ANG YU ASUNCION, et al., petitioners, vs.

CA and BUEN REALTY DEVELOPMENT CORPORATION, respondents

G.R. No. 109125 December 2, 1994
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting aside and declaring
without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et
al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil
Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned
by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935
and have been religiously paying the rental and complying with all the conditions of the lease contract; that on several
occasions before October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving
them priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs
made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the
terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another letter dated January
28, 1987 with the same request; that since defendants failed to specify the terms and conditions of the offer to sell and
because of information received that defendants were about to sell the property, plaintiffs were compelled to file the complaint
to compel defendants to sell the property to them.
Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of
cause of action.
After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court. The trial
court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon
the terms and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled
that should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the
right of first refusal. Thus the dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs
summarily dismissing the complaint subject to the aforementioned condition that if the defendants
subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower,
then the plaintiffs has the option to purchase the property or of first refusal, otherwise, defendants need
not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and
concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower
court's judgment, holding:
In resume, there was no meeting of the minds between the parties concerning the sale of the property.
Absent such requirement, the claim for specific performance will not lie. Appellants' demand for actual,
moral and exemplary damages will likewise fail as there exists no justifiable ground for its award.
Summary judgment for defendants was properly granted. Courts may render summary judgment when
there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a
matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the
court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but
subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-
appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos
or lower; however, considering the mercurial and uncertain forces in our market economy today. We find
no reason not to grant the same right of first refusal to herein appellants in the event that the subject
property is sold for a price in excess of Eleven Million pesos. No pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court denied
the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses
executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen Realty and
Development Corporation, subject to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of
which in full is hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor
of the VENDEE, his heirs, executors, administrators or assigns, the above-described property with all the
improvements found therein including all the rights and interest in the said property free from all liens and
encumbrances of whatever nature, except the pending ejectment proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his
favor and other expenses incidental to the sale of above-described property including capital gains tax
and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu
thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter
vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis
pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the
Court of Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:
Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano.
Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty.
Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the
rubber stamp and signatures upon the copy of the Motion for Execution.
The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the
Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the
petition for review and that the same was denied by the highest tribunal in its resolution dated May 6,
1991 in G.R. No.
L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by
the Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already become
final and executory.
It is the observation of the Court that this property in dispute was the subject of the Notice of Lis Pendens
and that the modified decision of this Court promulgated by the Court of Appeals which had become final
to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or
lower, and considering the mercurial and uncertain forces in our market economy today, the same right of
first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess
of Eleven Million pesos or more.
WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the property in
litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15
Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be
issued in favor of the buyer.
All previous transactions involving the same property notwithstanding the issuance of another title to
Buen Realty Corporation, is hereby set aside as having been executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff
Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others
to comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order
and for defendants to execute the necessary Deed of Sale of the property in litigation in favor of the
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15,000,000.00 and
ordering the Register of Deeds of the City of Manila, to cancel and set aside the title already issued in
favor of Buen Realty Corporation which was previously executed between the latter and defendants and
to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued.
1

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the above questioned
orders of the court a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens,
carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from the Cu
Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a purchase option and a contract to
sell. For ready reference, we might point out some fundamental precepts that may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential
elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law, contracts,
quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to be observed (to give, to do or not to do); and (c) the
subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service (Art. 1305, Civil Code). A contract undergoes various stages that include its negotiation or
preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in
the contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence of the essential elements
thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on
the object and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as in a pledge or
commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a donation
of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof. The stage of consummation
begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the topic
for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and
to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the fulfillment of
a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to convey title from
acquiring an obligatory force.
2
In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a
sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the
price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property
sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection.
3
If the condition is
imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil
Code).
4

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

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and
separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the
second paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price. (1451a)
6

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

Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or
solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are
not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at
this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree
learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally
govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its
acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art.
1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479,
modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs.
Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it
could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer
during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject
matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option)
by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own
stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the
real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the
part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can evidence its
perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of
sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an
option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319
9
of the same Code. An option or an offer would
require, among other things,
10
a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while
the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a
binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum
juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human
conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance
of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby
negating the indispensable element of consensuality in the perfection of contracts.
11
It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19
12
of the
Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners. The consequence of
such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of
private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for
damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith
and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that
must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject
to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its
day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil
Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As already
stated, there was nothing in said decision
13
that decreed the execution of a deed of sale between the Cu Unjiengs and
respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the name of petitioner (Limpin vs. IAC,
147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs.
CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of any deed of sale between
the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and 27 September 1991, of the
court a quo. Costs against petitioners.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners, vs. MAYFAIR THEATER, INC., respondent
G.R. No. 106063 November 21, 1996] EN BANC

FACTS:
Before us is a petition for review of the decision
1
of the Court of Appeals
2
involving questions in the resolution of which the respondent appellate court
analyzed and interpreted particular provisions of our laws on contracts and sales. In its assailed decision, the respondent court reversed the trial court
3

which, in dismissing the complaint for specific performance with damages and annulment of contract,
4
found the option clause in the lease contracts entered
into by private respondent Mayfair Theater, Inc. (hereafter, Mayfair) and petitioner Carmelo & Bauermann, Inc. (hereafter, Carmelo) to be impossible of
performance and unsupported by a consideration and the subsequent sale of the subject property to petitioner Equatorial Realty Development, Inc.
(hereafter, Equatorial) to have been made without any breach of or prejudice to, the said lease contracts.
5


Carmelo & Bauermann, Inc. owned a parcel of land, with two 2-storey buildings constructed thereon, located at Claro M Recto Avenue, Manila. On June 1,
1967 Carmelo entered into a contract with Mayfair Theater, Inc. for the latter's lease of a portion of Carmelo's property particularly a portion of the second
floor of the two storey building and mezzanine to be used as a motion picture theater for a term of twenty years. Mayfair thereafter constructed on the leased
property a movie house known as "Maxim Theatre." Two years later, the parties entered into another contract of lease for the lease of another portion of said
two storey building particularly a portion of the 2
nd
floor and two store spaces at the ground floor and mezzanine for similar use as a movie theater and for
a similar term of twenty years. Mayfair put up another movie house known as "Miramar Theatre" on this leased property.

Both contracts of lease provides (sic) identically worded paragraph 8, which reads:
That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it hereby
binds and obligates itself, to stipulate in the Deed of Sale hereof that the purchaser shall recognize this lease and be bound by all the terms and
conditions thereof.
Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone conversation that Carmelo was
desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for US
Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos.
Mr. Yang replied that he would let Mr. Pascal know of his decision. Subsequently, Mayfair replied through a letter reiterating the provision as stated in
paragraph 8. Carmelo did not reply to this letter. On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring
not only the leased premises but "the entire building and other improvements if the price is reasonable. However, both Carmelo and Equatorial questioned
the authenticity of the second letter. Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the
leased premises housing the "Maxim" and "Miramar" theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.
In September 1978, Mayfair instituted the action a quo for specific performance and annulment of the sale of the leased premises to Equatorial. In its
Answer, Carmelo alleged as special and affirmative defense (a) that it had informed Mayfair of its desire to sell the entire C.M. Recto Avenue property and
offered the same to Mayfair, but the latter answered that it was interested only in buying the areas under lease, which was impossible since the property was
not a condominium; and (b) that the option to purchase invoked by Mayfair is null and void for lack of consideration. Equatorial, in its Answer, pleaded as
special and affirmative defense that the option is void for lack of consideration (sic) and is unenforceable by reason of its impossibility of performance
because the leased premises could not be sold separately from the other portions of the land and building. It counterclaimed for cancellation of the contracts
of lease, and for increase of rentals in view of alleged supervening extraordinary devaluation of the currency.
After assessing the evidence, the court a quo rendered the appealed decision against Mayfair. The trial court adjudged the identically worded paragraph 8
found in both aforecited lease contracts to be an option clause which however cannot be deemed to be binding on Carmelo because of lack of distinct
consideration therefor. On appeal, respondent appellate court reversed the court a quo and rendered judgment:
2. Directing the plaintiff-appellant Mayfair Theater Inc. to pay and return to Equatorial the amount of P11,300,000.00 within fifteen (15) days from
notice of this Decision, and ordering Equatorial Realty Development, Inc. to accept such payment;
3. Upon payment of the sum of P11,300,000, directing Equatorial Realty Development, Inc. to execute the deeds and documents necessary for
the issuance and transfer of ownership to Mayfair of the lot registered under TCT Nos. 17350, 118612, 60936, and 52571; and
4. Should plaintiff-appellant Mayfair Theater, Inc. be unable to pay the amount as adjudged, declaring the Deed of Absolute Sale between the
defendants-appellants Carmelo & Bauermann, Inc. and Equatorial Realty Development, Inc. as valid and binding upon all the parties.


Respondent Court of Appeals concluded that since paragraph 8 of the two lease contracts does not state a fixed price for the purchase of the leased
premises, which is an essential element for a contract of sale to be perfected, what paragraph 8 is, must be a right of first refusal and not an option contract.
It explicated:
Firstly, the court a quo misapplied the provisions of Articles 1324 and 1479, second paragraph, of the Civil Code.
Article 1324 speaks of an "offer" made by an offeror which the offeree may or may not accept within a certain period. Under this article, the offer
may be withdrawn by the offeror before the expiration of the period and while the offeree has not yet accepted the offer. However, the offer cannot
be withdrawn by the offeror within the period if a consideration has been promised or given by the offeree in exchange for the privilege of being
given that period within which to accept the offer. The consideration is distinct from the price which is part of the offer. The contract that arises is
known as option.
Article 1479, second paragraph, on the other hand, contemplates of an "accepted unilateral promise to buy or to sell a determinate thing for a price
within (which) is binding upon the promisee if the promise is supported by a consideration distinct from the price." That "unilateral promise to buy
or to sell a determinate thing for a price certain" is called an offer. An "offer", in laws, is a proposal to enter into a contract. To constitute a legal
offer, the proposal must be certain as to the object, the price and other essential terms of the contract (Art. 1319, Civil Code).
Based on the foregoing discussion, it is evident that the provision granting Mayfair "30-days exclusive option to purchase" the leased premises is
NOT AN OPTION in the context of Arts. 1324 and 1479, second paragraph, of the Civil Code. Although the provision is certain as to the object
(the sale of the leased premises) the price for which the object is to be sold is not stated in the provision Otherwise stated, the questioned
stipulation is not by itself, an "option" or the "offer to sell" because the clause does not specify the price for the subject property.
Although the provision giving Mayfair "30-days exclusive option to purchase" cannot be legally categorized as an option, it is, nevertheless, a valid
and binding stipulation. What the trial court failed to appreciate was the intention of the parties behind the questioned proviso.
The provision in question is not of the pro-forma type customarily found in a contract of lease. Even appellees have recognized that the stipulation
was incorporated in the two Contracts of Lease at the initiative and behest of Mayfair. Evidently, the stipulation was intended to benefit and protect
Mayfair in its rights as lessee in case Carmelo should decide, during the term of the lease, to sell the leased property. This intention of the parties
is achieved in two ways in accordance with the stipulation. The first is by giving Mayfair "30-days exclusive option to purchase" the leased
property. The second is, in case Mayfair would opt not to purchase the leased property, "that the purchaser (the new owner of the leased property)
shall recognize the lease and be bound by all the terms and conditions thereof."
In other words, paragraph 8 of the two Contracts of lease, particularly the stipulation giving Mayfair "30-days exclusive option to purchase the
(leased premises)," was meant to provide Mayfair the opportunity to purchase and acquire the leased property in the event that Carmelo should
decide to dispose of the property. In order to realize this intention, the implicit obligation of Carmelo once it had decided to sell the leased property,
was not only to notify Mayfair of such decision to sell the property, but, more importantly, to make an offer to sell the leased premises to Mayfair,
giving the latter a fair and reasonable opportunity to accept or reject the offer, before offering to sell or selling the leased property to third parties.
The right vested in Mayfair is analogous to the right of first refusal, which means that Carmelo should have offered the sale of the leased premises
to Mayfair before offering it to other parties, or, if Carmelo should receive any offer from third parties to purchase the leased premises, then
Carmelo must first give Mayfair the opportunity to match that offer.
Besides the ruling that paragraph 8 vests in Mayfair the right of first refusal as to which the requirement of distinct consi deration indispensable in an option
contract, has no application, respondent appellate court also addressed the claim of Carmelo and Equatorial that assuming arguendo that the option is valid
and effective, it is impossible of performance because it covered only the leased premises and not the entire Claro M. Recto property, while Carmelo's offer
to sell pertained to the entire property in question. The Court of Appeals ruled as to this issue in this wise:
We are not persuaded by the contentions of the defendants-appellees. It is to be noted that the Deed of Absolute Sale between Carmelo and
Equatorial covering the whole Claro M. Recto property, made reference to four titles: TCT Nos. 17350, 118612, 60936 and 52571. Based on the
information submitted by Mayfair in its appellant's Brief (pp. 5 and 46) which has not been controverted by the appellees, and which We, therefore,
take judicial notice of the two theaters stand on the parcels of land covered by TCT No. 17350 with an area of 622.10 sq. m and TCT No. 118612
with an area of 2,100.10 sq. m. The existence of four separate parcels of land covering the whole Recto property demonstrates the legal and
physical possibility that each parcel of land, together with the buildings and improvements thereof, could have been sold independently of the
other parcels.
At the time both parties executed the contracts, they were aware of the physical and structural conditions of the buildings on which the theaters
were to be constructed in relation to the remainder of the whole Recto property. The peculiar language of the stipulation would tend to limit
Mayfair's right under paragraph 8 of the Contract of Lease to the acquisition of the leased areas only. Indeed, what is being contemplated by the
questioned stipulation is a departure from the customary situation wherein the buildings and improvements are included in and form part of the
sale of the subjacent land. Although this situation is not common, especially considering the non-condominium nature of the buildings, the sale
would be valid and capable of being performed. A sale limited to the leased premises only, if hypothetically assumed, would have brought into
operation the provisions of co-ownership under which Mayfair would have become the exclusive owner of the leased premises and at the same
time a co-owner with Carmelo of the subjacent land in proportion to Mayfair's interest over the premises sold to it.
10

ISSUE:
In essence, our task is two-fold: (1) to define the true nature, scope and efficacy of paragraph 8 stipulated in the two contracts of lease between Carmelo
and Mayfair in the face of conflicting findings by the trial court and the Court of Appeals; and (2) to determine the rights and obligations of Carmelo and
Mayfair, as well as Equatorial, in the aftermath of the sale by Carmelo of the entire Claro M. Recto property to Equatorial.

HELD:
We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an
option clause or an option contract. It is a contract of a right of first refusal. An option contract is one necessarily involving the choice granted to another for a
distinct and separate consideration as to whether or not to purchase a determinate thing at a predetermined fixed price. In the case at bar, it appears that
there was no cause or consideration; said provision cannot be considered a contract of option.
The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid and enforceable, must, among
other things, indicate the definite price at which the person granting the option, is willing to sell.
Notably, in one case we held that the lessee loses his right to buy the leased property for a named price per square meter upon failure to make the purchase
within the time specified;
17
in one other case we freed the landowner from her promise to sell her land if the prospective buyer could raise P4,500.00 in three
weeks because such option was not supported by a distinct consideration;
18
in the same vein in yet one other case, we also invalidated an instrument
entitled, "Option to Purchase" a parcel of land for the sum of P1,510.00 because of lack of consideration;
19
and as an exception to the doctrine enumerated
in the two preceding cases, in another case, we ruled that the option to buy the leased premises for P12,000.00 as stipulated in the lease contract, is not
without consideration for in reciprocal contracts, like lease, the obligation or promise of each party is the consideration for that of the other.
20
In all these
cases, the selling price of the object thereof is always predetermined and specified in the option clause in the contract or in the separate deed of option.
In the light of the foregoing disquisition and in view of the wording of the questioned provision in the two lease contracts involved in the instant case, we so
hold that no option to purchase in contemplation of the second paragraph of Article 1479 of the Civil Code, has been granted to Mayfair under the said lease
contracts. Respondent Court of Appeals correctly ruled that the said paragraph 8 grants the right of first refusal to Mayfair and is not an option contract. It
also correctly reasoned that as such, the requirement of a separate consideration for the option, has no applicability in the instant case. There is nothing in
the identical Paragraphs "8" of the June 1, 1967 and March 31, 1969 contracts which would bring them into the ambit of the usual offer or option requiring an
independent consideration. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and
distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration.

In the instant case,
the right of first refusal is an integral part of the contracts of lease. The consideration is built into the reciprocal obligations of the parties.
The Court of Appeals is correct in stating that Paragraph 8 was incorporated into the contracts of lease for the benefit of Mayfair which wanted to be assured
that it shall be given the first crack or the first option to buy the property at the price which Carmelo is willing to accept. It is not also correct to say that there
is no consideration in an agreement of right of first refusal. The stipulation is part and parcel of the entire contract of l ease. The consideration for the lease
includes the consideration for the right of first refusal. Thus, Mayfair is in effect stating that it consents to lease the premises and to pay the price agreed
upon provided the lessor also consents that, should it sell the leased property, then, Mayfair shall be given the right to match the offered purchase price and
to buy the property at that price.
We shall now determine the consequential rights, obligations and liabilities of Carmelo, Mayfair and Equatorial.
First and foremost is that the petitioners acted in bad faith to render Paragraph 8 "inutile". What Carmelo and Mayfair agreed to, by executing the two lease
contracts, was that Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It is undisputed that Carmelo did recognize this
right of Mayfair, for it informed the latter of its intention to sell the said property in 1974. There was an exchange of letters evidencing the offer and counter-
offers made by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it initially recognized Mayfair's right of first refusal,
Carmelo violated such right when without affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite offer and a
possible corresponding acceptance within the "30-day exclusive option" time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for some
time, and then sold, without prior notice to Mayfair, the entire Claro M Recto property to Equatorial.
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We agree with respondent Appellate Court
that the records bear out the fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sal e, studied the said contracts. As
such, Equatorial cannot tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused
to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said
contract. It is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause, or
to protect some incompatible and preferent right created by the contract. Rescission implies a contract which, even if initially valid, produces a lesion or
pecuniary damage to someone that justifies its invalidation for reasons of equity.
It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the action for its rescission where it is shown that such
third person is in lawful possession of the subject of the contract and that he did not act in bad faith. However, this rule is not applicable in the case before us
because the petitioner is not considered a third party in relation to the Contract of Sale nor may its possession of the subject property be regarded as
acquired lawfully and in good faith.
A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such
property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the
property. Good faith connotes an honest intention to abstain from taking unconscientious advantage of another. Tested by these principles, the petitioner
cannot tenably claim to be a buyer in good faith as it had notice of the lease of the property by Mayfair and such knowledge should have cautioned it to look
deeper into the agreement to determine if it involved stipulations that would prejudice its own interests.
Petitioners assert the alleged impossibility of performance because the entire property is indivisible property. It was petitioner Carmelo which fixed the limits
of the property it was leasing out. Common sense and fairness dictate that instead of nullifying the agreement on that basis, the stipulation should be given
effect by including the indivisible appurtenances in the sale of the dominant portion under the right of first refusal. A valid and legal contract where the
ascendant or the more important of the two parties is the landowner should be given effect, if possible, instead of being nullified on a selfish pretext posited
by the owner. Following the arguments of petitioners and the participation of the owner in the attempt to strip Mayfair of i ts rights, the right of first refusal
should include not only the property specified in the contracts of lease but also the appurtenant portions sold to Equatorial which are claimed by petitioners
to be indivisible. Carmelo acted in bad faith when it sold the entire property to Equatorial without informing Mayfair, a clear violation of Mayfair's rights. While
there was a series of exchanges of letters evidencing the offer and counter-offers between the parties, Carmelo abandoned the negotiations without giving
Mayfair full opportunity to negotiate within the 30-day period.
The facts of the case and considerations of justice and equity require that we order rescission here and now. Rescission is a relief allowed for the protection
of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred
right by the contract.

