THIRD DIVISION

[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 Floraida 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. DECISION
MELO, J.:

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00. The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a document entitled “Receipt of Down Payment” (Exh. “A”) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1,240,000.00 - Total amount 50,000.00 - Down payment -----------------------------------------P1,190,000.00 - Balance Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated.

On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00. Clearly, the conditions appurtenant to the sale are the following: 1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document aforestated; 2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. “B”, Exh. “2”). On February 6, 1985, the property originally registered in the name of the Coronel’s father was transferred in their names under TCT No. 327043 (Exh. “D”; Exh “4”) On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. “F-3”; Exh. “6-C”) For this reason, Coronels canceled and rescinded the contract (Exh. “A”) with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. “E”; Exh. “5”). On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. “F”; Exh. “6”). On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. “G”; Exh. “7”). On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. “H”; Exh. “8”). (Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits “A” through “J”, inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then

defendants (now petitioners) accordingly offered and marked them as Exhibits “1” through “10”, likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution. On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs’ claim for damages and 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 petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that

Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court). Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed. IN VIEW OF THE FOREGOING, the “Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge” dated March 20, 1989 is hereby DENIED. SO ORDERED. Quezon City, Philippines, July 12, 1989. (Rollo, pp. 108-109)

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 the said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

While, it is the position of private respondents that the “Receipt of Down Payment” embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the

document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale. Plainly, such variance in the contending parties’ contention is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) c) Determinate subject matter; and Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective 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.

In fact. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller. In a contract to sell. vs. cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. cannot be a registrant in good faith. the sale becomes absolute and this will definitely affect the seller’s title thereto. In case a title is issued to the second buyer. Homesite and Housing Corp. the first element of consent is present. upon the fulfillment of the suspensive condition which is the full payment of the purchase price. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. 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. although it is conditioned upon the happening of a contingent event which may or may not occur. the contract of sale is thereby perfected. the first buyer may seek reconveyance of the property subject of the 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. If the suspensive condition is not fulfilled. A contract to sell as defined hereinabove. 133 SCRA 777 [1984]). however. if there had been previous delivery of the subject property. but to a third person. the perfection of the contract of sale is completely abated (cf. In a contract to sell. the seller will no longer have any title to transfer to any third person. the seller’s ownership or title to the property is automatically transferred to the buyer such that. or at least was charged with the obligation to discover such defect. of course. may be sued for damages by the intending buyer. Such second buyer cannot defeat the first buyer’s title. while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer. such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’s title. However. In a conditional contract of sale. binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon. there being no previous sale of the property. that is. ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. for instance. if the suspensive condition is fulfilled. full payment of the purchase price.An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor of the promise is supported by a consideration distinct from the price. such that if there had already been previous delivery of the property subject of the sale to the buyer. Applying Article 1544 of the Civil Code. ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price. There is no double sale in such case. but the latter. as in the case at bench. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se. upon the fulfillment of the suspensive condition. . Court of Appeals.

212 SCRA 586 [1992]). pay the entire balance of the purchase price. it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer. It was more . 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. without any reservation of title until full payment of the entire purchase price. 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. to the latter and to execute the deed of absolute sale whereupon. after which.00. petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Furthermore. there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Moreover. now in their names. covered by TCT No.With the above postulates as guidelines. the parties did not merely enter into a contract to sell where the sellers. Thus. the Court may safely presume that. when petitioners declared in the said “Receipt of Down Payment” that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog. the sum of Fifty Thousand Pesos purchase price of our inherited house and lot. unlike in a contract to sell. Quezon City. completely willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. 1199627 of the Registry of Deeds of Quezon City. that the transfer certificate of title was then still in the name of their father. Thus. to cause the issuance of a new certificate of title in their names from that of their father. When the “Receipt of Down payment” is considered in its entirety. they undertook to have the certificate of title change to their names and immediately thereafter. had the certificate of title been in the names of petitioners-sellers at that time. petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. 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. Court of Appeals. the latter shall. the natural and ordinary idea conveyed is that they sold their property. after compliance by the buyer with certain terms and conditions.000. promised to sell the property to the latter. they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. but since the transfer certificate of title was still in the name of petitioner’s father.240. 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. in turn. however. On the contrary. in the total amount of P1. they promised to present said title. Under the established facts and circumstances of the case. It just so happened. to execute the written deed of absolute sale. we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. Alcaraz. having already agreed to sell the subject property. Therefore.

As soon as the new certificate of title is issued in their names. consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners’ father. to their names. The Court significantly notes that this suspensive condition was. in the contract entered into in the case at bar. 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. Alcaraz. Exh. 1985. petitioners. petitioners were committed to immediately execute the deed of absolute sale. 1985 (Exh. and to immediately execute the deed of absolute sale. et. shall depend upon the happening of the event which constitutes the condition.000. 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. the parties may reciprocally demand performance. Thus. as it were. Thus.. . Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioner’s names was fulfilled on February 6. Constancio P.00. Art. Coronel. “4”). was obliged to forthwith pay the balance of the purchase price amounting to P1.00. that is. the acquisition of rights.190. Art. the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. which petitioners unequivocally committed themselves to do as evidenced by the “Receipt of Down Payment. subject to the provisions of the law governing the form of contracts. It was the sellers in this case who. were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. as sellers.expedient to first effect the change in the certificate of title so as to bear their names. the buyer. the conditional contract of sale between petitioners and private respondent Ramona P.” Article 1475. 1475. as well as the extinguishment or loss of those already acquired. while the buyer on her part. “D”. on said date. the respective obligations of the parties under the contract of sale became mutually demandable. in fact. plainly applies to the case at bench. both of the Civil Code. 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. the parties had agreed to a conditional contract of sale. al.000. From that moment. Coronel. had the impediment which prevented. so to speak. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. 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. In conditional obligations. What is clearly established by the plain language of the subject document is that when the said “Receipt of Down Payment” was prepared and signed by petitioners Romulo A. 1181. the execution of an contract of absolute sale. fulfilled on February 6. in correlation with Article 1181.

Exh. “1”).) not aware that they have set their own trap for themselves. petitioners conclusively admitted that: 3.) (Rollo. 1985. as evidenced by the document denominated as “Receipt of Down Payment” (Exh. 327403 (Exh. 1985. 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. Exh. 1985. Exh. “4”). Only. p. 1985 because they were then not yet the absolute owners of the inherited property. the retroactive effect of the condition that has been complied with. therefore.) (Ibid. when a new title was issued in the names of petitioners as evidenced by TCT No. for Article 1186 of the Civil Code expressly provides that: Art. As of that point in time. The sale was still subject to this suspensive condition. . The petitioners-sellers Coronel bound themselves “to effect the transfer in our names from our deceased father Constancio P. reciprocal obligations of both seller and buyer arose. once the condition has been fulfilled. The inevitable conclusion is that on January 19. they contend. 1187. the parties entered into a contract of sale subject to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their father’s name to their names and that. The effects of conditional obligation to give. . 1186. 16) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Petitioners also argue there could been no perfected contract on January 19. in each case. “D”. the courts shall determine. “D”. . the transfer certificate of title immediately upon receipt of the downpayment above-stated". In obligations to do or not to do. We cannot sustain this argument. 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.It is also significant to note that in the first paragraph in page 9 of their petition. there could be no perfected contract of sale. shall retroact to the day of the constitution of the obligation . . . We. (Emphasis supplied. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. 1985. Besides. “A”. continuing in the same paragraph. Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names. “4”). in accordance with Article 1187 which pertinently provides Art. on February 6. (Emphasis supplied. this condition was fulfilled (Exh. hold that. Coronel. that: .

Alcaraz. De Vera. and cannot be denied or disproved as against the person relying thereon. such that any rights or obligations pertaining thereto became binding and enforceable upon them. are deemed controverted even if no reply is filed by the plaintiffs (Sec. Cuison vs. Revised Rules of Court). rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. Through estoppel an admission or representation is rendered conclusive upon the person making it. Having represented themselves as the true owners of the subject property at the time of sale. the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America. The records are absolutely bereft of any supporting evidence to substantiate petitioners’ allegations. 850 [1952]). 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. p. The Civil Code expressly states that: Art. 2. petitioners cannot claim now that they were not yet the absolute owners thereof at that time. We note that these supposed grounds for petitioner’s rescission. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. 43).Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. telephone number. so petitioners conclude. which by express provision of the rules. Mere allegation is not an evidence (Lagasca vs. Ng Diong. Succession is a mode of acquisition by virtue of which the property. 774. Alcaraz. Coronel are compulsory heirs who were called to succession by operation of law. 376 [1947]). Civil Code. 110 Phil. 1985. without leaving her address. Embisan. Villanueva. petitioners stepped into his shoes insofar as the subject property is concerned. are mere allegations found only in their responsive pleadings. and Special Power of Attorney (Paragraphs 14 and 15. 882 [1961]. . Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Rule 6. 79 Phil. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777. 2 SCRA 598 [1961]). at the point their father drew his last breath. 1431. p. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. 90 Phil. 11. Rollo. for which reason. Answer with Compulsory Counterclaim to the Amended Complaint. Recaro vs. 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. Aside from this. Thus. they were correct in unilaterally rescinding the contract of sale.

the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale. xxx In reciprocal obligations. (Emphasis supplied. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default. to wit: Art. CA. Ramona’s corresponding obligation to pay the balance of the purchase price in the amount of P1. “B”. therefore. 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. petitioners are estopped from raising the alleged absence of Ramona P. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. There is no evidence showing that petitioners ever questioned Concepcion’s authority to represent 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. 1544. (cf. as far as petitioners are concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. if it should be movable property. Alcaraz when they accepted her personal check. With the foregoing conclusions.000. Alcaraz was in the United States of America on February 6. if not also in her own behalf. incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. who had acted for and in behalf of her daughter. Accordingly. Mabanag. 132 SCRA 722 [1984]) Moreover. insofar as her obligation to pay the full purchase price is concerned. Those obliged to deliver or to do something. 1169. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Ramona’s mother. gave rise to a case of double sale where Article 1544 of the Civil Code will apply. Alcaraz as the buyer.00 (as buyer) never became due and demandable and.Even assuming arguendo that Ramona P. Alcaraz with her own personal Check (Exh. Neither did they raise any objection as regards payment being effected by a third person. Vda. Taguba vs. the down payment was made by Concepcion D. Catalina B. Alcaraz. the sale to the other petitioner. “2”) for and in behalf of Ramona P. Ramona P. we cannot justify petitioners-sellers’ act of unilaterally and extrajudicially rescinding the contract of sale. Alcaraz. the sellers had been dealing with Concepcion D. Dignos vs. delay by the other begins.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. .190. De Leon. 158 SCRA 375 [1988]. Alcaraz cannot even be deemed to be in default. If the same thing should have been sold to different vendees. Indeed. Exh. 1985. to wit: Art. she cannot be deemed to have been in default. Corollarily.

Justice Jose C. Thus. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. 22 June 1984. 69 SCRA 99. The record of the case shows that the Deed of Absolute Sale dated April 25. the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18. 129 SCRA 656). CA. stronger in right). 02 September 1992). The above-cited provision on double sale presumes title or ownership to pass to the buyer. Compendium of Civil Law and Jurisprudence. Court of Appeals. 1985 because as . an accepted authority on the subject. acquires possession of the property ahead of the first buyer. 1985. Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22. 1544. the second buyer satisfies these requirements. whereas.R. In a case of double sale.R. she was unaware of any adverse claim or previous sale. (J. 1993 Edition. 1985. Court of Appeals.Should it be immovable property. since knowledge taints his registration with bad faith (see also Astorga vs. registers the sale ahead of the first buyer. 1985. to merit the protection of Art. that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. bought the property under a clean title. 58530. the second buyer. petitioner Mabanag could not have in good faith. knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register. Should there be no inscription. in the absence thereof to the person who presents the oldest title. Crisostomo vs. Cabana (G. explains: The governing principle is prius tempore. The idea conveyed is that at the time petitioner Mabanag. In his commentaries on the Civil Code. As clearly borne out by the evidence in this case. what finds relevance and materiality is not whether or not the second buyer in good faith but whether or not said second buyer registers such second sale in good faith. No. without knowledge of any defect in the title of the property sold. Unless.R. now a distinguished member of the Court. registered the sale entered into on February 18. in good faith. 26 December 1984). title or ownership will not transfer to him to the prejudice of the first buyer. for which reason she is a buyer in good faith. Gonzales. the exceptions being: (a) when the second buyer. G. No. Mabanag on June 5. and. p. when the second buyer. In Cruz vs. Vitug. in good faith. Vitug. Conversely. 159 SCRA 33). We are not persuaded by such argument. and (b) should there be no inscription by either of the two buyers. provided there is good faith. No. that is. potior jure (first in time. 95843. second paragraph. it was held that it is essential. 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. 56232. G. 604). the ownership shall pertain to the person who in good faith was first in the possession. 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. the second paragraph of Article 1544 shall apply.

At the time of registration. Mercader. the sale of the subject parcel of land between petitioners and Ramona P. 554. her mother. Fernandez vs. citing Palarca vs. SO ORDERED. or. petitioner. (Chairman). Panganiban. prior to that between petitioners and Catalina B. no part. Davide. ROMERO. WHEREFORE. 146. 107207 November 23. 581. the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED. (Salvoro vs. We will not touch this issue and no longer disturb the lower courts’ ruling on this point. concur. DE ONGSIONG. a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners. 43 Phil. 87 SCRA 349 [1978]. . 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. Jr.. Tanega. premises considered. 43 Phil.J. Cagaoan. 1985. perfected on February 6. Mabanag on February 18. Cagaoan vs. Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion. vs. whereas petitioner Mabanag registered the said sale sometime in April. Thus. J. and Francisco. at least. 1995 VIRGILIO R. therefore. 1985. nor in such assumption disputed between mother and daughter. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. HON. Director of Land.) Thus. Narvasa. Petitioner Mabanag cannot close her eyes to the defect in petitioners’ title to the property at the time of the registration of the property. COURT OF APPEALS and ENRIQUETA CHUA VDA. petitioner Mabanag knew that the same property had already been previously sold to private respondents..R. respondents. the registration will constitute a registration in bad faith and will not confer upon him any right. 1985.. 1985. No. C. was correctly upheld by both the courts below. JJ. Alcaraz. as agent insofar as the subject contract of sale is concerned. This Court had occasions to rule that: If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale. 43 Phil.early as February 22. she was charged with knowledge that a previous buyer is claiming title to the same property.

he found the place suitable for a central warehouse. Mandaluyong Metro Manila. Plainview Subd. hereinafter referred to as the VENDEE: W I T N E S S E T H : That WHEREAS. petitioner and his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2. is to be paid upon signing and execution of this instrument. the VENDEE. a contract. of legal age. the VENDOR agrees to sell to the VENDEE.561. Metro Manila. and residing at 110 San Miguel St. In 1988. executors. more or less. . for (sic) has offered to buy a parcel of land and the VENDOR has accepted the offer. accompanied by a broker.000 square meters.600. manufacture and exportation of perlite filter aids. offered a parcel of land measuring 1. their heirs. DE ONGSIONG. Metro Manila. subject to the terms and conditions hereinafter stipulated: NOW. J. for and in consideration of the sum of ONE MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS (P1. Alfonso Flores and his wife.952 square meters.. The project was made known to several freelance real estate brokers. Philippine Currency. Filipino and residing at 105 Simoun St. denominated "Deed of Conditional Sale.VITUG.000. hereinafter referred to as the VENDOR.." was executed between petitioner and private respondent.. married to Severina L. Quezon City. the Flores spouses called on petitioner with a proposal that should he advance the amount of P50. assign. Petitioner expressed his concurrence. ROMERO.00 per square meter. Romero. was engaged in the business of production. 1988 by and between: ENRIQUETA CHUA VDA. Lat.00) ONLY. administrators. subject to the following terms and conditions: 1. the lot was covered by TCT No. On 09 June 1988. widow.00) ONLY Philippine Currency. 361402 in the name of private respondent Enriqueta Chua vda. Parañaque. Later. That the sum of FIFTY THOUSAND PESOS (P50. private respondent would agree to sell the property for only P800. the VENDOR is the owner of One (1) parcel of land with a total area of ONE THOUSAND NINE HUNDRED FIFTY TWO (1. made and executed in the Municipality of Makati. of Legal age. de Ongsiong. all her rights. a civil engineer. Philippines this 9th day of June.952) SQUARE METERS. permalite insulation and processed perlite ore.: The parties pose this question: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period? Petitioner Virgilio R. except for the presence of squatters in the area. Province of Rizal. 361402 issued by the Registry of Deeds of Pasig and more particularly described as follows: xxx xxx xxx WHEREAS. payable by VENDEE to in to (sic) manner set forth. Municipality of Parañaque. Filipino. THEREFORE. The simply-drawn contract read: DEED OF CONDITIONAL SALE KNOW ALL MEN BY THESE PRESENTS: This Contract.00 which could be used in taking up an ejectment case against the squatters. located in Barrio San Dionisio. A day or so after the announcement. covered by TCT No. titles and interest in and to the property mentioned in the FIRST WHEREAS CLAUSE. successors. Located in Barangay San Dionisio. -andVIRGILIO R. Petitioner visited the property and.000.

the parties hereunto signed those (sic) presents in the City of Makati MM. in his reply of 17 April 1989. In a letter. That in the event that the VENDEE shall not be able to pay the VENDOR the balance of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1.00) ONLY shall be paid 45 days after the removal of all squatters from the above described property.511.511. private respondent filed a complaint for ejectment (Civil Case No. Atty.600. on 30 March 1989. acknowledged (sic) and deliver the corresponding deed of absolute sale in favor of the VENDEE free from all liens and encumbrances and all Real Estate taxes are all paid and updated. the downpayment made by the buyer shall be returned/reimbursed by the VENDOR to the VENDEE.00) previously paid as downpayment shall be forfeited in favor of the VENDOR. IN WITNESS WHEREOF. The balance of the purchase price in the amount of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1. 3. dated 07 April 1989. Expenses for the registration such as registration fees.F. VENDOR without necessity of demand shall immediately sign.00 she received from petitioner since. Upon full payment of the overall purchase price as aforesaid. counsel for petitioner. or on 21 February 1989. Ongsiong Jack M. 3 Pursuant to the agreement. transfer fee. documentary stamp. The writ of execution of the judgment was issued.) Rowena C.00 2 from petitioner.000. Cruz 1 Alfonso Flores.00) ONLY after 45 days from written notification to the VENDEE of the removal of the squatters from the property being purchased. (Sgd. Apostol.000. The decision was handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the contract. Sergio A. covenanted and stipulated by and between the parties hereto that if after 60 days from the date of the signing of this contract the VENDOR shall not be able to remove the squatters from the property being purchased. judgment was rendered ordering the defendants to vacate the premises. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Parañaque. in behalf of private respondent. he proposes that he shall take it . refused the tender and stated:. still later.2. it is now possible to eject the squatters from the premises of the subject property. DE ONGSIONG Vendee Vendor SIGNED IN THE PRESENCE OF: (Sgd. forthwith received and acknowledged a check for P50. assurances and such other fees and expenses as may be necessary to transfer the title to the name of the VENDEE shall be for the account of the VENDEE while capital gains tax shall be paid by the VENDOR. private respondent sought to return the P50. 1988. for which reason.) (Sgd.600. she said.) (Sgd. A few months later. she could not "get rid of the squatters" on the lot. Philippines on this 9th day of June. It is hereby agreed.) VIRGILIO R. the FIFTY THOUSAND PESOS (P50. ROMERO ENRIQUETA CHUA VDA.000. Our client believes that with the exercise of reasonable diligence considering the favorable decision rendered by the Court and the writ of execution issued pursuant thereto. execute.

