HEIRS OF EDUARDO MANLAPAT, G.R. No. 125585 In December 1981, Leon Banaag, Jr.
In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo,
represented by GLORIA MANLAPAT-
BANAAG and LEON M. BANAAG, JR., Petitioners,
- versus -
HON. COURT OF APPEALS,
RURAL BANK OF SAN PASCUAL,
INC., and JOSE B. SALAZAR,
CONSUELO CRUZ and Promulgated:
ROSALINA CRUZ-BAUTISTA,
and the REGISTER OF DEEDS of
Meycauayan, Bulacan, June 8, 2005
Before this Court is a Rule 45 petition assailing the Decision[1] dated 29 September 1994 of the Court
of Appeals that reversed the Decision[2] dated 30 April 1991 of the Regional Trial Court (RTC) of
Bulacan, Branch 6, Malolos. The trial court declared Transfer Certificates of Title (TCTs) No. T-9326-
P(M) and No. T-9327-P(M) as void ab initio and ordered the restoration of Original Certificate of Title
(OCT) No. P-153(M) in the name of Eduardo Manlapat (Eduardo), petitioners predecessor-in-interest.
The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters, located at
Panghulo, Obando, Bulacan. The property had been originally in the possession of Jose Alvarez,
Eduardos grandfather, until his demise in 1916. It remained unregistered until 8 October 1976 when
OCT No. P-153(M) was issued in the name of Eduardo pursuant to a free patent issued in Eduardos
name[3] that was entered in the Registry of Deeds of Meycauayan, Bulacan.[4]The subject lot is
adjacent to a fishpond owned by one
Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo Cruz and Rosalina Cruz-
Bautista (Cruzes).[5]
On 19 December 1954, before the subject lot was titled, Eduardo sold a portion thereof with an area of
553 square meters to Ricardo. The sale is evidenced by a deed of sale entitled Kasulatan ng Bilihang
Tuluyan ng Lupang Walang Titulo (Kasulatan)[6] which was signed by Eduardo himself as vendor and
his wife Engracia Aniceto with a certain Santiago Enriquez signing as witness. The deed was notarized
by Notary Public Manolo Cruz.[7] On 4 April 1963, the Kasulatan was registered with the Register of
Deeds of Bulacan.[8]
On 18 March 1981, another Deed of Sale[9] conveying another portion of the subject lot consisting of
50 square meters as right of way was executed by Eduardo in favor of Ricardo in order to reach the
portion covered by the first sale executed in 1954 and to have access to his fishpond from the provincial
road.[10] The deed was signed by Eduardo himself and his wife Engracia Aniceto, together with
Eduardo Manlapat, Jr. and Patricio Manlapat. The same was also duly notarized on 18 July 1981 by
Notary Public Arsenio Guevarra.[11]
executed a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP), for P100,000.00
with the subject lot as collateral. Banaag deposited the owners duplicate certificate of OCT No. P-
153(M) with the bank.
On 31 August 1986, Ricardo died without learning of the prior issuance of OCT No. P-153(M) in the
name of Eduardo.[12] His heirs, the Cruzes, were not immediately aware of the consummated sale
between Eduardo and Ricardo.
Eduardo himself died on 4 April 1987. He was survived by his heirs, Engracia Aniceto, his spouse; and
children, Patricio, Bonifacio, Eduardo, Corazon, Anselmo, Teresita and Gloria, all surnamed
Manlapat.[13] Neither did the heirs of Eduardo (petitioners) inform the Cruzes of the prior sale in favor
of their predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes came to learn about the sale
and the issuance of the OCT in the name of Eduardo.
Upon learning of their right to the subject lot, the Cruzes immediately tried to confront petitioners on the
mortgage and obtain the surrender of the OCT. The Cruzes, however, were thwarted in their bid to see
the heirs. On the advice of the Bureau of Lands, NCR Office, they brought the matter to
the barangay captain of Barangay Panghulo, Obando, Bulacan. During the hearing, petitioners were
informed that the Cruzes had a legal right to the property covered by OCT and needed the OCT for the
purpose of securing a separate title to cover the interest of Ricardo. Petitioners, however, were
unwilling to surrender the OCT.[14]
Having failed to physically obtain the title from petitioners, in July 1989, the Cruzes instead went to
RBSP which had custody of the owners duplicate certificate of the OCT, earlier surrendered as a
consequence of the mortgage. Transacting with RBSPs manager, Jose Salazar (Salazar), the Cruzes
sought to borrow the owners duplicate certificate for the purpose of photocopying the same and
thereafter showing a copy thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the
owners duplicate certificate outside the bank premises when the latter showed the Kasulatan.[15] The
Cruzes returned the owners duplicate certificate on the same day after having copied the same. They
then brought the copy of the OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and
showed the same to him to secure his legal opinion as to how the Cruzes could legally protect their
interest in the property and register the same.[16] Flores suggested the preparation of a subdivision
plan to be able to segregate the area purchased by Ricardo from Eduardo and have the same covered
by a separate title.[17]
Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla), Land Registration Officer,
Director III, Legal Affairs Department, Land Registration Authority at Quezon City, who agreed with the
advice given by Flores.[18]Relying on the suggestions of Flores and Arandilla, the Cruzes hired two
geodetic engineers to prepare the corresponding subdivision plan. The subdivision plan was presented
to the Land Management Bureau, Region III, and there it was approved by a certain Mr. Pambid of said
office on 21 July 1989.
After securing the approval of the subdivision plan, the Cruzes went back to RBSP and again asked for
the owners duplicate certificate from Salazar. The Cruzes informed him that the presentation of the
owners duplicate certificate was necessary, per advise of the Register of Deeds, for the cancellation of
the OCT and the issuance in lieu thereof of two separate titles in the names of Ricardo and Eduardo in
accordance with the approved subdivision plan.[19] Before giving the owners duplicate certificate,
Salazar required the Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal counsel of RBSP, to
secure from the latter a clearance to borrow the title. Atty. Santiago would give the clearance on the
condition that only Cruzes put up a substitute collateral, which they did.[20] As a result, the Cruzes got
hold again of the owners duplicate certificate.
After the Cruzes presented the owners duplicate certificate, along with the deeds of sale and the
subdivision plan, the Register of Deeds cancelled the OCT and issued in lieu thereof TCT No. T-9326-
P(M) covering 603 square meters of Lot No. 2204 in the name of Ricardo and TCT No. T-9327-P(M)
covering the remaining 455 square meters in the name of Eduardo.[21]
On 9 August 1989, the Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-P(M)
in the name of Eduardo and retrieved the title they had earlier given as substitute collateral. After
securing the new separate titles, the Cruzes furnished petitioners with a copy of TCT No. 9327-P(M)
through the barangay captain and paid the real property tax for 1989.[22]
The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director, Supervision Sector, Department
III of the Central Bank of the Philippines, inquiring whether they committed any violation of existing bank
laws under the circumstances. A certain Zosimo Topacio, Jr. of the Supervision Sector sent a reply
letter advising the Cruzes, since the matter is between them and the bank, to get in touch with the bank
for the final settlement of the case.[23]
In October of 1989, Banaag went to RBSP, intending to tender full payment of the mortgage obligation.
It was only then that he learned of the dealings of the Cruzes with the bank which eventually led to the
subdivision of the subject lot and the issuance of two separate titles thereon. In exchange for the full
payment of the loan, RBSP tried to persuade petitioners to accept TCT No. T-9327-P(M) in the name of
Eduardo.[24]
As a result, three (3) cases were lodged, later consolidated, with the trial court, all involving the
issuance of the TCTs, to wit:
(1) Civil Case No. 650-M-89, for reconveyance with damages filed by the heirs of Eduardo Manlapat
against Consuelo Cruz, Rosalina Cruz-Bautista, Rural Bank of San Pascual, Jose Salazar and Jose
Flores, in his capacity as Deputy Registrar, Meycauayan Branch of the Registry of Deeds of Bulacan;
(2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against Consuelo Cruz, et. [sic] al.; and
(3) Civil Case No. 644-M-89, for declaration of nullity of title with damages filed by Rural Bank of San
Pascual, Inc. against the spouses Ricardo Cruz and Consuelo Cruz, et al.[25]
After trial of the consolidated cases, the RTC of Malolos rendered a decision in favor of the heirs of
Eduardo, the dispositive portion of which reads:
WHEREFORE, premised from the foregoing, judgment is hereby rendered:
1.Declaring Transfer Certificates of Title Nos. T-9326-P(M) and T-9327-P(M) as void ab initio and
ordering the Register of Deeds, Meycauayan Branch to cancel said titles and to restore Original
Certificate of Title No. P-153(M) in the name of plaintiffs predecessor-in-interest Eduardo Manlapat;
2.-Ordering the defendants Rural Bank of San Pascual, Jose Salazar, Consuelo Cruz and Rosalina
Cruz-Bautista, to pay the plaintiffs Heirs of Eduardo Manlapat, jointly and severally, the following:
a)P200,000.00 as moral damages;
b)P50,000.00 as exemplary damages;
c)P20,000.00 as attorneys fees; and
d)the costs of the suit.
3.Dismissing the counterclaims.
SO ORDERED.[26]
The trial court found that petitioners were entitled to the reliefs of reconveyance and damages. On this
matter, it ruled that petitioners were bona fide mortgagors of an unclouded title bearing no annotation of
any lien and/or encumbrance. This fact, according to the trial court, was confirmed by the bank when it
accepted the mortgage unconditionally on 25 November 1981. It found that petitioners were complacent
and unperturbed, believing that the title to their property, while serving as security for a loan, was safely
vaulted in the impermeable confines of RBSP. To their surprise and prejudice, said title was subdivided
into two portions, leaving them a portion of 455 square meters from the original total area of 1,058
square meters, all because of the fraudulent and negligent acts of respondents and RBSP. The trial
court ratiocinated that even assuming that a portion of the subject lot was sold by Eduardo to Ricardo,
petitioners were still not privy to the transaction between the bank and the Cruzes which eventually led
to the subdivision of the OCT into TCTs No. T-9326-P(M) and No. T-9327-P(M), clearly to the damage
and prejudice of petitioners.[27]
Concerning the claims for damages, the trial court found the same to be bereft of merit. It ruled that
although the act of the Cruzes could be deemed fraudulent, still it would not constitute intrinsic fraud.
Salazar, nonetheless, was clearly guilty of negligence in letting the Cruzes borrow the owners duplicate
certificate of the OCT. Neither the bank nor its manager had business entrusting to strangers titles
mortgaged to it by other persons for whatever reason. It was a clear violation of the mortgage and
banking laws, the trial court concluded.
The trial court also ruled that although Salazar was personally responsible for allowing the title to be
borrowed, the bank could not escape liability for it was guilty of contributory negligence. The evidence
showed that RBSPs legal counsel was sought for advice regarding respondents request. This could
only mean that RBSP through its lawyer if not through its manager had known in advance of the Cruzes
intention and still it did nothing to prevent the eventuality. Salazar was not even summarily dismissed by
the bank if he was indeed the sole person to blame. Hence, the banks claim for damages must
necessarily fail.[28]
The trial court granted the prayer for the annulment of the TCTs as a necessary consequence of its
declaration that reconveyance was in order. As to Flores, his work being ministerial as Deputy Register
of the Bulacan Registry of Deeds, the trial court absolved him of any liability with a stern warning that
he should deal with his future transactions more carefully and in the strictest sense as a responsible
government official.[29]
Aggrieved by the decision of the trial court, RBSP, Salazar and the Cruzes appealed to the Court of
Appeals. The appellate court, however, reversed the decision of the RTC. The decretal text of the
decision reads:
THE FOREGOING CONSIDERED, the appealed decision is hereby reversed and set aside, with costs
against the appellees.
SO ORDERED.[30]
The appellate court ruled that petitioners were not bona fide mortgagors since as early as 1954 or
before the 1981 mortgage, Eduardo already sold to Ricardo a portion of the subject lot with an area of
553 square meters. This fact, the Court of Appeals noted, is even supported by a document of sale
signed by Eduardo Jr. and Engracia Aniceto, the surviving spouse of Eduardo, and registered with the
Register of Deeds of Bulacan. The appellate court also found that on 18 March 1981, for the second
time, Eduardo sold to Ricardo a separate area containing 50 square meters, as a road right-of-
way.[31]Clearly, the OCT was issued only after the first sale. It also noted that the title was given to the
Cruzes by RBSP voluntarily, with knowledge even of the banks counsel.[32]Hence, the imposition of
damages cannot be justified, the Cruzes themselves being the owners of the property. Certainly,
Eduardo misled the bank into accepting the entire area as a collateral since the 603-square meter
portion did not anymore belong to him. The appellate court, however, concluded that there was no
conspiracy between the bank and Salazar.[33]
Hence, this petition for review on certiorari.
Petitioners ascribe errors to the appellate court by asking the following questions, to wit: (a) can a
mortgagor be compelled to receive from the mortgagee a smaller portion of the originally encumbered
title partitioned during the subsistence of the mortgage, without the knowledge of, or authority derived
from, the registered owner; (b) can the mortgagee question the veracity of the registered title of the
mortgagor, as noted in the owners duplicate certificate, and thus, deliver the certificate to such third
persons, invoking an adverse, prior, and unregistered claim against the registered title of the mortgagor;
(c) can an adverse prior claim against a registered title be noted, registered and entered without a
competent court order; and (d) can belief of ownership justify the taking of property without due process
of law?[34]
The kernel of the controversy boils down to the issue of whether the cancellation of the OCT in the
name of the petitioners predecessor-in-interest and its splitting into two separate titles, one for the
petitioners and the other for the Cruzes, may be accorded legal recognition given the peculiar factual
backdrop of the case. We rule in the affirmative.
Private respondents (Cruzes) own
the portion titled in their names
Consonant with law and justice, the ultimate denouement of the property dispute lies in the
determination of the respective bases of the warring claims. Here, as in other legal disputes, what is
written generally deserves credence.
A careful perusal of the evidence on record reveals that the Cruzes have sufficiently proven their claim
of ownership over the portion of Lot No. 2204 with an area of 553 square meters. The duly notarized
instrument of conveyance was executed in 1954 to which no less than Eduardo was a signatory. The
execution of the deed of sale was rendered beyond doubt by Eduardos admission in his Sinumpaang
Salaysay dated 24 April 1963.[35] These documents make the affirmance of the right of the Cruzes
ineluctable. The apparent irregularity, however, in the obtention of the owners duplicate certificate from
the bank, later to be presented to the Register of Deeds to secure the issuance of two new TCTs in
place of the OCT, is another matter.
Petitioners argue that the 1954 deed of sale was not annotated on the OCT which was issued in 1976
in favor of Eduardo; thus, the Cruzes claim of ownership based on the sale would not hold water. The
Court is not persuaded.
Registration is not a requirement for validity of the contract as between the parties, for the effect of
registration serves chiefly to bind third persons.[36] The principal purpose of registration is merely to
notify other persons not parties to a contract that a transaction involving the property had been entered
into. Where the party has knowledge of a prior existing interest which is unregistered at the time he
acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of
registration as to him.[37]
Further, the heirs of Eduardo cannot be considered third persons for purposes of applying the rule. The
conveyance shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs
and devisees, and (3) third persons having actual notice or knowledge thereof.[38] Not only are
petitioners the heirs of Eduardo, some of them were actually parties to the Kasulatan executed in favor
of Ricardo. Thus, the annotation of the adverse claim of the Cruzes on the OCT is no longer required to
bind the heirs of Eduardo, petitioners herein.
Petitioners had no right to constitute
mortgage over disputed portion
The requirements of a valid mortgage are clearly laid down in Article 2085 of the New Civil Code, viz:
ART. 2085. The following requisites are essential to the contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property,
and in the absence thereof, that they be legally authorized for the purpose.
Third persons who are not parties to the principal obligation may secure the latter by pledging or
mortgaging their own property. (emphasis supplied)
For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner
thereof as required by Article 2085 of the New Civil Code.[39] The mortgagor must be the owner,
otherwise the mortgage is void.[40] In a contract of mortgage, the mortgagor remains to be the owner of
the property although the property is subjected to a lien.[41] A mortgage is regarded as nothing more
than a mere lien, encumbrance, or security for a debt, and passes no title or estate to the mortgagee
and gives him no right or claim to the possession of the property.[42] In this kind of contract, the
property mortgaged is merely delivered to the mortgagee to secure the fulfillment of the principal
obligation.[43] Such delivery does not empower the mortgagee to convey any portion thereof in favor of
another person as the right to dispose is an attribute of ownership.[44] The right to dispose includes the
right to donate, to sell, to pledge or mortgage. Thus, the mortgagee, not being the owner of the
property, cannot dispose of the whole or part thereof nor cause the impairment of the security in any
manner without violating the foregoing rule.[45]The mortgagee only owns the mortgage credit, not the
property itself.[46]
Petitioners submit as an issue whether a mortgagor may be compelled to receive from the mortgagee a
smaller portion of the lot covered by the originally encumbered title, which lot was partitioned during the
subsistence of the mortgage without the knowledge or authority of the mortgagor as registered owner.
This formulation is disingenuous, baselessly assuming, as it does, as an admitted fact that the
mortgagor is the owner of the mortgaged property in its entirety. Indeed, it has not become a salient
issue in this case since the mortgagor was not the owner of the entire mortgaged property in the first
place.
Issuance of OCT No. P-153(M), improper
It is a glaring fact that OCT No. P-153(M) covering the property mortgaged was in the name of
Eduardo, without any annotation of any prior disposition or encumbrance. However, the property was
sufficiently shown to be not entirely owned by Eduardo as evidenced by the Kasulatan. Readily
apparent upon perusal of the records is that the OCT was issued in 1976, long after the Kasulatan was
executed way back in 1954. Thus, a portion of the property registered in Eduardos name arising from
the grant of free patent did not actually belong to him. The utilization of the Torrens system to
perpetrate fraud cannot be accorded judicial sanction.
Time and again, this Court has ruled that the principle of indefeasibility of a Torrens title does not apply
where fraud attended the issuance of the title, as was conclusively established in this case. The
Torrens title does not furnish a shied for fraud.[47] Registration does not vest title. It is not a mode of
acquiring ownership but is merely evidence of such title over a particular property. It does not give the
holder any better right than what he actually has, especially if the registration was done in bad faith.
The effect is that it is as if no registration was made at all.[48] In fact, this Court has ruled that a decree
of registration cut off or extinguished a right acquired by a person when such right refers to a lien or
encumbrance on the landnot to the right of ownership thereofwhich was not annotated on the certificate
of title issued thereon.[49]
Issuance of TCT Nos. T-9326-P(M)
and T-9327-P(M), Valid
The validity of the issuance of two TCTs, one for the portion sold to the predecessor-in-interest of the
Cruzes and the other for the portion retained by petitioners, is readily apparent from Section 53 of the
Presidential Decree (P.D.) No. 1529 or the Property Registration Decree. It provides:
SEC 53. Presentation of owners duplicate upon entry of new certificate. No voluntary instrument shall
be registered by the Register of Deeds, unless the owners duplicate certificate is presented with such
instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause
shown.
The production of the owners duplicate certificate, whenever any voluntary instrument is presented for
registration, shall be conclusive authority from the registered owner to the Register of Deeds to enter a
new certificate or to make a memorandum of registration in accordance with such instrument, and the
new certificate or memorandum shall be binding upon the registered owner and upon all persons
claiming under him, in favor of every purchaser for value and in good faith.
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice, however, to the rights of any innocent holder of the
decree of registration on the original petition or application, any subsequent registration procured by the
presentation of a forged duplicate certificate of title, or a forged deed or instrument, shall be null and
void. (emphasis supplied)
Petitioners argue that the issuance of the TCTs violated the third paragraph of Section 53 of P.D. No.
1529. The argument is baseless. It must be noted that the provision speaks of forged duplicate
certificate of title and forged deed or instrument. Neither instance obtains in this case. What the Cruzes
presented before the Register of Deeds was the very genuine owners duplicate certificate earlier
deposited by Banaag, Eduardos attorney-in-fact, with RBSP. Likewise, the instruments of conveyance
are authentic, not forged. Section 53 has never been clearer on the point that as long as the owners
duplicate certificate is presented to the Register of Deeds together with the instrument of conveyance,
such presentation serves as conclusive authority to the Register of Deeds to issue a transfer certificate
or make a memorandum of registration in accordance with the instrument.
The records of the case show that despite the efforts made by the Cruzes in persuading the heirs of
Eduardo to allow them to secure a separate TCT on the claimed portion, their ownership being amply
evidenced by the Kasulatan and Sinumpaang Salaysay where Eduardo himself acknowledged the
sales in favor of Ricardo, the heirs adamantly rejected the notion of separate titling. This prompted the
Cruzes to approach the bank manager of RBSP for the purpose of protecting their property right. They
succeeded in persuading the latter to lend the owners duplicate certificate. Despite the apparent
irregularity in allowing the Cruzes to get hold of the owners duplicate certificate, the bank officers
consented to the Cruzes plan to register the deeds of sale and secure two new separate titles, without
notifying the heirs of Eduardo about it.
Further, the law on the matter, specifically P.D. No. 1529, has no explicit requirement as to the manner
of acquiring the owners duplicate for purposes of issuing a TCT. This led the Register of Deeds of
Meycauayan as well as the Central Bank officer, in rendering an opinion on the legal feasibility of the
process resorted to by the Cruzes. Section 53 of P.D. No. 1529 simply requires the production of the
owners duplicate certificate, whenever any voluntary instrument is presented for registration, and the
same shall be conclusive authority from the registered owner to the Register of Deeds to enter a new
certificate or to make a memorandum of registration in accordance with such instrument, and the new
certificate or memorandum shall be binding upon the registered owner and upon all persons claiming
under him, in favor of every purchaser for value and in good faith.
Quite interesting, however, is the contention of the heirs of Eduardo that the surreptitious lending of the
owners duplicate certificate constitutes fraud within the ambit of the third paragraph of Section 53 which
could nullify the eventual issuance of the TCTs. Yet we cannot subscribe to their position.
Impelled by the inaction of the heirs of Eduardo as to their claim, the Cruzes went to the bank where the
property was mortgaged. Through its manager and legal officer, they were assured of recovery of the
claimed parcel of land since they are the successors-in-interest of the real owner thereof. Relying on
the bank officers opinion as to the legality of the means sought to be employed by them and the
suggestion of the Central Bank officer that the matter could be best settled between them and the bank,
the Cruzes pursued the titling of the claimed portion in the name of Ricardo. The Register of Deeds
eventually issued the disputed TCTs.
The Cruzes resorted to such means to protect their interest in the property that rightfully belongs to
them only because of the bank officers acquiescence thereto. The Cruzes could not have secured a
separate TCT in the name of Ricardo without the banks approval. Banks, their business being
impressed with public interest, are expected to exercise more care and prudence than private
individuals in their dealings, even those involving registered lands.[50] The highest degree of diligence
is expected, and high standards of integrity and performance are even required of it.[51]
Indeed, petitioners contend that the mortgagee cannot question the veracity of the registered title of the
mortgagor as noted in the owners duplicate certificate, and, thus, he cannot deliver the certificate to
such third persons invoking an adverse, prior, and unregistered claim against the registered title of the
mortgagor. The strength of this argument is diluted by the peculiar factual milieu of the case.
A mortgagee can rely on what appears on the certificate of title presented by the mortgagor and an
innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the
mortgagors title. This rule is strictly applied to banking institutions. A mortgagee-bank must exercise
due diligence before entering into said contract. Judicial notice is taken of the standard practice for
banks, before approving a loan, to send representatives to the premises of the land offered as collateral
and to investigate who the real owners thereof are.[52]
Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than
private individuals, as their business is one affected with public interest. Banks keep in trust money
belonging to their depositors, which they should guard against loss by not committing any act of
negligence that amounts to lack of good faith. Absent good faith, banks would be denied the protective
mantle of the land registration statute, Act 496, which extends only to purchasers for value and good
faith, as well as to mortgagees of the same character and description.[53] Thus, this Court clarified that
the rule that persons dealing with registered lands can rely solely on the certificate of title
does not apply to banks.[54]
Bank Liable for Nominal Damages
Of deep concern to this Court, however, is the fact that the bank lent the owners duplicate of the OCT
to the Cruzes when the latter presented the instruments of conveyance as basis of their claim of
ownership over a portion of land covered by the title. Simple rationalization would dictate that a
mortgagee-bank has no right to deliver to any stranger any property entrusted to it other than to those
contractually and legally entitled to its possession. Although we cannot dismiss the banks
acknowledgment of the Cruzes claim as legitimized by instruments of conveyance in their possession,
we nonetheless cannot sanction how the bank was inveigled to do the bidding of virtual strangers.
Undoubtedly, the banks cooperative stance facilitated the issuance of the TCTs. To make matters
worse, the bank did not even notify the heirs of Eduardo. The conduct of the bank is as dangerous as it
is unthinkably negligent. However, the aspect does not impair the right of the Cruzes to be recognized
as legitimate owners of their portion of the property.
Undoubtedly, in the absence of the banks participation, the Register of Deeds could not have issued
the disputed TCTs. We cannot find fault on the part of the Register of Deeds in issuing the TCTs as his
authority to issue the same is clearly sanctioned by law. It is thus ministerial on the part of the Register
of Deeds to issue TCT if the deed of conveyance and the original owners duplicate are presented to
him as there appears on theface of the instruments no badge of irregularity or nullity.[55] If there is
someone to blame for the shortcut resorted to by the Cruzes, it would be the bank itself whose manager
and legal officer helped the Cruzes to facilitate the issuance of the TCTs.
The bank should not have allowed complete strangers to take possession of the owners duplicate
certificate even if the purpose is merely for photocopying for a danger of losing the same is more than
imminent. They should be aware of the conclusive presumption in
Section 53. Such act constitutes manifest negligence on the part of the bank which would necessarily
hold it liable for damages under Article 1170 and other relevant provisions of the Civil Code.[56]
In the absence of evidence, the damages that may be awarded may be in the form of nominal
damages. Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.[57] This award rests on the mortgagors right to
rely on the banks observance of the highest diligence in the conduct of its business. The act of RBSP of
entrusting to respondents the owners duplicate certificate entrusted to it by the mortgagor without even
notifying the mortgagor and absent any prior investigation on the veracity of respondents claim and
character is a patent failure to foresee the risk created by the act in view of the provisions of Section 53
of P.D. No. 1529. This act runs afoul of every banks mandate to observe the highest degree of
diligence in dealing with its clients. Moreover, a mortgagor has also the right to be afforded due process
before deprivation or diminution of his property is effected as the OCT was still in the name of Eduardo.
Notice and hearing are indispensable elements of this right which the bank miserably ignored.
Under the circumstances, the Court believes the award of P50,000.00 as nominal damages is
appropriate.
Five-Year Prohibition against alienation or encumbrance under the Public Land Act
One vital point. Apparently glossed over by the courts below and the parties is an aspect which is
essential, spread as it is all over the record and intertwined with the crux of the controversy, relating as
it does to the validity of the dispositions of the subject property and the mortgage thereon. Eduardo was
issued a title in 1976 on the basis of his free patent application. Such application implies the recognition
of the public dominion character of the land and, hence, the five (5)-year prohibition imposed by the
Public Land Act against alienation or encumbrance of the land covered by a free patent or
homestead[58] should have been considered.

The deed of sale covering the fifty (50)-square meter right of way executed by Eduardo on 18 March
1981 is obviously covered by the proscription, the free patent having been issued on 8 October 1976.
However, petitioners may recover the portion sold since the prohibition was imposed in favor of the free
patent holder. In Philippine National Bank v. De los Reyes,[59] this Court ruled squarely on the point,
thus:

While the law bars recovery in a case where the object of the contract is contrary to law and one or both
parties acted in bad faith, we cannot here apply the doctrine of in pari delicto which admits of an
exception, namely, that when the contract is merely prohibited by law, not illegal per se, and the
prohibition is designed for the protection of the party seeking to recover, he is entitled to the relief
prayed for whenever public policy is enhanced thereby. Under the Public Land Act, the prohibition to
alienate is predicated on the fundamental policy of the State to preserve and keep in the family of the
homesteader that portion of public land which the State has gratuitously given to him, and recovery is
allowed even where the land acquired under the Public Land Act was sold and not merely encumbered,
within the prohibited period.[60]

The sale of the 553 square meter portion is a different story. It was executed in 1954, twenty-two (22)
years before the issuance of the patent in 1976. Apparently, Eduardo disposed of the portion even
before he thought of applying for a free patent. Where the sale or transfer took place before the filing of
the free patent application, whether by the vendor or the vendee, the prohibition should not be applied.
In such situation, neither the prohibition nor the rationale therefor which is
to keep in the family of the patentee that portion of the public land which the government has
gratuitously given him, by shielding him from the temptation to dispose of his landholding, could be
relevant. Precisely, he had disposed of his rights to the lot even before the government could give the
title to him.

The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was forged in
December 1981 a few months past the period of prohibition.

WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject to the modifications herein.
Respondent Rural Bank of San Pascual is hereby ORDERED to PAY petitioners Fifty Thousand Pesos
(P50,000.00) by way of nominal damages. Respondents Consuelo Cruz and Rosalina Cruz-Bautista
are hereby DIVESTED of title to, and respondent Register of Deeds of Meycauayan, Bulacan is
accordingly ORDERED to segregate, the portion of fifty (50) square meters of the subject Lot No. 2204,
as depicted in the approved plan covering the lot, marked as Exhibit A, and to issue a new title covering
the said portion in the name of the petitioners at the expense of the petitioners. No costs.

SO ORDERED.
WILFREDO T. VAGILIDAD G.R. No. 161136
and LOLITA A. VAGILIDAD,
Petitioners,
- versus -
SANDOVAL -GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
GABINO VAGILIDAD, JR.
PUNO, J.:
This is a Petition for Review on Certiorari of the Decision[1] and Resolution[2]of the Court of Appeals in
CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, reversing and
setting aside the decision of the Regional Trial Court of Antique, Sixth Judicial Region, Branch II, in Civil
Case No. 2825 dated January 26, 1999.
The facts are stated in the assailed Decision[3] of the appellate court, viz.:
A parcel of land, Lot No. 1253, situated in Atabay, San Jose, Antique, measuring 4,280 square meters,
was owned by Zoilo [Labiao] (hereafter ZOILO) as per Original Certificate of Title No. RO-2301 issued
on March 3, 1931. Sometime in 1931, ZOILO died. Subsequently, on May 12, 1986,
Loreto Labiao(hereafter LORETO), son of ZOILO, sold to Gabino Vagilidad Jr. (hereafter GABINO JR.)
a portion of Lot No. 1253 (hereafter Lot 1253-B), measuring 1,604 square meters as evidenced by the
Deed of Absolute Sale executed by LORETO.
In view of the death of ZOILO, his children, LORETO, Efren Labiao(hereafter EFREN) and
Priscilla Espanueva (hereafter PRISCILLA) executed an Extrajudicial x x x Settlement of Estate dated
January 20, 1987, adjudicating the entire Lot No. 1253, covering 4,280 square meters, to LORETO.
On January 29, 1987, Transfer Certificate of Title (TCT) No. T-16693 was issued in favor of LORETO,
EFREN and PRISCILLA, but on even date, TCT No. T-16693 was cancelled and TCT No. T-16694,
covering the said property, was issued in the name of LORETO alone.
On July 31, 1987, GABINO JR., as petitioner, filed a Petition for the Surrender of TCT No. T-16694,
covering Lot No. 1253, with the Regional TrialCourt of San Jose City, Sixth Judicial Region, against
LORETO, docketed as Cadastral Case No. 87-731-A. The plaintiff alleged that, being the owner of
x x xLot No. 1253-B, under TCT No. T-16694, by virtue of the sale that took place on May 12, 1986, he
is entitled to ask for the surrender of the owners copy of TCT No. T-16694 to the Register of Deeds of
Antique in order to effect the transfer of title to the name of the petitioner. However, as per motion of
both counsels[,] since the parties seemed to have already reached an amicable settlement without the
knowledge of their counsels, the trial court issued an Order dated March 21, 1994 sending the case to
the archives.
On September 21, 1988, [GABINO JR.] paid real estate taxes on the land he bought from LORETO as
per Tax Declaration No. 1038 where the property was specified as Lot No. 1253-B. GABINO JR.
thereafter sold the same lot to Wilfredo Vagilidad (hereafter WILFREDO) as per Deed of Absolute
Sale dated December 7, 1989. On even date, Deed of Absolute Sale of a Portion of Land involving the
opt-described property was also executed by LORETO in favor of WILFREDO. The aforementioned
deeds, which were both executed on December 7, 1989 [and] notarized by Atty. Warloo Cardenal[,]
[appear] to have been given the same entry number in his notarial books as both contained the
designation Document No. 236, Page No. 49, Book No. XI, Series of 1989[.]
Corollarily, on February 14, 1990, the sale of Lot No. 1253-B to WILFREDO was registered with the
Registry of Deeds of the Province of Antiqueunder Entry No. 180425. Consequently, TCT No. T-18023,
cancelling TCT No. 16694, was issued in favor of WILFREDO pursuant to the Deed of Absolute Sale
dated December 7, 1989.
On October 24, 1991, spouses WILFREDO and LOLITA obtained a loan from the Philippine National
Bank (PNB for brevity) in the amount of P150,000.00 and mortgaged Lot No. 1253-B as collateral of the
said loan and the transaction was inscribed at the back of TCT No. 18023 as Entry No. 186876.
Subsequently, the xxx real estate mortgage was cancelled under Entry No. 191053 as per inscription
dated November 17, 1992 in xxx TCT No. 18023.
Subsequently, WILFREDO obtained another loan from Development Bank of the Philippines (DBP for
brevity) in the amount of P200,000.00 and mortgaged Lot No. 1253-B as collateral of the xxx loan and
the transaction was inscribed at the back of TCT No. 18023 as Entry No. 196268. The said loan was
paid and, consequently, the mortgage was cancelled as Entry No. 202500.
On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter DOROTHY), as
plaintiffs, filed a Complaint for Annulment of Document, Reconveyance and Damages, with the
Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, against spouses WILFREDO and
Lolita Vagilidad (hereafter LOLITA), docketed as Civil Case No. 2825. The plaintiffs claimed that they
are the lawful owners of Lot No. 1253-B which was sold to him by LORETO in 1986. They alleged that
[GABINO JR.] is a nephew of defendant WILFREDO. They likewise raised that when GABINO SR.
died, defendant WILFREDO requested GABINO JR. to transfer the ownership of Lot No. 1253-B in
defendantWILFREDOs name for loaning purposes with the agreement that the land will be returned
when the plaintiffs need the same. They added that, pursuant to the mentioned agreement, plaintiff
GABINO JR., without the knowledge and consent of his spouse, DOROTHY, executed the Deed of
Sale dated December 7, 1989 in favor of defendant WILFREDO receiving nothing as payment therefor.
They pointed out that after defendant WILFREDO was able to mortgage the property, plaintiffs
demanded the return of the property but the defendants refused to return the same. The plaintiffs
claimed that the same document is null and void for want of consideration and the same does not bind
the non-consenting spouse. They likewise prayed that the defendant be ordered to pay the plaintiffs not
less than P100,000.00 as actual and moral damages, P10,000.00 as attorneys fees and P5,000.00 as
litigation expenses.
For their part, the defendants, on January 15, 1996, filed their Answer, denying the material allegations
of the plaintiffs. Defendants claimed that they are the lawful owners of Lot No. 1253-B. They alleged
that LORETO, with conformity of his wife, sold to them Lot No. 1253 on December 7, 1989
for P5,000.00 and the transaction was registered with the Register of Deeds of the Province of Antique
under Entry No. 180425. They added that, subsequently, TCT No. T-18023, covering Lot No. 1253-B,
was issued in favor of the defendants. Hence, they claimed that the plaintiffs be directed to pay the
defendants P200,000.00 as moral damages, P50,000.00 as exemplary damages, P20,000.00 as
attorneys fees and P30,000.00 for litigation expenses.[4]
The trial court ruled in favor of petitioners WILFREDO and LOLITA and held that LORETO did not
validly convey Lot No. 1253-B to GABINO, JR. on May 12, 1986 since at that time, the heirs of ZOILO
had not partitioned Lot No. 1253.[5] It ruled that LORETO could only sell at that time his aliquot share in
the inheritance. He could not have sold a divided part thereof designated by metes and bounds. Thus, it
held that LORETO remained the owner of the subject lot when he sold it to WILFREDO on December
7, 1989. It further found that there was no proof that WILFREDO knew of the sale that took place
between LORETO and GABINO, JR. on May 12, 1986. The dispositiveportion of the decision states:
WHEREFORE, in view of the foregoing pronouncements and a preponderance of evidence, judgment
is hereby rendered:
1. FINDING the defendants WILFREDO VAGILIDAD and LOLITA VAGILIDAD to have duly acquired
ownership of Lot No. 1253-B containing an area of 1,604 square meters, more or less, situated in San
Jose, Antique;
2. SUSTAINING the validity of Transfer Certificate of Title No. T-18023 covering the subject Lot No.
1253-B and issued in the name of the defendant WILFREDO VAGILIDAD, married to the defendant
LOLITA VAGILIDAD;
3. DISMISSING the complaint of the plaintiffs GABINO VAGILIDAD, JR. and MA. DOROTHY
VAGILIDAD, as well as the counterclaims of the defendants WILFREDO VAGILIDAD and LOLITA
VAGILIDAD and of the defendants LORETO LABIAO and FRANCISCA LABIAO; and
4. PRONOUNCING no cost.[6]
GABINO, JR. and DOROTHY filed an appeal with the Court of Appeals. The appellate court reversed
and set aside the decision of the court a quo, viz.:
WHEREFORE, premises considered, the Decision dated January 26, 1999 of the Regional Trial Court
of Antique, Sixth Judicial Region, Branch 11, in Civil Case No. 2825, is hereby REVERSED and SET
ASIDE and a new one is entered: (1) declaring the Deed of Absolute Sale [of Portion of Land] dated
December 7, 1989 executed by appellee LORETO in favor of appellee WILFREDO null and void; (2)
ordering the defendants-appellees WILFREDO and LOLITA to reconvey Lot No. 1253-B to plaintiffs-
appellants GABINO, JR. and DOROTHY; and (3)
ordering the defendants-appellees to pay the plaintiffs-appellants P100,000.00 as moral
damages, P10,000.00 as attorneys fees and P5,000.00 as litigation expenses.[7]
The appellate court ruled that the sale made by LORETO in favor of GABINO, JR. on May 12, 1986 is
valid. The rights of LORETO to succession are transmitted from the moment of ZOILOs death in 1931.
Thus, when LORETO sold the 1,604-square meter portion of Lot No. 1253 to GABINO JR., he already
had the right as co-owner to his share to Lot No. 1253, even if at that time the property had not yet
been partitioned. Consequently, the sale made by LORETO in favor of WILFREDO on December 7,
1989 is void because LORETO and FRANCISCA were no longer the owners of Lot No. 1253-B as of
that time. The appellate court also held WILFREDO and LOLITA liable for moral damages for falsifying
the fictitious deeds of sale on December 7, 1989.
WILFREDO and LOLITA moved for reconsideration but the motion was denied in the questioned
Resolution dated November 13, 2003. Hence, this petition for review on certiorari raising the following
errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1349 AND ARTICLE
1460 OF THE NEW CIVIL CODE IN THE CASE AT BAR.
II
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISION OF
ARTICLE 1544 OF THE NEW CIVIL CODE AND THE DOCTRINE OF DOUBLE SALE THAT THE
BUYER WHO IS IN POSSESSION OF THE TORRENS TITLE AND HAD THE DEED
OF SALE REGISTERED MUST PREVAIL.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1391 OF THE NEW
CIVIL CODE AND THE DOCTRINE THAT IN CASE OF FRAUD, ACTION FOR RECONVEYANCE
MUST BE BROUGHT WITHIN FOUR (4) YEARS FROM THE DISCOVERY OF THE FRAUD.
IV
THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PRIVATE RESPONDENT MORAL
DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES.[8]
We deny the petition.
I
First, petitioners contend that the Deed of Absolute Sale between LORETO and GABINO, JR. does not
have a determinate object. They anchor their claim on the following discrepancies: (1) the object of the
Deed of Absolute Sale between LORETO and GABINO, JR. is Lot No. 1253 with an area of 1,604
square meters; (2) the object of the Deed of Absolute Sale of Portion of Land between LORETO and
WILFREDO is a portion of Lot No. 1253, known as Lot No. 1253-B, also with an area of 1,604 square
meters;[9] (3) the Deed of Absolute Sale between LORETO and GABINO, JR. shows that its object, Lot
No. 1253, is not registered under the Land Registration Act nor under the Spanish Mortgage Law; and
(4) the property subject of this action, Lot No. 1253-B, was taken from Lot No. 1253 containing an area
of 4,280 square meters previously registered in the name of ZOILO under Original Certificate of Title
(OCT) No. RO-2301.[10] With these discrepancies, petitioners contend that either the Deed of Absolute
Sale between LORETO and GABINO, JR. does not have a determinate object or that Lot No. 1253-B,
the subject parcel, is not the object thereof. Hence, absent a determinate object, the contract is void.
They rely on Articles 1349 and 1460 of the Civil Code, viz.:
Art. 1349. The object of every contract must be determinate, as to its kind. The fact that the quantity is
not determinate shall not be an obstacle to the existence of the contract, provided it is possible to
determine the same, without the need of a new contract between the parties.
Art. 1460. A thing is determinate when it is particularly designated or physically segregated from all
others of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing
is capable of being made determinate without the necessity of a new or further agreement between the
parties.
Petitioners err. The evidence on record shows that Lot No. 1253-B, the subject parcel, and the lot
described as Lot No. 1253 in the Deed of Absolute Sale of May 12, 1986 between LORETO and
GABINO, JR., are the same. In the Deed of Absolute Sale, Lot No. 1253 is described, viz.:
A parcel of land (Lot No. 1253 of the Cadastral Survey of San Jose), with the improvements thereon.
Bounded on the North [by] 1254 and 1255; on the South by road; on the East by 1253 and road on the
West by 1240-Angel Salazar; containing an area of 1,604 square meters more or less declared under
Tax Declaration No. 4159.[11]
In the Deed of Absolute Sale of Portion of Land of December 7, 1989 between LORETO and
WILFREDO, the subject parcel is described, viz.:
A parcel of land (Lot No. 1253. Ap-06-00271) of the Cadastral Survey of San Jose, LRC Cad. Rec. No.
936), situated at Atabay, San Jose, Antique. Bounded on the N. and E. along lines 1-2-3 by lot 1255;
San Jose Cadastre; on the S. along line 3-4 by Road; on the W. along line 4-5 by Lot 1240; San Jose
Cadastre; and on the N. along line 5-1 by Lot 1254, San Jose Cadastre containing an area of [Four]
Thousand Two Hundred Eighty (4,280) square meters, more or less.
of which a portion of land subject of this sale is hereinbelow (sic) particularly described as follows, to
wit:
A portion of Lot No. 1253-B of the Cadastral Survey of San Jose, situated at Atabay, San Jose,
Antique. Bounded on the North by Lot No. 1254; South by Road; West by Lot 1253-A; and on the East
by Lot No. 1253-C; containing an area of 1,604 square meters, more or less.[12]
The description of Lot No. 1253, the object of the Deed of Absolute Sale, as not registered under Act
No. 196[,] otherwise known as the Land Registration Act, nor under the Spanish Mortgage Law[13] is a
stray description of the subject parcel. It is uncorroborated by any evidence in the records. This
description solely appears on the Deed of Absolute Sale and the discrepancy was not explained by
LORETO who signed the Deed of Absolute Sale as vendor. LORETO does not, in fact, deny the
existence of the Deed of Absolute Sale. He merely counters that the Deed of Absolute Sale was
purportedly a mortgage. However, LORETOs claim that it was one of mortgage is clearly negated by a
Certification[14] issued by the Bureau of Internal Revenue dated May 12, 1986. It certified that
LORETO was not required to pay the capital gains tax on the transfer of Lot No. 1253 to GABINO, JR.
because the property was classified as an ordinary asset.
To be sure, petitioners could have easily shown that LORETO owned properties other than Lot No.
1253 to bolster their claim that the object of the Deed of Absolute Sale was different from Lot No. 1253-
B which is the object described in the Deed of Absolute Sale of Portion of Land. They did not proffer
any evidence.
The trial court itself comprehensively traced the origin of Lot No. 1253-B. It clearly demonstrated that
the subject parcel was originally part of the registered lot of ZOILO. It also showed how the subject
parcel was eventually bounded by Lot No. 1253-A on the West and by Lot No. 1253-C on the East, as
the lot would be later described in the Deed of Absolute Sale of Portion of Land.
The trial court found that ZOILO previously owned Lot No. 1253 under OCT No. RO-2301 issued
on March 3, 1931. On November 14, 1986, Entry No. 167922 was inscribed in the certificate of title, per
Order dated March 30, 1978 of Judge Noli Ma. Cortes of the then Court of First Instance of Antique,
stating that it was a reconstituted certificate of title.[15] Lot No. 1253 was subdivided by virtue of a
subdivision plan dated June 19, 1987. On January 20, 1987, an Extrajudicial Settlement of Estate
executed by LORETO, EFREN and PRISCILLA was entered as Entry No. 170722. The OCT of ZOILO
was cancelled by TCT No. T-16693 in the names of LORETO, EFREN and PRISCILLA on January 29,
1987. TCT No. T-16693 was cancelled on the same day by TCT No. T-16694 in the name of LORETO
alone. The TCT was partially cancelled by the issuance of TCTs covering Lot Nos. 1253-A, 1253-C and
1253-D. The TCT of Lot No. 1253-B was issued in the name of WILFREDO married to LOLITA
on February 15, 1990. WILFREDOs TCT No. T-18023 appears to be a transfer from LORETOs TCT
No. T-16694.
II
Next, petitioners contend that the appellate court should have upheld the title of WILFREDO under
Article 1544 of the Civil Code and the doctrine of double sale where the buyer who is in possession of
the Torrens Title must prevail.[16]First, petitioners title was issued pursuant to the purported Deed of
Absolute Sale of Portion of Land dated December 7, 1989. Second, WILFREDO did not see any
encumbrance at the back of the title of the subject lot when he purchased it from LORETO
on December 7, 1989. Thus, since he is not bound to go beyond the certificate of title, he has acquired
the subject property in due course and in good faith.
We disagree. Article 1544 of the Civil Code states, viz.:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the person who presents the oldest title, provided there
is good faith.
Petitioners reliance on Article 1544 is misplaced. While title to the property was issued
in WILFREDOs name on February 15, 1990, the following circumstances show that he registered the
subject parcel with evident bad faith.
First, the Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO and
WILFREDO is tainted with blatant irregularities. It is a fact that the Deed of Absolute Sale of Portion of
Land and the Deed of Absolute Sale between GABINO, JR. and WILFREDO are of even date. Both
Deeds had the same object Lot No. 1253-B. Both deeds were notarized by Atty. Warloo Cardenal and
bear the same entry in his notarial register: Document No. 236, Page No. 49, Book No. XI, Series of
1989.
Second, the testimony of a disinterested witness, Febe Mabuhay, established the irregularity. Mabuhay
used to work as secretary for Atty. Cardenal and co-signed as witness in both Deeds. She stated that
Atty. Cardenal instructed her to prepare the two documents in the last week of November 1989. She
was present when GABINO, JR. signed the Deed of Absolute Sale. She testified that after GABINO,
JR. left, LORETO and his wife FRANCISCA arrived and signed the Deed of Absolute Sale of Portion of
Land.[17] The Decision of the court a quo further states, viz.:
[Mabuhay testified that when she prepared the two documents, she] noticed the similarity of Lot No.
1253 as technically described in both documents but she did not call the attention of Atty. Warlo[o]
Cardenal. [She likewise stated that Atty. Cardenal] specifically instructed her to assign the same
document number to the two documents notarized on December 7, 1989.[18]
Third, the testimony of Atty. Ernesto Estoya, then Clerk of Court of the Regional Trial Court of Antique,
supports the claim that there was bad faith in the execution of the Deed of Absolute Sale of Portion of
Land. Atty. Estoya brought the notarial record of Atty. Cardenal for the year 1989 pursuant to a
subpoena. He stated that he had not brought both Deeds as required in the subpoena because Doc.
No. 236; Page No. 49; Book No. XI; Series of 1989 as entered in the notarial register of Atty. Cardenal
could not be found in the files. He further explained that the last document on page 48 of the notarial
register of Atty. Cardenal is Document No. 235, while the first document on page 49 is Document No.
239, leaving three unexplained gaps for document numbers 236, 237 and 238. Atty. Estoya stated that
he was not the one who received the 1989 notarial register of Atty. Cardenal when the latter
surrendered it since he assumed office only in 1994.[19]
Fourth, we give credence to the testimony of GABINO, JR. that LORETO and WILFREDO had
employed the scheme to deprive him and his wife of their lawful title to the subject property. The facts
speak for themselves. WILFREDO knew that he could not use the Deed of Absolute Sale executed in
his favor by GABINO, JR. because the latter had no title to transfer. Without a title, WILFREDO could
not use the subject property as collateral for a bank loan. Hence, LORETO, who had refused to
surrender the title to GABINO, JR. and in whose name the land remained registered, had to execute the
Deed of Absolute Sale of Portion of Land in favor of WILFREDO. Hence, it was convenient for
WILFREDO to deny the existence of the Deed of Absolute Sale of December 7, 1989 between him and
GABINO, JR. But the evidence on record shows that after he was able to register the subject property
in his name on February 15, 1990, WILFREDO used the title as collateral in the loans that he
contracted with the Philippine National Bank on October 24, 1991 and the Development Bank of
the Philippines on December 1, 1993. This supports the claim of GABINO, JR. that WILFREDO needed
the lot for loaning purposes.
With these corroborating circumstances and the following irrefragable documents on record, the
evidence preponderates in favor of GABINO, JR. One, he acquired Lot No.1253-B from LORETO
on May 12, 1986[20] by virtue of the Deed of Absolute Sale. Two, the Bureau of Internal Revenue
issued a Certification, also on May 12, 1986, for the exemption from the payment of capital gains tax
when LORETO sold to him the subject parcel. Three, GABINO, JR. paid the real estate tax on the
subject parcel in 1987. Four, he filed a Petition for the Surrender of LORETOs title on July 31, 1987 so
he could transfer the title of the property in his name.
Petitioners likewise err in their argument that the contract of sale between LORETO and GABINO, JR.
is void on the ground that at the time of the sale on May 12, 1986, LORETO had a right to dispose only
an aliquot part of the yet undivided property of ZOILO. The subject parcel, being an inherited property,
is subject to the rules of co-ownership under the Civil Code.
Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a
thing, not materially or physically divided.[21]Before the partition of the property held in common, no
individual or co-owner can claim title to any definite portion thereof. All that the co-owner has is an ideal
or abstract quota or proportionate share in the entire property.[22]
LORETO sold the subject property to GABINO, JR. on May 12, 1986 as a co-owner. LORETO had a
right, even before the partition of the property on January 19, 1987,[23] to transfer in whole or in part his
undivided interest in the lot even without the consent of his co-heirs. This right is absolute in
accordance with the well-settled doctrine that a co-owner has full ownership of his pro-indiviso share
and has the right to alienate, assign or mortgage it, and substitute another person for its
enjoyment.[24] Thus, what GABINO, JR. obtained by virtue of the sale on May 12, 1986 were the same
rights as the vendor LORETO had as co-owner, in an ideal share equivalent to the consideration given
under their transaction.[25]
LORETO sold some 1,604 square meters of Lot No. 1253 to GABINO, JR. Consequently, when
LORETO purportedly sold to WILFREDO on December 7, 1989 the same portion of the lot, he was no
longer the owner of Lot No. 1253-B. Based on the principle that no one can give what he does not
have,[26]LORETO could not have validly sold to WILFREDO on December 7, 1989 what he no longer
had. As correctly pointed out by the appellate court, the sale made by LORETO in favor of WILFREDO
is void as LORETO did not have the right to transfer the ownership of the subject property at the time of
sale.
III
Petitioners contend that since the subdivision plan of Lot No. 1253 was only approved on January 19,
1987, the appellate court can not presume
that the aliquot part of LORETO was the parcel designated as Lot 1253-B.[27]
Petitioners err. The mere fact that LORETO sold a definite portion of the co-owned lot by metes and
bounds before partition does not, per se, render the sale a nullity. We held in Lopez v. Vda.
De Cuaycong[28] that the fact that an agreement purported to sell a concrete portion of a co-owned
property does not render the sale void, for it is well-established that the binding force of a contract must
be recognized as far as it is legally possible to do so.[29]
In the case at bar, the contract of sale between LORETO and GABINO, JR. on May 12, 1986 could be
legally recognized. At the time of sale, LORETO had an aliquot share of one-third of the 4,280-square
meter property or some 1,426[30]square meters but sold some 1,604 square meters to GABINO, JR.
We have ruled that if a co-owner sells more than his aliquot share in the property, the sale will affect
only his share but not those of the other co-owners who did not consent to the sale.[31] Be that as it
may, the co-heirs of LORETO waived all their rights and interests over Lot No. 1253 in favor of
LORETO in an Extrajudicial Settlement of Estate dated January 20, 1987. They declared that they have
previously received their respective shares from the other estate of their parents ZOILO and
PURIFICACION.[32] The rights of GABINO, JR. as owner over Lot No. 1253-B are thus preserved.
These rights were not effectively transferred by LORETO to WILFREDO in the Deed of Absolute Sale
of Portion of Land. Nor were these rights alienated from GABINO, JR. upon the issuance of the title to
the subject property in the name of WILFREDO. Registration of property is not a means of acquiring
ownership.[33] Its alleged incontrovertibility cannot be successfully invoked by WILFREDO because
certificates of title cannot be used to protect a usurper from the true owner or be used as a shield for
the commission of fraud.[34]
IV
On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that an
action for reconveyance based on fraud prescribes after the lapse of four years.[35] They cite Article
1391[36] of the Civil Code and the case of Gerona v. De Guzman.[37]
We disagree. This Court explained in Salvatierra v. Court of Appeals,[38]viz.: IN VIEW WHEREOF, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, are
An action for reconveyance based on an implied or constructive trust must perforce prescribe AFFIRMED in toto. Costs against petitioners.
in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an
implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the
property. The only discordant note, it seems, is Balbin v. Medalla, which states that the prescriptive SO ORDERED.
period for a reconveyance action is four years. However, this variance can be explained by the
erroneous reliance on Gerona v. de Guzman. But in Gerona, the fraud was discovered on June 25,
1948, hence Section 43(3) of Act No. 190 was applied, the New Civil Code not coming into effect until
August 30, 1950 xxx. It must be stressed, at this juncture, that Article 1144 and Article 1456 are new
provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the
latter being then resorted to as legal basis of the four-year prescriptive period for an action for
reconveyance of title of real property acquired under false pretenses.[39]

[Thus,] under the present Civil Code, xxx just as an implied or constructive trust is an offspring of xxx
Art. 1456, xxx so is the corresponding obligation to reconvey the property and the title thereto in favor of
the true owner. In this context, and vis--vis prescription, Article 1144 of the Civil Code is
applicable[, viz.:]

Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:

1) Upon a written contract;

2) Upon an obligation created by law;
3) Upon a judgment.[40] (emphases supplied)

Thus, in the case at bar, although the TCT of WILFREDO became indefeasible after the lapse of one
year from the date of registration, the attendance of fraud in its issuance created an implied trust in
favor of GABINO, JR. under Article 1456[41] of the Civil Code. Being an implied trust, the action for
reconveyance of the subject property therefore prescribes within a period of ten years from February
15, 1990. Thus, when respondents filed the instant case with the court a quo on September 26, 1995, it
was well within the prescriptive period.
V
On the issue of damages, petitioners contend that the grant is erroneous and the alleged connivance
between Atty. Cardenal and WILFREDO lacks basis.

