SALES: FIRST ASSIGNMENT
(August 22, 2017)
CORONEL vs. CA
The petition before us has its roots in a complaint for specific performance to
compel herein petitioners (except the last named, Catalina Balais Mabanag) to
consummate the sale of a parcel of land with its improvements located along
Roosevelt Avenue in Quezon City entered into by the parties sometime in January
1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in
this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to
as Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor of
plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced
hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio
P. Coronel, the transfer certificate of title immediately upon receipt of the down payment
above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed
of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay
the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon
execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered
in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos
down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the
deed of absolute sale in favor of Ramona and the latter will pay the former the whole
balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter
referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels father
was transferred in their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One
Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the back of
TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the
same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina
under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
In the course of the proceedings before the trial court (Branch 83,
RTC, Quezon City) the parties agreed to submit the case for decision solely on the
basis of documentary exhibits.Thus, plaintiffs therein (now private respondents)
proffered their documentary evidence accordingly marked as Exhibits A through J,
inclusive of their corresponding submarkings. Adopting these same exhibits as
their own, then defendants (now petitioners) accordingly offered and marked them
as Exhibits 1 through 10, likewise inclusive of their corresponding
submarkings.Upon motion of the parties, the trial court gave them thirty (30) days
within which to simultaneously submit their respective memoranda, and an
additional 15 days within which to submit their corresponding comment or reply
thereto, after which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of
the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge
Roura from his regular bench at Macabebe, Pampanga for the Quezon
City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant
to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land
embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon City, together with all the improvements
existing thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the
plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting
to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds
for Quezon City in the name of intervenor is hereby canceled and declared to be without
force and effect. Defendants and intervenor and all other persons claiming under them are
hereby ordered to vacate the subject property and deliver possession thereof to
plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding
judge of the Quezon City RTC but the same was denied by Judge Estrella T.
Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew
decision by the undersigned Presiding Judge should be denied for the following
reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the
parties terminated the presentation of their respective documentary evidence and when the
Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to
file memoranda at some future date did not change the fact that the hearing of the case was
terminated before Judge Roura and therefore the same should be submitted to him for
decision; (2) When the defendants and intervenor did not object to the authority of Judge
Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for
the first time before the undersigned Presiding Judge at the hearing of a pending incident in
Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced
thereto and they are now estopped from questioning said authority of Judge Roura after
they received the decision in question which happens to be adverse to them; (3) While it is
true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court,
he was in all respects the Presiding Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he returned to his Official
Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases
submitted to him for decision or resolution because he continued as Judge of the Regional
Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule
and supported by jurisprudence is that a Judge to whom a case is submitted for decision has
the authority to decide the case notwithstanding his transfer to another branch or region of
the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned Presiding
Judge, after a meticulous examination of the documentary evidence presented by the
parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul
Decision and Render Anew Decision by the Incumbent Presiding Judge dated March 20,
1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the
Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its
decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last
pleading, private respondents Reply Memorandum, was filed on September 15,
1993. The case was, however, re-raffled to undersigned ponente only on August
28, 1996, due to the voluntary inhibition of the Justice to whom the case was last
assigned.
While we deem it necessary to introduce certain refinements in the
disquisition of respondent court in the affirmance of the trial courts decision, we
definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the
other issues in the case at bar is the precise determination of the legal significance
of the document entitled Receipt of Down Payment which was offered in evidence
by both parties. There is no dispute as to the fact that the said document embodied
the binding contract between Ramona Patricia Alcaraz on the one hand, and the
heirs of Constancio P. Coronel on the other, pertaining to a particular house and
lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the
Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.
While, it is the position of private respondents that the Receipt of Down
Payment embodied a perfected contract of sale, which perforce, they seek to
enforce by means of an action for specific performance, petitioners on their part
insist that what the document signified was a mere executory contract to sell,
subject to certain suspensive conditions, and because of the absence of Ramona
P. Alcaraz, who left for the United States of America, said contract could not
possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is brought about by
the way each interprets the terms and/or conditions set forth in said private
instrument. Withal, based on whatever relevant and admissible evidence may be
available on record, this Court, as were the courts below, is now called upon to
adjudge what the real intent of the parties was at the time the said document was
executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by
mere consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for
the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a contract to sell,
the prospective seller explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the happening of an
event, which for present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase price
is delivered to him. In other words the full payment of the purchase price partakes
of a suspensive condition, the non-fulfillment of which prevents the obligation to
sell from arising and thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741
[1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract
to sell where the ownership or title is retained by the seller and is not to pass until the full
payment of the price, such payment being a positive suspensive condition and failure of
which is not a breach, casual or serious, but simply an event that prevented the obligation
of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the
full payment of the purchase price, the prospective sellers obligation to sell the
subject property by entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor of the promise is supported by a consideration distinct from the
price.
A contract to sell may thus be defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a
conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition, because
in a conditional contract of sale, the first element of consent is present, although it
is conditioned upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals,
133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous
delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act
having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, ownership will not automatically transfer to
the buyer although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional
contract of sale specially in cases where the subject property is sold by the owner
not to the party the seller contracted with, but to a third person, as in the case at
bench. In a contract to sell, there being no previous sale of the property, a third
person buying such property despite the fulfillment of the suspensive condition
such as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because there is no defect in
the owner-sellers title per se, but the latter, of course, may be sued for damages
by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the
suspensive condition, the sale becomes absolute and this will definitely affect the
sellers title thereto. In fact, if there had been previous delivery of the subject
property, the sellers ownership or title to the property is automatically transferred to
the buyer such that, the seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second buyer of the property
who may have had actual or constructive knowledge of such defect in the sellers
title, or at least was charged with the obligation to discover such defect, cannot be
a registrant in good faith. Such second buyer cannot defeat the first buyers title. In
case a title is issued to the second buyer, the first buyer may seek reconveyance
of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners and private
respondents.
It is a canon in the interpretation of contracts that the words used therein
should be given their natural and ordinary meaning unless a technical meaning
was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when
petitioners declared in the said Receipt of Down Payment that they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the
natural and ordinary idea conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes
more manifest that there was a clear intent on the part of petitioners to transfer title
to the buyer, but since the transfer certificate of title was still in the name of
petitioners father, they could not fully effect such transfer although the buyer was
then willing and able to immediately pay the purchase price. Therefore, petitioners-
sellers undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their
names from that of their father, after which, they promised to present said title, now
in their names, to the latter and to execute the deed of absolute sale whereupon,
the latter shall, in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers
herein made no express reservation of ownership or title to the subject parcel of
land. Furthermore, the circumstance which prevented the parties from entering into
an absolute contract of sale pertained to the sellers themselves (the certificate of
title was not in their names) and not the full payment of the purchase price. Under
the established facts and circumstances of the case, the Court may safely
presume that, had the certificate of title been in the names of petitioners-sellers at
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
that time, there would have been no reason why an absolute contract of sale could
not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not
merely promise to sell the property to private respondent upon the fulfillment of the
suspensive condition. On the contrary, having already agreed to sell the subject
property, they undertook to have the certificate of title change to their names and
immediately thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers,
after compliance by the buyer with certain terms and conditions, promised to sell
the property to the latter.What may be perceived from the respective undertakings
of the parties to the contract is that petitioners had already agreed to sell the house
and lot they inherited from their father, completely willing to transfer ownership of
the subject house and lot to the buyer if the documents were then in order. It just
so happened, however, that the transfer certificate of title was then still in the name
of their father. It was more expedient to first effect the change in the certificate of
title so as to bear their names. That is why they undertook to cause the issuance of
a new transfer of the certificate of title in their names upon receipt of the down
payment in the amount of P50,000.00. As soon as the new certificate of title is
issued in their names, petitioners were committed to immediately execute the deed
of absolute sale. Only then will the obligation of the buyer to pay the remainder of
the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly
entered into so as to protect the seller against a buyer who intends to buy the
property in installment by withholding ownership over the property until the buyer
effects full payment therefor, in the contract entered into in the case at bar, the
sellers were the ones who were unable to enter into a contract of absolute sale by
reason of the fact that the certificate of title to the property was still in the name of
their father. It was the sellers in this case who, as it were, had the impediment
which prevented, so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is
that when the said Receipt of Down Payment was prepared and signed by
petitioners Romulo A. Coronel, et. al., the parties had agreed to a conditional
contract of sale, consummation of which is subject only to the successful transfer
of the certificate of title from the name of petitioners father, Constancio P. Coronel,
to their names.
The Court significantly notes that this suspensive condition was, in fact,
fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional
contract of sale between petitioners and private respondent Ramona P. Alcaraz
became obligatory, the only act required for the consummation thereof being the
delivery of the property by means of the execution of the deed of absolute sale in a
public instrument, which petitioners unequivocally committed themselves to do as
evidenced by the Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly
applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioners names was fulfilled on February 6, 1985, the
respective obligations of the parties under the contract of sale became mutually
demandable, that is, petitioners, as sellers, were obliged to present the transfer
certificate of title already in their names to private respondent Ramona P. Alcaraz,
the buyer, and to immediately execute the deed of absolute sale, while the buyer
on her part, was obliged to forthwith pay the balance of the purchase price
amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their
petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer
in our names from our deceased father Constancio P. Coronel, the
transfer certificate of title immediately upon receipt of the
downpayment above-stated". The sale was still subject to this
suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale
subject to a suspensive condition. Only, they contend, continuing in the same
paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to
the property under their names, there could be no perfected contract of sale. (Emphasis
supplied.)
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the
Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents
its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling
than these mere hypothetical arguments is the fact that the condition herein
referred to was actually and indisputably fulfilled on February 6, 1985, when a
new title was issued in the names of petitioners as evidenced by TCT No. 327403
(Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the
document denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties
entered into a contract of sale subject to the suspensive condition that the sellers
shall effect the issuance of new certificate title from that of their fathers name to
their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh.
4).
We, therefore, hold that, in accordance with Article 1187 which pertinently
provides -
Art. 1187. The effects of conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of
sale became mutually due and demandable as of the time of fulfillment or
occurrence of the suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19,
1985 because they were then not yet the absolute owners of the inherited
property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring
ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent and value of the inheritance of a person are transmitted through his
death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the
decedent Constancio P. Coronel are compulsory heirs who were called to
succession by operation of law.Thus, at the point their father drew his last breath,
petitioners stepped into his shoes insofar as the subject property is concerned,
such that any rights or obligations pertaining thereto became binding and
enforceable upon them. It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article 777, Civil
Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be declared
unless the creditors have been paid is rendered moot by the fact that they were
able to effect the transfer of the title to the property from the decedents name to
their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of
capacity to enter into an agreement at that time and they cannot be allowed to now
take a posture contrary to that which they took when they entered into the
agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly
states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying
thereon.
Having represented themselves as the true owners of the subject property at the
time of sale, petitioners cannot claim now that they were not yet the absolute
owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of
sale between them and Ramona P. Alcaraz, the latter breach her reciprocal
obligation when she rendered impossible the consummation thereof by going to
the United States of America, without leaving her address, telephone number, and
Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so
petitioners conclude, they were correct in unilaterally rescinding the contract of
sale.
We do not agree with petitioners that there was a valid rescission of the
contract of sale in the instant case. We note that these supposed grounds for
petitioners rescission, are mere allegations found only in their responsive
 SALES: FIRST ASSIGNMENT
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pleadings, which by express provision of the rules, are deemed controverted even
if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The
records are absolutely bereft of any supporting evidence to substantiate petitioners
allegations. We have stressed time and again that allegations must be proven by
sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs.
Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De
Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of
America on February 6, 1985, we cannot justify petitioners-sellers act of
unilaterally and extrajudicially rescinding the contract of sale, there being no
express stipulation authorizing the sellers to extrajudicially rescind the contract of
sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132
SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of
Ramona P. Alcaraz because although the evidence on record shows that the sale
was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing
with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of
her daughter, if not also in her own behalf. Indeed, the down payment was made
by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in
behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcions authority to represent Ramona P. Alcaraz when they
accepted her personal check. Neither did they raise any objection as regards
payment being effected by a third person. Accordingly, as far as petitioners are
concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind
the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default,
insofar as her obligation to pay the full purchase price is concerned. Petitioners
who are precluded from setting up the defense of the physical absence of Ramona
P. Alcaraz as above-explained offered no proof whatsoever to show that they
actually presented the new transfer certificate of title in their names and signified
their willingness and readiness to execute the deed of absolute sale in accordance
with their agreement. Ramonas corresponding obligation to pay the balance of the
purchase price in the amount of P1,190,000.00 (as buyer) never became due and
demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving
reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis
supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale
between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B.
Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code
will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good faith,
if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof to the person who presents the oldest
title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25,
1985 as proof of the second contract of sale was registered with the Registry of
Deeds of Quezon City giving rise to the issuance of a new certificate of title in the
name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of
Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass
to the buyer, the exceptions being: (a) when the second buyer, in good faith,
registers the sale ahead of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith, acquires
possession of the property ahead of the first buyer. Unless, the second buyer
satisfies these requirements, title or ownership will not transfer to him to the
prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject,
now a distinguished member of the Court, Justice Jose C. Vitug, explains:
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

The governing principle is prius tempore, potior jure (first in time, stronger in Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554;
right). Knowledge by the first buyer of the second sale cannot defeat the first buyers rights Fernandez vs. Mercader, 43 Phil. 581.)
except when the second buyer first registers in good faith the second sale (Olivares vs.
Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first Thus, the sale of the subject parcel of land between petitioners and Ramona
sale defeats his rights even if he is first to register, since knowledge taints his registration P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and
with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the
1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that courts below.
it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty
buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Although there may be ample indications that there was in fact an agency
Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). between Ramona as principal and Concepcion, her mother, as agent insofar as
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). the subject contract of sale is concerned, the issue of whether or not Concepcion
was also acting in her own behalf as a co-buyer is not squarely raised in the
Petitioners point out that the notice of lis pendens in the case at bar was instant petition, nor in such assumption disputed between mother and
annotated on the title of the subject property only on February 22, 1985, whereas, daughter. Thus, We will not touch this issue and no longer disturb the lower courts
the second sale between petitioners Coronels and petitioner Mabanag was ruling on this point.
supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is
that at the time petitioner Mabanag, the second buyer, bought the property under a WHEREFORE, premises considered, the instant petition is hereby
clean title, she was unaware of any adverse claim or previous sale, for which DISMISSED and the appealed judgment AFFIRMED.
reason she is a buyer in good faith.
SO ORDERED.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether
or not the second buyer in good faith but whether or not said second buyer
registers such second sale in good faith, that is, without knowledge of any defect in
the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could
not have in good faith, registered the sale entered into on February 18, 1985
because as early as February 22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the names of petitioners, whereas
petitioner Mabanag registered the said sale sometime in April, 1985. At the time of
registration, therefore, petitioner Mabanag knew that the same property had
already been previously sold to private respondents, or, at least, she was charged
with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title
to the property at the time of the registration of the property.
This Court had occasions to rule that:

If a vendee in a double sale registers the sale after he has acquired knowledge that there
was a previous sale of the same property to a third party or that another person claims said
property in a previous sale, the registration will constitute a registration in bad faith and
will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

the purchase and sale of said parcel of land, under the following terms
VILLAMAR vs. MANGAOIL and conditions:

1. The price of the land is ONE HUNDRED AND

EIGHTY THOUSAND (180,000.00) PESOS per
The Case
hectare but only the 3.5000 hec. shall be paid and the
rest shall be given free, so that the total purchase or
Before us is a petition for review on certiorari[1] under Rule 45 of the Rules of Court filed selling price shall be [P]630,000.00 only;

by Estelita Villamar (Villamar) to assail the Decision[2] rendered by the Court of Appeals 2. ONE HUNDRED EIGHTY FIVE THOUSAND
(CA) on February 20, 2009 in CA-G.R. CV No. 86286, the dispositive portion of which (185,000.00) PESOS of the total price was already
received on March 27, 1998 for payment of the loan
reads: secured by the certificate of title covering the land
in favor of the Rural Bank of Cauayan, San Manuel
WHEREFORE, the instant appeal is DISMISSED. The Branch, San Manuel, Isabela [Rural Bank of Cauayan],
assailed decision is AFFIRMED in toto. in order that the certificate of title thereof be
SO ORDERED.[3] withdrawn and released from the said bank, and the
rest shall be for the payment of the mortgag[e]s in
favor of Romeo Lacaden and Florante Parangan;
3. After the release of the certificate of title covering
The resolution[4] issued by the CA on July 8, 2009 denied the petitioner's motion
the land subject-matter of this agreement, the
for reconsideration to the foregoing. necessary deed of absolute sale in favor of the
PARTY OF THE SECOND PART shall be executed
and the transfer be immediately effected so that the
The ruling[5] of Branch 23, Regional Trial Court (RTC) of Roxas, Isabela, which latter can apply for a loan from any lending institution
was affirmed by the CA in the herein assailed decision and resolution, ordered the (1) using the corresponding certificate of title as collateral
therefor, and the proceeds of the loan, whatever be the
rescission of the contract of sale of real property entered into by Villamar and Balbino amount, be given to the PARTY OF THE FIRST
Mangaoil (Mangaoil); and (2) return of the down payment made relative to the said PART;
contract. 4. Whatever balance left from the agreed purchase
price of the land subject matter hereof after deducting
the proceed of the loan and the [P]185,000.00 already
Antecedents Facts
received as above-mentioned, the PARTY OF THE
SECOND PART shall pay unto the PARTY OF THE
The CA aptly summarized as follows the facts of the case prior to the filing by Mangaoil of FIRST PART not later than June 30, 1998 and
thereafter the parties shall be released of any
the complaint[6] for rescission of contract before the RTC: obligations for and against each other; xxx

Villamar is the registered owner of a 3.6080 hectares parcel of land On April 1, 1998, the parties executed a Deed of Absolute Sale whereby
[hereinafter referred as the subject property] in San Francisco, Manuel, Villamar (then Estelita Bernabe) transferred the subject parcel of land to
Isabela covered by Transfer Certificate of Title (TCT) No. T-92958-A. Mangaoil for and in consideration of [P]150,000.00.
On March 30, 1998, she entered into an Agreement with Mangaoil for
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
In a letter dated September 18, 1998, Mangaoil informed Villamar that
he was backing out from the sale agreed upon giving as one of the
reasons therefor:
3. That the area is not yet fully cleared by
incumbrances as there are tenants who are not willing
to vacate the land without giving them back the amount
that they mortgaged the land.
Mangaoil demanded refund of his [P]185,000.00 down payment.
Reiterating said demand in another letter dated April 29, 1999, the same,
however, was unheeded.[7] x x x (Citations omitted)
On January 28, 2002, the respondent filed before the RTC a complaint [8] for
rescission of contract against the petitioner. In the said complaint, the respondent sought
the return of P185,000.00 which he paid to the petitioner, payment of interests thereon to
be computed from March 27, 1998 until the suit's termination, and the award of damages,
costs and P20,000.00 attorney's fees. The respondent's factual allegations were as follows:
5. That as could be gleaned the Agreement (Annex A), the
plaintiff [Mangaoil] handed to the defendant [Villamar] the sum
of [P]185,000.00 to be applied as follows; [P]80,000 was for the
redemption of the land which was mortgaged to the Rural Bank of
Cauayan, San Manuel Branch, San Manuel, Isabela, to enable the
plaintiff to get hold of the title and register the sale x x
x and [P]105,000.00 was for the redemption of the said land from private
mortgages to enable plaintiff to posses[s] and cultivate the same;
6. That although the defendant had already long redeemed the
said land from the said bank and withdrawn TCT No. T-92958-A, she
has failed and refused, despite repeated demands, to hand over the said
title to the plaintiff and still refuses and fails to do so;
7. That, also, the plaintiff could not physically, actually and
materially posses[s] and cultivate the said land because the private
mortgage[e]s and/or present possessors refuse to vacate the same;
xxxx
11. That on September 18, 1998, the plaintiff sent a letter to the
defendant demanding a return of the amount so advanced by him, but the
latter ignored the same, x x x;
12. That, again, on April 29, 1999, the plaintiff sent to the
defendant another demand letter but the latter likewise ignored the same,
x x x;
13. That, finally, the plaintiff notified the defendant by a
notarial act of his desire and intention to rescind the said contract of sale,
xxx;
x x x x.[9] (Citations omitted)
In the respondents answer to the complaint, she averred that she had complied with her
obligations to the respondent. Specifically, she claimed having caused the release of TCT
No. T-92958-A by the Rural Bank of Cauayan and its delivery to a certain Atty. Pedro C.
Antonio (Atty. Antonio). The petitioner alleged that Atty. Antonio was commissioned to
facilitate the transfer of the said title in the respondent's name. The petitioner likewise
insisted that it was the respondent who unceremoniously withdrew from their agreement
for reasons only the latter knew.
The Ruling of the RTC
On September 9, 2005, the RTC ordered the rescission of the agreement and the deed of
absolute sale executed between the respondent and the petitioner. The petitioner was, thus
directed to return to the respondent the sum of P185,000.00 which the latter tendered as
initial payment for the purchase of the subject property. The RTC ratiocinated that:
There is no dispute that the defendant sold the LAND to the plaintiff
for [P]630,000.00 with down payment of [P]185,000.00. There is no
evidence presented if there were any other partial payments made after
the perfection of the contract of sale.
Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale[,] one of the
contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing,
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
and the other to pay therefore a price certain in
money or its equivalent.
As such, in a contract of sale, the obligation of the vendee to pay the
price is correlative of the obligation of the vendor to deliver the thing
sold. It created or established at the same time, out of the same course,
and which result in mutual relations of creditor and debtor between the
parties.
The claim of the plaintiff that the LAND has not been delivered to him
was not refuted by the defendant. Considering that defendant failed to
deliver to him the certificate of title and of the possession over the
LAND to the plaintiff, the contract must be rescinded pursuant to Article
1191 of the Civil Code which, in part, provides:
Art. 1191. The power of rescind obligations is
implied in reciprocal ones in case one of the obligors
should not comply with what is incumbent upon
him.[10]
The petitioner filed before the CA an appeal to challenge the foregoing. She ascribed error
on the part of the RTC when the latter ruled that the agreement and deed of sale executed
by and between the parties can be rescinded as she failed to deliver to the respondent both
the subject property and the certificate of title covering the same.
The Ruling of the CA
On February 20, 2009, the CA rendered the now assailed decision dismissing the
petitioners appeal based on the following grounds:
Burden of proof is the duty of a party to prove the truth of his claim or
defense, or any fact in issue necessary to establish his claim or defense
by the amount of evidence required by law. In civil cases, the burden of
proof is on the defendant if he alleges, in his answer, an affirmative
defense, which is not a denial of an essential ingredient in the plaintiff's
cause of action, but is one which, if established, will be a good
defense i.e., an avoidance of the claim, which prima facie, the plaintiff
already has because of the defendant's own admissions in the pleadings.
Defendant-appellant Villamar's defense in this case was an affirmative
defense. She did not deny plaintiff-appellees allegation that she had an
agreement with plaintiff-appellee for the sale of the subject parcel of
land. Neither did she deny that she was obliged under the contract to
deliver the certificate of title to plaintiff-appellee immediately after said
title/property was redeemed from the bank. What she rather claims is
that she already complied with her obligation to deliver the title to
plaintiff-appellee when she delivered the same to Atty. Antonio as it
was plaintiff-appellee himself who engaged the services of said lawyer to
precisely work for the immediate transfer of said title in his name. Since,
however, this affirmative defense as alleged in defendant-appellant's
answer was not admitted by plaintiff-appellee, it then follows that it
behooved the defendant-appellant to prove her averments by
preponderance of evidence.
Yet, a careful perusal of the record shows that the defendant-appellant
failed to sufficiently prove said affirmative defense. She failed to prove
that in the first place, Atty. Antonio existed to receive the title for and
in behalf of plaintiff-appellee. Worse, the defendant-appellant failed to
prove that Atty. Antonio received said title as allegedly agreed upon.
We likewise sustain the RTC's finding that defendant-appellant
V[i]llamar failed to deliver possession of the subject property to
plaintiff-appellee Mangaoil. As correctly observed by the RTC - [t]he
claim of the plaintiff that the land has not been delivered to him was not
refuted by the defendant. Not only that. On cross-examination, the
defendant-appellant gave Us insight on why no such delivery could be
made, viz.:
xxxx
Q: So, you were not able to deliver this
property to Mr. Mangaoil just after you redeem the
property because of the presence of these two (2)
persons, is it not?
xxx
A: Yes, sir.
Q: Forcing you to file the case against them and which
according to you, you have won, is it not?
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
A: Yes, sir.
Q: And now at present[,] you are in actual
possession of the land?
A: Yes, sir. x x x
With the foregoing judicial admission, the RTC could not have erred in
finding that defendant-[appellant] failed to deliver the possession of the
property sold, to plaintiff-appellee.
Neither can We agree with defendant-appellant in her argument that the
execution of the Deed of Absolute Sale by the parties is already
equivalent to a valid and constructive delivery of the property to
plaintiff-appellee. Not only is it doctrinally settled that in a contract of
sale, the vendor is bound to transfer the ownership of, and to deliver
the thing that is the object of the sale, the way Article 1547 of the Civil
Code is worded, viz.:
Art. 1547. In a contract of sale, unless a contrary
intention appears, there is:
(1) An implied warranty on the part of the
seller that he has a right to sell the thing at the time
when the ownership is to pass, and that the buyer
shall from that time have and enjoy the legal and
peaceful possession of the thing;
(2) An implied warranty that the thing shall be free
from any hidden defaults or defects, or any change or
encumbrance not declared or known to the buyer.
x x x.
shows that actual, and not mere constructive delivery is warrantied by
the seller to the buyer. (P)eaceful possession of the thing sold can
hardly be enjoyed in a mere constructive delivery.
The obligation of defendant-appellant Villamar to transfer ownership and
deliver possession of the subject parcel of land was
her correlative obligation to plaintiff-appellee in exchange for the latter's
purchase price thereof. Thus, if she fails to comply with what is
incumbent upon her, a correlative right to rescind such contract from
plaintiff-appellee arises, pursuant to Article 1191 of the Civil Code. [11] x
x x (Citations omitted)
The Issues
Aggrieved, the petitioner filed before us the instant petition and submits the following
issues for resolution:
I.
WHETHER THE FAILURE OF PETITIONER-SELLER TO DELIVER
THE CERTIFICATE OF TITLE OVER THE PROPERTY TO
RESPONDENT-BUYER IS A BREACH OF OBLIGATION IN A
CONTRACT OF SALE OF REAL PROPERTY THAT WOULD
WARRANT RESCISSION OF THE CONTRACT;
II.
WHETHER PETITIONER IS LIABLE FOR BREACH OF
OBLIGATION IN A CONTRACT OF SALE FOR FAILURE OF
RESPONDENT[-]BUYER TO IMMEDIATELY TAKE ACTUAL
POSSESSION OF THE PROPERTY NOTWITHSTANDING THE
ABSENCE OF ANY STIPULATION IN THE CONTRACT
PROVIDING FOR THE SAME;
III.
WHETHER THE EXECUTION OF A DEED OF SALE OF REAL
PROPERTY IN THE PRESENT CASE IS ALREADY EQUIVALENT
TO A VALID AND CONSTRUCTIVE DELIVERY OF THE
PROPERTY TO THE BUYER;
IV.
WHETHER OR NOT THE CONTRACT OF SALE SUBJECT
MATTER OF THIS CASE SHOULD BE RESCINDED ON SLIGHT
OR CASUAL BREACH;
V.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
AFFIRMING THE DECISION OF THE RTC ORDERING THE
RESCISSION OF THE CONTRACT OF SALE[.][12]
The Petitioner's Arguments
The petitioner avers that the CA, in ordering the rescission of the agreement and deed of
sale, which she entered into with the respondent, on the basis of her alleged failure to
deliver the certificate of title, effectively imposed upon her an extra duty which was neither
stipulated in the contract nor required by law. She argues that under Articles 1495 [13] and
1496[14] of the New Civil Code (NCC), the obligation to deliver the thing sold is complied
with by a seller who executes in favor of a buyer an instrument of sale in a public
document. Citing Chua v. Court of Appeals,[15] she claims that there is a distinction
between transferring a certificate of title in the buyer's name, on one hand, and transferring
ownership over the property sold, on the other. The latter can be accomplished by the
seller's execution of an instrument of sale in a public document. The recording of the sale
with the Registry of Deeds and the transfer of the certificate of title in the buyer's name are
necessary only to bind third parties to the transfer of ownership. [16]
The petitioner contends that in her case, she had already complied with her obligations
under the agreement and the law when she had caused the release of TCT No. T-92958-A
from the Rural Bank of Cauayan, paid individual mortgagees Romeo Lacaden (Lacaden)
and Florante Parangan (Paranga), and executed an absolute deed of sale in the respondent's
favor. She adds that before T-92958-A can be cancelled and a new one be issued in the
respondent's favor, the latter decided to withdraw from their agreement. She also points out
that in the letters seeking for an outright rescission of their agreement sent to her by the
respondent, not once did he demand for the delivery of TCT.
The petitioner insists that the respondent's change of heart was due to (1) the latter's
realization of the difficulty in determining the subject property's perimeter boundary; (2)
his doubt that the property he purchased would yield harvests in the amount he expected;
and (3) the presence of mortgagees who were not willing to give up possession without
first being paid the amounts due to them. The petitioner contends that the actual reasons for
the respondent's intent to rescind their agreement did not at all constitute a substantial
breach of her obligations.
The petitioner stresses that under Article 1498 of the NCC, when a sale is made through a
public instrument, its execution is equivalent to the delivery of the thing which is the
contract's object, unless in the deed, the contrary appears or can be inferred. Further,
in Power Commercial and Industrial Corporation v. CA,[17] it was ruled that the failure of a
seller to eject lessees from the property he sold and to deliver actual and physical
possession, cannot be considered a substantial breach, when such failure was not stipulated
as a resolutory or suspensive condition in the contract and when the effects and
consequences of the said failure were not specified as well. The execution of a deed of sale
operates as a formal or symbolic delivery of the property sold and it already authorizes the
buyer to use the instrument as proof of ownership. [18]
The petitioner argues that in the case at bar, the agreement and the absolute deed of sale
contains no stipulation that she was obliged to actually and physically deliver the subject
property to the respondent. The respondent fully knew Lacaden's and Parangan's
possession of the subject property. When they agreed on the sale of the property, the
respondent consciously assumed the risk of not being able to take immediate physical
possession on account of Lacaden's and Parangan's presence therein.
The petitioner likewise laments that the CA allegedly misappreciated the evidence offered
before it when it declared that she failed to prove the existence of Atty. Antonio. For the
record, she emphasizes that the said lawyer prepared and notarized the agreement and deed
of absolute sale which were executed between the parties. He was also the petitioners
counsel in the proceedings before the RTC. Atty. Antonio was also the one asked by the
respondent to cease the transfer of the title over the subject property in the latter's name and
to return the money he paid in advance.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

