G.R. No.

134971 March 25, 2004

HERMINIO TAYAG, petitioner,

vs.
AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON, TEODISIA LACSON-ESPINOSA and THE COURT OF
APPEALS, respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 and the Resolution2 of respondent Court of Appeals in CA-G.R. SP No. 44883.

The Case for the Petitioner

Respondents Angelica Tiotuyco Vda. de Lacson,3 and her children Amancia, Antonio, Juan, and Teodosia, all surnamed Lacson, were the registered
owners of three parcels of land located in Mabalacat, Pampanga, covered by Transfer Certificates of Title (TCT) Nos. 35922-R, 35923-R, and 35925-R,
registered in the Register of Deeds of San Fernando, Pampanga. The properties, which were tenanted agricultural lands,4 were administered by Renato
Espinosa for the owner.

On March 17, 1996, a group of original farmers/tillers, namely, Julio Tiamson, Renato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores,
Norma Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga Laxamana,
Felicencia de Leon, Emiliano Ramos, and another group, namely, Felino G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo Quiambao,
Roman Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda, Jose Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino, Sixto
Hernandez, Alex Quiambao, Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando Flores, and Aurelio Flores,5 individually executed in favor
of the petitioner separate Deeds of Assignment6 in which the assignees assigned to the petitioner their respective rights as tenants/tillers of the
landholdings possessed and tilled by them for and in consideration of P50.00 per square meter. The said amount was made payable "when the legal
impediments to the sale of the property to the petitioner no longer existed." The petitioner was also granted the exclusive right to buy the property if and
when the respondents, with the concurrence of the defendants-tenants, agreed to sell the property. In the interim, the petitioner gave varied sums of
money to the tenants as partial payments, and the latter issued receipts for the said amounts.

On July 24, 1996, the petitioner called a meeting of the defendants-tenants to work out the implementation of the terms of their separate
agreements.7 However, on August 8, 1996, the defendants-tenants, through Joven Mariano, wrote the petitioner stating that they were not attending the
meeting and instead gave notice of their collective decision to sell all their rights and interests, as tenants/lessees, over the landholding to the
respondents.8 Explaining their reasons for their collective decision, they wrote as follows:

Kami ay nagtiwala sa inyo, naging tapat at nanindigan sa lahat ng ating napagkasunduan, hindi tumanggap ng ibang buyer o ahente, pero sinira ninyo
ang aming pagtitiwala sa pamamagitan ng demanda ninyo at pagbibigay ng problema sa amin na hindi naman nagbenta ng lupa.

Kaya kami ay nagpulong at nagpasya na ibenta na lang ang aming karapatan o ang aming lupang sinasaka sa landowner o sa mga pamilyang Lacson,
dahil ayaw naming magkaroon ng problema.

Kaya kung ang sasabihin ninyong ito’y katangahan, lalo sigurong magiging katangahan kung ibebenta pa namin sa inyo ang aming lupang sinasaka, kaya
pasensya na lang Mister Tayag. Dahil sinira ninyo ang aming pagtitiwala at katapatan.9

On August 19, 1996, the petitioner filed a complaint with the Regional Trial Court of San Fernando, Pampanga, Branch 44, against the defendants-
tenants, as well as the respondents, for the court to fix a period within which to pay the agreed purchase price of P50.00 per square meter to the
defendants, as provided for in the Deeds of Assignment. The petitioner also prayed for a writ of preliminary injunction against the defendants and the
respondents therein.10 The case was docketed as Civil Case No. 10910.

In his complaint, the petitioner alleged, inter alia, the following:

4. That defendants Julio Tiamson, Renato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita Tolentino,
Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de Leon, Emiliano
Ramos are original farmers or direct tillers of landholdings over parcels of lands covered by Transfer Certificate of Title Nos. 35922-R, 35923-
R and 35925-R which are registered in the names of defendants LACSONS; while defendants Felino G. Tolentino, Rica Gozun, Perla Gozun,
Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Alfredo Gozun, Jose Tiamson, Augusto Tolentino, Sixto
Hernandez, Alex Quiambao, Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, and Aurelio Flores are sub-tenants over the same parcel
of land.

5. That on March 17, 1996 the defendants TIAMSON, et al., entered into Deeds of Assignment with the plaintiff by which the defendants
assigned all their rights and interests on their landholdings to the plaintiff and that on the same date (March 17, 1996), the defendants received
from the plaintiff partial payments in the amounts corresponding to their names. Subsequent payments were also received:

1st PAYMENT 2nd PAYMENT CHECK NO. TOTAL

P
1.Julio Tiamson - - - - - - P 20,000 P 10,621.54 231281
30,621.54
2. Renato Gozun - - - - - - P 10,000 96,000 106,000.0
[son of Felix Gozun (deceased)] 0

P
3. Rosita Hernandez - - - - P 5,000 14,374.24 231274
19,374.24

4. Bienvenido Tongol - - - P 10,000 14,465.90 231285 24,465.90

[Son of Abundio Tongol (deceased)]

5. Alfonso Flores - - - - - - P 30,000 26,648.40 231271 56,648.40

6. Norma Quiambao - - - - P 10,000 41,501.10 231279 51,501.10

7. Rosita Tolentino - - - - - P 10,000 22,126.08 231284 32,126.08

8. Jose Sosa - - - - - - - - - P 10,000 14,861.31 231291 24,861.31

9. Francisco Tolentino, Sr. P 10,000 24,237.62 231283 34,237.62

10. Emiliano Laxamana - - P 10,000 ------ ------ ------

11. Ruben Torres - - - - - -

P 10,000 P 33,587.31 ------ P 43,587.31
[Son of Mariano Torres (deceased)]

12. Meliton Allanigue P 10,000 12,944.77 231269 P 22,944.77

13. Dominga Laxamana P 5,000 22,269.02 231275 27,269.02

14. Felicencia de Leon 10,000 ------ ------ ------

15. Emiliano Ramos 5,000 18,869.60 231280 23,869.60

16. Felino G. Tolentino 10,000 ------ ------ ------

17. Rica Gozun 5,000 ------ ------ ------

18. Perla Gozun 10,000 ------ ------ ------

19. Benigno Tolentino 10,000 ------ ------ ------

20. Rodolfo Quiambao 10,000 ------ ------ ------

21. Roman Laxamana 10,000 ------ ------ ------

22. Eddie San Luis 10,000 ------ ------ ------

23. Ricardo Hernandez 10,000 ------ ------ ------

24. Nicenciana Miranda 10,000 ------ ------ ------

25. Jose Gozun 10,000 ------ ------ ------

26. Alfredo Sosa 5,000 ------ ------ ------

27. Jose Tiamson 10,000 ------ ------ ------

28. Augusto Tolentino 5,000 ------ ------ ------

29. Sixto Hernandez 10,000 ------ ------ ------

30. Alex Quiambao 10,000 ------ ------ ------

31. Isidro Tolentino 10,000 ------ ------ ------

32. Ceferino de Leon ------ 11,378.70 231270 ------

33. Alberto Hernandez 10,000 ------ ------ ------

34. Orlando Florez 10,000 ------ ------ ------

35. Aurelio Flores 10,000 ------ ------ ------

6. That on July 24, 1996, the plaintiff wrote the defendants TIAMSON, et al., inviting them for a meeting regarding the
negotiations/implementations of the terms of their Deeds of Assignment;
 7. That on August 8, 1996, the defendants TIAMSON, et al., through Joven Mariano, replied that they are no longer willing to pursue with the
negotiations, and instead they gave notice to the plaintiff that they will sell all their rights and interests to the registered owners (defendants
LACSONS).

A copy of the letter is hereto attached as Annex "A" etc.;

8. That the defendants TIAMSON, et. al., have no right to deal with the defendants LACSON or with any third persons while their contracts
with the plaintiff are subsisting; defendants LACSONS are inducing or have induced the defendants TIAMSON, et. al., to violate their contracts
with the plaintiff;

9. That by reason of the malicious acts of all the defendants, plaintiff suffered moral damages in the forms of mental anguish, mental torture
and serious anxiety which in the sum of P500,000.00 for which defendants should be held liable jointly and severally.11

In support of his plea for injunctive relief, the petitioner, as plaintiff, also alleged the following in his complaint:

11. That to maintain the status quo, the defendants TIAMSON, et al., should be restrained from rescinding their contracts with the plaintiff,
and the defendants LACSONS should also be restrained from accepting any offer of sale or alienation with the defendants TIAMSON, et al., in
whatever form, the latter’s rights and interests in the properties mentioned in paragraph 4 hereof; further, the LACSONS should be restrained
from encumbering/alienating the subject properties covered by TCT No. 35922-R, 35923-R and TCT No. 35925-R, Registry of Deeds of San
Fernando, Pampanga;

12. That the defendants TIAMSON, et al., threaten to rescind their contracts with the plaintiff and are also bent on selling/alienating their
rights and interests over the subject properties to their co-defendants (LACSONS) or any other persons to the damage and prejudice of the
plaintiff who already invested much money, efforts and time in the said transactions;

13. That the plaintiff is entitled to the reliefs being demanded in the complaint;

14. That to prevent irreparable damages and prejudice to the plaintiff, as the latter has no speedy and adequate remedy under the ordinary
course of law, it is essential that a Writ of Preliminary Injunction be issued enjoining and restraining the defendants TIAMSON, et al., from
rescinding their contracts with the plaintiff and from selling/alienating their properties to the LACSONS or other persons;

15. That the plaintiff is willing and able to put up a reasonable bond to answer for the damages which the defendants would suffer should the
injunction prayed for and granted be found without basis.12

The petitioner prayed, that after the proceedings, judgment be rendered as follows:

1. Pending the hearing, a Writ of Preliminary Injunction be issued prohibiting, enjoining and restraining defendants Julio Tiamson, Renato
Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino Sr.,
Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de Leon, Emiliano Ramos, Felino G. Tolentino, Rica
Gozun, Perla Gozun, Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda,
Jose Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando Flores, and Aurelio Flores from
rescinding their contracts with the plaintiff and from alienating their rights and interest over the aforementioned properties in favor of
defendants LACSONS or any other third persons; and prohibiting the defendants LACSONS from encumbering/alienating TCT Nos. 35922-R,
35923-R and 35925-R of the Registry of Deeds of San Fernando, Pampanga.

2. And pending the hearing of the Prayer for a Writ of Preliminary Injunction, it is prayed that a restraining order be issued restraining the
aforementioned defendants (TIAMSON, et al.) from rescinding their contracts with the plaintiff and from alienating the subject properties to
the defendants LACSONS or any third persons; further, restraining and enjoining the defendants LACSONS from encumbering/selling the
properties covered by TCT Nos. 35922-R, 35923-R, and 35925-R of the Registry of Deeds of San Fernando, Pampanga.

3. Fixing the period within which plaintiff shall pay the balance of the purchase price to the defendants TIAMSON, et al., after the lapse of legal
impediment, if any.

4. Making the Writ of Preliminary Injunction permanent;

5. Ordering the defendants to pay the plaintiff the sum of P500,000.00 as moral damages;

6. Ordering the defendants to pay the plaintiff attorney’s fees in the sum of P100,000.00 plus litigation expenses of P50,000.00;

Plaintiff prays for such other relief as may be just and equitable under the premises.13

In their answer to the complaint, the respondents as defendants asserted that (a) the defendant Angelica Vda. de Lacson had died on April 24, 1993; (b)
twelve of the defendants were tenants/lessees of respondents, but the tenancy status of the rest of the defendants was uncertain; (c) they never induced
the defendants Tiamson to violate their contracts with the petitioner; and, (d) being merely tenants-tillers, the defendants-tenants had no right to enter
into any transactions involving their properties without their knowledge and consent. They also averred that the transfers or assignments of leasehold
rights made by the defendants-tenants to the petitioner is contrary to Presidential Decree (P.D.) No. 27 and Republic Act No. 6657, the Comprehensive
Agrarian Reform Program (CARP).14 The respondents interposed counterclaims for damages against the petitioner as plaintiff.
The defendants-tenants Tiamson, et al., alleged in their answer with counterclaim for damages, that the money each of them received from the petitioner
were in the form of loans, and that they were deceived into signing the deeds of assignment:

a) That all the foregoing allegations in the Answer are hereby repleaded and incorporated in so far as they are material and relevant herein;

b) That the defendants Tiamson, et al., in so far as the Deeds of Assignment are concern[ed] never knew that what they did sign is a Deed of
Assignment. What they knew was that they were made to sign a document that will serve as a receipt for the loan granted [to] them by the
plaintiff;

c) That the Deeds of Assignment were signed through the employment of fraud, deceit and false pretenses of plaintiff and made the defendants
believe that what they sign[ed] was a mere receipt for amounts received by way of loans;

d) That the documents signed in blank were filled up and completed after the defendants Tiamson, et al., signed the documents and their
completion and accomplishment was done in the absence of said defendants and, worst of all, defendants were not provided a copy thereof;

e) That as completed, the Deeds of Assignment reflected that the defendants Tiamson, et al., did assign all their rights and interests in the
properties or landholdings they were tilling in favor of the plaintiff. That if this is so, assuming arguendo that the documents were voluntarily
executed, the defendants Tiamson, et al., do not have any right to transfer their interest in the landholdings they are tilling as they have no
right whatsoever in the landholdings, the landholdings belong to their co-defendants, Lacson, et al., and therefore, the contract is null and
void;

f) That while it is admitted that the defendants Tiamson, et al., received sums of money from plaintiffs, the same were received as approved
loans granted by plaintiff to the defendants Tiamson, et al., and not as part consideration of the alleged Deeds of Assignment; and by way
of:…15

At the hearing of the petitioner’s plea for a writ of preliminary injunction, the respondents’ counsel failed to appear. In support of his plea for a writ of
preliminary injunction, the petitioner adduced in evidence the Deeds of Assignment,16 the receipts17 issued by the defendants-tenants for the amounts
they received from him; and the letter18 the petitioner received from the defendants-tenants. The petitioner then rested his case.

The respondents, thereafter, filed a Comment/Motion to dismiss/deny the petitioner’s plea for injunctive relief on the following grounds: (a) the Deeds
of Assignment executed by the defendants-tenants were contrary to public policy and P.D. No. 27 and Rep. Act No. 6657; (b) the petitioner failed to
prove that the respondents induced the defendants-tenants to renege on their obligations under the "Deeds of Assignment;" (c) not being privy to the
said deeds, the respondents are not bound by the said deeds; and, (d) the respondents had the absolute right to sell and dispose of their property and to
encumber the same and cannot be enjoined from doing so by the trial court.

The petitioner opposed the motion, contending that it was premature for the trial court to resolve his plea for injunctive relief, before the respondents
and the defendants-tenants adduced evidence in opposition thereto, to afford the petitioner a chance to adduce rebuttal evidence and prove his
entitlement to a writ of preliminary injunction. The respondents replied that it was the burden of the petitioner to establish the requisites of a writ of
preliminary injunction without any evidence on their part, and that they were not bound to adduce any evidence in opposition to the petitioner’s plea for
a writ of preliminary injunction.

On February 13, 1997, the court issued an Order19 denying the motion of the respondents for being premature. It directed the hearing to proceed for the
respondents to adduce their evidence. The court ruled that the petitioner, on the basis of the material allegations of the complaint, was entitled to
injunctive relief. It also held that before the court could resolve the petitioner’s plea for injunctive relief, there was need for a hearing to enable the
respondents and the defendants-tenants to adduce evidence to controvert that of the petitioner. The respondents filed a motion for reconsideration,
which the court denied in its Order dated April 16, 1997. The trial court ruled that on the face of the averments of the complaint, the pleadings of the
parties and the evidence adduced by the petitioner, the latter was entitled to injunctive relief unless the respondents and the defendants-tenants adduced
controverting evidence.

The respondents, the petitioners therein, filed a petition for certiorari in the Court of Appeals for the nullification of the February 13, 1997 and April 16,
1997 Orders of the trial court. The case was docketed as CA-G.R. SP No. 44883. The petitioners therein prayed in their petition that:

1. An order be issued declaring the orders of respondent court dated February 13, 1997 and April 16, 1997 as null and void;

2. An order be issued directing the respondent court to issue an order denying the application of respondent Herminio Tayag for the issuance
of a Writ of Preliminary Injunction and/or restraining order.

3. In the meantime, a Writ of Preliminary Injunction be issued against the respondent court, prohibiting it from issuing its own writ of
injunction against Petitioners, and thereafter making said injunction to be issued by this Court permanent.

Such other orders as may be deemed just & equitable under the premises also prayed for.20

The respondents asserted that the Deeds of Assignment executed by the assignees in favor of the petitioner were contrary to paragraph 13 of P.D. No. 27
and the second paragraph of Section 70 of Rep. Act No. 6657, and, as such, could not be enforced by the petitioner for being null and void. The
respondents also claimed that the enforcement of the deeds of assignment was subject to a supervening condition:

3. That this exclusive and absolute right given to the assignee shall be exercised only when no legal impediments exist to the lot to effect the smooth
transfer of lawful ownership of the lot/property in the name of the ASSIGNEE.21
The respondents argued that until such condition took place, the petitioner would not acquire any right to enforce the deeds by injunctive relief.
Furthermore, the petitioner’s plea in his complaint before the trial court, to fix a period within which to pay the balance of the amounts due to the
tenants under said deeds after the "lapse" of any legal impediment, assumed that the deeds were valid, when, in fact and in law, they were not. According
to the respondents, they were not parties to the deeds of assignment; hence, they were not bound by the said deeds. The issuance of a writ of preliminary
injunction would restrict and impede the exercise of their right to dispose of their property, as provided for in Article 428 of the New Civil Code. They
asserted that the petitioner had no cause of action against them and the defendants-tenants.

On April 17, 1998, the Court of Appeals rendered its decision against the petitioner, annulling and setting aside the assailed orders of the trial court; and
permanently enjoining the said trial court from proceeding with Civil Case No. 10901. The decretal portion of the decision reads as follows:

However, even if private respondent is denied of the injunctive relief he demands in the lower court still he could avail of other course of action in order
to protect his interest such as the institution of a simple civil case of collection of money against TIAMSON, et al.

For all the foregoing considerations, the orders dated 13 February 1997 and 16 April 1997 are hereby NULLIFIED and ordered SET ASIDE for having
been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Accordingly, public respondent is permanently enjoined from
proceeding with the case designated as Civil Case No. 10901.22

The CA ruled that the respondents could not be enjoined from alienating or even encumbering their property, especially so since they were not privies to
the deeds of assignment executed by the defendants-tenants. The defendants-tenants were not yet owners of the portions of the landholdings
respectively tilled by them; as such, they had nothing to assign to the petitioner. Finally, the CA ruled that the deeds of assignment executed by the
defendants-tenants were contrary to P.D. No. 27 and Rep. Act No. 6657.

On August 4, 1998, the CA issued a Resolution denying the petitioner’s motion for reconsideration.23

Hence, the petitioner filed his petition for review on certiorari before this Court, contending as follows:

A MERE ALLEGATION IN THE ANSWER OF THE TENANTS COULD NOT BE USED AS EVIDENCE OR BASIS FOR ANY CONCLUSION, AS THIS
ALLEGATION, IS STILL THE SUBJECT OF TRIAL IN THE LOWER COURT (RTC).24

II

THE COURT OF APPEALS CANNOT ENJOIN THE HEARING OF A PETITION FOR PRELIMINARY INJUNCTION AT A TIME WHEN THE LOWER
COURT (RTC) IS STILL RECEIVING EVIDENCE PRECISELY TO DETERMINE WHETHER OR NOT THE WRIT OF PRELIMINARY INJUNCTION
BEING PRAYED FOR BY TAYAG SHOULD BE GRANTED OR NOT.25

III

THE COURT OF APPEALS CANNOT USE "FACTS" NOT IN EVIDENCE, TO SUPPORT ITS CONCLUSION THAT THE TENANTS ARE NOT YET
"AWARDEES OF THE LAND REFORM.26

IV

THE COURT OF APPEALS CANNOT CAUSE THE PERMANENT STOPPAGE OF THE ENTIRE PROCEEDINGS BELOW INCLUDING THE TRIAL ON
THE MERITS OF THE CASE CONSIDERING THAT THE ISSUE INVOLVED ONLY THE PROPRIETY OF MAINTAINING THE STATUS QUO. 27

THE COURT OF APPEALS CANNOT INCLUDE IN ITS DECISION THE CASE OF THE OTHER 35 TENANTS WHO DO NOT QUESTION THE
JURISDICTION OF THE LOWER COURT (RTC) OVER THE CASE AND WHO ARE IN FACT STILL PRESENTING THEIR EVIDENCE TO OPPOSE
THE INJUNCTION PRAYED FOR, AND TO PROVE AT THE SAME TIME THE COUNTER-CLAIMS THEY FILED AGAINST THE PETITIONER.28

VI

THE LOWER COURT (RTC) HAS JURISDICTION OVER THE CASE FILED BY TAYAG FOR "FIXING OF PERIOD" UNDER ART. 1197 OF THE NEW
CIVIL CODE AND FOR "DAMAGES" AGAINST THE LACSONS UNDER ART. 1314 OF THE SAME CODE. THIS CASE CANNOT BE SUPPRESSED OR
RENDERED NUGATORY UNCEREMONIOUSLY.29

The petitioner faults the Court of Appeals for permanently enjoining the trial court from proceeding with Civil Case No. 10910. He opines that the same
was too drastic, tantamount to a dismissal of the case. He argues that at that stage, it was premature for the appellate court to determine the merits of the
case since no evidentiary hearing thereon was conducted by the trial court. This, the Court of Appeals cannot do, since neither party moved for the
dismissal of Civil Case No. 10910. The petitioner points out that the Court of Appeals, in making its findings, went beyond the issue raised by the private
respondents, namely, whether or not the trial court committed a grave abuse of discretion amounting to excess or lack of jurisdiction when it denied the
respondent’s motion for the denial/dismissal of the petitioner’s plea for a writ of preliminary injunction. He, likewise, points out that the appellate court
erroneously presumed that the leaseholders were not DAR awardees and that the deeds of assignment were contrary to law. He contends that leasehold
tenants are not prohibited from conveying or waiving their leasehold rights in his favor. He insists that there is nothing illegal with his contracts with the
leaseholders, since the same shall be effected only when there are no more "legal impediments."
At bottom, the petitioner contends that, at that stage, it was premature for the appellate court to determine the merits of his case since no evidentiary
hearing on the merits of his complaint had yet been conducted by the trial court.

The Comment/Motion of the

Respondents to Dismiss/Deny
Petitioner’s Plea for a Writ
of Preliminary Injunction
Was Not Premature.

Contrary to the ruling of the trial court, the motion of the respondents to dismiss/deny the petitioner’s plea for a writ of preliminary injunction after the
petitioner had adduced his evidence, testimonial and documentary, and had rested his case on the incident, was proper and timely. It bears stressing that
the petitioner had the burden to prove his right to a writ of preliminary injunction. He may rely solely on the material allegations of his complaint or
adduce evidence in support thereof. The petitioner adduced his evidence to support his plea for a writ of preliminary injunction against the respondents
and the defendants-tenants and rested his case on the said incident. The respondents then had three options: (a) file a motion to deny/dismiss the
motion on the ground that the petitioner failed to discharge his burden to prove the factual and legal basis for his plea for a writ of preliminary injunction
and, if the trial court denies his motion, for them to adduce evidence in opposition to the petitioner’s plea; (b) forgo their motion and adduce testimonial
and/or documentary evidence in opposition to the petitioner’s plea for a writ of preliminary injunction; or, (c) waive their right to adduce evidence and
submit the incident for consideration on the basis of the pleadings of the parties and the evidence of the petitioner. The respondents opted not to adduce
any evidence, and instead filed a motion to deny or dismiss the petitioner’s plea for a writ of preliminary injunction against them, on their claim that the
petitioner failed to prove his entitlement thereto. The trial court cannot compel the respondents to adduce evidence in opposition to the petitioner’s plea
if the respondents opt to waive their right to adduce such evidence. Thus, the trial court should have resolved the respondents’ motion even without the
latter’s opposition and the presentation of evidence thereon.

The RTC Committed a Grave

Abuse of Discretion Amounting
to Excess or Lack of Jurisdiction
in Issuing its February 13, 1997
and April 16, 1997 Orders

In its February 13, 1997 Order, the trial court ruled that the petitioner was entitled to a writ of preliminary injunction against the respondents on the
basis of the material averments of the complaint. In its April 16, 1997 Order, the trial court denied the respondents’ motion for reconsideration of the
previous order, on its finding that the petitioner was entitled to a writ of preliminary injunction based on the material allegations of his complaint, the
evidence on record, the pleadings of the parties, as well as the applicable laws:

… For the record, the Court denied the LACSONS’ COMMENT/MOTION on the basis of the facts culled from the evidence presented, the pleadings and
the law applicable unswayed by the partisan or personal interests, public opinion or fear of criticism (Canon 3, Rule 3.02, Code of Judicial Ethics).30

Section 3, Rule 58 of the Rules of Court, as amended, enumerates the grounds for the issuance of a writ of preliminary injunction, thus:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or
continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice
to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment
ineffectual.

A preliminary injunction is an extraordinary event calculated to preserve or maintain the status quo of things ante litem and is generally availed of to
prevent actual or threatened acts, until the merits of the case can be heard. Injunction is accepted as the strong arm of equity or a transcendent
remedy.31 While generally the grant of a writ of preliminary injunction rests on the sound discretion of the trial court taking cognizance of the case,
extreme caution must be observed in the exercise of such discretion.32 Indeed, in Olalia v. Hizon,33 we held:

It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound
discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to
cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages.

Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or
precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency demands it.34

The very foundation of the jurisdiction to issue writ of injunction rests in the existence of a cause of action and in the probability of irreparable injury,
inadequacy of pecuniary compensation and the prevention of the multiplicity of suits. Where facts are not shown to bring the case within these
conditions, the relief of injunction should be refused.35

For the court to issue a writ of preliminary injunction, the petitioner was burdened to establish the following: (1) a right in esse or a clear and
unmistakable right to be protected; (2) a violation of that right; (3) that there is an urgent and permanent act and urgent necessity for the writ to prevent
serious damage.36 Thus, in the absence of a clear legal right, the issuance of the injunctive writ constitutes a grave abuse of discretion. Where the
complainant’s right is doubtful or disputed, injunction is not proper. Injunction is a preservative remedy aimed at protecting substantial rights and
interests. It is not designed to protect contingent or future rights. The possibility of irreparable damage without proof of adequate existing rights is not a
ground for injunction.37
We have reviewed the pleadings of the parties and found that, as contended by the respondents, the petitioner failed to establish the essential requisites
for the issuance of a writ of preliminary injunction. Hence, the trial court committed a grave abuse of its discretion amounting to excess or lack of
jurisdiction in denying the respondents’ comment/motion as well as their motion for reconsideration.

First. The trial court cannot enjoin the respondents, at the instance of the petitioner, from selling, disposing of and encumbering their property. As the
registered owners of the property, the respondents have the right to enjoy and dispose of their property without any other limitations than those
established by law, in accordance with Article 428 of the Civil Code. The right to dispose of the property is the power of the owner to sell, encumber,
transfer, and even destroy the property. Ownership also includes the right to recover the possession of the property from any other person to whom the
owner has not transmitted such property, by the appropriate action for restitution, with the fruits, and for indemnification for damages. 38 The right of
ownership of the respondents is not, of course, absolute. It is limited by those set forth by law, such as the agrarian reform laws. Under Article 1306 of
the New Civil Code, the respondents may enter into contracts covering their property with another under such terms and conditions as they may deem
beneficial provided they are not contrary to law, morals, good conduct, public order or public policy.

The respondents cannot be enjoined from selling or encumbering their property simply and merely because they had executed Deeds of Assignment in
favor of the petitioner, obliging themselves to assign and transfer their rights or interests as agricultural farmers/laborers/sub-tenants over the
landholding, and granting the petitioner the exclusive right to buy the property subject to the occurrence of certain conditions. The respondents were not
parties to the said deeds. There is no evidence that the respondents agreed, expressly or impliedly, to the said deeds or to the terms and conditions set
forth therein. Indeed, they assailed the validity of the said deeds on their claim that the same were contrary to the letter and spirit of P.D. No. 27 and
Rep. Act No. 6657. The petitioner even admitted when he testified that he did not know any of the respondents, and that he had not met any of them
before he filed his complaint in the RTC. He did not even know that one of those whom he had impleaded as defendant, Angelica Vda. de Lacson, was
already dead.

Q: But you have not met any of these Lacsons?

A: Not yet, sir.

Q: Do you know that two (2) of the defendants are residents of the United States?

A: I do not know, sir.

Q: You do not know also that Angela Tiotuvie (sic) Vda. de Lacson had already been dead?

A: I am aware of that, sir.39

We are one with the Court of Appeals in its ruling that:

We cannot see our way clear on how or why injunction should lie against petitioners. As owners of the lands being tilled by TIAMSON, et al., petitioners,
under the law, have the right to enjoy and dispose of the same. Thus, they have the right to possess the lands, as well as the right to encumber or alienate
them. This principle of law notwithstanding, private respondent in the lower court sought to restrain the petitioners from encumbering and/or alienating
the properties covered by TCT No. 35922-R, 35923-R and TCT No. 35925-R of the Registry of Deeds of San Fernando, Pampanga. This cannot be
allowed to prosper since it would constitute a limitation or restriction, not otherwise established by law on their right of ownership, more so considering
that petitioners were not even privy to the alleged transaction between private respondent and TIAMSON, et al.40

Second. A reading the averments of the complaint will show that the petitioner clearly has no cause of action against the respondents for the principal
relief prayed for therein, for the trial court to fix a period within which to pay to each of the defendants-tenants the balance of the P50.00 per square
meter, the consideration under the Deeds of Assignment executed by the defendants-tenants. The respondents are not parties or privies to the deeds of
assignment. The matter of the period for the petitioner to pay the balance of the said amount to each of the defendants-tenants is an issue between them,
the parties to the deed.

Third. On the face of the complaint, the action of the petitioner against the respondents and the defendants-tenants has no legal basis. Under the Deeds
of Assignment, the obligation of the petitioner to pay to each of the defendants-tenants the balance of the purchase price was conditioned on the
occurrence of the following events: (a) the respondents agree to sell their property to the petitioner; (b) the legal impediments to the sale of the
landholding to the petitioner no longer exist; and, (c) the petitioner decides to buy the property. When he testified, the petitioner admitted that the legal
impediments referred to in the deeds were (a) the respondents’ refusal to sell their property; and, (b) the lack of approval of the Department of Agrarian
Reform:

Q : There is no specific agreement prior to the execution of those documents as when they will pay?

A : We agreed to that, that I will pay them when there are no legal impediment, sir.

Q : Many of the documents are unlattered (sic) and you want to convey to this Honorable Court that prior to the execution of these documents
you have those tentative agreement for instance that the amount or the cost of the price is to be paid when there are no legal impediment, you
are using the word "legal impediment," do you know the meaning of that?

A : When there are (sic) no more legal impediment exist, sir.

Q : Did you make how (sic) to the effect that the meaning of that phrase that you used the unlettered defendants?

A : We have agreed to that, sir.

 ATTY. OCAMPO:

May I ask, Your Honor, that the witness please answer my question not to answer in the way he wanted it.

COURT:

Just answer the question, Mr. Tayag.

WITNESS:

Yes, Your Honor.

ATTY. OCAMPO:

Q : Did you explain to them?

A : Yes, sir.

Q : What did you tell them?

A : I explain[ed] to them, sir, that the legal impediment then especially if the Lacsons will not agree to sell their shares to me or to us it would
be hard to (sic) me to pay them in full. And those covered by DAR. I explain[ed] to them and it was clearly stated in the title that there is [a]
prohibited period of time before you can sell the property. I explained every detail to them.41

It is only upon the occurrence of the foregoing conditions that the petitioner would be obliged to pay to the defendants-tenants the balance of the P50.00
per square meter under the deeds of assignment. Thus:

2. That in case the ASSIGNOR and LANDOWNER will mutually agree to sell the said lot to the ASSIGNEE, who is given an exclusive and
absolute right to buy the lot, the ASSIGNOR shall receive the sum of FIFTY PESOS (P50.00) per square meter as consideration of the total
area actually tilled and possessed by the ASSIGNOR, less whatever amount received by the ASSIGNOR including commissions, taxes and all
allowable deductions relative to the sale of the subject properties.

3. That this exclusive and absolute right given to the ASSIGNEE shall be exercised only when no legal impediments exist to the lot to effect the
smooth transfer of lawful ownership of the lot/property in the name of the ASSIGNEE;

4. That the ASSIGNOR will remain in peaceful possession over the said property and shall enjoy the fruits/earnings and/or harvest of the said
lot until such time that full payment of the agreed purchase price had been made by the ASSIGNEE.42

There is no showing in the petitioner’s complaint that the respondents had agreed to sell their property, and that the legal impediments to the agreement
no longer existed. The petitioner and the defendants-tenants had yet to submit the Deeds of Assignment to the Department of Agrarian Reform which, in
turn, had to act on and approve or disapprove the same. In fact, as alleged by the petitioner in his complaint, he was yet to meet with the defendants-
tenants to discuss the implementation of the deeds of assignment. Unless and until the Department of Agrarian Reform approved the said deeds, if at all,
the petitioner had no right to enforce the same in a court of law by asking the trial court to fix a period within which to pay the balance of the purchase
price and praying for injunctive relief.

We do not agree with the contention of the petitioner that the deeds of assignment executed by the defendants-tenants are perfected option
contracts.43 An option is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a
fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy
the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions, or which gives to the owner of the
property the right to sell or demand a sale. It imposes no binding obligation on the person holding the option, aside from the consideration for the offer.
Until accepted, it is not, properly speaking, treated as a contract.44 The second party gets in praesenti, not lands, not an agreement that he shall have the
lands, but the right to call for and receive lands if he elects.45 An option contract is a separate and distinct contract from which the parties may enter into
upon the conjunction of the option.46

In this case, the defendants-tenants-subtenants, under the deeds of assignment, granted to the petitioner not only an option but the exclusive right to
buy the landholding. But the grantors were merely the defendants-tenants, and not the respondents, the registered owners of the property. Not being the
registered owners of the property, the defendants-tenants could not legally grant to the petitioner the option, much less the "exclusive right" to buy the
property. As the Latin saying goes, "NEMO DAT QUOD NON HABET."

Fourth. The petitioner impleaded the respondents as parties-defendants solely on his allegation that the latter induced or are inducing the defendants-
tenants to violate the deeds of assignment, contrary to the provisions of Article 1314 of the New Civil Code which reads:

Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.

In So Ping Bun v. Court of Appeals,47 we held that for the said law to apply, the pleader is burdened to prove the following: (1) the existence of a valid
contract; (2) knowledge by the third person of the existence of the contract; and (3) interference by the third person in the contractual relation without
legal justification.
Where there was no malice in the interference of a contract, and the impulse behind one’s conduct lies in a proper business interest rather than in
wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested, and such interest motivates his conduct,
it cannot be said that he is an officious or malicious intermeddler.48

In fine, one who is not a party to a contract and who interferes thereon is not necessarily an officious or malicious intermeddler. The only evidence
adduced by the petitioner to prove his claim is the letter from the defendants-tenants informing him that they had decided to sell their rights and
interests over the landholding to the respondents, instead of honoring their obligation under the deeds of assignment because, according to them, the
petitioner harassed those tenants who did not want to execute deeds of assignment in his favor, and because the said defendants-tenants did not want to
have any problem with the respondents who could cause their eviction for executing with the petitioner the deeds of assignment as the said deeds are in
violation of P.D. No. 27 and Rep. Act No. 6657.49 The defendants-tenants did not allege therein that the respondents induced them to breach their
contracts with the petitioner. The petitioner himself admitted when he testified that his claim that the respondents induced the defendants-assignees to
violate contracts with him was based merely on what "he heard," thus:

Q: Going to your last statement that the Lacsons induces (sic) the defendants, did you see that the Lacsons were inducing the defendants?

A: I heard and sometime in [the] first week of August, sir, they went in the barrio (sic). As a matter of fact, that is the reason why they sent me
letter that they will sell it to the Lacsons.

Q: Incidentally, do you knew (sic) these Lacsons individually?

A: No, sir, it was only Mr. Espinosa who I knew (sic) personally, the alleged negotiator and has the authority to sell the property.50

Even if the respondents received an offer from the defendants-tenants to assign and transfer their rights and interests on the landholding, the
respondents cannot be enjoined from entertaining the said offer, or even negotiating with the defendants-tenants. The respondents could not even be
expected to warn the defendants-tenants for executing the said deeds in violation of P.D. No. 27 and Rep. Act No. 6657. Under Section 22 of the latter
law, beneficiaries under P.D. No. 27 who have culpably sold, disposed of, or abandoned their land, are disqualified from becoming beneficiaries.

From the pleadings of the petitioner, it is quite evident that his purpose in having the defendants-tenants execute the Deeds of Assignment in his favor
was to acquire the landholding without any tenants thereon, in the event that the respondents agreed to sell the property to him. The petitioner knew
that under Section 11 of Rep. Act No. 3844, if the respondents agreed to sell the property, the defendants-tenants shall have preferential right to buy the
same under reasonable terms and conditions:

SECTION 11. Lessee’s Right of Pre-emption. – In case the agricultural lessor desires to sell the landholding, the agricultural lessee shall have the
preferential right to buy the same under reasonable terms and conditions: Provided, That the entire landholding offered for sale must be pre-empted by
the Land Authority if the landowner so desires, unless the majority of the lessees object to such acquisition: Provided, further, That where there are two
or more agricultural lessees, each shall be entitled to said preferential right only to the extent of the area actually cultivated by him. …51

Under Section 12 of the law, if the property was sold to a third person without the knowledge of the tenants thereon, the latter shall have the right to
redeem the same at a reasonable price and consideration. By assigning their rights and interests on the landholding under the deeds of assignment in
favor of the petitioner, the defendants-tenants thereby waived, in favor of the petitioner, who is not a beneficiary under Section 22 of Rep. Act No. 6657,
their rights of preemption or redemption under Rep. Act No. 3844. The defendants-tenants would then have to vacate the property in favor of the
petitioner upon full payment of the purchase price. Instead of acquiring ownership of the portions of the landholding respectively tilled by them, the
defendants-tenants would again become landless for a measly sum of P50.00 per square meter. The petitioner’s scheme is subversive, not only of public
policy, but also of the letter and spirit of the agrarian laws. That the scheme of the petitioner had yet to take effect in the future or ten years hence is not a
justification. The respondents may well argue that the agrarian laws had been violated by the defendants-tenants and the petitioner by the mere
execution of the deeds of assignment. In fact, the petitioner has implemented the deeds by paying the defendants-tenants amounts of money and even
sought their immediate implementation by setting a meeting with the defendants-tenants. In fine, the petitioner would not wait for ten years to evict the
defendants-tenants. For him, time is of the essence.

The Appellate Court Erred

In Permanently Enjoining
The Regional Trial Court
From Continuing with the
Proceedings in Civil Case No. 10910.

We agree with the petitioner’s contention that the appellate court erred when it permanently enjoined the RTC from continuing with the proceedings in
Civil Case No. 10910. The only issue before the appellate court was whether or not the trial court committed a grave abuse of discretion amounting to
excess or lack of jurisdiction in denying the respondents’ motion to deny or dismiss the petitioner’s plea for a writ of preliminary injunction. Not one of
the parties prayed to permanently enjoin the trial court from further proceeding with Civil Case No. 10910 or to dismiss the complaint. It bears stressing
that the petitioner may still amend his complaint, and the respondents and the defendants-tenants may file motions to dismiss the complaint. By
permanently enjoining the trial court from proceeding with Civil Case No. 10910, the appellate court acted arbitrarily and effectively dismissed the
complaint motu proprio, including the counterclaims of the respondents and that of the defendants-tenants. The defendants-tenants were even deprived
of their right to prove their special and affirmative defenses.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals nullifying the February 13, 1996 and
April 16, 1997 Orders of the RTC is AFFIRMED. The writ of injunction issued by the Court of Appeals permanently enjoining the RTC from further
proceeding with Civil Case No. 10910 is hereby LIFTED and SET ASIDE. The Regional Trial Court of Mabalacat, Pampanga, Branch 44, is ORDERED to
continue with the proceedings in Civil Case No. 10910 as provided for by the Rules of Court, as amended.

SO ORDERED.
G.R. No. 111238 January 25, 1995

ADELFA PROPERTIES, INC., petitioner,

vs.
COURT OF APPEALS, ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.

REGALADO, J.:
The main issues presented for resolution in this petition for review on certiorari of the judgment of respondent Court of appeals, dated April 6, 1993, in
CA-G.R. CV No. 347671 are (1) whether of not the "Exclusive Option to Purchase" executed between petitioner Adelfa Properties, Inc. and private
respondents Rosario Jimenez-Castañeda and Salud Jimenez is an option contract; and (2) whether or not there was a valid suspension of payment of the
purchase price by said petitioner, and the legal effects thereof on the contractual relations of the parties.

The records disclose the following antecedent facts which culminated in the present appellate review, to wit:

1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were the registered co-owners of a parcel of land consisting of 17,710
square meters, covered by Transfer Certificate of Title (TCT) No. 309773,2situated in Barrio Culasi, Las Piñas, Metro Manila.

2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-half of said parcel of land, specifically the eastern portion thereof, to
herein petitioner pursuant to a "Kasulatan sa Bilihan ng Lupa."3Subsequently, a "Confirmatory Extrajudicial Partition Agreement" 4 was executed by the
Jimenezes, wherein the eastern portion of the subject lot, with an area of 8,855 square meters was adjudicated to Jose and Dominador Jimenez, while
the western portion was allocated to herein private respondents.

3. Thereafter, herein petitioner expressed interest in buying the western portion of the property from private respondents. Accordingly, on November 25,
1989, an "Exclusive Option to Purchase"5 was executed between petitioner and private respondents, under the following terms and conditions:

1. The selling price of said 8,655 square meters of the subject property is TWO MILLION EIGHT HUNDRED FIFTY SIX
THOUSAND ONE HUNDRED FIFTY PESOS ONLY (P2,856,150.00)

2. The sum of P50,000.00 which we received from ADELFA PROPERTIES, INC. as an option money shall be credited as partial
payment upon the consummation of the sale and the balance in the sum of TWO MILLION EIGHT HUNDRED SIX THOUSAND
ONE HUNDRED FIFTY PESOS (P2,806,150.00) to be paid on or before November 30, 1989;

3. In case of default on the part of ADELFA PROPERTIES, INC. to pay said balance in accordance with paragraph 2 hereof, this
option shall be cancelled and 50% of the option money to be forfeited in our favor and we will refund the remaining 50% of said
money upon the sale of said property to a third party;

4. All expenses including the corresponding capital gains tax, cost of documentary stamps are for the account of the VENDORS, and
expenses for the registration of the deed of sale in the Registry of Deeds are for the account of ADELFA PROPERTIES, INC.

Considering, however, that the owner's copy of the certificate of title issued to respondent Salud Jimenez had been lost, a petition for the re-issuance of a
new owner's copy of said certificate of title was filed in court through Atty. Bayani L. Bernardo, who acted as private respondents' counsel. Eventually, a
new owner's copy of the certificate of title was issued but it remained in the possession of Atty. Bernardo until he turned it over to petitioner Adelfa
Properties, Inc.

4. Before petitioner could make payment, it received summons6 on November 29, 1989, together with a copy of a complaint filed by the nephews and
nieces of private respondents against the latter, Jose and Dominador Jimenez, and herein petitioner in the Regional Trial Court of Makati, docketed as
Civil Case No. 89-5541, for annulment of the deed of sale in favor of Household Corporation and recovery of ownership of the property covered by TCT
No. 309773.7

5. As a consequence, in a letter dated November 29, 1989, petitioner informed private respondents that it would hold payment of the full purchase price
and suggested that private respondents settle the case with their nephews and nieces, adding that ". . . if possible, although November 30, 1989 is a
holiday, we will be waiting for you and said plaintiffs at our office up to 7:00 p.m." 8 Another letter of the same tenor and of even date was sent by
petitioner to Jose and Dominador Jimenez.9 Respondent Salud Jimenez refused to heed the suggestion of petitioner and attributed the suspension of
payment of the purchase price to "lack of word of honor."

6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its option contract with private respondents, and its contract of sale with
Jose and Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4, respectively.

7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty. Bernardo, in his capacity as petitioner's counsel, and to inform the
latter that they were cancelling the transaction. In turn, Atty. Bernardo offered to pay the purchase price provided that P500,000.00 be deducted
therefrom for the settlement of the civil case. This was rejected by private respondents. On December 22, 1989, Atty. Bernardo wrote private respondents
on the same matter but this time reducing the amount from P500,000.00 to P300,000.00, and this was also rejected by the latter.

8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case No. 89-5541. Thus, on February 28, 1990, petitioner caused to be
annotated anew on TCT No. 309773 the exclusive option to purchase as Entry No. 4442-4.

9. On the same day, February 28, 1990, private respondents executed a Deed of Conditional Sale 10 in favor of Emylene Chua over the same parcel of land
for P3,029,250, of which P1,500,000.00 was paid to private respondents on said date, with the balance to be paid upon the transfer of title to the
specified one-half portion.

10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter that in view of the dismissal of the case against them, petitioner was
willing to pay the purchase price, and he requested that the corresponding deed of absolute sale be executed. 11 This was ignored by private respondents.

11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing therein a check for P25,000.00 representing the refund of fifty
percent of the option money paid under the exclusive option to purchase. Private respondents then requested petitioner to return the owner's duplicate
copy of the certificate of title of respondent Salud Jimenez. 12 Petitioner failed to surrender the certificate of title, hence private respondents filed Civil
Case No. 7532 in the Regional Trial Court of Pasay City, Branch 113, for annulment of contract with damages, praying, among others, that the exclusive
option to purchase be declared null and void; that defendant, herein petitioner, be ordered to return the owner's duplicate certificate of title; and that the
annotation of the option contract on TCT No. 309773 be cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a complaint in intervention.

12. The trial court rendered judgment 13 therein on September 5, 1991 holding that the agreement entered into by the parties was merely an option
contract, and declaring that the suspension of payment by herein petitioner constituted a counter-offer which, therefore, was tantamount to a rejection of
the option. It likewise ruled that herein petitioner could not validly suspend payment in favor of private respondents on the ground that the vindicatory
action filed by the latter's kin did not involve the western portion of the land covered by the contract between petitioner and private respondents, but the
eastern portion thereof which was the subject of the sale between petitioner and the brothers Jose and Dominador Jimenez. The trial court then directed
the cancellation of the exclusive option to purchase, declared the sale to intervenor Emylene Chua as valid and binding, and ordered petitioner to pay
damages and attorney's fees to private respondents, with costs.

13. On appeal, respondent Court of appeals affirmed in toto the decision of the court a quo and held that the failure of petitioner to pay the purchase
price within the period agreed upon was tantamount to an election by petitioner not to buy the property; that the suspension of payment constituted an
imposition of a condition which was actually a counter-offer amounting to a rejection of the option; and that Article 1590 of the Civil Code on suspension
of payments applies only to a contract of sale or a contract to sell, but not to an option contract which it opined was the nature of the document subject of
the case at bar. Said appellate court similarly upheld the validity of the deed of conditional sale executed by private respondents in favor of intervenor
Emylene Chua.

In the present petition, the following assignment of errors are raised:

1. Respondent court of appeals acted with grave abuse of discretion in making its finding that the agreement entered into by petitioner and private
respondents was strictly an option contract;

2. Granting arguendo that the agreement was an option contract, respondent court of Appeals acted with grave abuse of discretion in grievously failing
to consider that while the option period had not lapsed, private respondents could not unilaterally and prematurely terminate the option period;

3. Respondent Court of Appeals acted with grave abuse of discretion in failing to appreciate fully the attendant facts and circumstances when it made the
conclusion of law that Article 1590 does not apply; and

4. Respondent Court of Appeals acted with grave abuse of discretion in conforming with the sale in favor of appellee Ma. Emylene Chua and the award of
damages and attorney's fees which are not only excessive, but also without in fact and in law. 14

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

1. In view of the extended disquisition thereon by respondent court, it would be worthwhile at this juncture to briefly discourse on the rationale behind
our treatment of the alleged option contract as a contract to sell, rather than a contract of sale. The distinction between the two is important for in
contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in
the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless
the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a
positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming
effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in
the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay
within a fixed period. 15

There are two features which convince us that the parties never intended to transfer ownership to petitioner except upon the full payment of the
purchase price. Firstly, the exclusive option to purchase, although it provided for automatic rescission of the contract and partial forfeiture of the amount
already paid in case of default, does not mention that petitioner is obliged to return possession or ownership of the property as a consequence of non-
payment. There is no stipulation anent reversion or reconveyance of the property to herein private respondents in the event that petitioner does not
comply with its obligation. With the absence of such a stipulation, although there is a provision on the remedies available to the parties in case of breach,
it may legally be inferred that the parties never intended to transfer ownership to the petitioner to completion of payment of the purchase price.

In effect, there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the price. Article 1478 of the civil code
does not require that such a stipulation be expressly made. Consequently, an implied stipulation to that effect is considered valid and, therefore, binding
and enforceable between the parties. It should be noted that under the law and jurisprudence, a contract which contains this kind of stipulation is
considered a contract to sell.

Moreover, that the parties really intended to execute a contract to sell, and not a contract of sale, is bolstered by the fact that the deed of absolute sale
would have been issued only upon the payment of the balance of the purchase price, as may be gleaned from petitioner's letter dated April 16,
1990 16 wherein it informed private respondents that it "is now ready and willing to pay you simultaneously with the execution of the corresponding deed
of absolute sale."

Secondly, it has not been shown there was delivery of the property, actual or constructive, made to herein petitioner. The exclusive option to purchase is
not contained in a public instrument the execution of which would have been considered equivalent to delivery. 17 Neither did petitioner take actual,
physical possession of the property at any given time. It is true that after the reconstitution of private respondents' certificate of title, it remained in the
possession of petitioner's counsel, Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner. Normally, under the law, such
possession by the vendee is to be understood as a delivery.18 However, private respondents explained that there was really no intention on their part to
deliver the title to herein petitioner with the purpose of transferring ownership to it. They claim that Atty. Bernardo had possession of the title only
because he was their counsel in the petition for reconstitution. We have no reason not to believe this explanation of private respondents, aside from the
fact that such contention was never refuted or contradicted by petitioner.

2. Irrefragably, the controverted document should legally be considered as a perfected contract to sell. On this particular point, therefore, we reject the
position and ratiocination of respondent Court of Appeals which, while awarding the correct relief to private respondents, categorized the instrument as
"strictly an option contract."

The important task in contract interpretation is always the ascertainment of the intention of the contracting parties and that task is, of course, to be
discharged by looking to the words they used to project that intention in their contract, all the words not just a particular word or two, and words in
context not words standing alone. 19 Moreover, judging from the subsequent acts of the parties which will hereinafter be discussed, it is undeniable that
the intention of the parties was to enter into a contract to sell. 20 In addition, the title of a contract does not necessarily determine its true
nature. 21 Hence, the fact that the document under discussion is entitled "Exclusive Option to Purchase" is not controlling where the text thereof shows
that it is a contract to sell.

An option, as used in the law on sales, is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to
buy the property at a fixed price within a certain time, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the
property the right to sell or demand a sale. It is also sometimes called an "unaccepted offer." An option is not of itself a purchase, but merely secures the
privilege to buy. 22 It is not a sale of property but a sale of property but a sale of the right to purchase. 23 It is simply a contract by which the owner of
property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he
does not then agree to sell it; but he does sell something, that it is, the right or privilege to buy at the election or option of the other party. 24 Its
distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Until
acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject
matter, but is merely a contract by which the owner of property gives the optionee the right or privilege of accepting the offer and buying the property on
certain terms. 25

On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons whereby one binds himself, with respect to the other, to
give something or to render some service. 26 Contracts, in general, are perfected by mere consent, 27 which is manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. 28

The distinction between an "option" and a contract of sale is that an option is an unaccepted offer. It states the terms and conditions on which the owner
is willing to sell the land, if the holder elects to accept them within the time limited. If the holder does so elect, he must give notice to the other party, and
the accepted offer thereupon becomes a valid and binding contract. If an acceptance is not made within the time fixed, the owner is no longer bound by
his offer, and the option is at an end. A contract of sale, on the other hand, fixes definitely the relative rights and obligations of both parties at the time of
its execution. The offer and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the agreement. 29

A perusal of the contract in this case, as well as the oral and documentary evidence presented by the parties, readily shows that there is indeed a
concurrence of petitioner's offer to buy and private respondents' acceptance thereof. The rule is that except where a formal acceptance is so required,
although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be
made either in a formal or an informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest a present
intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the
existence of the contract of sale. 30

The records also show that private respondents accepted the offer of petitioner to buy their property under the terms of their contract. At the time
petitioner made its offer, private respondents suggested that their transfer certificate of title be first reconstituted, to which petitioner agreed. As a
matter of fact, it was petitioner's counsel, Atty. Bayani L. Bernardo, who assisted private respondents in filing a petition for reconstitution. After the title
was reconstituted, the parties agreed that petitioner would pay either in cash or manager's check the amount of P2,856,150.00 for the lot. Petitioner was
supposed to pay the same on November 25, 1989, but it later offered to make a down payment of P50,000.00, with the balance of P2,806,150.00 to be
paid on or before November 30, 1989. Private respondents agreed to the counter-offer made by petitioner. 31 As a result, the so-called exclusive option to
purchase was prepared by petitioner and was subsequently signed by private respondents, thereby creating a perfected contract to sell between them.

It cannot be gainsaid that the offer to buy a specific piece of land was definite and certain, while the acceptance thereof was absolute and without any
condition or qualification. The agreement as to the object, the price of the property, and the terms of payment was clear and well-defined. No other
significance could be given to such acts that than they were meant to finalize and perfect the transaction. The parties even went beyond the basic
requirements of the law by stipulating that "all expenses including the corresponding capital gains tax, cost of documentary stamps are for the account of
the vendors, and expenses for the registration of the deed of sale in the Registry of Deeds are for the account of Adelfa properties, Inc." Hence, there was
nothing left to be done except the performance of the respective obligations of the parties.

We do not subscribe to private respondents' submission, which was upheld by both the trial court and respondent court of appeals, that the offer of
petitioner to deduct P500,000.00, (later reduced to P300,000.00) from the purchase price for the settlement of the civil case was tantamount to a
counter-offer. It must be stressed that there already existed a perfected contract between the parties at the time the alleged counter-offer was made.
Thus, any new offer by a party becomes binding only when it is accepted by the other. In the case of private respondents, they actually refused to concur
in said offer of petitioner, by reason of which the original terms of the contract continued to be enforceable.

At any rate, the same cannot be considered a counter-offer for the simple reason that petitioner's sole purpose was to settle the civil case in order that it
could already comply with its obligation. In fact, it was even indicative of a desire by petitioner to immediately comply therewith, except that it was being
prevented from doing so because of the filing of the civil case which, it believed in good faith, rendered compliance improbable at that time. In addition,
no inference can be drawn from that suggestion given by petitioner that it was totally abandoning the original contract.

More importantly, it will be noted that the failure of petitioner to pay the balance of the purchase price within the agreed period was attributed by private
respondents to "lack of word of honor" on the part of the former. The reason of "lack of word of honor" is to us a clear indication that private respondents
considered petitioner already bound by its obligation to pay the balance of the consideration. In effect, private respondents were demanding or exacting
fulfillment of the obligation from herein petitioner. with the arrival of the period agreed upon by the parties, petitioner was supposed to comply with the
obligation incumbent upon it to perform, not merely to exercise an option or a right to buy the property.
The obligation of petitioner on November 30, 1993 consisted of an obligation to give something, that is, the payment of the purchase price. The contract
did not simply give petitioner the discretion to pay for the property. 32 It will be noted that there is nothing in the said contract to show that petitioner
was merely given a certain period within which to exercise its privilege to buy. The agreed period was intended to give time to herein petitioner within
which to fulfill and comply with its obligation, that is, to pay the balance of the purchase price. No evidence was presented by private respondents to
prove otherwise.

The test in determining whether a contract is a "contract of sale or purchase" or a mere "option" is whether or not the agreement could be specifically
enforced. 33 There is no doubt that the obligation of petitioner to pay the purchase price is specific, definite and certain, and consequently binding and
enforceable. Had private respondents chosen to enforce the contract, they could have specifically compelled petitioner to pay the balance of
P2,806,150.00. This is distinctly made manifest in the contract itself as an integral stipulation, compliance with which could legally and definitely be
demanded from petitioner as a consequence.

This is not a case where no right is as yet created nor an obligation declared, as where something further remains to be done before the buyer and seller
obligate themselves. 34 An agreement is only an "option" when no obligation rests on the party to make any payment except such as may be agreed on
between the parties as consideration to support the option until he has made up his mind within the time specified. 35 An option, and not a contract to
purchase, is effected by an agreement to sell real estate for payments to be made within specified time and providing forfeiture of money paid upon
failure to make payment, where the purchaser does not agree to purchase, to make payment, or to bind himself in any way other than the forfeiture of the
payments made. 36 As hereinbefore discussed, this is not the situation obtaining in the case at bar.

While there is jurisprudence to the effect that a contract which provides that the initial payment shall be totally forfeited in case of default in payment is
to be considered as an option contract, 37 still we are not inclined to conform with the findings of respondent court and the court a quo that the contract
executed between the parties is an option contract, for the reason that the parties were already contemplating the payment of the balance of the
purchase price, and were not merely quoting an agreed value for the property. The term "balance," connotes a remainder or something remaining from
the original total sum already agreed upon.

In other words, the alleged option money of P50,000.00 was actually earnest money which was intended to form part of the purchase price. The amount
of P50,000.00 was not distinct from the cause or consideration for the sale of the property, but was itself a part thereof. It is a statutory rule 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. 38 It
constitutes an advance payment and must, therefore, be deducted from the total price. Also, earnest money is given by the buyer to the seller to bind the
bargain.

There are clear distinctions between earnest money and option money, viz.: (a) earnest money is part of the purchase price, while option money ids the
money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies
to a sale not yet perfected; and (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option
money, he is not required to buy. 39

The aforequoted characteristics of earnest money are apparent in the so-called option contract under review, even though it was called "option money"
by the parties. In addition, private respondents failed to show that the payment of the balance of the purchase price was only a condition precedent to the
acceptance of the offer or to the exercise of the right to buy. On the contrary, it has been sufficiently established that such payment was but an element of
the performance of petitioner's obligation under the contract to sell. 40

II

1. This brings us to the second issue as to whether or not there was valid suspension of payment of the purchase price by petitioner and the legal
consequences thereof. To justify its failure to pay the purchase price within the agreed period, petitioner invokes Article 1590 of the civil Code which
provides:

Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper
case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere
act of trespass shall not authorize the suspension of the payment of the price.

Respondent court refused to apply the aforequoted provision of law on the erroneous assumption that the true agreement between the parties was a
contract of option. As we have hereinbefore discussed, it was not an option contract but a perfected contract to sell. Verily, therefore, Article 1590 would
properly apply.

Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed against the parties herein involved only the eastern half of the land
subject of the deed of sale between petitioner and the Jimenez brothers, it did not, therefore, have any adverse effect on private respondents' title and
ownership over the western half of the land which is covered by the contract subject of the present case. We have gone over the complaint for recovery of
ownership filed in said case 41 and we are not persuaded by the factual findings made by said courts. At a glance, it is easily discernible that, although the
complaint prayed for the annulment only of the contract of sale executed between petitioner and the Jimenez brothers, the same likewise prayed for the
recovery of therein plaintiffs' share in that parcel of land specifically covered by TCT No. 309773. In other words, the plaintiffs therein were claiming to
be co-owners of the entire parcel of land described in TCT No. 309773, and not only of a portion thereof nor, as incorrectly interpreted by the lower
courts, did their claim pertain exclusively to the eastern half adjudicated to the Jimenez brothers.

Such being the case, petitioner was justified in suspending payment of the balance of the purchase price by reason of the aforesaid vindicatory action
filed against it. The assurance made by private respondents that petitioner did not have to worry about the case because it was pure and simple
harassment 42 is not the kind of guaranty contemplated under the exceptive clause in Article 1590 wherein the vendor is bound to make payment even
with the existence of a vindicatory action if the vendee should give a security for the return of the price.
2. Be that as it may, and the validity of the suspension of payment notwithstanding, we find and hold that private respondents may no longer be
compelled to sell and deliver the subject property to petitioner for two reasons, that is, petitioner's failure to duly effect the consignation of the purchase
price after the disturbance had ceased; and, secondarily, the fact that the contract to sell had been validly rescinded by private respondents.

The records of this case reveal that as early as February 28, 1990 when petitioner caused its exclusive option to be annotated anew on the certificate of
title, it already knew of the dismissal of civil Case No. 89-5541. However, it was only on April 16, 1990 that petitioner, through its counsel, wrote private
respondents expressing its willingness to pay the balance of the purchase price upon the execution of the corresponding deed of absolute sale. At most,
that was merely a notice to pay. There was no proper tender of payment nor consignation in this case as required by law.

The mere sending of a letter by the vendee expressing the intention to

pay, without the accompanying payment, is not considered a valid tender of payment. 43 Besides, a mere tender of payment is not sufficient to compel
private respondents to deliver the property and execute the deed of absolute sale. It is consignation which is essential in order to extinguish petitioner's
obligation to pay the balance of the purchase price. 44 The rule is different in case of an option contract 45 or in legal redemption or in a sale with right to
repurchase, 46 wherein consignation is not necessary because these cases involve an exercise of a right or privilege (to buy, redeem or repurchase) rather
than the discharge of an obligation, hence tender of payment would be sufficient to preserve the right or privilege. This is because the provisions on
consignation are not applicable when there is no obligation to pay. 47 A contract to sell, as in the case before us, involves the performance of an obligation,
not merely the exercise of a privilege of a right. consequently, performance or payment may be effected not by tender of payment alone but by both
tender and consignation.

Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased with the dismissal of the civil case filed against it.
Necessarily, therefore, its obligation to pay the balance again arose and resumed after it received notice of such dismissal. Unfortunately, petitioner failed
to seasonably make payment, as in fact it has deposit the money with the trial court when this case was originally filed therein.

By reason of petitioner's failure to comply with its obligation, private respondents elected to resort to and did announce the rescission of the contract
through its letter to petitioner dated July 27, 1990. That written notice of rescission is deemed sufficient under the circumstances. Article 1592 of the
Civil Code which requires rescission either by judicial action or notarial act is not applicable to a contract to sell. 48 Furthermore, judicial action for
rescission of a contract is not necessary where the contract provides for automatic rescission in case of breach,49 as in the contract involved in the present
controversy.

We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that the right to rescind is not absolute, being ever subject to
scrutiny and review by the proper court. It is our considered view, however, that this rule applies to a situation where the extrajudicial rescission is
contested by the defaulting party. In other words, resolution of reciprocal contracts may be made extrajudicially unless successfully impugned in court. If
the debtor impugns the declaration, it shall be subject to judicial determination 51 otherwise, if said party does not oppose it, the extrajudicial rescission
shall have legal effect. 52

In the case at bar, it has been shown that although petitioner was duly furnished and did receive a written notice of rescission which specified the
grounds therefore, it failed to reply thereto or protest against it. Its silence thereon suggests an admission of the veracity and validity of private
respondents' claim. 53 Furthermore, the initiative of instituting suit was transferred from the rescinder to the defaulter by virtue of the automatic
rescission clause in the contract. 54 But then, the records bear out the fact that aside from the lackadaisical manner with which petitioner treated private
respondents' latter of cancellation, it utterly failed to seriously seek redress from the court for the enforcement of its alleged rights under the contract. If
private respondents had not taken the initiative of filing Civil Case No. 7532, evidently petitioner had no intention to take any legal action to compel
specific performance from the former. By such cavalier disregard, it has been effectively estopped from seeking the affirmative relief it now desires but
which it had theretofore disdained.

WHEREFORE, on the foregoing modificatory premises, and considering that the same result has been reached by respondent Court of Appeals with
respect to the relief awarded to private respondents by the court a quo which we find to be correct, its assailed judgment in CA-G.R. CV No. 34767 is
hereby AFFIRMED.

SO ORDERED.
G.R. No. 97332 October 10, 1991

SPOUSES JULIO D. VILLAMOR AND MARINA VILLAMOR, petitioners,

vs.
THE HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND ROBERTO REYES,respondents.

Tranquilino F. Meris for petitioners.

Agripino G. Morga for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 24176 entitled, "Spouses Julio Villamor and Marina
Villamor, Plaintiffs-Appellees, versus Spouses Macaria Labing-isa Reyes and Roberto Reyes, Defendants-Appellants," which reversed the decision of
the Regional Trial Court (Branch 121) at Caloocan City in Civil Case No. C-12942.

The facts of the case are as follows:

Macaria Labingisa Reyes was the owner of a 600-square meter lot located at Baesa, Caloocan City, as evidenced by Transfer Certificate of Title No.
(18431) 18938, of the Register of Deeds of Rizal.

In July 1971, Macaria sold a portion of 300 square meters of the lot to the Spouses Julio and Marina and Villamor for the total amount of P21,000.00.
Earlier, Macaria borrowed P2,000.00 from the spouses which amount was deducted from the total purchase price of the 300 square meter lot sold. The
portion sold to the Villamor spouses is now covered by TCT No. 39935 while the remaining portion which is still in the name of Macaria Labing-isa is
covered by TCT No. 39934 (pars. 5 and 7, Complaint). On November 11, 1971, Macaria executed a "Deed of Option" in favor of Villamor in which the
remaining 300 square meter portion (TCT No. 39934) of the lot would be sold to Villamor under the conditions stated therein. The document reads:

DEED OF OPTION

This Deed of Option, entered into in the City of Manila, Philippines, this 11th day of November, 1971, by and between Macaria Labing-isa, of
age, married to Roberto Reyes, likewise of age, and both resideing on Reparo St., Baesa, Caloocan City, on the one hand, and on the other hand
the spouses Julio Villamor and Marina V. Villamor, also of age and residing at No. 552 Reparo St., corner Baesa Road, Baesa, Caloocan City.

WITNESSETH

That, I Macaria Labingisa, am the owner in fee simple of a parcel of land with an area of 600 square meters, more or less, more particularly
described in TCT No. (18431) 18938 of the Office of the Register of Deeds for the province of Rizal, issued in may name, I having inherited the
same from my deceased parents, for which reason it is my paraphernal property;

That I, with the conformity of my husband, Roberto Reyes, have sold one-half thereof to the aforesaid spouses Julio Villamor and Marina V.
Villamor at the price of P70.00 per sq. meter, which was greatly higher than the actual reasonable prevailing value of lands in that place at the
time, which portion, after segregation, is now covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan, issued on August 17,
1971 in the name of the aforementioned spouses vendees;

That the only reason why the Spouses-vendees Julio Villamor and Marina V. Villamor, agreed to buy the said one-half portion at the above-
stated price of about P70.00 per square meter, is because I, and my husband Roberto Reyes, have agreed to sell and convey to them the
remaining one-half portion still owned by me and now covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan, whenever
the need of such sale arises, either on our part or on the part of the spouses (Julio) Villamor and Marina V. Villamor, at the same price of
P70.00 per square meter, excluding whatever improvement may be found the thereon;

That I am willing to have this contract to sell inscribed on my aforesaid title as an encumbrance upon the property covered thereby, upon
payment of the corresponding fees; and
 That we, Julio Villamor and Marina V. Villamor, hereby agree to, and accept, the above provisions of this Deed of Option.

IN WITNESS WHEREOF, this Deed of Option is signed in the City of Manila, Philippines, by all the persons concerned, this 11th day of
November, 1971.

JULIO VILLAMOR MACARIA LABINGISA

With My Conformity:

MARINA VILLAMOR ROBERTO REYES

Signed in the Presence Of:

MARIANO Z. SUNIGA
ROSALINDA S. EUGENIO

ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES)

CITY OF MANILA ) S.S.

At the City of Manila, on the 11th day of November, 1971, personally appeared before me Roberto Reyes, Macaria Labingisa, Julio Villamor and
Marina Ventura-Villamor, known to me as the same persons who executed the foregoing Deed of Option, which consists of two (2) pages
including the page whereon this acknowledgement is written, and signed at the left margin of the first page and at the bottom of the
instrument by the parties and their witnesses, and sealed with my notarial seal, and said parties acknowledged to me that the same is their free
act and deed. The Residence Certificates of the parties were exhibited to me as follows: Roberto Reyes, A-22494, issued at Manila on Jan. 27,
1971, and B-502025, issued at Makati, Rizal on Feb. 18, 1971; Macaria Labingisa, A-3339130 and B-1266104, both issued at Caloocan City on
April 15, 1971, their joint Tax Acct. Number being 3028-767-6; Julio Villamor, A-804, issued at Manila on Jan. 14, 1971, and B-138, issued at
Manila on March 1, 1971; and Marina Ventura-Villamor, A-803, issued at Manila on Jan. 14, 1971, their joint Tax Acct. Number being 608-202-
6.

ARTEMIO M. MALUBAY
Notary Public
Until December 31, 1972
PTR No. 338203, Manila
January 15, 1971

Doc. No. 1526;

Page No. 24;
Book No. 38;
Series of 1971. (pp. 25-29, Rollo)

According to Macaria, when her husband, Roberto Reyes, retired in 1984, they offered to repurchase the lot sold by them to the Villamor spouses but
Marina Villamor refused and reminded them instead that the Deed of Option in fact gave them the option to purchase the remaining portion of the lot.

The Villamors, on the other hand, claimed that they had expressed their desire to purchase the remaining 300 square meter portion of the lot but the
Reyeses had been ignoring them. Thus, on July 13, 1987, after conciliation proceedings in the barangay level failed, they filed a complaint for specific
performance against the Reyeses.

On July 26, 1989, judgment was rendered by the trial court in favor of the Villamor spouses, the dispositive portion of which states:

WHEREFORE, and (sic) in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the defendants ordering
the defendant MACARIA LABING-ISA REYES and ROBERTO REYES, to sell unto the plaintiffs the land covered by T.C.T No. 39934 of the
Register of Deeds of Caloocan City, to pay the plaintiffs the sum of P3,000.00 as and for attorney's fees and to pay the cost of suit.

The counterclaim is hereby DISMISSED, for LACK OF MERIT.

SO ORDERED. (pp. 24-25, Rollo)

Not satisfied with the decision of the trial court, the Reyes spouses appealed to the Court of Appeals on the following assignment of errors:

1. HOLDING THAT THE DEED OF OPTION EXECUTED ON NOVEMBER 11, 1971 BETWEEN THE PLAINTIFF-APPELLEES AND
DEFENDANT-APPELLANTS IS STILL VALID AND BINDING DESPITE THE LAPSE OF MORE THAN THIRTEEN (13) YEARS FROM THE
EXECUTION OF THE CONTRACT;

2. FAILING TO CONSIDER THAT THE DEED OF OPTION CONTAINS OBSCURE WORDS AND STIPULATIONS WHICH SHOULD BE
RESOLVED AGAINST THE PLAINTIFF-APPELLEES WHO UNILATERALLY DRAFTED AND PREPARED THE SAME;
 3. HOLDING THAT THE DEED OF OPTION EXPRESSED THE TRUE INTENTION AND PURPOSE OF THE PARTIES DESPITE ADVERSE,
CONTEMPORANEOUS AND SUBSEQUENT ACTS OF THE PLAINTIFF-APPELLEES;

4. FAILING TO PROTECT THE DEFENDANT-APPELLANTS ON ACCOUNT OF THEIR IGNORANCE PLACING THEM AT A

DISADVANTAGE IN THE DEED OF OPTION;

5. FAILING TO CONSIDER THAT EQUITABLE CONSIDERATION TILT IN FAVOR OF THE DEFENDANT-APPELLANTS; and

6. HOLDING DEFENDANT-APPELLANTS LIABLE TO PAY PLAINTIFF-APPELLEES THE AMOUNT OF P3,000.00 FOR AND BY WAY OF
ATTORNEY'S FEES. (pp. 31-32, Rollo)

On February 12, 1991, the Court of Appeals rendered a decision reversing the decision of the trial court and dismissing the complaint. The reversal of the
trial court's decision was premised on the finding of respondent court that the Deed of Option is void for lack of consideration.

The Villamor spouses brought the instant petition for review on certiorari on the following grounds:

I. THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE PHRASE WHENEVER THE NEED FOR SUCH SALE ARISES ON
OUR (PRIVATE RESPONDENT) PART OR ON THE PART OF THE SPOUSES JULIO D. VILLAMOR AND MARINA V. VILLAMOR'
CONTAINED IN THE DEED OF OPTION DENOTES A SUSPENSIVE CONDITION;

II. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS INDEED A CONDITION, THE COURT OF
APPEALS ERRED IN NOT FINDING, THAT THE SAID CONDITION HAD ALREADY BEEN FULFILLED;

III. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS INDEED A CONDITION, THE COURT OF
APPEALS ERRED IN HOLDING THAT THE IMPOSITION OF SAID CONDITION PREVENTED THE PERFECTION OF THE CONTRACT OF
SALE DESPITE THE EXPRESS OFFER AND ACCEPTANCE CONTAINED IN THE DEED OF OPTION;

IV. THE COURT OF APPEALS ERRED IN FINDING THAT THE DEED OF OPTION IS VOID FOR LACK OF CONSIDERATION;

V. THE COURT OF APPEALS ERRED IN HOLDING THAT A DISTINCT CONSIDERATION IS NECESSARY TO SUPPORT THE DEED OF
OPTION DESPITE THE EXPRESS OFFER AND ACCEPTANCE CONTAINED THEREIN. (p. 12, Rollo)

The pivotal issue to be resolved in this case is the validity of the Deed of Option whereby the private respondents agreed to sell their lot to petitioners
"whenever the need of such sale arises, either on our part (private respondents) or on the part of Julio Villamor and Marina Villamor (petitioners)." The
court a quo, rule that the Deed of Option was a valid written agreement between the parties and made the following conclusions:

xxx xxx xxx

It is interesting to state that the agreement between the parties are evidence by a writing, hence, the controverting oral testimonies of the
herein defendants cannot be any better than the documentary evidence, which, in this case, is the Deed of Option (Exh. "A" and "A-a")

The law provides that when the terms of an agreement have been reduced to writing it is to be considered as containing all such terms, and
therefore, there can be, between the parties and their successors in interest no evidence of their terms of the agreement, other than the
contents of the writing. ... (Section 7 Rule 130 Revised Rules of Court) Likewise, it is a general and most inflexible rule that wherever written
instruments are appointed either by the requirements of law, or by the contract of the parties, to be the repositories and memorials of truth,
any other evidence is excluded from being used, either as a substitute for such instruments, or to contradict or alter them. This is a matter both
of principle and of policy; of principle because such instruments are in their nature and origin entitled to a much higher degree of credit than
evidence of policy, because it would be attended with great mischief if those instruments upon which man's rights depended were liable to be
impeached by loose collateral evidence. Where the terms of an agreement are reduced to writing, the document itself, being constituted by
the parties as the expositor of their intentions, it is the only instrument of evidence in respect of that agreement which the law will recognize
so long as it exists for the purpose of evidence. (Starkie, EV, pp. 648, 655 cited in Kasheenath vs. Chundy, W.R. 68, cited in Francisco's Rules of
Court, Vol. VII Part I p. 153) (Emphasis supplied, pp. 126-127, Records).

The respondent appellate court, however, ruled that the said deed of option is void for lack of consideration. The appellate court made the following
disquisitions:

Plaintiff-appellees say they agreed to pay P70.00 per square meter for the portion purchased by them although the prevailing price at that time
was only P25.00 in consideration of the option to buy the remainder of the land. This does not seem to be the case. In the first place, the deed
of sale was never produced by them to prove their claim. Defendant-appellants testified that no copy of the deed of sale had ever been given to
them by the plaintiff-appellees. In the second place, if this was really the condition of the prior sale, we see no reason why it should be
reiterated in the Deed of Option. On the contrary, the alleged overprice paid by the plaintiff-appellees is given in the Deed as reason for the
desire of the Villamors to acquire the land rather than as a consideration for the option given to them, although one might wonder why they
took nearly 13 years to invoke their right if they really were in due need of the lot.

At all events, the consideration needed to support a unilateral promise to sell is a dinstinct one, not something that is as uncertain as P70.00
per square meter which is allegedly 'greatly higher than the actual prevailing value of lands.' A sale must be for a price certain (Art. 1458). For
how much the portion conveyed to the plaintiff-appellees was sold so that the balance could be considered the consideration for the promise to
sell has not been shown, beyond a mere allegation that it was very much below P70.00 per square meter.
 The fact that plaintiff-appellees might have paid P18.00 per square meter for another land at the time of the sale to them of a portion of
defendant-appellant's lot does not necessarily prove that the prevailing market price at the time of the sale was P18.00 per square meter. (In
fact they claim it was P25.00). It is improbable that plaintiff-appellees should pay P52.00 per square meter for the privilege of buying when the
value of the land itself was allegedly P18.00 per square meter. (pp. 34-35, Rollo)

As expressed in Gonzales v. Trinidad, 67 Phil. 682, consideration is "the why of the contracts, the essential reason which moves the contracting parties to
enter into the contract." The cause or the impelling reason on the part of private respondent executing the deed of option as appearing in the deed itself
is the petitioner's having agreed to buy the 300 square meter portion of private respondents' land at P70.00 per square meter "which was greatly higher
than the actual reasonable prevailing price." This cause or consideration is clear from the deed which stated:

That the only reason why the spouses-vendees Julio Villamor and Marina V. Villamor agreed to buy the said one-half portion at the above
stated price of about P70.00 per square meter, is because I, and my husband Roberto Reyes, have agreed to sell and convey to them the
remaining one-half portion still owned by me ... (p. 26, Rollo)

The respondent appellate court failed to give due consideration to petitioners' evidence which shows that in 1969 the Villamor spouses bough an adjacent
lot from the brother of Macaria Labing-isa for only P18.00 per square meter which the private respondents did not rebut. Thus, expressed in terms of
money, the consideration for the deed of option is the difference between the purchase price of the 300 square meter portion of the lot in 1971 (P70.00
per sq.m.) and the prevailing reasonable price of the same lot in 1971. Whatever it is, (P25.00 or P18.00) though not specifically stated in the deed of
option, was ascertainable. Petitioner's allegedly paying P52.00 per square meter for the option may, as opined by the appellate court, be improbable but
improbabilities does not invalidate a contract freely entered into by the parties.

The "deed of option" entered into by the parties in this case had unique features. Ordinarily, an optional contract is a privilege existing in one person, for
which he had paid a consideration and which gives him the right to buy, for example, certain merchandise or certain specified property, from another
person, if he chooses, at any time within the agreed period at a fixed price (Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look closely at the "deed of
option" signed by the parties, We will notice that the first part covered the statement on the sale of the 300 square meter portion of the lot to Spouses
Villamor at the price of P70.00 per square meter "which was higher than the actual reasonable prevailing value of the lands in that place at that time (of
sale)." The second part stated that the only reason why the Villamor spouses agreed to buy the said lot at a much higher price is because the vendor
(Reyeses) also agreed to sell to the Villamors the other half-portion of 300 square meters of the land. Had the deed stopped there, there would be no
dispute that the deed is really an ordinary deed of option granting the Villamors the option to buy the remaining 300 square meter-half portion of the lot
in consideration for their having agreed to buy the other half of the land for a much higher price. But, the "deed of option" went on and stated that the
sale of the other half would be made "whenever the need of such sale arises, either on our (Reyeses) part or on the part of the Spouses Julio Villamor and
Marina V. Villamor. It appears that while the option to buy was granted to the Villamors, the Reyeses were likewise granted an option to sell. In other
words, it was not only the Villamors who were granted an option to buy for which they paid a consideration. The Reyeses as well were granted an option
to sell should the need for such sale on their part arise.

In the instant case, the option offered by private respondents had been accepted by the petitioner, the promise, in the same document. The acceptance of
an offer to sell for a price certain created a bilateral contract to sell and buy and upon acceptance, the offer, ipso facto assumes obligations of a vendee
(See Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil. 948). Demandabilitiy may be exercised at any time after the execution of the deed. In Sanchez v.
Rigos, No. L-25494, June 14, 1972, 45 SCRA 368, 376, We held:

In other words, since there may be no valid contract without a cause of consideration, the promisory is not bound by his promise and may,
accordingly withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if
accepted, results in a perfected contract of sale.

A contract of sale is, under Article 1475 of the Civil Code, "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 perform of contracts." Since there was, between the parties, a
meeting of minds upon the object and the price, there was already a perfected contract of sale. What was, however, left to be done was for either party to
demand from the other their respective undertakings under the contract. It may be demanded at any time either by the private respondents, who may
compel the petitioners to pay for the property or the petitioners, who may compel the private respondents to deliver the property.

However, the Deed of Option did not provide for the period within which the parties may demand the performance of their respective undertakings in
the instrument. The parties could not have contemplated that the delivery of the property and the payment thereof could be made indefinitely and render
uncertain the status of the land. The failure of either parties to demand performance of the obligation of the other for an unreasonable length of time
renders the contract ineffective.

Under Article 1144 (1) of the Civil Code, actions upon written contract must be brought within ten (10) years. The Deed of Option was executed on
November 11, 1971. The acceptance, as already mentioned, was also accepted in the same instrument. The complaint in this case was filed by the
petitioners on July 13, 1987, seventeen (17) years from the time of the execution of the contract. Hence, the right of action had prescribed. There were
allegations by the petitioners that they demanded from the private respondents as early as 1984 the enforcement of their rights under the contract. Still,
it was beyond the ten (10) years period prescribed by the Civil Code. In the case of Santos v. Ganayo,
L-31854, September 9, 1982, 116 SCRA 431, this Court affirming and subscribing to the observations of the court a quo held, thus:

... Assuming that Rosa Ganayo, the oppositor herein, had the right based on the Agreement to Convey and Transfer as contained in Exhibits '1'
and '1-A', her failure or the abandonment of her right to file an action against Pulmano Molintas when he was still a co-owner of the on-half
(1/2) portion of the 10,000 square meters is now barred by laches and/or prescribed by law because she failed to bring such action within ten
(10) years from the date of the written agreement in 1941, pursuant to Art. 1144 of the New Civil Code, so that when she filed the adverse claim
through her counsel in 1959 she had absolutely no more right whatsoever on the same, having been barred by laches.

It is of judicial notice that the price of real estate in Metro Manila is continuously on the rise. To allow the petitioner to demand the delivery of the
property subject of this case thirteen (13) years or seventeen (17) years after the execution of the deed at the price of only P70.00 per square meter is
inequitous. For reasons also of equity and in consideration of the fact that the private respondents have no other decent place to live, this Court, in the
exercise of its equity jurisdiction is not inclined to grant petitioners' prayer.
ACCORDINGLY, the petition is DENIED. The decision of respondent appellate court is AFFIRMED for reasons cited in this decision. Judgement is
rendered dismissing the complaint in Civil Case No. C-12942 on the ground of prescription and laches.

SO ORDERED.
G.R. No. L-25494 June 14, 1972

NICOLAS SANCHEZ, plaintiff-appellee,

vs.
SEVERINA RIGOS, defendant-appellant.

Santiago F. Bautista for plaintiff-appellee.

Jesus G. Villamar for defendant-appellant.

CONCEPCION, C.J.:p

Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which certified the case to Us, upon the ground that it
involves a question purely of law.

The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an instrument entitled "Option to Purchase,"
whereby Mrs. Rigos "agreed, promised and committed ... to sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of Abar and
Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in Transfer Certificate of Title No. NT-12528 of said province,
within two (2) years from said date with the understanding that said option shall be deemed "terminated and elapsed," if "Sanchez shall fail to exercise
his right to buy the property" within the stipulated period. Inasmuch as several tenders of payment of the sum of Pl,510.00, made by Sanchez within said
period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija and
commenced against the latter the present action, for specific performance and damages.

After the filing of defendant's answer — admitting some allegations of the complaint, denying other allegations thereof, and alleging, as special defense,
that the contract between the parties "is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New
Civil Code, is null and void" — on February 11, 1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings.
Accordingly, on February 28, 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him
and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney's fees, and other costs.
Hence, this appeal by Mrs. Rigos.

This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which provides:

ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise
is supported by a consideration distinct from the price.

In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed
and committed to buy" the land described in the option, copy of which was annexed to said pleading as Annex A thereof and is quoted on the
margin.1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally demandable," pursuant to the first paragraph of said
Article 1479. Although defendant had really "agreed, promised and committed" herself to sell the land to the plaintiff, it is not true that the latter had, in
turn, "agreed and committed himself " to buy said property. Said Annex A does not bear out plaintiff's allegation to this effect. What is more, since Annex
A has been made "an integral part" of his complaint, the provisions of said instrument form part "and parcel"2 of said pleading.

The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a "contract to buy and sell." It merely granted
plaintiff an "option" to buy. And both parties so understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument.
Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00,
but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct
from the price" stipulated for the sale of the land.

Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said consideration, and this would seem to be the main factor that
influenced its decision in plaintiff's favor. It should be noted, however, that:

(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an
accepted unilateral promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar.

(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the
promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the promisor to comply with the promise,
unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration.
Plaintiff herein has not even alleged the existence thereof in his complaint.

(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise
to sell and, by joining in the petition for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's answer.
Indeed as early as March 14, 1908, it had been held, in Bauermann v. Casas,3 that:

One who prays for judgment on the pleadings without offering proof as to the truth of his own allegations, and without giving the
opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant
allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as
are admitted in the pleadings. (La Yebana Company vs. Sevilla, 9 Phil. 210). (Emphasis supplied.)

This view was reiterated in Evangelista v. De la Rosa4 and Mercy's Incorporated v. Herminia Verde.5

Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co.,6 from which We quote:

The main contention of appellant is that the option granted to appellee to sell to it barge No. 10 for the sum of P30,000 under the
terms stated above has no legal effect because it is not supported by any consideration and in support thereof it invokes article 1479
of the new Civil Code. The article provides:

"ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration distinct from the price."

On the other hand, Appellee contends that, even granting that the "offer of option" is not supported by any consideration, that
option became binding on appellant when the appellee gave notice to it of its acceptance, and that having accepted it within the
period of option, the offer can no longer be withdrawn and in any event such withdrawal is ineffective. In support this contention,
appellee invokes article 1324 of the Civil Code which provides:
 "ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn any
time before acceptance by communicating such withdrawal, except when the option is founded upon
consideration as something paid or promised."

There is no question that under article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said
article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the context of said
article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, "an
accepted unilateral promise can only have a binding effect if supported by a consideration which means that the option can still be
withdrawn, even if accepted, if the same is not supported by any consideration. It is not disputed that the option is without
consideration. It can therefore be withdrawn notwithstanding the acceptance of it by appellee.

It is true that under article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives
to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is
founded upon consideration, but this general rule must be interpreted as modified by the provision of article 1479 above referred to,
which applies to "a promise to buy and sell" specifically. As already stated, this rule requires that a promise to sell to be valid must
be supported by a consideration distinct from the price.

We are not oblivious of the existence of American authorities which hold that an offer, once accepted, cannot be withdrawn,
regardless of whether it is supported or not by a consideration (12 Am. Jur. 528). These authorities, we note, uphold the general
rule applicable to offer and acceptance as contained in our new Civil Code. But we are prevented from applying them in view of the
specific provision embodied in article 1479. While under the "offer of option" in question appellant has assumed a clear obligation to
sell its barge to appellee and the option has been exercised in accordance with its terms, and there appears to be no valid or
justifiable reason for appellant to withdraw its offer, this Court cannot adopt a different attitude because the law on the matter is
clear. Our imperative duty is to apply it unless modified by Congress.

However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek,8 decided later that Southwestern Sugar & Molasses Co. v. Atlantic
Gulf & Pacific Co.,9 saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar
to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate
consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. Speaking through Associate Justice, later Chief Justice,
Cesar Bengzon, this Court said:

Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option
within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to
buy. He is free either to buy or not to buy later. In this case, however, upon accepting herein petitioner's offer a bilateral promise to
sell and to buy ensued, and the respondent ipso facto assumed the obligation of a purchaser. He did not just get the right
subsequently to buy or not to buy. It was not a mere option then; it was a bilateral contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that:

"If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until
accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even
though the option was not supported by a sufficient consideration. ... . (77 Corpus Juris Secundum, p. 652. See
also 27 Ruling Case Law 339 and cases cited.)

"It can be taken for granted, as contended by the defendant, that the option contract was not valid for lack of
consideration. But it was, at least, an offer to sell, which was accepted by letter, and of the acceptance the offerer
had knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance —
could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code)."
(Zayco vs. Serra, 44 Phil. 331.)

In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly,
withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a
perfected contract of sale.

This view has the advantage of avoiding a conflict between Articles 1324 — on the general principles on contracts — and 1479 — on sales — of the Civil
Code, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation
should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of
drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v.
Atlantic Gulf & Pacific Co., 10 holding that Art. 1324 is modified by Art. 1479 of the Civil Code, in effect, considers the latter as an exception to the former,
and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is more,
the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly
suggests that the two (2) provisions intended to enforce or implement the same principle.

Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll &
Co. case, and that, insofar as inconsistent therewith, the view adhered to in the Southwestern Sugar & Molasses Co. case should be deemed abandoned
or modified.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant Severina Rigos. It is so ordered.

Reyes, J.B.L., Makalintal, Zaldivar, Teehankee, Barredo and Makasiar, JJ., concur.

Castro, J., took no part.

Separate Opinions

ANTONIO, J., concurring:

I concur in the opinion of the Chief Justice.

I fully agree with the abandonment of the view previously adhered to in Southwestern Sugar & Molasses Co. vs. Atlantic Gulf and Pacific Co.,1 which
holds that an option to sell can still be withdrawn, even if accepted, if the same is not supported by any consideration, and the reaffirmance of the
doctrine in Atkins, Kroll & Co., Inc. vs. Cua Hian Tek,2 holding that "an option implies ... the legal obligation to keep the offer (to sell) open for the time
specified;" that it could be withdrawn before acceptance, if there was no consideration for the option, but once the "offer to sell" is accepted, a bilateral
promise to sell and to buy ensues, and the offeree ipso facto assumes the obligations of a purchaser. In other words, if the option is given without a
consideration, it is a mere offer to sell, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding
contract of sale. The concurrence of both acts — the offer and the acceptance — could in such event generate a contract.

While the law permits the offeror to withdraw the offer at any time before acceptance even before the period has expired, some writers hold the view, that
the offeror can not exercise this right in an arbitrary or capricious manner. This is upon the principle that an offer implies an obligation on the part of the
offeror to maintain in such length of time as to permit the offeree to decide whether to accept or not, and therefore cannot arbitrarily revoke the offer
without being liable for damages which the offeree may suffer. A contrary view would remove the stability and security of business transactions.3

In the present case the trial court found that the "Plaintiff (Nicolas Sanchez) had offered the sum of Pl,510.00 before any withdrawal from the contract
has been made by the Defendant (Severina Rigos)." Since Rigos' offer sell was accepted by Sanchez, before she could withdraw her offer, a bilateral
reciprocal contract — to sell and to buy — was generated.

Separate Opinions

ANTONIO, J., concurring:

I concur in the opinion of the Chief Justice.

I fully agree with the abandonment of the view previously adhered to in Southwestern Sugar & Molasses Co. vs. Atlantic Gulf and Pacific Co.,1 which
holds that an option to sell can still be withdrawn, even if accepted, if the same is not supported by any consideration, and the reaffirmance of the
doctrine in Atkins, Kroll & Co., Inc. vs. Cua Hian Tek,2 holding that "an option implies ... the legal obligation to keep the offer (to sell) open for the time
specified;" that it could be withdrawn before acceptance, if there was no consideration for the option, but once the "offer to sell" is accepted, a bilateral
promise to sell and to buy ensues, and the offeree ipso facto assumes the obligations of a purchaser. In other words, if the option is given without a
consideration, it is a mere offer to sell, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding
contract of sale. The concurrence of both acts — the offer and the acceptance — could in such event generate a contract.

While the law permits the offeror to withdraw the offer at any time before acceptance even before the period has expired, some writers hold the view, that
the offeror can not exercise this right in an arbitrary or capricious manner. This is upon the principle that an offer implies an obligation on the part of the
offeror to maintain in such length of time as to permit the offeree to decide whether to accept or not, and therefore cannot arbitrarily revoke the offer
without being liable for damages which the offeree may suffer. A contrary view would remove the stability and security of business transactions.3

In the present case the trial court found that the "Plaintiff (Nicolas Sanchez) had offered the sum of Pl,510.00 before any withdrawal from the contract
has been made by the Defendant (Severina Rigos)." Since Rigos' offer sell was accepted by Sanchez, before she could withdraw her offer, a bilateral
reciprocal contract — to sell and to buy — was generated.
NO CONDITIONAL SALE

G.R. No. L-51824 February 7, 1992

PERCELINO DIAMANTE, petitioner,

vs.
HON. COURT OF APPEALS and GERARDO DEYPALUBUS, respondents.

Hernandez, Velicaria, Vibar & Santiago for petitioner.

Amancio B. Sorongon for private respondent.

DAVIDE, JR., J.:

Assailed in this petition for review is the Resolution of the respondent Court of Appeals dated 21 March 1979 in C.A.-G.R. No. SP-04866 setting aside its
earlier decision therein, promulgated on 6 December 1978, which reversed the decision of the then Court of First Instance (now Regional Trial Court) of
Iloilo City. The latter nullified the Orders of the Secretary of the Department of Agriculture and Natural Resources (DANR) dated 29 August 1969, 20
November 1969 and 21 April 1970, declared binding the Fishpond Lease Agreement (FLA) issued to private respondent and disallowed petitioner from
repurchasing from private respondent a portion of the fishery lot located at Dumangas, Iloilo, covered by the FLA.

The pleadings of the parties and the decision of the respondent Court disclose the factual antecedents of this case.

A fishery lot, encompassing an area of 9.4 hectares and designated as Lot No. 518-A of the Cadastral Survey of Dumangas, Iloilo, was previously covered
by Fishpond Permit No. F-2021 issued in the name of Anecita Dionio. Upon Anecita's death, her heirs, petitioner Diamante and Primitivo Dafeliz,
inherited the property which they later divided between themselves; petitioner got 4.4. hectares while Dafeliz got 5 hectares. It is the petitioner's share
that is the subject of the present controversy. Primitivo Dafeliz later sold his share to private respondent.

On 21 May 1959, petitioner sold to private respondent his leasehold rights over the property in question for P8,000.00 with the right to repurchase the
same within three (3) years from said date.

On 16 August 1960, private respondent filed an application with the Bureau of Fisheries, dated 12 July 1960, for a fishpond permit and a fishpond lease
agreement over the entire lot, submitting therewith the deeds of sale executed by Dafeliz and the petitioner.

Pressed by urgent financial needs, petitioner, on 17 October 1960, sold all his remaining rights over the property in question to the private respondent for
P4,000.00.

On 25 October 1960, private respondent, with his wife's consent, executed in favor of the petitioner an Option to Repurchase the property in question
within ten (10) years from said date, with a ten-year grace period.

Private respondent submitted to the Bureau of Fisheries the definite deed of sale; he did not, however, submit the Option to Repurchase.

Thereafter, on 2 August 1961, the Bureau of Fisheries issued to private respondent Fishpond Permit No. 4953-Q; on 17 December 1962, it approved FLA
No. 1372 in the latter's favor.

On 11 December 1963, petitioner, contending that he has a valid twenty-year option to repurchase the subject property, requested the Bureau of Fisheries
to nullify FLA No. 1372 insofar as the said property is concerned. On 18 December 1964, his letter-complaint was dismissed. Petitioner then sought a
reconsideration of the dismissal; the same was denied on 29 April 1965. His appeal to the Secretary of the DANR was likewise dismissed on 30 October
1968. Again, on 20 November 1968, petitioner sought for a reconsideration; this time, however, he was successful. On 29 August 1969, the DANR
Secretary granted his motion in an Order cancelling FLA No. 1372 and stating, inter alia, that:

Evidently, the application as originally filed, could not be favorably acted upon by reason of the existing right of a third party over a
portion thereof. It was only the submission of the deed of absolute sale which could eliminate the stumbling block to the approval of
the transfer and the issuance of a permit or lease agreement. It was on the basis of this deed of sale, in fact, the one entitled "option
to repurchase" executed barely a week from the execution of the deed of absolute sale, (which) reverted, in effect, the status of the
land in question to what it was after the execution of the deed of sale with right to repurchase; that is, the land was again placed
under an encumbrance in favor of a third party. Circumstantially, there is a ground (sic) to believe that the deed of absolute sale was
executed merely with the end in view of circumventing the requirements for the approval of the transfer of leasehold rights of
Diamante in favor of Deypalubos; and the subsequent execution of the "Option to Repurchase" was made to assure the maintenance
of a vendor a retro's rights in favor of Diamante. There was, therefore, a misrepresentation of an essential or material fact
committed by the lessee-appellee (Deypalubos) in his application for the permit and the lease agreement, without which the same
could not have been issued. 1

The Secretary based his action on Section 20 of Fisheries Administrative Order No. 60, the second paragraph of which reads:

Any and all of the statements made in the corresponding application shall be considered as essential conditions and parts of the
permit or lease granted. Any false statements in the application of facts or any alteration, change or modification of any or all terms
and conditions made therein shall ipso facto cause the cancellation of the permit or lease.
Private respondent moved for a reconsideration of this last Order arguing that the DANR Secretary's previous Order of 30 October 1968 dismissing
petitioner's letter-complaint had already become final on the ground that he (private respondent) was not served a copy of petitioner's 20 November
1968 motion for reconsideration. On 20 November 1969, private respondent's motion for reconsideration was denied; a second motion for
reconsideration was likewise denied on 20 April 1970.

On 5 May 1970, private respondent filed with the Court of First Instance of Iloilo City a special civil action for certiorari with preliminary injunction
(docketed as Civil Case No. 8209), seeking to annul the Secretary's Orders of 20 April 1970, 20 November 1969 and 29 August 1969 on the ground that
the Secretary: (1) gravely abused his discretion in not giving him the opportunity to be heard on the question of whether or not the Option to Repurchase
was forged; and (2) has no jurisdiction to set aside FLA No. 1372 as the Order of the Bureau of Fisheries dismissing petitioner's 11 December 1963 letter-
complaint had already become final.

After issuing a temporary restraining order and a writ of preliminary injunction, the lower court tried the case jointly with Criminal Case No. 520
wherein both the petitioner and a certain Atty. Agustin Dioquino, the Notary Public who notarized the 25 October 1960 Option to Repurchase, were
charged with falsification of a public document.

After due trial, the lower court acquitted the accused in the criminal case and decided in favor of the private respondent in Civil Case No. 8209; the court
ruled that: (1) the DANR Secretary abused his discretion in issuing the questioned Orders, (2) petitioner cannot repurchase the property in question as
the Option to Repurchase is of doubtful validity, and (3) FLA No. 1372 in the name of private respondent is valid and binding.

Petitioner appealed to the respondent Court which, on 6 December 1978, reversed the decision of the trial court 2 on the ground that no grave abuse of
discretion was committed by respondent Secretary inasmuch as private respondent was given the opportunity to be heard on his claim that the Option to
Repurchase is spurious, and that the trial court merely indulged in conjectures in not upholding its validity. Said the respondent Court:

With all the foregoing arguments appellee had exhaustively adduced to show the spuriousness of the deed of "Option to
Repurchase", appellee can hardly complain of not having been given an opportunity to be heard, which is all that is necessary in
relation to the requirement of notice and hearing in administrative proceedings. Moreover, appellee never asked for a formal hearing
at the first opportunity that he had to do so, as when he filed his first motion for reconsideration. He asked for a formal hearing only
in his second motion for reconsideration evidently as a mere afterthought, upon realizing that his arguments were futile without
proofs to support them.

The only remaining question, therefore, is whether the Secretary acted with grave abuse of discretion in giving weight to the alleged
execution by appellee of the deed of Option to Repurchase, on the basis of the xerox copy of said deed as certified by the Notary
Public, Agustin Dioquino.

With such documentary evidence duly certified by the Notary Public, which is in effect an affirmation of the existence of the deed of
"Option of Repurchase" (sic) and its due execution, the Secretary may not be said to have gravely abused his discretion in giving the
document enough evidentiary weight to justify his action in applying the aforequoted provisions of Fisheries Adm. Order No. 60.
This piece of evidence may be considered substantial enough to support the conclusion reached by the respondent Secretary, which
is all that is necessary to sustain an administrative finding of fact (Ortua vs. Encarnacion, 59 Phil. 635; Ang Tibay vs. CIR, 69 Phil.
635; Ramos vs. The Sec. of Agriculture and Natural Resources, et al. L-29097, Jan. 28, 1974, 55 SCRA 330). Reviewing courts do not
re-examine the sufficiency of the evidence in an administrative case, if originally instituted as such, nor are they authorized to
receive additional evidence that was not submitted to the administrative agency concerned. For common sense dictates that the
question of whether the administrative agency abused its discretion in weighing evidence should be resolved solely on the basis of
the proof that the administrative authorities had before them and no other (Timbancaya vs. Vicente, L-19100, Dec. 27, 1963, 9 SCRA
852). In the instant case the evidence presented for the first time before the court a quo could be considered only for the criminal
case heard jointly with this case.

The lower court's action of acquitting the notary public, Agustin Dioquino, and appellant Diamante in Criminal Case No. 520 for
falsification of public document is in itself a finding that the alleged forgery has not been conclusively established. This finding is
quite correct considering the admission of the NBI handwriting expert that admission of the NBI handwriting expert that he cannot
make any finding on the question of whether appellee's signature on the deed of "Option to Repurchase" is forged or not, because of
the lack of (sic) specimen signature of appellee for comparative examination. The Secretary may have such signature in the
application papers of appellee on file with the former's office upon which to satisfy himself of (sic) the genuineness of appellee's
signature. It would be strange, indeed, that appellee had not provided the NBI expert with a specimen of his signature when his
purpose was to have an expert opinion that his signature on the questioned document is forged.

On the other hand, as to the signature of his wife, the latter herself admitted the same to be her own. Thus —

Q There is a signature below the typewritten words "with my marital consent" and above the name Edelina Duyo, whose signature is
this?A That is my signature. (T.s.n., Crim. Case No. 520, April 5, 1971, p. 14).

In not finding in favor of the perfect validity of the "Option to Repurchase," the court a quo merely indulged in conjectures. Thus,
believing the testimony of appellee that the later (sic) could not have executed the deed of option to repurchase after spending
allegedly P12,000.00, and that if there was really a verbal agreement upon the execution of the deed of absolute sale, as alleged by
appellant, that appellant's right to repurchase, as was stipulated in the earlier deed of sale, shall be preserved, such agreement
should have been embodied in the deed of sale of October 17, 1960 (Exh. D), the court doubted the genuineness of the deed of Option
to Repurchase (sic).

It is highly doubtful if appellee had spent P12,000.00 during the period from October 17, 1960 to October 25, 1960 when the deed of
option was executed. Likewise, the right to repurchase could not have been embodied in the deed of absolute sale since, as the
Secretary of DANR found, the purpose of the deed of absolute sale is to circumvent the law and insure the approval of appellee's
 application, as with his right to 4.4 hectares appearing to be subject to an encumbrance, his application would not have been given
favorable action.

Above all, the speculation and conjectures as indulged in by the court a quo cannot outweigh the probative effect of the document
itself, a certified xerox copy thereof as issued by the Notary Public, the non-presentation of the original having been explained by its
loss, as was the testimony of the same Notary Public, who justly won acquittal when charged with falsification of public document at
the instance of appellee. The fact that the spaces for the document number, page and book numbers were not filled up in the
photostatic copy presented by the representative of the Bureau of Records Management does not militate against the genuineness of
the document. It simply means that the copy sent to the said Bureau happens to have those spaces unfilled up (sic). But the sending
of a copy of the document to the Bureau of Records Management attests strongly to the existence of such document, the original of
which was duly executed, complete with the aforesaid data duly indicated thereon, as shown by the xerox copy certified true by the
Notary Public.

Indeed, in the absence of positive and convincing proof of forgery, a public instrument executed with the intervention of a Notary
Public must be held in high respect and accorded full integrity, if only upon the presumption of the regularity of official functions as
in the nature of those upon the presumption of the regularity of official functions as in the nature of those of a notary public
(Bautista vs. Dy Bun Chin, 49 OG 179; El Hogar Filipino vs. Olviga, 60 Phil. 17).