We disagree. The evidence on record is clear that petitioners committed bad faith in the execution of
the purported Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO
and WILFREDO. As stated by the appellate court, viz.:
xxxx From the series of events, it can be reasonably inferred that appellees WILFREDO, LORETO and
Atty. Cardenal connived in attempting to deprive appellants of Lot No. 1253-B, hence, the appellants
entitlement to moral damages. Further, it is a well-settled rule that attorneys fees are allowed to be
awarded if the claimant is compelled to litigate with third persons or to incur expenses to protect his
interest by reason of an unjustified act or omission of the party for whom it is sought. xxxx To protect
themselves, the appellants engaged the services of counsel and incurred expenses in the course of
litigation. Hence, we deem it equitable to award attorneys fees to the appellant xxx.[42]
G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, respondents.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate Appellate Court (now
Court of Appeals) dated December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano,
Plaintiff- Appellee versus National Grains Authority and William Cabal, Defendants Appellants", which
affirmed the decision of the Court of First Instance of Cagayan, in Civil Case No. 2754 and its resolution
(p. 28, Rollo) dated April 17, 1986 which denied the Motion for Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority, NFA for short) is a government
agency created under Presidential Decree No. 4. One of its incidental functions is the buying of palay
grains from qualified farmers.
On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to the NFA, through
William Cabal, the Provincial Manager of NFA stationed at Tuguegarao, Cagayan. He submitted the
documents required by the NFA for pre-qualifying as a seller, namely: (1) Farmer's Information Sheet
accomplished by Soriano and certified by a Bureau of Agricultural Extension (BAEX) technician,
Napoleon Callangan, (2) Xerox copies of four (4) tax declarations of the riceland leased to him and
copies of the lease contract between him and Judge Concepcion Salud, and (3) his Residence Tax
Certificate. Private respondent Soriano's documents were processed and accordingly, he was given a
quota of 2,640 cavans of palay. The quota noted in the Farmer's Information Sheet represented the
maximum number of cavans of palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered 630
cavans of palay. The palay delivered during these two days were not rebagged, classified and weighed.
when Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be
held in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was
not a bona tide farmer and the palay delivered by him was not produced from his farmland but was
taken from the warehouse of a rice trader, Ben de Guzman. On August 28, 1979, Cabal wrote Soriano
advising him to withdraw from the NFA warehouse the 630 cavans Soriano delivered stating that NFA
cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX
technician, Napoleon Callangan that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, private respondent Soriano insisted that the palay
grains delivered be paid. He then filed a complaint for specific performance and/or collection of money
with damages on November 2, 1979, against the National Food Authority and Mr. William Cabal,
Provincial Manager of NFA with the Court of First Instance of Tuguegarao, and docketed as Civil Case
No. 2754.
Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in
question were withdrawn from the warehouse of NFA. An inventory was made by the sheriff as
representative of the Court, a representative of Soriano and a representative of NFA (p. 13, Rollo).
On September 30, 1982, the trial court rendered judgment ordering petitioner National Food Authority,
its officers and agents to pay respondent Soriano (as plaintiff in Civil Case No. 2754) the amount of P
47,250.00 representing the unpaid price of the 630 cavans of palay plus legal interest thereof (p. 1-2,
CA Decision). The dispositive portion reads as follows:
WHEREFORE, the Court renders judgment in favor of the plaintiff and against the defendants National
Grains Authority, and William Cabal and hereby orders:
1. The National Grains Authority, now the National Food Authority, its officers and agents, and Mr.
William Cabal, the Provincial Manager of the National Grains Authority at the time of the filing of this
case, assigned at Tuguegarao, Cagayan, whomsoever is his successors, to pay to the plaintiff Leon T.
Soriano, the amount of P47,250.00, representing the unpaid price of the palay deliveries made by the
plaintiff to the defendants consisting of 630 cavans at the rate Pl.50 per kilo of 50 kilos per cavan of
palay;
2. That the defendants National Grains Authority, now National Food Authority, its officer and/or agents,
and Mr. William Cabal, the Provincial Manager of the National Grains Authority, at the time of the filing
of this case assigned at Tuguegarao, Cagayan or whomsoever is his successors, are likewise ordered
to pay the plaintiff Leon T. Soriano, the legal interest at the rate of TWELVE (12%) percent per annum,
of the amount of P 47,250.00 from the filing of the complaint on November 20, 1979, up to the final
payment of the price of P 47,250.00;
3. That the defendants National Grains Authority, now National Food Authority, or their agents and duly
authorized representatives can now withdraw the total number of bags (630 bags with an excess of 13
bags) now on deposit in the bonded warehouse of Eng. Ben de Guzman at Tuguegarao, Cagayan
pursuant to the order of this court, and as appearing in the written inventory dated October 10, 1980,
(Exhibit F for the plaintiff and Exhibit 20 for the defendants) upon payment of the price of P 47,250.00
and TWELVE PERCENT (12%) legal interest to the plaintiff,
4. That the counterclaim of the defendants is hereby dismissed;
5. That there is no pronouncement as to the award of moral and exemplary damages and attorney's
fees; and
6. That there is no pronouncement as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was denied on December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate Appellate Court. In a decision
promulgated on December 23, 1986 (pp. 9-21, Rollo) the then Intermediate Appellate Court upheld the
findings of the trial court and affirmed the decision ordering NFA and its officers to pay Soriano the price
of the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of the appellate court's
decision was denied in a resolution dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority and Mr. William Cabal on May 15,
1986 assailing the decision of the Intermediate Appellate Court on the sole issue of whether or not
there was a contract of sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by Soriano on August 23, 1979 was made
only for purposes of having it offered for sale. Further, petitioners stated that the procedure then
prevailing in matters of palay procurement from qualified farmers were: firstly, there is a rebagging
wherein the palay is transferred from a private sack of a farmer to the NFA sack; secondly, after the
rebagging has been undertaken, classification of the palay is made to determine its variety; thirdly, after
the determination of its variety and convinced that it passed the quality standard, the same will be
weighed to determine the number of kilos; and finally, it will be piled inside the warehouse after the
preparation of the Warehouse Stock Receipt (WSP) indicating therein the number of kilos, the variety
and the number of bags. Under this procedure, rebagging is the initial operative act signifying
acceptance, and acceptance will be considered complete only after the preparation of the Warehouse
Stock Receipt (WSR). When the 630 cavans of palay were brought by Soriano to the Carig warehouse
of NFA they were only offered for sale. Since the same were not rebagged, classified and weighed in
accordance with the palay procurement program of NFA, there was no acceptance of the offer which, to
petitioners' mind is a clear case of solicitation or an unaccepted offer to sell.
The petition is not impressed with merit.
Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and
the other party to pay therefore a price certain in money or its equivalent. A contract, on the other hand,
is a meeting of minds between two (2) persons whereby one binds himself, with respect to the other, to
give something or to render some service (Art. 1305, Civil Code of the Philippines). The essential
requisites of contracts are: (1) consent of the contracting parties, (2) object certain which is the subject
matter of the contract, and (3) cause of the obligation which is established (Art. 1318, Civil Code of the
Philippines.
In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA. When
the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans,
there was already a meeting of the minds between the parties. The object of the contract, being the
palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its
quality. The fact that the exact number of cavans of palay to be delivered has not been determined
does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact
that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it
is possible to determine the same, without the need of a new contract between the parties." In this
case, there was no need for NFA and Soriano to enter into a new contract to determine the exact
number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not
exceed 2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners further contend that there
was no contract of sale because of the absence of an essential requisite in contracts, namely, consent.
It cited Section 1319 of the Civil Code which states: "Consent is manifested by the meeting of the offer
and the acceptance of the thing and the cause which are to constitute the contract. ... " Following this
line, petitioners contend that there was no consent because there was no acceptance of the 630
cavans of palay in question.
The above contention of petitioner is not correct Sale is a consensual contract, " ... , there is perfection
when there is consent upon the subject matter and price, even if neither is delivered." (Obana vs. C.A.,
L-36249, March 29, 1985, 135 SCRA 557, 560) This is provided by Article 1475 of the Civil Code which
states:
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.
xxx
The acceptance referred to which determines consent is the acceptance of the offer of one party by the
other and not of the goods delivered as contended by petitioners.
From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with their
mutual obligations or "the parties may reciprocally demand performance" thereof. (Article 1475, Civil
Code, 2nd par.).
The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is
that it (NFA) cannot legally accept the said delivery because Soriano is allegedly not a bona fide farmer.
The trial court and the appellate court found that Soriano was a bona fide farmer and therefore, he was
qualified to sell palay grains to NFA.
Both courts likewise agree that NFA's refusal to accept was without just cause. The above factual
findings which are supported by the record should not be disturbed on appeal.
ACCORDINGLY, the instant petition for review is DISMISSED. The assailed decision of the then
Intermediate Appellate Court (now Court of Appeals) is affirmed. No costs.
SO ORDERED.
[G.R. No. 104482. January 22, 1996]
BELINDA TAREDO, for herself and in representation of her brothers and sisters, and TEOFILA
CORPUZ TANEDO, representing her minor daughter VERNA TANEDO, petitioners, vs. THE COURT
OF APPEALS, SPOUSES RICARDO M. TAREDO AND TERESITA BARERA TAREDO, respondents.
Is a sale of future inheritance valid? In multiple sales of the same real property, who has preference in
ownership? What is the probative value of the lower courts finding of good faith in registration of such
sales in the registry of property? These are the main questions raised in this Petition for review on
certiorari under Rule 45 of the Rules of Court to set aside and reverse the Decision1 of the Court of
Appeals2 in CA-G.R. CV NO. 24987 promulgated on September 26, 1991 affirming the decision of the
Regional Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328, and its
Resolution denying reconsideration thereof, promulgated on May 27, 1992.
By the Courts Resolution on October 25, 1995, this case (along with several others) was transferred
from the First to the Third Division and after due deliberation, the Court assigned it to the
undersigned ponenle for the writing of this Decision.
The Facts
On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute sale in favor of his eldest
brother, Ricardo Taedo, and the latters wife, Teresita Barera, private respondents herein, whereby he
conveyed to the latter in consideration of P1,500.00, one hectare of whatever share I shall have over
Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by Title T-l3829 of the
Register of Deeds of Tarlac, the said property being his future inheritance from his parents (Exh. 1).
Upon the death of his father Matias, Lazaro executed an Affidavit of Conformity dated February 28,
1980 (Exh. 3) to re-affirm, respect. acknowledge and validate the sale I made in 1962. On January 13,
1981, Lazaro executed another notarized deed of sale in favor of private respondents covering his
undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh. 4). He acknowledged
therein his receipt of P 10,000.00 as consideration therefor. In February 1981, Ricardo learned that
Lazaro sold the same property to his children, petitioners herein, through a deed of sale
dated December 29, 1980 (Exh. E). On June 7, 1982, private respondents recorded the Deed of Sale
(Exh. 4) in their favor in the Registry of Deeds and the corresponding entry was made in Transfer
Certificate of Title No. 166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale
executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from his
father.
Petitioners claimed that their father, Lazaro, executed an Absolute Deed of Sale dated December 29,
1980 (Exit. E), conveying to his ten children his allotted portion under the extrajudicial partition executed
by the heirs of Matias, which deed included the land in litigation (Lot 191).
Petitioners also presented in evidence: (1) a private writing purportedly prepared and signed by Matias
dated December 28, 1978, stating that it was his desire that whatever inheritance Lazaro would receive
from him should be given to his (Lazaros) children (Exh. A); (2) a typewritten document dated March
10, 1979 signed by Lazaro in the presence of two witnesses, wherein he confirmed that he would
voluntarily abide by the wishes of his father, Matias, to give to his (Lazaros) children all the property he
would inherit from the latter (Exh. B); and (3) a letter dated January 1, 1980 of Lazaro to his daughter,
Carmela, stating that his share in the extrajudicial settlement of the estate of his father was intended for
his children, petitioners herein (Exh. C).
Private respondents, however presented in evidence a Deed of Revocation of a Deed of Sale
dated March 12, 1981 (Exh. 6), wherein Lazaro revoked the sale in favor of petitioners for the reason
that it was simulated or fictitious - without any consideration whatsoever.
Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G) which virtually
repudiated the contents of the Deed of Revocation of a Deed of Sale (Exh. 6) and the Deed of Sale
(Exh. 4) in favor of private respondents. However, Lazaro testified that he sold the property to Ricardo,
and that it was a lawyer who induced him to execute a deed of sale in favor of his children after giving
him five pesos (P5.00) to buy a drink (TSN September 18, 1985, pp. 204-205).
The trial court decided in favor of private respondents, holding that petitioners failed to adduce a
preponderance of evidence to support (their) claim. On appeal, the Court of Appeals affirmed the
decision of the trial court, ruling that the Deed of Sale dated January 13, 1981 (Exh. 9) was valid and
that its registration in good faith vested title in said respondents.
The Issues
Petitioners raised the following errors in the respondent Court, which they also now allege in the instant
Petition:
I. The trial court erred in concluding that the Contract of Sale of October 20, 1962 (Exhibit 7, Answer) is
merely voidable or annulable and not void ab initio pursuant to paragraph 2 of Article 1347 of the New
Civil Code involving as it does a future inheritance.
II. The trial court erred in holding that defendants-appellees acted in good faith in registering the deed
of sale of January 13, 1981 (Exhibit 9) with the Register of Deeds of Tarlac and therefore ownership of
the land in question passed on to defendants-appellees.
III. The trial court erred in ignoring and failing to consider the testimonial and documentary evidence of
plaintiffs-appellants which clearly established by preponderance of evidence that they are indeed the
legitimate and lawful owners of the property in question.
IV. The decision is contrary to law and the facts of the case and the conclusions drawn from the
established facts are illogical and off-tangent.
From the foregoing, the issues may be restated as follows:
1. Is the sale of a future inheritance valid?
2. Was the subsequent execution on January 13, 1981 (and registration with the Registry of Property)
of a deed of sale covering the same property to the same buyers valid?
3. May this Court review the findings of the respondent Court (a) holding that the buyers acted in good
faith in registering the said subsequent deed of sale and (b) in failing to consider petitioners evidence?
Are the conclusions of the respondent Court illogical and off-tangent?
The Courts Ruling
At the outset, let it be clear that the errors which are reviewable by this Court in this petition for review
on certiorari are only those allegedly committed by the respondent Court of Appeals and not directly
those of the trial court, which is not a party here. The assignment of errors in the petition quoted above
are therefore totally misplaced, and for that reason, the petition should be dismissed. But in order to
give the parties substantial justice we have decided to delve into the issues as above re-stated. The
errors attributed by petitioners to the latter (trial) court will be discussed only insofar as they are relevant
to the appellate courts assailed Decision and Resolution.
The sale made in 1962 involving future inheritance is not really at issue here. In context, the assailed
Decision conceded it may be legally correct that a contract of sale of anticipated future inheritance is
null and void.3
But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of the Civil Code,
(n)o contract may be entered into upon a future inheritance except in cases expressly authorized by
law.
Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the
creator of any obligation between the parties.
Hence, the affidavit of conformity dated February 28, 1980, insofar as it sought to validate or ratify the
1962 sale, is also useless and, in the words of the respondent Court, suffers from the same infirmity.
Even private respondents in their memorandum4concede this.
However, the documents that are critical to the resolution of this case are: (a) the deed of sale of
January 13, 1981 in favor of private respondents covering Lazaros undivided inheritance of one-twelfth
(1/12) share in Lot No. 191, which was subsequently registered on June 7, 1982; and (b) the deed of
sale dated December 29, 1980 in favor of petitioners covering the same property. These two
documents were executed after the death of Matias (and his spouse) and after a deed of extrajudicial
settlement of his (Matias) estate was executed, thus vesting in Lazaro actual title over said property. In
other words, these dispositions, though conflicting, were no longer infected with the infirmities of the
1962 sale.
Petitioners contend that what was sold on January 13, 1981 was only one-half hectare out of Lot No.
191, citing as authority the trial courts decision. As earlier pointed out, what is on review in these
proceedings by this Court is the Court of Appeals decision - which correctly identified the subject matter
of the January 13, 1981 sale to be the entire undivided 1/12 share of Lazaro in Lot No. 191 and which is
the same property disposed of on December 29, 1980 in favor of petitioners.
Critical in determining which of these two deeds should be given effect is the registration of the sale in
favor of private respondents with the register of deeds on June 7, 1982.
Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales, as
follows:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the person who presents the oldest title, provided there
is good faith.
The property in question is land, an immovable, and following the above-quoted law, ownership shall
belong to the buyer who in good faith registers it first in the registry of property. Thus, although the deed
of sale in favor of private respondents was later than the one in favor of petitioners, ownership would
vest in the former because of the undisputed fact of registration. On the other hand, petitioners have not
registered the sale to them at all.
Petitioners contend that they were in possession of the property and that private respondents never
took possession thereof. As between two purchasers, the one who registered the sale in his favor has a
preferred right over the other who has not registered his title, even if the latter is in actual possession of
the immovable property.5
As to third issue, while petitioners conceded the fact of registration, they nevertheless contended that it
was done in bad faith. On this issue, the respondent Court ruled:
Under the second assignment of error, plaintiffs-appellants contend that defendants-appellees acted in
bad faith when they registered the Deed of Sale in their favor as appellee Ricardo already knew of the
execution of the deed of sale in favor of the plaintiffs; appellants cite the testimony of plaintiff Belinda
Tafledo to the effect that defendant Ricardo Taedo called her up on January 4 or 5, 1981 to tell her that
he was already the owner of the land in question but the contract of sale between our father and us
were (sic) already consumated (pp. 9-10, tsn, January 6, 1984). This testimony is obviously self-
serving, and because it was a telephone conversation, the deed of sale dated December 29, 1980 was
not shown; Belinda merely told her uncle that there was already a document showing that plaintiffs are
the owners (p. 80). Ricardo Taedo controverted this and testified that he learned for the first time of the
deed of sale executed by Lazaro in favor of his children about a month or sometime in February 1981.
The respondent Court, reviewing the trial courts findings, refused to overturn the latters assessment of
the testimonial evidence, as follows:
We are not prepared to set aside the finding of the lower court upholding Ricardo Tanedos testimony,
as it involves a matter of credibility of witnesses which the trial judge, who presided at the hearing, was
in a better position to resolve. (Court of Appeals Decision, p. 6.)
In this connection, we note the tenacious allegations made by petitioners, both in their basic petition
and in their memorandum, as follows:
1. The respondent Court allegedly ignored the claimed fact that respondent Ricardo by fraud and deceit
and with foreknowledge that the property in question had already been sold to petitioners, made Lazaro
execute the deed of January 13, 1981;
2. There is allegedly adequate evidence to show that only 1/2 of the purchase price of P10,000.00 was
paid at the time of the execution of the deed of sale, contrary to the written acknowledgment, thus
showing bad faith;
3. There is allegedly sufficient evidence showing that the deed of revocation of the sale in favor of
petitioners was tainted with fraud or deceit.
4. There is allegedly enough evidence to show that private respondents took undue advantage over the
weakness and unschooled and pitiful situation of Lazaro Tafledo . . . and that respondent Ricardo
Taedo exercised moral ascendancy over his younger brother he being the eldest brother and who
reached fourth year college of law and at one time a former Vice-Governor of Tarlac, while his younger
brother only attained first year high school x x x ;
5. The respondent Court erred in not giving credence to petitioners evidence, especially Lazaro
Taedos Sinumpaang Salaysay dated July 27, 1982 stating that Ricardo Taedo deceived the former in
executing the deed of sale in favor of private respondents.
To be sure, there are indeed many conflicting documents and testimonies as well as arguments over
their probative value and significance. Suffice it to say, however, that all the above contentions involve
questions of fact, appreciation of evidence and credibility of witnesses, which are not proper in this
review. It is well-settled that the Supreme Court is not a trier of facts. In petitions for review under Rule
45 of the Revised Rules of Court, only questions of law may be raised and passed upon. Absent any
whimsical or capricious exercise of judgment, and unless the lack of any basis for the conclusions
made by the lower courts be amply demonstrated, the Supreme Court will not disturb their findings. At
most, it appears that petitioners have shown that their evidence was not believed by both the trial and
the appellate courts, and that the said courts tended to give more credence to the evidence presented
by private respondents. But this in itself is not a reason for setting aside such findings. We are far from
convinced that both courts gravely abused their respective authorities and judicial prerogatives.
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goidrock Construction and
Development Corp.:7
The Court has consistently held that the factual findings of the trial court, as well as the Court of
Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional
circumstances where a reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or Impossible; when there is grave abuse of discretion in the
appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings
went beyond the issues of the case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above grounds present to
justify the re-evaluation of the findings of fact made by the courts below.
In the same vein, the ruling in the recent case of South Sea Surety and Insurance Company, Inc. vs.
Hon. Court of Appeals, et al.[8] is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the
function of this Court to assess and evaluate all over again the evidence, testimonial and documentary,
adduced by the parties, particularly where, such as here, the findings of both the trial court and the
appellate court on the matter coincide. (italics supplied)
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED.
No Costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 131679. February 1, 2000]
CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST COMPANY, petitioners, vs.
SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1] of the Court of Appeals in C.A. GR CV No.
42315 and the order dated December 9, 1997 denying petitioners motion for reconsideration.
The following facts are not in dispute.
Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are
banking institutions duly organized and existing under Philippine laws. On or about June 15, 1983, a
certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to secure which he
mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon City and covered by
TCT No. 300809 registered in his name. As Guansing defaulted in the payment of his loan, CDB
foreclosed the mortgage. At the foreclosure sale held on March 15, 1984, the mortgaged property was
sold to CDB as the highest bidder. Guansing failed to redeem, and on March 2, 1987, CDB
consolidated title to the property in its name. TCT No. 300809 in the name of Guansing was cancelled
and, in lieu thereof, TCT No. 355588 was issued in the name of CDB.
On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios
Gatpandan, offered to purchase the property from CDB. The written Offer to Purchase, signed by Lim
and Gatpandan, states in part:
We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma, Quezon City for
P300,000.00 under the following terms and conditions:
(1) 10% Option Money;
(2) Balance payable in cash;
(3) Provided that the property shall be cleared of illegal occupants or tenants. Scjuris
Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option
Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB. However,
after some time following up the sale, Lim discovered that the subject property was originally registered
in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing, under TCT No. 91148.
Rodolfo succeeded in having the property registered in his name under TCT No. 300809, the same title
he mortgaged to CDB and from which the latters title (TCT No. 355588) was derived. It appears,
however, that the father, Perfecto, instituted Civil Case No. Q-39732 in the Regional Trial Court, Branch
83, Quezon City, for the cancellation of his sons title. On March 23, 1984, the trial court rendered a
decision[2] restoring Perfectos previous title (TCT No. 91148) and cancelling TCT No. 300809 on the
ground that the latter was fraudulently secured by Rodolfo. This decision has since become final and
executory.
Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company,
FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August 29, 1989
an action for specific performance and damages against petitioners in the Regional Trial Court, Branch
96, Quezon City, where it was docketed as Civil Case No. Q-89-2863. On April 20, 1990, the complaint
was amended by impleading the Register of Deeds of Quezon City as an additional defendant.
On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that: (1)
there was a perfected contract of sale between Lim and CDB, contrary to the latters contention that the
written offer to purchase and the payment of P30,000.00 were merely pre-conditions to the sale and still
subject to the approval of FEBTC; (2) performance by CDB of its obligation under the perfected contract
of sale had become impossible on account of the 1984 decision in Civil Case No. Q-39732 cancelling
the title in the name of mortgagor Rodolfo Guansing; (3) CDB and FEBTC were not exempt from liability
despite the impossibility of performance, because they could not credibly disclaim knowledge of the
cancellation of Rodolfo Guansings title without admitting their failure to discharge their duties to the
public as reputable banking institutions; and (4) CDB and FEBTC are liable for damages for the
prejudice caused against the Lims.[3] Based on the foregoing findings, the trial court ordered CDB and
FEBTC to pay private respondents, jointly and severally, the amount of P30,000.00 plus interest at the
legal rate computed from June 17, 1988 until full payment. It also ordered petitioners to pay private
respondents, jointly and severally, the amounts of P250,000.00 as moral damages, P50,000.00 as
exemplary damages, P30,000.00 as attorneys fees, and the costs of the suit.[4]
Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in toto the
decision of the Regional Trial Court. Petitioners moved for reconsideration, but their motion was denied
by the appellate court on December 9, 1997. Hence, this petition. Petitioners contend that - Jjlex
1. The Honorable Court of Appeals erred when it held that petitioners CDB and FEBTC were aware of
the decision dated March 23, 1984 of the Regional Trial Court of Quezon City in Civil Case No. Q-
39732.
2. The Honorable Court of Appeals erred in ordering petitioners to pay interest on the deposit of
THIRTY THOUSAND PESOS (P30,000.00) by applying Article 2209 of the New Civil Code.
3. The Honorable Court of Appeals erred in ordering petitioners to pay moral damages, exemplary
damages, attorneys fees and costs of suit.
I.
At the outset, it is necessary to determine the legal relation, if any, of the parties.
Petitioners deny that a contract of sale was ever perfected between them and private respondent Lolita
Chan Lim. They contend that Lims letter-offer clearly states that the sum of P30,000.00 was given as
option money, not as earnest money.[5] They thus conclude that the contract between CDB and Lim
was merely an option contract, not a contract of sale.
The contention has no merit. Contracts are not defined by the parties thereto but by principles of
law.[6] In determining the nature of a contract, the courts are not bound by the name or title given to it
by the contracting parties.[7] In the case at bar, the sum of P30,000.00, although denominated in the
offer to purchase as "option money," is actually in the nature of earnest money or down payment when
considered with the other terms of the offer. In Carceler v. Court of Appeals,[8] we explained the nature
of an option contract, viz. -
An option contract is a preparatory contract in which one party grants to the other, for a fixed period and
under specified conditions, the power to decide, whether or not to enter into a principal contract, it binds
the party who has given the option not to enter into the principal contract with any other person during
the period designated, and within that period, to enter into such contract with the one to whom the
option was granted, if the latter should decide to use the option. It is a separate agreement distinct from
the contract to which the parties may enter upon the consummation of the option. Newmiso
An option contract is therefore a contract separate from and preparatory to a contract of sale which, if
perfected, does not result in the perfection or consummation of the sale. Only when the option is
exercised may a sale be perfected.
In this case, however, after the payment of the 10% option money, the Offer to Purchase provides for
the payment only of the balance of the purchase price, implying that the "option money" forms part of
the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil
Code. It is clear then that the parties in this case actually entered into a contract of sale, partially
consummated as to the payment of the price. Moreover, the following findings of the trial court based
on the testimony of the witnesses establish that CDB accepted Lims offer to purchase:
It is further to be noted that CDB and FEBTC already considered plaintiffs offer as good and no longer
subject to a final approval. In his testimony for the defendants on February 13, 1992, FEBTCs Leomar
Guzman stated that he was then in the Acquired Assets Department of FEBTC wherein plaintiffs offer
to purchase was endorsed thereto by Myoresco Abadilla, CDBs senior vice-president, with a
recommendation that the necessary petition for writ of possession be filed in the proper court; that the
recommendation was in accord with one of the conditions of the offer, i.e., the clearing of the property
of illegal occupants or tenants (tsn, p. 12); that, in compliance with the request, a petition for writ of
possession was thereafter filed on July 22, 1988 (Exhs. 1 and 1-A); that the offer met the requirements
of the banks; and that no rejection of the offer was thereafter relayed to the plaintiffs (p. 17); which was
not a normal procedure, and neither did the banks return the amount of P30,000.00 to the plaintiffs.[9]
Given CDBs acceptance of Lims offer to purchase, it appears that a contract of sale was perfected and,
indeed, partially executed because of the partial payment of the purchase price. There is, however, a
serious legal obstacle to such sale, rendering it impossible for CDB to perform its obligation as seller to
deliver and transfer ownership of the property. Acctmis
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not have.
In applying this precept to a contract of sale, a distinction must be kept in mind between the "perfection"
and "consummation" stages of the contract.
A 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.[10] It is, therefore, not required that, at the perfection stage,
the seller be the owner of the thing sold or even that such subject matter of the sale exists at that point
in time.[11] Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a thing which, at
that time, was not his, but later acquires title thereto, such title passes by operation of law to the buyer
or grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of the Civil
Code. However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is
required that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his
obligation to transfer ownership to the buyer. It is at the consummation stage where the principle
of nemo dat quod non habet applies.
In Dignos v. Court of Appeals,[12] the subject contract of sale was held void as the sellers of the subject
land were no longer the owners of the same because of a prior sale.[13] Again, in Nool v. Court of
Appeals,[14] we ruled that a contract of repurchase, in which the seller does not have any title to the
property sold, is invalid:
We cannot sustain petitioners view. Article 1370 of the Civil Code is applicable only to valid and
enforceable contracts. The Regional Trial Court and the Court of Appeals ruled that the principal
contract of sale contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both
void. This conclusion of the two lower courts appears to find support in Dignos v. Court of Appeals,
where the Court held:
"Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were
no longer owners of the same and the sale is null and void."
In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of
sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit C, it
is itself void. A void contract cannot give rise to a valid one. Verily, Article 1422 of the Civil Code
provides that (a) contract which is the direct result of a previous illegal contract, is also void and
inexistent."
We should however add that Dignos did not cite its basis for ruling that a "sale is null and void" where
the sellers "were no longer the owners" of the property. Such a situation (where the sellers were no
longer owners) does not appear to be one of the void contracts enumerated in Article 1409 of the Civil
Code. Moreover, the Civil Code itself recognizes a sale where the goods are to be acquired x x x by the
seller after the perfection of the contract of sale, clearly implying that a sale is possible even if the seller
was not the owner at the time of sale, provided he acquires title to the property later on. Misact
In the present case, however, it is likewise clear that the sellers can no longer deliver the object of the
sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the
rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and may thus fall, by
analogy, under item No. 5 of Article 1409 of the Civil Code: Those which contemplate an impossible
service. Article 1459 of the Civil Code provides that "the vendor must have a right to transfer the
ownership thereof [subject of the sale] at the time it is delivered." Here, delivery of ownership is no
longer possible. It has become impossible.[15]
In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing must,
therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be sure, CDB
never acquired a valid title to the property because the foreclosure sale, by virtue of which the property
had been awarded to CDB as highest bidder, is likewise void since the mortgagor was not the owner of
the property foreclosed.
A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of the
Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to transfer the
ownership of the thing sold to the highest bidder who, in turn, is obliged to pay therefor the bid price in
money or its equivalent. Being a sale, the rule that the seller must be the owner of the thing sold also
applies in a foreclosure sale. This is the reason Art. 2085[16] of the Civil Code, in providing for the
essential requisites of the contract of mortgage and pledge, requires, among other things, that the
mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in anticipation of a
possible foreclosure sale should the mortgagor default in the payment of the loan.
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising
therefrom are given effect by reason of public policy. This is the doctrine of "the mortgagee in good
faith" based on the rule that all persons dealing with property covered by a Torrens Certificate of Title,
as buyers or mortgagees, are not required to go beyond what appears on the face of the title.[17] The
public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership
of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied
upon what appears on the face of the certificate of title. Sdjad
This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to make a
detailed investigation of the history of the title of the property given as security before accepting a
mortgage.
We are not convinced, however, that under the circumstances of this case, CDB can be considered a
mortgagee in good faith. While petitioners are not expected to conduct an exhaustive investigation on
the history of the mortgagors title, they cannot be excused from the duty of exercising the due diligence
required of banking institutions. In Tomas v. Tomas,[18] we noted that it is standard practice for banks,
before approving a loan, to send representatives to the premises of the land offered as collateral and to
investigate who are the real owners thereof, noting that banks are expected to exercise more care and
prudence than private individuals in their dealings, even those involving registered lands, for their
business is affected with public interest. We held thus:
We, indeed, find more weight and vigor in a doctrine which recognizes a better right for the innocent
original registered owner who obtained his certificate of title through perfectly legal and regular
proceedings, than one who obtains his certificate from a totally void one, as to prevail over judicial
pronouncements to the effect that one dealing with a registered land, such as a purchaser, is under no
obligation to look beyond the certificate of title of the vendor, for in the latter case, good faith has yet to
be established by the vendee or transferee, being the most essential condition, coupled with valuable
consideration, to entitle him to respect for his newly acquired title even as against the holder of an
earlier and perfectly valid title. There might be circumstances apparent on the face of the certificate of
title which could excite suspicion as to prompt inquiry, such as when the transfer is not by virtue of a
voluntary act of the original registered owner, as in the instant case, where it was by means of a self-
executed deed of extra-judicial settlement, a fact which should be noted on the face of Eusebia Tomas
certificate of title. Failing to make such inquiry would hardly be consistent with any pretense of good
faith, which the appellant bank invokes to claim the right to be protected as a mortgagee, and for the
reversal of the judgment rendered against it by the lower court.[19]
In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the validity of
Rodolfo Guansings title. It appears that Rodolfo Guansing obtained his fraudulent title by executing an
Extra-Judicial Settlement of the Estate With Waiver where he made it appear that he and Perfecto
Guansing were the only surviving heirs entitled to the property, and that Perfecto had waived all his
rights thereto. This self-executed deed should have placed CDB on guard against any possible defect
in or question as to the mortgagors title. Moreover, the alleged ocular inspection report[20]by CDBs
representative was never formally offered in evidence. Indeed, petitioners admit that they are aware
that the subject land was being occupied by persons other than Rodolfo Guansing and that said
persons, who are the heirs of Perfecto Guansing, contest the title of Rodolfo.[21] Sppedsc
II.The sale by CDB to Lim being void, the question now arises as to who, if any, among the parties was
at fault for the nullity of the contract. Both the trial court and the appellate court found petitioners guilty
of fraud, because on June 16, 1988, when Lim was asked by CDB to pay the 10% option money, CDB
already knew that it was no longer the owner of the said property, its title having been
cancelled.[22] Petitioners contend that: (1) such finding of the appellate court is founded entirely on
speculation and conjecture; (2) neither CDB nor FEBTC was a party in the case where the mortgagors
title was cancelled; (3) CDB is not privy to any problem among the Guansings; and (4) the final decision
cancelling the mortgagors title was not annotated in the latters title.
As a rule, only questions of law may be raised in a petition for review, except in circumstances where
questions of fact may be properly raised.[23] Here, while petitioners raise these factual issues, they
have not sufficiently shown that the instant case falls under any of the exceptions to the above rule. We
are thus bound by the findings of fact of the appellate court. In any case, we are convinced of
petitioners negligence in approving the mortgage application of Rodolfo Guansing.
III.We now come to the civil effects of the void contract of sale between the parties. Article 1412(2) of
the Civil Code provides:
If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the
following rules shall be observed. . . .(2).......When only one of the contracting parties is at fault, he
cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may demand the return of what he has given without any
obligation to comply with his promise.
Private respondents are thus entitled to recover the P30,000.00 option money paid by them. Moreover,
since the filing of the action for damages against petitioners amounted to a demand by respondents for
the return of their money, interest thereon at the legal rate should be computed from August 29, 1989,
the date of filing of Civil Case No. Q-89-2863, not June 17, 1988, when petitioners accepted the
payment. This is in accord with our ruling in Castillo v. Abalayan[24] that in case of a void sale, the
seller has no right whatsoever to keep the money paid by virtue thereof and should refund it, with
interest at the legal rate, computed from the date of filing of the complaint until fully paid. Indeed, Art.
1412(2) which provides that the non-guilty party "may demand the return of what he has given" clearly
implies that without such prior demand, the obligation to return what was given does not become legally
demandable. Sccalr
Considering CDBs negligence, we sustain the award of moral damages on the basis of Arts. 21 and
2219 of the Civil Code and our ruling in Tan v. Court of Appeals[25] that moral damages may be
recovered even if a banks negligence is not attended with malice and bad faith. We find, however, that
the sum of P250,000.00 awarded by the trial court is excessive. Moral damages are only intended to
alleviate the moral suffering undergone by private respondents, not to enrich them at the expense of the
petitioners.[26] Accordingly, the award of moral damages must be reduced to P50,000.00.
Likewise, the award of P50,000.00 as exemplary damages, although justified under Art. 2232 of the
Civil Code, is excessive and should be reduced to P30,000.00. The award of P30,000.00 attorneys fees
based on Art. 2208, pars. 1, 2, 5 and 11 of the Civil Code should similarly be reduced to P20,000.00.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION as to the
award of damages as above stated.SO ORDERED.
Hermosilla vs. Remoquillo
Petitioners Heirs of Salvador Hermosilla, namely: Adelaida H. Dolleton, Ruben Hermosilla, Lolita H. de
la Vega, Erlinda H. Inovio,[1] Celia[2] H. Vivit, Zenaida H. Achoy, Precilla[3] H. Limpiahoy, and
Edgardo Hermosilla, assail the Court of Appeals Decision[4] dated September 29, 2004 which reversed
the trial courts decision in their favor and accordingly dismissed their complaint.
Subject of the controversy is a 65-square meter portion of a lot located in Poblacion, San Pedro,
Laguna.
On August 31, 1931, the Republic of the Philippines acquired through purchase the San
Pedro Tunasan Homesite.
Apolinario Hermosilla (Apolinario), who was occupying a lot in San Pedro Tunasan Homesite until his
death in 1964, caused the subdivision of the lot into two, Lot 12 with an area of 341 square meters,
and Lot 19 with an area of 341 square meters of which the 65 square meters subject of this controversy
form part.
On April 30, 1962, Apolinario executed a Deed of Assignmenttransferring possession of Lot 19 in favor
of his grandson, herein respondent Jaime Remoquillo (Jaime). As the Land Tenure Administration
(LTA) later found that Lot 19 was still available for disposition to qualified applicants, Jaime, being its
actual occupant, applied for its acquisition before the LTA on May 10, 1963.
On July 8, 1963, Apolinario conveyed Lot 12 to his son Salvador Hermosilla (Salvador), Jaimes uncle.
Salvador later filed an application to purchase Lot 12 which was awarded to him by the defunct Land
Authority on December 16, 1971.
On February 10, 1972, Jaime and his uncle Salvador forged
a Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar (Kasunduan) whereby Jaime
transferred ownership of the 65 square meters (the questioned property) in favor of Salvador.
After Apolinario died, his daughter Angela Hermosilla filed a protest before the Land Authority, which
became the National Housing Authority (NHA),[5] contending that as an heir of the deceased, she is
also entitled to Lots 12 and 19. By Resolution of June 10, 1981, the NHA dismissed the protest.
The NHA later awarded on March 16, 1986 Lot 19 to Jaime for which he and his wife were issued a
title, Transfer Certificate of Title No. T-156296, on September 15, 1987.[6]
On May 25, 1992, petitioners filed an action for Annulment of Title on the ground of fraud with damages
against Jaime and his spouse, together with the Register of Deeds, before the Regional Trial Court
(RTC) of Bian, Laguna, alleging that by virtue of the Kasunduan executed in 1972, Jaime had conveyed
to his uncle Salvador the questioned propertypart of Lot 19 covered by TCT No. T-156296 which was
issued in 1987.
By Decision[7] of May 11, 1999, the RTC of Bian, Laguna, Branch 25, found the Kasunduan a perfected
contract of sale, there being a meeting of the minds upon an identified object and upon a specific price,
and that ownership over the questioned property had already been transferred and delivered
to Salvador.
On the alleged failure of consideration of the Kasunduan, the trial court held that the same did not
render the contract void, but merely allowed an action for specific performance. The dispositive portion
of the trial courts Decision reads:
WHEREFORE, judgment is hereby rendered declaring plaintiffs as co-owners of the 65 square meters
of the 341 square meters covered by TCT T-156296, registered in the name of defendants. The Court
hereby directs the Register of Deeds of Laguna, Calamba Branch, to cancel said Transfer Certificate of
Title, and in lieu thereof, to issue another [to] plaintiffs [as] co-owners of the above portion.
No pronouncement as to costs.
SO ORDERED.[8] (Underscoring supplied)
The Court of Appeals, reversing the decision of the trial court, held that the Kasunduan was void
because at the time of its execution in 1972, the Republic of the Philippines was still the owner of Lot
19, hence, no right thereover was transmitted by Jaime who was awarded the Lot in 1986, and
consequently no right was transmitted by Salvador through succession to petitioners. And it found no
evidence of fraud in Jaimes act of having Lot 19, including the questioned property, registered in his
and his wifes name in 1987.
At all events, the appellate court held that the action had prescribed, it having been filed in 1992, more
than four years from the issuance to Jaime and his wife of the Transfer Certificate of Title.
Hence, the present petition for review on certiorari.
Petitioners argue that the application of the law on prescription would perpetrate fraud and spawn
injustice, they citing Cometa v. Court of Appeals;[9]and that at any rate, prescription does not lie against
a co-owner. Cometainvolves a different factual milieu concerning the right of redemption, however.And
petitioners contention that prescription does not lie against a co-owner fails because only the title
covering the questioned property, which petitioners claim to solely own, is being assailed.
While this Court finds that the action is, contrary to the appellate courts ruling, not barred by the statute
of limitations, it is still dismissible as discussed below.
Albeit captioned as one for Annulment of Title, the Complaint ultimately seeks the reconveyance of the
property.
 and void: Provided, however, That such privilege or preference may be waived or forfeited only in favor
of the Land Authority . . .[17] (Italics in the original, emphasis and underscoring supplied)
From the allegations of the Complaint, petitioners seek the reconveyanceof the property based on
implied trust. The prescriptive period for the reconveyance of fraudulently registered real property is 10
years, reckoned from the date of the issuance of the certificate of title,[10] if the plaintiff is not in
possession, but imprescriptible if he is in possession of the property.
Petitioners insistence on any right to the property under the Kasunduanthus fails.

An action for reconveyance based on an implied trust prescribes in ten years. The ten-year prescriptive
period applies only if there is an actual need to reconvey the property as when the plaintiff is not in
possession of the property.However, if the plaintiff, as the real owner of the property also remains in
possession of the property, the prescriptive period to recover the title and possession of the property
does not run against him. In such a case, an action for reconveyance, if nonetheless filed, would be in
the nature of a suit for quieting of title, an action that is imprescriptible.[11] (Emphasis and underscoring
supplied)
[T]he transfer became one in violation of law (the rules of the PHHC being promulgated in pursuance of
law have the force of law) and therefore void abinitio. Hence, appellant acquired no right over the lot
from a contract void abinitio, no rights are created. Estoppel, as postulated by petitioner, will not apply
for it cannot be predicated on an illegal act. It is generally considered that as between the parties to a
contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public
policy.[18] (Emphasis and underscoring supplied)

It is undisputed that petitioners houses occupy the questioned property and that respondents have not
been in possession thereof.[12] Since there was no actual need to reconvey the property as petitioners
remained in possession thereof, the action took the nature of a suit for quieting of title, it having been Petitioners go on to postulate that if the Kasunduan is void, it follows that the 1962 Deed of Assignment
filed to enforce an alleged implied trust after Jaime refused to segregate title over Lot 19. One who is in executed by Apolinario in favor of Jaime is likewise void to thus deprive the latter of any legal basis for
actual possession of a piece of land claiming to be the owner thereof may wait until his possession is his occupation and acquisition of Lot 19.
disturbed or his title is attacked before taking steps to vindicate his right.[13] From the body of the
complaint, this type of action denotes imprescriptibility.
Petitioners position fails. Petitioners lose sight of the fact that, as reflected above, Jaime
acquired Lot 19 in his own right, independently of the Deed of Assignment.
As priorly stated, however, when the Kasunduan was executed in 1972 by Jaime in favor
of Salvador petitioners predecessor-in-interest Lot 19, of which the questioned property forms part, was
still owned by the Republic.Nemo dat quod non habet.[14] Nobody can give what he does not In another vein, since the property was previously a public land, petitioners have no personality to
possess.Jaime could not thus have transferred anything to Salvador via the Kasunduan. impute fraud or misrepresentation against the State or violation of the law.[19] If the title was in fact
fraudulently obtained, it is the State which should file the suit to recover the property through the Office
of the Solicitor General. The title originated from a grant by the government, hence, its cancellation is a
Claiming exception to the rule, petitioners posit that at the time the Kasunduan was executed by Jaime matter between the grantor and the grantee.[20]
in 1972, his application which was filed in 1963 for the award to him of Lot 19 was still pending, hence,
the Kasunduantransferred to Salvador Jaimes vested right to purchase the same, in support of which
they cite a law on estoppel, Art. 1434 of the Civil Code, which provides that [w]hen a person who is not At all events, for an action for reconveyance based on fraud to prosper, the plaintiff must prove by clear
the owner of a thing sells or alienates and delivers it and later, the seller or grantor acquires title and convincing evidence not only his title to the property but also the fact of fraud. Fraud is never
thereto, such title passes by operation of law to the buyer or grantee.[15] presumed. Intentional acts to deceive and deprive another of his right, or in some manner injure him
must be specifically alleged and proved by the plaintiff by clear and convincing evidence.[21] Petitioners
failed to discharge this burden, however.
Petitioners reliance on Article 1434 of the Civil Code does not lie. The principles of estoppel apply
insofar as they are not in conflict with the provisions of the Civil Code, the Code of Commerce, the
Rules of Court and special laws.[16]

Land Authority Administrative Order No. 4 (1967), RULES AND REGULATIONS GOVERNING
DISPOSITION OF THE LAGUNA SETTLEMENT PROJECT IN SAN PEDRO, LAGUNA, proscribes the
conveyance of the privilege or preference to purchase a land from the San
Pedro Tunasan project before it is awarded to a tenant or bona fide occupant, thus:

SEC. 6. Privilege of Preference to Purchase Intransferable; Waiver or Forfeiture Thereof. From the date
of acquisition of the estate by the Government and before issuance of the Order of Award, no tenant WHEREFORE, the petition is, in light of the foregoing ratiocination, DENIED.
or bona fide occupant in whose favor the land may be sold shall transfer or encumber the privilege or
preference to purchase the land, and any transfer or encumbrance made in violation hereof shall be null
SO ORDERED.

Reyes vs. Beltran
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision[1] dated 31 January 2006 rendered by the Court of Appeals in CA-G.R. SP No. 87066, which
affirmed the Decision[2] dated 30 June 2003 of the Office of the President, in O.P. Case No. 02-A-007,
approving the application of respondent Elena Socco-Beltran to purchase the subject property.
The subject property in this case is a parcel of land originally identified as Lot No. 6-B, situated
in Zamora Street, Dinalupihan, Bataan, with a total area of 360 square meters. It was originally part of a
larger parcel of land, measuring 1,022 square meters, allocated to the Spouses
Marcelo Laquian and ConstanciaSocco (Spouses Laquian), who paid for the same with Japanese
money. When Marcelo died, the property was left to his wife Constancia. Upon Constanciassubsequent
death, she left the original parcel of land, along with her other property, with her heirs her siblings,
namely: Filomena Eliza Socco, Isabel Socco de Hipolito, Miguel R. Socco, and Elena Socco-
Beltran.[3] Pursuant to an unnotarized document entitled Extrajudicial Settlement of the Estate of the
Deceased Constancia R. Socco, executed by Constancias heirs sometime in 1965, the parcel of land
was partitioned into three lotsLot No. 6-A, Lot No. 6-B, and Lot No. 6-C.[4] The subject property, Lot No.
6-B, was adjudicated to respondent, but no title had been issued in her name.
On 25 June 1998, respondent Elena Socco-Beltran filed an application for the purchase of Lot No. 6-B
before the Department of Agrarian Reform (DAR), alleging that it was adjudicated in her favor in the
extra-judicial settlement of Constancia Soccos estate.[5]
Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondents petition before
the DAR on the ground that the subject property was sold by respondents brother, Miguel R. Socco, in
favor of their father, Arturo Reyes, as evidenced by the Contract to Sell, dated 5 September 1954,
stipulating that:[6]
That I am one of the co-heirs of the Estate of the deceased ConstanciaSocco; and that I am to
inherit as such a portion of her lot consisting of Four Hundred Square Meters (400) more or less located
on the (sic) Zamora St., Municipality of Dinalupihan, Province of Bataan, bounded as follows:
xxxx
That for or in consideration of the sum of FIVE PESOS (P5.00) per square meter, hereby sell, convey
and transfer by way of this conditional sale the said 400 sq.m. more or less unto Atty. Arturo C. Reyes,
his heirs, administrator and assigns x x x. (Emphasis supplied.)
Petitioners averred that they took physical possession of the subject property in 1954 and had been
uninterrupted in their possession of the said property since then.
Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted an
investigation, the results of which were contained in her Report/ Recommendation dated 15 April
1999. Other than recounting the afore-mentioned facts, Legal Officer Pinlac also made the following
findings in her Report/Recommendation:[7]
Further investigation was conducted by the undersigned and based on the documentary evidence
presented by both parties, the following facts were gathered:that the house of [the] Reyes family is
adjacent to the landholding in question and portion of the subject property consisting of about 15 meters
[were] occupied by the heirs of Arturo Reyes were a kitchen and bathroom [were] constructed therein;
on the remaining portion a skeletal form made of hollow block[s] is erected and according to the heirs of
late Arturo Reyes, this was constructed since the year (sic) 70s at their expense; that construction of
the said skeletal building was not continued and left unfinished which according to the affidavit of
Patricia Hipolito the Reyes family where (sic) prevented by Elena Socco in their attempt of occupancy
of the subject landholding; (affidavit of Patricia Hipolito is hereto attached as Annex F); that
Elena Socco cannot physically and personally occupy the subject property because of the skeletal
building made by the Reyes family who have been requesting that they be paid for the cost of the
construction and the same be demolished at the expense of Elena Socco; that according to
Elena Socco, [she] is willing to waive her right on the portion where [the] kitchen and bathroom is (sic)
constructed but not the whole of Lot [No.] 6-B adjudicated to her; that the Reyes family included the
subject property to the sworn statement of value of real properties filed before the municipality
of Dinalupihan, Bataan, copies of the documents are hereto attached as Annexes G and H; that
likewise Elena Socco has been continuously and religiously paying the realty tax due on the said
property.
In the end, Legal Officer Pinlac recommended the approval of respondents petition for issuance of title
over the subject property, ruling that respondent was qualified to own the subject property pursuant to
Article 1091 of the New Civil Code.[8] Provincial Agrarian Reform Officer
(PARO) RaynorTaroy concurred in the said recommendation in his Indorsement dated 22 April 1999.[9]
In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta, however, dismissed
respondents petition for issuance of title over the subject property on the ground that respondent was
not an actual tiller and had abandoned the said property for 40 years; hence, she had already
renounced her right to recover the same.[10] The dispositive part of the Order reads:
1. DISMISSING the claims of Elena Socco-Beltran, duly represented by Myrna Socco for lack of merit;
2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square meters, more or less,
situated Zamora Street, Dinalupihan, Bataan, in favor of the heirs of Arturo Reyes.
3. ORDERING the complainant to refrain from any act tending to disturb the peaceful possession of
herein respondents.
4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent documents for the issuance
of CLOA in favor of the heirs of Arturo Reyes.[11]
Respondent filed a Motion for Reconsideration of the foregoing Order, which was denied by DAR had no right to transfer the same. Accordingly, the Court of Appeals affirmed respondents right over the
Regional Director Acosta in another Order dated 15 September 1999.[12] subject property, which was derived form the original allocatees thereof.[20] The fallo of the said
Decision reads:

Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9 November 2001,
the DAR Secretary reversed the Decision of DAR Regional Director Acosta after finding that neither WHEREFORE, premises considered, the instant PETITION FOR REVIEW is DISMISSED. Accordingly,
petitioners predecessor-in-interest, Arturo Reyes, nor respondent was an actual occupant of the subject the Decision dated 30 June 2003 and the Resolution dated 30 December 2004 both issued by the
property. However, since it was respondent who applied to purchase the subject property, she was Office of the President are hereby AFFIRMED in toto.[21]
better qualified to own said property as opposed to petitioners, who did not at all apply to purchase the
same. Petitioners were further disqualified from purchasing the subject property because they were not
landless. Finally, during the investigation of Legal Officer Pinlac, petitioners requested that respondent
pay them the cost of the construction of the skeletal house they built on the subject property. This was
construed by the DAR Secretary as a waiver by petitioners of their right over the subject property.[13]In The Court of Appeals denied petitioners Motion for Reconsideration of its Decision in a Resolution
the said Order, the DAR Secretary ordered that: dated 16 August 2006.[22]

WHEREFORE, premises considered, the September 15, 1999 Order is hereby SET ASIDE and a new Hence, the present Petition, wherein petitioners raise the following issues:
Order is hereby issued APPROVING the application to purchase Lot [No.] 6-B of Elena Socco-
Beltran.[14]
IWHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
FINDINGS OF THE OFFICE OF THE PRESIDENT THAT THE SUBJECT LOT IS VACANT AND THAT
PETITIONERS ARE NOT ACTUAL OCCUPANTS THEREOF BY DENYING THE LATTERS CLAIM
THAT THEY HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE, NOTORIOUS AND AVDERSE
Petitioners sought remedy from the Office of the President by appealing the 9 November 2001 Decision POSSESSION THEREOF SINCE 1954 OR FOR MORE THAN THIRTY (30) YEARS.
of the DAR Secretary. Their appeal was docketed as O.P. Case No. 02-A-007. On 30 June 2003, the
Office of the President rendered its Decision denying petitioners appeal and affirming the DAR
Secretarys Decision.[15] The fallo of the Decision reads:
IIWHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT PETITIONERS
CANNOT LEGALLY ACQUIRE THE SUBJECT PROPERTY AS THEY ARE NOT CONSIDERED
LANDLESS AS EVIDENCED BY A TAX DECLARATION.
WHEREFORE, premises considered, judgment appealed from is AFFIRMED and the instant
appeal DISMISSED.[16]
IIIWHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT WHATEVER
RESERVATION WE HAVE OVER THE RIGHT OF MYRNA SOCCO TO SUCCEED WAS ALREADY
Petitioners Motion for Reconsideration was likewise denied by the Office of the President in a SETTLED WHEN NO LESS THAN MIGUEL SOCCO (PREDECESSOR-IN INTEREST OF HEREIN
Resolution dated 30 September 2004.[17] In the said Resolution, the Office of the President noted that PETITIONERS) EXECUTED HIS WAIVER OF RIGHT DATED APRIL 19, 2005 OVER THE SUBJECT
petitioners failed to allege in their motion the date when they received the Decision dated 30 June PROPERTY IN FAVOR OF MYRNA SOCCO.
2003. Such date was material considering that the petitioners Motion for Reconsideration was filed only
on 14 April 2004, or almost nine months after the promulgation of the decision sought to be
reconsidered. Thus, it ruled that petitioners Motion for Reconsideration, filed beyond fifteen days from
receipt of the decision to be reconsidered, rendered the said decision final and executory. IVWHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONERS
MOTION FOR NEW TRIAL THEREBY BRUSHING ASIDE THE FACT THAT MYRNA V. SOCCO-
ARIZO GROSSLY MISREPRESENTED IN HER INFORMATION SHEET OF BENEFICIARIES AND
APPLICATION TO PURCHASE LOT IN LANDED ESTATES THAT SHE IS A FILIPINO CITIZEN,
Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-G.R. SP No. WHEN IN TRUTH AND IN FACT, SHE IS ALREADY AN AMERICAN NATIONAL.[23]
87066. Pending the resolution of this case, the DAR already issued on 8 July 2005 a Certificate of Land
Ownership Award (CLOA) over the subject property in favor of the respondents niece and
representative, Myrna Socco-Beltran.[18] Respondent passed away on 21 March 2001,[19] but the
records do not ascertain the identity of her legal heirs and her legatees. The main issue in this case is whether or not petitioners have a better right to the subject property over
the respondent. Petitioners claim over the subject property is anchored on the Contract to Sell executed
between Miguel Socco and Arturo Reyes on 5 September 1954. Petitioners additionally allege that they
and their predecessor-in-interest, Arturo Reyes, have been in possession of the subject lot since 1954
Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its Decision, for an uninterrupted period of more than 40 years.
dated 31 January 2006, affirming the Decision dated 30 June 2003 of the Office of the President. It held
that petitioners could not have been actual occupants of the subject property, since actual occupancy
requires the positive act of occupying and tilling the land, not just the introduction of an unfinished
skeletal structure thereon. The Contract to Sell on which petitioners based their claim over the subject The Court is unconvinced.
property was executed by Miguel Socco, who was not the owner of the said property and, therefore,

Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was
unmistakably stated in the Contract and made clear to both parties thereto that the vendor, Miguel
R. Socco, was not yet the owner of the subject property and was merely expecting to inherit the same
as his share as a co-heir of Constancias estate.[24] It was also declared in the Contract itself that
Miguel R. Soccos conveyance of the subject to the buyer, Arturo Reyes, was a conditional sale. It is,
therefore, apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon
the event that Miguel Socco would actually inherit and become the owner of the said property.Absent
such occurrence, Miguel R. Socco never acquired ownership of the subject property which he could
validly transfer to Arturo Reyes.
Under Article 1459 of the Civil Code on contracts of sale, The thing must be licit and the vendor must
have a right to transfer ownership thereof at the time it is delivered. The law specifically requires that
the vendor must have ownership of the property at the time it is delivered. Petitioners claim that the
property was constructively delivered to them in 1954 by virtue of the Contract to Sell.However, as
already pointed out by this Court, it was explicit in the Contract itself that, at the time it was executed,
Miguel R. Socco was not yet the owner of the property and was only expecting to inherit it. Hence, there
was no valid sale from which ownership of the subject property could have transferred from
Miguel Socco to Arturo Reyes. Without acquiring ownership of the subject property, Arturo Reyes also
could not have conveyed the same to his heirs, herein petitioners.
Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30 years and,
thus, they gained ownership of the property through acquisitive prescription, citing Sandoval v. Insular
Government [25]and San Miguel Corporation v. Court of Appeals. [26]
In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of Act No. 926,
otherwise known as the Land Registration Act, which required -- for the issuance of a certificate of title
to agricultural public lands -- the open, continuous, exclusive, and notorious possession and occupation
of the same in good faith and under claim of ownership for more than ten years. After evaluating the
evidence presented, consisting of the testimonies of several witnesses and proof that fences were
constructed around the property, the Court in the afore-stated case denied the petition on the ground
that petitioners failed to prove that they exercised acts of ownership or were in open, continuous, and
peaceful possession of the whole land, and had caused it to be enclosed to the exclusion of other
persons. It further decreed that whoever claims such possession shall exercise acts of dominion and
ownership which cannot be mistaken for the momentary and accidental enjoyment of the property. [27]
In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and undisputed
possession of alienable public land for the period prescribed by law creates the legal fiction whereby
land ceases to be public land and is, therefore, private property. It stressed, however, that the
occupation of the land for 30 years must be conclusively established. Thus, the evidence offered by
petitioner therein tax declarations, receipts, and the sole testimony of the applicant for
registration, petitioners predecessor-in-interest who claimed to have occupied the land before selling it
to the petitioner were considered insufficient to satisfy the quantum of proof required to establish the
claim of possession required for acquiring alienable public land.[28]
As in the two aforecited cases, petitioners herein were unable to prove actual possession of the subject
property for the period required by law. It was underscored in San Miguel Corporation that the open,
continuous, exclusive, and notorious occupation of property for more than 30 years must be no less
than conclusive, such quantum of proof being necessary to avoid the erroneous validation of actual
fictitious claims of possession over the property that is being claimed.[29]
In the present case, the evidence presented by the petitioners falls short of being conclusive. Apart
from their self-serving statement that they took possession of the subject property, the only proof
offered to support their claim was a general statement made in the letter[30] dated 4 February
2002 of Barangay Captain Carlos Gapero, certifying that Arturo Reyes was the occupant of the subject
property since peace time and at present. The statement is rendered doubtful by the fact that as early
as 1997, when respondent filed her petition for issuance of title before the DAR, Arturo Reyes had
already died and was already represented by his heirs, petitioners herein.
Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes occupied the premises
for an unspecified period of time, i.e., since peace time until the present, cannot prevail over Legal
Officer Pinlacsmore particular findings in her Report/Recommendation. Legal Officer Pinlacreported
that petitioners admitted that it was only in the 1970s that they built the skeletal structure found on the
subject property. She also referred to the averments made by Patricia Hipolito in an
Affidavit,[31] dated 26 February 1999, that the structure was left unfinished because respondent
prevented petitioners from occupying the subject property. Such findings disprove petitioners claims
that their predecessor-in-interest, Arturo Reyes, had been in open, exclusive, and continuous
possession of the property since 1954. The adverted findings were the result of Legal
Officer Pinlacs investigation in the course of her official duties, of matters within her expertise which
were later affirmed by the DAR Secretary, the Office of the President, and the Court of Appeals. The
factual findings of such administrative officer, if supported by evidence, are entitled to great respect.[32]
In contrast, respondents claim over the subject property is backed by sufficient evidence. Her
predecessors-in-interest, the spouses Laquian, have been identified as the original allocatees who have
fully paid for the subject property. The subject property was allocated to respondent in the extrajudicial
settlement by the heirs of Constancias estate. The document entitled Extra-judicial Settlement of the
Estate of the Deceased Constancia Socco was not notarized and, as a private document, can only bind
the parties thereto.However, its authenticity was never put into question, nor was its legality
impugned. Moreover, executed in 1965 by the heirs of Constancia Socco, or more than 30 years ago, it
is an ancient document which appears to be genuine on its face and therefore its authenticity must be
upheld.[33] Respondent has continuously paid for the realty tax due on the subject property, a fact
which, though not conclusive, served to strengthen her claim over the property.[34]
From the foregoing, it is only proper that respondents claim over the subject property be upheld. This
Court must, however, note that the Order of the DAR Secretary, dated 9 November 2001, which
granted the petitioners right to purchase the property, is flawed and may be assailed in the proper
proceedings. Records show that the DAR affirmed that respondents predecessors-in-interest,
Marcelo Laquian and Constancia Socco, having been identified as the original allocatee, have fully paid
for the subject property as provided under an agreement to sell. By the nature of a contract or
agreement to sell, the title over the subject property is transferred to the vendee upon the full payment
of the stipulated consideration. Upon the full payment of the purchase price, and absent any showing
that the allocatee violated the conditions of the agreement, ownership of the subject land should be
conferred upon the allocatee.[35] Since the extrajudicial partition
transferring Constancia Soccosinterest in the subject land to the respondent is valid, there is clearly no
need for the respondent to purchase the subject property, despite the application for the purchase of
the property erroneously filed by respondent. The only act which remains to be performed is the
issuance of a title in the name of her legal heirs, now that she is deceased.
Moreover, the Court notes that the records have not clearly established the right of respondents
representative, Myrna Socco-Arizo, over the subject property. Thus, it is not clear to this Court why the
DAR issued on 8 July 2005 a CLOA[36] over the subject property in favor of Myrna Socco-
Arizo.Respondents death does not automatically transmit her rights to the property to Myrna Socco-
Beltran. Respondent only authorized Myrna Socco-Arizo, through a Special Power of
Attorney[37] dated 10 March 1999, to represent her in the present case and to administer the subject
property for her benefit. There is nothing in the Special Power of Attorney to the effect that
Myrna Socco-Arizo can take over the subject property as owner thereof upon respondents death. That
Miguel V. Socco, respondents only nephew, the son of the late Miguel R. Socco, and Myrna Socco-
Arizos brother, executed a waiver of his right to inherit from respondent, does not automatically mean
that the subject property will go to Myrna Socco-Arizo, absent any proof that there is no other qualified
heir to respondents estate. Thus, this Decision does not in any way confirm the issuance of the CLOA
in favor of Myrna Socco-Arizo, which may be assailed in appropriate proceedings.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED.The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 87066, promulgated on 31 January 2006,
is AFFIRMED with MODIFICATION.This Court withholds the confirmation of the validity of title over the
subject property in the name of Myrna Socco-Arizo pending determination of respondents legal heirs in
appropriate proceedings. No costs.