and for the consignation of P50. reimbursement of the downpayment.00 advance payment. Furthermore. the contract had already been partially fulfilled and executed upon receipt of the downpayment of your client. Moreover." 6 On 23 June 1989. The court added: . plus damages. Ongsiong is precluded from rejecting its binding effects relying upon her inability to eject the squatters from the premises of subject property during the agreed period. advised Atty. Acting favorably on the request. Farley O. Viloria.000.000.561. 4 Meanwhile. that expenses which shall be incurred by reason thereof shall be chargeable to the purchase price of the land. Branch 133.upon himself to eject the squatters. counsel for private respondent. Meanwhile. Apostol reminded private respondent on the expiry of the 45-day grace period and his client's willingness to "underwrite the expenses for the execution of the judgment and ejectment of the occupants.600. 7579 on motion of private respondent but the squatters apparently still stayed on. He added that private respondent had "decided to retain the property. on 25 August 1989. under Article 1191 of the Civil Code. filed with the Regional Trial Court of Makati. prompted by petitioner's continued refusal to accept the return of the P50. through its Regional Director for Luzon.00 if the vendor were to fail in her obligation to free the property from squatters within the stipulated period or (b). of availing himself of the power to rescind the contract and demand the return. amounted to "penalty clauses". rescind the agreement. provided. our client is the injured party. the Regional Trial Court of Makati 8 rendered decision holding that private respondent had no right to rescind the contract since it was she who "violated her obligation to eject the squatters from the subject property" and that petitioner. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his client's failure to evict the squatters from the premises within the agreed 60-day period. Apostol wrote back to explain: The contract of sale between the parties was perfected from the very moment that there was a meeting of the minds of the parties upon the subject lot and the price in the amount of P1. Civil Case No. Atty. the court suspended the enforcement of the writ of execution accordingly. Ms. In fact. the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price. the Metropolitan Trial Court issued an alias writ of execution in Civil Case No. Moreover. Joaquin Yuseco. however." 5 In his letter of 19 June 1989. upon the other hand. Instead. the Presidential Commission for the Urban Poor ("PCUD"). private respondent. 89-4394. 7 A few days later (or on 27 June 1989). Atty. your client has not complied with her obligation under their contract in good faith. we refer you to our letters addressed to your client dated April 17. 1989. Suffice it to state that.. Jr.00. Atty. being the injured party. asked the Metropolitan Trial Court of Parañaque for a grace period of 45 days from 21 April 1989 within which to relocate and transfer the squatter families.000. a perusal of the terms and conditions of the contract clearly shows that the right to rescind the contract and to demand the return/reimbursement of the downpayment is granted to our client for his protection.00 cash. 89-4394 for rescission of the deed of "conditional" sale. on 26 June 1990. our client had opted to take it upon himself to eject the squatters from the premises. Please consider this letter as a tender of payment to your client and a demand to execute the absolute Deed of Sale. On 08 June 1989. the provision of the Deed of Conditional Sale do not grant her the option or prerogative to rescind the contract and to retain the property should she fail to comply with the obligation she has assumed under the contract. Precisely. it is basic under the law on contracts that the power to rescind is given to the injured party. Back to Civil Case No. under the circumstances. 1989 and June 8. Undoubtedly. Ongsiong deliberately refused to exert efforts to eject the squatters from the premises of the subject property and her decision to retain the property was brought about by the sudden increase in the value of realties in the surrounding areas. was the party who could. It is undeniable that Ms. The court ruled that the provisions in the contract relating to (a) the return/reimbursement of the P50.

to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees.000.This Court is not convinced of the ground relied upon by the plaintiff in seeking the rescission. 6) in the ejectment suit which was almost two months after she filed the complaint before this Court on June 27.00 was to be paid upon the execution of the document of sale and the balance of P1. the appellate court rendered its decision. private respondent to eject or cause the ejectment of the squatters from the property and to execute the absolute deed of conveyance upon payment of the full purchase price by petitioner.00. or subject to. On 29 May 1992. in the case of the vendor. To the mind of the Court.000. Civil Code).952-square meter lot in San Dionisio. in the case of vendee. If the condition is imposed on an obligation of a party which is not complied with. Private respondent appealed to the Court of Appeals.e. covered by Transfer Certificate of Title No. of the prescribed condition. in the case before us. 10 It opined that the contract entered into by the parties was subject to a resolutory condition. 15 The object of the sale. that private respondent substantially complied with her obligation to evict the squatters. was specifically identified to be a 1. 1989 (Exh. the so-called squatter factor is simply factuitous (sic). 1545.00 in case private respondent would fail to eject the squatters within the 60-day period was not a penal clause. tsn. namely: (1) he (sic) is afraid of the squatters. Notably. she did not even report to the police the alleged phone threats from the squatters. 11 Failing to obtain a reconsideration. 6. 14 The term "condition" in the context of a perfected contract of sale pertains.561. the demandability of the reciprocal prestation of the other party. 13 In determining the real character of the contract. usage and . i. and (2) she has spent so much to eject them from the premises (p. 1989. Where. For example. a deed of sale. 361402 of the Registry of Deeds for Pasig and therein technically described. of course.00 payable "45 days after the removal of all squatters from the above described property.00 remittance made by petitioner. Rizal. that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract. dismissed the complaint and ordered. although denominated as a deed of conditional sale. accordingly.00 which was deposited in the court below. The reciprocal obligations referred to would normally be. the fulfillment of certain express warranties (which. in turn. the non-occurrence of which resulted in the failure of the object of the contract. 3. center on the nature of the contract adverted to and the P50." From the moment the contract is perfected. 9 The lower court. ses. any condition imposed on the passing of title of the thing to be conveyed or on the obligation of a party thereto. Militating against her profession of good faith is plaintiffs conduct which is not in accord with the rules of fair play and justice. the title given to it by the parties is not as much significant as its substance. Besides. WHEREFORE. she caused the issuance of an alias writ of execution on August 25. the failure of such condition would prevent the juridical relation itself from coming into existence. the condition is imposed upon the perfection of the contract itself. may be in keeping with good faith.511. Thus. of which P50. the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which. The purchase price was fixed at P1. It would be futile to challenge the agreement here in question as not being a duly perfected contract. and a new one entered declaring the contract of conditional sale dated June 9. instead. Jan. in fine. in reality. the payment of the agreed purchase price and. for a price certain. may be treated as absolute in nature. in the case at bench is the timely eviction of the squatters on the property). it concluded. When ownership is retained until the fulfillment of a positive condition the breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force.600.600. the ejectment of the squatters from the land. A sale is at once perfected when a person (the seller) obligates himself. then she should not have pursued the issuance of an alias writ of execution.. 1990). petitioner filed this petition for review on certiorari raising issues that. according to their nature.000. Parañaque. A perfected contract of sale may either be absolute or conditional 12 depending on whether the agreement is devoid of. If she were really afraid of the squatters. 1988 cancelled and ordering the defendantappellee to accept the return of the downpayment in the amount of P50. to the compliance by one party of an undertaking the fulfillment of which would beckon. and that the provision requiring a mandatory return/reimbursement of the P50. the other party may either refuse to proceed or waive said condition (Art. the decision appealed from is REVERSED and SET ASIDE.000. as the case may be. No pronouncement as to costs. if title to the property sold is not reserved in the vendor or if the vendor is not granted the right to unilaterally rescind the contract predicated on the fulfillment or non-fulfillment.

having been made prior to the demand for rescission. to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. We share the opinion of the appellate court that the undertaking required of private respondent does not constitute a "potestative condition dependent solely on his will" that might. She is not the injured party.R. the questioned decision of the Court of Appeals is hereby REVERSED AND SET ASIDE. Melo and Panganiban. 112212 March 2. aforementioned. and another is entered ordering petitioner to pay private respondent the balance of the purchase price and the latter to execute the deed of absolute sale in favor of petitioner. Romero. 20 In any case. JJ. No costs. ROMERO. SO ORDERED. 22 It is private respondent who has failed in her obligation under the contract.. Petitioner did not breach the agreement. Here. WHEREFORE. assuming for the sake of argument that such a demand is proper under Article 1592 23 of the Civil Code. evidently.00 advance payment is reimbursable to petitioner or forfeitable by private respondent. private respondent is obligated to evict the squatters on the property. counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale.e. this offer to pay. 19 In contracts of sale particularly. No. concur. neither may petitioner demand its reimbursement from private respondent nor may private respondent subject it to forfeiture. vs. private respondent's action for rescission is not warranted. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. NINEVETCH CRUZ and JUAN BELARMINO. Article 1545 of the Civil Code. in fact. Suffice it to say that petitioner having opted to proceed with the sale. Under the agreement. would likewise suffice to defeat private respondent's prerogative to rescind thereunder. petitioner has waived the performance of the condition imposed on private respondent to free the property from squatters. He has agreed. 1998 GREGORIO FULE. leaving unaffected the obligation itself.: . since. In his letter of 23 June 1989. allows the obligee to choose between proceeding with the agreement or waiving the performance of the condition. 21 The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. however." 18 We must hasten to add. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. Feliciano. the matter has ceased to be an issue. otherwise. i. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation. on the basis of our foregoing conclusions.. It is this provision which is the pertinent rule in the case at bench. Parenthetically. respondents. be void in accordance with Article 1182 of the Civil Code 17 but a "mixed" condition "dependent not on the will of the vendor alone but also of third persons like the squatters and government agencies and personnel concerned. that where the so-called "potestative condition" is imposed not on the birth of the obligation but on its fulfillment. petitioner. 16 This option clearly belongs to petitioner and not to private respondent.law. COURT OF APPEALS.000. J. to pay the balance of the purchase price. There is no need to still belabor the question of whether the P50. only the obligation is avoided.

987. asked Remelia Dichoso and Oliva Mendoza to look for a buyer who might be interested in the Tanay property. petitioner had shown interest in buying a pair of emerald-cut diamond earrings owned by Dr.00. The disparity between the actual contract price and the one indicated on the deed of absolute sale was purportedly aimed at . Cruz and Atty. Belarmino to finally execute a deed of absolute sale. the Court hereby renders judgment dismissing the complaint for lack of merit and ordering plaintiff to pay: 1. Belarmino at the latter's residence to prepare the documents of sale.00 as and for exemplary damages. As found by the Court of Appeals and the lower court.00. Dr. Cruz the sum of P300.This petition for review on certiorari questions the affirmance by the Court of Appeals of the decision 1 of the Regional Trial Court of San Pablo City.00 and a 2. Belarmino was aware that she and petitioner had previously agreed to exchange a pair of emerald-cut diamond earrings for the Tanay property. found out that no sale or barter was feasible because the one-year period for redemption of the said property had not yet expired at the time.000. Atty. the antecedent facts of this case are as follows: Petitioner Gregorio Fule. Cruz had already agreed to the proposed barter.000. 320725 which used to be under the name of Fr. petitioner went to Prudential Bank once again to take a look at the jewelry.000.00 at the exchange rate of $1. Rizal (hereinafter "Tanay property"). and on even date. Jacobe sold the property to petitioner for P75. In July 1984. Petitioner then made another bid to buy them for US$6. however. a banker by profession and a jeweler at the same time.00 as and for moral damages and the sum of P150. The costs of suit. Defendant Dra. Inc. Subsequently. Cruz herself was not around but Atty. The following day. Juan Belarmino the sum of P250. The haste with which the two deeds were executed is shown by the fact that the deed of sale was notarized ahead of the deed of redemption. In the afternoon of October 23. Cruz which he had seen in January of the same year when his mother examined and appraised them as genuine. Petitioner also issued a certification to the effect that the actual consideration of the sale was P200. 2.00. petitioner. Jacobe purportedly in the amount of P15. Antonio Jacobe. Ninevetch M. but the mortgage was later foreclosed and the property offered for public auction upon his default. In an effort to cut through any legal impediment. Cruz who again refused to sell them since the exchange rate of the peso at the time appreciated to P19. covered by Transfer Certificate of Title No. dismissing the complaint that prayed for the nullification of a contract of sale of a 10hectare property in Tanay. Defendant Atty.000. Cruz. Having sketched the jewelry for twenty to thirty minutes. Belarmino the amount of P13. Laguna.00 as and for moral damages and the sum of P100. Petitioner signed the deed and gave Atty.000.00 to P25. Fr.00 as and for exemplary damages. petitioner inspected said jewelry at the lobby of the Prudential Bank branch in San Pablo City and then made a sketch thereof. Juan Belarmino to check the property who. SP-2455). together with Dichoso and Mendoza.000. petitioner. Defendant Dra. 1984. Belarmino accordingly caused the preparation of a deed of absolute sale while petitioner and Dr. Rizal in consideration of the amount of P40.5 carat emerald-cut diamond (Civil Case No. however. SO ORDERED. 2 Dr. The latter had mortgaged it earlier to the Rural Bank of Alaminos (the Bank).000. The two found one in the person of herein private respondent Dr. Branch 30. petitioner gave them back to Dr. petitioner met Atty. as corporate secretary of the bank.78. negotiations for the barter of the jewelry and the Tanay property ensued. declined petitioner's offer to buy the jewelry for P100. Belarmino the sum of P25.000.000.00 for necessary expenses in the transfer of title over the Tanay property. in turn. Ninevetch Cruz. arrived at the residence of Atty.00 and not P80.00 each as and for attorney's fees and litigation expenses.000. 1984.00 as indicated in the deed of absolute sale. petitioner executed on October 19. It so happened that at the time. to secure a loan in the amount of P10. Cruz attended to the safekeeping of the jewelry. 3. and 4. Cruz requested herein private respondent Atty. Dr. acquired a 10-hectare property in Tanay.00.000. At this point. a deed of redemption on behalf of Fr.00 to a dollar.700. As Dr.000. premises considered. The lower court's decision disposed of the case as follows: WHEREFORE.

the parties agreed that the balance of P40. The latter. On November 20.m. When he went at 8:00 p. Cruz to petitioner.m. Confronting the issue of whether or not the genuine pair of earrings used as consideration for the sale was delivered by Dr.00. Dra.000. petitioner reported the matter to the police station where Dichoso and Mendoza likewise executed sworn statements. Dichoso called up Atty. Cruz to borrow her car so that. After a while. a jeweler. the lower court issued a temporary restraining order directing the Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in the transaction. ahead of Dr.. Dr. went near the electric light at the bank's lobby. He then used a tester to prove the alleged fakery. complaining about the fake jewelry. there was already undue delay because of the lapse of a considerable length of time since he got hold of subject jewelries (sic). the lower court said: The Court finds that the answer is definitely in the affirmative. At that instance. 1984. at 8:30 p. Petitioner then accused Dichoso and Mendoza of deceiving him which they. When asked by Dra.00 would just be paid later in cash. Indeed. At around 9:30 p.00 and some pieces of jewelry. Petitioner nonetheless took back the US$300. Plaintiff took delivery of the subject jewelries (sic) before 6:00 p. arriving there at past 5:00 p. after taking one look at the earrings. Later. the lower court rendered its decision on March 7. 1988). Being a professional banker and engaged in the jewelry business plaintiff is conversant and competent to detect a fake diamond from the real thing.m. and (c) price certain in money or its equivalent. Reynaldo Alcantara residing at Lakeside Subdivision in San Pablo City. Believing that petitioner had finally agreed to give them half of the pair of earrings. On October 30. plaintiff even nodded his satisfaction (Hearing of Feb.m. but the cashier who kept the other key to the deposit box had already left the bank. On October 26. denied. however. the group decided to go to the house of a certain Macario Dimayuga. Since the jewelry was appraised only at P160. 1989. 1984. "Okay na ba iyan?" Petitioner expressed his satisfaction by nodding his head. the former retrieving a transparent plastic or cellophane bag with the jewelry inside and handing over the same to petitioner. Belarmino complaining that the jewelry given to him was fake. that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit. the amount of US$300. among other things. the same court lifted its previous order and denied the prayer for a writ of preliminary injunction.. Meanwhile. instructed Dichoso to proceed immediately to his residence because petitioner was there. After trial. Cruz and Dichoso. looked for said cashier and found him having a haircut. The same elements. however. of October 24. Cruz had agreed to lend her car.00 and jewelry he had given them. As soon as his haircut was finished. The lower court explained thus: . Dr. Cruz delivered (the) subject jewelries (sic) into the hands of plaintiff who even raised the same nearer to the lights of the lobby of the bank near the door.. Dr. Thereafter. petitioner filed a complaint before the Regional Trial Court of San Pablo City against private respondents praying. 3 The lower court further ruled that all the elements of a valid contract under Article 1458 of the Civil Code were present. petitioner arrived at the residence of Atty. Cruz and Dichoso who arrived at 5:55 p. Dichoso went posthaste to the residence of Atty. Cruz and the cashier then opened the safety deposit box. Dimayuga. petitioner went to one Atty. Belarmino already with a tester complaining about some fake jewelries (sic). 1984. therefore. Cruz was principally a barter contract. (b) determinate subject matter. Cruz if everything was in order. were present despite the fact that the agreement between petitioner and Dr. that same day to the residence of Atty. Cruz also arrived shortly thereafter. however. Cruz asked. give them half of the pair of earrings in question which he had earlier promised. the cashier returned to the bank and arrived there at 5:48 p. After Dr.000. He did not. at about 8:00 o'clock in the evening of the same day. complain or beg for additional time to examine further the jewelries (sic). petitioner left Atty. Upon being advised by the latter. Belarmino. namely: (a) consent or meeting of the minds. petitioner paid the agents. Belarmino's residence with Dichoso and Mendoza and headed for the bank. Belarmino only to find petitioner already demonstrating with a tester that the earrings were fake. however. The lapse of two (2) hours more or less before plaintiff complained is considered by the Court as unreasonable delay. For services rendered. Belarmino.m.minimizing the amount of the capital gains tax that petitioner would have to shoulder. 24. they could register the Tanay property. They countered that petitioner could not have been fooled because he had vast experience regarding jewelry.m. to have the earrings tested. As pre-arranged. Plaintiff was accorded the reasonable time and opportunity to ascertain and inspect the jewelries (sic) in accordance with Article 1584 of the Civil Code.m. according to the lower court. 1984. plaintiff did not protest. Dichoso and Mendoza. with Atty. immediately declared them counterfeit. Dr. The latter took the jewelry from the bag. Dichoso and Mendoza went to the residence of Dr. held the jewelry against the light and examined it for ten to fifteen minutes.

