Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 103577 October 7, 1996
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONALES !"or #er$e%" &'( o' be#&%" o" )%or*(& C. T+,,er, &$
&ttor'e-.*'."&ct/, CIELITO A. CORONEL, )LORAI0A A. ALMONTE, &'( CATALINA
BALAIS MABANAG, petitioners,
vs.
T1E COURT O) APPEALS, CONCEPCION 0. ALCARA, &'( RAMONA PATRICIA
ALCARA, &$$*$te( b- GLORIA ). NOEL &$ &ttor'e-.*'."&ct, respondents.

MELO, J.:p
The petition before us has its roots in a coplaint for specific perforance to copel
herein petitioners !e"cept the last naed, #atalina $alais Mabana%& to consuate
the sale of a parcel of land 'ith its iproveents located alon% Roosevelt (venue in
)ue*on #it+ entered into b+ the parties soetie in ,anuar+ -./0 for the price of
P-,123,333.33.
The undisputed facts of the case 'ere suari*ed b+ respondent court in this 'ise4
On ,anuar+ -., -./0, defendants5appellants Roulo #oronel, et al. !hereinafter
referred to as #oronels& e"ecuted a docuent entitled 6Receipt of Do'n Pa+ent6
!7"h. 6(6& in favor of plaintiff Raona Patricia (lcara* !hereinafter referred to as
Raona& 'hich is reproduced hereunder4
R7#7IPT O8 DO9N P(:M7NT
P-,123,333.33 ; Total aount
03,333 ; Do'n pa+ent
;;;;;;;;;;;
P-,-.3,333.33 ; $alance
Received fro Miss Raona Patricia (lcara* of -2< Tio%, )ue*on #it+, the su of
8ift+ Thousand Pesos purchase price of our inherited house and lot, covered b+ T#T
No. --.<1= of the Re%istr+ of Deeds of )ue*on #it+, in the total aount of
P-,123,333.33.
9e bind ourselves to effect the transfer in our naes fro our deceased father,
#onstancio P. #oronel, the transfer certificate of title iediatel+ upon receipt of the
do'n pa+ent above5stated.
On our presentation of the T#T alread+ in or nae, 9e 'ill iediatel+ e"ecute the
deed of absolute sale of said propert+ and Miss Raona Patricia (lcara* shall
iediatel+ pa+ the balance of the P-,-.3,333.33.
#learl+, the conditions appurtenant to the sale are the follo'in%4
-. Raona 'ill a>e a do'n pa+ent of 8ift+ Thousand !P03,333.33& Pesos upon
e"ecution of the docuent aforestated?
1. The #oronels 'ill cause the transfer in their naes of the title of the propert+
re%istered in the nae of their deceased father upon receipt of the 8ift+ Thousand
!P03,333.33& Pesos do'n pa+ent?
@. Apon the transfer in their naes of the subBect propert+, the #oronels 'ill e"ecute
the deed of absolute sale in favor of Raona and the latter 'ill pa+ the forer the
'hole balance of One Million One Hundred Ninet+ Thousand !P-,-.3,333.33& Pesos.
On the sae date !,anuar+ -0, -./0&, plaintiff5appellee #oncepcion D. (lcara*
!hereinafter referred to as #oncepcion&, other of Raona, paid the do'n pa+ent of
8ift+ Thousand !P03,333.33& Pesos !7"h. 6$6, 7"h. 616&.
On 8ebruar+ <, -./0, the propert+ ori%inall+ re%istered in the nae of the #oronelsC
father 'as transferred in their naes under T#T
No. @1=32@ !7"h. 6D6? 7"h. 626&
On 8ebruar+ -/, -./0, the #oronels sold the propert+ covered b+ T#T No. @1=32@ to
intervenor5appellant #atalina $. Mabana% !hereinafter referred to as #atalina& for One
Million 8ive Hundred 7i%ht+ Thousand !P-,0/3,333.33& Pesos after the latter has paid
Three Hundred Thousand !P@33,333.33& Pesos !7"hs. 685@6? 7"h. 6<5#6&
1
8or this reason, #oronels canceled and rescinded the contract !7"h. 6(6& 'ith Raona
b+ depositin% the do'n pa+ent paid b+ #oncepcion in the ban> in trust for Ramona
Patricia Alcaraz.
On 8ebruar+ 11, -./0, #oncepcion, et al., filed a coplaint for specific perforance
a%ainst the #oronels and caused the annotation of a notice of lis pendens at the bac>
of T#T No. @1=23@ !7"h. 676? 7"h. 606&.
On (pril 1, -./0, #atalina caused the annotation of a notice of adverse clai coverin%
the sae propert+ 'ith the Re%istr+ of Deeds of )ue*on #it+ !7"h. 686? 7"h. 6<6&.
On (pril 10, -./0, the #oronels e"ecuted a Deed of (bsolute Sale over the subBect
propert+ in favor of #atalina !7"h. 6D6? 7"h. 6=6&.
On ,une 0, -./0, a ne' title over the subBect propert+ 'as issued in the nae of
#atalina under T#T No. @0-0/1 !7"h. 6H6? 7"h. 6/6&.
!Rollo, pp. -@25-@<&
In the course of the proceedin%s before the trial court !$ranch /@, RT#, )ue*on #it+&
the parties a%reed to subit the case for decision solel+ on the basis of docuentar+
e"hibits. Thus, plaintiffs therein !no' private respondents& proffered their docuentar+
evidence accordin%l+ ar>ed as 7"hibits 6(6 throu%h 6,6, inclusive of their
correspondin% subar>in%s. (doptin% these sae e"hibits as their o'n, then
defendants !no' petitioners& accordin%l+ offered and ar>ed the as 7"hibits 6-6
throu%h 6-36, li>e'ise inclusive of their correspondin% subar>in%s. Apon otion of the
parties, the trial court %ave the thirt+ !@3& da+s 'ithin 'hich to siultaneousl+ subit
their respective eoranda, and an additional -0 da+s 'ithin 'hich to subit their
correspondin% coent or repl+ thereof, after 'hich, the case 'ould be deeed
subitted for resolution.
On (pril -2, -.//, the case 'as subitted for resolution before ,ud%e Re+naldo Roura,
'ho 'as then teporaril+ detailed to preside over $ranch /1 of the RT# of )ue*on
#it+. On March -, -./., Bud%ent 'as handed do'n b+ ,ud%e Roura fro his re%ular
bench at Macabebe, Papan%a for the )ue*on #it+ branch, disposin% as follo's4
9H7R78OR7, Bud%ent for specific perforance is hereb+ rendered orderin%
defendant to e"ecute in favor of plaintiffs a deed of absolute sale coverin% that parcel of
land ebraced in and covered b+ Transfer #ertificate of Title No. @1=23@ !no' T#T No.
@@-0/1& of the Re%istr+ of Deeds for )ue*on #it+, to%ether 'ith all the iproveents
e"istin% thereon free fro all liens and encubrances, and once accoplished, to
iediatel+ deliver the said docuent of sale to plaintiffs and upon receipt thereof, the
said docuent of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to
pa+ defendants the 'hole balance of the purchase price aountin% to P-,-.3,333.33 in
cash. Transfer #ertificate of Title No. @@-0/1 of the Re%istr+ of Deeds for )ue*on #it+
in the nae of intervenor is hereb+ canceled and declared to be 'ithout force and
effect. Defendants and intervenor and all other persons claiin% under the are hereb+
ordered to vacate the subBect propert+ and deliver possession thereof to plaintiffs.
PlaintiffsC clai for daa%es and attorne+Cs fees, as 'ell as the counterclais of
defendants and intervenors are hereb+ disissed.
No pronounceent as to costs.
So Ordered.
Macabebe, Papan%a for )ue*on #it+, March -, -./..
!Rollo, p. -3<&
( otion for reconsideration 'as filed b+ petitioner before the ne' presidin% Bud%e of
the )ue*on #it+ RT# but the sae 'as denied b+ ,ud%e 7strella T. 7strada, thusl+4
The pra+er contained in the instant otion, i.e., to annul the decision and to render
ane' decision b+ the undersi%ned Presidin% ,ud%e should be denied for the follo'in%
reasons4 !-& The instant case becae subitted for decision as of (pril -2, -.// 'hen
the parties terinated the presentation of their respective docuentar+ evidence and
'hen the Presidin% ,ud%e at that tie 'as ,ud%e Re+naldo Roura. The fact that the+
'ere allo'ed to file eoranda at soe future date did not chan%e the fact that the
hearin% of the case 'as terinated before ,ud%e Roura and therefore the sae should
be subitted to hi for decision? !1& 9hen the defendants and intervenor did not obBect
to the authorit+ of ,ud%e Re+naldo Roura to decide the case prior to the rendition of the
decision, 'hen the+ et for the first tie before the undersi%ned Presidin% ,ud%e at the
hearin% of a pendin% incident in #ivil #ase No. )52<-20 on Noveber --, -.//, the+
'ere deeed to have acEuiesced thereto and the+ are no' estopped fro Euestionin%
said authorit+ of ,ud%e Roura after the+ received the decision in Euestion 'hich
happens to be adverse to the? !@& 9hile it is true that ,ud%e Re+naldo Roura 'as
erel+ a ,ud%e5on5detail at this $ranch of the #ourt, he 'as in all respects the
Presidin% ,ud%e 'ith full authorit+ to act on an+ pendin% incident subitted before this
#ourt durin% his incubenc+. 9hen he returned to his Official Station at Macabebe,
Papan%a, he did not lose his authorit+ to decide or resolve such cases subitted to
hi for decision or resolution because he continued as ,ud%e of the Re%ional Trial
#ourt and is of co5eEual ran> 'ith the undersi%ned Presidin% ,ud%e. The standin% rule
and supported b+ Burisprudence is that a ,ud%e to 'ho a case is subitted for
decision has the authorit+ to decide the case not'ithstandin% his transfer to another
branch or re%ion of the sae court !Sec. ., Rule -@0, Rule of #ourt&.
2
#oin% no' to the t'in pra+er for reconsideration of the Decision dated March -, -./.
rendered in the instant case, resolution of 'hich no' pertains to the undersi%ned
Presidin% ,ud%e, after a eticulous e"aination of the docuentar+ evidence
presented b+ the parties, she is convinced that the Decision of March -, -./. is
supported b+ evidence and, therefore, should not be disturbed.
IN VI79 O8 TH7 8OR7DOIND, the 6Motion for Reconsideration andFor to (nnul
Decision and Render (ne' Decision b+ the Incubent Presidin% ,ud%e6 dated March
13, -./. is hereb+ D7NI7D.
SO ORD7R7D.
)ue*on #it+, Philippines, ,ul+ -1, -./..
!Rollo, pp. -3/5-3.&
Petitioners thereupon interposed an appeal, but on Deceber -<, -..-, the #ourt of
(ppeals !$uena, Don*a%a5Re+es, (bad Santos !P&, ,,.& rendered its decision full+
a%reein% 'ith the trial court.
Hence, the instant petition 'hich 'as filed on March 0, -..1. The last pleadin%, private
respondentsC Repl+ Meorandu, 'as filed on Septeber -0, -..@. The case 'as,
ho'ever, re5raffled to undersi%ned ponente onl+ on (u%ust 1/, -..<, due to the
voluntar+ inhibition of the ,ustice to 'ho the case 'as last assi%ned.
9hile 'e dee it necessar+ to introduce certain refineents in the disEuisition of
respondent court in the affirance of the trial courtCs decision, 'e definitel+ find the
instant petition bereft of erit.
The heart of the controvers+ 'hich is the ultiate >e+ in the resolution of the other
issues in the case at bar is the precise deterination of the le%al si%nificance of the
docuent entitled 6Receipt of Do'n Pa+ent6 'hich 'as offered in evidence b+ both
parties. There is no dispute as to the fact that said docuent ebodied the bindin%
contract bet'een Raona Patricia (lcara* on the one hand, and the heirs of
#onstancio P. #oronel on the other, pertainin% to a particular house and lot covered b+
T#T No. --.<1=, as defined in (rticle -@30 of the #ivil #ode of the Philippines 'hich
reads as follo's4
(rt. -@30. ( contract is a eetin% of inds bet'een t'o persons 'hereb+ one binds
hiself, 'ith respect to the other, to %ive soethin% or to render soe service.
9hile, it is the position of private respondents that the 6Receipt of Do'n Pa+ent6
ebodied a perfected contract of sale, 'hich perforce, the+ see> to enforce b+ eans
of an action for specific perforance, petitioners on their part insist that 'hat the
docuent si%nified 'as a ere e"ecutor+ contract to sell, subBect to certain suspensive
conditions, and because of the absence of Raona P. (lcara*, 'ho left for the Anited
States of (erica, said contract could not possibl+ ripen into a contract absolute sale.
Plainl+, such variance in the contendin% partiesC contentions is brou%ht about b+ the
'a+ each interprets the ters andFor conditions set forth in said private instruent.
9ithal, based on 'hatever relevant and adissible evidence a+ be available on
record, this, #ourt, as 'ere the courts belo', is no' called upon to adBud%e 'hat the
real intent of the parties 'as at the tie the said docuent 'as e"ecuted.
The #ivil #ode defines a contract of sale, thus4
(rt. -20/. $+ the contract of sale one of the contractin% parties obli%ates hiself to
transfer the o'nership of and to deliver a deterinate thin%, and the other to pa+
therefor a price certain in one+ or its eEuivalent.
Sale, b+ its ver+ nature, is a consensual contract because it is perfected b+ ere
consent. The essential eleents of a contract of sale are the follo'in%4
a& #onsent or eetin% of the inds, that is, consent to transfer o'nership in e"chan%e
for the price?
b& Deterinate subBect atter? and
c& Price certain in one+ or its eEuivalent.
Ander this definition, a #ontract to Sell a+ not be considered as a #ontract of Sale
because the first essential eleent is lac>in%. In a contract to sell, the prospective
seller e"plicit+ reserves the transfer of title to the prospective bu+er, eanin%, the
prospective seller does not as +et a%ree or consent to transfer o'nership of the
propert+ subBect of the contract to sell until the happenin% of an event, 'hich for
present purposes 'e shall ta>e as the full pa+ent of the purchase price. 9hat the
seller a%rees or obli%es hiself to do is to fulfill is proise to sell the subBect propert+
'hen the entire aount of the purchase price is delivered to hi. In other 'ords the full
pa+ent of the purchase price parta>es of a suspensive condition, the non5fulfillent of
'hich prevents the obli%ation to sell fro arisin% and thus, o'nership is retained b+ the
prospective seller 'ithout further reedies b+ the prospective bu+er. In Roque vs.
Lapuz !.< S#R( =2- G-./3H&, this #ourt had occasion to rule4
3
Hence, 9e hold that the contract bet'een the petitioner and the respondent 'as a
contract to sell 'here the o'nership or title is retained b+ the seller and is not to pass
until the full pa+ent of the price, such pa+ent bein% a positive suspensive condition
and failure of 'hich is not a breach, casual or serious, but sipl+ an event that
prevented the obli%ation of the vendor to conve+ title fro acEuirin% bindin% force.
Stated positivel+, upon the fulfillent of the suspensive condition 'hich is the full
pa+ent of the purchase price, the prospective sellerCs obli%ation to sell the subBect
propert+ b+ enterin% into a contract of sale 'ith the prospective bu+er becoes
deandable as provided in (rticle -2=. of the #ivil #ode 'hich states4
(rt. -2=.. ( proise to bu+ and sell a deterinate thin% for a price certain is
reciprocall+ deandable.
(n accepted unilateral proise to bu+ or to sell a deterinate thin% for a price certain is
bindin% upon the proissor if the proise is supported b+ a consideration distinct fro
the price.
( contract to sell a+ thus be defined as a bilateral contract 'hereb+ the prospective
seller, 'hile e"pressl+ reservin% the o'nership of the subBect propert+ despite deliver+
thereof to the prospective bu+er, binds hiself to sell the said propert+ e"clusivel+ to
the prospective bu+er upon fulfillent of the condition a%reed upon, that is, full pa+ent
of the purchase price.
( contract to sell as defined hereinabove, a+ not even be considered as a conditional
contract of sale 'here the seller a+ li>e'ise reserve title to the propert+ subBect of the
sale until the fulfillent of a suspensive condition, because in a conditional contract of
sale, the first eleent of consent is present, althou%h it is conditioned upon the
happenin% of a contin%ent event 'hich a+ or a+ not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is copletel+ abated !cf.
Hoesite and housin% #orp. vs. #ourt of (ppeals, -@@ S#R( === G-./2H&. Ho'ever, if
the suspensive condition is fulfilled, the contract of sale is thereb+ perfected, such that
if there had alread+ been previous deliver+ of the propert+ subBect of the sale to the
bu+er, o'nership thereto autoaticall+ transfers to the bu+er b+ operation of la'
'ithout an+ further act havin% to be perfored b+ the seller.
In a contract to sell, upon the fulfillent of the suspensive condition 'hich is the full
pa+ent of the purchase price, o'nership 'ill not autoaticall+ transfer to the bu+er
althou%h the propert+ a+ have been previousl+ delivered to hi. The prospective
seller still has to conve+ title to the prospective bu+er b+ enterin% into a contract of
absolute sale.
It is essential to distin%uish bet'een a contract to sell and a conditional contract of sale
speciall+ in cases 'here the subBect propert+ is sold b+ the o'ner not to the part+ the
seller contracted 'ith, but to a third person, as in the case at bench. In a contract to
sell, there bein% no previous sale of the propert+, a third person bu+in% such propert+
despite the fulfillent of the suspensive condition such as the full pa+ent of the
purchase price, for instance, cannot be deeed a bu+er in bad faith and the
prospective bu+er cannot see> the relief of reconve+ance of the propert+. There is no
double sale in such case. Title to the propert+ 'ill transfer to the bu+er after re%istration
because there is no defect in the o'ner5sellerCs title per se, but the latter, of course,
a+ be used for daa%es b+ the intendin% bu+er.
In a conditional contract of sale, ho'ever, upon the fulfillent of the suspensive
condition, the sale becoes absolute and this 'ill definitel+ affect the sellerCs title
thereto. In fact, if there had been previous deliver+ of the subBect propert+, the sellerCs
o'nership or title to the propert+ is autoaticall+ transferred to the bu+er such that, the
seller 'ill no lon%er have an+ title to transfer to an+ third person. (ppl+in% (rticle -022
of the #ivil #ode, such second bu+er of the propert+ 'ho a+ have had actual or
constructive >no'led%e of such defect in the sellerCs title, or at least 'as char%ed 'ith
the obli%ation to discover such defect, cannot be a re%istrant in %ood faith. Such
second bu+er cannot defeat the first bu+erCs title. In case a title is issued to the second
bu+er, the first bu+er a+ see> reconve+ance of the propert+ subBect of the sale.
9ith the above postulates as %uidelines, 'e no' proceed to the tas> of decipherin% the
real nature of the contract entered into b+ petitioners and private respondents.
It is a canon in the interpretation of contracts that the 'ords used therein should be
%iven their natural and ordinar+ eanin% unless a technical eanin% 'as intended !Tan
vs. #ourt of (ppeals, 1-1 S#R( 0/< G-..1H&. Thus, 'hen petitioners declared in the
said 6Receipt of Do'n Pa+ent6 that the+ ;
Received fro Miss Raona Patricia (lcara* of -2< Tio%, )ue*on #it+, the su of
8ift+ Thousand Pesos purchase price of our inherited house and lot, covered b+ T#T
No. --..<1= of the Re%istr+ of Deeds of )ue*on #it+, in the total aount of
P-,123,333.33.
'ithout an+ reservation of title until full pa+ent of the entire purchase price, the natural
and ordinar+ idea conve+ed is that the+ sold their propert+.
9hen the 6Receipt of Do'n Pa+ent6 is considered in its entiret+, it becoes ore
anifest that there 'as a clear intent on the part of petitioners to transfer title to the
bu+er, but since the transfer certificate of title 'as still in the nae of petitionerCs father,
the+ could not full+ effect such transfer althou%h the bu+er 'as then 'illin% and able to
iediatel+ pa+ the purchase price. Therefore, petitioners5sellers undertoo> upon
4
receipt of the do'n pa+ent fro private respondent Raona P. (lcara*, to cause the
issuance of a ne' certificate of title in their naes fro that of their father, after 'hich,
the+ proised to present said title, no' in their naes, to the latter and to e"ecute the
deed of absolute sale 'hereupon, the latter shall, in turn, pa+ the entire balance of the
purchase price.
The a%reeent could not have been a contract to sell because the sellers herein ade
no express reservation of ownership or title to the subject parcel of land. 8urtherore,
the circustance 'hich prevented the parties fro enterin% into an absolute contract of
sale pertained to the sellers theselves !the certificate of title 'as not in their naes&
and not the full pa+ent of the purchase price. Ander the established facts and
circustances of the case, the #ourt a+ safel+ presue that, had the certificate of
title been in the naes of petitioners5sellers at that tie, there 'ould have been no
reason 'h+ an absolute contract of sale could not have been e"ecuted and
consuated ri%ht there and then.
Moreover, unli>e in a contract to sell, petitioners in the case at bar did not erel+
proise to sell the properl+ to private respondent upon the fulfillent of the suspensive
condition. On the contrar+, havin% alread+ a%reed to sell the subBect propert+, the+
undertoo> to have the certificate of title chan%ed to their naes and iediatel+
thereafter, to e"ecute the 'ritten deed of absolute sale.
Thus, the parties did not erel+ enter into a contract to sell 'here the sellers, after
copliance b+ the bu+er 'ith certain ters and conditions, proised to sell the
propert+ to the latter. 9hat a+ be perceived fro the respective underta>in%s of the
parties to the contract is that petitioners had alread+ a%reed to sell the house and lot
the+ inherited fro their father, copletel+ 'illin% to transfer full o'nership of the
subBect house and lot to the bu+er if the docuents 'ere then in order. It Bust
happened, ho'ever, that the transfer certificate of title 'as then still in the nae of their
father. It 'as ore e"pedient to first effect the chan%e in the certificate of title so as to
bear their naes. That is 'h+ the+ undertoo> to cause the issuance of a ne' transfer
of the certificate of title in their naes upon receipt of the do'n pa+ent in the aount
of P03,333.33. (s soon as the ne' certificate of title is issued in their naes,
petitioners 'ere coitted to iediatel+ e"ecute the deed of absolute sale. Onl+
then 'ill the obli%ation of the bu+er to pa+ the reainder of the purchase price arise.
There is no doubt that unli>e in a contract to sell 'hich is ost coonl+ entered into
so as to protect the seller a%ainst a bu+er 'ho intends to bu+ the propert+ in installent
b+ 'ithholdin% o'nership over the propert+ until the bu+er effects full pa+ent therefor,
in the contract entered into in the case at bar, the sellers 'ere the one 'ho 'ere
unable to enter into a contract of absolute sale b+ reason of the fact that the certificate
of title to the propert+ 'as still in the nae of their father. It 'as the sellers in this case
'ho, as it 'ere, had the ipedient 'hich prevented, so to spea>, the e"ecution of an
contract of absolute sale.
9hat is clearl+ established b+ the plain lan%ua%e of the subBect docuent is that 'hen
the said 6Receipt of Do'n Pa+ent6 'as prepared and si%ned b+ petitioners Roeo (.
#oronel, et al., the parties had a%reed to a conditional contract of sale, consuation
of 'hich is subBect onl+ to the successful transfer of the certificate of title fro the nae
of petitionersC father, #onstancio P. #oronel, to their naes.
The #ourt si%nificantl+ notes this suspensive condition 'as, in fact, fulfilled on 8ebruar+
<, -./0 !7"h. 6D6? 7"h. 626&. Thus, on said date, the conditional contract of sale
bet'een petitioners and private respondent Raona P. (lcara* becae obli%ator+, the
onl+ act reEuired for the consuation thereof bein% the deliver+ of the propert+ b+
eans of the e"ecution of the deed of absolute sale in a public instruent, 'hich
petitioners uneEuivocall+ coitted theselves to do as evidenced b+ the 6Receipt of
Do'n Pa+ent.6
(rticle -2=0, in correlation 'ith (rticle --/-, both of the #ivil #ode, plainl+ applies to
the case at bench. Thus,
(rt. -2=0. The contract of sale is perfected at the oent there is a eetin% of inds
upon the thin% 'hich is the obBect of the contract and upon the price.
8ro the oent, the parties a+ reciprocall+ deand perforance, subBect to the
provisions of the la' %overnin% the for of contracts.
(rt. --/-. In conditional obli%ations, the acEuisition of ri%hts, as 'ell as the
e"tin%uishent or loss of those alread+ acEuired, shall depend upon the happenin% of
the event 'hich constitutes the condition.
Since the condition conteplated b+ the parties 'hich is the issuance of a certificate of
title in petitionersC naes 'as fulfilled on 8ebruar+ <, -./0, the respective obli%ations of
the parties under the contract of sale becae utuall+ deandable, that is, petitioners,
as sellers, 'ere obli%ed to present the transfer certificate of title alread+ in their naes
to private respondent Raona P. (lcara*, the bu+er, and to iediatel+ e"ecute the
deed of absolute sale, 'hile the bu+er on her part, 'as obli%ed to forth'ith pa+ the
balance of the purchase price aountin% to P-,-.3,333.33.
It is also si%nificant to note that in the first para%raph in pa%e . of their petition,
petitioners conclusivel+ aditted that4
5
@. The petitioners5sellers #oronel bound theselves 6to effect the transfer in our naes
fro our deceased father #onstancio P. #oronel, the transfer certificate of title
iediatel+ upon receipt of the do'npa+ent above5stated6. The sale was still subject
to this suspensive condition. !7phasis supplied.&
!Rollo, p. -<&
Petitioners theselves reco%ni*ed that the+ entered into a contract of sale subBect to a
suspensive condition. Onl+, the+ contend, continuin% in the sae para%raph, that4
. . . Had petitioners5sellers not complied 'ith this condition of first transferrin% the title to
the propert+ under their naes, there could be no perfected contract of sale.
!7phasis supplied.&
!bid.&
not a'are that the+ set their o'n trap for theselves, for (rticle --/< of the #ivil #ode
e"pressl+ provides that4
(rt. --/<. The condition shall be deeed fulfilled 'hen the obli%or voluntaril+ prevents
its fulfillent.
$esides, it should be stressed and ephasi*ed that 'hat is ore controllin% than these
ere h+pothetical ar%uents is the fact that the condition herein referred to was
actuall! and indisputabl! fulfilled on "ebruar! #, $%&', 'hen a ne' title 'as issued in
the naes of petitioners as evidenced b+ T#T No. @1=23@ !7"h. 6D6? 7"h. 626&.
The inevitable conclusion is that on ,anuar+ -., -./0, as evidenced b+ the docuent
denoinated as 6Receipt of Do'n Pa+ent6 !7"h. 6(6? 7"h. 6-6&, the parties entered
into a contract of sale subBect onl+ to the suspensive condition that the sellers shall
effect the issuance of ne' certificate title fro that of their fatherCs nae to their naes
and that, on 8ebruar+ <, -./0, this condition 'as fulfilled !7"h. 6D6? 7"h. 626&.
9e, therefore, hold that, in accordance 'ith (rticle --/= 'hich pertinentl+ provides ;
(rt. --/=. The effects of conditional obli%ation to %ive, once the condition has been
fulfilled, shall retroact to the da+ of the constitution of the obli%ation . . .
In obli%ation to do or not to do, the courts shall deterine, in each case, the retroactive
effect of the condition that has been coplied 'ith.
the ri%hts and obli%ations of the parties 'ith respect to the perfected contract of sale
becae utuall+ due and deandable as of the tie of fulfillent or occurrence of the
suspensive condition on 8ebruar+ <, -./0. (s of that point in tie, reciprocal
obli%ations of both seller and bu+er arose.
Petitioners also ar%ue there could been no perfected contract on ,anuar+ -., -./0
because the+ 'ere then not +et the absolute o'ners of the inherited propert+.
9e cannot sustain this ar%uent.
(rticle ==2 of the #ivil #ode defines Succession as a ode of transferrin% o'nership
as follo's4
(rt. ==2. Succession is a ode of acEuisition b+ virtue of 'hich the propert+, ri%hts and
obli%ations to be e"tent and value of the inheritance of a person are transitted
throu%h his death to another or others b+ his 'ill or b+ operation of la'.
Petitioners5sellers in the case at bar bein% the sons and dau%hters of the decedent
#onstancio P. #oronel are copulsor+ heirs 'ho 'ere called to succession b+
operation of la'. Thus, at the point their father dre' his last breath, petitioners stepped
into his shoes insofar as the subBect propert+ is concerned, such that an+ ri%hts or
obli%ations pertainin% thereto becae bindin% and enforceable upon the. It is
e"pressl+ provided that ri%hts to the succession are transitted fro the oent of
death of the decedent !(rticle ===, #ivil #ode? #uison vs. Villanueva, .3 Phil. /03
G-.01H&.
$e it also noted that petitionersC clai that succession a+ not be declared unless the
creditors have been paid is rendered oot b+ the fact that the+ 'ere able to effect the
transfer of the title to the propert+ fro the decedentCs nae to their naes on
8ebruar+ <, -./0.
(side fro this, petitioners are precluded fro raisin% their supposed lac> of capacit+
to enter into an a%reeent at that tie and the+ cannot be allo'ed to no' ta>e a
posture contrar+ to that 'hich the+ too> 'hen the+ entered into the a%reeent 'ith
private respondent Raona P. (lcara*. The #ivil #ode e"pressl+ states that4
(rt. -2@-. Throu%h estoppel an adission or representation is rendered conclusive
upon the person a>in% it, and cannot be denied or disproved as a%ainst the person
rel+in% thereon.
6
Havin% represented theselves as the true o'ners of the subBect propert+ at the tie
of sale, petitioners cannot clai no' that the+ 'ere not +et the absolute o'ners thereof
at that tie.
Petitioners also contend that althou%h there 'as in fact a perfected contract of sale
bet'een the and Raona P. (lcara*, the latter breached her reciprocal obli%ation
'hen she rendered ipossible the consuation thereof b+ %oin% to the Anited States
of (erica, 'ithout leavin% her address, telephone nuber, and Special Po'er of
(ttorne+ !Para%raphs -2 and -0, (ns'er 'ith #opulsor+ #ounterclai to the
(ended #oplaint, p. 1? Rollo, p. 2@&, for 'hich reason, so petitioners conclude, the+
'ere correct in unilaterall+ rescindin% rescindin% the contract of sale.
9e do not a%ree 'ith petitioners that there 'as a valid rescission of the contract of sale
in the instant case. 9e note that these supposed %rounds for petitionersC rescission,
are ere alle%ations found onl+ in their responsive pleadin%s, 'hich b+ e"press
provision of the rules, are deeed controverted even if no repl+ is filed b+ the plaintiffs
!Sec. --, Rule <, Revised Rules of #ourt&. The records are absolutel+ bereft of an+
supportin% evidence to substantiate petitionersC alle%ations. 9e have stressed tie and
a%ain that alle%ations ust be proven b+ sufficient evidence !N% #ho #io vs. N% Dion%,
--3 Phil. //1 G-.<-H? Recaro vs. 7bisan, 1 S#R( 0./ G-.<-H. Mere alle%ation is not
an evidence !Ia%asca vs. De Vera, =. Phil. @=< G-.2=H&.
7ven assuin% ar(uendo that Raona P. (lcara* 'as in the Anited States of (erica
on 8ebruar+ <, -./0, 'e cannot Bustif+ petitioner5sellersC act of unilaterall+ and
e"tradiciall+ rescindin% the contract of sale, there bein% no e"press stipulation
authori*in% the sellers to e"tarBudiciall+ rescind the contract of sale. !cf. Di%nos vs. #(,
-0/ S#R( @=0 G-.//H? Ta%uba vs. Vda. de Ieon, -@1 S#R( =11 G-./2H&
Moreover, petitioners are estopped fro raisin% the alle%ed absence of Raona P.
(lcara* because althou%h the evidence on record sho's that the sale 'as in the nae
of Raona P. (lcara* as the bu+er, the sellers had been dealin% 'ith #oncepcion D.
(lcara*, RaonaCs other, 'ho had acted for and in behalf of her dau%hter, if not also
in her o'n behalf. Indeed, the do'n pa+ent 'as ade b+ #oncepcion D. (lcara* 'ith
her o'n personal chec> !7"h. 6$6? 7"h. 616& for and in behalf of Raona P. (lcara*.
There is no evidence sho'in% that petitioners ever Euestioned #oncepcionCs authorit+
to represent Raona P. (lcara* 'hen the+ accepted her personal chec>. Neither did
the+ raise an+ obBection as re%ards pa+ent bein% effected b+ a third person.
(ccordin%l+, as far as petitioners are concerned, the ph+sical absence of Raona P.
(lcara* is not a %round to rescind the contract of sale.
#orollaril+, Raona P. (lcara* cannot even be deeed to be in default, insofar as her
obli%ation to pa+ the full purchase price is concerned. Petitioners 'ho are precluded
fro settin% up the defense of the ph+sical absence of Raona P. (lcara* as above5
e"plained offered no proof 'hatsoever to sho' that the+ actuall+ presented the ne'
transfer certificate of title in their naes and si%nified their 'illin%ness and readiness to
e"ecute the deed of absolute sale in accordance 'ith their a%reeent. RaonaCs
correspondin% obli%ation to pa+ the balance of the purchase price in the aount of
P-,-.3,333.33 !as bu+er& never becae due and deandable and, therefore, she
cannot be deeed to have been in default.
(rticle --<. of the #ivil #ode defines 'hen a part+ in a contract involvin% reciprocal
obli%ations a+ be considered in default, to 'it4
(rt. --<.. Those obli%ed to deliver or to do soethin%, incur in dela+ fro the tie the
obli%ee Budiciall+ or e"traBudiciall+ deands fro the the fulfillent of their obli%ation.
""" """ """
In reciprocal obli%ations, neither part+ incurs in dela+ if the other does not compl! or is
not read! to compl! in a proper manner with what is incumbent upon him. 8ro the
oent one of the parties fulfill his obli%ation, dela+ b+ the other be%ins. !7phasis
supplied.&
There is thus neither factual nor le%al basis to rescind the contract of sale bet'een
petitioners and respondents.
9ith the fore%oin% conclusions, the sale to the other petitioner, #atalina $. Mabana%,
%ave rise to a case of double sale 'here (rticle -022 of the #ivil #ode 'ill appl+, to 'it4
(rt. -022. If the sae thin% should have been sold to different vendees, the o'nership
shall be transferred to the person 'ho a+ have first ta>en possession thereof in %ood
faith, if it should be ovable propert+.
Should if be iovable propert+, the o'nership shall belon% to the person acEuirin% it
'ho in %ood faith first recorded it in Re%istr+ of Propert+.
Should there be no inscription, the o'nership shall pertain to the person 'ho in %ood
faith 'as first in the possession? and, in the absence thereof to the person 'ho
presents the oldest title, provided there is %ood faith.
The record of the case sho's that the Deed of (bsolute Sale dated (pril 10, -./0 as
proof of the second contract of sale 'as re%istered 'ith the Re%istr+ of Deeds of
)ue*on #it+ %ivin% rise to the issuance of a ne' certificate of title in the nae of
7
#atalina $. Mabana% on ,une 0, -./0. Thus, the second para%raph of (rticle -022
shall appl+.
The above5cited provision on double sale presues title or o'nership to pass to the
first bu+er, the e"ceptions bein%4 !a& 'hen the second bu+er, in %ood faith, re%isters the
sale ahead of the first bu+er, and !b& should there be no inscription b+ either of the t'o
bu+ers, 'hen the second bu+er, in %ood faith, acEuires possession of the propert+
ahead of the first bu+er. Anless, the second bu+er satisfies these reEuireents, title or
o'nership 'ill not transfer to hi to the preBudice of the first bu+er.
In his coentaries on the #ivil #ode, an accepted authorit+ on the subBect, no' a
distin%uished eber of the #ourt, ,ustice ,ose #. Vitu%, e"plains4
The %overnin% principle is prius tempore, potior jure !first in tie, stron%er in ri%ht&.
Jno'led%e b+ the first bu+er of the second sale cannot defeat the first bu+erCs ri%hts
e"cept 'hen the second bu+er first re%isters in %ood faith the second sale !Olivares vs.
Don*ales, -0. S#R( @@&. #onversel+, >no'led%e %ained b+ the second bu+er of the
first sale defeats his ri%hts even if he is first to re%ister, since >no'led%e taints his
re%istration 'ith bad faith !see also (stor%a vs. #ourt of (ppeals, D.R. No. 0/0@3, 1<
Deceber -./2&. In )ruz vs. )abana !D.R. No. 0<1@1, 11 ,une -./2, -1. S#R( <0<&,
it has held that it is essential, to erit the protection of (rt. -022, second para%raph,
that the second realt+ bu+er ust act in %ood faith in re%isterin% his deed of sale !citin%
#arbonell vs. #ourt of (ppeals, <. S#R( .., #risostoo vs. #(, D.R. No. .0/2@, 31
Septeber -..1&.
!*. +itu( )ompendium of )ivil Law and *urisprudence, $%%, -dition, p. #./&.
Petitioner point out that the notice of lis pendens in the case at bar 'as annoted on the
title of the subBect propert+ onl+ on 8ebruar+ 11, -./0, 'hereas, the second sale
bet'een petitioners #oronels and petitioner Mabana% 'as supposedl+ perfected prior
thereto or on 8ebruar+ -/, -./0. The idea conve+ed is that at the tie petitioner
Mabana%, the second bu+er, bou%ht the propert+ under a clean title, she 'as una'are
of an+ adverse clai or previous sale, for 'hich reason she is bu+er in %ood faith.
9e are not persuaded b+ such ar%uent.
In a case of double sale, 'hat finds relevance and aterialit+ is not 'hether or not the
second bu+er 'as a bu+er in %ood faith but 'hether or not said second bu+er re%isters
such second sale in %ood faith, that is, 'ithout >no'led%e of an+ defect in the title of
the propert+ sold.
(s clearl+ borne out b+ the evidence in this case, petitioner Mabana% could not have in
%ood faith, re%istered the sale entered into on 8ebruar+ -/, -./0 because as earl+ as
8ebruar+ 11, -./0, a notice of lis pendens had been annotated on the transfer
certificate of title in the naes of petitioners, 'hereas petitioner Mabana% re%istered
the said sale soetie in (pril, -./0. (t the tie of re%istration, therefore, petitioner
Mabana% >ne' that the sae propert+ had alread+ been previousl+ sold to private
respondents, or, at least, she 'as char%ed 'ith >no'led%e that a previous bu+er is
claiin% title to the sae propert+. Petitioner Mabana% cannot close her e+es to the
defect in petitionersC title to the propert+ at the tie of the re%istration of the propert+.
This #ourt had occasions to rule that4
If a vendee in a double sale re%isters that sale after he has acEuired >no'led%e that
there 'as a previous sale of the sae propert+ to a third part+ or that another person
clais said propert+ in a pervious sale, the re%istration 'ill constitute a re%istration in
bad faith and 'ill not confer upon hi an+ ri%ht. !Salvoro vs. Tane%a, /= S#R( @2.
G-.=/H? citin% Palarca vs. Director of Iand, 2@ Phil. -2<? #a%aoan vs. #a%aoan, 2@ Phil.
002? 8ernande* vs. Mercader, 2@ Phil. 0/-.&
Thus, the sale of the subBect parcel of land bet'een petitioners and Raona P. (lcara*,
perfected on 8ebruar+ <, -./0, prior to that bet'een petitioners and #atalina $.
Mabana% on 8ebruar+ -/, -./0, 'as correctl+ upheld b+ both the courts belo'.
(lthou%h there a+ be aple indications that there 'as in fact an a%enc+ bet'een
Raona as principal and #oncepcion, her other, as a%ent insofar as the subBect
contract of sale is concerned, the issue of 'hether or not #oncepcion 'as also actin%
in her o'n behalf as a co5bu+er is not sEuarel+ raised in the instant petition, nor in such
assuption disputed bet'een other and dau%hter. Thus, 9e 'ill not touch this issue
and no lon%er disturb the lo'er courtsC rulin% on this point.
9H7R78OR7, preises considered, the instant petition is hereb+ DISMISS7D and the
appealed Bud%ent (88IRM7D.
SO ORD7R7D.
8
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 107207 No3e4ber 23, 1995
5IRGILIO R. ROMERO, petitioner,
vs.
1ON. COURT O) APPEALS &'( ENRI6UETA C1UA 50A. 0E ONGSIONG,
respondents.

5ITUG, J.:
The parties pose this Euestion4 Ma+ the vendor deand the rescission of a contract for
the sale of a parcel of land for a cause traceable to his o'n failure to have the
sEuatters on the subBect propert+ evicted 'ithin the contractuall+5stipulated periodK
Petitioner Vir%ilio R. Roero, a civil en%ineer, 'as en%a%ed in the business of
production, anufacture and e"portation of perlite filter aids, peralite insulation and
processed perlite ore. In -.//, petitioner and his forei%n partners decided to put up a
central 'arehouse in Metro Manila on a land area of appro"iatel+ 1,333 sEuare
eters. The proBect 'as ade >no'n to several freelance real estate bro>ers.
( da+ or so after the announceent, (lfonso 8lores and his 'ife, accopanied b+ a
bro>er, offered a parcel of land easurin% -,.01 sEuare eters. Iocated in $aran%a+
San Dionisio, ParaLaEue, Metro Manila, the lot 'as covered b+ T#T No. @<-231 in the
nae of private respondent 7nriEueta #hua vda. de On%sion%. Petitioner visited the
propert+ and, e"cept for the presence of sEuatters in the area, he found the place
suitable for a central 'arehouse.
Iater, the 8lores spouses called on petitioner 'ith a proposal that should he advance
the aount of P03,333.33 'hich could be used in ta>in% up an eBectent case a%ainst
the sEuatters, private respondent 'ould a%ree to sell the propert+ for onl+ P/33.33 per
sEuare eter. Petitioner e"pressed his concurrence. On 3. ,une -.//, a contract,
denoinated 6Deed of #onditional Sale,6 'as e"ecuted bet'een petitioner and private
respondent. The sipl+5dra'n contract read4
0--0 1" )120T12AL 3AL-
JNO9 (II M7N $: TH7S7 PR7S7NTS4
This #ontract, ade and e"ecuted in the Municipalit+ of Ma>ati, Philippines this .th da+
of ,une, -.// b+ and bet'een4
7NRI)A7T( #HA( VD(. D7 ONDSIOND, of le%al a%e, 'ido', 8ilipino and residin% at
-30 Sioun St., )ue*on #it+, Metro Manila, hereinafter referred to as the V7NDOR?
5and5
VIRDIIIO R. ROM7RO, arried to Severina I. Iat, of Ie%al a%e, 8ilipino, and residin%
at --3 San Mi%uel St., Plainvie' Subd., Mandalu+on% Metro Manila, hereinafter
referred to as the V7ND774
9 I T N 7 S S 7 T H 4 That
9H7R7(S, the V7NDOR is the o'ner of One !-& parcel of land 'ith a total area of
ON7 THOAS(ND NIN7 HANDR7D 8I8T: T9O !-,.01& S)A(R7 M7T7RS, ore or
less, located in $arrio San Dionisio, Municipalit+ of ParaLaEue, Province of Ri*al,
covered b+ T#T No. @<-231 issued b+ the Re%istr+ of Deeds of Pasi% and ore
particularl+ described as follo's4
""" """ """
9H7R7(S, the V7ND77, for !sic& has offered to bu+ a parcel of land and the
V7NDOR has accepted the offer, subBect to the ters and conditions hereinafter
stipulated4
NO9, TH7R78OR7, for and in consideration of the su of ON7 MIIIION 8IV7
HANDR7D SIMT: ON7 THOAS(ND SIM HANDR7D P7SOS !P-,0<-,<33.33& ONI:,
Philippine #urrenc+, pa+able b+ V7ND77 to in to !sic& anner set forth, the V7NDOR
a%rees to sell to the V7ND77, their heirs, successors, adinistrators, e"ecutors,
assi%n, all her ri%hts, titles and interest in and to the propert+ entioned in the 8IRST
9H7R7(S #I(AS7, subBect to the follo'in% ters and conditions4
9
-. That the su of 8I8T: THOAS(ND P7SOS !P03,333.33& ONI: Philippine
#urrenc+, is to be paid upon si%nin% and e"ecution of this instruent.
1. The balance of the purchase price in the aount of ON7 MIIIION 8IV7 HANDR7D
7I7V7N THOAS(ND SIM HANDR7D P7SOS !P-,0--,<33.33& ONI: shall be paid 20
da+s after the reoval of all sEuatters fro the above described propert+.
@. Apon full pa+ent of the overall purchase price as aforesaid, V7NDOR 'ithout
necessit+ of deand shall iediatel+ si%n, e"ecute, ac>no'led%ed !sic& and deliver
the correspondin% deed of absolute sale in favor of the V7ND77 free fro all liens and
encubrances and all Real 7state ta"es are all paid and updated.
It is hereb+ a%reed, covenanted and stipulated b+ and bet'een the parties hereto that if
after <3 da+s fro the date of the si%nin% of this contract the V7NDOR shall not be
able to reove the sEuatters fro the propert+ bein% purchased, the do'npa+ent
ade b+ the bu+er shall be returnedFreibursed b+ the V7NDOR to the V7ND77.
That in the event that the V7ND77 shall not be able to pa+ the V7NDOR the balance
of the purchase price of ON7 MIIIION 8IV7 HANDR7D 7I7V7N THOAS(ND SIM
HANDR7D P7SOS !P-,0--,<33.33& ONI: after 20 da+s fro 'ritten notification to the
V7ND77 of the reoval of the sEuatters fro the propert+ bein% purchased, the 8I8T:
THOAS(ND P7SOS !P03,333.33& previousl+ paid as do'npa+ent shall be forfeited
in favor of the V7NDOR.
7"penses for the re%istration such as re%istration fees, docuentar+ stap, transfer
fee, assurances and such other fees and e"penses as a+ be necessar+ to transfer
the title to the nae of the V7ND77 shall be for the account of the V7ND77 'hile
capital %ains ta" shall be paid b+ the V7NDOR.
IN 9ITN7SS 9H7R7O8, the parties hereunto si%ned those !sic& presents in the #it+ of
Ma>ati MM, Philippines on this .th da+ of ,une, -.//.
!S%d.& !S%d.&
VIRDIIIO R. ROM7RO 7NRI)A7T( #HA( VD(.
D7 ONDSIOND
Vendee Vendor
SIDN7D IN TH7 PR7S7N#7 O84
!S%d.& !S%d.&
Ro'ena #. On%sion% ,ac> M. #ru*
1
(lfonso 8lores, in behalf of private respondent, forth'ith received and ac>no'led%ed a
chec> for P03,333.33
2
fro petitioner.
3
Pursuant to the a%reeent, private respondent filed a coplaint for eBectent !#ivil
#ase No. =0=.& a%ainst Melchor Musa and 1. other sEuatter failies 'ith the
Metropolitan Trial #ourt of ParaLaEue. ( fe' onths later, or on 1- 8ebruar+ -./.,
Bud%ent 'as rendered orderin% the defendants to vacate the preises. The decision
'as handed do'n be+ond the <35da+ period !e"pirin% 3. (u%ust -.//& stipulated in the
contract. The 'rit of e"ecution of the Bud%ent 'as issued, still later, on @3 March
-./..
In a letter, dated 3= (pril -./., private respondent sou%ht to return the P03,333.33 she
received fro petitioner since, she said, she could not 6%et rid of the sEuatters6 on the
lot. (tt+. Ser%io (.8. (postol, counsel for petitioner, in his repl+ of -= (pril -./., refused
the tender and stated4.
Our client believes that 'ith the e"ercise of reasonable dili%ence considerin% the
favorable decision rendered b+ the #ourt and the 'rit of e"ecution issued pursuant
thereto, it is no' possible to eBect the sEuatters fro the preises of the subBect
propert+, for 'hich reason, he proposes that he shall ta>e it upon hiself to eBect the
sEuatters, provided, that e"penses 'hich shall be incurred b+ reason thereof shall be
char%eable to the purchase price of the land.
7
Mean'hile, the Presidential #oission for the Arban Poor !6P#AD6&, throu%h its
Re%ional Director for Iu*on, 8arle+ O. Viloria, as>ed the Metropolitan Trial #ourt of
ParaLaEue for a %race period of 20 da+s fro 1- (pril -./. 'ithin 'hich to relocate
and transfer the sEuatter failies. (ctin% favorabl+ on the reEuest, the court suspended
the enforceent of the 'rit of e"ecution accordin%l+.
On 3/ ,une -./., (tt+. (postol reinded private respondent on the e"pir+ of the 205
da+ %race period and his clientCs 'illin%ness to 6under'rite the e"penses for the
e"ecution of the Bud%ent and eBectent of the occupants.6
5
In his letter of -. ,une -./., (tt+. ,oaEuin :useco, ,r., counsel for private respondent,
advised (tt+. (postol that the Deed of #onditional Sale had been rendered null and
void b+ virtue of his clientCs failure to evict the sEuatters fro the preises 'ithin the
a%reed <35da+ period. He added that private respondent had 6decided to retain the
propert+.6
6
10
On 1@ ,une -./., (tt+. (postol 'rote bac> to e"plain4
The contract of sale bet'een the parties 'as perfected fro the ver+ oent that
there 'as a eetin% of the inds of the parties upon the subBect lot and the price in the
aount of P-,0<-,<33.33. Moreover, the contract had alread+ been partiall+ fulfilled
and e"ecuted upon receipt of the do'npa+ent of +our client. Ms. On%sion% is
precluded fro reBectin% its bindin% effects rel+in% upon her inabilit+ to eBect the
sEuatters fro the preises of subBect propert+ durin% the a%reed period. Suffice it to
state that, the provision of the Deed of #onditional Sale do not %rant her the option or
prero%ative to rescind the contract and to retain the propert+ should she fail to copl+
'ith the obli%ation she has assued under the contract. In fact, a perusal of the ters
and conditions of the contract clearl+ sho's that the ri%ht to rescind the contract and to
deand the returnFreiburseent of the do'npa+ent is %ranted to our client for his
protection.
Instead, ho'ever, of availin% hiself of the po'er to rescind the contract and deand
the return, reiburseent of the do'npa+ent, our client had opted to ta>e it upon
hiself to eBect the sEuatters fro the preises. Precisel+, 'e refer +ou to our letters
addressed to +our client dated (pril -=, -./. and ,une /, -./..
Moreover, it is basic under the la' on contracts that the po'er to rescind is %iven to the
inBured part+. Andoubtedl+, under the circustances, our client is the inBured part+.
8urtherore, +our client has not coplied 'ith her obli%ation under their contract in
%ood faith. It is undeniable that Ms. On%sion% deliberatel+ refused to e"ert efforts to
eBect the sEuatters fro the preises of the subBect propert+ and her decision to retain
the propert+ 'as brou%ht about b+ the sudden increase in the value of realties in the
surroundin% areas.
Please consider this letter as a tender of pa+ent to +our client and a deand to
e"ecute the absolute Deed of Sale.
7
( fe' da+s later !or on 1= ,une -./.&, private respondent, propted b+ petitionerCs
continued refusal to accept the return of the P03,333.33 advance pa+ent, filed 'ith
the Re%ional Trial #ourt of Ma>ati, $ranch -@@, #ivil #ase No. /.52@.2 for rescission of
the deed of 6conditional6 sale, plus daa%es, and for the consi%nation of P03,333.33
cash.
Mean'hile, on 10 (u%ust -./., the Metropolitan Trial #ourt issued an alias 'rit of
e"ecution in #ivil #ase No. =0=. on otion of private respondent but the sEuatters
apparentl+ still sta+ed on.
$ac> to #ivil #ase No. /.52@.2, on 1< ,une -..3, the Re%ional Trial #ourt of Ma>ati
8