The sale of the subject real property by Carmelo to Equatorial should now be rescinded considering that Mayfair, which had substantial
interest over the subject property, was prejudiced by the sale of the subject property to Equatorial without Carmelo conferring to Mayfair every opportunity to
negotiate within the 30-day stipulated period.
WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The
Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby deemed rescinded; petitioner
Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty Development the purchase price. The latter is directed to execute the deeds and
documents necessary to return ownership to Carmelo and Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc.
to buy the aforesaid lots for P11,300,000.00.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-26872 July 25, 1975
VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE TAGLE, intervenor-appellee, vs. BORMAHECO, INC., FRANCISCO N.
CERVANTES and ROSARIO N. CERVANTES, defendants-appellants. Meer, Meer & Meer for plaintiff-appellee.
This action was instituted by Villonco Realty Company against Bormaheco, Inc. and the spouses Francisco N. Cervantes and Rosario N. Cervantes for the
specific performance of a supposed contract for the sale of land and the improvements thereon for one million four hundred thousand pesos. Edith Perez de
Tagle, as agent, intervened in order to recover her commission. The lower court enforced the sale. Bormaheco, Inc. and the Cervantes spouses, as
supposed vendors, appealed.
This Court took cognizance of the appeal because the amount involved is more than P200,000 and the appeal was perfected before Republic Act No. 5440
took effect on September 9, 1968. The facts are as follows:
Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with a
total area of three thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532, Exh. A, A-1 and A-2). The lots were mortgaged to the
Development Bank of the Phil (DBP) on April 21, 1959 as security for a loan of P441,000. The mortgage debt was fully paid on July 10, 1969.
Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and agricultural machinery. The entire lots are occupied by the building,
machinery and equipment of Bormaheco, Inc. and are adjacent to the property of Villonco Realty Company situated at 219 Buendia Avenue.
In the early part of February, 1964 there were negotiations for the sale of the said lots and the improvements thereon between Romeo Villonco of Villonco
Realty Company "and Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through the intervention of Edith Perez de Tagle, a real estate
broker".
In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco conferred with Cervantes in his office to discuss the price and terms of
the sale. Later, Cervantes "went to see Villonco for the same reason until some agreement" was arrived at. On a subsequent occasion, Cervantes,
accompanied by Edith Perez de Tagle, discussed again the terms of the sale with Villonco.
During the negotiations, Villonco Realty Company assumed that the lots belonged to Bormaheco, Inc. and that Cervantes was duly authorized to sell the
same. Cervantes did not disclose to the broker and to Villonco Realty Company that the lots were conjugal properties of himself and his wife and that they
were mortgaged to the DBP.
Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964, to Romeo Villonco for the sale of the property. The offer reads (Exh. B):
BORMAHECO, INC.
February 12,1964
Mr. Romeo
Villonco Villonco Building
Buendia Avenue
Makati, Rizal.
Dear Mr. Villonco:
This is with reference to our telephone conversation this noon on the matter of the sale of our property located at Buendia
Avenue, with a total area of 3,500 sq. m., under the following conditions:
(1) That we are offering to sell to you the above property at the price of P400.00 per square meter;
(2) That a deposit of P100,000.00 must be placed as earnest money on the purchase of the above
property which will become part payment of the property in the event that the sale is consummated;
(3) That this sale is to be consummated only after I shall have also consummated my purchase of another
property located at Sta. Ana, Manila;
(4) That if my negotiations with said property will not be consummated by reason beyond my control, I will
return to you your deposit of P100,000 and the sale of my property to you will not also be consummated;
and
(5) That final negotiations on both properties can be definitely known after 45 days.
If the above terms is (are) acceptable to your Board, please issue out the said earnest money in favor of Bormaheco, Inc., and
deliver the same thru the bearer, Miss Edith Perez de Tagle.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
The property mentioned in Bormaheco's letter was the land of the National Shipyards & Steel Corporation (Nassco), with an area of twenty thousand square
meters, located at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964 that land was awarded to Bormaheco, Inc., the highest bidder, for the
price of P552,000. The Nassco Board of Directors in its resolution of February 18, 1964 authorized the General Manager to sign the necessary contract
(Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a letter to the Economic Coordinator, requesting approval of that resolution. The Acting
Economic Coordinator approved the resolution on March 24, 1964 (Exh. 1).
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their negotiations for the sale of the Buendia Avenue property. Cervantes and
Teofilo Villonco had a final conference on February 27, 1964. As a result of that conference Villonco Realty Company, through Teofilo Villonco, in its letter of
March 4, 1964 made a revised counter- offer (Romeo Villonco's first counter-offer was dated February 24, 1964, Exh. C) for the purchase of the property.
The counter-offer was accepted by Cervantes as shown in Exhibit D, which is quoted below:
VILLONCO REALTY COMPANY
V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines
March 4, 1964
Mr. Francisco Cervantes.
Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal
Dear Mr. Cervantes:
In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26, 1964 in respect to the terms and conditions
on the purchase of your property located at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we hereby
revise our offer, as follows:
1. That the price of the property shall be P400.00 per sq. m., including the improvements thereon;
2. That a deposit of P100,000.00 shall be given to you as earnest money which will become as part payment in the event the
sale is consummated;
3. This sale shall be cancelled, only if your deal with another property in Sta. Ana shall not be consummated and in such case,
the P100,000-00 earnest money will be returned to us with a 10% interest p.a. However, if our deal with you is finalized, said
P100,000.00 will become as part payment for the purchase of your property without interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and
650,000.00 as part of the down payment, or
P750,000.00 as total down payment
b. The balance is payable as follows:
P100,000.00 after 3 months
125,000.00 -do-
212,500.00 -do-
P650,000.00 Total
As regards to the other conditions which we have discussed during our last conference on February 27, 1964, the same shall
be finalized upon preparation of the contract to sell.*
If the above terms and conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is our check for
ONE HUNDRED THOUSAND (P100,000.00) PESOS, MBTC Check No. 448314, as earnest money.
Very truly yours,
VILLONCO REALTY COMPANY
(Sgd.) TEOFILO VILLONCO
CONFORME:
BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
That this sale shall be subject to favorable consummation of a property in Sta. Ana we are negotiating.
(Sgd.) FRANCISCO CERVANTES
The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was delivered by Edith Perez de Tagle to Bormaheco, Inc. on March 4, 1964 and
was received by Cervantes. In the voucher-receipt evidencing the delivery the broker indicated in her handwriting that the earnest money was "subject to the
terms and conditions embodied in Bormaheco's letter" of February 12 and Villonco Realty Company's letter of March 4, 1964 (Exh. E-1; 14 tsn).
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the signing of the contract of sale, Exhibit D, Cervantes returned the earnest
money, with interest amounting to P694.24 (at ten percent per annum). Cervantes cited as an excuse the circumstance that "despite the lapse of 45 days
from February 12, 1964 there is no certainty yet" for the acquisition of the Punta property (Exh. F; F-I and F-2). Villonco Realty Company refused to accept
the letter and the checks of Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded the contract, he was already aware that the Punta
lot had been awarded to Bormaheco, Inc. (25-26 tsn).
Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964 articulated her shock and surprise at Bormaheco's turnabout. She reviewed
the history of the deal and explained why Romeo Villonco could not agree to the rescission of the sale (Exh. G).**
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the forty-five day period had already expired and the sale to Bormaheco,
Inc. of the Punta property had not been consummated. Cervantes said that his letter was a "manifestation that we are no longer interested to sell" the
Buendia Avenue property to Villonco Realty Company (Annex I of Stipulation of Facts). The latter was furnished with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to Bormaheco, Inc., stating that the condition for the cancellation of the
contract had not arisen and at the same time announcing that an action for breach of contract would be filed against Bormaheco, Inc. (Annex G of Stipulation
of Facts).1wph1.t
On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated April 6) for specific performance against Bormaheco, Inc. Also on that
same date, April 7, at eight-forty-five in the morning, a notice of lis pendens was annotated on the titles of the said lots.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that the perfection of the contract of sale was subject to the conditions (a)
"that final acceptance or not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta. Ana property".
On June 2, 1964 or during the pendency of this case, the Nassco Acting General Manager wrote to Bormaheco, Inc., advising it that the Board of Directors
and the Economic Coordinator had approved the sale of the Punta lot to Bormaheco, Inc. and requesting the latter to send its duly authorized representative
to the Nassco for the signing of the deed of sale (Exh. 1).
The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc. was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs.
Abanes, L-28087, July 31, 1973, 52 SCRA 73).
In view of the disclosure in Bormaheco's amended answer that the three lots were registered in the names of the Cervantes spouses and not in the name of
Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed an amended complaint impleading the said spouses as defendants. Bormaheco, Inc. and
the Cervantes spouses filed separate answers.
As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers' Bank & Trust Company the sum of P8,712.25 as interests on the overdraft
line of P100,000 and the sum of P27.39 as interests daily on the same loan since January 16, 1965. (That overdraft line was later settled by Villonco Realty
Company on a date not mentioned in its manifestation of February 19, 1975).
Villonco Realty Company had obligated itself to pay the sum of P20,000 as attorney's fees to its lawyers. It claimed that it was damaged in the sum of
P10,000 a month from March 24, 1964 when the award of the Punta lot to Bormaheco, Inc. was approved. On the other hand, Bormaheco, Inc. claimed that
it had sustained damages of P200,000 annually due to the notice of lis pendens which had prevented it from constructing a multi-story building on the three
lots. (Pars. 18 and 19, Stipulation of Facts).1wph1.t
Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes, obligated itself to pay her a three percent commission on the price of
P1,400,000 or the amount of forty-two thousand pesos (14 tsn).
After trial, the lower court rendered a decision ordering the Cervantes spouses to execute in favor of Bormaheco, Inc. a deed of conveyance for the three
lots in question and directing Bormaheco, Inc. (a) to convey the same lots to Villonco Realty Company, (b) to pay the latter, as consequential damages, the
sum of P10,000 monthly from March 24, 1964 up to the consummation of the sale, (c) to pay Edith Perez de Tagle the sum of P42,000 as broker's
commission and (d) pay P20,000 as to attorney's fees (Civil Case No. 8109).
Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions are (a) that no contract of sale was perfected because Cervantes made a
supposedly qualified acceptance of the revised offer contained in Exhibit D, which acceptance amounted to a counter-offer, and because the condition that
Bormaheco, inc. would acquire the Punta land within the forty-five-day period was not fulfilled; (2) that Bormaheco, Inc. cannot be compelled to sell the land
which belongs to the Cervantes spouses and (3) that Francisco N. Cervantes did not bind the conjugal partnership and his wife when, as president of
Bormaheco, Inc., he entered into negotiations with Villonco Realty Company regarding the said land.
We hold that the appeal, except as to the issue of damages, is devoid of merit.
"By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determining thing, and the other to pay
therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional" (Art. 1458, Civil Code).
"The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts" (Art. 1475, Ibid.).
"Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law" (Art. 1315, Civil Code).
"Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer" (Art. 1319, Civil Code). "An acceptance may be express or implied"
(Art. 1320, Civil Code).
Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia Avenue property, as shown in Teofilo Villonco's letter dated March 4,
1964 (Exh. D), indubitably proves that there was a meeting of minds upon the subject matter and consideration of the sale. Therefore, on that date the sale
was perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs. Tambunting, 1 Phil. 490). Not only that Bormaheco's acceptance of the
part payment of one hundred ,thousand pesos shows that the sale was conditionally consummated or partly executed subject to the purchase by
Bormaheco, Inc. of the Punta property. The nonconsummation of that purchase would be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43 Phil.
873).
On February 18, 1964 Bormaheco's bid for the Punta property was already accepted by the Nassco which had authorized its General Manager to sign the
corresponding deed of sale. What was necessary only was the approval of the sale by the Economic Coordinator and a request for that approval was
already pending in the office of that functionary on March 4, 1964.
Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected because Cervantes allegedly qualified his acceptance of Villonco's
revised offer and, therefore, his acceptance amounted to a counter-offer which Villonco Realty Company should accept but no such acceptance was ever
transmitted to Bormaheco, Inc. which, therefore, could withdraw its offer.
That contention is not well-taken. It should be stressed that there is no evidence as to what changes were made by Cervantes in Villonco's revised offer. And
there is no evidence that Villonco Realty Company did not assent to the supposed changes and that such assent was never made known to Cervantes.
What the record reveals is that the broker, Miss Tagle, acted as intermediary between the parties. It is safe to assume that the alleged changes or
qualifications made by Cervantes were approved by Villonco Realty Company and that such approval was duly communicated to Cervantes or Bormaheco,
Inc. by the broker as shown by the fact that Villonco Realty Company paid, and Bormaheco, Inc. accepted, the sum of P100,000 as earnest money or down
payment. That crucial fact implies that Cervantes was aware that Villonco Realty Company had accepted the modifications which he had made in Villonco's
counter-offer. Had Villonco Realty Company not assented to those insertions and annotations, then it would have stopped payment on its check for
P100,000. The fact that Villonco Realty Company allowed its check to be cashed by Bormaheco, Inc. signifies that the company was in conformity with the
changes made by Cervantes and that Bormaheco, Inc. was aware of that conformity. Had those insertions not been binding, then Bormaheco, Inc. would not
have paid interest at the rate of ten percent per annum, on the earnest money of P100,000.
The truth is that the alleged changes or qualifications in the revised counter offer (Exh. D) are not material or are mere clarifications of what the parties
had previously agreed upon.
Thus, Cervantes' alleged insertion in his handwriting of the figure and the words "12th and" in Villonco's counter-offer is the same as the statement found in
the voucher-receipt for the earnest money, which reads: "subject to the terms and conditions embodied in Bormaheco's letter of Feb. 12, 1964 and your
letter of March 4, 1964" (Exh. E-1).
Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's revised counter-offer and substituted for it the word "another" so that the
original phrase, "Nassco's property in Sta. Ana", was made to read as "another property in Sta. Ana". That change is trivial. What Cervantes did was merely
to adhere to the wording of paragraph 3 of Bormaheco's original offer (Exh. B) which mentions "another property located at Sta. Ana." His obvious purpose
was to avoid jeopardizing his negotiation with the Nassco for the purchase of its Sta. Ana property by unduly publicizing it.
It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex 1) or after the Nassco property had been awarded to Bormaheco, Inc.,
alluded to the "Nassco property". At that time, there was no more need of concealing from the public that Bormaheco, Inc. was interested in the Nassco
property.
Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word "interest" in that same paragraph 3 of the revised counter-offer (Exh. D)
could not be categorized as a major alteration of that counter-offer that prevented a meeting of the minds of the parties. It was understood that the parties
had contemplated a rate of ten percent per annum since ten percent a month or semi-annually would be usurious.
Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying in the voucher for the earnest money of P100,000 that Bormaheco's
acceptance thereof was subject to the terms and conditions embodied in Bormaheco's letter of February 12, 1964 and your (Villonco's) letter of March 4,
1964" made Bormaheco's acceptance "qualified and conditional".
That contention is not correct. There is no incompatibility between Bormaheco's offer of February 12, 1964 (Exh. B) and Villonco's counter-offer of March 4,
1964 (Exh. D). The revised counter-offer merely amplified Bormaheco's original offer.
The controlling fact is that there was agreement between the parties on the subject matter, the price and the mode of payment and that part of the price was
paid. "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract" (Art.
1482, Civil Code).
"It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. 'So long as it is clear that
the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not, a contract is formed.' " (Stuart vs.
Franklin Life Ins. Co., 165 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).
Thus, it was held that the vendor's change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not
amount to a rejection of the offer and the tender of a counter-offer (Stuart vs. Franklin Life Ins. Co., supra).
The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41 Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In
those two cases the acceptance radically altered the offer and, consequently, there was no meeting of the minds of the parties.
Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar central for P1,000,000 on condition that the price be paid in cash, or, if
not paid in cash, the price would be payable within three years provided security is given for the payment of the balance within three years with interest.
Zayco, instead of unconditionally accepting those terms, countered that he was going to make a down payment of P100,000, that Serra's mortgage
obligation to the Philippine National Bank of P600,000 could be transferred to Zayco's account and that he (plaintiff) would give a bond to secure the
payment of the balance of the price. It was held that the acceptance was conditional or was a counter-offer which had to be accepted by Serra. There was
no such acceptance. Serra revoked his offer. Hence, there was no perfected contract.
In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan Hacienda owned by Benito Legarda, who had empowered Valdes to sell it.
Borck was given three months from December 4, 1911 to buy the hacienda for P307,000. On January 17, 1912 Borck wrote to Valdes, offering to purchase
the hacienda for P307,000 payable on May 1, 1912. No reply was made to that letter. Borck wrote other letters modifying his proposal. Legarda refused to
convey the property.
It was held that Borck's January 17th letter plainly departed from the terms of the offer as to the time of payment and was a counter-offer which amounted to
a rejection of Valdes' original offer. A subsequent unconditional acceptance could not revive that offer.
The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270 where the written offer to sell was revoked by the offer or before the
offeree's acceptance came to the offeror's knowledge.
Appellants' next contention is that the contract was not perfected because the condition that Bormaheco, Inc. would acquire the Nassco land within forty-five
days from February 12, 1964 or on or before March 28, 1964 was not fulfilled. This contention is tied up with the following letter of Bormaheco, Inc. (Exh. F):
BORMAHECO, INC.
March 30, 1964
Villonco Realty Company
V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
Gentlemen:
We are returning herewith your earnest money together with interest thereon at 10% per annum. Please be informed that
despite the lapse of the 45 days from February 12, 1964 there is no certainty yet for us to acquire a substitute property, hence
the return of the earnest money as agreed upon.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
Encl.: P.N.B. Check No. 112994 J
P.N.B. Check No. 112996J
That contention is predicated on the erroneous assumption that Bormaheco, Inc. was to acquire the Nassco land within forty-five days or on or before March
28, 1964.
The trial court ruled that the forty-five-day period was merely an estimate or a forecast of how long it would take Bormaheco, Inc. to acquire the Nassco
property and it was not "a condition or a deadline set for the defendant corporation to decide whether or not to go through with the sale of its Buendia
property".
The record does not support the theory of Bormaheco, Inc. and the Cervantes spouses that the forty-five-day period was the time within which (a) the
Nassco property and two Pasong Tamo lots should be acquired, (b) when Cervantes would secure his wife's consent to the sale of the three lots and (c)
when Bormaheco, Inc. had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of the Buendia lots would be consummated after he had consummated the
purchase of the Nassco property. Then, in paragraph 5 of the same offer he stated "that final negotiations on both properties can be definitely known after
forty-five days" (See Exh. B).
It is deducible from the tenor of those statements that the consummation of the sale of the Buendia lots to Villonco Realty Company was conditioned on
Bormaheco's acquisition of the Nassco land. But it was not spelled out that such acquisition should be effected within forty-five days from February 12, 1964.
Had it been Cervantes' intention that the forty-five days would be the period within which the Nassco land should be acquired by Bormaheco, then he would
have specified that period in paragraph 3 of his offer so that paragraph would read in this wise: "That this sale is to be consummated only after I shall have
consummated my purchase of another property located at Sta. Ana, Manila within forty-five days from the date hereof ." He could have also specified that
period in his "conforme" to Villonco's counter-offer of March 4, 1964 (Exh. D) so that instead of merely stating "that this sale shall be subject to favorable
consummation of a property in Sta. Ana we are negotiating" he could have said: "That this sale shall be subject to favorable consummation within forty-five
days from February 12, 1964 of a property in Sta. Ana we are negotiating".
No such specification was made. The term of forty-five days was not a part of the condition that the Nassco property should be acquired. It is clear that the
statement "that final negotiations on both property can be definitely known after 45 days" does not and cannot mean that Bormaheco, Inc. should acquire the
Nassco property within forty-five days from February 12, 1964 as pretended by Cervantes. It is simply a surmise that after forty-five days (in fact when the
forty-five day period should be computed is not clear) it would be known whether Bormaheco, Inc. would be able to acquire the Nassco property and whether
it would be able to sell the Buendia property. That aforementioned paragraph 5 does not even specify how long after the forty-five days the outcome of the
final negotiations would be known.
It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended complaint, which answer was verified by Cervantes, it was alleged that
Cervantes accepted Villonco's revised counter-offer of March 4, 1964 subject to the condition that "the final negotiations (acceptance) will have to be made
by defendant within 45 days from said acceptance" (31 Record on Appeal). If that were so, then the consummation of Bormaheco's purchase of the Nassco
property would be made within forty-five days from March 4, 1964.
What makes Bormaheco's stand more confusing and untenable is that in its three answers it invariably articulated the incoherent and vague affirmative
defense that its acceptance of Villonco's revised counter-offer was conditioned on the circumstance "that final acceptance or not shall be made after 45
days" whatever that means. That affirmative defense is inconsistent with the other aforequoted incoherent statement in its third answer that "the final
negotiations (acceptance) will have to be made by defendant within 45 days from said acceptance" (31 Record on Appeal).1wph1.t
Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964 do not sustain at all its theory that the Nassco property should be
acquired on or before March 28, 1964. Its rescission or revocation of its acceptance cannot be anchored on that theory which, as articulated in its pleadings,
is quite equivocal and unclear.
It should be underscored that the condition that Bormaheco, Inc. should acquire the Nassco property was fulfilled. As admitted by the appellants, the Nassco
property was conveyed to Bormaheco, Inc. on June 26, 1964. As early as January 17, 1964 the property was awarded to Bormaheco, Inc. as the highest
bidder. On February 18, 1964 the Nassco Board authorized its General Manager to sell the property to Bormaheco, Inc. (Exh. H). The Economic Coordinator
approved the award on March 24, 1964. It is reasonable to assume that had Cervantes been more assiduous in following up the transaction, the Nassco
property could have been transferred to Bormaheco, Inc. on or before March 28, 1964, the supposed last day of the forty-five-day period.
The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot be required to sell the three lots in question because they are conjugal
properties of the Cervantes spouses. They aver that Cervantes in dealing with the Villonco brothers acted as president of Bormaheco, Inc. and not in his
individual capacity and, therefore, he did not bind the conjugal partnership nor Mrs. Cervantes who was allegedly opposed to the sale.
Those arguments are not sustainable. It should be remembered that Cervantes, in rescinding the contract of sale and in returning the earnest money, cited
as an excuse the circumstance that there was no certainty in Bormaheco's acquisition of the Nassco property (Exh. F and Annex 1). He did not say that Mrs.
Cervantes was opposed to the sale of the three lots. He did not tell Villonco Realty Company that he could not bind the conjugal partnership. In truth, he
concealed the fact that the three lots were registered "in the name of FRANCISCO CERVANTES, Filipino, of legal age, married to Rosario P. Navarro, as
owner thereof in fee simple". He certainly led the Villonco brothers to believe that as president of Bormaheco, Inc. he could dispose of the said lots. He
inveigled the Villoncos into believing that he had untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots and that he was invested
with adequate authority to sell the same.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three lots as "our property" which "we are offering to sell ..." (Opening
paragraph and par. 1 of Exh. B). Whether the prounoun "we" refers to himself and his wife or to Bormaheco, Inc. is not clear. Then, in paragraphs 3 and 4 of
the offer, he used the first person and said: "I shall have consummated my purchase" of the Nassco property; "... my negotiations with said property" and "I
will return to you your deposit". Those expressions conveyed the impression and generated the belief that the Villoncos did not have to deal with Mrs.
Cervantes nor with any other official of Bormaheco, Inc.
The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and studiously avoided making the allegation that Cervantes was not authorized by
his wife to sell the three lots or that he acted merely as president of Bormaheco, Inc. That defense was not interposed so as not to place Cervantes in the
ridiculous position of having acted under false pretenses when he negotiated with the Villoncos for the sale of the three lots.
Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on February 12, 1964, after some prior negotiations, the defendant
(Bormaheco, Inc.) made a formal offer to sell to the plaintiff the property of the said defendant situated at the abovenamed address along Buendia Avenue,
Makati, Rizal, under the terms of the letter-offer, a copy of which is hereto attached as Annex A hereof", now Exhibit B (2 Record on Appeal).
That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer dated May 5, 1964. It did not traverse that paragraph 2. Hence, it was
deemed admitted. However, it filed an amended answer dated May 25, 1964 wherein it denied that it was the owner of the three lots. It revealed that the
three lots "belong and are registered in the names of the spouses Francisco N. Cervantes and Rosario N. Cervantes."
The three answers of Bormaheco, Inc. contain the following affirmative defense:
13. That defendant's insistence to finally decide on the proposed sale of the land in question after 45 days had not only for its
purpose the determination of its acquisition of the said Sta. Ana (Nassco) property during the said period, but also to negotiate
with the actual and registered owner of the parcels of land covered by T.C.T. Nos. 43530, 43531 and 43532 in question which
plaintiff was fully aware that the same were not in the name of the defendant (sic; Par. 18 of Answer to Amended Complaint,
10, 18 and 34, Record on Appeal).
In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five days within which to acquire the Nassco property and "to negotiate" with the
registered owner of the three lots. The absurdity of that pretension stands out in bold relief when it is borne in mind that the answers of Bormaheco, Inc.
were verified by Cervantes and that the registered owner of the three lots is Cervantes himself. That affirmative defense means that Cervantes as president
of Bormaheco, Inc. needed forty-five days in order to "negotiate" with himself (Cervantes).
The incongruous stance of the Cervantes spouses is also patent in their answer to the amended complaint. In that answer they disclaimed knowledge or
information of certain allegations which were well-known to Cervantes as president of Bormaheco, Inc. and which were admitted in Bormaheco's three
answers that were verified by Cervantes.
It is significant to note that Bormaheco, Inc. in its three answers, which were verified by Cervantes, never pleaded as an affirmative defense that Mrs.
Cervantes opposed the sale of the three lots or that she did not authorize her husband to sell those lots. Likewise, it should be noted that in their separate
answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes was opposed to the sale of three lots or that Cervantes could not bind the
conjugal partnership. The appellants were at first hesitant to make it appear that Cervantes had committed the skullduggery of trying to sell property which
he had no authority to alienate.
It was only during the trial on May 17, 1965 that Cervantes declared on the witness stand that his wife was opposed to the sale of the three lots, a defense
which, as already stated, was never interposed in the three answers of Bormaheco, Inc. and in the separate answer of the Cervantes spouses. That same
viewpoint was adopted in defendants' motion for reconsideration dated November 20, 1965.
But that defense must have been an afterthought or was evolved post litem motam since it was never disclosed in Cervantes' letter of rescission and in his
letter to Miss Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not testify at the trial to fortify that defense which had already been waived for not
having been pleaded (See sec. 2, Rule 9, Rules of Court).
Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife and the fact that the three lots were entirely occupied by Bormaheco's
building, machinery and equipment and were mortgaged to the DBP as security for its obligation, and considering that appellants' vague affirmative defenses
do not include Mrs. Cervantes' alleged opposition to the sale, the plea that Cervantes had no authority to sell the lots strains the rivets of credibility (Cf. Papa
and Delgado vs. Montenegro, 54 Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31).
"Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith" (Art. 1159, Civil Code).
Inasmuch as the sale was perfected and even partly executed, Bormaheco, Inc., and the Cervantes spouses, as a matter of justice and good faith, are
bound to comply with their contractual commitments.
Parenthetically, it may be observed that much misunderstanding could have been avoided had the broker and the buyer taken the trouble of making some
research in the Registry of Deeds and availing themselves of the services of a competent lawyer in drafting the contract to sell.
Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail the trial court's award to Villonco Realty Company of consequential
damage amounting to ten thousand pesos monthly from March 24, 1964 (when the Economic Coordinator approved the award of the Nassco property to
Bormaheco, Inc.) up to the consummation of the sale. The award was based on paragraph 18 of the stipulation of facts wherein Villonco Realty Company
"submits that the delay in the consummation of the sale" has caused it to suffer the aforementioned damages.
The appellants contend that statement in the stipulation of facts simply means that Villonco Realty Company speculates that it has suffered damages but it
does not mean that the parties have agreed that Villonco Realty Company is entitled to those damages.
Appellants' contention is correct. As rightly observed by their counsel, the damages in question were not specifically pleaded and proven and were "clearly
conjectural and speculative".
However, appellants' view in their seventh assignment of error that the trial court erred in ordering Bormaheco, Inc. to pay Villonco Realty Company the sum
of twenty thousand pesos as attorney's fees is not tenable. Under the facts of the case, it is evident that Bormaheco, Inc. acted in gross and evident bad faith
in refusing to satisfy the valid and just demand of Villonco Realty Company for specific performance. It compelled Villonco Realty Company to incure
expenses to protect its interest. Moreover, this is a case where it is just and equitable that the plaintiff should recover attorney's fees (Art. 2208, Civil Code).
The appellants in their eighth assignment of error impugn the trial court's adjudication of forty-two thousand pesos as three percent broker's commission to
Miss Tagle. They allege that there is no evidence that Bormaheco, Inc. engaged her services as a broker in the projected sale of the three lots and the
improvements thereon. That allegation is refuted by paragraph 3 of the stipulation of facts and by the documentary evidence. It was stipulated that Miss
Tagle intervened in the negotiations for the sale of the three lots. Cervantes in his original offer of February 12, 1964 apprised Villonco Realty Company that
the earnest money should be delivered to Miss Tagle, the bearer of the letter-offer. See also Exhibit G and Annex I of the stipulation of facts.
We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay Miss Tagle her three percent commission.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive notice from the clerk of the lower court that the records of this case have been
received from this Court, the spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes should execute a deed conveying to Bormaheco, Inc. their
three lots covered by Transfer Certificate of Title Nos. 43530, 43531 and 43532 of the Registry of Deeds of Rizal.
2. Within five (5) days from the execution of such deed of conveyance, Bormaheco, Inc. should execute in favor of Villonco Realty Company, V. R. C.
Building, 219 Buendia Avenue, Makati, Rizal a registerable deed of sale for the said three lots and all the improvements thereon, free from all lien and
encumbrances, at the price of four hundred pesos per square meter, deducting from the total purchase price the sum of P100,000 previously paid by
Villonco Realty Company to Bormaheco, Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to pay Bormaheco, Inc. the balance of the price in the sum of one million
three hundred thousand pesos (P1,300,000).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle
the sum of forty-two thousand pesos (P42,000) as commission. Costs against the defendants-appellants.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-36083 September 5, 1975
Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON DOROMAL, JR., and GAUDELIA VEGA, petitioners, vs. HON.
COURT OF APPEALS and FILOMENA JAVELLANA, respondents
Petition for review of the decision of the Court of Appeals in CA-G.R. No. 47945-R entitled Filomena Javellana vs. Spouses Ramon Doromal, Sr., et al.
which reversed the decision of the Court of First Instance of Iloilo that had in turn dismissed herein private respondent Filomena Javellana's action for
redemption of a certain property sold by her co-owners to herein petitioners for having been made out of time.
The factual background found by the Court of Appeals and which is binding on this Court, the same not being assailed by petitioners as being capricious, is
as follows:
IT RESULTING: That the facts are quite simple; Lot 3504 of the cadastral survey of Iloilo, situated in the poblacion of La Paz,
one of its districts, with an area of a little more than 2- hectares was originally decreed in the name of the late Justice
Antonio Horilleno, in 1916, under Original Certificate of Title No. 1314, Exh. A; but before he died, on a date not particularized
in the record, he executed a last will and testament attesting to the fact that it was a co-ownership between himself and his
brothers and sisters, Exh. C; so that the truth was that the owners or better stated, the co-owners were; beside Justice
Horilleno,
"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was succeeded by her only daughter and heir herein
plaintiff. Filomena Javellana, in the proportion of 1/7 undivided ownership each; now then, even though their right had not as
yet been annotated in the title, the co-owners led by Carlos, and as to deceased Justice Antonio Horilleno, his daughter Mary,
sometime since early 1967, had wanted to sell their shares, or if possible if Filomena Javellana were agreeable, to sell the
entire property, and they hired an acquaintance Cresencia Harder, to look for buyers, and the latter came to interest
defendants, the father and son, named Ramon Doromal, Sr. and Jr., and in preparation for the execution of the sale, since the
brothers and sisters Horilleno were scattered in various parts of the country, Carlos in Ilocos Sur, Mary in Baguio, Soledad
and Fe, in Mandaluyong, Rizal, and Rosita in Basilan City, they all executed various powers of attorney in favor of their niece,
Mary H. Jimenez Exh. 1-8, they also caused preparation of a power of attorney of identical tenor for signature by plaintiff,
Filomena Javellana, Exh. M, and sent it with a letter of Carlos, Exh. 7 dated 18 January, 1968 unto her thru Mrs. Harder, and
here, Carlos informed her that the price was P4.00 a square meter, although it now turns out according to Exh. 3 that as
early as 22 October, 1967, Carlos had received in check as earnest money from defendant Ramon Doromal, Jr., the sum of
P5,000.00 and the price therein agreed upon was five (P5.00) pesos a square meter as indeed in another letter also of Carlos
to Plaintiff in 5 November, 1967, Exh. 6, he had told her that the Doromals had given the earnest money of P5,000.00 at
P5.00 a square meter, at any rate, plaintiff not being agreeable, did not sign the power of attorney, and the rest of the co-
owners went ahead with their sale of their 6/7, Carlos first seeing to it that the deed of sale by their common attorney in fact,
Mary H. Jimenez be signed and ratified as it was signed and ratified in Candon, Ilocos Sur, on 15 January, 1968, Exh. 2, then
brought to Iloilo by Carlos in the same month, and because the Register of Deeds of Iloilo refused to register right away, since
the original registered owner, Justice Antonio Horilleno was already dead, Carlos had to ask as he did, hire Atty. Teotimo
Arandela to file a petition within the cadastral case, on 26 February, 1968, for the purpose, Exh. C, after which Carlos returned
to Luzon, and after compliance with the requisites of publication, hearing and notice, the petition was approved, and we now
see that on 29 April, 1968, Carlos already back in Iloilo went to the Register of Deeds and caused the registration of the order
of the cadastral court approving the issuance of a new title in the name of the co-owners, as well as of the deed of sale to the
Doromals, as a result of which on that same date, a new title was issued TCT No. 23152, in the name of the Horillenos to 6/7
and plaintiff Filomena Javellana to 1/7, Exh. D, only to be cancelled on the same day under TCT No. 23153, Exh. 2, already in
the names of the vendees Doromals for 6/7 and to herein plaintiff, Filomena Javellana, 1/7, and the next day 30 April, 1968,
the Doromals paid unto Carlos by check, the sum of P97,000.00 Exh. 1, of Chartered Bank which was later substituted by
check of Phil. National Bank, because there was no Chartered Bank Branch in Ilocos Sur, but besides this amount paid in
check, the Doromals according to their evidence still paid an additional amount in cash of P18,250.00 since the agreed price
was P5.00 a square meter; and thus was consummated the transaction, but it is here where complications set in,
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo, plaintiff's lawyer, Atty. Arturo H. Villanueva, bringing with him her letter
of that date, reading,
"P.O. Box 189, Bacolod
City
June 10, 1968
Mr. & Mrs. Ramon Doromal, Sr.
and Mr. and Mrs. Ramon Doromal, Jr.
"Dumangas Iloilo
Dear Mr. and Mrs. Doromal:
The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., of this City. Through him, I am
making a formal offer to repurchase or redeem from you the 6/7 undivided share in Lot No. 3504, of the
Iloilo Cadastre, which you bought from my erstwhile co-owners, the Horillenos, for the sum of P30,000.00,
Atty. Villanueva has with him the sum of P30,000.00 in cash, which he will deliver to you as soon as you
execute the contract of sale in my favor.
Thank you very much for whatever favorable consideration you can give this request.
Very truly yours,
(SIGNED)
Mrs. FILOMENA
JAVELLANA"
p. 26, Exh. "J", Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he had the P30,000.00 with him in cash, and tendered it to
them, for the exercise of the legal redemption, the Doromals were aghast, and refused. and the very next day as has been
said. 11 June, 1968, plaintiff filed this case, and in the trial, thru oral and documentary proofs sought to show that as co-
owner, she had the right to redeem at the price stated in the deed of sale, Exh. 2, namely P30,000.00 of the but defendants in
answer, and in their evidence, oral and documentary sought to show that plaintiff had no more right to redeem and that if ever
she should have, that it should be at the true and real price by them paid, namely, the total sum of P115,250.00, and trial
judge, after hearing the evidence, believed defendants, that plaintiff had no more right, to redeem, because,
"Plaintiff was informed of the intended sale of the 6/7 share belonging to the Horillenos."
and that,
"The plaintiff have every reason to be grateful to Atty. Carlos Horilleno because in the petition for declaration of heirs of her
late uncle Antonio Horilleno in whose name only the Original Certificate of Title covering the Lot in question was issued, her
uncle Atty. Carlos Horilleno included her as one of the heirs of said Antonio Horilleno. Instead, she filed this case to redeem
the 6/7 share sold to the Doromals for the simple reason that the consideration in the deed of sale is the sum of P30,000.00
only instead of P115,250.00 approximately which was actually paid by the defendants to her co-owners, thus she wants to
enrich herself at the expense of her own blood relatives who are her aunts, uncles and cousins. The consideration of
P30,000.00 only was placed in the deed of sale to minimize the payment of the registration fees, stamps, and sales tax. pp.
77-78, R.A.,
and dismiss and further condemned plaintiff to pay attorney's fees, and moral and exemplary damages as set forth in few
pages back, it is because of this that plaintiff has come here and contends, that Lower Court erred:
"I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of the Iloilo Cadastre, the right of legal redemption under
Art. 1620, of the Civil Code:
"II. ... as a consequence of the above error, in refusing to order the defendants-appellees, the vendees of a portion of the
aforesaid Lot No. 3504 which they bought from the co-owners of the plaintiff-appellant, to reconvey the portion they purchased
to the herein plaintiff-appellant..
"III. ... in admitting extrinsic evidence in the determination of the consideration of the sale, instead of simply adhering to the
purchase price of P30,000.00, set forth in the pertinent Deed of Sale executed by the vendors and owners of the plaintiff-
appellant in favor of the defendants-appellees.
"IV. ... in dismissing the complaint filed in this case." pp. 1-3, Appellant's Brief,.
which can be reduced to the simple question of whether or not on tile basis of the evidence and the law, the judgment
appealed from should be maintained; (Pp. 16-22, Record.) .
Upon these facts, the Court of Appeals reversed the trial court's decision and held that although respondent Javellana was informed of her co-owners'
proposal to sell the land in question to petitioners she was, however, "never notified ... least of all, in writing", of the actual execution and registration of the
corresponding deed of sale, hence, said respondent's right to redeem had not yet expired at the time she made her offer for that purpose thru her letter of
June 10, 1968 delivered to petitioners on even date. The intermediate court further held that the redemption price to be paid by respondent should be that
stated in the deed of sale which is P30,000 notwithstanding that the preponderance of the evidence proves that the actual price paid by petitioners was
P115,250. Thus, in their brief, petitioners assign the following alleged errors:
I
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN WRITING OF THE SALE
CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE REFERS TO A NOTICE IN WRITING AFTER THE EXECUTION
AND REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF THE DOCUMENT OF SALE.
II
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE INSCRIPTION OF THE SALE IN THE REGISTRY OF
PROPERTY TAKES EFFECT AS AGAINST THIRD PERSONS INCLUDING CLAIMS OF POSSIBLE REDEMPTIONERS.
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT TO REDEEM, THE COURT OF APPEALS
ERRED IN HOLDING THAT THE REDEMPTION PRICE SHOULD BE THAT STATED IN THE DEED OF SALE. (Pp. 1-2,
Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 co-owner of the property in dispute. The thrust of their first assignment
of error is that for purposes of Article 1623 of the Civil Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit 7, and November 5, 1967, Exhibit 6, constituted the required notice in
writing from which the 30-day period fixed in said provision should be computed. But to start with, there is no showing that said letters were in fact received
by respondent and when they were actually received. Besides, petitioners do not pinpoint which of these two letters, their dates being more than two months
apart, is the required notice. In any event, as found by the appellate court, neither of said letters referred to a consummated sale. As may be observed, it
was Carlos Horilleno alone who signed them, and as of January 18, 1968, powers of attorney from the various co-owners were still to be secured. Indeed,
the later letter of January 18, 1968 mentioned that the price was P4.00 per square meter whereas in the earlier letter of November 5, 1967 it was P5.00, as
in fact, on that basis, as early as October 27, 1967, Carlos had already received P5,000 from petitioners supposedly as earnest money, of which, however,
mention was made by him to his niece only in the later letter of January 18, 1968, the explanation being that "at later negotiation it was increased to P5.00
per square meter." (p. 4 of petitioners' brief as appellees in the Court of Appeals quoting from the decision of the trial court.) In other words, while the letters
relied upon by petitioners could convey the idea that more or less some kind of consensus had been arrived at among the other co-owners to sell the
property in dispute to petitioners, it cannot be said definitely that such a sale had even been actually perfected. The fact alone that in the later letter of
January 18, 1968 the price indicated was P4.00 per square meter while in that of November 5, 1967, what was stated was P5.00 per square meter negatives
the possibility that a "price definite" had already been agreed upon. While P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing
to show that the same was in the concept of the earnest money contemplated in Article 1482 of the Civil Code, invoked by petitioner, as signifying perfection
of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are more inclined to believe that the said P5,000 were paid in the
concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out, considering that it
is not clear that there was already a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the property should
respondent Javellana refuse to agree to part with her 1/7 share.
In the light of these considerations, it cannot be said that the Court of Appeals erred in holding that the letters aforementioned sufficed to comply with the
requirement of notice of a sale by co-owners under Article 1623 of the Civil Code. We are of the considered opinion and so hold that for purposes of the co-
owner's right of redemption granted by Article 1620 of the Civil Code, the notice in writing which Article 1623 requires to be made to the other co-owners and
from receipt of which the 30-day period to redeem should be counted is a notice not only of a perfected sale but of the actual execution and delivery of the
deed of sale. This is implied from the latter portion of Article 1623 which requires that before a register of deeds can record a sale by a co-owner, there must
be presented to him, an affidavit to the effect that the notice of the sale had been sent in writing to the other co-owners. A sale may not be presented to the
register of deeds for registration unless it be in the form of a duly executed public instrument. Moreover, the law prefers that all the terms and conditions of
the sale should be definite and in writing. As aptly observed by Justice Gatmaitan in the decision under review, Article 1619 of the Civil Code bestows unto a
co-owner the right to redeem and "to be subrogated under the same terms and conditions stipulated in the contract", and to avoid any controversy as to the
terms and conditions under which the right to redeem may be exercised, it is best that the period therefor should not be deemed to have commenced unless
the notice of the disposition is made after the formal deed of disposal has been duly executed. And it being beyond dispute that respondent herein has never
been notified in writing of the execution of the deed of sale by which petitioners acquired the subject property, it necessarily follows that her tender to redeem
the same made on June 10, 1968 was well within the period prescribed by law. Indeed, it is immaterial when she might have actually come to know about
said deed, it appearing she has never been shown a copy thereof through a written communication by either any of the petitioners-purchasers or any of her
co-owners-vendees. (Cornejo et al. vs. CA et al., 16 SCRA 775.)
The only other pivotal issue raised by petitioners relates to the price which respondent offered for the redemption in question. In this connection, from the
decision of the Court of Appeals, We gather that there is "decisive preponderance of evidence" establishing "that the price paid by defendants was not that
stated in the document, Exhibit 2, of P30,000 but much more, at least P97,000, according to the check, Exhibit 1, if not a total of P115,250.00 because
another amount in cash of P18,250 was paid afterwards."
It is, therefore, the contention of petitioners here that considering said finding of fact of the intermediate court, it erred in holding nevertheless that "the
redemption price should be that stated in the deed of sale."
Again, petitioners' contention cannot be sustained. As stated in the decision under review, the trial court found that "the consideration of P30,000 only was
placed in the deed of sale to minimize the payment of the registration fees, stamps and sales tax." With this undisputed fact in mind, it is impossible for the
Supreme Court to sanction petitioners' pragmatic but immoral posture. Being patently violative of public policy and injurious to public interest, the seemingly
wide practice of understating considerations of transactions for the purpose of evading taxes and fees due to the government must be condemned and all
parties guilty thereof must be made to suffer the consequences of their ill-advised agreement to defraud the state. Verily, the trial court fell short of its
devotion and loyalty to the Republic in officially giving its stamp of approval to the stand of petitioners and even berating respondent Javellana as wanting to
enrich herself "at the expense of her own blood relatives who are her aunts, uncles and cousins." On the contrary, said "blood relatives" should have been
sternly told, as We here hold, that they are in pari-delicto with petitioners in committing tax evasion and should not receive any consideration from any court
in respect to the money paid for the sale in dispute. Their situation is similar to that of parties to an illegal contract.
1

Of course, the Court of Appeals was also eminently correct in its considerations supporting the conclusion that the redemption in controversy should be only
for the price stipulated in the deed, regardless of what might have been actually paid by petitioners that style inimitable and all his own, Justice Gatmaitan
states those considerations thus:
CONSIDERING: As to this that the evidence has established with decisive preponderance that the price paid by defendants
was not that stated in the document, Exh. 2 of P30,000.00 but much more, at least P97,000.00 according to the check, Exh. 1
if not a total of P115,250.00 because another amount in cash of P18,250.00 was paid afterwards, perhaps it would be neither
correct nor just that plaintiff should be permitted to redeem at only P30,000.00, that at first glance would practically enrich her
by the difference, on the other hand, after some reflection, this Court can not but have to bear in mind certain definite points.
1st According to Art. 1619
"Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of
one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by
onerous title." pp. 471-472, New Civil Code,
and note that redemptioner right is to be subrogated
"upon the same terms and conditions stipulated in the contract."
and here, the stipulation in the public evidence of the contract, made public by both vendors and vendees is that the price was
P30,000.00;
2nd According to Art. 1620,
"A co-owner of a thing may exercise the right of redemption in case the share of all the other co-owners or any of them, are sold to a third person. If the price
of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. p. 472, New Civil Code, .
from which it is seen that if the price paid is 'grossly excessive' redemptioner is required to pay only a reasonable one; not that
actually paid by the vendee, going to show that the law seeks to protect redemptioner and converts his position into one not
that of a contractually but of a legally subrogated creditor as to the right of redemption, if the price is not 'grossly excessive',
what the law had intended redemptioner to pay can be read in Art. 1623.
The right of a legal pre-emption or redemption shall not be exercised except within thirty (30) days from
the notice in writing by the prospective vendor, or by the vendor as the case may be. The deed of sale
shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he
has given written notice thereof of all possible redemptioners.' p. 473, New Civil Code,
if that be so that affidavit must have been intended by the lawmakers for a definite purpose, to argue that this affidavit has no
purpose is to go against all canons of statutory construction, no law mandatory in character and worse, prohibitive should be
understood to have no purpose at all, that would be an absurdity, that purpose could not but have been to give a clear and
unmistakable guide to redemptioner, on how much he should pay and when he should redeem; from this must follow that that
notice must have been intended to state the truth and if vendor and vendee should have instead, decided to state an untruth
therein, it is they who should bear the consequences of having thereby misled the redemptioner who had the right to rely and
act thereon and on nothing else; stated otherwise, all the elements of equitable estoppel are here since the requirement of the
law is to submit the affidavit of notice to all possible redemptioners, that affidavit to be a condition precedent to registration of
the sale therefore, the law must have intended that it be by the parties understood that they were there asking a solemn
representation to all possible redemptioners, who upon faith of that are thus induced to act, and here worse for the parties to
the sale, they sought to avoid compliance with the law and certainly refusal to comply cannot be rewarded with exception and
acceptance of the plea that they cannot be now estopped by their own representation, and this Court notes that in the trial and
to this appeal, plaintiff earnestly insisted and insists on their estoppel;
3rd If therefore, here vendors had only attempted to comply with the law, they would have been obligated to send a copy of
the deed of sale unto Filomena Javellana and from that copy, Filomena would have been notified that she should if she had
wanted to redeem, offered no more, no less, that P30,000.00, within 30 days, it would have been impossible for vendors and
vendees to have inserted in the affidavit that the price was truly P97,000.00 plus P18,250.00 or a total of P115,250.00; in
other words, if defendants had only complied with the law, they would have been obligated to accept the redemption money of
only P30,000.00;
4th If it be argued that foregoing solution would mean unjust enrichment for plaintiff, it need only be remembered that
plaintiff's right is not contractual, but a mere legal one, the exercise of a right granted by the law, and the law is definite that
she can subrogate herself in place of the buyer,
"upon the same terms and conditions stipulated in the contract,"
in the words of Art. 1619, and here the price
"stipulated in the contract"
was P30,000.00, in other words, if this be possible enrichment on the part of Filomena, it was not unjust but just enrichment
because permitted by the law; if it still be argued that plaintiff would thus be enabled to abuse her right, the answer simply is
that what she is seeking to enforce is not an abuse but a mere exercise of a right; if it be stated that just the same, the effect
of sustaining plaintiff would be to promote not justice but injustice, the answer again simply is that this solution is not unjust
because it only binds the parties to make good their solemn representation to possible redemptioners on the price of the sale,
to what they had solemnly averred in a public document required by the law to be the only basis for that exercise of
redemption; (Pp. 24-27, Record.)
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against petitioners..
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. 126812 November 24, 1998
GOLDENROD, INC., petitioner, vs. COURT OF APPEALS, PIO BARRETO & SONS, INC., PIO BARRETO REALTY DEVELOPMENT, INC. and
ANTHONY QUE, respondents.

In the absence of a specific stipulation, may the seller of real estate keep the earnest money to answer for damages in the event the sale fails due to the
fault of the prospective buyer?
Pio Barreto and Sons, Inc. (BARRETO & SONS) owned forty-three (43) parcels of registered land with a total area of 18,500 square meters located at
Carlos Palanca St., Quiapo, Manila, which were mortgaged with United Coconut Planters Bank (UCPB). In 1988, the obligation of the corporation with UCPB
remained unpaid making foreclosure of the mortgage imminent.
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETO & SONS. On 25 May 1988, through its president Sonya G. Mathay, petitioner
wrote respondent Anthony Que, President of respondent BARRETO & SONS, as follows:
Thank you for your reply to our letter offering to buy your property in Echague (C. Palanca) Quiapo.
We are happy that you accepted our offer except the two amendments concerning the payment of interest which should be
monthly instead of semi-annually and the period to remove the trusses, steel frames etc. which shall be 180 days instead of
90 days only. Please be advised that we agree to your amendments.
As to your other query, we prefer that the lots be reconsolidated back to its (sic) mother titles.
Enclosed is the earnest money of P1 million which shall form part of the purchase price.
Payment of the agreed total consideration shall be effected in accordance with our offer as you have accepted and upon
execution of the necessary documents of sale to be implemented after the said reconsolidation of the lots.
Kindly acknowlege receipt of the earnest money.
When the term of existence of BARRETO & SONS expired, all its assets and liabilities including the property located in Quiapo were transferred to
respondent Pio Barreto Realty Development, Inc. (BARRETO REALTY). Petitioner's offer to buy the property resulted in its agreement with respondent
BARRETO REALTY that petitioner would pay the following amounts: (a) P24.5 million representing the outstanding obligations of BARRETO REALTY with
UCPB on 30 June 1988, the deadline set by the bank for payment; and, (b) P20 million which was the balance of the purchase price of the property to be
paid in installments within a 3-year period with interes at 18% per annum.
Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETO REALTY on the deadline set for payment; instead, it asked for an extension of
one (1) month or up to 31 July 1988 to settle the obligation, which the bank granted. On 31 July 1988, petitioner requested another extension of sixty (60)
days to pay the loan. This time bank demurred.
In the meantime BARRETO REALTY was able to cause the reconsolidation of the forty-three (43) titles covering the property subject of the purchase into
two (2) titles covering Lots 1 and 2, which were issued on 4 August 1988. The reconsolidation of the titles was made pursuant to the request of petitioner in
its letter to private respondents on 25 May 1988. Respondent BARRETO REALTY allegedly incurred expenses for the reconsolidation amounting to
P250,000.00.
On 25 August 1988 petitioner sought reconsideration of the denial by the bank of its request for extension of sixty (60) days by asking for a shorter period of
thirty (30) days. This was again denied by UCPB.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and Development Corporation (LOGARTA REALTY), which acted as agent and broker of
petitioner, wrote private respondent Anthony Que informing him on behalf of petitioner that it could not go through with the purchase of the property due to
circumstances beyond its fault, i.e., the denial by UCPB of its request for extension of time to pay the obligation. In the same letter, Logarta also demanded
the refund of the earnest money of P1 million which petitioner gave to respondent BARRETO REALTY.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld Trade Center Phils., Inc. (ASIAWORLD), Lot 2, one of the two (2) consolidated lots,
for the price of P23 million. On 13 October 1988 respondent BARRETTO REALTY executed a deed transferring by way of "dacion" the property
reconsolidated as Lot 1 in favor of UCPB, which in turn sold the property to ASIAWORLD for P24 million.
On 12 December 1988 Logarta again wrote respondent Que demanding the return of the earnest money to GOLDENROD. On 7 February 1989 petitioner
through its lawyer reiterated its demand, but the same remained unheeded by private respondents. This prompted petitioner to file a complaint with the
Regional Trial Court of Manila against private respondents for the return of the amount of P1 million and the payment of damages including lost interests or
profits. In their answer, private respondents contended that it was the agreement of the parties that the earnest money of P1 million would be forfeited to
answer for losses and damages that might be suffered by private respondents in case of failure by petitioner to comply with the terms of their purchase
agreement.
On 15 March 1991 the trial court rendered a decision
1
ordering private respondents jointly and severally to pay petitioner P1,000.000.00 with legal interest
from 9 February 1989 until fully paid, P50,000.00 representing unrealized profits and P10,000.00 as attorney's fees. The trial court found that there was no
written agreement between the parties concerning forfeiture of the earnest money if the sale did not push through. It further declared that the earnest money
given by petitioner to respondent BARRETO REALTY was intended to form part of the purchase price; thus, the refusal of the latter to return the money
when the sale was not consummated violated Arts. 22 and 23 of the Civil Code against unjust enrichment.
Obviously dissatisfied with the decision of the trial court, private respondents appealed to the Court of Appeals which reversed the trial court and ordered the
dismissal of the complaint; hence, this petition.
Petitioner alleges that the Court of Appeals erred in disregarding the finding of the trial court that the earnest money given by petitioner to respondent
BARRETTO REALTY should be returned to the former. The absence of an express stipulation that the same shall be forfeited in favor of the seller in case
the buyer fails to comply with his obligation is compelling. It argues that the forfeiture of the money in favor of respondent BARRETTO REALTY would
amount to unjust enrichment at the expense of petitioner.
We sustain petitioner. Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of sale, it shall be considered as part of the
purchase price and as proof of the perfection of the contract. Petitioner clearly stated without any objection from private respondents that the earnest money
was intended to form part of the purchase price. It was an advance payment which must be deducted from the total price. Hence, the parties could not have
intended that the earnest money or advance payment would be forfeited when the buyer should fail to pay the balance of the price, especially in the absence
of a clear and express agreement thereon. By reason oi its failure to make payment petitioner, through its agent, informed private respondents that it would
no longer push through with the sale. In other words, petitioner resorted to extrajudicial rescission of its agreement with private respondents.
In University of the Philippines v. de los Angeles,
2
the right to rescind contracts is not absolute and is subject to scrutiny and review by the proper court. We
held further, in the more recent case of Adelfa Properties, Inc. v. Court of Appeals,
3
that rescission of reciprocal contracts may be extrajudicially rescinded
unless successfully impugned in court. If the party does not oppose the declaration of rescission of the other party, specifying the grounds therefor, and it
fails to reply or protest against it, its silence thereon suggests an admission of the veracity and validity of the rescinding party's claim.
Private respondents did not interpose any objection to the rescission by petitioner of the agreement. As found by the Court of Appeals, private respondent
BARRETTO REALTY even sold Lot 2 of the subject consolidated lots to another buyer, ASIAWORLD, one day after its President Anthony Que received the
broker's letter rescinding tne sale. Subsequently, on 13 October 1988 respondent BARRETO REALTY also conveyed ownership over Lot 1 to UCPB which,
in turn, sold the same to ASIAWORLD.
Art. 1385 of the Civil Code provides that rescission creates the obligation to return the things which were the object of the contract together with their fruits
and interest. The vendor is therefore obliged to return the purchase price paid to him by the buyer if the latter rescinds the sale,
4
or when the transaction
was called off and the subject property had already been sold to a third person, as what obtained in this case.
5
Therefore, by virtue of the extrajudicial
rescission of the contract to sell by petitioner without opposition from private respondents who, in turn, sold the property to other persons, private respondent
BARRETTO REALTY, as the vendor, had the obligation to return the earnest money of P1000,000.00 plus legal interest from the date it received notice of
rescission from petitioner, i.e., 30 August 1988, up to the date of the return or payment. It would be most inequitable if resondent BARRETTO REALTY
would be allowed to retain petitioner's payment of P1,000,000.00 and at the same time appropriate the proceeds of the second sale made to another.
6

WHEREFORE, the Petition is GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE. Private respondent Pio Barretto Realty
Development, Inc. (BARRETTO REALTY), its successors and assigns are ordered to return to petitioner Goldenrod, Inc. (GOLDENROD), the amount of
P1,000,000.00 with legal interest thereon from 30 August 1988, the date of notice of extrajudicial rescission, until the amount is fully paid, with costs against
private respondents.
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G.R. No. 78903 February 28, 1990
SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners,
vs.
THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR., respondents.
Francisco A. Puray, Sr. for petitioners.
Gabriel N. Duazo for private respondent.