SO ORDERED.
Boston Bank vs. Manalo
Before us is a Petition for Review on Certiorari of the Decision[1] of the Court of Appeals (CA) in CA-
G.R. CV No. 47458 affirming, on appeal, the Decision[2] of the Regional Trial Court (RTC) of Quezon
City, Branch 98, in Civil Case No. Q-89-3905.
The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the
Xavierville Estate Subdivision, with an area of 42 hectares.XEI caused the subdivision of the property
into residential lots, which was then offered for sale to individual lot buyers.[3]
On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The
Overseas Bank of Manila (OBM), as vendee, executed a Deed of Sale of Real Estate over some
residential lots in the subdivision, including Lot 1, Block 2, with an area of 907.5 square meters, and Lot
2, Block 2, with an area of 832.80 square meters. The transaction was subject to the approval of the
Board of Directors of OBM, and was covered by real estate mortgages in favor of the Philippine
National Bank as security for its account amounting to P5,187,000.00, and the Central Bank of
the Philippines as security for advances amounting to P22,185,193.74.[4] Nevertheless, XEI continued
selling the residential lots in the subdivision as agent of OBM.[5]
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos
Manalo, Jr. who was in business of drilling deep water wells and installing pumps under the business
name Hurricane Commercial, Inc. For P34,887.66, Manalo, Jr. installed a water pump at Ramos
residence at the corner of Aurora Boulevard and Katipunan Avenue, Quezon City. Manalo, Jr. then
proposed to XEI, through Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of
the downpayment the P34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a letter
dated February 8, 1972, Ramos requested Manalo, Jr. to choose which lots he wanted to buy so that
the price of the lots and the terms of payment could be fixed and incorporated in the conditional
sale.[6] Manalo, Jr. met with Ramos and informed him that he and his wife Perla had chosen Lots 1 and
2 of Block 2 with a total area of 1,740.3 square meters.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. He also
pegged the price of the lots at P200.00 per square meter, or a total of P348,060.00, with a 20% down
payment of the purchase price amounting to P69,612.00 less the P34,887.66 owing from Ramos,
payable on or before December 31, 1972; the corresponding Contract of Conditional Sale would then
be signed on or before the same date, but if the selling operations of XEI resumed after December 31,
1972, the balance of the downpayment would fall due then, and the spouses would sign the aforesaid
contract within five (5) days from receipt of the notice of resumption of such selling operations. It was
also stated in the letter that, in the meantime, the spouses may introduce improvements thereon subject
to the rules and regulations imposed by XEI in the subdivision. Perla Manalo conformed to the letter
agreement.[7]
The spouses Manalo took possession of the property on September 2, 1972, constructed a house
thereon, and installed a fence around the perimeter of the lots.
In the meantime, many of the lot buyers refused to pay their monthly installments until they were
assured that they would be issued Torrens titles over the lots they had purchased.[8] The spouses
Manalo were notified of the resumption of the selling operations of XEI.[9] However, they did not pay
the balance of the downpayment on the lots because Ramos failed to prepare a contract of conditional
sale and transmit the same to Manalo for their signature.On August 14, 1973, Perla Manalo went to the
XEI office and requested that the payment of the amount representing the balance of the downpayment
be deferred, which, however, XEI rejected. On August 10,
1973, XEI furnished her with a statement of their account as of July 31, 1973, showing that they had a
balance of P34,724.34 on the downpayment of the two lots after deducting the account of Ramos,
plus P3,819.68[10] interest thereon from September 1, 1972 to July 31, 1973, and that the interests on
the unpaid balance of the purchase price of P278,448.00 from September 1, 1972 to July 31, 1973
amounted to P30,629.28.[11] The spouses were informed that they were being billed for said unpaid
interests.[12]
On January 25, 1974, the spouses Manalo received another statement of account from XEI, inclusive of
interests on the purchase price of the lots.[13] In a letter dated April 6, 1974 to XEI, Manalo, Jr. stated
they had not yet received the notice of resumption of Leis selling operations, and that there had been
no arrangement on the payment of interests; hence, they should not be charged with interest on the
balance of the downpayment on the property.[14] Further, they demanded that a deed of conditional
sale over the two lots be transmitted to them for their signatures. However, XEI ignored the
demands. Consequently, the spouses refused to pay the balance of the downpayment of the purchase
price.[15]
Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house. In a
letter dated June 17, 1976, XEI informed Manalo, Jr. that business signs were not allowed along the
sidewalk. It demanded that he remove the same, on the ground, among others, that the sidewalk was
not part of the land which he had purchased on installment basis from XEI.[16] Manalo, Jr. did not
respond. XEI reiterated its demand on September 15, 1977.[17]
Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots already
contracted and those yet to be sold.[18] On December 8, 1977, OBM warned Manalo, Jr., that putting
up of a business sign is specifically prohibited by their contract of conditional sale and that his failure to
comply with its demand would impel it to avail of the remedies as provided in their contract of
conditional sale.[19]
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title (TCT) No.
T-265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor of the OBM.[20] The
lien in favor of the Central Bank of the Philippines was annotated at the dorsal portion of said title,
which was later cancelled on August 4, 1980.[21]
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM. CBM
wrote Edilberto Ng, the president of Xavierville Homeowners Association that, as of January 31, 1983,
Manalo, Jr. was one of the lot buyers in the subdivision.[22] CBM reiterated in its letter to Ng that, as
of January 24, 1984, Manalo was a homeowner in the subdivision.[23]
In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going construction on
the property since it (CBM) was the owner of the lot and she had no permission for such
construction.[24] She agreed to have a conference meeting with CBM officers where she informed them
that her husband had a contract with OBM, through XEI, to purchase the property. When asked to
prove her claim, she promised to send the documents to CBM. However, she failed to do
so.[25] On September 5, 1986, CBM reiterated its demand that it be furnished with the documents
promised,[26] but Perla Manalo did not respond.
On July 27, 1987, CBM filed a complaint[27] for unlawful detainer against the spouses with the
Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No. 51618. CBM
claimed that the spouses had been unlawfully occupying the property without its consent and that
despite its demands, they refused to vacate the property. The latter alleged that they, as vendors, and
XEI, as vendee, had a contract of sale over the lots which had not yet been rescinded.[28]
While the case was pending, the spouses Manalo wrote CBM to offer an amicable settlement,
promising to abide by the purchase price of the property (P313,172.34), per agreement with XEI,
through Ramos. However, on July 28, 1988, CBM wrote the spouses, through counsel, proposing that
the price of P1,500.00 per square meter of the property was a reasonable starting point for negotiation
of the settlement.[29] The spouses rejected the counter proposal,[30] emphasizing that they would
abide by their original agreement with XEI. CBM moved to withdraw its complaint[31] because of the
issues raised.[32]
In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its
complaint against the spouses Manalo, the latter filed a complaint for specific performance and
damages against the bank before the Regional Trial Court (RTC) of Quezon City on October 31, 1989.
The plaintiffs alleged therein that they had always been ready, able and willing to pay the installments
on the lots sold to them by the defendants remote predecessor-in-interest, as might be or stipulated in
the contract of sale, but no contract was forthcoming; they constructed their house worth P2,000,000.00
on the property in good faith; Manalo, Jr., informed the defendant, through its counsel, on October 15,
1988 that he would abide by the terms and conditions of his original agreement with the defendants
predecessor-in-interest; during the hearing of the ejectment case on October 16, 1988, they offered to
pay P313,172.34 representing the balance on the purchase price of said lots; such tender of payment
was rejected, so that the subject lots could be sold at considerably higher prices to third parties.
Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the execution and
delivery of a Deed of Absolute Sale covering the subject lots, sufficient in form and substance to
transfer title thereto free and clear of any and all liens and encumbrances of whatever kind and
nature.[33]The plaintiffs prayed that, after due hearing, judgment be rendered in their favor, to wit:
WHEREFORE, it is respectfully prayed that after due hearing:
(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over subject lots
in favor of the plaintiffs after payment of the sum of P313,172.34, sufficient in form and substance to
transfer to them titles thereto free and clear of any and all liens and encumbrances of whatever kind or
nature;
(b) The defendant should be held liable for moral and exemplary damages in the amounts
of P300,000.00 and P30,000.00, respectively, for not promptly executing and delivering to plaintiff the
necessary Contract of Sale, notwithstanding repeated demands therefor and for having been
constrained to engage the services of undersigned counsel for which they agreed to pay attorneys fees
in the sum of P50,000.00 to enforce their rights in the premises and appearance fee of P500.00;
(c) And for such other and further relief as may be just and equitable in the premises.[34]
In its Answer to the complaint, the defendant interposed the following affirmative defenses: (a) plaintiffs
had no cause of action against it because the August 22, 1972 letter agreement between XEI and the
plaintiffs was not binding on it; and (b) it had no record of any contract to sell executed by it or its
predecessor, or of any statement of accounts from its predecessors, or records of payments of the
plaintiffs or of any documents which entitled them to the possession of the lots.[35] The defendant,
likewise, interposed counterclaims for damages and attorneys fees and prayed for the eviction of the
plaintiffs from the property.[36]
Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an amicable
settlement of the case by paying P942,648.70, representing the balance of the purchase price of the
two lots based on the current market value.[37] However, the defendant rejected the same and insisted
that for the smaller lot, they pay P4,500,000.00, the current market value of the property.[38] The
defendant insisted that it owned the property since there was no contract or agreement between it and
the plaintiffs relative thereto.
During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional Sale executed
between XEI and Alberto Soller;[39] Alfredo Aguila,[40] and Dra. Elena Santos-Roque[41] to prove that
XEI continued selling residential lots in the subdivision as agent of OBM after the latter had acquired
the said lots.
For its part, defendant presented in evidence the letter dated August 22, 1972, where XEI proposed to
sell the two lots subject to two suspensive conditions: the payment of the balance of the downpayment
of the property, and the execution of the corresponding contract of conditional sale. Since plaintiffs
failed to pay, OBM consequently refused to execute the corresponding contract of conditional sale and
forfeited the P34,877.66 downpayment for the two lots, but did not notify them of said forfeiture.[42] It
alleged that OBM considered the lots unsold because the titles thereto bore no annotation that they had
been sold under a contract of conditional sale, and the plaintiffs were not notified of XEIs resumption of
its selling operations.
On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the
defendant. The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant
(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and 2, Block 2 of the
Xavierville Estate Subdivision after payment of the sum of P942,978.70 sufficient in form and substance
to transfer to them titles thereto free from any and all liens and encumbrances of whatever kind and
nature.
(b) Ordering the defendant to pay moral and exemplary damages in the amount of P150,000.00; and
(c) To pay attorneys fees in the sum of P50,000.00 and to pay the costs.
SO ORDERED.[43]
The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs, the
parties had a complete contract to sell over the lots, and that they had already partially consummated
the same. It declared that the failure of the defendant to notify the plaintiffs of the resumption of its
selling operations and to execute a deed of conditional sale did not prevent the defendants obligation to
convey titles to the lots from acquiring binding effect. Consequently, the plaintiffs had a cause of action
to compel the defendant to execute a deed of sale over the lots in their favor.
Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a) not concluding
that the letter of XEI to the spouses Manalo, was at most a mere contract to sell subject to suspensive
conditions, i.e., the payment of the balance of the downpayment on the property and the execution of a
deed of conditional sale (which were not complied with); and (b) in awarding moral and exemplary
damages to the spouses Manalo despite the absence of testimony providing facts to justify such
awards.[44]
On September 30, 2002, the CA rendered a decision affirming that of the RTC with
modification. The fallo reads:
WHEREFORE, the appealed decision is AFFIRMED with MODIFICATIONS that (a) the
figure P942,978.70 appearing [in] par. (a) of the dispositive portion thereof is changed to P313,172.34
plus interest thereon at the rate of 12% per annum from September 1, 1972 until fully paid and (b) the
award of moral and exemplary damages and attorneys fees in favor of plaintiffs-appellees is DELETED.
SO ORDERED.[45]
The appellate court sustained the ruling of the RTC that the appellant and the appellees had executed a
Contract to Sell over the two lots but declared that the balance of the purchase price of the property
amounting to P278,448.00 was payable in fixed amounts, inclusive of pre-computed interests, from
delivery of the possession of the property to the appellees on a monthly basis for 120 months, based on
the deeds of conditional sale executed by XEI in favor of other lot buyers.[46] The CA also declared
that, while XEI must have resumed its selling operations before the end of 1972 and the downpayment
on the property remained unpaid as of December 31, 1972, absent a written notice of cancellation of
the contract to sell from the bank or notarial demand therefor as required by Republic Act No. 6552, the
spouses had, at the very least, a 60-day grace period from January 1, 1973 within which to pay the
same.
Boston Bank filed a motion for the reconsideration of the decision alleging that there was no perfected
contract to sell the two lots, as there was no agreement between XEI and the respondents on the
manner of payment as well as the other terms and conditions of the sale. It further averred that its claim
for recovery of possession of the aforesaid lots in its Memorandum dated February 28, 1994 filed
before the trial court constituted a judicial demand for rescission that satisfied the requirements of the
New Civil Code. However, the appellate court denied the motion.
Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA rulings. It
maintains that, as held by the CA, the records do not reflect any schedule of payment of the 80%
balance of the purchase price, or P278,448.00. Petitioner insists that unless the parties had agreed on
the manner of payment of the principal amount, including the other terms and conditions of the contract,
there would be no existing contract of sale or contract to sell.[47] Petitioner avers that the letter
agreement to respondent spouses dated August 22, 1972 merely confirmed their reservation for the
purchase of Lot Nos. 1 and 2, consisting of 1,740.3 square meters, more or less, at the price
of P200.00 per square meter (or P348,060.00), the amount of the downpayment thereon and the
application of the P34,887.00 due from Ramos as part of such downpayment.
Petitioner asserts that there is no factual basis for the CA ruling that the terms and conditions relating to
the payment of the balance of the purchase price of the property (as agreed upon by XEI and other lot
buyers in the same subdivision) were also applicable to the contract entered into between the petitioner
and the respondents. It insists that such a ruling is contrary to law, as it is tantamount to compelling the
parties to agree to something that was not even discussed, thus, violating their freedom to contract.
Besides, the situation of the respondents cannot be equated with those of the other lot buyers, as, for
one thing, the respondents made a partial payment on the downpayment for the two lots even before
the execution of any contract of conditional sale.
Petitioner posits that, even on the assumption that there was a perfected contract to sell between the
parties, nevertheless, it cannot be compelled to convey the property to the respondents because the
latter failed to pay the balance of the downpayment of the property, as well as the balance of 80% of
the purchase price, thus resulting in the extinction of its obligation to convey title to the lots to the
respondents.
Another egregious error of the CA, petitioner avers, is the application of Republic Act No. 6552. It
insists that such law applies only to a perfected agreement or perfected contract to sell, not in this case
where the downpayment on the purchase price of the property was not completely paid, and no
installment payments were made by the buyers.
Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the respondents of
cancellation or rescission of the contract to sell, or notarial demand therefor. Petitioner insists that
its August 5, 1986 letter requiring respondents to vacate the property and its complaint for ejectment in
Civil Case No. 51618 filed in the Metropolitan Trial Court amounted to the requisite demand for a
rescission of the contract to sell. Moreover, the action of the respondents below was barred by laches
because despite demands, they failed to pay the balance of the purchase price of the lots (let alone the
downpayment) for a considerable number of years.
For their part, respondents assert that as long as there is a meeting of the minds of the parties to a
contract of sale as to the price, the contract is valid despite the parties failure to agree on the manner of
payment. In such a situation, the balance of the purchase price would be payable on demand,
conformably to Article 1169 of the New Civil Code. They insist that the law does not require a party to
agree on the manner of payment of the purchase price as a prerequisite to a valid contract to sell. The
respondents cite the ruling of this Court in Buenaventura v. Court of Appeals[48] to support their
submission.
They argue that even if the manner and timeline for the payment of the balance of the purchase price of
the property is an essential requisite of a contract to sell, nevertheless, as shown by their letter
agreement of August 22, 1972 with the OBM, through XEI and the other letters to them, an agreement
was reached as to the manner of payment of the balance of the purchase price. They point out that
such letters referred to the terms of the
terms of the deeds of conditional sale executed by XEI in favor of the other lot buyers in the subdivision,
which contained uniform terms of 120 equal monthly installments (excluding the downpayment, but
inclusive of pre-computed interests). The respondents assert that XEI was a real estate broker and
knew that the contracts involving residential lots in the subdivision contained uniform terms as to the
manner and timeline of the payment of the purchase price of said lots.
Respondents further posit that the terms and conditions to be incorporated in the corresponding
contract of conditional sale to be executed by the parties would be the same as those contained in the
contracts of conditional sale executed by lot buyers in the subdivision. After all, they maintain, the
contents of the corresponding contract of conditional sale referred to in the August 22, 1972 letter
agreement envisaged those contained in the contracts of conditional sale that XEI and other lot buyers
executed. Respondents cite the ruling of this Court in Mitsui Bussan Kaisha v. Manila E.R.R. & L.
Co.[49]
The respondents aver that the issues raised by the petitioner are factual, inappropriate in a petition for
review on certiorari under Rule 45 of the Rules of Court. They assert that petitioner adopted a theory in
litigating the case in the trial court, but changed the same on appeal before the CA, and again in this
Court. They argue that the petitioner is estopped from adopting a new theory contrary to those it had
adopted in the trial and appellate courts. Moreover, the existence of a contract of conditional sale was
admitted in the letters of XEI and OBM. They aver that they became owners of the lots upon delivery to
them by XEI.
The issues for resolution are the following: (1) whether the factual issues raised by the petitioner are
proper; (2) whether petitioner or its predecessors-in-interest, the XEI or the OBM, as seller, and the
respondents, as buyers, forged a perfect contract to sell over the property; (3) whether
petitioner is estopped from contending that no such contract was forged by the parties; and (4) whether
respondents has a cause of action against the petitioner for specific performance.
The rule is that before this Court, only legal issues may be raised in a petition for review on certiorari.
The reason is that this Court is not a trier of facts, and is not to review and calibrate the evidence on
record. Moreover, the findings of facts of the trial court, as affirmed on appeal by the Court of Appeals,
are conclusive on this Court unless the case falls under any of the following exceptions:
(1) when the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2)
when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave
abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in making its findings went beyond the
issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when
the findings are contrary to those of the trial court; (8) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well
as in the petitioners main and reply briefs are not disputed by the respondents; and (10) when the
findings of fact of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.[50]
We have reviewed the records and we find that, indeed, the ruling of the appellate court dismissing
petitioners appeal is contrary to law and is not supported by evidence. A careful examination of the
factual backdrop of the case, as well as the antecedental proceedings constrains us to hold that
petitioner is not barred from asserting that XEI or OBM, on one hand, and the respondents, on the
other, failed to forge a perfected contract to sell the subject lots.
It must be stressed that the Court may consider an issue not raised during the trial when there is plain
error.[51] Although a factual issue was not raised in the trial court, such issue may still be considered
and resolved by the Court in the interest of substantial justice, if it finds that to do so is necessary to
arrive at a just decision,[52] or when an issue is closely related to an issue raised in the trial court and
the Court of Appeals and is necessary for a just and complete resolution of the case.[53] When the trial
court decides a case in favor of a party on certain grounds, the Court may base its decision upon some
other points, which the trial court or appellate court ignored or erroneously decided in favor of a
party.[54]
In this case, the issue of whether XEI had agreed to allow the respondents to pay the purchase price of
the property was raised by the parties.The trial court ruled that the parties had perfected a contract to
sell, as against petitioners claim that no such contract existed. However, in resolving the issue of
whether the petitioner was obliged to sell the property to the respondents, while the CA declared that
XEI or OBM and the respondents failed to agree on the schedule of payment of the balance of the
purchase price of the property, it ruled that XEI and the respondents had forged a contract to sell;
hence, petitioner is entitled to ventilate the issue before this Court.
We agree with petitioners contention that, for a perfected contract of sale or contract to sell to exist in
law, there must be an agreement of the parties, not only on the price of the property sold, but also on
the manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of
the contracting parties obliges himself to transfer the ownership of and deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent. A contract of sale is perfected at the
moment there is a meeting of the minds upon the thing which is the object of the contract and the
price. From the averment of perfection, the parties are bound, not only to the fulfillment of what has
been
expressly stipulated, but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law.[55] On the other hand, when the contract of sale or to sell is
not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation
between the parties.[56]
A definite agreement as to the price is an essential element of a binding agreement to sell personal or
real property because it seriously affects the rights and obligations of the parties. Price is an essential
element in the formation of a binding and enforceable contract of sale. The fixing of the price can never
be left to the decision of one of the contracting parties. But a price fixed by one of the contracting
parties, if accepted by the other, gives rise to a perfected sale.[57]
It is not enough for the parties to agree on the price of the property. The parties must also agree on the
manner of payment of the price of the property to give rise to a binding and enforceable contract of sale
or contract to sell. This is so because the agreement as to the manner of payment goes into the price, Please let us know your choice lot so that we can fix the price and terms of payment in our conditional
such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.[58] sale.

In a contract to sell property by installments, it is not enough that the parties agree on the price as well Sincerely yours,
as the amount of downpayment. The parties must, likewise, agree on the manner of payment of the
balance of the purchase price and on the other terms and conditions relative to the sale. Even if the
buyer makes a downpayment or portion thereof, such payment cannot be considered as sufficient proof XAVIERVILLE ESTATE, INC.
of the perfection of any purchase and sale between the parties. Indeed, this Court ruled in Velasco v.
Court of Appeals[59] that:
(Signed)

It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they EMERITO B. RAMOS, JR.
and the respondent still had to meet and agree on how and when the down-payment and the President
installment payments were to be paid. Such being the situation, it cannot, therefore, be said that a
definite and firm sales agreement between the parties had been perfected over the lot in question.
Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the
CONFORME:
purchase price is an essential element in the formation of a binding and enforceable contract of sale.
The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000.00 as part of the
downpayment that they had to pay cannot be considered as sufficient proof of the perfection of any
purchase and sale agreement between the parties herein under article 1482 of the New Civil Code, as (Signed)
the petitioners themselves admit that some essential matter the terms of payment still had to be
CARLOS T. MANALO, JR.
mutually covenanted.[60]
Hurricane Rotary Well Drilling[62]

We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the
records, of the schedule of payment of the balance of the purchase price on the property amounting The August 22, 1972 letter agreement of XEI and the respondents reads:
to P278,448.00. We have meticulously reviewed the records, including Ramos February 8, 1972 and
August 22, 1972 letters to respondents,[61] and find that said parties confined themselves to agreeing
on the price of the property (P348,060.00), the 20% downpayment of the purchase price (P69,612.00),
Mrs. Perla P. Manalo
and credited respondents for the P34,887.00 owing from Ramos as part of the 20% downpayment. The
timeline for the payment of the balance of the downpayment (P34,724.34) was also agreed upon, that 1548 Rizal Avenue Extension
is, on or before XEI resumed its selling operations, on or before December 31, 1972, or within five (5)
days from written notice of such resumption of selling operations. The parties had also agreed to Caloocan City
incorporate all the terms and conditions relating to the sale, inclusive of the terms of payment of the
balance of the purchase price and the other substantial terms and conditions in the corresponding
contract of conditional sale, to be later signed by the parties, simultaneously with respondents Dear Mrs. Manalo:
settlement of the balance of the downpayment.

This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-subdivision plan as
The February 8, 1972 letter of XEI reads: amended, consisting of 1,740.3 square meters more or less, at the price of P200.00 per square meter
or a total price of P348,060.00.
Mr. Carlos T. Manalo, Jr.
Hurricane Rotary Well Drilling
It is agreed that as soon as we resume selling operations, you must pay a down payment of 20% of the
Rizal Avenue Ext.,Caloocan City purchase price of the said lots and sign the corresponding Contract of Conditional Sale, on or before
December 31, 1972, provided, however, that if we resume selling after December 31, 1972, then you
must pay the aforementioned down payment and sign the aforesaid contract within five (5) days from
Dear Mr. Manalo: your receipt of our notice of resumption of selling operations.

We agree with your verbal offer to exchange the proceeds of your contract with us to form as a down
payment for a lot in our Xavierville Estate Subdivision.
In the meanwhile, you may introduce such improvements on the said lots as you may desire, subject to
the rules and regulations of the subdivision.
If the above terms and conditions are acceptable to you, please signify your conformity by signing on
the space herein below provided.
Thank you.
Very truly yours,
XAVIERVILLE ESTATE, INC. CONFORME:
By:
(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO
President Buyer[63]
Based on these two letters, the determination of the terms of payment of the P278,448.00 had yet to be
agreed upon on or before December 31, 1972, or even afterwards, when the parties sign the
corresponding contract of conditional sale.
Jurisprudence is that if a material element of a contemplated contract is left for future negotiations, the
same is too indefinite to be enforceable.[64] And when an essential element of a contract is reserved
for future agreement of the parties, no legal obligation arises until such future agreement is
concluded.[65]
So long as an essential element entering into the proposed obligation of either of the parties remains to
be determined by an agreement which they are to make, the contract is incomplete and
unenforceable.[66] The reason is that such a contract is lacking in the necessary qualities of
definiteness, certainty and mutuality.[67]
There is no evidence on record to prove that XEI or OBM and the respondents had agreed,
after December 31, 1972, on the terms of payment of the balance of the purchase price of the property
and the other substantial terms and conditions relative to the sale. Indeed, the parties are in agreement
that there had been no contract of conditional sale ever executed by XEI, OBM or petitioner, as vendor,
and the respondents, as vendees.[68]
The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because the
issue of the manner of payment of the purchase price of the property was not raised therein.
We reject the submission of respondents that they and Ramos had intended to incorporate the terms of
payment contained in the three contracts of conditional sale executed by XEI and other lot buyers in the
corresponding contract of conditional sale, which would later be signed by them.[69] We have
meticulously reviewed the respondents complaint and find no such allegation therein.[70] Indeed,
respondents merely alleged in their complaint that they were bound to pay the balance of the purchase
price of the property in installments.When respondent Manalo, Jr. testified, he was never asked, on
direct examination or even on cross-examination, whether the terms of payment of the balance of the
purchase price of the lots under the contracts of conditional sale executed by XEI and other lot buyers
would form part of the corresponding contract of conditional sale to be signed by them simultaneously
with the payment of the balance of the downpayment on the purchase price.
We note that, in its letter to the respondents dated June 17, 1976, or almost three years from the
execution by the parties of their August 22, 1972letter agreement, XEI stated, in part, that respondents
had purchased the property on installment basis.[71] However, in the said letter, XEI failed to state a
specific amount for each installment, and whether such payments were to be made monthly, semi-
annually, or annually. Also, respondents, as plaintiffs below, failed to adduce a shred of evidence to
prove that they were obliged to pay the P278,448.00 monthly, semi-annually or annually. The allegation
that the payment of the P278,448.00 was to be paid in installments is, thus, vague and indefinite.Case
law is that, for a contract to be enforceable, its terms must be certain and explicit, not vague or
indefinite.[72]
There is no factual and legal basis for the CA ruling that, based on the terms of payment of the balance
of the purchase price of the lots under the contracts of conditional sale executed by XEI and the other
lot buyers, respondents were obliged to pay the P278,448.00 with pre-computed interest of 12% per
annum in 120-month installments. As gleaned from the ruling of the appellate court, it failed to justify its
use of the terms of payment under the three contracts of conditional sale as basis for such ruling, to wit:
On the other hand, the records do not disclose the schedule of payment of the purchase price, net of
the downpayment. Considering, however, the Contracts of Conditional Sale (Exhs. N, O and P) entered
into by XEI with other lot buyers, it would appear that the subdivision lots sold by XEI, under contracts
to sell, were payable in 120 equal monthly installments (exclusive of the downpayment but including
pre-computed interests) commencing on delivery of the lot to the buyer.[73]
By its ruling, the CA unilaterally supplied an essential element to the letter agreement of XEI and the
respondents. Courts should not undertake to make a contract for the parties, nor can it enforce one, the
terms of which are in doubt.[74] Indeed, the Court emphasized in Chua v. Court of Appeals[75] that it is
not the province of a court to alter a contract by construction or to make a new contract for the parties;
its duty is confined to the interpretation of the one which they have made for themselves, without regard
to its wisdom or folly, as the court cannot supply material stipulations or read into contract words which
it does not contain.
Respondents, as plaintiffs below, failed to allege in their complaint that the terms of payment of
the P278,448.00 to be incorporated in the corresponding contract of conditional sale were those
contained in the contracts of conditional sale executed by XEI and Soller, Aguila and Roque.[76] They
likewise failed to prove such allegation in this Court.
The bare fact that other lot buyers were allowed to pay the balance of the purchase price of lots
purchased by them in 120 or 180 monthly installments does not constitute evidence that XEI also
agreed to give the respondents the same mode and timeline of payment of the P278,448.00.
Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain thing at one
time is not admissible to prove that he did the same or similar thing at another time, although such
evidence may be received to prove habit, usage, pattern of conduct or the intent of the parties.
Similar acts as evidence. Evidence that one did or did not do a certain thing at one time is not
admissible to prove that he did or did not do the same or a similar thing at another time; but it may be
received to prove a specific intent or knowledge, identity, plan, system, scheme, habit, custom or
usage, and the like.
However, respondents failed to allege and prove, in the trial court, that, as a matter of business usage,
habit or pattern of conduct, XEI granted all lot buyers the right to pay the balance of the purchase price
in installments of 120 months of fixed amounts with pre-computed interests, and that XEI and the
respondents had intended to adopt such terms of payment relative to the sale of the two lots in
question. Indeed, respondents adduced in evidence the three contracts of conditional sale executed by
XEI and other lot buyers merely to prove that XEI continued to sell lots in the subdivision as sales agent
of OBM after it acquired said lots, not to prove usage, habit or pattern of conduct on the part of XEI to
require all lot buyers in the subdivision to pay the balance of the purchase price of said lots in 120
months. It further failed to prive that the trial court admitted the said deeds[77] as part of the testimony
of respondent Manalo, Jr.[78]
Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must contend
with the caveat that, before they admit evidence of usage, of habit or pattern of conduct, the offering
party must establish the degree of specificity and frequency of uniform response that ensures more
than a mere tendency to act in a given manner but rather, conduct that is semi-automatic in nature. The
offering party must allege and prove specific, repetitive conduct that might constitute evidence of
habit. The examples offered in evidence to prove habit, or pattern of evidence must be numerous
enough to base on inference of systematic conduct. Mere similarity of contracts does not present the
kind of sufficiently similar circumstances to outweigh the danger of prejudice and confusion.
In determining whether the examples are numerous enough, and sufficiently regular, the key criteria are
adequacy of sampling and uniformity of response. After all, habit means a course of behavior of a
person regularly represented in like circumstances.[79] It is only when examples offered to establish
pattern of conduct or habit are numerous enough to lose an inference of systematic conduct that
examples are admissible. The key criteria are adequacy of sampling and uniformity of response or ratio
of reaction to situations.[80]
There are cases where the course of dealings to be followed is defined by the usage of a particular
trade or market or profession. As expostulated by Justice Benjamin Cardozo of the United States
Supreme Court: Life casts the moulds of conduct, which will someday become fixed as law. Law
preserves the moulds which have taken form and shape from life.[81] Usage furnishes a standard for
the measurement of many of the rights and acts of men.[82] It is also well-settled that parties who
contract on a subject matter concerning which known usage prevail, incorporate such usage by
implication into their agreement, if nothing is said to be contrary.[83]
However, the respondents inexplicably failed to adduce sufficient competent evidence to prove usage,
habit or pattern of conduct of XEI to justify the use of the terms of payment in the contracts of the other
lot buyers, and thus grant respondents the right to pay the P278,448.00 in 120 months, presumably
because of respondents belief that the manner of payment of the said amount is not an essential
element of a contract to sell. There is no evidence that XEI or OBM and all the lot buyers in the
subdivision, including lot buyers who pay part of the downpayment of the property purchased by them
in the form of service, had executed contracts of conditional sale containing uniform terms and
conditions. Moreover, under the terms of the contracts of conditional sale executed by XEI and three lot
buyers in the subdivision, XEI agreed to grant 120 months within which to pay the balance of the
purchase price to two of them, but granted one 180 months to do so.[84] There is no evidence on
record that XEI granted the same right to buyers of two or more lots.
Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be considered
certain if it be so with reference to another thing certain. It is sufficient if it can be determined by the
stipulations of the contract made by the parties thereto[85] or by reference to an agreement
incorporated in the contract of sale or contract to sell or if it is capable of being ascertained with
certainty in said contract;[86] or if the contract contains express or implied provisions by which it may be
rendered certain;[87] or if it provides some method or criterion by which it can be definitely
ascertained.[88]As this Court held in Villaraza v. Court of Appeals,[89] the price is considered certain if,
by its terms, the contract furnishes a basis or measure for ascertaining the amount agreed upon.
We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no direct or
implied reference to the manner and schedule of payment of the balance of the purchase price of the
lots covered by the deeds of conditional sale executed by XEI and that of the other lot buyers[90] as
basis for or mode of determination of the schedule of the payment by the respondents of
the P278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light Company[91] is
not applicable in this case because the basic price fixed in the contract was P9.45 per long ton, but it
was stipulated that the price was subject to modification in proportion to variations in calories and ash
content, and not otherwise. In this case, the parties did not fix in their letters-agreement, any method or
mode of determining the terms of payment of the balance of the purchase price of the property
amounting to P278,448.00.
It bears stressing that the respondents failed and refused to pay the balance of the downpayment and
of the purchase price of the property amounting to P278,448.00 despite notice to them of the
resumption by XEI of its selling operations. The respondents enjoyed possession of the property
without paying a centavo. On the other hand, XEI and OBM failed and refused to transmit a contract of
conditional sale to the respondents. The respondents could have at least consigned the balance of the
downpayment after notice of the resumption of the selling operations of XEI and filed an action to
compel XEI or OBM to transmit to them the said contract; however, they failed to do so.
As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected contract to
sell the two lots; hence, respondents have no cause of action for specific performance against
petitioner. Republic Act No. 6552 applies only to a perfected contract to sell and not to a contract with
no binding and enforceable effect.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED.The Decision of the Court of Appeals
in CA-G.R. CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City,
Branch 98 is ordered to dismiss the complaint. Costs against the respondents.

SO ORDERED.
G.R. No. L-10244 February 29, 1916
SANTIAGO CRUZADO, plaintiff-appellant,
vs.
ESTEFANIA BUSTOS and MANUEL ESCALER, defendants-appellees.
TORRES, J.:
This appeal, by bill of exceptions, was taken from the judgment of June 17, 1914, in which the trial
judge absolved defendants from the complaint and plaintiff from the cross-complaint, without express
finding as to costs. Counsel for plaintiff appealed from this judgment and moved for a new trial. This
motion was denied, exception was taken by appellant, and, on the filing of the proper bill of exceptions,
the same was approved, certified, and transmitted to the clerk of this court, together with a transcript of
the evidence introduced at the trial.
Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended on
September 25, 1913, in which he alleged that plaintiff was the owner of certain rural property situated in
the barrio of Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga, containing an area
of 65 balitas and bounded as set forth in the complaint; that Estafania Bustos, during her lifetime, and
now the administrator of her estate, together with the other defendant, Manuel Escaler, had, since the
year 1906 up to the present, been detaining the said parcel of land, and had refused to deliver the
possession thereof to plaintiff and to recognize his ownership of the same, notwithstanding the
repeated demands made upon them; that by such detention, the plaintiff had suffered losses and
damages to the amount of P3,500. He therefore asked for judgment declaring plaintiff to be the owner
of the said parcel of land and ordering defendants to return it to plaintiff and to pay the latter P3,500 for
losses and damages, and the costs.
The demurrer filed by the defendant Bustos having been overruled, in her answer she made a general
denial of each and all of the allegations of the complaint, and of each and all of the paragraphs thereof,
and, as a special defense, alleged that the title to the said land, produced by the plaintiff, was not a
lawful one, for the reason that only a simulated sale of the land was made by the between herself and
the deceased Agapito Geronimo Cruzado, plaintiff's father, and that for more than thirty years
preceding the present time she had been the sole, exclusive, and lawful owner of the said parcel of land
in question; that she had been holding it quietly, peaceably, publicly and in good faith; that it formed an
integral part of another larger parcel of land, both parcels aggregating a total area of 100 balitas,
9 loanes, and 41 square brazas; that in September, 1891, with plaintiff's knowledge, the defendant
Bustos sold and conveyed all the said property to the other defendant Manuel Escaler who then
acquired the possession and ownership of the said parcel of land, and had retained such ownership
and possession up to the present time; that at no time and on no account whatever had plaintiff or any
other person except defendants acquired possession of the said parcel of land or any part thereof, nor
any right or title therein. She therefore prayed to be absolved from the complaint, with the costs against
plaintiff.
The other defendant, Manuel Escaler, in an amended answer to the aforementioned complaint, denied
each and all of the allegations therein contained and each and all of its clauses, and, as a special
defense, alleged that plaintiff's title to the said land was illegal as only a simulated sale was made by
and between Agapito Geronimo Cruzado, plaintiff's predecessor in interest, and Bernardino Dizon; that
defendants had been in possession of the said parcel of land for more than thirty years; that the
defendant Escaler in good faith purchased the land in question from Estefania Bustos, widow of Dizon,
without ever having had any notice of any defect in the vendor's title; that plaintiff had knowledge of the
contract of sale of the land in question yet did nothing to oppose its purchase by the defendant Escaler,
wherefore the latter, in acquiring the property, did so under the belief that the plaintiff Santiago Cruzado
had no right or interest therein. He therefore prayed that the complaint be dismissed, with the costs
against plaintiff, and that an injunction issue to restrain the latter from interfering with the defendant
Escaler in the enjoyment of his property and rights and from performing any act prejudicial to his
interests.
On the case coming to trial, both parties adduced evidence, among which was included the deposition
of Inocencio Rosete.
Counsel for defendants, in a cross-complaint set forth: that as shown by the evidence, the defendant
Escaler acquired in good faith from Estefania Bustos the land in question at a time when there was no
record whatever in the property registry to show that this land belonged to a third person or any other
than the vendor; that, on entering into possession of the property, Escaler spent P4,000 in-
improvements and in the repair of a long dike to prevent the erosion of the land by the frequent
overflows of the adjoining estuary; that of this sum P2,000 was paid by Escaler and the remaining
P2,000 by Estafania Bustos, in her capacity as lessee of the land; and that in case the judgment of the
court should be adverse to defendants, these latter, as owners in good faith, were entitled to be
indemnified by plaintiff for the said expenses. He therefore asked that plaintiff be ordered to reimburse
half of the said P4,000 to each of the defendants in case judgment should be rendered favorable to
plaintiff.
The latter's counsel, in answer to the said cross-complaint, specifically denied each and all of the
allegations thereof and, in special defense, reproduced plaintiff's amended complaint in all its parts and
alleged that the facts set forth in the cross-complaint did not constitute a cause of action. He therefore
prayed that plaintiff be absolved from the cross-complaint and that judgment be rendered against
defendants, in conformity with the prayer of his complaint.
After the evidence was all in, counsel for the defendant Escaler moved that the deposition of the
witness Inocencio Espanol Rosete be admitted into the record, and in support of his motion stated that
with the authorization of the court the said deposition had been taken on November 21, 1913, in the
municipality of Arayat in the presence of plaintiff's attorney; that the said declaration of the deponent
was duly forwarded to the clerk of the court, and there attached to the record, but through an
unintentional oversight of defendant's attorney, it was not presented in evidence at the trial; that this
deposition was very important for the defendants' defense; and that the deponent was and continued to
be unable to appear before the court on account of a threatened attack of brain fever which might
develop during the journey from Arayat to San Fernando.
Plaintiff's counsel asked that the foregoing motion be overruled and that the deposition of the witness
Rosete be stricken from the record, because defendants' motion was made out of time and was
contrary to the rules of procedure, and there was no reason for altering the order of procedure, as
requested by defendants, for, when the period for the reception of the evidence of both parties is
closed, an alteration in the order of procedure such as asked by defendants would be improper and
illegal, counsel citing the decision of this court in the case of Garcia vs. Reyes.1 He alleged, moreover,
that the said deposition necessarily affected the main issue in controversy and that to allow the motion
would be in contravention of the provisions of section 364 of the Code of Civil Procedure. He therefore
asked that the said motion be overruled. The court, however, ordered that the deposition of the witness
Inocencio Rosete be admitted in evidence, and that plaintiff's exception be noted. In view of the
foregoing, the judgment aforementioned was rendered.
The questions herein submitted for the decision of this court are:
1. Is it or is it not true that the deed of sale, Exhibit A, (p. 40 of the record) of 65 balitas of land situated
in the municipality of Bacolor, Pampanga, executed by Estefania Bustos, with the assistance of her
husband Bernardino Dizon, in favor of Agapito Geronimo Cruzado, for the sum of P2,200, was
simulated, not with intent to defraud any third person, but for the sole purpose of making it appear that
the vendee, Cruzado, then a candidate for the position of procurador on the date of the said deed,
September 7,1875, possessed real estate to the value of P2,200 with which to guarantee the faithful
discharge of the duties of the office of procurador?
2. It is or is it not true that, notwithstanding such apparent alienation of the 65 balitas of land, the
supposed vendee continued in possession thereof, without the supposed purchaser having taken
possession of the property until September 10, 1891, when its owner Bustos sold to Escaler, not only
the said 65 balitas of land, but also all the remainder of a large tract of agricultural land of which the
portion appearing as sold to Agapito G. Cruzado formed and forms a part, and that Escaler was then
and, until the date of plaintiff's claim, continued to be in peaceable, uninterrupted possession of the said
whole tract of land, including the aforementioned portion of 65 balitas?
3. Has the right of ownership prescribed which Manuel Escaler is and has been enjoying in the land
which Estefania Bustos had sold to him and which includes the parcel of 65 balitas claimed by plaintiff,
Santiago Cruzado, or has the right of any real or personal action he might exercise by reason of the
sale to Cruzado prescribed on account of the lapse of the respective periods fixed by law, between the
7th of September, 1875, the date of said sale, and the 8th of October, 1910, that of the filing of the
complaint?
To judge from the evidence adduced in this case, there is ample ground for holding that the said deed
of sale of a parcel of 65 balitas of land was simulated, not to defraud any creditor or other person
interested in the land nor for the purpose of eluding any lawful obligation on the part of its owner,
Estafania Bustos, but for the sole purpose of doing a favor, of rendering a special service to Agapito
Geronimo Cruzado, father of the plaintiff Santiago Cruzado.
During his lifetime Agapito G. Cruzado aspired to hold the office of procurador in the Court of First
Instance of Pampanga, but notwithstanding that he possessed the required ability for the discharge of
the duties of that position, he was unable to give the required bond, an indispensable condition for his
appointment, as he was possessed of no means or real property wherewith to guarantee the proper
discharge of his duties in the manner prescribed by the laws then in force.
In the certified copy of the record of the case tried in the Secretaria de Gobierno of the abolished Real
Audiencia de Manila, issued by the Assistant Executive Secretary and chief of the division of archives,
there appears on page 178 a decree by the presidencia of this latter tribunal, issued by virtue of the
resolution passed by the sala de gobierno on November 24, 1875, whereby it was ordered that Agapito
Geronimo Cruzado should be noticed that within the period of 30 days he must show proof of having
furnished a bond of P700 in cash or of P2,100 in real property as security for the position
of procurador to which he had been appointed, with the understanding that should be fail to furnish
such bond he would not be issued the certificate entitling him to practice the profession of procurador.
After complying with the requirements of the said court and executing the mortgage deed of the land
purchased by the procurador elect Cruzado from Estefania Bustos, on March 18, 1876, the mortgage
was recorded in the old mortgage registry then kept in the office of the Ayuntamiento of Manila during
the former sovereignty, and thereafter Agapito G. Cruzado received his appointment and commenced
to discharge the duties of his position.
The above-related facts conclusively prove that Estefania Bustos executed the deed of sale Exhibit A in
favor of the deceased Cruzado in order to enable the latter, by showing that he was a property owner,
to hold the office of procurador. This position he held for many years, thanks to the liberality of the
pretended vendor, who, notwithstanding the statements contained in the deed of sale, does not appear
to have been paid anything as a result of the sham sale, a sale which was affected, not in prejudice or
fraud of any person, nor those who were entitled to hold Cruzado liable for the proper discharge of the
duties of his office, because, had the need arisen, any liability of his could have been covered by the
value of the land, the sale of which was fictitiously set forth in that deed as lawfully belonging to
Cruzado, and then Estefania Bustos would have had no right either to object to or escape the
consequences of that alienation, although simulated.
The simulation of the said sale was effected by making a pretended contract which bore the
appearance of truth, when really and truly there was no contract, because the contracting parties did
not in fact intend to execute one, but only to formulate a sale in such a manner that, for the particular
purposes sought by Bustos and Cruzado, it would appear to have been celebrated solely that Cruzado
might hold his office of procurador on the strength of the security afforded by the value of the land
feignedly sold.
The record does not show when the procurador Cruzado died, but it is unquestionable that he was still
living during the last months of 1882, judging from the certificate which he himself issued to Norberto
Decena (Exhibit 3). He must have died sometime between the years 1882 and 1890, to judge from the
contents of the letters plaintiff addressed to Natalio Dizon, one of the children of Estefania Bustos, on
July 7, 1891, and July 4, 1896, and from the fact that in the said year 1890 Agapito G. Cruzado was no
longer a practicing procurador in the Court of First Instance of Pampanga..
It is true that even after the death of the aforesaid procurador, any liability he might have incurred in
connection with the exercise of his office could have been, upon presentation of the proper claim,
collected out of the value of the land apparently sold by Estafania Bustos and pledged as security for
the proper discharge of the duties of his office. On October 8, 1910, when his son Santiago Cruzado
filed his complaint, already more than twenty years had elapsed since 1889, if plaintiff's father died in
1889 and not between 1883 and 1889; therefore, any right of action to foreclose the mortgage, or any
personal action with regard to the value of the encumbered land, as the result of any liability incurred in
the performance of his duties as procurador, has more than prescribed. (Art. 1964, Civil Code, and
secs. 38, 39 and 43, Act. No. 190.).
On the termination of the sovereignty of Spain over this Archipelago, the Spanish courts here
established went out of existence on January 31, 1899, the Pampanga court indeed being abolished
about the middle of 1897 as a result of the revolution against the former sovereignty. The personnel of
those courts also ceased to render service as such. It may therefore be affirmed that, if the said lien on
the land in question has not terminated by its no longer having any object, it is at least undeniable that
prescription has already run with respect to any action that might have been brought against the
pledged land to recover for any liability which might have been incurred by the procurador Cruzado
during his lifetime in connection with his office, so that this real estate may now be considered as free
from that hypothecary encumbrance.
At the present time we have only to explain what rights Agapito G. Cruzado transmitted at his death to
his son, the herein plaintiff, by virtue of the deed of sale of the land in litigation, executed by its owner
Estefania Bustos.
It is unquestionable that the contract of sale of the 65 balitas of land was perfect and binding upon both
contracting parties, since they both appear in that instrument to have agreed upon the thing sold, to wit,
the 65 balitas of land, and upon the price, P2,200; but it is also undeniable that the said contract was
not consummated, inasmuch as, notwithstanding that the deed of sale Exhibit A was accomplished and
this document was kept by the pretended purchaser, it is positively certain that the latter did not pay the
purchase price of P2,200, and never took possession of the land apparently sold in the said deed. All
that this vendee afterwards did was to pledge the land on March 14, 1876, that is, six months and
some days after the 7th of September, 1875, the date when he purchased it as security for the
faithful discharge of the duties of his office of procurador of the Court of First Instance of Pampanga.
The plaintiff, Santiago Cruzado, a son of the vendee, claiming that the said land was being detained by
the vendor, or by the administrator of the latter's estate or her death after the commencement of these
proceedings, and by the other defendant Manuel Escaler, prayed the court to declare him to be the
owner thereof, to order the defendants to return it to him and to pay him for losses and damages, and
the costs.
The action brought by the plaintiff is evidently one for recovery of possession, founded on the right
transmitted to him by his father at his death, a right arising from the said simulated deed of sale of
the land in question. This action is of course improper, not only because the sale was simulated, but
also because it was not consummated. The price of the land was not paid nor did the vendee take
possession of the property from the 7th of September, 1875, when the said sale was feigned, until the
time of his death; nor did any of his successors, nor the plaintiff himself until the date of his claim, enter
into possession of the land.
It is indeed true that it is not necessary that the thing sold or its price should have been delivered in
order that the contract of purchase and sale be deemed perfect on account of its being consensual, and
from it reciprocal obligations arise mutually to compel the parties to effect its fulfillment; but there is no
transmission of ownership until the thing, as in the case at bar, the land, has been delivered, and the
moment such delivery is made the contract of purchase and sale is regarded as consummated. Article
1450 of the Civil Code, relied upon in this connection by the appellant, refers solely to the perfection of
the contract and not to its consummation.
The purchaser is also a creditor with respect to the products of the thing sold, and article 1095 of the
Civil Code prescribes as follows:
A creditor has a right to the fruits of a thing from the time the obligation to deliver it arises. However, he
shall not acquire a property right thereto until it has been delivered to him.
The provisions of this article are in agreement with that of the second paragraph of article 609 of the
same Code, which is of the following tenor:
Ownership is acquired by retention.
Ownership and other property rights are required and transmitted by law, by gift, by testate or intestate
succession, and, in consequence of certain contracts, by tradition.
They can also be acquired by prescription.
The provisions of the said article 1095 are also in accord with those of article 1462 which reads:
A thing sold shall be considered as delivered, when it is placed in the hands and possession of the
vendee.
When the sale should be made by means of a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if in said instrument the
contrary does not appear or may be clearly inferred.
It is true that the deed of sale Exhibit A remained in possession of the vendee Cruzado, but the sale is
not to be considered as consummated by this because the said vendee never entered into possession
of the land and neither did his son the plaintiff. The latter, moreover, was unable to prove that at any
time as owner of the land he collected the fruits harvested thereon, or that any other person cultivated
the said land in the name and representation of his deceased father or of the plaintiff himself. The
fiction created by means of the execution and delivery of a public instrument produces no effect if the
person acquiring it never takes possession of the thing sold or acquired, as happened in the case at
bar.
If, as prescribed by the preinserted article 1095, the creditor, and in the present case the vendee, does
not acquire a property right in the land purchased until the property has been delivered to him or he has
taken possession of it, it is unquestionable that, as neither the plaintiff nor his predecessor in interest
took possession of the land in litigation, neither of them acquired any property right therein and,
consequently, could not and cannot now bring an action for recovery of possession which arises out of
a property right in a thing which belongs to them and not a mere right productive of a personal
obligation. The plaintiff Santiago Cruzado could only, in a proper case, exercise the personal right of
action flowing from the right possessed by his father to compel the vendor to fulfill the contract made in
a public instrument to deliver the land sold or to give him possession of it, in consequence of the said
contract, though simulated and executed for the sole purpose that the deceased Cruzado in default of
P700 in cash might appear to own real estate with which to insure the proper performance of his duties
as procurador, an office he then desired to hold.
The supreme court of Spain in a decision of cassation of June 1, 1990, established the following
doctrine:
That articles 1258 and 1450 of the Civil Code and the decisions of cassation of June 30, 1854, April 13
and December 13, 1861, June 30, 1864, and April 19 and December 15, 1865, do not warrant the
conclusion that whoever purchases personal or real property may exercise with respect thereto all
rights of action inherent in its ownership, without it having, in some way or another, been placed at his
disposal. On the contrary, the distinction between the perfecting and the consummation of a contract
marks the diversity of relations of the contracting parties among themselves and of the owner with
respect to what constitutes this property.
This principle is in harmony with those set up by the same high tribunal in its decision of January 19,
1898, and March 8, 1901.
In this last decision, also rendered on an appeal in cassation, the doctrine enunciated in the excerpt
copied here below was established:
That the contract of purchase and sale, as consensual, is perfected by consent as to the price and the
thing and is consummated by the reciprocal delivery of the one and the other, the full ownership of the
thing sold being conveyed to the vendee, from which moment the rights of action derived from this right
may be exercised.
It is, then, of the utmost importance to examine whether in the said sale the purchase price was paid
and whether the vendee took possession of the land supposed to have been sold.
The record discloses that Cruzado during his lifetime was, before he became a procurador, an
official escribiente or clerk charged with the duty of coursing records and proceedings in the Court of
Pampanga; that his salary was hardly sufficient to maintain him and his family; that on account of the
insufficiency of his monthly stipend, he was frequently obliged to borrow money from his friends,
notwithstanding that he with his family lodged in the house of Bernardino Dizon, the husband of the
vendor Bustos, situated in the municipality of Bacolor, with whom Cruzado maintained intimate relations
of friendship, and on this account the said couple were content to live in a country house they owned on
one of their rice fields. Such was the testimony of several witnesses who lived in that municipality, and
who knew and had considerable dealings with the plaintiff's father for many years. It was the opinion of
these witnesses that the deceased Agapito G. Cruzado was a poor man, for the reason that his monthly
salary scarcely provided for the needs of himself and his family, and they therefore believed that he
could not have furnished the sum of P2,200 to purchase the land in question, and, furthermore, if the
plaintiff's father had possessed this sum, he would have made the deposit of the sum of P700, the
amount of security required by the Presidencia of the former Real Audiencia de Manila for his
appointment as procurador, since, having the means, he would have preferred to deposit this smaller
sum rather than to have used P2,200 in acquiring a piece of land from which he would derive no benefit
whatever, as in fact he never did, as he must have known that in spite of the simulated sale of the
property its owner would continue in its possession and would cultivate it, as she did do until her death.
It is, therefore, unquestionable that the price of the sale was not paid, an omission which would indicate
that it was in effect simulated.
Aside from the fact that the spouses Estafania Bustos and Bernardino Dizon had no need to sell the
said 65 balitas of land, or of fencing or separating this parcel from the large tract of land that belonged
to them and of which it formed a part, for the reason that they were rich and at that time were not in
need of money to cultivate their extensive landholdings, it is also to be noted that the portion of land
sold was worth very much more than the P2,200 which, in the said instrument, purported to be its price.
In addition to the foregoing, the proceedings in the case at bar furnish ample proof that Agapito
Geronimo Cruzado during his lifetime stated to various persons that he succeeded in giving bond for his
appointment as procurador by means of the said instrument of simulated sale, executed in his favor by
the spouses Dizon and Bustos, as he did not have the money to make the deposit required for his
appointment. So close were the relations that then existed between the Cruzado family and that of
Dizon and Bustos, that later on the plaintiff married a daughter of these latter; hence, plaintiff, in the
beginning of his letters Exhibits 8 and 9 addressed to Natalio Dizon, a son of the vendor Estefania
Bustos, calls his correspondent his "dear and esteemed brother-in-law." It is therefore not stranger that
these spouses should have wished to help plaintiff's predecessor in interest by assisting him to obtain
the office of procurador, even to the extent of making a feigned sale.
However, years afterwards, prompted by an intuition of possible future difficulties, Dizon and his wife
Bustos went to the office of Agapito G. Cruzado and required him to cancel the said deed of sale, in
order to avoid any lawsuit after their death. Cruzado promised to look for money wherewith to substitute
the mortgage bond. This demand had to be repeated several times, because Cruzado did not cancel
the deed as he promised.
Furthermore, it is shown that the instrument Exhibit A is merely a second copy obtained by the plaintiff
from the chief of division of archives, without prior summons or notification of the vendor Estefania
Bustos, who was still living, in conformity with the provisions contained in article 18 of the Notarial Law
of February 15, 1889, and without the plaintiff's having explained what became of the first copy.
Besides, the clerk and notary who certified that instrument did not attest therein that in his presence the
vendee Cruzado paid over the sum of P2,200, the price of the land sold, and as the vendor denied
having received this sum, the obligation devolved upon plaintiff to prove that his deceased father had
paid the price stated in that instrument. By this not having done so, his omission constitutes additional
proof that the sale of the land, the recovery of possession of which plaintiff now seeks, was really
simulated.
The supreme court of Spain, in a decision dated February 20, 1899, rendered on an appeal in
cassation, laid down the doctrine that, in accordance with the provisions of article 40 of the Mortgage
Law, in the alienation of real property it is understood that no price has been paid if the notary does not
attest its delivery or the contracting parties do not prove that it was previously paid.
The courts are allowed full latitude to accept the presumption that the purchase price has not been paid
when the notary before whom the instrument was executed does not attest the delivery of the money,
and when, such delivery being denied by one of the contracting parties, the other does not adduce
proof of its payment, especially when such presumption is corroborated by other circumstantial
evidence which, all together, undoubtedly prove that the sale was feigned and simulated for certain
purposes sought to be attained by the parties, though, as in the case at bar, the simulation was not
effected in fraud of creditors.
Besides the failure to pay the purchase price, the record discloses another very important fact, to wit,
that neither the vendee nor his heirs, among these latter, the plaintiff, had at any time taken possession
of the land which in the said instrument Exhibit A appeared to have been sold, for, by the testimony of
seven competent witnesses examined at the trial it is decisively and conclusively proven that the
alleged vendor, Estefania Bustos, and her husband while he was living, notwithstanding the said
alienation, continued to possess the said land supposedly sold to plaintiff's father, and cultivated it, as
she had done long before the sale of September, 1875, and continued to do so up to the date of the
complaint filed by Santiago Cruzado; in the first period, until September 10, 1891, as the owner of the
land, and from this date, when the whole of the large tract of land of which the said portion apparently
sold forms a part was sold to the other defendant Manuel Escaler, the original owner Estefania Bustos
continued in the material possession of the land, but now as the lessee of the new owner, until 1908,
when she was substituted by Marcelo Rodriguez as the new lessee of the property. The plaintiff at no
time after his father's death occupied the land in litigation, notwithstanding his allegation that he has
been collecting rentals from Estefania Bustos, his mother-in-law, by reason of his having leased the
land to her.
The plaintiff endeavored to prove that during the years 1882 and 1883 he personally took charge of and
tilled the disputed land on shares through his tenants named Florentino de los Reyes, Lino Cortes,
Macario de los Reyes and Regino de los Reyes, all of whom corroborated plaintiff's testimony in this
regard. However, six of the defendants' witnesses positively stated that they never were aware that the
said tenants had worked on the land in question during either the said two years or in any other, for
these latter were working on the adjacent lands belonging to other owners. Pablo Angeles, one of the
defendants' witnesses, testified that Regino and Florentino de los Reyes were his tenants on shares
and were employed on his land adjoining that in question. He was positively certain that they never
worked on the disputed land during or about the years aforementioned, because the carabaos used by
his said two tenants belonged to him and he never would have permitted them to use these animals in
working land that did not belong to him. He added that Regino's children, Macario and Basilio, were at
that time so young, being about eight years of age, that they were not yet able to work in the fields.
The plaintiff must have been well convinced that he had no right whatever in the land supposedly
purchased by his father. The latter never demanded its possession from its owner Estefania Bustos and
never thought of declaring the property as belonging to him, for the purposes of the land tax, from the
time this tax was established in this country, notwithstanding that the plaintiff, knowing his obligation,
filed a sworn declaration relative to a lot he owned in the municipality of Bacolor. This procedure of
plaintiff's proves that he did not believe himself to be the owner of the land he claims and which its
present owner Manuel Escaler has constantly declared for the purpose of assessment.
Moreover, about the middle of the year 1891, the plaintiff Santiago Cruzado begged his brother-in-law
Natalio Dizon to tell the latter's mother, plaintiff's mother-in-law, that Cruzado desired the lease
four balitas of the land in question, and some days afterwards, possibly because he received no reply
from his said brother-in-law, he addressed a letter to Dizon (Exhibit 9, page 152 of the record,
translated on page 154) in which he repeated his request and asked for a reply; but notwithstanding
that his brother-in-law Dizon told him that he could not dispose of any part of the said land for the
reason that his mother Estefania Bustos was negotiating for the sale of all the land she possessed in
the sitio of Sicat to Manuel Escaler, plaintiff went to Dizon's house on an occasion when Paulino de la
Cruz was there. Cruz was a representative of Escaler and had been charged to inform himself of the
situation, condition and quality of the land which Bustos was about to sell to his principal and was at the
said house for the purpose of being shown the land offered for sale. On this occasion plaintiff learned
that negotiations were being made for the sale of all the land owned by Estefania Bustos of which the
65 balitas in litigation formed a part. Plaintiff did not then or afterwards make any statement or objection
whatever in defense of his rights and interest, if he really believed that he was entitled to the land
shown in the instrument Exhibit A to have been purchased by his father.
Plaintiff made no protest whatsoever, because he well knew that the said sale was simulated and that
his father had acquired no right whatever in the property; he was therefore anxious to lease
four balitas of the same land, a purpose in which he was unsuccessful because a deal was then already
going forward for the sale of the said land to its present owner, Manuel Escaler, who in fact did but it on
September 10, 1891. If plaintiff were convinced that he was the owner of the land, as he rashly
asserted that he was in his complaint for recovery of possession, it is not understood why about the
middle of the year 1891 he wished to lease, not all the 65 balitas, but only four of them, as stated in his
said letter, Exhibit 9.
From that time the new owner Manuel Escaler took possession of all the land sold by Estefania Bustos,
including the 65 balitas in litigation, and continued in its possession as the owner thereof until October
8, 1910, when plaintiff filed his claim. Thus, more than the ten years required by law for ordinary
prescription had already elapsed, as Escaler purchased the land and was holding it in good faith under
a lawful title and was not disturbed in his continuous and peaceable possession, one that was adverse
to the whole world. It is therefore unquestionable that he has absolutely acquired by prescription the
ownership of the disputed land, and the action brought by plaintiff, founded solely on a simulated sale
executed by the original owner of the land, not to the prejudice, but to the benefit, of the pretended
vendee, cannot prevail against Escaler's rights.
The registration obtained by the plaintiff in the property registry of the second copy of the said
instrument Exhibit A, about two months before filing his action for recovery, to wit, on August 23, 1910,
has not improved the deed of sale nor made it more effective, nor could it affect the rights held by the
original owner and the present proprietor of the land in question, inasmuch as their predecessor in
interest, by default of payment of the price of the sale and on account of his never having taken
possession of the land sold, was not the owner thereof, nor did he acquire any property right whatever
therein. Consequently at his death he could not have transmitted to the plaintiff as his successor any
greater right than a personal right to exact the fulfillment of a contract, and as plaintiff was not the
owner of the land, he could not validly register it.
Article 1473 of the Civil Code prescribes:
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 personal property.
Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took possession of it in good
faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith.
On the sale of the land to the defendant Escaler, neither he nor the plaintiff had had it entered in the
property registry, but the said new owner, Escaler, took possession of the land on the date of its
acquisition, September 10,1891, and has retained possession thereof up to the present time. So that
when plaintiff registered the land he was not in possession thereof and no longer had any right
whatever therein, because it already belonged to the defendant Escaler, its lawful owner.
However, even though it were proper for plaintiff to bring the real action for recovery derived, though we
do not admit that it could be, from the simulated sale before mentioned, both this action as well as the
personal action the only one available in a proper case, as before demonstrated, pursuant to the
provisions of article 1095 of the Civil Code have both certainly prescribed, for the reason that the
periods fixed by law for filing such actions have much more than elapsed.
Article 1939 of the Civil Code says:
Prescription, which began to run before the publication of this code, shall be governed by the prior laws;
but if, after this code became operative, all the time required in the same for prescription has elapsed, it
shall be effectual, even if according to said prior laws a longer period of time may be required.
Personal actions prescribe after ten years; and the same with the writ of execution therein issued, after
twenty years; while real actions prescribe after thirty years: according to Law 5, Title 8, Book 1 of
the Novisima Recopilacion, and Law 21, Title 29, Partida 3, which were those in force on the date of the
execution of the deed of sale, Exhibit A.
From September 7, 1875, to October 8, 1910, when the complaint was filed, thirty-five years have
elapsed. Therefore, not only in accordance with the laws aforecited, but also pursuant to the provisions
of articles 1963 and 1964 of the Civil Code, the periods fixed for the prescription of the personal action
which could, in a proper case, have been exercised, as well as for the real action for recovery of
possession brought by the plaintiff without right so to do, have more than prescribed.
For all the foregoing reasons, whereby the errors assigned to the judgment appealed from have been
duly refuted, the said judgment should be, as it is hereby, affirmed, with the costs against the appellant.
So ordered.
Doles vs. Angeles
The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is valid; second; if
valid, whether petitioner is obliged to sign and execute the necessary documents to effect the transfer
AUSTRIA-MARTINEZ, J.: of her rights over the property to the respondent; and third, whether petitioner is liable for damages.

This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:
Decision[1] dated April 30, 2001 of the Court of Appeals (CA) in C.A.-G.R. CV No. 66985, which
reversed the Decision dated July 29, 1998 of the Regional Trial Court (RTC), Branch 21, City of Manila;
and the CA Resolution[2] dated August 6, 2001 which denied petitioners Motion for Reconsideration.
WHEREFORE, premises considered, the Court hereby orders the dismissal of the complaint for
insufficiency of evidence. With costs against plaintiff.
The antecedents of the case follow:
SO ORDERED.
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific
Performance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-
82716. Respondent alleged that petitioner was indebted to the former in the concept of a personal loan The RTC held that the sale was void for lack of cause or consideration:[5]
amounting to P405,430.00 representing the principal amount and interest; that on October 5, 1996, by
virtue of a Deed of Absolute Sale,[3] petitioner, as seller, ceded to respondent, as buyer, a parcel of
land, as well as the improvements thereon, with an area of 42 square meters, covered by Transfer Plaintiff Angeles admission that the borrowers are the friends of defendant Doles and further admission
Certificate of Title No. 382532,[4] and located at a subdivision project known as Camella Townhomes that the checks issued by these borrowers in payment of the loan obligation negates [sic] the cause or
Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this property was consideration of the contract of sale executed by and between plaintiff and defendant. Moreover, the
mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure petitioners loan in the property is not solely owned by defendant as appearing in Entry No. 9055 of Transfer Certificate of Title
sum of P337,050.00 with that entity; that as a condition for the foregoing sale, respondent shall assume No. 382532 (Annex A, Complaint), thus:
the undue balance of the mortgage and pay the monthly amortization of P4,748.11 for the remainder of
the 25 years which began on September 3, 1994; that the property was at that time being occupied by a
tenant paying a monthly rent of P3,000.00; that upon verification with the NHMFC, respondent learned Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share of Teodorico
that petitioner had incurred arrearages amounting to P26,744.09, inclusive of penalties and interest; Doles on the parcel of land described in this certificate of title by virtue of the special power of attorney
that upon informing the petitioner of her arrears, petitioner denied that she incurred them and refused to to mortgage, executed before the notary public, etc.
pay the same; that despite repeated demand, petitioner refused to cooperate with respondent to
execute the necessary documents and other formalities required by the NHMFC to effect the transfer of
the title over the property; that petitioner collected rent over the property for the month of January 1997
and refused to remit the proceeds to respondent; and that respondent suffered damages as a result The rule under the Civil Code is that contracts without a cause or consideration produce no effect
and was forced to litigate. whatsoever. (Art. 1352, Civil Code).

Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she borrowed Respondent appealed to the CA. In her appeal brief, respondent interposed her sole assignment of
error:
money from respondent, and averred that from June to September 1995, she referred her friends to
respondent whom she knew to be engaged in the business of lending money in exchange for personal
checks through her capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo,
Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money from THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF [sic] THE
respondent and issued personal checks in payment of the loan; that the checks bounced for DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF
insufficiency of funds; that despite her efforts to assist respondent to collect from the borrowers, she EVIDENCE.[6]
could no longer locate them; that, because of this, respondent became furious and threatened petitioner
that if the accounts were not settled, a criminal case will be filed against her; that she was forced to
issue eight checks amounting to P350,000 to answer for the bounced checks of the borrowers she On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which reads:
referred; that prior to the issuance of the checks she informed respondent that they were not sufficiently
funded but the latter nonetheless deposited the checks and for which reason they were subsequently
dishonored; that respondent then threatened to initiate a criminal case against her for violation of Batas
WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision of the
Pambansa Blg. 22; that she was forced by respondent to execute an Absolute Deed of Sale over her
lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new one is entered ordering
property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no valid consideration;
defendant-appellee to execute all necessary documents to effect transfer of subject property to plaintiff-
that she did not appear before a notary public; that the Community Tax Certificate number on the deed
appellant with the arrearages of the formers loan with the NHMFC, at the latters expense. No costs.
was not hers and for which respondent may be prosecuted for falsification and perjury; and that she
suffered damages and lost rental as a result.
SO ORDERED.
The CA concluded that petitioner was the borrower and, in turn, would re-lend the amount borrowed
from the respondent to her friends. Hence, the Deed of Absolute Sale was supported by a valid
consideration, which is the sum of money petitioner owed respondent amounting to P405,430.00,
representing both principal and interest.
The CA took into account the following circumstances in their entirety: the supposed friends of
petitioner never presented themselves to respondent and that all transactions were made by and
between petitioner and respondent;[7] that the money borrowed was deposited with the bank account of
the petitioner, while payments made for the loan were deposited by the latter to respondents bank
account;[8] that petitioner herself admitted in open court that she was re-lending the money loaned from
respondent to other individuals for profit;[9] and that the documentary evidence shows that the actual
borrowers, the friends of petitioner, consider her as their creditor and not the respondent.[10]
Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiate consent,
since the same is considered just or legal if made to enforce ones claim through competent authority
under Article 1335[11] of the Civil Code;[12] that with respect to the arrearages of petitioner on her
monthly amortization with the NHMFC in the sum of P26,744.09, the same shall be deemed part of the
balance of petitioners loan with the NHMFC which respondent agreed to assume; and that the amount
of P3,000.00 representing the rental for January 1997 supposedly collected by petitioner, as well as the
claim for damages and attorneys fees, is denied for insufficiency of evidence.[13]
On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing that respondent
categorically admitted in open court that she acted only as agent or representative of Arsenio Pua, the
principal financier and, hence, she had no legal capacity to sue petitioner; and that the CA failed to
consider the fact that petitioners father, who co-owned the subject property, was not impleaded as a
defendant nor was he indebted to the respondent and, hence, she cannot be made to sign the
documents to effect the transfer of ownership over the entire property.
On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing
matters had already been passed upon.
On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner
filed the present Petition and raised the following issues:
I.
WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE
RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT
DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.[14]
Although, as a rule, it is not the business of this Court to review the findings of fact made by the lower
courts, jurisprudence has recognized several exceptions, at least three of which are present in the
instant case, namely: when the judgment is based on a misapprehension of facts; when the findings of
facts of the courts a quo are conflicting; and when the CA manifestly overlooked certain relevant facts
not disputed by the parties, which, if properly considered, could justify a different conclusion.[15] To
arrive at a proper judgment, therefore, the Court finds it necessary to re-examine the evidence
presented by the contending parties during the trial of the case.
The Petition is meritorious.
The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration.
1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then
she is not a party to the loan; and that the Deed of Sale executed between her and the respondent in
their own names, which was predicated on that pre-existing debt, is void for lack of consideration.
Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price
certain in money[16] and that this sum indisputably pertains to the debt in issue. This Court has
consistently held that a contract of sale is null and void and produces no effect whatsoever where the
same is without cause or consideration.[17] The question that has to be resolved for the moment is
whether this debt can be considered as a valid cause or consideration for the sale.
To restate, the CA cited four instances in the record to support its holding that petitioner re-lends the
amount borrowed from respondent to her friends: first, the friends of petitioner never presented
themselves to respondent and that all transactions were made by and between petitioner and
respondent;[18] second; the money passed through the bank accounts of petitioner and
respondent;[19] third, petitioner herself admitted that she was re-lending the money loaned to other
individuals for profit;[20] and fourth, the documentary evidence shows that the actual borrowers, the
friends of petitioner, consider her as their creditor and not the respondent.[21]
On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during
her cross-examination:[22]
Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
 q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa Atty. Diza:
Inocencio, Zenaida Romulo, they are your friends?
q. What profit do you have, do you have commission?
witness:
witness:
a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just referred.
a. Yes, sir.
Atty. Diza:
Atty. Diza:
q. And you have transact[ed] with the plaintiff?
q. How much?
witness:
witness:
a. Yes, sir.
a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir.
Atty. Diza:
Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent,
q. What is that transaction? the real lender.
witness: But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her
cross examination:[23]
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Villacorta:
Atty. Diza:
q. Who is this Arsenio Pua?
q. Did the plaintiff personally see the transactions with your friends?
witness:
witness:
a. Principal financier, sir.
a. No, sir.
Atty. Villacorta:
Atty. Diza:
q. So the money came from Arsenio Pua?
q. Your friends and the plaintiff did not meet personally?
witness:
witness:
a. Yes, because I am only representing him, sir.
a. Yes, sir.
Other portions of the testimony of respondent must likewise be considered:[24]
Atty. Diza:
Atty. Villacorta:
q. So it is not actually your money but the money of Arsenio Pua?
q. You are intermediaries?
witness:
witness:
a. Yes, sir.
a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the
name of Arsenio Pua because the money came from Arsenio Pua. Court:
xxxx q. It is not your money?
Atty. Diza: witness:
q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the one you a. Yes, Your Honor.
mentioned [a] while ago?
Atty. Villacorta:
witness:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are
a. Yes, she knows the money will go to those persons. you aware of that?
Atty. Diza: witness:
q. You are re-lending the money? a. I am aware of that.
witness: Atty. Villacorta:
a. Yes, sir. q. More or less she [accommodated] several friends of the defendant?
witness: Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her disclosed
principal. She is also estopped to deny that petitioner acted as agent for the alleged debtors, the friends
a. Yes, sir, I am aware of that. whom she (petitioner) referred.
xxxx This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
Atty. Villacorta: representation.[25] The question of whether an agency has been created is ordinarily a question which
may be established in the same way as any other fact, either by direct or circumstantial evidence. The
q. And these friends of the defendant borrowed money from you with the assurance of the defendant? question is ultimately one of intention.[26] Agency may even be implied from the words and conduct of
the parties and the circumstances of the particular case.[27] Though the fact or extent of authority of the
witness: agents may not, as a general rule, be established from the declarations of the agents alone, if one
a. They go direct to Jocelyn because I dont know them. professes to act as agent for another, she may be estopped to deny her agency both as against the
asserted principal and the third persons interested in the transaction in which he or she is engaged.[28]
xxxx
Atty. Villacorta:
In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the
q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from you borrowers are friends of petitioner.
her friends who [are] in need of money issued check[s] to you? There were checks issued to you?
witness:
The CA is incorrect when it considered the fact that the supposed friends of [petitioner], the actual
a. Yes, there were checks issued. borrowers, did not present themselves to [respondent] as evidence that negates the agency
relationshipit is sufficient that petitioner disclosed to respondent that the former was acting in behalf of
Atty. Villacorta: her principals, her friends whom she referred to respondent. For an agency to arise, it is not necessary
q. By the friends of the defendant, am I correct? that the principal personally encounter the third person with whom the agent interacts. The law in fact
contemplates, and to a great degree, impersonal dealings where the principal need not personally know
witness: or meet the third person with whom her agent transacts: precisely, the purpose of agency is to extend
the personality of the principal through the facility of the agent.[29]
a. Yes, sir.
Atty. Villacorta:
In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they are
q. And because of your assistance, the friends of the defendant who are in need of money were able to
representing someone else, and so both of them are estopped to deny the same.It is evident from the
obtain loan to [sic] Arsenio Pua through your assistance?
record that petitioner merely refers actual borrowers and then collects and disburses the amounts of the
witness: loan upon which she received a commission; and that respondent transacts on behalf of her principal
financier, a certain Arsenio Pua.If their respective principals do not actually and personally know each
a. Yes, sir. other, such ignorance does not affect their juridical standing as agents, especially since the very
purpose of agency is to extend the personality of the principal through the facility of the agent.
Atty. Villacorta:
q. So that occasion lasted for more than a year?
With respect to the admission of petitioner that she is re-lending the money loaned from respondent to
witness:
other individuals for profit, it must be stressed that the manner in which the parties designate the
a. Yes, sir. relationship is not controlling. If an act done by one person in behalf of another is in its essential nature
one of agency, the former is the agent of the latter notwithstanding he or she is not so called.[30] The
Atty. Villacorta: question is to be determined by the fact that one represents and is acting for another, and if relations
exist which will constitute an agency, it will be an agency whether the parties understood the exact
q. And some of the checks that were issued by the friends of the defendant bounced, am I correct?
nature of the relation or not.[31]
witness:
a. Yes, sir.
That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner
Atty. Villacorta: issued checks in payment of the loan in the name of Pua. If it is true that petitioner was re-lending, then
the checks should have been drawn in her name and not directly paid to Pua.
q. And because of that Arsenio Pua got mad with you?
witness:
With respect to the second point, particularly, the finding of the CA that the disbursements and
a. Yes, sir. payments for the loan were made through the bank accounts of petitioner and respondent,
suffice it to say that in the normal course of commercial dealings and for reasons of convenience and
practical utility it can be reasonably expected that the facilities of the agent, such as a bank account,
may be employed, and that a sub-agent be appointed, such as the bank itself, to carry out the task, SO ORDERED.
especially where there is no stipulation to the contrary.[32]

In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan
between their principals. Since the sale is predicated on that loan, then the sale is void for lack of
consideration.