00 in exchange for a genuine pair of emerald cut diamond worth P200. Verily. Plaintiff signified his approval by nodding his head. How could in less than a day (Oct. The ownership and/or title over the jewelries (sic) was transmitted immediately before 6:00 p. 86 SCRA 305. . rendered a decision 7 affirming in toto the lower court's decision. Once a contract is shown to have been consummated or fully performed by the parties thereto. Cruz. et al. 26). the trial court likewise dwelt on the unexplained delay with which petitioner complained about the alleged fakery. when Exhibit D was executed. when it is placed in the control and possession of the vendee (Art. Pan Oriental Shipping Co.R. Plaintiff's ownership over the Tanay property passed unto Dra. On October 20. the award of attorney's fees is warranted under the circumstances (Art. 1984 up to the present they were living under a pall of doubt. but also they suffered besmirched reputations. But he was not satisfied in being able to get subject jewelries for a song. Why then did he not bring it out when he was examining the subject jewelries (sic) at about 6:00 p. Class 1978-79. Both of them are near the twilight of their lives after maintaining and nurturing their good reputation in the community only to be stunned with a court case.m. 20 Phil. 2219. CA G. petitioner now files the instant petition alleging that: . Cruz parted ways at the bank. It must be remembered that in July 1984 plaintiff made a sketch of the subject jewelries (sic) at the Prudential Bank. in the bank's lobby? Obviously. Cruz. D) operates as a formal or symbolic delivery of the Tanay property and authorizes the buyer. however. the Court of Appeals. at the residence of Atty.000. 5 Finally. His motion for reconsideration having been denied on October 19. Cruz and plaintiff left the bank both of them had fully performed their respective prestations. Since the filing of this case on October 26. More so. 399). Dra. Moreover..m. Cruz over the subject jewelries (sic) transferred to the plaintiff upon her actual personal delivery to him at the lobby of the Prudential Bank. Plaintiff came to Court with unclean hands dragging the defendants and soiling their clean and good name in the process. The length of time this case dragged on during which period their reputation were (sic) tarnished and their names maligned by the pendency of the case. Civil Code. Maritime Building Co. a professional banker as well as a jeweler in his own right. He had to file a malicious and unfounded case against Dra. 13 Phil. Plaintiff had a tester at 8:00 p. On the other hand. Similarly. 6 From the trial court's adverse decision. Delivery or tradition. 1987). 12 SCRA 276). nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period (Taguba v. respected and held in high esteem in San Pablo City where everybody practically knows everybody. Watson & Co. He also retrieved the US$300. its existence and binding effect can no longer be disputed. 1992. Froilan v. . Belarmino who are well known. The execution of the public instrument (Exh. 132 SCRA 722. . in awarding damages to the defendants. plaintiff is already estopped to come back after the lapse of considerable length of time to claim that what he got was fake. .m. Vda. 1984) the value would (sic) triple under normal circumstances? Plaintiff. the ownership of Dra.000. malice and baseless nature of the complaint defendants were compelled to litigate. the Court is of the belief that some of the damages they prayed for in their answers to the complaint are reasonably proportionate to the sufferings they underwent (Art. 4 Aside from concluding that the contract of barter or sale had in fact been consummated when petitioner and Dr. Cruz and Atty. Luzon Brokerage Co. L-35721. also on that same day it was executed. Oct.00 and jewelries (sic) from his agents. Dra. because of the falsity. 19. Cruz runs her own hospital and defendant Belarmino is a well respected legal practitioner. Inc. He is a Business Management graduate of La Salle University.000. No. De Leon.00 (Exh.00 belonging to Dra. 1497. Inc. Kuenzle & Straff vs.00. New Civil Code). Civil Code). It is irrelevant and immaterial to dispute the due execution of a contract if both of them have in fact performed their obligations thereunder and their respective signatures and those of their witnesses appear upon the face of the document (Weldon Construction v. 712. When Dra. 1993. vs. . was able to exchange the Tanay property which his bank valued only at P25. it was equivalent to the delivery of the Tanay property in favor of Dra.000. 12. he had no need for it after being satisfied of the genuineness of the subject jewelries (sic). Cruz upon the constructive delivery thereof by virtue of the Deed of Absolute Sale (Exh. New Civil Code). It is expressly provided by law that the thing sold shall be understood as delivered. the lower court remarked: The Court finds that plaintiff acted in wanton bad faith. 2208. Cruz to use the document as proof of ownership (Florendo v. . 1984. is one of the modes of acquiring ownership (Art. Exhibit 2-Belarmino purports to show that the Tanay property is worth P25. the property's worth was magnified at P75. However. D). Thus: . since Exhibit D does not contain any proviso or stipulation to the effect that title to the property is reserved with the vendor until full payment of the purchase price. 3-Belarmino). Belarmino. Hence. Surely. of October 24. Foz. Two hours is more than enough time to make a switch of a Russian diamond with the real diamond. with the assistance of his agents. petitioner elevated the matter to the Court of Appeals. this affected not only their earning capacity in their practice of their respective professions.

(4) when the judgment is based on a misapprehension of facts. this Court's jurisdiction is only limited to reviewing errors of law in the absence of any showing that the findings complained of are totally devoid of support in the record or that they are glaringly erroneous as to constitute serious abuse of discretion. 1989 hearing was conducted solely for the presentation of petitioner's rebuttal testimony. The immediate rendition of the decision was no more than Judge Jaramillo's compliance with his duty as a judge to "dispose of the court's business promptly and decide cases within the required periods. went beyond the issues of the case and the same is contrary to the admission of both parties. AND IN FAILING TO GRANT REASONABLE DAMAGES IN FAVOR OF THE PLAINTIFF. conclusiveness to a lower court's findings of fact unless it is shown. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFF'S COMPLAINT AND IN HOLDING THAT THE PLAINTIFF ACTUALLY RECEIVED A GENUINE PAIR OF EMERALD CUT DIAMOND EARRING(S) FROM DEFENDANT CRUZ . In fact. in making its findings. We accord. The March 6. (3) when there is a grave abuse of discretion. No proof has been adduced that Judge Jaramillo was motivated by a malicious or sinister intent in disposing of the case with dispatch. THE TRIAL COURT ERRED IN AWARDING MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES IN FAVOR OF DEFENDANTS AND AGAINST THE PLAINTIFF IN THIS CASE. Belarmino terminated presentation of evidence on October 13." 14 The two-year period within which Judge Jaramillo handled the case provided him with all the time to study it and even write down its facts as soon as these were presented to court. 1989. THE TRIAL. the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which. COURT ERRED IN NOT DECLARING THE DEED OF SALE OF THE TANAY PROPERTY (EXH. absurd and impossible. The Civil Code provides that contracts are perfected by mere consent. . a contract of sale has the force of . we cannot do without unduly transcending the limits of our review power in petitions of this nature which are confined merely to pure questions of law. Neither is there proof that someone else wrote the decision for him. This. The acts of a judge which pertain to his judicial functions are not subject to disciplinary power unless they are committed with fraud. in this regard. 11 Nonetheless. while Dr. (2) the inference is manifestly mistaken. this Court has to closely delve into petitioner's allegation that the lower court's decision of March 7. that warrants the application of any of these exceptions. Cruz finished hers on February 4. 8 As to the first allegation. The Court finds nothing anomalous in the said situation. Judge Jaramillo is presumed to have performed his job in accordance with law and should instead be commended for his close attention to duty. the Court observes that petitioner is essentially raising a factual issue as it invites us to examine and weigh anew the facts regarding the genuineness of the earrings bartered in exchange for the Tanay property. however. in the absence of sufficient proof to the contrary. corruption or bad faith. according to their nature. of course. Belarmino clarified that Judge Jaramillo had issued the first order in the case as early as March 9. this Court upholds the appellate court's findings of fact especially because these concur with those of the trial court which. type it and release it on March 7. finds it incredible that Judge J. inter alia. surmises or conjectures. Having disposed of petitioner's first contention. as a general rule. provided that no malice or any wrongful conduct attends its adoption. or more than a month prior to the rendition of the judgment. dishonesty. From this moment. "D") AS NULL AND VOID OR IN NOT ANNULLING THE SAME. Atty. we now come to the core issue of this petition which is whether the Court of Appeals erred in upholding the validity of the contract of barter or sale under the circumstances of this case. This allegation is obviously no more than a desperate effort on the part of petitioner to disparage the lower court's findings of fact in order to convince this Court to review the same. are firmly grounded on evidence presented at the trial. may be in keeping with good faith. Neither can Judge Jaramillo be made administratively answerable for the immediate rendition of the decision. . Ausberto Jaramillo was able to write a 12-page single-spaced decision. and III. that: (1) the conclusion is a finding grounded on speculations. this Court does not see anything wrong in the practice of writing a decision days before the scheduled promulgation of judgment and leaving the dispositive portion for typing at a time close to the date of promulgation. upon a thorough scrutiny of the records. 1989. and (6) when the Court of Appeals. 10 To reiterate. 1987. 18 Being consensual. 15 The practice serves the dual purposes of safeguarding the confidentiality of draft decisions and rendering decisions with promptness. It is noteworthy that Atty. 1987 or two years before the rendition of the decision.I. He stressed that Judge Jaramillo replaced Judge Salvador de Guzman and heard only his rebuttal testimony. 1989. II. usage and law. 17 A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Judge Jaramillo had ample time to study the case and write the decision because the rebuttal evidence would only serve to confirm or verify the facts already presented by the parties. 16 Hence. 12 Petitioner. less than a day after the last hearing on March 6. 9 We find nothing. Consequently. (5) when the findings of fact are conflicting. 1989 is a "ready-made" one because it was handed down a day after the last date of the trial of the case. . In fact. 13 In other words.

Cruz by affixing his signature to the contract of sale.000. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument. petitioner subsequently sought the nullification of said contract on the ground that it was. 22 Accordingly. If indeed petitioner's property was truly worth that much. He. without them. correctly ruled that there were no legal bases for the nullification of the contract of sale. 29 By taking the jewelry outside the bank. he would not have agreed to. Cruz if he was satisfied with the same. He had the intellectual capacity and the business acumen as a banker to take precautionary measures to avert such a mistake. through his agents. There is fraud when. To invalidate a contract. it can be rightfully assumed that he was an expert on matters regarding gems. are bare of any evidence manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering the contract of barter. he could have avoided the present situation that he himself brought about. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the earrings in exchange for said property. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400. however. it appears that it was petitioner. the finger of suspicion of switching the genuine jewelry for a fake inevitably points to him. therefore. Such a mistake caused by manifest negligence cannot invalidate a juridical act. "tainted with fraud" 23 such that his consent was vitiated. Cruz and petitioner. is only for convenience. even though there may have been no damage to the contracting parties are: (1) those where one of the parties is incapable of giving consent to a contract. The fact that he had seen the jewelry before October 24. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil Code within which to examine the jewelry as he in fact accepted them when asked by Dr. who led Dr. Moreover. 20 Formal requirements are. This gains credence when it is borne in mind that he himself had earlier delivered the Tanay property to Dr. petitioner did not clearly allege mistake as a ground for nullification of the contract of sale. and the price with interest. Cruz did not initially accede to petitioner's proposal to buy the said jewelry. Neither is there any evidence showing that Dr. it was in fact petitioner who resorted to machinations to convince Dr. Cruz to exchange her jewelry for the Tanay property. 30 Said contract of sale being absolute in nature. Cruz. the contract can be voided in accordance with law so as to compel the parties to restore to each other the things that have been the subject of the contract with their fruits. petitioner cannot successfully invoke the same. failed to prove the fact that prior to the delivery of the jewelry to him.00. Ownership over the parcel of land and the pair of emerald-cut diamond earrings had been transferred to Dr. undue influence or fraud. The nature and value of the thing he had taken preclude its return after that supervening period within which anything could have happened. Even assuming that he did. 19 and registration of the instrument only adversely affects third parties. It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr.law between the contracting parties and they are expected to abide in good faith by their respective contractual commitments.000. considering the value of both the jewelry and his land. could not sever the juridical tie that now bound him and Dr. upon the actual and constructive delivery thereof. That after two hours he later claimed that the jewelry was not the one he intended in exchange for his Tanay property. respectively. title passed to the vendee upon delivery of the thing sold since there was no stipulation in the contract that title to the property sold has been reserved in the seller until full payment of the price or that the vendor has the right to unilaterally . 1984 should not have precluded him from having its genuineness tested in the presence of Dr. 26 In his allegations in the complaint. In short." On account of his work as a banker-jeweler. Likewise. Indeed. in fact. Had he done so. they are bound by the contract unless there are reasons or circumstances that warrant its nullification. mistake must "refer to the substance of the thing that is the object of the contract. On the contrary. or to those conditions which have principally moved one or both parties to enter into the contract. private respondents endeavored to make such substitution. petitioner executed an act which was more consistent with his exercise of ownership over it. Rather. however. "(t)here is no mistake if the party alleging it knew the doubt.00 or more than double that of the jewelry which was valued only at P160. the other is induced to enter into a contract which. Dr. violence. however. 24 The records. the problem that should be addressed in this case is whether or not under the facts duly established herein. Cruz. 27 As the Civil Code provides. contingency or risk affecting the object of the contract. not excluding the alteration of the jewelry or its being switched with an inferior kind. 21 Contracts that are voidable or annullable. it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for half its price. On the pretext that those pieces of jewelry turned out to be counterfeit. for the benefit of third parties. the facts as proven do not support the allegation that petitioner himself could be excused for the "mistake. Cruz. and (2) those where the consent is vitiated by mistake. therefore. intimidation. through the insidious words or machinations of one of the contracting parties. petitioner insinuated that an inferior one or one that had only Russian diamonds was substituted for the jewelry he wanted to exchange with his 10-hectare land. petitioner now stresses before this Court that he entered into the contract in the belief that the pair of emerald-cut diamond earrings was genuine." 25 An example of mistake as to the object of the contract is the substitution of a specific thing contemplated by the parties with another. As such. Hence. Both the trial and appellate courts." 28 Furthermore.

which his bank owns. For moral damages to be awarded. (3) Should he be in default. it is essential that the claimant must have satisfactorily proved during the trial the existence of the factual basis of the damages and its causal connection with the adverse party's acts. He must likewise establish sufficient data upon which the court can properly base its estimate of the amount of damages. there is no stipulation for the payment of interest in the contract of sale nor proof that the Tanay property produced fruits or income.00. its nonpayment by Dr. of course. oppressive or malevolent manner. the court shall take into account the circumstances obtaining in the case said assess damages according to its discretion. it must be shown that the person to whom these are awarded has sustained injury. 31 Such stipulations are not manifest in the contract of sale. Belarmino should return to him the owner's duplicate copy of TCT No. more than that.00. 34 Moral and exemplary damages may be awarded without proof of pecuniary loss." thereby affecting their earning capacity in the exercise of their respective professions and besmirching their reputation. Neither did petitioner demand payment of the price as in fact he filed an action to nullify the contract of sale. . Article 1589 of the Civil Code prescribes the payment of interest by the vendee "for the period between the delivery of the thing and the payment of the price" in the following cases: (1) Should it have been so stipulated. such indemnity could not be outrightly awarded. If the court has no proof or evidence upon which the claim for moral damages could be based. . the lower court appeared to have awarded damages on a ground analogous to malicious prosecution under Article 2219 (8) of the Civil Code 39 as shown by (1) petitioner's "wanton bad faith" in bloating the value of the Tanay property which he exchanged for "a genuine pair of emerald-cut diamond worth P200. he pleads for the total deletion of the award as regards private respondent Belarmino whom he considers a mere "nominal party" because "no specific claim for damages against him" was alleged in the complaint. While it is true that the amount of P40. Legaspi. Cruz. Petitioner alleges further that Atty. all that petitioner wanted was that Atty. 32 Neither may such failure to pay the balance of the purchase price result in the payment of interest thereon.00 forming part of the consideration was still payable to petitioner. This case should. get back the real property. Belarmino should not have delivered all those documents to Dr. 33 where the court held that failure to pay the consideration after the notarization of the contract as previously promised resulted in the vendee's liability for payment of interest. petitioner asserts that there was no firm basis for damages except for Atty." Moreover. Belarmino's uncorroborated testimony. 320725. Having taken possession of the genuine jewelry of Dra. (2) Should the thing sold and delivered produce fruits or income. Cruz is not a sufficient cause to invalidate the contract or bar the transfer of ownership and possession of the things exchanged considering the fact that their contract is silent as to when it becomes due and demandable. Fule has obtained a genuine jewelry which he could sell anytime. 38 In this regard. from the time of judicial or extrajudicial demand for the payment of the price. 37 Thus: . respected and held in high esteem in San Pablo City where everybody practically knows everybody" and whose good names in the "twilight of their lives" were soiled by petitioner's coming to court with "unclean hands.000. the deed of sale executed by Fr. petitioner appears to have elevated this case to this Court for the principal reason of mitigating the amount of damages awarded to both private respondents which petitioner considers as "exorbitant. 35 To warrant the award of damages. All told. For its part. 36 Statements of facts should establish such data rather than mere conclusions or opinions of witnesses." He contends that private respondents do not deserve at all the award of damages. the deed of redemption and the check alloted for expenses. Fule now wishes to return a fake jewelry to Dra. In fact. In the case at bar. the Court of Appeals affirmed the award of damages to private respondents for these reasons: The malice with which Fule filed this case is apparent. .resolve the contract the moment the buyer fails to pay within a fixed period. Cruz because as the "lawyer for both the seller and the buyer in the sale contract. be distinguished from De la Cruz v. In awarding such damages. The same holds true with respect to the award of exemplary damages where it must be shown that the party acted in a wanton. he should have protected the rights of both parties. Not one of these cases obtains here. Antonio Jacobe." and (2) his filing of a "malicious and unfounded case" against private respondents who were "well known. . Cruz and. When he filed the case.

that he could not have been such a victim because he should have examined the jewelry in question before accepting delivery thereof. This is plain and simple. like pieces of fabric sewn into a quilt. a situation where petitioner's complaint was simply found later to be based on an erroneous ground which. Cruz to exchange her jewelry for the Tanay property. Indeed. concur. it took him two more hours of unexplained delay before he complained that the jewelry he received were counterfeit. they would sufficiently demonstrate that his acts were not merely negligent but rather studied and deliberate. including the possibility of substituting them with fake ones. As pointed out earlier. considering his exposure to the banking and jewelry businesses. Cruz were not genuine. Add to that the fact that he had been shrewd enough to bloat the Tanay property's price only a few days after he purchased it at a much lower value. however. the cause of action of the instant case appears to have been contrived by petitioner himself. even going to the extent of sketching their appearance. and that he filed the action for the nullification of the contract of sale with unclean hands. he carried on his person a tester which he later used to prove the alleged fakery but which he did not use at the time when it was most needed. therefore. cannot apply in the case at bar.000. the decision of the Court of Appeals dated October 20. is ordered to pay petitioner the balance of the purchase price of P40. all deserve full faith and credit to support the conclusion that petitioner was motivated more by ill will than a sincere attempt to protect his rights in commencing suit against respondents. Kapunan and Purisima. however. In other words.J. The truth is that petitioner even failed to successfully prove during trial that the jewelry he received from Dr. Why at the precise moment when he was about to take physical possession thereof he failed to exert extra efforts to check their genuineness despite the large consideration involved has never been explained at all by petitioner. 42 Instead. Narvasa. petitioner took pains to thoroughly examine said jewelry. under settled jurisprudence.. WHEREFORE. against which respondents would have a great deal of difficulty defending themselves. without the same being traced to the original owner for practically nothing. The factual findings of the courts a quo to the effect that petitioner filed this case because he was the victim of fraud. as a rule. JJ.anywhere and to anybody. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION . a closer scrutiny of the chain of events immediately prior to and on October 24. Hence. 41 the same. 1984 itself would amply demonstrate that petitioner was not simply negligent in failing to exercise due diligence to assure himself that what he was taking in exchange for his property were genuine diamonds.. He had rather placed himself in a situation from which it preponderantly appears that his seeming ignorance was actually just a ruse. therefore. 1992 is hereby AFFIRMED in toto. His insistent pursuit of such case then coupled with circumstances showing that he himself was guilty in bringing about the supposed wrongdoing on which he anchored his cause of action would render him answerable for all damages the defendant may suffer because of it. This is precisely what took place in the petition at bar and we find no cogent reason to disturb the findings of the courts below that respondents in this case suffered considerable damages due to petitioner's unwarranted action. it was actually gross recklessness for him to have merely conducted a cursory examination of the jewelry when every opportunity for doing so was not denied him. see here no semblance of an honest and sincere belief on his part that he was swindled by respondents which would entitle him to redress in court. he was placed in a situation where he could not honestly evaluate whether his cause of action has a semblance of merit. 40 While. We do not have here. we stated earlier that anything could have happened during all the time that petitioner was in complete possession and control of the jewelry. Apparently. Dr. he had unnecessarily dragged respondents to face the travails of litigation in speculating at the possible favorable outcome of his complaint when he should have realized that his supposed predicament was his own making. Furthermore. such that it would require the expertise of the courts to put it to a test. C. We. Cruz. SO ORDERED.00 within ten (10) days from the finality of this decision. It must be noted that before petitioner was able to convince Dr. moral damages cannot be recovered from a person who has filed a complaint against another in good faith because it is not sound policy to place a penalty on the right to litigate. Being an experienced banker and a businessman himself who deliberately skirted a legal impediment in the sale of the Tanay property and to minimize the capital gains tax for its exchange. would not have been a reason for awarding moral and exemplary damages. Costs against petitioner. it is our considered view that if this slew of circumstances were connected. His acts thus failed to accord with what an ordinary prudent man would have done in the same situation. unjust enrichment. Thus.