Although Articles 1458, 1495 and

The Respondent's Contentions
1498 of the NCC and case law do
not generally require the seller to
In the respondent's comment,[19] he seeks the dismissal of the instant petition. He deliver to the buyer the physical
possession of the property subject
invokes Articles 1191 and 1458 to argue that when a seller fails to transfer the ownership of a contract of sale and the
and possession of a property sold, the buyer is entitled to rescind the contract of sale. certificate of title covering the
same, the agreement entered into
Further, he contends that the execution of a deed of absolute sale does not necessarily by the petitioner and the
amount to a valid and constructive delivery. In Masallo v. Cesar,[20] it was ruled that a respondent provides otherwise.
However, the terms of the
person who does not have actual possession of real property cannot transfer constructive
agreement cannot be considered as
possession by the execution and delivery of a public document by which the title to the violative of law, morals, good
land is transferred. In Addison v. Felix and Tioco,[21] the Court was emphatic that symbolic customs, public order, or public
policy, hence, valid.
delivery by the execution of a public instrument is equivalent to actual delivery only when
the thing sold is subject to the control of the vendor.
Article 1458 of the NCC obliges the seller to transfer the ownership of and to deliver a

Our Ruling determinate thing to the buyer, who shall in turn pay therefor a price certain in money or its
equivalent. In addition thereto, Article 1495 of the NCC binds the seller to warrant the

The instant petition is bereft of merit. thing which is the object of the sale. On the other hand, Article 1498 of the same code
provides that when the sale is made through a public instrument, the execution thereof shall

There is only a single issue for resolution in the instant petition, to wit, whether or not the be equivalent to the delivery of the thing which is the object of the contract, if from the

failure of the petitioner to deliver to the respondent both the physical possession of the deed, the contrary does not appear or cannot clearly be inferred.

subject property and the certificate of title covering the same amount to a substantial
breach of the former's obligations to the latter constituting a valid cause to rescind the In the case of Chua v. Court of Appeals,[22] which was cited by the petitioner, it was ruled

agreement and deed of sale entered into by the parties. that when the deed of absolute sale is signed by the parties and notarized, then delivery of
the real property is deemed made by the seller to the buyer. [23] The transfer of the

We rule in the affirmative. certificate of title in the name of the buyer is not necessary to confer ownership upon him.

The RTC and the CA both found that the petitioner failed to comply with her obligations to In the case now under our consideration, item nos. 2 and 3 of the agreement entered into by

deliver to the respondent both the possession of the subject property and the certificate of the petitioner and the respondent explicitly provide:

title covering the same.

2. ONE HUNDRED EIGHTY FIVE THOUSAND (P185,000.00)
PESOS of the total price was already received on March 27, 1998 for
payment of the loan secured by the certificate of title covering the land in
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

favor of the Rural Bank of Cauayan, San Manuel Branch, San Manuel,
using the corresponding certificate of title as collateral therefore. Item no. 3 is literal
Isabela, in order that the certificate of title thereof be withdrawn and
released from the said bank, and the rest shall be for the payment of the enough to mean that there should be physical delivery of the TCT for how else can the
mortgages in favor of Romeo Lacaden and Florante Parangan; respondent use it as a collateral to obtain a loan if the title remains in the petitioners
3. After the release of the certificate of title covering the land subject- possession. We agree with the RTC and the CA that the petitioner failed to prove that she
matter of this agreement, the necessary deed of absolute sale in favor of delivered the TCT covering the subject property to the respondent. What the petitioner
the PARTY OF THE SECOND PART shall be executed and the transfer
be immediately effected so that the latter can apply for a loan from any attempted to establish was that she gave the TCT to Atty. Antonio whom she alleged was
lending institution using the corresponding certificate of title as commissioned to effect the transfer of the title in the respondent's name. Although Atty.
collateral therefor, and the proceeds of the loan, whatever be the amount,
Antonio's existence is certain as he was the petitioners counsel in the proceedings before
be given to the PARTY OF THE FIRST PART;[24] (underlining supplied)
the RTC, there was no proof that the former indeed received the TCT or that he was
commissioned to process the transfer of the title in the respondent's name.
As can be gleaned from the agreement of the contending parties, the respondent initially
paid the petitioner P185,000.00 for the latter to pay the loan obtained from the Rural Bank
It is likewise the petitioners contention that pursuant to Article 1498 of the NCC, she had
of Cauayan and to cause the release from the said bank of the certificate of title covering
already complied with her obligation to deliver the subject property upon her execution of
the subject property. The rest of the amount shall be used to pay the mortgages over the
an absolute deed of sale in the respondents favor. The petitioner avers that she did not
subject property which was executed in favor of Lacaden and Parangan. After the release
undertake to eject the mortgagors Parangan and Lacaden, whose presence in the premises
of the TCT, a deed of sale shall be executed and transfer shall be immediately effected so
of the subject property was known to the respondent.
that the title covering the subject property can be used as a collateral for a loan the
respondent will apply for, the proceeds of which shall be given to the petitioner.
We are not persuaded.

Under Article 1306 of the NCC, the contracting parties may establish such stipulations,
In the case of Power Commercial and Industrial Corporation[25] cited by the petitioner, the
clauses, terms and conditions as they may deem convenient, provided they are not contrary
Court ruled that the failure of the seller to eject the squatters from the property sold cannot
to law, morals, good customs, public order or public policy.
be made a ground for rescission if the said ejectment was not stipulated as a condition in
the contract of sale, and when in the negotiation stage, the buyer's counsel himself
While Articles 1458 and 1495 of the NCC and the doctrine enunciated in the case
undertook to eject the illegal settlers.
of Chua do not impose upon the petitioner the obligation to physically deliver to the
respondent the certificate of title covering the subject property or cause the transfer in the
The circumstances surrounding the case now under our consideration are different. In item
latter's name of the said title, a stipulation requiring otherwise is not prohibited by law and
no. 2 of the agreement, it is stated that part of the P185,000.00 initially paid to the
cannot be regarded as violative of morals, good customs, public order or public policy.
petitioner shall be used to pay the mortgagors, Parangan and Lacaden. While the provision
Item no. 3 of the agreement executed by the parties expressly states that transfer [shall] be
does not expressly impose upon the petitioner the obligation to eject the said mortgagors,
immediately effected so that the latter can apply for a loan from any lending institution
the undertaking is necessarily implied. Cessation of occupancy of the subject property is
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

logically expected from the mortgagors upon payment by the petitioner of the amounts due him. The respondent cannot be deprived of his right to demand for rescission in view of the
to them. petitioners failure to abide with item nos. 2 and 3 of the agreement. This remains true
notwithstanding the absence of express stipulations in the agreement indicating the
[26]
We note that in the demand letter dated September 18, 1998, which was sent by the consequences of breaches which the parties may commit. To hold otherwise would render
respondent to the petitioner, the former lamented that the area is not yet fully cleared of Article 1191 of the NCC as useless.
incumbrances as there are tenants who are not willing to vacate the land without giving
them back the amount that they mortgaged the land. Further, in the proceedings before the Article 1498 of the NCC generally
considers the execution of a public
RTC conducted after the complaint for rescission was filed, the petitioner herself testified instrument as constructive delivery
that she won the ejectment suit against the mortgagors only last year. [27] The complaint was by the seller to the buyer of the
property subject of a contract of
filed on September 8, 2002 or more than four years from the execution of the parties' sale. The case at bar, however, falls
agreement. This means that after the lapse of a considerable period of time from the among the exceptions to the
foregoing rule since a mere
agreement's execution, the mortgagors remained in possession of the subject property. presumptive and not conclusive
delivery is created as the
Notwithstanding the absence respondent failed to take material
of stipulations in the agreement possession of the subject property.
and absolute deed of sale entered
into by Villamar and Mangaoil
expressly indicating the Further, even if we were to assume for argument's sake that the agreement entered into by
consequences of the former's
failure to deliver the physical the contending parties does not require the delivery of the physical possession of the
possession of the subject property subject property from the mortgagors to the respondent, still, the petitioner's claim that her
and the certificate of title covering
the same, the latter is entitled to execution of an absolute deed of sale was already sufficient as it already amounted to a
demand for the rescission of their constructive delivery of the thing sold which Article 1498 of the NCC allows, cannot stand.
contract pursuant to Article 1191
of the NCC.
In Philippine Suburban Development Corporation v. The Auditor General,[29] we held:

We note that the agreement entered into by the petitioner and the respondent only contains
three items specifying the parties' undertakings. In item no. 5, the parties consented to
abide with all the terms and conditions set forth in this agreement and never violate the
same.[28]
Article 1191 of the NCC is clear that the power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with what is incumbent upon
When the sale of real property is made in a public instrument, the
execution thereof is equivalent to the delivery of the thing object of the
contract, if from the deed the contrary does not appear or cannot clearly
be inferred.
In other words, there is symbolic delivery of the property subject of the
sale by the execution of the public instrument, unless from the express
terms of the instrument, or by clear inference therefrom, this was not the
intention of the parties. Such would be the case, for instance, x x x where
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

the vendor has no control over the thing sold at the moment of the sale,
and, therefore, its material delivery could not have been
made.[30] (Underlining supplied and citations omitted)

Stated differently, as a general rule, the execution of a public instrument amounts to a

constructive delivery of the thing subject of a contract of sale. However, exceptions exist,
among which is when mere presumptive and not conclusive delivery is created in cases
where the buyer fails to take material possession of the subject of sale. A person who does
not have actual possession of the thing sold cannot transfer constructive possession by the
execution and delivery of a public instrument.

In the case at bar, the RTC and the CA found that the petitioner failed to deliver to the
respondent the possession of the subject property due to the continued presence and
occupation of Parangan and Lacaden. We find no ample reason to reverse the said findings.
Considered in the light of either the agreement entered into by the parties or the pertinent
provisions of law, the petitioner failed in her undertaking to deliver the subject property to
the respondent.

IN VIEW OF THE FOREGOING, the instant petition is DENIED. The February 20,
2009 Decision and July 8, 2009 Resolution of the Court of Appeals, directing the rescission
of the agreement and absolute deed of sale entered into by Estelita Villamar and Balbino
Mangaoil and the return of the down payment made for the purchase of the subject
property, are AFFIRMED. However, pursuant to our ruling in Eastern Shipping Lines,
Inc. v. CA,[31] an interest of 12% per annum is imposed on the sum of P185,000.00 to be
returned to Mangaoil to be computed from the date of finality of this Decision until full
satisfaction thereof.

SO ORDERED.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
BOSTON BANK OF THE PHL
vs. MANALO
[1]
Before us is a Petition for Review on Certiorari of the Decision of the Court of Appeals
(CA) in CA-G.R. CV No. 47458 affirming, on appeal, the Decision[2] of the Regional Trial
Court (RTC) of Quezon City, Branch 98, in Civil Case No. Q-89-3905.
The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known
as the Xavierville Estate Subdivision, with an area of 42 hectares. XEI caused the
subdivision of the property into residential lots, which was then offered for sale to
individual lot buyers.[3]
On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as
vendor, and The Overseas Bank of Manila (OBM), as vendee, executed a Deed of Sale of
Real Estate over some residential lots in the subdivision, including Lot 1, Block 2, with an
area of 907.5 square meters, and Lot 2, Block 2, with an area of 832.80 square meters. The
transaction was subject to the approval of the Board of Directors of OBM, and was covered
by real estate mortgages in favor of the Philippine National Bank as security for its account
amounting to P5,187,000.00, and the Central Bank of the Philippines as security for
advances amounting to P22,185,193.74.[4] Nevertheless, XEI continued selling the
residential lots in the subdivision as agent of OBM.[5]
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services
of Engr. Carlos Manalo, Jr. who was in business of drilling deep water wells and installing
pumps under the business name Hurricane Commercial, Inc. For P34,887.66, Manalo, Jr.
installed a water pump at Ramos residence at the corner of Aurora
Boulevardand Katipunan Avenue, Quezon City. Manalo, Jr. then proposed to XEI, through
Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the
downpayment the P34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a letter
dated February 8, 1972, Ramos requested Manalo, Jr. to choose which lots he wanted to
buy so that the price of the lots and the terms of payment could be fixed and incorporated
in the conditional sale.[6] Manalo, Jr. met with Ramos and informed him that he and his
wife Perla had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square meters.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the
reservation of the lots. He also pegged the price of the lots at P200.00 per square meter, or
a total of P348,060.00, with a 20% down payment of the purchase price amounting
to P69,612.00 less the P34,887.66 owing from Ramos, payable on or before December 31,
1972; the corresponding Contract of Conditional Sale would then be signed on or before
the same date, but if the selling operations of XEI resumed after December 31, 1972, the
balance of the downpayment would fall due then, and the spouses would sign the aforesaid
contract within five (5) days from receipt of the notice of resumption of such selling
operations. It was also stated in the letter that, in the meantime, the spouses may introduce
improvements thereon subject to the rules and regulations imposed by XEI in the
subdivision. Perla Manalo conformed to the letter agreement. [7]
The spouses Manalo took possession of the property on September 2, 1972,
constructed a house thereon, and installed a fence around the perimeter of the lots.
In the meantime, many of the lot buyers refused to pay their monthly installments
until they were assured that they would be issued Torrens titles over the lots they had
purchased.[8] The spouses Manalo were notified of the resumption of the selling operations
of XEI.[9] However, they did not pay the balance of the downpayment on the lots because
Ramos failed to prepare a contract of conditional sale and transmit the same to Manalo for
their signature. On August 14, 1973, Perla Manalo went to the XEI office and requested
that the payment of the amount representing the balance of the downpayment be deferred,
which, however, XEI rejected. On August 10,
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
1973, XEI furnished her with a statement of their account as of July 31, 1973, showing that
they had a balance of P34,724.34 on the downpayment of the two lots after deducting the
[10]
account of Ramos, plus P3,819.68 interest thereon from September 1, 1972 to July 31,
1973, and that the interests on the unpaid balance of the purchase price of P278,448.00
[11]
from September 1, 1972 to July 31, 1973 amounted to P30,629.28. The spouses were
informed that they were being billed for said unpaid interests.[12]
On January 25, 1974, the spouses Manalo received another statement of account
from XEI, inclusive of interests on the purchase price of the lots.[13] In a letter dated April
6, 1974 to XEI, Manalo, Jr. stated they had not yet received the notice of resumption of
Leis selling operations, and that there had been no arrangement on the payment of interests;
hence, they should not be charged with interest on the balance of the downpayment on the
property.[14] Further, they demanded that a deed of conditional sale over the two lots be
transmitted to them for their signatures. However, XEI ignored the
demands. Consequently, the spouses refused to pay the balance of the downpayment of the
purchase price.[15]
Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk
near his house. In a letter dated June 17, 1976, XEI informed Manalo, Jr. that business
signs were not allowed along the sidewalk. It demanded that he remove the same, on the
ground, among others, that the sidewalk was not part of the land which he had purchased
on installment basis from XEI.[16] Manalo, Jr. did not respond. XEI reiterated its demand
on September 15, 1977.[17]
Subsequently, XEI turned over its selling operations to OBM, including the
receivables for lots already contracted and those yet to be sold.[18] On December 8, 1977,
OBM warned Manalo, Jr., that putting up of a business sign is specifically prohibited by
their contract of conditional sale and that his failure to comply with its demand would
impel it to avail of the remedies as provided in their contract of conditional sale. [19]
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer
Certificate of Title (TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-265823
over Lot 2, Block 2, in favor of the OBM.[20] The lien in favor of the Central Bank of
the Philippines was annotated at the dorsal portion of said title, which was later cancelled
on August 4, 1980.[21]
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville
Estate from OBM. CBM wrote Edilberto Ng, the president of Xavierville Homeowners
Association that, as of January 31, 1983, Manalo, Jr. was one of the lot buyers in the
subdivision.[22] CBM reiterated in its letter to Ng that, as of January 24, 1984, Manalo was
a homeowner in the subdivision.[23]
In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-
going construction on the property since it (CBM) was the owner of the lot and she had no
permission for such construction.[24] She agreed to have a conference meeting with CBM
officers where she informed them that her husband had a contract with OBM, through XEI,
to purchase the property. When asked to prove her claim, she promised to send the
documents to CBM. However, she failed to do so. [25] On September 5, 1986, CBM
reiterated its demand that it be furnished with the documents promised, [26] but Perla Manalo
did not respond.
On July 27, 1987, CBM filed a complaint[27] for unlawful detainer against the
spouses with the Metropolitan Trial Court of Quezon City. The case was docketed as Civil
Case No. 51618. CBM claimed that the spouses had been unlawfully occupying the
property without its consent and that despite its demands, they refused to vacate the
property.The latter alleged that they, as vendors, and XEI, as vendee, had a contract of sale
over the lots which had not yet been rescinded.[28]
While the case was pending, the spouses Manalo wrote CBM to offer an amicable
settlement, promising to abide by the purchase price of the property (P313,172.34), per
agreement with XEI, through Ramos. However, on July 28, 1988, CBM wrote the spouses,
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
through counsel, proposing that the price of P1,500.00 per square meter of the property was
a reasonable starting point for negotiation of the settlement.[29] The spouses rejected the
counter proposal,[30] emphasizing that they would abide by their original agreement with
XEI. CBM moved to withdraw its complaint[31] because of the issues raised.[32]
In the meantime, the CBM was renamed the Boston Bank of the Philippines. After
CBM filed its complaint against the spouses Manalo, the latter filed a complaint for
specific performance and damages against the bank before the Regional Trial Court (RTC)
of Quezon City on October 31, 1989.
The plaintiffs alleged therein that they had always been ready, able and willing to
pay the installments on the lots sold to them by the defendants remote predecessor-in-
interest, as might be or stipulated in the contract of sale, but no contract was forthcoming;
they constructed their house worth P2,000,000.00 on the property in good faith; Manalo,
Jr., informed the defendant, through its counsel, on October 15, 1988 that he would abide
by the terms and conditions of his original agreement with the defendants predecessor-in-
interest; during the hearing of the ejectment case on October 16, 1988, they offered to
pay P313,172.34 representing the balance on the purchase price of said lots; such tender of
payment was rejected, so that the subject lots could be sold at considerably higher prices to
third parties.
Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled
to the execution and delivery of a Deed of Absolute Sale covering the subject lots,
sufficient in form and substance to transfer title thereto free and clear of any and all liens
and encumbrances of whatever kind and nature.[33] The plaintiffs prayed that, after due
hearing, judgment be rendered in their favor, to wit:
WHEREFORE, it is respectfully prayed that after due hearing:
(a) The defendant should be ordered to execute and deliver a
Deed of Absolute Sale over subject lots in favor of the plaintiffs after
payment of the sum of P313,172.34, sufficient in form and substance to
transfer to them titles thereto free and clear of any and all liens and
encumbrances of whatever kind or nature;
(b) The defendant should be held liable for moral and exemplary
damages in the amounts of P300,000.00 and P30,000.00, respectively,
for not promptly executing and delivering to plaintiff the necessary
Contract of Sale, notwithstanding repeated demands therefor and for
having been constrained to engage the services of undersigned counsel
for which they agreed to pay attorneys fees in the sum of P50,000.00 to
enforce their rights in the premises and appearance fee of P500.00;
(c) And for such other and further relief as may be just and
equitable in the premises.[34]
In its Answer to the complaint, the defendant interposed the following affirmative
defenses: (a) plaintiffs had no cause of action against it because the August 22, 1972 letter
agreement between XEI and the plaintiffs was not binding on it; and (b) it had no record of
any contract to sell executed by it or its predecessor, or of any statement of accounts from
its predecessors, or records of payments of the plaintiffs or of any documents
which entitled them to the possession of the lots.[35] The defendant, likewise, interposed
counterclaims for damages and attorneys fees and prayed for the eviction of the plaintiffs
from the property.[36]
Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel,
proposed an amicable settlement of the case by paying P942,648.70, representing the
balance of the purchase price of the two lots based on the current market
value.[37] However, the defendant rejected the same and insisted that for the smaller lot,
they pay P4,500,000.00, the current market value of the property. [38] The defendant insisted
that it owned the property since there was no contract or agreement between it and the
plaintiffs relative thereto.
During the trial, the plaintiffs adduced in evidence the separate Contracts of
Conditional Sale executed between XEI and Alberto Soller;[39] Alfredo Aguila,[40] and Dra.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
Elena Santos-Roque[41] to prove that XEI continued selling residential lots in the
subdivision as agent of OBM after the latter had acquired the said lots.
For its part, defendant presented in evidence the letter dated August 22, 1972,
where XEI proposed to sell the two lots subject to two suspensive conditions: the payment
of the balance of the downpayment of the property, and the execution of the corresponding
contract of conditional sale. Since plaintiffs failed to pay, OBM consequently refused to
execute the corresponding contract of conditional sale and forfeited the P34,877.66
downpayment for the two lots, but did not notify them of said forfeiture.[42] It alleged that
OBM considered the lots unsold because the titles thereto bore no annotation that they had
been sold under a contract of conditional sale, and the plaintiffs were not notified of XEIs
resumption of its selling operations.
On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against
the defendant. The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendant
(a) Ordering the latter to execute and deliver a Deed of Absolute
Sale over Lot 1 and 2, Block 2 of the Xavierville Estate Subdivision after
payment of the sum of P942,978.70 sufficient in form and substance to
transfer to them titles thereto free from any and all liens and
encumbrances of whatever kind and nature.
(b) Ordering the defendant to pay moral and exemplary
damages in the amount of P150,000.00; and
(c) To pay attorneys fees in the sum of P50,000.00 and to pay
the costs.
SO ORDERED.[43]
The trial court ruled that under the August 22, 1972 letter agreement of XEI and the
plaintiffs, the parties had a complete contract to sell over the lots, and that they had already
partially consummated the same. It declared that the failure of the defendant to notify the
plaintiffs of the resumption of its selling operations and to execute a deed of conditional
sale did not prevent the defendants obligation to convey titles to the lots from acquiring
binding effect. Consequently, the plaintiffs had a cause of action to compel the defendant
to execute a deed of sale over the lots in their favor.
Boston Bank appealed the decision to the CA, alleging that the lower court erred
in (a) not concluding that the letter of XEI to the spouses Manalo, was at most a mere
contract to sell subject to suspensive conditions, i.e., the payment of the balance of the
downpayment on the property and the execution of a deed of conditional sale (which were
not complied with); and (b) in awarding moral and exemplary damages to the spouses
Manalo despite the absence of testimony providing facts to justify such awards. [44]
On September 30, 2002, the CA rendered a decision affirming that of the RTC
with modification. The fallo reads:
WHEREFORE, the appealed decision is AFFIRMED with
MODIFICATIONS that (a) the figure P942,978.70 appearing [in] par. (a)
of the dispositive portion thereof is changed to P313,172.34 plus interest
thereon at the rate of 12% per annum from September 1, 1972 until fully
paid and (b) the award of moral and exemplary damages and attorneys
fees in favor of plaintiffs-appellees is DELETED.
SO ORDERED.[45]
The appellate court sustained the ruling of the RTC that the appellant and the
appellees had executed a Contract to Sell over the two lots but declared that the balance of
the purchase price of the property amounting to P278,448.00 was payable in fixed
amounts, inclusive of pre-computed interests, from delivery of the possession of the
property to the appellees on a monthly basis for 120 months, based on the deeds of
conditional sale executed by XEI in favor of other lot buyers. [46] The CA also declared that,
while XEI must have resumed its selling operations before the end of 1972 and the
downpayment on the property remained unpaid as of December 31, 1972, absent a written
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