Subsequently, the respondent Court, acting on private respondent's motion for reconsideration, promulgated on 21 March 1979 the challenged
Resolution 3 setting aside the earlier decision and affirmed, in toto, the ruling of the trial court, thus:

. . . the respondent (DANR) Secretary had gone beyond his statutory authority and had clearly acted in abuse of discretion in giving
due weight to the alleged option to repurchase whose (sic) genuiness (sic) and due execution had been impugned and denied by
petitioner-appellee (Deypalubos). While the certified true copy of the option to repurchase may have been the basis of the
respondent Secretary in resolving the motion for reconsideration, the Court believes that he should have first ordered the
presentation of evidence to resolve this factual issue considering the conflicting claims of the parties. As earlier pointed out, all that
was submitted to the Bureau of Fisheries and consequently to the respondent Secretary, was a xerox copy of the questioned
document which was certified to by a notary public to be a copy of a deed found in his notarial file which did not bear any specimen
of the signatures of the contracting parties. And assuming that a certification made by a notary public as to the existence of a
document should be deemed an affirmation that such document actually exists. Nevertheless, (sic) when such claim is impugned, the
one who assails the existence of a document should be afforded the opportunity to prove such claim, because, at most, the
presumption of regularity in the performance of official duties is merely disputable and can be rebutted by convincing and positive
evidence to the contrary.

His motion for reconsideration having been denied, the petitioner filed the instant petition for review.

Petitioner contends that the Rules of Court should not be strictly applied to administrative proceedings and that the findings of fact of administrative
bodies, absent a showing of arbitrariness, should be accorded respect.

While the petition has merit, petitioner's victory is hollow and illusory for, as shall hereafter be shown, even as We reverse the assailed resolution of the
respondent Court of Appeals, the questioned decision of the Secretary must, nevertheless, be set aside on the basis of an erroneous conclusion of law with
respect to the Option to Repurchase.

The respondent Court correctly held in its decision of 6 December 1978 that the respondent Secretary provided the private respondent sufficient
opportunity to question the authenticity of the Option to Repurchase and committed no grave abuse of discretion in holding that the same was in fact
executed by private respondent. We thus find no sufficient legal and factual moorings for respondent Court's sudden turnabout in its resolution of 21
March 1979. That private respondent and his wife executed the Option to Repurchase in favor of petitioner on 25 October 1960 is beyond dispute. As
determined by the respondent Court in its decision of 6 December 1978, private respondent's wife, Edelina Duyo, admitted having affixed her signature
to the said document. Besides, the trial court itself in Criminal Case No. 520 which was jointly tried with the civil case, acquitted both the petitioners and
the notary public, before whom the Option to Repurchase was acknowledged, of the crime of falsification of said document.

We hold, however, that the respondent Secretary gravely erred in holding that private respondent's non-disclosure and suppression of the fact that 4.4
hectares of the area subject of the application is burdened with or encumbered by the Option to Repurchase constituted a falsehood or a
misrepresentation of an essential or material fact which, under the second paragraph of Section 29 of Fisheries Administrative Order No. 60 earlier
quoted, "shall ipso facto cause the cancellation of the permit or lease." In short, the Secretary was of the opinion that the Option to Repurchase was an
encumbrance on the property which affected the absolute and exclusive character of private respondent's ownership over the 4.4 hectares sold to him by
petitioner. This is a clear case of a misapplication of the law on conventional redemption and a misunderstanding of the effects of a right to repurchase
granted subsequently in an instrument different from the original document of sale.

Article 1601 of the Civil Code provides:

Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to
comply with the provisions of article 1616 and other stipulations which may have been agreed upon.

In Villarica, et al. vs. Court of Appeals, et al., 4 decided on 29 November 1968, or barely seven (7) days before the respondent Court promulgated its
decision in this case, this Court, interpreting the above Article, held:

The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the
vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the
vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate
instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. . . .
In the earlier case of Ramos, et al. vs. Icasiano, et al., 5 decided in 1927, this Court had already ruled that "an agreement to repurchase becomes a
promise to sell when made after the sale, because when the sale is made without such an agreement, the purchaser acquires the thing sold absolutely,
and if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the purchaser, as absolute owner already of the object.
In that case the vendor has not reserved to himself the right to repurchase."

In Vda. de Cruzo, et al. vs. Carriaga, et al., 6 this Court found another occasion to apply the foregoing principle.

Hence, the Option to Repurchase executed by private respondent in the present case, was merely a promise to sell, which must be governed by Article
1479 of the Civil Code which reads as follows:

Art. 1479. — A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise
is supported by a consideration distinct from the price.

A copy of the so-called Option to Repurchase is neither attached to the records nor quoted in any of the pleadings of the parties. This Court cannot,
therefore, properly rule on whether the promise was accepted and a consideration distinct from the price, supports the option. Undoubtedly, in the
absence of either or both acceptance and separate consideration, the promise to sell is not binding upon the promissor (private respondent).

A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at the moment it is accepted.
Acceptance is the act that gives life to a juridical obligation, because, before the promise is accepted, the promissor may withdraw it
at any time. Upon acceptance, however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the
obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails to deliver the thing he had offered
for sale.

xxx xxx xxx

. . . The contract of option is a separate and distinct contract from the contract which the parties may enter into upon the
consummation of the option, and a consideration for an optional contract is just as important as the consideration for any other kind
of contract. Thus, a distinction should be drawn between the consideration for the option to repurchase, and the consideration for
the contract of repurchase itself.7

Even if the promise was accepted, private respondent was not bound thereby in the absence of a distinct consideration. 8

It may be true that the foregoing issues were not squarely raised by the parties. Being, however, intertwined with the issue of the correctness of the
decision of the respondent Secretary and, considering further that the determination of said issues is essential and indispensable for the rendition of a
just decision in this case, this Court does not hesitate to rule on them.

In Hernandez vs. Andal, 9 this Court held:

If the appellants' assignment of error be not considered a direct challenge to the decision of the court below, we still believe that the
objection takes a narrow view of practice and procedure contrary to the liberal spirit which pervades the Rules of Court. The first
injunction of the new Rules (Rule 1, section 2) is that they "shall be liberally construed in order to promote their object and to assist
the parties in obtaining just, speedy, and inexpensive determination of every action and proceeding." In line with the modern trends
of procedure, we are told that, "while an assignment of error which is required by law or rule of court has been held essential to
appellate review, and only those assigned will be considered, there are a number of cases which appear to accord to the appellate
court a broad discretionary power to waive the lack of proper assignment of errors and consider errors not assigned. And an
unassigned error closely related to an error properly assigned, or upon which the determination of the question raised by the error
properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as error." (4 C.J.S.,
1734; 3 C.J., 1341, footnote 77). At the least, the assignment of error, viewed in this light, authorizes us to examine and pass upon the
decision of the court below.

In Insular Life Assurance Co., Ltd. Employees Association-NATU vs. Insular Life Assurance Co., Ltd., 10 this Court ruled:

. . . (t)he Supreme Court has ample authority to review and resolve matter not assigned and specified as errors by either of the
parties in the appeal if it finds the consideration and determination of the same essential and indispensable in order to arrive at a
just decision in the case. 11 This Court, thus, has the authority to waive the lack of proper assignment of errors if the unassigned
errors closely relate to errors properly pinpointed out or if the unassigned errors refer to matters upon which the determination of
the questions raised by the errors properly assigned depend. 12

The same also applies to issues not specifically raised by the parties. The Supreme Court, likewise, has broad discretionary power, in
the resolution of a controversy, to take into consideration matters on record which the parties fail to submit to the Court as specific
questions for determination. 13 Where the issues already raised also rest on other issues not specifically presented, as long as the
latter issues bear relevance and close relation to the former and as long as they arise from matters on record, the Court has the
authority to include them in its discussion of the controversy as well as to pass upon them. In brief, in those cases wherein questions
not particularly raised by the parties surface as necessary for the complete adjudication of the rights and obligations of the parties
and such questions fall within the issues already framed by the parties, the interests of justice dictate that the Court consider and
resolve them.
WHEREFORE, the instant petition is GRANTED. The Resolution of respondent Court of Appeals of 21 March 1979 in C.A.-G.R. No. SP-04866 and the
Decision of the trial court in Civil Case No. 8209, insofar as they declare, for the reasons therein given, Fishpond Lease Agreement No. 1372, valid and
binding, are hereby REVERSED and SET ASIDE. The challenged Orders of the respondent Secretary of Agriculture and Natural Resources of 29 August
1969, 20 November 1969 and 21 April 1970 are likewise REVERSED and SET ASIDE and Fishpond Lease Agreement No. 1372 is ordered REINSTATED.

No pronouncement as to costs.

IT IS SO ORDERED.

G.R. No. 126454 November 26, 2004

BIBLE BAPTIST CHURCH and PASTOR REUBEN BELMONTE, petitioners,

vs.
COURT OF APPEALS and MR. & MRS. ELMER TITO MEDINA VILLANUEVA, respondents.

AZCUNA, J.:

This petition for review on certiorari seeks to annul the Decision1 dated August 7, 1996, of the Court of Appeals in CA-G.R. CV No. 45956, and its
Resolution2 dated September 12, 1996, denying reconsideration of the decision. In the questioned issuances, the Court of Appeals affirmed the
Decision3 dated June 8, 1993, of the Regional Trial Court of Manila, Branch 3, in Civil Case No. 90-55437.

The antecedents are:

On June 7, 1985, the Bible Baptist Church (petitioner Baptist Church) entered into a contract of lease4 with Mr. & Mrs. Elmer Tito Medina Villanueva
(respondent spouses Villanueva). The latter are the registered owners of a property located at No. 2436 (formerly 2424) Leon Guinto St., Malate, Manila.
The pertinent stipulations in the lease contract were:

1. That the LESSOR lets and leases to the LESSEE a store space known as 2424 Leon Guinto Sr. St., Malate, Manila, of which property the
LESSOR is the registered owner in accordance with the Land Registration Act.

2. That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15) years.

3. That LESSEE shall pay the LESSOR within five (5) days of each calendar month, beginning Twelve (12) months from the date of this
agreement, a monthly rental of Ten Thousand Pesos (P10,000.00) Philippine Currency, plus 10% escalation clause per year starting on June 7,
1988.

4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty Four Thousand Pesos (P84,000.00) Philippine
Currency. Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is
mortgaged by the LESSOR.
 5. That the title will remain in the safe keeping of the Bible Baptist Church, Malate, Metro Manila until the expiration of the lease agreement or
the leased premises be purchased by the LESSEE, whichever comes first. In the event that the said title will be lost or destroyed while in the
possession of the LESSEE, the LESSEE agrees to pay all costs involved for the re-issuance of the title.

6. That the leased premises may be renovated by the LESSEE, to the satisfaction of the LESSEE to be fit and usable as a Church.

7. That the LESSOR will remove all other tenants from the leased premises no later than March 15, 1986. It is further agreed that if those
tenants are not vacated by June 1, 1986, the rental will be lowered by the sum of Three Thousand Pesos (P3,000.00) per month until said
tenants have left the leased premises.

8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the
premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down
payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos
(P120,000.00), Philippine Currency, per year.

x x x.5

The foregoing stipulations of the lease contract are the subject of the present controversy.

Although the same lease contract resulted in several cases6 filed between the same parties herein, petitioner submits, for this Court's review, only the
following errors allegedly committed by the Court of Appeals:

a) Respondent Court of Appeals erred in finding that the option to buy granted the petitioner Baptist Church under its contract of lease with
the Villanuevas did not have a consideration and, therefore, did not bind the latter;

b) [R]espondent court again also erred in finding that the option to buy did not have a fixed price agreed upon by the parties for the purchase
of the property; and

c) [F]inally, respondent court erred in not awarding petitioners Baptist Church and its pastor attorney's fees. 7

In sum, this Court has three issues to resolve: 1) Whether or not the option to buy given to the Baptist Church is founded upon a consideration; 2)
Whether or not by the terms of the lease agreement, a price certain for the purchase of the land had been fixed; and 3) Whether or not the Baptist Church
is entitled to an award for attorney's fees.

The stipulation in the lease contract which purportedly gives the lessee an option to buy the leased premises at any time within the duration of the lease,
is found in paragraph 8 of the lease contract, viz:

8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the
premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down
payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos
(P120,000.00), Philippine Currency, per year.

Under Article 1479 of the Civil Code, it is provided:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price.

The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract
to be valid and enforceable against the promissor, there must be a separate and distinct consideration that supports it.

In this case, petitioner Baptist Church seeks to buy the leased premises from the spouses Villanueva, under the option given to them. Petitioners claim
that the Baptist Church "agreed to advance the large amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to grant it a
long term lease and an option to buy the property for P1.8 million."8 They argue that the consideration supporting the option was their agreement to pay
off the Villanueva's P84,000 loan with the bank, thereby freeing the subject property from the mortgage encumbrance. They state further that the Baptist
Church would not have agreed to advance such a large amount as it did to rescue the property from bank foreclosure had it not been given an enforceable
option to buy that went with the lease agreement.

In the petition, the Baptist Church states that "[t]rue, the Baptist Church did not pay a separate and specific sum of money to cover the option alone. But
the P84,000 it paid the Villanuevas in advance should be deemed consideration for the one contract they entered into – the lease with option to
buy."9 They rely on the case of Teodoro v. Court of Appeals10 to support their stand.

This Court finds no merit in these contentions.

First, petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas' property from the mortgage should be deemed the separate
consideration to support the contract of option. It must be pointed out that said amount was in fact apportioned into monthly rentals spread over a
period of one year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Church's monthly rent had already
been paid for, such that it only again commenced paying the rentals in June 1986. This is shown by the testimony of petitioner Pastor Belmonte where he
states that the P84,000 was advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist
Church did not pay monthly rent.11

This Court agrees with respondents that the amount of P84,000 has been fully exhausted and utilized by their occupation of the premises and there is no
separate consideration to speak of which could support the option.12

Second, petitioners' reliance on the case of Teodoro v. Court of Appeals13 is misplaced. The facts of the Teodoro case reveal that therein respondent Ariola
was the registered lessee of a property owned by the Manila Railroad Co. She entered into an agreement whereby she allowed Teodoro to occupy a
portion of the rented property and gave Teodoro an option to buy the same, should Manila Railroad Co. decide to sell the property to Ariola. In addition,
Teodoro, who was occupying only a portion of the subject rented property, also undertook to pay the Manila Railroad Co., the full amount of the rent
supposed to be paid by the registered lessor Ariola. Consequently, unlike this case, Teodoro paid over and above the amount due for her own occupation
of a portion of the property. That amount, which should have been paid by Ariola as lessor, and for her own occupation of the property, was deemed by
the Court as sufficient consideration for the option to buy which Ariola gave to Teodoro upon Ariola's acquiring the property.

Hence, in Teodoro, this Court was able to find that a separate consideration supported the option contract and thus, its enforcement may be demanded.
Petitioners, therefore, cannot rely on Teodoro, for the case even supports the respondents' stand that a consideration that is separate and distinct from
the purchase price is required to support an option contract.

Petitioners further insist that a consideration need not be a separate sum of money. They posit that their act of advancing the money to "rescue" the
property from mortgage and impending foreclosure, should be enough consideration to support the option.

In Villamor v. Court of Appeals,14 this Court defined consideration as "the why of the contracts, the essential reason which moves the contracting parties
to enter into the contract."15 This definition illustrates that the consideration contemplated to support an option contract need not be monetary. Actual
cash need not be exchanged for the option. However, by the very nature of an option contract, as defined in Article 1479, the same is an onerous contract
for which the consideration must be something of value, although its kind may vary.

Specifically, in Villamor v. Court of Appeals,16 half of a parcel of land was sold to the spouses Villamor for P70 per square meter, an amount much higher
than the reasonable prevailing price. Thereafter, a deed of option was executed whereby the sellers undertook to sell the other half to the same spouses. It
was stated in the deed that the only reason the spouses bought the first half of the parcel of land at a much higher price, was the undertaking of the
sellers to sell the second half of the land, also at the same price. This Court held that the cause or consideration for the option, on the part of the spouses-
buyers, was the undertaking of the sellers to sell the other half of the property. On the part of the sellers, the consideration supporting the option was the
much higher amount at which the buyers agreed to buy the property. It was explicit from the deed therein that for the parties, this was the consideration
for their entering into the contract.

It can be seen that the Court found that the buyer/optionee had parted with something of value, which was the amount he paid over and above the actual
prevailing price of the land. Such amount, different from the price of the land subject of the option, was deemed sufficient and distinct consideration
supporting the option contract. Moreover, the parties stated the same in their contract.

Villamor is distinct from the present case because, First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside from
the amount of P84,000 which was in fact eventually utilized as rental payments. Second, there is no document that contains an agreement between the
parties that petitioner Baptist Church's supposed rescue of the mortgaged property was the consideration which the parties contemplated in support of
the option clause in the contract. As previously stated, the amount advanced had been fully utilized as rental payments over a period of one year. While
the Villanuevas may have them to thank for extending the payment at a time of need, this is not the separate consideration contemplated by law.

Noting that the option clause was part of a lease contract, this Court looked into its previous ruling in the early case of Vda. De Quirino v.
Palarca,17 where the Court did say that "in reciprocal contracts, like the one in question,18 the obligation or promise of each party is the consideration for
that of the other."19 However, it must be noted that in that case, it was also expressly stated in the deed that should there be failure to exercise the option
to buy the property, the optionee undertakes to sell the building and/or improvements he has made on the premises. In addition, the optionee had also
been paying an amount of rent that was quite high and in fact turned out to be too burdensome that there was a subsequent agreement to reduce said
rentals. The Court found that "the amount of rentals agreed upon x x x – which amount turned out to be so burdensome upon the lessee, that the lessor
agreed, five years later, to reduce it – as well as the building and/or improvements contemplated to be constructed and/or introduced by the lessee, were,
undoubtedly, part of the consideration for his option to purchase the leased premises." 20

Again, this Court notes that the parties therein clearly stipulated in their contract that there was an undertaking on the part of the optionee to sell the
improvements made on the property if the option was not exercised. Such is a valuable consideration that could support the option contract. Moreover,
there was the excessive rental payments that the optionee paid for five years, which the Court also took into account in deciding that there was a separate
consideration supporting the option.

To summarize the rules, an option contract needs to be supported by a separate consideration. The consideration need not be monetary but could consist
of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous
nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified
as such in the option contract or clause.

This Court also notes that in the present case both the Regional Trial Court and the Court of Appeals agree that the option was not founded upon a
separate and distinct consideration and that, hence, respondents Villanuevas cannot be compelled to sell their property to petitioner Baptist Church.

The Regional Trial Court found that "[a]ll payments made under the contract of lease were for rentals. No money [was] ever exchanged for and in
consideration of the option." Hence, the Regional Trial Court found the action of the Baptist Church to be "premature and without basis to compel the
defendant to sell the leased premises." The Regional Trial Court consequently ruled:
 WHEREFORE, judgment is rendered:

1) Denying plaintiffs' application for writ of injunction;

2) That defendant cannot be compelled to sell to plaintiffs the leased premises in accordance with par. 8 of the contract of lease;

3) Defendant is hereby ordered to reimburse plaintiffs the sum of P15, 919.75 plus 12% interest representing real estate taxes,
plaintiffs paid the City Treasurer's Office of Manila;

4) Declaring that plaintiff made a valid and legal consignation to the Court of the initial amount of P18,634.00 for the month of
November and December 1990 and every month thereafter.

All other claims of the plaintiffs are hereby dismissed for lack of merit.

No pronouncement as to costs.

SO ORDERED. 21

On appeal, the Court of Appeals agreed with the Regional Trial Court and found that the option to buy the leased premises was not binding upon the
Villanuevas for non-compliance with Article 1479. It found that said option was not supported by a consideration as "no money was ever really
exchanged for and in consideration of the option." In addition, the appellate court determined that in the instant case, "the price for the object is not yet
certain." Thus, the Court of Appeals affirmed the Regional Trial Court decision and dismissed the appeal for lack of merit. 22

Having found that the option to buy granted to the petitioner Baptist Church was not founded upon a separate consideration, and hence, not enforceable
against respondents, this Court finds no need to discuss whether a price certain had been fixed as the purchase price.

Anent the claim for attorney's fees, it is stipulated in paragraph 13 of the lease agreement that in the event of failure of either of the parties to comply
with any of the conditions of the agreement, the aggrieved party can collect reasonable attorney's fees.23

In view of this Court's finding that the option contract is not enforceable for being without consideration, the respondents Villanueva spouses' refusal to
comply with it cannot be the basis of a claim for attorney's fees.

Hence, this Court agrees with as the Court of Appeals, which affirmed the findings of the Regional Trial Court, that such claim is to be dismissed for lack
of factual and legal basis.

WHEREFORE, the Decision and Resolution of the Court of Appeals subject of the petition are hereby AFFIRMED.

No costs. SO ORDERED.
SECOND DIVISION

G.R. No. 202050, July 25, 2016

PHILIPPINE NATIONAL OIL COMPANY AND PNOC DOCKYARD & ENGINEERING CORPORATION, Petitioners, v. KEPPEL
PHILIPPINES HOLDINGS, INC., Respondent.

DECISION

BRION, J.:

Before the Court is a petition for review on certiorari filed under Rule 45 of the Rules of Court, appealing the decision dated 19 December 2011 1 and
resolution dated 14 May 20122 of the Court of Appeals (CA) in CA-G.R. CV No. 86830. These assailed CA rulings affirmed in toto the decision dated 12
January 20063of the Regional Trial Court (RTQ of Batangas City, Branch 84, in Civil Case No. 7364.

THE FACTS

The 1976 Lease Agreement and Option to Purchase

Almost 40 years ago or on 6 August 1976, the respondent Keppel Philippines Holdings, Inc.4 (Keppel) entered into a lease agreement5 (the agreement)
with Luzon Stevedoring Corporation (Lusteveco) covering 11 hectares of land located in Bauan, Batangas. The lease was for a period of 25 years for a
consideration of P2.1 million.6 At the option of Lusteveco, the rental fee could be totally or partially converted into equity shares in
Keppel.7chanrobleslaw

At the end of the 25-year Jease period, Keppel was given the "firm and absolute option to purchase8the land for P4.09 million, provided that
it had acquired the necessary qualification to own land under Philippine laws at the time the option is exercised. 9 Apparently, when
the lease agreement was executed, less than 60% of Keppel's shareholding was Filipino-owned, hence, it was not constitutionally qualified to acquire
private lands in the country.10chanrobleslaw

If, at the end of the 25-year lease period (or in 2001), Keppel remained unqualified to own private lands, the agreement provided that the lease would be
automatically renewed for another 25 years.11 Keppel was further allowed to exercise the option to purchase the land up to the 30th year of the lease (or
in 2006), also on the condition that, by then, it would have acquired the requisite qualification to own land in the Philippines.12chanrobleslaw

Together with Keppel's lease rights and option to purchase, Lusteveco warranted not to sell the land or assign its rights to the land for the duration of the
lease unless with the prior written consent of Keppel.13 Accordingly, when the petitioner Philippine National Oil Corporation14 (PNOC) acquired the land
from Lusteveco and took over the rights and obligations under the agreement, Keppel did not object to the assignment so long as the agreement was
annotated on PNOC's title.15 With PNOC's consent and cooperation, the agreement was recorded as Entry No. 65340 on PNOC's Transfer of Certificate of
Title No. T-50724.16chanrobleslaw

The Case and the Lower Court Rulings

On 8 December 2000, Keppel wrote PNOC informing the latter that at least 60% of its shares were now owned by Filipinos17 Consequently, Keppel
expressed its readiness to exercise its option to purchase the land. Keppel reiterated its demand to purchase the land several times, but on every
occasion, PNOC did not favourably respond.18chanrobleslaw

To compel PNOC to comply with the Agreement, Keppel instituted a complaint for specific performance with the RTC on 26 September 2003
against PNOC.19 PNOC countered Keppel's claims by contending that the agreement was illegal for circumventing the constitutional prohibition against
aliens holding lands in the Philippines.20 It further asserted that the option contract was void, as it was unsupported by a separate valuable
consideration.21 It also claimed that it was not privy to the agreement.22chanrobleslaw

After due proceedings, the RTC rendered a decision23in favour of Keppel and ordered PNOC to execute a deed of absolute sale upon
payment by Keppel of the purchase price of P4.09 million.24chanrobleslaw

PNOC elevated the case to the CA to appeal the RTC decision.25cralawred Affirming the RTC decision in toto, the CA upheld Keppel's right to
acquire the land.26 It found that since the option contract was embodied in the agreement - a reciprocal contract - the consideration was the obligation
that each of the contracting party assumed.27 Since Keppel was already a Filipino-owned corporation, it satisfied the condition that entitled it to purchase
the land.28chanrobleslaw

Failing to secure a reconsideration of the CA decision,29 PNOC filed the present Rule 45 petition before this Court to assail the CA rulings.

THE PARTIES' ARGUMENTS and THE ISSUES

PNOC argues that the CA failed to resolve the constitutionality of the agreement. It contends that the terms of the agreement amounted to a virtual sale
of the land to Keppel who, at the time of the agreement's enactment, was a foreign corporation and, thus, violated the 1973 Constitution.

Specifically, PNOC refers to (a) the 25-year duration of the lease that was automatically renewable for another 25 years 30; (b) the option to purchase the
land for a nominal consideration of P100.00 if the option is exercised anytime between the 25th and the 30th year of the lease31; and (c) the prohibition
imposed on Lusteveco to sell the land or assign its rights therein during the lifetime of the lease.32 Taken together, PNOC submits that these provisions
amounted to a virtual transfer of ownership of the land to an alien which act the 1973 Constitution prohibited.

PNOC claims that the agreement is no different from the lease contract in Philippine Banking Corporation v. Lui She,33 which the Court struck down as
unconstitutional. In Lui She, the lease contract allowed the gradual divestment of ownership rights by the Filipino owner-lessor in favour of the
foreigner-lessee.34The arrangement in Lui She was declared as a scheme designed to enable the parties to circumvent the constitutional
prohibition.35 PNOC posits that a similar intent is apparent from the terms of the agreement with Keppel and accordingly should also be
nullified.36chanrobleslaw

PNOC additionally contends the illegality of the option contract for lack of a separate consideration, as required by Article 1479 of the Civil Code.37 It
claims that the option contract is distinct from the main contract of lease and must be supported by a consideration other than the rental fees provided in
the agreement.38chanrobleslaw

On the other hand, Keppel maintains the validity of both the agreement and the option contract it contains. It opposes the claim that there was "virtual
sale" of the land, noting that the option is subject to the condition that Keppel becomes qualified to own private lands in the Philippines.39 This condition
ripened in 2000, when at least 60% of Keppel's equity became Filipino-owned.

Keppel contends that the agreement is not a scheme designed to circumvent the constitutional prohibition. Lusteveco was not proscribed from alienating
its ownership rights over the land but was simply required to secure Keppel's prior written consent. 40 Indeed, Lusteveco was able to transfer its interest
to PNOC without any objection from Keppel.41chanrobleslaw

Keppel also posits that the requirement of a separate consideration for an option to purchase applies only when the option is granted in a separate
contract.42 In the present case, the option is embodied in a reciprocal contract and, following the Court's ruling in Vda. De Quirino v. Palarca,43 the
option is supported by the same consideration supporting the main contract.

From the parties' arguments, the following ISSUES emerge:

chanRoblesvirtualLawlibraryFirst, the constitutionality of the Agreement, i.e., whether the terms of the Agreement amounted to a virtual sale of the land
to Keppel that was designed to circumvent the constitutional prohibition on aliens owning lands in the Philippines.

Second, the validity of the option contract, i.e., whether the option to purchase the land given to Keppel is supported by a separate valuable
consideration.
If these issues are resolved in favour of Keppel, a third issue emerges - one that was not considered by the lower courts, but is critical in terms of
determining Keppel's right to own and acquire full title to the land, i.e., whether Keppel's equity ownership meets the 60% Filipino-owned capital
requirement of trie Constitution, in accordance with the Court's ruling in Gamboa v. Teves.44chanrobleslaw

THE COURT'S RULING

I. The constitutionality of the Agreement

The Court affirms the constitutionality of the Agreement.

Preserving the ownership of land, whether public or private, in Filipino hands is the policy consistently adopted in all three of our constitutions. 45 Under
the 1935,46 1973,47 and 198748 Constitutions, no private land shall be transferred, assigned, or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain. Consequently, only Filipino citizens, or corporations or associations whose capital is
60% owned by Filipinos citizens, are constitutionally qualified to own private lands.

Upholding this nationalization policy, the Court has voided not only outright conveyances of land to foreigners,49: but also arrangements where the rights
of ownership were gradually transferred to foreigners.50 In Lui Shui,51 we considered a 99-year lease agreement, which gave the foreigner-lessee the
option to buy the land and prohibited the Filipino owner-lessor from selling or otherwise disposing the land, amounted to -
a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land (Jus possidendi, jus utendi, jus
fruendi, and jus abutendi) but also of the right to dispose of it (jus disponendi) — rights the sum total of which make up ownership.52 [Emphasis
supplied]
In the present case, PNOC submits that a similar scheme is apparent from the agreement's terms, but a review of the overall circumstances leads us to
reject PNOC's claim.

The agreement was executed to enable Keppel to use the land for its shipbuilding and ship repair business.53 The industrial/commercial purpose
behind the agreement differentiates the present case from Lui She where the leased property was primarily devoted to residential use.54 Undoubtedly, the
establishment and operation of a shipyard business involve significant investments. Keppel's uncontested testimony showed that it incurred P60 million
costs solely for preliminary activities to make the land suitable as a shipyard, and subsequently introduced improvements worth P177 million.55 Taking
these investments into account and the nature of the business that Keppel conducts on the land, we find it reasonable that the agreement's terms
provided for an extended duration of the lease and a restriction on the rights of Lusteveco.

We observe that, unlike in Lui She,56 Lusteveco was not completely denied its ownership rights during the course of the lease. It could dispose of the
lands or assign its rights thereto, provided it secured Keppel's prior written consent. 57 That Lusteveco was able to convey the land in favour of PNOC
during the pendency of the lease58 should negate a finding that the agreement's terms amounted to a virtual transfer of ownership of the land to Keppel.

II. The validity of the option contract

II.A An option contract must be supported by a separate consideration that is either clearly specified as such in the contract
or duly proven by the offeree/promisee.

An option contract is defined in the second paragraph of Article 1479 of the Civil Code:ChanRoblesVirtualawlibrary
Article 14791 x x x An accepted 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.
An option contract is a contract where one person (the offeror/promissor) grants to another person (the offeree/promisee) the right or privilege to buy
(or to sell) a determinate thing at a fixed price, if he or she chooses to do so within an agreed period. 59chanrobleslaw

As a contract, it must necessarily have the essential elements of subject matter, consent, and consideration.60 Although an option contract is deemed a
preparatory contract to the principal contract of sale,61 it is separate and distinct therefrom,62 thus, its essential elements should be distinguished from
those of a sale.63chanrobleslaw

In an option contract, the subject matter is the right or privilege to buy (or to sell) a determinate thing for a price certain,64 while in a sales contract,
the subject matter is the determinate thing itself.65 The consent in an option contract is the acceptance by the offeree of the offerer's promise to sell (or
to buy)the determinate thing, i.e., the offeree agrees to hold the right or privilege to buy (or to sell) within a specified period. This acceptance is different
from the acceptance of the offer itself whereby the offeree asserts his or her right or privilege to buy (or to sell), which constitutes as his or her consent to
the sales contract. The consideration in an option contract may be anything of value, unlike in a sale where the purchase price must be in money or its
equivalent.66 There is sufficient consideration for a promise if there is any benefit to the offeree or any detriment to the offeror. 67chanrobleslaw

In the present case, PNOC claims the option contract is void for want of consideration distinct from the purchase price for the land.68 The option is
incorporated as paragraph 5 of the Agreement and reads as
5. If within the period of the first [25] years [Keppel] becomes qualified to own land under the laws of the Philippines, it has the firm and absolute option
to purchase the above property for a total price of [P-4,090,000.00] at the end of the 25th year, discounted at 16% annual for every year before the end of
the 25th year, which amount may be converted into equity of [Keppel] at book value prevailing at the time of sale, or paid in cash at Lusteveco's option.

However, if after the first [25] years, [Keppel] is still not qualified to own land under the laws of the Republic of the Philippines, [Keppel's] lease of the
above stated property shall be automatically renewed for another [25] years, under the same terms and conditions save for the rental price which shall be
for the sum of P4,090,000.00... and which sum may be totally converted into equity of [Keppel] at book value prevailing at the time of conversion, or
paid in cash at Lusteveco's option.

If anytime within the second [25] years up to the [30th] year from the date of this agreement, [Keppel] becomes qualified to own land under the laws of
the Republic of the Philippines, [Keppel] has the firm and absolute option to buy and Lusteveco hereby undertakes to sell the above stated property for
the nominal consideration of [P100.00.00]...69
Keppel counters that a separate consideration is not necessary to support its option to buy because the option is one of the stipulations of the lease
contract. It claims that a separate consideration is required only when an option to buy is embodied in an independent contract.70 It relies on Vda. de
Quirino v. Palarca,71 where the Court declared that the option to buy the leased property is supported by the same consideration as that of the lease
itself: "in reciprocal contracts [such as lease], the obligation or promise of each party is the consideration for that of the other.72chanrobleslaw

In considering Keppel's submission, we note that the Court's ruling in 1969 in Vda. de Quirino v. Palarcahas been taken out of context and erroneously
applied in subsequent cases. In 2004, through Bible Baptist Church v. CA73 we revisited Vda. de Quirino v. Palarca and observed that the option to buy
given to the lessee Palarca by the lessor Quirino was in fact supported by a separate consideration: Palarca paid a higher amount of rent and, in the event
that he does not exercise the option to buy the leased property, gave Quirino the option to buy the improvements he introduced thereon. These
additional concessions were separate from the purchase price and deemed by the Court as sufficient consideration to support the option contract.

Vda. de Quirino v. Palarca, therefore, should not be regarded as authority that the mere inclusion of an option contract in a reciprocal lease contract
provides it with the requisite separate consideration for its validity. The reciprocal contract should be closely scrutinized and assessed
whether it contains additional concessions that the parties intended to constitute as a consideration for the option contract,
separate from that of the purchase price.

In the present case, paragraph 5 of the agreement provided that should Keppel exercise its option to buy, Lusteveco could opt to convert the purchase
price into equity in Keppel. May Lusteveco's option to convert the price for shares be deemed as a sufficient separate consideration for Keppel's option
to buy?

As earlier mentioned, the consideration for an option contract does not need to be monetary and may be anything of value. 74 However, when the
consideration is not monetary, the consideration must be clearly specified as such in the option contract or clause. 75chanrobleslaw

In Villamor v. CA,76 the parties executed a deed expressly acknowledging that the purchase price of P70.00 per square meter "was greatly higher than the
actual reasonable prevailing value of lands in that place at that time."77 The difference between the purchase price and the prevailing value constituted as
the consideration for the option contract. Although the actual amount of the consideration was not stated, it was ascertainable from the contract whose
terms evinced the parties' intent to constitute this amount as consideration for the option contract. 78 Thus, the Court upheld the validity of the option
contract.79 In the light of the offeree's acceptance of the option, the Court further declared that a bilateral contract to sell and buy was created and that
the parties' respective obligations became reciprocally demandable. 80chanrobleslaw

When the written agreement itself does not state the consideration for the option contract, the offeree or promisee bears the
burden of proving the existence of a separate consideration for the option.81 The offeree cannot rely on Article 1354 of the Civil Code,82 which
presumes the existence of consideration, since Article 1479 of the Civil Code is a specific provision on option contracts that explicitly requires the
existence of a consideration distinct from the purchase price.83chanrobleslaw

In the present case, none of the above rules were observed. We find nothing in paragraph 5 of the Agreement indicating that the grant to Lusteveco of the
option to convert the purchase price for Keppel shares was intended by the parties as the consideration for Keppel's option to buy the land; Keppel itself
as the offeree presented no evidence to support this finding. On the contrary, the option to convert the purchase price for shares should be deemed part
of the consideration for the contract of sale itself, since the shares are merely an alternative to the actual cash price.

There are, however cases where, despite the absence of an express intent in the parties' agreements, the Court considered the additional concessions
stipulated in an agreement to constitute a sufficient separate consideration for the option contract.

In Teodoro v. CA,84 the sub-lessee (Teodoro) who was given the option to buy the land assumed .the obligation to pay not only her rent as sub-lessee, but
also the rent of the sub-lessor (Ariola) to the primary lessor (Manila Railroad Company).85 In other words, Teodoro paid an amount over and above the
amount due for her own occupation of the property, and this amount was found by the Court as sufficient consideration for the option
contract.86chanrobleslaw

In Dijamco v. CA,87 the spouses Dijamco failed to pay their loan with the bank, allowing the latter to foreclose the mortgage. 88 Since the spouses Dijamco
did not exercise their right to redeem, the bank consolidated its ownership over the mortgaged property.89 The spouses Dijamco later proposed to
purchase the same property by paying a purchase price of P622,095.00 (equivalent to their principal loan) and a monthly amount of P13,478.00 payable
for 12 months (equivalent to the interest on their principal loan). They further stated that should they fail to make a monthly payment, the proposal
should be automatically revoked and all payments be treated as rentals for their continued use of the property.90 The Court treated the spouses Dijamco's
proposal to purchase the property as an option contract, and the consideration for which was the monthly interest payments. 91 Interestingly, this ruling
was made despite the categorical stipulation that the monthly interest payments should be treated as rent for the spouses Dijamco's continued
possession and use of the foreclosed property.

At the other end of the jurisprudential spectrum are cases where the Court refused to consider the additional concessions stipulated in agreements as
separate consideration for the option contract.

In Bible Baptist Church v. CA,92 the lessee (Bible Baptist Church) paid in advance P84,000.00 to the lessor in order to free the property from an
encumbrance. The lessee claimed that the advance payment constituted as the separate consideration for its option to buy the property.93 The Court,
however, disagreed noting that the P84,000.00 paid in advance was eventually offset against the rent due for the first year of the lease, "such that for the
entire year from 1985 to 1986 the [Bible Baptist Church] did not pay monthly rent." 94 Hence, the Court refused to recognize the existence of a valid
option contract.95chanrobleslaw

What Teodoro, Dijamco, and Bible Baptist Church show is that the determination of whether the additional concessions in agreements are sufficient to
support an option contract, is fraught with danger; in ascertaining the parties' intent on this matter, a court may read too much or too little from the facts
before it.

For uniformity and consistency in contract interpretation, the better rule to follow is that the consideration for the option contract should be
clearly specified as such in the option contract or clause. Otherwise, the offeree must bear the burden of proving that a separate
consideration for the option contract exists.

Given our finding that the Agreement did not categorically refer to any consideration to support Keppel's option to buy and for Keppel's failure to present
evidence in this regard, we cannot uphold the existence of an option contract in this case.

II. B. An option, though unsupported by a separate consideration, remains an offer that, if duly accepted, generates into a
contract to sell where the parties' respective obligations become reciprocally demandable

The absence of a consideration supporting the option contract, however, does not invalidate an offer to buy (or to sell). An option unsupported by a
separate consideration stands as an unaccepted offer to buy (or to sell) which, when properly accepted, ripens into a contract to
sell. This is the rule established by the Court en banc as early as 1958 in Atkins v. Cua Hian Tek,96 and upheld in 1972 in Sanchez v.
Rigos.97chanrobleslaw

Sanchez v. Rigos reconciled the apparent conflict between Articles 1324 and 1479 of the Civil Code, which are quoted below:ChanRoblesVirtualawlibrary
Article 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

Article 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise
is supported by a consideration distinct from the price, [emphases supplied]
The Court en banc declared that there is no distinction between these two provisions because the scenario contemplated in the second paragraph of

Article 1479 is the same as that in the last clause of Article 1324.98 Instead of finding a conflict, Sanchez v. Rigos harmonised the two provisions,
consistent with the established rules of statutory construction. 99chanrobleslaw

Thus, when an offer is supported by a separate consideration, a valid option contract exists, i.e., there is a contracted offer100 which the offerer cannot
withdraw from without incurring liability in damages.

On the other hand, when the offer is not supported by a separate consideration, the offer stands but, in the absence of a binding contract, the offeror may
withdraw it any time.101 In either case, once the acceptance of the offer is duly communicated before the withdrawal of the offer, a bilateral contract to
buy and sell is generated which, in accordance with the first paragraph of Article 1479 of the Civil Code, becomes reciprocally
demandable.102chanrobleslaw

Sanchez v. Rigos expressly overturned the 1955 case of Southwestern Sugar v. AGPC,103 which declared that
a unilateral promise to buy or to sell, even if accepted, is only binding if supported by a consideration... In other words, an accepted unilateral
promise can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if
accepted, if the same is not supported by any consideration.104 [Emphasis supplied]
The Southwestern Sugar doctrine was based on the reasoning that Article 1479 of the Civil Code is distinct from Article 1324 of the Civil Code and is a
provision that specifically governs options to buy (or to sell).105 As mentioned, Sanchez v. Rigos found no conflict between these two provisions and
accordingly abandoned the Southwestern Sugar doctrine.

Unfortunately, without expressly overturning or abandoning the Sanchez ruling, subsequent cases reverted back to the Southwestern Sugar
doctrine.106 In 2009, Eulogio v Apeles107 referred to Southwestern Sugar v. AGPC as the controlling doctrine108 and, due to the lack of a separate
consideration, refused to recognize the option to buy as an offer that would have resulted in a sale given its timely acceptance by the offeree. In
2010, Tuazon v. Del Rosario-Suarez109 referred to Sanchez v. Rigos but erroneously cited as part of its ratio decidendi that portion of the Southwestern
Sugar doctrine that Sanchez had expressly abandoned.110chanrobleslaw

Given that! the issue raised in the present case involves the application of Article 1324 and 1479 of the Civil Code, it becomes imperative for the Court [en
banc] to clarify and declare here which between Sanchez and Southwestern Sugar is the controlling doctrine.

The Constitution itself declares that "no doctrine or principle of law laid down by the court in a decision rendered en banc or in division may be modified
or reversed except by the court sitting en banc.111Sanchez v. Rigos was an en banc decision which was affirmed in 1994 in Asuncion v. CA,112 also an en
banc decision, while the decisions citing the Southwestern Sugar doctrine are all division cases.113Based on the constitutional rule (as well as the
inherent logic in reconciling Civil Code provisions), there should be no doubt that Sanchez v. Rigos remains as the controlling doctrine.

Accordingly, when an option to buy or to sell is not supported by a consideration separate from the purchase price, the option constitutes as an offer to
buy or to sell, which may be withdrawn by the offeror at any time prior to the communication of the offeree's acceptance. When the offer is duly accepted,
a mutual promise to buy and to sell under the first paragraph of Article 1479 of the Civil Code ensues and the parties' respective obligations become
reciprocally demandable.

Applied to the present case, we find that the offer to buy the land was timely accepted by Keppel.

As early as 1994, Keppel expressed its desire to exercise its option to buy the land. Instead of rejecting outright Keppel's acceptance, PNOC referred the
matter to the Office of the Government Corporate Counsel (OGCC). In its Opinion No. 160, series of 1994, the OGCC opined that Keppel "did not yet have
the right to purchase the Bauan lands."114 On account of the OGCC opinion, the PNOC did not agree with Keppel's attempt to buy the land;115 nonetheless,
the PNOC made no categorical withdrawal of the offer to sell provided under the Agreement.

By 2000, Keppel had met the required Filipino equity proportion and duly communicated its acceptance of the offer to buy to PNOC.116 Keppel met with
the board of directors and officials of PNOC who interposed no objection to the sale. 117 It was only when the amount of purchase price was raised that the
conflict between the parties arose,118 with PNOC backtracking in its position and questioning the validity of the option. 119chanrobleslaw

Thus, when Keppel communicated its acceptance, the offer to purchase the Bauan land stood, not having been withdrawn by PNOC. The offer having
been duly accepted, a contract to sell the land ensued which Keppel can rightfully demand PNOC to comply with.

III. Keppel's constitutional right to acquire full title to the land

Filipinization is the spirit that pervades the constitutional provisions on national patrimony and economy. The Constitution has reserved the ownership
of public and private lands,120 the ownership and operation of public utilities,121 and certain areas of investment122 to Filipino citizens, associations, and
corporations. To qualify, sixty per cent (60%) of the association or corporation's capital must be owned by Filipino citizens. Although the 60% Filipino
equity proportion has been adopted in our Constitution since 1935, it was only in 2011 that the Court interpreted what the term capital constituted.

In Gamboa v. Teves,123 the Court declared that the "legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the
hands of Filipino nationals." 124 Clarifying the ruling, the Court decreed that the 60% Filipino ownership requirement applies separately to each
class of shares, whether with or without voting rights,125 thus:ChanRoblesVirtualawlibrary
Applying uniformly the 60-40 ownership requirement in favour of Filipino citizens to each class of shares, regardless of differences in voting rights,
privileges and restrictions, guarantees effective Filipino control of public utilities, as mandated by the Constitution. 126
Although the ruling was made in the context of ownership and operation of public utilities, the same should be applied to the ownership of public and
private lands, since the same proportion of Filipino ownership is required and the same nationalist policy pervades.

The uncontested fact is that, as of November 2000, Keppel's capital is 60% Filipino-owned.127 However, there is nothing in the records showing the
nature and composition of Keppel's shareholdings, i.e.,whether its shareholdings are divided into different classes, and 60% of each share class is legally
and beneficially owned by Filipinos - understandably because when Keppel exercised its option to buy the land in 2000, the Gamboa ruling had not yet
been promulgated. The Court cannot deny Keppel its option to buy the land by retroactively applying the Gamboa ruling without violating Keppel's
vested right. Thus, Keppel's failure to prove the nature and composition of its shareholdings in 2000 could not prevent it from validly exercising its
option to buy the land.

Nonetheless, the Court cannot completely disregard the effect of the Gamboa ruling; the 60% Filipino equity proportion is a continuing requirement to
hold land in the Philippines. Even in Gamboa, the Court prospectively applied its ruling, thus enabling the public utilities to meet the nationality
requirement before the Securities and Exchange Commission commences administrative investigation and cases, and imposes sanctions for
noncompliance on erring corporations.128 In this case, Keppel must be allowed to prove whether it meets the required Filipino equity ownership and
proportion in accordance with the Gamboa ruling before it can acquire full title to the land.

In view of the foregoing, the Court AFFIRMS the decision dated 19 December 2011 and the resolution dated 14 May 2012 of the CA in CA-G.R. CV No.
86830 insofar as these rulings uphold the respondent Keppel Philippines Holdings, Inc.'s option to buy the land, and REMANDS the case to the
Regional Trial Court of Batangas City, Branch 84, for the determination of whether the respondent Keppel Philippines Holdings, Inc. meets the required
Filipino equity ownership and proportion in accordance with the Court's ruling in Gamboa v. Teves, to allow it to acquire full title to the land.

SO ORDERED.chanRoblesvirtualLawlibrary

G.R. No. 183612 March 15, 2010

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, Petitioner,

vs.
GOLDEN HORIZON REALTY CORPORATION, Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 184260

NATIONAL DEVELOPMENT COMPANY, Petitioner,

vs.
GOLDEN HORIZON REALTY CORPORATION, Respondent.

DECISION

VILLARAMA, JR., J.:

The above-titled consolidated petitions filed under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seek to reverse the Decision1 dated June 25,
2008 and Resolution dated August 22, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 84399 which affirmed the Decision2 dated November 25,
2004 of the Regional Trial Court (RTC) of Makati City, Branch 144 in Civil Case No. 88-2238.

The undisputed facts are as follows:

Petitioner National Development Company (NDC) is a government- owned and controlled corporation, created under Commonwealth Act No. 182, as
amended by Com. Act No. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic University of the Philippines (PUP) is a public, non-
sectarian, non-profit educational institution created in 1978 by virtue of P.D. No. 1341.

In the early sixties, NDC had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known as
the NDC Compound and covered by Transfer Certificate of Title Nos. 92885, 110301 and 145470.

On September 7, 1977, NDC entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation (GHRC) over a portion of the property,
with an area of 2,407 square meters for a period of ten (10) years, renewable for another ten (10) years with mutual consent of the parties.3

On May 4, 1978, a second Contract of Lease (C-12-78) was executed between NDC and GHRC covering 3,222.80 square meters, also renewable upon
mutual consent after the expiration of the ten (10)-year lease period. In addition, GHRC as lessee was granted the "option to purchase the area leased,
the price to be negotiated and determined at the time the option to purchase is exercised."4

Under the lease agreements, GHRC was obliged to construct at its own expense buildings of strong material at no less than the stipulated cost, and other
improvements which shall automatically belong to the NDC as lessor upon the expiration of the lease period. Accordingly, GHRC introduced permanent
improvements and structures as required by the terms of the contract. After the completion of the industrial complex project, for which GHRC spent ₱5
million, it was leased to various manufacturers, industrialists and other businessmen thereby generating hundreds of jobs. 5

On June 13, 1988, before the expiration of the ten (10)-year period under the second lease contract, GHRC wrote a letter to NDC indicating its exercise of
the option to renew the lease for another ten (10) years. As no response was received from NDC, GHRC sent another letter on August 12, 1988,
reiterating its desire to renew the contract and also requesting for priority to negotiate for its purchase should NDC opt to sell the leased premises.6 NDC
still did not reply but continued to accept rental payments from GHRC and allowed the latter to remain in possession of the property.

Sometime after September 1988, GHRC discovered that NDC had decided to secretly dispose the property to a third party. On October 21, 1988, GHRC
filed in the RTC a complaint for specific performance, damages with preliminary injunction and temporary restraining order. 7

In the meantime, then President Corazon C. Aquino issued Memorandum Order No. 214 dated January 6, 1989, ordering the transfer of the whole NDC
Compound to the National Government, which in turn would convey the said property in favor of PUP at acquisition cost. The memorandum order cited
the serious need of PUP, considered the "Poor Man’s University," to expand its campus, which adjoins the NDC Compound, to accommodate its growing
student population, and the willingness of PUP to buy and of NDC to sell its property. The order of conveyance of the 10.31-hectare property would
automatically result in the cancellation of NDC’s total obligation in favor of the National Government in the amount of ₱57,193,201.64.8

On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining NDC and its attorneys, representatives, agents and any other persons
assisting it from proceeding with the sale and disposition of the leased premises.9

On February 23, 1989, PUP filed a motion to intervene as party defendant, claiming that as a purchaser pendente lite of a property subject of litigation it
is entitled to intervene in the proceedings. The RTC granted the said motion and directed PUP to file its Answer-in-Intervention.10

PUP also demanded that GHRC vacate the premises, insisting that the latter’s lease contract had already expired. Its demand letter unheeded by GHRC,
PUP filed an ejectment case (Civil Case No. 134416) before the Metropolitan Trial Court (MeTC) of Manila on January 14, 1991.11

Due to this development, GHRC filed an Amended and/or Supplemental Complaint to include as additional defendants PUP, Honorable Executive
Secretary Oscar Orbos and Judge Ernesto A. Reyes of the Manila MeTC, and to enjoin the afore-mentioned defendants from prosecuting Civil Case No.
134416 for ejectment. A temporary restraining order was subsequently issued by the RTC enjoining PUP from prosecuting and Judge Francisco
Brillantes, Jr. from proceeding with the ejectment case.12

In its Second Amended and/or Supplemental Complaint, GHRC argued that Memorandum Order No. 214 is a nullity, for being violative of the writ of
injunction issued by the trial court, apart from being an infringement of the Constitutional prohibition against impairment of obligation of contracts, an
encroachment on legislative functions and a bill of attainder. In the alternative, should the trial court adjudge the memorandum order as valid, GHRC
contended that its existing right must still be respected by allowing it to purchase the leased premises.13

Pre-trial was set but was suspended upon agreement of the parties to await the final resolution of a similar case involving NDC, PUP and another lessee
of NDC, Firestone Ceramics, Inc. (Firestone), then pending before the RTC of Pasay City.14

On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513 (Polytechnic University of the Philippines v. Court of Appeals) and 143590
(National Development Corporation v. Firestone Ceramics, Inc.),15which declared that the sale to PUP by NDC of the portion leased by Firestone
pursuant to Memorandum Order No. 214 violated the right of first refusal granted to Firestone under its third lease contract with NDC. We thus decreed:

WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590 are DENIED. Inasmuch as the first contract of lease fixed the area of the leased
premises at 2.90118 hectares while the second contract placed it at 2.60 hectares, let a ground survey of the leased premises be immediately conducted
by a duly licensed, registered surveyor at the expense of private respondent FIRESTONE CERAMICS, INC., within two (2) months from the finality of
the judgment in this case. Thereafter, private respondent FIRESTONE CERAMICS, INC., shall have six (6) months from receipt of the approved survey
within which to exercise its right to purchase the leased property at P1,500.00 per square meter, and petitioner Polytechnic University of the Philippines
is ordered to reconvey the property to FIRESTONE CERAMICS, INC., in the exercise of its right of first refusal upon payment of the purchase price
thereof.

SO ORDERED.16

The RTC resumed the proceedings and when mediation and pre-trial failed to settle the case amicably, trial on the merits ensued.17

On November 25, 2004, the RTC rendered its decision upholding the right of first refusal granted to GHRC under its lease contract with NDC and
ordering PUP to reconvey the said portion of the property in favor of GHRC. The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering the plaintiff to cause
immediate ground survey of the premises subject of the leased contract under Lease Contract No. C-33-77 and C-12-78 measuring 2,407 and 3,222.8
square meters respectively, by a duly licensed and registered surveyor at the expense of the plaintiff within two months from receipt of this Decision and
thereafter, the plaintiff shall have six (6) months from receipt of the approved survey within which to exercise its right to purchase the leased property at
P554.74 per square meter. And finally, the defendant PUP, in whose name the property is titled, is hereby ordered to reconvey the aforesaid property to
the plaintiff in the exercise of its right of its option to buy or first refusal upon payment of the purchase price thereof.

The defendant NDC is hereby further ordered to pay the plaintiff attorney’s fees in the amount of P100,000.00.

The case against defendant Executive Secretary is dismissed and this decision shall bind defendant Metropolitan Trial Court, Branch 20 of Manila.
With costs against defendants NDC and PUP.

SO ORDERED.18

NDC and PUP separately appealed the decision to the CA.19 By Decision of June 25, 2008, the CA affirmed in toto the decision of the RTC.20

Both the RTC and the CA applied this Court’s ruling in Polytechnic University of the Philippines v. Court of Appeals (supra), considering that GHRC is
similarly situated as a lessee of NDC whose right of first refusal under the lease contract was violated by the sale of the property to PUP without NDC
having first offered to sell the same to GHRC despite the latter’s request for the renewal of the lease and/or to purchase the leased premises prior to the
expiration of the second lease contract. The CA further agreed with the RTC’s finding that there was an implied renewal of the lease upon the failure of
NDC to act on GHRC’s repeated requests for renewal of the lease contract, both verbal and written, and continuing to accept monthly rental payments
from GHRC which was allowed to continue in possession of the leased premises.

The CA also rejected the argument of NDC and PUP that even assuming that GHRC had the right of first refusal, said right pertained only to the second
lease contract, C-12-78 covering 3,222.80 square meters, and not to the first lease contract, C-33-77 covering 2,407 square meters, which had already
expired. It sustained the RTC’s finding that the two (2) lease contracts were interrelated because each formed part of GHRC’s industrial complex, such
that business operations would be rendered useless and inoperative if the first contract were to be detached from the other, as similarly held in the afore-
mentioned case of Polytechnic University of the Philippines v. Court of Appeals.

Petitioner PUP argues that respondent’s right to exercise the option to purchase had expired with the termination of the original contract of lease and
was not carried over to the subsequent implied new lease between respondent and petitioner NDC. As testified to by their witnesses Leticia Cabantog and
Atty. Rhoel Mabazza, there was no agreement or document to the effect that respondent’s request for extension or renewal of the subject contracts of
lease for another ten (10) years was approved by NDC. Hence, respondent can no longer exercise the option to purchase the leased premises when the
same were conveyed to PUP pursuant to Memorandum Order No. 214 dated January 6, 1989, long after the expiration of C-33-77 and C-12-78 in
September 1988.21

Petitioner PUP further contends that while it is conceded that there was an implied new lease between respondent and petitioner NDC after the
expiration of the lease contracts, the same did not include the right of first refusal originally granted to respondent. The CA should have applied the
ruling in Dizon v. Magsaysay22 that the lessee cannot any more exercise its option to purchase after the lapse of the one (1)-year period of the lease
contract. With the implicit renewal of the lease on a monthly basis, the other terms of the original contract of lease which are revived in the implied new
lease under Article 1670 of the Civil Code are only those terms which are germane to the lessee’s right of continued enjoyment of the property leased. The
provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien
to the possession of the lessee. Consequently, as in this case, respondent’s right of option to purchase the leased premises was not violated despite the
impliedly renewed contract of lease with NDC. Respondent cannot favorably invoke the decision in G.R. Nos. 143513 and 143590 (Polytechnic University
of the Philippines v. Court of Appeals) for the simple reason, among others, that unlike in said cases, the contracts of lease of respondent with NDC were
not mutually extended or renewed for another ten (10) years. Thus, when the leased premises were conveyed to PUP, respondent did not any more have
any right of first refusal, which incidentally appears only in the second lease contract and not in the first lease contract. 23

On its part, petitioner NDC assails the CA in holding that the contracts of lease were impliedly renewed for another ten (10)-year period. The provisions
of C-33-77 and C-12-78 clearly state that the lessee is granted the option "to renew for another ten (10) years with the mutual consent of both parties." As
regards the continued receipt of rentals by NDC and possession by the respondent of the leased premises, the impliedly renewed lease was only month-
to-month and not ten (10) years since the rentals are being paid on a monthly basis, as held in Dizon v. Magsaysay.24

Petitioner NDC further faults the CA in sustaining the RTC’s decision which erroneously granted respondent the option to purchase the leased premises
at the rate of ₱554.74 per square meter, the same rate for which NDC sold the property to petitioner PUP and/or the National Government, which is the
mere acquisition cost thereof. It must be noted that such consideration or rate was imposed by Memorandum Order No. 214 under the premise that it
shall, in effect, be a sale and/or purchase from one (1) government agency to another. It was intended merely as a transfer of one (1) user of the National
Government to another, with the beneficiary, PUP in this case, merely returning to the petitioner/transferor the cost of acquisition thereof, as appearing
on its accounting books. It does not in any way reflect the true and fair market value of the property, nor was it a price a "willing seller" would demand
and accept for parting with his real property. Such benefit, therefore, cannot be extended to respondent as a private entity, as the latter does not share
the same pocket, so to speak, with the National Government.25

The issue to be resolved is whether or not our ruling in Polytechnic University of the Philippines v. Court of Appealsapplies in this case involving another
lessee of NDC who claimed that the option to purchase the portion leased to it was similarly violated by the sale of the NDC Compound in favor of PUP
pursuant to Memorandum Order No. 214.

We rule in the affirmative.

The second lease contract contained the following provision:

III. It is mutually agreed by the parties that this Contract of Lease shall be in full force and effect for a period of ten (10) years counted from the effectivity
of the payment of rental as provided under sub-paragraph (b) of Article I, with option to renew for another ten (10) years with the mutual consent of both
parties. In no case should the rentals be increased by more than 100% of the original amount fixed.

Lessee shall also have the option to purchase the area leased, the price to be negotiated and determined at the time the option to
purchase is exercised. [emphasis supplied]

An option is a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the former’s property at a
fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy
the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the owner of the
property the right to sell or demand a sale.26 It binds the party, who has given the option, not to enter into the principal contract with any other person
during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide
to use the option.271avvphi1

Upon the other hand, a right of first refusal is a contractual grant, not of the sale of a property, but of the first priority to buy the property in the event the
owner sells the same.28 As distinguished from an option contract, in a right of first refusal, while the object might be made determinate, the exercise of
the right of first refusal would be dependent not only on the owner’s eventual intention to enter into a binding juridical relation with another but also on
terms, including the price, that are yet to be firmed up.29

As the option to purchase clause in the second lease contract has no definite period within which the leased premises will be offered for sale to
respondent lessee and the price is made subject to negotiation and determined only at the time the option to buy is exercised, it is obviously a mere right
of refusal, usually inserted in lease contracts to give the lessee the first crack to buy the property in case the lessor decides to sell the same. That
respondent was granted a right of first refusal under the second lease contract appears not to have been disputed by petitioners. What petitioners assail
is the CA’s erroneous conclusion that such right of refusal subsisted even after the expiration of the original lease period, when respondent was allowed
to continue staying in the leased premises under an implied renewal of the lease and without the right of refusal carried over to such month-to-month
lease. Petitioners thus maintain that no right of refusal was violated by the sale of the property in favor of PUP pursuant to Memorandum Order No. 214.

Petitioners’ position is untenable.

When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until
after the lessor has made an offer to sell the property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to exercise his right
of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee, or under terms and
conditions more favorable to the lessor.30

Records showed that during the hearing on the application for a writ of preliminary injunction, respondent adduced in evidence a letter of Antonio A.
Henson dated 15 July 1988 addressed to Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary Catalino Macaraeg, reviewing a
proposed memorandum order submitted to President Corazon C. Aquino transferring the whole NDC Compound, including the premises leased by
respondent, in favor of petitioner PUP. This letter was offered in evidence by respondent to prove the existence of documents as of that date and even
prior to the expiration of the second lease contract or the lapse of the ten (10)-year period counted from the effectivity of the rental payment -- that is,
one hundred and fifty (150) days from the signing of the contract (May 4, 1978), as provided in Art. I, paragraph (b) of C-12-78, or on October 1, 1988.

Respondent thus timely exercised its option to purchase on August 12, 1988. However, considering that NDC had been negotiating through the National
Government for the sale of the property in favor of PUP as early as July 15, 1988 without first offering to sell it to respondent and even when respondent
communicated its desire to exercise the option to purchase granted to it under the lease contract, it is clear that NDC violated respondent’s right of first
refusal. Under the premises, the matter of the right of refusal not having been carried over to the impliedly renewed month-to-month lease after the
expiration of the second lease contract on October 21, 1988 becomes irrelevant since at the time of the negotiations of the sale to a third party, petitioner
PUP, respondent’s right of first refusal was still subsisting.

Petitioner NDC in its memorandum contended that the CA erred in applying the ruling in Polytechnic University of the Philippines v. Court of
Appeals pointing out that the case of lessee Firestone Ceramics, Inc. is different because the lease contract therein had not yet expired while in this case
respondent’s lease contracts have already expired and never renewed. The date of the expiration of the lease contract in said case is December 31, 1989
which is prior to the issuance of Memorandum Order No. 214 on January 6, 1989. In contrast, respondent’s lease contracts had already expired
(September 1988) at the time said memorandum order was issued.31

Such contention does not hold water. As already mentioned, the reckoning point of the offer of sale to a third party was not the issuance of Memorandum
Order No. 214 on January 6, 1989 but the commencement of such negotiations as early as July 1988 when respondent’s right of first refusal was still
subsisting and the lease contracts still in force. Petitioner NDC did not bother to respond to respondent’s letter of June 13, 1988 informing it of
respondent’s exercise of the option to renew and requesting to discuss further the matter with NDC, nor to the subsequent letter of August 12, 1988
reiterating the request for renewing the lease for another ten (10) years and also the exercise of the option to purchase under the lease contract.
Petitioner NDC had dismissed these letters as "mere informative in nature, and a request at its best." 32

Perusal of the letter dated August 12, 1988, however, belies such claim of petitioner NDC that it was merely informative, thus:

August 12, 1988

HON. ANTONIO HENSON

General Manager

NATIONAL DEVELOPMENT COMPANY

377 Se(n). Gil J. Puyat Avenue
Makati, Metro Manila

REF: Contract of Lease

Nos. C-33-77 & C-12-78

Dear Sir:

This is further to our earlier letter dated June 13, 1988 formally advising your goodselves of our intention to exercise our option for
another ten (10) years. Should the National Development Company opt to sell the property covered by said leases, we also request
for priority to negotiate for its purchase at terms and/or conditions mutually acceptable.
As a backgrounder, we wish to inform you that since the start of our lease, we have improved on the property by constructing bodega-type buildings
which presently house all legitimate trading and manufacturing concerns. These business are substantial taxpayers, employ not less than 300 employees
and contribute even foreign earnings.

It is in this context that we are requesting for the extension of the lease contract to prevent serious economic disruption and
dislocation of the business concerns, as well as provide ourselves, the lessee, an opportunity to recoup our investments and obtain
a fair return thereof.

Your favorable consideration on our request will be very much appreciated.

very truly yours,

TIU HAN TENG

President33

As to petitioners’ argument that respondent’s right of first refusal can be invoked only with respect to the second lease contract which expressly provided
for the option to purchase by the lessee, and not in the first lease contract which contained no such clause, we sustain the RTC and CA in finding that the
second contract, covering an area of 3,222.80 square meters, is interrelated to and inseparable from the first contract over 2,407 square meters. The
structures built on the leased premises, which are adjacent to each other, form part of an integrated system of a commercial complex leased out to
manufacturers, fabricators and other businesses. Petitioners submitted a sketch plan and pictures taken of the driveways, in an effort to show that the
leased premises can be used separately by respondent, and that the two (2) lease contracts are distinct from each other. 34 Such was a desperate attempt
to downplay the commercial purpose of respondent’s substantial improvements which greatly contributed to the increased value of the leased premises.
To prove that petitioner NDC had considered the leased premises as a single unit, respondent submitted evidence showing that NDC issued only one (1)
receipt for the rental payments for the two portions.35 Respondent further presented the blueprint plan prepared by its witness, Engr. Alejandro E. Tinio,
who supervised the construction of the structures on the leased premises, to show the building concept as a one-stop industrial site and integrated
commercial complex.36

In fine, the CA was correct in declaring that there exists no justifiable reason not to apply the same rationale in Polytechnic University of the Philippines
v. Court of Appeals in the case of respondent who was similarly prejudiced by petitioner NDC’s sale of the property to PUP, as to entitle the respondent
to exercise its option to purchase until October 1988 inasmuch as the May 4, 1978 contract embodied the option to renew the lease for another ten (10)
years upon mutual consent and giving respondent the option to purchase the leased premises for a price to be negotiated and determined at the time
such option was exercised by respondent. It is to be noted that Memorandum Order No. 214 itself declared that the transfer is "subject to such
liens/leases existing [on the subject property]." Thus:

...we now proceed to determine whether FIRESTONE should be allowed to exercise its right of first refusal over the property. Such right
was expressly stated by NDC and FIRESTONE in par. XV of their third contract denominated as A-10-78 executed on 22 December
1978 which, as found by the courts a quo, was interrelated to and inseparable from their first contract denominated as C-30-65 executed
on 24 August 1965 and their second contract denominated as C-26-68 executed on 8 January 1969. Thus -

Should the LESSOR desire to sell the leased premises during the term of this Agreement, or any extension thereof, the LESSOR shall first give to the
LESSEE, which shall have the right of first option to purchase the leased premises subject to mutual agreement of both parties.

In the instant case, the right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The
consideration for the right is built into the reciprocal obligations of the parties. Thus, it is not correct for petitioners to insist that there was no
consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the stipulation is part and parcel of the contract of lease making
the consideration for the lease the same as that for the option.

It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to
anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that
the lessor’s first offer shall be in his favor.

The option in this case was incorporated in the contracts of lease by NDC for the benefit of FIRESTONE which, in view of the total
amount of its investments in the property, wanted to be assured that it would be given the first opportunity to buy the property at a
price for which it would be offered. Consistent with their agreement, it was then implicit for NDC to have first offered the leased
premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its right of first
priority could NDC lawfully sell the property to petitioner PUP.37 [emphasis supplied]

As we further ruled in the afore-cited case, the contractual grant of a right of first refusal is enforceable, and following an earlier ruling in Equatorial
Realty Development, Inc. v. Mayfair Theater, Inc.,38 the execution of such right consists in directing the grantor to comply with his obligation according
to the terms at which he should have offered the property in favor of the grantee and at that price when the offer should have been made. We then
determined the proper rate at which the leased portion should be reconveyed to respondent by PUP, to whom the lessor NDC sold it in violation of
respondent lessee’s right of first refusal, as follows:

It now becomes apropos to ask whether the courts a quo were correct in fixing the proper consideration of the sale at ₱1,500.00 per square meter. In
contracts of sale, the basis of the right of first refusal must be the current offer of the seller to sell or the offer to purchase of the prospective buyer. Only
after the lessee-grantee fails to exercise its right under the same terms and within the period contemplated can the owner validly offer to sell the property
to a third person, again, under the same terms as offered to the grantee. It appearing that the whole NDC compound was sold to PUP for ₱554.74 per
square meter, it would have been more proper for the courts below to have ordered the sale of the property also at the same price. However, since
FIRESTONE never raised this as an issue, while on the other hand it admitted that the value of the property stood at ₱1,500.00 per
square meter, then we see no compelling reason to modify the holdings of the courts a quo that the leased premises be sold at that
price.39 [emphasis supplied]
In the light of the foregoing, we hold that respondent, which did not offer any amount to petitioner NDC, and neither disputed the ₱1,500.00 per square
meter actual value of NDC’s property at that time it was sold to PUP at ₱554.74 per square meter, as duly considered by this Court in the Firestone case,
should be bound by such determination. Accordingly, the price at which the leased premises should be sold to respondent in the exercise of its right of
first refusal under the lease contract with petitioner NDC, which was pegged by the RTC at ₱554.74 per square meter, should be adjusted to ₱1,500.00
per square meter, which more accurately reflects its true value at that time of the sale in favor of petitioner PUP.

Indeed, basic is the rule that a party to a contract cannot unilaterally withdraw a right of first refusal that stands upon valuable consideration.40 We have
categorically ruled that it is not correct to say that there is no consideration for the grant of the right of first refusal if such grant is embodied in the same
contract of lease. Since the stipulation forms part of the entire lease contract, the consideration for the lease includes the consideration for the grant of
the right of first refusal. In entering into the contract, the lessee is in effect stating that it consents to lease the premises and to pay the price agreed upon
provided the lessor also consents that, should it sell the leased property, then, the lessee shall be given the right to match the offered purchase price and
to buy the property at that price.41

We have further stressed that not even the avowed public welfare or the constitutional priority accorded to education, invoked by petitioner PUP in
the Firestone case, would serve as license for us, and any party for that matter, to destroy the sanctity of binding obligations. While education may be
prioritized for legislative and budgetary purposes, it is doubtful if such importance can be used to confiscate private property such as the right of first
refusal granted to a lessee of petitioner NDC.42 Clearly, no reversible error was committed by the CA in sustaining respondent’s contractual right of first
refusal and ordering the reconveyance of the leased portion of petitioner NDC’s property in its favor.

WHEREFORE, the petitions are DENIED. The Decision dated November 25, 2004 of the Regional Trial Court of Makati City, Branch 144 in Civil Case
No. 88-2238, as affirmed by the Court of Appeals in its Decision dated June 25, 2008 in CA-G.R. CV No. 84399, is
hereby AFFIRMED with MODIFICATION in that the price to be paid by respondent Golden Horizon Realty Corporation for the leased portion of the
NDC Compound under Lease Contract Nos. C-33-77 and C-12-78 is hereby increased to ₱1,500.00 per square meter.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,

vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.

Antonio M. Albano for petitioners.

Umali, Soriano & Associates for private respondent.

VITUG, J.:

Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting aside and declaring
without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058.

The antecedents are recited in good detail by the appellate court thusly:

On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against
Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058,
alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as
Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying the
rental and complying with all the conditions of the lease contract; that on several occasions before October 9, 1986, defendants
informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same; that during the
negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter,
plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs
did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since defendants failed to
specify the terms and conditions of the offer to sell and because of information received that defendants were about to sell the
property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them.

Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of
action.

After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court. The trial court
found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms
and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that should the
defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal.
Thus the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily
dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to
offer their property for sale for a purchase price of Eleven Million Pesos or lower, then the plaintiffs has the
option to purchase the property or of first refusal, otherwise, defendants need not offer the property to the
plaintiffs if the purchase price is higher than Eleven Million Pesos.

SO ORDERED.

Aggrieved by the decision, plaintiffs appealed to this Court in

CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and concurred in by
Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower court's judgment, holding:

In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent
such requirement, the claim for specific performance will not lie. Appellants' demand for actual, moral and
exemplary damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for
defendants was properly granted. Courts may render summary judgment when there is no genuine issue as to
any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals,
176 SCRA 815). All requisites obtaining, the decision of the court a quo is legally justifiable.
 WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but
subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants
the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower;
however, considering the mercurial and uncertain forces in our market economy today. We find no reason not to
grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price
in excess of Eleven Million pesos. No pronouncement as to costs.

SO ORDERED.

The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court denied the
appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition).

On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses executed a
Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen Realty and Development
Corporation, subject to the following terms and conditions:

1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of which in
full is hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE,
his heirs, executors, administrators or assigns, the above-described property with all the improvements found
therein including all the rights and interest in the said property free from all liens and encumbrances of
whatever nature, except the pending ejectment proceeding;

2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his favor
and other expenses incidental to the sale of above-described property including capital gains tax and accrued
real estate taxes.

As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT
No. 195816 was issued in the name of petitioner on December 3, 1990.

On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the
premises.

On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis
pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.

The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the Court of
Appeals in CA-G.R. CV No. 21123.

On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:

Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano.
Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty. Anacleto
Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp
and signatures upon the copy of the Motion for Execution.

The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the Court of
Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the petition for review and
that the same was denied by the highest tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by the
Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already become final and
executory.

It is the observation of the Court that this property in dispute was the subject of the Notice of Lis Pendens and
that the modified decision of this Court promulgated by the Court of Appeals which had become final to the
effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower, and
considering the mercurial and uncertain forces in our market economy today, the same right of first refusal to
herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million
pesos or more.

WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation
in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in
recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the
buyer.

All previous transactions involving the same property notwithstanding the issuance of another title to Buen
Realty Corporation, is hereby set aside as having been executed in bad faith.

SO ORDERED.

On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:
 WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff
Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others to
comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order and for
defendants to execute the necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu
Asuncion, Keh Tiong and Arthur Go for the consideration of P15,000,000.00 and ordering the Register of
Deeds of the City of Manila, to cancel and set aside the title already issued in favor of Buen Realty Corporation
which was previously executed between the latter and defendants and to register the new title in favor of the
aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.

SO ORDERED.

On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued.1

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the above questioned
orders of the court a quo.

In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis
pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991
from the Cu Unjiengs.

We affirm the decision of the appellate court.

A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a purchase option and a
contract to sell. For ready reference, we might point out some fundamental precepts that may find some relevance to this discussion.

An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential
elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law, contracts,
quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to be observed (to give, to do or not to do); and (c)
the subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.

Among the sources of an obligation is a contract (Art. 1157, Civil Code), which 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 (Art. 1305, Civil Code). A contract undergoes various stages that include its
negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence of the
essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer
and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as
in a pledge or commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law,
such as in a donation of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof. The
stage of consummation begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the
topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to
deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. 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, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the
fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to
convey title from acquiring an obligatory force.2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of
Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated,
e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a
public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would
prevent such perfection.3 If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or
refuse to proceed with the sale (Art. 1545, Civil Code).4

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and
compliance therewith may accordingly be exacted.5

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration
distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it
conforms with the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . .

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. (1451a)6
Observe, however, that the option is not the contract of sale itself.7 The optionee has the right, but not the obligation, to buy. Once the option is exercised
timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound
to comply with their respective undertakings.8

Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or
solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected,
are not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The
offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the
offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following
rules generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its
acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree
(see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art.
1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Parañaque,
Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily;
otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and
in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."

(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer
during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement
(subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise
of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed
to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care
should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with
a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a
contract of sale that can evidence its perfection (Art. 1482, Civil Code).

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract
of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview
of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or an offer
would require, among other things,10 a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first
refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention
to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it
can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to
establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions
of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an
issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right of first refusal would
be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article
1912 of the Civil Code, can warrant a recovery for damages.

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners. The consequence
of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure
of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an
action for damages in a proper forum for the purpose.

Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad
faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters
that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held
subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly
afforded its day in court.

We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in
Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:

Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As already
stated, there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and respondent
lessees, or the fixing of the price of the sale, or the cancellation of title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516;
Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of any deed of sale between
the Cu Unjiengs and petitioners.

WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and 27 September 1991, of the
court a quo. Costs against petitioners.

SO ORDERED.
G.R. No. 111538 February 26, 1997

PARAÑAQUE KINGS ENTERPRISES, INCORPORATED, petitioner,

vs.
COURT OF APPEALS, CATALINA L. SANTOS, represented by her attorney-in-fact, LUZ B. PROTACIO, and DAVID A.
RAYMUNDO, respondents.

PANGANIBAN, J.:

Do allegations in a complaint showing violation of a contractual right of "first option or priority to buy the properties subject of the lease" constitute a
valid cause of action? Is the grantee of such right entitled to be offered the same terms and conditions as those given to a third party who eventually
bought such properties? In short, is such right of first refusal enforceable by an action for specific performance?

These questions are answered in the affirmative by this Court in resolving this petition for review under Rule 45 of the Rules of Court challenging the
Decision 1 of the Court of Appeals 2 promulgated on March 29, 1993, in CA-G.R. CV No. 34987 entitled "Parañaque Kings Enterprises, Inc. vs. Catalina L.
Santos, et al.," which affirmed the order 3of September 2, 1991, of the Regional Trial Court of Makati, Branch 57, 4 dismissing Civil Case No. 91-786 for
lack of a valid cause of action.

Facts of the Case

On March 19, 1991, herein petitioner filed before the Regional Trial Court of Makati a complaint, 5 which is reproduced in full below:

Plaintiff, by counsel, respectfully states that:

1. Plaintiff is a private corporation organized and existing under and by virtue of the laws of the Philippines, with principal place of
business of (sic) Dr. A. Santos Avenue, Parañaque, Metro Manila, while defendant Catalina L. Santos, is of legal age, widow, with
residence and postal address at 444 Plato Street, Ct., Stockton, California, USA, represented in this action by her attorney-in-fact,
Luz B. Protacio, with residence and postal address at No, 12, San Antonio Street, Magallanes Village, Makati, Metro Manila, by virtue
of a general power of attorney. Defendant David A. Raymundo, is of legal age, single, with residence and postal address at 1918
Kamias Street, Damariñas Village, Makati, Metro Manila, where they (sic) may be served with summons and other court processes.
Xerox copy of the general power of attorney is hereto attached as Annex "A".

2. Defendant Catalina L. Santos is the owner of eight (8) parcels of land located at (sic) Parañaque, Metro Manila with transfer
certificate of title nos. S-19637, S-19638 and S-19643 to S-19648. Xerox copies of the said title (sic) are hereto attached as Annexes
"B" to "I", respectively.

3. On November 28, 1977, a certain Frederick Chua leased the above-described property from defendant Catalina L. Santos, the said
lease was registered in the Register of Deeds. Xerox copy of the lease is hereto attached as Annex "J".

4. On February 12, 1979, Frederick Chua assigned all his rights and interest and participation in the leased property to Lee Ching
Bing, by virtue of a deed of assignment and with the conformity of defendant Santos, the said assignment was also registered. Xerox
copy of the deed of assignment is hereto attached as Annex "K".

5. On August 6, 1979, Lee Ching Bing also assigned all his rights and interest in the leased property to Parañaque Kings Enterprises,
Incorporated by virtue of a deed of assignment and with the conformity of defendant Santos, the same was duly registered, Xerox
copy of the deed of assignment is hereto attached as Annex "L".

6. Paragraph 9 of the assigned leased (sic) contract provides among others that:
 "9. That in case the properties subject of the lease agreement are sold or encumbered, Lessors shall impose as a
condition that the buyer or mortgagee thereof shall recognize and be bound by all the terms and conditions of
this lease agreement and shall respect this Contract of Lease as if they are the LESSORS thereof and in case of
sale, LESSEE shall have the first option or priority to buy the properties subject of the lease;"

7. On September 21, 1988, defendant Santos sold the eight parcels of land subject of the lease to defendant David Raymundo for a
consideration of FIVE MILLION (P5,000,000.00) PESOS. The said sale was in contravention of the contract of lease, for the first
option or priority to buy was not offered by defendant Santos to the plaintiff. Xerox copy of the deed of sale is hereto attached as
Annex "M".

8. On March 5, 1989, defendant Santos wrote a letter to the plaintiff informing the same of the sale of the properties to defendant
Raymundo, the said letter was personally handed by the attorney-in-fact of defendant Santos, Xerox copy of the letter is hereto
attached as Annex "N".

9. Upon learning of this fact plaintiff's representative wrote a letter to defendant Santos, requesting her to rectify the error and
consequently realizing the error, she had it reconveyed to her for the same consideration of FIVE MILLION (P5,000,000.00)
PESOS. Xerox copies of the letter and the deed of reconveyance are hereto attached as Annexes "O" and "P".

10. Subsequently the property was offered for sale to plaintiff by the defendant for the sum of FIFTEEN MILLION (P15,000,000.00)
PESOS. Plaintiff was given ten (10) days to make good of the offer, but therefore (sic) the said period expired another letter came
from the counsel of defendant Santos, containing the same tenor of (sic) the former letter. Xerox copies of the letters are hereto
attached as Annexes "Q" and "R".

11. On May 8, 1989, before the period given in the letter offering the properties for sale expired, plaintiff's counsel wrote counsel of
defendant Santos offering to buy the properties for FIVE MILLION (P5,000,000.00) PESOS. Xerox copy of the letter is hereto
attached as Annex "S".

12. On May 15, 1989, before they replied to the offer to purchase, another deed of sale was executed by defendant Santos (in favor of)
defendant Raymundo for a consideration of NINE MILLION (P9,000,000.00) PESOS. Xerox copy of the second deed of sale is
hereto attached as Annex "T".

13. Defendant Santos violated again paragraph 9 of the contract of lease by executing a second deed of sale to defendant Raymundo.

14. It was only on May 17, 1989, that defendant Santos replied to the letter of the plaintiff's offer to buy or two days after she sold her
properties. In her reply she stated among others that the period has lapsed and the plaintiff is not a privy (sic) to the contract. Xerox
copy of the letter is hereto attached as Annex "U".

15. On June 28, 1989, counsel for plaintiff informed counsel of defendant Santos of the fact that plaintiff is the assignee of all rights
and interest of the former lessor. Xerox copy of the letter is hereto attached as Annex "V".

16. On July 6, 1989, counsel for defendant Santos informed the plaintiff that the new owner is defendant Raymundo. Xerox copy of
the letter is hereto attached as Annex "W".

17. From the preceding facts it is clear that the sale was simulated and that there was a collusion between the defendants in the sales
of the leased properties, on the ground that when plaintiff wrote a letter to defendant Santos to rectify the error, she immediately
have (sic) the property reconveyed it (sic) to her in a matter of twelve (12) days.

18. Defendants have the same counsel who represented both of them in their exchange of communication with plaintiff's counsel, a
fact that led to the conclusion that a collusion exist (sic) between the defendants.

19. When the property was still registered in the name of defendant Santos, her collector of the rental of the leased properties was
her brother-in-law David Santos and when it was transferred to defendant Raymundo the collector was still David Santos up to the
month of June, 1990. Xerox copies of cash vouchers are hereto attached as Annexes "X" to "HH", respectively.

20. The purpose of this unholy alliance between defendants Santos and Raymundo is to mislead the plaintiff and make it appear that
the price of the leased property is much higher than its actual value of FIVE MILLION (P5,000,000.00) PESOS, so that plaintiff
would purchase the properties at a higher price.

21. Plaintiff has made considerable investments in the said leased property by erecting a two (2) storey, six (6) doors commercial
building amounting to THREE MILLION (P3,000,000.00) PESOS. This considerable improvement was made on the belief that
eventually the said premises shall be sold to the plaintiff.

22. As a consequence of this unlawful act of the defendants, plaintiff will incurr (sic) total loss of THREE MILLION (P3,000,000.00)
PESOS as the actual cost of the building and as such defendants should be charged of the same amount for actual damages.

23. As a consequence of the collusion, evil design and illegal acts of the defendants, plaintiff in the process suffered mental anguish,
sleepless nights, bismirched (sic) reputation which entitles plaintiff to moral damages in the amount of FIVE MILLION
(P5,000,000.00) PESOS.
 24. The defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent manner and as a deterrent to the commission
of similar acts, they should be made to answer for exemplary damages, the amount left to the discretion of the Court.

25. Plaintiff demanded from the defendants to rectify their unlawful acts that they committed, but defendants refused and failed to
comply with plaintiffs just and valid and (sic) demands. Xerox copies of the demand letters are hereto attached as Annexes "KK" to
"LL", respectively.

26. Despite repeated demands, defendants failed and refused without justifiable cause to satisfy plaintiff's claim, and was
constrained to engaged (sic) the services of undersigned counsel to institute this action at a contract fee of P200,000.00, as and for
attorney's fees, exclusive of cost and expenses of litigation.

PRAYER

WHEREFORE, it is respectfully prayed, that judgment be rendered in favor of the plaintiff and against defendants and ordering
that:

a. The Deed of Sale between defendants dated May 15, 1989, be annulled and the leased properties be sold to the plaintiff in the
amount of P5,000,000.00;

b. Dependants (sic) pay plaintiff the sum of P3,000,000.00 as actual damages;

c. Defendants pay the sum of P5,000,000.00 as moral damages;

d. Defendants pay exemplary damages left to the discretion of the Court;

e. Defendants pay the sum of not less than P200,000.00 as attorney's fees.

Plaintiff further prays for other just and equitable reliefs plus cost of suit.

Instead of filing their respective answers, respondents filed motions to dismiss anchored on the grounds of lack of cause of action, estoppel and laches.

On September 2, 1991, the trial court issued the order dismissing the complaint for lack of a valid cause of action. It ratiocinated thus:

Upon the very face of the plaintiff's Complaint itself, it therefore indubitably appears that the defendant Santos had verily complied
with paragraph 9 of the Lease Agreement by twice offering the properties for sale to the plaintiff for ~1 5 M. The said offers, however,
were plainly rejected by the plaintiff which scorned the said offer as "RIDICULOUS". There was therefore a definite refusal on the
part of the plaintiff to accept the offer of defendant Santos. For in acquiring the said properties back to her name, and in so making
the offers to sell both by herself (attorney-in-fact) and through her counsel, defendant Santos was indeed conscientiously complying
with her obligation under paragraph 9 of the Lease Agreement. . . . .

xxx xxx xxx

This is indeed one instance where a Complaint, after barely commencing to create a cause of action, neutralized itself by its
subsequent averments which erased or extinguished its earlier allegations of an impending wrong. Consequently, absent any
actionable wrong in the very face of the Complaint itself, the plaintiffs subsequent protestations of collusion is bereft or devoid of
any meaning or purpose. . . . .

The inescapable result of the foregoing considerations point to no other conclusion than that the Complaint actually does not
contain any valid cause of action and should therefore be as it is hereby ordered DISMISSED. The Court finds no further need to
consider the other grounds of estoppel and laches inasmuch as this resolution is sufficient to dispose the matter. 6

Petitioners appealed to the Court of Appeals which affirmed in toto the ruling of the trial court, and further reasoned that:

. . . . Appellant's protestations that the P15 million price quoted by appellee Santos was reduced to P9 million when she later resold
the leased properties to Raymundo has no valid legal moorings because appellant, as a prospective buyer, cannot dictate its own
price and forcibly ram it against appellee Santos, as owner, to buy off her leased properties considering the total absence of any
stipulation or agreement as to the price or as to how the price should be computed under paragraph 9 of the lease contract, . . . . 7

Petitioner moved for reconsideration but was denied in an order dated August 20, 1993. 8

Hence this petition. Subsequently, petitioner filed an "Urgent Motion for the Issuance of Restraining Order and/or Writ of Preliminary Injunction and to
Hold Respondent David A. Raymundo in Contempt of Court." 9 The motion sought to enjoin respondent Raymundo and his counsel from pursuing the
ejectment complaint filed before the barangay captain of San Isidro, Parañaque, Metro Manila; to direct the dismissal of said ejectment complaint or of
any similar action that may have been filed; and to require respondent Raymundo to explain why he should not be held in contempt of court for forum-
shopping. The ejectment suit initiated by respondent Raymundo against petitioner arose from the expiration of the lease contract covering the property
subject of this case. The ejectment suit was decided in favor of Raymundo, and the entry of final judgment in respect thereof renders the said motion
moot and academic.
 Issue

The principal legal issue presented before us for resolution is whether the aforequoted complaint alleging breach of the contractual right of "first option
or priority to buy" states a valid cause of action.

Petitioner contends that the trial court as well as the appellate tribunal erred in dismissing the complaint because it in fact had not just one but at least
three (3) valid causes of action, to wit: (1) breach of contract, (2) its right of first refusal founded in law, and (3) damages.

Respondents Santos and Raymundo, in their separate comments, aver that the petition should be denied for not raising a question of law as the issue
involved is purely factual — whether respondent Santos complied with paragraph 9 of the lease agreement — and for not having complied with Section 2,
Rule 45 of the Rules of Court, requiring the filing of twelve (12) copies of the petitioner's brief. Both maintain that the complaint filed by petitioner before
the Regional Trial Court of Makati stated no valid cause of action and that petitioner failed to substantiate its claim that the lower courts decided the
same "in a way not in accord with law and applicable decisions of the Supreme Court"; or that the Court of Appeals has "sanctioned departure by a trial
court from the accepted and usual course of judicial proceedings" so as to merit the exercise by this Court of the power of review under Rule 45 of the
Rules of Court. Furthermore, they reiterate estoppel and laches as grounds for dismissal, claiming that petitioner's payment of rentals of the leased
property to respondent Raymundo from June 15, 1989, to June 30, 1990, was an acknowledgment of the latter's status as new owner-lessor of said
property, by virtue of which petitioner is deemed to have waived or abandoned its first option to purchase.

Private respondents likewise contend that the deed of assignment of the lease agreement did not include the assignment of the option to purchase.
Respondent Raymundo further avers that he was not privy to the contract of lease, being neither the lessor nor lessee adverted to therein, hence he could
not be held liable for violation thereof.

The Court's Ruling

Preliminary Issue: Failure to File

Sufficient Copies of Brief

We first dispose of the procedural issue raised by respondents, particularly petitioner's failure to file twelve (12) copies of its brief. We have ruled that
when non-compliance with the Rules was not intended for delay or did not result in prejudice to the adverse party, dismissal of appeal on mere
technicalities — in cases where appeal is a matter of right — may be stayed, in the exercise of the court's equity jurisdiction. 10 It does not appear that
respondents were unduly prejudiced by petitioner's nonfeasance. Neither has it been shown that such failure was intentional.

Main Issue: Validity of Cause of Action

We do not agree with respondents' contention that the issue involved is purely factual. The principal legal question, as stated earlier, is whether the
complaint filed by herein petitioner in the lower court states a valid cause of action. Since such question assumes the facts alleged in the complaint as
true, it follows that the determination thereof is one of law, and not of facts. There is a question of law in a given case when the doubt or difference arises
as to what the law is on a certain state of facts, and there is a question of fact when the doubt or difference arises as to the truth or the falsehood of
alleged facts. 11

At the outset, petitioner concedes that when the ground for a motion to dismiss is lack of cause of action, such ground must appear on the face of the
complaint; that to determine the sufficiency of a cause of action, only the facts alleged in the complaint and no others should be considered; and that the
test of sufficiency of the facts alleged in a petition or complaint to constitute a cause of action is whether, admitting the facts alleged, the court could
render a valid judgment upon the same in accordance with the prayer of the petition or complaint.

A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to respect or not to violate such right, and (3) an act or omission on the part of such
defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an
action for recovery of damages. 12

In determining whether allegations of a complaint are sufficient to support a cause of action, it must be borne in mind that the complaint does not have
to establish or allege facts proving the existence of a cause of action at the outset; this will have to be done at the trial on the merits of the case. To sustain
a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist, rather than that a claim has been
defectively stated, or is ambiguous, indefinite or uncertain. 13

Equally important, a defendant moving to dismiss a complaint on the ground of lack of cause of action is regarded as having hypothetically admitted all
the averments thereof. 14

A careful examination of the complaint reveals that it sufficiently alleges an actionable contractual breach on the part of private respondents. Under
paragraph 9 of the contract of lease between respondent Santos and petitioner, the latter was granted the "first option or priority" to purchase the leased
properties in case Santos decided to sell. If Santos never decided to sell at all, there can never be a breach, much less an enforcement of such "right." But
on September 21, 1988, Santos sold said properties to Respondent Raymundo without first offering these to petitioner. Santos indeed realized her error,
since she repurchased the properties after petitioner complained. Thereafter, she offered to sell the properties to petitioner for P15 million, which
petitioner, however, rejected because of the "ridiculous" price. But Santos again appeared to have violated the same provision of the lease contract when
she finally resold the properties to respondent Raymundo for only P9 million without first offering them to petitioner at such price. Whether there was
actual breach which entitled petitioner to damages and/or other just or equitable relief, is a question which can better be resolved after trial on the merits
where each party can present evidence to prove their respective allegations and defenses. 15

The trial and appellate courts based their decision to sustain respondents' motion to dismiss on the allegations of Parañaque Kings Enterprises that
Santos had actually offered the subject properties for sale to it prior to the final sale in favor of Raymundo, but that the offer was rejected. According to
said courts, with such offer, Santos had verily complied with her obligation to grant the right of first refusal to petitioner.
We hold, however, that in order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of the
properties for the amount of P9 million, the price for which they were finally sold to respondent Raymundo, should have likewise been first offered to
petitioner.

The Court has made an extensive and lengthy discourse on the concept of, and obligations under, a right of first refusal in the case of Guzman, Bocaling
& Co. vs. Bonnevie. 16 In that case, under a contract of lease, the lessees (Raul and Christopher Bonnevie) were given a "right of first priority" to purchase
the leased property in case the lessor (Reynoso) decided to sell. The selling price quoted to the Bonnevies was 600,000.00 to be fully paid in cash, less a
mortgage lien of P100,000.00. On the other hand, the selling price offered by Reynoso to and accepted by Guzman was only P400,000.00 of which
P137,500.00 was to be paid in cash while the balance was to be paid only when the property was cleared of occupants. We held that even if the Bonnevies
could not buy it at the price quoted (P600,000.00), nonetheless, Reynoso could not sell it to another for a lower price and under more favorable terms
and conditions without first offering said favorable terms and price to the Bonnevies as well. Only if the Bonnevies failed to exercise their right of first
priority could Reynoso thereafter lawfully sell the subject property to others, and only under the same terms and conditions previously offered to the
Bonnevies.

Of course, under their contract, they specifically stipulated that the Bonnevies could exercise the right of first priority, "all things and conditions being
equal." This Court interpreted this proviso to mean that there should be identity of terms and conditions to be offered to the Bonnevies and all other
prospective buyers, with the Bonnevies to enjoy the right of first priority. We hold that the same rule applies even without the same proviso if the right of
first refusal (or the first option to buy) is not to be rendered illusory.

From the foregoing, the basis of the right of first refusal* must be the current offer to sell of the seller or offer to purchase of any prospective buyer. Only
after the optionee fails to exercise its right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell
the property to a third person, again, under the same terms as offered to the optionee.

This principle was reiterated in the very recent case of Equatorial Realty vs. Mayfair Theater, Inc. 17 which was decided en banc. This Court upheld the
right of first refusal of the lessee Mayfair, and rescinded the sale of the property by the lessor Carmelo to Equatorial Realty "considering that Mayfair,
which had substantial interest over the subject property, was prejudiced by its sale to Equatorial without Carmelo conferring to Mayfair every
opportunity to negotiate within the 30-day stipulated period" (emphasis supplied).

In that case, two contracts of lease between Carmelo and Mayfair provided "that if the LESSOR should desire to sell the leased premises, the LESSEE
shall be given 30 days exclusive option to purchase the same." Carmelo initially offered to sell the leased property to Mayfair for six to seven million
pesos. Mayfair indicated interest in purchasing the property though it invoked the 30-day period. Nothing was heard thereafter from Carmelo. Four
years later, the latter sold its entire Recto Avenue property, including the leased premises, to Equatorial for P11,300,000.00 without priorly informing
Mayfair. The Court held that both Carmelo and Equatorial acted in bad faith: Carmelo for knowingly violating the right of first option of Mayfair, and
Equatorial for purchasing the property despite being aware of the contract stipulation. In addition to rescission of the contract of sale, the Court ordered
Carmelo to allow Mayfair to buy the subject property at the same price of P11,300,000.00.

No cause of action
under P.D. 1517

Petitioner also invokes Presidential Decree No. 1517, or the Urban Land Reform Law, as another source of its right of first refusal. It claims to be covered
under said law, being the "rightful occupant of the land and its structures" since it is the lawful lessee thereof by reason of contract. Under the lease
contract, petitioner would have occupied the property for fourteen (14) years at the end of the contractual period.

Without probing into whether petitioner is rightfully a beneficiary under said law, suffice it to say that this Court has previously ruled that under
Section 6 18 of P.D. 1517, "the terms and conditions of the sale in the exercise of the lessee's right of first refusal to purchase shall be determined by the
Urban Zone Expropriation and Land Management Committee. Hence, . . . . certain prerequisites must be complied with by anyone who wishes to avail
himself of the benefits of the decree." 19There being no allegation in its complaint that the prerequisites were complied with, it is clear that the complaint
did fail to state a cause of action on this ground.

Deed of Assignment included

the option to purchase

Neither do we find merit in the contention of respondent Santos that the assignment of the lease contract to petitioner did not include the option to
purchase. The provisions of the deeds of assignment with regard to matters assigned were very clear. Under the first assignment between Frederick Chua
as assignor and Lee Ching Bing as assignee, it was expressly stated that:

. . . . the ASSIGNOR hereby CEDES, TRANSFERS and ASSIGNS to herein ASSIGNEE, all his rights, interest and participation over
said premises afore-described, . . . . 20 (emphasis supplied)

And under the subsequent assignment executed between Lee Ching Bing as assignor and the petitioner, represented by its Vice President Vicenta Lo
Chiong, as assignee, it was likewise expressly stipulated that;

. . . . the ASSIGNOR hereby sells, transfers and assigns all his rights, interest and participation over said leased premises, . . .
. 21 (emphasis supplied)

One of such rights included in the contract of lease and, therefore, in the assignments of rights was the lessee's right of first option or priority to buy the
properties subject of the lease, as provided in paragraph 9 of the assigned lease contract. The deed of assignment need not be very specific as to which
rights and obligations were passed on to the assignee. It is understood in the general provision aforequoted that all specific rights
and obligationscontained in the contract of lease are those referred to as being assigned. Needless to state, respondent Santos gave her unqualified
conformity to both assignments of rights.
 Respondent Raymundo privy
to the Contract of Lease

With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being the lessor nor the lessee referred to therein,
he could thus not have violated its provisions, but he is nevertheless a proper party. Clearly, he stepped into the shoes of the owner-lessor of the land as,
by virtue of his purchase, he assumed all the obligations of the lessor under the lease contract. Moreover, he received benefits in the form of rental
payments. Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the properties to him. Both pleadings also alleged
collusion between him and respondent Santos which defeated the exercise by petitioner of its right of first refusal.

In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not indispensable, party to the case. 22 A favorable
judgment for the petitioner will necessarily affect the rights of respondent Raymundo as the buyer of the property over which petitioner would like to
assert its right of first option to buy.

Having come to the conclusion that the complaint states a valid cause of action for breach of the right of first refusal and that the trial court should thus
not have dismissed the complaint, we find no more need to pass upon the question of whether the complaint states a cause of action for damages or
whether the complaint is barred by estoppel or laches. As these matters require presentation and/or determination of facts, they can be best resolved
after trial on the merits.

While the lower courts erred in dismissing the complaint, private respondents, however, cannot be denied their day in court. While, in the resolution of a
motion to dismiss, the truth of the facts alleged in the complaint are theoretically admitted, such admission is merely hypothetical and only for the
purpose of resolving the motion. In case of denial, the movant is not to be deprived of the right to submit its own case and to submit evidence to rebut the
allegations in the complaint. Neither will the grant of the motion by a trial court and the ultimate reversal thereof by an appellate court have the effect of
stifling such right. 23 So too, the trial court should be given the opportunity to evaluate the evidence, apply the law and decree the proper remedy. Hence,
we remand the instant case to the trial court to allow private respondents to have their day in court.

WHEREFORE, the petition is GRANTED. The assailed decisions of the trial court and Court of Appeals are hereby REVERSED and SET ASIDE. The case
is REMANDED to the Regional Trial Court of Makati for further proceedings.

SO ORDERED.
G.R. No. 140479 March 8, 2001

ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, petitioners,

vs.
PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO MAGBANUA and LIZZA TIANGCO, respondents.

GONZAGA-REYES, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking reversal of the Decision 1 of the Court of Appeals dated June 25, 1999
in CA-G.R. CV No. 53963. The Court of Appeals decision reversed and set aside the Decision 2 dated May 13, 1996 of Branch 217 of the Regional Trial
Court of Quezon City in Civil Case No. Q-93-18582.1âwphi1.nêt

The case was originally filed on December 10, 1993 by Paterno Inquing, Irene Guillermo and Federico Bantugan, herein respondents, against Rosencor
Development Corporation (hereinafter "Rosencor"), Rene Joaquin, and Eufrocina de Leon. Originally, the complaint was one for annulment of absolute
deed of sale but was later amended to one for rescission of absolute deed of sale. A complaint-for intervention was thereafter filed by respondents
Fernando Magbanua and Danna Lizza Tiangco. The complaint-in-intervention was admitted by the trial court in an Order dated May 4, 1994.3

The facts of the case, as stated by the trial court and adopted by the appellate court, are as follows:

"This action was originally for the annulment of the Deed of Absolute Sale dated September 4, 1990 between defendants Rosencor and
Eufrocina de Leon but later amended (sic) praying for the rescission of the deed of sale.

Plaintiffs and plaintiffs-intervenors averred that they are the lessees since 1971 of a two-story residential apartment located at No. 150 Tomas
Morato Ave., Quezon City covered by TCT No. 96161 and owned by spouses Faustino and Cresencia Tiangco. The lease was not covered by any
contract. The lessees were renting the premises then for P150.00 a month and were allegedly verbally granted by the lessors the pre-emptive
right to purchase the property if ever they decide to sell the same.

Upon the death of the spouses Tiangcos in 1975, the management of the property was adjudicated to their heirs who were represented by
Eufrocina de Leon. The lessees were allegedly promised the same pre-emptive right by the heirs of Tiangcos since the latter had knowledge
that this right was extended to the former by the late spouses Tiangcos. The lessees continued to stay in the premises and allegedly spent their
 own money amounting from P50,000.00 to P100,000.00 for its upkeep. These expenses were never deducted from the rentals which already
increased to P1,000.00.

In June 1990, the lessees received a letter from Atty. Erlinda Aguila demanding that they vacate the premises so that the demolition of the
building be undertaken. They refused to leave the premises. In that same month, de Leon refused to accept the lessees’ rental payment
claiming that they have run out of receipts and that a new collector has been assigned to receive the payments. Thereafter, they received a
letter from Eufrocina de Leon offering to sell to them the property they were leasing for P2,000,000.00. xxx.

The lessees offered to buy the property from de Leon for the amount of P1,000,000.00. De Leon told them that she will be submitting the offer
to the other heirs. Since then, no answer was given by de Leon as to their offer to buy the property. However, in November 1990, Rene Joaquin
came to the leased premises introducing himself as its new owner.

In January 1991, the lessees again received another letter from Atty. Aguila demanding that they vacate the premises. A month thereafter, the
lessees received a letter from de Leon advising them that the heirs of the late spouses Tiangcos have already sold the property to Rosencor. The
following month Atty. Aguila wrote them another letter demanding the rental payment and introducing herself as counsel for Rosencor/Rene
Joaquin, the new owners of the premises.

The lessees requested from de Leon why she had disregarded the pre-emptive right she and the late Tiangcos have promised them. They also
asked for a copy of the deed of sale between her and the new owners thereof but she refused to heed their request. In the same manner, when
they asked Rene Joaquin a copy of the deed of sale, the latter turned down their request and instead Atty. Aguila wrote them several letters
demanding that they vacate the premises. The lessees offered to tender their rental payment to de Leon but she refused to accept the same.

In April 1992 before the demolition can be undertaken by the Building Official, the barangay interceded between the parties herein after which
Rosencor raised the issue as to the rental payment of the premises. It was also at this instance that the lessees were furnished with a copy of the
Deed of Sale and discovered that they were deceived by de Leon since the sale between her and Rene Joaquin/Rosencor took place in
September 4, 1990 while de Leon made the offer to them only in October 1990 or after the sale with Rosencor had been consummated. The
lessees also noted that the property was sold only for P726,000.00.