MEDIALDEA, J .:
This is a petition to annul and set aside the decision of the Court of Appeals rendered on May 26, 1987, upholding the validity of the sale of a parcel of land
by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private respondent Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:
A parcel of land located at Panyawan, Sogod, Southern Leyte, declared in the name of Segundo Dalion, under Tax
Declaration No. 11148, with an area of 8947 hectares, assessed at P 180.00, and bounded on the North, by Sergio Destriza
and Titon Veloso, East, by Feliciano Destriza, by Barbara Bonesa (sic); and West, by Catalino Espina. (pp. 36-37, Rollo)
The decision affirms in toto the ruling of the trial court
1
issued on January 17, 1984, the dispositive portion of which provides as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders judgment.
(a) Ordering the defendants to deliver to the plaintiff the parcel of land subject of this case, declared in the name of Segundo
Dalion previously under Tax Declaration No. 11148 and lately under Tax Declaration No. 2297 (1974) and to execute the
corresponding formal deed of conveyance in a public document in favor of the plaintiff of the said property subject of this case,
otherwise, should defendants for any reason fail to do so, the deed shall be executed in their behalf by the Provincial Sheriff
or his Deputy;
(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as attorney's fees and P 500.00 as litigation expenses,
and to pay the costs; and
(c) Dismissing the counter-claim. (p. 38, Rollo)
The facts of the case are as follows:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, dated July 1, 1965 (Exhibit "A"),
allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery,
and that subject land is conjugal property, which he and his wife acquired in 1960 from Saturnina Sabesaje as evidenced by the "Escritura de Venta
Absoluta" (Exhibit "B"). The spouses denied claims of Sabesaje that after executing a deed of sale over the parcel of land, they had pleaded with Sabesaje,
their relative, to be allowed to administer the land because Dalion did not have any means of livelihood. They admitted, however, administering since 1958,
five (5) parcels of land in Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They never received
their agreed 10% and 15% commission on the sales of copra and abaca, respectively. Sabesaje's suit, they countered, was intended merely to harass,
preempt and forestall Dalion's threat to sue for these unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning errors some of which, however, were disregarded by the appellate court, not having
been raised in the court below. While the Court of Appeals duly recognizes Our authority to review matters even if not assigned as errors in the appeal, We
are not inclined to do so since a review of the case at bar reveals that the lower court has judicially decided the case on its merits.
As to the controversy regarding the identity of the land, We have no reason to dispute the Court of Appeals' findings as follows:
To be sure, the parcel of land described in Exhibit "A" is the same property deeded out in Exhibit "B". The boundaries
delineating it from adjacent lots are identical. Both documents detail out the following boundaries, to wit:
On the North-property of Sergio Destriza and Titon Veloso;
On the East-property of Feliciano Destriza;
On the South-property of Barbara Boniza and
On the West-Catalino Espina.
(pp. 41-42, Rollo)
The issues in this case may thus be limited to: a) the validity of the contract of sale of a parcel of land and b) the necessity of a public document for transfer
of ownership thereto.
The appellate court upheld the validity of the sale on the basis of Secs. 21 and 23 of Rule 132 of the Revised Rules of Court.
SEC. 21. Private writing, its execution and authenticity, how proved.-Before any private writing may be received in evidence,
its due execution and authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker; or
(c) By a subscribing witness
xxx xxx xxx
SEC. 23. Handwriting, how proved. The handwriting of a person may be proved by any witness who believes it to be the
handwriting of such person, and has seen the person write, or has seen writing purporting to be his upon which the witness
has acted or been charged, and has thus acquired knowledge of the handwriting of such person. Evidence respecting the
handwriting may also be given by a comparison, made by the witness or the court, with writings admitted or treated as
genuine by the party against whom the evidence is offered, or proved to be genuine to the satisfaction of the judge. (Rule 132,
Revised Rules of Court)
And on the basis of the findings of fact of the trial court as follows:
Here, people who witnessed the execution of subject deed positively testified on the authenticity thereof. They categorically
stated that it had been executed and signed by the signatories thereto. In fact, one of such witnesses, Gerardo M. Ogsoc,
declared on the witness stand that he was the one who prepared said deed of sale and had copied parts thereof from the
"Escritura De Venta Absoluta" (Exhibit B) by which one Saturnina Sabesaje sold the same parcel of land to appellant Segundo
Dalion. Ogsoc copied the bounderies thereof and the name of appellant Segundo Dalion's wife, erroneously written as
"Esmenia" in Exhibit "A" and "Esmenia" in Exhibit "B". (p. 41, Rollo)
xxx xxx xxx
Against defendant's mere denial that he signed the document, the positive testimonies of the instrumental Witnesses Ogsoc
and Espina, aside from the testimony of the plaintiff, must prevail. Defendant has affirmatively alleged forgery, but he never
presented any witness or evidence to prove his claim of forgery. Each party must prove his own affirmative allegations
(Section 1, Rule 131, Rules of Court). Furthermore, it is presumed that a person is innocent of a crime or wrong (Section 5 (a),
Idem), and defense should have come forward with clear and convincing evidence to show that plaintiff committed forgery or
caused said forgery to be committed, to overcome the presumption of innocence. Mere denial of having signed, does not
suffice to show forgery.
In addition, a comparison of the questioned signatories or specimens (Exhs. A-2 and A-3) with the admitted signatures or
specimens (Exhs. X and Y or 3-C) convinces the court that Exhs. A-2 or Z and A-3 were written by defendant Segundo Dalion
who admitted that Exhs. X and Y or 3-C are his signatures. The questioned signatures and the specimens are very similar to
each other and appear to be written by one person.
Further comparison of the questioned signatures and the specimens with the signatures Segundo D. Dalion appeared at the
back of the summons (p. 9, Record); on the return card (p. 25, Ibid.); back of the Court Orders dated December 17, 1973 and
July 30, 1974 and for October 7, 1974 (p. 54 & p. 56, respectively, Ibid.), and on the open court notice of April 13, 1983 (p.
235, Ibid.) readily reveal that the questioned signatures are the signatures of defendant Segundo Dalion.
It may be noted that two signatures of Segundo D. Dalion appear on the face of the questioned document (Exh. A), one at the
right corner bottom of the document (Exh. A-2) and the other at the left hand margin thereof (Exh. A-3). The second signature
is already a surplusage. A forger would not attempt to forge another signature, an unnecessary one, for fear he may commit a
revealing error or an erroneous stroke. (Decision, p. 10) (pp. 42-43, Rollo)
We see no reason for deviating from the appellate court's ruling (p. 44, Rollo) as we reiterate that
Appellate courts have consistently subscribed to the principle that conclusions and findings of fact by the trial courts are
entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons, since it is undeniable
that the trial court is in a more advantageous position to examine real evidence, as well as to observe the demeanor of the
witnesses while testifying in the case (Chase v. Buencamino, Sr., G.R. No. L-20395, May 13, 1985, 136 SCRA 365; Pring v.
Court of Appeals, G.R. No. L-41605, August 19, 1985, 138 SCRA 185)
Assuming authenticity of his signature and the genuineness of the document, Dalion nonetheless still impugns the validity of the sale on the ground that the
same is embodied in a private document, and did not thus convey title or right to the lot in question since "acts and contracts which have for their object the
creation, transmission, modification or extinction of real rights over immovable property must appear in a public instrument" (Art. 1358, par 1, NCC).
This argument is misplaced. The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is
not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument.
A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon
perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the
object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC).
The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in a
public document. Under Art. 1498, NCC, when the sale is made through a public instrument, the execution thereof is equivalent to the delivery of the thing.
Delivery may either be actual (real) or constructive. Thus delivery of a parcel of land may be done by placing the vendee in control and possession of the
land (real) or by embodying the sale in a public instrument (constructive).
As regards petitioners' contention that the proper action should have been one for specific performance, We believe that the suit for recovery of ownership is
proper. As earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected contract of sale the right to reciprocally demand performance, and to
observe a particular form, if warranted, (Art. 1357). The trial court, aptly observed that Sabesaje's complaint sufficiently alleged a cause of action to compel
Dalion to execute a formal deed of sale, and the suit for recovery of ownership, which is premised on the binding effect and validity inter partes of the
contract of sale, merely seeks consummation of said contract.
... . A sale of a real property may be in a private instrument but that contract is valid and binding between the parties upon its
perfection. And a party may compel the other party to execute a public instrument embodying their contract affecting real
rights once the contract appearing in a private instrument hag been perfected (See Art. 1357).
... . (p. 12, Decision, p. 272, Records)
ACCORDINGLY, the petition is DENIED and the decision of the Court of Appeals upholding the ruling of the trial court is hereby AFFIRMED. No costs.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-55048 May 27, 1981
SUGA SOTTO YUVIENCO, BRITANIA SOTTO, and MARCELINO SOTTO, petitioners,
vs.
HON. AUXENCIO C. DACUYCUY, Judge of the CFI of Leyte, DELY RODRIGUEZ, FELIPE ANG CRUZ, CONSTANCIA NOGAR, MANUEL GO,
INOCENTES DIME, WILLY JULIO, JAIME YU, OSCAR DY, DY CHIU SENG, BENITO YOUNG, FERNANDO YU, SEBASTIAN YU, CARLOS UY, HOC
CHUAN and MANUEL DY, respondents.

BARREDO, J .:1wph1.t
Petition for certiorari and prohibition to declare void for being in grave abuse of discretion the orders of respondent judge dated November 2, 1978 and
August 29, 1980, in Civil Case No. 5759 of the Court of First Instance of Leyte, which denied the motion filed by petitioners to dismiss the complaint of
private respondents for specific performance of an alleged agreement of sale of real property, the said motion being based on the grounds that the
respondents' complaint states no cause of action and/or that the claim alleged therein is unenforceable under the Statute of Frauds.
Finding initially prima facie merit in the petition, We required respondents to answer and We issued a temporary restraining order on October 7, 1980
enjoining the execution of the questioned orders.
In essence, the theory of petitioners is that while it is true that they did express willingness to sell to private respondents the subject property for P6,500,000
provided the latter made known their own decision to buy it not later than July 31, 1978, the respondents' reply that they were agreeable was not absolute,
so much so that when ultimately petitioners' representative went to Cebu City with a prepared and duly signed contract for the purpose of perfecting and
consummating the transaction, respondents and said representative found variance between the terms of payment stipulated in the prepared document and
what respondents had in mind, hence the bankdraft which respondents were delivering to petit loners' representative was returned and the document
remained unsigned by respondents. Hence the action below for specific performance.
To be more specific, the parties do not dispute that on July 12, 1978, petitioners, thru a certain Pedro C. Gamboa, sent to respondents the following letter:
Mr. Yao King Ong
Life Bakery
Tacloban City
Dear Mr. Yao: 1wph1.t
This refers to the Sotto property (land and building) situated at Tacloban City. My clients are willing to sell them at a total price
of P6,500,000.00.
While there are other parties who are interested to buy the property, I am giving you and the other occupants the preference,
but such priority has to be exercised within a given number of days as I do not want to lose the opportunity if you are not
interested. I am therefore gluing you and the rest of the occupants until July 31, 1978 within it which to decide whether you
want to buy the property. If I do not hear from you by July 31, I will offer or close the deal with the other interested buyer.
Thank you so much for the hospitality extended to me during my last trip to Tacloban, and I hope to hear from you very soon.
1wph1.t
Ver
y
trul
y
you
rs,
Ped
ro
C.
Ga
mb
oa
1

(Page 9, Record.)
Reacting to the foregoing letter, the following telegram was sent by "Yao King Ong & tenants" to Atty. Pedro Gamboa in Cebu
City:
Atty. Pedro Gamboa
Room 314, Maria Cristina Bldg.
Osmea Boulevard, Cebu City
Reurlet dated July 12 inform Dra. Yuvienco we agree to buy property proceed Tacloban to negotiate details 1wph1.t
Yao
Kin
g
On
g &
ten
ant
s
(Page 10, Record.)
Likewise uncontroverted is the fact that under date of July 27, 1978, Atty. Gamboa wired Yao King Ong in Tacloban City as
follows:
NLT
YAO KING ONG
LIFE BAKERY
TACLOBAN CITY
PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH CONTRACT PREPARE PAYMENT BANK DRAFT
1wph1.t
AT
TY.
GA
MB
OA
(Page 10, Id.)
Now, Paragraph 10 of the complaint below of respondents alleges: 1wph1.t
10. That on August 1, 1978, defendant Pedro Gamboa arrived Tacloban City bringing with him the prepared contract to
purchase and to sell referred to in his telegram dated July 27, 1978 (Annex 'D' hereof) for the purpose of closing the
transactions referred to in paragraphs 8 and 9 hereof, however, to the complete surprise of plaintiffs, the defendant (except
def. Tacloban City Ice Plant, Inc.) without giving notice to plaintiffs, changed the mode of payment with respect to the balance
of P4,500,000.00 by imposing upon plaintiffs to pay same amount within thirty (30) days from execution of the contract instead
of the former term of ninety (90) days as stated in paragraph 8 hereof. (Pp. 10-11, Record.)
Additionally and to reenforce their position, respondents alleged further in their complaint: 1wph1.t
8. That on July 12, 1978, defendants (except defendant Tacloban City Ice Plant, Inc.) finally sent a telegram letter to plaintiffs-
tenants, through same Mr. Yao King Ong, notifying them that defendants are willing to sell the properties (lands and building)
at a total price of P6,500,000.00, which herein plaintiffs-tenants have agreed to buy the said properties for said price; a copy
of which letter is hereto attached as integral part hereof and marked as Annex 'C', and plaintiffs accepted the offer through a
telegram dated July 25, 1978, sent to defendants (through defendant Pedro C. Gamboa), a copy of which telegram is hereto
attached as integral part hereof and marked as Annex C-1 and as a consequence hereof. plaintiffs except plaintiff Tacloban -
merchants' Realty Development Corporation) and defendants (except defendant Tacloban City Ice Plant. Inc.) agreed to the
following terms and conditions respecting the payment of said purchase price, to wit: 1wph1.t
P2,000,000.00 to be paid in full on the date of the execution of the contract; and the balance of
P4,500,000.00 shall be fully paid within ninety (90) days thereafter;
9. That on July 27, 1978, defendants sent a telegram to plaintiff- tenants, through the latter's representative Mr. Yao King Ong,
reiterating their acceptance to the agreement referred to in the next preceding paragraph hereof and notifying plaintiffs-
tenants to prepare payment by bank drafts; which the latter readily complied with; a copy of which telegram is hereto attached
as integral part hereof and marked as Annex "D"; (Pp 49-50, Record.)
It was on the basis of the foregoing facts and allegations that herein petitioners filed their motion to dismiss alleging as main grounds: 1wph1.t
I. That plaintiff, TACLOBAN MERCHANTS' REALTY DEVELOPMENT CORPORATION, amended complaint, does not state a
cause of action and the claim on which the action is founded is likewise unenforceable under the provisions of the Statute of
Frauds.
II. That as to the rest of the plaintiffs, their amended complaint does not state a cause of action and the claim on which the
action is founded is likewise unenforceable under the provisions of the Statute of Frauds. (Page 81, Record.)
With commendable knowledgeability and industry, respondent judge ruled negatively on the motion to dismiss, discoursing at length on the personality as
real party-in-interest of respondent corporation, while passing lightly, however, on what to Us are the more substantial and decisive issues of whether or not
the complaint sufficiently states a cause of action and whether or not the claim alleged therein is unenforceable under the Statute of Frauds, by holding thus:
1wph1.t
The second ground of the motion to dismiss is that plaintiffs' claim is unenforceable under the Statute of Frauds. The
defendants argued against this motion and asked the court to reject the objection for the simple reason that the contract of
sale sued upon in this case is supported by letters and telegrams annexed to the complaint and other papers which will be
presented during the trial. This contention of the defendants is not well taken. The plaintiffs having alleged that the contract is
backed up by letters and telegrams, and the same being a sufficient memorandum, the complaint states a cause of action and
they should be given a day in court and allowed to substantiate their allegations (Paredes vs. Espino, 22 SCRA 1000).
To take a contract for the sale of land out of the Statute of Frauds a mere note or memorandum in writing subscribed by the
vendor or his agent containing the name of the parties and a summary statement of the terms of the sale either expressly or
by reference to something else is all that is required. The statute does not require a formal contract drawn up with technical
exactness for the language of Par. 2 of Art. 1403 of the Philippine Civil Code is' ... an agreement ... or some note or
memorandum thereof,' thus recognizing a difference between the contract itself and the written evidence which the statute
requires (Berg vs. Magdalena Estate, Inc., 92 Phil. 110; Ill Moran, Comments on the Rules of Court, 1952 ed. p. 187). See
also Bautista's Monograph on the Statute of Frauds in 21 SCRA p. 250. (Pp. 110-111, Record)
Our first task then is to dwell on the issue of whether or not in the light of the foregoing circumstances, the complaint in controversy states sufficiently a
cause of action. This issue necessarily entails the determination of whether or not the plaintiffs have alleged facts adequately showing the existence of a
perfected contract of sale between herein petitioners and the occupant represented by respondent Yao King Ong.
In this respect, the governing legal provision is, of course, Article 1319 of the Civil Code which provides:1wph1.t
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
constitute the contract. The offer must be certain the acceptance absolute. A qualified acceptance constitute a counter-offer.
Acceptance made by letter or telegram does not bind offerer except from the time it came to his knowledge. The contract, in a
case, is presumed to have been entered into in the place where the offer was made.
In the instant case, We can lay aside, for the moment, petitioners' contention that the letter of July 12, 1978 of Atty. Pedro C. Gamboa to respondents Yao
King Ong and his companions constitute an offer that is "certain", although the petitioners claim that it was a mere expression of willingness to sell the
subject property and not a direct offer of sale to said respondents. What We consider as more important and truly decisive is what is the correct juridical
significance of the telegram of respondents instructing Atty. Gamboa to "proceed to Tacloban to negotiate details." We underline the word "negotiate"
advisedly because to Our mind it is the key word that negates and makes it legally impossible for Us to hold that respondents' acceptance of petitioners'
offer, assuming that it was a "certain" offer indeed, was the "absolute" one that Article 1319 above-quoted requires.
Dictionally, the implication of "to negotiate" is practically the opposite of the Idea that an agreement has been reached. Webster's Third International
Dictionary, Vol. II (G. & C. Merriam Co., 1971 Philippine copyright) gives the meaning of negotiate as "to communicate or confer with another so as to arrive
at the settlement of some matter; meet with another so as to arrive through discussion at some kind of agreement or compromise about something; to
arrange for or bring about through conference or discussion; work at or arrive at or settle upon by meetings and agreements or compromises ".
Importantly, it must be borne in mind that Yao King Ong's telegram simply says "we agree to buy property". It does not necessarily connote acceptance of
the price but instead suggests that the details were to be subject of negotiation.
Respondents now maintain that what the telegram refers to as "details" to be "negotiated" are mere "accidental elements", not the essential elements of the
contract. They even invite attention to the fact that they have alleged in their complaint (Par. 6) that it was as early as "in the month of October, 1977 (that)
negotiations between plaintiffs and defendants for the purchase and sale (in question) were made, thus resulting to offers of same defendants and
counter-offer of plaintiffs". But to Our mind such alleged facts precisely indicate the failure of any meeting of the minds of the parties, and it is only from the
letter and telegrams above-quoted that one can determine whether or not such meeting of the minds did materialize. As We see it, what such allegations
bring out in bold relief is that it was precisely because of their past failure to arrive at an agreement that petitioners had to put an end to the uncertainty by
writing the letter of July 12, 1978. On the other hand, that respondents were all the time agreeable to buy the property may be conceded, but what impresses
Us is that instead of "absolutely" accepting the "certain" offer if there was one of the petitioners, they still insisted on further negotiation of details. For
anyone to read in the telegram of Yao that they accepted the price of P6,500,000.00 would be an inference not necessarily warranted by the words "we
agree to buy" and "proceed Tacloban to negotiate details". If indeed the details being left by them for further negotiations were merely accidental or formal
ones, what need was there to say in the telegram that they had still "to negotiate (such) details", when, being unessential per their contention, they could
have been just easily clarified and agreed upon when Atty. Gamboa would reach Tacloban?
Anent the telegram of Atty. Gamboa of July 27, 1978, also quoted earlier above, We gather that it was in answer to the telegram of Yao. Considering that
Yao was in Tacloban then while Atty. Gamboa was in Cebu, it is difficult to surmise that there was any communication of any kind between them during the
intervening period, and none such is alleged anyway by respondents. Accordingly, the claim of respondents in paragraph 8 of their complaint below that
there was an agreement of a down payment of P2 M, with the balance of P4.5M to be paid within 90 days afterwards is rather improbable to imagine to have
actually happened.
Respondents maintain that under existing jurisprudence relative to a motion to dismiss on the ground of failure of the complaint to state a cause of action,
the movant-defendant is deemed to admit the factual allegations of the complaint, hence, petitioners cannot deny, for purposes of their motion, that such
terms of payment had indeed been agreed upon.
While such is the rule, those allegations do not detract from the fact that under Article 1319 of the Civil Code above-quoted, and judged in the light of the
telegram-reply of Yao to Atty. Gamboa's letter of July 12, 1978, there was not an absolute acceptance, hence from that point of view, petitioners' contention
that the complaint of respondents state no cause of action is correct.
Nonetheless, the alleged subsequent agreement about the P2 M down and P4.5 M in 90 days may at best be deemed as a distinct cause of action. And
placed against the insistence of petitioners, as demonstrated in the two deeds of sale taken by Atty. Gamboa to Tacloban, Annexes 9 and 10 of the answer
of herein respondents, that there was no agreement about 90 days, an issue of fact arose, which could warrant a trial in order for the trial court to determine
whether or not there was such an agreement about the balance being payable in 90 days instead of the 30 days stipulated in Annexes 9 and 10 above-
referred to. Our conclusion, therefore, is that although there was no perfected contract of sale in the light of the letter of Atty. Gamboa of July 12, 1978 and
the letter-reply thereto of Yao; it being doubtful whether or not, under Article 1319 of the Civil Code, the said letter may be deemed as an offer to sell that is
"certain", and more, the Yao telegram is far from being an "absolute" acceptance under said article, still there appears to be a cause of action alleged in
Paragraphs 8 to 12 of the respondents' complaint, considering it is alleged therein that subsequent to the telegram of Yao, it was agreed that the petitioners
would sell the property to respondents for P6.5 M, by paving P2 M down and the balance in 90 days and which agreement was allegedly violated when in
the deeds prepared by Atty. Gamboa and taken to Tacloban, only 30 days were given to respondents.
But the foregoing conclusion is not enough to carry the day for respondents. It only brings Us to the question of whether or not the claim for specific
performance of respondents is enforceable under the Statute of Frauds. In this respect, We man, view the situation at hand from two angles, namely, (1) that
the allegations contained in paragraphs 8 to 12 of respondents' complaint should be taken together with the documents already aforementioned and (2) that
the said allegations constitute a separate and distinct cause of action. We hold that either way We view the situation, the conclusion is inescapable e that the
claim of respondents that petitioners have unjustifiably refused to proceed with the sale to them of the property v in question is unenforceable under the
Statute of Frauds.
It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing or memorandum, much less a duly signed agreement to the effect
that the price of P6,500,000 fixed by petitioners for the real property herein involved was agreed to be paid not in cash but in installments as alleged by
respondents. The only documented indication of the non-wholly-cash payment extant in the record is that stipulated in Annexes 9 and 10 above-referred to,
the deeds already signed by the petitioners and taken to Tacloban by Atty. Gamboa for the signatures of the respondents. In other words, the 90-day term
for the balance of P4.5 M insisted upon by respondents choices not appear in any note, writing or memorandum signed by either the petitioners or any of
them, not even by Atty. Gamboa. Hence, looking at the pose of respondents that there was a perfected agreement of purchase and sale between them and
petitioners under which they would pay in installments of P2 M down and P4.5 M within ninety 90) days afterwards it is evident that such oral contract
involving the "sale of real property" comes squarely under the Statute of Frauds (Article 1403, No. 2(e), Civil Code.)
On the other score of considering the supposed agreement of paying installments as partly supported by the letter and t telegram earlier quoted herein, His
Honor declared with well studied ratiocination, albeit legally inaccurate, that: 1wph1.t
The next issue relate to the State of Frauds. It is contended that plaintiffs' action for specific performance to compel the
defendants to execute a good and sufficient conveyance of the property in question (Sotto land and building) is unenforceable
because there is no other note memorandum or writing except annexes "C", "C-l" and "D", which by themselves did not give
birth to a contract to sell. The argument is not well founded. The rules of pleading limit the statement of the cause of action
only to such operative facts as give rise to the right of action of the plaintiff to obtain relief against the wrongdoer. The details
of probative matter or particulars of evidence, statements of law, inferences and arguments need not be stated. Thus, Sec. 1
of Rule 8 provides that 'every pleading shall contain in a methodical and logical form, a plain concise and direct statement of
the ultimate facts on which the party pleading relies for his claim or defense, as the case may be, omitting the statement of
mere evidentiary facts.' Exhibits need not be attached. The contract of sale sued upon in this case is supported by letters and
telegrams annexed to the complaint and plaintiffs have announced that they will present additional evidences during the trial
to prove their cause of action. The plaintiffs having alleged that the contract is backed up by letters and telegrams, and the
same being sufficient memorandum, the complaint states a cause of action and they should be given their day in court and
allowed to substantiate their allegations (Parades vs. Espino, 22 SCRA 1000). (Pp 165-166, Record.)
The foregoing disquisition of respondent judge misses at least two (2) juridical substantive aspects of the Statute of Frauds insofar as sale of real property is
concerned. First, His Honor assumed that the requirement of perfection of such kind of contract under Article 1475 of the Civil Code which provides that
"(t)he contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price", the
Statute would no longer apply as long as the total price or consideration is mentioned in some note or memorandum and there is no need of any indication of
the manner in which such total price is to be paid.
We cannot agree. In the reality of the economic world and the exacting demands of business interests monetary in character, payment on installments or
staggered payment of the total price is entirely a different matter from cash payment, considering the unpredictable trends in the sudden fluctuation of the
rate of interest. In other words, it is indisputable that the value of money - varies from day to day, hence the indispensability of providing in any sale of the
terms of payment when not expressly or impliedly intended to be in cash.
Thus, We hold that in any sale of real property on installments, the Statute of Frauds read together with the perfection requirements of Article 1475 of the
Civil Code must be understood and applied in the sense that the idea of payment on installments must be in the requisite of a note or memorandum therein
contemplated. Stated otherwise, the inessential elements" mentioned in the case of Parades vs. Espino, 22 SCRA 1000, relied upon by respondent judge
must be deemed to include the requirement just discussed when it comes to installment sales. There is nothing in the monograph re the Statute of Frauds
appearing in 21 SCRA 250 also cited by His Honor indicative of any contrary view to this ruling of Ours, for the essence and thrust of the said monograph
refers only to the form of the note or memorandum which would comply with the Statute, and no doubt, while such note or memorandum need not be in one
single document or writing and it can be in just sufficiently implicit tenor, imperatively the separate notes must, when put together', contain all the requisites
of a perfected contract of sale. To put it the other way, under the Statute of Frauds, the contents of the note or memorandum, whether in one writing or in
separate ones merely indicative for an adequate understanding of all the essential elements of the entire agreement, may be said to be the contract itself,
except as to the form.
Secondly, We are of the considered opinion that under the rules on proper pleading, the ruling of the trial court that, even if the allegation of the existence of
a sale of real property in a complaint is challenged as barred from enforceability by the Statute of Frauds, the plaintiff may simply say there are documents,
notes or memoranda without either quoting them in or annexing them to the complaint, as if holding an ace in the sleeves is not correct. To go directly to the
point, for Us to sanction such a procedure is to tolerate and even encourage undue delay in litigation, for the simple reason that to await the stage of trial for
the showing or presentation of the requisite documentary proof when it already exists and is asked to be produced by the adverse party would amount to
unnecessarily postponing, with the concomitant waste of time and the prolongation of the proceedings, something that can immediately be evidenced and
thereby determinable with decisiveness and precision by the court without further delay.
In this connection, Moran observes that unlike when the ground of dismissal alleged is failure of the complaint to state a cause of action, a motion to dismiss
invoking the Statute of Frauds may be filed even if the absence of compliance does not appear an the face of the complaint. Such absence may be the
subject of proof in the motion stage of the proceedings. (Moran, Comment on the Rules of Court, Vol. 1, p. 494, 1979 ed.) It follows then that when such a
motion is filed and all the documents available to movant are before the court, and they are insufficient to comply with the Statute, it becomes incumbent
upon the plaintiff, for the reasons of policy We have just' indicated regarding speedy administration of justice, to bring out what note or memorandum still
exists in his possession in order to enable the court to expeditiously determine then and there the need for further proceedings. In other words, it would be
inimical to the public interests in speedy justice for plaintiff to play hide and seek at his own convenience, particularly, when, as is quite apparent as in the
instant case that chances are that there are no more writings, notes or memoranda of the installment agreement alleged by respondents. We cannot divine
any reason why any such document would be withheld if they existed, except the unpermissible desire of the respondents to force the petitioners to undergo
the ordeals, time, effort and expenses of a futile trial.
In the foregoing premises, We find no alternative than to render judgment in favor of petitioners in this certiorari and prohibition case. If at all, appeal could
be available if the petitioners subjected themselves to the trial ruled to be held by the trial court. We foresee even at this point, on the basis of what is both
extant and implicit in the records, that no different result can be probable. We consider it as sufficiently a grave abuse of discretion warranting the special
civil actions herein the failure of respondent judge to properly apply the laws on perfection of contracts in relation to the Statute of Frauds and the pertinent
rules of pleading and practice, as We have discussed above.
ACCORDINGLY, the impugned orders of respondent judge of November 2, 1978 and August 29, 1980 are hereby set aside and private respondents'
amended complaint, Annex A of the petition, is hereby ordered dismissed and the restraining order heretofore issued by this Court on October 7, 1980 is
declared permanent. Costs against respondents.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. 115849 January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents.
D E C I S I O N
PANGANIBAN, J .:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a
perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If
so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after said
contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a "derivative suit" by the majority
shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court, to
set aside the Decision promulgated January 14, 1994 of the respondent Court of Appeals
1
in CA-G.R CV No. 35756 and the Resolution promulgated June
14, 1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3, 4 and 6 of its
dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other
aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to legally refer to the plaintiff-
appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's
2
decision dated July 10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an
area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land
Records of Laguna, between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million
(P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the amount of P5.5 Million, to
execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs
the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles
in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P200,000.00 each in moral
damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due course in a Resolution dated
January 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda. The First Division transferred this case to the Third Division
per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for
the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a banking institution organized and
existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times
material to this case, Head-Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose
Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision
3
as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101
hectares located at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to
be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. The original
plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel, Jose Fajardo, met with defendant
Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs' plan to
buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal
purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows:
August 30, 1987
The Producers Bank of the Philippines
Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept.
Gentleman:
I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total
area of 101 hectares, more or less.
TCT NO. AREA
T-106932 113,580 sq. m.
T-106933 70,899 sq. m.
T-106934 52,246 sq. m.
T-106935 96,768 sq. m.
T-106936 187,114 sq. m.
T-106937 481,481 sq. m.
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. "C"):
September 1, 1987
JP M-P GUTIERREZ ENTERPRISES
142 Charisma St., Doa Andres II
Rosario, Pasig, Metro Manila
Attention: JOSE O. JANOLO
Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please
be informed however that the bank's counter-offer is at P5.5 million for more than 101 hectares on lot basis.
We shall be very glad to hear your position on the on the matter.
Best regards.
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"):
September 17, 1987
Producers Bank
Paseo de Roxas
Makati, Metro Manila
Attention: Mr. Mercurio Rivera
Gentlemen:
In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I would like to amend my previous
offer and I now propose to buy the said lot at P4.250 million in CASH..
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on September 28, 1987 between the
plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days
later, or on September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila
Attention: Mr. Mercurio Rivera
Re: 101 Hectares of Land
in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for us to purchase the property
at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND
(P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was
replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff
Demetria the following letter (Exh. "F"):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta. Rosa, Laguna is under study yet as of this
time by the newly created committee for submission to the newly designated Acting Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected
contract of sale, which demands were in one form or another refused by the bank. As detailed by the trial court in its decision, on November 17,
1987, plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered payment of the amount of P5.5 million "pursuant to (our) perfected sale
agreement." Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction were
advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution by the bank of the documents on
what was considered as a "perfected agreement." Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta. Rosa, Laguna, and which are
covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the amount of P5.5 million was
accepted by our client thru a letter dated September 30, 1987 and was received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that despite repeated follow-up to
consummate the purchase, you now refuse to honor your commitment. Instead, you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the necessary actions/documentation
within three (3) days from your receipt hereof. We are ready to remit the agreed amount of P5.5 million at your advice. Otherwise, we shall be
constrained to file the necessary court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its communication of December 2, 1987
(Exh. "I"), that said letter has been "referred . . . to the office of our Conservator for proper disposition" However, no response came from the
Acting Conservator. On December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L" and "L-1"), this time through the Acting
Conservator, defendant Encarnacion. Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as our
agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered under
Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of the said lots. Please inform
us of the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel, made a final demand for
compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit "N"). As recounted by the trial court (Original
Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of defendant's answer to amended complaint), the defendants through Acting
Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-
offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the non-
compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivers and Acting Conservator
Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale, The defendants took the
position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting
of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in
the trial court, alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a substantial interest in resisting the complaint. On
July 8, 1991, the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. It
also denied a motion for reconsideration filed thereafter. From the trial court's decision, the Bank, petitioner Rivera and conservator Encarnacion
appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of his
motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and Janolo, in view of the assignment of the
latters' rights in the matter in litigation to said private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders of the Bank, through counsel
Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case") purportedly a "derivative suit" with the Regional Trial Court
of Makati, Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as
unenforceable and to stop Ejercito from enforcing or implementing the sale"
4
In his answer, Janolo argued that the Second Case was barred by litis
pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of
Court to Dismiss the Case Without Prejudice. "Private respondent opposed this motion on the ground, among others, that plaintiff's act of forum shopping
justifies the dismissal of both cases, with prejudice."
5
Private respondent, in his memorandum, averred that this motion is still pending in the Makati RTC.
In their Petition
6
and Memorandum
7
, petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the
bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the ground
8
that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this
case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by; respondent Ejercito) and
the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency and the contract, has no
authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular No. 28-91 requiring that a party "must
certify under oath . . . [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the
Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending" in said courts or agencies. A
violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure, petitioners have included
a VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of
Makati, Branch 134, involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject
of a pending Motion to Dismiss Without Prejudice.
9

Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum shopping because the instant petition
pending before this Court involves "identical parties or interests represented, rights asserted and reliefs sought (as that) currently pending before the
Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so interwined that a judgement or resolution in either
case will constitute res judicata in the other."
10

On the other hand, petitioners explain
11
that there is no forum-shopping because:
1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as a defendant, whereas in the "Second Case"
(assuming the Bank is the real party in interest in a derivative suit), it was plaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a
"derivative suit," it "does not mean that it is one" and "(t)hat is a legal question for the courts to decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law.
12
, where non-resident litigants are given the option to choose the forum or
place wherein to bring their suit for various reasons or excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle of forum non conveniens was
developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and
the parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary
13
says that forum shopping "occurs when a party attempts to have his action tried in a particular court or jurisdiction
where he feels he will receive the most favorable judgment or verdict." Hence, according to Words and Phrases
14
, "a litigant is open to the charge of "forum
shopping" whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt
to settle their differences without imposing undue expenses and vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of venues, as it was originally understood in conflicts of laws,
but also to a choice of remedies. As to the first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal actions "where
the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4,
Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from the same
set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal each
remedy being available independently of the others although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action, This was the original
concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the encouragement of their lawyers, file
their actions in all available courts, or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic) conflicting
adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme
inconvenience to some of the parties to the action.
Thus, "forum shopping" had acquired a different concept which is unethical professional legal practice. And this necessitated or had given rise
to the formulation of rules and canons discouraging or altogether prohibiting the practice.
15

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and mis-used
to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated Circular 28-91. And even before
that, the Court had prescribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several cases
16
the inveterate use
of this insidious malpractice. Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R. Narvasa (now
Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible manipulation of court processes and proceedings
. . ."
17
when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or
certiorari) in another. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the
courts while an administrative proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an
unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which the second suit was
brought, has no jurisdiction.
18