notice of cancellation of the contract to sell from the bank or notarial demand therefor as the respondents made a partial payment on the downpayment for the two lots even before
required by Republic Act No. 6552, the spouses had, at the very least, a 60-day grace the execution of any contract of conditional sale.
period from January 1, 1973 within which to pay the same.
Petitioner posits that, even on the assumption that there was a perfected contract
Boston Bank filed a motion for the reconsideration of the decision alleging that to sell between the parties, nevertheless, it cannot be compelled to convey the property to
there was no perfected contract to sell the two lots, as there was no agreement between XEI the respondents because the latter failed to pay the balance of the downpayment of the
and the respondents on the manner of payment as well as the other terms and conditions of property, as well as the balance of 80% of the purchase price, thus resulting in the
the sale. It further averred that its claim for recovery of possession of the aforesaid lots in extinction of its obligation to convey title to the lots to the respondents.
its Memorandum dated February 28, 1994 filed before the trial court constituted a judicial
Another egregious error of the CA, petitioner avers, is the application of Republic
demand for rescission that satisfied the requirements of the New Civil Code. However, the
Act No. 6552. It insists that such law applies only to a perfected agreement or perfected
appellate court denied the motion.
contract to sell, not in this case where the downpayment on the purchase price of the
Boston Bank, now petitioner, filed the instant petition for review property was not completely paid, and no installment payments were made by the buyers.
on certiorari assailing the CA rulings. It maintains that, as held by the CA, the records do
Petitioner also faults the CA for declaring that petitioner failed to serve a notice
not reflect any schedule of payment of the 80% balance of the purchase price,
on the respondents of cancellation or rescission of the contract to sell, or notarial demand
or P278,448.00. Petitioner insists that unless the parties had agreed on the manner of
therefor. Petitioner insists that its August 5, 1986 letter requiring respondents to vacate the
payment of the principal amount, including the other terms and conditions of the contract,
property and its complaint for ejectment in Civil Case No. 51618 filed in the Metropolitan
there would be no existing contract of sale or contract to sell. [47] Petitioner avers that the
Trial Court amounted to the requisite demand for a rescission of the contract to sell.
letter agreement to respondent spouses dated August 22, 1972 merely confirmed their
Moreover, the action of the respondents below was barred by laches because despite
reservation for the purchase of Lot Nos. 1 and 2, consisting of 1,740.3 square meters, more
demands, they failed to pay the balance of the purchase price of the lots (let alone the
or less, at the price of P200.00 per square meter (or P348,060.00), the amount of the
downpayment) for a considerable number of years.
downpayment thereon and the application of the P34,887.00 due from Ramos as part of
such downpayment.
For their part, respondents assert that as long as there is a meeting of the minds of
the parties to a contract of sale as to the price, the contract is valid despite the parties
Petitioner asserts that there is no factual basis for the CA ruling that the terms and
failure to agree on the manner of payment. In such a situation, the balance of the purchase
conditions relating to the payment of the balance of the purchase price of the property (as
price would be payable on demand, conformably to Article 1169 of the New Civil Code.
agreed upon by XEI and other lot buyers in the same subdivision) were also applicable to
They insist that the law does not require a party to agree on the manner of payment of the
the contract entered into between the petitioner and the respondents. It insists that such a
purchase price as a prerequisite to a valid contract to sell. The respondents cite the ruling of
ruling is contrary to law, as it is tantamount to compelling the parties to agree to something
this Court in Buenaventura v. Court of Appeals[48] to support their submission.
that was not even discussed, thus, violating their freedom to contract. Besides, the situation
of the respondents cannot be equated with those of the other lot buyers, as, for one thing,
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
They argue that even if the manner and timeline for the payment of the balance of
the purchase price of the property is an essential requisite of a contract to sell, nevertheless,
as shown by their letter agreement of August 22, 1972 with the OBM, through XEI and the
other letters to them, an agreement was reached as to the manner of payment of the balance
of the purchase price. They point out that such letters referred to the terms of the
terms of the deeds of conditional sale executed by XEI in favor of the other lot buyers in
the subdivision, which contained uniform terms of 120 equal monthly installments
(excluding the downpayment, but inclusive of pre-computed interests). The respondents
assert that XEI was a real estate broker and knew that the contracts involving residential
lots in the subdivision contained uniform terms as to the manner and timeline of the
payment of the purchase price of said lots.
Respondents further posit that the terms and conditions to be incorporated in the
corresponding contract of conditional sale to be executed by the parties would be the same
as those contained in the contracts of conditional sale executed by lot buyers in the
subdivision. After all, they maintain, the contents of the corresponding contract of
conditional sale referred to in the August 22, 1972 letter agreement envisaged those
contained in the contracts of conditional sale that XEI and other lot buyers executed.
Respondents cite the ruling of this Court in Mitsui Bussan Kaisha v. Manila E.R.R. & L.
Co.[49]
The respondents aver that the issues raised by the petitioner are factual,
inappropriate in a petition for review on certiorari under Rule 45 of the Rules of Court.
They assert that petitioner adopted a theory in litigating the case in the trial court, but
changed the same on appeal before the CA, and again in this Court. They argue that the
petitioner is estopped from adopting a new theory contrary to those it had adopted in the
trial and appellate courts. Moreover, the existence of a contract of conditional sale was
admitted in the letters of XEI and OBM. They aver that they became owners of the lots
upon delivery to them by XEI.
The issues for resolution are the following: (1) whether the factual issues raised by
the petitioner are proper; (2) whether petitioner or its predecessors-in-interest, the XEI or
the OBM, as seller, and the respondents, as buyers, forged a perfect contract to sell over the
property; (3) whether
petitioner is estopped from contending that no such contract was forged by the parties; and
(4) whether respondents has a cause of action against the petitioner for specific
performance.
The rule is that before this Court, only legal issues may be raised in a petition for
review on certiorari. The reason is that this Court is not a trier of facts, and is not to review
and calibrate the evidence on record. Moreover, the findings of facts of the trial court, as
affirmed on appeal by the Court of Appeals, are conclusive on this Court unless the case
falls under any of the following exceptions:
(1) when the conclusion is a finding grounded entirely on
speculations, surmises and conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) where there is a grave
abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting;
(6) when the Court of Appeals, in making its findings went beyond the
issues of the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings are contrary to those of the
trial court; (8) when the findings of fact are conclusions without citation
of specific evidence on which they are based; (9) when the facts set forth
in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondents; and (10) when the findings of fact of the
Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.[50]
We have reviewed the records and we find that, indeed, the ruling of the appellate
court dismissing petitioners appeal is contrary to law and is not supported by evidence. A
careful examination of the factual backdrop of the case, as well as the antecedental
proceedings constrains us to hold that petitioner is not barred from asserting that XEI or
OBM, on one hand, and the respondents, on the other, failed to forge a perfected contract
to sell the subject lots.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
It must be stressed that the Court may consider an issue not raised during the trial
when there is plain error.[51] Although a factual issue was not raised in the trial court, such
issue may still be considered and resolved by the Court in the interest of substantial justice,
if it finds that to do so is necessary to arrive at a just decision, [52] or when an issue is
closely related to an issue raised in the trial court and the Court of Appeals and is necessary
[53]
for a just and complete resolution of the case. When the trial court decides a case in
favor of a party on certain grounds, the Court may base its decision upon some other
points, which the trial court or appellate court ignored or erroneously decided in favor of a
[54]
party.
In this case, the issue of whether XEI had agreed to allow the respondents to pay
the purchase price of the property was raised by the parties. The trial court ruled that the
parties had perfected a contract to sell, as against petitioners claim that no such contract
existed. However, in resolving the issue of whether the petitioner was obliged to sell the
property to the respondents, while the CA declared that XEI or OBM and the respondents
failed to agree on the schedule of payment of the balance of the purchase price of the
property, it ruled that XEI and the respondents had forged a contract to sell; hence,
petitioner is entitled to ventilate the issue before this Court.
We agree with petitioners contention that, for a perfected contract of sale or
contract to sell to exist in law, there must be an agreement of the parties, not only on the
price of the property sold, but also on the manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute
or conditional, one of the contracting parties obliges himself to transfer the ownership of
and deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent. A contract of sale is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and the price. From the averment of
perfection, the parties are bound, not only to the fulfillment of what has been
expressly stipulated, but also to all the consequences which, according to their nature, may
be in keeping with good faith, usage and law. [55] On the other hand, when the contract of
sale or to sell is not perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation between the parties.[56]
A definite agreement as to the price is an essential element of a binding agreement
to sell personal or real property because it seriously affects the rights and obligations of the
parties. Price is an essential element in the formation of a binding and enforceable contract
of sale. The fixing of the price can never be left to the decision of one of the contracting
parties. But a price fixed by one of the contracting parties, if accepted by the other, gives
rise to a perfected sale.[57]
It is not enough for the parties to agree on the price of the property. The parties
must also agree on the manner of payment of the price of the property to give rise to a
binding and enforceable contract of sale or contract to sell. This is so because the
agreement as to the manner of payment goes into the price, such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price.[58]
In a contract to sell property by installments, it is not enough that the parties agree on the
price as well as the amount of downpayment. The parties must, likewise, agree on the
manner of payment of the balance of the purchase price and on the other terms and
conditions relative to the sale. Even if the buyer makes a downpayment or portion thereof,
such payment cannot be considered as sufficient proof of the perfection of any purchase
and sale between the parties. Indeed, this Court ruled in Velasco v. Court of Appeals[59]that:
It is not difficult to glean from the aforequoted averments that
the petitioners themselves admit that they and the respondent still had to
meet and agree on how and when the down-payment and the installment
payments were to be paid. Such being the situation, it cannot, therefore,
be said that a definite and firm sales agreement between the parties had
been perfected over the lot in question. Indeed, this Court has already
ruled before that a definite agreement on the manner of payment of the
purchase price is an essential element in the formation of a binding and
enforceable contract of sale. The fact, therefore, that the petitioners
delivered to the respondent the sum of P10,000.00 as part of the
downpayment that they had to pay cannot be considered as sufficient
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

proof of the perfection of any purchase and sale agreement between the
parties herein under article 1482 of the New Civil Code, as the XAVIERVILLE ESTATE, INC.
petitioners themselves admit that some essential matter the terms of
payment still had to be mutually covenanted.[60] (Signed)
EMERITO B. RAMOS, JR.
President

We agree with the contention of the petitioner that, as held by the CA, there is no CONFORME:
showing, in the records, of the schedule of payment of the balance of the purchase price on
(Signed)
the property amounting to P278,448.00. We have meticulously reviewed the records, CARLOS T. MANALO, JR.
including Ramos February 8, 1972 and August 22, 1972 letters to respondents,[61] and find Hurricane Rotary Well Drilling[62]
that said parties confined themselves to agreeing on the price of the property
(P348,060.00), the 20% downpayment of the purchase price (P69,612.00), and credited
respondents for the P34,887.00 owing from Ramos as part of the 20% downpayment. The The August 22, 1972 letter agreement of XEI and the respondents reads:
timeline for the payment of the balance of the downpayment (P34,724.34) was also agreed
Mrs. Perla P. Manalo
upon, that is, on or before XEI resumed its selling operations, on or before December 31, 1548 Rizal Avenue Extension
1972, or within five (5) days from written notice of such resumption of selling operations. Caloocan City
The parties had also agreed to incorporate all the terms and conditions relating to the sale,
Dear Mrs. Manalo:
inclusive of the terms of payment of the balance of the purchase price and the other
This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our
substantial terms and conditions in the corresponding contract of conditional sale, to be
consolidation-subdivision plan as amended, consisting of 1,740.3 square
later signed by the parties, simultaneously with respondents settlement of the balance of the meters more or less, at the price of P200.00 per square meter or a total
downpayment. price of P348,060.00.

It is agreed that as soon as we resume selling operations, you must pay a

The February 8, 1972 letter of XEI reads: down payment of 20% of the purchase price of the said lots and sign the
Mr. Carlos T. Manalo, Jr. corresponding Contract of Conditional Sale, on or before December 31,
Hurricane Rotary Well Drilling 1972, provided, however, that if we resume selling after December 31,
Rizal Avenue Ext.,Caloocan City 1972, then you must pay the aforementioned down payment and sign the
aforesaid contractwithin five (5) days from your receipt of our notice of
Dear Mr. Manalo: resumption of selling operations.

We agree with your verbal offer to exchange the proceeds of In the meanwhile, you may introduce such improvements on the said lots
your contract with us to form as a down payment for a lot in our as you may desire, subject to the rules and regulations of the subdivision.
Xavierville Estate Subdivision.
If the above terms and conditions are acceptable to you, please signify
Please let us know your choice lot so that we can fix the price your conformity by signing on the space herein below provided.
and terms of payment in our conditional sale.
Sincerely yours,
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

Thank you.
The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in
this case because the issue of the manner of payment of the purchase price of the property
Very truly yours, was not raised therein.
XAVIERVILLE ESTATE, INC. CONFORME:
By: We reject the submission of respondents that they and Ramos had intended to
incorporate the terms of payment contained in the three contracts of conditional sale
(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO executed by XEI and other lot buyers in the corresponding contract of conditional sale,

President Buyer[63] which would later be signed by them.[69] We have meticulously reviewed the respondents

Based on these two letters, the determination of the terms of payment of complaint and find no such allegation therein.[70] Indeed, respondents merely alleged in

the P278,448.00 had yet to be agreed upon on or before December 31, 1972, or even their complaint that they were bound to pay the balance of the purchase price of the

afterwards, when the parties sign the corresponding contract of conditional sale. property in installments. When respondent Manalo, Jr. testified, he was never asked, on
direct examination or even on cross-examination, whether the terms of payment of the

Jurisprudence is that if a material element of a contemplated contract is left for balance of the purchase price of the lots under the contracts of conditional sale executed by

future negotiations, the same is too indefinite to be enforceable.[64] And when an essential XEI and other lot buyers would form part of the corresponding contract of conditional sale

element of a contract is reserved for future agreement of the parties, no legal obligation to be signed by them simultaneously with the payment of the balance of the downpayment

arises until such future agreement is concluded.[65] on the purchase price.

We note that, in its letter to the respondents dated June 17, 1976, or almost three
So long as an essential element entering into the proposed obligation of either of
years from the execution by the parties of their August 22, 1972 letter agreement, XEI
the parties remains to be determined by an agreement which they are to make, the contract
stated, in part, that respondents had purchased the property on installment
is incomplete and unenforceable.[66] The reason is that such a contract is lacking in the
basis.[71] However, in the said letter, XEI failed to state a specific amount for each
necessary qualities of definiteness, certainty and mutuality. [67]
installment, and whether such payments were to be made monthly, semi-annually, or
annually. Also, respondents, as plaintiffs below, failed to adduce a shred of evidence to
There is no evidence on record to prove that XEI or OBM and the respondents had
prove that they were obliged to pay the P278,448.00 monthly, semi-annually or annually.
agreed, after December 31, 1972, on the terms of payment of the balance of the purchase
The allegation that the payment of the P278,448.00 was to be paid in installments is, thus,
price of the property and the other substantial terms and conditions relative to the sale.
vague and indefinite. Case law is that, for a contract to be enforceable, its terms must be
Indeed, the parties are in agreement that there had been no contract of conditional sale ever
certain and explicit, not vague or indefinite.[72]
executed by XEI, OBM or petitioner, as vendor, and the respondents, as vendees. [68]
There is no factual and legal basis for the CA ruling that, based on the terms of
payment of the balance of the purchase price of the lots under the contracts of conditional
sale executed by XEI and the other lot buyers, respondents were obliged to pay
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
the P278,448.00 with pre-computed interest of 12% per annum in 120-month
installments. As gleaned from the ruling of the appellate court, it failed to justify its use of
the terms of payment under the three contracts of conditional sale as basis for such ruling,
to wit:
On the other hand, the records do not disclose the schedule of
payment of the purchase price, net of the downpayment. Considering,
however, the Contracts of Conditional Sale (Exhs. N, O and P) entered
into by XEI with other lot buyers, it would appear that the subdivision
lots sold by XEI, under contracts to sell, were payable in 120 equal
monthly installments (exclusive of the downpayment but including pre-
computed interests) commencing on delivery of the lot to the buyer. [73]
By its ruling, the CA unilaterally supplied an essential element to the letter
agreement of XEI and the respondents. Courts should not undertake to make a contract for
the parties, nor can it enforce one, the terms of which are in doubt. [74] Indeed, the Court
emphasized in Chua v. Court of Appeals[75] that it is not the province of a court to alter a
contract by construction or to make a new contract for the parties; its duty is confined to
the interpretation of the one which they have made for themselves, without regard to its
wisdom or folly, as the court cannot supply material stipulations or read into contract
words which it does not contain.
Respondents, as plaintiffs below, failed to allege in their complaint that the terms
of payment of the P278,448.00 to be incorporated in the corresponding contract of
conditional sale were those contained in the contracts of conditional sale executed by XEI
and Soller, Aguila and Roque.[76] They likewise failed to prove such allegation in this
Court.
The bare fact that other lot buyers were allowed to pay the balance of the purchase
price of lots purchased by them in 120 or 180 monthly installments does not constitute
evidence that XEI also agreed to give the respondents the same mode and timeline of
payment of the P278,448.00.
Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a
certain thing at one time is not admissible to prove that he did the same or similar thing at
another time, although such evidence may be received to prove habit, usage, pattern of
conduct or the intent of the parties.
Similar acts as evidence. Evidence that one did or did not do a
certain thing at one time is not admissible to prove that he did or did not
do the same or a similar thing at another time; but it may be received to
prove a specific intent or knowledge, identity, plan, system, scheme,
habit, custom or usage, and the like.
However, respondents failed to allege and prove, in the trial court, that, as a
matter of business usage, habit or pattern of conduct, XEI granted all lot buyers the right to
pay the balance of the purchase price in installments of 120 months of fixed amounts with
pre-computed interests, and that XEI and the respondents had intended to adopt such terms
of payment relative to the sale of the two lots in question. Indeed, respondents adduced in
evidence the three contracts of conditional sale executed by XEI and other lot
buyers merely to prove that XEI continued to sell lots in the subdivision as sales agent of
OBM after it acquired said lots, not to prove usage, habit or pattern of conduct on the part
of XEI to require all lot buyers in the subdivision to pay the balance of the purchase price
of said lots in 120 months. It further failed to prive that the trial court admitted the said
deeds[77] as part of the testimony of respondent Manalo, Jr.[78]
Habit, custom, usage or pattern of conduct must be proved like any other facts.
Courts must contend with the caveat that, before they admit evidence of usage, of habit or
pattern of conduct, the offering party must establish the degree of specificity and frequency
of uniform response that ensures more than a mere tendency to act in a given manner but
rather, conduct that is semi-automatic in nature. The offering party must allege and prove
specific, repetitive conduct that might constitute evidence of habit. The examples offered in
evidence to prove habit, or pattern of evidence must be numerous enough to base on
inference of systematic conduct. Mere similarity of contracts does not present the kind of
sufficiently similar circumstances to outweigh the danger of prejudice and confusion.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

so.[84] There is no evidence on record that XEI granted the same right to buyers of two or
In determining whether the examples are numerous enough, and sufficiently more lots.
regular, the key criteria are adequacy of sampling and uniformity of response. After all,
Irrefragably, under Article 1469 of the New Civil Code, the price of the property
habit means a course of behavior of a person regularly represented in like
sold may be considered certain if it be so with reference to another thing certain. It is
circumstances.[79] It is only when examples offered to establish pattern of conduct or habit
sufficient if it can be determined by the stipulations of the contract made by the parties
are numerous enough to lose an inference of systematic conduct that examples are
thereto[85] or by reference to an agreement incorporated in the contract of sale or contract to
admissible. The key criteria are adequacy of sampling and uniformity of response or ratio
sell or if it is capable of being ascertained with certainty in said contract; [86] or if the
of reaction to situations.[80]
contract contains express or implied provisions by which it may be rendered certain; [87]or if
it provides some method or criterion by which it can be definitely ascertained. [88] As this
There are cases where the course of dealings to be followed is defined by the
Court held in Villaraza v. Court of Appeals,[89] the price is considered certain if, by its
usage of a particular trade or market or profession. As expostulated by Justice Benjamin
terms, the contract furnishes a basis or measure for ascertaining the amount agreed upon.
Cardozo of the United States Supreme Court: Life casts the moulds of conduct, which will
someday become fixed as law. Law preserves the moulds which have taken form and shape
We have carefully reviewed the August 22, 1972 letter agreement of the parties
from life.[81] Usage furnishes a standard for the measurement of many of the rights and acts
and find no direct or implied reference to the manner and schedule of payment of the
of men.[82] It is also well-settled that parties who contract on a subject matter concerning
balance of the purchase price of the lots covered by the deeds of conditional sale executed
which known usage prevail, incorporate such usage by implication into their agreement, if
by XEI and that of the other lot buyers[90] as basis for or mode of determination of the
nothing is said to be contrary.[83]
schedule of the payment by the respondents of the P278,448.00.
However, the respondents inexplicably failed to adduce sufficient competent
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and
evidence to prove usage, habit or pattern of conduct of XEI to justify the use of the terms
Light Company[91] is not applicable in this case because the basic price fixed in the contract
of payment in the contracts of the other lot buyers, and thus grant respondents the right to
was P9.45 per long ton, but it was stipulated that the price was subject to modification in
pay the P278,448.00 in 120 months, presumably because of respondents belief that the
proportion to variations in calories and ash content, and not otherwise. In this case, the
manner of payment of the said amount is not an essential element of a contract to
parties did not fix in their letters-agreement, any method or mode of determining the terms
sell. There is no evidence that XEI or OBM and all the lot buyers in the subdivision,
of payment of the balance of the purchase price of the property amounting to P278,448.00.
including lot buyers who pay part of the downpayment of the property purchased by them
in the form of service, had executed contracts of conditional sale containing uniform terms
It bears stressing that the respondents failed and refused to pay the balance of the
and conditions. Moreover, under the terms of the contracts of conditional sale executed by
downpayment and of the purchase price of the property amounting to P278,448.00 despite
XEI and three lot buyers in the subdivision, XEI agreed to grant 120 months within which
notice to them of the resumption by XEI of its selling operations. The respondents enjoyed
to pay the balance of the purchase price to two of them, but granted one 180 months to do
possession of the property without paying a centavo. On the other hand, XEI and OBM
failed and refused to transmit a contract of conditional sale to the respondents. The
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

respondents could have at least consigned the balance of the downpayment after notice of
the resumption of the selling operations of XEI and filed an action to compel XEI or OBM
to transmit to them the said contract; however, they failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to forge a
perfected contract to sell the two lots; hence, respondents have no cause of action for
specific performance against petitioner. Republic Act No. 6552 applies only to a perfected
contract to sell and not to a contract with no binding and enforceable effect.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The

Decision of the Court of Appeals in CA-G.R. CV No. 47458 is REVERSED and SET
ASIDE. The Regional Trial Court of Quezon City, Branch 98 is ordered to dismiss the
complaint. Costs against the respondents.

