooden jalousies in question to the plaintiff-appellant.
P9,531,09, with a stipulation in the said Compromise Agreement, that the
items forming part of the improvements will form as security for such an II
undertaking;
The lower court erred in not holding that plaintiff-appellant was the rightful
5. That due to non-compliance by CAPITOL "300", Inc., JALWINDOR owner of the glass and wooden jalousies when they were sold by the Sheriff
executed judgment that the Sheriff of Quezon City made levy on the items at the public auction,
above-stated in paragraph 3 hereof and sold them at a public auction to
JALWINDOR MANUFACTURERS, INC. as the highest bidder, on August 30, III
1965, for the total amount of P 6,000.00:
The lower court erred in not declaring as null and void the levy on execution
6. That after CAPITOL "300", Inc. failed to pay the rentals in arrears from and the Sheriff's sale at public auction of the glass and wooden jalousies.
March 1, 1964 to April 30, 1965, water, electric and telephone services
amounting to P 10,772.90, the plaintiff SAMPAGUITA PICTURES, INC. filed IV
with the City Court of Quezon City, Civil Case No. 11-13161 for ejectment and
collection of a sum of money against the CAPITOL "300", Inc,; that the City The lower court erred in holding that defendant-appellee became the rightful
Court rendered judgment in favor of the Sampaguita Pictures, Inc., on June 8, owner of the glass and wooden jalousies.
SALES AND LEASE

The items in question were illegally levied upon since they do not belong to the
When the glass and wooden jalousies in question were delivered and installed judgemnt debtor. The power of the Court in execution of judgment extends
in the leased premises, Capitol became the owner thereof. Ownership is not only to properties unquestionably belonging to the judgment debtor. The fact
transferred by perfection of the contract but by delivery, either actual or that Capitol failed to pay Jalwindor the purchase price of the items levied upon
constructive. This is true even if the purchase has been made on credit, as in did not prevent the transfer of ownership to Capitol. The complaint of
the case at bar. Payment of the purchase price is not essential to the transfer Sampaguita to nullify the Sheriff's sale well-founded, and should prosper.
of ownership as long as the property sold has been delivered. Ownership is Execution sales affect the rights of judgment debtor only, and the purchaser in
acquired from the moment the thing sold was delivered to vendee, as when it the auction sale acquires only the right as the debtor has at the time of sale.
is placed in his control and possession. (Arts. 1477, 1496 and 1497, Civil Code Since the items already belong to Sampaguita and not to Capitol, the judgment
of the Phil.) debtor, the levy and auction sale are, accordingly, null and void. It is well-
settled in this jurisdiction that the sheriff is not authorized to attach property not
Capitol entered into a lease Contract with Sampaguita in 1964, and the latter belonging to the judgment debtor. (Arabay, Inc. vs. Salvador, et al., 3
became the owner of the items in question by virtue of the agreement in said PHILAJUR, 413 [1978], Herald Publishing vs. Ramos, 88 Phil. 94, 100).
contract "that all permanent improvements made by lessee shall belong to the
lessor and that said improvements have been considered as part of the WHEREFORE, the decision appealed from is hereby reversed, and plaintiff-
monthly rentals." When levy or said items was made on July 31, 1965, Capitol, appellant Sampaguita is declared the lawful owner of the disputed glass and
the judgment debtor, was no longer the owner thereof. wooden jalousies. Defendant-appellee Jalwindor is permanently enjoined from
detaching said items from the roofdeck of the Sampaguita Pictures Building,
The action taken by Sampaguita to protect its interest is sanctioned by Section and is also ordered to pay plaintiff-appellant the sum of P1,000.00 for and as
17, Rule 39 of the Rules of Court, which reads: attorney's fees, and costs.

Section 17, Proceedings where property claimed by third person. SO ORDERED.

... The officer is not liable for damages for the taking or keeping of the property
to any third-party claimant unless a claim is made by the latter and unless an
action for damages is brought by him against the officer within one hundred
twenty (120) days from the date of the filing of the bond. But nothing herein
contained shall prevent claimant from vindicating his claim to the property by
any action.

It is, likewise, recignized in the case of Bayer Phil., Inc. vs. Agana, et al., 63
SCRA 358, wherein the Court declared, "that the rights of third party claimants
over certain properties levied upon by the sheriff to satisfy the judgment, may
not be taken up in the case where such claims are presented but in a separate
and independent action instituted by claimants. ... and should a third-party
appear to claim is denied, the remedy contemplated by the rules in the filing
by said party of a reinvicatiry action against the execution creditor or the
purchaser of the property after the sale is completed or that a complaint for
damages to be charged against the bond filed by the creditor in favor of the
sheriff. ... Thus, when a property levied upon by the sheriff pursuant to a writ
of execution is claimed by a third person in a sworn statement of ownership
thereof, as prescribed by the rules, an entirely different matter calling for a new
adjudication arises."