The lessees offered to reimburse de Leon the selling price of P726,000.00 plus an additional P274,000.00 to complete their P1,000.000.00
earlier offer. When their offer was refused, they filed the present action praying for the following: a) rescission of the Deed of Absolute Sale
between de Leon and Rosencor dated September 4, 1990; b) the defendants Rosencor/Rene Joaquin be ordered to reconvey the property to de
Leon; and c) de Leon be ordered to reimburse the plaintiffs for the repairs of the property, or apply the said amount as part of the price for the
purchase of the property in the sum of P100,000.00."4

After trial on the merits, the Regional Trial Court rendered a Decision5 dated May 13, 1996 dismissing the complaint. The trial court held that the right of
redemption on which the complaint. The trial court held that the right of redemption on which the complaint was based was merely an oral one and as
such, is unenforceable under the law. The dispositive portion of the May 13, 1996 Decision is as follows:

"WHEREFORE, in view of the foregoing, the Court DISMISSES the instant action. Plaintiffs and plaintiffs-intervenors are hereby ordered to
pay their respective monthly rental of P1,000.00 per month reckoned from May 1990 up to the time they leave the premises. No costs.

SO ORDERED."6

Not satisfied with the decision of the trial court, respondents herein filed a Notice of Appeal dated June 3, 1996. On the same date, the trial court issued
an Order for the elevation of the records of the case to the Court of Appeals. On August 8, 1997, respondents filed their appellate brief before the Court of
Appeals.

On June 25, 1999, the Court of Appeals rendered its decision7 reversing the decision of the trial court. The dispositive portion of the June 25, 1999
decision is as follows:

"WHEREFORE, premises considered, the appealed decision (dated May 13, 1996) of the Regional Trial Court (Branch 217) in Quezon City in
Case No. Q-93-18582 is hereby REVERSED and SET ASIDE. In its stead, a new one is rendered ordering:

(1) The rescission of the Deed of Absolute Sale executed between the appellees on September 4, 1990;

(2) The reconveyance of the subject premises to appellee Eufrocina de Leon;

(3) The heirs of Faustino and Crescencia Tiangco, thru appellee Eufrocina de Leon, to afford the appellants thirty days within which
to exercise their right of first refusal by paying the amount of ONE MILLION PESOS (P1,000,000.00) for the subject property; and

(4) The appellants to, in turn, pay the appellees back rentals from May 1990 up to the time this decision is promulgated.

No pronouncement as to costs.

SO ORDERED".8

Petitioners herein filed a Motion for Reconsideration of the decision of the Court of Appeals but the same was denied in a Resolution dated October 15,
1999.9
Hence, this petition for review on certiorari where petitioners Rosencor Development Corporation and Rene Joaquin raise the following assignment of
errors10:

I.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT ORDERED THE RESCISSION OF THE ABSOLUTE DEED OF SALE BETWEEN
EUFROCINA DE LEON AND PETITIONER ROSENCOR.

II.

THE COURT OF APPEALS COMMTITED MANIFEST ERROR IN MANDATING THAT EUFROCINA DE LEON AFFORD RESPONDENTS
THE OPPORTUNITY TO EXERCISE THEIR RIGHT OF FIRST REFUSAL.

III.

THE COURT OF APPEALS GRIEVOUSLY ERRED IN CONCLUDING THAT RESPONDENTS HAVE ESTABLISHED THEIR RIGHT OF
FIRST REFUSAL DESPITE PETITIONERS’ RELIANCE ON THEIR DEFENSE BASED ON THE STATUTE OF FRAUDS.

Eufrocina de Leon, for herself and for the heirs of the spouses Faustino and Crescencia Tiangco, did not appeal the decision of the Court of Appeals.

At the onset, we not that both the Court of Appeals and the Regional Trial Court relied on Article 1403 of the New Civil Code, more specifically the
provisions on the statute of frauds, in coming out with their respective decisions. The trial court, in denying the petition for reconveyance, held that right
of first refusal relied upon by petitioners was not reduced to writing and as such, is unenforceable by virtue of the said article. The Court of Appeals, on
the other hand, also held that the statute of frauds governs the "right of first refusal" claimed by respondents. However, the appellate court ruled that
respondents had duly proven the same by reason of petitioners’ waiver of the protection of the statute by reason of their failure to object to the
presentation of oral evidence of the said right.

Both the appellate court and the trial court failed to discuss, however, the threshold issue of whether or not a right of first refusal is indeed covered by the
provisions of the New Civil Code on the statute of frauds. The resolution of the issue on the applicability of the statute of frauds is important as it will
determine the type of evidence which may be considered by the trial court as proof of the alleged right of first refusal.

The term "statute of frauds" is descriptive of statutes which require certain classes of contracts to be in writing. This statute does not deprive the parties
of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it
enforceable. Thus, they are included in the provisions of the New Civil Code regarding unenforceable contracts, more particularly Art. 1403, paragraph 2.
Said article provides, as follows:

"Art. 1403. The following contracts are unenforceable, unless they are ratified:

xxx

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

a) An agreement that by its terms is not to be performed within a year from the making thereof;

b) A special promise to answer for the debt, default, or miscarriage of another;

c) An agreement made in consideration of marriage, other than a mutual promise to marry;

d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept
and receive part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part
of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the
sale, of the amount and kind of property sold, terms of sale, price, names of purchasers and person on whose account the sale is
made, it is a sufficient memorandum;

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

f) A representation to the credit of a third person."

The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of
witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. 11 Moreover, the
statute of frauds refers to specific kinds of transactions and cannot apply to any other transaction that is not enumerated therein.12 The application of
such statute presupposes the existence of a perfected contract.13
The question now is whether a "right of first refusal" is among those enumerated in the list of contracts covered by the Statute of Frauds. More
specifically, is a right of first refusal akin to "an agreement for the leasing of a longer period than one year, or for the sale of real property or of an interest
therein" as contemplated by Article 1403, par. 2(e) of the New Civil Code.

We have previously held that not all agreements "affecting land" must be put into writing to attain enforceability. 14Thus, we have held that the setting up
of boundaries,15 the oral partition of real property16, and an agreement creating a right of way17 are not covered by the provisions of the statute of frauds.
The reason simply is that these agreements are not among those enumerated in Article 1403 of the New Civil Code.

A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the
New Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale.18 A right of first refusal, such as the one involved in the instant
case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involved, but of
the right of first refusal over the property sought to be sold19.

It is thus evident that the statute of frauds does not contemplate cases involving a right of first refusal. As such, a right of first refusal need not be written
to be enforceable and may be proven by oral evidence.

The next question to be ascertained is whether or not respondents have satisfactorily proven their right of first refusal over the property subject of the
Deed of Absolute Sale dated September 4, 1990 between petitioner Rosencor and Eufrocina de Leon.

On this point, we agree with the factual findings of the Court of Appeals that respondents have adequately proven the existence of their right of first
refusal. Federico Bantugan, Irene Guillermo, and Paterno Inquing uniformly testified that they were promised by the late spouses Faustino and
Crescencia Tiangco and, later on, by their heirs a right of first refusal over the property they were currently leasing should they decide to sell the same.
Moreover, respondents presented a letter20 dated October 9, 1990 where Eufrocina de Leon, the representative of the heirs of the spouses Tiangco,
informed them that they had received an offer to buy the disputed property for P2,000,000.00 and offered to sell the same to the respondents at the
same price if they were interested. Verily, if Eufrocina de Leon did not recognize respondents’ right of first refusal over the property they were leasing,
then she would not have bothered to offer the property for sale to the respondents.

It must be noted that petitioners did not present evidence before the trial court contradicting the existence of the right of first refusal of respondents over
the disputed property. They only presented petitioner Rene Joaquin, the vice-president of petitioner Rosencor, who admitted having no personal
knowledge of the details of the sales transaction between Rosencor and the heirs of the spouses Tiangco 21. They also dispensed with the testimony of
Eufrocina de Leon22 who could have denied the existence or knowledge of the right of first refusal. As such, there being no evidence to the contrary, the
right of first refusal claimed by respondents was substantially proven by respondents before the lower court.

Having ruled upon the question as to the existence of respondents’ right of first refusal, the next issue to be answered is whether or not the Court of
Appeals erred in ordering the rescission of the Deed of Absolute Sale dated September 4, 1990 between Rosencor and Eufrocina de Leon and in
decreeing that the heirs of the spouses Tiangco should afford respondents the exercise of their right of first refusal. In other words, may a contract of sale
entered into in violation of a third party’s right of first refusal be rescinded in order that such third party can exercise said right?

The issue is not one of first impression.

In Guzman, Bocaling and Co, Inc. vs. Bonnevie23, the Court upheld the decision of a lower court ordering the rescission of a deed of sale which violated a
right of first refusal granted to one of the parties therein. The Court held:

"xxx Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may
nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded the
Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their
right of first priority under the Contract of Lease.

According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparations for
damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior
to the celebration of said contract. It is a relief allowed for the protection of one of the contracting parties and even third persons from all
injury and damage the contract may cause, or to protect some incompatible and preferent right created by the contract. Rescission implies a
contract which, even if initially valid, produces a lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity.

It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the action for its rescission where it is
shown that such third person is in lawful possession of the subject of the contract and that he did not act in bad faith. However, this rule is not
applicable in the case before us because the petitioner is not considered a third party in relation to the Contract of Sale nor may its possession
of the subject property be regarded as acquired lawfully and in good faith.

Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale. Moreover, the petitioner cannot be deemed a purchaser in good
faith for the record shows that it categorically admitted that it was aware of the lease in favor of the Bonnevies, who were actually occupying
the subject property at the time it was sold to it. Although the occupying the subject property at the time it was sold to it. Although the Contract
of Lease was not annotated on the transfer certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot
deny actual knowledge of such lease which was equivalent to and indeed more binding than presumed notice by registration.

A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest
in such property without and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest
of some other person in the property. Good faith connotes an honest intention to abstain from taking unconscientious advantage of another.
Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith as it had notice of the lease of the property by the
Bonnevies and such knowledge should have cautioned it to look deeper into the agreement to determine if it involved stipulations that would
prejudice its own interests."
Subsequently24 in Equatorial Realty and Development, Inc. vs. Mayfair Theater, Inc.25, the Court, en banc, with three justices dissenting,26 ordered the
rescission of a contract entered into in violation of a right of first refusal. Using the ruling in Guzman Bocaling & Co., Inc. vs. Bonnevie as basis, the
Court decreed that since respondent therein had a right of first refusal over the said property, it could only exercise the said right if the fraudulent sale is
first set aside or rescinded. Thus:

"What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will have the right of first refusal in the event
Carmelo sells the leased premises. It is undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its intention to
sell the said property in 1974. There was an exchange of letters evidencing the offer and counter-offers made by both parties. Carmelo,
however, did not pursue the exercise to its logical end. While it initially recognized Mayfair’s right of first refusal, Carmelo violated such right
when without affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite offer and a possible
corresponding acceptance within the "30-day exclusive option" time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for
some time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question, rescissible. We agree with respondent
Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such, Equatorial cannot tenably claim that to be a purchaser in good faith, and, therefore, rescission lies.

XXX

As also earlier emphasized, the contract of sale between Equatorial and Carmelo is characterized by bad faith, since it was knowingly entered
into in violation of the rights of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of Appeals, Equatorial admitted that
its lawyers had studied the contract or lease prior to the sale. Equatorial’s knowledge of the stipulations therein should have cautioned it to
look further into the agreement to determine if it involved stipulations that would prejudice its own interests.

Since Mayfair had a right of first refusal, it can exercise the right only if the fraudulent sale is first set aside or rescinded. All of these matters
are now before us and so there should be no piecemeal determination of this case and leave festering sores to deteriorate into endless
litigation. The facts of the case and considerations of justice and equity require that we order rescission here and now. Rescission is a relief
allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to
protect some incompatible and preferred right by the contract. The sale of the subject real property should now be rescinded considering that
Mayfair, which had substantial interest over the subject property, was prejudiced by the sale of the subject property to Equatorial without
Carmelo conferring to Mayfair every opportunity to negotiate within the 30-day stipulate periond.27

In Paranaque Kings Enterprises, Inc. vs. Court of Appeals,28 the Court held that the allegations in a complaint showing violation of a contractual right of
"first option or priority to buy the properties subject of the lease" constitute a valid cause of action enforceable by an action for specific performance.
Summarizing the rulings in the two previously cited cases, the Court affirmed the nature of and concomitant rights and obligations of parties under a
right of first refusal. Thus:

"We hold however, that in order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of
the properties for the amount of P9,000,000.00, the price for which they were finally sold to respondent Raymundo, should have likewise
been offered to petitioner.

The Court has made an extensive and lengthy discourse on the concept of, and obligations under, a right of first refusal in the case of Guzman,
Bocaling & Co. vs. Bonnevie. In that case, under a contract of lease, the lessees (Raul and Christopher Bonnevie) were given a "right of first
priority" to purchase the leased property in case the lessor (Reynoso) decided to sell. The selling price quoted to the Bonnevies was
600,000.00 to be fully paid in cash, less a mortgage lien of P100,000.00. On the other hand, the selling price offered by Reynoso to and
accepted by Guzman was only P400,000.00 of which P137,500.00 was to be paid in cash while the balance was to be paid only when the
property was cleared of occupants. We held that even if the Bonnevies could not buy it at the price quoted (P600,000.00), nonetheless,
Reynoso could not sell it to another for a lower price and under more favorable terms and conditions without first offering said favorable terms
and price to the Bonnevies as well. Only if the Bonnevies failed to exercise their right of first priority could Reynoso thereafter lawfully sell the
subject property to others, and only under the same terms and conditions previously offered to the Bonnevies.

XXX

This principle was reiterated in the very recent case of Equatorial Realty vs. Mayfair Theater, Inc. which was decided en banc. This Court
upheld the right of first refusal of the lessee Mayfair, and rescinded the sale of the property by the lessor Carmelo to Equatorial Realty
"considering that Mayfair, which had substantial interest over the subject property, was prejudiced by its sale to Equatorial without Carmelo
conferring to Mayfair every opportunity to negotiate within the 30-day stipulated period"

In that case, two contracts of lease between Carmelo and Mayfair provided "that if the LESSOR should desire to sell the leased premises, the
LESSEE shall be given 30 days exclusive option to purchase the same." Carmelo initially offered to sell the leased property to Mayfair for six to
seven million pesos. Mayfair indicated interest in purchasing the property though it invoked the 30-day period. Nothing was heard thereafter
from Carmelo. Four years later, the latter sold its entire Recto Avenue property, including the leased premises, to Equatorial for
P11,300,000.00 without priorly informing Mayfair. The Court held that both Carmelo and Equatorial acted in bad faith: Carmelo or knowingly
violating the right of first option of Mayfair, and Equatorial for purchasing the property despite being aware of the contract stipulation. In
addition to rescission of the contract of sale, the Court ordered Carmelo to allow Mayfair to buy the subject property at the same price of
P11,300,000.00.

In the recent case of Litonjua vs L&R Corporation,29 the Court, also citing the case of Guzman, Bocaling & Co. vs. Bonnevie, held that the sale made
therein in violation of a right of first refusal embodied in a mortgage contract, was rescissible. Thus:

"While petitioners question the validity of paragraph 8 of their mortgage contract, they appear to be silent insofar as paragraph 9 thereof is
concerned. Said paragraph 9 grants upon L&R Corporation the right of first refusal over the mortgaged property in the event the mortgagor
 decides to sell the same. We see nothing wrong in this provision. The right of first refusal has long been recognized as valid in our jurisdiction.
The consideration for the loan mortgage includes the consideration for the right of first refusal. L&R Corporation is in effect stating that it
consents to lend out money to the spouses Litonjua provided that in case they decide to sell the property mortgaged to it, then L&R
Corporation shall be given the right to match the offered purchase price and to buy the property at that price. Thus, while the spouses Litonjua
had every right to sell their mortgaged property to PWHAS without securing the prior written consent of L&R Corporation, they had the
obligation under paragraph 9, which is a perfectly valid provision, to notify the latter of their intention to sell the property and give it priority
over other buyers. It is only upon the failure of L&R Corporation to exercise its right of first refusal could the spouses Litonjua validly sell the
subject properties to the others, under the same terms and conditions offered to L&R Corporation.

What then is the status of the sale made to PWHAS in violation of L & R Corporation’s contractual right of first refusal? On this score, we agree
with the Amended Decision of the Court of Appeals that the sale made to PWHAS is rescissible. The case of Guzman, Bocaling & Co. v.
Bonnevie is instructive on this point.

XXX

It was then held that the Contract of Sale there, which violated the right of first refusal, was rescissible.

In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R Corporation over the subject properties since
the Deed of Real Estate Mortgage containing such a provision was duly registered with the Register of Deeds. As such, PWHAS is presumed to
have been notified thereof by registration, which equates to notice to the whole world.

XXX

All things considered, what then are the relative rights and obligations of the parties? To recapitulate: the sale between the spouses Litonjua
and PWHAS is valid, notwithstanding the absence of L & R Corporation’s prior written consent thereto. Inasmuch as the sale to PWHAS was
valid, its offer to redeem and its tender of the redemption price, as successor-in-interest of the spouses Litonjua, within the one-year period
should have been accepted as valid by the L & R Corporation. However, while the sale is, indeed, valid, the same is rescissible because it
ignored L & R Corporation’s right of first refusal."

Thus, the prevailing doctrine, as enunciated in the cited cases, is that a contract of sale entered into in violation of a right of first refusal of another
person, while valid, is rescissible.

There is, however, a circumstance which prevents the application of this doctrine in the case at bench. In the cases cited above, the Court ordered the
rescission of sales made in violation of a right of first refusal precisely because the vendees therein could not have acted in good faith as they were aware
or should have been aware of the right of first refusal granted to another person by the vendors therein. The rationale for this is found in the provisions of
the New Civil Code on rescissible contracts. Under Article 1381 of the New Civil Code, paragraph 3, a contract validly agreed upon may be rescinded if it
is "undertaken in fraud of creditors when the latter cannot in any manner collect the claim due them." Moreover, under Article 1385, rescission shall not
take place "when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith."30

It must be borne in mind that, unlike the cases cited above, the right of first refusal involved in the instant case was an oral one given to respondents by
the deceased spouses Tiangco and subsequently recognized by their heirs. As such, in order to hold that petitioners were in bad faith, there must be clear
and convincing proof that petitioners were made aware of the said right of first refusal either by the respondents or by the heirs of the spouses Tiangco.

It is axiomatic that good faith is always presumed unless contrary evidence is adduced. 31 A purchaser in good faith is one who buys the property of
another without notice that some other person has a right or interest in such a property and pays a full and fair price at the time of the purchase or before
he has notice of the claim or interest of some other person in the property.32 In this regard, the rule on constructive notice would be inapplicable as it is
undisputed that the right of first refusal was an oral one and that the same was never reduced to writing, much less registered with the Registry of Deeds.
In fact, even the lease contract by which respondents derive their right to possess the property involved was an oral one.

On this point, we hold that the evidence on record fails to show that petitioners acted in bad faith in entering into the deed of sale over the disputed
property with the heirs of the spouses Tiangco. Respondents failed to present any evidence that prior to the sale of the property on September 4, 1990,
petitioners were aware or had notice of the oral right of first refusal.

Respondents point to the letter dated June 1, 199033 as indicative of petitioners’ knowledge of the said right. In this letter, a certain Atty. Erlinda Aguila
demanded that respondent Irene Guillermo vacate the structure they were occupying to make way for its demolition.

We fail to see how the letter could give rise to bad faith on the part of the petitioner. No mention is made of the right of first refusal granted to
respondents. The name of petitioner Rosencor or any of it officers did not appear on the letter and the letter did not state that Atty. Aguila was writing in
behalf of petitioner. In fact, Atty. Aguila stated during trial that she wrote the letter in behalf of the heirs of the spouses Tiangco. Moreover, even
assuming that Atty. Aguila was indeed writing in behalf of petitioner Rosencor, there is no showing that Rosencor was aware at that time that such a
right of first refusal existed.

Neither was there any showing that after receipt of this June 1, 1990 letter, respondents notified Rosencor or Atty. Aguila of their right of first refusal
over the property. Respondents did not try to communicate with Atty. Aguila and inform her about their preferential right over the disputed property.
There is even no showing that they contacted the heirs of the spouses Tiangco after they received this letter to remind them of their right over the
property.

Respondents likewise point to the letter dated October 9, 1990 of Eufrocina de Leon, where she recognized the right of first refusal of respondents, as
indicative of the bad faith of petitioners. We do not agree. Eufrocina de Leon wrote the letter on her own behalf and not on behalf of petitioners and, as
such, it only shows that Eufrocina de Leon was aware of the existence of the oral right of first refusal. It does not show that petitioners were likewise
aware of the existence of the said right. Moreover, the letter was made a month after the execution of the Deed of Absolute Sale on September 4, 1990
between petitioner Rosencor and the heirs of the spouses Tiangco. There is no showing that prior to the date of the execution of the said Deed,
petitioners were put on notice of the existence of the right of first refusal.

Clearly, if there was any indication of bad faith based on respondents’ evidence, it would only be on the part of Eufrocina de Leon as she was aware of the
right of first refusal of respondents yet she still sold the disputed property to Rosencor. However, bad faith on the part of Eufrocina de Leon does not
mean that petitioner Rosencor likewise acted in bad faith. There is no showing that prior to the execution of the Deed of Absolute Sale, petitioners were
made aware or put on notice of the existence of the oral right of first refusal. Thus, absent clear and convincing evidence to the contrary, petitioner
Rosencor will be presumed to have acted in good faith in entering into the Deed of Absolute Sale over the disputed property.

Considering that there is no showing of bad faith on the part of the petitioners, the Court of Appeals thus erred in ordering the rescission of the Deed of
Absolute Sale dated September 4, 1990 between petitioner Rosencor and the heirs of the spouses Tiangco. The acquisition by Rosencor of the property
subject of the right of first refusal is an obstacle to the action for its rescission where, as in this case, it was shown that Rosencor is in lawful possession of
the subject of the contract and that it did not act in bad faith.34

This does not mean however that respondents are left without any remedy for the unjustified violation of their right of first refusal. Their remedy
however is not an action for the rescission of the Deed of Absolute Sale but an action for damages against the heirs of the spouses Tiangco for the
unjustified disregard of their right of first refusal35.

WHEREFORE, premises considered, the decision of the Court of Appeals dated June 25, 1999 is REVERSED and SET ASIDE. The Decision dated May
13, 1996 of the Quezon City Regional Trial Court, Branch 217 is hereby REINSTATED insofar as it dismisses the action for rescission of the Deed of
Absolute Sale dated September 4, 1990 and orders the payment of monthly rentals of P1,000.00 per month reckoned from May 1990 up to the time
respondents leave the premises.

SO ORDERED.
G.R. No. 149734 November 19, 2004

DR. DANIEL VAZQUEZ and MA. LUIZA M. VAZQUEZ, petitioners,

vs.
AYALA CORPORATION, respondent.

TINGA, J.:

The rise in value of four lots in one of the country's prime residential developments, Ayala Alabang Village in Muntinlupa City, over a period of six (6)
years only, represents big money. The huge price difference lies at the heart of the present controversy. Petitioners insist that the lots should be sold to
them at 1984 prices while respondent maintains that the prevailing market price in 1990 should be the selling price.

Dr. Daniel Vazquez and Ma. Luisa Vazquez1 filed this Petition for Review on Certiorari2 dated October 11, 2001 assailing the Decision3 of the Court of
Appeals dated September 6, 2001 which reversed the Decision4 of the Regional Trial Court (RTC) and dismissed their complaint for specific performance
and damages against Ayala Corporation.

Despite their disparate rulings, the RTC and the appellate court agree on the following antecedents:5

On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa M. Vasquez (hereafter, Vasquez spouses) entered into a Memorandum of Agreement
(MOA) with Ayala Corporation (hereafter, AYALA) with AYALA buying from the Vazquez spouses, all of the latter's shares of stock in Conduit
Development, Inc. (hereafter, Conduit). The main asset of Conduit was a 49.9 hectare property in Ayala Alabang, Muntinlupa, which was then
being developed by Conduit under a development plan where the land was divided into Villages 1, 2 and 3 of the "Don Vicente Village." The
development was then being undertaken for Conduit by G.P. Construction and Development Corp. (hereafter, GP Construction).

Under the MOA, Ayala was to develop the entire property, less what was defined as the "Retained Area" consisting of 18,736 square meters.
This "Retained Area" was to be retained by the Vazquez spouses. The area to be developed by Ayala was called the "Remaining Area". In this
"Remaining Area" were 4 lots adjacent to the "Retained Area" and Ayala agreed to offer these lots for sale to the Vazquez spouses at the
prevailing price at the time of purchase. The relevant provisions of the MOA on this point are:

"5.7. The BUYER hereby commits that it will develop the 'Remaining Property' into a first class residential subdivision of the same class as its
New Alabang Subdivision, and that it intends to complete the first phase under its amended development plan within three (3) years from the
date of this Agreement. x x x"

5.15. The BUYER agrees to give the SELLERS a first option to purchase four developed lots next to the "Retained Area" at the prevailing
market price at the time of the purchase."

The parties are agreed that the development plan referred to in paragraph 5.7 is not Conduit's development plan, but Ayala's amended
development plan which was still to be formulated as of the time of the MOA. While in the Conduit plan, the 4 lots to be offered for sale to the
Vasquez Spouses were in the first phase thereof or Village 1, in the Ayala plan which was formulated a year later, it was in the third phase, or
Phase II-c.

Under the MOA, the Vasquez spouses made several express warranties, as follows:

"3.1. The SELLERS shall deliver to the BUYER:

xxx
3.1.2. The true and complete list, certified by the Secretary and Treasurer of the Company showing:

xxx

D. A list of all persons and/or entities with whom the Company has pending contracts, if any.

xxx

3.1.5. Audited financial statements of the Company as at Closing date.

4. Conditions Precedent

All obligations of the BUYER under this Agreement are subject to fulfillment prior to or at the Closing, of the following conditions:

4.1. The representations and warranties by the SELLERS contained in this Agreement shall be true and correct at the time of Closing as though
such representations and warranties were made at such time; and

xxx

6. Representation and Warranties by the SELLERS

The SELLERS jointly and severally represent and warrant to the BUYER that at the time of the execution of this Agreement and at the Closing:

xxx

6.2.3. There are no actions, suits or proceedings pending, or to the knowledge of the SELLERS, threatened against or affecting the SELLERS
with respect to the Shares or the Property; and

7. Additional Warranties by the SELLERS

7.1. With respect to the Audited Financial Statements required to be submitted at Closing in accordance with Par. 3.1.5 above, the SELLER
jointly and severally warrant to the BUYER that:

7.1.1 The said Audited Financial Statements shall show that on the day of Closing, the Company shall own the "Remaining Property", free from
all liens and encumbrances and that the Company shall have no obligation to any party except for billings payable to GP Construction &
Development Corporation and advances made by Daniel Vazquez for which BUYER shall be responsible in accordance with Par. 2 of this
Agreement.

7.1.2 Except to the extent reflected or reserved in the Audited Financial Statements of the Company as of Closing, and those disclosed to
BUYER, the Company as of the date thereof, has no liabilities of any nature whether accrued, absolute, contingent or otherwise, including,
without limitation, tax liabilities due or to become due and whether incurred in respect of or measured in respect of the Company's income
prior to Closing or arising out of transactions or state of facts existing prior thereto.

7.2 SELLERS do not know or have no reasonable ground to know of any basis for any assertion against the Company as at closing or any
liability of any nature and in any amount not fully reflected or reserved against such Audited Financial Statements referred to above, and those
disclosed to BUYER.

xxx xxx xxx

7.6.3 Except as otherwise disclosed to the BUYER in writing on or before the Closing, the Company is not engaged in or a party to, or to the
best of the knowledge of the SELLERS, threatened with, any legal action or other proceedings before any court or administrative body, nor do
the SELLERS know or have reasonable grounds to know of any basis for any such action or proceeding or of any governmental investigation
relative to the Company.

7.6.4 To the knowledge of the SELLERS, no default or breach exists in the due performance and observance by the Company of any term,
covenant or condition of any instrument or agreement to which the company is a party or by which it is bound, and no condition exists which,
with notice or lapse of time or both, will constitute such default or breach."

After the execution of the MOA, Ayala caused the suspension of work on Village 1 of the Don Vicente Project. Ayala then received a letter from
one Maximo Del Rosario of Lancer General Builder Corporation informing Ayala that he was claiming the amount of P1,509,558.80 as the
subcontractor of G.P. Construction...

G.P. Construction not being able to reach an amicable settlement with Lancer, on March 22, 1982, Lancer sued G.P. Construction, Conduit and
Ayala in the then Court of First Instance of Manila in Civil Case No. 82-8598. G.P. Construction in turn filed a cross-claim against Ayala. G.P.
Construction and Lancer both tried to enjoin Ayala from undertaking the development of the property. The suit was terminated only on
February 19, 1987, when it was dismissed with prejudice after Ayala paid both Lancer and GP Construction the total of P4,686,113.39.
 Taking the position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area" within 3 years from the date of the MOA, the
Vasquez spouses sent several "reminder" letters of the approaching so-called deadline. However, no demand after April 23, 1984, was ever
made by the Vasquez spouses for Ayala to sell the 4 lots. On the contrary, one of the letters signed by their authorized agent, Engr. Eduardo
Turla, categorically stated that they expected "development of Phase 1 to be completed by February 19, 1990, three years from the settlement of
the legal problems with the previous contractor."

By early 1990 Ayala finished the development of the vicinity of the 4 lots to be offered for sale. The four lots were then offered to be sold to the
Vasquez spouses at the prevailing price in 1990. This was rejected by the Vasquez spouses who wanted to pay at 1984 prices, thereby leading to
the suit below.

After trial, the court a quo rendered its decision, the dispositive portion of which states:

"THEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering defendant to sell to plaintiffs the relevant
lots described in the Complaint in the Ayala Alabang Village at the price of P460.00 per square meter amounting to P1,349,540.00; ordering
defendant to reimburse to plaintiffs attorney's fees in the sum of P200,000.00 and to pay the cost of the suit."

In its decision, the court a quo concluded that the Vasquez spouses were not obligated to disclose the potential claims of GP Construction,
Lancer and Del Rosario; Ayala's accountants should have opened the records of Conduit to find out all claims; the warranty against suit is with
respect to "the shares of the Property" and the Lancer suit does not affect the shares of stock sold to Ayala; Ayala was obligated to develop
within 3 years; to say that Ayala was under no obligation to follow a time frame was to put the Vasquezes at Ayala's mercy; Ayala did not
develop because of a slump in the real estate market; the MOA was drafted and prepared by the AYALA who should suffer its ambiguities; the
option to purchase the 4 lots is valid because it was supported by consideration as the option is incorporated in the MOA where the parties had
prestations to each other. [Emphasis supplied]

Ayala Corporation filed an appeal, alleging that the trial court erred in holding that petitioners did not breach their warranties under the MOA6 dated
April 23, 1981; that it was obliged to develop the land where the four (4) lots subject of the option to purchase are located within three (3) years from the
date of the MOA; that it was in delay; and that the option to purchase was valid because it was incorporated in the MOA and the consideration therefor
was the commitment by Ayala Corporation to petitioners embodied in the MOA.

As previously mentioned, the Court of Appeals reversed the RTC Decision. According to the appellate court, Ayala Corporation was never informed
beforehand of the existence of the Lancer claim. In fact, Ayala Corporation got a copy of the Lancer subcontract only on May 29, 1981 from G.P.
Construction's lawyers. The Court of Appeals thus held that petitioners violated their warranties under the MOA when they failed to disclose Lancer's
claims. Hence, even conceding that Ayala Corporation was obliged to develop and sell the four (4) lots in question within three (3) years from the date of
the MOA, the obligation was suspended during the pendency of the case filed by Lancer.

Interpreting the MOA's paragraph 5.7 above-quoted, the appellate court held that Ayala Corporation committed to develop the first phase of its own
amended development plan and not Conduit's development plan. Nowhere does the MOA provide that Ayala Corporation shall follow Conduit's
development plan nor is Ayala Corporation prohibited from changing the sequence of the phases of the property it will develop.

Anent the question of delay, the Court of Appeals ruled that there was no delay as petitioners never made a demand for Ayala Corporation to sell the
subject lots to them. According to the appellate court, what petitioners sent were mere reminder letters the last of which was dated prior to April 23, 1984
when the obligation was not yet demandable. At any rate, the Court of Appeals found that petitioners in fact waived the three (3)-year period when they
sent a letter through their agent, Engr. Eduardo Turla, stating that they "expect that the development of Phase I will be completed by 19 February 1990,
three years from the settlement of the legal problems with the previous contractor."7

The appellate court likewise ruled that paragraph 5.15 above-quoted is not an option contract but a right of first refusal there being no separate
consideration therefor. Since petitioners refused Ayala Corporation's offer to sell the subject lots at the reduced 1990 price of P5,000.00 per square
meter, they have effectively waived their right to buy the same.

In the instant Petition, petitioners allege that the appellate court erred in ruling that they violated their warranties under the MOA; that Ayala
Corporation was not obliged to develop the "Remaining Property" within three (3) years from the execution of the MOA; that Ayala was not in delay; and
that paragraph 5.15 of the MOA is a mere right of first refusal. Additionally, petitioners insist that the Court should review the factual findings of the
Court of Appeals as they are in conflict with those of the trial court.

Ayala Corporation filed a Comment on the Petition 8 dated March 26, 2002, contending that the petition raises questions of fact and seeks a review of
evidence which is within the domain of the Court of Appeals. Ayala Corporation maintains that the subcontract between GP Construction, with whom
Conduit contracted for the development of the property under a Construction Contract dated October 10, 1980, and Lancer was not disclosed by
petitioners during the negotiations. Neither was the liability for Lancer's claim included in the Audited Financial Statements submitted by petitioners
after the signing of the MOA. These justify the conclusion that petitioners breached their warranties under the afore-quoted paragraphs of the MOA.
Since the Lancer suit ended only in February 1989, the three (3)-year period within which Ayala Corporation committed to develop the property should
only be counted thence. Thus, when it offered the subject lots to petitioners in 1990, Ayala Corporation was not yet in delay.

In response to petitioners' contention that there was no action or proceeding against them at the time of the execution of the MOA on April 23, 1981,
Ayala Corporation avers that the facts and circumstances which gave rise to the Lancer claim were already extant then. Petitioners warranted that their
representations under the MOA shall be true and correct at the time of "Closing" which shall take place within four (4) weeks from the signing of the
MOA.9 Since the MOA was signed on April 23, 1981, "Closing" was approximately the third week of May 1981. Hence, Lancer's claims, articulated in a
letter which Ayala Corporation received on May 4, 1981, are among the liabilities warranted against under paragraph 7.1.2 of the MOA.

Moreover, Ayala Corporation asserts that the warranties under the MOA are not just against suits but against all kinds of liabilities not reflected in the
Audited Financial Statements. It cannot be faulted for relying on the express warranty that except for billings payable to GP Construction and advances
made by petitioner Daniel Vazquez in the amount of P38,766.04, Conduit has no other liabilities. Hence, petitioners cannot claim that Ayala Corporation
should have examined and investigated the Audited Financial Statements of Conduit and should now assume all its obligations and liabilities including
the Lancer suit and the cross-claim of GP Construction.

Furthermore, Ayala Corporation did not make a commitment to complete the development of the first phase of the property within three (3) years from
the execution of the MOA. The provision refers to a mere declaration of intent to develop the first phase of its (Ayala Corporation's) own development
plan and not Conduit's. True to its intention, Ayala Corporation did complete the development of the first phase (Phase II-A) of its amended
development plan within three (3) years from the execution of the MOA. However, it is not obliged to develop the third phase (Phase II-C) where the
subject lots are located within the same time frame because there is no contractual stipulation in the MOA therefor. It is free to decide on its own the
period for the development of Phase II-C. If petitioners wanted to impose the same three (3)-year timetable upon the third phase of the amended
development plan, they should have filed a suit to fix the time table in accordance with Article 1197 10 of the Civil Code. Having failed to do so, Ayala
Corporation cannot be declared to have been in delay.

Ayala Corporation further contends that no demand was made on it for the performance of its alleged obligation. The letter dated October 4, 1983 sent
when petitioners were already aware of the Lancer suit did not demand the delivery of the subject lots by April 23, 1984. Instead, it requested Ayala
Corporation to keep petitioners posted on the status of the case. Likewise, the letter dated March 4, 1984 was merely an inquiry as to the date when the
development of Phase 1 will be completed. More importantly, their letter dated June 27, 1988 through Engr. Eduardo Turla expressed petitioners'
expectation that Phase 1 will be completed by February 19, 1990.

Lastly, Ayala Corporation maintains that paragraph 5.15 of the MOA is a right of first refusal and not an option contract.

Petitioners filed their Reply11 dated August 15, 2002 reiterating the arguments in their Petition and contending further that they did not violate their
warranties under the MOA because the case was filed by Lancer only on April 1, 1982, eleven (11) months and eight (8) days after the signing of the MOA
on April 23, 1981. Ayala Corporation admitted that it received Lancer's claim before the "Closing" date. It therefore had all the time to rescind the MOA.
Not having done so, it can be concluded that Ayala Corporation itself did not consider the matter a violation of petitioners' warranty.

Moreover, petitioners submitted the Audited Financial Statements of Conduit and allowed an acquisition audit to be conducted by Ayala Corporation.
Thus, the latter bought Conduit with "open eyes."

Petitioners also maintain that they had no knowledge of the impending case against Conduit at the time of the execution of the MOA. Further, the MOA
makes Ayala Corporation liable for the payment of all billings of GP Construction. Since Lancer's claim was actually a claim against GP Construction
being its sub-contractor, it is Ayala Corporation and not petitioners which is liable.

Likewise, petitioners aver that although Ayala Corporation may change the sequence of its development plan, it is obliged under the MOA to develop the
entire area where the subject lots are located in three (3) years.

They also assert that demand was made on Ayala Corporation to comply with their obligation under the MOA. Apart from their reminder letters dated
January 24, February 18 and March 5, 1984, they also sent a letter dated March 4, 1984 which they claim is a categorical demand for Ayala Corporation
to comply with the provisions of the MOA.

The parties were required to submit their respective memoranda in the Resolution 12 dated November 18, 2002. In compliance with this directive,
petitioners submitted their Memorandum13 dated February 14, 2003 on even date, while Ayala Corporation filed its Memorandum 14 dated February 14,
2003 on February 17, 2003.

We shall first dispose of the procedural question raised by the instant petition.

It is well-settled that the jurisdiction of this Court in cases brought to it from the Court of Appeals by way of petition for review under Rule 45 is limited
to reviewing or revising errors of law imputed to it, its findings of fact being conclusive on this Court as a matter of general principle. However, since in
the instant case there is a conflict between the factual findings of the trial court and the appellate court, particularly as regards the issues of breach of
warranty, obligation to develop and incurrence of delay, we have to consider the evidence on record and resolve such factual issues as an exception to the
general rule.15 In any event, the submitted issue relating to the categorization of the right to purchase granted to petitioners under the MOA is legal in
character.

The next issue that presents itself is whether petitioners breached their warranties under the MOA when they failed to disclose the Lancer claim. The
trial court declared they did not; the appellate court found otherwise.

Ayala Corporation summarizes the clauses of the MOA which petitioners allegedly breached when they failed to disclose the Lancer claim:

a) Clause 7.1.1. – that Conduit shall not be obligated to anyone except to GP Construction for P38,766.04, and for advances made by Daniel
Vazquez;

b) Clause 7.1.2. – that except as reflected in the audited financial statements Conduit had no other liabilities whether accrued, absolute,
contingent or otherwise;

c) Clause 7.2. – that there is no basis for any assertion against Conduit of any liability of any value not reflected or reserved in the financial
statements, and those disclosed to Ayala;

d) Clause 7.6.3. – that Conduit is not threatened with any legal action or other proceedings; and
 e) Clause 7.6.4. – that Conduit had not breached any term, condition, or covenant of any instrument or agreement to which it is a party or by
which it is bound.16

The Court is convinced that petitioners did not violate the foregoing warranties.

The exchanges of communication between the parties indicate that petitioners substantially apprised Ayala Corporation of the Lancer claim or the
possibility thereof during the period of negotiations for the sale of Conduit.

In a letter17 dated March 5, 1984, petitioner Daniel Vazquez reminded Ayala Corporation's Mr. Adolfo Duarte (Mr. Duarte) that prior to the completion of
the sale of Conduit, Ayala Corporation asked for and was given information that GP Construction sub-contracted, presumably to Lancer, a greater
percentage of the project than it was allowed. Petitioners gave this information to Ayala Corporation because the latter intimated a desire to "break the
contract of Conduit with GP." Ayala Corporation did not deny this. In fact, Mr. Duarte's letter18 dated March 6, 1984 indicates that Ayala Corporation had
knowledge of the Lancer subcontract prior to its acquisition of Conduit. Ayala Corporation even admitted that it "tried to explore…legal basis to
discontinue the contract of Conduit with GP" but found this "not feasible when information surfaced about the tacit consent of Conduit to the sub-
contracts of GP with Lancer."

At the latest, Ayala Corporation came to know of the Lancer claim before the date of Closing of the MOA. Lancer's letter19 dated April 30, 1981 informing
Ayala Corporation of its unsettled claim with GP Construction was received by Ayala Corporation on May 4, 1981, well before the "Closing"20 which
occurred four (4) weeks after the date of signing of the MOA on April 23, 1981, or on May 23, 1981.

The full text of the pertinent clauses of the MOA quoted hereunder likewise indicate that certain matters pertaining to the liabilities of Conduit were
disclosed by petitioners to Ayala Corporation although the specifics thereof were no longer included in the MOA:

7.1.1 The said Audited Financial Statements shall show that on the day of Closing, the Company shall own the "Remaining Property", free from
all liens and encumbrances and that the Company shall have no obligation to any party except for billings payable to GP Construction &
Development Corporation and advances made by Daniel Vazquez for which BUYER shall be responsible in accordance with Paragraph 2 of this
Agreement.

7.1.2 Except to the extent reflected or reserved in the Audited Financial Statements of the Company as of Closing, and those disclosed to
BUYER, the Company as of the date hereof, has no liabilities of any nature whether accrued, absolute, contingent or otherwise, including,
without limitation, tax liabilities due or to become due and whether incurred in respect of or measured in respect of the Company's income
prior to Closing or arising out of transactions or state of facts existing prior thereto.

7.2 SELLERS do not know or have no reasonable ground to know of any basis for any assertion against the Company as at Closing of any
liability of any nature and in any amount not fully reflected or reserved against such Audited Financial Statements referred to above, and those
disclosed to BUYER.

xxx xxx xxx

7.6.3 Except as otherwise disclosed to the BUYER in writing on or before the Closing, the Company is not engaged in or a party to, or to the
best of the knowledge of the SELLERS, threatened with, any legal action or other proceedings before any court or administrative body, nor do
the SELLERS know or have reasonable grounds to know of any basis for any such action or proceeding or of any governmental investigation
relative to the Company.

7.6.4 To the knowledge of the SELLERS, no default or breach exists in the due performance and observance by the Company of any term,
covenant or condition of any instrument or agreement to which the Company is a party or by which it is bound, and no condition exists which,
with notice or lapse of time or both, will constitute such default or breach."21 [Emphasis supplied]

Hence, petitioners' warranty that Conduit is not engaged in, a party to, or threatened with any legal action or proceeding is qualified by Ayala
Corporation's actual knowledge of the Lancer claim which was disclosed to Ayala Corporation before the "Closing."

At any rate, Ayala Corporation bound itself to pay all billings payable to GP Construction and the advances made by petitioner Daniel Vazquez.
Specifically, under paragraph 2 of the MOA referred to in paragraph 7.1.1, Ayala Corporation undertook responsibility "for the payment of all billings of
the contractor GP Construction & Development Corporation after the first billing and any payments made by the company and/or SELLERS shall be
reimbursed by BUYER on closing which advances to date is P1,159,012.87."22

The billings knowingly assumed by Ayala Corporation necessarily include the Lancer claim for which GP Construction is liable. Proof of this is Ayala
Corporation's letter23 to GP Construction dated before "Closing" on May 4, 1981, informing the latter of Ayala Corporation's receipt of the Lancer claim
embodied in the letter dated April 30, 1981, acknowledging that it is taking over the contractual responsibilities of Conduit, and requesting copies of all
sub-contracts affecting the Conduit property. The pertinent excerpts of the letter read:

In this connection, we wish to inform you that this morning we received a letter from Mr. Maximo D. Del Rosario, President of Lancer General
Builders Corporation apprising us of the existence of subcontracts that they have with your corporation. They have also furnished us with a
copy of their letter to you dated 30 April 1981.

Since we are taking over the contractual responsibilities of Conduit Development, Inc., we believe that it is necessary, at this point in time, that
you furnish us with copies of all your subcontracts affecting the property of Conduit, not only with Lancer General Builders Corporation, but all
subcontracts with other parties as well…24
Quite tellingly, Ayala Corporation even attached to its Pre-Trial Brief25 dated July 9, 1992 a copy of the letter26 dated May 28, 1981 of GP Construction's
counsel addressed to Conduit furnishing the latter with copies of all sub-contract agreements entered into by GP Construction. Since it was addressed to
Conduit, it can be presumed that it was the latter which gave Ayala Corporation a copy of the letter thereby disclosing to the latter the existence of the
Lancer sub-contract.

The ineluctable conclusion is that petitioners did not violate their warranties under the MOA. The Lancer sub-contract and claim were substantially
disclosed to Ayala Corporation before the "Closing" date of the MOA. Ayala Corporation cannot disavow knowledge of the claim.

Moreover, while in its correspondence with petitioners, Ayala Corporation did mention the filing of the Lancer suit as an obstacle to its development of
the property, it never actually brought up nor sought redress for petitioners' alleged breach of warranty for failure to disclose the Lancer claim until it
filed its Answer27 dated February 17, 1992.

We now come to the correct interpretation of paragraph 5.7 of the MOA. Does this paragraph express a commitment or a mere intent on the part of Ayala
Corporation to develop the property within three (3) years from date thereof? Paragraph 5.7 provides:

5.7. The BUYER hereby commits that it will develop the 'Remaining Property' into a first class residential subdivision of the same class as its
New Alabang Subdivision, and that it intends to complete the first phase under its amended development plan within three (3) years from the
date of this Agreement….28

Notably, while the first phrase of the paragraph uses the word "commits" in reference to the development of the "Remaining Property" into a first class
residential subdivision, the second phrase uses the word "intends" in relation to the development of the first phase of the property within three (3) years
from the date of the MOA. The variance in wording is significant. While "commit" 29 connotes a pledge to do something, "intend"30 merely signifies a
design or proposition.

Atty. Leopoldo Francisco, former Vice President of Ayala Corporation's legal division who assisted in drafting the MOA, testified:

COURT

You only ask what do you mean by that intent. Just answer on that point.

ATTY. BLANCO

Don't talk about standard.

WITNESS

A Well, the word intent here, your Honor, was used to emphasize the tentative character of the period of development because it will be noted
that the sentence refers to and I quote "to complete the first phase under its amended development plan within three (3) years from the date of
this agreement, at the time of the execution of this agreement, your Honor." That amended development plan was not yet in existence because
the buyer had manifested to the seller that the buyer could amend the subdivision plan originally belonging to the seller to conform with its
own standard of development and second, your Honor, (interrupted)31

It is thus unmistakable that this paragraph merely expresses an intention on Ayala Corporation's part to complete the first phase under its amended
development plan within three (3) years from the execution of the MOA. Indeed, this paragraph is so plainly worded that to misunderstand its import is
deplorable.

More focal to the resolution of the instant case is paragraph 5.7's clear reference to the first phase of Ayala Corporation's amended development plan as
the subject of the three (3)-year intended timeframe for development. Even petitioner Daniel Vazquez admitted on cross-examination that the paragraph
refers not to Conduit's but to Ayala Corporation's development plan which was yet to be formulated when the MOA was executed:

Q: Now, turning to Section 5.7 of this Memorandum of Agreement, it is stated as follows: "The Buyer hereby commits that to develop the remaining
property into a first class residential subdivision of the same class as New Alabang Subdivision, and that they intend to complete the first phase under its
amended development plan within three years from the date of this agreement."

Now, my question to you, Dr. Vasquez is that there is no dispute that the amended development plan here is the amended development plan of Ayala?

A: Yes, sir.

Q: In other words, it is not Exhibit "D-5" which is the original plan of Conduit?

A: No, it is not.

Q: This Exhibit "D-5" was the plan that was being followed by GP Construction in 1981?

A: Yes, sir.
 Q: And point of fact during your direct examination as of the date of the agreement, this amended development plan was still to be formulated
by Ayala?

A: Yes, sir.32

As correctly held by the appellate court, this admission is crucial because while the subject lots to be sold to petitioners were in the first phase of the
Conduit development plan, they were in the third or last phase of the Ayala Corporation development plan. Hence, even assuming that paragraph 5.7
expresses a commitment on the part of Ayala Corporation to develop the first phase of its amended development plan within three (3) years from the
execution of the MOA, there was no parallel commitment made as to the timeframe for the development of the third phase where the subject lots are
located.

Lest it be forgotten, the point of this petition is the alleged failure of Ayala Corporation to offer the subject lots for sale to petitioners within three (3)
years from the execution of the MOA. It is not that Ayala Corporation committed or intended to develop the first phase of its amended development plan
within three (3) years. Whether it did or did not is actually beside the point since the subject lots are not located in the first phase anyway.

We now come to the issue of default or delay in the fulfillment of the obligation.

Article 1169 of the Civil Code provides:

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.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered
or the service is to be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

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 fulfills his obligation, delay by the other begins.

In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable and already
liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially.33

Under Article 1193 of the Civil Code, obligations for whose fulfillment a day certain has been fixed shall be demandable only when that day comes.
However, no such day certain was fixed in the MOA. Petitioners, therefore, cannot demand performance after the three (3) year period fixed by the MOA
for the development of the first phase of the property since this is not the same period contemplated for the development of the subject lots. Since the
MOA does not specify a period for the development of the subject lots, petitioners should have petitioned the court to fix the period in accordance with
Article 119734 of the Civil Code. As no such action was filed by petitioners, their complaint for specific performance was premature, the obligation not
being demandable at that point. Accordingly, Ayala Corporation cannot likewise be said to have delayed performance of the obligation.

Even assuming that the MOA imposes an obligation on Ayala Corporation to develop the subject lots within three (3) years from date thereof, Ayala
Corporation could still not be held to have been in delay since no demand was made by petitioners for the performance of its obligation.

As found by the appellate court, petitioners' letters which dealt with the three (3)-year timetable were all dated prior to April 23, 1984, the date when the
period was supposed to expire. In other words, the letters were sent before the obligation could become legally demandable. Moreover, the letters were
mere reminders and not categorical demands to perform. More importantly, petitioners waived the three (3)-year period as evidenced by their agent,
Engr. Eduardo Turla's letter to the effect that petitioners agreed that the three (3)-year period should be counted from the termination of the case filed by
Lancer. The letter reads in part:

I. Completion of Phase I

As per the memorandum of Agreement also dated April 23, 1981, it was undertaken by your goodselves to complete the development of Phase I
within three (3) years. Dr. & Mrs. Vazquez were made to understand that you were unable to accomplish this because of legal problems with
the previous contractor. These legal problems were resolved as of February 19, 1987, and Dr. & Mrs. Vazquez therefore expect that the
development of Phase I will be completed by February 19, 1990, three years from the settlement of the legal problems with the previous
contractor. The reason for this is, as you know, that security-wise, Dr. & Mrs. Vazquez have been advised not to construct their residence till
the surrounding area (which is Phase I) is developed and occupied. They have been anxious to build their residence for quite some time now,
and would like to receive assurance from your goodselves regarding this, in compliance with the agreement.

II. Option on the adjoining lots

We have already written your goodselves regarding the intention of Dr. & Mrs. Vazquez to exercise their option to purchase the two lots on
each side (a total of 4 lots) adjacent to their "Retained Area". They are concerned that although over a year has elapsed since the settlement of
 the legal problems, you have not presented them with the size, configuration, etc. of these lots. They would appreciate being provided with
these at your earliest convenience.35

Manifestly, this letter expresses not only petitioners' acknowledgement that the delay in the development of Phase I was due to the legal problems with
GP Construction, but also their acquiescence to the completion of the development of Phase I at the much later date of February 19, 1990. More
importantly, by no stretch of semantic interpretation can it be construed as a categorical demand on Ayala Corporation to offer the subject lots for sale to
petitioners as the letter merely articulates petitioners' desire to exercise their option to purchase the subject lots and concern over the fact that they have
not been provided with the specifications of these lots.

The letters of petitioners' children, Juan Miguel and Victoria Vazquez, dated January 23, 1984 36 and February 18, 198437 can also not be considered
categorical demands on Ayala Corporation to develop the first phase of the property within the three (3)-year period much less to offer the subject lots
for sale to petitioners. The letter dated January 23, 1984 reads in part:

You will understand our interest in the completion of the roads to our property, since we cannot develop it till you have constructed the same.
Allow us to remind you of our Memorandum of Agreement, as per which you committed to develop the roads to our property "as per the
original plans of the company", and that

1. The back portion should have been developed before the front portion – which has not been the case.

2. The whole project – front and back portions be completed by 1984.38

The letter dated February 18, 1984 is similarly worded. It states:

In this regard, we would like to remind you of Articles 5.7 and 5.9 of our Memorandum of Agreement which states respectively:…39

Even petitioner Daniel Vazquez' letter40 dated March 5, 1984 does not make out a categorical demand for Ayala Corporation to offer the subject lots for
sale on or before April 23, 1984. The letter reads in part:

…and that we expect from your goodselves compliance with our Memorandum of Agreement, and a definite date as to when the road to our
property and the development of Phase I will be completed.41

At best, petitioners' letters can only be construed as mere reminders which cannot be considered demands for performance because it must appear that
the tolerance or benevolence of the creditor must have ended.42

The petition finally asks us to determine whether paragraph 5.15 of the MOA can properly be construed as an option contract or a right of first refusal.
Paragraph 5.15 states:

5.15 The BUYER agrees to give the SELLERS first option to purchase four developed lots next to the "Retained Area" at the prevailing market
price at the time of the purchase.43

The Court has clearly distinguished between an option contract and a right of first refusal. An option is a preparatory contract in which one party grants
to another, for a fixed period and at a determined price, the privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds
the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to
enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate and distinct contract
from that which the parties may enter into upon the consummation of the option. It must be supported by consideration.44

In a right of first refusal, on the other hand, while the object might be made determinate, the exercise of the right would be dependent not only on the
grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up.45

Applied to the instant case, paragraph 5.15 is obviously a mere right of first refusal and not an option contract. Although the paragraph has a definite
object, i.e., the sale of subject lots, the period within which they will be offered for sale to petitioners and, necessarily, the price for which the subject lots
will be sold are not specified. The phrase "at the prevailing market price at the time of the purchase" connotes that there is no definite period within
which Ayala Corporation is bound to reserve the subject lots for petitioners to exercise their privilege to purchase. Neither is there a fixed or
determinable price at which the subject lots will be offered for sale. The price is considered certain if it may be determined with reference to another
thing certain or if the determination thereof is left to the judgment of a specified person or persons.46

Further, paragraph 5.15 was inserted into the MOA to give petitioners the first crack to buy the subject lots at the price which Ayala Corporation would be
willing to accept when it offers the subject lots for sale. It is not supported by an independent consideration. As such it is not governed by Articles 1324
and 1479 of the Civil Code, viz:

Art. 1324. When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
Consequently, the "offer" may be withdrawn anytime by communicating the withdrawal to the other party.47

In this case, Ayala Corporation offered the subject lots for sale to petitioners at the price of P6,500.00/square meter, the prevailing market price for the
property when the offer was made on June 18, 1990.48 Insisting on paying for the lots at the prevailing market price in 1984 of P460.00/square meter,
petitioners rejected the offer. Ayala Corporation reduced the price to P5,000.00/square meter but again, petitioners rejected the offer and instead made
a counter-offer in the amount of P2,000.00/square meter.49 Ayala Corporation rejected petitioners' counter-offer. With this rejection, petitioners lost
their right to purchase the subject lots.

It cannot, therefore, be said that Ayala Corporation breached petitioners' right of first refusal and should be compelled by an action for specific
performance to sell the subject lots to petitioners at the prevailing market price in 1984.

WHEREFORE, the instant petition is DENIED. No pronouncement as to costs.

SO ORDERED.
G.R. No. 140182. April 12, 2005

TANAY RECREATION CENTER AND DEVELOPMENT CORP., Petitioners,

vs.
CATALINA MATIENZO FAUSTO* and ANUNCIACION FAUSTO PACUNAYEN, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-square meter property located in Sitio Gayas, Tanay, Rizal,
owned by Catalina Matienzo Fausto,1 under a Contract of Lease executed on August 1, 1971. On this property stands the Tanay Coliseum Cockpit operated
by petitioner. The lease contract provided for a 20-year term, subject to renewal within sixty days prior to its expiration. The contract also provided that
should Fausto decide to sell the property, petitioner shall have the "priority right" to purchase the same.2

On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease. 3 However, it was Fausto’s daughter, respondent Anunciacion
F. Pacunayen, who replied, asking that petitioner remove the improvements built thereon, as she is now the absolute owner of the property.4 It appears
that Fausto had earlier sold the property to Pacunayen on August 8, 1990, for the sum of ₱10,000.00 under a "Kasulatan ng Bilihan Patuluyan ng
Lupa,"5 and title has already been transferred in her name under Transfer Certificate of Title (TCT) No. M-35468.6

Despite efforts, the matter was not resolved. Hence, on September 4, 1991, petitioner filed an Amended Complaint for Annulment of Deed of Sale,
Specific Performance with Damages, and Injunction, docketed as Civil Case No. 372-M.7

In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the deed of sale as the latter acknowledged her ownership
when it merely asked for a renewal of the lease. According to respondent, when they met to discuss the matter, petitioner did not demand for the exercise
of its option to purchase the property, and it even asked for grace period to vacate the premises.8

After trial on the merits, the Regional Trial Court of Morong, Rizal (Branch 78), rendered judgment extending the period of the lease for another seven
years from August 1, 1991 at a monthly rental of ₱10,000.00, and dismissed petitioner’s claim for damages.9

On appeal, docketed as CA-G.R. CV No. 43770, the Court of Appeals (CA) affirmed with modifications the trial court’s judgment per its Decision dated
June 14, 1999.10 The dispositive portion of the decision reads:

WHEREFORE, the appealed decision is AFFIRMED AND ACCORDINGLY MODIFIED AS DISCUSSED.

Furthermore, we resolved:
1.0. That TRCDC VACATE the leased premises immediately;

2.0. To GRANT the motion of Pacunayen to allow her to withdraw the amount of ₱320,000.00, deposited according to records, with this court.

3.0. To order TRCDC to MAKE THE NECESSARY ACCOUNTING regarding the amounts it had already deposited (for unpaid rentals for the extended
period of seven [7] years of the contract of lease). In case it had not yet completed its deposit, to immediately pay the remaining balance to Pacunayen.

4.0. To order TRCDC to PAY the amount of ₱10,000.00 as monthly rental, with regard to its continued stay in the leased premises even after the
expiration of the extended period of seven (7) years, computed from August 1, 1998, until it finally vacates therefrom.

SO ORDERED.11

In arriving at the assailed decision, the CA acknowledged the priority right of TRCDC to purchase the property in question. However, the CA interpreted
such right to mean that it shall be applicable only in case the property is sold to strangers and not to Fausto’s relative. The CA stated that "(T)o interpret
it otherwise as to comprehend all sales including those made to relatives and to the compulsory heirs of the seller at that would be an absurdity," and
"her (Fausto’s) only motive for such transfer was precisely one of preserving the property within her bloodline and that someone administer the
property."12 The CA also ruled that petitioner already acknowledged the transfer of ownership and is deemed to have waived its right to purchase the
property.13 The CA even further went on to rule that even if the sale is annulled, petitioner could not achieve anything because the property will be
eventually transferred to Pacunayen after Fausto’s death.14

Petitioner filed a motion for reconsideration but it was denied per Resolution dated September 14, 1999.15

Dissatisfied, petitioner elevated the case to this Court on petition for review on certiorari, raising the following grounds:

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN HOLDING THAT THE CONTRACTUAL STIPULATION
GIVING PETITIONER THE PRIORITY RIGHT TO PURCHASE THE LEASED PREMISES SHALL ONLY APPLY IF THE LESSOR DECIDES TO SELL
THE SAME TO STRANGERS;

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN HOLDING THAT PETITIONER’S PRIORITY RIGHT TO
PURCHASE THE LEASED PREMISES IS INCONSEQUENTIAL.16

The principal bone of contention in this case refers to petitioner’s priority right to purchase, also referred to as the right of first refusal.

Petitioner’s right of first refusal in this case is expressly provided for in the notarized "Contract of Lease" dated August 1, 1971, between Fausto and
petitioner, to wit:

7. That should the LESSOR decide to sell the leased premises, the LESSEE shall have the priority right to purchase the same;17

When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has
made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that the lessor's first offer shall be in his
favor.18 Petitioner’s right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The
consideration for the lease includes the consideration for the right of first refusal19 and is built into the reciprocal obligations of the parties.

It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to Fausto’s relative.20 When the terms of an
agreement have been reduced to writing, it is considered as containing all the terms agreed upon. As such, there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written agreement, except when it fails to express the true intent and
agreement of the parties.21 In this case, the wording of the stipulation giving petitioner the right of first refusal is plain and unambiguous, and leaves no
room for interpretation. It simply means that should Fausto decide to sell the leased property during the term of the lease, such sale should first be
offered to petitioner. The stipulation does not provide for the qualification that such right may be exercised only when the sale is made to strangers or
persons other than Fausto’s kin. Thus, under the terms of petitioner’s right of first refusal, Fausto has the legal duty to petitioner not to sell the property
to anybody, even her relatives, at any price until after she has made an offer to sell to petitioner at a certain price and said offer was rejected by
petitioner. Pursuant to their contract, it was essential that Fausto should have first offered the property to petitioner before she sold it to respondent. It
was only after petitioner failed to exercise its right of first priority could Fausto then lawfully sell the property to respondent.

The rule is that a sale made in violation of a right of first refusal is valid. However, it may be rescinded, or, as in this case, may be the subject of an action
for specific performance.22 In Riviera Filipina, Inc. vs. Court of Appeals,23 the Court discussed the concept and interpretation of the right of first refusal
and the consequences of a breach thereof, to wit:

. . . It all started in 1992 with Guzman, Bocaling & Co. v. Bonnevie where the Court held that a lease with a proviso granting the lessee the right of
first priority "all things and conditions being equal" meant that there should be identity of the terms and conditions to be offered to the lessee and all
other prospective buyers, with the lessee to enjoy the right of first priority. A deed of sale executed in favor of a third party who cannot be deemed a
purchaser in good faith, and which is in violation of a right of first refusal granted to the lessee is not voidable under the Statute of Frauds but rescissible
under Articles 1380 to 1381 (3) of the New Civil Code.

Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of Appeals, the Court en banc departed from the doctrine laid down in Guzman,
Bocaling & Co. v. Bonnevie and refused to rescind a contract of sale which violated the right of first refusal. The Court held that the so-called "right
of first refusal" cannot be deemed a perfected contract of sale under Article 1458 of the New Civil Code and, as such, a breach thereof decreed under a
final judgment does not entitle the aggrieved party to a writ of execution of the judgment but to an action for damages in a proper forum for the purpose.
In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., the Court en banc reverted back to the doctrine in Guzman
Bocaling & Co. v. Bonnevie stating that rescission is a relief allowed for the protection of one of the contracting parties and even third persons from
all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract.

Thereafter in 1997, in Parañaque Kings Enterprises, Inc. v. Court of Appeals, the Court affirmed the nature of and the concomitant rights and
obligations of parties under a right of first refusal. The Court, summarizing the rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial
Realty Development, Inc. v. Mayfair Theater, Inc., held that in order to have full compliance with the contractual right granting petitioner the
first option to purchase, the sale of the properties for the price for which they were finally sold to a third person should have likewise been first offered
to the former. Further, there should be identity of terms and conditions to be offered to the buyer holding a right of first refusal if such right is not to be
rendered illusory. Lastly, the basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective
buyer.

The prevailing doctrine therefore, is that a right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective
buyers and a contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible.24

It was also incorrect for the CA to rule that it would be useless to annul the sale between Fausto and respondent because the property would still remain
with respondent after the death of her mother by virtue of succession, as in fact, Fausto died in March 1996, and the property now belongs to respondent,
being Fausto’s heir.25

For one, Fausto was bound by the terms and conditions of the lease contract. Under the right of first refusal clause, she was obligated to offer the
property first to petitioner before selling it to anybody else. When she sold the property to respondent without offering it to petitioner, the sale while
valid is rescissible so that petitioner may exercise its option under the contract.

With the death of Fausto, whatever rights and obligations she had over the property, including her obligation under the lease contract, were transmitted
to her heirs by way of succession, a mode of acquiring the property, rights and obligation of the decedent to the extent of the value of the inheritance of
the heirs. Article 1311 of the Civil Code provides:

ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received
from the decedent.

A lease contract is not essentially personal in character.26 Thus, the rights and obligations therein are transmissible to the heirs. The general rule is that
heirs are bound by contracts entered into by their predecessors-in-interest except when the rights and obligations arising therefrom are not transmissible
by (1) their nature, (2) stipulation or (3) provision of law.27

In this case, the nature of the rights and obligations are, by their nature, transmissible. There is also neither contractual stipulation nor provision of law
that makes the rights and obligations under the lease contract intransmissible. The lease contract between petitioner and Fausto is a property right,
which is a right that passed on to respondent and the other heirs, if any, upon the death of Fausto.

In DKC Holdings Corporation vs. Court of Appeals,28 the Court held that the Contract of Lease with Option to Buy entered into by the late Encarnacion
Bartolome with DKC Holdings Corporation was binding upon her sole heir, Victor, even after her demise and it subsists even after her death. The Court
ruled that:

. . . Indeed, being an heir of Encarnacion, there is privity of interest between him and his deceased mother. He only succeeds to what rights his
mother had and what is valid and binding against her is also valid and binding as against him. This is clear from Parañaque Kings
Enterprises vs. Court of Appeals, where this Court rejected a similar defense-

With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being the lessor nor the lessee referred to therein,
he could thus not have violated its provisions, but he is nevertheless a proper party. Clearly, he stepped into the shoes of the owner-lessor of the land as,
by virtue of his purchase, he assumed all the obligations of the lessor under the lease contract. Moreover, he received benefits in the form of rental
payments. Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the properties to him. Both pleadings also alleged
collusion between him and respondent Santos which defeated the exercise by petitioner of its right of first refusal.

In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not indispensable, party to the case. A favorable judgment
for the petitioner will necessarily affect the rights of respondent Raymundo as the buyer of the property over which petitioner would like to assert its
right of first option to buy.29 (Emphasis supplied)

Likewise in this case, the contract of lease, with all its concomitant provisions, continues even after Fausto’s death and her heirs merely stepped into her
shoes.30 Respondent, as an heir of Fausto, is therefore bound to fulfill all its terms and conditions.

There is no personal act required from Fausto such that respondent cannot perform it. Fausto’s obligation to deliver possession of the property to
petitioner upon the exercise by the latter of its right of first refusal may be performed by respondent and the other heirs, if any. Similarly,
nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract.31

The CA likewise found that petitioner acknowledged the legitimacy of the sale to respondent and it is now barred from exercising its right of first refusal.
According to the appellate court:

Second, when TRCDC, in a letter to Fausto, signified its intention to renew the lease contract, it was Pacunayen who answered the letter on June 19, 1991.
In that letter Pacunayen demanded that TRCDC vacate the leased premises within sixty (60) days and informed it of her ownership of the leased
premises. The pertinent portion of the letter reads:
Furtherly, please be advised that the land is no longer under the absolute ownership of my mother and the undersigned is now the real and absolute
owner of the land.

Instead of raising a howl over the contents of the letter, as would be its expected and natural reaction under the circumstances, TRCDC surprisingly kept
silent about the whole thing. As we mentioned in the factual antecedents of this case, it even invited Pacunayen to its special board meeting particularly
to discuss with her the renewal of the lease contract. Again, during that meeting, TRCDC did not mention anything that could be construed as
challenging Pacunayen’s ownership of the leased premises. Neither did TRCDC assert its priority right to purchase the same against Pacunayen.32

The essential elements of estoppel are: (1) conduct of a party amounting to false representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at
least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real
facts.33

The records are bereft of any proposition that petitioner waived its right of first refusal under the contract such that it is now estopped from exercising
the same. In a letter dated June 17, 1991, petitioner wrote to Fausto asking for a renewal of the term of lease. 34 Petitioner cannot be faulted for merely
seeking a renewal of the lease contract because obviously, it was working on the assumption that title to the property is still in Fausto’s name and the
latter has the sole authority to decide on the fate of the property. Instead, it was respondent who replied, advising petitioner to remove all the
improvements on the property, as the lease is to expire on the 1st of August 1991. Respondent also informed petitioner that her mother has already sold
the property to her.35 In order to resolve the matter, a meeting was called among petitioner’s stockholders, including respondent, on July 27, 1991, where
petitioner, again, proposed that the lease be renewed. Respondent, however, declined. While petitioner may have sought the renewal of the lease, it
cannot be construed as a relinquishment of its right of first refusal. Estoppel must be intentional and unequivocal. 36

Also, in the excerpts from the minutes of the special meeting, it was further stated that the possibility of a sale was likewise considered.37 But respondent
also refused to sell the land, while the improvements, "if for sale shall be subject for appraisal." 38 After respondent refused to sell the land, it was then
that petitioner filed the complaint for annulment of sale, specific performance and damages. 39 Petitioner’s acts of seeking all possible avenues for the
amenable resolution of the conflict do not amount to an intentional and unequivocal abandonment of its right of first refusal.

Respondent was well aware of petitioner’s right to priority of sale, and that the sale made to her by her mother was merely for her to be able to take
charge of the latter’s affairs. As admitted by respondent in her Appellee’s Brief filed before the CA, viz.:

After June 19, 1991, TRCDC invited Pacunayen to meeting with the officers of the corporation. . . . In the same meeting, Pacunayen’s attention
was called to the provision of the Contract of Lease had by her mother with TRCDC, particularly paragraph 7 thereof, which states:

7. That should the lessor decide to sell the leased premises, the LESSEE shall have the priority right to purchase the same.

Of course, in the meeting she had with the officers of TRCDC, Pacunayen explained that the sale made in her favor by her mother was just a formality so
that she may have the proper representation with TRCDC in the absence of her parents, more so that her father had already passed away, and there was
no malice in her mine (sic) and that of her mother, or any intention on their part to deceive TRCDC. All these notwithstanding, and for her to show their
good faith in dealing with TRCDC, Pacunayen started the ground work to reconvey ownership over the whole land, now covered by Transfer Certificare
(sic) of Title No. M-259, to and in the name of her mother (Fausto), but the latter was becoming sickly, old and weak, and they found no time to do it as
early as they wanted to.40 (Emphasis supplied)

Given the foregoing, the "Kasulatan ng Bilihan Patuluyan ng Lupa" dated August 8, 1990 between Fausto and respondent must be
rescinded. Considering, however, that Fausto already died on March 16, 1996, during the pendency of this case with the CA, her heirs
should have been substituted as respondents in this case. Considering further that the Court cannot declare respondent Pacunayen as the sole heir, as it
is not the proper forum for that purpose, the right of petitioner may only be enforced against the heirs of the deceased Catalina Matienzo Fausto,
represented by respondent Pacunayen.

In Parañaque Kings Enterprises, Inc. vs. Court of Appeals,41 it was ruled that the basis of the right of the first refusal must be the current offer to sell of
the seller or offer to purchase of any prospective buyer. It is only after the grantee fails to exercise its right of first priority under the same terms and
within the period contemplated, could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the grantee.
The circumstances of this case, however, dictate the application of a different ruling. An offer of the property to petitioner under identical terms and
conditions of the offer previously given to respondent Pacunayen would be inequitable. The subject property was sold in 1990 to respondent Pacunayen
for a measly sum of ₱10,000.00. Obviously, the value is in a small amount because the sale was between a mother and daughter. As admitted by said
respondent, "the sale made in her favor by her mother was just a formality so that she may have the proper representation with TRCDC in the absence of
her parents…"42 Consequently, the offer to be made to petitioner in this case should be under reasonable terms and conditions, taking into account the
fair market value of the property at the time it was sold to respondent.

In its complaint, petitioner prayed for the cancellation of TCT No. M-35468 in the name of respondent Pacunayen,43which was issued by the Register of
Deeds of Morong on February 7, 1991.44 Under ordinary circumstances, this would be the logical effect of the rescission of the "Kasulatan ng Bilihan
Patuluyan ng Lupa" between the deceased Fausto and respondent Pacunayen. However, the circumstances in this case are not ordinary. The buyer of
the subject property is the seller’s own daughter. If and when the title (TCT No. M-35468) in respondent Pacunayen’s name is cancelled and reinstated in
Fausto’s name, and thereafter negotiations between petitioner and respondent Pacunayen for the purchase of the subject property break down, then the
subject property will again revert to respondent Pacunayen as she appears to be one of Fausto’s heirs. This would certainly be a winding route to traverse.
Sound reason therefore dictates that title should remain in the name of respondent Pacunayen, for and in behalf of the other heirs, if any, to be cancelled
only when petitioner successfully exercises its right of first refusal and purchases the subject property.

Petitioner further seeks the award of the following damages in its favor: (1) ₱100,000.00 as actual damages; (2) ₱1,100,000.00 as compensation for lost
goodwill or reputation; (3) ₱100,000.00 as moral damages; (4) ₱100,000.00 as exemplary damages; (5) ₱50,000.00 as attorney’s fees; (6) ₱1,000.00
appearance fee per hearing; and (7) the costs of suit.45
According to petitioner, respondent’s act in fencing the property led to the closure of the Tanay Coliseum Cockpit and petitioner was unable to conduct
cockfights and generate income of not less than ₱100,000.00 until the end of September 1991, aside from the expected rentals from the cockpit space
lessees in the amount of ₱11,000.00.46

Under Article 2199 of the Civil Code, it is provided that:

Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has
duly proved. Such compensation is referred to as actual or compensatory damages. (Emphasis supplied)

The rule is that actual or compensatory damages cannot be presumed, but must be proved with reasonable degree of certainty. A court cannot rely on
speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by
the injured party and on the best obtainable evidence of the actual amount thereof. It must point out specific facts, which could afford a basis for
measuring whatever compensatory or actual damages are borne.47

In the present case, there is no question that the Tanay Coliseum Cockpit was closed for two months and TRCDC did not gain any income during said
period. But there is nothing on record to substantiate petitioner’s claim that it was bound to lose some ₱111,000.00 from such closure. TRCDC’s
president, Ambrosio Sacramento, testified that they suffered income losses with the closure of the cockpit from August 2, 1991 until it re-opened on
October 20, 1991.48 Mr. Sacramento, however, cannot state with certainty the amount of such unrealized income.49 Meanwhile, TRCDC’s accountant,
Merle Cruz, stated that based on the corporation’s financial statement for the years 1990 and 1991, 50 they derived the amount of ₱120,000.00 as annual
income from rent.51 From said financial statement, it is safe to presume that TRCDC generated a monthly income of ₱10,000.00 a month (₱120,000.00
annual income divided by 12 months). At best therefore, whatever actual damages that petitioner suffered from the cockpit’s closure for a period of two
months can be reasonably summed up only to ₱20,000.00.

Such award of damages shall earn interest at the legal rate of six percent (6%) per annum, which shall be computed from the time of the filing of the
Complaint on August 22, 1991, until the finality of this decision. After the present decision becomes final and executory, the rate of interest shall increase
to twelve percent (12%) per annum from such finality until its satisfaction, this interim period being deemed to be equivalent to a forbearance of
credit.52 This is in accord with the guidelines laid down by the Court in Eastern Shipping Lines, Inc. vs. Court of Appeals,53regarding the manner of
computing legal interest, viz.:

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof,
is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.54

Petitioner also claims the amount of ₱1,100,000.00 as compensation for lost goodwill or reputation. It alleged that "with the unjust and wrongful
conduct of the defendants as above-described, plaintiff stands to lose its goodwill and reputation established for the past 20 years." 55

An award of damages for loss of goodwill or reputation falls under actual or compensatory damages as provided in Article 2205 of the Civil Code, to wit:

Art. 2205. Damages may be recovered:

(1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury;

(2) For injury to the plaintiff’s business standing or commercial credit.

Even if it is not recoverable as compensatory damages, it may still be awarded in the concept of temperate or moderate damages.56 In arriving at a
reasonable level of temperate damages to be awarded, trial courts are guided by the ruling that:

. . . There are cases where from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is convinced that there has
been such loss. For instance, injury to one's commercial credit or to the goodwill of a business firm is often hard to show certainty in terms of money.
Should damages be denied for that reason? The judge should be empowered to calculate moderate damages in such cases, rather than that the plaintiff
should suffer, without redress from the defendant's wrongful act. (Araneta v. Bank of America, 40 SCRA 144, 145)57
In this case, aside from the nebulous allegation of petitioner in its amended complaint, there is no evidence on record, whether testimonial or
documentary, to adequately support such claim. Hence, it must be denied.

Petitioner’s claim for moral damages must likewise be denied. The award of moral damages cannot be granted in favor of a corporation because, being an
artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses. It cannot, therefore, experience physical
suffering and mental anguish, which can be experienced only by one having a nervous system. 58 Petitioner being a corporation,59 the claim for moral
damages must be denied.

With regard to the claim for exemplary damages, it is a requisite in the grant thereof that the act of the offender must be accompanied by bad faith or
done in wanton, fraudulent or malevolent manner.60 Moreover, where a party is not entitled to actual or moral damages, an award of exemplary damages
is likewise baseless.61 In this case, petitioner failed to show that respondent acted in bad faith, or in wanton, fraudulent or malevolent manner.

Petitioner likewise claims the amount of ₱50,000.00 as attorney’s fees, the sum of ₱1,000.00 for every appearance of its counsel, plus costs of suit. It is
well settled that no premium should be placed on the right to litigate and not every winning party is entitled to an automatic grant of attorney's fees. The
party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code. In this case, since petitioner was compelled to
engage the services of a lawyer and incurred expenses to protect its interest and right over the subject property, the award of attorney’s fees is proper.
However there are certain standards in fixing attorney's fees, to wit: (1) the amount and the character of the services rendered; (2) labor, time and
trouble involved; (3) the nature and importance of the litigation and business in which the services were rendered; (4) the responsibility imposed; (5) the
amount of money and the value of the property affected by the controversy or involved in the employment; (6) the skill and the experience called for in
the performance of the services; (7) the professional character and the social standing of the attorney; and (8) the results secured, it being a recognized
rule that an attorney may properly charge a much larger fee when it is contingent than when it is not. 62 Considering the foregoing, the award of
₱10,000.00 as attorney’s fees, including the costs of suit, is reasonable under the circumstances.

WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. The Court of Appeals’ Decision dated June 14, 1999 in CA-G.R. CV No.
43770 is MODIFIED as follows:

(1) the "Kasulatan ng Bilihan Patuluyan ng Lupa" dated August 8, 1990 between Catalina Matienzo Fausto and respondent Anunciacion Fausto
Pacunayen is hereby deemed rescinded;

(2) The Heirs of the deceased Catalina Matienzo Fausto who are hereby deemed substituted as respondents, represented by respondent Anunciacion
Fausto Pacunayen, are ORDERED to recognize the obligation of Catalina Matienzo Fausto under the Contract of Lease with respect to the priority right
of petitioner Tanay Recreation Center and Development Corp. to purchase the subject property under reasonable terms and conditions;

(3) Transfer Certificate of Title No. M-35468 shall remain in the name of respondent Anunciacion Fausto Pacunayen, which shall be cancelled in the
event petitioner successfully purchases the subject property;

(4) Respondent is ORDERED to pay petitioner Tanay Recreation Center and Development Corporation the amount of Twenty Thousand Pesos
(₱20,000.00) as actual damages, plus interest thereon at the legal rate of six percent (6%) per annum from the filing of the Complaint until the finality of
this Decision. After this Decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction; and,

(5) Respondent is ORDERED to pay petitioner the amount of Ten Thousand Pesos (₱10,000.00) as attorney’s fees, and to pay the costs of suit.

(6) Let the case be remanded to the Regional Trial Court, Morong, Rizal (Branch 78) for further proceedings on the determination of the "reasonable
terms and conditions" of the offer to sell by respondents to petitioner, without prejudice to possible mediation between the parties.

The rest of the unaffected dispositive portion of the Court of Appeals’ Decision is AFFIRMED.

SO ORDERED.
G.R. No. 168325 December 8, 2010
ROBERTO D. TUAZON, Petitioner,
vs.
LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R. SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL LUIS S. DE LEON,
ROMMEL LEE S. DE LEON, and GUILLERMA L. SANDICO-SILVA, as attorney-in-fact of the defendants, except Lourdes Q. Del
Rosario-Suarez, Respondents.

DECISION

DEL CASTILLO, J.:

In a situation where the lessor makes an offer to sell to the lessee a certain property at a fixed price within a certain period, and the lessee fails to accept
the offer or to purchase on time, then the lessee loses his right to buy the property and the owner can validly offer it to another.

This Petition for Review on Certiorari1 assails the Decision2 dated May 30, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 78870, which affirmed
the Decision3 dated November 18, 2002 of the Regional Trial Court (RTC), Branch 101, Quezon City in Civil Case No. Q-00-42338.

Factual Antecedents

Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of land, containing more or less an area of 1,211 square meters located
along Tandang Sora Street, Barangay Old Balara, Quezon City and previously covered by Transfer Certificate of Title (TCT) No. RT-561184 issued by the
Registry of Deeds of Quezon City.

On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a Contract of Lease5 over the abovementioned parcel of land for a
period of three years. The lease commenced in March 1994 and ended in February 1997. During the effectivity of the lease, Lourdes sent a letter 6 dated
January 2, 1995 to Roberto where she offered to sell to the latter subject parcel of land. She pegged the price at ₱37,541,000.00 and gave him two years
from January 2, 1995 to decide on the said offer.

On June 19, 1997, or more than four months after the expiration of the Contract of Lease, Lourdes sold subject parcel of land to her only child, Catalina
Suarez-De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and Rommel S. De Leon (the De Leons), for a total
consideration of only ₱2,750,000.00 as evidenced by a Deed of Absolute Sale7 executed by the parties. TCT No. 1779868 was then issued by the Registry
of Deeds of Quezon City in the name of the De Leons.

The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the premises. Roberto refused hence, the De Leons filed a
complaint for Unlawful Detainer before the Metropolitan Trial Court (MeTC) of Quezon City against him. On August 30, 2000, the MeTC rendered a
Decision9 ordering Roberto to vacate the property for non-payment of rentals and expiration of the contract.

Ruling of the Regional Trial Court

On November 8, 2000, while the ejectment case was on appeal, Roberto filed with the RTC of Quezon City a Complaint 10 for Annulment of Deed of
Absolute Sale, Reconveyance, Damages and Application for Preliminary Injunction against Lourdes and the De Leons. On November 13, 2000, Roberto
filed a Notice of Lis Pendens11 with the Registry of Deeds of Quezon City.

On January 8, 2001, respondents filed An Answer with Counterclaim12 praying that the Complaint be dismissed for lack of cause of action. They claimed
that the filing of such case was a mere leverage of Roberto against them because of the favorable Decision issued by the MeTC in the ejectment case.

On September 17, 2001, the RTC issued an Order13 declaring Lourdes and the De Leons in default for their failure to appear before the court for the
second time despite notice. Upon a Motion for Reconsideration,14 the trial court in an Order15 dated October 19, 2001 set aside its Order of default.

After trial, the court a quo rendered a Decision declaring the Deed of Absolute Sale made by Lourdes in favor of the De Leons as valid and binding. The
offer made by Lourdes to Roberto did not ripen into a contract to sell because the price offered by the former was not acceptable to the latter. The offer
made by Lourdes is no longer binding and effective at the time she decided to sell the subject lot to the De Leons because the same was not accepted by
Roberto. Thus, in a Decision dated November 18, 2002, the trial court dismissed the complaint. Its dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled Complaint for lack of merit, and ordering the Plaintiff
to pay the Defendants, the following:

1. the amount of ₱30,000.00 as moral damages;

2. the amount of ₱30,000.00 as exemplary damages;

3. the amount of ₱30,000.00 as attorney’s fees; and

4. cost of the litigation.

SO ORDERED.16

Ruling of the Court of Appeals

On May 30, 2005, the CA issued its Decision dismissing Roberto’s appeal and affirming the Decision of the RTC.

Hence, this Petition for Review on Certiorari filed by Roberto advancing the following arguments:

I.

The Trial Court and the Court of Appeals had decided that the "Right of First Refusal" exists only within the parameters of an "Option to Buy", and did
not exist when the property was sold later to a third person, under favorable terms and conditions which the former buyer can meet.

II.

What is the status or sanctions of an appellee in the Court of Appeals who has not filed or failed to file an appellee’s brief?17

Petitioner’s Arguments

Roberto claims that Lourdes violated his right to buy subject property under

the principle of "right of first refusal" by not giving him "notice" and the opportunity to buy the property under the same terms and conditions or
specifically based on the much lower price paid by the De Leons.

Roberto further contends that he is enforcing his "right of first refusal" based on Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.18 which is
the leading case on the "right of first refusal."

Respondents’ Arguments

On the other hand, respondents posit that this case is not covered by the principle of "right of first refusal" but an unaccepted unilateral promise to sell
or, at best, a contract of option which was not perfected. The letter of Lourdes to Roberto clearly embodies an option contract as it grants the latter only
two years to exercise the option to buy the subject property at a price certain of ₱37,541,000.00. As an option contract, the said letter would have been
binding upon Lourdes without need of any consideration, had Roberto accepted the offer. But in this case there was no acceptance made neither was
there a distinct consideration for the option contract.

Our Ruling

The petition is without merit.

This case involves an option contract and not a contract of a right of first refusal

In Beaumont v. Prieto,19 the nature of an option contract is explained thus:

In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:

‘A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or selling to, B certain
securities or properties within a limited time at a specified price. (Story vs. Salamon, 71 N. Y., 420.)’

From Vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following
quotation has been taken:

‘An agreement in writing to give a person the ‘option’ to purchase lands within a given time at a named price is neither a sale nor an agreement to sell. It
is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a
fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something; that is, the right or privilege
to buy at the election or option of the other party. The second party gets in praesenti, not lands, nor an agreement that he shall have lands, but he does
get something of value; that is, the right to call for and receive lands if he elects. The owner parts with his right to sell his lands, except to the second
party, for a limited period. The second party receives this right, or rather, from his point of view, he receives the right to elect to buy.

But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the case where there was cause or consideration
for the obligation x x x. (Emphasis supplied.)

On the other hand, in Ang Yu Asuncion v. Court of Appeals,20 an elucidation on the "right of first refusal" was made thus:

In the law on sales, the so-called ‘right of first refusal’ is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract
of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview
of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 of the same Code. An option or an offer
would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first
refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the
grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations
governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an
issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection of contracts. It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 of
the Civil Code, can warrant a recovery for damages. (Emphasis supplied.)

From the foregoing, it is thus clear that an option contract is entirely different and distinct from a right of first refusal in that in the former, the option
granted to the offeree is for a fixed period and at a determined price. Lacking these two essential requisites, what is involved is only a right of first
refusal.

In this case, the controversy is whether the letter of Lourdes to Roberto dated January 2, 1995 involved an option contract or a contract of a right of first
refusal. In its entirety, the said letter-offer reads:

206 Valdes Street

Josefa Subd. Balibago
Angeles City 2009

January 2, 1995

Tuazon Const. Co.

986 Tandang Sora Quezon City

Dear Mr. Tuazon,

I received with great joy and happiness the big box of sweet grapes and ham, fit for a king’s party. Thanks very much.

I am getting very old (79 going 80 yrs. old) and wish to live in the U.S.A. with my only family. I need money to buy a house and lot and a farm with a little
cash to start.

I am offering you to buy my 1211 square meter at ₱37,541,000.00 you can pay me in dollars in the name of my daughter. I never offered it to
anyone. Please shoulder the expenses for the transfer. I wish the Lord God will help you buy my lot easily and you will be very lucky forever in this
place. You have all the time to decide when you can, but not for 2 years or more.

I wish you long life, happiness, health, wealth and great fortune always!

I hope the Lord God will help you be the recipient of multi-billion projects aid from other countries.

Thank you,

Lourdes Q. del Rosario vda de Suarez

It is clear that the above letter embodies an option contract as it grants Roberto a fixed period of only two years to buy the subject property at a price
certain of ₱37,541,000.00. It being an option contract, the rules applicable are found in Articles 1324 and 1479 of the Civil Code which provide:

Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.

It is clear from the provision of Article 1324 that there is a great difference between the effect of an option which is without a consideration from one
which is founded upon a consideration. If the option is without any consideration, the offeror may withdraw his offer by communicating such withdrawal
to the offeree at anytime before acceptance; if it is founded upon a consideration, the offeror cannot withdraw his offer before the lapse of the period
agreed upon.

The second paragraph of Article 1479 declares that "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." Sanchez v. Rigos21 provided an interpretation of the said
second paragraph of Article 1479 in relation to Article 1324. Thus:

There is no question that under Article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said article, to be valid
must be "supported by a consideration distinct from the price." This is clearly inferred from the context of said article that a unilateral promise to buy or
to sell, even if accepted, is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a binding effect if
supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration.
Hence, it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee.

It is true that under Article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to the offeree a
certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration, but this
general rule must be interpreted as modified by the provision of Article 1479 above referred to, which applies to "a promise to buy and sell" specifically.
As already stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price.

In Diamante v. Court of Appeals,22 this Court further declared that:

A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at the moment it is accepted. Acceptance is the act
that gives life to a juridical obligation, because, before the promise is accepted, the promissor may withdraw it at any time. Upon
acceptance, however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the obligations of a purchaser; the offeror, on
the other hand, would be liable for damages if he fails to deliver the thing he had offered for sale.

xxxx

Even if the promise was accepted, private respondent was not bound thereby in the absence of a distinct consideration. (Emphasis
ours.)

In this case, it is undisputed that Roberto did not accept the terms stated in the letter of Lourdes as he negotiated for a much lower price. Roberto’s act of
negotiating for a much lower price was a counter-offer and is therefore not an acceptance of the offer of Lourdes. Article 1319 of the Civil Code provides:

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must
be certain and the acceptance absolute. A qualified acceptanceconstitutes a counter-offer. (Emphasis supplied.)

The counter-offer of Roberto for a much lower price was not accepted by Lourdes. There is therefore no contract that was perfected between them with
regard to the sale of subject property. Roberto, thus, does not have any right to demand that the property be sold to him at the price for which it was sold
to the De Leons neither does he have the right to demand that said sale to the De Leons be annulled.

Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not applicable here

It is the position of Roberto that the facts of this case and that of Equatorial are similar in nearly all aspects. Roberto is a lessee of the property like
Mayfair Theater in Equatorial. There was an offer made to Roberto by Lourdes during the effectivity of the contract of lease which was also the case
in Equatorial. There were negotiations as to the price which did not bear fruit because Lourdes sold the property to the De Leons which was also the case
in Equatorial wherein Carmelo and Bauermann sold the property to Equatorial. The existence of the lease of the property is known to the De Leons as
they are related to Lourdes while in Equatorial, the lawyers of Equatorial studied the lease contract of Mayfair over the property. The property in this
case was sold by Lourdes to the De Leons at a much lower price which is also the case in Equatorial where Carmelo and Bauerman sold to Equatorial at a
lesser price. It is Roberto’s conclusion that as in the case of Equatorial, there was a violation of his right of first refusal and hence annulment or
rescission of the Deed of Absolute Sale is the proper remedy.

Roberto’s reliance in Equatorial is misplaced. Despite his claims, the facts in Equatorial radically differ from the facts of this case. Roberto overlooked
the fact that in Equatorial, there was an express provision in the Contract of Lease that –

(i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be given 30-days exclusive option to purchase the same.

There is no such similar provision in the Contract of Lease between Roberto and Lourdes. What is involved here is a separate and distinct offer made by
Lourdes through a letter dated January 2, 1995 wherein she is selling the leased property to Roberto for a definite price and which gave the latter a
definite period for acceptance. Roberto was not given a right of first refusal. The letter-offer of Lourdes did not form part of the Lease Contract because it
was made more than six months after the commencement of the lease.

It is also very clear that in Equatorial, the property was sold within the lease period. In this case, the subject property was sold not only after the
expiration of the period provided in the letter-offer of Lourdes but also after the effectivity of the Contract of Lease.

Moreover, even if the offer of Lourdes was accepted by Roberto, still the former is not bound thereby because of the absence of a consideration distinct
and separate from the price. The argument of Roberto that the separate consideration was the liberality on the part of Lourdes cannot stand. A perusal of
the letter-offer of Lourdes would show that what drove her to offer the property to Roberto was her immediate need for funds as she was already very
old. Offering the property to Roberto was not an act of liberality on the part of Lourdes but was a simple matter of convenience and practicality as he was
the one most likely to buy the property at that time as he was then leasing the same.

All told, the facts of the case, as found by the RTC and the CA, do not support Roberto’s claims that the letter of Lourdes gave him a right of first refusal
which is similar to the one given to Mayfair Theater in the case of Equatorial.Therefore, there is no justification to annul the deed of sale validly entered
into by Lourdes with the De Leons.

What is the effect of the failure of Lourdes to file her appellee’s brief at the CA?

Lastly, Roberto argues that Lourdes should be sanctioned for her failure to file her appellee’s brief before the CA.
Certainly, the appellee’s failure to file her brief would not mean that the case would be automatically decided against her. Under the circumstances, the
prudent action on the part of the CA would be to deem Lourdes to have waived her right to file her appellee’s brief. De Leon v. Court of Appeals,23 is
instructive when this Court decreed:

On the second issue, we hold that the Court of Appeals did not commit grave abuse of discretion in considering the appeal submitted for decision. The
proper remedy in case of denial of the motion to dismiss is to file the appellee’s brief and proceed with the appeal. Instead, petitioner opted to file a
motion for reconsideration which, unfortunately, was pro forma. All the grounds raised therein have been discussed in the first resolution of the
respondent Court of Appeals. There is no new ground raised that might warrant reversal of the resolution. A cursory perusal of the motion would readily
show that it was a near verbatim repetition of the grounds stated in the motion to dismiss; hence, the filing of the motion for reconsideration did not
suspend the period for filing the appellee’s brief. Petitioner was therefore properly deemed to have waived his right to file appellee’s
brief. (Emphasis supplied.)lawphi1

In the above cited case, De Leon was the plaintiff in a Complaint for a sum of money in the RTC. He obtained a favorable judgment and so defendant
went to the CA. The appeal of defendant-appellant was taken cognizance of by the CA but De Leon filed a Motion to Dismiss the Appeal with Motion to
Suspend Period to file Appellee’s Brief. The CA denied the Motion to Dismiss. De Leon filed a Motion for Reconsideration which actually did not suspend
the period to file the appellee’s brief. De Leon therefore failed to file his brief within the period specified by the rules and hence he was deemed by the CA
to have waived his right to file appellee’s brief.

The failure of the appellee to file his brief would not result to the rendition of a decision favorable to the appellant. The former is considered only to have
waived his right to file the Appellee’s Brief. The CA has the jurisdiction to resolve the case based on the Appellant’s Brief and the records of the case
forwarded by the RTC. The appeal is therefore considered submitted for decision and the CA properly acted on it.

WHEREFORE, the instant petition for review on certiorari is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 78870,
which affirmed the Decision dated November 18, 2002 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-00-42338
is AFFIRMED.

SO ORDERED.
G.R. No. 177783 January 23, 2013

HEIRS OF FAUSTO C. IGNACIO, namely MARFEL D. IGNACIO-MANALO, MILFA D. IGNACIO-MANALO AND FAUSTINO D.
IGNACIO, Petitioners,
vs.
HOME BANKERS SAVINGS AND TRUST COMPANY, SPOUSES PHILLIP AND THELMA RODRIGUEZ, CATHERINE, REYNOLD &
JEANETTE, all surnamed ZUNIGA, Respondents.

DECISION

VILLARAMA, JR., J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 assailing the Decision 1 dated July 18, 2006 and Resolution2 dated May 2, 2007 of
the Court of Appeals (CA) in CA-G.R. CV No. 73551. The CA reversed the Decision3 dated June 15, 1999 of the Regional Trial Court (RTC) of Pasig City,
Branch 151 in Civil Case No. 58980.

The factual antecedents:

In August 1981, petitioner Fausto C. Ignacio mortgaged two parcels of land to Home Savings Bank and Trust Company, the predecessor of respondent
Home Bankers Savings and Trust Company, as security for the ₱500,000.00 loan extended to him by said bank. These properties which are located in
Cabuyao, Laguna are covered by Transfer Certificate of Title Nos. (T-40380) T-8595 and (T-45804) T-8350 containing an area of 83,303 square meters
and 120,110 square meters, respectively.4

When petitioner defaulted in the payment of his loan obligation, respondent bank proceeded to foreclose the real estate mortgage. At the foreclosure sale
held on January 26, 1983, respondent bank was the highest bidder for the sum of ₱764,984.67. On February 8, 1983, the Certificate of Sale issued to
respondent bank was registered with the Registry of Deeds of Calamba, Laguna. With the failure of petitioner to redeem the foreclosed properties within
one year from such registration, title to the properties were consolidated in favor of respondent bank. Consequently, TCT Nos. T-8595 and T-8350 were
cancelled and TCT Nos. 111058 and 111059 were issued in the name of respondent bank.5

Despite the lapse of the redemption period and consolidation of title in respondent bank, petitioner offered to repurchase the properties. While the
respondent bank considered petitioner's offer to repurchase, there was no repurchase contract executed. The present controversy was fuelled by
petitioner's stance that a verbal repurchase/compromise agreement was actually reached and implemented by the parties.

In the meantime, respondent bank made the following dispositions of the foreclosed properties already titled in its name:

TCT No. 111059 (Subdivided into six lots with individual titles - TCT Nos. 117771, 117772, 117773, 117774, 117775 and 117776)

A. TCT No. 117771 (16,350 sq.ms.) - Sold to Fermin Salvador and Bella Salvador under Deed of Absolute Sale dated May 23, 1984 for the price
of ₱150,000.00

B. TCT No. 11772 (82,569 sq.ms. subdivided into 2 portions

1) Lot 3-B-1 (35,447 sq.ms.) - Sold to Dr. Oscar Remulla and Natividad Pagtakhan, Dr. Edilberto Torres and Dra. Rebecca Amores
under Deed of Absolute Sale dated April 17, 1985 for the price of ₱150,000.00

2) Lot 3-B-2 covered by separate title TCT No. 124660 (Subdivided into 3 portions -

Lot 3-B-2-A (15,000 sq.ms.) - Sold to Dr. Myrna del Carmen Reyes under Deed of Absolute Sale dated March 23, 1987 for
the price of ₱150,000.00

Lot 3-B-2-B (15,000 sq.ms.) - Sold to Dr. Rodito Boquiren under Deed of Absolute Sale dated March 23, 1987 for the price
of ₱150,000.00

Lot 3-B-2-C (17,122 sq.ms.) covered by TCT No. T-154568 -

C. TCT No.117773 (17,232 sq.ms.) - Sold to Rizalina Pedrosa under Deed of Absolute Sale dated June 4, 1984 for the price of ₱150,000.00

The expenses for the subdivision of lots covered by TCT No. 111059 and TCT No. 117772 were shouldered by petitioner who likewise negotiated the
above-mentioned sale transactions. The properties covered by TCT Nos. T-117774 to 117776 are still registered in the name of respondent bank.6

In a letter addressed to respondent bank dated July 25, 1989, petitioner expressed his willingness to pay the amount of ₱600,000.00 in full, as balance of
the repurchase price, and requested respondent bank to release to him the remaining parcels of land covered by TCT Nos. 111058 and T-154658 ("subject
properties").7 Respondent bank however, turned down his request. This prompted petitioner to cause the annotation of an adverse claim on the said
titles on September 18, 1989.8

Prior to the annotation of the adverse claim, on August 24, 1989, the property covered by TCT No. 154658 was sold by respondent bank to respondent
spouses Phillip and Thelma Rodriguez, without informing the petitioner. On October 6, 1989, again without petitioner's knowledge, respondent bank
sold the property covered by TCT No T-111058 to respondents Phillip and Thelma Rodriguez, Catherine M. Zuñiga, Reynold M. Zuñiga and Jeannette M.
Zuñiga.9

On December 27, 1989, petitioner filed an action for specific performance and damages in the RTC against the respondent bank. As principal relief,
petitioner sought in his original complaint the reconveyance of the subject properties after his payment of ₱600,000.00.10 Respondent bank filed its
Answer denying the allegations of petitioner and asserting that it was merely exercising its right as owner of the subject properties when the same were
sold to third parties.

For failure of respondent bank to appear during the pre-trial conference, it was declared as in default and petitioner was allowed to present his evidence
ex parte on the same date (September 3, 1990). Petitioner simultaneously filed an "Ex-Parte Consignation" tendering the amount of ₱235,000.00 as
balance of the repurchase price.11 On September 7, 1990, the trial court rendered judgment in favor of petitioner. Said decision, as well as the order of
default, were subsequently set aside by the trial court upon the filing of a motion for reconsideration by the respondent bank.12

In its Order dated November 19, 1990, the trial court granted the motion for intervention filed by respondents Phillip and Thelma Rodriguez, Catherine
Zuñiga, Reynold Zuñiga and Jeannette Zuñiga. Said intervenors asserted their status as innocent purchasers for value who had no notice or knowledge of
the claim or interest of petitioner when they bought the properties already registered in the name of respondent bank. Aside from a counterclaim for
damages against the petitioner, intervenors also prayed that in the event respondent bank is ordered to reconvey the properties, respondent bank should
be adjudged liable to the intervenors and return all amounts paid to it.
On July 8, 1991, petitioner amended his complaint to include as alternative relief under the prayer for reconveyance the payment by respondent bank of
the prevailing market value of the subject properties "less whatever remaining obligation due the bank by reason of the mortgage under the terms of the
compromise agreement.

On June 15, 1999, the trial court rendered its Decision, the dispositive portion of which reads:

WHEREFORE, findings [sic] the facts aver[r]ed in the complaint supported by preponderance of evidences adduced, judgment is hereby rendered in
favor of the plaintiff and against the defendant and intervenors by:

1. Declaring the two Deeds of Sale executed by the defendant in favor of the intervenors as null and void and the Register of Deeds in Calamba,
Laguna is ordered to cancel and/or annul the two Transfer Certificate of Titles No. T-154658 and TCT No. T-111058 issued to the intervenors.

2. Ordering the defendant to refund the amount of ₱1,004,250.00 to the intervenors as the consideration of the sale of the two properties.

3. Ordering the defendant to execute the appropriate Deed of Reconveyance of the two (2) properties in favor of the plaintiff after the plaintiff
pays in full the amount of ₱600,000.00 as balance of the repurchase price.

4. Ordering the defendant bank to pay plaintiff the sum of ₱50,000.00 as attorney's fees.

5. Dismissing the counterclaim of the defendant and intervenors against the plaintiff.

Costs against the defendant.

SO ORDERED.15

The trial court found that respondent bank deliberately disregarded petitioner's substantial payments on the total repurchase consideration. Reference
was made to the letter dated March 22, 1984 (Exhibit "I")16 as the authority for petitioner in making the installment payments directly to the Universal
Properties, Inc. (UPI), respondent bank's collecting agent. Said court concluded that the compromise agreement amounts to a valid contract of sale
between petitioner, as Buyer, and respondent bank, as Seller. Hence, in entertaining other buyers for the same properties already sold to petitioner with
intention to increase its revenues, respondent bank acted in bad faith and is thus liable for damages to the petitioner. Intervenors were likewise found
liable for damages as they failed to exercise due diligence before buying the subject properties.

Respondent bank appealed to the CA which reversed the trial court's ruling, as follows:

WHEREFORE, the foregoing premises considered, the instant appeal is hereby GRANTED. Accordingly, the assailed decision is hereby REVERSED and
SET ASIDE.

SO ORDERED.

The CA held that by modifying the terms of the offer contained in the March 22, 1984 letter of respondent bank, petitioner effectively rejected the
original offer with his counter-offer. There was also no written conformity by respondent bank's officers to the amended conditions for repurchase which
were unilaterally inserted by petitioner. Consequently, no contract of repurchase was perfected and respondent bank acted well within its rights when it
sold the subject properties to herein respondents-intervenors.

