Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 170202

July 14, 2008

OPTIMUM MOTOR CENTER CORPORATION, Petitioner,

vs.
ANNIE TAN, doing business under the name & style "AJ & T Trading,"
Respondent.
DECISION
TINGA, J.:
This Petition for Review1 seeks to reverse the Decision2 and Resolution3 of the Court of
Appeals in CA-G.R. CV No. 63985. The decision affirmed with modification the
judgment4 of the Regional Trial Court (RTC) of Manila, Branch 19 in Civil Case No. 9471847.
The case originated from a Complaint5 for recovery of possession filed by Annie Tan
(respondent) against Optimum Motor Center Corporation (Optimum) and Cesar Pea
(Pea) with the RTC of Manila. Respondent is doing business under the name and style,
"AJ & T Trading" which is engaged in transportation of cargoes.6 AJ & T Trading is the
registered owner7 of an Isuzu cargo truck with Plate No. NWM 418, the subject of this
complaint. Optimum is a domestic corporation which owned and operated an auto
repair shop located at 120 Del Monte Avenue, Quezon City.8
Respondents version of the facts is as follows.
On 14 January 1994, she brought the subject truck to Optimum for body repair and
painting. Pea introduced himself as the owner and manager of Optimum. Respondent
verbally contracted with Pea for the repair of the damaged portions of the truck,
repainting and upholstery replacement. It was then agreed that the work would take
thirty (30) days to complete and would thus be finished on 15 February 1994.9
Leopoldo Daza, a security guard assigned to Optimum, received the truck and prepared
a checklist10 of the items found therein. On 20 January 1994, an estimate11 detailing the
description and price rates for the repair was sent to respondent. To bring down the
repair costs, the parties agreed that respondent would supply the necessari materials
such as windshield glasses for the front and back of the truck, rubber strip and
quartered glass panel.12
On 15 February 1994, respondent went to Optimum but was told to come back in
March as the repair was not yet finished.13 On several occasions, respondent tried to
claim her truck from Optimum14 to no avail. On 4 March 1994, she again went to
Optimums repair shop and was surprised to see that the trade name "AJ & T Trading"
painted in the middle and side doors of the truck had been scraped off. She also
noticed that the 100-meter skyline rope, oil stick gauge and right side mirror were
missing.15 On 22 April 1994, she found her truck abandoned and unrepaired at
Optimums compound. On 16 May 1994, she discovered that Optimum had already
vacated its shop in Del Monte and that her truck was nowhere to be found.16 Later, she
learned that Optimum had transferred to a new location but her still unrepaired truck
was found in Valenzuela City.

This prompted respondent to file the instant complaint with the trial court on 5 October
1994.17 She prayed for the recovery of possession of the truck or, in the alternative, the
payment of the value thereof. She also sought the award of attorneys fees, moral
damages and costs of suit.18 At the trial of the case, two witnesses, Maximo Merigildo19
and Bel Eduardo Nitafan,20 testified on the dilapidated condition of the truck when they
saw it on separate occasions.
On 20 October 1994, the trial court issued an order directing the seizure of the vehicle
upon respondents filing of a bond in the amount of P1,200,000.00.21 Respondent
posted the required bond.22 Optimum posted a counterbond to lift said order.23
Optimum controverted the allegations of respondent. In its own account of the facts, it
denied guaranteeing that the repair work would be completed within 30 days from 15
January 1994. It claimed that the repairs were completed only on 8 May 1994 due to
delay in
respondents delivery of the parts.24 It presented as its witnesses the employees who
had undertaken the tinsmithing25 painting26 and electrical works27 on the truck.
Optimum also explained that by virtue of a writ of execution28 issued against it by the
Metropolitan Trial Court of Quezon City, it was forced to vacate its repair shop and to
transfer all its equipment, tools and all the vehicles in its possession and custody,
including respondents truck, to the IIC Compound in Sitio Malinis, Bagbaguin,
Valenzuela City. It claimed that it tried to get in touch with respondent to ask her to
claim the truck but she was not available.
Optimum claimed its right to retain possession of the truck, by virtue of Article 1731 of
the Civil Code, until the cost of repairs is paid. By way of counterclaim, it asked for the
payment of P79,370.00 as the unpaid cost of repairs and P25,000.00 as attorneys
fees.29
On 31 May 1999, the trial court rendered a decision in favor of respondent, thus:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendants
Optimum Motor Center Corporation and/or any person acting for and in its behalf, to
surrender in good running condition the Isuzu Cargo Truck, subject matter of this
complaint and if this is not feasible, to jointly and severally pay the sum of P600,000.00
with legal interest from the date (October 5, 1994) the complaint was filed, until fully
satisfied, moral damages of P50,000.00 and litigation expenses of P30,000.00 plus 25%
of the amount awarded from defendants as and for attorneys fees. The counterclaim of
defendants is hereby DISMISSED for lack of merit.
SO ORDERED.30
Of the two opposing contentions, the trial court accepted the version of respondent that
the repairs on her truck had not been accomplished. It observed:
x x x Plaintiff claimed that even after the thirty (30) day period for the completion of
the repair on the truck, the same remained unrepaired. This was supported by the
testimonies of the Courts personnel, namely: Maximo Merigildo of the RTC, Branch 31,
Quezon City, who served on April 25, 1994 the Writ of Execution in the Ejectment case
against defendants and implemented the same on May 14, 1994. He observed that the
three (3) tires were not installed and there were no left side mirror and door. Eduardo
Bel Nitafan, Process Server, declared in open court that the Isuzu Cargo Truck was now
parked at the I.I.C. Compound in Valenzuela, Metro Manila. The truck was surrounded

with piles of lumber, about eight (8) feet in height. Missing were the two (2) batteries,
one spare tire, front side glass, skyline rope and the light on top of the cowl. The
electrical wirings were not in order. The interior portion appeared to be newly-painted
but the outer portion looked rusty. He could not categorically tell if the truck was in
good running condition, because the batteries and ignition key were missing. The
testimonies of these witnesses were not rebutted by the defendants. They are
independent witnesses whose testimonies deserve full faith and credit being neutral
parties to the case. Even defendant Cesar Pea admitted that the repair was not
completed after thirty (30) days from receipt of the Cargo Truck.31
Furthermore, the trial court held Optimum liable for damages for its failure to execute
its part of the contract on time, pursuant to Article 1170 of the Civil Code.32
Optimum filed a Notice of Appeal,33 whereas respondent moved for reconsideration on
the ground that the trial court failed to award actual damages and that Oriental
Assurance Corporation, the bonding company of Optimum, should have been adjudged
liable for damages payable by the latter.34 On 5 August 1999, the trial court issued an
order denying the motion for reconsideration on the ground that it has already lost
jurisdiction over the case.35 Thus, respondent filed her Notice of Appeal36 on 25 August
1999.
On 28 June 2005, the Court of Appeals promulgated its Decision affirming with
modification the ruling of the RTC, to wit:
WHEREFORE, the appealed Decision is hereby AFFIRMED with the following
MODIFICATIONS:
1. Appellant Optimum is ordered to return the cargo truck or to reimburse its
value in the amount of P600,000.00 plus legal interest from the time of the
commencement of the action until fully satisfied;
2. Temperate or moderate damages in the amount of Thirty Thousand Pesos
(P30,000.00) is awarded;
3. Twenty percent (20%) of the total award is hereby given to appellee/appellant
Tan for both attorneys fees and litigation expenses; and
4. The award of moral damages is deleted.
SO ORDERED.37
The Court of Appeals adhered to the trial courts findings that the repairs on the truck
had not been completed and that Optimum is liable for damages. It likewise ordered
the return of the truck to respondent. It noted:
The trial court, in giving credence to the claim of appellee/appellant Tan that the repair
of the cargo truck was not in accordance with her agreement with appellant Optimum,
found the testimonies of a court personnel and a process server to be deserving of full
faith and credit, being neutral parties. These witnesses categorically declared in favor of
appellee/appellant Tan that the cargo truck was not yet repaired as of April 25, 1994
and May 14, 1994, respectively. Thus, even if We admit appellant Optimums defense
that the repair was delayed by the late delivery on May 7, 1994 of the quarter glass
panel and the rubber strips, the fact remains that even after the said delivery on May 7,
1994, no such repair was yet done. The trial court found the defense of late delivery to
be even toppled by a rebuttal witness for appellee/appellant Tan who testified that the