The test for determining whether a party violated the rule against forum shopping has been laid dawn in the 1986 case of Buan vs. Lopez
19
, also by Chief
Justice Narvasa, and that is, forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to
res judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least such parties as represent the
same interests in both actions, as well as identity of rights asserted and relief prayed for, the relief being founded on the same facts, and the
identity on the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful,
amount to res adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties, or interests represented,
rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter action
pendant or lis pendens. That same identity puts into operation the sanction of twin dismissals just mentioned. The application of this sanction will
prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the
Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the petition upon grounds which
appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged
violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is bar to the others; and, a
final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other
party as a ground to ask for summary dismissal of the two
20
(or more) complaints or petitions, and for imposition of the other sanctions, which are direct
contempt of court, criminal prosecution, and disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there exist identity of parties or interests
represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint
21
in the
Second Case seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank", which is the petitioner herein.
In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in
the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner
Bank to escape from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit.
22
, this Court ruled that the filing by
a party of two apparently different actions, but with the same objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein PNOC in the case before the
lower court and the COA in the case before this Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the
questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by
and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a
rebidding and from selling to other parties the vessel "T/T Andres Bonifacio", and for an extension of time for it to comply with the paragraph 1 of
the memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the
ultimate objective in both actions is the same, that is, approval of the sale of vessel in favor of petitioner and to overturn the letter-directive of the
COA of October 10, 1988 disapproving the sale. (emphasis supplied).
In an earlier case
23
but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their
action in the Makati Regional Trial Court, is a species of forum-shopping. Both actions unquestionably involve the same transactions, the same
essential facts and circumstances. The petitioners' claim of absence of identity simply because the PCGG had not been impleaded in the RTC
suit, and the suit did not involve certain acts which transpired after its commencement, is specious. In the RTC action, as in the action before this
Court, the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the
propriety of implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of the pledged shares, etc.)
were the basic issues. So, too, the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante. When
the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not
become functus oficio. It remained an effective vehicle for obtention of relief; and petitioners' remedy in the premises was plain and patent: the
filing of an amended and supplemental pleading in the RTC suit, so as to include the PCGG as defendant and seek nullification of the acts sought
to be enjoined but nonetheless done. The remedy was certainly not the institution of another action in another forum based on essentially the
same facts, The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions, in this Court as well
as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et
al.) are not name parties in the First Case, they represent the same interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in controversy. They are not principally or even
subsidiarily liable; much less are they direct parties in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit". In the caption itself, petitioners
claim to have brought suit "for and in behalf of the Producers Bank of the Philippines"
24
. Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holdsstock in order to protect or vindicate
corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued or hold the control of the corporation. In such
actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA
40, 47 [1979]; emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought to deny that the Second Case was
a derivative suit, reasoning that it was brought, not by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the
outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So,
whether they sued "derivatively" or directly, there is undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct from its shareholders. But the rulings of
this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which
the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an
aggregation of individuals."
25

In addition to the many cases
26
where the corporate fiction has been disregarded, we now add the instant case, and declare herewith that the corporate veil
cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct
actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not
been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to
encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is identity of parties, causes of action and
reliefs sought, "because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case)",citing as authority Victronics
Computers, Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et al.,
27
where Court held:
The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against the plaintiff instead of
filing a responsive pleading in the other case setting forth therein, as causes of action, specific denials, special and affirmative defenses or even
counterclaims, Thus, Velhagen's and King's motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as
such did not exist in the first place. (emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present suit. In the former, as underscored in
the above-quoted Court ruling, the defendants did not file any responsive pleading in the first case. In other words, they did not make any denial or raise any
defense or counter-claim therein In the case before us however, petitioners filed a responsive pleading to the complaint as a result of which, the issues
were joined.
Indeed, by praying for affirmative reliefs and interposing counterclaims in their responsive pleadings, the petitioners became plaintiffs themselves in the
original case, giving unto themselves the very remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a
party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same
reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is exactly the
problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the
Second Case barring the parties front enforcing or implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other
28
.
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible now is the dismissal of both cases with
prejudice, as the other sanctions cannot be imposed because petitioners' present counsel entered their appearance only during the proceedings in this
Court, and the Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in
observing Circular 28-91. The Lawyers who filed the Second Case are not before us; thus the rudiments of due process prevent us from motu propio
imposing disciplinary measures against them in this Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants are
admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes They are warned that a repetition of the
same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive
issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established, a perfected contract of sale as the
ultimate issue. Holding that a valid contract has been established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of six (6) parcels
of land specifically identified under Transfer Certificates of Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank intended to
sell the property. As testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite
that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the
Property Management Department of the defendant bank, in early August 1987. The procedure in the sale of acquired assets as well as the nature
and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself, which testimony was relied upon by both
the bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-office
memorandum distributed to all branches that these are acquired assets for sale. I was instructed to advertise acquired assets for sale so
on that basis, I have to entertain offer; to accept offer, formal offer and upon having been offered, I present it to the Committee. I provide
the Committee with necessary information about the property such as original loan of the borrower, bid price during the foreclosure, total
claim of the bank, the appraised value at the time the property is being offered for sale and then the information which are relative to the
evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank
and it is also the Committee that submit to the Conservator for final approval and once approved, we have to execute the deed of sale
and it is the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with and talked to the right person.
Necessarily, the agenda was the price of the property, and plaintiffs were dealing with the bank official authorized to entertain offers, to accept
offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination.
Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official information regarding the price, as determined by the
Committee and approved by the Conservator, can be had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. The
testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank his authority to sell any
property?
A: No, sir. Not point blank although it came from him, (W)hen I asked him how long it would take because he was saying that the matter
of pricing will be passed upon by the committee. And when I asked him how long it will take for the committee to decide and he said the
committee meets every week. If I am not mistaken Wednesday and in about two week's (sic) time, in effect what he was saying he was
not the one who was to decide. But he would refer it to the committee and he would relay the decision of the committee to me.
Q Please answer the question.
A He did not say that he had the authority (.) But he said he would refer the matter to the committee and he would relay the decision
to me and he did just like that.
"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose Entereso as one of the
members.
What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the bank's internal procedure
in the matter of the sale of bank's assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20, 1987 stating that
they would buy at the price of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such
offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying
price on one hand, and the bank Committee, the Conservator and ultimately the bank itself with the set price on the other, and considering further
the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be no other logical conclusion than that
when, on September 1, 1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot
basis," such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly
presented plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower, bid price during foreclosure, total claim of
the bank, and market value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"),
the official and definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not discussed by the Committee and that
price. As correctly characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are at best
equivocal and considering the gratuitous and self-serving character of these declarations, the bank's submission on this point does not inspire
belief. Both Co ad Entereso, as members of the Past Due Committee of the bank, claim that the offer of the plaintiff was never discussed by the
Committee. In the same vein, both Co and Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note
that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price, having been made to
understand by Rivera, the official in charge of the negotiation, that the price will be submitted for approval by the bank and that the bank's decision
will be relayed to plaintiffs. From the facts, the official bank price. At any rate, the bank placed its official, Rivera, in a position of authority to accept
offers to buy and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot turn around and later say, as it now
does, that what Rivera states as the bank's action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if
a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out
to the public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation
through such agent, he estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357,
369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993).
29

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of the contracting parties; (2) Object
certain which is the subject matter of the contract; (3) Cause of the obligation which is established."
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate
area of about 101 hectares, more or less, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first
and third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or Co) may have made is unauthorized.
Since there was no counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept."
30
They disputed the factual
basis of the respondent Court's findings that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5 million. We have
perused the evidence but cannot find fault with the said Court's findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact if there be
any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by respondent
more than that presented by petitioners is not by itself a reversible error. In fact, such findings merit serious consideration by this Court, particularly where,
as in this case, said courts carefully and meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the question of Rivera's authority to act and petitioner's
allegations that the P5.5 million counter-offer was extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be
drawn from the factual findings of the respondent Court. They also delve into the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of "apparent authority", with special reference to
banks, was laid out in Prudential Bank vs. Court of Appeals
31
, where it was held that:
Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agent's apparent
representation yields to the principal's true representation and the contract is considered as entered into between the principal and the third person
(citing National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their
representative capacity but not for acts outside the scape of their authority (9 C.J.S., p. 417). A bank holding out its officers and agents
as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk its responsibility for such frauds even though no benefit may accrue to the bank therefrom
(10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit
(McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on
the confidence of the people in their honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in the selection and
supervision of its employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling
its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case, Manager of the Property Management Department
of the Bank". By his own admission, Rivera was already the person in charge of the Bank's acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting between the buyers and
Rivera, the latter suggested that the buyers' offer should be no less than P3.3 million (TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to buy the property for P4.25 million (TSN, July 30, 1990,
p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994, during which the Bank's offer of P5.5 million was
confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and officer of the Bank, confirmed Rivera's
statement as to the finality of the Bank's counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the Bank in relation to parties
interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in the Bank's advertisements offering for sale
the property in question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.
32
, the Court, through Justice Jose A. R. Melo, affirmed the doctrine of
apparent authority as it held that the apparent authority of the officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances
surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through documents and testimony which seek to establish Rivera's actual
authority. These pieces of evidence, however, are inherently weak as they consist of Rivera's self-serving testimony and various inter-office memoranda that
purport to show his limited actual authority, of which private respondent cannot be charged with knowledge. In any event, since the issue is apparent
authority, the existence of which is borne out by the respondent Court's findings, the evidence of actual authority is immaterial insofar as the liability of a
corporation is concerned
33
.
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm" had once acted for the Bank in three criminal cases,
they should be charged with actual knowledge of Rivera's limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual
finding that the buyers had no notice of Rivera's actual authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to
any acquired assets; on the other hand, respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a
professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter dated September 17, 1987 extinguished the Bank's offer of P5.5
million
34
.They disputed the respondent Court's finding that "there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex
"L" (letter dated September 30, 1987) "accepted" Rivera's counter offer of P5.5 million under Annex "J" (letter dated September 17, 1987)", citing the late
Justice Paras
35
, Art. 1319 of the Civil Code
36
and related Supreme Court rulings starting with Beaumont vs. Prieto
37
.
However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the respondent Court which reviewed the
testimonies on this point, what was "accepted" by Janolo in his letter dated September 30, 1987 was the Bank's offer of P5.5 million as confirmed and
reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30, 1987
begins with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28, 1987 meeting "was meant to have
the offerors improve on their position of P5.5. million."
38
However, both the trial court and the Court of Appeals found petitioners' testimonial evidence "not
credible", and we find no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that private respondents' evidence is more in keeping with
truth and logic that during the meeting on September 28, 1987, Luis Co and Rivera "confirmed that the P5.5 million price has been passed upon by the
Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35)"
39
. Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5 million price during the September 28, 1987 meeting revived the said offer. And
by virtue of the September 30, 1987 letter accepting this revived offer, there was a meeting of the minds, as the acceptance in said letter was absolute and
unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority and action, particularly the latter's counter-offer of P5.5 million,
as being "unauthorized and illegal" came only on May 12, 1988 or more than seven (7) months after Janolo' acceptance. Such delay, and the absence of
any circumstance which might have justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-
minute attempt on the Bank's part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of the petitioners that the written offer made on
September 1, 1987 was carried through during the meeting of September 28, 1987. This is the conclusion consistent with human experience, truth and good
faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was raised for the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact and arguments not adequately
brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be raised for the
first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592).
40

. . . It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be
raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713
[1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70
[1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).
41

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an opportunity in the trial court to controvert the
same through opposing evidence. Indeed, this is a matter of due process. But we passed upon the issue anyway, if only to avoid deciding the case on purely
procedural grounds, and we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the inevitable conclusion
is simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged
42
:
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28 September 1987, and it was this
verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987, the contract produced thereby would be unenforceable by
action there being no note, memorandum or writing subscribed by the Bank to evidence such contract. (Please see article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs' acceptance of the price on September 30, 1987, are
not, in themselves, formal contracts of sale. They are however clear embodiments of the fact that a contract of sale was perfected between the
parties, such contract being binding in whatever form it may have been entered into (case citations omitted). Stated simply, the banks' letter of
September 1, 1987, taken together with plaintiffs' letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected
contract of sale.
The respondent Court could have added that the written communications commenced not only from September 1, 1987 but from Janolo's August 20, 1987
letter. We agree that, taken together, these letters constitute sufficient memoranda since they include the names of the parties, the terms and conditions
of the contract, the price and a description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a "new" offer which was accepted by Janolo
on September 30, 1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank's
counter-offer of P5.5 million. Hence, petitioners by such utter failure to object are deemed to have waived any defects of the contract under the statute
of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the failure to object to the presentation of
oral evidence to prove the same, or by the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer of P5.5 million is a plenty and the silence of
petitioners all throughout the presentation makes the evidence binding on them thus;
A Yes, sir, I think it was September 28, 1987 and I was again present because Atty. Demetria told me to accompany him we were able to meet
Luis Co at the Bank.
xxx xxx xxx
Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q What price?
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price and that is the price they intends (sic)
to have, sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant Rivera's counter-offer of 5.5 million was the
defendant's bank (sic) final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.
A He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A We went straight to the point because he being a busy person, I told him if the amount of P5.5 million could still be reduced and he said that was
already passed upon by the committee. What the bank expects which was contrary to what Mr. Rivera stated. And he told me that is the final offer
of the bank P5.5 million and we should indicate our position as soon as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us
at the time at his office.
Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in Producers Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it is not within his power to reduce this
amount. What can you say to that statement that the amount of P5.5 million was reached by the Committee?
A It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic)
in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and
perfection of the contract of sale took place. Petitioners energetically contended that the conservator has the power to revoke or overrule actions of the
management or the board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a
non-bank financial intermediary performing quasi-banking functions is in a state of continuing inability or unwillingness to maintain a state of
liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the
assets, liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all powers necessary to
preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the power to overrule or revoke
the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions,
any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time in this
Petition as this was not litigated in the trial court or Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let
alone in the Court of Appeals, "cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process."
43

In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected, actually repudiated or overruled said
contract of sale. The Bank's acting conservator at the time, Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What
petitioners are really referring to is the letter of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987
(Annex V, petition) which unilaterally repudiated not the contract but the authority of Rivera to make a binding offer and which unarguably came
months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6) parcels of land located at Sta. Rosa,
Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a "contract to sell and buy" with any of them
for the following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by former Acting Conservator Mr. Andres I. Rustia, Producers
Bank Senior Manager Perfecto M. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A.), you
will immediately read that Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged counter-
offer. In short, your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act
(Rep. Act No. 265, as amended), only the Board of Directors/Conservator may authorize the sale of any property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators (starting January, 1984) to sell the
aforesaid property to any of your clients. Apparently, what took place were just preliminary discussions/consultations between him and your
clients, which everyone knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative of corporate and banking laws.
We believe that this is more than sufficient legal justification for refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal and in accordance with law. We also have no
personal interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank, it must be pointed out that such
powers must be related to the "(preservation of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability."
Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe
against the non-impairment clause of the Constitution
44
. If the legislature itself cannot revoke an existing valid contract, how can it delegate such non-
existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective i.e., void,
voidable, unenforceable or rescissible. Hence, the conservator merely takes the place of a bank's board of directors. What the said board cannot do such
as repudiating a contract validly entered into under the doctrine of implied authority the conservator cannot do either. Ineluctably, his power is not
unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts as he
has already done so in the instant case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither by common sense.
To rule otherwise would be to enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke
all previous dealings which had one way or another or come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor
vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the Court of Appeals are not reviewable by the
Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation,
45
, we held:
. . . The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has
been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. "The
jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it,
its findings of the fact being conclusive " [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of
decisions]. This Court has emphatically declared that "it is not the function of the Supreme Court to analyze or weigh such evidence all over again,
its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court" (Tiongco v. De la Merced, G. R. No. L-
24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of
Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596). "Barring, therefore, a showing that the findings complained of are totally devoid
of support in the record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court
is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties" [Santa Ana, Jr. vs. Hernandez, G.
R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals
46
, we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of evidence and the credibility of
witnesses presented. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. The
Supreme Court's jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a
trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp.
47
:
The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and conclusive and may not be
reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or
impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts;
when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a careful
study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company Inc. vs. Hon. Court of Appeals, et al.
48
is equally
applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is not the function of this Court to assess and evaluate all
over again the evidence, testimonial and documentary, adduced by the parties, particularly where, such as here, the findings of both the trial court
and the appellate court on the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and conclusions which were not only contrary to the evidence on
record but have no bases at all," specifically the findings that (1) the "Bank's counter-offer price of P5.5 million had been determined by the past due
committee and approved by conservator Romey, after Rivera presented the same for discussion" and (2) "the meeting with Co was not to scale down the
price and start negotiations anew, but a meeting on the already determined price of P5.5 million" Hence, citing Philippine National Bank vs. Court of Appeals
49
, petitioners are asking us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals
50
, thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is
at P5.5 Million for more than 101 hectares on lot basis, "such counter-offer price had been determined by the Past Due Committee and approved
by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee . . . Tersely put, under the established fact, the
price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at which the bank was selling the property.
(p. 11, CA Decision)
xxx xxx xxx
. . . The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28, 1987 between the plaintiffs,
Rivera and Luis Co, the senior vice-president of the bank, where the topic was the possible lowering of the price, the bank official refused it and
confirmed that the P5.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35)
(p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as "not credible" and "at best equivocal and considering
the gratuitous and self-serving character of these declarations, the bank's submissions on this point do not inspire belief."
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf, as he would have been
in the best position to establish their thesis. Under the rules on evidence
51
, such suppression gives rise to the presumption that his testimony would have
been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners' evidence was deemed insufficient by both the trial court and the respondent
Court, and instead, it was respondent's submissions that were believed and became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. But the petitioners are now
asking this Court to disturb these findings to fit the conclusion they are espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals
52
. We have studied both the
records and the CA Decision and we find no such exceptions in this case. On the contrary, the findings of the said Court are supported by a preponderance
of competent and credible evidence. The inferences and conclusions are seasonably based on evidence duly identified in the Decision. Indeed, the appellate
court patiently traversed and dissected the issues presented before it, lending credibility and dependability to its findings. The best that can be said in favor
of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners' claims, but were closer to the evidence as
presented in the trial court by private respondent. But this alone is no reason to reverse or ignore such factual findings, particularly where, as in this case,
the trial court and the appellate court were in common agreement thereon. Indeed, conclusions of fact of a trial judge as affirmed by the Court of Appeals
are conclusive upon this Court, absent any serious abuse or evident lack of basis or capriciousness of any kind, because the trial court is in a better
position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping and the raising of issues for the first time on appeal [viz., the extinguishment of the
Bank's offer of P5.5 million and the conservator's powers to repudiate contracts entered into by the Bank's officers] which per se could justify the
dismissal of the present case. We did not limit ourselves thereto, but delved as well into the substantive issues the perfection of the contract of sale and
its enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of facts and as a rule we are not required to
look into the factual bases of respondent Court's decisions and resolutions, we did so just the same, if only to find out whether there is reason to disturb any
of its factual findings, for we are only too aware of the depth, magnitude and vigor by which the parties through their respective eloquent counsel, argued
their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed conservator and "there is need to
rehabilitate the Bank in order to get it back on its feet . . . as many people depend on (it) for investments, deposits and well as employment. As of June 1987,
the Bank's overdraft with the Central Bank had already reached P1.023 billion . . . and there were (other) offers to buy the subject properties for a substantial
amount of money."
53

While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally close its eyes to overriding considerations of
substantive and procedural law, like respect for perfected contracts, non-impairment of obligations and sanctions against forum-shopping, which must be
upheld under the rule of law and blind justice.
This Court cannot just gloss over private respondent's submission that, while the subject properties may currently command a much higher price, it is equally
true that at the time of the transaction in 1987, the price agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at
a foreclosure sale for no more than P3.5 million
54
. That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to
promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of the increase in land values. To rule in favor of the Bank
simply because the property in question has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in the
fulfillment of binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES the petition. The assailed Decision is
AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be
dealt with more severely. Costs against petitioners.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. 92871 August 2, 1991
MARIA P. VDA. DE JOMOC, ET AL., petitioners,
vs.
THE COURT OF APPEALS, REGIONAL TRIAL COURT OF MISAMIS ORIENTAL, 10th Judicial Region, Br. 25, respondents.
G.R. No. 92860 August 2, 1991
SPOUSES LIM LEONG KANG & LIM PUE KING, petitioners,
vs.
MAURA SO & HON. COURT OF APPEALS (Eleventh Division), respondents.
Pablito C. Pielago, Nemesio G. Beltran, Federico C. Villaroya and Medardo P.
Millares for petitioners in G.R. No. 92860.
Manolo S. Tagarda for petitioners in G.R. No. 92871.
Jose Ngaw collaborating counsel for the petitioners in G.R. No. 92871.