SO ORDERED.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
GAITE vs. FONACIER
This appeal comes to us directly from the Court of First Instance because the
claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by
himself or in a representative capacity, of 11 iron lode mineral claims, known as
the Dawahan Group, situated in the municipality of Jose Panganiban, province of
Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier
constituted and appointed plaintiff-appellee Fernando A. Gaite as his true and
lawful attorney-in-fact to enter into a contract with any individual or juridical person
for the exploration and development of the mining claims aforementioned on a
royalty basis of not less than P0.50 per ton of ore that might be extracted
therefrom. On March 19, 1954, Gaite in turn executed a general assignment
(Record on Appeal, pp. 17-19) conveying the development and exploitation of said
mining claims into the Larap Iron Mines, a single proprietorship owned solely by
and belonging to him, on the same royalty basis provided for in Exhibit "3".
Thereafter, Gaite embarked upon the development and exploitation of the mining
claims in question, opening and paving roads within and outside their boundaries,
making other improvements and installing facilities therein for use in the
development of the mines, and in time extracted therefrom what he claim and
estimated to be approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority
granted by him to Gaite to exploit and develop the mining claims in question, and
Gaite assented thereto subject to certain conditions. As a result, a document
entitled "Revocation of Power of Attorney and Contract" was executed on
December 8, 1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
consideration of P20,000.00, plus 10% of the royalties that Fonacier would receive
from the mining claims, all his rights and interests on all the roads, improvements,
and facilities in or outside said claims, the right to use the business name "Larap
Iron Mines" and its goodwill, and all the records and documents relative to the
mines. In the same document, Gaite transferred to Fonacier all his rights and
interests over the "24,000 tons of iron ore, more or less" that the former had
already extracted from the mineral claims, in consideration of the sum of
P75,000.00, P10,000.00 of which was paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be
paid from and out of the first letter of credit covering the first shipment of
iron ores and of the first amount derived from the local sale of iron ore
made by the Larap Mines & Smelting Co. Inc., its assigns, administrators,
or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to
execute in favor of Gaite a surety bond, and pursuant to the promise, Fonacier
delivered to Gaite a surety bond dated December 8, 1954 with himself (Fonacier)
as principal and the Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando
Ty as sureties (Exhibit "A-1"). Gaite testified, however, that when this bond was
presented to him by Fonacier together with the "Revocation of Power of Attorney
and Contract", Exhibit "A", on December 8, 1954, he refused to sign said Exhibit
"A" unless another bond under written by a bonding company was put up by
defendants to secure the payment of the P65,000.00 balance of their price of the
iron ore in the stockpiles in the mining claims. Hence, a second bond, also dated
December 8, 1954 (Exhibit "B"),was executed by the same parties to the first bond
Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as additional surety,
but it provided that the liability of the surety company would attach only when there
had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an
amount of not less then P65,000.00, and that, furthermore, the liability of said
surety company would automatically expire on December 8, 1955. Both bonds
were attached to the "Revocation of Power of Attorney and Contract", Exhibit "A",
and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite
and the two executed and signed the "Revocation of Power of Attorney and
Contract", Exhibit "A", Fonacier entered into a "Contract of Mining Operation",
ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc.
the right to develop, exploit, and explore the mining claims in question, together
with the improvements therein and the use of the name "Larap Iron Mines" and its
good will, in consideration of certain royalties. Fonacier likewise transferred, in the
same document, the complete title to the approximately 24,000 tons of iron ore
which he acquired from Gaite, to the Larap & Smelting Co., in consideration for the
signing by the company and its stockholders of the surety bonds delivered by
Fonacier to Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far
Eastern Surety and Insurance Company, no sale of the approximately 24,000 tons
of iron ore had been made by the Larap Mines & Smelting Co., Inc., nor had the
P65,000.00 balance of the price of said ore been paid to Gaite by Fonacier and his
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
sureties payment of said amount, on the theory that they had lost right to make use
of the period given them when their bond, Exhibit "B" automatically expired
(Exhibits "C" to "C-24"). And when Fonacier and his sureties failed to pay as
demanded by Gaite, the latter filed the present complaint against them in the Court
of First Instance of Manila (Civil Case No. 29310) for the payment of the
P65,000.00 balance of the price of the ore, consequential damages, and attorney's
fees.
All the defendants except Francisco Dante set up the uniform defense that the
obligation sued upon by Gaite was subject to a condition that the amount of
P65,000.00 would be payable out of the first letter of credit covering the first
shipment of iron ore and/or the first amount derived from the local sale of the iron
ore by the Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the
complaint, no sale of the iron ore had been made, hence the condition had not yet
been fulfilled; and that consequently, the obligation was not yet due and
demandable. Defendant Fonacier also contended that only 7,573 tons of the
estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered, and
counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of evidence to
two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite
P65,000.00 become due and demandable when the defendants failed to renew the
surety bond underwritten by the Far Eastern Surety and Insurance Co., Inc.
(Exhibit "B"), which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to
defendant Fonacier were actually in existence in the mining claims when these
parties executed the "Revocation of Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to
pay plaintiff the P65,000.00 balance of the price of the approximately 24,000 tons
of iron ore was one with a term: i.e., that it would be paid upon the sale of sufficient
iron ore by defendants, such sale to be effected within one year or before
December 8, 1955; that the giving of security was a condition precedent to Gait's
giving of credit to defendants; and that as the latter failed to put up a good and
sufficient security in lieu of the Far Eastern Surety bond (Exhibit "B") which expired
on December 8, 1955, the obligation became due and demandable under Article
1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have
approximately 24,000 tons of iron ore at the mining claims in question at the time
of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants
to pay him, jointly and severally, P65,000.00 with interest at 6% per annum from
December 9, 1955 until payment, plus costs. From this judgment, defendants
jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were presented for
resolution: a motion to declare the appellants Larap Mines & Smelting Co., Inc.
and George Krakower in contempt, filed by appellant Fonacier, and two motions to
dismiss the appeal as having become academic and a motion for new trial and/or
to take judicial notice of certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation therein that the appellants
Larap Mines & Smelting Co., Inc. and Krakower had sold the iron ore here in
question, which allegedly is "property in litigation", has not been substantiated; and
even if true, does not make these appellants guilty of contempt, because what is
under litigation in this appeal is appellee Gaite's right to the payment of the
balance of the price of the ore, and not the iron ore itself. As for the several
motions presented by appellee Gaite, it is unnecessary to resolve these motions in
view of the results that we have reached in this case, which we shall hereafter
discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant Fonacier to
pay appellee Gaite the P65,000.00 (balance of the price of the iron ore in
question)is one with a period or term and not one with a suspensive condition, and
that the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only 10,954.5 tons in
the stockpiles of iron ore sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the contract
Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F.
Fonacier all his rights and interests over the 24,000 tons of iron ore, more
or less, above-referred to together with all his rights and interests to
operate the mine in consideration of the sum of SEVENTY-FIVE
THOUSAND PESOS (P75,000.00) which the latter binds to pay as follows:
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of
this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be
paid from and out of the first letter of credit covering the first shipment of
iron ore made by the Larap Mines & Smelting Co., Inc., its assigns,
administrators, or successors in interest.
We find the court below to be legally correct in holding that the shipment or local
sale of the iron ore is not a condition precedent (or suspensive) to the payment of
the balance of P65,000.00, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its efficacy or obligatory force
(as distinguished from its demandability) is subordinated to the happening of a
future and uncertain event; so that if the suspensive condition does not take place,
the parties would stand as if the conditional obligation had never existed. That the
parties to the contract Exhibit "A" did not intend any such state of things to prevail
is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's obligation to
pay: "The balance of Sixty-Five Thousand Pesos (P65,000.00) will be paid out of
the first letter of credit covering the first shipment of iron ores . . ." etc. There is no
uncertainty that the payment will have to be made sooner or later; what is
undetermined is merely the exact date at which it will be made. By the very terms
of the contract, therefore, the existence of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not only does each one
of the parties assume a correlative obligation (the seller to deliver and transfer
ownership of the thing sold and the buyer to pay the price),but each party
anticipates performance by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated to an uncertain event, so that
the other understands that he assumes the risk of receiving nothing for what he
gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in
the usual course of business to do so; hence, the contingent character of the
obligation must clearly appear. Nothing is found in the record to evidence that
Gaite desired or assumed to run the risk of losing his right over the ore without
getting paid for it, or that Fonacier understood that Gaite assumed any such risk.
This is proved by the fact that Gaite insisted on a bond a to guarantee payment of
the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines & Smelting
Co., and the company's stockholders, but also on one by a surety company; and
the fact that appellants did put up such bonds indicates that they admitted the
definite existence of their obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or
shipment of the ore as a condition precedent, would be tantamount to leaving the
payment at the discretion of the debtor, for the sale or shipment could not be made
unless the appellants took steps to sell the ore. Appellants would thus be able to
postpone payment indefinitely. The desireability of avoiding such a construction of
the contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the
parties indented a suspensive condition or a suspensive period (dies ad quem) for
the payment of the P65,000.00, the rules of interpretation would incline the scales
in favor of "the greater reciprocity of interests", since sale is essentially onerous.
The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest
reciprocity of interests.
and there can be no question that greater reciprocity obtains if the buyer' obligation
is deemed to be actually existing, with only its maturity (due date) postponed or
deferred, that if such obligation were viewed as non-existent or not binding until the
ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was
a sale on credit, and not an aleatory contract where the transferor, Gaite, would
assume the risk of not being paid at all; and that the previous sale or shipment of
the ore was not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his
sureties, still have the right to insist that Gaite should wait for the sale or shipment
of the ore before receiving payment; or, in other words, whether or not they are
entitled to take full advantage of the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the right court
below that the appellants have forfeited the right to compel Gaite to wait for the
sale of the ore before receiving payment of the balance of P65,000.00, because of
their failure to renew the bond of the Far Eastern Surety Company or else replace
it with an equivalent guarantee. The expiration of the bonding company's
undertaking on December 8, 1955 substantially reduced the security of the
vendor's rights as creditor for the unpaid P65,000.00, a security that Gaite
considered essential and upon which he had insisted when he executed the deed
of sale of the ore to Fonacier (Exhibit "A"). The case squarely comes under
paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines:
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities
which he has promised.
(3) When by his own acts he has impaired said guaranties or securities
after their establishment, and when through fortuitous event they
disappear, unless he immediately gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its
expiration plainly impaired the securities given to the creditor (appellee Gaite),
unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety
company's bond with full knowledge that on its face it would automatically expire
within one year was a waiver of its renewal after the expiration date. No such
waiver could have been intended, for Gaite stood to lose and had nothing to gain
barely; and if there was any, it could be rationally explained only if the appellants
had agreed to sell the ore and pay Gaite before the surety company's bond
expired on December 8, 1955. But in the latter case the defendants-appellants'
obligation to pay became absolute after one year from the transfer of the ore to
Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his
rights in demanding payment and instituting this action one year from and after the
contract (Exhibit "A") was executed, either because the appellant debtors had
impaired the securities originally given and thereby forfeited any further time within
which to pay; or because the term of payment was originally of no more than one
year, and the balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really
24,000 tons of iron ore in the stockpiles sold by appellee Gaite to appellant
Fonacier, and whether, if there had been a short-delivery as claimed by appellants,
they are entitled to the payment of damages, we must, at the outset, stress two
things: first, that this is a case of a sale of a specific mass of fungible goods for a
single price or a lump sum, the quantity of "24,000 tons of iron ore, more or less,"
stated in the contract Exhibit "A," being a mere estimate by the parties of the total
tonnage weight of the mass; and second, that the evidence shows that neither of
the parties had actually measured of weighed the mass, so that they both tried to
arrive at the total quantity by making an estimate of the volume thereof in cubic
meters and then multiplying it by the estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore because no
provision was made in their contract for the measuring or weighing of the ore sold
in order to complete or perfect the sale, nor was the price of P75,000,00 agreed
upon by the parties based upon any such measurement.(see Art. 1480, second
par., New Civil Code). The subject matter of the sale is, therefore, a determinate
object, the mass, and not the actual number of units or tons contained therein, so
that all that was required of the seller Gaite was to deliver in good faith to his buyer
all of the ore found in the mass, notwithstanding that the quantity delivered is less
than the amount estimated by them (Mobile Machinery & Supply Co., Inc. vs. York
Oilfield Salvage Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil
Code). There is no charge in this case that Gaite did not deliver to appellants all
the ore found in the stockpiles in the mining claims in questions; Gaite had,
therefore, complied with his promise to deliver, and appellants in turn are bound to
pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy,
not a definite mass, but approximately 24,000 tons of ore, so that any substantial
difference in this quantity delivered would entitle the buyers to recover damages
for the short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or
weighed the whole mass of ore cubic meter by cubic meter, or ton by ton. Both
parties predicate their respective claims only upon an estimated number of cubic
meters of ore multiplied by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the
stockpiles of ore that he sold to Fonacier, while appellants contend that by actual
measurement, their witness Cirpriano Manlagit found the total volume of ore in
the stockpiles to be only 6.609 cubic meters. As to the average weight in tons per
cubic meter, the parties are again in disagreement, with appellants claiming the
correct tonnage factor to be 2.18 tons to a cubic meter, while appellee Gaite claims
that the correct tonnage factor is about 3.7.
In the face of the conflict of evidence, we take as the most reliable estimate of the
tonnage factor of iron ore in this case to be that made by Leopoldo F. Abad, chief
of the Mines and Metallurgical Division of the Bureau of Mines, a government
pensionado to the States and a mining engineering graduate of the Universities of
Nevada and California, with almost 22 years of experience in the Bureau of Mines.
This witness placed the tonnage factor of every cubic meter of iron ore at between
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

3 metric tons as minimum to 5 metric tons as maximum. This estimate, in turn,

closely corresponds to the average tonnage factor of 3.3 adopted in his corrected
report (Exhibits "FF" and FF-1") by engineer Nemesio Gamatero, who was sent by
the Bureau of Mines to the mining claims involved at the request of appellant
Krakower, precisely to make an official estimate of the amount of iron ore in
Gaite's stockpiles after the dispute arose.

Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles
made by appellant's witness Cipriano Manlagit is correct, if we multiply it by the
average tonnage factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons,
which is not very far from the estimate of 24,000 tons made by appellee Gaite,
considering that actual weighing of each unit of the mass was practically
impossible, so that a reasonable percentage of error should be allowed anyone
making an estimate of the exact quantity in tons found in the mass. It must not be
forgotten that the contract Exhibit "A" expressly stated the amount to be 24,000
tons, more or less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L.
Ed. 1164).

There was, consequently, no short-delivery in this case as would entitle appellants

to the payment of damages, nor could Gaite have been guilty of any fraud in
making any misrepresentation to appellants as to the total quantity of ore in the
stockpiles of the mining claims in question, as charged by appellants, since Gaite's
estimate appears to be substantially correct.

WHEREFORE, finding no error in the decision appealed from, we hereby affirm

the same, with costs against appellants.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
BRAVO vs. BRAVO
The Case
Before the Court is a petition for review[2] assailing the Decision[3] of 21
December 2001 of the Court of Appeals in CA-G.R. CV No. 67794. The Court of
Appeals reversed the Decision[4] of 11 May 2000 of the Regional Trial Court of
Makati, Branch No. 139, in Civil Case No. 97-1379 denying respondents prayer to
partition the subject properties.
Antecedent Facts
Spouses Mauricio Bravo (Mauricio) and Simona[5]
Andaya Bravo (Simona)
owned two parcels of land (Properties) measuring 287 and 291 square meters and
located along Evangelista Street, Makati City, Metro Manila. The Properties are
registered under TCT Nos. 58999 and 59000 issued by the Register of Deeds of
Rizal on 23 May 1958. The Properties contain a large residential dwelling, a
smaller house and other improvements.
Mauricio and Simona had three children - Roland, Cesar and Lily, all
surnamed Bravo. Cesar died without issue. Lily Bravo married David Diaz, and had
a son, David B. Diaz, Jr. (David Jr.). Roland had six children, namely, Lily
Elizabeth Bravo-Guerrero (Elizabeth), Edward Bravo (Edward), Roland Bravo, Jr.
(Roland Jr.), Senia Bravo, Benjamin Mauricio Bravo, and their half-sister, Ofelia
Bravo (Ofelia).
Simona executed a General Power of Attorney (GPA) on 17 June 1966
appointing Mauricio as her attorney-in-fact. In the GPA, Simona authorized
Mauricio to mortgage or otherwise hypothecate, sell, assign and dispose of any
and all of my property, real, personal or mixed, of any kind whatsoever and
wheresoever situated, or any interest therein xxx.[6] Mauricio subsequently
mortgaged the Properties to the Philippine National Bank (PNB) and Development
Bank of the Philippines (DBP) for P10,000 and P5,000, respectively.[7]
On 25 October 1970, Mauricio executed a Deed of Sale with Assumption of
Real Estate Mortgage (Deed of Sale) conveying the Properties to Roland A. Bravo,
Ofelia A. Bravo and Elizabeth Bravo[8] (vendees). The sale was conditioned on the
payment of P1,000 and on the assumption by the vendees of the PNB and DBP
mortgages over the Properties.
As certified by the Clerk of Court of the Regional Trial Court of Manila, the
Deed of Sale was notarized by Atty. Victorio Q. Guzman on 28 October 1970 and
entered in his Notarial Register.[9] However, the Deed of Sale was not annotated
on TCT Nos. 58999 and 59000. Neither was it presented to PNB and DBP. The
mortage loans and the receipts for loan payments issued by PNB and DBP
continued to be in Mauricios name even after his death on 20 November 1973.
Simona died in 1977.
On 23 June 1997, Edward, represented by his wife, Fatima Bravo, filed an
action for the judicial partition of the Properties. Edward claimed that he and the
other grandchildren of Mauricio and Simona are co-owners of the Properties by
succession. Despite this, petitioners refused to share with him the possession and
rental income of the Properties. Edward later amended his complaint to include a
prayer to annul the Deed of Sale, which he claimed was merely simulated to
prejudice the other heirs.
In 1999, David Jr., whose parents died in 1944 and who was subsequently
raised by Simona, moved to intervene in the case. David Jr. filed a complaint-in-
intervention impugning the validity of the Deed of Sale and praying for the partition
of the Properties among the surviving heirs of Mauricio and Simona. The trial court
allowed the intervention in its Order dated 5 May 1999.[10]
The Ruling of the Trial Court
The trial court upheld Mauricios sale of the Properties to the vendees. The
trial court ruled that the sale did not prejudice the compulsory heirs, as the
Properties were conveyed for valuable consideration. The trial court also noted
that the Deed of Sale was duly notarized and was in existence for many years
without question about its validity.
The dispositive portion of the trial courts Decision of 11 May 2000 reads:
WHEREFORE, premises considered, the Court hereby DENIES the JUDICIAL
PARTITION of the properties covered by TCT Nos. 58999 and 59000 registered with the
Office of the Register of Deeds of Rizal.
SO ORDERED.[11]
Dissatisfied, Edward and David Jr. (respondents) filed a joint appeal to the
Court of Appeals.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
The Ruling of the Court of Appeals
Citing Article 166 of the Civil Code (Article 166), the Court of Appeals
declared the Deed of Sale void for lack of Simonas consent. The appellate court
held that the GPA executed by Simona in 1966 was not sufficient to authorize
Mauricio to sell the Properties because Article 1878 of the Civil Code (Article 1878)
requires a special power of attorney for such transactions. The appellate court
reasoned that the GPA was executed merely to enable Mauricio to mortgage the
Properties, not to sell them.
The Court of Appeals also found that there was insufficient proof that the
vendees made the mortgage payments on the Properties, since the PNB and DBP
receipts were issued in Mauricios name. The appellate court opined that the rental
income of the Properties, which the vendees never shared with respondents, was
sufficient to cover the mortgage payments to PNB and DBP.
The Court of Appeals declared the Deed of Sale void and ordered the
partition of the Properties in its Decision of 21 December 2001 (CA Decision), as
follows:
WHEREFORE, the decision of the Regional Trial Court of Makati City, Metro-Manila,
Branch 13[9] dated 11 May 2000[,] review of which is sought in these proceedings[,] is
REVERSED.
1. The Deed of Sale with Assumption of Real Estate Mortgage (Exh. 4) dated 28
October 1970 is hereby declared null and void;
2. Judicial Partition on the questioned properties is hereby GRANTED in the
following manner:
A. In representation of his deceased mother, LILY BRAVO-DIAZ,
intervenor DAVID DIAZ, JR., is entitled to one-half (1/2) interest of
the subject properties;
B. Plaintiff-appellant EDWARD BRAVO and the rest of the five siblings,
namely: LILY ELIZABETH, EDWARD, ROLAND, JR., SENIA,
BENJAMIN and OFELIA are entitled to one-sixth (1/6) representing
the other half portion of the subject properties;
C. Plaintiff-appellant Edward Bravo, intervenor DAVID DIAZ, JR.,
SENIA and BENJAMIN shall reimburse the defendant-appellees
LILY ELIZABETH, OFELIA and ROLAND the sum of One
Thousand (P1,000.00) PESOS representing the consideration paid on
the questioned deed of sale with assumption of mortgage with
interest of six (6) percent per annum effective 28 October 1970 until
fully paid.
SO ORDERED.[12]
The Issues
Petitioners seek a reversal of the Decision of the Court of Appeals, raising
these issues:
1. WHETHER THE COURT OF APPEALS ERRED IN NOT UPHOLDING THE
VALIDITY AND ENFORCEMENT OF THE DEED OF SALE WITH
ASSUMPTION OF MORTGAGE.
2. WHETHER THE COURT OF APPEALS ERRED IN ORDERING THE
PARTITION OF THE PROPERTY IN QUESTION.[13]
At the least, petitioners argue that the subject sale is valid as to Mauricios
share in the Properties.
On the other hand, respondents maintain that they are co-owners of the
Properties by succession. Respondents argue that the sale of the conjugal
Properties is void because: (1) Mauricio executed the Deed of Sale without
Simonas consent; and (2) the sale was merely simulated, as shown by the grossly
inadequate consideration Mauricio received for the Properties.
While this case was pending, Leonida Andaya Lolong (Leonida), David Jr.s
aunt, and Atty. Cendaa, respondents counsel, informed the Court that David Jr.
died on 14 September 2004. Afterwards, Leonida and Elizabeth wrote separate
letters asking for the resolution of this case. Atty. Cendaa later filed an urgent
motion to annotate attorneys lien on TCT Nos. 58999 and 59000. In its Resolution
dated 10 November 2004,[14] the Court noted the notice of David Jr.s death, the
letters written by Leonida and Elizabeth, and granted the motion to annotate
attorneys lien on TCT Nos. 58999 and 59000.
The Ruling of the Court
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
The petition is partly meritorious.
The questions of whether Simona consented to the Deed of Sale and whether
the subject sale was simulated are factual in nature. The rule is factual findings of
the Court of Appeals are binding on this Court. However, there are exceptions,
such as when the factual findings of the Court of Appeals and the trial court are
contradictory, or when the evidence on record does not support the factual
findings.[15] Because these exceptions obtain in the present case, the Court will
consider these issues.
On the Requirement of the Wifes Consent
We hold that the Court of Appeals erred when it declared the Deed of Sale
void based on Article 166, which states:
Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is
under civil interdiction or is confined in a leprosarium, the husband cannot alienate or
encumber any real property of the conjugal partnership without the wifes consent. If she
refuses unreasonably to give her consent, the court may compel her to grant the same.
This article shall not apply to property acquired by the conjugal partnerships before the
effective date of this Code.
Article 166 expressly applies only to properties acquired by the conjugal
partnership after the effectivity of the Civil Code of the Philippines (Civil Code). The
Civil Code came into force on 30 August 1950.[16] Although there is no dispute that
the Properties were conjugal properties of Mauricio and Simona, the records do
not show, and the parties did not stipulate, when the Properties were
acquired.[17] Under Article 1413 of the old Spanish Civil Code, the husband could
alienate conjugal partnership property for valuable consideration without the wifes
consent.[18]
Even under the present Civil Code, however, the Deed of Sale is not void. It is
well-settled that contracts alienating conjugal real property without the wifes
consent are merely voidable under the Civil Code that is, binding on the parties
unless annulled by a competent court and not void ab initio.[19]
Article 166 must be read in conjunction with Article 173 of the Civil Code
(Article 173). The latter prescribes certain conditions before a sale of conjugal
property can be annulled for lack of the wifes consent, as follows:
Art. 173. The wife may, during the marriage and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of the husband
entered into without her consent, when such consent is required, or any act or contract of
the husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs after the
dissolution of the marriage, may demand the value of property fraudulently
alienated by the husband. (Emphasis supplied)
Under the Civil Code, only the wife can ask to annul a contract that disposes
of conjugal real property without her consent. The wife must file the action for
annulment during the marriage and within ten years from the questioned
transaction. Article 173 is explicit on the remedies available if the wife fails to
exercise this right within the specified period. In such case, the wife or her heirs
can only demand the value of the property provided they prove that the husband
fraudulently alienated the property. Fraud is never presumed, but must be
established by clear and convincing evidence.[20]
Respondents action to annul the Deed of Sale based on Article 166 must fail
for having been filed out of time. The marriage of Mauricio and Simona was
dissolved when Mauricio died in 1973. More than ten years have passed since the
execution of the Deed of Sale.
Further, respondents, who are Simonas heirs, are not the parties who can
invoke Article 166. Article 173 reserves that remedy to the wife alone. Only Simona
had the right to have the sale of the Properties annulled on the ground that
Mauricio sold the Properties without her consent.
Simona, however, did not assail the Deed of Sale during her marriage or even
after Mauricios death. The records are bereft of any indication that Simona
questioned the sale of the Properties at any time. Simona did not even attempt to
take possession of or reside on the Properties after Mauricios death. David Jr.,
who was raised by Simona, testified that he and Simona continued to live in Pasay
City after Mauricios death, while her children and other grandchildren resided on
the Properties.[21]
We also agree with the trial court that Simona authorized Mauricio to dispose
of the Properties when she executed the GPA. True, Article 1878 requires a
special power of attorney for an agent to execute a contract that transfers the
ownership of an immovable. However, the Court has clarified that Article 1878
refers to the nature of the authorization, not to its form. [22]Even if a document is
titled as a general power of attorney, the requirement of a special power of
attorney is met if there is a clear mandate from the principal specifically authorizing
the performance of the act.[23]
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
In Veloso v. Court of Appeals,[24] the Court explained that a general power
of attorney could contain a special power to sell that satisfies the requirement of
Article 1878, thus:
An examination of the records showed that the assailed power of attorney was valid and
regular on its face. It was notarized and as such, it carries the evidentiary weight conferred
upon it with respect to its due execution. While it is true that it was denominated as a
general power of attorney, a perusal thereof revealed that it stated an authority to sell, to
wit:
2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and
hereditaments or other forms of real property, more specifically TCT No. 49138, upon such
terms and conditions and under such covenants as my said attorney shall deem fit and
proper.
Thus, there was no need to execute a separate and special power of attorney since the
general power of attorney had expressly authorized the agent or attorney in fact the power
to sell the subject property. The special power of attorney can be included in the
general power when it is specified therein the act or transaction for which the special
power is required. (Emphasis supplied)
In this case, Simona expressly authorized Mauricio in the GPA to sell, assign
and dispose of any and all of my property, real, personal or mixed, of any kind
whatsoever and wheresoever situated, or any interest therein xxx as well as to act
as my general representative and agent, with full authority to buy, sell, negotiate
and contract for me and in my behalf.[25]Taken together, these provisions constitute
a clear and specific mandate to Mauricio to sell the Properties. Even if it is called a
general power of attorney, the specific provisions in the GPA are sufficient for the
purposes of Article 1878. These provisions in the GPA likewise indicate that
Simona consented to the sale of the Properties.
Whether the Sale of the Properties was Simulated
or is Void for Gross Inadequacy of Price
We point out that the law on legitime does not bar the disposition of property
for valuable consideration to descendants or compulsory heirs. In a sale, cash of
equivalent value replaces the property taken from the estate.[26] There is no
diminution of the estate but merely a substitution in values. Donations and other
dispositions by gratuitous title, on the other hand, must be included in the
computation of legitimes.[27]
Respondents, however, contend that the sale of the Properties was merely
simulated. As proof, respondents point to the consideration of P1,000 in the Deed
of Sale, which respondents claim is grossly inadequate compared to the actual
value of the Properties.
Simulation of contract and gross inadequacy of price are distinct legal
concepts, with different effects. When the parties to an alleged contract do not
really intend to be bound by it, the contract is simulated and void. [28] A simulated or
fictitious contract has no legal effect whatsoever [29] because there is no real
agreement between the parties.
In contrast, a contract with inadequate consideration may nevertheless
embody a true agreement between the parties. A contract of sale is a consensual
contract, which becomes valid and binding upon the meeting of minds of the
parties on the price and the object of the sale.[30] The concept of a simulated sale
is thus incompatible with inadequacy of price. When the parties agree on a price
as the actual consideration, the sale is not simulated despite the inadequacy of the
price.[31]
Gross inadequacy of price by itself will not result in a void contract. Gross
inadequacy of price does not even affect the validity of a contract of sale, unless it
signifies a defect in the consent or that the parties actually intended a donation or
some other contract.[32] Inadequacy of cause will not invalidate a contract unless
there has been fraud, mistake or undue influence. [33] In this case, respondents
have not proved any of the instances that would invalidate the Deed of Sale.
Respondents even failed to establish that the consideration paid by the
vendees for the Properties was grossly inadequate. As the trial court pointed out,
the Deed of Sale stipulates that, in addition to the payment of P1,000, the vendees
should assume the mortgage loans from PNB and DBP. The consideration for the
sale of the Properties was thus P1,000 in cash and the assumption of the P15,000
mortgage.
Respondents argue that P16,000 is still far below the actual value of the
Properties. To bolster their claim, respondents presented the following: (1) Tax
Declarations No. A-001-00905[34] and A-001-00906[35] for the year 1979, which
placed the assessed value of the Properties at P70,020 and their approximate
market value at P244,290; and (2) a certified copy of the Department of Finances
Department Order No. 62-97[36] dated 6 June 1997 and attached
guidelines[37] which established the zonal value of the properties along Evangelista
Street atP15,000 per square meter.
The subject Deed of Sale, however, was executed in 1970. The valuation of
the Properties in 1979 or 1997 is of little relevance to the issue of whether P16,000
was a grossly inadequate price to pay for the Properties in 1970. Certainly, there is
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
nothing surprising in the sharp increase in the value of the Properties nine or
twenty-seven years after the sale, particularly when we consider that the
Properties are located in the City of Makati.
More pertinent are Tax Declarations No. 15812[38] and No. 15813,[39] both
issued in 1967, presented by petitioners. These tax declarations placed the
assessed value of both Properties at P16,160. Compared to this, the price
of P16,000 cannot be considered grossly inadequate, much less so shocking to
the conscience[40] as to justify the setting aside of the Deed of Sale.
Respondents next contend that the vendees did not make the mortgage
payments on the Properties. Respondents allege that the rents paid by the tenants
leasing portions of the Properties were sufficient to cover the mortgage payments
to DBP and PNB.
Again, this argument does not help respondents cause. Assuming that the
vendees failed to pay the full price stated in the Deed of Sale, such partial failure
would not render the sale void. In Buenaventura v. Court of Appeals,[41] the
Court held:
xxx If there is a meeting of the minds of the parties as to the price, the contract of sale is
valid, despite the manner of payment, or even the breach of that manner of payment.
xxx
It is not the act of payment of price that determines the validity of a contract of sale.
Payment of the price has nothing to do with the perfection of the contract. Payment of the
price goes into the performance of the contract. Failure to pay the consideration is different
from lack of consideration. The former results in a right to demand the fulfillment or
cancellation of the obligation under an existing valid contract while the latter prevents the
existence of a valid contract. (Emphasis supplied.)
Neither was it shown that the rentals from tenants were sufficient to cover the
mortgage payments. The parties to this case stipulated to only one tenant, a
certain Federico M. Puno, who supposedly leased a room on the Properties
for P300 per month from 1992 to 1994.[42] This is hardly significant, when we
consider that the mortgage was fully paid by 1974. Indeed, the fact that the
Properties were mortgaged to DBP and PNB indicates that the conjugal
partnership, or at least Mauricio, was short of funds.
Petitioners point out that they were duly employed and had the financial
capacity to buy the Properties in 1970. Respondents did not refute this. Petitioners
presented 72 receipts[43]showing the mortgage payments made to PNB and DBP,
and the Release of the Real Estate Mortgage [44] (Mortgage Release) dated 5 April
1974. True, these documents all bear Mauricios name. However, this tends to
support, rather than detract from, petitioner-vendees explanation that they initially
gave the mortgage payments directly to Mauricio, and then later directly to the
banks, without formally advising the bank of the sale. The last 3 mortgage receipts
and the Mortgage Release were all issued in Mauricios name even after his death
in 1970. Obviously, Mauricio could not have secured the Mortgage Release and
made these last payments.
Presumption of Regularity and Burden of Proof
The Deed of Sale was notarized and, as certified by the Regional Trial Court
of Manila, entered in the notarial books submitted to that court. As a document
acknowledged before a notary public, the Deed of Sale enjoys the presumption of
regularity[45] and due execution.[46] Absent evidence that is clear, convincing and
more than merely preponderant, the presumption must be upheld.[47]
Respondents evidence in this case is not even preponderant. Respondents
allegations, testimony and bare denials cannot prevail over the documentary
evidence presented by petitioners. These documents the Deed of Sale and the
GPA which are both notarized, the receipts, the Mortgage Release and the 1967
tax declarations over the Properties support petitioners account of the sale.
As the parties challenging the regularity of the Deed of Sale and alleging its
simulation, respondents had the burden of proving these charges. [48] Respondents
failed to discharge this burden. Consequentially, the Deed of Sale stands.
On the Partition of the Property
Nevertheless, this Court finds it proper to grant the partition of the Properties,
subject to modification.
Petitioners have consistently claimed that their father is one of the vendees
who bought the Properties. Vendees Elizabeth and Ofelia both testified that the
Roland A. Bravo in the Deed of Sale is their father,[49] although their brother,
Roland Bravo, Jr., made some of the mortgage payments. Petitioners counsel,
Atty. Paggao, made the same clarification before the trial court.[50]
As Roland Bravo, Sr. is also the father of respondent Edward Bravo, Edward
is thus a compulsory heir of Roland Bravo, and entitled to a share, along with his
brothers and sisters, in his fathers portion of the Properties. In short, Edward and
petitioners are co-owners of the Properties.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

As such, Edward can rightfully ask for the partition of the Properties. Any co-
owner may demand at any time the partition of the common property unless a co-
owner has repudiated the co-ownership.[51] This action for partition does not
prescribe and is not subject to laches.[52]
WHEREFORE, we REVERSE the Decision of 21 December 2001 of the
Court of Appeals in CA-G.R. CV No. 67794. We REINSTATE the Decision of 11
May 2000 of the Regional Trial Court of Makati, Branch No. 139, in Civil Case No.
97-137, declaring VALID the Deed of Sale with Assumption of Mortgage dated 28
October 1970, with the following MODIFICATIONS:
1. We GRANT judicial partition of the subject Properties in the following
manner:

a. Petitioner LILY ELIZABETH BRAVO-GUERRERO is entitled to one-third

(1/3) of the Properties;

b. Petitioner OFELIA BRAVO-QUIESTAS is entitled to one-third (1/3) of the

Properties; and

c. The remaining one-third (1/3) portion of the Properties should be divided

equally between the children of ROLAND BRAVO.