09.: Before us is a petition for review on certiorari from the judgment rendered by the Court of Appeals which. and the latter shall take over from the SELLER the possession. YNARES-SANTIAGO. No.00). affirmed the decision of the Regional Trial Court of Lucena City.R. That for and in consideration of the agreed purchase price of TWO MILLION PESOS (P2.000. That immediately upon the execution of this document. provided however that the amount in excess of P496. control and management of the RICEMILL and PIGGERY found on the aforesaid parcels of land. P103. 2.310. . SPOUSES MIGUEL K.00) PESOS shall be paid by the BUYER to the SELLERS in four (4) equal quarterly installments of THREE HUNDRED FIFTY THOUSAND PESOS (P350. petitioner. executed an "Agreement of Purchase and Sale" respecting two parcels of land situated at Barrio Puri. ONG. the first to be due and payable on June 15.500. the mode and manner of payment is as follows: A. petitioner Jaime Ong.000. That the sum of P496.00) as verbally agreed by the parties. setting aside the "Agreement of Purchase and Sale" entered into by herein petitioner and private respondent spouses in Civil Case No. San Antonio. Philippine currency. operation. situated at Barangay Puri. 1999 JAIME G. and every quarter thereafter. ROBLES and ALEJANDRO M.nêt On May 10. vs. 97347 July 6.91 shall be paid. on the other hand. ROBLES. on the one hand. .09 shall be paid directly by the BUYER to the Bank of Philippine Islands to answer for the loan of the SELLERS which as of March 15. and as already paid by the BUYER to the SELLERS on March 22. B. as stipulated under the Certification of undertaking dated March 22. 1983. and respondent spouses Miguel K. 8585. free and clear from all liens and encumbrances. 1983.000. Branch 60. 1âwphi1. 1983. except as to the award of exemplary damages.00). San Antonio Quezon.499. shall be chargeable from the time deposit of the SELLERS with the aforesaid bank. until the whole amount is fully paid. That the balance of ONE MILLION FOUR HUNDRED THOUSAND (P1.G. respondents. THE HONORABLE COURT OF APPEALS. J. 2. Quezon. . 3. .000.000. That upon the payment of the total purchase price by the BUYER the SELLERS bind themselves to deliver to the former a good and sufficient deed of sale and conveyance for the described two (2) parcels of land.10. 1983 and covered by a check of even date.500. up to the time said obligation of the SELLERS with the said bank has been settled. 1983 amounted to P537.400. to the BUYER. The initial payment of SIX HUNDRED THOUSAND PESOS (P600. shall be broken down as follows: 1. 1983. Robles and Alejandra Robles. and for the interest that may accrued (sic) from March 15. The terms and conditions of the contract read:" 1. by these presents promise to sell to said BUYER the two (2) parcels of agricultural land including the rice mill and the piggery which are the most notable improvements thereon. surrender and transfer possession of the said parcels of land including all the improvements that may be found thereon. the SELLERS shall deliver.

500. while the case was still pending with the trial court. they sold three transformers of the rice mill worth P51. as per agreement.00 to pay off their outstanding obligation with said bank. judgment is hereby rendered: a) Ordering that the contract entered into by plaintiff spouses Miguel K. residential house and other improvements thereon. To make matters worse.00 each. Robles and the defendant. 1983.60. Later. Branch 60.400. SO ORDERED. xxx xxx xxx 1 On May 15. 11 On June 1. a complaint for rescission of contract and recovery of properties with damages. respondent spouses.000. 157710 dated December 15. b) Ordering defendant. however.00 petitioner issued four (4) post-dated Metro Bank checks payable to respondent spouses in the amount of P350. Miguel Robles and Alejandra Robles to return to Jaime Ong the sum of P497.679. Jaime Ong captioned "Agreement of Purchase and Sale. and e) Ordering defendant Jaime Ong to pay the plaintiffs spouses Miguel K. so.000.179. petitioner introduced major improvements on the subject properties by constructing a complete fence made of hollow blocks and expanding the piggery.0000. 12 . namely: Check No. Robles and Alejandra Robles the sum of P20. Robles and Alejandra M. Subsequently. with the knowledge and conformity of petitioner. On August 2. 7 When presented for payment. 157708 dated June 15.00 loan of respondent spouses with the Bank of the Philippine Islands.00 as exemplary damages. out of the P496. however. 157709 dated September 15. 1983 6 and Check No. 10 The trial court granted the application and enjoined petitioner from introducing improvements on the properties except for repairs. voluntarily gave the spouses authority to operate the rice mill. petitioner Ong took possession of the subject parcels of land together with the piggery. building. the checks were dishonored due to insufficient funds. Petitioner promised to replace the checks but failed to do so. ricemill. Their demand was left unheeded. The motion of the plaintiff spouses Miguel K. 4 Check No. sent petitioner a demand letter asking for the return of the properties.411.00 as attorney's fees and litigation expenses. c) Ordering plaintiff spouses. they filed with the Regional Trial Court of Lucena City. petitioner only managed to dole out no more than P393. should have paid. Roles and Alejandra Robles for the appointment of receivership is rendered moot and academic. continued to be in possession of the two parcels of land while private respondents were forced to use the rice mill for residential purposes.4. 1984. Robles. 1985. on September 2. d) Ordering defendant Jaime Ong to pay the plaintiffs the sum of P100. When the bank threatened to foreclose the respondent spouses' mortgage. 1985. petitioner paid respondent spouses the sum of P103. Robles and Alejandro M. which petitioner. 157711 dated March 15. 8 Petitioner. in return. petitioner deposited sums of money with the Bank of Philippine Islands (BPI). 5 Check No. 3 in accordance with their stipulation that petitioner pay the loan of respondents with BPI." marked as Exhibit "A" set aside.000. 1983. These prompted the respondent spouses to ask for a writ of preliminary injunction. That all payments due and payable under this contract shall be effected in the residence of the SELLERS located at Barangay Puri. San Antonio.499. 1983. Pursuant to the contract they executed. 9 He. To answer for his balance of P1. Jaime Ong to deliver the two (2) parcels of land which are the subject matter of Exhibit "A" together with the improvements thereon to the spouses Miguel K. 1989 the trial court rendered a decision. through counsel.51.91 2 by depositing it with the United Coconut Planters Bank. Quezon unless another place shall have been subsequently designated by both parties in writing. the dispositive portion of which reads as follows: IN VIEW OF THE FOREGOING.

such as in the case at bench. the findings of both the trial court and the appellate court on the matter coincide. to the effect that where specific performance is available as a remedy. Those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due them. et seq. Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. it must be stated that the issues raised by the petitioner are generally factual in nature and were already passed upon by the Court of Appeals and the trial court. Article 1383 is inapplicable. rescission may not be resorted to. produces a lesion or a pecuniary damage to someone. He cites Article 1383 instead. the contract entered into by the parties in the case at bar does not fall under any of those mentioned by Article 1381. which expressly enumerates the following rescissible contracts: 1. while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code. as contemplated in Articles 1380. 13 The only pertinent legal issues raised which are worthy of discussion are (1) whether the contract entered into by the parties may be validly rescinded under Article 1191 of the New Civil Code. of the New Civil Code. however. At the outset. May the contract entered into between the parties. even if this should be valid. petitioner appealed to the Court of Appeals. the Court of Appeals noted that the failure of petitioner to completely pay the purchase price is a substantial breach of his obligation which entitles the private respondents to rescind their contract under Article 1191 of the New Civil Code. A discussion of the aforesaid articles is in order. Hence. Reciprocal obligations are those which arise from the same cause.. Although both presuppose contracts validly entered into and subsisting and both require mutual restitution when proper. Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof. 4. 3. 14 It implies a contract. 17" Resolution is a principal action which is based on breach of a party. 5. There is no cogent reason shown that would justify the court to discard the factual findings of the two courts below and to superimpose its own. which affirmed the decision of the Regional Trial Court but deleted the award of exemplary damages. if the latter suffer the lesion stated in the preceding number. Rescission. adduced by the parties to an appeal. from which the article was based. is a remedy granted by law to the contracting parties and even to third persons. they are not entirely identical. such that the obligation of one is dependent upon the obligation of the other. 2. particularly where. Consequently. 15 On the other hand. to secure the reparation of damages caused to them by a contract. and in which each party is a debtor and a creditor of the other.From this decision. which even if initially valid. 16 They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. All other contracts specially declared by law to be subject to rescission. In affirming the decision of the trial court. we have stated that it is not the function of the Supreme Court to assess and evaluate all over again the evidence. Petitioner contends that Article 1191 of the New Civil Code is not applicable since he has already paid respondent spouses a considerable sum and has therefore substantially complied with his obligation. testimonial and documentary. be rescinded based on Article 1191? . Obviously. While Article 1191 uses the term "rescission. was "resolution. Those agreed upon in representation of absentees. Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from rescission of contracts under Article 1383. the instant petition. Time and again. and (2) whether the parties had novated their original contract as to the time and manner of payment. Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations." the original term which was used in the old Civil Code. by restoration of things to their condition at the moment prior to the celebration of the contract.

680. When the bank threatened to foreclose the properties. casual or serious.A careful reading of the parties' "Agreement of Purchase and Sale" shows that it is in the nature of a contract to sell. his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force. or that the old and the new obligations be on every point incompatible with each other. Consequently. the payment of the purchase price is a positive suspensive condition. 18 In a contract to sell. We are not persuaded. however. and Mrs." Novation is never presumed.679. and Mrs. it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between the old and the new obligation. Robles. It is true that petitioner paid respondents small sums of money amounting to P48. 23 Records further show that petitioner agreed to the sale of MERALCO transformers by private respondents to pay for the balance of their subsisting loan with the Bank of Philippine Islands. Article 1292 of the New Civil Code states that. 19 Respondents in the case at bar bound themselves to deliver a deed of absolute sale and clean title covering the two parcels of land upon full payment by the buyer of the purchase price of P2.500. Petitioner. he authorized respondent spouses to sell the three (3) . It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation. These installments were. ownership is. "8" to "47") on the condition that these installments be credited to petitioner's account and deducted from the balance of the purchase price. it is imperative that it be so declared in unequivocal terms. however.000. reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. failed to complete payment of the purchase price. The same will be utilized as partial payment to existing loan with the Bank of Philippine Islands. agreed that part of the purchase price in the sum of P496. Miguel K. The non-fulfillment of the condition of full payment rendered the contract to sell ineffective and without force and effect. In a contract of sale. as distinguished from a contract of sale. is not even a breach but merely an event which prevents the vendor's obligation to convey title from acquiring binding force. while in a contract to sell. Rather. "In order that an obligation may be extinguished by another which substitutes the same. and petitioner replied that these represented the interest of the principal amount which he owed them. Petitioner insists. in this instance. the agreement of the parties in the case at bench may be set aside.00.00 would be directly deposited by petitioner to the Bank of Philippine Islands to answer for the loan of respondent spouses. This promise to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase price by the petitioner. but not because of a breach on the part of petitioner for failure to complete payment of the purchase price. records show that the parties never even intended to novate their previous agreement. petitioner only managed to deposit P393. the failure of which is not a breach. objected to by respondent spouses. it is mutually understood that whatever payment received from MERALCO as payment to the transfromers will be considered as partial payment of the undersigned's obligation to Mr. however. the take-over by the respondents of the custody and operation of the rice mill. by agreement.00. 20 Failure to pay. It is also mutually understood that this payment to the Bank of Philippine Islands will be reimbursed to Mr. 22 Petitioner cites the following instances as proof that the contract was novated: the retrieval of the transformers from petitioner's custody and their sale by the respondents to MERALCO on the condition that the proceeds thereof be accounted for by the respondents and deducted from the price of the contract. the title to the property passes to the vendee upon the delivery of the thing sold. that the contract was novated as to the manner and time of payment. Contrary to petitioner's claim. but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. Robles by the undersigned. [Emphasis supplied] 24 It should be noted that while it was. Petitioner's letter of authorization reads: xxx xxx xxx Under this authority. Miguel K. 21 Hence.60. petitioner apparently could not even raise the sum needed to forestall any action on the part of the bank.000. and the continuous and regular withdrawals by respondent Miguel Robles of installment sums per vouchers (Exhs. in contravention of the manner of payment stipulated in their contract.

plaintiff-appellee. Davide. INC. We repeat to the point of triteness. Costs against petitioner. WHEREFORE. novation is never presumed. J.: . while petitioner might have wanted to novate the original agreement as to his manner of payment.J. shows that petitioner had a "little misunderstanding" with respondent spouses whom he was evidently trying to appease by authorizing them to continue temporarily with the operation of the rice mill. J. As regards the improvements introduced by petitioner to the premises and for which he claims reimbursement. The tenor of his letter dated August 12. GAITE.680. The subsequent acts of the parties hardly demonstrate their intent to dissolve the old obligation as a consideration for the emergence of the new one.L. temperate. PACIFICO ESCANDOR and FERNANDO TY. LARAP MINES & SMELTING CO. Clearly. C. JJ.R. Alejo Mabanag for plaintiff-appellee.00 in addition to the amounts already awarded. we see no reason to depart from the ruling of the trial court and the appellate court that petitioner is a builder in bad faith. liquidated or compensatory damages in addition to exemplary damages were awarded. the concurrence of the following requisites is indispensable: (1) there must be a previous valid obligation. although the parties agreed to credit the proceeds from the sale of the transformers to petitioner's obligation. REYES. FRNACISCO DANTE.B. Simplicio U. the records are bereft of evidence that respondent spouses willingly agreed to modify their previous arrangement.nêt SO ORDERED.. L-11827 July 31. ISABELO FONACIER. concur. This can only mean that there was never an intention on the part of either of the parties to novate petitioner's manner of payment. petitioner introduced major improvements on the premises even while the case against him was pending before the trial court.. He introduced the improvements on the premises knowing fully well that he has not paid the consideration of the contract in full and over the vigorous objections of respondent spouses. We find that this is unsubstantiated by the evidenced on the record. 1961 FERNANDO A. Tapia. However. In order for novation to take place. Petitioner contends that the parties verbally agreed to novate the manner of payment when respondent spouses proposed to operate the rice mill on the condition that they will account for its earnings. Moreover. Antonio Barredo and Pedro Guevarra for defendants-appellants. 1âwphi1.. the decision rendered by the Court of Appeals is hereby AFFIRMED with the MODIFICATION that respondent spouses are ordered to return to petitioner the sum of P48.transformers. GEORGE KRAKOWER. he was supposed to reimburse the same later to respondent spouses. defendants-appellants. The award of exemplary damages was correctly deleted by the Court of Appeals in as much as no moral. Jr. No. and (4) there must be the validity of the new contract. Melo. SEGUNDINA VIVAS. in fact. there must be an express intention to novate. Republic of the Philippines SUPREME COURT Manila EN BANC G. 1984 to respondent spouses.. vs. (3) there must be the extinguishment of the old contract. 25 The aforesaid requisites are not found in the case at bench. (2) there must be an agreement of the parties concerned to a new contract. Kapunan and Pardo...

000. Exhibit "B" automatically expired (Exhibits "C" to "C-24"). Exhibit "A".00. and its stockholders George Krakower. all his rights and interests on all the roads. Pacifico Escandor.. Defendant-appellant Isabelo Fonacier was the owner and/or holder. consequential damages. Inc.00 balance of the price of the ore. in consideration for the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite (Record on Appeal. province of Camarines Norte. and in time extracted therefrom what he claim and estimated to be approximately 24.00. however. the right to use the business name "Larap Iron Mines" and its goodwill. Isabelo Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop the mining claims in question. together with the improvements therein and the use of the name "Larap Iron Mines" and its good will. the liability of said surety company would automatically expire on December 8. On March 19.000 tons of iron ore which he acquired from Gaite. pp.. in consideration of certain royalties. in consideration of the sum of P75.00 of which was paid upon the signing of the agreement. ceding.000. 1954 (Exhibit "A"). its assigns. Gaite testified.000. administrators. to the Larap & Smelting Co. and facilities in or outside said claims. Gaite in turn executed a general assignment (Record on Appeal. Inc.00.000. but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. 29310) for the payment of the P65. of 11 iron lode mineral claims. for the consideration of P20. Segundina Vivas. and all the records and documents relative to the mines.was executed by the same parties to the first bond Exhibit "A-1". that when this bond was presented to him by Fonacier together with the "Revocation of Power of Attorney and Contract". 1954. transferring. opening and paving roads within and outside their boundaries. he refused to sign said Exhibit "A" unless another bond under written by a bonding company was put up by defendants to secure the payment of the P65.000 metric tons of iron ore. P10. Thereafter. By a "Deed of Assignment" dated September 29. situated in the municipality of Jose Panganiban. Fonacier promised to execute in favor of Gaite a surety bond.000. 8294). the right to develop. a second bond. on the theory that they had lost right to make use of the period given them when their bond. In the same document. Both bonds were attached to the "Revocation of Power of Attorney and Contract". 1954.. Fonacier likewise transferred. and made integral parts thereof. improvements. also dated December 8. for an amount of not less then P65. and pursuant to the promise. with the Far Eastern Surety and Insurance Co. or successors in interests. and that. And when Fonacier and his sureties failed to pay as demanded by Gaite. and b. Exhibit "A". Exhibit "A". either by himself or in a representative capacity.00 balance of their price of the iron ore in the stockpiles in the mining claims.000. Gaite transferred to Fonacier all his rights and interests over the "24. exploit. when the bond Exhibit "B" expired with respect to the Far Eastern Surety and Insurance Company. 1955.000 tons of iron ore had been made by the Larap Mines & Smelting Co. on the same royalty basis provided for in Exhibit "3". 17-19) conveying the development and exploitation of said mining claims into the Larap Iron Mines. more or less" that the former had already extracted from the mineral claims. making other improvements and installing facilities therein for use in the development of the mines.. and attorney's fees. As a result. The balance of SIXTY-FIVE THOUSAND PESOS (P65.000.This appeal comes to us directly from the Court of First Instance because the claims involved aggregate more than P200. and Fernando Ty as sureties (Exhibit "A-1"). Fonacier delivered to Gaite a surety bond dated December 8. 1954 with himself (Fonacier) as principal and the Larap Mines and Smelting Co.50 per ton of ore that might be extracted therefrom. nor had the P65. no sale of the approximately 24. Up to December 8. in the same document.00.000 tons of iron ore.000. . and explore the mining claims in question. furthermore.00. Fonacier constituted and appointed plaintiff-appellee Fernando A. Hence. Fonacier entered into a "Contract of Mining Operation". Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims aforementioned on a royalty basis of not less than P0. on December 8. 1954 (Exhibit "B"). 1952(Exhibit "3"). and Gaite assented thereto subject to certain conditions. Inc. 1955. On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two executed and signed the "Revocation of Power of Attorney and Contract".00) will be paid from and out of the first letter of credit covering the first shipment of iron ores and of the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co. the complete title to the approximately 24. and conveying unto the Larap Mines and Smelting Co..wherein Gaite transferred to Fonacier.000. a document entitled "Revocation of Power of Attorney and Contract" was executed on December 8. To secure the payment of the said balance of P65. plus 10% of the royalties that Fonacier would receive from the mining claims. For some reason or another. Gaite embarked upon the development and exploitation of the mining claims in question. a single proprietorship owned solely by and belonging to him. the latter filed the present complaint against them in the Court of First Instance of Manila (Civil Case No. as additional surety.000. pp. known as the Dawahan Group. Francisco Dante.00 balance of the price of said ore been paid to Gaite by Fonacier and his sureties payment of said amount.