As to the receipts presented by petitioner allegedly proving the installment payments he had completed, the CA said that these were not payments of the
repurchase price but were actually remittances of the payments made by petitioner's buyers for the purchase of the foreclosed properties already titled in
the name of respondent bank. It was noted that two of these receipts (Exhibits "K" and "K-1")18 were issued to Fermin Salvador and Rizalina Pedrosa, the
vendees of two subdivided lots under separate Deeds of Absolute Sale executed in their favor by the respondent bank. In view of the attendant
circumstances, the CA concluded that petitioner acted merely as a broker or middleman in the sales transactions involving the foreclosed properties.
Lastly, the respondents-intervenors were found to be purchasers who bought the properties in good faith without notice of petitioner's interest or claim.
Nonetheless, since there was no repurchase contract perfected, the sale of the subject properties to respondents-intervenors remains valid and binding,
and the issue of whether the latter were innocent purchasers for value would be of no consequence.

Petitioner's motion for reconsideration was likewise denied by the appellate court.

Hence, this petition alleging that:

A.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF THE TRIAL
COURT THAT THERE WAS A PERFECTED CONTRACT TO REPURCHASE BETWEEN PETITIONER AND RESPONDENT-BANK.

B.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF THE TRIAL
COURT THAT PETITIONER DID NOT ACT AS BROKER IN THE SALE OF THE FORECLOSED PROPERTIES AND THUS FAILED TO
 CONSIDER THE EXISTENCE OF OFFICIAL RECEIPTS ISSUED IN THE NAME OF THE PETITIONER THAT ARE DULY NOTED FOR HIS
ACCOUNT.

C.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF THE TRIAL
COURT THAT RESPONDENT-BANK DID NOT HAVE THE RIGHT TO DISPOSE THE SUBJECT PROPERTIES.

D.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF THE TRIAL
COURT THAT RESPONDENTS-INTERVENORS ARE NOT INNOCENT PURCHASERS FOR VALUE IN GOOD FAITH.19

It is to be noted that the above issues raised by petitioner alleged grave abuse of discretion committed by the CA, which is proper in a petition for
certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, but not in the present petition for review on certiorari under Rule 45.

The core issue for resolution is whether a contract for the repurchase of the foreclosed properties was perfected between petitioner and respondent bank.

The Court sustains the decision of the CA.

Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract.20 The requisite acceptance of the offer is expressed in Article 1319 of the Civil Code which states:

ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

In Palattao v. Court of Appeals,21 this Court held that if the acceptance of the offer was not absolute, such acceptance is insufficient to generate consent
that would perfect a contract. Thus:

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting of the minds. Once there is concurrence between the
offer and the acceptance upon the subject matter, consideration, and terms of payment, a contract is produced. The offer must be certain. To convert the
offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and
without variance of any sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection
of the original offer. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to
generate consent because any modification or variation from the terms of the offer annuls the offer.22

The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.23 Where a party sets a different
purchase price than the amount of the offer, such acceptance was qualified which can be at most considered as a counter-offer; a perfected contract
would have arisen only if the other party had accepted this counter-offer.24 In Villanueva v. Philippine National Bank25 this Court further elucidated on
the meaning of unqualified acceptance, as follows:

…While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those points in the offer which, under
the operative facts of each contract, are not only material but motivating as well. Anything short of that level of mutuality produces not a contract but a
mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer and its acceptance must be
unanimous both on the rate of the payment and on its term. An acceptance of an offer which agrees to the rate but varies the term is
ineffective.26 (Emphasis supplied)

Petitioner submitted as evidence of a perfected contract of repurchase the March 22, 1984 letter (Exhibit "I")27 from Rita B. Manuel, then President of
UPI, a corporation formed by respondent bank to dispose of its acquired assets, with notations handwritten by petitioner himself. Said letter reads:

March 22, 1984

Honorable Judge Fausto Ignacio

412 Bagumbayan Street, Pateros
Metro Manila

Dear Judge Ignacio:

Your proposal to repurchase your foreclosed properties located at Cabuyao, Laguna consisting of a total area of 203,413 square meters has been favorably
considered subject to the following terms and conditions:

1) Total Selling Price shall be ₱950,000.00

2) Downpayment of ₱150,00000 with the balance

Payable in Three (3) equal installments
as follows:
 1st Installment - P 266,667 - on or before May 31, '84

2nd Installment - P 266,667 - on or before Sept. 31, '84

3rd Installment - P 266,666 - on or before Jan. 30, '85

TOTAL - P 800,000.00

3) All expenses pertinent to the subdivision of the parcel of land consisting of 120,110 square meters shall be for your account.

Thank you,

Very truly yours,

RITA B. MANUEL
President

According to petitioner, he wrote the notations in the presence of a certain Mr. Lazaro, the representative of Mrs. Manuel (President), and a certain Mr.
Fajardo, which notations supposedly represent their "compromise agreement." 28 These notations indicate that the repurchase price would be
₱900,000.00 which shall be paid as follows: ₱150,000 - end of May '84; ₱150,000 - end of June '84; Balance - "Depending on financial position".
Petitioner further alleged the following conditions of the verbal agreement: (1) respondent bank shall release the equivalent land area for payments made
by petitioner who shall shoulder the expenses for subdivision of the land; (2) in case any portion of the subdivided land is sold by petitioner, a separate
document of sale would be executed directly to the buyer; (3) the remaining portion of the properties shall not be subject of respondent bank's
transaction without the consent and authority of petitioner; (4) the petitioner shall continue in possession of the properties and whatever portion still
remaining, and attending to the needs of its tenants; and (5) payments shall be made directly to UPI.29

The foregoing clearly shows that petitioner's acceptance of the respondent bank's terms and conditions for the repurchase of the foreclosed properties
was not absolute. Petitioner set a different repurchase price and also modified the terms of payment, which even contained a unilateral condition for
payment of the balance (₱600,000), that is, depending on petitioner's "financial position." The CA thus considered the qualified acceptance by petitioner
as a counter-proposal which must be accepted by respondent bank. However, there was no evidence of any document or writing showing the conformity
of respondent bank's officers to this counter-proposal.

Petitioner contends that the receipts issued by UPI on his installment payments are concrete proof -- despite denials to the contrary by respondent bank
-- that there was an implied acceptance of his counter-proposal and that he did not merely act as a broker for the sale of the subdivided portions of the
foreclosed properties to third parties. Since all these receipts, except for two receipts issued in the name of Fermin Salvador and Rizalina Pedrosa, were
issued in the name of petitioner instead of the buyers themselves, petitioner emphasizes that the payments were made for his account. Moreover,
petitioner asserts that the execution of the separate deeds of sale directly to the buyers was in pursuance of the perfected repurchase agreement with
respondent bank, such an arrangement being "an accepted practice to save on taxes and shortcut paper works."

The Court is unconvinced.

In Adelfa Properties, Inc. v. CA,30 the Court ruled that:

x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be
evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts,
conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance
may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale.31

Even assuming that the bank officer or employee whom petitioner claimed he had talked to regarding the March 22, 1984 letter had acceded to his own
modified terms for the repurchase, their supposed verbal exchange did not bind respondent bank in view of its corporate nature. There was no evidence

that said Mr. Lazaro or Mr. Fajardo was authorized by respondent bank's Board of Directors to accept petitioner's counter-proposal to
repurchase the foreclosed properties at the price and terms other than those communicated in the March 22, 1984 letter. As this Court ruled in AF Realty
& Development, Inc. v. Dieselman Freight Services, Co.32

Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a
natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions
to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate
agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the
affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the
corporation.33

Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents

when authorized by a board resolution or its by-laws.

In the absence of conformity or acceptance by properly authorized bank officers of petitioner's counter-proposal, no perfected repurchase contract was
born out of the talks or negotiations between petitioner and Mr. Lazaro and Mr. Fajardo. Petitioner therefore had no legal right to compel respondent
bank to accept the ₱600,000 being tendered by him as payment for the supposed balance of repurchase price.
A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without
acceptance of the other, there is no contract.35 When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation between the parties.36

In sum, we find the ruling of the CA more in accord with the established facts and applicable law and jurisprudence. Petitioner's claim of utmost
accommodation by respondent bank of his own terms for the repurchase of his foreclosed properties is simply contrary to normal business practice. As
aptly observed by the appellate court:

The submission of the plaintiff-appellee is unimpressive.

First, if the counter-proposal was mutually agreed upon by both the plaintiff-appellee and defendant-appellant, how come not a single signature of the
representative of the defendant-appellant was affixed thereto. Second, it is inconceivable that an agreement of such great importance, involving two
personalities who are both aware and familiar of the practical and legal necessity of reducing agreements into writing, the plaintiff-appellee, being a
lawyer and the defendant-appellant, a banking institution, not to formalize their repurchase agreement. Third, it is quite absurd and unusual that the
defendant-appellant could have acceded to the condition that the balance of the payment of the repurchase price would depend upon the financial
position of the plaintiff-appellee. Such open[-]ended and indefinite period for payment is hardly acceptable to a banking institution like the defendant-
appellant whose core existence fundamentally depends upon its financial arrangements and transactions which, most, if not all the times are intended to
bear favorable outcome to its business. Last, had there been a repurchase agreement, then, there should have been titles or deeds of conveyance issued in
favor of the plaintiff-appellee. But as it turned out, the plaintiff-appellee never had any land deeded or titled in his name as a result of the alleged
repurchase agreement. All these, reinforce the conclusion that the counter-proposal was unilaterally made and inserted by the plaintiff-appellee in
Exhibit "I" and could not have been accepted by the defendant-appellant, and that a different agreement other than a repurchase agreement was
perfected between them.37

Petitioner Fausto C. Ignacio passed away on November 11, 2008 and was substituted by his heirs, namely: Marfel D. Ignacio-Manalo, Milfa D. Ignacio-
Manalo and Faustino D. Ignacio.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated July 18, 2006 and Resolution dated May 2, 2007 of the Court of
Appeals in CA-G.R. CV No. 73551 are hereby AFFIRMED.

With costs against the petitioners.

SO ORDERED.

G.R. No. L-26872 July 25, 1975

VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE TAGLE, intervenor-appellee,
vs.
BORMAHECO, INC., FRANCISCO N. CERVANTES and ROSARIO N. CERVANTES, defendants-appellants. Meer, Meer & Meer
for plaintiff-appellee.

J. Villareal, Navarro and Associates for defendants-appellants.

P. P. Gallardo and Associates for intervenor-appellee.

AQUINO, J.:

This action was instituted by Villonco Realty Company against Bormaheco, Inc. and the spouses Francisco N. Cervantes and Rosario N. Cervantes for the
specific performance of a supposed contract for the sale of land and the improvements thereon for one million four hundred thousand pesos. Edith Perez
de Tagle, as agent, intervened in order to recover her commission. The lower court enforced the sale. Bormaheco, Inc. and the Cervantes spouses, as
supposed vendors, appealed.

This Court took cognizance of the appeal because the amount involved is more than P200,000 and the appeal was perfected before Republic Act No.
5440 took effect on September 9, 1968. The facts are as follows:

Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with
a total area of three thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532, Exh. A, A-1 and A-2). The lots were mortgaged to the
Development Bank of the Phil (DBP) on April 21, 1959 as security for a loan of P441,000. The mortgage debt was fully paid on July 10, 1969.

Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and agricultural machinery. The entire lots are occupied by the
building, machinery and equipment of Bormaheco, Inc. and are adjacent to the property of Villonco Realty Company situated at 219 Buendia Avenue.

In the early part of February, 1964 there were negotiations for the sale of the said lots and the improvements thereon between Romeo Villonco of
Villonco Realty Company "and Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through the intervention of Edith Perez de Tagle, a
real estate broker".

In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco conferred with Cervantes in his office to discuss the price and terms
of the sale. Later, Cervantes "went to see Villonco for the same reason until some agreement" was arrived at. On a subsequent occasion, Cervantes,
accompanied by Edith Perez de Tagle, discussed again the terms of the sale with Villonco.

During the negotiations, Villonco Realty Company assumed that the lots belonged to Bormaheco, Inc. and that Cervantes was duly authorized to sell the
same. Cervantes did not disclose to the broker and to Villonco Realty Company that the lots were conjugal properties of himself and his wife and that
they were mortgaged to the DBP.

Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964, to Romeo Villonco for the sale of the property. The offer reads (Exh.
B):

BORMAHECO, INC.

February 12,1964

Mr. Romeo
Villonco Villonco Building
Buendia Avenue
Makati, Rizal.

Dear Mr. Villonco:

This is with reference to our telephone conversation this noon on the matter of the sale of our propertylocated at Buendia Avenue,
with a total area of 3,500 sq. m., under the following conditions:

(1) That we are offering to sell to you the above property at the price of P400.00 per square meter;

(2) That a deposit of P100,000.00 must be placed as earnest money on the purchase of the above property
which will become part payment of the property in the event that the sale is consummated;

(3) That this sale is to be consummated only after I shall have also consummated my purchase of another
property located at Sta. Ana, Manila;

(4) That if my negotiations with said property will not be consummated by reason beyond my control, I will
return to you your deposit of P100,000 and the sale of my property to you will not also be consummated; and
 (5) That final negotiations on both properties can be definitely known after 45 days.

If the above terms is (are) acceptable to your Board, please issue out the said earnest money in favor of Bormaheco, Inc., and deliver
the same thru the bearer, Miss Edith Perez de Tagle.

The property mentioned in Bormaheco's letter was the land of the National Shipyards & Steel Corporation (Nassco), with an area of
twenty thousand square meters, located at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964 that land was awarded
to Bormaheco, Inc., the highest bidder, for the price of P552,000. The Nassco Board of Directors in its resolution of February 18,
1964 authorized the General Manager to sign the necessary contract (Exh. H).

On February 28, 1964, the Nassco Acting General Manager wrote a letter to the Economic Coordinator, requesting approval of that resolution. The
Acting Economic Coordinator approved the resolution on March 24, 1964 (Exh. 1).

In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their negotiations for the sale of the Buendia Avenue property. Cervantes
and Teofilo Villonco had a final conference on February 27, 1964. As a result of that conference Villonco Realty Company, through Teofilo Villonco, in its
letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's first counter-offer was dated February 24, 1964, Exh. C) for the purchase of the
property. The counter-offer was accepted by Cervantes as shown in Exhibit D, which is quoted below:

VILLONCO REALTY COMPANY

V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines

March 4, 1964

Mr. Francisco Cervantes.

Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal

Dear Mr. Cervantes:

In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26, 1964 in respect to the terms and conditions on the
purchase of your property located at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we hereby revise our offer, as
follows:

1. That the price of the property shall be P400.00 per sq. m., including the improvements thereon;

2. That a deposit of P100,000.00 shall be given to you as earnest money which will become as part payment in the event the sale is
consummated;

3. This sale shall be cancelled, only if your deal with another property in Sta. Ana shall not be consummated and in such case, the
P100,000-00 earnest money will be returned to us with a 10% interest p.a. However, if our deal with you is finalized, said
P100,000.00 will become as part payment for the purchase of your property without interest:

4. The manner of payment shall be as follows:

a. P100,000.00 earnest money and

650,000.00 as part of the down payment, or
P750,000.00 as total down payment

b. The balance is payable as follows:

P100,000.00 after 3 months
125,000.00 -do-
212,500.00 -do-
P650,000.00 Total

As regards to the other conditions which we have discussed during our last conference on February 27, 1964, the same shall be
finalized upon preparation of the contract to sell.*

If the above terms and conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is our check for ONE
HUNDRED THOUSAND (P100,000.00) PESOS, MBTC Check No. 448314, as earnest money.

Very truly yours,

CONFORME:
 BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES

That this sale shall be subject to favorable consummation of a property in Sta. Ana we are negotiating.

(Sgd.) FRANCISCO CERVANTES

The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was delivered by Edith Perez de Tagle to Bormaheco, Inc. on March 4, 1964
and was received by Cervantes. In the voucher-receipt evidencing the delivery the broker indicated in her handwriting that the earnest money was
"subject to the terms and conditions embodied in Bormaheco's letter" of February 12 and Villonco Realty Company's letter of March 4, 1964 (Exh. E-1; 14
tsn).

Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the signing of the contract of sale, Exhibit D, Cervantes returned the
earnest money, with interest amounting to P694.24 (at ten percent per annum). Cervantes cited as an excuse the circumstance that "despite the lapse of
45 days from February 12, 1964 there is no certainty yet" for the acquisition of the Punta property (Exh. F; F-I and F-2). Villonco Realty Company
refused to accept the letter and the checks of Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded the contract, he was already
aware that the Punta lot had been awarded to Bormaheco, Inc. (25-26 tsn).

Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964 articulated her shock and surprise at Bormaheco's turnabout. She
reviewed the history of the deal and explained why Romeo Villonco could not agree to the rescission of the sale (Exh. G).**

Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the forty-five day period had already expired and the sale to Bormaheco,
Inc. of the Punta property had not been consummated. Cervantes said that his letter was a "manifestation that we are no longer interested to sell" the
Buendia Avenue property to Villonco Realty Company (Annex I of Stipulation of Facts). The latter was furnished with a copy of that letter.

In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to Bormaheco, Inc., stating that the condition for the cancellation of the
contract had not arisen and at the same time announcing that an action for breach of contract would be filed against Bormaheco, Inc. (Annex G of
Stipulation of Facts).1äwphï1.ñët

On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated April 6) for specific performance against Bormaheco, Inc. Also on
that same date, April 7, at eight-forty-five in the morning, a notice of lis pendens was annotated on the titles of the said lots.

Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that the perfection of the contract of sale was subject to the conditions (a)
"that final acceptance or not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta. Ana property".

On June 2, 1964 or during the pendency of this case, the Nassco Acting General Manager wrote to Bormaheco, Inc., advising it that the Board of
Directors and the Economic Coordinator had approved the sale of the Punta lot to Bormaheco, Inc. and requesting the latter to send its duly authorized
representative to the Nassco for the signing of the deed of sale (Exh. 1).

The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc. was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs.
Abanes, L-28087, July 31, 1973, 52 SCRA 73).

In view of the disclosure in Bormaheco's amended answer that the three lots were registered in the names of the Cervantes spouses and not in the name
of Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed an amended complaint impleading the said spouses as defendants. Bormaheco, Inc.
and the Cervantes spouses filed separate answers.

As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers' Bank & Trust Company the sum of P8,712.25 as interests on the
overdraft line of P100,000 and the sum of P27.39 as interests daily on the same loan since January 16, 1965. (That overdraft line was later settled by
Villonco Realty Company on a date not mentioned in its manifestation of February 19, 1975).

Villonco Realty Company had obligated itself to pay the sum of P20,000 as attorney's fees to its lawyers. It claimed that it was damaged in the sum of
P10,000 a month from March 24, 1964 when the award of the Punta lot to Bormaheco, Inc. was approved. On the other hand, Bormaheco, Inc. claimed
that it had sustained damages of P200,000 annually due to the notice of lis pendens which had prevented it from constructing a multi-story building on
the three lots. (Pars. 18 and 19, Stipulation of Facts).1äwphï1.ñët

Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes, obligated itself to pay her a three percent commission on the price of
P1,400,000 or the amount of forty-two thousand pesos (14 tsn).

After trial, the lower court rendered a decision ordering the Cervantes spouses to execute in favor of Bormaheco, Inc. a deed of conveyance for the three
lots in question and directing Bormaheco, Inc. (a) to convey the same lots to Villonco Realty Company, (b) to pay the latter, as consequential damages,
the sum of P10,000 monthly from March 24, 1964 up to the consummation of the sale, (c) to pay Edith Perez de Tagle the sum of P42,000 as broker's
commission and (d) pay P20,000 as to attorney's fees (Civil Case No. 8109).

Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions are (a) that no contract of sale was perfected because Cervantes made a
supposedly qualified acceptance of the revised offer contained in Exhibit D, which acceptance amounted to a counter-offer, and because the condition
that Bormaheco, inc. would acquire the Punta land within the forty-five-day period was not fulfilled; (2) that Bormaheco, Inc. cannot be compelled to sell
the land which belongs to the Cervantes spouses and (3) that Francisco N. Cervantes did not bind the conjugal partnership and his wife when, as
president of Bormaheco, Inc., he entered into negotiations with Villonco Realty Company regarding the said land.
We hold that the appeal, except as to the issue of damages, is devoid of merit.

"By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determining thing, and the other to
pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional" (Art. 1458, Civil Code).

"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. 1475, Ibid.).

"Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated
but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law" (Art. 1315, Civil Code).

"Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must
be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer" (Art. 1319, Civil Code). "An acceptance may be express or
implied" (Art. 1320, Civil Code).

Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia Avenue property, as shown in Teofilo Villonco's letter dated March
4, 1964 (Exh. D), indubitably proves that there was a meeting of minds upon the subject matter and consideration of the sale. Therefore, on that date the
sale was perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs. Tambunting, 1 Phil. 490). Not only that Bormaheco's acceptance
of the part payment of one hundred ,thousand pesos shows that the sale was conditionally consummated or partly executed subject to the purchase by
Bormaheco, Inc. of the Punta property. The nonconsummation of that purchase would be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43
Phil. 873).

On February 18, 1964 Bormaheco's bid for the Punta property was already accepted by the Nassco which had authorized its General Manager to sign the
corresponding deed of sale. What was necessary only was the approval of the sale by the Economic Coordinator and a request for that approval was
already pending in the office of that functionary on March 4, 1964.

Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected because Cervantes allegedly qualified his acceptance of Villonco's
revised offer and, therefore, his acceptance amounted to a counter-offer which Villonco Realty Company should accept but no such acceptance was ever
transmitted to Bormaheco, Inc. which, therefore, could withdraw its offer.

That contention is not well-taken. It should be stressed that there is no evidence as to what changes were made by Cervantes in Villonco's revised offer.
And there is no evidence that Villonco Realty Company did not assent to the supposed changes and that such assent was never made known to Cervantes.

What the record reveals is that the broker, Miss Tagle, acted as intermediary between the parties. It is safe to assume that the alleged changes or
qualifications made by Cervantes were approved by Villonco Realty Company and that such approval was duly communicated to Cervantes or
Bormaheco, Inc. by the broker as shown by the fact that Villonco Realty Company paid, and Bormaheco, Inc. accepted, the sum of P100,000 as earnest
money or down payment. That crucial fact implies that Cervantes was aware that Villonco Realty Company had accepted the modifications which he had
made in Villonco's counter-offer. Had Villonco Realty Company not assented to those insertions and annotations, then it would have stopped payment
on its check for P100,000. The fact that Villonco Realty Company allowed its check to be cashed by Bormaheco, Inc. signifies that the company was in
conformity with the changes made by Cervantes and that Bormaheco, Inc. was aware of that conformity. Had those insertions not been binding, then
Bormaheco, Inc. would not have paid interest at the rate of ten percent per annum, on the earnest money of P100,000.

The truth is that the alleged changes or qualifications in the revised counter — offer (Exh. D) are not material or are mere clarifications of what the
parties had previously agreed upon.

Thus, Cervantes' alleged insertion in his handwriting of the figure and the words "12th and" in Villonco's counter-offer is the same as the statement found
in the voucher-receipt for the earnest money, which reads: "subject to the terms and conditions embodied in Bormaheco's letter of Feb. 12, 1964 and your
letter of March 4, 1964" (Exh. E-1).

Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's revised counter-offer and substituted for it the word "another" so that the
original phrase, "Nassco's property in Sta. Ana", was made to read as "another property in Sta. Ana". That change is trivial. What Cervantes did was
merely to adhere to the wording of paragraph 3 of Bormaheco's original offer (Exh. B) which mentions "another property located at Sta. Ana." His
obvious purpose was to avoid jeopardizing his negotiation with the Nassco for the purchase of its Sta. Ana property by unduly publicizing it.

It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex 1) or after the Nassco property had been awarded to Bormaheco,
Inc., alluded to the "Nassco property". At that time, there was no more need of concealing from the public that Bormaheco, Inc. was interested in the
Nassco property.

Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word "interest" in that same paragraph 3 of the revised counter-offer
(Exh. D) could not be categorized as a major alteration of that counter-offer that prevented a meeting of the minds of the parties. It was understood that
the parties had contemplated a rate of ten percent per annum since ten percent a month or semi-annually would be usurious.

Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying in the voucher for the earnest money of P100,000 that
Bormaheco's acceptance thereof was subject to the terms and conditions embodied in Bormaheco's letter of February 12, 1964 and your (Villonco's) letter
of March 4, 1964" made Bormaheco's acceptance "qualified and conditional".

That contention is not correct. There is no incompatibility between Bormaheco's offer of February 12, 1964 (Exh. B) and Villonco's counter-offer of
March 4, 1964 (Exh. D). The revised counter-offer merely amplified Bormaheco's original offer.
The controlling fact is that there was agreement between the parties on the subject matter, the price and the mode of payment and that part of the price
was paid. "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"
(Art. 1482, Civil Code).

"It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. 'So long as it is clear that
the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not, a contract is formed.' " (Stuart
vs. Franklin Life Ins. Co., 165 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).

Thus, it was held that the vendor's change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not
amount to a rejection of the offer and the tender of a counter-offer (Stuart vs. Franklin Life Ins. Co., supra).

The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41 Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In
those two cases the acceptance radically altered the offer and, consequently, there was no meeting of the minds of the parties.

Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar central for P1,000,000 on condition that the price be paid in cash, or, if
not paid in cash, the price would be payable within three years provided security is given for the payment of the balance within three years with interest.
Zayco, instead of unconditionally accepting those terms, countered that he was going to make a down payment of P100,000, that Serra's mortgage
obligation to the Philippine National Bank of P600,000 could be transferred to Zayco's account and that he (plaintiff) would give a bond to secure the
payment of the balance of the price. It was held that the acceptance was conditional or was a counter-offer which had to be accepted by Serra. There was
no such acceptance. Serra revoked his offer. Hence, there was no perfected contract.

In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan Hacienda owned by Benito Legarda, who had empowered Valdes to sell it.
Borck was given three months from December 4, 1911 to buy the hacienda for P307,000. On January 17, 1912 Borck wrote to Valdes, offering to purchase
the hacienda for P307,000 payable on May 1, 1912. No reply was made to that letter. Borck wrote other letters modifying his proposal. Legarda refused to
convey the property.

It was held that Borck's January 17th letter plainly departed from the terms of the offer as to the time of payment and was a counter-offer which
amounted to a rejection of Valdes' original offer. A subsequent unconditional acceptance could not revive that offer.

The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270 where the written offer to sell was revoked by the offer or before
the offeree's acceptance came to the offeror's knowledge.

Appellants' next contention is that the contract was not perfected because the condition that Bormaheco, Inc. would acquire the Nassco land within
forty-five days from February 12, 1964 or on or before March 28, 1964 was not fulfilled. This contention is tied up with the following letter of Bormaheco,
Inc. (Exh. F):

BORMAHECO, INC.

March 30, 1964

Villonco Realty Company

V.R.C. Building
219 Buendia Ave.,
Makati, Rizal

Gentlemen:

We are returning herewith your earnest money together with interest thereon at 10% per annum. Please be informed that despite the
lapse of the 45 days from February 12, 1964 there is no certainty yet for us to acquire a substitute property, hence the return of the
earnest money as agreed upon.

Very truly yours,

Encl.: P.N.B. Check No. 112994 J

P.N.B. Check No. 112996J

That contention is predicated on the erroneous assumption that Bormaheco, Inc. was to acquire the Nassco land within forty-five days or on or before
March 28, 1964.

The trial court ruled that the forty-five-day period was merely an estimate or a forecast of how long it would take Bormaheco, Inc. to acquire the Nassco
property and it was not "a condition or a deadline set for the defendant corporation to decide whether or not to go through with the sale of its Buendia
property".

The record does not support the theory of Bormaheco, Inc. and the Cervantes spouses that the forty-five-day period was the time within which (a) the
Nassco property and two Pasong Tamo lots should be acquired, (b) when Cervantes would secure his wife's consent to the sale of the three lots and (c)
when Bormaheco, Inc. had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of the Buendia lots would be consummated after he had consummated the
purchase of the Nassco property. Then, in paragraph 5 of the same offer he stated "that final negotiations on both properties can be definitely
known after forty-five days" (See Exh. B).

It is deducible from the tenor of those statements that the consummation of the sale of the Buendia lots to Villonco Realty Company was conditioned on
Bormaheco's acquisition of the Nassco land. But it was not spelled out that such acquisition should be effected within forty-five days from February 12,
1964. Had it been Cervantes' intention that the forty-five days would be the period within which the Nassco land should be acquired by Bormaheco, then
he would have specified that period in paragraph 3 of his offer so that paragraph would read in this wise: "That this sale is to be consummated only after
I shall have consummated my purchase of another property located at Sta. Ana, Manila within forty-five days from the date hereof ." He could have also
specified that period in his "conforme" to Villonco's counter-offer of March 4, 1964 (Exh. D) so that instead of merely stating "that this sale shall be
subject to favorable consummation of a property in Sta. Ana we are negotiating" he could have said: "That this sale shall be subject to favorable
consummation within forty-five days from February 12, 1964 of a property in Sta. Ana we are negotiating".

No such specification was made. The term of forty-five days was not a part of the condition that the Nassco property should be acquired. It is clear that
the statement "that final negotiations on both property can be definitely known after 45 days" does not and cannot mean that Bormaheco, Inc. should
acquire the Nassco property within forty-five days from February 12, 1964 as pretended by Cervantes. It is simply a surmise that after forty-five days (in
fact when the forty-five day period should be computed is not clear) it would be known whether Bormaheco, Inc. would be able to acquire the Nassco
property and whether it would be able to sell the Buendia property. That aforementioned paragraph 5 does not even specify how long after the forty-five
days the outcome of the final negotiations would be known.

It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended complaint, which answer was verified by Cervantes, it was alleged that
Cervantes accepted Villonco's revised counter-offer of March 4, 1964 subject to the condition that "the final negotiations (acceptance) will have to be
made by defendant within 45 daysfrom said acceptance" (31 Record on Appeal). If that were so, then the consummation of Bormaheco's purchase of the
Nassco property would be made within forty-five days from March 4, 1964.

What makes Bormaheco's stand more confusing and untenable is that in its three answers it invariably articulated the incoherent and vague affirmative
defense that its acceptance of Villonco's revised counter-offer was conditioned on the circumstance "that final acceptance or not shall be made after 45
days" whatever that means. That affirmative defense is inconsistent with the other aforequoted incoherent statement in its third answer that "the final
negotiations (acceptance) will have to be made by defendant within 45 days from said acceptance" (31 Record on Appeal).1äwphï1.ñët

Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964 do not sustain at all its theory that the Nassco property should be
acquired on or before March 28, 1964. Its rescission or revocation of its acceptance cannot be anchored on that theory which, as articulated in its
pleadings, is quite equivocal and unclear.

It should be underscored that the condition that Bormaheco, Inc. should acquire the Nassco property was fulfilled. As admitted by the appellants, the
Nassco property was conveyed to Bormaheco, Inc. on June 26, 1964. As early as January 17, 1964 the property was awarded to Bormaheco, Inc. as the
highest bidder. On February 18, 1964 the Nassco Board authorized its General Manager to sell the property to Bormaheco, Inc. (Exh. H). The Economic
Coordinator approved the award on March 24, 1964. It is reasonable to assume that had Cervantes been more assiduous in following up the transaction,
the Nassco property could have been transferred to Bormaheco, Inc. on or before March 28, 1964, the supposed last day of the forty-five-day period.

The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot be required to sell the three lots in question because they are
conjugal properties of the Cervantes spouses. They aver that Cervantes in dealing with the Villonco brothers acted as president of Bormaheco, Inc. and
not in his individual capacity and, therefore, he did not bind the conjugal partnership nor Mrs. Cervantes who was allegedly opposed to the sale.

Those arguments are not sustainable. It should be remembered that Cervantes, in rescinding the contract of sale and in returning the earnest money,
cited as an excuse the circumstance that there was no certainty in Bormaheco's acquisition of the Nassco property (Exh. F and Annex 1). He did not say
that Mrs. Cervantes was opposed to the sale of the three lots. He did not tell Villonco Realty Company that he could not bind the conjugal partnership. In
truth, he concealed the fact that the three lots were registered "in the name of FRANCISCO CERVANTES, Filipino, of legal age, married to Rosario P.
Navarro, as owner thereof in fee simple". He certainly led the Villonco brothers to believe that as president of Bormaheco, Inc. he could dispose of the
said lots. He inveigled the Villoncos into believing that he had untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots and that he
was invested with adequate authority to sell the same.

Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three lots as "our property" which "we are offering to sell ..." (Opening
paragraph and par. 1 of Exh. B). Whether the prounoun "we" refers to himself and his wife or to Bormaheco, Inc. is not clear. Then, in paragraphs 3 and 4
of the offer, he used the first person and said: "I shall have consummated my purchase" of the Nassco property; "... my negotiations with said property"
and "I will return to you your deposit". Those expressions conveyed the impression and generated the belief that the Villoncos did not have to deal with
Mrs. Cervantes nor with any other official of Bormaheco, Inc.

The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and studiously avoided making the allegation that Cervantes was not authorized
by his wife to sell the three lots or that he acted merely as president of Bormaheco, Inc. That defense was not interposed so as not to place Cervantes in
the ridiculous position of having acted under false pretenses when he negotiated with the Villoncos for the sale of the three lots.

Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on February 12, 1964, after some prior negotiations, the defendant
(Bormaheco, Inc.) made a formal offer to sell to the plaintiff the property of the said defendant situated at the abovenamed address along Buendia
Avenue, Makati, Rizal, under the terms of the letter-offer, a copy of which is hereto attached as Annex A hereof", now Exhibit B (2 Record on Appeal).

That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer dated May 5, 1964. It did not traverse that paragraph 2. Hence, it was
deemed admitted. However, it filed an amended answer dated May 25, 1964 wherein it denied that it was the owner of the three lots. It revealed that the
three lots "belong and are registered in the names of the spouses Francisco N. Cervantes and Rosario N. Cervantes."

The three answers of Bormaheco, Inc. contain the following affirmative defense:
 13. That defendant's insistence to finally decide on the proposed sale of the land in question after 45 days had not only for its
purpose the determination of its acquisition of the said Sta. Ana (Nassco) property during the said period, but also to negotiate with
the actual and registered owner of the parcels of land covered by T.C.T. Nos. 43530, 43531 and 43532 in question which plaintiff
was fully aware that the same were not in the name of the defendant (sic; Par. 18 of Answer to Amended Complaint, 10, 18 and 34,
Record on Appeal).

In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five days within which to acquire the Nassco property and "to negotiate" with
the registered owner of the three lots. The absurdity of that pretension stands out in bold relief when it is borne in mind that the answers of Bormaheco,
Inc. were verified by Cervantes and that the registered owner of the three lots is Cervantes himself. That affirmative defense means that Cervantes as
president of Bormaheco, Inc. needed forty-five days in order to "negotiate" with himself (Cervantes).

The incongruous stance of the Cervantes spouses is also patent in their answer to the amended complaint. In that answer they disclaimed knowledge or
information of certain allegations which were well-known to Cervantes as president of Bormaheco, Inc. and which were admitted in Bormaheco's three
answers that were verified by Cervantes.

It is significant to note that Bormaheco, Inc. in its three answers, which were verified by Cervantes, never pleaded as an affirmative defense that Mrs.
Cervantes opposed the sale of the three lots or that she did not authorize her husband to sell those lots. Likewise, it should be noted that in their separate
answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes was opposed to the sale of three lots or that Cervantes could not bind the
conjugal partnership. The appellants were at first hesitant to make it appear that Cervantes had committed the skullduggery of trying to sell property
which he had no authority to alienate.

It was only during the trial on May 17, 1965 that Cervantes declared on the witness stand that his wife was opposed to the sale of the three lots, a defense
which, as already stated, was never interposed in the three answers of Bormaheco, Inc. and in the separate answer of the Cervantes spouses. That same
viewpoint was adopted in defendants' motion for reconsideration dated November 20, 1965.

But that defense must have been an afterthought or was evolved post litem motam since it was never disclosed in Cervantes' letter of rescission and in his
letter to Miss Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not testify at the trial to fortify that defense which had already been waived for
not having been pleaded (See sec. 2, Rule 9, Rules of Court).

Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife and the fact that the three lots were entirely occupied by
Bormaheco's building, machinery and equipment and were mortgaged to the DBP as security for its obligation, and considering that appellants' vague
affirmative defenses do not include Mrs. Cervantes' alleged opposition to the sale, the plea that Cervantes had no authority to sell the lots strains the
rivets of credibility (Cf. Papa and Delgado vs. Montenegro, 54 Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31).

"Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith" (Art. 1159, Civil
Code). Inasmuch as the sale was perfected and even partly executed, Bormaheco, Inc., and the Cervantes spouses, as a matter of justice and good faith,
are bound to comply with their contractual commitments.

Parenthetically, it may be observed that much misunderstanding could have been avoided had the broker and the buyer taken the trouble of making
some research in the Registry of Deeds and availing themselves of the services of a competent lawyer in drafting the contract to sell.

Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail the trial court's award to Villonco Realty Company of consequential
damage amounting to ten thousand pesos monthly from March 24, 1964 (when the Economic Coordinator approved the award of the Nassco property to
Bormaheco, Inc.) up to the consummation of the sale. The award was based on paragraph 18 of the stipulation of facts wherein Villonco Realty Company
"submits that the delay in the consummation of the sale" has caused it to suffer the aforementioned damages.

The appellants contend that statement in the stipulation of facts simply means that Villonco Realty Company speculates that it has suffered damages but
it does not mean that the parties have agreed that Villonco Realty Company is entitled to those damages.

Appellants' contention is correct. As rightly observed by their counsel, the damages in question were not specifically pleaded and proven and were
"clearly conjectural and speculative".

However, appellants' view in their seventh assignment of error that the trial court erred in ordering Bormaheco, Inc. to pay Villonco Realty Company the
sum of twenty thousand pesos as attorney's fees is not tenable. Under the facts of the case, it is evident that Bormaheco, Inc. acted in gross and evident
bad faith in refusing to satisfy the valid and just demand of Villonco Realty Company for specific performance. It compelled Villonco Realty Company to
incure expenses to protect its interest. Moreover, this is a case where it is just and equitable that the plaintiff should recover attorney's fees (Art. 2208,
Civil Code).

The appellants in their eighth assignment of error impugn the trial court's adjudication of forty-two thousand pesos as three percent broker's
commission to Miss Tagle. They allege that there is no evidence that Bormaheco, Inc. engaged her services as a broker in the projected sale of the three
lots and the improvements thereon. That allegation is refuted by paragraph 3 of the stipulation of facts and by the documentary evidence. It was
stipulated that Miss Tagle intervened in the negotiations for the sale of the three lots. Cervantes in his original offer of February 12, 1964 apprised
Villonco Realty Company that the earnest money should be delivered to Miss Tagle, the bearer of the letter-offer. See also Exhibit G and Annex I of the
stipulation of facts.

We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay Miss Tagle her three percent commission.

WHEREFORE, the trial court's decision is modified as follows:

1. Within ten (10) days from the date the defendants-appellants receive notice from the clerk of the lower court that the records of this case have been
received from this Court, the spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes should execute a deed conveying to Bormaheco, Inc.
their three lots covered by Transfer Certificate of Title Nos. 43530, 43531 and 43532 of the Registry of Deeds of Rizal.

2. Within five (5) days from the execution of such deed of conveyance, Bormaheco, Inc. should execute in favor of Villonco Realty Company, V. R. C.
Building, 219 Buendia Avenue, Makati, Rizal a registerable deed of sale for the said three lots and all the improvements thereon, free from all lien and
encumbrances, at the price of four hundred pesos per square meter, deducting from the total purchase price the sum of P100,000 previously paid by
Villonco Realty Company to Bormaheco, Inc.

3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to pay Bormaheco, Inc. the balance of the price in the sum of one
million three hundred thousand pesos (P1,300,000).

4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle
the sum of forty-two thousand pesos (P42,000) as commission. Costs against the defendants-appellants.

SO ORDERED.

G.R. No. 166862 December 20, 2006

MANILA METAL CONTAINER CORPORATION, petitioner,

REYNALDO C. TOLENTINO, intervenor,
vs.
PHILIPPINE NATIONAL BANK, respondent,
DMCI-PROJECT DEVELOPERS, INC., intervenor.

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. No. 46153 which affirmed the decision2 of the
Regional Trial Court (RTC), Branch 71, Pasig City, in Civil Case No. 58551, and its Resolution 3 denying the motion for reconsideration filed by petitioner
Manila Metal Container Corporation (MMCC).

The Antecedents

Petitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City), Metro Manila. The property was covered by
Transfer Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from respondent
Philippine National Bank (PNB), petitioner executed a real estate mortgage over the lot. Respondent PNB later granted petitioner a new credit
accommodation of P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment4 of Real Estate Mortgage over its property. On March
31, 1981, petitioner secured another loan of P653,000.00 from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and
other charges.5
On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public
auction for P911,532.21, petitioner's outstanding obligation to respondent PNB as of June 30, 1982,6 plus interests and attorney's fees.

After due notice and publication, the property was sold at public auction on September 28, 1982 where respondent PNB was declared the winning bidder
for P1,000,000.00. The Certificate of Sale7 issued in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated at the
dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984.

Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an extension of time to redeem/repurchase the
property.8 In its reply dated August 30, 1983, respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for
appropriate action and recommendation.9

In a letter10 dated February 10, 1984, petitioner reiterated its request for a one year extension from February 17, 1984 within which to redeem/repurchase
the property on installment basis. It reiterated its request to repurchase the property on installment. 11 Meanwhile, some PNB Pasay City Branch
personnel informed petitioner that as a matter of policy, the bank does not accept "partial redemption." 12

Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a new title in favor of
respondent PNB.13 Petitioner's offers had not yet been acted upon by respondent PNB.

Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 petitioner's obligation
amounted to P1,574,560.47. This included the bid price of P1,056,924.50, interest, advances of insurance premiums, advances on realty taxes,
registration expenses, miscellaneous expenses and publication cost.14 When apprised of the statement of account, petitioner remitted P725,000.00 to
respondent PNB as "deposit to repurchase," and Official Receipt No. 978191 was issued to it.15

In the meantime, the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property
for P1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitioner that it was rejecting the offer and the
recommendation of the SAMD. It was suggested that petitioner purchase the property for P2,660,000.00, its minimum market value. Respondent PNB
gave petitioner until December 15, 1984 to act on the proposal; otherwise, its P725,000.00 deposit would be returned and the property would be sold to
other interested buyers.16

Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another letter dated December 12, 1984 requesting for a
reconsideration. Respondent PNB replied in a letter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property
for P2,660,000.00. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the
property.17 On February 25, 1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984. Petitioner declared that
it had already agreed to the SAMD's offer to purchase the property for P1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned
respondent PNB that it would seek judicial recourse should PNB insist on the position.18

On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner's offer to purchase the property, but
for P1,931,389.53 in cash less the P725,000.00 already deposited with it.19 On page two of the letter was a space above the typewritten name of
petitioner's President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated
therein that he had received it.20 Petitioner did not respond, so PNB requested petitioner in a letter dated June 30, 1988 to submit an amended offer to
repurchase.

Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB had agreed to sell the property
for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price
of the property.21 Petitioner averred that it had a net balance payable in the amount of P643,452.34. Respondent PNB, however, rejected petitioner's
offer to pay the balance of P643,452.34 in a letter dated August 1, 1989.22

On August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or
Specific Performance with Damages." To support its cause of action for specific performance, it alleged the following:

34. As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the substantial amount of P725,000.00 for the
redemption/repurchase price of P1,574,560.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time
that has elapsed, the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition
which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD. The Bank cannot take advantage of a
condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal.

35. PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from Manila Metal. PNB cannot take advantage of
its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila
Metal.

Petitioner later filed an amended complaint and supported its claim for damages with the following arguments:

36. That in order to protect itself against the wrongful and malicious acts of the defendant Bank, plaintiff is constrained to engage the services
of counsel at an agreed fee of P50,000.00 and to incur litigation expenses of at least P30,000.00, which the defendant PNB should be
condemned to pay the plaintiff Manila Metal.

37. That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal suffered besmirched reputation for
which defendant PNB is liable for moral damages of at least P50,000.00.
 38. That for the wrongful and malicious act of defendant PNB which are highly reprehensible, exemplary damages should be awarded in favor
of the plaintiff by way of example or correction for the public good of at least P30,000.00.23

Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus:

a) Declaring the Amended Real Estate Mortgage (Annex "A") null and void and without any legal force and effect.

b) Declaring defendant's acts of extra-judicially foreclosing the mortgage over plaintiff's property and setting it for auction sale null and void.

c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. 43792) covering the property
described in paragraph 4 of the Complaint, to reinstate TCT No. 37025 in the name of Manila Metal and to cancel the annotation of the
mortgage in question at the back of the TCT No. 37025 described in paragraph 4 of this Complaint.

d) Ordering the defendant PNB to return and/or deliver physical possession of the TCT No. 37025 described in paragraph 4 of this Complaint
to the plaintiff Manila Metal.

e) Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages, moral and exemplary damages in the aggregate amount of
not less than P80,000.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion, and
attorney's fees of P50,000.00 and litigation expenses of at least P30,000.00 as may be proved during the trial, and costs of suit.

Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises.24

In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the
period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had
expired.

During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts. 25 The parties agreed to limit the issues to the
following:

1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiff's offer to purchase the property is still valid and legally
enforceable.

2. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the
defendant in its letter dated June 4, 1985.

3. Whether or not there is a perfected contract of sale between the parties.26

While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner vacate the property within 15 days from notice,27 but
petitioners refused to do so.

On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00.28 The offer was however rejected by respondent PNB, in a letter
dated April 13, 1993. According to it, the prevailing market value of the property was approximately P30,000,000.00, and as a matter of policy, it could
not sell the property for less than its market value.29 On June 21, 1993, petitioner offered to purchase the property for P4,250,000.00 in cash.30 The offer
was again rejected by respondent PNB on September 13, 1993.31

On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and respondent PNB's counterclaim. It ordered respondent PNB
to refund the P725,000.00 deposit petitioner had made.32 The trial court ruled that there was no perfected contract of sale between the parties; hence,
petitioner had no cause of action for specific performance against respondent. The trial court declared that respondent had rejected petitioner's offer to
repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner had
offered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which respondent PNB
had demanded. It further declared that the P725,000.00 remitted by petitioner to respondent PNB on June 4, 1985 was a "deposit," and not a
downpayment or earnest money.

On appeal to the CA, petitioner made the following allegations:

THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING
PLAINTIFF-APPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE.

II

THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT
AND DEFENDANT-APPELLEE.

III
 THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO PURCHASE THE SUBJECT
PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4
JUNE 1985.

IV

THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH RENDERED IT
DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE.

THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF
SUBJECT CONTRACT OF REPURCHASE.

VI

THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE
OFFER.

VII

THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFF-APPELLANT.

VIII

THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES,
ATTOTRNEY'S FEES AND LITIGATION EXPENSES.33

Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over
the property covered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors. 34 Thereafter, Bayani Gabriel executed a Deed
of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as
plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting the motion,35 and likewise granted the motion of Reynaldo Tolentino
substituting petitioner MMCC, as plaintiff-appellant, and his motion to withdraw as intervenor.36

The CA rendered judgment on May 11, 2000 affirming the decision of the RTC. 37 It declared that petitioner obviously never agreed to the selling price
proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly
therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale.

The CA ratiocinated that petitioner's original offer to purchase the subject property had not been accepted by respondent PNB. In fact, it made a counter-
offer through its June 4, 1985 letter specifically on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not prosper.
Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4, 1985 letter of respondent PNB.
Consequently, there was no perfected contract of sale, and as such, there was no contract to rescind.

According to the appellate court, the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented
to support it. Respondent PNB's letter dated June 30, 1988 cannot revive the failed negotiations between the parties. Respondent PNB merely asked
petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower selling price and that the balance of the
repurchase be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989.

Petitioner filed a motion for reconsideration, which the CA likewise denied.

Thus, petitioner filed the instant petition for review on certiorari, alleging that:

I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE
BETWEEN THE PETITIONER AND RESPONDENT.

II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY
THE PETITIONER IS NOT AN EARNEST MONEY.

III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONER-
APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985 LETTER MEANS THAT THERE WAS
NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.

IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE
BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF
APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.
 V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONER-APPELLANT DATED MARCH
18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS
NO PERFECTED CONTRACT OF SALE.38

The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from
respondent.

Petitioner maintains that it had accepted respondent's offer made through the SAMD, to sell the property for P1,574,560.00. When the acceptance was
made in its letter dated June 25, 1984; it then deposited P725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which
respondent had issued. Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. Moreover, as
gleaned from the letter of SAMD dated June 4, 1985, the PNB Board of Directors had approved petitioner's offer to purchase the property. It claims that
this was the suspensive condition, the fulfillment of which gave rise to the contract. Respondent could no longer unilaterally withdraw its offer to sell the
property for P1,574,560.47, since the acceptance of the offer resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of
the original purchase price of P1,574,560.47, while respondent was obliged to transfer ownership and deliver the property to petitioner, conformably
with Article 1159 of the New Civil Code.

Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondent's offer to sell the property
for P1,574,560.00. Consequently, respondent could no longer validly make a counter-offer of P1,931,789.88 for the purchase of the property. It likewise
maintains that, although the P725,000.00 was considered as "deposit for the repurchase of the property" in the receipt issued by the SAMD, the amount
constitutes earnest money as contemplated in Article 1482 of the New Civil Code. Petitioner cites the rulings of this Court in Villonco v.
Bormaheco39 and Topacio v. Court of Appeals.40

Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent and its failure to pay the balance of the price as fixed by
respondent within the 60-day period from notice was to protest respondent's breach of its obligation to petitioner. It did not amount to a rejection of
respondent's offer to sell the property since respondent was merely seeking to enforce its right to pay the balance of P1,570,564.47. In any event,
respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract.

Petitioner's letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency of the case in the RTC were merely to compromise the
pending lawsuit, they did not constitute separate offers to repurchase the property. Such offer to compromise should not be taken against it, in
accordance with Section 27, Rule 130 of the Revised Rules of Court.

For its part, respondent contends that the parties never graduated from the "negotiation stage" as they could not agree on the amount of the repurchase
price of the property. All that transpired was an exchange of proposals and counter-proposals, nothing more. It insists that a definite agreement on the
amount and manner of payment of the price are essential elements in the formation of a binding and enforceable contract of sale. There was no such
agreement in this case. Primarily, the concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the
obligation becomes effective. It clearly presupposes the existence of a valid and binding agreement, the effectivity of which is subordinated to its
fulfillment. Since there is no perfected contract in the first place, there is no basis for the application of the principles governing "suspensive conditions."

According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984 cannot be classified as a counter-offer; it is simply a recital of
its total monetary claims against petitioner. Moreover, the amount stated therein could not likewise be considered as the counter-offer since as admitted
by petitioner, it was only recommendation which was subject to approval of the PNB Board of Directors.

Neither can the receipt by the SAMD of P725,000.00 be regarded as evidence of a perfected sale contract. As gleaned from the parties' Stipulation of
Facts during the proceedings in the court a quo, the amount is merely an acknowledgment of the receipt of P725,000.00 as deposit to repurchase the
property. The deposit of P725,000.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of
Directors. Respondent maintains that its acceptance of the amount was qualified by that condition, thus not absolute. Pending such approval, it cannot
be legally claimed that respondent is already bound by any contract of sale with petitioner.

According to respondent, petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering, managing
and preserving the properties and other special assets of PNB. The SAMD does not have the power to sell, encumber, dispose of, or otherwise alienate the
assets, since the power to do so must emanate from its Board of Directors. The SAMD was not authorized by respondent's Board to enter into contracts
of sale with third persons involving corporate assets. There is absolutely nothing on record that respondent authorized the SAMD, or made it appear to
petitioner that it represented itself as having such authority.

Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition, among
others, "that the selling price shall be the total bank's claim as of documentation date x x x payable in cash (P725,000.00 already deposited)

within 60 days from notice of approval." A new Statement of Account was attached therein indicating the total bank's claim to be P1,931,389.53 less
deposit of P725,000.00, or P1,206,389.00. Furthermore, while respondent's Board of Directors accepted petitioner's offer to repurchase the property,
the acceptance was qualified, in that it required a higher sale price and subject to specified terms and conditions enumerated therein. This qualified
acceptance was in effect a counter-offer, necessitating petitioner's acceptance in return.

The Ruling of the Court

The ruling of the appellate court that there was no perfected contract of sale between the parties on June 4, 1985 is correct.

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.41 Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

 (2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

Contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract.42 Once perfected, they bind other contracting parties and the obligations arising therefrom have the form of law between the
parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the
consequences which, according to their nature, may be in keeping with good faith, usage and law.43

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.44 The absence of any of the essential elements will negate the existence of a perfected contract of sale.
As the Court ruled in Boston Bank of the Philippines v. Manalo:45

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.46

A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without
acceptance of the other, there is no contract.47 When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation between the parties.48

In San Miguel Properties Philippines, Inc. v. Huang,49 the Court ruled that the stages of a contract of sale are as follows: (1) negotiation, covering the
period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes
place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and
upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in
the extinguishment thereof.

A negotiation is formally initiated by an offer, which, however, must be certain.50 At any time prior to the perfection of the contract, either negotiating
party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the
offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and
without variance of any sort from the proposal. In Adelfa Properties, Inc. v. Court of Appeals,51 the Court ruled that:

x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and
must be evidenced by some acts or conduct communicated to the offeror, it may be shown by acts, conduct, or words of the accepting party
that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts,
conduct, or words of a party recognizing the existence of the contract of sale.52

A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered
in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis.53 Consequently, when something is
desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation
from the terms of the offer annuls the offer.54 The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of
the minds.

In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since it lacked the resources, it requested for more
time to redeem/repurchase the property under such terms and conditions agreed upon by the parties. 55 The request, which was made through a letter
dated August 25, 1983, was referred to the respondent's main branch for appropriate action. 56 Before respondent could act on the request, petitioner
again wrote respondent as follows:

1. Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150,000.00);

2. Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00);
and

3. The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one
year grave period requested for.57

When the petitioner was told that respondent did not allow "partial redemption,"58 it sent a letter to respondent's President reiterating its offer to
purchase the property.59 There was no response to petitioner's letters dated February 10 and 15, 1984.

The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984 was P1,574,560.47 cannot be considered an
unqualified acceptance to petitioner's offer to purchase the property. The statement is but a computation of the amount which petitioner was obliged to
pay in case respondent would later agree to sell the property, including interests, advances on insurance premium, advances on realty taxes, publication
cost, registration expenses and miscellaneous expenses.

There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept petitioner's offer and sell the property
for P1,574,560.47. Any acceptance by the SAMD of petitioner's offer would not bind respondent. As this Court ruled in AF Realty Development, Inc. vs.
Diesehuan Freight Services, Inc.:60
 Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of
directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly
delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by
the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of
authorized duties of such director, are held not binding on the corporation.

Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when
authorized by a board resolution or its by-laws.61

It appears that the SAMD had prepared a recommendation for respondent to accept petitioner's offer to repurchase the property even beyond the one-
year period; it recommended that petitioner be allowed to redeem the property and pay P1,574,560.00 as the purchase price. Respondent later approved
the recommendation that the property be sold to petitioner. But instead of the P1,574,560.47 recommended by the SAMD and to which petitioner had
previously conformed, respondent set the purchase price at P2,660,000.00. In fine, respondent's acceptance of petitioner's offer was qualified, hence can
be at most considered as a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of sale would have arisen; as it turns out,
however, petitioner merely sought to have the counter-offer reconsidered. This request for reconsideration would later be rejected by respondent.

We do not agree with petitioner's contention that the P725,000.00 it had remitted to respondent was "earnest money" which could be considered as
proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. The provision reads:

ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of
the contract.

This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court:

8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCC's
total liability to PNB as of June 25, 1984 to be P1,574,560.47 and recommended this amount as the repurchase price of the subject property.

9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property. The deposit of P725,000 was accepted by
PNB on the condition that the purchase price is still subject to the approval of the PNB Board.62

Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price of the property, in the event that respondent would approve the
recommendation of SAMD for respondent to accept petitioner's offer to purchase the property for P1,574,560.47. Unless and until the respondent
accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of
sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.63

It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to accept the offer to purchase the property for P1,931,389.53.
However, this amounted to an amendment of respondent's qualified acceptance, or an amended counter-offer, because while the respondent lowered the
purchase price, it still declared that its acceptance was subject to the following terms and conditions:

1. That the selling price shall be the total Bank's claim as of documentation date (pls. see attached statement of account as of 5-31-85), payable
in cash (P725,000.00 already deposited) within sixty (60) days from notice of approval;

2. The Bank sells only whatever rights, interests and participation it may have in the property and you are charged with full knowledge of the
nature and extent of said rights, interests and participation and waive your right to warranty against eviction.

3. All taxes and other government imposts due or to become due on the property, as well as expenses including costs of documents and science
stamps, transfer fees, etc., to be incurred in connection with the execution and registration of all covering documents shall be borne by you;

4. That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale, if there are any;

5. That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer, your
deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties.

6. That the sale shall be subject to such other terms and conditions that the Legal Department may impose to protect the interest of the Bank.64

It appears that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested respondent
to reconsider its amended counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund its P725,000.00 deposit.

In sum, then, there was no perfected contract of sale between petitioner and respondent over the subject property.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.

The assailed decision is AFFIRMED. Costs against petitioner Manila Metal Container Corporation.

SO ORDERED.
G.R. No. 199648 January 28, 2015

FIRST OPTIMA REALTY CORPORATION, Petitioner,

vs.
SECURITRON SECURITY SERVICES, INC., Respondent.

DECISION

DEL CASTILLO, J.:

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 CA’s
December 9, 2011 Resolution4 denying the herein petitioner’s 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 Young’s 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
petitioner’s board of directors.

Sometime thereafter, Eleazar personally went to petitioner’s 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 sister’s advice on the matter.10 She likewise informed Eleazar that
prior approval of petitioner’s 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:

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 x15

The check was eventually deposited with and credited to petitioner’s 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 respondent’s 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 respondent’s 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 respondent’s ₱100,000.00 check
payment cannot be considered as earnest money for the subject property, since said payment was merely coursed through petitioner’s 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 attorney’s fees and costs of suit.

In a Reply,21 respondent countered that authorization by petitioner’s 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 petitioner’s receiving clerk into accepting the February 4,
2005 letter and check for ₱100,000.00; that petitioner’s acceptance of the check and its failure – for more than a year – to return respondent’s payment
amounts to estoppel and a ratification of the sale; and that petitioner is not entitled to its counterclaim.

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 petitioner’s 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 petitioner’s receiving
clerk, the latter was harassed or forced to accept the same; and that for the sale of the subject property, no resolution of petitioner’s 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 petitioner’s
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 court’s 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-appellant’s silence or inaction on said letter shows its conformity or
consent thereto; Second. In addition to the aforementioned letter, defendant-appellant’s 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-appellee’s 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.

As stated above the presence of defendant-appellant’s 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-appellant’s 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[-]president’s 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-appellant’s 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:

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

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

Petitioner’s 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 CA’s
ruling, respondent’s delivery of the February 4, 2005 letter and check; petitioner’s failure to respond to said letter; petitioner’s 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
respondent’s 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 latter’s 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.
Respondent’s letter and check constitute merely an offer which required petitioner’s 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 latter’s 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

Respondent’s Arguments

In its Comment,32 respondent counters that petitioner’s 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 court’s pronouncements that petitioner’s failure to reply to
respondent’s 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 petitioner’s account and failure to timely
return the money to respondent militates against petitioner’s claim of lack of knowledge and consent. Rather they indicate petitioner’s decision to sell
subject property as agreed. Respondent adds that contrary to petitioner’s 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 petitioner’s
failure to reply to its February 4, 2005 letter meant that it was amenable to respondent’s 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
respondent’s check payment, as it involved a large sum of money that was deposited in the former’s 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 respondent’s 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 petitioner’s 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 respondent’s offer to purchase the subject property was never accepted by the petitioner at
any 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

Respondent’s subsequent sending of the February 4, 2005 letter and check to petitioner – without awaiting the approval of petitioner’s board of directors
and Young’s 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.1âwphi1 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 petitioner’s 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 respondent’s check payment; petitioner’s failure to
return the purported earnest money cannot mean that it agreed to respondent’s offer.

Besides, respondent’s 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 Eleazar’s
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 petitioner’s mere receiving clerk or receptionist instead of
directly with Young’s 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 respondent’s irregular and improper actions and petitioner’s 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 cliché, 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. An agreement where the prior
free consent of one party thereto is withheld or suppressed will be struck down, and the Court shall always endeavor to protect a property owner’s 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.

G.R. No. 157493 February 5, 2007

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

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to reverse and set aside the
Court of Appeals Decision1 dated 26 April 2002 in CA-G.R. CV No. 53130 entitled, Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, Enriqueta, Adolfo,
and Jesus, all surnamed Oesmer vs. Paraiso Development Corporation, as modified by its Resolution 2 dated 4 March 2003, declaring the Contract to Sell
valid and binding with respect to the undivided proportionate shares of the six signatories of the said document, herein petitioners, namely: Ernesto,
Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); and ordering them to execute the Deed of Absolute Sale concerning their
6/8 share over the subject parcels of land in favor of herein respondent Paraiso Development Corporation, and to pay the latter the attorney’s fees plus
costs of the suit. The assailed Decision, as modified, likewise ordered the respondent to tender payment to the petitioners in the amount of
₱3,216,560.00 representing the balance of the purchase price of the subject parcels of land.

The facts of the case are as follows:

Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed Oesmer, together with Adolfo Oesmer (Adolfo) and Jesus
Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided shares of two parcels of agricultural and tenanted land situated in Barangay
Ulong Tubig, Carmona, Cavite, identified as Lot 720 with an area of 40,507 square meters (sq. m.) and Lot 834 containing an area of 14,769 sq. m., or a
total land area of 55,276 sq. m. Both lots are unregistered and originally owned by their parents, Bibiano Oesmer and Encarnacion Durumpili, who
declared the lots for taxation purposes under Tax Declaration No. 3438 3(cancelled by I.D. No. 6064-A) for Lot 720 and Tax Declaration No.
34374 (cancelled by I.D. No. 5629) for Lot 834. When the spouses Oesmer died, petitioners, together with Adolfo and Jesus, acquired the lots as heirs of
the former by right of succession.

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

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

Pursuant to the said meeting, a Contract to Sell5 was drafted by the Executive Assistant of Sotero Lee, Inocencia Almo. On 1 April 1989, petitioners
Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the amount of ₱100,000.00, payable to Ernesto, was given as option money.
Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said Contract to Sell. However, two of the brothers, Adolfo and Jesus,
did not sign the document.

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

In a letter6 dated 1 November 1989, addressed to respondent corporation, petitioners informed the former of their intention to rescind the Contract to
Sell and to return the amount of ₱100,000.00 given by respondent as option money.

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

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

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

WHEREFORE, premises considered, judgment is hereby rendered in favor of herein [respondent] Paraiso Development Corporation. The assailed
Contract to Sell is valid and binding only to the undivided proportionate share of the signatory of this document and recipient of the check, [herein
petitioner] co-owner Ernesto Durumpili Oesmer. The latter is hereby ordered to execute the Contract of Absolute Sale concerning his 1/8 share over the
subject two parcels of land in favor of herein [respondent] corporation, and to pay the latter the attorney’s fees in the sum of Ten Thousand (₱10,000.00)
Pesos plus costs of suit.

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

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

WHEREFORE, premises considered, the Decision of the court a quo is hereby MODIFIED. Judgment is hereby rendered in favor of herein [respondent]
Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to the undivided proportionate share of the six (6)
signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The
said [petitioners] are hereby ordered to execute the Deed of Absolute Sale concerning their 6/8 share over the subject two parcels of land and in favor of
herein [respondent] corporation, and to pay the latter the attorney’s fees in the sum of Ten Thousand Pesos (₱10,000.00) plus costs of suit.11

Aggrieved by the above-mentioned Decision, petitioners filed a Motion for Reconsideration of the same on 2 July 2002. Acting on petitioners’ Motion for
Reconsideration, the Court of Appeals issued a Resolution dated 4 March 2003, maintaining its Decision dated 26 April 2002, with the modification that
respondent tender payment to petitioners in the amount of ₱3,216,560.00, representing the balance of the purchase price of the subject parcels of land.
The dispositive portion of the said Resolution reads:

WHEREFORE, premises considered, the assailed Decision is hereby modified.1awphi1.net Judgment is hereby rendered in favor of herein [respondent]
Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to the undivided proportionate shares of the six (6)
signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The
said [petitioners] are hereby ordered to execute the Deed of Absolute Sale concerning their 6/8 share over the subject two parcels of land in favor of
herein [respondent] corporation, and to pay the latter attorney’s fees in the sum of Ten Thousand Pesos (₱10,000.00) plus costs of suit. Respondent is
likewise ordered to tender payment to the above-named [petitioners] in the amount of Three Million Two Hundred Sixteen Thousand Five Hundred
Sixty Pesos (₱3,216,560.00) representing the balance of the purchase price of the subject two parcels of land. 12

Hence, this Petition for Review on Certiorari.

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

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

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

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

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

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

The Petition is bereft of merit.

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

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

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

However, despite petitioner Ernesto’s lack of written authority from the five petitioners to sell their shares in the subject parcels of land, the supposed
Contract to Sell remains valid and binding upon the latter.

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

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

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

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in the subject parcels of
land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been stipulated in the Contract to Sell and such
acceptance was made known to respondent corporation when the duplicate copy of the Contract to Sell was returned to the latter bearing petitioners’
signatures.
As to petitioner Enriqueta’s claim that she merely signed as a witness to the said contract, the contract itself does not say so. There was no single
indication in the said contract that she signed the same merely as a witness. The fact that her signature appears on the right-hand margin of the Contract
to Sell is insignificant. The contract indisputably referred to the "Heirs of Bibiano and Encarnacion Oesmer," and since there is no showing that
Enriqueta signed the document in some other capacity, it can be safely assumed that she did so as one of the parties to the sale.

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

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

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

First, the Contract to Sell is couched in such a simple language which is undoubtedly easy to read and understand. The terms of the Contract, specifically
the amount of ₱100,000.00 representing the option money paid by [respondent] corporation, the purchase price of ₱60.00 per square meter or the total
amount of ₱3,316,560.00 and a brief description of the subject properties are well-indicated thereon that any prudent and mature man would have
known the nature and extent of the transaction encapsulated in the document that he was signing.

Second, the following circumstances, as testified by the witnesses and as can be gleaned from the records of the case clearly indicate the [petitioners’]
intention to be bound by the stipulations chronicled in the said Contract to Sell.

As to [petitioner] Ernesto, there is no dispute as to his intention to effect the alienation of the subject property as he in fact was the one who initiated the
negotiation process and culminated the same by affixing his signature on the Contract to Sell and by taking receipt of the amount of ₱100,000.00 which
formed part of the purchase price.

xxxx

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

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

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

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

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

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

As the Court has held:

x x x The rule that one who signs a contract is presumed to know its contents has been applied even to contracts of illiterate persons on the ground that if
such persons are unable to read, they are negligent if they fail to have the contract read to them. If a person cannot read the instrument, it is as much his
duty to procure some reliable persons to read and explain it to him, before he signs it, as it would be to read it before he signed it if he were able to do and
his failure to obtain a reading and explanation of it is such gross negligence as will estop from avoiding it on the ground that he was ignorant of its
contents."16
That the petitioners really had the intention to dispose of their shares in the subject parcels of land, irrespective of whether or not all of the heirs
consented to the said Contract to Sell, was unveiled by Adolfo’s testimony as follows:

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

WITNESS: No sir.

ATTY. GAMO: What you are saying is that when your brothers and sisters except Jesus and you did not sign that agreement which had been marked as
[Exhibit] "D", your brothers and sisters were grossly violating your agreement.

WITNESS: Yes, sir, they violated what we have agreed upon.17

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

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

Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate,
assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation
or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the
co-ownership. [Emphases supplied.]

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

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

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

The Contract to Sell is not void merely because it does not bear the signature of the respondent corporation. Respondent corporation’s consent to be
bound by the terms of the contract is shown in the uncontroverted facts which established that there was partial performance by respondent of its
obligation in the said Contract to Sell when it tendered the amount of ₱100,000.00 to form part of the purchase price, which was accepted and
acknowledged expressly by petitioners. Therefore, by force of law, respondent is required to complete the payment to enforce the terms of the contract.
Accordingly, despite the absence of respondent’s signature in the Contract to Sell, the former cannot evade its obligation to pay the balance of the
purchase price.

As a final point, the Contract to Sell entered into by the parties is not a unilateral promise to sell merely because it used the word option money when it
referred to the amount of ₱100,000.00, which also form part of the purchase price.

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

In the instant case, the consideration of ₱100,000.00 paid by respondent to petitioners was referred to as "option money." However, a careful
examination of the words used in the contract indicates that the money is not option money but earnest money. "Earnest money" and "option money"
are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct
consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected;
and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to
buy, but may even forfeit it depending on the terms of the option.20

The sum of ₱100,000.00 was part of the purchase price. Although the same was denominated as "option money," it is actually in the nature of earnest
money or down payment when considered with the other terms of the contract. Doubtless, the agreement is not a mere unilateral promise to sell, but,
indeed, it is a Contract to Sell as both the trial court and the appellate court declared in their Decisions.

WHEREFORE, premises considered, the Petition is DENIED, and the Decision and Resolution of the Court of Appeals dated 26 April 2002 and 4 March
2003, respectively, are AFFIRMED, thus, (a) the Contract to Sell is DECLARED valid and binding with respect to the undivided proportionate shares
in the subject parcels of land of the six signatories of the said document, herein petitioners Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and
Leonora (all surnamed Oesmer); (b) respondent is ORDERED to tender payment to petitioners in the amount of ₱3,216,560.00 representing the
balance of the purchase price for the latter’s shares in the subject parcels of land; and (c) petitioners are further ORDERED to execute in favor of
respondent the Deed of Absolute Sale covering their shares in the subject parcels of land after receipt of the balance of the purchase price, and to pay
respondent attorney’s fees plus costs of the suit. Costs against petitioners.
SO ORDERED.
G.R. No. 160132 April 17, 2009

SERAFIN, RAUL, NENITA, NAZARETO, NEOLANDA, all surnamed NARANJA, AMELIA NARANJA-RUBINOS, NILDA NARANJA-
LIMANA, and NAIDA NARANJA-GICANO, Petitioners,
vs.
COURT OF APPEALS, LUCILIA P. BELARDO, represented by her Attorney-in-Fact, REBECCA CORDERO, and THE LOCAL
REGISTER OF DEEDS, BACOLOD CITY, Respondents.

DECISION

NACHURA, J.:

This petition seeks a review of the Court of Appeals (CA) Decision1 dated September 13, 2002 and Resolution2dated September 24, 2003 which upheld
the contract of sale executed by petitioners’ predecessor, Roque Naranja, during his lifetime, over two real properties.

Roque Naranja was the registered owner of a parcel of land, denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC) Pcs-886, Bacolod
Cadastre, with an area of 136 square meters and covered by Transfer Certificate of Title (TCT) No. T-18764.

Roque was also a co-owner of an adjacent lot, Lot No. 2, of the same subdivision plan, which he co-owned with his brothers, Gabino and Placido
Naranja.

When Placido died, his one-third share was inherited by his children, Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja, herein
petitioners.

Lot No. 2 is covered by TCT No. T-18762 in the names of Roque, Gabino and the said children of Placido. TCT No. T-18762 remained even after Gabino
died. The other petitioners — Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos — are the children of Gabino.3

The two lots were being leased by Esso Standard Eastern, Inc. for 30 years from 1962-1992. For his properties, Roque was being paid ₱200.00
per month by the company.4

In 1976, Roque, who was single and had no children, lived with his half sister, Lucilia P. Belardo (Belardo), in Pontevedra, Negros Occidental. At that
time, a catheter was attached to Roque’s body to help him urinate. But the catheter was subsequently removed when Roque was already able to urinate
normally. Other than this and the influenza prior to his death, Roque had been physically sound.5

Roque had no other source of income except for the ₱200.00 monthly rental of his two properties. To show his gratitude to Belardo, Roque sold Lot
No. 4 and his one-third share in Lot No. 2 to Belardo on August 21, 1981, through a Deed of Sale of Real Property which was duly
notarized by Atty. Eugenio Sanicas. The Deed of Sale reads:

I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod City, do hereby declare that I am the registered owner of Lot No. 4 of the
Cadastral Survey of the City of Bacolod, consisting of 136 square meters, more or less, covered by Transfer Certificate of Title No. T-18764 and a co-
owner of Lot No. 2, situated at the City of Bacolod, consisting of 151 square meters, more or less, covered by Transfer Certificate of Title No. T-18762 and
my share in the aforesaid Lot No. 2 is one-third share.

That for and in consideration of the sum of TEN THOUSAND PESOS (₱10,000.00), Philippine Currency, and other valuable consideration, receipt of
which in full I hereby acknowledge to my entire satisfaction, by these presents, I hereby transfer and convey by way of absolute sale the above-mentioned
Lot No. 4 consisting of 136 square meters covered by Transfer Certificate of Title No. T-18764 and my one-third share in Lot No. 2, covered by Transfer
Certificate of Title No. T-18762, in favor of my sister LUCILIA P. BELARDO, of legal age, Filipino citizen, married to Alfonso D. Belardo, and a resident
of Pontevedra, Negros Occidental, her heirs, successors and assigns.

IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of August, 1981 at Bacolod City, Philippines.

(SGD.)
ROQUE NARANJA6

Roque’s copies of TCT No. T-18764 and TCT No. T-18762 were entrusted to Atty. Sanicas for registration of the deed of sale and transfer of the titles to
Belardo. But the deed of sale could not be registered because Belardo did not have the money to pay for the registration fees.7

1. Belardo’s only source of income was her store and coffee shop.
2. Sometimes, her children would give her money to help with the household expenses, including the expenses incurred for Roque’s support.
3. At times, she would also borrow money from Margarita Dema-ala, a neighbor.8

When the amount of her loan reached ₱15,000.00, Dema-ala required a security. On November 19, 1983, Roque executed a deed of sale in
favor of Dema-ala, covering his two properties in consideration of the ₱15,000.00 outstanding loan and an additional ₱15,000.00, for a total of
 ₱30,000.00. Dema-ala explained that she wanted Roque to execute the deed of sale himself since the properties were still in his name. Belardo
merely acted as a witness. The titles to the properties were given to Dema-ala for safekeeping.9

Three days later, or on December 2, 1983, Roque died of influenza. The proceeds of the loan were used for his treatment while the rest was spent for his
burial.10

In 1985, Belardo fully paid the loan secured by the second deed of sale. Dema-ala returned the certificates of title to Belardo, who, in turn, gave them
back to Atty. Sanicas.

Unknown to Belardo, petitioners, the children of Placido and Gabino Naranja, executed an Extrajudicial Settlement Among Heirs 12 on October 11, 1985,
adjudicating among themselves Lot No. 4. On February 19, 1986, petitioner Amelia Naranja-Rubinos, accompanied by Belardo, borrowed the two TCTs,
together with the lease agreement with Esso Standard Eastern, Inc., from Atty. Sanicas on account of the loan being proposed by Belardo to
her. Thereafter, petitioners had the Extrajudicial Settlement Among Heirs notarized on February 25, 1986. With Roque’s copy of TCT No. T-18764 in
their possession, they succeeded in having it cancelled and a new certificate of title, TCT No. T-140184, issued in their names.13

In 1987, Belardo decided to register the Deed of Sale dated August 21, 1981. With no title in hand, she was compelled to file a petition with the RTC to
direct the Register of Deeds to annotate the deed of sale even without a copy of the TCTs. In an Order dated June 18, 1987, the RTC granted the petition.
But she only succeeded in registering the deed of sale in TCT No. T-18762 because TCT No. T-18764 had already been cancelled.14

On December 11, 1989, Atty. Sanicas prepared a certificate of authorization, giving Belardo’s daughter, Jennelyn P. Vargas, the authority to collect the
payments from Esso Standard Eastern, Inc. But it appeared from the company’s Advice of Fixed Payment that
payment of the lease rental had already been transferred from Belardo to Amelia Naranja-Rubinos because of the Extrajudicial
Settlement Among Heirs.

On June 23, 1992, Belardo,15 through her daughter and attorney-in-fact, Rebecca Cordero, instituted a suit for reconveyance with damages. The
complaint prayed that judgment be rendered declaring Belardo as the sole legal owner of Lot No. 4, declaring null and void the Extrajudicial Settlement
Among Heirs, and TCT No. T-140184, and ordering petitioners to reconvey to her the subject property and to pay damages. The case was docketed as
Civil Case No. 7144.

Subsequently, petitioners also filed a case against respondent for annulment of sale and quieting of title with damages, praying, among others, that
judgment be rendered nullifying the Deed of Sale, and ordering the Register of Deeds of Bacolod City to cancel the annotation of the Deed of Sale on TCT
No. T-18762. This case was docketed as Civil Case No. 7214.

On March 5, 1997, the RTC rendered a Decision in the consolidated cases in favor of petitioners.

The trial court noted that the Deed of Sale was defective in form since it did not contain a technical description of the subject properties but merely
indicated that they were Lot No. 4, covered by TCT No. T-18764 consisting of 136 square meters, and one-third portion of Lot No. 2 covered by TCT No.
T-18762. The trial court held that, being defective in form, the Deed of Sale did not vest title in private respondent. Full and absolute ownership did not
pass to private respondent because she failed to register the Deed of Sale. She was not a purchaser in good faith since she acted as a witness to the
second sale of the property knowing that she had already purchased the property from Roque. Whatever rights private respondent had over the
properties could not be superior to the rights of petitioners, who are now the registered owners of the parcels of land. The RTC disposed, thus:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered:

1. Dismissing Civil Case No. 7144.

2. Civil Case No. 7214.

a) Declaring the Deed of Sale dated August 21, 1981, executed by Roque Naranja, covering his one-third (1/3) share of Lot 2 of the
consolidation-subdivision plan (LRC) Pcs-886, being a portion of the consolidation of Lots 240-A, 240-B, 240-C and 240-D,
described on plan, Psd-33443 (LRC) GLRO Cad. Rec. No. 55 in favor of Lucilia Belardo, and entered as Doc. No. 80, Page 17, Book
No. XXXVI, Series of 1981 of Notary Public Eugenio Sanicas of Bacolod City, as null and void and of no force and effect;

b) Ordering the Register of Deeds of Bacolod City to cancel Entry No. 148123 annotate at the back of Transfer Certificate of Title No.
T-18762;

c) Ordering Lucilia Belardo or her successors-in-interest to pay plaintiffs the sum of ₱20,000.00 as attorney’s fees, the amount of
₱500.00 as appearance fees.

Counterclaims in both Civil Cases Nos. 7144 and 7214 are hereby DISMISSED.

SO ORDERED.16

On September 13, 2002, the CA reversed the RTC Decision.

The CA held that the unregisterability of a deed of sale will not undermine its validity and efficacy in transferring ownership of the properties to private
respondent. The CA noted that the records were devoid of any proof evidencing the alleged vitiation of Roque’s consent to the sale; hence, there is no
reason to invalidate the sale. Registration is only necessary to bind third parties, which petitioners, being the heirs of Roque Naranja, are not. The trial
court erred in applying Article 1544 of the Civil Code to the case at bar since petitioners are not purchasers of the said properties. Hence, it is not
significant that private respondent failed to register the deed of sale before the extrajudicial settlement among the heirs. The dispositive portion of the
CA Decision reads:

WHEREFORE, the decision dated March 5, 1997 in Civil Cases Nos. 7144 and 7214 is hereby REVERSED and SET ASIDE. In lieu thereof, judgment is
hereby rendered as follows:

1. Civil Case No. 7214 is hereby ordered DISMISSED for lack of cause of action.

2. In Civil Case No. 7144, the extrajudicial settlement executed by the heirs of Roque Naranja adjudicating among themselves Lot No. 4 of the
consolidation-subdivision plan (LRC) Pcs – 886 of the Bacolod Cadastre is hereby declared null and void for want of factual and legal basis.
The certificate of title issued to the heirs of Roque Naranja (Transfer Certificate of [T]i[t]le No. T-140184) as a consequence of the void extra-
judicial settlement is hereby ordered cancelled and the previous title to Lot No. 4, Transfer Certificate of Title No. T-18764, is hereby ordered
reinstated. Lucilia Belardo is hereby declared the sole and legal owner of said Lot No. 4, and one-third of Lot No. 2 of the same consolidation-
subdivision plan, Bacolod Cadastre, by virtue of the deed of sale thereof in her favor dated August 21, 1981.

SO ORDERED.17

The CA denied petitioners’ motion for reconsideration on September 24, 2003.18 Petitioners filed this petition for review, raising the following issues:

1. WHETHER OR NOT THE HONORABLE RESPONDENT COURT OF APPEALS IS CORRECT IN IGNORING THE POINT RAISED BY
[PETITIONERS] THAT THE DEED OF SALE WHICH DOES NOT COMPL[Y] WITH THE PROVISIONS OF ACT NO. 496 IS [NOT] VALID.

2. WHETHER OR NOT THE ALLEGED DEED OF SALE [OF REAL PROPERTIES] IS VALID CONSIDERING THAT THE CONSENT OF THE
LATE ROQUE NARANJA HAD BEEN VITIATED; x x x THERE [IS] NO CONCLUSIVE SHOWING THAT THERE WAS CONSIDERATION
AND THERE [ARE] SERIOUS IRREGULARITIES IN THE NOTARIZATION OF THE SAID DOCUMENTS.19

In her Comment, private respondent questioned the Verification and Certification of Non-Forum Shopping attached to the Petition for Review, which
was signed by a certain Ernesto Villadelgado without a special power of attorney. In their reply, petitioners remedied the defect by attaching a Special
Power of Attorney signed by them.

Pursuant to its policy to encourage full adjudication of the merits of an appeal, the Court had previously excused the late submission of a special power of
attorney to sign a certification against forum-shopping.20 But even if we excuse this defect, the petition nonetheless fails on the merits.

The Court does not agree with petitioners’ contention that a deed of sale must contain a technical description of the subject property in order to be valid.
Petitioners anchor their theory on Section 127 of Act No. 496, 21 which provides a sample form of a deed of sale that includes, in particular, a technical
description of the subject property.

To be valid, a contract of sale need not contain a technical description of the subject property. Contracts of sale of real property have no prescribed form
for their validity; they follow the general rule on contracts that they may be entered into in whatever form, provided all the essential requisites for their
validity are present.22

The requisites of a valid contract of sale under Article 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and
(3) price certain in money or its equivalent.

The failure of the parties to specify with absolute clarity the object of a contract by including its technical description is of no moment. What is important
is that there is, in fact, an object that is determinate or at least determinable, as subject of the contract of sale. The form of a deed of sale provided in
Section 127 of Act No. 496 is only a suggested form. It is not a mandatory form that must be strictly followed by the parties to a contract.

In the instant case, the deed of sale clearly identifies the subject properties by indicating their respective lot numbers, lot areas, and the certificate of title
covering them. Resort can always be made to the technical description as stated in the certificates of title covering the two properties.

On the alleged nullity of the deed of sale, we hold that petitioners failed to submit sufficient proof to show that Roque executed the deed of sale under the
undue influence of Belardo or that the deed of sale was simulated or without consideration.

A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a notary
public have in their favor the presumption of regularity. It must be sustained in full force and effect so long as he who impugns it does not present strong,
complete, and conclusive proof of its falsity or nullity on account of some flaws or defects provided by law.23

Petitioners allege that Belardo unduly influenced Roque, who was already physically weak and senile at that time, into executing the deed of sale. Belardo
allegedly took advantage of the fact that Roque was living in her house and was dependent on her for support.

(Moral Ascendancy) There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a
reasonable freedom of choice.24 One who alleges any defect, or the lack of consent to a contract by reason of fraud or undue influence, must establish by
full, clear and convincing evidence, such specific acts that vitiated the party’s consent; otherwise, the latter’s presumed consent to the contract
prevails.25 For undue influence to be present, the influence exerted must have so overpowered or subjugated the mind of a contracting party as to destroy
his free agency, making him express the will of another rather than his own.26
Petitioners adduced no proof that Roque had lost control of his mental faculties at the time of the sale. Undue influence is not to be inferred from age,
sickness, or debility of body, if sufficient intelligence remains.27 The evidence presented pertained more to Roque’s physical condition rather than his
mental condition. On the contrary, Atty. Sanicas, the notary public, attested that Roque was very healthy and mentally sound and sharp at the time of the
execution of the deed of sale. Atty. Sanicas said that Roque also told him that he was a Law graduate.28

Neither was the contract simulated. The late registration of the Deed of Sale and Roque’s execution of the second deed of sale in favor of Dema-ala did
not mean that the contract was simulated. We are convinced with the explanation given by respondent’s witnesses that the deed of sale was not
immediately registered because Belardo did not have the money to pay for the fees. This explanation is, in fact, plausible considering that Belardo could
barely support herself and her brother, Roque. As for the second deed of sale, Dema-ala, herself, attested before the trial court that she let Roque sign the
second deed of sale because the title to the properties were still in his name.

Finally, petitioners argue that the Deed of Sale was not supported by a consideration since no receipt was shown, and it is incredulous that Roque, who
was already weak, would travel to Bacolod City just to be able to execute the Deed of Sale.

The Deed of Sale which states "receipt of which in full I hereby acknowledge to my entire satisfaction" is an acknowledgment receipt in itself. Moreover,
the presumption that a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration.29

Heirs are bound by contracts entered into by their predecessors-in-interest.30 As heirs of Roque, petitioners are bound by the contract of sale that Roque
executed in favor of Belardo. Having been sold already to Belardo, the two properties no longer formed part of Roque’s estate which petitioners could
have inherited. The deed of extrajudicial settlement that petitioners executed over Lot No. 4 is, therefore, void, since the property subject thereof did not
become part of Roque’s estate.

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated September 13, 2002 and Resolution dated September
24, 2003 are AFFIRMED.

SO ORDERED.
G.R. No. 78903 February 28, 1990

SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners,

vs.
THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR., respondents.

Francisco A. Puray, Sr. for petitioners.

Gabriel N. Duazo for private respondent.

MEDIALDEA, J.:

This is a petition to annul and set aside the decision of the Court of Appeals rendered on May 26, 1987, upholding the validity of the sale of a parcel of
land by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private respondent Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:

A parcel of land located at Panyawan, Sogod, Southern Leyte, declared in the name of Segundo Dalion, under Tax Declaration No.
11148, with an area of 8947 hectares, assessed at P 180.00, and bounded on the North, by Sergio Destriza and Titon Veloso, East, by
Feliciano Destriza, by Barbara Bonesa (sic); and West, by Catalino Espina. (pp. 36-37, Rollo)

The decision affirms in toto the ruling of the trial court 1 issued on January 17, 1984, the dispositive portion of which provides as follows:

WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders judgment.

(a) Ordering the defendants to deliver to the plaintiff the parcel of land subject of this case, declared in the name of Segundo Dalion
previously under Tax Declaration No. 11148 and lately under Tax Declaration No. 2297 (1974) and to execute the corresponding
formal deed of conveyance in a public document in favor of the plaintiff of the said property subject of this case, otherwise, should
defendants for any reason fail to do so, the deed shall be executed in their behalf by the Provincial Sheriff or his Deputy;

(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as attorney's fees and P 500.00 as litigation expenses, and to
pay the costs; and

(c) Dismissing the counter-claim. (p. 38, Rollo)

The facts of the case are as follows:

On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, dated July 1, 1965 (Exhibit "A"),
allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery,
and that subject land is conjugal property, which he and his wife acquired in 1960 from Saturnina Sabesaje as evidenced by the "Escritura de Venta
Absoluta" (Exhibit "B"). The spouses denied claims of Sabesaje that after executing a deed of sale over the parcel of land, they had pleaded with Sabesaje,
their relative, to be allowed to administer the land because Dalion did not have any means of livelihood. They admitted, however, administering since
1958, five (5) parcels of land in Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They never
received their agreed 10% and 15% commission on the sales of copra and abaca, respectively. Sabesaje's suit, they countered, was intended merely to
harass, preempt and forestall Dalion's threat to sue for these unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning errors some of which, however, were disregarded by the appellate court, not
having been raised in the court below. While the Court of Appeals duly recognizes Our authority to review matters even if not assigned as errors in the
appeal, We are not inclined to do so since a review of the case at bar reveals that the lower court has judicially decided the case on its merits.

As to the controversy regarding the identity of the land, We have no reason to dispute the Court of Appeals' findings as follows:

To be sure, the parcel of land described in Exhibit "A" is the same property deeded out in Exhibit "B". The boundaries delineating it
from adjacent lots are identical. Both documents detail out the following boundaries, to wit:

On the North-property of Sergio Destriza and Titon Veloso;

On the East-property of Feliciano Destriza;

On the South-property of Barbara Boniza and

On the West-Catalino Espina.

(pp. 41-42, Rollo)

The issues in this case may thus be limited to: a) the validity of the contract of sale of a parcel of land and b) the necessity of a public document for
transfer of ownership thereto.

The appellate court upheld the validity of the sale on the basis of Secs. 21 and 23 of Rule 132 of the Revised Rules of Court.

SEC. 21. Private writing, its execution and authenticity, how proved.-Before any private writing may be received in evidence, its due
execution and authenticity must be proved either:

(a) By anyone who saw the writing executed;

(b) By evidence of the genuineness of the handwriting of the maker; or

(c) By a subscribing witness

xxx xxx xxx

SEC. 23. Handwriting, how proved. — The handwriting of a person may be proved by any witness who believes it to be the
handwriting of such person, and has seen the person write, or has seen writing purporting to be his upon which the witness has
acted or been charged, and has thus acquired knowledge of the handwriting of such person. Evidence respecting the handwriting
may also be given by a comparison, made by the witness or the court, with writings admitted or treated as genuine by the party
against whom the evidence is offered, or proved to be genuine to the satisfaction of the judge. (Rule 132, Revised Rules of Court)

And on the basis of the findings of fact of the trial court as follows:

Here, people who witnessed the execution of subject deed positively testified on the authenticity thereof. They categorically stated
that it had been executed and signed by the signatories thereto. In fact, one of such witnesses, Gerardo M. Ogsoc, declared on the
witness stand that he was the one who prepared said deed of sale and had copied parts thereof from the "Escritura De Venta
Absoluta" (Exhibit B) by which one Saturnina Sabesaje sold the same parcel of land to appellant Segundo Dalion. Ogsoc copied the
bounderies thereof and the name of appellant Segundo Dalion's wife, erroneously written as "Esmenia" in Exhibit "A" and
"Esmenia" in Exhibit "B". (p. 41, Rollo)

xxx xxx xxx

Against defendant's mere denial that he signed the document, the positive testimonies of the instrumental Witnesses Ogsoc and
Espina, aside from the testimony of the plaintiff, must prevail. Defendant has affirmatively alleged forgery, but he never presented
any witness or evidence to prove his claim of forgery. Each party must prove his own affirmative allegations (Section 1, Rule 131,
Rules of Court). Furthermore, it is presumed that a person is innocent of a crime or wrong (Section 5 (a),Idem), and defense should
have come forward with clear and convincing evidence to show that plaintiff committed forgery or caused said forgery to be
committed, to overcome the presumption of innocence. Mere denial of having signed, does not suffice to show forgery.

In addition, a comparison of the questioned signatories or specimens (Exhs. A-2 and A-3) with the admitted signatures or specimens
(Exhs. X and Y or 3-C) convinces the court that Exhs. A-2 or Z and A-3 were written by defendant Segundo Dalion who admitted that
Exhs. X and Y or 3-C are his signatures. The questioned signatures and the specimens are very similar to each other and appear to be
written by one person.

Further comparison of the questioned signatures and the specimens with the signatures Segundo D. Dalion appeared at the back of
the summons (p. 9, Record); on the return card (p. 25, Ibid.); back of the Court Orders dated December 17, 1973 and July 30, 1974
 and for October 7, 1974 (p. 54 & p. 56, respectively, Ibid.), and on the open court notice of April 13, 1983 (p. 235, Ibid.) readily reveal
that the questioned signatures are the signatures of defendant Segundo Dalion.

It may be noted that two signatures of Segundo D. Dalion appear on the face of the questioned document (Exh. A), one at the right
corner bottom of the document (Exh. A-2) and the other at the left hand margin thereof (Exh. A-3). The second signature is already a
surplusage. A forger would not attempt to forge another signature, an unnecessary one, for fear he may commit a revealing error or
an erroneous stroke. (Decision, p. 10) (pp. 42-43, Rollo)

We see no reason for deviating from the appellate court's ruling (p. 44, Rollo) as we reiterate that

Appellate courts have consistently subscribed to the principle that conclusions and findings of fact by the trial courts are entitled to
great weight on appeal and should not be disturbed unless for strong and cogent reasons, since it is undeniable that the trial court is
in a more advantageous position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the
case (Chase v. Buencamino, Sr., G.R. No. L-20395, May 13, 1985, 136 SCRA 365; Pring v. Court of Appeals, G.R. No. L-41605,
August 19, 1985, 138 SCRA 185)

Assuming authenticity of his signature and the genuineness of the document, Dalion nonetheless still impugns the validity of the sale on the ground that
the same is embodied in a private document, and did not thus convey title or right to the lot in question since "acts and contracts which have for their
object the creation, transmission, modification or extinction of real rights over immovable property must appear in a public instrument" (Art. 1358, par 1,
NCC).

This argument is misplaced. The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It
is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument.

A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon
perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the
object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC).

The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in
a public document. Under Art. 1498, NCC, when the sale is made through a public instrument, the execution thereof is equivalent to the delivery of the
thing. Delivery may either be actual (real) or constructive. Thus delivery of a parcel of land may be done by placing the vendee in control and possession
of the land (real) or by embodying the sale in a public instrument (constructive).

As regards petitioners' contention that the proper action should have been one for specific performance, We believe that the suit for recovery of
ownership is proper. As earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected contract of sale the right to reciprocally demand
performance, and to observe a particular form, if warranted, (Art. 1357). The trial court, aptly observed that Sabesaje's complaint sufficiently alleged a
cause of action to compel Dalion to execute a formal deed of sale, and the suit for recovery of ownership, which is premised on the binding effect and
validity inter partes of the contract of sale, merely seeks consummation of said contract.

... . A sale of a real property may be in a private instrument but that contract is valid and binding between the parties upon its
perfection. And a party may compel the other party to execute a public instrument embodying their contract affecting real rights
once the contract appearing in a private instrument hag been perfected (See Art. 1357).

... . (p. 12, Decision, p. 272, Records)

ACCORDINGLY, the petition is DENIED and the decision of the Court of Appeals upholding the ruling of the trial court is hereby AFFIRMED. No costs.

SO ORDERED.

G.R. No. 105647* July 31, 2001

HEIRS OF ERNESTO BIONA, NAMELY: EDITHA B. BLANCAFLOR, MARIANITA D. DE JESUS, VILMA B. BLANCAFLOR, ELSIE B.
RAMOS and PERLITA B. CARMEN, petitioners,
vs.
THE COURT OF APPEALS and LEOPOLDO HILAJOS, respondents.

KAPUNAN, J.:
Before us is a petition for review on certiorari under Rule 45 of the Decision of the Court of Appeals dated March 31, 1992, reversing the decision of the
Regional Trial Court, 11th Judicial region, Branch 26, Surallah, South Cotabato and the Resolution dated May 26, 1992, denying the subsequent motion
for reconsideration.

Quoting from the decision of the Court of Appeals, the antecedent facts are as follows:

On October 23, 1953, the late Ernesto Biona, married to plaintiff-appellee Soledad Biona, was awarded Homestead Patent No. V-840 over the
property subject of this suit, a parcel of agricultural land denominated as lot 177 of PLS-285-D, located in Bo. 3, Banga, Cotabato, containing
an area of ten (10) hectares, forty-three (43) acres and sixty-eight (68) centares, Original Certificate of Title No. (V-2323) P-3831 was issued in
his name by the Register of Deeds of Cotabato (Exh. C). On June 3, 1954, Ernesto and Soledad Biona obtained a loan from the then
Rehabilitation Finance Corporation (now the Development Bank of the Philippines) and put up as collateral the subject property (Exh. 4). On
June 12, 1956, Ernesto Biona died (Exh. B) leaving as his heirs herein plaintiffs-appellees, namely, his wife, Soledad Estrobillo Vda. De Biona,
and five daughters, Editha B. Blancaflor, Marianita B. de Jesus, Vilma B. Blancaflor, Elsie B. Ramos and Perlita B. Carmen.

On March 1, 1960, plaintiff-appellee Soledad Biona obtained a loan from defendant-appellant in the amount of P1,000 and as security
therefore, the subject property was mortgaged. It was further agreed upon by the contracting parties that for a period of two years until the
debt is paid, defendant-appellant shall occupy the land in dispute and enjoy the usufruct thereof.

The two-year period elapsed but Soledad Biona was not able to pay her indebtedness. Defendant-appellant continued occupying and
cultivating the subject property without protest from plaintiffs-appellees.

On July 3, 1962, defendant-appellant paid the sum of P1,400.00 to the Development Bank of the Philippines to cancel the mortgage previously
constituted by the Biona spouses on June 3, 1953 (Exhs. 4 and 6).

Thereafter, and for a period of not less than twenty-five years, defendant-appellant continued his peaceful and public occupation of the
property, declaring it in his name for taxation purposes (Exhs. 10 and 11), paying real estate property taxes thereon (Exhs. 12, 13, 13-a to 13-e,
F, G, H and I), and causing the same to be tenanted (Exhs. 7, 8, 9).

On June 19, 1985, plaintiffs-appellees, filed a complaint for recovery of ownership, possession, accounting and damages, with a prayer for a
writ of preliminary mandatory injunction and/ or restraining order against defendant-appellant alleging, among others, that the latter had
unlawfully been depriving them of the use, possession and enjoyment of the subject property; that the entire parcel of land, which was devoted
and highly suited to palay and corn, was yielding three harvests annually, with an average of one hundred twenty (120) sacks of corn and
eighty cavans of rice per hectare; that plaintiffs-appellees were deprived of its total produce amounting to P150,000.00. Plaintiffs-appellees
prayed for the award of moral damages in the sum of P50,000.00, exemplary damages in the amount of P20,000,00 and litigation expenses in
the amount of P2,000.00.

On September 19, 1986, defendant-appellant filed his answer with counterclaim traversing the material allegations in the complaint and
alleging, by way of affirmative and special defenses, that: on September 11, 1961, Soledad Biona, after obtaining the loan of P1,000.00 from
defendant-appellant, approached and begged the latter to buy the whole of Lot No. 177 since it was then at the brink of foreclosure by the
Development Bank of the Philippines and she had no money to redeem the same nor the resources to support herself and her five small
children; that defendant-appellant agreed to buy the property for the amount of P4,300.00, which consideration was to include the
redemption price to be paid to the Development Bank of the Philippines; that the purchase price paid by defendant far exceeded the then
current market value of the property and defendant had to sell his own eight-hectare parcel of land in Surallah to help Soledad Biona; that to
evidence the transaction, a deed of sale was handwritten by Soledad Biona and signed by her and the defendant; that at the time of the sale,
half of the portion of the property was already submerged in water and from the years 1969 to 1984, two and one-half hectares thereof were
eroded by the Allah River; that by virtue of his continuous and peaceful occupation of the property from the time of its sale and for more than
twenty- five years thereafter, defendant possesses a better right thereto subject only to the rights of the tenants whom he had allowed to
cultivate the land under the Land Reform Program of the government; that the complaint states no cause of action; that plaintiff's alleged
right, if any, is barred by the statutes of fraud. As counterclaim, defendant-appellant prayed that plaintiffs-appellees be ordered to execute a
formal deed of sale over the subject property and to pay him actual, moral and exemplary damages as the trial court may deem proper. He
likewise prayed for the award of attorney's fees in the sum of P10,000.00.

During the hearing of the case, plaintiffs-appellees presented in evidence the testimonies of Editha Biona Blancaflor and Vilma Biona
Blancaflor, and documentary exhibits A to G and their submarkings.

Defendant-appellant, for his part, presented the testimonies of himself and Mamerto Famular, including documentary exhibits 1 to 13, F, G, H,
I, and their submarkings.1

On January 31, 1990, the RTC rendered a decision with the following dispositive portion:

I (SIC) VIEW OF THE FOREGOING, decision is hereby rendered:

1. ordering the defendant to vacate possession of the lot in question to the extent of six-tenths (6/10) of the total area thereof and to deliver the
same to the plaintiff Soledad Estrobillo Biona upon the latter's payment of the sum of P1,000.00 TO THE FORMER IN REDEMPTION OF ITS
MORTGAGE CONSTITUTED UNDER exh. "1" of defendant;

2. ordering the defendant to vacate the possession of the remaining four-tenths (4/10) of the area of the lot in question, representing the
shares of the children of the late Ernesto Biona and deliver the same to said plaintiffs; the defendant shall render an accounting of the net
produce of the area ordered returned to the co-plaintiffs of Soledad Biona commencing from the date of the filing of the complaint until
possession thereto has been delivered to said co-plaintiffs and to deliver or pay 25% of said net produce to said co-plaintiffs;
 3. ordering the defendant to pay the costs of this suit.

The defendant's counter-claim are dismissed for lack of merit.

SO ORDERED.2

Dissatisfied, herein private respondent appealed to the Court of Appeals which reversed the trial court's ruling. The dispositive portion reads as follows:

WHEREFORE, premises considered, the judgment appealed from is set aside and a new one entered dismissing the complaint, and the
plaintiffs-appellees are ordered to execute a registrable deed of conveyance of the subject property in favor of the defendant-appellant within
ten (10) days from the finality of this decision. With costs against plaintiffs-appellees.3

Hence, the instant petition where the following assignment of errors were made:

I. - RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THE SIGNATURE OF SOLEDAD ESTROBILLO IN THE DEED
OF SALE (EXHIBIT "2"), A PRIVATE DOCUMENT, IS GENUINE.

II - RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF SALE (EXHIBIT 2) IS VALID AND COULD LEGALLY
CONVEY TO PRIVATE RESPONDENT OWNERSHIP AND TITLE OVER THE SUBJECT PROPERTY.

III - RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT HEREIN PETITIONERS HAD LOST THEIR RIGHT TO RECOVER
THE SUBJECT PROPERTY BY VIRTUE OF THE EQUITABLE PRINCIPLE OF LACHES.

IV - RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT PRIVATE RESPONDENT'S RIGHT OF ACTION UNDER THE
DEED OF SALE (EXHIBIT "2") HAD PRESCRIBED.4

As correctly pointed out by the Court of Appeals, the pivotal issue in the instant case is whether or not the deed of sale is valid and if it effectively
conveyed to the private respondents the subject property.

In ruling in favor of the petitioners, the trial court refused to give weight to the evidence of private respondent which consisted of (1) the handwritten and
unnotarized deed of sale executed by Soledad Biona in favor of the private respondent; and (2) the corresponding acknowledgment receipt of the amount
of P3,500.00 as partial payment for the land in dispute. To the mind of the trial court, the signature of Soledad Biona on the deed of sale was not
genuine. There was no direct evidence to prove that Soledad Biona herself signed the document. Moreover, the deed of sale was not notarized and
therefore, did not convey any rights to the vendee. The trial court also ruled that petitioners' rights over the land have not allegedly prescribed.

On the other hand, the respondent Court of Appeals accepted as genuine the deed of sale (Exh. 2) which "sets forth in unmistakable terms that Soledad
Biona agreed for the consideration of P4,500.00, to transfer to defendant-appellant Lot 177. The fact that payment was made is evidenced by the
acknowledgment receipt for P3,500.00 (Exh. 3) signed by Soledad Biona, and private respondent previous delivery of P1,000.00 to her pursuant to the
Mutual Agreement (Exh. 1). The contract of sale between the contracting parties was consummated by the delivery of the subject land to private
respondent who since then had occupied and cultivated the same continuously and peacefully until the institution of this suit."5

Given the contrary findings of the trial court and the respondent court, there is a need to re-examine the evidence altogether. After a careful study, we are
inclined to agree with the findings and conclusions of the respondent court as they are more in accord with the law and evidence on record.