2. The other heirs of ROLAND BRAVO must reimburse ROLAND BRAVO,

JR. for whatever expenses the latter incurred in paying for and securing
the release of the mortgage on the Properties.
SO ORDERED.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
QUIROGA vs. PARSONS
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. Parsons
(to whose rights and obligations the present defendant later subrogated itself), as
party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES
QUIROGA AND J. PARSONS, BOTH MERCHANTS
ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF
"QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds
in the Visayan Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for
the latter's establishment in Iloilo, and shall invoice them at the same price
he has fixed for sales, in Manila, and, in the invoices, shall make and
allowance 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 different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received,
within a period of sixty days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M.
Quiroga, and the freight, insurance, and cost of unloading from the vessel
at the point where the beds are received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment,
said payment when made shall be considered as a prompt payment, and
as such a deduction of 2 per cent shall be made from the amount of the
invoice.
The same discount shall be made on the amount of any invoice which Mr.
Parsons may deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before
hand of any alteration in price which he may plan to make in respect to his
beds, and agrees that if on the date when such alteration takes effect he
should have any order pending to be served to Mr. Parsons, such order
shall enjoy the advantage of the alteration if the price thereby be lowered,
but shall not be affected by said alteration if the price thereby be
increased, for, in this latter case, Mr. Quiroga assumed the obligation to
invoice the beds at the price at which the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the
"Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the
benefit of both contracting parties, Mr. Parsons may find himself obliged to
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 island not comprised with the Visayan group.
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 exclusive agents, and shall immediately report such action to Mr.
Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be
terminated by either of the contracting parties on a previous notice of
ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his complaint, only two of
them constitute the subject matter of this appeal and both substantially amount to
the averment that the defendant violated the following obligations: not to sell the
beds at higher prices than those of the invoices; to have an open 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 order the beds by the dozen
and in no other manner. As may be seen, with the exception of the obligation on
the part of the defendant to order the beds by 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. But the plaintiff alleged that the defendant was
his agent for the sale of his beds in Iloilo, and that said obligations are implied in a
contract of commercial agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the contract hereinbefore
transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.
In order to classify a contract, due regard must be given to its essential clauses. In
the contract in question, what was essential, as constituting its cause and subject
matter, is that the plaintiff was to furnish the defendant with the beds which the
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
latter might order, at the price stipulated, and that the defendant was to pay the
price in the manner stipulated. The price agreed upon was the one determined by
the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25
per cent, according to their class. Payment was to be made at the end of sixty
days, or before, at the plaintiff's request, or in cash, if the defendant so preferred,
and in these last two cases 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 obligation on the part of the plaintiff to supply the beds, and,
on the part of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent received
the thing to sell it, and does not pay its price, but delivers to the principal the price
he obtains from the sale of the thing to a third person, and if he does not succeed
in selling it, he returns it. By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily obliged to pay their
price within the term fixed, without any other consideration and regardless as to
whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the
defendant and the plaintiff is one of purchase and sale, in order to show that it was
not one made on the basis of a commission on sales, as the plaintiff claims it was,
for these contracts are incompatible with each other. But, besides, examining the
clauses of this contract, none of them is found that substantially supports the
plaintiff's contention. Not a single one of these clauses necessarily conveys the
idea of an agency. The words commission on sales used in clause (A) of article 1
mean nothing else, as stated in the contract itself, than a mere discount on the
invoice price. The word agency, also used in articles 2 and 3, only expresses that
the defendant was the only one that could sell the plaintiff's beds in the Visayan
Islands. With regard to the remaining clauses, the least that can be said is that
they are not incompatible with the contract of purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-
president of the defendant corporation and who established and managed the
latter's business in Iloilo. It appears that this witness, prior to the time of his
testimony, had serious trouble with the defendant, had maintained a civil suit
against it, and had even accused one of its partners, Guillermo Parsons, of
falsification. He testified that it was he who drafted the contract Exhibit A, and,
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
sales. However, according to the defendant's evidence, it was Mariano Lopez
Santos, a director of the corporation, who prepared Exhibit A. But, even supposing
that Ernesto Vidal has stated the truth, his statement as to what 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, constitute, as we have
said, a contract of purchase and sale, and not one of commercial agency. This
only means that Ernesto Vidal was mistaken in his classification of the contract.
But it must be understood that a contract is what the law defines it to be, and not
what it is called by the contracting parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it
could not sell; that, without previous notice, it forwarded to the defendant the beds
that it wanted; and that the defendant received its commission for the beds sold by
the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on
the part of both of them, there was mutual tolerance in the performance of the
contract in disregard of its terms; and it gives no right to have the contract
considered, not as the parties stipulated it, but as they performed it. Only the acts
of the contracting parties, subsequent to, and in connection with, the execution of
the contract, must be considered for the 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 and plainly show that the contract belongs to a
certain kind and not to another. Furthermore, the return made was of certain brass
beds, and was not effected in exchange for the price paid for them, but was for
other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's
prior consent with respect to said beds, which shows that it was not considered
that the defendant had a right, by virtue of the contract, to make this return. As
regards the shipment of beds without previous notice, it is insinuated in the record
that these brass beds were precisely the ones so shipped, and that, for this very
reason, the plaintiff agreed to their return. And with respect to the so-called
commissions, we have said that they merely constituted a discount on the invoice
price, and the reason for applying this benefit to the beds sold directly by the
plaintiff to persons in Iloilo was because, as the defendant obligated itself in the
contract to incur the expenses of advertisement of the plaintiff's beds, such sales
were to be considered as a result of that advertisement.
In respect to the defendant's obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle the
plaintiff to disregard the orders which the defendant might place under other
conditions; but if the plaintiff consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the
plaintiff and the defendant was one of purchase and sale, and that the obligations
the breach of which is alleged as a cause of action are not imposed upon the
defendant, either by agreement or by law.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
The judgment appealed from is affirmed, with costs against the appellant. So
ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.
REYES vs. TUPARAN
Subject of this petition for review is the February 13, 2009 Decision [1]
of the
Court of Appeals (CA) which affirmed with modification the February 22, 2006
Decision[2]of the Regional Trial Court, Branch 172, Valenzuela City (RTC), in Civil Case
No. 3945-V-92, an action for Rescission of Contract with Damages.
On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for
Rescission of Contract with Damages against Victoria T. Tuparan (respondent) before the
RTC.In her Complaint, petitioner alleged, among others, that she was the registered owner
of a 1,274 square meter residential and commercial lot located in
Karuhatan, ValenzuelaCity, and covered by TCT No. V-4130; that on that property, she put
up a three-storey commercial building known as RBJ Building and a residential apartment
building; that since 1990, she had been operating a drugstore and cosmetics store on the
ground floor of RBJ Building where she also had been residing while the other areas of the
buildings including the sidewalks were being leased and occupied by tenants and street
vendors.
In December 1989, respondent leased from petitioner a space on the ground floor
of the RBJ Building for her pawnshop business for a monthly rental of 4,000.00. A close
friendship developed between the two which led to the respondent investing thousands of
pesos in petitioners financing/lending business from February 7, 1990 to May 27, 1990,
with interest at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers
Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of 2,000,000.00 payable
in installments. On November 15, 1990, petitioners outstanding account on the mortgage
reached 2,278,078.13. Petitioner then decided to sell her real properties for at least
6,500,000.00 so she could liquidate her bank loan and finance her businesses. As a
gesture of friendship, respondent verbally offered to conditionally buy petitioners real
properties for 4,200,000.00 payable on installment basis without interest and to assume
the bank loan. To induce the petitioner to accept her offer, respondent offered the following
conditions/concessions:
1. That the conditional sale will be cancelled if the plaintiff
(petitioner) can find a buyer of said properties for the amount of
6,500,000.00 within the next three (3) months provided all amounts
received by the plaintiff from the defendant (respondent) including
payments actually made by defendant to Farmers Savings and Loan Bank
would be refunded to the defendant with additional interest of six (6%)
monthly;
2. That the plaintiff would continue using the space occupied by
her and drugstore and cosmetics store without any rentals for the duration
of the installment payments;
3. That there will be a lease for fifteen (15) years in favor of the
plaintiff over the space for drugstore and cosmetics store at a monthly
rental of only 8,000.00 after full payment of the stipulated installment
payments are made by the defendant;
4. That the defendant will undertake the renewal and payment of
the fire insurance policies on the two (2) subject buildings following the
expiration of the then existing fire insurance policy of the plaintiff up to
the time that plaintiff is fully paid of the total purchase price of
4,200,000.00.[3]
After petitioners verbal acceptance of all the conditions/concessions, both parties
worked together to obtain FSL Banks approval for respondent to assume her (petitioners)
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

outstanding bank account. The assumption would be part of respondents purchase price for
petitioners mortgaged real properties. FSL Bank approved their proposal on the condition
that petitioner would sign or remain as co-maker for the mortgage obligation assumed by
respondent.
On November 26, 1990, the parties and FSL Bank executed the corresponding
Deed of Conditional Sale of Real Properties with Assumption of Mortgage. Due to their
close personal friendship and business relationship, both parties chose not to reduce into
writing the other terms of their agreement mentioned in paragraph 11 of the complaint.
Besides, FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real
Properties with Assumption of Mortgage any other side agreement between petitioner and
respondent.
Petitioner further averred that despite her success in finding a prospective buyer
for the subject real properties within the 3-month period agreed upon, respondent reneged
on her promise to allow the cancellation of their deed of conditional sale. Instead,
respondent became interested in owning the subject real properties and even wanted to
convert the entire property into a modern commercial complex. Nonetheless, she consented
because respondent repeatedly professed friendship and assured her that all their verbal
side agreement would be honored as shown by the fact that since December 1990, she
(respondent) had not collected any rentals from the petitioner for the space occupied by her
drugstore and cosmetics store.
On March 19, 1992, the residential building was gutted by fire which caused the
petitioner to lose rental income in the amount of 8,000.00 a month since April 1992.
Respondent neglected to renew the fire insurance policy on the subject buildings.

Under the Deed of Conditional Sale of Real Properties with Assumption of

Since December 1990, respondent had taken possession of the subject real
Mortgage, respondent was bound to pay the petitioner a lump sum of 1.2 million pesos
properties and had been continuously collecting and receiving monthly rental income from
without interest as part of the purchase price in three (3) fixed installments as follows:
the tenants of the buildings and vendors of the sidewalk fronting the RBJ building without
sharing it with petitioner.
a) 200,000.00 due January 31, 1991
b) 200,000.00 due June 30, 1991
On September 2, 1992, respondent offered the amount of 751,000.00 only
c) 800,000.00 due December 31, 1991
payable on September 7, 1992, as full payment of the purchase price of the subject real
properties and demanded the simultaneous execution of the corresponding deed of absolute
Respondent, however, defaulted in the payment of her obligations on their due
sale.
dates. Instead of paying the amounts due in lump sum on their respective maturity dates,
respondent paid petitioner in small amounts from time to time. To compensate for her
delayed payments, respondent agreed to pay petitioner an interest of 6% a month. As Respondents Answer

of August 31, 1992, respondent had only paid 395,000.00, leaving a balance of
Respondent countered, among others, that the tripartite agreement erroneously
805,000.00 as principal on the unpaid installments and 466,893.25 as unpaid
designated by the petitioner as a Deed of Conditional Sale of Real Property with
accumulated interest.
Assumption of Mortgage was actually a pure and absolute contract of sale with a term
period. It could not be considered a conditional sale because the acquisition of contractual
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
rights and the performance of the obligation therein did not depend upon a future and
uncertain event. Moreover, the capital gains and documentary stamps and other
miscellaneous expenses and real estate taxes up to 1990 were supposed to be paid by
petitioner but she failed to do so.
Respondent further averred that she successfully rescued the properties from a
definite foreclosure by paying the assumed mortgage in the amount of 2,278,078.13 plus
interest and other finance charges. Because of her payment, she was able to obtain a deed
of cancellation of mortgage and secure a release of mortgage on the subject real properties
including petitioners ancestral residential property in Sta. Maria, Bulacan.
Petitioners claim for the balance of the purchase price of the subject real
properties was baseless and unwarranted because the full amount of the purchase price had
already been paid, as she did pay more than 4,200,000.00, the agreed purchase price of
the subject real properties, and she had even introduced improvements thereon worth more
than 4,800,000.00. As the parties could no longer be restored to their original positions,
rescission could not be resorted to.
Respondent added that as a result of their business relationship, petitioner was
able to obtain from her a loan in the amount of 400,000.00 with interest and took several
pieces of jewelry worth 120,000.00. Petitioner also failed and refused to pay the monthly
rental of 20,000.00 since November 16, 1990 up to the present for the use and occupancy
of the ground floor of the building on the subject real property, thus, accumulating
arrearages in the amount of 470,000.00 as of October 1992.
Ruling of the RTC
On February 22, 2006, the RTC handed down its decision finding that respondent failed to
pay in full the 4.2 million total purchase price of the subject real properties leaving a
balance of 805,000.00. It stated that the checks and receipts presented by respondent refer
to her payments of the mortgage obligation with FSL Bank and not the payment of the
balance of 1,200,000.00. The RTC also considered the Deed of Conditional Sale of Real
Property with Assumption of Mortgage executed by and among the two parties and FSL
Bank a contract to sell, and not a contract of sale. It was of the opinion that although the
petitioner was entitled to a rescission of the contract, it could not be permitted because her
non-payment in full of the purchase price may not be considered as substantial and
fundamental breach of the contract as to defeat the object of the parties in entering into the
contract.[4] The RTC believed that the respondents offer stated in her counsels letter
dated September 2, 1992 to settle what she thought was her unpaid balance of 751,000.00
showed her sincerity and willingness to settle her obligation. Hence, it would be more
equitable to give respondent a chance to pay the balance plus interest within a given period
of time.
Finally, the RTC stated that there was no factual or legal basis to award damages and
attorneys fees because there was no proof that either party acted fraudulently or in bad
faith.
Thus, the dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Allowing the defendant to pay the plaintiff within thirty
(30) days from the finality hereof the amount of 805,000.00,
representing the unpaid purchase price of the subject property,
with interest thereon at 2% a month from January 1, 1992 until
fully paid. Failure of the defendant to pay said amount within the
said period shall cause the automatic rescission of the contract
(Deed of Conditional Sale of Real Property with Assumption of
Mortgage) and the plaintiff and the defendant shall be restored to
their former positions relative to the subject property with each
returning to the other whatever benefits each derived from the
transaction;
2. Directing the defendant to allow the plaintiff to
continue using the space occupied by her for drugstore and
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

cosmetic store without any rental pending payment of the

her to pay the unpaid balance of the purchase price plus interest. Thus, the decretal portion
aforesaid balance of the purchase price.
of the CA Decision reads:
3. Ordering the defendant, upon her full payment of the
purchase price together with interest, to execute a contract of lease WHEREFORE, premises considered, the Decision
for fifteen (15) years in favor of the plaintiff over the space for the dated 22 February 2006 and Order dated 22 December 2006 of
drugstore and cosmetic store at a fixed monthly rental the Regional Trial Court of Valenzuela City, Branch 172 in Civil
of 8,000.00; and Case No. 3945-V-92 are AFFIRMED with MODIFICATION in that
defendant-appellant Victoria T. Tuparan is hereby ORDERED to
pay plaintiff-appellee/appellant Mila A. Reyes, within 30 days
from finality of this Decision, the amount of 805,000.00
representing the unpaid balance of the purchase price of the
4. Directing the plaintiff, upon full payment to her by the subject property, plus interest thereon at the rate of 6% per annum
defendant of the purchase price together with interest, to execute from 11 September 1992 up to finality of this Decision and,
the necessary deed of sale, as well as to pay the Capital Gains Tax, thereafter, at the rate of 12% per annum until full payment. The
documentary stamps and other miscellaneous expenses necessary ruling of the trial court on the automatic rescission of the Deed of
for securing the BIR Clearance, and to pay the real estate taxes due Conditional Sale with Assumption of Mortgage is hereby
on the subject property up to 1990, all necessary to transfer DELETED. Subject to the foregoing, the dispositive portion of the
ownership of the subject property to the defendant. trial courts decision is AFFIRMED in all other respects.

No pronouncement as to damages, attorneys fees and SO ORDERED.[6]

costs.

SO ORDERED.[5] After the denial of petitioners motion for reconsideration and respondents motion
for partial reconsideration, petitioner filed the subject petition for review praying for the
reversal and setting aside of the CA Decision anchored on the following
Ruling of the CA ASSIGNMENT OF ERRORS

On February 13, 2009, the CA rendered its decision affirming with modification the RTC
A. THE COURT OF APPEALS SERIOUSLY ERRED AND
Decision. The CA agreed with the RTC that the contract entered into by the parties is a ABUSED ITS DISCRETION IN DISALLOWING THE
contract to sell but ruled that the remedy of rescission could not apply because the OUTRIGHT RESCISSION OF THE SUBJECT DEED OF
CONDITIONAL SALE OF REAL PROPERTIES WITH
respondents failure to pay the petitioner the balance of the purchase price in the total ASSUMPTION OF MORTGAGE ON THE GROUND THAT
amount of 805,000.00 was not a breach of contract, but merely an event that prevented RESPONDENT TUPARANS FAILURE TO PAY PETITIONER
REYES THE BALANCE OF THE PURCHASE PRICE OF
the seller (petitioner) from conveying title to the purchaser (respondent). It reasoned that 805,000.00 IS NOT A BREACH OF CONTRACT DESPITE ITS
out of the total purchase price of the subject property in the amount of 4,200,000.00, OWN FINDINGS THAT PETITIONER STILL RETAINS
OWNERSHIP AND TITLE OVER THE SUBJECT REAL
respondents remaining unpaid balance was only 805,000.00. Since respondent had PROPERTIES DUE TO RESPONDENTS REFUSAL TO PAY THE
already paid a substantial amount of the purchase price, it was but right and just to allow BALANCE OF THE TOTAL PURCHASE PRICE OF 805,000.00
WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE
OF 4,200,000.00 OR 66% OF THE STIPULATED LAST
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

INSTALLMENT OF 1,200,000.00 PLUS THE INTEREST CONTAINED IN HER AMENDED COMPLAINT DATED APRIL
THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED 22, 2006.
AND ADOPTED THE TRIAL COURTS CONCLUSION THAT
THE RESPONDENTS NON-PAYMENT OF THE 805,000.00 IS
ONLY A SLIGHT OR CASUAL BREACH OF CONTRACT. E. THE COURT OF APPEALS SERIOUSLY ERRED AND
ABUSED ITS DISCRETION IN THE APPRECIATION OF FACTS
RESULTING INTO THE DENIAL OF THE CLAIM OF
B. THE COURT OF APPEALS SERIOUSLY ERRED AND PETITIONER REYES FOR THE 29,609.00 BACK RENTALS
ABUSED ITS DISCRETION IN DISREGARDING AS GROUND THAT WERE COLLECTED BY RESPONDENT TUPARAN
FOR THE RESCISSION OF THE SUBJECT CONTRACT THE FROM THE OLD TENANTS OF THE PETITIONER.
OTHER FRAUDULENT AND MALICIOUS ACTS COMMITTED
BY THE RESPONDENT AGAINST THE PETITIONER WHICH
BY THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A F. THE COURT OF APPEALS SERIOUSLY ERRED AND
GRACE PERIOD OF THIRTY (30) DAYS TO THE ABUSED ITS DISCRETION IN DENYING THE PETITIONERS
RESPONDENT WITHIN WHICH TO PAY TO THE EARLIER URGENT MOTION FOR ISSUANCE OF A
PETITIONER THE 805,000.00 PLUS INTEREST THEREON. PRELIMINARY MANDATORY AND PROHIBITORY
INJUNCTION DATED JULY 7, 2008 AND THE SUPPLEMENT
THERETO DATED AUGUST 4, 2008 THEREBY CONDONING
C. EVEN ASSUMING ARGUENDO THAT PETITIONER THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO
IS NOT ENTITLED TO THE RESCISSION OF THE SUBJECT ALEJO TO RESOLVE WITHIN ELEVEN (11) YEARS THE
CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY PETITIONERS THREE (3) SEPARATE MOTIONS FOR
ERRED AND ABUSED ITS DISCRETION IN REDUCING THE PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING
INTEREST ON THE 805,000.00 TO ONLY 6% PER ANNUM ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME
STARTING FROM THE DATE OF FILING OF THE DATED MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7,
COMPLAINT ON SEPTEMBER 11, 1992 DESPITE THE 2006 THEREBY PERMITTING THE RESPONDENT TO
PERSONAL COMMITMENT OF THE RESPONDENT AND UNJUSTLY ENRICH HERSELF BY CONTINUOUSLY
AGREEMENT BETWEEN THE PARTIES THAT RESPONDENT COLLECTING ALL THE RENTALS/FRUITS OF THE SUBJECT
WILL PAY INTEREST ON THE 805,000.00 AT THE RATE OF REAL PROPERTIES WITHOUT ANY ACCOUNTING AND
6% MONTHLY STARTING THE DATE OF DELINQUENCY ON COURT DEPOSIT OF THE COLLECTED RENTALS/FRUITS
DECEMBER 31, 1991. AND THE PETITIONERS URGENT MOTION TO DIRECT
DEFENDANT VICTORIA TUPARAN TO PAY THE
ACCUMULATED UNPAID REAL ESTATE TAXES AND SEF
D. THE COURT OF APPEALS SERIOUSLY ERRED AND TAXES ON THE SUBJECT REAL PROPERTIES
ABUSED ITS DISCRETION IN THE APPRECIATION AND/OR DATED JANUARY 13, 2007 THEREBY EXPOSING THE
MISAPPRECIATION OF FACTS RESULTING INTO THE SUBJECT REAL PROPERTIES TO IMMINENT
DENIAL OF THE CLAIM OF PETITIONER REYES FOR AUCTION SALE BY THE CITY TREASURER
ACTUAL DAMAGES WHICH CORRESPOND TO THE OF VALENZUELA CITY.
MILLIONS OF PESOS OF RENTALS/FRUITS OF THE SUBJECT
REAL PROPERTIES WHICH RESPONDENT TUPARAN
COLLECTED CONTINUOUSLY SINCE DECEMBER 1990, G. THE COURT OF APPEALS SERIOUSLY ERRED AND
EVEN WITH THE UNPAID BALANCE OF 805,000.00 AND ABUSED ITS DISCRETION IN DENYING THE PETITIONERS
DESPITE THE FACT THAT RESPONDENT DID NOT CLAIM FOR MORAL AND EXEMPLARY DAMAGES AND
CONTROVERT SUCH CLAIM OF THE PETITIONER AS ATTORNEYS FEES AGAINST THE RESPONDENT.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

In sum, the crucial issue that needs to be resolved is whether or not the CA was
Position of the Respondent
correct in ruling that there was no legal basis for the rescission of the Deed of Conditional
Sale with Assumption of Mortgage.
The respondent counters that the subject Deed of Conditional Sale with Assumption of
Mortgage entered into between the parties is a contract to sell and not a contract of sale
Position of the Petitioner because the title of the subject properties still remains with the petitioner as she failed to
pay the installment payments in accordance with their agreement.
The petitioner basically argues that the CA should have granted the rescission of the
subject Deed of Conditional Sale of Real Properties with Assumption of Mortgage for the
Respondent echoes the RTC position that her inability to pay the full balance on the
following reasons:
purchase price may not be considered as a substantial and fundamental breach of the
subject contract and it would be more equitable if she would be allowed to pay the balance
1. The subject deed of conditional sale is a reciprocal obligation
whose outstanding characteristic is reciprocity arising from identity of including interest within a certain period of time. She claims that as early as 1992, she has
cause by virtue of which one obligation is correlative of the other. shown her sincerity by offering to pay a certain amount which was, however, rejected by
2. The petitioner was rescinding not enforcing the subject Deed the petitioner.
of Conditional Sale pursuant to Article 1191 of the Civil Code because of
the respondents failure/refusal to pay the 805,000.00 balance of the total
purchase price of the petitioners properties within the stipulated period Finally, respondent states that the subject deed of conditional sale explicitly provides that
ending December 31, 1991. the installment payments shall not bear any interest. Moreover, petitioner failed to prove
that she was entitled to back rentals.
3. There was no slight or casual breach on the part of the
respondent because she (respondent) deliberately failed to comply with The Courts Ruling
her contractual obligations with the petitioner by violating the terms or
manner of payment of the 1,200,000.00 balance and unjustly enriched
herself at the expense of the petitioner by collecting all rental payments
The petition lacks merit.
for her personal benefit and enjoyment.