said glass need not even be repaired or that it was not necessary for the complete
repair of the cargo truck since they were not damaged at the time he had inspected the
cargo truck prior to its delivery for repair to appellant Optimum.
Necessarily then, appellant Optimum was already liable to appellee/appellant Tan for
damages from the time the latter demanded delivery of the cargo truck and the latter
could not as yet deliver the same despite the lapse of the agreed period. The trial court
rightly concluded that appellant Optimum was already remiss in the performance of its
part of the contract for repair from the time of such demand. Hence, its liability accrues
by virtue of Article 1170 of the Civil Code that states: Those who in the performance of
their obligation are guilty of fraud, negligence or delay and those who in any manner
contravene the tenor thereof are liable for damages. Thus, appellant Optimum may be
compelled to deliver the cargo truck to appellee/appellant Tan despite that the agreed
repair was not totally made or to reimburse the value thereof in the claimed amount of
Six Hundred Thousand Pesos (P600,000.00), plus the legal interest of six percent (6%)
thereof from the filing of the complaint for recovery.38
Both parties moved for reconsideration. For her part, respondent reiterated that her
claim for compensatory damages is supported by statement of accounts showing the
earnings of the truck before it was brought to Optimum for repair. She likewise
expressed disinterest in the return of the truck as it was no longer in good condition.
Instead, she sought merely the reimbursement of its value at P600,000.00 with
interest. Both motions were denied in a Resolution dated 17 October 2005. The
appellate court however made the following clarifications:
Nonetheless, this Court wishes to clarify that the order for the return of the cargo truck
must be qualified by the phrase "if feasible" AND that the payment of legal interest
applies in both circumstances, i.e., whether there would be the return of such truck OR
there would be mere reimbursement of its value pegged at Six Hundred Thousand
Pesos (P600,000.00), with the same amount being the basis of the computation of legal
interest.39
Unfazed by the unfavorable judgment, Optimum now comes to this Court via a petition
for review.
In refusing to abide by the appellate courts ruling, Optimum reiterates its claim for
mechanics lien to justify its retention of the truck. It advances the view that by virtue
of the repairs it has actually performed on respondents truck, it has the right under
Article 1731 of the Civil Code40 to enforce the mechanics lien. It maintains that the lien
applies and can be availed of whether or not the repair work was completely executed.
Accordingly, it prays for the payment of the cost of repairs amounting to P69,145.00 in
exchange for the return of the subject truck, as well as for the award of temperate
damages in the sum of P30,000.00 and attorneys fees.41
Respondent counters that Optimum cannot avail of the mechanics lien because it was
found by the lower courts that the repairs on the truck had not been accomplished.
Respondent prevails.
The concept of a mechanics lien is articulated in Article 1731 of the Civil Code, which
provides:
ARTICLE 1731. He who has executed work upon a movable has a right to retain it by
way of pledge until he is paid.

The mechanics lien is akin to a contractors or warehousemans lien in that by way of

pledge, the repairman has the right to retain possession of the movable until he is paid.
However, the right of retention is conditioned upon the execution of work upon the
movable. The creation of a mechanic's lien does not depend upon the owner's
nonpayment. Rather, the contractor "creates" his or her own lien by performing the
work or furnishing the materials.42
In Bachrach Motor Co. v. Mendoza,43 the Court had the occasion to rule that a person
who has made repairs upon an automobile at the request of the owner is entitled to
retain it until he has been paid the price of the work executed.44
Optimums invocation of the mechanics lien is apparently based on the repairs it
executed on the truck.1awphil However, the lower courts had already come up with a
categorical finding based on testimonies of independent witnesses that the repairs had
not been accomplished in accordance with the agreement of the parties. We have to
sustain these factual findings, for basic is the tenet that the trial court's findings of facts
as affirmed by the Court of Appeals are binding on this Court, unless the lower courts
overlooked, misconstrued or misinterpreted facts and circumstances of substance
which, if considered, would change the outcome of the case.45
As a result of the failure to accomplish the repairs on the truck, the right to retain the
truck in accordance with Article 1731 did not arise. Optimums continuous possession or
detention of the truck turned to be that of a deforciant and so respondent has every
right to recover possession of it.
From another perspective, Optimum is obliged to take care of the truck with the proper
diligence of a good father to a family while the same is in its possession.46 Records
show that the subject truck had already deteriorated while in the possession of
Optimum. Taking into consideration the last known condition of the truck in tandem
with the fact that the court proceedings have spanned almost a decade, it can be
readily inferred that the truck has become wholly useless. Since restitution is no longer
feasible, Optimum is bound to pay the value of the truck.
The value of the truck should be based on the fair market value that the property would
command at the time it was entrusted to Optimum. Such recoverable value is fair and
reasonable considering that the value of a motor vehicle depreciates. This value may be
recovered without prejudice to such other damages a claimant is entitled to under
applicable laws.47
In this case, however, respondent did not appeal the appellate courts denial of
compensatory damages. Hence, the issue has obtained finality and this Court need not
pass upon the same.
Nevertheless, temperate damages have been properly imposed by the appellate court.
Under Article 2224 of the Civil Code, temperate damages may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated 28
June 2005 is AFFIRMED.
SO ORDERED.
DANTE O. TINGA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 107737 October 1, 1999

JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN, JR.,
petitioners,
vs.
COURT OF APPEALS, LUIS CRISOSTOMO and VICENTE ASUNCION,
respondents.
GONZAGA-REYES, J.:
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals
affirming the decision of the Regional Trial Court of Bulacan, Branch 9 2 that disposed
of Civil Case No. 5610-M (Luis Crisostomo v. Luis Keh, Juan Perez, Charlie Kee and Atty.
Rosendo G. Tansinsin, Jr.) as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
a) directing defendant JUAN PEREZ to allow plaintiff LUIS
CRISOSTOMO to occupy and operate the "Papaya Fishpond"
for a period of 5 1/2 years at the rental rates of P150,000.00
for the first six months and P175,000.00 for the remaining
five years (the same rates provided for in Exh. 4);
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN
PEREZ and Atty. ROSENDO TANSINSIN, JR. to pay unto the
plaintiff the amounts of P150,000.00 as actual damages;
P20,000.00 as moral damages; P20,000.00 as exemplary
damages; and P10,000.00 as attorney's fees, plus the costs
of the suit;
c) directing the release, delivery or payment directly to
plaintiff LUIS CRISOSTOMO of the amounts of P128,572.00
and P123,993.85, including the interests which may have
already accrued thereon, deposited with the Paluwagan ng
Bayan Savings Bank (Paombong, Bulacan Branch) in the
name of the Clerk of Court and/or Deputy Clerk of Court
Rodrigo C. Libunao under this Court's Order dated February
14, 1980; however, the plaintiff is required to pay defendant
Perez the corresponding rental on the fishpond for the
period June 1979-January 1980 based on the rate of
P150,000.00 per annum, deducting therefrom the amount of
P21,428.00 already paid to and received by then cousufructuary Maria Perez (Exh. E);
d) dismissing the defendants' separate counter-claims for
damages, for lack of merit; and

e) dismissing the Pleading in Intervention Pro Interesse Suo

filed by VICENTE ASUNCION on the ground of lis pendens.
SO ORDERED.
The facts upon which the Court of Appeals based its Decision are the following:
Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente
Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called the
"Papaya Fishpond." Covered by Transfer Certificate of Title No. 8498 of the Registry of
Deeds for the Province of Bulacan, the fishpond is located in Sto. Rosario, Hagonoy,
Bulacan and has an area of around 110 hectares. On June 5, 1975, the usufructuaries
entered into a contract leasing the fishpond to Luis Keh for a period of five (5) years
and renewable for another five (5) years by agreement of the parties, under the
condition that for the first five-year period the annual rental would be P150,000.00 and
for the next five years, P175,000.00. Paragraph 5 of the lease contract states that the
lessee "cannot sublease" the fishpond "nor assign his rights to anyone." 3
Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman
engaged in the operation of fishponds. On September 20, 1977, while he was at his
fishpond in Almazar, Hermosa, Bataan, his bosom friend named Ming Cosim arrived
with petitioner Charlie Lee. The two persuaded private respondent to take over the
operation of "Papaya Fishpond" as petitioner Lee and his partner, petitioner Luis Keh,
were allegedly losing money in its operation. Private respondent having acceded to the
proposal, sometime in December of that year, he and petitioners Lee and Keh executed
a written agreement denominated as "pakiao buwis" whereby private respondent would
take possession of the "Papaya Fishpond" from January 6, 1978 to June 6, 1978 in
consideration of the amount of P128,000.00 broken down as follows: P75,000.00 as
rental, P50,000.00 for the value of milkfish in the fishpond and P3,000 for labor
expenses. Private respondent paid the P75,000.00 to petitioner Keh at the house of
petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of Lee's wife, brother-inlaw and other persons. He paid the balance to petitioner Lee sometime in February or
March 1978 because he was uncertain as to the right of petitioners Keh and Lee to
transfer possession over the fishpond to him. Private respondent made that payment
only after he had received a copy of a written agreement dated January 9, 1978 4
whereby petitioner Keh ceded, conveyed and transferred all his "rights and interests"
over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point
of view, that document assured him of continuous possession of the property for as
long as he paid the agreed rentals of P150,000.00 until 1980 and P.175,000.00 until
1985.1wphi1.nt
For the operation of the fishpond from June 1978 to May 1979, private respondent,
accompanied by Ming Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at the
Malabon, Metro Manila office of petitioner Keh. The following receipt was issued to him:
RECEIPT
June 6, 1978