GUTIERREZ, JR., J .:p
The main issue raised in these consolidated petitions is whether or not private respondent Maura So abandoned or backed out from the agreement for the
purchase of a lot belonging to the heirs of Pantaleon Jomoc, so that the subsequent sale to petitioner spouses Lim is null and void.
The subject lot in Cagayan de Oro City forms part of the estate of the late Pantaleon Jomoc. Because it was fictitiously sold and transferred to third persons,
petitioner Maria P. Vda. Jomoc, as administratrix of the estate and in behalf of all the heirs, filed suit to recover the property before the trial court of Misamis
Oriental in Civil Case No. 4750. Mariano So, the last of the transferees and the husband of Maria So, intervened. The case was decided in favor of Jomoc
and was accordingly appealed by Mariano So and one Gaw Sur Cheng to the Court of Appeals. In February 1979, pending the appeal, Jomoc executed a
Deed of Extrajudicial Settlement and Sale of Land (Exhibit "A") with private respondent for P300,000.00. The document was not yet signed by all the parties
nor notarized but in the meantime, Maura So had made partial payments amounting to P49,000.00.
In 1983, Mariano So, the appellant in the recovery proceeding, agreed to settle the case by executing a Deed of Reconveyance of the land in favor of the
heirs of Pantaleon Jomoc. The reconveyance was in compliance with the decision in the recovery case and resulted in the dismissal of his appeal. On
February 28, 1983, the heirs of Jomoc executed another extra-judicial settlement with absolute sale in favor of intervenors Lim Leong Kang and Lim Pue
filing. Later, Maura So demanded from the Jomoc family the execution of a final deed of conveyance. They ignored the demand.
Thus, private respondent Maria So sued petitioners-heirs for specific performance to compel them to execute and deliver the proper registrable deed of sale
over the lot. The case was docketed as Civil Case No. 8983. So then filed a notice of lis pendens with the Register of Deeds on February 28, 1983. It was on
the same date, February 28, 1983, allegedly upon the Jomocs' belief that Maura So had backed out from the transaction that the Jomocs executed the other
extrajudicial settlement with sale of registered land in favor of the spouses Lim for a consideration of P200,000.00 part of which amount was allegedly
intended to be returned to Maura So as reimbursement. The spouses Lim, however, registered their settlement and sale only on April 27, 1983.
The Jomocs as defendants, and the spouses Lim as intervenors alleged that complainant Maura so backed out as evidenced by an oral testimony that she
did so in a conference with the Jomocs' lawyers where she expressed frustration in evicting squatters who demanded large sums as a condition for vacating.
They alleged the lack of signatures of four of the heirs of Jomoc and Maura So herself as well as the lack of notarization.
The lower court, finding that there was no sufficient evidence to show complainant-respondents' withdrawal from the sale, concluded that: (1) the case is one
of double sale; (2) the spouses-intervenors are registrants in bad faith who registered their questioned deed of sale long after the notice of lis pendens of
Civil Case No. 8983 was recorded.
On appeal, the trial court decision was affirmed except for the award of moral and exemplary damages and attorney's fees and expenses for litigation.
Hence, these petitions.
The petitioners' allegation that the contract of sale by Maria P. Jomoc with private respondent is unenforceable under the Statute of Frauds, is without merit.
The petitioners-heirs, in their brief before the appellate court, admitted that the extrajudicial settlement with sale in favor of Maura So is valid and enforceable
under the Statute of Frauds.
Of importance to the Court is the fact that the petitioners do not deny the existence of Exhibit "A"; including its terms and contents, notwithstanding the
incompleteness in form. The meeting of the minds and the delivery of sums as partial payment is clear and this is admitted by both parties to the agreement.
Hence, there was already a valid and existing contract, not merely perfected as the trial court saw it, but partly executed. It is of no moment whether or not it
is enforceable under the Statute of Frauds, which rule we do not find to be applicable because of partial payment of the vendee's obligation and its
acceptance by the vendors-heirs. The contract of sale of real property even if not complete in form, so long as the essential requisites of consent of the
contracting parties, object, and cause of the obligation concur and they were clearly established to be present, is valid and effective as between the parties.
Under Article 1357 of the Civil Code, its enforceability is recognized as each contracting party is granted the right to compel the other to execute the proper
public instrument so that the valid contract of sale of registered land can be duly registered and can bind third persons. The complainant respondent
correctly exercised such right simultaneously with a prayer for the enforcement of the contract in one complaint.
The Court finds no cogent reason to reverse the factual finding of the Regional Trial Court and the Court of Appeals that private respondent did not
subsequently abandon her intention of purchasing the subject lot.
The facts reveal an agreement between the contracting parties to Exhibit "A" to the effect that "the consideration of P300,000.00 or whatever balance
remains after deducting the advanced payments thereon, shall be paid upon the termination of (Mariano So's) appeal in the case involving the property in
question." (G.R. No. 92871, Rollo, p. 123). The finding is supported by substantial evidence. As reasoned by both courts, even if the sums paid by Maura So
were allegedly intended to expedite the dismissal of the appeal of Mariano So, such payment only indicates interest in acquiring the subject lot. In addition,
the claim by the defendants-petitioners that the payments were for the gathering of the several heirs from far places to sign Exhibit "A" confirms respondent
Maura So's continuing interest. The terms of Exhibit "A" and the actual intention of the parties are clear and no reform requiring parole evidence is being
sought to elucidate the intention further. The oral evidence offered by defendants-petitioners to show a subsequent refusal to proceed with the sale cannot
be considered to reverse the express intention in the contract. Moreover, the two courts below had definite findings on this factual issue and we see no
reason to reject and reverse their conclusion.
The petitioners contend that the trial court and the appellate court erred in declaring as void the subsequent deed of extra-judicial settlement with spouses
Lim since specific performance and not annulment of contract due to existence of double sale, was the thrust of the complaint. This argument is untenable.
The issue of double sale had to be resolved to determine whether or not complainant Maura So was entitled to the reliefs prayed for There was no hard
evidence to show that the vinculum or contractual relation between petitioners-heirs and Maura So had been cut-off. Yet, petitioners-heirs sold the same lot
to spouses Lim. The case therefore requires us to discern who has the better right to the property.
Article 1544 of the Civil Code provides:
xxx xxx xxx
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property.
xxx xxx xxx
In view of this provision, the two courts below correctly ruled that the spouses Lim do not have a better right. They purchased the land with full knowledge of
a previous sale to private respondent and without requiring from the vendors-heirs any proof' of the prior vendee's revocation of her purchase. They should
have exercised extra caution in their purchase especially if at the time of the sale, the land was still covered by TCT No. 19648 bearing the name of Mariano
So and was not yet registered in the name of petitioners- heirs of Pantaleon Jomoc (Original Records, p. 80), although it had been reconveyed to said heirs.
Not having done this, petitioners spouses Lim cannot be said to be buyers in good faith. When they registered the sale on April 27, 1983 after having been
charged with notice of lis pendens annotated as early as February 28, 1983 (the same date of their purchase), they did so in bad faith or on the belief that a
registration may improve their position being subsequent buyers of the same lot. Under Article 1544, mere registration is not enough to acquire new title.
Good faith must concur. ( Bergado v. Court of Appeals, 173 SCRA 497 [1989]; Concepcion V. Court of Appeals, G.R. No. 83208, February 6,1991)
Considering the failure of the petitioners to show that the findings of the two courts below are not supported by substantial trial evidence or that their
conclusions are contrary to law and jurisprudence, we find no reversible error in the questioned decision.
WHEREFORE, the petitions are hereby DISMISSED for lack of merit. The decision of the Court of Appeals dated September 13, 1989 and its resolution
dated April 2, 1990 are AFFIRMED.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-10265 March 3, 1916
EUTIQUIANO CUYUGAN, plaintiff-appellant, vs. ISIDORO SANTOS, defendant-appellee
The complaint in this case alleges that the plaintiff is the sole heir of his mother, Guillerma Cuyugan y Candia, deceased; that in the year 1895 she borrowed
the sum of P3,500 from the defendant and executed, at the same time, the document, Exhibit C, attached to the complaint, which purports on its face to be a
deed of sale of the land described therein, with a reservation in favor of the vendor of the right to repurchase for the sum of P3,500; that although the
instrument purports on its face to be a deed of sale, it was intended by the parties merely to evidence the loan of the nominal purchase price and to serve as
a security for the repayment of the amount of the loan; that under the terms of the instrument plaintiff's mother was left in possession of the land as a
nominal tenant of the defendant at an annual rental of P420, an amount equal to the agreed upon annual interest on the loan at the rate of 12 per cent per
annum; that in the year 1897 the borrower paid P1,000 on the loan, whereupon the nominal rent on the land was reduced from P420 to P300 per annum,
that being the amount of the interest on the unpaid balance of the loan at the rate of 12 per cent per annum; that plaintiff and his mother continued in the
peaceable possession of the land until the defendant, in the year prior to the institution of this action, served notice on the plaintiff that an annual payment of
P420 would be required of him thereafter, that is to say, the original amount of the annual payments as agreed upon prior to the payment of P1,000 on the
debt in the year 1897; that upon plaintiff's refusal to meet this demand, defendant set up a claim of ownership in himself and threatened to eject the plaintiff
from the land; that thereupon plaintiff offered to pay, and still stands ready to pay the balance due on the original indebtedness and the unpaid interest
thereon for one year, but that defendant declined and continues to decline to accept the amount tendered and to cancel the formal deed of sale to the land.
The prayer of the complaint is that the defendant be required to accept the amount thus tendered, and to cancel the formal deed of conveyance.
A demurrer to the complaint was sustained by the court below on the ground that it does not set forth facts constituting a cause of action it appearing on
the face of the deed of conveyance attached to the complaint that it was a deed of sale of land with a reserved right in the vendor to repurchase; and the
allegations of the complaint disclosing that the deed of conveyance was executed by plaintiff's mother, that the stipulated price of repurchase has not been
paid in full, and that the time allowed in the deed for repurchase has long since expired.
This is an appeal from the order sustaining the demurrer and dismissing the complaint.
We are of opinion that the demurrer should have been overruled on two separate and distinct grounds, either one of which is sufficient to sustain the ruling.
1. Since the demurrer to the complaint admits all the material facts well pleaded therein, it follows that, for the purposes of the demurrer, the defendant
admits that the true nature and intent of the transaction mentioned in the complaint was a mere loan of money secured by a formal conveyance of the land of
the vendor; that the written instrument, purporting to be a deed of sale of the land, with a right of repurchase reserved by the vendor, did not set forth the real
nature of the agreement between the parties thereto; and that the true intention and understanding of the parties at the time when the deed was executed
and delivered was that it should be held by the defendant, not as a deed of sale of the land, but rather as an instrument in the nature of a mortgage,
evidencing a loan secured by the lands of the borrower. The demurrer further admits that the borrower's successor in interest had tendered the full amount
of the indebtedness together with the interest due and payable thereon at the time of the tender, and that he stands ready at any time to pay the full amount
due on the loan with interest, upon the cancellation by the defendant of the formal deed of conveyance of the land.
But proof of these facts would clearly entitle the plaintiff to the relief prayed for. The demurrer should therefore have been overruled and the plaintiff should
have been given an opportunity to submit his evidence in support of the allegation of his complaint.
It is contended, however, that even if all these allegations in the complaint were true in fact, nevertheless, the demurrer should be sustained, because, as it
is said, these allegations of fact can not be sustained at the trial by the introduction of competent testimony, since the court will be compelled to exclude any
evidence offered by the plaintiff which would tend to alter, vary, or defeat the terms of the written deed of conveyance which is attached to the complaint as
an exhibit, and the execution of which the plaintiff's mother is expressly alleged and admitted in the complaint.
In support of this contention we are cited to various decisions of this court wherein we have held that the intent of the parties executing instruments
purporting to evidence sales of lands with the right of repurchase reserved to the vendors was sufficiently and satisfactorily disclosed by the terms of the
instruments themselves; and that the intent of the parties as disclosed by the terms of these instruments should be given full force and effect in accordance
therewith, despite the contentions of the vendors that the original transactions between the parties were had in contemplation of, and to give effect to
contracts or agreements for the loan of money, the repayment of which was to be secured by the lands of the borrower.
It is true that in a number of cases submitted to this court in which such a contention has been advanced, and in which the language of the instrument
evidencing the transaction under investigation clearly and without ambiguity set forth a contract of sale with a reserved right to repurchase, we have
uniformly declined to maintain such contentions, and have enforced the contract in accord with the terms of the instrument by which it was evidence. But it
does not necessarily follow that such a contention can never be successfully asserted and maintained in the courts in this jurisdiction.
An examination of these cases will disclose that the true ground upon which they are based was the lack of evidence sufficiently clear, satisfactory and
convincing to sustain a holding that the true nature of the transaction between the parties was any other than that set forth in written instruments executed by
them and purporting to evidence sales of land with a right of repurchase reserved to the vendors. And the fact that, in the cases relied upon, the court
examined and weighed the evidence before rejecting it as insufficient affords reasonable ground for an inference that had the court been of the opinion that
the parol evidence submitted in any of these cases was clear, satisfactory and convincing, it might, and doubtless would have arrived at a different
conclusion.
But however this may be, and without entering upon an extend review of the reported opinions of this court to ascertain whether language has been used in
any of them which might be construed as an intimation by this court of its views on the question now under consideration, we are of the opinion that the
issues raised on this appeal are such as to impose on us the duty of reexamining the whole question as to the power of the courts in this jurisdiction to admit
extraneous parol evidence in support of allegations that an instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer
the title with a mere right of repurchase under specified conditions reserved to the vendor, was in truth and in fact given merely as a security; and upon proof
of the truth of such allegations to enforce such an agreement or understanding in accord with the true intend of the parties at the time when it was executed.
The question having been brought here on an appeal from a ruling on a demurrer, the issue of law is squarely presented, without being obscured or
befogged by the intervention of any doubtful question of fact, or of the relevancy, materiality, competence or probative value of specific questions and
answers in a particular case.
We are of opinion, and so hold, that on both principle and authority, this question must be answered in the affirmative.
The Supreme Court of Porto Rico in the case of Monagas vs. Albertucci (17 Porto Rico, 684, cited and in effect affirmed as to this ruling by the Supreme
Court of the United States, 235 U. S., 81) observed in the course of a discussion of a similar question that "The American doctrine on this subject does
not differ materially from the principles set forth in our Civil Code," a code which is substantially identical with the Civil Code of the Philippines in all its
provisions with relation to the question under consideration; and we are satisfied on a full review of the whole question that, under our Codes, both
substantive and adjective, the doctrine which must be applied in this jurisdiction "does not differ materially" from the equitable doctrine frequently announced
and applied by the Supreme Court of the United States in the numerous cases in which similar questions have come to it from the various states and
territories within its jurisdiction.
We shall consider first, whether the provisions of the new Code of Civil Procedure should be so construed as to deny the right to the borrower in such cases,
to introduce extraneous and parol evidence to support his allegations as to the existence of a parol agreement, whereby the lender obligated himself to hold
the title to the lands merely as security for the repayment of the debt; and further whether there is anything in that Code which would deny the right of the
borrower in such cases, upon proof of such allegations, to enforce the agreement in accordance with its terms. The authors of the new Code of Civil
Procedure (Act No. 190 of the Civil Commission) were American lawyers, and the avowed purpose and object of its enactment was to introduce in these
Islands a system of procedure of civil cases modelled upon precedents in general use in the United States. Most of its provisions are borrowed directly from
the statute books of one or other of the States of the Union, and many of its more important provisions have been construed and applied by both state and
federal courts of last resort. We have, therefore, in the Supreme Court Reports of the various States from which these provisions were borrowed, numerous
precedents of strong and persuasive, if not conclusive authority; and, except in so far as they are affected by the substantive law in force in this jurisdiction
or necessarily modified by local conditions, we have always felt ourselves bound by the rulings of the Supreme Court of the United States in construing and
applying statutory enactments modelled upon or borrowed from English or American originals.
The various provisions of the new Code of Civil Procedure which have any bearing on the question now under consideration, or statutory provisions of like
tenor and effect, have been construed and applied by all or nearly all the courts of last resorts in England and the United States; and while these courts are
not wholly in accord as to the reasoning upon which their conclusions are based, it may safely be asserted that with substantial, if not absolute unanimity,
they have arrived a substantially similar results.
But we shall not shop at this time to review all the questions which have been raised in connection with the subject now under consideration. It will be
sufficient for our purposes to examine the obligations which have been advanced against the admission of parol evidence to sustain allegations similar in
effect to those set forth in the case at bar, based either on the ground that such evidence should be excluded under the "Statute of Frauds," the alleged
agreement not having been reduced to writing, or on the ground that its admission would violate the rule that parol evidence will not be admitted to vary or
contradict the terms of a written instrument.
For this purpose we can do no better than to insert here a few citations from the books, which set forth quite fully the doctrine in this regard that has been
announced by the great weight of authority, and which in our opinion should prevail in this jurisdiction in applying and construing the pertinent provisions of
the new Code of Civil Procedure. But, before doing so, it may be well to indicate that we do not adopt every proposition advanced in these somewhat
extended citations from text-book and judicial authority, and that, at this time, we make the doctrine our own only to the extent of declaring that the
provisions of the new Code of Civil Procedure do not have the effect of excluding parol evidence in support of allegations such as those set forth in the
complaint in the case at bar, or of denying the right of the borrower in cases of this kind to enforce the alleged agreement in accordance with its terms.
Supported by numerous citations the doctrine summarily stated in 27 Cyclopedia, page 1023, is as follows:
Effect of statute of frauds. The statute of frauds does not stand in the way of treating an absolute deed as a mortgage, when such
was the intention of the parties, although the agreement for redemption or defeasance rests wholly in parol, or is proved by parol
evidence. The courts will not permit the statute to be used as a shield for fraud, or as a means for perpetrating fraud.
Rule prohibiting contradiction of written documents. The admission of parol testimony to prove that a deed absolute in form was in
fact given and accepted as a mortgage does not violate the rule against the admission of oral evidence to vary or contradict the terms of
a written instrument.
In the case of Russell vs. Southard (53 U. S., 139, 147), the Supreme Court of the United States dealt with these objections in part as follows:
The first question is, whether this transaction was a mortgage, or a sale.
It is insisted, on behalf of the defendants, that this question is to be determined by inspection of the written papers alone, oral evidence
not being admissible to contradict, vary, or add to, their contents. But we have no doubt extraneous evidence is admissible to inform the
court of every material fact known to the parties when the deed and memorandum were executed. This is clear, both upon principle and
authority. To insist on what was really a mortgage, as a sale, is in equity a fraud, which cannot be successfully practiced, under the
shelter of any written papers, however precise and complete they may appear to be. In Conway vs. Alexander (7 Cranch, 238), Ch. J.
Marshall says: `Having made these observations on the deed itself, the court will proceed to examine those extrinsic circumstances,
which are to determine whether it was a sale or a mortgage;' and in Morris vs. Nixon (1 How., 126), it is stated; 'The charge against
Nixon is, substantially, a fraudulent attempt to convert that into an absolute sale, which was originally meant to be a security for a loan. It
is in this view of the case that the evidence is admitted to ascertain the truth of the transaction, though the deed be absolute on its face.'
These views are supported by many authorities. (Maxwell vs. Montacute, Pr. in Ch., 526; Dixon vs. Parker, 2 Ves., Sen., 225; Prince vs.
Bearden, 1 A. K. Marsh. [Ky.], 170; Oldham vs. Halley, 2 J. J. March. [Ky.], 114; Whittick vs. Kane, 1 Paige [N. Y.], 202; Taylor vs.
Luther, 2 Sumn, 232; Flagg vs. Mann, Id., 538; Overton vs. Bigelow, 3 Yerg. [Tenn.] 513; Brainerd vs. Brainerd, 15 Conn., 575; Wright
vs. Bates, 13 Vt., 341; McIntyre vs. Humphries, 1 Hoffm. [N. Y.] Ch., 331; 4 Kent, 143, note A., and 2 Green. Cruise, 86, n.)
It is suggested that a different rule is held by the highest court of equity in Kentucky. If it were, with great respect for that learned court,
this court would not feel bound thereby. This being a suit in equity, and oral evidence being admitted, or rejected, not by the mere force
of any state statute, but upon the principles of general equity jurisprudence, this court must be governed by its own views of those
principles. (Robinson vs. Campbell, 3 Wheat., 212; United States vs. Howland, 4 Id., 108; Boyle vs. Zacharie et al., 6 Pet., 658; Swift vs.
Tyson, 16 Id., 1; Foxcroft vs. Mallett, 4 How., 379.) But we do not perceive that the rule held in Kentucky differs from that above laid
down. The rule, as stated in Thomas vs. McCormack (9 Dana [Ky.], 109), is that oral evidence is not admissible in opposition to the legal
import of the deed, and the positive denial in the answer, unless a foundation for such evidence had been first laid by an allegation, and
some proof of fraud or mistake in the execution of the conveyance, or some vice in the consideration.
But the inquiry still remains, what amounts to an allegation of fraud, or of some vice in the consideration and it is the doctrine of this
court, that when it is alleged and proved that a loan on security was really intended, and the defendant sets up the loan as a payment of
purchase money, and the conveyance as a sale, both fraud and a vice in the consideration are sufficiently averred and proved to require
a court of equity to hold the transaction to be a mortgage; and we know of no court which has stated this doctrine with more distinctness,
than the Court of Appeals of the State of Kentucky. In Edrington vs. Harper (3 J. J. Marsh. [Ky.], 355), that court declared: `The fact that
the real transaction between the parties was a borrowing and lending, will, whenever, or however it may appear, show that a deed
absolute on its face was intended as a security for money; and whenever it can be ascertained to be a security for money, it is only a
mortgage, however artfully it may be disguised.'
xxx xxx xxx
In respect to the written memorandum, it was clearly intended to manifest a conditional sale. Very uncommon pains are taken to do this.
Indeed, so much anxiety is manifested on this point, as to make it apparent that the draftsman considered he had a somewhat difficult
task to perform. But it is not to be forgotten, that the same language which truly describes a real sale, may also be employed to cut off
the right of redemption, in case of a loan on security; that it is the duty of the court to watch vigilantly these exercises of skill, lest they
should be effectual to accomplish what equity forbids; and that, in doubtful cases, the court leans to the conclusion that the reality was a
mortgage, and not a sale. (Conway vs. Alexander, 7 Cranch, 218; Flagg vs. Mann, 2 Sumn., 533; Secrest vs. Turner, 2 J. J. March.
[Ky.], 471; Edrington vs. Harper, 3 Id., 354; Crane vs. Bonnell, 1 Green [N. J.] Ch., 264; Robertson vs. Campbell, 2 Call. [Va.], 421;
Poindexter vs. McCannon, 1 Dev. [N. C.] Eq., 373.)
It is true Russell must have given his assent to this form of the memorandum; but the distress for money under which he then was,
places him in the same condition as other borrowers, in numerous cases reported in the books, who have submitted to the dictation of
the lender under the pressure of their wants; and a court of equity does not consider a consent, thus obtained, to be sufficient to fix the
rights of the parties. `Necessitous men,' says the Lord Chancellor, in Vernon vs. Bethell (2 Eden, 113), `are not, truly speaking, free
men; but, to answer a present emergency, will submit to any terms that the crafty may impose upon them.'
The memorandum does not contain any promise by Russell to repay the money, and no personal security was taken; but it is settled
that this circumstance does not make the conveyance less effectual as a mortgage. (Floyer vs. Lavington, 1 P. Wms., 268; Lawly vs.
Hooper, 3 Atk., 278; Scott vs. Fields, 7 Watts. [Pa.], 360; Flagg vs. Mann, 2 Sumn., 533; Ancaster vs. Mayer, 1 Bro. C. C., 464.) And
consequently it is not only entirely consistent with the conclusion that a mortgage was intended, but in a case where it was the design of
one of the parties to clothe the transaction with the forms of a sale, in order to cut off the right of redemption, it is not to be expected that
the party would, by taking personal security, effectually defeat his own attempt to avoid the appearance of a loan.
Citing and relying upon this case Mr. Justice Field speaking for the Supreme Court of the United States (Brick vs. Brick, 98 U. S., 514) announced the
doctrine with relation to transactions in personal property, which is summarized as follows in the head notes:
Parol evidence is admissible in equity to show that a certificate of stock issued to a party as owner was delivered to him as security for a
loan of money. A court of equity will look beyond the terms of an instrument to the real transaction, and when that is shown to be one of
security and not of sale, it will give effect to the actual contract of the parties.
The rule which excludes such evidence to contradict or vary a written instrument does not forbid an inquiry into the object of the parties
in execution and receiving it.
In the case of Monagas vs. Albertucci (235 U. S., 81, 83) the Supreme Court of the United States inserts the following excerpt from the opinion of the
Supreme Court of Porto Rico (17 Porto Rico, 684, 686):
The whole case really turns on the question of whether the written instrument in controversy was a mortgage or a conditional sale. If it is
the latter, it must be complied with according to its terms; if the former, the plaintiff must be allowed to repay the money received and
take a reconveyance of the land. The real intention of the parties at the time the written instrument was made must govern in the
interpretation given to it by the courts. This must be ascertained from the circumstances surrounding the transaction and from the
language of the document itself. The correct test, where it can be applied, is the continued existence of a debt or liability between the
parties. If such exists, the conveyance may be held to be merely a security for the debt or an indemnity against the liability. On the
contrary, if no debt or liability is found to exist, then the transaction is not a mortgage, but merely a sale with a contract of repurchase
within a fixed time. While every case depends on its own special facts, certain circumstances are considered as important, and the
courts regard them as throwing much light upon the real intent of the parties and upon the nature of such transactions: such are the
existence of a collateral agreement made by the grantor for the payment of money to the grantee, his liability to pay interest, inadequacy
of price paid for the conveyance, the grantor still remaining in possession of the land conveyed, and any negotiation or application for a
loan made preceding or during the transaction resulting in the conveyance. The American doctrine on this subject does not differ
materially from the principles set forth in our Civil Code.
We insert here an extract of some length from the discussion of the subject (supported by numerous citations of authority) found in Jones' Commentaries on
Evidence, (1913) volume 3, paragraphs 446, 447:
446. To show that instruments apparently absolute are only securities. It has long been the settled rule that in courts exercising
equitable jurisdiction it is admissible to prove by parol that instruments in writing apparently transferring the absolute title are in fact only
given as security. The doctrine is thus stated by Mr. Field: `It is an established doctrine that a court of equity will treat a deed, absolute in
form, as a mortgage, when it is executed as security for loan of money. That court looks beyond the terms of the instrument to the real
transaction; and when that is shown to be one of security and not of sale, it will give effect to the actual contract of the parties. As the
equity, upon which the court acts in such cases, arises from the real character of the transaction, any evidence, written or oral, tending
to show this is admissible. The rule which excludes parol testimony to contradict or vary a written instrument has reference to the
language used by the parties. That cannot be qualified or varied from its natural import, but must speak for itself. The rule does not
forbid an inquiry into the object of the parties in executing and receiving the instrument.' Although in some of the earlier cases this
evidence was received only on the grounds of fraud or mistake, yet in later cases it was deemed sufficient evidence of fraud for the
grantee to treat the conveyance as absolute, when in fact it was not, and the tendency of the modern decisions is that such evidence
may be received to show the real nature and object of the transaction, although no fraud or mistake of any kind is alleged or proved. It is
held that "the agreement for the defeasance, whether written or unwritten, is no more than one of the conditions upon which the deed
was given, and therefore constitutes a part of the consideration for the conveyance . . . . Where the deed does not contain the
defeasance, the presumption arises that the conveyance is absolute, and, in making proof that a defeasance was intended by the
parties, and was in fact a part of the consideration upon which the conveyance was made, this presumption must be removed by
testimony before the debtor can use the evidence showing his right to defeat the absolute character of the conveyance . . . . It comes
finally to a question of what was the understanding and the intention of the parties at the time the instrument was made; and this, like
any other fact, depends for its support upon what was said and done by the parties at the time, together with all the other circumstances
bearing upon the question.'
447. Same Real intention of the parties to be ascertained. In applying the exception under discussion, the extrinsic evidence will
not be received because of any particular form of language which the parties may have adopted. As we have shown in the preceding
section, the intention of the parties must govern; and it matters not what peculiar form the transaction may have taken. The inquiry
always is, Was a security for the loan of money or other property intended? But where the deed and accompanying papers on their face
constitute a mortgage, parol evidence is not competent to show the contrary. In solving the question upon the facts, a few things are
absolutely necessary to be found to exist before the deed can be construed a mortgage. A debt owing to the mortgagee, or a liability
incurred for the grantor, either preexisting or created at the time the deed is made, is essential to give the deed the character of a
mortgage. The relation of debtor and creditor must appear. The existence of the debt is one of the tests. The amount of the debt, as well
as its continuance, should also be made to appear where a foreclosure is asked in the same suit wherein it is sought to establish the
character of the instrument. It is also of importance to know precisely when the character claimed for the instrument was fixed. In
construing the deed to be a mortgage, its character as such must have existed from its very inception, created at the time the
conveyance was made. The character of the transaction is precisely what the intention of the parties at the time made it. It will therefore
be discovered that the testimony of those who were present at the time the instrument was made, and especially of those who
participated in the transaction, becomes most important. In arriving at the real intent of the parties, their statements and acts at the time
of the transaction, the inadequacy of the consideration named in the deed, the prior existence of a debt, and the recognition of its
continuance, as by the payment of interest or other acts, are all facts to be considered, and are relevant to the issue. But although parol
evidence is received in such cases to show the real nature of the transaction, the presumption is that the instrument is what it purports
to be; and before a deed absolute in form can be shown to be a mortgage, the proof should be clear and convincing. The burden rests
upon the moving party of overcoming the strong presumption arising from the terms of a written instrument. If the proofs are doubtful
and unsatisfactory, if there is a failure to overcome this presumption by testimony entirely plain and convincing beyond reasonable
controversy, the writing will be held to express correctly the intention of the parties. A judgment of the court, a deliberate deed or writing,
are of too much solemnity to be brushed away by loose and inconclusive evidence. Proof tending to show that no transfer of title was
contemplated does not fall within the condemnation of the rule prohibiting oral evidence to vary the terms of a written instrument. As the
rule has often been stated, `to convert a deed absolute into a mortgage, the evidence should be so clear as to leave no substantial
doubt that the real intention of the parties was to execute a mortgage.'"
Having disposed of the contention that the provisions of the new Code of Civil Procedure, enacted under American sovereignty, forbid the introduction of
parol evidence to establish the true nature of transactions such as that under consideration in the case at bar, we come now to consider whether there is
anything in the Spanish Codes which denies the power of the courts to enforce the equitable doctrine announced by the Supreme Court of the United States
with reference to agreements and understandings of this nature.
But first, it may be well at this time to emphasize the fact that the courts of these Islands are not organized with reference to the old English and American
classification into courts of law and equity; and that our Codes recognize no distinction between actions at law and suits in equity, as these terms are
understood in English and American jurisdictions, wherein a distinction is made between law and equity in the enforcement of private rights and the redress
of private wrongs.
Deeply embedded among the fundamental principles on which the authors of the Civil Code of Spain erected that monument to their genuis as codifiers, is
the broad equitable rule that "No man may wrongfully (tortiously) enrich himself at the expense of (to the injury of) another." ("E aun dixeron, que ninguno
non deue enriqueszer tortizeramente con dao de otro"). (Regla 17, Title 34, Setena Partida, sentencias Tribunal de Espaa, May 1, 1875; December 16,
1880; May 24, 1882, April 24, 1896.)
As deeply embedded at the very foundation of all the provisions of the Spanish Code touching the nature and effect of all contractual obligations is the
maxim that the will of the contracting parties is the law of their contract a maxim which is amplified in the elementary propositions that "contracts are
perfected by mere consent" (article 1258); that "the contracting parties may make any agreement and establish any clauses and conditions which they may
deem advisable, provided they are not in contravention of law, morals, or public order" (article 1255); that "the validity and fulfillment of contracts cannot be
left to the will of one of the contracting parties" (article 1256); and that "contracts shall be binding, whatever be the form in which they may have been
executed, provided the essential conditions required for their validity exist" (article 1278).
In the light of these elementary and basic principles of the Code there can be no question, in the absence of express statutory prohibition, as to the validity of
an agreement or understanding whereby the lender of money, who as security for the repayment of the loan has taken a deed to land, absolute on its face or
in the form of a deed reserving a mere right of repurchase to the vendor, obligates himself to hold such deed, not as evidence of a contract of sale but by
way of security for the repayment of the debt; and that unless the rights of innocent third persons have intervened the lender of the money may be compelled
to comply specifically with the terms of such an agreement, whether it be oral or written; and further, that he will not be permitted, in violation of its terms, to
set up title in himself or to assert a claim or absolute ownership.
If the parties actually enter into such an agreement, the lender of the money is legally and morally bound to fulfill it. Of course such an oral contract does not
give the borrower a real right in the lands unless it is executed in compliance with the formalities prescribed by law. If entered into orally, it creates a mere
personal obligation which in no wise effects the lands, and if the lender conveys the lands to innocent third persons, the borrower must content himself with a
mere right of action for damages against the lender, for failure to comply with his agreement. But so long as the land remains in the hands of the lender, the
borrower may demand the fulfillment of the agreement, and a mere lack of any of the formalities prescribed under the Spanish Code for the execution of
contracts affecting real estate will not defeat his right to have the contract fulfilled, as the lender may be compelled in appropriate proceedings to execute the
contract with the necessary prescribed formalities.
We have frequently held that under the Spanish Codes an oral contract affecting lands, even an oral contract for the sale of lands, was valid and
enforceable, provided none of the essential requisites of all valid contracts is lacking, that is to say, (1) consent, (2) definite object, and (3) causa or
consideration. The lack of the formal requisites prescribed by the Code in order that such contracts may become effective to bind or convey the property,
such as their execution in public instruments and the like, does not invalidate them as personal obligations, as "either party may compel the other to comply
with such formalities" from the moment the valid personal obligation has been entered into. (Article 1279 of the Civil Code.)
In like manner an agreement such as we have just described, entered into by a lender of money, who has taken lands and security for its repayment, is a
valid contract, and we know of no provision in the Codes which denies the right of the borrower to demand its fulfillment. On the contrary, provided the rights
of innocent purchasers for valuable consideration have not intervened, and provided of course that the borrower can establish satisfactorily the fact that such
a contract was actually entered into, the principle that no man may wrongfully enrich himself at the expense of another imposes an imperative obligation on
the lender to carry out his contract, and secures the right to the borrower to have it enforced by the courts. And on the other hand, the same principle
secures to the lender the right to enforce the contract upon the failure of the borrower to comply with its terms, that is to say, to have the lands held as
security sold and the proceeds applied to the payment of the debt.
But this conclusion is in substance and in effect identical with that arrived at by the courts in England and the United States, when they declare that the
transaction in such cases will be treated as in the nature of an equitable mortgage and enforced as such. That is merely to say that the parties will be
compelled to comply with the terms of the agreement that the lands should be held as security for the debt, provided of course the agreement can be
established by competent evidence and the rights of innocent third parties have not intervened.
Under neither system will the contract be given the effect of a duly recorded or a valid mortgage, so as to bind the lands in the hands of innocent third
persons; but the result under both systems is substantially identical in that as long as the property remains in the hands of the lender he cannot deny the
right of the borrower to recover the lands by the payment of the debt, nor can he set up a claim of absolute ownership on the lands which will defeat the right
of the borrower in this regard until and unless the borrower's right of action has prescribed.
The real difficulty which has confronted the borrowers in attempting to enforce alleged contracts of this nature has not lain in the failure of the law to
recognize their rights in the premises, but rather in the inherent difficulties confronting them in their attempts to prove the existence of such a contract.
In the very nature of things the disqualification of those directly interested in an action to testify as witnesses, prescribed in article 1247 of the Spanish Code,
must have enormously increased the difficulties confronting a borrower in an attempt to establish the existence of such an oral contract, prior to the
enactment of the new Code of Civil Procedure prescribing new rules in this regard. This because, as a rule, the existence of such contracts is made known
to few persons other than the contracting parties themselves.
And while the new rules of evidence have removed this difficulty from the path of the lender seeking to establish the existence of such an agreement, they by
no means relief him of the necessity of establishing his allegations by clear, convincing and satisfactory evidence. The principle on which the codifiers rested
the rule laid down in article 1248 of the Civil Code is not less imperative under the new rules of evidence than under those found in the Spanish Code. That
article is as follows:
The probative force of the testimony of the witnesses shall be valued by the courts in accordance with the provisions of the Law of Civil
Procedure, taking care to avoid that, by the simple coincidence of some testimony, unless its truthfulness be evident, the affairs may be
finally decided in which are usually employed public deeds, private documents, or any commencement of written evidence.
In this jurisdiction, as in the United States, the existence of an oral agreement or understanding such as that alleged in the complaint in the case at bar
cannot be maintained on vague, uncertain and indefinite testimony, against the reasonable presumption that prudent men who enter into such contracts will
execute them in writing, and comply with the formalities prescribed by law for the creation of a valid mortgage. But where the evidence as to the existence of
such an understanding or agreement is clear, convincing and satisfactory, the same broad principles of equity operate in this jurisdiction as in the United
States to compel the parties to live up to the terms of their contract.
2. The second ground upon which the demurrer should have been overruled is that it admits the truth of the allegation of the complaint that in the year 1897,
two years after the date of the execution of the instrument purporting to be a deed of sale, the nominal vendor paid the nominal purchaser P1,000,
whereupon the nominal rent of the land was reduced from P420 to P300 per annum, the real purpose and object of this arrangement being to reduce the
amount of the annual interest on the original loan made to the nominal vendor of the land, proportionately to the reduction of the amount of the loan itself by
the payment of P1,000. If it be true that two years after the transaction evidenced by the instrument attached to the complaint, the defendant accepted from
the plaintiff's mother the sum of P1,000, and thereafter reduced the amount of the annual payments to be made by her, it cannot be doubted that the plaintiff
has a good cause of action against the defendant.
The acceptance by the defendant of this large sum of money, under the circumstances as they appear from the complaint, can only be accounted for on one
of two hypotheses. Either the original transaction was in truth and in fact an arrangement or agreement by virtue of which a loan of money was made and
secured by a formal deed of sale of land with a reserved right of repurchase; or, if the original transaction was in truth and in fact one of purchase and sale of
real estate, with a reserved right of repurchase in the vendor, then the purchaser, by the acceptance from the vendor of the sum of P1,000, waived and
surrendered his rights under the original contract, and entered into a new contract with the vendor, under which he obligated himself to cancel the deed, or
resell the land to the original vendor on the payment of the balance of the original purchase price, and bound himself not to exercise his right, under the
original deed of sale, to refuse to allow the original vendor to repurchase after the expiration of the period stipulated in the original contract for that purpose.
Upon either hypothesis, plaintiff would clearly be entitled to the relief prayed for in his complaint. Of course the defendant is not entitled to keep both the land
and the payment of a thousand pesos. The acceptance and retention of such a payment is wholly inconsistent with a claim of a right of absolute ownership
in the land, without any obligation to resell it to the original vendor. Defendant can not eat his cake and have it too.
In the case of Lichauco vs. Berenguer (20 Phil. Rep., 12), we found the fact that various partial payments had been made by the vendor, and accepted by
the purchaser, for the purpose of repaying the original purchase price, absolutely incompatible "with the idea of the irrevocability of the title of ownership of
the purchaser" at the expiration of the term stipulated in the original contract for the exercise of the right of repurchase. Speaking through the Chief Justice,
we said in that case:
The vendee, who has been reimbursed by the vendor for a part of the repurchase price, is bound to fulfill the obligation to sell back,
derived from the sale with right to repurchase, or must show reason why he may keep this part of the price and, notwithstanding his so
doing, be considered released from effecting the resale. He may be entitled to require the completion of the price, or that he be paid
other expenses before he returns the thing which he had purchased under such a condition subsequent; but the exercise of the right of
redemption having been begun and admitted, the irrevocability of the ownership in such manner acquired is in all respects incompatible
with these acts so performed.
The order entered in the court below, sustaining the demurrer to the complaint must be reversed, and the record remanded for further proceedings, without
costs in this instance.
Let judgment be entered in accordance herewith. So ordered.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-12342 August 3, 1918
A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J .:
By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix, with the consent of her husband, the defendant Balbino Tioco,
four parcels of land, described in the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of P3,000 on account of the
purchase price, and bound herself to pay the remainder in installments, the first of P2,000 on July 15, 1914, and the second of P5,000 thirty days after the
issuance to her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title P10, for each coconut tree in
bearing and P5 for each such tree not in bearing, that might be growing on said four parcels of land on the date of the issuance of title to her, with the
condition that the total price should not exceed P85,000. It was further stipulated that the purchaser was to deliver to the vendor 25 per centum of the value
of the products that she might obtain from the four parcels "from the moment she takes possession of them until the Torrens certificate of title be issued in
her favor."
It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of
purchase and sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products of the four parcels sold, and
I shall obliged to return to her, Marciana Felix, all the sums that she may have paid me, together with interest at the rate of 10 per cent per annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to compel Marciana Felix to make payment of the first installment of
P2,000, demandable in accordance with the terms of the contract of sale aforementioned, on July 15, 1914, and of the interest in arrears, at the stipulated
rate of 8 per cent per annum. The defendant, jointly with her husband, answered the complaint and alleged by way of special defense that the plaintiff had
absolutely failed to deliver to the defendant the lands that were the subject matter of the sale, notwithstanding the demands made upon him for this purpose.
She therefore asked that she be absolved from the complaint, and that, after a declaration of the rescission of the contract of the purchase and sale of said
lands, the plaintiff be ordered to refund the P3,000 that had been paid to him on account, together with the interest agreed upon, and to pay an indemnity for
the losses and damages which the defendant alleged she had suffered through the plaintiff's non-fulfillment of the contract.
The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the request of the purchaser, went to Lucena, accompanied by a
representative of the latter, for the purpose of designating and delivering the lands sold. He was able to designate only two of the four parcels, and more
than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The
plaintiff admitted that the purchaser would have to bring suit to obtain possession of the land (sten. notes, record, p. 5). In August, 1914, the surveyor
Santamaria went to Lucena, at the request of the plaintiff and accompanied by him, in order to survey the land sold to the defendant; but he surveyed only
two parcels, which are those occupied mainly by the brothers Leon and Julio Villafuerte. He did not survey the other parcels, as they were not designated to
him by the plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of injunction against the occupants, and for the
purpose of the issuance of this writ the defendant, in June, 1914, filed an application with the Land Court for the registration in her name of four parcels of
land described in the deed of sale executed in her favor by the plaintiff. The proceedings in the matter of this application were subsequently dismissed, for
failure to present the required plans within the period of the time allowed for the purpose.
The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be rescinded and ordering the return to the plaintiff the P3,000
paid on account of the price, together with interest thereon at the rate of 10 per cent per annum. From this judgment the plaintiff appealed.
In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the indisputable fact that up to that time the lands sold had not been
registered in accordance with the Torrens system, and on the terms of the second paragraph of clause (h) of the contract, whereby it is stipulated that ". . .
within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of the conventional rescission relied upon by the court, but on
the failure to deliver the land sold. He argues that the right to rescind the contract by virtue of the special agreement not only did not exist from the moment
of the execution of the contract up to one year after the registration of the land, but does not accrue until the land is registered. The wording of the clause, in
fact, substantiates the contention. The one year's deliberation granted to the purchaser was to be counted "from the date of the certificate of title ... ."
Therefore the right to elect to rescind the contract was subject to a condition, namely, the issuance of the title. The record show that up to the present time
that condition has not been fulfilled; consequently the defendant cannot be heard to invoke a right which depends on the existence of that condition. If in the
cross-complaint it had been alleged that the fulfillment of the condition was impossible for reasons imputable to the plaintiff, and if this allegation had been
proven, perhaps the condition would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue was not presented in the
defendant's answer.
However, although we are not in agreement with the reasoning found in the decision appealed from, we consider it to be correct in its result. The record
shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the purchaser; and as
regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and
possession of the vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the execution of a public instruments is equivalent to the
delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer
upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument
is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make
use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to
reality the delivery has not been effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the French Civil code, "the word "delivery" expresses a complex
idea . . . the abandonment of the thing by the person who makes the delivery and the taking control of it by the person to whom the delivery is made."
The execution of a public instrument is sufficient for the purposes of the abandonment made by the vendor; but it is not always sufficient to permit of the
apprehension of the thing by the purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article
"merely declares that when the sale is made through the means of a public instrument, the execution of this latter is equivalent to the delivery of the thing
sold: which does not and cannot mean that this fictitious tradition necessarily implies the real tradition of the thing sold, for it is incontrovertible that, while its
ownership still pertains to the vendor (and with greater reason if it does not), a third person may be in possession of the same thing; wherefore, though, as a
general rule, he who purchases by means of a public instrument should be deemed . . . to be the possessor in fact, yet this presumption gives way before
proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the instrument was not a fulfillment of the vendors' obligation to deliver the thing sold, and
that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price. (Civ.
Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of imposing upon the purchaser the obligation to take the necessary steps to obtain the
material possession of the thing sold, and it were proven that she knew that the thing was in the possession of a third person claiming to have property rights
therein, such agreement would be perfectly valid. But there is nothing in the instrument which would indicate, even implicitly, that such was the agreement. It
is true, as the appellant argues, that the obligation was incumbent upon the defendant Marciana Felix to apply for and obtain the registration of the land in
the new registry of property; but from this it cannot be concluded that she had to await the final decision of the Court of Land Registration, in order to be able
to enjoy the property sold. On the contrary, it was expressly stipulated in the contract that the purchaser should deliver to the vendor one-fourth "of the
products ... of the aforesaid four parcels from the moment when she takes possession of them until the Torrens certificate of title be issued in her favor." This
obviously shows that it was not forseen that the purchaser might be deprived of her possession during the course of the registration proceedings, but that
the transaction rested on the assumption that she was to have, during said period, the material possession and enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual agreement, it is not the conventional but the legal interest that is
demandable.
It is therefore held that the contract of purchase and sale entered into by and between the plaintiff and the defendant on June 11, 1914, is rescinded, and the
plaintiff is ordered to make restitution of the sum of P3,000 received by him on account of the price of the sale, together with interest thereon at the legal rate
of 6 per annum from the date of the filing of the complaint until payment, with the costs of both instances against the appellant. So ordered.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-69970 November 28, 1988
FELIX DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her husband, JOSE TAGACAY, respondents.
The subject of this dispute is the two lots owned by Domingo Melad which is claimed by both the petitioner and the respondent. The trial court believed the
petitioner but the respondent court, on appeal, upheld the respondent. The case is now before us for a resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner in the then Court of First Instance of Cagayan for recovery of a farm lot and a
residential lot which she claimed she had purchased from Domingo Melad in 1943 and were now being unlawfully withheld by the defendant.
1
In his answer,
the petitioner denied the allegation and averred that he was the owner of the said lots of which he had been in open, continuous and adverse possession,
having acquired them from Domingo Melad in 1941 and 1943.
2
The case was dismissed for failure to prosecute but was refiled in 1967.
3

At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly signed by Domingo Melad and duly notarized, which conveyed the
said properties to her for the sum of P80.00.
4
She said the amount was earned by her mother as a worker at the Tabacalera factory. She claimed to be the
illegitimate daughter of Domingo Melad, with whom she and her mother were living when he died in 1945. She moved out of the farm only when in 1946
Felix Danguilan approached her and asked permission to cultivate the land and to stay therein. She had agreed on condition that he would deliver part of the
harvest from the farm to her, which he did from that year to 1958. The deliveries having stopped, she then consulted the municipal judge who advised her to
file the complaint against Danguilan. The plaintiff 's mother, her only other witness, corroborated this testimony.
5

For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's niece, whom he and his wife Juana Malupang had taken into their
home as their ward as they had no children of their own. He and his wife lived with the couple in their house on the residential lot and helped Domingo with
the cultivation of the farm. Domingo Melad signed in 1941 a private instrument in which he gave the defendant the farm and in 1943 another private
instrument in which he also gave him the residential lot, on the understanding that the latter would take care of the grantor and would bury him upon his
death.
6
Danguilan presented three other witnesses
7
to corroborate his statements and to prove that he had been living in the land since his marriage to
Isidra and had remained in possession thereof after Domingo Melad's death in 1945. Two of said witnesses declared that neither the plaintiff nor her mother
lived in the land with Domingo Melad.
8

The decision of the trial court was based mainly on the issue of possession. Weighing the evidence presented by the parties, the judge
9
held that the
defendant was more believable and that the plaintiff's evidence was "unpersuasive and unconvincing." It was held that the plaintiff's own declaration that she
moved out of the property in 1946 and left it in the possession of the defendant was contradictory to her claim of ownership. She was also inconsistent when
she testified first that the defendant was her tenant and later in rebuttal that he was her administrator. The decision concluded that where there was doubt as
to the ownership of the property, the presumption was in favor of the one actually occupying the same, which in this case was the defendant.
10

The review by the respondent court
11
of this decision was manifestly less than thorough. For the most part it merely affirmed the factual findings of the trial
court except for an irrelevant modification, and it was only toward the end that it went to and resolved what it considered the lone decisive issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad had conveyed the two parcels of land to the petitioner, were null and
void. The reason was that they were donations of real property and as such should have been effected through a public instrument. It then set aside the
appealed decision and declared the respondents the true and lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows:
12

I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the truth of my giving to Felix Danguilan, my
agricultural land located at Barrio Fugu-Macusi, Penablanca, Province of Cagayan, Philippine Islands; that this land is
registered under my name; that I hereby declare and bind myself that there is no one to whom I will deliver this land except to
him as he will be the one responsible for me in the event that I will die and also for all other things needed and necessary for
me, he will be responsible because of this land I am giving to him; that it is true that I have nieces and nephews but they are
not living with us and there is no one to whom I will give my land except to Felix Danguilan for he lives with me and this is the
length175 m. and the width is 150 m.
IN WITNESS WHEREOF, I hereby sign my name below and also those present in the execution of this receipt this 14th day of
September 1941.
Penablanca Cagayan, September 14, 1941.
(SGD.) DOMINGO MELAD
WITNESSES:
1. (T.M.) ISIDRO MELAD
2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows:
13

I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do hereby swear and declare the truth that I
have delivered my residential lot at Centro, Penablanca, Cagayan, to Felix Danguilan, my son-in-law because I have no child;
that I have thought of giving him my land because he will be the one to take care of SHELTERING me or bury me when I die
and this is why I have thought of executing this document; that the boundaries of this lot ison the east, Cresencio
Danguilan; on the north, Arellano Street; on the south by Pastor Lagundi and on the west, Pablo Pelagio and the area of this
lot is 35 meters going south; width and length beginning west to east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO
It is our view, considering the language of the two instruments, that Domingo Melad did intend to donate the properties to the petitioner, as the private
respondent contends. We do not think, however, that the donee was moved by pure liberality. While truly donations, the conveyances were onerous
donations as the properties were given to the petitioner in exchange for his obligation to take care of the donee for the rest of his life and provide for his
burial. Hence, it was not covered by the rule in Article 749 of the Civil Code requiring donations of real properties to be effected through a public instrument.
The case at bar comes squarely under the doctrine laid down in Manalo v. De Mesa,
14
where the Court held:
There can be no doubt that the donation in question was made for a valuable consideration, since the donors made it
conditional upon the donees' bearing the expenses that might be occasioned by the death and burial of the donor Placida
Manalo, a condition and obligation which the donee Gregorio de Mesa carried out in his own behalf and for his wife Leoncia
Manalo; therefore, in order to determine whether or not said donation is valid and effective it should be sufficient to
demonstrate that, as a contract, it embraces the conditions the law requires and is valid and effective, although not recorded
in a public instrument.
The private respondent argues that as there was no equivalence between the value of the lands donated and the services for which they were being
exchanged, the two transactions should be considered pure or gratuitous donations of real rights, hence, they should have been effected through a public
instrument and not mere private writings. However, no evidence has been adduced to support her contention that the values exchanged were
disproportionate or unequal.
On the other hand, both the trial court and the respondent court have affirmed the factual allegation that the petitioner did take care of Domingo Melad and
later arranged for his burial in accordance with the condition imposed by the donor. It is alleged and not denied that he died when he was almost one
hundred years old,
15
which would mean that the petitioner farmed the land practically by himself and so provided for the donee (and his wife) during the
latter part of Domingo Melad's life. We may assume that there was a fair exchange between the donor and the donee that made the transaction an onerous
donation.
Regarding the private respondent's claim that she had purchased the properties by virtue of a deed of sale, the respondent court had only the following to
say: "Exhibit 'E' taken together with the documentary and oral evidence shows that the preponderance of evidence is in favor of the appellants." This was,
we think, a rather superficial way of resolving such a basic and important issue.
The deed of sale was allegedly executed when the respondent was only three years old and the consideration was supposedly paid by her mother, Maria
Yedan from her earnings as a wage worker in a factory.
16
This was itself a suspicious circumstance, one may well wonder why the transfer was not made to
the mother herself, who was after all the one paying for the lands. The sale was made out in favor of Apolonia Melad although she had been using the
surname Yedan her mother's surname, before that instrument was signed and in fact even after she got married.
17
The averment was also made that the
contract was simulated and prepared after Domingo Melad's death in 1945.
18
It was also alleged that even after the supposed execution of the said contract,
the respondent considered Domingo Melad the owner of the properties and that she had never occupied the same.
19

Considering these serious challenges, the appellate court could have devoted a little more time to examining Exhibit "E" and the circumstances surrounding
its execution before pronouncing its validity in the manner described above. While it is true that the due execution of a public instrument is presumed, the
presumption is disputable and will yield to contradictory evidence, which in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the record shows that the private respondent did not take possession of the disputed properties
and indeed waited until 1962 to file this action for recovery of the lands from the petitioner. If she did have possession, she transferred the same to the
petitioner in 1946, by her own sworn admission, and moved out to another lot belonging to her step-brother.
20
Her claim that the petitioner was her tenant
(later changed to administrator) was disbelieved by the trial court, and properly so, for its inconsistency. In short, she failed to show that she consummated
the contract of sale by actual delivery of the properties to her and her actual possession thereof in concept of purchaser-owner.
As was held in Garchitorena v. Almeda:
21

Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass by mere stipulation but only
by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a public document does
not constitute sufficient delivery where the property involved is in the actual and adverse possession of third persons (Addison
vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable that even if included in the contract, the
ownership of the property in dispute did not pass thereby to Mariano Garchitorena. Not having become the owner for lack of
delivery, Mariano Garchitorena cannot presume to recover the property from its present possessors. His action, therefore, is
not one of revindicacion, but one against his vendor for specific performance of the sale to him.
In the aforecited case of Fidelity and Deposit Co. v. Wilson,
22
Justice Mapa declared for the Court:
Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a well- known doctrine of law that "non
mudis pactis sed traditione dominia rerum transferuntur". In conformity with said doctrine as established in paragraph 2 of
article 609 of said code, that "the ownership and other property rights are acquired and transmitted by law, by gift, by testate
or intestate succession, and, in consequence of certain contracts, by tradition". And as the logical application of this
disposition article 1095 prescribes the following: "A creditor has the rights to the fruits of a thing from the time the obligation to
deliver it arises. However, he shall not acquire a real right" (and the ownership is surely such) "until the property has been
delivered to him."
In accordance with such disposition and provisions the delivery of a thing constitutes a necessary and indispensable requisite
for the purpose of acquiring the ownership of the same by virtue of a contract. As Manresa states in his Commentaries on the
Civil Code, volume 10, pages 339 and 340: "Our law does not admit the doctrine of the transfer of property by mere consent
but limits the effect of the agreement to the due execution of the contract. ... The ownership, the property right, is only derived
from the delivery of a thing ... "
As for the argument that symbolic delivery was effected through the deed of sale, which was a public instrument, the Court has held:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is
placed "in the hands and possession of the vendee." (Civil Code, art. 1462). It is true that the same article declares that the
execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that
this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the
thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields
to realitythe delivery has not been effected.
23

There is no dispute that it is the petitioner and not the private respondent who is in actual possession of the litigated properties. Even if the respective claims
of the parties were both to be discarded as being inherently weak, the decision should still incline in favor of the petitioner pursuant to the doctrine
announced in Santos & Espinosa v. Estejada
24
where the Court announced:
If the claim of both the plaintiff and the defendant are weak, judgment must be for the defendant, for the latter being in
possession is presumed to be the owner, and cannot be obliged to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court REINSTATED, with costs against the private respondent. It is so
ordered.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-21998 November 10, 1975
CALIXTO PASAGUI and FAUSTA MOSAR, plaintiffs-appellants,
vs.
ESTER T. VILLABLANCA, ZOSIMO VILLABLANCA, EUSTAQUIA BOCAR and CATALINA BOCAR defendants-appellees.
Julio Siayngco for plaintiffs-appellants.
Filomeno Arteche, Jr. for defendants-appellees. .