During the pendency of this appeal. and that consequently. the parties agreed to limit the presentation of evidence to two issues: (1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65. P65. that the giving of security was a condition precedent to Gait's giving of credit to defendants. The motion for contempt is unmeritorious because the main allegation therein that the appellants Larap Mines & Smelting Co. and (2) that the lower court erred in not holding that there were only 10. and counterclaimed for more than P200. filed by appellant Fonacier.000.954.5 tons in the stockpiles of iron ore sold by appellee Gaite to appellant Fonacier. 1955 until payment.00 with interest at 6% per annum from December 9.00) which the latter binds to pay as follows: a. rendered in favor of plaintiff Gaite ordering defendants to pay him. and even if true. and Krakower had sold the iron ore here in question. 1955. and two motions to dismiss the appeal as having become academic and a motion for new trial and/or to take judicial notice of certain documents.000. that up to the time of the filing of the complaint. the obligation became due and demandable under Article 1198 of the New Civil Code.e..00 balance of the price of the approximately 24. accordingly. Defendant Fonacier also contended that only 7. 1955. no sale of the iron ore had been made. From this judgment.000.000. As to the second question. Inc. 1955. which we shall hereafter discuss. 1955. hence the condition had not yet been fulfilled. the lower court held that the obligation of the defendants to pay plaintiff the P65. As for the several motions presented by appellee Gaite.000 tons of iron ore. because what is under litigation in this appeal is appellee Gaite's right to the payment of the balance of the price of the ore. At the trial of the case.. Inc.000 tons of iron ore was one with a term: i. . and (2) Whether the estimated 24..00 (balance of the price of the iron ore in question)is one with a period or term and not one with a suspensive condition. and that as the latter failed to put up a good and sufficient security in lieu of the Far Eastern Surety bond (Exhibit "B") which expired on December 8.573 tons of the estimated 24. Inc. Fonacier all his rights and interests over the 24. which expired on December 8. Inc." On the first question. has not been substantiated. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. does not make these appellants guilty of contempt. the obligation was not yet due and demandable.00) will be paid upon the signing of this agreement." Judgment was.00 would be payable out of the first letter of credit covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co.00 become due and demandable when the defendants failed to renew the surety bond underwritten by the Far Eastern Surety and Insurance Co.000 tons of iron ore at the mining claims in question at the time of the execution of the contract Exhibit "A..000.. more or less. Exhibit "A. plus costs.000. jointly and severally. The first issue involves an interpretation of the following provision in the contract Exhibit "A": 7. and that the term expired on December 8.000.00 damages.. (Exhibit "B"). filed by appellee Gaite.All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by Gaite was subject to a condition that the amount of P65.000. TEN THOUSAND PESOS (P10. such sale to be effected within one year or before December 8. The main issues presented by appellants in this appeal are: (1) that the lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite the P65. and George Krakower in contempt.000 tons of iron ore sold to him by Gaite was actually delivered. several incidental motions were presented for resolution: a motion to declare the appellants Larap Mines & Smelting Co. and not the iron ore itself. defendants jointly appealed to this Court. that it would be paid upon the sale of sufficient iron ore by defendants. the lower court found that plaintiff Gaite did have approximately 24. above-referred to together with all his rights and interests to operate the mine in consideration of the sum of SEVENTY-FIVE THOUSAND PESOS (P75. it is unnecessary to resolve these motions in view of the results that we have reached in this case. which allegedly is "property in litigation".000 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were actually in existence in the mining claims when these parties executed the "Revocation of Power of Attorney and Contract".

the existence of the obligation to pay is recognized. The balance of SIXTY-FIVE THOUSAND PESOS (P65. would be tantamount to leaving the payment at the discretion of the debtor. still have the right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment. That the parties to the contract Exhibit "A" did not intend any such state of things to prevail is supported by several circumstances: 1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of Sixty-Five Thousand Pesos (P65. only its maturity or demandability is deferred. the rules of interpretation would incline the scales in favor of "the greater reciprocity of interests"." etc. The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit. an not only upon a bond by Fonacier. Fonacier and his sureties. in fine. what is undetermined is merely the exact date at which it will be made. The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: . administrators. that if such obligation were viewed as non-existent or not binding until the ore was sold. hence. . . so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations. with only its maturity (due date) postponed or deferred. By the very terms of the contract. but was intended merely to fix the future date of the payment. We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65. the next point of inquiry is whether appellants. emptio spei). so that if the suspensive condition does not take place. but was only a suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event. 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid P65.000.. We agree with the court below that the appellant have forfeited the right court below that the appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65. the contingent character of the obligation must clearly appear. provides: If the contract is onerous. and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65.00) will be paid out of the first letter of credit covering the first shipment of iron ores .000. and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price. or successors in interest. Appellants would thus be able to postpone payment indefinitely.00. for the sale or shipment could not be made unless the appellants took steps to sell the ore.00)will be paid from and out of the first letter of credit covering the first shipment of iron ore made by the Larap Mines & Smelting Co. 4) Assuming that there could be doubt whether by the wording of the contract the parties indented a suspensive condition or a suspensive period (dies ad quem) for the payment of the P65. it is not in the usual course of business to do so.000.00 to the sale or shipment of the ore as a condition precedent. and the company's stockholders. since sale is essentially onerous. the Larap Mines & Smelting Co.00.00. therefore. but also on one by a surety company. The Civil Code of the Philippines.000. and not an aleatory contract where the transferor.00.00. 3) To subordinate the obligation to pay the remaining P65. or that Fonacier understood that Gaite assumed any such risk.000.but each party anticipates performance by the other from the very start. would assume the risk of not being paid at all. or.b.. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his right over the ore without getting paid for it. 2) A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price). whether or not they are entitled to take full advantage of the period granted them for making the payment. Gaite.000. Inc. in other words. and there can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be actually existing.000. This issue settled. its assigns. because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. paragraph 1. This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65. The desireability of avoiding such a construction of the contract Exhibit "A" needs no stressing. Article 1378. The expiration of the bonding company's undertaking on December 8. a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier (Exhibit "A"). There is no uncertainty that the payment will have to be made sooner or later.000. the parties would stand as if the conditional obligation had never existed. the doubt shall be settled in favor of the greatest reciprocity of interests. While in a sale the obligation of one party can be lawfully subordinated to an uncertain event..000.00.

7." being a mere estimate by the parties of the total tonnage weight of the mass. and not the actual number of units or tons contained therein. we take as the most reliable estimate of the tonnage factor of iron ore in this case to be that made by Leopoldo F. the parties are again in disagreement. a government pensionado to the States and a mining engineering graduate of the Universities of Nevada and California. The sale between the parties is a sale of a specific mass or iron ore because no provision was made in their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale. for Gaite stood to lose and had nothing to gain barely. their witness Cirpriano Manlañgit found the total volume of ore in the stockpiles to be only 6. Now. and when through fortuitous event they disappear.. chief of the Mines and Metallurgical Division of the Bureau of Mines. with almost 22 . . Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite).000 tons of iron ore in the stockpiles sold by appellee Gaite to appellant Fonacier. Coming now to the second issue in this appeal.00 agreed upon by the parties based upon any such measurement. In the face of the conflict of evidence. No such waiver could have been intended. (3) When by his own acts he has impaired said guaranties or securities after their establishment. we must. it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8. appellee Gaite asserts that there was a total of 7. As to the average weight in tons per cubic meter. Gaite had. or ton by ton. lead to the same result: that Gaite acted within his rights in demanding payment and instituting this action one year from and after the contract (Exhibit "A") was executed. therefore. and if there was any. the quantity of "24. (2) When he does not furnish to the creditor the guaranties or securities which he has promised. more or less." stated in the contract Exhibit "A. the mass. Inc. while appellants contend that by actual measurement. 872.. that the evidence shows that neither of the parties had actually measured of weighed the mass. unless immediately renewed or replaced. so that they both tried to arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter. nor was the price of P75. so that any substantial difference in this quantity delivered would entitle the buyers to recover damages for the short-delivery.000 tons of iron ore. with appellants claiming the correct tonnage factor to be 2. but approximately 24. The debtor shall lose every right to make use of the period: (1) . was there really a short-delivery in this case? We think not.00 became due and payable thereafter. There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date. applying art. Abad. As already stated. 1198. But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy. Inc. . while appellee Gaite claims that the correct tonnage factor is about 3. New Civil Code).18 tons to a cubic meter. not a definite mass. 1480. 1955. so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass.(see Art. they are entitled to the payment of damages. either because the appellant debtors had impaired the securities originally given and thereby forfeited any further time within which to pay. and the balance of P65. which is whether there were really 24. or because the term of payment was originally of no more than one year. But in the latter case the defendants-appellants' obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A. if there had been a short-delivery as claimed by appellants. The subject matter of the sale is. at the outset. and whether.609 cubic meters.000. and appellants in turn are bound to pay the lump price. and second. stress two things: first. that this is a case of a sale of a specific mass of fungible goods for a single price or a lump sum. Both parties predicate their respective claims only upon an estimated number of cubic meters of ore multiplied by the average tonnage factor per cubic meter.375 cubic meters in the stockpiles of ore that he sold to Fonacier."ART. therefore.". York Oilfield Salvage Co. unless he immediately gives new ones equally satisfactory. 171 So. complied with his promise to deliver.000 tons of ore. vs. There is no charge in this case that Gaite did not deliver to appellants all the ore found in the stockpiles in the mining claims in questions. notwithstanding that the quantity delivered is less than the amount estimated by them (Mobile Machinery & Supply Co. second par.. therefore. neither of the parties had actually measured or weighed the whole mass of ore cubic meter by cubic meter. All the alternatives.000. 2459 of the Louisiana Civil Code). a determinate object.

Negros Occidental holding that private respondent Edy de los Reyes had acquired ownership of Lot No. respondents. in CA-G. which is not very far from the estimate of 24. Even granting. petitioner.: This is a petition for review on certiorari of the decision 1 of the Court of Appeals. 279. 2nd Division. In 1975. 1164). consequently. It must not be forgotten that the contract Exhibit "A" expressly stated the amount to be 24. nor could Gaite have been guilty of any fraud in making any misrepresentation to appellants as to the total quantity of ore in the stockpiles of the mining claims in question. to his widow Laurenciana. as charged by appellants. PADILLA. No. vs. This estimate. the product is 21.720 sq. closely corresponds to the average tonnage factor of 3.609 cubic meters of ore in the stockpiles made by appellant's witness Cipriano Manlañgit is correct. who was sent by the Bureau of Mines to the mining claims involved at the request of appellant Krakower. The lot has an area of 13. petitioner Teodoro Acap had been the tenant of a portion of the said land. with costs against appellants. meters. R-12179. Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter. finding no error in the decision appealed from. 36177. covering an area of nine thousand five hundred (9. Ed. since Gaite's estimate appears to be substantially correct. The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. 118114 December 7. There was. their only son Felixberto inherited the lot.809. COURT OF APPEALS and EDY DE LOS REYES. This witness placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to 5 metric tons as maximum. 1995 TEODORO ACAP.years of experience in the Bureau of Mines. 1130 of the Cadastral Survey of Hinigaran. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. more or less. precisely to make an official estimate of the amount of iron ore in Gaite's stockpiles after the dispute arose. Felixberto executed a duly notarized document entitled "Declaration of Heirship and Deed of Absolute Sale" in favor of Cosme Pido. The evidence before the court a quo established that since 1960. then. No. The facts of the case are as follows: The title to Lot No.. Negros Occidental based on a document entitled "Declaration of Heirship and Waiver of Rights". 1130 of the Cadastral Survey of Hinigaran. . 46 L. which affirmed the decision 2 of the Regional Trial Court of Himamaylan. Negros Occidental was evidenced by OCT No. so that a reasonable percentage of error should be allowed anyone making an estimate of the exact quantity in tons found in the mass.R. After both spouses died. upon Pido's death. WHEREFORE. J. considering that actual weighing of each unit of the mass was practically impossible. (ch. that the estimate of 6.R. in turn.3 tons to a cubic meter. vs U. we hereby affirm the same.3 adopted in his corrected report (Exhibits "FF" and FF-1") by engineer Nemesio Gamatero.7 tons. Pine River Logging & Improvement Co. no short-delivery in this case as would entitle appellants to the payment of damages. and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay rentals.S.000 tons. When ownership was transferred in 1975 by Felixberto to Cosme Pido.500) meters. if we multiply it by the average tonnage factor of 3.000 tons made by appellee Gaite.

In 1983. 3844. He denied having entered into a verbal lease tenancy contract with private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge.A. We LAURENCIANA 3. she instructed him to stay in the landholding and to pay the accumulated rentals upon her demand or return from abroad. . Edy de los Reyes. do hereby waive. Teodoro Acap. however. interests and participation over the said parcel of land in favor of EDY DE LOS REYES. he died intestate and without any known debts and obligations which the said parcel of land is (sic) held liable. he never reneged on his rental obligations. married to VIRGINIA DE LOS REYES. On 28 April 1988. ERVIN. That invoking the provision of Section 1. and ELECHOR all surnamed PIDO. In 1982. petitioner refused to pay any further lease rentals on the land. Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurenciana's departure for abroad. the dispositive part of which reads: WHEREFORE.D. title to the property continued to be registered in the name of the Vasquez spouses. grants him the right to redeem the same at a reasonable price. . the lower court rendered a decision in favor of private respondent. . and resident of Hinigaran. prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran. Private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. The MAR invited petitioner to a conference scheduled on 13 October 1983. his surviving heirs executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. as amended. . 1130 Hinigaran Cadastre. Negros Occidental. Upon obtaining the Declaration of Heirship with Waiver of Rights in his favor. He averred that he continues to recognize Cosme Pido as the owner of the said land. private respondent filed a complaint for recovery of possession and damages against petitioner. petitioner reiterated his refusal to recognize private respondent's ownership over the subject land. after the lapse of four (4) years." wherein they declared. quitclaim all our rights. (f)ilipino. When the latter left for abroad. to quote its pertinent portions. Rule 74 of the Rules of Court. ERVIN and ELECHOR all surnamed PIDO. It will be noted that at the time of Cosme Pido's death. the above-mentioned heirs do hereby declare unto [sic] ourselves the only heirs of the late Cosme Pido and that we hereby adjudicate unto ourselves the above-mentioned parcel of land in equal shares. premises considered. that: . 4 (Emphasis supplied) The document was signed by all of Pido's heirs. private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had become the new owner of the land and that the lease rentals thereon should be paid to him. private respondent Edy de los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse claim against the original certificate of title. Negros Occidental. Negros Occidental. During the trial before the court a quo. therefore. Now. Petitioner did not attend the conference but sent his wife instead to the conference. 27. Philippines. and having been a registered tenant therein since 1960. ELY. children. On 20 August 1991. ELY. namely: LAURENCIANA PIDO. an officer of the Ministry informed Acap's wife about private respondent's ownership of the said land but she stated that she and her husband (Teodoro) did not recognize private respondent's claim of ownership over the land. wife. ordering the following. petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands. and against the defendant. . ELMER. Private respondent Edy de los Reyes did not sign said document. Petitioner also bewailed private respondent's ejectment action as a violation of his right to security of tenure under P. to wit: . alleging in the main that as his leasehold tenant. Thereafter. the Court renders judgment in favor of the plaintiff. he continued to pay rentals to Pido's widow. Cosme Pido died in the Municipality of Hinigaran. of legal age. When Pido died.The controversy began when Pido died intestate and on 27 November 1981. ELMER. R. During the meeting. That Cosme Pido was survived by his/her legitimate heirs. petitioner allegedly complied with said obligation.

1130 and that he.) as private respondent's evidence because it was not registered with the Registry of . However. his right to a certificate of land transfer under P. no further proof of its due execution was necessary. petitioner impugns the decision of the Court of Appeals as not in accord with the law and evidence when it rules that private respondent acquired ownership of Lot No. likewise passed on their ownership of Lot 1130 to herein plaintiff (private respondent). the sum of P1. should pay rentals to private respondent and that failing to pay the same from 1983 to 1987. According to respondent court. 2. the issues to be resolved presently are the following: 1. Otherwise stated.00 as actual damages. . 27 was deemed forfeited.000. when the latter died their tenancy relations changed since ownership of said land was passed on to his heirs who. herein defendant. as tenant.00 as expenses of litigation and the amount of P10. . 7 Aggrieved. 6 xxx xxx xxx Certainly. Like the trial court. 1130 through the aforementioned Declaration of Heirship and Waiver of Rights.00 as attorney's fees. 3. which defendant admitted in his affidavit. respondent court noted that petitioner had actual knowledge of the subject sale of the land in dispute to private respondent because as early as 1983. he (petitioner) actually paid rent to private respondent. The Court of Appeals brushed aside petitioner's argument that the Declaration of Heirship and Waiver of Rights (Exhibit "D"). since the Declaration of Heirship and Waiver of Rights appears to have been duly notarized.000. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN QUESTION. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION. was excluded by the lower court in its order dated 27 August 1990. in its order dated 7 August 1990. explicitly excluded the document marked as Exhibit "D" (Declaration of Heirship. etc.1. plaintiff has the right to demand payment of rental and the tenant is obligated to pay rentals due from the time demand is made. and that in 1982. . the trial court stated that the evidence had established that the subject land was "sold" by the heirs of Cosme Pido to private respondent. respondent court considered this fact of rental payment in 1982 as estoppel on petitioner's part to thereafter refute private respondent's claim of ownership over the said land. respondent court ruled that indeed there was deliberate refusal by petitioner to pay rent for a continued period of five years that merited forfeiture of his otherwise preferred right to the issuance of a certificate of land transfer.000. he (petitioner) already knew of private respondent's claim over the said land but which he thereafter denied. 2. however. respondent court was also convinced that the said document stands as prima facie proof of appellee's (private respondent's) ownership of the land in dispute.D. the document relied upon by private respondent to prove his ownership to the lot. As owner hereof. Petitioner argues that the Regional Trial Court. 27 and his farmholdings. Ordering the defendant Teodoro Acap to deliver possession of said farm to plaintiff. imputing error to the lower court when it ruled that private respondent acquired ownership of Lot No. With respect to its non-registration. This is clear from the following disquisitions contained in the trial court's six (6) page decision: There is no doubt that defendant is a registered tenant of Cosme Pido. assumes the rights and obligations of the former landowner to the tenant Teodoro Acap. and. In the present petition. Under these circumstances. Ordering the defendant to pay P5. Hence. The order indeed noted that the document was not identified by Cosme Pido's heirs and was not registered with the Registry of Deeds of Negros Occidental. the sale of the Pido family of Lot 1130 to herein plaintiff does not of itself extinguish the relationship. 5 In arriving at the above-mentioned judgment. by executing a Deed of Sale. Declaring forfeiture of defendant's preferred right to issuance of a Certificate of Land Transfer under Presidential Decree No. There was only a change of the personality of the lessor in the person of herein plaintiff Edy de los Reyes who being the purchaser or transferee. petitioner appealed to the Court of Appeals.