rendered decision holdin% that private respondent had no ri%ht to rescind the contract
since it 'as she 'ho 6violated her obli%ation to eBect the sEuatters fro the subBect
propert+6 and that petitioner, bein% the inBured part+, 'as the part+ 'ho could, under
(rticle --.- of the #ivil #ode, rescind the a%reeent. The court ruled that the
provisions in the contract relatin% to !a& the returnFreiburseent of the P03,333.33 if
the vendor 'ere to fail in her obli%ation to free the propert+ fro sEuatters 'ithin the
stipulated period or !b&, upon the other hand, the suCs forfeiture b+ the vendor if the
vendee 'ere to fail in pa+in% the a%reed purchase price, aounted to 6penalt+
clauses6. The court added4
This #ourt is not convinced of the %round relied upon b+ the plaintiff in see>in% the
rescission, nael+4 !-& he !sic& is afraid of the sEuatters? and !1& she has spent so
uch to eBect the fro the preises !p. <, tsn, ses. ,an. @, -..3&. Militatin% a%ainst
her profession of %ood faith is plaintiffs conduct 'hich is not in accord 'ith the rules of
fair pla+ and Bustice. Notabl+, she caused the issuance of an alias 'rit of e"ecution on
(u%ust 10, -./. !7"h. <& in the eBectent suit 'hich 'as alost t'o onths after she
filed the coplaint before this #ourt on ,une 1=, -./.. If she 'ere reall+ afraid of the
sEuatters, then she should not have pursued the issuance of an alias 'rit of e"ecution.
$esides, she did not even report to the police the alle%ed phone threats fro the
sEuatters. To the ind of the #ourt, the so5called sEuatter factor is sipl+ factuitous
!sic&.
9
The lo'er court, accordin%l+, disissed the coplaint and ordered, instead, private
respondent to eBect or cause the eBectent of the sEuatters fro the propert+ and to
e"ecute the absolute deed of conve+ance upon pa+ent of the full purchase price b+
petitioner.
Private respondent appealed to the #ourt of (ppeals. On 1. Ma+ -..1, the appellate
court rendered its decision.
10
It opined that the contract entered into b+ the parties 'as
subBect to a resolutor+ condition, i.e., the eBectent of the sEuatters fro the land, the
non5occurrence of 'hich resulted in the failure of the obBect of the contract? that private
respondent substantiall+ coplied 'ith her obli%ation to evict the sEuatters? that it 'as
petitioner 'ho 'as not read+ to pa+ the purchase price and fulfill his part of the
contract, and that the provision reEuirin% a andator+ returnFreiburseent of the
P03,333.33 in case private respondent 'ould fail to eBect the sEuatters 'ithin the <35
da+ period 'as not a penal clause. Thus, it concluded.
9H7R78OR7, the decision appealed fro is R7V7RS7D and S7T (SID7, and a ne'
one entered declarin% the contract of conditional sale dated ,une ., -.// cancelled
and orderin% the defendant5appellee to accept the return of the do'npa+ent in the
aount of P03,333.33 'hich 'as deposited in the court belo'. No pronounceent as
to costs.
11
11
8ailin% to obtain a reconsideration, petitioner filed this petition for revie' on certiorari
raisin% issues that, in fine, center on the nature of the contract adverted to and the
P03,333.33 reittance ade b+ petitioner.
( perfected contract of sale a+ either be absolute or conditional
12
dependin% on
'hether the a%reeent is devoid of, or subBect to, an+ condition iposed on the
passin( of title of the thin% to be conve+ed or on the obli(ation of a part+ thereto. 9hen
o'nership is retained until the fulfillent of a positive condition the breach of the
condition 'ill sipl+ prevent the dut+ to conve+ title fro acEuirin% an obli(ator! force.
If the condition is iposed on an obli(ation of a part+ 'hich is not coplied 'ith, the
other part! a+ either refuse to proceed or 'aive said condition !(rt. -020, #ivil #ode&.
9here, of course, the condition is iposed upon the perfection of the contract itself, the
failure of such condition 'ould prevent the Buridical relation itself fro coin% into
e"istence.
13
In deterinin% the real character of the contract, the title %iven to it b+ the parties is not
as uch si%nificant as its substance. 8or e"aple, a deed of sale, althou%h
denoinated as a deed of conditional sale, a+ be treated as absolute in nature, if title
to the propert+ sold is not reserved in the vendor or if the vendor is not %ranted the ri%ht
to unilaterall+ rescind the contract predicated
on the fulfillent or non5fulfillent, as the case a+ be, of the prescribed condition.
17
The ter 6condition6 in the conte"t of a perfected contract of sale pertains, in realit+, to
the copliance b+ one part+ of an underta>in% the fulfillent of 'hich 'ould bec>on, in
turn, the deandabilit+ of the reciprocal prestation of the other part+. The reciprocal
obli%ations referred to 'ould norall+ be, in the case of vendee, the pa+ent of the
a%reed purchase price and, in the case of the vendor, the fulfillent of certain e"press
'arranties !'hich, in the case at bench is the tiel+ eviction of the sEuatters on the
propert+&.
It 'ould be futile to challen%e the a%reeent here in Euestion as not bein% a dul+
perfected contract. ( sale is at once perfected 'hen a person !the seller& obli%ates
hiself, for a price certain, to deliver and to transfer o'nership of a specified thin% or
ri%ht to another !the bu+er& over 'hich the latter a%rees.
15
The obBect of the sale, in the case before us, 'as specificall+ identified to be a -,.015
sEuare eter lot in San Dionisio, ParaLaEue, Ri*al, covered b+ Transfer #ertificate of
Title No. @<-231 of the Re%istr+ of Deeds for Pasi% and therein technicall+ described.
The purchase price 'as fi"ed at P-,0<-,<33.33, of 'hich P03,333.33 'as to be paid
upon the e"ecution of the docuent of sale and the balance of P-,0--,<33.33 pa+able
620 da+s after the reoval of all sEuatters fro the above described propert+.6
8ro the oent the contract is perfected, the parties are bound not onl+ to the
fulfillent of 'hat has been e"pressl+ stipulated but also to all the conseEuences
'hich, accordin% to their nature, a+ be in >eepin% 'ith %ood faith, usa%e and la'.
Ander the a%reeent, private respondent is obli%ated to evict the sEuatters on the
propert+. The eBectent of the sEuatters is a condition the operative act of 'hich sets
into otion the period of copliance b+ petitioner of his o'n obli%ation, i.e., to pa+ the
balance of the purchase price. Private respondentCs failure 6to reove the sEuatters
fro the propert+6 'ithin the stipulated period %ives petitioner the ri%ht to either refuse
to proceed 'ith the a%reeent or 'aive that condition in consonance 'ith (rticle -020
of the #ivil #ode.
16
This option clearl+ belon%s to petitioner and not to private
respondent.
9e share the opinion of the appellate court that the underta>in% reEuired of private
respondent does not constitute a 6potestative condition dependent solel+ on his 'ill6
that i%ht, other'ise, be void in accordance 'ith (rticle --/1 of the #ivil #ode
17
but a
6i"ed6 condition 6dependent not on the 'ill of the vendor alone but also of third
persons li>e the sEuatters and %overnent a%encies and personnel concerned.6
18
9e
ust hasten to add, ho'ever, that 'here the so5called 6potestative condition6 is
iposed not on the birth of the obli%ation but on its fulfillent, onl+ the obli%ation is
avoided, leavin% unaffected the obli%ation itself.
19
In contracts of sale particularl+, (rticle -020 of the #ivil #ode, aforeentioned, allo's
the obli%ee to choose bet'een proceedin% 'ith the a%reeent or 'aivin% the
perforance of the condition. It is this provision 'hich is the pertinent rule in the case
at bench. Here, evidentl+, petitioner has 'aived the perforance of the condition
iposed on private respondent to free the propert+ fro sEuatters.
20
In an+ case, private respondentCs action for rescission is not 'arranted. She is not the
inBured part+.
21
The ri%ht of resolution of a part+ to an obli%ation under (rticle --.- of
the #ivil #ode is predicated on a breach of faith b+ the other part+ that violates the
reciprocit+ bet'een the.
22
It is private respondent 'ho has failed in her obli%ation
under the contract. Petitioner did not breach the a%reeent. He has a%reed, in fact, to
shoulder the e"penses of the e"ecution of the Bud%ent in the eBectent case and to
a>e arran%eents 'ith the sheriff to effect such e"ecution. In his letter of 1@ ,une
-./., counsel for petitioner has tendered pa+ent and deanded forth'ith the
e"ecution of the deed of absolute sale. Parentheticall+, this offer to pa+, havin% been
ade prior to the deand for rescission, assuin% for the sa>e of ar%uent that such
a deand is proper under (rticle -0.1
23
of the #ivil #ode, 'ould li>e'ise suffice to
defeat private respondentCs prero%ative to rescind thereunder.
There is no need to still belabor the Euestion of 'hether the P03,333.33 advance
pa+ent is reibursable to petitioner or forfeitable b+ private respondent, since, on the
basis of our fore%oin% conclusions, the atter has ceased to be an issue. Suffice it to
12
sa+ that petitioner havin% opted to proceed 'ith the sale, neither a+ petitioner
deand its reiburseent fro private respondent nor a+ private respondent subBect
it to forfeiture.
9H7R78OR7, the Euestioned decision of the #ourt of (ppeals is hereb+ R7V7RS7D
(ND S7T (SID7, and another is entered orderin% petitioner to pa+ private respondent
the balance of the purchase price and the latter to e"ecute the deed of absolute sale in
favor of petitioner. No costs.
SO ORD7R7D.
13
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 112212 M&rc# 2, 1998
GREGORIO )ULE, petitioner,
vs.
COURT O) APPEALS, NINE5ETC1 CRU &'( 9UAN BELARMINO, respondents.

ROMERO, J.:
This petition for revie' on certiorari Euestions the affirance b+ the #ourt of (ppeals of
the decision
1
of the Re%ional Trial #ourt of San Pablo #it+, $ranch @3, disissin% the
coplaint that pra+ed for the nullification of a contract of sale of a -35hectare propert+
in Tana+, Ri*al in consideration of the aount of P23,333.33 and a 1.0 carat eerald5
cut diaond !#ivil #ase No. SP51200&. The lo'er courtCs decision disposed of the case
as follo's4
9H7R78OR7, preises considered, the #ourt hereb+ renders Bud%ent disissin%
the coplaint for lac> of erit and orderin% plaintiff to pa+4
-. Defendant Dra. Ninevetch M. #ru* the su of P@33,333.33 as and for oral
daa%es and the su of P-33,333.33 as and for e"eplar+ daa%es?
1. Defendant (tt+. ,uan $elarino the su of P103,333.33 as and for oral daa%es
and the su of P-03,333.33 as and for e"eplar+ daa%es?
@. Defendant Dra. #ru* and (tt+. $elarino the su of P10,333.33 each as and for
attorne+Cs fees and liti%ation e"penses? and
2. The costs of suit.
SO ORD7R7D.
(s found b+ the #ourt of (ppeals and the lo'er court, the antecedent facts of this case
are as follo's4
Petitioner Dre%orio 8ule, a ban>er b+ profession and a Be'eler at the sae tie,
acEuired a -35hectare propert+ in Tana+, Ri*al !hereinafter 6Tana+ propert+6&, covered
b+ Transfer #ertificate of Title No. @13=10 'hich used to be under the nae of 8r.
(ntonio ,acobe. The latter had ort%a%ed it earlier to the Rural $an> of (lainos !the
$an>&, Ia%una, Inc. to secure a loan in the aount of P-3,333.33, but the ort%a%e
'as later foreclosed and the propert+ offered for public auction upon his default.
In ,ul+ -./2, petitioner, as corporate secretar+ of the ban>, as>ed Reelia Dichoso
and Oliva Mendo*a to loo> for a bu+er 'ho i%ht be interested in the Tana+ propert+.
The t'o found one in the person of herein private respondent Dr. Ninevetch #ru*. It so
happened that at the tie, petitioner had sho'n interest in bu+in% a pair of eerald5cut
diaond earrin%s o'ned b+ Dr. #ru* 'hich he had seen in ,anuar+ of the sae +ear
'hen his other e"ained and appraised the as %enuine. Dr. #ru*, ho'ever,
declined petitionerCs offer to bu+ the Be'elr+ for P-33,333.33. Petitioner then ade
another bid to bu+ the for ASN<,333.33 at the e"chan%e rate of N-.33 to P10.33. (t
this point, petitioner inspected said Be'elr+ at the lobb+ of the Prudential $an> branch in
San Pablo #it+ and then ade a s>etch thereof. Havin% s>etched the Be'elr+ for t'ent+
to thirt+ inutes, petitioner %ave the bac> to Dr. #ru* 'ho a%ain refused to sell the
since the e"chan%e rate of the peso at the tie appreciated to P-..33 to a dollar.
SubseEuentl+, ho'ever, ne%otiations for the barter of the Be'elr+ and the Tana+
propert+ ensued. Dr. #ru* reEuested herein private respondent (tt+. ,uan $elarino to
chec> the propert+ 'ho, in turn, found out that no sale or barter 'as feasible because
the one5+ear period for redeption of the said propert+ had not +et e"pired at the tie.
In an effort to cut throu%h an+ le%al ipedient, petitioner e"ecuted on October -.,
-./2, a deed of redeption on behalf of 8r. ,acobe purportedl+ in the aount of
P-0,./=.=/, and on even date, 8r. ,acobe sold the propert+ to petitioner for
P=0,333.33. The haste 'ith 'hich the t'o deeds 'ere e"ecuted is sho'n b+ the fact
that the deed of sale 'as notari*ed ahead of the deed of redeption. (s Dr. #ru* had
alread+ a%reed to the proposed barter, petitioner 'ent to Prudential $an> once a%ain to
ta>e a loo> at the Be'elr+.
In the afternoon of October 1@, -./2, petitioner et (tt+. $elarino at the latterCs
residence to prepare the docuents of sale.
2
Dr. #ru* herself 'as not around but (tt+.
$elarino 'as a'are that she and petitioner had previousl+ a%reed to e"chan%e a pair
of eerald5cut diaond earrin%s for the Tana+ propert+. (tt+. $elarino accordin%l+
caused the preparation of a deed of absolute sale 'hile petitioner and Dr. #ru*
attended to the safe>eepin% of the Be'elr+.
14
The follo'in% da+, petitioner, to%ether 'ith Dichoso and Mendo*a, arrived at the
residence of (tt+. $elarino to finall+ e"ecute a deed of absolute sale. Petitioner si%ned
the deed and %ave (tt+. $elarino the aount of P-@,=33.33 for necessar+ e"penses
in the transfer of title over the Tana+ propert+. Petitioner also issued a certification to
the effect that the actual consideration of the sale 'as P133,333.33 and not
P/3,333.33 as indicated in the deed of absolute sale. The disparit+ bet'een the actual
contract price and the one indicated on the deed of absolute sale 'as purportedl+
aied at inii*in% the aount of the capital %ains ta" that petitioner 'ould have to
shoulder. Since the Be'elr+ 'as appraised onl+ at P-<3,333.33, the parties a%reed that
the balance of P23,333.33 'ould Bust be paid later in cash.
(s pre5arran%ed, petitioner left (tt+. $elarinoCs residence 'ith Dichoso and Mendo*a
and headed for the ban>, arrivin% there at past 0433 p.. Dr. #ru* also arrived shortl+
thereafter, but the cashier 'ho >ept the other >e+ to the deposit bo" had alread+ left the
ban>. Dr. #ru* and Dichoso, therefore, loo>ed for said cashier and found hi havin% a
haircut. (s soon as his haircut 'as finished, the cashier returned to the ban> and
arrived there at 042/ p.., ahead of Dr. #ru* and Dichoso 'ho arrived at 0400 p.. Dr.
#ru* and the cashier then opened the safet+ deposit bo", the forer retrievin% a
transparent plastic or cellophane ba% 'ith the Be'elr+ inside and handin% over the
sae to petitioner. The latter too> the Be'elr+ fro the ba%, 'ent near the electric li%ht
at the ban>Cs lobb+, held the Be'elr+ a%ainst the li%ht and e"ained it for ten to fifteen
inutes. (fter a 'hile, Dr. #ru* as>ed, 614a! na ba i!an56 Petitioner e"pressed his
satisfaction b+ noddin% his head.
8or services rendered, petitioner paid the a%ents, Dichoso and Mendo*a, the aount of
ASN@33.33 and soe pieces of Be'elr+. He did not, ho'ever, %ive the half of the pair
of earrin%s in Euestion 'hich he had earlier proised.
Iater, at about /433 oCcloc> in the evenin% of the sae da+, petitioner arrived at the
residence of (tt+. $elarino coplainin% that the Be'elr+ %iven to hi 'as fa>e. He
then used a tester to prove the alle%ed fa>er+. Mean'hile, at /4@3 p.., Dichoso and
Mendo*a 'ent to the residence of Dr. #ru* to borro' her car so that, 'ith (tt+.
$elarino, the+ could re%ister the Tana+ propert+. (fter Dr. #ru* had a%reed to lend her
car, Dichoso called up (tt+. $elarino. The latter, ho'ever, instructed Dichoso to
proceed iediatel+ to his residence because petitioner 'as there. $elievin% that
petitioner had finall+ a%reed to %ive the half of the pair of earrin%s, Dichoso 'ent
posthaste to the residence of (tt+. $elarino onl+ to find petitioner alread+
deonstratin% 'ith a tester that the earrin%s 'ere fa>e. Petitioner then accused
Dichoso and Mendo*a of deceivin% hi 'hich the+, ho'ever, denied. The+ countered
that petitioner could not have been fooled because he had vast e"perience re%ardin%
Be'elr+. Petitioner nonetheless too> bac> the ASN@33.33 and Be'elr+ he had %iven
the.
Thereafter, the %roup decided to %o to the house of a certain Macario Dia+u%a, a
Be'eler, to have the earrin%s tested. Dia+u%a, after ta>in% one loo> at the earrin%s,
iediatel+ declared the counterfeit. (t around .4@3 p.., petitioner 'ent to one (tt+.
Re+naldo (lcantara residin% at Ia>eside Subdivision in San Pablo #it+, coplainin%
about the fa>e Be'elr+. Apon bein% advised b+ the latter, petitioner reported the atter
to the police station 'here Dichoso and Mendo*a li>e'ise e"ecuted s'orn stateents.
On October 1<, -./2, petitioner filed a coplaint before the Re%ional Trial #ourt of San
Pablo #it+ a%ainst private respondents pra+in%, aon% other thin%s, that the contract of
sale over the Tana+ propert+ be declared null and void on the %round of fraud and
deceit.
On October @3, -./2, the lo'er court issued a teporar+ restrainin% order directin% the
Re%ister of Deeds of Ri*al to refrain fro actin% on the pertinent docuents involved in
the transaction. On Noveber 13, -./2, ho'ever, the sae court lifted its previous
order and denied the pra+er for a 'rit of preliinar+ inBunction.
(fter trial, the lo'er court rendered its decision on March =, -./.. #onfrontin% the issue
of 'hether or not the %enuine pair of earrin%s used as consideration for the sale 'as
delivered b+ Dr. #ru* to petitioner, the lo'er court said4
The #ourt finds that the ans'er is definitel+ in the affirative. Indeed, Dra. #ru*
delivered !the& subBect Be'elries !sic& into the hands of plaintiff 'ho even raised the
sae nearer to the li%hts of the lobb+ of the ban> near the door. 9hen as>ed b+ Dra.
#ru* if ever+thin% 'as in order, plaintiff even nodded his satisfaction !Hearin% of 8eb.
12, -.//&. (t that instance, plaintiff did not protest, coplain or be% for additional tie
to e"aine further the Be'elries !sic&. $ein% a professional ban>er and en%a%ed in the
Be'elr+ business plaintiff is conversant and copetent to detect a fa>e diaond fro
the real thin%. Plaintiff 'as accorded the reasonable tie and opportunit+ to ascertain
and inspect the Be'elries !sic& in accordance 'ith (rticle -0/2 of the #ivil #ode. Plaintiff
too> deliver+ of the subBect Be'elries !sic& before <433 p.. of October 12, -./2. 9hen
he 'ent at /433 p.. that sae da+ to the residence of (tt+. $elarino alread+ 'ith a
tester coplainin% about soe fa>e Be'elries !sic&, there 'as alread+ undue dela+
because of the lapse of a considerable len%th of tie since he %ot hold of subBect
Be'elries !sic&. The lapse of t'o !1& hours ore or less before plaintiff coplained is
considered b+ the #ourt as unreasonable dela+.
3
The lo'er court further ruled that all the eleents of a valid contract under (rticle -20/
of the #ivil #ode 'ere present, nael+4 !a& consent or eetin% of the inds? !b&
deterinate subBect atter, and !c& price certain in one+ or its eEuivalent. The sae
eleents, accordin% to the lo'er court, 'ere present despite the fact that the
a%reeent bet'een petitioner and Dr. #ru* 'as principall+ a barter contract. The lo'er
court e"plained thus4
15
. . . . PlaintiffCs o'nership over the Tana+ propert+ passed unto Dra. #ru* upon the
constructive deliver+ thereof b+ virtue of the Deed of (bsolute Sale !7"h. D&. On the
other hand, the o'nership of Dra. #ru* over the subBect Be'elries !sic& transferred to
the plaintiff upon her actual personal deliver+ to hi at the lobb+ of the Prudential $an>.
It is e"pressl+ provided b+ la' that the thin% sold shall be understood as delivered,
'hen it is placed in the control and possession of the vendee !(rt. -2.=, #ivil #ode?
Juen*le O Straff vs. 9atson O #o. -@ Phil. 1<&. The o'nership andFor title over the
Be'elries !sic& 'as transitted iediatel+ before <433 p.. of October 12, -./2.
Plaintiff si%nified his approval b+ noddin% his head. Deliver+ or tradition, is one of the
odes of acEuirin% o'nership !(rt. =-1, #ivil #ode&.
Siilarl+, 'hen 7"hibit D 'as e"ecuted, it 'as eEuivalent to the deliver+ of the Tana+
propert+ in favor of Dra. #ru*. The e"ecution of the public instruent !7"h. D& operates
as a foral or s+bolic deliver+ of the Tana+ propert+ and authori*es the bu+er, Dra.
#ru* to use the docuent as proof of o'nership !8lorendo v. 8o*, 13 Phil. @..&. More
so, since 7"hibit D does not contain an+ proviso or stipulation to the effect that title to
the propert+ is reserved 'ith the vendor until full pa+ent of the purchase price, nor is
there a stipulation %ivin% the vendor the ri%ht to unilaterall+ rescind the contract the
oent the vendee fails to pa+ 'ithin a fi"ed period !Ta%uba v. Vda. De Ieon, -@1
S#R( =11? Iu*on $ro>era%e #o. Inc. vs. Maritie $uildin% #o. Inc. /< S#R( @30?
8roilan v. Pan Oriental Shippin% #o. et al. -1 S#R( 1=<&.
7
(side fro concludin% that the contract of barter or sale had in fact been consuated
'hen petitioner and Dr. #ru* parted 'a+s at the ban>, the trial court li>e'ise d'elt on
the une"plained dela+ 'ith 'hich petitioner coplained about the alle%ed fa>er+. Thus4
. . . . Veril+, plaintiff is alread+ estopped to coe bac> after the lapse of considerable
len%th of tie to clai that 'hat he %ot 'as fa>e. He is a $usiness Mana%eent
%raduate of Ia Salle Aniversit+, #lass -.=/5=., a professional ban>er as 'ell as a
Be'eler in his o'n ri%ht. T'o hours is ore than enou%h tie to a>e a s'itch of a
Russian diaond 'ith the real diaond. It ust be reebered that in ,ul+ -./2
plaintiff ade a s>etch of the subBect Be'elries !sic& at the Prudential $an>. Plaintiff had
a tester at /433 p.. at the residence of (tt+. $elarino. 9h+ then did he not brin% it out
'hen he 'as e"ainin% the subBect Be'elries !sic& at about <433 p.. in the ban>Cs
lobb+K Obviousl+, he had no need for it after bein% satisfied of the %enuineness of the
subBect Be'elries !sic&. 9hen Dra. #ru* and plaintiff left the ban> both of the had full+
perfored their respective prestations. Once a contract is sho'n to have been
consuated or full+ perfored b+ the parties thereto, its e"istence and bindin% effect
can no lon%er be disputed. It is irrelevant and iaterial to dispute the due e"ecution
of a contract if both of the have in fact perfored their obli%ations thereunder and
their respective si%natures and those of their 'itnesses appear upon the face of the
docuent !9eldon #onstruction v. #( D.R. No. I5@0=1-, Oct. -1, -./=&.
5
8inall+, in a'ardin% daa%es to the defendants, the lo'er court rear>ed4
The #ourt finds that plaintiff acted in 'anton bad faith. 7"hibit 15$elarino purports to
sho' that the Tana+ propert+ is 'orth P10,333.33. Ho'ever, also on that sae da+ it
'as e"ecuted, the propert+Cs 'orth 'as a%nified at P=0,333.33 !7"h. @5$elarino&.
Ho' could in less than a da+ !Oct. -., -./2& the value 'ould !sic& triple under noral
circustancesK Plaintiff, 'ith the assistance of his a%ents, 'as able to e"chan%e the
Tana+ propert+ 'hich his ban> valued onl+ at P10,333.33 in e"chan%e for a %enuine
pair of eerald cut diaond 'orth P133,333.33 belon%in% to Dra. #ru*. He also
retrieved the ASN@33.33 and Be'elries !sic& fro his a%ents. $ut he 'as not satisfied in
bein% able to %et subBect Be'elries for a son%. He had to file a alicious and unfounded
case a%ainst Dra. #ru* and (tt+. $elarino 'ho are 'ell >no'n, respected and held in
hi%h estee in San Pablo #it+ 'here ever+bod+ practicall+ >no's ever+bod+. Plaintiff
cae to #ourt 'ith unclean hands dra%%in% the defendants and soilin% their clean and
%ood nae in the process. $oth of the are near the t'ili%ht of their lives after
aintainin% and nurturin% their %ood reputation in the counit+ onl+ to be stunned
'ith a court case. Since the filin% of this case on October 1<, -./2 up to the present
the+ 'ere livin% under a pall of doubt. Surel+, this affected not onl+ their earnin%
capacit+ in their practice of their respective professions, but also the+ suffered
besirched reputations. Dra. #ru* runs her o'n hospital and defendant $elarino is a
'ell respected le%al practitioner. The len%th of tie this case dra%%ed on durin% 'hich
period their reputation 'ere !sic& tarnished and their naes ali%ned b+ the pendenc+
of the case, the #ourt is of the belief that soe of the daa%es the+ pra+ed for in their
ans'ers to the coplaint are reasonabl+ proportionate to the sufferin%s the+ under'ent
!(rt. 11-., Ne' #ivil #ode&. Moreover, because of the falsit+, alice and baseless
nature of the coplaint defendants 'ere copelled to liti%ate. Hence, the a'ard of
attorne+Cs fees is 'arranted under the circustances !(rt. 113/, Ne' #ivil #ode&.
6
8ro the trial courtCs adverse decision, petitioner elevated the atter to the #ourt of
(ppeals. On October 13, -..1, the #ourt of (ppeals, ho'ever, rendered a decision
7

affirin% in toto the lo'er courtCs decision. His otion for reconsideration havin% been
denied on October -., -..@, petitioner no' files the instant petition alle%in% that4
I. TH7 TRI(I #OART 7RR7D IN DISMISSIND PI(INTI88CS #OMPI(INT (ND IN
HOIDIND TH(T TH7 PI(INTI88 (#TA(II: R7#7IV7D ( D7NAIN7 P(IR O8
7M7R(ID #AT DI(MOND 7(RRIND!S& 8ROM D787ND(NT #RAP . . . ?
II. TH7 TRI(I #OART 7RR7D IN (9(RDIND MOR(I (ND 7M7MPI(R: D(M(D7S
(ND (TTORN7:CS 877S IN 8(VOR O8 D787ND(NTS (ND (D(INST TH7
PI(INTI88 IN THIS #(S7? and
III. TH7 TRI(I, #OART 7RR7D IN NOT D7#I(RIND TH7 D77D O8 S(I7 O8 TH7
T(N(: PROP7RT: !7MH. 6D6& (S NAII (ND VOID OR IN NOT (NNAIIIND TH7
16
S(M7, (ND IN 8(IIIND TO DR(NT R7(SON($I7 D(M(D7S IN 8(VOR O8 TH7
PI(INTI88.
8
(s to the first alle%ation, the #ourt observes that petitioner is essentiall+ raisin% a
factual issue as it invites us to e"aine and 'ei%h ane' the facts re%ardin% the
%enuineness of the earrin%s bartered in e"chan%e for the Tana+ propert+. This, of
course, 'e cannot do 'ithout undul+ transcendin% the liits of our revie' po'er in
petitions of this nature 'hich are confined erel+ to pure Euestions of la'. 9e accord,
as a %eneral rule, conclusiveness to a lo'er courtCs findin%s of fact unless it is sho'n,
inter alia, that4 !-& the conclusion is a findin% %rounded on speculations, surises or
conBectures? !1& the inference is anifestl+ ista>en, absurd and ipossible? !@& 'hen
there is a %rave abuse of discretion? !2& 'hen the Bud%ent is based on a
isapprehension of facts? !0& 'hen the findin%s of fact are conflictin%? and !<& 'hen the
#ourt of (ppeals, in a>in% its findin%s, 'ent be+ond the issues of the case and the
sae is contrar+ to the adission of both parties.
9
9e find nothin%, ho'ever, that
'arrants the application of an+ of these e"ceptions.
#onseEuentl+, this #ourt upholds the appellate courtCs findin%s of fact especiall+
because these concur 'ith those of the trial court 'hich, upon a thorou%h scrutin+ of
the records, are firl+ %rounded on evidence presented at the trial.
10
To reiterate, this
#ourtCs Burisdiction is onl+ liited to revie'in% errors of la' in the absence of an+
sho'in% that the findin%s coplained of are totall+ devoid of support in the record or
that the+ are %larin%l+ erroneous as to constitute serious abuse of discretion.
11
Nonetheless, this #ourt has to closel+ delve into petitionerCs alle%ation that the lo'er
courtCs decision of March =, -./. is a 6read+5ade6 one because it 'as handed do'n
a da+ after the last date of the trial of the case.
12
Petitioner, in this re%ard, finds it
incredible that ,ud%e ,. (usberto ,araillo 'as able to 'rite a -15pa%e sin%le5spaced
decision, t+pe it and release it on March =, -./., less than a da+ after the last hearin%
on March <, -./.. He stressed that ,ud%e ,araillo replaced ,ud%e Salvador de
Du*an and heard onl+ his rebuttal testion+.
This alle%ation is obviousl+ no ore than a desperate effort on the part of petitioner to
dispara%e the lo'er courtCs findin%s of fact in order to convince this #ourt to revie' the
sae. It is note'orth+ that (tt+. $elarino clarified that ,ud%e ,araillo had issued the
first order in the case as earl+ as March ., -./= or t'o +ears before the rendition of the
decision. In fact, (tt+. $elarino terinated presentation of evidence on October -@,
-./=, 'hile Dr. #ru* finished hers on 8ebruar+ 2, -./., or ore than a onth prior to
the rendition of the Bud%ent. The March <, -./. hearin% 'as conducted solel+ for the
presentation of petitionerCs rebuttal testion+.
13
In other 'ords, ,ud%e ,araillo had
aple tie to stud+ the case and 'rite the decision because the rebuttal evidence
'ould onl+ serve to confir or verif+ the facts alread+ presented b+ the parties.
The #ourt finds nothin% anoalous in the said situation. No proof has been adduced
that ,ud%e ,araillo 'as otivated b+ a alicious or sinister intent in disposin% of the
case 'ith dispatch. Neither is there proof that soeone else 'rote the decision for hi.
The iediate rendition of the decision 'as no ore than ,ud%e ,arailloCs
copliance 'ith his dut+ as a Bud%e to 6dispose of the courtCs business proptl+ and
decide cases 'ithin the reEuired periods.6
17
The t'o5+ear period 'ithin 'hich ,ud%e
,araillo handled the case provided hi 'ith all the tie to stud+ it and even 'rite
do'n its facts as soon as these 'ere presented to court. In fact, this #ourt does not
see an+thin% 'ron% in the practice of 'ritin% a decision da+s before the scheduled
proul%ation of Bud%ent and leavin% the dispositive portion for t+pin% at a tie close
to the date of proul%ation, provided that no alice or an+ 'ron%ful conduct attends its
adoption.
15
The practice serves the dual purposes of safe%uardin% the confidentialit+ of
draft decisions and renderin% decisions 'ith proptness. Neither can ,ud%e ,araillo
be ade adinistrativel+ ans'erable for the iediate rendition of the decision. The
acts of a Bud%e 'hich pertain to his Budicial functions are not subBect to disciplinar+
po'er unless the+ are coitted 'ith fraud, dishonest+, corruption or bad faith.
16

Hence, in the absence of sufficient proof to the contrar+, ,ud%e ,araillo is presued
to have perfored his Bob in accordance 'ith la' and should instead be coended
for his close attention to dut+.
Havin% disposed of petitionerCs first contention, 'e no' coe to the core issue of this
petition 'hich is 'hether the #ourt of (ppeals erred in upholdin% the validit+ of the
contract of barter or sale under the circustances of this case.
The #ivil #ode provides that contracts are perfected b+ ere consent. 8ro this
oent, the parties are bound not onl+ to the fulfillent of 'hat has been e"pressl+
stipulated but also to all the conseEuences 'hich, accordin% to their nature, a+ be in
>eepin% 'ith %ood faith, usa%e and la'.
17
( contract of sale is perfected at the oent
there is a eetin% of the inds upon the thin% 'hich is the obBect of the contract and
upon the price.
18
$ein% consensual, a contract of sale has the force of la' bet'een the
contractin% parties and the+ are e"pected to abide in %ood faith b+ their respective
contractual coitents. (rticle -@0/ of the #ivil #ode 'hich reEuires the ebodient
of certain contracts in a public instruent, is onl+ for convenience,
19
and re%istration of
the instruent onl+ adversel+ affects third parties.
20
8oral reEuireents are,
therefore, for the benefit of third parties. Non5copliance there'ith does not adversel+
affect the validit+ of the contract nor the contractual ri%hts and obli%ations of the parties
thereunder.
It is evident fro the facts of the case that there 'as a eetin% of the inds bet'een
petitioner and Dr. #ru*. (s such, the+ are bound b+ the contract unless there are
reasons or circustances that 'arrant its nullification. Hence, the proble that should
be addressed in this case is 'hether or not under the facts dul+ established herein, the
contract can be voided in accordance 'ith la' so as to copel the parties to restore to
17
each other the thin%s that have been the subBect of the contract 'ith their fruits, and the
price 'ith interest.
21
#ontracts that are voidable or annullable, even thou%h there a+ have been no
daa%e to the contractin% parties are4 !-& those 'here one of the parties is incapable
of %ivin% consent to a contract? and !1& those 'here the consent is vitiated b+ ista>e,
violence, intiidation, undue influence or fraud.
22
(ccordin%l+, petitioner no' stresses
before this #ourt that he entered into the contract in the belief that the pair of eerald5
cut diaond earrin%s 'as %enuine. On the prete"t that those pieces of Be'elr+ turned
out to be counterfeit, ho'ever, petitioner subseEuentl+ sou%ht the nullification of said
contract on the %round that it 'as, in fact, 6tainted 'ith fraud6
23
such that his consent
'as vitiated.
There is fraud 'hen, throu%h the insidious 'ords or achinations of one of the
contractin% parties, the other is induced to enter into a contract 'hich, 'ithout the, he
'ould not have a%reed to.
27
The records, ho'ever, are bare of an+ evidence
anifestin% that private respondents eplo+ed such insidious 'ords or achinations to
entice petitioner into enterin% the contract of barter. Neither is there an+ evidence
sho'in% that Dr. #ru* induced petitioner to sell his Tana+ propert+ or that she caBoled
hi to ta>e the earrin%s in e"chan%e for said propert+. On the contrar+, Dr. #ru* did not
initiall+ accede to petitionerCs proposal to bu+ the said Be'elr+. Rather, it appears that it
'as petitioner, throu%h his a%ents, 'ho led Dr. #ru* to believe that the Tana+ propert+
'as 'orth e"chan%in% for her Be'elr+ as he represented that its value 'as P233,333.33
or ore than double that of the Be'elr+ 'hich 'as valued onl+ at P-<3,333.33. If
indeed petitionerCs propert+ 'as trul+ 'orth that uch, it 'as certainl+ contrar+ to the
nature of a businessan5ban>er li>e hi to have parted 'ith his real estate for half its
price. In short, it 'as in fact petitioner 'ho resorted to achinations to convince Dr.
#ru* to e"chan%e her Be'elr+ for the Tana+ propert+.
Moreover, petitioner did not clearl+ alle%e ista>e as a %round for nullification of the
contract of sale. 7ven assuin% that he did, petitioner cannot successfull+ invo>e the
sae. To invalidate a contract, ista>e ust 6refer to the substance of the thin% that is
the obBect of the contract, or to those conditions 'hich have principall+ oved one or
both parties to enter into the contract.6
25
(n e"aple of ista>e as to the obBect of the
contract is the substitution of a specific thin% conteplated b+ the parties 'ith another.
26
In his alle%ations in the coplaint, petitioner insinuated that an inferior one or one
that had onl+ Russian diaonds 'as substituted for the Be'elr+ he 'anted to e"chan%e
'ith his -35hectare land. He, ho'ever, failed to prove the fact that prior to the deliver+
of the Be'elr+ to hi, private respondents endeavored to a>e such substitution.
Ii>e'ise, the facts as proven do not support the alle%ation that petitioner hiself could
be e"cused for the 6ista>e.6 On account of his 'or> as a ban>er5Be'eler, it can be
ri%htfull+ assued that he 'as an e"pert on atters re%ardin% %es. He had the
intellectual capacit+ and the business acuen as a ban>er to ta>e precautionar+
easures to avert such a ista>e, considerin% the value of both the Be'elr+ and his
land. The fact that he had seen the Be'elr+ before October 12, -./2 should not have
precluded hi fro havin% its %enuineness tested in the presence of Dr. #ru*. Had he
done so, he could have avoided the present situation that he hiself brou%ht about.
Indeed, the fin%er of suspicion of s'itchin% the %enuine Be'elr+ for a fa>e inevitabl+
points to hi. Such a ista>e caused b+ anifest ne%li%ence cannot invalidate a
Buridical act.
27
(s the #ivil #ode provides, 6!t&here is no ista>e if the part+ alle%in% it
>ne' the doubt, contin%enc+ or ris> affectin% the obBect of the contract.6
28
8urtherore, petitioner 'as afforded the reasonable opportunit+ reEuired in (rticle
-0/2 of the #ivil #ode 'ithin 'hich to e"aine the Be'elr+ as he in fact accepted the
'hen as>ed b+ Dr. #ru* if he 'as satisfied 'ith the sae.
29
$+ ta>in% the Be'elr+
outside the ban>, petitioner e"ecuted an act 'hich 'as ore consistent 'ith his
e"ercise of o'nership over it. This %ains credence 'hen it is borne in ind that he
hiself had earlier delivered the Tana+ propert+ to Dr. #ru* b+ affi"in% his si%nature to
the contract of sale. That after t'o hours he later claied that the Be'elr+ 'as not the
one he intended in e"chan%e for his Tana+ propert+, could not sever the Buridical tie that
no' bound hi and Dr. #ru*. The nature and value of the thin% he had ta>en preclude
its return after that supervenin% period 'ithin 'hich an+thin% could have happened, not
e"cludin% the alteration of the Be'elr+ or its bein% s'itched 'ith an inferior >ind.
$oth the trial and appellate courts, therefore, correctl+ ruled that there 'ere no le%al
bases for the nullification of the contract of sale. O'nership over the parcel of land and
the pair of eerald5cut diaond earrin%s had been transferred to Dr. #ru* and
petitioner, respectivel+, upon the actual and constructive deliver+ thereof.
30
Said
contract of sale bein% absolute in nature, title passed to the vendee upon deliver+ of the
thin% sold since there 'as no stipulation in the contract that title to the propert+ sold
has been reserved in the seller until full pa+ent of the price or that the vendor has the
ri%ht to unilaterall+ resolve the contract the oent the bu+er fails to pa+ 'ithin a fi"ed
period.
31
Such stipulations are not anifest in the contract of sale.
9hile it is true that the aount of P23,333.33 forin% part of the consideration 'as still
pa+able to petitioner, its nonpa+ent b+ Dr. #ru* is not a sufficient cause to invalidate
the contract or bar the transfer of o'nership and possession of the thin%s e"chan%ed
considerin% the fact that their contract is silent as to 'hen it becoes due and
deandable.
32
Neither a+ such failure to pa+ the balance of the purchase price result in the pa+ent
of interest thereon. (rticle -0/. of the #ivil #ode prescribes the pa+ent of interest b+
the vendee 6for the period bet'een the deliver+ of the thin% and the pa+ent of the
price6 in the follo'in% cases4
18
!-& Should it have been so stipulated?
!1& Should the thin% sold and delivered produce fruits or incoe?
!@& Should he be in default, fro the tie of Budicial or e"traBudicial deand for the
pa+ent of the price.
Not one of these cases obtains here. This case should, of course, be distin%uished
fro 0e la )ruz v. Le(aspi,
33
'here the court held that failure to pa+ the consideration
after the notari*ation of the contract as previousl+ proised resulted in the vendeeCs
liabilit+ for pa+ent of interest. In the case at bar, there is no stipulation for the pa+ent
of interest in the contract of sale nor proof that the Tana+ propert+ produced fruits or
incoe. Neither did petitioner deand pa+ent of the price as in fact he filed an action
to nullif+ the contract of sale.
(ll told, petitioner appears to have elevated this case to this #ourt for the principal
reason of iti%atin% the aount of daa%es a'arded to both private respondents
'hich petitioner considers as 6e"orbitant.6 He contends that private respondents do not
deserve at all the a'ard of daa%es. In fact, he pleads for the total deletion of the
a'ard as re%ards private respondent $elarino 'ho he considers a ere 6noinal
part+6 because 6no specific clai for daa%es a%ainst hi6 'as alle%ed in the
coplaint. 9hen he filed the case, all that petitioner 'anted 'as that (tt+. $elarino
should return to hi the o'nerCs duplicate cop+ of T#T No. @13=10, the deed of sale
e"ecuted b+ 8r. (ntonio ,acobe, the deed of redeption and the chec> alloted for
e"penses. Petitioner alle%es further that (tt+. $elarino should not have delivered all
those docuents to Dr. #ru* because as the 6la'+er for both the seller and the bu+er in
the sale contract, he should have protected the ri%hts of both parties.6 Moreover,
petitioner asserts that there 'as no fir basis for daa%es e"cept for (tt+. $elarinoCs
uncorroborated testion+.
37
Moral and e"eplar+ daa%es a+ be a'arded 'ithout proof of pecuniar+ loss. In
a'ardin% such daa%es, the court shall ta>e into account the circustances obtainin%
in the case said assess daa%es accordin% to its discretion.
35
To 'arrant the a'ard of
daa%es, it ust be sho'n that the person to 'ho these are a'arded has sustained
inBur+. He ust li>e'ise establish sufficient data upon 'hich the court can properl+
base its estiate of the aount of daa%es.
36
Stateents of facts should establish
such data rather than ere conclusions or opinions of 'itnesses.
37
Thus4
. . . . 8or oral daa%es to be a'arded, it is essential that the claiant ust have
satisfactoril+ proved durin% the trial the e"istence of the factual basis of the daa%es
and its causal connection 'ith the adverse part+Cs acts. If the court has no proof or
evidence upon 'hich the clai for oral daa%es could be based, such indenit+
could not be outri%htl+ a'arded. The sae holds true 'ith respect to the a'ard of
e"eplar+ daa%es 'here it ust be sho'n that the part+ acted in a 'anton,
oppressive or alevolent anner.
38
In this re%ard, the lo'er court appeared to have a'arded daa%es on a %round
analo%ous to alicious prosecution under (rticle 11-. !/& of the #ivil #ode
39
as sho'n
b+ !-& petitionerCs 6'anton bad faith6 in bloatin% the value of the Tana+ propert+ 'hich
he e"chan%ed for 6a %enuine pair of eerald5cut diaond 'orth P133,33.33?6 and !1&
his filin% of a 6alicious and unfounded case6 a%ainst private respondents 'ho 'ere
6'ell >no'n, respected and held in hi%h estee in San Pablo #it+ 'here ever+bod+
practicall+ >no's ever+bod+6 and 'hose %ood naes in the 6t'ili%ht of their lives6 'ere
soiled b+ petitionerCs coin% to court 'ith 6unclean hands,6 thereb+ affectin% their
earnin% capacit+ in the e"ercise of their respective professions and besirchin% their
reputation.
8or its part, the #ourt of (ppeals affired the a'ard of daa%es to private respondents
for these reasons4
The alice 'ith 'hich 8ule filed this case is apparent. Havin% ta>en possession of the
%enuine Be'elr+ of Dra. #ru*, 8ule no' 'ishes to return a fa>e Be'elr+ to Dra. #ru*
and, ore than that, %et bac> the real propert+, 'hich his ban> o'ns. 8ule has obtained
a %enuine Be'elr+ 'hich he could sell an+tie, an+'here and to an+bod+, 'ithout the
sae bein% traced to the ori%inal o'ner for practicall+ nothin%. This is plain and siple,
unBust enrichent.
70
9hile, as a rule, oral daa%es cannot be recovered fro a person 'ho has filed a
coplaint a%ainst another in %ood faith because it is not sound polic+ to place a penalt+
on the ri%ht to liti%ate,
71
the sae, ho'ever, cannot appl+ in the case at bar. The
factual findin%s of the courts a quo to the effect that petitioner filed this case because
he 'as the victi of fraud? that he could not have been such a victi because he
should have e"ained the Be'elr+ in Euestion before acceptin% deliver+ thereof,
considerin% his e"posure to the ban>in% and Be'elr+ businesses? and that he filed the
action for the nullification of the contract of sale 'ith unclean hands, all deserve full
faith and credit to support the conclusion that petitioner 'as otivated ore b+ ill 'ill
than a sincere attept to protect his ri%hts in coencin% suit a%ainst respondents.
(s pointed out earlier, a closer scrutin+ of the chain of events iediatel+ prior to and
on October 12, -./2 itself 'ould apl+ deonstrate that petitioner 'as not sipl+
ne%li%ent in failin% to e"ercise due dili%ence to assure hiself that 'hat he 'as ta>in%
in e"chan%e for his propert+ 'ere %enuine diaonds. He had rather placed hiself in a
situation fro 'hich it preponderantl+ appears that his seein% i%norance 'as actuall+
Bust a ruse. Indeed, he had unnecessaril+ dra%%ed respondents to face the travails of
liti%ation in speculatin% at the possible favorable outcoe of his coplaint 'hen he
should have reali*ed that his supposed predicaent 'as his o'n a>in%. 9e,
19
therefore, see here no seblance of an honest and sincere belief on his part that he
'as s'indled b+ respondents 'hich 'ould entitle hi to redress in court. It ust be
noted that before petitioner 'as able to convince Dr. #ru* to e"chan%e her Be'elr+ for
the Tana+ propert+, petitioner too> pains to thorou%hl+ e"aine said Be'elr+, even %oin%
to the e"tent of s>etchin% their appearance. 9h+ at the precise oent 'hen he 'as
about to ta>e ph+sical possession thereof he failed to e"ert e"tra efforts to chec> their
%enuineness despite the lar%e consideration involved has never been e"plained at all
b+ petitioner. His acts thus failed to accord 'ith 'hat an ordinar+ prudent an 'ould
have done in the sae situation. $ein% an e"perienced ban>er and a businessan
hiself 'ho deliberatel+ s>irted a le%al ipedient in the sale of the Tana+ propert+
and to inii*e the capital %ains ta" for its e"chan%e, it 'as actuall+ %ross
rec>lessness for hi to have erel+ conducted a cursor+ e"aination of the Be'elr+
'hen ever+ opportunit+ for doin% so 'as not denied hi. (pparentl+, he carried on his
person a tester 'hich he later used to prove the alle%ed fa>er+ but 'hich he did not use
at the tie 'hen it 'as ost needed. 8urtherore, it too> hi t'o ore hours of
une"plained dela+ before he coplained that the Be'elr+ he received 'ere counterfeit.
Hence, 'e stated earlier that an+thin% could have happened durin% all the tie that
petitioner 'as in coplete possession and control of the Be'elr+, includin% the
possibilit+ of substitutin% the 'ith fa>e ones, a%ainst 'hich respondents 'ould have a
%reat deal of difficult+ defendin% theselves. The truth is that petitioner even failed to
successfull+ prove durin% trial that the Be'elr+ he received fro Dr. #ru* 'ere not
%enuine. (dd to that the fact that he had been shre'd enou%h to bloat the Tana+
propert+Cs price onl+ a fe' da+s after he purchased it at a uch lo'er value. Thus, it is
our considered vie' that if this sle' of circustances 'ere connected, li>e pieces of
fabric se'n into a Euilt, the+ 'ould sufficientl+ deonstrate that his acts 'ere not
erel+ ne%li%ent but rather studied and deliberate.
9e do not have here, therefore, a situation 'here petitionerCs coplaint 'as sipl+
found later to be based on an erroneous %round 'hich, under settled Burisprudence,
'ould not have been a reason for a'ardin% oral and e"eplar+ daa%es.
72
Instead,
the cause of action of the instant case appears to have been contrived b+ petitioner
hiself. In other 'ords, he 'as placed in a situation 'here he could not honestl+
evaluate 'hether his cause of action has a seblance of erit, such that it 'ould
reEuire the e"pertise of the courts to put it to a test. His insistent pursuit of such case
then coupled 'ith circustances sho'in% that he hiself 'as %uilt+ in brin%in% about
the supposed 'ron%doin% on 'hich he anchored his cause of action 'ould render hi
ans'erable for all daa%es the defendant a+ suffer because of it. This is precisel+
'hat too> place in the petition at bar and 'e find no co%ent reason to disturb the
findin%s of the courts belo' that respondents in this case suffered considerable
daa%es due to petitionerCs un'arranted action.
9H7R78OR7, the decision of the #ourt of (ppeals dated October 13, -..1 is hereb+
(88IRM7D in toto. Dr. #ru*, ho'ever, is ordered to pa+ petitioner the balance of the
purchase price of P23,333.33 'ithin ten !-3& da+s fro the finalit+ of this decision.
#osts a%ainst petitioner.
SO ORD7R7D.
20
Republic of the Philippines
SUPREME COURT
Manila
8IRST DIVISION

G.R. No. 97377 9+%- 6, 1999
9AIME G. ONG, petitioner,
vs.
T1E 1ONORABLE COURT O) APPEALS, SPOUSES MIGUEL :. ROBLES &'(
ALE9AN0RO M. ROBLES,respondents.

