G.R. No.
118114 December 7, 1995 known debts and obligations which the said parcel of
TEODORO ACAP, petitioner,
vs.
COURT OF APPEALS and EDY DE LOS
REYES, respondents.
PADILLA, J.:
This is a petition for review on certiorari  of the
decision1 of the Court of Appeals, 2nd Division, in CA-
G.R. No. 36177, which affirmed the decision 2 of the
Regional Trial Court of Himamaylan, Negros Occidental
holding that private respondent Edy de los Reyes had
acquired ownership of Lot No. 1130 of the Cadastral
Survey of Hinigaran, Negros Occidental based on a
document entitled "Declaration of Heirship and Waiver
of Rights", and ordering the dispossession of petitioner
as leasehold tenant of the land for failure to pay rentals.
The facts of the case are as follows:
The title to Lot No. 1130 of the Cadastral Survey of
Hinigaran, Negros Occidental was evidenced by OCT No.
R-12179. The lot has an area of 13,720 sq. meters. The
title was issued and is registered in the name of spouses
Santiago Vasquez and Lorenza Oruma. After both
spouses died, their only son Felixberto inherited the lot.
In 1975, 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, petitioner Teodoro Acap had been the
tenant of a portion of the said land, covering an area of
nine thousand five hundred (9,500) meters. When
ownership was transferred in 1975 by Felixberto to
Cosme Pido, Acap continued to be the registered tenant
thereof and religiously paid his leasehold rentals to Pido
and thereafter, upon Pido's death, to his widow
Laurenciana.
The controversy began when Pido died intestate and on
27 November 1981, his surviving heirs executed a
notarized document denominated as "Declaration of
Heirship and Waiver of Rights of Lot No. 1130 Hinigaran
Cadastre," wherein they declared; to quote its pertinent
portions, that:
. . . Cosme Pido died in the Municipality of Hinigaran,
Negros Occidental, he died intestate and without any
land is (sic) held liable.
That Cosme Pido was survived by his/her legitimate
heirs, namely: LAURENCIANA PIDO, wife, ELY, ERVIN,
ELMER, and ELECHOR all surnamed PIDO; children;
That invoking the provision of Section 1, Rule 74 of the
Rules of Court, 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.
Now, therefore, We LAURENCIANA3 , ELY, ELMER, ERVIN
and ELECHOR all surnamed PIDO, do hereby waive,
quitclaim all our rights, interests and participation over
the said parcel of land in favor of EDY DE LOS REYES, of
legal age, (f)ilipino, married to VIRGINIA DE LOS REYES,
and resident of Hinigaran, Negros Occidental,
Philippines. . . .4 (Emphasis supplied)
The document was signed by all of Pido's heirs. Private
respondent Edy de los Reyes did not sign said
document.
It will be noted that at the time of Cosme Pido's death,
title to the property continued to be registered in the
name of the Vasquez spouses. Upon obtaining the
Declaration of Heirship with Waiver of Rights in his
favor, 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.
Thereafter, 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 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. In 1982, petitioner allegedly
complied with said obligation. In 1983, however,
petitioner refused to pay any further lease rentals on
the land, prompting private respondent to seek the
assistance of the then Ministry of Agrarian Reform
(MAR) in Hinigaran, Negros Occidental. The MAR invited
petitioner to a conference scheduled on 13 October
1983. Petitioner did not attend the conference but sent
his wife instead to the conference. During the meeting,
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.
On 28 April 1988, after the lapse of four (4) years,
private respondent filed a complaint for recovery of
possession and damages against petitioner, alleging in
the main that as his leasehold tenant, petitioner refused
and failed to pay the agreed annual rental of ten (10)
cavans of palay despite repeated demands.
During the trial before the court a quo, petitioner
reiterated his refusal to recognize private respondent's
ownership over the subject land. He averred that he
continues to recognize Cosme Pido as the owner of the
said land, and having been a registered tenant therein
since 1960, he never reneged on his rental obligations.
When Pido died, he continued to pay rentals to Pido's
widow. When the latter left for abroad, she instructed
him to stay in the landholding and to pay
the accumulated rentals upon her demand or return
from abroad.
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. 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, R.A. 3844, as amended, grants
him the right to redeem the same at a reasonable price.
Petitioner also bewailed private respondent's ejectment
action as a violation of his right to security of tenure
under P.D. 27.
On 20 August 1991, the lower court rendered a decision
in favor of private respondent, the dispositive part of
which reads:
WHEREFORE, premises considered, the Court renders
judgment in favor of the plaintiff, Edy de los Reyes, and
against the defendant, Teodoro Acap, ordering the
following, to wit:
1. Declaring forfeiture of defendant's preferred right to
issuance of a Certificate of Land Transfer under
Presidential Decree No. 27 and his farmholdings;
2. Ordering the defendant Teodoro Acap to deliver
possession of said farm to plaintiff, and;
3. Ordering the defendant to pay P5,000.00 as
attorney's fees, the sum of P1,000.00 as expenses of
litigation and the amount of P10,000.00 as actual
damages.5
In arriving at the above-mentioned judgment, the trial
court stated that the evidence had established that the
subject land was "sold" by the heirs of Cosme Pido to
private respondent. 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. However, when the latter died their
tenancy relations changed since ownership of said land
was passed on to his heirs who, by executing a Deed of
Sale, which defendant admitted in his affidavit, likewise
passed on their ownership of Lot 1130 to herein plaintiff
(private respondent). As owner hereof, plaintiff has the
right to demand payment of rental and the tenant is
obligated to pay rentals due from the time demand is
made. . . .6
xxx xxx xxx
Certainly, the sale  of the Pido family of Lot 1130 to
herein plaintiff does not of itself extinguish the
relationship. 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, assumes
the rights and obligations of the former landowner to
the tenant Teodoro Acap, herein defendant. 7
Aggrieved, petitioner appealed to the Court of Appeals,
imputing error to the lower court when it ruled that
private respondent acquired ownership of Lot No. 1130
and that he, as tenant, should pay rentals to private
respondent and that failing to pay the same from 1983
to 1987, his right to a certificate of land transfer under
P.D. 27 was deemed forfeited.
The Court of Appeals brushed aside petitioner's
argument that the Declaration of Heirship and Waiver
of Rights (Exhibit "D"), the document relied upon by
private respondent to prove his ownership to the lot,
was excluded by the lower court in its order dated 27
August 1990. 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. According to respondent court, however,
since the Declaration of Heirship and Waiver of Rights
appears to have been duly notarized, no further proof
of its due execution was necessary. Like the trial court,
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.
With respect to its non-registration, 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) already knew
of private respondent's claim over the said land but
which he thereafter denied, and that in 1982, he
(petitioner) actually paid rent to private respondent.
Otherwise stated, 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. Under these
circumstances, 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.
In the present petition, 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. 1130 through the
aforementioned Declaration of Heirship and Waiver of
Rights.
Hence, the issues to be resolved presently are the
following:
1. 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.
2. WHETHER OR NOT THE SAID DOCUMENT CAN BE
CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE
RESPONDENT OF THE LOT IN QUESTION.
Petitioner argues that the Regional Trial Court, in its
order dated 7 August 1990, explicitly excluded the
document marked as Exhibit "D" (Declaration of
Heirship, etc.) as private respondent's evidence because
it was not registered with the Registry of Deeds and was
not identified by anyone of the heirs of Cosme Pido. The
Court of Appeals, however, held the same to be
admissible, it being a notarized document, hence,
a  prima facie  proof of private respondents' ownership
of the lot to which it refers.
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. 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).
Private respondent defends the decision of respondent
Court of Appeals as in accord with the evidence and the
law. 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 trial court declared him nonetheless
owner of the subject lot based on other evidence
adduced during the trial, namely, the notice of adverse
claim (Exhibit "E") duly registered by him with the
Registry of Deeds, which contains the questioned
Declaration of Heirship and Waiver of Rights as an
integral part thereof.
We find the petition impressed with merit.
In the first place, an asserted right or claim to
ownership or a real right over a thing arising from a
juridical act, however justified, is not  per se sufficient to
give rise to ownership over the res. That right or title
must be completed by fulfilling certain conditions
imposed by law. Hence, ownership and real rights are
acquired only pursuant to a legal mode or process.
While title is the juridical justification, mode is the
actual process of acquisition or transfer of ownership
over a thing in question.8
Under Article 712 of the Civil Code, the modes of
acquiring ownership are generally classified into two (2)
classes, namely, the original mode (i.e., through
occupation, acquisitive prescription, law or intellectual
creation) and the derivative mode  (i.e., through
succession mortis causa  or tradition as a result of
certain contracts, such as sale, barter, donation,
assignment or mutuum).
In the case at bench, the trial court was obviously
confused as to the nature and effect of the Declaration
of Heirship and Waiver of Rights, equating the same
with a contract (deed) of sale. They are not the same.
In a Contract of Sale, one of the contracting parties
obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other party to pay
a price certain in money or its equivalent. 9
Upon the other hand, a declaration of heirship and some future date, and is no better than a notice of lis
waiver of rights operates as a public instrument when pendens which is a notice of a case already pending in
filed with the Registry of Deeds whereby the intestate court."15
heirs adjudicate and divide the estate left by the
It is to be noted that while the existence of said adverse
decedent among themselves as they see fit. It is in
claim was duly proven, there is no evidence whatsoever
effect an extrajudicial settlement between the heirs
that a deed of sale was executed between Cosme Pido's
under Rule 74 of the Rules of Court. 10
heirs and private respondent transferring the rights of
Hence, there is a marked difference between a sale of Pido's heirs to the land in favor of private respondent.
hereditary rights and a waiver  of hereditary rights. The Private respondent's right or interest therefore in the
first presumes the existence of a contract or deed of tenanted lot remains an adverse claim which cannot by
sale between the parties.11 The second is, technically itself be sufficient to cancel the OCT to the land and title
speaking, a mode of extinction of ownership where the same in private respondent's name.
there is an abdication or intentional relinquishment of a
Consequently, while the transaction between Pido's
known right with knowledge of its existence and
heirs and private respondent may be binding on both
intention to relinquish it, in favor of other persons who
parties, the right of petitioner as a registered tenant to
are co-heirs in the succession.12 Private respondent,
the land cannot be perfunctorily forfeited on a mere
being then a stranger to the succession of Cosme Pido,
allegation of private respondent's ownership without
cannot conclusively claim ownership over the subject
the corresponding proof thereof.
lot on the sole basis of the waiver document which
neither recites the elements of either a sale, 13 or a Petitioner had been a registered tenant in the subject
donation,14 or any other derivative mode of acquiring land since 1960 and religiously paid lease rentals
ownership. thereon. In his mind, he continued to be the registered
tenant of Cosme Pido and his family (after Pido's death),
Quite surprisingly, both the trial court and public
even if in 1982, private respondent allegedly informed
respondent Court of Appeals concluded that a "sale"
petitioner that he had become the new owner of the
transpired between Cosme Pido's heirs and private
land.
respondent and that petitioner acquired actual
knowledge of said sale when he was summoned by the Under the circumstances, petitioner may have, in good
Ministry of Agrarian Reform to discuss private faith, assumed such statement of private respondent to
respondent's claim over the lot in question. This be true and may have in fact delivered 10 cavans of
conclusion has no basis both in fact and in law. palay as annual rental for 1982 to private respondent.
But in 1983, it is clear that petitioner had misgivings
On record, Exhibit "D", which is the "Declaration of
over private respondent's claim of ownership over the
Heirship and Waiver of Rights" was excluded by the trial
said land because in the October 1983 MAR conference,
court in its order dated 27 August 1990 because the
his wife Laurenciana categorically denied all of private
document was neither registered with the Registry of
respondent's allegations. In fact, petitioner even
Deeds nor identified by the heirs of Cosme Pido. There
secured a certificate from the MAR dated 9 May 1988 to
is no showing that private respondent had the same
the effect that he continued to be the registered tenant
document attached to or made part of the record. What
of Cosme Pido and not of private respondent. The
the trial court admitted was Annex "E", a notice of
reason is that private respondent never registered the
adverse claim filed with the Registry of Deeds which
Declaration of Heirship with Waiver of Rights with the
contained the Declaration of Heirship with Waiver of
Registry of Deeds or with the MAR. Instead, he (private
rights and was annotated at the back of the Original
respondent) sought to do indirectly what could not be
Certificate of Title to the land in question.
done directly, i.e., file a notice of adverse claim on the
A notice of adverse claim, by its nature, does not said lot to establish ownership thereover.
however prove private respondent's ownership over
It stands to reason, therefore, to hold that there was
the tenanted lot. "A notice of adverse claim is nothing
no unjustified or deliberate refusal  by petitioner to pay
but a notice of a claim adverse to the registered owner,
the lease rentals or amortizations to the
the validity of which is yet to be established in court at
landowner/agricultural lessor which, in this case,
private respondent failed to establish in his favor by
clear and convincing evidence.16

Consequently, the sanction of forfeiture of his preferred

right to be issued a Certificate of Land Transfer under
P.D. 27 and to the possession of his farmholdings should
not be applied against petitioners, since private
respondent has not established a cause of action for
recovery of possession against petitioner.

WHEREFORE, premises considered, 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, Negros Occidental dated 20
August 1991 is hereby SET ASIDE. 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, 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.

SO ORDERED.

G.R. No. L-116650 May 23, 1995

TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.
DAVIDE, JR., J.:
At the heart of the present controversy is the document
marked Exhibit "A" 1 for the private respondent, which
was signed by a sales representative of Toyota Shaw,
Inc. named Popong Bernardo. The document reads as
follows:
4 June 1989
AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
SHAW, INC.
1. all necessary documents will be submitted to TOYOTA
SHAW, INC. (POPONG BERNARDO) a week after, upon
arrival of Mr. Sosa from the Province (Marinduque)
where the unit will be used on the 19th of June.
2. the downpayment of P100,000.00 will be paid by Mr.
Sosa on June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-
up [sic] and released by TOYOTA SHAW, INC. on the
17th of June at 10 a.m.
Very truly yours,
(Sgd.) POPONG BERNARDO.
Was this document, executed and signed by the
petitioner's sales representative, a perfected contract of
sale, binding upon the petitioner, breach of which
would entitle the private respondent to damages and
attorney's fees? The trial court and the Court of Appeals
took the affirmative view. The petitioner disagrees.
Hence, this petition for review on certiorari.
The antecedents as disclosed in the decisions of both
the trial court and the Court of Appeals, as well as in the
pleadings of petitioner Toyota Shaw, Inc.
(hereinafter Toyota) and respondent Luna L. Sosa
(hereinafter Sosa) are as follows. Sometime in June of
1989, Luna L. Sosa wanted to purchase a Toyota Lite
Ace. It was then a seller's market and Sosa had difficulty
finding a dealer with an available unit for sale. But upon
contacting Toyota Shaw, Inc., he was told that there
was an available unit. So on 14 June 1989, Sosa and his
son, Gilbert, went to the Toyota office at Shaw
Boulevard, Pasig, Metro Manila. There they met Popong
Bernardo, a sales representative of Toyota.
Sosa emphasized to Bernardo that he needed the Lite
Ace not later than 17 June 1989 because he, his family,
and a balikbayan guest would use it on 18 June 1989 to
go to Marinduque, his home province, where he would
celebrate his birthday on the 19th of June. He added
that if he does not arrive in his hometown with the new
car, he would become a "laughing stock." Bernardo
assured Sosa that a unit would be ready for pick up at
10:00 a.m. on 17 June 1989. Bernardo then signed the
aforequoted "Agreements Between Mr. Sosa & Popong
Bernardo of Toyota Shaw, Inc." It was also agreed upon
by the parties that the balance of the purchase price
would be paid by credit financing through B.A. Finance,
and for this Gilbert, on behalf of his father, signed the
documents of Toyota and B.A. Finance pertaining to the
application for financing.
The next day, 15 June 1989, Sosa and Gilbert went to
Toyota to deliver the downpayment of P100,000.00.
They met Bernardo who then accomplished a printed
Vehicle Sales Proposal (VSP) No. 928,2 on which Gilbert
signed under the subheading CONFORME. This
document shows that the customer's name is "MR.
LUNA SOSA" with home address at No. 2316 Guijo
Street, United Parañaque II; that the model series of the
vehicle is a "Lite Ace 1500" described as "4 Dr minibus";
that payment is by "installment," to be financed by
"B.A.," 3 with the initial cash outlay of P100,000.00
broken down as follows:
a) downpayment — P 53,148.00
b) insurance — P 13,970.00
c) BLT registration fee — P 1,067.00
CHMO fee — P 2,715.00
service fee — P 500.00
accessories — P 29,000.00
 