The Court agrees with the ruling of the courts below that the subject Deed of
Furthermore, the petitioner claims that the respondent is liable to pay interest at
Conditional Sale with Assumption of Mortgage entered into by and among the two parties
the rate of 6% per month on her unpaid installment of 805,000.00 from the date of the
and FSL Bank on November 26, 1990 is a contract to sell and not a contract of sale. The
delinquency, December 31, 1991, because she obligated herself to do so.
subject contract was correctly classified as a contract to sell based on the following
Finally, the petitioner asserts that her claim for damages or lost income as well as
pertinent stipulations:
for the back rentals in the amount of 29,609.00 has been fully substantiated and,
therefore, should have been granted by the CA. Her claim for moral and exemplary 8. That the title and ownership of the subject real
damages and attorneys fees has been likewise substantiated. properties shall remain with the First Party until the full payment
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
of the Second Party of the balance of the purchase price and
liquidation of the mortgage obligation of 2,000,000.00. Pending
payment of the balance of the purchase price and liquidation of the
mortgage obligation that was assumed by the Second Party, the
Second Party shall not sell, transfer and convey and otherwise
encumber the subject real properties without the written consent
of the First and Third Party.
9. That upon full payment by the Second Party of the full
balance of the purchase price and the assumed mortgage
obligation herein mentioned the Third Party shall issue the
corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in
favor of the Second Party.[7]
Based on the above provisions, the title and ownership of the subject properties
remains with the petitioner until the respondent fully pays the balance of the purchase price
and the assumed mortgage obligation. Thereafter, FSL Bank shall then issue the
corresponding deed of cancellation of mortgage and the petitioner shall execute the
corresponding deed of absolute sale in favor of the respondent.
Accordingly, the petitioners obligation to sell the subject properties becomes
demandable only upon the happening of the positive suspensive condition, which is the
respondents full payment of the purchase price. Without respondents full payment, there
can be no breach of contract to speak of because petitioner has no obligation yet to turn
over the title. Respondents failure to pay in full the purchase price is not the breach of
contract contemplated under Article 1191 of the New Civil Code but rather just an
event that prevents the petitioner from being bound to convey title to the respondent. The
2009 case of Nabus v. Joaquin & Julia Pacson[8] is enlightening:
The Court holds that the contract entered into by the
Spouses Nabus and respondents was a contract to sell, not a
contract of sale.
A contract of sale is defined in Article 1458 of the Civil
Code, thus:
Art. 1458. By the contract of sale, one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.
xxx
Sale, by its very nature, is a consensual contract because it
is perfected by mere consent. The essential elements of a contract
of sale are the following:
a) Consent or meeting of the minds, that is,
consent to transfer ownership in exchange for
the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be
considered as a Contract of Sale because the first essential element
is lacking. In a contract to sell, the prospective seller explicitly
reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as
the full payment of the purchase price. What the seller agrees or
obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is delivered
to him. In other words, the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and, thus, ownership is
retained by the prospective seller without further remedies by the
prospective buyer.
xxx xxx xxx
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by
entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which
states:
Art. 1479. A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct
from the price.
A contract to sell may thus be defined as a bilateral
contract whereby the prospective seller, while expressly reserving
the ownership of the subject property despite delivery thereof to
the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it
is conditioned upon the happening of a contingent event which
may or may not occur. If the suspensive condition is not fulfilled,
the perfection of the contract of sale is completely abated.
However, if the suspensive condition is fulfilled, the contract of
sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by
the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer
by entering into a contract of absolute sale.
Further, Chua v. Court of Appeals, cited this distinction
between a contract of sale and a contract to sell:
In a contract of sale, the title to the
property passes to the vendee upon the delivery of
the thing sold; in a contract to sell, ownership is,
by agreement, reserved in the vendor and is not to
pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of
sale, the vendor loses ownership over the property
and cannot recover it until and unless the contract
is resolved or rescinded; whereas, in a contract to
sell, title is retained by the vendor until full
payment of the price. In the latter contract,
payment of the price is a positive suspensive
condition, failure of which is not a breach but an
event that prevents the obligation of the vendor to
convey title from becoming effective.
It is not the title of the contract, but its express terms or
stipulations that determine the kind of contract entered into by the
parties. In this case, the contract entitled Deed of Conditional
Sale is actually a contract to sell. The contract stipulated that as
soon as the full consideration of the sale has been paid by the
vendee, the corresponding transfer documents shall be executed
by the vendor to the vendee for the portion sold. Where the vendor
promises to execute a deed of absolute sale upon the completion
by the vendee of the payment of the price, the contract is only a
contract to sell. The aforecited stipulation shows that the vendors
reserved title to the subject property until full payment of the
purchase price.
xxx
Unfortunately for the Spouses Pacson, since the Deed of
Conditional Sale executed in their favor was merely a contract to
sell, the obligation of the seller to sell becomes demandable only
upon the happening of the suspensive condition. The full payment
of the purchase price is the positive suspensive condition, the
failure of which is not a breach of contract, but simply an event that
prevented the obligation of the vendor to convey title from acquiring
binding force. Thus, for its non-fulfilment, there is no contract to
speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. With this
circumstance, there can be no rescission or fulfillment of an
obligation that is still non-existent, the suspensive condition not
having occurred as yet. Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code is the obligors
failure to comply with an obligation already extant, not a failure of a
condition to render binding that obligation. [Emphases and
underscoring supplied]
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of
Atienza v. Espidol, [9] where it was written:
Regarding the right to cancel the contract for non-payment
of an installment, there is need to initially determine if what the
parties had was a contract of sale or a contract to sell. In a contract
of sale, the title to the property passes to the buyer upon the
delivery of the thing sold. In a contract to sell, on the other hand,
the ownership is, by agreement, retained by the seller and is not to
pass to the vendee until full payment of the purchase price. In the
contract of sale, the buyers non-payment of the price is a negative
resolutory condition; in the contract to sell, the buyers full
payment of the price is a positive suspensive condition to the
coming into effect of the agreement. In the first case, the seller has
lost and cannot recover the ownership of the property unless he
takes action to set aside the contract of sale. In the second case,
the title simply remains in the seller if the buyer does not comply
with the condition precedent of making payment at the time
specified in the contract. Here, it is quite evident that the contract
involved was one of a contract to sell since the Atienzas, as sellers,
were to retain title of ownership to the land until respondent
Espidol, the buyer, has paid the agreed price. Indeed, there seems
no question that the parties understood this to be the case.
Admittedly, Espidol was unable to pay the second
installment of P1,750,000.00 that fell due in December 2002. That
payment, said both the RTC and the CA, was a positive suspensive
condition failure of which was not regarded a breach in the sense
that there can be no rescission of an obligation (to turn over title)
that did not yet exist since the suspensive condition had not taken
place. x x x. [Emphases and underscoring supplied]
Thus, the Court fully agrees with the CA when it resolved: Considering, however,
that the Deed of Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that
out of the total purchase price of the subject property in the amount of 4,200,000.00, the
remaining unpaid balance of Tuparan (respondent) is only 805,000.00, a substantial
amount of the purchase price has already been paid. It is only right and just to allow
Tuparan to pay the said unpaid balance of the purchase price to Reyes.[10]
Granting that a rescission can be permitted under Article 1191, the Court still
cannot allow it for the reason that, considering the circumstances, there was only a slight or
casual breach in the fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of the
contract is substantial and fundamental to the fulfillment of the obligation. Whether the
breach is slight or substantial is largely determined by the attendant circumstances. [11] In
the case at bench, the subject contract stipulated the following important provisions:
2. That the purchase price of 4,200,000.00 shall be paid as
follows:
a) 278,078.13 received in cash by the First Party but directly
paid to the Third Party as partial payment of the mortgage obligation of
the First Party in order to reduce the amount to 2,000,000.00 only as
of November 15, 1990;
b) 721,921.87 received in cash by the First Party as additional
payment of the Second Party;
c) 1,200,000.00 to be paid in installments as follows:
1. 200,000.00 payable on or before January 31,
1991;
2. 200,000.00 payable on or before June 30,
1991;
3. 800,000.00 payable on or before December
31, 1991;
Note: All the installments shall not bear any interest.
d) 2,000,000.00 outstanding balance of the mortgage
obligation as of November 15, 1990 which is hereby assumed by the
Second Party.
xxx
3. That the Third Party hereby acknowledges receipts from
the Second Party P278,078.13 as partial payment of the loan obligation
of First Party in order to reduce the account to only 2,000,000.00 as of
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

November 15, 1990 to be assumed by the Second Party effective

correct in imposing interest at the rate of 6% per annum starting from the filing of the
November 15, 1990.[12]
complaint on September 11, 1992.

From the records, it cannot be denied that respondent paid to FSL Bank
petitioners mortgage obligation in the amount of 2,278,078.13, which formed part of the
purchase price of the subject property. Likewise, it is not disputed that respondent paid
directly to petitioner the amount of 721,921.87 representing the additional payment for
the purchase of the subject property. Clearly, out of the total price of 4,200,000.00,
Finally, the Court upholds the ruling of the courts below regarding the non-
respondent was able to pay the total amount of 3,000,000.00, leaving a balance of
imposition of damages and attorneys fees. Aside from petitioners self-serving statements,
1,200,000.00 payable in three (3) installments.
there is not enough evidence on record to prove that respondent acted fraudulently and
maliciously against the petitioner. In the case of Heirs of Atienza v. Espidol,[13] it was
Out of the 1,200,000.00 remaining balance, respondent paid on several dates the
stated:
first and second installments of 200,000.00 each. She, however, failed to pay the third and
Respondents are not entitled to moral damages because
last installment of 800,000.00 due on December 31, 1991. Nevertheless, on August 31,
contracts are not referred to in Article 2219 of the Civil Code,
1992, respondent, through counsel, offered to pay the amount of 751,000.00, which was which enumerates the cases when moral damages may be
rejected by petitioner for the reason that the actual balance was 805,000.00 excluding the recovered. Article 2220 of the Civil Code allows the recovery of
moral damages in breaches of contract where the defendant acted
interest charges. fraudulently or in bad faith. However, this case involves a contract
to sell, wherein full payment of the purchase price is a positive
suspensive condition, the non-fulfillment of which is not a breach
Considering that out of the total purchase price of 4,200,000.00, respondent has of contract, but merely an event that prevents the seller from
already paid the substantial amount of 3,400,000.00, more or less, leaving an unpaid conveying title to the purchaser. Since there is no breach of
contract in this case, respondents are not entitled to moral
balance of only 805,000.00, it is right and just to allow her to settle, within a reasonable damages.
period of time, the balance of the unpaid purchase price. The Court agrees with the courts
below that the respondent showed her sincerity and willingness to comply with her In the absence of moral, temperate, liquidated or
obligation when she offered to pay the petitioner the amount of 751,000.00. compensatory damages, exemplary damages cannot be granted for
they are allowed only in addition to any of the four kinds of
damages mentioned.
On the issue of interest, petitioner failed to substantiate her claim that respondent
made a personal commitment to pay a 6% monthly interest on the 805,000.00 from the
date of delinquency, December 31, 1991. As can be gleaned from the contract, there was a WHEREFORE, the petition is DENIED.
stipulation stating that: All the installments shall not bear interest. The CA was, however,
SO ORDERED.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
DE LEON vs. ONG
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of
land2 with improvements situated in Antipolo, Rizal to respondent Benita T. Ong.
As these properties were mortgaged to Real Savings and Loan Association,
Incorporated (RSLAI), petitioner and respondent executed a notarized deed of
absolute sale with assumption of mortgage3 stating:
xxx xxx xxx
That for and in consideration of the sum of ONE MILLION ONE HUNDRED
THOUSAND PESOS (1.1 million), Philippine currency, the receipt whereof is
hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a
manner absolute and irrevocable, unto said [RESPONDENT], his heirs and
assigns that certain real estate together with the buildings and other improvements
existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following
terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR
HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (415,000),
[petitioner] shall execute and sign a deed of assumption of mortgage in
favor of [respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX
HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS
(684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis
supplied)
xxx xxx xxx
Pursuant to this deed, respondent gave petitioner 415,500 as partial payment.
Petitioner, on the other hand, handed the keys to the properties and wrote a letter
informing RSLAI of the sale and authorizing it to accept payment from respondent
and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the
properties.5 Respondent likewise informed RSLAI of her agreement with petitioner
for her to assume petitioners outstanding loan. RSLAI required her to undergo
credit investigation.
Subsequently, respondent learned that petitioner again sold the same properties to
one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys
he gave her useless. Respondent thus proceeded to RSLAI to inquire about the
credit investigation. However, she was informed that petitioner had already paid
the amount due and had taken back the certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance,
declaration of nullity of the second sale and damages6 against petitioner and
Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed
that since petitioner had previously sold the properties to her on March 10, 1993,
he no longer had the right to sell the same to Viloria. Thus, petitioner fraudulently
deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of
action against him and consequently prayed for the dismissal of the complaint. He
claimed that since the transaction was subject to a condition (i.e., that RSLAI
approve the assumption of mortgage), they only entered into a contract to sell.
Inasmuch as respondent did apply for a loan from RSLAI, the condition did not
arise. Consequently, the sale was not perfected and he could freely dispose of the
properties. Furthermore, he made a counter-claim for damages as respondent filed
the complaint allegedly with gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that
she knew that the validity of the sale was subject to a condition. The perfection of a
contract of sale depended on RSLAIs approval of the assumption of mortgage.
Since RSLAI did not allow respondent to assume petitioners obligation, the RTC
held that the sale was never perfected.
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of
cause of action and ordered respondent to pay petitioner 100,000 moral
damages, 20,000 attorneys fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the
court a quo erred in dismissing the complaint.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
The CA found that the March 10, 2003 contract executed by the parties did not
impose any condition on the sale and held that the parties entered into a contract
of sale. Consequently, because petitioner no longer owned the properties when he
sold them to Viloria, it declared the second sale void. Moreover, it found petitioner
liable for moral and exemplary damages for fraudulently depriving respondent of
the properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and
nullified the sale to Viloria. It likewise ordered respondent to reimburse petitioner
715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was
ordered to deliver the certificates of titles to respondent and pay her 50,000 moral
damages and 15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated
November 11, 2005.10 Hence, this petition,11 with the sole issue being whether the
parties entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the
transaction was subject to a suspensive condition, that is, the approval by RSLAI
of respondents assumption of mortgage. Because RSLAI did not allow respondent
to assume his (petitioners) obligation, the condition never materialized.
Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as
petitioner already conveyed full ownership of the subject properties upon the
execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed.
The RTC ruled that it was a contract to sell while the CA held that it was a contract
of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer
upon the perfection of the contract. Should the buyer default in the payment of the
purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of the price is
therefore a negative resolutory condition.12
On the other hand, a contract to sell is subject to a positive suspensive condition.
The buyer does not acquire ownership of the property until he fully pays the
purchase price. For this reason, if the buyer defaults in the payment thereof, the
seller can only sue for damages.13
The deed executed by the parties (as previously quoted) stated that petitioner sold
the properties to respondent "in a manner absolute and irrevocable" for a sum of
1.1 million.14 With regard to the manner of payment, it required respondent to pay
415,500 in cash to petitioner upon the execution of the deed, with the
balance15 payable directly to RSLAI (on behalf of petitioner) within a reasonable
time.16 Nothing in said instrument implied that petitioner reserved ownership of the
properties until the full payment of the purchase price. 17 On the contrary, the terms
and conditions of the deed only affected the manner of payment, not the
immediate transfer of ownership (upon the execution of the notarized contract)
from petitioner as seller to respondent as buyer. Otherwise stated, the said terms
and conditions pertained to the performance of the contract, not the perfection
thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and
deliver the same to the buyer.18 In this regard, Article 1498 of the Civil
Code19 provides that, as a rule, the execution of a notarized deed of sale is
equivalent to the delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of
respondent. Moreover, not only did petitioner turn over the keys to the properties to
respondent, he also authorized RSLAI to receive payment from respondent and
release his certificates of title to her. The totality of petitioners acts clearly
indicates that he had unqualifiedly delivered and transferred ownership of the
properties to respondent. Clearly, it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was
subject to the condition that RSLAI had to approve the assumption of mortgage,
the said condition was considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the certificates of title without
even notifying respondent. In this connection, Article 1186 of the Civil Code
provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
Void Sale Or Double Sale?
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
Petitioner sold the same properties to two buyers, first to respondent and then to
Viloria on two separate occasions.20 However, the second sale was not void for the
sole reason that petitioner had previously sold the same properties to respondent.
On this account, the CA erred.
This case involves a double sale as the disputed properties were sold validly on
two separate occasions by the same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence thereof, to
the person who presents the oldest title, provided there is good
faith. (emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply only to
purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice
that some other person has a right to, or an interest in, such property and pays a
full and fair price for the same at the time of such purchase, or before he has
notice of some other persons claim or interest in the property. 21 The law requires,
on the part of the buyer, lack of notice of a defect in the title of the seller and
payment in full of the fair price at the time of the sale or prior to having notice of
any defect in the sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the
mortgage to RSLAI. According to her agreement with petitioner, respondent had
the obligation to assume the balance of petitioners outstanding obligation to
RSLAI. Consequently, respondent informed RSLAI of the sale and of her
assumption of petitioners obligation. However, because petitioner surreptitiously
paid his outstanding obligation and took back her certificates of title, petitioner
himself rendered respondents obligation to assume petitioners indebtedness to
RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation
become legally or physically impossible without the fault of the obligor.
Since respondents obligation to assume petitioners outstanding balance with
RSLAI became impossible without her fault, she was released from the said
obligation. Moreover, because petitioner himself willfully prevented the condition
vis--vis the payment of the remainder of the purchase price, the said condition is
considered fulfilled pursuant to Article 1186 of the Civil Code. For purposes,
therefore, of determining whether respondent was a purchaser in good faith, she is
deemed to have fully complied with the condition of the payment of the remainder
of the purchase price.
Respondent was not aware of any interest in or a claim on the properties other
than the mortgage to RSLAI which she undertook to assume. Moreover, Viloria
bought the properties from petitioner after the latter sold them to respondent.
Respondent was therefore a purchaser in good faith. Hence, the rules on double
sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale
of the properties with the registrar of deeds, the one who took prior possession of
the properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he
executed the notarized deed22 and handed over to respondent the keys to the
properties. For this reason, respondent took actual possession and exercised
control thereof by making repairs and improvements thereon. Clearly, the sale was
perfected and consummated on March 10, 1993. Thus, respondent became the
lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase
price was deemed fulfilled, respondents obligation to pay it subsisted. Otherwise,
she would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner 684,500, the amount stated in the
deed. This is because the provisions, terms and conditions of the contract
constitute the law between the parties. Moreover, the deed itself provided that the
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

assumption of mortgage "was without any further cost whatsoever." Petitioner, on Las Pias, Metro Manila
the other hand, must deliver the certificates of title to respondent. We likewise
affirm the award of damages.
March 19, 1990
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of
the Court of Appeals in CA-G.R. CV No. 59748 are RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23
hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is
ordered to pay petitioner Raymundo de Leon 684,500 representing the balance COVERED BY TCT NO. T-9905, LAS PIAS,
of the purchase price as provided in their March 10, 1993 agreement. METRO MANILA

Costs against petitioner. RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF
ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL
SO ORDERED.
PAYMENT OF OUR LOTSITUATED IN LAS PIAS, M.M. COVERED BY TCT
NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.
SERRANO vs. CAGUIAT MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE
PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
AND SIGN THE FINAL DEED OF SALE ON THIS DATE.
Procedure, as amended, assailing the Decision[1] of the Court of Appeals
dated January 29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No.
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
48824.

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

Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu,
a lot located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-
wrote petitioners informing them of his readiness to pay the balance of the contract
9905.
price and requesting them to prepare the final deed of sale.[3]

Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the

lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave
petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the
corresponding receipt stating that respondent promised to pay the balance of the
purchase price on or before March 23, 1990, thus:
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter [4] to
respondent stating that petitioner Amparo Herrera is leaving for abroad on or
before April 15, 1990 and that they are canceling the transaction. Petitioners also
informed respondent that he can recover the earnest money of P100,000.00 anytime.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

Again, on April 6, 1990,[5] petitioners wrote respondent stating that they purchase price ready for payment (Exh. C). Defendants mere allegation
delivered to his counsel Philippine National Bank Managers Check No. 790537 that it was plaintiff who did not appear on March 23, 1990 is
dated April 6, 1990 in the amount of P100,000.00 payable to him. unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere
afterthought.

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

On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999,
affirmed the trial courts judgment.
On June 27, 1994, after hearing, the trial court rendered its Decision [7] finding there
was a perfected contract of sale between the parties and ordering petitioners to execute
a final deed of sale in favor of respondent. The trial court held: Forthwith, petitioners filed their motion for reconsideration but it was denied
by the appellate court in its Resolution[8] dated July 14, 1999.
xxx

In the evaluation of the evidence presented by the parties as to

the issue as to who was ready to comply with his obligation on the Hence, the present recourse.
verbal agreement to sell on March 23, 1990, shows that plaintiffs
position deserves more weight and credibility. First, the P100,000.00
that plaintiff paid whether as downpayment or earnest money showed
that there was already a perfected contract. Art. 1482 of the Civil Code The basic issue to be resolved is whether the document entitled Receipt
of the Philippines, reads as follows, to wit:
for Partial Payment signed by both parties earlier mentioned is a contract to sell or

Art. 1482. Whenever earnest money is given in a a contract of sale.

contract of sale, it shall be considered as part of the price and
as proof of the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to push
through with the sale by sending defendants the letter dated March 25,
1990. (Exh. D) and reiterated the same intent to pursue the sale in a
letter dated April 6, 1990. Third, plaintiff had the balance of the
Petitioners contend that the Receipt is not a perfected contract of sale as
provided for in Article 1458[9] in relation to Article 1475[10] of the Civil Code. The
delivery to them of P100,000.00 as down payment cannot be considered as proof of
the perfection of a contract of sale under Article 1482[11] of the same Code since there
was no clear agreement between the parties as to the amount of consideration.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

It is a canon in the interpretation of contracts that the words used therein

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

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF

In holding that there is a perfected contract of sale, both courts mainly relied
on the earnest money given by respondent to petitioners. They invoked Article 1482 of
the Civil Code which provides that "Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of the perfection of the
contract."
ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL
PAYMENT OF OUR LOTSITUATED IN LAS PIAS, M.M. COVERED BY TCT
NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE
PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE
AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

We are not convinced.

In San Miguel Properties Philippines, Inc. v. Spouses Huang, [13] we held that the there can be no other interpretation than that they agreed to a conditional contract of
stages of a contract of sale are: (1) negotiation, covering the period from the time the sale, consummation of which is subject only to the full payment of the purchase price.
prospective contracting parties indicate interest in the contract to the time the contract
is perfected; (2) perfection, which takes place upon the concurrence of the essential
A contract to sell is akin to a conditional sale where the efficacy or obligatory
elements of the sale, which is the meeting of the minds of the parties as to the object of
force of the vendor's obligation to transfer title is subordinated to the happening of a
the contract and upon the price; and (3) consummation, which begins when the parties
future and uncertain event, so that if the suspensive condition does not take place, the
perform their respective undertakings under the contract of sale, culminating in the
parties would stand as if the conditional obligation had never existed. The suspensive
extinguishment thereof.
condition is commonly full payment of the purchase price.[15]

With the above postulates as guidelines, we now proceed to determine the real
nature of the contract entered into by the parties.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

The differences between a contract to sell and a contract of sale are well- rescind unilaterally the contract the moment respondent fails to pay within the fixed
settled in jurisprudence. As early as 1951, in Sing Yee v. Santos, [16]
we held that: period.[18]

x x x [a] distinction must be made between a contract of sale in which Second, the agreement between the parties was not embodied in a deed of
title passes to the buyer upon delivery of the thing sold and a contract sale. The absence of a formal deed of conveyance is a strong indication that the parties
to sell x x x where by agreement the ownership is reserved in the seller
did not intend immediate transfer of ownership, but only a transfer after full payment
and is not to pass until the full payment, of the purchase price is
of the purchase price.[19]
made. In the first case, non-payment of the price is a
negative resolutory condition; in the second case, full payment is a
positive suspensive condition. Being contraries, their effect in law
cannot be identical. In the first case, the vendor has lost and cannot Third, petitioners retained possession of the certificate of title of the lot. This is
recover the ownership of the land sold until and unless the contract of an additional indication that the agreement did not transfer to respondent, either by
sale is itself resolved and set aside. In the second case, however, the
actual or constructive delivery, ownership of the property. [20]
title remains in the vendor if the vendee does not comply with the
condition precedent of making payment at the time specified in the
contract.
It is true that Article 1482 of the Civil Code provides that Whenever earnest
money is given in a contract of sale, it shall be considered as part of the price and proof
of the perfection of the contract. However, this article speaks of earnest money given
In other words, in a contract to sell, ownership is retained by the seller and is in a contract of sale. In this case, the earnest money was given in a contract to
not to pass to the buyer until full payment of the price. [17]
sell. The earnest money forms part of the consideration only if the sale is
consummated upon full payment of the purchase price.[21] Now, since the earnest
money was given in a contract to sell, Article 1482, which speaks of a contract of sale,
In this case, the Receipt for Partial Payment shows that the true agreement does not apply.
between the parties is a contract to sell.