As to the authenticity of the deed of sale, we subscribe to the Court of Appeals' appreciation of evidence that private respondent has substantially proven
that Soledad Biona indeed signed the deed of sale of the subject property in his favor. His categorical statement in the trial court that he himself saw
Soledad Estrobillo affix her signature on the deed of sale lends credence. This was corroborated by another witness, Mamerto Famular. Although the
petitioners consider such testimony as self-serving and biased,6 it can not, however, be denied that private respondent has shown by competent proof
that a contract of sale where all the essential elements are present for its validity was executed between the parties. 7 The burden is on the petitioners to
prove the contrary which they have dismally failed to do. As aptly stated by the Court of Appeals:

Having established the due execution of the subject deed of sale and the receipt evidencing payment of the consideration, the burden now
shifted to plaintiffs-appellees to prove by contrary evidence that the property was not so transferred. They were not able to do this since the
very person who could deny the due execution of the document, Soledad Biona, did not testify. She similarly failed to take the witness stand in
order to deny her signatures on Exhs. 2 and 3. Admitting as true that she was under medication in Manila while the hearing of the case was
underway, it was easy enough to get her deposition. Her non-presentation gives rise to the presumption that if her testimony was taken, the
same would be adverse to the claim by plaintiffs-appellees.1âwphi1.nêt

It must also be noted that under Sec. 22 Rule 132 of our procedural law, evidence respecting handwriting may also be given by a comparison,
made by the witness or the court, with writings admitted or treated as genuine by the party against whom the evidence is offered. Our own
close scrutiny of the signature of Soledad Biona appearing on Exh. 1, the document admitted by the contending parties, reveals that it is the
same as the signatures appearing on Exhs. 2 and 3, the documents in dispute. Admittedly, as was pointed out by the trial court, the "S" in Exhs.
2 and 3 were written in printed type while that in Exh. 1 is in handwriting type. But a careful look at the text of Exh. 2 would reveal that
Soledad Biona alternately wrote the letter "S" in longhand and printed form. Thus, the words "Sum" and "Sept.," found in the penultimate and
last paragraphs of the document, respectively, were both written in longhand, while her name appearing on first part of the document, as well
as the erased word "Sept." in the last paragraph thereof were written in printed form. Moreover, all doubts about the genuineness of Soledad
Biona's signatures on Exhs. 2 and 3 are removed upon their comparison to her signature appearing on the special power of attorney (Exh. A)
presented in evidence by plaintiffs-appellees during trial. In said document, Soledad Biona signed her name using the same fact that Soledad
Estrobillo Biona wrote her entire name on Exh. 2 while she merely affixed her maiden name on the other two documents may have been due to
the lesser options left to her when the lawyers who drafted the two documents (Exhs. 2 and 3) already had typewritten the names "SOLEDAD
 ESTROBILLO" thereon whereas in Exh. 2, it was Soledad Biona herself who printed and signed her own name. Thus, in the special power of
attorney (Exh. A), Soledad Biona signed her name in the same manner it was typewritten on the document.8

We agree with the private respondent that all the requisites for a valid contract of sale are present in the instant case. For a valuable consideration of
P4,500.00, Soledad Biona agreed to sell and actually conveyed the subject property to private respondent. The fact that the deed of sale was not
notarized does not render the agreement null and void and without any effect. The provision of Article 1358 of the Civil Code 9 on the necessity of a public
document is only for convenience, and not for validity or enforceability.10 The observance of which is only necessary to insure its efficacy, so that after the
existence of said contract had been admitted, the party bound may be compelled to execute the proper document. 11 Undeniably, a contract has been
entered into by Soledad Biona and the private respondent. Regardless of its form, it was valid, binding and enforceable between the parties. We quote
with favor the respondent court's ratiocination on the matter:

xxx The trial court cannot dictate the manner in which the parties may execute their agreement, unless the law otherwise provides for a
prescribed form, which is not so in this case. The deed of sale so executed, although a private document, is effective as between the parties
themselves and also as the third persons having no better title, and should be admitted in evidence for the purpose of showing the rights and
relations of the contracting parties (Carbonell v. Court of Appeals, 69 SCRA 99; Elumbaring v. Elumbaring, 12 Phil. 384). Under Art. 1356 of
the Civil Code, contracts shall be obligatory in whatever form they may have been entered into provided all the essential requisites for their
necessary elements for a valid contract of sale were met when Soledad Biona agreed to sell and actually conveyed Lot 177 to defendant-
appellant who paid the amount of P4,500.00 therefore. The deed of sale (Exh. 2) is not made ineffective merely because it is not notarized or
does not appear in a public document. The contract is binding upon the contracting parties, defendant-appellant and Soledad Biona, including
her successors-in-interest. Pursuant to Art. 1357, plaintiffs-appellees may be compelled by defendant-appellant to execute a public document
to embody their valid and enforceable contract and for the purpose of registering the property in the latter's name (Clarin v. Rulona, 127 SCRA
512; Heirs of Amparo v. Santos, 108 SCRA 43; Araneta v. Montelibano, 14 Phil. 117).12

Finally, we find no merit in petitioners' contention that their right over the land has not prescribed. The principle of laches was properly applied against
petitioner. Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due
diligence could or should have been done earlier, it is negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it has either abandoned it or declined to assert it.13 In the instant case, the Court of Appeals point to the circumstances that
warrant the principle to come into play:

Laches had been defined to be such neglect or omission to assert a right taken in conjunction with the lapse of time and other circumstances
causing prejudice to an adverse party, as will bar him in equity (Heirs of Batiog Lacamen v. Heirs of Laruan, 65 SCRA 605, 609-610). In the
instant suit, Soledad Biona, at the time of the execution of the deed of sale (Exh. 2) on September 11, 1961, could only alienate that portion of
Lot 177 belonging to her, which is seven-twelfths of the entire property. She had no power or authority to dispose of the shares of her co-
owners, the five daughters of the deceased Ernesto Biona, who were entitled to an indivisible five-twelfths portion of the whole property. It is
not disputed, however, that as early as 1960, when Soledad Biona borrowed money from defendant-appellant (Exh. L), the latter entered,
possessed and started occupying the same in the concept of an owner. He caused its cultivation through various tenants under Certificates of
Land Transfer (Exhs. 7-9), declared the property in his name, religiously paid taxes thereon, reaped benefits therefrom, and executed other
acts of dominion without any protest or interference from plaintiffs-appellees for more than twenty-five years. Even when the five daughters of
the deceased Ernesto Biona were way past the age of majority, when they could have already asserted their right to their share, no sale in
defendant-appellant's favor was ever brought or any other action was taken by them to recover their share. Instead, they allowed defendant-
appellant to peacefully occupy the property without protest. Although it is true that no title to registered land in derogation of that of the
registered owner shall be acquired by prescription or adverse possession as the right to recover possession of registered land is imprescriptible,
jurisprudence has laid down the rule that a person and his heirs may lose their right to recover back the possession of such property and title
thereto by reason of laches. (Victoriano v. Court of Appeals, 194 SCRA 19; Lola v. CA, 145 SCRA 439, 449). Indeed, it has been ruled in the case
of Miguel v. Catalino, 26 SCRA 234, 239, that:

'Courts can not look with favor at parties who, by their silence, delay and inaction, knowingly induce another to spend time, effort
and expense in cultivating the land, paying taxes and making improvements thereof for 30 long years, only to spring from ambush
and claim title when the possessor's efforts and the rise of land values offer an opportunity to make easy profit at his expense.'

Thus, notwithstanding the invalidity of the sale with respect to the share of plaintiffs-appellees, the daughters of the late Ernesto Biona, they
[allowed] the vendee, defendant-appellant herein, to enter, occupy and possess the property in the concept of an owner without demurrer and
molestation for a long period of time, never claiming the land as their own until 1985 when the property has greatly appreciated in
value. Vigilantibus non dormientibus sequitas subvenit.14

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED.

SO ORDERED.
G.R. No. 85240 July 12, 1991

HEIRS OF CECILIO (also known as BASILIO) CLAUDEL, namely, MODESTA CLAUDEL, LORETA HERRERA, JOSE CLAUDEL,
BENJAMIN CLAUDEL, PACITA CLAUDEL, CARMELITA CLAUDEL, MARIO CLAUDEL, ROBERTO CLAUDEL, LEONARDO
CLAUDEL, ARSENIA VILLALON, PERPETUA CLAUDEL and FELISA CLAUDEL, petitioners,
vs.
HON. COURT OF APPEALS, HEIRS OF MACARIO, ESPERIDIONA, RAYMUNDA and CELESTINA, all surnamed
CLAUDEL, respondents.

This petition for review on certiorari seeks the reversal of the decision rendered by the Court of Appeals in CA-G.R. CV No. 044291 and the reinstatement
of the decision of the then Court of First Instance (CFI) of Rizal, Branch CXI, in Civil Case No. M-5276-P, entitled. "Heirs of Macario Claudel, et al. v.
Heirs of Cecilio Claudel, et al.," which dismissed the complaint of the private respondents against the petitioners for cancellation of titles and
reconveyance with damages.2

As early as December 28, 1922, Basilio also known as "Cecilio" Claudel, acquired from the Bureau of Lands, Lot No. 1230 of the Muntinlupa Estate
Subdivision, located in the poblacion of Muntinlupa, Rizal, with an area of 10,107 square meters; he secured Transfer Certificate of Title (TCT) No. 7471
issued by the Registry of Deeds for the Province of Rizal in 1923; he also declared the lot in his name, the latest Tax Declaration being No. 5795. He
dutifully paid the real estate taxes thereon until his death in 1937.3 Thereafter, his widow "Basilia" and later, her son Jose, one of the herein petitioners,
paid the taxes.

The same piece of land purchased by Cecilio would, however, become the subject of protracted litigation thirty-nine years after his death.

Two branches of Cecilio's family contested the ownership over the land-on one hand the children of Cecilio, namely, Modesto, Loreta, Jose, Benjamin,
Pacita, Carmelita, Roberto, Mario, Leonardo, Nenita, Arsenia Villalon, and Felisa Claudel, and their children and descendants, now the herein petitioners
(hereinafter referred to as HEIRS OF CECILIO), and on the other, the brother and sisters of Cecilio, namely, Macario, Esperidiona, Raymunda, and
Celestina and their children and descendants, now the herein private respondents (hereinafter referred to as SIBLINGS OF CECILIO). In 1972, the
HEIRS OF CECILIO partitioned this lot among themselves and obtained the corresponding Transfer Certificates of Title on their shares, as follows:

TCT No. 395391 1,997 sq. m. –– Jose Claudel

TCT No. 395392 1,997 sq. m. –– Modesta Claudel and children

TCT No. 395393 1,997 sq. m. –– Armenia C. Villalon

TCT No. 395394 1,997 sq. m. –– Felisa Claudel4

Four years later, on December 7, 1976, private respondents SIBLINGS OF CECILIO, filed Civil Case No. 5276-P as already adverted to at the outset, with
the then Court of First Instance of Rizal, a "Complaint for Cancellation of Titles and Reconveyance with Damages," alleging that 46 years earlier, or
sometime in 1930, their parents had purchased from the late Cecilio Claudel several portions of Lot No. 1230 for the sum of P30.00. They admitted that
the transaction was verbal. However, as proof of the sale, the SIBLINGS OF CECILIO presented a subdivision plan of the said land, dated March 25,
1930, indicating the portions allegedly sold to the SIBLINGS OF CECILIO.

As already mentioned, the then Court of First Instance of Rizal, Branch CXI, dismissed the complaint, disregarding the above sole evidence (subdivision
plan) presented by the SIBLINGS OF CECILIO, thus:
 Examining the pleadings as well as the evidence presented in this case by the parties, the Court can not but notice that the present complaint
was filed in the name of the Heirs of Macario, Espiridiona, Raymunda and Celestina, all surnamed Claudel, without naming the different heirs
particularly involved, and who wish to recover the lots from the defendants. The Court tried to find this out from the evidence presented by the
plaintiffs but to no avail. On this point alone, the Court would not be able to apportion the property to the real party in interest if ever they are
entitled to it as the persons indicated therein is in generic term (Section 2, Rule 3). The Court has noticed also that with the exception of
plaintiff Lampitoc and (sic) the heirs of Raymunda Claudel are no longer residing in the property as they have (sic) left the same in 1967. But
most important of all the plaintiffs failed to present any document evidencing the alleged sale of the property to their predecessors in interest
by the father of the defendants. Considering that the subject matter of the supposed sale is a real property the absence of any document
evidencing the sale would preclude the admission of oral testimony (Statute of Frauds). Moreover, considering also that the alleged sale took
place in 1930, the action filed by the plaintiffs herein for the recovery of the same more than thirty years after the cause of action has accrued
has already prescribed.

WHEREFORE, the Court renders judgment dismissing the complaint, without pronouncement as to costs.

SO ORDERED.5

On appeal, the following errors6 were assigned by the SIBLINGS OF CECILIO:

1. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS' COMPLAINT DESPITE CONCLUSIVE EVIDENCE SHOWING THE PORTION
SOLD TO EACH OF PLAINTIFFS' PREDECESSORS.

2. THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS FAILED TO PROVE ANY DOCUMENT EVIDENCING THE ALLEGED
SALE.

3. THE TRIAL COURT ERRED IN NOT GIVING CREDIT TO THE PLAN, EXHIBIT A, SHOWING THE PORTIONS SOLD TO EACH OF THE
PLAINTIFFS' PREDECESSORS-IN-INTEREST.

4. THE TRIAL COURT ERRED IN NOT DECLARING PLAINTIFFS AS OWNERS OF THE PORTION COVERED BY THE PLAN, EXHIBIT A.

5. THE TRIAL COURT ERRED IN NOT DECLARING TRANSFER CERTIFICATES OF TITLE NOS. 395391, 395392, 395393 AND 395394 OF
THE REGISTER OF DEEDS OF RIZAL AS NULL AND VOID.

The Court of Appeals reversed the decision of the trial court on the following grounds:

1. The failure to bring and prosecute the action in the name of the real party in interest, namely the parties themselves, was not a fatal omission since the
court a quo could have adjudicated the lots to the SIBLINGS OF CECILIO, the parents of the herein respondents, leaving it to them to adjudicate the
property among themselves.

2. The fact of residence in the disputed properties by the herein respondents had been made possible by the toleration of the deceased Cecilio.

3. The Statute of Frauds applies only to executory contracts and not to consummated sales as in the case at bar where oral evidence may be admitted as
cited in Iñigo v. Estate of Magtoto7 and Diana, et al. v. Macalibo.8

In addition,

. . . Given the nature of their relationship with one another it is not unusual that no document to evidence the sale was executed, . . ., in their
blind faith in friends and relatives, in their lack of experience and foresight, and in their ignorance, men, in spite of laws, will make and
continue to make verbal contracts. . . .9

4. The defense of prescription cannot be set up against the herein petitioners despite the lapse of over forty years from the time of the alleged sale in 1930
up to the filing of the "Complaint for Cancellation of Titles and Reconveyance . . ." in 1976.

According to the Court of Appeals, the action was not for the recovery of possession of real property but for the cancellation of titles issued to the HEIRS
OF CECILIO in 1973. Since the SIBLINGS OF CECILIO commenced their complaint for cancellation of titles and reconveyance with damages on
December 7, 1976, only four years after the HEIRS OF CECILIO partitioned this lot among themselves and obtained the corresponding Transfer
Certificates of Titles, then there is no prescription of action yet.

Thus the respondent court ordered the cancellation of the Transfer Certificates of Title Nos. 395391, 395392, 395393, and 395394 of the Register of
Deeds of Rizal issued in the names of the HEIRS OF CECILIO and corollarily ordered the execution of the following deeds of reconveyance:

To Celestina Claudel, Lot 1230-A with an area of 705 sq. m.

To Raymunda Claudel, Lot 1230-B with an area of 599 sq. m.

To Esperidiona Claudel, Lot 1230-C with an area of 597 sq. m.

To Macario Claudel, Lot 1230-D, with an area of 596 sq. m.10

The respondent court also enjoined that this disposition is without prejudice to the private respondents, as heirs of their deceased parents, the SIBLINGS
OF CECILIO, partitioning among themselves in accordance with law the respective portions sold to and herein adjudicated to their parents.

The rest of the land, lots 1230-E and 1230-F, with an area of 598 and 6,927 square meters, respectively would go to Cecilio or his heirs, the herein
petitioners. Beyond these apportionments, the HEIRS OF CECILIO would not receive anything else.

The crux of the entire litigation is whether or not the Court of Appeals committed a reversible error in disposing the question of the true ownership of the
lots.

And the real issues are:

1. Whether or not a contract of sale of land may be proven orally:

2. Whether or not the prescriptive period for filing an action for cancellation of titles and reconveyance with damages (the action filed by the
SIBLINGS OF CECILIO) should be counted from the alleged sale upon which they claim their ownership (1930) or from the date of the
issuance of the titles sought to be cancelled in favor of the HEIRS OF CECILIO (1976).

The rule of thumb is that a sale of land, once consummated, is valid regardless of the form it may have been entered into. 11 For nowhere does law or
jurisprudence prescribe that the contract of sale be put in writing before such contract can validly cede or transmit rights over a certain real property
between the parties themselves.

However, in the event that a third party, as in this case, disputes the ownership of the property, the person against whom that claim is brought can not
present any proof of such sale and hence has no means to enforce the contract. Thus the Statute of Frauds was precisely devised to protect the parties in a
contract of sale of real property so that no such contract is enforceable unless certain requisites, for purposes of proof, are met.

The provisions of the Statute of Frauds pertinent to the present controversy, state:

Art. 1403 (Civil Code). The following contracts are unenforceable, unless they are ratified:

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

(Emphasis supplied.)

The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted
memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced in Writing. 12

The provisions of the Statute of Frauds originally appeared under the old Rules of Evidence. However when the Civil Code was re-written in 1949 (to take
effect in 1950), the provisions of the Statute of Frauds were taken out of the Rules of Evidence in order to be included under the title on Unenforceable
Contracts in the Civil Code. The transfer was not only a matter of style but to show that the Statute of Frauds is also a substantive law.

Therefore, except under the conditions provided by the Statute of Frauds, the existence of the contract of sale made by Cecilio with his siblings13 can not
be proved.

On the second issue, the belated claim of the SIBLINGS OF CECILIO who filed a complaint in court only in 1976 to enforce a light acquired allegedly as
early as 1930, is difficult to comprehend.

The Civil Code states:

Art. 1145. The following actions must be commenced within six years:

(1) Upon an oral contract . . . (Emphasis supplied).

If the parties SIBLINGS OF CECILIO had allegedly derived their right of action from the oral purchase made by their parents in 1930, then the action
filed in 1976 would have clearly prescribed. More than six years had lapsed.
We do not agree with the parties SIBLINGS OF CECILIO when they reason that an implied trust in favor of the SIBLINGS OF CECILIO was established
in 1972, when the HEIRS OF CECILIO executed a contract of partition over the said properties.

But as we had pointed out, the law recognizes the superiority of the torrens title.

Above all, the torrens title in the possession of the HEIRS OF CECILIO carries more weight as proof of ownership than the survey or subdivision plan of
a parcel of land in the name of SIBLINGS OF CECILIO.

The Court has invariably upheld the indefeasibility of the torrens title. No possession by any person of any portion of the land could defeat the title of the
registered owners thereof.14

A torrens title, once registered, cannot be defeated, even by adverse, open and notorious possession. A registered title under the torrens system
cannot be defeated by prescription.1âwphi1 The title, once registered, is notice to the world. All persons must take notice. No one can plead
ignorance of the registration.15

xxx xxx xxx

Furthermore, a private individual may not bring an action for reversion or any action which would have the effect of cancelling a free patent
and the corresponding certificate of title issued on the basis thereof, with the result that the land covered thereby will again form part of the
public domain, as only the Solicitor General or the officer acting in his stead may do so.16

It is true that in some instances, the Court did away with the irrevocability of the torrens title, but the circumstances in the case at bar varied significantly
from these cases.

In Bornales v. IAC, 17 the defense of indefeasibility of a certificate of title was disregarded when the transferee who took it had notice of the flaws in the
transferor's title. No right passed to a transferee from a vendor who did not have any in the first place. The transferees bought the land registered under
the torrens system from vendors who procured title thereto by means of fraud. With this knowledge, they can not invoke the indefeasibility of a
certificate of title against the private respondent to the extent of her interest. This is because the torrens system of land registration, though indefeasible,
should not be used as a means to perpetrate fraud against the rightful owner of real property.

Mere registration of the sale is not good enough, good faith must concur with registration. Otherwise registration becomes an exercise in futility. 18

In Amerol v. Bagumbaran,19 we reversed the decision of the trial court. In this case, the title was wrongfully registered in another person's name. An
implied trust was therefore created. This trustee was compelled by law to reconvey property fraudulently acquired notwithstanding the irrevocability of
the torrens title.20

In the present case, however, the facts belie the claim of ownership.

For several years, when the SIBLINGS OF CECILIO, namely, Macario, Esperidiona Raymunda, and Celestina were living on the contested premises, they
regularly paid a sum of money, designated as "taxes" at first, to the widow of Cecilio, and later, to his heirs.21 Why their payments were never directly
made to the Municipal Government of Muntinlupa when they were intended as payments for "taxes" is difficult to square with their claim of ownership.
We are rather inclined to consider this fact as an admission of non-ownership. And when we consider also that the petitioners HEIRS OF CECILIO had
individually paid to the municipal treasury the taxes corresponding to the particular portions they were occupying,22 we can readily see the superiority of
the petitioners' position.

Renato Solema and Decimina Calvez, two of the respondents who derive their right from the SIBLINGS OF CLAUDEL, bought a portion of the lot from
Felisa Claudel, one of the HEIRS OF CLAUDEL.23 The Calvezes should not be paying for a lot that they already owned and if they did not acknowledge
Felisa as its owner.

In addition, before any of the SIBLINGS OF CECILIO could stay on any of the portions of the property, they had to ask first the permission of Jose
Claudel again, one of the HEIRS OF CECILIO.24 In fact the only reason why any of the heirs of SIBLINGS OF CECILIO could stay on the lot was because
they were allowed to do so by the HEIRS OF CECILIO.25

In view of the foregoing, we find that the appellate court committed a reversible error in denigrating the transfer certificates of title of the petitioners to
the survey or subdivision plan proffered by the private respondents. The Court generally recognizes the profundity of conclusions and findings of facts
reached by the trial court and hence sustains them on appeal except for strong and cogent reasons inasmuch as the trial court is in a better position to
examine real evidence and observe the demeanor of witnesses in a case.

No clear specific contrary evidence was cited by the respondent appellate court to justify the reversal of the lower court's findings. Thus, in this case,
between the factual findings of the trial court and the appellate court, those of the trial court must prevail over that of the latter.26

WHEREFORE, the petition is GRANTED We REVERSE and SET ASIDE the decision rendered in CA-G.R. CV No. 04429, and we hereby REINSTATE
the decision of the then Court of First Instance of Rizal (Branch 28, Pasay City) in Civil Case No. M-5276-P which ruled for the dismissal of the
Complaint for Cancellation of Titles and Reconveyance with Damages filed by the Heirs of Macario, Esperidiona Raymunda, and Celestina, all surnamed
CLAUDEL. Costs against the private respondents.

SO ORDERED.
[G.R. No. 144225. June 17, 2003]

SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO and EDITHA B.
SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH
TUAZON, petitioners, vs. SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS, respondents.

DECISION

CARPIO, J.:

The Case

Before us is a petition for review assailing the Decision[1] of the Court of Appeals dated 26 November 1999 affirming the decision [2] of the Regional
Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the Resolution of the Court of Appeals dated 26 July 2000
denying petitioners motion for reconsideration.

The Antecedent Facts

A parcel of land measuring 81,524 square meters (Subject Land) in Barrio Culis, Mabiga, Hermosa, Bataan is the subject of controversy in this
case. The registered owners of the Subject Land were petitioner spouses, Godofredo Alfredo (Godofredo) and Carmen Limon Alfredo (Carmen). The
Subject Land is covered by Original Certificate of Title No. 284 (OCT No. 284) issued to Godofredo and Carmen under Homestead Patent No. V-69196.

On 7 March 1994, the private respondents, spouses Armando Borras (Armando) and Adelia Lobaton Borras (Adelia), filed a complaint for specific
performance against Godofredo and Carmen before the Regional Trial Court of Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94.

Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the Subject Land for P7,000.00 with the Development
Bank of the Philippines (DBP). To pay the debt, Carmen and Godofredo sold the Subject Land to Armando and Adelia for P15,000.00, the buyers to pay
the DBP loan and its accumulated interest, and the balance to be paid in cash to the sellers.

Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which signed the release of mortgage and returned the owners
duplicate copy of OCT No. 284 to Godofredo and Carmen. Armando and Adelia subsequently paid the balance of the purchase price of the Subject Land
for which Carmen issued a receipt dated 11 March 1970. Godofredo and Carmen then delivered to Adelia the owners duplicate copy of OCT No. 284, with
the document of cancellation of mortgage, official receipts of realty tax payments, and tax declaration in the name of Godofredo. Godofredo and Carmen
introduced Armando and Adelia, as the new owners of the Subject Land, to the Natanawans, the old tenants of the Subject Land.Armando and Adelia
then took possession of the Subject Land.

In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land and were cutting trees under instructions of
allegedly new owners of the Subject Land.Subsequently, Armando and Adelia discovered that Godofredo and Carmen had re-sold portions of the Subject
Land to several persons.

On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of Bataan. Armando and Adelia discovered that
Godofredo and Carmen had secured an owners duplicate copy of OCT No. 284 after filing a petition in court for the issuance of a new copy. Godofredo
and Carmen claimed in their petition that they lost their owners duplicate copy. Armando and Adelia wrote Godofredo and Carmen complaining about
their acts, but the latter did not reply. Thus, Armando and Adelia filed a complaint for specific performance.

On 28 March 1994, Armando and Adelia amended their complaint to include the following persons as additional defendants: the spouses Arnulfo
Savellano and Editha B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth Tuazon (Subsequent
Buyers). The Subsequent Buyers, who are also petitioners in this case, purchased from Godofredo and Carmen the subdivided portions of the Subject
Land. The Register of Deeds of Bataan issued to the Subsequent Buyers transfer certificates of title to the lots they purchased.
 In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively petitioners) argued that the action is unenforceable under the
Statute of Frauds. Petitioners pointed out that there is no written instrument evidencing the alleged contract of sale over the Subject Land in favor of
Armando and Adelia. Petitioners objected to whatever parole evidence Armando and Adelia introduced or offered on the alleged sale unless the same was
in writing and subscribed by Godofredo. Petitioners asserted that the Subsequent Buyers were buyers in good faith and for value. As counterclaim,
petitioners sought payment of attorneys fees and incidental expenses.

Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus Lobaton, Roberto Lopez, Apolinario Natanawan,
Rolando Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented two witnesses, Godofredo and Constancia Calonso.

On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the spouses Adelia Lobaton Borras and Armando F. Borras, and
against the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo, spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F.
Espiritu, Jr. and Estela S. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as follows:

1. Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) executed by the spouses Godofredo
Alfredo and Camen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F.
Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as null and void;

2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names of spouses Arnulfo Sabellano and Editha B.
Sabellano; Transfer Certificates of Title Nos. T-163268 and 163272 in the names of spouses Delfin F. Espiritu, Jr. and
Estela S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T-163271 in the name of Danton D. Matawaran; and
Transfer Certificate of Title No. T-163270 in the name of Elizabeth Tuazon, as null and void and that the Register of Deeds
of Bataan is hereby ordered to cancel said titles;

3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to execute and deliver a good and valid Deed of
Absolute Sale of the disputed parcel of land (covered by OCT No. 284) in favor of the spouses Adelia Lobaton Borras and
Armando F. Borras within a period of ten (10) days from the finality of this decision;

4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to surrender their owners duplicate copy of OCT No.
284 issued to them by virtue of the Order dated May 20, 1992 of the Regional Trial Court of Bataan, Dinalupihan Branch,
to the Registry of Deeds of Bataan within ten (10) days from the finality of this decision, who, in turn, is directed to cancel
the same as there exists in the possession of herein plaintiffs of the owners duplicate copy of said OCT No. 284 and, to
restore and/or reinstate OCT No. 284 of the Register of Deeds of Bataan to its full force and effect;

5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to restitute and/or return the amount of the
respective purchase prices and/or consideration of sale of the disputed parcels of land they sold to their co-defendants
within ten (10) days from the finality of this decision with legal interest thereon from date of the sale;

6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum of P20,000.00 as and for attorneys fees and
litigation expenses; and

7. Ordering defendants to pay the costs of suit.

Defendants counterclaims are hereby dismissed for lack of merit.

SO ORDERED.[3]

Petitioners appealed to the Court of Appeals.

On 26 November 1999, the Court of Appeals issued its Decision affirming the decision of the trial court, thus:

WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is hereby AFFIRMED in its entirety. Treble costs against the
defendants-appellants.

SO ORDERED.[4]

On 26 July 2000, the Court of Appeals denied petitioners motion for reconsideration.

The Ruling of the Trial Court

The trial court ruled that there was a perfected contract of sale between the spouses Godofredo and Carmen and the spouses Armando and
Adelia. The trial court found that all the elements of a contract of sale were present in this case. The object of the sale was specifically identified as the
81,524-square meter lot in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued by the Registry of Deeds of Bataan. The purchase
price was fixed at P15,000.00, with the buyers assuming to pay the sellers P7,000.00 DBP mortgage loan including its accumulated interest. The balance
of the purchase price was to be paid in cash to the sellers. The last payment of P2,524.00 constituted the full settlement of the purchase price and this
was paid on 11 March 1970 as evidenced by the receipt issued by Carmen.

The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo and Carmen delivered to Armando and Adelia the
Subject Land; (2) Armando and Adelia treated as their own tenants the tenants of Godofredo and Carmen; (3) Godofredo and Carmen turned over to
Armando and Adelia documents such as the owners duplicate copy of the title of the Subject Land, tax declaration, and the receipts of realty tax
payments in the name of Godofredo; and (4) the DBP cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and
Carmen. Moreover, the receipt of payment issued by Carmen served as an acknowledgment, if not a ratification, of the verbal sale between the sellers and
the buyers. The trial court ruled that the Statute of Frauds is not applicable because in this case the sale was perfected.

The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of the Subsequent Buyers testified in court on how
they purchased their respective lots.The Subsequent Buyers totally depended on the testimony of Constancia Calonso (Calonso) to explain the
subsequent sale. Calonso, a broker, negotiated with Godofredo and Carmen the sale of the Subject Land which Godofredo and Carmen subdivided so
they could sell anew portions to the Subsequent Buyers.

Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out that Calonso did not inquire on the nature of the
tenancy of the Natanawans and on who owned the Subject Land. Instead, she bought out the tenants for P150,000.00. The buy out was embodied in
a Kasunduan. Apolinario Natanawan (Apolinario) testified that he and his wife accepted the money and signed the Kasunduan because Calonso and the
Subsequent Buyers threatened them with forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he was asked to produce
the documents showing that Adelia is the owner of the Subject Land. Since Apolinario could not produce the documents, the agrarian officer told him
that he would lose the case. Thus, Apolinario was constrained to sign the Kasunduan and accept the P150,000.00.

Another indication of Calonsos bad faith was her own admission that she saw an adverse claim on the title of the Subject Land when she registered
the deeds of sale in the names of the Subsequent Buyers. Calonso ignored the adverse claim and proceeded with the registration of the deeds of sale.

The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In justifying the award of attorneys fees, the trial court invoked
Article 2208 (2) of the Civil Code which allows a court to award attorneys fees, including litigation expenses, when it is just and equitable to award the
same. The trial court ruled that Armando and Adelia are entitled to attorneys fees since they were compelled to file this case due to petitioners refusal to
heed their just and valid demand.

The Ruling of the Court of Appeals

The Court of Appeals found the factual findings of the trial court well supported by the evidence. Based on these findings, the Court of Appeals also
concluded that there was a perfected contract of sale and the Subsequent Buyers were not innocent purchasers.

The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient proof that Godofredo and Carmen sold the Subject Land
to Armando and Adelia upon payment of the balance of the purchase price. The Court of Appeals found the recitals in the receipt as sufficient to serve as
the memorandum or note as a writing under the Statute of Frauds.[5] The Court of Appeals then reiterated the ruling of the trial court that the Statute of
Frauds does not apply in this case.

The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia, Mildred Lobaton, who explained why the title to the
Subject Land was not in the name of Armando and Adelia. Lobaton testified that Godofredo was then busy preparing to leave for Davao. Godofredo
promised that he would sign all the papers once they were ready. Since Armando and Adelia were close to the family of Carmen, they trusted Godofredo
and Carmen to honor their commitment. Armando and Adelia had no reason to believe that their contract of sale was not perfected or validly executed
considering that they had received the duplicate copy of OCT No. 284 and other relevant documents. Moreover, they had taken physical possession of the
Subject Land.

The Court of Appeals held that the contract of sale is not void even if only Carmen signed the receipt dated 11 March 1970. Citing Felipe v. Heirs
of Maximo Aldon,[6] the appellate court ruled that a contract of sale made by the wife without the husbands consent is not void but merely
voidable. The Court of Appeals further declared that the sale in this case binds the conjugal partnership even if only the wife signed the receipt because
the proceeds of the sale were used for the benefit of the conjugal partnership. The appellate court based this conclusion on Article 161[7] of the Civil Code.

The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith because they had constructive notice of the adverse
claim of Armando and Adelia. Calonso, who brokered the subsequent sale, testified that when she registered the subsequent deeds of sale, the adverse
claim of Armando and Adelia was already annotated on the title of the Subject Land. The Court of Appeals believed that the act of Calonso and the
Subsequent Buyers in forcibly ejecting the Natanawans from the Subject Land buttresses the conclusion that the second sale was tainted with bad faith
from the very beginning.

Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer. Nonetheless, the appellate court explained that
since this action is actually based on fraud, the prescriptive period is four years, with the period starting to run only from the date of the discovery of the
fraud. Armando and Adelia discovered the fraudulent sale of the Subject Land only in January 1994. Armando and Adelia lost no time in writing a letter
to Godofredo and Carmen on 2 February 1994 and filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights or lose their
rights by prescription.

The Court of Appeals sustained the award of attorneys fees and imposed treble costs on petitioners.

The Issues

Petitioners raise the following issues:

Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and enforceable, where (1) it was orally entered into and
not in writing; (2) Carmen did not obtain the consent and authority of her husband, Godofredo, who was the sole owner of the Subject Land
in whose name the title thereto (OCT No. 284) was issued; and (3) it was entered into during the 25-year prohibitive period for alienating the
Subject Land without the approval of the Secretary of Agriculture and Natural Resources.

II

Whether the action to enforce the alleged oral contract of sale brought after 24 years from its alleged perfection had been barred by
prescription and by laches.

III

Whether the deeds of absolute sale and the transfer certificates of title over the portions of the Subject Land issued to the Subsequent
Buyers, innocent purchasers in good faith and for value whose individual titles to their respective lots are absolute and indefeasible, are valid.
IV

Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as attorneys fees and litigation expenses and the treble costs, where
the claim of Armando and Adelia is clearly unfounded and baseless.

Whether petitioners are entitled to the counterclaim for attorneys fees and litigation expenses, where they have sustained such expenses by
reason of institution of a clearly malicious and unfounded action by Armando and Adelia.[8]

The Courts Ruling

The petition is without merit.

In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not errors of facts. [9] The factual findings of the
appellate court are generally binding on this Court.[10] This applies with greater force when both the trial court and the Court of Appeals are in complete
agreement on their factual findings.[11] In this case, there is no reason to deviate from the findings of the lower courts. The facts relied upon by the trial
and appellate courts are borne out by the record. We agree with the conclusions drawn by the lower courts from these facts.

Validity and Enforceability of the Sale

The contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia was a perfected contract. A contract is
perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation. [12] In the instant case, the object of the
sale is the Subject Land, and the price certain is P15,000.00. The trial and appellate courts found that there was a meeting of the minds on the sale of the
Subject Land and on the purchase price of P15,000.00. This is a finding of fact that is binding on this Court.We find no reason to disturb this finding
since it is supported by substantial evidence.

The contract of sale of the Subject Land has also been consummated because the sellers and buyers have performed their respective obligations
under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same, to
the buyer who obligates himself to pay a price certain to the seller.[13] In the instant case, Godofredo and Carmen delivered the Subject Land to Armando
and Adelia, placing the latter in actual physical possession of the Subject Land. This physical delivery of the Subject Land also constituted a transfer of
ownership of the Subject Land to Armando and Adelia.[14] Ownership of the thing sold is transferred to the vendee upon its actual or constructive
delivery.[15] Godofredo and Carmen also turned over to Armando and Adelia the documents of ownership to the Subject Land, namely the owners
duplicate copy of OCT No. 284, the tax declaration and the receipts of realty tax payments.

On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt dated 11 March 1970 issued by Carmen. Armando
and Adelia fulfilled their obligation to provide the P7,000.00 to pay the DBP loan of Godofredo and Carmen, and to pay the latter the balance
of P8,000.00 in cash. The P2,524.00 paid under the receipt dated 11 March 1970 was the last installment to settle fully the purchase price. Indeed, upon
payment to DBP of the P7,000.00 and the accumulated interests, the DBP cancelled the mortgage on the Subject Land and returned the owners
duplicate copy of OCT No. 284 to Godofredo and Carmen.

The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The Statute of Frauds [16] provides that a contract for the
sale of real property shall be unenforceable unless the contract or some note or memorandum of the sale is in writing and subscribed by the party
charged or his agent. The existence of the receipt dated 11 March 1970, which is a memorandum of the sale, removes the transaction from the provisions
of the Statute of Frauds.

The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed. [17] Thus, where one party has
performed ones obligation, oral evidence will be admitted to prove the agreement. [18] In the instant case, the parties have consummated the sale of the
Subject Land, with both sellers and buyers performing their respective obligations under the contract of sale. In addition, a contract that violates the
Statute of Frauds is ratified by the acceptance of benefits under the contract.[19] Godofredo and Carmen benefited from the contract because they paid
their DBP loan and secured the cancellation of their mortgage using the money given by Armando and Adelia. Godofredo and Carmen also accepted
payment of the balance of the purchase price.

Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because they have performed their
obligations, and have accepted benefits, under the verbal contract. [20] Armando and Adelia have also performed their obligations under the verbal
contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to
prevent fraud.[21] This law cannot be used to advance the very evil the law seeks to prevent.

Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is void on two grounds. First, Carmen sold the Subject
Land without the marital consent of Godofredo. Second, the sale was made during the 25-year period that the law prohibits the alienation of land grants
without the approval of the Secretary of Agriculture and Natural Resources.

These arguments are without basis.

The Family Code, which took effect on 3 August 1988, provides that any alienation or encumbrance made by the husband of the conjugal
partnership property without the consent of the wife is void. However, when the sale is made before the effectivity of the Family Code, the applicable law
is the Civil Code.[22]

Article 173 of the Civil Code provides that the disposition of conjugal property without the wifes consent is not void but merely voidable. Article 173
reads:

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.
In Felipe v. Aldon,[23] we applied Article 173 in a case where the wife sold some parcels of land belonging to the conjugal partnership without the
consent of the husband. We ruled that the contract of sale was voidable subject to annulment by the husband. Following petitioners argument that
Carmen sold the land to Armando and Adelia without the consent of Carmens husband, the sale would only be voidable and not void.

However, Godofredo can no longer question the sale. Voidable contracts are susceptible of ratification.[24] Godofredo ratified the sale when he
introduced Armando and Adelia to his tenants as the new owners of the Subject Land. The trial court noted that Godofredo failed to deny categorically on
the witness stand the claim of the complainants witnesses that Godofredo introduced Armando and Adelia as the new landlords of the tenants.[25] That
Godofredo and Carmen allowed Armando and Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredos
acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an action to annul the sale. He did not. The prescriptive
period to annul the sale has long lapsed. Godofredos conduct belies his claim that his wife sold the Subject Land without his consent.

Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with the DBP. We agree with the Court of Appeals that
the sale redounded to the benefit of the conjugal partnership. Article 161 of the Civil Code provides that the conjugal partnership shall be liable for debts
and obligations contracted by the wife for the benefit of the conjugal partnership. Hence, even if Carmen sold the land without the consent of her
husband, the sale still binds the conjugal partnership.

Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to Armando and Adelia as shown by this portion of
Adelias testimony on cross-examination:

Q -- No title was delivered to you by Godofredo Alfredo?

A -- I got the title from Julie Limon because my sister told me.[26]

Petitioners raise this factual issue for the first time. The Court of Appeals could have passed upon this issue had petitioners raised this earlier. At
any rate, the cited testimony of Adelia does not convincingly prove that Godofredo and Carmen did not deliver the Subject Land to Armando and
Adelia. Adelias cited testimony must be examined in context not only with her entire testimony but also with the other circumstances.

Adelia stated during cross-examination that she obtained the title of the Subject Land from Julie Limon (Julie), her classmate in college and the
sister of Carmen. Earlier, Adelias own sister had secured the title from the father of Carmen. However, Adelias sister, who was about to leave for the
United States, gave the title to Julie because of the absence of the other documents. Adelias sister told Adelia to secure the title from Julie, and this was
how Adelia obtained the title from Julie.

It is not necessary that the seller himself deliver the title of the property to the buyer because the thing sold is understood as delivered when it is
placed in the control and possession of the vendee.[27] To repeat, Godofredo and Carmen themselves introduced the Natanawans, their tenants, to
Armando and Adelia as the new owners of the Subject Land. From then on, Armando and Adelia acted as the landlords of the Natanawans. Obviously,
Godofredo and Carmen themselves placed control and possession of the Subject Land in the hands of Armando and Adelia.

Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and Natural Resources to nullify the sale. Petitioners never
raised this issue before the trial court or the Court of Appeals. Litigants cannot raise an issue for the first time on appeal, as this would contravene the
basic rules of fair play, justice and due process.[28] However, we will address this new issue to finally put an end to this case.

The sale of the Subject Land cannot be annulled on the ground that the Secretary did not approve the sale, which was made within 25 years from
the issuance of the homestead title.Section 118 of the Public Land Act (Commonwealth Act No. 141) reads as follows:

SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or legally constituted banking corporation, lands acquired under
free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of
five years from and after the date of the issuance of the patent or grant.

xxx

No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds.

A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time that the patent or grant
is issued.[29] A violation of this prohibition renders a sale void.[30] This prohibition, however, expires on the fifth year. From then on until the next 20
years[31] the land grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The Secretary is required
to approve the alienation unless there are constitutional and legal grounds to deny the approval. In this case, there are no apparent constitutional or legal
grounds for the Secretary to disapprove the sale of the Subject Land.

The failure to secure the approval of the Secretary does not ipso facto make a sale void.[32] The absence of approval by the Secretary does not nullify
a sale made after the expiration of the 5-year period, for in such event the requirement of Section 118 of the Public Land Act becomes merely
directory[33] or a formality.[34] The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been
previously authorized.[35] As held in Evangelista v. Montano:[36]

Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the approval by the Department Secretary "shall not be denied except on
constitutional and legal grounds." There being no allegation that there were constitutional or legal impediments to the sales, and no pretense that if the
sales had been submitted to the Secretary concerned they would have been disapproved, approval was a ministerial duty, to be had as a matter of
course and demandable if refused. For this reason, and if necessary, approval may now be applied for and its effect will be to ratify and adopt the
transactions as if they had been previously authorized. (Emphasis supplied)

Action Not Barred by Prescription and Laches

Petitioners insist that prescription and laches have set in. We disagree.

The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one for Specific Performance. In reality, the ultimate
relief sought by Armando and Adelia is the reconveyance to them of the Subject Land. An action for reconveyance is one that seeks to transfer property,
wrongfully registered by another, to its rightful and legal owner.[37] The body of the pleading or complaint determines the nature of an action, not its title
or heading.[38] Thus, the present action should be treated as one for reconveyance.[39]

Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes by operation of law a trustee of an implied trust for
the benefit of the real owner of the property. The presence of fraud in this case created an implied trust in favor of Armando and Adelia. This gives
Armando and Adelia the right to seek reconveyance of the property from the Subsequent Buyers.[40]

To determine when the prescriptive period commenced in an action for reconveyance, plaintiffs possession of the disputed property is material. An
action for reconveyance based on an implied trust prescribes in ten years. [41] The ten-year prescriptive period applies only if there is an actual need to
reconvey the property as when the plaintiff is not in possession of the property.[42] However, if the plaintiff, as the real owner of the property also remains
in possession of the property, the prescriptive period to recover title and possession of the property does not run against him.[43] In such a case, an action
for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible.[44]

In this case, the appellate court resolved the issue of prescription by ruling that the action should prescribe four years from discovery of the
fraud. We must correct this erroneous application of the four-year prescriptive period. In Caro v. Court of Appeals,[45] we explained why an action for
reconveyance based on an implied trust should prescribe in ten years. In that case, the appellate court also erroneously applied the four-year prescriptive
period. We declared in Caro:

We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154 SCRA 396 illuminated what used to be
a gray area on the prescriptive period for an action to reconvey the title to real property and, corollarily, its point of reference:

xxx It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code of Civil Procedure (Act No. 190)
governed prescription. It provided:

SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can only be brought within the following periods after
the right of action accrues:

xxx xxx xxx

3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case shall not be deemed to have accrued until the
discovery of the fraud;

xxx xxx xxx

In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the
corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis-a-vis prescription, Article 1144
of the Civil Code is applicable.

Article 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxxxxxxxx

(Emphasis supplied).

An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A
long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for
reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the
property. The only discordant note, it seems, is Balbin vs. Medalla which states that the prescriptive period for a reconveyance action is four years.
However, this variance can be explained by the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25,1948,
hence Section 43(3) of Act No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned earlier. It must be
stressed, at this juncture, that article 1144 and article 1456, are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil
Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property
acquired under false pretenses.

An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides:

In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without
prejudice, however, to the rights of any innocent holder of the decree of registration on the original petition or application, xxx

This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:

Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true owner. Correlating Section 53,
paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the prescriptive period for
the reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the issuance of the certificate of title xxx (Emphasis
supplied)[46]

Following Caro, we have consistently held that an action for reconveyance based on an implied trust prescribes in ten years. [47] We went further by
specifying the reference point of the ten-year prescriptive period as the date of the registration of the deed or the issuance of the title.[48]

Had Armando and Adelia remained in possession of the Subject Land, their action for reconveyance, in effect an action to quiet title to property,
would not be subject to prescription. Prescription does not run against the plaintiff in actual possession of the disputed land because such plaintiff has a
right to wait until his possession is disturbed or his title is questioned before initiating an action to vindicate his right.[49] His undisturbed possession
gives him the continuing right to seek the aid of a court of equity to determine the nature of the adverse claim of a third party and its effect on his title.[50]

Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly drove away from the Subject Land the Natanawans,
the tenants of Armando and Adelia.[51] This created an actual need for Armando and Adelia to seek reconveyance of the Subject Land. The statute of
limitation becomes relevant in this case. The ten-year prescriptive period started to run from the date the Subsequent Buyers registered their deeds of
sale with the Register of Deeds.

The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February 1994, the date of execution of their deeds of sale. The
Register of Deeds issued the transfer certificates of title to the Subsequent Buyers on 24 February 1994. Armando and Adelia filed the Complaint on 7
March 1994. Clearly, prescription could not have set in since the case was filed at the early stage of the ten-year prescriptive period.

Neither is the action barred by laches. We have defined laches as the failure or neglect, for an unreasonable time, to do that which, by the exercise
of due diligence, could or should have been done earlier.[52] It is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it.[53] Armando and Adelia discovered in January 1994 the
subsequent sale of the Subject Land and they filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.

Validity of Subsequent Sale of Portions of the Subject Land

Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers, the co-petitioners of Godofredo and Carmen,
purchased and registered the Subject Land in good faith. Petitioners argue that the testimony of Calonso, the person who brokered the second sale,
should not prejudice the Subsequent Buyers. There is no evidence that Calonso was the agent of the Subsequent Buyers and that she communicated to
them what she knew about the adverse claim and the prior sale. Petitioners assert that the adverse claim registered by Armando and Adelia has no legal
basis to render defective the transfer of title to the Subsequent Buyers.

We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando and Adelia. The settled rule is when ownership or
title passes to the buyer, the seller ceases to have any title to transfer to any third person.[54] If the seller sells the same land to another, the second buyer
who has actual or constructive knowledge of the prior sale cannot be a registrant in good faith.[55] Such second buyer cannot defeat the first buyers
title.[56] In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.[57]

Thus, to merit protection under the second paragraph of Article 1544[58] of the Civil Code, the second buyer must act in good faith in registering the
deed.[59] In this case, the Subsequent Buyers good faith hinges on whether they had knowledge of the previous sale. Petitioners do not dispute that
Armando and Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers purchased their
respective lots only on 22 February 1994 as shown by the date of their deeds of sale. Consequently, the adverse claim registered prior to the second sale
charged the Subsequent Buyers with constructive notice of the defect in the title of the sellers,[60] Godofredo and Carmen.

It is immaterial whether Calonso, the broker of the second sale, communicated to the Subsequent Buyers the existence of the adverse claim. The
registration of the adverse claim on 8 February 1994 constituted, by operation of law, notice to the whole world. [61] From that date onwards, the
Subsequent Buyers were deemed to have constructive notice of the adverse claim of Armando and Adelia. When the Subsequent Buyers purchased
portions of the Subject Land on 22 February 1994, they already had constructive notice of the adverse claim registered earlier.[62] Thus, the Subsequent
Buyers were not buyers in good faith when they purchased their lots on 22 February 1994. They were also not registrants in good faith when they
registered their deeds of sale with the Registry of Deeds on 24 February 1994.

The Subsequent Buyers individual titles to their respective lots are not absolutely indefeasible. The defense of indefeasibility of the Torrens Title
does not extend to a transferee who takes the certificate of title with notice of a flaw in his title. [63] The principle of indefeasibility of title does not apply
where fraud attended the issuance of the titles as in this case.[64]

Attorneys Fees and Costs

We sustain the award of attorneys fees. The decision of the court must state the grounds for the award of attorneys fees. The trial court complied
with this requirement.[65] We agree with the trial court that if it were not for petitioners unjustified refusal to heed the just and valid demands of
Armando and Adelia, the latter would not have been compelled to file this action.

The Court of Appeals echoed the trial courts condemnation of petitioners fraudulent maneuverings in securing the second sale of the Subject Land
to the Subsequent Buyers. We will also not turn a blind eye on petitioners brazen tactics. Thus, we uphold the treble costs imposed by the Court of
Appeals on petitioners.

WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble costs against petitioners.

SO ORDERED.
THIRD DIVISION

November 8, 2017

G.R. No. 164482

LOURDES J. ESTRELLADO; THE HEIRS OF EUGENIO ESTRELLADO, represented by LOURDES J. ESTRELLADO; NARCISA T.
ESTRELLADO; THE HEIRS OF NICOLAS ESTRELLADO, represented by CLARITA E. MAINAR; PILAR E. BARREDO-FUENTES; and
THE HEIRS OF VIVINA ESTRELLADO-BARREDO and ALIPIO BARREDO, represented by PILAR E. BARREDO-
FUENTES, Petitioners
vs.
THE PRESIDING JUDGE OF THE MUNICIPALTRIAL COURT IN CITIES, llTH JUDICIAL REGION, BRANCH 3, DAVAO CITY; J.S.
FRANCISCO,AND SONS, INC., represented by its PRESIDENT, JOSELITO C. FRANCISCO; and THE HEIRS OF DR. JOVITO S.
FRANCISCO, represented by JOSELITO C. FRANCISCO, Respondents
x-----------------------x

G.R. No. 211320

LOURDES C.FRANCISCO-MADRAZO; ROMEO C. FRANCISCO; CONCEPCION C. FRANCISCO; GATCHALIAN; and RENE JOSE C.
FRANCISCO, Petitioners,
vs.
PILAR BARREDO-FUENTES; JORGE BARREDO; OSCAR BARREDO; RODOLFO BARREDO; ERNESTO BARREDO; ARMANDO
BARREDO; DANILO BARREDO; TERESITA BARREDO-MCMAHON; LETICIA BARREDO-CUARIO; and ESPERANZA BARREDO-
TUL-ID, Respondents

DECISION

BERSAMIN, J.:

A petition for the annulment of a judgment is a remedy in equity so exceptional in nature that it may be availed of only when other remedies are wanting,
and only if the judgment, final order or final resolution sought to be annulled was rendered without jurisdiction or through extrinsic fraud. The remedy is
not available as a recourse to obtain relief from a judgment that has long attained finality after having been passed upon and affirmed by the higher court
on appeal taken in due course.

The Case

For consideration and resolution are the consolidated appeals by petition for review on certiorari, namely:

(a) G.R. No. 164482, the petitioners, namely: Lourdes J. Estrellado; the Heirs of Eugenio Estrellado, represented by Lourdes J. Estrellado; Narcisa T.
Estrellado; the Heirs of Nicolas Estrellado, represented by Clarita E. Mainar; Pilar E. Barredo-Fuentes; and the Heirs of Vivina Estrellado-Barredo; and
Alipio Barredo, represented by Pilar E. Barredo-Fuentes, assail the adverse decision rendered by the Regional Trial Court (RTC), Branch 13, in Davao
City dismissing their petition for annulment of judgment;1 and

(b) G.R. No. 211320, the petitioners, namely: Lourdes C. Francisco-Madrazo, Romeo C. Francisco, Concepcion C. Francisco-Gatchalian, and Rene Jose C.
Francisco, challenge the decision promulgated on March 14, 2013,2whereby the Court of Appeals (CA), in CA-G.R. CV No. 01727- MIN, reversed the
decision of the Regional Trial Court (RTC), Branch 16, in Davao City rendered on October 20, 2008, and declared respondents Heirs of the late Vivina
Estrellado-Barredo and Alipio Barredo (namely: Pilar Barredo-Fuentes, Jorge Barredo, Oscar Barredo, Rodolfo Barredo, Ernesto Barredo, Armando
Barredo, Danilo Barredo, Teresita Barredo-Mcmahon, Leticia Barredo-Cuario, and Esperanza Barredo-Tul-Id) the lawful owners and possessors of the
property covered by Transfer Certificate of Title (TCT) No. T-19930 of the Registry of Deeds of Davao City.

Antecedents

These consolidated appeals originated from special civil actions for forcible entry involving three adjacent parcels of land.

The Spouses Eugenio and Lourdes Estrellado were the former owners of the parcel of land with an area of 15,465 square meters located in Barangay
Matina-Aplaya, Davao City and covered by TCT No. T-19351 of the Registry of Deeds of Davao City. The Spouses and Nicolas and Narcisa Estrellado were
. the former owners of the parcel of land also located in Barangay Matina-Aplaya, Davao City with an area of 15,466 square meters and covered by TCT
No. 19350 of the Registry of Deeds of Davao City. The late Spouses Alipio and Vivina Barredo were the former owners of the parcel of land containing an
area of 15,465 square meters located in the same area and covered by TCT No. 19348 of the Registry of Deeds of Davao City. The landowners herein
mentioned were related to one another either by consanguinity or by affinity.3

The petitioners in G.R. No. 164482 are the successors-in-interest and heirs of the above-named landowners. The respondents in G.R. No. 211320 are
the heirs of the late Spouses Alipio and Vivina Barredo. For ease of reference, they are collectively referred herein as the Estrellados unless otherwise
indicated.

Each of the three parcels of land herein mentioned was subdivided into two portions - the smaller portion containing 5,000 square meters, and the
bigger portion with an area of about 10,465 square meters.

In September 1967, the Spouses Eugene and Lourdes Estrellado sold their 5,000-square meter lot for ₱l0,000.00 to Dr. Jovito S. Francisco, the owner of
J.S. Francisco & Sons, Inc. and the predecessor-in-interest of the respondents in G.R. No. 164482 and petitioners in G.R. No. 211320. The sale was
evidenced by a deed of absolute sale dated September 25, 1967.4

The Spouses Nicolas and Narcisa Estrellado also sold their 5,000- square meter property to Dr. Francisco for ₱l0,000.00 through the deed of absolute
sale dated September 25, 1967.5

The late Spouses Alipio and Vivina Barredo likewise sold their 5,000- square meter lot to Dr. Francisco for ₱l0,000.00 under the deed of absolute sale
dated September 25, 1967.6

After selling the smaller lots to Dr. Francisco, the Estrellados separately sold the bigger portions of their respective lots to the latter on the following
dates: the Spouses Eugene and Lourdes Estrellado on August 2, 1969; the Spouses Nicolas and Narcisa Estrellado on October 29, 1969; and the late
Spouses Alipio and Vivina Barredo on June 10, 1970. Dr. Francisco and his successors-in-interest (collectively referred to as the Franciscos) immediately
started their uninterrupted possession of the entire landholdings of the Estrellados in 1967. However, the Franciscos could not produce the formal deeds
of sale relevant to the subsequent sales. They only had a book of accounts evidencing their installments to the Estrellados.7
The three bigger lots covered by TCT No. 19932, TCT No. 19930, and TCT No. 19928 of the Register of Deeds of Davao City became the subject of the
three forcible entry cases commenced in the Municipal Trial Court in Cities in Davao City (MTCC) by J.S. Francisco & Sons, Inc. against the Estrellados
on October 21, 19988 (Civil Case No. 6,296-C-98, Civil Case No. 6,297-C-98, and Civil Case No. 6,298-C-98). The Estrellados, as the defendants in the
three cases, denied selling the bigger lots to Dr. Francisco.

On April 26, 1999, the MTCC rendered judgment in favor of the Franciscos, and ordered the Estrellados, their successors-in-interest and other persons
acting on their behalf to vacate the properties; to pay the Franciscos the fruits of the properties appropriated by the Estrellados; and to further pay the
rent for the use of the properties, as well as attorney's fees, litigation expenses, and the costs of suit.9

On appeal, the RTC, Branch 12, in Davao City affirmed the MTCC's judgment on August 27, 1999.10

The Estrellados appealed to the CA.

By decision dated June 28, 2000,11 and another decision dated January 24, 2003,12 the CA dismissed the appeals and affirmed the decision of the
RTC.13 Considering that the Estrellados did not thereafter appeal, the decisions of the CA became final and executory. 14 On October 7, 2003, upon
motion, the MTCC issued the writ of execution to enforce the judgment.15

G.R. No. 164482

The petitioners were some of the defendants and successors-in-interest in the already concluded forcible entry cases filed by J.S. Francisco & Sons, Inc.
On December 15, 2003, they filed a petition for annulment of the judgments of the MTCC in the RTC in Davao City (docketed as Civil Case No. 30,111-
03), alleging that they were victims of extrinsic fraud that had deprived them of the opportunity to fully present their defense in the MTCC that
eventually cost them the case;16 that the MTCC had no jurisdiction over the forcible entry cases filed against them;17and that they had valid, clear and
current possessory rights over the disputed parcels of land.18

The respondents moved to dismiss the petition for annulment, submitting that' the decisions of the MTCC were not the proper subjects of the petition for
annulment due to their having been affirmed by the RTC and the CA; that the annulment of the decisions would be tantamount to vesting in the R TC the
power to annul the decision of a co-equal branch, as well as the decision of a superior court like the CA; 19 that the petition for annulment was barred
by res judicata, litis pendentia and the rules prohibiting forum-shopping; that the MTCC had jurisdiction over the forcible entry cases because the issue
involved prior de facto possession; and that not all of the petitioners for annulment had executed the certificate of non-forum shopping in violation of
the Rules of Court.20

On June 11, 2004, the RTC rendered judgment in Civil Case No. 30, 111-03 dismissing the petition for annulment of judgment. It held that it had no
jurisdiction over the petition for annulment inasmuch as the decision sought to be annulled had been affirmed on appeal by the R TC and the CA; that
the petition for annulment was already barred by res judicata; and that the petitioners were guilty of forum-shopping. It disposed:

WHEREFORE, in view of the foregoing, this case is hereby DISMISSED.

The Motion of Private Respondents to cite counsels for petitioners have (sic) direct contempt, however, is GRANTED.

Petitioners' counsel is summarily found GUILTY of Direct Contempt and fined Five Hundred Pesos (₱500.00).

SO ORDERED.21

Hence, this appeal directly filed in this Court.

The main issue raised is whether an independent action for the annulment of the judgment of the MTCC filed in the RTC should be given due course. The
ancillary issues are whether or not the remedy of annulment of judgment is available; and whether or not non-parties could file an action for the
annulment of a final and executory judgment.

The petitioners submit that the judgment rendered in the forcible entry cases did not bind them because they had not been impleaded as parties therein;
and that for the same reason the judgment could not be enforced against them without violating their rights as co-owners of the properties subject
thereof.

G.R. No. 211320

The respondents were the children of the late Spouses Alipio and Vivina Barredo. They alleged their ownership of the parcel of land covered by TCT No.
19930 that had been the subject of one of the forcible entry cases decided against the Estrellados.

The respondents contended that the execution of the judgment rendered in the forcible entry case would violate their rights as the owners of the
property; that they sought to recover all the attributes of their ownership and to erase the cloud over their title; and that, accordingly, they had brought
the accion reinvindicatoria and action for quieting of title in the RTC (Branch 16) in Davao City (Civil Case No. 29,759-03).22

On October 20, 2008, the RTC (Branch 16), through Judge Emmanuel Carpio, rendered its decision against the respondents, viz.:

PREMISES CONSIDERED, judgment is hereby rendered:

1. Dismissing the complaints filed by plaintiff and plaintiffs-intervenors;

2. Ordering the Register of Deeds to:

A. REINSTATE TCT No. T-19930; and

B. CANCEL all derivative titles of TCT No. T-19930; and

3. Ordering the plaintiff and plaintiffs-intervenors solidarily to pay defendants, collectively:

A. Nominal damages in the amount of ₱50,000.00;

B. Exemplary damages in the amount of ₱50,000.00; and

C. ₱100,000.00 as attorney's fees and expenses of litigation.

SO ORDERED.23

The respondents appealed to the CA (C.A.-G.R. CV No. 01727-MIN), which, on March 14, 2013, reversed and set aside the decision of the RTC, and
declared the respondents as the rightful owners and possessors of the property,24 decreeing:

WHEREFORE, the appeal is hereby GRANTED and the Decision dated October 20, 2008 of the RTC, 11th Judicial Region, Branch 16, Davao City is
REVERSED AND SET ASIDE. A new judgment is hereby entered DECLARING plaintiff-appellant and plaintiffs-intervenors, as the heirs of Vivina
Estrellado and Alipio Barredo, to be the lawful and rightful owners and possessors of the property covered by TCT No. T-19930. The issuance of the new
transfer certificate of titles to plaintiff-appellant and plaintiffs-intervenors derived from TCT No. T- 19930 is therefore respected.

SO ORDERED.25

The CA opined that the adjudication of the issue of ownership in ejectment cases was merely provisional and did not bar an action between the same
parties involving title to the same property; that the RTC had only referred to the decision of the CA in CA-G.R. SP No. 55727 regarding the forcible entry
case as well as the petitions to cancel the adverse claims of Dr. Francisco annotated on the TCTs of the disputed properties; and that the R TC did not
thereby determine who among the parties owned the parcels of land, and relied primordially on the principle of conclusiveness of judgment.

The petitioners assert that the CA erred in holding that the RTC did not make its own determination on who owned the property; that the CA did not
consider that the case for the cancellation of adverse claim was conclusive between the parties; and that the complaint for quieting of title was already
barred by prescription.26

Ruling of the Court

We deny the petition for review on certiorari in G.R. No. 164482 but grant the petition for review on certiorari in G.R. No. 211320.

G.R. No. 164482

I.

At the heart of the arguments of the Estrellados was the ownership of the bigger parcels of land and their contention that the final and executory
decisions promulgated in CA-G.R. SP No. 55727, CA-G.R. SP No. 55732 and CA-G.R. SP No. 55734 did not bind them because they had not been
impleaded as parties therein. Accordingly, they have adamantly opposed the execution of the judgment against them, and have sued to recover the
parcels of land.

There ought to be no dispute that once the judgment of the MTCC in the forcible entry cases attained finality, the Estrellados as well as their heirs and
successors-in-interest became bound thereby. The judgment of the MTCC, even if it was in personam, could be enforced against the petitioners in G.R.
No. 164482 notwithstanding that they had not been expressly impleaded in the complaint. Their being bound by the judgment was by virtue of their
privity with their predecessors-in-interest. They were not strangers as to such judgment. The enforceability of the judgment against them was explained
thuswise:

A judgment directing a party to deliver possession of a property to another is in personam. x x x Any judgment therein is binding only upon the parties
properly impleaded and duly heard or given an opportunity to be heard. However, this rule admits of the exception, such that even a non-party may be
bound by the judgment in an ejectment suit where he is any of the following: (a) trespasser, squatter; or agent of the defendant fraudulently occupying
the property to frustrate the judgment; (b) guest or occupant of the premises with the permission of the defendant; (c) transferee pendente lite; (d)
sublessee; (e) co-lessee; or (f) member of the family, relative or privy of the defendant.27 (Bold underscoring supplied for emphasis)

II.

The RTC correctly dismissed the petition for annulment of the judgment of the MTCC considering that the RTC and the CA had already affirmed the
judgment in due course.
The grounds for the remedy annulment of judgment under Rule 47 of the Rules of Court were limited to extrinsic fraud and lack of jurisdiction. The
limitation was stringent; otherwise, there would be interminable litigations because the objective of the proceedings for annulment was to return the
petitioners to a situation as if the judgment had not been rendered.

The Court has expounded on the nature and scope of the remedy annulment of judgment in Dare Adventure Farm Corporation v. Court of Appeals,28 to
wit:

A petition for annulment of judgment is a remedy in equity so exceptional in nature that it may be availed of only when other remedies are wanting, and
only if the judgment, final order or final resolution sought to be annulled was rendered by a court lacking jurisdiction or through extrinsic fraud. Yet, the
remedy, being exceptional in character, is not allowed to be so easily and readily abused by parties aggrieved by the final judgments, orders or
resolutions. The Court has thus instituted safeguards by limiting the grounds for the annulment to lack of jurisdiction and extrinsic fraud, and by
prescribing in Section 1 of Rule 47 of the Rules of Court that the petitioner should show that the ordinary remedies of new trial, appeal, petition for relief
or other appropriate remedies are no longer available through no fault of the petitioner. A petition for annulment that ignores or disregards any of the
safeguards cannot prosper.29

It is worthy to emphasize that the petition for annulment of judgment is available only when the ordinary remedies of new trial, appeal, petition for relief
or other appropriate remedies are no longer available through no fault of the petitioner. Given that the petitioners herein (or their predecessors-in-
interest) had earlier availed themselves of the remedy of appeal, they could no longer resort to the remedy of annulment of judgment.

Moreover, the petitioners alleged extrinsic fraud, claiming that their counsel had failed to submit important documents to support their defense.
However, the allegation could not justify the relief of annulment being sought. For purposes of Rule 47 of the Rules of Court, only extrinsic fraud is
recognized as a ground. Fraud is extrinsic when it prevents a party from having a trial or from presenting his entire case to the court, or where it operates
upon matters pertaining not to the judgment itself, but to the manner in which the judgment is procured. The overriding consideration is that the
fraudulent scheme of the prevailing litigant prevented the petitioner from having his day in court.30 In this case, however, the Franciscos as the
prevailing parties had no part in the commission of the fraud committed by the petitioners' counsel.

The petitioners' contention that the MTCC had no jurisdiction over the subject matter was similarly unwarranted.1âwphi1 It is noteworthy that the
averments of the Franciscos as plaintiffs in the forcible entry cases were resolved by the MTCC, and such resolution was affirmed on appeal by the RTC
and later on by the CA.

At any rate, the challenge mounted against the decision of the RTC dismissing the petition for annulment of judgment implicates the determination of
questions of fact centering on the issues and the conduct of the trial. If there is the need for re-evaluation of the averments in the forcible entry case, the
Court cannot involve itself in the determination because it is not a trier of facts. In addition, the Court will not engage in another review of the same facts
that were already the subject of the common findings among the MTCC, RTC and the CA.

G.R. No. 211320

The R TC and the CA differed on the outcome for the ace ion reinvindicatoria initiated by the respondents. The CA concluded that the RTC did not make
any further examination and determination of the ownership of the parcel of land in question; and gave premium to the owner's duplicate copy of the
TCT the respondents had obtained in 1998 over the petitioners' evidence showing the sale to Dr. Francisco, their father, by the late Vivina Barredo, the
predecessor in interest of the respondents, of the parcel of land in question.

The CA's conclusion cannot be upheld.

The sole issue for resolution in ejectment cases relates to the physical or material possession of the property involved, independent of any claim of
ownership by any of the parties. Where the issue of ownership is raised by any of the parties, the courts may pass upon the same only in order to
determine who has the better right to possess the property. The adjudication of ownership, being merely provisional, does not bar or prejudice an action
between the same parties involving title to the same property.31 As such, the resolutions of the CA in CA-G.R. SP No. 55727, CA-G.R. SP No. 55732 and
CA-G.R. SP No. 55734 sustaining the ownership of the Franciscos over the disputed parcels of land did not prevent the Estrellados from initiating the
present action in court.

Under Article 1475 of the Civil Code, the contract of sale is perfected at the moment there is a meeting of minds not only upon the thing that is the object
of the contract but also upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts. The elements of a contract of sale are consent, object, and price in money or its equivalent. The absence of any of these
essential elements negates the existence of a perfected contract of sale. Sale is a consensual contract, and the party who alleges the sale must show its
existence by competent proof.32

The Franciscos could not produce the deeds of sale between them and the Estrellados. Nonetheless, they presented the certification dated June 10, 1970
signed in Davao City by the late Spouses Alipio and Vivina Barredo,33 to wit:

This is to certify that we have sold to Dr. JOVITO S. FRANCISCO 15,465 sq. m. of our land in Barrio Sangay, Matina Aplaya for (₱30,930.00) THIRTY
THOUSAND NINE HUNDRED THIRTY PESOS; and that to date we have received a total of TWENTY NINE THOUSAND SIX HUNDRED EIGHTY
NINE AND 50/100 (₱29,689.SO) PESOS duly receipted and TWO HUNDRED SIXTY EIGHT and 35/100 (₱268.35) PESOS for medicine, survey fee and
miscellaneous expenses giving a total of TWENTY NINE THOUSAND NINE HUNDRED FIFTY SEVEN and 85/100 PESOS leaving a balance of NINE
HUNDRED SEVENTY TWO and 15/100 (₱972.15) PESOS.

The Franciscos also presented the receipt signed on June 13, 1970 by the late Spouses Alipio and Vivina Barredo to the effect that they had received from
Dr. Francisco the balance of ₱972.15 as the "final instalment and full payment of the sale of 15,465 sq. m. of our land in Barrio Sangay, Matina Aplaya,
Davao City x x x."34
These documents pointed to nothing else but that the late Spouses Alipio and Vivina Barredo had sold their parcel of land of 15,465 square meters to Dr.
Francisco.

It is required under Article 1403(2) of the Civil Code that the sale of real property, to be enforceable, should be in a writing subscribed by the party
charged for it. This requirement was met herein by the Franciscos even in the absence of any formal deed of sale. Considering that the agreement
between the parties on the sale was reduced in writing and signed by the late Spouses Alipio and Vivina Barredo as the sellers, the sale was enforceable
under the Statute of Frauds. Despite the document embodying the agreement on the sale not being acknowledged before a notary public, the
nonobservance of the form prescribed by Article 1358(1)35 of the Civil Code did not render the sale invalid. Indeed, the form required by Article 1358 was
only for convenience of the parties, and was not essential to the validity or enforceability of the sale. 36

Lastly, the respondents' possession of the owner's duplicate copy of the TCT obtained in 1998 did not justify the conclusion of the CA that they were the
owners of the parcel of land. Indeed, possession of the owner's duplicate copy of the TCT was not necessarily equivalent to ownership of the land therein
described. For one, the TCT was merely evidence of title.37 And, moreover, registration of real property under the Torrens System does not create or vest
title because it is not a mode of acquiring ownership.

WHEREFORE, the Court DISPOSES of the consolidated appeals as follows:

1. In G.R. No. 164482, the Court AFFIRMS the decision rendered by the Regional Trial Court, Branch 13, in Davao City DISMISSING the
petition for annulment of judgment in Civil Case No. 30,111-03; and

2. In G.R. No. 211320, the Court REVERSES and SETS ASIDE the decision promulgated by the Court of Appeals in CA-G.R. CV No. 01727-
MIN, and REINSTATES the decision rendered in Civil Case No. 29,759-03 by the Regional Trial Court, Branch 16, in Davao City.

The Court ORDERS the petitioners in G.R. No. 164482 and the respondents in G.R. No. 211320 to pay the costs of suit.

SO ORDERED.
G.R. No. 120820 August 1, 2000

SPS. FORTUNATO SANTOS and ROSALINDA R SANTOS, petitioners,

vs.
COURT OF APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.

QUISUMBING, J.:

For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995, in CA-G.R. CV No. 30955, which reversed and set aside the
judgment of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 89-4759. Petitioners (the Santoses) were the owners of a house and lot
informally sold, with conditions, to herein private respondents (the Casedas). In the trial court, the Casedas had complained that the Santoses refused to
deliver said house and lot despite repeated demands. The trial court dismissed the complaint for specific performance and damages, but in the Court of
Appeals, the dismissal was reversed, as follows:

"WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and SET ASIDE and a new one entered:

"1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the finality of judgment within which to pay the balance
of the obligation in accordance with their agreement;

"2. Ordering appellees to restore possession of the subject house and lot to the appellants upon receipt of the full amount of the balance due on
the purchase price; and

"3. No pronouncement as to costs.

"SO ORDERED."1

The undisputed facts of this case are as follows:

The spouses Fortunato and Rosalinda Santos owned the house and lot consisting of 350 square meters located at Lot 7, Block 8, Better Living
Subdivision, Parañaque, Metro Manila, as evidenced by TCT (S-11029) 28005 of the Register of Deeds of Parañaque. The land together with the house,
was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16, 1987.

Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in Pasay City and soon became very good friends with her. The
duo even became kumadres when Carmen stood as a wedding sponsor of Rosalinda's nephew.

On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84 in unpaid interest and other charges. Since the Santos
couple had no funds, Rosalinda offered to sell the house and lot to Carmen. After inspecting the real property, Carmen and her husband agreed.

Sometime that month of June, Carmen and Rosalinda signed a document, which reads:

"Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the (total) amount of 350,000.00 (house and lot) that is
own (sic) by Mrs. Rosalinda R. Santos.
 (Sgd.) Carmen H. Caseda

direct buyer

Mrs. Carmen Caseda

"(Sgd.) Rosalinda Del R. Santos

Owner

Mrs. Rosalinda R. Santos

House and Lot

Better Living Subd. Parañaque, Metro Manila

Section V Don Bosco St."2

The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay: (1) the balance of the mortgage loan with the Rural bank
amounting to P135,385.18; (2) the real estate taxes; (3) the electric and water bills; and (4) the balance of the cash price to be paid not later than June 16,
1987, which was the maturity date of the loan.3

The Casedas gave an initial payment of P54,100.00 and immediately took possession of the property, which they then leased out. They also paid in
installments, P81,696.84 of the mortgage loan. The Casedas, however, failed to pay the remaining balance of the loan because they suffered bankruptcy
in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes on the property for 1981-1984. She
also settled the electric bills from December 12, 1988 to July 12, 1989. All these payments were made in the name of Rosalinda Santos.

In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the remaining installments and/or amortization of the loan, repossessed
the property. The Santoses then collected the rentals from the tenants.

In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached petitioners and offered to pay the balance of the purchase price
for the house and lot. The parties, however, could not agree, and the deal could not push through because the Santoses wanted a higher price. For
understandably, the real estate boom in Metro Manila at this time, had considerably jacked up realty values. On August 11, 1989, the Casedas filed Civil
Case No. 89-4759, with the RTC of Makati, to have the Santoses execute the final deed of conveyance over the property, or in default thereof, to
reimburse the amount of P180,000.00 paid in cash and P249,900.00 paid to the rural bank, plus interest, as well as rentals for eight months amounting
to P32,000.00, plus damages and costs of suit.1âwphi1.nêt

After trial on the merits, the lower court disposed of the case as follows:

"WHEREFORE, judgment is hereby ordered:

(a) dismissing plaintiff's (Casedas') complaint; and

(b) declaring the agreement; marked as Annex "C" of the complaint rescinded. Costs against plaintiffs.

"SO ORDERED."4

Said judgment of dismissal is mainly based on the trial court's finding that:

"Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as cash payment and P135,385.18, assumption of
mortgage. Of it plaintiffs [Casedas] paid the following: (1) P54,100.00 down payment; and (2) P81,694.64 installment payments to the bank on
the loan (Exhs. E to E-19) or a total of P135,794.64. Thus, plaintiffs were short of the purchase price. They cannot, therefore, demand specific
performance."5

The trial court further held that the Casedas were not entitled to reimbursement of payments already made, reasoning that:

"As earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the purchase price of P485,385.18. The property was in plaintiffs'
possession from June 1984 to January 1989 or a period of fifty-five months. During that time, plaintiffs leased the property. Carmen said the
property was rented for P25.00 a day or P750.00 a month at the start and in 1987 it was increased to P2,000.00 and P4,000 a month. But the
evidence is not precise when the different amounts of rental took place. Be that as it may, fairness demands that plaintiffs must pay defendants
for the exercise of dominical rights over the property by renting it to others. The amount of P2,000.00 a month would be reasonable based on
the average of P750.00, P2,000.00, P4,000.00 lease-rentals charged. Multiply P2,000 by 55 months, the plaintiffs must pay defendants
P110,000 for the use of the property. Deducting this amount from the P135,794.64 payment of the plaintiffs on the property the difference is
P25,794.64. Should the plaintiffs be entitled to a reimbursement of this amount? The answer is in the negative. Because of failure of plaintiffs
to liquidated the mortgage loan on time, it had ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of
December 31, 1988. Defendants [Santoses] had to pay the last amount to the bank to save the property from foreclosure. Logically, plaintiffs
 must share in the burden arising from their failure to liquidate the loan per their contractual commitment. Hence, the amount of P25,794.64
as their share in the defendants' damages in the form of increased loan-amount, is reasonable."6

On appeal, the appellate court, as earlier noted, reversed the lower court. The appellate court held that rescission was not justified under the
circumstances and allowed the Caseda spouses a period of ninety days within which to pay the balance of the agreed purchase price.

Hence, this instant petition for review on certiorari filed by the Santoses.

Petitioners now submit the following issues for our consideration:

WHETHER OR NOT THE COURT OF APPEALS, HAS JURISDICTION TO DECIDE PRIVATE RESPONDENT'S APPEAL INTERPOSING
PURELY QUESTIONS OF LAW.

WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE BUT A MERE ORAL CONTRACT TO SELL IN
WHICH CASE JUDICIAL DEMAND FOR RESCISSION (ART. 1592,7 CIVIL CODE) IS NOT APPLICABLE.

ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED, WHETHER PETITIONERS' DEMAND AND
PRAYER FOR RESCISSION CONTAINED IN THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT.

WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE PURCHASE PRICE INCLUDING THE NON-
COMPLIANCE WITH THE STIPULATION TO LIQUIDATE THE MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE DAMAGE AND
PREJUDICE TO PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO JUSTIFY RESCISSION OF A CONTRACT TO SELL UNDER
ARTICLE 1191 8(CIVIL CODE).

On the first issue, petitioners argue that, since both the parties and the apellate court adopted the findings of trial court, 9 no questions of fact were raised
before the Court of Appeals. According to petitioners, CA-G.R. CV No. 30955, involved only pure questions of law. They aver that the court a quo had no
jurisdiction to hear, much less decide, CA-G.R. CV No. 30955, without running afoul of Supreme Court Circular No. 290 (4) [c].10

There is a question of law in a given case when the doubt or difference arises as to how the law is on a certain set of facts, and there is a question of fact
when the doubt or difference arises as to the truth or falsehood of the alleged facts. 11 But we note that the first assignment of error submitted by
respondents for consideration by the appellate court dealt with the trial court's finding that herein petitioners got back the property in question because
respondents did not have the means to pay the installments and/or amortization of the loan.12 The resolution of this question involved an evaluation of
proof, and not only a consideration of the applicable statutory and case laws. Clearly, C.A.-G.R. CV No. 30955 did not involve pure questions of law,
hence the Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-90.

Moreover, we find that petitioners took an active part in the proceedings before the Court of Appeals, yet they did not raise there the issue of jurisdiction.
They should have raised this issue at the earliest opportunity before the Court of Appeals. A party taking part in the proceedings before the appellate
court and submitting his case for its decision ought not to later on attack the court's decision for want of jurisdiction because the decision turns out to be
adverse to him.13

The second and third issues deal with the question: Did the Court of Appeals err in holding that a judicial rescission of the agreement was necessary? In
resolving both issues, we must first make a preliminary determination of the nature of the contract in question: Was it a contract of sale, as insisted by
the respondents or a mere contract to sell, as contended by petitioners?

Petitioners argue that the transaction between them and respondents was a mere contract to sell, and not a contract of sale, since the sole documentary
evidence (Exh. D, receipt) referring to their agreement clearly showed that they did not transfer ownership of the property in question simultaneous with
its delivery and hence remained its owners, pending fulfillment of the other suspensive conditions, i.e. full payment of the balance of the purchase price
and the loan amortizations. Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.,
43 SCRA 93 (1972), where he held that article 1592 of the Civil Code is inapplicable to a contract to sell. They charge the court a quo with reversible error
in holding that petitioners should have judicially rescinded the agreement with respondents when the latter failed to pay the amortizations on the bank
loan.

Respondents insist that there was a perfected contract of sale, since upon their partial payment of the purchase price, they immediately took possession
of the property as vendees, and subsequently leased it, thus exercising all the rights of ownership over the property. This showed that transfer of
ownership was simultaneous with the delivery of the realty sold, according to respondents.

It must be emphasized from the outset that a contract is what the law defines it to be, taking into consideration its essential elements, and not what the
contracting parties call it.14 Article 145815 of the Civil Code defines a contract of sale. Note that the said article expressly obliges the vendor to transfer the
ownership of the thing sold as an essential element of a contract of sale. 16 We have carefully examined the contents of the unofficial receipt, Exh. D, with
the terms and conditions informally agreed upon by the parties, as well as the proofs submitted to support their respective contentions. We are far from
persuaded that there was a transfer of ownership simultaneously with the delivery of the property purportedly sold. The records clearly show that,
notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005 (S-11029)
issued by the Register of Deeds of Parañaque, has remained always in the name of Rosalinda Santos. 17 Note further that although the parties agreed that
the Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos.18 We
likewise find that the bank's cancellation and discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda Santos.19 The foregoing
circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to the Casedas. Absent this essential element,
their agreement cannot be deemed a contract of sale. We agree with petitioner's averment that the agreement between Rosalinda Santos and Carmen
Caseda is a contract to sell. In contracts to sell, ownership is reserved the by the vendor and is not to pass until full payment of the purchase price. This
we find fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require
notarial and other formalities of law before transfer thereof could be validly effected.
In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the appellate court erred when it
decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. As we earlier
pointed, in a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full, Thus, in contract to
sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but
a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. 20 This is entirely different from the situation in a
contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor
has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. 21 In a contract to sell, however, the
vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase. If the vendor should eject the
vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the petitioners in the instant case
repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and
not rescinding it. As petitioners correctly point out the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract
pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply
to a contract to sell.22As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property. 23Neither
provision is applicable in the present case.

As to the last issue, we need not tarry to make a determination of whether the breach of contract by private respondents is so substantial as to defeat the
purpose of the parties in entering into the agreement and thus entitle petitioners to rescission. Having ruled that there is no rescission to speak of in this
case, the question is moot.

WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court of Appeals in CA-G.R. CV No. 30955 is REVERSED and SET
ASIDE. The judgment of the Regional Trial Court of Makati, Branch 133, with respect to the DISMISSAL of the complaint in Civil Case No. 89-4759, is
hereby REINSTATED. No pronouncement as to costs.1âwphi1.nêt

SO ORDERED.
G.R. No. 133895 October 2, 2001

ZENAIDA M. SANTOS, petitioner,

vs.
CALIXTO SANTOS, ALBERTO SANTOS, ROSA SANTOS-CARREON and ANTONIO SANTOS, respondents.

QUISUMBING, J.:

This petition for review1 seeks to annul and set aside the decision date March 10, 1998 of the Court of Appeals that affirmed the decision of the Regional
Trial Court of Manila, Branch 48, dated March 17, 1993. Petitioner also seeks to annul the resolution that denied her motion for reconsideration.

Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa
Santos-Carreon.

The spouses Jesus and Rosalia Santos owned a parcel of land registered under TCT No. 27571 with an area of 154 square meters, located at Sta. Cruz
Manila. On it was a four-door apartment administered by Rosalia who rented them out. The spouses had five children, Salvador, Calixto, Alberto,
Antonio and Rosa.

On January 19, 1959, Jesus and Rosalia executed a deed of sale of the properties in favor of their children Salvador and Rosa. TCT No. 27571 became TCT
No. 60819. Rosa in turn sold her share to Salvador on November 20, 1973 which resulted in the issuance of a new TCT No. 113221. Despite the transfer of
the property to Salvador, Rosalia continued to lease receive rentals form the apartment units.1âwphi1.nêt

On November 1, 1979, Jesus died. Six years after or on January 9, 1985, Salvador died, followed by Rosalia who died the following month. Shortly after,
petitioner Zenaida, claiming to be Salvador's heir, demanded the rent from Antonio Hombrebueno, 2 a tenant of Rosalia. When the latter refused to pay,
Zenaida filed and ejectment suit against him with the Metropolitan Trial Court of Manila, Branch 24, which eventually decided in Zenaida's favor.
On January 5, 1989, private respondents instituted an action for reconveyance of property with preliminary injunction against petitioner in the Regional
Trial Court of Manila, where they alleged that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were simulated for lack of
consideration. They were executed to accommodate Salvador in generation funds for his business and providing him with greater business flexibility.

In her Answer, Zenaida denied the material allegations in the complaint as special and affirmative defenses, argued that Salvador was the registered
owner of the property, which could only be subjected to encumbrances or liens annotated on the title; that the respondents' right to reconveyance was
already barred by prescription and laches; and that the complaint state no cause of action.

RTC:

On March 17, 1993, the trial court decided in private respondents' favor, thus:

WHEREFORE, viewed from all the foregoing considerations, judgment is hereby made in favor of the plaintiffs and against the defendants:

a) Declaring Exh. "B", the deed of sale executed by Rosalia Santos and Jesus Santos on January 19, 1959, as entirely null and void for being
fictitious or stimulated and inexistent and without any legal force and effect:

b) Declaring Exh. "D", the deed of sale executed by Rosa Santos in favor of Salvador Santos on November 20, 1973, also as entirely null and
void for being likewise fictitious or stimulated and inexistent and without any legal force and effect;

c) Directing the Register of Deeds of Manila to cancel Transfer Certificate of Title No. T-113221 registered in the name of Salvador Santos, as
well as, Transfer Certificate of Title No. 60819 in the names of Salvador Santos, Rosa Santos, and consequently thereafter, reinstating with the
same legal force and effect as if the same was not cancelled, and which shall in all respects be entitled to like faith and credit; Transfer
Certificate of Title No. T-27571 registered in the name of Rosalia A. Santos, married to Jesus Santos, the same to be partitioned by the heirs of
the said registered owners in accordance with law; and

d) Making the injunction issued in this case permanent.

Without pronouncement as to costs.

SO OREDERED.3

The trial court reasoned that notwithstanding the deeds of sale transferring the property to Salvador, the spouses Rosalia and Jesus continued to possess
the property and to exercise rights of ownership not only by receiving the monthly rentals, but also by paying the realty taxes. Also, Rosalia kept the
owner's duplicate copy of the title even after it was already in the name of Salvador. Further, the spouses had no compelling reason in 1959 to sell the
property and Salvador was not financially capable to purchase it. The deeds of sale were therefore fictitious. Hence, the action to assail the same does not
prescribe.4

Upon appeal, the Court of Appeals affirmed the trial court's decision dated March 10, 1998. It held that in order for the execution of a public instrument
to effect tradition, as provided in Article 1498 of the Civil Code,5 the vendor shall have had control over the thing sold, at the moment of sale. It was not
enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. The subject deeds of sale
did not confer upon Salvador the ownership over the subject property, because even after the sale, the original vendors remained in dominion, control,
and possession thereof. The appellate court further said that if the reason for Salvador's failure to control and possess the property was due to his
acquiescence to his mother, in deference to Filipino custom, petitioner, at least, should have shown evidence to prove that her husband declared the
property for tax purposes in his name or paid the land taxes, acts which strongly indicate control and possession. The appellate court disposed:

WHEREFORE, finding no reversible error in the decision appealed from, the same is hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.6

Hence, this petition where petitioner avers that the Court of Appeals erred in:

I.

… HOLDING THAT THE OWNERSHIP OVER THE LITIGATED PROPERTY BY THE LATE HUSBAND OF DEFENDANT-APPELLANT WAS
AFFECTED BY HIS FAILURE TO EXERCISE CERTAIN ATTRIBUTES OF OWNERSHIP.

II.

…HOLDING THAT DUE EXECUTION OF A PUBLIC INSTRUMENT IS NOT EQUIVALENT TO DELIVERY OF THE LAND IN DISPUTE.

III.

…NOT FINDING THAT THE CAUSE OF ACTION OF ROSALIA SANTOS HAD PRESCRIBED AND/OR BARRED BY LACHES.

IV.
 … IGNORING PETITIONER'S ALLEGATION TO THE EFFECT THAT PLAINTIFF DR. ROSA [S.] CARREON IS NOT DISQUALIFIED TO
TESTIFY AS TO THE QUESTIONED DEEDS OF SALE CONSIDERING THAT SALVADOR SANTOS HAS LONG BEEN DEAD.7

In this petition, we are asked to resolve the following:

1. Are payments of realty taxes and retention of possession indications of continued ownership by the original owners?

2. Is a sale through a public instrument tantamount to delivery of the thing sold?

3. Did the cause of action of Rosalia Santos and her heirs prescribe?

4. Can petitioner invoke the "Dead Man's Statute?"8

On the first issue, petitioner contends that the Court of Appeals erred in holding that despite the deeds of sale in Salvador's favor, Jesus and Rosalia still
owned the property because the spouses continued to pay the realty taxes and possess the property. She argues that tax declarations are not conclusive
evidence of ownership when not supported by evidence. She avers that Salvador allowed his mother to possess the property out of respect to her in
accordance with Filipino values.

It is true that neither tax receipts nor declarations of ownership for taxation purposes constitute sufficient proof of ownership. They must be supported
by other effective proofs.9 These requisite proofs we find present in this case. As admitted by petitioner, despite the sale, Jesus and Rosalia continued to
possess and administer the property and enjoy its fruits by leasing it to third persons.10 Both Rosa and Salvador did not exercise any right of ownership
over it.11 Before the second deed of sale to transfer her ½ share over the property was executed by Rosa, Salvador still sought she permission of his
mother.12 Further, after Salvador registered the property in his name, he surrendered the title to his mother. 13 These are clear indications that ownership
still remained with the original owners. In Serrano vs. CA, 139 SCRA 179, 189 (1985), we held that the continued collection of rentals from the tenants by
the seller of realty after execution of alleged deed of sale is contrary to the notion of ownership.

Petitioner argues that Salvador, in allowing her mother to use the property even after the sale, did so out of respect for her and out of generosity, a factual
matter beyond the province of this Court.14 Significantly, in Alcos vs. IAC 162 SCRA 823, 837 (1988), we noted that the buyer's immediate possession and
occupation of the property corroborated the truthfulness and authenticity of the deed of sale. Conversely, the vendor's continued possession of the
property makes dubious the contract of sale between the parties.

On the second issue, is a sale through a public instrument tantamount to delivery of the thing sold? Petitioner in her memorandum invokes Article
147715 of the Civil Code which provides that ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. Article 1498,
in turn, provides that when the sale is made through a public instrument, its execution is equivalent to the delivery of the thing subject of the contract.
Petitioner avers that applying said provisions to the case, Salvador became the owner of the subject property by virtue of the two deeds of sale executed
in his favor.

Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a conclusive presumption of delivery of possession. The Code
merely said that the execution shall be equivalent to delivery. The presumption can be rebutted by clear and convincing evidence.16 Presumptive delivery
can be negated by the failure of the vendee to take actual possession of the land sold.17

In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a public instrument to effect tradition, the purchaser must be placed in
control of the thing sold. When there is no impediment to prevent the thing sold from converting to tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material tenancy nor make use of it himself or through another in his name, then delivery has not been
effected.

As found by both the trial and appellate courts and amply supported by the evidence on record, Salvador was never placed in control of the property. The
original sellers retained their control and possession. Therefore, there was no real transfer of ownership.

Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA 694, 698-699 (1991), citing the land case of Abuan vs. Garcia, 14 SCRA 759 (1965), we held that
the critical factor in the different modes of effecting delivery, which gives legal effect to the act is the actual intention of the vendor to deliver, and its
acceptance by the vendee. Without that intention, there is no tradition. In the instant case, although the spouses Jesus and Rosalia executed a deed of
sale, they did not deliver the possession and ownership of the property to Salvador and Rosa. They agreed to execute a deed of sale merely to
accommodate Salvador to enable him to generate funds for his business venture.

On the third issue, petitioner argues that from the date of the sale from Rosa to Salvador on November 20, 1973, up to his death on January 9, 1985,
more or less twelve years had lapsed, and from his death up to the filing of the case for reconveyance in the court a quo on January 5, 1989, four years
had lapsed. In other words, it took respondents about sixteen years to file the case below. Petitioner argues that an action to annul a contract for lack of
consideration prescribes in ten years and even assuming that the cause of action has not prescribed, respondents are guilty of laches for their inaction for
a long period of time.

Has respondents' cause of action prescribed? In Lacsamana vs. CA, 288 SCRA 287, 292 (1998), we held that the right to file an action for reconveyance
on the ground that the certificate of title was obtained by means of a fictitious deed of sale is virtually an action for the declaration of its nullity, which
does not prescribe. This applies squarely to the present case. The complaint filed by respondent in the court a quo was for the reconveyance of the
subject property to the estate of Rosalia since the deeds of sale were simulated and fictitious. The complaint amounts to a declaration of nullity of a void
contract, which is imprescriptible. Hence, respondents' cause of action has not prescribed.

Neither is their action barred by laches. The elements of laches are: 1) conduct on the part of the defendant, or of one under whom he claims, giving rise
to the situation of which the complaint seeks a remedy; 2) delay in asserting the complainant's rights, the complainant having had knowledge or notice of
the defendant's conduct as having been afforded an opportunity to institute a suit; 3) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right in which he bases his suit; and 4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held barred.18 These elements must all be proved positively. The conduct which caused the complaint in the court a
quo was petitioner's assertion of right of ownership as heir of Salvador. This started in December 1985 when petitioner demanded payment of the lease
rentals from Antonio Hombrebueno, the tenant of the apartment units. From December 1985 up to the filing of the complaint for reconveyance on
January 5, 1989, only less than four years had lapsed which we do not think is unreasonable delay sufficient to bar respondents' cause of action. We
likewise find the fourth element lacking. Neither petitioner nor her husband made considerable investments on the property from the time it was
allegedly transferred to the latter. They also did not enter into transactions involving the property since they did not claim ownership of it until
December 1985. Petitioner stood to lose nothing. As we held in the same case of Lacsamana vs. CA, cited above, the concept of laches is not concerned
with the lapse of time but only with the effect of unreasonble lapse. In this case, the alleged 16 years of respondents' inaction has no adverse effect on the
petitioner to make respondents guilty of laches.

Lastly, petitioner in her memorandum seeks to expunge the testimony of Rosa Santos-Carreon before the trial court in view of Sec. 23, Rule 130 of the
Revised Rules of Court, otherwise known as the "Dead Man's Statute." 19 It is too late for petitioner, however, to invoke said rule. The trial court in its
order dated February 5, 1990, denied petitioner's motion to disqualify respondent Rosa as a witness. Petitioner did not appeal therefrom. Trial ensued
and Rosa testified as a witness for respondents and was cross-examined by petitioner's counsel. By her failure to appeal from the order allowing Rosa to
testify, she waived her right to invoke the dean man's statute. Further, her counsel cross-examined Rosa on matters that occurred during Salvadors'
lifetime. In Goñi vs. CA, 144 SCRA 222, 231 (1986) we held that protection under the dead man's statute is effectively waived when a counsel for a
petitioner cross-examines a private respondent on matters occurring during the deceased's lifetime. The Court of appeals cannot be faulted in ignoring
petitioner on Rosa's disqualification.

WHEREFORE, the instant petition is DENIED. The assailed decision dated March 10, 1998 of the Court of Appeals, which sustained the judgment of
the Regional Trial Court dated March 17, 1993, in favor of herein private respondents, is AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 97130 June 19, 1991

FRANCISCO N. DY, JR., Substituted by his Estate Rep. by ROSARIO PEREZ-DY, Administratrix, petitioner,
vs.
COURT OF APPEALS and FERTILIZER MARKETING COMPANY OF THE PHILIPPINES, respondents.
Loreta F. Sablaya for petitioner.
Rayala & Associates for private respondent.

GRIÑO-AQUINO, J.:

This is a petition for review of the Court of Appeals' decision dated December 11, 1990, which affirmed in toto the decision of the Regional Trial Court of
Makati dated July 18, 1988, which ordered the petitioner to pay the private respondent the sum of P337,120.00 plus interest of 12% per annum,
attorney's fees and costs.

Private respondent Fertilizer Marketing Company of the Philippines filed an action to collect from Francisco Dy, Jr. (now deceased) and the Francisco
Dy, Jr. Trading Corporation the sum of P337,120.00 as unpaid balance on their purchase of fertilizers on credit from the private respondent.

The defendants were declared in default on August 15, 1983 for failure to answer the complaint within the reglementary period. Private respondent was
thereafter allowed to present its evidence ex parte before the Branch Clerk of Court.

Subsequently, the defendants filed a motion to admit their answer, but it was denied by the court. They filed a motion for reconsideration; it was granted;
the order of default was set aside; their answer was admitted; and they were allowed to present their evidence without retaking the plaintiff s evidence.

On the date set for the reception of their evidence, the defendants failed to appear despite due notice, so, judgment was rendered by the trial court
against them on January 4, 1984.

On appeal to the Court of Appeals, the judgment by default was set aside and the case was remanded to the lower court for pre-trial and trial on the
merits (AC-G.R. CV No. 03747, p. 46, Rollo).

At the pre-trial conference on November 12, 1987, the plaintiff and defendant Francisco Dy, Jr. appeared, but there was no appearance for the defendant
trading corporation, so it was declared in default again and the plaintiff was allowed to present its evidence ex parte before the Branch Clerk of Court.
However, in that same pre-trial conference the parties agreed that the evidence previously presented by the plaintiff shall remain on record for purposes
of the continuation of the trial, subject to cross-examination in open court, and, that the presentation of the affidavits in question and answer form will
constitute the direct testimony of the defendant's witnesses likewise subject to cross-examination of the adverse counsel.

On motion for reconsideration, the order of default against the corporation was lifted. A second motion for reconsideration was filed by the defendants
on January 22, 1988 to set aside the agreement for trial by affidavits but it was denied by the court.

On the date of the hearing set on April 25, 1988, the defendants failed to appear to present their evidence despite due notice, hence, they were deemed to
have waived the presentation of their evidence. The case was submitted for decision upon the plaintiffs evidence.

On July 18, 1988, the trial court rendered a decision (mentioned earlier) for the plaintiff and against the defendants. The latter appealed to the Court of
Appeals (CA-G.R. CV No. 23540) alleging that the court a quo erred (1) in reinstating the nullified proceedings on August 19, 1983 before the Branch
Clerk of Court; (2) in denying her procedural due process; and (3) in awarding damages against her.

During the pendency of the appeal, Francisco Dy, Jr. passed away on June 20, 1989. His wife, Rosario Perez-Dy, as judicial administratrix of his estate,
prosecuted the appeal (Azarraga vs. Cortes, 9 Phil. 698).

On December 11, 1990, the Court of Appeals dismissed the appeal (CA-G.R. CV No. 23540) for lack of merit.

In this petition for review of that decision, the petitioner reiterates the same issues that she raised in the Court of Appeals.

With regard to the validity of the proceedings before the Branch Clerk of Court, we agree with the observations of the Court of Appeals that:

Appellant is now estopped from questioning the retention of the proceedings held on August 19, 1983 before the Branch Clerk of Court since
her husband agreed to the same during the pre-trial conference held on November 12, 1987. Agreements reached at the pre-trial conference
and embodied in the pre-trial order shall control the subsequent course of the trial and should not be disturbed unless there could be manifest
injustice.

The agreement is not unjust to appellant. Aside from appellant having the right to adduce evidence on her behalf, the parties agreed that the
evidence presented by appellee before the Branch Clerk of Court would be retained, with appellant having the right to cross-examine appellee's
witnesses.

xxx xxx xxx

The agreement of the parties as contained in the pre-trial order is not invalid. The parties are authorized by the Rules of Court to consider
"[s]uch other matters as may aid in the prompt disposition of the action." An authority believes this includes "agreement on certain matters so
that witnesses need not and will not be called." Undoubtedly, the procedure agreed upon by the parties in this case would have greatly
accelerated the trial and the decision therein, which, at the, time of the pre-trial conference, had been pending for three years and had already
gone up on appeal to this Court. (pp. 27-28, Rollo.)
The presentation of the plaintiff's evidence before the Branch Clerk of Court was not void. The Supreme Court, in the case of Continental Bank vs.
Tiangco, et al. (94 SCRA 715) departing from its contrary statement in the Lim Tan Hu case (66 SCRA 425), declared that a decision based on evidence
heard by a deputy clerk of court as commissioner is valid and enforceable because it was rendered by a court of competent jurisdiction, was not impaired
by extrinsic fraud, nor by lack of due process, and there was no showing that the private respondents were prejudiced by such a procedure, or that the
commissioner committed any mistake or abuse of discretion, or that the proceedings were vitiated by collusion and collateral fraud. That ruling applies
four square to this case.

The practice of designating the clerk of court as a commissioner to receive evidence in the event of the non-appearance of the defendant and its counsel,
is not irregular and is sanctioned by Rule 33 of the Rules of Court on trial by commissioner (J.M. Tuazon, Inc. vs. Dela Rosa, 18 SCRA 591; Wassmer vs.
Velez, 12 SCRA 648).

The petitioner was not denied due process. As pointed out by the appellate court:

. . . Appellant retained her right to present evidence on her behalf and the opportunity to cross-examine the witnesses already presented by
appellee. At any rate, if appellant believes that her right to procedural due process had been curtailed, the same was due to a voluntary waiver
by her husband. (p. 28, Rollo)

WHEREFORE, the petition for review is denied for lack of merit. Costs against the petitioners.

SO ORDERED.
G.R. No. L-12342 August 3, 1918

A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.

Thos. D. Aitken for appellant.

Modesto Reyes and Eliseo Ymzon for appellees.

FISHER, J.:

By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix, with the consent of her husband, the defendant Balbino
Tioco, four parcels of land, described in the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of P3,000 on account
of the purchase price, and bound herself to pay the remainder in installments, the first of P2,000 on July 15, 1914, and the second of P5,000 thirty days
after the issuance to her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title P10, for each
coconut tree in bearing and P5 for each such tree not in bearing, that might be growing on said four parcels of land on the date of the issuance of title to
her, with the condition that the total price should not exceed P85,000. It was further stipulated that the purchaser was to deliver to the vendor 25 per
centum of the value of the products that she might obtain from the four parcels "from the moment she takes possession of them until the Torrens
certificate of title be issued in her favor."

It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract
of purchase and sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products of the four parcels
sold, and I shall obliged to return to her, Marciana Felix, all the sums that she may have paid me, together with interest at the rate of 10 per cent per
annum."

In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to compel Marciana Felix to make payment of the first
installment of P2,000, demandable in accordance with the terms of the contract of sale aforementioned, on July 15, 1914, and of the interest in arrears, at
the stipulated rate of 8 per cent per annum. The defendant, jointly with her husband, answered the complaint and alleged by way of special defense that
the plaintiff had absolutely failed to deliver to the defendant the lands that were the subject matter of the sale, notwithstanding the demands made upon
him for this purpose. She therefore asked that she be absolved from the complaint, and that, after a declaration of the rescission of the contract of the
purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid to him on account, together with the interest agreed
upon, and to pay an indemnity for the losses and damages which the defendant alleged she had suffered through the plaintiff's non-fulfillment of the
contract.

The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the request of the purchaser, went to Lucena, accompanied by
a representative of the latter, for the purpose of designating and delivering the lands sold. He was able to designate only two of the four parcels, and more
than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The
plaintiff admitted that the purchaser would have to bring suit to obtain possession of the land (sten. notes, record, p. 5). In August, 1914, the surveyor
Santamaria went to Lucena, at the request of the plaintiff and accompanied by him, in order to survey the land sold to the defendant; but he surveyed
only two parcels, which are those occupied mainly by the brothers Leon and Julio Villafuerte. He did not survey the other parcels, as they were not
designated to him by the plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of injunction against the occupants,
and for the purpose of the issuance of this writ the defendant, in June, 1914, filed an application with the Land Court for the registration in her name of
four parcels of land described in the deed of sale executed in her favor by the plaintiff. The proceedings in the matter of this application were
subsequently dismissed, for failure to present the required plans within the period of the time allowed for the purpose.

The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be rescinded and ordering the return to the plaintiff the
P3,000 paid on account of the price, together with interest thereon at the rate of 10 per cent per annum. From this judgment the plaintiff appealed.

In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the indisputable fact that up to that time the lands sold had not
been registered in accordance with the Torrens system, and on the terms of the second paragraph of clause (h) of the contract, whereby it is stipulated
that ". . . within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and
sale . . . ."