P150.000,00
Received from Mr. LUIS KEH the sum of ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00), Philippine Currency, as full payment of
the yearly leased rental of the Papaya Fishpond for the year beginning

June 1978 and ending on May 1979. The next payment shall be made on
June 6, 1979.
Said sum was paid in Producers Bank of the Philippines Check No.
(illegible) 164595 dated June 6, 1978.
Mr. Luis Keh has not transferred his rights over the fishpond to any
person.
Caloocan City, June 6, 1978.
JUAN L. PEREZ ET AL.
By:
(Sgd.)
Rosendo G. Tansinsin, Jr.
CONFORME TO THE ABOVE:
(Sgd.)
LUIS KEH
Handwritten below that receipt but above the signature of petitioner Charlie Lee,
are the following: "Rec'd from Luis Crisostomo sum of one hundred fifty-four
thousand P154,000.00 for above payment. 5
Private respondent incurred expenses for repairs in and improvement of the fishpond in
the total amount of P486,562.65. 6 However, sometime in June 1979, petitioners
Tansinsin and Juan Perez, in the company of men bearing armalites, went to the
fishpond and presented private respondent with a letter dated June 7, 1979 showing
that petitioner Luis Keh had surrendered possession of the fishpond to the
usufructuaries.
Because of the threat to deprive him of earnings of around P700,000.00 that the
700,000 milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan
Perez and Lee to accept the rental for June 5, 1979 to June 6, 1980, private respondent
filed on June 14, 1979 with the then Court of First Instance of Bulacan an action for
injunction and damages. He prayed for the issuance of a restraining order enjoining
therein defendants Keh, Perez and Lee from entering the premises and taking
possession of the fishpond. He also prayed for actual damages of P50,000.00, moral
damages of P20,000.00, exemplary damages in an amount that the court might award,
and attorney's fees of P10,000.00. 7
That same day, June 14, 1979, the lower court granted the prayer for a restraining
order. On November 13, 1979, Crisostomo paid one of the usufructuaries, Maria Perez
(who died in 1984), the amount of P21,428.00 as her 1/7 share of the annual rental of
the fishpond for 1979-80. Maria Perez issued a notarized receipt for that amount. 8
On January 11, 1980, the court lifted the restraining order thereby effectively depriving
private respondent of possession over the fishpond. On February 14, 1980, the parties
submitted a partial compromise agreement with the following stipulations:

1. The amount of P128,572.00 that private respondent

deposited as rental with the Office of the Clerk of Court
under O.R. No. 21630 dated November 15, 1979 be
withdrawn from that office and deposited with the
Paluwagan ng Bayan Savings & Loan Association, Inc.
(Paombong, Bulacan branch) and which deposit shall not be
withdrawn unless authorized by the court; and
2. The plaintiff could personally harvest milkfish "with
commercial value" in the presence of Perez and under the
supervision of the deputy clerk of court within the appointed
period and that the net proceeds of the sale (P123,993.85
per the Report dated March 4, 1980 of the deputy clerk of
court) be deposited in the name of the deputy clerk of court
of Branch 6 of the then Court of First Instance of Bulacan
with the same branch of the Paluwagan ng Bayan Savings &
Loan Association, Inc. and which deposit shall not be
withdrawn unless upon order of the court after hearing.
The court approved that agreement on that same date.
Thereafter, the usufructuaries entered into a contract of lease with Vicente Raymundo
and Felipe Martinez for the six-year period of June 1, 1981 to May 30, 1987 in
consideration of the annual rentals of P550,000.00 for the first two years and
P400,000.00 for the next four years. Upon expiration of that lease, the same property
was leased to Pat Laderas for P1 million a year.
The complaint was later amended to include petitioner Tansinsin, the alleged
administrator of the fishpond, as one of the defendants. 9 Except in the joint answer
that the defendants had filed, petitioners Keh and Lee did not appear before the court.
Neither did they testify.
In their defense, petitioners Juan Perez and Tansinsin presented evidence to prove that
they had negotiated for the lease of the property with Benito Keh in 1975. However,
they averred, for reasons unknown to petitioner Perez, in the contract of lease that
petitioner Tansinsin prepared, petitioner Luis Keh was named as lessee. Petitioner Perez
had never met Keh or Lee but according to petitioner Tansinsin, petitioner Luis Keh was
substituted for Benito Keh because the latter was preoccupied with his other
businesses. Sometime in 1979, petitioner Keh's agent named Catalino Alcantara relayed
to petitioner Perez, Keh's intention to surrender possession of the fishpond to the
usufructuaries. Because petitioner Perez demanded that said intention should be made
in writing, on June 5, 1979, Perez received from Keh a letter to that effect.
When private respondent received a copy of that letter of petitioner Keh, he took the
position that petitioner Perez had no right to demand possession of the fishpond from
him because Perez had no contract with him. Private respondent was allowed four (4)
months within which to vacate the premises but he immediately filed the complaint for
injunction and damages. Thereafter, private respondent's counsel, Atty. Angel Cruz and
other persons tried to prevail upon petitioner Perez to allow private respondent to
occupy the property for three (3) more years. Petitioner Perez declined that proposition.
On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at
the conclusion that the defendants therein "conspired with one another to exploit the
plaintiff's naivete and educational inadequacies and, in the process, to defraud him by

inducing him into taking possession of the "Papaya Fishpond" in their fond hope that, as
soon as the plaintiff applying his known expertise as a successful fishpond operator
shall have considerably improved the fishpond, they will regain possession of the
premises and offer the lease thereof to other interested parties at much higher rental
rates as laid bare by supervening realities." That conclusion was founded on the
following:
1. The plaintiffs (private respondent Crisostomo's) testimony
bears the "hallmarks of truth: candid, straightforward and
uncontrived." He had proven himself a "much more credible
witness than his opponents."
2. The notarized receipt of Maria Perez of her share as a
usufructuary in the rental for 1979-80 is a "clear avowal of
plaintiffs legitimate operation of the "Papaya Fishpond" as
assignee or transferee thereof." It was impossible for the
other usufructuaries, especially Juan Perez who was residing
in the same locality and actively involved in the "affairs of
the fishpond," not to have known that plaintiff occupied the
fishpond for one and a half years as assignee of Keh and
Lee. It was unbelievable that both Tansinsin and Perez
would only perceive the plaintiff as a mere encargado of Keh
and Lee.
3. The receipt whereby Tansinsin acknowledged payment of
P150,000.00 as rental for June 1978-May 1979 bears "telltale signs" of the conspiracy. Firstly, the statement "Mr. Luis
Keh has not transferred his rights over the fishpond to any
person" is entirely irrelevant to that receipt unless it was
intended "to preempt plaintiff's claim of rights and interests
over the said property as either sub-lessee or assignee."
Secondly, Keh's having signified "Conforme to the above" is
a gratuitous notation as it actually indicates that the money
came from the plaintiff. Thirdly, Atty. Tansinsin's receipt of
the amount for and in behalf of "JUAN L. PEREZ ET AL."
illustrates his "active and dominant role in the affairs" of the
fishpond whether as administrator thereof or as beneficiary
of a share from its fruits.
4. Service upon plaintiff of Keh's letter surrendering
possession of the fishpond implied that defendants knew
that plaintiff was in possession thereof. That they resorted
to the intimidating presence of armed men is proof that they
expected the plaintiff to refuse to give up possession of the
property. These circumstances "completely belie the
protestations of Perez and Tansinsin of lack of knowledge of
the contract entered into" between the plaintiff, and Lee and
Keh.
5. The nonpresentation of Lee and Keh on the witness stand
by Atty. Tansinsin "can very well be construed as a smart
maneuver to cover up the sinister cabal for deception
inferrable from the attendant facts and circumstances." In
their joint answer, Keh and Lee tried to relieve Perez of any

liability in favor of the plaintiff. That is understandable

"because, should the Court disregard the reliance of Perez
on the prohibition against sub-lease or assignment of the
"Papaya Fishpond", then all the defendants shall have
exposed themselves to unavoidable liability for the acts
complained of by the plaintiff."
6. Atty. Tansinsin was the common legal counsel of all the
defendants and, by his testimony, even the plaintiff. Atty.
Tansinsin's denial that he was plaintiffs counsel was his way
of "deflecting plaintiffs imputations of professional
improprieties against him." Plaintiff must have assumed that
Atty. Tansinsin was also his lawyer considering that they
were "on very friendly terms" and therefore Atty. Tansinsin
might have been instrumental in dispelling whatever fears
plaintiff had entertained as regards the business transactions
involved.
7. The fact that the fishpond was subsequently rented out
for astronomical amounts is proof that the plaintiff had
considerably improved the fishpond. 10
The lower court added:
Bluntly yet succinctly put, the foregoing circumstances when viewed
collectively with other cogent aspects of the instant case inexorably lead
to the Court's well-considered view that the defendants tempted by the
bright prospect of a lucrative business coup embarked themselves in an
egregious scheme to take undue advantage of the gullibility of the plaintiff
who, as borne by ensuing events, proved himself an ideal victim to prey
upon: pathetically unsuspecting yet only too eager to invest his material
resources and self-acquired technical know-how to redeem what was then
a dwindling business enterprise from total collapse. Plaintiffs impressive
performance, alas, only redounded ultimately to the supreme benefit
exclusively of the defendants. A classic case of "ako ang nagsaing, iba ang
kumain!"
The defendants elevated the case to the Court of Appeals which, as earlier mentioned,
affirmed the decision of the trial court and disposed of the appeal on February 18, 1992
as follows:
WHEREFORE, in view of all the foregoing, judgment appealed from, is
hereby AFFIRMED.
However, intervenor-appellant is hereby declared co-usufructuary of the
Papaya fishpond, and is, therefore, entitled to all rights and interest due
to the usufructuaries of the said fishpond.
SO ORDERED.
On the defendant-appellants' contention that the principle of res judicata should be
applied because the Court of Appeals had ruled on the issue of possession in CA-G.R.
No. 10415-R, a petition for certiorari and injunction with preliminary mandatory
injunction, the Court of Appeals held that said principle was unavailing. The petition in

CA-G.R. No. 10415-R involved a writ of injunction "which presupposes the pendency of
a principal or main action." Moreover, the decision in that case did not resolve the issue
of who should be in possession of the Papaya Fishpond as findings of fact of the trial
court cannot be reviewed in a certiorari proceeding.1wphi1.nt
The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a
possessor in bad faith, considering that he took possession of the fishpond when
appellants Keh and Lee assigned to him appellant Keh's leasehold right." It held that
appellant Perez knew of the transfer of possession of the fishpond to appellee and that
the receipt evidencing payment of the 1978-1979 rental even bears an expressed
admission by Lee that the payment came from appellee Crisostomo.
Agreeing with the court a quo that "defendants-appellants employed fraud to the
damage and prejudice of plaintiff-appellee," the Court of Appeals held that appellants
should be held liable for damages. As regards the intervention pro interesse suo, the
appellate court ruled that the same should be allowed because, even if the litigation
would not be technically binding upon him, complications might arise that would
prejudice his rights. Pointing out that a usufruct may be transferred, assigned or
disposed of, the Court of Appeals ruled that the intervenor cannot be excluded as a
usufructuary because he had acquired his right as such from a sale in execution of the
share of Jorge Lorenzo, one of the usufructuaries of the fishpond.
Herein petitioners filed a motion for the reconsideration of that Decision of the Court of
Appeals. They alleged that the Decision was premature because it was rendered when
they had not yet even received a copy of the intervenor's brief wherein assignments of
errors that directly affected their rights and interests were made. They insisted that the
principle of res judicata was applicable because in G.R. No. 64354, this Court upheld
the Decision of the Court of Appeals in CA-G.R. No. 10415. They added that appellee
Crisostomo was guilty of forum shopping because the issue of possession had been
"squarely decided" in CA-G.R. No. 10415. They stressed that the contract of lease
between Keh and the usufructuaries prohibited subleasing of the fishpond; that by the
receipt dated June 6, 1978, it was Keh who paid the rental; that appellee Crisostomo
was a perjured witness because in the notebook showing his expenses, the amount of
P150,000.00 for rentals does not appear; that the term of the contract had expired and
there was no renewal thereof, and that the consideration of P150,000.00 was grossly
inadequate. They averred that the Court of Appeals erred in awarding damages that
were not prayed for in the second amended complaint and that amounts not specified
in the complaint were awarded as damages. They disclaimed that Atty. Tansinsin was
the administrator of the fishpond.
On October 30, 1992, the Court of Appeals denied the motion for reconsideration for
lack of merit. It ruled that the Decision was not prematurely promulgated "considering
that the intervention proceeding is solely between intervenor and defendantsappellants, which is completely separable and has nothing to do with the merits of the
appeal."
In the instant petition for review on certiorari, petitioners raise six (6) grounds for
giving due course to it. 11 Those grounds may be distilled into the following: (a) the
applicability of the principle of res judicata; (b) the premature promulgation of the
Decision of the Court of Appeals, and (c) private respondent was not a sublesee of the
fishpond under the law.
In arguing that the principle of res judicata applies in this case, petitioners rely on the
portion of the Decision 12 of the Court of Appeals in CA-G.R. No. 10415 that states:

We find no basis for declaring respondent Judge guilty of grave abuse of

discretion on this regard. The trial court's finding that petitioner does not

appear entitled to any contract or law to retain possession of the fishpond

in question since he is neither an assignee or sub-lessee and, therefore,
merely a stranger to the contract of lease is a finding of fact review of
which is not proper in a certiorari proceedings. Not only is petitioner not a
party to the lease agreement over the fishpond in question but also the
very authority upon which he predicates his possession over the fishpond
that the leasehold right of Luis Keh had been assigned to him
undoubtedly lacks basis for the very contract between Luis Keh and the
lessors expressly provides
That the lessee cannot sub-lease above-described fishpond
nor assign his rights to anyone.
xxx xxx xxx
(Emphasis supplied by petitioners.)

13

Petitioners assert that said Decision of the Court of Appeals which was in effect upheld
by this Court when it denied the petition for review on certiorari in G.R. No. 64354 (Luis
Crisostomo v. Intermediate Appellate Court), 14 is "res judicata to the issue of
possession in this case." 15 However, as expressed in that quoted portion of the
Decision in CA-G.R. No. 10415, the issue of whether private respondent is an assignee
or a sub-lessee "is a finding of fact review of which is not proper in a certiorari
proceeding" or the proceeding in that case.
CA-G.R. No. 10415 was spawned by the lifting on January 11, 1980 of the restraining
order previously issued by the trial court on June 14, 1979. Private respondent filed a
special civil action of certiorari and injunction with preliminary mandatory injunction
and/or mandatory restraining order to question the order of January 11, 1980. Thus,
the issue in that petition was whether or not the trial court gravely abused its discretion
in lifting the restraining order. The statement in that Decision of the Court of Appeals
that a writ of preliminary injunction may be denied "if the party applying for it has
insufficient title or interest to sustain it and no claim to an ultimate relief (is) sought" by
no means resolved the issue of who is entitled to possess the fishpond. In denying the
petition for certiorari, the Court of Appeals was simply saying that there was no reason
to restore private respondent to the possession of the fishpond pursuant to the
restraining order that he had earlier obtained. The issue of possession was collaterally
discussed only to resolve the propriety of the lifting of the restraining order based on
evidence available at that time. Hence, there was no judgment on the merits in the
main case or in Civil Case No. 5610-M. Simply put, the Decision in CA-G.R. No. 10415
involves an interlocutory order on the propriety of the lifting of the restraining order and
not a judgment on the merits of Civil Case No. 5610-M.
For res judicata to apply, the following requisites must concur: (a) the former judgment
must be final; (b) the court which rendered it had jurisdiction over the subject matter
and the parties; (c) the judgment must be on the merits, and (d) there must be
between the first and second actions identity of parties, subject matter and causes of
action. 16 The Decision in CA-G.R. No. 10415 having resolved only an interlocutory
matter, the principle of res judicata cannot be applied in this case. There can be no res
judicata where the previous order in question was not an order or judgment
determinative of an issue of fact pending before the court but was only an interlocutory
order because it required the parties to perform certain acts for final adjudication. 17 In