As previously discussed, the suspensive condition (payment of the balance by

First, ownership over the property was retained by petitioners and was not to respondent) did not take place. Clearly, respondent cannot compel petitioners to
pass to respondent until full payment of the purchase price. Thus, petitioners need not transfer ownership of the property to him.
push through with the sale should respondent fail to remit the balance of the purchase
price before the deadline on March 23, 1990. In effect, petitioners have the right to
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

WHEREFORE, we GRANT the instant Petition for Review. The challenged

Decision of the Court of Appeals is REVERSED and respondents complaint
is DISMISSED.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
TANEDO vs. CA
Is a sale of future inheritance valid? In multiple sales of the same real
property, who has preference in ownership? What is the probative value of the
lower courts finding of good faith in registration of such sales in the registry of
property? These are the main questions raised in this Petition for review on
certiorari under Rule 45 of the Rules of Court to set aside and reverse the
Decision1 of the Court of Appeals2 in CA-G.R. CV NO. 24987 promulgated on
September 26, 1991 affirming the decision of the Regional Trial Court, Branch 63,
Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328, and its Resolution
denying reconsideration thereof, promulgated on May 27, 1992.
By the Courts Resolution on October 25, 1995, this case (along with several
others) was transferred from the First to the Third Division and after due
deliberation, the Court assigned it to the undersigned ponenle for the writing of this
Decision.
The Facts
On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute
sale in favor of his eldest brother, Ricardo Taedo, and the latters wife, Teresita
Barera, private respondents herein, whereby he conveyed to the latter in
consideration of P1,500.00, one hectare of whatever share I shall have over Lot
No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by Title
T-l3829 of the Register of Deeds of Tarlac, the said property being his future
inheritance from his parents (Exh. 1). Upon the death of his father Matias, Lazaro
executed an Affidavit of Conformity dated February 28, 1980 (Exh. 3) to re-affirm,
respect. acknowledge and validate the sale I made in 1962. On January 13, 1981,
Lazaro executed another notarized deed of sale in favor of private respondents
covering his undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191
x x (Exh. 4). He acknowledged therein his receipt of P 10,000.00 as consideration
therefor. In February 1981, Ricardo learned that Lazaro sold the same property to
his children, petitioners herein, through a deed of sale dated December 29,
1980 (Exh. E). On June 7, 1982, private respondents recorded the Deed of Sale
(Exh. 4) in their favor in the Registry of Deeds and the corresponding entry was
made in Transfer Certificate of Title No. 166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of
the deeds of sale executed by Lazaro in favor of private respondents covering the
property inherited by Lazaro from his father.
Petitioners claimed that their father, Lazaro, executed an Absolute Deed of
Sale dated December 29, 1980 (Exit. E), conveying to his ten children his allotted
portion under the extrajudicial partition executed by the heirs of Matias, which deed
included the land in litigation (Lot 191).
Petitioners also presented in evidence: (1) a private writing purportedly
prepared and signed by Matias dated December 28, 1978, stating that it was his
desire that whatever inheritance Lazaro would receive from him should be given to
his (Lazaros) children (Exh. A); (2) a typewritten document dated March 10, 1979
signed by Lazaro in the presence of two witnesses, wherein he confirmed that he
would voluntarily abide by the wishes of his father, Matias, to give to his (Lazaros)
children all the property he would inherit from the latter (Exh. B); and (3) a letter
dated January 1, 1980 of Lazaro to his daughter, Carmela, stating that his share in
the extrajudicial settlement of the estate of his father was intended for his children,
petitioners herein (Exh. C).
Private respondents, however presented in evidence a Deed of Revocation of
a Deed of Sale dated March 12, 1981 (Exh. 6), wherein Lazaro revoked the sale in
favor of petitioners for the reason that it was simulated or fictitious - without any
consideration whatsoever.
Shortly after the case a quo was filed, Lazaro executed a sworn statement
(Exh. G) which virtually repudiated the contents of the Deed of Revocation of a
Deed of Sale (Exh. 6) and the Deed of Sale (Exh. 4) in favor of private
respondents. However, Lazaro testified that he sold the property to Ricardo, and
that it was a lawyer who induced him to execute a deed of sale in favor of his
children after giving him five pesos (P5.00) to buy a drink (TSN September 18,
1985, pp. 204-205).
The trial court decided in favor of private respondents, holding that petitioners
failed to adduce a preponderance of evidence to support (their) claim. On appeal,
the Court of Appeals affirmed the decision of the trial court, ruling that the Deed of
Sale dated January 13, 1981 (Exh. 9) was valid and that its registration in good
faith vested title in said respondents.
The Issues
Petitioners raised the following errors in the respondent Court, which they
also now allege in the instant Petition:
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
I. The trial court erred in concluding that the Contract of Sale of October 20, 1962 (Exhibit
7, Answer) is merely voidable or annulable and not void ab initio pursuant to paragraph 2
of Article 1347 of the New Civil Code involving as it does a future inheritance.
II. The trial court erred in holding that defendants-appellees acted in good faith in
registering the deed of sale of January 13, 1981 (Exhibit 9) with the Register of Deeds of
Tarlac and therefore ownership of the land in question passed on to defendants-appellees.
III. The trial court erred in ignoring and failing to consider the testimonial and
documentary evidence of plaintiffs-appellants which clearly established by preponderance
of evidence that they are indeed the legitimate and lawful owners of the property in
question.
IV. The decision is contrary to law and the facts of the case and the conclusions drawn
from the established facts are illogical and off-tangent.
From the foregoing, the issues may be restated as follows:
1. Is the sale of a future inheritance valid?
2. Was the subsequent execution on January 13, 1981 (and registration
with the Registry of Property) of a deed of sale covering the same
property to the same buyers valid?
3. May this Court review the findings of the respondent Court (a) holding
that the buyers acted in good faith in registering the said subsequent
deed of sale and (b) in failing to consider petitioners evidence? Are
the conclusions of the respondent Court illogical and off-tangent?
The Courts Ruling
At the outset, let it be clear that the errors which are reviewable by this Court
in this petition for review on certiorari are only those allegedly committed by the
respondent Court of Appeals and not directly those of the trial court, which is not a
party here. The assignment of errors in the petition quoted above are therefore
totally misplaced, and for that reason, the petition should be dismissed. But in
order to give the parties substantial justice we have decided to delve into the
issues as above re-stated. The errors attributed by petitioners to the latter (trial)
court will be discussed only insofar as they are relevant to the appellate courts
assailed Decision and Resolution.
The sale made in 1962 involving future inheritance is not really at issue here.
In context, the assailed Decision conceded it may be legally correct that a contract
of sale of anticipated future inheritance is null and void.3
But to remove all doubts, we hereby categorically rule that, pursuant to Article
1347 of the Civil Code, (n)o contract may be entered into upon a future inheritance
except in cases expressly authorized by law.
Consequently, said contract made in 1962 is not valid and cannot be the
source of any right nor the creator of any obligation between the parties.
Hence, the affidavit of conformity dated February 28, 1980, insofar as it
sought to validate or ratify the 1962 sale, is also useless and, in the words of the
respondent Court, suffers from the same infirmity. Even private respondents in
their memorandum4 concede this.
However, the documents that are critical to the resolution of this case are: (a)
the deed of sale of January 13, 1981 in favor of private respondents covering
Lazaros undividedinheritance of one-twelfth (1/12) share in Lot No. 191, which was
subsequently registered on June 7, 1982; and (b) the deed of sale dated
December 29, 1980 in favor of petitioners covering the same property. These two
documents were executed after the death of Matias (and his spouse) and after a
deed of extrajudicial settlement of his (Matias) estate was executed, thus vesting in
Lazaro actual title over said property. In other words, these dispositions, though
conflicting, were no longer infected with the infirmities of the 1962 sale.
Petitioners contend that what was sold on January 13, 1981 was only one-half
hectare out of Lot No. 191, citing as authority the trial courts decision. As earlier
pointed out, what is on review in these proceedings by this Court is the Court of
Appeals decision - which correctly identified the subject matter of the January 13,
1981 sale to be the entire undivided 1/12 share of Lazaro in Lot No. 191 and which
is the same property disposed of on December 29, 1980 in favor of petitioners.
Critical in determining which of these two deeds should be given effect is the
registration of the sale in favor of private respondents with the register of deeds
on June 7, 1982.
Article 1544 of the Civil Code governs the preferential rights of vendees in
cases of multiple sales, as follows:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
The property in question is land, an immovable, and following the above-
quoted law, ownership shall belong to the buyer who in good faith registers it first
in the registry of property. Thus, although the deed of sale in favor of private
respondents was later than the one in favor of petitioners, ownership would vest in
the former because of the undisputed fact of registration. On the other hand,
petitioners have not registered the sale to them at all.
Petitioners contend that they were in possession of the property and that
private respondents never took possession thereof. As between two purchasers,
the one who registered the sale in his favor has a preferred right over the other
who has not registered his title, even if the latter is in actual possession of the
immovable property.5
As to third issue, while petitioners conceded the fact of registration, they
nevertheless contended that it was done in bad faith. On this issue, the respondent
Court ruled:
Under the second assignment of error, plaintiffs-appellants contend that defendants-
appellees acted in bad faith when they registered the Deed of Sale in their favor as appellee
Ricardo already knew of the execution of the deed of sale in favor of the plaintiffs;
appellants cite the testimony of plaintiff Belinda Tafledo to the effect that defendant
Ricardo Taedo called her up on January 4 or 5, 1981 to tell her that he was already the
owner of the land in question but the contract of sale between our father and us were (sic)
already consumated (pp. 9-10, tsn, January 6, 1984). This testimony is obviously self-
serving, and because it was a telephone conversation, the deed of sale dated December 29,
1980 was not shown; Belinda merely told her uncle that there was already a document
showing that plaintiffs are the owners (p. 80). Ricardo Taedo controverted this and testified
that he learned for the first time of the deed of sale executed by Lazaro in favor of his
children about a month or sometime in February 1981 (p. 111, tsn, Nov. 28, 1984). x x x 6
The respondent Court, reviewing the trial courts findings, refused to overturn the
latters assessment of the testimonial evidence, as follows:
We are not prepared to set aside the finding of the lower court upholding Ricardo Tanedos
testimony, as it involves a matter of credibility of witnesses which the trial judge, who
presided at the hearing, was in a better position to resolve. (Court of Appeals Decision, p.
6.)
In this connection, we note the tenacious allegations made by petitioners,
both in their basic petition and in their memorandum, as follows:
1. The respondent Court allegedly ignored the claimed fact that
respondent Ricardo by fraud and deceit and with foreknowledge that
the property in question had already been sold to petitioners, made
Lazaro execute the deed of January 13, 1981;
2. There is allegedly adequate evidence to show that only 1/2 of the
purchase price of P10,000.00 was paid at the time of the execution of
the deed of sale, contrary to the written acknowledgment, thus
showing bad faith;
3. There is allegedly sufficient evidence showing that the deed of
revocation of the sale in favor of petitioners was tainted with fraud or
deceit.
4. There is allegedly enough evidence to show that private respondents
took undue advantage over the weakness and unschooled and pitiful
situation of Lazaro Tafledo . . . and that respondent Ricardo Taedo
exercised moral ascendancy over his younger brother he being the
eldest brother and who reached fourth year college of law and at one
time a former Vice-Governor of Tarlac, while his younger brother only
attained first year high school x x x ;
5. The respondent Court erred in not giving credence to petitioners
evidence, especially Lazaro Taedos Sinumpaang
Salaysay dated July 27, 1982 stating that Ricardo Taedo deceived
the former in executing the deed of sale in favor of private
respondents.
To be sure, there are indeed many conflicting documents and testimonies as
well as arguments over their probative value and significance. Suffice it to say,
however, that all the above contentions involve questions of fact, appreciation of
evidence and credibility of witnesses, which are not proper in this review. It is well-
settled that the Supreme Court is not a trier of facts. In petitions for review under
Rule 45 of the Revised Rules of Court, only questions of law may be raised and
passed upon. Absent any whimsical or capricious exercise of judgment, and
unless the lack of any basis for the conclusions made by the lower courts be amply
demonstrated, the Supreme Court will not disturb their findings. At most, it appears
that petitioners have shown that their evidence was not believed by both the trial
and the appellate courts, and that the said courts tended to give more credence to
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

the evidence presented by private respondents. But this in itself is not a reason for
setting aside such findings. We are far from convinced that both courts gravely
abused their respective authorities and judicial prerogatives.
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and
Goidrock Construction and Development Corp.:7

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

In the same vein, the ruling in the recent case of South Sea Surety and
Insurance Company, Inc. vs. Hon. Court of Appeals, et al.[8] is equally applicable to
the present case:

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

WHEREFORE, the petition is DENIED and the assailed Decision of the Court
of Appeals is AFFIRMED. No Costs.
SO ORDERED.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

STARBRIGHT SALES On November 29, 1988 Msgr. Cirilos wrote SSE, requesting it to remove the
ENTERPRISES, INC., vs. occupants on the property and, should it decide not to do this, Msgr. Cirilos would return to

PHILIPPINE REALTY it the P100,000.00 that he received. On January 24, 1989 SSE replied with an updated
proposal.[2] It would be willing to comply with Msgr. Cirilos condition provided the
CORPORATION purchase price is lowered to P1,150.00 per square meter.

On January 26, 1989 Msgr. Cirilos wrote back, rejecting the updated proposal. He
The present case involves a determination of the perfection of contract of sale.
said that other buyers were willing to acquire the property on an as is, where is basis
at P1,400.00 per square meter. He gave SSE seven days within which to buy the property
The Facts and the Case
at P1,400.00 per square meter, otherwise, Msgr. Cirilos would take it that SSE has lost
interest in the same. He enclosed a check for P100,000.00 in his letter as refund of what he
On April 17, 1988 Ramon Licup wrote Msgr. Domingo A. Cirilos, offering to buy
earlier received.
three contiguous parcels of land in Paraaque that The Holy See and Philippine Realty
Corporation (PRC) owned for P1,240.00 per square meter. Licup accepted the
On February 4, 1989 SSE wrote Msgr. Cirilos that they already had a perfected
responsibility for removing the illegal settlers on the land and enclosed a check
contract of sale in the April 17, 1988 letter which he signed and that, consequently, he
for P100,000.00 to close the transaction.[1] He undertook to pay the balance of the purchase
could no longer impose amendments such as the removal of the informal settlers at the
price upon presentation of the title for transfer and once the property has been cleared of its
buyers expense and the increase in the purchase price.
occupants.

SSE claimed that it got no reply from Msgr. Cirilos and that the next thing they
Msgr. Cirilos, representing The Holy See and PRC, signed his name on
knew, the land had been sold to Tropicana Properties on March 30, 1989. On May 15, 1989
the conforme portion of the letter and accepted the check. But the check could not be
SSE demanded rescission of that sale. Meanwhile, on August 4, 1989 Tropicana Properties
encashed due to Licups stop-order payment. Licup wrote Msgr. Cirilos on April 26, 1988,
sold the three parcels of land to Standard Realty.
requesting that the titles to the land be instead transferred to petitioner Starbright Sales
Enterprises, Inc. (SSE). He enclosed a new check for the same amount. SSEs
representatives, Mr. and Mrs. Cu, did not sign the letter.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
Its demand for rescission unheeded, SSE filed a complaint for annulment of sale
and reconveyance with damages before the Regional Trial Court (RTC) of Makati, Branch
61, against The Holy See, PRC, Msgr. Cirilos, and Tropicana Properties in Civil Case 90-
183. SSE amended its complaint on February 24, 1992, impleading Standard Realty as
additional defendant.
The Holy See sought dismissal of the case against it, claiming that as a foreign
government, it cannot be sued without its consent. The RTC held otherwise but, on
December 1, 1994,[3] the Court reversed the ruling of the RTC and ordered the case against
The Holy See dismissed. By Order of January 26, 1996 the case was transferred to the
Paraaque RTC, Branch 258.
SSE alleged that Licups original letter of April 17, 1988 to Msgr. Cirilos
constituted a perfected contract. Licup even gave an earnest money of P100,000.00 to close
the transaction. His offer to rid the land of its occupants was a mere gesture of
accommodation if only to expedite the transfer of its title. [4] Further, SSE claimed that, in
representing The Holy See and PRC, Msgr. Cirilos acted in bad faith when he set the price
of the property at P1,400.00 per square meter when in truth, the property was sold to
Tropicana Properties for only P760.68 per square meter.
Msgr. Cirilos maintained, on the other hand, that based on their exchange of
letters, no contract of sale was perfected between SSE and the parties he represented. And,
only after the negotiations between them fell through did he sell the land to Tropicana
Properties.
In its Decision of February 14, 2000, the Paraaque RTC treated the April 17, 1988
letter between Licum and Msgr. Cirilos as a perfected contract of sale between the
parties. Msgr. Cirilos attempted to change the terms of contract and return SSEs initial
deposit but the parties reached no agreement regarding such change. Since such agreement
was wanting, the original terms provided in the April 17, 1988 letter continued to bind the
parties.
On appeal to the Court of Appeals (CA), the latter rendered judgment on
November 10, 2006,[5] reversing the Paraaque RTC decision. The CA held that no
perfected contract can be gleaned from the April 17, 1988 letter that SSE had relied
on. Indeed, the subsequent exchange of letters between SSE and Msgr. Cirilos show that
the parties were grappling with the terms of the sale. Msgr. Cirilos made no unconditional
acceptance that would give rise to a perfected contract.
As to the P100,000.00 given to Msgr. Cirilos, the CA considered it an option
money that secured for SSE only the privilege to buy the property even if Licup called it a
deposit. The CA denied SSEs motion for reconsideration on May 2, 2007.
The Issue Presented
The only issue in this case is whether or not the CA erred in holding that no
perfected contract of sale existed between SSE and the land owners, represented by Msgr.
Cirilos.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
The Courts Ruling
Three elements are needed to create a perfected contract: 1) the consent of the
contracting parties; (2) an object certain which is the subject matter of the contract; and (3)
the cause of the obligation which is established.[6] Under the law on sales, a contract of sale
is perfected when the seller, obligates himself, for a price certain, to deliver and to transfer
ownership of a thing or right to the buyer, over which the latter agrees. [7] From that
moment, the parties may demand reciprocal performance.
The Court believes that the April 17, 1988 letter between Licup and Msgr. Cirilos,
the representative of the propertys owners, constituted a perfected contract. When Msgr.
Cirilos affixed his signature on that letter, he expressed his conformity to the terms of
Licups offer appearing on it. There was meeting of the minds as to the object and
consideration of the contract.
But when Licup ordered a stop-payment on his deposit and proposed in his April
26, 1988 letter to Msgr. Cirilos that the property be instead transferred to SSE, a subjective
novation took place.
A subjective novation results through substitution of the person of the debtor or
through subrogation of a third person to the rights of the creditor. To accomplish a
subjective novation through change in the person of the debtor, the old debtor needs to be
expressly released from the obligation and the third person or new debtor needs to assume
his place in the relation.[8]
Novation serves two functions one is to extinguish an existing obligation, the
other to substitute a new one in its place requiring concurrence of four requisites: 1) a
previous valid obligation; 2) an agreement of all parties concerned to a new contract; 3) the
extinguishment of the old obligation; and 4) the birth of a valid new obligation. [9]
Notably, Licup and Msgr. Cirilos affixed their signatures on the original
agreement embodied in Licups letter of April 26, 1988. No similar letter agreement can be
found between SSE and Msgr. Cirilos.
The proposed substitution of Licup by SSE opened the negotiation stage for a new
contract of sale as between SSE and the owners. The succeeding exchange of letters
between Mr. Stephen Cu, SSEs representative, and Msgr. Cirilos attests to an unfinished
negotiation. Msgr. Cirilos referred to his discussion with SSE regarding the purchase as a
pending transaction.[10]
Cu, on the other hand, regarded SSEs first letter to Msgr. Cirilos as an updated
proposal.[11] This proposal took up two issues: which party would undertake to evict the
occupants on the property and how much must the consideration be for the property. These
are clear indications that there was no meeting of the minds between the parties. As it
turned out, the parties reached no consensus regarding these issues, thus producing no
perfected sale between them.
Parenthetically, Msgr. Cirilos did not act in bad faith when he sold the property to
Tropicana even if it was for a lesser consideration. More than a month had passed since the
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

last communication between the parties on February 4, 1989. It is not improbable for
prospective buyers to offer to buy the property during that time.

The P100,000.00 that was given to Msgr. Cirilos as deposit cannot be considered
as earnest money. Where the parties merely exchanged offers and counter-offers, no
contract is perfected since they did not yet give their consent to such offers. [12] Earnest
money applies to a perfected sale.

SSE cannot revert to the original terms stated in Licups letter to Msgr. Cirilos
dated April 17, 1988 since it was not privy to such contract. The parties to it were Licup
and Msgr. Cirilos. Under the principle of relativity of contracts, contracts can only bind the
parties who entered into it. It cannot favor or prejudice a third person. [13] Petitioner SSE
cannot, therefore, impose the terms Licup stated in his April 17, 1988 letter upon the
owners.

WHEREFORE, the Court DISMISSES the petition and AFFIRMS the Court of
Appeals Decision dated November 10, 2006 in CA-G.R. CV 67366.