and that the "BALANCE TO BE FINANCED" is
"P274,137.00." The spaces provided for "Delivery
Terms" were not filled-up. It also contains the following
pertinent provisions:
CONDITIONS OF SALES
1. This sale is subject to availability of unit.
2. Stated Price is subject to change without prior notice,
Price prevailing and in effect at time of selling will apply.
...
Rodrigo Quirante, the Sales Supervisor of Bernardo,
checked and approved the VSP.
On 17 June 1989, at around 9:30 a.m., Bernardo called
Gilbert to inform him that the vehicle would not be
ready for pick up at 10:00 a.m. as previously agreed
upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa
and Gilbert met Bernardo at the latter's office.
According to Sosa, Bernardo informed them that the
Lite Ace was being readied for delivery. After waiting for
about an hour, Bernardo told them that the car could
not be delivered because "nasulot ang unit ng ibang
malakas."
Toyota contends, however, that the Lite Ace was not
delivered to Sosa because of the disapproval by B.A.
Finance of the credit financing application of Sosa. It
further alleged that a particular unit had already been
reserved and earmarked for Sosa but could not be
released due to the uncertainty of payment of the
balance of the purchase price. Toyota then gave Sosa
the option to purchase the unit by paying the full
purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would not be
delivered to him, Sosa asked that his downpayment be
refunded. Toyota did so on the very same day by issuing
a Far East Bank check for the full amount of
P100,000.00, 4 the receipt of which was shown by a
check voucher of Toyota,5 which Sosa signed with the
reservation, "without prejudice to our future claims for
damages."
Thereafter, Sosa sent two letters to Toyota. In the first
letter, dated 27 June 1989 and signed by him, he
demanded the refund, within five days from receipt, of
the downpayment of P100,000.00 plus interest from
the time he paid it and the payment of damages with a
warning that in case of Toyota's failure to do so he
would be constrained to take legal action. 6 The second,
dated 4 November 1989 and signed by M. O. Caballes,
Sosa's counsel, demanded one million pesos
representing interest and damages, again, with a
warning that legal action would be taken if payment
was not made within three days.7 Toyota's counsel
answered through a letter dated 27 November
1989 8 refusing to accede to the demands of Sosa. But
even before this answer was made and received by
Sosa, the latter filed on 20 November 1989 with Branch
38 of the Regional Trial Court (RTC) of Marinduque a
complaint against Toyota for damages under Articles 19
and 21 of the Civil Code in the total amount of
P1,230,000.00.9 He alleges, inter alia,  that:
9. As a result of defendant's failure and/or refusal to
deliver the vehicle to plaintiff, plaintiff suffered
embarrassment, humiliation, ridicule, mental anguish
and sleepless nights because: (i) he and his family were
constrained to take the public transportation from
Manila to Lucena City on their way to Marinduque; (ii)
his balikbayan-guest canceled his scheduled first visit to
Marinduque in order to avoid the inconvenience of
taking public transportation; and (iii) his relatives,
friends, neighbors and other provincemates,
continuously irked him about "his Brand-New Toyota
Lite Ace — that never was." Under the circumstances,
defendant should be made liable to the plaintiff for
moral damages in the amount of One Million Pesos
(P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no
sale was entered into between it and Sosa, that
Bernardo had no authority to sign Exhibit "A" for and in
its behalf, and that Bernardo signed Exhibit "A" in his
personal capacity. As special and affirmative defenses, it
alleged that: the VSP did not state date of delivery; Sosa
had not completed the documents required by the
financing company, and as a matter of policy, the
vehicle could not and would not be released prior to full
compliance with financing requirements, submission of
all documents, and execution of the sales
agreement/invoice; the P100,000.00 was returned to
and received by Sosa; the venue was improperly laid;
and Sosa did not have a sufficient cause of action
against it. It also interposed compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial
session, 11 the trial court rendered on 18 February 1992
a decision in favor of Sosa. 12 It ruled that Exhibit "A,"
the "AGREEMENTS BETWEEN MR. SOSA AND POPONG
BERNARDO," was a valid perfected contract of sale
between Sosa and Toyota which bound Toyota to
deliver the vehicle to Sosa, and further agreed with Sosa
that Toyota acted in bad faith in selling to another the
unit already reserved for him.
As to Toyota's contention that Bernardo had no
authority to bind it through Exhibit "A," the trial court
held that the extent of Bernardo's authority "was not
made known to plaintiff," for as testified to by Quirante,
"they do not volunteer any information as to the
company's sales policy and guidelines because they are
internal matters." 13 Moreover, "[f]rom the beginning of
the transaction up to its consummation when the
downpayment was made by the plaintiff, the
defendants had made known to the plaintiff the
impression that Popong Bernardo is an authorized sales
executive as it permitted the latter to do acts within the
scope of an apparent authority holding him out to the
public as possessing power to do these
acts." 14 Bernardo then "was an agent of the defendant
Toyota Shaw, Inc. and hence bound the defendants." 15
The court further declared that "Luna Sosa proved his
social standing in the community and suffered
besmirched reputation, wounded feelings and sleepless
nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment
is hereby rendered in favor of the plaintiff and against
the defendant:
1. ordering the defendant to pay to the plaintiff the sum
of P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the sum of
P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00
attorney's fees plus P2,000.00 lawyer's transportation
fare per trip in attending to the hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of
P2,000.00 transportation fare per trip of the plaintiff in
attending the hearing of this case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota
appealed to the Court of Appeals. The case was
docketed as CA-G.R. CV No. 40043. In its decision
promulgated on 29 July 1994,17 the Court of Appeals
affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition
and raises the core issue stated at the beginning of
the  ponencia and also the following related issues: (a)
whether or not the standard VSP was the true and
documented understanding of the parties which would
have led to the ultimate contract of sale, (b) whether or
not Sosa has any legal and demandable right to the
delivery of the vehicle despite the non-payment of the
consideration and the non-approval of his credit
application by B.A. Finance, (c) whether or not Toyota
acted in good faith when it did not release the vehicle
to Sosa, and (d) whether or not Toyota may be held
liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead
to the conclusion that Exhibit "A" is a  perfected
contract of sale.
Article 1458 of the Civil Code defines a contract of sale
as follows:
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed
perfected:
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.
What is clear from Exhibit "A" is not what the trial court
and the Court of Appeals appear to see. It is not a
contract of sale. No obligation on the part of Toyota to
transfer ownership of a determinate thing to Sosa and
no correlative obligation on the part of the latter to pay
therefor a price certain appears therein. The provision
on the downpayment of P100,000.00 made no specific
reference to a sale of a vehicle. If it was intended for a
contract of sale, it could only refer to a sale on
installment basis, as the VSP executed the following day
confirmed. But nothing was mentioned about the full
purchase price and the manner the installments were to
be paid.
This Court had already ruled that a definite agreement
on the manner of payment of the price is an essential
element in the formation of a binding and enforceable
contract of sale. 18 This is so because the agreement as
to the manner of payment goes into the price such that
a disagreement on the manner of payment is
tantamount to a failure to agree on the price.
Definiteness as to the price is an essential element of a
binding agreement to sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting
of minds between Toyota and Sosa. For one thing, Sosa
did not even sign it. For another, Sosa was well aware
from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG
BERNARDO OF TOYOTA SHAW, INC.
that he was not dealing with Toyota but with Popong
Bernardo and that the latter did not misrepresent that
he had the authority to sell any Toyota vehicle. He knew
that Bernardo was only a sales representative  of Toyota
and hence a mere agent of the latter. It was incumbent
upon Sosa to act with ordinary prudence and
reasonable diligence to know the extent of Bernardo's
authority as an
agent20 in respect of contracts to sell Toyota's vehicles.
A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the
agent.21
At the most, Exhibit "A" may be considered as part of
the initial phase of the generation or negotiation stage
of a contract of sale. There are three stages in the
contract of sale, namely:
(a) preparation, conception, or generation, which is the
period of negotiation and bargaining, ending at the
moment of agreement of the parties;
(b) perfection or birth of the contract, which is the
moment when the parties come to agree on the terms
of the contract; and
(c) consummation or death, which is the fulfillment or
performance of the terms agreed upon in the
contract.22
The second phase of the generation or negotiation
stage in this case was the execution of the VSP. It must
be emphasized that thereunder, the downpayment of
the purchase price was P53,148.00 while the balance to
be paid on installment should be financed by B.A.
Finance Corporation. It is, of course, to be assumed that
B.A. Finance Corp. was acceptable to Toyota, otherwise
it should not have mentioned B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A.
No. 5980, as amended by P.D. No. 1454 and P.D. No.
1793, as "corporations or partnerships, except those
regulated by the Central Bank of the Philippines, the
Insurance Commission and the Cooperatives
Administration Office, which are primarily organized for
the purpose of extending credit facilities to consumers
and to industrial, commercial, or agricultural
enterprises, either by discounting or factoring
commercial papers or accounts receivables, or by
buying and selling contracts, leases, chattel mortgages,
or other evidence of indebtedness, or by leasing of
motor vehicles, heavy equipment and industrial
machinery, business and office machines and
equipment, appliances and other movable property." 23
Accordingly, in a sale on installment basis which is
financed by a financing company, three parties are thus
involved: the buyer who executes a note or notes for
the unpaid balance of the price of the thing purchased
on installment, the seller who assigns the notes or
discounts them with a financing company, and the
financing company which is subrogated in the place of
the seller, as the creditor of the installment
buyer. 24 Since B.A. Finance did not approve Sosa's
application, there was then no meeting of minds on the
sale on installment basis.
We are inclined to believe Toyota's version that B.A.
Finance disapproved Sosa's application for which reason
it suggested to Sosa that he pay the full purchase price.
When the latter refused, Toyota cancelled the VSP and
returned to him his P100,000.00. Sosa's version that the
VSP was cancelled because, according to Bernardo, the
vehicle was delivered to another who was "mas
malakas" does not inspire belief and was obviously a
delayed afterthought. It is claimed that Bernardo said,
"Pasensiya kayo, nasulot ang unit ng ibang malakas,"
while the Sosas had already been waiting for an hour
for the delivery of the vehicle in the afternoon of 17
June 1989. However, in paragraph 7 of his complaint,
Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning,
defendant's sales representative, Mr. Popong Bernardo,
called plaintiff's house and informed the plaintiff's son
that the vehicle will not be ready for pick-up at 10:00
a.m. of June 17, 1989 but at 2:00 p.m. of that day
instead. Plaintiff and his son went to defendant's office CV NO. 40043 as well as that of Branch 38 of the
on June 17 1989 at 2:00 p.m. in order to pick-up the Regional Trial Court of Marinduque in Civil Case No. 89-
vehicle but the defendant for reasons known only to its 14 are REVERSED and SET ASIDE and the complaint in
representatives, refused and/or failed to release the Civil Case No. 89-14 is DISMISSED. The counterclaim
vehicle to the plaintiff. Plaintiff demanded for an therein is likewise DISMISSED.
explanation, but nothing was given; . . . (Emphasis
No pronouncement as to costs.
supplied). 25
SO ORDERED.
The VSP was a mere  proposal  which was aborted in lieu
of subsequent events. It follows that the VSP created no
demandable right in favor of Sosa for the delivery of the
vehicle to him, and its non-delivery did not cause any
legally indemnifiable injury.

The award then of moral and exemplary damages and

attorney's fees and costs of suit is without legal basis.
Besides, the only ground upon which Sosa claimed
moral damages is that since it was known to his friends,
townmates, and relatives that he was buying a Toyota
Lite Ace which they expected to see on his birthday, he
suffered humiliation, shame, and sleepless nights when
the van was not delivered. The van became the subject
matter of talks during his celebration that he may not
have paid for it, and this created an impression against
his business standing and reputation. At the bottom of
this claim is nothing but misplaced pride and ego. He
should not have announced his plan to buy a Toyota
Lite Ace knowing that he might not be able to pay the
full purchase price. It was he who brought
embarrassment upon himself by bragging about a thing
which he did not own yet.

Since Sosa is not entitled to moral damages and there

being no award for temperate, liquidated, or
compensatory damages, he is likewise not entitled to
exemplary damages. Under Article 2229 of the Civil
Code, exemplary or corrective damages are imposed by
way of example or correction for the public good, in
addition to moral, temperate, liquidated, or
compensatory damages.