The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of the conventional rescission relied upon by the court, but
on the failure to deliver the land sold. He argues that the right to rescind the contract by virtue of the special agreement not only did not exist from the
moment of the execution of the contract up to one year after the registration of the land, but does not accrue until the land is registered. The wording of
the clause, in fact, substantiates the contention. The one year's deliberation granted to the purchaser was to be counted "from the date of the certificate of
title ... ." Therefore the right to elect to rescind the contract was subject to a condition, namely, the issuance of the title. The record show that up to the
present time that condition has not been fulfilled; consequently the defendant cannot be heard to invoke a right which depends on the existence of that
condition. If in the cross-complaint it had been alleged that the fulfillment of the condition was impossible for reasons imputable to the plaintiff, and if
this allegation had been proven, perhaps the condition would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue was
not presented in the defendant's answer.

However, although we are not in agreement with the reasoning found in the decision appealed from, we consider it to be correct in its result. The record
shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the purchaser; and
as regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person.

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and
possession of the vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the execution of a public instruments is equivalent to the
delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that
the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to
confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a
public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of
the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another
will, then fiction yields to reality — the delivery has not been effected.

As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the French Civil code, "the word "delivery" expresses a complex
idea . . . the abandonment of the thing by the person who makes the delivery and the taking control of it by the person to whom the delivery is made."

The execution of a public instrument is sufficient for the purposes of the abandonment made by the vendor; but it is not always sufficient to permit of the
apprehension of the thing by the purchaser.

The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this
article "merely declares that when the sale is made through the means of a public instrument, the execution of this latter is equivalent to the delivery of
the thing sold: which does not and cannot mean that this fictitious tradition necessarily implies the real tradition of the thing sold, for it is
incontrovertible that, while its ownership still pertains to the vendor (and with greater reason if it does not), a third person may be in possession of the
same thing; wherefore, though, as a general rule, he who purchases by means of a public instrument should be deemed . . . to be the possessor in fact, yet
this presumption gives way before proof to the contrary."

It is evident, then, in the case at bar, that the mere execution of the instrument was not a fulfillment of the vendors' obligation to deliver the thing sold,
and that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price.
(Civ. Code, arts. 1506 and 1124.)

Of course if the sale had been made under the express agreement of imposing upon the purchaser the obligation to take the necessary steps to obtain the
material possession of the thing sold, and it were proven that she knew that the thing was in the possession of a third person claiming to have property
rights therein, such agreement would be perfectly valid. But there is nothing in the instrument which would indicate, even implicitly, that such was the
agreement. It is true, as the appellant argues, that the obligation was incumbent upon the defendant Marciana Felix to apply for and obtain the
registration of the land in the new registry of property; but from this it cannot be concluded that she had to await the final decision of the Court of Land
Registration, in order to be able to enjoy the property sold. On the contrary, it was expressly stipulated in the contract that the purchaser should deliver
to the vendor one-fourth "of the products ... of the aforesaid four parcels from the moment when she takes possession of them until the Torrens
certificate of title be issued in her favor." This obviously shows that it was not forseen that the purchaser might be deprived of her possession during the
course of the registration proceedings, but that the transaction rested on the assumption that she was to have, during said period, the material
possession and enjoyment of the four parcels of land.

Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual agreement, it is not the conventional but the legal interest
that is demandable.

It is therefore held that the contract of purchase and sale entered into by and between the plaintiff and the defendant on June 11, 1914, is rescinded, and
the plaintiff is ordered to make restitution of the sum of P3,000 received by him on account of the price of the sale, together with interest thereon at the
legal rate of 6 per annum from the date of the filing of the complaint until payment, with the costs of both instances against the appellant. So ordered.

Torres, Johnson, Street, Malcolm and Avanceña, JJ., concur.

G.R. No. 168499 November 26, 2012

SPOUSES EROSTO SANTIAGO and NELSIE SANTIAGO, Petitioners,

vs.
MANCER VILLAMOR, CARLOS 6, JOHN VILLAMOR and DOMINGO VILLAMOR, JR., Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 tiled by spouses Eros to Santiago and Nelsie Santiago (petitioners) to challenge the August 10, 2004
decision2 and the June 8, 2005 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 59112. The CA decision set aside the May 28, 1997 decision4 of
the Regional Trial Court (RTC) of San Jacinto, Masbate, Branch 50, in Civil Case No. 201. The CA resolution denied the petitioners' subsequent motion
for reconsideration.

THE FACTUAL ANTECEDENTS

In January 1982,5 the spouses Domingo Villamor, Sr. and Trinidad Gutierrez Villamor (spouses Villamor, Sr.), the parents of Mancer Villamor, Carlos
Villamor and Domingo Villamor, Jr. (respondents) and the grandparents of respondent John Villamor, mortgaged their 4.5-hectare coconut land in Sta.
Rosa, San Jacinto, Masbate, known as Lot No. 1814, to the Rural Bank of San Jacinto (Masbate), Inc. (San Jacinto Bank) as security for a P10,000.00
loan.

For non-payment of the loan, the San Jacinto Bank extrajudicially foreclosed the mortgage, and, as the highest bidder at the public auction, bought the
land. When the spouses Villamor, Sr. failed to redeem the property within the prescribed period, the San Jacinto Bank obtained a final deed of sale in its
favor sometime in 1991. The San Jacinto Bank then offered the land for sale to any interested buyer. 6

a. The Specific Performance Case

Since the respondents had been in possession and cultivation of the land, they decided, together with their sister Catalina Villamor Ranchez, to acquire
the land from the San Jacinto Bank. The San Jacinto Bank agreed with the respondents and Catalina to a P65,000.00 sale, payable in installments. The
respondents and Catalina made four (4) installment payments of P28,000.00, P5,500.00, P7,000.00 and P24,500.00 on November 4, 1991, November
23, 1992, April 26, 1993 and June 8, 1994, respectively.7

When the San Jacinto Bank refused to issue a deed of conveyance in their favor despite full payment, the respondents and Catalina filed a complaint
against the San Jacinto Bank (docketed as Civil Case No. 200) with the RTC on October 11, 1994. The complaint was for specific performance with
damages.

The San Jacinto Bank claimed that it already issued a deed of repurchase in favor of the spouses Villamor, Sr.; the payments made by the respondents
and Catalina were credited to the account of Domingo, Sr. since the real buyers of the land were the spouses Villamor, Sr.8

In a February 10, 2004 decision, the RTC dismissed the specific performance case. It found that the San Jacinto Bank acted in good faith when it
executed a deed of "repurchase" in the spouses Villamor, Sr.’s names since Domingo, Sr., along with the respondents and Catalina, was the one who
transacted with the San Jacinto Bank to redeem the land.9

The CA, on appeal, set aside the RTC’s decision.10 The CA found that the respondents and Catalina made the installment payments on their own behalf
and not as representatives of the spouses Villamor, Sr. The San Jacinto Bank mistakenly referred to the transaction as a "repurchase" when the
redemption period had already lapsed and the title had been transferred to its name; the transaction of the respondents and Catalina was altogether alien
to the spouses Villamor, Sr.’s loan with mortgage. Thus, it ordered the San Jacinto Bank to execute the necessary deed of sale in favor of the respondents
and Catalina, and to pay P30,000.00 as attorney’s fees.11 No appeal appears to have been taken from this decision.

b. The Present Quieting of Title Case

On July 19, 1994 (or prior to the filing of the respondents and Catalina’s complaint for specific performance, as narrated above), the San Jacinto Bank
issued a deed of sale in favor of Domingo, Sr.12 On July 21, 1994, the spouses Villamor, Sr. sold the land to the petitioners for P150,000.00.13

After the respondents and Catalina refused the petitioners’ demand to vacate the land, the petitioners filed on October 20, 1994 a complaint for quieting
of title and recovery of possession against the respondents.14 This is the case that is now before us.

The respondents and Catalina assailed the San Jacinto Bank’s execution of the deed of sale in favor of Domingo, Sr., claiming that the respondents and
Catalina made the installment payments on their own behalf.15

In its May 28, 1997 decision,16 the RTC declared the petitioners as the legal and absolute owners of the land, finding that the petitioners were purchasers
in good faith; the spouses Villamor, Sr.’s execution of the July 21, 1994 notarized deed of sale in favor of the petitioners resulted in the constructive
delivery of the land. Thus, it ordered the respondents to vacate and to transfer possession of the land to the petitioners, and to pay P10,000.00 as moral
damages.17
On appeal, the CA, in its August 10, 2004 decision, found that the petitioners’ action to quiet title could not prosper because the petitioners failed to
prove their legal or equitable title to the land. It noted that there was no real transfer of ownership since neither the spouses Villamor, Sr. nor the
petitioners were placed in actual possession and control of the land after the execution of the deeds of sale. It also found that the petitioners failed to
show that the respondents and Catalina’s title or claim to the land was invalid or inoperative, noting the pendency of the specific performance case, at
that time on appeal with the CA. Thus, it set aside the RTC decision and ordered the dismissal of the complaint, without prejudice to the outcome of the
specific performance case.18

When the CA denied19 the motion for reconsideration20 that followed, the petitioners filed the present Rule 45 petition.

THE PETITION

The petitioners argue that the spouses Villamor, Sr.’s execution of the July 21, 1994 deed of sale in the petitioners’ favor was equivalent to delivery of the
land under Article 1498 of the Civil Code; the petitioners are purchasers in good faith since they had no knowledge of the supposed transaction between
the San Jacinto Bank and the respondents and Catalina; and the respondents and Catalina’s possession of the land should not be construed against them
(petitioners) since, by tradition and practice in San Jacinto, Masbate, the children use their parents’ property.

THE CASE FOR THE RESPONDENTS

The respondents and respondent John submit that they hold legal title to the land since they perfected the sale with the San Jacinto Bank as early as
November 4, 1991, the first installment payment, and are in actual possession of the land; the petitioners are not purchasers in good faith since they
failed to ascertain why the respondents were in possession of the land.

THE ISSUE

The case presents to us the issue of whether the CA committed a reversible error when it set aside the RTC decision and dismissed the petitioners’
complaint for quieting of title and recovery of possession.

OUR RULING

The petition lacks merit.

Quieting of title is a common law remedy for the removal of any cloud, doubt or uncertainty affecting title to real property. The plaintiffs must show not
only that there is a cloud or contrary interest over the subject real property,21but that they have a valid title to it.22 Worth stressing, in civil cases, the
plaintiff must establish his cause of action by preponderance of evidence; otherwise, his suit will not prosper.23

The petitioners anchor their claim over the disputed land on the July 21, 1994 notarized deed of sale executed in their favor by the spouses Villamor, Sr.
who in turn obtained a July 19, 1994 notarized deed of sale from the San Jacinto Bank. On the other hand, the respondents and respondent John claim
title by virtue of their installment payments to the San Jacinto Bank from November 4, 1991 to June 8, 1994 and their actual possession of the disputed
land.

After considering the parties’ evidence and arguments, we agree with the CA that the petitioners failed to prove that they have any legal or equitable title
over the disputed land.

Execution of the deed of sale only a

prima facie presumption of delivery.

Article 1477 of the Civil Code recognizes that the "ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof." Related to this article is Article 1497 which provides that "the thing sold shall be understood as delivered, when it is placed in the control and
possession of the vendee."

With respect to incorporeal property, Article 1498 of the Civil Code lays down the general rule: the execution of a public instrument "shall be equivalent
to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred." However, the
execution of a public instrument gives rise only to a prima facie presumption of delivery, which is negated by the failure of the vendee to take actual
possession of the land sold.24 "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."25

In this case, no constructive delivery of the land transpired upon the execution of the deed of sale since it was not the spouses Villamor, Sr. but the
respondents who had actual possession of the land. The presumption of constructive delivery is inapplicable and must yield to the reality that the
petitioners were not placed in possession and control of the land.

The petitioners are not purchasers in

good faith.

The petitioners can hardly claim to be purchasers in good faith.

"A purchaser in good faith is one who buys property without notice that some other person has a right to or interest in such property and pays its fair
price before he has notice of the adverse claims and interest of another person in the same property." 26 However, where the land sold is in the possession
of a person other than the vendor, the purchaser must be wary and must investigate the rights of the actual possessor; without such inquiry, the buyer
cannot be said to be in good faith and cannot have any right over the property.27

In this case, the spouses Villamor, Sr. were not in possession of the land.1âwphi1 The petitioners, as prospective vendees, carried the burden of
investigating the rights of the respondents and respondent John who were then in actual possession of the land. The petitioners cannot take refuge
behind the allegation that, by custom and tradition in San Jacinto, Masbate, the children use their parents' property, since they offered no proof
supporting their bare allegation. The burden of proving the status of a purchaser in good faith lies upon the party asserting that status and cannot be
discharged by reliance on the legal presumption of good faith.28 The petitioners failed to discharge this burden.

Lastly, since the specific performance case already settled the respondents and respondent John's claim over the disputed land, the dispositive portion of
the CA decision (dismissing the complaint without prejudice to the outcome of the specific performance case29 ) is modified to reflect this fact; we thus
dismiss for lack of merit the complaint for quieting of title and recovery of possession.

WHEREFORE, we hereby DENY the petition and ORDER the DISMISSAL of Civil Case No. 201 before the Regional Trial Court of San Jacinto, Masbate,
Branch 50.

Costs against the petitioners.

SO ORDERED.

G.R. No. L-24069 June 28, 1968

LA FUERZA, INC., petitioner,
vs.
THE HON. COURT OF APPEALS and ASSOCIATED ENGINEERING CO., INC., respondents.

Sycip, Salazar, Luna and Associates for respondent Associated Engineering Co., Inc.
De Santos and Delfino for petitioner.

CONCEPCION, C.J.:

Ordinary action for the recovery of a sum of money. In due course, the Court of First Instance of Manila rendered judgment for defendant, La Fuerza,
Inc. — hereinafter referred to as La Fuerza — which was at first affirmed by the Court of Appeals. On motion for reconsideration, the latter, however, set
aside its original decision and sentenced La Fuerza to pay to the plaintiff, Associated Engineering Co., — hereinafter referred to as the Plaintiff — the sum
of P8,250.00, with interest at the rate of 1% per month, from July, 1960 until fully paid, plus P500 as attorney's fees and the costs. Hence, this Petition
for review on certiorari.

The facts, as found by the Court of First Instance and adopted by the Court of Appeals, are:

The plaintiff (Associated Engineering, Co., Inc.) is a corporation engaged in the manufacture and installation of flat belt conveyors. The
defendant (La Fuerza, Inc.) is also a corporation engaged in the manufacture of wines. Sometime in the month of January, 1960, Antonio Co,
the manager of the plaintiff corporation, who is an engineer, called the office of the defendant located at 399 Muelle de Binondo, Manila and
told Mariano Lim, the President and general manager of the defendant that he had just visited the defendant's plant at Pasong Tamo, Makati,
Rizal and was impressed by its size and beauty but he believed it needed a conveyor system to convey empty bottles from the storage room in
the plant to the bottle washers in the production room thereof. He therefore offered his services to manufacture and install a conveyor system
which, according to him, would increase production and efficiency of his business. The president of the defendant corporation did not make up
his mind then but suggested to Antonio Co to put down his offer in writing. Effectively, on February 4, 1960, marked as Exhibit A in this case.
Mariano Lim did not act on the said offer until February 11, 1960, when Antonio Co returned to inquire about the action of the defendant on
his said offer. The defendants president and general manager then expressed his conformity to the offer made in Exhibit A by writing at the
foot thereof under the word "confirmation" his signature. He caused, however, to be added to this offer at the foot a note which reads: "All
specifications shall be in strict accordance with the approved plan made part of this agreement hereof." A few days later, Antonio Co made the
demand for the down payment of P5,000.00 which was readily delivered by the defendant in the form of a check for the said amount. After
that agreement, the plaintiff started to prepare the premises for the installations of the conveyor system by digging holes in the cement floor of
the plant and on April 18, 1960, they delivered one unit of 110' 26" wide flat belt conveyor, valued at P3,750.00, and another unit measuring
190' and 4" wide flat conveyor, valued at P4,500.00, or a total of P13,250.00. Deducting the down payment of P5,000.00 from this value, there
is a balance, of P8,250.00 to be paid by the defendant upon the completion of the installation, Exhibit B.

The work went under way during the months of March and April, during which time the president and general manager of the defendant
corporation was duly apprised of the progress of the same because his plant mechanic, one Mr. Santos, had kept him informed of the
installation for which he gave the go signal. It seems that the work was completed during the month of May, 1960. Trial runs were made in the
presence of the president and general manager of the defendant corporation, Antonio Co, the technical manager of the plaintiff, and some
other people. Several trial runs were made then totalling about five. These runs were continued during the month of June where about three
trial runs were made and, lastly, during the month of July, 1960.

As a result of this trial or experimental runs, it was discovered, according to the defendant's general manager, that the conveyor system did not
function to their satisfaction as represented by the technical manager of the plaintiff Antonio Co for the reason that, when operated several
bottles collided with each other, some jumping off the conveyor belt and were broken, causing considerable damage. It was further observed
that the flow of the system was so sluggish that in the opinion of the said general manager of the defendant their old system of carrying the
bottles from the storage room to the washers by hand carrying them was even more efficient and faster.

After the last trial run made in the month of July and after the plaintiff's technical manager had been advised several times to make the
necessary and proper adjustments or corrections in order to improve the efficiency of the conveyor system, it seems that the defects indicated
by the said president and general manager of the defendant had not been remedied so that they came to the parting of the ways with the result
that when the plaintiff billed the defendant for the balance of the contract price, the latter refused to pay for the reason that according to the
defendant the conveyor system installed by the plaintiff did not serve the purpose for which the same was manufactured and installed at such a
heavy expense. The flat belt conveyors installed in the factory of the defendant are still there....

xxx xxx xxx

On March 22, 1961, the contractor commenced the present action to recover the sums of P8,250, balance of the stipulated price of the aforementioned
conveyors, and P2,000, as attorney's fees, in addition to the costs.

In its answer to the complaint, La Fuerza alleged that the "conveyors furnished and installed by the plaintiff do not meet the conditions and warrantings"
(warranties?) of the latter, and set up a counterclaim for the P5,000 advanced by La Fuerza, which prayed that the complaint be dismissed; that its
contract with the plaintiff be rescinded; and that plaintiff be sentenced to refund said sum of P5,000 to La Fuerza, as well as to pay thereto P1,000 as
attorney's fees, apart from the costs.

After appropriate proceedings, the Court of First Instance of Manila rendered a decision the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered rescinding the contract entered into by the parties in this case, marked as Exhibit A, and ordering
the plaintiff to refund or return to the defendant the amount of P5,000.00 which they had received as down payment, and the costs of this
action. On the other hand, defendant is ordered to permit the plaintiff to remove the flat belt conveyors installed in their premises.
As above indicated, this decision was affirmed by the Court of Appeals, which, on motion for reconsideration of the plaintiff, later set aside its original
decision and rendered another in plaintiff's favor, as stated in the opening paragraph hereof.

The appealed resolution of the Court of Appeals was, in effect, based upon the theory of prescription of La Fuerza's right of action for rescission of its
contract with the plaintiff, for — in the language of said resolution — "Article 1571 of the Civil Code provides that an action to rescind 'shall be barred
after six months from delivery of the thing sold'", and, in the case at bar, La Fuerza did not avail of the right to demand rescission until the filing of its
answer in the Court of First Instance, on April 17, 1961, or over ten (10) months after the installation of the conveyors in question had been completed on
May 30, 1960.

La Fuerza assails the view taken by the Court of Appeals, upon the ground: 1) that there has been, in contemplation of law, no delivery of the conveyors
by the plaintiff; and 2) that, assuming that there has been such delivery, the period of six (6) months prescribed in said Art. 1571 refers to the "period
within which" La Fuerza may "bring an action to demand compliance of the warranty against hidden defects", not the action for rescission of the
contract. Both grounds are untenable.

With respect to the first point, La Fuerza maintains that plaintiff is deemed not to have delivered the conveyors, within the purview of Art. 1571, until it
shall have complied with the conditions or requirements of the contract between them — that is to say, until the conveyors shall meet La Fuerza's "need
of a conveyor system that would mechanically transport empty bottles from the storage room to the bottle workers in the production room thus
increasing the production and efficiency" of its business-and La Fuerza had accepted said conveyors.

On this point, the Court of Appeals had the following to say:

Article 1571 of the Civil Code provides that an action to rescind 'shall be barred after six months, from delivery of the thing sold". This article is
made applicable to the case at bar by Article 1714 which provides that "the pertinent provisions on warranty of title against hidden defect in a
contract of sale" shall be applicable to a contract for a piece of work. Considering that Article 1571 is a provision on sales, the delivery
mentioned therein should be construed in the light of the provisions on sales. Article 1497 provides that the thing sold shall be understood as
delivered when it is placed in the control and possession of the vendee. Therefore, when the thing subject of the sale is placed in the control
and possession of the vendee, delivery is complete. Delivery is an act of the vendor. Thus, one of the obligations of the vendor is the delivery of
the thing sold (Art. 1495). The vendee has nothing to do with the act of delivery by the vendor. On the other hand, acceptance is an obligation
on the part of the vendee (Art. 1582). Delivery and acceptance are two distinct and separate acts of different parties. Consequently, acceptance
cannot be regarded as a condition to complete delivery.

xxx xxx xxx

We find no plausible reason to disagree with this view. Upon the completion of the installation of the conveyors, in May, 1960, particularly after the last
trial run, in July 1960, La Fuerza was in a position to decide whether or not it was satisfied with said conveyors, and, hence, to state whether the same
were a accepted or rejected. The failure of La Fuerza to express categorically whether they accepted or rejected the conveyors does not detract from the
fact that the same were actually in its possession and control; that, accordingly, the conveyors had already been delivered by the plaintiff; and that, the
period prescribed in said Art. 1571 had begun to run.

With respect to the second point raised by La Fuerza, Art. 1571 of the Civil Code provides:

Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold.

xxx xxx xxx

Among the "ten articles" referred to in this provision, are Articles 1566 and 1567, reading:

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof.
."This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing
sold.

Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding
a proportionate reduction of the price, with damages in either case.

xxx xxx xxx

Pursuant to these two (2) articles, if the thing sold has hidden faults or defects — as the conveyors are claimed to have — the vendor — in the case at bar,
the plaintiff — shall be responsible therefor and the vendee — or La Fuerza, in the present case — "may elect between withdrawing from the contract
and demanding a proportional reduction of the price, with damages in either case." In the exercise of this right of election, La Fuerza had chosen to
withdraw from the contract, by praying for its rescission; but the action therefor — in the language of Art. 1571 — "shall be barred after six months, from
the delivery of the thing sold." The period of four (4) years, provided in Art. 1389 of said Code, for "the action to claim rescission," applies to contracts, in
general, and must yields, in the instant case, to said Art. 1571, which refers to sales in particular.

Indeed, in contracts of the latter type, especially when goods, merchandise, machinery or parts or equipment thereof are involved, it is obviously wise to
require the parties to define their position, in relation thereto, within the shortest possible time. Public interest demands that the status of the relations
between the vendor and the vendee be not left in a condition of uncertainty for an unreasonable length of time, which would be the case, if the lifetime of
the vendee's right of rescission were four (4) years.

WHEREFORE, the appealed resolution of the Court of Appeals is hereby affirmed, with costs against appellant, La Fuerza, Inc. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Angeles and Fernando, JJ., concur.
Castro, J., took no part.

G.R. No. 13203 September 18, 1918

BEHN, MEYER & CO. (LTD.), plaintiff-appellant,

vs.
TEODORO R. YANCO, defendant-appellee.

Crossfield & O'Brien for appellant.

Charles C. Cohn for appellee.

MALCOLM, J.:

The first inquiry to be determined is what was the contract between the parties.

The memorandum agreement executed by the duly authorized representatives of the parties to this action reads:

Contract No. 37.

MANILA, 7 de marzo, de 1916.

Confirmanos haber vendido a Bazar Siglo XX, 80 drums Caustic Soda 76 per cent "Carabao" brand al precio de Dollar Gold Nine and 75/100
per 100-lbs., c.i.f. Manila, pagadero against delivery of documents. Embarque March, 1916.

Comprador Bazar Siglo XX

de Teodoro R. Yangco
J. Siquia

Vendores
BEHN, MEYER & CO. (Ltd.)
O. LOMBECK.

This contract of sale can be analyzed into three component parts.

1. SUBJECT MATTER AND CONSIDERATION.

Facts. — The contract provided for "80 drums Caustic Soda 76 per cent "Carabao" brand al precio de Dollar Gold Nine and 75/100 1-lbs."

Resorting to the circumstances surrounding the agreement are we are permitted to do, in pursuance of this provision, the merchandise was shipped from
New York on the steamship Chinese Prince. The steamship was detained by the British authorities at Penang, and part of the cargo, including seventy-
one drums of caustic soda, was removed. Defendant refused to accept delivery of the remaining nine drums of soda on the ground that the goods were in
bad order. Defendant also refused the optional offer of the plaintiff, of waiting for the remainder of the shipment until its arrival, or of accepting the
substitution of seventy-one drums of caustic soda of similar grade from plaintiff's stock. The plaintiff thereupon sold, for the account of the defendant,
eighty drums of caustic soda from which there was realized the sum of P6,352.89. Deducting this sum from the selling price of P10,063.86, we have the
amount claimed as damages for alleged breach of the contract.

Law. — It is sufficient to note that the specific merchandise was never tendered. The soda which the plaintiff offered to defendant was not of the
"Carabao" brand, and the offer of drums of soda of another kind was not made within the time that a March shipment, according to another provision the
contract, would normally have been available.

2. PLACE OF DELIVERY.

Facts. — The contract provided for "c.i.f. Manila, pagadero against delivery of documents."

Law. — Determination of the place of delivery always resolves itself into a question of act. If the contract be silent as to the person or mode by which the
goods are to be sent, delivery by the vendor to a common carrier, in the usual and ordinary course of business, transfers the property to the vendee. A
specification in a contact relative to the payment of freight can be taken to indicate the intention of the parties in regard to the place of delivery. If the
buyer is to pay the freight, it is reasonable to suppose that he does so because the goods become his at the point of shipment. On the other hand, if the
seller is to pay the freight, the inference is equally so strong that the duty of the seller is to have the goods transported to their ultimate destination and
that title to property does not pass until the goods have reached their destination. (See Williston on Sales, PP. 406-408.)

The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify that the price fixed covers not only the cost of the goods,
but the expense of freight and insurance to be paid by the seller. (Ireland vs.Livingston, L. R., 5 H. L., 395.) Our instant contract, in addition to the letters
"c.i.f.," has the word following, "Manila." Under such a contract, an Australian case is authority for the proposition that no inference is permissible that a
seller was bound to deliver at the point of destination. (Bowden vs. Little, 4 Comm. [Australia], 1364.)

In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free on Board," are frequently used. The meaning is that the seller
shall bear all expenses until the goods are delivered where they are to be "F.O.B." According as to whether the goods are to be delivered "F.O.B." at the
point of shipment or at the point of destination determines the time when property passes.

Both the terms "c.i.f." and "F.O.B." merely make rules of presumption which yield to proof of contrary intention. As Benjamin, in his work on Sales, well
says: "The question, at last, is one of intent, to be ascertained by a consideration of all the circumstances." For instance, in a case of Philippine origin,
appealed to the United States Supreme Court, it was held that the sale was complete on shipment, though the contract was for goods, "F.O.B. Manila,"
the place of destination the other terms of the contract showing the intention to transfer the property. (United States vs. R. P. Andrews & Co. [1907], 207
U.S., 229.)

With all due deference to the decision of the High Court of Australia, we believe that the word Manila in conjunction with the letters "c.i.f." must mean
that the contract price, covering costs, insurance, and freight, signifies that delivery was to made at Manila. If the plaintiff company has seriously thought
that the place of delivery was New York and Not Manila, it would not have gone to the trouble of making fruitless attempts to substitute goods for the
merchandise named in the contract, but would have permitted the entire loss of the shipment to fall upon the defendant. Under plaintiffs hypothesis, the
defendant would have been the absolute owner of the specific soda confiscated at Penang and would have been indebted for the contract price of the
same.

This view is corroborated by the facts. The goods were not shipped nor consigned from New York to plaintiff. The bill of lading was for goods received
from Neuss Hesslein & Co. the documents evidencing said shipment and symbolizing the property were sent by Neuss Hesslein & Co. to the Bank of the
Philippine Islands with a draft upon Behn, Meyer & Co. and with instructions to deliver the same, and thus transfer the property to Behn, Meyer & Co.
when and if Behn, Meyer & Co. should pay the draft.

The place of delivery was Manila and plaintiff has not legally excused default in delivery of the specified merchandise at that place.

3. TIME OF DELIVERY.

Facts. — The contract provided for: "Embarque: March 1916," the merchandise was in fact shipped from New York on the Steamship Chinese Prince on
April 12, 1916.

Law. — The previous discussion makes a resolution of this point unprofitable, although the decision of the United States Supreme Court in
Norrington vs. Wright (([1885], 115 U.S., 188) can be read with profit. Appellant's second and third assignments of error could, if necessary, be admitted,
and still could not recover.

THE CONTRACT.

To answer the inquiry with which we begun this decision, the contract between the parties was for 80 drums of caustic soda, 76 per cent "Carabao"
brand, at the price of $9.75 per one hundred pounds, cost, insurance, and freight included, to be shipped during March, 1916, to be delivered to Manila
and paid for on delivery of the documents.

PERFORMANCE.
In resume, we find that the plaintiff has not proved the performance on its part of the conditions precedent in the contract. The warranty — the material
promise — of the seller to the buyer has not been complied with. The buyer may therefore rescind the contract of sale because of a breach in substantial
particulars going to the essence of the contract. As contemplated by article 1451 of the Civil Code, the vendee can demand fulfillment of the contract, and
this being shown to be impossible, is relieved of his obligation. There thus being sufficient ground for rescission, the defendant is not liable.

The judgment of the trial court ordering that the plaintiff take nothing by its action, without special finding as to costs, is affirmed, with the costs of this
instance. Against the appellant. So ordered.

Arellano, C.J., Torres, Johnson, Street and Avanceña, JJ., concur.

G.R. No. 194785 July 11, 2012

VIRGILIO S. DAVID, Petitioner,

vs.
MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC., Respondent.

DECISION

MENDOZA, J.:

Before this Court is a petition for review under Rule 45 of the Rules of Court assailing the July 8, 2010 Decision1 of the Court of Appeals (CA), in CA-G.R.
CR No. 91839, which affirmed the July 17, 2008 Decision2 of the Regional Trial Court, Branch VIII, Manila (RTC) in Civil Case No. 94-69402, an action
for specific performance and damages.

The Facts:

Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric Sales, a company engaged in the business of supplying electrical
hardware including transformers for rural electric cooperatives like respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI), with
principal office located in Ozamis City.
To solve its problem of power shortage affecting some areas within its coverage, MOELCI expressed its intention to purchase a 10 MVA power
transformer from David. For this reason, its General Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet David in the latter’s office in Quezon
City. David agreed to supply the power transformer provided that MOELCI would secure a board resolution because the item would still have to be
imported.

On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who was in-charge of procurement, returned to Manila and presented to David the
requested board resolution which authorized the purchase of one 10 MVA power transformer. In turn, David presented his proposal for the acquisition of
said transformer. This proposal was the same proposal that he would usually give to his clients.

After the reading of the proposal and the discussion of terms, David instructed his then secretary and bookkeeper, Ellen M. Wong, to type the names of
Engr. Rada and Jimenez at the end of the proposal. Both signed the document under the word "conforme." The board resolution was thereafter
attached to the proposal.

As stated in the proposal, the subject transformer, together with the basic accessories, was valued at P5,200,000.00. It was also stipulated therein that
50% of the purchase price should be paid as downpayment and the remaining balance to be paid upon delivery. Freight handling, insurance, customs
duties, and incidental expenses were for the account of the buyer.

The Board Resolution, on the other hand, stated that the purchase of the said transformer was to be financed through a loan from the National
Electrification Administration (NEA). As there was no immediate action on the loan application, Engr. Rada returned to Manila in early December 1992
and requested David to deliver the transformer to them even without the required downpayment. David granted the request provided that MOELCI
would pay interest at 24% per annum. Engr. Rada acquiesced to the condition. On December 17, 1992, the goods were shipped to Ozamiz City via
William Lines. In the Bill of Lading, a sales invoice was included which stated the agreed interest rate of 24% per annum.

When nothing was heard from MOELCI for sometime after the shipment, Emanuel Medina (Medina), David’s Marketing Manager, went to Ozamiz City
to check on the shipment. Medina was able to confer with Engr. Rada who told him that the loan was not yet released and asked if it was possible to
withdraw the shipped items. Medina agreed.

When no payment was made after several months, Medina was constrained to send a demand letter, dated September 15, 1993, which MOELCI duly
received. Engr. Rada replied in writing that the goods were still in the warehouse of William Lines again reiterating that the loan had not been approved
by NEA. This prompted Medina to head back to Ozamiz City where he found out that the goods had already been released to MOELCI evidenced by the
shipping company’s copy of the Bill of Lading which was stamped "Released," and with the notation that the arrastre charges in the amount of P5,095.60
had been paid. This was supported by a receipt of payment with the corresponding cargo delivery receipt issued by the Integrated Port Services of
Ozamiz, Inc.

Subsequently, demand letters were sent to MOELCI demanding the payment of the whole amount plus the balance of previous purchases of other
electrical hardware. Aside from the formal demand letters, David added that several statements of accounts were regularly sent through the mails by the
company and these were never disputed by MOELCI.

On February 17, 1994, David filed a complaint for specific performance with damages with the RTC . In response, MOECLI moved for
as there was no contract of sale, to begin with, or in the
its dismissal on the ground that there was lack of cause of action
alternative, the said contract was unenforceable under the Statute of Frauds. MOELCI argued that the quotation letter could
not be considered a binding contract because there was nothing in the said document from which consent, on its part, to the terms and conditions
proposed by David could be inferred. David knew that MOELCI’s assent could only be obtained upon the issuance of a purchase order in favor of the
bidder chosen by the Canvass and Awards Committee.

Eventually, pursuant to Rule 16, Section 5 of the Rules of Court, MOELCI filed its Motion for Preliminary Hearing of Affirmative Defenses and
Deferment of the Pre-Trial Conference which was denied by the RTC to abbreviate proceedings and for the parties to proceed to trial and avoid piecemeal
resolution of issues. The order denying its motion was raised with the CA, and then with this Court. Both courts sustained the RTC ruling.

Trial ensued. By reason of MOELCI’s continued failure to appear despite notice, David was allowed to present his testimonial and documentary evidence
ex parte, pursuant to Rule 18, Section 5 of the Rules. A Very Urgent Motion to Allow Defendant to Present Evidence was filed by MOELCI, but was
denied.

In its July 17, 2008 Decision, the RTC dismissed the complaint. It found that although a contract of sale was perfected, it was not consummated because
David failed to prove that there was indeed a delivery of the subject item and that MOELCI received it.3

Aggrieved, David appealed his case to the CA.

On July 8, 2010, the CA affirmed the ruling of the RTC. In the assailed decision, the CA reasoned out that although David was correct in saying that
MOELCI was deemed to have admitted the genuineness and due execution of the "quotation letter" (Exhibit A), wherein the signatures of the Chairman
and the General Manager of MOELCI appeared, he failed to offer any textual support to his stand that it was a contract of sale instead of a mere price
quotation agreed to by MOELCI representatives. On this score, the RTC erred in stating that a contract of sale was perfected between the parties despite
the irregularities that tainted their transaction. Further, the fact that MOELCI’s representatives agreed to the terms embodied in the agreement would
not preclude the finding that said contract was at best a mere contract to sell.

A motion for reconsideration was filed by David but it was denied.4

Hence, this petition.

Before this Court, David presents the following issues for consideration:

I.

WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE.

II.

WHETHER OR NOT THERE WAS A DELIVERY THAT CONSUMMATED THE CONTRACT.

The Court finds merit in the petition.

I.

On the issue as to whether or not there was a perfected contract of sale, this Court is required to delve into the evidence of the case. In a petition for
review on certiorari under Rule 45 of the Rules of Court, the issues to be threshed out are generally questions of law only, and not of fact.

This was reiterated in the case of Buenaventura v. Pascual,5 where it was written:

Time and again, this Court has stressed that its jurisdiction in a petition for review on certiorari under Rule 45 of the Rules of Court is limited to
reviewing only errors of law, not of fact, unless the findings of fact complained of are devoid of support by the evidence on record, or the assailed
judgment is based on the misapprehension of facts. The trial court, having heard the witnesses and observed their demeanor and manner of testifying, is
in a better position to decide the question of their credibility. Hence, the findings of the trial court must be accorded the highest respect, even finality, by
this Court.

That being said, the Court is not unmindful, however, of the recognized exceptions well-entrenched in jurisprudence. It has always been stressed that
when supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court,
unless the case falls under any of the following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, 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 without citation of specific evidence on which the conclusions are based;

(9) When the facts set forth in the petition as well as in the petitioner’s 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. 6 [Emphasis supplied]

In this case, the CA and the RTC reached different conclusions on the question of whether or not there was a perfected contract of sale. The RTC ruled
that a contract of sale was perfected although the same was not consummated because David failed to show proof of delivery. 7

The CA was of the opposite view. The CA wrote:

Be that as it may, it must be emphasized that the appellant failed to offer any textual support to his insistence that Exhibit "A" is a contract of sale instead
of a mere price quotation conformed to by MOELCI representatives. To that extent, the trial court erred in laying down the premise that "indeed a
contract of sale is perfected between the parties despite the irregularities attending the transaction." x x x

That representatives of MOELCI conformed to the terms embodied in the agreement does not preclude the finding that such contract is, at best, a mere
contract to sell with stipulated costs quoted should it ultimately ripen into one of sale. The conditions upon which that development may occur may even
be obvious from statements in the agreement itself, that go beyond just "captions." Thus, the appellant opens with, "WE are pleased to submit our
quotation xxx." The purported contract also ends with. "Thank you for giving us the opportunity to quote on your requirements and we hope to receive
your order soon" apparently referring to a purchase order which MOELCI contends to be a formal requirement for the entire transaction.8
In other words, the CA was of the position that Exhibit A was at best a contract to sell.

A perusal of the records persuades the Court to hold otherwise.

The elements of a contract of sale are, to wit: 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.9It is the absence of the first element which distinguishes a contract of sale
from that of a contract to sell.

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, such as, in most cases, 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.10

In a contract of sale, on the other hand, the title to the property passes to the vendee upon the delivery of the thing sold. Unlike in a contract to sell, 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. The vendor loses ownership over the property and
cannot recover it until and unless the contract is resolved or rescinded.11

SC: CONTRACT OF SALE!

An examination of the alleged contract to sell, "Exhibit A," despite its unconventional form, would show that said document, with all the stipulations
therein and with the attendant circumstances surrounding it, was actually a Contract of Sale. The rule is that 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.12

First, there was meeting of minds as to the transfer of ownership of the subject matter. The letter (Exhibit A), though appearing to be a mere price
quotation/proposal, was not what it seemed. It contained terms and conditions, so that, by the fact that Jimenez, Chairman of the Committee on
Management, and Engr. Rada, General Manager of MOELCI, had signed their names under the word "CONFORME," they, in effect, agreed with the
terms and conditions with respect to the purchase of the subject 10 MVA Power Transformer. As correctly argued by David, if their purpose was merely
to acknowledge the receipt of the proposal, they would not have signed their name under the word "CONFORME."

Besides, the uncontroverted attending circumstances bolster the fact that there was consent or meeting of minds in the transfer of ownership. To begin
with, a board resolution was issued authorizing the purchase of the subject power transformer. Next, armed with the said resolution, top officials of
MOELCI visited David’s office in Quezon City three times to discuss the terms of the purchase. Then, when the loan that MOELCI was relying upon to
finance the purchase was not forthcoming, MOELCI, through Engr. Rada, convinced David to do away with the 50% downpayment and deliver the unit
so that it could already address its acute power shortage predicament, to which David acceded when it made the delivery, through the carrier William

Lines, as evidenced by a bill of lading.

Second, the document specified a determinate subject matter which was one (1) Unit of 10 MVA Power Transformer with corresponding KV Line
Accessories. And third, the document stated categorically the price certain in money which was P5,200,000.00 for one (1) unit of 10 MVA Power
Transformer and P2,169,500.00 for the KV Line Accessories.

In sum, since there was a meeting of the minds, there was consent on the part of David to transfer ownership of the power transformer to MOELCI in
exchange for the price, thereby complying with the first element. Thus, the said document cannot just be considered a contract to sell but rather a
perfected contract of sale.

II.

Now, the next question is, was there a delivery?

MOELCI, in denying that the power transformer was delivered to it, argued that the Bill of Lading which David was relying upon was not conclusive. It
argued that although the bill of lading was stamped "Released," there was nothing in it that indicated that said power transformer was indeed released to
it or delivered to its possession. For this reason, it is its position that it is not liable to pay the purchase price of the 10 MVA power transformer.

This Court is unable to agree with the CA that there was no delivery of the items. On the contrary, there was delivery and release.

To begin with, among the terms and conditions of the proposal to which MOELCI agreed stated:

2. Delivery – Ninety (90) working days upon receipt of your purchase order and downpayment.

C&F Manila, freight, handling, insurance, custom duties and incidental expenses shall be for the account of MOELCI II. 13 (Emphasis supplied)

On this score, it is clear that MOELCI agreed that the power transformer would be delivered and that the freight, handling, insurance, custom duties, and
incidental expenses shall be shouldered by it.
On the basis of this express agreement, Article 1523 of the Civil Code becomes applicable.1âwphi1 It provides:

Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided
for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears. (Emphasis supplied)

Thus, the delivery made by David to William Lines, Inc., as evidenced by the Bill of Lading, was deemed to be a delivery to MOELCI. David was
authorized to send the power transformer to the buyer pursuant to their agreement. When David sent the item through the carrier, it amounted to a
delivery to MOELCI.

Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco,14 it was pointed out that a specification in a contract relative to the payment of freight
can be taken to indicate the intention of the parties with regard to the place of delivery. So that, if the buyer is to pay the freight, as in this case, it is
reasonable to suppose that the subject of the sale is transferred to the buyer at the point of shipment. In other words, the title to the goods transfers to
the buyer upon shipment or delivery to the carrier.

Of course, Article 1523 provides a mere presumption and in order to overcome said presumption, MOELCI should have presented evidence to the
contrary. The burden of proof was shifted to MOELCI, who had to show that the rule under Article 1523 was not applicable. In this regard, however,
MOELCI failed.

There being delivery and release, said fact constitutes partial performance which takes the case out of the protection of the Statute of Frauds. It is
elementary that the partial execution of a contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential
requisites of consent of the contracting parties, object and cause of the obligation concur and are clearly established to be present.15

That being said, the Court now comes to David’s prayer that MOELCI be made to pay the total sum of ₱ 5,472,722.27 plus the stipulated interest at 24%
per annum from the filing of the complaint. Although the Court agrees that MOELCI should pay interest, the stipulated rate is, however, unconscionable
and should be equitably reduced. While there is no question that parties to a loan agreement have wide latitude to stipulate on any interest rate in view of
the Central Bank Circular No. 905 s. 1982 which suspended the Usury Law ceiling on interest effective January 1, 1983, it is also worth stressing that
interest rates whenever unconscionable may still be reduced to a reasonable and fair level. There is nothing in the said circular which grants lenders carte
blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.16Accordingly, the
excessive interest of 24% per annum stipulated in the sales invoice should be reduced to 12% per annum.

Indeed, David was compelled to file an action against MOELCI but this reason alone will not warrant an award of attorney’s fees. It is settled that the
award of attorney's fees is the exception rather than the rule. Counsel's fees are not awarded every time a party prevails in a suit because of the policy that
no premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not necessarily equated to the amount paid by a litigant to a
lawyer. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered
to the latter; while in its extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing party to the
prevailing party. Attorney's fees as part of damages are awarded only in the instances specified in Article 2208 of the Civil Code 17 which demands factual,
legal, and equitable justification. Its basis cannot be left to speculation or conjecture. In this regard, none was proven.

Moreover, in the absence of stipulation, a winning party may be awarded attorney's fees only in case plaintiffs action or defendant's stand is so untenable
as to amount to gross and evident bad faith.18 is MOELCI's case cannot be similarly classified.

Also, David's claim for the balance of P73,059.76 plus the stipulated interest is denied for being unsubstantiated.

WHEREFORE, the petition Is GRANTED. The July 8, 2010 Decision of the Court of Appeals Is REVERSED and SET ASIDE. Respondent Misamis
Occidental II Electric Cooperative, Inc. is ordered to pay petitioner Virgilio S. David the total sum of P5,472,722.27 with interest at the rate of 12o/o per
annum reckoned from the filing of the complaint until fully paid.

SO ORDERED.
G.R. No. 184513, March 09, 2016

DESIGNER BASKETS, INC., Petitioner, v. AIR SEA TRANSPORT, INC. AND ASIA CARGO CONTAINER LINES, INC., Respondents.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 of the August 16, 2007 Decision2 and September 2, 2008 Resolution3 of the Court of Appeals (CA) in CA-G.R.
CV No. 79790, absolving respondents Air Sea Transport, Inc. (ASTI) and Asia Cargo Container Lines, Inc. (ACCLI) from liability in the complaint for sum
of money and damages filed by petitioner Designer Baskets, Inc. (DBI).

The Facts

DBI is a domestic corporation engaged in theproduction of housewares and handicraft items for export.4Sometime in October 1995, Ambiente, a foreign-
based company, ordered from DBI5 223 cartons of assorted wooden items (the shipment).6 The shipment was worth Twelve Thousand Five Hundred
Ninety and Eighty-Seven Dollars (US$12,590.87) and payable through telegraphic transfer.7 Ambiente designated ACCLI as the forwarding agent that
will ship out its order from the Philippines to the United States (US). ACCLI is a domestic corporation acting as agent of ASTI, a US based corporation
engaged in carrier transport business, in the Philippines.8

On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila and delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239,
Beverly Hills, California. To acknowledge receipt and to serve as the contract of sea carriage, ACCLI issued to DBI triplicate copies of ASTI Bill of Lading
No. AC/MLLA601317.9 DBI retained possession of the originals of the bills of lading pending the payment of the goods by Ambiente.10

On January 23, 1996, Ambiente and ASTI entered into an Indemnity Agreement (Agreement).11 Under the Agreement, Ambiente obligated ASTI to
deliver the shipment to it or to its order "without the surrender of the relevant bill(s) of lading due to the non-arrival or loss thereof."12 In exchange,
Ambiente undertook to indemnify and hold ASTI and its agent free from any liability as a result of the release of the shipment.13 Thereafter, ASTI
released the shipment to Ambiente without the knowledge of DBI, and without it receiving payment for the total cost of the shipment.14

DBI then made several demands to Ambiente for the payment of the shipment, but to no avail. Thus, on October 7, 1996, DBI filed the Original
Complaint against ASTI, ACCLI and ACCLFs incorporators-stockholders15 for the payment of the value of the shipment in the amount of US$12,590.87
or Three Hundred Thirty-Three and Six Flundred Fifty-Eight Pesos (P333,658.00), plus interest at the legal rate from January 22, 1996, exemplary
damages, attorney's fees and cost of suit.16

In its Original Complaint, DBI claimed that under Bill of Lading Number AC/MLLA601317, ASTI and/or ACCLI is "to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or copies of [the] Bill of Lading is or are surrendered to them; otherwise, they become
liable to the shipper for the value of the shipment."17 DBI also averred that ACCLI should be jointly and severally liable with its co-defendants because
ACCLI failed to register ASTI as a foreign corporation doing business in the Philippines. In addition, ACCLI failed to secure a license to act as agent of
ASTI.18

On February 20, 1997, ASTI, ACCLI, and ACCLI's incorporators-stockholders filed a Motion to Dismiss.19They argued that: (a) they are not the real
parties-in-interest in the action because the cargo was delivered and accepted by Ambiente. The case, therefore, was a simple case of nonpayment of the
buyer; (b) relative to the incorporators-stockholders of ACCLI, piercing the corporate veil is misplaced; (c) contrary to the allegation of DBI, the bill of
lading covering the shipment does not contain a proviso exposing ASTI to liability in case the shipment is released without the surrender of the bill of
lading; and (d) the Original Complaint did not attach a certificate of non-forum shopping.20

DBI filed an Opposition to the Motion to Dismiss,21 asserting that ASTI and ACCLI failed to exercise the required extraordinary diligence when they
allowed the cargoes to be withdrawn by the consignee without the surrender of the original bill of lading. ASTI, ACCLI, and ACCLI's incorporators-
stockholders countered that it is DBI who failed to exercise extraordinary diligence in protecting its own interest. They averred that whether or not the
buyer-consignee pays the seller is already outside of their concern.22
Before the trial court could resolve the motion to dismiss, DBI filed an Amended Complaint23 impleading Ambiente as a new defendant and praying that
it be held solidarity liable with ASTI, ACCLI, and ACCLFs incorporators-stockholders for the payment of the value of the shipment. DBI alleged that it
received reliable information that the shipment was released merely on the basis of a company guaranty of Ambiente. 24 Further, DBI asserted that
ACCLI's incorporators-stockholders have not yet fully paid their stock subscriptions; thus, "under the circumstance of [the] case," they should be held
liable to the extent of the balance of their subscriptions.25cralawred

In their Answer,26 ASTI, ACCLI, and ACCLI's incorporators-stockholders countered that DBI has no cause of action against ACCLI and its incorporators-
stockholders because the Amended Complaint, on its face, is for collection of sum of money by an unpaid seller against a buyer. DBI did not allege any
act of the incorporators-stockholders which would constitute as a ground for piercing the veil of corporate fiction.27ACCLI also reiterated that there is no
stipulation in the bill of lading restrictively subjecting the release of the cargo only upon the presentation of the original bill of lading.28 It regarded the
issue of ASTI's lack of license to do business in the Philippines as "entirely foreign and irrelevant to the issue of liability for breach of contract" between
DBI and Ambiente. It stated that the purpose of requiring a license (to do business in the Philippines) is to subject the foreign corporation to the
jurisdiction of Philippine courts.29

On July 22, 1997, the trial court directed the service of summons to Ambiente through the Department of Trade and Industry.30 The summons was
served on October 6, 199731 and December 18, 1997.32Ambiente failed to file an Answer. Hence, DBI moved to declare Ambiente in default, which the trial
court granted in its Order dated September 15, 1998.33

The Ruling of the Trial Court

In a Decision34 dated July 25, 2003, the trial court found ASTI, ACCLI, and Ambiente solidarity liable to DBI for the value of the shipment. It awarded
DBI the following:
chanRoblesvirtualLawlibrary

1. US$12,590.87, or the equivalent of [P]333,658.00 at the time of the shipment, plus 12% interest per annum from 07 January 1996 until the
same is fully paid;

2. [P]50,000.00 in exemplary damages;

3. [P]47,000.00 as and for attorney's fees; and,

4. [P]10,000.00 as cost of suit.35

The trial court declared that the liability of Ambiente is "very clear." As the buyer, it has an obligation to pay for the value of the shipment. The trial court
noted that "[the case] is a simple sale transaction which had been perfected especially since delivery had already been effected and with only the payment
for the shipment remaining left to be done."36

With respect to ASTI, the trial court held that as a common carrier, ASTI is bound to observe extraordinary diligence in the vigilance over the goods.
However, ASTI was remiss in its duty when it allowed the unwarranted release of the shipment to Ambiente.37 The trial court found that the damages
suffered by DBI was due to ASTI's release of the merchandise despite the non-presentation of the bill of lading. That ASTI entered into an Agreement
with Ambiente to release the shipment without the surrender of the bill of lading is of no moment.38 The Agreement cannot save ASTI from liability
because in entering into such, it violated the law, the terms of the bill of lading and the right of DBI over the goods.39

The trial court also added that the Agreement only involved Ambiente and ASTI. Since DBI is not privy to the Agreement, it is not bound by its
terms.40cralawred

The trial court found that ACCLI "has not done enough to prevent the defendants Ambiente and [ASTI] from agreeing among themselves the release of
the goods in total disregard of [DBFs] rights and in contravention of the country's civil and commercial laws." 41 As the forwarding agent, ACCLI was "well
aware that the goods cannot be delivered to the defendant Ambiente since [DBI] retained possession of the originals of the bill of
lading."42 Consequently, the trial court held ACCLI solidarily liable with ASTI.

As regards ACCLFs incorporators-stockholders, the trial court absolved them from liability. The trial court ruled that the participation of ACCLFs
incorporators-stockholders in the release of the cargo is not as direct as that of ACCLI.43

DBI, ASTI and ACCLI appealed to the CA. On one hand, DBI took issue with the order of the trial court awarding the value of the shipment in Philippine
Pesos instead of US Dollars. It also alleged that even assuming that the shipment may be paid in Philippine Pesos, the trial court erred in pegging its
value at the exchange rate prevailing at the time of the shipment, rather than at the exchange rate prevailing at the time of payment.44

On the other hand, ASTI and ACCLI questioned the trial court's decision finding them solidarily liable with DBI for the value of the shipment. They also
assailed the trial court's award of interest, exemplary damages, attorney's fees and cost of suit in DBFs favor.45

The Ruling of the Court of Appeals

The CA affirmed the trial court's finding that Ambiente is liable to DBI, but absolved ASTI and ACCLI from liability. The CA found that the pivotal issue
is whether the law requires that the bill of lading be surrendered by the buyer/consignee before the carrier can release the goods to the former. It then
answered the question in the negative, thus:

There is nothing in the applicable laws that require the surrender of bills of lading before the goods may be released to the
buyer/consignee. In fact, Article 353 of the Code of Commerce suggests a contrary conclusion, viz —

"Art. 353. After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange
of this title with the thing transported, the respective obligations shall be considered canceled xxx In case the consignee, upon receiving the goods,
cannot return the bill of lading subscribed by the carrier because of its loss or of any other cause, he must give the latter a receipt for the goods delivered,
this receipt producing the same effects as the return of the bill of lading."
The clear import of the above article is that the surrender of the bill of lading is not an absolute and mandatory requirement for the release of the goods
to the consignee. The fact that the carrier is given the alternative option to simply require a receipt for the goods delivered suggests
that the surrender of the bill of lading may be dispensed with when it cannot be produced by the consignee for whatever
cause.46 (Emphasis supplied.)

The CA stressed that DBI failed to present evidence to prove its assertion that the surrender of the bill of lading upon delivery of the goods is a common
mercantile practice.47 Further, even assuming that such practice exists, it cannot prevail over law and jurisprudence.48

As for ASTI, the CA explained that its only obligation as a common carrier was to deliver the shipment in good condition. It did not include looking
beyond the details of the transaction between the seller and the consignee, or more particularly, ascertaining the payment of the goods by the buyer
Ambiente.49

Since the agency between ASTI and ACCLI was established and not disputed by any of the parties, neither can ACCLI, as a mere agent of ASTI, be held
liable. This must be so in the absence of evidence that the agent exceeded its authority.50

The CA, thus, ruled:

WHEREFORE, in view of the foregoing, the Decision dated July 25, 2003 of Branch 255 of the Regional Trial court of Las [Piñas] City in Civil Case No.
LP-96-0235 is hereby AFFIRMED with the following MODIFICATIONS:

1. Defendants-appellants Air Sea Transport, Inc. and Asia Cargo Container Lines, Inc. are hereby ABSOLVED from all liabilities;

2. The actual damages to be paid by defendant Ambiente shall be in the amount of US$12,590.87. Defendant Ambiente's liability may be paid in
Philippine currency, computed at the exchange rate prevailing at the time of payment;51 and

3. The rate of interest to be imposed on the total amount of US$12,590.87 shall be 6% per annum computed from the filing of the complaint on
October 7, 1996 until the finality of this decision. After this decision becomes final and executory, the applicable rate shall be 12% per annum
until its full satisfaction.

SO ORDERED.52ChanRoblesVirtualawlibrary
Hence, this petition for review, which raises the sole issue of whether ASTI and ACCLI may be held solidarily liable to DBI for the value of the shipment.

Our Ruling

We deny the petition.

A common carrier may release the goods to the consignee even without the surrender of the hill of lading.

This case presents an instance where an unpaid seller sues not only the buyer, but the carrier and the carrier's agent as well, for the payment of the value
of the goods sold. The basis for ASTI and ACCLI's liability, as pleaded by DBI, is the bill of lading covering the shipment.

A bill of lading is defined as "a written acknowledgment of the receipt of goods and an agreement to transport and to deliver them at a specified place to a
person named or on his order."53 It may also be defined as an instrument in writing, signed by a carrier or his agent, describing the freight so as to
identify it, stating the name of the consignor, the terms of the contract of carriage, and agreeing or directing that the freight be delivered to bearer, to
order or to a specified person at a specified place.54

Under Article 350 of the Code of Commerce, "the shipper as well as the carrier of the merchandise or goods may mutually demand that a bill of lading be
made." A bill of lading, when issued by the carrier to the shipper, is the legal evidence of the contract of carriage between the former and the latter. It
defines the rights and liabilities of the parties in reference to the contract of carriage. The stipulations in the bill of lading are valid and binding unless
they are contrary to law, morals, customs, public order or public policy.55

Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This bill of lading governs the rights, obligations and liabilities of DBI
and ASTI. DBI claims that Bill of Lading No. AC/MLLA601317 contains a provision stating that ASTI and ACCLI are "to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or copies of the said Bill of Lading is or are surrendered to them; otherwise they
become liable to [DBI] for the value of the shipment."56Quite tellingly, however, DBI does not point or refer to any specific clause or provision on the bill
of lading supporting this claim. The language of the bill of lading shows no such requirement. What the bill of lading provides on its face is:

Received by the Carrier in apparent good order and condition unless otherwise indicated hereon, the Container(s) and/or goods hereinafter mentioned
to be transported and/or otherwise forwarded from the Place of Receipt to the intended Place of Delivery upon and [subject] to all the terms and
conditions appearing on the face and back of this Bill of Lading. If required by the Carrier this Bill of Lading duly endorsed must be
surrendered in exchange for the Goods of delivery order.57 (Emphasis supplied.)

There is no obligation, therefore, on the part of ASTI and ACCLI to release the goods only upon the surrender of the original bill of lading.

Further, a carrier is allowed by law to release the goods to the consignee even without the latter's surrender of the bill of lading. The third paragraph of
Article 353 of the Code of Commerce is enlightening:

Article 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the contents of which the disputes which
may arise regarding their execution and performance shall be decided, no exceptions being admissible other than those of falsity and material error in
the drafting.

After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this
title with the thing transported, the respective obligations and actions shall be considered cancelled, unless in the same act the claim which the parties
may wish to reserve be reduced to writing, with the exception of that provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or any
other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill
of lading. (Emphasis supplied.)

The general rule is that upon receipt of the goods, the consignee surrenders the bill of lading to the carrier and their respective obligations are considered
canceled. The law, however, provides two exceptions where the goods may be released without the surrender of the bill of lading because the consignee
can no longer return it. These exceptions are when the bill of lading gets lost or for other cause. In either case, the consignee must issue a receipt to the
carrier upon the release of the goods. Such receipt shall produce the same effect as the surrender of the bill of lading.

We have already ruled that the non-surrender of the original bill of lading does not violate the carrier's duty of extraordinary diligence over the
goods.58 In Republic v. Lorenzo Shipping Corporation,59 we found that the carrier exercised extraordinary diligence when it released the shipment to the
consignee, not upon the surrender of the original bill of lading, but upon signing the delivery receipts and surrender of the certified true copies of the
bills of lading. Thus, we held that the surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its
contractual obligation.

Under special circumstances, we did not even require presentation of any form of receipt by the consignee, in lieu of the original bill of lading, for the
release of the goods. In Macam v. Court of Appeals, we absolved the carrier from liability for releasing the goods to the consignee without the bills of
lading despite this provision on the bills of lading:

"One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order."61 (Citations omitted.)

In clearing the carrier from liability, we took into consideration that the shipper sent a telex to the carrier after the goods were shipped. The telex
instructed the carrier to deliver the goods without need of presenting the bill of lading and bank guarantee per the shipper's request since "for prepaid
shipt ofrt charges already fully paid our end x x x."62 We also noted the usual practice of the shipper to request the shipping lines to immediately release
perishable cargoes through telephone calls.

Also, in Eastern Shipping Lines v. Court of Appeals,63 we absolved the carrier from liability for releasing the goods to the supposed consignee,
Consolidated Mines, Inc. (CMI), on the basis of an Undertaking for Delivery of Cargo but without the surrender of the original bill of lading presented by
CMI. Similar to the factual circumstance in this case, the Undertaking in Eastern Shipping Lines guaranteed to hold the carrier "harmless from all
demands, claiming liabilities, actions and expenses."64 Though the central issue in that case was who the consignee was in the bill of lading, it is
noteworthy how we gave weight to the Undertaking in ruling in favor of the carrier:

But assuming that CMI may not be considered consignee, the petitioner cannot be faulted for releasing the goods to CMI under the circumstances, due to
its lack of knowledge as to who was the real consignee in view of CMI's strong representations and letter of undertaking wherein it stated that the bill of
lading would be presented later. This is precisely the situation covered by the last paragraph of Art. 353 of the [Code of Commerce] to wit:

"If in case of loss or for any other reason whatsoever, the consignee cannot return upon receiving the merchandise the bill of lading subscribed by the
carrier, he shall give said carrier a receipt of the goods delivered this receipt producing the same effects as the return of the bill of
lading."65ChanRoblesVirtualawlibrary
Clearly, law and jurisprudence is settled that the surrender of the original bill of lading is not absolute; that in case of loss or any other cause, a common
carrier may release the goods to the consignee even without it.

Here, Ambiente could not produce the bill of lading covering the shipment not because it was lost, but for another cause: the bill of lading was retained
by DBI pending Ambiente's full payment of the shipment. Ambiente and ASTI then entered into an Indemnity Agreement, wherein the former asked the
latter to release the shipment even without the surrender of the bill of lading. The execution of this Agreement, and the undisputed fact that the shipment
was released to Ambiente pursuant to it, to our mind, operates as a receipt in substantial compliance with the last paragraph of Article 353 of the Code of
Commerce.

Articles 1733, 1734, and 1735 of the Civil Code are not applicable.

DBI, however, challenges the Agreement, arguing that the carrier released the goods pursuant to it, notwithstanding the carrier's knowledge that the bill
of lading should first be surrendered. As such, DBI claims that ASTI and ACCLI are liable for damages because they failed to exercise extraordinary
diligence in the vigilance over the goods pursuant to Articles 1733, 1734, and 1735 of the Civil Code.66

DBI is mistaken.

Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this case. The Articles state:

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary
diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.

Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following
causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
required in Article 1733.
Articles 1733, 1734, and 1735 speak of the common carrier's responsibility over the goods. They refer to the general liability of common carriers in case
of loss, destruction or deterioration of goods and the presumption of negligence against them. This responsibility or duty of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation, until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.67 It is, in fact, undisputed that the goods were
timely delivered to the proper consignee or to the one who was authorized to receive them. DBFs only cause of action against ASTI and ACCLI is the
release of the goods to Ambiente without the surrender of the bill of lading, purportedly in violation of the terms of the bill of lading. We have already
found that Bill of Lading No. AC/MLLA601317 does not contain such express prohibition. Without any prohibition, therefore, the carrier had no
obligation to withhold release of the goods. Articles 1733, 1734, and 1735 do not give ASTI any such obligation.

The applicable provision instead is Article 353 of the Code of Commerce, which we have previously discussed. To reiterate, the Article allows the release
of the goods to the consignee even without his surrender of the original bill of lading. In such case, the duty of the carrier to exercise extraordinary
diligence is not violated. Nothing, therefore, prevented the consignee and the carrier to enter into an indemnity agreement of the same nature as the one
they entered here. No law or public policy is contravened upon its execution.

Article 1503 of the Civil Code does not apply to contracts for carriage of goods.

In its petition, DBI continues to assert the wrong application of Article 353 of the Code of Commerce to its Amended Complaint. It alleges that the third
paragraph of Article 1503 of the Civil Code is the applicable provision because: (a) Article 1503 is a special provision that deals particularly with the
situation of the seller retaining the bill of lading; and (b) Article 1503 is a law which is later in point of time to Article 353 of the Code of
Commerce.68 DBI posits that being a special provision, Article 1503 of the Civil Code should prevail over Article 353 of the Code of Commerce, a general
provision that makes no reference to the seller retaining the bill of lading.

DBFs assertion is untenable. Article 1503 is an exception to the general presumption provided in the first paragraph of Article 1523, which reads:

Article 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of
the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery
of the goods to the buyer, except in the cases provided for in Articles 1503, first, second and third paragraphs, or unless a contrary
intent appears.

Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard
to the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in the course of transit,
the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.

Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the seller knows or ought to know that it is usual
to insure, the seller must give such notice to the buyer as may enable him to insure them during their transit, and, if the seller fails to do so, the goods
shall be deemed to be at his risk during such transit. (Emphasis supplied.)
Article 1503, on the other hand, provides:

Article 1503. When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or
ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the
delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.

Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller
thereby reserves the ownership in the goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of
the goods, the seller's property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the
contract.

Where goods are shipped, and by the bill of lading the goods are deliverable to order of the buyer or of his agent, but possession of
the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the
buyer.

Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance
or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the
bill of lading he acquires no added right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the
buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods
from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.
(Emphasis supplied.)
Articles 1523 and 1503, therefore, refer to a contract of sale between a seller and a buyer. In particular, they refer to who between the seller and the buyer
has the right of possession or ownership over the goods subject of the sale. Articles 1523 and 1503 do not apply to a contract of carriage between the
shipper and the common carrier. The third paragraph of Article 1503, upon which DBI relies, does not oblige the common carrier to withhold delivery of
the goods in the event that the bill of lading is retained by the seller. Rather, it only gives the seller a better right to the possession of the goods as against
the mere inchoate right of the buyer. Thus, Articles 1523 and 1503 find no application here. The case before us does not involve an action where the seller
asserts ownership over the goods as against the buyer. Instead, we are confronted with a complaint for sum of money and damages filed by the seller
against the buyer and the common carrier due to the non-payment of the goods by the buyer, and the release of the goods by the carrier despite non-
surrender of the bill of lading. A contract of sale is separate and distinct from a contract of carriage. They involve different parties, different rights,
different obligations and liabilities. Thus, we quote with approval the ruling of the CA, to wit:

On the third assigned error, [w]e rule for the defendants-appellants [ASTI and ACCLI]. They are correct in arguing that the nature of their
obligation with plaintiff [DBI] is separate and distinct from the transaction of the latter with defendant Ambiente. As carrier of the
goods transported by plaintiff, its obligation is simply to ensure that such goods are delivered on time and in good condition. In the
case [Macam v. Court of Appeals], the Supreme Court emphasized that "the extraordinary responsibility of the common carriers lasts until actual or
constructive delivery of the cargoes to the consignee or to the person who has the right to receive them." x x x

It is therefore clear that the moment the carrier has delivered the subject goods, its responsibility ceases to exist and it is thereby
freed from all the liabilities arising from the transaction. Any question regarding the payment of the buyer to the seller is no longer
the concern of the carrier. This easily debunks plaintiffs theory of joint liability.70 x x x (Emphasis supplied; citations omitted.)
The contract between DBI and ASTI is a contract of carriage of goods; hence, ASTI's liability should be pursuant to that contract and the law on
transportation of goods. Not being a party to the contract of sale between DBI and Ambiente, ASTI cannot be held liable for the payment of the value of
the goods sold. In this regard, we cite Loadstar Shipping Company, Incorporated v. Malayan Insurance Company, Incorporated,71 thus:

Malayan opposed the petitioners' invocation of the Philex-PASAR purchase agreement, stating that the contract involved in this case is a contract of
affreightment between the petitioners and PASAR, not the agreement between Philex and PASAR, which was a contract for the sale of copper
concentrates.

On this score, the Court agrees with Malayan that contrary to the trial court's disquisition, the petitioners cannot validly invoke the penalty clause under
the Philex-PASAR purchase agreement, where penalties are to be imposed by the buyer PASAR against the seller Philex if some elements exceeding the
agreed limitations are found on the copper concentrates upon delivery. The petitioners are not privy to the contract of sale of the copper
concentrates. The contract between PASAR and the petitioners is a contract of carriage of goods and not a contract of sale.
Therefore, the petitioners and PASAR are bound by the laws on transportation of goods and their contract of affreightment. Since
the Contract of Affreightment between the petitioners and PASAR is silent as regards the computation of damages, whereas the bill of lading presented
before the trial court is undecipherable, the New Civil Code and the Code of Commerce shall govern the contract between the parties.72 (Emphasis
supplied; citations omitted.)

In view of the foregoing, we hold that under Bill of Lading No. AC/MLLA601317 and the pertinent law and jurisprudence, ASTI and ACCLI are not liable
to DBI. We sustain the finding of the CA that only Ambiente, as the buyer of the goods, has the obligation to pay for the value of the shipment. However,
in view of our ruling in Nacar v. Gallery Frames,73 we modify the legal rate of interest imposed by the CA. Instead of 12% per annum from the finality of
this judgment until its full satisfaction, the rate of interest shall only be 6% per annum.chanrobleslaw

WHEREFORE, the petition is DENIED for lack of merit. The August 16, 2007 Decision and the September 2, 2008 Resolution of the Court of Appeals
in CA-G.R. CV No. 79790 are hereby AFFIRMEDwith the MODIFICATION that from the finality of this decision until its full satisfaction, the
applicable rate of interest shall be 6% per annum.

SO ORDERED.

G.R. No. 196444

DASMARIÑAS T. ARCAINA and MAGNANI T. BANTA, Petitioners

vs.
NOEMI L. INGRAM, represented by MA. NENETTE L. ARCHINUE, Respondent

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 assailing the October 26, 2010 Decision2 and March 1 7, 2011 Resolution3 of the Court of Appeals (CA) in CA-
G.R. SP No. 107997, which affirmed with modification the March 11, 2009 Decision4 of the Regional Trial Court-Branch 7 of Legazpi City (RTC). The RTC
reversed the July 31, 2008 Order5 of the 3rd Municipal Circuit Trial Court of Sto. Domingo-Manito in Albay (MCTC). The MCTC dismissed for
insufficiency of evidence Civil Case No. S-241-a case for recovery of ownership and title to real property, possession and damages with preliminary
injunction (recovery case)-filed by respondent Noemi L. Ingram (Ingram) against petitioners Dasmariñas T. Arcaina (Arcaina) and Magnani T. Banta
(Banta) [collectively, petitioners].

Arcaina is the owner of Lot No. 3230 (property) located at Salvacion, Sto. Domingo, Albay. Sometime in 2004, her attorney-in-fact, Banta, entered into a
contract with Ingram for the sale of the property. Banta showed Ingram and the latter’s attorney-in-fact, respondent Ma. Nenette L. Archinue
(Archinue), the metes and bounds of the property and represented that Lot No. 3230 has an area of more or less 6,200 aquare meters (sq.m.) per the tax
declaration covering it. The contract price was ₱1,860,000.00, with Ingram making installment payments for the property from May 5, 2004 to February
10, 2005 totaling ₱1,715,000.00.6

Banta and Ingram thereafter executed a Memorandum of Agreement acknowledging the previous payments and that Ingram still had an obligation to
pay the remaining balance in the amount of ₱145,000.00.7 They also separately executed deeds of absolute sale over the property in Ingram’s favor. Both
deeds described the property to wit:

DESCRIPTION

A parcel of land Lot No. 3230, situated at Salvacion, Sto. Domingo, Albay, Bounded on the NE-by Lot 3184 on the SE-by Seashore on the SW-Lot No.
3914 and on the NW-by Road with an area of SIX THOUSAND TWO HUNDRED (6,200) sq. meters more or less.8

Subsequently, Ingram caused the property to be surveyed and discovered that Lot No. 3230 has an area of 12,000 sq. m. Upon learning of the
actual area of the property, Banta allegedly insisted that the difference of 5,800 sq. m. remains unsold. This was opposed by Ingram who claims that she
owns the whole lot by virtue of the sale.9 Thus, Archinue, on behalf of Ingram, instituted the recovery case, docketed as Civil Case No. S-241, against
petitioners before the MCTC.

In her Complaint, Ingram alleged that upon discovuery of the actual area of the property, Banta insisted on fencing the portion which she claimed to be
unsold. Ingram further maintained that she is ready to pay the balance of ₱145,000.00 as soon as petitioners recognize her ownership of the whole
property. After all, the sale contemplated the entire property as in fact the boundaries of the lot were clearly stated in the deeds of sale.10 Accordingly,
Ingram prayed that the MCTC declare her owner of the whole property and order petitioners to pay moral damages, attorney's fees and litigation
expenses. She also asked the court to issue a writ of preliminary injunction to enjoin the petitioners from undertaking acts of ownership over the alleged
unsold portion.11

In their Answer with Counterclaim, petitioners denied that the sale contemplates the entire property and contended that the parties agreed that only
6,200 sq. m. shall be sold at the rate of ₱300.00 per sq. m.12 This, according to petitioners, is consistent with the contemporaneous acts of the parties:
Ingram declared only 6,200 sq. m. of the property for tax purposes, while Arcaina declared the remaining portion under her name with no objection
from Ingram. Petitioners averred that since Ingram failed to show that that she has a right over the unsold portion of the property, the complaint for
recovery of possession should be dismissed.13 By way of counterclaim, petitioners asked for the payment of the balance of ₱145,000.00, as well as
attorney's fees, litigation expenses, and costs of suit.14

Trial ensued. After Ingram presented her evidence, petitioners filed a demurrer on the grounds that (1) Ingram failed to sufficiently establish her claim
and (2) her claim lacks basis in fact and in law.15

In its Order dated July 31, 2008, the MCTC granted petitioners' demurrer and counterclaim against Ingram, thus:

WHEREFORE, in view of the foregoing this instant case is hereby ordered DISMISSED for insufficiency of evidence.

Plaintiffs are further ordered to pay to the Defendants the remaining amount of ONE HUNDRED FORTY FIVE THOUSAND (PhP 145,000.00)
PESOS as counterclaim for the remaining balance of the contract as admitted by the Plaintiffs during the Pre-Trial.

SO ORDERED.16

The MCTC held that the testimonies of Ingram and her witnesses suffer from several inconsistencies and improbabilities. For instance, while Archinue
claimed that what was sold was the entire property, she also admitted in her cross-examination that she was not present when the sale was consummated
between Banta, Ingram and Ingram's husband Jeffrey. Further, Archinue stated that she was made aware before their ocular visit to the property that the
lot being sold is only 6,200 sq. m. based on the tax declaration covering it.17 Ingram also had knowledge of the area of the property as confirmed by her
husband Jeffrey's testimony. Jeffrey also testified that Banta gave them a copy of the tax declaration of the property.18

The MCTC declared that the survey showed that the property was 12,000 sq. m. or more than what was stated in the deeds of sale.19 For Ingram to be
awarded the excess 5,800 sq. m. portion of the property, she should have presented evidence that she paid for the surplus area consistent with Article
1540 of the Civil Code which reads:

Art. 1540. If, in the case of the preceding article, there is a greater area or number in the immovable than that stated in the contract, the vendee may
accept the area included in the contract and reject the rest. If he accepts the whole area, he must pay for the same at the contract rate.

Accordingly, since Ingram failed to show that she paid for the value of the excess land area, the MCTC held that she cannot claim ownership and
possession of the whole property.

On appeal, the RTC reversed and set aside the Order of the MCTC, to wit:

WHEREFORE, premises considered, the assailed Decision dated July 31, 2008 by the Municipal [Circuit] Trial Court of Sto. Domingo, Al bay is hereby
REVERSED and SET ASIDE and a new judgment is hereby rendered as follows:

1. Ordering plaintiff-appellant [referring to Ingram] to pay the defendant-appellee [referring to Arcaina] the amount of ₱145,000.00 representing the
remaining balance of the purchase price of Lot 3230;

2. Declaring Noemi L. Ingram the owner of the whole Lot 3230;

3. Ordering defendants-appellees Dasmariñas T. Arcaina and Magnani Banta or their agents to remove the fence constructed by them on the said lot and
to respect the peaceful possession of Noemi Ingram over the same;

4. Ordering defendants-appellees Dasmariñas Arcaina and Magnani Banta to pay jointly and severally the plaintiff-appellent Noemi Ingram the amount
of ₱5,000.00 as reasonable attorney's fees; and

5. To pay the cost of suit.

SO ORDERED.20

The RTC found that neither of the parties presented competent evidence to prove the property's actual area. Except for a photocopy of the cadastral
map purportedly showing the graphical presentation of the property, no plan duly prepared and approved by the proper government agency showing the
area of the lot was presented. Hence, the RTC concluded that the area of Lot No. 3230 as shown by the boundaries indicated in the deeds of sale is only
6,200 sq. m. more or less. Having sold Lot No. 3230 to Ingram, Arcaina must vacate it.21

In addition, the RTC held that Article 1542, which covers sale of real estate in lump sum, applies in this case.

Having apparently sold the entire Lot No. 3230 for a lump sum, Arcaina, as the vendor, is obligated to deliver all the land included in the boundaries of
the property, regardless of whether the real area should be greater or smaller than what is recited in the deeds of sale.22
In its Decision dated October 26, 2010, the CA affirmed the RTC's ruling with modification. It deleted paragraphs 4 and 5 of the dispositive portion of the
RTC's Decision, which ordered petitioners to pay ₱5,000.00 as attorney's fees and costs of suit, respectively.23

The CA agreed with the RTC that other than the uniform statements of the parties, no evidence was presented to show that the property was found to
have an actual area of more or less 12,000 sq. m. It held that the parties' statements cannot be simply admitted as true and correct because the area of
the land is a matter of public record and presumed to have been recorded in the Registry of Deeds. The CA noted that the best evidence should have been
a certified true copy of the survey plan duly approved by the proper government agency.24

The CA also agreed with the RTC that the sale was made for a lump sum and not on a per-square-meter basis. The parties merely agreed on the
purchase price of ₱l,860,000.00 for the 6,200 sq. m. lot, with the deed of sale providing for the specific boundaries of the property. 25 Citing Rudolf Lietz,
Inc. v. Court of Appeals,26 the CA explained that in case of conflict between the area and the boundaries of a land subject of the sale, the vendor is
obliged to deliver to the vendee everything within the boundaries. This is in consonance with Article 1542 of the Civil Code. Further, the CA found the
area in excess "substantial" which, to its mind, "should have not escaped the discerning eye of an ordinary vendor of a piece of land." 27 Thus, it held that
the RTC correctly ordered petitioners to deliver the entire property to Ingram.

The CA, however, deleted the award of attorney's fees and the costs of suit, stating that there was no basis in awarding them. First, the RTC did not
discuss the grounds for granting attorney's fees in the body of its decision. Second, Arcaina cannot be faulted for claiming and then fencing the excess
area of the land after the survey on her honest belief that the ownership remained with her.28

Petitioners moved for reconsideration, raising for the first time the issue of prescription. They pleaded that under Article 154329 of the Civil Code, Ingram
should have filed the action within six months from the delivery of the property. Counting from Arcaina's execution of the notarized deed of absolute sale
on April 13, 2005, petitioners concluded that the filing of the case only on January 25, 2006 is already time-barred.30 The CA denied petitioners' motion
for reconsideration and ruled that Article 1543 does not apply because Ingram had no intention of rescinding the sale. In fact, she instituted the action to
recover the excess portion of the land that petitioners claimed to be unsold. Thus, insofar as Ingram is concerned, that portion remained undelivered.31

Petitioners now assail the CA' s declaration that the sale of the property was made for a lump sum. They insist that they sold the property on a per-
square-meter basis, at the rate of ₱300.00 per sq. m. They further claim that they were aware that the property contains more than 6,200 sq. m.
According to petitioners, this is the reason why the area sold is specifically stated in the deeds of sale. Unfortunately, in the drafting of the deeds, the
word "portion" was omitted. They allege that contemporaneously with the execution of the formal contract of sale, they delivered the area sold and
constructed a fence delineating the unsold portion of the property.32 Ingram allegedly recognized the demarcation because she introduced improvements
confined to the area delivered.33 Since the sale was on a per-square-meter basis, petitioners argue that it is Article 1539,34 and not Article 1542 of the Civil
Code, which governs.35

In her Comment, Ingram accuses petitioners of raising new and irrelevant issues based on factual allegations which they cannot in any case prove, as a
consequence of their filing a demurrer to evidence.36 She maintains that the only issue for resolution is whether the sale was made on a lump sum or per-
square-meter basis. On this score, Ingram asserts that the parties intended the sale of the entire lot, the boundaries of which were stated in the deeds of
sale. These deeds of sale, as observed by the CA, did not contain any qualification.37

II

At the outset, we find that contrary to the findings of the RTC and the CA, the result of the survey conducted on the property is not a disputed fact. In
their Answer to the Complaint, petitioners admitted that when the property was surveyed, it yielded an area of more or less 12,000 sq. m.38 Nevertheless,
petitioners now proffer that they agree with the CA that the final survey of the property is not yet approved; hence, there can be no valid verdict for the
final adjudication of the parties' rights under the contract of sale.39

We reject petitioners' contention on this point.

Judicial admissions made by the parties in the pleadings, or in the course of the trial or other proceedings in the same case, are conclusive and do not
require further evidence to prove them. These admissions cannot be contradicted unless previously shown to have been made through palpable mistake
or that no such admission was made.40 Petitioners do not deny their previous admission, much less allege that they had made a palpable mistake. Thus,
they are bound by it.

We now resolve the main issue in this case and hold that Lot No. 3230 was sold for a lump sum. In sales involving real estate, the parties may choose
between two types of pricing agreement: a unit price contract wherein the purchase price is determined by way of reference to a stated rate per unit
area (e.g, ₱1,000.00 per sq. m.) or a lump sum contract which states a full purchase price for an immovable the area of which may be declared based
on an estimate or where both the area and boundaries are stated (e.g., ₱1 million for 1,000 sq. m., etc.).41 Here, the Deed of Sale executed by Banta on
March 21, 200542 and the Deed of Sale executed by Arcaina on April 13, 200543both show that the property was conveyed to Ingram at the predetermined
price of ₱1,860,000.00. There was no indication that it was bought on a per-square-meter basis. Thus, Article 1542 of the Civil Code governs the
sale, viz.:

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or less area or number than that stated in the contract. (Hard and Fast Rul; flexible)

The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a
reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the
failure to deliver what has been stipulated.

The provision teaches that where both the area and the boundaries of the immovable are declared in a sale of real estate for a lump sum, the area covered
within the boundaries of the immovable prevails over the stated area.44 The vendor is obliged to deliver all that is included within the boundaries
regardless of whether the actual area is more than what was specified in the contract of sale; and he/she shall do so without a corresponding increase in
the contract price. This is particularly true when the stated area is qualified to be approximate only, such as when the words "more or less" were used.45

The deeds of sale in this case provide both the boundaries and the estimated area of the property. The land is bounded on the North East by Lot No.
3184, on the South East by seashore, on the South West by Lot No. 3914 and on the North West by a road.46 It has an area of more or less 6,200 sq. m.
The uniform allegations of petitioners and Ingram, however, reveal that the actual area within the boundaries of the property amounts to more or less
12,000 sq. m., with a difference of 5,800 sq. m. from what was stated in the deeds of sale. With Article 1542 in mind, the RTC and the CA ordered
petitioners to deliver the excess area to Ingram.

They are mistaken.

In Del Prado v. Spouses Caballero,47 we were confronted with facts analogous to the present petition. Pending the issuance of the Original Certificate of
Title (OCT) in their name, Spouses Caballero sold a parcel of land to Del Prado. The contract of sale stated both the property's boundaries and estimated
area of more or less 4,000 sq. m. Later, when the OCT was issued, the technical description of the property appeared to be 14,457 sq. m., more or less.
Del Prado alleged that Spouses Caballero were bound to deliver all that was included in the boundaries of the land since the sale was made for a lump
sum. Although, we agreed with Del Prado that the sale partakes of the nature of a lump sum contract, we did not apply Article 1542. In holding that Del
Prado is entitled only to the area stated in the contract of sale, we explained:

The Court, however, clarified that the rule laid down in Article 1542 is not hard and fast and admits of an exception. It held:

"A caveat is in order, however. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or
deficiency. A vendee of land sold in gross or with the description "more or less" with reference to its area does not thereby ipso facto take all risk of
quantity in the land.

xxx

In the instant case, the deed of sale is not one of a unit price contract. The parties agreed on the purchase price of ₱40,000.00 for a predetermined area
of 4,000 sq m, more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the
West by Lot No. 11910. In a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any other statement, with
respect to the area contained within its boundaries.

Black's Law Dictionary defines the phrase "more or less" to mean:

"About; substantially; or approximately; implying that both parties assume the risk of any ordinary discrepancy. The words are intended to cover
slight or unimportant inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57 S.W.2d 408; and are ordinarily to be interpreted
as taking care of unsubstantial differences or differences of small importance compared to the whole number of items
transferred."

Clearly, the discrepancy of 10,475 sq m cannot be considered a slight difference in quantity. The difference in the area is obviously
sizeable and too substantial to be overlooked. It is not a reasonable excess or deficiency that should be deemed included in the deed
of sale.48(Emphasis supplied; citations omitted.)

In a lump sum contract, a vendor is generally obligated to deliver all the land covered within the boundaries, regardless of whether the real area should
be greater or smaller than that recited in the deed.49 However, in case there is conflict between the area actually covered by the boundaries and the
estimated area stated in the contract of sale, he/she shall do so only when the excess or deficiency between the former and the latter is reasonable.50

Applying Del Prado to the case before us, we find that the difference of 5,800 sq. m. is too substantial to be considered reasonable. We note that only
6,200 sq. m. was agreed upon between petitioners and Ingram. Declaring Ingram as the owner of the whole 12,000 sq. m. on the premise that this is the
actual area included in the boundaries would be ordering the delivery of almost twice the area stated in the deeds of sale. Surely, Article 1542 does not
contemplate such an unfair situation to befall a vendor-that he/she would be compelled to deliver double the amount that he/she originally sold without
a corresponding increase in price. In Asiain v. Jalandoni,51 we explained that "[a] vendee of a land when it is sold in gross or with the description 'more
or less' does not thereby ipso facto take all risk of quantity in the land. The use of 'more or less' or similar words in designating quantity covers only a
reasonable excess or deficiency."52 Therefore, we rule that Ingram is entitled only to 6,200 sq. m. of the property. An area of 5,800 sq. m. more than the
area intended to be sold is not a reasonable excess that can be deemed included in the sale.53

Further, at the time of the sale, Ingram and petitioners did not have knowledge of the actual area of the land within the boundaries of the property. It is
undisputed that before the survey, the parties relied on the tax declaration covering the lot, which merely stated that it measures more or less 6,200 sq.
m. Thus, when petitioners offered the property for sale and when Ingram accepted the offer, the object of their consent or meeting of the minds is only a
6,200 sq. m. property. The deeds of sale merely put into writing what was agreed upon by the parties. In this regard, we quote with approval the ruling of
the MCTC:

In this case, the Deed of Absolute Sale (Exhibit "M") dated April 13, 2005 is clear and unequivocal as to the area sold being up to only 6,200 square
meters.1âwphi1 The agreement of the parties were clear and unambiguous, hence, the inconsistent and impossible testimonies of N[e]nette [Archinue]
and the Spouses Ingram. No amount of extrinsic aids are required and no further extraneous sources are necessary in order to ascertain the parties'
intent, determinable as it is, from the document itself. The court is thus convinced that the deed expresses truly the parties' intent as against the oral
testimonies of Nenette, and the Spouses Ingram.54

The contract of sale is the law between Ingram and petitioners; it must be complied with in good faith. Petitioners have already performed their
obligation by delivering the 6,200 sq. m. property. Since Ingram has yet to fulfill her end of the bargain,55 she must pay petitioners the remaining balance
of the contract price amounting to ₱145,000.00.
WHEREFORE, premises considered, the petition is GRANTED. The October 26, 2010 Decision and March 1 7, 2011 Resolution of the Court of
Appeals in CA-G.R. SP No. 107997 are hereby REVERSED and SET ASIDE. The July 31, 2008 Order of the 3rd Municipal Circuit Trial Court of Sto.
Domingo-Manito, dismissing Civil Case No. S-241 for insufficiency of evidence, and ordering Ingram to pay ₱145,000.00 to petitioners, is
hereby REINSTATED with MODIFICATION.

Ingram is ordered to pay petitioners the amount of ₱145,000.00 to earn interest at the rate of six percent (6%) per annum from July 31, 200856 until the
finality of this Decision. Thereafter, the total amount due shall earn legal interest at the rate of 6% per annum57 until fully paid.

SO ORDERED.
G.R. No. 193787 April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C. Roque represented by his substitute heir
JOVETTE ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE PHILIPPINES (NCCP),
represented by its Secretary General SHARON ROSE JOY RUIZ-DUREMDES, LAND BANK OF THE PHILIPPINES (LBP),
represented by Branch Manager EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, in his Official Capacity as Register of Deeds for
Rizal, Morong Branch, and CECILIO U. PULAN, in his Official Capacity as Sheriff, Office of the Clerk of Court, Regional Trial Court,
Binangonan, Rizal,Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated May 12, 2010 and the Resolution3 dated September 15, 2010 of the Court of
Appeals (CA) in CA G.R. CV No. 92113 which affirmed the Decision 4 dated July 8, 2008 of the Regional Trial Court of Binangonan, Rizal, Branch 69
(RTC) that dismissed Civil Case Nos. 03-022 and 05-003 for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure and certificate of
sale, and damages.

The Facts

The property subject of this case is a parcel of land with an area of 20,862 square meters (sq. m.), located in Sitio Tagpos, Barangay Tayuman,
Binangonan, Rizal, known as Lot 18089.5

On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and the original owners of the then unregistered Lot
18089 – namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela Gonzales, Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R.
Topacio, and Augusto Rivero (Rivero, et al.) – executed a Deed of Conditional Sale of Real Property6 (1977 Deed of Conditional Sale) over a 1,231-sq. m.
portion of Lot 18089 (subject portion) for a consideration of ₱30,775.00. The parties agreed that Sps. Roque shall make an initial payment of ₱15,387.50
upon signing, while the remaining balance of the purchase price shall be payable upon the registration of Lot 18089, as well as the segregation and the
concomitant issuance of a separate title over the subject portion in their names. After the deed’s execution, Sps. Roque took possession and introduced
improvements on the subject portion which they utilized as a balut factory.7

On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of Churches in the Philippines (NCCP), applied for a free
patent over the entire Lot 18089 and was eventually issued Original Certificate of Title (OCT) No. M-59558 in his name on October 21, 1991. On June 24,
1993, Sabug, Jr. and Rivero, in her personal capacity and in representation of Rivero, et al., executed a Joint Affidavit 9 (1993 Joint Affidavit),
acknowledging that the subject portion belongs to Sps. Roque and expressed their willingness to segregate the same from the entire area of Lot 18089.

On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute Sale10 (1999 Deed of Absolute Sale), sold Lot 18089 to one Ma. Pamela P. Aguado
(Aguado) for ₱2,500,000.00, who, in turn, caused the cancellation of OCT No. M-5955 and the issuance of Transfer Certificate of Title (TCT) No. M-
96692 dated December 17, 199911 in her name.

Thereafter, Aguado obtained an ₱8,000,000.00 loan from the Land Bank of the Philippines (Land Bank) secured by a mortgage over Lot 18089.12 When
she failed to pay her loan obligation, Land Bank commenced extra-judicial foreclosure proceedings and eventually tendered the highest bid in the auction
sale. Upon Aguado’s failure to redeem the subject property, Land Bank consolidated its ownership, and TCT No. M-11589513 was issued in its name on
July 21, 2003.14

On June 16, 2003, Sps. Roque filed a complaint15 for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure, and certificate of sale,
and damages before the RTC, docketed as Civil Case No. 03-022, against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal,
and Sheriff Cecilio U. Pulan, seeking to be declared as the true owners of the subject portion which had been erroneously included in the sale between
Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its entirety.

In defense, NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional Sale through which the subject portion had been purportedly
conveyed to Sps. Roque.16

For her part, Aguado raised the defense of an innocent purchaser for value as she allegedly derived her title (through the 1999 Deed of Absolute Sale)
from Sabug, Jr., the registered owner in OCT No. M-5955, covering Lot 18089, which certificate of title at the time of sale was free from any lien and/or
encumbrances. She also claimed that Sps. Roque’s cause of action had already prescribed because their adverse claim was made only on April 21, 2003,
or four (4) years from the date OCT No. M-5955 was issued in Sabug, Jr.’s name on December 17, 1999.17

On the other hand, Land Bank averred that it had no knowledge of Sps. Roque’s claim relative to the subject portion, considering that at the time the loan
was taken out, Lot 18089 in its entirety was registered in Aguado’s name and no lien and/or encumbrance was annotated on her certificate of title.18

Meanwhile, on January 18, 2005, NCCP filed a separate complaint19 also for declaration of nullity of documents and certificates of title and damages,
docketed as Civil Case No. 05-003. It claimed to be the real owner of Lot 18089 which it supposedly acquired from Sabug, Jr. through an oral contract of
sale20 in the early part of 1998, followed by the execution of a Deed of Absolute Sale on December 2, 1998 (1998 Deed of Absolute Sale).21 NCCP also
alleged that in October of the same year, it entered into a Joint Venture Agreement (JVA) with Pilipinas Norin Construction Development Corporation
(PNCDC), a company owned by Aguado’s parents, for the development of its real properties, including Lot 18089, into a subdivision project, and as such,
turned over its copy of OCT No. M-5955 to PNCDC.22 Upon knowledge of the purported sale of Lot 18089 to Aguado, Sabug, Jr. denied the transaction
and alleged forgery. Claiming that the Aguados23 and PNCDC conspired to defraud NCCP, it prayed that PNCDC’s corporate veil be pierced and that the
Aguados be ordered to pay the amount of ₱38,092,002.00 representing the unrealized profit from the JVA.24 Moreover, NCCP averred that Land Bank
failed to exercise the diligence required to ascertain the true owners of Lot 18089. Hence, it further prayed that: (a) all acts of ownership and dominion
over Lot 18089 that the bank might have done or caused to be done be declared null and void; (b) it be declared the true and real owners of Lot 18089;
and (c) the Register of Deeds of Morong, Rizal be ordered to cancel any and all certificates of title covering the lot, and a new one be issued in its
name.25 In its answer, Land Bank reiterated its stance that Lot 18089 was used as collateral for the ₱8,000,000.00 loan obtained by the Countryside
Rural Bank, Aguado, and one Bella Palasaga. There being no lien and/ or encumbrance annotated on its certificate of title, i.e., TCT No. M-115895, it
cannot be held liable for NCCP’s claims. Thus, it prayed for the dismissal of NCCP’s complaint.26

On September 7, 2005, Civil Case Nos. 02-022 and 05-003 were ordered consolidated.27

The RTC Ruling

After due proceedings, the RTC rendered a Decision28 dated July 8, 2008, dismissing the complaints of Sps. Roque and NCCP.

With respect to Sps. Roque’s complaint, the RTC found that the latter failed to establish their ownership over the subject portion, considering the
following: (a) the supposed owners-vendors, i.e., Rivero, et al., who executed the 1977 Deed of Conditional Sale, had no proof of their title over Lot
18089; (b) the 1977 Deed of Conditional Sale was not registered with the Office of the Register of Deeds; 29 (c) the 1977 Deed of Conditional Sale is neither
a deed of conveyance nor a transfer document, as it only gives the holder the right to compel the supposed vendors to execute a deed of absolute sale
upon full payment of the consideration; (d) neither Sps. Roque nor the alleged owners-vendors, i.e., Rivero, et al., have paid real property taxes in
relation to Lot 18089; and (e) Sps. Roque’s occupation of the subject portion did not ripen into ownership that can be considered superior to the
ownership of Land Bank.30 Moreover, the RTC ruled that Sps. Roque’s action for reconveyance had already prescribed, having been filed ten (10) years
after the issuance of OCT No. M-5955.31

On the other hand, regarding NCCP’s complaint, the RTC observed that while it anchored its claim of ownership over Lot 18089 on the 1998 Deed of
Absolute Sale, the said deed was not annotated on OCT No. M-5955. Neither was any certificate of title issued in its name nor did it take possession of
Lot 18089 or paid the real property taxes therefor. Hence, NCCP’s claim cannot prevail against Land Bank’s title, which was adjudged by the RTC as an
innocent purchaser for value. Also, the RTC disregarded NCCP’s allegation that the signature of Sabug, Jr. on the 1999 Deed of Absolute Sale in favor of
Aguado was forged because his signatures on both instruments bear semblances of similarity and appear genuine. Besides, the examiner from the
National Bureau of Investigation, who purportedly found that Sabug, Jr.’s signature thereon was spurious leading to the dismissal of a criminal case
against him, was not presented as a witness in the civil action.32

Finally, the RTC denied the parties’ respective claims for damages.33

The CA Ruling

On appeal, the Court of Appeals (CA) affirmed the foregoing RTC findings in a Decision 34 dated May 12, 2010. While Land Bank was not regarded as a
mortgagee/purchaser in good faith with respect to the subject portion considering Sps. Roque’s possession thereof, 35 the CA did not order its
reconveyance or segregation in the latter’s favor because of Sps. Roque’s failure to pay the remaining balance of the purchase price. Hence, it only
directed Land Bank to respect Sps. Roque’s possession with the option to appropriate the improvements introduced thereon upon payment of
compensation.36

As regards NCCP, the CA found that it failed to establish its right over Lot 18089 for the following reasons: (a) the sale to it of the lot by Sabug, Jr. was
never registered; and (b) there is no showing that it was in possession of Lot 18089 or any portion thereof from 1998. Thus, as far as NCCP is concerned,
Land Bank is a mortgagee/purchaser in good faith.37

Aggrieved, both Sps. Roque38 and NCCP39 moved for reconsideration but were denied by the CA in a Resolution 40dated September 15, 2010, prompting
them to seek further recourse before the Court.

The Issue Before the Court

The central issue in this case is whether or not the CA erred in not ordering the reconveyance of the subject portion in Sps. Roque’s favor.

Sps. Roque maintain that the CA erred in not declaring them as the lawful owners of the subject portion despite having possessed the same since the
execution of the 1977 Deed of Conditional Sale, sufficient for acquisitive prescription to set in in their favor. 41 To bolster their claim, they also point to the
1993 Joint Affidavit whereby Sabug, Jr. and Rivero acknowledged their ownership thereof. 42 Being the first purchasers and in actual possession of the
disputed portion, they assert that they have a better right over the 1,231- sq. m. portion of Lot 18089 and, hence, cannot be ousted therefrom by Land
Bank, which was adjudged as a ortgagee/purchaser in bad faith, pursuant to Article 1544 of the Civil Code.43

In opposition, Land Bank espouses that the instant petition should be dismissed for raising questions of fact, in violation of the proscription under Rule
45 of the Rules of Court which allows only pure questions of law to be raised. 44 Moreover, it denied that ownership over the subject portion had been
acquired by Sps. Roque who admittedly failed to pay the remaining balance of the purchase price. 45 Besides, Land Bank points out that Sps. Roque’s
action for reconveyance had already prescribed.46

Instead of traversing the arguments of Sps. Roque, NCCP, in its Comment47 dated December 19, 2011, advanced its own case, arguing that the CA erred
in holding that it failed to establish its claimed ownership over Lot 18089 in its entirety. Incidentally, NCCP’s appeal from the CA Decision dated May 12,
2010 was already denied by the Court,48 and hence, will no longer be dealt with in this case.
The Court’s Ruling

The petition lacks merit.

The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or erroneously registered in another person’s name
to its rightful owner or to one with a better right.49 Thus, it is incumbent upon the aggrieved party to show that he has a legal claim on the property
superior to that of the registered owner and that the property has not yet passed to the hands of an innocent purchaser for value.50

Sps. Roque claim that the subject portion covered by the 1977 Deed of Conditional Sale between them and Rivero, et al. was wrongfully included in the
certificates of title covering Lot 18089, and, hence, must be segregated therefrom and their ownership thereof be confirmed. The salient portions of the
said deed state:

DEED OF CONDITIONAL SALE OF REAL PROPERTY

KNOW ALL MEN BY THESE PRESENTS:

xxxx

That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE PESOS (₱30,775.00), Philippine Currency,
payable in the manner hereinbelow specified, the VENDORS do hereby sell, transfer and convey unto the VENDEE, or their heirs, executors,
administrators, or assignors, that unsegregated portion of the above lot, x x x.

That the aforesaid amount shall be paid in two installments, the first installment which is in the amount of __________ (₱15,387.50) and the balance
in the amount of __________ (₱15,387.50), shall be paid as soon as the described portion of the property shall have been registered under the Land
Registration Act and a Certificate of Title issued accordingly;

That as soon as the total amount of the property has been paid and the Certificate of Title has been issued, an absolute deed of sale shall be executed
accordingly;

x x x x51

Examining its provisions, the Court finds that the stipulation above-highlighted shows that the 1977 Deed of Conditional Sale is actually in the nature of a
contract to sell and not one of sale contrary to Sps. Roque’s belief.52 In this relation, it has been consistently ruled that where the seller promises to
execute a deed of absolute sale upon the completion by the buyer of the payment of the purchase price, the contract is only a contract to sell even if their
agreement is denominated as a Deed of Conditional Sale,53 as in this case. This treatment stems from the legal characterization of a contract to sell, that
is, 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 subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as,
the full payment of the purchase price.54 Elsewise stated, in a contract to sell, ownership is retained by the vendor and is not to pass to the vendee until
full payment of the purchase price.55 Explaining the subject matter further, the Court, in Ursal v. CA,56 held that:

[I]n contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, the full
payment of the purchase price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the
ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer,
even if there is a contract to sell between them.

Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price.57 As such, the condition which would have triggered the
parties’ obligation to enter into and thereby perfect a contract of sale in order to effectively transfer the ownership of the subject portion from the sellers
(i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over the
subject portion even if they had made an initial payment and even took possession of the same.58

The Court further notes that Sps. Roque did not even take any active steps to protect their claim over the disputed portion. This remains evident from the
following circumstances appearing on record: (a) the 1977 Deed of Conditional Sale was never registered; (b) they did not seek the actual/physical
segregation of the disputed portion despite their knowledge of the fact that, as early as 1993, the entire Lot 18089 was registered in Sabug, Jr.’s name
under OCT No. M-5955; and (c) while they signified their willingness to pay the balance of the purchase price,59Sps. Roque neither compelled Rivero et
al., and/or Sabug, Jr. to accept the same nor did they consign any amount to the court, the proper application of which would have effectively fulfilled
their obligation to pay the purchase price.60 Instead, Sps. Roque waited 26 years, reckoned from the execution of the 1977 Deed of Conditional Sale, to
institute an action for reconveyance (in 2003), and only after Lot 18089 was sold to Land Bank in the foreclosure sale and title thereto was consolidated
in its name. Thus, in view of the foregoing, Sabug, Jr. – as the registered owner of Lot 18089 borne by the grant of his free patent application – could
validly convey said property in its entirety to Aguado who, in turn, mortgaged the same to Land Bank. Besides, as aptly observed by the RTC, Sps. Roque
failed to establish that the parties who sold the property to them, i.e., Rivero, et al., were indeed its true and lawful owners.61 In fine, Sps. Roque failed to
establish any superior right over the subject portion as against the registered owner of Lot 18089, i.e., Land Bank, thereby warranting the dismissal of
their reconveyance action, without prejudice to their right to seek damages against the vendors, i.e., Rivero et al.62 As applied in the case of Coronel v.
CA:63

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 fulfilment 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.1âwphi1 Title to the property will transfer to the buyer after registration because there is no defect in the owner-
seller’s title per se, but the latter, of course, may be sued for damages by the intending buyer. (Emphasis supplied)

On the matter of double sales, suffice it to state that Sps. Roque’s reliance64 on Article 154465 of the Civil Code has been misplaced since the contract they
base their claim of ownership on is, as earlier stated, a contract to sell, and not one of sale. In Cheng v. Genato,66 the Court stated the circumstances
which must concur in order to determine the applicability of Article 1544, none of which are obtaining in this case, viz.:

(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales transactions;

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the same seller.

Finally, regarding Sps. Roque’s claims of acquisitive prescription and reimbursement for the value of the improvements they have introduced on the
subject property,67 it is keenly observed that none of the arguments therefor were raised before the trial court or the CA.68 Accordingly, the Court applies
the well-settled rule that litigants cannot raise an issue for the first time on appeal as this would contravene the basic rules of fair play and justice. In any
event, such claims appear to involve questions of fact which are generally prohibited under a Rule 45 petition.69

With the conclusions herein reached, the Court need not belabor on the other points raised by the parties, and ultimately finds it proper to proceed with
the denial of the petition.