;NARES.SANTIAGO, J.:
$efore us is a petition for revie' on certiorari fro the Bud%ent rendered b+ the #ourt
of (ppeals 'hich, e"cept as to the a'ard of e"eplar+ daa%es, affired the decision
of the Re%ional Trial #ourt of Iucena #it+, $ranch <3, settin% aside the 6(%reeent of
Purchase and Sale6 entered into b+ herein petitioner and private respondent spouses in
#ivil #ase No. /05/0.$6wphi$.n7t
On Ma+ -3, -./@, petitioner ,aie On%, on the one hand, and respondent spouses
Mi%uel J. Robles and (leBandra Robles, on the other hand, e"ecuted an 6(%reeent of
Purchase and Sale6 respectin% t'o parcels of land situated at $arrio Puri, San (ntonio,
)ue*on. The ters and conditions of the contract read46
-. That for and in consideration of the a%reed purchase price of T9O MIIIION P7SOS
!P1,333,333.33&, Philippine currenc+, the ode and anner of pa+ent is as follo's4
(. The initial pa+ent of SIM HANDR7D THOAS(ND P7SOS !P<33,333.33& as
verball+ a%reed b+ the parties, shall be bro>en do'n as follo's4
-. P-3@,2....- shall be paid, and as alread+ paid b+ the 89:-R to the3-LL-R3 on
March 11, -./@, as stipulated under the )ertification of underta4in( dated March 11,
-./@ and covered b+ a chec> of even date.
1. That the su of P2.<,033.3. shall be paid directl+ b+ the 89:-R to the $an> of
Philippine Islands to ans'er for the loan of the 3-LL-R3 'hich as of March -0, -./@
aounted to P0@=,@-3.-3, and for the interest that a+ accrued !sic& fro March -0,
-./@, up to the tie said obli%ation of the3-LL-R3 'ith the said ban> has been
settled, provided ho'ever that the aount in e"cess of P2.<,033.3., shall be
char%eable fro the tie deposit of the 3-LL-R3 'ith the aforesaid ban>.
$. That the balance of ON7 MIIIION 8OAR HANDR7D THOAS(ND !P-,233,333.33&
P7SOS shall be paid b+ the 89:-R to the 3-LL-R3 in four !2& eEual Euarterl+
installents of THR77 HANDR7D 8I8T: THOAS(ND P7SOS !P@03,333.33&, the first
to be due and pa+able on ,une -0, -./@, and ever+ Euarter thereafter, until the 'hole
aount is full+ paid, b+ these presents proise to sell to said $A:7R the t'o !1&
parcels of a%ricultural land includin% the rice ill and the pi%%er+ 'hich are the ost
notable iproveents thereon, situated at $aran%a+ Puri, San (ntonio )ue*on, . . .
1. That upon the pa+ent of the total purchase price b+ the 89:-R the 3-LL-R3 bind
theselves to deliver to the forer a %ood and sufficient deed of sale and conve+ance
for the described t'o !1& parcels of land, free and clear fro all liens and
encubrances.
@. That iediatel+ upon the e"ecution of this docuent, the 3-LL-R3 shall deliver,
surrender and transfer possession of the said parcels of land includin% all the
iproveents that a+ be found thereon, to the 89:-R, and the latter shall ta>e over
fro the 3-LL-R the possession, operation, control and ana%eent of the RI#7MIII
and PIDD7R: found on the aforesaid parcels of land.
2. That all pa+ents due and pa+able under this contract shall be effected in the
residence of the3-LL-R3 located at $aran%a+ Puri, San (ntonio, )ue*on unless
another place shall have been subseEuentl+ desi%nated b+ both parties in 'ritin%.
""" """ """
1
On Ma+ -0, -./@, petitioner On% too> possession of the subBect parcels of land
to%ether 'ith the pi%%er+, buildin%, riceill, residential house and other iproveents
thereon.
Pursuant to the contract the+ e"ecuted, petitioner paid respondent spouses the su of
P-3@,2....-
2
b+ depositin% it 'ith the Anited #oconut Planters $an>. SubseEuentl+,
petitioner deposited sus of one+ 'ith the $an> of Philippine Islands !$PI&,
3
in
accordance 'ith their stipulation that petitioner pa+ the loan of respondents 'ith $PI.
21
To ans'er for his balance of P-,233,333.33 petitioner issued four !2& post5dated Metro
$an> chec>s pa+able to respondent spouses in the aount of P@03,3333.33 each,
nael+4 #hec> No. -0==3/ dated ,une -0, -./@,
7
#hec> No. -0==3. dated Septeber
-0, -./@,
5
#hec> No. -0==-3 dated Deceber -0, -./@
6
and #hec> No. -0==--
dated March -0, -./2.
7
9hen presented for pa+ent, ho'ever, the chec>s 'ere
dishonored due to insufficient funds. Petitioner proised to replace the chec>s but
failed to do so. To a>e atters 'orse, out of the P2.<,033.33 loan of respondent
spouses 'ith the $an> of the Philippine Islands, 'hich petitioner, as per a%reeent,
should have paid, petitioner onl+ ana%ed to dole out no ore than P@.@,<=..<3.
9hen the ban> threatened to foreclose the respondent spousesC ort%a%e, the+ sold
three transforers of the rice ill 'orth P0-,2--.33 to pa+ off their outstandin%
obli%ation 'ith said ban>, 'ith the >no'led%e and conforit+ of petitioner.
8
Petitioner,
in return, voluntaril+ %ave the spouses authorit+ to operate the rice ill.
9
He, ho'ever,
continued to be in possession of the t'o parcels of land 'hile private respondents 'ere
forced to use the rice ill for residential purposes.
On (u%ust 1, -./0, respondent spouses, throu%h counsel, sent petitioner a deand
letter as>in% for the return of the properties. Their deand 'as left unheeded, so, on
Septeber 1, -./0, the+ filed 'ith the Re%ional Trial #ourt of Iucena #it+, $ranch <3, a
coplaint for rescission of contract and recover+ of properties 'ith daa%es. Iater,
'hile the case 'as still pendin% 'ith the trial court, petitioner introduced aBor
iproveents on the subBect properties b+ constructin% a coplete fence ade of
hollo' bloc>s and e"pandin% the pi%%er+. These propted the respondent spouses to
as> for a 'rit of preliinar+ inBunction.
10
The trial court %ranted the application and
enBoined petitioner fro introducin% iproveents on the properties e"cept for
repairs.
11
On ,une -, -./. the trial court rendered a decision, the dispositive portion of 'hich
reads as follo's4
IN VI79 O8 TH7 8OR7DOIND, Bud%ent is hereb+ rendered4
a& Orderin% that the contract entered into b+ plaintiff spouses Mi%uel J. Robles and
(leBandra M. Robles and the defendant, ,aie On% captioned 6(%reeent of Purchase
and Sale,6 ar>ed as 7"hibit 6(6 set aside?
b& Orderin% defendant, ,aie On% to deliver the t'o !1& parcels of land 'hich are the
subBect atter of 7"hibit 6(6 to%ether 'ith the iproveents thereon to the spouses
Mi%uel J. Robles and (leBandro M. Robles?
c& Orderin% plaintiff spouses, Mi%uel Robles and (leBandra Robles to return to ,aie
On% the su of P2.=,-=..0-?
d& Orderin% defendant ,aie On% to pa+ the plaintiffs the su of P-33,333.33 as
e"eplar+ daa%es? and
e& Orderin% defendant ,aie On% to pa+ the plaintiffs spouses Mi%uel J. Robles and
(leBandra Robles the su of P13,333.33 as attorne+Cs fees and liti%ation e"penses.
The otion of the plaintiff spouses Mi%uel J. Roles and (leBandra Robles for the
appointent of receivership is rendered oot and acadeic.
SO ORD7R7D.
12
8ro this decision, petitioner appealed to the #ourt of (ppeals, 'hich affired the
decision of the Re%ional Trial #ourt but deleted the a'ard of e"eplar+ daa%es. In
affirin% the decision of the trial court, the #ourt of (ppeals noted that the failure of
petitioner to copletel+ pa+ the purchase price is a substantial breach of his obli%ation
'hich entitles the private respondents to rescind their contract under (rticle --.- of the
Ne' #ivil #ode. Hence, the instant petition.
(t the outset, it ust be stated that the issues raised b+ the petitioner are %enerall+
factual in nature and 'ere alread+ passed upon b+ the #ourt of (ppeals and the trial
court. Tie and a%ain, 'e have stated that it is not the function of the Supree #ourt to
assess and evaluate all over a%ain the evidence, testionial and docuentar+,
adduced b+ the parties to an appeal, particularl+ 'here, such as in the case at bench,
the findin%s of both the trial court and the appellate court on the atter coincide. There
is no co%ent reason sho'n that 'ould Bustif+ the court to discard the factual findin%s of
the t'o courts belo' and to superipose its o'n.
13
The onl+ pertinent le%al issues raised 'hich are 'orth+ of discussion are !-& 'hether
the contract entered into b+ the parties a+ be validl+ rescinded under (rticle --.- of
the Ne' #ivil #ode? and !1& 'hether the parties had novated their ori%inal contract as
to the tie and anner of pa+ent.
Petitioner contends that (rticle --.- of the Ne' #ivil #ode is not applicable since he
has alread+ paid respondent spouses a considerable su and has therefore
substantiall+ coplied 'ith his obli%ation. He cites (rticle -@/@ instead, to the effect
that 'here specific perforance is available as a reed+, rescission a+ not be
resorted to.
( discussion of the aforesaid articles is in order.
Rescission, as conteplated in (rticles -@/3, et seq., of the Ne' #ivil #ode, is a
reed+ %ranted b+ la' to the contractin% parties and even to third persons, to secure
22
the reparation of daa%es caused to the b+ a contract, even if this should be valid, b+
restoration of thin%s to their condition at the oent prior to the celebration of the
contract.
17
It iplies a contract, 'hich even if initiall+ valid, produces a lesion or a
pecuniar+ daa%e to soeone.
15
On the other hand, (rticle --.- of the Ne' #ivil #ode refers to rescission applicable to
reciprocal obli%ations. Reciprocal obli%ations are those 'hich arise fro the sae
cause, and in 'hich each part+ is a debtor and a creditor of the other, such that the
obli%ation of one is dependent upon the obli%ation of the other.
16
The+ are to be
perfored siultaneousl+ such that the perforance of one is conditioned upon the
siultaneous fulfillent of the other. Rescission of reciprocal obli%ations under (rticle
--.- of the Ne' #ivil #ode should be distin%uished fro rescission of contracts under
(rticle -@/@. (lthou%h both presuppose contracts validl+ entered into and subsistin%
and both reEuire utual restitution 'hen proper, the+ are not entirel+ identical.
9hile (rticle --.- uses the ter 6rescission,6 the ori%inal ter 'hich 'as used in the
old #ivil #ode, fro 'hich the article 'as based, 'as 6resolution.
17
6 Resolution is a
principal action 'hich is based on breach of a part+, 'hile rescission under (rticle -@/@
is a subsidiar+ action liited to cases of rescission for lesion under (rticle -@/- of the
Ne' #ivil #ode, 'hich e"pressl+ enuerates the follo'in% rescissible contracts4
-. Those 'hich are entered into b+ %uardians 'henever the 'ards 'ho the+
represent suffer lesion b+ ore than one fourth of the value of the thin%s 'hich are the
obBect thereof?
1. Those a%reed upon in representation of absentees, if the latter suffer the lesion
stated in the precedin% nuber?
@. Those underta>en in fraud of creditors 'hen the latter cannot in an+ anner collect
the clais due the?
2. Those 'hich refer to thin%s under liti%ation if the+ have been entered into b+ the
defendant 'ithout the >no'led%e and approval of the liti%ants or of copetent Budicial
authorit+?
0. (ll other contracts speciall+ declared b+ la' to be subBect to rescission.
Obviousl+, the contract entered into b+ the parties in the case at bar does not fall under
an+ of those entioned b+ (rticle -@/-. #onseEuentl+, (rticle -@/@ is inapplicable.
Ma+ the contract entered into bet'een the parties, ho'ever, be rescinded based on
(rticle --.-K
( careful readin% of the partiesC 6(%reeent of Purchase and Sale6 sho's that it is in
the nature of a contract to sell, as distin%uished fro a contract of sale. In a contract of
sale, the title to the propert+ passes to the vendee upon the deliver+ of the thin% sold?
'hile in a contract to sell, o'nership is, b+ a%reeent, reserved in the vendor and is
not to pass to the vendee until full pa+ent of the purchase price.
18
In a contract to
sell, the pa+ent of the purchase price is a positive suspensive condition, the failure of
'hich is not a breach, casual or serious, but a situation that prevents the obli%ation of
the vendor to conve+ title fro acEuirin% an obli%ator+ force.
19
Respondents in the case at bar bound theselves to deliver a deed of absolute sale
and clean title coverin% the t'o parcels of land upon full pa+ent b+ the bu+er of the
purchase price of P1,333,333.33. This proise to sell 'as subBect to the fulfillent of
the suspensive condition of full pa+ent of the purchase price b+ the petitioner.
Petitioner, ho'ever, failed to coplete pa+ent of the purchase price. The non5
fulfillent of the condition of full pa+ent rendered the contract to sell ineffective and
'ithout force and effect. It ust be stressed that the breach conteplated in (rticle
--.- of the Ne' #ivil #ode is the obli%orCs failure to copl+ 'ith an
obli%ation.
20
8ailure to pa+, in this instance, is not even a breach but erel+ an event
'hich prevents the vendorCs obli%ation to conve+ title fro acEuirin% bindin%
force.
21
Hence, the a%reeent of the parties in the case at bench a+ be set aside, but
not because of a breach on the part of petitioner for failure to coplete pa+ent of the
purchase price. Rather, his failure to do so brou%ht about a situation 'hich prevented
the obli%ation of respondent spouses to conve+ title fro acEuirin% an obli%ator+ force.
Petitioner insists, ho'ever, that the contract 'as novated as to the anner and tie of
pa+ent.
9e are not persuaded. (rticle -1.1 of the Ne' #ivil #ode states that, 6In order that an
obli%ation a+ be e"tin%uished b+ another 'hich substitutes the sae, it is iperative
that it be so declared in uneEuivocal ters, or that the old and the ne' obli%ations be
on ever+ point incopatible 'ith each other.6
Novation is never presued, it ust be proven as a fact either b+ e"press stipulation
of the parties or b+ iplication derived fro an irreconcilable incopatibilit+ bet'een
the old and the ne' obli%ation.
22
Petitioner cites the follo'in% instances as proof that
the contract 'as novated4 the retrieval of the transforers fro petitionerCs custod+
and their sale b+ the respondents to M7R(I#O on the condition that the proceeds
thereof be accounted for b+ the respondents and deducted fro the price of the
contract? the ta>e5over b+ the respondents of the custod+ and operation of the rice
ill? and the continuous and re%ular 'ithdra'als b+ respondent Mi%uel Robles of
installent sus per vouchers !7"hs. 6/6 to 62=6& on the condition that these
installents be credited to petitionerCs account and deducted fro the balance of the
purchase price.
23
#ontrar+ to petitionerCs clai, records sho' that the parties never even intended to
novate their previous a%reeent. It is true that petitioner paid respondents sall sus
of one+ aountin% to P2/,</3.33, in contravention of the anner of pa+ent
stipulated in their contract. These installents 'ere, ho'ever, obBected to b+
respondent spouses, and petitioner replied that these represented the interest of the
principal aount 'hich he o'ed the.
23
Records further sho' that petitioner a%reed
to the sale of M7R(I#O transforers b+ private respondents to pa+ for the balance
of their subsistin% loan 'ith the $an> of Philippine Islands. PetitionerCs letter of
authori*ation reads4
""" """ """
Ander this authorit+, it is utuall+ understood that 'hatever pa+ent received fro
M7R(I#O as pa+ent to the transfroers 'ill be considered as partial pa+ent of the
undersi%nedCs obli%ation to Mr. and Mrs. Mi%uel J. Robles.
The sae 'ill be utili*ed as partial pa+ent to e"istin% loan 'ith the $an> of Philippine
Islands.
It is also utuall+ understood that this pa+ent to the $an> of Philippine Islands 'ill be
reibursed to Mr. and Mrs. Mi%uel J. Robles b+ the undersi%ned. G7phasis
suppliedH
27
It should be noted that 'hile it 'as. a%reed that part of the purchase price in the su of
P2.<,033.33 'ould be directl+ deposited b+ petitioner to the $an> of Philippine Islands
to ans'er for the loan of respondent spouses, petitioner onl+ ana%ed to deposit
P@.@,<=..<3. 9hen the ban> threatened to foreclose the properties, petitioner
apparentl+ could not even raise the su needed to forestall an+ action on the part of
the ban>. #onseEuentl+, he authori*ed respondent spouses to sell the three !@&
transforers. Ho'ever, althou%h the parties a%reed to credit the proceeds fro the
sale of the transforers to petitionerCs obli%ation, he 'as supposed to reiburse the
sae later to respondent spouses. This can onl+ ean that there 'as never an
intention on the part of either of the parties to novate petitionerCs anner of pa+ent.
Petitioner contends that the parties verball+ a%reed to novate the anner of pa+ent
'hen respondent spouses proposed to operate the rice ill on the condition that the+
'ill account for its earnin%s. 9e find that this is unsubstantiated b+ the evidenced on
the record. The tenor of his letter dated (u%ust -1, -./2 to respondent spouses, in fact,
sho's that petitioner had a 6little isunderstandin%6 'ith respondent spouses 'ho he
'as evidentl+ tr+in% to appease b+ authori*in% the to continue teporaril+ 'ith the
operation of the rice ill. #learl+, 'hile petitioner i%ht have 'anted to novate the
ori%inal a%reeent as to his anner of pa+ent, the records are bereft of evidence that
respondent spouses 'illin%l+ a%reed to odif+ their previous arran%eent.
In order for novation to ta>e place, the concurrence of the follo'in% reEuisites is
indispensable4 !-& there ust be a previous valid obli%ation? !1& there ust be an
a%reeent of the parties concerned to a ne' contract? !@& there ust be the
e"tin%uishent of the old contract? and !2& there ust be the validit+ of the ne'
contract.
25
The aforesaid reEuisites are not found in the case at bench. The
subseEuent acts of the parties hardl+ deonstrate their intent to dissolve the old
obli%ation as a consideration for the eer%ence of the ne' one. 9e repeat to the point
of triteness, novation is never presued, there ust be an e"press intention to novate.
(s re%ards the iproveents introduced b+ petitioner to the preises and for 'hich he
clais reiburseent, 'e see no reason to depart fro the rulin% of the trial court and
the appellate court that petitioner is a builder in bad faith. He introduced the
iproveents on the preises >no'in% full+ 'ell that he has not paid the consideration
of the contract in full and over the vi%orous obBections of respondent spouses.
Moreover, petitioner introduced aBor iproveents on the preises even 'hile the
case a%ainst hi 'as pendin% before the trial court.
The a'ard of e"eplar+ daa%es 'as correctl+ deleted b+ the #ourt of (ppeals in as
uch as no oral, teperate, liEuidated or copensator+ daa%es in addition to
e"eplar+ daa%es 'ere a'arded.
9H7R78OR7, the decision rendered b+ the #ourt of (ppeals is hereb+ (88IRM7D
'ith the MODI8I#(TION that respondent spouses are ordered to return to petitioner
the su of P2/,</3.33 in addition to the aounts alread+ a'arded. #osts a%ainst
petitioner. SO ORD7R7D.
Republic of the Philippines
SUPREME COURT
Manila
7N $(N#
24
G.R. No. L.11827 9+%- 31, 1961
)ERNAN0O A. GAITE, plaintiff5appellee,
vs.
ISABELO )ONACIER, GEORGE :RA:O<ER, LARAP MINES = SMELTING CO.,
INC., SEGUN0INA 5I5AS, )RNACISCO 0ANTE, PACI)ICO ESCAN0OR &'(
)ERNAN0O T;, defendants5appellants.
Alejo ;abana( for plaintiff<appellee.
3implicio 9. Tapia, Antonio 8arredo and Pedro =uevarra for defendants<appellants.
RE;ES, 9.B.L., J.>
This appeal coes to us directl+ fro the #ourt of 8irst Instance because the clais
involved a%%re%ate ore than P133,333.33.
Defendant5appellant Isabelo 8onacier 'as the o'ner andFor holder, either b+ hiself or
in a representative capacit+, of -- iron lode ineral clais, >no'n as the Da'ahan
Droup, situated in the unicipalit+ of ,ose Pan%aniban, province of #aarines Norte.
$+ a 6Deed of (ssi%nent6 dated Septeber 1., -.01!7"hibit 6@6&, 8onacier
constituted and appointed plaintiff5appellee 8ernando (. Daite as his true and la'ful
attorne+5in5fact to enter into a contract 'ith an+ individual or Buridical person for the
e"ploration and developent of the inin% clais aforeentioned on a ro+alt+ basis of
not less than P3.03 per ton of ore that i%ht be e"tracted therefro. On March -.,
-.02, Daite in turn e"ecuted a %eneral assi%nent !Record on (ppeal, pp. -=5-.&
conve+in% the developent and e"ploitation of said inin% clais into the Iarap Iron
Mines, a sin%le proprietorship o'ned solel+ b+ and belon%in% to hi, on the sae
ro+alt+ basis provided for in 7"hibit 6@6. Thereafter, Daite ebar>ed upon the
developent and e"ploitation of the inin% clais in Euestion, openin% and pavin%
roads 'ithin and outside their boundaries, a>in% other iproveents and installin%
facilities therein for use in the developent of the ines, and in tie e"tracted
therefro 'hat he clai and estiated to be appro"iatel+ 12,333 etric tons of iron
ore.
8or soe reason or another, Isabelo 8onacier decided to revo>e the authorit+ %ranted
b+ hi to Daite to e"ploit and develop the inin% clais in Euestion, and Daite
assented thereto subBect to certain conditions. (s a result, a docuent entitled
6Revocation of Po'er of (ttorne+ and #ontract6 'as e"ecuted on Deceber /, -.02
!7"hibit 6(6&,'herein Daite transferred to 8onacier, for the consideration of P13,333.33,
plus -3Q of the ro+alties that 8onacier 'ould receive fro the inin% clais, all his
ri%hts and interests on all the roads, iproveents, and facilities in or outside said
clais, the ri%ht to use the business nae 6Iarap Iron Mines6 and its %ood'ill, and all
the records and docuents relative to the ines. In the sae docuent, Daite
transferred to 8onacier all his ri%hts and interests over the 612,333 tons of iron ore,
ore or less6 that the forer had alread+ e"tracted fro the ineral clais, in
consideration of the su of P=0,333.33, P-3,333.33 of 'hich 'as paid upon the
si%nin% of the a%reeent, and
b. The balance of SIMT:58IV7 THOAS(ND P7SOS !P<0,333.33& 'ill be paid fro and
out of the first letter of credit coverin% the first shipent of iron ores and of the first
aount derived fro the local sale of iron ore ade b+ the Iarap Mines O Seltin% #o.
Inc., its assi%ns, adinistrators, or successors in interests.
To secure the pa+ent of the said balance of P<0,333.33, 8onacier proised to
e"ecute in favor of Daite a suret+ bond, and pursuant to the proise, 8onacier
delivered to Daite a suret+ bond dated Deceber /, -.02 'ith hiself !8onacier& as
principal and the Iarap Mines and Seltin% #o. and its stoc>holders Deor%e Jra>o'er,
Se%undina Vivas, Pacifico 7scandor, 8rancisco Dante, and 8ernando T+ as sureties
!7"hibit 6(5-6&. Daite testified, ho'ever, that 'hen this bond 'as presented to hi b+
8onacier to%ether 'ith the 6Revocation of Po'er of (ttorne+ and #ontract6, 7"hibit 6(6,
on Deceber /, -.02, he refused to si%n said 7"hibit 6(6 unless another bond under
'ritten b+ a bondin% copan+ 'as put up b+ defendants to secure the pa+ent of the
P<0,333.33 balance of their price of the iron ore in the stoc>piles in the inin% clais.
Hence, a second bond, also dated Deceber /, -.02 !7"hibit 6$6&,'as e"ecuted b+ the
sae parties to the first bond 7"hibit 6(5-6, 'ith the 8ar 7astern Suret+ and Insurance
#o. as additional suret+, but it provided that the liabilit+ of the suret+ copan+ 'ould
attach onl+ 'hen there had been an actual sale of iron ore b+ the Iarap Mines O
Seltin% #o. for an aount of not less then P<0,333.33, and that, furtherore, the
liabilit+ of said suret+ copan+ 'ould autoaticall+ e"pire on Deceber /, -.00. $oth
bonds 'ere attached to the 6Revocation of Po'er of (ttorne+ and #ontract6, 7"hibit
6(6, and ade inte%ral parts thereof.
On the sae da+ that 8onacier revo>ed the po'er of attorne+ he %ave to Daite and the
t'o e"ecuted and si%ned the 6Revocation of Po'er of (ttorne+ and #ontract6, 7"hibit
6(6, 8onacier entered into a 6#ontract of Minin% Operation6, cedin%, transferrin%, and
conve+in% unto the Iarap Mines and Seltin% #o., Inc. the ri%ht to develop, e"ploit,
and e"plore the inin% clais in Euestion, to%ether 'ith the iproveents therein and
the use of the nae 6Iarap Iron Mines6 and its %ood 'ill, in consideration of certain
ro+alties. 8onacier li>e'ise transferred, in the sae docuent, the coplete title to the
appro"iatel+ 12,333 tons of iron ore 'hich he acEuired fro Daite, to the Iarap O
Seltin% #o., in consideration for the si%nin% b+ the copan+ and its stoc>holders of
the suret+ bonds delivered b+ 8onacier to Daite !Record on (ppeal, pp. /15.2&.
25
Ap to Deceber /, -.00, 'hen the bond 7"hibit 6$6 e"pired 'ith respect to the 8ar
7astern Suret+ and Insurance #opan+, no sale of the appro"iatel+ 12,333 tons of
iron ore had been ade b+ the Iarap Mines O Seltin% #o., Inc., nor had the
P<0,333.33 balance of the price of said ore been paid to Daite b+ 8onacier and his
sureties pa+ent of said aount, on the theor+ that the+ had lost ri%ht to a>e use of
the period %iven the 'hen their bond, 7"hibit 6$6 autoaticall+ e"pired !7"hibits 6#6
to 6#5126&. (nd 'hen 8onacier and his sureties failed to pa+ as deanded b+ Daite, the
latter filed the present coplaint a%ainst the in the #ourt of 8irst Instance of Manila
!#ivil #ase No. 1.@-3& for the pa+ent of the P<0,333.33 balance of the price of the
ore, conseEuential daa%es, and attorne+Cs fees.
(ll the defendants e"cept 8rancisco Dante set up the unifor defense that the
obli%ation sued upon b+ Daite 'as subBect to a condition that the aount of P<0,333.33
'ould be pa+able out of the first letter of credit coverin% the first shipent of iron ore
andFor the first aount derived fro the local sale of the iron ore b+ the Iarap Mines O
Seltin% #o., Inc.? that up to the tie of the filin% of the coplaint, no sale of the iron
ore had been ade, hence the condition had not +et been fulfilled? and that
conseEuentl+, the obli%ation 'as not +et due and deandable. Defendant 8onacier
also contended that onl+ =,0=@ tons of the estiated 12,333 tons of iron ore sold to hi
b+ Daite 'as actuall+ delivered, and counterclaied for ore than P133,333.33
daa%es.
(t the trial of the case, the parties a%reed to liit the presentation of evidence to t'o
issues4
!-& 9hether or not the obli%ation of 8onacier and his sureties to pa+ Daite P<0,333.33
becoe due and deandable 'hen the defendants failed to rene' the suret+ bond
under'ritten b+ the 8ar 7astern Suret+ and Insurance #o., Inc. !7"hibit 6$6&, 'hich
e"pired on Deceber /, -.00? and
!1& 9hether the estiated 12,333 tons of iron ore sold b+ plaintiff Daite to defendant
8onacier 'ere actuall+ in e"istence in the inin% clais 'hen these parties e"ecuted
the 6Revocation of Po'er of (ttorne+ and #ontract6, 7"hibit 6(.6
On the first Euestion, the lo'er court held that the obli%ation of the defendants to pa+
plaintiff the P<0,333.33 balance of the price of the appro"iatel+ 12,333 tons of iron
ore 'as one 'ith a ter4 i.e., that it 'ould be paid upon the sale of sufficient iron ore b+
defendants, such sale to be effected 'ithin one +ear or before Deceber /, -.00? that
the %ivin% of securit+ 'as a condition precedent to DaitCs %ivin% of credit to defendants?
and that as the latter failed to put up a %ood and sufficient securit+ in lieu of the 8ar
7astern Suret+ bond !7"hibit 6$6& 'hich e"pired on Deceber /, -.00, the obli%ation
becae due and deandable under (rticle --./ of the Ne' #ivil #ode.
(s to the second Euestion, the lo'er court found that plaintiff Daite did have
appro"iatel+ 12,333 tons of iron ore at the inin% clais in Euestion at the tie of the
e"ecution of the contract 7"hibit 6(.6
,ud%ent 'as, accordin%l+, rendered in favor of plaintiff Daite orderin% defendants to
pa+ hi, Bointl+ and severall+, P<0,333.33 'ith interest at <Q per annu fro
Deceber ., -.00 until pa+ent, plus costs. 8ro this Bud%ent, defendants Bointl+
appealed to this #ourt.
Durin% the pendenc+ of this appeal, several incidental otions 'ere presented for
resolution4 a otion to declare the appellants Iarap Mines O Seltin% #o., Inc. and
Deor%e Jra>o'er in contept, filed b+ appellant 8onacier, and t'o otions to disiss
the appeal as havin% becoe acadeic and a otion for ne' trial andFor to ta>e
Budicial notice of certain docuents, filed b+ appellee Daite. The otion for contept is
uneritorious because the ain alle%ation therein that the appellants Iarap Mines O
Seltin% #o., Inc. and Jra>o'er had sold the iron ore here in Euestion, 'hich alle%edl+
is 6propert+ in liti%ation6, has not been substantiated? and even if true, does not a>e
these appellants %uilt+ of contept, because 'hat is under liti%ation in this appeal is
appellee DaiteCs ri%ht to the pa+ent of the balance of the price of the ore, and not the
iron ore itself. (s for the several otions presented b+ appellee Daite, it is unnecessar+
to resolve these otions in vie' of the results that 'e have reached in this case, 'hich
'e shall hereafter discuss.
The ain issues presented b+ appellants in this appeal are4
!-& that the lo'er court erred in holdin% that the obli%ation of appellant 8onacier to pa+
appellee Daite the P<0,333.33 !balance of the price of the iron ore in Euestion&is one
'ith a period or ter and not one 'ith a suspensive condition, and that the ter
e"pired on Deceber /, -.00? and
!1& that the lo'er court erred in not holdin% that there 'ere onl+ -3,.02.0 tons in the
stoc>piles of iron ore sold b+ appellee Daite to appellant 8onacier.
The first issue involves an interpretation of the follo'in% provision in the contract 7"hibit
6(64
=. That 8ernando Daite or Iarap Iron Mines hereb+ transfers to Isabelo 8. 8onacier all
his ri%hts and interests over the 12,333 tons of iron ore, ore or less, above5referred to
to%ether 'ith all his ri%hts and interests to operate the ine in consideration of the su
of S7V7NT:58IV7 THOAS(ND P7SOS !P=0,333.33& 'hich the latter binds to pa+ as
follo's4
26
a. T7N THOAS(ND P7SOS !P-3,333.33& 'ill be paid upon the si%nin% of this
a%reeent.
b. The balance of SIMT:58IV7 THOAS(ND P7SOS !P<0,333.33&'ill be paid fro and
out of the first letter of credit coverin% the first shipent of iron ore ade b+ the Iarap
Mines O Seltin% #o., Inc., its assi%ns, adinistrators, or successors in interest.
9e find the court belo' to be le%all+ correct in holdin% that the shipent or local sale of
the iron ore is not a condition precedent !or suspensive& to the pa+ent of the balance
of P<0,333.33, but 'as onl+ a suspensive period or ter. 9hat characteri*es a
conditional obli%ation is the fact that its efficac+ or obli%ator+ force !as distin%uished
fro its deandabilit+& is subordinated to the happenin% of a future and uncertain
event? so that if the suspensive condition does not ta>e place, the parties 'ould stand
as if the conditional obli%ation had never e"isted. That the parties to the contract 7"hibit
6(6 did not intend an+ such state of thin%s to prevail is supported b+ several
circustances4
-& The 'ords of the contract e"press no contin%enc+ in the bu+erCs obli%ation to pa+4
6The balance of Si"t+58ive Thousand Pesos !P<0,333.33& will be paid out of the first
letter of credit coverin% the first shipent of iron ores . . .6 etc. There is no uncertaint+
that the pa+ent 'ill have to be ade sooner or later? 'hat is undeterined is erel+
the exact date at 'hich it 'ill be ade. $+ the ver+ ters of the contract, therefore, the
e"istence of the obli%ation to pa+ is reco%ni*ed? onl+ its maturit! or demandabilit! is
deferred.
1& ( contract of sale is norall+ coutative and onerous4 not onl+ does each one of
the parties assue a correlative obli%ation !the seller to deliver and transfer o'nership
of the thin% sold and the bu+er to pa+ the price&,but each part+ anticipates perforance
b+ the other fro the ver+ start. 9hile in a sale the obli%ation of one part+ can be
la'full+ subordinated to an uncertain event, so that the other understands that he
assues the ris> of receivin% nothin% for 'hat he %ives !as in the case of a sale of
hopes or e"pectations, emptio spei&, it is not in the usual course of business to do so?
hence, the contin%ent character of the obli%ation ust clearl+ appear. Nothin% is found
in the record to evidence that Daite desired or assued to run the ris> of losin% his
ri%ht over the ore 'ithout %ettin% paid for it, or that 8onacier understood that Daite
assued an+ such ris>. This is proved b+ the fact that Daite insisted on a bond a to
%uarantee pa+ent of the P<0,333.33, an not onl+ upon a bond b+ 8onacier, the Iarap
Mines O Seltin% #o., and the copan+Cs stoc>holders, but also on one b+ a suret+
copan+? and the fact that appellants did put up such bonds indicates that the+
aditted the definite e"istence of their obli%ation to pa+ the balance of P<0,333.33.
@& To subordinate the obli%ation to pa+ the reainin% P<0,333.33 to the sale or
shipent of the ore as a condition precedent, 'ould be tantaount to leavin% the
pa+ent at the discretion of the debtor, for the sale or shipent could not be ade
unless the appellants too> steps to sell the ore. (ppellants 'ould thus be able to
postpone pa+ent indefinitel+. The desireabilit+ of avoidin% such a construction of the
contract 7"hibit 6(6 needs no stressin%.
2& (ssuin% that there could be doubt 'hether b+ the 'ordin% of the contract the
parties indented a suspensive condition or a suspensive period !dies ad quem& for the
pa+ent of the P<0,333.33, the rules of interpretation 'ould incline the scales in favor
of 6the %reater reciprocit+ of interests6, since sale is essentiall+ onerous. The #ivil #ode
of the Philippines, (rticle -@=/, para%raph -, in fine, provides4
If the contract is onerous, the doubt shall be settled in favor of the %reatest reciprocit+
of interests.
and there can be no Euestion that %reater reciprocit+ obtains if the bu+erC obli%ation is
deeed to be actuall+ e"istin%, 'ith onl+ its aturit+ !due date& postponed or deferred,
that if such obli%ation 'ere vie'ed as non5e"istent or not bindin% until the ore 'as sold.
The onl+ rational vie' that can be ta>en is that the sale of the ore to 8onacier 'as a
sale on credit, and not an aleator+ contract 'here the transferor, Daite, 'ould assue
the ris> of not bein% paid at all? and that the previous sale or shipent of the ore 'as
not a suspensive condition for the pa+ent of the balance of the a%reed price, but 'as
intended erel+ to fi" the future date of the pa+ent.
This issue settled, the ne"t point of inEuir+ is 'hether appellants, 8onacier and his
sureties, still have the ri%ht to insist that Daite should 'ait for the sale or shipent of
the ore before receivin% pa+ent? or, in other 'ords, 'hether or not the+ are entitled to
ta>e full advanta%e of the period %ranted the for a>in% the pa+ent.
9e a%ree 'ith the court belo' that the appellant have forfeited the ri%ht court belo'
that the appellants have forfeited the ri%ht to copel Daite to 'ait for the sale of the ore
before receivin% pa+ent of the balance of P<0,333.33, because of their failure to
rene' the bond of the 8ar 7astern Suret+ #opan+ or else replace it 'ith an
eEuivalent %uarantee. The e"piration of the bondin% copan+Cs underta>in% on
Deceber /, -.00 substantiall+ reduced the securit+ of the vendorCs ri%hts as creditor
for the unpaid P<0,333.33, a securit+ that Daite considered essential and upon 'hich
he had insisted 'hen he e"ecuted the deed of sale of the ore to 8onacier !7"hibit 6(6&.
The case sEuarel+ coes under para%raphs 1 and @ of (rticle --./ of the #ivil #ode of
the Philippines4
6(RT. --./. The debtor shall lose ever+ ri%ht to a>e use of the period4
27
!-& . . .
!1& 9hen he does not furnish to the creditor the %uaranties or securities 'hich he has
proised.
!@& 9hen b+ his o'n acts he has ipaired said %uaranties or securities after their
establishent, and 'hen throu%h fortuitous event the+ disappear, unless he
iediatel+ %ives ne' ones eEuall+ satisfactor+.
(ppellantsC failure to rene' or e"tend the suret+ copan+Cs bond upon its e"piration
plainl+ ipaired the securities %iven to the creditor !appellee Daite&, unless iediatel+
rene'ed or replaced.
There is no erit in appellantsC ar%uent that DaiteCs acceptance of the suret+
copan+Cs bond 'ith full >no'led%e that on its face it 'ould autoaticall+ e"pire 'ithin
one +ear 'as a 'aiver of its rene'al after the e"piration date. No such 'aiver could
have been intended, for Daite stood to lose and had nothin% to %ain barel+? and if there
'as an+, it could be rationall+ e"plained onl+ if the appellants had a%reed to sell the ore
and pa+ Daite before the suret+ copan+Cs bond e"pired on Deceber /, -.00. $ut in
the latter case the defendants5appellantsC obli%ation to pa+ becae absolute after one
+ear fro the transfer of the ore to 8onacier b+ virtue of the deed 7"hibit 6(.6.
(ll the alternatives, therefore, lead to the sae result4 that Daite acted 'ithin his ri%hts
in deandin% pa+ent and institutin% this action one +ear fro and after the contract
!7"hibit 6(6& 'as e"ecuted, either because the appellant debtors had ipaired the
securities ori%inall+ %iven and thereb+ forfeited an+ further tie 'ithin 'hich to pa+? or
because the ter of pa+ent 'as ori%inall+ of no ore than one +ear, and the balance
of P<0,333.33 becae due and pa+able thereafter.
#oin% no' to the second issue in this appeal, 'hich is 'hether there 'ere reall+
12,333 tons of iron ore in the stoc>piles sold b+ appellee Daite to appellant 8onacier,
and 'hether, if there had been a short5deliver+ as claied b+ appellants, the+ are
entitled to the pa+ent of daa%es, 'e ust, at the outset, stress t'o thin%s4 first, that
this is a case of a sale of a specific ass of fun%ible %oods for a sin%le price or a lup
su, the Euantit+ of 612,333 tons of iron ore, ore or less,6 stated in the contract
7"hibit 6(,6 bein% a ere estiate b+ the parties of the total tonna%e 'ei%ht of the
ass? and second, that the evidence sho's that neither of the parties had actuall+
easured of 'ei%hed the ass, so that the+ both tried to arrive at the total Euantit+ b+
a>in% an estiate of the volue thereof in cubic eters and then ultipl+in% it b+ the
estiated 'ei%ht per ton of each cubic eter.
The sale bet'een the parties is a sale of a specific ass or iron ore because no
provision 'as ade in their contract for the easurin% or 'ei%hin% of the ore sold in
order to coplete or perfect the sale, nor 'as the price of P=0,333,33 a%reed upon b+
the parties based upon an+ such easureent.!see (rt. -2/3, second par., Ne' #ivil
#ode&. The subBect atter of the sale is, therefore, a deterinate obBect, the ass, and
not the actual nuber of units or tons contained therein, so that all that 'as reEuired of
the seller Daite 'as to deliver in %ood faith to his bu+er all of the ore found in the ass,
not'ithstandin% that the Euantit+ delivered is less than the aount estiated b+ the
!Mobile Machiner+ O Suppl+ #o., Inc. vs. :or> Oilfield Salva%e #o., Inc. -=- So. /=1,
appl+in% art. 120. of the Iouisiana #ivil #ode&. There is no char%e in this case that
Daite did not deliver to appellants all the ore found in the stoc>piles in the inin%
clais in Euestions? Daite had, therefore, coplied 'ith his proise to deliver, and
appellants in turn are bound to pa+ the lup price.
$ut assuin% that plaintiff Daite undertoo> to sell and appellants undertoo> to bu+, not
a definite ass, but appro"iatel+ 12,333 tons of ore, so that an+ substantial difference
in this Euantit+ delivered 'ould entitle the bu+ers to recover daa%es for the short5
deliver+, 'as there reall+ a short5deliver+ in this caseK
9e thin> not. (s alread+ stated, neither of the parties had actuall+ easured or
'ei%hed the 'hole ass of ore cubic eter b+ cubic eter, or ton b+ ton. $oth parties
predicate their respective clais onl+ upon an estiated nuber of cubic eters of ore
ultiplied b+ the avera%e tonna%e factor per cubic eter.
No', appellee Daite asserts that there 'as a total of =,@=0 cubic eters in the
stoc>piles of ore that he sold to 8onacier, 'hile appellants contend that b+ actual
easureent, their 'itness #irpriano ManlaL%it found the total volue of ore in the
stoc>piles to be onl+ <.<3. cubic eters. (s to the avera%e 'ei%ht in tons per cubic
eter, the parties are a%ain in disa%reeent, 'ith appellants claiin% the correct
tonna%e factor to be 1.-/ tons to a cubic eter, 'hile appellee Daite clais that the
correct tonna%e factor is about @.=.
In the face of the conflict of evidence, 'e ta>e as the ost reliable estiate of the
tonna%e factor of iron ore in this case to be that ade b+ Ieopoldo 8. (bad, chief of the
Mines and Metallur%ical Division of the $ureau of Mines, a %overnent pensionado to
the States and a inin% en%ineerin% %raduate of the Aniversities of Nevada and
#alifornia, 'ith alost 11 +ears of e"perience in the $ureau of Mines. This 'itness
placed the tonna%e factor of ever+ cubic eter of iron ore at bet'een @ etric tons as
iniu to 0 etric tons as a"iu. This estiate, in turn, closel+ corresponds to
the avera%e tonna%e factor of @.@ adopted in his corrected report !7"hibits 6886 and 885
-6& b+ en%ineer Neesio Daatero, 'ho 'as sent b+ the $ureau of Mines to the
inin% clais involved at the reEuest of appellant Jra>o'er, precisel+ to a>e an
official estiate of the aount of iron ore in DaiteCs stoc>piles after the dispute arose.
28
7ven %rantin%, then, that the estiate of <,<3. cubic eters of ore in the stoc>piles
ade b+ appellantCs 'itness #ipriano ManlaL%it is correct, if 'e ultipl+ it b+ the
avera%e tonna%e factor of @.@ tons to a cubic eter, the product is 1-,/3..= tons, 'hich
is not ver+ far fro the estiate of 12,333 tons ade b+ appellee Daite, considerin%
that actual 'ei%hin% of each unit of the ass 'as practicall+ ipossible, so that a
reasonable percenta%e of error should be allo'ed an+one a>in% an estiate of the
e"act Euantit+ in tons found in the ass. It ust not be for%otten that the contract
7"hibit 6(6 e"pressl+ stated the aount to be 12,333 tons, more or less. !ch. Pine River
Io%%in% O Iproveent #o. vs A.S., 1=., 2< I. 7d. --<2&.
There 'as, conseEuentl+, no short5deliver+ in this case as 'ould entitle appellants to
the pa+ent of daa%es, nor could Daite have been %uilt+ of an+ fraud in a>in% an+
isrepresentation to appellants as to the total Euantit+ of ore in the stoc>piles of the
inin% clais in Euestion, as char%ed b+ appellants, since DaiteCs estiate appears to
be substantiall+ correct.
9H7R78OR7, findin% no error in the decision appealed fro, 'e hereb+ affir the
sae, 'ith costs a%ainst appellants.
Republic of the Philippines
SUPREME COURT
Manila
8IRST DIVISION