ANTONIO, J .:
The only issue posed by this appeal is whether or not, from the nature of the action pleaded as appears in the allegations of the complaint, the aforesaid
action is one of forcible entry, within the exclusive jurisdiction of the municipal court. .
On February 4, 1963, appellants Calixto Pasagui and Fausta Mosar filed a complaint with the Court of First Instance at Tacloban City, alleging that
onNovember 15, 1962, for and in consideration of Two Thousand Eight Hundred Pesos (P2,800.00), they bought from appellees Eustaquia Bocar and
Catalina Bocar a parcel of agricultural land with an area of 2.6814 hectares, situated in Hamindangon, Pastrana, Leyte; that the corresponding document of
sale was executed, notarized on the same date, and recorded in the Registry of Deeds of Tacloban, Leyte on November 16, 1962; that during the first week
of February, 1963, defendant spouses Ester T. Villablanca and Zosimo Villablanca, "illegally and without any right, whatsoever, took possession of the above
property harvesting coconuts from the coconut plantation thereon, thus depriving plaintiffs" of its possession; that despite demands made by the plaintiffs
upon the above-mentioned defendants "to surrender to them the above-described property and its possession" the latter failed or refused to return said
parcel of land to the former, causing them damage; and that Eustaquia and Catalina Bocar, vendors of the property, are included defendants in the
complaint by virtue of the warranty clause contained in the document of sale. Plaintiffs prayed for a decision ordering defendants to surrender the
possession of the parcel of land above-described to them and to pay damages in the amounts specified. .
On February 21, 1963, appellees moved to dismiss the complaint on the ground that the Court of First Instance had no jurisdiction over the subject matter,
the action being one of forcible entry. Appellants opposed the Motion to Dismiss asserting that the action is not one for forcible entry inasmuch as in the
complaint, there is no allegation that the deprivation of possession was effected through "force, intimidation, threat, strategy or stealth." .
On May 13, 1963, the trial court issued an order dismissing the complaint for lack of jurisdiction, it appearing from the allegations in the complaint that the
case is one for forcible entry which belongs to the exclusive jurisdiction of the Justice of the Peace (now Municipal Court) of Pastrana, Leyte. The first Motion
for Reconsideration was denied on May 27, 1963 and the second was likewise denied on July 5, 1963. From the aforementioned orders, appeal on a pure
question of law was interposed to this Court. .
It is well-settled that what determines the jurisdiction of the municipal court in a forcible entry case is the nature of the action pleaded as appears from the
allegations in the complaint. In ascertaining whether or not the action is one of forcible entry within the original exclusive jurisdiction of the municipal court,
the averments of the complaint and the character of the relief sought are the ones to be consulted.. 1 .
In the case at bar, the complaint does not allege that the plaintiffs were in physical possession of the land and have been deprived of that possession
through force, intimidation, threat, strategy, or stealth. It simply avers that plaintiffs-appellants bought on November 12, 1962 from defendants-appellees
Eustaquia Bocar and Catalina Bocar the parcel of land in question for the amount of P2,800.00; that a deed of sale was executed, notarized and
registered;that "during this first week of February, 1963, defendants Ester T. Villablanca and her husband, Zosimo Villablanca, illegally and without any right
whatsoever, took possession of the above described property, harvesting coconuts from the coconut plantation therein, thus depriving of its possession
herein plaintiffs, and causing them damages for the amount of EIGHT HUNDRED PESOS (P800.00)"; that for the purpose of enforcing the vendors'
warranty in case of eviction, Eustaquia Bocar and Catalina Bocar were also included as defendants; and, therefore, plaintiffs-appellants pray that a decision
be rendered, ordering (a) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to surrender the possession of the above described
property to said plaintiffs"; (b) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to pay to said plaintiffs the amount of EIGHT
HUNDRED PESOS (P800.00) as damages for the usurpation by them of said property"; and (c) defendants Eustaquia Bocar and Catalina Bocar "to pay the
plaintiffs the amount of P2,800.00, plus incidental expenses, as provided for by Art. 1555 of the Civil Code, in case of eviction or loss of ownership to said
above described property on the part of plaintiffs." .
It is true that the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land subject of the sale.
2
This presumptive
delivery only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. It
can be negated by the reality that the vendees actually failed to obtain material possession of the land subject of the sale.. 3 It appears from the records of
the case at bar that plaintiffs-appellants had not acquired physical possession of the land since its purchase on November 12, 1962. As a matter of fact, their
purpose in filing the complaint in Civil Case No. 3285 is precisely to "get the possession of the property."
4
In order that an action may be considered as one
for forcible entry, it is not only necessary that the plaintiff should allege his prior physical possession of the property but also that he was deprived of his
possession by any of the means provided in section 1, Rule 70 of the Revised Rules of Court, namely: force, intimidation, threats, strategy and stealth. For, if
the dispossession did not take place by any of these means, the courts of first instance, not the municipal courts, have jurisdictions.. 5 The bare allegation in
the complaint that the plaintiff has been "deprived" of the land of which he is and has been the legal owner for a long period has been held to be insufficient.
6

It is true that the mere act of a trespasser in unlawfully entering the land, planting himself on the ground and excluding therefrom the prior possessor would
imply the use of force. In the case at bar, no such inference could be made as plaintiffs-appellants had not claimed that they were in actual physical
possession of the property prior to the entry of the Villablancas. Moreover, it is evident that plaintiffs-appellants are not only seeking to get the possession of
the property, but as an alternative cause of action, they seek the return of the price and payment of damages by the vendors "in case of eviction or loss of
ownership" of the said property. It is, therefore, not the summary action of forcible entry within the context of the Rules. .
WHEREFORE, the order of dismissal is hereby set aside, and the case remanded to the court a quo for further proceedings. Costs against defendants-
appellees. .
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. 92989 July 8, 1991
PERFECTO DY, JR. petitioner,
vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES, respondents.
Zosa & Quijano Law Offices for petitioner.
Expedito P. Bugarin for respondent GELAC Trading, Inc.

GUTIERREZ, JR., J .:p
This is a petition for review on certiorari seeking the reversal of the March 23, 1990 decision of the Court of Appeals which ruled that the petitioner's
purchase of a farm tractor was not validly consummated and ordered a complaint for its recovery dismissed.
The facts as established by the records are as follows:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo Dy purchased a truck and a farm tractor through financing extended
by Libra Finance and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as security for the loan.
The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he wrote a letter to Libra requesting that he be allowed to purchase from
Wilfredo Dy the said tractor and assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of the petitioner over the tractor in question.
At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate release could not be effected because Wilfredo Dy had obtained
financing not only for said tractor but also for a truck and Libra insisted on full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so that full payment could be made for both. On November 22, 1979, a
PNB check was issued in the amount of P22,000.00 in favor of Libra, thus settling in full the indebtedness of Wilfredo Dy with the financing firm. Payment
having been effected through an out-of-town check, Libra insisted that it be cleared first before Libra could release the chattels in question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a collection case to recover the sum of P12,269.80 was pending in another
court in Cebu.
On the strength of an alias writ of execution issued on December 27, 1979, the provincial sheriff was able to seize and levy on the tractor which was in the
premises of Libra in Carmen, Cebu. The tractor was subsequently sold at public auction where Gelac Trading was the lone bidder. Later, Gelac sold the
tractor to one of its stockholders, Antonio Gonzales.
It was only when the check was cleared on January 17, 1980 that the petitioner learned about GELAC having already taken custody of the subject tractor.
Consequently, the petitioner filed an action to recover the subject tractor against GELAC Trading with the Regional Trial Court of Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive portion of the decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, pronouncing that the plaintiff is
the owner of the tractor, subject matter of this case, and directing the defendants Gelac Trading Corporation and Antonio
Gonzales to return the same to the plaintiff herein; directing the defendants jointly and severally to pay to the plaintiff the
amount of P1,541.00 as expenses for hiring a tractor; P50,000 for moral damages; P50,000 for exemplary damages; and to
pay the cost. (Rollo, pp. 35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the complaint with costs against the petitioner. The Court of Appeals held
that the tractor in question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the alias writ of execution issued in Civil
Case No. R-16646.
The petitioner now comes to the Court raising the following questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE FACTS AND ERRED IN NOT
AFFIRMING THE TRIAL COURT'S FINDING THAT OWNERSHIP OF THE FARM TRACTOR HAD ALREADY PASSED TO
HEREIN PETITIONER WHEN SAID TRACTOR WAS LEVIED ON BY THE SHERIFF PURSUANT TO AN ALIAS WRIT OF
EXECUTION ISSUED IN ANOTHER CASE IN FAVOR OF RESPONDENT GELAC TRADING INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS EMBARKED ON MERE CONJECTURE AND SURMISE IN
HOLDING THAT THE SALE OF THE AFORESAID TRACTOR TO PETITIONER WAS DONE IN FRAUD OF WILFREDO
DY'S CREDITORS, THERE BEING NO EVIDENCE OF SUCH FRAUD AS FOUND BY THE TRIAL COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE FACTS AND ERRED IN NOT
SUSTAINING THE FINDING OF THE TRIAL COURT THAT THE SALE OF THE TRACTOR BY RESPONDENT GELAC
TRADING TO ITS CO-RESPONDENT ANTONIO V. GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH
RESPONDENTS ALREADY KNEW OF THE FILING OF THE INSTANT CASE WAS VIOLATIVE OF THE HUMAN
RELATIONS PROVISIONS OF THE CIVIL CODE AND RENDERED THEM LIABLE FOR THE MORAL AND EXEMPLARY
DAMAGES SLAPPED AGAINST THEM BY THE TRIAL COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale, no constructive delivery was effected since the consummation of the sale
depended upon the clearance and encashment of the check which was issued in payment of the subject tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA 80 [1989]), we stated that:
xxx xxx xxx
The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has the power to
alienate the same; however, he is obliged under pain of penal liability, to secure the written consent of the mortgagee.
(Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the instruments
of mortgage are binding, while they subsist, not only upon the parties executing them but also upon those who later, by
purchase or otherwise, acquire the properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a third person,
therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the Revised Penal Code and the
binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage.
xxx xxx xxx
The mortgagor who gave the property as security under a chattel mortgage did not part with the ownership over the same. He had the right to sell it although
he was under the obligation to secure the written consent of the mortgagee or he lays himself open to criminal prosecution under the provision of Article 319
par. 2 of the Revised Penal Code. And even if no consent was obtained from the mortgagee, the validity of the sale would still not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the subject tractor. There is no dispute that the consent of Libra Finance was
obtained in the instant case. In a letter dated August 27, 1979, Libra allowed the petitioner to purchase the tractor and assume the mortgage debt of his
brother. The sale between the brothers was therefore valid and binding as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501 or in any other manner signing an agreement that the possession is transferred from the vendor to the vendee. We agree
with the petitioner that Articles 1498 and 1499 are applicable in the case at bar.
Article 1498 states:
Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.
xxx xxx xxx
Article 1499 provides:
Article 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting
parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already
had it in his possession for any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could not be made. However, there was constructive delivery already upon the execution of the
public instrument pursuant to Article 1498 and upon the consent or agreement of the parties when the thing sold cannot be immediately transferred to the
possession of the vendee. (Art. 1499)
The respondent court avers that the vendor must first have control and possession of the thing before he could transfer ownership by constructive delivery.
Here, it was Libra Finance which was in possession of the subject tractor due to Wilfredo's failure to pay the amortization as a preliminary step to
foreclosure. As mortgagee, he has the right of foreclosure upon default by the mortgagor in the performance of the conditions mentioned in the contract of
mortgage. The law implies that the mortgagee is entitled to possess the mortgaged property because possession is necessary in order to enable him to have
the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor, his right of ownership was not divested from him upon his
default. Neither could it be said that Libra was the owner of the subject tractor because the mortgagee can not become the owner of or convert and
appropriate to himself the property mortgaged. (Article 2088, Civil Code) Said property continues to belong to the mortgagor. The only remedy given to the
mortgagee is to have said property sold at public auction and the proceeds of the sale applied to the payment of the obligation secured by the mortgagee.
(See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no showing that Libra Finance has already foreclosed the mortgage and that it was the new owner
of the subject tractor. Undeniably, Libra gave its consent to the sale of the subject tractor to the petitioner. It was aware of the transfer of rights to the
petitioner.
Where a third person purchases the mortgaged property, he automatically steps into the shoes of the original mortgagor. (See Industrial Finance Corp. v.
Apostol, 177 SCRA 521 [1989]). His right of ownership shall be subject to the mortgage of the thing sold to him. In the case at bar, the petitioner was fully
aware of the existing mortgage of the subject tractor to Libra. In fact, when he was obtaining Libra's consent to the sale, he volunteered to assume the
remaining balance of the mortgage debt of Wilfredo Dy which Libra undeniably agreed to.
The payment of the check was actually intended to extinguish the mortgage obligation so that the tractor could be released to the petitioner. It was never
intended nor could it be considered as payment of the purchase price because the relationship between Libra and the petitioner is not one of sale but still a
mortgage. The clearing or encashment of the check which produced the effect of payment determined the full payment of the money obligation and the
release of the chattel mortgage. It was not determinative of the consummation of the sale. The transaction between the brothers is distinct and apart from
the transaction between Libra and the petitioner. The contention, therefore, that the consummation of the sale depended upon the encashment of the check
is untenable.
The sale of the subject tractor was consummated upon the execution of the public instrument on September 4, 1979. At this time constructive delivery was
already effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff in December, 1979. Well settled is
the rule that only properties unquestionably owned by the judgment debtor and which are not exempt by law from execution should be levied upon or sought
to be levied upon. For the power of the court in the execution of its judgment extends only over properties belonging to the judgment debtor. (Consolidated
Bank and Trust Corp. v. Court of Appeals, G.R. No. 78771, January 23, 1991).
The respondents further claim that at that time the sheriff levied on the tractor and took legal custody thereof no one ever protested or filed a third party
claim.
It is inconsequential whether a third party claim has been filed or not by the petitioner during the time the sheriff levied on the subject tractor. A person other
than the judgment debtor who claims ownership or right over levied properties is not precluded, however, from taking other legal remedies to prosecute his
claim. (Consolidated Bank and Trust Corp. v. Court of Appeals, supra) This is precisely what the petitioner did when he filed the action for replevin with the
RTC.
Anent the second and third issues raised, the Court accords great respect and weight to the findings of fact of the trial court. There is no sufficient evidence
to show that the sale of the tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo and Perfecto are brothers, this fact alone does not give
rise to the presumption that the sale was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663 [1963]). Moreover, fraud can not
be presumed; it must be established by clear convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading were indeed violative of the provisions on human relations. As found by the trial
court, GELAC knew very well of the transfer of the property to the petitioners on July 14, 1980 when it received summons based on the complaint for
replevin filed with the RTC by the petitioner. Notwithstanding said summons, it continued to sell the subject tractor to one of its stockholders on August 2,
1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals promulgated on March 23, 1990 is SET ASIDE and the decision of
the Regional Trial Court dated April 8, 1988 is REINSTATED.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. 119745 June 20, 1997
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE NATIONAL BANK, respondents.

PANGANIBAN, J .:
Is the seller's failure to eject the lessees from a lot that is the subject of a contract of sale with assumption of mortgage a ground (1) for rescission of such
contract and (2) for a return by the mortgagee of the amortization payments made by the buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for review on certiorari of the March 27, 1995 Decision
1
of the Court of Appeals,
Eighth Division, in CA-G.R. CV Case No. 32298 upholding the validity of the contract of sale with assumption of mortgage and absolving the mortgagee from
the liability of returning the mortgage payments already made.
2

The Facts
Petitioner Power Commercial & Industrial Development Corporation, an industrial asbestos manufacturer, needed a bigger office space and warehouse for
its products. For this purpose, on January 31, 1979, it entered into a contract of sale with the spouses Reynaldo and Angelita R. Quiambao, herein private
respondents. The contract involved a 612-sq. m. parcel of land covered by Transfer Certificate of Title No. S-6686 located at the corner of Bagtican and St.
Paul Streets, San Antonio Village, Makati City. The parties agreed that petitioner would pay private respondents P108,000.00 as down payment, and the
balance of P295,000.00 upon the execution of the deed of transfer of the title over the property. Further, petitioner assumed, as part of the purchase price,
the existing mortgage on the land. In full satisfaction thereof, he paid P79,145.77 to Respondent Philippine National Bank ("PNB" for brevity).
On June 1, 1979, respondent spouses mortgaged again said land to PNB to guarantee a loan of P145,000.00, P80,000.00 of which was paid to respondent
spouses. Petitioner agreed to assume payment of the loan.
On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage which contained the following terms and conditions:
3

That for and in consideration of the sum of Two Hundred Ninety-Five Thousand Pesos (P295,000.00) Philippine Currency, to
us in hand paid in cash, and which we hereby acknowledge to be payment in full and received to our entire satisfaction, by
POWER COMMERCIAL AND INDUSTRIAL DEVELOPMENT CORPORATION, a 100% Filipino Corporation, organized and
existing under and by virtue of Philippine Laws with offices located at 252-C Vito Cruz Extension, we hereby by these
presents SELL, TRANSFER and CONVEY by way of absolute sale the above described property with all the improvements
existing thereon unto the said Power Commercial and Industrial Development Corporation, its successors and assigns, free
from all liens and encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered by the provisions of the Land Reform Code the
same having no agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or
encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power
Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and
all third persons; subject, however, to the provisions hereunder provided to wit:
That the above described property is mortgaged to the Philippine National Bank, Cubao, Branch, Quezon City for the amount
of one hundred forty-five thousand pesos, Philippine, evidenced by document No. 163, found on page No. 34 of Book No. XV,
Series of 1979 of Notary Public Herita
L. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal . . . ;
That the said Power Commercial and Industrial Development Corporation assumes to pay in full the entire amount of the said
mortgage above described plus interest and bank charges, to the said mortgagee bank, thus holding the herein vendor free
from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and approval of the said Philippine National Bank to the
herein sale of this property, hereby agreeing to abide by any and all requirements of the said bank, agreeing that failure to do
so shall give to the bank first lieu (sic) over the herein described property.
On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-corporation, submitted to PNB said deed with a formal application for
assumption of mortgage.
4

On February 15, 1980, PNB informed respondent spouses that, for petitioner's failure to submit the papers necessary for approval pursuant to the former's
letter dated January 15, 1980, the application for assumption of mortgage was considered withdrawn; that the outstanding balance of P145,000.00 was
deemed fully due and demandable; and that said loan was to be paid in full within fifteen (15) days from notice.
5

Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23, 1980, payments which were to be applied to the outstanding loan. On
December 23, 1980, PNB received a letter from petitioner which reads:
6

With regard to the presence of the people who are currently in physical occupancy of the (l)ot . . . it is our desire as buyers
and new owners of this lot to make use of this lot for our own purpose, which is why it is our desire and intention that all the
people who are currently physically present and in occupation of said lot should be removed immediately.
For this purpose we respectfully request that . . . our assumption of mortgage be given favorable consideration, and that the
mortgage and title be transferred to our name so that we may undertake the necessary procedures to make use of this lot
ourselves.
It was our understanding that this lot was free and clear of problems of this nature, and that the previous owner would be
responsible for the removal of the people who were there. Inasmuch as the previous owner has not been able to keep his
commitment, it will be necessary for us to take legal possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as follows:
7

(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed by you on June 4, 1979 for P101,500.00. It
was last renewed on December 24, 1980 to mature on June 4, 1981.
A review of our records show that it has been past due from last maturity with interest arrearages amounting to P25,826.08 as
of February 19, 1982. The last payment received by us was on December 24, 1980 for P20,283. 14. In order to place your
account in current form, we request you to remit payments to cover interest, charges, and at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses for rescission and damages before the Regional Trial Court of Pasig,
Branch 159. Then, in its reply to PNB's letter of February 19, 1982, petitioner demanded the return of the payments it made on the ground that its
assumption of mortgage was never approved. On May 31, 1983,
8
while this case was pending, the mortgage was foreclosed. The property was
subsequently bought by PNB during the public auction. Thus, an amended complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court
9
ruled that the failure of respondent spouses to deliver actual possession to petitioner entitled the latter to rescind the sale,
and in view of such failure and of the denial of the latter's assumption of mortgage, PNB was obliged to return the payments made by the latter. The
dispositive portion of said decision states:
10

IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage executed between plaintiff and defendants
Spouses Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the amount of P187,144.77 (P108,000.00 plus P79,145.77)
with legal interest of 12% per annum from date of filing of herein complaint, that is, March 17, 1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59 (P41,880.45 and P20,283.14) with 12% interest
thereon from date of herein judgment until the same is fully paid.
No award of other damages and attorney's fees, the same not being warranted under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent Court of Appeals reversed the trial court. In the assailed Decision, it held that the deed of sale
between respondent spouses and petitioner did not obligate the former to eject the lessees from the land in question as a condition of the sale, nor was the
occupation thereof by said lessees a violation of the warranty against eviction. Hence, there was no substantial breach to justify the rescission of said
contract or the return of the payments made. The dispositive portion of said Decision reads:
11

WHEREFORE, the Decision appealed from is hereby REVERSED and the complaint filed by Power Commercial and
Industrial Development Corporation against the spouses Reynaldo and Angelita Quiambao and the Philippine National Bank
is DISMISSED. No costs.
Hence, the recourse to this Court.
Issues
Petitioner contends that: (1) there was a substantial breach of the contract between the parties warranting rescission; and (2) there was a "mistake in
payment" made by petitioner, obligating PNB to return such payments. In its Memorandum, it specifically assigns the following errors of law on the part of
Respondent Court:
12

A. Respondent Court of Appeals gravely erred in failing to consider in its decision that a breach of implied warranty under
Article 1547 in relation to Article 1545 of the Civil Code applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in failing to consider in its decision that a mistake in payment giving rise to a
situation where the principle of solutio indebiti applies is obtaining in the case-at-bar.
The Court's Ruling
The petition is devoid of merit. It fails to appreciate the difference between a condition and a warranty and the consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged "failure" of respondent spouses to eject the lessees from the lot in question and to deliver actual and physical possession thereof cannot be
considered a substantial breach of a condition for two reasons: first, such "failure" was not stipulated as a condition whether resolutory or suspensive
in the contract; and second, its effects and consequences were not specified either.
13

The provision adverted to by petitioner does not impose a condition or an obligation to eject the lessees from the lot. The deed of sale provides in part:
14

We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or
encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power
Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and
all third persons; subject, however, to the provisions hereunder provided to wit:
By his own admission, Anthony Powers, General Manager of petitioner-corporation, did not ask the corporation's lawyers to stipulate in the contract that
Respondent Reynaldo was guaranteeing the ejectment of the occupants, because there was already a proviso in said deed of sale that the sellers were
guaranteeing the peaceful possession by the buyer of the land in question.
15
Any obscurity in a contract, if the above-quoted provision can be so described,
must be construed against the party who caused it.
16
Petitioner itself caused the obscurity because it omitted this alleged condition when its lawyer drafted
said contract.
If the parties intended to impose on respondent spouses the obligation to eject the tenants from the lot sold, it should have included in the contract a
provision similar to that referred to in Romero vs. Court of Appeals,
17
where the ejectment of the occupants of the lot sold by private respondent was the
operative act which set into motion the period of petitioner's compliance with his own obligation, i.e., to pay the balance of the purchase price. Failure to
remove the squatters within the stipulated period gave the other party the right to either refuse to proceed with the agreement or to waive that condition of
ejectment in consonance with Article 1545 of the Civil Code. In the case cited, the contract specifically stipulated that the ejectment was a condition to be
fulfilled; otherwise, the obligation to pay the balance would not arise. This is not so in the case at bar.
Absent a stipulation therefor, we cannot say that the parties intended to make its nonfulfillment a ground for rescission. If they did intend this, their contract
should have expressly stipulated so. In Ang vs. C.A.,
18
rescission was sought on the ground that the petitioners had failed to fulfill their obligation "to remove
and clear" the lot sold, the performance of which would have given rise to the payment of the consideration by private respondent. Rescission was not
allowed, however, because the breach was not substantial and fundamental to the fulfillment by the petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual warranty against eviction, and not to a condition that was not met.
The terms of the contract are so clear as to leave no room for any other interpretation.
19

Furthermore, petitioner was well aware of the presence of the tenants at the time it entered into the sales transaction. As testified to by Reynaldo,
20

petitioner's counsel during the sales negotiation even undertook the job of ejecting the squatters. In fact, petitioner actually filed suit to eject the occupants.
Finally, petitioner in its letter to PNB of December 23, 1980 admitted that it was the "buyer(s) and new owner(s) of this lot."
Effective Symbolic Delivery
The Court disagrees with petitioner's allegation that the respondent spouses failed to deliver the lot sold. Petitioner asserts that the legal fiction of symbolic
delivery yielded to the truth that, at the execution of the deed of sale, transfer of possession of said lot was impossible due to the presence of occupants on
the lot sold. We find this misleading.
Although most authorities consider transfer of ownership as the primary purpose of sale, delivery remains an indispensable requisite as our law does not
admit the doctrine of transfer of property by mere consent.
21
The Civil Code provides that delivery can either be (1) actual (Article 1497) or (2) constructive
(Articles 1498-1501). Symbolic delivery (Article 1498), as a species of constructive delivery, effects the transfer of ownership through the execution of a
public document. Its efficacy can, however, be prevented if the vendor does not possess control over the thing sold,
22
in which case this legal fiction must
yield to reality.
The key word is control, not possession, of the land as petitioner would like us to believe. The Court has consistently held that:
23

. . . (I)n order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had
such control over the thing sold that . . . its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields
to reality the delivery has not been effected.
Considering that the deed of sale between the parties did not stipulate or infer otherwise, delivery was effected through the execution of said deed. The lot
sold had been placed under the control of petitioner; thus, the filing of the ejectment suit was subsequently done. It signified that its new owner intended to
obtain for itself and to terminate said occupants' actual possession thereof. Prior physical delivery or possession is not legally required and the execution of
the deed of sale is deemed equivalent to delivery.
24
This deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer to use
the document as proof of ownership. Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach of the warranty against eviction. Despite its protestation that its
acquisition of the lot was to enable it to set up a warehouse for its asbestos products and that failure to deliver actual possession thereof defeated this
purpose, still no breach of warranty against eviction can be appreciated because the facts of the case do not show that the requisites for such breach have
been satisfied. A breach of this warranty requires the concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and
(4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee.
25

In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the occupants of said lot, and not that it has been evicted therefrom. As correctly pointed out
by Respondent Court, the presence of lessees does not constitute an encumbrance of the land,
26
nor does it deprive petitioner of its control thereof.
We note, however, that petitioner's deprivation of ownership and control finally occurred when it failed and/or discontinued paying the amortizations on the
mortgage, causing the lot to be foreclosed and sold at public auction. But this deprivation is due to petitioner's fault, and not to any act attributable to the
vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is presumed, under the law, to be valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the payments it made to PNB is warranted under Article 2154 of the Code, solutio indebiti does not
apply in this case. This doctrine applies where: (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and
the person who received the payment, and (2) the payment is made through mistake, and not through liberality or some other cause.
27

In this case, petitioner was under obligation to pay the amortizations on the mortgage under the contract of sale and the deed of real estate mortgage. Under
the deed of sale (Exh. "2"),
28
both parties agreed to abide by any and all the requirements of PNB in connection with the real estate mortgage. Petitioner
was aware that the deed of mortgage (Exh. "C") made it solidarily and, therefore, primarily
29
liable for the mortgage obligation:
30

(e) The Mortgagor shall neither lease the mortgaged property. . . nor sell or dispose of the same in any manner, without the
written consent of the Mortgagee. However, if not withstanding this stipulation and during the existence of this mortgage, the
property herein mortgaged, or any portion thereof, is . . . sold, it shall be the obligation of the Mortgagor to impose as a
condition of the sale, alienation or encumbrance that the vendee, or the party in whose favor the alienation or encumbrance is
to be made, should take the property subject to the obligation of this mortgage in the same terms and condition under which it
is constituted, it being understood that the Mortgagor is not in any manner relieved of his obligation to the Mortgagee under
this mortgage by such sale, alienation or encumbrance; on the contrary both the vendor and the vendee, or the party in whose
favor the alienation or encumbrance is made shall be jointly and severally liable for said mortgage obligations. . . .
Therefore, it cannot be said that it did not have a duty to pay to PNB the amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a mistake because PNB disapproved its assumption of mortgage after it failed to submit the
necessary papers for the approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the land purchased, the payment of the loan by petitioner was a condition clearly imposed
by the contract of sale. This fact alone disproves petitioner's insistence that there was a "mistake" in payment. On the contrary, such payments were
necessary to protect its interest as a "the buyer(s) and new owner(s) of the lot."
The quasi-contract of solutio indebiti is one of the concrete manifestations of the ancient principle that no one shall enrich himself unjustly at the expense of
another.
31
But as shown earlier, the payment of the mortgage was an obligation petitioner assumed under the contract of sale. There is no unjust
enrichment where the transaction, as in this case, is quid pro quo, value for value.
All told, respondent Court did not commit any reversible error which would warrant the reversal of the assailed Decision.
WHEREFORE, the petition is hereby DENIED, and the assailed Decision is AFFIRMED.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-40195 May 29, 1987
VICTORIA R. VALLARTA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and THE HONORABLE JUDGE FRANCISCO LLAMAS, Pasay City Court, respondents.
Francisco G.H. Salva for petitioner.