WHEREFORE, the petition is DENIED. The Decision dated May 12, 2010 and the Resolution dated September 15, 2010 of the Court of Appeals in
CAG.R. CV No. 92113 are hereby AFFIRMED.

SO ORDERED.

G.R. No. 103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of
Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.

MELO, J.:p

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag)
to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in
January 1985 for the price of P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels) executed a document
entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona)
which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 — Total amount

50,000 — Down payment

———————————
P1,190,000.00 — Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.

We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the down payment 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 specific performance against the Coronels and caused the annotation
of a notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds
of Quezon City (Exh. "F"; Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. "H"; Exh.
"8").
 (Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis
of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits "A"
through "J", inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly
offered and marked them as Exhibits "1" through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court
gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereof, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of
the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon
City branch, disposing as follows:

WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of
absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582)
of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances,
and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the said document of
sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price
amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of
intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming
under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs' claim for
damages and attorney's fees, as well as the counterclaims of defendants and intervenors are hereby dismissed.

No pronouncement as to costs.

So Ordered.

Macabebe, Pampanga for Quezon City, March 1, 1989.

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T.
Estrada, thusly:

The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding
Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the
parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge
Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of
the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the
defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the
decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case
No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said
authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that
Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full
authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official
Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases submitted to him for decision or
resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge.
The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to
decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court).

Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of
which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by
the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the
Incumbent Presiding Judge" dated March 20, 1989 is hereby DENIED.

SO ORDERED.

Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its
decision fully agreeing with the trial court.

Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply Memorandum, was filed on September 15,
1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case
was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial court's decision, we
definitely find the instant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal
significance of the document entitled "Receipt of Down Payment" which was offered in evidence by both parties. There is no dispute as to the fact that
said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other,
pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service.

While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of sale, which perforce, they seek to
enforce by means of an action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to
sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract
could not possibly ripen into a contract absolute sale.

Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms and/or conditions set forth in said
private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this, Court, as were the courts below, is now
called upon to adjudge what the real intent of the parties was at the time the said document was executed.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the
prospective seller explicity reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill is promise to sell the subject property when the entire amount
of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is
retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and
failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective seller's obligation to
sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code
which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise
is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the
seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner
not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property,
a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance,
cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such
case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course,
may be used for damages by the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the
seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically
transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such
second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to
the second buyer, the first buyer may seek reconveyance of the property subject of the sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private
respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning
was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down Payment" that they —

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.

without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their
property.

When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to
transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer
although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down
payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after
which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn,
pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of
land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the
certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the
Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to private respondent upon the fulfillment
of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title changed to
their names and immediately thereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised
to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already
agreed to sell the house and lot they inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if
the documents were then in order. It just happened, however, that the transfer certificate of title was then still in the name of their father. It was more
expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer
of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in
their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder
of the purchase price arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the
property in installment by withholding ownership over the property until the buyer effects full payment therefor, in the contract entered into in the case
at bar, the sellers were the one who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property
was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an
contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment" was prepared and signed by
petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners' father, Constancio P. Coronel, to their names.

The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional
contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof
being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally
committed themselves to do as evidenced by the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.

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

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes the condition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was fulfilled on February 6, 1985, the
respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the
transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute
sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that:

3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our deceased father Constancio P.
Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated". The sale was still subject to
this suspensive condition. (Emphasis supplied.)

(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend, continuing in the same
paragraph, that:

. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there
could be no perfected contract of sale. (Emphasis supplied.)

(Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that:

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein
referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No.
327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"),
the parties entered into a contract of sale subject only to the suspensive condition that the sellers shall effect the issuance of new certificate title from that
of their father's name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides —

Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .

In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been
complied with.

the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of
fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and
buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited
property.

We cannot sustain this argument.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to be extent and value of the
inheritance of a person are transmitted through his death to another or others by his will or by operation of law.
 Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called
to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly
provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva,
90 Phil. 850 [1952]).

Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they
were able to effect the transfer of the title to the property from the decedent's name to their names on February 6, 1985.

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed
to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code
expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied
or disproved as against the person relying thereon.

Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not
yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breached her
reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address,
telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo,
p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding rescinding the contract of sale.

We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for
petitioners' rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted
even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to
substantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong,
110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioner-sellers' act of
unilaterally and extradicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extarjudicially rescind the
contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale
was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in
behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh.
"B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to represent
Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person.
Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners
who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that
they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute
sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.

xxx xxx xxx

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis
supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil
Code will apply, to wit:

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

Should if be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in Registry
of Property.
 Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the
absence thereof to the person who presents the oldest title, provided there is good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with the Registry
of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second
paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good
faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to
him to the prejudice of the first buyer.

In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains:

The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale
cannot defeat the first buyer's rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales,
159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz
vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals,
69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject property only on February 22, 1985, whereas,
the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed
is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale,
for which reason she is buyer in good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985
because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas
petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same
property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to
the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the
property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has acquired knowledge that there was a previous sale of the same property to
a third party or that another person claims said property in a pervious sale, the registration will constitute a registration in bad faith
and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146;
Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners
and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.

Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her mother, as agent insofar as
the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in
the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower
courts' ruling on this point.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.

SO ORDERED.
G.R. No. 115158 September 5, 1997

EMILLA M. URACA, CONCORDIA D. CHING and ONG SENG, represented by ENEDINO H. FERRER, petitioners,
vs.
COURT OF APPEALS, JACINTO VELEZ, JR., CARMEN VELEZ TING, AVENUE MERCHANDISING, INC., FELIX TING AND
ALFREDO GO, respondents.

PANGANIBAN, J.:

Novation is never presumed; it must be sufficiently established that a valid new agreement or obligation has extinguished or changed an existing one.
The registration of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale.

Statement of the Case

These doctrines are stressed by this Court as it resolves the instant petition challenging the December 28, 1993 Decision 1 of Respondent Court of
Appeals2 in CA-G.R. SP No. 33307, which reversed and set aside the judgment of the Regional Trial Court of Cebu City, Branch 19, and entered a new one
dismissing the petitioners' complaint. The dispositive portion of the RTC decision reads:3

WHEREFORE, judgment is hereby rendered:

1) declaring as null and void the three (3) deeds of sale executed by the Velezes to Felix C. Ting, Manuel Ting and Alfredo Go;

2) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to execute a deed of absolute sale in favor of Concordia D. Ching and Emilia
M. Uraca for the properties in question for P1,400,000.00, which sum must be delivered by the plaintiffs to the Velezes immediately
after the execution of said contract;

3) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to reimburse Felix C. Ting, Manuel C. Ting and Alfredo Go whatever
amount the latter had paid to the former;

4) ordering Felix C. Ting, Manuel C. Ting and Alfredo Go to deliver the properties in question to the plaintiffs within fifteen (15) days
from receipt of a copy of this decision;

5) ordering all the defendants to pay, jointly and severally, the plaintiffs the sum of P20,000.00 as attorney's fees.

SO ORDERED.
 The Antecedent Facts

The facts narrated by the Court of Appeals are as follows:4

The Velezes (herein private respondents) were the owners of the lot and commercial building in question located at Progreso and
M.C. Briones Streets in Cebu City.

Herein (petitioners) were the lessees of said commercial building.5

On July 8, 1985, the Velezes through Carmen Velez Ting wrote a letter to herein (petitioners) offering to sell the subject property for
P1,050,000.00 and at the same time requesting (herein petitioners) to reply in three days.

On July 10, 1985, (herein petitioners) through Atty. Escolastico Daitol sent a reply-letter to the Velezes accepting the aforesaid offer
to sell.

On July 11, 1985, (herein petitioner) Emilia Uraca went to see Carmen Ting about the offer to sell but she was told by the latter that
the price was P1,400,000.00 in cash or manager's check and not P1,050,000.00 as erroneously stated in their letter-offer after some
haggling. Emilia Uraca agreed to the price of P1,400,000.00 but counter-proposed that payment be paid in installments with a down
payment of P1,000,000.00 and the balance of P400,000 to be paid in 30 days. Carmen Velez Ting did not accept the said counter-
offer of Emilia Uraca although this fact is disputed by Uraca.

No payment was made by (herein petitioners) to the Velezes on July 12, 1985 and July 13, 1985.

On July 13, 1985, the Velezes sold the subject lot and commercial building to the Avenue Group (Private Respondent Avenue
Merchandising Inc.) for P1,050,000.00 net of taxes, registration fees, and expenses of the sale.

At the time the Avenue Group purchased subject property on July 13, 1985 from the Velezes, the certificate of title of the said
property was clean and free of any annotation of adverse claims or lis pendens.

On July 31, 1985 as aforestated, herein (petitioners) filed the instant complaint against the Velezes.

On August 1, 1985, (herein petitioners) registered a notice of lis pendens over the property in question with the Office of the Register
of Deeds.6

On October 30, 1985, the Avenue Group filed an ejectment case against (herein petitioners) ordering the latter to vacate the
commercial building standing on the lot in question.

Thereafter, herein (petitioners) filed an amended complaint impleading the Avenue Group as new defendants (after about 4 years
after the filing of the original complaint).

The trial court found two perfected contracts of sale between the Velezes and the petitioners involving the real property in
question.

RTC: there was a perfected contract.

The first sale was for P1,050,000.00 and the second was for P1,400,000.00. In respect to the first sale, the trial court held that "[d]ue to the unqualified
acceptance by the plaintiffs within the period set by the Velezes, there consequently came about a meeting of the minds of the parties not only as to the
object certain but also as to the definite consideration or cause of the contract."7 And even assuming arguendo that the second sale was not perfected, the
trial court ruled that the same still constituted a mere modificatory novation which did not extinguish the first sale. Hence, the trial court held that "the
Velezes were not free to sell the properties to the Avenue Group."8 It also found that the Avenue Group purchased the property in bad faith.9

CA: No contract of sale was perfected.

Private respondents appealed to the Court of Appeals. As noted earlier, the CA found the appeal meritorious. Like the trial court, the public respondent
held that there was a perfected contract of sale of the property for P1,050,000.00 between the Velezes and herein petitioners. It
added, however, that such perfected contract of sale was subsequently novated. Thus, it ruled: "Evidence shows that that was the original
contract. However, the same was mutually withdrawn, cancelled and rescinded by novation, and was therefore abandoned by the parties when Carmen
Velez Ting raised the consideration of the contract [by] P350,000.00, thus making the price P1,400,000.00 instead of the original price of
P1,050,000.00. Since there was no agreement as to the 'second' price offered, there was likewise no meeting of minds between the parties, hence, no
contract of sale was perfected." 10 The Court of Appeals added that, assuming there was agreement as to the price and a second contract was perfected,
the later contract would be unenforceable under the Statute of Frauds. It further held that such second agreement, if there was one, constituted a mere
promise to sell which was not binding for lack of acceptance or a separate consideration. 11

The Issues

Petitioners allege the following "errors" in the Decision of Respondent Court:

 I

Since it ruled in its decision that there was no meeting of the minds on the "second" price offered (P1,400,000.00), hence no
contract of sale was perfected, the Court of Appeals erred in not holding that the original written contract to buy and sell for
P1,050,000.00 the Velezes property continued to be valid and enforceable pursuant to Art. 1279 in relation with Art. 1479, first
paragraph, and Art. 1403, subparagraph 2 (e) of the Civil Code.

II

The Court of Appeals erred in not ruling that petitioners have better rights to buy and own the Velezes' property for registering their
notice of lis pendens ahead of the Avenue Group's registration of their deeds of sale taking into account Art. 1544, 2nd paragraph, of
the Civil Code. 12

The Court's Ruling

The petition is meritorious.

First Issue: No Extinctive Novation

The lynchpin of the assailed Decision is the public respondent's conclusion that the sale of the real property in controversy, by the Velezes to petitioners
for P1,050,000.00, was extinguished by novation after the said parties negotiated to increase the price to P1,400,000.00. Since there was no agreement
on the sale at the increased price, then there was no perfected contract to enforce. We disagree.

The Court notes that the petitioners accepted in writing and without qualification the Velezes' written offer to sell at P1,050,000.00 within the three-day
period stipulated therein. Hence, from the moment of acceptance on July 10, 1985, a contract of sale was perfected since undisputedly the contractual
elements of consent, object certain and cause concurred. 13 Thus, this question is posed for our resolution: Was there a novation of this perfected
contract?

Article 1600 of the Civil Code provides that "(s)ales are extinguished by the same causes as all other obligations, . . . ." Article 1231 of the same Code
states that novation is one of the ways to wipe out an obligation. Extinctive novation requires: (1) the existence of a previous valid obligation; (2) the
agreement of all the parties to the new contract; (3) the extinguishment of the old obligation or contract; and (4) the validity of the new one. 14 The
foregoing clearly show that novation is effected only when a new contract has extinguished an earlier contract between the same parties. In this light,
novation is never presumed; it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable
incompatibility between old and new obligations or contracts. 15 After a thorough review of the records, we find this element lacking in the case at bar.

As aptly found by the Court of Appeals, the petitioners and the Velezes did not reach an agreement on the new price of P1,400,000.00 demanded by the
latter. In this case, the petitioners and the Velezes clearly did not perfect a new contract because the essential requisite of consent was absent, the parties
having failed to agree on the terms of the payment. True, petitioners made a qualified acceptance of this offer by proposing that the payment of this
higher sale price be made by installment, with P1,000,000.00 as down payment and the balance of P400,000.00 payable thirty days thereafter. Under
Article 1319 of the Civil Code, 16 such qualified acceptance constitutes a counter-offer and has the ineludible effect of rejecting the Velezes' offer. 17 Indeed,
petitioners' counter-offer was not accepted by the Velezes. It is well-settled that "(a)n offer must be clear and definite, while an acceptance must be
unconditional and unbounded, in order that their concurrence can give rise to a perfected contract." 18 In line with this basic postulate of contract law, "a
definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale." 19 Since
the parties failed to enter into a new contract that could have extinguished their previously perfected contract of sale, there can be no novation of the
latter. Consequently, the first sale of the property in controversy, by the Velezes to petitioners for P1,050,000.00, remained valid and existing.

In view of the validity and subsistence of their original contract of sale as previously discussed, it is unnecessary to discuss public respondent's theses
that the second agreement is unenforceable under the Statute of Frauds and that the agreement constitutes a mere promise to sell.

Second Issue: Double Sale of an Immovable

The foregoing holding would have been simple and straightforward. But Respondent Velezes complicated the matter by selling the same property to the
other private respondents who were referred to in the assailed Decision as the Avenue Group.

Before us therefore is a classic case of a double sale — first, to the petitioner; second, to the Avenue Group. Thus, the Court is now called upon to
determine which of the two groups of buyers has a better right to said property.

Article 1544 of the Civil Code provides the statutory solution:

xxx xxx xxx

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.
Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the
property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that "(t)he governing principle
is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's
rights except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first
buyer does not bar her from availing of her rights under the law, among them, to register firsther purchase as against the second buyer. But in converso,
knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior
registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that
before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e, in ignorance of the first sale and of
the first buyer's rights) — from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of
possession." 20 (Emphasis supplied)

After a thorough scrutiny of the records of the instant case, the Court finds that bad faith tainted the Avenue Group's purchase on July 13, 1985 of the
Velezes' real property subject of this case, and the subsequent registration thereof on August 1, 1995. The Avenue Group had actual knowledge of the
Velezes' prior sale of the same property to the petitioners, a fact antithetical to good faith. For a second buyer like the Avenue Group to successfully
invoke the second paragraph, Article 1544 of the Civil Code, it must possess good faith from the time of the sale in its favor until the registration of the
same. This requirement of good faith the Avenue Group sorely failed to meet. That it had knowledge of the prior sale, a fact undisputed by the Court of
Appeals, is explained by the trial court thus:

The Avenue Group, whose store is close to the properties in question, had known the plaintiffs to be the lessee-occupants thereof for
quite a time. Felix Ting admitted to have a talk with Ong Seng in 1983 or 1984 about the properties. In the cross-examination,
Manuel Ting also admitted that about a month after Ester Borromeo allegedly offered the sale of the properties Felix Ting went to
see Ong Seng again. If these were so, it can be safely assumed that Ong Seng had consequently told Felix about plaintiffs' offer on
January 11, 1985 to buy the properties for P1,000,000.00 and of their timely acceptance on July 10, 1985 to buy the same at
P1,050,000.00.

The two aforesaid admissions by the Tings, considered together with Uraca's positive assertion that Felix Ting met with her on July
11th and who was told by her that the plaintiffs had transmitted already to the Velezes their decision to buy the properties at
P1,050,000.00, clinches the proof that the Avenue Group had prior knowledge of plaintiffs' interest. Hence, the Avenue Group
defendants, earlier forewarned of the plaintiffs' prior contract with the Velezes, were guilty of bad faith when they proceeded to buy
the properties to the prejudice of the plaintiffs. 21

The testimony of Petitioner Emilia Uraca supports this finding of the trial court. The salient portions of her testimony follow:

BY ATTY. BORROMEO: (To witness)

Q According to Manuel Ting in his testimony, even if they know, referring to the Avenue Group, that you were
tenants of the property in question and they were neighbors to you, he did not inquire from you whether you
were interested in buying the property, what can you say about that?

A It was Felix Ting who approached me and asked whether I will buy the property, both the house and the land
and that was on July 10, 1985.

ATTY BORROMEO: (To witness)

Q What was your reply, if any?

A Yes, sir, I said we are going to buy this property because we have stayed for a long time there already and we
have a letter from Carmen Ting asking us whether we are going to buy the property and we have already given
our answer that we are willing to buy.

COURT: (To witness)

Q What do you mean by that, you mean you told Felix Ting and you showed him that letter of Carmen Ting?

WITNESS:

A We have a letter of Carmen Ting where she offered to us for sale the house and lot and I told him that I have
already agreed with Concordia Ching, Ong Seng and my self that we buy the land. We want to buy the land and
the building. 22

We see no reason to disturb the factual finding of the trial court that the Avenue Group, prior to the registration of the property in the Registry of
Property, already knew of the first sale to petitioners. It is hornbook doctrine that "findings of facts of the trial court, particularly when affirmed by the
Court of Appeals, are binding upon this Court" 23save for exceptional
circumstances 24 which we do not find in the factual milieu of the present case. True, this doctrine does not apply where there is a variance in the factual
findings of the trial court and the Court of Appeals. In the present case, the Court of Appeals did not explicitly sustain this particular holding of the trial
court, but neither did it controvert the same. Therefore, because the registration by the Avenue Group was in bad faith, it amounted to no "inscription" at
all. Hence, the third and not the second paragraph of Article 1544 should be applied to this case. Under this provision, petitioners are entitled to the
ownership of the property because they were first in actual possession, having been the property's lessees and possessors for decades prior to the sale.
Having already ruled that petitioners' actual knowledge of the first sale tainted their registration, we find no more reason to pass upon the issue of
whether the annotation of lis pendens automatically negated good faith in such registration.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is hereby SET ASIDE and the dispositive portion of the trial
court's decision dated October 19, 1990 is REVIVED with the following MODIFICATION — the consideration to be paid under par. 2 of the disposition is
P1,050,000.00 and not P1,400,000.00. No Costs.

SO ORDERED.

G.R. No. 176308 May 8, 2009

ANGEL M. PAGADUAN, AMELIA P. TUCCI, TERESITA P. DEL MONTE, ORLITA P. GADIN, PERLA P. ESPIRITU, ELISA P. DUNN,
LORNA P. KIMBLE, EDITO N. PAGADUAN, and LEO N. PAGADUAN, Petitioners,
vs.
SPOUSES ESTANISLAO & FE POSADAS OCUMA, Respondents.

DECISION

TINGA, J.:

In this Petition for Review,1 petitioners assail the Decision2 of the Court of Appeals dated September 18, 2006 which ruled that petitioners’ action for
reconveyance is barred by prescription and consequently reversed the decision3 dated June 25, 2002 of the Regional Trial Court (RTC) of Olongapo City.

Petitioners Angel N. Pagaduan, Amelia P. Tucci, Teresita P. del Monte, Orlita P. Gadin, Perla P. Espiritu, Elisa P. Dunn, Lorna P. Kimble, Edito N.
Pagaduan and Leo N. Pagaduan are all heirs of the late Agaton Pagaduan. Respondents are the spouses Estanislao Ocuma and Fe Posadas Ocuma.

The facts are as follows:

The subject lot used to be part of a big parcel of land that originally belonged to Nicolas Cleto as evidenced by Certificate of Title (C.T.) No. 14. The big
parcel of land was the subject of two separate lines of dispositions. The first line of dispositions began with the sale by Cleto to Antonio Cereso on May 11,
1925. Cereso in turn sold the land to the siblings with the surname Antipolo on September 23, 1943. The Antipolos sold the property to Agaton
Pagaduan, father of petitioners, on March 24, 1961. All the dispositions in this line were not registered and did not result in the issuance of new
certificates of title in the name of the purchasers.

The second line of dispositions started on January 30, 1954, after Cleto’s death, when his widow Ruperta Asuncion as his sole heir and new owner of the
entire tract, sold the same to Eugenia Reyes. This resulted in the issuance of Transfer Certificate of Title (TCT) No. T-1221 in the name of Eugenia Reyes
in lieu of TCT No. T-1220 in the name of Ruperta Asuncion.

On November 26, 1961, Eugenia Reyes executed a unilateral deed of sale where she sold the northern portion with an area of 32,325 square meters to
respondents for ₱1,500.00 and the southern portion consisting of 8,754 square meters to Agaton Pagaduan for ₱500.00. Later, on June 5, 1962, Eugenia
executed another deed of sale, this time conveying the entire parcel of land, including the southern portion, in respondent’s favor. Thus, TCT No. T-1221
was cancelled and in lieu thereof TCT No. T-5425 was issued in the name of respondents. On June 27, 1989, respondents subdivided the land into two
lots. The subdivision resulted in the cancellation of TCT No. T-5425 and the issuance of TCT Nos. T-37165 covering a portion with 31,418 square meters
and T-37166 covering the remaining portion with 9,661 square meters.

On July 26, 1989, petitioners instituted a complaint for reconveyance of the southern portion with an area of 8,754 square meters, with damages, against
respondents before the RTC of Olongapo City.

On June 25, 2002, the trial court rendered a decision in petitioners’ favor. Ruling that a constructive trust over the property was created in petitioners’
favor, the court below ordered respondents to reconvey the disputed southern portion and to pay attorney’s fees as well as litigation expenses to
petitioners. The dispositive portion of the decision reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered:

1. Ordering the defendants to reconvey to the plaintiffs, a portion of their property originally covered by Certificate of Title No. T-542164 now
TCT Nos. 37165 and 37166 an area equivalent to 8,754 square meters.

2. Ordering the defendant to pay plaintiffs ₱15,000.00 as attorneys fees and ₱5,000.00 for litigation expenses.

3. Defendants counterclaims are dismissed.

SO ORDERED.5

Dissatisfied with the decision, respondents appealed it to the Court of Appeals. The Court of Appeals reversed and set aside the decision of the trial court;
with the dispositive portion of the decision reading, thus:
WHEREFORE, premises considered, the appeal is granted. Accordingly, prescription having set in, the assailed June 25, 2002 Decision of the RTC is
reversed and set aside, and the Complaint for reconveyance is hereby DISMISSED.

SO ORDERED.6

The Court of Appeals ruled that while the registration of the southern portion in the name of respondents had created an implied trust in favor of Agaton
Pagaduan, petitioners, however, failed to show that they had taken possession of the said portion. Hence, the appellate court concluded that prescription
had set in, thereby precluding petitioners’ recovery of the disputed portion.

Unperturbed by the reversal of the trial court’s decision, the petitioners come to this Court via a petition for review on certiorari.7 They assert that the
Civil Code provision on double sale is controlling. They submit further that since the incontrovertible evidence on record is that they are in possession of
the southern portion, the ten (10)-year prescriptive period for actions for reconveyance should not apply to them.8 Respondents, on the other hand, aver
that the action for reconveyance has prescribed since the ten (10)-year period, which according to them has to be reckoned from the issuance of the title
in their name in 1962, has elapsed long ago.9

The Court of Appeals decision must be reversed and set aside, hence the petition succeeds.

An action for reconveyance respects the decree of registration as incontrovertible but seeks the transfer of property, which has been wrongfully or
erroneously registered in other persons' names, to its rightful and legal owners, or to those who claim to have a better right. However, contrary to the
positions of both the appellate and trial courts, no trust was created under Article 1456 of the new Civil Code which provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes. (Emphasis supplied)

The property in question did not come from the petitioners. In fact that property came from Eugenia Reyes. The title of the Ocumas can be traced back
from Eugenia Reyes to Ruperta Asuncion to the original owner Nicolas Cleto. Thus, if the respondents are holding the property in trust for anyone, it
would be Eugenia Reyes and not the petitioners.1a v v p h i 1

Moreover, as stated in Berico v. Court of Appeals,10 Article 1456 refers to actual or constructive fraud. Actual fraud consists in deception, intentionally
practiced to induce another to part with property or to surrender some legal right, and which accomplishes the end designed. Constructive fraud, on the
other hand, is a breach of legal or equitable duty which the law declares fraudulent irrespective of the moral guilt of the actor due to the tendency to
deceive others, to violate public or private confidence, or to injure public interests. The latter proceeds from a breach of duty arising out of a fiduciary or
confidential relationship. In the instant case, none of the elements of actual or constructive fraud exists. The respondents did not deceive Agaton
Pagaduan to induce the latter to part with the ownership or deliver the possession of the property to them. Moreover, no fiduciary relations existed
between the two parties.

This lack of a trust relationship does not inure to the benefit of the respondents. Despite a host of jurisprudence that states a certificate of title is
indefeasible, unassailable and binding against the whole world, it merely confirms or records title already existing and vested, and it cannot be used to
protect a usurper from the true owner, nor can it be used for the perpetration of fraud; neither does it permit one to enrich himself at the expense of
others.11

Rather, after a thorough scrutiny of the records of the instant case, the Court finds that this is a case of double sale under article 1544 of the Civil Code
which reads:

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 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 possession; and, in the absence thereof; to the
person who presents the oldest title, provided there is good faith.

Otherwise stated, where it is an immovable property that is the subject of a double sale, ownership shall be transferred: (1) to the person acquiring it who
in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default
thereof, to the person who presents the oldest title, provided there is good faith. The requirement of the law then is two-fold: acquisition in good faith
and registration in good faith.12

In this case there was a first sale by Eugenia Reyes to Agaton Pagaduan and a second sale by Eugenia Reyes to the respondents.13 For a second buyer like
the respondents to successfully invoke the second paragraph, Article 1544 of the Civil Code, it must possess good faith from the time of the sale in its
favor until the registration of the same. Respondents sorely failed to meet this requirement of good faith since they had actual knowledge of Eugenia’s
prior sale of the southern portion property to the petitioners, a fact antithetical to good faith. This cannot be denied by respondents since in the same
deed of sale that Eugenia sold them the northern portion to the respondents for ₱1,500.00, Eugenia also sold the southern portion of the land to Agaton
Pagaduan for ₱500.00.14

It is to be emphasized that the Agaton Pagaduan never parted with the ownership and possession of that portion of Lot No. 785 which he had purchased
from Eugenia Santos. Hence, the registration of the deed of sale by respondents was ineffectual and vested upon them no preferential rights to the
property in derogation of the rights of the petitioners.
Respondents had prior knowledge of the sale of the questioned portion to Agaton Pagaduan as the same deed of sale that conveyed the northern portion
to them, conveyed the southern portion to Agaton Pagaduan.15 Thus the subsequent issuance of TCT No. T-5425, to the extent that it affects the
Pagaduan’s portion, conferred no better right than the registration which was the source of the authority to issue the said title. Knowledge gained by
respondents of the first sale defeats their rights even if they were first to register the second sale. Knowledge of the first sale blackens this prior
registration with bad faith.16 Good faith must concur with the registration.17 Therefore, because the registration by the respondents was in bad faith, it
amounted to no registration at all.

As the respondents gained no rights over the land, it is petitioners who are the rightful owners, having established that their successor-in-interest Agaton
Pagaduan had purchased the property from Eugenia Reyes on November 26, 1961 and in fact took possession of the said property. The action to recover
the immovable is not barred by prescription, as it was filed a little over 27 years after the title was registered in bad faith by the Ocumas as per Article
1141 of the Civil Code.18

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated January 25, 2006 and its Resolution dated May 5, 2006 are
hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court is hereby REINSTATED.

SO ORDERED.

G.R. No. L-29972 January 26, 1976

ROSARIO CARBONELL, petitioner,

vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON INFANTE, respondents.

MAKASIAR, J.

Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five) dated October 30, 1968, reversing its decision of November 2,
1967 (Fifth Division), and its resolution of December 6, 1968 denying petitioner's motion for reconsideration.

The dispositive part of the challenged resolution reads:

Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is hereby granted and the decision of
November 2, 1967, is hereby annulled and set aside. Another judgement shall be entered affirming in toto that of the court a
quo, dated January 20, 1965, which dismisses the plaintiff's complaint and defendant's counterclaim.

Without costs.

The facts of the case as follows:

Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the owner of the parcel of land herein involve with improvements
situated at 179 V. Agan St., San Juan, Rizal, having an area of some one hundred ninety-five (195) square meters, more or less, covered by TCT No. 5040
and subject to mortgage in favor of the Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor of
respondent Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.

Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot from Poncio (Poncio's Answer, p. 38, rec. on appeal).

Respondent Poncio, unable to keep up with the installments due on the mortgage, approached petitioner one day and offered to sell to the latter the said
lot, excluding the house wherein respondent lived. Petitioner accepted the offer and proposed the price of P9.50 per square meter. Respondent Poncio,
after having secured the consent of his wife and parents, accepted the price proposed by petitioner, on the condition that from the purchase price would
come the money to be paid to the bank.

Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the consent of the President thereof for her to pay the
arrears on the mortgage and to continue the payment of the installments as they fall due. The amount in arrears reached a total sum of P247.26. But
because respondent Poncio had previously told her that the money, needed was only P200.00, only the latter amount was brought by petitioner
constraining respondent Jose Poncio to withdraw the sum of P47.00 from his bank deposit with Republic Savings Bank. But the next day, petitioner
refunded to Poncio the sum of P47.00.

On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and executed a document in the Batanes dialect, which,
translated into English, reads:

CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM

JOSE PONCIO

Beginning today January 27, 1955, Jose Poncio can start living on the lot sold by him to me, Rosario Carbonell, until after one year
during which time he will not pa anything. Then if after said one can he could not find an place where to move his house, he could
still continue occupying the site but he should pay a rent that man, be agreed.

(Sgd) JOSE PONCIO

(Sgd.) ROSARIO CARBONELL
(Sgd) CONSTANCIO MEONADA
Witness

(Pp. 6-7 rec. on appeal).

Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of sale, which she brought to respondent
Poncio together with the amount of some P400.00, the balance she still had to pay in addition to her assuming the mortgaged obligation to Republic
Savings Bank.

Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he could not proceed any more with the sale, because he had
already given the lot to respondent Emma Infants; and that he could not withdraw from his deal with respondent Mrs. Infante, even if he were to go to
jail. Petitioner then sought to contact respondent Mrs. Infante but the latter refused to see her.

On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.

Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the land in question with the Office of the Register of Deeds
of Rizal. Atty. Garcia actually sent a letter of inquiry to the Register of Deeds and demand letters to private respondents Jose Poncio and Emma Infante.

In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante improved her offer and he agreed to sell the land and its
improvements to her for P3,535.00" (pp. 38-40, ROA).

In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed bound himself to sell to his corespondent Emma Infante, the
property for the sum of P2,357.52, with respondent Emma Infante still assuming the existing mortgage debt in favor of Republic Savings Bank in the
amount of P1,177.48. Emma Infante lives just behind the houses of Poncio and Rosario Carbonell.

On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of respondent Mrs. Infante in the total sum of P3,554.00 and on
the same date, the latter paid Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot was eventually discharged.

Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty. Garcia prepared an adverse claim for petitioner, who
signed and swore to an registered the same on February 8, 1955.

The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955. As a consequence thereof, a Transfer Certificate of Title
was issued to her but with the annotation of the adverse claim of petitioner Rosario Carbonell.

Respondent Emma Infante took immediate possession of the lot involved, covered the same with 500 cubic meters of garden soil and built therein a wall
and gate, spending the sum of P1,500.00. She further contracted the services of an architect to build a house; but the construction of the same started
only in 1959 — years after the litigation actually began and during its pendency. Respondent Mrs. Infante spent for the house the total amount of
P11,929.00.

On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint against private respondents, praying that she be declared
the lawful owner of the questioned parcel of land; that the subsequent sale to respondents Ramon R. Infante and Emma L. Infante be declared null and
void, and that respondent Jose Poncio be ordered to execute the corresponding deed of conveyance of said land in her favor and for damages and
attorney's fees (pp. 1-7, rec. on appeal in the C.A.).

Respondents first moved to dismiss the complaint on the ground, among others, that petitioner's claim is unenforceable under the Statute of Frauds, the
alleged sale in her favor not being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.); and when said motion was denied without
prejudice to passing on the question raised therein when the case would be tried on the merits (p. 17, ROA in the C.A.), respondents filed separate
answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).

During the trial, when petitioner started presenting evidence of the sale of the land in question to her by respondent Poncio, part of which evidence was
the agreement written in the Batanes dialect aforementioned, respondent Infantes objected to the presentation by petitioner of parole evidence to prove
the alleged sale between her and respondent Poncio. In its order of April 26, 1966, the trial court sustained the objection and dismissed the complaint on
the ground that the memorandum presented by petitioner to prove said sale does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).

From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-11231) which ruled in a decision dated May 12, 1958, that the
Statute of Frauds, being applicable only to executory contracts, does not apply to the alleged sale between petitioner and respondent Poncio, which
petitioner claimed to have been partially performed, so that petitioner is entitled to establish by parole evidence "the truth of this allegation, as well as
the contract itself." The order appealed from was thus reversed, and the case remanded to the court a quo for further proceedings (pp. 26-49, ROA in the
C.A.).

After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the second sale by respondent Jose Poncio to his co-respondents
Ramon Infante and Emma Infante of the land in question null and void and ordering respondent Poncio to execute the proper deed of conveyance of said
land in favor of petitioner after compliance by the latter of her covenants under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.).

On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial to adduce evidence for the proper implementation of the
court's decision in case it would be affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by petitioner for being premature (pp.
61-64, ROA in the C.A.). Before their motion for re-trial could be resolved, respondent Infantes, this time through their former counsel, filed another
motion for new trial, claiming that the decision of the trial court is contrary to the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was
also opposed by petitioner (pp. 78-89, ROA in the C.A.).

The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the respondents introduced additional evidence consisting
principally of the cost of improvements they introduced on the land in question (p. 9, ROA in the C.A.).

After the re-hearing, the trial court rendered a decision, reversing its decision of December 5, 1962 on the ground that the claim of the respondents was
superior to the claim of petitioner, and dismissing the complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner Rosario Carbonell appealed
to the respondent Court of Appeals (p. 96, ROA in the C.A.).

On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking
through Justice Magno Gatmaitan), rendered judgment reversing the decision of the trial court, declaring petitioner therein, to have a superior right to
the land in question, and condemning the defendant Infantes to reconvey to petitioner after her reimbursement to them of the sum of P3,000.00 plus
legal interest, the land in question and all its improvements (Appendix "A" of Petition).

Respondent Infantes sought reconsideration of said decision and acting on the motion for reconsideration, the Appellate Court, three Justices (Villamor,
Esguerra and Nolasco) of Special Division of Five, granted said motion, annulled and set aside its decision of November 2, 1967, and entered another
judgment affirming in toto the decision of the court a quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).

Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of Five, which motion was denied by Minute Resolution of
December 6, 1968 (but with Justices Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition].

Hence, this appeal by certiorari.

Article 1544, New Civil Code, which is decisive of this case, recites:

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 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).

It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of said Article
1544.
Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in good faith of personal or real
property, the second paragraph directs that ownership of immovable property should be recognized in favor of one "who in good faith first recorded" his
right. Under the first and third paragraph, good faith must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405;
Soriano, et al. vs. Magale, et al., 8 SCRA 489).

If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case at bar, prior registration in good faith is a
pre-condition to superior title.

When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of Poncio was still in his name solely
encumbered by bank mortgage duly annotated thereon. Carbonell was not aware — and she could not have been aware — of any sale of Infante as there
was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist
when she recorded her adverse claim four (4) days prior to the registration of Infantes's deed of sale. Carbonell's good faith did not cease after Poncio
told her on January 31, 1955 of his second sale of the same lot to Infante. Because of that information, Carbonell wanted an audience with Infante, which
desire underscores Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of a good Christian and good neighbor, Infante
snubbed Carbonell like a leper and refused to see her. So Carbonell did the next best thing to protect her right — she registered her adversed claim on
February 8, 1955. Under the circumstances, this recording of her adverse claim should be deemed to have been done in good faith and should emphasize
Infante's bad faith when she registered her deed of sale four (4) days later on February 12, 1955.

Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts, the vital significance and evidenciary
effect of which the respondent Court of Appeals either overlooked of failed to appreciate:

(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he sold the lot to Infante but several days
before Infante registered her deed of sale. This indicates that Infante knew — from Poncio and from the bank — of the prior sale of the lot by Poncio to
Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only
mean that she did not want to listen to Carbonell's story that she (Carbonell) had previously bought the lot from Poncio.

(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving deposit passbook — Exhibit "1" — Infantes] and Poncio's copy of
the mortgage contract, when Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed the balance of his mortgaged
indebtedness to the bank, which in the normal course of business must have necessarily informed Infante about the said assumption by Carbonell of the
mortgage indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of Poncio to the Bank. Infante naturally must have demanded
from Poncio the delivery to her of his mortgage passbook as well as Poncio's mortgage contract so that the fact of full payment of his bank mortgage will
be entered therein; and Poncio, as well as the bank, must have inevitably informed her that said mortgage passbook could not be given to her because it
was already delivered to Carbonell.

If Poncio was still in possession of the mortgage passbook and his copy of the mortgage contract at the time he executed a deed of sale in favor of the
Infantes and when the Infantes redeemed his mortgage indebtedness from the bank, Poncio would have surrendered his mortgage passbook and his copy
of the mortgage contract to the Infantes, who could have presented the same as exhibits during the trial, in much the same way that the Infantes were
able to present as evidence Exhibit "1" — Infantes, Poncio's savings deposit passbook, of which Poncio necessarily remained in possession as the said
deposit passbook was never involved in the contract of sale with assumption of mortgage. Said savings deposit passbook merely proves that Poncio had
to withdraw P47.26, which amount was tided to the sum of P200.00 paid by Carbonell for Poncio's amortization arrearages in favor of the bank on
January 27, 1955; because Carbonell on that day brought with her only P200.00, as Poncio told her that was the amount of his arrearages to the bank.
But the next day Carbonell refunded to Poncio the sum of P47.26.

(3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage passbook was already in possession of
Carbonell, should have compelled Infante to inquire from Poncio why he was no longer in possession of the mortgage passbook and from Carbonell why
she was in possession of the same (Paglago, et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did not
bother anymore to make such injury , w because in the ordinary course of business the bank must have told her that Poncio already sold the lot to
Carbonell who thereby assumed the mortgage indebtedness of Poncio and to whom Poncio delivered his mortgage passbook. Hoping to give a semblance
of truth to her pretended good faith, Infante snubbed Carbonell's request to talk to her about the prior sale to her b Poncio of the lot. As aforestated, this
is not the attitude expected of a good neighbor imbued with Christian charity and good will as well as a clear conscience.

(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly annotated on Poncio's title, four [4] days before Infante registered
on February 12, 1955 her deed of sale executed on February 2, 1955. Here she was again on notice of the prior sale to Carbonell. Such registration of
adverse claim is valid and effective (Jovellanos vs. Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).

(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance, he alleged that both Mrs. Infante and Mrs. Carbonell
offered to buy the lot at P15.00 per square meter, which offers he rejected as he believed that his lot is worth at least P20.00 per square meter. It is
therefore logical to presume that Infante was told by Poncio and consequently knew of the offer of Carbonell which fact likewise should have put her on
her guard and should have compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell.

As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante
and Emma Infante (1-11231, May 12, 1958), Poncio alleged in his answer:

... that he had consistently turned down several offers, made by plaintiff, to buy the land in question, at P15 a square meter, for he
believes that it is worth not less than P20 a square meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square meter;
that, on or about January 27, 1955, Poncio was advised by plaintiff that should she decide to buy the property at P20 a square meter,
she would allow him to remain in the property for one year; that plaintiff then induced Poncio to sign a document, copy of which if
probably the one appended to the second amended complaint; that Poncio signed it 'relying upon the statement of the plaintiff that
the document was a permit for him to remain in the premises in the event defendant decided to sell the property to the plaintiff at
P20.00 a square meter'; that on January 30, 1955, Mrs. Infante improved her offer and agreed to sell the land and its
improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell his property, worth at least P4,000, for the paltry sum
P1,177.48, the amount of his obligation to the Republic Saving s Bank; and that plaintiff's action is barred by the Statute of Frauds. ...
(pp. 38-40, ROA, emphasis supplied).
II

EXISTENCE OF THE PRIOR SALE TO CARBONELL

DULY ESTABLISHED

(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private document Exhibit "A" executed by Poncio and Carbonell
and witnessed by Constancio Meonada captioned "Contract for One-half Lot which I Bought from Jose Poncio," was not such a memorandum in writing
within the purview of the Statute of Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when he stated that "the
memorandum in question merely states that Poncio is allowed to stay in the property which he had sold to the plaintiff. There is no mention of the
reconsideration, a description of the property and such other essential elements of the contract of sale. There is nothing in the memorandum which
would tend to show even in the slightest manner that it was intended to be an evidence of contract sale. On the contrary, from the terms of the
memorandum, it tends to show that the sale of the property in favor of the plaintiff is already an accomplished act. By the very contents of the
memorandum itself, it cannot therefore, be considered to be the memorandum which would show that a sale has been made by Poncio in favor of the
plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial court, to repeat the said memorandum states "that Poncio is allowed to stay in the
property which he had sold to the plaintiff ..., it tends to show that the sale of the property in favor of the plaintiff is already an accomplished act..."

(2) When the said order was appealed to the Supreme Court by Carbonell in the previous case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and
Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a unanimous Court, reversed the aforesaid order of the trial
court dismissing the complaint, holding that because the complaint alleges and the plaintiff claims that the contract of sale was partly performed, the
same is removed from the application of the Statute of Frauds and Carbonell should be allowed to establish by parol evidence the truth of her allegation
of partial performance of the contract of sale, and further stated:

Apart from the foregoing, there are in the case at bar several circumstances indicating that plaintiff's claim might not be entirely
devoid of factual basis. Thus, for instance, Poncio admitted in his answer that plaintiff had offered several times to purchase his
land.

Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect, which, according to plaintiff's
uncontradicted evidence, is the one spoken by Poncio, he being a native of said region. Exhibit A states that Poncio would stay in
the land sold by him to plaintiff for one year, from January 27, 1955, free of charge, and that, if he cannot find a place where to
transfer his house thereon, he may remain upon. Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit
A under the belief that it "was a permit for him to remain in the premises in the" that "he decided to sell the property" to the
plaintiff at P20 a sq. m." is, on its face, somewhat difficult to believe. Indeed, if he had not decided as yet to sell the land to plaintiff,
who had never increased her offer of P15 a square meter, there was no reason for Poncio to get said permit from her. Upon the
other hand, if plaintiff intended to mislead Poncio, she would have caused Exhibit A to be drafted, probably, in English , instead of
taking the trouble of seeing to it that it was written precisely in his native dialect, the Batanes. Moreover, Poncio's signature on
Exhibit A suggests that he is neither illiterate nor so ignorant as to sign document without reading its contents, apart from the fact
that Meonada had read Exhibit A to him and given him a copy thereof, before he signed thereon, according to Meonada's
uncontradicted testimony.

Then, also, defendants say in their brief:

The only allegation in plaintiff's complaint that bears any relation to her claim that there has been partial
performance of the supposed contract of sale, is the notation of the sum of P247.26 in the bank book of
defendant Jose Poncio. The noting or jotting down of the sum of P247.26 in the bank book of Jose Poncio does
not prove the fact that the said amount was the purchase price of the property in question. For all we knew, the
sum of P247.26 which plaintiff claims to have paid to the Republic Savings Bank for the account of the
defendant, assuming that the money paid to the Republic Savings Bank came from the plaintiff, was the result of
some usurious loan or accomodation, rather than earnest money or part payment of the land. Neither is it
competent or satisfactory evidence to prove the conveyance of the land in question the fact that the bank book
account of Jose Poncio happens to be in the possession of the plaintiff. (Defendants-Appellees' brief, pp. 25-26).

How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether there is any relation between the
P247.26 entry therein and the partial payment of P247.26 allegedly made by plaintiff to Poncio on account of the price of his land,
if we do not allow the plaintiff to explain it on the witness stand? Without expressing any opinion on the merits of plaintiff's claim,
it is clear, therefore, that she is entitled , legally as well as from the viewpoint of equity, to an opportunity to introduce parol
evidence in support of the allegations of her second amended complaint. (pp. 46-49, ROA, emphasis supplied).

(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the Infantes and ordering Poncio to execute a deed of conveyance
in favor of Carbonell, the trial judge found:

... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that the sale of the parcel of land in
question by the defendant Poncio in favor of the plaintiff was covered therein and that the said Exh. "a' was also executed to allow
the defendant to continue staying in the premises for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him to
me' and having been written originally in a dialect well understood by the defendant Poncio, he signed the said Exh. 'A' with a full
knowledge and consciousness of the terms and consequences thereof. This therefore, corroborates the testimony of the plaintiff
Carbonell that the sale of the land was made by Poncio. It is further pointed out that there was a partial performance of the verbal
sale executed by Poncio in favor of the plaintiff, when the latter paid P247.26 to the Republic Savings Bank on account of Poncio's
mortgage indebtedness. Finally, the possession by the plaintiff of the defendant Poncio's passbook of the Republic Savings Bank
also adds credibility to her testimony. The defendant contends on the other hand that the testimony of the plaintiff, as well as her
witnesses, regarding the sale of the land made by Poncio in favor of the plaintiff is inadmissible under the provision of the Statute of
Fraud based on the argument that the note Exh. "A" is not the note or memorandum referred to in the to in the Statute of Fraud. The
defendants argue that Exh. "A" fails to comply with the requirements of the Statute of Fraud to qualify it as the note or
 memorandum referred to therein and open the way for the presentation of parole evidence to prove the fact contained in the note or
memorandum. The defendant argues that there is even no description of the lot referred to in the note, especially when the note
refers to only one half lot. With respect to the latter argument of the Exhibit 'A', the court has arrived at the conclusion that there is
a sufficient description of the lot referred to in Exh. 'A' as none other than the parcel of land occupied by the defendant Poncio and
where he has his improvements erected. The Identity of the parcel of land involved herein is sufficiently established by the contents
of the note Exh. "A". For a while, this court had that similar impression but after a more and thorough consideration of the context in
Exh. 'A' and for the reasons stated above, the Court has arrived at the conclusion stated earlier (pp. 52-54, ROA, emphasis supplied).

(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965 another decision dismissing the complaint, although he found

1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel of land with an area of 195 square
meters, more or less, covered by TCT No. 5040 of the Province of Rizal, located at San Juan del Monte, Rizal, for the price of P6.50
per square meter;

2. That the purchase made by the plaintiff was not reduced to writing except for a short note or memorandum Exh. A, which also
recited that the defendant Poncio would be allowed to continue his stay in the premises, among other things, ... (pp. 91-92, ROA,
emphasis supplied).

From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that his legal conclusion is that it is not sufficient to transfer
ownership (pp. 93-94, ROA).

(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals composed of Justices Esguerra (now Associate Justice of the
Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:

... the testimony of Rosario Carbonell not having at all been attempted to be disproved by defendants, particularly Jose Poncio,
and corroborated as it is by the private document in Batanes dialect, Exhibit A, the testimony being to the effect that between
herself and Jose there had been celebrated a sale of the property excluding the house for the price of P9.50 per square meter, so
much so that on faith of that, Rosario had advanced the sum of P247.26 and binding herself to pay unto Jose the balance of the
purchase price after deducting the indebtedness to the Bank and since the wording of Exhibit A, the private document goes so far
as to describe their transaction as one of sale, already consummated between them, note the part tense used in the phrase, "the lot
sold by him to me" and going so far even as to state that from that day onwards, vendor would continue to live therein, for one year,
'during which time he will not pay anything' this can only mean that between Rosario and Jose, there had been a true contract of
sale, consummated by delivery constitutum possession, Art. 1500, New Civil Code;vendor's possession having become converted
from then on, as a mere tenant of vendee, with the special privilege of not paying rental for one year, — it is true that the sale by
Jose Poncio to Rosario Carbonell corroborated documentarily only by Exhibit A could not have been registered at all, but it was a
valid contract nonetheless, since under our law, a contract sale is consensual, perfected by mere consent, Couto v. Cortes, 8 Phil
459, so much so that under the New Civil Code, while a sale of an immovable is ordered to be reduced to a public document, Art.
1358, that mandate does not render an oral sale of realty invalid, but merely incapable of proof, where still executory and action is
brought and resisted for its performance, 1403, par. 2, 3; but where already wholly or partly executed or where even if not yet, it is
evidenced by a memorandum, in any case where evidence to further demonstrate is presented and admitted as the case was here,
then the oral sale becomes perfectly good, and becomes a good cause of action not only to reduce it to the form of a public
document, but even to enforce the contract in its entirety, Art. 1357; and thus it is that what we now have is a case wherein on the
one hand Rosario Carbonell has proved that she had an anterior sale, celebrated in her favor on 27 January, 1955, Exhibit
A, annotated as an adverse claim on 8 February, 1955, and on other, a sale is due form in favor of Emma L. Infante on 2 February,
1955, Exhibit 3-Infante, and registered in due form with title unto her issued on 12 February, 1955; the vital question must now come
on which of these two sales should prevail; ... (pp. 74-76, rec., emphasis supplied).

(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice Esguerra (now a member of this Court), concurred in by Justices
Villamor and Nolasco, constituting the majority of a Special Division of Five, the Court of Appeals, upon motion of the Infantes, while reversing the
decision of November 2, 1967 and affirming the decision of the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence
and genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did not consider the same as satisfying "the essential
elements of a contract of sale," because it "neither specifically describes the property and its boundaries, nor mention its certificate of title number, nor
states the price certain to be paid, or contrary to the express mandate of Articles 1458 and 1475 of the Civil Code.

(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision of November 2, 1967 as well as his findings of facts
therein, and reiterated that the private memorandum Exhibit "A", is a perfected sale, as a sale is consensual and consummated by mere consent, and is
binding on and effective between the parties. This statement of the principle is correct [pp. 89-92, rec.].

III

ADEQUATE CONSIDERATION OR PRICE FOR THE SALE

IN FAVOR OF CARBONELL

It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank for failure on the part of Poncio to pay the amortizations
thereon. To forestall the foreclosure and at the same time to realize some money from his mortgaged lot, Poncio agreed to sell the same to Carbonell at
P9.50 per square meter, on condition that Carbonell [1] should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in the amount of P247.26 to
the bank; and [2] should assume his mortgage indebtedness. The bank president agreed to the said sale with assumption of mortgage in favor of
Carbonell an Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank because that was the
amount that Poncio told her as his arrearages and Poncio advanced the sum of P47.26, which amount was refunded to him by Carbonell the following
day. This conveyance was confirmed that same day, January 27, 1955, by the private document, Exhibit "A", which was prepared in the Batanes dialect by
the witness Constancio Meonada, who is also from Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given the right to continue staying on the land without paying any rental for one year,
after which he should pay rent if he could not still find a place to transfer his house. All these terms are part of the consideration of the sale to Carbonell.

It is evident therefore that there was ample consideration, and not merely the sum of P200.00, for the sale of Poncio to Carbonell of the lot in question.

But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to Carbonell and told Carbonell, who confronted him
about it, that he would not withdraw from his deal with Infante even if he is sent to jail The victim, therefore, "of injustice and outrage is the widow
Carbonell and not the Infantes, who without moral compunction exploited the greed and treacherous nature of Poncio, who, for love of money and
without remorse of conscience, dishonored his own plighted word to Carbonell, his own cousin.

Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante from the time she enticed Poncio to dishonor his contract
with Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a much higher price than the price for which he sold the same to Carbonell.
Being guilty of bad faith, both in taking physical possession of the lot and in recording their deed of sale, the Infantes cannot recover the value of the
improvements they introduced in the lot. And after the filing by Carbonell of the complaint in June, 1955, the Infantes had less justification to erect a
building thereon since their title to said lot is seriously disputed by Carbonell on the basis of a prior sale to her.

With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief that it was a permit for him to remain in the premises in
ease he decides to sell the property to Carbonell at P20.00 per square meter, the observation of the Supreme Court through Mr. Chief Justice Concepcion
in G.R. No. L-11231, supra, bears repeating:

... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the belief that it 'was a permit for him to
remain in the premises in the event that 'he decided to sell the property' to the plaintiff at P20.00 a sq. m is, on its face, somewhat
difficult to believe. Indeed, if he had not decided as yet to sell that land to plaintiff, who had never increased her offer of P15 a square
meter, there as no reason for Poncio to get said permit from her. Upon the they if plaintiff intended to mislead Poncio, she would
have Exhibit A to be drafted, probably, in English, instead of taking the trouble of seeing to it that it was written precisely in his
native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign a
document without reading its contents, apart from the fact that Meonada had read Exhibit A to him-and given him a copy thereof,
before he signed thereon, according to Meonada's uncontradicted testimony. (pp. 46-47, ROA).

As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated in his dissent from the resolution of the majority of the
Special Division. of Five on October 30, 1968, Exhibit A, the private document in the Batanes dialect, is a valid contract of sale between the parties, since
sale is a consensual contract and is perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all between the parties and
accords to the vendee the right to compel the vendor to execute the proper public document As a matter of fact, Exhibit A, while merely a private
document, can be fully or partially performed, to it from the operation of the statute of frauds. Being a all consensual contract, Exhibit A effectively
transferred the possession of the lot to the vendee Carbonell by constitutum possessorium (Article 1500, New Civil Code); because thereunder the vendor
Poncio continued to retain physical possession of the lot as tenant of the vendee and no longer as knew thereof. More than just the signing of Exhibit A
by Poncio and Carbonell with Constancio Meonada as witness to fact the contract of sale, the transition was further confirmed when Poncio agreed to the
actual payment by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and by his consequent delivery of his own mortgage passbook
to Carbonell. If he remained owner and mortgagor, Poncio would not have surrendered his mortgage passbook to' Carbonell.

IV

IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT "A"

The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as the subject matter of the sale, was correctly disposed of in
the first decision of the trial court of December 5, 1962, thus: "The defendant argues that there is even no description of the lot referred to in the note (or
memorandum), especially when the note refers to only one-half lot. With respect to the latter argument of the defendant, plaintiff points out that one-
half lot was mentioned in Exhibit 'A' because the original description carried in the title states that it was formerly part of a bigger lot and only segregated
later. The explanation is tenable, in (sic) considering the time value of the contents of Exh. 'A', the court has arrived at the conclusion that there is
sufficient description of the lot referred to in Exh. As none other than the parcel of lot occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land involved herein is sufficiently established by the contents of the note Exh. 'A'. For a while, this
court had that similar impression but after a more and through consideration of the context in Exh. 'A' and for the reasons stated above, the court has
arrived to (sic) the conclusion stated earlier" (pp. 53-54, ROA).

Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the lot of his cousin Carbonell and likewise mortgaged by him
to the Republic Savings Bank. The transaction therefore between Poncio and Carbonell can only refer and does refer to the lot involved herein. If Poncio
had another lot to remove his house, Exhibit A would not have stipulated to allow him to stay in the sold lot without paying any rent for one year and
thereafter to pay rental in case he cannot find another place to transfer his house.

While petitioner Carbonell has the superior title to the lot, she must however refund to respondents Infantes the amount of P1,500.00, which the
Infantes paid to the Republic Savings Bank to redeem the mortgage.

It appearing that the Infantes are possessors in bad faith, their rights to the improvements they introduced op the disputed lot are governed by Articles
546 and 547 of the New Civil Code. Their expenses consisting of P1,500.00 for draining the property, filling it with 500 cubic meters of garden soil,
building a wall around it and installing a gate and P11,929.00 for erecting a b ' bungalow thereon, are useful expenditures, for they add to the value of the
property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45).

Under the second paragraph of Article 546, the possessor in good faith can retain the useful improvements unless the person who defeated him in his
possession refunds him the amount of such useful expenses or pay him the increased value the land may have acquired by reason thereof. Under Article
547, the possessor in good faith has also the right to remove the useful improvements if such removal can be done without damage to the land, unless the
person with the superior right elects to pay for the useful improvements or reimburse the expenses therefor under paragraph 2 of Article 546. These
provisions seem to imply that the possessor in bad faith has neither the right of retention of useful improvements nor the right to a refund for useful
expenses.

But, if the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury or mere pleasure only by paying the
value thereof at the time he enters into possession (Article 549 NCC), as a matter of equity, the Infantes, although possessors in bad faith, should be
allowed to remove the aforesaid improvements, unless petitioner Carbonell chooses to pay for their value at the time the Infantes introduced said useful
improvements in 1955 and 1959. The Infantes cannot claim reimbursement for the current value of the said useful improvements; because they have
been enjoying such improvements for about two decades without paying any rent on the land and during which period herein petitioner Carbonell was
deprived of its possession and use.

WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED;
PETITIONER ROSARIO CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS HEREBY
DIRECTED TO REIMBURSE TO PRIVATE RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00)
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO
CANCEL TRANSFER CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES COVERING THE DISPUTED
LOT, WHICH CANCELLED TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER
CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER TO THE
INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00).

PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE LOT WITHIN THREE (3)
MONTHS FROM THE FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL ELECTS TO ACQUIRE THE SAME AND
PAYS THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00) WITHIN THREE (3)
MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE
AFORESTATED PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN
WHICH THE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE
EXPIRATION OF THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL IMPROVEMENTS.

WITH COSTS AGAINST PRIVATE RESPONDENTS.

Castro, C.J, Aquino and Martin, JJ., concur.

G.R. No. 194846 June 19, 2013
*HOSPICIO D. ROSAROSO, ANTONIO D. ROSAROSO, MANUEL D. ROSAROSO, ALGERICA D. ROSAROSO, and CLEOFE R.
LABINDAO, Petitioners,
vs.
LUCILA LABORTE SORIA, SPOUSES HAM SOLUTAN and **LAILA SOLUTAN, and MERIDIAN REALTY
CORPORATION, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the December 4, 2009 Decision 1 of the Court of Appeals (CA). in
CA G.R. CV No. 00351, which reversed and set aside the July 30, 2004 Decision 2 of the Regional Trial Court, Branch 8, 7th Judicial Region, Cebu City
(RTC), in Civil Case No. CEB-16957, an action for declaration of nullity of documents.

The Facts

Spouses Luis Rosaroso (Luis) and Honorata Duazo (Honorata) acquired several real properties in Daan Bantayan, Cebu City, including the subject
properties. The couple had nine (9) children namely: Hospicio, Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and Angelica. On April 25,
1952, Honorata died. Later on, Luis married Lourdes Pastor Rosaroso (Lourdes).

On January 16, 1995, a complaint for Declaration of Nullity of Documents with Damages was filed by Luis, as one of the plaintiffs, against his daughter,
Lucila R. Soria (Lucila); Lucila’s daughter, Laila S. Solutan (Laila); and Meridian Realty Corporation (Meridian). Due to Luis’ untimely death, however,
an amended complaint was filed on January 6, 1996, with the spouse of Laila, Ham Solutan (Ham); and Luis’ second wife, Lourdes, included as
defendants.3

In the Amended Complaint, it was alleged by petitioners Hospicio D. Rosaroso, Antonio D. Rosaroso (Antonio), Angelica D. Rosaroso (Angelica), and
Cleofe R. Labindao (petitioners) that on November 4, 1991, Luis, with the full knowledge and consent of his second wife, Lourdes, executed the Deed of
Absolute Sale4 (First Sale) covering the properties with Transfer Certificate of Title (TCT) No. 31852 (Lot No. 8); TCT. No. 11155 (Lot 19); TCT No. 10885
(Lot No. 22); TCT No. 10886 (Lot No. 23); and Lot Nos. 5665 and 7967, all located at Daanbantayan, Cebu, in their favor.5

They also alleged that, despite the fact that the said properties had already been sold to them, respondent Laila, in conspiracy with her mother, Lucila,
obtained the Special Power of Attorney (SPA),6 dated April 3, 1993, from Luis (First SPA); that Luis was then sick, infirm, blind, and of unsound mind;
that Lucila and Laila accomplished this by affixing Luis’ thumb mark on the SPA which purportedly authorized Laila to sell and convey, among others,
Lot Nos. 8, 22 and 23, which had already been sold to them; and that on the strength of another SPA 7 by Luis, dated July 21, 1993 (Second SPA),
respondents Laila and Ham mortgaged Lot No. 19 to Vital Lending Investors, Inc. for and in consideration of the amount of ₱150,000.00 with the
concurrence of Lourdes.8

Petitioners further averred that a second sale took place on August 23, 1994, when the respondents made Luis sign the Deed of Absolute Sale9 conveying
to Meridian three (3) parcels of residential land for ₱960,500.00 (Second Sale); that Meridian was in bad faith when it did not make any inquiry as to
who were the occupants and owners of said lots; and that if Meridian had only investigated, it would have been informed as to the true status of the
subject properties and would have desisted in pursuing their acquisition.

Petitioners, thus, prayed that they be awarded moral damages, exemplary damages, attorney’s fees, actual damages, and litigation expenses and that the
two SPAs and the deed of sale in favor of Meridian be declared null and void ab initio.10

On their part, respondents Lucila and Laila contested the First Sale in favor of petitioners. They submitted that even assuming that it was valid,
petitioners were estopped from questioning the Second Sale in favor of Meridian because they failed not only in effecting the necessary transfer of the
title, but also in annotating their interests on the titles of the questioned properties. With respect to the assailed SPAs and the deed of absolute sale
executed by Luis, they claimed that the documents were valid because he was conscious and of sound mind and body when he executed them. In fact, it
was Luis together with his wife who received the check payment issued by Meridian where a big part of it was used to foot his hospital and medical
expenses.11

Respondent Meridian, in its Answer with Compulsory Counterclaim, averred that Luis was fully aware of the conveyances he made. In fact, Sophia
Sanchez (Sanchez), Vice-President of the corporation, personally witnessed Luis affix his thumb mark on the deed of sale in its favor. As to petitioners’
contention that Meridian acted in bad faith when it did not endeavor to make some inquiries as to the status of the properties in question, it countered
that before purchasing the properties, it checked the titles of the said lots with the Register of Deeds of Cebu and discovered therein that the First Sale
purportedly executed in favor of the plaintiffs was not registered with the said Register of Deeds. Finally, it argued that the suit against it was filed in bad
faith.12

On her part, Lourdes posited that her signature as well as that of Luis appearing on the deed of sale in favor of petitioners, was obtained through fraud,
deceit and trickery. She explained that they signed the prepared deed out of pity because petitioners told them that it was necessary for a loan
application. In fact, there was no consideration involved in the First Sale. With respect to the Second Sale, she never encouraged the same and neither
did she participate in it. It was purely her husband’s own volition that the Second Sale materialized. She, however, affirmed that she received Meridian’s
payment on behalf of her husband who was then bedridden.13

RTC Ruling

After the case was submitted for decision, the RTC ruled in favor of petitioners. It held that when Luis executed the second deed of sale in favor of
Meridian, he was no longer the owner of Lot Nos. 19, 22 and 23 as he had already sold them to his children by his first marriage. In fact, the subject
properties had already been delivered to the vendees who had been living there since birth and so had been in actual possession of the said properties.
The trial court stated that although the deed of sale was not registered, this fact was not prejudicial to their interest. It was of the view that the actual
registration of the deed of sale was not necessary to render a contract valid and effective because where the vendor delivered the possession of the parcel
of land to the vendee and no superior rights of third persons had intervened, the efficacy of said deed was not destroyed. In other words, Luis lost his
right to dispose of the said properties to Meridian from the time he executed the first deed of sale in favor of petitioners. The same held true with his
alleged sale of Lot 8 to Lucila Soria.14 Specifically, the dispositive portion of the RTC decision reads:

IN VIEW OF THE FOREGOING, the Court finds that a preponderance of evidence exists in favor of the plaintiffs and against the defendants. Judgment
is hereby rendered:

a. Declaring that the Special Power of Attorney, Exhibit "K," for the plaintiffs and Exhibit "3" for the defendants null and void including all
transactions subsequent thereto and all proceedings arising therefrom;

b. Declaring the Deed of Sale marked as Exhibit "E" valid and binding;

c. Declaring the Deed of Absolute Sale of Three (3) Parcels of Residential Land marked as Exhibit "F" null and void from the beginning;

d. Declaring the Deed of Sale, Exhibit "16" (Solutan) or Exhibit "FF," null and void from the beginning;

e. Declaring the vendees named in the Deed of Sale marked as Exhibit "E" to be the lawful, exclusive and absolute owners and possessors of
Lots Nos. 8, 19, 22, and 23;

f. Ordering the defendants to pay jointly and severally each plaintiff ₱50,000.00 as moral damages; and

g. Ordering the defendants to pay plaintiffs ₱50,000.00 as attorney’s fees; and ₱20,000.00 as litigation expenses.

The crossclaim made by defendant Meridian Realty Corporation against defendants Soria and Solutan is ordered dismissed for lack of sufficient
evidentiary basis.

SO ORDERED."15

Ruling of the Court of Appeals

On appeal, the CA reversed and set aside the RTC decision. The CA ruled that the first deed of sale in favor of petitioners was void because they failed to
prove that they indeed tendered a consideration for the four (4) parcels of land. It relied on the testimony of Lourdes that petitioners did not pay her
husband. The price or consideration for the sale was simulated to make it appear that payment had been tendered when in fact no payment was made at
all.16

With respect to the validity of the Second Sale, the CA stated that it was valid because the documents were notarized and, as such, they enjoyed the
presumption of regularity. Although petitioners alleged that Luis was manipulated into signing the SPAs, the CA opined that evidence was wanting in
this regard. Dr. Arlene Letigio Pesquira, the attending physician of Luis, testified that while the latter was physically infirmed, he was of sound mind
when he executed the first SPA.17

With regard to petitioners’ assertion that the First SPA was revoked by Luis when he executed the affidavit, dated November 24, 1994, the CA ruled that
the Second Sale remained valid. The Second Sale was transacted on August 23, 1994, before the First SPA was revoked. In other words, when the Second
Sale was consummated, the First SPA was still valid and subsisting. Thus, "Meridian had all the reasons to rely on the said SPA during the time of its
validity until the time of its actual filing with the Register of Deeds considering that constructive notice of the revocation of the SPA only came into effect
upon the filing of the Adverse Claim and the aforementioned Letters addressed to the Register of Deeds on 17 December 1994 and 25 November 1994,
respectively, informing the Register of Deeds of the revocation of the first SPA."18 Moreover, the CA observed that the affidavit revoking the first SPA was
also revoked by Luis on December 12, 1994.19

Furthermore, although Luis revoked the First SPA, he did not revoke the Second SPA which authorized respondent Laila to sell, convey and mortgage,
among others, the property covered by TCT T-11155 (Lot No. 19). The CA opined that had it been the intention of Luis to discredit the

Second Sale, he should have revoked not only the First SPA but also the Second SPA. The latter being valid, all transactions emanating from it,
particularly the mortgage of Lot 19, its subsequent redemption and its second sale, were valid.20 Thus, the CA disposed in this wise:

WHEREFORE, the appeal is hereby GRANTED. The Decision dated 30 July 2004 is hereby REVERSED AND SET ASIDE, and in its stead a new decision
is hereby rendered:

1. DECLARING the Special Power of Attorney, dated 21 July 1993, as valid;

2. DECLARING the Special Power of Attorney, dated 03 April 1993, as valid up to the time of its revocation on 24 November 1994;

3. DECLARING the Deed of Absolute sale, dated 04 November 1991, as ineffective and without any force and effect;

4. DECLARING the Deed of Absolute Sale of Three (3) Parcels of Residential Land, dated 23 August 1994, valid and binding from the very
beginning;
 5. DECLARING the Deed of Absolute Sale, dated 27 September 1994, also valid and binding from the very beginning;

6. ORDERING the substituted plaintiffs to pay jointly and severally the defendant-appellant Meridian Realty Corporation the sum of
Php100,000.00 as moral damages, Php100,000.00 as attorney’s fee and Php100,000.00 as litigation expenses; and

7. ORDERING the substituted plaintiffs to pay jointly and severally the defendant-appellants Leila Solutan et al., the sum of Php50,000.00 as
moral damages.

SO ORDERED.21

Petitioners filed a motion for reconsideration, but it was denied in the CA Resolution, 22 dated November 18, 2010. Consequently, they filed the present
petition with the following ASSIGNMENT OF ERRORS

I.

THE HONORABLE COURT OF APPEALS (19TH DIVISION) GRAVELY ERRED WHEN IT DECLARED AS VOID THE FIRST SALE EXECUTED BY
THE LATE LUIS ROSAROSO IN FAVOR OF HIS CHILDREN OF HIS FIRST MARRIAGE.

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT SUSTAINING AND AFFIRMING THE RULING OF THE TRIAL COURT
DECLARING THE MERIDIAN REALTY CORPORATION A BUYER IN BAD FAITH, DESPITE THE TRIAL COURT’S FINDINGS THAT THE DEED OF
SALE (First Sale), IS GENUINE AND HAD FULLY COMPLIED WITH ALL THE LEGAL FORMALITIES.

III.

THE HONORABLE COURT OF APPEALS FURTHER ERRED IN NOT HOLDING THE SALE (DATED 27 SEPTEMBER 1994), NULL AND VOID FROM
THE VERY BEGINNING SINCE LUIS ROSAROSO ON NOVEMBER 4, 1991 WAS NO LONGER THE OWNER OF LOTS 8, 19, 22 AND 23 AS HE HAD
EARLIER DISPOSED SAID LOTS IN FAVOR OF THE CHILDREN OF HIS (LUIS ROSAROSO) FIRST MARRIAGE.23

Petitioners argue that the second deed of sale was null and void because Luis could not have validly transferred the ownership of the subject properties to
Meridian, he being no longer the owner after selling them to his children. No less than Atty. William Boco, the lawyer who notarized the first deed of sale,
appeared and testified in court that the said deed was the one he notarized and that Luis and his second wife, Lourdes, signed the same before him. He
also identified the signatures of the subscribing witnesses.24 Thus, they invoke the finding of the RTC which wrote:

In the case of Heirs of Joaquin Teves, Ricardo Teves versus Court of Appeals, et al., G.R. No. 109963, October 13, 1999, the Supreme Court held that a
public document executed [with] all the legal formalities is entitled to a presumption of truth as to the recitals contained therein. In order to overthrow a
certificate of a notary public to the effect that a grantor executed a certain document and acknowledged the fact of its execution before him, mere
preponderance of evidence will not suffice. Rather, the evidence must (be) so clear, strong and convincing as to exclude all reasonable dispute as to the
falsity of the certificate. When the evidence is conflicting, the certificate will be upheld x x x .

A notarial document is by law entitled to full faith and credit upon its face. (Ramirez vs. Ner, 21 SCRA 207). As such it … must be sustained in full force
and effect so long as he who impugns it shall not have presented strong, complete and conclusive proof of its falsity or nullity on account of some flaw or
defect provided against by law (Robinson vs. Villafuerte, 18 Phil. 171, 189-190).25

Furthermore, petitioners aver that it was erroneous for the CA to say that the records of the case were bereft of evidence that they paid the price of the
lots sold to them. In fact, a perusal of the records would reveal that during the cross-examination of Antonio Rosaroso, when asked if there was a
monetary consideration, he testified that they indeed paid their father and their payment helped him sustain his daily needs. 26

Petitioners also assert that Meridian was a buyer in bad faith because when its representative visited the site, she did not make the necessary inquiries.
The fact that there were already houses on the said lots should have put Meridian on its guard and, for said reason, should have made inquiries as to who
owned those houses and what their rights were over the same.27

Meridian’s assertion that the Second Sale was registered in the Register of Deeds was a falsity. The subject titles, namely: TCT No. 11155 for Lot 19, TCT
No. 10885 for Lot 22, and TCT No. 10886 for Lot 23 were free from any annotation of the alleged sale.28

After an assiduous assessment of the records, the Court finds for the petitioners.

The First Deed Of Sale Was Valid

The fact that the first deed of sale was executed, conveying the subject properties in favor of petitioners, was never contested by the respondents. What
they vehemently insist, though, is that the said sale was simulated because the purported sale was made without a valid consideration.

Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have been fair and regular; (2) the
ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. 29 These presumptions operate against an
adversary who has not introduced proof to rebut them. They create the necessity of presenting evidence to rebut the prima facie case they created, and
which, if no proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is but, by the presumption, the one who has
that burden is relieved for the time being from introducing evidence in support of the averment, because the presumption stands in the place of evidence
unless rebutted.30

In this case, the respondents failed to trounce the said presumption. Aside from their bare allegation that the sale was made without a consideration,
they failed to supply clear and convincing evidence to back up this claim. It is elementary in procedural law that bare allegations, unsubstantiated by
evidence, are not equivalent to proof under the Rules of Court.31

The CA decision ran counter to this established rule regarding disputable presumption. It relied heavily on the account of Lourdes who testified that the
children of Luis approached him and convinced him to sign the deed of sale, explaining that it was necessary for a loan application, but they did not pay
the purchase price for the subject properties.32 This testimony, however, is self-serving and would not amount to a clear and convincing evidence
required by law to dispute the said presumption. As such, the presumption that there was sufficient consideration will not be disturbed.

Granting that there was no delivery of the consideration, the seller would have no right to sell again what he no longer owned. His remedy would be to
rescind the sale for failure on the part of the buyer to perform his part of their obligation pursuant to Article 1191 of the New Civil Code. In the case of
Clara M. Balatbat v. Court Of Appeals and Spouses Jose Repuyan and Aurora Repuyan, 33 it was written:

The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first
rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment only creates a right to demand the fulfillment of the obligation or to
rescind the contract. [Emphases supplied]

Meridian is Not a
Buyer in Good Faith

Respondents Meridian and Lucila argue that, granting that the First Sale was valid, the properti3es belong to them as they acquired these in good faith
and had them first recorded in the Registry of Property, as they were unaware of the First Sale.34

Again, the Court is not persuaded.

The fact that Meridian had them first registered will not help its cause. In case of double sale, Article 1544 of the Civil Code provides:

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first 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 possession; and, in the absence thereof; to the
person who presents the oldest title, provided there is good faith.

Otherwise stated, ownership of an immovable property which is the subject of a double sale shall be transferred: (1) to the person acquiring it who in
good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default
thereof, to the person who presents the oldest title, provided there is good faith. The requirement of the law then is two-fold: acquisition in good faith
and registration in good faith. Good faith must concur with the registration. If it would be shown that a buyer was in bad faith, the alleged registration
they have made amounted to no registration at all.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of a double sale of immovable property.
When the thing sold twice is an immovable, the one who acquires it and first records it in the Registry of Property, both made in good faith, shall be
deemed the owner. Verily, the act of registration must be coupled with good faith— that is, the registrant must have no knowledge of the defect or lack of
title of his vendor or must not have been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint
him with the defects in the title of his vendor.)35 [Emphases and underlining supplied]

When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should investigate the rights of those in
possession. Without making such inquiry, one cannot claim that he is a buyer in good faith. When a man proposes to buy or deal with realty, his duty is
to read the public manuscript, that is, to look and see who is there upon it and what his rights are. A want of caution and diligence, which an honest man
of ordinary prudence is accustomed to exercise in making purchases, is in contemplation of law, a want of good faith. The buyer who has failed to know
or discover that the land sold to him is in adverse possession of another is a buyer in bad faith.36 In the case of Spouses Sarmiento v. Court of Appeals,37 it
was written:

Verily, every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way
oblige him to go behind the certificate to determine the condition of the property. Thus, the general rule is that a purchaser may be considered a
purchaser in good faith when he has examined the latest certificate of title. An exception to this rule is when there exist important facts that would create
suspicion in an otherwise reasonable man to go beyond the present title and to investigate those that preceded it. Thus, it has been said that a person
who deliberately ignores a significant fact which would create suspicion in an otherwise reasonable man is not an innocent purchaser for value. A
purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor. As we have held:

The failure of appellees to take the ordinary precautions which a prudent man would have taken under the circumstances, specially in buying a piece of
land in the actual, visible and public possession of another person, other than the vendor, constitutes gross negligence amounting to bad faith.
In this connection, it has been held that where, as in this case, the land sold is in the possession of a person other than the vendor, the purchaser is
required to go beyond the certificate of title to make inquiries concerning the rights of the actual possessor. Failure to do so would make him a purchaser
in bad faith. (Citations omitted).

One who purchases real property which is in the actual possession of another should, at least make some inquiry concerning the right of those in
possession. The actual possession by other than the vendor should, at least put the purchaser upon inquiry. He can scarely, in the absence of such
inquiry, be regarded as a bona fide purchaser as against such possessors. (Emphases supplied)

Prescinding from the foregoing, the fact that private respondent RRC did not investigate the Sarmiento spouses' claim over the subject land despite its
knowledge that Pedro Ogsiner, as their overseer, was in actual possession thereof means that it was not an innocent purchaser for value upon said land.
Article 524 of the Civil Code directs that possession may be exercised in one's name or in that of another. In herein case, Pedro Ogsiner had informed
RRC that he was occupying the subject land on behalf of the Sarmiento spouses. Being a corporation engaged in the business of buying and selling real
estate, it was gross negligence on its part to merely rely on Mr. Puzon's assurance that the occupants of the property were mere squatters considering the
invaluable information it acquired from Pedro Ogsiner and considering further that it had the means and the opportunity to investigate for itself the
accuracy of such information. [Emphases supplied]

In another case, it was held that if a vendee in a double sale registers the sale after he has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon him any right. If the registration is done in bad faith, it is as if there is no registration at
all, and the buyer who has first taken possession of the property in good faith shall be preferred.38

In the case at bench, the fact that the subject properties were already in the possession of persons other than Luis was never disputed. Sanchez,
representative and witness for Meridian, even testified as follows:

x x x; that she together with the two agents, defendant Laila Solutan and Corazon Lua, the president of Meridian Realty Corporation, went immediately
to site of the lots; that the agents brought with them the three titles of the lots and Laila Solutan brought with her a special power of attorney executed by
Luis B. Rosaroso in her favor but she went instead directly to Luis Rosaroso to be sure; that the lots were pointed to them and she saw that there were
houses on it but she did not have any interest of the houses because her interest was on the lots; that Luis Rosaroso said that the houses belonged to him;
that he owns the property and that he will sell the same because he is very sickly and he wanted to buy medicines; that she requested someone to check
the records of the lots in the Register of Deeds; that one of the titles was mortgaged and she told them to redeem the mortgage because the corporation
will buy the property; that the registered owner of the lots was Luis Rosaroso; that in more or less three months, the encumbrance was cancelled and she
told the prospective sellers to prepare the deed of sale; that there were no encumbrances or liens in the title; that when the deed of absolute sale was
prepared it was signed by the vendor Luis Rosaroso in their house in Opra x x x.39 (Underscoring supplied)

From the above testimony, it is clear that Meridian, through its agent, knew that the subject properties were in possession of persons other than the
seller. Instead of investigating the rights and interests of the persons occupying the said lots, however, it chose to just believe that Luis still owned them.
Simply, Meridian Realty failed to exercise the due diligence required by law of purchasers in acquiring a piece of land in the possession of person or
persons other than the seller.

In this regard, great weight is accorded to the findings of fact of the RTC. Basic is the rule that the trial court is in a better position to examine real
evidence as well as to observe the demeanor of witnesses who testify in the case.40

WHEREFORE, the petition is GRANTED. The December 4, 2009 Decision and the November 18, 201 0 Resolution of the Court of Appeals, in CA-G.R.
CV No. 00351, are REVERSED and SET ASIDE. The July 30, 2004 Decision of the Regional Trial Court, Branch 8, 7th Judicial Region, Cebu City, in
Civil Case No. CEB-16957, is hereby REINSTATED.

SO ORDERED.
G.R. No. 200173 April 15, 2013

SPS. ESMERALDO D. VALLIDO and ARSENIA M. V ALLIDO, rep. by ATTY. SERGIO C. SUMAYOD, Petitioners,
vs.
SPS. ELMER PONO and JULIET PONO, and PURIFICACION CERNA-PONG and SPS. MARIANITO PONO and ESPERANZA MERO-
PONO, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari assailing the December 8, 2011 Decision of the Court of Appeals (CA) which reversed and set aside the July 20,
2004 Decision of the Regional Trial Court, Branch 12, Ormoc City (RTC). a case involving a double sale of a parcel of land.

It appears that Martino Dandan (Martino) was the registered owner of a parcel of land in Kananga, Leyte, with an area of 28,214 square meters, granted
under Homestead Patent No. V-21513 on November 11, 1953 and covered by Original Certificate of Title (OCT) No. P-429.

On January 4, 1960, Martino, who was at that time living in Kananga, Leyte, sold a portion of the subject property equivalent to 18,214 square meters to
respondent Purificacion Cerna (Purificacion). Upon execution of the Deed of Absolute Sale, Martino gave Purificacion the owner’s copy of OCT No. P-
429. The transfer, however, was not recorded in the Registry of Deeds.

On May 4, 1973, Purificacion sold her18,214 square meter portion of the subject property to respondent Marianito Pono (Marianito) and also delivered
OCT No. P-429 to him. Marianito registered the portion he bought for taxation purposes, paid its taxes, took possession, and allowed his son respondent
Elmer Pono (Elmer) and daughter-in-law, Juliet Pono (Juliet), to construct a house thereon. Marianito kept OCT No. P-429. The transfer, however, was
also not recorded in the Registry of Deeds.

Meanwhile, Martino left Kananga, Leyte, and went to San Rafael III, Noveleta, Cavite, and re-settled there. On June 14, 1990, he sold the whole subject
property to his grandson, petitioner Esmeraldo Vallido (Esmeraldo), also a resident of Noveleta, Cavite. Considering that Martino had delivered OCT No.
P-429 to Purificacion in 1960, he no longer had any certificate of title to hand over to Esmeraldo.

On May 7, 1997, Martino filed a petition seeking for the issuance of a new owner’s duplicate copy of OCT No. P-429, which he claimed was lost. He stated
that he could not recall having delivered the said owner’s duplicate copy to anybody to secure payment or performance of any legal obligation. On June 8,
1998, the petition was granted by the RTC, Branch 12 of Ormoc City. On September 17, 1999, Esmeraldo registered the deed of sale in the Registry of
Deeds and Transfer Certificate of Title (TCT) No. TP-13294 was thereafter issued in the name of the petitioners.

Subsequently, the petitioners filed before the RTC a complaint for quieting of title, recovery of possession of real property and damages against the
respondents. In their Answer, respondents Elmer and Juliet averred that their occupation of the property was upon permission of Marianito. They
included a historical chronology of the transactions from that between Martino and Purificacion to that between Purificacion and Marianito.

On July 20, 2004, the RTC promulgated a decision 1 favoring the petitioners. The RTC held that there was a double sale under Article 1544 of the Civil
Code. The respondents were the first buyers while the petitioners were the second buyers. The RTC deemed the petitioners as buyers in good faith
because during the sale on June 4, 1990, OCT No. P-429 was clean and free from all liens. The petitioners were also deemed registrants in good faith
because at the time of the registration of the deed of sale, both OCT No. P-429 and TCT No. TP-13294 did not bear any annotation or mark of any lien or
encumbrance. The RTC concluded that because the petitioners registered the sale in the Register of Deeds, they had a better right over the respondents.

Aggrieved, the respondents filed their Notice of Appeal on August 27, 2004.

In the assailed Decision,2 dated December 8, 2011, the CA ruled in favor of the respondents. The CA agreed that there was a double sale. It, however, held
that the petitioners were neither buyers nor registrants in good faith. The respondents indisputably were occupying the subject land. It wrote that where
the land sold was in the possession of a person other than the vendor, the purchaser must go beyond the certificate of title and make inquiries concerning
the rights of the actual possessors. It further stated that mere registration of the sale was not enough as good faith must concur with the registration.
Thus, it ruled that the petitioners failed to discharge the burden of proving that they were buyers and registrants in good faith. Accordingly, the CA
concluded that because the sale to Purificacion took place in 1960, thirty (30) years prior to Esmeraldo’s acquisition in 1990, the respondents had a
better right to the property.

Hence, this petition.

The petitioners argue that the CA erred in ruling in favor of the respondents. Primarily, they contend that the Appellant’s Brief was filed beyond the 30-
day extension period granted by the CA and that the findings of fact of the RTC were no longer subject to review and should not have been disturbed on
appeal.

They invoke that they are buyers and registrants in good faith. They claim that the title of the land was clean and free from any and all liens and
encumbrances from the time of the sale up to the time of its registration. They also aver that they had no knowledge of the sale between Martino and
Purificacion on July 4, 1960 as they have been residents of Noveleta, Cavite, which is very far from Brgy. Masarayao, Kananga, Leyte. When Esmeraldo
confronted his grandfather, Martino, about the July 4, 1960 sale to Purificacion, he took as gospel truth the vehement denial of his grandfather on the
existence of the sale. The latter explained that the transaction was only a mortgage. These facts show that indeed they were buyers and registrants in
good faith. Thus, their right of ownership is preferred against the unregistered claim of the respondents.

The petition is without merit.

On the procedural aspect, it was the ruling of the CA that the respondents were deemed to have filed their Appellant’s Brief within the reglementary
period.3 The Court accepts that as it was merely a technical issue.

The core issue in this case is whether the petitioners are buyers and registrants in good faith.

It is undisputed that there is a double sale and that the respondents are the first buyers while the petitioners are the second buyers. The burden of
proving good faith lies with the second buyer (petitioners herein) which is not discharged by simply invoking the ordinary presumption of good faith.4

After an assiduous assessment of the evidentiary records, this Court holds that the petitioners are NOT buyers in good faith as they failed to discharge
their burden of proof.

Notably, it is admitted that Martino is the grandfather of Esmeraldo. As an heir, petitioner Esmeraldo cannot be considered as a third party to the prior
transaction between Martino and Purificacion. In Pilapil v. Court of Appeals,5it was written:

The purpose of the registration is to give notice to third persons. And, privies are not third persons. The vendor's heirs are his privies. Against them,
failure to register will not vitiate or annul the vendee's right of ownership conferred by such unregistered deed of sale.

The non-registration of the deed of sale between Martino and Purificacion is immaterial as it is binding on the petitioners who are privies.6 Based on the
privity between petitioner Esmeraldo and Martino, the petitioner as a second buyer is charged with constructive knowledge of prior dispositions or
encumbrances affecting the subject property. The second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good
faith.7

Moreover, although it is a recognized principle that a person dealing on a registered land need not go beyond its certificate of title, it is also a firmly
settled rule that where there are circumstances which would put a party on guard and prompt him to investigate or inspect the property being sold to
him, such as the presence of occupants/tenants thereon, it is expected from the purchaser of a valued piece of land to inquire first into the status or
nature of possession of the occupants. As in the common practice in the real estate industry, an ocular inspection of the premises involved is a safeguard
that a cautious and prudent purchaser usually takes. Should he find out that the land he intends to buy is occupied by anybody else other than the seller
who, as in this case, is not in actual possession, it would then be incumbent upon the purchaser to verify the extent of the occupant’s possessory rights.

The failure of a prospective buyer to take such precautionary steps would mean negligence on his part and would preclude him from claiming or invoking
the rights of a "purchaser in good faith."8 It has been held that "the registration of a later sale must be done in good faith to entitle the registrant to
priority in ownership over the vendee in an earlier sale."9

There are several indicia that should have placed the petitioners on guard and prompted them to investigate or inspect the property being sold to them.
First, Martino, as seller, did not have possession of the subject property. Second, during the sale on July 4, 1990, Martino did not have the owner’s
duplicate copy of the title. Third, there were existing permanent improvements on the land. Fourth, the respondents were in actual possession of the
land. These circumstances are too glaring to be overlooked and should have prompted the petitioners, as prospective buyers, to investigate or inspect the
land. Where the vendor is not in possession of the property, the prospective vendees are obligated to investigate the rights of one in possession.10

When confronted by Esmeraldo on the alleged previous sale, Martino declared that there was no sale but only a mortgage.The petitioners took the
declaration of Martino as gospel truth or ex cathedra.11 The petitioners are not convincing. Glaringly, Martino gave conflicting statements. He stated in
his Petition for Issuance of New Owner's Duplicate Copy of OTC12 that he could not recall having delivered the owner's duplicate copy to anybody to
secure payment or performance of any obligation. Yet, when confronted by Esmeraldo, Martino stated that he mortgaged the land with Purificacion. The
claims of Martino, as relayed by the petitioners, cannot be relied upon.

As the petitioners cannot be considered buyers in good faith, they cannot lean on the indefeasibility of their TCT in view of the doctrine that the defense
of indefeasibility of a torrens title does not extend to transferees who take the certificate of title in bad faith.13

The Court cannot ascribe good faith to those who have not shown any diligence in protecting their rights.14

Lastly, it is uncontroverted that the respondents were occupying the land since January 4, 1960 based on the deed of sale between Martino and
Puriticacion. They have also made improvements on the land by erecting a house of mixed permanent materials thereon, which was also admitted by the
petitioners.15 The respondents, without a doubt, are possessors in good faith. Ownership should therefore vest in the respondents because they were first
in possession of the property in good faith.16

WHEREFORE, the petition is DENIED.

JOSE CATRAL MENDOZA
Associate Justice

WE CONCUR:
G.R. No. 195975, September 05, 2016

TAINA MANIGQUE-STONE, Petitioner, v. CATTLEYA LAND, INC., AND SPOUSES TROADIO B. TECSON AND ASUNCION ORTALIZ-
TECSON, Respondents.

DECISION

DEL CASTILLO, J.:

The sale of Philippine land to an alien or foreigner, even if titled in the name of his Filipino spouse, violates the Constitution and is thus, void.

Assailed in this Petition for Review on Certiorari1 are the August 16, 2010 Decision2 of the Court of Appeals (CA) which dismissed the appeal by Taina
Manigque-Stone (Taina) in CA-G.R. CV No. 02352, and its February 22, 2011 Resolution,3 which denied Taina's motion for reconsideration4 thereon.

Factual Antecedents

Sometime in July 1992, Cattleya Land, Inc. (Cattleya) sent its legal counsel, Atty. Federico C. Cabilao, Jr. (Atty. Cabilao, Jr.), to Tagbilaran City to
investigate at the Office of the Register of Deeds in that city the status of the properties of spouses Col. Troadio B. Tecson (Col. Tecson) and Asuncion
Tecson (collectively, Tecson spouses), which Cattleya wanted to purchase. One of these properties, an 8,805-square meter parcel of land located at Doljo,
Panglao, Bohol, is registered in the name of the Tecson spouses, and covered by Transfer Certificate of Title (TCT) No. 17655 (henceforth, the subject
property). Atty. Cabilao, Jr. found that no encumbrances or liens on the subject property had been annotated on the TCT thereof, except for an
attachment issued in connection with Civil Case No. 3399 entitled "Tantrade Corporation vs. Bohol Resort Hotel, Inc., et al."5

On November 6, 1992, Cattleya entered into a Contract of Conditional Sale with the Tecson spouses covering nine parcels of land, including the subject
property. In this transaction the Tecson spouses were represented by Atty. Salvador S. Pizarras (Atty. Pizarras). The Contract of Conditional Sale was
entered in the Primary Book of the Office of the Register of Deeds of Bohol that same day, per Entry No. 83422. On August 30, 1993, the parties executed
a Deed of Absolute Sale covering the subject property. This Deed of Absolute Sale was also entered in the Primary Book on October 4, 1993, per Entry
No. 87549. However, neither the Contract of Conditional Sale nor the Deed of Absolute Sale could be annotated on the certificate of title covering the
subject property because the then Register of Deeds of Bohol, Atty. Narciso S. De la Serna (Atty. De la Serna) refused to annotate both deeds. According
to Atty. De la Serna it was improper to do so because of the writ of attachment that was annotated on the certificate of title of the subject property, in
connection with the said Civil Case No. 3399.6

On December 1, 1993, Atty. Cabilao, Jr. and Atty. Pizarras, in representation of their respective clients, again requested Atty. De la Serna to annotate the
Deed of Absolute Sale and all other pertinent documents on the original certificate of title covering the subject property. But Atty. De la Serna refused
anew – this time saying that he would accede to the request only if he was presented with a court order to that effect. Atty. De la Serna still refused the
request to annotate, even after Atty. Cabilao, Jr. had told him that all that he (Atty. Cabilao, Jr.) was asking was for the Deed of Absolute Sale to be
annotated on the original certificate of title, and not for Atty. De la Serna to issue a new transfer of title to the subject property.7

The writ of attachment on the certificate of title to the subject property was, however, lifted, after the parties in Civil Case No. 3399 reached an amicable
settlement or compromise agreement. Even then, however, Cattleya did not still succeed in having the aforementioned Deed of Absolute Sale registered,
and in having title to the subject property transferred to its name, because it could not surrender the owner's copy of TCT No. 17655, which was in
possession of the Tecson spouses. According to Cattleya, the Tecson spouses could not deliver TCT No. 17655 to it, because according to the Tecson
spouses this certificate of title had been destroyed in a fire which broke out in Sierra Bullones, Bohol.8

This claim by the Tecson spouses turned out to be false, however, because Atty. Cabilao, Jr. came to know, while following up the registration of the
August 30, 1993 Deed of Absolute Sale at the Office of the Register of Deeds of Bohol, that the owner's copy of TCT No. 17655 had in fact been presented
by Taina at the Office of the Register of Deeds of Bohol, along with the Deed of Sale that was executed by the Tecson spouses, in favor of Taina covering
the subject property.9

It appears that when Taina's then common-law husband, Michael (Mike) Stone, visited Bohol sometime in December 1985, he fell in love with the place
and decided to buy a portion of the beach lot in Doljo, Panglao, Bohol. They met with Col. Tecson, and the latter agreed to sell them a portion of the
beach lot for US$8,805.00. Mike and Taina made an initial downpayment of US$1,750.00 (or equivalent P35,000.00 at that time) for a portion of a
beach lot, but did not ask for a receipt for this initial downpayment. On June 1, 1987, a Deed of Absolute Sale covering the subject portion was executed
by Col. Tecson in Taina's favor. Subsequent payments were made by Mike totalling P40,000.00, as of August 29, 1986, although another payment of
P5,000.00 was made sometime in August 1987. The last payment in the amount of P32,000.00, was made in September 1987.10 In 1990, Troadio Tecson,
Jr., the son of Col. Tecson and Taina's brother-in-law, delivered to Taina the owner's copy of TCT No. 17655.11

In the meantime, in October 1986, Taina and Mike got married.

On April 25, 1994, Taina filed a Notice of Adverse Claim covering the subject portion, after she learned that Col. Tecson and his lawyer had filed a
petition for the issuance of a second owner's copy over TCT No. 17655.12

On February 8, 1995, Taina sought to have her Deed of Absolute Sale registered with the Office of the Register of Deeds of Bohol, and on that occasion
presented the owner's copy of TCT No. 17655. Taina also caused a Memorandum of Encumbrance to be annotated on this certificate of title. The result
was that on February 10, 1995, a new certificate of title, TCT No. 21771, was issued in the name of Taina, in lieu of TCT No. 17655, in the name of the
Tecson spouses.13 The subject property is described in TCT No. 21771 as follows:
A parcel of Land (Lot 5 of the consolidation-subdivision plan Pcs-07-000907, being a portion of lots I-A and I-B, Psd-07-02-12550, LRC. Rec. No. ___),
situated in the Barrio of Doljo, Municipality of Panglao, Province of Bohol, Island of Bohol. Bounded on the North, along lines 15-16-1 by Bohol Strait; on
the East and Southeast, along line 1-2 by Lot 4 of the consolidation-subdividion plan; along line 3-4 by Primitivo Hora; and along line 4-5 by Lot 6 of the
consolidation-subdivision plan; on the South and Southwest, along line 5-6-7-8 by Andres Guimalan; along line 8-9 by [Bienvenido] Biosino; along lines
9-10-11-12-13-14 by Angel Hora; and on the West, along lines 14-15 by Lot 7 of the consolidation-subdivision plan. Beginning at a point marked "1" on
plan, being S. 83 deg. 08'E., 1045.79 m. from triangulation point TIP, USCGS, 1908, Doljo, Panglao, Bohol; containing an area of EIGHT THOUSAND
EIGHT HUNDRED AND FIVE (8,805) SQUARE METERS, more or less.14

Whereupon, Cattleya instituted against Taina a civil action for quieting of title and/or recovery of ownership and cancellation of title with
damages.15 Docketed as Civil Case No. 5782 of the Regional Trial Court (RTC) of Bohol at Tagbilaran City, Cattleya therein initially impleaded Atty. De la
Serna as party defendant; but as the latter had already retired as Register of Deeds of Bohol, both parties agreed to drop his name from the case.16

Taina likewise filed a motion for leave to admit a third-party complaint against the Tecson spouses; this motion was granted by the RTC.17

After due proceedings, the RTC of Bohol gave judgment18 for Cattleya, thus:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant in the main case as follows:

1. Quieting the title or ownership of the plaintiff in Lot 5 by declaring the sale in its favor as valid and enforceable by virtue of a prior registration of the
sale in accordance with the provisions of Presidential Decree No. 1529 otherwise known as the Property Registration Decree;

2. Ordering the cancellation of Transfer Certificate of Title No. 21771 in the name of defendant TAINA MANIGQUE-STONE and the issuance of a new
title in favor of the plaintiff after payment of the required fees; and

3. Ordering the defendant to desist from claiming ownership and possession thereof. Without pronouncement as to costs.

As to defendant's third[-]party complaint against spouses x x x Tecson[,] x x x judgment is hereby rendered as follows:

1. Ordering the return of the total amount of Seventy-seven Thousand (P77,000.00) Pesos to the third[-]party plaintiff with legal rate of interest from the
time of the filing of the third[-]party complaint on June 28, 2004 until the time the same shall have been fully satisfied; and

2. Ordering the payment of P50,000.00 by way of moral and exemplary damages and x x x of attorney's fees in the amount of P30,000.00 and to pay the
costs.

SO ORDERED.19

In finding for Cattleya, the RTC held that the sale entered by the Tecson spouses with Cattleya and with Taina involving one and the same property was a
double sale, and that Cattleya had a superior right to the lot covered thereby, because Cattleya was the first to register the sale in its favor in good faith;
that although at the time of the sale the TCT covering the subject property could not yet be issued, and the deed of sale could not be annotated thereon
due to a pending case between the vendors-spouses (Tecson spouses) and Tantrade, Inc., the evidence convincingly showed nonetheless that it was
Cattleya that was the first to register the sale in its favor with the Office of the Provincial Registry of Deeds of Bohol on October 4, [1993] as shown in
Entry No. 87549.20 Furthermore, the RTC found that Cattleya had no notice, nor was it aware, of Taina's claim to the subject property, and that the only
impediment it (Cattleya) was aware of was the pending case (Civil Case No. 3399) between Tantrade Corporation and Bohol Resort Hotel, Inc.21

On the other hand, the RTC found Taina's position untenable because: First, the June 1, 1987 sale between Col. Tecson and Mike, Taina's then common-
law husband, was a patent nullity, an absolutely null and void sale, because under the Philippine Constitution a foreigner or alien cannot acquire real
property in the Philippines. Second, at the time of the sale, Taina was only Mike's dummy, and their subsequent marriage did not validate or legitimize
the constitutionally proscribed sale earlier made in Mike's favor. And third, no less than Taina herself admitted that at the time she caused the sale to be
registered and title thereto issued to her, she knew or was otherwise aware that the very same lot had already been sold to Cattleya, or at least claimed by
the latter – and this is a state of affairs constitutive of bad faith on her part.22

The RTC likewise held that neither parties in the main case was entitled to damages, because they failed to substantiate their respective claims thereto.23

As regards Taina's third-party complaint against the Tecson spouses, the RTC ordered the return or restitution to her of the sum of P77,000.00, plus
legal interest. Likewise awarded by the RTC in Taina's favor were moral and exemplary damages in the amount of P50,000.00 and attorney's fees in the
amount of P30,000.00 plus costs.24

Dissatisfied with this judgment, Taina appealed to the CA.

Ruling of the Court of Appeals

On August 16, 2010, the CA handed down the assailed Decision,25cralawred which contained the following decretal portion:

WHEREFORE, the challenged Decision of the Regional Trial Court dated [August 10, 2007] is hereby AFFIRMED with MODIFICATIONS; to wit:

1. Quieting the title of ownership of the plaintiff-appellee, CATTLEYA LAND, INC. in the above-described property by declaring the sale in its favor as
valid and enforceable;
2. Ordering the cancellation of Transfer Certificate of Title No. 21771 in the name of defendant-appellant TAINA MANIGQUE-STONE;

3. Ordering the registration of the Deed of Absolute Sale involving the subject property executed in favor of CATTLEYA LAND, INC. and the issuance x x
x of a new title in favor of the plaintiff-appellee CATTLEYA LAND, INC. ate payment of the required fees; and

4. Ordering the defendant-appellant, TAINA MANIGQUE-STONE to desist from claiming ownership and possession thereof. Without pronouncement as
to cost.

As to the third-party defendants-appellees, the spouses Troadio B. Tecson and Asuncion Ortaliz Tecson, judgment is hereby rendered as follows:

1. Ordering third-party defendants-appellees, spouses TROADIO B. TECSON and ASUNCION ORTALIZ TECSON, [to] return x x x the total amount of
Seventy-seven Thousand (P77,000.00) Pesos to the defendant-appellant, TAINA MANIGQUE-STONE, with legal rate of interest from the time of filing
of the third[-]party complaint on June 28, 2004 until the time the same shall have been fully satisfied; and

2. Ordering third-party defendants-appellees, spouses TROADIO B. TECSON and ASUNCION ORTALIZ TECSON [to pay] P50,000.00 to the defendant-
appellant, TAINA MANIGQUE-STONE by way of moral and exemplary damages and [to pay] attorney's fees in the amount of P30,000.00 x x x.

No pronouncement as to cost.

SO ORDERED.26

In support of its Decision, the CA ratiocinated —

Article 1498 of the Civil Code provides that, as a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing sold. In this case, the
notarization of the deed of sale of TAINA is defective. TAINA testified that the deed of sale was executed and signed by Col. Troadio Tecson in Bohol but
was notarized in Manila without the vendors appearing personally before the notary public.

Additionally, Article 1477 of the Civil Code provides that the ownership of the thing sold is transferred upon the actual or constructive delivery thereof;
however, the delivery of the owner's copy of TCT 17655 to TAINA is dubious. It was not the owner, Col. Troadio Tecson, himself who delivered the same
but his son who also happens to be TAINA's brother-in-law. Hence, the foregoing circumstances negate the fact that there was indeed an absolute
delivery or transfer of ownership.

Anent the issue on validity of the sale to Taina Manigque-Stone, the fundamental law is perspicuous in its prohibition against aliens from holding title or
acquiring private lands, except only by way of legal succession or if the acquisition was made by a former natural-born citizen.

A scrutiny of the records would show that the trial court aptly held that the defendant-appellant was only a dummy for Mike Stone who is a foreigner.
Even if the Deed of Absolute Sale is in the name of Taina Manigque-Stone that does not change the fact that the real buyer was Mike Stone, a foreigner.
The appellant herself had admitted in court that the buyer was Mike Stone and at the time of the negotiation she was not yet legally married to Mike
Stone. They cannot do indirectly what is prohibited directly by the law.

To further militate against her stand, the appellant herself testified during the cross examination:

Q: Now, the Deed of Sale states that the buyer is Taina Manigque-Stone?

A: Yes.

Q: And not Mike Stone who according to you was the one who paid the entire consideration and was the one who negotiated with Colonel Tecson. Will
you kindly tell the Court how come it was your name who placed [sic] in the Deed of Sale?

A: Because an American, foreign national cannot buy land here.

Q: Yes because an American national, foreigner cannot own land here.

A: Yes.

Q: And so the Deed of Sale was placed in your name, correct?

A: Yes.
The above testimony is a clear admission against interest. An admission against interest is the best evidence which affords the greatest certainty of the
facts in dispute. The rationale for the rule is based on the presumption that no man would declare anything against himself unless such declaration is
true. Accordingly, it is rational to presume that the testimony corresponds with the truth, and she bears the burden if it does not.