29
G.R. No. 118117 0ece4ber 7, 1995
TEO0ORO ACAP, petitioner,
vs.
COURT O) APPEALS &'( E0; 0E LOS RE;ES, respondents.

PA0ILLA, J.:
This is a petition for revie' on certiorari of the decision
1
of the #ourt of (ppeals, 1nd
Division, in #(5D.R. No. @<-==, 'hich affired the decision
2
of the Re%ional Trial
#ourt of Hiaa+lan, Ne%ros Occidental holdin% that private respondent 7d+ de los
Re+es had acEuired o'nership of Iot No. --@3 of the #adastral Surve+ of Hini%aran,
Ne%ros Occidental based on a docuent entitled 6Declaration of Heirship and 9aiver
of Ri%hts6, and orderin% the dispossession of petitioner as leasehold tenant of the land
for failure to pa+ rentals.
The facts of the case are as follo's4
The title to Iot No. --@3 of the #adastral Surve+ of Hini%aran, Ne%ros Occidental 'as
evidenced b+ O#T No. R5-1-=.. The lot has an area of -@,=13 sE. eters. The title
'as issued and is re%istered in the nae of spouses Santia%o VasEue* and Ioren*a
Orua. (fter both spouses died, their onl+ son 8eli"berto inherited the lot. In -.=0,
8eli"berto e"ecuted a dul+ notari*ed docuent entitled 6Declaration of Heirship and
Deed of (bsolute Sale6 in favor of #ose Pido.
The evidence before the court a quo established that since -.<3, petitioner Teodoro
(cap had been the tenant of a portion of the said land, coverin% an area of nine
thousand five hundred !.,033& eters. 9hen o'nership 'as transferred in -.=0 b+
8eli"berto to #ose Pido, (cap continued to be the re%istered tenant thereof and
reli%iousl+ paid his leasehold rentals to Pido and thereafter, upon PidoCs death, to his
'ido' Iaurenciana.
The controvers+ be%an 'hen Pido died intestate and on 1= Noveber -./-, his
survivin% heirs e"ecuted a notari*ed docuent denoinated as 6Declaration of
Heirship and 9aiver of Ri%hts of Iot No. --@3 Hini%aran #adastre,6 'herein the+
declared? to Euote its pertinent portions, that4
. . . #ose Pido died in the Municipalit+ of Hini%aran, Ne%ros Occidental, he died
intestate and 'ithout an+ >no'n debts and obli%ations 'hich the said parcel of land is
!sic& held liable.
That #ose Pido 'as survived b+ hisFher le%itiate heirs, nael+4 I(AR7N#I(N(
PIDO, 'ife, 7I:, 7RVIN, 7IM7R, and 7I7#HOR all surnaed PIDO? children?
That invo>in% the provision of Section -, Rule =2 of the Rules of #ourt, the above5
entioned heirs do hereb+ declare unto GsicH ourselves the onl+ heirs of the late #ose
Pido and that 'e hereb+ adBudicate unto ourselves the above5entioned parcel of land
in eEual shares.
No', therefore, 9e I(AR7N#I(N(
3
, 7I:, 7IM7R, 7RVIN and 7I7#HOR all
surnaed PIDO, do hereb! waive, quitclaim all our ri(hts, interests and participation
over the said parcel of land in favor of 7D: D7 IOS R7:7S, of le%al a%e, !f&ilipino,
arried to VIRDINI( D7 IOS R7:7S, and resident of Hini%aran, Ne%ros Occidental,
Philippines. . . .
7
!7phasis supplied&
The docuent 'as si%ned b+ all of PidoCs heirs. Private respondent 7d+ de los Re+es
did not si%n said docuent.
It 'ill be noted that at the tie of #ose PidoCs death, title to the propert+ continued to
be re%istered in the nae of the VasEue* spouses. Apon obtainin% the Declaration of
Heirship 'ith 9aiver of Ri%hts in his favor, private respondent 7d+ de los Re+es filed
the sae 'ith the Re%istr+ of Deeds as part of a notice of an adverse claim a%ainst the
ori%inal certificate of title.
Thereafter, private respondent sou%ht for petitioner !(cap& to personall+ infor hi that
he !7d+& had becoe the ne' o'ner of the land and that the lease rentals thereon
should be paid to hi. Private respondent further alle%ed that he and petitioner entered
into an oral lease a%reeent 'herein petitioner a%reed to pa+ ten !-3& cavans of pala+
per annum as lease rental. In -./1, petitioner alle%edl+ coplied 'ith said obli%ation.
In -./@, ho'ever, petitioner refused to pa+ an+ further lease rentals on the land,
proptin% private respondent to see> the assistance of the then Ministr+ of (%rarian
Refor !M(R& in Hini%aran, Ne%ros Occidental. The M(R invited petitioner to a
conference scheduled on -@ October -./@. Petitioner did not attend the conference but
sent his 'ife instead to the conference. Durin% the eetin%, an officer of the Ministr+
infored (capCs 'ife about private respondentCs o'nership of the said land but she
stated that she and her husband !Teodoro& did not reco%ni*e private respondentCs clai
of o'nership over the land.
On 1/ (pril -.//, after the lapse of four !2& +ears, private respondent filed a coplaint
for recover+ of possession and daa%es a%ainst petitioner, alle%in% in the ain that as
his leasehold tenant, petitioner refused and failed to pa+ the a%reed annual rental of ten
!-3& cavans of pala+ despite repeated deands.
30
Durin% the trial before the court a quo, petitioner reiterated his refusal to reco%ni*e
private respondentCs o'nership over the subBect land. He averred that he continues to
reco%ni*e #ose Pido as the o'ner of the said land, and havin% been a re%istered
tenant therein since -.<3, he never rene%ed on his rental obli%ations. 9hen Pido died,
he continued to pa+ rentals to PidoCs 'ido'. 9hen the latter left for abroad, she
instructed hi to sta+ in the landholdin% and to pa+ the accumulated rentals upon her
deand or return fro abroad.
Petitioner further claied before the trial court that he had no >no'led%e about an+
transfer or sale of the lot to private respondent in -./- and even the follo'in% +ear
after IaurencianaCs departure for abroad. He denied havin% entered into a verbal lease
tenanc+ contract 'ith private respondent and that assuin% that the said lot 'as
indeed sold to private respondent 'ithout his >no'led%e, R.(. @/22, as aended,
%rants hi the ri%ht to redee the sae at a reasonable price. Petitioner also be'ailed
private respondentCs eBectent action as a violation of his ri%ht to securit+ of tenure
under P.D. 1=.
On 13 (u%ust -..-, the lo'er court rendered a decision in favor of private respondent,
the dispositive part of 'hich reads4
9H7R78OR7, preises considered, the #ourt renders Bud%ent in favor of the
plaintiff, 7d+ de los Re+es, and a%ainst the defendant, Teodoro (cap, orderin% the
follo'in%, to 'it4
-. Declarin% forfeiture of defendantCs preferred ri%ht to issuance of a #ertificate of Iand
Transfer under Presidential Decree No. 1= and his farholdin%s?
1. Orderin% the defendant Teodoro (cap to deliver possession of said far to plaintiff,
and?
@. Orderin% the defendant to pa+ P0,333.33 as attorne+Cs fees, the su of P-,333.33 as
e"penses of liti%ation and the aount of P-3,333.33 as actual daa%es.
5
In arrivin% at the above5entioned Bud%ent, the trial court stated that the evidence
had established that the subBect land 'as 6sold6 b+ the heirs of #ose Pido to private
respondent. This is clear fro the follo'in% disEuisitions contained in the trial courtCs si"
!<& pa%e decision4
There is no doubt that defendant is a re%istered tenant of #ose Pido. Ho'ever, 'hen
the latter died their tenanc+ relations chan%ed since o'nership of said land 'as passed
on to his heirs 'ho, b+ e"ecutin% a 0eed of 3ale, 'hich defendant aditted in his
affidavit, li>e'ise passed on their o'nership of Iot --@3 to herein plaintiff !private
respondent&. (s o'ner hereof, plaintiff has the ri%ht to deand pa+ent of rental and
the tenant is obli%ated to pa+ rentals due fro the tie deand is ade. . . .
6
""" """ """
#ertainl+, the sale of the Pido fail+ of Iot --@3 to herein plaintiff does not of itself
e"tin%uish the relationship. There 'as onl+ a chan%e of the personalit+ of the lessor in
the person of herein plaintiff 7d+ de los Re+es 'ho bein% the purchaser or transferee,
assues the ri%hts and obli%ations of the forer lando'ner to the tenant Teodoro (cap,
herein defendant.
7
(%%rieved, petitioner appealed to the #ourt of (ppeals, iputin% error to the lo'er court
'hen it ruled that private respondent acEuired o'nership of Iot No. --@3 and that he,
as tenant, should pa+ rentals to private respondent and that failin% to pa+ the sae
fro -./@ to -./=, his ri%ht to a certificate of land transfer under P.D. 1= 'as deeed
forfeited.
The #ourt of (ppeals brushed aside petitionerCs ar%uent that the Declaration of
Heirship and 9aiver of Ri%hts !7"hibit 6D6&, the docuent relied upon b+ private
respondent to prove his o'nership to the lot, 'as e"cluded b+ the lo'er court in its
order dated 1= (u%ust -..3. The order indeed noted that the docuent 'as not
identified b+ #ose PidoCs heirs and 'as not re%istered 'ith the Re%istr+ of Deeds of
Ne%ros Occidental. (ccordin% to respondent court, ho'ever, since the Declaration of
Heirship and 9aiver of Ri%hts appears to have been dul+ notari*ed, no further proof of
its due e"ecution 'as necessar+. Ii>e the trial court, respondent court 'as also
convinced that the said docuent stands as prima facie proof of appelleeCs !private
respondentCs& ownership of the land in dispute.
9ith respect to its non5re%istration, respondent court noted that petitioner had actual
>no'led%e of the subBect sale of the land in dispute to private respondent because as
earl+ as -./@, he !petitioner& alread+ >ne' of private respondentCs clai over the said
land but 'hich he thereafter denied, and that in -./1, he !petitioner& actuall+ paid rent
to private respondent. Other'ise stated, respondent court considered this fact of rental
pa+ent in -./1 as estoppel on petitionerCs part to thereafter refute private
respondentCs clai of o'nership over the said land. Ander these circustances,
respondent court ruled that indeed there 'as deliberate refusal b+ petitioner to pa+ rent
for a continued period of five +ears that erited forfeiture of his other'ise preferred
ri%ht to the issuance of a certificate of land transfer.
In the present petition, petitioner ipu%ns the decision of the #ourt of (ppeals as not in
accord 'ith the la' and evidence 'hen it rules that private respondent acEuired
o'nership of Iot No. --@3 throu%h the aforeentioned Declaration of Heirship and
9aiver of Ri%hts.
31
Hence, the issues to be resolved presentl+ are the follo'in%4
-. 9H7TH7R OR NOT TH7 SA$,7#T D7#I(R(TION O8 H7IRSHIP (ND 9(IV7R
O8 RIDHTS IS ( R7#ODNIP7D MOD7 O8 (#)AIRIND O9N7RSHIP $: PRIV(T7
R7SPOND7NT OV7R TH7 IOT IN )A7STION.
1. 9H7TH7R OR NOT TH7 S(ID DO#AM7NT #(N $7 #ONSID7R7D ( D77D O8
S(I7 IN 8(VOR O8 PRIV(T7 R7SPOND7NT O8 TH7 IOT IN )A7STION.
Petitioner ar%ues that the Re%ional Trial #ourt, in its order dated = (u%ust -..3,
e"plicitl+ e"cluded the docuent ar>ed as 7"hibit 6D6 !Declaration of Heirship, etc.&
as private respondentCs evidence because it 'as not re%istered 'ith the Re%istr+ of
Deeds and 'as not identified b+ an+one of the heirs of #ose Pido. The #ourt of
(ppeals, ho'ever, held the sae to be adissible, it bein% a notari*ed docuent,
hence, a prima facie proof of private respondentsC o'nership of the lot to 'hich it refers.
Petitioner points out that the Declaration of Heirship and 9aiver of Ri%hts is not one of
the reco%ni*ed odes of acEuirin% o'nership under (rticle =-1 of the #ivil #ode.
Neither can the sae be considered a deed of sale so as to transfer o'nership of the
land to private respondent because no consideration is stated in the contract !assuin%
it is a contract or deed of sale&.
Private respondent defends the decision of respondent #ourt of (ppeals as in accord
'ith the evidence and the la'. He posits that 'hile it a+ indeed be true that the trial
court e"cluded his 7"hibit 6D6 'hich is the Declaration of Heirship and 9aiver of Ri%hts
as part of his evidence, the trial court declared hi nonetheless o'ner of the subBect lot
based on other evidence adduced durin% the trial, nael+, the notice of adverse clai
!7"hibit 676& dul+ re%istered b+ hi 'ith the Re%istr+ of Deeds, 'hich contains the
Euestioned Declaration of Heirship and 9aiver of Ri%hts as an inte%ral part thereof.
9e find the petition ipressed 'ith erit.
In the first place, an asserted ri%ht or clai to o'nership or a real ri%ht over a thin%
arisin% fro a Buridical act, ho'ever Bustified, is not per se sufficient to %ive rise to
o'nership over the res. That ri%ht or title ust be copleted b+ fulfillin% certain
conditions iposed b+ la'. Hence, o'nership and real ri%hts are acEuired onl+
pursuant to a le%al ode or process. 9hile title is the Buridical Bustification, ode is the
actual process of acEuisition or transfer of o'nership over a thin% in Euestion.
8
Ander (rticle =-1 of the #ivil #ode, the odes of acEuirin% o'nership are %enerall+
classified into t'o !1& classes, nael+, the ori(inal mode !i.e., throu%h occupation,
acEuisitive prescription, la' or intellectual creation& and the derivative mode !i.e.,
throu%h succession mortis causa or tradition as a result of certain contracts, such as
sale, barter, donation, assi%nent or utuu&.
In the case at bench, the trial court 'as obviousl+ confused as to the nature and effect
of the Declaration of Heirship and 9aiver of Ri%hts, eEuatin% the sae 'ith a contract
!deed& of sale. The+ are not the sae.
In a #ontract of Sale, one of the contractin% parties obli%ates hiself to transfer the
o'nership of and to deliver a deterinate thin%, and the other part+ to pa+ a price
certain in one+ or its eEuivalent.
9
Apon the other hand, a declaration of heirship and 'aiver of ri%hts operates as a public
instruent 'hen filed 'ith the Re%istr+ of Deeds 'hereb+ the intestate heirs adBudicate
and divide the estate left b+ the decedent aon% theselves as the+ see fit. It is in
effect an e"traBudicial settleent bet'een the heirs under Rule =2 of the Rules of #ourt.
10
Hence, there is a ar>ed difference bet'een a sale of hereditar+ ri%hts and a waiver of
hereditar+ ri%hts. The first presues the e"istence of a contract or deed of sale
bet'een the parties.
11
The second is, technicall+ spea>in%, a ode of e"tinction of
o'nership 'here there is an abdication or intentional relinEuishent of a >no'n ri%ht
'ith >no'led%e of its e"istence and intention to relinEuish it, in favor of other persons
who are co<heirs in the succession.
12
Private respondent, bein% then a stran%er to the
succession of #ose Pido, cannot conclusivel+ clai o'nership over the subBect lot on
the sole basis of the 'aiver docuent 'hich neither recites the eleents of either a
sale,
13
or a donation,
17
or an+ other derivative ode of acEuirin% o'nership.
)uite surprisin%l+, both the trial court and public respondent #ourt of (ppeals
concluded that a 6sale6 transpired bet'een #ose PidoCs heirs and private respondent
and that petitioner acEuired actual >no'led%e of said sale 'hen he 'as suoned b+
the Ministr+ of (%rarian Refor to discuss private respondentCs clai over the lot in
Euestion. This conclusion has no basis both in fact and in la'.
On record, 7"hibit 6D6, 'hich is the 6Declaration of Heirship and 9aiver of Ri%hts6 'as
excluded b+ the trial court in its order dated >? Au(ust $%%. because the docuent
'as neither re%istered 'ith the Re%istr+ of Deeds nor identified b+ the heirs of #ose
Pido. There is no sho'in% that private respondent had the sae docuent attached to
or ade part of the record. 9hat the trial court aditted 'as (nne" 676, a notice of
adverse clai filed 'ith the Re%istr+ of Deeds 'hich contained the Declaration of
Heirship 'ith 9aiver of ri%hts and 'as annotated at the bac> of the Ori%inal #ertificate
of Title to the land in Euestion.
32
( notice of adverse clai, b+ its nature, does not ho'ever prove private respondentCs
o'nership over the tenanted lot. 6( notice of adverse clai is nothin% but a notice of a
clai adverse to the re%istered o'ner, the validit+ of 'hich is +et to be established in
court at soe future date, and is no better than a notice of lis pendens 'hich is a notice
of a case alread+ pendin% in court.6
15
It is to be noted that 'hile the e"istence of said adverse clai 'as dul+ proven, there is
no evidence 'hatsoever that a deed of sale 'as e"ecuted bet'een #ose PidoCs heirs
and private respondent transferrin% the ri%hts of PidoCs heirs to the land in favor of
private respondent. Private respondentCs ri%ht or interest therefore in the tenanted lot
reains an adverse clai 'hich cannot b+ itself be sufficient to cancel the O#T to the
land and title the sae in private respondentCs nae. #onseEuentl+, 'hile the
transaction bet'een PidoCs heirs and private respondent a+ be bindin% on both
parties, the ri%ht of petitioner as a re%istered tenant to the land cannot be perfunctoril+
forfeited on a ere alle%ation of private respondentCs o'nership 'ithout the
correspondin% proof thereof.
Petitioner had been a re%istered tenant in the subBect land since -.<3 and reli%iousl+
paid lease rentals thereon. In his ind, he continued to be the re%istered tenant of
#ose Pido and his fail+ !after PidoCs death&, even if in -./1, private respondent
alle%edl+ infored petitioner that he had becoe the ne' o'ner of the land.
Ander the circustances, petitioner a+ have, in %ood faith, assued such stateent
of private respondent to be true and a+ have in fact delivered -3 cavans of pala+ as
annual rental for -./1 to private respondent. $ut in -./@, it is clear that petitioner had
is%ivin%s over private respondentCs clai of o'nership over the said land because in
the October -./@ M(R conference, his 'ife Iaurenciana cate%oricall+ denied all of
private respondentCs alle%ations. In fact, petitioner even secured a certificate fro the
M(R dated . Ma+ -.// to the effect that he continued to be the re%istered tenant of
#ose Pido and not of private respondent. The reason is that private respondent never
re(istered the Declaration of Heirship 'ith 9aiver of Ri%hts 'ith the Re%istr+ of Deeds
or 'ith the M(R. Instead, he !private respondent& sou%ht to do indirectl+ 'hat could not
be done directl+, i.e., file a notice of adverse claim on the said lot to establish
ownership thereover.
It stands to reason, therefore, to hold that there 'as no unjustified or deliberate refusal
b+ petitioner to pa+ the lease rentals or aorti*ations to the lando'nerFa%ricultural
lessor 'hich, in this case, private respondent failed to establish in his favor b+ clear
and convincin% evidence.
16
#onseEuentl+, the sanction of forfeiture of his preferred ri%ht to be issued a #ertificate
of Iand Transfer under P.D. 1= and to the possession of his farholdin%s should not be
applied a%ainst petitioners, since private respondent has not established a cause of
action for recover+ of possession a%ainst petitioner.
9H7R78OR7, preises considered, the #ourt hereb+ DR(NTS the petition and the
decision of the #ourt of (ppeals dated - Ma+ -..2 'hich affired the decision of the
RT# of Hiaa+lan, Ne%ros Occidental dated 13 (u%ust -..- is hereb+ S7T (SID7.
The private respondentCs coplaint for recover+ of possession and daa%es a%ainst
petitioner (cap is hereb+ DISMISS7D for failure to properl+ state a cause of action,
'ithout preBudice to private respondent ta>in% the proper le%al steps to establish the
le%al ode b+ 'hich he clais to have acEuired o'nership of the land in Euestion.
SO ORD7R7D.
Republic of the Philippines
SUPREME COURT
Manila
S7#OND DIVISION

33
G.R. No. 126777 0ece4ber 7, 1998
AL)ONSO 6UI9A0A, CRESENTE 6UI9A0A, RE;NEL0A 6UI9A0A, 0EMETRIO
6UI9A0A, ELIUTERIA 6UI9A0A, EULALIO 6UI9A0A, &'( <ARLITO 6UI9A0A,
petitioners,
vs.
COURT O) APPEALS, REGALA0O MON0E9AR, RO0UL)O GOLORAN, ALBERTO
ASIS, SEGUN0INO RAS, ERNESTO GOLORAN, CELSO ABISO, )ERNAN0O
BAUTISTA, ANTONIO MACASERO, &'( NESTOR MAGUINSA;, respondents.

MARTINE, J.:
Petitioners, as heirs of the late Trinidad )uiBada, filed a coplaint a%ainst private
respondents for Euietin% of title, recover+ of possession and o'nership of parcels of
land 'ith clai for attorne+Cs fees and daa%es. The suit 'as preised on the
follo'in% facts found b+ the court of (ppeals 'hich is ateriall+ the sae as that found
b+ the trial court4
Plaintiffs5appellees !petitioners& are the children of the late Trinidad #orvera Vda, de
)uiBada. Trinidad 'as one of the heirs of the late Pedro #orvera and inherited fro the
latter the t'o5hectare parcel of land subBect of the case, situated in the barrio of San
(%ustin, Talaco%on, (%usan del Sur. On (pril 0, -.0<, Trinidad )uiBada to%ether 'ith
her sisters Ieonila #orvera Vda. de SeEueLa and Pa* #orvera #abiltes and brother
7papiadito #orvera e"ecuted a conditional deed of donation !7"h. #& of the t'o5
hectare parcel of land subBect of the case in favor of the Municipalit+ of Talaco%on, the
condition bein% that the parcel of land shall be used solel+ and e"clusivel+ as part of
the capus of the proposed provincial hi%h school in Talaco%on. (pparentl+, Trinidad
reained in possession of the parcel of land despite the donation. On ,ul+ 1., -.<1,
Trinidad sold one !-& hectare of the subBect parcel of land to defendant5appellant
Re%alado MondeBar !7"h. -&. SubseEuentl+, Trinidad verball+ sold the reainin% one
!-& hectare to defendant5appellant !respondent& Re%alado MondeBar 'ithout the benefit
of a 'ritten deed of sale and evidenced solel+ b+ receipts of pa+ent. In -./3, the
heirs of Trinidad, 'ho at that tie 'as alread+ dead, filed a coplaint for forcible entr+
!7"h. 7& a%ainst defendant5appellant !respondent& Re%alado MondeBar, 'hich
coplaint 'as, ho'ever, disissed for failure to prosecute !7"h. 8&. In -./=, the
proposed provincial hi%h school havin% failed to ateriali*e, the San%%unian% $a+an of
the unicipalit+ of Talaco%on enacted a resolution revertin% the t'o !1& hectares of land
donated bac> to the donors !7"h. D&. In the eantie, defendant5appellant
!respondent& Re%alado MondeBar sold portions of the land to defendants5appellants
!respondents& 8ernando $autista !7"h. 0&, Rodolfo Doloran !7"h. <&, 7fren Duden
!7"h. =& and 7rnesto Doloran !7"h. /&.
On ,ul+ 0, -.//, plaintiffs5appellees !petitioners& filed this action a%ainst defendants5
appellants !respondents&. In the coplaint, plaintiffs5appellees !petitioners& alle%ed that
their deceased other never sold, conve+ed, transferred or disposed of the propert+ in
Euestion to an+ person or entit+ uch less to Re%alado MondeBar save the donation
ade to the Municipalit+ of Talaco%on in -.0<? that at the tie of the alle%ed sale to
Re%alado MondeBar b+ Trinidad )uiBada, the land still belon%s to the Municipalit+ of
Talaco%on, hence, the supposed sale is null and void.
Defendants5appellants !respondents&, on the other hand, in their ans'er claied that
the land in dispute 'as sold to Re%alado MondeBar, the one !-& hectare on ,ul+ 1.,
-.<1, and the reainin% one !-& hectare on installent basis until full+ paid. (s
affirative andFor special defense, defendants5appellants !respondents& alle%ed that
plaintiffs action is barred b+ laches or has prescribed.
The court a quo rendered Bud%ent in favor of plaintiffs5appellees !petitioners&4 firstl+
because 6Trinidad )uiBada had no le%al title or ri%ht to sell the land to defendant
MondeBar in -.<1, -.<<, -.<= and -.</, the sae not bein% hers to dispose of
because o'nership belon%s to the Municipalit+ of Talaco%on !Decision, p. 2? Rollo, p.
@.& and, secondl+, that the deed of sale e"ecuted b+ Trinidad )uiBada in favor of
MondeBar did not carr+ 'ith it the conforit+ and acEuiescence of her children, ore so
that she 'as alread+ <@ +ears old at the tie, and a 'ido' !Decision, p. <? Rollo, p.
2-&.6
1
The dispositive portion of the trial courtCs decision reads4
9H7R78OR7, vie'ed fro the above perceptions, the scale of Bustice havin% tilted in
favor of the plaintiffs, Bud%ent is, as it is hereb+ rendered4
-& orderin% the Defendants to return and vacate the t'o !1& hectares of land to Plaintiffs
as described in Ta" Declaration No. -13. in the nae of Trinidad )uiBada?
1& orderin% an+ person actin% in DefendantsC behalf to vacate and restore the peaceful
possession of the land in Euestion to Plaintiffs?
@& orderin% the cancellation of the Deed of Sale e"ecuted b+ the late Trinidad )uiBada
in favor of Defendant Re%alado MondeBar as 'ell as the Deeds of
SaleFRelinEuishents e"ecuted b+ MondeBar in favor of the other Defendants?
2& orderin% Defendants to reove their iproveents constructed on the Euestioned
lot?
34
0& orderin% the Defendants to pa+ Plaintiffs, Bointl+ and severall+, the aount of
P-3,333.33 representin% attorne+Cs fees?
<& orderin% Defendants to pa+s the aount of P/,333.33 as e"penses of liti%ation? and
=& orderin% Defendants to pa+ the su of P@3,333.33 representin% oral daa%es.
SO ORD7R7D.
2
On appeal, the #ourt of (ppeals reversed and set aside the Bud%ent a quo
3
rulin% that
the sale ade b+ Trinidad )uiBada to respondent MondeBar 'as valid as the forer
retained an inchoate interest on the lots b+ virtue of the autoatic reversion clause in
the deed of donation.
7
Thereafter, petitioners filed a otion for reconsideration. 9hen
the #( denied their otion,
5
petitioners instituted a petition for revie' to this #ourt
ar%uin% principall+ that the sale of the subBect propert+ ade b+ Trinidad )uiBada to
respondent MondeBar is void, considerin% that at that tie, o'nership 'as alread+
transferred to the Municipalit+ of Talaco%on. On the contrar+, private respondents
contend that the sale 'as valid, that the+ are bu+ers in %ood faith, and that petitionersC
case is barred b+ laches.
6
9e affir the decision of the respondent court.
The donation ade on (pril 0, -.0< b+ Trinidad )uiBada and her brother and sisters
7

'as subBect to the condition that the donated propert+ shall be 6used solel+ and
e"clusivel+ as a part of the capus of the proposed Provincial Hi%h School in
Talaco%on.6
8
The donation further provides that should 6the proposed Provincial Hi%h
School be discontinued or if the sae shall be opened but for soe reason or another,
the sae a+ in the future be closed6 the donated propert+ shall autoaticall+ revert to
the donor.
9
Such condition, not bein% contrar+ to la', orals, %ood custos, public
order or public polic+ 'as validl+ iposed in the donation.
10
9hen the Municipalit+Cs acceptance of the donation 'as ade >no'n to the donor, the
forer becae the ne' o'ner of the donated propert+ ; donation bein% a ode of
acEuirin% and transittin% o'nership
11
; not'ithstandin% the condition iposed b+ the
donee. The donation is perfected once the acceptance b+ the donee is ade >no'n to
the donor.
12
(ccordin%, o'nership is iediatel+ transferred to the latter and that
o'nership 'ill onl+ revert to the donor if the resolutor+ condition is not fulfilled.
In this case, that resolutor+ condition is the construction of the school. It has been ruled
that 'hen a person donates land to another on the condition that the latter 'ould build
upon the land a school, the condition iposed is not a condition precedent or a
suspensive condition but a resolutor+ one.
13
Thus, at the tie of the sales ade in
-.<1 to'ards -.</, the alle%ed seller !Trinidad& could not have sold the lots since she
had earlier transferred o'nership thereof b+ virtue of the deed of donation. So lon% as
the resolutor+ condition subsists and is capable of fulfillent, the donation reains
effective and the donee continues to be the o'ner subBect onl+ to the ri%hts of the
donor or his successors5in5interest under the deed of donation. Since no period 'as
iposed b+ the donor on 'hen ust the donee copl+ 'ith the condition, the latter
reains the o'ner so lon% as he has tried to copl+ 'ith the condition 'ithin a
reasonable period. Such period, ho'ever, becae irrelevant herein 'hen the donee5
Municipalit+ anifested throu%h a resolution that it cannot copl+ 'ith the condition of
buildin% a school and the sae 'as ade >no'n to the donor. Onl+ then ; 'hen the
non5fulfillent of the resolutor+ condition 'as brou%ht to the donorCs >no'led%e ; that
o'nership of the donated propert+ reverted to the donor as provided in the autoatic
reversion clause of the deed of donation.
The donor a+ have an inchoate interest in the donated propert+ durin% the tie that
o'nership of the land has not reverted to her. Such inchoate interest a+ be the
subBect of contracts includin% a contract of sale. In this case, ho'ever, 'hat the donor
sold 'as the land itself 'hich she no lon%er o'ns. It 'ould have been different if the
donor5seller sold her interests over the propert+ under the deed of donation 'hich is
subBect to the possibilit+ of reversion of o'nership arisin% fro the non5fulfillent of the
resolutor+ condition.
(s to laches, petitionersC action is not +et barred thereb+. Iaches presupposes failure or
ne%lect for an unreasonable and une"plained len%th of tie, to do that 'hich, b+
e"ercisin% due dili%ence, could or should have been done earlier?
17
6it is ne%li%ence or
oission to assert a ri%ht 'ithin a reasonable tie, thus, %ivin% rise to a presuption
that the part+ entitled to assert it either has abandoned or declined to assert it.6
15
Its
essential eleents of4
a& #onduct on the part of the defendant, or of one under 'ho he clais, %ivin% rise to
the situation coplained of?
b& Dela+ in assertin% coplainantCs ri%ht after he had >no'led%e of the defendantCs
conduct and after he has an opportunit+ to sue?
c& Iac> of >no'led%e or notice on the part of the defendant that the coplainant 'ould
assert the ri%ht on 'hich he bases his suit? and,
d& InBur+ or preBudice to the defendant in the event relief is accorded to the coplainant.
16
35
are absent in this case. PetionersC cause of action to Euiet title coenced onl+ 'hen
the propert+ reverted to the donor andFor his successors5in5interest in -./=. #ertainl+,
'hen the suit 'as initiated the follo'in% +ear, it cannot be said that petioners had slept
on their ri%hts for a lon% tie. The -.<3Cs sales ade b+ Trinidad )uiBada cannot be
the rec>onin% point as to 'hen petitionersC cause of action arose. The+ had no interest
over the propert+ at that tie e"cept under the deed of donation to 'hich private
respondents 'ere not priv+. Moreover, petitioners had previousl+ filed an eBectent suit
a%ainst private respondents onl+ that it did not prosper on a technicalit+.
$e that at it a+, there is one thin% 'hich ilitates a%ainst the clai of petitioners.
Sale, bein% a consensual contract, is perfected b+ ere consent, 'hich is anifested
the oent there is a eetin% of the inds
17
as to the offer and acceptance thereof on
three !@& eleents4 subBect atter, price and ters of pa+ent of the price.
18

O'nership b+ the seller on the thin% sold at the tie of the perfection of the contract of
sale is not an eleent for its perfection. 9hat the la' reEuires is that the seller has the
ri%ht to transfer o'nership at the tie the thin% sold is delivered.
19
Perfection per se
does not transfer o'nership 'hich occurs upon the actual or constructive deliver+ of
the thin% sold.
20
( perfected contract of sale cannot be challen%ed on the %round of
non5o'nership on the part of the seller at the tie of its perfection? hence, the sale is
still valid.
The consuation, ho'ever, of the perfected contract is another atter. It occurs upon
the constructive or actual deliver+ of the subBect atter to the bu+er 'hen the seller or
her successors5in5interest subseEuentl+ acEuires o'nership thereof. Such
circustance happened in this case 'hen petitioners ; 'ho are Trinidad )uiBadaCs
heirs and successors5in5interest ; becae the o'ners of the subBect propert+ upon
the reversion of the o'nership of the land to the. #onseEuentl+, o'nership is
transferred to respondent MondeBar and those 'ho clai their ri%ht fro hi. (rticle
-2@2 of the Ne' #ivil #ode supports the rulin% that the sellerCs 6title passes b+
operation of la' to the bu+er.6
21
This rule applies not onl+ 'hen the subBect atter of
the contract of sale is %oods,
22
but also to other >inds of propert+, includin% real
propert+.
23
There is also no erit in petitionersC contention that since the lots 'ere o'ned b+ the
unicipalit+ at the tie of the sale, the+ 'ere outside the coerce of en under
(rticle -23. !2& of the N##?
27
thus, the contract involvin% the sae is ine"istent and
void fro the be%innin%. Ho'ever, no'here in (rticle -23. !2& is it provided that the
properties of a unicipalit+, 'hether it be those for public use or its patrionial propert+
25
are outside the coerce of en. $esides, the lots in this case 'ere conditionall+
o'ned b+ the unicipalit+. To rule that the donated properties are outside the
coerce of en 'ould render nu%ator+ the unchallen%ed reasonableness and
Bustness of the condition 'hich the donor has the ri%ht to ipose as o'ner thereof.
Moreover, the obBects referred to as outsides the coerce of an are those 'hich
cannot be appropriated, such as the open seas and the heavenl+ bodies.
9ith respect to the trial courtCs a'ard of attorne+Cs fees, liti%ation e"penses and oral
daa%es, there is neither factual nor le%al basis thereof. (ttorne+Cs fees and e"penses
of liti%ation cannot, follo'in% the %eneral rule in (rticle 113/ of the Ne' #ivil #ode, be
recovered in this case, there bein% no stipulation to that effect and the case does not
fall under an+ of the
e"ceptions.
26
It cannot be said that private respondents had copelled petitioners to
liti%ate 'ith third persons. Neither can it be ruled that the forer acted in 6%ross and
evident bad faith6 in refusin% to satisf+ the latterCs clais considerin% that private
respondents 'ere under an honest belief that the+ have a le%al ri%ht over the propert+
b+ virtue of the deed of sale. Moral daa%es cannot li>e'ise be Bustified as none of the
circustances enuerated under (rticles 11-..
27
and 1113
28
of the Ne' #ivil #ode
concur in this case
9H7R78OR7, b+ virtue of the fore%oin%, the assailed decision of the #ourt of (ppeals
is (88IRM7D.
SO ORD7R7D.
Republic of the Philippines
SUPREME COURT
Manila
7N $(N#
G.R. No. L.8506 A+?+$t 31, 1956
CELESTINO CO = COMPAN;, petitioner,
vs.
COLLECTOR O) INTERNAL RE5ENUE, respondent.
36
1ffice of the 3olicitor =eneral Ambrosio Padilla, "isrt Assistant 3olicitor =eneral
=uillermo -. Torres and 3olicitor "ederico +. 3ian for respondent.
BENGON, J.>
(ppeal fro a decision of the #ourt of Ta" (ppeals.
#elestino #o O #opan+ is a dul+ re%istered %eneral copartnership doin% business
under the trade nae of 6Oriental Sash 8actor+6. 8ro -.2< to -.0- it paid percenta%e
ta"es of = per cent on the %ross receipts of its sash, door and 'indo' factor+, in
accordance 'ith section one hundred ei%ht+5si" of the National Revenue #ode
iposin% ta"es on sale of anufactured articles. Ho'ever in -.01 it be%an to clai
liabilit+ onl+ to the contractorCs @ per cent ta" !instead of = per cent& under section -.-
of the sae #ode? and havin% failed to convince the $ureau of Internal Revenue, it
brou%ht the atter to the #ourt of Ta" (ppeals, 'here it also failed. Said the #ourt4
To support his contention that his client is an ordinar+ contractor . . . counsel
presented . . . duplicate copies of letters, s>etches of doors and 'indo's and price
Euotations supposedl+ sent b+ the ana%er of the Oriental Sash 8actor+ to four
custoers 'ho alle%edl+ ade special orders to doors and 'indo' fro the said
factor+. The conclusion that counsel 'ould li>e us to deduce fro these fe' e"hibits is
that the Oriental Sash 8actor+ does not anufacture read+5ade doors, sash and
'indo's for the public but onl+ upon special order of its select custoers. . . . I cannot
believe that petitioner copan+ 'ould ta>e, as in fact it has ta>en, all the trouble and
e"pense of re%isterin% a special trade nae for its sash business and then orders
copan+ stationer+ carr+in% the bold print @1riental 3ash "actor! !#elestino #o O
#opan+, Prop.& .1< Raon St. )uiapo, Manila, Tel. No. @@3=<, ;anufacturers of all
4inds of doors, windows, sashes, furniture, etc. used season<dried and 4iln<dried
lumber, of the best qualit! wor4manships@ solel+ for the purpose of suppl+in% the needs
for doors, 'indo's and sash of its special and liited custoers. One ill note that
petitioner has chosen for its tradenae and has offered itself to the public as a
68actor+6, 'hich eans it is out to do business, in its chosen lines on a bi% scale. (s a
%eneral rule, sash factories receive orders for doors and 'indo's of special desi%n
onl+ in particular cases but the bul> of their sales is derived fro a read+5ade doors
and 'indo's of standard si*es for the avera%e hoe. Moreover, as sho'n fro the
investi%ation of petitionerCs boo> of accounts, durin% the period fro ,anuar+ -, -.01 to
Septeber @3, -.01, it sold sash, doors and 'indo's 'orth P-//,=02.<.. I find it
difficult to believe that this aount 'hich runs to si" fi%ures 'as derived b+ petitioner
entirel+ fro its fe' custoers 'ho ade special orders for these ites.
7ven if 'e 'ere to believe petitionerCs clai that it does not anufacture read+5ade
sash, doors and 'indo's for the public and that it a>es these articles onl+ special
order of its custoers, that does not a>e it a contractor 'ithin the purvie' of section
-.- of the national Internal Revenue #ode. there are no less than fift+ occupations
enuerated in the aforesaid section of the national Internal Revenue #ode subBect to
percenta%e ta" and after readin% carefull+ each and ever+ one of the, 'e cannot find
under 'hich the business of anufacturin% sash, doors and 'indo's upon special
order of custoers fall under the cate%or+ of 6road, buildin%, navi%ation, artesian 'ell,
'ater 'or>ers and other construction 'or> contractors6 are those 'ho alter or repair
buildin%s, structures, streets, hi%h'a+s, se'ers, street rail'a+s railroads lo%%in% roads,
electric lines or po'er lines, and includes an+ other 'or> for the construction, alterin%
or repairin% for 'hich achiner+ driven b+ echanical po'er is used. !Pa+ton vs. #it+
of (nadardo <2 P. 1d /=/, //3, -=. O>l. </&.
Havin% thus eliinated the feasibilit+ off ta"in% petitioner as a contractor under -.- of
the national Internal Revenue #ode, this leaves us to decide the reainin% issue
'hether or not petitioner could be ta"ed 'ith lesser strain and ore accurac+ as seller
of its anufactured articles under section -/< of the sae code, as the respondent
#ollector of Internal Revenue has in fact been doin% the Oriental Sash 8actor+ 'as
established in -.2<.
The percenta%e ta" iposed in section -.- of our Ta" #ode is %enerall+ a ta" on the
sales of services, in contradiction 'ith the ta" iposed in section -/< of the sae #ode
'hich is a ta" on the ori%inal sales of articles b+ the anufacturer, producer or iporter.
!8orille*aCs #oentaries and ,urisprudence on the National Internal Revenue
#ode, Vol. II, p. =22&. The fact that the articles sold are anufactured b+ the seller does
not e"chan%e the contract fro the purvie' of section -/< of the National Internal
Revenue #ode as a sale of articles.
There 'as a stron% dissent? but upon careful consideration of the 'hole atter are
inclines to accept the above stateent of the facts and the la'. The iportant thin% to
reeber is that #elestino #o O #opan+ habituall! ma4es sash, 'indo's and doors,
as it has represented in its stationer+ and advertiseents to the public. That it
6anufactures6 the sae is practicall+ aditted b+ appellant itself. The fact that
'indo's and doors are ade b+ it onl+ 'hen custoers place their orders, does not
alter the nature of the establishent, for it is obvious that it onl+ accepted such orders
as called for the eplo+ent of such aterial5ouldin%, fraes, panels5as it ordinaril+
anufactured or 'as in a position habituall+ to anufacture.
Perhaps the follo'in% para%raph represents in brief the appellantCs position in this
#ourt4
Since the petitioner, b+ clear proof of facts not disputed b+ the respondent,
anufacturers sash, 'indo's and doors onl+ for special custoers and upon their
special orders and in accordance 'ith the desired specifications of the persons
orderin% the sae and not for the %eneral ar>et4 since the doors ordered b+ Don
37
Toribio Teodoro O Sons, Inc., for instance, are not in e"istence and 'hich never 'ould
have e"isted but for the order of the part+ desirin% it? and since petitionerCs contractual
relation 'ith his custoers is that of a contract for a piece of 'or> or since petitioner is
en%a%ed in the sale of services, it follo's that the petitioner should be ta"ed under
section -.- of the Ta" #ode and NOT under section -/0 of the sae #ode.6
!(ppellantCs brief, p. --5-1&.
$ut the ar%uent rests on a false foundation. (n+ builder or hoeo'ner, 'ith sufficient
one+, a+ order 'indo's or doors of the >ind anufactured b+ this appellant.
Therefore it is not true that it serves special custoers onl! or confines its services to
the alone. (nd an+one 'ho sees, and li>es, the doors ordered b+ Don Toribio
Teodoro O Sons Inc. a+ purchase fro appellant doors of the sae >ind, provided he
pa+s the price. Surel+, the appellant 'ill not refuse, for it can easil+ duplicate or even
ass5produce the sae doors5it is echanicall+ eEuipped to do so.
That the doors and 'indo's ust eet desired specifications is neither here nor there.
If these specifications do not happen to be of the >ind habituall+ anufactured b+
appellant ; special fors for sash, ouldin%s of panels ; it 'ould not accept the
order ; and no sale is ade. If the+ do, the transaction 'ould be no different fro a
purchasers of anufactured %oods held is stoc> for sale? the+ are bou%ht because the+
eet the specifications desired b+ the purchaser.
Nobod+ 'ill sa+ that 'hen a sa'ill cuts luber in accordance 'ith the peculiar
specifications of a custoer5si*es not previousl+ held in stoc> for sale to the public5it
thereb+ becoes an eplo+ee or servant of the custoer,
-
not the seller of luber.
The sae consideration applies to this sash anufacturer.
The Oriental Sash 8actor+ does nothin% ore than sell the %oods that it ass5
produces or habituall+ a>es? sash, panels, ouldin%s, fraes, cuttin% the to such
si*es and cobinin% the in such fors as its custoers a+ desire.
On the other hand, petitionerCs idea of bein% a contractor doin% construction Bobs is
untenable. Nobod+ 'ould re%ard the doin% of t'o 'indo' panels a construction 'or> in
coon parlance.
1
(ppellant invo>es (rticle -2<= of the Ne' #ivil #ode to bolster its contention that in
filin% orders for 'indo's and doors accordin% to specifications, it did not sell, but
erel+ contracted for particular pieces of 'or> or 6erel+ sold its services6.
Said article reads as follo's4
( contract for the deliver+ at a certain price of an article 'hich the vendor in
the ordinar+ course of his business anufactures or procures for the %eneral
ar>et, 'hether the sae is on hand at the tie or not, is a contract of sale,
but if the %oods are to be anufactured speciall+ for the custoer and upon
his special order, and not for the %eneral ar>et, it is contract for a piece of
'or>.
It is at once apparent that the Oriental Sash 8actor+ did not erel+ sell its services to
Don Toribio Teodoro O #o. !To ta>e one instance& because it also sold the aterials.
The truth of the atter is that it sold aterials ordinaril+ anufactured b+ it ; sash,
panels, ouldin%s ; to Teodoro O #o., althou%h in such for or cobination as suited
the fanc+ of the purchaser. Such ne' for does not divest the Oriental Sash 8actor+ of
its character as anufacturer. Neither does it ta>e the transaction out of the cate%or+ of
sales under (rticle -2<= above Euoted, because althou%h the 8actor+ does not, in the
ordinar+ course of its business, anufacture and >eep on stoc> doors of the 4ind sold
to Teodoro, it could stoc> andFor probabl+ had in stoc> the sash, ouldin%s and panels
it used therefor !soe of the at least&.
In our opinion 'hen this 8actor+ accepts a Bob that reEuires the use of e"traordinar+ or
additional eEuipent, or involves services not %enerall+ perfored b+ it5it thereb+
contracts for a piece of wor4 ; filin% special orders 'ithin the eanin% of (rticle -2<=.
The orders herein e"hibited 'ere not sho'n to be special. The+ 'ere erel+ orders for
'or> ; nothin% is sho'n to call the special reEuirin% e"traordinar+ service of the
factor+.
The thou%ht occurs to us that if, as alle%ed5all the 'or> of appellant is onl+ to fill orders
previousl+ ade, such orders should not be called special 'or>, but re%ular 'or>.
9ould a factor+ do business perforin% onl+ special, e"traordinar+ or peculiar
erchandiseK
(n+'a+, supposin% for the oent that the transactions 'ere not sales, the+ 'ere
neither lease of services nor contract Bobs b+ a contractor. $ut as the doors and
'indo's had been adittedl+ 6anufactured6 b+ the Oriental Sash 8actor+, such
transactions could be, and should be ta"ed as 6transfers6 thereof under section -/< of
the National Revenue #ode.
The appealed decision is conseEuentl+ affired. So ordered.
38
Re,+b%*c o" t#e P#*%*,,*'e$
SUPREME COURT
M&'*%&
)IRST 0I5ISION

G.R. No. L.27077 9+'e 30, 1975
T1E COMMISSIONER O) INTERNAL RE5ENUE, ,et*t*o'er,
3$.
ENGINEERING E6UIPMENT AN0 SUPPL; COMPAN; AN0 T1E COURT O) TA@
APPEALS, re$,o'(e't$.
G.R. No. L.27752 9+'e 30, 1975
39
ENGINEERING E6UIPMENT AN0 SUPPL; COMPAN;, ,et*t*o'er,
3$.
T1E COMMISSIONER O) INTERNAL RE5ENUE AN0 T1E COURT O) TA@
APPEALS, re$,o'(e't.
1ffice of the 3olicitor =eneral Antonio P. 8arredo, Assistant 3olicitor =eneral "elicisimo
R. Rosete, 3olicitor Lolita 1. =al<lan(, and 3pecial Attorne! =emaliel A. ;ontalino for
)ommissioner of nternal Revenue, etc.
;elquides ). =utierrez, *ose 9. 1n(, *uan =. )ollas, *r., Luis ;a. =uerrero and *.R.
8alon4ita for -n(ineerin( and 3uppl! )ompan!.