this case, the lifting of the restraining order paved the way for the possession of the
fishpond on the part of petitioners and/or their representatives pending the resolution
of the main action for injunction. In other words, the main issue of whether or not
private respondent may be considered a sublessee or a transferee of the lease entitled
to possess the fishpond under the circumstances of the case had yet to be resolved
when the restraining order was lifted.
Petitioners assail the Court of Appeals' Decision as "premature" and therefore null and
void, because prior to the promulgation of that Decision, private respondent-intervenor
Vicente Asuncion failed to furnish them with a copy of his brief the assignment of errors
of which allegedly "directly" affected their rights and interests. 18 While it is true that
petitioners were deprived of the opportunity to contravene the allegations of the
intervenor in his brief, that fact can not result in the nullity of the Decision of the Court
of Appeals. 19 Vicente Asuncion intervened pro interesse suo or "according to his
interest." 20 Intervention pro interessse suo is a mode of intervention in equity wherein
a stranger desires to intervene for the purpose of asserting a property right in the res,
or thing, which is the subject matter of the litigation, without becoming a formal
plaintiff or defendant, and without acquiring control over the course of a litigation,
which is conceded to the main actors therein. 21 In this case, intervenor Vicente
Asuncion aimed to protect his right as a usufructuary. Inasmuch as he has the same
rights and interests as petitioner Juan Perez, any judgment rendered in the latter's
favor entitled him to assert his right as such usufructuary against his co-usufructuary.
Should said intervenor claim his share in the usufruct, no rights of the petitioners other
than those of Juan Perez would be prejudiced thereby.
Worth noting is the fact that after the trial court had allowed Vicente Asuncion's
intervention pro interesse suo, petitioner Juan Perez filed a petition for certiorari
docketed as CA-G.R. No. 13519 to set aside the order denying his motion to dismiss the
pleading in intervention. In its Decision of January 27, 1988, the Seventh Division of the
Court of Appeals 22 denied the petition for certiorari for lack of merit. It upheld the trial
court's ruling to allow the intervention pro interesse suo to protect Vicente Asuncion's
right as a co-usufructuary in the distribution or disposition of the amounts representing
the rentals that were deposited with the court. That Vicente Asuncion had filed Civil
Case No. 8215-M seeking recovery of his alleged share in the fruits of the Papaya
Fishpond from 1978 would not be a reason for the dismissal of the motion for
intervention pursuant to Rule 16, Sec. 1 (e) of the Rules of Court. 23 The Court of
Appeals explained as follows:
Indeed, if by means of intervention a stranger to a lawsuit is permitted to
intervene without thereby becoming a formal plaintiff or defendant
(Joaquin v. Herrera, 37 Phil. 705, 723 [1918]), then there is in the case at
bar no identity of parties to speak of. Lis pendens as a ground for a
motion to dismiss requires as a first element identity of parties in the two
cases.
Nor is there an identity of relief sought. Civil Case No. 8295-M seeks an
accounting of the proceeds of the fishpond while Civil Case No. 5610-M is
for injunction to prevent the petitioner from retaking the fishpond from
Luis Crisostomo. The herein private respondent sought to intervene in the
latter case simply to protect his right as usufructuary in the money
deposited in the court by the plaintiff Luis Crisostomo. We hold that in
allowing the intervention in this case the trial court acted with prudence
and exercised its discretion wisely. 24

Unconvinced by the Court of Appeals' Decision in CA-G.R. SP No. 13519, petitioner Juan
Perez filed a petition for review on certiorari with this Court under G.R. No. 82096. On
May 9, 1988, this Court denied the petition on the grounds that the issues raised are
factual and that there is no sufficient showing that the findings of the respondent court
are not supported by substantial evidence or that the court had committed any
reversible error in the questioned judgment. 25 The Resolution of the Court dated May
9, 1988 became final and executory on August 26, 1988. 26
Moreover, granting that the intervention be considered as Vicente Asuncion's "appeal,"
a litigant's failure to furnish his opponent with a copy of his appeal does not suffice to
warrant dismissal of that appeal. In such an instance, all that is needed is for the court
to order the litigant to furnish his opponent with a copy of his appeal. 27 This is
precisely what happened in this case. On May 13, 1992, the Court of Appeals issued a
Resolution directing counsel for intervenor to furnish herein petitioners with a copy of
intervenor Vicente Asuncion's brief within a 10-day period. It also granted petitioners an
opportunity to file a reply-brief or memorandum and the intervenor, a reply to said
memorandum. 28 That Resolution is proper under the premises because, by the nature
of an intervention pro interesse suo, it can proceed independently of the main action.
Thus, in the Resolution of October 30, 1992, in resolving the issue of the alleged
prematurity of its Decision, the Court of Appeals held that "the proceeding is solely
between intervenor and defendants-appellants, which is completely separable and has
nothing to do with the merits of the appeal." 29
At the hearing of Civil Case No. 5610-M, petitioner Juan Perez attempted to establish
the death on October 14, 1979 of Jorge Lorenzo, 30 the usufructuary from whom
Vicente Asuncion derived his right to intervene pro interesse suo. Since under Article
603 of the Civil Code a usufruct is extinguished "by the death of the usufructuary,
unless a contrary intention clearly appears," there is no basis by which to arrive at the
conclusion that the usufruct originally exercised by Jorge Lorenzo has indeed been
extinguished or, on the contrary, has survived Lorenzo's demise on account of
provisions in the document constituting the usufruct. That matter is best addressed in
Civil Case No. 8215-M wherein Vicente Asuncion seeks his share as a transferee of the
usufruct established for Jorge Lorenzo. All that is discussed here is the matter of
intervention pro interesse suo vis-a-vis the issue of prematurity of the Decision of the
Court of Appeals.
Petitioners' principal argument against the Court of Appeals' Decision in favor of private
respondent Crisostomo is that he could not have been an assignee or sub-lessee of the
fishpond because no contract authorized him to be so. Petitioners' argument is
anchored on factual issues that, however, have no room for discussion before this
Court. It is well-entrenched doctrine that questions of fact are not proper subjects of
appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is
confined to questions of law. 31 Factual findings of the Court of Appeals are conclusive
on the parties and carry even more weight when said court affirms the factual findings
of the trial
court. 32 Accordingly, this review shall be limited to questions of law arising from the
facts as found by both the Court of Appeals and the trial court.
Admittedly, the contract between the usufructuaries and petitioner Keh has a provision
barring the sublease of the fishpond. However, it was petitioner Keh himself who
violated that provision in offering the operation of the fishpond to private respondent.
Apparently on account of private respondent's apprehensions as regards the right of
petitioners Keh and Lee to transfer operation of the fishpond to him, on January 9,
1978, petitioner Keh executed a document ceding and transferring his rights and

interests over the fishpond to petitioner Lee. That the same document might have been
a ruse to inveigle private respondent to agree to their proposal that he operate the
fishpond is of no moment. The fact is, petitioner Keh did transfer his rights as a lessee
to petitioner Lee in writing and that, by virtue of that document, private respondent
acceded to take over petitioner Keh's rights as a lessee of the fishpond.
Although no written contract to transfer operation of the fishpond to private respondent
was offered in evidence, 33 the established facts further show that petitioner Juan Perez
and his counsel, petitioner Tansinsin, knew of and acquiesced to that arrangement by
their act of receiving from the private respondent the rental for 1978-79. By their act of
receiving rental from private respondent through the peculiarly written receipt dated
June 6, 1978, petitioners Perez and Tansinsin were put in estoppel to question private
respondent's right to possess the fishpond as a lessee. Estoppel in pais arises when
one, by his acts, representations or admissions, or by his own silence when he ought to
speak out, intentionally or through culpable negligence, induces another to believe
certain facts to exist and such other rightfully relies and acts on such belief, so that he
will be prejudiced if the former is permitted to deny the existence of such facts. 34
Nevertheless, we hesitate to grant private respondent's prayer that he should be
restored to the possession of the fishpond as a consequence of his unjustified
ejectment therefrom. To restore possession of the fishpond to him would entail
violation of contractual obligations that the usufructuaries have entered into over quite
a long period of time now. Supervening events, such as the devaluation of the peso as
against the dollar as well as the addition of improvements in the fishpond that the
succeeding lessees could have introduced, have contributed to the increase in rental
value of the property. To place private respondent in the same position he was in
before the lifting of the restraining order in 1980 when he was deprived the right to
operate the fishpond under the contract that already expired in 1985 shall be to
sanction injustice and inequity. This Court, after all, may not supplant the right of the
usufructuaries to enter into contracts over the fishpond through this Decision.
Nonetheless, under the circumstances of the case, it is but proper that private
respondent should be properly compensated for the improvements he introduced in the
fishpond.1wphi1.nt
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and
the obligor does what has been forbidden him, it shall also be undone at his expense."
The lease contract prohibited petitioner Luis Keh, as lessee, from subleasing the
fishpond. In entering into the agreement for pakiao-buwis with private respondent, not
to mention the apparent artifice that was his written agreement with petitioner Lee on
January 9, 1978, petitioner Keh did exactly what was prohibited of him under the
contract to sublease the fishpond to a third party. That the agreement for pakiaobuwis was actually a sublease is borne out by the fact that private respondent paid
petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual
rental agreed upon in the lease contract between the usufructuaries and petitioner Keh.
Petitioner Keh led private respondent to unwittingly incur expenses to improve the
operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable
to private respondent for the value of the improvements he had made in the fishpond
or for P486,562.65 with interest of six percent (6%) per annum from the rendition of
the decision of the trial court on September 6, 1989. 35
The law supports the awards of moral and exemplary damages in favor of private
respondent and against the petitioners. Their conspiratorial scheme to utilize private
respondent's expertise in the operation of fishponds to bail themselves out of financial
losses has been satisfactorily established to warrant a ruling that they violated Article