the modes of acquiring ownership are generally classified into two (2) classes. being then a stranger to the succession of Cosme Pido. however. however justified. On record. Private respondent defends the decision of respondent Court of Appeals as in accord with the evidence and the law. namely. Exhibit "D".e. by its nature. is not per se sufficient to give rise to ownership over the res.. technically speaking. through succession mortis causa or tradition as a result of certain contracts. the notice of adverse claim (Exhibit "E") duly registered by him with the Registry of Deeds. Quite surprisingly. there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. namely. mode is the actual process of acquisition or transfer of ownership over a thing in question. 10 Hence. which is the "Declaration of Heirship and Waiver of Rights" was excluded by the trial court in its order dated 27 August 1990 because the document was neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. We find the petition impressed with merit. both the trial court and public respondent Court of Appeals concluded that a "sale" transpired between Cosme Pido's heirs and private respondent and that petitioner acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss private respondent's claim over the lot in question. The first presumes the existence of a contract or deed of sale between the parties. ownership and real rights are acquired only pursuant to a legal mode or process. There is no showing that private respondent had the same document attached to or made part of the record. the validity of which is yet to be .e. a prima facie proof of private respondents' ownership of the lot to which it refers. the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights. donation.Deeds and was not identified by anyone of the heirs of Cosme Pido. 11 The second is. cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale. held the same to be admissible. a notice of adverse claim filed with the Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was annotated at the back of the Original Certificate of Title to the land in question. which contains the questioned Declaration of Heirship and Waiver of Rights as an integral part thereof. Hence. That right or title must be completed by fulfilling certain conditions imposed by law. 12 Private respondent. an asserted right or claim to ownership or a real right over a thing arising from a juridical act. law or intellectual creation) and the derivative mode (i. it being a notarized document. 9 Upon the other hand. does not however prove private respondent's ownership over the tenanted lot. in favor of other persons who are co-heirs in the succession. assignment or mutuum). barter. He posits that while it may indeed be true that the trial court excluded his Exhibit "D" which is the Declaration of Heirship and Waiver of Rights as part of his evidence. The Court of Appeals. acquisitive prescription. Neither can the same be considered a deed of sale so as to transfer ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale). the original mode (i. a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it. What the trial court admitted was Annex "E". such as sale. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. through occupation. This conclusion has no basis both in fact and in law. Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. In the first place. A notice of adverse claim. In the case at bench. They are not the same.. 13 or a donation. 14 or any other derivative mode of acquiring ownership. "A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner. In a Contract of Sale. and the other party to pay a price certain in money or its equivalent. While title is the juridical justification. a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. 8 Under Article 712 of the Civil Code. equating the same with a contract (deed) of sale. the trial court declared him nonetheless owner of the subject lot based on other evidence adduced during the trial. one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing. hence.

petitioner even secured a certificate from the MAR dated 9 May 1988 to the effect that he continued to be the registered tenant of Cosme Pido and not of private respondent. private respondent allegedly informed petitioner that he had become the new owner of the land. REYNELDA QUIJADA.. it is clear that petitioner had misgivings over private respondent's claim of ownership over the said land because in the October 1983 MAR conference. concur. FERNANDO BAUTISTA. i. and is no better than a notice of lis pendens which is a notice of a case already pending in court. petitioner may have. since private respondent has not established a cause of action for recovery of possession against petitioner. Jr. Kapunan and Hermosisima. SO ORDERED. SEGUNDINO RAS. Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease rentals thereon. the Court hereby GRANTS the petition and the decision of the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan. Instead. No. In fact. therefore. ERNESTO GOLORAN. without prejudice to private respondent taking the proper legal steps to establish the legal mode by which he claims to have acquired ownership of the land in question. even if in 1982. EULALIO QUIJADA. CELSO ABISO. Bellosillo. Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondent's name.R." 15 It is to be noted that while the existence of said adverse claim was duly proven.e.. 1998] ALFONSO QUIJADA. file a notice of adverse claim on the said lot to establish ownership thereover. Under the circumstances. there is no evidence whatsoever that a deed of sale was executed between Cosme Pido's heirs and private respondent transferring the rights of Pido's heirs to the land in favor of private respondent. Jr. COURT OF APPEALS. ANTONIO MACASERO. he continued to be the registered tenant of Cosme Pido and his family (after Pido's death). he (private respondent) sought to do indirectly what could not be done directly. 126444. 16 Consequently. It stands to reason. WHEREFORE. The reason is that private respondent never registered the Declaration of Heirship with Waiver of Rights with the Registry of Deeds or with the MAR. and WARLITO QUIJADA.established in court at some future date. 27 and to the possession of his farmholdings should not be applied against petitioners. private respondent failed to establish in his favor by clear and convincing evidence. in this case. to hold that there was no unjustified or deliberate refusal by petitioner to pay the lease rentals or amortizations to the landowner/agricultural lessor which. the sanction of forfeiture of his preferred right to be issued a Certificate of Land Transfer under P.D. December 4.. petitioners. RODULFO GOLORAN. vs. the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondent's ownership without the corresponding proof thereof. while the transaction between Pido's heirs and private respondent may be binding on both parties. CRESENTE QUIJADA. ELIUTERIA QUIJADA.. REGALADO MONDEJAR. in good faith. The private respondent's complaint for recovery of possession and damages against petitioner Acap is hereby DISMISSED for failure to properly state a cause of action. his wife Laurenciana categorically denied all of private respondent's allegations. JJ. But in 1983. In his mind. DEMETRIO QUIJADA. ALBERTO ASIS. Consequently. premises considered. and . [G. assumed such statement of private respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to private respondent. Davide. Negros Occidental dated 20 August 1991 is hereby SET ASIDE.

as heirs of the late Trinidad Quijada. Trinidad Quijada together with her sisters Leonila Corvera Vda. In 1987. the heirs of Trinidad. Trinidad verbally sold the remaining one (1) hectare to defendant-appellant (respondent) Regalado Mondejar without the benefit of a written deed of sale and evidenced solely by receipts of payment. C) of the two-hectare parcel of land subject of the case in favor of the Municipality of Talacogon. 1956. 7) and Ernesto Goloran (Exh. 1988. Apparently. the same not being hers to dispose of because ownership belongs to the Municipality of Talacogon' (Decision.: Petitioners. E) against defendant-appellant (respondent) Regalado Mondejar. on the other hand. 1962. p. 1966. in their answer claimed that the land in dispute was sold to Regalado Mondejar. conveyed. Efren Guden (Exh. "Defendants-appellants (respondents). In 1980. "On July 5. filed a complaint for forcible entry (Exh. and the remaining one (1) hectare on installment basis until fully paid. 5). Rollo. however. de Sequeña and Paz Corvera Cabiltes and brother Epapiadito Corvera executed a conditional deed of donation (Exh. On July 29. who at that time was already dead. plaintiffs-appellees (petitioners) filed this action against defendantsappellants (respondents). respondents. . the Sangguniang Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares of land donated back to the donors (Exh. transferred or disposed of the property in question to any person or entity much less to Regalado Mondejar save the donation made to the Municipality of Talacogon in 1956. Trinidad sold one (1) hectare of the subject parcel of land to defendant-appellant Regalado Mondejar (Exh. 39) and. 6). 8). recovery of possession and ownership of parcels of land with claim for attorney's fees and damages. As affirmative and/or special defense. Talacogon.NESTOR MAGUINSAY. which complaint was. "The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly because 'Trinidad Quijada had no legal title or right to sell the land to defendant Mondejar in 1962. In the meantime. situated in the barrio of San Agustin. Subsequently. which is materially the same as that found by the trial court: "Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda. that at the time of the alleged sale to Regalado Mondejar by Trinidad Quijada. D). defendants-appellants (respondents) alleged that plaintiffs' action is barred by laches or has prescribed. The suit was premised on the following facts found by the Court of Appeals. J. 4. On April 5. de Quijada. In the complaint. DECISION MARTINEZ. the one (1) hectare on July 29. the supposed sale is null and void. defendant-appellant (respondent) Regalado Mondejar sold portions of the land to defendants-appellants (respondents) Fernando Bautista (Exh. 1962. 1967 and 1968. p. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the latter the two-hectare parcel of land subject of the case. filed a complaint against private respondents for quieting of title. Trinidad remained in possession of the parcel of land despite the donation. Agusan del Sur. hence. the proposed provincial high school having failed to materialize. Rodolfo Goloran (Exh. 1). the land still belongs to the Municipality of Talacogon. F). the condition being that the parcel of land shall be used solely and exclusively as part of the campus of the proposed provincial high school in Talacogon. plaintiffs-appellees (petitioners) alleged that their deceased mother never sold. dismissed for failure to prosecute (Exh.

the Court of Appeals reversed and set aside the judgment a quoiii[3] ruling that the sale made by Trinidad Quijada to respondent Mondejar was valid as the4 former retained an inchoate interest on the lots by virtue of the automatic reversion clause in the deed of donation.ix[9] Such condition. as it is hereby rendered: 1) ordering the Defendants to return and vacate the two (2) hectares of land to Plaintiffs as described in Tax Declaration No."ii[2] On appeal. On the contrary. the former became the new owner of the donated property -. The donation is perfected once the acceptance by the donee is made known to the donor.donation being a mode of acquiring and transmitting ownershipxi[11] . that the deed of sale executed by Trinidad Quijada in favor of Mondejar did not carry with it the conformity and acquiescence of her children. p.00 representing attorney's fees. 1956 by Trinidad Quijada and her brother and sistersvii[7] was subject to the condition that the donated property shall be "used solely and exclusively as a part of the campus of the proposed Provincial High School in Talacogon. that they are buyers in good faith. 6) ordering Defendants to pays the amount of P8. 2) ordering any person acting in Defendants' behalf to vacate and restore the possession of the land in question to Plaintiffs. judgment is.notwithstanding the condition imposed by the donee. the scale of justice having tilted in favor of the plaintiffs. the same may in the future be closed" the donated property shall automatically revert to the donor. public order or public policy was validly imposed in the donation. 1209 in the name of Trinidad Quijada. The donation made on April 5. SO ORDERED.x[10] When the Municipality's acceptance of the donation was made known to the donor. petitioners filed a motion for reconsideration. 5) ordering the Defendants to pay Plaintiffs. good customs. morals.vi[6] We affirm the decision of the respondent court. When the CA denied their motion.v[5] petitioners instituted a petition for review to this Court arguing principally that the sale of the subject property made by Trinidad Quijada to respondent Mondejar is void. the amount of P10. Rollo.000.000. 6. and 7) ordering Defendants to pay the sum of P30.secondly. viewed from the above perceptions.00 as expenses of litigation.00 representing moral damages. 41). ownership was already transferred to the Municipality of Talacogon. not being contrary to law. more so that she was already 63 years old at the time. considering that at that time."i[1] The dispositive portion of the trial court's decision reads: "WHEREFORE. peaceful 3) ordering the cancellation of the Deed of Sale executed by the late Trinidad Quijada in favor of Defendant Regalado Mondejar as well as the Deeds of Sale/Relinquishments executed by Mondejar in favor of the other Defendants. and that petitioners' case is barred by laches. jointly and severally.000." viii[8] The donation further provides that should "the proposed Provincial High School be discontinued or if the same shall be opened but for some reason or another. xii[12] Accordingly. private respondents contend that the sale was valid. 4) ordering Defendants to remove their improvements constructed on the questioned lot. and a widow (Decision. . iv[4] Thereafter. p.

. The 1960's sales made by Trinidad Quijada cannot be the reckoning point as to when petitioners' cause of action arose. Such period. or of one under whom he claims."xvi[16] are absent in this case. the condition imposed is not a condition precedent or a suspensive condition but a resolutory one. thus. b) Delay in asserting complainant's right after he had knowledge of the defendant's conduct and after he has an opportunity to sue. that resolutory condition is the construction of the school. when the suit was initiated the following year. what the donor sold was the land itself which she no longer owns. and. the alleged seller (Trinidad) could not have sold the lots since she had earlier transferred ownership thereof by virtue of the deed of donation. As to laches. however. Such inchoate interest may be the subject of contracts including a contract of sale. at the time of the sales made in 1962 towards 1968. Petitioners' cause of action to quiet title commenced only when the property reverted to the donor and/or his successors-in-interest in 1987.xiii[13] Thus. the latter remains the owner so long as he has tried to comply with the condition within a reasonable period.when the non-fulfillment of the resolutory condition was brought to the donor's knowledge . giving rise to the situation complained of. by exercising due diligence. It would have been different if the donor-seller sold her interests over the property under the deed of donation which is subject to the possibility of reversion of ownership arising from the non-fulfillment of the resolutory condition. Since no period was imposed by the donor on when must the donee comply with the condition. giving rise to a presumption that the party entitled to assert it either has abandoned or declined to assert it. In this case. The donor may have an inchoate interest in the donated property during the time that ownership of the land has not reverted to her. however. became irrelevant herein when the donee-Municipality manifested through a resolution that it cannot comply with the condition of building a school and the same was made known to the donor."xv[15] Its essential elements of: a) Conduct on the part of the defendant. d) Injury or prejudice to the defendant in the event relief is accorded to the complainant. Certainly.ownership is immediately transferred to the latter and that ownership will only revert to the donor if the resolutory condition is not fulfilled.xiv[14] "it is negligence or omission to assert a right within a reasonable time. It has been ruled that when a person donates land to another on the condition that the latter would build upon the land a school. In this case.that ownership of the donated property reverted to the donor as provided in the automatic reversion clause of the deed of donation. c) Lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit. Laches presupposes failure or neglect for an unreasonable and unexplained length of time. it cannot be said that petitioners had slept on their rights for a long time. to do that which. Moreover. Only then . So long as the resolutory condition subsists and is capable of fulfillment. They had no interest over the property at that time except under the deed of donation to which private respondents were not privy. the donation remains effective and the donee continues to be the owner subject only to the rights of the donor or his successors-in-interest under the deed of donation. could or should have been done earlier. petitioners' action is not yet barred thereby. petitioners had previously filed an ejectment suit against private respondents only that it did not prosper on a technicality.

With respect to the trial court’s award of attorney’s fees. following the general rule in Article 2208 of the New Civil Code. hence. However. the sale is still valid. including real property. The consummation. Consequently.who are Trinidad Quijada's heirs and successors-in-interest -became the owners of the subject property upon the reversion of the ownership of the land to them. Neither can it be ruled that the former acted in “gross and evident bad faith” in refusing to satisfy the latter’s claims considering that private respondents were under an honest belief that they have a legal right over the property by virtue of the deed of sale. however. such as the open seas and the heavenly bodies. SO ORDERED. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered.xx[20] A perfected contract of sale cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection.xix[19] Perfection per se does not transfer ownership which occurs upon the actual or constructive delivery of the thing sold.Be that at it may. . the contract involving the same is inexistent and void from the beginning. ownership is transferred to respondent Mondejar ands those who claim their right from him. of the perfected contract is another matter.xxiv[24] thus. there is neither factual nor legal basis thereof. Sale. the assailed decision of the Court of Appeals is AFFIRMED. price and terms of payment of the price. It occurs upon the constructive or actual delivery of the subject matter to the buyer when the seller or her successors-in-interest subsequently acquires ownership thereof.xxii[22] but also to other kinds of property. whether it be those for public use or its patrimonial propertyxxv[25] are outside the commerce of men.xxvi[26] It cannot be said that private respondents had compelled petitioners to litigate with third persons.xxiii[23] There is also no merit in petitioners' contention that since the lots were owned by the municipality at the time of the sale. which is manifested the moment there is a meeting of the mindsxvii[17] as to the offer and acceptance thereof on three (3) elements: subject matter. Such circumstance happened in this case when petitioners -. Article 1434 of the New Civil Code supports the ruling that the seller's "title passes by operation of law to the buyer. WHEREFORE. by virtue of the foregoing."xxi[21] This rule applies not only when the subject matter of the contract of sale is goods. being a consensual contract. Moral damages cannot likewise be justified as none of the circumstances enumerated under Articles 2219xxvii[27] and 2220xxviii[28] of the New Civil Code concur in this case. To rule that the donated properties are outside the commerce of men would render nugatory the unchallenged reasonableness and justness of the condition which the donor has the right to impose as owner thereof. Moreover. xviii[18] ownership by the seller on the thing sold at the time of the perfection of the contract of sale is not an element for its perfection. there being no stipulation to that effect and the case does not fall under any of the exceptions. the objects referred to as outsides the commerce of man are those which cannot be appropriated. Besides. they were outside the commerce of men under Article 1409 (4) of the NCC. Attorney’s fees and expenses of litigation cannot. litigation expenses and moral damages. the lots in this case were conditionally owned by the municipality. be recovered in this case. there is one thing which militates against the claim of petitioners. is perfected by mere consent. nowhere in Article 1409 (4) is it provided that the properties of a municipality.