SO ORDERED.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
FIRST OPTIMA REALTY
CORPORATION vs.
SECURITRON SECURITY
SERVICE, INC.,
In a potential sale transaction, the prior payment of earnest money even before the
property owner can agree to sell his property is irregular, and cannot be used to
bind the owner to the obligations of a seller under an otherwise perfected contract
of sale; to cite a well-worn cliche, the carriage cannot be placed before the horse.
The property owner-prospective seller may not be legally obliged to enter into a
sale with a prospective buyer through the latter's employment of questionable
practices which prevent the owner from freely giving his consent to the transaction;
this constitutes a palpable transgression of the prospective seller's rights of
ownership over his property, an anomaly which the Court will certainly not
condone.
This Petition for Review on Certiorari1 seeks to set aside: 1) the September 30,
2011 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 93715 affirming
the February 16, 2009 Decision' of the Regional Trial Court (RTC) of Pasay City,
Branch 115 in Civil Case No. 06-0492 CFM; and 2) the CAs December 9, 2011
Resolution4 denying the herein petitioners Motion for Reconsideration5 of the
assailed judgment.
Factual Antecedents
Petitioner First Optima Realty Corporation is a domestic corporation engaged in
the real estate business. It is the registered owner of a 256-square meter parcel of
land with improvements located in Pasay City, covered by Transfer Certificate of
Title No. 125318 (the subject property).6 Respondent Securitron Security Services,
Inc., on the other hand, is a domestic corporation with offices located beside the
subject property.
Looking to expand its business and add toits existing offices, respondent through
its General Manager, Antonio Eleazar (Eleazar) sent a December 9, 2004
Letter7 addressed to petitioner through its Executive Vice-President, Carolina T.
Young (Young) offering to purchase the subject property at 6,000.00 per
square meter. A series of telephone calls ensued, but only between Eleazar and
Youngs secretary;8 Eleazar likewise personally negotiated with a certain Maria
Remoso (Remoso), who was an employee of petitioner. 9 At this point, Eleazar was
unable to personally negotiate with Young or the petitioners board of directors.
Sometime thereafter, Eleazar personally went to petitioners office offering to pay
for the subject property in cash, which he already brought with him. However,
Young declined to accept payment, saying that she still needed to secure her
sisters advice on the matter.10 She likewise informed Eleazar that prior approval of
petitioners Board of Directors was required for the transaction, to which remark
Eleazar replied that respondent shall instead await such approval.11
On February 4, 2005, respondent sent a Letter12 of even date to petitioner. It was
accompanied by Philippine National Bank Check No. 24677 (the subject check),
issued for 100,000.00 and made payable to petitioner. The letter states thus:
Gentlemen:
As agreed upon, we are making a deposit of ONE HUNDRED THOUSAND
PESOS (Php 100,000.00) as earnest money for your property at the corner of
Layug St., & Lim-An St., Pasay City as per TCT No. 125318 with an area of 256
sq. m. at 6,000.00/ sq. m. for a total of ONE MILLION FIVE HUNDRED THIRTY
SIX THOUSAND PESOS (Php 1,536,000.00).
Full payment upon clearing of the tenants at said property and signing of the Deed
of Sale.
(signed)
ANTONIO S. ELEAZAR13
Despite the delicate nature of the matter and large amount involved, respondent
did not deliver the letter and check directly to Young or her office; instead, they
were coursed through an ordinary receiving clerk/receptionist of the petitioner, who
thus received the same and therefor issued and signed Provisional Receipt No.
33430.14 The said receipt reads:
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
Received from x x x Antonio Eleazar x x x the sum of Pesos One Hundred
Thousand x x x
IN PAYMENT OF THE FOLLOWING x x x
Earnest money or Partial payment of
Pasay Property Layug & Lim-an St. x x x.
Note: This is issued to transactions not
yet cleared but subsequently an OfficialReceipt will be issued. x x x 15
The check was eventually deposited with and credited to petitioners bank account.
Thereafter, respondent through counsel demanded in writing that petitioner
proceed with the sale of the property.16In a March 3, 2006 Letter17 addressed to
respondents counsel, petitioner wrote back:
Dear Atty. De Jesus:
Anent your letter dated January 16, 2006 received on February 20, 2006, please
be informed of the following:
1. It was your client SECURITRON SECURITY SERVICES, INC.
represented by Mr. Antonio Eleazar who offered to buy our property
located at corner Layug and Lim-An St., Pasay City;
2. It tendered an earnest money despite the fact that we are still undecided
to sell the said property;
3. Our Board of Directors failed to pass a resolution to date whether it
agrees to sell the property;
4. We have no Contract for the earnest money nor Contract to Sell the
said property with your client;
Considering therefore the above as well as due to haste and demands which we
feel [are forms] of intimidation and harassment, we regret to inform you that we are
now incline (sic) not to accept your offer to buy our property. Please inform your
client to coordinate with us for the refund of this (sic) money.
Very truly yours,
(signed)
CAROLINA T. YOUNG
Executive Vice[-]President18
Ruling of the Regional Trial Court of Pasay City
On April 18, 2006, respondent filed with the Pasay RTC a civil case against
petitioner for specific performance with damages to compel the latter to
consummate the supposed sale of the subject property. Docketed as Civil Case
No. 06-0492 CFM and assigned to Branch 115 of the Pasay RTC, the
Complaint19 is predicated on the claim that since a perfected contract of sale arose
between the parties after negotiations were conducted and respondent paid the
100,000.00 supposed earnest money which petitioner accepted, the latter
should be compelled to sell the subject property to the former. Thus, respondent
prayed that petitioner be ordered to comply with its obligation as seller, accept the
balance of the purchase price, and execute the corresponding deed of sale in
respondents favor; and that petitioner be made to pay 200,000.00 damages for
its breach and delay in the performance of its obligations, 200,000.00 by way of
attorney's fees, and costs of suit.
In its Answer with Compulsory Counterclaim,20 petitioner argued that it never
agreed to sell the subject property; that its board of directors did not authorize the
sale thereof to respondent, as no corresponding board resolution to such effect
was issued; that the respondents 100,000.00 check payment cannot be
considered as earnest money for the subject property, since said payment was
merely coursed through petitioners receiving clerk, who was forced to accept the
same; and that respondent was simply motivated by a desire to acquire the subject
property at any cost. Thus, petitioner prayed for the dismissal of the case and, by
way of counterclaim, it sought the payment of moral damages in the amount of
200,000.00; exemplary damages in the amount of 100,000.00; and attorneys
fees and costs of suit.
In a Reply,21 respondent countered that authorization by petitioners Board of
Directors was not necessary since it is a real estate corporation principally
engaged in the buying and selling of real property; that respondent did not force
nor intimidate petitioners receiving clerk into accepting the February 4, 2005 letter
and check for 100,000.00; that petitioners acceptance of the check and its failure
for more than a year to return respondents payment amounts to estoppel and
a ratification of the sale; and that petitioner is not entitled to its counterclaim.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
After due proceedings were taken, the Pasay RTC issued its Decision dated
February 16, 2009, decreeing as follows:
WHEREFORE, defendant First Optima Realty Corporation is directed to comply
with its obligation by accepting the remaining balance of One Million Five Hundred
Thirty-Six Thousand Pesos and Ninety-Nine Centavos (1,536,000.99), and
executing the corresponding deed of sale in favor of the plaintiff Securitron
Security Services, Inc. over the subject parcel of land.
No costs.
SO ORDERED.22
In ruling for the respondent, the trial court held that petitioners acceptance of
100,000.00 earnest money indicated the existence of a perfected contract of sale
between the parties; that there is no showing that when respondent gave the
February 4, 2005 letter and check to petitioners receiving clerk, the latter was
harassed or forced to accept the same; and that for the sale of the subject
property, no resolution of petitioners board of directors was required since Young
was "free to represent" the corporation in negotiating with respondent for the sale
thereof. Ruling of the Court of Appeals
Petitioner filed an appeal with the CA. Docketed as CA-G.R. CV No. 93715, the
appeal made out a case that no earnest money can be considered to have been
paid to petitioner as the supposed payment was received by a mere receiving
clerk, who was not authorized to accept the same; that the required board of
directors resolution authorizing the sale of corporate assets cannot be dispensed
with in the case of petitioner; that whatever negotiations were held between the
parties only concerned the possible sale, not the sale itself, of the subject property;
that without the written authority of petitioners board of directors, Young cannot
enter into a sale of its corporate property; and finally, that there was no meeting of
the minds between the parties in the first place.
On September 30, 2011, the CA issued the assailed Decision affirming the trial
courts February 16, 2009Decision, pronouncing thus:
Article 1318 of the Civil Code declares that no contract exists unless the following
requisites concur: (1) consent of the contracting parties; (2) object certain which is
the subject matter of the contract; and (3) cause of the obligation established.
A careful perusal of the records of the case show[s] that there was indeed a
negotiation between the parties as regards the sale of the subject property, their
disagreement lies on whether they have arrived on an agreement regarding said
sale. Plaintiff-appellee avers that the parties have already agreed on the sale and
the price for it and the payment of earnest money and the remaining balance upon
clearing of the property of unwanted tenants. Defendant-appellant on the other
hand disputes the same and insists that there was no concrete agreement
between the parties.
Upon a careful consideration of the arguments of the parties and the records of the
case, we are more inclined to sustain the arguments of the plaintiff-appellee and
affirm the findings of the trial court that there was indeed a perfected contract of
sale between the parties. The following instances militate against the claim of the
defendant-appellant: First. The letter of the plaintiff-appellee dated February 4,
2005 reiterating their agreement as to the sale of the realty for the consideration of
Php 1,536,000.00 was not disputed nor replied to by the defendant-appellant, the
said letter also provides for the payment of the earnest money of Php 100,000.00
and the full payment upon the clearing of the property of unwanted tenants, if the
defendant-appellant did not really agree on the sale of the property it could have
easily replied to the said letter informing the plaintiff-appellee that it is not selling
the property or that the matter will be decided first by the board of directors,
defendant-appellants silence or inaction on said letter shows its conformity or
consent thereto; Second. In addition to the aforementioned letter, defendant-
appellants acceptance of the earnest money and the issuance of a provisional
receipt clearly shows that there was indeed an agreement between the parties and
we do not subscribe to the argument of the defendant-appellant that the check was
merely forced upon its employee and the contents of the receipt was just dictated
by the plaintiff-appellees employee because common sense dictates that a person
would not issue a receipt for a check with a huge amount if she does not know
what that is for and similarly would not issue [a] receipt which would bind her
employer if she does not have prior instructions to do [so] from her superiors;
Third. The said check for earnest money was deposited in the bank by defendant-
appellant and not until after one year did it offer to return the same. Defendant-
appellant cannot claim lack of knowledge of the payment of the check since there
was a letter for it, and it is just incredible that a big amount of money was
deposited in [its] account [without knowing] about it [or] investigat[ing] what [it was]
for. We are more inclined to believe that their inaction for more than one year on
the earnest money paid was due to the fact that after the payment of earnest
money the place should be cleared of unwanted tenants before the full amount of
the purchase price will be paid as agreed upon as shown in the letter sent by the
plaintiff-appellee.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
As stated above the presence of defendant-appellants consent and, corollarily, the
existence of a perfected contract between the parties are evidenced by the
payment and receipt of Php 100,000.00 as earnest money by the contracting
parties x x x. Under the law on sales, specifically Article 1482 of the Civil Code, it
provides that whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and proof of the perfection of the contract. Although
the presumption is not conclusive, as the parties may treat the earnest money
differently, there is nothing alleged in the present case that would give rise to a
contrary presumption.
We also do not find merit in the contention of the defendant-appellant that there is
a need for a board resolution for them to sell the subject property since it is a
corporation, a juridical entity which acts only thru the board of directors. While we
agree that said rule is correct, we must also point out that said rule is the general
rule for all corporations [but] a corporation [whose main business is buying and
selling real estate] like herein defendant-appellant, is not required to have a board
resolution for the sale of the realty in the ordinary course of business, thus
defendant-appellants claim deserves scant consideration.
Furthermore, the High Court has held that "a corporate officer or agent may
represent and bind the corporation in transactions with third persons to the extent
that the authority to do so has been conferred upon him, and this includes powers
which have been intentionally conferred, and also such powers as, in the usual
course of the particular business, are incidental to, or may be implied from, the
powers intentionally conferred, powers added by custom and usage, as usually
pertaining to the particular officer or agent, and such apparent powers as the
corporation has caused persons dealing with the officer or agent to believe that it
was conferred."
In the case at bench, it is not disputed and in fact was admitted by the defendant-
appellant that Ms. Young, the Executive Vice-President was authorized to
negotiate for the possible sale of the subject parcel of land. Therefore, Ms. Young
can represent and bind defendant-appellant in the transaction.
Moreover, plaintiff-appellee can assume that Ms. Young, by virtue of her position,
was authorized to sell the property of the corporation. Selling of realty is not foreign
to [an] executive vice[-]presidents function, and the real estate sale was shown to
be a normal business activity of defendant-appellant since its primary business is
the buy and sell of real estate. Unmistakably, its Executive Vice-President is
cloaked with actual or apparent authority to buy or sell real property, an activity
which falls within the scope of her general authority.
Furthermore, assuming arguendo that a board resolution was indeed needed for
the sale of the subject property, the defendant-appellant is estopped from raising it
now since, [it] did not inform the plaintiff-appellee of the same, and the latter deal
(sic) with them in good faith. Also it must be stressed that the plaintiff-appellee
negotiated with one of the top officer (sic) of the company thus, any requirement
on the said sale must have been known to Ms. Young and she should have
informed the plaintiff-appellee of the same.
In view of the foregoing we do not find any reason to deviate from the findings of
the trial court, the parties entered into the contract freely, thus they must perform
their obligation faithfully. Defendant-appellants unjustified refusal to perform its
part of the agreement constitutes bad faith and the court will not tolerate the same.
WHEREFORE, premises considered, the Decision of the Regional Trial Court of
Pasay City Branch 115, in Civil Case No. 06-0492 CFM is hereby AFFIRMED.
SO ORDERED.23
Petitioner moved for reconsideration,24 but in a December 9, 2011 Resolution, the
CA held its ground. Hence, the present Petition.
Issues
In an October 9,2013 Resolution,25 this Court resolved to give due course to the
Petition, which raises the following issues:
I
THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION OF LAW
WHEN IT RULED THAT THE MONEY RESPONDENT DELIVERED TO
PETITIONER WAS EARNEST MONEY THEREBY PROVIDING A PERFECTED
CONTRACT OF SALE.
II
THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION OF LAW
WHEN IT RULED THAT THE TIME THAT LAPSED IN RETURNING THE MONEY
AND IN REPLYING TO THE LETTER IS PROOF OF ACCEPTANCE OF
EARNEST MONEY.
III
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND GRAVE
ERROR WHEN IT IGNOREDTHE RESERVATION IN THE PROVISIONAL
RECEIPT "Note: This is issued to transactions not yet cleared but subsequently
an Official Receipt will be issued."26
Petitioners Arguments
In its Petition and Reply27 seeking to reverse and set aside the assailed CA
dispositions and in effect to dismiss Civil Case No. 06-0492 CFM, petitioner argues
that respondent failed to prove its case that a contract of sale was perfected
between the parties. It particularly notes that, contrary to the CAs ruling,
respondents delivery of the February 4, 2005 letter and check; petitioners failure
to respond to said letter; petitioners supposed acceptance of the check by
depositing the same in its account; and its failure to return the same after more
than one year from its tender these circumstances do not at all prove that a
contract of sale was perfected between the parties. It claims that there was never
an agreement in the first place between them concerning the sale of the subject
property, much less the payment of earnest money therefor; that during trial,
Eleazar himself admitted that the check was merely a "deposit"; 28 that the
February 4, 2005 letter and check were delivered not to Young, but to a mere
receiving clerk of petitioner who knew nothing about the supposed transaction and
was simply obliged to accept the same without the prerogative to reject them; that
the acceptance of respondents supposed payment was not cleared and was
subject to approval and issuance of the corresponding official receipt as noted in
Provisional Receipt No. 33430; that respondent intentionally delivered the letter
and check in the manner that it did in order to bind petitioner to the supposed sale
with or without the latters consent; that petitioner could not be faulted for receiving
the check and for depositing the same as a matter of operational procedure with
respect to checks received in the course of its day-to-day business.
Petitioner argues that ultimately, it cannot be said that it gave its consent to any
transaction with respondent or to the payment made by the latter. Respondents
letter and check constitute merely an offer which required petitioners acceptance
in order to give rise to a perfected sale; "[o]therwise, a buyer can easily bind any
unsuspecting seller to a contract of sale by merely devising a way that prevents
the latter from acting on the communicated offer."29
Petitioner thus theorizes that since it had no perfected agreement with the
respondent, the latters check should be treated not as earnest money, but as
mere guarantee, deposit or option money to prevent the prospective seller from
backing out from the sale,30 since the payment of any consideration acquires the
character of earnest money only after a perfected sale between the parties has
been arrived at.31
Respondents Arguments
In its Comment,32 respondent counters that petitioners case typifies a situation
where the seller has had an undue change of mind and desires to escape the legal
consequences attendant to a perfected contract of sale. It reiterates the appellate
courts pronouncements that petitioners failure to reply to respondents February
4, 2005 letter indicates its consent to the sale; that its acceptance of the check as
earnest money and the issuance of the provisional receipt prove that there is a
prior agreement between the parties; that the deposit of the check in petitioners
account and failure to timely return the money to respondent militates against
petitioners claim of lack of knowledge and consent. Rather they indicate
petitioners decision to sell subject property as agreed. Respondent adds that
contrary to petitioners claim, negotiations were in fact held between the parties
after it sent its December 9, 2004 letter-offer, which negotiations precisely
culminated in the preparation and issuance of the February4, 2005 letter; that
petitioners failure to reply to its February 4, 2005 letter meant that it was amenable
to respondents terms; that the issuance of a provisional receipt does not prevent
the perfection of the agreement between the parties, since earnest money was
already paid; and that petitioner cannot pretend to be ignorant of respondents
check payment, as it involved a large sum of money that was deposited in the
formers bank account.
Our Ruling
The Court grants the Petition. The trial and appellate courts erred materially in
deciding the case; they overlooked important facts that should change the
complexion and outcome of the case.
It cannot be denied that there were negotiations between the parties conducted
after the respondents December 9, 2004 letter-offer and prior to the February 4,
2005 letter. These negotiations culminated in a meeting between Eleazar and
Young whereby the latter declined to enter into an agreement and accept cash
payment then being tendered by the former. Instead, Young informed Eleazar
during said meeting that she still had to confer with her sister and petitioners
board of directors; in turn, Eleazar told Young that respondent shall await the
necessary approval.
Thus, the trial and appellate courts failed to appreciate that respondents offer to
purchase the subject property was never accepted by the petitioner at any
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
instance, even after negotiations were held between them. Thus, as between
them, there is no sale to speak of. "When there is merely an offer by one party
without acceptance of the other, there is no contract."33 To borrow a
pronouncement in a previously decided case,
The stages of a contract of sale are: (1) negotiation, starting from the time the
prospective contracting parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place upon the concurrence of the
essential elements of the sale; and (3) consummation, which commences when
the parties perform their respective undertakings under the contract of sale,
culminating in the extinguishment of the contract.
In the present case, the parties never got past the negotiation stage. Nothing
shows that the parties had agreed on any final arrangement containing the
essential elements of a contract of sale, namely, (1) consent or the meeting of the
minds of the parties; (2) object or subject matter of the contract; and (3) price or
consideration of the sale.34
Respondents subsequent sending of the February 4, 2005 letter and check to
petitioner without awaiting the approval of petitioners board of directors and
Youngs decision, or without making a new offer constitutes a mere reiteration of
its original offer which was already rejected previously; thus, petitioner was under
no obligation to reply to the February 4, 2005 letter. It would be absurd to require a
party to reject the very same offer each and every time it is made; otherwise, a
perfected contract of sale could simply arise from the failure to reject the same
offer made for the hundredth time.1wphi1 Thus, said letter cannot be considered
as evidence of a perfected sale, which does not exist in the first place; no binding
obligation on the part of the petitioner to sell its property arose as a consequence.
The letter made no new offer replacing the first which was rejected.
Since there is no perfected sale between the parties, respondent had no obligation
to make payment through the check; nor did it possess the right to deliver earnest
money to petitioner in order to bind the latter to a sale. As contemplated under Art.
1482 of the Civil Code, "there must first be a perfected contract of sale before we
can speak of earnest money."35 "Where the parties merely exchanged offers and
counter-offers, no contract is perfected since they did not yet give their consent to
such offers. Earnest money applies to a perfected sale."36
This Court is inclined to accept petitioners explanation that since the check was
mixed up with all other checks and correspondence sent to and received by the
corporation during the course of its daily operations, Young could not have timely
discovered respondents check payment; petitioners failure to return the purported
earnest money cannot mean that it agreed to respondents offer.
Besides, respondents payment of supposed earnest money was made under
dubious circumstances and in disregard of sound business practice and common
sense. Indeed, respondent must be faulted for taking such a course of action that
is irregular and extraordinary: common sense and logic dictate that if any payment
is made under the supposed sale transaction, it should have been made directly to
Young or coursed directly through her office, since she is the officer directly
responsible for negotiating the sale, as far as respondent is concerned and
considering the amount of money involved; no other ranking officer of petitioner
can be expected to know of the ongoing talks covering the subject property.
Respondent already knew, from Eleazars previous meeting with Young, that it
could only effectively deal with her; more than that, it should know that
corporations work only through the proper channels. By acting the way it did
coursing the February 4, 2005 letter and check through petitioners mere receiving
clerk or receptionist instead of directly with Youngs office, respondent placed itself
under grave suspicion of putting into effect a premeditated plan to unduly bind
petitioner to its rejected offer, in a manner which it could not achieve through
negotiation and employing normal business practices. It impresses the Court that
respondent attempted to secure the consent needed for the sale by depositing part
of the purchase price and under the false pretense that an agreement was already
arrived at, even though there was none. Respondent achieved the desired effect
up to this point, but the Court will not be fooled.
Thus, as between respondents irregular and improper actions and petitioners
failure to timely return the 100,000.00 purported earnest money, this Court sides
with petitioner. In a manner of speaking, respondent cannot fault petitioner for not
making a refund since it is equally to blame for making such payment under false
pretenses and irregular circumstances, and with improper motives. Parties must
come to court with clean hands, as it were.
In a potential sale transaction, the prior payment of earnest money even before the
property owner can agree to sell his property is irregular, and cannot be used to
bind the owner to the obligations of a seller under an otherwise perfected contract
of sale; to cite a well-worn clich, the carriage cannot be placed before the horse.
The property owner-prospective seller may not be legally obliged to enter into a
sale with a prospective buyer through the latters employment of questionable
practices which prevent the owner from freely giving his consent to the transaction;
this constitutes a palpable transgression of the prospective sellers rights of
ownership over his property, an anomaly which the Court will certainly not
condone. An agreement where the prior free consent of one party thereto is
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
withheld or suppressed will be struck down, and the Court shall always endeavor
to protect a property owners rights against devious practices that put his property
in danger of being lost or unduly disposed without his prior knowledge or consent.
As this ponente has held before, "[t]his Court cannot presume the existence of a
sale of land, absent any direct proof of it."37
Nor will respondent's supposed payment be 'treated as a deposit or guarantee; its
actions will not be dignified and must be called for what they are: they were done
irregularly and with a view to acquiring the subject property against petitioner's
consent.
Finally, since there is nothing in legal contemplation which petitioner must perform
particularly for the respondent, it should follow that Civil Case No. 06-0492 CFM
for specific performance with damages is left with no leg. to stand on; it must be
dismissed.
With the foregoing view, there is no need to resolve the other specific issues and
arguments raised by the petitioner, as they do not materially affect the rights and
obligations of the parties - the Court having declared that no agreement exists
between them; nor do they have the effect of altering the outcome of the case.
WHEREFORE, the Petition is GRANTED. The September 30, 2011 Decision and
December 9, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 93715,
as well as the February 16, 2009 Decision of the Regional Trial Court of Pasay
City, Branch 115 in Civil Case No. 06-0492 CFM are REVERSED and SET ASIDE.
Civil Case No. 06-0492 CFM is ordered DISMISSED. , Petitioner First Optima
Realty Corporation is ordered to REFUND the amount of 100,000.00 to
respondent Securitron Security Services, Inc. without interest, unless petitioner
has done so during the course of the proceedings.
SO ORDERED.
CHING vs. GOYANKO
On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania)
were married.[1] Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda,
Julius, Mary Ellen and Jess, all surnamed Goyanko.
Respondents claim that in 1961, their parents acquired a 661 square meter property located
at 29 F. Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the
time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia).
On May 1, 1993, Sulpicia executed a deed of sale [2] over the property in favor of
respondents father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of
sale[3]over the property in favor of his common-law-wife-herein petitioner Maria B. Ching.
Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioners name.
After Goyankos death on March 11, 1996, respondents discovered that ownership of the
property had already been transferred in the name of petitioner. Respondents thereupon had
the purported signature of their father in the deed of sale verified by the Philippine
National Police Crime Laboratory which found the same to be a forgery. [4]
Respondents thus filed with the Regional Trial Court of Cebu City a complaint for
recovery of property and damages against petitioner, praying for the nullification of the
deed of sale and of TCT No. 138405 and the issuance of a new one in favor of their father
Goyanko.
In defense, petitioner claimed that she is the actual owner of the property as it was
she who provided its purchase price. To disprove that Goyankos signature in the
questioned deed of sale is a forgery, she presented as witness the notary public who
testified that Goyanko appeared and signed the document in his presence.
By Decision of October 16, 1998,[5] the trial court dismissed the complaint against
petitioner, the pertinent portions of which decision read:
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
There is no valid and sufficient ground to declare the sale as null and
void, fictitious and simulated. The signature on the questioned Deed
of Sale is genuine. The testimony of Atty. Salvador Barrameda who
declared in court that Joseph Goyanko, Sr. and Maria Ching together
with their witnesses appeared before him for notarization of Deed of Sale
in question is more reliable than the conflicting testimonies of the two
document examiners. Defendant Maria Ching asserted that the Deed of
Sale executed by Joseph Goyanko, Sr. in her favor is valid and genuine.
The signature of Joseph Goyanko, Sr. in the questioned Deed of
Absolute Sale is genuine as it was duly executed and signed by Joseph
Goyanko, Sr. himself.
The parcel of lands known as Lot No. 6 which is sought to be recovered
in this case could never be considered as the conjugal property of the
original Spouses Joseph C. Goyanko and Epifania dela Cruz or the
exclusive capital property of the husband. The acquisition of the said
property by defendant Maria Ching is well-elicited from the
aforementioned testimonial and documentary evidence presented by the
defendant. Although for a time being the property passed through Joseph
Goyanko, Sr. as a buyer yet his ownership was only temporary and
transitory for the reason that it was subsequently sold to herein defendant
Maria Ching. Maria Ching claimed that it was even her money which
was used by Joseph Goyanko, Sr. in the purchase of the land and so it
was eventually sold to her. In her testimony, defendant Ching justified
her financial capability to buy the land for herself. The transaction
undertaken was from the original owner Sulpicia Ventura to Joseph
Goyanko, Sr. and then from Joesph Goyanko, Sr. to herein defendant
Maria Ching.
The land subject of the litigation is already registered in the name of
defendant Maria Ching under TCT No. 138405. By virtue of the Deed of
Sale executed in favor of Maria Ching, Transfer Certificate of Title No.
138405 was issued in her favor. In recognition of the proverbial
virtuality of a Torrens title, it has been repeatedly held that, unless bad
faith can be established on the part of the person appearing as owner on
the certificate of title, there is no other owner than that in whose favor it
has been issued. A Torrens title is not subject to collateral attack. It is a
well-known doctrine that a Torrens title, as a rule, is irrevocable and
indefeasible, and the duty of the court is to see to it that this title is
maintained and respected unless challenged in a direct proceedings
[sic].[6] (Citations omitted; underscoring supplied)
Before the Court of Appeals where respondents appealed, they argued that the trial court
erred:
1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining
the sale of the subject property between Joseph, Sr. and the
defendant-appellee, despite the proliferation in the records and
admissions by both parties that defendant-appellee was the mistress
or common-law wife of Joseph, Sr..
2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining
the sale of the subject property between Joseph, Sr. and the
defendant-appellee, despite the fact that the marriage of Joseph,
Sr. and Epifania was then still subsisting thereby rendering the
subject property as conjugal property of Joseph, Sr. and Epifania.
3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the
validity of the sale of the subject property between Joseph, Sr. and
the defendant-appellee, despite the clear findings of forgery and the
non-credible testimony of notary public.[7]
By Decision dated October 21, 2003,[8] the appellate court reversed that of the trial
court and declared null and void the questioned deed of sale and TCT No. 138405.Held the
appellate court:
. . . The subject property having been acquired during the existence of a
valid marriage between Joseph Sr. and Epifania dela Cruz-Goyanko,
is presumed to belong to the conjugal partnership. Moreover, while this
presumption in favor of conjugality is rebuttable with clear and
convincing proof to the contrary, we find no evidence on record to
conclude otherwise. The record shows that while Joseph Sr. and his wife
Epifania have been estranged for years and that he and defendant-
appellant Maria Ching, have in fact been living together as common-law
husband and wife, there has never been a judicial decree declaring the
dissolution of his marriage to Epifania nor their conjugal partnership. It
is therefore undeniable that the 661-square meter property located at No.
29 F. Cabahug Street, Cebu City belongs to the conjugal partnership.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

Even if we were to assume that the subject property was not conjugal, . . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS
still we cannot sustain the validity of the sale of the property by Joseph, PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF THE NEW
Sr. to defendant-appellant Maria Ching, there being overwhelming CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW
evidence on records that they have been living together as common-law SPOUSES.
husband and wife. On this score, Art. 1352 of the Civil Code provides:
III.
Art. 1352. Contracts without cause, or with unlawful cause, . . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY
produce no effect whatsoever. The cause is unlawful if it is MADE BY A TRUSTEE, WHO BECAME AS SUCH IN
contrary to law, morals, good customs, public order or public CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A
policy. COMMON LAW HUSBAND OF THE BENEFICIARY, IS NOT A
VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST
We therefore find that the contract of sale in favor of the defendant- CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN
appellant Maria Ching was null and void for being contrary to morals LEGITIMATE AND COMMON LAW SPOUSES.
and public policy. The purported sale, having been made by Joseph Sr. in
favor of his concubine, undermines the stability of the family, a basic IV.
social institution which public policy vigilantly protects. Furthermore, . . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL
the law emphatically prohibits spouses from selling property to each THEORY OF THEIR CASE DURING APPEAL.[10]
other, subject to certain exceptions. And this is so because transfers or
conveyances between spouses, if allowed during the marriage
would destroy the system of conjugal partnership, a basic policy in civil
The pertinent provisions of the Civil Code which apply to the present case read:
law. The prohibition was designed to prevent the exercise of undue
influence by one spouse over the other and is likewise applicable even to
ART. 1352. Contracts without cause, or with unlawful cause, produce no effect
common-law relationships otherwise, the condition of those who
whatever. The cause is unlawful if it is contrary to law, morals, good
incurred guilt would turn out to be better than those in legal
customs, public order or public policy.
union.[9] (Underscoring supplied)

Hence, the present petition, petitioners arguing that the appellate court gravely erred in:
ART. 1409. The following contracts are inexistent and void from the beginning:
I.
. . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST
(1) Those whose cause, object or purpose is contrary to law, morals, good
CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN
customs, public order or public policy;
LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT
(2) Those which are absolutely simulated or fictitious;
PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO,
(3) Those whose cause or object did not exist at the time of
AS THE EXCLUSIVE PROPERTY OF PETITIONER, AND THAT
the transaction;
THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY
(4) Those whose object is outside the commerce of men;
OF THE MARRIAGE BETWEEN RESPONDENTS MOTHER
(5) Those which contemplate an impossible service;
EPIFANIA GOYANKO AND PETITIONERS COMMON LAW
(6) Those where the intention of the parties relative to the
HUSBAND, JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR
principal object of the contract cannot be ascertained;
CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE
(7) Those expressly prohibited or declared void by law.
THE SAME WAS VALIDLY ACQUIRED BY PETITIONER.
These contracts cannot be ratified. Neither can the right to set up
II.
the defense of illegality be waived.
 SALES: FIRST ASSIGNMENT
(August 22, 2017)
ARTICLE 1490. The husband and wife cannot sell property to
each other, except:
(1) When a separation of property was agreed upon in the
marriage settlements; or
(2) When there has been a judicial separation of property under
Article 191. (Underscoring supplied)
The proscription against sale of property between spouses applies even to common
law relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al.:[11]
Anent the second issue, we find that the contract of sale was null and
void for being contrary to morals and public policy. The sale was made
by a husband in favor of a concubine after he had abandoned his
family and left the conjugal home where his wife and children lived
and from whence they derived their support. The sale was
subversive of the stability of the family, a basic social institution
which public policy cherishes and protects.
Article 1409 of the Civil Code states inter alia that: contracts whose
cause, object, or purposes is contrary to law, morals, good customs,
public order, or public policy are void and inexistent from the very
beginning.
Article 1352 also provides that: Contracts without cause, or
with unlawful cause, produce no effect whatsoever. The cause is
unlawful if it is contrary to law, morals, good customs, public order, or
public policy.
Additionally, the law emphatically prohibits the spouses from
selling property to each other subject to certain exceptions.
Similarly,
donations between spouses during marriage are prohibited. And this
is so because if transfers or conveyances between spouses were allowed
during marriage, that would destroy the system of conjugal partnership, a
basic policy in civil law. It was also designed to prevent the exercise of
undue influence by one spouse over the other, as well as to protect the
institution of marriage, which is the cornerstone of family law. The
prohibitions apply to a couple living as husband and wife without
benefit of marriage, otherwise, the condition of those who incurred
guilt would turn out to be better than those in legal union. Those
provisions are dictated by public interest and their criterion must be
imposed upon the will of the parties. . . . [12](Italics in the original;
emphasis and underscoring supplied)
As the conveyance in question was made by Goyangko in favor of his common- law-wife-
herein petitioner, it was null and void.
Petitioners argument that a trust relationship was created between Goyanko as
trustee and her as beneficiary as provided in Articles 1448 and 1450 of the Civil Code
which read:
ARTICLE 1448. There is an implied trust when property is sold, and the
legal estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is
the trustee, while the latter is the beneficiary. However, if the person to
whom the title is conveyed is a child, legitimate or illegitimate, of the
one paying the price of the sale, no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.
ARTICLE 1450. If the price of a sale of property is loaned or paid by
one person for the benefit of another and the conveyance is made to the
lender or payor to secure the payment of the debt, a trust arises by
operation of law in favor of the person to whom the money is loaned or
for whom it is paid. The latter may redeem the property and compel a
conveyance thereof to him.
does not persuade.
For petitioners testimony that it was she who provided the purchase price is
uncorroborated. That she may have been considered the breadwinner of the family and that
there was proof that she earned a living do not conclusively clinch her claim.
As to the change of theory by respondents from forgery of their fathers signature in the
deed of sale to sale contrary to public policy, it too does not persuade. Generally, a party in
 SALES: FIRST ASSIGNMENT
(August 22, 2017)

a litigation is not permitted to freely and substantially change the theory of his case so as
not to put the other party to undue disadvantage by not accurately and timely apprising him
of what he is up against,[13] and to ensure that the latter is given the opportunity during trial
to refute all allegations against him by presenting evidence to the contrary. In the present
case, petitioner cannot be said to have been put to undue disadvantage and to have been
denied the chance to refute all the allegations against her. For the nullification of the sale is
anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409
and 1490 of the Civil Code.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED