FIRST DIVISION

 
G.R. No. L-27862 November 20, 1974
LORENZO PASCUAL and LEONILA
TORRES, plaintiffs-appellees,
vs.
UNIVERSAL MOTORS CORPORATION, defendant-
appellant.
Cesar C. Peralejo for plaintiffs-appellees.
Francisco Carreon & Renato E. Tañada for defendant-
appellant.

MAKALINTAL, C.J.:p
In the lower court the parties entered into the following
stipulation of facts:
1. That the Pascual executed the real estate
mortgage subject matter of this complaint on
December 14, 1960 to secure the payment of
the indebtedness of PDP Transit, Inc. for the
purchase of five (5) units of Mercedez Benz
trucks under invoices Nos. 2836, 2837, 2838,
2839 and 2840 with a total purchase price or
principal obligation of P152,506.50 but
plaintiffs' guarantee is not to exceed
P50,000.00 which is the value of the mortgage.
2. That the principal obligation of P152,506.50
was to bear interest at 1% a month from
December 14, 1960.
3. That as of April 5, 1961 with reference to the
two units mentioned above and as of May 22,
 1961 with reference to the three units, PDP
Transit, Inc., plaintiffs' principal, had paid to the
defendant Universal Motors Corporation the
sum of P92,964.91, thus leaving a balance of
P68,641.69 including interest due as of
February 8, 1965.
4. That the aforementioned obligation
guaranteed by the plaintiffs under the Real
Estate Mortgage, subject of this action, is
further secured by separate deeds of chattel
mortgages on the Mercedez Benz units
covered by the aforementioned invoices in
favor of the defendant Universal Motors
Corporation.
5. That on March 19, 1965, the defendant
Universal Motors Corporation filed a complaint
against PDP Transit, Inc. before, the Court of
First Instance of Manila docketed as Civil Case
No. 60201 with a petition for a writ of Replevin,
to collect the balance due under the Chattel
Mortgages and to repossess all the units to
sold to plaintiffs' principal PDP Transit, Inc.
including the five (5) units guaranteed under
the subject Real (Estate) Mortgage.
In addition to the foregoing the Universal Motors
Corporation admitted during the hearing that in its suit
(C.C. No. 60201) against the PDP Transit, Inc. it was
able to repossess all the units sold to the latter,
including the five (5) units guaranteed by the subject
real estate mortgage, and to foreclose all the chattel
mortgages constituted thereon, resulting in the sale of
the trucks at public auction.
With the foregoing background, the spouses Lorenzo
Pascual and Leonila Torres, the real estate mortgagors,
filed an action in the Court of First Instance of Quezon
City (Civil Case No. 8189) for the cancellation of the
mortgage they constituted on two (2) parcels of land1 in
favor of the Universal Motors Corporation to guarantee
the obligation of PDP Transit, Inc. to the extent of
P50,000. The court rendered judgment for the plaintiffs,
ordered the cancellation of the mortgage, and directed
the defendant Universal Motors Corporation to pay
attorney's fees to the plaintiffs in the sum of P500.00.
Unsatisfied with the decision, defendant interposed the
present appeal.
In rendering judgment for the plaintiffs the lower court
said in part: "... there does not seem to be any doubt
that Art. 14842 of the New Civil Code may be applied in
relation to a chattel mortgage constituted upon personal
property on the installment basis (as in the present
case) precluding the mortgagee to maintain any further
action against the debtor for the purpose of recovering
whatever balance of the debt secured, and even adding
that any agreement to the contrary shall be null and
void."
The appellant now disputes the applicability of Article
1484 of the Civil Code to the case at bar on the ground
that there is no evidence on record that the purchase by
PDP Transit, Inc. of the five (5) trucks, the payment of
the price of which was partly guaranteed by the real
estate mortgage in question, was payable in
installments and that the purchaser had failed to pay
two or more installments. The appellant also contends
that in any event what article 1484 prohibits is for the
vendor to recover from the purchaser the unpaid
balance of the price after he has foreclosed the chattel
mortgage on the thing sold, but not a recourse against
the security put up by a third party.
Both arguments are without merit. The first involves an
issue of fact: whether or not the sale was one on
installments; and on this issue the lower court found that
it was, and that there was failure to pay two or more
installments. This finding is not subject to review by this
Court. The appellant's bare allegation to the contrary
cannot be considered at this stage of the case.
The next contention is that what article 1484 withholds
from the vendor is the right to recover any deficiency
from the purchaser after the foreclosure of the chattel
mortgage and not a recourse to the additional security
put up by a third party to guarantee the purchaser's
performance of his obligation. A similar argument has
been answered by this Court in this wise: "(T)o sustain
appellant's argument is to overlook the fact that if the
guarantor should be compelled to pay the balance of the
purchase price, the guarantor will in turn be entitled to
recover what she has paid from the debtor vendee (Art.
2066, Civil Code); so that ultimately, it will be the
vendee who will be made to bear the payment of the
balance of the price, despite the earlier foreclosure of
the chattel mortgage given by him. Thus, the protection
given by Article 1484 would be indirectly subverted, and
public policy overturned." (Cruz vs. Filipinas Investment
& Finance Corporation, L-24772, May 27, 1968; 23
SCRA 791).
The decision appealed from is affirmed, with costs
against the defendant-appellant.
Castro, Makasiar, Esguerra and Muñoz Palma, JJ.,
concur.
Teehankee, J., took no part.
 SECOND DIVISION
G.R. No. L-67181 November 22, 1985
SPOUSES RESTITUTO NONATO and ESTER
NONATO, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE
COURT and INVESTOR'S FINANCE
CORPORATION respondents.

ESCOLIN, J.:
The issue posed in this petition for review of the
decision of the respondent appellate court is whether a
vendor, or his assignee, who had cancelled the sale of a
motor vehicle for failure of the buyer to pay two or more
of the stipulated installments, may also demand
payment of the balance of the purchase price.
The pertinent facts are summarized by the respondent
appellate court as follows:
On June 28, 1976, defendant spouses
Restituto Nonato and Ester Nonato purchased
one (1) unit of Volkswagen Sakbayan from the
People's Car, Inc., on installment basis. To
secure complete payment, the defendants
executed a promissory note (Exh. A or 1) and a
chattel mortgage in favor of People's Car, Inc,
(Exh. B or 2). People's Car, Inc., assigned its
rights and interests over the note and
mortgage in favor of plaintiff Investor's Finance
Corporation (FNCB) Finance). For failure of
defendants to pay two or more installments,
despite demands, the car was repossessed by
plaintiff on March 20, 1978 (Exh. E or 4).
 Despite repossession, plaintiff demanded from
defendants that they pay the balance of the
price of the car (Exhs. F and C). Finally, on
June 9, 1978, plaintiff filed before the Court of
First Instance of Negros Occidental the present
complaint against defendants for the latter to
pay the balance of the price of the car, with
damages and attorney's fees. (Records, pp.
36-37)
In their answer, the spouses Nonato alleged by way of
defense that when the company repossessed the
vehicle, it had, by that act, effectively cancelled the sale
of the vehicle. It is therefore barred from exacting
recovery of the unpaid balance of the purchase price, as
mandated by the provisions of Article 1484 of the Civil
Code.
After due hearing, the trial court rendered a decision in
favor of the IFC and against the Nonatos, as follows:
PREMISES CONSIDERED, the Court hereby
renders judgment ordering the defendant to
pay to the plaintiff the amount of P 17,537.60
with interest at the rate of 14% per annum from
July 28, 1976 until fully paid, 10% of the
amount due as attorney's fees, litigation
expenses in the amount of P 133.05 plus the
costs of this suit. No pronouncement as to
other charges and damages, the same not
having been proven to the satisfaction of the
Court. 1
On appeal, the respondent appellate court affirmed the j
judgment.
Hence, this petition for review on certiorari.
The applicable law in the case at bar, involving as it
does a sale of personal property on installment, is
Article 1484 of the Civil Code which provides:
In a contract of sale of personal property the
price of which is payable in installments, the
vendor may exercise any of the following
remedies:
(1) Exact fulfillment of the obligation, should
the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure
to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee's failure to pay cover two or more
installments. In this case, he shall have no
further action against the purchaser to recover
any unpaid balance of the price. Any
agreement to the contrary shall be void.
The meaning of the aforequoted provision has been
repeatedly enunciated in a long line of cases. Thus:
"Should the vendee or purchaser of a personal property
default in the payment of two or more of the agreed
installments, the vendor or seller has the option to avail
of any of these three remedies-either to exact fulfillment
by the purchaser of the obligation, or to cancel the sale,
or to foreclose the mortgage on the purchased personal
property, if one was constituted. These remedies have
been recognized as alternative, not cumulative, that the
exercise of one would bar the exercise of the others. 2
It is not disputed that the respondent company had
taken possession of the car purchased by the Nonatos
on installments. But while the Nonatos maintain that the
company had, by that act, exercised its option to cancel
the contract of sale, the company contends that the
repossession of the vehicle was only for the purpose of
appraising its value and for storage and safekeeping
pending full payment by the Nonatos of the purchasing
price. The company thus denies having exercised its
right to cancel the sale of the repossessed car. The
records show otherwise.
The receipt issued by the respondent company to the
Nonatos when it took possession of the vehicle states
that the vehicle could be redeemed within fifteen [151
days. 3 This could only mean that should petitioners fail
to redeem the car within the aforesaid period by paying
the balance of the purchase price, the company would
retain permanent possession of the vehicle, as it did in
fact. This was confirmed by Mr. Ernesto Carmona, the
company's witness, who testified, to wit:
ATTY. PAMPLONA:
So that Mr. Witness, it is clear now
that, per your receipt and your
answer, the company will not return
the unit without paying a sum of
money, more particularly the balance
of the account?
WITNESS: Yes, sir. 4
Respondent corporation further asserts that it
repossessed the vehicle merely for the purpose of
appraising its current value. The allegation is untenable,
for even after it had notified the Nonatos that the value
of the car was not sufficient to cover the balance of the
purchase price, there was no attempt at all on the part
of the company to return the repossessed car,
Indeed, the acts performed by the corporation are
wholly consistent with the conclusion that it had opted to
cancel the contract of sale of the vehicle. It is thus
barred from exacting payment from petitioners of the
balance of the price of the vehicle which it had already
repossessed. It cannot have its cake and eat it too.
WHEREFORE, the judgment of the appellate court in
CA-G.R. No. 69276-R is hereby set aside and the
complaint filed by respondent Investors Finance
Corporation against petitioner in Civil Case No. 13852
should be, as it is hereby, dismissed. No costs.
SO ORDERED.
G.R. No. 82508 September 29, 1989
FILINVEST CREDIT CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, JOSE SY BANG and
ILUMINADA TAN SY BANG,*respondents.
Labaquis, Loyola, Angara and Associates for petitioner.
Alfredo 1. Raya for private respondents.

SARMIENTO, J.:
This is a petition for review on certiorari of the
decision, 1 dated March 17, 1988, of the Court of
Appeals which affirmed with modification the
decision 2 of the Regional Trial Court of Quezon, Branch
LIX, Lucena City. The controversy stemmed from the
following facts: The private respondents, the spouses
Jose Sy Bang and Iluminada Tan, were engaged in the
sale of gravel produced from crushed rocks and used
for construction purposes. In order to increase their
production, they engaged the services of Mr. Ruben
Mercurio, the proprietor of Gemini Motor Sales in
Lucena City, to look for a rock crusher which they could
buy. Mr. Mercurio referred the private respondents to
the Rizal Consolidated Corporation which then had for
sale one such machinery described as:
ONE UNIT LIPPMAN PORTABLE CRUSHING
PLANT (RECONDITIONED) [sic]
JAW CRUSHER-10xl6 DOUBLE ROLL
CRUSHER 16x16
3 UNITS PRODUCT CONVEYOR
75 HP ELECTRIC MOTOR
 8 PCS. BRAND NEW TIRES CHASSIS NO.
19696 GOOD RUNNING CONDITION 3
Oscar Sy Bang, a brother of private respondent Jose Sy
Bang, went to inspect the machine at the Rizal
Consolidated's plant site. Apparently satisfied with the
machine, the private respondents signified their intent to
purchase the same. They were however confronted with
a problem-the rock crusher carried a cash price tag of P
550,000.00. Bent on acquiring the machinery, the
private respondents applied for financial assistance from
the petitioner, Filinvest Credit Corporation. The
petitioner agreed to extend to the private respondents
financial aid on the following conditions: that the
machinery be purchased in the petitioner's name; that it
be leased (with option to purchase upon the termination
of the lease period) to the private respondents; and that
the private respondents execute a real estate mortgage
in favor of the petitioner as security for the amount
advanced by the latter. Accordingly, on May 18,1981, a
contract of lease of machinery (with option to purchase)
was entered into by the parties whereby the private
respondents agreed to lease from the petitioner the rock
crusher for two years starting from July 5, 1 981 payable
as follows:
P10,000.00 - first 3 months
23,000.00 - next 6 months
24,800.00 - next 15 months
The contract likewise stipulated that at the end of the
two-year period, the machine would be owned by the
private respondents. Thus, the private respondents
issued in favor of the petitioner a check for
P150,550.00, as initial rental (or guaranty deposit), and
twenty-four (24) postdated checks corresponding to the
24 monthly rentals. In addition, to guarantee their
compliance with the lease contract, the private
respondents executed a real estate mortgage over two
parcels of land in favor of the petitioner. The rock
crusher was delivered to the private respondents on
June 9, 1981. Three months from the date of delivery, or
on September 7, 1981, however, the private
respondents, claiming that they had only tested the
machine that month, sent a letter-complaint to the
petitioner, alleging that contrary to the 20 to 40 tons per
hour capacity of the machine as stated in the lease
contract, the machine could only process 5 tons of rocks
and stones per hour. They then demanded that the
petitioner make good the stipulation in the lease
contract. They followed that up with similar written
complaints to the petitioner, but the latter did not,
however, act on them. Subsequently, the private
respondents stopped payment on the remaining checks
they had issued to the petitioner. 5
As a consequence of the non-payment by the private
respondents of the rentals on the rock crusher as they
fell due despite the repeated written demands, the
petitioner extrajudicially foreclosed the real estate
mortgage. 6 On April 18, 1983, the private respondents
received a Sheriff s Notice of Auction Sale informing
them that their mortgaged properties were going to be
sold at a public auction on May 25, 1983 at 10:00
o'clock in the morning at the Office of the Provincial
Sheriff in Lucena City to satisfy their indebtedness to the
petitioner. 7 To thwart the impending auction of their
properties, the private respondents filed before the
Regional Trial Court of Quezon, on May 4, 1983, 8 a
complaint against the petitioner, for the rescission of the
contract of lease, annullment of the real estate
mortgage, and for injunction and damages, with prayer
for the issuance of a writ of preliminary injunction.9 On
May 23, 1983, three days before the scheduled auction
sale, the trial court issued a temporary restraining order
commanding the Provincial Sheriff of Quezon, and the
petitioner, to refrain and desist from proceeding with the
public auction. 10 Two years later, on September 4,
1985, the trial court rendered a decision in favor of the
private respondents, the dispositive portion of which
reads:
WHEREFORE, PREMISES CONSIDERED, judgment is
hereby rendered:
1. making the injunction permanent;
2. rescinding the contract of lease of the
machinery and equipment and ordering the
plaintiffs to return to the defendant corporation
the machinery subject of the lease contract,
and the defendant corporation to return to
plaintiffs the sum of P470,950.00 it received
from the latter as guaranty deposit and rentals
with legal interest thereon until the amount is
fully restituted;
3. annulling the real estate mortgage
constituted over the properties of the plaintiffs
covered by Transfer Certificate of Title Nos.
T32480 and T-5779 of the Registry of Deeds of
Lucena City;
4. ordering the defendant corporation to pay
plaintiffs P30,000.00 as attorney's fees and the
costs of the suit.
SO ORDERED. 11
Dissatisfied with the trial court's decision, the petitioner
elevated the case to the respondent Court of Appeals.
On March 17, 1988, the appellate court, finding no error
in the appealed judgment, affirmed the same in
toto. 12 Hence, this petition.
Before us, the petitioner reasserts that the private
respondents' cause of action is not against it (the
petitioner), but against either the Rizal Consolidated
Corporation, the original owner-seller of the subject rock
crusher, or Gemini Motors Sales which served as a
conduit facilitator of the purchase of the said machine.
The petitioner argues that it is a financing institution
engaged in quasi-banking activities, primarily the
lending of money to entrepreneurs such as the private
respondents and the general public, but certainly not the
leasing or selling of heavy machineries like the subject
rock crusher. The petitioner denies being the seller of
the rock crusher and only admits having financed its
acquisition by the private respondents. Further, the
petitioner absolves itself of any liability arising out of the
lease contract it signed with the private respondents due
to the waiver of warranty made by the latter. The
petitioner likewise maintains that the private
respondents being presumed to be knowledgeable
about machineries, should be held responsible for the
detection of defects in the machine they had acquired,
and on account of that, they are estopped from claiming
any breach of warranty. Finally, the petitioner interposed
the defense of prescription, invoking Article 1571 of the
Civil Code, which provides:
Art. 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after six months,
from the delivery of the thing sold.
We find the petitioner's first contention untenable. While
it is accepted that the petitioner is a financing institution,
it is not, however, immune from any recourse by the
private respondents. Notwithstanding the testimony of
private respondent Jose Sy Bang that he did not
purchase the rock crusher from the petitioner, the fact
that the rock crusher was purchased from Rizal
Consolidated Corporation in the name and with the
funds of the petitioner proves beyond doubt that the
ownership thereof was effectively transferred to it. It is
precisely this ownership which enabled the petitioner to
enter into the "Contract of Lease of Machinery and
Equipment" with the private respondents.
Be that as it may, the real intention of the parties should
prevail. The nomenclature of the agreement cannot
change its true essence, i.e., a sale on installments. It is
basic that a contract is what the law defines it and the
parties intend it to be, not what it is called by the
parties. 13 It is apparent here thatthe intent of the parties
to the subject contract is for the so-called rentals to be
the installment payments. Upon the completion of the
payments, then the rock crusher, subject matter of the
contract, would become the property of the private
respondents. This form of agreement has been criticized
as a lease only in name. Thus in Vda. de Jose v.
Barrueco 14 we stated:
Sellers desirous of making conditional sales of their
goods, but who do not wish openly to make a bargain in
that form, for one reason or another, have frequently
resorted to the device of making contracts in the form of
leases either with options to the buyer to purchase for a
small consideration at the end of term, provided the so-
called rent has been duly paid, or with stipulations that if
the rent throughout the term is paid, title shall thereupon
vest in the lessee. It is obvious that such transactions
are leases only in name. The so-called rent must
necessarily be regarded as payment of the price in
installments since the due payment of the agreed
amount results, by the terms of bargain, in the transfer
of title to the lessee. 15
The importance of the criticism is heightened in the light
of Article 1484 of the new Civil Code which provides for
the remedies of an unpaid seller of movables on
installment basis.
 Article 1484. In a contract of sale of personal
property the price of which is payable in
installments, the vendor may exercise any of
the following remedies:
(1) Exact fulfillment of the obligation, should
the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure
to pay cover two or more installments;
(3) Foreclose the chattel mortgage or the thing
sold, if one has been constituted, should the
vendee's failure to pay cover two or more
installments. In this case, he shall have no
further action against the purchaser to recover
any unpaid balance of the price. Any
agreement to the contrary shall be void.
Under the aforequoted provision, the seller of movables
in installments, in case the buyer fails to pay two or
more installments may elect to pursue either of the
following remedies: (1) exact fulfillment by the purchaser
of the obligation; (2) cancel the sale; or (3) foreclose the
mortgage on the purchased property if one was
constituted thereon. It is now settled that the said
remedies are alternative and not cumulative and
therefore, the exercise of one bars the exercise of the
others.
Indubitably, the device contract of lease with option to
buy is at times resorted to as a means to circumvent
Article 1484, particularly paragraph (3) thereof.Through
the set-up, the vendor, by retaining ownership over the
property in the guise of being the lessor, retains,
likewise, the right to repossess the same, without going
through the process of foreclosure, in the event the
vendee-lessee defaults in the payment of the
installments. There arises therefore no need to
constitute a chattel mortgage over the movable sold.
More important, the vendor, after repossessing the
property and, in effect, canceling the contract of sale,
gets to keep all the installments-cum-rentals already
paid. It is thus for these reasons that Article 1485 of the
new Civil Code provides that:
Article 1485. The preceding article shall be
applied to contracts purporting to be leases of
personal property with option to buy, when the
lessor has deprived the lessee of possession
or enjoyment of the thing. (Emphasis ours.)
Unfortunately, even with the foregoing findings, we
however fail to find any reason to hold the petitioner
liable for the rock crusher's failure to produce in
accordance with its described capacity. According to the
petitioner, it was the private respondents who chose,
inspected, and tested the subject machinery. It was only
after they had inspected and tested the machine, and
found it to their satisfaction, that the private respondents
sought financial aid from the petitioner. These
allegations of the petitioner had never been rebutted by
the private respondents. In fact, they were even
admitted by the private respondents in the contract they
signed. Thus:
LESSEE'S SELECTION, INSPECTION AND
VERIFICATION.-The LESSEE hereby confirms and
acknowledges that he has independently inspected and
verified the leased property and has selected and
received the same from the Dealer of his own choosing
in good order and excellent running and operating
condition and on the basis of such verification, etc. the
LESSEE has agreed to enter into this Contract." 16
Moreover, considering that between the parties, it is the
private respondents, by reason of their business, who
are presumed to be more knowledgeable, if not experts,
on the machinery subject of the contract, they should
not therefore be heard now to complain of any alleged
deficiency of the said machinery. It is their failure or
neglect to exercise the caution and prudence of an
expert, or, at least, of a prudent man, in the selection,
testing, and inspection of the rock crusher that gave rise
to their difficulty and to this conflict. A well- established
principle in law is that between two parties, he, who by
his negligence caused the loss, shall bear the same.
At any rate, even if the private respondents could not be
adjudged as negligent, they still are precluded from
imputing any liability on the petitioner. One of the
stipulations in the contract they entered into with the
petitioner is an express waiver of warranties in favor of
the latter. By so signing the agreement, the private
respondents absolved the petitioner from any liability
arising from any defect or deficiency of the machinery
they bought. The stipulation on the machine's
production capacity being "typewritten" and that of the
waiver being "printed" does not militate against the
latter's effectivity. As such, whether "a capacity of 20 to
40 tons per hour" is a condition or a description is of no
moment. What stands is that the private respondents
had expressly exempted the petitioner from any
warranty whatsoever. Their Contract of Lease Of
Machinery And Equipment states:
WARRANTY-LESSEE absolutely releases the lessor
from any liability whatsoever as to any and all matters in
relation to warranty in accordance with the provisions
hereinafter stipulated. 17
Taking into account that due to the nature of its
business and its mode of providing financial assistance
to clients, the petitioner deals in goods over which it has
no sufficient know-how or expertise, and the selection of
a particular item is left to the client concerned, the latter,
therefore, shoulders the responsibility of protecting
himself against product defects. This is where the
waiver of warranties is of paramount importance.
Common sense dictates that a buyer inspects a product
before purchasing it (under the principle of caveat
emptor or "buyer beware") and does not return it for
defects discovered later on, particularly if the return of
the product is not covered by or stipulated in a contract
or warranty. In the case at bar, to declare the waiver as
non-effective, as the lower courts did, would impair the
obligation of contracts. Certainly, the waiver in question
could not be considered a mere surplusage in the
contract between the parties. Moreover, nowhere is it
shown in the records of the case that the private
respondent has argued for its nullity or illegality. In any
event, we find no ambiguity in the language of the
waiver or the release of warranty. There is therefore no
room for any interpretation as to its effect or applicability
vis-a- vis the deficient output of the rock crusher. Suffice
it to say that the private respondents have validly
excused the petitioner from any warranty on the rock
crusher. Hence, they should bear the loss for any defect
found therein.
WHEREFORE, the Petition is GRANTED; the Decision
of the Court of Appeals dated March 17, 1988 is hereby
REVERSED AND SET ASIDE, and another one
rendered DISMISSING the complaint. Costs against the
private respondents.
SO ORDERED.
 FIRST DIVISION
G.R. No. 142618               July 12, 2007
PCI LEASING AND FINANCE, INC., Petitioner,
vs.
GIRAFFE-X CREATIVE IMAGING, INC., Respondent.
DECISION
GARCIA, J.:
On a pure question of law involving the application of
Republic Act (R.A.) No. 5980, as amended by R.A. No.
8556¸ in relation to Articles 1484 and 1485 of the Civil
Code, petitioner PCI Leasing and Finance, Inc. (PCI
LEASING, for short) has directly come to this Court via
this petition for review under Rule 45 of the Rules of
Court to nullify and set aside the Decision and
Resolution dated December 28, 1998 and February 15,
2000, respectively, of the Regional Trial Court (RTC) of
Quezon City, Branch 227, in its Civil Case No. Q-98-
34266, a suit for a sum of money and/or personal
property with prayer for a writ of replevin, thereat
instituted by the petitioner against the herein
respondent, Giraffe-X Creative Imaging, Inc. (GIRAFFE,
for brevity).
The facts:
On December 4, 1996, petitioner PCI LEASING and
respondent GIRAFFE entered into a Lease
Agreement,1 whereby the former leased out to the latter
one (1) set of Silicon High Impact Graphics and
accessories worth ₱3,900,00.00 and one (1) unit of
Oxberry Cinescan 6400-10 worth ₱6,500,000.00. In
connection with this agreement, the parties
subsequently signed two (2) separate documents, each
denominated as Lease Schedule.2 Likewise forming
parts of the basic lease agreement were two (2)
separate documents denominated Disclosure
Statements of Loan/Credit Transaction (Single Payment
or Installment Plan)3 that GIRAFFE also executed for
each of the leased equipment. These disclosure
statements inter alia described GIRAFFE, vis-à-vis the
two aforementioned equipment, as the "borrower" who
acknowledged the "net proceeds of the loan," the "net
amount to be financed," the "financial charges," the
"total installment payments" that it must pay monthly for
thirty-six (36) months, exclusive of the 36% per annum
"late payment charges." Thus, for the Silicon High
Impact Graphics, GIRAFFE agreed to pay ₱116,878.21
monthly, and for Oxberry Cinescan, ₱181.362.00
monthly. Hence, the total amount GIRAFFE has to pay
PCI LEASING for 36 months of the lease, exclusive of
monetary penalties imposable, if proper, is as indicated
below:

P116,878.21 @ month (for the

Silicon High
Impact Graphics) x 36 months = P 4,207,615.56
-- PLUS--
P181,362.00 @ month (for the
Oxberry
Cinescan) x 36 months = P 6,529,032.00
Total Amount to be paid by
GIRAFFE
P
(or the NET CONTRACT
10,736,647.56
AMOUNT)

By the terms, too, of the Lease Agreement, GIRAFFE

undertook to remit the amount of ₱3,120,000.00 by way
of "guaranty deposit," a sort of performance and
compliance bond for the two equipment. Furthermore,
the same agreement embodied a standard acceleration
clause, operative in the event GIRAFFE fails to pay any
rental and/or other accounts due.
A year into the life of the Lease Agreement, GIRAFFE
defaulted in its monthly rental-payment obligations. And
following a three-month default, PCI LEASING, through
one Atty. Florecita R. Gonzales, addressed a formal
pay-or-surrender-equipment type of demand
letter4 dated February 24, 1998 to GIRAFFE.
The demand went unheeded.
Hence, on May 4, 1998, in the RTC of Quezon City, PCI
LEASING instituted the instant case against GIRAFFE.
In its complaint,5 docketed in said court as Civil Case
No. 98-34266 and raffled to Branch 2276 thereof, PCI
LEASING prayed for the issuance of a writ of replevin
for the recovery of the leased property, in addition to the
following relief:
2. After trial, judgment be rendered in favor of plaintiff
[PCI LEASING] and against the defendant [GIRAFFE],
as follows:
a. Declaring the plaintiff entitled to the possession
of the subject properties;
b. Ordering the defendant to pay the balance of
rental/obligation in the total amount of
₱8,248,657.47 inclusive of interest and charges
thereon;
c. Ordering defendant to pay plaintiff the expenses
of litigation and cost of suit…. (Words in bracket
added.)
Upon PCI LEASING’s posting of a replevin bond, the
trial court issued a writ of replevin, paving the way for
PCI LEASING to secure the seizure and delivery of the
equipment covered by the basic lease agreement.
Instead of an answer, GIRAFFE, as defendant a quo,
filed a Motion to Dismiss, therein arguing that the
seizure of the two (2) leased equipment stripped PCI
LEASING of its cause of action. Expounding on the
point, GIRAFFE argues that, pursuant to Article 1484 of
the Civil Code on installment sales of personal property,
PCI LEASING is barred from further pursuing any claim
arising from the lease agreement and the companion
contract documents, adding that the agreement
between the parties is in reality a lease of movables with
option to buy. The given situation, GIRAFFE continues,
squarely brings into applicable play Articles 1484 and
1485 of the Civil Code, commonly referred to as the
Recto Law. The cited articles respectively provide:
ART. 1484. In a contract of sale of personal property the
price of which is payable in installments, the vendor may
exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the
vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to
pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee's failure to pay cover two or more
installments. In this case, he shall have no further
action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary
shall be void. (Emphasis added.)
ART. 1485. The preceding article shall be applied to
contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.
It is thus GIRAFFE’s posture that the aforequoted Article
1484 of the Civil Code applies to its contractual relation
with PCI LEASING because the lease agreement in
question, as supplemented by the schedules
documents, is really a lease with option to buy under the
companion article, Article 1485. Consequently, so
GIRAFFE argues, upon the seizure of the leased
equipment pursuant to the writ of replevin, which seizure
is equivalent to foreclosure, PCI LEASING has no
further recourse against it. In brief, GIRAFFE asserts in
its Motion to Dismiss that the civil complaint filed by PCI
LEASING is proscribed by the application to the case of
Articles 1484 and 1485, supra, of the Civil Code.
In its Opposition to the motion to dismiss, PCI LEASING
maintains that its contract with GIRAFFE is a straight
lease without an option to buy. Prescinding therefrom,
PCI LEASING rejects the applicability to the suit of
Article 1484 in relation to Article 1485 of the Civil Code,
claiming that, under the terms and conditions of the
basic agreement, the relationship between the parties is
one between an ordinary lessor and an ordinary lessee.
In a decision7 dated December 28, 1998, the trial court
granted GIRAFFE’s motion to dismiss mainly on the
interplay of the following premises: 1) the lease
agreement package, as memorialized in the contract
documents, is akin to the contract contemplated in
Article 1485 of the Civil Code, and 2) GIRAFFE’s loss of
possession of the leased equipment consequent to the
enforcement of the writ of replevin is "akin to
foreclosure, … the condition precedent for application of
Articles 1484 and 1485 [of the Civil Code]." Accordingly,
the trial court dismissed Civil Case No. Q-98-34266,
disposing as follows:
WHEREFORE, premises considered, the defendant
[GIRAFFE] having relinquished any claim to the
personal properties subject of replevin which are now in
the possession of the plaintiff [PCI LEASING], plaintiff is
DEEMED fully satisfied pursuant to the provisions of
Articles 1484 and 1485 of the New Civil Code. By virtue
of said provisions, plaintiff is DEEMED estopped from
further action against the defendant, the plaintiff having
recovered thru (replevin) the personal property sought
to be payable/leased on installments, defendants being
under protection of said RECTO LAW. In view thereof,
this case is hereby DISMISSED.
With its motion for reconsideration having been denied
by the trial court in its resolution of February 15,
2000,8 petitioner has directly come to this Court via this
petition for review raising the sole legal issue of whether
or not the underlying Lease Agreement, Lease
Schedules and the Disclosure Statements that embody
the financial leasing arrangement between the parties
are covered by and subject to the consequences of
Articles 1484 and 1485 of the New Civil Code.
As in the court below, petitioner contends that the
financial leasing arrangement it concluded with the
respondent represents a straight lease covered by R.A.
No. 5980, the Financing Company Act, as last amended
by R.A. No. 8556, otherwise known as Financing
Company Act of 1998, and is outside the application
and coverage of the Recto Law. To the petitioner, R.A.
No. 5980 defines and authorizes its existence and
business.
The recourse is without merit.
R.A. No. 5980, in its original shape and as amended,
partakes of a supervisory or regulatory legislation,
merely providing a regulatory framework for the
organization, registration, and regulation of the
operations of financing companies. As couched, it does
not specifically define the rights and obligations of
parties to a financial leasing arrangement. In fact, it
does not go beyond defining commercial or
transactional financial leasing and other financial leasing
concepts. Thus, the relevancy of Article 18 of the Civil
Code which reads:
Article 18. - In matters which are governed by … special
laws, their deficiency shall be supplied by the provisions
of this [Civil] Code.
Petitioner foists the argument that the Recto Law, i.e.,
the Civil Code provisions on installment sales of
movable property, does not apply to a financial leasing
agreement because such agreement, by definition, does
not confer on the lessee the option to buy the property
subject of the financial lease. To the petitioner, the
absence of an option-to-buy stipulation in a financial
leasing agreement, as understood under R.A. No. 8556,
prevents the application thereto of Articles 1484 and
1485 of the Civil Code.
We are not persuaded.
The Court can allow that the underlying lease
agreement has the earmarks or made to appear as a
financial leasing,9 a term defined in Section 3(d) of R.A.
No. 8556 as -
a mode of extending credit through a non-cancelable
lease contract under which the lessor purchases or
acquires, at the instance of the lessee, machinery,
equipment, … office machines, and other movable or
immovable property in consideration of the periodic
payment by the lessee of a fixed amount of money
sufficient to amortize at least seventy (70%) of the
purchase price or acquisition cost, including any
incidental expenses and a margin of profit over an
obligatory period of not less than two (2) years during
which the lessee has the right to hold and use the
leased property … but with no obligation or option on his
part to purchase the leased property from the owner-
lessor at the end of the lease contract.
In its previous holdings, however, the Court, taking into
account the following mix: the imperatives of equity, the
contractual stipulations in question and the actuations of
parties vis-à-vis their contract, treated disguised
transactions technically tagged as financing lease, like
here, as creating a different contractual relationship.
Notable among the Court’s decisions because of its
parallelism with this case is BA Finance Corporation v.
Court of Appeals10 which involved a motor vehicle.
Thereat, the Court has treated a purported financial
lease as actually a sale of a movable property on
installments and prevented recovery beyond the buyer’s
arrearages. Wrote the Court in BA Finance:
The transaction involved … is one of a "financial lease"
or "financial leasing," where a financing company would,
in effect, initially purchase a mobile equipment and turn
around to lease it to a client who gets, in addition, an
option to purchase the property at the expiry of the
lease period. xxx.
x x x           x x x          x x x
The pertinent provisions of [RA] 5980, thus
implemented, read:
"'Financing companies,' … are primarily organized for
the purpose of extending credit facilities to consumers
… either by … leasing of motor vehicles, … and office
machines and equipment, … and other movable
property."
"'Credit' shall mean any loan, … any contract to sell, or
sale or contract of sale of property or service, … under
which part or all of the price is payable subsequent to
the making of such sale or contract; any rental-purchase
contract; ….;"
The foregoing provisions indicate no less than a mere
financing scheme extended by a financing company to a
client in acquiring a motor vehicle and allowing the latter
to obtain the immediate possession and use thereof
pending full payment of the financial accommodation
that is given.
In the case at bench, xxx. [T]he term of the contract
[over a motor vehicle] was for thirty six (36) months at a
"monthly rental" … (P1,689.40), or for a total amount of
P60,821.28. The contract also contained [a] clause
[requiring the Lessee to give a guaranty deposit in the
amount of P20,800.00] xxx
After the private respondent had paid the sum of
P41,670.59, excluding the guaranty deposit of
P20,800.00, he stopped further payments. Putting the
two sums together, the financing company had in its
hands the amount of P62,470.59 as against the total
agreed "rentals" of P60,821.28 or an excess of
P1,649.31.
The respondent appellate court considered it only just
and equitable for the guaranty deposit made by the
private respondent to be applied to his arrearages and
thereafter to hold the contract terminated. Adopting the
ratiocination of the court a quo, the appellate court said:
xxx In view thereof, the guaranty deposit of P20,800.00
made by the defendant should and must be credited in
his favor, in the interest of fairness, justice and equity.
The plaintiff should not be allowed to unduly enrich itself
at the expense of the defendant. xxx This is even more
compelling in this case where although the transaction,
on its face, appear ostensibly, to be a contract of lease,
it is actually a financing agreement, with the plaintiff
financing the purchase of defendant's automobile ….
The Court is constrained, in the interest of truth and
justice, to go into this aspect of the transaction between
the plaintiff and the defendant … with all the facts and
circumstances existing in this case, and which the court
must consider in deciding the case, if it is to decide the
case according to all the facts. xxx.
x x x           x x x          x x x
Considering the factual findings of both the court a quo
and the appellate court, the only logical conclusion is
that the private respondent did opt, as he has claimed,
to acquire the motor vehicle, justifying then the
application of the guarantee deposit to the balance still
due and obligating the petitioner to recognize it as an
exercise of the option by the private respondent. The
result would thereby entitle said respondent to the
ownership and possession of the vehicle as the buyer
thereof. We, therefore, see no reversible error in the
ultimate judgment of the appellate court.11 (Italics in the
original; underscoring supplied and words in bracket
added.)
In Cebu Contractors Consortium Co. v. Court of
Appeals,12 the Court viewed and thus declared a
financial lease agreement as having been simulated to
disguise a simple loan with security, it appearing that
the financing company purchased equipment already
owned by a capital-strapped client, with the intention of
leasing it back to the latter.
In the present case, petitioner acquired the office
equipment in question for their subsequent lease to the
respondent, with the latter undertaking to pay a monthly
fixed rental therefor in the total amount of ₱292,531.00,
or a total of ₱10,531,116.00 for the whole 36 months.
As a measure of good faith, respondent made an up-
front guarantee deposit in the amount of ₱3,120,000.00.
The basic agreement provides that in the event the
respondent fails to pay any rental due or is in a default
situation, then the petitioner shall have cumulative
remedies, such as, but not limited to, the following:13
 1. Obtain possession of the property/equipment;
2. Retain all amounts paid to it. In addition, the
guaranty deposit may be applied towards the
payment of "liquidated damages";
3. Recover all accrued and unpaid rentals;
4. Recover all rentals for the remaining term of the
lease had it not been cancelled, as additional
penalty;
5. Recovery of any and all amounts advanced by
PCI LEASING for GIRAFFE’s account xxx;
6. Recover all expenses incurred in repossessing,
removing, repairing and storing the property; and,
7. Recover all damages suffered by PCI LEASING
by reason of the default.
In addition, Sec. 6.1 of the Lease Agreement states that
the guaranty deposit shall be forfeited in the event the
respondent, for any reason, returns the equipment
before the expiration of the lease.
At bottom, respondent had paid the equivalent of about
a year’s lease rentals, or a total of ₱3,510,372.00, more
or less. Throw in the guaranty deposit (₱3,120,000.00)
and the respondent had made a total cash outlay of
₱6,630,372.00 in favor of the petitioner. The replevin-
seized leased equipment had, as alleged in the
complaint, an estimated residual value of ₱6,900.000.00
at the time Civil Case No. Q-98-34266 was instituted on
May 4, 1998. Adding all cash advances thus made to
the residual value of the equipment, the total value
which the petitioner had actually obtained by virtue of its
lease agreement with the respondent amounts to
₱13,530,372.00 (₱3,510,372.00 + ₱3,120,000.00 +
₱6,900.000.00 = ₱13,530,372.00).
The acquisition cost for both the Silicon High Impact
Graphics equipment and the Oxberry Cinescan was, as
stated in no less than the petitioner’s letter to the
respondent dated November 11, 199614 approving in the
latter’s favor a lease facility, was ₱8,100,000.00.
Subtracting the acquisition cost of ₱8,100,000.00 from
the total amount, i.e., ₱13,530,372.00, creditable to the
respondent, it would clearly appear that petitioner
realized a gross income of ₱5,430,372.00 from its lease
transaction with the respondent. The amount of
₱5,430,372.00 is not yet a final figure as it does not
include the rentals in arrears, penalties thereon, and
interest earned by the guaranty deposit.
As may be noted, petitioner’s demand letter15 fixed the
amount of ₱8,248,657.47 as representing the
respondent’s "rental" balance which became due and
demandable consequent to the application of the
acceleration and other clauses of the lease agreement.
Assuming, then, that the respondent may be compelled
to pay ₱8,248,657.47, then it would end up paying a
total of ₱21,779,029.47 (₱13,530,372.00 +
₱8,248,657.47 = ₱21,779,029.47) for its use - for a year
and two months at the most - of the equipment. All in all,
for an investment of ₱8,100,000.00, the petitioner
stands to make in a year’s time, out of the transaction, a
total of ₱21,779,029.47, or a net of ₱13,679,029.47, if
we are to believe its outlandish legal submission that the
PCI LEASING-GIRAFFE Lease Agreement was an
honest-to-goodness straight lease.
A financing arrangement has a purpose which is at once
practical and salutary. R.A. No. 8556 was, in fact,
precisely enacted to regulate financing companies’
operations with the end in view of strengthening their
critical role in providing credit and services to small and
medium enterprises and to curtail acts and practices
prejudicial to the public interest, in general, and to their
clienteles, in particular.16 As a regulated activity,
financing arrangements are not meant to quench only
the thirst for profit. They serve a higher purpose, and
R.A. No. 8556 has made that abundantly clear.
We stress, however, that there is nothing in R.A. No.
8556 which defines the rights and obligations, as
between each other, of the financial lessor and the
lessee. In determining the respective responsibilities of
the parties to the agreement, courts, therefore, must
train a keen eye on the attendant facts and
circumstances of the case in order to ascertain the
intention of the parties, in relation to the law and the
written agreement. Likewise, the public interest and
policy involved should be considered. It may not be
amiss to state that, normally, financing contracts come
in a standard prepared form, unilaterally thought up and
written by the financing companies requiring only the
personal circumstances and signature of the borrower
or lessee; the rates and other important covenants in
these agreements are still largely imposed unilaterally
by the financing companies. In other words, these
agreements are usually one-sided in favor of such
companies. A perusal of the lease agreement in
question exposes the many remedies available to the
petitioner, while there are only the standard contractual
prohibitions against the respondent. This is
characteristic of standard printed form contracts.
There is more. In the adverted February 24, 1998
demand letter17 sent to the respondent, petitioner
fashioned its claim in the alternative: payment of the full
amount of ₱8,248,657.47, representing the unpaid
balance for the entire 36-month lease period or the
surrender of the financed asset under pain of legal
action. To quote the letter:
Demand is hereby made upon you to pay in full your
outstanding balance in the amount of P8,248,657.47 on
or before March 04, 1998 OR to surrender to us the one
(1) set Silicon High Impact Graphics and one (1) unit
Oxberry Cinescan 6400-10…
We trust you will give this matter your serious and
preferential attention. (Emphasis added).
Evidently, the letter did not make a demand for the
payment of the ₱8,248,657.47 AND the return of the
equipment; only either one of the two was required. The
demand letter was prepared and signed by Atty.
Florecita R. Gonzales, presumably petitioner’s counsel.
As such, the use of "or" instead of "and" in the letter
could hardly be treated as a simple typographical error,
bearing in mind the nature of the demand, the amount
involved, and the fact that it was made by a lawyer.
Certainly Atty. Gonzales would have known that a world
of difference exists between "and" and "or" in the
manner that the word was employed in the letter.
A rule in statutory construction is that the word "or" is a
disjunctive term signifying dissociation and
independence of one thing from other things
enumerated unless the context requires a different
interpretation.18
In its elementary sense, "or", as used in a statute, is a
disjunctive article indicating an alternative. It often
connects a series of words or propositions indicating a
choice of either. When "or" is used, the various
members of the enumeration are to be taken
separately.19
The word "or" is a disjunctive term signifying
disassociation and independence of one thing from
each of the other things enumerated.20
The demand could only be that the respondent need not
return the equipment if it paid the ₱8,248,657.47
outstanding balance, ineluctably suggesting that the
respondent can keep possession of the equipment if it
exercises its option to acquire the same by paying the
unpaid balance of the purchase price. Stated otherwise,
if the respondent was not minded to exercise its option
of acquiring the equipment by returning them, then it
need not pay the outstanding balance. This is the logical
import of the letter: that the transaction in this case is a
lease in name only. The so-called monthly rentals are in
truth monthly amortizations of the price of the leased
office equipment.
On the whole, then, we rule, as did the trial court, that
the PCI LEASING- GIRAFFE lease agreement is in
reality a lease with an option to purchase the
equipment. This has been made manifest by the actions
of the petitioner itself, foremost of which is the
declarations made in its demand letter to the
respondent. There could be no other explanation than
that if the respondent paid the balance, then it could
keep the equipment for its own; if not, then it should
return them. This is clearly an option to purchase given
to the respondent. Being so, Article 1485 of the Civil
Code should apply.
The present case reflects a situation where the
financing company can withhold and conceal - up to the
last moment - its intention to sell the property subject of
the finance lease, in order that the provisions of the
Recto Law may be circumvented. It may be, as
petitioner pointed out, that the basic "lease agreement"
does not contain a "purchase option" clause. The
absence, however, does not necessarily argue against
the idea that what the parties are into is not a straight
lease, but a lease with option to purchase. This Court
has, to be sure, long been aware of the practice of
vendors of personal property of denominating a contract
of sale on installment as one of lease to prevent the
ownership of the object of the sale from passing to the
vendee until and unless the price is fully paid. As this
Court noted in Vda. de Jose v. Barrueco:21
Sellers desirous of making conditional sales of their
goods, but who do not wish openly to make a bargain in
that form, for one reason or another, have frequently
resorted to the device of making contracts in the form of
leases either with options to the buyer to purchase for a
small consideration at the end of term, provided the so-
called rent has been duly paid, or with stipulations that if
the rent throughout the term is paid, title shall thereupon
vest in the lessee. It is obvious that such transactions
are leases only in name. The so-called rent must
necessarily be regarded as payment of the price in
installments since the due payment of the agreed
amount results, by the terms of the bargain, in the
transfer of title to the lessee.
In another old but still relevant case of U.S. Commercial
v. Halili,22 a lease agreement was declared to be in fact
a sale of personal property by installments. Said the
Court:
. . . There can hardly be any question that the so-called
contracts of lease on which the present action is based
were veritable leases of personal property with option to
purchase, and as such come within the purview of the
above article [Art. 1454-A of the old Civil Code on sale
of personal property by installment]. xxx
Being leases of personal property with option to
purchase as contemplated in the above article, the
contracts in question are subject to the provision that
when the lessor in such case "has chosen to deprive the
lessee of the enjoyment of such personal property," "he
shall have no further action" against the lessee "for the
recovery of any unpaid balance" owing by the latter,
"agreement to the contrary being null and void."
In choosing, through replevin, to deprive the respondent
of possession of the leased equipment, the petitioner
waived its right to bring an action to recover unpaid
rentals on the said leased items. Paragraph (3), Article
1484 in relation to Article 1485 of the Civil Code, which
we are hereunder re-reproducing, cannot be any
clearer.
ART. 1484. In a contract of sale of personal property the
price of which is payable in installments, the vendor may
exercise any of the following remedies:
x x x           x x x          x x x
(3) Foreclose the chattel mortgage on the thing sold, if
one has been constituted, should the vendee's failure to
pay cover two or more installments. In this case, he
shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement
to the contrary shall be void.
ART. 1485. The preceding article shall be applied to
contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.
As we articulated in Elisco Tool Manufacturing Corp. v.
Court of Appeals,23 the remedies provided for in Article
1484 of the Civil Code are alternative, not cumulative.
The exercise of one bars the exercise of the others. This
limitation applies to contracts purporting to be leases of
personal property with option to buy by virtue of the
same Article 1485. The condition that the lessor has
deprived the lessee of possession or enjoyment of the
thing for the purpose of applying Article 1485 was
fulfilled in this case by the filing by petitioner of the
complaint for a sum of money with prayer for replevin to
recover possession of the office equipment.24 By virtue
of the writ of seizure issued by the trial court, the
petitioner has effectively deprived respondent of their
use, a situation which, by force of the Recto Law, in turn
precludes the former from maintaining an action for
recovery of "accrued rentals" or the recovery of the
balance of the purchase price plus interest. 25
The imperatives of honest dealings given prominence in
the Civil Code under the heading: Human Relations,
provide another reason why we must hold the petitioner
to its word as embodied in its demand letter. Else, we
would witness a situation where even if the respondent
surrendered the equipment voluntarily, the petitioner
can still sue upon its claim. This would be most unfair
for the respondent. We cannot allow the petitioner to
renege on its word. Yet more than that, the very word
"or" as used in the letter conveys distinctly its intention
not to claim both the unpaid balance and the equipment.
It is not difficult to discern why: if we add up the
amounts paid by the respondent, the residual value of
the property recovered, and the amount claimed by the
petitioner as sued upon herein (for a total of
₱21,779,029.47), then it would end up making an
instant killing out of the transaction at the expense of its
client, the respondent. The Recto Law was precisely
enacted to prevent this kind of aberration. Moreover,
due to considerations of equity, public policy and justice,
we cannot allow this to happen.1avvphil.zw+ Not only to
the respondent, but those similarly situated who may fall
prey to a similar scheme.
WHEREFORE, the instant petition is DENIED and the
trial court’s decision is AFFIRMED.
Costs against petitioner.
SO ORDERED.
G.R. No. 112733 October 24, 1997
PEOPLE'S INDUSTRIAL AND COMMERCIAL
CORPORATION, petitioner,
vs.
COURT OF APPEALS and MAR-ICK INVESTMENT
CORPORATION, respondents.

ROMERO, J.:
This petition for review on certiorari of the Decision1 of
the Court of Appeals arose from the complaint
for accion publiciana de posesion over several
subdivision lots that was premised on the automatic
cancellation of the contracts to sell those lots.
Private respondent Mar-ick Investment Corporation is
the exclusive and registered owner of Mar-ick
Subdivision in Barrio Buli, Cainta, Rizal. On May 29,
1961, private respondent entered into six (6)
agreements with petitioner People's Industrial and
Commercial Corporation whereby it agreed to sell to
petitioner six (6) subdivision lots.2 Except for Lot No. 8
that has an area of 253 square meters, all the lots
measure 240 square meters each. Five of the
agreements, involving Lots Nos. 3, 4, 5, 6 and 7,
similarly stipulate that the petitioner agreed to pay
private respondent for each lot, the amount of
P7,333.20 with a down payment of P480.00. The
balance of P6,853.20 shall be payable in 120 equal
monthly installments of P57.11 every 30th of the month,
for a period of ten years. With respect to Lot No. 8, the
parties agreed to the purchase price of P7,730.00 with a
down payment of P506.00 and equal monthly
installments of P60.20.
All the agreements have the following provisions:
 9. Should the PURCHASER fail to make the
payment of any of the monthly installments as
agreed herein, within One Hundred Twenty (120)
days from its due date, this contract shall, by the
mere fact of nonpayment, expire by itself and
become null and void without necessity of notice to
the PURCHASER or of any judicial declaration to
the effect, and any and all sums of money paid
under this contract shall be considered and become
rentals on the property, and in this event, the
PURCHASER should he/she be in possession of
the property shall become a mere intruder or
unlawful detainer of the same and may be ejected
therefrom by the means provided by law for
trespassers or unlawful detainers. Immediately after
the expiration of the 120 days provided for in this
clause, the OWNER shall be at liberty to dispose of
and sell said parcel of land to any other person in
the same manner as if this contract had never been
executed or entered into.
The breach by the PURCHASER of any of the
conditions considered herein shall have the same
effect as non-payment of the installments of the
purchase price.
In any of the above cases the PURCHASER
authorizes the OWNER or her representatives to
enter into the property to take possession of the
same and take whatever action is necessary or
advisable to protect its rights and interests in the
property, and nothing that may be done or made by
the PURCHASER shall be considered as revoking
this authority or a denial thereof.3
After the lapse of ten years, however, petitioner still had
not fully paid for the six lots; it had paid only the down
payment and eight (8) installments, even after private
respondent had given petitioner a grace period of four
months to pay the arrears.4 As of May 1, 1980, the total
amount due to private respondent under the contract
was P214,418.00.5
In his letter of March 30, 1980 to Mr. Tomas Siatianum
(Siatianun) who signed the agreements for petitioner,
private respondent's counsel protested petitioner's
encroachment upon a portion of its subdivision
particularly Lots Nos. 2, 3, 4, 5, 6, 7 and 8. A portion of
the letter reads:
Examinations conducted on the records of said lots
revealed that you once contracted to purchase said
lots but your contracts were cancelled for non-
payment of the stipulated installments.
Desirous of maintaining good and neighborly
relations with you, we caused to send you this
formal demand for you to remove your said wall
within fifteen (15) days from your receipt hereof,
otherwise, much to our regret, we shall be
constrained to seek redress before the Courts and
at the same time charge you with reasonable
rentals for the use of said lots at the rate of One
(P1.00) Peso per square meter per month until you
shall have finally removed said wall.6
Private respondent reiterated its protest against the
encroachment in a letter dated February 16, 1981.7 It
added that petitioner had failed to abide by its promise
to remove the encroachment, or to purchase the lots
involved "at the current price or pay the rentals on the
basis of the total area occupied, all within a short period
of time." It also demanded the removal of the illegal
constructions on the property that had prejudiced the
subdivision and its neighbors.
After a series of negotiations between the parties, they
agreed to enter into a new contract to sell8 involving
seven (7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8,
with a total area of 1,693 square meters. The contract
stipulates that the previous contracts involving the same
lots (actually minus Lot No. 2) "have been cancelled due
to the failure of the PURCHASER to pay the stipulated
installments." It states further that the new contract was
entered into "to avoid litigation, considering that the
PURCHASER has already made use of the premises
since 1981 to the present without paying the stipulated
installments." The parties agreed that the contract price
would be P423,250.00 with a down payment of
P42,325.00 payable upon the signing of the contract
and the balance of P380,925.00 payable in forty-eight
(48) equal monthly amortization payments of P7,935.94.
The new contract bears the date of October 11, 1983
but neither of the parties signed it. Thereafter, Tomas
Siatianum issued the following checks in the total
amount of P37,642.72 to private respondent: (a) dated
March 4, 1984 for P10,000.00; (b) dated March 31,
1984 for P10,000.00; (c) dated April 30, 1984 for
P10,000.00; (d) dated May 31, 1984 for P7,079.00, and
(e) dated May 31, 1984 for P563.72.9
Private respondent received but did not encash those
checks. Instead, on July 12, 1984 it filed in the Regional
Trial Court of Antipolo, Rizal, a complaint for accion
publiciana de posesion against petitioner and Tomas
Siatianum, as president and majority stockholder of
petitioner.10 It prayed that petitioner be ordered to
remove the wall on the premises and to surrender
possession of Lots Nos. 2 to 8 of Block 11 of the Mar-ick
Subdivision, and that petitioner and Tomas Siatianum
be ordered to pay: (a) P259,074.00 as reasonable
rentals for the use of the lots from 1961, "plus P1,680.00
per month from July 1, 1984 up to and until the
premises shall have been vacated and the wall
demolished"; (b) P10,000.00 as attorney's fees; (c)
moral and exemplary damages, and (d) costs of suit. In
the alternative, the complaint prayed that should the
agreements be deemed not automatically cancelled, the
same agreements should be declared null and void.
In due course, the lower court11 rendered a decision
finding that the original agreements of the parties were
validly cancelled in accordance with provision No. 9 of
each agreement. The parties did not enter into a new
contract in accordance with Art. 1403 (2) of the Civil
Code as the parties did not sign the draft contract.
Receipt by private respondent of the five checks could
not amount to perfection of the contract because private
respondent never encashed and benefited from those
checks. Furthermore, there was no meeting of the
minds between the parties because Art. 475 of the Civil
Code should be read with the Statute of Frauds that
requires the embodiment of the contract in a note or
memorandum.
The lower court opined that the checks represented the
deposit under the new contract because petitioner failed
to prove that those were monthly installments that
private respondent refused to accept. What petitioner
proved instead was the fact that it was not able to pay
the rest of the installments because of a strike, fire and
storm that affected its operations. Be that as it may,
what was clearly proven was that both parties
negotiated a new contract after the termination of the
first. Thus, the fact that the parties tried to negotiate a
new contract indicated that they considered the first
contract as "already cancelled."
With respect to petitioner's allegation on a "free right-of-
way" constituted on Lot No. 2, the lower court found that
the agreement thereon was oral and not in writing. As
such, it was not in accordance with Art. 749 of the Civil
Code requiring that, to be valid, a donation must be in a
public document. Consequently, because of the
principle against unjust enrichment, petitioner must pay
rentals for the occupancy of the property. The lower
court disposed of the case as follows:
IN VIEW OF ALL THE FOREGOING, defendant
corporation is hereby directed to return subject Lots
Nos. 2, 3, 4, 5, 6, 7 and 8 to plaintiff corporation,
and to pay to the latter the following amounts:
1. reasonable rental of P1.00 per
square meter per month from
May 29, 1961, for Lots Nos. 3, 4,
5, 6, 7 and 8, and from July 12,
1984, for Lot No. 2, up to the date
they will vacate said lots. The
amount of P4,735.12 (Exhibit "R")
already paid by defendant
corporation to plaintiff corporation
for the six (6) lots under the
original contracts shall be
deducted from the said rental;
2. attorney's fees in the amount
of P10,000.00; and
3. costs of the suit.
SO ORDERED.
Petitioner elevated the case to the Court of Appeals.
However, on October 16, 1992, the Court of Appeals
affirmed in toto the lower court's decision. Petitioner's
motion for reconsideration having been denied, it
instituted the instant petition for review
on certiorari raising the following issues for resolution:
(1) whether or not the lower court had
jurisdiction over the subject matter of the
case in view of the provisions of Republic
 Act No. 6552 and Presidential Decree No.
1344;
(2) whether or not there was a perfected
and enforceable contract of sale (sic) on
October 11, 1983 which modified the
earlier contracts to sell which had not been
validly rescinded;
(3) whether or not there was a valid grant
of right of way involving Lot No. 2 in favor
of petitioner; and
(4) whether or not there was a justification
for the grant of rentals and the award of
attorney's fees in favor of private
respondent.12
The issue of jurisdiction has been precluded by the
principle of estoppel. It is settled that lack of jurisdiction
may be assailed at any stage of the proceedings.
However, a party's participation therein estops such
party from raising the issue.13 Petitioner undoubtedly
has actively participated in the proceedings from its
inception to date. In its answer to the complaint,
petitioner did not assail the lower court's jurisdiction;
instead, it prayed for "affirmative relief.14 Even after the
lower court had decided against it, petitioner continued
to affirm the lower court's jurisdiction by elevating the
decision to the appellate court,15 hoping to obtain a
favorable decision but the Court of Appeals affirmed the
court a quo's ruling. Then and only then did petitioner
raise the issue of jurisdiction — in its motion for
reconsideration of the appellate court's decision. Such a
practice, according to Tijam v. Sibonghanoy,16 cannot be
countenanced for reasons of public policy.
Granting, however, that the issue was raised
seasonably at the first opportunity, still, petitioner has
incorrectly considered as legal bases for its position on
the issue of jurisdiction the provisions of P.D. Nos. 957
and 1344 and Republic Act No. 6552. P.D. No. 957, the
"Subdivision and Condominium Buyers' Protective
Decree" which took effect upon its approval on July 12,
1976, vests upon the National Housing Authority (NHA)
"exclusive jurisdiction to regulate the real estate trade
and business" in accordance with the provisions of the
same decree.17 P.D. No. 1344, issued on April 2, 1978,
empowered the National Housing Authority to issue a
writ of execution in the enforcement of its decisions
under P.D. No. 957.
These decrees, however, were not yet in existence
when private respondent invoked provision No. 9 of the
agreements or contracts to sell and cancelled these in
October 1971.18 Article 4 of the Civil Code provides that
laws shall have no retroactive effect unless the contrary
is provided. Thus, it is necessary that an express
provision for its retroactive application must be made in
the law.19 There being no such provision in both P.D.
Nos. 957 and 1344, these decrees cannot be applied to
a situation that occurred years before their
promulgation. Moreover, granting that said decrees
indeed provide for a retroactive application, still, these
may not be applied in this case.
The contracts to sell of 1961 were cancelled in virtue of
provision No. 9 thereof to which the parties voluntarily
bound themselves. In Manila Bay Club Corp. v. Court of
Appeals,20 this Court interpreted as requiring mandatory
compliance by the parties, a provision in a lease
contract that failure or neglect to perform or comply with
any of the covenants, conditions, agreements or
restrictions stipulated shall result in the automatic
termination and cancellation of the lease. The Court
added:
 . . . . Certainly, there is nothing wrong if the parties
to the lease contract agreed on certain mandatory
provisions concerning their respective rights and
obligations, such as the procurement of insurance
and the rescission clause. For it is well to recall that
contracts are respected as the law between the
contracting parties, and they may establish such
stipulations, clauses, terms and conditions as they
may want to include. As long as such agreements
are not contrary to law, morals, good customs,
public policy or public order they shall have the
force of law between them.
Consequently, when petitioner failed to abide by its
obligation to pay the installments in accordance with the
contracts to sell, provision No. 9 automatically took
effect. That private respondent failed to observe Section
4 of Republic Act No. 6552, the "Realty Installment
Buyer Protection Act," is of no moment. That section
provides that "(I)f the buyer fails to pay the installments
due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the
buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act. Private
respondent's cancellation of the agreements without a
duly notarized demand for rescission did not mean that
it violated said provision of law. Republic Act No. 6552
was approved on August 26, 1972, long after provision
No. 9 of the contracts to sell had become automatically
operational. As with P.D. Nos. 957 and 1344, Republic
Act No. 6552 does not expressly provide for its
retroactive application and, therefore, it could not have
encompassed the cancellation of the contracts to sell in
this case.
At this juncture, it is apropos to stress that the 1961
agreements are contracts to sell and not contracts of
sale. The distinction between these contracts is
graphically depicted in Adelfa Properties, Inc. v. Court of
Appeals,21 as follows:
. . . . The distinction between the two is important
for in a contract of sale, the title passes to the
vendee upon the delivery of the thing sold; whereas
in a contract to sell, by agreement the ownership is
reserved in the vendor and is not to pass until the
full payment of the price. In a contract of sale, the
vendor has lost and cannot recover ownership until
and unless the contract is resolved or rescinded;
whereas, in a contract to sell, title is retained by the
vendor until the full payment of the price, such
payment being a positive suspensive condition and
failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title
from becoming effective. Thus, a deed of sale is
considered absolute in nature where there is
neither a stipulation in the deed that title to the
property sold is reserved in the seller until the full
payment of the price, nor one giving the vendor the
right to unilaterally resolve the contract the moment
the buyer fails to pay within a fixed period.
That the agreements of 1961 are contracts to sell is
clear from the following provisions thereof:
3. Title to said parcel of land shall remain in the
name of the OWNER until complete payment by the
PURCHASER of all obligations herein stipulated, at
which time the OWNER agrees to execute a final
deed of sale in favor of the PURCHASER and
cause the issuance of a certificate of title in the
name of the latter, free from liens and
encumbrances except those provided in the Land
Registration Act, those imposed by the authorities,
and those contained in Clauses Nos. Five (5) and
Six (6) of this agreement.
 xxx xxx xxx
4. The PURCHASER shall be deemed for all legal
purposes to take possession of the parcel of land
upon payment of the down or first
payment; provided, however, that his/her
possession under this section shall be only that of a
tenant or lessee and subject to ejectment
proceedings during all the period of this agreement.
5. The parcel of land subject of this agreement shall
be used by the PURCHASER exclusively for legal
purposes, and he shall not be entitled to take or
remove soil, stones, or gravel from it or any other
lots belonging to the OWNER.
Hence, being contracts to sell, Article 1592 of the Civil
Code which requires rescission either by judicial action
or notarial act is not applicable.22
Neither may petitioner claim ignorance of the
cancellation of the contracts. Aside from his letters of
March 30, 1980 and February 16, 1981, private
respondent's counsel, Atty. Manuel Villamayor, had sent
petitioner other formal protests and demands.23 These
letters adequately satisfied the notice requirement
stipulated in provision No. 9 of the contracts to sell. If
petitioner had not agreed to the automatic and
extrajudicial cancellation of the contracts, it could have
gone to court to impugn the same but it did not. Instead,
it sought to enter into a new contract to sell, thereby
confirming its veracity and validity of the extrajudicial
rescission.24 Had not private respondent filed the accion
publiciana de posesion, petitioner would have remained
silent about the whole situation. It is now estopped from
questioning the validity of the cancellation of the
contracts. An unopposed rescission of a contract has
legal effects.25
Petitioner's reliance on the portion of the Court of
Appeals' Decision stating that private respondent had
not made known to petitioner its supposed rescission of
the contract,26 is misplaced. Moreover, it quoted only the
portion that appears favorable to its case. To be sure,
the Court of Appeals quoted provision No. 9 which
requires that "actual cancellation shall take place thirty
days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract
by a notarial act and upon full payment of the cash
surrender value," and added that "R.A. 6552 even more
underscored the indispensability of such notice to the
defaulting buyer." However, the same appellate court
continued:
The absence of the aforesaid notice in the case at
bar in the forms respectively deemed efficacious
before and after the passage of R.A. 6552 does
not, however, necessarily impress merit in the
appellant's position. Extrajudicial rescission, after
all, has legal effect where the other party does not
oppose it (Zulueta vs. Mariano, 111 SCRA 206;
Nera vs. Vacante, 3 SCRA 505; Magdalena Estate
vs. Myrick, 71 Phil. 344). Where it is objected to, a
judicial determination of the issue is still necessary.
In other words, resolution of reciprocal contracts
may be made extrajudicially unless successfully
impugned in Court. If the debtor impugns the
declaration, it shall be subject to judicial
determination (Jison vs. Court of Appeals, 164
SCRA 339, citing Palay Inc. vs. Clave, supra; Univ.
of the Philippines vs. Angeles, supra). In its July 5,
1984 complaint, the appellee had, in fact,
significantly prayed for the cancellation of the said
sales agreement in the alternative (p. 4, orig.
rec.).27 (Emphasis supplied.)
Moreover, private respondent's act of cancelling the
contracts to sell was not done arbitrarily. The record
shows that private respondent dealt with petitioner with
admirable patience, probably in view of the strike, the
fire in 1968 that burned petitioner's factory, and the
typhoon in 1970.28 If exercised its contractual authority
to cancel the agreements only after petitioner had
reneged in its obligation after paying only eight (8)
installments. When the contracts matured, it still gave
petitioner a grace period of four (4) months within which
to comply with its obligations. It considered the contracts
cancelled only as of October 1971 or several years after
petitioner's last installment payment29 and definitely
more than ten years after the agreements were entered
into.
Because the contracts to sell had long been cancelled
when private respondent filed the accion publiciana de
posesion on July 12, 1984, it was the proper Regional
Trial Court that had jurisdiction over the case. By then,
there was no more installment buyer and seller
relationship to speak of. It had been recuded to a mere
case of an owner claiming possession of its property
that had long been illegally withheld from it by another.
Petitioner alleges that there was a "new perfected and
enforceable contract of sale" between the parties in
October 1983 for two reasons. First, it paid private
respondent the down payment or "deposit of
Contract"30 through the five checks. Second, the receipt
signed by private respondent's representative satisfies
the requirement of a "note or memorandum" under
Article 1403 (2) of the Civil Code because it states the
object of the contract (six lots of Mar-Ick Subdivision
measuring 1,453 square meters), the price (P250.00 per
square meter with a down payment of 10% or
P37,542.72), and the receipt itself opens with a
statement referring to the "purchase" of the six lots of
Mar-Ick Subdivision.31
The contract of October 1983 which private respondent
offered in evidence as Exhibit S, is entitled "CONTRACT
TO SELL." While the title of a contract is not controlling,
its stipulations confirm the nature of that contract. Thus,
it provides:
5. Title to said parcels of land shall remain in the
name of the OWNER until complete payment by the
PURCHASER of all obligations herein stipulated, at
which time, the OWNER agrees to execute a final
deed of sale in favor of the PURCHASER and
cause the issuance of certificates of title in the
name of the latter, free from all liens and
encumbrances except those provided in the Land
Registration Act, those imposed by the authorities,
and those contained in the stipulations that follow.
Under the law, there is a binding contract between the
parties whose minds have met on a certain matter
notwithstanding that they did not affix their signatures to
its written form.
In the case at bar, it was private respondent's company
lawyer and sole witness, Atty. Manuel Villamayor, who
volunteered that after the cancellation of the 1961
agreements, the parties should negotiate and enter into
"a new agreement based on the current price" or at
P400.00 per square meter. However, there was a hitch
in the negotiations because after he had drafted the
contract and sent it to petitioner, the latter "deposited a
check for downpayment" but its representative refused
to sign the prepared contract.32 Private respondent even
offered the contract to sell as its Exhibit S.33 In the
absence of proof to the contrary, this draft contract may
be deemed to embody the agreement of the parties.
Moreover, when Tomas Siatianun, petitioner's president,
testified, private respondent cross-examined him as
regards the October 1983 contract.34 Private respondent
did not and has not denied the existence of that
contract.
Under these facts, therefore, the parties may ideally be
considered as having perfected the contract of October
1983. Again in Adelfa Properties, Inc. v. Court of
Appeals, the Court said that
. . . a contract, like a contract to sell, involves a
meeting of the minds between two persons
whereby one binds himself, with respect to the
other, to give something or to render some service.
Contracts, in general, are perfected by mere
consent, which is manifested by the meeting of the
offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer
must be certain and the acceptance absolute.35
Moreover, private respondent's offer to sell and
petitioner's acceptance thereof are manifest in the
documentary evidence presented by the parties. Thus,
private respondent presented the five (5) checks36 that,
through Atty. Villamayor, it admitted as the down
payment under the October 1983 contract. Private
respondent's intentional non-encashment of the check
cannot serve to belie the fact of its tender as down
payment. For its part, petitioner presented Exhibit 10, a
receipt dated February 28, 1984, showing that private
respondent's authorized representative received the
total amount of P37,642.72 represented by said five
checks as "deposit of Contract (sic)." As this Court also
held in the Adelfa Properties case, acceptance may be
evidenced by some acts or conduct communicated to
the offeror, either in a formal or an informal manner, that
clearly manifest the intention or determination to accept
the offer to buy or
sell.37
Justice and equity, however, will not be served by a
positive ruling on the perfection and performance of the
contract to sell. There are facts on record proving that,
after all, the parties had not arrived at a definite
agreement. By Atty. Villamayor's admission, the checks
were not encashed because Tomas Siatianun did not
sign the draft contract that he had prepared.38 On his
part, Tomas Siatianun explained that he did not sign the
contract because it covered seven (7) lots while their
agreement was only for six (6) lots. According to him,
private respondent had conceded that Lot No. 2 was
meant for petitioner's right of way39 and, therefore, it
could not have been part of the properties it wanted to
buy. It is on record, moreover, that the only agreement
that the parties arrived at in a conference at the Silahis
Hotel was the price indicated in the draft contract.40
The number of lots to be sold is a material component of
the contract to sell. Without an agreement on the matter,
the parties may not in any way be considered as having
arrived at a contract under the law. The parties' failure to
agree on a fundamental provision of the contract was
aggravated by petitioner's failure to deposit the
installments agreed upon. Neither did it attempt to make
a consignation of the installments. This Court's
disquisition on the matter in the Adelfa Properties case
is relevant. Thus:
The mere sending of a letter by the vendee
expressing the intention to pay, without the
accompanying payment, is not considered a valid
tender of payment. Besides, a mere tender of
payment is not sufficient to compel private
respondents to deliver the property and execute the
deed of absolute sale. It is consignation which is
essential in order to extinguish petitioner's
obligation to pay the balance of the purchase price.
The rule is different in case of an option contract or
 in legal redemption or in a sale with right to
repurchase, wherein consignation is not necessary
because these cases involve an exercise of a right
or privilege (to buy, redeem or repurchase) rather
than the discharge of an obligation, hence tender of
payment would be sufficient to preserve the right or
privilege. This is because the provisions on
consignation are not applicable when there is no
obligation to pay. A contract to sell, as in the case
before us, involves the performance of an
obligation, not merely the exercise of a privilege or
a right. Consequently, performance or payment
may be effected not by tender of payment alone but
by both tender and consignation.41 (Emphasis
supplied.)
As earlier noted, petitioner did not lift a finger towards
the performance of the contract other than the tender of
down payment. There is no record that it even bothered
to tender payment of the installments or to amend the
contract to reflect the true intention of the parties as
regards the number of lots to be sold. Indeed, by
petitioner's inaction, private respondent may not be
judicially enjoined to validate a contract that the former
appeared to have taken for granted. As in the earlier
agreements, petitioner ignored opportunities to
resuscitate a contract to sell that was rendered
moribund and inoperative by its inaction.
In view of the foregoing, there is no need to discuss the
issue of whether or not there was a valid grant of right of
way in favor of petitioners. Suffice it to say that the
documentary evidence offered by petitioner on the
matter manifests that that right of way on an unidentified
property was granted in April 1961 by private
respondent's board of directors to W. Ick & Sons, Inc.
and Julian Martinez.42 On May 12, 1961, Fritz Ick, the
president of W. Ick & Sons, Inc., in turn indorsed the
unidentified property to petitioner.43
What needs stressing is that the installments paid by the
petitioner on the land should be deemed rentals in
accordance with provision No. 9, as well as by law.
Article 1486 of the Civil Code provides that a stipulation
that the installments or rents paid shall not be returned
to the vendee or lessee shall be valid insofar as the
same may not be unconscionable under the
circumstances.44 The down payment and the eight (8)
installments paid by petitioner on the six lots under the
1961 agreements amounted to P5,672.00. The lots,
including Lot No. 2, adjoins petitioner's Vetsin and oil
factories constructed on a 20,000-square-meter land
that petitioner likewise bought from private respondent.
Obviously, petitioner made use of the lots not only
during the construction of the factories but also during
its operations as an oil factory. Petitioner enclosed the
area with a fence and made constructions thereon. It is,
therefore, not unconscionable to allow respondent
rentals on the lots as correctly decreed by the lower
court.
As to attorney's fees, Article 2208 of the Civil Code
allows the award of such fees when its claimant is
compelled to litigate with third persons or to incur
expenses to protect its just and valid claim. In view of
petitioner's rejection of private respondent's demands
for rentals45 and its unjustified refusal to settle private
respondent's claims,46 the award of attorney's fees of
P10,000.00 is more than just and reasonable.47
WHEREFORE, the instant petition for review
on certiorari is hereby denied and the questioned
Decision of the Court of Appeals is AFFIRMED. This
Decision is immediately executory. Costs against
petitioner.
FIRST DIVISION
 
 
SPOUSES GOMER and G.R. No. 145330
LEONOR RAMOS,
Petitioners, Present:
'Davide, Jr., C.J.,
' Chairman,
'Quisumbing,
- versus - Ynares-Santiago,
'Carpio, and
'Azcuna, JJ.
SPOUSES SANTIAGO and
MINDA HERUELA, and 'Promulgated:
SPOUSES CHERRY and
RAYMOND PALLORI,
Respondents. October 14, 2005
 
x-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - -x
 
 
DECISION
 
CARPIO, J.:
 
 
The Case
 
 
 
Before the Court is a petition for review [1] assailing the
Decision [2] dated 23 August 2000 and the Order dated
20 September 2000 of the Regional Trial Court (trial
court') of Misamis Oriental, Branch 21, in Civil Case No.
98-060. The trial court dismissed the plaintiffs' action for
recovery of ownership with damages.
 
 
The Antecedent Facts
 
The spouses Gomer and Leonor Ramos (spouses
Ramos') own a parcel of land, consisting of 1,883
square meters, covered by Transfer Certificate of Title
(TCT') No. 16535 of the Register of Deeds of Cagayan
de Oro City. On 18 February 1980, the spouses Ramos
made an agreement with the spouses Santiago and
Minda Heruela (spouses Heruela') [3] covering 306
square meters of the land (land'). According to the
spouses Ramos, the agreement is a contract of
conditional sale. The spouses Heruela allege that the
contract is a sale on installment basis.
 
On 27 January 1998, the spouses Ramos filed a
complaint for Recovery of Ownership with Damages
against the spouses Heruela. The case was docketed
as Civil Case No. 98-060. The spouses Ramos allege
that out of the P15,300 [4] consideration for the sale of
the land, the spouses Heruela paid only P4,000. The
last installment that the spouses Heruela paid was on
18 December 1981. The spouses Ramos assert that the
spouses Heruela's unjust refusal to pay the balance of
the purchase price caused the cancellation of the Deed
of Conditional Sale. In June 1982, the spouses Ramos
discovered that the spouses Heruela were already
occupying a portion of the land. Cherry and Raymond
Pallori (spouses Pallori'), daughter and son-in-law,
respectively, of the spouses Heruela, erected another
house on the land. The spouses Heruela and the
spouses Pallori refused to vacate the land despite
demand by the spouses Ramos.
 
The spouses Heruela allege that the contract is a sale
on installment basis. They paid P2,000 as down
payment and made the following installment payments:
 
31 March P200  
1980
2 May 1980 P400 (for April and May
1980)
20 June P200 (for June 1980)
1980
8 October P500 (for July, August
1980 and part of
September 1980)
5 March P400 (for October and
 1981 November 1980)
18 P300 (for December
December 1980 and part of
1981 January 1981)
 
 
The spouses Heruela further allege that the 306
square meters specified in the contract was reduced to
282 square meters because upon subdivision of the
land, 24 square meters became part of the road. The
spouses Heruela claim that in March 1982, they
expressed their willingness to pay the balance
of P11,300 but the spouses Ramos refused their offer.
 
The Ruling of the Trial Court
 
In its Decision [5] dated 23 August 2000, the trial court
ruled that the contract is a sale by installment. The trial
court ruled that the spouses Ramos failed to comply
with Section 4 of Republic Act No. 6552 (RA
6552'), [6] as follows:
 
SEC. 4. In case where less than two years of
installments were paid, the seller shall give the
buyer a grace period of not less than sixty days
from the date the installment became due. If
the buyer fails to pay the installments due at
the expiration of the grace period, the seller
may cancel the contract after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of the
contract by a notarial act.
 
 
The dispositive portion of the Decision reads:
 
WHEREFORE, the complaint is hereby
dismissed and plaintiff[s] are ordered to
execute the corresponding Deed of Sale in
favor of defendants after the latter have paid
the remaining balance of Eleven Thousand and
Three Hundred Pesos (P11,300.00).
 
Plaintiffs are further ordered to pay defendants
the sum of P20,000.00, as Attorney's fees
and P10,000.00 as litigation expenses.
 
SO ORDERED. [7]
 
 
In an Order [8] dated 20 September 2000, the trial court
denied the spouses Ramos' motion for reconsideration.
Hence, this petition.
 
 
The Issues
 
The spouses Ramos raise the following issues:
 
 I.                   Whether RA 6552 is applicable to
an absolute sale of land;
 
II.                Whether Articles 1191 and 1592 of
the Civil Code are applicable to the
present case;
 
III.             Whether the spouses Ramos have a
right to cancel the sale;
 
IV.            Whether the spouses Heruela have
a right to damages. [9]
 
 
 
The Ruling of the Court
 
The petition is partly meritorious.
 
The Agreement is a Contract to Sell
 
In its Decision, the trial court ruled on whether the
contract made by the parties is a conditional sale or a
sale on installment. The spouses Ramos' premise is that
since the trial court ruled that the contract is a sale on
installment, the trial court also in effect declared that the
sale is an absolute sale. The spouses Ramos allege
that RA 6552 is not applicable to an absolute sale.
 
Article 1458 of the Civil Code provides that a contract of
sale may be absolute or conditional. A contract of sale is
absolute when title to the property passes to the vendee
upon delivery of the thing sold. [10] A deed of sale is
absolute when there is no stipulation in the contract that
title to the property remains with the seller until full
payment of the purchase price. [11] The sale is also
absolute if there is no stipulation giving the vendor the
right to cancel unilaterally the contract the moment the
vendee fails to pay within a fixed period. [12] In a
conditional sale, as in a contract to sell, ownership
remains with the vendor and does not pass to the
vendee until full payment of the purchase price. [13] The
full payment of the purchase price partakes of a
suspensive condition, and non-fulfillment of the
condition prevents the obligation to sell from arising. [14]
 
In this case, the agreement of the parties is embodied in
a one-page, handwritten document. [15] The document
does not contain the usual terms and conditions of a
formal deed of sale. The original document, elevated to
this Court as part of the Records, is torn in part. Only
the words 'LMENT BASIS' is legible on the title. The
names and addresses of the parties and the identity of
the property cannot be ascertained. The agreement only
provides for the following terms of the sale:
 
TERM[S] OF SALE:
 
PRICE PER SQM P50.00 X 306
SQM P 15,300.00
DOWN PAYMENT (TWO THOUSAND
PESOS) ' 2,000.00
BALANCE PAYABLE AT MINIMUM
OF P200.00 P 13,300.00
 PER MONTH UNTIL FULLY PAID ' =======
 
In Manuel v. Rodriguez, et al ., [16] the Court ruled
that to be a written contract, all the terms must be in
writing, so that a contract partly in writing and partly oral
is in legal effect an oral contract. The Court reiterated
the Manuel ruling in Alfonso v. Court of Appeals : [17]
 
xxx In Manuel, 'only the price and the terms of
payment were in writing, but the most
important matter in the controversy, the alleged
transfer of title was never 'reduced to any
written document.[] It was held that the contract
should not be considered as a written but an
oral one; not a sale but a promise to sell; and
that 'the absence of a formal deed of
conveyance was a strong indication 'that the
parties did not intend immediate transfer of
title, but only a transfer after full payment of the
price. Under these circumstances, the Court
ruled Article 1504 of the Civil Code of 1889
(Art. 1592 of the present Code) to be
inapplicable to the contract in controversy ' a
contract to sell or promise to sell ' 'where title
remains with the vendor until fulfillment of a
positive suspensive condition, such as full
payment of the price x x [x].
 
 
The records show that the spouses Heruela did not
immediately take actual, physical possession of the
land. According to the spouses Ramos, in March 1981,
they allowed the niece of the spouses Heruela to
occupy a portion of the land. Indeed, the spouses
Ramos alleged that they only discovered in June 1982
that the spouses Heruela were already occupying the
land. In their answer to the complaint, the spouses
Heruela and the spouses Pallori alleged that their
occupation of the land is lawful because having made
partial payments of the purchase price, 'they already
considered themselves owners' of the land. [18] Clearly,
there was no transfer of title to the spouses Heruela.
The spouses Ramos retained their ownership of the
land. This only shows that the parties did not intend the
transfer of ownership until full payment of the purchase
price.
 
 
RA 6552 is the Applicable Law
The trial court did not err in applying RA 6552 to the
present case.
 
Articles 1191 [19] and 1592 [20] of the Civil Code are
applicable to contracts of sale. In contracts to sell, RA
6552 applies. In Rillo v. Court of Appeals , [21] the
Court declared:
 
xxx Known as the Maceda Law, R.A. No. 6552
recognizes in conditional sales of all kinds of
real estate (industrial, commercial, residential)
the right of the seller to cancel the contract
upon non-payment of an installment by the
buyer, which is simply an event that prevents
the obligation of the vendor to convey title from
acquiring binding force. It also provides the
right of the buyer on installments in case he
 defaults in the payment of succeeding
installments xxx.
 
 
Sections 3 and 4 of RA 6552 provide:
 
Sec. 3. In all transactions or contracts involving
the sale or financing of real estate on
installment payments, including residential
condominium apartments but excluding
industrial lots, commercial buildings and sales
to tenants under Republic Act Numbered
Thirty-eight hundred forty-four as amended by
Republic Act Numbered Sixty-three hundred
eighty-nine, where the buyer has paid at least
two years of installments, the buyer is entitled
to the following rights in case he defaults in the
payment of succeeding installments:
 
(a)        To pay, without additional
interest, the unpaid installments
due within the total grace period
earned by him, which is hereby
fixed at the rate of one month
grace period for every one year of
installment payments
made: Provided, That this right
shall be exercised by the buyer
only once in every five years of the
life of the contract and its
extensions, if any.
 
(b)        If the contract is cancelled, the
seller shall refund to the buyer the
cash surrender value of the
 payments on the property
equivalent to fifty per cent of the
total payments made and, after five
years of installments, an additional
five per cent every year but not to
exceed ninety per cent of the total
payments made: Provided, That
the actual cancellation of the
contract shall take place after thirty
days from receipt by the buyer of
the notice of cancellation or the
demand for rescission of the
contract by a notarial act and upon
full payment of the cash surrender
value to the buyer.
 
Down payments, deposits or options on the
contract shall be included in the computation of
the total number of installments made.
 
Sec. 4. In case where less than two years of
installments were paid, the seller shall give the
buyer a grace period of not less than sixty days
from the date the installment became due. If
the buyer fails to pay the installments due at
the expiration of the grace period, the seller
may cancel the contract after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of the
contract by a notarial act.
 
 
In this case, the spouses Heruela paid less than two
years of installments. Thus, Section 4 of RA 6552
applies. However, there was neither a notice of
cancellation nor demand for rescission by notarial act to
the spouses Heruela. In Olympia Housing, Inc. v.
Panasiatic Travel Corp. , [22] the Court ruled that the
vendor could go to court to demand judicial rescission in
lieu of a notarial act of rescission. However, an action
for reconveyance is not an action for rescission. The
Court explained in Olympia :
 
The action for reconveyance filed by petitioner
was predicated on an assumption that its
contract to sell executed in favor of respondent
buyer had been validly cancelled or rescinded.
The records would show that, indeed, no such
cancellation took place at any time prior to the
institution of the action for reconveyance. xxx
 
xxx
 
xxx Not only is an action for reconveyance
conceptually different from an action for
rescission but that, also, the effects that flow
from an affirmative judgment in either case
would be materially dissimilar in various
respects. The judicial resolution of a contract
gives rise to mutual restitution which is not
necessarily the situation that can arise in an
action for reconveyance. Additionally, in an
action for rescission (also often termed as
resolution), unlike in an action for
reconveyance predicated on an extrajudicial
rescission (rescission by notarial act), the
Court, instead of decreeing rescission, may
 authorize for a just cause the fixing of a
period. [23]
 
In the present case, there being no valid rescission of
the contract to sell, the action for reconveyance is
premature. Hence, the spouses Heruela have not lost
the statutory grace period within which to pay. The trial
court should have fixed the grace period to sixty days
conformably with Section 4 of RA 6552.
 
The spouses Heruela are not entirely fault-free. They
have been remiss in performing their obligation. The trial
court found that the spouses Heruela offered once to
pay the balance of the purchase price. However, the
spouses Heruela did not consign the payment during
the pendency of the case. In the meanwhile, the
spouses Heruela enjoyed the use of the land.
 
For the breach of obligation, the court, in its discretion,
and applying Article 2209 of the Civil Code, [24] may
award interest at the rate of 6% per annum on the
amount of damages. [25] The spouses Heruela have
been enjoying the use of the land since 1982. In 1995,
they allowed their daughter and son-in-law, the spouses
Pallori, to construct a house on the land. Under the
circumstances, the Court deems it proper to award
interest at 6% per annum on the balance of the
purchase price.
The records do not show when the spouses Ramos
made a demand from the spouses Heruela for payment
of the balance of the purchase price. The complaint only
alleged that the spouses Heruela's 'unjust refusal to pay
in full the purchase price xxx has caused the Deed of
Conditional Sale to be rescinded, revoked and
annulled. [26] The complaint did not specify when the
spouses Ramos made the demand for payment. For
purposes of computing the legal interest, the reckoning
period should be the filing on 27 January 1998 of the
complaint for reconveyance, which the spouses Ramos
erroneously considered an action for rescission of the
contract.
 
The Court notes the reduction of the land area from 306
square meters to 282 square meters. Upon subdivision
of the land, 24 square meters became part of the road.
However, Santiago Heruela expressed his willingness to
pay for the 306 square meters agreed upon despite the
reduction of the land area. [27] Thus, there is no dispute
on the amount of the purchase price even with the
reduction of the land area.
 
On the Award of Attorney's Fees and Litigation
Expenses
 
The trial court ordered the spouses Ramos to pay the
spouses Heruela and the spouses Pallori the amount
of P20,000 as attorney's fees and P10,000 as litigation
expenses. Article 2208 [28] of the Civil Code provides
that subject to certain exceptions, attorney's fees and
expenses of litigation, other than judicial costs, cannot
be recovered in the absence of stipulation. None of the
enumerated exceptions applies to this case. Further, the
policy of the law is to put no premium on the right to
litigate. [29] Hence, the award of attorney's fees and
litigation expenses should be deleted.
 
WHEREFORE, we AFFIRM the Decision dated 23
August 2000 of the Regional Trial Court of Misamis
Oriental, Branch 21, dismissing the complaint for
Recovery of Ownership with Damages, with the
following MODIFICATION:
 
1.       The spouses Heruela shall pay the spouses
Ramos P11,300 as balance of the purchase
price plus interest at 6% per annum from 27
January 1998. The spouses Heruela shall pay
within 60 days from finality of this Decision;
2.       Upon payment, the spouses Ramos shall
execute a deed of absolute sale of the land and
deliver the certificate of title in favor of the
spouses Heruela;
3.       In case of failure to thus pay within 60 days
from finality of this Decision, the spouses
Heruela and the spouses Pallori shall
immediately vacate the premises without need of
further demand, and the down payment and
installment payments of P4,000 paid by the
spouses Heruela shall constitute rental for the
land;
4.       The award of P20,000 as attorney's fees
and P10,000 as litigation expenses in favor of
the spouses Heruela and the spouses Pallori is
deleted.
 
SO ORDERED.
SECOND DIVISION
G.R. No. 152346 November 25, 2005
ISAIAS F. FABRIGAS and MARCELINA R.
FABRIGAS, Petitioners,
vs.
SAN FRANCISCO DEL MONTE, INC., Respondent.
DECISION
Tinga, J.:
Before the Court is a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure,
which assails the Decision of the Court of Appeals in
CA-G.R. CV No. 45203 and its Resolution therein
denying petitioners’ motion for reconsideration.
Said Decision affirmed the Decision dated January 3,
1994 of the Regional Trial Court (RTC), Branch 63,
Makati City in Civil Case No. 90-2711 entitled San
Francisco Del Monte, Inc. v. Isaias F. Fabrigas and
Marcelina R. Fabrigas.
The dispositive portion of the trial
court’s Decision reads:
In the light of the foregoing, the Court is convinced that
plaintiff has proven by preponderance of evidence, the
allegation appearing in its complaint and is therefore,
entitled to the reliefs prayed for.
Considering, however, that defendants had already paid
₱78,152.00, the Court exercising its discretion, hereby
renders judgment as follows:
1. Ordering defendant to make complete payment under
the conditions of Contract to Sell No. 2491-V dated
January 21, 1985, within twenty days from receipt of this
Decision, and in the event that defendant fail or refuse
to observe the latter, defendants and all persons
claiming right of possession or occupation from
defendants are ordered to vacate and leave the
premises, described as Lot No. 9 Block No. 3 of
Subdivision Plan (LRC) Psd-50064 covered by Transfer
Certificate of Title No. 4980 (161653) T-1083 of the
Registry of Deeds of Rizal, and to surrender possession
thereof to plaintiff or any of its authorized
representatives;
2. That in the event that defendants chose to surrender
possession of the property, they are further ordered to
pay plaintiff ₱206,223.80 as unpaid installments on the
land inclusive of interests;
3. Ordering defendants to jointly and severally pay
plaintiff the amount of ₱10,000.00 as and for attorney’s
fees; and
4. Ordering defendants to pay the costs of suit.
SO ORDERED.1
The following factual antecedents are matters of record.
On April 23, 1983, herein petitioner spouses Isaias and
Marcelina Fabrigas ("Spouses Fabrigas" or "petitioners")
and respondent San Francisco Del Monte, Inc. ("Del
Monte") entered into an agreement, denominated
as Contract to Sell No. 2482-V, whereby the latter
agreed to sell to Spouses Fabrigas a parcel of
residential land situated in Barrio Almanza, Las Piñas,
Manila for and in consideration of the amount of
₱109,200.00. Said property, which is known as Lot No.
9, Block No. 3 of Subdivision Plan (LRC) Psd-50064, is
covered by Transfer Certificate of Title No. 4980
(161653) T-1083 registered in the name of respondent
Del Monte. The agreement stipulated that Spouses
Fabrigas shall pay ₱30,000.00 as downpayment and the
balance within ten (10) years in monthly successive
installments of ₱1,285.69.2 Among the clauses in the
contract is an automatic cancellation clause in case of
default, which states as follows:
7. Should the PURCHASER fail to make any of the
payments including interest as herein provided, within
30 days after the due date, this contract will be deemed
and considered as forfeited and annulled without
necessity of notice to the PURCHASER, and said
SELLER shall be at liberty to dispose of the said parcel
of land to any other person in the same manner as if this
contract had never been executed. In the event of such
forfeiture, all sums of money paid under this contract will
be considered and treated as rentals for the use of said
parcel of land, and the PURCHASER hereby waives all
right to ask or demand the return thereof and agrees to
peaceably vacate the said premises.3
After paying ₱30,000.00, Spouses Fabrigas took
possession of the property but failed to make any
installment payments on the balance of the purchase
price. Del Monte sent demand letters on four occasions
to remind Spouses Fabrigas to satisfy their contractual
obligation.4 In particular, Del Monte’s third letter dated
November 9, 1983 demanded the payment of arrears in
the amount of ₱8,999.00. Said notice granted Spouses
Fabrigas a fifteen-day grace period within which to settle
their accounts. Petitioners’ failure to heed Del Monte’s
demands prompted the latter to send a final demand
letter dated December 7, 1983, granting Spouses
Fabrigas another grace period of fifteen days within
which to pay the overdue amount and warned them that
their failure to satisfy their obligation would cause the
rescission of the contract and the forfeiture of the sums
of money already paid. Petitioners received Del Monte’s
final demand letter on December 23, 1983. Del Monte
considered Contract to Sell No. 2482-V cancelled fifteen
days thereafter, but did not furnish petitioners any notice
regarding its cancellation.5
On November 6, 1984, petitioner Marcelina Fabrigas
("petitioner Marcelina") remitted the amount of
₱13,000.00 to Del Monte.6 On January 12, 1985,
petitioner Marcelina again remitted the amount of
₱12,000.00.7 A few days thereafter, or on January 21,
1985, petitioner Marcelina and Del Monte entered into
another agreement denominated as Contract to Sell No.
2491-V, covering the same property but under
restructured terms of payment. Under the second
contract, the parties agreed on a new purchase price of
₱131,642.58, the amount of ₱26,328.52 as
downpayment and the balance to be paid in monthly
installments of ₱2,984.60 each.8
Between March 1985 and January 1986, Spouses
Fabrigas made irregular payments under Contract to
Sell No. 2491-V, to wit:
March 19, 1985 ₱1, 328.52
July 2, 1985 ₱2, 600.00
September 30, 1985 ₱2, 600.00
November 27, 1985 ₱2, 600.00
January 20, 1986 ₱2, 000.009
Del Monte sent a demand letter dated February 3, 1986,
informing petitioners of their overdue account equivalent
to nine (9) installments or a total amount of ₱26,861.40.
Del Monte required petitioners to satisfy said amount
immediately in two subsequent letters dated March 5
and April 2, 1986.10 This prompted petitioners to pay the
following amounts:
February 3, 1986 ₱2, 000.00
March 10, 1986 ₱2, 000.00
April 9, 1986 ₱2, 000.00
May 13, 1986 ₱2, 000.00
June 6, 1986 ₱2, 000.00
July 14, 1986 ₱2, 000.0011
No other payments were made by petitioners except the
amount of ₱10,000.00 which petitioners tendered
sometime in October 1987 but which Del Monte refused
to accept, the latter claiming that the payment was
intended for the satisfaction of Contract to Sell No.
2482-V which had already been previously cancelled.
On March 24, 1988, Del Monte sent a letter demanding
the payment of accrued installments under Contract to
Sell No. 2491-V in the amount of ₱165,759.60 less
₱48,128.52, representing the payments made under the
restructured contract, or the net amount of ₱117,631.08.
Del Monte allowed petitioners a grace period of thirty
(30) days within which to pay the amount asked to avoid
rescission of the contract. For failure to pay, Del Monte
notified petitioners on March 30, 1989 that Contract to
Sell No. 2482-V had been cancelled and demanded that
petitioners vacate the property.12
On September 28, 1990, Del Monte instituted an action
for Recovery of Possession with Damages against
Spouses Fabrigas before the RTC, Branch 63 of Makati
City. The complaint alleged that Spouses Fabrigas
owed Del Monte the principal amount of ₱206,223.80
plus interest of 24% per annum. In their answer,
Spouses Fabrigas claimed, among others, that Del
Monte unilaterally cancelled the first contract and forced
petitioner Marcelina to execute the second contract,
which materially and unjustly altered the terms and
conditions of the original contract.13
After trial on the merits, the trial court rendered
a Decision on January 3, 1994, upholding the validity
of Contract to Sell No. 2491-V and ordering Spouses
Fabrigas either to complete payments thereunder or to
vacate the property.
Aggrieved, Spouses Fabrigas elevated the matter to the
Court of Appeals, arguing that the trial court should
have upheld the validity and existence of Contract to
Sell No. 2482-V instead and nullified Contract to Sell
No. 2491-V. The Court of Appeals rejected this
argument on the ground that Contract to Sell No. 2482-
V had been rescinded pursuant to the automatic
rescission clause therein. While the Court of Appeals
declared Contract to Sell No. 2491-V as merely
unenforceable for having been executed without
petitioner Marcelina’s signature, it upheld its validity
upon finding that the contract was subsequently ratified.
Hence, the instant petition attributing the following errors
to the Court of Appeals:
A. THE COURT OF APPEALS GRAVELY ERRED
WHEN IT IGNORED THE PROVISIONS OF R.A. NO.
6552 (THE MACEDA LAW) AND RULED THAT
CONTRACT TO SELL NO. 2482-V WAS VALIDLY
CANCELLED BY SENDING A MERE NOTICE TO THE
PETITIONERS.
B. THE COURT OF APPEALS GRAVELY ERRED IN
RULING THAT THERE WAS AN IMPLIED
RATIFICATION OF CONTRACT TO SELL NO. 2491-V.
C. THE COURT OF APPEALS ERRED IN ITS
APPLICATION OF THE RULES OF NOVATION TO
THE INSTANT CASE.14
As reframed for better understanding, the questions are
the following: Was Contract to Sell No. 2482-
V extinguished through rescission or was it novated by
the subsequent Contract to Sell No. 2491-V? If Contract
to Sell No. 2482-V was rescinded, should the manner of
rescission comply with the requirements of Republic Act
No. (R.A.) 6552? If Contract to Sell No. 2482-V was
subsequently novated by Contract to Sell No. 2491-V,
are petitioners liable for breach under the subsequent
agreement?
Petitioners theorize that Contract to Sell No. 2482-
V should remain valid and subsisting because the notice
of cancellation sent by Del Monte did not observe the
requisites under Section 3 of R.A. 6552.15 According to
petitioners, since respondent did not send a notarial
notice informing them of the cancellation or rescission
of Contract to Sell No. 2482-V and also did not pay
them the cash surrender value of the payments on the
property, the Court of Appeals erred in concluding that
respondent correctly applied the automatic rescission
clause of Contract to Sell No. 2482-V. Petitioners also
cite Section 716 of said law to bolster their theory that the
automatic rescission clause in Contract to Sell No.
2482-V is invalid for being contrary to law and public
policy.
The Court of Appeals erred in ruling that Del Monte was
"well within its right to cancel the contract by express
grant of paragraph 7 without the need of notifying
[petitioners],17" instead of applying the pertinent
provisions of R.A. 6552. Petitioners’ contention that
none of Del Monte’s demand letters constituted a valid
rescission of Contract to Sell No. 2482-V is correct.
Petitioners defaulted in all monthly installments. They
may be credited only with the amount of ₱30,000.00
paid upon the execution of Contract to Sell No. 2482-V,
which should be deemed equivalent to less than two (2)
years’ installments. Given the nature of the contract
between petitioners and Del Monte, the applicable legal
provision on the mode of cancellation of Contract to Sell
No. 2482-V is Section 4 and not Section 3 of R.A. 6552.
Section 4 is applicable to instances where less than two
years installments were paid. It reads:
SECTION 4. In case where less than two years of
installments were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date
the installment became due.
If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of
the contract by a notarial act.
Thus, the cancellation of the contract under Section 4 is
a two-step process. First, the seller should extend the
buyer a grace period of at least sixty (60) days from the
due date of the installment. Second, at the end of the
grace period, the seller shall furnish the buyer with a
notice of cancellation or demand for rescission through
a notarial act, effective thirty (30) days from the buyer’s
receipt thereof. It is worth mentioning, of course, that a
mere notice or letter, short of a notarial act, would not
suffice.
While the Court concedes that Del Monte had allowed
petitioners a grace period longer than the minimum sixty
(60)-day requirement under Section 4, it did not comply,
however, with the requirement of notice of cancellation
or a demand for rescission. Instead, Del Monte applied
the automatic rescission clause of the contract.
Contrary, however, to Del Monte’s position which the
appellate court sustained, the automatic cancellation
clause is void under Section 718 in relation to Section 4
of R.A. 6552.19
Rescission, of course, is not the only mode of
extinguishing obligations. Ordinarily, obligations are also
extinguished by payment or performance, by the loss of
the thing due, by the condonation or remission of the
debt, by the confusion or merger of the rights of the
creditor and debtor, by compensation, or by novation.20
Novation, in its broad concept, may either be extinctive
or modificatory. It is extinctive when an old obligation is
terminated by the creation of a new obligation that takes
the place of the former; it is merely modificatory when
the old obligation subsists to the extent it remains
compatible with the amendatory agreement. An
extinctive novation results either by changing the object
or principal conditions (objective or real), or by
substituting the person of the debtor or subrogating a
third person in the rights of the creditor (subjective or
personal). Under this mode, novation would have dual
functions—one to extinguish an existing obligation, the
other to substitute a new one in its place—requiring a
conflux of four essential requisites: (1) a previous valid
obligation; (2) an agreement of all parties concerned to
a new contract; (3) the extinguishment of the old
obligation; and (4) the birth of a valid new obligation.21
Notwithstanding the improper rescission, the facts of the
case show that Contract to Sell No. 2482-V was
subsequently novated by Contract to Sell No. 2491-V.
The execution of Contract to Sell No. 2491-
V accompanied an upward change in the contract price,
which constitutes a change in the object or principal
conditions of the contract. In entering into Contract to
Sell No. 2491-V, the parties were impelled by causes
different from those obtaining under Contract to Sell No.
2482-V. On the part of petitioners, they agreed to the
terms and conditions of Contract to Sell No. 2491-V not
only to acquire ownership over the subject property but
also to avoid the consequences of their default
under Contract No. 2482-V. On Del Monte’s end, the
upward change in price was the consideration for
entering into Contract to Sell No. 2491-V.
In order that an obligation may be extinguished by
another which substitutes the same, it is imperative that
it be so declared in unequivocal terms, or that the old
and the new obligations be on every point incompatible
with each other.22 The test of incompatibility is whether
or not the two obligations can stand together, each one
having its independent existence. If they cannot, they
are incompatible and the latter obligation novates the
first.23 The execution of Contract to Sell No. 2491-
V created new obligations in lieu of those
under Contract to Sell No. 2482-V, which are already
considered extinguished upon the execution of the
second contract. The two contracts do not have
independent existence for to hold otherwise would
present an absurd situation where the parties would be
liable under each contract having only one subject
matter.
To dispel the novation of Contract to Sell No. 2482-
V by Contract to Sell No. 2491-V, petitioners contend
that the subsequent contract is void for two reasons:
first, petitioner Isaias Fabrigas did not give his consent
thereto, and second, the subsequent contract is a
contract of adhesion.
Petitioner rely on Article 172 of the Civil Code governing
their property relations as spouses. Said article states
that the wife cannot bind the conjugal partnership
without the husband’s consent except in cases provided
by law. Since only petitioner Marcelina
executed Contract to Sell No. 2491-V, the same is
allegedly void, petitioners conclude.
Under the Civil Code, the husband is the administrator
of the conjugal partnership.24 Unless the wife has been
declared a non compos mentis or a spendthrift, or is
under civil interdiction or is confined in a leprosarium,
the husband cannot alienate or encumber any real
property of the conjugal partnership without the wife's
consent.25 Conversely, the wife cannot bind the conjugal
partnership without the husband’s consent except in
cases provided by law.26
Thus, if a contract entered into by one spouse involving
a conjugal property lacks the consent of the other
spouse, as in the case at bar, is it automatically void for
that reason alone?
Article 17327 of the Civil Code expressly classifies a
contract executed by the husband without the consent
of the wife as merely annullable at the instance of the
wife. However, there is no comparable provision
covering an instance where the wife alone has
consented to a contract involving conjugal property.
Article 172 of the Civil Code, though, does not expressly
declare as void a contract entered by the wife without
the husband’s consent. It is also not one of the contracts
considered as void under Article 140928 of the Civil
Code.
In Felipe v. Heirs of Maximo Aldon,29 the Court had the
occasion to rule on the validity of a sale of lands
belonging to the conjugal partnership made by the wife
without the consent of the husband. Speaking through
Mr. Justice Abad Santos, the Court declared such a
contract as voidable because one of the parties is
incapable of giving consent to the contract. The capacity
to give consent belonged not even to the husband alone
but to both
spouses.30 In that case, the Court anchored its ruling on
Article 173 of the Civil Code which states that contracts
entered by the husband without the consent of the wife
when such consent is required, are annullable at her
instance during the marriage and within ten years from
the transaction mentioned.31
The factual milieu of the instant case, however, differs
from that in Felipe. The defect which Contract to Sell
No. 2491-V suffers from is lack of consent of the
husband, who was out of the country at the time of the
execution of the contract. There is no express provision
in the Civil Code governing a situation where the
husband is absent and his absence incapacitates him
from administering the conjugal partnership property.
The following Civil Code provisions, however, are
illuminating:
ARTICLE 167. In case of abuse of powers of
administration of the conjugal partnership property by
the husband, the courts, on petition of the wife, may
provide for receivership, or administration by the wife, or
separation of property.
ARTICLE 168. The wife may, by express authority of the
husband embodied in a public instrument, administer
the conjugal partnership property.
ARTICLE 169. The wife may also, by express authority
of the husband appearing in a public instrument,
administer the latter's estate.
While the husband is the recognized administrator of the
conjugal property under the Civil Code, there are
instances when the wife may assume administrative
powers or ask for the separation of property. In the
abovementioned instances, the wife must be authorized
either by the court or by the husband. Where the
husband is absent and incapable of administering the
conjugal property, the wife must be expressly authorized
by the husband or seek judicial authority to assume
powers of administration. Thus, any transaction entered
by the wife without the court or the husband’s authority
is unenforceable in accordance with Article 131732 of the
Civil Code. That is the status to be accorded Contract to
Sell No. 2491-V, it having been executed by petitioner
Marcelina without her husband’s conformity.
Being an unenforceable contract, Contract to Sell No.
2491-V is susceptible to ratification. As found by the
courts below, after being informed of the execution of
the contract, the husband, petitioner Isaias Fabrigas,
continued remitting payments for the satisfaction of the
obligation under Contract to Sell No. 2491-V. These
acts constitute ratification of the contract. Such
ratification cleanses the contract from all its defects from
the moment it was constituted. The factual findings of
the courts below are beyond review at this stage.
Anent Del Monte’s claim that Contract to Sell No. 2491-
V is a contract of adhesion, suffice it to say that
assuming for the nonce that the contract is such the
characterization does not automatically render it void. A
contract of adhesion is so-called because its terms are
prepared by only one party while the other party merely
affixes his signature signifying his adhesion thereto.
Such contracts are not void in themselves. They are as
binding as ordinary contracts. Parties who enter into
such contracts are free to reject the stipulations
entirely.33
The Court quotes with approval the following factual
observations of the trial court, which cannot be
disturbed in this case, to wit:
The Court notes that defendant, Marcelina Fabrigas,
although she had to sign contract No. 2491-V, to avoid
forfeiture of her downpayment, and her other monthly
amortizations, was entirely free to refuse to accept the
new contract. There was no clear case of intimidation or
threat on the part of plaintiff in offering the new contract
to her. At most, since she was of sufficient intelligence
to discern the agreement she is entering into, her
signing of Contract No. 2491-V is taken to be valid and
binding. The fact that she has paid monthly
amortizations subsequent to the execution of Contract
to Sell No. 2491-V, is an indication that she had
recognized the validity of such contract. . . .34
In sum, Contract to Sell No. 2491-V is valid and binding.
There is nothing to prevent respondent Del Monte from
enforcing its contractual stipulations and pursuing the
proper court action to hold petitioners liable for their
breach thereof.
WHEREFORE, the instant Petition for Review is
DENIED and the September 28, 2001 Decision of the
Court of Appeals in CA-G.R. CV No. 45203 is
AFFIRMED. Costs against petitioners.
SO ORDERED.
 SECOND DIVISION
 
G.R. No. 125347 June 19, 1997
EMILIANO RILLO, petitioner,
vs.
COURT OF APPEALS and CORB REALTY
INVESTMENT, CORP., respondents.

PUNO, J.:
This is an appeal under Rule 45 of the Rules of Court to
set aside the decision 1 of the Court of Appeals in CA
G.R. CV No. 39108 cancelling the "Contract to Sell"
between petitioner Emiliano Rillo and private
respondent Corb Realty Investment Corporation. It also
ordered Rillo to vacate the premises subject of the
contract and Corb Realty to return 50% of P158,184.00
or P79,092.00 to Rillo.
The facts of the case are the following:
On June 18, 1985, petitioner Rillo signed a "Contract To
Sell of Condominium Unit" with private respondent Corb
Realty Investment Corporation. Under the contract,
CORB REALTY agreed to sell to RILLO a 61.5 square
meter condominium unit located in Mandaluyong, Metro
Manila. The contract price was P150,000.00, one half of
which was paid upon its execution, while the balance of
P75,000.00 was to be paid in twelve (12) equal monthly
installments of P7,092.00 beginning July 18, 1985. It
was also stipulated that all outstanding balance would
bear an interest of 24% per annum; the installment in
arrears would be subject to liquidated penalty of 1.5%
for every month of default from due date. It was further
agreed that should petitioner default in the payment of
three (3) or four (4) monthly installments, forfeiture
proceedings would be governed by existing laws,
particularly the Condominium Act. 2
On July 18, 1985, RILLO failed to pay the initial monthly
amortization. On August 18, 1985, he again defaulted in
his payment. On September 20, 1985, he paid the first
monthly installment of P7,092.00. On October 2, 1985,
he paid the second monthly installment of P7,092.00.
His third payment was on February 2, 1986 but he paid
only P5,000.00 instead of the stipulated P7,092.00. 3
On July 20, 1987 or seventeen (17) months after
RILLO's last payment, CORB REALTY informed him by
letter that it is cancelling their contract due to his failure
to settle his accounts on time. CORB REALTY also
expressed its willingness to refund RILLO's money. 4
CORB REALTY, however, did not cancel the contract
for on September 28, 1987, it received P60,000.00 from
petitioner. 5
RILLO defaulted again in his monthly installment
payment. Consequently, CORB REALTY informed
RILLO through letter that it was proceeding to rescind
their contract. 6 In a letter dated August 29, 1988, it
requested RILLO to come to its office and withdraw
P102,459.35 less the rentals of the unit from July 1,
1985 to February 28, 1989. 7 Again the threatened
rescission did not materialize. A "compromise" was
entered into by the parties on March 12, 1989, which
stipulated the following:
1. Restructure Outstanding Balance
Down to P50,000.00
2. Payment @ P2,000.00/Month @
18% (Eighteen Percent)
— Monthly — To Compute No. of
Installments
 3. To Pay Titling Plus Any Real Estate
Tax Due
4. Installments to start April 15,
1989. 8
Rillo once more failed to honor their agreement. RILLO
was able to pay P2,000.00 on April 25, 1989 and
P2,000.00 on May 15, 1989. 9
On April 3, 1990, CORB REALTY sent RILLO a
statement of accounts which fixed his total arrears,
including interests and penalties, to P155,129.00. When
RILLO failed to pay this amount, CORE REALTY filed a
complaint 10 for cancellation of the contract to sell with
the Regional Trial Court of Pasig.
In his answer to the complaint, RILLO averred, among
others, that while he had already paid a total of
P149,000.00, CORB REALTY could not deliver to him
his individual title to the subject property; that CORB
REALTY could not claim any right under their previous
agreement as the same was already novated by their
new agreement for him to pay P50,000.00 representing
interest charges and other penalties spread through
twenty-five (25) months beginning April 1989; and that
CORB REALTY's claim of P155,129.99 over and above
the amount he already paid has no legal basis. 11
At the pre-trial, the parties stipulated that RILLO's
principal outstanding obligation as of March 12, 1989
was P50,000.00 and he has paid only P4,000.00 thereof
and that the monthly amortization of P2,000.00 was to
bear 18% interest per annum based on the unpaid
balance. The issues were defined as: (1) whether or not
CORB REALTY was entitled to a rescission of the
contract; and (2) if not, whether or not RILLO's current
obligation to CORB REALTY amounts to P62,000.00
only inclusive of accrued interests. 12
The Regional Trial Court held that CORB REALTY
cannot rescind the "Contract to Sell" because petitioner
did not commit a substantial breach of its terms. It found
that RILLO substantially complied with the "Contract to
Sell" by paying a total of P154,184.00. It ruled that the
remedy of CORB REALTY is to file a case for specific
performance to collect the outstanding balance of the
purchase price.
CORB REALTY appealed the aforesaid decision to
public respondent Court of Appeals assigning the
following errors, to wit:
THE TRIAL COURT ERRED IN
DISREGARDING OTHER FACTS OF THE
CASE, INCLUDING THE FACT THAT THE
CONTRACT TO SELL, AS NOVATED,
CREATED RECIPROCAL OBLIGATIONS ON
BOTH PARTIES;
THE TRIAL COURT ERRED IN
DISREGARDING ARTICLE 1191 OF THE
CIVIL CODE;
THE TRIAL COURT ERRED IN RENDERING
JUDGMENT BY SIMPLY DISREGARDING
THE CASE OF ROQUE V. LAPUZ, 96 SCRA
744, AND WITHOUT INDICATING THE
APPLICABLE LAW ON THE CASE.
THE TRIAL COURT ERRED IN RENDERING
A DECISION WHICH DID NOT COMPLETELY
DISPOSE OF THE CASE.
The respondent Court of Appeals reversed the decision.
It ruled: (1) that rescission does not apply as the
contract between the parties is not an absolute
conveyance of real property but is a contract to sell; (2)
that the Condominium Act (Republic Act No. 4726, as
amended by R.A. 7899) does not provide anything on
forfeiture proceedings in cases involving installment
sales of condominium units, hence, it is Presidential
Decree No. 957 (Subdivision and Condominium Buyers
Protective Decree) which should be applied to the case
at bar. Under Presidential Decree No. 957, the rights of
a buyer in the event of failure to pay installment due,
other than the failure of the owner or developer to
develop the project, shall be governed by Republic Act
No. 6552 or the REALTY INSTALLMENT BUYER
PROTECTION ACT also known as the Maceda Law
(enacted on September 14, 1972). The dispositive
portion of its Decision states:
WHEREFORE, the decision appealed from is
hereby SET ASIDE. The Contract to Sell is
hereby declared cancelled and rendered
ineffective. Plaintiff-Appellant is hereby ordered
to return 50% of P158,184.00 or P79,092.00 to
appellee who is hereby ordered to vacate the
subject premises.
SO ORDERED. 13
Hence, this appeal with the following assignment of
errors:
THE HONORABLE COURT OF APPEALS
SERIOUSLY AND GRAVELY ERRED IN
HOLDING AND DECIDING THAT
RESCISSION IS THE PROPER REMEDY ON
A PERFECTED AND CONSUMMATED
CONTRACT;
THE HONORABLE COURT OF APPEALS
SERIOUSLY AND GRAVELY ERRED IN NOT
HOLDING AND DECIDING THAT THE OLD
CONSUMMATED CONTRACT HAS BEEN
SUPERSEDED BY A NEW, SEPARATE,
 INDEPENDENT AND SUBSEQUENT
CONTRACT BY NOVATION.
The petition is without merit.
The respondent court did not err when it did not apply
Articles 1191 and 1592 of the Civil Code on rescission
to the case at bar. The contract between the parties is
not an absolute conveyance of real property but a
contract to sell. In a contract to sell real property on
installments, the full payment of the purchase price is a
positive suspensive condition, the failure of which is not
considered a breach, casual or serious, but simply an
event which prevented the obligation of the vendor to
convey title from acquiring any obligatory force." 14 The
transfer of ownership and title would occur after full
payment of the purchase price. We held in Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc. 15 that
there can be no rescission of an obligation that is still
non-existent, the suspensive condition not having
happened.
Given the nature of the contract of the parties, the
respondent court correctly applied Republic Act No.
6552. Known as the Maceda Law, R.A. No. 6552
recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller
to cancel the contract upon non-payment of an
installment by the buyer, which is simply an event that
prevents the obligation of the vendor to convey title from
acquiring binding force. 16 It also provides the right of the
buyer on installments in case he defaults in the payment
of succeeding installments, viz:
(1) Where he has paid at least two years of installments,
(a) To pay, without additional interest, the
unpaid installments due within the total grace
period earned by him, which is hereby fixed at
 the rate of one month grace period for every
one year of installment payments
made: Provided, That this right shall be
exercised by the buyer only once in every five
years of the life of the contract and its
extensions, if any.
(b) If the contract is cancelled, the seller shall
refund to the buyer the cash surrender value of
the payments on the property equivalent to fifty
per cent of the total payments made and, after
five years of installments, an additional five per
cent every year but not to exceed ninety per
cent of the total payments made: Provided,
That the actual cancellation of the contract
shall take place after cancellation or the
demand for rescission of the contract by a
notarial act and upon full payment of the cash
surrender value to the buyer.
Down payments, deposits or options on the
contract shall be included in the computation of
the total number of installments made.
(2) Where he has paid less than two years in
installments,
Sec. 4. . . . the seller shall give the buyer a
grace period of not less than sixty days from
the date the installment became due. If the
buyer fails to pay the installments due at the
expiration of the grace period, the seller may
cancel the contract after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of the
contract by a notarial act.
Petitioner RILLO paid less than two years in installment
payments, hence, he is only entitled to a grace period of
not less than sixty (60) days from the due date within
which to make his installment payment. CORB
REALTY, on the otherhand, has the right to cancel the
contract after thirty (30) days from receipt by RILLO of
the notice of cancellation. Hence, the respondent court
did not err when it upheld CORB REALTY's right to
cancel the subject contract upon repeated defaults in
payment by RILLO.
Petitioner further contends that the contract to sell has
been novated by the parties agreement of March 12,
1989. The contention cannot be sustained. Article 1292
of the Civil Code provides that "In order that an
obligation may be extinguished by another which
substitutes the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the
new obligations be on every point incompatible with
each other." Novation is never presumed. 17 Parties to a
contract must expressly agree that they are abrogating
their old contract in favor of a new one. 18 In the absence
of an express agreement, novation takes place only
when the old and the new obligations are incompatible
on every point. 19 In the case at bar, the parties
executed their May 12, 1989 "compromise agreement"
precisely to give life to their "Contract to Sell". It merely
clarified the total sum owed by petitioner RILLO to
private respondent CORB REALTY with the view that
the former would find it easier to comply with his
obligations under the Contract to Sell. In fine, the
"compromise agreement" can stand together with the
Contract to Sell.
Nevertheless, we do not agree with the respondent
Court so far as it ordered private respondent CORB
REALTY to refund 50% of P158,184.00 or P79,092.00
to petitioner RILLO. Under Republic Act No. 6552, the
right of the buyer to a refund accrues only when he has
paid at least two (2) years of installments. In the case at
bar, RILLO has paid less than two (2) years in
installments, hence, he is not entitled to a refund.
IN VIEW WHEREOF, the decision appealed from is
AFFIRMED with the MODIFICATION that the refund of
50% P158,184.00 or P79,092.00 made in favor of
petitioner Emiliano Rillo is deleted. No costs.
SO ORDERED.
 THIRD DIVISION
G.R. No. 208185, September 06, 2017
PRISCILLA ZAFRA ORBE, Petitioner, v. FILINVEST
LAND, INC., Respondent.
DECISION
LEONEN, J.:
When Republic Act No. 6552 or the Maceda Law
speaks of paying "at least two years of installments" in
order for the benefits under its Section 31 to become
available, it refers to the buyer's payment of two (2)
years' worth of the stipulated fractional, periodic
payments due to the seller. When the buyer's payments
fall short of the equivalent of two (2) years' worth of
installments, the benefits that the buyer may avail of are
limited to those under Section 4.2 Should the buyer still
fail to make payments within Section 4's grace period,
the seller may cancel the contract. Any such
cancellation is ineffectual, however, unless it is made
through a valid notarial act.

This resolves a Petition for Review on Certiorari3 under

Rule 45 of the 1997 Rules of Civil Procedure praying
that the assailed October 11, 2012 Decision4 and July 3,
2013 Resolution5 of the Court of Appeals in CA-G.R. SP
No. 118285 be reversed and set aside.

The assailed Court of Appeals October 11, 2012

Decision reversed the prior rulings of the Office of the
President, the Board of Commissioners of the Housing
and Land Use Regulator; Board (HLURB Board of
Commissioners), and of Housing and Land Use Arbiter
Leonard Jacinto A. Soriano (Arbiter Soriano) of the
Expanded National Capital Region Field Office of the
Housing and Land Use Regulatory Board (HLURB Field
Office). It held that petitioner Priscilla Zafra Orbe (Orbe)
is entitled to the benefits of Section 3 of Republic Act
No. 6552.6 The assailed Court of Appeals July 3, 2013
Resolution denied Orbe's Motion for Reconsideration.7

Sometime in June 2001, Orbe entered into a purchase

agreement with respondent Filinvest Land, Inc.
(Filinvest) over a 385-square-meter lot identified as Lot
1, Block 10, Phase 1, Highlands Pointe, Taytay, Rizal.
The total contract price was P2,566,795.00, payable on
installment basis8 under the following terms:

Total Contract
  : [P]2,566,795.00
Price
Reservation Fee   : [P]20,000.00
Down Payments   : [P]493,357.00
Payable on [P]54,818.00
  :
installments monthly
from 8/4/01-
   
4/4/02
Balance   : [P]2,053,436.00
Payable on
   
installments
for a period of 7
   
years
from
   
5/8/024/8/09
[P]27,936.84
First year   :
monthly
[P]39,758.84
Second year   :
monthly
[P]41,394.84
Third year   :
monthly
Fourth year to [P]42,138.84
  :
Seventh year monthly9
From June 17, 2001 to July 14, 2004, Orbe paid a total
of P608,648.20. These were mainly through several
Metrobank checks, for which Filinvest issued official
receipts.10 Check payments were made as follows:
METROBANK CHECK                  
DATE  
NO. AMOUNT
Metro Bank Check No. June 17,
[P]20,000.00  
0306533 2001
Metro Bank Check No. July 29,
[P]54,818.00  
0306544 2001
Metro Bank Check No. Aug. 29,
[P]54,818.00  
0306545 2001
Metro Bank Check No. Sept. 29,
[P]54,818.00  
0306546 2001
Metro Bank Check No. May 8,
[P]100,000.00  
032()243 2002
Metro Bank Check No. May 22,
[P]100,000.00  
0320244 2002
Metro Bank Check No. March 26,
[P]80,000.00  
0370882 2003
Metro Bank Check No. April 26,
[P]75,789.00  
0370883 2003
Metro Bank Check No. Feb. 12,
[P]37,811.00  
0401000 2004
Metro Bank Check No. July 14,
[P]30,000.0011  
0531301 2004
Orbe was unable to make further payments allegedly on
account of financial difficulties.12

On October 4, 2004, Filinvest sent a notice of

cancellation,13 which was received by Orbe on October
18, 2004.14 The notice and its accompanying jurat read:
PRISCILLA Z. ORBE
#107 Morena St. Villaverde Homes
Novaliches, Q,C.

                Re: Account No.    6181426

                      Project             HIGH
                      Phase               1
                      Block               10
                      Lot                   1

Gentlemen (sic):

Our records show that your account remains unpaid

despite our written request for your payment. We have
in fact given you sixty (60) days to update but you failed
to settle your account. Accordingly, please be informed
that we are now hereby canceling your account effective
thirty (30) days from receipt hereof,
Very truly yours,

COLLECTION DEPARTMENT

By:

_________________(sgd.)_________________
                 MA. LOUELLA D. SENIA

Republic of the Philippines )

Makati City                      )S.S.

SUBSCRIBED AND SWORN to before me this OCT 06

2004, affiant exhibiting to me Community Tax Certificate
No. 05465460 issued on February 09, 2004 at Manila.
             (sgd.)
AVELIO L. SALCEDO
    NOTARY PUBLIC
UNTIL DECEMBER 31, 2004
PTR NO. 3703389 3/01/04 SAN JUAN
IBP N0.609984 2/04/04 PASIG CITY

Doc. No. 314

Page No. 64
Book No. XVIII
Series of 200415
Noting that "efforts . . . to seek for a reconsideration of
said cancellation . . . proved futile," and that the parcel
had since been sold by Filinvest to a certain Ruel
Ymana "in evident bad faith,"16 Orbe filed against
Filinvest a Complaint for refund with damages dated
November 13, 2007 before the HLURB Field
Office.17 Orbe emphasized that she had made payments
"beginning June, 2001 up to October, 2004."18 She
further asserted that the October 4, 2004 Notice did not
amount to an "effective cancellation by notarial act."19

In its Answer with Counterclaim, Filinvest asserted that

Orbe failed to make 24 monthly amortization
payments on her account, and thus, could not benefit
from Section 3 of Republic Act No. 6552. According to
Filinvest, the P608,648.20 paid by Orbe from June 17,
2001 to July 14, 2004 covered only the reservation fee,
down payment, and late payment charges, exclusive of
the monthly amortization payments stipulated in the
Purchase Agreement.20

In his July 25, 2008 Decision,21 Arbiter Soriano of the

HLURB Field Office ruled in favor of Orbe. He held that
since Orbe made payments "from 17 June 2001 to 14
July 2004, or a period of more than two years,"22 all of
which should be credited to the principal,23 she was
entitled to a refund of the cash surrender value
equivalent to 50% of the total payments she had made,
pursuant to Section 3 of Republic Act No. 6552.24
Filinvest appealed to the HLURB Board of
Commissioners.25

In its April 15, 2009 Decision,26 the HLURB Board of

Commissioners affirmed Arbiter Soriano's Decision.27 It
disagreed with Arbiter Soriano's conclusion that Orbe
had paid two (2) years' installments. It specifically noted
rather, that the buyer's payments fell two (2) months
short of the equivalent of two years of installments.28 It
added, however, that "[e]quity . . . should come in
especially where, as here, the payment period is
relatively short and the monthly installment is relatively
of substantial amounts."29 Thus, it concluded that Orbe
was still entitled to a 50% refund.30

Filinvest then appealed to the Office of the President.31

In its February 4, 2011 Decision,32 the Office of the

President sustained the conclusion that Orbe was
entitled to a 50% refund. It disagreed with the HLURB
Board of Commissioners' finding that Section 3's
benefits were available to Orbe purely as a matter of
equity. It agreed instead with Arbiter Soriano's reliance
on how Orbe "ha[d] made installment payments for
more than two (2) years."33

Filinvest made another appeal to the Court of

Appeals,34 arguing that:
[W]hat [Republic Act No. 6552] requires for refund of the
cash surrender value is not the length of time of at least
two years from the first payment to the last payment, but
the number of installments paid, that is, at least two ears
of installments or twenty[-]four (24) monthly installments
paid.35
Thus, Section 3, which requires the refund of the cash
surrender value, will only apply when the buyer has
made at least 24 installment payments.36
In its assailed October 11, 2012 Decision,37 the Court of
Appeals reversed the prior rulings of the Office of the
President, of the HLURB Board of Commissioners, and
of Arbiter Soriano; and dismissed Orbe's Complaint.38

The Court of Appeals reasoned that the phrase "two

years of installments" under Section 3 means that total
payments made should at least be equivalent to two
years' worth of installments.39 Considering that Orbe's
total payment of P608,648.20 was short of the required
two (2) years' worth of installments, she could not avail
of the benefits of Section 3.40 What applied instead was
Section 4, enabling a grace period of 60 days from the
day the installment became due and further enabling the
seller to cancel or rescind the contract through a notarial
act, should the buyer still fail to pay within the grace
period.41 It found Filinvest to have sent Orbe a valid,
notarized notice of cancellation thereby precluding any
further relief.42

In its assailed July 3, 2013 Resolution,43 the Court of

Appeals denied Orbe's Motion for Reconsideration.