2. A further scrutiny of the record shows, however, that the sale might have been backed up
by another consideration that is separate and distinct from the debt: respondent averred in her
complaint and testified that the parties had agreed that as a condition for the conveyance of the
property the respondent shall assume the balance of the mortgage loan which petitioner allegedly owed
to the NHMFC.[33] This Court in the recent past has declared that an assumption of a mortgage debt
may constitute a valid consideration for a sale.[34]

Although the record shows that petitioner admitted at the time of trial that she owned the property
described in the TCT,[35] the Court must stress that the Transfer Certificate of Title No. 382532[36] on
its face shows that the owner of the property which admittedly forms the subject matter of the Deed of
Absolute Sale refers neither to the petitioner nor to her father, Teodorico Doles, the alleged co-
owner. Rather, it states that the property is registered in the name of Household Development
Corporation.Although there is an entry to the effect that the petitioner had been granted a special power
of attorney covering the shares of Teodorico Doles on the parcel of land described in this
certificate,[37] it cannot be inferred from this bare notation, nor from any other evidence on the record,
that the petitioner or her father held any direct interest on the property in question so as to validly
constitute a mortgage thereon[38] and, with more reason, to effect the delivery of the object of the sale
at the consummation stage.[39]What is worse, there is a notation that the TCT itself has been
cancelled.[40]

In view of these anomalies, the Court cannot entertain the

possibility that respondent agreed to assume the balance of the mortgage loan which petitioner
allegedly owed to the NHMFC, especially since the record is bereft of any factual finding that petitioner
was, in the first place, endowed with any ownership rights to validly mortgage and convey the
property. As the complainant who initiated the case, respondent bears the burden of proving the basis
of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the
sale void for lack of cause.And since the sale is void, the Court finds it unnecessary to dwell on the
issue of whether duress or intimidation had been foisted upon petitioner upon the execution of the sale.

Moreover, even assuming the mortgage validly exists, the Court notes respondents allegation that the
mortgage with the NHMFC was for 25 years which began September 3, 1994.Respondent filed her
Complaint for Specific Performance in 1997.Since the 25 years had not lapsed, the prayer of
respondent to compel petitioner to execute necessary documents to effect the transfer of title is
premature.

WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals
are REVERSED and SET ASIDE. The complaint of respondent in Civil Case No. 97-82716
is DISMISSED.
[G.R. No. 134559. December 9, 1999]
ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA
BARING, petitioners, vs. COURT OF APPEALS and MANUEL TORRES, respondents.
DECISION
PANGANIBAN, J.:
Courts may not extricate parties from the necessary consequences of their acts. That the terms of a
contract turn out to be financially disadvantageous to them will not relieve them of their obligations
therein. The lack of an inventory of real property will not ipso facto release the contracting partners from
their respective obligations to each other arising from acts executed in accordance with their
agreement.
The Case
The Petition for Review on Certiorari before us assails the March 5, 1998 Decision[1] Second
Division of the Court of Appeals[2] (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution
denying reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of
Cebu City in Civil Case No. R-21208, which disposed as follows:
WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and against the
plaintiffs, orders the dismissal of the plaintiffs complaint. The counterclaims of the defendant are
likewise ordered dismissed. No pronouncement as to costs.[3]
The Facts
Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement"
with Respondent Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to
the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who
then had it registered in his name. By mortgaging the property, respondent obtained from Equitable
Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development
of the subdivision.[4] All three of them also agreed to share the proceeds from the sale of the
subdivided lots.
The project did not push through, and the land was subsequently foreclosed by the bank.
According to petitioners, the project failed because of respondents lack of funds or means and skills.
They add that respondent used the loan not for the development of the subdivision, but in furtherance
of his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement the Agreement. With the
said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu Lapu
City Councils approval of the subdivision project which he advertised in a local newspaper. He also
caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with an
engineering firm for the building of sixty low-cost housing units and actually even set up a model house
on one of the subdivision lots. He did all of these for a total expense of P85,000.
Respondent claimed that the subdivision project failed, however, because petitioners and their relatives
had separately caused the annotations of adverse claims on the title to the land, which eventually
scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the
claims, thereby forcing him to give up on the project.[5]
Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were
however acquitted. Thereafter, they filed the present civil case which, upon respondent's motion, was
later dismissed by the trial court in an Order dated September 6, 1982. On appeal, however, the
appellate court remanded the case for further proceedings. Thereafter, the RTC issued its assailed
Decision, which, as earlier stated, was affirmed by the CA.
Hence, this Petition.[6]
Ruling of the Court of Appeals
In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed a
partnership for the development of the subdivision. Thus, they must bear the loss suffered by the
partnership in the same proportion as their share in the profits stipulated in the contract.Disagreeing
with the trial courts pronouncement that losses as well as profits in a joint venture should be distributed
equally,[7] the CA invoked Article 1797 of the Civil Code which provides:
Article 1797 - The losses and profits shall be distributed in conformity with the agreement. If only the
share of each partner in the profits has been agreed upon, the share of each in the losses shall be in
the same proportion.
The CA elucidated further:
In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to
what he may have contributed, but the industrial partner shall not be liable for the losses. As for the
profits, the industrial partner shall receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed capital, he shall also receive a share in the
profits in proportion to his capital.
The Issue
Petitioners impute to the Court of Appeals the following error:
x x x [The] Court of Appeals erred in concluding that the transaction x x x between the petitioners and
respondent was that of a joint venture/partnership, ignoring outright the provision of Article 1769, and
other related provisions of the Civil Code of the Philippines.[8]
The Courts Ruling
The Petition is bereft of merit.
Main Issue: Existence of a Partnership
Petitioners deny having formed a partnership with respondent. They contend that the Joint Venture
Agreement and the earlier Deed of Sale, both of which were the bases of the appellate courts finding of
a partnership, were void.
In the same breath, however, they assert that under those very same contracts, respondent is liable for
his failure to implement the project. Because the agreement entitled them to receive 60 percent of the
proceeds from the sale of the subdivision lots, they pray that respondent pay them damages equivalent
to 60 percent of the value of the property.[9]
The pertinent portions of the Joint Venture Agreement read as follows:
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March, 1969, by
and between MR. MANUEL R. TORRES, x x x the FIRST PARTY, likewise, MRS. ANTONIA B.
TORRES, and MISS EMETERIA BARING, x x x the SECOND PARTY:
W I T N E S S E T H:
That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property located at
Lapu-Lapu City, Island of Mactan, under Lot No. 1368 covering TCT No. T-0184 with a total area of
17,009 square meters, to be sub-divided by the FIRST PARTY;
Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, upon the execution of this contract for the property entrusted
by the SECOND PARTY, for sub-division projects and development purposes;
NOW THEREFORE, for and in consideration of the above covenants and promises herein contained
the respective parties hereto do hereby stipulate and agree as follows:
ONE: That the SECOND PARTY signed an absolute Deed of Sale x x x dated March 5, 1969, in the
amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50)
Philippine Currency, for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine
Currency, in favor of the FIRST PARTY, but the SECOND PARTY did not actually receive the payment.
SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary amount of
TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, for their personal obligations and this
particular amount will serve as an advance payment from the FIRST PARTY for the property mentioned
to be sub-divided and to be deducted from the sales.
THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the
principal amount involving the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, until the sub-division project is terminated and ready for sale to any interested parties, and
the amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, will be deducted
accordingly.
FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should be paid
by the FIRST PARTY, exclusively and all the expenses will not be deducted from the sales after the
development of the sub-division project.
FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for the
SECOND PARTY and FORTY PERCENTUM 40% for the FIRST PARTY, and additional profits or
whatever income deriving from the sales will be divided equally according to the x x x percentage
[agreed upon] by both parties.
SIXTH: That the intended sub-division project of the property involved will start the work and all
improvements upon the adjacent lots will be negotiated in both parties['] favor and all sales shall [be]
decided by both parties.
SEVENTH: That the SECOND PARTIES, should be given an option to get back the property mentioned
provided the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, borrowed by
the SECOND PARTY, will be paid in full to the FIRST PARTY, including all necessary improvements
spent by the FIRST PARTY, and the FIRST PARTY will be given a grace period to turnover the
property mentioned above.
That this AGREEMENT shall be binding and obligatory to the parties who executed same freely and
voluntarily for the uses and purposes therein stated.[10]
A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership
pursuant to Article 1767 of the Civil Code, which provides:
ART. 1767. By the contract of partnership two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves.
Under the above-quoted Agreement, petitioners would contribute property to the partnership in the form
of land which was to be developed into a subdivision; while respondent would give, in addition to his
industry, the amount needed for general expenses and other costs. Furthermore, the income from the
said project would be divided according to the stipulated percentage. Clearly, the contract manifested
the intention of the parties to form a partnership.[11]
It should be stressed that the parties implemented the contract. Thus, petitioners transferred the title to
the land to facilitate its use in the name of the respondent. On the other hand, respondent caused the
subject land to be mortgaged, the proceeds of which were used for the survey and the subdivision of
the land. As noted earlier, he developed the roads, the curbs and the gutters of the subdivision and
entered into a contract to construct low-cost housing units on the property.
Respondents actions clearly belie petitioners contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or property,
but also industry.
Petitioners Bound by Terms of Contract
Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly
stipulated, but also to all necessary consequences thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law.
It is undisputed that petitioners are educated and are thus presumed to have understood the terms of
the contract they voluntarily signed. If it was not in consonance with their expectations, they should
have objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and the
fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve
parties thereto of their obligations. They cannot now disavow the relationship formed from such
agreement due to their supposed misunderstanding of its terms.
Alleged Nullity of the Partnership Agreement
Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code, which
provides:
ART. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an
inventory of said property is not made, signed by the parties, and attached to the public instrument.
They contend that since the parties did not make, sign or attach to the public instrument an inventory of
the real property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent Arturo
M. Tolentino states that under the aforecited provision which is a complement of Article 1771,[12] the
execution of a public instrument would be useless if there is no inventory of the property contributed,
because without its designation and description, they cannot be subject to inscription in the Registry of
Property, and their contribution cannot prejudice third persons. This will result in fraud to those who
contract with the partnership in the belief [in] the efficacy of the guaranty in which the immovables may
consist. Thus, the contract is declared void by the law when no such inventory is made. The case at bar
does not involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property.[13] They cannot in one breath
deny the contract and in another recognize it, depending on what momentarily suits their
purpose.Parties cannot adopt inconsistent positions in regard to a contract and courts will not tolerate,
much less approve, such practice.
In short, the alleged nullity of the partnership will not prevent courts from considering the Joint Venture
Agreement an ordinary contract from which the parties rights and obligations to each other may be
inferred and enforced.
Partnership Agreement Not the Result of an Earlier Illegal Contract
Petitioners also contend that the Joint Venture Agreement is void under Article 1422[14] of the Civil
Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land
without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for the sale
was the expectation of profits from the subdivision project. Its first stipulation states that petitioners did
not actually receive payment for the parcel of land sold to respondent.Consideration, more properly
denominated as cause, can take different forms, such as the prestation or promise of a thing or service
by another.[15]
In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in
the expectation of profits from the subdivision project, for which the land was intended to be used. As
explained by the trial court, the land was in effect given to the partnership as [petitioners] participation
therein. x x x There was therefore a consideration for the sale, the [petitioners] acting in the expectation
that, should the venture come into fruition, they [would] get sixty percent of the net profits.
Liability of the Parties
Claiming that respondent was solely responsible for the failure of the subdivision project, petitioners
maintain that he should be made to pay damages equivalent to 60 percent of the value of the property,
which was their share in the profits under the Joint Venture Agreement.
We are not persuaded. True, the Court of Appeals held that petitioners acts were not the cause of the
failure of the project.[16] But it also ruled that neither was respondent responsible therefor.[17] In
imputing the blame solely to him, petitioners failed to give any reason why we should disregard the
factual findings of the appellate court relieving him of fault. Verily, factual issues cannot be resolved in a
petition for review under Rule 45, as in this case. Petitioners have not alleged, not to say shown, that
their Petition constitutes one of the exceptions to this doctrine.[18] Accordingly, we find no reversible
error in the CA's ruling that petitioners are not entitled to damages.
WHEREFORE, the Petition is hereby DENIED and the challenged Decision AFFIRMED.Costs against
petitioners.
SO ORDERED.
G.R. No. L-11908 February 4, 1918 make such payment. In the case at bar where was no contract, express or implied, for the payment of
interest pending the award of the committee appointed to value the property sold on May 3, 1910, and
ANTONIO M.A BARRETTO, plaintiff-appellant, there was no delay in the punctual compliance with defendant's obligation to make immediate payment,
vs. in cash, of the amount of the award, upon the filing of the report of the committee.
JOSE SANTA MARINA and "LA INSULAR," defendants-appellees.
We conclude that the judgment entered in the court below dismissing the complaint in this case sine
CARSON, J.: die should be affirmed, with the costs of this instance against the appellant. So ordered.
The material facts upon which our disposition of this appeal necessarily turns are set out at length in
our opinion in the case of Barretto vs. Santa Marina, decided December 2, 1913 (26 Phil rep., 200).
This court having ruled against the plaintiff's contention in the former case, he now sets up a claim for
interest at the legal rate upon the amount of the purchase price of his share (participacion) in the
business from the 1st day of July, 1909, to the 22d day of November, 1910, the day upon which it was
turned over to him.
The finding of facts, and the reasoning upon which we based our rulings in the former case, are
manifestly conclusive in the present case as to the plaintiff's claim of a right to interest from the first of
July, 1909, to the third of May, 1910.
In the former case we held that the sale of plaintiff's share (participacion) in the tobacco factory was
consummated on the latter date; that the valuation set upon his share (participacion) in business was
determined as of that day by the committee charged with the duty of ascertaining the cash value of this
share (participacion) in order to determine the exact amount which the parties had agreed upon as the
purchase price to be paid therefor; and that the committee had included that the plaintiff's share of the
profits of the business down to the third of May, 1910, in their estimate of the value of his share
(participacion) in the business of that date.
These rulings were made after a review of the same record which is now relied upon by the plaintiff in
support of his claim of interest upon the amount fixed by the committee as the true value of his share
(participacion) in the business. We find nothing in the record of the contention of counsel in this regard
which would justify or necessitate a modification or reversal of the conclusions reached by us in our
former opinion.
Plaintiff's share (participacion) in the business having been sold on the 3rd day of May, 1910, for a
stipulated price, that is to say, for its value on that day as fixed by the valuation committee, it is very
clear that he is not entitled to interest on the amount fixed by the committee, prior to the date on which
the sale was consummated (3rd of may, 1910).
So also plaintiff's contention that he should be allowed interest on the amount of the purchase price
from the date of the sale, May 3, 1910, down to the day upon which the money was actually turned over
to him, November 22, 1910, cannot be sustained. Under the express terms of the agreement for the
sale on May 3, 1910, the plaintiff agreed to accept, and the defendant to pay, the amount which the
committee should find to be the true value of plaintiff's share (participacion) in the business as of that
day. Under the agreement the defendant neither expressly nor impliedly obligated himself to pay
interest on that amount pending the report of the committee. The only contractual obligation assumed
by him was that he would pay the amount fixed by the committee in cash immediately upon the making
of the award by the committee, and in accordance with its terms.
The committee's report is dated November 14, 1910, and it appears that promptly upon the submission
of this report, the amount awarded the plaintiff (P280,025.16) was paid over by the defendant to the
plaintiff in cash; and the letter of counsel for plaintiff dated November 17, 1910, tendering a formal deed
of sale of plaintiff's share (participacion) in the business and making demand for the purchase price as
fixed by the committee, read together with the formal deed of sale executed November 22, 1910, with
its acknowledgment of the receipt of the purchase price, leaves no room for doubt that at that time the
parties understood and accepted the purchase price therein set forth as full payment of plaintiff's share
(participacion) in the business in exact conformity with the conditions imposed in the agreement
consummated to May 3, 1910.
The right to interest arises either by virtue of a contract or by way of damages for delay or failure
(demora) to pay the principal on which interest is demanded, at the time when the debtor is obligated to
[G.R. No. 1300. February 3, 1904. ]
E. C. McCULLOUGH, Plaintiff-Appellee, v. R. AENLLE & Co., Defendants-Appellants.
On August 27, 1901, the parties to this action made a written contract which contained among other
things the following clause:jgc:chanrobles.com.ph
"For the purpose of carrying into effect the said contract of sale entered into with the other party hereto,
said Francisco Gonzalez y de la Fuente and Don Antonio la Puente y Arce, in the name and on behalf
of th mercantile partnership denominated R. Aenlle & Co., by virtue of the powers conferred upon them
and in compliance with the instructions given them by Don Matias Saenz de Vizmanos y Lecaroz, the
manager of the said partnership, solemnly declare that they sell, absolutely and in fee simple, to E.C.
McCullough, the tobacco and cigarette factory known as La Maria Cristina, located at No. 36 Calle
Echague, Plaza de Goiti, Santa Cruz district, this city, said sale including the trade-mark La Maria
Cristina, which has been duly registered, three stock of tobacco in leaf and manufactured, machinery,
labels, wrappers, furniture, fixtures, and everything else belonging to the said factory, as known in the
inventory to be drawn up for the purpose of making formal delivery of the said property; all of the same
for the following sums:jgc:chanrobles.com.ph
"(a) For the transfer of the ownership of the trade-mark La Maria Cristina, 20,000 pesos;
"(b) For the machinery installed in the factory, together with tools and other equipment and cost of
installation, approximately 30,000 pesos;
"(c) For the furniture, approximately, 4,500 pesos;
"(d) For the leaf tobacco on hand, approximately, 71,000 pesos;
"(e) For the boxes on hand, approximately, 1,500 pesos;
"(f) For the manufactured tobacco on hand, approximately, 12,500 pesos;
"(g) For cigar and cigarette wrappers and labels at present on hand, 10,000 pesos;
"(h) And for the stock of cigarette paper on hand, approximately, 4,000 pesos; which said sums make in
all 153,500 pesos.
"This sum is subject to modification, in accordance with the result shown by the inventory to be drawn
up. In this inventory the value of each individual piece of furniture will be fixed at 10 per cent below the
price shown in the partnership inventory. The machinery and cost of installating the same will also be
fixed at 10 per cent below its invoice price. The value of the tobacco, both in leaf and in process of
manufacture, boxes, labels, wrappers, cigars, cigarettes, and paper mouthpieces for cigarettes will be
fixed at the invoice price. The value of the tobacco made up into cigars will be fixed in accordance with
the price list of the partnership, less 20 per cent discount. The cigars will be inventoried at the prices in
the same lists, less a discount of 35 per cent. The $20,000 mentioned as the value of the trade-mark
will, however, remain unchanged."cralaw virtua1aw library
The inventory mentioned in this contract was afterwards made by the defendant and delivered to the
plaintiff, who, prior to September 26, through an expert selected by him, examined bales of the tobacco
selected by the defendant and which its agents said were sample bales of the different lots of tobacco
mentioned in the inventory. Tyhese sample bales corresponded as to quality with the lots described in
the inventory, and on September 26 the parties executed a second instrument, which in addition to a
recital of substance of the contract of August 27, contained the following clauses:jgc:chanrobles.com.ph
"Second. That the parties hereto have completed the before mentioned inventory of machinery,
furniture, stock of tobacco in leaf and manufactured, boxes, labels, wrappers, and the other
appurtenances of the said tobacco factory, representing a total and effective value of 131,000 pesos,
after deducting the discount agreed upon for each article, and including the value of the trade-mark,
which as stated, was fixed at 20,000 pesos; and that E. C. McCullough, the purchaser, remained in the
possession of the above-mentioned tobacco factory, and of all its appurtenances and the stock on hand
to his entire and complete satisfaction.
"Third. That by virtue of the conditions set forth, the parties hereto fix the selling price of the above-
mentioned tobacco factory called La Maria Cristina, together with its trade-mark of the same name,
and all its appurtenances, at said sum of $131,000, on account of which the vendee, Mr. McCullough,
authorizes the vendors, Don Francisco Gonzalez y de la Fuente and Don Antonio la Puente y Arce, to
collect and receive the 20,000 pesos deposited in the Spanish-Philippine Bank for that purpose and
binds himself to pay the said vendees the $111,000 remaining for the complete and total payment of
the said purchase price by the 30th day of September, instant, on which date said sum must be paid,
and in case said payment shall not be made by Mr. Cullough on said date, the said contract of sale of
the said factory will be rescinded, the said sum of 20,000 pesos before mentioned accruing to the
benefit of the representatives of R. Aenlle & Co."cralaw virtua1aw library
On September 30 they executed a third contract, in which the defendant acknowledged the receipt at
that time of the full purchase price of the sale.
Among other items of leaf tobacco in the inventory were the two following:jgc:chanrobles.com.ph
"1. Y. P. I. 4. S. Angadanan 99 221 bales , net weight qqs. 571.35 at 40. $22,854.
"2. Isabela, 99 loose leaves. 1. 2. 3. 76 bales re-baled, net weight, qqs. 130.32 at 42. $5,473.44."cralaw
virtua1aw library
It is admitted that the first item means that the 221 bales were of the fourth-class superior, from
Angadanan and of the crop of 1899, and that the 76 bales in the second item were from Isabela of the
crop 1899 and of the first, second, and third class.
In December, 1901, the plaintiff, with others, organized a company, to which the plaintiff sold all the
tobacco bought by him from the defendant. The purchaser, the new company, on examining these two
lots, rejected them because the tobacco was not of the quality indicated in the inventory. Thereupon the
plaintiff, claiming that the tobacco i these two lots was worthless, brought this action against the
defendant to recover what he paid therefor, namely, the two sums of $22,854 and $5,473.44.
The court below found that the first lot was worth at the time of the sale only 8 pesos a quintal instead
of 40, the price paid by the plaintiff; that the second lot was worth 11 pesos instead of 42, and ordered
against the defendant for the difference, which amounted to 24,109.24 pesos. The defendant excepted
to the judgment, moved for a new trial on the ground that the evidence was insufficient to support the
judgment, and excepted to the judgment, and excepted to the order denying this motion.
It was proved by the defendant at the trial, by means of the original invoices, that the prices stated in
the inventory were the prices which it paid for the tobacco, and the plaintiff makes no claim to the
contrary.
At the time in question the plaintiff was the owner of a printing establishment and he testified that he
desired to move it to the building in which the defendant had its cigar factory; that it was impossible for
him to get the building without buying the tobacco factory, and for that reason he bought it, intending to
sell it as soon as he could without loss. The said contract of August 27 contained provisions for the
leasing and ultimate purchase of the building by the plaintiff.
The document of August 27 was a completed contract of sale. (Art. 1450, Civil Code.) The articles
which were the subject of the sale were definitely and finally agreed upon. The appellee agreed to buy,
among other things, all of the leaf tobacco then in the factory. This was sufficient description of the thing
sold. The price of each article was fixed. It is true that the price of this tobacco, for example , was not
stated in dollars and cents in the contract. But by its terms the appellee agreed to pay therefor the
amount named in the invoices then in existence. The price could be made certain by a mere reference
to those invoices. In this respect the contract is covered by article 1447 of the Civil Code. By the
instrument of August 27 the contract was perfected and thereafter each party could compel the other to
fulfill it. (Art. 1258, Civil Code.) By its term the appellee was bound to take all the leaf tobacco then
belonging to the factory and to pay therefor the prices named in the invoices. This obligation was
absolute and did not depend at all upon the quality of the tobacco or its value. The appellee did not, in
this contract, reserve the right to reject the tobacco if it were not of a specified crop. He did not buy
tobacco of a particular kind, class, or quality. He bought all the tobacco which the appellant owned and
agreed to pay for it what the defendant had paid for it. The plaintiff testified that this was the express
agreement (p.16).
By section 497, Code of Civil Procedure, we are authorized in cases of this kind to find the facts from
the evidence and "render such final judgment as justice and equity require." (Benedicto v. de la Rama,
December 8, 1903. 1)
The judgment below is reversed. We find the facts to be as herein before stated and upon such facts
we hold as a conclusion of law that the plaintiff can not recover. Judgment will be entered that the
plaintiff take nothing by the action and that th defendant recover the costs of both instances, and after
the expiration of twenty days the cause shall be returned to the lower court for execution.

There is nothing in this contract to show that he bought 221 bales of fourth-class superior Anganadan of
the crop of 1899. The fact that in the inventory subsequently made that particular lot of tobacco is
mentioned can not in any respect change the rights of the parties which had already been fixed by the
contract. The purpose of this inventory was not to make a new contract for the parties. It could not add
anything to nor take anything from the rights and obligations of the parties already stated in the existing
contract. Its sole purpose was to ascertain what the total purchase price was. If it correctly gave the
number of bales and the price paid therefor by the appellant, according to the invoices, it was sufficient
compliance with the contract. The fact that the tobacco was described as of one class instead of
another would be unimportant. The appellee did not purchase by class or quality, but by quantity.

There was evidence tending to show that the first lot instead of being fourth-class superior of 1899 was
fourth-class inferior of 1898; and the second lot instead of being of the first, second, and third class of
1899 was "particular" of 1898. The case is perhaps made more plain by supposing that when he
inventory was presented to the plaintiff these two lots were described as "Y. P. I. fourth-class inferior
Angadanan, 1898" and as "Isabela hojas sueltas particular 1898." It seems clear that if the inventory
had been so written the plaintiff could not have maintained this action under those circumstances he
can not under th existing circumstances.

There is no evidence to show that any representations as to the quality of the tobacco were made to the
plaintiff by the defendant prior to that time as to an exhibition of samples nor that there was any
agreement prior to that time as to an exhibition of samples nor that the plaintiff prior to that time made
any examination or inquiry as to the quality of the tobacco. The fact is that the plaintiff in order to get the
building had to buy the factory and everything that went with it. He saw himself obliged to take all the
tobacco which the defendant had, no matter what its quality was. The defendant was not willing to sell
him the building and the good tobacco which it had on hand, retaining itself that of poorer quality. He
had to take it all or not get the building. He probably thought that he was safe in agreeing to pay no
more than the defendant had paid. But, however this may be and whatever may have been his reasons
therefor, it is certain that the plaintiff bound himself by the contract of August 27 to take all the tobacco
which the defendant then had and pay therefor the prices that the company had paid. He could relieve
himself from this obligation only by showing either that the tobacco in the inventory was not owned by
the defendant on August 27 or that the prices stated therein were not the prices which the defendant
paid for it. He undertook to do neither of these things, and his action must fail. The right to rescind a
contract for lesion when the value is less than half of the purchase price, given by Law 56, title 5.
partida 5, has been expressly taken away by article 1293 of the Civil Code. Article 1474 of the Civil
Code has no application in this case. The fact that an article is of one grade or quality instead of
another does not constitute a hidden defect within the meaning of that article.

It is claimed by the plaintiff, the appellee, that the motion for anew trial below should have specified
more in detail, the grounds of the motion. This contention can not be sustained. There is nothing in
sections 145, 146, or 497 which requires the party to state at length and in detail his reasons for
thinking that he is entitled to a new trial.

In view of the result thus arrived at it is not necessary to consider the other questions argued by the
parties.
G.R. No. L-16736 December 22, 1921
EVARISTA ROBLES and her husband ENRIQUE MARTIN, Plaintiffs-Appellees, v.LIZARRAGA
HERMANOS Defendants-Appellant.
Owing to the character of the facts in the three above entitled cases and the intimate connection
existing between them, they were, by agreement of the parties, tried together in the court below, and on
appeal this court was requested to try them at the same time, which was done, and these three cases
are jointly adjudged in the present decision.chanroblesvirtualawlibrary chanrobles virtual law library
The following facts are undisputed:chanrobles virtual law library
Anastasia de la Rama died on the 17th of October, 1916, leaving six children, to wit, Magdalena, Jose,
Evarista, Zacarias, Felix, and Purificacion, surnamed Robles, and some properties, among which is
house No. 4 on Iznart Street in the city of Iloilo, concerning which a controversy arose which developed
into the three cases now under consideration.chanroblesvirtualawlibrary chanrobles virtual law library
The children and heirs of Anastasia de la Rama entered into partnership with Lizarraga Hermanos in
liquidation and settlement of their accounts, by virtue of which the competent court awarded to said
partnership the properties left by the deceased, including the aforesaid house No. 4 on Iznart
Street.chanroblesvirtualawlibrary chanrobles virtual law library
Evarista Robles, one of the aforesaid heirs, since before the death of her mother Anastasia de la Rama,
has been with her husband occupying the aforesaid house No. 4 on Iznart Street, at the beginning, by
permission of her mother, later on by the consent of her coheirs, and lastly by agreement with the
partnership, Lizarraga Hermanos, to whom it had been awarded, having made some improvements on
the house, the value of which is fixed at four thousand five hundred pesos (P4,500), and paying to said
partnership forty pesos (P40) monthly as rent of the upper story.chanroblesvirtualawlibrary chanrobles
virtual law library
On March 18, 1918, Lizarraga Hermanos notified Evarista Robles (Exhibit J) that beginning April next
the rent of the upper story of the house would be raised to sixty pesos (P60) a month, and that, if she
did not agree to the new rate of rent, she might vacate the house. Evarista Robles refused to pay such
a new rate of rent and to vacate the house, and Lizarraga Hermanos brought suit against her for
ejectment. Evarista Robles sued Lizarraga Hermanos afterwards to recover the value of the
improvements, and demanded, in another action, that said value be noted on the certificate of title as
an encumbrance.chanroblesvirtualawlibrary chanrobles virtual law library
Evarista Robles contends that the understanding with Lizarraga Hermanos by virtue of which she
continued to occupy the house and made the improvements, was a contract whereby it was agreed to
sell her the said building on Iznart Street, the deed of sale to be executed as soon as the title deeds of
the property were transferred to the name of said partnership; that by virtue of this contract she
remained in the occupation of the building and made the improvements; that, as one of the stipulations
in the contract of sale of the estate, Evarista Robles assumed the liability of an encumbrance of
fourteen thousand pesos (P14,000)on the estate and another one in favor of the Agricultural Bank and
its successor, the National Bank, paying the interest thereon as well as the land tax and the premiums
of the five insurance, all of which payments were made through the same firm of Lizarraga Hermanos
who, as a result of the liquidation of accounts, held funds in their possession belonging to Exhibit A, B,
C, F, H, and I. It should here be noted that Evarista Robles does not seek the execution of the proper
instrument of evidence this contract of sale, nor the performance thereof. She only claims the cost of
the improvements made at her expense and that this be recorded in the corresponding certificate of
title.chanroblesvirtualawlibrary chanrobles virtual law library
While the firm of Lizarraga Hermanos does not question that fact that said improvements have been
made and that their value amounts to four thousand five hundred pesos (P4,500), it denies, however,
having entered into any agreement with Evarista Robles for the sale of the building in question. In
deciding the case No. 16736 of this court, the court a quo found such a verbal contract of sale to have
been proven not only by Exhibit A, which leads to such a conclusion, but by the oral evidence, which, in
its opinion, had a preponderance in favor thereof, and by the corroborative evidence consisting in the
fact of Lizarraga Hermanos having executed the deed of sale of the warehouse mentioned in the said
Exhibit A. This firm questions the right of Evarista Robles to the improvements under
consideration.chanroblesvirtualawlibrary chanrobles virtual law library
The fundamental questions upon which hinges the controversy in these three cases are: First, whether
Evarista Robles is the owner of the aforesaid improvements and has the right to demand payment of
their value (case No. 16736); second, whether she has any right to retain the building until the said
value is paid to her (case No. 16661); and third, whether a note for the four thousand five hundred
pesos (P4,500), the value of the above-mentioned improvements, as an encumbrance on this estate
(case No. 16662), should be made on the title deeds thereof.chanroblesvirtualawlibrary chanrobles
virtual law library
Regarding the controversy in the case No. 16736, attention is called to article 453 of the Civil Code
which reads:
Necessary expenditures shall be refunded to every possessor, but only the possessor in good faith may
retain the thing until they are repaid to him.chanroblesvirtualawlibrary chanrobles virtual law library
Useful expenditures shall be paid the possessor in good faith with the same right to retention, the
person who has defeated him in his possession having the opinion of refunding the amount of such
expenditures or paying him the increase in value which the thing has acquired by reason thereof.
This provision of law is in force and applies to personal as well as real
property.chanroblesvirtualawlibrary chanrobles virtual law library
The expenditures incurred in these improvements were not necessary inasmuch as without them the
house would have continued to stand just as before, but were useful, inasmuch as with them the house
better serves the purpose for which it was intended, being used as a residence, and the improvements
consisting of the addition of a dining room, kitchen, closet, and bathroom in the lower and upper stories
of the house, and a stable, suitable as a coach house and dwelling, it is beyond doubt that such
improvements are useful to the building. One of the chiefs of the firm of Lizarraga Hermanos, on the
occasion of a luncheon in the house, on noting the improvements, could not refrain from expressing
that such improvements added much to the value of the building (folio 25, stenographic
notes).chanroblesvirtualawlibrary chanrobles virtual law library
Now then, was Evarista Robles a possessor in good faith when she made those improvements? Article
434 provides that "good faith is always presumed and the burden of proving bad faith on the part of the
possessor rests upon the person alleging it." Lizarraga Hermanos did not allege, nor prove in the first
instance the bad faith characterizing Evarista Robles' possession, who, as shown in the records and
heretofore stated, began to occupy the house by permission of the former owner, her mother Anastasia
de la Rama, and continued later in the occupation by the consent of her coheirs, and afterwards by
considering herself the future owner of the building by virtue of the contract with the present owner,
Lizarraga Hermanos. The evidence shows that said improvements were begun about the end of
December, 1916, after the agreement with Lizarraga Hermanos for the sale thereof to Evarista Robles.
(Folios 23, 24, 25, stenographic notes.)chanrobles virtual law library
We find that in the court below the presumption of good faith in favor of Evarista Robles' possession at
the time she made the improvements on the property was neither disputed nor discussed, but on the
contrary, there is positive evidence sufficient to support the conclusion that when she made the
improvements on the aforesaid building she was possessing it in good
faith.chanroblesvirtualawlibrary chanrobles virtual law library
If the improvements are useful and Evarista Robles' possession was in good faith, the conclusion set
out in article 453 of the Civil Code, supra, is inevitable; Evarista Robles is the owner of such
improvements, and entitled to reimbursement therefor, and to retain the building until the same is
made.chanroblesvirtualawlibrary chanrobles virtual law library
One of the proofs establishing the fact that Evarista Robles' possession was in good faith is found in
Exhibit A, which textually is as follows:
Value of house For }Evarista P16,500.00
Value of Warehouse
Evarista pays them in this way -
Balance in h/f owning from L. Hnos P1,424.35
Legacy to Evarista 500.00
Legacy to J. Robles 500.00
Legacy to Ambrosio 100.00
Credit Agricultural Bank 14,000.00
Paid by Zacarias 16,524.35
Cash balance carried forward 24.35
Liquidation 16,500.00
Severiano Lizarraga acknowledged having drawn this document and admitted it to be in his own hand-
writing (folios 6-8, transcript of stenographic notes taken in case No. 16661 at the trial held December
6, 1919). Taking into consideration the explanation he gives of the contents of this exhibit, there is the
inevitable conclusion which is obviously inferred from the phrases "Value of house - of warehouse - For
Evarista P16,500 - Evarista pays them in this way," that Evarista Robles was to become the owner of
the house (which is the one question) and the warehouse for sixteen thousand five hundred pesos
(P16,500), which sum she was to pay by assuming the liability of all the amounts enumerated in the
said memorandum all the way through.chanroblesvirtualawlibrary chanrobles virtual law library
But the admissibility of this document as evidence is disputed by reference to section 335, case No. 5,
of the Code of Civil Procedure, which in the English text, which is clearer on this point, reads:
SEC. 335. Agreements invalid unless made in writing. - In the following cases an agreement hereafter
made shall be unenforceable (Emphasis ours) by action unless the same, or some note or
memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the writing, or secondary evidence of its
contents:chanrobles virtual law library
No. 5. An agreement for . . . the sale of real property, etc.
It should be noted, first of all, that this rule of evidence does not go to the extent of rendering invalid any
verbal contract for the sale of real property (Conlu vs. Araneta and Guanko, 15 Phil., 387), but declares
inadmissible any evidence of such a contract other than the document itself of the sale or some
memorandum signed by the party charged, in so far as the object of the action instituted is to enforce
performance of said contract of sale. But we are not dealing with that phase in any of the cases now
before us. This document was introduced only to reinforce the proofs relative to the good faith
characterizing the possession of Evarista Robles when she made the improvements in question, to the
effect that if she made then, it was because she entertained the well-founded, may certain belief that
she was making them on a building that was to become her property by virtue of the verbal contract of
sale.chanroblesvirtualawlibrary chanrobles virtual law library
In the action wherein Evarista Robles and her husband ask that they be adjudged owners of these
improvements and that their value be paid to them, Lizarraga Hermanos filed a general denied and a
counterclaim and cross-complaint for nineteen thousand pesos (P19,000) as compensation for
damages alleged to have been sustained by them on account of their inability to sell the house and the
warehouse, due to the fact that the buyer imposed the condition that the house should be vacated,
which the plaintiffs refused to do.chanroblesvirtualawlibrary chanrobles virtual law library
It is a fact that the value of the improvements in question has not as yet been paid by Lizarraga
Hermanos. Wherefore, if Evarista Robles and her husband are entitled to retain the building until the
value of such improvements is paid them, Lizarraga Hermanos have not yet any right to oust them from
the building, nor, therefore, to be indemnified for any damages caused by the refusal of the plaintiffs
found on their legitimate rights.chanroblesvirtualawlibrary chanrobles virtual law library
In regard to the ejectment sought in the case No. 16661, the suit was brought by Lizarraga Hermanos
in the justice of the peace court of Iloilo on May 6, 1918, based on the failure of Evarista Robles and her
husband to pay the rent of the upper story of the house in question for the month of April of that year,
amounting to sixty pesos (P60), and on the refusal of said spouses to quit the building. These spouses
in their answer alleged as special defense that they had never been the tenants of Lizarraga Hermanos
until November, 1917, when they became so "under the special circumstances" under which the plaintiff
partnership sold the building, whereon they later made, with the latter's consent, improvements
amounting to four thousand five hundred pesos (P4,500), setting out the other stipulations and
conditions hereinabove stated, which were incorporated into the contract of sale, and prayed, under
their counterclaim, that Lizarraga Hermanos be sentenced to pay the sum of four thousand five hundred
pesos (P4,500), the value of the improvements referred to, and under their cross-complaint, that said
partnership be ordered to pay then thousand pesos (P10,000) as compensation for damages alleged to
have been sustained by the aforesaid spouses due to the aforesaid partnership's act, praying lastly, in
view of the questions raised, that the case be regarded not as one of unlawful detainer, but for the
recovery of title to real property, and that the court of the justice of the peace abstain from taking
cognizance thereof for want of jurisdiction.chanroblesvirtualawlibrary chanrobles virtual law library
The case having been appealed to the Court of First Instance, these allegations were
reproduced.chanroblesvirtualawlibrary chanrobles virtual law library
In the Court of First Instance Lizarraga Hermanos demurred to this counterclaim and cross-complaint,
and the demurrer was sustained by the court in its decision on the merits of the case, whereby the
defendants are sentenced to return to Lizarraga Hermanos the possession of the building, to pay the
rents thereof due from April, 1918, until they vacate the house, at the rate of sixty pesos (P60) per
month, and the costs.chanroblesvirtualawlibrary chanrobles virtual law library
From this judgment Evarista Robles and her husband have appealed, assigning as errors of the court a
quo in finding the Lizarraga Hermanos were entitled to bring action for unlawful detainer, and ordering
them to return the possession of the building.chanroblesvirtualawlibrary chanrobles virtual law library
If Evarista Robles and her husband were mere lessees of this building, the plaintiff's action for unlawful
detainer is obvious and must prosper. But, were Evarista Robles and her husband mere
lessees?chanrobles virtual law library
As above stated, we hold that there existed a contract of sale of this building executed by Lizarraga
Hermanos in favor of Evarista Robles about November, 1916, the performance of which is not,
however, sought to be enforced, nor would it be enforceable if the evidence offered in the action
instituted for the purpose be not the document itself of the sale, or a memorandum thereof, signed by
the party bound by the contract and required in the action to fulfill it, and objection be made to said
evidence, as was done here.chanroblesvirtualawlibrary chanrobles virtual law library
The possession of these spouses was in no way begun by virtue of any lease whatever, since it is not
disputed, and is a proven fact, that they came to occupy the building by permission of the mother of
Evarista Robles. Upon said mother's death, the continued to occupy the property by the consent of the
coheirs. After the assignment of the property of Lizarraga Hermanos was concluded, but before the title
deeds were transferred to the name of this partnership, an agreement was made for the sale of the
building to Evarista Robles and her husband, the latter agreeing in the meantime to pay to Lizarraga
Hermanos a certain sum per month - forty pesos (P40) - by way of compensation for the occupation of
the building until the execution of the deed of sale in favor of the
occupants.chanroblesvirtualawlibrary chanrobles virtual law library
Considering abstractly the naked fact that these spouses occupied the house by paying a certain sum As a consequence of all the foregoing, we affirm the judgments appealed from in the three cases in so
for its occupation, it would seem that this is indeed a case of lease. But such was not the contract. It far as they are in harmony with the conclusions herein set out, and reverse them in so far as they are in
was simply the sense of justice of the parties that led them to make the stipulation that, while the conflict therewith, and it is hereby adjudged and decreed:chanrobles virtual law library
conveyance of the building was being carried into effect in due form, the future owners should pay a
certain sum for its possession. This peculiar situation continued for all the time in which the said First. That Lizarraga Hermanos pay to the spouses Evarista Robles and Enrique Martin the sum of four
spouses made and completed the improvements in question until Lizarraga Hermanos changed their thousand five hundred pesos (P4,500), the value of the improvements referred to in these cases, with
resolution to sell the building to Evarista Robles and her husband. But then all the improvements in right on the part of said spouses to retain the building in question until the payment hereby ordered is
question had already been made, and when these spouses were requested to vacate the building, they made.chanroblesvirtualawlibrary chanrobles virtual law library
answered and gave it to understand, that they would do so as soon as the value of the improvements Second. That said spouses Evarista Robles and Enrique Martin vacate the aforesaid building
was paid to them. Up to that time they were not lessees strictly speaking. Did they become so immediately after the receipt, or the legal tender, of the payment hereby
afterwards? Neither; for since that moment they have been as are at present, in possession of the decreed.chanroblesvirtualawlibrary chanrobles virtual law library
building by virtue of the right that they had, and do have, to retain it until the value of the improvements
is paid to them. And it was after these spouses had manifested their intention not to leave the building Third. That the said spouses Evarista Robles and Enrique Martin pay to Lizarraga Hermanos a
until they were reimbursed for the improvements made thereon that this action for unlawful detainer compensation for the occupation of the building at the rate of forty pesos (P40) a month, beginning with
was instituted.chanroblesvirtualawlibrary chanrobles virtual law library the month of April, 1918, until they vacate the aforesaid building as it is ordered
herein.chanroblesvirtualawlibrary chanrobles virtual law library
Before these improvements were made, or before these spouses demanded payment of their value,
that is, while the possession was partly based on the stipulation with color of lease, an action for Fourth. That upon payment of his lawful fees, the register of deeds note said right of retention on the
unlawful detainer might have, in a sense, been justifiable, though not entirely maintainable, owing to the back of the transfer certificate No. 526 issued in favor of Lizarraga Hermanos, or of any other certificate
fact that such possession was based primarily on the well-founded belief of the occupants that they standing in lieu thereof, concerning the said building, which note will remain in force until the payment
were to become the owners of the house in their possession, that the monthly payment being a of the aforesaid improvements is made as above ordered. Without pronouncement as to the costs in
provisional arrangement, an incidental and peremptory stipulation, while the solemn formalities of the this instance, so ordered.
conveyance were being complied with.chanroblesvirtualawlibrary chanrobles virtual law library
But after the improvements had been made and Lizarraga Hermanos had manifested their resolution to
rescind the contract of sale and not to pay for them, then the possession of the aforesaid spouses lost
all color of lease, and turns out to be possession based only upon the latter's right to retain the building.
And these were all the attending circumstances of said possession when the action for unlawful
detainer was commenced.chanroblesvirtualawlibrary chanrobles virtual law library
We are, therefore, of opinion, and so hold, that Lizarraga Hermanos were not, and are not, entitled to
maintain any action for unlawful detainer so long as they do not pay the value of the improvements in
question.chanroblesvirtualawlibrary chanrobles virtual law library
We will now take up the case No. 16662 wherein Evarista Robles and her husband ask that these
improvements be noted on the proper certificate of title as an
encumbrance.chanroblesvirtualawlibrary chanrobles virtual law library
These spouses pray in their complaint for the cancellation of the said certificate of title, which is the
transfer certificate No. 526, a substitute of the original No. 32 of the office of the register of deeds of
Iloilo.chanroblesvirtualawlibrary chanrobles virtual law library
If the object of these spouses is, as it cannot be otherwise, to have such an encumbrance noted, the
cancellation is not necessary, and, of course, not justifiable. At any rate, the fraud alleged in this last
action to have been committed precisely to secure such a transfer certificate cannot be held
proven.chanroblesvirtualawlibrary chanrobles virtual law library
But it having been decided that these spouses are entitled to demand payment of the value of the
improvements and to retain the building until such value is paid them, it only remains for us to
determine whether this right of retention has the character of a real right to be regarded as one of the
encumbrances referred to in section 70 and the following sections of the Land Registration
Act.chanroblesvirtualawlibrary chanrobles virtual law library
It being a burden on the building to the extent of being inseparably attached to the possession thereof,
this right of retention must necessarily be a real one. If so, as we regard, and find, it to be, it is but just
that such an encumbrance should be noted on the transfer certificate No. 526 issued by the register of
deeds of Iloilo in favor of Lizarraga Hermanos, or on any substitute
thereof.chanroblesvirtualawlibrary chanrobles virtual law library
G.R. No. 21943 September 15, 1924 consideration for the transfer which, according to the conveyance, consisted of P1 and other valuable
consideration, and which, according to the oral testimony, in reality consisted of P107 in cash, a bill
ASKAY, plaintiff-appellant, fold, one sheet, one cow, and two carabaos. Gross inadequacy naturally suggests fraud and is some
vs. evidence thereof, so that it may be sufficient to show it when taken in connection with other
FERNANDO A. COSALAN, defendant-appellee. circumstances, such as ignorance or the fact that one of the parties has an advantage over the other.
MALCOLM, J.: But the fact that the bargain was a hard one, coupled with mere inadequacy of price when both parties
are in a position to form an independent judgment concerning the transaction, is not a sufficient ground
The plaintiff in this case is Askay, an illiterate Igorrote between 70 and 80 years of age, residing in the for the cancellation of a contract.
municipal district of Tublay, Province of Benguet, who at various time has been the owner of mining
property. The defendant is Fernando A. Cosalan, the nephew by marriage of Askay, and municipal Against the plaintiff and in favor of the defendant, we have the document itself executed in the presence
president of Tublay, who likewise has been interested along with his uncle in mining enterprises. of witnesses and before a notary public and filed with the mining recorder. The notary public, Nicanor
Sison, and one of the attesting witnesses, Apolonio Ramos, testified to the effect that in the presence of
About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay, Benguet. On the plaintiff and the defendant and of the notary public and the subscribing witnesses, the deed of sale
November 23, 1914, if we are to accept defendant's Exhibit 1, Askay sold this claim to Cosalan. Nine was interpreted to the plaintiff and that thereupon he placed his thumb mark on the document. Two
years later, in 1923, Askay instituted action in the Court of First Instance of Benguet to have the sale of finger print experts, Dr. Charles S. Banks and A. Simkus, have declared in depositions that the thumb
the Pet Kel Mineral Claim adhered null, to secure possession of the mineral claim, and to obtain mark on Exhibit 1 is that of Askay. No less than four other witnesses testified that at various times
damages from the defendant in the amount of P10,500. Following the presentation of various pleadings Askay had admitted to them that he had sold the Pet Kel Mine to Fernando A. Cosalan.
including the answer of the defendant, and following trial before Judge of First Instance Harvey,
judgment was rendered dismissing the complaint and absolving the defendant from the same, with Having in mind all of these circumstances, how can the plaintiff expect the courts to nullify the deed of
costs against the plaintiff. On being informed of the judgment of the trial court, plaintiff attacked it on two sale on mere suspicion? Having waited nine years from the date when the deed was executed, nine
grounds: The first, jurisdiction, and the second, formal. Both motions were denied and an appeal was years from the time Fernando A. Cosalan started developing the mine, nine years from the time Askay
perfected. himself had been deprived of the possession of the mine, and nine years permitting of a third party to
obtain a contract of lease from Cosalan, how can this court overlook plaintiff's silent acquiescence in
Two questions are suggested by the assignments of error. The first is whether Judge George R. Harvey the legal rights of the defendant? On the facts of record, the trial judge could have done nothing less
had jurisdiction to try the case. The second is whether the plaintiff has established his cause of action than dismiss the action.
by a preponderance of the evidence.
We conclude therefore, that Judge Harvey had jurisdiction to try this case, that his findings of fact are in
I. On April 16, 1923, as appears from the Official Gazette, the Secretary of Justice authorized and accordance with the evidence, that no prejudicial error was committed in the trial, and that the
instructed the Honorable George R. Harvey, Judge of First Instance of the Ninth Judicial District, to hold complaint was properly dismissed. As a result, judgment is affirmed with costs against the appellant. So
a special term of court in the City of Baguio, Mountain Province, beginning May 2, 1923. (Administrative ordered.
Order No. 43, 21 Off. Gaz., p. 893.) Acting under the authority granted by the order of the Secretary of
Justice, Judge Harvey proceeded to hear the case of Askay vs. Cosalan, without protest from anyone
until after an adverse decision for the plaintiff and until after Judge Harvey had left the district.
The point which plaintiff now presses is that Act No. 3107, amendatory of section 155 of the
Administrative Code, which authorizes a Judge of First Instance to be detailed by the Secretary of
Justice to temporary duty, for a period which shall in no case exceed six months, in a district or
province other than his own, for the purpose of trying all kinds of cases, excepting criminal and election
cases, was not in force until fifteen days after the completion of the publication of the statute in the
Official Gazette, or not until August 3, 1923. Plaintiff relies on section 11 of the Administrative Code,
which in part reads: "A statute passed by the Philippine Legislature shall, in the absence of special
provision, take effect at the beginning of the fifteenth day after the completion of the publication of the
statute in the Official Gazette, the date of issue being excluded."
Now turning to Act No. 3107, its final section provides that "This Act shall take effect on its approval."
The Act was approved on March 17, 1923. Obviously, therefore, there being a special provision in Act
No. 3107, it applies to the exclusion of the general provision contained in the Administrative Code.
Recalling, therefore, that Act No. 3107 went into effect on March, 17, 1923, and that it was subsequent
thereto, on April 16, 1923, that Judge Harvey was authorized to hold court at Baguio, beginning with
May 2, 1923, appellant's argument along this line is found to be without persuasive merit. We pass to
the material issue which is one of fact.
II. Plaintiff contends that the sale of the Pet Kel Mineral Claim was accomplished through fraud and
deceit on the part of the defendant. Plaintiff may be right but in our judgment he has failed to
established his claim. Fraud must be both alleged and proved.
One facts exists in plaintiff's favor, and this is the age and ignorance of the plaintiff who could be easily
duped by the defendant, a man of greater intelligence. Another fact is the inadequacy of the
G.R. No. L-14823 December 9, 1919
HILARIA AGUILAR, plaintiff-appellant,
vs.
JUAN RUBIATO, defendant-appellant, and MANUEL GONZALEZ VILA, defendant-appellee.
As certainly as may be ascertained, the facts of record in this case are believed to be the following:
Juan Rubiato is a resident of the municipality of Nagcarlan, Province of Laguna, of somewhat ordinary
intelligence and astuteness. Early in the year 1915, he was the owner of various parcels of land having
a potential value of approximately P26,000. Rubiato was desirous of obtaining a loan of not to exceed
P1,000. Being in this state of mind, two men, Manuel Gonzalez Vila a procurador judicial and one
Gregorio Azucena, and possibly another, one Marto Encarnacion, came to the house of Rubiato and
there induced him to sign the second page of a power of attorney in favor of Manuel Gonzalez Vila.
This power of attorney, introduced in evidence as Exhibit A, reads as follows:
To all whom it may concern:
I, Juan Rubiato e Isles, of age, married, a resident of the barrio of Rizal, municipality of Nagcarlan,
Province of Laguna, Philippine Islands, do hereby freely and voluntarily set forth the following:
First. That I own and possess the full and absolute dominion over eight parcels of land (planted with
about two thousand five hundred coconut trees) situated in the aforesaid barrio, municipality of
Nagcarlan, Province of Laguna, P. I.; that the description and boundaries of same are duly described in
the possessory title (dated the 15th day of January, 1896) (titulo posesorio) issued to me by the former
Spanish sovereignty; that same is inscribed in the register of property of said province under numbers
141, 144, 146, 148, 150, 152, 154 and 156; that these facts are proven by the certificate written on the
legal official papers numbered 0.153.826, 0.460.498, 0.455.683 and 0.460.459 and duly authorized by
registrar, Sr. Antonio Roura, . . .lawphi1.net
Second. That being unable, on account of illness, to go in person to Manila, I hereby declare that I grant
to Sr. Manuel Gonzalez Vila, a resident of the municipality of San Pablo, Province of Laguna, P. I., any
power whatever required by law to secure in said city a loan not exceeding one thousand pesos
(P1,000), Philippine currency; that he shall secure same in my name and representation; that he may
secure same either under the rate of interest and conditions considered most convenient and beneficial
for my interests, or under pacto de retro; that furthermore he has ample power to execute, sign and
ratify, as though he were myself, any writing necessary for the mortgage of my land described in the
aforementioned document; and the he holds this special power of attorney over said lands to the end
that same may be used as a guaranty of the loan to be secured. . . .
By reason of the power thus given, Manuel Gonzalez Vila on April 29, 1915, formulated the document
introduced in evidence as Exhibit C, by which the lands of Rubiato were sold to Hilaria Aguilar of
Manila, for the sum of P800, with right of repurchase within one year, Rubiato to remain in possession
of the land as lessee and to pay P120 every three months as lease rent. Hilaria Aguilar never saw the
lands in question and did not know, until after she had consulted her attorney, exactly what her rights
were. Manuel Gonzalez Vila received from Hilaria Aguilar the P800 mentioned in Exhibit C as the
selling price of the land. Whether this money was then passed on to Juan Rubiato is uncertain,
although it is undeniable that Hilaria Aguilar has never been paid the money she advanced.
The one year mentioned in the pacto de retro having expired without Hilaria Aguilar having received the
principal nor any part of the lease rent, she began action against Juan Rubiato and Manuel Gonzalez
Vila to consolidate the eight parcels of land in her name. After due trial, the trial judge, the Hon. Manuel
Camus, rendered a decision in which he recited the facts somewhat, although not exactly, as
hereinbefore set forth. The court found that the power of attorney only authorized Manuel Gonzalez Vila
to obtain a loan subject to a mortgage, and not to sell the property. The judgment handed down was to
the effect that the plaintiff Hilaria Aguilar recover from the defendant Juan Rubiato the sum of P800 with
interest at the rate of 60 per cent per annum from April 29, 1915 until May 1, 1916, and with interest at
the rate of 12 per cent per annum from May 1, 1916, until the payment of the principal, with the costs
against the defendant. Both parties appealed.
The points raised by the plaintiff-appellant going as they do to the facts and these being as
hereinbefore stated, no lengthy discussion of plaintiff's five assignments of error need be indulged in.
The issue is not precisely relative to an interpretation of the power of attorney. The court is under no
necessity of seizing on inexact language in order to hold that the document authorized a mortgage and
not a sale. The so-called power of attorney might indeed be construed as authorizing Vila to sell the
property of Rubiato. And it might indeed be construed under a conception similar to that of the trial
court's as a loan guaranteed by a mortgage. But the controlling fact is, that the power of attorney was in
reality no power of attorney but a sham document.
In addition to the evidence, there is one very cogent reason which impels us to the conclusion that
Rubiato is only responsible to the plaintiff for a loan. It is that the inadequacy of the price which Vila
obtained for the eight parcels of land belonging to Rubiato is so great that the minds revolts at it. It is an
agreement which a reasonable man would neither directly nor indirectly be likely to enter into or to
consent to. To hold that the power of attorney signed by Rubiato authorized Vila to enter into the instant
contract of sale would be equivalent to holding, if we may be permitted to use the language of Lord
Hardwicke, that "a man in his senses and not under delusion" would dispose of lands worth P26,000 for
P1,000, and would pay interest thereon at the rate of 60 per cent per annum. (See 6 R. C. L., 679, 841.)
The members of this court after most particular and cautious consideration, having in view all the facts
and all the naturals tendencies of mankind, consider that Rubiato is only responsible to the plaintiff for
the loan of P800.
The points advanced by defendant-appellant likewise necessitate only brief consideration. While
entertaining some doubt as to the justice of requiring Rubiato to pay back the amount of P800, we do
not feel authorized in disturbing this finding of the trial court. It may well be that Vila and his partners,
acting as middlemen, fabricated the document which Rubiato signed, secured the money from Hilaria
Aguilar, and then pocketed the same. Yet as minor details somewhat corroborative of the result
reached by the trial court, are the undeniable facts that Rubiato admitted his desire to obtain a loan,
that Hilaria Aguilar made such a loan, and that while the testimony of Vila is not overly truthful, in this
one respect we do have his forceful statement that the money was paid over to Rubiato. That payment
of the sum of P800 was not explicity prayed for in the complaint, does not deprive the court of power to
render judgment for this amount, because it is a rule of good pleading that "the demand in the
complaint is no part of the statement of the cause of action, and does not give it character. The facts
alleged do this, and the plaintiff is entitled to so much relief as they warrant." (Sutherland on Code
Pleading, Vol. I, sec. 186; Code of Civil Procedure, sec. 126.)
The only remaining question which merits resolution, on which the plaintiff and defendants flatly
disagree, relates to the interest which should be allowed. The trial court, it will be remembered,
permitted the plaintiff to recover interest at the rate of 60 per cent per annum from April 29, 1915, when
the pacto de retro was formulated, until May 1, 1916, the date when the Usury Law, Act No. 2655, went
into effect, and interest at the rate of 12 per cent per annum after that date. It is, of course, true, as
previously decided by this court in United States vs. Constantino Tan Quingco Chua ([1919], 39 Phil.,
552), that usury laws, such as that in force in the Philippines, are to be construed prospectively and not
retrospectively. As stated in the decision just cited, "The reason is, that if the contract is legal at its
inception, it cannot be rendered illegal by any subsequent legislation, for this would be tantamount to
the impairment of the obligation for the contract." As we have held that the defendant is under
obligation to the plaintiff for a mere loan, as this loan fails to name a lawful rate of interest, and as
interest at the rate of 60 per cent per annum is unquestionably exorbitant and usurious under the Usury
Law, on and after the date when this law became effective, the defendant would be liable for the legal
rate of interest, which is 6 per cent per annum. We would even go further and hold that he would be
liable only for such interest prior to the enactment of the Usury Law. This we can do under the sanction
of article 1255 of the Civil Code which condemns agreements contrary to morals and public policy.
Judgment is affirmed, with the sole modification that the plaintiff shall only recover interest at the rate of
6 per cent per annum on the sum of P800 from April 29, 1915 until paid, without special finding as to
costs in this instance. So ordered.
FIRST DIVISION
[G.R. No. 126376. November 20, 2003]
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO
EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD
JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and FELICIANA
LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN
and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES
ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and
FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO
JOAQUIN and LEA ASIS, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of
Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3] dated 18 February
1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 89-
5174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for
valid consideration and that the plaintiffs did not have a cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion,
Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and
Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their
respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and
the corresponding certificates of title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on 11
July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. C), pursuant
to which TCT No. [36113/T-172] was issued in her name (Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7
June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. D), pursuant
to which TCT No. S-109772 was issued in her name (Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12
May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration
of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on 12
May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration
of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued to them (Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed
on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00 (Exh. G), pursuant
to which TCT No. 157203 was issued in her name (Exh. G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed on 7
October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. K), pursuant to which
TCT No. 157779 was issued in his name (Exh. K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in
their complaint, aver:
- XX-
The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND
VOID AB INITIO because
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis;
b) Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the
properties are more than three-fold times more valuable than the measly sums appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and
vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.
- XXI -
Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-
109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties
in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well
as the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales
were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with
full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were
issued with sufficient factual and legal basis.[4] (Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino
Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea
Asis filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial
court noted that compulsory heirs have the right to a legitime but such right is contingent since said
right commences only from the moment of death of the decedent pursuant to Article 777 of the Civil
Code of the Philippines.[7]
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court
stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the
Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the
negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against defendants
since there can be no legitime to speak of prior to the death of their parents. The court finds this
contention tenable. In determining the legitime, the value of the property left at the death of the testator
shall be considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is
computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of
their legitime while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the counterclaim is
likewise DISMISSED.
No costs.
SO ORDERED.[8]
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is,
whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters,
are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their
parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely
inchoate and vests only upon the latters death. While still alive, defendant parents are free to dispose of
their properties, provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to
be creditors of their defendant parents. Consequently, they cannot be considered as real parties in
interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for
failure to express the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et
al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound
thereby; hence, they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions
made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held
by the court a quo, the legitime of a compulsory heir is computed as of the time of the death of the
decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is
inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-
appellants.
SO ORDERED.[9]
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION
HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE
WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT
EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART
AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE
CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR
INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD,
SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.[10]
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the
Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted
that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners strategy
was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to
their respondent parents. If their parents die still owning the lots, petitioners and their respondent
siblings will then co-own their parents estate by hereditary succession.[11]
It is evident from the records that petitioners are interested in the properties subject of the Deeds of
Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should
have dismissed the action for this reason alone. An action must be prosecuted in the name of the real
party-in-interest.[12]
[T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured
by the judgment, or the party entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the real parties are those who are parties
to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with
respect to one of the contracting parties and can show the detriment which would positively result to
them from the contract even though they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank,
22 Phil. 572 [1912]) xxx.
These are parties with a present substantial interest, as distinguished from a mere expectancy or
future, contingent, subordinate, or consequential interest. The phrase present substantial interest more
concretely is meant such interest of a party in the subject matter of the action as will entitle him, under
the substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and
the defendant will be protected in a payment to or recovery by him.[13]
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the
appellate court stated, petitioners right to their parents properties is merely inchoate and vests only
upon their parents death. While still living, the parents of petitioners are free to dispose of their
properties. In their overzealousness to safeguard their future legitime, petitioners forget that
theoretically, the sale of the lots to their siblings does not affect the value of their parents estate. While
the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of
Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract
of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a
meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. If the real price is not stated in the contract,
then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the
parties as to the price, because the price stipulated in the contract is simulated, then the contract is
void.[14] Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale
is void.
It is not the act of payment of price that determines the validity of a contract of sale.Payment of the
price has nothing to do with the perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is different from lack of consideration. The
former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid
contract while the latter prevents the existence of a valid contract.[15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove
simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent
Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for
her payment of the purchase price.[16] The trial court did not find the allegation of absolute simulation
of price credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of
knowledge of their respondent siblings financial capacity to buy the questioned lots.[17] On the other
hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot
sold. Not only did respondents minds meet as to the purchase price, but the real price was also stated
in the Deeds of Sale.As of the filing of the complaint, respondent siblings have also fully paid the price
to their respondent father.[18]
Whether the Deeds of Sale are void
for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect
in the consent, or that the parties really intended a donation or some other act or contract. (Emphasis
supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code
which would invalidate, or even affect, the Deeds of Sale.Indeed, there is no requirement that the price
be equal to the exact value of the subject matter of sale. All the respondents believed that they received
the commutative value of what they gave. As we stated in Vales v. Villa:[19]
Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from
unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts.Courts
cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not
because one person has been defeated or overcome by another, but because he has been defeated or
overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and
lose money by them indeed, all they have in the world; but not for that alone can the law intervene and
restore. There must be, in addition, a violation of the law, the commission of what the law knows as
an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it.
(Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater
weight when they coincide with the factual findings of the trial court.This Court will not weigh the
evidence all over again unless there has been a showing that the findings of the lower court are totally
devoid of support or are clearly erroneous so as to constitute serious abuse of discretion.[20] In the
instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant
children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of
the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
G.R. No. 166862
MANILA METAL CONTAINER CORPORATION vs. PNB
Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R.
No. 46153 which affirmed the decision[2]of the Regional Trial Court (RTC), Branch 71, Pasig City, in
Civil Case No. 58551, and its Resolution[3] denying the motion for reconsideration filed by petitioner
Manila Metal Container Corporation (MMCC).
The Antecedents
Petitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City),
Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No. 332098 of the
Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from respondent Philippine
National Bank (PNB), petitioner executed a real estate mortgage over the lot.Respondent PNB later
granted petitioner a new credit accommodation of P1,000,000.00; and, on November 16,
1973, petitioner executed an Amendment[4] of Real Estate Mortgage over its property. On March 31,
1981, petitioner secured another loan of P653,000.00 from respondent PNB, payable in quarterly
installments of P32,650.00, plus interests and other charges.[5]
On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate
mortgage and sought to have the property sold at public auction for P911,532.21, petitioners
outstanding obligation to respondent PNB as of June 30, 1982,[6] plus interests and attorneys fees.
After due notice and publication, the property was sold at public auction on September 28, 1982 where
respondent PNB was declared the winning bidder for P1,000,000.00. The Certificate of Sale[7] issued
in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated at the
dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire
on February 17, 1984.
Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an
extension of time to redeem/repurchase the property.[8] In its reply dated August 30, 1983, respondent
PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate
action and recommendation.[9]
In a letter[10] dated February 10, 1984, petitioner reiterated its request for a one year extension
from February 17, 1984 within which to redeem/repurchase the property on installment basis. It
reiterated its request to repurchase the property on installment.[11] Meanwhile, some PNB Pasay City
Branch personnel informed petitioner that as a matter of policy, the bank does not accept partial
redemption.[12]
Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 on June
1, 1984, and issued a new title in favor of respondent PNB.[13] Petitioners offers had not yet been
acted upon by respondent PNB.
Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of
account, and as of June 25, 1984 petitioners obligation amounted to P1,574,560.47. This included the
bid price of P1,056,924.50, interest, advances of insurance premiums, advances on realty taxes,
registration expenses, miscellaneous expenses and publication cost.[14] When apprised of the
statement of account, petitioner remitted P725,000.00 to respondent PNB as deposit to repurchase,
and Official Receipt No. 978191 was issued to it.[15]
In the meantime, the SAMD recommended to the management of respondent PNB that petitioner be
allowed to repurchase the property for P1,574,560.00. In a letter dated November 14, 1984, the PNB
management informed petitioner that it was rejecting the offer and the recommendation of
the SAMD. It was suggested that petitioner purchase the property for P2,660,000.00, its minimum
market value. Respondent PNB gave petitioner untilDecember 15, 1984 to act on the proposal;
otherwise, its P725,000.00 deposit would be returned and the property would be sold to other interested
buyers.[16]
Petitioner, however, did not agree to respondent PNBs proposal. Instead, it wrote another letter
dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in a letter
dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property
for P2,660,000.00. PNB again informed petitioner that it would return the deposit should petitioner
desire to withdraw its offer to purchase the property.[17] On February 25, 1985, petitioner, through
counsel, requested that PNB reconsider its letter dated December 28, 1984. Petitioner declared that it
had already agreed to the SAMDs offer to purchase the property for P1,574,560.47, and that was why it
had paid P725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse should
PNB insist on the position.[18]
On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted
petitioners offer to purchase the property, but for P1,931,389.53 in cash less the P725,000.00 already
deposited with it.[19]On page two of the letter was a space above the typewritten name of petitioners
President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform
to the letter but merely indicated therein that he had received it.[20] Petitioner did not respond, so PNB
requested petitioner in a letter dated June 30, 1988 to submit an amended offer to repurchase.
Petitioner rejected respondents proposal in a letter dated July 14, 1988. It maintained that respondent
PNB had agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment
had been accepted, respondent PNB was proscribed from increasing the purchase price of the
property.[21] Petitioner averred that it had a net balance payable in the amount of P643,452.34.
Respondent PNB, however, rejected petitioners offer to pay the balance of P643,452.34 in a letter
dated August 1, 1989.[22]
On August 28, 1989, petitioner filed a complaint against respondent PNB for Annulment of Mortgage
and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages. To support its
cause of action for specific performance, it alleged the following:
34. As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the
substantial amount of P725,000.00 for the redemption/repurchase price of P1,574,560.47 as approved
by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed, the
approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly
a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the
approval of SMAD. The Bank cannot take advantage of a condition which is entirely dependent upon its
own will after accepting and benefiting from the substantial payment made by Manila Metal.
35. PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from
Manila Metal. PNB cannot take advantage of its own delay and long inaction in demanding a higher
amount based on unilateral computation of interest rate without the consent of Manila Metal.
Petitioner later filed an amended complaint and supported its claim for damages with the following
arguments:
36. That in order to protect itself against the wrongful and malicious acts of the defendant Bank,
plaintiff is constrained to engage the services of counsel at an agreed fee of P50,000.00 and to incur
litigation expenses of at least P30,000.00, which the defendant PNB should be condemned to pay the
plaintiff Manila Metal.
37. That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal
suffered besmirched reputation for which defendant PNB is liable for moral damages of at
least P50,000.00.
38. That for the wrongful and malicious act of defendant PNB which are highly reprehensible,
exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the
public good of at least P30,000.00.[23]

Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus:
a) Declaring the Amended Real Estate Mortgage (Annex A) null and void and without any legal force
and effect.
b) Declaring defendants acts of extra-judicially foreclosing the mortgage over plaintiffs property and
setting it for auction sale null and void.
c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT
NO. 43792) covering the property described in paragraph 4 of the Complaint, to reinstate TCT
No. 37025 in the name of Manila Metal and to cancel the annotation of the mortgage in question at the
back of the TCT No. 37025 described in paragraph 4 of this Complaint.
d) Ordering the defendant PNB to return and/or deliver physical possession of the
TCT No. 37025 described in paragraph 4 of this Complaint to the plaintiff Manila Metal.
e) Ordering the defendant PNB to pay the plaintiff Manila Metals actual damages, moral and
exemplary damages in the aggregate amount of not less thanP80,000.00 as may be warranted by the
evidence and fixed by this Honorable Court in the exercise of its sound discretion, and attorneys fees
of P50,000.00 and litigation expenses of at least P30,000.00 as may be proved during the trial, and
costs of suit.
Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the
premises.[24]
In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it
had acquired ownership over the property after the period to redeem had elapsed. It claimed that no
contract of sale was perfected between it and petitioner after the period to redeem the property had
expired.
During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of
facts.[25] The parties agreed to limit the issues to the following:
1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiffs offer to
purchase the property is still valid and legally enforceable.
2. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform
with the conditions set forth by the defendant in its letter dated June 4, 1985.
3. Whether or not there is a perfected contract of sale between the parties.[26]
While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner
vacate the property within 15 days from notice,[27] but petitioners refused to do so.
On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00.[28] The offer was
however rejected by respondent PNB, in a letter dated April 13, 1993. According to it, the prevailing
market value of the property was approximately P30,000,000.00, and as a matter of policy, it could not
sell the property for less than its market value.[29] On June 21, 1993, petitioner offered to purchase the
property for P4,250,000.00 in cash.[30] The offer was again rejected by respondent PNB on September
13, 1993.[31]
On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and
respondent PNBs counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit
petitioner had made.[32] The trial court ruled that there was no perfected contract of sale between the
parties; hence, petitioner had no cause of action for specific performance against respondent.The trial
court declared that respondent had rejected petitioners offer to repurchase the property. Petitioner, in
turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While
petitioner had offered to repurchase the property per its letter of
July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which respondent PNB
had demanded. It further declared that the P725,000.00 remitted by petitioner to respondent PNB
on June 4, 1985 was a deposit, and not a downpayment or earnest money.
On appeal to the CA, petitioner made the following allegations:
I
THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEES LETTER DATED 4 JUNE
1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANTS OFFER TO PURCHASE THE SUBJECT
PROPERTY IS NOT VALID AND ENFORCEABLE.
II
THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT
OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE.
III
THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO
PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS
SET FORTH BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4 JUNE 1985.
IV
THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANT-
APPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT
TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE.
V
THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID
RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE.
VI
THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO
SUBMIT THE AMENDED REPURCHASE OFFER.
VII
THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFF-
APPELLANT.
VIII
THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND
EXEMPLARY DAMAGES, ATTOTRNEYS FEES AND LITIGATION EXPENSES.[33]
Meanwhile, on June 17, 1993, petitioners Board of Directors approved Resolution No. 3-004, where it
waived, assigned and transferred its rights over the property covered by TCT No. 33099 and TCT No.
37025 in favor of Bayani Gabriel, one of its Directors.[34] Thereafter, Bayani Gabriel executed a Deed
of Assignment over 51% of the ownership and management of the property in favor of
Reynaldo Tolentino, who later moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the
CA issued a resolution granting the motion,[35] and likewise granted the motion of
Reynaldo Tolentino substituting petitioner MMCC, as plaintiff-appellant, and his motion to withdraw as
intervenor.[36]
The CA rendered judgment on May 11, 2000 affirming the decision of the RTC.[37] It declared that
petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53)
since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly
therefore, there was no meeting of the minds between the parties as to the price or consideration of the
sale.
The CA ratiocinated that petitioners original offer to purchase the subject property had not been
accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985 letter specifically
on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not
prosper.Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period
set in the June 4, 1985 letter of respondent PNB. Consequently, there was no perfected contract of
sale, and as such, there was no contract to rescind.
According to the appellate court, the claim for damages and the counterclaim were correctly dismissed
by the court a quo for no evidence was presented to support it. Respondent PNBs letter dated June 30,
1988 cannot revive the failed negotiations between the parties. Respondent PNB merely asked
petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower
selling price and that the balance of the repurchase be reduced, however, respondent rejected the
proposal in a letter dated August 1, 1989.
Petitioner filed a motion for reconsideration, which the CA likewise denied.
Thus, petitioner filed the instant petition for review on certiorari, alleging that:
I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS
NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT.
II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE
AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY.
III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE
FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS
CONTAINED IN PNBS JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY
ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.
IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE
PETITIONER-APPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB
DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES
NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.
V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF
PETITIONER-APPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE
SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED
CONTRACT OF SALE.[38]
The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected
contract for petitioner to repurchase the property from respondent.
Petitioner maintains that it had accepted respondents offer made through the SAMD, to sell the
property for P1,574,560.00. When the acceptance was made in its letter dated June 25, 1984; it then
deposited P725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which
respondent had issued. Petitioner avers that the SAMDs acceptance of the deposit amounted to an
acceptance of its offer to repurchase. Moreover, as gleaned from the letter of SAMD dated June 4,
1985, the PNB Board of Directors had approved petitioners offer to purchase the property. It claims that
this was the suspensive condition, the fulfillment of which gave rise to the contract.Respondent could
no longer unilaterally withdraw its offer to sell the property for P1,574,560.47, since the acceptance of
the offer resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of the
original purchase price of P1,574,560.47, while respondent was obliged to transfer ownership and
deliver the property to petitioner, conformably with Article 1159 of the New Civil Code.
Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted
respondents offer to sell the property for P1,574,560.00. Consequently, respondent could no longer
validly make a counter-offer of P1,931,789.88 for the purchase of the property. It likewise maintains
that, although the P725,000.00 was considered as deposit for the repurchase of the property in the
receipt issued by the SAMD, the amount constitutes earnest money as contemplated in Article 1482 of
the New Civil Code. Petitioner cites the rulings of this Court
in Villonco v. Bormaheco[39] and Topacio v. Court of Appeals.[40]
Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent and its
failure to pay the balance of the price as fixed by respondent within the 60-day period from notice was
to protest respondents breach of its obligation to petitioner. It did not amount to a rejection of
respondents offer to sell the property since respondent was merely seeking to enforce its right to pay
the balance of P1,570,564.47. In any event, respondent had the option either to accept the balance of
the offered price or to cause the rescission of the contract.
Petitioners letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency of the
case in the RTC were merely to compromise the pending lawsuit, they did not constitute separate offers
to repurchase the property. Such offer to compromise should not be taken against it, in accordance with
Section 27, Rule 130 of the Revised Rules of Court.
For its part, respondent contends that the parties never graduated from the negotiation stage as they
could not agree on the amount of the repurchase price of the property. All that transpired was an
exchange of proposals and counter-proposals, nothing more. It insists that a definite agreement on the
amount and manner of payment of the price are essential elements in the formation of a binding and
enforceable contract of sale. There was no such agreement in this case. Primarily, the concept
of suspensive condition signifies a future and uncertain event upon the fulfillment of which the obligation
becomes effective. It clearly presupposes the existence of a valid and binding agreement,
the effectivity of which is subordinated to its fulfillment. Since there is no perfected contract in the first
place, there is no basis for the application of the principles governing suspensive conditions.
According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984 cannot be
classified as a counter-offer; it is simply a recital of its total monetary claims against
petitioner. Moreover, the amount stated therein could not likewise be considered as the counter-offer
since as admitted by petitioner, it was only recommendation which was subject to approval of the PNB
Board of Directors.
Neither can the receipt by the SAMD of P725,000.00 be regarded as evidence of a perfected sale
contract. As gleaned from the parties Stipulation of Facts during the proceedings in the court a quo, the
amount is merely an acknowledgment of the receipt of P725,000.00 as deposit to repurchase the
property. The deposit of P725,000.00 was accepted by respondent on the condition that the purchase
price would still be approved by its Board of Directors. Respondent maintains that its acceptance of the
amount was qualified by that condition, thus not absolute. Pending such approval, it cannot be legally
claimed that respondent is already bound by any contract of sale with petitioner.
According to respondent, petitioner knew that the SAMD has no capacity to bind respondent and that its
authority is limited to administering, managing and preserving the properties and other special assets of
PNB. The SAMD does not have the power to sell, encumber, dispose of, or otherwise alienate the
assets, since the power to do so must emanate from its Board of Directors. The SAMD was not
authorized by respondents Board to enter into contracts of sale with third persons involving corporate
assets. There is absolutely nothing on record that respondent authorized the SAMD, or made it appear
to petitioner that it represented itself as having such authority.
Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been
approved by the Board subject to the condition, among others, that the selling price shall be the total
banks claim as of documentation date x x x payable in cash (P725,000.00 already deposited)
within 60 days from notice of approval. A new Statement of Account was attached therein indicating the
total banks claim to be P1,931,389.53 less deposit of P725,000.00, or P1,206,389.00. Furthermore,
while respondents Board of Directors accepted petitioners offer to repurchase the property, the
acceptance was qualified, in that it required a higher sale price and subject to specified terms and
conditions enumerated therein. This qualified acceptance was in effect a counter-offer, necessitating
petitioners acceptance in return.
The Ruling of the Court
The ruling of the appellate court that there was no perfected contract of sale between the parties
on June 4, 1985 is correct.
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.[41] Under Article 1318 of the New Civil Code, there
is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Contracts are perfected by mere consent which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract.[42] Once perfected, they
bind other contracting parties and the obligations arising therefrom have the form of law between the
parties and should be complied with in good faith. The parties are bound not only to the fulfillment of
what has been expressly stipulated but also to the consequences which, according to their nature, may
be in keeping with good faith, usage and law.[43]
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and
deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.[44] The absence of any of the essential elements will negate the existence of a perfected
contract of sale. As the Court ruled in Boston Bank of the Philippines v. Manalo:[45]
A definite agreement as to the price is an essential element of a binding agreement to sell personal or
real property because it seriously affects the rights and obligations of the parties. Price is an essential
element in the formation of a binding and enforceable contract of sale. The fixing of the price can never
be left to the decision of one of the contracting parties. But a price fixed by one of the contracting
parties, if accepted by the other, gives rise to a perfected sale.[46]
A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When
there is merely an offer by one party without acceptance of the other, there is no contract.[47] When the
contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation between the parties.[48]
In San Miguel Properties Philippines, Inc. v. Huang,[49] the Court ruled that the stages of a contract of
sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place
upon the concurrence of the essential elements of the sale which are the meeting of the minds of the
parties as to the object of the contract and upon the price; and (3) consummation, which begins when
the parties perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof.
A negotiation is formally initiated by an offer, which, however, must be certain.[50] At any time prior to
the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer
may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer
into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be
plain, unequivocal, unconditional and without variance of any sort from the
proposal. In Adelfa Properties, Inc. v. Court of Appeals,[51]the Court ruled that:
x x x The rule is that except where a formal acceptance is so required, although the acceptance must
be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to
the offeror, it may be shown by acts, conduct, or words of the accepting party that clearly manifest a
present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by
the acts, conduct, or words of a party recognizing the existence of the contract of sale.[52]
A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of
the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to
end the negotiation between the parties on a different basis.[53] Consequently, when something is
desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee
consent because any modification or variation from the terms of the offer annuls the offer.[54] The
acceptance must be identical in all respects with that of the offer so as to produce consent or meeting
of the minds.
In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since
it lacked the resources, it requested for more time to redeem/repurchase the property under such terms
and conditions agreed upon by the parties.[55] The request, which was made through a letter
dated August 25, 1983, was referred to the respondents main branch for appropriate action.[56] Before
respondent could act on the request, petitioner again wrote respondent as follows:
1. Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND
PESOS (P150,000.00);
2. Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY
THOUSAND PESOS (P450,000.00); and
3. The remaining balance together with the interest and other expenses that will be incurred will be paid
within the last six months of the one year grave period requested for.[57]
When the petitioner was told that respondent did not allow partial redemption,[58] it sent a letter to
respondents President reiterating its offer to purchase the property.[59] There was no response to
petitioners letters dated February 10 and 15, 1984.
The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25,
1984 was P1,574,560.47 cannot be considered an unqualified acceptance to petitioners offer to
purchase the property. The statement is but a computation of the amount which petitioner was obliged
to pay in case respondent would later agree to sell the property, including interests, advances on
insurance premium, advances on realty taxes, publication cost, registration expenses and
miscellaneous expenses.
There is no evidence that the SAMD was authorized by respondents Board of Directors to accept
petitioners offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioners
offer would not bind respondent. As this Court ruled in AF Realty Development, Inc.
vs. Diesehuan Freight Services, Inc.:[60]
Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations
shall be exercised by the board of directors. Just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must
be made either by the board of directors or by a corporate agent duly authorized by the board. Absent
such valid delegation/authorization, the rule is that the declarations of an individual director relating to
the affairs of the corporation, but not in the course of, or connected with the performance of authorized
duties of such director, are held not binding on the corporation.
Thus, a corporation can only execute its powers and transact its business through its Board of Directors
and through its officers and agents when authorized by a board resolution or its by-laws.[61]
It appears that the SAMD had prepared a recommendation for respondent to accept petitioners offer to
repurchase the property even beyond the one-year period; it recommended that petitioner be allowed to
redeem the property and pay P1,574,560.00 as the purchase price. Respondent later approved the
recommendation that the property be sold to petitioner. But instead of the P1,574,560.47 recommended
by the SAMD and to which petitioner had previously conformed, respondent set the purchase price
at P2,660,000.00. In fine, respondents acceptance of petitioners offer was qualified, hence can be at
most considered as a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of
sale would have arisen; as it turns out, however, petitioner merely sought to have the counter-offer
reconsidered. This request for reconsideration would later be rejected by respondent.
We do not agree with petitioners contention that the P725,000.00 it had remitted to respondent was
earnest money which could be considered as proof of the perfection of a contract of sale under Article
1482 of the New Civil Code.The provision reads:
ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.
1. That the selling price shall be the total Banks claim as of documentation date (pls. see
attached statement of account as of 5-31-85), payable in cash (P725,000.00 already deposited) within
sixty (60) days from notice of approval;
2. The Bank sells only whatever rights, interests and participation it may have in the property and
you are charged with full knowledge of the nature and extent of said rights, interests and participation
and waive your right to warranty against eviction.
3. All taxes and other government imposts due or to become due on the property, as well as
expenses including costs of documents and science stamps, transfer fees, etc., to be incurred in
connection with the execution and registration of all covering documents shall be borne by you;
4. That you shall undertake at your own expense and account the ejectment of the occupants of
the property subject of the sale, if there are any;
5. That upon your failure to pay the balance of the purchase price within sixty (60) days from
receipt of advice accepting your offer, your deposit shall be forfeited and the Bank is thenceforth
authorized to sell the property to other interested parties.
6. That the sale shall be subject to such other terms and conditions that the Legal Department
may impose to protect the interest of the Bank.[64]
It appears that although respondent requested petitioner to conform to its amended counter-offer,
petitioner refused and instead requested respondent to reconsider its amended counter-
offer. Petitioners request was ultimately rejected and respondent offered to refund its P725,000.00
deposit.
In sum, then, there was no perfected contract of sale between petitioner and respondent over the
subject property.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.
The assailed decision is AFFIRMED. Costs against petitioner Manila Metal Container Corporation.
SO ORDERED.

This contention is likewise negated by the stipulation of facts which the parties entered into in the trial
court:

8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB prepared an updated
Statement of Account showing MMCCs total liability to PNB as of June 25, 1984 to be P1,574,560.47
and recommended this amount as the repurchase price of the subject property.

9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property. The
deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the
approval of the PNB Board.[62]

Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price of the property,
in the event that respondent would approve the recommendation of SAMD for respondent to accept
petitioners offer to purchase the property for P1,574,560.47. Unless and until the respondent accepted
the offer on these terms, no perfected contract of sale would arise.Absent proof of the concurrence of
all the essential elements of a contract of sale, the giving of earnest money cannot establish the
existence of a perfected contract of sale.[63]
It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to accept the
offer to purchase the property for P1,931,389.53. However, this amounted to an amendment of
respondents qualified acceptance, or an amended counter-offer, because while the respondent lowered
the purchase price, it still declared that its acceptance was subject to the following terms and
conditions:
Serrano vs. Caguiat
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision[1] of the Court of Appeals dated January 29, 1999 and its Resolution
dated July 14, 1999 in CA-G.R. CV No. 48824.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias,
Metro Manila covered by Transfer Certificate of Title No. T-9905.
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to
sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial
payment.In turn, petitioners gave respondent the corresponding receipt stating that respondent
promised to pay the balance of the purchase price on or before March 23, 1990, thus:
Las Pias, Metro Manila
March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIAS,
METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND
PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M.
COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED
OF SALE ON THIS DATE.
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]
On March 28, 1990, respondent, through his counsel Atty. PoncianoEspiritu, wrote petitioners informing
them of his readiness to pay the balance of the contract price and requesting them to prepare the final
deed of sale.[3]
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter[4] to respondent stating that
petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling
the transaction. Petitioners also informed respondent that he can recover the earnest money
of P100,000.00 anytime.
Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his counsel
Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the amount
of P100,000.00 payable to him.
In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court,
Branch 63, Makati City a complaint against them for specific performance and damages, docketed as
Civil Case No. 90-1067.[6]
On June 27, 1994, after hearing, the trial court rendered its Decision[7]finding there was a perfected
contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of
respondent.The trial court held:
xxx
In the evaluation of the evidence presented by the parties as to the issue as to who was ready to
comply with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiffs
position deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as
downpayment or earnest money showed that there was already a perfected contract. Art. 1482 of the
Civil Code of the Philippines, reads as follows, to wit:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending
defendants the letter dated March 25, 1990. (Exh. D) and reiterated the same intent to pursue the sale
in a letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment
(Exh. C).Defendants mere allegation that it was plaintiff who did not appear on March 23, 1990 is
unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere afterthought.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial courts
judgment.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its
Resolution[8] dated July 14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled Receipt for Partial Payment signed by
both parties earlier mentioned is a contract to sell or a contract of sale.
Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article
1458[9] in relation to Article 1475[10] of the Civil Code. The delivery to them of P100,000.00 as down
payment cannot be considered as proof of the perfection of a contract of sale under Article 1482[11] of
the same Code since there was no clear agreement between the parties as to the amount of
consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and should not be
disturbed except for cogent reasons.14Indeed, they should not be changed on appeal in the absence of
a clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight and
significance, which if considered would have altered the result of the case.[12] In the present case, we
find that both the trial court and the Court of Appeals interpreted some significant facts resulting in an
erroneous resolution of the issue involved.
In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money
given by respondent to petitioners.They invoked Article 1482 of the Civil Code which provides that
"Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and
as proof of the perfection of the contract."
We are not convinced.
In San Miguel Properties Philippines, Inc. v. Spouses Huang,[13] we held that the stages of a contract
of sale are: (1) negotiation, covering the period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place
upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the
parties as to the object of the contract and upon the price; and (3) consummation, which begins when
the parties perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof.
With the above postulates as guidelines, we now proceed to determine the real nature of the contract
entered into by the parties.
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.[14] Thus, when petitioners declared in
the said Receipt for Partial Payment that they
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND
PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M.
COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR consummated upon full payment of the purchase price.[21] Now, since the earnest money was given in
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
OF SALE ON THIS DATE.
there can be no other interpretation than that they agreed to a conditional contract of sale,
consummation of which is subject only to the full payment of the purchase price. As previously discussed, the suspensive condition (payment of the balance by respondent) did not take
place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's
obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the
suspensive condition does not take place, the parties would stand as if the conditional obligation had WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of
never existed. The suspensive condition is commonly full payment of the purchase price.[15] Appeals is REVERSED and respondents complaint is DISMISSED.
The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As
early as 1951, in Sing Yee v. Santos,[16] we held that:
x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon
delivery of the thing sold and a contract to sell x x x where by agreement the ownership is reserved in
the seller and is not to pass until the full payment, of the purchase price is made. In the first case, non-
payment of the price is a negative resolutory condition; in the second case, full payment is a positive SO ORDERED.
suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the
vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale
is itself resolved and set aside. In the second case, however, the title remains in the vendor if the
vendee does not comply with the condition precedent of making payment at the time specified in the
contract.

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer
until full payment of the price.[17]

In this case, the Receipt for Partial Payment shows that the true agreement between the parties is
a contract to sell.

First, ownership over the property was retained by petitioners and was not to pass to respondent until
full payment of the purchase price. Thus, petitioners need not push through with the sale should
respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In
effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay
within the fixed period.[18]

Second, the agreement between the parties was not embodied in a deed of sale. The absence of a
formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of
ownership, but only a transfer after full payment of the purchase price.[19]

Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication
that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of
the property.[20]