7SDA7RR(, *.B
Petition for revie' on certiorari of the decision of the #ourt of Ta" (ppeals in #T( #ase
No. </-, dated Noveber 1., -.<<, assessin% a copensatin% ta" of P-=2,22-.<1 on
the 7n%ineerin% 7Euipent and Suppl+ #opan+.
(s found b+ the #ourt of Ta" (ppeals, and as established b+ the evidence on record,
the facts of this case are as follo's4
7n%ineerin% 7Euipent and Suppl+ #o. !7n%ineerin% for short&, a doestic corporation,
is an en%ineerin% and achiner+ fir. (s operator of an inte%rated en%ineerin% shop, it
is en%a%ed, aon% others, in the desi%n and installation of central t+pe air conditionin%
s+ste, pupin% plants and steel fabrications. !Vol. I pp. -15-< T.S.N. (u%ust 1@, -.<3&
On ,ul+ 1=, -.0<, one ,uan de la #ru*, 'rote the then #ollector, no' #oissioner, of
Internal Revenue denouncin% 7n%ineerin% for ta" evasion b+ isdeclarin% its iported
articles and failin% to pa+ the correct percenta%e ta"es due thereon in connivance 'ith
its forei%n suppliers !7"h. 616 p. - $IR record Vol. I&. 7n%ineerin% 'as li>e'ise
denounced to the #entral $an> !#$& for alle%ed fraud in obtainin% its dollar allocations.
(ctin% on these denunciations, a raid and search 'as conducted b+ a Boint tea of
#entral $an>, !#$&, National $ureau of Investi%ation !N$I& and $ureau of Internal
Revenue !$IR& a%ents on Septeber 1=, -.0<, on 'hich occasion voluinous records
of the fir 'ere sei*ed and confiscated. !pp. -=@5-== T.S.N.&
On Septeber @3, -.0=, revenue e"ainers )uesada and #atudan reported and
recoended to the then #ollector, no' #oissioner, of Internal Revenue
!hereinafter referred to as #oissioner& that 7n%ineerin% be assessed for
P2/3,.-1.3- as deficienc+ advance sales ta" on the theor+ that it isdeclared its
iportation of air conditionin% units and parts and accessories thereof 'hich are
subBect to ta" under Section -/0!&
-
of the Ta" #ode, instead of Section -/< of the
sae #ode. !7"h. 6@6 pp. 0.5<@ $IR rec. Vol. I& This assessent 'as revised on
,anuar+ 1@, -.0., in line 'ith the observation of the #hief, $IR Ia' Division, and 'as
raised to P.-<,@<1.0< representin% deficienc+ advance sales ta" and anufacturers
sales ta", inclusive of the 10Q and 03Q surchar%es. !pp. =15/3 $IR rec. Vol. I&
On March @, -.0.. the #oissioner assessed a%ainst, and deanded upon,
7n%ineerin% pa+ent of the increased aount and su%%ested that P-3,333 be paid as
coproise in e"traBudicial settleent of 7n%ineerin%Cs penal liabilit+ for violation of the
Ta" #ode. The fir, ho'ever, contested the ta" assessent and reEuested that it be
furnished 'ith the details and particulars of the #oissionerCs assessent. !7"h. 6$6
and 6-06, pp. /<5// $IR rec. Vol. I& The #oissioner replied that the assessent 'as
in accordance 'ith la' and the facts of the case.
On ,ul+ @3, -.0., 7n%ineerin% appealed the case to the #ourt of Ta" (ppeals and
durin% the pendenc+ of the case the investi%atin% revenue e"ainers reduced
7n%ineerin%Cs deficienc+ ta" liabilities fro P.-<,@<1.<0 to P=23,0/=./< !7"hs. 6R6 and
6.6 pp. -<15-=3, $IR rec.&, based on findin%s after conferences had 'ith 7n%ineerin%Cs
(ccountant and (uditor.
On Noveber 1., -.<<, the #ourt of Ta" (ppeals rendered its decision, the dispositive
portion of 'hich reads as follo's4
8or (II TH7 8OR7DOIND #ONSID7R(TIONS, the decision of respondent appealed
fro is hereb+ odified, and petitioner, as a contractor, is declared e"ept fro the
deficienc+ anufacturers sales ta" coverin% the period fro ,une -, -.2/. to
Septeber 1, -.0<. Ho'ever, petitioner is ordered to pa+ respondent, or his dul+
authori*ed collection a%ent, the su of P-=2,-2-.<1 as copensatin% ta" and 10Q
surchar%e for the period fro -.0@ to Septeber -.0<. 9ith costs a%ainst petitioner.
The #oissioner, not satisfied 'ith the decision of the #ourt of Ta" (ppeals,
appealed to this #ourt on ,anuar+ -/, -.<=, !D.R. No. I51=322&. On the other hand,
7n%ineerin%, on ,anuar+ 2, -.<=, filed 'ith the #ourt of Ta" (ppeals a otion for
reconsideration of the decision aboveentioned. This 'as denied on (pril <, -.<=,
proptin% 7n%ineerin% to file also 'ith this #ourt its appeal, doc>eted as D.R. No. I5
1=201.
Since the t'o cases, D.R. No. I51=322 and D.R. No. I51=201, involve the sae parties
and issues, 9e have decided to consolidate and Bointl+ decide the.
40
7n%ineerin% in its Petition clais that the #ourt of Ta" (ppeals coitted the follo'in%
errors4
-. That the #ourt of Ta" (ppeals erred in holdin% 7n%ineerin% 7Euipent O Suppl+
#opan+ liable to the @3Q copensatin% ta" on its iportations of eEuipent and
ordinar+ articles used in the central t+pe air conditionin% s+stes it desi%ned,
fabricated, constructed and installed in the buildin%s and preises of its custoers,
rather than to the copensatin% ta" of onl+ =Q?
1. That the #ourt of Ta" (ppeals erred in holdin% 7n%ineerin% 7Euipent O Suppl+
#opan+ %uilt+ of fraud in effectin% the said iportations on the basis of incoplete
Euotations fro the contents of alle%ed photostat copies of docuents sei*ed ille%all+
fro 7n%ineerin% 7Euipent and Suppl+ #opan+ 'hich should not have been
aditted in evidence?
@. That the #ourt of Ta" (ppeals erred in holdin% 7n%ineerin% 7Euipent O Suppl+
#opan+ liable to the 10Q surchar%e prescribed in Section -.3 of the Ta" #ode?
2. That the #ourt of Ta" (ppeals erred in holdin% the assessent as not havin%
prescribed?
0. That the #ourt of Ta" (ppeals erred in holdin% 7n%ineerin% 7Euipent O Suppl+
#opan+ liable for the su of P-=2,-2-.<1 as @3Q copensatin% ta" and 10Q
surchar%e instead of copletel+ absolvin% it fro the deficienc+ assessent of the
#oissioner.
The #oissioner on the other hand clais that the #ourt of Ta" (ppeals erred4
-. In holdin% that the respondent copan+ is a contractor and not a anufacturer.
1. In holdin% respondent copan+ liable to the @Q contractorCs ta" iposed b+ Section
-.- of the Ta" #ode instead of the @3Q sales ta" prescribed in Section -/0!& in
relation to Section -.2!"& both of the sae #ode?
@. In holdin% that the respondent copan+ is subBect onl+ to the @3Q copensatin% ta"
under Section -.3 of the Ta" #ode and not to the @3Q advance sales ta" iposed b+
section -/@ !b&, in relation to section -/0!& both of the sae #ode, on its iportations
of parts and accessories of air conditionin% units?
2. In not holdin% the copan+ liable to the 03Q fraud surchar%e under Section -/@ of
the Ta" #ode on its iportations of parts and accessories of air conditionin% units,
not'ithstandin% the findin% of said court that the respondent copan+ fraudulentl+
isdeclared the said iportations?
0. In holdin% the respondent copan+ liable for P-=2,-2-.<1 as copensatin% ta" and
10Q surchar%e instead of P=23,0/=./< as deficienc+ advance sales ta", deficienc+
anufacturers ta" and 10Q and 03Q surchar%e for the period fro ,une -, -.2/ to
Deceber @-, -.0<.
The ain issue revolves on the Euestion of 'hether or not 7n%ineerin% is a
anufacturer of air conditionin% units under Section -/0!&, supra, in relation to
Sections -/@!b& and -.2 of the #ode, or a contractor under Section -.- of the sae
#ode.
The #oissioner contends that 7n%ineerin% is a anufacturer and seller of air
conditionin% units and parts or accessories thereof and, therefore, it is subBect to the
@3Q advance sales ta" prescribed b+ Section -/0!& of the Ta" #ode, in relation to
Section -.2 of the sae, 'hich defines a anufacturer as follo's4
Section -.2. ; 9ords and Phrases Defined. ; In appl+in% the provisions of this Title,
'ords and phrases shall be ta>en in the sense and e"tension indicated belo'4
""" """ """
!"& 6Manufacturer6 includes ever+ person 'ho b+ ph+sical or cheical process alters
the e"terior te"ture or for or inner substance of an+ ra' aterial or anufactured or
partiall+ anufactured products in such anner as to prepare it for a special use or
uses to 'hich it could not have been put in its ori%inal condition, or 'ho b+ an+ such
process alters the Eualit+ of an+ such aterial or anufactured or partiall+
anufactured product so as to reduce it to ar>etable shape, or prepare it for an+ of
the uses of industr+, or 'ho b+ an+ such process cobines an+ such ra' aterial or
anufactured or partiall+ anufactured products 'ith other aterials or products of the
sae or of different >inds and in such anner that the finished product of such process
of anufacture can be put to special use or uses to 'hich such ra' aterial or
anufactured or partiall+ anufactured products in their ori%inal condition could not
have been put, and 'ho in addition alters such ra' aterial or anufactured or
partiall+ anufactured products, or cobines the sae to produce such finished
products for the purpose of their sale or distribution to others and not for his o'n use or
consuption.
In ans'er to the above contention, 7n%ineerin% clais that it is not a anufacturer and
setter of air5conditionin% units and spare parts or accessories thereof subBect to ta"
under Section -/0!& of the Ta" #ode, but a contractor en%a%ed in the desi%n, suppl+
41
and installation of the central t+pe of air5conditionin% s+ste subBect to the @Q ta"
iposed b+ Section -.- of the sae #ode, 'hich is essentiall+ a ta" on the sale of
services or labor of a contractor rather than on the sale of articles subBect to the ta"
referred to in Sections -/2, -/0 and -/< of the #ode.
The ar%uents of both the 7n%ineerin% and the #oissioner call for a clarification of
the ter contractor as 'ell as the distinction bet'een a contract of sale and contract for
furnishin% services, labor and aterials. The distinction bet'een a contract of sale and
one for 'or>, labor and aterials is tested b+ the inEuir+ 'hether the thin% transferred
is one not in e"istence and 'hich never 'ould have e"isted but for the order of the
part+ desirin% to acEuire it, or a thin% 'hich 'ould have e"isted and has been the
subBect of sale to soe other persons even if the order had not been %iven.
1
If the
article ordered b+ the purchaser is e"actl+ such as the plaintiff a>es and >eeps on
hand for sale to an+one, and no chan%e or odification of it is ade at defendantCs
reEuest, it is a contract of sale, even thou%h it a+ be entirel+ ade after, and in
conseEuence of, the defendants order for it.
@

Our Ne' #ivil #ode, li>e'ise distin%uishes a contract of sale fro a contract for a piece
of 'or> thus4
(rt. -2<=. ( contract for the deliver+ at a certain price of an article 'hich the vendor in
the ordinar+ course of his business anufactures or procures for the %eneral ar>et,
'hether the sae is on hand at the tie or not, is a contract of sale, but if the %oods
are to be anufactured speciall+ for the custoer and upon his special order and not
for the %eneral ar>et, it is a contract for a piece of 'or>.
The 'ord 6contractor6 has coe to be used 'ith special reference to a person 'ho, in
the pursuit of the independent business, underta>es to do a specific Bob or piece of
'or> for other persons, usin% his o'n eans and ethods 'ithout subittin% hiself
to control as to the pett+ details. !(raLas, (nnotations and ,urisprudence on the
National Internal Revenue #ode, p. @-/, par. -.- !1&, -.=3 7d.& The true test of a
contractor as 'as held in the cases of Luzon 3tevedorin( )o., vs. Trinidad, 2@, Phil.
/3@, /3=5/3/, and La )arlota 3u(ar )entral vs. Trinidad, 2@, Phil. /-<, /-., 'ould
see to be that he renders service in the course of an independent occupation,
representin% the 'ill of his eplo+er onl+ as to the result of his 'or>, and not as to the
eans b+ 'hich it is accoplished.
9ith the fore%oin% criteria as %uideposts, 9e shall no' e"aine 'hether 7n%ineerin%
reall+ did 6anufacture6 and sell, as alle%ed b+ the #oissioner to hold it liable to the
advance sales ta" under Section -/0!&, or it onl+ had its services 6contracted6 for
installation purposes to hold it liable under section -./ of the Ta" #ode.
I
(fter %oin% over the three volues of steno%raphic notes and the voluinous record of
the $IR and the #T( as 'ell as the e"hibits subitted b+ both parties, 9e find that
7n%ineerin% did not anufacture air conditionin% units for sale to the %eneral public, but
iported soe ites !as refri%eration copressors in coplete set, heat e"chan%ers or
coils, t.s.n. p. @.& 'hich 'ere used in e"ecutin% contracts entered into b+ it.
7n%ineerin%, therefore, undertoo> ne%otiations and e"ecution of individual contracts for
the desi%n, suppl+ and installation of air conditionin% units of the central t+pe !t.s.n. pp.
135@<? 7"hs. 686, 6D6, 6H6, 6I6, 6,6, 6J6, 6I6, and 6M6&, ta>in% into consideration in the
process such factors as the area of the space to be air conditioned? the nuber of
persons occup+in% or 'ould be occup+in% the preises? the purpose for 'hich the
various air conditionin% areas are to be used? and the sources of heat %ain or coolin%
load on the plant such as sun load, li%htin%, and other electrical appliances 'hich are or
a+ be in the plan. !t.s.n. p. @2, Vol. I& 7n%ineerin% also testified durin% the hearin% in
the #ourt of Ta" (ppeals that relative to the installation of air conditionin% s+ste,
7n%ineerin% desi%ned and en%ineered coplete each particular plant and that no t'o
plants 'ere identical but each had to be en%ineered separatel+.
(s found b+ the lo'er court, 'hich findin%
2
9e adopt ;
7n%ineerin%, in a nutshell, fabricates, assebles, supplies and installs in the buildin%s
of its various custoers the central t+pe air conditionin% s+ste? prepares the plans
and specifications therefor 'hich are distinct and different fro each other? the air
conditionin% units and spare parts or accessories thereof used b+ petitioner are not the
'indo' t+pe of air conditioner 'hich are anufactured, assebled and produced
locall+ for sale to the %eneral ar>et? and the iported air conditionin% units and spare
parts or accessories thereof are supplied and installed b+ petitioner upon previous
orders of its custoers conforabl+ 'ith their needs and reEuireents.
The facts and circustances aforeEuoted support the theor+ that 7n%ineerin% is a
contractor rather than a anufacturer.
The #oissioner in his $rief ar%ues that 6it is ore in accord 'ith reason and sound
business ana%eent to sa+ that an+one 'ho desires to have air conditionin% units
installed in his preises and 'ho is in a position and 'illin% to pa+ the price can order
the sae fro the copan+ !7n%ineerin%& and, therefore, 7n%ineerin% could have
ass produced and stoc>piled air conditionin% units for sale to the public or to an+
custoer 'ith enou%h one+ to bu+ the sae.6 This is untenable in the li%ht of the fact
that air conditionin% units, pac>a%ed, or 'hat 'e >no' as self5contained air
conditionin% units, are distinct fro the central s+ste 'hich 7n%ineerin% dealt in. To
Our ind, the distinction as e"plained b+ 7n%ineerin%, in its $rief, Euotin% fro boo>s,
is not an idle pla+ of 'ords as claied b+ the #oissioner, but a si%nificant fact 'hich
9e Bust cannot i%nore. (s Euoted b+ 7n%ineerin% 7Euipent O Suppl+ #o., fro an
42
7n%ineerin% handboo> b+ I.#. Morro', and 'hich 9e reproduce hereunder for eas+
reference4
... there is a %reat variet+ of eEuipent in use to do this Bob !of air conditionin%&. Soe
devices are desi%ned to serve a specific t+pe of space? others to perfor a specific
function? and still others as coponents to be assebled into a tailor5ade s+ste to
fit a particular buildin%. Denerall+, ho'ever, the+ a+ be %rouped into t'o
classifications ; unitar+ and central s+ste.
The unitar+ eEuipent classification includes those desi%ns such as roo air
conditioner, 'here all of the functional coponents are included in one or t'o
pac>a%es, and installation involves onl+ a>in% service connection such as electricit+,
'ater and drains. #entral5station s+stes, often referred to as applied or built5up
s+stes, reEuire the installation of coponents at different points in a buildin% and their
interconnection.
The roo air conditioner is a unitar+ eEuipent desi%ned specificall+ for a roo or
siilar sall space. It is uniEue aon% air conditionin% eEuipent in t'o respects4 It is
in the electrical appliance classification, and it is ade b+ a %reat nuber of
anufacturers.
There is also the testion+ of one #arlos Navarro, a licensed Mechanical and 7lectrical
7n%ineer, 'ho 'as once the #hairan of the $oard of 7"ainers for Mechanical
7n%ineers and 'ho 'as alle%edl+ responsible for the preparation of the refri%eration
and air conditionin% code of the #it+ of Manila, 'ho said that 6the central t+pe air
conditionin% s+ste is an en%ineerin% Bob that reEuires plannin% and eticulous la+out
due to the fact that usuall+ architects assi%n definite space and usuall+ the spaces the+
assi%n are ver+ sall and of various si*es. #ontinuin% further, he testified4
I donCt thin> I have seen central t+pe of air conditionin% achiner+ roo that are e"actl+
ali>e because all our buildin%s here are desi%ned b+ architects dissiilar to e"istin%
buildin%s, and usuall+ the+ donCt coordinate and %et the advice of air conditionin% and
refri%eratin% en%ineers so uch so that 'hen 'e coe to desi%n, 'e have to a>e use
of the available space that the+ are assi%nin% to us so that 'e have to desi%n the
different coponent parts of the air conditionin% s+ste in such a 'a+ that 'ill be
accoodated in the space assi%ned and after'ards the s+ste a+ be considered
as a definite portion of the buildin%. ...
Definitel+ there is Euite a bi% difference in the operation because the 'indo' t+pe air
conditioner is a sort of coproise. In fact it cannot control huidit+ to the desired
level? rather the anufacturers, b+ hit and iss, 'ere able to satisf+ theselves that
the desired cofort 'ithin a roo could be ade b+ a definite settin% of the achine as
it coes fro the factor+? 'hereas the central t+pe s+ste definitel+ reEuires an
intelli%ent operator. !t.s.n. pp. @3-5@30, Vol. II&
The point, therefore, is this ; 7n%ineerin% definitel+ did not and 'as not en%a%ed in
the anufacture of air conditionin% units but had its services contracted for the
installation of a central s+ste. The cases cited b+ the #oissioner !(dvertisin%
(ssociates, Inc. vs. #ollector of #ustos, .=, Phil. <@<? #elestino #o O #o. vs.
#ollector of Internal Revenue, .. Phil. /2- and Manila Tradin% O Suppl+ #o. vs. #it+ of
Manila, 0< O.D. @<1.&, are not in point. Neither are the+ applicable because the facts in
all the cases cited are entirel+ different. Ta>e for instance the case of #elestino #o
'here this #ourt held the ta"pa+er to be a anufacturer rather than a contractor of
sash, doors and 'indo's anufactured in its factor+. Indeed, fro the ver+ start,
#elestino #o intended itself to be a anufacturer of doors, 'indo's, sashes etc. as it
did re%ister a special trade nae for its sash business and ordered copan+ stationer+
carr+in% the bold print 6ORI7NT(I S(SH 8(#TOR: !#7I7STINO #O (ND
#OMP(N:, PROP.& .1< Raon St., )uiapo, Manila, Tel. No. etc., Manufacturers of (ll
Jinds of Doors, 9indo's ... .6 Ii>e'ise, #elestino #o never put up a contractorCs bond
as reEuired b+ (rticle -=1. of the #ivil #ode. (lso, as a %eneral rule, sash factories
receive orders for doors and 'indo's of special desi%n onl+ in particular cases, but the
bul> of their sales is derived fro read+5ade doors and 'indo's of standard si*es for
the avera%e hoe, 'hich 6sales6 'ere reflected in their boo>s of accounts totallin%
P--/,=02.<. for the period fro ,anuar+, -.01 to Septeber @3, -.01, or for a period
of onl+ nine !.& onths. This #ourt found said su difficult to have been derived fro
its fe' custoers 'ho placed special orders for these ites. (ppl+in% the abovestated
facts to the case at bar, 9e found the to he inapposite. 7n%ineerin% advertised itself
as 7n%ineerin% 7Euipent and Suppl+ #opan+, Machiner+ Mechanical Supplies,
7n%ineers, #ontractors, -=2 MarEues de #oillas, Manila !7"h. 6$6 and 6-06 $IR rec.
p. -/<&, and not as anufacturers. It li>e'ise paid the contractors ta" on all the
contracts for the desi%n and construction of central s+ste as testified to b+ Mr. Re+
Par>er, its President and Deneral Mana%er. !t.s.n. p. -31, -3@& Siilarl+, 7n%ineerin%
did not have read+5ade air conditionin% units for sale but as per testion+ of Mr.
Par>er upon inEuir+ of ,ud%e Iuciano of the #T( ;
) ; (side fro the %eneral coponents, 'hich %o into air conditionin% plant or s+ste
of the central t+pe 'hich +our copan+ underta>es, and the procedure follo'ed b+ +ou
in obtainin% and e"ecutin% contracts 'hich +ou have alread+ testified to in previous
hearin%, 'ould +ou sa+ that the coverin% contracts for these different proBects listed ...
referred to in the list, 7"h. 686 are identical in ever+ respectK I ean ever+ plan or
s+ste covered b+ these different contracts are identical in standard in ever+ respect,
so that +ou can reproduce theK
( ; No, sir. The+ are not all standard. On the contrar+, none of the are the sae.
7ach one ust be desi%ned and constructed to eet the particular reEuireents,
'hether the application is to be operated. !t.s.n. pp. -3-5-31&
43
9hat 9e consider as on all fours 'ith the case at bar is the case of 3.;. Lawrence )o.
vs. ;c"arland, #oissioner of Internal Revenue of the State of Tennessee and
Mc#anless, @00 S9 1d, -33, -3-, 6'here the cause presents the Euestion of 'hether
one en%a%ed in the business of contractin% for the establishent of air conditionin%
s+ste in buildin%s, 'hich 'or> reEuires, in addition to the furnishin% of a coolin% unit,
the connection of such unit 'ith electrical and plubin% facilities and the installation of
ducts 'ithin and throu%h 'alls, ceilin%s and floors to conve+ cool air to various parts of
the buildin%, is liable for sale or use ta" as a contractor rather than a retailer of tan%ible
personal propert+. (ppellee too> the Position that appellant 'as not en%a%ed in the
business of sellin% air conditionin% eEuipent as such but in the furnishin% to its
custoers of copleted air conditionin% s+stes pursuant to contract, 'as a contractor
en%a%ed in the construction or iproveent of real propert+, and as such 'as liable for
sales or use ta" as the consuer of aterials and eEuipent used in the
consuation of contracts, irrespective of the ta" status of its contractors. To transit
the 'ar or cool air over the buildin%s, the appellant installed s+ste of ducts runnin%
fro the basic units throu%h 'alls, ceilin%s and floors to re%isters. The contract called
for copleted air conditionin% s+stes 'hich becae peranent part of the buildin%s
and iproveents to the realt+.6 The #ourt held the appellant a contractor 'hich used
the aterials and the eEuipent upon the value of 'hich the ta" herein iposed 'as
levied in the perforance of its contracts 'ith its custoers, and that the custoers did
not purchase the eEuipent and have the sae installed.
(ppl+in% the facts of the aforeentioned case to the present case, 9e see that the
suppl+ of air conditionin% units to 7n%ineerCs various custoers, 'hether the said
achineries 'ere in hand or not, 'as especiall+ ade for each custoer and installed
in his buildin% upon his special order. The air conditionin% units installed in a central
t+pe of air conditionin% s+ste 'ould not have e"isted but for the order of the part+
desirin% to acEuire it and if it e"isted 'ithout the special order of 7n%ineerin%Cs
custoer, the said air conditionin% units 'ere not intended for sale to the %eneral
public. Therefore, 9e have but to affir the conclusion of the #ourt of Ta" (ppeals that
7n%ineerin% is a contractor rather than a anufacturer, subBect to the contractors ta"
prescribed b+ Section -.- of the #ode and not to the advance sales ta" iposed b+
Section -/0!& in relation to Section -.2 of the sae #ode. Since it has been proved
to Our satisfaction that 7n%ineerin% iported air conditionin% units, parts or accessories
thereof for use in its construction business and these ites 'ere never sold, resold,
bartered or e"chan%ed, 7n%ineerin% should be held liable to pa+ ta"es prescribed
under Section -.3
0
of the #ode. This copensatin% ta" is not a ta" on the iportation
of %oods but a ta" on the use of iported %oods not subBect to sales ta". 7n%ineerin%,
therefore, should be held liable to the pa+ent of @3Q copensatin% ta" in accordance
'ith Section -.3 of the Ta" #ode in relation to Section -/0!& of the sae, but 'ithout
the 03Q ar> up provided in Section -/@!b&.
II
9e ta>e up ne"t the issue of fraud. The #oissioner char%ed 7n%ineerin% 'ith
isdeclaration of the iported air conditionin% units and parts or accessories thereof so
as to a>e the subBect to a lo'er rate of percenta%e ta" !=Q& under Section -/< of
the Ta" #ode, 'hen the+ are alle%edl+ subBect to a hi%her rate of ta" !@3Q& under its
Section -/0!&. This char%e of fraud 'as denied b+ 7n%ineerin% but the #ourt of Ta"
(ppeals in its decision found adversel+ and said6
... 9e are apl+ convinced fro the evidence presented b+ respondent that petitioner
deliberatel+ and purposel+ isdeclared its iportations. This evidence consists of
letters 'ritten b+ petitioner to its forei%n suppliers, instructin% the on ho' to invoice
and describe the air conditionin% units ordered b+ petitioner. ... !p. 1-/ #T( rec.&
Despite the above findin%s, ho'ever, the #ourt of Ta" (ppeals absolved 7n%ineerin%
fro pa+in% the 03Q surchar%e prescribe b+ Section -/@!a& of the Ta" #ode b+
reasonin% out as follo's4
The iposition of the 03Q surchar%e prescribed b+ Section -/@!a& of the Ta" #ode is
based on 'illful ne%lect to file the onthl+ return 'ithin 13 da+s after the end of each
onth or in case a false or fraudulent return is 'illfull+ ade, it can readil+ be seen,
that petitioner cannot le%all+ be held subBect to the 03Q surchar%e iposed b+ Section
-/@!a& of the Ta" #ode. Neither can petitioner be held subBect to the 03Q surchar%e
under Section -.3 of the Ta" #ode dealin% on copensatin% ta" because the
provisions thereof do not include the 03Q surchar%e. 9here a particular provision of
the Ta" #ode does not ipose the 03Q surchar%e as fraud penalt+ 'e cannot enforce
a non5e"istin% provision of la' not'ithstandin% the assessent of respondent to the
contrar+. Instances of the e"clusion in the Ta" #ode of the 03Q surchar%e are those
dealin% on ta" on ban>s, ta"es on receipts of insurance copanies, and franchise ta".
Ho'ever, if the Ta" #ode iposes the 03Q surchar%e as fraud penalt+, it e"pressl+ so
provides as in the cases of incoe ta", estate and inheritance ta"es, %ift ta"es, inin%
ta", auseent ta" and the onthl+ percenta%e ta"es. (ccordin%l+, 'e hold that
petitioner is not subBect to the 03Q surchar%e despite the e"istence of fraud in the
absence of le%al basis to support the iportation thereof. !p. 11/ #T( rec.&
9e have %one over the e"hibits subitted b+ the #oissioner evidencin% fraud
coitted b+ 7n%ineerin% and 9e reproduce soe of the hereunder for clarit+.
(s earl+ as March -/, -.0@, 7n%ineerin% in a letter of even date 'rote to Trane #o.
!7"h. 6@5J6 pp. -015-00, $IR rec.& vizB
:our invoices should be ade in the nae of Madri%al O #o., Inc., Manila, Philippines,
cFo 7n%ineerin% 7Euipent O Suppl+ #o., Manila, Philippines ; for'ardin% all
correspondence and shippin% papers concernin% this order to us onl+ and not to the
custoer.
44
9hen invoicin%, +our invoices should be e"actl+ as detailed in the custoerCs Ietter
Order dated March -2th, -.0@ attached. This is in accordance 'ith the Philippine
iport licenses %ranted to Madri%al O #o., Inc. and such details ust onl+ be sho'n on
all papers and shippin% docuents for this shipent. 2o mention of words air
conditionin( equipment should be made on an! shippin( documents as well as on the
cases. Please %ive this atter +our careful attention, other'ise %reat difficulties 'ill be
encountered 'ith the Philippine $ureau of #ustos 'hen clearin% the shipent on its
arrival in Manila. (ll invoices and cases should be ar>ed 6THIS 7)AIPM7NT 8OR
RIP(I #7M7NT #O.6
The sae instruction 'as ade to (ce Industries, Inc., San 8rancisco, #alifornia in a
letter dated March -., -.0@ !7"h. 6@5,5-6 pp. -035-0-, $IR rec.&
On (pril <, -.0@, 7n%ineerin% 'rote to O'ens5#ornin% 8iber%lass #orp., Ne' :or>,
A.S.(. !7"h. 6@5-6 pp. -2=5-2., $IR rec.& also enBoinin% the latter fro entionin% or
referrin% to the ter Cair conditionin%C and to describe the %oods on order as 8iber%lass
pipe and pipe fittin% insulation instead. Ii>e'ise on (pril @3, -.0@, 7n%ineerin%
threatened to discontinue the for'ardin% service of Aniversal Transcontinental
#orporation 'hen it 'rote Trane #o. !7"h. 6@5H6 p. -2<, $IR rec.&4
It 'ill be noted that the Aniversal Transcontinental #orporation is not follo'in% throu%h
on the instructions 'hich have been covered b+ the above correspondence, and 'hich
indicates the necessit+ of discontinuin% the use of the ter 6(ir conditionin% Machiner+
or (ir #oolers6. Our instructions concernin% this %eneral situation have been sent to +ou
in aple tie to have avoided this error in terinolo%+, and 'e 'ill as> that on receipt
of this letter that +ou a%ain 'rite to Aniversal Transcontinental #orp. and infor the
that, if in the future, the+ are unable to cooperate 'ith us on this reEuireent, 'e 'ill
thereafter be unable to utili*e their for'ardin% service. Please infor the that 'e 'ill
not tolerate another failure to follo' our reEuireents.
(nd on ,ul+ -=, -.0@ !7"h5 6@5%6 p. -20, $IR rec.& 7n%ineerin% 'rote Trane #o. another
letter, vizB
In the past, 'e have al'a+s paid the air conditionin% ta" on cliate chan%ers and that
ar> is reco%ni*ed in the Philippines, as air conditionin% eEuipent. This atter of
avoidin% an+ tie5in on air conditionin% is ver+ iportant to us, and 'e are as>in% that
fro hereon that 'hoever ta>es care of the processin% of our orders be carefull+
instructed so as to avoid a%ain usin% the ter 6#liate chan%ers6 or in an+ 'a+
referrin% to the eEuipent as 6air conditionin%.6
(nd in response to the aforeEuoted letter, Trane #o. 'rote on ,ul+ @3, -.0@,
su%%estin% a solution, vizB
9e feel that 'e can probabl+ solve all the probles b+ follo'in% the procedure outlined
in +our letter of March 10, -.0@ 'herein +ou stated that in all future Bobs +ou 'ould
enclose photostatic copies of +our iport license so that 'e i%ht a>e up t'o sets of
invoices4 one set describin% eEuipent ordered sipl+ accordin% to the 'a+ that the+
are listed on the iport license and another accordin% to our ordinar+ re%ular ethods
of order 'rite5up. 9e 'ould then include the set ade up accordin% to the iport
license in the shippin% bo"es theselves and use those ites as our actual shippin%
docuents and invoices, and 'e 'ill send the other re%ular invoice to +ou, b+ separate
correspondence. !7"h5 No. 6@585-6, p. -22 $IR rec.&
(nother interestin% letter of 7n%ineerin% is one dated (u%ust 1=, -.00 !7"h. 6@5#6 p.
-2- $IR rec.&
In the process of clearin% the shipent fro the piers, one of the #ustos inspectors
reEuested to see the pac>in% list. Apon presentin% the pac>in% list, it 'as discovered
that the sae 'as prepared on a cop+ of +our letterhead 'hich indicated that the Trane
#o. anufactured air conditionin%, heatin% and heat transfer eEuipent. (ccordin%l+,
the inspectors insisted that this eEuipent 'as bein% iported for air conditionin%
purposes. To date, we have not been able to clear the shipment and it is possible that
we will be required to pa! heav! taxes on equipment.
The purpose of this letter is to request that in the future, no documents of an! 4ind
should be sent with the order that indicate in an! wa! that the equipment could possibl!
be used for air conditionin(.
It is reali*ed that this a broad reEuest and fairl+ difficult to accoplish and adinister,
but 'e believe 'ith proper caution it can be e"ecuted. :our cooperation and close
supervision concernin% these atters 'ill be appreciated. !7phasis supplied&
The aforeEuoted counications are stron%l+ indicative of the fraudulent intent of
7n%ineerin% to isdeclare its iportation of air conditionin% units and spare parts or
accessories thereof to evade pa+ent of the @3Q ta". (nd since the coission of
fraud is alto%ether too %larin%, 9e cannot a%ree 'ith the #ourt of Ta" (ppeals in
absolvin% 7n%ineerin% fro the 03Q fraud surchar%e, other'ise 9e 'ill be %ivin%
preiu to a plainl+ intolerable act of ta" evasion. (s aptl+ stated b+ then Solicitor
Deneral, no' ,ustice, (ntonio P. $arredo4 Cthis circustance 'ill not free it fro the
03Q surchar%e because in an+ case 'hether it is subBect to advance sales ta" or
copensatin% ta", it is reEuired b+ la' to trul+ declare its iportation in the iport
entries and internal revenue declarations before the iportations a+be released fro
custos custod+. The said entries are the ver+ docuents 'here the nature, Euantit+
and value of the iported %oods declared and 'here the custos duties, internal
revenue ta"es, and other fees or char%es incident to the iportation are coputed.
45
These entries, therefore, serve the sae purpose as the returns reEuired b+ Section
-/@!a& of the #ode.C
(nent the 10Q delinEuenc+ surchar%e, 9e full+ a%ree to the rulin% ade b+ the #ourt
of Ta" (ppeals and hold 7n%ineerin% liable for the sae. (s held b+ the lo'er court4
(t first blush it 'ould see that the contention of petitioner that it is not subBect to the
delinEuenc+, surchar%e of 10Q is sound, valid and tenable. Ho'ever, a serious stud+
and critical anal+sis of the historical provisions of Section -.3 of the Ta" #ode dealin%
on copensatin% ta" in relation to Section -/@!a& of the sae #ode, 'ill sho' that the
contention of petitioner is 'ithout erit. The ori%inal te"t of Section -.3 of
#oon'ealth (ct 2<<, other'ise >no'n as the National Internal Revenue #ode, as
aended b+ #oon'ealth (ct No. 03@, effective on October -, -.@., does not
provide for the filin% of a copensation ta" return and pa+ent of the 10 Q surchar%e
for late pa+ent thereof. Ander the ori%inal te"t of Section -.3 of the Ta" #ode as
aended b+ #oon'ealth (ct No. 03@, the contention of the petitioner that it is not
subBect to the 10Q surchar%e appears to be le%all+ tenable. Ho'ever, Section -.3 of
the Ta" #ode 'as subseEuentl+ aended b+ the Republic (cts Nos. 10@, @<-, -0--
and -<-1 effective October -, -.2<, ,ul+ -, -.2/, ,une ., -.2., ,une -<, -.0< and
(u%ust 12, -.0< respectivel+, 'hich invariabl+ provides aon% others, the follo'in%4
... If an+ article 'ithdra'n fro the custohouse or the post office 'ithout pa+ent of
the copensatin% ta" is subseEuentl+ used b+ the iporter for other purposes,
correspondin% entr+ should be ade in the boo>s of accounts if an+ are >ept or a
'ritten notice thereof sent to the #ollector of Internal Revenue and pa+ent of the
correspondin% copensatin% ta" ade 'ithin @3 da+s fro the date of such entr+ or
notice and if ta" is not paid 'ithin such period the aount of the ta" shall be increased
b+ 10Q the increent to be a part of the ta".
Since the iported air conditionin% units5and spare parts or accessories thereof are
subBect to the copensatin% ta" of @3Q as the sae 'ere used in the construction
business of 7n%ineerin%, it is incubent upon the latter to copl+ 'ith the aforeEuoted
reEuireent of Section -.3 of the #ode, b+ postin% in its boo>s of accounts or notif+in%
the #ollector of Internal Revenue that the iported articles 'ere used for other
purposes 'ithin @3 da+s. ... #onseEuentl+? as the @3Q copensatin% ta" 'as not paid
b+ petitioner 'ithin the tie prescribed b+ Section -.3 of the Ta" #ode as aended, it
is therefore subBect to the 10Q surchar%e for delinEuenc+ in the pa+ent of the said
ta". !pp. 112511< #T( rec.&
III
Iastl+ the Euestion of prescription of the ta" assessent has been put in issue.
7n%ineerin% contends that it 'as not %uilt+ of ta" fraud in effectin% the iportations and,
therefore, Section @@1!a& prescribin% ten +ears is inapplicable, claiin% that the
pertinent prescriptive period is five +ears fro the date the Euestioned iportations
'ere ade. ( revie' of the record ho'ever reveals that 7n%ineerin% did file a ta"
return or declaration 'ith the $ureau of #ustos before it paid the advance sales ta" of
=Q. (nd the declaration filed reveals that it did in fact isdeclare its iportations.
Section @@1 of the Ta" #ode 'hich provides4
Section @@1. ; 7"ceptions as to period of liitation of assessent and collection of
ta"es. ;
!a& In the case of a false or fraudulent return 'ith intent to evade ta" or of a failure to
file a return, the ta" a+ be assessed, or a proceedin% in court for the collection of
such ta" a+ be be%un 'ithout assessent at an+ tie 'ithin ten +ears after the
discover+ of the falsit+, fraud or oission. is applicable, considerin% the preponderance
of evidence of fraud 'ith the intent to evade the hi%her rate of percenta%e ta" due fro
7n%ineerin%. The, ta" assessent 'as ade 'ithin the period prescribed b+ la' and
prescription had not set in a%ainst the Dovernent.
9H7R78OR7, the decision appealed fro is affired 'ith the odification that
7n%ineerin% is hereb+ also ade liable to pa+ the 03Q fraud surchar%e. SO
ORD7R7D.
Republic of the Philippines
SUPREME COURT
Manila
T1IR0 0I5ISION
G.R. No. 52267 9&'+&r- 27, 1996
ENGINEERING = MAC1INER; CORPORATION, ,et*t*oner,
vs.
COURT O) APPEALS &'( PONCIANO L. ALME0A, respondent.
0ECISION
PANGANIBAN, J.>
Is a contract for the fabrication and installation of a central air5conditionin% s+ste in a
buildin%, one of 6sale6 or 6for a piece of 'or>6K 9hat is the prescriptive period for filin%
actions for breach of the ters of such contractK
46
These are the le%al Euestions brou%ht before this #ourt in this Petition for revie' on
certiorari under Rule 20 of the Rules of #ourt, to set aside the Decision
-
of the #ourt of
(ppeals
1
in #(5D.R. No. 0/1=<5R proul%ated on Noveber 1/, -.=/ !affirin% in
toto the decision
@
dated (pril -0, -.=2 of the then #ourt of 8irst Instance of Ri*al,
$ranch II
2
, in #ivil #ase No. -2=-1, 'hich ordered petitioner to pa+ private respondent
the aount needed to rectif+ the faults and deficiencies of the air5conditionin% s+ste
installed b+ petitioner in private respondentCs buildin%, plus daa%es, attorne+Cs fees
and costs&.
$+ a resolution of the 8irst Division of this #ourt dated Noveber -@, -..0, this case
'as transferred to the Third. (fter deliberatin% on the various subissions of the
parties, includin% the petition, record on appeal, private respondentCs coent and
briefs for the petitioner and the private respondent, the #ourt assi%ned the 'ritin% of
this Decision to the undersi%ned, 'ho too> his oath as a eber of the #ourt on
October -3, -..0.
The "acts
Pursuant to the contract dated Septeber -3, -.<1 bet'een petitioner and private
respondent, the forer undertoo> to fabricate, furnish and install the air5conditionin%
s+ste in the latterCs buildin% alon% $uendia (venue, Ma>ati in consideration of
P1-3,333.33. Petitioner 'as to furnish the aterials, labor, tools and all services
reEuired in order to so fabricate and install said s+ste. The s+ste 'as copleted in
-.<@ and accepted b+ private respondent, 'ho paid in full the contract price.
On Septeber 1, -.<0, private respondent sold the buildin% to the National Investent
and Developent #orporation !NID#&. The latter too> possession of the buildin% but on
account of NID#Cs noncopliance 'ith the ters and conditions of the deed of sale,
private respondent 'as able to secure Budicial rescission thereof. The o'nership of the
buildin% havin% been decreed bac> to private respondent, he re5acEuired possession
soetie in -.=-. It 'as then that he learned fro soe NID#, eplo+ees of the
defects of the air5conditionin% s+ste of the buildin%.
(ctin% on this inforation, private respondent coissioned 7n%ineer David R. Sapico
to render a technical evaluation of the s+ste in relation to the contract 'ith petitioner.
In his report, Sapico enuerated the defects of the s+ste and concluded that it 'as
6not capable of aintainin% the desired roo teperature of =<R8 5 1R8 !7"hibit #&6
0
.
On the basis of this report, private respondent filed on Ma+ /, -.=- an action for
daa%es a%ainst petitioner 'ith the then #ourt of 8irst Instance of Ri*al !#ivil #ase No.
-2=-1&. The coplaint alle%ed that the air5conditionin% s+ste installed b+ petitioner
did not copl+ 'ith the a%reed plans and specifications. Hence, private respondent
pra+ed for the aount of P1-3,333.33 representin% the rectification cost, P-33,333.33
as daa%es and P-0,333.33 as attorne+Cs fees.
Petitioner oved to disiss the coplaint, alle%in% that the prescriptive period of si"
onths had set in pursuant to (rticles -0<< and -0<=, in relation to (rticle -0=- of the
#ivil #ode, re%ardin% the responsibilit+ of a vendor for an+ hidden faults or defects in
the thin% sold.
Private respondent countered that the contract dated Septeber -3, -.<1 'as not a
contract for sale but a contract for a piece of 'or> under (rticle -=-@ of the #ivil #ode.
Thus, in accordance 'ith (rticle --22 !-& of the sae #ode, the coplaint 'as tiel+
brou%ht 'ithin the ten5+ear prescriptive period.
In its repl+, petitioner ar%ued that (rticle -0=- of the #ivil #ode providin% for a si"5
onth prescriptive period is applicable to a contract for a piece of 'or> b+ virtue of
(rticle -=-2, 'hich provides that such a contract shall be %overned b+ the pertinent
provisions on 'arrant+ of title and a%ainst hidden defects and the pa+ent of price in a
contract of sale
<
.
The trial court denied the otion to disiss. In its ans'er to the coplaint, petitioner
reiterated its clai of prescription as an affirative defense. It alle%ed that 'hatever
defects i%ht have been discovered in the air5conditionin% s+ste could have been
caused b+ a variet+ of factors, includin% ordinar+ 'ear and tear and lac> of proper and
re%ular aintenance. It pointed out that durin% the one5+ear period that private
respondent 'ithheld final pa+ent, the s+ste 'as subBected to 6ver+ ri%id inspection
and testin% and corrections or odifications effected6 b+ petitioner. It interposed a
copulsor+ counterclai su%%estin% that the coplaint 'as filed 6to offset the adverse
effects6 of the Bud%ent in #ivil #ase No. =-2.2, #ourt of 8irst Instance of Manila,
involvin% the sae parties, 'herein private respondent 'as adBud%ed to pa+ petitioner
the balance of the unpaid contract price for the air5conditionin% s+ste installed in
another buildin% of private respondent, aountin% to P-@/,2/1.10.
Thereafter, private respondent filed an ex<parte otion for preliinar+ attachent on
the stren%th of petitionerCs o'n stateent to the effect that it had sold its business and
'as no lon%er doin% business in Manila. The trial court %ranted the otion and, upon
private respondentCs postin% of a bond of 8C03,333.33, ordered the issuance of a 'rit of
attachent.
In due course, the trial court rendered a decision findin% that petitioner failed to install
certain parts and accessories called for b+ the contract, and deviated fro the plans of
the s+ste, thus reducin% its operational effectiveness to the e"tent that @0 'indo'5
t+pe units had to be installed in the buildin% to achieve a fairl+ desirable roo
teperature. On the Euestion of prescription, the trial court ruled that the coplaint 'as
47
filed 'ithin the ten5+ear court prescriptive period althou%h the contract 'as one for a
piece of 'or>, because it involved the 6installation of an air5conditionin% s+ste 'hich
the defendant itself anufactured, fabricated, desi%ned and installed.6
Petitioner appealed to the #ourt of (ppeals, 'hich affired the decision of the trial
court. Hence, it instituted the instant petition.
The 3ubmissions of the Parties
In the instant Petition, petitioner raised three issues. 8irst, it contended that private
respondentCs acceptance of the 'or> and his pa+ent of the contract price
e"tin%uished an+ liabilit+ 'ith respect to the defects in the air5conditionin% s+ste.
Second, it claied that the #ourt of (ppeals erred 'hen it held that the defects in the
installation 'ere not apparent at the tie of deliver+ and acceptance of the 'or>
considerin% that private respondent 'as not an e"pert 'ho could reco%ni*e such
defects. Third, it insisted that, assuin% ar(uendo that there 'ere indeed hidden
defects, private respondentCs coplaint 'as barred b+ prescription under (rticle -0=-
of the #ivil #ode, 'hich provides for a si"5onth prescriptive period.
Private respondent, on the other hand, averred that the issues raised b+ petitioner, li>e
the Euestion of 'hether there 'as an acceptance of the 'or> b+ the o'ner and
'hether the hidden defects in the installation could have been discovered b+ siple
inspection, involve Euestions of fact 'hich have been passed upon b+ the appellate
court.
The )ourtCs Rulin(
The Supree #ourt revie's onl+ errors of la' in petitions for revie' on certiorari under
Rule 20. It is not the function of this #ourt to re5e"aine the findin%s of fact of the
appellate court unless said findin%s are not supported b+ the evidence on record or the
Bud%ent is based on a isapprehension of facts
=
of (ppeals erred 'hen it held that
the defects in the installation 'ere not apparent at the tie of deliver+ and acceptance
of the 'or> considerin% that private respondent 'as not an e"pert 'ho could reco%ni*e
such defects. Third. it insisted that, assuin% ar(uendo that there 'ere indeed hidden
defects, private respondentCs coplaint 'as barred b+ prescription under (rticle -0=-
of the #ivil #ode, 'hich provides for a si"5onth prescriptive period.
Private respondent, on the other hand, averred that the issues raised b+ petitioner, li>e
the Euestion of 'hether here 'as an acceptance of the 'or> b+ the o'ner and 'hether
the hidden defects in the installation could have been discovered b+ siple inspection,
involve Euestions of fact 'hich have been passed upon b+ the appellate court.
The #ourt has consistentl+ held that the factual findin%s of the trial court, as 'ell as the
#ourt of (ppeals, are final and conclusive and a+ not be revie'ed on appeal. (on%
the e"ceptional circustances 'here a reassessent of facts found b+ the lo'er courts
is allo'ed are 'hen the conclusion is a findin% %rounded entirel+ on speculation,
surises or conBectures? 'hen the inference ade is anifestl+ absurd, ista>en or
ipossible? 'hen there is %rave abuse of discretion in the appreciation of facts? 'hen
the Bud%ent is preised on a isapprehension of facts? 'hen the findin%s 'ent
be+ond the issues of the case and the sae are contrar+ to the adissions of both
appellant and appellee. (fter a careful stud+ of the case at bench, 'e find none of the
above %rounds present to Bustif+ the re5evaluation of the findin%s of fact ade b+ the
courts belo'.
/

9e see no valid reason to discard the factual conclusions of the appellate court. . . . !I&t
is not the function of this #ourt to assess and evaluate all over a%ain the evidence,
testionial and docuentar+, adduced b+ the parties, particularl+ 'here, such as here,
the findin(s of both the trial court and the appellate court on the matter coincide.
.