Hence, the present petition was filed.44

For resolution is the issue of whether or not petitioner

Priscilla Zafra Orbe is entitled to a refund or to any other
benefit under Republic Act No. 6552.

The Court of Appeals correctly held that petitioner was

not entitled to benefits under Section 3 of Republic Act
No. 6552 as she had failed to pay two (2) years' worth of
installments pursuant to the terms of her original
agreement with respondent. It also correctly held that
with the shortage in petitioner's payment, what applies is
Section 4, instead of Section 3. This means that
respondent could cancel the contract since petitioner
failed to pay within the 60-day grace period.

The Court of Appeals, however, failed to realize that the

notice of cancellation made by respondent was an
invalid notarial act. Failing to satisfy all of Section 4's
requisites for a valid cancellation, respondent's
cancellation was ineffectual. The contract between
petitioner and respondent should then be deemed valid
and subsisting.45 Considering however, that respondent
ha.s since sold the lot to another person, an equitable
ruling is proper. Therefore, this Court rules in a manner
consistent with how it resolved Olympia Housing v.
Panasiatic Travel,46Pagtalunan v. Vda. de
Manzano,47Active Realty and Development v.
Daroya,48Associated Marine Officers and Seamen's
Union of the Philippines PTGWO-ITF v.
Decena,49 and Gatchalian Realty v. Angeles.50
I

Republic Act No. 6552, the Realty Installment Buyer Act

or more popularly reffered to as the Maceda Law,
named after its author, the late Sen. Ernesto Maceda,
was adopted with the purpose of "protect[ing] buyers of
real estate on installment payments against onerous
and oppressive conditions."51 It "delineat[es] the rights
and remedies of . . . buyers and protect[s] them from
one-sided and pernicious contract stipulations":52
Its declared public policy is to protect buyers of real
estate on installment basis against onerous and
oppressive conditions. The law seeks to address the
acute housing shortage problem in our country that has
prompted thousands of middle and lower class buyers
of houses, lots and condominium units to enter into all
sorts of contracts with private housing developers
involving installment schemes. Lot buyers, mostly low
income earners eager to acquire a lot upon which to
build their homes, readily affix their signatures on these
contracts, without an opportunity to question the
onerous provisions therein as the contract is offered to
them on a "take it or leave it" basis. Most of these
contracts of adhesion, drawn exclusively by the
developers, entrap innocent buyers by requiring cash
deposits for reservation agreements which often times
include, in fine print, onerous default clauses where all
the installment payments made will be forfeited upon
failure to pay any installment due even if the buyers had
made payments for several years. Real estate
developers thus enjoy an unnecessary advantage over
lot buyers who[m] they often exploit with iniquitous
results. They get to forfeit all the installment payments
of defaulting buyers and resell the same lot to another
buyer with the same exigent conditions. To help
especially the low income lot buyers, the legislature
enacted R.A. No. 6552 delineating the rights and
remedies of lot buyers and protect[ing] them from one-
sided and pernicious contract stipulations.53
Having been adopted with the explicit objective of
protecting buyers against what it recognizes to be
disadvantageous and onerous conditions, the Maceda
Law's provisions must be liberally construed in favor of
buyers. Within the bounds of reason, fairness, and
justice, doubts in its interpretation must be resolved in a
manner that will afford buyers the fullest extent of its
benefits.
II

Sections 3 and 4 of the Maceda Law spell out the rights

of defaulting buyers on installment payments,
depending on the extent of payments made.

Section 3 governs situations in which a buyer "has paid

at least two years of installments":
Section 3. In all transactions or contracts involving the
sale or financing of real estate on installment payments,
including residential condominium apartments but
excluding industrial lots, commercial buildings and sales
to tenants under Republic Act Numbered Thirty eight
hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the
buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid

installments due within the total grace period earned
by him, which is hereby fixed at the rate of one
month grace period for every one year of installment
payments made: Provided, That this right shall be
exercised by the buyer only once in every five years
of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to
the buyer the cash surrender value of the payments
on the property equivalent to fifty per cent of the total
payments made and, after five years of installments,
an additional five per cent every year but not to
exceed ninety per cent of the total payments
made: Provided, That the actual cancellation of the
contract shall take place after thirty days from receipt
by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial
act and upon full payment of the cash surrender
value to the buyer.

Down payments, deposits or options on the contract

shall be included in the computation of the total number
of installment payments made.
Section 4 governs situations "where less than two years
of installments were paid":
Section 4, In case where less than two years of
installments were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date
the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period,
the seller may cancel the contract after thirty days from
receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.
In both Sections 3 and 4, defaulting buyers are afforded
grace periods in which they may pay the installments
due. Should they fail to make payment within the
applicable period, cancellation of their agreement with
the seller may ensue.
III

Contrary to petitioner's allegations, she did not pay "at

least two years of installments" as to fall within the
protection of Section 3.

In a sale by installment, a buyer defers full payment of

the purchase price and ratably apportions payment
across a period. It is typified by regular, fractional
payments. It is these regular, fractional payments that
are referred to as "installments."54

Thus, when Section 3 speaks of paying "at least two

years of installments," it refers to the equivalent of the
totality of payments diligently or consistently made
throughout a period of two (2) years. Accordingly, where
installments are to be paid on a monthly basis, paying
"at least two years of installments" pertains to the
aggregate value of 24 monthly installments. As
explained in Gatchalian Realty v. Angeles:55
It should be noted that Section 3 of R.A. 6552 and
paragraph six of Contract Nos. 2271 and 2272, speak of
"two years of installments." The basis for computation of
the term refers to the installments that correspond to the
number of months of payments, and not to the number
of months that the contract is in effect as well as any
grace period that has been given. Both the law and the
contracts thus prevent any buyer who has not been
diligent in paying his monthly installments tom unduly
claiming the rights provided in Section 3 of R.A.
6552.56 (Emphasis supplied)
The phrase "at least two years of installments" refers to
value and time. It does not only refer to the period when
the buyer has been making payments, with total
disregard for the value that the buyer has actually
conveyed.57 It refers to the proportionate value of the
installments made, as well as payments having been
made for at least two (2) years.

Laws should never be so interpreted as to produce

results that are absurd or unreasonable.58 Sustaining
petitioner's contention that spe falls within Section 3's
protection just because she has been paying for more
than two (2) years goes beyond a justified, liberal
construction of the Maceda Law. It facilitates
arbitrariness, as intermittent payments of fluctuating
amounts would become permissible, so long as they
stretch for two (2) years. Worse, it condones an
absurdity. It sets a precedent that would endorse
minimal, token payments that extend for two (2) years.
A buyer could, then, literally pay loose change for two
(2) years and still come under Section 3's protection.

Reckoning payment of "at least two years of

installments" on the basis of the regular, factional
payments due from the buyer was demonstrated
in Marina Properties Corp. v. Court of Appeals.59 There,
the monthly amortization of P67,024.22 was considered
in determining the validity of the cancellation of the
contract by the seller:
We likewise uphold the finding that MARINA's
cancellation of the Contract To Buy and To Sell was
clearly illegal. Prior to MARINA's unilateral act of
rescission, H.L. CARLOS had already paid
P1,810,330.70, or more than 50% of the contract price
of P3,614,000.00. Moreover, the sum H.L. CARLOS had
disbursed amounted to more than the total of 24
installments, i.e., two years' worth of installments
computed at a monthly installment rate of P67,024.22,
inclusive of the downpayment.60
In Jestra Development and Management Corporation v.
Pacifico,61 where down payment was itself payable in
portions, this Court reckoned the monthly installment
payment for the down payment amounting to
P121,666.66, rather than the monthly amortization. This
Court justified this by referencing Section 3's injunction
that "[d]own payments, deposits or options on the
contract shall be included in the computation of the total
number of installment payments made":
The total purchase price of the property is P2,500,000.
As provided in the Reservation Application, the 30%
down payment on the purchase price or P750,000 was
to be paid in six monthly installments of P121,666.66.
Under the Contract to Sell, the 70% balance of
P1,750,000.00 on the purchase price was to be paid in
10 years through monthly installments of P34,983,
which was later increased to P39,468 in accordance
with the agreement to restructure the same.

While, under the above-quoted Section 3 of R.A. No.

6552, the down payment is included in computing the
total number of installment payments made, the proper
divisor is neither P34,983 nor P39,468, but
P121,666.66, the monthly installment on the down
payment.

The P750,000 down payment was to be paid in six

monthly installments. If the down payment of P750,000
is to be deducted from the total payment of P846,600,
the remainder is only P96,600. Since respondent was
able to pay the down payment in full eleven (11) months
after the last monthly installment was due, and the sum
of P76,600 representing penalty for delay of payment is
deducted from the remaining P96,600, only a balance of
P20,000 remains.

As respondent failed to pay at least two years of

installments, he is not, under above-quoted Section 3 of
R.A. No. 6552, entitled to a refund of the cash surrender
value of his payments.62
Jestra was wrong to use the installment payments on
the down payment as divisor. It is an error to reckon the
payment of two (2) years' worth of installments on the
apportionment of the down payment because, even in
cases where the down payment is broken down into
smaller, more affordable portions, payments for it still do
not embody the ratable apportionment of the contract
price throughout the entire duration of the contract term.
Rather than the partial payments for the down payment,
it is the partition of the contract price into monthly
amortizations that manifests the ratable apportionment
across a complete contract term that is the essence of
sales on installment. The correct standard is that which
was used in Marina, not in Jestra.

Marina also correctly demonstrated how Section 3's

injunction that "[d]own payments, deposits or options on
the contract shall be included in the computation of the
total number of installment payments made" should
operate. In Marina, the total amount of P1,810,330.70
paid by the buyer was inclusive of payments for down
payment worth P1,034,200.00 and cash deposit worth
P50,000.00. In concluding that the buyer in Marina had
paid more than two (2) years' or 24 months' worth of
installments, what this Court considered was the total
amount of P1,810,330.70 and not merely the payments
on amortizations.

Following Marina, this Court reckons petitioner's

satisfaction of the requisite two (2) years' or 24 months'
worth of installments using as divisor the monthly
amortizations due from petitioner. However, this Court
notes that the mon1hly amortizations due from petitioner
were stipulated to escalate on a yearly basis. In keeping
with the need to construe the Maceda Law in a manner
favorable to the buyer, this Court uses as basis the
monthly amortizations set for the first year, i.e.,
P27,936.84. With this as the divisor, it shall appear that
petitioner has only paid 21.786 months' worth of
installments. This falls short of the requisite two (2)
years' or 24 months' worth of installments.
IV

Failing to satisfy Section 3's threshold, petitioner's case

is governed by Section 4 of the Maceda Law.

Thus, she was "entitled to a grace period of not less

than sixty (60) days from the due date within which to
make [her] installment payment. [Respondent], on the
other hand, ha[d] the right to cancel the contract after
thirty (30) days from receipt by [petitioner] of the notice
of cancellation."63

For cancellations under Section 4 to be valid, three (3)

requisites must concur, First, the buyer must have been
given a 60-day grace period but failed to utilize it.
Second, the seller must have sent a notice of
cancellation or demand for rescission by notarial act
And third, the cancellation shall take effect only after 30
days of the buyer's receipt of the notice of cancellation:
Essentially, the said provision provides for three (3)
requisites before the seller may actually cancel the
subject contract: first, the seller shall give the buyer
a 60-day grace period to be reckoned from the date
the installment became due; second, the seller must
give the buyer a notice of cancellation/demand for
rescission by notarial act if the buyer fails to pay the
installments due at the expiration of the said grace
period; and third, the seller may actually cancel the
contract only after thirty (30) days from the buyer's
receipt of the said notice of cancellation/demand for
rescission by notarial act.64 (Emphasis in the original)
Respondent's October 4, 2004 notice indicates that
petitioner failed to utilize the 60-day grace period. It also
indicates that cancellation was to take effect "thirty (30)
days from [its] receipt":
Our records show that your account remains unpaid
despite our written request for your payment. We have
in fact given you sixty (60) days to update but you failed
to settle your account. Accordingly, please be informed
that we are now hereby canceling your account effective
thirty (30) days from receipt hereof.65
The notice of cancellation was also accompanied by a
jurat; thereby making it appear to have been a valid
notarial act:
SUBSCRIBED AND SWORN to before me this OCT 06
2004, affiant exhibiting to me Community Tax Certificate
No. 05465460 issued on February 09, 2004 at
lvfanila.66 (Emphasis supplied)
This is not, however, the valid notarial act contemplated
by the Maceda Law.

In ordinary circumstances, "[n]otarization of a private

document converts the document into a public one
making it admissible in court without further proof of its
authenticity."67 To enable this conversion, Rule 132,
Section 19 of the Revised Rules of Evidence specifically
requires that a document be "acknowledged before a
notary public."68

Rule II, Section 1 of A.M. No. 02-8-13-SC, the 2004

Rules on Notarial Practice, defines an
acknowledgement, as follows:
SECTION 1. Acknowledgment. - "Acknowledgment"
refers to an act in which an individual on a single
occasion:
(a) appears in person before the notary public and
presents an integrally complete instrument or
document;
(b) is attested to be personally known to the notary
public or identified by the notary public through
competent evidence of identity as defined by these
Rules; and
(c) represents to the notary public that the signature on
the instrument or document was voluntarily affixed
by him for the purposes stated in the instrument or
document, declares that he has executed the
instrument or document as his free and voluntary act
and deed, and, if he acts in a particular
representative capacity, that he has the authority to
sign in that capacity.
Notarization under the Maceda Law extends beyond
converting private documents into public ones. Under
Sections 3 and 4, notarization enables the exercise of
the statutory right of unilateral cancellation by the seller
of a perfected contract. If an acknowledgement is
necessary in the customary rendition of public
documents, with greater reason should an
acknowledgement be imperative in notices of
cancellation or demands for rescission made under
Sections 3 and 4 of the Maceda Law.

Through an acknowledgement, individuals acting as

representatives declare that they are authorized to act
as such representatives. This is particularly crucial with
respect to signatories to notices of cancellation or
demands for rescission under Sections 3 and 4 of the
Maceda Law. In a great number of cases, the sellers of
real property shall be juridical persons acting through
representatives. In these cases, it is imperative that the
officer signing for the seller indicate that he or she is
duly authorized to effect the cancellation of an otherwise
perfected contract. Not all personnel are capacitated to
effect these cancellations; individuals purporting to do
so must demonstrate their specific authority. In the case
of corporations, this authority is vested through board
resolutions, or by stipulations in the articles of
incorporation or by-laws.

Respondent's notice of cancellation here was executed

by an individual identified only as belonging to
respondent's Collection Department. It was also
accompanied not by an acknowledgement, but by a
jurat.

A jurat is a distinct notarial act, which makes no

averment concerning the authority of a representative. It
is defined by Rule II, Section 6 of the 2004 Rules on
Notarial Practice, as follows:
SECTION 6. Jurat. - "Jurat" refers to an act in which an
individual on a single occasion:

(a) appears in person before the notary public and

presents an instrument or document;
(b) is personally known to the notary public or identified
by the notary public through competent evidence of
identity as defined by these Rules;
(c) signs the instrument or document in the presence of
the notary; and
(d) takes an oath or affirmation before the notary public
as to such instrument or document.
Even if respondent's notarization by jurat and not by
acknowledgement were to be condoned, respondent's
jurat was not even a valid jurat executed according to
the requirements of the 2004 Rules on Notarial Practice.

The 2004 Rules on Notarial Practice took effect on

August 1, 2004.69 It governed respondent's October 4,
2004 notice, which was notarized on October 6, 2004.
As Rule II, Section 6 of these Rules clearly states, the
person signing the document must be "personally
known to the notary public or identified by the notary
public through competent evidence of identity."

Rule II, Section 12, in turn, defines "competent evidence

of identity." As originally worded, when the 2004 Rules
on Notarial Practice came into effect on August 1, 2004,
Rule II, Section 12 read:
Section 12. Competent Evidence of Identity. - The
phrase "competent evidence of identity" refers to the
identification of an individual based on:

(a) at least one current identification document issued

by an official agency bearing the photograph and
signature of the individual; or
(b) the oath or affirmation of one credible witness not
privy to the instrument, document or transaction who
is personally known to the notary public and who
personally knows the individual, or of two credible
witnesses neither of whom is privy to the instrument,
document or transaction who each personally knows
the individual and shows to the notary public
documentary identification.
The proof of identity used by the signatory to
respondent's notice of cancellation was a community tax
certificate, which no longer satisfies this requirement.

Rule II, Section 12 was eventually amended by A.M. No.

02-8-13-SC. As amended, it specifically rebukes the
validity of a community tax certificate as a competent
evidence of identity:
Section 12. Competent Evidence of Identity. - The
phrase "competent evidence of identity" refers to the
identification of an individual based on:
a. at least one current identification document issued
by an official agency bearing the photograph and
signature of the individual, such as but not limited
 to, passport, driver's license, Professional
Regulations Commission ID, National Bureau of
Investigation clearance, police clearance, postal ID,
voter's ID, Barangay certification, Government
Service and Insurance System (GSIS) e-card,
Social Security System (SSS) card, Philhealth card,
senior citizen card, Overseas Workers Welfare
Administration (OWWA) ID, OFW ID, seaman's
book, alien certificate of registration/immigrant
certificate of registration, government office ID,
certification from the National Council for the
Welfare of Disabled Persons (NCWDP),
Department of Social Welfare and Development
(DSWD) certification; or
b. the oath or affirmation of one credible witness not
privy to the instrument, document or transaction
who is personally known to the notary public and
who personally knows the individual, or of two
credible witnesses neither of whom is privy to the
instrument, document or transaction who each
personally knows the individual and shows to the
notary public documentary identification.
Baylon v. Almo70 explained why community tax
certificates were specifically excluded as a permissible
proof of identity:
As a matter of fact, recognizing the established
unreliability of a community tax certificate in proving the
identity of a person who wishes to have his document
notarized, we did not include it in the list of competent
evidence of identity that notaries public should use in
ascertaining the identity of persons appearing before
them to have their documents notarized.71
Marina Properties v. Court of Appeals72 was
unequivocal: "[I]n order to effect the cancellation of a
contract, a notarial cancellation must first be
had."73Realty Exchange Venture Corp. v.
Sendino74 explained, "Since R.A. 6552 mandates
cancellation by notarial act - among other requirements
before any cancellation of a contract may be effected,
petitioners' precipitate cancellation of its contract with
private respondent without observing the conditions
imposed by the said law was invalid and
improper."75 In Active Realty and Development v.
Daroya,76 where the seller "failed to send a notarized
notice of cancellation,"77 this Court decried the iniquity
foisted upon a buyer. "[W]e find it illegal and iniquitous
that petitioner, without complying with the mandatory
legal requirements for canceling the contract, forfeited
both respondent's land and hard-earned money."78

In ordinary circumstances, where notarization serves

merely to convert a private document into a public
document, notaries public have been admonished about
faithfully observing the rules governing notarial acts:
"Faithful observance and utmost respect of the legal
solemnity of an oath in an acknowledgment or jurat is
sacrosanct."79 It is with greater reason that the diligent
observance of notarial rules should be impressed in
cases concerned with a seller's exercise of a statutory
privilege through cancellations under the Maceda Law.

Respondent's failure to diligently satisfy the imperatives

of the 2004 Rules on Notarial Practice constrains this
Court to consider its notice as an invalid notarial act.
This amounts to respondent's failure to satisfy the
second requisite for valid cancellations under Section 4,
ultimately rendering its cancellation of the purchase
agreement ineffectual.

This Court is mindful of jurisprudence in which it has

been lenient with the requirement of presenting a
competent evidence of identity before a notary public.

Galicto v. Aquino,80Coca Cola Bottlers Philippines, Inc.

v. Dela Cruz,81Victorio-Aquino v. Pacific Plans,
Inc.,82 and Reyes v. Glaucoma

Research Foundation, Inc.83 concerned verifications and

certifications of non-forum shopping in which jurats did
not indicate the required competent evidence of identity.
In these cases, this Court overlooked the defects
considering that "defective jurat in the
Verification/Certification of Non-Forum Shopping is not a
fatal defect . . . The verification is only a formal, not a
jurisdictional, requirement that the Court may
waive."84 Likewise, this Court considered it more
appropriate to not hinder the consideration of pleadings
in order that party-litigants may exhaustively plead their
cases.85

Galicto, Coca-Cola, Victorio-Aquino, and Reyes are

markedly different from the present controversy. They
merely concerned formal infractions. In contrast, this
case concerns Section 4's definite precondition for the
seller's exercise of its option to repudiate a contract. At
stake in Galicto, Coca-Cola, Victorio-Aquino,
and Reyes was the right to be heard in judicial
proceedings, a cognate of due process. What is at stake
here is different: the grant of a statutory privilege
relating to a civil contract.