21 of the Civil Code and therefore private respondent should be entitled to an award of
moral damages. Article 21 states that "(a)ny person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage." Exemplary damages shall likewise be awarded
pursuant to Article 2229 of the Civil Code. 36 Because private respondent was compelled
to litigate to protect his interest, attorney's fees shall also be awarded. 37
WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals is
AFFIRMED insofar as it (a) directs the release to private respondent of the amounts of
P128,572.00 and P123,993.85 deposited with the Paluwagan ng Bayan Savings Bank in
Paombong, Bulacan and (b) requires private respondent Crisostomo to pay petitioner
Juan Perez the rental for the period June 1979 to January 1980 at the rate of
P150,000.00 per annum less the amount of P21,428.00 already paid to usufructuary
Maria Perez. It should, however, be subject to the MODIFICATIONS that:
1. Petitioner Luis Keh shall pay private respondent Luis
Crisostomo in the amount of P486,562.25 with legal interest
from the rendition of the judgment in Civil Case No. 5610-M
or on September 6, 1989, and
2. Petitioners be made liable jointly and severally liable for
moral damages of P50,000.00, exemplary damages of
P20,000 and attorney's fees of P10,000.00.
No costs.
SO ORDERED.

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. GONZALES (for herself and on behalf of Florida C. Tupper, as
attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and
CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA
ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents.

MELO, J.:p
The petition before us has its roots in a complaint for specific performance to compel
herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the
sale of a parcel of land with its improvements located along Roosevelt Avenue in
Quezon City entered into by the parties sometime in January 1985 for the price of
P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al.
(hereinafter referred to as Coronels) executed a document entitled
"Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia
Alcaraz (hereinafter referred to as Ramona) which is reproduced
hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 Total amount
50,000 Down payment

P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited house
and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased
father, Constancio P. Coronel, the transfer certificate of title immediately
upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately
execute the deed of absolute sale of said property and Miss Ramona
Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00)
Pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt of
the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels
will execute the deed of absolute sale in favor of Ramona and the latter
will pay the former the whole balance of One Million One Hundred Ninety
Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D.
Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid
the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh.
"2").
On February 6, 1985, the property originally registered in the name of the
Coronels' father was transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the property covered by TCT No.
327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred
to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand
(P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh. "A")
with Ramona by depositing the down payment paid by Concepcion in the
bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific
performance against the Coronels and caused the annotation of a notice
of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse
claim covering the same property with the Registry of Deeds of Quezon
City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over
the subject property in favor of Catalina (Exh. "G"; Exh. "7").
On June 5, 1985, a new title over the subject property was issued in the
name of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City)
the parties agreed to submit the case for decision solely on the basis of documentary
exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary
evidence accordingly marked as Exhibits "A" through "J", inclusive of their
corresponding submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked them as Exhibits "1"

through "10", likewise inclusive of their corresponding submarkings. Upon motion of the
parties, the trial court gave them thirty (30) days within which to simultaneously submit
their respective memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereof, after which, the case would be deemed
submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura,
who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon
City. On March 1, 1989, judgment was handed down by Judge Roura from his regular
bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered
ordering defendant to execute in favor of plaintiffs a deed of absolute sale
covering that parcel of land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of
Deeds for Quezon City, together with all the improvements existing
thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon
receipt thereof, the said document of sale to plaintiffs and upon receipt
thereof, the plaintiffs are ordered to pay defendants the whole balance of
the purchase price amounting to P1,190,000.00 in cash. Transfer
Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in
the name of intervenor is hereby canceled and declared to be without
force and effect. Defendants and intervenor and all other persons claiming
under them are hereby ordered to vacate the subject property and deliver
possession thereof to plaintiffs. Plaintiffs' claim for damages and
attorney's fees, as well as the counterclaims of defendants and
intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new presiding judge of
the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and
to render anew decision by the undersigned Presiding Judge should be
denied for the following reasons: (1) The instant case became submitted
for decision as of April 14, 1988 when the parties terminated the
presentation of their respective documentary evidence and when the
Presiding Judge at that time was Judge Reynaldo Roura. The fact that
they were allowed to file memoranda at some future date did not change
the fact that the hearing of the case was terminated before Judge Roura
and therefore the same should be submitted to him for decision; (2)
When the defendants and intervenor did not object to the authority of
Judge Reynaldo Roura to decide the case prior to the rendition of the
decision, when they met for the first time before the undersigned
Presiding Judge at the hearing of a pending incident in Civil Case No. Q46145 on November 11, 1988, they were deemed to have acquiesced

thereto and they are now estopped from questioning said authority of
Judge Roura after they received the decision in question which happens to
be adverse to them; (3) While it is true that Judge Reynaldo Roura was
merely a Judge-on-detail at this Branch of the Court, he was in all
respects the Presiding Judge with full authority to act on any pending
incident submitted before this Court during his incumbency. When he
returned to his Official Station at Macabebe, Pampanga, he did not lose
his authority to decide or resolve such cases submitted to him for decision
or resolution because he continued as Judge of the Regional Trial Court
and is of co-equal rank with the undersigned Presiding Judge. The
standing rule and supported by jurisprudence is that a Judge to whom a
case is submitted for decision has the authority to decide the case
notwithstanding his transfer to another branch or region of the same court
(Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated
March 1, 1989 rendered in the instant case, resolution of which now
pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she is
convinced that the Decision of March 1, 1989 is supported by evidence
and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to
Annul Decision and Render Anew Decision by the Incumbent Presiding
Judge" dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of
Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully
agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private
respondents' Reply Memorandum, was filed on September 15, 1993. The case was,
however, re-raffled to undersigned ponente only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of
respondent court in the affirmance of the trial court's decision, we definitely find the
instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other
issues in the case at bar is the precise determination of the legal significance of the
document entitled "Receipt of Down Payment" which was offered in evidence by both
parties. There is no dispute as to the fact that said document embodied the binding
contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio
P. Coronel on the other, pertaining to a particular house and lot covered by TCT No.
119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as
follows:

Art. 1305. A contract is a meeting of minds between two persons whereby

one binds himself, with respect to the other, to give something or to
render some service.
While, it is the position of private respondents that the "Receipt of Down Payment"
embodied a perfected contract of sale, which perforce, they seek to enforce by means
of an action for specific performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who left for the United
States of America, said contract could not possibly ripen into a contract absolute sale.
Plainly, such variance in the contending parties' contentions is brought about by the
way each interprets the terms and/or conditions set forth in said private instrument.
Withal, based on whatever relevant and admissible evidence may be available on
record, this, Court, as were the courts below, is now called upon to adjudge what the
real intent of the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership
in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective seller
explicity reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill is promise to sell the subject property
when the entire amount of the purchase price is delivered to him. In other words the
full payment of the purchase price partakes of a suspensive condition, the nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is
retained by the prospective seller without further remedies by the prospective buyer. In
Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the
respondent was a contract to sell where the ownership or title is retained
by the seller and is not to pass until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not
a breach, casual or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, the prospective seller's obligation to sell the subject

property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by
a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract of
sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is completely abated (cf.
Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if
the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that
if there had already been previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The prospective
seller still has to convey title to the prospective buyer by entering into a contract of
absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not to the party the
seller contracted with, but to a third person, as in the case at bench. In a contract to
sell, there being no previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the property. There is no
double sale in such case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-seller's title per se, but the latter,
of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the seller's title
thereto. In fact, if there had been previous delivery of the subject property, the seller's
ownership or title to the property is automatically transferred to the buyer such that,
the seller will no longer have any title to transfer to any third person. Applying Article
1544 of the Civil Code, such second buyer of the property who may have had actual or
constructive knowledge of such defect in the seller's title, or at least was charged with
the obligation to discover such defect, cannot be a registrant in good faith. Such second

buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer,
the first buyer may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the
real nature of the contract entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be
given their natural and ordinary meaning unless a technical meaning was intended (Tan
vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the
said "Receipt of Down Payment" that they
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited house
and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price,
the natural and ordinary idea conveyed is that they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it becomes more
manifest that there was a clear intent on the part of petitioners to transfer title to the
buyer, but since the transfer certificate of title was still in the name of petitioner's
father, they could not fully effect such transfer although the buyer was then willing and
able to immediately pay the purchase price. Therefore, petitioners-sellers undertook
upon receipt of the down payment from private respondent Ramona P. Alcaraz, to
cause the issuance of a new certificate of title in their names from that of their father,
after which, they promised to present said title, now in their names, to the latter and to
execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made
no express reservation of ownership or title to the subject parcel of land. Furthermore,
the circumstance which prevented the parties from entering into an absolute contract of
sale pertained to the sellers themselves (the certificate of title was not in their names)
and not the full payment of the purchase price. Under the established facts and
circumstances of the case, the Court may safely presume that, had the certificate of
title been in the names of petitioners-sellers at that time, there would have been no
reason why an absolute contract of sale could not have been executed and
consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely
promise to sell the properly to private respondent upon the fulfillment of the suspensive
condition. On the contrary, having already agreed to sell the subject property, they
undertook to have the certificate of title changed to their names and immediately
thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after
compliance by the buyer with certain terms and conditions, promised to sell the
property to the latter. What may be perceived from the respective undertakings of the
parties to the contract is that petitioners had already agreed to sell the house and lot
they inherited from their father, completely willing to transfer full ownership of the
subject house and lot to the buyer if the documents were then in order. It just
happened, however, that the transfer certificate of title was then still in the name of
their father. It was more expedient to first effect the change in the certificate of title so

as to bear their names. That is why they undertook to cause the issuance of a new
transfer of the certificate of title in their names upon receipt of the down payment in
the amount of P50,000.00. As soon as the new certificate of title is issued in their
names, petitioners were committed to immediately execute the deed of absolute sale.
Only then will the obligation of the buyer to pay the remainder of the purchase price
arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into
so as to protect the seller against a buyer who intends to buy the property in
installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the
one who were unable to enter into a contract of absolute sale by reason of the fact that
the certificate of title to the property was still in the name of their father. It was the
sellers in this case who, as it were, had the impediment which prevented, so to speak,
the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is that when
the said "Receipt of Down Payment" was prepared and signed by petitioners Romeo A.
Coronel, et al., the parties had agreed to a conditional contract of sale, consummation
of which is subject only to the successful transfer of the certificate of title from the
name of petitioners' father, Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact, fulfilled on February
6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale
between petitioners and private respondent Ramona P. Alcaraz became obligatory, the
only act required for the consummation thereof being the delivery of the property by
means of the execution of the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as evidenced by the "Receipt of
Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to
the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.
From the moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of
title in petitioners' names was fulfilled on February 6, 1985, the respective obligations of
the parties under the contract of sale became mutually demandable, that is, petitioners,
as sellers, were obliged to present the transfer certificate of title already in their names
to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the
deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the
balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition,
petitioners conclusively admitted that:

3. The petitioners-sellers Coronel bound themselves "to effect the transfer

in our names from our deceased father Constancio P. Coronel, the
transfer certificate of title immediately upon receipt of the downpayment
above-stated". The sale was still subject to this suspensive condition.
(Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a
suspensive condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first
transferring the title to the property under their names, there could be no
perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for Article 1186 of the
Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these
mere hypothetical arguments is the fact that the condition herein referred to was
actually and indisputably fulfilled on February 6, 1985, when a new title was issued in
the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by the document
denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered
into a contract of sale subject only to the suspensive condition that the sellers shall
effect the issuance of new certificate title from that of their father's name to their
names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently provides
Art. 1187. The effects of conditional obligation to give, once the condition
has been fulfilled, shall retroact to the day of the constitution of the
obligation . . .
In obligation to do or not to do, the courts shall determine, in each case,
the retroactive effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of
sale became mutually due and demandable as of the time of fulfillment or
occurrence of the suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985
because they were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as
follows:

Art. 774. Succession is a mode of acquisition by virtue of which the

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

authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA,
158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P.
Alcaraz because although the evidence on record shows that the sale was in the name
of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D.
Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also
in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with
her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz.
There is no evidence showing that petitioners ever questioned Concepcion's authority to
represent Ramona P. Alcaraz when they accepted her personal check. Neither did they
raise any objection as regards payment being effected by a third person. Accordingly,
as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a
ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her
obligation to pay the full purchase price is concerned. Petitioners who are precluded
from setting up the defense of the physical absence of Ramona P. Alcaraz as aboveexplained offered no proof whatsoever to show that they actually presented the new
transfer certificate of title in their names and signified their willingness and readiness to
execute the deed of absolute sale in accordance with their agreement. Ramona's
corresponding obligation to pay the balance of the purchase price in the amount of
P1,190,000.00 (as buyer) never became due and demandable and, therefore, she
cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from
the time the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other does not

comply or is not ready to comply in a proper manner with what is

incumbent upon him. From the moment one of the parties fulfill his
obligation, delay by the other begins. (Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between
petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag,
gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should if be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in Registry of
Property.

Should there be no inscription, the ownership shall pertain to the person

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

the said sale sometime in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been previously sold to private
respondents, or, at least, she was charged with knowledge that a previous buyer is
claiming title to the same property. Petitioner Mabanag cannot close her eyes to the
defect in petitioners' title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired
knowledge that there was a previous sale of the same property to a third
party or that another person claims said property in a pervious sale, the
registration will constitute a registration in bad faith and will not confer
upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil.
554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz,
perfected on February 6, 1985, prior to that between petitioners and Catalina B.
Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between
Ramona as principal and Concepcion, her mother, as agent insofar as the subject
contract of sale is concerned, the issue of whether or not Concepcion was also acting in
her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not touch this issue
and no longer disturb the lower courts' ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the
appealed judgment AFFIRMED.
SO ORDERED.

Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.

Panganiban, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 191431

March 13, 2013

RODOLFO G. CRUZ and ESPERANZA IBIAS, Petitioners,

vs.
ATTY. DELFIN GRUSPE, Respondent.
DECISION
BRION, J.:
Before the Court is the petition for review on certiorari1 filed under Rule 45 of the Rules
of Court, assailing the decision2 dated July 30, 2009 and the resolution3 dated February
19, 2010 of the Court of Appeals (CA) in CA-G.R. CV No. 86083. The CA rulings affirmed
with modification the decision dated September 27, 2004 of the Regional Trial Court
(RTC) of Bacoor, Cavite, Branch 19, in Civil Case No. BCV-99-146 which granted
respondent Atty. Delfin Grupes claim for payment of sum of money against petitioners
Rodolfo G. Cruz and Esperanza Ibias.4
THE FACTUAL BACKGROUND
The claim arose from an accident that occurred on October 24, 1999, when the mini
bus owned and operated by Cruz and driven by one Arturo Davin collided with the
Toyota Corolla car of Gruspe; Gruspes car was a total wreck. The next day, on October
25, 1999, Cruz, along with Leonardo Q. Ibias went to Gruspes office, apologized for the
incident, and executed a Joint Affidavit of Undertaking promising jointly and severally to
replace the Gruspes damaged car in 20 days, or until November 15, 1999, of the same
model and of at least the same quality; or, alternatively, they would pay the cost of
Gruspes car amounting to P350,000.00, with interest at
12% per month for any delayed payment after November 15, 1999, until fully paid.5
When Cruz and Leonardo failed to comply with their undertaking, Gruspe filed a
complaint for collection of sum of money against them on November 19, 1999 before
the RTC.
In their answer, Cruz and Leonardo denied Gruspes allegation, claiming that Gruspe, a
lawyer, prepared the Joint Affidavit of Undertaking and forced them to affix their
signatures thereon, without explaining and informing them of its contents; Cruz affixed
his signature so that his mini bus could be released as it was his only means of income;
Leonardo, a barangay official, accompanied Cruz to Gruspes office for the release of
the mini bus, but was also deceived into signing the Joint Affidavit of Undertaking.
Leonardo died during the pendency of the case and was substituted by his widow,
Esperanza. Meanwhile, Gruspe sold the wrecked car for P130,000.00.
In a decision dated September 27, 2004, the RTC ruled in favor of Gruspe and ordered
Cruz and Leonardo to pay P220,000.00,6 plus 15% per annum from November 15, 1999
until fully paid, and the cost of suit.