!7phasis supplied&
Hence, the first t'o issues 'ill not be resolved as the+ raise Euestions of fact.
Thus, the onl+ Euestion left to be resolved is that of prescription. In their subissions,
the parties ar%ued len%thil+ on the nature of the contract entered into b+ the, viz.,
'hether it 'as one of sale or for a piece of 'or>.
(rticle -=-@ of the #ivil #ode defines a contract for a piece of 'or> thus4
$+ the contract for a piece of 'or> the contractor binds hiself to e"ecute a piece of
'or> for the eplo+er, in consideration of a certain price or copensation. The
contractor a+ either eplo+ onl+ his labor or s>ill, or also furnish the aterial.
( contract for a piece of 'or>, labor and aterials a+ be distin%uished fro a contract
of sale b+ the inEuir+ as to 'hether the thin% transferred is one not in e"istence and
'hich 'ould never have e"isted but for the order, of the person desirin% it
-3
. In such
case, the contract is one for a piece of 'or>, not a sale. On the other hand, if the thin%
subBect of the contract 'ould have e"isted and been the subBect of a sale to soe other
person even if the order had not been %iven, then the contract is one of sale
--
.
Thus, Mr. ,ustice Vitu%
-1
e"plains that 5
( contract for the deliver+ at a certain price of an article 'hich the vendor in the
ordinar+ course of his business anufactures or procures for the %eneral ar>et,
'hether the sae is on hand at the tie or not is a contract of sale, but if the %oods are
48
to be anufactured speciall+ for the custoer and upon his special order, and not for
the %eneral ar>et, it is a contract for a piece of wor4 !(rt. -2<=, #ivil #ode&. The ere
fact alone that certain articles are ade upon previous orders of custoers 'ill not
ar%ue a%ainst the iposition of the sales ta" if such articles are ordinaril+ anufactured
b+ the ta"pa+er for sale to the public !#elestino #o. vs. #ollector, .. Phil. /2-&.
To Tolentino, the distinction bet'een the t'o contracts depends on the intention of the
parties. Thus, if the parties intended that at soe future date an obBect has to be
delivered, 'ithout considerin% the 'or> or labor of the part+ bound to deliver, the
contract is one of sale. $ut if one of the parties accepts the underta>in% on the basis of
soe plan, ta>in% into account the 'or> he 'ill eplo+ personall+ or throu%h another,
there is a contract for a piece of 'or>
-@
.
#learl+, the contract in Euestion is one for a piece of 'or>. It is not petitionerCs line of
business to anufacture air5conditionin% s+stes to be sold 6off5the5shelf.6 Its business
and particular field of e"pertise is the fabrication and installation of such s+stes as
ordered b+ custoers and in accordance 'ith the particular plans and specifications
provided b+ the custoers. Naturall+, the price or copensation for the s+ste
anufactured and installed 'ill depend %reatl+ on the particular plans and
specifications a%reed upon 'ith the custoers.
The obli%ations of a contractor for a piece of 'or> are set forth in (rticles -=-2 and
-=-0 of the #ivil #ode, 'hich provide4
(rt. -=-2. If the contractor a%rees to produce the 'or> fro aterial furnished b+ hi,
he shall deliver the thin% produced to the eplo+er and transfer doinion over the
thin%. This contract shall be %overned b+ the follo'in% articles as 'ell as b+ the
pertinent provisions on 'arrant+ of title and a%ainst hidden defects and the pa+ent of
price in a contract of sale.
(rt. -=-0. The contractor shall e"ecute the 'or> in such a anner that it has the
Eualities a%reed upon and has no defects 'hich destro+ or lessen its value or fitness
for its ordinar+ or stipulated use. Should the 'or> be not of such Eualit+, the eplo+er
a+ reEuire that the contractor reove the defect or e"ecute another 'or>. If the
contractor fails or refuses to copl+ 'ith this obli%ation, the eplo+er a+ have the
defect reoved or another 'or> e"ecuted, at the contractorCs cost.
The provisions on 'arrant+ a%ainst hidden defects, referred to in (rt. -=-2 above5
Euoted, are found in (rticles -0<- and -0<<, 'hich read as follo's4
(rt. -0<-. The vendor shall be responsible for 'arrant+ a%ainst the hidden defects
'hich the thin% sold a+ have, should the+ render it unfit for the use for 'hich it is
intended, or should the+ diinish its fitness for such use to such an e"tent that, had the
vendee been a'are thereof, he 'ould not have acEuired it or 'ould have %iven a lo'er
price for it? but said vendor shall not be ans'erable for patent defects or those 'hich
a+ be visible, or for those 'hich are not visible if the vendee is an e"pert 'ho, b+
reason of his trade or profession, should have >no'n the.
""" """ """
(rt. -0<<. The vendor is responsible to the vendee for an+ hidden faults or defects in
the thin% sold, even thou%h he 'as not a'are thereof.
This provision shall not appl+ if the contrar+ has been stipulated, and the vendor 'as
not a'are of the hidden faults or defects in the thin% sold.
The reed+ a%ainst violations of the 'arrant+ a%ainst hidden defects is either to
'ithdra' fro the contract !redhibitor+ action& or to deand a proportionate reduction
of the price !accion quanti manoris&, 'ith daa%es in either case
-2
.
In +illostas vs. )ourt of Appeals
-0
, 'e held that, 6'hile it is true that (rticle -0=- of the
#ivil #ode provides for a prescriptive period of si" onths for a redhibitor+ action, a
cursor+ readin% of the ten precedin% articles to 'hich it refers 'ill reveal that said rule
a+ be applied onl+ in case of iplied 'arranties6? and 'here there is an e"press
'arrant+ in the contract, as in the case at bench, the prescriptive period is the one
specified in the e"press 'arrant+, and in the absence of such period, 6the %eneral rule
on rescission of contract, 'hich is four +ears !(rticle -@/., #ivil #ode& shall appl+6
-<
.
#onsistent 'ith the above discussion, it 'ould appear that this suit is barred b+
prescription because the coplaint 'as filed ore than four +ears after the e"ecution
of the contract and the copletion of the air5conditionin% s+ste.
Ho'ever, a close scrutin+ of the coplaint filed in the trial court reveals that the ori%inal
action is not reall+ for enforceent of the 'arranties a%ainst hidden defects, but one for
breach of the contract itself. It alle%ed
-=
that the petitioner, 6in the installation of the air
conditionin% s+ste did not copl+ 'ith the specifications provided6 in the 'ritten
a%reeent bet'een the parties, 6and an evaluation of the air5conditionin% s+ste as
installed b+ the defendant sho'ed the follo'in% defects and violations of the
specifications of the a%reeent, to 'it4
DROAND 8IOOR4
6(. RIDHT 9IND4
49
7Euipped 'ith 9orthin%ton #opressor, Model 1V#2 directl+ driven b+ an Hp 7lin
electric otor -=03 rp, @ phase, <3 c+cles, 113 volts, coplete 'ith starter
evaporative condenser, circulatin% 'ater pup, air handlin% unit air ducts.
Defects Noted4
-. Deteriorated evaporative condenser panels, coils are full of scales and heav+
corrosion is ver+ evident.
1. Defective %au%es of copressors?
@. No belt %uard on otor?
2. Main s'itch has no cover?
0. Desired roo teperature not attained?
(side fro the above defects, the follo'in% 'ere noted not installed althou%h provided
in the specifications.
-. 8ace b+5pass daper of D.I. sheets No. -<. This daper re%ulates the flo' of
cooled air dependin% on roo condition.
1. No fresh air inta>e provision 'ere provided 'hich is ver+ necessar+ for efficient
cofort coolin%..
@. No otor to re%ulate the face and b+5pass daper.
2. IiEuid level indicator for refri%erant not provided.
0. Suitable heat e"chan%er is not installed. This is an iportant coponent to increase
refri%eration efficienc+.
<. Modulatin% therostat not provided.
=. 9ater treatent device for evaporative condenser 'as not provided.
/. IiEuid receiver not provided b+ si%ht %lass.
$. I78T 9IND4
9orthin%ton #opressor Model 1V#2 is installed coplete 'ith -0 Hp electric otor, @
phase, 113 volts <3 c+cles 'ith starter.
Defects Noted4
Sae as ri%ht 'in%. e"cept No. 2, (ll other defects on ri%ht 'in% are coon to the left
'in%.
S7#OND 8IOOR4 !#oon up to 7IDHT 8IOORS&
#opressors installed are M7I#O 'ith =.0 Hp V5belt driven b+ -/33 RPM, 5113 volts,
<3 c+cles, @ phase, Thri%e electric otor 'ith starters.
(s stated in the specifications under, Section No. IV, the M7I#O copressors do not
satisf+ the conditions stated therein due to the follo'in%4
-. M7I#O #opressors are not provided 'ith autoatic capacit+ unloader.
1. Not provided 'ith oil pressure safet+ control.
@. Particular copressors do not have provision for rene'al sleeves.
Out of the total -0 M7I#O copressors installed to serve the 1nd floor up to /th floors,
onl+ si" !<& units are in operation and the rest 'ere alread+ replaced. Of the reainin%
si" !<& units, several of the have been replaced 'ith bi%%er cran>shafts.
NINTH 8IOOR4
T'o !1& 9orthin%ton 1V#2 driven b+ -0 Hp, @ phase, 113 volts, <3 c+cles, -=03 rp,
Hi%%s otors 'ith starters.
Defects Noted are siilar to %round floor.
D7N7R(I R7M(RJS4
50
Ander Section III, Desi%n conditions of specification for air conditionin% 'or>, and
ta>in% into account 6(6 O 6$6 sae, the present s+stes are not capable of aintainin%
the desired teperature of =< S 1R8 !sic&.
The present tenant have installed @0 'indo' t+pe air conditionin% units distributed
aon% the different floor levels. Teperature easureents conducted on March 1..
-.=-, revealed that =/R8 roo !sic& is onl+ aintained due to the additional 'indo'
t+pe units.
The trial court, after evaluatin% the evidence presented, held that, indeed, petitioner
failed to install ites and parts reEuired in the contract and substituted soe other
ites 'hich 'ere not in accordance 'ith the specifications
-/
, thus4
8ro all of the fore%oin%, the #ourt is persuaded to believe the plaintiff that not onl+
had the defendant failed to install ites and parts provided for in the specifications of
the air5conditionin% s+ste be installed, li>e face and b+5pass dapers and odulatin%
therostat and an+ others, but also that there are ites, parts and accessories 'hich
'ere used and installed on the air5conditionin% s+ste 'hich 'ere not in full accord
'ith contract specifications. These oissions to install the eEuipents, parts and
accessories called for in the specifications of the contract, as 'ell as the deviations
ade in puttin% into the air5conditionin% s+ste eEuipents, parts and accessories not
in full accord 'ith the contract specification naturall+ resulted to adversel+ affect the
operational effectiveness of the air5conditionin% s+ste 'hich necessitated the
installation of thirt+5five 'indo' t+pe of air5conditionin% units distributed aon% the
different floor levels in order to be able to obtain a fairl+ desirable roo teperature for
the tenants and actual occupants of the buildin%. The #ourt opines and so holds that
the failure of the defendant to follo' the contract specifications and said oissions and
deviations havin% resulted in the operational ineffectiveness of the s+ste installed
a>es the defendant liable to the plaintiff in the aount necessar+ to rectif+ to put the
air conditionin% s+ste in its proper operational condition to a>e it serve the purpose
for 'hich the plaintiff entered into the contract 'ith the defendant.
The respondent #ourt affired the trial courtCs decision thereb+ a>in% the latterCs
findin%s also its o'n.
Havin% concluded that the ori%inal coplaint is one for daa%es arisin% fro breach of
a 'ritten contract 5 and not a suit to enforce 'arranties a%ainst hidden defects 5 'e
here 5 'ith declare that the %overnin% la' is (rticle -=-0 !supra&. Ho'ever, inasuch
as this provision does not contain a specific prescriptive period, the %eneral la' on
prescription, 'hich is (rticle --22 of the #ivil #ode, 'ill appl+. Said provision states,
inter alia, that actions 6upon a 'ritten contract6 prescribe in ten !-3& +ears. Since the
%overnin% contract 'as e"ecuted on Septeber -3, -.<1 and the coplaint 'as filed
on Ma+ /, -.=-, it is clear that the action has not prescribed.
9hat about petitionerCs contention that 6acceptance of the 'or> b+ the eplo+er
relieves the contractor of liabilit+ for an+ defect in the 'or>6K This 'as ans'ered b+
respondent #ourt
-.
as follo's4
(s the breach of contract 'hich %ave rise to the instant case consisted in appellantCs
oission to install the eEuipents !sic&, parts and accessories not in accordance 'ith
the plan and specifications provided for in the contract and the deviations ade in
puttin% into the air conditionin% s+ste parts and accessories not in accordance 'ith
the contract specifications, it is evident that the defect in the installation 'as not
apparent at the tie of the deliver+ and acceptance of the 'or>, considerin% further that
plaintiff is not an e"pert to reco%ni*e the sae. 8ro the ver+ nature of thin%s, it is
ipossible to deterine b+ the siple inspection of air conditionin% s+ste installed in
an /5floor buildin% 'hether it has been furnished and installed as per a%reed
specifications.
Veril+, the ere fact that the private respondent accepted the 'or> does not, ipso facto,
relieve the petitioner fro liabilit+ for deviations fro and violations of the 'ritten
contract, as the la' %ives hi ten !-3& +ears 'ithin 'hich to file an action based on
breach thereof.
9H7R78OR7, the petition is hereb+ D7NI7D and the assailed Decision is (88IRM7D.
No costs. SO ORD7R7D.
Republic of the Philippines
SUPREME COURT
Manila
7N $(N#
G.R. No. L.11791 A+?+$t 23, 1918
AN0RES 6UIROGA, plaintiff5appellant,
vs.
PARSONS 1AR0<ARE CO., defendant5appellee.
Alfredo )hicote, *ose Arnaiz and Pascual 8. Azanza for appellant.
)rossfield D 1C8rien for appellee.
A5ANCEAA, J.>
51
On ,anuar+ 12, -.--, in this cit+ of anila, a contract in the follo'in% tenor 'as entered
into b+ and bet'een the plaintiff, as part+ of the first part, and ,. Parsons !to 'hose
ri%hts and obli%ations the present defendant later subro%ated itself&, as part+ of the
second part4
#ONTR(#T 7M7#AT7D $: (ND $7T977N (NDR7S )AIROD( (ND ,. P(RSONS,
$OTH M7R#H(NTS 7ST($IISH7D IN M(NII(, 8OR TH7 7M#IASIV7 S(I7 O8
6)AIROD(6 $7DS IN TH7 VIS(:(N ISI(NDS.
(RTI#I7 -. Don (ndres )uiro%a %rants the e"clusive ri%ht to sell his beds in the
Visa+an Islands to ,. Parsons under the follo'in% conditions4
!(& Mr. )uiro%a shall furnish beds of his anufacture to Mr. Parsons for the latterCs
establishent in Iloilo, and shall invoice the at the sae price he has fi"ed for sales,
in Manila, and, in the invoices, shall a>e and allo'ance of a discount of 10 per cent of
the invoiced prices, as coission on the sale? and Mr. Parsons shall order the beds
b+ the do*en, 'hether of the sae or of different st+les.
!$& Mr. Parsons binds hiself to pa+ Mr. )uiro%a for the beds received, 'ithin a period
of si"t+ da+s fro the date of their shipent.
!#& The e"penses for transportation and shipent shall be borne b+ M. )uiro%a, and
the frei%ht, insurance, and cost of unloadin% fro the vessel at the point 'here the
beds are received, shall be paid b+ Mr. Parsons.
!D& If, before an invoice falls due, Mr. )uiro%a should reEuest its pa+ent, said
pa+ent 'hen ade shall be considered as a propt pa+ent, and as such a
deduction of 1 per cent shall be ade fro the aount of the invoice.
The sae discount shall be ade on the aount of an+ invoice 'hich Mr. Parsons a+
dee convenient to pa+ in cash.
!7& Mr. )uiro%a binds hiself to %ive notice at least fifteen da+s before hand of an+
alteration in price 'hich he a+ plan to a>e in respect to his beds, and a%rees that if
on the date 'hen such alteration ta>es effect he should have an+ order pendin% to be
served to Mr. Parsons, such order shall enBo+ the advanta%e of the alteration if the price
thereb+ be lo'ered, but shall not be affected b+ said alteration if the price thereb+ be
increased, for, in this latter case, Mr. )uiro%a assued the obli%ation to invoice the
beds at the price at 'hich the order 'as %iven.
!8& Mr. Parsons binds hiself not to sell an+ other >ind e"cept the 6)uiro%a6 beds.
(RT. 1. In copensation for the e"penses of advertiseent 'hich, for the benefit of
both contractin% parties, Mr. Parsons a+ find hiself obli%ed to a>e, Mr. )uiro%a
assues the obli%ation to offer and %ive the preference to Mr. Parsons in case an+one
should appl+ for the e"clusive a%enc+ for an+ island not coprised 'ith the Visa+an
%roup.
(RT. @. Mr. Parsons a+ sell, or establish branches of his a%enc+ for the sale of
6)uiro%a6 beds in all the to'ns of the (rchipela%o 'here there are no e"clusive a%ents,
and shall iediatel+ report such action to Mr. )uiro%a for his approval.
(RT. 2. This contract is ade for an unliited period, and a+ be terinated b+ either
of the contractin% parties on a previous notice of ninet+ da+s to the other part+.
Of the three causes of action alle%ed b+ the plaintiff in his coplaint, onl+ t'o of the
constitute the subBect atter of this appeal and both substantiall+ aount to the
averent that the defendant violated the follo'in% obli%ations4 not to sell the beds at
hi%her prices than those of the invoices? to have an open establishent in Iloilo? itself to
conduct the a%enc+? to >eep the beds on public e"hibition, and to pa+ for the
advertiseent e"penses for the sae? and to order the beds b+ the do*en and in no
other anner. (s a+ be seen, 'ith the e"ception of the obli%ation on the part of the
defendant to order the beds b+ the do*en and in no other anner, none of the
obli%ations iputed to the defendant in the t'o causes of action are e"pressl+ set forth
in the contract. $ut the plaintiff alle%ed that the defendant 'as his a%ent for the sale of
his beds in Iloilo, and that said obli%ations are iplied in a contract of coercial
a%enc+. The 'hole Euestion, therefore, reduced itself to a deterination as to 'hether
the defendant, b+ reason of the contract hereinbefore transcribed, 'as a purchaser or
an a%ent of the plaintiff for the sale of his beds.
In order to classif+ a contract, due re%ard ust be %iven to its essential clauses. In the
contract in Euestion, 'hat 'as essential, as constitutin% its cause and subBect atter, is
that the plaintiff 'as to furnish the defendant 'ith the beds 'hich the latter i%ht order,
at the price stipulated, and that the defendant 'as to pa+ the price in the anner
stipulated. The price a%reed upon 'as the one deterined b+ the plaintiff for the sale of
these beds in Manila, 'ith a discount of fro 13 to 10 per cent, accordin% to their class.
Pa+ent 'as to be ade at the end of si"t+ da+s, or before, at the plaintiffCs reEuest, or
in cash, if the defendant so preferred, and in these last t'o cases an additional
discount 'as to be allo'ed for propt pa+ent. These are precisel+ the essential
features of a contract of purchase and sale. There 'as the obli%ation on the part of the
plaintiff to suppl+ the beds, and, on the part of the defendant, to pa+ their price. These
features e"clude the le%al conception of an a%enc+ or order to sell 'hereb+ the
andator+ or a%ent received the thin% to sell it, and does not pa+ its price, but delivers
to the principal the price he obtains fro the sale of the thin% to a third person, and if he
does not succeed in sellin% it, he returns it. $+ virtue of the contract bet'een the
52
plaintiff and the defendant, the latter, on receivin% the beds, 'as necessaril+ obli%ed to
pa+ their price 'ithin the ter fi"ed, 'ithout an+ other consideration and re%ardless as
to 'hether he had or had not sold the beds.
It 'ould be enou%h to hold, as 'e do, that the contract b+ and bet'een the defendant
and the plaintiff is one of purchase and sale, in order to sho' that it 'as not one ade
on the basis of a coission on sales, as the plaintiff clais it 'as, for these contracts
are incopatible 'ith each other. $ut, besides, e"ainin% the clauses of this contract,
none of the is found that substantiall+ supports the plaintiffCs contention. Not a sin%le
one of these clauses necessaril+ conve+s the idea of an a%enc+. The 'ords
commission on sales used in clause !(& of article - ean nothin% else, as stated in the
contract itself, than a ere discount on the invoice price. The 'ord a(enc!, also used
in articles 1 and @, onl+ e"presses that the defendant 'as the onl+ one that could sell
the plaintiffCs beds in the Visa+an Islands. 9ith re%ard to the reainin% clauses, the
least that can be said is that the+ are not incopatible 'ith the contract of purchase
and sale.
The plaintiff calls attention to the testion+ of 7rnesto Vidal, a forer vice5president of
the defendant corporation and 'ho established and ana%ed the latterCs business in
Iloilo. It appears that this 'itness, prior to the tie of his testion+, had serious trouble
'ith the defendant, had aintained a civil suit a%ainst it, and had even accused one of
its partners, Duillero Parsons, of falsification. He testified that it 'as he 'ho drafted
the contract 7"hibit (, and, 'hen Euestioned as to 'hat 'as his purpose in contractin%
'ith the plaintiff, replied that it 'as to be an a(ent for his beds and to collect a
commission on sales. Ho'ever, accordin% to the defendantCs evidence, it 'as Mariano
Iope* Santos, a director of the corporation, 'ho prepared 7"hibit (. $ut, even
supposin% that 7rnesto Vidal has stated the truth, his stateent as to 'hat 'as his idea
in contractin% 'ith the plaintiff is of no iportance, inasuch as the a%reeents
contained in 7"hibit ( 'hich he clais to have drafted, constitute, as 'e have said, a
contract of purchase and sale, and not one of coercial a%enc+. This onl+ eans that
7rnesto Vidal 'as ista>en in his classification of the contract. $ut it ust be
understood that a contract is 'hat the la' defines it to be, and not 'hat it is called b+
the contractin% parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it
could not sell? that, 'ithout previous notice, it for'arded to the defendant the beds that
it 'anted? and that the defendant received its coission for the beds sold b+ the
plaintiff directl+ to persons in Iloilo. $ut all this, at the ost onl+ sho's that, on the part
of both of the, there 'as utual tolerance in the perforance of the contract in
disre%ard of its ters? and it %ives no ri%ht to have the contract considered, not as the
parties stipulated it, but as the+ perfored it. Onl+ the acts of the contractin% parties,
subseEuent to, and in connection 'ith, the e"ecution of the contract, ust be
considered for the purpose of interpretin% the contract, 'hen such interpretation is
necessar+, but not 'hen, as in the instant case, its essential a%reeents are clearl+ set
forth and plainl+ sho' that the contract belon%s to a certain >ind and not to another.
8urtherore, the return ade 'as of certain brass beds, and 'as not effected in
e"chan%e for the price paid for the, but 'as for other beds of another >ind? and for the
letter 7"hibit I5-, reEuested the plaintiffCs prior consent 'ith respect to said beds, 'hich
sho's that it 'as not considered that the defendant had a ri%ht, b+ virtue of the
contract, to a>e this return. (s re%ards the shipent of beds 'ithout previous notice,
it is insinuated in the record that these brass beds 'ere precisel+ the ones so shipped,
and that, for this ver+ reason, the plaintiff a%reed to their return. (nd 'ith respect to the
so5called coissions, 'e have said that the+ erel+ constituted a discount on the
invoice price, and the reason for appl+in% this benefit to the beds sold directl+ b+ the
plaintiff to persons in Iloilo 'as because, as the defendant obli%ated itself in the
contract to incur the e"penses of advertiseent of the plaintiffCs beds, such sales 'ere
to be considered as a result of that advertiseent.
In respect to the defendantCs obli%ation to order b+ the do*en, the onl+ one e"pressl+
iposed b+ the contract, the effect of its breach 'ould onl+ entitle the plaintiff to
disre%ard the orders 'hich the defendant i%ht place under other conditions? but if the
plaintiff consents to fill the, he 'aives his ri%ht and cannot coplain for havin% acted
thus at his o'n free 'ill.
8or the fore%oin% reasons, 'e are of opinion that the contract b+ and bet'een the
plaintiff and the defendant 'as one of purchase and sale, and that the obli%ations the
breach of 'hich is alle%ed as a cause of action are not iposed upon the defendant,
either b+ a%reeent or b+ la'. The Bud%ent appealed fro is affired, 'ith costs
a%ainst the appellant. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
7N $(N#
G.R. No. L.77538 9+'e 20, 1971
GONALO PU;AT = SONS, INC., petitioner,
vs.
ARCO AMUSEMENT COMPAN; !"or4er%- B'oC' &$ Te&tro Arco/, respondent.
"eria D Lao for petitioner.
*. E. "errier and 0aniel ;e. =omez for respondent.
LAUREL, J.>
53
This is a petition for the issuance of a 'rit of certiorari to the #ourt of (ppeals for the
purpose of revie'in% its (useent #opan+ !forerl+ >no'n as Teatro (rco&,
plaintiff5appellant, vs. Don*alo Pu+at and Sons. Inc., defendant5appellee.6
It appears that the respondent herein brou%ht an action a%ainst the herein petitioner in
the #ourt of 8irst Instance of Manila to secure a reiburseent of certain aounts
alle%edl+ overpaid b+ it on account of the purchase price of sound reproducin%
eEuipent and achiner+ ordered b+ the petitioner fro the Starr Piano #opan+ of
Richond, Indiana, A.S.(. The facts of the case as found b+ the trial court and
confired b+ the appellate court, 'hich are aditted b+ the respondent, are as follo's4
In the +ear -.1., the 6Teatro (rco6, a corporation dul+ or%ani*ed under the la's of the
Philippine Islands, 'ith its office in Manila, 'as en%a%ed in the business of operatin%
cineato%raphs. In -.@3, its nae 'as chan%ed to (rco (useent #opan+. #. S.
Salon 'as the president, 'hile (. $. #oulette 'as the business ana%er. (bout the
sae tie, Don*alo Pu+at O Sons, Inc., another corporation doin% business in the
Philippine Islands, 'ith office in Manila, in addition to its other business, 'as actin% as
e"clusive a%ents in the Philippines for the Starr Piano #opan+ of Richond, Indiana,
A.S. (. It 'ould see that this last copan+ dealt in cineato%rapher eEuipent and
achiner+, and the (rco (useent #opan+ desirin% to eEuipt its cineato%raph
'ith sound reproducin% devices, approached Don*alo Pu+at O Sons, Inc., thru its then
president and actin% ana%er, Dil Pu+at, and an eplo+ee naed Santos. (fter soe
ne%otiations, it 'as a%reed bet'een the parties, that is to sa+, Salon and #oulette on
one side, representin% the plaintiff, and Dil Pu+at on the other, representin% the
defendant, that the latter 'ould, on behalf of the plaintiff, order sound reproducin%
eEuipent fro the Starr Piano #opan+ and that the plaintiff 'ould pa+ the
defendant, in addition to the price of the eEuipent, a -3 per cent coission, plus all
e"penses, such as, frei%ht, insurance, ban>in% char%es, cables, etc. (t the e"pense of
the plaintiff, the defendant sent a cable, 7"hibit 6@6, to the Starr Piano #opan+,
inEuirin% about the eEuipent desired and a>in% the said copan+ to Euote its price
'ithout discount. ( repl+ 'as received b+ Don*alo Pu+at O Sons, Inc., 'ith the price,
evidentl+ the list price of N-,=33 f.o.b. factor+ Richond, Indiana. The defendant did not
sho' the plaintiff the cable of inEuir+ nor the repl+ but erel+ infored the plaintiff of
the price of N-,=33. $ein% a%reeable to this price, the plaintiff, b+ eans of 7"hibit 6-6,
'hich is a letter si%ned b+ #. S. Salon dated Noveber -., -.1., forall+ authori*ed
the order. The eEuipent arrived about the end of the +ear -.1., and upon deliver+ of
the sae to the plaintiff and the presentation of necessar+ papers, the price of N-.=33,
plus the -3 per cent coission a%reed upon and plus all the e"penses and char%es,
'as dul+ paid b+ the plaintiff to the defendant.
Soetie the follo'in% +ear, and after soe ne%otiations bet'een the sae parties,
plaintiff and defendants, another order for sound reproducin% eEuipent 'as placed b+
the plaintiff 'ith the defendant, on the sae ters as the first order. This a%reeent or
order 'as confired b+ the plaintiff b+ its letter 7"hibit 616, 'ithout date, that is to sa+,
that the plaintiff 'ould pa+ for the eEuipent the aount of N-,<33, 'hich 'as
supposed to be the price Euoted b+ the Starr Piano #opan+, plus -3 per cent
coission, plus all e"penses incurred. The eEuipent under the second order arrived
in due tie, and the defendant 'as dul+ paid the price of N-,<33 'ith its -3 per cent
coission, and N-<3, for all e"penses and char%es. This aount of N-<3 does not
represent actual out5of5poc>et e"penses paid b+ the defendant, but a ere flat char%e
and rou%h estiate ade b+ the defendant eEuivalent to -3 per cent of the price of
N-,<33 of the eEuipent.
(bout three +ears later, in connection 'ith a civil case in Vi%an, filed b+ one 8idel
Re+es a%ainst the defendant herein Don*alo Pu+at O Sons, Inc., the officials of the
(rco (useent #opan+ discovered that the price Euoted to the b+ the defendant
'ith re%ard to their t'o orders entioned 'as not the net price but rather the list price,
and that the defendants had obtained a discount fro the Starr Piano #opan+.
Moreover, b+ readin% revie's and literature on prices of achiner+ and cineato%raph
eEuipent, said officials of the plaintiff 'ere convinced that the prices char%ed the b+
the defendant 'ere uch too hi%h includin% the char%es for out5of5poc>et e"pense. 8or
these reasons, the+ sou%ht to obtain a reduction fro the defendant or rather a
reiburseent, and failin% in this the+ brou%ht the present action.
The trial court held that the contract bet'een the petitioner and the respondent 'as
one of outri%ht purchase and sale, and absolved that petitioner fro the coplaint. The
appellate court, ho'ever, ; b+ a division of four, 'ith one Bustice dissentin% ; held
that the relation bet'een petitioner and respondent 'as that of a%ent and principal, the
petitioner actin% as a%ent of the respondent in the purchase of the eEuipent in
Euestion, and sentenced the petitioner to pa+ the respondent alle%ed overpa+ents in
the total su of N-,@@0.01 or P1,<=-.32, to%ether 'ith le%al interest thereon fro the
date of the filin% of the coplaint until said aount is full+ paid, as 'ell as to pa+ the
costs of the suit in both instances. The appellate court further ar%ued that even if the
contract bet'een the petitioner and the respondent 'as one of purchase and sale, the
petitioner 'as %uilt+ of fraud in concealin% the true price and hence 'ould still be liable
to reiburse the respondent for the overpa+ents ade b+ the latter.
The petitioner no' clais that the follo'in% errors have been incurred b+ the appellate
court4
I. 7l Tribunal de (pelaciones incurrio en error de derecho al declarar Eue, se%un
hechos, entre la recurrente + la recurrida e"istia una relacion iplicita de andataria a
andante en la transaccion de Eue se trata, en ve* de la de vendedora a copradora
coo ha declarado el ,u*%ado de Priera Instncia de Manila, presidido entonces por
el ho+ Ma%istrado Honorable Marcelino Montea+or.
54
II. 7l Tribunal de (pelaciones incurrio en error de derecho al declarar Eue, suponiendo
Eue dicha relacion fuerra de vendedora a copradora, la recurrente obtuvo, ediante
dolo, el consentiiento de la recurrida en cuanto al precio de N-,=33 + N-,<33 de las
aEuinarias + eEuipos en cuestion, + condenar a la recurrente ha obtenido de la Starr
Piano #opan+ of Richond, Indiana.
9e sustain the theor+ of the trial court that the contract bet'een the petitioner and the
respondent 'as one of purchase and sale, and not one of a%enc+, for the reasons no'
to be stated.
In the first place, the contract is the la' bet'een the parties and should include all the
thin%s the+ are supposed to have been a%reed upon. 9hat does not appear on the
face of the contract should be re%arded erel+ as 6dealerCs6 or 6traderCs tal>6, 'hich
can not bind either part+. !Nolbroo> v. #onner, 0< So., 0=<, -- (. Rep., 1-1? $an> v.
$rosscell, -13 III., -<-? $an> v. Paler, 2= III., .1? Hosser v. #opper, / (llen, @@2?
Doles v. Merrill, -=@ Mass., 2--.& The letters, 7"hibits - and 1, b+ 'hich the respondent
accepted the prices of N-,=33 and N-,<33, respectivel+, for the sound reproducin%
eEuipent subBect of its contract 'ith the petitioner, are clear in their ters and adit
no other interpretation that the respondent in Euestion at the prices indicated 'hich are
fi"ed and deterinate. The respondent aditted in its coplaint filed 'ith the #ourt of
8irst Instance of Manila that the petitioner a%reed to sell to it the first sound reproducin%
eEuipent and achiner+. The third para%raph of the respondentCs cause of action
states4
@. That on or about Noveber -., -.1., the herein plaintiff !respondent& and defendant
!petitioner& entered into an a%reeent, under and b+ virtue of 'hich the herein
defendant 'as to secure fro the Anited States, and sell and deliver to the herein
plaintiff, certain sound reproducin% eEuipent and achiner+, for 'hich the said
defendant, under and b+ virtue of said a%reeent, 'as to receive the actual cost price
plus ten per cent !-3Q&, and 'as also to be reibursed for all out of poc>et e"penses
in connection 'ith the purchase and deliver+ of such eEuipent, such as costs of
tele%ras, frei%ht, and siilar e"penses. !7phasis ours.&
9e a%ree 'ith the trial Bud%e that 6'hatever unforseen events i%ht have ta>en place
unfavorable to the defendant !petitioner&, such as chan%e in prices, ista>e in their
Euotation, loss of the %oods not covered b+ insurance or failure of the Starr Piano
#opan+ to properl+ fill the orders as per specifications, the plaintiff !respondent& i%ht
still le%all+ hold the defendant !petitioner& to the prices fi"ed of N-,=33 and N-,<33.6
This is incopatible 'ith the pretended relation of a%enc+ bet'een the petitioner and
the respondent, because in a%enc+, the a%ent is e"epted fro all liabilit+ in the
dischar%e of his coission provided he acts in accordance 'ith the instructions
received fro his principal !section 102, #ode of #oerce&, and the principal ust
indenif+ the a%ent for all daa%es 'hich the latter a+ incur in carr+in% out the
a%enc+ 'ithout fault or iprudence on his part !article -=1., #ivil #ode&.
9hile the latters, 7"hibits - and 1, state that the petitioner 'as to receive ten per cent
!-3Q& coission, this does not necessaril+ a>e the petitioner an a%ent of the
respondent, as this provision is onl+ an additional price 'hich the respondent bound
itself to pa+, and 'hich stipulation is not incopatible 'ith the contract of purchase and
sale. !3ee )uiro%a vs. Parsons Hard'are #o., @/ Phil., 03-.&
In the second place, to hold the petitioner an a%ent of the respondent in the purchase
of eEuipent and achiner+ fro the Starr Piano #opan+ of Richond, Indiana, is
incopatible 'ith the aditted fact that the petitioner is the e"clusive a%ent of the sae
copan+ in the Philippines. It is out of the ordinar+ for one to be the a%ent of both the
vendor and the purchaser. The facts and circustances indicated do not point to
an+thin% but plain ordinar+ transaction 'here the respondent enters into a contract of
purchase and sale 'ith the petitioner, the latter as e"clusive a%ent of the Starr Piano
#opan+ in the Anited States.
It follo's that the petitioner as vendor is not bound to reiburse the respondent as
vendee for an+ difference bet'een the cost price and the sales price 'hich represents
the profit reali*ed b+ the vendor out of the transaction. This is the ver+ essence of
coerce 'ithout 'hich erchants or iddlean 'ould not e"ist.
The respondents contends that it erel+ a%reed to pa+ the cost price as distin%uished
fro the list price, plus ten per cent !-3Q& coission and all out5of5poc>et e"penses
incurred b+ the petitioner. The distinction 'hich the respondents see>s to dra' bet'een
the cost price and the list price 'e consider to be spacious. It is to be observed that the
t'ent+5five per cent !10Q& discount %ranted b+ the Starr piano #opan+ to the
petitioner is available onl+ to the latter as the forerCs e"clusive a%ent in the
Philippines. The respondent could not have secured this discount fro the Starr Piano
#opan+ and neither 'as the petitioner 'illin% to 'aive that discount in favor of the
respondent. (s a atter of fact, no reason is advanced b+ the respondent 'h+ the
petitioner should 'aive the 10 per cent discount %ranted it b+ the Starr Piano #opan+
in e"chan%e for the -3 percent coission offered b+ the respondent. Moreover, the
petitioner 'as not dut+ bound to reveal the private arran%eent it had 'ith the Starr
Piano #opan+ relative to such discount to its prospective custoers, and the
respondent 'as not even a'are of such an arran%eent. The respondent, therefore,
could not have offered to pa+ a -3 per cent coission to the petitioner provided it 'as
%iven the benefit of the 10 per cent discount enBo+ed b+ the petitioner. It is 'ell >no'n
that local dealers actin% as a%ents of forei%n anufacturers, aside fro obtainin% a
discount fro the hoe office, soeties add to the list price 'hen the+ resell to local
purchasers. It 'as apparentl+ to %uard a%ainst an e"horbitant additional price that the
respondent sou%ht to liit it to -3 per cent, and the respondent is estopped fro
55
Euestionin% that additional price. If the respondent later on discovers itself at the short
end of a bad bar%ain, it alone ust bear the blae, and it cannot rescind the contract,
uch less copel a reiburseent of the e"cess price, on that %round alone. The
respondent could not secure eEuipent and achiner+ anufactured b+ the Starr
Piano #opan+ e"cept fro the petitioner alone? it 'illin%l+ paid the price Euoted? it
received the eEuipent and achiner+ as represented? and that 'as the end of the
atter as far as the respondent 'as concerned. The fact that the petitioner obtained
ore or less profit than the respondent calculated before enterin% into the contract or
reducin% the price a%reed upon bet'een the petitioner and the respondent. Not ever+
concealent is fraud? and short of fraud, it 'ere better that, 'ithin certain liits,
business acuen perit of the loosenin% of the sleeves and of the sharpenin% of the
intellect of en and 'oen in the business 'orld.
The 'rit of certiorari should be, as it is hereb+, %ranted. The decision of the appellate
court is accordin%l+ reversed and the petitioner is absolved fro the respondentCs
coplaint in D. R. No. -31@, entitled 6(rco (useent #opan+ !forerl+ >no'n as
Teatro (rco&, plaintiff5appellant, vs. Don*alo Pu+at O Sons, Inc., defendants5appellee,6
'ithout pronounceent re%ardin% costs. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
7N $(N#
G.R. No. L.15113 9&'+&r- 28, 1961
ANTONIO ME0INA, petitioner,
vs.
COLLECTOR O) INTERNAL RE5ENUE &'( T1E COURT O) TA@ APPEALS
respondents.
-usebio 0. ;orales for petitioner.
1ffice of the 3olicitor =eneral for respondents.
56
RE;ES, J.B.L. J.>
Petition to revie' a decision of the #ourt of Ta" (ppeals upholdin% a ta" assessent of
the #ollector of Internal Revenue e"cept 'ith respect to the iposition of so5called
coproise penalties, 'hich 'ere set aside.
The records sho' that on or about Ma+ 13, -.22, petitionin% ta"pa+er (ntonio Medina
arried (ntonia Rodri%ue*. $efore -.2<, the spouses had neither propert+ nor
business of their o'n. Iater, ho'ever, petitioner acEuired forest, concessions in the
unicipalities of San Mariano and Palanan in the Province of Isabela. 8ro -.2< to
-.2/, the lo%s cut and reoved b+ the petitioner fro his concessions 'ere sold to
different persons in Manila throu%h his a%ent, Mariano Osorio.
Soe tie in -.2., (ntonia R. Medina, petitionerCs 'ife, started to en%a%e in business
as a luber dealer, and up to around -.01, petitioner sold to her alost all the lo%s
produced in his San Mariano, concession. Mrs. Medina, In turn, sold in Manila the lo%s
bou%ht fro her husband throu%h the sae a%ent, Mariano Osorio. The proceeds
'ere, upon instructions fro petitioner, either received b+ Osorio for petitioner or
deposited b+ said a%ent in petitionerCs current account 'ith the Philippine National
$an>.
On the thesis that the sales ade b+ petitioner to his 'ife 'ere null and void pursuant
to the provisions of (rticle -2.3 of the #ivil #ode of the Philippines !forerl+, (rt. -20/,
#ivil #ode of -//.&, the #ollector considered the sales ade b+ Mrs. Medina as the
petitionerCs ori%inal sales ta"able under Section -/< of the National Internal Revenue
#ode and, therefore, iposed a ta" assessent on petitioner, callin% for the pa+ent
of P2,00@.02 as deficienc+ sales ta"es and surchar%es fro -.2. to -.01. This sae
assessent of Septeber 1<, -.0@ sou%ht also the collection of another su of
P<2@..2 as deficienc+ sales ta" and surchar%e based on petitionerCs Euarterl+ returns
fro -.2< to -.01.
On Noveber @3, -.0@, petitioner protested the assessent? ho'ever, respondent
#ollector insisted on his deand. On ,ul+ ., -.02, petitioner filed a petition for
reconsideration revealin% for the first tie the e"istence of an alle%ed prearital
a%reeent of coplete separation of properties bet'een hi and his 'ife, and
contendin% that the assessent for the +ears -.2< to -.01 had alread+ prescribed.
(fter one hearin%, the #onference Staff of the $ureau of Internal Revenue eliinated
the 03Q fraud penalt+ and held that the ta"es assessed a%ainst hi before -.2/ had
alread+ prescribed. $ased on these findin%s, the #ollector issued a odified
assessent, deandin% the pa+ent of onl+ P@,@10.</, coputed as follo's4
0Q ta" due on P=,13../@ 5-.2. P @<3.2.
0Q ta" due on -<,.20.00 5 -.03 /2=.1/
0Q ta" due on -<,/=2.01 5 -.0- /2@.=0
0Q ta" due on --,33...2 5 -.01 003.03
TOT(I sales ta" due P1,<31.3
10Q Surchar%e thereon <03.0-
Short ta"es per Euarterl+ returns, @rd Euarter, -.03 0/.01
10Q Surchar%e thereon -2.<@
TOT(I (MOANT due O collectible P@,@10.</
Petitioner a%ain reEuested for reconsideration, but respondent #ollector, in his letter of
(pril 2, -.00, denied the sae.
Petitioner appealed to the #ourt of Ta" (ppeals, 'hich rendered Bud%ent as aforesaid.
The #ourtCs decision 'as based on t'o ain findin%s, nael+, !a& that there 'as no
prearital a%reeent of absolute separation of propert+ bet'een the Medina spouse?
and !b& assuin% that there 'as such an a%reeent, the sales in Euestion ade b+
petitioner to his 'ife 'ere fictitious, siulated, and not bona fide.
In his petition for revie' to this #ourt, petitioner raises several assi%nents of error
revolvin% around the central issue of 'hether or not the sales ade b+ the petitioner to
his 'ife could be considered as his ori%inal ta"able sales under the provisions of
Section -/< of the National Internal Revenue #ode.
Rel+in% ainl+ on testionial evidence that before their arria%e, he and his 'ife
e"ecuted and recorded a prenuptial a%reeent for a re%ie of coplete separation of
propert+, and that all trace of the docuent 'as lost on account of the 'ar, petitioner
iputes lac> of basis for the ta" courtCs factual findin% that no a%reeent of coplete
separation of propert+ 'as ever e"ecuted b+ and bet'een the spouses before their
arria%e. 9e do not thin> so. (side fro the aterial inconsistencies in the testion+
of petitionerCs 'itnesses pointed out b+ the trial court, the circustantial evidence is
a%ainst petitionerCs clai. Thus, it appears that at the tie of the arria%e bet'een
petitioner and his 'ife, the+ neither had an+ propert+ nor business of their o'n, as to
have reall+ ur%ed the to enter into the supposed propert+ a%reeent. Secondl+, the
testion+ that the separation of propert+ a%reeent 'as recorded in the Re%istr+ of
Propert+ three onths before the arria%e, is patentl+ absurd, since such a prenuptial
a%reeent could not be effective before arria%e is celebrated, and 'ould
autoaticall+ be cancelled if the union 'as called off. Ho' then could it be accepted for
recordin% prior to the arria%eK In the third place, despite their insistence on the
e"istence of the ante nuptial contract, the couple, stran%el+ enou%h, did not act in
accordance 'ith its alle%ed covenants. )uite the contrar+, it 'as proved that even
57
durin% their ta"able +ears, the o'nership, usufruct, and adinistration of their
properties and business 'ere in the husband. (nd even 'hen the 'ife 'as en%a%ed in
luber dealin%, and she and her husband contracted sales 'ith each other as
aforestated, the proceeds she derived fro her alle%ed subseEuent disposition of the
lo%s ; incidentall+, b+ and throu%h the sae a%ent of her husband, Mariano Osorio ;
'ere either received b+ Osorio for the petitioner or deposited b+ said a%ent in
petitionerCs current account 'ith the Philippine National $an>. 8ourth, althou%h
petitioner, a la'+er b+ profession, alread+ >ne', after he 'as infored b+ the #ollector
on or about Septeber of -.0@, that the priar+ reason 'h+ the sales of lo%s to his
'ife could not be considered as the ori%inal ta"able sales 'as because of the e"press
prohibition found in (rticle -2.3 of the #ivil #ode of sales bet'een spouses arried
under a counit+ s+ste? +et it 'as not until ,ul+ of -.02 that he alle%ed, for the first
tie, the e"istence of the supposed propert+ separation a%reeent. 8inall+, the Da+
$oo> of the Re%ister of Deeds on 'hich the a%reeent 'ould have been entered, had
it reall+ been re%istered as petitioner insists, and 'hich boo> 'as aon% those saved
fro the rava%es of the 'ar, did not sho' that the docuent in Euestion 'as aon%
those recorded therein.
9e have alread+ ruled that 'hen the credibilit+ of 'itnesses is the one at issue, the trial
courtCs Bud%ent as to their de%ree of credence deserves serious consideration b+ this
#ourt !#ollector vs. $autista, et al., D.R. Nos. I5-1103 O I5-110., Ma+ 1=, -.0.&. This
is all the ore true in this case because not ever+ cop+ of the supposed a%reeent,
particularl+ the one that 'as said to have been filed 'ith the #ler> of #ourt of Isabela,
'as accounted for as lost? so that, appl+in% the 6best evidence rule6, the court did ri%ht
in %ivin% little or no credence to the secondar+ evidence to prove the due e"ecution and
contents of the alle%ed docuent !see #oents on the Rules of #ourt, Moran, -.0=
7d., Vol. @, pp. -3.-1&.
The fore%oin% findin%s not'ithstandin%, the petitioner ar%ues that the prohibition to sell
e"pressed under (rticle -2.3 of the #ivil #ode has no application to the sales ade b+
said petitioner to his 'ife, because said transactions are conteplated and allo'ed b+
the provisions of (rticles = and -3 of the #ode of #oerce. $ut said provisions
erel+ state, under certain conditions, a presuption that the 'ife is authori*ed to
en%a%e in business and for the incidents that flo' therefro 'hen she so en%a%es
therein. $ut the transactions peritted are those entered into 'ith stran%ers, and do not
constitute e"ceptions to the prohibitor+ provisions of (rticle -2.3 a%ainst sales bet'een
spouses.
PetitionerCs contention that the respondent #ollector can not assail the Euestioned
sales, he bein% a stran%er to said transactions, is li>e'ise untenable. The %overnent,
as correctl+ pointed out b+ the Ta" #ourt, is al'a+s an interested part+ to all atters
involvin% ta"able transactions and, needless to sa+, Eualified to Euestion their validit+ or
le%itiac+ 'henever necessar+ to bloc> ta" evasion.
#ontracts violative of the provisions of (rticle -2.3 of the #ivil #ode are null and void
!A+ Sui Pin vs. #antollas, =3 Phil. 00? A+ #oEue vs. Sioca 20 Phil. 2@&. $ein% void
transactions, the sales ade b+ the petitioner to his 'ife 'ere correctl+ disre%arded b+
the #ollector in his ta" assessents that considered as the ta"able sales those ade
b+ the 'ife throu%h the spousesC coon a%ent, Mariano Osorio. In upholdin% that
stand, the #ourt belo' coitted no error.
It is also the petitionerCs contention that the lo'er court erred in usin% ille%all+ sei*ed
docuentar+ evidence a%ainst hi. $ut even assuin% ar(uendo the truth of
petitionerCs char%e re%ardin% the sei*ure, it is no' settled in this Burisdiction that ille%all+
obtained docuents and papers are adissible in evidence, if the+ are found to be
copetent and relevant to the case !see 9on% O Iee vs. #ollector of Internal Revenue,
D.R. No. I5-3-00, (u%ust @3, -.0/&. In fairness to the #ollector, ho'ever, it should be
stated that petitionerCs iputation is veheentl+ denied b+ hi, and rel+in% on Sections
@, ., @@= and @@/ of the Ta" #ode and the pertinent portions of Revenue Re%ulations
No. V5- and citin% this #ourtCs rulin% in A.S. vs. (viado, @/ Phil. -3, the #ollector
aintains that he and other internal revenue officers and a%ents could reEuire the
production of boo>s of accounts and other records fro a ta"pa+er. Havin% arrived at
the fore%oin% conclusion, it becoes unnecessar+ to discuss the other issues raised,
'hich are but preised on the assuption that a prearital a%reeent of total
separation of propert+ e"isted bet'een the petitioner and his 'ife.
9H7R78OR7, the decision appealed fro is affired, 'ith costs a%ainst the petitioner.
Republic of the Philippines
SUPREME COURT
Manila
8IRST DIVISION
G.R. No. L.57799 9+'e 22, 1987
MERCE0ES CALIMLIM. CANULLAS, petitioner,
vs.
1ON. <ILLELMO )ORTUN, 9+(?e, Co+rt o" )*r$t *'$t&'ce o" P&'?&$*'&', Br&'c#
I, &'( CORAON 0AGUINES, respondents.
"ernandez Law 1ffices for petitioner.
58
"rancisco Pulido for respondents.