To be effective, sellers' cancellations under the Maceda

Law must strictly comply with the requirements of
Sections 3 and 4. This Court clarifies here that with
respect to notices of cancellation or demands for
rescission by notarial act, an acknowledgement is
imperative. Moreover, when these are made through
representatives of juridical persons selling real property,
the authority of these representatives must be duly
demonstrated. For corporations, the representative's
authority must have either been granted by a board
resolution or existing in the seller's articles of
incorporation or by-laws.
With the Maceda Law's avowed purpose of extending
benefits to disadvantaged buyers and liberating them
from onerous and oppressive conditions, it necessarily
follows that the Maceda Law's permission for sellers to
cancel contracts becomes available only when its
conditions are heedfully satisfied. No liberal construction
of the Maceda Law can be made in favor of the seller
and at the same time burdening the buyer.
V

There being no valid cancellation, the purchase

agreement between petitioner and respondent "remains
valid and subsisting."86 However, respondent has
already sold the lot purchased by petitioner to a certain
Ruel Ymana.87

Gatchalian Realty v. Angeles88 confronted a similar

predicament. In determining the most judicious manner
of disposing of the controversy, this Court considered
the analogous cases of Olympia Housing v. Panasiatic
Travel,89Pagtalunan v. Vda. de Manzano,90Active Realty
and Development v. Daroya,91 and Associated Marine
Officers and Seamen's Union of the Philippines
PTGWO-ITF v. Decena:92
In Olympia, this Court dismissed the complaint for
recovery of possession for having been prematurely
filed without complying with the mandate of R.A. 6552.
We ordered the defaulting buyer to pay the developer
the balance as of the date of the filing of the complaint
plus 18% interest per annum computed from the day
after the date of the filing of the complaint, but within 60
days from the receipt of a copy of the decision. Upon
payment, the developer shall issue the corresponding
certificate of title in favor of the defaulting buyer, If the
defaulting buyer fails to pay the full amount, then the
defaulting buyer shall vacate the subject property
without need of demand and all payments will be
charged as rentals to the property. There was no award
for damages and attorney's fees, and no costs were
charged to the parties.

In Pagtalunan, this Court dismissed the complaint for

unlawful detainer. We also ordered the defaulting buyer
to pay the developer the balance of the purchase price
plus interest at 6% per annum from the date of filing of
the complaint up to the finality of judgment, and
thereafter, at the rate of 12% per annum. Upon
payment, the developer shall issue a Deed of Absolute
Sale of the subject property and deliver the
corresponding certificate of title in favor of the defaulting
buyer. If the defaulting buyer fails to pay the full amount
within 60 days from finality of the decision, then the
defaulting buyer should vacate the subject property
without need of demand and all payments will be
charged as rentals to the property. No costs were
charged to the parties.

In Active, this Court held that the Contract to Sell

between the parties remained valid because of the
developer's failure to send a notarized notice of
cancellation and to refund the cash surrender value.
The defaulting buyer thus had the right to offer to pay
the balance of the purchase price, and the developer
had no choice but to accept payment. However, the
defaulting buyer was unable to exercise this right
because the developer sold the subject lot. This
Court ordered the developer to refund to the defaulting
buyer the actual value of the lot with 12% interest per
annum computedfrom the date of the filing of the
complaint until fully paid, or to deliver a substitute lot at
the option of the defaulting buyer.

In Associated, this Court dismissed the complaint for

unlawful detainer. We held that the Contract to Sell
between the parties remained valid because the
developer failed to send to the defaulting buyer a
notarized notice of cancellation and to refund the cash
surrender value. We ordered the MeTC to conduct a
hearing within 30 days from receipt of the decision to
determine the unpaid balance of the full value of the
subject properties as well as the current reasonable
amount of rent for the subject properties. We ordered
the defaulting buyer to pay, within 60 days from the trial
court's determination of the amounts, the unpaid
balance of the full value of the subject properties with
interest at 6% per annum computed from the date of
sending of the notice of final demand up to the date of
actual payment. Upon payment, we ordered the
developer to execute a Deed of Absolute Sale over the
subject properties and deliver the transfer certificate of
title to the defaulting buyer. In case of failure to pay
within the mandated 60 day period, we ordered the
defaulting buyer to immediately vacate the premises
without need for further demand. The developer should
also pay the defaulting buyer the cash surrender value,
and the contract should be deemed cancelled 30 days
after the defaulting buyer's receipt of the full payment of
the cash surrender value. If the defaulting buyer failed to
vacate the premises, he should be charged reasonable
rental in the amount determined by the trial
court.93 (Emphasis supplied)
Gatchalian proceeded to, first, assert the propriety of
equitably resolving the controversy, and second,
consider the options available to the buyer. It
specifical1y noted that in the event that its subject
properties were no longer available, only two (2) options
remained: a refund or an offer of substitute properties. It
was exclusively for the buyer to choose between these
options:
We observe that this case has, from the institution of the
complaint, been pending with the courts for 10 years. As
both parties prayed for the issuance of reliefs that are
just and equitable under the premises, and in the
exercise of our discretion, we resolve to dispose of this
case in an equitable manner. Considering that GRI did
not validly rescind Contracts to Sell Nos. 2271 and
2272, Angeles has two options:

1. The option to pay, within 60 days from the MeTC's

determination of the proper amounts, the unpaid
balance of the full value of the purchase price of the
subject properties plus interest at 6% per annum from
11 November 2003, the date of filing of the complaint,
up to the finality of this Decision, and thereafter, at the
rate of 6% per annum. Upon payment of the full amount,
GRI shall immediately execute Deeds of Absolute Sale
over the subject properties and deliver the
corresponding transfer certificate of title to Angeles.

In the event that the subject properties are no longer

available, GRI should offer substitute properties of equal
value. Acceptance the suitability of the substitute
properties is Angeles' sole prerogative. Should Angeles
refuse the substitute properties, GRI shall refund to
Angeles the actual value of the subject properties with
6% interest per annum computed from 11 November
2003, the date of the filing of the complaint, until fully
paid; and

2. The option to accept from GRI P574,148.40, the cash

surrender value of the subject properties, with interest at
6% per annum, computed from 11 November 2003, the
date of the filing of the complaint, until fully paid.
Contracts to Sell Nos. 2271 and 2272 shall be deemed
cancelled 30 days after Angeles' receipt of GRI's full
payment of the cash surrender value. No rent is further
charged upon Angeles as GRI already had possession
of the subject properties on 10 October
2006.94 (Emphasis supplied)
This case is most akin to Active. There, as in this case,
the subject property was actually sold by the seller to a
third person. Gatchalian mirrored Active in discerning an
equitable ruling in the event that its subject properties
had been sold by the seller to another person.

It was Active that originally identified two (2) options

where a seller wrongly cancelled a contract with a
buyer and had since sold that property to a third person,
refunding the actual95 value of the lot sold plus interest
or delivering a substitute lot to the buyer:
Thus, for failure to cancel the contract in accordance
with the procedure provided by law, we hold that the
contract to sell between the parties remains valid and
subsisting. Following Section 3(a) of R.A. No. 6552,
respondent has the right to offer to pay for the balance
of the purchase price, without interest, which she did in
this case. Ordinarily, petitioner would have had no other
recourse but to accept payment. However, respondent
can no longer exercise this right as the subject lot was
already sold by the petitioner to another buyer which lot,
as admitted by the petitioner, was valued at P1,700.00
per square meter. As respondent lost her chance to pay
for the balance of the P875,000.00 lot, it is only just and
equitable that the petitioner be ordered to refund to
respondent the actual value of the lot resold, i.e.,
P875,000.00, with 12% interest per annum computed
from August 26, 1991 until fully paid or to deliver a
substitute lot at the option of the
respondent.96 (Emphasis supplied)
In Active, the buyer managed to pay the full price of the
principal value of the lot but was still short of the total
contract price net of interest.97 Unlike the buyer
in Active, petitioner here has only made partial
payments. Thus, a full refund of the actual value of the
lot, as Active and Gatchalian ordered, is improper. In
addition, petitioner has disavowed any interest in
proceeding with the purchase.98 She has even admitted
to not having the financial capacity for this.99 The
antecedents, too, demonstrate that petitioner made no
further attempt at proceeding with the purchase.
Therefore, this Court follows Active's precedent, as it did
in Gatchalian, but makes adjustments in consideration
of the peculiarities of this case.

Considering that it did not validly cancel its contract with

petitioner and has also sold the lot to another person, it
is proper that respondent be ordered to refund
petitioner. This refund shall not be the full, actual value
of the lot resold, as was ordered
in Active and Gatchalian, lest petitioner be unjustly
enriched. Rather, it shall only be the amount actually
paid by petitioner to respondent, i.e., P608,648.20. In
view of Nacar v. Gallery Frames, this amount shall be
subject to legal interest at the rate of twelve percent
(12%) per annum reckoned from the filing of petitioner's
Complaint100 until June 30, 2013; and six percent (6%)
per annum from July 1, 2013 until fully paid.101

WHEREFORE, the Petition for Review on Certiorari

is GRANTED.

The assailed October 11, 2012 Decision and July 3,

2013 Resolution of the Court of Appeals in CA-G.R. SP
No. 118285 are REVERSED and SET ASIDE.

Respondent Filinvest Land, Inc. is ordered to refund

petitioner Priscilla Zafra Orbe the amount of
P608,648.20. This refund shall earn legal interest at
twelve percent (12%) per annum from November 17,
2004 to June 30, 2013, and six percent (6%) per
annum, reckoned from July 1, 2013 until fully paid.

This case is REMANDED to the Housing and Land Use

Regulatory Board Expanded National Capital Regional
Field Office FOR PROPER EXECUTION.
SO ORDERED.
G.R. No. 157171             March 14, 2006
ARSENIA B. GARCIA, Petitioner,
vs.
HON. COURT OF APPEALS and the PEOPLE OF
THE PHILIPPINES, Respondents
DECISION
QUISUMBING, J.:
This petition seeks the review of the judgment of the
Court of Appeals in CA-G.R. CR No. 245471that
affirmed the conviction of petitioner by the Regional Trial
Court2of Alaminos City, Pangasinan, Branch 54, for
violation of Section 27(b) of Republic Act No. 6646.3
Based on the complaint-affidavit of Aquilino Q. Pimentel,
Jr., who ran in the 1995 senatorial elections, an
information dated March 30, 1998, was filed in the
Regional Trial Court of Alaminos, charging Herminio R.
Romero, Renato R. Viray, Rachel Palisoc and Francisca
de Vera, and petitioner, with violation of Section 27(b).
The information reads:
That on or about May 11, 1995, which was within the
canvassing period during the May 8, 1995 elections, in
the Municipality of Alaminos, Province of Pangasinan,
Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, Election Officer
Arsenia B. Garcia, Municipal Treasurer Herminio R.
Romero, Public School District Supervisor Renato R.
Viray, Chairman, Vice-Chairman, and Member-
Secretary, respectively, of the Municipal Board of
Canvassers of Alaminos, Pangasinan, tabulators Rachel
Palisoc and Francisca de Vera, conspiring with,
confederating together and mutually helping each other,
did, then and there, willfully, and unlawfully decrease[d]
the votes received by senatorial candidate Aquilino Q.
Pimentel, Jr. from six thousand nine hundred ninety-
eight (6,998) votes, as clearly disclosed in the total
number of votes in the one hundred fifty-nine (159)
precincts of the Statement of Votes by Precincts of said
municipality, with Serial Nos. 008417, 008418, 008419,
008420, 008421, 008422 and 008423 to one thousand
nine hundred twenty-one (1,921) votes as reflected in
the Statement of Votes by Precincts with Serial No.
008423 and Certificate of Canvass with Serial No.
436156 with a difference of five thousand seventy-seven
(5,077) votes.
CONTRARY TO LAW.4
In a Decision dated September 11, 2000, the RTC
acquitted all the accused for insufficiency of evidence,
except petitioner who was convicted as follows:
xxx
5. And finally, on the person of Arsenia B. Garcia, the
Court pronounces her GUILTY beyond reasonable
doubt, of the crime defined under Republic Act 6646,
Section 27 (b) for decreasing the votes of Senator
Pimentel in the total of 5,034 and in relation to BP Blg.
881, considering that this finding is a violation of
Election Offense, she is thus sentenced to suffer an
imprisonment of SIX (6) YEARS as maximum, but
applying the INDETERMINATE SENTENCE LAW, the
minimum penalty is the next degree lower which is SIX
(6) MONTHS; however, accused Arsenia B. Garcia is
not entitled to probation; further, she is sentenced to
suffer disqualification to hold public office and she is
also deprived of her right of suffrage.
The bailbond posted by her is hereby ordered cancelled,
and the Provincial Warden is ordered to commit her
person to the Bureau of Correctional Institution for
Women, at Metro Manila, until further orders from the
court.
No pronouncement as to costs.
IT IS SO ORDERED.5
Petitioner appealed before the Court of Appeals which
affirmed with modification the RTC Decision, thus,
WHEREFORE, foregoing considered, the appealed
decision is hereby affirmed with modification, increasing
the minimum penalty imposed by the trial court from six
(6) months to one (1) year.
SO ORDERED.6
The Court of Appeals likewise denied the motion for
reconsideration. Hence, this appeal assigning the
following as errors of the appellate court:
I
ON THE FIRST AND SECOND GROUNDS RELIED
UPON BY THE RESPONDENT COURT, NAMELY,
THAT IT COULD NOT HAVE BEEN SECRETARY
VIRAY WHO DECREASED THE VOTES OF
COMPLAINANT PIMENTEL SINCE HE MERELY
RELIED ON WHAT THE PETITIONER DICTATED,
AND THAT IT COULD NOT HAVE ALSO BEEN THE
TABULATORS BECAUSE PETITIONER WAS THE
ONE WHO READ THE ADDING [MACHINE] TAPE.
II
ON THE THIRD GROUND, NAMELY, THAT
PETITIONER DID NOT PRODUCE THE TAPES
DURING THE TRIAL BECAUSE IF PRODUCED, IT IS
GOING TO BE ADVERSE TO HER.
III
ON THE FOURTH GROUND, NAMELY, THAT THE
PETITIONER WAS THE ONE WHO ENTERED THE
REDUCED FIGURE OF 1,921 IN THE CERTIFICATE
OF CANVASS (COC), Exh. "7", WHEN THE DUTY
WAS THAT OF THE SECRETARY OF THE BOARD.
IV
THE REDUCTION OF THE VOTES OF CANDIDATE
PIMENTEL WAS CLEARLY NOT WILLFUL OR
INTENTIONAL.7
Petitioner contends that (1) the Court of Appeals’
judgment is erroneous, based on speculations, surmises
and conjectures, instead of substantial evidence; and
(2) there was no motive on her part to reduce the votes
of private complainant.
Respondent on the other hand contends that good faith
is not a defense in the violation of an election law, which
falls under the class of mala prohibita.
The main issue is, Is a violation of Section 27(b) of Rep.
Act No. 6646, classified under mala in se or mala
prohibita? Could good faith and lack of criminal intent be
valid defenses?
Generally, mala in se felonies are defined and penalized
in the Revised Penal Code. When the acts complained
of are inherently immoral, they are deemed mala in se,
even if they are punished by a special law.8Accordingly,
criminal intent must be clearly established with the other
elements of the crime; otherwise, no crime is committed.
On the other hand, in crimes that are mala prohibita, the
criminal acts are not inherently immoral but become
punishable only because the law says they are
forbidden. With these crimes, the sole issue is whether
the law has been violated.9Criminal intent is not
necessary where the acts are prohibited for reasons of
public policy.10
Section 27(b) of Republic Act No. 664611provides:
SEC. 27. Election Offenses.- In addition to the
prohibited acts and election offenses enumerated in
Sections 261 and 262 of Batas Pambansa Blg. 881, as
amended, the following shall be guilty of an election
offense:
xxx
(b) Any member of the board of election inspectors or
board of canvassers who tampers, increases, or
decreases the votes received by a candidate in any
election or any member of the board who refuses, after
proper verification and hearing, to credit the correct
votes or deduct such tampered votes.
xxx
Clearly, the acts prohibited in Section 27(b) are mala in
se.12For otherwise, even errors and mistakes committed
due to overwork and fatigue would be punishable. Given
the volume of votes to be counted and canvassed within
a limited amount of time, errors and miscalculations are
bound to happen. And it could not be the intent of the
law to punish unintentional election canvass errors.
However, intentionally increasing or decreasing the
number of votes received by a candidate is inherently
immoral, since it is done with malice and intent to injure
another.
Criminal intent is presumed to exist on the part of the
person who executes an act which the law punishes,
unless the contrary shall appear.13Thus, whoever
invokes good faith as a defense has the burden of
proving its existence.
Records show that the canvassing of votes on May 11,
1995 before the Board of Canvassers of the Municipality
of Alaminos, Pangasinan was conducted as follows:
1. After the votes in the 159 precincts of the
municipality of Alaminos were tallied, the results
thereof were sealed and forwarded to the Municipal
Board of Canvassers for canvassing;
2. The number of votes received by each candidate
in each precinct was then recorded in the
Statement of Votes with appellant, in her capacity
as Chairman, reading the figures appearing in the
results from the precincts and accused Viray, in his
capacity as secretary of the Board, entering the
number in the Statements of Votes as read by the
appellant. Six Statements of Votes were filled up to
reflect the votes received by each candidate in the
159 precincts of the Municipality of Alaminos,
Pangasinan.
3. After the number of votes received by each
candidate for each precincts were entered by
accused Viray in the Statements of Votes, these
votes were added by the accused Palisoc and de
Vera with the use of electrical adding machines.
4. After the tabulation by accused Palisoc and de
Vera, the corresponding machine tapes were
handed to appellant who reads the subtotal of votes
received by each candidate in the precincts listed in
each Statement of Votes. Accused Viray [then]
records the subtotal in the proper column in the
Statement of Votes.
5. After the subtotals had been entered by accused
Viray, tabulators accused Palisoc and de Vera
added all the subtotals appearing in all Statement
of Votes.
6. After the computation, the corresponding
machine tape on which the grand total was
reflected was handed to appellant who reads the
 same and accused Viray enters the figure read by
appellant in the column for grand total in the
Statement of Votes.14
Neither the correctness of the number of votes entered
in the Statement of Votes (SOV) for each precinct, nor
of the number of votes entered as subtotals of votes
received in the precincts listed in SOV Nos. 008417 to
008422 was raised as an issue.
At first glance, however, there is a noticeable
discrepancy in the addition of the subtotals to arrive at
the grand total of votes received by each candidate for
all 159 precincts in SOV No. 008423.15The grand total of
the votes for private complainant, Senator Aquilino
Pimentel, was only 1,921 instead of 6,921, or 5,000
votes less than the number of votes private complainant
actually received. This error is also evident in the
Certificate of Canvass (COC) No. 436156 signed by
petitioner, Viray and Romero.16
During trial of this case, petitioner admitted that she was
indeed the one who announced the figure of 1,921,
which was subsequently entered by then accused Viray
in his capacity as secretary of the board.17Petitioner
likewise admitted that she was the one who prepared
the COC (Exhibit A-7), though it was not her duty. To
our mind, preparing the COC even if it was not her task,
manifests an intention to perpetuate the erroneous entry
in the COC.18
Neither can this Court accept petitioner’s explanation
that the Board of Canvassers had no idea how the SOV
(Exhibit "6") and the COC reflected that private
complainant had only 1,921 votes instead of 6,921
votes. As chairman of the Municipal Board of
Canvassers, petitioner’s concern was to assure
accurate, correct and authentic entry of the votes. Her
failure to exercise maximum efficiency and fidelity to her
trust deserves not only censure but also the
concomitant sanctions as a matter of criminal
responsibility pursuant to the dictates of the law.19
The fact that the number of votes deducted from the
actual votes received by private complainant, Sen.
Aquilino Pimentel, Jr. was not added to any senatorial
candidate does not relieve petitioner of liability under
Section 27(b) of Rep. Act No. 6646. The mere
decreasing of the votes received by a candidate in an
election is already punishable under the said provision.20
At this point, we see no valid reason to disturb the
factual conclusions of the appellate court. The Court has
consistently held that factual findings of the trial court,
as well as of the Court of Appeals are final and
conclusive and may not be reviewed on appeal,
particularly where the findings of both the trial court and
the appellate court on the matter coincide.21
Public policy dictates that extraordinary diligence should
be exercised by the members of the board of
canvassers in canvassing the results of the elections.
Any error on their part would result in the
disenfranchisement of the voters. The Certificate of
Canvass for senatorial candidates and its supporting
statements of votes prepared by the municipal board of
canvassers are sensitive election documents whose
entries must be thoroughly scrutinized.22
In our review, the votes in the SOV should total 6,998.23
As between the grand total of votes alleged to have
been received by private complainant of 6,921 votes
and statement of his actual votes received of 6,998 is a
difference of 77 votes. The discrepancy may be validly
attributed to mistake or error due to fatigue. However, a
decrease of 5,000 votes as reflected in the Statement of
Votes and Certificate of Canvass is substantial, it cannot
be allowed to remain on record unchallenged, especially
when the error results from the mere transfer of totals
from one document to another.
WHEREFORE, the instant petition is DENIED. The
assailed Decision of the Court of Appeals sustaining
petitioner’s conviction but increasing the minimum
penalty in her sentence to one year instead of six
months is AFFIRMED.
SO ORDERED.