Melo (Acting Chairman). concur. JJ. and Mendoza. Puno. ..

used season-dried and kiln-dried lumber. 179 Okl. petitioner. Tel. City of Anadardo 64 P. Said the Court: To support his contention that his client is an ordinary contractor . navigation. From 1946 to 1951 it paid percentage taxes of 7 per cent on the gross receipts of its sash. Prop. 68).754. 1952 to September 30. which means it is out to do business. sashes. COLLECTOR OF INTERNAL REVENUE. 1952. Even if we were to believe petitioner's claim that it does not manufacture ready-made sash.: Appeal from a decision of the Court of Tax Appeals. sash and windows for the public but only upon special order of its select customers. . Office of the Solicitor General Ambrosio Padilla. counsel presented . altering or repairing for which machinery driven by mechanical power is used. and having failed to convince the Bureau of Internal Revenue. Torres and Solicitor Federico V. vs.R. Celestino Co & Company is a duly registered general copartnership doing business under the trade name of "Oriental Sash Factory". J. sewers. sketches of doors and windows and price quotations supposedly sent by the manager of the Oriental Sash Factory to four customers who allegedly made special orders to doors and window from the said factory. respondent. No. Sian for respondent. Having thus eliminated the feasibility off taxing petitioner as a contractor under 191 of the national Internal Revenue Code. . I cannot believe that petitioner company would take. this leaves us to decide the remaining issue whether or not petitioner could be taxed with lesser strain and more accuracy as seller of its manufactured articles under section 186 of the same code. where it also failed. windows. doors and windows upon special order of customers fall under the category of "road. we cannot find under which the business of manufacturing sash. BENGZON. there are no less than fifty occupations enumerated in the aforesaid section of the national Internal Revenue Code subject to percentage tax and after reading carefully each and every one of them. and includes any other work for the construction. artesian well. during the period from January 1. No. etc. streets. as in fact it has taken. One ill note that petitioner has chosen for its tradename and has offered itself to the public as a "Factory". doors and windows worth P188. Moreover. all the trouble and expense of registering a special trade name for its sash business and then orders company stationery carrying the bold print "Oriental Sash Factory (Celestino Co & Company. 2d 878. I find it difficult to believe that this amount which runs to six figures was derived by petitioner entirely from its few customers who made special orders for these items. street railways railroads logging roads. highways.i ii iii Republic of the Philippines SUPREME COURT Manila EN BANC G. As a general rule. However in 1952 it began to claim liability only to the contractor's 3 per cent tax (instead of 7 per cent) under section 191 of the same Code. doors and windows for the public and that it makes these articles only special order of its customers. sash factories receive orders for doors and windows of special design only in particular cases but the bulk of their sales is derived from a ready-made doors and windows of standard sizes for the average home. Manila.69. structures. building. Fisrt Assistant Solicitor General Guillermo E. 880. water workers and other construction work contractors" are those who alter or repair buildings. . that does not make it a contractor within the purview of section 191 of the national Internal Revenue Code. door and window factory. . duplicate copies of letters. The conclusion that counsel would like us to deduce from these few exhibits is that the Oriental Sash Factory does not manufacture ready-made doors. it sold sash. 33076. . of the best quality workmanships" solely for the purpose of supplying the needs for doors. windows and sash of its special and limited customers. in its chosen lines on a big scale.) 926 Raon St. (Payton vs. . L-8506 August 31. in accordance with section one hundred eighty-six of the National Revenue Code imposing taxes on sale of manufactured articles. furniture. Quiapo. as shown from the investigation of petitioner's book of accounts. electric lines or power lines. Manufacturers of all kinds of doors. it brought the matter to the Court of Tax Appeals. as the respondent Collector of Internal Revenue has in fact been doing the Oriental Sash Factory was established in 1946. . . 1956 CELESTINO CO & COMPANY.

with sufficient money. because although the Factory does not. mouldings of panels — it would not accept the order — and no sale is made. p. . mouldings and panels it used therefor (some of them at least). On the other hand. The important thing to remember is that Celestino Co & Company habitually makes sash. it could stock and/or probably had in stock the sash. The truth of the matter is that it sold materials ordinarily manufactured by it — sash." (Appellant's brief.2 Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filing orders for windows and doors according to specifications. Therefore it is not true that it serves special customers only or confines its services to them alone.The percentage tax imposed in section 191 of our Tax Code is generally a tax on the sales of services. producer or importer. they are bought because they meet the specifications desired by the purchaser. for instance. Surely. windows and doors only for special customers and upon their special orders and in accordance with the desired specifications of the persons ordering the same and not for the general market: since the doors ordered by Don Toribio Teodoro & Sons. are not in existence and which never would have existed but for the order of the party desiring it. provided he pays the price. The same consideration applies to this sash manufacturer. but if the goods are to be manufactured specially for the customer and upon his special order. That it "manufactures" the same is practically admitted by appellant itself. Vol. If they do. manufacturers sash. There was a strong dissent. although in such form or combination as suited the fancy of the purchaser. Any builder or homeowner. 11-12). and likes. the doors ordered by Don Toribio Teodoro & Sons Inc.. does not alter the nature of the establishment. The fact that windows and doors are made by it only when customers place their orders. Inc. II. It is at once apparent that the Oriental Sash Factory did not merely sell its services to Don Toribio Teodoro & Co. it did not sell.. for it is obvious that it only accepted such orders as called for the employment of such material-moulding. the transaction would be no different from a purchasers of manufactured goods held is stock for sale. If these specifications do not happen to be of the kind habitually manufactured by appellant — special forms for sash. panels.1 not the seller of lumber. manufacture and keep on stock doors of the kind sold to Teodoro. whether the same is on hand at the time or not. it is contract for a piece of work. That the doors and windows must meet desired specifications is neither here nor there. and not for the general market. Said article reads as follows: A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market. The fact that the articles sold are manufactured by the seller does not exchange the contract from the purview of section 186 of the National Internal Revenue Code as a sale of articles. 744). Neither does it take the transaction out of the category of sales under Article 1467 above quoted. panels. in contradiction with the tax imposed in section 186 of the same Code which is a tax on the original sales of articles by the manufacturer. as it has represented in its stationery and advertisements to the public. panels-as it ordinarily manufactured or was in a position habitually to manufacture. by clear proof of facts not disputed by the respondent. but upon careful consideration of the whole matter are inclines to accept the above statement of the facts and the law. is a contract of sale. may purchase from appellant doors of the same kind. Perhaps the following paragraph represents in brief the appellant's position in this Court: Since the petitioner. sash. frames. windows and doors. but merely contracted for particular pieces of work or "merely sold its services". (To take one instance) because it also sold the materials. Nobody would regard the doing of two window panels a construction work in common parlance. and since petitioner's contractual relation with his customers is that of a contract for a piece of work or since petitioner is engaged in the sale of services. (Formilleza's Commentaries and Jurisprudence on the National Internal Revenue Code. it follows that the petitioner should be taxed under section 191 of the Tax Code and NOT under section 185 of the same Code. Such new form does not divest the Oriental Sash Factory of its character as manufacturer. p. mouldings. mouldings — to Teodoro & Co. for it can easily duplicate or even mass-produce the same doors-it is mechanically equipped to do so. the appellant will not refuse. But the argument rests on a false foundation. Nobody will say that when a sawmill cuts lumber in accordance with the peculiar specifications of a customer-sizes not previously held in stock for sale to the public-it thereby becomes an employee or servant of the customer. petitioner's idea of being a contractor doing construction jobs is untenable. The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually makes. And anyone who sees. frames. may order windows or doors of the kind manufactured by this appellant. cutting them to such sizes and combining them in such forms as its customers may desire. in the ordinary course of its business.

such orders should not be called special work. but regular work. Concepcion. The thought occurs to us that if.In our opinion when this Factory accepts a job that requires the use of extraordinary or additional equipment. Would a factory do business performing only special. as alleged-all the work of appellant is only to fill orders previously made. JJ. and should be taxed as "transfers" thereof under section 186 of the National Revenue Code. extraordinary or peculiar merchandise? Anyway. Reyes.. They were merely orders for work — nothing is shown to call them special requiring extraordinary service of the factory.. and Felix. But as the doors and windows had been admittedly "manufactured" by the Oriental Sash Factory. J. J. C. Paras. such transactions could be. Padilla. iv v vi vii viii ix x xi xii xiii xiv xv xvi xvii xviii xix xx xxi xxii . The appealed decision is consequently affirmed. supposing for the moment that the transactions were not sales. The orders herein exhibited were not shown to be special. or involves services not generally performed by it-it thereby contracts for a piece of work — filing special orders within the meaning of Article 1467. Montemayor. they were neither lease of services nor contract jobs by a contractor. B. So ordered. Bautista Angelo. L.. concur.

: Is a contract for the fabrication and installation of a central air-conditioning system in a building. J. DECISION PANGANIBAN.000. No. On September 2. the Court assigned the writing of this Decision to the undersigned. 1962 between petitioner and private respondent. including the petition. who paid in full the contract price. petitioner. to set aside the Decision1 of the Court of Appeals2 in CA-G. Petitioner was to furnish the materials. 1996 ENGINEERING & MACHINERY CORPORATION. Hence. private respondent prayed for the amount of P210. Makati in consideration of P210. .R. 52267 January 24. Branch II4 . he re-acquired possession sometime in 1971.000.2ºF (Exhibit C)"5 . It was then that he learned from some NIDC. private respondent's comment and briefs for the petitioner and the private respondent. private respondent filed on May 8.000. private respondent sold the building to the National Investment and Development Corporation (NIDC). 1995. By a resolution of the First Division of this Court dated November 13.00 as attorney's fees.00 representing the rectification cost. plus damages. labor. 1978 (affirming in toto the decision3 dated April 15. tools and all services required in order to so fabricate and install said system. The system was completed in 1963 and accepted by private respondent. 1974 of the then Court of First Instance of Rizal. Sapico enumerated the defects of the system and concluded that it was "not capable of maintaining the desired room temperature of 76ºF . 1971 an action for damages against petitioner with the then Court of First Instance of Rizal (Civil Case No. Sapico to render a technical evaluation of the system in relation to the contract with petitioner. this case was transferred to the Third. COURT OF APPEALS and PONCIANO L. respondent. After deliberating on the various submissions of the parties. attorney's fees and costs). furnish and install the air-conditioning system in the latter's building along Buendia Avenue. one of "sale" or "for a piece of work"? What is the prescriptive period for filing actions for breach of the terms of such contract? These are the legal questions brought before this Court in this Petition for review on certiorari under Rule 45 of the Rules of Court. ALMEDA. vs. the former undertook to fabricate.00 as damages and P15. 14712. who took his oath as a member of the Court on October 10.00. 1965.R. In his report. 58276-R promulgated on November 28. in Civil Case No. The latter took possession of the building but on account of NIDC's noncompliance with the terms and conditions of the deed of sale. record on appeal. private respondent commissioned Engineer David R. The ownership of the building having been decreed back to private respondent. 1995. On the basis of this report. 14712). Acting on this information. employees of the defects of the air-conditioning system of the building. P100. The complaint alleged that the air-conditioning system installed by petitioner did not comply with the agreed plans and specifications. No.000.xxiii xxiv xxv xxvi xxvii xxviii Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. private respondent was able to secure judicial rescission thereof. The Facts Pursuant to the contract dated September 10. which ordered petitioner to pay private respondent the amount needed to rectify the faults and deficiencies of the air-conditioning system installed by petitioner in private respondent's building.

In its reply. The Court's Ruling The Supreme Court reviews only errors of law in petitions for review on certiorari under Rule 45. it insisted that. involve questions of fact which have been passed upon by the appellate court. the trial court ruled that the complaint was filed within the ten-year court prescriptive period although the contract was one for a piece of work. as well as the Court of Appeals. The Court has consistently held that the factual findings of the trial court. thus reducing its operational effectiveness to the extent that 35 window-type units had to be installed in the building to achieve a fairly desirable room temperature. Thus. the complaint was timely brought within the ten-year prescriptive period. private respondent filed an ex-parte motion for preliminary attachment on the strength of petitioner's own statement to the effect that it had sold its business and was no longer doing business in Manila. in accordance with Article 1144 (1) of the same Code. petitioner argued that Article 1571 of the Civil Code providing for a six-month prescriptive period is applicable to a contract for a piece of work by virtue of Article 1714. The trial court denied the motion to dismiss. ordered the issuance of a writ of attachment. involving the same parties. because it involved the "installation of an air-conditioning system which the defendant itself manufactured. including ordinary wear and tear and lack of proper and regular maintenance. 71494. Court of First Instance of Manila. Thereafter. like the question of whether there was an acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple inspection. wherein private respondent was adjudged to pay petitioner the balance of the unpaid contract price for the air-conditioning system installed in another building of private respondent. the system was subjected to "very rigid inspection and testing and corrections or modifications effected" by petitioner. assuming arguendo that there were indeed hidden defects. it instituted the instant petition. Second. It alleged that whatever defects might have been discovered in the air-conditioning system could have been caused by a variety of factors. designed and installed. which affirmed the decision of the trial court. petitioner raised three issues. private respondent's complaint was barred by prescription under Article 1571 of the Civil Code. are final and conclusive and may not be reviewed on appeal.000." Petitioner appealed to the Court of Appeals. It is not the function of this Court to re-examine the findings of fact of the appellate court unless said findings are not supported by the evidence on record or the judgment is based on a misapprehension of facts7 of Appeals erred when it held that the defects in the installation were not apparent at the time of delivery and acceptance of the work considering that private respondent was not an expert who could recognize such defects.482. Private respondent countered that the contract dated September 10. Hence. It interposed a compulsory counterclaim suggesting that the complaint was filed "to offset the adverse effects" of the judgment in Civil Case No. It pointed out that during the one-year period that private respondent withheld final payment. fabricated. regarding the responsibility of a vendor for any hidden faults or defects in the thing sold. on the other hand. the trial court rendered a decision finding that petitioner failed to install certain parts and accessories called for by the contract. In due course. it claimed that the Court of Appeals erred when it held that the defects in the installation were not apparent at the time of delivery and acceptance of the work considering that private respondent was not an expert who could recognize such defects.00. 1962 was not a contract for sale but a contract for a piece of work under Article 1713 of the Civil Code. which provides for a six-month prescriptive period. Third. on the other hand.25. private respondent's complaint was barred by prescription under Article 1571 of the Civil Code.Petitioner moved to dismiss the complaint. The Submissions of the Parties In the instant Petition. alleging that the prescriptive period of six months had set in pursuant to Articles 1566 and 1567. involve questions of fact which have been passed upon by the appellate court. petitioner reiterated its claim of prescription as an affirmative defense. like the question of whether here was an acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple inspection. amounting to P138. averred that the issues raised by petitioner. Among the exceptional circumstances where a reassessment of facts . and deviated from the plans of the system. it contended that private respondent's acceptance of the work and his payment of the contract price extinguished any liability with respect to the defects in the air-conditioning system. First. which provides that such a contract shall be governed by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale6 . in relation to Article 1571 of the Civil Code. In its answer to the complaint. it insisted that. On the question of prescription. Private respondent. upon private respondent's posting of a bond of F'50. Private respondent. Third. which provides for a six-month prescriptive period. The trial court granted the motion and. averred that the issues raised by petitioner. assuming arguendo that there were indeed hidden defects.

if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given. Thus. Thus. 1714 above-quoted. at the contractor's cost. not a sale.found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation.9 (Emphasis supplied) Hence. mistaken or impossible." Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. which provide: Art. It is not petitioner's line of business to manufacture air-conditioning systems to be sold "off-the-shelf. But if one of the parties accepts the undertaking on the basis of some plan. when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. On the other hand. are found in Articles 1561 and 1566.. of the person desiring it10 . the employer may have the defect removed or another work executed. the contract in question is one for a piece of work. it is a contract for a piece of work (Art. . Civil Code). there is a contract for a piece of work13 . the only question left to be resolved is that of prescription. labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order. which read as follows: . if the parties intended that at some future date an object has to be delivered. The contractor may either employ only his labor or skill. testimonial and documentary. the parties argued lengthily on the nature of the contract entered into by them. 1714. 1715. referred to in Art. the first two issues will not be resolved as they raise questions of fact. Collector. taking into account the work he will employ personally or through another. vs. whether the same is on hand at the time or not is a contract of sale. 99 Phil. The mere fact alone that certain articles are made upon previous orders of customers will not argue against the imposition of the sales tax if such articles are ordinarily manufactured by the taxpayer for sale to the public (Celestino Co. In such case. particularly where. surmises or conjectures. The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use.8 We see no valid reason to discard the factual conclusions of the appellate court. the employer may require that the contractor remove the defect or execute another work. Clearly. 1467. we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. in consideration of a certain price or compensation. but if the goods are to be manufactured specially for the customer and upon his special order. Thus. Should the work be not of such quality. 841). viz. when the judgment is premised on a misapprehension of facts. such as here. then the contract is one of sale11 . the findings of both the trial court and the appellate court on the matter coincide. the contract is one for a piece of work. adduced by the parties. the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers. the distinction between the two contracts depends on the intention of the parties. Justice Vitug12 explains that A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market. . when the inference made is manifestly absurd. Mr. whether it was one of sale or for a piece of work. Naturally. The obligations of a contractor for a piece of work are set forth in Articles 1714 and 1715 of the Civil Code. A contract for a piece of work. Article 1713 of the Civil Code defines a contract for a piece of work thus: By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer. If the contractor agrees to produce the work from material furnished by him. In their submissions. . when there is grave abuse of discretion in the appreciation of facts. without considering the work or labor of the party bound to deliver. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. he shall deliver the thing produced to the employer and transfer dominion over the thing. The provisions on warranty against hidden defects. the contract is one of sale. If the contractor fails or refuses to comply with this obligation. Art. or also furnish the material. (I)t is not the function of this Court to assess and evaluate all over again the evidence. and not for the general market. After a careful study of the case at bench. To Tolentino.

. 220 volts. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold. Desired room temperature not attained. he would not have acquired it or would have given a lower price for it. Consistent with the above discussion. a close scrutiny of the complaint filed in the trial court reveals that the original action is not really for enforcement of the warranties against hidden defects. 3. 1. "in the installation of the air conditioning system did not comply with the specifications provided" in the written agreement between the parties. but one for breach of the contract itself. Defects Noted: 1. 2. No belt guard on motor. In Villostas vs. Defective gauges of compressors. Court of Appeals15 . even though he was not aware thereof. xxx xxx xxx Art. the following were noted not installed although provided in the specifications. This damper regulates the flow of cooled air depending on room condition. "and an evaluation of the air-conditioning system as installed by the defendant showed the following defects and violations of the specifications of the agreement.. Civil Code) shall apply"16 . 1566. which is four years (Article 1389. 4.I. we held that. but said vendor shall not be answerable for patent defects or those which may be visible. or for those which are not visible if the vendee is an expert who. Aside from the above defects. Model 2VC4 directly driven by an Hp Elin electric motor 1750 rmp. No fresh air intake provision were provided which is very necessary for efficient comfort cooling. the prescriptive period is the one specified in the express warranty. No motor to regulate the face and by-pass damper. it would appear that this suit is barred by prescription because the complaint was filed more than four years after the execution of the contract and the completion of the air-conditioning system. to wit: GROUND FLOOR: "A. as in the case at bench. had the vendee been aware thereof. However. by reason of his trade or profession. 3. and the vendor was not aware of the hidden faults or defects in the thing sold. It alleged17 that the petitioner. Deteriorated evaporative condenser panels. RIGHT WING: Equipped with Worthington Compressor. This provision shall not apply if the contrary has been stipulated. and where there is an express warranty in the contract. complete with starter evaporative condenser. air handling unit air ducts. 3 phase. or should they diminish its fitness for such use to such an extent that. Face by-pass damper of G. 60 cycles. with damages in either case14 . sheets No. should have known them. and in the absence of such period.Art. a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties". should they render it unfit for the use for which it is intended. 1561. coils are full of scales and heavy corrosion is very evident. circulating water pump. The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (redhibitory action) or to demand a proportionate reduction of the price (accion quanti manoris). 5. Main switch has no cover. "the general rule on rescission of contract. 16. "while it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have. 2.

All other defects on right wing are common to the left wing. the Court is persuaded to believe the plaintiff that not only had the defendant failed to install items and parts provided for in the specifications of the air-conditioning system be installed.4. 1750 rpm. Particular compressors do not have provision for renewal sleeves. This is an important component to increase refrigeration efficiency. IV. 60 cycles. 3 phase. GENERAL REMARKS: Under Section III. 8. The trial court. 5. Suitable heat exchanger is not installed. after evaluating the evidence presented. 220 volts 60 cycles with starter. thus: From all of the foregoing. the present systems are not capable of maintaining the desired temperature of 76 = 2ºF (sic). Of the remaining six (6) units. revealed that 78ºF room (sic) is only maintained due to the additional window type units. like face and by-pass dampers . Defects Noted: Same as right wing. 1971. Temperature measurements conducted on March 29. Liquid level indicator for refrigerant not provided. except No. several of them have been replaced with bigger crankshafts. 2. 6. the MELCO compressors do not satisfy the conditions stated therein due to the following: 1. As stated in the specifications under. held that. 60 cycles. NINTH FLOOR: Two (2) Worthington 2VC4 driven by 15 Hp. The present tenant have installed 35 window type air conditioning units distributed among the different floor levels. -220 volts. indeed. Out of the total 15 MELCO compressors installed to serve the 2nd floor up to 8th floors. Modulating thermostat not provided. 7. and taking into account "A" & "B" same. 3 phase. 3. 3 phase. Thrige electric motor with starters. Defects Noted are similar to ground floor. 4. petitioner failed to install items and parts required in the contract and substituted some other items which were not in accordance with the specifications18 . only six (6) units are in operation and the rest were already replaced. Not provided with oil pressure safety control. Higgs motors with starters. 220 volts. SECOND FLOOR: (Common up to EIGHT FLOORS) Compressors installed are MELCO with 7. B.5 Hp V-belt driven by 1800 RPM. Water treatment device for evaporative condenser was not provided. Design conditions of specification for air conditioning work. Section No. MELCO Compressors are not provided with automatic capacity unloader. Liquid receiver not provided by sight glass. LEFT WING: Worthington Compressor Model 2VC4 is installed complete with 15 Hp electric motor.