MELENCIO.1ERRERA, J.:
Petition for Revie' on certiorari assailin% the Decision, dated October <, -./3, and the
Resolution on the Motion for Reconsideration, dated Noveber 1=, -./3, of the then
#ourt of 8irst Instance of Pan%asinan, $ranch I, in #ivil #ase No. -0<13 entitled
6#ora*on D(DAIN7S vs. M7R#7D7S #alili5#anullas,6 upholdin% the sale of a
parcel of land in favor of D(DAIN7S but not of the conBu%al house thereonC
The bac>%round facts a+ be suari*ed as follo's4 Petitioner M7R#7D7S
#alili5#anullas and 87RN(NDO #anullas 'ere arried on Deceber -., -.<1.
The+ be%ot five children. The+ lived in a sall house on the residential land in Euestion
'ith an area of appro"iatel+ /.- sEuare eters, located at $acabac, $u%allon,
Pan%asinan. (fter 87RN(NDOCs father died in -.<0, 87RN(NDO inherited the land.
In -.=/, 87RN(NDO abandoned his fail+ and 'as livin% 'ith private respondent
#ora*on D(DAIN7S. Durin% the pendenc+ of this appeal, the+ 'ere convicted of
concubina%e in a Bud%ent rendered on October 1=, -./- b+ the then #ourt of 8irst
Instance of Pan%asinan, $ranch II, 'hich Bud%ent has becoe final.
On (pril -0, -./3, 87RN(NDO sold the subBect propert+ 'ith the house thereon to
D(DAIN7S for the su of P1,333.33. In the docuent of sale, 87RN(NDO described
the house as 6also inherited b+ e fro + deceased parents.6
Anable to ta>e possession of the lot and house, D(DAIN7S initiated a coplaint on
,une -., -./3 for Euietin% of title and daa%es a%ainst M7R#7D7S. The latter
resisted and claied that the house in dispute 'here she and her children 'ere
residin%, includin% the coconut trees on the land, 'ere built and planted 'ith conBu%al
funds and throu%h her industr+? that the sale of the land to%ether 'ith the house and
iproveents to D(DAIN7S 'as null and void because the+ are conBu%al properties
and she had not %iven her consent to the sale,
In its ori%inal Bud%ent, respondent #ourt principall+ declared D(DAIN7S 6as the
la'ful o'ner of the land in Euestion as 'ell as the one5half !& of the house erected on
said land.6 Apon reconsideration pra+ed for b+ M7R#7D7S, ho'ever, respondent
#ourt resolved4
9H7R78OR7, the dispositive portion of the Decision of this #ourt, proul%ated on
October <, -./3, is hereb+ aended to read as follo's4
!-& Declarin% plaintiff as the true and la'ful o'ner of the land in Euestion and the -3
coconut trees?
!1& Declarin% as null and void the sale of the conBu%al house to plaintiff on (pril -0,
-./3 !7"hibit (& includin% the @ coconut trees and other crops planted durin% the
conBu%al relation bet'een 8ernando #anullas !vendor& and his le%itiate 'ife, herein
defendant Mercedes #alili5 #anullas?
""" """ """
The issues posed for resolution are !-& 'hether or not the construction of a conBu%al
house on the e"clusive propert+ of the husband ipso facto %ave the land the character
of conBu%al propert+? and !1& 'hether or not the sale of the lot to%ether 'ith the house
and iproveents thereon 'as valid under the circustances surroundin% the
transaction.
The deterination of the first issue revolves around the interpretation to be %iven to the
second para%raph of (rticle -0/ of the #ivil #ode, 'hich reads4
""" """ """
$uildin%s constructed at the e"pense of the partnership durin% the arria%e on land
belon%in% to one of the spouses also pertain to the partnership, but the value of the
land shall be reibursed to the spouse 'ho o'ns the sae.
9e hold that pursuant to the fore%oin% provision both the land and the buildin% belon%
to the conBu%al partnership but the conBu%al partnership is indebted to the husband for
the value of the land. The spouse o'nin% the lot becoes a creditor of the conBu%al
partnership for the value of the lot, 1 'hich value 'ould be reibursed at the liEuidation
of the conBu%al partnership.
2

In his coentar+ on the correspondin% provision in the Spanish #ivil #ode !(rt.
-232&, Manresa stated4
7l articulo cabia la doctrine? los edificios construidos durante el atrionio en suelo
propio de uno de los conBu%es son %ananciales, abonandose el valor del suelo al conB
u%e a Euien pertene*ca.
It is true that in the case of ;aramba vs. Lozano,
3
relied upon b+ respondent ,ud%e, it
'as held that the land belon%in% to one of the spouses, upon 'hich the spouses have
built a house, becoes conBu%al propert+ onl+ 'hen the conBu%al partnership is
59
liEuidated and indenit+ paid to the o'ner of the land. 9e believe that the better rule is
that enunciated b+ Mr. ,ustice ,.$.I. Re+es in Padilla vs. Paterno, @ S#R( <=/, <.-
!-.<-&, 'here the follo'in% 'as e"plained4
(s to the above properties, their conversion fro paraphernal to conBu%al assets should
be deeed to retroact to the tie the conBu%al buildin%s 'ere first constructed thereon
or at the ver+ latest, to the tie iediatel+ before the death of Narciso (. Padilla that
ended the conBu%al partnership. The+ can not be considered to have becoe conBu%al
propert+ onl+ as of the tie their values 'ere paid to the estate of the 'ido'
#oncepcion Paterno because b+ that tie the conBu%al partnership no lon%er e"isted
and it could not acEuire the o'nership of said properties. The acEuisition b+ the
partnership of these properties 'as, under the -.2@ decision, subBect to the suspensive
condition that their values 'ould be reibursed to the 'ido' at the liEuidation of the
conBu%al partnership? once paid, the effects of the fulfillent of the condition should be
deeed to retroact to the date the obli%ation 'as constituted !(rt. --/=, Ne' #ivil
#ode& ...
The fore%oin% preises considered, it follo's that 87RN(NDO could not have
alienated the house and lot to D(DAIN7S since M7R#7D7S had not %iven her
consent to said sale.
7

(nent the second issue, 'e find that the contract of sale 'as null and void for bein%
contrar+ to orals and public polic+. The sale 'as ade b+ a husband in favor of a
concubine after he had abandoned his fail+ and left the conBu%al hoe 'here his 'ife
and children lived and fro 'hence the+ derived their support. That sale 'as
subversive of the stabilit+ of the fail+, a basic social institution 'hich public polic+
cherishes and protects.
5
(rticle -23. of the #ivil #ode states inter alia that4 contracts 'hose cause, obBect, or
purpose is contrar+ to la', orals, %ood custos, public order, or public polic+ are void
and ine"istent fro the ver+ be%innin%.
(rticle -@01 also provides that4 6#ontracts 'ithout cause, or 'ith unlawful cause,
produce no effect whatsoever. The cause is unla'ful if it is contrar+ to la', orals,
%ood custos, public order, or public polic+.6
(dditionall+, the la' ephaticall+ prohibits the spouses fro sellin% propert+ to each
other subBect to certain e"ceptions.
6
Siilarl+, donations bet'een spouses durin%
arria%e are prohibited.
7
(nd this is so because if transfers or con conve+ances
bet'een spouses 'ere allo'ed durin% arria%e, that 'ould destro+ the s+ste of
conBu%al partnership, a basic polic+ in civil la'. It 'as also desi%ned to prevent the
e"ercise of undue influence b+ one spouse over the other,
8
as 'ell as to protect the
institution of arria%e, 'hich is the cornerstone of fail+ la'. The prohibitions appl+ to
a couple livin% as husband and 'ife 'ithout benefit of arria%e, other'ise, 6the
condition of those 'ho incurred %uilt 'ould turn out to be better than those in le%al
union.6 Those provisions are dictated b+ public interest and their criterion ust be
iposed upon the 'i% of the parties. That 'as the rulin% in 8uenaventura vs. 8autista,
also penned b+ ,ustice ,$I Re+es !#(& 03 O.D. @<=., and cited in ;atabuena vs.
)ervantes.
9
9e Euote hereunder the pertinent dissertation on this point4
9e reach a different conclusion. 9hile (rt. -@@ of the #ivil #ode considers as void a
donation bet'een the spouses durin% the arria%e, polic+ considerations of the ost
e"i%ent character as 'en as the dictates of moralit! reEuire that the same prohibition
should appl! to a common<law relationship.
(s announced in the outset of this opinion, a -.02 #ourt of (ppeals decision,
$uenaventura vs. $autista, 03 OD @<=., interpretin% a siilar provision of the old #ivil
#ode spea>s uneEuivocall+. If the polic+ of the la' is, in the lan%ua%e of the opinion of
the then ,ustice ,.$.I. Re+es of that #ourt, Cto prohibit donations in favor of the other
consort and his descendants because of fear of undue influence and improper
pressure upon the donor, a preBudice deepl+ rooted in our ancient la', ..., then there is
ever! reason to appl! the same prohibitive polic! to persons livin( to(ether as husband
and wife without benefit of nuptials. 8or it is not to be doubted that assent to such
irre%ular connection for thirt+ +ears bespea>s %reater influence of one part+ over the
other, so that the dan%er that the la' see>s to avoid is correspondin%l+ increasedC.
Moreover, as pointed out b+ Alpian !in his lib @1 ad Sabinu, fr. -&, 6It 'ould not be Bust
that such donations ; should subsist, lest the conditions of those 'ho incurred %uilt
should turn out to be better.6 So lon% as arria%e reains the cornerstone of our fail+
la', reason and oralit+ ali>e deand that the disabilities attached to arria%e should
li>e'ise attach to concubina(e !7phasis supplied&,
9H7R78OR7, the Decision of respondent ,ud%e, dated October <, -./3, and his
Resolution of Noveber 1=, -./3 on petitionerCs Motion for Reconsideration, are
hereb+ set aside and the sale of the lot, house and iproveents in Euestion, is hereb+
declared null and void. No costs.
SO ORD7R7D.
60
Republic of the Philippines
SUPREME COURT
Manila
8IRST DIVISION

G.R. No. 125172 9+'e 26, 1998
S,o+$e$ ANTONIO &'( LU5IMIN0A GUIANG, petitioners,
vs.
COURT O) APPEALS &'( GIL0A COPU, respondents.

61
PANGANIBAN, J.:
The sale of a conBu%al propert+ reEuires the consent of both the husband and the 'ife.
The absence of the consent of one renders the sale null and void, 'hile the vitiation
thereof a>es it erel+ voidable. Onl+ in the latter case can ratification cure the defect.
The )ase
These 'ere the principles that %uided the #ourt in decidin% this petition for revie' of
the Decision
1
dated ,anuar+ @3, -..< and the Resolution
2
dated Ma+ 1/, -..<,
proul%ated b+ the #ourt of (ppeals in #(5DR #V No. 2-=0/, affirin% the Decision of
the lo'er court and den+in% reconsideration, respectivel+.
On Ma+ 1/, -..3, Private Respondent Dilda #orpu* filed an (ended #oplainant
3

a%ainst her husband ,udie #orpu* and Petitioner5Spouses (ntonio and Iu*viinda
Duian%. The said #oplaint sou%ht the declaration of a certain deed of sale, 'hich
involved the conBu%al propert+ of private respondent and her husband, null and void.
The case 'as raffled to the Re%ional Trial #ourt of Joronadal, South #otabato, $ranch
10. In due course, the trial court rendered a Decision
7
dated Septeber ., -..1,
disposin% as follo'4
5
(##ORDINDI:, Bud%ent is rendered for the plaintiff and a%ainst the defendants,
-. Declarin% both the Deed of Transfer of Ri%hts dated March -, -..3 !7"h. 6(6& and
the 6aicable settleent6 dated March -<, -..3 !7"h. 6$6& as null void and of no effect?
1. Reco%ni*in% as la'ful and valid the o'nership and possession of plaintiff Dilda
#orpu* over the reainin% one5half portion of Iot ., $loc> /, !IR#& Psd5-<023. 'hich
has been the subBect of the Deed of Transfer of Ri%hts !7"h. 6(6&?
@. Orderin% plaintiff Dilda #orpu* to reiburse defendants Iu*viinda Duian% the
aount of NIN7 THOAS(ND !P.,333.33& P7SOS correspondin% to the pa+ent ade
b+ defendants Duian%s to Manuel #alleBo for the unpaid balance of the account of
plaintiff in favor of Manuel #alleBo, and another su of P@=..<1 representin% one5half of
the aount of realt+ ta"es paid b+ defendants Duian%s on Iot ., $loc> /, !IR#& Psd5
-<023., both 'ith le%al interests thereon coputed fro the finalit+ of the decision.
No pronounceent as to costs in vie' of the factual circustances of the case.
Dissatisfied, petitioners5spouses filed an appeal 'ith the #ourt of (ppeals. Respondent
#ourt, in its challen%ed Decision, ruled as follo'4
6
9H7R78OR7, the appealed of the lo'er court in #ivil #ase No. 132 is hereb+
(88IRM7D b+ this #ourt. No costs considerin% plaintiff5appelleeCs failure to file her brief
despite notice.
Reconsideration 'as siilarl+ denied b+ the sae court in its assailed Resolution4
7
8indin% that the issues raised in defendants5appellants otion for reconsideration of
Our decision in this case of ,anuar+ @3, -..<, to be a ere rehash of the sae issues
'hich 'e have alread+ passed upon in the said decision, and there Gbein%H no co%ent
reason to disturb the sae, this #ourt R7SOIV7D to D7N: the instant otion for
reconsideration for lac> of erit.
The "acts
The facts of this case are siple. Over the obBection of private respondent and 'hile
she 'as in Manila see>in% eplo+ent, her husband sold to the petitioners5spouses
one half of their conBu%al peopert+, consistin% of their residence and the lot on 'hich it
stood. The circustances of this sale are set forth in the Decision of Respondent #ourt,
'hich Euoted fro the Decision of the trial court as follo's4
8
-. Plaintiff Dilda #orpu* and defendant ,udie #orpu* are le%all+ arried spouses. The+
'ere arried on Deceber 12, -.</ in $acolod #it+, before a Bud%e. This is aditted
b+ defendants5spouses (ntonio and Iu*viinda Duian% in their ans'er, and also
aditted b+ defendant ,udie #orpu* 'hen he testified in court !tsn. p. @, ,une ., -..1&,
althou%h the latter sa+s that the+ 'ere arried in -.<=. The couple have three children,
nael+4 ,unie ; -/ +ears old, Harriet ; -= +ears of a%e, and ,odie or ,oBi, the
+oun%est, 'ho 'as -0 +ears of a%e in (u%ust, -..3 'hen her other testified in court.
Soetie on 8ebruar+ -2, -./@, the couple Dilda and ,udie #orpu*, 'ith plaintiff5'ife
Dilda #orpu* as vendee, bou%ht a 21- sE. eter lot located in $aran%a+ Den. Paulino
Santos !$o. -&, Joronadal, South #otabato, and particularl+ >no'n as Iot ., $loc> /,
!IR#& Psd5-<023. fro Manuel #alleBo 'ho si%ned as vendor throu%h a conditional
deed of sale for a total consideration of P-2,=@0.33. The consideration 'as pa+able in
installent, 'ith ri%ht of cancellation in favor of vendor should vendee fail to pa+ three
successive installents !7"h. 616, tsn p. <, 8ebruar+ -2, -..3&.
1. Soetie on (pril 11, -.//, the couple Dilda and ,udie #orpu* sold one5half portion
of their Iot No. ., $loc> /, !IR#& Psd5-<023. to the defendants5spouses (ntonio and
Iu*viinda Duian%. The latter have since then occupied the one5half portion GandH built
their house thereon !tsn. p. 2, Ma+ 11, -..1&. The+ are thus adBoinin% nei%hbors of the
#orpu*es.
62
@. Plaintiff Dilda #orpu* left for Manila soetie in ,une -./.. She 'as tr+in% to loo>
for 'or> abroad, in GtheH Middle 7ast. Anfortunatel+, she becae a victi of an
unscrupulous ille%al recruiter. She 'as not able to %o abroad. She sta+ed for soetie
in Manila ho'ever, coin% bac> to Joronadal, South #otabato, . . . on March --, -..3.
PlaintiffCs departure for Manila to loo> for 'or> in the Middle 7ast 'as 'ith the consent
of her husband ,udie #orpu* !tsn. p. -<, (u%. -1, -..3? p. -3 Sept. <, -..-&.
(fter his 'ifeCs departure for Manila, defendant ,udie #orpu* seldo 'ent hoe to the
conBu%al d'ellin%. He sta+ed ost of the tie at his place of 'or> at Saahan% Na+on
$uildin%, a hotel, restaurant, and a cooperative. Dau%hter Herriet #orpu* 'ent to
school at Jin%Cs #olle%e, $o. -, Joronadal, South #otabato, but she 'as at the sae
tie 'or>in% as household help of, and sta+in% at, the house of Mr. Panes. Her brother
,unie 'as not 'or>in%. Her +oun%er sister ,odie !,oBie& 'as %oin% to school. Her
other soeties sent the one+ !tsn. p. -2, Sept. <, -..-.&
Soetie in ,anuar+ -..3, Harriet #orpu* learned that her father intended to sell the
reainin% one5half portion includin% their house, of their hoelot to defendants
Duian%s. She 'rote a letter to her other inforin% her. She GDilda #orpu*H replied that
she 'as obBectin% to the sale. Harriet, ho'ever, did not infor her father about this? but
instead %ave the letter to Mrs. Iu*viinda Duian% so that she GDuian%H 'ould advise
her father !tsn. pp. -<5-=, Sept. <, -..-&.
2. Ho'ever, in the absence of his 'ife Dilda #orpu*, defendant ,udie #orpu* pushed
throu%h the sale of the reainin% one5half portion of Iot ., $loc> /, !IR#& Psd5-<023..
On March -, -..3, he sold to defendant Iu*viinda Duian% thru a docuent >no'n as
6Deed of Transfer of Ri%hts6 !7"h. 6(6& the reainin% one5half portion of their lot and
the house standin% thereon for a total consideration of P@3,333.33 of 'hich P0,333.33
'as to be paid in ,une, -..3. Transferor ,udie #orpu*Cs children ,unie and Harriet
si%ned the docuent as 'itness.
8our !2& da+s after March -, -..3 or on March 0, -..3, obviousl+ to cure 'hatever
defect in defendant ,udie #orpu*Cs title over the lot transferred, defendant Iu*viinda
Duian% as vendee e"ecuted another a%reeent over Iot ., $loc> /, !IR#& Psd5-<023/
!7"h. 6@6&, this tie 'ith Manuela ,iene* #alleBo, a 'ido' of the ori%inal re%istered
o'ner fro 'ho the couple ,udie and Dilda #orpu* ori%inall+ bou%ht the lot !7"h.
616&, 'ho si%ned as vendor for a consideration of P.,333.33. Defendant ,udie #orpu*
si%ned as a 'itness to the sale !7"h. 6@5(6&. The ne' sale !7"h. 6@6& describes the lot
sold as Iot /, $loc> ., !IR#& Psd5-<023/ but it is obvious fro the ass of evidence
that the correct lot is Iot /, $loc> ., !IR#& Psd5-<023., the ver+ lot earlier sold to the
couple Dilda and ,udie #orpu*.
0. Soeties on March --, -..3, plaintiff returned hoe. She found her children
sta+in% 'ith other households. Onl+ ,unie 'as sta+in% in their house. Harriet and ,oBi
'ere 'ith Mr. Panes. Dilda %athered her children to%ether and sta+ed at their house.
Her husband 'as no'here to be found. She 'as infored b+ her children that their
father had a 'ife alread+.
<. 8or sta+in% in their house sold b+ her husband, plaintiff 'as coplained a%ainst b+
defendant Iu*viinda Duian% and her husband (ntonio Duian% before the $aran%a+
authorities of $aran%a+ Deneral Paulino Santos !$o. -&, Joronadal, South #otabato,
for trespassin% !tsn. p. @2, (u%. -=, -..3&. The case 'as doc>eted b+ the baran%a+
authorities as $aran%a+ #ase No. @/ for 6trespassin%6. On March -<, -..3, the parties
thereat si%ned a docuent >no'n as 6aicable settleent6. In full, the settleent
provides for, to 'it4
That respondent, Mrs. Dilda #orpu* and her three children, nael+4 ,unie, Hariet and
,udie to leave voluntaril+ the house of Mr. and Mrs. (ntonio Duian%, 'here the+ are
presentl+ boardin% 'ithout an+ char%e, on or before (pril =, -..3.
8(II NOT AND7R TH7 P7N(IT: O8 TH7 I(9.
$elievin% that she had received the shorter end of the bar%ain, plaintiff to the $aran%a+
#aptain of $aran%a+ Paulino Santos to Euestion her si%nature on the aicable
settleent. She 'as referred ho'ever to the Office5In5#har%e at the tie, a certain Mr.
de la #ru*. The latter in turn told her that he could not do an+thin% on the atter !tsn. p.
@-, (u%. -=, -..3&.
This particular point not rebutted. The $aran%a+ #aptain 'ho testified did not den+ that
Mrs. Dilda #orpu* approached hi for the annulent of the settleent. He erel+ said
he for%ot 'hether Mrs. #orpu* had approached hi !tsn. p. -@, Sept. 1<, -..3&. 9e
thus conclude that Mrs. #orpu* reall+ approached the $aran%a+ #aptain for the
annulent of the settleent. (nnulent not havin% been ade, plaintiff sta+ed put in
her house and lot.
=. Defendant5spouses Duian% follo'ed thru the aicable settleent 'ith a otion for
the e"ecution of the aicable settleent, filin% the sae 'ith the Municipal Trial #ourt
of Joronadal, South #otabato. The proceedin%s GareH still pendin% before the said court,
'ith the filin% of the instant suit.
/. (s a conseEuence of the sale, the spouses Duian% spent P<33.33 for the
preparation of the Deed of Transfer of Ri%hts, 7"h. 6(6, P.,333.33 as the aount the+
paid to Mrs. Manuela #alleBo, havin% assued the reainin% obli%ation of the
#orpu*es to Mrs. #alleBo !7"h. 6@6&? P-33.33 for the preparation of 7"hibit 6@6? a total of
P=0..<1 basic ta" and special education fund on the lot? P-1=.03 as the total
docuentar+ stap ta" on the various docuents? P0@0.=1 for the capital %ains ta"?
63
P11.03 as transfer ta"? a standard fee of P-=.33? certification fee of P0.33. These
e"penses particularl+ the ta"es and other e"penses to'ards the transfer of the title to
the spouses Duian%s 'ere incurred for the 'hole Iot ., $loc> /, !IR#& Psd5-<023..
Rulin( of Respondent )ourt
Respondent #ourt found no reversible error in the trial courtCs rulin% that an+ alienation
or encubrance b+ the husband of the conBu%al propet+ 'ithout the consent of his 'ife
is null and void as provided under (rticle -12 of the 8ail+ #ode. It also reBected
petitionersC contention that the 6aicable sttleent6 ratified said sale, citin( (rticle -23.
of the #ode 'hich e"pressl+ bars ratification of the contracts specified therein,
particularl+ those 6prohibited or declared void b+ la'.6 Hence, this petition.
9
The ssues
In their Meorandu, petitioners assi%n to public respondent the follo'in% errors4
10
I
9hether or not the assailed Deed of Transfer of Ri%hts 'as validl+ e"ecuted.
II
9hether or not the #our of (ppeals erred in not declairin% as voidable contract under
(rt. -@.3 of the #ivil #ode the ipu%ned Deed of Transfer of Ri%hts 'hich 'as validl+
ratified thru the e"ecution of the 6aicable settleent6 b+ the contendin% parties.
III
9hether or not the #ourt of (ppeals erred in not settin% aside the findin%s of the #ourt
a quo 'hich reco%ni*ed as la'ful and valid the o'nership and possession of private
respondent over the reainin% one half !-F1& portion of the properl+.
In a nutshell, petitioners5spouses contend that !-& the contract of sale !Deed of Transfer
of Ri%hts& 'as erel+ voidable, and !1& such contract 'as ratified b+ private
respondent 'hen she entered into an aicable sttleent 'ith the.
This )ourtCs Rulin(
The petition is bereft of erit.
"irst ssue4 +oid or +oidable )ontract5
Petitioners insist that the Euestioned Deed of Transfer of Ri%hts 'as validl+ e"ecuted
b+ the parties5liti%ants in %ood faith and for valuable consideration. The absence of
private respondentCs consent erel+ rendered the Deed voidable under (rticle -@.3 of
the #ivil #ode, 'hich provides4
(rt. -@.3. The follo'in% contracts are voidable or annullable, even thou%h there a+
have been no daa%e to the contractin% parties4
""" """ """
!1& Those 'here the consent is vitiated b+ ista>e, violence, intiidation, undue
influence or fraud.
These contracts are bindin%, unless the+ are annulled b+ a proper action in court. The+
are susceptible of ratification.!n&
The error in petitionersC contention is evident. (rticle -@.3, par. 1, refers to contracts
visited b+ vices of consent, i.e., contracts 'hich 'ere entered into b+ a person 'hose
consent 'as obtained and vitiated throu%h ista>e, violence, intiidation, undue
influence or fraud. In this instance, private respondentCs consent to the contract of sale
of their conBu%al propert+ 'as totall+ ine"istent or absent. Dilda #orpu*, on direct
e"aination, testified thus4
11
) No', on March -, -..3, could +ou still recall 'here +ou 'ereK
( I 'as still in Manila durin% that tie.
""" """ """
(TT:. 8A7NT7S4
) 9hen did +ou coe bac> to Joronadal, South #otabatoK
( That 'as on March --, -..3, MaCa.
) No', 'hen +ou arrived at Joronadal, 'as there an+ proble 'hich arose concernin%
the o'nership of +our residential house at #alleBo SubdivisionK
64
( 9hen I arrived here in Joronadal, there 'as a proble 'hich arose re%ardin% +
residential house and lot because it 'as sold b+ + husband 'ithout + >no'led%e.
This bein% the case, said contract properl+ falls 'ithin the abit of (rticle -12 of the
8ail+ #ode, 'hich 'as correctl+ applied b+ the teo lo'er court4
(rt. -12. The adinistration and enBo+ent of the conBu%al partnerhip properl+ shall
belon% to both spouses Bointl+. In case of dis%reeent, the husbandCs decision shall
prevail, subBect recourse to the court b+ the 'ife for proper reed+, 'hich ust be
availed of 'ithin five +ears fro the date of the contract ipleentin% such decision.
In the event that one spouse is incapacitated or other'ise unable to participate in the
adinistration of the conBu%al properties, the other spouse a+ assue sole po'ers of
adinistration. These po'ers do not include the po'ers of disposition or encubrance
'hich ust have the authorit+ of the court or the 'ritten consent of the other spouse. n
the absence of such authorit! or consent, the disposition or encumbrance shall be void.
Ho'ever, the transaction shall be construed as a continuin% offer on the part of the
consentin% spouse and the third person, and a+ be perfected as a bindin% contract
upon the acceptance b+ the other spouse or authori*ation b+ the court before the offer
is 'ithdra'n b+ either or both offerors. !-<0a& !7phasis supplied&
#oparin% said la' 'ith its eEuivalent provision in the #ivil #ode, the trial court adroitl+
e"plained the aendator+ effect of the above provision in this 'ise4
12
The le%al provision is clear. The disposition or encubrance is void. It becoes still
clearer if 'e copare the sae 'ith the eEuivalent provision of the #ivil #ode of the
Philippines. Ander (rticle -<< of the #ivil #ode, the husband cannot %enerall+ alienate
or encuber an+ real propert+ of the conBu%al partnershit 'ithout the 'ifeCs consent.
The alienation or encubrance if so ade ho'ever is not null and void. It is erel+
voidable. The offended 'ife a+ brin% an action to annul the said alienation or
encubrance. Thus the provision of (rticle -=@ of the #ivil #ode of the Philippines, to
'it4
(rt. -=@. The 'ife a+, durin% the arria%e and 'ithin ten +ears fro the transaction
Euestioned, as> the courts for the annulent of an+ contract of the husband entered
into 'ithout her consent, 'hen such consent is reEuired, or an+ act or contract of the
husband 'hich tends to defraud her or ipair her interest in the conBu%al partnership
propert+. Should the 'ife fail to e"ercise this ri%ht, she or her heirs after the dissolution
of the arria%e, a+ deand the value of propert+ fraudulentl+ alienated b+ the
husband.!n&
This particular provision %ivin% the 'ife ten !-3& +ears . . . durin% GtheH arria%e to annul
the alienation or encubrance 'as not carried over to the 8ail+ #ode. It is thus clear
that an+ alienation or encubrance ade after (u%ust @, -.// 'hen the 8ail+ #ode
too> effect b+ the husband of the conBu%al partnership propert+ 'ithout the consent of
the 'ife is null and void.
8urtherore, it ust be noted that the fraud and the intiidation referred to b+
petitioners 'ere perpetrated in the e"ecution of the docuent ebod+in% the aicable
settleent. Dilda #orpu* alle%ed durin% trial that baran%a+ authorities ade her si%n
said docuent throu%h isrepresentation and
coercion.
13
In an+ event, its e"ecution does not alter the void character of the deed of
sale bet'een the husband and the petitioners5spouses, as 'ill be discussed later. The
fact reains that such contract 'as entered into 'ithout the 'ifeCs consent.
In su, the nullit+ of the contract of sale is preised on the absence of private
respondentCs consent. To constitute a valid contract, the #ivil #ode reEuires the
concurrence of the follo'in% eleents4 !-& cause, !1& obBect, and !@& consent,
17
the last
eleent bein% indubitabl+ absent in the case at bar.
3econd ssue4 Amicable 3ettlement
Insistin% that the contract of sale 'as erel+ voidable, petitioners aver that it 'as dul+
ratified b+ the contendin% parties throu%h the 6aicable settleent6 the+ e"ecuted on
March -<, -..3 in $aran%a+ #ase No. @/.
The position is not 'ell ta>en. The trial and the appellate courts have resolved this
issue in favor of the private respondent. The trial court correctl+ held4
15
$+ the specific provision of the la' G(rt. -@.3, #ivil #odeH therefore, the Deed to
Transfer of Ri%hts !7"h. 6(6& cannot be ratified, even b+ an 6aicable settleent6. The
participation b+ soe baran%a+ authorities in the 6aicable settleent6 cannot
other'ise validate an invalid act. Moreover, it cannot be denied that the 6aicable
settleent !7"h. 6$6& entered into b+ plaintiff Dilda #orpu* and defendent spouses
Duian% is a contract. It is a direct offshoot of the Deed of Transfer of Ri%hts !7"h. 6(6&.
$+ e"press provision of la', such a contract is also void. Thus, the le%al provision, to
'it4
(rt. -211. (contract 'hich is the direct result of a previous ille%al contract, is also void
and ine"istent. !#ivil #ode of the Philippines&.
In suation therefore, both the Deed of transfer of Ri%hts !7"h. 6(6& and the
6aicable settleent6 !7"h. 6@6& are null and void.
65
Doctrinall+ and clearl+, a void contract cannot be ratified.
16
Neither can the 6aicable settleent6 be considered a continuin% offer that 'as
accepted and perfected b+ the parties, follo'in% the last sentence of (rticle -12. The
order of the pertinent events is clear4 after the sale, petitioners filed a coplaint for
trespassin% a%ainst private respondent, after 'hich the baran%a+ authorities secured
an 6aicable settleent6 and petitioners filed before the MT# a otion for its
e"ecution. The settleent, ho'ever, does not ention a continuin% offer to sell the
propert+ or an acceptance of such a continuin% offer. Its tenor 'as to the effect that
private respondent 'ould vacate the propert+. $+ no stretch of the ia%ination, can the
#ourt interpret this docuent as the acceptance entioned in (rticle -12.
9H7R78OR7, the #ourt hereb+ D7NI7S the petition and (88IRMS the challen%ed
Decision and Resolution. #osts a%ainst petitioners.
SO ORD7R7D.
Republic of the Philippines
SUPREME COURT
Manila
7N $(N#

G.R. No. L.35702 M&- 29, 1973
0OMINGO 0. RUBIAS, plaintiff5appellant,
vs.
ISAIAS BATILLER, defendant5appellee.
=re(orio ;. Rubias for plaintiff<appellant.
+icente R. Acsa! for defendant<appellee.

TEE1AN:EE, J.:
66
In this appeal certified b+ the #ourt of (ppeals to this #ourt as involvin% purel+ le%al
Euestions, 'e affir the disissal order rendered b+ the Iloilo court of first instance
after pre5trial and subittal of the pertinent docuentar+ e"hibits.
Such disissal 'as proper, plaintiff havin% no cause of action, since it 'as dul+
established in the record that the application for re%istration of the land in Euestion filed
b+ 8rancisco Militante, plaintiffCs vendor and predecessor interest, had been disissed
b+ decision of -.01 of the land re%istration court as affired b+ final Bud%ent in -.0/
of the #ourt of (ppeals and hence, there 'as no title or ri%ht to the land that could be
transitted b+ the purported sale to plaintiff.
(s late as -.<2, the Iloilo court of first instance had in another case of eBectent
li>e'ise upheld b+ final Bud%ent defendantCs 6better ri%ht to possess the land in
Euestion . havin% been in the actual possession thereof under a clai of title an+
+ears before 8rancisco Militante sold the land to the plaintiff.6
8urtherore, even assuin% that Militante had an+thin% to sell, the deed of sale
e"ecuted in -.0< b+ hi in favor of plaintiff at a tie 'hen plaintiff 'as concededl+ his
counsel of record in the land re%istration case involvin% the ver+ land in dispute
!ultiatel+ decided adversel+ a%ainst Militante b+ the #ourt of (ppealsC -.0/ Bud%ent
affirin% the lo'er courtCs disissal of MilitanteCs application for re%istration& 'as
properl+ declared ine"istent and void b+ the lo'er court, as decreed b+ (rticle -23. in
relation to (rticle -2.- of the #ivil #ode.
The appellate court, in its resolution of certification of 10 ,ul+ -.=1, %ave the follo'in%
bac>%rounder of the appeal at bar4
On (u%ust @-, -.<2, plaintiff Doin%o D. Rubias, a la'+er, filed a suit to recover the
o'nership and possession of certain portions of lot under Psu5..=.- located in $arrio
Deneral Iuna, $arotac VieBo, Iloilo 'hich he bou%ht fro his father5in5la', 8rancisco
Militante in -.0< a%ainst its present occupant defendant, Isaias $atiller, 'ho ille%all+
entered said portions of the lot on t'o occasions ; in -.20 and in -.0.. Plaintiff
pra+ed also for daa%es and attorne+s fees. !pp. -5=, Record on (ppeal&. In his
ans'er 'ith counter5clai defendant clais the coplaint of the plaintiff does not state
a cause of action, the truth of the atter bein% that he and his predecessors5in5interest
have al'a+s been in actual, open and continuous possession since tie ieorial
under clai of o'nership of the portions of the lot in Euestion and for the alle%ed
alicious institution of the coplaint he clais he has suffered oral daa%es in the
aount of P 1,333.33, as 'ell as the su of P033.33 for attorne+Cs fees. ...
On Deceber ., -.<2, the trial court issued a pre5trial order, after a pre5trial conference
bet'een the parties and their counsel 'hich order reads as follo's..
C9hen this case 'as called for a pre5trial conference toda+, the plaintiff appeared
assisted b+ hiself and (tt+. Dre%orio M. Rubias. The defendant also appeared,
assisted b+ his counsel (tt+. Vicente R. (csa+.
(. Durin% the pre5trial conference, the parties have a%reed that the followin( facts are
attendant in this case and that the+ 'ill no lon%er introduced an+ evidence, testionial
or docuentar+ to prove the4
-. That 8rancisco Militante claied o'nership of a parcel of land located in the $arrio
of Deneral Iuna, unicipalit+ of $arotac VieBo province of Iloilo, 'hich he caused to be
surve+ed on ,ul+ -/5@-, -.@2, 'hereb+ he 'as issued a plan Psu5..=.- !7"hibit 6$6&.
!The land claied contained an area of -=-4@0<- hectares.&
1. $efore the 'ar 'ith ,apan, 8rancisco Militante filed 'ith the #ourt of 8irst Instance of
Iloilo an application for the re%istration of the title of the land technicall+ described in
psu5..=.- !7"h. 6$6& opposed b! the 0irector of Lands, the 0irector of "orestr! and
other oppositors. Ho'ever, durin% the 'ar 'ith ,apan, the record of the case 'as lost
before it 'as heard, so after the 'ar 8rancisco Militante petitioned this court to
reconstitute the record of the case. The record was reconstituted on the #ourt of the
8irst Instance of Iloilo and doc>eted as Land )ase 2o. R<#%', =LR1 Rec. 2o. '/&'>.
The #ourt of 8irst Instance heard the land re%istration case on Noveber -2, -.01,
and after the trial this court dismissed the application for re(istration. The appellant,
8rancisco Militante, appealed fro the decision of this #ourt to the #ourt of (ppeals
'here the case 'as doc>eted as #(5DR No. -@2.=5R..
@. Pendin( the disposal of the appeal in #(5DR No. -@2.=5R and ore particularl+ on
*une $&, $%'#, "rancisco ;ilitante sold to the plaintiff, 0omin(o Rubias the land
technicall+ described in psu5..=.- !7"h. 6(6&. The sale 'as dul+ recorded in the Office
of the Re%ister of Deeds for the province of Iloilo as 7ntr+ No. -@<3. on ,ul+ --, -.<3
!7"h. 6(5-6&.
!NOT74 (s per deed of sale, 7"h. (, 'hat Militante purportedl+ sold to plaintiff5
appellant, his son5in5la', for the sum of P>,...... 'as 6a parcel of untitled land havin%
an area Of -22..3=1 hectares ... surve+ed under Psu ..=.- ... !and& subBect to the
e"clusions ade b+ e, under !case& )A<i,/%?, Land Re(istration )ase 2o. R<#%',
=.L.R.1. 2o. '/&'>, #ourt of 8irst Instance of the province of Iloilo. These e"clusions
referred to portions of the ori%inal area of over -=- hectares ori%inall+ claied b+
Militante as applicant, but 'hich he e"pressl+ reco%ni*ed durin% the trial to pertain to
soe oppositors, such as the $ureau of Public 9or>s and $ureau of 8orestr+ and
several other individual occupants and accordin%l+ 'ithdre' his application over the
sae. This is e"pressl+ ade of record in 7"h. (, 'hich is the )ourt of AppealsC
decision of >> 3eptember $%'& confirmin( the land re%istration courtCs dismissal of
MilitanteCs application for re%istration.&
67
2. On Septeber 11,-.0/ the #ourt of appeals in #(5D.R. No. -@2.=5R proul%ated
its Bud%ent confirin% the decision of this #ourt in Iand #ase No. R5<.0, DIRO Rec.
No. 02/01 'hich disissed the application for Re%istration filed b+ 8rancisco Militante
!7"h. 6I6&.
0. Doin%o Rubias declared the land described in 7"h. C$C for ta"ation purposes under
Ta" Dec. No. /0/0 !7"h. 6#6& for -.0=? Ta" Dec. Nos. .0@@ !7"h. 6#5-6& and -33-.
!7"h. 6#5@6&for the +ear -.<-? Ta" Dec. No. ./</ !7"h. 6#516& for the +ear -.<2, pa+in%
the land ta"es under Ta" Dec. No. /0/0 and .0@@ !7"h. 6D6, 6D5-6, 6D5<6&.
<. 8rancisco Militante iediate predecessor5in5interest of the plaintiff, has also
declared the land for ta"ation purposes under Ta" Dec. No. 0-=1 in -.23 !7"h. 676& for
-.20? under Ta" Dec. No. T5/< !7"h. 675-6& for -.2/? under Ta" Dec. No. =-11 !7"h.
616&, and paid the land ta"es for -.23 !7"hs. 6D6 and 6D5=6&, for -.20 2< !7"h. 6D5-6&
for -.2= !7"h. 6D516&, for -.2= O -.2/ !7"h. 6D5@6&, for -.2/ !7"h. 6D526&, and for -.2/
and -.2. !7"h. 6D506&.
=. Ta" Declaration No. 12@2 in the nae of Iiberato DeontaLo for the land described
therein !7"h. 686& 'as cancelled b+ Ta". Dec. No. 0-=1 of 8rancisco Militante !7"h.
676&. Iiberato DeontaLo paid the land ta" under Ta" Dec. No. 12@2 on Dec. 13, -.@.
for the +ears -.@/ !03Q& and -.0. !7"h. 6H6&.
/. The defendant had declared for ta"ation purposes Iot No. 1 of the Psu5-0012-
under Ta" Dec. Not. /0/@ for -.0= and a portion of Iot No. 1, Psu5-0012-, for -.20
under Ta" Dec. No. /0/2 !7"h. 615(6 Ta" No. /0/@ !7"h. 616& 'as revised b+ Ta" Dec.
No. .2./ in the nae of the defendant !7"h. 615$6& and Ta" Dec. No. /0/2 !7"h. 615(6&
'as cancelled b+ Ta" Dec. No. .0/2 also in the nae of the defendant !7"h. 615#6&.
The defendant paid the land ta"es for Iot 1, Psu5-0012-, on Nov. ., -.<3 for the +ears
-.20 and -.2<, for the +ear -.03, and for the +ear -.<3 as sho'n b+ the certificate of
the treasurer !7"h. 6@6&. The defendant a+ present to the #ourt other land ta"es
receipts for the pa+ent of ta"es for this lot.
.. The land claimed b! the defendant as his o'n 'as surve+ed on ,une < and =,-.0<,
and a plan approved b! 0irector of Land on 2ovember $', $%'# 'as issued, identified
as Psu $''>/$ F-xh. @'@G.
-3. On (pril 11, -.<3, the plaintiff filed forcible -ntr! and 0etainer case a%ainst Isaias
$atiller in the ,ustice of the Peace #ourt of $arotac VieBo Province of Iloilo !7"h. 626& to
'hich the defendant Isaias $atiller riled his ans'er on (u%ust 1., -.<3 !7"h. 625(6&.
The ;unicipal )ourt of $arotac VieBo after trial, decided the case on ;a! $., $%#$ in
favor of the defendant and a(ainst the plaintiff !7"h. 625$6&. The plaintiff appealed fro
the decision of the Municipal #ourt of $arotac VieBo 'hich 'as doc>eted in this #ourt
as #ivil #ase No. 0=03 on ,une @, -.<-, to 'hich the defendant, Isaias $atiller, on
,une -@, -.<- filed his ans'er !7"h. 625#6&. (nd this )ourt after the trial. decided the
case on 2ovember >#, $%#/, in favor of the defendant, saias 8atiller and a%ainst the
plaintiff !7"h. 625D6&.
!NOT74 (s per 7"h. 25$, 'hich is the Iloilo court of first instance decision of 1<
Noveber -.<2 dismissin( plaintiffCs therein coplaint for eBectent a%ainst defendant,
the iloilo court e"pressl+ found 6that plaintiffCs coplaint is unjustified, intended to
harass the defendant6 and 6that the defendant, Isaias $atiller, has a better ri(ht to
possess the land in Euestion described in Psu -0012- !7"h. 6@6&, Isaias $atiller havin%
been in the actual ph!sical possession thereof under a claim of title man! !ears before
"rancisco ;ilitante sold the land to the plaintiff<hereb! dismissin( plaintiffCs coplaint
and orderin% the plaintiff to pa+ the defendant attorne+Cs fees ....6&
$. Durin% the trial of this case on the erit, the plaintiff 'ill prove b+ copetent
evidence the follo'in%4
-. That the land he purchased fro 8rancisco Militante under 7"h. 6(6 'as forerl+
o'ned and possessed b+ Iiberato DeontaLo but that on Septeber <, -.-. the land
'as sold at public auction b+ virtue of a Bud%ent in a #ivil #ase entitled @-dw *.
Pflieder plaintiff vs. Liberato 0emontaHo "rancisco 8alladeros and =re(orio :ulo,
defendants@, of 'hich :ap Pon%co 'as the purchaser !7"h. 6-5@6&. The sale 'as
re%istered in the Office of the Re%ister of Deeds of Iloilo on (u%ust 2, -.13, under
Priar+ 7ntr+ No. <. !7"h. 6-6&, and a definite Deed of Sale 'as e"ecuted b+
#onstantino (. #anto, provincial Sheriff of Iloilo, on ,an. -., -.@2 in favor of :ap
Pon%co !7"h. 6I6&, the sale havin% been re%istered in the Office of the Re%ister of
Deeds of Iloilo on 8ebruar+ -3, -.@2 !7"h. 6-5-6&.
1. On Septeber 11, -.@2, :ap Pon%co sold this land to 8rancisco Militante as
evidenced b+ a notarial deed !7"h. 6,6& 'hich 'as re%istered in the Re%istr+ of Deeds
on Ma+ -@, -.23 !7"h. 6,5-6&.
@. That plaintiff suffered daa%es alle%ed in his coplaint.
#. Defendants, on the other hand 'ill prove b+ copetent evidence durin% the trial of
this case the follo'in% facts4
-. That lot No. 1 of the Psu5-001 it !7"h. C0C& 'as ori%inall+ o'ned and possessed b+
8elipe $atiller, %randfather of the defendant $asilio $atiller, on the death of the forer
in -.13, as his sole heir. Isaias $atiller succeeded his father , $asilio $atiller, in the
o'nership and possession of the land in the +ear -.@3, and since then up to the
present, the land reains in the possession of the defendant, his possession bein%
68
actual, open, public, peaceful and continuous in the concept of an o'ner, e"clusive of
an+ other ri%hts and adverse to all other claiants.
1. That the alle%ed predecessors in interest of the plaintiff have never been in the
actual possession of the land and that the+ never had an+ title thereto.
@. That Iot No. 1, Psu -0012-, the subBect of "ree Patent application of the defendant
has been approved.
2. The daa%es suffered b+ the defendant, as alle%ed in his counterclai.6C
1
The appellate court further related the developents of the case, as follo's4
On (u%ust -=, -.<0, defendantCs counsel anifested in open court that before an+ trial
on the erit of the case could proceed he 'ould file a motion to dismiss plaintiffCs
coplaint 'hich he did, alle%in% that plaintiff does not have cause of action a(ainst him
because the propert+ in dispute 'hich he !plaintiff& alle%edl+ bou%ht fro his father5in5
la', 8rancisco Militante 'as the subBect atter of IR# No. <.0 filed in the #8I of Iloilo,
'hich case 'as brou%ht on appeal to this #ourt and doc>eted as #(5D.R. No. -@2.=5R
in 'hich aforesaid case plaintiff was the counsel on record of his father5in5la',
8rancisco Militante. Invo>in% (rts. -23. and -2.- of the #ivil #ode 'hich reads4
C(rt. -23.. The follo'in% contracts are ine"istent and void fro the be%innin%4
""" """ """
!=& Those e"pressl+ prohibited b+ la'.
C(RT. -2.-. The follo'in% persons cannot acEuire an+ purchase, even at a public
auction, either in person of throu%h the ediation of another4 .
""" """ """
!0& *ustices, jud(es, prosecutin( attorne!s, cler4s of superior and inferior courts, and
other officers and emplo!ees connected with the administration of justice, the propert+
and ri%hts of in liti%ation or levied upon an e"ecution before the court 'ithin 'hose
Burisdiction or territor+ the+ e"ercise their respective functions? this prohibition includes
the act of acEuirin% an assi%nent and shall appl+ to law!ers, 'ith respect to the
propert+ and ri%hts 'hich a+ be the obBect of an+ liti%ation in 'hich the+ a+ ta>e part
b+ virtue of their profession.C
defendant clais that plaintiff could not have acEuired an+ interest in the propert+ in
dispute as the contract he !plaintiff& had 'ith 8rancisco Militante 'as ine"istent and
void. !See pp. 115@-, Record on (ppeal&. Plaintiff stron%l+ opposed defendantCs otion
to disiss claiin% that defendant can not invo>e (rticles -23. and -2.- of the #ivil
#ode as (rticle -211 of the sae #ode provides that CThe defense of ille%alit+ of
contracts is not available to third persons 'hose interests are not directl+ affectedC !See
pp. @15@0 Record on (ppeal&.
1n 1ctober $&, $%#', the lo'er court issued an order disclaimin( plaintiffs complaint
!pp. 2152., Record on (ppeal.& In the aforesaid order of disissal the lo'er court
practicall+ a%reed 'ith defendantCs contention that the contract !7"h. (& bet'een
plaintiff and 8rancis Militante 'as null and void. In due season plaintiff filed a otion
for reconsideration !pp. 0350< Record on (ppeal& 'hich 'as denied b+ the lo'er court
on ,anuar+ -2, -.<< !p. 0=, Record on (ppeal&.
Hence, this appeal b+ plaintiff fro the orders of October -/, -.<0 and ,anuar+ -2,
-.<<.
Plaintiff5appellant iputes to the lo'er court the follo'in% errors4
C-. The lo'er court erred in holdin% that the contract of sale bet'een the plaintiff5
appellant and his father5in5la', 8rancisco Militante, Sr., no' deceased, of the propert+
covered b+ Plan Psu5..=.-, !7"h. 6(6& 'as void, not voidable because it 'as ade
'hen plaintiff5appellant 'as the counsel of the latter in the Iand Re%istration case.
C1. The lo'er court erred in holdin% that the defendant5appellee is an interested person
to Euestion the validit+ of the contract of sale bet'een plaintiff5appellant and the
deceased, 8rancisco Militante, Sr.
C@. The lo'er court erred in entertainin% the otion to disiss of the defendant5appellee
after he had alread+ filed his ans'er, and after the terination of the pre5trial, 'hen the
said otion to disiss raised a collateral Euestion.
C2. The lo'er court erred in disissin% the coplaint of the plaintiff5appellant.C
The appellate court concluded that plaintiffs 6assi%nent of errors %ives rise to t'o !1&
le%al posers ; !-& 'hether or not the contract of sale bet'een appellant and his father5
in5la', the late 8rancisco Militante over the propert+ subBect of Plan Psu5..=.- 'as
void because it 'as ade 'hen plaintiff 'as counsel of his father5in5la' in a land
re%istration case involvin% the propert+ in dispute? and !1& 'hether or not the lo'er
court 'as correct in entertainin% defendant5appelleeCs otion to disiss after the latter
had alread+ filed his ans'er and after he !defendant& and plaintiff5appellant had a%reed
69
on soe atters in a pre5trial conference. Hence, its elevation of the appeal to this
#ourt as involvin% pure Euestions of la'.
It is at once evident fro the fore%oin% narration that the pre5trial conference held b+
the trial court at 'hich the parties 'ith their counsel a%reed and stipulated on the
aterial and relevant facts and subitted their respective docuentar+ e"hibits as
referred to in the pre5trial order, supra,
2
practicall+ aounted to a fulldress trial 'hich
placed on record all the facts and e"hibits necessar+ for adBudication of the case.
The three points on 'hich plaintiff reserved the presentation of evidence at the5trial
dealin% 'ith the source of the alle%ed ri%ht and title of 8rancisco MilitanteCs
predecessors, supra,
3
actuall+ are alread+ ade of record in the stipulated facts and
admitted exhibits. The chain of MilitanteCs alle%ed title and ri%ht to the land as
supposedl+ traced bac> to Iiberato DeontaLo 'as actuall! asserted b+ Militante !and
his vendee, la'+er and son5in5la', herein plaintiff& in the land re%istration case and
rejected b+ the Iloilo land re%istration court 'hich dismissed MilitanteCs application for
re%istration of the land. Such disissal, as alread+ stated, 'as affired b+ the final
Bud%ent in -.0/ of the #ourt of (ppeals.
7