Also, it is settled that for attorney's fees to be granted,

the court must explicitly state in the body of the
decision, and not only in the dispositive portion thereof,
the legal reason for the award of attorney's fees. 26 No
such explicit determination thereon was made in the
body of the decision of the trial court. No reason thus G.R. No. 143513            November 14, 2001
exists for such an award.
POLYTECHNIC UNIVERSITY OF THE
WHEREFORE, the instant petition is GRANTED. The PHILIPPINES, petitioner,
challenged decision of the Court of Appeals in CA-G.R. vs.
COURT OF APPEALS and FIRESTONE CERAMICS,
INC., respondents.
x---------------------------------------------------------x
G.R. No. 143590                        November 14, 2001
NATIONAL DEVELOPMENT CORPORATION, petitioner,
vs.
FIRESTONE CERAMICS, INC., respondents.
BELLOSILLO, J.:
A litigation is not simply a contest of litigants before the
bar of public opinion; more than that, it is a pursuit of
justice through legal and equitable means. To prevent
the search for justice from evolving into a competition
for public approval, society invests the judiciary with
complete independence thereby insulating it from
demands expressed through any medium, the press not
excluded. Thus, if the court would merely reflect, and
worse, succumb to the great pressures of the day, the
end result, it is feared, would be a travesty of justice.
In the early sixties, petitioner National Development
Corporation (NDC), a government owned and controlled
corporation created under CA 182 as amended by CA
311 and PD No. 668, had in its disposal a ten (10)-
hectare property located along Pureza St., Sta. Mesa,
Manila. The estate was popularly known as the NDC
compound and covered by Transfer Certificates of Title
Nos. 92885, 110301 and 145470.
Sometime in May 1965 private respondent Firestone
Ceramics Inc. (FIRESTONE) manifested its desire to lease
a portion of the property for its ceramic manufacturing
business. On 24 August 1965 NDC and FIRESTONE
entered into a contract of lease denominated as
Contract No. C-30-65 covering a portion of the property
measured at 2.90118 hectares for use as a
manufacturing plant for a term of ten (10) years,
renewable for another ten (10) years under the same
terms and conditions.1 In consequence of the
agreement, FIRESTONE constructed on the leased
premises several warehouses and other improvements
needed for the fabrication of ceramic products.
Three and a half (3-1/2) years later, or on 8 January
1969, FIRESTONE entered into a second contract of
lease with NDC over the latter's four (4)-unit pre-
fabricated reparation steel warehouse stored in Daliao,
Davao. FIRESTONE agreed to ship the warehouse to
Manila for eventual assembly within the NDC
compound. The second contract, denominated as
Contract No. C-26-68, was for similar use as a ceramic
manufacturing plant and was agreed expressly to be
"co-extensive with the lease of LESSEE with LESSOR on
the 2.60 hectare-lot."2
On 31 July 1974 the parties signed a similar contract
concerning a six (6)-unit pre-fabricated steel warehouse
which, as agreed upon by the parties, would expire on 2
December 1978.3 Prior to the expiration of the
aforementioned contract, FIRESTONE wrote NDC
requesting for an extension of their lease agreement.
Consequently on 29 November 1978 the Board of
Directors of NDC adopted Resolution No. 11-78-117
extending the term of the lease, subject to several
conditions among which was that in the event NDC
"with the approval of higher authorities, decide to
dispose and sell these properties including the lot,
priority should be given to the LESSEE"4 (underscoring
supplied). On 22 December 1978, in pursuance of the
resolution, the parties entered into a new agreement
for a ten-year lease of the property, renewable for
another ten (10) years, expressly granting FIRESTONE
the first option to purchase the leased premises in the
event that it decided "to dispose and sell these
properties including the lot . . . . "5
The contracts of lease conspicuously contain an
identically worded provision requiring FIRESTONE to
construct buildings and other improvements within the
leased premises worth several hundred thousands of
pesos.6
The parties' lessor-lessee relationship went smoothly
until early 1988 when FIRESTONE, cognizant of the
impending expiration of their lease agreement with
NDC, informed the latter through several letters and
telephone calls that it was renewing its lease over the
property. While its letter of 17 March 1988 was
answered by Antonio A. Henson, General Manager of
NDC, who promised immediate action on the matter,
the rest of its communications remained
unacknowledged.7 FIRESTONE's predicament worsened
when rumors of NDC's supposed plans to dispose of the
subject property in favor of petitioner Polytechnic
University of the Philippines (PUP) came to its
knowledge. Forthwith, FIRESTONE served notice on NDC
conveying its desire to purchase the property in the
exercise of its contractual right of first refusal.
Apprehensive that its interest in the property would be
disregarded, FIRESTONE instituted an action for specific
performance to compel NDC to sell the leased property
in its favor. FIRESTONE averred that it was pre-empting
the impending sale of the NDC compound to petitioner
PUP in violation of its leasehold rights over the 2.60-
hectare8 property and the warehouses thereon which
would expire in 1999. FIRESTONE likewise prayed for
the issuance of a writ of preliminary injunction to enjoin
NDC from disposing of the property pending the
settlement of the controversy.9
In support of its complaint, FIRESTONE adduced in
evidence a letter of Antonio A. Henson dated 15 July
1988 addressed to Mr. Jake C. Lagonera, Director and
Special Assistant to Executive Secretary Catalino
Macaraeg, reviewing a proposed memorandum order
submitted to then President Corazon C. Aquino
transferring the whole NDC compound, including the
leased property, in favor of petitioner PUP. Attached to
the letter was a draft of the proposed memorandum
order as well as a summary of existing leases on the
subject property. The survey listed FIRESTONE as lessee
of a portion of the property, placed at 29,000 10 square
meters, whose contract with NDC was set to expire on
31 December 198911 renewable for another ten (10)
years at the option of the lessee. The report expressly
recognized FIRESTONE's right of first refusal to purchase
the leased property "should the lessor decide to sell the
same."12
Meanwhile, on 21 February 1989 PUP moved to
intervene and asserted its interest in the subject
property, arguing that a "purchaser pendente lite of
property which is subject of a litigation is entitled to
intervene in the proceedings."13 PUP referred
to Memorandum Order No. 214 issued by then
President Aquino ordering the transfer of the whole
NDC compound to the National Government, which in
turn would convey the aforementioned property in
favor of PUP at acquisition cost. The issuance was
supposedly made in recognition of PUP's status as the
"Poor Man's University" as well as its serious need to
extend its campus in order to accommodate the
growing student population. The order of conveyance of
the 10.31-hectare property would automatically result
in the cancellation of NDC's total obligation in favor of
the National Government in the amount
of P57,193,201.64.
Convinced that PUP was a necessary party to the
controversy that ought to be joined as party defendant
in order to avoid multiplicity of suits, the trial court
granted PUP's motion to intervene. FIRESTONE moved
for reconsideration but was denied. On certiorari, the
Court of Appeals affirmed the order of the trial court.
FIRESTONE came to us on review but in a Resolution
dated 11 July 1990 we upheld PUP's inclusion as party-
defendant in the present controversy.
Following the denial of its petition, FIRESTONE amended
its complaint to include PUP and Executive Secretary
Catalino Macaraeg, Jr., as party-defendants, and sought
the annulment of Memorandum Order No. 214.
FIRESTONE alleged that although Memorandum Order
No. 214 was issued "subject to such liens/leases existing
[on the subject property]," PUP disregarded and
violated its existing lease by increasing the rental rate
at P200,000.00 a month while demanding that it
vacated the premises immediately.14 FIRESTONE prayed
that in the event Memorandum Order No. 214 was not
declared unconstitutional, the property should be sold
in its favor at the price for which it was sold to PUP
- P554.74 per square meter or for a total purchase price
of P14,423,240.00.15
Petitioner PUP, in its answer to the amended complaint,
argued in essence that the lease contract covering the
property had expired long before the institution of the
complaint, and that further, the right of first refusal
invoked by FIRESTONE applied solely to the six-unit pre-
fabricated warehouse and not the lot upon which it
stood.
After trial on the merits, judgment was rendered
declaring the contracts of lease executed between
FIRESTONE and NDC covering the 2.60-hectare property
and the warehouses constructed thereon valid and
existing until 2 June 1999. PUP was ordered and
directed to sell to FIRESTONE the "2.6 hectare leased
premises or as may be determined by actual verification
and survey of the actual size of the leased properties
where plaintiff's fire brick factory is located"
at P1,500.00 per square meter considering that, as
admitted by FIRESTONE, such was the prevailing market
price thereof.
The trial court ruled that the contracts of lease
executed between FIRESTONE and NDC were
interrelated and inseparable because "each of them
forms part of the integral system of plaintiff's brick
manufacturing plant x x x if one of the leased premises
will be taken apart or otherwise detached from the two
others, the purpose of the lease as well as plaintiff's
business operations would be rendered useless and
inoperative."16 It thus decreed that FIRESTONE could
exercise its option to purchase the property until 2 June
1999 inasmuch as the 22 December 1978
contract embodied a covenant to renew the lease for
another ten (10) years at the option of the lessee as well
as an agreement giving the lessee the right of first
refusal.
The trial court also sustained the constitutionality
of Memorandum Order No. 214 which was not per
se  hostile to FIRESTONE's property rights, but deplored
as prejudicial thereto the "very manner with which
defendants NDC and PUP interpreted and applied the
same, ignoring in the process that plaintiff has existing
contracts of lease protectable by express provisions in
the Memorandum No. 214 itself." 17 It further explained
that the questioned memorandum was issued "subject
to such liens/leases existing thereon" 18 and petitioner
PUP was under express instructions "to enter, occupy
and take possession of the transferred property subject
to such leases or liens and encumbrances that may be
existing thereon"19  (italics supplied).
Petitioners PUP, NDC and the Executive Secretary
separately filed their Notice of Appeal, but a few days
thereafter, or on 3 September 1996, perhaps realizing
the groundlessness and the futility of it all, the
Executive Secretary withdrew his appeal. 20
Subsequently, the Court of Appeals affirmed the
decision of the trial court ordering the sale of the
property in favor of FIRESTONE but deleted the award
of attorney's fees in the amount of Three Hundred
Thousand Pesos (P300,000.00). Accordingly, FIRESTONE
was given a grace period of six (6) months from finality
of the court's judgment within which to purchase the
property in questioned in the exercise of its right of first
refusal. The Court of Appeals observed that as there
was a sale of the subject property, NDC could not
excuse itself from its obligation TO OFFER THE
PROPERTY FOR SALE FIRST TO FIRESTONE BEFORE IT
COULD TO OTHER PARTIES. The Court of Appeals held:
"NDC cannot look to Memorandum Order No. 214 to
excuse or shield it from its contractual obligations to
FIRESTONE. There is nothing therein that allows NDC to
disavow or repudiate the solemn engagement that it
freely and voluntarily undertook, or agreed to
undertake."21
PUP moved for reconsideration asserting that in
ordering the sale of the property in favor of FIRESTONE
the courts a quo  unfairly created a contract to sell
between the parties. It argued that the "court cannot
substitute or decree its mind or consent for that of the
parties in determining whether or not a contract (has
been) perfected between PUP and NDC."22 PUP further
contended that since "a real property located in Sta.
Mesa can readily command a sum of P10,000.00 per
square (meter)," the lower court gravely erred in
ordering the sale of the property at only P1,500.00 per
square meter. PUP also advanced the theory that the
enactment of Memorandum Order No. 214 amounted
to a withdrawal of the option to purchase the property
granted to FIRESTONE. NDC, for its part, vigorously
contended that the contracts of lease executed
between the parties had expired without being
renewed by FIRESTONE; consequently, FIRESTONE was
no longer entitled to any preferential right in the sale or
disposition of the leased property.
We do not see it the way PUP and NDC did. It is
elementary that a party to a contract cannot unilaterally
withdraw a right of first refusal that stands upon
valuable consideration. That principle was clearly
upheld by the Court of Appeals when it denied on 6
June 2000 the twin motions for reconsideration filed by
PUP and NDC on the ground that the appellants failed
to advance new arguments substantial enough to
warrant a reversal of the Decision sought to be
reconsidered.23 On 28 June 2000 PUP filed an urgent
motion for an additional period of fifteen (15) days from
29 June 2000 or until 14 July 2000 within which to file
a Petition for Review on Certiorari of the Decision of the
Court of Appeals.
On the last day of the extended period PUP filed
its Petition for Review on Certiorari assailing
the Decision of the Court of Appeals of 6 December
1999 as well as the Resolution of 6 June 2000 denying
reconsideration thereof. PUP raised two issues: (a)
whether the courts a quo erred when they
"conjectured" that the transfer of the leased property
from NDC to PUP amounted to a sale; and, (b) whether
FIRESTONE can rightfully invoke its right of first refusal.
Petitioner posited that if we were to place
our imprimatur on the decisions of the courts a quo,
"public welfare or specifically the constitutional priority
accorded to education" would greatly be prejudiced. 24
Paradoxically, our paramount interest in education does
not license us, or any party for that matter, to destroy
the sanctity of binding obligations. Education may be
prioritized for legislative or budgetary purposes, but we
doubt if such importance can be used to confiscate
private property such as FIRESTONE's right of first
refusal.
On 17 July 2000 we denied PUP's motion for extension
of fifteen (15) days within which to appeal inasmuch as
the aforesaid pleading lacked an affidavit of service of
copies thereof on the Court of Appeals and the adverse
party, as well as written explanation for not filing and
serving the pleading personally.25
Accordingly, on 26 July 2000 we issued
a Resolution dismissing PUP's Petition for Review for
having been filed out of time. PUP moved for
reconsideration imploring a resolution or decision on
the merits of its petition. Strangely, about the same
time, several articles came out in the newspapers
assailing the denial of the petition. The daily papers
reported that we unreasonably dismissed PUP's petition
on technical grounds, affirming in the process the
decision of the trial court to sell the disputed property
to the prejudice of the government in the amount
of P1,000,000,000.00.26 Counsel for petitioner PUP,
alleged that the trial court and the Court of Appeals
"have decided a question of substance in a way
definitely not in accord with law or jurisprudence." 27
At the outset, let it be noted that the amount
of P1,000,000,000.00 as reported in the papers was way
too exaggerated, if not fantastic. We stress that NDC
itself sold the whole 10.31-hectare property to PUP at
only P57,193,201.64 which represents NDC's obligation
to the national government that was, in exchange,
written off. The price offered per square meter of the
property was pegged at P554.74. FIRESTONE's leased
premises would therefore be worth
only P14,423,240.00. From any angle, this amount is
certainly far below the ballyhooed price
of P1,000,000,000.00.
On 4 October 2000 we granted PUP's Motion for
Reconsideration to give it a chance to ventilate its right,
if any it still had in the leased premises, thereby paving
the way for a reinstatement of its Petition for
Review.28 In its appeal, PUP took to task the courts a
quo for supposedly "substituting or decreeing its mind
or consent for that of the parties (referring to NDC and
PUP) in determining whether or not a contract of sale
was perfected." PUP also argued that inasmuch as "it is
the parties alone whose minds must meet in reference
to the subject matter and cause," it concluded that it
was error for the lower courts to have decreed the
existence of a sale of the NDC compound thus allowing
FIRESTONE to exercise its right of first refusal.
On the other hand, NDC separately filed its own Petition
for Review and advanced arguments which, in fine,
centered on whether or not the transaction between
petitioners NDC and PUP amounted to a sale
considering that "ownership of the property remained
with the government."29 Petitioner NDC introduced the
novel proposition that if the parties involved are both
government entities the transaction cannot be legally
called a sale.
In due course both petitions were consolidated. 30
We believe that the courts a quo did not hypothesize,
much less conjure, the sale of the disputed property by
NDC in favor of petitioner PUP. Aside from the fact that
the intention of NDC and PUP to enter into a contract of
sale was clearly expressed in the Memorandum Order
No. 214,31 a close perusal of the circumstances of this
case strengthens the theory that the conveyance of the
property from NDC to PUP was one of absolute sale, for
a valuable consideration, and not a mere paper transfer
as argued by petitioners.
A contract of sale, as defined in the Civil Code, is a
contract where one of the parties obligates himself to
transfer the ownership of and to deliver a determinate
thing to the other or others who shall pay therefore a
sum certain in money or its equivalent. 32 It is therefore a
general requisite for the existence of a valid and
enforceable contract of sale that it be mutually
obligatory, i.e., there should be a concurrence of the
promise of the vendor to sell a determinate thing and
the promise of the vendee to receive and pay for the
property so delivered and transferred. The Civil Code
provision is, in effect, a "catch-all" provision which
effectively brings within its grasp a whole gamut of
transfers whereby ownership of a thing is ceded for a
consideration.
Contrary to what petitioners PUP and NDC propose,
there is not just one party involved in the questioned
transaction. Petitioners NDC and PUP have their
respective charters and therefore each possesses a
separate and distinct individual personality. 33 The
inherent weakness of NDC's proposition that there was
no sale as it was only the government which was
involved in the transaction thus reveals itself. Tersely
put, it is not necessary to write an extended dissertation
on government owned and controlled corporations and
their legal personalities. Beyond cavil, a government
owned and controlled corporation has a personality of
its own, distinct and separate from that of the
government.34 The intervention in the transaction of the
Office of the President through the Executive Secretary
did not change the independent existence of these
entities. The involvement of the Office of the President
was limited to brokering the consequent relationship
between NDC and PUP. But the withdrawal of the
appeal by the Executive Secretary is considered
significant as he knew, after a review of the records,
that the transaction was subject to existing liens and
encumbrances, particularly the priority to purchase the
leased premises in favor of FIRESTONE.
True that there may be instances when a particular
deed does not disclose the real intentions of the parties,
but their action may nevertheless indicate that a
binding obligation has been undertaken. Since the
conduct of the parties to a contract may be sufficient to
establish the existence of an agreement and the terms
thereof, it becomes necessary for the courts to examine
the contemporaneous behavior of the parties in
establishing the existence of their contract.
The preponderance of evidence shows that NDC sold to
PUP the whole NDC compound, including the leased
premises, without the knowledge much less consent of
private respondent FIRESTONE which had a valid and
existing right of first refusal.
All three (3) essential elements of a valid sale, without
which there can be no sale, were attendant in the
"disposition" and "transfer" of the property from NDC
to PUP - consent of the parties, determinate subject
matter,  and  consideration therefor.
Consent to the sale is obvious from the prefatory
clauses of Memorandum Order No. 214 which explicitly
states the acquiescence of the parties to the sale of the
property -
WHEREAS, PUP has expressed its willingness to acquire
said NDC properties and NDC has expressed its
willingness to sell the properties to PUP (underscoring
supplied).35
Furthermore, the cancellation of NDC's liabilities in
favor of the National Government in the amount
of P57,193,201.64 constituted the "consideration" for
the sale. As correctly observed by the Court of Appeals-
The defendants-appellants' interpretation that there
was a mere transfer, and not a sale, apart from being
specious sophistry and a mere play of words, is too
strained and hairsplitting. For it is axiomatic that every
sale imposes upon the vendor the obligation to transfer
ownership as an essential element of the contract.
Transfer of title or an agreement to transfer title for a
price paid, or promised to be paid, is the very essence
of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid &
Oberly, Inc., v. RJL Martinez Fishing Corp., 166 SCRA
493). At whatever legal angle we view it, therefore, the
inescapable fact remains that all the requisites of a valid
sale were attendant in the transaction between co-
defendants-appellants NDC and PUP concerning the
realities subject of the present suit.36
What is more, the conduct of petitioner PUP
immediately after the transaction is in itself an
admission that there was a sale of the NDC compound
in its favor. Thus, after the issuance of Memorandum
Order No. 214 petitioner PUP asserted its ownership
over the property by posting notices within the
compound advising residents and occupants to vacate
the premises.37 In its Motion for Intervention  petitioner
PUP  also  admitted that its interest as a
"purchaser pendente lite" would be better protected if
it was joined as party-defendant in the controversy
thereby confessing that it indeed purchased the
property.
In light of the foregoing disquisition, we now proceed to
determine whether FIRESTONE should be allowed to
exercise its right of first refusal over the property. Such
right was expressly stated by NDC and FIRESTONE in
par. XV of their third contract denominated as A-10-78
executed on 22 December 1978 which, as found by the
courts a quo, was interrelated to and inseparable from
their first contract denominated as C-30-65 executed on
24 August 1965 and their second contract denominated
as C-26-68 executed on 8 January 1969. Thus -
Should the LESSOR desire to sell the leased premises
during the term of this Agreement, or any extension
thereof, the LESSOR shall first give to the LESSEE, which
shall have the right of first option to purchase the leased
premises subject to mutual agreement of both parties. 38
In the instant case, the right of first refusal is an integral
and indivisible part of the contract of lease and is
inseparable from the whole contract. The consideration
for the right is built into the reciprocal obligations of the
parties. Thus, it is not correct for petitioners to insist
that there was no consideration paid by FIRESTONE to
entitle it to the exercise of the right, inasmuch as the
stipulation is part and parcel of the contract of lease
making the consideration for the lease the same as that
for the option.
It is a settled principle in civil law that when a lease
contract contains a right of first refusal, the lessor is
under a legal duty to the lessee not to sell to anybody at
any price until after he has made an offer to sell to the
latter at a certain price and the lessee has failed to
accept it.39 The lessee has a right that the lessor's first
offer shall be in his favor.
The option in this case was incorporated in the
contracts of lease by NDC for the benefit of FIRESTONE
which, in view of the total amount of its investments in
the property, wanted to be assured that it would be
given the first opportunity to buy the property at a price
for which it would be offered. Consistent with their
agreement, it was then implicit for NDC to have first
offered the leased premises of 2.60 hectares to
FIRESTONE prior to the sale in favor of PUP. Only if
FIRESTONE failed to exercise its right of first priority
could NDC lawfully sell the property to petitioner PUP.
It now becomes apropos to ask whether the courts a
quo  were correct in fixing the proper consideration of
the sale at P1,500.00 per square meter. In contracts of
sale, the basis of the right of first refusal must be the
current offer of the seller to sell or the offer to purchase
of the prospective buyer. Only after the lessee-grantee
fails to exercise its right under the same terms and
within the period contemplated can the owner validly
offer to sell the property to a third person, again, under
the same terms as offered to the grantee.40 It appearing
that the whole NDC compound was sold to PUP
for P554.74 per square meter, it would have been more
proper for the courts below to have ordered the sale of
the property also at the same price. However, since
FIRESTONE never raised this as an issue, while on the
other hand it admitted that the value of the property
stood at P1,500.00 per square meter, then we see no
compelling reason to modify the holdings of the
courts a quo that the leased premises be sold at that
price.
Our attention is invited by petitioners to Ang Yu
Asuncion v. CA41 in concluding that if our holding in Ang
Yu would be applied to the facts of this case then
FIRESTONE's "option, if still subsisting, is not
enforceable," the option being merely a preparatory
contract which cannot be enforced.
The contention has no merit. At the heels of Ang
Yu  came Equatorial Realty Development, Inc., v.
Mayfair Theater, Inc.,42 where after much deliberation
we declared, and so we hold, that a right of first refusal
is neither "amorphous nor merely preparatory" and can
be enforced and executed according to its terms. Thus,
in Equatorial we ordered the rescission of the sale
which was made in violation of the lessee's right of first
refusal and further ordered the sale of the leased
property in favor of Mayfair Theater, as grantee of the
right. Emphatically, we held that "(a right of first
priority) should be enforced according to the law on
contracts instead of the panoramic and indefinite rule
on human relations." We then concluded that the
execution of the right of first refusal consists in directing
the grantor to comply with his obligation according to
the terms at which he should have offered the property
in favor of the grantee and at that price when the offer
should have been made.
One final word. Petitioner PUP should be cautioned
against bidding for public sympathy by bewailing the
dismissal of its petition before the press. Such advocacy
is not likely to elicit the compassion of this Court or of
any court for that matter. An entreaty for a favorable
disposition of a case not made directly through
pleadings and oral arguments before the courts do not
persuade us, for as judges, we are ruled only by our
forsworn duty to give justice where justice is due.
WHEREFORE, the petitions in G.R. No. 143513 and G.R.
No. 143590 are DENIED. Inasmuch as the first contract
of lease fixed the area of the leased premises at
2.90118 hectares while the second contract placed it at
2.60 hectares, let a ground survey of the leased
premises be immediately conducted by a duly licensed,
registered surveyor at the expense of private
respondent FIRESTONE CERAMICS, INC., within two (2)
months from finality of the judgment in this case.
Thereafter, private respondent FIRESTONE CERAMICS,
INC., shall have six (6) months from receipt of the
approved survey within which to exercise its right to
purchase the leased property at P1,500.00 per square
meter, and petitioner Polytechnic University of the
Philippines is ordered to reconvey the property to
FIRESTONE CERAMICS, INC., in the exercise of its right of
first refusal upon payment of the purchase price
thereof.