It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a contract
of sale, it shall be considered as part of the price and proof of the perfection of the contract. However,
this article speaks of earnest money given in a contract of sale.In this case, the earnest money was
given in a contract to sell. The earnest money forms part of the consideration only if the sale is
G.R. No. 128325 September 14, 1999
SPOUSES RODOLFO CAOILI and IMELDA CAOLI, petitioners,
vs.
COURT OF APPEALS and ROSITA VDA. DE SANTIAGO, respondents.
GONZAGA-REYES, J.:
Before this Court is a petition for review on certiorari which seeks to set aside the Decision dated
December 9, 1996 of the Court of Appeals 1 in CA-G.R. CV No. 48363 and prays for the reinstatement
of the Decision 2 dated January 9, 1995 of the Regional Trial Court of Manila, Branch 31 in Civil Case
No. 93-65569.
Petitioners spouses Rodolfo and Imelda Caoili were lessees of a parcel of land with an area of 42.90
square meters including a one (1) door apartment unit located at 1752 Tecson de Guia St., Tondo,
Manila belonging to private respondent Rosita Vda. de Santiago. On March 30, 1987, private
respondent secured a loan from petitioners in the amount of P30,000.00 with the understanding that the
latter shall pay their monthly rentals as long as the loan was not paid. 3 On or about July 10, 1990, an
agreement was made between the parties herein for the sale of the property being occupied by
petitioners, although it was not "formal or written". 4
On December 14, 1990, a "Receipt" denominated as an "Addendum to Agreement dated August 8,
1990" was signed by private respondent in the presence of Alicia B. Ay-ay and Benilda Miller and
acknowledged before notary public Crispulo B. Ducusin for the sale of the subject property to
petitioners in the amount of P250,000.00. It was stated therein that private respondent received from
petitioners the sum of P140,000.00, in addition to the partial payment of P60,000.00, the "balance
payable when the good title in the name of herein vendor is delivered to the spouses." 5
Petitioners sent two (2) letters 6 to private respondent demanding delivery of the title or corresponding
transfer certificate of title over the subject property within 15 days or make a refund "double (the)
amount you have received as agreed or the total amount of Four Hundred Thirty Thousand
(P430,000.00) pesos".1wphi1.nt
Private respondent refused to comply. Hence, a complaint for collection of sum of money was filed with
the Regional Trial Court of Manila, Branch 31 by herein petitioners against private respondent praying,
inter alia, that the latter be ordered to pay the former the amount of P489,520.00 with interest. The case
was docketed as Civil Case No. 93-65569.
Private respondent Rosita Vda. de Santiago filed her Answer alleging, as special and affirmative
defenses, that plaintiffs were mere lessees of the apartment and lot in question; that sometime in March
1987, she obtained a loan in the amount of P30,000.00 from plaintiffs, the same to be offset by the
monthly rental of P1,300.00 and that said loan in fact had been offset by January 1989, or after 23
months; that since plaintiffs have not been paying the monthly rentals even after January 1989,
defendant again obtained from the spouses another loan of P60.000.00 on July 10, 1990, which was
totally set off by the monthly rentals as of October 26, 1993 when she filed her answer to the complaint.
On the matter of the receipt, Exhibit "B", she denied having received the amount of P140,000.00 which
was the alleged value of the improvements introduced by plaintiffs on the leased premises and that it
was only upon the assurance of plaintiffs that they would give to her the receipts showing the actual
amounts spent for the improvements that she signed Exhibit "B" even without the opportunity of first
reading it but the receipts for expenses for expenses of the improvements were never shown to her. 7
On January 9, 1995, the Regional Trial Court of Manila, Branch 31 rendered judgment, the dispositive
portion 8 of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant ordering
the latter to pay:
1. The amount of P489,520.00 (P244,760.00 x 2) with legal interest until the full amount is fully paid;
2. Attorney's fees in the amount of P20,000.00 plus P1,000.00 per appearance;
3. That the status quo is maintained until the aforesaid amounts are fully paid by the defendant; and
4. The costs of this suit.
Defendant-appellant interposed an appeal and the Court of Appeals rendered judgment on December
9, 1996, the dispositive portion 9 of which decision reads, to wit:
WHEREFORE, the appealed decision dated January 9, 1995 is hereby SET ASIDE and judgment is
hereby rendered ORDERING defendant-appellant Rosita Vda. de Santiago to PAY plaintiffs-appellees,
the spouses Rodolfo Caoili and Imelda Caoili, the amount of P33,600.00, with legal interest until fully
paid. No cost.
On January 2, 1997, plaintiffs-appellees Caoili filed a Motion of Reconsideration 10 of the decision of
the Court of Appeals arguing that they were able to substantiate the causes of action in their complaint;
that they were able to establish material, pertinent and relevant documentary evidences supported by
the unrefuted oral testimonies of both spouses; that the findings of fact of the court a quo were based
and founded on unrefuted documents and oral testimonies of plaintiffs-appellees in contrast with the
general denials and oral testimony of defendant-appellant which were self-serving and therefore
inadmissible; that defendant-appellant had been in absolute bad faith in dealing with plaintiffs-appellees
on the transaction between them; and that since the subject property is still subject to successional
rights of the children of defendant-appellant, it was highly impossible for defendant-appellant to deliver
a good title to plaintiffs-appellees.
On January 27, 1997, plaintiffs-appellees Caoili filed a Supplemental Motion for Reconsideration with
Leave of Court. Said Supplemental Motion for Reconsideration was denied and expunged from the
record as it "would, in effect, render nugatory the mandatory procedural rule that a motion for
reconsideration should be filed within a reglementary period of 15 days from receipt of the judgment or
order sought to be reconsidered." 11
The Court of Appeals in a Resolution 12 dated January 18, 1997 denied plaintiffs-appellees' Motion for
Reconsideration.
Hence, the present petition interposed by plaintiffs Caoili raising the issue that:
THE HONORABLE COURT OF APPEALS ERRED IN MODIFYING THE DECISION OF THE COURT
A QUO IN REDUCING THE AMOUNT OF THE AWARDED CLAIM FOR P489,520.00 (P244,760.00 x
2) WITH INTEREST UNTIL THE FULL AMOUNT IS FULLY PAID TO P33,600.00 WITH LEGAL
INTEREST UNTIL FULLY PAID NO COST.
In their petition, petitioners Caoili contend that there was no legal justification for the Court of Appeals to
reduce the amount awarded to them by the trial court. Petitioner Imelda Caoili allegedly testified and
identified how partial payments were made to private respondent through Exhibits "C" to "J" in the total
amount of P95,700.00 which amount did not include the first payment of P30,000.00 and other
advances reaching a total of P200,000.00. Petitioners further argue that private respondent, on cross-
examination, admitted having received the amounts of P60,000.00; P49,000.00 and P35,000.00
covered by different checks in the total sum of P144,000.00 and that the amount of P35,000.00 was
received by private respondent for "effecting or finishing papers contemplated for the house and lot."
Petitioners aver that the purported sale did not materialize because of the death of private respondent's
husband Francisco Santiago; thus private respondent remained indebted to petitioners in accordance
with the terms and conditions of Exhibit "B". Finally, petitioners argue that private respondent was
placed under estoppel in denying the terms and conditions of the agreement and the receipt of
payments when she admitted having received the two (2) letters of demand, Exhibits "K" and "L",
respectively.
In their Comment/Opposition, private respondent alleged that while petitioners insist that the receipt
dated December 9, 1990, is an addendum to an alleged agreement made on August 8, 1990,
petitioners nonetheless failed to present the alleged Agreement of August 8, 1990 or any evidence that
would prove the sale of the subject property to them. Private respondent submits that there was really
no sale as the transaction between the parties was simple a loan.
In their Reply, petitioners argue that the absence of a written contract in their initial agreement was
cured when the receipt marked as Exhibit "B" was executed on December 14, 1990 wherein private
respondent acknowledged having sold the property to petitioners and having received the amount of
P140,000.00 from the latter, in addition to partial payments of P60,000.00, for the agreed total amount
of P250,000.00, the balance of the price being payable when good title will be delivered to petitioners.
The main issue raised by petitioners in their petition is whether or not the Court of Appeals erred in
reducing the amount awarded by the court a quo.
At the outset, it must be stated that this petition for review on certiorari was filed pursuant to Rule 45 of
the Revised Rules of Court wherein a review is not a matter of right but of sound of judicial discretion
and will be granted only when there are special and important reasons therefor. 13 It is not the function
of this Court to re-examine the evidence submitted by the parties unless the findings of facts of the
Court of Appeals are not supported by evidence on record or the judgment is based on a
misapprehension of facts. 14 This Court is limited to the review or revision of errors of law and not to
analyze or weigh the evidence all over again. 15
The issue of whether or not the Court of Appeals erred in reducing the amount awarded by the court a
quo raised a question of fact as it involves an examination of the probative value of the evidence
presented by the parties. In the case of Reyes vs. Court of Appeals, 16 we held:
Clearly, the main issue to be resolved is the authenticity of the Deed of Extrajudicial Partition and
Settlement which is a question of fact rather than of law. In the case of Manila Bay Club Corporation v.
Court of Appeals, 17 this Court held that for a question to be one of law, it must involve no examination
of the probative value of the evidence presented by the litigants or any of them. To reiterate the
distinction between the two types of questions: there is a question of law in a given case when the
doubt or difference arises as to what the law is pertaining to certain state of facts, and there is a
question of fact when the doubt arises as to the truth or the falsity of alleged facts. (emphasis supplied).
However, the rule that findings of fact of the lower court are not reviewable on appeal by this Court is
subject to exceptions. Thus:
Settled is the rule that the jurisdiction of this Court in cases brought before it from the Court of Appeals
via Rule 45 of the Rules of Court is limited to reviewing errors of law. Findings of fact of the latter are
conclusive, except in the following instances: (1) when the findings are grounded entirely on
speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings
the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions
of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when
the findings are conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the
respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record. 18 (emphasis supplied).
The instant petition is an admitted exception under no. 7 above-quoted.
The trial court considered Exhibit "B" as valid and binding between the parties therein and ruled that the
same belies the posture of private respondent herein that she merely obtained a loan from petitioners
which is to be offset by the monthly rentals. 19
On the other hand, the Court of Appeals ruled that Exhibit "B", which is the "Addendum to the
Agreement dated August 8, 1990", is "not a true and faithful documentation of the alleged receipt of
P140,000.00 and the alleged sale of the property on July 10, 1990." It stated, however, that Exhibit "B"
contemplated two (2) separate obligations, namely: (1) the obligation of petitioners to pay the balance
upon delivery of the title; and (2) the obligation of private respondent to make a refund in double the
amount agreed upon, if the title to the property is not good and cannot be made good within a
reasonable time. 20 The Court of Appeals likewise ruled that since petitioners have not complied with
their obligation to present receipts of expenses for improvements made, then private respondent had
been released from the obligation to refund double the amount claimed by petitioners. 21 The ruling
seems to be inconsistent because if the said Exhibit "B" is not true and faithful documentation of the
alleged receipt of P140,000.00 and the alleged sale of the property, as the Court of Appeals held, then
there can be no separate obligations that can be ascribed to the parties therein.
In resolving the issue of whether or not the Court of Appeals erred in reducing the amount awarded to
petitioners, we should first determine whether there was a contract for the sale of the subject property,
as petitioners claim, or merely a loan, as asserted by private respondent.
There is no question that the parties initially entered into a contract of lease. The notarized
"Kasunduan" dated March 30, 1987 22 evidences the relationship between petitioners, as lessees, and
private respondent, as lessor, wherein the latter borrowed from the former the amount of P30,000.00 on
condition that petitioners will not pay the monthly rentals as long as the said amount is not fully paid by
private respondent. Private respondent admitted that there was an agreement for the purchase of the
subject premises but the same was not made in writing. 23 The absence of a formal deed of sale does
not render the agreement null and void or without any effect. The provision of Article 1358 of the Civil
Code 24 on the necessity of a public document is only for convenience, not for validity or enforceability.
25 It does not mean that no contract has been perfected 26 so long as the essential requisites of
consent of the contracting parties, object, and cause of the obligation concur. 27
There is the "Receipt" marked as Exhibit "B", reproduced hereunder, which states:
RECEIPT
Addendum to Agreement dated August 8, 1990.
Received from the Spouses RODOLFO CAOILI and IMELDA CAOILI, both Filipino, both of legal ages,
the sum of ONE HUNDRED FORTY (P140,000.00) THOUSAND PESOS, Philippine Currency, in
addition to the partial payment of Six (sic) Thousand (P60,000.00) pesos for the purchase of a parcel of
land together with its improvement situated at 1752 Tecson de Guia St., Tondo, Manila, containing an
area of more or less 42.90 square meters which I have sold on July 10, 1990 and agreed to convey to
said spouses for the sum of P250,000.00, balance payable when the good title in the name of herein
vendor is delivered to the spouses. A reasonable time, after delivery of title, is to be allowed for
examination thereof. It is agreed that, if the title to said premises is not good and cannot be made good
within a reasonable time then this agreement shall be null and void and the above amount in double the
amount shall be refunded and paid to the vendee.
Manila, December 14, 1990.
(SIGNED)
ROSITA ROBLES VDA. DE SANTIAGO
Vendor
SIGNED IN THE PRESENCE OF:
(signed) Alicia B. Ay-ay
(signed) Benilda Miller 28
Exhibit "B", which was signed by private respondent herself 29 indubitably shows that the agreement
was to convey the subject premises to petitioners for the sum of P250,000.00. It confirms that there was
a meeting of the minds upon the subject property, which is the object of the contract and upon the price,
which is P250,000.00. 30 The agreement is subject to the condition that the balance is "payable when
the good title in the name of herein vendor is delivered to the spouses" and a "reasonable time, after
delivery of title, is to be allowed for examination thereof." The obligation to deliver title is likewise
subject to a penal clause that "if the title to said premises is not good and cannot be made good within
a reasonable time then this agreement shall be null and void" and a sum double the "above amount"
shall be refunded and paid to the vendee." The said document clearly acknowledges that petitioners
have paid the amount of P140,000.00 "in addition to the partial payment of P60,000.00" and the
balance is payable "when the good title in the name of the vendor is delivered to the spouses." Verily,
under the agreement, private respondent was obligated to deliver a good title to petitioners and this
condition is the operative act which would give rise to the corresponding obligation of petitioners to pay
the balance of the purchase price. 31 Since it is not disputed that private respondent has not delivered
a good title, petitioners have by law the right to either refuse to proceed with the agreement or to waive
that condition pursuant to Article 1545 of the Civil Code. 32
Furthermore, subsequent developments show that the parties indeed agreed on a contract for the sale
of the subject premises. Private respondent herself admitted 33 having received advances and
payments from petitioners after December 14, 1990 (the date of execution of Exhibit "B") as shown by
receipts marked as Exhibits "C" to "J", to wit:
1. Exhibit "C" 34 is a Far East Bank check dated January 4, 1991 payable to the order of private
respondent signed by petitioner Imelda Caoili in the amount P49,000.00;
2. Exhibit "D" 35 is a receipt dated May 30, 1991 signed by private respondent for the sum of
P15,000.00 as "partial payment House & Lot";
3. Exhibit "E" 36 is a receipt dated September 3, 1992 signed by private respondent in the amount of
P12,000.00 also as "partial payment";
4. Exhibit "F" 37 is a receipt dated September 3, 1991 signed by private respondent in the amount of
P5,000.00 as "Partial payment re papers transfer";
5. Exhibit "G" 38 is a receipt dated November 11, 1992 signed by private respondent in the amount of
P3,500.00 as "advance payment";
6. Exhibit "H" 39 is a receipt dated November 27, 1992 signed by private respondent in the amount of
P2,000.00 as "advance payment";
7. Exhibit "I" 40 is a receipt dated July 23, 1992 signed by private respondent in the amount of
P5,000.00 as "additional payment"; and
8. Exhibit "J" 41 is a check dated July 23, 1992 payable to the order of private respondent signed by
petitioner Imelda Caoili in the amount of P4,200.00.
It is to be observed that Exhibit "D", for instance, is a receipt in the amount of P15,000.00 expressly
denominated as partial payment for "House & Lot" 42, while Exhibit "F" is a receipt in the amount of
P5,000.00 as "partial payment re papers transfer." 43 These receipts corroborate the fact that there
was an agreement for the sale of the subject property.
The evidence shows that private respondent received payments from petitioners in the following
amounts: a total of P95,700.00 as shown in Exhibits "C" to "J"; P200,000.00 as shown in Exhibit "B";
and P30,000.00 as shown in Exhibit "A". However, the amount of P30,000.00 (Exhibit "A") was clearly a
loan by private respondent with the understanding that petitioners will not pay the rentals until the
amount of loan is not paid ("hanggang hindi ko nababayaran ang nasabing halaga"). The receipt
evidencing payment of P30,000.00 was made in 1987, several years before the agreement for the sale
of the subject property was made.
Private respondent claims that the amount of P60,000.00 mentioned in Exhibit "B" as partial payment
was a loan which she incurred and which was offset by the monthly rentals. However, aside from
private respondent's bare allegation, 44 no proof to that effect was presented.
As regards the amount of P140,000.00 also mentioned in Exhibit "B", petitioners claim that it
"represents the loan of P30,000.00 plus the deposits I made in the house plus the repairs of the
faucets" 45 while private respondent averred that it was spent for "renovation and building of an
additional room of the house". 46 Whatever the amount represented, what is confirmed is that it was
acknowledged as part of the purchase price in the document signed by private respondent herself.
As stated, Exhibit "B", above-quoted, which is denominated as a "Receipt" and "Addendum to
Agreement dated August 8, 1990" bolsters the claim of petitioners that there was indeed an agreement
for the sale of the subject property. This "Receipt" was acknowledged before a notary public on
December 28, 1990 47 and as such is considered a public document. 48 Being a public document, it is
a prima facie evidence of the facts therein stated. 49 It may be presented without further proof, the
certificate of acknowledgment being prima facie evidence of the execution of the instrument or
document involved. 50 Exhibit "B" being a notarized document has in its favor the presumption of
regularity, and to contradict the same, there must be evidence that is clear, convincing and more than
merely preponderant. 51 Otherwise the document should be upheld. 52 There being no proof to the
contrary, the parties are therefor bound to comply with the clear and unequivocal terms under Exhibit
"B" and in view of the failure of private respondent to deliver a good title to petitioners, she is under
obligation to pay double the amount which private respondent received from petitioners as
acknowledged in Exhibits "B".
As regards the amount to be awarded to petitioners, from the evidence thus presented, private
respondent has received from petitioners the amount of P95,700.00 as shown in Exhibits "C" to "J" and
P140,000.00 in addition to P60,000.00 as shown in Exhibits "B", or an aggregate amount of
P295,700.00. It should be noted, however, that in their demand letter, 53 petitioners claim that a total of
P215,000.00 has been received by private respondent and in their complaint, 54 petitioners alleged that
per their latest computation, they have paid private respondent the amount of P244,760.00. This being
the case, petitioners should deemed under estoppel to claim an amount more than what they had
prayed for. Accordingly, the trial court's decision ordering private respondent to pay petitioners the
amount of P489,520.00, which is double the amount of P244,760.00, is upheld.1wphi1.nt
Finally, petitioners contend that their Supplemental Motion for Reconsideration was submitted after the
main Motion for Reconsideration had been filed within the required period and which motion had not yet
been timely resolved. They argue that had the Supplemental Motion for Reconsideration been admitted,
the meritorious allegations therein would have been given due course.
The rule is well-settled that the admission or non-admission of a supplemental pleading is not a matter
of right but is discretionary on the court. 55 As differentiated from an amended pleading which takes the
place of the original pleading, a supplemental pleading does not extinguish the existence of the original;
it only serves to bolster or adds something to the primary pleading. A supplement exists side by side
with the original; it does not replace that which it supplements: 56 it does not supersede the original but
assumes that the original pleading is to stand and the issues joined under the original pleading remain
as issues to be tried in the action. 57 A supplemental pleading supplies deficiencies in aid of an original
pleading, not to entirely substitute the latter. 58
A perusal of the Supplemental Motion for Reconsideration reveals that the arguments raised by
petitioners in the supplemental motion are matters which have already been substantially discussed,
considered, and passed by the Court of Appeals in its decision. Thus, even assuming a grati argumenti
that the supplemental motion was admitted as part of the record, the Court of Appeals would not have
decided otherwise.
WHEREFORE, the Decision dated December 9, 1996 of the Court of Appeals in CA-G.R. CV No.
48363 is hereby SET ASIDE. Accordingly, the Decision dated January 9, 1995 of the Regional Trial
Court of Manila, Branch 31 in Civil Case No. 93-65569 is REINSTATED. No pronouncement as to
costs.
SO ORDERED.
G.R. No. 160132 April 17, 2009
SERAFIN, RAUL, NENITA, NAZARETO, NEOLANDA, all surnamed NARANJA, AMELIA NARANJA-
RUBINOS, NILDA NARANJA-LIMANA, and NAIDA NARANJA-GICANO, Petitioners,
vs.
COURT OF APPEALS, LUCILIA P. BELARDO, represented by her Attorney-in-Fact, REBECCA
CORDERO, and THE LOCAL REGISTER OF DEEDS, BACOLOD CITY, Respondents.
DECISION
NACHURA, J.:
This petition seeks a review of the Court of Appeals (CA) Decision1 dated September 13, 2002 and
Resolution2 dated September 24, 2003 which upheld the contract of sale executed by petitioners
predecessor, Roque Naranja, during his lifetime, over two real properties.
Roque Naranja was the registered owner of a parcel of land, denominated as Lot No. 4 in
Consolidation-Subdivision Plan (LRC) Pcs-886, Bacolod Cadastre, with an area of 136 square meters
and covered by Transfer Certificate of Title (TCT) No. T-18764. Roque was also a co-owner of an
adjacent lot, Lot No. 2, of the same subdivision plan, which he co-owned with his brothers, Gabino and
Placido Naranja. When Placido died, his one-third share was inherited by his children, Nenita,
Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja, herein petitioners. Lot No. 2 is covered by
TCT No. T-18762 in the names of Roque, Gabino and the said children of Placido. TCT No. T-18762
remained even after Gabino died. The other petitioners Serafin Naranja, Raul Naranja, and Amelia
Naranja-Rubinos are the children of Gabino.3
The two lots were being leased by Esso Standard Eastern, Inc. for 30 years from 1962-1992. For his
properties, Roque was being paid P200.00 per month by the company.4
In 1976, Roque, who was single and had no children, lived with his half sister, Lucilia P. Belardo
(Belardo), in Pontevedra, Negros Occidental. At that time, a catheter was attached to Roques body to
help him urinate. But the catheter was subsequently removed when Roque was already able to urinate
normally. Other than this and the influenza prior to his death, Roque had been physically sound.5
Roque had no other source of income except for the P200.00 monthly rental of his two properties. To
show his gratitude to Belardo, Roque sold Lot No. 4 and his one-third share in Lot No. 2 to Belardo on
August 21, 1981, through a Deed of Sale of Real Property which was duly notarized by Atty. Eugenio
Sanicas. The Deed of Sale reads:
I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod City, do hereby declare
that I am the registered owner of Lot No. 4 of the Cadastral Survey of the City of Bacolod, consisting of
136 square meters, more or less, covered by Transfer Certificate of Title No. T-18764 and a co-owner
of Lot No. 2, situated at the City of Bacolod, consisting of 151 square meters, more or less, covered by
Transfer Certificate of Title No. T-18762 and my share in the aforesaid Lot No. 2 is one-third share.
That for and in consideration of the sum of TEN THOUSAND PESOS (P10,000.00), Philippine
Currency, and other valuable consideration, receipt of which in full I hereby acknowledge to my entire
satisfaction, by these presents, I hereby transfer and convey by way of absolute sale the above-
mentioned Lot No. 4 consisting of 136 square meters covered by Transfer Certificate of Title No. T-
18764 and my one-third share in Lot No. 2, covered by Transfer Certificate of Title No. T-18762, in
favor of my sister LUCILIA P. BELARDO, of legal age, Filipino citizen, married to Alfonso D. Belardo,
and a resident of Pontevedra, Negros Occidental, her heirs, successors and assigns.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of August, 1981 at Bacolod City,
Philippines.
(SGD.)
ROQUE NARANJA6
Roques copies of TCT No. T-18764 and TCT No. T-18762 were entrusted to Atty. Sanicas for
registration of the deed of sale and transfer of the titles to Belardo. But the deed of sale could not be
registered because Belardo did not have the money to pay for the registration fees.7
Belardos only source of income was her store and coffee shop. Sometimes, her children would give
her money to help with the household expenses, including the expenses incurred for Roques support.
At times, she would also borrow money from Margarita Dema-ala, a neighbor.8 When the amount of
her loan reached P15,000.00, Dema-ala required a security. On November 19, 1983, Roque executed
a deed of sale in favor of Dema-ala, covering his two properties in consideration of the P15,000.00
outstanding loan and an additional P15,000.00, for a total of P30,000.00. Dema-ala explained that she
wanted Roque to execute the deed of sale himself since the properties were still in his name. Belardo
merely acted as a witness. The titles to the properties were given to Dema-ala for safekeeping.9
Three days later, or on December 2, 1983, Roque died of influenza. The proceeds of the loan were
used for his treatment while the rest was spent for his burial.10
In 1985, Belardo fully paid the loan secured by the second deed of sale. Dema-ala returned the
certificates of title to Belardo, who, in turn, gave them back to Atty. Sanicas.11
Unknown to Belardo, petitioners, the children of Placido and Gabino Naranja, executed an Extrajudicial
Settlement Among Heirs12 on October 11, 1985, adjudicating among themselves Lot No. 4. On
February 19, 1986, petitioner Amelia Naranja-Rubinos, accompanied by Belardo, borrowed the two
TCTs, together with the lease agreement with Esso Standard Eastern, Inc., from Atty. Sanicas on
account of the loan being proposed by Belardo to her. Thereafter, petitioners had the Extrajudicial
Settlement Among Heirs notarized on February 25, 1986. With Roques copy of TCT No. T-18764 in
their possession, they succeeded in having it cancelled and a new certificate of title, TCT No. T-
140184, issued in their names.13
In 1987, Belardo decided to register the Deed of Sale dated August 21, 1981. With no title in hand, she
was compelled to file a petition with the RTC to direct the Register of Deeds to annotate the deed of
sale even without a copy of the TCTs. In an Order dated June 18, 1987, the RTC granted the petition.
But she only succeeded in registering the deed of sale in TCT No. T-18762 because TCT No. T-18764
had already been cancelled.14
On December 11, 1989, Atty. Sanicas prepared a certificate of authorization, giving Belardos daughter,
Jennelyn P. Vargas, the authority to collect the payments from Esso Standard Eastern, Inc. But it
appeared from the companys Advice of Fixed Payment that payment of the lease rental had already
been transferred from Belardo to Amelia Naranja-Rubinos because of the Extrajudicial Settlement
Among Heirs.
On June 23, 1992, Belardo,15 through her daughter and attorney-in-fact, Rebecca Cordero, instituted a
suit for reconveyance with damages. The complaint prayed that judgment be rendered declaring
Belardo as the sole legal owner of Lot No. 4, declaring null and void the Extrajudicial Settlement Among
Heirs, and TCT No. T-140184, and ordering petitioners to reconvey to her the subject property and to
pay damages. The case was docketed as Civil Case No. 7144.
Subsequently, petitioners also filed a case against respondent for annulment of sale and quieting of title
with damages, praying, among others, that judgment be rendered nullifying the Deed of Sale, and
ordering the Register of Deeds of Bacolod City to cancel the annotation of the Deed of Sale on TCT No.
T-18762. This case was docketed as Civil Case No. 7214.
On March 5, 1997, the RTC rendered a Decision in the consolidated cases in favor of petitioners. The
trial court noted that the Deed of Sale was defective in form since it did not contain a technical
description of the subject properties but merely indicated that they were Lot No. 4, covered by TCT No.
T-18764 consisting of 136 square meters, and one-third portion of Lot No. 2 covered by TCT No. T-
18762. The trial court held that, being defective in form, the Deed of Sale did not vest title in private
respondent. Full and absolute ownership did not pass to private respondent because she failed to
register the Deed of Sale. She was not a purchaser in good faith since she acted as a witness to the
second sale of the property knowing that she had already purchased the property from Roque.
Whatever rights private respondent had over the properties could not be superior to the rights of
petitioners, who are now the registered owners of the parcels of land. The RTC disposed, thus:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered:
1. Dismissing Civil Case No. 7144.
2. Civil Case No. 7214.
a) Declaring the Deed of Sale dated August 21, 1981, executed by Roque Naranja, covering his one-
third (1/3) share of Lot 2 of the consolidation-subdivision plan (LRC) Pcs-886, being a portion of the
consolidation of Lots 240-A, 240-B, 240-C and 240-D, described on plan, Psd-33443 (LRC) GLRO Cad.
Rec. No. 55 in favor of Lucilia Belardo, and entered as Doc. No. 80, Page 17, Book No. XXXVI, Series
of 1981 of Notary Public Eugenio Sanicas of Bacolod City, as null and void and of no force and effect;
b) Ordering the Register of Deeds of Bacolod City to cancel Entry No. 148123 annotate at the back of
Transfer Certificate of Title No. T-18762;
c) Ordering Lucilia Belardo or her successors-in-interest to pay plaintiffs the sum of P20,000.00 as
attorneys fees, the amount of P500.00 as appearance fees.
Counterclaims in both Civil Cases Nos. 7144 and 7214 are hereby DISMISSED.
SO ORDERED.16
On September 13, 2002, the CA reversed the RTC Decision. The CA held that the unregisterability of a
deed of sale will not undermine its validity and efficacy in transferring ownership of the properties to
private respondent. The CA noted that the records were devoid of any proof evidencing the alleged
vitiation of Roques consent to the sale; hence, there is no reason to invalidate the sale. Registration is
only necessary to bind third parties, which petitioners, being the heirs of Roque Naranja, are not. The
trial court erred in applying Article 1544 of the Civil Code to the case at bar since petitioners are not
purchasers of the said properties. Hence, it is not significant that private respondent failed to register
the deed of sale before the extrajudicial settlement among the heirs. The dispositive portion of the CA
Decision reads:
WHEREFORE, the decision dated March 5, 1997 in Civil Cases Nos. 7144 and 7214 is hereby
REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered as follows:
1. Civil Case No. 7214 is hereby ordered DISMISSED for lack of cause of action.
2. In Civil Case No. 7144, the extrajudicial settlement executed by the heirs of Roque Naranja
adjudicating among themselves Lot No. 4 of the consolidation-subdivision plan (LRC) Pcs 886 of the
Bacolod Cadastre is hereby declared null and void for want of factual and legal basis. The certificate of
title issued to the heirs of Roque Naranja (Transfer Certificate of [T]i[t]le No. T-140184) as a
consequence of the void extra-judicial settlement is hereby ordered cancelled and the previous title to
Lot No. 4, Transfer Certificate of Title No. T-18764, is hereby ordered reinstated. Lucilia Belardo is
hereby declared the sole and legal owner of said Lot No. 4, and one-third of Lot No. 2 of the same
consolidation-subdivision plan, Bacolod Cadastre, by virtue of the deed of sale thereof in her favor
dated August 21, 1981.
SO ORDERED.17
The CA denied petitioners motion for reconsideration on September 24, 2003.18 Petitioners filed this
petition for review, raising the following issues:
1. WHETHER OR NOT THE HONORABLE RESPONDENT COURT OF APPEALS IS CORRECT IN
IGNORING THE POINT RAISED BY [PETITIONERS] THAT THE DEED OF SALE WHICH DOES NOT
COMPL[Y] WITH THE PROVISIONS OF ACT NO. 496 IS [NOT] VALID.
2. WHETHER OR NOT THE ALLEGED DEED OF SALE [OF REAL PROPERTIES] IS VALID
CONSIDERING THAT THE CONSENT OF THE LATE ROQUE NARANJA HAD BEEN VITIATED; x x x
THERE [IS] NO CONCLUSIVE SHOWING THAT THERE WAS CONSIDERATION AND THERE [ARE]
SERIOUS IRREGULARITIES IN THE NOTARIZATION OF THE SAID DOCUMENTS.19
In her Comment, private respondent questioned the Verification and Certification of Non-Forum
Shopping attached to the Petition for Review, which was signed by a certain Ernesto Villadelgado
without a special power of attorney. In their reply, petitioners remedied the defect by attaching a Special
Power of Attorney signed by them.
Pursuant to its policy to encourage full adjudication of the merits of an appeal, the Court had previously
excused the late submission of a special power of attorney to sign a certification against forum-
shopping.20 But even if we excuse this defect, the petition nonetheless fails on the merits.
The Court does not agree with petitioners contention that a deed of sale must contain a technical
description of the subject property in order to be valid. Petitioners anchor their theory on Section 127 of
Act No. 496,21 which provides a sample form of a deed of sale that includes, in particular, a technical
description of the subject property.
To be valid, a contract of sale need not contain a technical description of the subject property.
Contracts of sale of real property have no prescribed form for their validity; they follow the general rule
on contracts that they may be entered into in whatever form, provided all the essential requisites for
their validity are present.22 The requisites of a valid contract of sale under Article 1458 of the Civil
Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in
money or its equivalent.
The failure of the parties to specify with absolute clarity the object of a contract by including its technical
description is of no moment. What is important is that there is, in fact, an object that is determinate or at
least determinable, as subject of the contract of sale. The form of a deed of sale provided in Section
127 of Act No. 496 is only a suggested form. It is not a mandatory form that must be strictly followed by
the parties to a contract.
In the instant case, the deed of sale clearly identifies the subject properties by indicating their
respective lot numbers, lot areas, and the certificate of title covering them. Resort can always be made
to the technical description as stated in the certificates of title covering the two properties.
On the alleged nullity of the deed of sale, we hold that petitioners failed to submit sufficient proof to
show that Roque executed the deed of sale under the undue influence of Belardo or that the deed of
sale was simulated or without consideration.1avvphi1
A notarized document carries the evidentiary weight conferred upon it with respect to its due execution,
and documents acknowledged before a notary public have in their favor the presumption of regularity. It
must be sustained in full force and effect so long as he who impugns it does not present strong,
complete, and conclusive proof of its falsity or nullity on account of some flaws or defects provided by
law.23
Petitioners allege that Belardo unduly influenced Roque, who was already physically weak and senile at
that time, into executing the deed of sale. Belardo allegedly took advantage of the fact that Roque was
living in her house and was dependent on her for support.
There is undue influence when a person takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of choice.24 One who alleges any defect, or the
lack of consent to a contract by reason of fraud or undue influence, must establish by full, clear and
convincing evidence, such specific acts that vitiated the partys consent; otherwise, the latters
presumed consent to the contract prevails.25 For undue influence to be present, the influence exerted
must have so overpowered or subjugated the mind of a contracting party as to destroy his free agency,
making him express the will of another rather than his own.26
Petitioners adduced no proof that Roque had lost control of his mental faculties at the time of the sale.
Undue influence is not to be inferred from age, sickness, or debility of body, if sufficient intelligence
remains.27 The evidence presented pertained more to Roques physical condition rather than his
mental condition. On the contrary, Atty. Sanicas, the notary public, attested that Roque was very
healthy and mentally sound and sharp at the time of the execution of the deed of sale. Atty. Sanicas
said that Roque also told him that he was a Law graduate.28
Neither was the contract simulated. The late registration of the Deed of Sale and Roques execution of
the second deed of sale in favor of Dema-ala did not mean that the contract was simulated. We are
convinced with the explanation given by respondents witnesses that the deed of sale was not
immediately registered because Belardo did not have the money to pay for the fees. This explanation
is, in fact, plausible considering that Belardo could barely support herself and her brother, Roque. As for
the second deed of sale, Dema-ala, herself, attested before the trial court that she let Roque sign the
second deed of sale because the title to the properties were still in his name.
Finally, petitioners argue that the Deed of Sale was not supported by a consideration since no receipt
was shown, and it is incredulous that Roque, who was already weak, would travel to Bacolod City just
to be able to execute the Deed of Sale.
The Deed of Sale which states "receipt of which in full I hereby acknowledge to my entire satisfaction"
is an acknowledgment receipt in itself. Moreover, the presumption that a contract has sufficient
consideration cannot be overthrown by a mere assertion that it has no consideration.29
Heirs are bound by contracts entered into by their predecessors-in-interest.30 As heirs of Roque,
petitioners are bound by the contract of sale that Roque executed in favor of Belardo. Having been sold
already to Belardo, the two properties no longer formed part of Roques estate which petitioners could
have inherited. The deed of extrajudicial settlement that petitioners executed over Lot No. 4 is,
therefore, void, since the property subject thereof did not become part of Roques estate.
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated
September 13, 2002 and Resolution dated September 24, 2003 are AFFIRMED.
SO ORDERED.
G.R. No. 118509 December 1, 1995
LIMKETKAI SONS MILLING, INC., petitioner,
vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK STORE,
respondents.
MELO, J.:
The issue in the petition before us is whether or not there was a perfected contract between petitioner
Limketkai Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering the sale of a
parcel of land, approximately 3.3 hectares in area, and located in Barrio Bagong Ilog, Pasig City, Metro
Manila.
Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig ruled
that there was a perfected contract of sale between petitioner and BPI. It stated that there was mutual
consent between the parties; the subject matter is definite; and the consideration was determined. It
concluded that all the elements of a consensual contract are attendant. It ordered the cancellation of a
sale effected by BPI to respondent National Book Store (NBS) while the case was pending and the
nullification of a title issued in favor of said respondent NBS.
Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected
because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code.
The decision of the trial court was reversed and the complaint dismissed.
Hence, the instant petition.
Shorn of the interpretations given to the acts of those who participated in the disputed sale, the findings
of facts of the trial court and the Court of Appeals narrate basically the same events and occurrences.
The records show that on May 14, 1976, Philippine Remnants Co., Inc. constituted BPI as its trustee to
manage, administer, and sell its real estate property. One such piece of property placed under trust was
the disputed lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig, Metro Manila covered by
Transfer Certificate of Title No. 493122.
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to
sell the lot for P1,000.00 per square meter. This arrangement was concurred in by the owners of the
Philippine Remnants.
Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8,
1988, petitioner's officials and Revilla were given permission by Rolando V. Aromin, BPI Assistant Vice-
President, to enter and view the property they were buying.
On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On July
11, 1988, petitioner's officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They
were entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. Petitioner asked
that the price of P1,000.00 per square meter be reduced to P900.00 while Albano stated the price to be
P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00 per square meter to be
paid in cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it may
be mentioned at this juncture that there is no dispute over petitioner's being the first comer and the
buyer to be first served.
Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso Lim
asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to
ask for payment on terms because in previous transactions, the same had been allowed. It was the
understanding, however, that should the term payment be disapproved, then the price shall be paid in
cash.
It was Albano who dictated the terms under which the installment payment may be approved, and
acting thereon, Alfonso Lim, on the same date, July 11, 1988, wrote BPI through Merlin Albano
embodying the payment initially of 10% and the remaining 90% within a period of 90 days.
Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim
went to BPI on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The payment
was refused because Albano stated that the authority to sell that particular piece of property in Pasig
had been withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona
who also refused to receive payment.
An action for specific performance with damages was thereupon filed on August 25, 1988 by petitioner
against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under
litigation to NBS on July 14, 1989. The complaint was thus amended to include NBS.
On June 10, 1991, the trial court rendered judgment in the case as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants Bank of the
Philippine Islands and National Book Store, Inc.:
1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the name of the Bank of
the Philippine Islands, situated in Barrio Bagong Ilog, Pasig, Metro Manila, in favor of National Book
Store, Inc., null and void;
2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer Certificate of Title
which may have been issued in favor of National Book Store, Inc. by virtue of the aforementioned Deed
of Sale dated July 14, 1989;
3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of P33,056,000.00, to execute a
Deed of Sale in favor of plaintiff of the aforementioned property at the price of P1,000.00 per square
meter; in default thereof, the Clerk of this Court is directed to execute the said deed;
4. Ordering the Register of Deeds of Pasig, upon registration of the said deed, whether executed by
defendant BPI or the Clerk of Court and payment of the corresponding fees and charges, to cancel said
T.C.T. No. 493122 and to issue, in lieu thereof, another transfer certificate of title in the name of
plaintiff;
5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and severally, to the plaintiff the
sums of P10,000,000.00 as actual and consequential damages and P150,000.00 as attorney's fees and
litigation expenses, both with interest at 12% per annum from date hereof;
6. On the cross-claim of defendant bank against National Book Store, ordering the latter to indemnify
the former of whatever amounts BPI shall have paid to the plaintiff by reason hereof; and
7. Dismissing the counterclaims of the defendants against the plaintiff and National Book Store's cross-
claim against defendant bank.
Costs against defendants.
(pp. 44-45, Rollo.)
As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and
Mabutas, JJ.), on August 12, 1994, reversed the trial court's decision and dismissed petitioner's
complaint for specific performance and damages.
The issues raised by the parties revolve around the following four questions:
(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the
subject matter of the contract and the cause of the obligation?
(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned
contract?
(3) Is there competent and admissible evidence to support the alleged meeting of the minds?
(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?
There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine
Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square meter;
(b) that Philippine Remnants confirmed the authority to sell of Revilla and the price at which he may sell
the lot; (c) that petitioner and Revilla agreed on the former buying the property; (d) that BPI Assistant
Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the property; and (e) that
BPI was formally informed about the broker having procured a buyer.
The controversy revolves around the interpretation or the significance of the happenings or events at
this point.
Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top officials
and broker Revilla finalized the details with BPI Vice-Presidents Merlin Albano and Rolando V. Aromin
at the BPI offices.
Respondents, however, contend that what transpired on this date were part of continuing negotiations
to buy the land and not the perfection of the sale. The arguments of respondents center on two
propositions (1) Vice-Presidents Aromin and Albano had no authority to bind BPI on this particular
transaction and (2) the subsequent attempts of petitioner to pay under terms instead of full payment in
cash constitutes a counter-offer which negates the existence of a perfected contract.
The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record.
At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed
lot. Exhibit B dated June 23, 1988 states, "this will serve as your authority to sell on an as is, where is
basis the property located at Pasig Blvd., Bagong Ilog . . . ." We agree with Revilla's testimony that the
authority given to him was to sell and not merely to look for a buyer, as contended by respondents.
Revilla testified that at the time he perfected the agreement to sell the litigated property, he was acting
for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up the sale of
the land, Revilla saw it fit to bring BPI officials into the transaction. If BPI could give the authority to sell
to a licensed broker, we see no reason to doubt the authority to sell of the two BPI Vice-Presidents
whose precise job in the Bank was to manage and administer real estate property.
Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made up of
top bank officials. It appears from the record that this trust committee meets rather infrequently and it
does not have to pass on regular transactions.
Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI
Real Property Management Unit. He had been in the Real Estate Division since 1985 and was the head
supervising officer of real estate matters. Aromin had been with the BPI Trust Department since 1968
and had been involved in the handling of properties of beneficial owners since 1975 (tsn., December 3,
1990, p. 5).
Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while
purporting to inform Aromin of his poor performance, is an admission of BPI that Aromin was in charge
of Torrens titles, lease contracts, problems of tenants, insurance policies, installment receivables,
management fees, quitclaims, and other matters involving real estate transactions. His immediate
superior, Vice-President Merlin Albano had been with the Real Estate Division for only one week but he
was present and joined in the discussions with petitioner.
There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident.
Revilla brought the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a
perfectly natural manner on the transaction before him with not the slightest indication that he was
acting ultra vires. This shows that BPI held Aromin out to the public as the officer routinely handling real
estate transactions and, as Trust Officer, entering into contracts to sell trust properties.
Respondents state and the record shows that the authority to buy and sell this particular trust property
was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have any authority to
act as alleged, there was no need to withdraw authority which he never possessed.
Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank vs.
Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co. (52
ND 752, 204 NW 818, 40 ALR 1021), to wit:
Accordingly a banking corporation is liable to innocent third persons where the representation is made
in the course of its business by an agent acting within the general scope of his authority even though, in
the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon
his principal or some other person for his own ultimate benefit.
(at pp. 652-653.)
In the present case, the position and title of Aromin alone, not to mention the testimony and
documentary evidence about his work, leave no doubt that he had full authority to act for BPI in the
questioned transaction. There is no allegation of fraud, nor is there the least indication that Aromin was
acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared that a top official of
the bank was personally interested in the sale of the Pasig property and did not like Aromin's testimony.
Aromin was charged with poor performance but his dismissal was only sometime after he testified in
court. More than two long years after the disputed transaction, he was still Assistant Vice-President of
BPI.
The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine
Remnants Co. regarding the sale of the firm's property was addressed to Aromin. The P1,000.00 figure
on the first page of broker Revilla's authority to sell was changed to P1,100.00 by Aromin. The price
was later brought down again to P1,000.00, also by Aromin. The permission given to petitioner to view
the lot was signed by Aromin and honored by the BPI guards. The letter dated July 9, 1988 from broker
Revilla informing BPI that he had a buyer was addressed to Aromin. The conference on July 11, 1988
when the contract was perfected was with Aromin and Vice-President Albano. Albano and Aromin were
the ones who assured petitioner Limketkai's officers that term payment was possible. It was Aromin
who called up Miguel Bicharra of Philippine Remnants to state that the BPI rejected payment on terms
and it was to Aromin that Philippine Remnants gave the go signal to proceed with the cash sale.
Everything in the record points to the full authority of Aromin to bind the bank, except for the self-
serving memoranda or letters later produced by BPI that Aromin was an inefficient and undesirable
officer and who, in fact, was dismissed after he testified in this case. But, of course, Aromin's alleged
inefficiency is not proof that he was not fully clothed with authority to bind BPI.
Respondents' second contention is that there was no perfected contract because petitioner's request to
pay on terms constituted a counter-offer and that negotiations were still in progress at that point.
Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among his
statements is one to the effect that
. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano counter-offered to
sell the property at P1,100.00 per square meter but after the usual haggling, we finally agreed to sell
the property at the price of P1,000.00 per square meter . . .
(tsn, 12-3-90, p. 17; Emphasis supplied.)
Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of
P1,000.00 per square meter, Aromin answered:
Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price is concerned, sir.
(ibid, p. 17.)
The requirements in the payment of the purchase price on terms instead of cash were suggested by
BPI Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the
possibility of paying on terms was referred to the Trust Committee but with the mutual agreement that
"if the proposed payment on terms will not be approved by our Trust Committee, Limketkai should pay
in cash . . . the amount was no longer subject to the approval or disapproval of the Committee, it is only
on the terms." (ibid, p. 19). This is incontrovertibly established in the following testimony of Aromin:
A. After you were able to agree on the price of P1,000.00/sq. m., since the letter or authority says the
payment must be in cash basis, what transpired later on?
B. After we have agreed on the price, the Lim brothers inquired on how to go about submitting the
covering proposal if they will be allowed to pay on terms. They requested us to give them a guide on
how to prepare the corresponding letter of proposal. I recall that, upon the request of Mr. Albino
Limketkai, we dictated a guide on how to word a written firm offer that was to be submitted by Mr. Lim
to the bank setting out the terms of payment but with the mutual agreement that if his proposed
payment on terms will not be approved by our trust committee, Limketkai should pay the price in cash.
Q And did buyer Limketkai agree to pay in cash in case the offer of terms will be cash (disapproved).
A Yes, sir.
Q At the start, did they show their willingness to pay in cash?
A Yes, sir.
Q You said that the agreement on terms was to be submitted to the trust committee for approval, are
you telling the Court that what was to be approved by the trust committee was the provision on the
payment on terms?
A Yes, sir.
Q So the amount was no longer subject to the approval or disapproval of the committee, it is only on the
terms?
A Yes, sir.
(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)
The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But
because petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent to
higher officials. Immediately upon learning that payment on terms was frozen and/or denied, Limketkai
exercised his right within the period given to him and tendered payment in full. The BPI rejected the
payment.
In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of Appeals (238
SCRA 602 [1994]) to bolster its case. Contrarywise, it would seem that the legal principles found in said
case strengthen and support petitioner's submission that the contract was perfected upon the meeting
of the minds of the parties.
The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to
sell the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to broker
Revilla to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property and finally
(d) the negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and
Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at
P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and
the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the
cause thereof.
The phases that a contract goes through may be summarized as follows:
a. preparation, conception or generation, which is the period of negotiation and bargaining, ending at
the moment of agreement of the parties;
b. perfection or birth of the contract, which is the moment when the parties come to agree on the terms
of the contract; and
c. consummation or death, which is the fulfillment or performance of the terms agreed upon in the
contract (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).
But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:
. . . A contract undergoes various stages that include its negotiation or preparation, its perfection and,
finally, its consummation. Negotiation covers the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is concluded (perfected). The perfection
of the contract takes place upon the concurrence of the essential elements thereof. A contract which is
consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of
offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to
the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly
referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by
law, such as in a donation of real property, is essential in order to make the act valid, the prescribed
form being thereby an essential element thereof. The stage of consummation begins when the parties
perform their respective undertakings under the contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation. In sales, particularly, to which the topic for discussion about the case at bench
belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain,
to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter
agrees.
(238 SCRA 602; 611 [1994].)
In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecendents
similar to this case, the Court, through Justice Aquino (later to be Chief Justice), quoting authorities,
upheld the perfection of the contract of sale thusly:
The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts. (Art. 1475, Ibid.)
xxx xxx xxx
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer (Art. 1319, Civil Code). "An acceptance may be express or
implied." (Art. 1320, Civil Code).
xxx xxx xxx
It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet
be a binding acceptance. "So long as it is clear that the meaning of the acceptance is positively and
unequivocally to accept the offer, whether such request is granted or not, a contract is formed." (Stuart
vs. Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).
xxx xxx xxx
. . . the vendor's change in a phrase of the offer to purchase, which change does not essentially change
the terms of the offer, does not amount to a rejection of the offer and the tender or a counter-offer.
(Stuart vs. Franklin Life Ins. Co., supra.)
(at pp. 362-363; 365-366.)
In the case at bench, the allegation of NBS that there was no concurrence of the offer and acceptance
upon the cause of the contract is belied by the testimony of the very BPI official with whom the contract
was perfected. Aromin and Albano concluded the sale for BPI. The fact that the deed of sale still had to
be signed and notarized does not mean that no contract had already been perfected. A sale of land is
valid regardless of the form it may have been entered into (Claudel vs. Court of Appeals, 199 SCRA
113, 119 [1991]). The requisite form under Article 1458 of the Civil Code is merely for greater efficacy
or convenience and the failure to comply therewith does not affect the validity and binding effect of the
act between the parties (Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, p.
552). If the law requires a document or other special form, as in the sale of real property, the
contracting parties may compel each other to observe that form, once the contract has been perfected.
Their right may be exercised simultaneously with action upon the contract (Article 1359, Civil Code).
Regarding the admissibility and competence of the evidence adduced by petitioner, respondent Court
of Appeals ruled that because the sale involved real property, the statute of frauds is applicable.
In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was held that contracts
infringing the Statute of Frauds are ratified when the defense fails to object, or asks questions on cross-
examination. The succinct words of Justice Araullo still ring in judicial cadence:
As no timely objection or protest was made to the admission of the testimony of the plaintiff with respect
to the contract; and as the motion to strike out said evidence came too late; and, furthermore, as the
defendants themselves, by the cross-questions put by their counsel to the witnesses in respect to said
contract, tacitly waived their right to have it stricken out, that evidence, therefore, cannot be considered
either inadmissible or illegal, and court, far from having erred in taking it into consideration and basing
his judgment thereon, notwithstanding the fact that it was ordered to be stricken out during the trial,
merely corrected the error he committed in ordering it to be so stricken out and complied with the rules
of procedure hereinbefore cited.
(at p. 748.)
In the instant case, counsel for respondents cross-examined petitioner's witnesses at length on the
contract itself, the purchase price, the tender of cash payment, the authority of Aromin and Revilla, and
other details of the litigated contract. Under the Abrenica rule (reiterated in a number of cases, among
them Talosig vs. Vda. de Nieba 43 SCRA 472 [1972]), even assuming that parol evidence was initially
inadmissible, the same became competent and admissible because of the cross-examination, which
elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is
deemed a waiver of the defense of the Statute of Frauds (Vitug, Compendium of Civil Law and
Jurisprudence, 1993 Revised Edition, supra, p. 563).
The reason for the rule is that as pointed out in Abrenica "if the answers of those witnesses were
stricken out, the cross-examination could have no object whatsoever, and if the questions were put to
the witnesses and answered by them, they could only be taken into account by connecting them with
the answers given by those witnesses on direct examination" (pp. 747-748).
Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts
pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the
contract. The memorandum may be found in several writings, not necessarily in one document. The
memorandum or memoranda is/are written evidence that such a contract was entered into.
We cite the findings of the trial court on this matter:
In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a written contract of
the sale is not necessary so long as the agreement to sell real property is evidenced by a written note
or memorandum, embodying the essentials of the contract and signed by the party charged or his
agent. Thus, it has been held:
The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not require
that the contract itself be written. The plain test of Article 1403, Paragraph (2) is clear that a written note
or memorandum, embodying the essentials of the contract and signed by the party charged, or his
agent suffices to make the verbal agreement enforceable, taking it out of the operation of the statute.
(Emphasis supplied)
xxx xxx xxx
In the case at bar, the complaint in its paragraph 3 pleads that the deal had been closed by letter and
telegram (Record on Appeal, p. 2), and the letter referred to was evidently the one copy of which was
appended as Exhibit A to plaintiffs opposition to the motion to dismiss. The letter, transcribed above in
part, together with the one marked as Appendix B, constitute an adequate memorandum of the
transaction. They are signed by the defendant-appellant; refer to the property sold as a Lot in Puerto
Princesa, Palawan, covered by T.C.T. No. 62, give its area as 1,825 square meters and the purchase
price of four (P4.00) pesos per square meter payable in cash. We have in them, therefore, all the
essential terms of the contract and they satisfy the requirements of the Statute of Frauds.
(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).
While there is no written contract of sale of the Pasig property executed by BPI in favor of plaintiff, there
are abundant notes and memoranda extant in the records of this case evidencing the elements of a
perfected contract. There is Exhibit P, the letter of Kenneth Richard Awad addressed to Roland Aromin,
authorizing the sale of the subject property at the price of P1,000.00 per square meter giving 2%
commission to the broker and instructing that the sale be on cash basis. Concomitantly, on the basis of
the instruction of Mr. Awad, (Exh. P), an authority to sell, (Exh. B) was issued by BPI to Pedro Revilla,
Jr., representing Assetrade Co., authorizing the latter to sell the property at the initial quoted price of
P1,000.00 per square meter which was altered on an unaccepted offer by Technoland. After the letter
authority was issued to Mr. Revilla, a letter authority was signed by Mr. Aromin allowing the buyer to
enter the premises of the property to inspect the same (Exh. C). On July 9, 1988, Pedro Revilla, Jr.,
acting as agent of BPI, wrote a letter to BPI informing it that he had procured a buyer in the name of
Limketkai Sons Milling, Inc. with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila,
represented by its Exec. Vice-President, Alfonso Lim (Exh. D). On July 11, 1988, the plaintiff, through
Alfonso Lim, wrote a letter to the bank, through Merlin Albano, confirming their transaction regarding the
purchase of the subject property (Exh. E). On July 18, 1988, the plaintiff tendered upon the officials of
the bank a check for P33,056,000.00 covered by Check No. CA510883, dated July 18, 1988. On July 1,
1988, Alfonso Zamora instructed Mr. Aromin in a letter to resubmit new offers only if there is no
transaction closed with Assetrade Co. (Exh. S). Combining all these notes and memoranda, the Court
is convinced of the existence of perfected contract of sale. Aptly, the Supreme Court, citing American
cases with approval, held:
No particular form of language or instrument is necessary to constitute a memorandum or note in
writing under the statute of frauds; any document or writing, formal or informal, written either for the
purpose of furnishing evidence of the contract or for another purpose, which satisfies all the
requirements of the statute as to contents and signature, as discussed respectively infra secs. 178-200,
and infra secs. 201-205, is a sufficient memorandum or note. A memorandum may be written as well
with lead pencil as with pen and ink. It may also be filled in on a printed form. (37 C.J.S., 653-654).
The note or memorandum required by the statute of frauds need not be contained in a single document,
nor, when contained in two or more papers, need each paper be sufficient as to contents and signature
to satisfy the statute. Two or more writings properly connected may be considered together, matters
missing or uncertain in one may be supplied or rendered certain by another, and their sufficiency will
depend on whether, taken together, they meet the requirements of the statute as to contents and the
requirements of the statutes as to signature, as considered respectively infra secs. 179-200 and secs.
201-215.
(pp. 460-463, Original RTC Record).
The credibility of witnesses is also decisive in this case. The trial court directly observed the demeanor
and manner of testifying of the witnesses while the Court of Appeals relied merely on the transcript of
stenographic notes.
In this regard, the court of origin had this to say:
Apart from weighing the merits of the evidence of the parties, the Court had occasion to observe the
demeanor of the witnesses they presented. This is one important factor that inclined the Court to
believe in the version given by the plaintiff because its witnesses, including hostile witness Roland V.
Aromin, an assistant vice-president of the bank, were straightforward, candid and unhesitating in giving
their respective testimonies. Upon the other hand, the witnesses of BPI were evasive, less than candid
and hesitant in giving their answers to cross examination questions. Moreover, the witnesses for BPI
and NBS contradicted each other. Fernando Sison III insisted that the authority to sell issued to Mr.
Revilla was merely an evidence by which a broker may convince a prospective buyer that he had
authority to offer the property mentioned therein for sale and did not bind the bank. On the contrary,
Alfonso Zamora, a Senior Vice-President of the bank, admitted that the authority to sell issued to Mr.
Pedro Revilla, Jr. was valid, effective and binding upon the bank being signed by two class "A" NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply
signatories and that the bank cannot back out from its commitment in the authority to sell to Mr. Revilla. cites the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 [1912]) and argues that the
enumeration there is exclusive. The decision in said case plainly states "the following are some of the
While Alfredo Ramos of NBS insisted that he did not know personally and was not acquainted with circumstances attending sales which have been denominated by courts (as) badges of fraud." There
Edmundo Barcelon, the latter categorically admitted that Alfredo Ramos was his friend and that they are innumerable situations where fraud is manifested. One enumeration in a 1912 decision cannot
have even discussed in one of the luncheon meetings the matter of the sale of the Pasig property to possibly cover all indications of fraud from that time up to the present and into the future.
NBS. George Feliciano emphatically said that he was not a consultant of Mr. Ramos nor was he
connected with him in any manner, but his calling card states that he was a consultant to the chairman The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the
of the Pacific Rim Export and Holdings Corp. whose chairman is Alfredo Ramos. This deliberate act of amended complaint to implead NBS, sheriffs fees, registration fees, plane fare and hotel expenses of
Mr. Feliciano of concealing his being a consultant to Mr. Alfredo Ramos evidently was done by him to Cebu-based counsel. Petitioner also claimed, and the trial court awarded, damages for the profits and
avoid possible implication that he committed some underhanded maneuvers in manipulating to have opportunity losses caused to petitioner's business in the amount of P10,000,000.00.
the subject property sold to NBS, instead of being sold to the plaintiff.
We rule that the profits and the use of the land which were denied to petitioner because of the non-
(pp. 454-455, Original RTC Record.) compliance or interference with a solemn obligation by respondents is somehow made up by the
appreciation in land values in the meantime.
On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and
the trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner
Appeals (196 SCRA 107 [1991]) bears stressing: Limketkai; that the BPI officials who transacted with petitioner had full authority to bind the bank; that
the evidence supporting the sale is competent and admissible; and that the sale of the lot to NBS during
It is a settled principle of civil procedure that the conclusions of the trial court regarding the credibility of the trial of the case was characterized by bad faith.
witnesses are entitled to great respect from the appellate courts because the trial court had an
opportunity to observe the demeanor of witnesses while giving testimony which may indicate their WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET
candor or lack thereof. While the Supreme Court ordinarily does not rule on the issue of credibility of ASIDE. The June 10, 1991 judgment of Branch 151 of the Regional Trial Court of The National Capital
witnesses, that being a question of fact not properly raised in a petition under Rule 45, the Court has Judicial Region stationed in Pasig, Metro Manila is REINSTATED except for the award of Ten Million
undertaken to do so in exceptional situations where, for instance, as here, the trial court and the Court Pesos (P10,000,000.00) damages which is hereby DELETED.
of Appeals arrived at divergent conclusions on questions of fact and the credibility of witnesses.
SO ORDERED.
(at p. 110.)
On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows that
it is not. It acted in bad faith.
Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It was
the willingness and design of NBS to buy property already sold to another party which led BPI to
dishonor the contract with Limketkai.
Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner
from paying the agreed price and getting possession of the property:
1. The sale was supposed to be done through an authorized broker, but top officials of BPI personally
and directly took over this particular sale when a close friend became interested.
2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo Ramos, was
his friend; that they had lunch meetings before this incident and discussed NBS's purchase of the lot.
Barcelon's father was a business associate of Ramos.
3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop the
case and give up the lot. Feliciano went to petitioner's office and haggled with Alfonso Lim but failed to
convince him inspite of various and increasing offers.
4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse
marked by easy portability. The warehouse is bolted to its foundations and can easily be dismantled.
It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly negates
any allegation of good faith on the part of the buyer. Instead of the vendee insisting that the vendor
guarantee its title to the land and recognize the right of the vendee to proceed against the vendor if the
title to the land turns out to be defective as when the land belongs to another person, the reverse is
found in the deed of sale between BPI and NBS. Any losses which NBS may incur in the event the title
turns out to be vested in another person are to be borne by NBS alone. BPI is expressly freed under the
contract from any recourse of NBS against it should BPI's title be found defective.
G.R. No. 171702 February 12, 2009
MANILA MINING CORPORATION, Petitioner,
vs.
MIGUEL TAN, doing business under the name and style of MANILA MANDARIN MARKETING,
Respondent.
DECISION
QUISUMBING, J.:
Assailed in this petition for review on certiorari are the Decision1 dated December 20, 2005 and the
Resolution2 dated February 24, 2006 of the Court of Appeals in CA-G.R. CV No. 84385. The Court of
Appeals had affirmed the Decision3 dated October 27, 2004 of the Regional Trial Court (RTC), Branch
55, Manila, in Civil Case No. 01-101786.
The facts of the case are as follows:
Miguel Tan, doing business under the name and style of Manila Mandarin Marketing, was engaged in
the business of selling electrical materials.
From August 19 to November 26, 1997, Manila Mining Corporation (MMC) ordered and received
various electrical materials from Tan valued at P2,347,880. MMC agreed to pay the purchase price
within 30 days from delivery, or be charged interest of 18% per annum, and in case of suit to collect the
same, to pay attorneys fees equal to 25% of the claim.4
MMC made partial payments in the amount of P464,636. But despite repeated demands, it failed to
give the remaining balance of P1,883,244, which was covered by nine invoices.5
On September 3, 2001, Tan filed a collection suit against MMC at the Manila RTC.6
After Tan completed presenting evidence, MMC filed a Demurrer to Evidence.7 On December 18,
2003, the RTC issued an Order, denying the demurrer and directing MMC to present evidence.8
MMC offered as sole witness Rainier Ibarrola, its accountant from year 2000 to 2002. Ibarrola
confirmed that it was standard office procedure for a supplier to present the original sales invoice and
purchase order when claiming to be paid. He testified that the absence of stamp marks on the invoices
and purchase orders negated receipt of said documents by MMCs representatives.9
On rebuttal, Tan presented Wally de los Santos, his sales representative in charge of MMCs account.
De los Santos testified that he delivered the originals of the invoices and purchase orders to MMCs
accounting department. As proof, he showed three customers acknowledgment receipts bearing the
notation:
I/We signed below to signify my/our receipt of your statement of account with you for the period and the
amount stated below, together with the corresponding original copies of the invoices, purchase order
and requisition slip attached for purpose of verification, bearing acknowledgment of my/our receipt of
goods.10
On October 27, 2004, the RTC ruled for Tan. Its ruling stated as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff, and against
the defendant, ordering the defendant to pay the principal amount of ONE MILLION EIGHT HUNDRED
EIGHTY-THREE THOUSAND TWO HUNDRED FORTY-FOUR PESOS (P1,883,244.00), with interest
thereon at the rate of eighteen [percent] (18%) per annum starting after thirty (30) days from each date
of delivery of the merchandise sold until finality hereof, and thereafter, at the rate of twelve percent
(12%) per annum, and the further sum equal to [twenty five percent] (25%) of the principal amount as
liquidated damages.
SO ORDERED.11
On November 30, 2004, MMC moved for reconsideration, but its motion was denied by the RTC in an
Order dated January 5, 2005.
On appeal, the Court of Appeals affirmed the RTCs decision. The decretal portion of the Court of
Appeals Decision dated December 20, 2005 reads:
WHEREFORE, premises considered, the appeal is DENIED. The Decision of the RTC dated October
27, 2004 is hereby AFFIRMED.
SO ORDERED.12
Hence, this petition, which raises as sole issue:
WHETHER OR NOT PETITIONERS OBLIGATION TO PAY HAD ALREADY LEGALLY ACCRUED
CONSIDERING THAT RESPONDENT HAS NOT FULLY COMPLIED WITH ALL THE
PREREQUISITES FOR PAYMENT IMPOSED UNDER PETITIONERS PURCHASE ORDERS, THERE
BEING NO PROOF THAT RESPONDENT HAD ACTUALLY DONE SO.13
Simply stated, we are now called upon to address the question of whether MMC should pay for the
electrical materials despite its allegation that Tan failed to comply with certain requisites for payment.
Petitioner contends that respondents claim for payment was premature inasmuch as the original
invoices and purchase orders were not sent to its accounting department. Consequently, Tans claims
were not verified and processed. MMC believes that mere delivery of the goods did not automatically
give rise to its obligation to pay. It relies on Article 1545 of the Civil Code to justify its refusal to pay:
ART. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is
not performed, such party may refuse to proceed with the contract or he may waive performance of the
condition.
Petitioner also assails the probative value of the documentary evidence presented during trial. MMC
claims that the unauthenticated photocopies of invoices and purchase orders did not satisfy the Best
Evidence Rule,14 which requires the production of the original writing in court. It adds that by Tans
failure to yield the original documents, he was presumed to have suppressed evidence under Section
3(e),15 Rule 131 of the Rules of Court.
In its Memorandum dated February 20, 2007,16 petitioner refutes any liability altogether, denying that it
consented to the sale. MMC maintains that the unmarked documents indicated a mere offer to sell,
which it did not act upon. MMC also charges Tan with laches for filing his claim nearly four years after
the transaction.
In his Memorandum dated January 30, 2007,17 respondent Tan counters that the petition presents a
factual issue which has already been settled by the Court of Appeals. He stresses that findings of fact
by the appellate court are conclusive on the Supreme Court and only questions of law may be
entertained by it.
After serious consideration, we are in agreement that the petition lacks merit.
Petitioner poses a question of fact which is beyond this Courts power to review. This Courts
jurisdiction is generally limited to reviewing errors of law that may have been committed by the Court of
Appeals. We reiterate the oft-repeated and fully established rule that findings of fact of the Court of
Appeals, especially when they are in agreement with those of the trial court, are accorded not only
respect but even finality, and are binding on this Court. Barring a showing that the findings complained
of were devoid of support, they must stand. For this Court is not expected or required to examine or
refute anew the oral and documentary evidence submitted by the parties. The trial court, having heard
the witnesses and observed their demeanor and manner of testifying, is admittedly in a better position
to assess their credibility.18 We cannot weigh again the merits of their testimonies.
Having thoroughly reviewed the records of this case, we find no persuasive much less compelling
reason to overturn the findings and conclusions of the trial court and appellate court. We hereby sustain
their findings and conclusions.
Worth stressing, Article 1475 of the Civil Code provides the manner by which a contract of sale is
perfected:
ART. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.1avvphi1
From that moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts.
In this case, the purchase orders constituted accepted offers when Tan supplied the electrical materials
to MMC.19 Hence, petitioner cannot evade its obligation to pay by claiming lack of consent to the
perfected contracts of sale. The invoices furnished the details of the transactions.
As regards respondents failure to present the original documents, suffice it to say that the best
evidence rule applies only if the contents of the writing are directly in issue. Where the existence of the
writing or its general purport is all that is in issue, secondary evidence may be introduced in proof.20
MMC did not deny the contents of the invoices and purchase orders. Its lone contention was that Tan
did not submit the original copies to facilitate payment. But we are in agreement that photocopies of the
documents were admissible in evidence to prove the contract of sale between the parties.
Neither is there merit to petitioners contention that respondent was guilty of delay in filing the collection
case. A careful examination of the records shows that Tan brought suit against MMC less than a year
after the latter stopped making partial payments. Tan is, therefore, not guilty of laches.
Laches is the neglect to assert a right or claim which, taken together with lapse of time and other
circumstances causing prejudice to adverse party, operates as bar in a court of equity.21 Here, Tan
had no reason to go to court while MMC was paying its obligation, even if partially, under the contracts
of sale.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated December 20, 2005 and
Resolution dated February 24, 2006 of the Court of Appeals in CA-G.R. CV No. 84385 are AFFIRMED.
SO ORDERED.
G.R. No. 156539 September 5, 2007
DOMINGO A. DIZON, petitioner,
vs.
ELPIDIO R. DIZON, respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 dated October 18, 2002 and Resolution2 dated
January 7, 2003 rendered by the Court of Appeals in CA-G.R. SP No. 45492, entitled "Elpidio R. Dizon,
petitioner, v. The Honorable Presiding Judge, Regional Trial Court, Manila, Branch 41, Deputy Sheriff
Cesar Q. Cabildo and Domingo A. Dizon, respondents."
Domingo A. Dizon, petitioner, purchased from his nephew, Elpidio R. Dizon (herein respondent), a
house and lot located on Limay St., Tondo, Manila. However, respondent failed to deliver the house
and lot to petitioner. It appears that the co-owner of the lot, respondents brother Ricardo, did not give
said respondent a written authority to sell his share. Consequently, petitioner filed with the Regional
Trial Court (RTC), Branch 41, Manila a complaint for specific performance and sum of money with
damages against respondent, docketed as Civil Case No. 90-51838.
On March 20, 1992, the trial court rendered a Decision rescinding the contract of sale between the
parties, thus:
PREMISES CONSIDERED, judgment is hereby rendered:
1) declaring the contract of sale entered into by and between plaintiff and defendant over that undivided
portion of Lot 27-B-3 in the name of Ricardo Dizon and the building constructed thereon rescinded;
2) ordering defendant to pay plaintiff as follows:
a) a sum of P207,000.00 with interest thereon at the legal rate from January 29, 1990 until the same is
fully paid;
b) the sum of P350,000.00 with interest thereon at the rate of 3% a month from January 29, 1990 until
the same is fully paid; and
c) the sum of P50,000.00 as and by way of attorneys fees and expenses of litigation.3
On January 13, 1997, the trial court issued a writ of execution implemented by sheriff Cesar Cabildo.
He scheduled the auction sale of respondents properties for the satisfaction of the above judgment on
April 3, 1997 at 10:00 a.m.
Petitioners attorney-in-fact as well as respondent and his counsel participated in the sale. Petitioner
emerged as the highest bidder, having offered P180,000.00 for the two (2) parcels of land owned by
respondent which were attached by the sheriff.
The proceedings at the auction sale were duly recorded in the Minutes of Sheriffs Sale4 signed by the
parties and their counsels.
In the afternoon of the same date, the sheriff went to the house of respondent and showed him the
"Supplemental Minutes on Sheriffs Sale" specifying that petitioners counsel arrived at 10:45 a.m. (after
the auction sale at 10:25 a.m.) and offered a new bid of P1,690,074.41 covering the same properties in
lieu of the earlier bid of P180,000.00.
Respondent refused to sign the supplemental sale contending that it will be difficult for him to redeem
the property. Besides, the auction sale had already been perfected and, therefore, the subsequent sale
is "a new or second sale." Consequently, he filed a motion to quash the "Supplemental Minutes on
Sheriffs Sale" alleging inter alia that the supplemental sale is void because it was prepared at 10:25
a.m. after the auction sale at 10:00 a.m.
In an Order dated May 5, 1997, the trial court denied respondents motion to quash "it appearing that
the subject supplemental sale redounds to the benefit of movant-defendant as it obviates the execution
and/or garnishment of any other property, income, or deposits of movant-defendant."5
Respondent filed a motion for reconsideration, but it was also denied by the trial court in its Order dated
August 12, 1997. He then filed a petition for certiorari and prohibition with the Court of Appeals alleging
that the RTC judge committed grave abuse of discretion in upholding the validity of the "Supplemental
Minutes on Sheriffs Sale."
In its assailed Decision dated October 18, 2002, the appellate court granted the petition and set aside
the questioned Orders of the RTC dated May 5, 1997 and August 12, 1997, thus:
The record shows that the auction sale begun on time, that is 10:00 AM of April 3, 1997, wherein both
parties as well as their respective counsels appeared and participated in the bid as reflected in the
Minutes of Sheriffs Sale. As certified by the respondent sheriff himself, the said sale was finished at
exactly 10:25 oclock in the morning of said date. The amended bid therefore of private respondents
counsel made at 10:45 AM of even date could not be considered as valid as the same was made after
the perfection of the auction sale.
xxx
Consequently, the respondent judge is considered to have gravely abused his discretion in upholding
the validity of the Supplemental Minutes on Sheriffs Sale.6
Petitioner filed a motion for reconsideration but it was denied by the appellate court in its Resolution
dated January 7, 2003.
Hence, the instant petition.
Petitioner contends that as the highest bidder, he has the option to amend his bid in order to conform to
the amounts awarded in his favor by the trial court.
Respondent maintains that since the auction sale had been perfected, its consideration can no longer
be modified; and that it will be difficult for him to redeem his properties valued at P1,690,074.41 instead
of only P180,000.00.
Article 1476, paragraph 2 of the Civil Code provides:
Article 1476. In the case of a sale by auction:
xxx
(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the
hammer, or in other customary manner. Until such announcement is made, any bidder may retract his
bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced
to be without reserve.
During the public auction conducted on April 3, 1997 which ended at 10:25 a.m., the sheriff declared
petitioner the highest bidder. Considering that the auction sale had already been perfected, a
supplemental sale with higher consideration at the instance of only one party (herein petitioner) could
no longer be validly executed.
We therefore rule that in denying respondents motion to quash the "Supplemental Minutes on Sheriffs
Sale," and declaring the supplemental sale valid, the trial court gravely abused its discretion.
WHEREFORE, we DENY the petition and AFFIRM the challenged Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 45492. Costs against petitioner.
SO ORDERED.
G.R. No. L-23630 August 25, 1925
TIBURCIO LEOQUINCO, plaintiff-appellant,
vs.
THE POSTAL SAVINGS BANK, ET AL., defendants-appellees.
Reyes and Reyes for appellant. Attorney-General Villa-Real for appellees.
JOHNSON, J.:
This action was commenced in the Court of First Instance of the City of Manila on the 15th day of May,
1924, against the Postal Savings Bank (El Banco Postal de Ahorros) and its board of directors
composed of Cipriano Unson, Miguel Unson, Antonio Villa-Real, Jose Topacio, Ben F. Wright, and Jose
Alba.
Plaintiff alleged that he was the highest bidder at a public auction held by the defendants on March 31,
1924, for the sale of a piece or parcel of land belonging to the Bank, situated at Navotas, Province of
Rizal, having offered P27,000 for said property; that in Resolution No. 31 of the board of directors of the
Bank, authorizing the sale of said property at public auction, as well as in the public notice announcing
said sale, the board of directors have expressly reserved to themselves the right to reject any and all
bids; that as such highest bidder at said auction, he wrote a letter to the defendants on May 9, 1924,
advising that he was ready to tender payment for the land as soon as the deed of sale of the same in
his favor is executed and delivered by the defendants; that the defendants refused to execute the deed
in spite of requests made therefor by him; that said refusal caused him damages in the sum of P25,000
more or less. Plaintiff prayed that said defendants be ordered to execute and deliver the deed of sale of
said land in his favor, and to pay him damages amounting to P25,000, and the costs.
The defendants answered, admitting the allegations of the complaint, except the conclusions of law
therein set forth and the damages alleged to have been suffered by plaintiff. As a special defense, the
defendants alleged that in Resolution No. 31 of the board of directors of the Postal Savings Bank,
authorizing the sale at public auction of the property in question, as well as in the notice announcing
said sale, the defendants expressly reserved to themselves "the right to reject any and all bids," and
that they never accepted the bid or offer of the plaintiff. The defendants prayed for relief from the
complaint, with costs against the plaintiff.
Upon the issue thus presented the cause was brought on for trial, at the conclusion of which and after a
careful consideration of the evidence adduced pro and con, the Honorable C.A. Imperial, judge,
rendered a judgment holding that the plaintiff had not established his case, and dismissed the complaint
without costs. From said judgment the plaintiff appealed, and now raises several questions of both fact
and law.
There is no dispute as to the facts of this case which are essential to the decision thereof. They are
clearly set forth in the pleadings and admitted by both parties. It only remains to be added that the
defendants not only did not accept the plaintiff's bid, but on May 10, 1924, they wrote him a letter,
advising him that his bid was rejected by the board of directors at its meeting of May 6, 1924.
There is absolutely no merit in this appeal. It may be summarily disposed of, without need for a
discussion of the errors assigned by appellant's counsel. Appellant set forth and admitted in his
pleadings that in the resolution adopted by the board of directors authorizing the sale at public auction
of the land, as well as in the notice announcing the auction, the appellees had expressly reserved to
themselves the right to reject any and all bids. By taking part in the auction and offering his bid, the
appellant voluntarily submitted to the terms and conditions of the auction sale, announced in the notice,
and clearly acknowledged the right so reserved to the appellees. The appellees, making use of that
right, rejected his offer. Clearly, the appellant has no ground of action to compel them to execute a
deed of sale of the land in his favor, nor to compel them to accept his bid or offer. "The owner of
property offered for sale at auction has the right to prescribe the manner, conditions and terms of sale,
and where these are reasonable and are made known to the buyer, they are binding upon him, and he
cannot acquire a title in opposition to them, and against the consent of the owner. ..." (Farr vs. John, 23
Iowa, 286; Batemann, on Auctions, p. 2; 6 Corpus Juris, p. 827.)
The owner of property offered for sale either at public or private auction has the right to prescribe the
manner, conditions and terms of such sale. He may provide that all of the purchase price shall be paid
at the time of the sale or any portion thereof, or that time will be given for the payment. (Blossom vs.
Milwaukee and Chicago Railroad Co., 3 Wallace [U.S.], 196.)
The conditions of a public sale announced by an auctioneer or the owner of the property at the time and
place of the sale, are binding upon a purchaser, whether he knew them or not. (Kennell vs. Boyer, 144
Iowa, 303; Vanleer vs. Fain, 6 Humphrey [Tenn.], 104.)
Therefore, the sentence appealed from should be and is hereby affirmed, with costs against the
appellant. So ordered.
G.R. No. L-34727 March 9, 1932
PACIFIC COMMERCIAL COMPANY, plaintiff-appellee,
vs.
ERMITA MARKET & COLD STORES, INC., defendant-appellant.
Jose Perez Cardenas and Guevara, Francisco & Recto for appellant. Jose Yulo for appellee.
OSTRAND, J.:
This is an appeal from a judgment of the Court of First Instance of Manila, ordering defendant to pay
plaintiff the sum of P1,740 with interest thereon at the rate of 10 per cent per annum from January 1,
1928, to date of payment; likewise, to pay plaintiff P174 for attorneys' fees and costs of collection; and
to pay P250.67 with legal interest from date of filing of complaint to date of payment for work, labor, and
services rendered and for materials used in the installation of a refrigerating machine for the defendant,
and pay the costs.
It appears that on September 14, 1927, the Pacific Commercial Co., the plaintiff herein, sold to the
Ermita Market & Cold Stores, Inc., the defendant herein, an automatic refrigerating machine of the
following description:
Una maquina refrigeradora automatica York Style Y-26 capacidad Dos toneladas de refrigeracion
consistente en: Compresor de amoniaco York, de Doble Cilinfro, Condensador, Recibidor, Separador
de aciete, Juego de manometros, Valvulas, Valvula reguladora de agua, Control automatico, Aparato
de seguridad, Motor Electrico G-E de cinco caballos de fuerza 220 volts Corriente alterna, de Una
Fase, montadas todas en una basee de hierro, asi como tambien incluye una bomba centrifuga para
circulacion de argua y correas.
The parties signed the usual printed sales-contract form of the plaintiff company, the purchase price
being P2,550, payable by installments on dates and in amounts stated in the sales contract. The
delivery of the machines was made on December 7, 1927, and by mutual agreement between the
vendor and the vendee, the former installed the machine which was completed on December 26, 1927.
The installation, including materials used, amounted to P250.67, to be paid by the Ermita Market & Cold
Stores, Inc., to the Pacific Commercial Company. Complying with the terms of the sales contract, the
defendant paid the plaintiff the amount of P810 against the purchase price of the machine, leaving a
balance of P1,740.
A few days after installation of the automatic refrigerating machine, the Ermita Market & Cold Stores
advised the Pacific Commercial Company that the machine was not serving the purpose for which it
was sold to defendant and that it was lacking ammonia receiver and oil separator. The plaintiff company
in turn advised the defendant that the machine installed was complete, having all the accessories as
stated in the contract. However, upon the insistence of the defendant, the plaintiff, just to please the
president of the defendant company, delivered and installed on the machine an additional oil separator
without charge. The machine did not give the result expected from it, and the defendant refused to pay
the installation of the machine. The Pacific Commercial Company thereupon brought this action. properly and the machine had been operated by competent persons. Any deficiency in this regard could
not be the plaintiff's fault; the coils were supplied and installed by someone other than the plaintiff, and
In its answer, the defendant generally and specially denied the allegations contained in plaintiff's the machine was being operated by the defendant itself.
complaint, and by way of special defense alleged substantially that the machine delivered to the
defendant by the plaintiff was not the machine described in the contract of sale inasmuch as the said The judgment appealed from is therefore affirmed in its entirely, with costs against appellant. So
machine was not automatic and as it was lacking ammonia receiver, oil separator, and the implements ordered.
necessary to make the said machine automatic.
By way of cross-complaint, the defendant further alleges that it bought the machine in question from the
plaintiff for the purpose of running the business of cold storage; that the temperature in the refrigerating
rooms did not reach, and had never reached, the necessary temperature for the preservation of meat,
fish, vegetables, and fruits; that owing to the negligence of the plaintiff in not repairing or putting in good
working condition the said refrigerating machine, the defendant had been forced to close its
establishment and for which reason the defendant claimed damages against the plaintiff as follows:
P5,000 for expenses in advertising and propaganda;
P15,000 as the value of fish, pork, meat, vegetables and fruits alleged to have deteriorated in the
refrigerating rooms;
P30,000 for the loss of its clientele and decrease in its sales;
P20,000 for the loss of the whole business; and "P3,600 for rentals of the premises, salaries of the
manager, guard and warehouseman, from May 10, 1928, up to October of the same year, at the rate of
P600 a month, because of the refusal of the plaintiff to withdraw the refrigerating machine in question
from the premises where it was installed. In other words, the defendant asks for damages in the total
sum of P73,600.
Replying to the defendant's cross-complaint, the plaintiff denied generally and specifically each and
every and every allegation in the said cross-complaint and by way of special defense, alleged that
whatever defects or deficiency there might have been in the temperature in the refrigerating rooms of
defendant's establishment, or in the functioning of the machine, these were due to the defects and
imperfections of the coils which were supplied and installed by the defendant itself, as well as to the
incompetency and inefficiency of the defendant's personnel to operate the machine.
After trial, the court below rendered the judgment above mentioned, and, as hereinbefore stated, the
defendant appealed to this court.
After a careful examination of the record, we have not the least doubt that the plaintiff delivered the
machine as described in the sales contract, and the fact that the defendant could not use it satisfactorily
in the three cold stores division cannot be attributed to plaintiff's fault; as far as we can see, the
machine was strictly in accordance with the written contract between the parties, and the defendant can
hardly honestly say that there was any deception by the plaintiff. (See article 327, Code of Commerce;
Palanca vs. Fred Wilson & Co., 37 Phil., 506.)
But it is clear that the defendant company did not fully understand the use of the motor. It complains
that the machine would not properly refrigerate the refrigerating rooms, but it is evident that the
machine could not operate automatically when the defendant had three refrigerating rooms which it
expected to maintain at three different temperatures.
The defendant also complained that the machine was not equipped with a thermostat and that the lack
of its obstructed the work of the refrigerating. In the first place, the thermostat was not include in the
sales contract and in the second place it would not have been of any service to defendant because it
could not possibly operate automatically at three different temperatures with the defendant's insufficient
equipment.
The defendant's complaint that the machine did not contain an oil separator is not true; the oil separator
is combined with the receiver and condenser in a single combined piece in the machine.
The evidence in this case is clear to us, and we cannot find any errors committed by the court below. It
may be that the machine could have given satisfaction to the defendant if the coils had been installed
G.R. No. L-42416 April 9, 1935
MACONDRAY & CO., INC., plaintiff-appellant,
vs.
PRAXEDES R. DE SANTOS, defendant-appellee.
Jose Agbulos for appellant. Pedro Magsalin for appellee.
GODDARD, J.:
In this case the defendant demurred to the complaint, the trial court sustained the demurrer and gave
the plaintiff five days within which to amend, if it so desired. Within the time designated the plaintiff
excepted to the order sustaining the demurrer and gave notice that it elected to stand upon its
complaint and thereupon the lower court, upon motion of the defendant, dismissed the complaint with
costs against the plaintiff. In due time the plaintiff excepted to the order dismissing the complaint and
moved for a new trial. Upon the denial of this motion the plaintiff excepted and upon appeal to this court
alleges that the trial court erred:
I. In sustaining the demurrer of the defendant to the plaintiff's complaint;
II. In dismissing the case;1vvphl.nt
III. In not rendering judgment in accordance with the prayer of the plaintiff's complaint;
attorney's fees and the costs of this case.
The defendant, as the only ground of her demurrer, alleges that under the provisions of Act No. 4122,
article 1454-A of the Civil Code, there is no cause of action against her. That article of the Civil Code
reads as follows:
ART. 1454-A. In a contract for the sale of personal property payable in installments, failure to pay two
or more installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage
if one has been given on the property, without reimbursement to the purchaser of the installments
already paid, if there be an agreement to this effect.
However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the
purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the
contrary shall be null and void.
Granting that there was a contract between the parties for the sale of personal property payable in
installments, which does not clearly appear in the record before this court, the complaint does not
allege nor does it appear in the record that there was a failure to pay two or more installments. On the
contrary the promissory note, copied in the complaint, was executed January 11, 1934, and, according
to the complaint, on or about January 21, 1934, the automobile, while in the possession of the
defendant, was wrecked and by reason of the failure of the defendant to replace said automobile or to
pay the value thereof the plaintiff foreclosed the mortgage on what remained of the wrecked automobile
and brought this suit to recover the balance due on the promissory note executed in its favor.

IV. Conceding, but not admitting, that the case falls under the provisions of Act No. 4122, the lower In order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a
court erred in not finding that the said law is unconstitutional in that it confiscates property without due contract for the sale of personal property payable in installments and that there has been a failure to
process of law and denies the equal protection of the laws of the plaintiff. pay two or more installments.

V. In not granting the plaintiff's motion for new trial. In view of the above, the trial court erred in sustaining the demurrer. The appellant's first, second, third
and fifth assignments of error are sustained. Wherefore it is not necessary to pass upon the fourth
The complaint alleges, for a first cause of action, that on January 11, 1934, the defendant executed and assignment of error.
delivered to the plaintiff a promissory note for the sum of P1,000, with interest thereon at the rate of 12
per cent per annum, payable in installments as set forth in said promissory note and in case of default The order of the trial court dismissing the complaint is hereby set aside and this case will be remanded
in the payment of the principal or interest an additional sum equal to 20 per cent of the total amount due to the trial court for further proceedings in accordance with law, with the costs of this appeal against the
was to be paid as attorney's fees; that to guarantee the payment of this note the defendant executed a defendant-appellee.
duly registered chattel mortgage on a Willis 77, Sedan, automobile; that one of the conditions of said
mortgage is that if the mortgaged property be lost, destroyed or damages, for any cause whatsoever,
the mortgage would immediately have the right to foreclose and declare the whole amount of the
principal and interest, secured by said mortgage, due and payable; that on January 21, 1934, the
mortgaged automobile, while in possession and control of the defendant, met with an accident resulting
in its total wreck and loss; that by reason of the failure of the defendant to replace or to restore the
automobile to its former condition or to pay the value thereof plaintiff foreclosed its mortgage and what
remained of the wrecked automobile was sold at public auction for the sum of P50; that after applying
this amount to the account of defendant there was an unpaid balance of P980.39 plus interest at 12 per
cent per annum from March 24, 1934, until paid, and 20 per cent of the amount due as attorney's fees,
which defendant refused to pay in spite of demand therefor.
As a second and alternative cause of action, the plaintiff reproduces the allegations contained in the
first cause of action and alleges that another condition of the
above-mentioned chattel mortgage is that the defendant agreed to use extraordinary care and diligence
in the preservation and maintenance of the mortgaged property and further engaged to pay any and all
damages for deteriorction, reasonable wear and tear excepted, resulting directly or indirectly from
carelessness or neglect of any kind on the part of the mortgagor and alleges further that through the
carelessness, neglect or reckless imprudence of the defendant and or her agents while the automobile
was in her possession or under her control the same was totally wrecked by reason of which the
plaintiff was damaged in the sums mentioned in the first cause of action and therefore the plaintiff prays
that defendant be sentenced to pay the plaintiff and above-mentioned sum of P980.39 with interest at
the rate of 12 per cent per annum for March 24, 1934, until paid, and 20 per cent of said sum as
G.R. No. L-46306 October 27, 1939 payment cannot be considered as a payment by installment, and even if it can be so considered, still
the law does not apply, for it requires non-payment of two or more installments in order that its
LEVY HERMANOS, INC., plaintiff-appellant, provisions may be invoked. Here, only one installment was unpaid.
vs. Judgment is reversed, and the defendant-appellee is hereby sentenced to pay plaintiff-appellant the
LAZARO BLAS GERVACIO, defendant-appellee. sum of P1,600 with interest at the rate of 12 per cent per annum from June 15, 1937, and the sum of
P52.08 with interest at the rate of 6 per cent from the date of the filing of the complaint, with costs in
Felipe Caniblas for appellant. Abreu, Lichaucco and Picazo for appellee. both instances against the appellee.