The four points on 'hich defendant on his part reserved the presentation of evidence at
the trial dealin% 'ith his and his ancestorsC continuous, open, public and peaceful
possession in the concept of o'ner of the land and the Director of IandsC approval of
his surve+ plan thereof, supra,
5
are li>e'ise alread+ dul+ established facts of record, in
the land re%istration case as 'ell as in the eBectent case 'herein the Iloilo court of
first instance reco%ni*ed the superiorit+ of defendantCs ri%ht to the land as a%ainst
plaintiff.
No error 'as therefore coitted b+ the lo'er court in disissin% plaintiffCs coplaint
upon defendantCs otion after the pre5trial.
-. The stipulated facts and e"hibits of record indisputabl+ established plaintiffCs lac> of
cause of action and Bustified the outri%ht disissal of the coplaint. PlaintiffCs clai of
o'nership to the land in Euestion 'as predicated on the sale thereof for P1,333.33
ade in -.0< b+ his father5in5 la', 8rancisco Militante, in his favor, at a tie 'hen
MilitanteCs application for re%istration thereof had alread+ been dismissed b+ the Iloilo
land re%istration court and 'as pendin% appeal in the #ourt of (ppeals.
9ith the #ourt of (ppealsC -.0/ final Bud%ent affirin% the dismissal of MilitanteCs
application for re%istration, the lac> of an+ ri%htful clai or title of Militante to the land
'as conclusivel+ and decisivel+ Budiciall+ deterined. Hence, there 'as no ri(ht or title
to the land that could be transferred or sold b+ MilitanteCs purported sale in -.0< in
favor of plaintiff.
Manifestl+, then plaintiffCs coplaint a%ainst defendant, to be declared absolute o'ner
of the land and to be restored to possession thereof 'ith daa%es 'as bereft of an+
factual or le%al basis.
1. No error could be attributed either to the lo'er courtCs holdin% that the purchase b+ a
la'+er of the propert+ in liti%ation fro his client is cate%oricall+ prohibited b+ (rticle
-2.-, para%raph !0& of the Philippine #ivil #ode, reproduced supra?
6
and that
conseEuentl+, plaintiffCs purchase of the propert+ in liti%ation fro his client !assuin%
that his client could sell the sae since as alread+ sho'n above, his clientCs clai to
the propert+ 'as defeated and reBected& 'as void and could produce no le%al effect, b+
virtue of (rticle -23., para%raph !=& of our #ivil #ode 'hich provides that contracts
6e"pressl+ prohibited or declared void b+ la'C are 6ine"istent and that 6!T&hese
contracts cannot be ratified. Neither can the ri%ht to set up the defense of ille%alit+ be
'aived.6
The -.-- case of Eolfson vs. -state of ;artinez
7
relied upon b+ plaintiff as holdin% that
a sale of propert+ in liti%ation to the part+ liti%antCs la'+er 6is not void but voidable at the
election of the vendor6 'as correctl+ held b+ the lo'er court to have been superseded
b+ the later -.1. case of 0irector of Lands vs. Aba(at.
8
In this later case of (ba%at, the
#ourt e"pressl+ cited t'o antecedent cases involvin% the sae transaction of purchase
of propert+ in liti%ation b+ the la'+er 'hich 'as e"pressl+ declared invalid under (rticle
-20. of the #ivil #ode of Spain !of 'hich (rticle -2.- of our #ivil #ode of the
Philippines is the counterpart& upon challen%e thereof not b+ the vendor5client but b+
the adverse parties a%ainst 'ho the la'+er 'as to enforce his ri%hts as vendee thus
acEuired.
These t'o antecedent cases thus cited in (ba%at clearl+ superseded !'ithout so
e"pressl+ statin% the previous rulin% in Eolfson4
The spouses, ,uan Soriano and Vicente Macarae%, 'ere the o'ners of t'elve parcels
of land. Vicenta Macarae% died in Noveber, -.3., leavin% a lar%e nuber of collateral
heirs but no descendants. Iiti%ation bet'een the survivin% husband, ,uan Soriano, and
the heirs of Vicenta iediatel+ arose, and the herein appellant Sisenando Palarca
acted as SorianoCs la'+er. On Ma+ 1, -.-/, Soriano e"ecuted a deed for the aforesaid
t'elve parcels of land in favor of Sisenando Palarca and on the follo'in% da+, Ma+ @,
-.-/, Palarca filed an application for the re%istration of the land in the deed. After
hearin(, the )ourt of "irst nstance declared that the deed was invalid b! virtue of the
provisions of article $/'% of the )ivil )ode, which prohibits law!ers and solicitors from
purchasin( propert! ri(hts involved in an! liti(ation in which the! ta4e part b! virtue of
their profession. The application for re(istration was consequentl! denied, and upon
appeal b! Palarca to the 3upreme )ourt, the jud(ement of the lower court was affirmed
b! a decision promul(ated 2ovember $#,$%>'. !D.R. No. 12@1., Palarca vs. Director of
Iands, not reported.&
70
In the eantie cadastral case No. @3 of the Province of Tarlac 'as instituted, and on
(u%ust 1-, -.1@, 7leuteria Macarae%, as adinistratri" of the estate of Vicente
Macarae%, filed clais for the parcels in Euestion. $uenaventura Iavitoria adinistrator
of the estate of ,uan Soriano, did li>e'ise and so did Sisenando Palarca. In a decision
dated ,une 1-, -.1=, the #ourt of 8irst Instance, ,ud%e #arballo presidin%, rendered
Bud%ent in favor of Palarea and ordered the re%istration of the land in his nae. 9pon
appeal to this court b! the administration of the estates of *uan 3oriano and +icente
;acarae(, the jud(ment of the court below was reversed and the land adjudicated to
the two estates as conju(al propert! of the deceased spouses. !D.R. No. 1/11<,
Director of Iands vs. (ba%at, proul%ated Ma+ 1-, -.1/, not reported.&
9

In the ver+ case of Aba(at itself, the #ourt, a%ain affirin% the invalidit+ and nullit+ of
the la'+erCs purchase of the land in liti%ation fro his client, ordered the issuance of a
'rit of possession for the return of the land b+ the la'+er to the adverse parties 'ithout
reiburseent of the price paid b+ hi and other e"penses, and ruled that 6the
appellant Palarca is a la'+er and is presued to >no' the la'. He ust, therefore,
fro the be%innin%, have been 'ell a'are of the defect in his title and is, conseEuentl+,
a possessor in bad faith.6
(s alread+ stated, Eolfson and Aba(at 'ere decided 'ith relation to (rticle -20. of the
#ivil #ode of Spain then adopted here, until it 'as superseded on (u%ust @3, -.03 b+
the #ivil #ode of the Philippines 'hose counterpart provision is (rticle -2.-.
(rticle -2.- of our #ivil #ode !li>e (rticle -20. of the Spanish #ivil #ode& prohibits in
its si" para%raphs certain persons, b+ reason of the relation of trust or their peculiar
control over the propert+, fro acEuirin% such propert+ in their trust or control either
directl+ or indirectl+ and 6even at a public or Budicial auction,6 as follo's4 !-& %uardians?
!1& a%ents? !@& adinistrators? !2& public officers and eplo+ees? Budicial officers and
eplo+ees, prosecutin% attorne+s, and la'+ers? and !<& others especiall+ disEualified
b+ la'.
In Eolfson 'hich involved the sale and assi%nent of a one+ Bud%ent b+ the client
to the la'+er, 9olfson, 'hose ri%ht to so purchase the Bud%ent 'as bein% challen%ed
b+ the Bud%ent debtor, the #ourt, throu%h ,ustice Moreland, then e"pressl+ reserved
decision on 6'hether or not the Bud%ent in Euestion actuall+ falls 'ithin the prohibition
of the article6 and held onl+ that the saleCs 6voidabilit+ can not be asserted b+ one not a
part+ to the transaction or his representative,6 citin% fro Manresa
10
that 6!#&onsiderin%
the Euestion fro the point of vie' of the civil la', the vie' ta>en b+ the code, 'e ust
liit ourselves to classif+in% as void all acts done contrar+ to the e"press prohibition of
the statute. No' then4 (s the code does not reco%ni*e such nullit+ b+ the ere
operation of la', the nullit+ of the acts hereinbefore referred to ust be asserted b+ the
person havin% the necessar+ le%al capacit+ to do so and decreed b+ a copetent
court.6
11

The reason thus %iven b+ Manresa in considerin% such prohibited acEuisitions under
(rticle -20. of the Spanish #ivil #ode as erel+ voidable at the instance and option of
the vendor and not void ; 6that the #ode does not reco%ni*e such nullit+ de pleno
derecho6 ; is no lon%er true and applicable to our o'n Philippine #ivil #ode 'hich
does reco%ni*e the absolute nullit+ of contracts 6'hose cause, obBect, or purpose is
contrar+ to la', orals, %ood custos, public order or public polic!6 or 'hich are
6expressl! prohibited or declared void b! law6 and declares such contracts 6inexistent
and void from the be(innin(.6
12

The Supree #ourt of Spain and odern authors have li>e'ise veered fro ManresaCs
vie' of the Spanish codal provision itself. In its sentencia of -- ,une -.<<, the
Supree #ourt of Spain ruled that the prohibition of (rticle -20. of the Spanish #ivil
#ode is based on public polic+, that violation of the prohibition contract cannot be
validated b+ confiration or ratification, holdin% that4
... la prohibicion Eue el articulo -20. del #.#. establece respecto a los adinistradores
+ apoderados, la cual tiene confore a la doctrina de esta Sala, contendia entre otras,
en S. de 1=505-.0., un fundaento de orden moral lu(ar la violacion de esta a la
nulidad de pleno derecho del acto o ne%ocio celebrado, ... + prohibicion le%al, afectante
orden publico, no cabe con efecto al%uno la aludida retification ...
13

The criterion of nullit+ of such prohibited contracts under (rticle -20. of the Spanish
#ivil #ode !(rticle -2.- of our #ivil #ode& as a atter of public order and polic+ as
applied b+ the Supree #ourt of Spain to adinistrators and a%ents in its above cited
decision should certainl+ appl+ 'ith %reater reason to Bud%es, Budicial officers, fiscals
and la'+ers under para%raph 0 of the codal article.
#itin% the sae decisions of the Supree #ourt of Spain, Dullon $allesteros, his
6#urso de Derecho #ivil, !#ontratos 7speciales&6 !Madrid, -.</& p. -/, affirs that,
'ith respect to (rticle -20., Spanish #ivil #ode4.
)ue caracter tendra la copra Eue se realice por estas personasK Porsupuesto no
cabe duda de Eue el caso !art.& -20., 23 + 03, la nulidad esabsoluta porEue el otivo
de la prohibicion es de orden publico.
17

Pere* Don*ales in such vie', statin% that 6Dado el caracter prohibitivo delprecepto, la
conseEuencia de la infraccion es la nulidad radical + e" le%e.6
15

#astan, Euotin% ManresaCs o'n observation that.
67l fundaento do esta prohibicion es clarisio. No sa trata con este precepto tan solo
de %uitar la ocasion al fraude? persi%uese, adeasel proposito de rodear a las
71
personas que intervienen en la administrcionde justicia de todos los reti(ios que
necesitan pora ejercer su ministerio librandolos de toda suspecha, que aunque fuere in
fundada, redundura endescredito de la institucion.6
16
arrives at the contrar+ and no'
accepted vie' that 6Puede considerace en nuestro derecho inexistente Co radicalmente
nulo el contrato en los si%uentes cases4 a& ...? b& cuando el contrato se ha celebrado en
violacion de una prescripcion Co prohibicion le(al, fundada sobre motivos de orden
publico !hipotesis del art. 2 del codi%o& ...6
17

It is note'orth+ that #altanCs rationale for his conclusion that fundaental consideration
of public polic+ render void and ine"istent such e"pressl+ prohibited purchase !e.%. b+
public officers and eplo+ees of %overnent propert+ intrusted to the and b+ Bustices,
Bud%es, fiscals and la'+ers of propert+ and ri%hts in liti%ation and subitted to or
handled b+ the, under (rticle -2.-, para%raphs !2& and !0& of our #ivil #ode& has
been adopted in a ne' article of our #ivil #ode, vi*, (rticle -23. declarin% such
prohibited contracts as 6inexistent and void from the be(innin(.6
18

Indeed, the nullit+ of such prohibited contracts is definite and peranent and cannot be
cured b+ ratification. The public interest and public polic+ reain paraount and do not
perit of coproise or ratification. In his aspect, the peranent disEualification of
public and Budicial officers and la'+ers %rounded on public polic! differs fro the first
three cases of %uardians, a%ents and adinistrators !(rticle -2.-, #ivil #ode&, as to
'hose transactions it had been opined that the+ a+ be 6ratified6 b+ eans of and in
6the for of a ne' contact, in 'hich cases its validit+ shall be deterined onl+ b+ the
circustances at the tie the e"ecution of such ne' contract. The causes of nullit+
'hich have ceased to e"ist cannot ipair the validit+ of the ne' contract. Thus, the
obBect 'hich 'as ille%al at the tie of the first contract, a+ have alread+ becoe
la'ful at the tie of the ratification or second contract? or the service 'hich 'as
ipossible a+ have becoe possible? or the intention 'hich could not be ascertained
a+ have been clarified b+ the parties. The ratification or second contract 'ould then
be valid from its execution? ho'ever, it does not retroact to the date of the first
contract.6
19

(s applied to the case at bar, the lo'er court therefore properl+ acted upon defendant5
appellantCs otion to disiss on the %round of nullit+ of plaintiffCs alle%ed purchase of
the land, since its Buridical effects and plaintiffCs alle%ed cause of action founded thereon
'ere bein% asserted a%ainst defendant5appellant. The principles %overnin% the nullit+ of
such prohibited contracts and Budicial declaration of their nullit+ have been 'ell restated
b+ Tolentino in his treatise on our #ivil #ode, as follo's4
Parties (ffected. ; An! person a+ invo>e the in existence of the contract 'henever
Buridical effects founded thereon are asserted a%ainst hi. Thus, if there has been a
void transfer of propert+, the transferor can recover it b+ the accion reinvindicatoria? and
an+ prossessor a+ refuse to deliver it to the transferee, 'ho cannot enforce the
contract. #reditors a+ attach propert+ of the debtor 'hich has been alienated b+ the
latter under a void contract? a ort%a%ee can alle%e the ine"istence of a prior
encubrance? a debtor can assert the nullit+ of an assi%nent of credit as a defense to
an action b+ the assi%nee.
(ction On #ontract. ; 7ven 'hen the contract is void or ine"istent, an action is
necessar+ to declare its ine"istence, 'hen it has alread+ been fulfilled. Nobod+ can
ta>e the la' into his o'n hands? hence, the intervention of the copetent court is
necessar+ to declare the absolute nullit+ of the contract and to decree the restitution of
'hat has been %iven under it. The Bud%ent, ho'ever, 'ill retroact to the ver+ da+
'hen the contract 'as entered into.
If the void contract is still full+ e"ecutor+, no part+ need brin% an action to declare its
nullit+? but if an+ part+ should brin% an action to enforce it, the other part+ can sipl+
set up the nullit+ as a defense.

(##ORDINDI:, the order of disissal appealed fro
is hereb+ affired, 'ith costs in all instances a%ainst plaintiff5appellant. So ordered.
EN BANC
DG.R. No. L.8777. M&- 31, 1956.E
T1E P1ILIPPINE TRUST COMPAN;, &$ G+&r(*&' o" t#e Pro,ert- o" t#e 4*'or,
MARIANO L. BERNAR0O, Petitioner, 3$. SOCORRO ROL0AN, )RANCISCO
1ERMOSO, )I0EL C. RAMOS &'( EMILIO CRU, Respondents.

0 E C I S I O N
BENGON, J.:
(s %uardian of the propert+ of the inor Mariano I. $ernardo, the Philippine Trust
#opan+ filed in the Manila court of first instance a coplaint to annul t'o contracts
re%ardin% -= parcels of land4.virtualla'librar+ !a& sale thereof b+ Socorro Roldan, as
%uardian of said inor, to 8idel #. Raos? and !b& sale thereof b+ 8idel #. Raos to
Socorro Roldan personall+. The coplaint li>e'ise sou%ht to annul a conve+ance of
four out of the said seventeen parcels b+ Socorro Roldan to 7ilio #ru*.
The action rests on the proposition that the first t'o sales 'ere in realit+ a sale b+ the
%uardian to herself ; therefore, null and void under (rticle -20. of the #ivil #ode. (s
to the third conve+ance, it is also ineffective, because Socorro Roldan had acEuired no
valid title to conve+ to #ru*.
The aterial facts of the case are not coplicated. These -= parcels located in
Dui%uinto, $ulacan, 'ere part of the properties inherited b+ Mariano I. $ernardo fro
his father, Marcelo $ernardo, deceased. In vie' of his inorit+, %uardianship
72
proceedin%s 'ere instituted, 'herein Socorro Roldan 'as appointed his %uardian. She
'as the survivin% spouse of Marcelo $ernardo, and the stepother of said Mariano I.
$ernardo.
On ,ul+ 1=, -.2=, Socorro Roldan filed in said %uardianship proceedin%s !Special
Proceedin% 12/0, Manila&, a otion as>in% for authorit+ to sell as %uardian the -=
parcels for the su of P-2,=33 to Dr. 8idel #. Raos, the purpose of the sale bein%
alle%edl+ to invest the one+ in a residential house, 'hich the inor desired to have on
Tindalo Street, Manila. The otion 'as %ranted.
On (u%ust 0, -.2= Socorro Roldan, as %uardian, e"ecuted the proper deed of sale in
favor of her brother5in5la' Dr. 8idel #. Raos !7"hibit (5-&, and on (u%ust -1, -.2=
she as>ed for, and obtained, Budicial confiration of the sale. On (u%ust -@, -.2=, Dr.
8idel #. Raos e"ecuted in favor of Socorro Roldan, personall+, a deed of conve+ance
coverin% the sae seventeen parcels, for the su of P-0,333 !7"hibit (51&. (nd on
October 1-, -.2= Socorro Roldan sold four parcels out of the seventeen to 7ilio #ru*
for P@,333, reservin% to herself the ri%ht to repurchase !7"hibit (5@&.
The Philippine Trust #opan+ replaced Socorro Roldan as %uardian, on (u%ust -3,
-.2/. (nd this liti%ation, started t'o onths later, see>s to undo 'hat the previous
%uardian had done. The step5other in effect, sold to herself, the properties of her
'ard, contends the Plaintiff, and the sale should be annulled because it violates (rticle
-20. of the #ivil #ode prohibitin% the %uardian fro purchasin% Teither in person or
throu%h the ediation of anotherU the propert+ of her 'ard.
The court of first instance, follo'in% our decision in Rodri%ue* vs. Mactal, <3 Phil. -@
held the article 'as not controllin%, because there 'as no proof that 8idel #. Raos
'as a ere interediar+ or that the latter had previousl+ a%reed 'ith Socorro Roldan
to bu+ the parcels for her benefit.
Ho'ever, ta>in% the forer %uardian at her 'ord 5 she s'ore she had repurchased the
lands fro Dr. 8idel #. Raos to preserve it and to %ive her prote%e opportunit+ to
redee ; the court rendered Bud%ent upholdin% the contracts but allo'in% the inor
to repurchase all the parcels b+ pa+in% P-0,333, 'ithin one +ear.
The #ourt of (ppeals affired the Bud%ent, addin% that the inor >ne' the particulars
of, and approved the transaction, and that Tonl+ clear and positive evidence of fraud or
bad faith, and not ere insinuations and inferences 'ill overcoe the presuptions
that a sale 'as concluded in all %ood faith for valueU.
(t first %lance the resolutions of both courts accoplished substantial Bustice the inor
recovers his properties. $ut if the conve+ances are annulled as pra+ed for, the inor
'ill obtain a better deal he receives all the fruits of the lands fro the +ear -.2= !(rticle
-@3@ #ivil #ode& and 'ill return P-2,=33, not P-0,333.
To our inds the first t'o transactions herein described couldnVt be in a better Buridical
situation than if this %uardian had purchased the seventeen parcels on the da+
follo'in% the sale to Dr. Raos. No', if she 'as 'illin% to pa+ P-0,333 'h+ did she sell
the parcels for lessK In one da+ !or actuall+ one 'ee>& the price could not have risen so
suddenl+. Obviousl+ 'hen, see>in% approval of the sale she represented the price to be
the best obtainable in the ar>et, she 'as not entirel+ truthful. This is one phase to
consider.
(%ain, supposin% she >ne' the parcels 'ere actuall+ 'orth P-=,333? she a%reed to sell
the to Dr. Raos at P-2,=33 >no'in% the realt+Vs value she offered hi the ne"t da+
P-0,333 or P-0,033, and %ot it. 9ill there be an+ doubt that she 'as recreant to her
%uardianship, and that her acEuisition should be nullifiedK 7ven 'ithout proof that she
had connived 'ith Dr. Raos. Reeberin% the %eneral doctrine that %uardianship is
a trust of the hi%hest order, and the trustee cannot be allo'ed to have an+ induceent
to ne%lect his 'ardVs interest and in line 'ith the courtVs suspicion 'henever the
%uardian acEuires the 'ardVs propert+ - 'e have no hesitation to declare that in this
case, in the e+es of the la', Socorro Roldan too> b+ purchase her 'ardVs parcels thru
Dr. Raos, and that (rticle -20. of the #ivil #ode applies.
She acted it a+ be true 'ithout alice? there a+ have been no previous a%reeent
bet'een her and Dr. Raos to the effect that the latter 'ould bu+ the lands for her. $ut
the stubborn fact reains that she acEuired her prote%eVs properties, throu%h her
brother5in5la'. That she planned to %et the for herself at the tie of sellin% the to Dr.
Raos, a+ be deduced fro the ver+ short tie bet'een the t'o sales !one 'ee>&.
The teptation 'hich naturall+ besets a %uardian so circustanced, necessitates the
annulent of the transaction, even if no actual collusion is proved !so hard to prove&
bet'een such %uardian and the interediate purchaser. This 'ould uphold a sound
principle of eEuit+ and Bustice. 1
9e are a'are of course that in Rodri%ue* vs. Mactal, <3 Phil. p. -@ 'herein the
%uardian Mactal sold in ,anuar+ -.1< the propert+ of her 'ard to Silverio #hioco, and
in March -.1/ she bou%ht it fro #hioco, this #ourt said4. TIn order to brin% the sale in
this case 'ithin the part of (rticle -20., Euoted above, it is essential that the proof
subitted establish soe a%reeent bet'een Silverio #hioco and Trinidad Mactal to
the effect that #hioco should bu+ the propert+ for the benefit of Mactal. If there 'as no
such a%reeent, either e"press or iplied, then the sale cannot be set aside crala' .
!Pa%e -<? Italics supplied.&U
73
Ho'ever, the underlined portion 'as not intended to establish a %eneral principle of la'
applicable to all subseEuent liti%ations. It erel+ eant that the subseEuent purchase
b+ Mactal could not be annulled in that particular case because there 'as no proof of a
previous a%reeent bet'een #hioco and her. The court then considered such proof
necessar+ to establish that the t'o sales 'ere actuall+ part of one schee ; %uardian
%ettin% the 'ardVs propert+ throu%h another person ; because t'o +ears had elapsed
bet'een the sales. Such period of tie 'as sufficient to dispel the natural suspicion of
the %uardianVs otives or actions. In the case at bar, ho'ever, onl+ one 'ee> had
elapsed. (nd if 'e 'ere technical, 'e could sa+, onl+ one da+ had elapsed fro the
Budicial approval of the sale !(u%ust -1&, to the purchase b+ the %uardian !(u%. -@&.
(tteptin% to prove that the transaction 'as beneficial to the inor, AppelleeVs attorne+
alle%es that the one+ !P-2,=33& invested in the house on Tindalo Street produced for
hi rentals of P1,233 +earl+? 'hereas the parcels of land +ielded to his step5other
onl+ an avera%e of P-,011 per +ear. @ The ar%uent 'ould carr+ soe 'ei%ht if that
house had been built out of the purchase price of P-2,=33 onl+. 2 One thin% is certain4.
the calculation does not include the price of the lot on 'hich the house 'as erected.
7stiatin% such lot at P-2,=33 onl+, !ordinaril+ the cit+ lot is ore valuable than the
buildin%& the result is that the price paid for the seventeen parcels %ave the inor an
incoe of onl+ P-,133 a +ear, 'hereas the harvest fro the seventeen parcels netted
his step5other a +earl+ profit of P-,011.33. The inor 'as thus on the losin% end.
Hence, fro both the le%al and eEuitable standpoints these three sales should not be
sustained4. the first t'o for violation of article -20. of the #ivil #ode? and the third
because Socorro Roldan could pass no title to 7ilio #ru*. The annulent carries 'ith
is !(rticle -@3@ #ivil #ode& the obli%ation of Socorro Roldan to return the -= parcels
to%ether 'ith their fruits and the dut+ of the inor, throu%h his %uardian to repa+
P-2,=33 'ith le%al interest.
,ud%ent is therefore rendered
a. (nnullin% the three contracts of sale in Euestion? declarin% the inor as the o'ner of
the seventeen parcels of land, 'ith the obli%ation to return to Socorro Roldan the price
of P-2,=33 'ith le%al interest fro (u%ust -1, -.2=? Orderin% Socorro Roldan and
7ilio #ru* to deliver said parcels of land to the inor? d. ReEuirin% Socorro Roldan to
pa+ hi be%innin% 'ith -.2= the fruits, 'hich her attorne+ adits, aounted to P-,011
a +ear? e. (uthori*in% the inor to deliver directl+ to 7ilio #ru*, out of the price of
P-2,=33 above entioned, the su of P@,333? and f. char%in% Appellees 'ith the
costs. SO OR0ERE0.
Republic of the Philippines
SUPREME COURT
Manila
8IRST DIVISION
G.R. No. L.36902 9&'+&r- 30, 1982
LUIS PIC1EL, petitioner,
vs.
PRU0ENCIO ALONO, respondent.

GUERRERO, J.>
This is a petition to revie' on certiorari the decision of the #ourt of 8irst Instance of
$asilan #it+ dated ,anuar+ 0, -.=@ in #ivil #ase No. /13 entitled 6Prudencio (lon*o,
plaintiff, vs. Iuis Pichel, defendant.6
This case ori%inated in the lo'er #ourt as an action for the annulent of a 6Deed of
Sale6 dated (u%ust -2, -.</ and e"ecuted b+ Prudencio (lon*o, as vendor, in favor of
Iuis Pichel, as vendee, involvin% propert+ a'arded to the forer b+ the Philippine
Dovernent under Republic (ct No. 2==. Pertinent portions of the docuent sued
upon read as follo's4
That the V7NDOR for and in consideration of the su of 8OAR THOAS(ND T9O
HANDR7D P7SOS !P2,133.33&, Philippine #urrenc+, in hand paid b+ the V7ND77 to
the entire satisfaction of the V7NDOR, the V7NDOR hereb+ sells transfers, and
74
conve+s, b+ 'a+ of absolute sale, all the coconut fruits of his coconut land, desi%nated
as Iot No. 1- 5 Subdivision Plan No. Psd5 @12<0, situated at $alactasan Plantation,
Iaitan, $asilan #it+, Philippines?
That for the herein sale of the coconut fruits are for all the fruits on the aforeentioned
parcel of land presentl+ found therein as 'ell as for future fruits to be produced on the
said parcel of land durin% the +ears period? 'hich sha% coence to run as of
S7PT7M$7R -0,-.</? up to ,(NA(R: -, -.=< !sic&?
That the deliver+ of the subBect atter of the Deed of Sale shall be fro tie to tie
and at the e"pense of the V7ND77 'ho shall do the harvestin% and %atherin% of the
fruits?
That the VendorCs ri%ht, title, interest and participation herein conve+ed is of his o'n
e"clusive and absolute propert+, free fro an+ liens and encubrances and he
'arrants to the Vendee %ood title thereto and to defend the sae a%ainst an+ and all
clais of all persons 'hosoever.
1
(fter the pre5trial conference, the #ourt a Euo issued an Order dated Noveber .,
-.=1 'hich in part read thus4
The follo'in% facts are aditted b+ the parties4
Plaintiff Prudencio (lon*o 'as a'arded b+ the Dovernent that parcel of land
desi%nated as Iot No. 1- of Subdivision Plan Psd @12<0 of $alactasan, Iaitan,
$asilan #it+ in accordance 'ith Republic (ct No. 2==. The a'ard 'as cancelled b+ the
$oard of IiEuidators on ,anuar+ 1=, -.<0 on the %round that, previous thereto, plaintiff
'as proved to have alienated the land to another, in violation of la'. In -.= 1, plaintiffCs
ri%hts to the land 'ere reinstated.
On (u%ust -2, -.</, plaintiff and his 'ife sold to defendant an the fruits of the coconut
trees 'hich a+ be harvested in the land in Euestion for the period, Septeber -0,
-.</ to ,anuar+ -, -.=<, in consideration of P2,133.33. 7ven as of the date of sale,
ho'ever, the land 'as still under lease to one, Raon Sua, and it 'as the a%reeent
that part of the consideration of the sale, in the su of P@,<03.33, 'as to be paid b+
defendant directl+ to Raon Sua so as to release the land fro the clutches of the
latter. Pendin% said pa+ent plaintiff refused to sno' the defendant to a>e an+
harvest.
In ,ul+ -.=1, defendant for the first tie since the e"ecution of the deed of sale in his
favor, caused the harvest of the fruit of the coconut trees in the land.
""" """ """
#onsiderin% the fore%oin%, t'o issues appear posed b+ the coplaint and the ans'er
'hich ust needs be tested in the crucible of a trial on the erits, and the+ are4
8irst.; 9hether or nor defendant actuall+ paid to plaintiff the full su of P2,133.33
upon e"ecution of the deed of sale.
Second.; Is the deed of sale, 7"hibit C(C, the prohibited encubrance conteplated in
Section / of Republic (ct No. 2==K
2

(nent the first issue, counsel for plaintiff (lon*o subseEuentl+ Cstipulated and a%reed
that his client ... adits fun pa+ent thereof b+ defendant.
3
The reainin% issue bein%
one of la', the #ourt belo' considered the case subitted for suar+ Bud%ent on
the basis of the pleadin%s of the parties, and the adission of facts and docuentar+
evidence presented at the pre5trial conference.
The lo'er court rendered its decision no' under revie', holdin% that althou%h the
a%reeent in Euestion is denoinated b+ the parties as a deed of sale of fruits of the
coconut trees found in the vendorCs land, it actuall+ is, for all le%al intents and purposes,
a contract of lease of the land itself. (ccordin% to the #ourt4
... the sale aforestated has %iven defendant coplete control and enBo+ent of the
iproveents of the land. That the contract is consensual? that its purpose is to allo'
the enBo+ent or use of a thin%? that it is onerous because rent or price certain is
stipulated? and that the enBo+ent or use of the thin% certain is stipulated to be for a
certain and definite period of tie, are characteristics 'hich adit of no other
conclusion. ... The provisions of the contract itself and its characteristics %overn its
nature.
7

The #ourt, therefore, concluded that the deed of sale in Euestion is an encubrance
prohibited b+ Republic (ct No. 2== 'hich provides thus4
Sec. /. 7"cept in favor of the Dovernent or an+ of its branches, units, or institutions,
land acEuired under the provisions of this (ct or an+ peranent iproveents thereon
shall not be thereon and for a ter of ten +ears fro and after the date of issuance of
the certificate of title, nor shall the+ becoe liable to the satisfaction of an+ debt
contracted prior to the e"piration of such period.
(n+ occupant or applicant of lands under this (ct 'ho transfers 'hatever ri%hts he has
acEuired on said lands andFor on the iproveents thereon before the date of the
a'ard or si%nature of the contract of sale, shall not be entitled to appl+ for another
75
piece of a%ricultural land or urban, hoesite or residential lot, as the case a+ be, fro
the National (baca and Other 8ibers #orporation? and such transfer shall be
considered null and void.
5
The dispositive portion of the lo'er #ourtCs decision states4
9H7R78OR7, it is the Bud%ent of this #ourt that the deed of sale, 7"hibit C(C, should
be, as it is, hereb+ declared nun and void? that plaintiff be, as he is, ordered to pa+ bac>
to defendant the consideration of the sale in the su of P2,133.33 the sae to bear
le%al interest fro the date of the filin% of the coplaint until paid? that defendant shall
pa+ to the plaintiff the su of P033.33 as attorne+Cs fees.
#osts a%ainst the defendant.
6
$efore %oin% into the issues raised b+ the instant Petition, the atter of 'hether, under
the aditted facts of this case, the respondent had the ri%ht or authorit+ to e"ecute the
6Deed of Sale6 in -.</, his a'ard over Iot No. 1- havin% been cancelled previousl+ b+
the $oard of IiEuidators on ,anuar+ 1=, -.<0, ust be clarified. The case in point is
Ras vs. 3ua
7
'herein it 'as cate%oricall+ stated b+ this #ourt that a cancellation of an
a'ard %ranted pursuant to the provisions of Republic (ct No. 2== does not
autoaticall+ divest the a'ardee of his ri%hts to the land. Such cancellation does not
result in the iediate reversion of the propert+ subBect of the a'ard, to the State.
Spea>in% throu%h Mr. ,ustice ,.$.I. Re+es, this #ourt ruled that 6until and unless an
appropriate proceedin% for reversion is instituted b+ the State, and its reacEuisition of
the o'nership and possession of the land decreed b+ a copetent court, the %rantee
cannot be said to have been divested of 'hatever ri%ht that he a+ have over the
sae propert+.6
8

There is nothin% in the record to sho' that at an+ tie after the supposed cancellation
of herein respondentCs a'ard on ,anuar+ 1=, -.<0, reversion proceedin%s a%ainst Iot
No. 1- 'ere instituted b+ the State. Instead, the aditted fact is that the a'ard 'as
reinstated in -.=1. (ppl+in% the doctrine announced in the above5cited Ras case,
therefore, herein respondent is not deeed to have lost an+ of his ri%hts as %rantee of
Iot No. 1- under Republic (ct No. 2== durin% the period aterial to the case at bar,
i.e., fro the cancellation of the a'ard in -.<0 to its reinstateent in -.=1. 9ithin said
period, respondent could e"ercise all the ri%hts pertainin% to a %rantee 'ith respect to
Iot No. 1-.
This brin%s As to the issues raised b+ the instant Petition. In his $rief, petitioner
contends that the lo'er #ourt erred4
-. In resortin% to construction and interpretation of the deed of sale in Euestion 'here
the ters thereof are clear and unabi%uous and leave no doubt as to the intention of
the parties?
1. In declarin% ; %rantin% 'ithout adittin% that an interpretation is necessar+ ; the
deed of sale in Euestion to be a contract of lease over the land itself 'here the
respondent hiself 'aived and abandoned his clai that said deed did not e"press the
true a%reeent of the parties, and on the contrar+, respondent aditted at the pre5trial
that his a%reeent 'ith petitioner 'as one of sale of the fruits of the coconut trees on
the land?
@. In decidin% a Euestion 'hich 'as not in issue 'hen it declared the deed of sale in
Euestion to be a contract of lease over Iot 1-?
2. In declarin% furtherore the deed of sale in Euestion to be a contract of lease over
the land itself on the basis of facts 'hich 'ere not proved in evidence?
0. In not holdin% that the deed of sale, 7"hibit 6(6 and 616, e"presses a valid contract of
sale?
<. In not decidin% sEuarel+ and to the point the issue as to 'hether or not the deed of
sale in Euestion is an encubrance on the land and its iproveents prohibited b+
Section / of Republic (ct 2==? and
=. In a'ardin% respondent attorne+Cs fees even %rantin%, 'ithout adittin%, that the
deed of sale in Euestion is violative of Section / of Republic (ct 2==.
The first five assi%ned errors are interrelated, hence, 9e shall consider the to%ether.
To be%in 'ith, 9e a%ree 'ith petitioner that construction or interpretation of the
docuent in Euestion is not called for. ( perusal of the deed fails to disclose an+
abi%uit+ or obscurit+ in its provisions, nor is there doubt as to the real intention of the
contractin% parties. The ters of the a%reeent are clear and uneEuivocal, hence the
literal and plain eanin% thereof should be observed. Such is the andate of the #ivil
#ode of the Philippines 'hich provides that4
(rt. -@=3. If the ters of a contract are clear and leave no doubt upon the intention of
the contractin% parties, the literal eanin% of its stipulation shall control ... .
Pursuant to the afore5Euoted le%al provision, the first and fundaental dut+ of the
courts is the application of the contract accordin% to its e"press ters, interpretation
bein% resorted to onl+ 'hen such literal application is ipossible.
9
76
Sipl+ and directl+ stated, the 6Deed of Sale dated (u%ust -2, -.</ is precisel+ 'hat it
purports to be. It is a docuent evidencin% the a%reeent of herein parties for the sale
of coconut fruits of Iot No. 1-, and not for the lease of the land itself as found b+ the
lo'er #ourt. In clear and e"press ters, the docuent defines the obBect of the
contract thus4 6the herein sale of the coconut fruits are for an the fruits on the
aforeentioned parcel of land durin% the +ears ...!fro& S7PT7M$7R -0, -.</? up to
,(NA(R: -, -.=<.6 Moreover, as petitioner correctl+ asserts, the docuent in Euestion
e"presses a valid contract of sale. It has the essential eleents of a contract of sale as
defined under (rticle -2/0 of the Ne' #ivil #ode 'hich provides thus4
(rt. -20/. $+ the contract of sale one of the contractin% parties obli%ates hiself to
transfer the o'nership of and to deliver a deterinate thin%, and the other to pa+
therefor a price certain in one+ or its eEuivalent.
( contract of sale a+ be absolute or conditional.
The subBect atter of the contract of sale in Euestion are the fruits of the coconut trees
on the land durin% the +ears fro Septeber -0, -.</ up to ,anuar+ -, -.=<, 'hich
subBect atter is a deterinate thin%. Ander (rticle -2<- of the Ne' #ivil #ode, thin%s
havin% a potential e"istence a+ be the obBect of the contract of sale. (nd in 3ibal vs.
+aldez, 03 Phil. 0-1, pendin% crops 'hich have potential e"istence a+ be the subBect
atter of the sale. Here, the Supree #ourt, citin% Meche on Sales and (erican
cases said 'hich have potential e"istence a+ be the subBect atter of sale. Here, the
Supree #ourt, citin% Meche on Sales and (erican cases said4
Mr. Meche sa+s that a valid sale a+ be ade of a thin%, 'hich thou%h not +et
actuall+ in e"istence, is reasonabl+ certain to coe into e"istence as the natural
increent or usual incident of soethin% alread+ in e"istence, and then belon%in% to
the vendor, and the title 'ill vest in the bu+er the oent the thin% coes into
e"istence. !7erson vs. 7uropean Rail'a+ #o., <= Me., @/=? #uttin% vs. Pac>ers
7"chan%e, 1- (. St. Rep. <@& Thin%s of this nature are said to have a potential
e"istence. ( an a+ sell propert+ of 'hich he is potentiall+ and not actuall+ possess.
He a+ a>e a valid sale of the 'ine that a vine+ard is e"pected to produce? or the
%rain a field a+ %ro' in a %iven tie? or the il> a co' a+ +ield durin% the coin%
+ear? or the 'ool that shall thereafter %ro' upon sheep? or 'hat a+ be ta>en at the
ne"t case of a fisheranCs net? or fruits to %ro'? or +oun% anials not +et in e"istence?
or the %ood'ill of a trade and the li>e. The thin% sold, ho'ever, ust be specific and
Identified. The+ ust be also o'ned at the tie b+ the vendor. !Hull vs. Hull 2/ #onn.
103 !23 (. Rep., -<0& !pp. 011501@&.
9e do not a%ree 'ith the trial court that the contract e"ecuted b+ and bet'een the
parties is 6actuall+ a contract of lease of the land and the coconut trees there.6 !#8I
Decision, p. <1, Records&. The #ourtCs holdin% that the contract in Euestion fits the
definition of a lease of thin%s 'herein one of the parties binds hiself to %ive to another
the enBo+ent or use of a thin% for a price certain and for a period 'hich a+ be
definite or indefinite !(rt. -<2@, #ivil #ode of the Philippines& is erroneous. The
essential difference bet'een a contract of sale and a lease of thin%s is that the deliver+
of the thin% sold transfers o'nership, 'hile in lease no such transfer of o'nership
results as the ri%hts of the lessee are liited to the use and enBo+ent of the thin%
leased.
In Rodri(uez vs. 8orromeo, 2@ Phil. 2=., 2.3, the Supree #ourt held4
Since accordin% to article -02@ of the sae #ode the contract of lease is defined as the
%ivin% or the concession of the enBo+ent or use of a thin% for a specified tie and
fi"ed price, and since such contract is a for of enBo+ent of the propert+, it is evident
that it ust be re%arded as one of the eans of enBo+ent referred to in said article
@./, inasuch as the ters enBo+ent, use, and benefit involve the sae and
analo%ous eanin% relative to the %eneral utilit+ of 'hich a %iven thin% is capable. !-32
,urisprudencia #ivil, 22@&
In concludin% that the possession and enBo+ent of the coconut trees can therefore be
said to be the possession and enBo+ent of the land itself because the defendant5
lessee in order to enBo+ his ri%ht under the contract, he actuall+ ta>es possession of the
land, at least durin% harvest tie, %ather all of the fruits of the coconut trees in the land,
and %ain e"clusive use thereof 'ithout the interference or intervention of the plaintiff5
lessor such that said plaintiff5lessor is e"cluded in fact fro the land durin% the period
aforesaid, the trial court erred. The contract 'as clearl+ a 6sale of the coconut fruits.6
The vendor sold, transferred and conve+ed 6b+ 'a+ of absolute sale, all the coconut
fruits of his land,6 thereb+ divestin% hiself of all o'nership or doinion over the fruits
durin% the seven5+ear period. The possession and enBo+ent of the coconut trees
cannot be said to be the possession and enBo+ent of the land itself because these
ri%hts are distinct and separate fro each other, the first pertainin% to the accessor+ or
iproveents !coconut trees& 'hile the second, to the principal !the land&. ( transfer of
the accessor+ or iproveent is not a transfer of the principal. It is the other 'a+
around, the accessor+ follo's the principal. Hence, the sale of the nuts cannot be
interpreted nor construed to be a lease of the trees, uch less e"tended further to
include the lease of the land itself.
The real and pivotal issue of this case 'hich is ta>en up in petitionerCs si"th assi%nent
of error and as alread+ stated above, refers to the validit+ of the 6Deed of Sale6, as
such contract of sale, vis5a5vis the provisions of Sec. /, R.(. No. 2==. The lo'er #ourt
did not rule on this Euestion, havin% reached the conclusion that the contract at bar 'as
one of lease. It 'as fro the conte"t of a lease contract that the #ourt belo'
deterined the applicabilit+ of Sec. /, R.(. No. 2==, to the instant case.
77
Resolvin% no' this principal issue, 9e find after a close and careful e"aination of the
ters of the first para%raph of Section / hereinabove Euoted, that the %rantee of a
parcel of land under R.(. No. 2== is not prohibited fro alienatin% or disposin% of the
natural andFor industrial fruits of the land a'arded to hi. 9hat the la' e"pressl+
disallo's is the encubrance or alienation of the land itself or an+ of the peranent
iproveents thereon. Peranent iproveents on a parcel of land are thin%s
incorporated or attached to the propert+ in a fi"ed anner, naturall+ or artificiall+. The+
include 'hatever is built, planted or so'n on the land 'hich is characteri*ed b+ fi"it+,
iutabilit+ or iovabilit+. Houses, buildin%s, achiner+, anial houses, trees and
plants 'ould fall under the cate%or+ of peranent iproveents, the alienation or
encubrance of 'hich is prohibited b+ R.(. No. 2==. 9hile coconut trees are
peranent iproveents of a land, their nuts are natural or industrial fruits 'hich are
eant to be %athered or severed fro the trees, to be used, enBo+ed, sold or other'ise
disposed of b+ the o'ner of the land. Herein respondents, as the %rantee of Iot No. 1-
fro the Dovernent, had the ri%ht and prero%ative to sell the coconut fruits of the
trees %ro'in% on the propert+.
$+ virtue of R.(. No. 2==, bona fide occupants, veterans, ebers of %uerilla
or%ani*ations and other Eualified persons 'ere %iven the opportunit+ to acEuire
%overnent lands b+ purchase, ta>in% into account their liited eans. It 'as intended
for these persons to a>e %ood and productive use of the lands a'arded to the, not
onl+ to enable the to iprove their standard of livin%, but li>e'ise to help provide for
the annual pa+ents to the Dovernent of the purchase price of the lots a'arded to
the. Section / 'as included, as stated b+ the #ourt a Euo, to protect the %rantees
fro theselves and the incursions of opportunists 'ho pre+ on their iser+ and
povert+.6 It is there to insure that the %rantees theselves benefit fro their respective
lots, to the e"clusion of other persons.
The purpose of the la' is not violated 'hen a %rantee sells the produce or fruits of his
land. On the contrar+, the ai of the la' is thereb+ achieved, for the %rantee is
encoura%ed and induced to be ore industrious and productive, thus a>in% it possible
for hi and his fail+ to be econoicall+ self5sufficient and to lead a respectable life. (t
the sae tie, the Dovernent is assured of pa+ent on the annual installents on
the land. 9e a%ree 'ith herein petitioner that it could not have been the intention of the
le%islature to prohibit the %rantee fro sellin% the natural and industrial fruits of his
land, for other'ise, it 'ould lead to an absurd situation 'herein the %rantee 'ould not
be able to receive and enBo+ the fruits of the propert+ in the real and coplete sense.
Respondent throu%h counsel, in his (ns'er to the Petition contends that even %rantin%
ar(uendo that he e"ecuted a deed of sale of the coconut fruits, he has the 6privile%e to
chan%e his ind and clai it as !an& iplied lease,6 and he has the 6le%itiate ri%ht6 to
file an action for annulent 6'hich no la' can stop.6 He clais it is his 6sole
construction of the eanin% of the transaction that should prevail and not petitioner.
!sic&.
10
RespondentCs counsel either isapplies the la' or is tr+in% too hard and %oin%
too far to defend his clientCs hopeless cause. Suffice it to sa+ that respondent5%rantee,
after havin% received the consideration for the sale of his coconut fruits, cannot be
allo'ed to ipu%n the validit+ of the contracts he entered into, to the preBudice of
petitioner 'ho contracted in %ood faith and for a consideration.
The issue raised b+ the seventh assi%nent of error as to the propriet+ of the a'ard of
attorne+Cs fees ade b+ the lo'er #ourt need not be passed upon, such a'ard havin%
been apparentl+ based on the erroneous findin% and conclusion that the contract at bar
is one of lease. 9e shall liit Ourselves to the Euestion of 'hether or not in
accordance 'ith Our rulin% in this case, respondent is entitled to an a'ard of attorne+Cs
fees. The #ivil #ode provides that4
(rt. 113/. In the absence of stipulation, attorne+Cs fees and e"penses of liti%ation, other
than Budicial costs, cannot be recovered, e"cept4
!-& 9hen e"eplar+ daa%es are a'arded?
!1& 9hen the defendantCs act or oission has copelled the plaintiff to liti%ate 'ith third
persons or to incur e"penses to protect his interest?
!@& In criinal cases of alicious prosecution a%ainst the plaintiff?
!2& In case of a clearl+ unfounded civil action or proceedin% a%ainst the plaintiff?
!0& 9here the defendant acted in %ross and evident bad faith in refusin% to satisf+ the
plaintiffCs plainl+ valid, Bust and deandable clai?
!<& In actions for le%al support?
!=& In actions for the recover+ of 'a%es of household helpers, laborers and s>illed
'or>ers?
!/& In actions for indenit+ under 'or>enCs copensation and eplo+erCs liabilit+
la's?
!.& In a separate civil action to recover civil liabilit+ arisin% fro a crie?
!-3& 9hen at least double Budicial costs are a'arded?
78
!--& In an+ other case 'here the court dees it Bust and eEuitable that attorne+Cs fees
and e"penses of liti%ation should be recovered.
In all cases, the attorne+Cs fees and e"penses of liti%ation ust be reasonable.
9e find that none of the le%al %rounds enuerated above e"ists to Bustif+ or 'arrant the
%rant of attorne+Cs fees to herein respondent.
IN VI79 O8 TH7 8OR7DOIND, the Bud%ent of the lo'er #ourt is hereb+ set aside
and another one is entered disissin% the #oplaint. 9ithout costs.
SO ORD7R7D.
79