SO ORDERED.
G.R. No. 137290               July 31, 2000
SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner,
vs.
SPOUSES ALFREDO HUANG and GRACE
HUANG, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision, 1 dated April
8, 1997, of the Court of Appeals which reversed the
decision of the Regional Trial Court, Branch 153, Pasig
City dismissing the complaint brought by respondents
against petitioner for enforcement of a contract of sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a
domestic corporation engaged in the purchase and sale
of real properties. Part of its inventory are two parcels
of land totalling 1, 738 square meters at the corner of
Meralco Avenue and General Capinpin Street, Barrio
Oranbo, Pasig City, which are covered by TCT Nos. PT-
82395 and PT-82396 of the Register of Deeds of Pasig
City.
On February 21, 1994, the properties were offered for
sale for ₱52,140,000.00 in cash. The offer was made to
Atty. Helena M. Dauz who was acting for respondent
spouses as undisclosed principals. In a letter2 dated
March 24, 1994, Atty. Dauz signified her clients’ interest
in purchasing the properties for the amount for which
they were offered by petitioner, under the following
terms: the sum of ₱500,000.00 would be given as
earnest money and the balance would be paid in eight
equal monthly installments from May to December,
1994. However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another
letter3 proposing the following terms for the purchase of
the properties, viz:
This is to express our interest to buy your-above-
mentioned property with an area of 1, 738 sq. meters.
For this purpose, we are enclosing herewith the sum of
₱1,000,000.00 representing earnest-deposit money,
subject to the following conditions.
1. We will be given the exclusive option to purchase the
property within the 30 days from date of your
acceptance of this offer.
2. During said period, we will negotiate on the terms
and conditions of the purchase; SMPPI will secure the
necessary Management and Board approvals; and we
initiate the documentation if there is mutual agreement
between us.
3. In the event that we do not come to an agreement on
this transaction, the said amount of ₱1,000,000.00 shall
be refundable to us in full upon demand. . . .
Isidro A. Sobrecarey, petitioner’s vice-president and
operations manager for corporate real estate, indicated
his conformity to the offer by affixing his signature to
the letter and accepted the "earnest-deposit" of ₱1
million. Upon request of respondent spouses,
Sobrecarey ordered the removal of the "FOR SALE" sign
from the properties.
Atty. Dauz and Sobrecarey then commenced
negotiations. During their meeting on April 8, 1994,
Sobrecarey informed Atty. Dauz that petitioner was
willing to sell the subject properties on a 90-day term.
Atty. Dauz countered with an offer of six months within
which to pay.
On April 14, 1994, the parties again met during which
Sobrecarey informed Atty. Dauz that petitioner had not
yet acted on her counter-offer. This prompted Atty.
Dauz to propose a four-month period of amortization.
On April 25, 1994, Atty. Dauz asked for an extension of
45 days from April 29, 1994 to June 13, 1994 within
which to exercise her option to purchase the property,
adding that within that period, "[we] hope to finalize
[our] agreement on the matter."4 Her request was
granted.
On July 7, 1994, petitioner, through its president and
chief executive officer, Federico Gonzales, wrote Atty.
Dauz informing her that because the parties failed to
agree on the terms and conditions of the sale despite
the extension granted by petitioner, the latter was
returning the amount of ₱1 million given as "earnest-
deposit."5
On July 20, 1994, respondent spouses, through counsel,
wrote petitioner demanding the execution within five
days of a deed of sale covering the properties.
Respondents attempted to return the "earnest-deposit"
but petitioner refused on the ground that respondents’
option to purchase had already expired.
On August 16, 1994, respondent spouses filed a
complaint for specific performance against petitioner
before the Regional Trial Court, Branch 133, Pasig City
where it was docketed as Civil Case No. 64660.
Within the period for filing a responsive pleading,
petitioner filed a motion to dismiss the complaint
alleging that (1) the alleged "exclusive option" of
respondent spouses lacked a consideration separate
and distinct from the purchase price and was thus
unenforceable and (2) the complaint did not allege a
cause of action because there was no "meeting of the
minds" between the parties and, therefore, no
perfected contract of sale. The motion was opposed by
respondents.
On December 12, 1994, the trial court granted
petitioner’s motion and dismissed the action.
Respondents filed a motion for reconsideration, but it
was denied by the trial court. They then appealed to the
Court of Appeals which, on April 8, 1997, rendered a
decision6 reversing the judgment of the trial court. The
appellate court held that all the requisites of a
perfected contract of sale had been complied with as
the offer made on March 29, 1994, in connection with
which the earnest money in the amount of ₱1 million
was tendered by respondents, had already been
accepted by petitioner. The court cited Art. 1482 of the
Civil Code which provides that "[w]henever earnest
money is given in a contract of sale, it shall be
considered as part of the price and as proof of the
perfection of the contract." The fact the parties had not
agreed on the mode of payment did not affect the
contract as such is not an essential element for its
validity. In addition, the court found that Sobrecarey
had authority to act in behalf of petitioner for the sale
of the properties.7
Petitioner moved for reconsideration of the trial court’s
decision, but its motion was denied. Hence, this
petition.
Petitioner contends that the Court of Appeals erred in
finding that there was a perfected contract of sale
between the parties because the March 29, 1994 letter
of respondents, which petitioner accepte d, merely
resulted in an option contract, albeit it was
unenforceable for lack of a distinct consideration.
Petitioner argues that the absence of agreement as to
the mode of payment was fatal to the perfection of the
contract of sale. Petitioner also disputes the appellate
court’s ruling that Isidro A. Sobrecarey had authority to
sell the subject real properties.8
Respondents were required to comment within ten (10)
days from notice. However, despite 13 extensions
totalling 142 days which the Court had given to them,
respondents failed to file their comment. They were
thus considered to have waived the filing of a comment.
The petition is meritorious.
In holding that there is a perfected contract of sale, the
Court of Appeals relied on the following findings: (1)
earnest money was allegedly given by respondents and
accepted by petitioner through its vice-president and
operations manager, Isidro A. Sobrecarey; and (2) the
documentary evidence in the records show that there
was a perfected contract of sale.
With regard to the alleged payment and acceptance of
earnest money, the Court holds that respondents did
not give the ₱1 million as "earnest money" as provided
by Art. 1482 of the Civil Code. They presented the
amount merely as a deposit of what would eventually
become the earnest money or downpayment should a
contract of sale be made by them. The amount was thus
given not as a part of the purchase price and as proof of
the perfection of the contract of sale but only as a
guarantee that respondents would not back out of the
sale. Respondents in fact described the amount as an
"earnest-deposit." In Spouses Doromal, Sr. v. Court of
Appeals,9 it was held:
. . . While the ₱5,000 might have indeed been paid to
Carlos in October, 1967, there is nothing to show that
the same was in the concept of the earnest money
contemplated in Art. 1482 of the Civil Code, invoked by
petitioner, as signifying perfection of the sale. Viewed in
the backdrop of the factual milieu thereof extant in the
record, We are more inclined to believe that the said
₱5,000.00 were paid in the concept of earnest money as
the term was understood under the Old Civil Code, that
is, as a guarantee that the buyer would not back out,
considering that it is not clear that there was already a
definite agreement as to the price then and that
petitioners were decided to buy 6/7 only of the
property should respondent Javellana refuse to agree to
part with her 1/7 share.10
In the present case, the ₱1 million "earnest-deposit"
could not have been given as earnest money as
contemplated in Art. 1482 because, at the time when
petitioner accepted the terms of respondents’ offer of
March 29, 1994, their contract had not yet been
perfected. This is evident from the following conditions
attached by respondents to their letter, to wit: (1) that
they be given the exclusive option to purchase the
property within 30 days from acceptance of the offer;
(2) that during the option period, the parties would
negotiate the terms and conditions of the purchase; and
(3) petitioner would secure the necessary approvals
while respondents would handle the documentation.
The first condition for an option period of 30 days
sufficiently shows that a sale was never
perfected.1âwphi1 As petitioner correctly points out,
acceptance of this condition did not give rise to a
perfected sale but merely to an option or an accepted
unilateral promise on the part of respondents to buy
the subject properties within 30 days from the date of
acceptance of the offer. Such option giving respondents
the exclusive right to buy the properties within the
period agreed upon is separate and distinct from the
contract of sale which the parties may enter. 11 All that
respondents had was just the option to buy the
properties which privilege was not, however, exercised
by them because there was a failure to agree on the
terms of payment. No contract of sale may thus be
enforced by respondents.
Furthermore, even the option secured by respondents
from petitioner was fatally defective. Under the second
paragraph of Art. 1479, an accepted unilateral promise
to buy or sell a determinate thing for a price certain is
binding upon the promisor only if the promise is
supported by a distinct consideration. Consideration in
an option contract may be anything of value, unlike in
sale where it must be the price certain in money or its
equivalent. There is no showing here of any
consideration for the option. Lacking any proof of such
consideration, the option is unenforceable.
Equally compelling as proof of the absence of a
perfected sale is the second condition that, during the
option period, the parties would negotiate the terms
and conditions of the purchase. The stages of a contract
of sale are as follows: (1) negotiation, covering the
period from the time the prospective contracting
parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place
upon the concurrence of the essential elements of the
sale which are the meeting of the minds of the parties
as to the object of the contract and upon the price; and
(3) consummation, which begins when the parties
perform their respective undertakings under the
contract of sale, culminating in the extinguishment
thereof.12 In the present case, the parties never got past
the negotiation stage. The alleged "indubitable
evidence"13 of a perfected sale cited by the appellate
court was nothing more than offers and counter-offers
which did not amount to any final arrangement
containing the essential elements of a contract of sale.
While the parties already agreed on the real properties
which were the objects of the sale and on the purchase
price, the fact remains that they failed to arrive at
mutually acceptable terms of payment, despite the 45-
day extension given by petitioner.
The appellate court opined that the failure to agree on
the terms of payment was no bar to the perfection of
the sale because Art. 1475 only requires agreement by
the parties as to the price of the object. This is error.
In Navarro v. Sugar Producers Cooperative Marketing
Association, Inc.,14 we laid down the rule that the
manner of payment of the purchase price is an essential
element before a valid and binding contract of sale can
exist. Although the Civil Code does not expressly state
that the minds of the parties must also meet on the
terms or manner of payment of the price, the same is
needed, otherwise there is no sale. As held in Toyota
Shaw, Inc. v. Court of Appeals,15 agreement on the
manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount
to a failure to agree on the price.16 In Velasco v. Court of
Appeals,17 the parties to a proposed sale had already
agreed on the object of sale and on the purchase price.
By the buyer’s own admission, however, the parties still
had to agree on how and when the downpayment and
the installments were to be paid. It was held:
. . . Such being the situation, it can not, therefore, be
said that a definite and firm sales agreement between
the parties had been perfected over the lot in
question. Indeed, this Court has already ruled before
that a definite agreement on the manner of payment of
the purchase price is an essential element in the
formation of a binding and enforceable contract of
sale. The fact, therefore, that the petitioners delivered
to the respondent the sum of P10,000 as part of the
down-payment that they had to pay cannot be
considered as sufficient proof of the perfection of any
purchase and sale agreement between the parties
herein under Art. 1482 of the new Civil Code, as the
petitioners themselves admit that some essential
matter - the terms of the payment - still had to be
mutually covenanted.18

Thus, it is not the giving of earnest money, but the proof

of the concurrence of all the essential elements of the
contract of sale which establishes the existence of a
perfected sale.

In the absence of a perfected contract of sale, it is

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

WHEREFORE, the decision of the Court of Appeals is

REVERSED and respondents’ complaint is DISMISSED.