CORTES, J .:
The petitioner seeks a reversal of the Court of Appeals decision dated December 13, 1974 affirming the Trial Court's judgment convicting her of estafa. We
denied the petition initially but granted a motion for reconsideration and gave the petition due course.
As found by the trial court and the Court of Appeals, Rosalinda Cruz, the private offended party, and accused Victoria Vallarta are long time friends and
business acquaintances. On November 20, 1968, Cruz entrusted to Victoria Vallarta seven pieces of jewelry. In December of the same year, Vallarta
decided to buy some items, exchanged one item with another, and issued a post-dated check in the amount of P5,000 dated January 30, 1969. Rosalinda
Cruz deposited said check with the bank. However, upon presentment, the check was dishonored and Cruz was informed that Vallarta's account had been
closed. Cruz apprised Vallarta of the dishonor and the latter promised to give another check. Later, Vallarta pleaded for more time. Still later, she started
avoiding Cruz. Hence, this criminal action was instituted.
Based on the foregoing facts, both the trial court and the Court of Appeals found Vallarta guilty beyond reasonable doubt of the crime of estafa.
WE affirm.
Petitioner is charged under Art. 315 (2) (d) as amended by Rep. Act No. 4885, of the Revised Penal Code, which penalizes any person who shall defraud
another "(b)y postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein
were not sufficient to cover the amount of the check."
By virtue of Rep. Act No. 4885, "(t)he failure of the drawer of the check to deposit the amount necessary to cover his check within three (3) days from receipt
of notice from the bank and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds" is deemed prima facie evidence of
deceit constituting false pretense or fraudulent act.
To constitute estafa under this provision the act of post-dating or issuing a check in payment of an obligation must be the efficient cause of defraudation, and
as such it should be either prior to, or simultaneous with the act of fraud. The offender must be able to obtain money or property from the offended party
because of the issuance of a check whether post-dated or not. That is, the latter would not have parted with his money or other property were it not for the
issuance of the check. likewise, the check should not be, issued in payment of a pre-existing obligation (People v. Lilius, 59 Phil. 339 [1933]).
In seeking acquittal, petitioner stresses that the transaction between her and Cruz was a "sale or return," perfected and consummated on November 20,
1968 when the seven pieces of jewelry were delivered. The check issued in December 1968 was therefore in payment of a pre-existing obligation. Thus,
even if it was dishonored, petitioner claims that she can only be held civilly liable, but not criminally liable under Art. 315 (2) (d), Revised Penal Code. She
also argues that at any rate, what prompted Cruz to deliver the jewelry was the social standing of petitioner Vallarta and not the postdated check.
She thus assigns as errors the finding of that Court a quo that the jewelries were entrusted on November 20, 1968, but the sale was perfected in December
1968, and the finding that there was deceit in the issuance of the postdated check.
In order to arrive at the proper characterization of the transaction between Vallarta and Cruz, that is, whether it was a "sale or return" or some other
transaction, it is necessary to determine the intention of the parties.
The following excerpts from the transcript of stenographic notes are significant:
I. Direct Examination of Rosalinda Cruz
Q: Now, what happened with that business transaction of yours with Mrs. Vallarta?
A: After that and after she finally agreed to buy two sets and changed the ruby ring with another ring, she
gave me postdated check; I waited for January 30, 1969. 1 deposited the check in the Security Bank. And
after that I knew (learned) that it was closed account (TSN, June 29, 1972, p. 9) (Emphasis supplied).
II. Cross-Examination of Rosalinda Cruz
Q: Now, you mentioned about certain jewelries in Exh. "A. Could you tell under your oath whether all the
jewelries listed here (Exh. "A") were taken by Mrs. Vallarta at one single instance?
A: Yes, Sir. It was on one (1) day when I entrusted them to her so she can select what she wants (Id at p.
22) (Emphasis supplied).
III. Cross-Examination of Rosalinda Cruz
COURT: But could you still recall or you cannot recall whether you agreed to reduce the cost to Five
Thousand Eight Hundred ( P5,800.00) Pesos?
A Yes, Sir. I agreed to reduce it to Five Thousand Eight Hundred (P5,800.00) Pesos, Sir, when I went to
see her in her house to finalize what jewelries she wanted (Id. at p. 26).
Note that Vallarta changed the ruby ring because it was not acceptable to her, and chose another ring. Likewise, the price to be paid for the jewelry was
finally agreed upon only in December 1968. Thus, there was a meeting of the minds between the parties as to the object of the contract and the
consideration therefore only in December 1968, the same time that the check was issued. The delivery made on November 20, 1968 was only for the
purpose of enabling Vallarta to select what jewelry she wanted.
Properly, then, the transaction entered into by Cruz and Vallarta was not a "sale or return." Rather, it was a "sale on approval " (also called " sale on
acceptance, " "sale on trial." or "sale on satisfaction" [CIVIL CODE, art. 1502]). In a "sale or return," the ownership passes to the buyer on delivery (CIVIL
CODE, art. 1502). (The subsequent return of the goods reverts ownership in the seller [CIVIL CODE, art. 1502]). Delivery, or tradition. as a mode of
acquiring ownership must be in consequence of a contract (CIVIL CODE, art. 712), e.g. sale.
If there was no meeting of the minds on November 20, 1968, then, as of that date, there was yet no contract of sale which could be the basis of delivery or
tradition. Thus, the delivery made on November 20, 1968 was not a delivery for purposes of transferring ownership the prestation incumbent on the
vendor. If ownership over the jewelry was not transmitted on that date, then it could have been transmitted only in December 1968, the date when the check
was issued. In which case, it was a "sale on approval" since ownership passed to the buyer. Vallarta, only when she signified her approval or acceptance to
the seller, Cruz, and the price was agreed upon.
Thus, when the check which later bounced was issued, it was not in payment of a pre-existing obligation. Instead the issuance of the check was
simultaneous with the transfer of ownership over the jewelry. But was the check issued simultaneously with the fraud?
Republic Act No. 4885, amending Art. 315 (2) (d), Revised Penal Code, establishes a prima facie evidence of deceit upon proof that the drawer of the check
failed to deposit the amount necessary to cover his check within three (3) days from receipt of notice of dishonor for lack or insufficiency of funds.
Admittedly, (1) the check was dishonored as Vallarta's account had been earlier closed; (2) she was notified by Cruz of the dishonor: and, (3) Vallarta failed
to make it good within three days. Deceit is therefore presumed.
Petitioner lays stress on her being an alumna of a reputable school, on her having a husband who is a bank manager, and on the big land-holdings of her
father, and argues that it was these qualifications and not the post-dated check which prompted Cruz to deliver the jewelry (Rollo, pp. 78-79: Motion for
Reconsideration, pp. 10-11). Hence, there was no deceit. It is thus suggested that a person of petitioner's social standing cannot be guilty of deceit, at least
in so far as issuing bouncing checks is concerned. This reasoning does not merit serious consideration. If accepted, it could result in a law that falls
unequally on persons depending on their social position.
Did Cruz part with the jewelry solely because she knew Vallarta to be rich, or did she do so because of the check issued to her? As the trial court and the
Court of Appeals found, petitioner was able to obtain the jewelry because she issued the check. Her failure to deposit the necessary amount to cover it
within three days from notice of dishonor created the prima facie presumption established by the amendatory law, Rep. Act No. 4885, which she failed to
rebut.
Petitioner, however, contends that Rep. Act No. 4885 is unconstitutional. She claims that even as the presumption of deceit established by Rep. Act No.
4885 is stated under the guise of being prima facie. It is in effect a conclusive presumption, because after the prosecution has proved that: (1) the check has
been dishonored; (2) notice has been given to the drawer; and, (3) three days from notice, the check is not funded or the obligation is not paid, the accused
is held guilty. Thus, it is alleged, the constitutional presumption of innocence is violated.
Contrary to petitioner's assertion, the presumption of deceit under Rep. Act No. 4885 is not conclusive. It is rebuttable. For instance, We ruled in the case of
People v. Villapando (56 Phil. 31 [1931]) that good faith is a defense to a charge of estafa by postdating a check, as when the drawer, foreseeing his inability
to pay the check at maturity, made an arrangement with his creditor as to the manner of payment of the debt.*
Moreover, it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be
overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome such
presumption of innocence" (People v. Mingoa, 92 Phil. 856 [1953] at 858-59, citing I COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS,
639-641). And the "legislature may enact that when certain facts have been proved they shall be prima facie evidence of the existence of the guilt of the
accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate fact presumed so that the inference
of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience" (People v.
Mingoa, supra. See also US v. Luling, 34 Phil. 725 [1916]).
There can be no doubt that the "postdating or issuing of a check in payment of an obligation when the offender had no funds in the bank, or his funds
deposited therein were not sufficient to cover the amount of the check," is a false pretense or a fraudulent act. It is so characterized by Art. 315 (2) (d),
Revised Penal Code. Republic Act No. 4885 does nothing more than limit the period within which the drawer/issuer must pay the creditor.
Petitioner also argues that Rep. Act No. 4885 violates the constitutional injunction against imprisonment for non-payment of debt. Ironically, she does not
question the constitutionality of Art. 315 (2) (d), Revised Penal Code, which defines the crime she is being accused of, and provides for its punishment. In
fact, she concedes the constitutionality of the latter statute. She further concedes that a person may be imprisoned for "criminal fraud" covered by Art. 315
(2) of the Revised Penal Code.
In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), this Court ruled that Rep. Act No. 4885 has not changed the rule established in Art.
315 (2) (d) prior to the amendment; that Republic Act No. 4885 merely established the prima facie evidence of deceit, and eliminated the requirement that
the drawer inform the payee that he had no funds in the bank or the funds deposited by him were not sufficient to cover the amount of the check. Thus, even
with the amendment introduced by Rep. Act No. 4885 it is still criminal fraud or deceit in the issuance of a check which is made punishable under the
Revised Penal Code, and not the non-payment of the debt.
Petitioner also assigns as error the denial by the trial court of her motion for reconsideration. Her motion was directed at the finding of the trial court that no
payments were made. Alleging that a check drawn by one Sison was given by petitioner to Cruz in payment of the rubber check, petitioner claims that had
her motion for reconsideration been granted, she would have called to the witness stand the Branch Manager of Security Bank and Trust Company, Pasay
City, where the check was allegedly deposited by Cruz, for said bank manager to Identify the owner-holder of the savings account to which the amount in
Sison's check had been credited (Brief for Petitioner, p. 46).
Granting that the bank manager's testimony would have been as alleged by petitioner, Our decision would remain. As correctly observed by both the trial
court and the Court of Appeals (Court of Appeals Decision, pp. 2-3), the payments petitioner allegedly made were not shown to have any relevance to the
obligation in question.
WHEREFORE, finding no error in the assailed decision of the Court of Appeals, the same is AFFIRMED. Costs against the petitioner.
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G.R. No. L-16394 December 17, 1966
JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners,
vs.
ROSA HERNANDEZ, respondent.
Manuel J. Serapio for petitioners..
J. T. de los Santos for respondent.
REYES, J.B.L., J .:
Appeal from the decision of the Court of Appeals in its Case CA-G.R. No. 20582-R, in effect reversing the decision of the Court of First Instance of Bulacan
in its Civil Case No. 1036.
The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned a 115,850-square meter parcel of land situated in barrio Balasing,
Sta. Maria, Bulacan, and covered by Transfer Certificate of Title No. T-3598. On 28 May 1954, they sold two (2) separate portions of the land for P11,000.00
to the herein respondent Rosa Hernandez. These portions were described in the deed of sale as follows:
Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria Perez, at Aurelio Perez; sa Timugan, sa lupang kasanib; sa
Silanganan, kay Mariano Flores at Emilio Ignacio; sa Kanluran, kay Cornelio Ignacio; Mayroong (12,500), m.c. humigit kumulang.
Bahaguing nasa gawing Silanganan Humahanga sa Hilagaan, sa kay Rosa Hernandez; sa Silanganan, kay Domingo Hernandez at
Antonio Hernandez; sa Timugan, sa Sta. Maria-Tigbi Road; at sa Kanluran, sa lupang kasanib (Jose Sta. Ana, Jr.), mayroong (26,500)
metros cuadrados, humigit kumulang.
After the sale (there were two other previous sales to different vendees of other portions of the land), the petitioners-spouses caused the preparation of a
subdivision plan, Psd-43187, was approved on 13 January 1955 by the Director of Lands. Rosa Hernandez, however, unlike the previous vendees, did not
conform to the plan and refused to execute an agreement of subdivision and partition for registration with the Register of Deeds of Bulacan; and she,
likewise, refused to vacate the areas that she had occupied. Instead, she caused the preparation of a different subdivision plan, which was approved by the
Director of Lands on 24 February 1955. This plan, Psd-42844, tallied with the areas that the defendant, Rosa Hernandez, had actually occupied.
On 28 February 1955, herein petitioners-spouses filed suit against respondent Rosa Hernandez in the Court of First Instance of Bulacan, claiming that said
defendant was occupying an excess of 17,000 square meters in area of what she had bought from them. Defendant Rosa Hernandez, on the other hand,
claimed that the alleged excess, was part of the areas that she bought.
The trial court observed:
The only question, therefore, to be determined by the Court is whether or not the plaintiffs had sold two portions without clear
boundaries but with exact areas (12,500 sq. m. and 26,000 sq. m.) at the rate of P.29 per square meter or, as defendant Rosa
Hernandez claimed, two portions, the areas of which were not definite but which were well defined on the land and with definite
boundaries and sold for the lump sum of P11,000.00.
Finding for the plaintiffs, the said court ordered the defendant, among other things, to vacate "the excess portions actually occupied by her and to confine her
occupation only to Lots 4-a and 4-b as shown in the plan, Exhibit E, of the plaintiffs . . .," referring to Psd-43187.
Not satisfied with the judgment, defendant Hernandez appealed to the Court of Appeals.
The Court of Appeals dismissed the complaint and declared Rosa Hernandez the owner of lots 4-a and 4-b in her plan, Psd-42844, upon the following
findings:
The contract between appellees and appellant (Exhibit D) provided for the sale of two separate portions of the same land for the single
consideration of P11,000.00. Appellee Jose Santa Ana, Jr. said the transaction was by a unit of measure or per square meter, and that
although the actual total purchase price of the two parcels of land was P11,300.00 at P0.29 per square meter the parties agreed to the
sale at the reduced price of P11,000.00. The appellant denied this claim of appellees. Gonzalo V. Ignacio, the notarial officer before the
contract of sale was executed, failed to corroborate Sta. Ana upon this point. Upon the contrary, Ignacio testified that appellant
complained to him and the appellees to the effect that the areas stated in the contract were less than the actual areas of the parcels of
land being sold and here we quote the notarial officer's own words:
"That the area stated in the document will not be the one to prevail but the one to prevail is the boundary of the land which you
already know." (p. 74, Innocencio).
Sta. Ana is the nephew of the appellant, and the former's assurance probably appeased the latter against insisting in the correction of
the areas stated in the contract of sale.
Two witnesses testified for the appellant. Jesus Policarpio divulged that the same parcels of land involved in this case were previously
offered to him by the appellees for the single purchase price of P12,000.00. Julio Hernandez stated that his sister, the herein appellant,
had offered P10,000.00 as against the appellees' price of P12,000.00, and that he was able to persuade the parties to meet halfway on
the price. Furthermore the previous conveyances made by the appellees for other portions of the same property (Exhibits B and C) are
also for lump sums.
The difference in area of 17,000 square meters is about one-half of the total area of the two parcels of land stated in the document, but
not for this alone may we infer gross mistake on the part of appellees. The appellees admit the lands in question were separated from
the rest of their property by a long and continuous "pilapil" or dike, and there is convincing proof to show that the bigger lot (Lot 4-a) was
wholly tenanted for appellees by Ciriaco Nicolas and Santiago Castillo and the smaller lot (Lot 4-b) was wholly tenanted for said
appellees by Gregorio Gatchalian. These facts support the theory that the two parcels of land sold to the appellant were identified by the
conspicuous boundaries and the extent or area each tenant used to till for the vendors. Again, appellees should not be heard to
complain about the deficiency in the area because as registered owners and possessors of the entire land since 1949 they can rightly
be presumed to have acquired a good estimate of the value and areas of the portions they subsequently sold.
The Court of Appeals concluded by applying to the case Article 1542 of the new Civil Code:
In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no
increase or decrease of the price, although there be greater or less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries,
which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be
bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and,
should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the
contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.
and declared Rosa Hernandez the owner of the whole of lots 4-a and 4-b of her own subdivision Plan Psd-42844, notwithstanding their increased area as
compared to that specified in the deed of sale.
In turn, the Sta. Ana spouses appealed to this Court, assigning the following errors:
The Court of Appeals committed a grave error of law when it departed from the accepted and usual course of judicial proceedings, by
disturbing the findings of fact of the trial court, made upon conflicting testimonies of the witnesses for the plaintiffs, now in the
petitioners, and the defendant, now the respondent, Rosa Hernandez.
The Court of Appeals committed a grave error of law when it held that the deed of sale, Exhibit D, was for a lump sum, despite the fact
that the boundaries given therein were not sufficiently certain and the boundaries indicated did not clearly identify the land, thereby
erroneously deciding a question of substance in a way not in accord with law and the applicable decisions of this Honorable Court.
On the face of the foregoing assignments of error and the petitioners' discussions thereabout, their position can be summarized as follows: that the Court of
Appeals erred in substituting its own findings of fact for that of the trial court's, without strong and cogent reasons for the substitution, contrary to the rule that
appellate courts shall not disturb the findings of fact of trial courts in the absence of such strong and cogent reasons; and that Article 1542 of the Civil Code
of the Philippines does not apply, allegedly because the boundaries, as shown in the deed of sale, are not definite.
In the first assignment of error, the petitioner spouses complain against the failure of the Court of Appeals to accept the findings of fact made by the Court of
First Instance. The credibility of witnesses and the weighing of conflicting evidence are matters within the exclusive authority of the Court of Appeals, and it
is not necessarily bound by the conclusions of the trial court. Both the Judiciary Act (R.A. 296, section 29) and the Rules of Court (Rule 45, section 2) only
allow a review of decisions of the Court of Appeals on questions of law; and numerous decisions of this Court have invariably and repeatedly held that
findings of fact by the Court of Appeals are conclusive and not reviewable by the Supreme Court (Galang vs. Court of Appeals, L-17248, 29 January 1962;
Fonacier vs. Court of Appeals, 96 Phil. 418, 421; and cases therein cited; Onglengco vs. Ozaeta, 70 Phil. 43; Nazareno vs. Magwagi, 71 Phil. 101). Barring,
therefore, a showing that the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for this Court is not expected or required to examine and contrast the oral and documentary evidence
submitted by the parties. As pointed out by former Chief Justice Moran in his Comments on the Rules of Court (1963 Ed., Vol. 2, p. 412), the law creating the
Court of Appeals was intended mainly to take away from the Supreme Court the work of examining the evidence, and confine its task for the determination
of questions which do not call for the reading and study of transcripts containing the testimony of witnesses.
The first assignment of error must, therefore, be overruled. We now turn to the second.
Despite the incontestable fact that the deed of sale in favor of Rosa Hernandez recites a price in a lump sum (P11,000.00) for both lots (Annex "C",
Complaint, Rec. on App., p. 21), appellants insist that the recited area should be taken as controlling. They combat the application of Article 1542 of the Civil
Code, on the ground that the boundaries given in the deed are indefinite. They point out that the southern boundary of the small parcel is merely given as
"lupang kasanib" and that the same occurs with the western boundary of the bigger lot, which is recited as "lupang kasanib (Jose Sta. Ana, Jr.)". The Court
of Appeals, however, found as a fact that
the two parcels of land sold to appellant (i.e., appellee herein, Rosa Hernandez) were identified by the conspicuous boundaries.
(Emphasis supplied)
consisting in a long and continuous pilapil or dike that separated the lands in question from the rest of the property. On the basis of such findings, that can
not be questioned at this stage, for reasons already shown, it is unquestionable that the sale made was of a definite and identified tract, a corpus certum,
that obligated the vendors to deliver to the buyer all the land within the boundaries, irrespective of whether its real area should be greater or smaller than
what is recited in the deed (Goyena vs. Tambunting, 1 Phil. 490; Teran vs. Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil. 599; Mondragon vs. Santos,
87 Phil. 471). And this is particularly true where, as in the case now before this Court, the area given is qualified to be approximate only ("humigit kumulang",
i.e., more or less Rec. on App., p. 22).
To hold the buyer to no more than the area recited on the deed, it must be made clear therein that the sale was made by unit of measure at a definite price
for each unit.
If the defendant intended to buy by the meter be should have so stated in the contract (Goyena vs. Tambunting, supra).
The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish Civil Code (copied verbatim in our Article 1542) is highly persuasive that
as between the absence of a recital of a given price per unit of measurement, and the specification of the total area sold, the former must prevail and
determines the applicability of the norms concerning sales for a lump sum.
La venta a cuerpo cierto indudablemente se verifica cuando en el contrato no solo no es precisado el precio singular por unidad de
medida, sino que tampoco son indicadas los dimensiones globales bales del inmueble, pero tambien se verifica cuando aun ng
habiendo sido indicado un precio singular por unidad de medida, sin embargo es especificada la dimension total del inmueble, en cuyo
ultimo caso entre los dos indices en contraste, constituido uno por la falta de un precio singular por unidad de medida, y otro por la
concrecion de las dimensiones globales del unmueble, la Ley da prevalencia al mero y presume que aquella individualizacion no habia
tenido para las partes valor esencial, que solo constituia una superabundancia, y no significa que las partes hayan convenido aquel
precio global solo en cuanto el inmueble tuviese efectivamente aquellas dimensiones totales, siendo de estimar que esta es una
presuncion absoluta, contra la cual ni el comprador ni el vendedor pueden articular prueba contraria.
Por tanto, ni el comprador ni el vendedor pueden pretender una disminucicion o, respectivamente un suplemento de precio, cuando las
dimensiones globales del unmueble resulten despues mayores o menores de las indicadas en el contrato, aunque aduzcan que solo en
tanto han convenido el aquel precio en cuanto creian que las dimensiones de la cosa fueran las precisadas en el contrato. (Tribunal
Supreme de Espaa, Sent. de 26 Junio 1956; Rep. Jurisp. Aranzadi, 2.729) (Emphasis supplied)
The Civil Code's rule as to sales "a cuerpo cierto" was not modified by Act 496, section 58, prohibiting the issuance of a certificate of title to a grantee of part
of a registered tract until a subdivision plan and technical description are duly approved by the Director of Lands, and authorizing only the entry of a
memorandum on the grantor's certificate of title in default of such plan. The latter provision is purely a procedural directive to Registers of Deeds that does
not attempt to govern the rights of vendor and vendee inter se, that remain controlled by the Civil Code of the Philippines. It does not even bar the
registration of the contract itself to bind the land.
WHEREFORE, the decision of the Court of Appeals, in its case No. 20582-R, is hereby affirmed. Costs against the appellants, Jose Santa Ana, Jr. and
Lourdes Sto. Domingo.
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G.R. No. L-29972 January 26, 1976
ROSARIO CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON INFANTE, respondents.

MAKASIAR, J .
Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five) dated October 30, 1968, reversing its decision of November 2,
1967 (Fifth Division), and its resolution of December 6, 1968 denying petitioner's motion for reconsideration.
The dispositive part of the challenged resolution reads:
Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is hereby granted and the decision of
November 2, 1967, is hereby annulled and set aside. Another judgement shall be entered affirming in toto that of the court a
quo, dated January 20, 1965, which dismisses the plaintiff's complaint and defendant's counterclaim.
Without costs.
The facts of the case as follows:
Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the owner of the parcel of land herein involve with improvements
situated at 179 V. Agan St., San Juan, Rizal, having an area of some one hundred ninety-five (195) square meters, more or less, covered by TCT No. 5040
and subject to mortgage in favor of the Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor of
respondent Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.
Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot from Poncio (Poncio's Answer, p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments due on the mortgage, approached petitioner one day and offered to sell to the latter the said lot,
excluding the house wherein respondent lived. Petitioner accepted the offer and proposed the price of P9.50 per square meter. Respondent Poncio, after
having secured the consent of his wife and parents, accepted the price proposed by petitioner, on the condition that from the purchase price would come the
money to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the consent of the President thereof for her to pay the arrears
on the mortgage and to continue the payment of the installments as they fall due. The amount in arrears reached a total sum of P247.26. But because
respondent Poncio had previously told her that the money, needed was only P200.00, only the latter amount was brought by petitioner constraining
respondent Jose Poncio to withdraw the sum of P47.00 from his bank deposit with Republic Savings Bank. But the next day, petitioner refunded to Poncio
the sum of P47.00.
On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and executed a document in the Batanes dialect, which,
translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio can start living on the lot sold by him to me, Rosario Carbonell, until after one
year during which time he will not pa anything. Then if after said one can he could not find an place where to move his house,
he could still continue occupying the site but he should pay a rent that man, be agreed.
(Sgd) JOSE PONCIO
(Sgd.) ROSARIO
CARBONELL
(Sgd) CONSTANCIO
MEONADA
Witness
(Pp. 6-7 rec. on appeal).
Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of sale, which she brought to respondent
Poncio together with the amount of some P400.00, the balance she still had to pay in addition to her assuming the mortgaged obligation to Republic Savings
Bank.
Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he could not proceed any more with the sale, because he had
already given the lot to respondent Emma Infants; and that he could not withdraw from his deal with respondent Mrs. Infante, even if he were to go to jail.
Petitioner then sought to contact respondent Mrs. Infante but the latter refused to see her.
On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the land in question with the Office of the Register of Deeds of
Rizal. Atty. Garcia actually sent a letter of inquiry to the Register of Deeds and demand letters to private respondents Jose Poncio and Emma Infante.
In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante improved her offer and he agreed to sell the land and its
improvements to her for P3,535.00" (pp. 38-40, ROA).
In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed bound himself to sell to his corespondent Emma Infante, the
property for the sum of P2,357.52, with respondent Emma Infante still assuming the existing mortgage debt in favor of Republic Savings Bank in the amount
of P1,177.48. Emma Infante lives just behind the houses of Poncio and Rosario Carbonell.
On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of respondent Mrs. Infante in the total sum of P3,554.00 and on the
same date, the latter paid Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot was eventually discharged.
Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty. Garcia prepared an adverse claim for petitioner, who signed
and swore to an registered the same on February 8, 1955.
The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955. As a consequence thereof, a Transfer Certificate of Title was
issued to her but with the annotation of the adverse claim of petitioner Rosario Carbonell.
Respondent Emma Infante took immediate possession of the lot involved, covered the same with 500 cubic meters of garden soil and built therein a wall and
gate, spending the sum of P1,500.00. She further contracted the services of an architect to build a house; but the construction of the same started only in
1959 years after the litigation actually began and during its pendency. Respondent Mrs. Infante spent for the house the total amount of P11,929.00.
On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint against private respondents, praying that she be declared
the lawful owner of the questioned parcel of land; that the subsequent sale to respondents Ramon R. Infante and Emma L. Infante be declared null and void,
and that respondent Jose Poncio be ordered to execute the corresponding deed of conveyance of said land in her favor and for damages and attorney's fees
(pp. 1-7, rec. on appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground, among others, that petitioner's claim is unenforceable under the Statute of Frauds, the
alleged sale in her favor not being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.); and when said motion was denied without
prejudice to passing on the question raised therein when the case would be tried on the merits (p. 17, ROA in the C.A.), respondents filed separate answers,
reiterating the grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of the sale of the land in question to her by respondent Poncio, part of which evidence was the
agreement written in the Batanes dialect aforementioned, respondent Infantes objected to the presentation by petitioner of parole evidence to prove the
alleged sale between her and respondent Poncio. In its order of April 26, 1966, the trial court sustained the objection and dismissed the complaint on the
ground that the memorandum presented by petitioner to prove said sale does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-11231) which ruled in a decision dated May 12, 1958, that the
Statute of Frauds, being applicable only to executory contracts, does not apply to the alleged sale between petitioner and respondent Poncio, which
petitioner claimed to have been partially performed, so that petitioner is entitled to establish by parole evidence "the truth of this allegation, as well as the
contract itself." The order appealed from was thus reversed, and the case remanded to the court a quo for further proceedings (pp. 26-49, ROA in the C.A.).
After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the second sale by respondent Jose Poncio to his co-respondents
Ramon Infante and Emma Infante of the land in question null and void and ordering respondent Poncio to execute the proper deed of conveyance of said
land in favor of petitioner after compliance by the latter of her covenants under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial to adduce evidence for the proper implementation of the
court's decision in case it would be affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by petitioner for being premature (pp. 61-64,
ROA in the C.A.). Before their motion for re-trial could be resolved, respondent Infantes, this time through their former counsel, filed another motion for new
trial, claiming that the decision of the trial court is contrary to the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was also opposed by
petitioner (pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the respondents introduced additional evidence consisting
principally of the cost of improvements they introduced on the land in question (p. 9, ROA in the C.A.).
After the re-hearing, the trial court rendered a decision, reversing its decision of December 5, 1962 on the ground that the claim of the respondents was
superior to the claim of petitioner, and dismissing the complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner Rosario Carbonell appealed to
the respondent Court of Appeals (p. 96, ROA in the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking
through Justice Magno Gatmaitan), rendered judgment reversing the decision of the trial court, declaring petitioner therein, to have a superior right to the
land in question, and condemning the defendant Infantes to reconvey to petitioner after her reimbursement to them of the sum of P3,000.00 plus legal
interest, the land in question and all its improvements (Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision and acting on the motion for reconsideration, the Appellate Court, three Justices (Villamor,
Esguerra and Nolasco) of Special Division of Five, granted said motion, annulled and set aside its decision of November 2, 1967, and entered another
judgment affirming in toto the decision of the court a quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).
Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of Five, which motion was denied by Minute Resolution of December
6, 1968 (but with Justices Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition].
Hence, this appeal by certiorari.
Article 1544, New Civil Code, which is decisive of this case, recites:
If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have
first taken possession thereof in good faith, if it should movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in
the absence thereof, to the person who presents the oldest title, provided there is good faith (emphasis supplied).
It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in good faith of personal or real
property, the second paragraph directs that ownership of immovable property should be recognized in favor of one "who in good faith first recorded" his right.
Under the first and third paragraph, good faith must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405; Soriano, et al.
vs. Magale, et al., 8 SCRA 489).
If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case at bar, prior registration in good faith is a pre-
condition to superior title.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of Poncio was still in his name solely
encumbered by bank mortgage duly annotated thereon. Carbonell was not aware and she could not have been aware of any sale of Infante as there
was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist
when she recorded her adverse claim four (4) days prior to the registration of Infantes's deed of sale. Carbonell's good faith did not cease after Poncio told
her on January 31, 1955 of his second sale of the same lot to Infante. Because of that information, Carbonell wanted an audience with Infante, which desire
underscores Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of a good Christian and good neighbor, Infante snubbed
Carbonell like a leper and refused to see her. So Carbonell did the next best thing to protect her right she registered her adversed claim on February 8,
1955. Under the circumstances, this recording of her adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad
faith when she registered her deed of sale four (4) days later on February 12, 1955.
Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts, the vital significance and evidenciary
effect of which the respondent Court of Appeals either overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he sold the lot to Infante but several days before
Infante registered her deed of sale. This indicates that Infante knew from Poncio and from the bank of the prior sale of the lot by Poncio to Carbonell.
Ordinarily, one will not refuse to see a neighbor. Infante lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only mean that she
did not want to listen to Carbonell's story that she (Carbonell) had previously bought the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving deposit passbook Exhibit "1" Infantes] and Poncio's copy of
the mortgage contract, when Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed the balance of his mortgaged indebtedness
to the bank, which in the normal course of business must have necessarily informed Infante about the said assumption by Carbonell of the mortgage
indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of Poncio to the Bank. Infante naturally must have demanded from Poncio
the delivery to her of his mortgage passbook as well as Poncio's mortgage contract so that the fact of full payment of his bank mortgage will be entered
therein; and Poncio, as well as the bank, must have inevitably informed her that said mortgage passbook could not be given to her because it was already
delivered to Carbonell.
If Poncio was still in possession of the mortgage passbook and his copy of the mortgage contract at the time he executed a deed of sale in favor of the
Infantes and when the Infantes redeemed his mortgage indebtedness from the bank, Poncio would have surrendered his mortgage passbook and his copy
of the mortgage contract to the Infantes, who could have presented the same as exhibits during the trial, in much the same way that the Infantes were able
to present as evidence Exhibit "1" Infantes, Poncio's savings deposit passbook, of which Poncio necessarily remained in possession as the said deposit
passbook was never involved in the contract of sale with assumption of mortgage. Said savings deposit passbook merely proves that Poncio had to
withdraw P47.26, which amount was tided to the sum of P200.00 paid by Carbonell for Poncio's amortization arrearages in favor of the bank on January 27,
1955; because Carbonell on that day brought with her only P200.00, as Poncio told her that was the amount of his arrearages to the bank. But the next day
Carbonell refunded to Poncio the sum of P47.26.
(3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage passbook was already in possession of
Carbonell, should have compelled Infante to inquire from Poncio why he was no longer in possession of the mortgage passbook and from Carbonell why she
was in possession of the same (Paglago, et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did not bother
anymore to make such injury , w because in the ordinary course of business the bank must have told her that Poncio already sold the lot to Carbonell who
thereby assumed the mortgage indebtedness of Poncio and to whom Poncio delivered his mortgage passbook. Hoping to give a semblance of truth to her
pretended good faith, Infante snubbed Carbonell's request to talk to her about the prior sale to her b Poncio of the lot. As aforestated, this is not the attitude
expected of a good neighbor imbued with Christian charity and good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly annotated on Poncio's title, four [4] days before Infante registered on
February 12, 1955 her deed of sale executed on February 2, 1955. Here she was again on notice of the prior sale to Carbonell. Such registration of adverse
claim is valid and effective (Jovellanos vs. Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to
buy the lot at P15.00 per square meter, which offers he rejected as he believed that his lot is worth at least P20.00 per square meter. It is therefore logical to
presume that Infante was told by Poncio and consequently knew of the offer of Carbonell which fact likewise should have put her on her guard and should
have compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell.
As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and
Emma Infante (1-11231, May 12, 1958), Poncio alleged in his answer:
... that he had consistently turned down several offers, made by plaintiff, to buy the land in question, at P15 a square meter,
for he believes that it is worth not less than P20 a square meter; that Mrs. Infante, likewise, tried to buy the land at P15 a
square meter; that, on or about January 27, 1955, Poncio was advised by plaintiff that should she decide to buy the property
at P20 a square meter, she would allow him to remain in the property for one year; that plaintiff then induced Poncio to sign a
document, copy of which if probably the one appended to the second amended complaint; that Poncio signed it 'relying upon
the statement of the plaintiff that the document was a permit for him to remain in the premises in the event defendant decided
to sell the property to the plaintiff at P20.00 a square meter'; that on January 30, 1955, Mrs. Infante improved her offer and
agreed to sell the land and its improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell his property, worth
at least P4,000, for the paltry sum P1,177.48, the amount of his obligation to the Republic Saving s Bank; and that plaintiff's
action is barred by the Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).
II
EXISTENCE OF THE PRIOR SALE TO CARBONELL
DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private document Exhibit "A" executed by Poncio and Carbonell and
witnessed by Constancio Meonada captioned "Contract for One-half Lot which I Bought from Jose Poncio," was not such a memorandum in writing within
the purview of the Statute of Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when he stated that "the memorandum in
question merely states that Poncio is allowed to stay in the property which he had sold to the plaintiff. There is no mention of the reconsideration, a
description of the property and such other essential elements of the contract of sale. There is nothing in the memorandum which would tend to show even in
the slightest manner that it was intended to be an evidence of contract sale. On the contrary, from the terms of the memorandum, it tends to show that the
sale of the property in favor of the plaintiff is already an accomplished act. By the very contents of the memorandum itself, it cannot therefore, be considered
to be the memorandum which would show that a sale has been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis supplied). As found by the
trial court, to repeat the said memorandum states "that Poncio is allowed to stay in the property which he had sold to the plaintiff ..., it tends to show that the
sale of the property in favor of the plaintiff is already an accomplished act..."
(2) When the said order was appealed to the Supreme Court by Carbonell in the previous case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and
Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a unanimous Court, reversed the aforesaid order of the trial court
dismissing the complaint, holding that because the complaint alleges and the plaintiff claims that the contract of sale was partly performed, the same is
removed from the application of the Statute of Frauds and Carbonell should be allowed to establish by parol evidence the truth of her allegation of partial
performance of the contract of sale, and further stated:
Apart from the foregoing, there are in the case at bar several circumstances indicating that plaintiff's claim might not be
entirely devoid of factual basis. Thus, for instance, Poncio admitted in his answer that plaintiff had offered several times to
purchase his land.
Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect, which, according to plaintiff's
uncontradicted evidence, is the one spoken by Poncio, he being a native of said region. Exhibit A states that Poncio would
stay in the land sold by him to plaintiff for one year, from January 27, 1955, free of charge, and that, if he cannot find a place
where to transfer his house thereon, he may remain upon. Incidentally, the allegation in Poncio's answer to the effect that he
signed Exhibit A under the belief that it "was a permit for him to remain in the premises in the" that "he decided to sell the
property" to the plaintiff at P20 a sq. m." is, on its face, somewhat difficult to believe. Indeed, if he had not decided as yet to
sell the land to plaintiff, who had never increased her offer of P15 a square meter, there was no reason for Poncio to get said
permit from her. Upon the other hand, if plaintiff intended to mislead Poncio, she would have caused Exhibit A to be drafted,
probably, in English , instead of taking the trouble of seeing to it that it was written precisely in his native dialect, the Batanes.
Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign document without
reading its contents, apart from the fact that Meonada had read Exhibit A to him and given him a copy thereof, before he
signed thereon, according to Meonada's uncontradicted testimony.
Then, also, defendants say in their brief:
The only allegation in plaintiff's complaint that bears any relation to her claim that there has been partial
performance of the supposed contract of sale, is the notation of the sum of P247.26 in the bank book of
defendant Jose Poncio. The noting or jotting down of the sum of P247.26 in the bank book of Jose Poncio
does not prove the fact that the said amount was the purchase price of the property in question. For all
we knew, the sum of P247.26 which plaintiff claims to have paid to the Republic Savings Bank for the
account of the defendant, assuming that the money paid to the Republic Savings Bank came from the
plaintiff, was the result of some usurious loan or accomodation, rather than earnest money or part
payment of the land. Neither is it competent or satisfactory evidence to prove the conveyance of the land
in question the fact that the bank book account of Jose Poncio happens to be in the possession of the
plaintiff. (Defendants-Appellees' brief, pp. 25-26).
How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether there is any relation between the
P247.26 entry therein and the partial payment of P247.26 allegedly made by plaintiff to Poncio on account of the price of his
land, if we do not allow the plaintiff to explain it on the witness stand? Without expressing any opinion on the merits of
plaintiff's claim, it is clear, therefore, that she is entitled , legally as well as from the viewpoint of equity, to an opportunity to
introduce parol evidence in support of the allegations of her second amended complaint. (pp. 46-49, ROA, emphasis
supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the Infantes and ordering Poncio to execute a deed of conveyance in
favor of Carbonell, the trial judge found:
... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that the sale of the parcel of land in
question by the defendant Poncio in favor of the plaintiff was covered therein and that the said Exh. "a' was also executed to
allow the defendant to continue staying in the premises for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by
him to me' and having been written originally in a dialect well understood by the defendant Poncio, he signed the said Exh. 'A'
with a full knowledge and consciousness of the terms and consequences thereof. This therefore, corroborates the testimony
of the plaintiff Carbonell that the sale of the land was made by Poncio. It is further pointed out that there was a partial
performance of the verbal sale executed by Poncio in favor of the plaintiff, when the latter paid P247.26 to the Republic
Savings Bank on account of Poncio's mortgage indebtedness. Finally, the possession by the plaintiff of the defendant
Poncio's passbook of the Republic Savings Bank also adds credibility to her testimony. The defendant contends on the other
hand that the testimony of the plaintiff, as well as her witnesses, regarding the sale of the land made by Poncio in favor of the
plaintiff is inadmissible under the provision of the Statute of Fraud based on the argument that the note Exh. "A" is not the
note or memorandum referred to in the to in the Statute of Fraud. The defendants argue that Exh. "A" fails to comply with the
requirements of the Statute of Fraud to qualify it as the note or memorandum referred to therein and open the way for the
presentation of parole evidence to prove the fact contained in the note or memorandum. The defendant argues that there is
even no description of the lot referred to in the note, especially when the note refers to only one half lot. With respect to the
latter argument of the Exhibit 'A', the court has arrived at the conclusion that there is a sufficient description of the lot referred
to in Exh. 'A' as none other than the parcel of land occupied by the defendant Poncio and where he has his improvements
erected. The Identity of the parcel of land involved herein is sufficiently established by the contents of the note Exh. "A". For a
while, this court had that similar impression but after a more and thorough consideration of the context in Exh. 'A' and for the
reasons stated above, the Court has arrived at the conclusion stated earlier (pp. 52-54, ROA, emphasis supplied).
(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965 another decision dismissing the complaint, although he found
1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel of land with an area of 195 square
meters, more or less, covered by TCT No. 5040 of the Province of Rizal, located at San Juan del Monte, Rizal, for the price of
P6.50 per square meter;
2. That the purchase made by the plaintiff was not reduced to writing except for a short note or memorandum Exh. A, which
also recited that the defendant Poncio would be allowed to continue his stay in the premises, among other things, ... (pp. 91-
92, ROA, emphasis supplied).
From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that his legal conclusion is that it is not sufficient to transfer
ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals composed of Justices Esguerra (now Associate Justice of the
Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:
... the testimony of Rosario Carbonell not having at all been attempted to be disproved by defendants, particularly Jose
Poncio, and corroborated as it is by the private document in Batanes dialect, Exhibit A, the testimony being to the effect that
between herself and Jose there had been celebrated a sale of the property excluding the house for the price of P9.50 per
square meter, so much so that on faith of that, Rosario had advanced the sum of P247.26 and binding herself to pay unto
Jose the balance of the purchase price after deducting the indebtedness to the Bank and since the wording of Exhibit A, the
private document goes so far as to describe their transaction as one of sale, already consummated between them, note the
part tense used in the phrase, "the lot sold by him to me" and going so far even as to state that from that day onwards, vendor
would continue to live therein, for one year, 'during which time he will not pay anything' this can only mean that between
Rosario and Jose, there had been a true contract of sale, consummated by delivery constitutum possession, Art. 1500, New
Civil Code; vendor's possession having become converted from then on, as a mere tenant of vendee, with the special
privilege of not paying rental for one year, it is true that the sale by Jose Poncio to Rosario Carbonell corroborated
documentarily only by Exhibit A could not have been registered at all, but it was a valid contract nonetheless, since under our
law, a contract sale is consensual, perfected by mere consent, Couto v. Cortes, 8 Phil 459, so much so that under the New
Civil Code, while a sale of an immovable is ordered to be reduced to a public document, Art. 1358, that mandate does not
render an oral sale of realty invalid, but merely incapable of proof, where still executory and action is brought and resisted for
its performance, 1403, par. 2, 3; but where already wholly or partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further demonstrate is presented and admitted as the case was here, then the
oral sale becomes perfectly good, and becomes a good cause of action not only to reduce it to the form of a public document,
but even to enforce the contract in its entirety, Art. 1357; and thus it is that what we now have is a case wherein on the one
hand Rosario Carbonell has proved that she had an anterior sale, celebrated in her favor on 27 January, 1955, Exhibit A,
annotated as an adverse claim on 8 February, 1955, and on other, a sale is due form in favor of Emma L. Infante on 2
February, 1955, Exhibit 3-Infante, and registered in due form with title unto her issued on 12 February, 1955; the vital question
must now come on which of these two sales should prevail; ... (pp. 74-76, rec., emphasis supplied).
(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice Esguerra (now a member of this Court), concurred in by Justices
Villamor and Nolasco, constituting the majority of a Special Division of Five, the Court of Appeals, upon motion of the Infantes, while reversing the decision
of November 2, 1967 and affirming the decision of the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence and
genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did not consider the same as satisfying "the essential elements of
a contract of sale," because it "neither specifically describes the property and its boundaries, nor mention its certificate of title number, nor states the price
certain to be paid, or contrary to the express mandate of Articles 1458 and 1475 of the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision of November 2, 1967 as well as his findings of facts therein,
and reiterated that the private memorandum Exhibit "A", is a perfected sale, as a sale is consensual and consummated by mere consent, and is binding on
and effective between the parties. This statement of the principle is correct [pp. 89-92, rec.].
III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE
IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank for failure on the part of Poncio to pay the amortizations
thereon. To forestall the foreclosure and at the same time to realize some money from his mortgaged lot, Poncio agreed to sell the same to Carbonell at
P9.50 per square meter, on condition that Carbonell [1] should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in the amount of P247.26 to the
bank; and [2] should assume his mortgage indebtedness. The bank president agreed to the said sale with assumption of mortgage in favor of Carbonell an
Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank because that was the amount that
Poncio told her as his arrearages and Poncio advanced the sum of P47.26, which amount was refunded to him by Carbonell the following day. This
conveyance was confirmed that same day, January 27, 1955, by the private document, Exhibit "A", which was prepared in the Batanes dialect by the witness
Constancio Meonada, who is also from Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given the right to continue staying on the land without paying any rental for one year,
after which he should pay rent if he could not still find a place to transfer his house. All these terms are part of the consideration of the sale to Carbonell.
It is evident therefore that there was ample consideration, and not merely the sum of P200.00, for the sale of Poncio to Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to Carbonell and told Carbonell, who confronted him about it,
that he would not withdraw from his deal with Infante even if he is sent to jail The victim, therefore, "of injustice and outrage is the widow Carbonell and not
the Infantes, who without moral compunction exploited the greed and treacherous nature of Poncio, who, for love of money and without remorse of
conscience, dishonored his own plighted word to Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante from the time she enticed Poncio to dishonor his contract with
Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a much higher price than the price for which he sold the same to Carbonell. Being
guilty of bad faith, both in taking physical possession of the lot and in recording their deed of sale, the Infantes cannot recover the value of the improvements
they introduced in the lot. And after the filing by Carbonell of the complaint in June, 1955, the Infantes had less justification to erect a building thereon since
their title to said lot is seriously disputed by Carbonell on the basis of a prior sale to her.
With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief that it was a permit for him to remain in the premises in ease he
decides to sell the property to Carbonell at P20.00 per square meter, the observation of the Supreme Court through Mr. Chief Justice Concepcion in G.R.
No. L-11231, supra, bears repeating:
... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the belief that it 'was a permit for
him to remain in the premises in the event that 'he decided to sell the property' to the plaintiff at P20.00 a sq. m is, on its face,
somewhat difficult to believe. Indeed, if he had not decided as yet to sell that land to plaintiff, who had never increased her
offer of P15 a square meter, there as no reason for Poncio to get said permit from her. Upon the they if plaintiff intended to
mislead Poncio, she would have Exhibit A to be drafted, probably, in English, instead of taking the trouble of seeing to it that it
was written precisely in his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither
illiterate nor so ignorant as to sign a document without reading its contents, apart from the fact that Meonada had read Exhibit
A to him-and given him a copy thereof, before he signed thereon, according to Meonada's uncontradicted testimony. (pp. 46-
47, ROA).
As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated in his dissent from the resolution of the majority of the
Special Division. of Five on October 30, 1968, Exhibit A, the private document in the Batanes dialect, is a valid contract of sale between the parties, since
sale is a consensual contract and is perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all between the parties and
accords to the vendee the right to compel the vendor to execute the proper public document As a matter of fact, Exhibit A, while merely a private document,
can be fully or partially performed, to it from the operation of the statute of frauds. Being a all consensual contract, Exhibit A effectively transferred the
possession of the lot to the vendee Carbonell by constitutum possessorium (Article 1500, New Civil Code); because thereunder the vendor Poncio continued
to retain physical possession of the lot as tenant of the vendee and no longer as knew thereof. More than just the signing of Exhibit A by Poncio and
Carbonell with Constancio Meonada as witness to fact the contract of sale, the transition was further confirmed when Poncio agreed to the actual payment
by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and by his consequent delivery of his own mortgage passbook to Carbonell. If
he remained owner and mortgagor, Poncio would not have surrendered his mortgage passbook to' Carbonell.
IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as the subject matter of the sale, was correctly disposed of in the
first decision of the trial court of December 5, 1962, thus: "The defendant argues that there is even no description of the lot referred to in the note (or
memorandum), especially when the note refers to only one-half lot. With respect to the latter argument of the defendant, plaintiff points out that one- half lot
was mentioned in Exhibit 'A' because the original description carried in the title states that it was formerly part of a bigger lot and only segregated later. The
explanation is tenable, in (sic) considering the time value of the contents of Exh. 'A', the court has arrived at the conclusion that there is sufficient description
of the lot referred to in Exh. As none other than the parcel of lot occupied by the defendant Poncio and where he has his improvements erected. The Identity
of the parcel of land involved herein is sufficiently established by the contents of the note Exh. 'A'. For a while, this court had that similar impression but after
a more and through consideration of the context in Exh. 'A' and for the reasons stated above, the court has arrived to (sic) the conclusion stated earlier" (pp.
53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the lot of his cousin Carbonell and likewise mortgaged by him to
the Republic Savings Bank. The transaction therefore between Poncio and Carbonell can only refer and does refer to the lot involved herein. If Poncio had
another lot to remove his house, Exhibit A would not have stipulated to allow him to stay in the sold lot without paying any rent for one year and thereafter to
pay rental in case he cannot find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must however refund to respondents Infantes the amount of P1,500.00, which the Infantes
paid to the Republic Savings Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their rights to the improvements they introduced op the disputed lot are governed by Articles 546
and 547 of the New Civil Code. Their expenses consisting of P1,500.00 for draining the property, filling it with 500 cubic meters of garden soil, building a wall
around it and installing a gate and P11,929.00 for erecting a b ' bungalow thereon, are useful expenditures, for they add to the value of the property (Aringo
vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45).
Under the second paragraph of Article 546, the possessor in good faith can retain the useful improvements unless the person who defeated him in his
possession refunds him the amount of such useful expenses or pay him the increased value the land may have acquired by reason thereof. Under Article
547, the possessor in good faith has also the right to remove the useful improvements if such removal can be done without damage to the land, unless the
person with the superior right elects to pay for the useful improvements or reimburse the expenses therefor under paragraph 2 of Article 546. These
provisions seem to imply that the possessor in bad faith has neither the right of retention of useful improvements nor the right to a refund for useful
expenses.
But, if the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury or mere pleasure only by paying the value
thereof at the time he enters into possession (Article 549 NCC), as a matter of equity, the Infantes, although possessors in bad faith, should be allowed to
remove the aforesaid improvements, unless petitioner Carbonell chooses to pay for their value at the time the Infantes introduced said useful improvements
in 1955 and 1959. The Infantes cannot claim reimbursement for the current value of the said useful improvements; because they have been enjoying such
improvements for about two decades without paying any rent on the land and during which period herein petitioner Carbonell was deprived of its possession
and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED;
PETITIONER ROSARIO CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS HEREBY
DIRECTED TO REIMBURSE TO PRIVATE RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00) WITHIN
THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL
TRANSFER CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES COVERING THE DISPUTED LOT,
WHICH CANCELLED TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER
CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER TO THE
INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE LOT WITHIN THREE (3)
MONTHS FROM THE FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL ELECTS TO ACQUIRE THE SAME AND
PAYS THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00) WITHIN THREE (3) MONTHS
FROM THE FINALITY OF THIS DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE AFORESTATED
PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH THE
RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF
THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. L-2397 August 9, 1950
TOMASA QUIMSON and MARCOS SANTOS, petitioners,
vs.
FRANCISCO ROSETE, respondent.
Marcelino Lontok for petitioners.
Ignacio Mangosing for respondent.
TUASON, J .:
This is an appeal by certiorari from a decision of the Court of Appeals reversing the judgment of the Court of First Instance of Zambales. The case involves s
dispute over a parcel of land sold to two different persons.
The Facts as found by the Court of Appeals are these:
Esta finca pertenecia originalmente al hoy difunto Dionisio Quimson, quien, en 7 de junio de 1932, otorgo la escritura Exhibit A de
trespaso de la misma a favor de su hija Tomasa Quimson, pero continuo en su posesion y goce. La vendio a los esposos Magno
Agustin y Paulina Manzano en 3 de Mayo de 1935, con pacto de recomprar dentro del plazo de seis aos; y dos aos escasos
despues, en 5 de abril de 1937, la volvio a vender a Francisco Rosete, tambien con pacto de retro por el termino de cinco aos,
despues de haber verificado su recompra de Agustin y Manzano, con dinero que le habla facilitado Rosete, otorgandose a este facto la
escritura de venta Exhibit 1. Desde entoces Rosete es el que esta en su posesion y disfrute, de una manera pacifica y quieta, aun
despues de la muerte de Dionisio Quimson, ocurrida en 6 de junio de 1939, hasta el enero de 1943, en que Tomasa Quimson acudio al
Juez de Paz de San Marcelino , Zambales, para que este interviniera en un arreglo con Rosete sobre dicha finca, cuyo fracaso motivo
una carrera hacia Iba, la capital de Zambales, para ganar la prioridad del registro e inscripcion de las escrituras de venta Exhibits A y 1
que Dionisio Quimson otorgara a favor de Tomasa Quimson y Francisco Rosete, respectivamente, carreraque aquella gano por haber
llegado a la meta una hora antes, a las 9:30 a.m. del 17 de febrero de 1943, en tanto que este la alcanzo a las 10:30 a.m. de ese
mismo dia.
Two questions are raised: (1) What were the effects of the registration of plaintiff's document? and (2) Who was prior in possession? The Court of Appeals'
answer to the question is , None, and to the second, the defendant or second purchaser.
We do not deem it necessary to pass upon the first issue in the light of the view we take of the last, to which we will address ourselves presently.
Articles 1462 and 1473 of the Civil Code provide:
ART. 1462. The thing sold shall be deemed delivered, when it is placed in the control and possession of the vendee.
When the sale is made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the
object of the contract, if from the said instrument the contrary does not appear or may not be clearly inferred.
ART. 1473. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who first recorded it in the registry.
Should there be no inscription, the ownership shall belong to the person who in good faith was first in the possession; and, in the
absence of this, to the person who represents the oldest title, provided there is good faith.
In the case of Buencamino vs. Viceo (13 Phil., 97), Mr. Justice Willard, speaking for the court and citing article 1462 says: "Upon a sale of real estate the
execution of a notarial document of sale is a sufficient delivery of the property sold.".
In the case of Florendo vs. Foz (20 Phil., 388), the court, through Mr. Chief Justice Arellano, rules that "When the sale is made by menas of a public
instrument, the execution thereof is tantamount to conveyance of the subject matter, unless the contrary clearly follows or be deduced from such instrument
itself, and in the absence of this condition such execution by the vendor is per se a formal or symbolical conveyance of the property sold, that is, the vedor in
the instrument itself authorizes the purchaser to used the title of ownership as proof that latter is thenceforth the owner of the property."
More decisive of the case at the bar, being almost on all fours with it, is the case of Sanchez vs. Ramon (40 Phil., 614). There. appeared that one Fernandez
sold a piece of land to Marcelino Gomez and Narcisa Sanchez under pacto de retro in a public instrument. The purchasers neither recorded the deed in the
registry of property nor ever took materials possession of the land. Later, Fernandez sold the same property by means of a private document to Ramos who
immediately entered upon the possession of it. It was held that, according to article 1473 of the Civil Code, Gomez and Sanchez were the first in possession
and. consequently, that the sale in their favor was superior. Says the court, through Mr. Justice Avancea, later chief justice:
To what kind of possession is acquired by the materials occupancy of the thing or right possessed, or by the fact that the latter is
subjected to the action of our will, or by the appropriate acts and legal formalities established for acquiring possession (art. 438, Civil
Code). by a simple reasoning, it appears that, because the law does not mention to which of these kinds of the possession the article
refers, it must be understood that it refers to all of these kinds. The proposition that this article, according to its letter, refers to the
materials possession and excludes the symbolic does not seem to be founded upon a solid ground. It is said that the law, in the first
possession and then the date of the date of the title and as a public instruments is a title, it is claimed that the inference is that the law
has deliberately intented to place the symbolic possession, which the execution of the public document implies, after the materials
possession. This argument, however, would only be forceful if the title, mentioned by this article, includes public instruments, and this
would only be true if public instruments are not included in the idea of the possession spoken of in said article. In other words the
strength of the arguments rests in that this possession is precisely the materials and does not include the symbolic. Consequently, the
argument is deficient for it is begging the same question, because if this possession includes the symbolic, which is acquired by the
execution of a public instruments, it should be understood that the title, mentioned by the law as the next cause of preference, does not
include instruments.
Furthermore, our interpretation of this article 1473 is more in consonance with the principles of the justice. The execution of the public
instrument is equivalent to the delivery of the realty sold (art. 1462, Civil Code ) and its possession by the vedee (art. 438).Under these
conditions the sale is considered consummated and completely transfers to the vendee all of the thing. the vendee by virtue of this sale
has acquired everything and nothing, absolutely nothing, is left to the vendor. Form this moment the vendor is a stranger to the thing
sold like any other who has never been its owner. As the obligation of even delivering it. If he continues taking materials possession of it,
is simply on account of the vendee's tolerance and, in this sense, his possession is vendor's possession. And if the latter should have to
ask him for the delivery of this materials possession it would not be by virtue of the sale, because this has been already consummated
and has produced all its effects, but by virtue of the vendee's ownership, in the same were not the vendor. This means that after the sale
of the realty by means of a public instruments, the vendor, who resells it to another, does not transmitted anything to this second sale,
takes materials possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights to
the thing lawfully acquired by the first vendee.
We are of the opinion that the possession mentioned in the article 1473 (for determining who has better right when the same piece of
land has been sold several times by the vendor ) includes not the materials but also the symbolic possession, which is acquired by the
execution of a public instrument.
The Supreme Court of Spain and Mr. Manresa are of the same opinion. On pp. 157 ,158 Vol. X, of his treatise on the Spanish Civil Code. Manresa
comments:
II. Observacion comun a la venta de muebles y a la de inmuebles. Hemos interpretado el precepto de articulo 1.473, en sus parrafos
1. y 3. en el sentido mas racional mas racional, aunque no tal vez en el mas adecuado a las palabras que se emplean. Las palabras
tomar posesion, y primero en la posesion las hemos considerado como equivalentes a la de la tradicion real o fingida a que se refieren
los articulos 1.462 al 1. 464 porque si la posesion materials del objeto puede otorgar preferencia e cuestiones de possesion y asi lo re-
conoe el articulo 445. no debe darla nunca en cuestiones de propiedad y de la propiedad habla expresamente el articulo 1.473. Asi en
nuestra opinion, robustecida por la doctrine que rectamente se deriva de la sentencia de 24 de Novembre de 1894, vendida una finca
A. en escritura publica despues a B., aunque se incate materialmente este del inmueble, la etrega de la cosa elvendedor carecia ya de
la facultad de disponer de ella .
The statement of Sr. Manresa which is said to sustain the theory of the Court of Appeals, expresses, as we under stand that statement, the literal meaning of
article 1473, for the decision of November 24, 1894 reflects, according to the learned author, the intention of the lawmaker and is in the conformity with the
principles of justice. now under both the a Spanish and Philippine rules of interpretation, the spirit, the intent, the law prevails over its letter.
Counsel for defendant denies that the land was sold to plaintiff's Tomasa Quimson or that the Court of Appeals so founds. All that latter court declared, he
says, was that a deed of the land was executed by the original owner on June 7, 1932.
The findings that a deed of conveyance was made by Dionisio Quimson in favor of his daughter could have no other meaning, in the absence of any
qualifying statement , that the land was sold by the father to his daughter. Furthermore, this was the trial court's explicit finding which was not reversed by
the Court of Appeals and stand as the fact of the case. Looking into the documents itself Exhibits A states categorically that the vendor received form the
vendee the consideration of sale, P 250, acknowledge before the notary public the notary public having executed the instruments of his own free will.
The expression in the court's decision in the case of Cruzado vs. Escaler (34 Phil., 17), cited by the Court of Appeals, Apparently to the effect that physical
possession by the purchaser is essential to the consummation of a sale of real of estate, is at best obiter dictum; for the court distinctly found that the sale to
plaintiff's Cruzado's father was a sham, execution with the sole purpose of enabling the senior Cruzado to mortgage the property and become procurador.
And with reference to the failure of the second vendee, Escaler, to register his purchase, the court disregarded the omission as well as the entry of the first
sale in the registry because that entry was made by the plaintiff, son and heir of the first supposed vendee, more than a score years after the alleged
transaction, when the plaintiff was no longer or had any right therein (in the land). Because it already belonged to the defendant Escaler, its lawful owner."
When Escaler, the second purchase was sued he had become the owner of the land by prescription. The defendant's possession in the present case fell far
short of having ripened into title by prescription when the plaintiff commenced her action.
For the reasons above stated, we are constrained to set aside the decision of the Court of Appeals. Because the Appellate Court found for the defendant, it
made no findings on damages for the latter's used of the property in controversy. Not being authorized in this appeal to examine the evidence we have to
accept the trials court's appraisal of the damages. Judge Llanes assessed the damages of P 180 for the occupation of the agricultural years 143-44,1944-45
and 1945-46, and P 60 a year thereafter until the possession of the property was restituted to the plaintiffs.
Let judgment be entered in accordance with the tenor of this decision, with costs against the defendant.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.R. No. 129760 December 29, 1998
RICARDO CHENG, petitioner,
vs.
RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA JOSE, respondents.