Moreover, TAINA asserts in the brief that 'ownership of the lot covered by TCT 21771 is held by her, a Filipino. As long as the lot is registered in the name
of a Filipino, the trial court is barred from inquiring [into] its legality.' Such assertion is bereft of merit.

The Honorable Supreme Court, in identifying the true ownership of a property registered in the name of a Filipina who was married to a foreign national,
pronounced in Borromeo vs. Descallar that:

'It is settled that registration is not a mode of acquiring ownership. It is only a means of confirming the fact of its existence with notice to the world at
large. Certificates of title are not a source of right. The mere possession of a title does not make one the true owner of the property. Thus, the mere fact
that respondent has the titles of the disputed properties in her name does not necessarily, conclusively and absolutely make her the owner [thereof].
The rule on indefeasibility of title likewise does not apply to respondent. A certificate of title implies that the title is quiet, and that it is perfect, absolute
and indefeasible. However, there are well-defined exceptions to this rule, as when the transferee is not a holder in good faith and did not acquire the
subject properties for a valuable consideration. This is the situation in the instant case. Respondent did not contribute a single centavo in the acquisition
of the properties. She had no income of her own at that time, nor did she have any savings. x x x'27

Taina moved for reconsideration28 of the CA's Decision, but the CA thumbed down this motion in its February 22, 2011 Resolution. 29 Hence, the present
Petition.

Issues

Before this Court, petitioner puts forward the following questions of law for resolution:

1. Whether the assailed Decision is legally correct in holding that petitioner is a mere dummy of Mike.

2. Whether the assailed Decision is legally correct in considering that the verbal contract of sale between spouses Tecson and Mike transferred ownership
to a foreigner, which falls within the constitutional ban on sales of land to foreigners.

3. Whether the assailed Decision is legally correct in not considering that, assuming that the sale of land to Mike violated the Constitution, the same has
been cured by the subsequent marriage of petitioner to Mike and by the registration of the land in the name of petitioner, a Filipino citizen.

4. Whether the assailed Decision is legally correct in not applying the rules on double sale, which clearly favor petitioner Taina.30

In amplification thereof, petitioner advances these arguments:

The trial court and the Court of Appeals departed from the clear provisions of the law and established jurisprudence when it failed to consider that the
Filipino wife of Mike Stone, petitioner Taina Manigque-Stone[,] has the legal capacity and the conjugal partnership interests to enter into a contract of
deed of absolute sale with respondent Sps. Troadio B. Tecson and Asuncion Ortaliz Tecson.

II

The trial court and the Court of Appeals departed from the provisions of the law and established jurisprudence when it failed to consider that the verbal
contract of sale of land to Mike Stone was unenforceable and did not transfer ownership to him, to fall within the constitutional ban on foreigners owning
lands in the Philippines.

III

The trial court and the Court of Appeals departed from established jurisprudence, when it failed to consider that, assuming arguendo that the sale of
land to Mike Stone violated the Constitutional ban on foreign ownership of lands, the same has been cured by the subsequent marriage of petitioner and
Mike Stone, and [the subsequent issuance of title] in the name of petitioner.

IV

The Court of Appeals gravely erred and departed from established rules of evidence when it ruled that the delivery of the owner's copy of TCT 17655 to
petitioner Taina is dubious.

The trial court and the Court of Appeals gravely erred when it departed from provisions of the law and established jurisprudence when it did not apply
the rules on double sale which clearly favor petitioner Taina.31
The fundamental issue for resolution in the case at bench is whether the sale of land by the Tecson spouses to Michael Stone a.k.a. Mike, a foreigner or
alien, although ostensibly made in Taina's name, was valid, despite the constitutional prohibition against the sale of lands in the Philippines to foreigners
or aliens. A collateral or secondary issue is whether Article 1544 of the Civil Code, the article which governs double sales, controls this case.

Petitioner's Arguments

In praying that the CA Decision be overturned Taina posits that while Mike's legal capacity (to own or acquire real property in the Philippines) was not
entirely unassailable, there was nevertheless no actual violation of the constitutional prohibition against the acquisition or purchase by aliens or
foreigners of lands in the Philippines, because in this case no real transfer of ownership had been effected in favor of Mike, from Col. Tecson;32 that all
payments made by Mike to Col. Tecson must be presumed to have come from the community property he had with Taina, because Mike had been her
(Taina's) common-law-husband from 1982 up to the day they were married, in 1986; hence, in this context, she (Taina) was not exactly Mike's dummy at
all, but his active partner;33 that it is of no consequence that she (Taina) had knowledge that Cattleya had likewise purchased or acquired the subject lot
because the deed of sale in favor of Cattleya was executed subsequent to the deed of sale that she and Mike had entered into with the Tecson spouses,
thus, she was the first to acquire ownership of the subject lot in good faith; 34 that assuming for argument's sake that neither she nor Cattleya was a
purchaser in good faith, still she was the first one to acquire constructive possession of the subject lot pursuant to Article 1544 3 rd paragraph of the Civil
Code, and for this reason she had acquired lawful title thereto.35

Respondent Cattleya Land's arguments

Cattleya counters that there could not have been a double sale in the instant case because the earlier sale between Col. Tecson and Mike was absolutely
null and void, as this was a flagrant violation of the constitutional provision barring or prohibiting aliens or foreigners from acquiring or purchasing land
in the Philippines; hence, there was only one valid sale in this case, and that was the sale between Col. Tecson and Cattleya.36

Court's Resolution with respect to Respondents-Spouses Tecson

This Court's Resolution dated June 20, 2012 noted, amongst others, the Manifestation filed by Cattleya, which inter alia stated: (1) that Col. Tecson died
on December 7, 2004; (2) that Taina instituted a third-party complaint against the Tecson spouses; (3) that in this third-party complaint the Tecson
spouses were declared in default by the trial court; (4) that this default order was not appealed by the Tecson spouses; (5) that the present appeal by
Taina from the CA Decision will in no way affect or prejudice the Tecson spouses, given the fact that these spouses did not appeal from the default order,
and (6) that the instant Petition be submitted for resolution without the Comment of the Tecson spouses. 37 In the Resolution of February 26, 2014, this
Court noted that since Asuncion Tecson had failed to submit to this Court the name of the legal representative of her deceased husband Col. Tecson
within the period which expired on October 3, 2013, this Court was dispensing with the Comment of the Tecson spouses in the instant Petition.38

Our Ruling

This Petition is bereft of merit.

Section 7, Article XII of the 1987 Constitution states that:

Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain.

Given the plain and explicit language of this constitutional mandate, it has been held that "[a]liens, whether individuals or corporations,
are disqualified from acquiring lands of the public domain. Hence, they are also disqualified from acquiring private lands. The primary purpose
of the constitutional provision is the conservation of the national patrimony."39

In the case at bench, Taina herself admitted that it was really Mike who paid with his own funds the subject lot; hence, Mike was its real purchaser or
buyer. More than that, it bears stressing that if the deed of sale at all proclaimed that she (Taina) was the purchaser or buyer of the subject property and
this subject property was placed under her name, it was simply because she and Mike wanted to skirt or circumvent the constitutional prohibition
barring or outlawing foreigners or aliens from acquiring or purchasing lands in the Philippines. Indeed, both the CA and the RTC exposed and laid bare
Taina's posturing and pretense for what these really are: that in the transaction in question, she was a mere dummy, a spurious stand-in, for her
erstwhile common-law husband, who was not a Filipino then, and never attempted to become a naturalized Filipino citizen thereafter. The CA put things
in correct perspective, thus —

A scrutiny of the records would show that the trial court aptly held that the defendant-appellant was only a dummy for Mike Stone who is a foreigner.
Even if the Deed of Absolute Sale is in the name of Taina Manigque-Stone that does not change the fact that the real buyer was Mike Stone, a foreigner.
The appellant herself had admitted in court that the buyer was Mike Stone and at the time of the negotiation she was not yet legally married to Mike
Stone. They cannot do indirectly what is prohibited directly by the law.40 (Emphasis supplied)

Citing the RTC's proceedings of December 7, 2004, the CA adverted to the following testimony by the petitioner during her cross-examination thus –

(Atty. Monteclar)

Q: Now, the Deed of Sale states that the buyer is Taina Manigque-Stone?

A: Yes.
Q: And not Mike Stone who according to you was the one who paid the entire consideration and was the one who negotiated with Colonel Tecson. Will
you kindly tell the Court how come it was your name who placed [sic] in the Deed of Sale?

A: Because an American, foreign national cannot buy land here.

Q: Yes because an American national, foreigner cannot own land here.

A: Yes.

Q: And so the Deed of Sale was placed in your name, correct?

A: Yes.41 (Emphasis supplied)

It is axiomatic, of course, that this Court is not a trier of facts. Subject to well-known exceptions, none of which obtains in the instant case, this Court is
bound by the factual findings of the CA, especially where such factual findings, as in this case, accorded in the main with the RTC's own findings.42

Given the fact that the sale by the Tecson spouses to Taina as Mike's dummy was totally abhorrent and repugnant to the Philippine Constitution, and is
thus, void ab initio, it stands to reason that there can be no double sale to speak of here. In the case of Fudot v. Cattleya Land, Inc.,43 which fortuitously
also involved the Tecson spouses and Cattleya, we held thus —

The petition is bereft of merit.

Petitioner's arguments, which rest on the assumption that there was a double sale, must fail.

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code, which provides the rule on double sale, applies only to a situation where
the same property is validly sold to different vendees. In this case, there is only one sale to advert to, that between the spouses Tecson and respondent.

In Remalante v. Tibe, this Court ruled that the Civil Law provision on double sale is not applicable where there is only one valid sale, the previous sale
having been found to be fraudulent. Likewise, in Espiritu and Apostol v. Valerio, where the same parcel of land was purportedly sold to two different
parties, the Court held that despite the fact that one deed of sale was registered ahead of the other, Art. 1544 of the Civil Code will not apply where said
deed is found to be a forgery, the result of this being that the right of the other vendee should prevail.

The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it bears the forged signature of Asuncion. x x x 44 (Citations
omitted; Emphasis supplied)

In view of the fact that the sale in the case at bench is worse off (because it is constitutionally infirm) than the sale in the Fudot case, which merely
involves a violation of the pertinent provisions of the Civil Code, this Court must affirm, as it hereby affirms the CA's ruling that, "there is only one sale to
reckon with, that is, the sale to Cattleya.45

Again, our holding in Muller v. Muller,46 which is almost on all fours with the case at bench, can only strengthen and reinforce our present stance.
In Muller, it appears that German national Helmut Muller (Helmut), alien or foreigner husband of the Filipina Elena Buenaventura Muller (Elena),
bought with his capital funds a parcel of land in Antipolo City and also paid for the construction of a house thereon. This Antipolo property was
registered under the name of Elena under TCT No. 219438. Subsequently, Helmut instituted a petition for separation of properties with the RTC of
Quezon City. After due proceedings, the RTC of Quezon City rendered judgment terminating the regime of absolute community of property between
Helmut and Elena. The RTC also decreed the separation of properties between the spouses. With respect to the Antipolo property, the RTC held that
although it was acquired with the use of Helmut's capital funds, nevertheless the latter could not recover his investment because the property was
purchased in violation of Section 7, Article XII of the Constitution. Dissatisfied with the RTC's judgment, Helmut appealed to the CA which upheld his
appeal. The CA ruled that: (1) Helmut merely prayed for reimbursement of the purchase price of the Antipolo property, and not that he be declared the
owner thereof; (2) Elena's ownership over this property was considered as ownership-in-trust for Helmut; (3) there is nothing in the Constitution which
prohibits Helmut from acquiring ownership of the house.

However, on a Petition for Review on Certiorari, this Court reversed the CA and reinstated the RTC's ruling. In sustaining the RTC, this Court once again
stressed the absolute character of the constitutional prohibition against ownership of lands in this country by foreigners or aliens:

The Court of Appeals erred in holding that an implied trust was created and resulted by operation of law in view of petitioner's marriage to respondent.
Save for the exception provided in cases of hereditary succession, respondent's disqualification from owning lands in the Philippines is absolute. Not
even an ownership in trust is allowed. Besides, where the purchase is made in violation of an existing statute and in evasion of its express provision, no
trust can result in favor of the party who is guilty of the fraud. To hold otherwise would allow circumvention of the constitutional
prohibition.47 (Citation omitted; Emphasis supplied)

The same absolute constitutional proscription was reiterated anew in the comparatively recent case of Matthews v. Taylor,48 erroneously invoked by
Taina. Taina claims that this case supports her position in the case at bench allegedly because, like her case, the alien or foreigner husband in
the Matthews case (Benjamin A. Taylor, a British subject) likewise provided the funds for the purchase of real property by his Filipino wife (Joselyn C.
Taylor) and this Court allegedly sustained said wife's ownership over the property. 49 That Taina's claim is a clear misapprehension of the thrust and
purport of the ruling enunciated in the Matthews case is put to rest by what this Court said there —
In light of the foregoing jurisprudence, we find and so hold that Benjamin has no right to nullify the Agreement of Lease between Joselyn and
petitioner. Benjamin, being an alien, is absolutely prohibited from acquiring private and public lands in the Philippines. Considering
that Joselyn appeared to be the designated 'vendee' in the Deed of Sale of said property, she acquired sole ownership there[of]. This is true even if we
sustain Benjamin's claim that he provided the funds for such acquisition. By entering into such contract knowing that it was illegal,
no implied trust was created in his favor; no reimbursement for his expenses can be allowed; and no declaration can be made that
the subject property was part of the conjugal/community property of the spouses. In any event, he had and has no capacity or personality to
question the subsequent lease of the Boracay property by his wife on the theory that in so doing, he was merely exercising the prerogative of a husband in
respect [to] conjugal property. To sustain such a theory would countenance indirect controversion of the constitutional prohibition. If
the property were to be declared conjugal, this would accord the alien husband a substantial interest and right over the land, as he
would then have a decisive vote as to its transfer or disposition. This is a right that the Constitution does not permit him to
have.(Citation omitted; emphasis and underscoring supplied)50

The other points raised by petitioner in the present Petition for Review are collateral or side issues and need not detain this Court any further. Suffice it
to say that the chief or main constitutional issue that has been addressed and resolved in the present Petition has effectively subsumed or relegated to
inconsequence the other collateral or side issues raised herein.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals dated August 16, 2010 and its Resolution dated February 22, 2011 in CA-
G.R. CV No. 02352 being in conformity with the law and with this Court's jurisprudential teachings, are hereby AFFIRMED in toto.

SO ORDERED.

G.R. No. 201883

SPOUSES DESIDERIO and TERESA DOMINGO, Petitioners

vs.
SPOUSES EMMANUEL and TITA MANZANO, FRANKLIN ESTABILLO, and CARMELITA AQUINO, Respondents

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 seeks to set aside: a) the January 4, 2012 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 93662 which
reversed the May 22, 2009 Decision3 of the Regional Trial Court (RTC) of Caloocan City, Branch 128 in Civil Case No. C-20102; and b) the CA's May 18,
2012 Resolution4 denying herein petitioners' Motion for Reconsideration.

Factual Antecedents

Respondents Emmanuel and Tita Manzano (the Manzanos) were the registered owners of a 35,281-square meter parcel of land with improvements in
Bagong Barrio, Caloocan City (subject property), covered by Transfer Certificate of Title (TCT) No. 160752.

On June 1, 2001, the Manzanos, through their duly appointed attorney-in-fact and herein co-respondent Franklin Estabillo (Estabillo), executed a
notarized agreement5 with petitioners Desiderio and Teresa Domingo which provided, among others, that –

Ako, si Desiderio Domingo na nakatira sa 188 Gen. Mascardo St. Bagong Barrio Kalookan City. Na bibilhin ko ang lupa at bahay ni Tita Manzano sa 168
Gen. Mascardo St. Bagong Barrio Kalookan City. Na ang may Special Power of Attorney si Franklin Estabillo sa halagang (₱900,000.00) nine hundred
thousand pesos. Sa aming napagkasunduan ako ay magbibigay ng halagang (₱l00,000.00) one hundred thousand pesos para sa Reservision [sic] Fee.

Ayon sa aming napagkasunduan ililipat lamang ang Titulo ng lupa na may no. 160752 at bahay pag nabayaran ko ng lahat ang (₱900,000.00) Nine
Hundred Thousand Pesos hanggang Marso ng 2001. Kami ay maghahati sa Gain Tax at documentary stamps na babayaran sa B.I.R. ayon sa aming
napagkasunduan.
Kalakip nito ang xerox title ng titulo ng lupa at bahay.6

Petitioners paid the ₱100,000.00 reservation fee upon the execution of the agreement. Thereafter, they also made payments on several occasions,
amounting to ₱160,000.00. However, they failed to tender full payment of the balance when the March 2001 deadline came.

Even then, Estabillo advised petitioners to continue their payments; thus, they made additional payments totaling ₱85,000.00. All in all, as of November
2001, petitioners had made payment in the amount of ₱345,000.00.

All this time, the Manzanos remained in possession of the subject property.

In December 2001, petitioners offered to pay the remaining ₱555,000.00 balance, but Estabillo refused to accept payment; instead, he advised
petitioners to await respondent Tita Manzano' s (Tita) arrival from abroad.

When Tita arrived, petitioners tendered payment of the balance, but the former refused to accept it. Instead, she told them that the property was no
longer for sale and she was forfeiting their payments.

For this reason, petitioners caused the annotation of an affidavit of adverse claim7 upon TCT No. 160752.

Soon thereafter, petitioners discovered that respondent Carmelita Aquino (Aquino) bought the subject property on May 7, 2002, and a new title – TCT
No. C-359293 – had been issued in her name. Their adverse claim was nevertheless carried over to Aquino's new title.

Ruling of the Regional Trial Court Against Aquino.. in favour of Domingo

On May 23, 2002, petitioners filed a Complaint for specific performance and damages with injunctive relief against respondents. The case was docketed
as Civil Case No. C-20102 and assigned to Branch 128 of the RTC of Caloocan City. Petitioners sought to compel the Manzanos to accept payment of the
remaining balance, execute a deed of sale over the subject property in their favor, and restrain the sale in favor of Aquino.

Petitioners later filed an Amended Complaint,8 praying further that Aquino's new title - TCT No. C-359293 - be cancelled and annulled, and that instead,
the Manzanos' TCT No. 160752 be reinstated, or alternatively, that a new title be issued in their name upon continuation of the sale in their favor and
payment of the outstanding balance.

In their respective Answers,9 Aquino and Estabillo alleged essentially that there was no sale between petitioners and the Manzanos, but a mere offer to
buy from petitioners, which was refused due to late payment; that the case was premature for failure to resort to conciliation; and that Aquino's new title
was indefeasible and may not be collaterally attacked. The Manzanos, who appear to be living in the United States of America, did not file a responsive
pleading, for which reason they were declared in default.

After the issues were joined, trial proceeded.

On May 22, 2009, the RTC issued a Decision declaring that, as against Aquino, petitioners have a prior right over the subject property. It held that the
agreement between petitioners and the Manzanos was a contract of sale. Applying Article 1544 of the Civil Code,10 the RTC held that Aquino was a
buyer in bad faith, as she knew of petitioners’ prior purchase and registered adverse claim – and such knowledge was
equivalent to registration, and thus, the registration of her sale was done in bad faith. Thus, the trial court decreed:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants as; follows:

1. The defendant Spouses Emmanuel and Tita Manzano are hereby ordered to execute a Deed of Absolute [sic] over a house and lot covered by Transfer
Certificate of Title No. 160752 of the Registry of Deeds of Kalookan City upon the tender of payment by the plaintiffs in the amount of Php555,000.00.

2. The Registry of Deeds is hereby ordered to cancel Transfer Certificate of Title No. C-35[9]293 issued in favor defendant [sic] Carmelita Aquino and
Transfer Certificate of Title No. 160752 is ordered reinstated.

3. The defendant Carmelita Aquino is hereby ordered to surrender possession of the property to the plaintiffs upon the execution of the necessary deed of
absolute sale.

4. The defendants Spouses Manzano and defendant Franklin Estabillo are hereby ordered to pay, jointly and severally, the plaintiffs the sum of
Php30,000.00 as reasonable attorney's fees.

5. The defendants Spouses Manzano and defendant Estabillo are likewise ordered to pay, jointly and severally, the costs of this suit.

SO ORDERED.11

Ruling of the Court of Appeals

Aquino filed an appeal before the CA, docketed as CA-G.R. CV No. 93662. The appellate court initially referred the case for mediation, but the parties
failed to settle amicably.
On January 4, 2012, the CA rendered the assailed Decision containing the following pronouncement:

We find for appellant.12

The crux of the instant petition is whether the agreement between the spouses Manzano and appellees 13 is a contract of sale, as the RTC ruled, or a
contract to sell, as appellant proposed. If it is a contract of sale, then Article 1544 of the Civil Code applies, and the RTC’s Decision stands on firm ground.
However, if the contract is merely a contract to sell, the propriety of applying Art. 1544 falters, and appellant’s principal thrust in her Brief deserves
discussion. Thus, the resolution of this issue is decisive.

x x x xCA: CONTRACT TO SELL..

We have applied the distinctions above and t1xamined the contract between the parties. In this regard, We differ from the RTC and find that the
Manzanos and appellees entered into a mere contract to sell.

We quote the following provision from the contract, which is particularly revealing of the contract's true nature:

'Ayon sa aming napagkasunduan, ililipat lamang ang Titulo ng lupa na may no. 160752 at bahay pag nabayaran ko ng lahat ng (₱900,000.00) Nine
Hundred thousand pesos hanggang Marso ng 2001.'

[Translated as: According to our agreement, the title of the land with no. 160752 and the house shall only be transferred when I have completely paid
the ₱900, 000. 00 by March 2001.]

The above passage clearly indicates that first, the ownership is reserved to the vendors, and second, that the title of the subject property passes to the
buyers only upon full payment of Php900,000.00 [in] March 2001. Additionally, appellees have never even granted possession of the subject property,
and that no deed of sale, absolute or conditional, has been executed in their favor. All have been held as indications that the contracting parties have
entered into a contract to sell.

Thus, with our determination of that character of the parties' agreement as a contract to sell, We now proceed to illuminate whether Art. 1544 indeed
applies to the situation at bar.

Applicability of Art. 1544 to Contracts to Sell NOT APPLICABLE

Relevant cases affirm an indubitable rule: Article 1544 only applies to instances of double sales, and not where one contract is some other transaction,
such as a contract to sell, even if the latter concurs with a contract of sale over the same realty.

In Cheng v. Genato, et al.,14 the Court succinctly clarified and explained the reason behind such inapplicability, to wit:

'However, a meticulous reading of the aforequoted provision (Art. l 544, Civil Code) shows that said law is not apropos to the instant case. This provision
connotes that the following circumstances must concur:

(a) The two (or more) sales transactions in the issue must pertain to exactly the same subject matter, and must be valid sales transactions.

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very same seller.’

These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has been consummated. The
contract to be binding upon the obligee or the vendor depends upon the fulfillment or non-fulfillment of an event.'

Later jurisprudence would then echo the above doctrine. Especially persuasive is the ruling in Spouses Nabus and Tolero v. Spouses Pacson,15 as its facts
closely resemble those at bar. Distilled, those facts show that the Nabuses (the sellers) entered into a contract with the Pacsons (the prospective buyers)
over a parcel of land. But the Pacsons failed to pay on time; this notwithstanding, the Nabuses still accepted their late payments. The Nabuses, however,
failed to appear on the designated date for the delivery of the final payment to them.

Later, the Pacsons heard that the land had been sold to Betty Tolero, a third party, later adjudged found to be buyer in bad faith. Tolero obtained a new
title over the property pursuant to the sale to her.

Thus, the Pacsons filed for the annulment of the deeds of sale, the cancellation of the titles issued in favor of the buyer Betty Tolero, and for damages.
The RTC and the CA ruled for the Pacsons, and against Betty Tolero.

The Supreme Court, however, disagreed, and upheld the rights from the latter contract of sale. The Court ruled:

'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.'

The Court found that the Pacsons could have consigned the amount to be paid to the Pacsons [sic], which would have produced the effect of payment and
fulfilled the suspensive condition in a contract to sell, hence obligating the prospective seller to transfer the title to the prospective buyers. The Pacsons,
however, failed to do so. In this case, appellees unfortunately committed the same error.

In any case, the foregoing principles result in the rule that in contracts to sell, specific performance is therefore an improper remedy to compel the seller
to execute the deed of sale before full payment of the purchase price. Thus, in the Nabus case, the Court held:

'Evidently, before the remedy of specific perfom1ance may be availed of, there must be a breach of the contract.

Under a contract to sell, the title of the thing to be sold is retained by the seller until the purchaser makes full payment of the agreed purchase price. Such
payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from
conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect. Thus, a
cause of action, for specific performance does not arise.'

As regards a subsequent 'buyer in bad faith' affecting prior contracts to sell, the peculiarities of a contract to sell, emphasized above, culminate in the
unique doctrine that in case a third person purchases a property subject of a prior contract to sell, such buyer is protected from the taint of bad faith
under Article 1544. Here the ruling in Spouses Cruz and Cruz v. Spouses Fernando and Fernando, 16 citing Coronel v. Court of Appeals17 enlightens, to
wit:

'In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition
such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no
defect in the owner-seller's title per se, but the latter, of course, may be sued for damages by the intending buyer.'

Considering these well-settled precedents, We rule that: first, the contract between the parties was a contract to sell; second, that since there are no
double sales over the same realty, Art. 1544 of the Civil Code is therefore inapplicable to the instant case; third, that because the contract between the
Manzanos and the appellees was a contract to sell, and appellees have not paid the full purchase price by full payment or consignment, specific
performance does not lie for a reconveyance of the property; and fourth, that by virtue of the inapplicability of Art. 1544 and the nature of a contract to
sell, appellant cannot be deemed in bad faith.

We find that such ruling soundly disposes of the other issues raised by appellant in her favor, thereby needing no further discussion.

In rendering Our pronouncement, We clarify that We are not unmindful of Filinvest Development Corporation v. Golden Haven Memorial Park18 which
appellees invoked in their Brief. In the Filinvestcase, where rights from a contract to sell clashed with those from a contract of sale over the same realty,
indeed the Court applied the principle of a "bad faith buyer" in a manner closely resembling an application of Art. 1544. However, the facts of that case
present a crucial difference. In Filinvest, no titles were yet issued in the subsequent buyer’s name; the subsequent buyer merely sought to annotate his
sales. As such, the holding in Spouses Cruz v. Fernando, i.e., that title to the property will transfer upon registration without the third person purchaser
being held in bad faith, has not yet, so to speak, locked in place against the intending buyer in the earlier contract to sell. Thus, before registration of the
sale, the vendee may still be held in bad faith and the sale to him annulled; but after registration, title will issue and the slighted intending buyer can only
recover damages from the seller, because, as the Spouses Cruz v. Fernando case emphasized, the owner-seller’s title suffers no defect per se.

This is not, however, to say that appellees are deprived of remedies. As found in the Nabus case, appellees are entitled to the reimbursement of the sums
they have paid, if only to prevent the defendants' unjust enrichment. Appellees are also entitled to nominal damages against the defendants Manzanos
and Estabillo. x x x

xxxx

In the matter of reimbursements, it bears stating that we are also aware that the appellees paid less than two years' installments on their contract. It is
thus relevant to discuss R.A. 6552, or the 'Realty Installment Buyer Act' which has been held applicable to contracts to sell realty on
installments.

Significantly, in Rillo v. Court of Appeals,19 the Court did not grant reimbursements under the law to the prospective buyer because the buyer paid less
than two year's installments. However, we find that this holding is inapplicable. In Rillo, the prospective buyer claimed reimbursement under Sec. 4 of
RA 6552. However, a reading of the law clarifies that Sec. 420 must be read in connection with Sec. 3, which provides:

‘Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium
apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as
amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to
the following rights in case he defaults in the payment of succeeding installments:x x x’

Clearly, the above provision and Sec. 4 apply only when the buyer defaults in payment. In case the defaulting buyer paid less than two years'
installments, RA. 6552 grants him no right to recover his installments. But appellees were not in default The acceptance by Estabillo of their late
installments waived the original period for payment, following Angeles v. Calasanz.21 We find that Estabillo's acceptance also bound his principals, the
Manzanos, who accepted the late payments, amounting to a tacit ratification of the agent's acts, and obligated the Manza.nos to comply with its
consequences. Therefore, the period to pay the balance has not yet lapsed and appellees were not in default.

Finally, we affirm the RTC's grant of attorney's fees and costs, as defendants' unilateral cancellation of the contract and subsequent sale to appellant,
without reimbursing appellees of their payments, constrained appellees to institute the present action to protect their interests.

WHEREFORE, the Petition is GRANTED. The Decision of the Regional Trial Court in Civil Case No. C-20102 dated 22 May 2009 is REVERSED and SET
ASIDE. Judgment is hereby rendered upholding the validity of the sale of the subject property made by defendants Emmanuel Manzano and Tita
Manzano in favor of appellant Carmelita Aquino, as well as the validity of Transfer Certificate of Title No. 359293 issued in the name of Carmelita
Aquino. Defendants Emmanuel Manzano and Tita Manzano and defendant Franklin Estabillo are ordered to reimburse appellees Spouses Desiderio and
Teresa Domingo the sum of Three Hundred and Forty Five Thousand Pesos (₱345,000.00) corresponding to the installment payments they have paid on
the subject property, with annual interest of twelve percent (12%) until fully paid. Defendants Emmanuel Manzano, Tita Manzano, and Franklin
Estabillo are likewise ordered jointly and severally to pay spouses Desiderio and Teresa Domingo nominal damages in the amount of Ten Thousand
Pesos (₱l0,000.00) and reasonable attorney's fees amounting to Thirty Thousand Pesos (₱30,000.00) each with annual interest of twelve percent (12%)
until fully paid. Costs against defendants Emmanuel Manzano, Tita Manzano, and Franklin Estabillo.

SO ORDERED.22

Petitioners filed a Motion for Reconsideration, which the CA denied in its subsequent May 18, 2012 Resolution. Hence, the present Petition.

Issues

In a March 24, 2014 Resolution,23 this Court resolved to give due course to the Petition, which contains the following assignment of errors:

1. THE COURT OF APPEALS ERRED IN NOT DISREGARDING THE ISSUE RAISED BY RESPONDENT AQUINO FOR THE FIRST TIME ON APPEAL
THAT ARTICLE 1544 OF THE CIVIL CODE IS NOT APPLICABLE TO THIS CASE.

2. THE COURT OF APPEALS ERRED IN HOLDING THAT ARTICLE 1544 IS NOT APPLICABLE TO THIS CASE.1âwphi1

3. THE COURT OF APPEALS ERRED IN NOT AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT OF CALOOCAN CITY.24

Petitioners' Arguments

In their Petition and Reply,25 petitioners contend that respondents Aquino and Estabillo are not entitled to the defense that Article 1544 is not applicable
in this case, since they did not include the same in their answers below; that the CA erred in not applying said Article 1544, in light of previous Supreme
Court rulings (Abarquez v. Court of Appeals26 and Filinvest Development Corporation v. Golden Haven Memorial Park Inc.27) to the effect that Article
1544 applies even when one of the double sale transactions involved is a mere contract to sell; that Aquino was a purchaser in bad faith as she clearly
knew of the prior sale in their favor through the adverse claim annotated on TCT No. 160752; and that their annotation of an adverse claim on TCT No.
160752 is equivalent to registration of ownership.28

Respondent Aquino's Arguments

Pleading affirmance, Aquino argues in her Comment (With Manifestation)29 that as correctly ruled by the CA, Article 1544 does not apply, and she is not
barred from arguing so to refute petitioners' insistence that the said provision applies; that it was the RTC that introduced the applicability of Article
1544 to the case through its May 22, 2009 Decision - thus, the necessity of arguing against it arose only on appeal; and that the agreement between the
Manzanos and petitioners being a contract to sell, Article 1544 cannot apply since as between them, no sale or transfer of ownership occurred, and when
petitioners failed to pay the purchase price in full, no breach of contract necessarily occurred, but the agreement between them simply became ineffective
and without force and effect. Finally, Aquino contends that the cited cases of Abarquez v. Court of Appeals and Filinvest Development Corporation v.
Golden Haven Memorial Park, Inc. are not applicable in this case, as misrepresented by petitioners: Abarquez does not involve a contract to sell, while
the Court clearly did not apply Article 1544 in Filinvest.

W/N 1544 is applicable. No

Our Ruling

The Court denies the Petition.

On petitioners' contention that respondent Aquino may not raise the issue pertaining to Article 1544 for the first time on appeal, this Court holds that –
as correctly noted by Aquino - since the relevance of Article 1544 was tackled only in the RTC's Decision, then it is understandable why she should refute
its applicability only on appeal.
Petitioners' main contention is that while their agreement with the Manzanos was admittedly a mere contract to sell where title is retained by the latter
until full payment of the price, they nonetheless have a superior right over the subject property, as against Aquino, by virtue of the applicability of Article
1544 and the fact that Aquino was a buyer in bad faith.

This Court, however, agrees with the CA' s pronouncement that Article 1544 cannot apply to the present case.1âwphi1 The appellate court' s disquisition
is succinct; nothing more can be added to what it has said. Just the same, the treatment and disposition of cases of this nature is quite settled.

This ponente has had the occasion to rulethat in a contract to sell, payment of the price is a positive suspensive condition, failure of which is not a breach
of contract warranting rescission but rather just an event that prevents the prospective buyer from compelling the prospective seller to convey title. In
other words, the non-fulfillment of the condition of full payment renders the contract to sell ineffective and without force and effect. 30

x x x A contract to sell is one where the prospective seller reserves the transfer of title to the prospective buyer until the happening of an event, such as
full payment of the purchase price. What the seller obliges himself to do is to sell the subject property only when the entire amount of the purchase price
has already been 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'. x x x31

And it is precisely for the above reason that Article 1544 of the Civil Code cannot apply. Since failure to pay the price in full in a contract to sell renders
the same ineffective and without force and effect, then there is no sale to speak of. Even petitioners' posture that their annotation of an adverse claim on
TCT No. 160752 is equivalent to registration or claim of ownership necessarily fails, on account of the fact that there was never a sale in their favor - and
without a sale in their favor, they could not register or claim ownership of the subject property. Thus, as between the parties to the instant case, there
could be no double sale which would justify the application of Article 1544. Petitioners failed to pay the purchase price in full, while Aquino
did, and thereafter she was able to register her purchase and obtain a new certificate of title in her name. As far as this Court is
concerned, there is only one sale - and that is, the one in Aquino's favor. "Since there is only one valid sale, the rule on double sales under Article 1544 of
the Civil Code does not apply."32

With regard to the cases cited by petitioners, Abarquez v. Court of Appeals and Filinvest Development Corporation v. Golden Haven Memorial Park,
Inc., suffice it to state that they do not apply, In Abarquez, while the agreement entered into was a contract to sell, the land subject of the sale was
nonetheless delivered to the buyer, who took possession thereof and even constructed a house thereon. In the present case, the subject property was
never surrendered to petitioners and they were never in possession thereof. There is a difference in the factual milieu. On the other hand,
the Filinvest case is not one involving Article 1544; and while the Court therein held that a notice of adverse claim is a "warning to third parties dealing
with the property that someone claims an interest in it or asserts a better right than the registered owner,"33 this is not true as regards petitioners, As
already stated, petitioners' failure to pay the price in full rendered their contract to sell ineffective and without force and effect, thus nullifying any claim
or better right they may have had.

WHEREFORE, the Petition is DENIED. The January 4, 2012 Decision and May 18, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 93662
are AFFIRMED with MODIFICATION, in that the monetary awards shall earn interest at the rate of 12% per annum up to June 30, 2013; thereafter,
the rate of interest shall be 6% per annum until judgment is fully satisfied.34

SO ORDERED.

G.R. No. 200009

SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L. LUMBRES and REBECCA T. ROARING, Petitioners
vs.
SPOUSES PEDRO TABLADA, JR. and ZENAIDA TABLADA, Respondents

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Decision 1 dated May 31,
2011 and Resolution2 dated January 4, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 94352 which reversed and set aside the Decision3 dated
September 1, 2009, of the Regional Trial Court (RTC), Branch 92, Calamba City.

The factual antecedents are as follows.

On October 12, 1992, petitioners, Spouses Pedro L. Lumbres and Rebecca T. Roaring, (Spouses Lumbres) entered into a Joint Venture Agreement with
Spring Homes Subdivision Co., Inc., through its chairman, the late Mr. Rolando B. Pasic, for the development of several parcels of land consisting of an
area of 28,378 square meters. For reasons of convenience and in order to facilitate the acquisition of permits and licenses in connection with the project,
the Spouses Lumbres transferred the titles to the parcels of land in the name of Spring Homes.4

On January 9, 1995, Spring Homes entered into a Contract to Sell with respondents, Spouses Pedro Tablada, Jr. and Zenaida Tablada, (Spouses
Tablada) for the sale of a parcel of land located at Lot No. 8, Block 3, Spring Homes Subdivision, Barangay Bucal, Calamba, Laguna, covered by Transfer
Certificate of Title (TCT) No. T-284037. On March 20, 1995, the Spouses Lumbres filed with the RTC of Calamba City a complaint for Collection of Sum
of Money, Specific Performance and Damages with prayer for the issuance of a Writ of Preliminary Attachment against Spring Homes for its alleged
failure to comply with the terms of the Joint Venture Agreement.5 Unaware of the pending action, the Spouses Tablada began constructing their house on
the subject lot and thereafter occupied the same. They were then issued a Certificate of Occupancy by the Office Building Official. Thereafter, on January
16, 1996, Spring Homes executed a Deed of Absolute Sale in favor of the Spouses Tablada, who paid Spring Homes a total of ₱1 79,500.00, more than the
₱157,500.00 purchase price as indicated in the Deed of Absolute Sale.6 The title over the subject property, however, remained with Spring Homes for its
failure to cause the cancellation of the TCT and the issuance of a new one in favor of the Spouses Tablada, who only received a photocopy of said title.

Subsequently, the Spouses Tablada discovered that the subject property was mortgaged as a security for a loan in the amount of over ₱4,000,000.00
with Premiere Development Bank as mortgagee and Spring Homes as mortgagor. In fact, since the loan remained unpaid, extrajudicial proceedings were
instituted. 7 Meanwhile, without waiting for trial on the specific performance and sum of money complaint, the Spouses Lumbres and Spring Homes
entered into a Compromise Agreement, approved by the Calamba RTC on October 28, 1999, wherein Spring Homes conveyed the subject property, as
well as several others, to the Spouses Lumbres.8 By virtue of said agreement, the Spouses Lumbres were authorized to collect Spring Homes' account
receivables arising from the conditional sales of several properties, as well as to cancel said sales, in the event of default in the payment by the
subdivision lot buyers. In its capacity as mortgagee, Premiere Development Bank was included as a party in the Compromise Agreement. 9

In the exercise of the power granted to them, the Spouses Lumbres started collecting deficiency payments from the subdivision lot buyers. Specifically,
they sent demand letters to the Spouses Tablada for the payment of an alleged outstanding balance of the purchase price of the subject property in the
amount of P230,000.00. Vv'hen no payment was received, the Spouses Lumbres caused the cancellation of the Contract to Sell previously executed by
Spring Homes in favor of the Spouses Tablada. On December 22, 2000, the Spouses Lumbres and Spring Homes executed a Deed of Absolute Sale over
the subject property, and as a result, a new title, TCT No. T-473055, was issued in the name of the Spouses Lumbres. 10

On June 20, 2001, the Spouses Tablada filed a complaint for Nullification of Title, Reconveyance and Damages against Spring Homes and the Spouses
Lumbres praying for the nullification of the second Deed of Absolute Sale executed in favor of the Spouses Lumbres, as well as the title issued as a
consequence thereof, the declaration of the validity of the first Deed of Absolute Sale executed in their favor, and the issuance of a new title in their
name. 11 The Sheriffs Return dated August 1, 2001 indicated that while the original copy of the complaint and the summons were duly served upon the
Spouses Lumbres, summons was not properly served upon Spring Homes because it was reportedly no longer existing as a corporate entity. 12

On August 14, 2001, the Spouses Lumbres filed a Motion to Dismiss the case against them raising as grounds the non-compliance with a condition
precedent and lack of jurisdiction of the RTC over the subject matter. They alleged that the Spouses Tablada failed to avail of conciliatory proceedings,
and that the RTC has no jurisdiction since the parties, as well as property in question, are all located at Calamba City, and that the action instituted by the
Spouses Tablada praying for the nullification of the Compromise Agreement actually corresponds to a nullification of a judgement issued by a co-equal
trial court. The Spouses Tablada opposed by alleging that Spring Homes holds office at Parafiaque City, falling under the exception from the requirement
of barangay conciliatory proceedings and that the action they filed was for nullification of title issued to the Spouses Lumbres as a result of a double sale,
which is rightly under the jurisdiction of the trial court. They also emphasized that as non-parties to the Compromise Agreement, the same is not binding
upon them. The Motion to Dismiss was eventually denied by the trial court on October 2, 2001. 13

Interestingly, on even date, the Spouses Lumbres filed an ejectment suit of their own before the Municipal Trial Court in Cities (MTCC) of Calamba City
demanding that the Spouses Tablada vacate the subject property and pay rentals due thereon. The MTCC, however, dismissed the suit ruling that the
Spouses Lumbres registered their title over the subject property in bad faith. Such ruling was reversed by the RTC which found that there was no valid
deed of absolute sale between the Spouses Tablada and Spring Homes. Nevertheless, the CA, on appeal, agreed with the MTCC and reinstated the
decision thereof. This was affirmed by the Court in Spouses Lumbres v. Spouses Tablada 14 on February 23, 2007.

Meanwhile, on the nullification and reconveyance of title suit filed by the Spouses Tablada, the R TC noted that Spring Homes has not yet been
summoned. This caused the Spouses Tablada to move for the discharge of Spring Homes as a party on the ground that the corporation had already
ceased to exist. The Spouses Lumbres, however, opposed said motion claiming that Spring Homes is an indispensable party. 15 The RTC ordered the
motion to be held in abeyance until the submission of proof on Spring Homes' corporate status. In the meantime, trial ensued. Eventually, it was shown
that Spring Homes' certificate of registration was revoked on September 29, 2003. 16

On September 1, 2009, the RTC rendered its Decision dismissing the Spouses Tablada's action for lack of jurisdiction over the person of Spring Homes,
an indispensable party. 17 According to the trial court, their failure to cause the service of summons upon Spring Homes was fatal for Spring Homes was
an indispensable party without whom no complete determination of the case may be reached. 18 In support thereof, the RTC cited the pronouncement
in Uy v. CA, et. al. 19that the absence of an indispensable party renders all subsequent actuations of the court null and void for want of authority to act
not only as to the absent parties but even as to those present.20 In the instant case, the Spouses Tablada prayed that the Deed of Absolute Sale executed
by Spring Homes in favor of the Spouses Lumbres be declared null and void and that Spring Homes be ordered to deliver the owner's duplicate
certificate of title covering the subject lot. Thus, without jurisdiction over Spring Homes, the case could not properly proceed. 21 The RTC added that the
Spouses Tablada's subsequent filing of the motion to discharge does serve as an excuse for at that time, the certificate of registration of Spring Homes
had not yet been cancelled or revoked by the Securities and Exchange· Commission (SEC). In fact, the assumption that it was already dissolved when the
suit was filed does not cure the defect, because the dissolution of a corporation does not render it beyond the reach of courts considering the fact that it
continues as a body corporate for the winding up of its affairs.22

In its Decision dated May 31, 2011, however, the CA reversed and set aside the RTC Decision finding that Spring Homes is not an indispensable party. It
held that Spring Homes may be the vendor of the subject property but the title over the same had already been issued in the name of the Spouses
Lumbres. So any action for nullification of the said title causes prejudice and involves only said spouses, the registered owners thereof. Thus, the trial
court may very well grant the relief prayed for by the Spouses Lumbres.23 In support thereof, the appellate court cited the ruling in Seno, el. al. v.
Mangubat, et. al. 24 wherein it was held that in the annulment of sale, where the action was dismissed against defendants who, before the filing of said
action, had sold their interests in the subject land to their codefendant, the said dismissal against the former, who are only necessary parties, will not bar
the action from proceeding against the latter as the remaining defendant, having been vested with absolute title over the subject property. 25 Thus, the CA
maintained that the R TC' s reliance on Uy v. CA is misplaced for in said case, it was imperative that an assignee of interests in certain contracts be
impleaded, and not the assignor, as the RTC interpreted the ruling to mean. Thus, the doctrine in Uy actually bolsters the finding that it is the Spouses
Lumbres, as assignee of the subject property, and not Spring Homes, as assignor, who are the indispensable parties.26

Moreover, considering that the RTC had already concluded its trial on the case and the presentation of evidence by both parties, the CA deemed it proper
to proceed to rule on the merits of the case. At the outset, the appellate court noted that the ruling of the Court in Spouses Lumbres v. Spouses Tablada
back in 2007 cannot automatically be applied herein for said ruling involves an ejectment case that is effective only with respect to the issue of possession
and cannot be binding as to the title of the subject property.

This notwithstanding, the CA ruled that based on the records, the first sale between Spring Homes and the Spouses Tablada must still be upheld as valid,
contrary to the contention of the Spouses Lumbres that the same was not validly consummated due to the Spouses Tablada's failure to pay the full
purchase price of P409,500.00. According to the appellate court, the first Deed of Absolute Sale clearly indicated that the consideration for the subject
property was ₱157,500.00.27 The Spouses Lumbres' argument that such Deed of Absolute Sale was executed only for the purpose of securing a loan from
PAG-IBIG in favor of the Spouses Tablada was unsubstantiated. In fact, even the second Deed of Absolute Sale executed by Spring Homes in favor of the
Spouses Lumbres, as well as several receipts presented, indicated the same amount of ₱157,500.00 as purchase price. As for the amount of ₱409,500.00
indicated in the Contract to Sell executed between Spring Homes and the Spouses Tablada, the CA adopted the findings of the Court in Spouses Lumbres
v. Spouses Tablada in 2007 and held that the amount of ₱409,500.00 is actually composed not only of the subject parcel of land but also the house to be
constructed thereon. But since it was proven that it was through the Spouses Tablada's own hard-earned money that the house was constructed, there
existed no balance of the purchase price in the amount of ₱230,000.00 as the Spouses Lumbres vehemently insist, viz. :

Further, the spouses Lumbres alleged that what was legal and binding between Spring Homes and plaintiffs-appellants [spouses Tablada] was the
Contract to Sell which, in part, reads:

3. That the SELLER, for and in consideration of the payments and other terms and conditions hereinafter to be designated, has offered to sell and the
BUYER has agreed to buy certain parcel of land more particularly described as follows:

Blk. No. Lot Area Sq. Price per sq. Total Selling
P-111 No. Meter Meter Price

3 8 105 P1,500

42 6,000

₱409,500

Similar to the ruling of the Supreme Court in Spouses Lumbres v. Spouses Tablada, despite there being no

question that the total land area of the subject property was One Hundred Five (105) square meters, there appears in the said contract to sell a numerical
value of Forty Two (42) square meters computed at the rate of Six Thousand Pesos (₱6,000.00) per square meter. We agree with the findings of the
Supreme Court in this regard that the Forty Two (42) square meters referred only to the land area of the house to be constructed in
the subject property. Since the spouses Lumbres failed to disprove the plaintiffs-appellants [spouses Tablada] claim that it was
through their own hard earned money that enabled them to fund the construction and completion of their house and not Spring
Homes, there existed no balance of the purchase price to begin with. It is important to note that what the plaintiffs-appellants
[spouses Tablada] bought from Spring Homes was a vacant lot. Nowhere in the Deed of Absolute Sale executed between plaintiffs-
appellants [spouses Tablada] and Spring Homes was it indicated that the improvements found thereon form part of the subject
property, lest, that any improvements existed thereto. It was only through the plaintiffs-appellants [spouses Tablada] own efforts
that a house was constructed on the subject property.28

The appellate court further stressed that at the time when the Spouses Tablada entered into a contract of sale with Spring Homes, the title over the
subject property was already registered in the name of Spring Homes. Thus, the Deed of Absolute Sale between Spring Homes and the Spouses Tablada
was valid and with sufficient consideration for every person dealing with a registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will, in no way, oblige him to go beyond the certificate to determine the condition of the property.29

In the end, the CA upheld the ruling of the Court in Spouses Lumbres v. Spouses Tablada that notwithstanding the fact that the Spouses Lumbres, as the
second buyer, registered their Deed of Absolute Sale, in contrast to the Spouses Tablada who were not able to register their Deed of Absolute Sale
precisely because of Spring Home's failure to deliver the owner's copy of the TCT, the Spouses Tablada's right could not be deemed defeated as the
Spouses Lumbres were in bad faith for even before their registration of their title, they were already informed that the subject property was already
previously sold to the Spouses Tablada, who had already constructed their house thereon.30 Thus, the CA disposed the case as follows:

WHEREFORE, in view of the foregoing premises, the instant appeal is hereby GRANTED. The assailed Decision dated September 1, 2009 in Civil Case
No. 3117-2001-C is hereby ANNULLED AND SET ASIDE. Accordingly, the Register of Deeds of Calamba, Laguna, is hereby directed to cancel Transfer
Certificate of Title No. T-473055 registered in the name of the defendants-appellees spouses Pedro L. Lumbres and Rebecca T. Roaring Lumbres and, in
lieu thereof, issue a new one in the name of plaintiffs-appellants.

SO ORDERED.31

When their Motion for Reconsideration was denied by the CA in its Resolution dated January 4, 2012, the Spouses Lumbres filed the instant petition
invoking the following arguments:

I.

THE COURT OF APPEALS ERRED IN NOT DISMISSING THE APPEAL FOR LACK OF JURISDICTION OF THE TRIAL COURT OVER THE PERSON
OF SPRING HOMES AS AN INDISPENSABLE PARTY.

II.

THE COURT OF APPEALS ERRED IN ORDERING THAT RESPONDENTS, NOT PETITIONERS, WERE PURCHASERS OF THE PROPERTY IN GOOD
FAITH, WHICH IS NOT IN ACCORD WITH ESTABLISHED FACTS, LAW, AND JURISPRUDENCE.

In the instant petition, the Spouses Lumbres insist that the Spouses Tablada have not yet paid the balance of the purchase price of the subject property in
the amount of ₱230,000.00 despite repeated demands.32 They also insist that since Spring Homes, an indispensable party, was not duly summoned, the
CA should have affirmed the RTC's dismissal of the instant complaint filed by the Spouses Tablada for lack of jurisdiction. 33 Citing the RTC's Decision,
the Spouses Lumbres reiterated that even assuming that Spring Homes had been dissolved at the time of the filing of the complaint, the same does not
excuse the failure to implead it for it still continues as a body corporate for three (3) years after revocation of its certificate of incorporation.34 .

Moreover, the Spouses Lumbres faulted the CA in upholding the findings of the Court in the 2007 case entitled Spouses Lumbres v. Spouses Tablada for
the issue therein only involves physical possession and not ownership. Contrary to the findings of the CA, the Spouses Lumbres claim that the Spouses
Tablada were not purchasers in good faith for their failure to react to their repeated demands for the payment of the ₱230,000.00.35 In fact, the Spouses
Tablada even admitted that they would pay the ₱230,000.00 upon the release of the PAG-IBIG loan.36 Thus, the purported Deed of Absolute Sale
between Spring Homes and the Spouses Tablada is void for having no valuable consideration, especially since it was issued merely for purposes of the
loan application from PAG-IBIG. On the other hand, the Spouses Lumbres claim that they were in good faith since the First Deed of Absolute Sale
between Spring Homes and the Spouses Tablada was not annotated at the back of the subject property's title.37

The petition is bereft of merit.

At the outset, it must be noted that Spring Homes is not an indispensable party. Section 7, 38 Rule 3 of the Revised Rules of Court defines indispensable
parties as parties-in-interest without whom there can be no final determination of an action and who, for this reason, must be joined either as plaintiffs
or as defendants. 39 Time and again, the Court has held that a party is indispensable, not only if he has an interest in the subject matter of the
controversy, but also if his interest is such that a final decree cannot be made without affecting this interest or without placing the controversy in a
situation where the final determination may be wholly inconsistent with equity and good conscience.40 He is a person whose absence disallows the court
from making an effective, complete, or equitable determination of the controversy between or among the contending parties.41 Conversely, a party is not
indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not
necessarily be prejudiced by a judgment which does complete justice to the parties in court.42 If his presence would merely permit complete relief
between him and those already parties to the action or will simply avoid multiple litigation, he is not indispensable.

In dismissing the complaint for lack of jurisdiction, the trial court relied on Uy v. CA, et. al. 43 and held that since Spring Homes, an indispensable party,
was not summoned, it had no authority to proceed. But as aptly observed by the CA, the doctrine in Uy hardly serves as basis for the trial court's
conclusions and actually even bolsters the finding that it is the Spouses Lumbres, as assignee of the subject property, and not Spring Homes, as assignor,
who are the indispensable parties. In said case, the Public Estates Authority (PEA), tasked to complete engineering works on the Heritage Memorial Park
project, assigned all of its interests therein to Heritage Park Management Corporation (HPMC). When a complaint was filed against the PEA in
connection with the project, the Court affirmed the dismissal thereof holding that HPMC, as assignee of PEA's interest, should have been impleaded,
being the indispensable party therein. The pertinent portion of the Decision states:

Based on the Constmction Agreement, PEA entered into it in its capacity as Project Manager, pursuant to the PFT A. According to the provisions of
the PFT A, upon the formation of the HPMC, the PEA would turn over to the HPMC all the contracts relating to the Heritage Park.
At the Hme of the filing of the CIAC Case on May 31, 2001, PEA ceased to be the Project Manager of the Heritage Park Project,
pursuant to Section 11 of the PFT A. Through a Deed of Assignment, PEA assigned its interests in all the existing contracts it entered
into as the Project Manager for Heritage Park to HPMC. As early as March 17, 2000, PEA officially turned over to HPMC all the documents and
equipment in its possession related to the Heritage Park Project. Petitioner was duly informed uf these incidents through a letter dated March 13,
2000. Apparently, as of the date of the filing of the CIAC Case, PEA is no Jonger a party-in-interest. Instead, it is now CIAC Case,
PEA is no longer a party-in-interest. Instead, it is now private respondent HPMC, as the assignee, who stands to be benefited or
injured by the judgement in the suit. In its absence, here cannot be a resolution of the dispute of the parties before the court which
is effective , complete or equitable. We thus reiterate that HPMC is an indispensable party.44

Moreover, as held by the CA, the pronouncement in Sena, et. al. v. Mangubat, et. al.45 is instructive.1âwphi1 In said case, the petitioner therein entered
into an agreement with certain respondents over a parcel of land, which agreement petitioner believed to be merely an equitable mortgage but
respondents insisted to be a sale. The agreement, however, was embodied in a document entitled "Deed of Absolute Sale." Consequently, respondents
were able to obtain title over the property in their names. When two of the three respondents sold their shares to the third respondent, the third
respondent registered the subject property solely in his name. Thereafter, the third respondent further sold said property to another set of persons.
Confronted with the issue of whether the two respondents who sold their shares to the third respondent should be impleaded as indispensable parties in
an action filed by petitioner to reform the agreement and to annul the subsequent sale, the Court ruled in the negative, viz.:

The first issue We need to resolve is whether or not defendants Andres Evangelista and Bienvenido Mangubat are indispensable
parties. Plaintiffs contend that said defendants being more dummies of defendant Marcos Mangubat and therefore not real parties in interest, there is
no room for the application of Sec. 7, Rule 3 of the Revised Rules of Court.

xxxx

In the present case, there are no rights of defendants Andres Evangelista and Bienvenido Mangubat to be safeguarded if the sale
should be held to be in fact an absolute sale nor if the sale is held to be an equitable mortgage. Defendant Marcos Mangubat became
the absolute owner of the subject property by virtue of the sale to him of the shares of the aforementioned defendants in the
property. Said defendants no longer have any interest in the subject property. However, being parties to the instrument sought to be
reformed, their presence is necessary in order to settle all the possible issues of tile controversy. Whether the disputed sale be declared an absolute sale
or an equitable mortgage, the rights of all the defendants will have been amply protected. Defendants-spouses Luzame in any event may enforce their
rights against defendant Marcos Mangubat. 46

Similarly, by virtue of the second Deed of Absolute Sale between Spring Homes and the Spouses Lumbres, the Spouses Lumbres became the absolute and
registered owner of the subject property herein. As such, they possess that certain interest in the property without which, the courts cannot proceed for
settled is the doctrine that registered owners of parcels of land whose title is sought to be nullified should be impleaded as an indispensable
party.47 Spring Homes, however, which has already sold its interests in the subject land, is no longer regarded as an indispensable party, but is, at best,
considered to be a necessary party whose presence is necessary to adjudicate the whole controversy, but whose interests are so far separable that a final
decree can be made in-its absence without affecting it.48 This is because when Spring Homes sold the property in question to the Spouses Lumbres, it
practically transferred all its interests therein to the said Spouses. In fact, a new title was already issued in the names of the Spouses Lumbres. As such,
Spring Homes no longer stands to be directly benefited or injured by the judgment in the instant suit regardless of whether the new title registered in the
names of the Spouses Lumbres is cancelled in favor of the Spouses Tablada or not. Thus, contrary to the ruling of the RTC, the failure to summon Spring
Homes does not deprive it of jurisdiction over the instant case for Spring Homes is not an indispensable party.

On the merits of the case, the Court likewise affirms the findings of the CA. The issue here involves what appears to be a double sale. First, the Spouses
Tablada entered into a Contract to Sell with Spring Homes in 1995 which was followed by a Deed of Absolute Sale in 1996. Second, in 2000, the Spouses
Lumbres and Spring Homes executed a Deed of Absolute Sale over the same property. The Spouses Lumbres persistently insist that the first Deed of Sale
executed by the Spouses Tablada is void for having no valuable consideration. They argue that out of the ₱409,500.00 purchase price under the Contract
to Sell, the Spouses Tablada merely paid ₱179,500.00, failing to pay the rest in the amount of ₱230,000.00 despite demands

There is no merit in the contention.

As the CA held, it is clear from the first Deed of Absolute Sale that the consideration for the subject property is ₱157,500.00. In fact, the same amount
was indicated as the purchase price in the second Deed of Absolute Sale between Spring Homes and the Spouses Lumbres. As for the varying amounts
contained in the Contract to Sell, the Court notes that the same has already been duly addressed by the Court in the 2007 Spouses Lumbres v. Spouses
Tablada 49 case, the pertinent portions of which states:

In claiming their rigt of possession over the subject lot, petitioners made much of the judicially approved Compromise Agreement in Civil Case No. 2194-
95-C, wherein Spring Homes' rights and interests over the said lot under its Contract to Sell with the respondents were effectively assigned to
them. Petitioners argue that out of the whole 1!409,500.00 purchase price under the respondents Contract to Sell with Spring
Homes, the respondents were able to pay only ₱179,500.00, leaving a balance of ₱230,000.00.

Upon scrutiny, however, the CA astutely observed that despite there being no question that the total land area of the subject lot is 105 square meters, the
Contract to Sell executed and entered into by Spring Homes and the respondent spouses states:

3. That the SELLER, for and in consideration of the payments and other terms and conditions hereinafter to be designated, has offered to sell and the
BUYER has agreed to buy certain parcel of land more particularly described as follows:

Per Total
Blk. No. P- Area Sq. Price sq.
Lot No. Selling
111 Meter Meter
Price

3 8 105 P1,500

42 6,000

P409,500

The two deeds of absolute sale as well as the respondents' Tax Declaration No. 019-1342 uniformly show that the land area of the
property covered by TCT No. T-284037 is 105 square meters. The parties never contested its actual land area.
However, while there is only one parcel of land being sold, which is Lot 8, Blk. 3, paragraph "1" above of the Contract to Sell speaks
of two (2) land areas, namely, "105" and "42," and two (2) prices per square meter, to wit: "₱1,500" and "₱6,000." As correctly
observed by the CA:

It does not require much imagination to understand why figures "3," "8," "105" and "Fl,500" appear in the paragraph "l" of the Contract to Sell. Certainly
"3" stands for "Blk. No.," "8" stands for "Lot No.," "105" stands for the land area and "Fl ,500" stands for the price per square meter. However, this Court
is perplexed as regards figures "42" and "6,000" as they are not accompanied by any "Blk. No." and/or "Lot No." In other words, while there is only one
parcel of land being sold, paragraph "l" of the Contract to Sell contains two land areas and two prices per square meter. There is no reason for the
inclusion of land area in the computation when it was established beyond cavil that the total area being sold is only 105 square meters. Likewise, there is
no explanation why there is another rate for the additional 42 square meters, which was pegged at ₱6,000 per square meter, while that of 105 square
meters was only ₱1,500.00.

The CA could only think of one possible explanation: the Contract to Sell refers only to a single lot with a total land area of 10 square
meters. The 42 square meters mentioned in the same contract and therein computed at the rate of 1!6,000 per square meter refer
to the cost of the house which would be constructed by the respondents on the subject lot through a Pag-lbig loan. The land area of the
house to be constructed was pegged at 42 square meters because of the following restrictions in the Contract to Sell:

9. The lot(s) subject matter of this contract are subject to the following restrictions:

a) Any building which may be constructed at anytime in said lot(s) must be strong x x x. Said building must not be constructed at a distance ofless than
(2) meters from any boundaries of the lot(s).

b) The total area to be voted to buildings or structures shall not exceed eighty percent (80%) of the total area of the lot(s).50

Thus, while the Spouses Lumbres would like Us to believe that based on the Contract to Sell, the total selling price of the subject property is
₱409,500.00, the contract itself, as well as the surrounding circumstances following its execution, negate their argument. As appropriately found by the
Court, said amount actually pertains to the sum of: (1) the cost of the land area of the lot at 105 square meters priced at ₱1,500 per square meter; and (2)
the cost of the house to be constructed on the land at 42 square meters priced at ₱6,000 per square meter. But it would be a grave injustice to hold the
Spouses Tablada liable for more than the cost of the land area when it was duly proven that they used their own funds in the construction of the house.
As shown by the records, the Spouses Tablada was forced to use their own money since their PAG-IBIG loan application did not materialize, not through
their own fault, but because Spring Homes failed, despite repeated demands, to deliver to them the owner's duplicate copy of the subject property's title
required by the loan application. In reality, therefore, what Spring Homes really sold to the Spouses Tablada was only the lot in the amount of
₱157,500.00, since the house was constructed thereon using the Spouses Tablada's own money. In fact, nowhere in the Contract to Sell was it stated that
the subject property includes any improvement thereon or that the same even exists. Moreover, as previously mentioned, in both the first and second
Deeds of Absolute Sale, it was indicated that the amount of the property subject of the sale is only ₱157,500.00. Accordingly, the Court held further
in Spouses Lumbres v. Spouses Tablada:

Looking at the above-quoted portion of the Contract to Sell, the CA found merit in the respondents' contention that the total selling
price of P409,500 includes not only the price of the lot but also the cost of the house that would be constructed thereon. We are A
inclined to agree. The CA went on to say:

It could be argued that the contract to sell never mentions the construction of any house or building on the subject property. Had it
been the intention of the parties that the total selling price would include the amount of the house that would be taken from a loan
to be obtained from Pag-Ibig, they could have specified so. However, one should not lose sight of the fact that the contract to sell is
an accomplished form. [Respondents,] trusting Spring Homes, could not be expected to demand that another contract duly
reflective of their agreements be utilized instead of the accomplished form. The terms and conditions of the contract may not contemplate
the inclusion of the cost of the house in the total selling price, but the entries typewritten thereon sufficiently reveal the intentions of the parties.

The position of the [respondents] finds support in the documents and subsequent actuations of Bertha Pasic, the representative of
Spring Homes. [Respondents] undeniably proved that they spent their own hard-earned money to construct a house thereon after
their Pag-lbig loan did not materialize. It is highly unjust for the [respondents] to pay for the amount of the house when the loan
did not materialize due to the failure of Spring Homes to deliver the owner's duplicate copy of TCT No. T-284037.

xxxx

If the total selling price was indeed ₱409,500.00, as [petitioners] would like to poster, said amount should have appeared as the
consideration in the deed of absolute sale dated January 15, 1996.1awp++i1 However, only ₱157,500.00 was stated. The amount stated
in the Deed of Absolute Sale dated January 15, 1996 was not only a portion of the selling price, because the Deed of Sale dated December 22, 2000 also
reflected P.157,500.00 as consideration. It is not shown that [petitioners] likewise applied for a loan with Pag-Ibig. The reasonable inference is that
the consistent amount stated in the two Deeds of Absolute Sale was the true selling price as it perfectly jibed with the computation
in the Contract to Sell.

We find the CA's reasoning to be sound. At any rate, the execution of the January 16, 1996 Deed of Absolute Sale in favor of the respondents effectively
rendered the previous Contract to Sell ineffective and canceled. Furthermore, we find no merit in petitioners' contention that the first sale to the
respondents was void for want of consideration. As the CA pointed out in its assailed decision:

Other than the [petitioners'] self-serving assertion that the Deeds of Absolute Sale was executed solely for the purpose of obtaining
a Pag-Ibig loan, no other concrete evidence was tendered to justify the execution of the deed of absolute sale. They failed to overcome
the clear and convincing evidence of the [respondents] that as early as July 5, 1995 the latter had already paid the total amount of :P.179,500.00, much
bigger than the actual purchase price for the subject land. 51
There is, therefore, no factual or legal basis for the Spouses Lumbres to claim that since the Spouses Tablada still had an outstanding balance of
₱230,000.00 from the total purchase price, the sale between Spring Homes and the Spouses Tablada was void, and consequently, they were authorized
to unilaterally cancel such sale, and thereafter execute another one transferring the subject property in their names. As correctly held by the Court
in Spouses Lumbres v. Spouses Tablada,52 the first Deed of Sale executed in favor of the Spouses Tablada is valid and with sufficient consideration. Thus,
in view of this validity of the sale subject of the first Deed of Absolute Sale between Spring Homes and the Spouses Tablada, the Court shall now
determine who, as between the two spouses herein, properly acquired ownership over the subject property. In this regard, Article 1544 of the Civil Code
reads:

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. (Emphasis supplied)

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of a double sale of immovable
property.53 Thus, the Court has consistently ruled that ownership of an immovable property which is the subject of a double sale shall be transferred: (1)
to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. 54 The requirement of the law then is two-
fold: acquisition in good faith and registration in good faith. Good faith must concur with the registration - that is, the registrant must have no knowledge
of the defect or lack of title of his vendor or must not have been aware of facts which should have put him upon such inquiry and investigation as might
be necessary to acquaint him with the defects in the title of his vendor. If it is shown that a buyer was in bad faith, the alleged registration they have made
amounted to no registration at all. 55

Here, the first buyers of the subject property, the Spouses Tablada, were able to take said property into possession but failed to register the same because
of Spring Homes' unjustified failure to deliver the owner's copy of the title whereas the second buyers, the Spouses Lumbres, were able to register the
property in their names. But while said the Spouses Lumbres successfully caused the transfer of the title in their names, the same was done in bad faith.
As correctly observed by the Court in Spouses Lumbres v. Spouses Tablada, 56 the Spouses Lumbres cannot claim good faith since at the time of the
execution of their Compromise Agreement with Spring Homes, they were indisputably and reasonably informed that the subject lot was previously sold
to the Spouses Tablada. They were also already aware that the Spouses Tablada had constmcted a house thereon and were in physical possession thereof.
They cannot, therefore, be permitted to freely claim good faith on their part for the simple reason that the First Deed of Absolute Sale between Spring
Homes and the Spouses Tablada was not annotated at the back of the subject property's title. It is beyond the Court's imagination how spouses Lumbres
can feign ignorance to the first sale when the records clearly reveal that they even made numerous demands on the Spouses Tablada to pay, albeit
erroneously, an alleged balance of the purchase price.

Indeed, knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except only as provided by law, as in cases where the
second buyer first registers in good faith the second sale ahead of the first. 57 Such knowledge of the first buyer does bar her from availing of her rights
under the law, among them, first her purchase as against the second buyer. But conversely, knowledge gained by the second buyer of the first sale defeats
his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. 58

Accordingly, in order for the Spouses Lumbres to obtain priority over the Spouses Tablada, the law requires a continuing good faith and innocence or
lack of knowledge of the first sale that would enable their contract to ripen into full ownership through prior registration. 59 But from the very beginning,
the Spouses Lumbres had already known of the fact that the subject property had previously been sold to the Spouses Tablada, by virtue of a valid Deed
of Absolute Sale. In fact, the Spouses Tablada were already

in possession of said property and had even constructed a house thereon. Clearly then, the Spouses Lumbres were in bad faith the moment they entered
into the second Deed of Absolute Sale and thereafter registered the subject property in their names. For this reason, the Court cannot, therefore, consider
them as the true and valid owners of the disputed property and permit them to retain title thereto.

WHEREFORE, premises considered, the instant petition is DENIED. The assailed Decision dated May 31, 2011 and Resolution dated January 4, 2012
of the Court of Appeals in CA-G.R. CV No. 94352 are hereby AFFIRMED.

SO ORDERED.
G.R. No. 222031

EMILIO CALMA, Petitioner

vs.
ATTY. JOSE M. LACHICA, JR.*, Respondent

DECISION

TIJAM, J.:

For Our resolution is a Petition for Review on Certiorari1 under Rule 45, assailing the Decision2 dated April 28, 2015 of the Court of Appeals (CA) in CA-
G.R. CV No. 93329, which reversed and set aside the Decision 3 dated January 20, 2009 of the Regional Trial Court (RTC) of Cabanatuan City, Branch 30
in Civil Case No. 4355.

Factual Antecedents

Respondent Atty. Jose M. Lachica, Jr. filed a complaint for Annulment of Void Deeds of Sale, Annulment of Titles, Reconveyance, and Damages
originally against Ricardo Tolentino (Ricardo) and petitioner Emilio Calma, and later on, Pablo Tumale (Pablo) was imp leaded as additional defendant
in a Second Amended Complaint.4

Subject of the said complaint was a 20,000-square meter parcel of land situated in Sumacabeste, Cabanatuan City covered by Transfer Certificate of Title
(TCT) No. T-28380.5
Respondent, in his complaint, alleged that he was the absolute owner and actual physical possessor of the subject property, having acquired the same
sometime in 1974 for PhP15,000 through sale from Ceferino Tolentino (Ceferino) married to Victoria Calderon, who are Ricardo's parents.
Consequently, the subject property's title was delivered to respondent also in 1974. Allegedly, he and his tenant/helper Oscar Justo (Oscar) has been in
actual physical possession and cultivation of the said land continuously since its acquisition up to present.6

Unfortunately, however, the 1974 Deed of Sale was allegedly lost. Hence, sometime in 1979, respondent and Ceferino agreed to execute another deed of
sale. Spouses Tolentino allegedly took advantage of the situation and demanded an additional PhP15,000 from respondent to which the latter heeded.
Thus, in the new Deed of Sale executed on April 29, 1979, the consideration for the sale of the subject property was increased to PhP30,000.7

After the notarization of the 1979 Deed of Sale on April 29, 1986, respondent requested Spouses Tolentino to execute an Affidavit of Non-Tenancy and
other documents required by the Department of Agrarian Reform for the transfer of the title in respondent's name. Again, taking advantage of the
situation, Ceferino and his son Ricardo allegedly requested respondent to allow them to cultivate the 5,000-square meter portion of the subject land. The
father and son allegedly offered to process the transfer of the title to respondent's name to persuade the latter to grant their request. According to the
respondent, because of the trust, confidence, love, and respect that his family had for Ceferino's family, he entrusted the notarized Deed of Sale, TCT No.
T-28380, and the other documents on hand for the transfer of the title to his name and waited for the Tolentinos to make good on their promise.8

In the meantime, respondent, through Oscar, allegedly continued to possess the entire subject property.9

Respondent's employment in the government required him to travel to several distant places within the country. 10Hence, on May 25, 1981, before leaving
Nueva Ecija again and being assigned to a far-away province, respondent caused the annotation of a Notice of Adverse Claim on TCT No. T-28380 to
protect his claimed rights and interest in the subject property.11

Due to respondent's employment and also because of an illness, he lost contact with the Tolentinos for a long period of time. 12

Sometime in March 2001, respondent returned to Cabanatuan City and learned that Ceferino had already passed away. Ricardo, on the other hand, was
nowhere to be located despite efforts to do so.13 He also found Pablo to have been placed in possession of the 5,000-square meter portion of the subject
property by the Tolentinos sometime in 1986.14

Upon checking with the Office of the Register of Deeds as regards to the processing of his title over the subject property, he discovered that the same was
transferred under the name of Ricardo, which had been later on transferred to the petitioner upon Ricardo's sale thereof to the latter. In fine, TCT No. T-
28380 under Ceferino's name was cancelled and replaced by TCT No. T-68769 under Ricardo's name, which was then also cancelled and replaced by
TCT No. T-96168 now under petitioner's name.15

Respondent argued that the sale between Ceferino and Ricardo was null and void for being executed with fraud, deceit, breach of trust, and also for lack
of lawful consideration. Respondent emphasized that not only was Ricardo in full knowledge of the sale of the subject property to him by Ceferino, but
also his adverse claim was evidently annotated in the latter's title and carried over to Ricardo's title. Respondent also alleged that petitioner is an alien, a
full-blooded Chinese citizen, hence, not qualified to own lands in the Philippines, and is likewise a buyer in bad faith.16

Respondent, thus, prayed for the annulment of the Deed of Sale between Ceferino and Ricardo, as well as the Deed of Sale between Ricardo and
petitioner. TCT No. T-68769 under Ricardo's name and TCT No. T- 96168 under petitioner's name were likewise sought to be annulled. Respondent
further prayed for the ejectment of Pablo from the 5,000-square meter portion of the subject property and the reconveyance of the entire property to
him. Exemplary damages, actual damages, litigation expenses and attorney's fees were also prayed for.17

To prove his case, respondent presented his testimony, the testimonies of Oscar Justo and Herminiano Tinio, Sr., and documentary evidence comprising
of TCT No. T-28380 with the annotation of his Notice of Adverse Claim dated May 25, 1981, the April 29, 1979 Deed of Sale, TCTT- 68769 with the
annotation of the same Notice of Adverse Claim and an entry regarding the cancellation thereof albeit the validity of such cancellation was challenged by
the respondent, TCT No. T-96168 dated December 22, 1998, March 6, 1989 Deed of Absolute Sale, which he alleged to be certified copies thereof, and the
alleged original copy of the certificate to file action.18

For their part, defendants before the trial court averred in their Amended Answer19 that petitioner is a buyer in good faith and for value, having acquired
the subject property on July 10, 1998 through sale from Ricardo. They argued, among others, that petitioner, despite merely relying on the correctness of
Ricardo's TCT, is duly protected by the law. It was stated in Ricardo's title that respondent's adverse claim had already been cancelled more than four
years before the sale or on April 26, 1994. Thus, defendants argued that petitioner had no notice of any defect in Ricardo's title before purchase of the
subject property.20

Petitioner presented the July 10, 1998 Deed of Absolute Sale, TCT No. T-68769 with the annotation of the cancellation of respondent's adverse claim,
TCT No. T-96168, to prove good faith in the acquisition of the subject property, and a copy of his passport, Marriage Certificate, and Certificate of Live
Birth to prove his Filipino citizenship, contrary to respondent's allegation.21

The RTC Ruling

The RTC ruled that petitioner is an innocent purchaser for value and that he had already acquired his indefeasible rights over the title. According to the
trial court, while it may be true that respondent's adverse claim was annotated in Ricardo's title, the same title also shows that such adverse claim had
already been cancelled more than four years before he bought the property. Moreover, the RTC ruled that respondent's cause of action had already
prescribed.22 The trial court also noted that respondent failed to present any evidence on the alleged fraud in the transfer of the title of subject property
to petitioner.23

Ricardo was, however, held liable for the value of the property, damages, and attorney's fees in favor of respondent as, according to the RTC, Ricardo
cannot claim good faith because of the existence of the adverse claim.24
Lastly, the RTC ruled that respondent has no recourse against Pablo, who is liable to petitioner as the lawful owner.

The RTC disposed, thus:

WHEREFORE, premises considered, judgment is hereby rendered:

1. In favor of [respondent] and against Defendant Ricardo Tolentino.

The latter is hereby ordered to pay:

a) Forty Thousand Pesos (₱40,000.00), the estimated assessed value of the property formerly covered by TCT No. NT-68769 [sic], as actual damages;

b) One Hundred Thousand Pesos (₱l00,000.00) as moral damages;

c) Fifty Thousand Pesos (₱50,000.00) as exemplary damages;

d) Eighty Thousand Pesos (₱80,000.00) as attorney's fees and litigation expenses; and

2. Against [respondent] and in favor of the [petitioner] Emilio Calma and Pablo Tumale dismissing this complaint against them.

No evidence having been offered by Defendant's [sic] to prove their Counterclaim, the same is, as it is, DISMISSED.

SO ORDERED.25

Respondent moved for the reconsideration of the said Decision, but the RTC denied the motion on March 24, 2009.26

Thus, respondent appealed before the CA.

The CA Ruling

In its assailed Decision, the CA reversed the RTC's ruling, finding that both Ricardo and petitioner were in bad faith in their respective acquisitions of the
subject property. Hence, both their titles should be annulled. While upholding the RTC's finding that the registration of title in Ricardo's name was null
and void as he had prior knowledge of the sale between his father and respondent, the CA added that because of such bad faith, Ricardo's title must be
annulled. Consequently, as Ricardo had no valid title to the subject property, he had nothing to convey to petitioner.27

The CA then proceeded to discuss its finding of bad faith against petitioner. The appellate court concluded that the investigation conducted by petitioner
on the title of the subject property before purchase was not sufficient to consider him to be a buyer in good faith. The CA noted petitioner's knowledge of
the annotation of an adverse claim on Ricardo's title and that his act of asking assurance from Ricardo, the Register of Deeds, and the bank where the
subject property was mortgaged prior to the sale to petitioner cannot be considered as diligent efforts to protect his rights as a buyer.28

The CA explained that petitioner should not have just relied on the face of the title as the notice of adverse claim annotated on Ceferino's title carried
over to Ricardo's title for a total of 13 years before its cancellation should have alerted him to conduct an actual inspection of the title.29 If only petitioner
had conducted an actual inspection of the property, the CA opined, petitioner would have readily found that Oscar, respondent's alleged tenant, had been
occupying and tilling the land.30 Thus, despite the fact that petitioner registered his acquisition of the subject property, since he was considered to be in
bad faith, such registration did not confer any right upon him.31 Applying the rule on double sale under Article 154432 of the Civil Code, as his registration
is deemed to be no registration at all because of his bad faith, the buyer who took prior possession of the property in good faith shall be preferred.33

The CA then disposed of the appeal as follows:

WHEREFORE, the appeal is hereby GRANTED. The appealed Decision dated January 20, 2009 of the Regional Trial Court of Cabanatuan City, Branch
30, in Civil Case No. 4355 for Annulment of Void Deeds of Sale, Cancellation of Titles, Re conveyance, and Damages is hereby REVERSED and SET
ASIDE, and a NEW DECISION is hereby entered to read, thus:

"WHEREFORE, judgment is hereby rendered in favor of [respondent] Atty. Jose M Lachica, Jr. and against x x x Ricardo Tolentino and [petitioner]
Emilio Calma, declaring [respondent} as the rightful owner of the subject land covered under Transfer Certificate of Title No. T- 96168 of the Registry
of Deeds of Cabanatuan City, and ordering:

1) the annulment of the Deed of Sale between Ricardo Tolentino and Ceferino Tolentino;

2) the annulment of the Deed of Absolute Sale between Ricardo Tolentino and Emilio Calma dated July 10, 1998;

3) the Register of Deeds of Cabanatuan City to cancel Transfer Certificate of Title No. T-96168 and to issue a new one in
the name of Jose M Lachica, Jr. married to Warlita Ordonio;
 4) x x x Ricardo Tolentino to pay [respondent] Atty. Jose M Lachica, Jr. the amounts of One Hundred Thousand Pesos
(₱100,000. 00) as moral damages and Fifty Thousand Pesos (₱50, 000. 00) as exemplary damages, the monetary
awards to earn interest at six percent (6%) per annum from finality of this Decision until fully paid; and

5) costs against x x x Ricardo Tolentino and Emilio Calma."

SO ORDERED.34

Hence, this petition.

The Issue

The resolution of the instant controversy boils down to who between the petitioner and the respondent has better right over the subject property.

The Ruling of the Court

We rule for the petitioner.

Both the petitioner and the respondent claim ownership over the subject property by virtue of acquisition through sale. To resolve the present
controversy, thus, it is necessary to look into the basis of each party's claimed rights.

Sale from Ceferino to

respondent

Respondent's claimed right over the subject property is grounded upon his alleged acquisition of the same from Ceferino by sale.

Both the RTC and the CA were convinced that the sale of the subject property by Ceferino to respondent was valid and as such, the latter has a valid claim
of right over the same. This can be gleaned from the RTC's Decision ordering Ricardo to pay respondent damages due to the former's bad faith in the
acquisition of the subject property, recognizing thus the latter's interest and right over the same. The CA upheld respondent's rights over the subject
property even more by ordering, among others, the cancellation of petitioner's title and the transfer thereof to respondent's name.

For this matter, thus, We adhere to the general rule of refraining to scrutinize further the factual findings of the trial court as affirmed by the appellate
court.35 Besides, it must be noted that Ricardo did not question the liability imposed against him by the RTC and the CA anymore as only petitioner came
before Us in this petition. Hence, the question as to respondent's right or the lack thereof in connection with Ricardo's liability cannot be dealt with by
this Court. Consequently, We are constrained to uphold respondent's claimed right over the subject property.

Sale from Ricardo to

Petitioner

Petitioner's claimed right over the subject property, on the other hand, is grounded upon his acquisition of the same from Ricardo by sale. Unlike the sale
from Ceferino to respondent, the Deed of Sale in petitioner's favor was registered with the Registry of Deeds, giving rise to the issuance of a new
certificate of title in the name of the petitioner.

However, in ruling that respondent is the rightful owner of the subject property, the CA ruled that no right was conferred upon the petitioner by such sale
primarily due to his predecessor's bad faith in the acquisition of the subject property. The CA also found that petitioner, like his predecessor, cannot be
considered as a buyer in good faith. These findings are grounded on the fact that respondent's Notice of Adverse Claim appears in Ceferino's title and
carried over to Ricardo's title, which according to the CA is sufficient notice to both Ricardo and the petitioner of respondent's interests over the subject
property. The CA opined that such adverse claim should have alerted petitioner to conduct an actual inspection of the property, otherwise, he cannot be
considered to be a buyer in good faith.

We do not agree.

The Torrens system was adopted to "obviate possible conflicts of title by giving the public the right to rely upon the face of the Torrens certificate and to
dispense, as a rule, with the necessity of inquiring further." 36 From this sprung the doctrinal rule that every person dealing with registered land may
safely rely on the correctness of the certificate of title issued therefor and is in no way obliged to go beyond the certificate to determine the condition of
the property.37 To be sure, this Court is not unaware of the recognized exceptions to this rule, to wit: (1.) when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make further inquiry; (2.) when the buyer has knowledge of a defect or the lack of title in
his vendor;38 or (3.) when the buyer/mortgagee is a bank or an institution of similar nature as they are enjoined to exert a. higher degree of diligence,
care, and prudence than individuals in handling real estate transactions.39

Complementing this doctrinal rule is the concept of an innocent purchaser for value, which refers to someone who buys the property of another without
notice that some other person has a right to or interest in it, and who pays in full and fair the price at the time of the purchase or without receiving any
notice of another person's claim.40

Section 44 of Presidential Decree No. 1529 or the Property Registration Decree41 recognizes innocent purchasers for value and their right to rely on a
clean title:
Section 44. Statutory liens affecting title. - Every registered owner receiving certificate of title in pursuance of a decree of registration, and every
subsequent purchaser of registered land taking a certificate of title for value and good faith, shall hold the same free from all encumbrances except those
noted in said certificate and any of the following encumbrances which may be subsisting, namely:

First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to appear of record in
the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record.

Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the land by an innocent
purchaser for value, without prejudice to the right of the government to collect taxes payable before that period from the delinquent taxpayer alone.

Third. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral thereof, if the certificate of title
does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined.

Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any other law or
regulations on agrarian reform. (emphasis supplied)

Guided by the foregoing, We find that the circumstances obtaining in this case show that petitioner is an innocent purchaser for value who exercised the
necessary diligence in purchasing the property, contrary to the CA's findings.

The following facts are clear and undisputed: (1) petitioner acquired the subject property through sale from Ricardo as evidenced by a Deed of Absolute
Sale dated July 10, 1998, duly notarized on even date; (2) said sale was registered in the Registry of Deeds, Cabanatuan City on December 22, 1998 as
evidenced by TCT No. T-96168; (3) petitioner made inquiries with the Register of Deeds and the bank where the subject property was mortgaged by
Ricardo as regards the authenticity and the status of Ricardo's title before proceeding with the purchase thereof; and (4) petitioner was able to ascertain
that Ricardo's title was clean and free from any lien and encumbrance as the said title, together with his inquiries, showed that the only annotations in
the said title were respondent's 1981 adverse claim and its cancellation in 1994.

From the foregoing factual backdrop, there was no indicia that could have aroused questions in the petitioner's mind regarding the title of the subject
property. Hence, We do not find any cogent reason not to apply the general rule allowing the petitioner to rely on the face of the title.

For one, it is clearly manifest in the records that while respondent's adverse claim appears in Ricardo's title, it also appears therein that the said adverse
claim had already been cancelled on April 26, 1994 or more than four years before petitioner puchased the subject property. As correctly found by the
RTC, thus, Ricardo's title is already clean on its face, way before petitioner puchased the same.

Further, respondent's allegation of fraud and petitioner's knowledge of the transaction between him and Ceferino are not supported by any evidence
except bare allegations. It is basic that an allegation of fraud must be substantiated. 42 Section 543 , Rule 8 provides that in all averments of fraud, the
circumstances constituting the same must be stated with particularity. Moreover, fraud is a question of fact which must be proved by clear and
convincing evidence.44

At any rate, contrary to the CA's ruling, petitioner was never remiss in his duty of ensuring that the property that he was going to purchase had a clean
title. Despite Ricardo's title being clean on its face, petitioner still conducted an investigation of his own by proceeding to the Register of Deeds, as well as
to the bank where said title was mortgaged, to check on the authenticity and the status of the title. Thus, petitioner was proven to be in good faith when
he dealt with Ricardo and relied on the title presented and authenticated to him by the Register of Deeds and confirmed by the mortgagee-bank.
Respondent, on the other hand, failed to proffer evidence to prove otherwise.

Notably, the CA's conclusions to the contrary are merely based on assumptions and conjectures, such as that the bank's advice for petitioner to buy the
subject property was meant only for the protection of the bank's interest; and that the annotation of the adverse claim on Ceferino's title and carried over
to Ricardo's title for a total of 13 years before it was cancelled should have aroused suspicion.45 These conclusions have no factual or legal basis. What is
essential on the matter of petitioner's good faith in the acquisition of the subject property is the cancellation of such adverse claim, which clearly appears
on the face of Ricardo's title.

As the fact that petitioner is an innocent purchaser for value had been established, the validity and efficacy of the registration, as well as the cancellation,
of respondent's adverse claim is immaterial in this case. What matters is that the petitioner had no knowledge of any defect in the title of the property
that he was going to purchase and that the same was clean and free of any lien and encumbrance on its face by virtue of the entry on the cancellation of
adverse claim therein. Thus, petitioner may safely rely on the correctness of the entries in the title.

Even the defect in Ricardo's title due to his bad faith in the acquisition of the subject property, as found by both the RTC and the CA, should not affect
petitioner's rights as an innocent purchaser for value. The CA patently erred in ruling that since Ricardo had no valid title on the subject property due to
his bad faith, he had nothing to convey to the petitioner. It is settled that a defective title may still be the source of a completely legal and valid title in the
hands of an innocent purchaser for value.46

Petitioner has a better

right of ownership over
the subject property

Applying now the rule on double sale under Article 1544 of the Civil Code, petitioner's right as an innocent purchaser for value who was able to register
his acquisition of the subject property should prevail over the unregistered sale of the same to the respondent. Article 1544 states:

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)

With that, We find no necessity to belabor on the other issues raised in the petition.

WHEREFORE, premises considered, the Decision dated April 28, 2015 of the Court of Appeals is REVERSED and SET ASIDE. Accordingly, the
Decision dated January 20, 2009 of the Regional Trial Court of Cabanatuan City, Branch 30, is hereby REINSTATED.

SO ORDERED.
G.R. No. L-18536 March 31, 1965

JOSE B. AZNAR, plaintiff-appellant,

vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.

Florentino M. Guanlao for plaintiff-appellant.

Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee.

REGALA, J.:

This is an appeal, on purely legal questions, from a decision of the Court of First Instance of Quezon City, Branch IV, declaring the intervenor-appellee,
Teodoro Santos, entitled to the possession of the car in dispute.

The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised in two metropolitan papers the sale of his FORD
FAIRLANE 500. In the afternoon of May 28, 1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos residence to
answer the ad. However, Teodoro Santos was out during this call and only the latter's son, Irineo Santos, received and talked with De Dios. The latter
told the young Santos that he had come in behalf of his uncle, Vicente Marella, who was interested to buy the advertised car.

On being informed of the above, Teodoro Santos instructed his son to see the said Vicente Marella the following day at his given address: 1642
Crisostomo Street, Sampaloc, Manila. And so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this meeting, Marella agreed
to buy the car for P14,700.00 on the understanding that the price would be paid only after the car had been registered in his name.

Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a certain Atty. Jose Padolina where the deed of the sale for the
car was executed in Marella's favor. The parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon City where the registration of
the car in Marella's name was effected. Up to this stage of the transaction, the purchased price had not been paid.

From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration papers and a copy of the deed of sale to his son, Irineo,
and instructed him not to part with them until Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then proceeded to 1642
Crisostomo Street, Sampaloc, Manila where the former demanded the payment from Vicente Marella. Marella said that the amount he had on hand then
was short by some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly living somewhere on Azcarraga Street, also in
Manila. Thereafter, he ordered L. De Dios to go to the said sister and suggested that Irineo Santos go with him. At the same time, he requested the
registration papers and the deed of sale from Irineo Santos on the pretext that he would like to show them to his lawyer. Trusting the good faith of
Marella, Irineo handed over the same to the latter and thereupon, in the company of L. De Dios and another unidentified person, proceeded to the
alleged house of Marella's sister.

At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house while their unidentified companion remained in the car.
Once inside, L. De Dios asked Irineo Santos to wait at the sala while he went inside a room. That was the last that Irineo saw of him. For, after a
considerable length of time waiting in vain for De Dios to return, Irineo went down to discover that neither the car nor their unidentified companion was
there anymore. Going back to the house, he inquired from a woman he saw for L. De Dios and he was told that no such name lived or was even known
therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to see Marella. He found the house closed and Marella gone. Finally, he reported the
matter to his father who promptly advised the police authorities.

That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the car in question to the plaintiff-appellant herein, Jose B.
Aznar, for P15,000.00. Insofar as the above incidents are concerned, we are bound by the factual finding of the trial court that Jose B. Aznar acquired the
said car from Vicente Marella in good faith, for a valuable consideration and without notice of the defect appertaining to the vendor's title.

While the car in question was thus in the possession of Jose B. Aznar and while he was attending to its registration in his name, agents of the Philippine
Constabulary seized and confiscated the same in consequence of the report to them by Teodoro Santos that the said car was unlawfully taken from him.

In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized
the car in question Claiming ownership of the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro Santos moved
and was allowed to intervene by the lower court.

At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle to the intervenor-appellee, Teodoro Santos. In brief, it
ruled that Teodoro Santos had been unlawfully deprived of his personal property by Vicente Marella, from whom the plaintiff-appellant traced his right.
Consequently, although the plaintiff-appellant acquired the car in good faith and for a valuable consideration from Vicente Marella, the said decision
concluded, still the intervenor-appellee was entitled to its recovery on the mandate of Article 559 of the New Civil Code which provides:
 ART. 559. The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who lost any movable or has been
unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner
cannot obtain its return without reimbursing the price paid therefor.

From this decision, Jose B. Aznar appeals.

The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant, Jose B. Aznar, who has a better right to the possession of
the disputed automobile?

We find for the intervenor-appellee, Teodoro Santos.

The plaintiff-appellant accepts that the car in question originally belonged to and was owned by the intervenor-appellee, Teodoro Santos, and that the
latter was unlawfully deprived of the same by Vicente Marella. However, the appellant contends that upon the facts of this case, the applicable provision
of the Civil Code is Article 1506 and not Article 559 as was held by the decision under review. Article 1506 provides:

ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been voided at the time of the sale, the buyer acquires a
good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title.

The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the seller should have a voidable title at least. It is very
clearly inapplicable where, as in this case, the seller had no title at all.

Vicente Marella did not have any title to the property under litigation because the same was never delivered to him. He sought ownership or acquisition
of it by virtue of the contract. Vicente Marella could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of the
car to him.

Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and
intestate succession, and in consequence of certain contracts, by tradition." As interpreted by this Court in a host of cases, by this provision, ownership is
not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil. 631,
Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).

For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be delivered, inasmuch as, according
to settled jurisprudence, the tradition of the thing is a necessary and indispensable requisite in the acquisition of said ownership by virtue of
contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.)

So long as property is not delivered, the ownership over it is not transferred by contract merely but by delivery. Contracts only constitute titles
or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same, the title and the
method of acquiring it being different in our law. (Gonzales v. Roxas, 16 Phil. 51)

In the case on hand, the car in question was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by
virtue of the contract. It should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the former, as
vendee, took possession of the subject matter thereof by stealing the same while it was in the custody of the latter's son.

There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to the car to the unidentified person who went with
him and L. De Dios to the place on Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery contemplated
by Article 712 of the Civil Code. For then, it would be indisputable that he turned it over to the unidentified companion only so that he may drive Irineo
Santos and De Dios to the said place on Azcarraga and not to vest the title to the said vehicle to him as agent of Vicente Marella. Article 712 above
contemplates that the act be coupled with the intent of delivering the thing. (10 Manresa 132)

The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under it, the rule is to the effect that if the owner has lost a
thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from third persons who
may have acquired it in good faith from such finder, thief or robber. The said article establishes two exceptions to the general rule of irrevindicability, to
wit, when the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the
owner, who may recover it without paying any indemnity, except when the possessor acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535;
Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.)

In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled
that —

Under Article 559 of the new Civil Code, a person illegally deprived of any movable may recover it from the person in possession of the same
and the only defense the latter may have is if he has acquired it in good faith at a public sale, in which case, the owner cannot obtain its return
without reimbursing the price paid therefor. In the present case, plaintiff has been illegally deprived of his car through the ingenious scheme of
defendant B to enable the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can still recover possession of the car even if
it is in the possession of a third party who had acquired it in good faith from defendant B. The maxim that "no man can transfer to another a
better title than he had himself" obtains in the civil as well as in the common law. (U.S. v. Sotelo, 28 Phil. 147)

Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee who had caused the fraud to be perpetrated by his
misplaced confidence on Vicente Marella, he, the intervenor-appellee, should be made to suffer the consequences arising therefrom, following the
equitable principle to that effect. Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another,
is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud
perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be
applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a common law principle and a statutory
provision, the latter must prevail in this jurisdiction. (Cruz v. Pahati, supra)

UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the lower court affirmed in full. Costs against the appellant.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.

G.R. No. 80298 April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,

vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style of "SANTOS BOOKSTORE," and THE
COURT OF APPEALS, respondents.

Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.

Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J.:

The case before us calls for the interpretation of Article 559 of the Civil Code and raises the particular question of when a person may be deemed to have
been "unlawfully deprived" of movable property in the hands of another. The article runs in full as follows:

Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from the person in possession of the same.
 If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner
cannot obtain its return without reimbursing the price paid therefor.

The movable property in this case consists of books, which were bought from the petitioner by an impostor who sold it to the private respondents.
Ownership of the books was recognized in the private respondents by the Municipal Trial Court, 1 which was sustained by the Regional Trial
Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner asks us to declare that all these courts have erred and should be reversed.

This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by telephone with the petitioner company
for 406 books, payable on delivery. 4 EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz issued a personal
check covering the purchase price of P8,995.65. 5 On October 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying
the seller's ownership from the invoice he showed her, paid him P1,700.00. 6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check, made inquiries with the De la
Salle College where he had claimed to be a dean and was informed that there was no such person in its employ. Further verification revealed that Cruz
had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check. 7 EDCA then went to the police,
which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Peña and his sale of 120 of the books he had
ordered from EDCA to the private respondents. 8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN Avenue, which forced their way into the store of the
private respondents and threatened Leonor Santos with prosecution for buying stolen property. They seized the 120 books without warrant, loading
them in a van belonging to EDCA, and thereafter turned them over to the petitioner. 9

Protesting this high-handed action, the private respondents sued for recovery of the books after demand for their return was rejected by EDCA. A writ of
preliminary attachment was issued and the petitioner, after initial refusal, finally surrendered the books to the private respondents. 10 As previously
stated, the petitioner was successively rebuffed in the three courts below and now hopes to secure relief from us.

To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in taking the law into its own hands and forcibly recovering the
disputed books from the private respondents. The circumstance that it did so with the assistance of the police, which should have been the first to uphold
legal and peaceful processes, has compounded the wrong even more deplorably. Questions like the one at bar are decided not by policemen but by judges
and with the use not of brute force but of lawful writs.

Now to the merits

It is the contention of the petitioner that the private respondents have not established their ownership of the disputed books because they have not even
produced a receipt to prove they had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559 provides that "the possession of
movable property acquired in good faith is equivalent to a title," thus dispensing with further proof.

The argument that the private respondents did not acquire the books in good faith has been dismissed by the lower courts, and we agree. Leonor Santos
first ascertained the ownership of the books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling them for a discount
because he was in financial need. Private respondents are in the business of buying and selling books and often deal with hard-up sellers who urgently
have to part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was accustomed to dealing
with. It is hardly bad faith for any one in the business of buying and selling books to buy them at a discount and resell them for a profit.

But the real issue here is whether the petitioner has been unlawfully deprived of the books because the check issued by the impostor in payment therefor
was dishonored.

In its extended memorandum, EDCA cites numerous cases holding that the owner who has been unlawfully deprived of personal property is entitled to
its recovery except only where the property was purchased at a public sale, in which event its return is subject to reimbursement of the purchase price.
The petitioner is begging the question. It is putting the cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at bar
that EDCA has been unlawfully deprived of the books.

The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly transferred to the private respondents. Its
reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. According
to the Civil Code:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and
upon the price.

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

xxx xxx xxx

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the buyer until full payment of the
purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual
or constructive delivery of the thing sold even if the purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent
the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another.

In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having
been paid by Ang, it sued for the recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying for the same in cash.
Finding that there was no conspiracy between Tan and Ang to deceive Asiatic the Court of Appeals declared:

Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things that "one who has been unlawfully deprived of
personal property may recover it from any person possessing it." We do not believe that the plaintiff has been unlawfully deprived of the
cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily parted with them pursuant to a contract of purchase and sale.
The circumstance that the price was not subsequently paid did not render illegal a transaction which was valid and legal at the beginning.

In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by
Feist was dishonored, the plaintiff sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it by reason of Feist's
deception. In ruling for Jimenez, the Court of Appeals held:

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

xxx xxx xxx

. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article 1390 N.C.C.). Being a voidable contract,
it is susceptible of either ratification or annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392, N.C.C.) and
the contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored to their
respective situations before the contract and mutual restitution follows as a consequence (Article 1398, N.C.C.).

However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of sale remains valid and
binding. When plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car
passed to Feist. Of course, the title that Feist acquired was defective and voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his
title thereto had not been avoided and he therefore conferred a good title on the latter, provided he bought the car in good faith, for value and
without notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is safe
to assume that he acted in good faith.

The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied to the case before us.

Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents.
The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents
to the books.

One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be interpreted in the manner suggested by the petitioner. A
person relying on the seller's title who buys a movable property from him would have to surrender it to another person claiming to be the original owner
who had not yet been paid the purchase price therefor. The buyer in the second sale would be left holding the bag, so to speak, and would be compelled to
return the thing bought by him in good faith without even the right to reimbursement of the amount he had paid for it.

It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the books belonged to Cruz before she agreed to purchase
them. The EDCA invoice Cruz showed her assured her that the books had been paid for on delivery. By contrast, EDCA was less than cautious — in fact,
too trusting in dealing with the impostor. Although it had never transacted with him before, it readily delivered the books he had ordered (by telephone)
and as readily accepted his personal check in payment. It did not verify his identity although it was easy enough to do this. It did not wait to clear the
check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that the books had been paid for on
delivery, thereby vesting ownership in the buyer.

Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the books being offered for sale by Cruz belonged to him; yet
she did. Although the title of Cruz was presumed under Article 559 by his mere possession of the books, these being movable property, Leonor Santos
nevertheless demanded more proof before deciding to buy them.

It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its own negligence.1âwphi1 We
cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good faith, and with proper care, when they bought the books from
Cruz.

While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents but against Tomas de la Peña, who
has apparently caused all this trouble. The private respondents have themselves been unduly inconvenienced, and for merely transacting a customary
deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against the petitioner.

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

TRINIDAD TAGATAC v. LIBERATO JIMENEZ

1957 / Ocampo / Appeal from CFI judgment

Trinidad Tagatac bought a car for $4,500 in the US, and seven months later, she brought the car to the Philippines. When her friend Joseph Lee came to
see her, he was with one Warner Feist who posed as a wealthy man. Seeing that Tagatac seemed to believe him, he offered to buy her car for P15,000, and
Tagatac was amenable to the idea. The deed of sale was made, Feist paid by means of a postdated check, and the car was delivered to Feist. When Tagatac
tried to encash the check, PNB refused to honor it and told her that Feist had no account in said bank. Tagatac notified the law enforcement agencies of
the estafa committed on her by Feist, but he was not apprehended and the car disappeared.

Meanwhile, Feist managed to have the private deed of sale notarized, so he succeeded in having the car’s registration certificate [RC] transferred in his
name. He sold the car to Sanchez, who was able to transfer the RC to his name. He offered to sell the car to defendant Liberato Jimenez, who bought the
car for P10,000 after investigating in the Motor Vehicles Office. Jimenez delivered the car to the California Car Exchange so that it may be displayed for
sale. Masalonga offered to sell the car for Jimenez, so the car was transferred to the former, but when Masalonga failed to sell it right away, he
transferred it to Villanueva so he could sell it for Jimenez. Tagatac discovered that the car was in California Car Exchange’s possession, so she demanded
from the manager for the delivery of the car, but the latter refused. The RC was retransferred to Jimenez.

Tagatac filed a suit for the recovery of the car’s possession, and the sheriff, pursuant to a warrant of seizure that Tagatac obtained, seized and impounded
the car, but it was delivered back to Jimenez upon his filing of a counter-bond. The lower court held that Jimenez had the right of ownership and
possession over the car.

JIMENEZ IS A PURCHASER IN GOOD FAITH; TAGATAC NOT ENTITLED TO POSSESSION

RATIO

The disputable presumption that a person found in possession of a thing taken in the doing of a recent wrongful act is the taker and the doer of the whole
act does NOT apply in this case because the car was not stolen from Tagatac, and Jimenez came into possession of the car two months after Feist
swindled Tagatac. In addition, when Jimenez acquired the car, he had no knowledge of any flaw in the title of the person from whom he acquired it. It
was only later that he became fully aware that there were some questions regarding the car, when he filed a petition to dissolve Tagatac’s search warrant
which had as its subject the car in question.

Re: Tagatac’s allegation that the lower court ignored the judgment convicting Feist of estafa, and that it erred in not declaring that restitution of the
swindled property must follow, SHE IS WRONG! The lower court noted that Feist was accused of estafa because of the check and NOT because of the
delivery of the car.

Her legal basis for the restitution of thing is RPC 104-51 . Now the question is WON she has beenunlawfully deprived of her car. It seems like though, but
it does not fall under the scope of NCC 599. 2In this case, there is a valid transmission of ownership from true owner [Tagatac] to the swindler [Feist],
considering that they had a contract of sale.

As long as no action is taken by the entitled party [annulment / ratification], the contract of sale remains valid and binding. Feist acquired defective and
voidable title, but when he sold it to Sanchez, he conferred a good title on the latter. Jimenez bought the car from Sanchez in good faith, for value, and
without notice of any defect in Sanchez’ title, so he acquired a good title to the car. Good title means an indefeasible title to the car, even as against
original owner Tagatac. As between two innocent parties, the one whose acts made possible the injury must shoulder the consequences thereof.

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1 Civil liability of person who is criminally liable includes restitution of thing even though it is with a third person who acquired it legally

2 Although possession of movable property acquired in good faith is equivalent to a title, one who has lost any movable or has been unlawfully deprived
thereof may recover it from the person who possesses it.