SO ORDERED.
G.R. No. 154493             December 6, 2006
REYNALDO VILLANUEVA, petitioner,
vs.
PHILIPPINE NATIONAL BANK (PNB), respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
The Petition for Review on Certiorari under Rule 45
before this Court assails the January 29, 2002
Decision1 and June 27, 2002 Resolution 2 of the Court of
Appeals (CA) in CA-G.R. CV No. 520083 which reversed
and set aside the September 14, 1995 Decision 4 of the
Regional Trial Court, Branch 22, General Santos City
(RTC) in Civil Case No. 4553.
As culled from the records, the facts are as follows:
The Special Assets Management Department (SAMD) of
the Philippine National Bank (PNB) issued an
advertisement for the sale thru bidding of certain PNB
properties in Calumpang, General Santos City, including
Lot No. 17, covered by TCT No. T-15042, consisting of
22,780 square meters, with an advertised floor price
of P1,409,000.00, and Lot No. 19, covered by TCT No. T-
15036, consisting of 41,190 square meters, with an
advertised floor price of P2,268,000.00.5 Bidding was
subject to the following conditions: 1) that cash bids be
submitted not later than April 27, 1989; 2) that said bids
be accompanied by a 10% deposit in manager’s or
cashier’s check; and 3) that all acceptable bids be
subject to approval by PNB authorities.
In a June 28, 1990 letter6 to the Manager, PNB-General
Santos Branch, Reynaldo Villanueva (Villanueva) offered
to purchase Lot Nos. 17 and 19 for P3,677,000.00. He
also manifested that he was depositing P400,000.00 to
show his good faith but with the understanding that
said amount may be treated as part of the payment of
the purchase price only when his offer is accepted by
PNB. At the bottom of said letter there appears an
unsigned marginal note stating that P400,000.00 was
deposited into Villanueva’s account (Savings Account
No. 43612) with PNB-General Santos Branch. 7
PNB-General Santos Branch forwarded the June 28,
1990 letter of Villanueva to Ramon Guevara (Guevara),
Vice President, SAMD.8 On July 6, 1990, Guevara
informed Villanueva that only Lot No. 19 is available and
that the asking price therefor
is P2,883,300.00.9 Guevara further wrote:
If our quoted price is acceptable to you, please submit a
revised offer to purchase. Sale shall be subject to our
Board of Director’s approval and to other terms and
conditions imposed by the Bank on sale of acquired
assets. 10 (Emphasis ours)
Instead of submitting a revised offer, Villanueva merely
inserted at the bottom of Guevara’s letter a July 11,
1990 marginal note, which reads:
C O N F O R M E:
PRICE OF P2,883,300.00 (downpayment of  P600,000.00
and the balance payable in two (2) years at quarterly
amortizations.) 11
Villanueva paid P200,000.00 to PNB which issued O.R.
No. 16997 to acknowledge receipt of the "partial
payment deposit on offer to purchase."12 On the dorsal
portion of Official Receipt No. 16997, Villanueva signed
a typewritten note, stating:
This is a deposit made to show the sincerity of my
purchase offer with the understanding that it shall be
returned without interest if my offer is not favorably
considered or be forfeited if my offer is approved but I
fail/refuse to push through the purchase. 13
Also, on July 24, 1990, P380,000.00 was debited from
Villanueva’s Savings Account No. 43612 and credited to
SAMD.14
On October 11, 1990, however, Guevara wrote
Villanueva that, upon orders of the PNB Board of
Directors to conduct another appraisal and public
bidding of Lot No. 19, SAMD is deferring negotiations
with him over said property and returning his deposit
of P580,000.00.15 Undaunted, Villanueva attempted to
deliver postdated checks covering the balance of the
purchase price but PNB refused the same.
Hence, Villanueva filed with the RTC a Complaint 16 for
specific performance and damages against PNB. In its
September 14, 1995 Decision, the RTC granted the
Complaint, thus:
WHEREFORE, judgment is rendered in favor of the
plaintiff and against the defendant directing it to do the
following:
1. To execute a deed of sale in favor of the plaintiff over
Lot 19 comprising 41,190 square meters situated at
Calumpang, General Santos City covered by TCT No. T-
15036 after payment of the balance in cash in the
amount of P2,303,300.00;
2. To pay the plaintiff P1,000,000.00 as moral
damages; P500,000.00 as attorney’s fees, plus litigation
expenses and costs of the suit.
SO ORDERED.17
The RTC anchored its judgment on the finding that
there existed a perfected contract of sale between PNB
and Villanueva. It found:
The following facts are either admitted or undisputed:
xxx
The defendant through Vice-President Guevara
negotiated with the plaintiff in connection with the
offer of the plaintiff to buy Lots 17 & 19. The offer of
plaintiff to buy, however, was accepted by the
defendant only insofar as Lot 19 is concerned as
exemplified by its letter dated July 6, 1990 where the
plaintiff signified his concurrence after conferring with
the defendant’s vice-president. The conformity of the
plaintiff was typewritten by the defendant’s own people
where the plaintiff accepted the price of P2,883,300.00.
The defendant also issued a receipt to the plaintiff on
the same day when the plaintiff paid the amount
of P200,000.00 to complete the downpayment
of P600,000.00 (Exhibit "F" & Exhibit "I"). With this
development, the plaintiff was also given the go signal
by the defendant to improve Lot 19 because it was
already in effect sold to him and because of that the
defendant fenced the lot and completed his two houses
on the property.18
The RTC also pointed out that Villanueva’s P580,000.00
downpayment was actually in the nature of earnest
money acceptance of which by PNB signified that there
was already a sale.19 The RTC further cited
contemporaneous acts of PNB purportedly indicating
that, as early as July 25, 1990, it considered Lot 19
already sold, as shown by Guevara’s July 25, 1990 letter
(Exh. "H")20 to another interested buyer.
PNB appealed to the CA which reversed and set aside
the September 14, 1995 RTC Decision, thus:
WHEREFORE, the appealed decision is REVERSED and
SET ASIDE and another rendered DISMISSING the
complaint.
SO ORDERED.21
According to the CA, there was no perfected contract of
sale because the July 6, 1990 letter of Guevara
constituted a qualified acceptance of the June 28, 1990
offer of Villanueva, and to which Villanueva replied on
July 11, 1990 with a modified offer. The CA held:
In the case at bench, consent, in respect to the price
and manner of its payment, is lacking. The record shows
that appellant, thru Guevara’s July 6, 1990 letter, made
a qualified acceptance of appellee’s letter-offer dated
June 28, 1990 by imposing an asking price
of P2,883,300.00 in cash for Lot 19. The letter dated July
6, 1990 constituted a counter-offer (Art. 1319, Civil
Code), to which appellee made a new proposal, i.e., to
pay the amount of P2,883,300.00 in staggered amounts,
that is, P600,000.00 as downpayment and the balance
within two years in quarterly amortizations.
A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and a rejection of
the original offer (Art. 1319, id.). Consequently, when
something is desired which is not exactly what is
proposed in the offer, such acceptance is not sufficient
to generate consent because any modification or
variation from the terms of the offer annuls the offer
(Tolentino, Commentaries and Jurisprudence on the
Civil Code of the Philippines, 6th ed., 1996, p. 450, cited
in ABS-CBN Broadcasting Corporation v. Court of
Appeals, et al., 301 SCRA 572).
Appellee’s new proposal, which constitutes a counter-
offer, was not accepted by appellant, its board having
decided to have Lot 19 reappraised and sold thru public
bidding.
Moreover, it was clearly stated in Guevara’s July 6, 1990
letter that "the sale shall be subject to our Board of
Director’s approval and to other terms and conditions
imposed by the Bank on sale of acquired assets." 22
Villanueva’s Motion for Reconsideration23 was denied
by the CA in its Resolution of June 27, 2002.
Petitioner Villanueva now assails before this Court the
January 29, 2002 Decision and June 27, 2002 Resolution
of the CA. He assigns five issues which may be
condensed into two: first, whether a perfected contract
of sale exists between petitioner and respondent PNB;
and second, whether the conduct and actuation of
respondent constitutes bad faith as to entitle petitioner
to moral and exemplary damages and attorney’s fees.
The Court sustains the CA on both issues.
Contracts of sale are perfected by mutual consent
whereby the seller obligates himself, for a price certain,
to deliver and transfer ownership of a specified thing or
right to the buyer over which the latter agrees. 24 Mutual
consent being a state of mind, its existence may only be
inferred from the confluence of two acts of the parties:
an offer certain as to the object of the contract and its
consideration, and an acceptance of the offer which is
absolute in that it refers to the exact object and
consideration embodied in said offer.25 While it is
impossible to expect the acceptance to echo every
nuance of the offer, it is imperative that it assents to
those points in the offer which, under the operative
facts of each contract, are not only material but
motivating as well. Anything short of that level of
mutuality produces not a contract but a mere counter-
offer awaiting acceptance.26 More particularly on the
matter of the consideration of the contract, the offer
and its acceptance must be unanimous both on the rate
of the payment and on its term. An acceptance of an
offer which agrees to the rate but varies the term is
ineffective. 27
To determine whether there was mutual consent
between the parties herein, it is necessary to retrace
each offer and acceptance they made.
Respondent began with an invitation to bid issued in
April 1989 covering several of its acquired assets in
Calumpang, General Santos City, including Lot No. 19
for which the floor price was P2,268,000.00. The offer
was subject to the condition that sealed bids,
accompanied by a 10% deposit in manager’s or cashier’s
check, be submitted not later than 10 o’clock in the
morning of April 27, 1989.
On June 28, 1990, petitioner made an offer to buy Lot
No. 17 and Lot No. 19 for an aggregate price
of P3,677,000.00. It is noted that this offer exactly
corresponded to the April 1989 invitation to bid issued
by respondent in that the proposed aggregate purchase
price for Lot Nos. 17 and 19 matched the advertised
floor prices for the same properties. However, it cannot
be said that the June 28, 1990 letter of petitioner was
an effective acceptance of the April 1989 invitation to
bid for, by its express terms, said invitation lapsed on
April 27, 1989.28 More than that, the April 1989
invitation was subject to the condition that all sealed
bids submitted and accepted be approved by
respondent’s higher authorities.
Thus, the June 28, 1990 letter of petitioner was an offer
to buy independent of the April 1989 invitation to bid. It
was a definite offer as it identified with certainty the
properties sought to be purchased and fixed the
contract price.
However, respondent replied to the June 28, 1990 offer
with a July 6, 1990 letter that only Lot No. 19 is available
and that the price therefor is now P2,883,300.00. As the
CA pointed out, this reply was certainly not an
acceptance of the June 28, 1990 offer but a mere
counter-offer. It deviated from the original offer on
three material points: first, the object of the proposed
sale is now only Lot No. 19 rather than Lot Nos. 17 and
19; second, the area of the property to be sold is still
41,190 sq. m but an 8,797-sq. m portion is now part of a
public road; and third, the consideration is P2,883,300
for one lot rather than P3,677,000.00 for two lots. More
important, this July 6, 1990 counter-offer imposed two
conditions: one, that petitioner submit a revised offer to
purchase based on the quoted price; and two, that the
sale of the property be approved by the Board of
Directors and subjected to other terms and conditions
imposed by the Bank on the sale of acquired assets.
In reply to the July 6, 1990 counter-offer, petitioner
signed his July 11, 1990 conformity to the quoted price
of P2,883,300.00 but inserted the term "downpayment
of P600,000.00 and the balance payable in two years at
quarterly amortization." The CA viewed this July 11,
1990 conformity not as an acceptance of the July 6,
1990 counter-offer but a further counter-offer for, while
petitioner accepted the P2,883,300.00 price for Lot No.
19, he qualified his acceptance by proposing a two-year
payment term.
Petitioner does not directly impugn such reasoning of
the CA. He merely questions it for taking up the issue of
whether his July 11, 1990 conformity modified the July
6, 1990 counter-offer as this was allegedly never raised
during the trial nor on appeal.29
Such argument is not well taken. From beginning to
end, respondent denied that a contract of sale with
petitioner was ever perfected.30 Its defense was broad
enough to encompass every issue relating to the
concurrence of the elements of contract, specifically on
whether it consented to the object of the sale and its
consideration. There was nothing to prevent the CA
from inquiring into the offers and counter-offers of the
parties to determine whether there was indeed a
perfected contract between them.
Moreover, there is merit in the ruling of the CA that the
July 11, 1990 marginal note was a further counter-offer
which did not lead to the perfection of a contract of sale
between the parties. Petitioner’s own June 28, 1990
offer quoted the price of P3,677,000.00 for two lots but
was silent on the term of payment. Respondent’s July 6,
1990 counter-offer quoted the price of P2,833,300.00
and was also silent on the term of payment. Up to that
point, the term or schedule of payment was not on the
negotiation table. Thus, when petitioner suddenly
introduced a term of payment in his July 11, 1990
counter-offer, he interjected into the negotiations a
new substantial matter on which the parties had no
prior discussion and over which they must yet
agree.31 Petitioner’s July 11, 1990 counter-offer,
therefore, did not usher the parties beyond the
negotiation stage of contract making towards its
perfection. He made a counter-offer that required
acceptance by respondent.
As it were, respondent, through its Board of Directors,
did not accept this last counter-offer. As stated in its
October 11, 1990 letter to petitioner, respondent
ordered the reappraisal of the property, in clear
repudiation not only of the proposed price but also the
term of payment thereof.
Petitioner insists, however, that the October 11, 1990
repudiation was belated as respondent had already
agreed to his July 11, 1990 counter-offer when it
accepted his "downpayment" or "earnest money"
of P580,000.00.32 He cites Article 1482 of the Civil Code
where it says that acceptance of "downpayment" or
"earnest money" presupposes the perfection of a
contract.
Not so. Acceptance of petitioner’s payments did not
amount to an implied acceptance of his last counter-
offer.
To begin with, PNB-General Santos Branch, which
accepted petitioner’s P380,000.00 payment, and PNB-
SAMD, which accepted his P200,000.00 payment, had
no authority to bind respondent to a contract of sale
with petitioner.33 Petitioner is well aware of this. To
recall, petitioner sent his June 28, 1990 offer to PNB-
General Santos Branch. Said branch did not act on his
offer except to endorse it to Guevarra. Thereafter,
petitioner transacted directly with Guevarra. Petitioner
then cannot pretend that PNB-General Santos Branch
had authority to accept his July 11, 1990 counter-offer
by merely accepting his P380,000.00 payment.
Neither did SAMD have authority to bind PNB. In its
April 1989 invitation to bid, as well as its July 6, 1990
counter-offer, SAMD was always careful to emphasize
that whatever offer is made and entertained will be
subject to the approval of respondent’s higher
authorities. This is a reasonable disclaimer considering
the corporate nature of respondent. 34
Moreover, petitioner’s payment of P200,000.00 was
with the clear understanding that his July 11, 1990
counter-offer was still subject to approval by
respondent. This is borne out by respondent’s Exhibits
"2-a" and "2-b", which petitioner never controverted,
where it appears on the dorsal portion of O.R. No.
16997 that petitioner acceded that the amount he paid
was a mere "x x x deposit made to show the sincerity of
[his] purchase offer with the understanding that it shall
be returned without interest if [his] offer is not
favorably considered x x x."35 This was a clear
acknowledgment on his part that there was yet no
perfected contract with respondent and that even with
the payments he had advanced, his July 11, 1990
counter-offer was still subject to consideration by
respondent.
Not only that, in the same Exh. "2-a" as well as in his
June 28, 1990 offer, petitioner referred to his payments
as mere "deposits." Even O.R. No. 16997 refers to
petitioner’s payment as mere deposit. It is only in the
debit notice issued by PNB-General Santos Branch
where petitioner’s payment is referred to as
"downpayment". But then, as we said, PNB-General
Santos Branch has no authority to bind respondent by
its interpretation of the nature of the payment made by
petitioner.

In sum, the amounts paid by petitioner were not in the

nature of downpayment or earnest money but were
mere deposits or proof of his interest in the purchase of
Lot No. 19. Acceptance of said amounts by respondent
does not presuppose perfection of any contract. 36

It must be noted that petitioner has expressly admitted

that he had withdrawn the entire amount
of P580,000.00 deposit from PNB-General Santos
Branch.37

With the foregoing disquisition, the Court foregoes

resolution of the second issue as it is evident that
respondent acted well within its rights when it rejected
the last counter-offer of petitioner.

In fine, petitioner’s petition lacks merit.

WHEREFORE, the petition is DENIED. The Decision

dated January 29, 2002 and Resolution dated June 27,
2002 of the Court of Appeals are AFFIRMED.

No costs.

SO ORDERED.
G.R. No. 126444 December 4, 1998
ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA
QUIJADA, DEMETRIO QUIJADA, ELIUTERIA QUIJADA,
EULALIO QUIJADA, and WARLITO
QUIJADA, petitioners,
vs.
COURT OF APPEALS, REGALADO MONDEJAR, RODULFO
GOLORAN, ALBERTO ASIS, SEGUNDINO RAS, ERNESTO
GOLORAN, CELSO ABISO, FERNANDO BAUTISTA,
ANTONIO MACASERO, and NESTOR
MAGUINSAY, respondents.
MARTINEZ, J.:
Petitioners, as heirs of the late Trinidad Quijada, filed a
complaint against private respondents for quieting of
title, recovery of possession and ownership of parcels of
land with claim for attorney's fees and damages. The
suit was premised on the following facts found by the
court of Appeals which is materially the same as that
found by the trial court:
Plaintiffs-appellees (petitioners) are the children of the
late Trinidad Corvera Vda, de Quijada. 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, situated in the barrio of San Agustin,
Talacogon, Agusan del Sur. On April 5, 1956, Trinidad
Quijada together with her sisters Leonila Corvera Vda.
de Sequeña and Paz Corvera Cabiltes and brother
Epapiadito Corvera executed a conditional deed of
donation (Exh. C) of the two-hectare parcel of land
subject of the case in favor of the Municipality of
Talacogon, 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. Apparently, Trinidad remained in possession
of the parcel of land despite the donation. On July 29,
1962, Trinidad sold one (1) hectare of the subject parcel
of land to defendant-appellant Regalado Mondejar
(Exh. 1). Subsequently, 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. In 1980, the heirs of Trinidad, who at that
time was already dead, filed a complaint for forcible
entry (Exh. E) against defendant-appellant (respondent)
Regalado Mondejar, which complaint was, however,
dismissed for failure to prosecute (Exh. F). In 1987, the
proposed provincial high school having failed to
materialize, the Sangguniang Bayan of the municipality
of Talacogon enacted a resolution reverting the two (2)
hectares of land donated back to the donors (Exh. D). In
the meantime, defendant-appellant (respondent)
Regalado Mondejar sold portions of the land to
defendants-appellants (respondents) Fernando Bautista
(Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7)
and Ernesto Goloran (Exh. 8).
On July 5, 1988, plaintiffs-appellees (petitioners) filed
this action against defendants-appellants (respondents).
In the complaint, plaintiffs-appellees (petitioners)
alleged that their deceased mother never sold,
conveyed, 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; that at the time of the alleged
sale to Regalado Mondejar by Trinidad Quijada, the land
still belongs to the Municipality of Talacogon, hence,
the supposed sale is null and void.
Defendants-appellants (respondents), on the other
hand, in their answer claimed that the land in dispute
was sold to Regalado Mondejar, the one (1) hectare on
July 29, 1962, and the remaining one (1) hectare on
installment basis until fully paid. As affirmative and/or
special defense, defendants-appellants (respondents)
alleged that plaintiffs action is barred by laches or has
prescribed.
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, 1966, 1967 and
1968, the same not being hers to dispose of because
ownership belongs to the Municipality of Talacogon
(Decision, p. 4; Rollo, p. 39) and, secondly, 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, more so that she was
already 63 years old at the time, and a widow (Decision,
p. 6; Rollo, p. 41)."1
The dispositive portion of the trial court's decision
reads:
WHEREFORE, viewed from the above perceptions, the
scale of justice having tilted in favor of the plaintiffs,
judgment is, 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. 1209 in the name of Trinidad Quijada;
2) ordering any person acting in Defendants' behalf to
vacate and restore the peaceful possession of the land
in question to Plaintiffs;
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;
4) ordering Defendants to remove their improvements
constructed on the questioned lot;
5) ordering the Defendants to pay Plaintiffs, jointly and
severally, the amount of P10,000.00 representing
attorney's fees;
6) ordering Defendants to pays the amount of
P8,000.00 as expenses of litigation; and
7) ordering Defendants to pay the sum of P30,000.00
representing moral damages.
SO ORDERED.2
On appeal, the Court of Appeals reversed and set aside
the judgment a quo3 ruling that the sale made by
Trinidad Quijada to respondent Mondejar was valid as
the former retained an inchoate interest on the lots by
virtue of the automatic reversion clause in the deed of
donation.4 Thereafter, petitioners filed a motion for
reconsideration. When the CA denied their
motion,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, considering that at that time,
ownership was already transferred to the Municipality
of Talacogon. On the contrary, private respondents
contend that the sale was valid, that they are buyers in
good faith, and that petitioners' case is barred by
laches. 6
We affirm the decision of the respondent court.
The donation made on April 5, 1956 by Trinidad Quijada
and her brother and sisters7 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." 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, the
same may in the future be closed" the donated
property shall automatically revert to the donor. 9 Such
condition, not being contrary to law, morals, good
customs, public order or public policy was validly
imposed in the donation. 10
When the Municipality's acceptance of the donation
was made known to the donor, the former became the
new owner of the donated property — donation being a
mode of acquiring and transmitting ownership 11 —
notwithstanding the condition imposed by the donee.
The donation is perfected once the acceptance by the
donee is made known to the donor.12 According,
ownership is immediately transferred to the latter and
that ownership will only revert to the donor if the
resolutory condition is not fulfilled.
In this case, that resolutory condition is the construction
of the school. 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, the condition
imposed is not a condition precedent or a suspensive
condition but a resolutory one. 13 Thus, at the time of
the sales made in 1962 towards 1968, the alleged seller
(Trinidad) could not have sold the lots since she had
earlier transferred ownership thereof by virtue of the
deed of donation. So long as the resolutory condition
subsists and is capable of fulfillment, 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. Since
no period was imposed by the donor on when must the
donee comply with the condition, the latter remains the
owner so long as he has tried to comply with the
condition within a reasonable period. Such period,
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. Only then
— when the non-fulfillment of the resolutory condition
was brought to the donor's knowledge — that
ownership of the donated property reverted to the
donor as provided in the automatic reversion clause of
the deed of donation.
The donor may have an inchoate interest in the
donated property during the time that ownership of the
land has not reverted to her. Such inchoate interest
may be the subject of contracts including a contract of
sale. In this case, however, what the donor sold was the
land itself which she no longer owns. 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.
As to laches, petitioners' action is not yet barred
thereby. Laches presupposes failure or neglect for an
unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should
have been done earlier; 14 "it is negligence or omission
to assert a right within a reasonable time, thus, giving
rise to a presumption that the party entitled to assert it
either has abandoned or declined to assert it." 15 Its
essential elements of:
a) Conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation
complained of;
b) Delay in asserting complainant's right after he had
knowledge of the defendant's conduct and after he has
an opportunity to sue;
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; and,
d) Injury or prejudice to the defendant in the event
relief is accorded to the complainant. 16
are absent in this case. Petioners' cause of action to
quiet title commenced only when the property reverted
to the donor and/or his successors-in-interest in 1987.
Certainly, when the suit was initiated the following year,
it cannot be said that petioners had slept on their rights
for a long time. The 1960's sales made by Trinidad
Quijada cannot be the reckoning point as to when
petitioners' cause of action arose. They had no interest
over the property at that time except under the deed of
donation to which private respondents were not privy.
Moreover, petitioners had previously filed an ejectment
suit against private respondents only that it did not
prosper on a technicality.
Be that at it may, there is one thing which militates
against the claim of petitioners. Sale, being a consensual
contract, is perfected by mere consent, which is
manifested the moment there is a meeting of the
minds17 as to the offer and acceptance thereof on three
(3) elements: subject matter, price and terms of
payment of the price. 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. What the
law requires is that the seller has the right to transfer
ownership at the time the thing sold is
delivered. 19 Perfection  per se does not transfer
ownership which occurs upon the actual or constructive
delivery of the thing sold. 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;
hence, the sale is still valid.
The consummation, however, of the perfected contract
is another matter. 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. Such circumstance
happened in this case when petitioners — 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.
Consequently, ownership is transferred to respondent
Mondejar and those who claim their right from him.
Article 1434 of the New Civil Code supports the ruling
that the seller's "title passes by operation of law to the
buyer." 21 This rule applies not only when the subject
matter of the contract of sale is goods,22 but also to
other kinds of property, including real property. 23
There is also no merit in petitioners' contention that
since the lots were owned by the municipality at the
time of the sale, they were outside the commerce of
men under Article 1409 (4) of the NCC;24 thus, the
contract involving the same is inexistent and void from
the beginning. However, nowhere in Article 1409 (4) is it
provided that the properties of a municipality, whether
it be those for public use or its patrimonial
property 25 are outside the commerce of men. Besides,
the lots in this case were conditionally owned by the
municipality. 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, the objects referred to as
outsides the commerce of man are those which cannot
be appropriated, such as the open seas and the
heavenly bodies.
With respect to the trial court's award of attorney's
fees, litigation expenses and moral damages, there is
neither factual nor legal basis thereof. Attorney's fees
and expenses of litigation cannot, following the general
rule in Article 2208 of the New Civil Code, be recovered
in this case, there being no stipulation to that effect and
the case does not fall under any of the
exceptions. 26 It cannot be said that private respondents
had compelled petitioners to litigate with third persons.
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. Moral damages
cannot likewise be justified as none of the
circumstances enumerated under Articles 2219. 27 and
2220 28 of the New Civil Code concur in this case

WHEREFORE, by virtue of the foregoing, the assailed

decision of the Court of Appeals is AFFIRMED.