MORAN, J.:
On February 9-4, 1938, plaintiff filed a complaint in the Court of First Instance of Manila, which
substantially recites the following facts:
On March 10, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packard
car. Defendant, after making the initial payment, executed a promissory note for the balance of P2,400,
payable on or before June 15, 1937, with interest at 12 per cent per annum, to secure the payment of
the note, he mortgaged the car to the plaintiff. Defendant failed to pay the note it its maturity.
Wherefore, plaintiff foreclosed the mortgage and the car was sold at public auction, at which plaintiff
was the highest bidder for P1,800. The present action is for the collection of the balance of P1,600 and
interest.
Defendant admitted the allegations of the complaint, and with this admission, the parties submitted the
case for decision. The lower court applied, the provisions of Act No. 4122, inserted as articles 1454-A of
the Civil Code, and rendered judgment in favor of the defendant. Plaintiff appealed.
Article 1454-A of the Civil Code reads as follows:
In a contract for the sale of personal property payable in installments shall confer upon the vendor the
right to cancel the sale or foreclose the mortgage if one has been given on the property, without
reimbursement to the purchaser of the installments already paid, if there be an agreement to this effect.
However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the
purchaser for the recovery of any unpaid balance owing by the same and any agreement to the
contrary shall be null and void.
In Macondray and Co. vs. De Santos (33 Off. Gaz., 2170), we held that "in order to apply the provisions
of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal
property payable in installments and that there has been a failure to pay two or more installments." The
contract, in the instant case, while a sale of personal property, is not, however, one on installments, but
on straight term, in which the balance, after payment of the initial sum, should be paid in its totality at
the time specified in the promissory note. The transaction is not is not, therefore, the one contemplated
in Act No. 4122 and accordingly the mortgagee is not bound by the prohibition therein contained as to
the right to the recovery of the unpaid balance.
Undoubtedly, the law is aimed at those sales where the price is payable in several installments, for,
generally, it is in these cases that partial payments consist in relatively small amounts, constituting thus
a great temptation for improvident purchasers to buy beyond their means. There is no such temptation
where the price is to be paid in cash, or, as in the instant case, partly in cash and partly in one term, for,
in the latter case, the partial payments are not so small as to place purchasers off their guard and
delude them to a miscalculation of their ability to pay. The oretically, perhaps, there is no difference
between paying the price in tow installments, in so far as the size of each partial payment is concerned;
but in actual practice the difference exists, for, according to the regular course of business, in contracts
providing for payment of the price in two installments, there is generally a provision for initial payment.
But all these considerations are immaterial, the language of the law being so clear as to require no
construction at all.lwphi1.nt
The suggestion that the cash payment made in this case should be considered as an installment in
order to bring the contract sued upon under the operation of the law, is completely untenable. A cash
[G.R. No. 94828. September 18, 1992.
SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL FAJARDO, Petitioners,
v. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORPORATION and the HONORABLE
COURT OF APPEALS, Respondents.
The pivotal point before Us is whether a chattel mortgagee, after opting to foreclose the mortgage but
failing afterwards to sell the property at public auction, may still sue to recover the unpaid balance of the
purchase price.
On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo,
petitioners herein, purchased on installment basis one (1) unit Hino truck from Benter Motor Sales
Corporation (BENTER for brevity). To secure payment, they executed in favor of BENTER a chattel
mortgage over the vehicle 1 and a promissory note for P282,360.00 payable in thirty (30) monthly
installments of P9,412.00. 2 On the same date, BENTER assigned its rights and interest over the
vehicle in favor of private respondent Asian Consumer and Industrial Finance Corporation (ASIAN for
brevity). 3 Although petitioners initially paid some installments they subsequently defaulted on more
than two (2) installments. Thereafter, notwithstanding the demand letter of ASIAN, 4 petitioners failed to
settle their obligation.
On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of chattel mortgage, the
sheriff attempted to repossess the vehicle but was unsuccessful because of the refusal of the son of
petitioner, Rolando de la Cruz to surrender the same. Hence, the return of the sheriff that the service
was not satisfied.chanrobles law library : red
On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the office of ASIAN and left it
there where it was inventoried and inspected. 5
On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection of the balance
of P196,152.99 of the purchase price, plus liquidated damages and attorneys fees. 6
After trial, the court below rendered judgment in favor of ASIAN.
On appeal, the Court of Appeals affirmed the judgment and held that
". . . no extrajudicial foreclosure of chattel mortgage ever transpired in the case at bar. Undoubtedly,
plaintiff had first chosen to extrajudically foreclose the mortgage, but this did not materialize through no
fault of plaintiff, as defendant refused to surrender the Hino truck. The mere fact that the writ in now in
possession of plaintiff and a Technical and Inspection Report was made in connection therewith is not
conclusive of the extrajudicial foreclosure, for in this kind of foreclosure, possession of the chattel by the
sheriff is necessary, aside from the sale at public auction."cralaw virtua1aw library
"Though the remedy of foreclosure was first chosen, this remedy however proved ineffectual due to no
fault of plaintiff. Therefore, plaintiff may exercise other remedies such as exact fulfillment of the
obligation and thereafter recover the deficiency. This is the essence of the rule of alternative remedies
under Article 1484." cralawnad
Petitioners take exception. While they do not dispute that where the mortgagee elects the remedy of
foreclosure which, according to them, includes the option to sell in a public or private sale, commences
and pursues it, and in consideration of which he also performs everything that is incumbent upon him to
do to implement the foreclosure they nevertheless insist that he should not later be allowed to
change course midway in the process, abandon the foreclosure and shift to other remedies such as
collection of the balance, especially after having recovered the mortgaged chattel from them and while
retaining possession thereof.
We do not agree with petitioners.
It is not disputed that the instant case is covered by the so-called "Recto Law", now Art. 1484 of the
New Civil Code, which provides:jgc:chanrobles.com.ph
"In a contract of sale of personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to
pay; (2) Cancel the sale, should the vendees failure to pay cover two or more installments; (3)
Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be
void."cralaw virtua1aw library
In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not
cumulative; the exercise of one would preclude the other remedies. Consequently, should the vendee-
mortgagor default in the payment of two or more of the agreed installments, the vendor-mortgagee has
the option to avail of any of these three (3) remedies: either to exact fulfillment of the obligation, to
cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted. 7
The records show that on 14 September 1984 ASIAN initiated a petition for extrajudicial foreclosure of
the chattel mortgage. But the sheriff failed to recover the motor vehicle from petitioners due to the
refusal of the son of petitioners Romulo and Delia de la Cruz to surrender it. It was not until 10 October
1984, or almost a month later that petitioners delivered the unit to ASIAN. The action to recover the
balance of the purchase price was instituted on 27 November 1984.chanrobles virtual lawlibrary
It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it
did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle
was ever conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. 8
"Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein
appellee, can only operate to extinguish appellants liability if the appellee had actually caused the
foreclosure sale of the mortgaged property when it recovered possession thereof (Northern Motors, Inc.
v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila
Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). It is worth noting that it is the fact of foreclosure and
actual sale of the mortgaged chattel that bar recovery by the vendor of any balance of the purchasers
outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article 1484). As held by this
Court, if the vendor desisted, on his own initiative, from consummating the auction sale, such
desistance was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific
performance" (Industrial Finance Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v. Lavin, L-
18563, April 27, 1963, 7 SCRA 804; Pacific Commercial Co. v. dela Rama, 72 Phil. 380 [1941]).
Consequently, in the case before Us, there being no actual foreclosure of the mortgaged property,
ASIAN is correct in resorting to an ordinary action for collection of the unpaid balance of the purchase
price.
We note however that the trial court, as well as the Court of Appeals failed to consider that the vehicle
was already in the possession of ASIAN when it directed petitioners herein to pay P184,466.67
representing the balance of the purchase price of the mortgaged property. Law and equity will not
permit ASIAN to have its cake and eat it too, so to speak. By allowing ASIAN to retain possession of the
vehicle and then directing petitioners to pay the unpaid balance would certainly result in unjust
enrichment of the former. Accordingly, the ownership and possession of the vehicle should be returned
to petitioners by ASIAN in the condition that it was when delivered to it, and if this be no longer feasible,
to deduct from the adjudged liability of petitioners the amount of P60,000.00, its corresponding
appraised value. 9
WHEREFORE, the assailed decision is AFFIRMED, with the MODIFICATION that the subject vehicle
be returned to petitioners or, at their option, they be allowed to deduct P60,000.00 from their adjudged
liability. No costs.
SO ORDERED.
MAGNA FINANCIAL SERVICES GROUP, INC.,
Petitioner,
- versus -
ELIAS COLARINA,
R e s p o n d e n t.
CHICO-NAZARIO, J.:
The undisputed facts of this case show that on 11 June 1997, Elias Colarina bought on installment from
Magna Financial Services Group, Inc., one (1) unit of Suzuki Multicab, more particularly described as
follows:
MAKE - SUZUKI MULTICAB
MODEL - ER HT
ENGINE NO. - 834963
FRAME NO. - LTO -067886-RO7-C
COLOR - WHITE[1]
After making a down payment, Colarina executed a promissory note for the balance of P229,284.00
payable in thirty-six (36) equal monthly installments at P6,369.00 monthly, beginning 18 July 1997. To
secure payment thereof, Colarina executed an integrated promissory note and deed of chattel
mortgage over the motor vehicle.
Colarina failed to pay the monthly amortization beginning January 1999, accumulating an unpaid
balance of P131,607.00. Despite repeated demands, he failed to make the necessary payment. On 31
October 2000 Magna Financial Services Group, Inc. filed a Complaint for Foreclosure of Chattel
Mortgage with Replevin[2] before the Municipal Trial Court in Cities (MTCC), Branch 2, Legaspi City,
docketed as Civil Case No. 4822.[3] Upon the filing of a Replevin Bond, a Writ of Replevin was issued
by the MTCC. On 27 December 2000, summons, together with a copy of the Writ of Replevin, was
served on Colarina who voluntarily surrendered physical possession of the vehicle to the Sheriff, Mr.
Antonio Lozano. On 02 January 2001, the aforesaid motor vehicle was turned over by the sheriff to
Magna Financial Services Group, Inc.[4] On 12 July 2001, Colarina was declared in default for having
filed his answer after more than six (6) months from the service of summons upon him. Thereupon, the
trial court rendered judgment based on the facts alleged in the Complaint. In a decision dated 23 July
2001, it held:[5]
WHEREFORE, judgment is hereby rendered in favor of plaintiff Magna Financial Services Group, Inc.
and against the defendant Elias Colarina, ordering the latter:
a) to pay plaintiff the principal sum of one hundred thirty one thousand six hundred seven
(P131,607.00) pesos plus penalty charges at 4.5% per month computed from January, 1999 until fully
paid;
b) to pay plaintiff P10,000.00 for attorneys fees; and
c) to pay the costs.
The foregoing money judgment shall be paid within ninety (90) days from the entry of judgment. In case
of default in such payment, the one (1) unit of Suzuki Multicab, subject of the writ of replevin and chattel
mortgage, shall be sold at public auction to satisfy the said judgment.[6]
Colarina appealed to the Regional Trial Court (RTC) of Legazpi City, Branch 4, where the case was
docketed as Civil Case No. 10013. During the pendency of his appeal before the RTC, Colarina died
and was substituted in the case by his heirs.[7] In a decision dated 30 January 2002, the RTC affirmed
in toto the decision of the MTCC.[8]
Colarina filed a Petition for Review before the Court of Appeals, docketed as CA-G.R. SP No. 69481.
On 21 January 2003, the Court of Appeals rendered its decision[9] holding:
. . . We find merit in petitioners assertion that the MTC and the RTC erred in ordering the defendant to
pay the unpaid balance of the purchase price of the subject vehicle irrespective of the fact that the
instant complaint was for the foreclosure of its chattel mortgage. The principal error committed by the
said courts was their immediate grant, however erroneous, of relief in favor of the respondent for the
payment of the unpaid balance without considering the fact that the very prayer it had sought was
inconsistent with its allegation in the complaint.
Verily, it is beyond cavil that the complaint seeks the judicial foreclosure of the chattel mortgage. The
fact that the respondent had unconscionably sought the payment of the unpaid balance regardless of its
complaint for the foreclosure of the said mortgage is glaring proof that it intentionally devised the same
to deprive the defendant of his rights. A judgment in its favor will in effect allow it to retain the
possession and ownership of the subject vehicle and at the same time claim against the defendant for
the unpaid balance of its purchase price. In such a case, the respondent would luckily have its cake and
eat it too. Unfortunately for the defendant, the lower courts had readily, probably unwittingly, made
themselves abettors to respondents devise to the detriment of the defendant.
WHEREFORE, finding error in the assailed decision, the instant petition is hereby GRANTED and the
assailed decision is hereby REVERSED AND SET ASIDE. Let the records be remanded to the court of
origin. Accordingly, the foreclosure of the chattel mortgage over the subject vehicle as prayed for by the
respondent in its complaint without any right to seek the payment of the unpaid balance of the purchase
price or any deficiency judgment against the petitioners pursuant to Article 1484 of the Civil Code of the
Philippines, is hereby ORDERED.[10]
A Motion for Reconsideration dated 11 February 2003[11] filed by Magna Financial Services Group, Inc.,
was denied by the Court of Appeals in a resolution dated 22 May 2003.[12] Hence, this Petition for
Review on Certiorari based on the sole issue:
WHAT IS THE TRUE NATURE OF A FORECLOSURE OF CHATTEL MORTGAGE, EXTRAJUDICIAL
OR JUDICIAL, AS AN EXERCISE OF THE 3RD OPTION UNDER ARTICLE 1484, PARAGRAPH 3 OF
THE CIVIL CODE.
In its Memorandum, petitioner assails the decision of the Court of Appeals and asserts that a mortgage
is only an accessory obligation, the principal one being the undertaking to pay the amounts scheduled
in the promissory note. To secure the payment of the note, a chattel mortgage is constituted on the
thing sold. It argues that an action for foreclosure of mortgage is actually in the nature of an action for
sum of money instituted to enforce the payment of the promissory note, with execution of the security.
In case of an extrajudicial foreclosure of chattel mortgage, the petition must state the amount due on
the obligation and the sheriff, after the sale, shall apply the proceeds to the unpaid debt. This, according
to petitioner, is the true nature of a foreclosure proceeding as provided under Rule 68, Section 2 of the
Rules of Court.[13]
On the other hand, respondent countered that the Court of Appeals correctly set aside the trial courts
decision due to the inconsistency of the remedies or reliefs sought by the petitioner in its Complaint
where it prayed for the custody of the chattel mortgage and at the same time asked for the payment of
the unpaid balance on the motor vehicle.[14]
Article 1484 of the Civil Code explicitly provides:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendees failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendees
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
Our Supreme Court in Bachrach Motor Co., Inc. v. Millan[15] held: Undoubtedly the principal object of
the above amendment (referring to Act 4122 amending Art. 1454, Civil Code of 1889) was to remedy
the abuses committed in connection with the foreclosure of chattel mortgages. This amendment
prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price
and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result
of this procedure was that the mortgagor found himself minus the property and still owing practically the
full amount of his original indebtedness
In its Complaint, Magna Financial Services Group, Inc. made the following prayer:
WHEREFORE, it is respectfully prayed that judgment render ordering defendant:
1. To pay the principal sum of P131,607.00 with penalty charges at 4.5% per month from January 1999
until paid plus liquidated damages.
2. Ordering defendant to reimburse the plaintiff for attorneys fee at 25% of the amount due plus
expenses of litigation at not less than P10,000.00.
3. Ordering defendant to surrender to the plaintiff the possession of the Multicab described in paragraph
2 of the complaint.
4. Plaintiff prays for other reliefs just and equitable in the premises.
It is further prayed that pendent lite, an Order of Replevin issue commanding the Provincial Sheriff at
Legazpi City or any of his deputies to take such multicab into his custody and, after judgment, upon
default in the payment of the amount adjudged due to the plaintiff, to sell said chattel at public auction in
accordance with the chattel mortgage law.[16]
In its Memorandum before us, petitioner resolutely declared that it has opted for the remedy provided
under Article 1484(3) of the Civil Code,[17] that is, to foreclose the chattel mortgage.
It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and
third remedies under Article 1484, at the same time suing for replevin. For this reason, the Court of
Appeals justifiably set aside the decision of the RTC. Perusing the Complaint, the petitioner, under its
prayer number 1, sought for the payment of the unpaid amortizations which is a remedy that is provided
under Article 1484(1) of the Civil Code, allowing an unpaid vendee to exact fulfillment of the obligation.
At the same time, petitioner prayed that Colarina be ordered to surrender possession of the vehicle so
that it may ultimately be sold at public auction, which remedy is contained under Article 1484(3). Such a
scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for
the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may
have under the promissory note.[18]
Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the
chattel mortgage, he shall have no further action against the purchaser to recover any unpaid balance
of the purchase price. Any agreement to the contrary shall be void. In other words, in all proceedings for
the foreclosure of chattel mortgages executed on chattels which have been sold on the installment plan,
the mortgagee is limited to the property included in the mortgage. [19]
Contrary to petitioners claim, a contract of chattel mortgage, which is the transaction involved in the
present case, is in the nature of a conditional sale of personal property given as a security for the
payment of a debt, or the performance of some other obligation specified therein, the condition being
that the sale shall be void upon the seller paying to the purchaser a sum of money or doing some other
act named.[20] If the condition is performed according to its terms, the mortgage and sale immediately
become void, and the mortgagee is thereby divested of his title.[21] On the other hand, in case of non
payment, foreclosure is one of the remedies available to a mortgagee by which he subjects the
mortgaged property to the satisfaction of the obligation to secure that for which the mortgage was
given. Foreclosure may be effected either judicially or extrajudicially, that is, by ordinary action or by
foreclosure under power of sale contained in the mortgage. It may be effected by the usual methods,
including sale of goods at public auction.[22] Extrajudicial foreclosure, as chosen by the petitioner, is
attained by causing the mortgaged property to be seized by the sheriff, as agent of the mortgagee, and
have it sold at public auction in the manner prescribed by Section 14 of Act No. 1508, or the Chattel
Mortgage Law.[23] This rule governs extrajudicial foreclosure of chattel mortgage.
In sum, since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of the
Civil Code, it is bound by its election and thus may not be allowed to change what it has opted for nor to
ask for more. On this point, the Court of Appeals correctly set aside the trial courts decision and instead
rendered a judgment of foreclosure as prayed for by the petitioner.
The next issue of consequence is whether or not there has been an actual foreclosure of the subject
vehicle.
In the case at bar, there is no dispute that the subject vehicle is already in the possession of the
petitioner, Magna Financial Services Group, Inc. However, actual foreclosure has not been pursued,
commenced or concluded by it.
Where the mortgagee elects a remedy of foreclosure, the law requires the actual foreclosure of the
mortgaged chattel. Thus, in Manila Motor Co. v. Fernandez,[24] our Supreme Court said that it is actual
sale of the mortgaged chattel in accordance with Sec. 14 of Act No. 1508 that would bar the creditor
(who chooses to foreclose) from recovering any unpaid balance. [25] And it is deemed that there has
been foreclosure of the mortgage when all the proceedings of the foreclosure, including the sale of the
property at public auction, have been accomplished.[26]
That there should be actual foreclosure of the mortgaged vehicle was reiterated in the case of De la
Cruz v. Asian Consumer and Industrial Finance Corporation:[27]
It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it
did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle
was ever conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. (G.R. No. 50449,
30 January 1982, 111 SCRA 421)
Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein
appellee, can only operate to extinguish appellants liability if the appellee had actually caused the
foreclosure sale of the mortgaged property when it recovered possession thereof (Northern Motors, Inc.
v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila
Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]).
Be that as it may, although no actual foreclosure as contemplated under the law has taken place in this
case, since the vehicle is already in the possession of Magna Financial Services Group, Inc. and it has
persistently and consistently avowed that it elects the remedy of foreclosure, the Court of Appeals, thus,
ruled correctly in directing the foreclosure of the said vehicle without more.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the decision of
the Court of Appeals dated 21 January 2003 is AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 109966. May 31, 1999]
ELISCO TOOL MANUFACTURING CORPORATION, petitioner, vs. COURT OF APPEALS,
ROLANDO LANTAN, and RINA LANTAN, respondents
DECISION
MENDOZA, J.:
This is a petition for review of the decision[if !supportFootnotes][1][endif] of the Court of Appeals which affirmed in
toto the decision of the Regional Trial Court of Pasig, Branch 51, declaring respondent spouses
Rolando Lantan and Rina Lantan owners of a 1979 model 2-door Colt Lancer car which they had
acquired under a car plan for top employees of the Elizalde group of companies.
The facts are as follows:
Private respondent Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as
head of its cash department. On January 9, 1980, he entered into an agreement with the company
which provided as follows:[if !supportFootnotes][2][endif]
That, EMPLOYER is the owner of a car Colt Lancer 2 door, Model 1979, with Serial No. 3403 under
LTC Registration Certificate No. 0526558;
That, for and in consideration of a monthly rental of ONE THOUSAND TEN & 65/100 ONLY
(P1,010.65) Philippine Currency, EMPLOYER desire to lease and EMPLOYEE accept in lease the
motor vehicle aforementioned for a period of FIVE (5) years;
That, the EMPLOYEE agree as he hereby agreed to pay the lease rental thru salary deduction from his
monthly remuneration in the amount as above specified for a period of FIVE (5) years;
That, for the duration of the lease contract, all expenses and costs of registration, insurance, repair and
maintenance, gasoline, oil, part replacement inclusive of all expenses necessary to maintain the vehicle
in top condition shall be for the account of the EMPLOYEE;
That, at the end of FIVE (5) year period or upon payment of the 60 th monthly rental, EMPLOYEE may
exercise the option to purchase the motor vehicle from the EMPLOYER and all monthly rentals shall be
applied to the payment of the full purchase price of the car and further, should EMPLOYEE desire to
exercise this option before the 5-year period lapse, he may do so upon payment of the remaining
balance on the five year rental unto the EMPLOYER, it being understood however that the option is
limited to the EMPLOYEE;
That, upon failure of the EMPLOYEE to pay THREE (3) accumulated monthly rentals will vest upon the
EMPLOYER the full right to lease the vehicle to another EMPLOYEE;
That, in the event of resignation and or dismissal from the service, the EMPLOYEE shall return the
subject motor vehicle to the EMPLOYER in its compound at Kalawaan Sur, Pasig, Metro Manila in good
working and body condition.
On the same day, January 9, 1980, private respondent executed a promissory note reading as follows: [if
!supportFootnotes][3][endif]
PROMISSORY NOTE
P60,639.00
FOR VALUE RECEIVED, we promise to pay [to] the order of ELISCO TOOL MFG. CORP. SPECIAL
PROJECT, at its office at Napindan, Taguig, Metro Manila, Philippines, the sum of ONE THOUSAND
TEN & 65/100 PESOS (P1,010.65), Philippine Currency, beginning January 9, 1980, without the
necessity of notice or demand in accordance with the schedule of payment hereto attached as an
integral part hereof.
In case of default in the payment of any installment on the stipulated due date, we agree to pay as
liquidated damages 2% of the amount due and unpaid for every thirty (30) days of default or fraction
thereof. Where the default covers two successive installments, the entire unpaid balance shall
automatically become due and payable.
It is further agreed that if upon such default attorneys services are availed of, an additional sum equal to
TWENTY (20%) percent of the total amount due thereon, but in no case be less than P1,000.00 shall
be paid to holder(s) hereof as attorneys fees in addition to the legal costs provided for by law. We agree
to submit to the jurisdiction of the proper courts of Makati, Metro Manila or the Province of Rizal, at the
option of the holder(s) waiving for this purpose any other venue.
In case extraordinary inflation or deflation of the currency stipulated should occur before this obligation
is paid in full, the value of the currency at the time of the establishment of the obligation will be the basis
of payment.
Holder(s) may accept partial payment reserving his right of recourse against each and all endorsers
who hereby waive DEMAND PRESENTMENT and NOTICE.
Acceptance by the holder(s) of payment or any part thereof after due date shall not be considered as
extending the time for the payment of the aforesaid obligation or as a modification of any of the
condition hereof.
After taking possession of the car, private respondent installed accessories therein worth P15,000.00.
In 1981, Elisco Tool ceased operations, as a result of which private respondent Rolando Lantan was
laid off. Nonetheless, as of December 4, 1984, private respondent was able to make payments for the
car in the total amount of P61,070.94.
On June 6, 1986, petitioner filed a complaint, entitled replevin plus sum of money, against private
respondent Rolando Lantan, his wife Rina, and two other persons, identified only as John and Susan
Doe, before the Regional Trial Court of Pasig, Metro Manila. Petitioner alleged that private respondents
failed to pay the monthly rentals which, as of May 1986, totalled P39,054.86; that despite demands,
private respondents failed to settle their obligation thereby entitling petitioner to the possession of the
car; that petitioner was ready to post a bond in an amount double the value of the car, which was
P60,000; and that in case private respondents could not return the car, they should be held liable for
the amount of P60,000 plus the accrued monthly rentals thereof, with interest at the rate of 14% per
annum, until fully paid. Petitioners complaint contained the following prayer:
WHEREFORE, plaintiffs prays that judgment be rendered as follows:
ON THE FIRST CAUSE OF ACTION
Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest from
the date of demand until the whole obligation is fully paid;
ON THE SECOND CAUSE OF ACTION
To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly
described in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina
Lantan, John Doe, Susan Doe and other person or persons in whose possession the said motor vehicle
may be found, complete with accessories and equipment, and direct deliver thereof to plaintiff in
accordance with law, and after due hearing to confirm said seizure and plaintiffs possession over the
same;
ON THE ALTERNATIVE CAUSE OF ACTION
In the event that manual delivery of the subject motor vehicle cannot be effected for any reason, to
render judgment in favor of plaintiff and against defendant Rolando Lantan ordering the latter to pay the
sum of SIXTY THOUSAND PESOS (P60,000.00) which is the estimated actual value of the above-
described motor vehicle, plus the accrued monthly rentals thereof with interests at the rate of fourteen
percent (14%) per annum until fully paid;
PRAYER COMMON TO ALL CAUSES OF ACTION
1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to twenty-five
percent (25%) of his outstanding obligation, for and as attorneys fees;
2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees and other
incidental expenses to be proved during the trial; and
3. Ordering defendants to pay the costs of suit.
Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable under
the premises.
Upon petitioners posting a bond in the amount of P120,000, the sheriff took possession of the car in
question and after five (5) days turned it over to petitioner.[if !supportFootnotes][4][endif]
In due time, private respondents filed their answer. They claimed that the agreement on which the
complaint was based had not been signed by petitioners representative, Jose Ma. S. del Gallego,
although it had been signed by private respondent Rolando Lantan; that their true agreement was to
buy and sell and not lease with option to buy the car in question at a monthly amortization of P1,000;
and that petitioner accepted the installment payments made by them and, in January 1986, agreed that
the balance of the purchase price would be paid on or before December 31, 1986. Private respondents
cited the provision of the agreement making respondent Rolando Lantan liable for the expenses for
registration, insurance, repair and maintenance, gasoline, oil and part replacements, inclusive of all
necessary expenses, as evidence that the transaction was one of sale. Private respondents further
alleged that, in any event, petitioner had waived its rights under the agreement because of the following
circumstances: (a) while the parties agreed that payment was to be made through salary deduction,
petitioner accepted payments in cash or checks; (b) although they agreed that upon the employees
resignation, the car should be returned to the employer, private respondent Rolando Lantan was not
required to do so when he resigned in September 1982; (c) petitioner did not lease the vehicle to
another employee after private respondent Rolando Lantan had allegedly failed to pay three monthly
rentals; and (d) petitioner failed to enforce the manner of payment under the agreement by its
acceptance of payments in various amounts and on different dates.
In its reply, petitioner maintained that the contract between the parties was one of lease with option to
purchase and that the promissory note was merely a nominal security for the agreement. It contended
that the mere acceptance of the amounts paid by private respondents and for indefinite periods of time
was not evidence that the parties agreement was one of purchase and sale. Neither was it guilty of
laches because, under the law, an action based on a written contract can be brought within ten (10)
years from the time the action accrues. On August 31, 1987, the trial court [if !supportFootnotes][5][endif] rendered
its decision.
The trial court sustained private respondents claim that the agreement in question was one of sale and
held that the latter had fully paid the price of the car having paid the total amount of P61,070.94 aside
from installing accessories in the car worth P15,000.00. Said the trial court:
Plaintiff now comes claiming ownership of the car in question and has succeeded in repossessing the
same by virtue of the writ of seizure issued in this case on July 29, 1986. Not content with recovering
possession of the said car, plaintiff still asks that defendants should pay it the sum of P39,054.86,
allegedly representing the rentals due on the car from the time of the last payment made by defendants
to its repossession thereof. This is indeed a classic case of one having his cake and eating it too! Under
the Recto law (Arts. 1484 & 1485, Civil Code), the vendor who repossesses the goods sold on
installments, has no right to sue the vendee for the unpaid balance thereof.
The Court can take judicial notice of the practice wherein executives enjoy car plans in progressive
companies. The agreement of January 9, 1980 between the parties is one such car plan. If defendant
Rolando Lantan failed to keep up with his amortizations on the car in question, it was not because of his
own liking but rather he was pushed to it by circumstances when his employer folded up and sent him
to the streets. That plaintiff was giving all the chance to defendants to pay the value of the car and
acquire full ownership thereof is shown by the delay in instituting the instant case. . . .
The court likewise found that the amount of P61,070.94 included a 2% penalty for late payments for
which there was no stipulation in the agreement:
. . . The agreement and defendant Rolando Lantans promissory note of January 9, 1980 do not provide
even for interest on the remaining balance of the purchase price of the car. This privilege extended by
corporations to their top executives is considered additional emolument to them. And so the reason for
the lack of provision for interest, much less penalty charges. Therefore, all payments made by
defendant should be applied to the principal account. Since the principal was only P60,639.00, the
defendants have made an overpayment of P431.94 which should be returned to defendant by plaintiff.
For this reason, it ordered petitioner to pay private respondents the amount of P431.94 as excess
payment, as well as rentals at the rate of P1,000 a month for depriving private respondents of the use
of their car, and moral damages for the worry, embarrassment, and mental torture suffered by them on
account of the repossession of the car.
The dispositive portion of the trial courts decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of defendants and against plaintiff, dismissing
plaintiffs complaint; declaring defendants the lawful owners of that Colt Lancer 2-door, Model 1979 with
Serial No. 3403 under Registration Certificate No. 0526558; ordering plaintiff to deliver to defendants
the aforesaid motor vehicle complete with all the accessories installed therein by defendants; should for
any reason plaintiff is unable to deliver the said car to defendants, plaintiff is ordered to pay to
defendants the value of said car in the sum of P60,639.00 plus P15,000.00, the value of the
accessories, plus interest of 12% on the said sums from August 6, 1986; and sentencing plaintiff to pay
defendants the following sums:
a) P12,431.94 as actual damages broken down as follows:
1) P431.94 overpayment made by defendants to plaintiff; and
2) P12,000.00 rental on the car in question from August 6, 1986 to August 5, 1987, plus the sum of
P1,000.00 a month beginning August 6, 1987 until the car is returned by plaintiff to, and is received by,
defendant;
b) the sum of P20,000.00 as moral damages;
c) the sum of P5,000.00 as exemplary damages; and
d) the sum of P5,000.00 as attorneys fees.
Costs against the plaintiff.
SO ORDERED.
Petitioner appealed to the Court of Appeals. On the other hand, private respondents filed a motion for
execution pending appeal. In its resolution of March 9, 1989, the Court of Appeals granted private
respondents motion and, upon the filing of a bond, in the amount of P70,000.00, it issued a writ of
execution, pursuant to which the car was delivered to private respondents on April 16, 1989. [if
!supportFootnotes][6][endif]
On August 26, 1992, the Court of Appeals rendered its decision, affirming in toto the decision of the trial
court. Hence, the instant petition for review on certiorari.
Petitioner contends that the Court of Appeals erred -
(a) in disregarding the admission in the pleadings as to what documents contain the terms of the parties
agreement.
(b) in holding that the interest stipulation in respondents Promissory Note was not valid and binding.
(c) in holding that respondents had fully paid their obligations.
It further argues that -
On the assumption that the Lease Agreement with option to buy in this case may be treated as a sale
on installments, the respondent Court of Appeals nonetheless erred in not finding that the parties have
validly agreed that the petitioner as seller may [i] cancel the contract upon the respondents default on
three or more installments, [ii] retake possession of the personalty, and [iii] keep the rents already paid.
First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in question
under a car plan for executives of the Elizalde group of companies. Under a typical car plan, the
company advances the purchase price of a car to be paid back by the employee through monthly
deductions from his salary. The company retains ownership of the motor vehicle until it shall have been
fully paid for.[if !supportFootnotes][7][endif] However, retention of registration of the car in the companys name is
only a form of a lien on the vehicle in the event that the employee would abscond before he has fully
paid for it. There are also stipulations in car plan agreements to the effect that should the employment
of the employee concerned be terminated before all installments are fully paid, the vehicle will be taken
by the employer and all installments paid shall be considered rentals per agreement.[if !supportFootnotes][8][endif]
This Court has long been aware of the practice of vendors of personal property of denominating a
contract of sale on installment as one of lease to prevent the ownership of the object of the sale from
passing to the vendee until and unless the price is fully paid. As this Court noted in Vda. de Jose v.
Barrueco:[if !supportFootnotes][9][endif]
Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a
bargain in that form, for one reason or another, have frequently resorted to the device of making
contracts in the form of leases either with options to the buyer to purchase for a small consideration at
the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent
throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions
are leases only in name. The so-called rent must necessarily be regarded as payment of the price in
installments since the due payment of the agreed amount results, by the terms of the bargain, in the
transfer of title to the lessee.
In an earlier case, Manila Gas Corporation v. Calupitan,[if !supportFootnotes][10][endif]
which involved a lease
agreement of a stove and a water heater, the Court said:
. . . [W]e are of the opinion, and so hold, that when in a so-called contract of lease of personal property
it is stipulated that the alleged lessee shall pay a certain amount upon signing the contract, and on or
before the 5th of every month, another specific amount, by way of rental, giving the alleged lessee the
right of option to buy the said personal property before the expiration of the period of lease, which is the
period necessary for the payment of the said amount at the rate of so much a month, deducting the
payments made by way of advance and alleged monthly rentals, and the said alleged lessee makes the
advance payment and other monthly installments, noting in his account and in the receipts issued to
him that said payments are on account of the price of the personal property allegedly leased, said
contract is one of sale on installment and not of lease.[if !supportFootnotes][11][endif]
In U.S. Commercial v. Halili,[if !supportFootnotes][12][endif] a lease agreement was declared to be in fact a sale of
personal property by installment. Said the Court:[if !supportFootnotes][13][endif]
. . . There can hardly be any question that the so-called contracts of lease on which the present action
is based were veritable leases of personal property with option to purchase, and as such come within
the purview of the above article [Art. 1454-A of the old Civil Code on sale of personal property by
installment]. In fact the instruments (exhibits `A and `B) embodying the contracts bear the heading or
title `Lease-Sale (Lease-Sale of Transportation and/or Mechanical Equipment). The contracts fix the
value of the vehicles conveyed to the lessee and expressly refer to the remainder of said value after
deduction of the down payment made by the lessee as `the unpaid balance of the purchase price of the
leased equipment. The contracts also provide that upon the full value (plus stipulated interest) being
paid, the lease would terminate and title to the leased property would be transferred to the lessee.
Indeed, as the defendant-appellant points out, the inclusion of a clause waiving benefit of article 1454-A
of the old Civil Code is conclusive proof of the parties understanding that they were entering into a
lease contract with option to purchase which come within the purview of said article.
Being leases of personal property with option to purchase as contemplated in the above article, the
contracts in question are subject to the provision that when the lessor in such case has chosen to
deprive the lessee of the enjoyment of such personal property, he shall have no further action against
the lessee for the recovery of any unpaid balance owing by the latter, agreement to the contrary being
null and void.
It was held that in choosing to deprive the defendant of possession of the leased vehicles, the plaintiff
waived its right to bring an action to recover unpaid rentals on the said vehicles.
In the case at bar, although the agreement provides for the payment by private respondents of monthly
rentals, the fifth paragraph thereof gives them the option to purchase the motor vehicle at the end of the
5th year or upon payment of the 60th monthly rental when all monthly rentals shall be applied to the
payment of the full purchase price of the car. It is clear that the transaction in this case is a lease in
name only. The so-called monthly rentals are in truth monthly amortizations on the price of the car.
Second. The contract being one of sale on installment, the Court of Appeals correctly applied to it the
following provisions of the Civil Code:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendees failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal
property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of
the thing.
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the
exercise of the others.[if !supportFootnotes][14][endif] This limitation applies to contracts purporting to be leases of
personal property with option to buy by virtue of Art. 1485.[if !supportFootnotes][15][endif] The condition that the
lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art.
1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover
possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy
sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. [if
!supportFootnotes][16][endif]
The car was not returned to private respondent until April 16, 1989, after two (2)
years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution. [if
!supportFootnotes][17][endif]
Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that they
were supposed to pay as of May 1986, plus interest at the legal rate. [if !supportFootnotes][18][endif] At the same
time, it prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle complete
with accessories and equipment.[if !supportFootnotes][19][endif] In the event the car could not be delivered to
petitioner, it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount
of P60,000.00, the estimated actual value of the car, plus accrued monthly rentals thereof with interests
at the rate of fourteen percent (14%) per annum until fully paid. [if !supportFootnotes][20][endif] This prayer of
course cannot be granted, even assuming that private respondents have defaulted in the payment of
their obligation. This led the trial court to say that petitioner wanted to eat its cake and have it too.
Notwithstanding this impossibility in petitioners choice of remedy, this case should be considered as
one for specific performance, pursuant to Art. 1484(1), consistent with its prayer with respect to the
unpaid installments as of May 1986. In this view, the prayer for the issuance of a writ of replevin is only
for the purpose of insuring specific performance by private respondents.
Both the trial court and the Court of Appeals correctly ruled that private respondents could no longer be
held liable for the amounts of P39,054.86 or P60,000.00 because private respondents had fulfilled their
part of the obligation. The agreement does not provide for the payment of interest on unpaid monthly
rentals or installments because it was entered into in pursuance of a car plan adopted by the company
for the benefit of its deserving employees. As the trial court correctly noted, the car plan was intended
to give additional benefits to executives of the Elizalde group of companies.
Petitioner contends that the promissory note provides for such interest payment. However, as the Court
of Appeals held:
The promissory note in which the 2% monthly interest on delayed payments appears does not form part
of the contract. There is no consideration for the promissory note. There is nothing to show that plaintiff
advanced the purchase price of the vehicle for Lantan so as to make the latter indebted to the former
for the amount stated in the promissory note. Thus, as stated in the complaint: That sometime in
January, 1980, defendant Rolando Lantan entered into an agreement with the plaintiff for the lease of a
motor vehicle supplied by the latter, with the option to purchase at the end of the period of lease . . . . In
other words, plaintiff did not buy the vehicle for Rolando Lantan, advancing the purchase price for that
purpose. There is nothing in the complaint or in the evidence to show such arrangement. Therefore,
there was no indebtedness secured by a promissory note to speak of. There being no consideration for
the promissory note, the same, including the penalty clause contained thereon, has no binding effect. [if
!supportFootnotes][21][endif]

There is no evidence that private respondents received the amount of P60,639.00 indicated in the
promissory note as its value. What was proven below is the fact that private respondents received from
petitioner the 2-door Colt Lancer car which was valued at P60,000 and for which private respondent
Rolando Lantan paid monthly amortizations of P1,010.65 through salary deductions.
Indeed, as already stated, private respondents default in paying installments was due to the cessation
of operations of Elizalde Steel Corporation, petitioners sister company. Petitioners acceptance of
payments made by private respondents through cash and checks could have been impelled solely by
petitioners inability to deduct the amortizations from private respondent Rolando Lantans salary which
he stopped receiving when his employment was terminated in September 1982. Apparently, to
minimize the adverse consequences of the termination of private respondents employment, petitioner
accepted even late payments. That petitioner accepted payments from private respondent Rolando
Lantan more than two (2) years after the latters employment had been terminated constitutes a waiver
of petitioners right to collect interest upon the delayed payments. The 2% surcharge is not provided for
in the agreement. Its collection by the company would in fact run counter to the purpose of providing
added emoluments to its deserving employees. Consequently, the total amount of P61,070.94 already
paid to petitioner should be considered payment of the full purchase price of the car or the total
installments paid.
Third. Private respondents presented evidence that they felt bad, were worried, embarrassed and
mentally tortured by the repossession of the car.[if !supportFootnotes][22][endif] This has not been rebutted by
petitioner. There is thus a factual basis for the award of moral damages. In addition, petitioner acted in
a wanton, fraudulent, reckless and oppressive manner in filing the instant case, hence, the award of
exemplary damages is justified.[if !supportFootnotes][23][endif] The award of attorneys fees is likewise proper
considering that private respondents were compelled to incur expenses to protect their rights. [if
!supportFootnotes][24][endif]