R. No costs. Having concluded that the original complaint is one for damages arising from breach of a written contract . Verily. relieve the petitioner from liability for deviations from and violations of the written contract. C. Melo and Francisco. which is Article 1144 of the Civil Code. parts and accessories not in full accord with the contract specification naturally resulted to adversely affect the operational effectiveness of the air-conditioning system which necessitated the installation of thirty-five window type of air-conditioning units distributed among the different floor levels in order to be able to obtain a fairly desirable room temperature for the tenants and actual occupants of the building. 1918 ANDRES QUIROGA. Jose Arnaiz and Pascual B. Narvasa.. However. parts and accessories called for in the specifications of the contract.and modulating thermostat and many others. parts and accessories which were used and installed on the air-conditioning system which were not in full accord with contract specifications.with declare that the governing law is Article 1715 (supra).. Since the governing contract was executed on September 10. Parsons (to whose rights and obligations the present defendant later subrogated itself). the mere fact that the private respondent accepted the work does not. concur. plaintiff-appellant. parts and accessories not in accordance with the plan and specifications provided for in the contract and the deviations made in putting into the air conditioning system parts and accessories not in accordance with the contract specifications. These omissions to install the equipments. will apply. and J. 1971. the general law on prescription. as party of the second part: . the petition is hereby DENIED and the assailed Decision is AFFIRMED. Crossfield & O'Brien for appellee. Azanza for appellant. it is evident that the defect in the installation was not apparent at the time of the delivery and acceptance of the work. ipso facto. it is clear that the action has not prescribed.: On January 24. No. it is impossible to determine by the simple inspection of air conditioning system installed in an 8-floor building whether it has been furnished and installed as per agreed specifications. SO ORDERED. in this city of manila. inter alia. as well as the deviations made in putting into the air-conditioning system equipments. but also that there are items.and not a suit to enforce warranties against hidden defects . From the very nature of things. The Court opines and so holds that the failure of the defendant to follow the contract specifications and said omissions and deviations having resulted in the operational ineffectiveness of the system installed makes the defendant liable to the plaintiff in the amount necessary to rectify to put the air conditioning system in its proper operational condition to make it serve the purpose for which the plaintiff entered into the contract with the defendant. Said provision states. 1962 and the complaint was filed on May 8. What about petitioner's contention that "acceptance of the work by the employer relieves the contractor of liability for any defect in the work"? This was answered by respondent Court19 as follows: As the breach of contract which gave rise to the instant case consisted in appellant's omission to install the equipments (sic).we here . a contract in the following tenor was entered into by and between the plaintiff. AVANCEÑA. that actions "upon a written contract" prescribe in ten (10) years.. considering further that plaintiff is not an expert to recognize the same. Davide Jr. Alfredo Chicote.. vs. WHEREFORE. L-11491 August 23. inasmuch as this provision does not contain a specific prescriptive period. 1911. as the law gives him ten (10) years within which to file an action based on breach thereof. The respondent Court affirmed the trial court's decision thereby making the latter's findings also its own. JJ. J. PARSONS HARDWARE CO. as party of the first part.J. Republic of the Philippines SUPREME COURT Manila EN BANC G. defendant-appellee.

according to their class. shall make and allowance of a discount of 25 per cent of the invoiced prices. and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party. PARSONS. ART. and does not pay its price. with a discount of from 20 to 25 per cent. Quiroga. Parsons shall order the beds by the dozen. only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices. and as such a deduction of 2 per cent shall be made from the amount of the invoice. or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents. for. but shall not be affected by said alteration if the price thereby be increased. In compensation for the expenses of advertisement which. he returns it. as constituting its cause and subject matter. and that the defendant was to pay the price in the manner stipulated. Quiroga assumed the obligation to invoice the beds at the price at which the order was given. ART. and shall immediately report such action to Mr. Parsons. and cost of unloading from the vessel at the point where the beds are received. itself to conduct the agency. or in cash. Quiroga for his approval. on the part of the defendant. by reason of the contract hereinbefore transcribed. in Manila. Mr. In the contract in question. as commission on the sale. Parsons for the latter's establishment in Iloilo. said payment when made shall be considered as a prompt payment. and if he does not succeed in selling it. for the benefit of both contracting parties. There was the obligation on the part of the plaintiff to supply the beds. the latter. due regard must be given to its essential clauses. (C) The expenses for transportation and shipment shall be borne by M. 3. and to order the beds by the dozen and in no other manner. ARTICLE 1. or before. if the defendant so preferred. These are precisely the essential features of a contract of purchase and sale. Parsons. Parsons in case anyone should apply for the exclusive agency for any island not comprised with the Visayan group. Of the three causes of action alleged by the plaintiff in his complaint. This contract is made for an unlimited period. and that said obligations are implied in a contract of commercial agency. but delivers to the principal the price he obtains from the sale of the thing to a third person. at the plaintiff's request. Parsons may find himself obliged to make. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it. 4. (D) If. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila. Quiroga for the beds received. FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS. (F) Mr. was a purchaser or an agent of the plaintiff for the sale of his beds. ART. Quiroga assumes the obligation to offer and give the preference to Mr. and in these last two cases an additional discount was to be allowed for prompt payment. The whole question. and Mr. and. By virtue of the contract between the plaintiff and the defendant. and. at the price stipulated. without any other consideration and regardless as to whether he had or had not sold the beds. insurance. shall be paid by Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds. to pay their price. 2. before an invoice falls due. is that the plaintiff was to furnish the defendant with the beds which the latter might order. with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner. Parsons binds himself not to sell any other kind except the "Quiroga" beds. what was essential. . BOTH MERCHANTS ESTABLISHED IN MANILA. Mr. Mr. (B) Mr. in the invoices. Mr. Mr. Quiroga should request its payment. Parsons under the following conditions: (A) Mr. and shall invoice them at the same price he has fixed for sales.CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. reduced itself to a determination as to whether the defendant. Parsons binds himself to pay Mr. Parsons may sell. In order to classify a contract. and the freight. was necessarily obliged to pay their price within the term fixed. (E) Mr. on receiving the beds. As may be seen. and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. to keep the beds on public exhibition. whether of the same or of different styles. Quiroga shall furnish beds of his manufacture to Mr. in this latter case. none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. to have an open establishment in Iloilo. such order shall enjoy the advantage of the alteration if the price thereby be lowered. Payment was to be made at the end of sixty days. and to pay for the advertisement expenses for the same. within a period of sixty days from the date of their shipment. therefore. The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo.

INC. had serious trouble with the defendant. only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. but was for other beds of another kind. Torres. it forwarded to the defendant the beds that it wanted. Arellano. 1941 GONZALO PUYAT & SONS. Only the acts of the contracting parties. there was mutual tolerance in the performance of the contract in disregard of its terms. It appears that this witness. For the foregoing reasons. subsequent to. requested the plaintiff's prior consent with respect to said beds. on the part of both of them. the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions. However. as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds. at the most only shows that. So ordered. No. But. The judgment appealed from is affirmed. that. Not a single one of these clauses necessarily conveys the idea of an agency. The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell. In respect to the defendant's obligation to order by the dozen. constitute. inasmuch as the agreements contained in Exhibit A which he claims to have drafted. and had even accused one of its partners. Republic of the Philippines SUPREME COURT Manila EN BANC G. it was Mariano Lopez Santos. a contract of purchase and sale. and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because. that the contract by and between the defendant and the plaintiff is one of purchase and sale. respondent. prior to the time of his testimony. Guillermo Parsons. and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant. as stated in the contract itself. the execution of the contract. With regard to the remaining clauses. as the plaintiff claims it was. As regards the shipment of beds without previous notice. C. as we do. which shows that it was not considered that the defendant had a right. but not when. without previous notice. as in the instant case. examining the clauses of this contract. even supposing that Ernesto Vidal has stated the truth. JJ.. he waives his right and cannot complain for having acted thus at his own free will. not as the parties stipulated it. a former vice-president of the defendant corporation and who established and managed the latter's business in Iloilo. its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another.. the plaintiff agreed to their return. and not one of commercial agency. it is insinuated in the record that these brass beds were precisely the ones so shipped.R. Johnson. the only one expressly imposed by the contract. we have said that they merely constituted a discount on the invoice price. But all this. as we have said. vs. had maintained a civil suit against it. and.. besides. the return made was of certain brass beds. a director of the corporation. But. also used in articles 2 and 3. either by agreement or by law. we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale. but as they performed it. with costs against the appellant. who prepared Exhibit A. . and not what it is called by the contracting parties. Street and Malcolm. by virtue of the contract. for these contracts are incompatible with each other. but if the plaintiff consents to fill them. when such interpretation is necessary. ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco). and was not effected in exchange for the price paid for them. the least that can be said is that they are not incompatible with the contract of purchase and sale. concur. But it must be understood that a contract is what the law defines it to be.It would be enough to hold. than a mere discount on the invoice price. and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. must be considered for the purpose of interpreting the contract. The words commission on sales used in clause (A) of article 1 mean nothing else. L-47538 June 20. He testified that it was he who drafted the contract Exhibit A. And with respect to the so-called commissions. to make this return. and in connection with. Furthermore. for this very reason. of falsification. in order to show that it was not one made on the basis of a commission on sales. This only means that Ernesto Vidal was mistaken in his classification of the contract. replied that it was to be an agent for his beds and to collect a commission on sales. The word agency. such sales were to be considered as a result of that advertisement. and it gives no right to have the contract considered. none of them is found that substantially supports the plaintiff's contention. his statement as to what was his idea in contracting with the plaintiff is of no importance. and for the letter Exhibit L-1. The plaintiff calls attention to the testimony of Ernesto Vidal. when questioned as to what was his purpose in contracting with the plaintiff.J. and that. petitioner. according to the defendant's evidence.

the petitioner was guilty of fraud in concealing the true price and hence would still be liable to reimburse the respondent for the overpayments made by the latter. however." It appears that the respondent herein brought an action against the herein petitioner in the Court of First Instance of Manila to secure a reimbursement of certain amounts allegedly overpaid by it on account of the purchase price of sound reproducing equipment and machinery ordered by the petitioner from the Starr Piano Company of Richmond. Moreover. Salmon and Coulette on one side. About the same time. Indiana. and an employee named Santos. while A. The appellate court.04. insurance. In 1930. and that the defendants had obtained a discount from the Starr Piano Company. The equipment under the second order arrived in due time. representing the defendant. another order for sound reproducing equipment was placed by the plaintiff with the defendant. Salmon was the president. was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond. said officials of the plaintiff were convinced that the prices charged them by the defendant were much too high including the charges for out-of-pocket expense. without date. At the expense of the plaintiff. and absolved that petitioner from the complaint. 1929. with office in Manila. approached Gonzalo Puyat & Sons.. Gomez for respondent. the petitioner acting as agent of the respondent in the purchase of the equipment in question. Inc. This agreement or order was confirmed by the plaintiff by its letter Exhibit "2". Gonzalo Puyat & Sons. Inc. in addition to the price of the equipment. This amount of $160 does not represent actual out-of-pocket expenses paid by the defendant. together with legal interest thereon from the date of the filing of the complaint until said amount is fully paid. A reply was received by Gonzalo Puyat & Sons. Gonzalo Puyat and Sons. and the Arco Amusement Company desiring to equipt its cinematograph with sound reproducing devices.. and Gil Puyat on the other. Inc. with one justice dissenting — held that the relation between petitioner and respondent was that of agent and principal. LAUREL. which are admitted by the respondent.600 with its 10 per cent commission. freight.S. Salmon dated November 19. to the Starr Piano Company. plaintiff and defendants. etc. Gil Puyat. with the price. and $160. that the plaintiff would pay for the equipment the amount of $1. vs. After some negotiations. was duly paid by the plaintiff to the defendant. plus all expenses incurred. which was supposed to be the price quoted by the Starr Piano Company. C..52 or P2. the "Teatro Arco". A. Indiana. its name was changed to Arco Amusement Company. evidently the list price of $1. by reading reviews and literature on prices of machinery and cinematograph equipment. defendant-appellee. About three years later. it was agreed between the parties. representing the plaintiff.b.335. W. — by a division of four. the defendant sent a cable.700 f. for all expenses and charges. a corporation duly organized under the laws of the Philippine Islands. filed by one Fidel Reyes against the defendant herein Gonzalo Puyat & Sons. and upon delivery of the same to the plaintiff and the presentation of necessary papers. that is to say. with its office in Manila. another corporation doing business in the Philippine Islands. and failing in this they brought the present action. The equipment arrived about the end of the year 1929. S. in addition to its other business.600. the plaintiff. in connection with a civil case in Vigan. The petitioner now claims that the following errors have been incurred by the appellate court: . and after some negotiations between the same parties. that the latter would. The defendant did not show the plaintiff the cable of inquiry nor the reply but merely informed the plaintiff of the price of $1. banking charges.: This is a petition for the issuance of a writ of certiorari to the Court of Appeals for the purpose of reviewing its Amusement Company (formerly known as Teatro Arco). that is to say. Being agreeable to this price. thru its then president and acting manager. Inc. J. plus 10 per cent commission. It would seem that this last company dealt in cinematographer equipment and machinery. The appellate court further argued that even if the contract between the petitioner and the respondent was one of purchase and sale. Indiana. the price of $1. on the same terms as the first order. U. plus the 10 per cent commission agreed upon and plus all the expenses and charges. a 10 per cent commission. they sought to obtain a reduction from the defendant or rather a reimbursement. Exhibit "3".700. but a mere flat charge and rough estimate made by the defendant equivalent to 10 per cent of the price of $1. J. U. inquiring about the equipment desired and making the said company to quote its price without discount. S. by means of Exhibit "1". as well as to pay the costs of the suit in both instances. Inc. plaintiff-appellant. are as follows: In the year 1929. cables. on behalf of the plaintiff.. such as.S. the officials of the Arco Amusement Company discovered that the price quoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the list price. For these reasons. which is a letter signed by C. Sometime the following year.A.671. and sentenced the petitioner to pay the respondent alleged overpayments in the total sum of $1. and the defendant was duly paid the price of $1. Ferrier and Daniel Me.700.. was engaged in the business of operating cinematographs.600 of the equipment.Feria & Lao for petitioner.o. factory Richmond. Coulette was the business manager. order sound reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant. The facts of the case as found by the trial court and confirmed by the appellate court. B. plus all expenses. formally authorized the order. The trial court held that the contract between the petitioner and the respondent was one of outright purchase and sale.

.) In the second place. such as costs of telegrams. Doles v. The third paragraph of the respondent's cause of action states: 3. Rep. by which the respondent accepted the prices of $1. Exhibits 1 and 2.700 y $1.I. 56 So. Code of Commerce). Civil Code). As a matter of fact. 8 Allen. Conner. It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction.) The letters. Indiana. 411. which can not bind either party. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (article 1729. Palmer. the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (section 254. 38 Phil. the herein plaintiff (respondent) and defendant (petitioner) entered into an agreement. state that the petitioner was to receive ten per cent (10%) commission.700 and $1. Brosscell. The respondent could not have secured this discount from the Starr Piano Company and neither was the petitioner willing to waive that discount in favor of the respondent. el consentimiento de la recurrida en cuanto al precio de $1. El Tribunal de Apelaciones incurrio en error de derecho al declarar que. was to receive the actual cost price plus ten per cent (10%). to hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr Piano Company of Richmond. 501. The distinction which the respondents seeks to draw between the cost price and the list price we consider to be spacious. Bank v. en vez de la de vendedora a compradora como ha declarado el Juzgado de Primera Instncia de Manila. While the latters.600. for the reasons now to be stated." This is incompatible with the pretended relation of agency between the petitioner and the respondent... 161. and the respondent was not even aware of such an arrangement. certain sound reproducing equipment and machinery. Bank v. We sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchase and sale. are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate. mediante dolo. Exhibits 1 and 2. This is the very essence of commerce without which merchants or middleman would not exist. entre la recurrente y la recurrida existia una relacion implicita de mandataria a mandante en la transaccion de que se trata. is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. In the first place. under and by virtue of said agreement. 212. and was also to be reimbursed for all out of pocket expenses in connection with the purchase and delivery of such equipment. the plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed of $1. mistake in their quotation. 1929.. El Tribunal de Apelaciones incurrio en error de derecho al declarar que. plus ten per cent (10%) commission and all out-of-pocket expenses incurred by the petitioner. 47 III.. loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications. under and by virtue of which the herein defendant was to secure from the United States. Indiana. the petitioner was not duty bound to reveal the private arrangement it had with the Starr Piano Company relative to such discount to its prospective customers. the latter as exclusive agent of the Starr Piano Company in the United States. segun hechos. The respondent admitted in its complaint filed with the Court of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. Merrill. II. therefore. The respondents contends that it merely agreed to pay the cost price as distinguished from the list price. as this provision is only an additional price which the respondent bound itself to pay. and sell and deliver to the herein plaintiff. this does not necessarily make the petitioner an agent of the respondent. and similar expenses. 576. 120 III. such as change in prices.600. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk". y condenar a la recurrente ha obtenido de la Starr Piano Company of Richmond. Parsons Hardware Co. (See Quiroga vs. and which stipulation is not incompatible with the contract of purchase and sale. for the sound reproducing equipment subject of its contract with the petitioner. That on or about November 19.600 de las maquinarias y equipos en cuestion.. Moreover. 173 Mass. because in agency. could not have offered to pay a 10 per cent commission to the petitioner provided it was given the benefit of . It is to be observed that the twenty-five per cent (25%) discount granted by the Starr piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. the contract is the law between the parties and should include all the things they are supposed to have been agreed upon. 92. and not one of agency. (Emphasis ours. The respondent. respectively.) We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to the defendant (petitioner). 334. Copper. suponiendo que dicha relacion fuerra de vendedora a compradora. no reason is advanced by the respondent why the petitioner should waive the 25 per cent discount granted it by the Starr Piano Company in exchange for the 10 percent commission offered by the respondent. Hosser v. la recurrente obtuvo. freight. presidido entonces por el hoy Magistrado Honorable Marcelino Montemayor. 11 Am.. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner. (Nolbrook v.700 and $1. for which the said defendant.

aside from obtaining a discount from the home office. entitled "Arco Amusement Company (formerly known as Teatro Arco). and the respondent is estopped from questioning that additional price. Gonzalo Puyat & Sons. defendants-appellee.the 25 per cent discount enjoyed by the petitioner. R. business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world.. The respondent could not secure equipment and machinery manufactured by the Starr Piano Company except from the petitioner alone. . plaintiff-appellant. The fact that the petitioner obtained more or less profit than the respondent calculated before entering into the contract or reducing the price agreed upon between the petitioner and the respondent. sometimes add to the list price when they resell to local purchasers. 1023. The writ of certiorari should be. granted. Inc. The decision of the appellate court is accordingly reversed and the petitioner is absolved from the respondent's complaint in G. it willingly paid the price quoted. No. It is well known that local dealers acting as agents of foreign manufacturers. Not every concealment is fraud. it alone must bear the blame. on that ground alone. it were better that. within certain limits. vs. and short of fraud." without pronouncement regarding costs. If the respondent later on discovers itself at the short end of a bad bargain. It was apparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent. it received the equipment and machinery as represented. much less compel a reimbursement of the excess price. and it cannot rescind the contract. So ordered. as it is hereby. and that was the end of the matter as far as the respondent was concerned.

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