SO ORDERED.
G.R. No. 133638             April 15, 2005
PERPETUA VDA. DE APE, Petitioner,
vs.
THE HONORABLE COURT OF APPEALS and GENOROSA
CAWIT VDA. DE LUMAYNO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari of the
Decision1 of the Court of Appeals in CA-G.R. CV No.
45886 entitled, "Generosa Cawit de Lumayno,
accompanied by her husband Braulio Lumayno v.
Fortunato Ape, including his wife Perpetua de Ape."
The pertinent facts are as follows:
Cleopas Ape was the registered owner of a parcel of
land particularly known as Lot No. 2319 of the Escalante
Cadastre of Negros Occidental and covered by Original
Certificate of Title (OCT) No. RP 1379 (RP-154
[300]).2 Upon Cleopas Ape's death sometime in 1950,
the property passed on to his wife, Maria Ondoy, and
their eleven (11) children, namely:  Fortunato, Cornelio,
Bernalda, Bienvenido, Encarnacion, Loreta, Lourdes,
Felicidad, Adela, Dominador, and Angelina, all
surnamed Ape.
On 15 March 1973, Generosa Cawit de Lumayno
(private respondent herein), joined by her husband,
Braulio,3 instituted a case for "Specific Performance of a
Deed of Sale with Damages" against Fortunato and his
wife Perpetua (petitioner herein) before the then Court
of First Instance of Negros Occidental.  It was alleged in
the complaint that on 11 April 1971, private respondent
and Fortunato entered into a contract of sale of land
under which for a consideration of P5,000.00, Fortunato
agreed to sell his share in Lot No. 2319 to private
respondent.  The agreement was contained in a receipt
prepared by private respondent's son-in-law, Andres
Flores, at her behest.  Said receipt was attached to the
complaint as Annex "A" thereof and later marked as
Exhibit "G" for private respondent. The receipt states:
April 11, 1971
TO WHOM IT MAY CONCERN:
This date received from Mrs. Generosa Cawit de
Lumayno the sum of THIRTY PESOS ONLY as Advance
Payment of my share in Land Purchased, for FIVE
THOUSAND PESOS – LOT #2319.
(Signed)
FORTUNATO APE
P30.00 WITNESS:
          (Illegible)4
As private respondent wanted to register the claimed
sale transaction, she supposedly demanded that
Fortunato execute the corresponding deed of sale and
to receive the balance of the consideration.  However,
Fortunato unjustifiably refused to heed her demands. 
Private respondent, therefore, prayed that Fortunato be
ordered to execute and deliver to her "a sufficient and
registrable deed of sale involving his one-eleventh
(1/11) share or participation in Lot No. 2319 of the
Escalante Cadastre; to pay P5,000.00 in damages;
P500.00 reimbursement for litigation expenses as well
as additional P500.00 for every appeal made; P2,000.00
for attorney's fees; and to pay the costs. 5
Fortunato and petitioner denied the material
allegations of the complaint and claimed that Fortunato
never sold his share in Lot No. 2319 to private
respondent and that his signature appearing on the
purported receipt was forged.  By way of counterclaim,
the defendants below maintained having entered into a
contract of lease with respondent involving Fortunato's
portion of Lot No. 2319.  This purported lease contract
commenced in 1960 and was supposed to last until
1965 with an option for another five (5) years.  The
annual lease rental was P100.00 which private
respondent and her husband allegedly paid on
installment basis.  Fortunato and petitioner also assailed
private respondent and her husband's continued
possession of the rest of Lot No. 2319 alleging that in
the event they had acquired the shares of Fortunato's
co-owners by way of sale, he was invoking his right to
redeem the same.  Finally, Fortunato and petitioner
prayed that the lease contract between them and
respondent be ordered annulled; and that respondent
be ordered to pay them attorney's fees; moral damages;
and exemplary damages.6
In their reply,7 the private respondent and her husband
alleged that they had purchased from Fortunato's co-
owners, as evidenced by various written
instruments,8 their respective portions of Lot No. 2319. 
By virtue of these sales, they insisted that Fortunato
was no longer a co-owner of Lot No. 2319 thus, his right
of redemption no longer existed.
Prior to the resolution of this case at the trial court
level, Fortunato died and was substituted in this action
by his children named Salodada, Clarita, Narciso,
Romeo, Rodrigo, Marieta, Fortunato, Jr., and Salvador,
all surnamed Ape.9
During the trial, private respondent testified that she
and her husband acquired the various portions of Lot
No. 2319 belonging to Fortunato's co-owners. 
Thereafter, her husband caused the annotation of an
adverse claim on the certificate of title of Lot No.
2319.10 The annotation states:
Entry No. 123539 – Adverse claim filed by Braulio
Lumayno. – Notice of adverse claim filed by Braulio
Lumayno affecting the lot described in this title to the
extent of 77511.93 square meters, more or less, the
aggregate area of shares sold to him on the basis of
(alleged) sales in his possession.  Doc. No. 157, Page No.
33, Book No. XI, Series of 1967 of Alexander Cawit of
Escalante, Neg. Occ. Date of instrument. – June 22,
1967 at 8:30 a.m. (SGD) FEDENCIORRAZ, Actg. Register
of Deeds.11
In addition, private respondent claimed that after the
acquisition of those shares, she and her husband had
the whole Lot No. 2319 surveyed by a certain Oscar
Mascada who came up with a technical description of
said piece of land.12 Significantly, private respondent
alleged that Fortunato was present when the survey
was conducted.13
Also presented as evidence for private respondent were
pictures taken of some parts of Lot No. 2319
purportedly showing the land belonging to Fortunato
being bounded by a row of banana plants thereby
separating it from the rest of Lot No. 2319. 14
As regards the circumstances surrounding the sale of
Fortunato's portion of the land, private respondent
testified that Fortunato went to her store at the time
when their lease contract was about to expire.  He
allegedly demanded the rental payment for his land but
as she was no longer interested in renewing their lease
agreement, they agreed instead to enter into a contract
of sale which Fortunato acceded to provided private
respondent bought his portion of Lot No. 2319 for
P5,000.00.  Thereafter, she asked her son-in-law Flores
to prepare the aforementioned receipt.  Flores read the
document to Fortunato and asked the latter whether he
had any objection thereto.  Fortunato then went on to
affix his signature on the receipt.
For her part, petitioner insisted that the entire Lot No.
2319 had not yet been formally subdivided; 15 that on 11
April 1971 she and her husband went to private
respondent's house to collect past rentals for their land
then leased by the former, however, they managed to
collect only thirty pesos;16 that private respondent made
her (petitioner's) husband sign a receipt acknowledging
the receipt of said amount of money;17 and that the
contents of said receipt were never explained to
them.18 She also stated in her testimony that her
husband was an illiterate and only learned how to write
his name in order to be employed in a sugar central. 19 As
for private respondent's purchase of the shares owned
by Fortunato's co-owners, petitioner maintained that
neither she nor her husband received any notice
regarding those sales transactions.20 The testimony of
petitioner was later on corroborated by her daughter-
in-law, Marietta Ape Dino.21
After due trial, the court a quo rendered a
decision22 dismissing both the complaint and the
counterclaim.  The trial court likewise ordered that
deeds or documents representing the sales of the
shares previously owned by Fortunato's co-owners be
registered and annotated on the existing certificate of
title of Lot No. 2319.  According to the trial court,
private respondent failed to prove that she had actually
paid the purchase price of P5,000.00 to Fortunato and
petitioner.  Applying, therefore, the provision of Article
1350 of the Civil Code,23 the trial court concluded that
private respondent did not have the right to demand
the delivery to her of the registrable deed of sale over
Fortunato's portion of the Lot No. 2319.
The trial court also rejected Fortunato and petitioner's
claim that they had the right of redemption over the
shares previously sold to private respondent and the
latter's husband, reasoning as follows:
Defendants in their counterclaim invoke their right of
legal redemption under Article 1623 of the New Civil
Code in view of the alleged sale of the undivided
portions of the lot in question by their co-heirs and co-
owners as claimed by the plaintiffs in their complaint. 
They have been informed by the plaintiff about said
sales upon the filing of the complaint in the instant case
as far back as March 14, 1973.  Defendant themselves
presented as their very own exhibits copies of the
respective deeds of sale or conveyance by their said co-
heirs and co-owners in favor of the plaintiffs or their
predecessors-in-interest way back on January 2, 1992
when they formally offered their exhibits in the instant
case; meaning, they themselves acquired possession of
said documentary exhibits even before they formally
offered them in evidence.  Under Art. 1623 of the New
Civil Code, defendants have only THIRTY (30) DAYS
counted from their actual knowledge of the exact terms
and conditions of the deeds of sale or conveyance of
their co-heirs' and co-owners' share within which to
exercise their right of legal redemption. 24
Within the reglementary period, both parties filed their
respective notices of appeal before the trial court with
petitioner and her children taking exception to the
finding of the trial court that the period within which
they could invoke their right of redemption had already
lapsed.25 For her part, private respondent raised as
errors the trial court's ruling that there was no contract
of sale between herself and Fortunato and the dismissal
of their complaint for specific performance. 26
The Court of Appeals, in the decision now assailed
before us, reversed and set aside the trial court's
dismissal of the private respondent's complaint but
upheld the portion of the court a quo's decision
ordering the dismissal of petitioner and her children's
counterclaim.  The dispositive portion of the appellate
court's decision reads:
WHEREFORE, the decision dated March 11, 1994, is
hereby REVERSED and SET ASIDE insofar as the dismissal
of plaintiffs-appellants' complaint is concerned, and
another one is entered ordering the defendant-
appellant Fortunato Ape and/or his wife Perpetua de
Ape and successors-in-interest to execute in favor of
plaintiff-appellant Generosa Cawit de Lumayno a Deed
of Absolute Sale involving the one-eleventh (1/11) share
or participation of Fortunato Ape in Lot No. 2319,
Escalante Cadastre, containing an area of 12,527.19
square meters, more or less, within (30) days from
finality of this decision, and in case of non-compliance
with this Order, that the Clerk of Court of said court is
ordered to execute the deed on behalf of the vendor.  compliance within said period, this Court appoints the
The decision is AFFIRMED insofar as the dismissal of
defendants-appellants' counterclaim is concerned.
Without pronouncement as to costs.27
The Court of Appeals upheld private respondent's
position that Exhibit "G" had all the earmarks of a valid
contract of sale, thus:
Exhibit G is the best proof that the P5,000.00
representing the purchase price of the 1/11 th share of
Fortunato Ape was not paid by the vendee on April 11,
1971, and/or up to the present, but that does not affect
the binding force and effect of the document.  The
vendee having paid the vendor an advance payment of
the agreed purchase price of the property, what the
vendor can exact from the vendee is full payment upon
his execution of the final deed of sale.  As is shown, the
vendee precisely instituted this action to compel the
vendor Fortunato Ape to execute the final document,
after she was informed that he would execute the same
upon arrival of his daughter "Bala" from Mindanao, but
afterwards failed to live up to his contractual obligation
(TSN, pp. 11-13, June 10, 1992).
It is not right for the trial court to expect plaintiff-
appellant to pay the balance of the purchase price
before the final deed is executed, or for her to deposit
the equivalent amount in court in the form of
consignation.  Consignation comes into fore in the case
of a creditor to whom tender of payment has been
made and refuses without just cause to accept it (Arts.
1256 and 1252, N.C.C.; Querino vs. Pelarca, 29 SCRA 1). 
As vendee, plaintiff-appellant Generosa Cawit de
Lumayno does not fall within the purview of a debtor.
We, therefore, find and so hold that the trial court
should have found that exhibit G bears all the earmarks
of a private deed of sale which is valid, binding and
enforceable between the parties, and that as a
consequence of the failure and refusal on the part of
the vendor Fortunato Ape to live up to his contractual
obligation, he and/or his heirs and successors-in-
interest can be compelled to execute in favor of, and to
deliver to the vendee, plaintiff-appellant Generosa
Cawit de Lumayno a registerable deed of absolute sale
involving his one-eleventh (1/11th) share or participation
in Lot No. 2319, Escalante Cadastre, containing an area
of 12,527.19 square meters, more or less, within 30
days from finality of this decision, and, in case of non-
Clerk of Court of the trial court to execute on behalf of
the vendor the said document.28
The Court of Appeals, however, affirmed the trial
court's ruling on the issue of petitioner and her
children's right of redemption.  It ruled that Fortunato's
receipt of the Second Owner's Duplicate of OCT (RP)
1379 (RP-154 ([300]), containing the adverse claim of
private respondent and her husband, constituted a
sufficient compliance with the written notice
requirement of Article 1623 of the Civil Code and the
period of redemption under this provision had long
lapsed.
Aggrieved by the decision of the appellate court,
petitioner is now before us raising, essentially, the
following issues: whether Fortunato was furnished with
a written notice of sale of the shares of his co-owners as
required by Article 1623 of the Civil Code; and whether
the receipt signed by Fortunato proves the existence of
a contract of sale between him and private respondent.
In her memorandum, petitioner claimed that the Court
of Appeals erred in sustaining the court a quo's
pronouncement that she could no longer redeem the
portion of Lot No. 2319 already acquired by private
respondent for no written notice of said sales was
furnished them.  According to her, the Court of Appeals
unduly expanded the scope of the law by equating
Fortunato's receipt of Second Owner's Duplicate of OCT
(RP) 1379 (RP-154 ([300]) with the written notice
requirement of Article 1623.  In addition, she argued
that Exhibit "G" could not possibly be a contract of sale
of Fortunato's share in Lot No. 2319 as said document
does not contain "(a) definite agreement on the manner
of payment of the price."29 Even assuming that Exhibit
"G" is, indeed, a contract of sale between private
respondent and Fortunato, the latter did not have the
obligation to deliver to private respondent a registrable
deed of sale in view of private respondent's own failure