On appeal, the CA affirmed the RTC decision, but reduced the interest rate to 12% per
annum pursuant to the Joint Affidavit of Undertaking.7 It declared that despite its title,
the Joint Affidavit of Undertaking is a contract, as it has all the essential elements of
consent, object certain, and consideration required under Article 1318 of the Civil
Code. The CA further said that Cruz and Leonardo failed to present evidence to support
their contention of vitiated consent. By signing the Joint Affidavit of Undertaking, they
voluntarily assumed the obligation for the damage they caused to Gruspes car;
Leonardo, who was not a party to the incident, could have refused to sign the affidavit,
but he did not.
THE PETITION
In their appeal by certiorari with the Court, Cruz and Esperanza assail the CA ruling,
contending that the Joint Affidavit of Undertaking is not a contract that can be the basis
of an obligation to pay a sum of money in favor of Gruspe. They consider an affidavit as
different from a contract: an affidavits purpose is simply to attest to facts that are
within his knowledge, while a contract requires that there be a meeting of the minds
between the two contracting parties.
Even if the Joint Affidavit of Undertaking was considered as a contract, Cruz and
Esperanza claim that it is invalid because Cruz and Leonardos consent thereto was
vitiated; the contract was prepared by Gruspe who is a lawyer, and its contents were
never explained to them. Moreover, Cruz and Leonardo were simply forced to affix their
signatures, otherwise, the mini van would not be released.
Also, they claim that prior to the filing of the complaint for sum of money, Gruspe did
not make any demand upon them. Hence, pursuant to Article 1169 of the Civil Code,
they could not be considered in default. Without this demand, Cruz and Esperanza
contend that Gruspe could not yet take any action.
THE COURTS RULING
The Court finds the petition partly meritorious and accordingly modifies the judgment of
the CA.
Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an
affidavit or a contract, the Court looks beyond the title of the document, since the
denomination or title given by the parties in their document is not conclusive of the
nature of its contents.8 In the construction or interpretation of an instrument, the
intention of the parties is primordial and is to be pursued. If the terms of the document
are clear and leave no doubt on the intention of the contracting parties, the literal
meaning of its stipulations shall control. If the words appear to be contrary to the
parties evident intention, the latter shall prevail over the former.9
A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that
it contains stipulations characteristic of a contract. As quoted in the CA decision,10 the
Joint Affidavit of Undertaking contained a stipulation where Cruz and Leonardo
promised to replace the damaged car of Gruspe, 20 days from October 25, 1999 or up
to November 15, 1999, of the same model and of at least the same quality. In the
event that they cannot replace the car within the same period, they would pay the cost
of Gruspes car in the total amount of P350,000.00, with interest at 12% per month for

any delayed payment after November 15, 1999, until fully paid. These, as read by the
CA, are very simple terms that both Cruz and Leonardo could easily understand.
There is also no merit to the argument of vitiated consent.1wphi1 An allegation of
vitiated consent must be proven by preponderance of evidence; Cruz and Leonardo
failed to support their allegation.
Although the undertaking in the affidavit appears to be onerous and lopsided, this does
not necessarily prove the alleged vitiation of consent. They, in fact, admitted the
genuineness and due execution of the Joint Affidavit and Undertaking when they said
that they signed the same to secure possession of their vehicle. If they truly believed
that the vehicle had been illegally impounded, they could have refused to sign the Joint
Affidavit of Undertaking and filed a complaint, but they did not. That the release of their
mini bus was conditioned on their signing the Joint Affidavit of Undertaking does not, by
itself, indicate that their consent was forced they may have given it grudgingly, but it
is not indicative of a vitiated consent that is a ground for the annulment of a contract.
Thus, on the issue of the validity and enforceability of the Joint Affidavit of Undertaking,
the CA did not commit any legal error that merits the reversal of the assailed decision.
Nevertheless, the CA glossed over the issue of demand which is material in the
computation of interest on the amount due. The RTC ordered Cruz and Leonardo to pay
Gruspe "P350,000.00 as cost of the car xxx plus fifteen percent (15%) per annum from
November 15, 1999 until fully paid."11 The 15% interest (later modified by the CA to be
12%) was computed from November 15, 1999 the date stipulated in the Joint
Affidavit of Undertaking for the payment of the value of Gruspes car. In the absence of
a finding by the lower courts that Gruspe made a demand prior to the filing of the
complaint, the interest cannot be computed from November 15, 1999 because until a
demand has been made, Cruz and Leonardo could not be said to be in default.12 "In
order that the debtor may be in default, it is necessary that the following requisites be
present: (1) that the obligation be demandable and already liquidated; (2) that the
debtor delays performance; and (3) that the creditor requires the performance judicially
and extrajudicially."13 Default generally begins from the moment the creditor demands
the performance of the obligation. In this case, demand could be considered to have
been made upon the filing of the complaint on November 19, 1999, and it is only from
this date that the interest should be computed.
Although the CA upheld the Joint Affidavit of Undertaking, we note that it imposed
interest rate on a per annum basis, instead of the per month basis that was stated in
the Joint Affidavit of Undertaking without explaining its reason for doing so.14 Neither
party, however, questioned the change. Nonetheless, the Court affirms the change in
the interest rate from 12% per month to 12% per annum, as we find the interest rate
agreed upon in the Joint Affidavit of Undertaking excessive.15
WHEREFORE, we AFFIRM the decision dated July 30, 2009 and the resolution dated
February 19, 2010 of the Court of Appeals in CA-G.R. CV No. 86083, subject to the
Modification that the twelve percent (12%) per annum interest imposed on the amount
due shall accrue only from November 19, 1999, when judicial demand was made.
SO ORDERED.
ARTURO D. BRION
Associate Justice

WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
MARIANO C. DEL CASTILLO
Associate Justice

MARTIN S. VILLARAMA, JR.*

Associate Justice

ESTELA M PERLAS-BERNABE
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson
Attest8tiort, it :s hereby certified that the conclusions in the above Decision had been
re2ched in consultation before the case was ... assigned to the writer of the opinion of
the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

Footnotes
*

Designated as Acting Member in lieu of Associate Justice Jose P. Perez per

Special Order No. 1426 dated March 8, 2013.
1

Rollo, pp. 3-8.

Penned by Associate Justice Amelita G. Tolentino, and concurred in by

Associate Justices Pampio A. Abarintos and Mario V. Lopez, id. at 12-21.
3

Id at 23-24.

Id. at 12-13.

Records, p. 6. Paragraph 5 of the Joint Affidavit of Undertaking read:

5. If we cannot replace said car within the said period, we will be liable to
pay the cost of the car (Toyota Corolla 1.6 GLI 1993 Model) in the total
amount of Three Hundred Fifty Thousand Pesos (P350,000.00), Philippine
currency, with interest rate of 12% per month of any delayed payment
after November 15, 1999 until fully paid.

The total claim for P350,000.00 less the P130,000.00 that Gruspe received for
selling his car;
6

rollo, p. 14.

Id. at 20. The dispositive portion of the CA decision dated July 30, 2009 read:
WHEREFORE, premises considered, the appeal is DISMISSED. The
assailed decision dated September 27, 2004 of the Regional Trial Court of
Bacoor, Cavite, Branch 19, is AFFRIMED with the MODIFICATION that the
interest charged be changed from 15% to 12% per annum pursuant to
the Joint Affidavit of Undertaking of the defendants-appellants.

In Tayco v. Heirs of Concepcion Tayco-Flores, G.R. No. 168692, December 13,

2010, 637 SCRA742, 751, the Court declared that "the denomination given by
the parties in their contract is not conclusiveof the nature of the contents."
9

Ayala Life Assurance, Inc. v. Ray Burton Devt. Corp., 515 Phil. 431, 437
(2006).
10

Supra note 2, at 19.

11

Id. at 12.

12

Civil Code, Art. 1169. Those obliged to deliver or to do something incur in

delay from the time the obligee judicially or extrajudicially demands from them
the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that
delay may exist:
1) When the obligation or the law expressly so declare; or
2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be delivered
or the service is to be rendered was a controlling motive for the
establishment of the contract; or
3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his
obligation, delay by the other begins.
13

Social Security System v. Moonwalk Development and Housing Corporation,

G.R. No. 73345, April 7, 1993, 221 SCRA 119, 128.
14

Compare paragraph 5 of the Joint Affidavit of Undertaking (supra, note 5) and

the dispositive portion of the CA decision dated July 30, 2009 (supra, note 7).
See Asian Cathay Finance and Leasing Corporation v. Spouses Gravador, G.R.
No. 186550, July 5, 2010, 623 SCRA 517, 523
15