MARTINEZ, J .:
This petition for review on certiorari seeks to annul and set aside the Decision of the Court of Appeals (CA)
1
dated July 7, 1997 in CA-G.R. No. CV No.
44706 entitled "Ricardo Cheng, plaintiff-appellee vs. Ramon B. Genato, defendant-appellant, Ernesto R. Da Jose & Socorro B. Da Jose, Intervenors-
Appellants" which reversed the ruling of the Regional Trial Court, Branch 96 of Quezon City dated January 18, 1994. The dispositive portion of the CA
Decision reads:
WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED and SET ASIDE and judgment is rendered
ordering;
1. The dismissal of the complaint;
2. The cancellation of the annotations of the defendant-appellant's Affidavit to Annul Contract to Sell and plaintiff-appellee's
Notice of Adverse Claim in the subject TCT's, namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M);
3. Payment by the intervenors-appellants of the remaining balance of the purchase price pursuant to their agreement with the
defendant-appellant to suspend encashment of the three post-dated checks issued since 1989.
4. Ordering the execution by the defendant-appellant Genato of the Deed of Absolute Sale over the subject two lots covered
by TCT No. T-76.196 (M) and TCT No. T-76.197 (M) in favor of intervenors-appellants Spouses Da Jose;
5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the plaintiff-appellee Cheng, and
6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-appellants Da Jose of P100,000.00,
exemplary damages of P50,000.00, attorney's fees of P50,000.00, and costs of suit; and to defendant-appellant, of
P100,000.00 in exemplary damages, P50,000.00 in attorney's fees. The amounts payable to the defendant-appellant may be
compensated by plaintiff appellee with the amount ordered under the immediately foregoing paragraph which defendant-
appellant has to pay the plaintiff-appellee.
SO ORDERED.
2

The antecedents of the case are as follows:
Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Paradise Farms, San Jose del Monte, Bulacan covered by TCT No. T-
76.196 (M)
3
and TCT No. T-76.197 (M)
4
with an aggregate area of 35,821square meters, more or less.
On September 6, 1989, respondent Genato entered into an agreement with respondent-spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose
spouses) over the above-mentioned two parcels of land. The agreement culminated in the execution of a contract to sell for which the purchase price was
P80.00 per square meter. The contract was in a public instrument and was duly annotated at the back of the two certificates of title on the same day.
Clauses 1and 3 thereof provide:
1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine Currency per square meter, of which the amount of
FIFTY THOUSAND (P50,000.00) PESOS shall be paid by the VENDEE to the VENDOR as partial down payment at the time
of execution of this Contract to Sell.
xxx xxx xxx
3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and only after having satisfactorily verified and
confirmed the truth and authenticity of documents, and that no restrictions, limitations, and developments imposed on and/or
affecting the property subject of this contract shall be detrimental to his interest, the VENDEE shall pay to the VENDOR, NINE
HUNDRED FIFTY THOUSAND (P950,00.00) PESOS. Philippine Currency, representing the full payment of the agreed Down
Payment, after which complete possession of the property shall be given to the VENDEE to enable him to prepare the
premises and any development therein.
On October 4, 1989, the Da Jose spouses, not having finished verifying the titles mentioned in clause 3 as aforequoted, asked for and was granted by
respondent Genato an extension of another 30 days or until November 5, 1989. However, according to Genato, the extension was granted on condition
that a new set of documents is made seven (7) days from October 4, 1989.
6
This was denied by the Da Jose spouses.
Pending the effectivity of the aforesaid extension period, and without due notice to the Da Jose spouses, Genato executed an Affidavit to Annul the Contract
to Sell,
7
on October 13, 1989. Moreover, no annotation of the said affidavit at the back of his titles was made right away. The affidavit contained, inter alia,
the following paragraphs;
xxx xxx xxx
That it was agreed between the parties that the agreed downpayment of P950,000.00 shall be paid thirty (30) days after the
execution of the Contract, that is on or before October 6, 1989;
The supposed VENDEES failed to pay the said full downpayment even up to this writing, a breach of contract;
That this affidavit is being executed to Annul the aforesaid Contract to Sell for the vendee having committed a breach of
contract for not having complied with the obligation as provided in the Contract to Sell;
8

On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's residence and expressed interest in buying the subject properties. On that
occasion, Genato showed to Ricardo Cheng copies of his transfer certificates of title and the annotations at the back thereof of his contract to sell with the
Da Jose spouses. Genato also showed him the aforementioned Affidavit to Annul the Contract to Sell which has not been annotated at the back of the titles.
Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato that the previous contract with the Da Jose spouses
will be annulled for which Genato issued a handwritten receipt (Exh. "D"), written in this wise:
10/24/89
Received from Ricardo Cheng
the Sum of Fifty Thousand Only (P50.000-)
as partial for T-76196 (M)
T-76197 (M) area 35.821 Sq.m.
Paradise Farm, Gaya-Gaya, San Jose Del Monte
P70/m2 Bulacan
plus C. G. T. etc.
Check # 470393 (SGD.) Ramon B. Genato
10/24/89
9

On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng called up Genato reminding him to register the affidavit to annul the
contract to sell.
10

The following day, or on October 26, 1989, acting on Cheng's request, Genato caused the registration of the Affidavit to Annul the Contract to Sell in the
Registry of Deeds, Meycauayan, Bulacan as primary entry No. 262702.
11

While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan on October 27, 1989, they met Genato by coincidence. It
was only then that the Da Jose spouses discovered about the affidavit to annul their contract. The latter were shocked at the disclosure and protested
against the rescission of their contract. After being reminded that he (Genato) had given them (Da Jose spouses) an additional 30-day period to finish their
verification of his titles, that the period was still in effect, and that they were willing and able to pay the balance of the agreed down payment, later on in the
day, Genato decided to continue the Contract he had with them. The agreement to continue with their contract was formalized in a conforme letter dated
October 27, 1989.
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his contract with the Da Jose spouses and the return of Cheng's P50,000.00
check. Consequently, on October 30, 1989, Cheng's lawyer sent a letter
12
to Genato demanding compliance with their agreement to sell the property to him
stating that the contract to sell between him and Genato was already perfected and threatening legal action.
On November 2, 1989, Genato sent a letter
13
to Cheng (Exh. "6") enclosing a BPI Cashier's Check for P50,000.00 and expressed regret for his inability to
"consummate his transaction" with him. After having received the letter of Genato on November 4, 1989, Cheng, however, returned the said check to the
former via RCPI telegram
14
dated November 6, 1989, reiterating that "our contract to sell your property had already been perfected."
Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim
15
and had it annotated on the subject TCT's.
On the same day, consistent with the decision of Genato and the Da Jose spouses to continue with their Contract to Sell of September 6, 1989, the Da Jose
spouses paid Genato the complete down payment of P950,000.00 and delivered to him three (3) postdated checks (all dated May 6, 1990, the stipulated
due date) in the total amount of P1,865,680.00 to cover full payment of the balance of the agreed purchase price. However, due to the filing of the pendency
of this case, the three (3) postdated checks have not been encashed.
On December 8, 1989, Cheng instituted a complaint
16
for specific performance to compel Genato to execute a deed of sale to him of the subject properties
plus damages and prayer for preliminary attachment. In his complaint, Cheng averred that the P50,000.00 check he gave was a partial payment to the total
agreed purchase price of the subject properties and considered as an earnest money for which Genato acceded. Thus, their contract was already perfected.
In Answer
17
thereto, Genato alleged that the agreement was only a simple receipt of an option-bid deposit, and never stated that it was a partial payment,
nor is it an earnest money and that it was subject to condition that the prior contract with the Da Jose spouses be first cancelled.
The Da Jose spouses, in their Answer in Intervention,
18
asserted that they have a superior right to the property as first buyers. They alleged that the
unilateral cancellation of the Contract to Sell was without effect and void. They also cited Cheng's bad faith as a buyer being duly informed by Genato of the
existing annotated Contract to Sell on the titles.
After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng unerringly meant a sale and not just a priority or an option to buy. It
cannot be true that the transaction was subjected to some condition or reservation, like the priority in favor of the Da Jose spouses as first buyer because, if
it were otherwise, the receipt would have provided such material condition or reservation, especially as it was Genato himself who had made the receipt in
his own hand. It also opined that there was a valid rescission of the Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell. Time was of the
essence in the execution of the agreement between Genato and Cheng, under this circumstance demand, extrajudicial or judicial, is not necessary. It falls
under the exception to the rule provided in Article 1169
19
of the Civil Code. The right of Genato to unilaterally rescind the contract is said to be under Article
1191
20
of the Civil Code. Additionally, after reference was made to the substance of the agreement between Genato and the Da Jose spouses, the lower
court also concluded that Cheng should be preferred over the intervenors-Da Jose spouses in the purchase of the subject properties. Thus, on January 18,
1994 the trial court rendered its decision the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the contract to sell dated September 6, 1989 executed between defendant Ramon Genato, as vendor, and
intervenors Spouses Ernesto and Socorro Da Jose, as vendees, resolved and rescinded in accordance with Art. 1191, Civil
Code, by virtue of defendant's affidavit to annul contract to sell dated October 13, 1989 and as the consequence of
intervenors' failure to execute within seven (7) days from October 4, 1989 another contract to sell pursuant to their mutual
agreement with defendant;
2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus interest at the legal rate from November 2,
1989 until full payment;
3. Directing defendant to return to the intervenors the three (3) postdated checks immediately upon finality of this judgment;
4. Commanding defendant to execute with and in favor of the plaintiff Ricardo Cheng, as vendee, a deed of conveyance and
sale of the real properties described and covered in Transfer Certificates of Title No. T-76-196 (M) and T-76.197 (M) of the
Registry of Deeds of Bulacan, Meycauayan Branch, at the rate of P70.000/square meter, less the amount of P50,000.00
alreaddy paid to defendant, which is considered as part of the purchase price, with the plaintiff being liable for payment of the
capital gains taxes and other expenses of the transfer pursuant to the agreement to sell dated October 24, 1989; and
5 Ordering defendant to pay the plaintiff and the intervenors as follows:
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorney's fees, to plaintiff;
d/ P20,000.00, as and for attorney's fees, to intervenors; and
e/ Cost of the suit.
xxx xxx xxx
Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose spouses appealed to the court a quo which reversed such
judgment and ruled that the prior contract to sell in favor of the Da Jose spouses was not validly rescinded; that the subsequent contract to sell between
Genato and Cheng, embodied in the handwritten receipt, was without force and effect due to the failure to rescind the prior contract; and that Cheng should
pay damages to the respondents herein being found to be in bad faith.
Hence this petition.
21

This petition for review, assails the Court of Appeals' Decision on the following grounds: (1) that the Da Jose spouses' Contract to Sell has been validly
rescinded or resolved; (2) that Ricardo Cheng's own contract with Genato was not just a contract to sell but one of conditional contract of sale which gave
him better rights, thus precluding the application of the rule on double sales under Article 1544, Civil Code; and (3) that, in any case, it was error to hold him
liable for damages.
The petition must be denied for failure to show that the Court of Appeals committed a reversible error which would warrant a contrary ruling.
No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid and effective rescission or resolution of the Da Jose spouses
Contract to Sell, contrary to petitioner's contentions and the trial court's erroneous ruling.
In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force.
22
It is one where the happening of the event gives rise to
an obligation. Thus, for its non-fulfillment there will be no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a
juridical relation. In fact with this circumstance, there can be no rescission of an obligation that is still non-existent, the suspensive condition not having
occurred as yet.
23
Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an
obligation already extant, not a failure of a condition to render binding that obligation.
24

Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the instant case because no default can be ascribed to the Da Jose
spouses since the 30-day extension period has not yet expired. The Da Jose spouses' contention that no further condition was agreed when they were
granted the 30-days extension period from October 7, 1989 in connection with clause 3 of their contract to sell dated September 6, 1989 should be upheld
for the following reason, to wit; firstly, If this were not true, Genato could not have been persuaded to continue his contract with them and later on agree to
accept the full settlement of the purchase price knowing fully well that he himself imposed such sine qua non condition in order for the extension to be valid;
secondly, Genato could have immediately annotated his affidavit to annul the contract to sell on his title when it was executed on October 13, 1989 and not
only on October 26, 1989 after Cheng reminded him of the annotation; thirdly, Genato could have sent at least a notice of such fact, there being no
stipulation authorizing him for automatic rescission, so as to finally clear the encumbrance on his titles and make it available to other would be buyers. It
likewise settles the holding of the trial court that Genato "needed money urgently."
Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by Genato, in their Contract to Sell, the execution by Genato of the
affidavit to annul the contract is not even called for. For with or without the aforesaid affidavit their non-payment to complete the full downpayment of the
purchase price ipso facto avoids their contract to sell, it being subjected to a suspensive condition. When a contract is subject to a suspensive condition, its
birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled.
25
If the suspensive condition does not take
place, the parties would stand as if the conditional obligation had never
existed.
26

Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written, to the Da Jose spouses for his decision to rescind their
contract. In many cases,
27
even though we upheld the validity of a stipulation in a contract to sell authorizing automatic rescission for a violation of its terms
and conditions, at least a written notice must be sent to the defaulter informing him of the same. The act of a party in treating a contract as cancelled should
be made known to the other.
28
For such act is always provisional. It is always subject to scrutiny and review by the courts in case the alleged defaulter
brings the matter to the proper courts. In University of the Philippines vs. De Los Angeles,
29
this Court stressed and we quote:
In other words, the party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without
previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require
that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps
to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages
accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that
he should exercise due diligence to minimize its own damages (Civil Code, Article 2203).
This rule validates, both in equity and justice, contracts such as the one at bat, in order to avoid and prevent the defaulting party from assuming the offer as
still in effect due to the obligee's tolerance for such non-fulfillment. Resultantly, litigations of this sort shall be prevented and the relations among would-be
parties may be preserved. Thus, Ricardo Cheng's contention that the Contract to Sell between Genato and the Da Jose spouses was rescinded or resolved
due to Genato's unilateral rescission finds no support in this case.
Anent the issue on the nature of the agreement between Cheng and Genato, the records of this case are replete with admissions
30
that Cheng believed it to
be one of a Contract to Sell and not one of Conditional Contract of Sale which he, in a transparent turn-around, now pleads in this Petition. This ambivalent
stance of Cheng is even noted by the appellate court, thus:
At the outset, this Court notes that plaintiff-appellee was inconsistent in characterizing the contract he allegedly entered into.
In his complaint.
31
Cheng alleged that the P50,000.00 down payment was earnest money. And next, his testimony
32
was
offered to prove that the transaction between him and Genato on October 24, 1989 was actually a perfected contract to sell.
33

Settled is the rule that an issue which was not raised during the trial in the court below cannot be raised for the first time on appeal.
34
Issues of fact and
arguments not adequately brought to the attention of the trial court need not be and ordinarily will not be considered by a reviewing court as they cannot be
raised for the first time on appeal.
35
In fact, both courts below correctly held that the receipt which was the result of their agreement, is a contract to sell. This
was, in fact Cheng's contention in his pleadings before said courts. This patent twist only operates against Cheng's posture which is indicative of the
weakness of his claim.
But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional contract of sale, it did not acquire any obligatory force since it was
subject to suspensive condition that the earlier contract to sell between Genato and the Da Jose spouses should first be cancelled or rescinded a
condition never met, as Genato, to his credit, upon realizing his error, redeemed himself by respecting and maintaining his earlier contract with the Da Jose
spouses. In fact, a careful reading of the receipt, Exh. "D," alone would not even show that a conditional contract of sale has been entered by Genato and
Cheng. When the requisites of a valid contract of sale are lacking in said receipt, therefore the "sale" is neither valid or enfoceable.
36

To support his now new theory that the transaction was a conditional contract of sale, petitioner invokes the case of Coronel vs. Court of Appeals
37
as the
law that should govern their Petition. We do not agree. Apparently, the factual milieu in Coronel is not on all fours with those in the case at bar.
In Coronel, this Court found that the petitioners therein clearly intended to transfer title to the buyer which petitioner themselves admitted in their pleading.
The agreement of the parties therein was definitively outlined in the "Receipt of Down Payment" both as to property, the purchase price, the delivery of the
seller of the property and the manner of the transfer of title subject to the specific condition that upon the transfer in their names of the subject property the
Coronels will execute the deed of absolute sale.
Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone such kind of circumstances cannot be ascertained without however
resorting to the exceptions of the Rule on Parol Evidence.
To our mind, the trial court and the appellate court correctly held that the agreement between Genato and Cheng is a contract to sell, which was, in fact,
petitioner connection in his pleadings before the said courts. Consequently, both to mind, which read:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and in the
absence thereof, to the person who presents he oldest title, provided there is good faith.
However, a meticulous reading of the aforequoted provision shows that said law is not apropos to the instant case. This provision connotes that the following
circumstances must concur:
(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales
transactions.
(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting
interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very
same seller.
These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has been consummated. The contract to
be binding upon the obligee or the vendor depends upon the fulfillment or non-fulfillment of an event.
Notwithstanding this contrary finding with the appellate court, we are of the view that the governing principle of Article 1544, Civil Code, should apply in this
situation. Jurisprudence
38
teaches us that the governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). For not only was
the contract between herein respondents first in time; it was also registered long before petitioner's intrusion as a second buyer. This principle only applies
when the special rules provided in the aforcited article of the Civil Code do not apply or fit the specific circumstances mandated under said law or by
jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace the first buyer are:
(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition
until title is transferred to him by registration or failing registration, by delivery of possession;
39

(2) the second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through
prior registration as provided by law.
40

Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of the new agreement between Cheng and Genato will not defeat
their rights as first buyers except where Cheng, as second buyer, registers or annotates his transaction or agreement on the title of the subject properties in
good faith ahead of the Da Jose spouses. Moreover, although the Da Jose spouses, as first buyers, knew of the second transaction it will not bar them from
availing of their rights granted by law, among them, to register first their agreement as against the second buyer.
In contrast, knowledge gained by Cheng of the first transaction between the Da Jose spouses and Genato defeats his rights even if he is first to register the
second transaction, since such knowledge taints his prior registration with bad faith.
"Registration", as defined by Soler and Castillo, means any entry made in the books of the registry, including both registration in its ordinary and strict sense,
and cancellation, annotation, and even marginal notes.
41
In its strict acceptation, it is the entry made in the registry which records solemnly and permanently
the right of ownership and other real rights.
42
We have ruled
43
before that when a Deed of Sale is inscribed in the registry of property on the original
document itself, what was done with respect to said entries or annotations and marginal notes amounted to a registration of the sale. In this light, we see no
reason why we should not give priority in right the annotation made by the Da Jose spouses with respect to their Contract to Sell dated September 6, 1989.
Moreover, registration alone in such cases without good faith is not sufficient. Good faith must concur with registration for such prior right to be enforceable.
In the instant case, the annotation made by the Da Jose spouses on the titles of Genato of their "Contract To Sell" more than satisfies this requirement.
Whereas in the case of Genato's agreement with Cheng such is unavailing. For even before the receipt, Exh. "D," was issued to Cheng information of such
pre-existing agreement has been brought to his knowledge which did not deter him from pursuing his agreement with Genato. We give credence to the
factual finding of the appellate court that "Cheng himself admitted that it was he who sought Genato in order to inquire about the property and offered to buy
the same.
44
And since Cheng was fully aware, or could have been if he had chosen to inquire, of the rights of the Da Jose spouses under the Contract to
Sell duly annotated on the transfer certificates of titles of Genato, it now becomes unnecessary to further elaborate in detail the fact that he is indeed in bad
faith in entering into such agreement. As we have held in Leung Yee vs. F.L. Strong Machinery Co.:
45

One who purchases real estate with knowledge of a defect . . . of title in his vendor cannot claim that he has acquired title
thereto in good faith as against . . . . an interest therein; and the same rule must be applied to one who has knowledge of facts
which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the
title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then
claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe
that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not
make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he
had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may
reasonably be required of a prudent man in a like situation. Good faith, or lack of it, is in its last analysis a question of
intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the
evidence as to the conduct and outward acts by which alone the inward motive may with safety, be determined. So it is that
"the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and
circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption
of good faith in which the courts always indulge in the absence of the proof to the contrary. "Good faith, or the want of it, is not
a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judge of by actual
or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet,
Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119 Mich., 8, 10, 17.) (Emphasis
ours)
Damages were awarded by the appellate court on the basis of its finding that petitioner "was in bad faith when he filed the suit for specific performance
knowing fully well that his agreement with Genato did not push through.
46
Such bad faith, coupled with his wrongful interference with the contractual
relations between Genato and the Da Jose spouses, which culminated in his filing of the present suit and thereby creating what the counsel for the
respondents describes as "a prolonged and economically unhealthy gridlock
47
on both the land itself and the respondents' rights provides ample basis for
the damages awarded. Based on these overwhelming evidence of bad faith on the part of herein petitioner Ricardo Cheng, we find that the award of
damages made by the appellate court is in order.
WHEREFORE, premises considered, the instant petition for review is DENIED and the assailed decision is hereby AFFIRMED EN TOTO.