to pay the full purchase price of Fortunato's portion of
Lot No. 2319.  Petitioner is also of the view that, at
most, Exhibit "G" merely contained a unilateral promise
to sell which private respondent could not enforce in
the absence of a consideration distinct from the
purchase price of the land.  Further, petitioner
reiterated her claim that due to the illiteracy of her
husband, it was incumbent upon private respondent to
show that the contents of Exhibit "G" were fully
explained to him.  Finally, petitioner pointed out that
the Court of Appeals erred when it took into
consideration the same exhibit despite the fact that
only its photocopy was presented before the court.
On the other hand, private respondent argued that the
annotation on the second owner's certificate over Lot
No. 2319 constituted constructive notice to the whole
world of private respondent's claim over the majority of
said parcel of land.  Relying on our decision in the case
of Cabrera v. Villanueva,30 private respondent insisted
that when Fortunato received a copy of the second
owner's certificate, he became fully aware of the
contracts of sale entered into between his co-owners
on one hand and private respondent and her deceased
husband on the other.
Private respondent also averred that "although (Lot No.
2319) was not actually partitioned in a survey after the
death of Cleopas Ape, the land was partitioned in a
'hantal-hantal' manner by the heirs.  Each took and
possessed specific portion or premises as his/her share
in land, farmed their respective portion or premises,
and improved them, each heir limiting his/her
improvement within the portion or premises which
were his/her respective share."31 Thus, when private
respondent and her husband purchased the other parts
of Lot No. 2319, it was no longer undivided as petitioner
claims.
The petition is partly meritorious.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not
be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as
the case may be.  The deed of sale shall not be recorded
in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice
thereof to all possible redemptioners.
Despite the plain language of the law, this Court has,
over the years, been tasked to interpret the "written
notice requirement" of the above-quoted provision.  In
the case Butte v. Manuel Uy & Sons, Inc.,32 we declared
that –
In considering whether or not the offer to redeem was
timely, we think that the notice given by the vendee
(buyer) should not be taken into account.  The text of
Article 1623 clearly and expressly prescribes that the
thirty days for making the redemption are to be
counted from notice in writing by the vendor.  Under
the old law (Civ. Code of 1889, Art. 1524), it was
immaterial who gave the notice; so long as the
redeeming co-owner learned of the alienation in favor
of the stranger, the redemption period began to run.  It
is thus apparent that the Philippine legislature in Article
1623 deliberately selected a particular method of giving
notice, and that method must be deemed exclusive. (39
Am. Jur., 237; Payne vs. State, 12 S.W. 2(d) 528).  As
ruled in Wampler vs. Lecompte, 150 Atl. 458 (affd. in 75
Law Ed. [U.S.] 275) –
why these provisions were inserted in the statute we
are not informed, but we may assume until the contrary
is shown, that a state of facts in respect thereto existed,
which warranted the legislature in so legislating.
The reasons for requiring that the notice should be
given by the seller, and not by the buyer, are easily
divined.  The seller of an undivided interest is in the
best position to know who are his co-owners that under
the law must be notified of the sale.  Also, the notice by
the seller removes all doubts as to fact of the sale, its
perfection; and its validity, the notice being a
reaffirmation thereof, so that the party notified need
not entertain doubt that the seller may still contest the
alienation.  This assurance would not exist if the notice
should be given by the buyer.33
The interpretation was somehow modified in the case
of De Conejero, et al. v. Court of Appeals, et
al.34 wherein it was pointed out that Article 1623 "does
not prescribe a particular form of notice, nor any
distinctive method for notifying the redemptioner"
thus, as long as the redemptioner was notified in writing
of the sale and the particulars thereof, the redemption
period starts to run.  This view was reiterated
in Etcuban v. The Honorable Court of Appeals, et
al.,35 Cabrera v. Villanueva,36 Garcia, et al. v. Calaliman,
et al.,37 Distrito, et al. v. The Honorable Court of Appeals,
et al.,38 and Mariano, et al. v. Hon. Court of Appeals, et
al.39
However, in the case of Salatandol v. Retes,40 wherein
the plaintiffs were not furnished any written notice of
sale or a copy thereof by the vendor, this Court again
referred to the principle enunciated in the case of
Butte.  As observed by Justice Vicente Mendoza, such
reversion is only sound, thus:
… Art. 1623 of the Civil Code is clear in requiring that
the written notification should come from the vendor or
prospective vendor, not from any other person.  There
is, therefore, no room for construction.  Indeed, the
principal difference between Art. 1524 of the former
Civil Code and Art. 1623 of the present one is that the
former did not specify who must give the notice,
whereas the present one expressly says the notice must
be given by the vendor.  Effect must be given to this
change in statutory language.41
In this case, the records are bereft of any indication that
Fortunato was given any written notice of prospective
or consummated sale of the portions of Lot No. 2319 by
the vendors or would-be vendors.  The thirty (30)-day
redemption period under the law, therefore, has not
commenced to run.
Despite this, however, we still rule that petitioner could
no longer invoke her right to redeem from private
respondent for the exercise of this right "presupposes
the existence of a co-ownership at the time the
conveyance is made by a co-owner and when it is
demanded by the other co-owner or co-owners." 42 The
regime of co-ownership exists when ownership of an
undivided thing or right belongs to different
persons.43 By the nature of a co-ownership, a co-owner
cannot point to specific portion of the property owned
in common as his own because his share therein
remains intangible.44 As legal redemption is intended to
minimize co-ownership,45 once the property is
subdivided and distributed among the co-owners, the
community ceases to exist and there is no more reason
to sustain any right of legal redemption. 46
In this case, records reveal that although Lot No. 2319
has not yet been formally subdivided, still, the particular
portions belonging to the heirs of Cleopas Ape had
already been ascertained and they in fact took
possession of their respective parts.  This can be
deduced from the testimony of petitioner herself, thus:
Q         When the plaintiffs leased the share of your
husband, were there any metes and bounds?
A         It was not formally subdivided.  We have only a
definite portion.  (hantal-hantal)
Q         This hantal-hantal of your husband, was it also
separate and distinct from the hantal-hantal or the
share of the brothers and sisters of your husband?
A         Well, this property in question is a common
property.
Q         To the north, whose share was that which is
adjacent to your husband's assumed partition?
A         I do not know what [does] this "north" [mean].
COURT
(To Witness)
Q         To the place from where the sun rises, whose
share was that?
A         The shares of Cornelia, Loreta, Encarnacion and
Adela.
Q         How could you determine their own shares?
A         They were residing in their respective assumed
portions.
Q         How about determining their respective
boundaries?
A         It could be determined by stakes and partly a row
of banana plantations planted by my son-in-law.
Q         Who is this son-in-law you mentioned?
A         Narciso Ape.
ATTY. CAWIT
(Continuing)
Q         You said that there were stakes to determine the
hantal-hantal of your husband and the hantal-hantal of
the other heirs, did I get you right?
ATTY. TAN
Admitted, Your Honor.
… land ostensibly corresponding to his share."49
ATTY. CAWIT
Q         Mrs. Ape, in 1960, Cleopas Ape was already
dead, is that correct?
A         Certainly, since he died in 1950.
Q         By the manifestation of your counsel that the
entire land (13 hectares) of your father-in-law, Cleopas
Ape, was leased to Generosa Lumayno, is this correct?
A         No, it is only the assumed portion of my husband
[which] was leased to Generosa Lumayno.
Q         For clarification, it was only the share of your
husband [which] was leased to Generosa Cawit
Lumayno?
A         Yes.47
ATTY. CAWIT
Q         My question: is that portion which you said was
leased by your husband to the Lumayno[s] and which
was included to the lease by your mother-in-law to the
Lumayno[s], when the Lumayno[s] returned your
husband['s] share, was that the same premises that
your husband leased to the Lumayno[s]?
A         The same.
Q         In re-possessing this portion of the land
corresponding to the share of your husband, did your
husband demand that they should re-possess the land
from the Lumayno[s] or did the Lumayno[s] return them
to your husband voluntarily?
A         They just returned to us without paying the
rentals.
COURT
Q        Was the return the result of your husband's
request or just voluntarily they returned it to your
husband?
A        No, sir, it was just returned voluntarily, and they
abandoned the area but my husband continued
farming.48
Similarly telling of the partition is the stipulation of the
parties during the pre-trial wherein it was admitted that
Lot No. 2319 had not been subdivided nevertheless,
"Fortunato Ape had possessed a specific portion of the
From the foregoing, it is evident that the partition of Lot
No. 2319 had already been effected by the heirs of
Cleopas Ape.  Although the partition might have been
informal is of no moment for even an oral agreement of
partition is valid and binding upon the
parties.50 Likewise, the fact that the respective shares of
Cleopas Ape's heirs are still embraced in one and the
same certificate of title and have not been technically
apportioned does not make said portions less
determinable and identifiable from one another nor
does it, in any way, diminish the dominion of their
respective owners.51
Turning now to the second issue of the existence of a
contract of sale, we rule that the records of this case
betray the stance of private respondent that Fortunato
Ape entered into such an agreement with her.
A contract of sale is a consensual contract, thus, it is
perfected by mere consent of the parties.  It is born
from the moment there is a meeting of minds upon the
thing which is the object of the sale and upon the
price.52 Upon its perfection, the parties may reciprocally
demand performance, that is, the vendee may compel
the transfer of the ownership and to deliver the object
of the sale while the vendor may demand the vendee to
pay the thing sold.53 For there to be a perfected contract
of sale, however, the following elements must be
present: consent, object, and price in money or its
equivalent.  In the case of Leonardo v. Court of Appeals,
et al.,54 we explained the element of consent, to wit:
The essence of consent is the agreement of the parties
on the terms of the contract, the acceptance by one of
the offer made by the other.  It is the concurrence of
the minds of the parties on the object and the cause
which constitutes the contract.  The area of agreement
must extend to all points that the parties deem material
or there is no consent at all.
To be valid, consent must meet the following requisites:
(a) it should be intelligent, or with an exact notion of
the matter to which it refers; (b) it should be free and
(c) it should be spontaneous.  Intelligence in consent is
vitiated by error; freedom by violence, intimidation or
undue influence; spontaneity by fraud. 55
In this jurisdiction, the general rule is that he who
alleges fraud or mistake in a transaction must
substantiate his allegation as the presumption is that a
person takes ordinary care for his concerns and that
private dealings have been entered into fairly and
regularly.56 The exception to this rule is provided for
under Article 1332 of the Civil Code which provides that
"[w]hen one of the parties is unable to read, or if the
contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been
fully explained to the former."
In this case, as private respondent is the one seeking to
enforce the claimed contract of sale, she bears the
burden of proving that the terms of the agreement
were fully explained to Fortunato Ape who was an
illiterate.  This she failed to do.  While she claimed in
her testimony that the contents of the receipt were
made clear to Fortunato, such allegation was debunked
by Andres Flores himself when the latter took the
witness stand.  According to Flores:
ATTY. TAN
Q         Mr. Witness, that receipt is in English, is it not?
A         Yes, sir.
Q         When you prepared that receipt, were you aware
that Fortunato Ape doesn't know how to read and write
English?
A         Yes, sir, I know.
Q         Mr. Witness, you said you were present at the
time of the signing of that alleged receipt of P30.00,
correct?
A         Yes, sir.
Q         Where, in what place was this receipt signed?
A         At the store.
Q         At the time of the signing of this receipt, were
there other person[s] present aside from you, your
mother-in-law and Fortunato Ape?
A           In the store, yes, sir.
Q         When you signed that document of course you
acted as witness upon request of your mother-in-law?
A         No, this portion, I was the one who prepared that
document.
Q         Without asking of (sic) your mother-in-law, you
prepared that document or it was your mother-in-law
who requested you to prepare that document and
acted as witness?
A         She requested me to prepare but does not
instructed (sic) me to act as witness.  It was our opinion
that whenever I prepared the document, I signed it as a
witness.
Q         Did it not occur to you to ask other witness to act
on the side of Fortunato Ape who did not know how to
read and write English?
A         It occurred to me.
Q         But you did not bother to request a person who
is not related to your mother-in-law, considering that
Fortunato Ape did not know how to read and write
English?
A         The one who represented Fortunato Ape doesn't
know also how to read and write English.  One a maid.
Q         You mentioned that there [was another] person
inside the store, under your previous statement, when
the document was signed, there [was another] person
in the store aside from you, your mother-in-law and
Fortunato Ape, is not true?
A         That is true, there is one person, but that person
doesn't know how to read also.
…
WHEREFORE, premises considered, the decision dated
25 March 1998 of the Court of Appeals is hereby
REVERSED and SET ASIDE and the decision dated 11
March 1994 of the Regional Trial Court, Branch 58, San
Carlos City, Negros Occidental, dismissing both the
complaint and the counterclaim, is hereby REINSTATED. 
No costs.
SO ORDERED.

Q         Of course, Mr. Witness, since it occurred to you

that there was need for other witness to sign that
document for Fortunato Ape, is it not a fact that the
Municipal Building is very near your house?

A         Quite (near).

Q         But you could readily proceed to the Municipal

Building and request one who is knowledgeable in
English to act as witness?

A         I think there is no need for that small receipt.  So I

don't bother myself to go.

Q         You did not consider that receipt very important

because you said that small receipt?

A         Yes, I know.57

As can be gleaned from Flores's testimony, while he was

very much aware of Fortunato's inability to read and
write in the English language, he did not bother to fully
explain to the latter the substance of the receipt
(Exhibit "G").  He even dismissed the idea of asking
somebody else to assist Fortunato considering that a
measly sum of thirty pesos was involved.  Evidently, it
did not occur to Flores that the document he himself
prepared pertains to the transfer altogether of
Fortunato's property to his mother-in-law.  It is
precisely in situations such as this when the wisdom of
Article 1332 of the Civil Code readily becomes apparent
which is "to protect a party to a contract disadvantaged
by illiteracy, ignorance, mental weakness or some other
handicap."58

In sum, we hold that petitioner is no longer entitled to

the right of redemption under Article 1632 of the Civil
Code as Lot No. 2319 had long been partitioned among
its co-owners. This Court likewise annuls the contract of
sale between Fortunato and private respondent on the
ground of vitiated consent.
.G.R. No. 137552               June 16, 2000
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA,
MICHAEL Z. LAFORTEZA, DENNIS Z. LAFORTEZA, and
LEA Z. LAFORTEZA, petitioners,
vs.
ALONZO MACHUCA, respondent.
GONZAGA-REYES, J.:
This Petition for Review on Certiorari  seeks the reversal
of the Decision of the Court of Appeals 1 in CA G.R. CV
No. 147457 entitled "ALONZO MACHUCA versus
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, LEA
ZULUETA-LAFORTEZA, MICHAEL Z. LAFORTEZA, and
DENNIS Z. LAFORTEZA".
The following facts as found by the Court of Appeals are
undisputed:
The property involved consists of a house and lot
located at No. 7757 Sherwood Street, Marcelo Green
Village, Parañaque, Metro Manila, covered by Transfer
Certificate of Title (TCT) No. (220656) 8941 of the
Registered of Deeds of Parañaque (Exhibit "D", Plaintiff,
record, pp. 331-332). The subject property is registered
in the name of the late Francisco Q. Laforteza, although
it is conjugal in nature (Exhibit "8", Defendants, record
pp. 331-386).
On August 2, 1988, defendant Lea Zulueta-Laforteza
executed a Special Power of Attorney in favor of
defendants Roberto Z. Laforteza and Gonzalo Z.
Laforteza, Jr., appointing both as her Attorney-in-fact
authorizing them jointly to sell the subject property and
sign any document for the settlement of the estate of
the late Francisco Q. Laforteza (Exh. "A", Plaintiff,
record, pp. 323-325).
Likewise on the same day, defendant Michael Z.
Laforteza executed a Special Power of Attorney in favor
of defendants Roberto Z. Laforteza and Gonzalo
Laforteza, Jr., likewise, granting the same authority
(Exh. "B", record, pp. 326-328) Both agency instruments
contained a provision that in any document or paper to
exercise authority granted, the signature of both
attorneys- in-fact must be affixed.
On October 27, 1988, defendant Dennis Z. Laforteza
executed a Special Power of Attorney in favor of
defendant Roberto Z. Laforteza for the purpose of
selling the subject property (Exh. "C", Plaintiff, record,
pp. 329-330). A year later, on October 30, 1989, Dennis
Z. Laforteza executed another Special Power of Attorney
in favor of defendants Roberto Z. Laforteza and Gonzalo
Laforteza, Jr. naming both attorneys-in-fact for the
purpose of selling the subject property and signing any
document for the settlement of the estate of the late
Francisco Q. Laforteza. The subsequent agency
instrument (Exh, "2", record, pp. 371-373) contained
similar provisions that both attorneys-in-fact should sign
any document or paper executed in the exercise of their
authority.1âwphi1.nêt
In the exercise of the above authority, on January 20,
1989, the heirs of the late Francisco Q. Laforteza
represented by Roberto Z. Laforteza and Gonzalo Z.
Laforteza, Jr. entered into a Memorandum of
Agreement (Contract to Sell) with the plaintiff 2 over the
subject property for the sum of SIX HUNDRED THIRTY
THOUSAND PESOS (P630,000.00) payable as follows:
(a) P30,000.00 as earnest money, to be forfeited in
favor of the defendants if the sale is not effected due to
the fault of the plaintiff;
(b) P600,000.00 upon issuance of the new certificate of
title in the name of the late Francisco Q. Laforteza and
upon execution of an extra-judicial settlement of the
decedent's estate with sale in favor of the plaintiff (Par.
2, Exh. "E", record, pp. 335-336).
Significantly, the fourth paragraph of the Memorandum
of Agreement (Contract to Sell) dated January 20, 1989
(Exh. "E", supra.) contained a provision as follows:
. . . . Upon issuance by the proper Court of the new title,
the BUYER-LESSEE shall be notified in writing and said
BUYER-LESSEE shall have thirty (30) days to produce the
balance of P600,000.00 which shall be paid to the
SELLER-LESSORS upon the execution of the Extrajudicial
Settlement with sale.
On January 20, 1989, plaintiff paid the earnest money of
THIRTY THOUSAND PESOS (P30,000.00), plus rentals for
the subject property (Exh. "F", Plaintiff, record, p. 339).
On September 18, 1998 3 , defendant heirs, through
their counsel wrote a letter (Exh. 1, Defendants, record,
p. 370) to the plaintiff furnishing the latter a copy of the
reconstituted title to the subject property, advising him
that he had thirty (3) days to produce the balance of SIX
HUNDRED PESOS (sic) (P600,000.00) under the
Memorandum of Agreement which plaintiff received on
the same date.
On October 18, 1989, plaintiff sent the defendant heirs
a letter requesting for an extension of the THIRTY (30)
DAYS deadline up to November 15, 1989 within which
to produce the balance of SIX HUNDRED THOUSAND
PESOS (P600,000.00) (Exh. "G", Plaintiff, record, pp.
341-342). Defendant Roberto Z. Laforteza, assisted by
his counsel Atty. Romeo L. Gutierrez, signed his
conformity to the plaintiff's letter request (Exh. "G-1
and "G-2", Plaintiff, record, p. 342). The extension,
however, does not appear to have been approved by
Gonzalo Z. Laforteza, the second attorney-in-fact as his
conformity does not appear to have been secured.
On November 15, 1989, plaintiff informed the
defendant heirs, through defendant Roberto Z.
Laforteza, that he already had the balance of SIX
HUNDRED THOUSAND PESOS (P600,000.00) covered by
United Coconut Planters Bank Manager's Check No.
000814 dated November 15, 1989 (TSN, August 25,
1992, p. 11; Exhs. "H", record, pp. 343-344; "M",
records p. 350; and "N", record, p. 351). However, the
defendants, refused to accept the balance (TSN, August
24, 1992, p. 14; Exhs. "M-1", Plaintiff, record, p. 350;
and "N-1", Plaintiff, record, p. 351). Defendant Roberto
Z. Laforteza had told him that the subject property was
no longer for sale (TSN, October 20, 1992, p. 19; Exh.
"J", record, p. 347).
On November 20, 1998 4 , defendants informed plaintiff
that they were canceling the Memorandum of
Agreement (Contract to Sell) in view of the plaintiff's
failure to comply with his contractual obligations (Exh.
"3").
Thereafter, plaintiff reiterated his request to tender
payment of the balance of SIX HUNDRED THOUSAND
PESOS (P600,000.00). Defendants, however, insisted on
the rescission of the Memorandum of Agreement.
Thereafter, plaintiff filed the instant action for specific
performance. The lower court rendered judgment on
July 6, 1994 in favor of the plaintiff, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of
plaintiff Alonzo Machuca and against the defendant
heirs of the late Francisco Q. Laforteza, ordering the
said defendants.
(a) To accept the balance of P600,000.00 as full
payment of the consideration for the purchase of the
house and lot located at No. 7757 Sherwood Street,
Marcelo Green Village, Parañaque, Metro Manila,
covered by Transfer Certificate of Title No. (220656)
8941 of the Registry of Deeds of Rizal Parañaque,
Branch;
(b) To execute a registrable deed of absolute sale over
the subject property in favor of the plaintiff;
(c) Jointly and severally to pay the plaintiff the sum of
P20,000.00 as attorney's fees plus cost of suit.
SO ORDERED. (Rollo, pp. 74-75). 5
Petitioners appealed to the Court of Appeals, which
affirmed with modification the decision of the lower
court; the dispositive portion of the Decision reads:
WHEREFORE, the questioned decision of the lower
court is hereby AFFIRMED with the MODIFICATION that
defendant heirs Lea Zulueta-Laforteza, Michael Z.
Laforteza, Dennis Z. Laforteza and Roberto Z. Laforteza
including Gonzalo Z. Laforteza, Jr. are hereby ordered to
pay jointly and severally the sum of FIFTY THOUSAND
PESOS (P50,000.00) as moral damages.
SO ORDERED. 6
Motion for Reconsideration was denied but the
Decision was modified so as to absolve Gonzalo Z.
Laforteza, Jr. from liability for the payment of moral
damages. 7 Hence this petition wherein the petitioners
raise the following issues:
I. WHETHER THE TRIAL AND APPELLATE COURTS
CORRECTLY CONSTRUED THE MEMORANDUM OF
AGREEMENT AS IMPOSING RECIPROCAL OBLIGATIONS.
II. WHETHER THE COURTS A QUO  CORRECTLY RULED
THAT RESCISSION WILL NOT LIE IN THE INSTANT CASE.
III. WHETHER THE RESPONDENT IS UNDER ESTOPPEL
FROM RAISING THE ALLEGED DEFECT IN THE SPECIAL
POWER OF ATTORNEY DATED 30 OCTOBER 1989
EXECUTED BY DENNIS LAFORTEZA.
IV. SUPPOSING EX GRATIA ARGUMENTI  THE
MEMORANDUM OF AGREEMENT IMPOSES RECIPROCAL
OBLIGATIONS, WHETHER THE PETITIONERS MAY BE
COMPELLED TO SELL THE SUBJECT PROPERTY WHEN
THE RESPONDENT FAILED TO MAKE A JUDICIAL
CONSIGNATION OF THE PURCHASE PRICE?
V. WHETHER THE PETITIONERS ARE IN BAD FAITH SO TO
AS MAKE THEM LIABLE FOR MORAL DAMAGES? 8
The petitioners contend that the Memorandum of
Agreement is merely a lease agreement with "option to
purchase". As it was merely an option, it only gave the
respondent a right to purchase the subject property
within a limited period without imposing upon them
any obligation to purchase it. Since the respondent's
tender of payment was made after the lapse of the
option agreement, his tender did not give rise to the
perfection of a contract of sale.
It is further maintained by the petitioners that the Court
of Appeals erred in ruling that rescission of the contract
was already out of the question. Rescission implies that
a contract of sale was perfected unlike the
Memorandum of Agreement in question which as
previously stated is allegedly only an option contract.
Petitioner adds that at most, the Memorandum of
Agreement (Contract to Sell) is a mere contract to sell,
as indicated in its title. The obligation of the petitioners
to sell the property to the respondent was conditioned
upon the issuance of a new certificate of title and the
execution of the extrajudicial partition with sale and
payment of the P600,000.00. This is why possession of
the subject property was not delivered to the
respondent as the owner of the property but only as the
lessee thereof. And the failure of the respondent to pay
the purchase price in full prevented the petitioners'
obligation to convey title from acquiring obligatory
force.
Petitioners also allege that assuming for the sake of
argument that a contract of sale was indeed perfected,
the Court of Appeals still erred in holding that
respondent's failure to pay the purchase price of
P600,000.00 was only a "slight or casual breach".
The petitioners also claim that the Court of Appeals
erred in ruling that they were not ready to comply with
their obligation to execute the extrajudicial settlement.
The Power of Attorney to execute a Deed of Sale made
by Dennis Z. Laforteza was sufficient and necessarily
included the power to execute an extrajudicial
settlement. At any rate, the respondent is estopped
from claiming that the petitioners were not ready to
comply with their obligation for he acknowledged the
petitioners' ability to do so when he requested for an
extension of time within which to pay the purchase
price. Had he truly believed that the petitioners were
not ready, he would not have needed to ask for said
extension.
Finally, the petitioners allege that the respondent's
uncorroborated testimony that third persons offered a
higher price for the property is hearsay and should not
be given any evidentiary weight. Thus, the order of the
lower court awarding moral damages was without any
legal basis.
The appeal is bereft of merit.
A perusal of the Memorandum Agreement shows that
the transaction between the petitioners and the
respondent was one of sale and lease. The terms of the
agreement read:
1. For and in consideration of the sum of PESOS: SIX
HUNDRED THIRTY THOUSAND (P630,000.00) payable in
a manner herein below indicated, SELLER-LESSOR
hereby agree to sell unto BUYER-LESSEE the property
described in the first WHEREAS of this Agreement
within six (6) months from the execution date hereof, or
upon issuance by the Court of a new owner's certificate
of title and the execution of extrajudicial partition with
sale of the estate of Francisco Laforteza, whichever is
earlier;
2. The above-mentioned sum of PESOS: SIX HUNDRED
THIRTY THOUSAND (P630,000.00) shall be paid in the
following manner:
P30,000.00 — as earnest money and as consideration
for this Agreement, which amount shall be forfeited in
favor of SELLER-LESSORS if the sale is not effected
because of the fault or option of BUYER-LESSEE;
P600,000.00 — upon the issuance of the new certificate
of title in the name of the late Francisco Laforteza and
upon the execution of an Extrajudicial Settlement of his
estate with sale in favor of BUYER-LESSEE free from lien
or any encumbrances.
3. Parties reasonably estimate that the issuance of a
new title in place of the lost one, as well as the
execution of extrajudicial settlement of estate with sale
to herein BUYER-LESSEE will be completed within six (6)
months from the execution of this Agreement. It is
therefore agreed that during the six months period,
BUYER-LESSEE will be leasing the subject property for
six months period at the monthly rate of PESOS: THREE
THOUSAND FIVE HUNDRED
(P3,500.00). Provided however, that if the issuance of
new title and the execution of Extrajudicial Partition is
completed prior to the expiration of the six months
period, BUYER-LESSEE shall only be liable for rentals for
the corresponding period commencing from his
occupancy of the premises to the execution and
completion of the Extrajudicial Settlement of the estate,
provided further that if after the expiration of six (6)
months, the lost title is not yet replaced and the extra
judicial partition is not executed, BUYER-LESSEE shall no
longer be required to pay rentals and shall continue to
occupy, and use the premises until subject condition is
complied by SELLER-LESSOR;
4. It is hereby agreed that within reasonable time from
the execution of this Agreement and the payment by
BUYER-LESSEE of the amount of P30,000.00 as herein
above provided, SELLER-LESSORS shall immediately file
the corresponding petition for the issuance of a new
title in lieu of the lost one in the proper Courts. Upon
issuance by the proper Courts of the new title, the
BUYER-LESSEE shall have thirty (30) days to produce the
balance of P600,000.00 which shall be paid to the
SELLER-LESSORS upon the execution of the Extrajudicial
Settlement with sale. 9
A contract of sale is a consensual contract and 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. 10 From that moment the parties
may reciprocally demand performance subject to the
provisions of the law governing the form of
contracts. 11 The elements of a valid contract of sale
under Article 1458 of the Civil Code are (1) consent or
meeting of the minds; (2) determinate subject matter
and (3) price certain money or its equivalent. 12
In the case at bench, there was a perfected agreement
between the petitioners and the respondent whereby
the petitioners obligated themselves to transfer the
ownership of and deliver the house and lot located at
7757 Sherwood St., Marcelo Green Village, Parañaque
and the respondent to pay the price amounting to six
hundred thousand pesos (P600,000.00). All the
elements of a contract of sale were thus present.
However, the balance of the purchase price was to be
paid only upon the issuance of the new certificate of
title in lieu of the one in the name of the late Francisco
Laforteza and upon the execution of an extrajudicial
settlement of his estate. Prior to the issuance of the
"reconstituted" title, the respondent was already placed
in possession of the house and lot as lessee thereof for
six months at a monthly rate of three thousand five
hundred pesos (P3,500.00). It was stipulated that
should the issuance of the new title and the execution
of the extrajudicial settlement be completed prior to
expiration of the six-month period, the respondent
would be liable only for the rentals pertaining to the
period commencing from the date of the execution of
the agreement up to the execution of the extrajudicial
settlement. It was also expressly stipulated that if after
the expiration of the six month period, the lost title was
not yet replaced and the extrajudicial partition was not
yet executed, the respondent would no longer be
required to pay rentals and would continue to occupy
and use the premises until the subject condition was
complied with the petitioners.
The six-month period during which the respondent
would be in possession of the property as lessee, was
clearly not a period within which to exercise an option.
An option is a contract granting a privilege to buy or sell
within an agreed time and at a determined price. An
option contract is a separate and distinct contract from
that which the parties may enter into upon the
consummation of the option. 13 An option must be
supported by consideration.14 An option contract is
governed by the second paragraph of Article 1479 of
the Civil Code 15 , which reads:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a
consideration distinct from the price.
In the present case, the six-month period merely
delayed the demandability of the contract of sale and
did not determine its perfection for after the expiration
of the six-month period, there was an absolute
obligation on the part of the petitioners and the
respondent to comply with the terms of the sale. The
parties made a "reasonable estimate" that the
reconstitution the lost title of the house and lot would
take approximately six months and thus presumed that
after six months, both parties would be able to comply
with what was reciprocally incumbent upon them. The
fact that after the expiration of the six-month period,
the respondent would retain possession of the house
and lot without need of paying rentals for the use
therefor, clearly indicated that the parties
contemplated that ownership over the property would
already be transferred by that time.
The issuance of the new certificate of title in the name
of the late Francisco Laforteza and the execution of an
extrajudicial settlement of his estate was not a
condition which determined the perfection of the
contract of sale. Petitioners' contention that since the
condition was not met, they no longer had an obligation
to proceed with the sale of the house and lot is
unconvincing. The petitioners fail to distinguish
between a condition imposed upon the perfection of
the contract and a condition imposed on the
performance of an obligation. Failure to comply with
the first condition results in the failure of a contract,
while the failure to comply with the second condition
only gives the other party the option either to refuse to
proceed with the sale or to waive the condition. Thus,
Art. 1545 of the Civil Code states:
Art. 1545. Where the obligation of either party to a
contract of sale is subject to any condition which is not
performed, such party may refuse to proceed with the
contract or he may waive performance of the condition.
If the other party has promised that the condition
should happen or be performed, such first mentioned
party may also treat the nonperformance of the
condition as a breach of warranty.
Where the ownership in the things has not passed, the
buyer may treat the fulfillment by the seller of his
obligation to deliver the same as described and as
warranted expressly or by implication in the contract of
sale as a condition of the obligation of the buyer to
perform his promise to accept and pay for the thing. 16
In the case at bar, there was already a perfected
contract. The condition was imposed only on the
performance of the obligations contained therein.
Considering however that the title was eventually
"reconstituted" and that the petitioners admit their
ability to execute the extrajudicial settlement of their
father's estate, the respondent had a right to demand
fulfillment of the petitioners' obligation to deliver and
transfer ownership of the house and lot.
What further militates against petitioners' argument
that they did not enter into a contract or sale is the fact
that the respondent paid thirty thousand pesos
(P30,000.00) as earnest money. Earnest money is
something of value to show that the buyer was really in
earnest, and given to the seller to bind the
bargain.17 Whenever earnest money is given in a
contract of sale, it is considered as part of the purchase
price and proof of the perfection of the contract. 18
We do not subscribe to the petitioners' view that the
Memorandum Agreement was a contract to sell. There
is nothing contained in the Memorandum Agreement
from which it can reasonably be deduced that the
parties intended to enter into a contract to sell, i.e. one
whereby the prospective seller would explicitly reserve
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 full payment of the price, such
payment being a positive suspensive condition, the
failure of which is not considered a breach, casual or
serious, but simply an event which prevented the
obligation from acquiring any obligatory force. 19 There
is clearly no express reservation of title made by the
petitioners over the property, or any provision which
would impose non-payment of the price as a condition
for the contract's entering into force. Although the
memorandum agreement was also denominated as a
"Contract to Sell", we hold that the parties
contemplated a contract of sale. A deed of sale is
absolute in nature although denominated a conditional
sale in the absence of a stipulation reserving title in the
petitioners until full payment of the purchase price. 20 In
such cases, ownership of the thing sold passes to the
vendee upon actual or constructive delivery
thereof. 21 The mere fact that the obligation of the
respondent to pay the balance of the purchase price
was made subject to the condition that the petitioners
first deliver the reconstituted title of the house and lot
does not make the contract a contract to sell for such
condition is not inconsistent with a contract of sale. 22
The next issue to be addressed is whether the failure of
the respondent to pay the balance of the purchase price
within the period allowed is fatal to his right to enforce
the agreement.
We rule in the negative.
Admittedly, the failure of the respondent to pay the
balance of the purchase price was a breach of the
contract and was a ground for rescission thereof. The
extension of thirty (30) days allegedly granted to the
respondent by Roberto Z. Laforteza (assisted by his
counsel Attorney Romeo Gutierrez) was correctly found
by the Court of Appeals to be ineffective inasmuch as
the signature of Gonzalo Z. Laforteza did not appear
thereon as required by the Special Powers of
Attorney. 23 However, the evidence reveals that after the
expiration of the six-month period provided for in the
contract, the petitioners were not ready to comply with
what was incumbent upon them, i.e. the delivery of the
reconstituted title of the house and lot. It was only on
September 18, 1989 or nearly eight months after the
execution of the Memorandum of Agreement when the
petitioners informed the respondent that they already
had a copy of the reconstituted title and demanded the
payment of the balance of the purchase price. The
respondent could not therefore be considered in delay
for in reciprocal obligations, neither party incurs in
delay if the other party does not comply or is not ready
to comply in a proper manner with what was incumbent
upon him. 24
Even assuming for the sake of argument that the
petitioners were ready to comply with their obligation,
we find that rescission of the contract will still not
prosper. The rescission of a sale of an immovable
property is specifically governed by Article 1592 of the
New Civil Code, which reads:
In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price
at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after
the expiration of the period, as long as no demand for
rescission of the contract has been made upon him
either judicially or by a notarial act. After the demand,
the court may not grant him a new term. 25
It is not disputed that the petitioners did not make a
judicial or notarial demand for rescission.1avvphi1 The
November 20, 1989 letter of the petitioners informing
the respondent of the automatic rescission of the
agreement did not amount to a demand for rescission,
as it was not notarized. 26 It was also made five days
after the respondent's attempt to make the payment of
the purchase price. This offer to pay prior to the
demand for rescission is sufficient to defeat the
petitioners' right under article 1592 of the Civil
Code. 27 Besides, the Memorandum Agreement between
the parties did not contain a clause expressly
authorizing the automatic cancellation of the contract
without court intervention in the event that the terms
thereof were violated. A seller cannot unilaterally and
extrajudicially rescind a contract or sale where there is
no express stipulation authorizing him to extrajudicially
rescind. 28 Neither was there a judicial demand for the
rescission thereof. Thus, when the respondent filed his
complaint for specific performance, the agreement was
still in force inasmuch as the contract was not yet
rescinded. At any rate, considering that the six-month
period was merely an approximation of the time if
would take to reconstitute the lost title and was not a
condition imposed on the perfection of the contract and
considering further that the delay in payment was only
thirty days which was caused by the respondents
justified but mistaken belief that an extension to pay
was granted to him, we agree with the Court of Appeals
that the delay of one month in payment was a mere
casual breach that would not entitle the respondents to
rescind the contract. Rescission of a contract will not be
permitted for a slight or casual breach, but only such
substantial and fundamental breach as would defeat
the very object of the parties in making the
agreemant. 29
Petitioners' insistence that the respondent should have
consignated the amount is not determinative of
whether respondent's action for specific performance
will lie. Petitioners themselves point out that the effect
of cansignation is to extinguish the obligation. It
releases the debtor from responsibility therefor. 30 The
failure of the respondent to consignate the P600,000.00
is not tantamount to a breach of the contract for by the
fact of tendering payment, he was willing and able to
comply with his obligation.
The Court of Appeals correctly found the petitioners
guilty of bad faith and awarded moral damages to the
respondent. As found by the said Court, the petitioners
refused to comply with, their obligation for the reason
that they were offered a higher price therefor and the
respondent was even offered P100,000.00 by the
petitioners' lawyer, Attorney Gutierrez, to relinquish his
rights over the property. The award of moral damages is
in accordance with Article 1191 31 of the Civil Code
pursuant to Article 2220 which provides that moral
damages may be awarded in case of breach of contract
where the defendant acted in bad faith. The amount
awarded depends on the discretion of the court based
on the circumstances of each
case. 32 Under the circumstances, the award given by
the Court of Appeals amounting to P50,000.00 appears
to us to be fair and reasonable.
ACCORDINGLY, the decision of the Court of Appeals in
CA G.R. CV No. 47457 is AFFIRMED and the instant
petition is hereby DENIED.
No pronouncement as to costs.

SO ORDERED.