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with costs against petitioner.
SO ORDERED.
PCI LEASING AND FINANCE, INC.,Petitioner,
- versus -
GIRAFFE-X CREATIVE IMAGING, INC.,Respondent.
GARCIA, J.:
On a pure question of law involving the application of Republic Act (R.A.) No. 5980, as amended by
R.A. No. 8556 in relation to Articles 1484 and 1485 of the Civil Code, petitioner PCI Leasing and
Finance, Inc. (PCI LEASING, for short) has directly come to this Court via this petition for review under
Rule 45 of the Rules of Court to nullify and set aside the Decision and Resolution dated December 28,
1998 and February 15, 2000, respectively, of the Regional Trial Court (RTC) of Quezon City, Branch
227, in its Civil Case No. Q-98-34266, a suit for a sum of money and/or personal property with prayer
for a writ of replevin, thereat instituted by the petitioner against the herein respondent, Giraffe-X
Creative Imaging, Inc. (GIRAFFE, for brevity).
The facts:
On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease
Agreement,[if !supportFootnotes][1][endif] whereby the former leased out to the latter one (1) set of Silicon High
Impact Graphics and accessories worth P3,900,00.00 and one (1) unit of Oxberry Cinescan 6400-10
worth P6,500,000.00. In connection with this agreement, the parties subsequently signed two (2)
separate documents, each denominated as Lease Schedule.[if !supportFootnotes][2][endif] Likewise forming parts
of the basic lease agreement were two (2) separate documents denominated Disclosure Statements of
Loan/Credit Transaction (Single Payment or Installment Plan)[if !supportFootnotes][3][endif] that GIRAFFE also
executed for each of the leased equipment. These disclosure statements inter alia described GIRAFFE,
vis--vis the two aforementioned equipment, as the borrower who acknowledged the net proceeds of the
loan, the net amount to be financed, the financial charges, the total installment payments that it must
pay monthly for thirty-six (36) months, exclusive of the 36% per annum late payment charges. Thus, for
the Silicon High Impact Graphics, GIRAFFE agreed to pay P116,878.21 monthly, and for Oxberry
Cinescan, P181.362.00 monthly. Hence, the total amount GIRAFFE has to pay PCI LEASING for 36
months of the lease, exclusive of monetary penalties imposable, if proper, is as indicated below:
P116,878.21 @ month (for the Silicon High
Impact Graphics) x 36 months = P 4,207,615.56
-- PLUS--
P181,362.00 @ month (for the Oxberry
Cinescan) x 36 months = P 6,529,032.00
Total Amount to be paid by GIRAFFE
(or the NET CONTRACT AMOUNT) P 10,736,647.56
By the terms, too, of the Lease Agreement, GIRAFFE undertook to remit the amount of P3,120,000.00
by way of guaranty deposit, a sort of performance and compliance bond for the two equipment.
Furthermore, the same agreement embodied a standard acceleration clause, operative in the event
GIRAFFE fails to pay any rental and/or other accounts due.
A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment
obligations. And following a three-month default, PCI LEASING, through one Atty. Florecita R.
Gonzales, addressed a formal pay-or-surrender-equipment type of demand letter[if !supportFootnotes][4][endif]
dated February 24, 1998 to GIRAFFE.
The demand went unheeded.
Hence, on May 4, 1998, in the RTC of Quezon City, PCI LEASING instituted the instant case against
GIRAFFE. In its complaint,[if !supportFootnotes][5][endif] docketed in said court as Civil Case No. 98-34266 and
raffled to Branch 227[if !supportFootnotes][6][endif] thereof, PCI LEASING prayed for the issuance of a writ of
replevin for the recovery of the leased property, in addition to the following relief:
2. After trial, judgment be rendered in favor of plaintiff [PCI LEASING] and against the defendant
[GIRAFFE], as follows:
a. Declaring the plaintiff entitled to the possession of the subject properties;
b. Ordering the defendant to pay the balance of rental/obligation in the total amount of P8,248,657.47
inclusive of interest and charges thereon;
c. Ordering defendant to pay plaintiff the expenses of litigation and cost of suit. (Words in bracket
added.)
Upon PCI LEASINGs posting of a replevin bond, the trial court issued a writ of replevin, paving the way
for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic lease
agreement.
Instead of an answer, GIRAFFE, as defendant a quo, filed a Motion to Dismiss, therein arguing that the
seizure of the two (2) leased equipment stripped PCI LEASING of its cause of action. Expounding on
the point, GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on installment sales of
personal property, PCI LEASING is barred from further pursuing any claim arising from the lease
agreement and the companion contract documents, adding that the agreement between the parties is in
reality a lease of movables with option to buy. The given situation, GIRAFFE continues, squarely brings
into applicable play Articles 1484 and 1485 of the Civil Code, commonly referred to as the Recto Law.
The cited articles respectively provide:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary
shall be void. (Emphasis added.)
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal
property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of
the thing.
It is thus GIRAFFEs posture that the aforequoted Article 1484 of the Civil Code applies to its contractual
relation with PCI LEASING because the lease agreement in question, as supplemented by the
schedules documents, is really a lease with option to buy under the companion article, Article 1485.
Consequently, so GIRAFFE argues, upon the seizure of the leased equipment pursuant to the writ of
replevin, which seizure is equivalent to foreclosure, PCI LEASING has no further recourse against it. In
brief, GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is
proscribed by the application to the case of Articles 1484 and 1485, supra, of the Civil Code.
In its Opposition to the motion to dismiss, PCI LEASING maintains that its contract with GIRAFFE is a
straight lease without an option to buy. Prescinding therefrom, PCI LEASING rejects the applicability to
the suit of Article 1484 in relation to Article 1485 of the Civil Code, claiming that, under the terms and
conditions of the basic agreement, the relationship between the parties is one between an ordinary
lessor and an ordinary lessee.
In a decision[if !supportFootnotes][7][endif] dated December 28, 1998, the trial court granted GIRAFFEs motion to
dismiss mainly on the interplay of the following premises: 1) the lease agreement package, as
memorialized in the contract documents, is akin to the contract contemplated in Article 1485 of the Civil
Code, and 2) GIRAFFEs loss of possession of the leased equipment consequent to the enforcement of
the writ of replevin is akin to foreclosure, the condition precedent for application of Articles 1484 and
1485 [of the Civil Code]. Accordingly, the trial court dismissed Civil Case No. Q-98-34266, disposing as
follows:
WHEREFORE, premises considered, the defendant [GIRAFFE] having relinquished any claim to the
personal properties subject of replevin which are now in the possession of the plaintiff [PCI LEASING],
plaintiff is DEEMED fully satisfied pursuant to the provisions of Articles 1484 and 1485 of the New Civil
Code. By virtue of said provisions, plaintiff is DEEMED estopped from further action against the
defendant, the plaintiff having recovered thru (replevin) the personal property sought to be
payable/leased on installments, defendants being under protection of said RECTO LAW. In view
thereof, this case is hereby DISMISSED.
With its motion for reconsideration having been denied by the trial court in its resolution of February 15,
2000,[if !supportFootnotes][8][endif] petitioner has directly come to this Court via this petition for review raising the
sole legal issue of whether or not the underlying Lease Agreement, Lease Schedules and the
Disclosure Statements that embody the financial leasing arrangement between the parties are covered
by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code.
As in the court below, petitioner contends that the financial leasing arrangement it concluded with the
respondent represents a straight lease covered by R.A. No. 5980, the Financing Company Act, as last
amended by R.A. No. 8556, otherwise known as Financing Company Act of 1998, and is outside the
application and coverage of the Recto Law. To the petitioner, R.A. No. 5980 defines and authorizes its
existence and business.
The recourse is without merit.
R.A. No. 5980, in its original shape and as amended, partakes of a supervisory or regulatory legislation,
merely providing a regulatory framework for the organization, registration, and regulation of the
operations of financing companies. As couched, it does not specifically define the rights and obligations
of parties to a financial leasing arrangement. In fact, it does not go beyond defining commercial or
transactional financial leasing and other financial leasing concepts. Thus, the relevancy of Article 18
of the Civil Code which reads:
Article 18. - In matters which are governed by special laws, their deficiency shall be supplied by the
provisions of this [Civil] Code.
Petitioner foists the argument that the Recto Law, i.e., the Civil Code provisions on installment sales of
movable property, does not apply to a financial leasing agreement because such agreement, by
definition, does not confer on the lessee the option to buy the property subject of the financial lease. To
the petitioner, the absence of an option-to-buy stipulation in a financial leasing agreement, as
understood under R.A. No. 8556, prevents the application thereto of Articles 1484 and 1485 of the Civil
Code.
We are not persuaded.
The Court can allow that the underlying lease agreement has the earmarks or made to appear as a
financial leasing,[if !supportFootnotes][9][endif] a term defined in Section 3(d) of R.A. No. 8556 as -
a mode of extending credit through a non-cancelable lease contract under which the lessor purchases
or acquires, at the instance of the lessee, machinery, equipment, office machines, and other movable or
immovable property in consideration of the periodic payment by the lessee of a fixed amount of money
sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any
incidental expenses and a margin of profit over an obligatory period of not less than two (2) years
during which the lessee has the right to hold and use the leased property but with no obligation or
option on his part to purchase the leased property from the owner-lessor at the end of the lease
contract.
In its previous holdings, however, the Court, taking into account the following mix: the imperatives of
equity, the contractual stipulations in question and the actuations of parties vis--vis their contract,
treated disguised transactions technically tagged as financing lease, like here, as creating a different
contractual relationship. Notable among the Courts decisions because of its parallelism with this case is
BA Finance Corporation v. Court of Appeals[if !supportFootnotes][10][endif] which involved a motor vehicle.
Thereat, the Court has treated a purported financial lease as actually a sale of a movable property on
installments and prevented recovery beyond the buyers arrearages. Wrote the Court in BA Finance:
The transaction involved is one of a "financial lease" or "financial leasing," where a financing
company would, in effect, initially purchase a mobile equipment and turn around to lease it to a
client who gets, in addition, an option to purchase the property at the expiry of the lease period.
The pertinent provisions of [RA] 5980, thus implemented, read:
"'Financing companies,' are primarily organized for the purpose of extending credit facilities to
consumers either by leasing of motor vehicles, and office machines and equipment, and other movable
property."
"'Credit' shall mean any loan, any contract to sell, or sale or contract of sale of property or service,
under which part or all of the price is payable subsequent to the making of such sale or contract; any
rental-purchase contract; .;"
The foregoing provisions indicate no less than a mere financing scheme extended by a financing
company to a client in acquiring a motor vehicle and allowing the latter to obtain the immediate
possession and use thereof pending full payment of the financial accommodation that is given.
In the case at bench, xxx. [T]he term of the contract [over a motor vehicle] was for thirty six (36)
months at a "monthly rental" (P1,689.40), or for a total amount of P60,821.28. The contract also
contained [a] clause [requiring the Lessee to give a guaranty deposit in the amount of P20,800.00] xxx
After the private respondent had paid the sum of P41,670.59, excluding the guaranty deposit of
P20,800.00, he stopped further payments. Putting the two sums together, the financing company had in
its hands the amount of P62,470.59 as against the total agreed "rentals" of P60,821.28 or an excess of
P1,649.31.
The respondent appellate court considered it only just and equitable for the guaranty deposit made by
the private respondent to be applied to his arrearages and thereafter to hold the contract terminated.
Adopting the ratiocination of the court a quo, the appellate court said:
xxx In view thereof, the guaranty deposit of P20,800.00 made by the defendant should and must be
credited in his favor, in the interest of fairness, justice and equity. The plaintiff should not be allowed
to unduly enrich itself at the expense of the defendant. xxx This is even more compelling in this
case where although the transaction, on its face, appear ostensibly, to be a contract of lease, it
is actually a financing agreement, with the plaintiff financing the purchase of defendant's
automobile . The Court is constrained, in the interest of truth and justice, to go into this aspect of the
transaction between the plaintiff and the defendant with all the facts and circumstances existing in
this case, and which the court must consider in deciding the case, if it is to decide the case according
to all the facts. xxx.
Considering the factual findings of both the court a quo and the appellate court, the only logical
conclusion is that the private respondent did opt, as he has claimed, to acquire the motor
vehicle, justifying then the application of the guarantee deposit to the balance still due and
obligating the petitioner to recognize it as an exercise of the option by the private respondent.
The result would thereby entitle said respondent to the ownership and possession of the vehicle
as the buyer thereof. We, therefore, see no reversible error in the ultimate judgment of the appellate
court.[if !supportFootnotes][11][endif] (Italics in the original; underscoring supplied and words in bracket added.)
In Cebu Contractors Consortium Co. v. Court of Appeals,[if !supportFootnotes][12][endif] the Court viewed and thus
declared a financial lease agreement as having been simulated to disguise a simple loan with security,
it appearing that the financing company purchased equipment already owned by a capital-strapped
client, with the intention of leasing it back to the latter.
In the present case, petitioner acquired the office equipment in question for their subsequent lease to
the respondent, with the latter undertaking to pay a monthly fixed rental therefor in the total amount of
P292,531.00, or a total of P10,531,116.00 for the whole 36 months. As a measure of good faith,
respondent made an up-front guarantee deposit in the amount of P3,120,000.00. The basic agreement
provides that in the event the respondent fails to pay any rental due or is in a default situation, then the
petitioner shall have cumulative remedies, such as, but not limited to, the following:[if !supportFootnotes][13][endif]
[if !supportLists]1. [endif]Obtain possession of the property/equipment;
[if !supportLists]2. [endif]Retain all amounts paid to it. In addition, the guaranty deposit may
be applied towards the payment of liquidated damages;
[if !supportLists]3. [endif]Recover all accrued and unpaid rentals;
[if !supportLists]4. [endif]Recover all rentals for the remaining term of the lease had it
not been cancelled, as additional penalty;
[if !supportLists]5. [endif]Recovery of any and all amounts advanced by PCI LEASING for
GIRAFFEs account xxx;
[if !supportLists]6. [endif]Recover all expenses incurred in repossessing, removing, repairing
and storing the property; and,
[if !supportLists]7. [endif]Recover all damages suffered by PCI LEASING by reason of the
default.
In addition, Sec. 6.1 of the Lease Agreement states that the guaranty deposit shall be forfeited in the
event the respondent, for any reason, returns the equipment before the expiration of the lease.
At bottom, respondent had paid the equivalent of about a years lease rentals, or a total of
P3,510,372.00, more or less. Throw in the guaranty deposit (P3,120,000.00) and the respondent had
made a total cash outlay of P6,630,372.00 in favor of the petitioner. The replevin-seized leased
equipment had, as alleged in the complaint, an estimated residual value of P6,900.000.00 at the time
Civil Case No. Q-98-34266 was instituted on May 4, 1998. Adding all cash advances thus made to the
residual value of the equipment, the total value which the petitioner had actually obtained by virtue of
its lease agreement with the respondent amounts to P13,530,372.00 (P3,510,372.00 + P3,120,000.00
+ P6,900.000.00 = P13,530,372.00).
The acquisition cost for both the Silicon High Impact Graphics equipment and the Oxberry Cinescan
was, as stated in no less than the petitioners letter to the respondent dated November 11, 1996 [if
!supportFootnotes][14][endif]
approving in the latters favor a lease facility, was P8,100,000.00. Subtracting the
acquisition cost of P8,100,000.00 from the total amount, i.e., P13,530,372.00, creditable to the
respondent, it would clearly appear that petitioner realized a gross income of P5,430,372.00 from its
lease transaction with the respondent. The amount of P5,430,372.00 is not yet a final figure as it does
not include the rentals in arrears, penalties thereon, and interest earned by the guaranty deposit.
As may be noted, petitioners demand letter[if !supportFootnotes][15][endif] fixed the amount of P8,248,657.47 as
representing the respondents rental balance which became due and demandable consequent to the
application of the acceleration and other clauses of the lease agreement. Assuming, then, that the
respondent may be compelled to pay P8,248,657.47, then it would end up paying a total of
P21,779,029.47 (P13,530,372.00 + P8,248,657.47 = P21,779,029.47) for its use - for a year and two
months at the most - of the equipment. All in all, for an investment of P8,100,000.00, the petitioner
stands to make in a years time, out of the transaction, a total of P21,779,029.47, or a net of
P13,679,029.47, if we are to believe its outlandish legal submission that the PCI LEASING-GIRAFFE
Lease Agreement was an honest-to-goodness straight lease.
A financing arrangement has a purpose which is at once practical and salutary. R.A. No. 8556 was, in
fact, precisely enacted to regulate financing companies operations with the end in view of strengthening
their critical role in providing credit and services to small and medium enterprises and to curtail acts and
practices prejudicial to the public interest, in general, and to their clienteles, in particular.[if
!supportFootnotes][16][endif]
As a regulated activity, financing arrangements are not meant to quench only the
thirst for profit. They serve a higher purpose, and R.A. No. 8556 has made that abundantly clear.
We stress, however, that there is nothing in R.A. No. 8556 which defines the rights and obligations, as
between each other, of the financial lessor and the lessee. In determining the respective responsibilities
of the parties to the agreement, courts, therefore, must train a keen eye on the attendant facts and
circumstances of the case in order to ascertain the intention of the parties, in relation to the law and the
written agreement. Likewise, the public interest and policy involved should be considered. It may not be
amiss to state that, normally, financing contracts come in a standard prepared form, unilaterally thought
up and written by the financing companies requiring only the personal circumstances and signature of
the borrower or lessee; the rates and other important covenants in these agreements are still largely
imposed unilaterally by the financing companies. In other words, these agreements are usually one-
sided in favor of such companies. A perusal of the lease agreement in question exposes the many
remedies available to the petitioner, while there are only the standard contractual prohibitions against
the respondent. This is characteristic of standard printed form contracts.
There is more. In the adverted February 24, 1998 demand letter[if !supportFootnotes][17][endif] sent to the
respondent, petitioner fashioned its claim in the alternative: payment of the full amount of
P8,248,657.47, representing the unpaid balance for the entire 36-month lease period or the surrender
of the financed asset under pain of legal action. To quote the letter:
Demand is hereby made upon you to pay in full your outstanding balance in the amount of
P8,248,657.47 on or before March 04, 1998 OR to surrender to us the one (1) set Silicon High Impact
Graphics and one (1) unit Oxberry Cinescan 6400-10
We trust you will give this matter your serious and preferential attention. (Emphasis added).
Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND the return of the
equipment; only either one of the two was required. The demand letter was prepared and signed by
Atty. Florecita R. Gonzales, presumably petitioners counsel. As such, the use of or instead of and in
the letter could hardly be treated as a simple typographical error, bearing in mind the nature of the
demand, the amount involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales
would have known that a world of difference exists between and and or in the manner that the word
was employed in the letter.
A rule in statutory construction is that the word "or" is a disjunctive term signifying dissociation and
independence of one thing from other things enumerated unless the context requires a different
interpretation.[if !supportFootnotes][18][endif]
In its elementary sense, "or", as used in a statute, is a disjunctive article indicating an alternative. It
often connects a series of words or propositions indicating a choice of either. When "or" is used, the
various members of the enumeration are to be taken separately. [if !supportFootnotes][19][endif]
The word "or" is a disjunctive term signifying disassociation and independence of one thing from each
of the other things enumerated.[if !supportFootnotes][20][endif]
The demand could only be that the respondent need not return the equipment if it paid the
P8,248,657.47 outstanding balance, ineluctably suggesting that the respondent can keep possession of
the equipment if it exercises its option to acquire the same by paying the unpaid balance of the
purchase price. Stated otherwise, if the respondent was not minded to exercise its option of acquiring
the equipment by returning them, then it need not pay the outstanding balance. This is the logical
import of the letter: that the transaction in this case is a lease in name only. The so-called monthly
rentals are in truth monthly amortizations of the price of the leased office equipment.
On the whole, then, we rule, as did the trial court, that the PCI LEASING- GIRAFFE lease agreement is
in reality a lease with an option to purchase the equipment. This has been made manifest by the
actions of the petitioner itself, foremost of which is the declarations made in its demand letter to the
respondent. There could be no other explanation than that if the respondent paid the balance, then it
could keep the equipment for its own; if not, then it should return them. This is clearly an option to
purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply.
The present case reflects a situation where the financing company can withhold and conceal - up to The imperatives of honest dealings given prominence in the Civil Code under the heading: Human
the last moment - its intention to sell the property subject of the finance lease, in order that the Relations, provide another reason why we must hold the petitioner to its word as embodied in its
provisions of the Recto Law may be circumvented. It may be, as petitioner pointed out, that the basic demand letter. Else, we would witness a situation where even if the respondent surrendered the
lease agreement does not contain a purchase option clause. The absence, however, does not equipment voluntarily, the petitioner can still sue upon its claim. This would be most unfair for the
necessarily argue against the idea that what the parties are into is not a straight lease, but a lease with respondent. We cannot allow the petitioner to renege on its word. Yet more than that, the very word or
option to purchase. This Court has, to be sure, long been aware of the practice of vendors of personal as used in the letter conveys distinctly its intention not to claim both the unpaid balance and the
property of denominating a contract of sale on installment as one of lease to prevent the ownership of equipment. It is not difficult to discern why: if we add up the amounts paid by the respondent, the
the object of the sale from passing to the vendee until and unless the price is fully paid. As this Court residual value of the property recovered, and the amount claimed by the petitioner as sued upon herein
noted in Vda. de Jose v. Barrueco:[if !supportFootnotes][21][endif (for a total of P21,779,029.47), then it would end up making an instant killing out of the transaction at
the expense of its client, the respondent. The Recto Law was precisely enacted to prevent this kind of
Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a aberration. Moreover, due to considerations of equity, public policy and justice, we cannot allow this to
bargain in that form, for one reason or another, have frequently resorted to the device of making happen. Not only to the respondent, but those similarly situated who may fall prey to a similar scheme.
contracts in the form of leases either with options to the buyer to purchase for a small
consideration at the end of term, provided the so-called rent has been duly paid, or with WHEREFORE, the instant petition is DENIED and the trial courts decision is AFFIRMED.
stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It
is obvious that such transactions are leases only in name. The so-called rent must necessarily be Costs against petitioner.
regarded as payment of the price in installments since the due payment of the agreed amount results,
by the terms of the bargain, in the transfer of title to the lessee.
SO ORDERED.
In another old but still relevant case of U.S. Commercial v. Halili,[if !supportFootnotes][22][endif] a lease agreement
was declared to be in fact a sale of personal property by installments. Said the Court:
. . . There can hardly be any question that the so-called contracts of lease on which the present action
is based were veritable leases of personal property with option to purchase, and as such come within
the purview of the above article [Art. 1454-A of the old Civil Code on sale of personal property by
installment]. xxx
Being leases of personal property with option to purchase as contemplated in the above article, the
contracts in question are subject to the provision that when the lessor in such case has chosen to
deprive the lessee of the enjoyment of such personal property, he shall have no further action against
the lessee for the recovery of any unpaid balance owing by the latter, agreement to the contrary being
null and void.
In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the
petitioner waived its right to bring an action to recover unpaid rentals on the said leased items.
Paragraph (3), Article 1484 in relation to Article 1485 of the Civil Code, which we are hereunder re-
reproducing, cannot be any clearer.
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal
property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of
the thing.
As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals, [if !supportFootnotes][23][endif] the
remedies provided for in Article 1484 of the Civil Code are alternative, not cumulative. The exercise of
one bars the exercise of the others. This limitation applies to contracts purporting to be leases of
personal property with option to buy by virtue of the same Article 1485. The condition that the lessor
has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article
1485 was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer
for replevin to recover possession of the office equipment.[if !supportFootnotes][24][endif] By virtue of the writ of
seizure issued by the trial court, the petitioner has effectively deprived respondent of their use, a
situation which, by force of the Recto Law, in turn precludes the former from maintaining an action for
recovery of accrued rentals or the recovery of the balance of the purchase price plus interest. [if
!supportFootnotes][25][endif]
G.R. No. 202358 November 27, 2013
GATCHALIAN REALTY, INC., Petitioner,
vs.
EVELYN M. ANGELES, Respondent.
DECISION
CARPIO, J.:
The Case G.R. No. 202358 is a petition for review1 assailing the Decision2 promulgated on 11
November 2011 as well as the Resolution3 promulgated on 19 June 2012 by the Court of Appeals (CA)
in CA-G.R. SP No. 105964. The CA reversed and set aside the 8 October 2008 Order 4 of Branch 197
of the Regional Trial Court of Las Pias City (RTC) in Civil Case No. LP-07-0143. The CA also
dismissed the unlawful detainer case filed by Gatchalian Realty, Inc. GRI) against Evelyn M. Angeles
(Angeles).
The Metropolitan Trial Court (MeTC) rendered on 28 February 2006 a decision5 in Civil Case No. 6809
in favor of GRI and against Angeles. In its decision6 dated 13 February 2008, the RTC set aside the
decision of the MeTC and dismissed the ejectment case filed by GRI against Angeles. The RTC
reversed itself in an Order7 dated 17 June 2008, and affirmed with modification the decision of the
MeTC. The RTC denied Angeles Motion for Reconsideration in an Order dated 8 October 2008.
The Facts
The CA recited the facts as follows:
On 28 December 1994, [Angeles] purchased a house (under Contract to Sell No. 2272) and lot (under
Contract to Sell No. 2271) from [GRI] valued at Seven Hundred Fifty Thousand Pesos (Php
750,000.00) and Four Hundred Fifty Thousand Pesos (Php 450,000.00), respectively, with twenty-four
percent (24%) interest per annum to be paid by installment within a period of ten years.
The house and lot were delivered to [Angeles] in 1995. Nonetheless, under the contracts to sell
executed between the parties, [GRI] retained ownership of the property until full payment of the
purchase price.
After sometime, [Angeles] failed to satisfy her monthly installments with [GRI]. [Angeles] was only able
to pay thirty-five (35) installments for Contract to Sell No. 2271 and forty-eight (48) installments for
Contract to Sell No. 2272. According to [GRI], [Angeles] was given at least twelve (12) notices for
payment in a span of three (3) years but she still failed to settle her account despite receipt of said
notices and without any valid reason. [Angeles] was again given more time to pay her dues and
likewise furnished with three (3) notices reminding her to pay her outstanding balance with warning of
impending legal action and/or rescission of the contracts, but to no avail. After giving a total of fifty-one
(51) months grace period for both contracts and in consideration of the continued disregard of the
demands of [GRI], [Angeles] was served with a notice of notarial rescission dated 11 September 2003
by registered mail which she allegedly received on 19 September 2003 as evidenced by a registry
return receipt.
Consequently [Angeles] was furnished by [GRI] with a demand letter dated 26 September 2003
demanding her to pay the amount of One Hundred Twelve Thousand Three Hundred Four Pesos and
Forty Two Centavos (Php 112,304.42) as outstanding reasonable rentals for her use and occupation of
the house and lot as of August 2003 and to vacate the same. She was informed in said letter that the
fifty percent (50%) refundable amount that she is entitled to has already been deducted with the
reasonable value for the use of the properties or the reasonable rentals she incurred during such period
that she was not able to pay the installments due her. After deducting the rentals from the refundable
amount, she still had a balance of One Hundred Twelve Thousand Three Hundred Four Pesos and
Forty Two Centavos (Php 112,304.42) which she was required to settle within fifteen (15) days from
receipt of the letter.
Allegedly, [Angeles] subsequently sent postal money orders through registered mail to [GRI]. In a letter
dated 27 January 2004 [Angeles] was notified by [GRI] of its receipt of a postal money order sent by
[Angeles]. More so, she was requested to notify [GRI] of the purpose of the payment. [Angeles] was
informed that if the postal money order was for her monthly amortization, the same will not be accepted
and she was likewise requested to pick it up from [GRIs] office. On 29 January 2004, another mail with
a postal money order was sent by [Angeles] to [GRI]. In her 6 February 2004 letter, [GRI] was informed
that the postal money orders were supposed to be payments for her monthly amortization. Again, in its
8 February 2004 letter, it was reiterated by [GRI] that the postal money orders will only be accepted if
the same will serve as payment of her outstanding rentals and not as monthly amortization. Four (4)
more postal money orders were sent by [Angeles] by registered mail to [GRI].
For her continued failure to satisfy her obligations with [GRI] and her refusal to vacate the house and
lot, [GRI] filed a complaint for unlawful detainer against [Angeles] on 11 November 2003. 8
The MeTCs Ruling
The MeTC of Branch 79, Las Pias City ruled in favor of GRI. The MeTC determined that the case was
for an unlawful detainer, and thus assumed jurisdiction. The MeTC further held that the facts show that
GRI was able to establish the validity of the rescission:
A careful scrutiny of the evidence presented by both parties regarding payments made clearly show
that [Angeles] defaulted in the payment of the monthly installments due. Repeated notices and
warnings were given to her but she still and failed to update her account (Exhibits "E" to "E-1" and "G"
to "G-2", [GRIs] Position Paper). This is a clear violation of the condition of their contracts. An ample
grace period, i.e., 51 months, was granted to her by [GRI] but she still failed to pay the whole amount
due as provided in paragraph 6 of the contracts and Section 3 of RA 6552. [Angeles] has been in
arrears beyond the grace period provided under the contracts and law. The last payment received by
[GRI], which represents [Angeles] 35th installment, was made in July 2002. On the other hand, the last
payment, which represents her 48th installment, [was] received [by GRI] in April 1999. Thus, [GRI], as
seller, can terminate or rescind the contract by giving her the notice of notarial rescission of the
contracts. The notarial rescission of the contracts was executed on September 26, 2003 and served
upon [Angeles].9
Although the MeTC agreed with Angeles that her total payment is already more than the contracted
amount, the MeTC found that Angeles did not pay the monthly amortizations in accordance with the
terms of the contract. Interests and penalties accumulated and increased the amount due. Furthermore,
the MeTC found the monthly rentals imposed by GRI reasonable and within the range of the prevailing
rental rates in the vicinity. Compensation between GRI and Angeles legally took effect in accordance
with Article 129010 of the Civil Code. The MeTC ruled that GRI is entitled to P1,060,896.39 by way of
reasonable rental fee less P574,148.40 as of May 2005, thus leaving a balance of P486,747.99 plus the
amount accruing until Angeles finally vacates the subject premises.
The dispositive portion of the MeTCs Decision reads:
WHEREFORE, in view of the foregoing, the Court renders judgment for [GRI] and against [Angeles]
and all persons claiming rights under her, as follows:
1. Ordering [Angeles] and all persons claiming rights under her to immediately vacate the property
subject of this case situated at Blk. 3, Lot 8, Lanzones St., Phase 3-C, Gatchalian Subdivision, Las
Pias City and surrender possession thereof to [GRI];
2. Ordering the encashment of the Postal Money Order (PMO) in the total amount of Php 120,000.00 in
favor of [GRI];
3. Ordering [Angeles] to pay [GRI] the outstanding amount of Php 486,747.99 representing reasonable
monthly rentals of the subject premises as of May 2005 less the amount of the postal money orders
[worth] Php 120,000.00 and all the monthly rentals that will accrue until she vacates the subject
premises and have possession thereof turned over to [GRI], plus the interests due thereon at the rate of
twelve percent (12%) per annum from the time of extra-judicial demand;
4. Ordering [Angeles] to pay [GRI] the amount of Php 20,000.00 as attorneys fees; and
5. Costs of suit.
[Angeles] counterclaims are hereby dismissed for lack of merit.
SO ORDERED.11
On 21 March 2006, Angeles filed a notice of appeal with the MeTC. A week later, on 28 March 2006,
Angeles filed a motion to dismiss based on lack of jurisdiction. The Las Pias RTC denied Angeles
motion to dismiss in an order dated 28 July 2006.
Angeles also filed on 2 October 2006 a Petition for Certiorari with Immediate Issuance of Temporary
Restraining Order and Injunction, which was docketed as SCA Case No. 06-008.12 On 3 May 2007,
Branch 201 of the Las Pias RTC dismissed Angeles Petition for Certiorari for forum-shopping.13
GRI, on the other hand, filed a Motion for Execution Pending Appeal. A Writ of Execution Pending
Appeal was issued in favor of GRI on 25 August 2006, and the properties were turned over to GRI on
10 October 2006.14
The RTCs Ruling
Angeles appeal before Branch 197 of the Las Pias RTC initially produced a result favorable to her.
The RTC found that the case was one for ejectment. As an ejectment court, the MeTCs jurisdiction is
limited only to the issue of possession and does not include the title or ownership of the properties in
question.
The RTC pointed out that Republic Act No. 6552 (R.A. 6552) provides that the non-payment by the
buyer of an installment prevents the obligation of the seller to convey title from acquiring binding force.
Moreover, cancellation of the contract to sell may be done outside the court when the buyer agrees to
the cancellation. In the present case, Angeles denied knowledge of GRIs notice of cancellation.
Cancellation of the contract must be done in accordance with Section 3 of R.A. 6552, which requires a
notarial act of rescission and refund to the buyer of the cash surrender value of the payments on the
properties. Thus, GRI cannot insist on compliance with Section 3(b) of R.A. 6552 by applying Angeles
cash surrender value to the rentals of the properties after Angeles failed to pay the installments due.
Contrary to the MeTCs ruling, there was no legal compensation between GRI and Angeles. The RTC
ruled:
There being no valid cancellation of the Contract to Sell, this Court finds merit in the appeal filed by
[Angeles] and REVERSES the decision of the court a quo. This Court recognized [Angeles] right to
continue occupying the property subject of the Contract to Sell.
WHEREFORE, premises considered, the decision of the lower court is hereby SET ASIDE and the
ejectment case filed by [GRI] is hereby DISMISSED.
SO ORDERED. 15
GRI filed a Motion for Reconsideration. The RTC issued an Order on 17 June 2008 which ruled that
GRI had complied with the provisions of R.A. 6552, and had refunded the cash surrender value to
Angeles upon its cancellation of the contract to sell when it deducted the amount of the cash surrender
value from rentals due on the subject properties. The RTC relied on this Courts ruling in Pilar
Development Corporation v. Spouses Villar.16 The RTC ruled:
Applying the above Pilar ruling in the present case, the cash surrender value of the payments made by
[Angeles] shall be applied to the rentals that accrued on the property occupied by [Angeles], which
rental is fixed by this Court in the amount of seven thousand pesos per month (P7,000.00). The total
rental payment due to Gatchalian Realty Inc. is six hundred twenty three thousand (P623,000.00)
counted from June 1999 to October 2006. According to R.A. 6552, the cash surrender value, which in
this case is equivalent to fifty percent (50%) of the total payment made by [Angeles], should be returned
to her by [GRI] upon cancellation of the contract to sell on September 11, 2003. Admittedly no such
return was ever made by [GRI]. Thus, the cash surrender value, which in this case is equivalent to
P182,094.48 for Contract to Sell No. 2271 and P392,053.92 for Contract to Sell No. 2272 or a total
cash surrender value of P574,148.40 should be deducted from the rental payment or award owing to
[Angeles].
WHEREFORE, premises considered, the Motion for Reconsideration is hereby GRANTED. The earlier
decision dated February 13, 2008 is SET ASIDE and the decision of the court a quo is MODIFIED to
wit:
1. Ordering [Angeles] and all persons claiming rights under her to immediately vacate the property
subject of this case situated at Blk. 3, Lot 8, Lanzones St., Phase 3-C, Gatchalian Subdivision, Las
Pias City and surrender possession thereof to [GRI];
2. Ordering the encashment of the Postal Money Order (PMO) in the total amount of Php 120,000.00 in
favor of [GRI];
3. Ordering defendant, Evelyn M. Angeles, to pay plaintiff, Gatchalian Realty Inc., the outstanding rental
amount of forty eight thousand eight hundred fifty one pesos and sixty centavos (P48,851.60) and legal
interest of six percent (6%) per annum, until the above amount is paid;
4. Ordering [Angeles] to pay [GRI] the amount of Php 20,000.00 as attorneys fees; and
5. Costs of suit.
SO ORDERED.17
The Court of Appeals Ruling
The CA dismissed GRIs complaint for unlawful detainer, and reversed and set aside the RTCs
decision. Although the CA ruled that Angeles received the notice of notarial rescission, it ruled that the
actual cancellation of the contract between the parties did not take place because GRI failed to refund
to Angeles the cash surrender value. The CA denied GRIs motion for reconsideration.
GRI filed the present petition for review before this Court on 10 August 2012.
The Issues
GRI assigned the following errors of the CA:
The court a quo committed reversible error when it declared that there was no refund of the cash
surrender value in favor of [Angeles] pursuant to R.A. No. 6552; and
The court a quo erred in holding that the actual cancellation of the contract between the parties did not
take place.18
The Courts Ruling
GRIs petition has no merit. We affirm the ruling of the CA with modification.
Validity of GRIs
Cancellation of the Contracts
Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment Buyer Protection Act,
has the declared public policy of "protecting buyers of real estate on installment payments against
onerous and oppressive conditions."19 Section 3 of R.A. 6552 provides for the rights of a buyer who has
paid at least two years of installments but defaults in the payment of succeeding installments. Section 3
reads:
Section 3. In all transactions or contracts involving the sale or financing of real estate on installment
payments, including residential condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as
amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least
two years of installments, the buyer is entitled to the following rights in case he defaults in the payment
of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned
by him which is hereby fixed at the rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the buyer only once in every five years
of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent of the total payments made, and, after five years of
installments, an additional five per cent every year but not to exceed ninety per cent of the total
payments made: Provided, That the actual cancellation of the contract shall take place after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total
number of installment payments made.
The sixth paragraph of the contracts between Angeles and GRI similarly provides:
SIXTH - Should the VENDEE/S fail to pay due any monthly installment the VENDOR shall have the
right to cancel this Contract and resell the lot/s subject matter of this contract to another buyer,
provided, however, that where the VENDEE/S has/have already paid at least two years of installments,
the VENDEE/S will have the right:
a) to pay without additional interest, the installments in arrears within the total grace period earned by
him/her/them which is hereby fixed at the rate of one (1) month grace period for every one (1) year of
installment payment made, but this right can be exercised by the VENDEE/S only once in every five (5)
years of the life of this contract and its extension, if any, and
b) if the contract is cancelled, the VENDOR shall refund to the VENDEE/S the cash surrender value of
the payments made on the lot/s equivalent to fifty per cent (50%) of the total payments made, and after
five (5) years of installment, an additional five per cent (5%) every year but not to exceed ninety per
cent (90%) of the total payments made; Provided, that the actual cancellation of the contract shall take
place after thirty (30) days from the receipt by the VENDEE/S of the notice of cancellation or the
demand for rescission of the contract by a notarial act upon full payment of the cash surrender value to
the VENDEE/S; where, however, the VENDEE/S has/have paid less than two (2) years of installments,
the VENDOR shall give the VENDEE/S [a] grace period of sixty (60) days from the date the installment
became due; and if the VENDEE/S fail/s to pay the installment due after the expiration of the grace
period, the VENDOR may cancel the contract after thirty (30) days from receipt by the VENDEE/S of
the notice of cancellation or the demand for rescission of the contract by a notarial act; and in case of
cancellation and/or rescission of this contract, all improvements on the lot/s above-described shall be
forfeited in favor of the VENDOR, and in this connection, the VENDEE/S obligate/s
himself/herself/themselves to peacefully vacate the premises mentioned above without necessity of
notice or demand by the VENDOR.20
We examine GRIs compliance with the requirements of R.A. 6552, as it insists that it extended to
Angeles considerations that are beyond what the law provides.
Grace Period
It should be noted that Section 3 of R.A. 6552 and paragraph six of Contract Nos. 2271 and 2272,
speak of "two years of installments." The basis for computation of the term refers to the installments
that correspond to the number of months of payments, and not to the number of months that the
contract is in effect as well as any grace period that has been given. Both the law and the contracts
thus prevent any buyer who has not been diligent in paying his monthly installments from unduly
claiming the rights provided in Section 3 of R.A. 6552.
The MeTC, the RTC, and the CA all found that Angeles was able to pay 35 installments for the lot
(Contract No. 2271) and 48 installments for the house (Contract No. 2272). 21 Angeles thus made
installment payments for less than three years on the lot, and exactly four years on the house.
Section 3(a) of R.A. 6552 provides that the total grace period corresponds to one month for every one
year of installment payments made, provided that the buyer may exercise this right only once in every
five years of the life of the contract and its extensions. The buyers failure to pay the installments due at
the expiration of the grace period allows the seller to cancel the contract after 30 days from the buyers
receipt of the notice of cancellation or demand for rescission of the contract by a notarial act. Paragraph
6(a) of the contract gave Angeles the same rights.
Both the RTC and the CA found that GRI gave Angeles an accumulated grace period of 51 months. 22
This extension went beyond what was provided in R.A. 6552 and in their contracts.
Receipt of the Notice of Notarial Rescission
The registry return of the registered mail is prima facie proof of the facts indicated therein. 23 Angeles
failed to present contrary evidence to rebut this presumption with competent and proper evidence. To
establish its claim of service of the notarial rescission upon Angeles, GRI presented the affidavit of its
liaison officer Fortunato Gumahad,24 the registry receipt from the Greenhills Post Office,25 and the
registry return receipt.26 We affirm the CAs ruling that GRI was able to substantiate its claim that it
served Angeles the notarial rescission sent through registered mail in accordance with the requirements
of R.A. 6552.
Amount of the Cash Surrender Value
GRI claims that it gave Angeles a refund of the cash surrender value of both the house and the lot in
the total amount of P574,148.40 when it deducted the amount of the cash surrender value from the
amount of rentals due.
For paying more than two years of installments on the lot, Angeles was entitled to receive cash
surrender value of her payments on the lot equivalent to fifty per cent of the total payments made. This
right is provided by Section 3(b) of R.A. 6552, as well as paragraph 6(b) of the contract. Out of the
contract price of P450,000, Angeles paid GRI a total of P364,188.96 consisting of P135,000 as
downpayment and P229,188.96 as installments and penalties.27 The cash surrender value of Angeles
payments on the lot amounted to P182,094.48.28
For the same reasons, Angeles was also entitled to receive cash surrender value of the payments on
the house equivalent to fifty per cent of the total payments made. Out of the contract price of P750,000,
Angeles paid GRI a total of P784,107.84 consisting of P165,000 as downpayment and P619,107.84 as
installments and penalties.29 The cash surrender value of Angeles payments on the house amounted to
P392,053.92.30
Actual Cancellation of the Contracts
There was no actual cancellation of the contracts because of GRIs failure to actually refund the cash
surrender value to Angeles.
Cancellation of the contracts for the house and lot was contained in a notice of notarial rescission dated
11 September 2003.31 The registry return receipts show that Angeles received this notice on 19
September 2003.32 GRIs demand for rentals on the properties, where GRI offset Angeles accrued
rentals by the refundable cash surrender value, was contained in another letter dated 26 September
2003.33 The registry return receipts show that Angeles received this letter on 29 September 2003. 34 GRI
filed a complaint for unlawful detainer against Angeles on 11 November 2003, 61 days after the date of
its notice of notarial rescission, and 46 days after the date of its demand for rentals. For her part,
Angeles sent GRI postal money orders in the total amount of P120,000.35
The MeTC ruled that it was proper for GRI to compensate the rentals due from Angeles occupation of
the property from the cash surrender value due to Angeles from GRI. The MeTC stated that
compensation legally took effect in accordance with Article 1290 of the Civil Code, which reads: "When
all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law
and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not
aware of the compensation." In turn, Article 1279 of the Civil Code provides:
In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
(2) That both debts consist of a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts are due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
However, it was error for the MeTC to apply Article 1279 as there was nothing in the contracts which
provided for the amount of rentals in case the buyer defaults in her installment payments. The rentals
due to GRI were not liquidated. GRI, in its letter to Angeles dated 26 September 2003, unilaterally
imposed the amount of rentals, as well as an annual 10% increase:
PERIOD COVERED NO. OF RENTALS
MONTHS PER MONTH
June to December 1999 7 11,000.00
January to December 2000 12 12,100.00
January to December 2001 12 13,310.00
January to December 2002 12 14,641.00
January to August 2003 8 16,105.10
TOTAL AMOUNT DUE:
We cannot subscribe to GRIs view that it merely followed our ruling in Pilar Development Corporation
v. Spouses Villar37 (Pilar) when it deducted the cash surrender value from the rentals due. In Pilar, the
developer also failed to refund the cash surrender value to the defaulting buyer when it cancelled the
Contract to Sell through a Notice of Cancellation. It was this Court, and not the developer, that
deducted the amount of the cash surrender value from the accrued rentals. Moreover, the developer in
Pilar did not unilaterally impose rentals. It was the MeTC that decreed the amount of monthly rent.
Neither did the developer unilaterally reduce the accrued rentals by the refundable cash surrender
value. The cancellation of the contract took effect only by virtue of this Courts judgment because of the
developers failure to return the cash surrender value.
This was how we ruled in Pilar:
According to R.A. 6552, the cash surrender value, which in this case is equivalent to fifty percent (50%)
of the total payment made by the respondent spouses, should be returned to them by the petitioner
upon the cancellation of the contract to sell on August 31, 1998 for the cancellation to take effect.
Admittedly, no such return was ever made by petitioner. Thus, the said cash surrender value is hereby
ordered deducted from the award owing to the petitioner based on the MeTC judgment, and
cancellation takes effect by virtue of this judgment.
Finally, as regards the award of P7,000.00/month as rental payment decreed by the MeTC for the use
of the property in question from the time the respondent spouses obtained possession thereof up to the
time that its actual possession is surrendered or restored to the petitioner, the Court finds the same just
and equitable to prevent the respondent spouses, who breached their contract to sell, from unjustly
enriching themselves at the expense of the petitioner which, for all legal intents and purposes, never
ceased to be the owner of the same property because of the respondents non-fulfillment of the
indispensable condition of full payment of the purchase price, as embodied in the parties contract to
sell. However, as earlier explained, this sum is to be reduced by the cash surrender value of the
payments so far made by the spouses, and the resulting net amount still owing as accrued rentals shall
be subject to legal interest from finality of this Decision up to the time of actual payment thereof. 38
Mandatory Twin Requirements: Notarized Notice of Cancellation and Refund of Cash Surrender
Value
This Court has been consistent in ruling that a valid and effective cancellation under R.A. 6552 must
comply with the mandatory twin requirements of a notarized notice of cancellation and a refund of the
cash surrender value.
In Olympia Housing, Inc. v. Panasiatic Travel Corp.,39 we ruled that the notarial act of rescission must
be accompanied by the refund of the cash surrender value.
x x x The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-
day period following the receipt by the buyer of the notice of cancellation or demand for rescission by a
notarial act and the full payment of the cash surrender value.
In Pagtalunan v. Dela Cruz Vda. De Manzano,40 we ruled that there is no valid cancellation of the
Contract to Sell in the absence of a refund of the cash surrender value. We stated that:
AMOUNT DUE
x x x Sec. 3 (b) of R.A. No. 6552 requires refund of the cash surrender value of the payments on the
property to the buyer before cancellation of the contract. The provision does not provide a different
requirement for contracts to sell which allow possession of the property by the buyer upon execution of
77,000.00
the contract like the instant case. Hence, petitioner cannot insist on compliance with the requirement by
assuming 145,200.00
that the cash surrender value payable to the buyer had been applied to rentals of the
property after respondent failed to pay the installments due. (Emphasis supplied)
159,720.00
Remedies of the Buyer in the Absence of a Valid Cancellation of a Contract to Sell
175,692.02 [sic]
In view of the absence of a valid cancellation, the Contract to Sell between GRI and Angeles remains
128,840.80Apart from Olympia and Pagtalunan, we are guided by our rulings in Active Realty
valid and subsisting.
& Development Corp. v.[sic]
P 686,452.82 Daroya
36 41
(Active) and Associated Marine Officers and Seamens Union of the
Philippines PTGWO-ITF v. Decena42 (Associated).
In Olympia , this Court dismissed the complaint for recovery of possession for having been prematurely
filed without complying with the mandate of R.A. 6552. We ordered the defaulting buyer to pay the
developer the balance as of the date of the filing of the complaint plus 18% interest per annum
computed from the day after the date of the filing of the complaint, but within 60 days from the receipt of
a copy of the decision. Upon payment, the developer shall issue the corresponding certificate of title in
favor of the defaulting buyer. If the defaulting buyer fails to pay the full amount, then the defaulting
buyer shall vacate the subject property without need of demand and all payments will be charged as
rentals to the property. There was no award for damages and attorneys fees, and no costs were
charged to the parties.
In Pagtalunan, this Court dismissed the complaint for unlawful detainer. We also ordered the defaulting
buyer to pay the developer the balance of the purchase price plus interest at 6% per annum from the
date of filing of the complaint up to the finality of judgment, and thereafter, at the rate of 12% per
annum. Upon payment, the developer shall issue a Deed of Absolute Sale of the subject property and
deliver the corresponding certificate of title in favor of the defaulting buyer. If the defaulting buyer fails to
pay the full amount within 60 days from finality of the decision, then the defaulting buyer should vacate
the subject property without need of demand and all payments will be charged as rentals to the
property. No costs were charged to the parties.
In Active, this Court held that the Contract to Sell between the parties remained valid because of the
developers failure to send a notarized notice of cancellation and to refund the cash surrender value.
The defaulting buyer thus had the right to offer to pay the balance of the purchase price, and the
developer had no choice but to accept payment. However, the defaulting buyer was unable to exercise
this right because the developer sold the subject lot. This Court ordered the developer to refund to the
defaulting buyer the actual value of the lot with 12% interest per annum computed from the date of the
filing of the complaint until fully paid, or to deliver a substitute lot at the option of the defaulting buyer.
In Associated, this Court dismissed the complaint for unlawful detainer. We held that the Contract to
Sell between the parties remained valid because the developer failed to send to the defaulting buyer a and deliver the corresponding transfer certificate of title to Angeles.
notarized notice of cancellation and to refund the cash surrender value. We ordered the MeTC to
conduct a hearing within 30 days from receipt of the decision to determine the unpaid balance of the full In the event that the subject properties are no longer available, GRI should offer substitute properties of
value of the subject properties as well as the current reasonable amount of rent for the subject equal value. Should Angeles refuse the substitute properties, GRI shall refund to Angeles the actual
properties. We ordered the defaulting buyer to pay, within 60 days from the trial courts determination of value of the subject properties with 6 interest per annum computed from November 2003, the date of
the amounts, the unpaid balance of the full value of the subject properties with interest at 6% per the filing of the complaint, until fully paid. Should Evelyn M. Angeles choose to accept payment of the
annum computed from the date of sending of the notice of final demand up to the date of actual cash surrender value, she shall receive from GRI P574,148.40 with interest at 6 per annum computed
payment. Upon payment, we ordered the developer to execute a Deed of Absolute Sale over the from November 2003, the date of the filing of the complaint, until fully paid. Contracts to Sell Nos. 2271
subject properties and deliver the transfer certificate of title to the defaulting buyer. In case of failure to and 2272 shall be deemed cancelled 30 days after Angeles' receipt of GRI's full payment of the cash
pay within the mandated 60-day period, we ordered the defaulting buyer to immediately vacate the surrender value. No rent is further charged upon Evelyn M. Angeles.
premises without need for further demand. The developer should also pay the defaulting buyer the cash No costs.
surrender value, and the contract should be deemed cancelled 30 days after the defaulting buyers
receipt of the full payment of the cash surrender value. If the defaulting buyer failed to vacate the SO ORDERED.
premises, he should be charged reasonable rental in the amount determined by the trial court.
We observe that this case has, from the institution of the complaint, been pending with the courts for 10
years. As both parties prayed for the issuance of reliefs that are just and equitable under the premises,
and in the exercise of our discretion, we resolve to dispose of this case in an equitable manner.
Considering that GRI did not validly rescind Contracts to Sell Nos. 2271 and 2272, Angeles has two
options:
1. The option to pay, within 60 days from the MeTCs determination of the proper amounts, the unpaid
balance of the full value of the purchase price of the subject properties plus interest at 6% per annum
from 11 November 2003, the date of filing of the complaint, up to the finality of this Decision, and
thereafter, at the rate of 6% per annum.43 Upon payment of the full amount, GRI shall immediately
execute Deeds of Absolute Sale over the subject properties and deliver the corresponding transfer
certificate of title to Angeles.
In the event that the subject properties are no longer available, GRI should offer substitute properties of
equal value.1wphi1 Acceptance of the suitability of the substitute properties is Angeles sole
prerogative. Should Angeles refuse the substitute properties, GRI shall refund to Angeles the actual
value of the subject properties with 6% interest per annum 44 computed from 11 November 2003, the
date of the filing of the complaint, until fully paid; and
2. The option to accept from GRI 574,148.40, the cash surrender value of the subject properties, with
interest at 6% per annum,45 computed from 11 November 2003, the date of the filing of the complaint,
until fully paid. Contracts to Sell Nos. 2271 and 2272 shall be deemed cancelled 30 days after Angeles
receipt of GRIs full payment of the cash surrender value. No rent is further charged upon Angeles as
GRI already had possession of the subject properties on 10 October 2006.
WHEREFORE, we DENY the petition. The Decision of the Court of Appeals in CA-G.R. SP No. 105964
promulgated on 11 November 2011 and the Resolution promulgated on 19 June 2012 are AFFIRMED
with MODIFICATIONS.
1. The Metropolitan Trial Court of Las Pias City is directed to conduct a hearing within a maximum
period of 30 days from finality of this Decision to (1) determine Evelyn M. Angeles unpaid balance on
Contracts to Sell Nos. 2271 and 2272; and (2) the actual value of the subject properties as of 11
November 2003.
2. Evelyn M. Angeles shall notify the Metropolitan Trial Court of Las Pias City and Gatchalian Realty,
Inc. within a maximum period of 60 days from the Metropolitan Trial Court of Las Pias Citys
determination of the unpaid balance whether she will pay the unpaid balance or accept the cash
surrender value.
Should Evelyn M. Angeles choose to pay the unpaid balance, she shall pay, within 60 days from the
MeTCs determination of the proper amounts, the unpaid balance of the full value of the purchase price
of the subject properties plus interest at 6% per annum from 11 November 2003, the date of filing of the
complaint, up to the finality of this Decision, and thereafter, at the rate of 6% per annum. Upon payment
of the full amount, GRI shall immediately execute Deeds of Absolute Sale over the subject properties
G.R. No. 147695 September 13, 2007
MANUEL C. PAGTALUNAN, petitioner,
vs.
RUFINA DELA CRUZ VDA. DE MANZANO, respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court of the Court of Appeals
(CA) Decision promulgated on October 30, 2000 and its Resolution dated March 23, 2001 denying
petitioners motion for reconsideration. The Decision of the CA affirmed the Decision of the Regional
Trial Court (RTC) of Malolos, Bulacan, dated June 25, 1999 dismissing the case of unlawful detainer for
lack of merit.
The facts are as follows:
On July 19, 1974, Patricio Pagtalunan (Patricio), petitioners stepfather and predecessor-in-interest,
entered into a Contract to Sell with respondent, wife of Patricios former mechanic, Teodoro Manzano,
whereby the former agreed to sell, and the latter to buy, a house and lot which formed half of a parcel of
land, covered by Transfer Certificate of Title (TCT) No. T-10029 (now TCT No. RT59929 [T-254773]),
with an area of 236 square meters. The consideration of P17,800 was agreed to be paid in the following
manner: P1,500 as downpayment upon execution of the Contract to Sell, and the balance to be paid in
equal monthly installments of P150 on or before the last day of each month until fully paid.
It was also stipulated in the contract that respondent could immediately occupy the house and lot; that
in case of default in the payment of any of the installments for 90 days after its due date, the contract
would be automatically rescinded without need of judicial declaration, and that all payments made and
all improvements done on the premises by respondent would be considered as rentals for the use and
occupation of the property or payment for damages suffered, and respondent was obliged to peacefully
vacate the premises and deliver the possession thereof to the vendor.
Petitioner claimed that respondent paid only P12,950. She allegedly stopped paying after December
1979 without any justification or explanation. Moreover, in a "Kasunduan"1 dated November 18, 1979,
respondent borrowed P3,000 from Patricio payable in one year either in one lump sum payment or by
installments, failing which the balance of the loan would be added to the principal subject of the monthly
amortizations on the land.
Lastly, petitioner asserted that when respondent ceased paying her installments, her status of buyer
was automatically transformed to that of a lessee. Therefore, she continued to possess the property by
mere tolerance of Patricio and, subsequently, of petitioner.
On the other hand, respondent alleged that she paid her monthly installments religiously, until
sometime in 1980 when Patricio changed his mind and offered to refund all her payments provided she
would surrender the house. She refused. Patricio then started harassing her and began demolishing the
house portion by portion. Respondent admitted that she failed to pay some installments after December
1979, but that she resumed paying in 1980 until her balance dwindled to P5,650. She claimed that
despite several months of delay in payment, Patricio never sued for ejectment and even accepted her
late payments.
Respondent also averred that on September 14, 1981, she and Patricio signed an agreement (Exh. 2)
whereby he consented to the suspension of respondents monthly payments until December 1981.
However, even before the lapse of said period, Patricio resumed demolishing respondents house,
prompting her to lodge a complaint with the Barangay Captain who advised her that she could continue
suspending payment even beyond December 31, 1981 until Patricio returned all the materials he took
from her house. This Patricio failed to do until his death.
Respondent did not deny that she still owed Patricio P5,650, but claimed that she did not resume
paying her monthly installment because of the unlawful acts committed by Patricio, as well as the filing
of the ejectment case against her. She denied having any knowledge of the Kasunduan of November
18, 1979.
Patricio and his wife died on September 17, 1992 and on October 17, 1994, respectively. Petitioner
became their sole successor-in-interest pursuant to a waiver by the other heirs. On March 5, 1997,
respondent received a letter from petitioners counsel dated February 24, 1997 demanding that she
vacate the premises within five days on the ground that her possession had become unlawful.
Respondent ignored the demand. The Punong Barangay failed to settle the dispute amicably.
On April 8, 1997, petitioner filed a Complaint for unlawful detainer against respondent with the
Municipal Trial Court (MTC) of Guiguinto, Bulacan praying that, after hearing, judgment be rendered
ordering respondent to immediately vacate the subject property and surrender it to petitioner; forfeiting
the amount of P12,950 in favor of petitioner as rentals; ordering respondent to pay petitioner the
amount of P3,000 under the Kasunduan and the amount of P500 per month from January 1980 until
she vacates the property, and to pay petitioner attorneys fees and the costs.
On December 22, 1998, the MTC rendered a decision in favor of petitioner. It stated that although the
Contract to Sell provides for a rescission of the agreement upon failure of the vendee to pay any
installment, what the contract actually allows is properly termed a resolution under Art. 1191 of the Civil
Code.
The MTC held that respondents failure to pay not a few installments caused the resolution or
termination of the Contract to Sell. The last payment made by respondent was on January 9, 1980
(Exh. 71). Thereafter, respondents right of possession ipso facto ceased to be a legal right, and
became possession by mere tolerance of Patricio and his successors-in-interest. Said tolerance ceased
upon demand on respondent to vacate the property.
The dispositive portion of the MTC Decision reads:
Wherefore, all the foregoing considered, judgment is hereby rendered, ordering the defendant:
a. to vacate the property covered by Transfer Certificate of Title No. T-10029 of the Register of Deeds
of Bulacan (now TCT No. RT-59929 of the Register of Deeds of Bulacan), and to surrender possession
thereof to the plaintiff;
b. to pay the plaintiff the amount of P113,500 representing rentals from January 1980 to the present;
c. to pay the plaintiff such amount of rentals, at P500/month, that may become due after the date of
judgment, until she finally vacates the subject property;
d. to pay to the plaintiff the amount of P25,000 as attorneys fees.
SO ORDERED.2
On appeal, the RTC of Malolos, Bulacan, in a Decision dated June 25, 1999, reversed the decision of
the MTC and dismissed the case for lack of merit. According to the RTC, the agreement could not be
automatically rescinded since there was delivery to the buyer. A judicial determination of rescission
must be secured by petitioner as a condition precedent to convert the possession de facto of
respondent from lawful to unlawful.
The dispositive portion of the RTC Decision states:
WHEREFORE, judgment is hereby rendered reversing the decision of the Municipal Trial Court of
Guiguinto, Bulacan and the ejectment case instead be dismissed for lack of merit. 3
The motion for reconsideration and motion for execution filed by petitioner were denied by the RTC for
lack of merit in an Order dated August 10, 1999.
Thereafter, petitioner filed a petition for review with the CA.
In a Decision promulgated on October 30, 2000, the CA denied the petition and affirmed the Decision of
the RTC. The dispositive portion of the Decision reads:
WHEREFORE, the petition for review on certiorari is Denied. The assailed Decision of the Regional
Trial Court of Malolos, Bulacan dated 25 June 1999 and its Order dated 10 August 1999 are hereby
AFFIRMED.
SO ORDERED. 4
The CA found that the parties, as well as the MTC and RTC failed to advert to and to apply Republic
Act (R.A.) No. 6552, more commonly referred to as the Maceda Law, which is a special law enacted in
1972 to protect buyers of real estate on installment payments against onerous and oppressive
conditions.
The CA held that the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A.
No. 6552, and recognized respondents right to continue occupying unmolested the property subject of
the contract to sell.
The CA denied petitioners motion for reconsideration in a Resolution dated March 23, 2001.
Hence, this petition for review on certiorari.
Petitioner contends that:
A. Respondent Dela Cruz must bear the consequences of her deliberate withholding of, and refusal to
pay, the monthly payment. The Court of Appeals erred in allowing Dela Cruz who acted in bad faith
from benefiting under the Maceda Law.
B. The Court of Appeals erred in resolving the issue on the applicability of the Maceda Law, which issue
was not raised in the proceedings a quo.
C. Assuming arguendo that the RTC was correct in ruling that the MTC has no jurisdiction over a
rescission case, the Court of Appeals erred in not remanding the case to the RTC for trial. 5
Petitioner submits that the Maceda Law supports and recognizes the right of vendors of real estate to
cancel the sale outside of court, without need for a judicial declaration of rescission, citing Luzon
Brokerage Co., Inc., v. Maritime Building Co., Inc.6
Petitioner contends that respondent also had more than the grace periods provided under the Maceda
Law within which to pay. Under Sec. 37 of the said law, a buyer who has paid at least two years of
installments has a grace period of one month for every year of installment paid. Based on the amount of
P12,950 which respondent had already paid, she is entitled to a grace period of six months within which
to pay her unpaid installments after December, 1979. Respondent was given more than six months
from January 1980 within which to settle her unpaid installments, but she failed to do so. Petitioners
demand to vacate was sent to respondent in February 1997.
There is nothing in the Maceda Law, petitioner asserts, which gives the buyer a right to pay arrearages
after the grace periods have lapsed, in the event of an invalid demand for rescission. The Maceda Law
only provides that actual cancellation shall take place after 30 days from receipt of the notice of
cancellation or demand for rescission and upon full payment of the cash surrender value to the buyer.
Petitioner contends that his demand letter dated February 24, 1997 should be considered the notice of
cancellation since the demand letter informed respondent that she had "long ceased to have any right
to possess the premises in question due to [her] failure to pay without justifiable cause." In support of
his contention, he cited Layug v. Intermediate Appellate Court8 which held that "the additional formality
of a demand on [the sellers] part for rescission by notarial act would appear, in the premises, to be
merely circuitous and consequently superfluous." He stated that in Layug, the seller already made a
written demand upon the buyer.
In addition, petitioner asserts that whatever cash surrender value respondent is entitled to have been
applied and must be applied to rentals for her use of the house and lot after December, 1979 or after
she stopped payment of her installments.
Petitioner argues that assuming Patricio accepted respondents delayed installments in 1981, such act
cannot prevent the cancellation of the Contract to Sell. Installments after 1981 were still unpaid and the
applicable grace periods under the Maceda Law on the unpaid installments have long lapsed.
Respondent cannot be allowed to hide behind the Maceda Law. She acted with bad faith and must bear
the consequences of her deliberate withholding of and refusal to make the monthly payments.
Petitioner also contends that the applicability of the Maceda Law was never raised in the proceedings
below; hence, it should not have been applied by the CA in resolving the case.
The Court is not persuaded.
The CA correctly ruled that R.A No. 6552, which governs sales of real estate on installment, is
applicable in the resolution of this case.
This case originated as an action for unlawful detainer. Respondent is alleged to be illegally withholding
possession of the subject property after the termination of the Contract to Sell between Patricio and
respondent. It is, therefore, incumbent upon petitioner to prove that the Contract to Sell had been
cancelled in accordance with R.A. No. 6552.
The pertinent provision of R.A. No. 6552 reads:
Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment
payments, including residential condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four as
amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least
two years of installments, the buyer is entitled to the following rights in case he defaults in the payment
of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned
by him, which is hereby fixed at the rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the buyer only once in every five years
of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of
the payments on the property equivalent to fifty percent of the total payments made and, after five
years of installments, an additional five percent every year but not to exceed ninety percent of the total
payments made: Provided, That the actual cancellation of the contract shall take place after thirty
days from receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of the cash surrender value to the buyer.9
R.A. No. 6552, otherwise known as the "Realty Installment Buyer Protection Act," recognizes in
conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to
cancel the contract upon non-payment of an installment by the buyer, which is simply an event that
prevents the obligation of the vendor to convey title from acquiring binding force. 10 The Court agrees
with petitioner that the cancellation of the Contract to Sell may be done outside the court particularly
when the buyer agrees to such cancellation.
However, the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of R.A.
No. 6552, which requires a notarial act of rescission and the refund to the buyer of the full payment of
the cash surrender value of the payments on the property. Actual cancellation of the contract takes
place after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Based on the records of the case, the Contract to Sell was not validly cancelled or rescinded under
Sec. 3 (b) of R.A. No. 6552.
First, Patricio, the vendor in the Contract to Sell, died on September 17, 1992 without canceling the
Contract to Sell.
Second, petitioner also failed to cancel the Contract to Sell in accordance with law.
Petitioner contends that he has complied with the requirements of cancellation under Sec. 3 (b) of R.A.
No. 6552. He asserts that his demand letter dated February 24, 1997 should be considered as the
notice of cancellation or demand for rescission by notarial act and that the cash surrender value of the
payments on the property has been applied to rentals for the use of the house and lot after respondent
stopped payment after January 1980.
of 12% per annum;
2. Upon payment, petitioner Manuel C. Pagtalunan shall execute a Deed of Absolute Sale of the subject
property and deliver the certificate of title in favor of respondent Rufina Dela Cruz Vda. de Manzano;
and

The Court, however, finds that the letter11 dated February 24, 1997, which was written by petitioners 3. In case of failure to pay within 60 days from finality of this Decision, respondent Rufina Dela Cruz
counsel, merely made formal demand upon respondent to vacate the premises in question within five Vda. de Manzano shall immediately vacate the premises without need of further demand, and the
days from receipt thereof since she had "long ceased to have any right to possess the premises x x x downpayment and installment payments of P12,300 paid by her shall constitute rental for the subject
due to [her] failure to pay without justifiable cause the installment payments x x x." property.

Clearly, the demand letter is not the same as the notice of cancellation or demand for rescission by a No costs.
notarial act required by R.A No. 6552. Petitioner cannot rely on Layug v. Intermediate Appellate SO ORDERED.
Court12 to support his contention that the demand letter was sufficient compliance. Layug held that "the
additional formality of a demand on [the sellers] part for rescission by notarial act would appear, in the
premises, to be merely circuitous and consequently superfluous" since the seller therein filed an action
for annulment of contract, which is a kindred concept of rescission by notarial act. 13 Evidently, the
case of unlawful detainer filed by petitioner does not exempt him from complying with the said
requirement.
In addition, Sec. 3 (b) of R.A. No. 6552 requires refund of the cash surrender value of the payments on
the property to the buyer before cancellation of the contract. The provision does not provide a different
requirement for contracts to sell which allow possession of the property by the buyer upon execution of
the contract like the instant case. Hence, petitioner cannot insist on compliance with the requirement by
assuming that the cash surrender value payable to the buyer had been applied to rentals of the
property after respondent failed to pay the installments due.
There being no valid cancellation of the Contract to Sell, the CA correctly recognized respondents right
to continue occupying the property subject of the Contract to Sell and affirmed the dismissal of the
unlawful detainer case by the RTC.
The Court notes that this case has been pending for more than ten years. Both parties prayed for other
reliefs that are just and equitable under the premises. Hence, the rights of the parties over the subject
property shall be resolved to finally dispose of that issue in this case.
Considering that the Contract to Sell was not cancelled by the vendor, Patricio, during his lifetime or by
petitioner in accordance with R.A. No. 6552 when petitioner filed this case of unlawful detainer after 22
years of continuous possession of the property by respondent who has paid the substantial amount of
P12,300 out of the purchase price of P17,800, the Court agrees with the CA that it is only right and just
to allow respondent to pay her arrears and settle the balance of the purchase price.
For respondents delay in the payment of the installments, the Court, in its discretion, and applying
Article 220914 of the Civil Code, may award interest at the rate of 6% per annum 15 on the unpaid
balance considering that there is no stipulation in the Contract to Sell for such interest. For purposes of
computing the legal interest, the reckoning period should be the filing of the complaint for unlawful
detainer on April 8, 1997.
Based on respondents evidence16 of payments made, the MTC found that respondent paid a total of
P12,300 out of the purchase price of P17,800. Hence, respondent still has a balance of P5,500, plus
legal interest at the rate of 6% per annum on the unpaid balance starting April 8, 1997.
The third issue is disregarded since petitioner assails an inexistent ruling of the RTC on the lack of
jurisdiction of the MTC over a rescission case when the instant case he filed is for unlawful detainer.
WHEREFORE, the Decision of the Court of Appeals dated October 30, 2000 sustaining the dismissal of
the unlawful detainer case by the RTC is AFFIRMED with the following MODIFICATIONS:
1. Respondent Rufina Dela Cruz Vda. de Manzano shall pay petitioner Manuel C. Pagtalunan the
balance of the purchase price in the amount of Five Thousand Five Hundred Pesos (P5,500) plus
interest at 6% per annum from April 8, 1997 up to the finality of this judgment, and thereafter, at the rate
[G.R. No. 141205. May 9, 2002]
ACTIVE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. NECITA G. DAROYA,
represented by Attorney-In-Fact Shirley Daroya-Quinones, respondents.
DECISION
PUNO, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks to
reverse and set aside the Resolution of the Court of Appeals, dated August 3, 1999, denying due
course to petitioners appeal for insufficiency of form and substance.
Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner and developer of Town &
Country Hills Executive Village in Antipolo, Rizal. On January 2, 1985, it entered into a Contract to Sell[if
!supportFootnotes][1][endif]
with respondent NECITA DAROYA, a contract worker in the Middle East, whereby the
latter agreed to buy a 515 sq. m. lot for P224,025.00 in petitioners subdivision.
The contract to sell stipulated that the respondent shall pay the initial amount of P53,766.00 upon
execution of the contract and the balance of P170,259.00 in sixty (60) monthly installments of
P4,893.35. Adding the down payment and installment payments, it would appear that the total amount
is P346,367.00, a figure higher than that stated as the contract price.
On May 5, 1989, petitioner accepted respondents amortization in the amount of P40,000.00. By August
8, 1989, respondent was in default of P15,282.85 representing three (3) monthly amortizations.
Petitioner sent respondent a notice of cancellation[if !supportFootnotes][2][endif] of their contract to sell, to
take effect thirty (30) days from receipt of the letter. It does not appear from the records, however, when
respondent received the letter. Nonetheless, when respondent offered to pay for the balance of the
contract price, petitioner refused as it has allegedly sold the lot to another buyer.
On August 26, 1991, respondent filed a complaint for specific performance and damages[if
!supportFootnotes][3][endif]
against petitioner before the Arbitration Branch of the Housing and Land Use
Regulatory Board (HLURB). It sought to compel the petitioner to execute a final Deed of Absolute Sale
in respondents favor after she pays any balance that may still be due from her. Respondent claimed
that she is entitled to the final deed of sale after she offered to pay the balance of P24,048.47,
considering that she has already paid the total sum of P314,816.76, which amount is P90,835.76
more than the total contract price of P224,025.00.
On June 14, 1993, HLURB Arbiter Alfredo M. Tan II found for the respondent. He ruled that the
cancellation of the contract to sell was void as petitioner failed to pay the cash surrender value to
respondent as mandated by law. However, as the subject lot was already sold to a third party and the
respondent had agreed to a full refund of her installment payments, petitioner was ordered to refund to
respondent all her payments in the amount of P314,816.70, with 12% interest per annum from
August 26, 1991 (the date of the filing of the complaint) until fully paid and to pay P10,000.00 as
attorneys fees.[if !supportFootnotes][4][endif]
On appeal, the HLURB Board of Commissioners set aside the Arbiters Decision. The Board refused
to apply the remedies provided under the Maceda Law and instead deemed it fit to formulate an
equitable solution to the case. It ruled that, as both parties were at fault, i.e., respondent incurred in
delay in her installment payments and respondent failed to send a notarized notice of cancellation,
petitioner was ordered to refund to the respondent one half of the total amount she has paid or
P157,408.35, which was allegedly akin to the remedy provided under the Maceda Law.[if
!supportFootnotes][5][endif]
Respondent appealed to the Office of the President. On June 2, 1998, then Chief Presidential
Counsel Renato C. Corona, acting by authority of the President, modified the Decision of the HLURB
as he found that it was not in accord with the provisions of the Maceda Law. He held that as petitioner
did not comply with the legal requisites for a valid cancellation of the contract, the contract to sell
between the parties subsisted and concluded that respondent was entitled to the lot after payment of
her outstanding balance. However, as the petitioner disclosed that the lot was already sold to another
person and that the actual value of the lot as of the date of the contract was P1,700.00 per square
meter, petitioner was ordered to refund to the respondent the amount of P875,000.00, the true
and actual value of the lot as of the date of the contract, with interest at 12% per annum
computed from August 26, 1991 until fully paid, or to deliver a substitute lot at the choice of
respondent.[if !supportFootnotes][6][endif]
Upon denial of its motion for reconsideration, petitioner assailed the Decision in the Court of Appeals.
However, its petition for review[if !supportFootnotes][7][endif] was denied due course for insufficiency in form and
substance,[if !supportFootnotes][8][endif] because: 1) no affidavit of service was attached to the petition; 2) except
for certified true copies of the decision and resolution of the Office of the President, no other material
portions of the record, as would support the allegations in the petition, were attached; and, 3) the
certification of forum-shopping was signed by the head counsel and vice-president of the petitioner
corporation who was not authorized by a Board Resolution to represent petitioner.
Petitioner moved for reconsideration. The Court of Appeals denied it on an entirely new ground, i.e., for
untimely filing of the petition for review.[if !supportFootnotes][9][endif]
Petitioner now impugns the decision of the Court of Appeals and raises the following procedural issues:
I
THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN RELYING TOO MUCH ON FORM
RATHER THAN ON THE MERITS OF THE PETITION THEREBY DENYING PETITIONER OF ITS
RIGHT TO DUE PROCESS.
II
THE HONORABLE COURT OF APPEALS ANCHORED THE DENIAL OF PETITIONERS MOTION
FOR RECONSIDERATION ON INCONSISTENT AND CONFLICTING RULINGS NOT BORNE BY
THE FACTS AND THE RECORDS OF THE CASE.
On the procedural points raised, we find for the petitioner.
Our perusal of the record reveals that petitioner substantially complied with the formal requirements of
Rule 43 of the Rules of Court.[if !supportFootnotes][10][endif] First, as to the non-attachment of the affidavit of
service, the records bear that the petition was accompanied by the original registry receipts issued by
the post office, showing that the petition and its annexes were served upon the parties. Moreover,
respondents counsel of record, Atty. Sergio Guadiz, actually received a copy of the petition. [if
!supportFootnotes][11][endif]
Second, petitioner likewise complied with Section 6 (c) of Rule 43 requiring the
submission of copies of the award, judgment, final order and resolution appealed from. Its petition was
accompanied by the duplicate original of the appealed Decision of the Chief Presidential Legal Counsel
and his Resolution denying petitioners motion for reconsideration, the Decision of the HLURB Board of
Commissioners and that of the HLURB arbiter. A perusal of these documents will reveal that they
contained all the relevant facts of the case from which the appellate body can form its own decision. Its
failure to submit the other documents, like the Complaint, Answer, Position Papers and Appeal
Memoranda of the parties before the HLURB, was due to the refusal of the Office of the President to
give them a certified true copy of these documents which were submitted with said Office. Third, as to
the lack of Board Resolution by petitioner corporation authorizing Atty. Rene Katigbak, its Chief Legal
Counsel and Vice-President for Legal Affairs, to represent it in the filing of the appeal, petitioner admits
that this was due to its honest belief that such authority is not required as it was not mentioned in
Section 6(c) of Rule 43.[if !supportFootnotes][12][endif] To make up for such omission, petitioner submitted a
Secretarys Certificate[if !supportFootnotes][13][endif] confirming and ratifying the authority of Atty. Katigbak to
represent petitioner. Finally, we find that the Court of Appeals erred in denying petitioners motion for
reconsideration due to untimely filing as the records clearly show that it was filed on June 25, 1999, a
day before the expiration of the period to appeal granted by the Court of Appeals.[if !supportFootnotes][14][endif]
In denying due course to the petition, the appellate court gave premium to form and failed to consider
the important rights of the parties in the case at bar. [if !supportFootnotes][15][endif] At the very least, petitioner
substantially complied with the procedural requirements for appeal, hence, it is best to give due
course to the petition at bar to clarify the rights and duties of a buyer in contracts to sell real estate on
installment basis.
The issue to be resolved is whether or not the petitioner can be compelled to refund to the respondent
the value of the lot or to deliver a substitute lot at respondents option.
We find for the respondent and rule in the affirmative.
The contract to sell in the case at bar is governed by Republic Act No. 6552 -- The Realty Installment
Buyer Protection Act, or more popularly known as the Maceda Law -- which came into effect in
September 1972. Its declared public policy is to protect buyers of real estate on installment basis
against onerous and oppressive conditions.[if !supportFootnotes][16][endif] The law seeks to address the acute
housing shortage problem in our country that has prompted thousands of middle and lower class
buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing
developers involving installment schemes. Lot buyers, mostly low income earners eager to acquire a lot
upon which to build their homes, readily affix their signatures on these contracts, without an opportunity
to question the onerous provisions therein as the contract is offered to them on a take it or leave it
basis.[if !supportFootnotes][17][endif] Most of these contracts of adhesion, drawn exclusively by the developers,
entrap innocent buyers by requiring cash deposits for reservation agreements which oftentimes include,
in fine print, onerous default clauses where all the installment payments made will be forfeited upon
failure to pay any installment due even if the buyers had made payments for several years.[if
!supportFootnotes][18][endif]
Real estate developers thus enjoy an unnecessary advantage over lot buyers who
they often exploit with iniquitous results. They get to forfeit all the installment payments of defaulting
buyers and resell the same lot to another buyer with the same exigent conditions. To help especially the
low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot
buyers and protect them from one-sided and pernicious contract stipulations.
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the
payment of succeeding installments, where he has already paid at least two (2) years of installments,
thus:
(a) To pay, without additional interest, the unpaid installments due within the total grace period
earned by him, which is hereby fixed at the rate of one month grace period for every one year of
installment payments made; x x x
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent of the total payments made; provided, that the
actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a notarial act and upon
full payment of the cash surrender value to the buyer.
In this case, respondent has already paid in four (4) years a total of P314,860.76 or P90,835.76
more than the contract price of P224,035.00. In April 1989, petitioner decided to cancel the contract
when the respondent incurred in delay in the payment of P15,282.85, representing three (3)
monthly amortizations. Petitioner refused to accept respondents subsequent tender of payment of the
outstanding balance alleging that it has already cancelled the contract and sold the subject lot to
another buyer. However, the records clearly show that the petitioner failed to comply with the
mandatory twin requirements for a valid and effective cancellation under the law,[if !supportFootnotes][19][endif]
i.e., he failed to send a notarized notice of cancellation and refund the cash surrender value. At no time,
from the date it gave a notice of cancellation up to the time immediately before the respondent filed the
case against petitioner, did the latter exert effort to pay the cash surrender value. In fact, the records
disclose that it was only during the preliminary hearing of the case before the HLURB arbiter when
petitioner offered to pay the cash surrender value. Petitioner justifies its inaction on the ground that the
respondent was always out of the country. Even then, the records are bereft of evidence to show that
petitioner attempted to pay the cash surrender value to respondent through her last known address.
The omission is surprising considering that even during the times respondent was out of the country,
petitioner has been sending her written notices to remind her to pay her installment arrears through her
last known address. Clearly, had respondent not filed a case demanding a final deed of sale in her
favor, petitioner would not have lifted a finger to give respondent what was due her actual payment of
the cash surrender value, among others. In disregard of basic equitable principles, petitioners stance
would enable it to resell the property, keep respondents installment payments, not to mention the cash
surrender value which it was obligated to return. The Layug[if !supportFootnotes][20][endif] case cited by petitioner
is inapropos. In Layug, the lot buyer did not pay for the outstanding balance of his account and the
Court found that notarial rescission or cancellation was no longer necessary as the seller has already
filed in court a case for rescission of the contract to sell. In the case at bar, respondent offered to pay
for her outstanding balance of the contract price but respondent refused to accept it. Neither did
petitioner adduce proof that the respondents offer to pay was made after the effectivity date stated in its
notice of cancellation. Moreover, there was no formal notice of cancellation or court action to rescind
the contract. Given the circumstances, we find it illegal and iniquitous that petitioner, without complying
with the mandatory legal requirements for canceling the contract, forfeited both respondents land and
hard-earned money after she has paid for, not just the contract price, but more than the consideration
stated in the contract to sell.
Thus, for failure to cancel the contract in accordance with the procedure provided by law, we
hold that the contract to sell between the parties remains valid and subsisting. Following
Section 3(a) of R.A. No. 6552, respondent has the right to offer to pay for the balance of the
purchase price, without interest, which she did in this case. Ordinarily, petitioner would have had
no other recourse but to accept payment. However, respondent can no longer exercise this right as the
subject lot was already sold by the petitioner to another buyer which lot, as admitted by the petitioner,
was valued at P1,700.00 per square meter. As respondent lost her chance to pay for the balance of the
P875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund to respondent the
actual value of the lot resold, i.e., P875,000.00, with 12% interest per annum computed from August 26,
1991 until fully paid or to deliver a substitute lot at the option of the respondent.
On a final note, it would not be amiss to stress that the HLURB Board Decision ordering petitioner to
refund to respondent one half of her total payments is not an equitable solution as it punished the
respondent for her delinquent payments but totally disregarded petitioners failure to comply with the
mandatory requisites for a valid cancellation of the contract to sell. The Board failed to consider that
the Maceda law was enacted to remedy the plight of low and middle-income lot buyers, save them
from the exacting default clauses in real estate sales and assure them of a home they can call their
own. Neither would the Decision of the HLURB Arbiter ordering a full refund of the installment payments
of respondent in the amount of P314,816.70 be justified as, under the law, respondent is entitled to the
lot she purchased after payment of her outstanding balance which she was ready and willing to do.
Thus, to penalize the petitioner for failing in its obligation to deliver the subject lot and to give the
respondent what is rightly hers, the petitioner was correctly ordered to refund to the respondent the
actual value of the land (P875,000.00) she lost to another buyer, plus interest at the rate of 12% per
annum from August 26, 1991 until fully paid or to deliver a substitute lot at the choice of the respondent.
IN VIEW WHEREOF, the Decision of then Chief Presidential Legal Assistant Renato Corona, Office of
the President, dated June 2, 1998, is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
[G.R. No. 147964. January 20, 2004]
FAR EAST BANK & TRUST CO., petitioner, vs. ARTURO L. MARQUEZ, respondent.
DECISION
PANGANIBAN, J.:
Under PD 957, the mortgage of a subdivision lot or a condominium unit is void, if executed by a
property developer without the prior written approval of the Housing and Land Use Regulatory Board
(HLURB). That an encumbrance has been constituted over an entire property, of which the subject lot
or unit is merely a part, does not affect the invalidity of the lien over the specific portion at issue.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the April 27, 2001
Decision2 of the Court of Appeals (CA) in CA-GR SP No. 56813. The decretal portion of the Decision
reads as follows:
WHEREFORE, the petition for review is DENIED, for lack of merit. 3
The Facts
The undisputed facts of the case are summarized in the CA Decision as follows:
1. On 13 March 1989, respondent [Arturo] Marquez entered into a Contract to Sell with Transamerican
Sales and Exposition (TSE), through the latters Owner/General Manager Engr. Jesus Garcia, involving
a 52.5 sq. m. lot in Diliman, Quezon City with a three-storey townhouse unit denominated as Unit No.
10 to be constructed thereon for a total consideration of P800,000.00. The parcel of land in question is
a portion of that property covered by TCT No. 156254 (now TCT No. 383697).
2. On 22 May 1989, TSE obtained a loan from petitioner FEBTC in the amount of P7,650,000.00 and
mortgaged the property covered by TCT No. 156254.
3. For failure of TSE to pay its obligation, petitioner FEBTC extrajudicially foreclosed the real estate
mortgage and became the highest bidder (P15.7 million) in the auction sale conducted for the purpose.
4. Respondent had already paid a total of P600,000.00 when he stopped payment because the
construction of his townhouse unit slackened. He discovered later on that this was due to the
foreclosure.
"5. Consequently, [respondent] instituted a case with the Office of Appeals, Adjudication and Legal
Affairs (OAALA) of the Housing and Land Use Regulatory Board (HLURB) on 29 January 1991 entitled
Arturo Marquez vs. Transamerican Sales, et al docketed as HLRB Case No. REM-012991-4712 to
compel TSE to complete the construction of the townhouse and to prevent the enforceability of the
extra-judicial foreclosure made by petitioner FEBTC and to have the mortgage between TSE and
petitioner FEBTC declared invalid, said mortgage having been entered into by the parties in violation of
section 18 of P.D. 957.
6. The OAALA ruled in favor of the respondent via a Decision dated 11 November 1991, the decretal
portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring the mortgage executed by and between x x x Engr. Jesus Garcia/Transamerican Sales
and Exposition and Far East Bank and Trust Company to be unenforceable against [respondent];
2. Ordering the x x x Far East Bank and Trust Company to compute and/or determine the loan value of
the [respondent] who was not able to complete or make full payment and accept payment and/or
receive the amortization from the [respondent] and upon full payment to deliver the title corresponding
to Unit No. 10 of that Townhouse Project located at No. 10 Panay Ave., Quezon City;
3. Ordering the Register of Deeds of Quezon City to cancel the annotations of the mortgage
indebtedness between x x x Engr. Jesus Garcia and Far East Bank and Trust Company;
4. Ordering, likewise, the Register of Deeds of Quezon City to cancel the annotation of the Certificate of
Sale in favor of the Far East Bank and Trust Company on Transfer Certificate of Title No. 156254 to
which the lot subject of this case is a part thereof, without prejudice to its right to require x x x Engr.
Jesus Garcia/Transamerican Sales and Exposition to constitute new collateral in lieu of said title
sufficient in value to cover the mortgage obligation.
xxx xxx xx x
7. Petitioner FEBTC interposed a Petition for Review from the decision issued by the OAALA with the
Board of Commissioners of the HLURB, docketed as HLRB Case No. REM-A-1126, which in a
Decision dated 18 July 1994 affirmed in toto the OAALA decision.
8. Hence, petitioner FEBTC appealed the Decision dated 18 July 1994 to the Office of the President
xxx.
xxx xxx xx x
9. The Office of the President dismissed the appeal and affirmed the Decision dated 18 July 1994 x x
x.4 (Citations omitted)
Petitioner then elevated the case to the CA through a Petition for review under Rule 43.
Ruling of the Court of Appeals
The CA found that petitioner had known that a subdivision was forthcoming inasmuch as the loan was
obtained by TSE to partially finance the construction of a 20-unit townhouse project, as stated in the
Whereas clause in the mortgage contract.5 Thus, the CA ruled that petitioner should not have merely
relied on the representation of TSE that it had obtained the approval and authorization of the proper
government agencies but should have required the submission of said documents. 6
Further, the appellate court found that the Certification against forum shopping attached to the Petition
before it had not been made under oath, in violation of the Rules of Court.
Hence, this Petition.7
The Issues
Petitioner raises the following issues for our consideration:
Whether or not the mortgage contract violated Section 18 of P.D. 957, hence, void insofar as third
persons are concerned.
Assuming arguendo that the mortgage contract violated Section 18 of P.D. 957, whether or not the
remedy granted and imposed by the HLURB, as sustained by the Office of the President and the Court
of Appeals, is proper.
Whether or not the inadvertent failure of the notary public to affix his signature on the Certification
against forum shopping executed by petitioner FEBTC in connection with the Petition for Review it filed
with the Court of Appeals provided a sufficient basis for the dismissal of the appeal.8
The Court's Ruling
The Petition is partly meritorious.
First Issue:
Violation of Section 18 of PD 957
Section 18 of PD 9579 provides as follows:
SEC. 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or developer without
prior written approval of the Authority. Such approval shall not be granted unless it is shown that the
proceeds of the mortgage loan shall be used for the development of the condominium or subdivision
project and effective measures have been provided to ensure such utilization. The loan value of each
lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified
before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit
directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness
secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over
the lot or unit promptly after full payment thereof.
Petitioner contends that the above-quoted provision does not apply to this case, because the land
mortgaged to it was one whole parcel, not of a subdivision lot, but of an unsubdivided one. It insists that
the written approval of the National Housing Authority (now the Housing and Land Use Regulatory
Board) was not a requirement for the constitution of a mortgage on the property.
We are not persuaded. It is undisputed that the subject 52.5-square-meter lot with a three-storey town
house unit denominated as Unit No. 10 (the lot) is part of the property mortgaged to petitioner and is
covered by TCT No. 156254. The lot was technically described and segregated in a Contact to Sell that
had been entered into before the mortgage loan was contracted. The fact that the lot had no separate
TCT did not make it less of a "subdivision lot" entitled to the protection of PD 957.
That the subject of the mortgage loan was the entire land, not the individual subdivided lots, does not
take the loan beyond the coverage of Section 18 of PD 957. Undeniably, the lot was also mortgaged
when the entire parcel of land, of which it was a part, was encumbered.
Petitioner also contends that Section 18 of PD 957 is merely a directory provision, noncompliance with
which does not render the mortgage transaction void.
In determining whether a law is mandatory, it is necessary to ascertain the legislative intent, as stated
by Sen. Arturo M. Tolentino, an authority on civil law:
There is no well-defined rule by which a mandatory or prohibitory law may, in all circumstances, be
distinguished from one which is directory, suppletory, or permissive. In the determination of this
question, the prime object is to ascertain the legislative intention. Generally speaking, those provisions
which are mere matter of form, or which are not material, do not affect any substantial right, and do not
relate to the essence of the thing to be done, so that compliance is a matter of convenience rather that
substance, are considered to be directory. On the other hand, statutory provisions which relate to
matters of substance, affect substantial rights and are the very essence of the thing required to be
done, are regarded as mandatory.10
In Philippine National Bank v. Office of the President,11 we had occasion to mull over the intent of PD
957 thus:
x x x [T]he unmistakable intent of the law [is] to protect innocent lot buyers from scheming subdivision
developers. As between these small lot buyers and the gigantic financial institutions which the
developers deal with, it is obvious that the law -- as an instrument of social justice -- must favor the
weak. Indeed, the petitioner Bank had at its disposal vast resources with which it could adequately
protect its loan activities, and therefore is presumed to have conducted the usual due diligence
checking and ascertaining (whether thru ocular inspection or other modes of investigation) the actual
status, condition, utilization and occupancy of the property offered as collateral, x x x On the other
hand, private respondents obviously were powerless to discover the attempt of the land developer to
hypothecate the property being sold to them. It was precisely in order to deal with this kind of situation
that P.D. 957 was enacted, its very essence and intendment being to provide a protective mantle over
helpless citizens who may fall prey to the razzmatazz of what P.D. 957 termed unscrupulous
subdivision and condominium sellers.12
Concededly, PD 957 aims to protect innocent lot buyers. Section 18 of the decree directly addresses
the problem of fraud committed against buyers when the lot they have contracted to purchase, and
which they have religiously paid for, is mortgaged without their knowledge. The avowed purpose of PD
957 compels the reading of Section 18 as prohibitory -- acts committed contrary to it are void.13 Such
construal ensures the attainment of the purpose of the law: to protect lot buyers, so that they do not end
up still homeless despite having fully paid for their home lots with their hard-earned cash.
Petitioner argues that it is an innocent mortgagee whose lien must be respected and protected, since
the title offered as security was clean of any encumbrance or lien. We do not agree.
x xx. As a general rule, where there is nothing on the certificate of title to indicate any cloud or vice in
the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore
further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate
right that may subsequently defeat his right thereto. This rule, however, admits of an exception as
where the purchaser or mortgagee has knowledge of a defect or lack of title in the vendor, or that he
was aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the
property in litigation.14
Petitioner bank should have considered that it was dealing with a town house project that was already
in progress. A reasonable person should have been aware that, to finance the project, sources of funds
could have been used other than the loan, which was intended to serve the purpose only partially.
Hence, there was need to verify whether any part of the property was already the subject of any other
contract involving buyers or potential buyers. In granting the loan, petitioner bank should not have been
content merely with a clean title, considering the presence of circumstances indicating the need for a
thorough investigation of the existence of buyers like respondent. Having been wanting in care and
prudence, the latter cannot be deemed to be an innocent mortgagee.
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as found by the Office
of the President and by the CA. Petitioner should not have relied only on the representation of the
mortgagor that the latter had secured all requisite permits and licenses from the government agencies
concerned. The former should have required the submission of certified true copies of those documents
and verified their authenticity through its own independent effort.
Having been negligent in finding out what respondents rights were over the lot, petitioner must be
deemed to possess constructive knowledge of those rights.15
Second Issue:
Remedy Granted
To retain possession of the lot, petitioner claims that its rights as the buyer in the foreclosure sale are
superior to those of respondent.
We are not persuaded. Aside from being a buyer of the lot, petitioner was also the mortgagee, which,
as previously discussed, was presumed to know the rights of respondent over that lot. The conversion
of the status of the former from mortgagee to buyer-owner will not lessen the importance of such
knowledge. Neither will the conversion set aside the consequences of its negligence as a mortgagee.
The lot was mortgaged in violation of Section 18 of PD 957. Respondent, who was the buyer of the
property, was not notified of the mortgage before the release of the loan proceeds by petitioner. Acts
executed against the provisions of mandatory or prohibitory laws shall be void.16 Hence, the mortgage
over the lot is null and void insofar as private respondent is concerned. 17
The remedy granted by the HLURB and sustained by the Office of the President is proper only insofar
as it refers to the lot of respondent. In short, the mortgage contract is void as against him. Since there is
no law stating the specifics of what should be done under the circumstances, that which is in accord
with equity should be ordered. The remedy granted by the HLURB in the first and the second
paragraphs of the dispositive portion of its Decision insofar as it referred to respondent's lot is in accord
with equity.
The HLURB, however, went overboard in its disposition in paragraphs 3 and 4, which pertained not only
to the lot but to the entire parcel of land mortgaged. Such ruling was improper. The subject of this
litigation is limited only to the lot that respondent is buying, not to the entire parcel of land. He has no
personality or standing to bring suit on the whole property, as he has actionable interest over the
subject lot only.
Third Issue:
Certification Against Forum Shopping
We find no cogent reason to alter the ruling of the CA regarding the Certification against forum
shopping that did not bear the notary public's signature. It is worth emphasizing that despite petitioner's
noncompliance with the technical requirements regarding the Certification, the CA still ruled on the
merits of the case.18 In fact, there is no more need to pass upon this issue inasmuch as, on the merits,
we have already turned down petitioners plea against respondent.
WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the HLURB is AFFIRMED, but it
shall be applicable only to the 52.5-square-meter lot with a three-storey town house unit denominated
as Unit No. 10. No costs.
SO ORDERED
CARLOS R. TAMAYO,
- versus -
MILAGROS HUANG, JOSEFINO HUANG, HUANG SUI SIN, MIGUEL HUANG and IAP TONG HA,
Respondents
CARPIO MORALES, J.:
On August 14, 1978, respondents Huang Sui Sin, Josefino Huang, Miguel Huang and Milagros Huang,
four of five registered owners of four parcels of land located in Barangay Matina, Davao City and
covered by Transfer Certificates of Title Nos. T-20694, T-20704, T-20717 and a portion of TCT No. T-
20729, executed a contract of Indenture with EAP Development Corporation (EAP) under which EAP
undertook to manage and develop said parcels of land into a first class subdivision and sell the lots
therein in consideration for which EAP would retain 55% percent of the sales proceeds. [1] The parcels of
land were later known as Doa Luisa Village (the subdivision).
On or about April 30, 1981, Carlos R. Tamayo (petitioner) entered into a contract to sell [2] (the contract)
with respondents through their Attorney-in-Fact and Manager, EAP, for the purchase of Lot No. 15,
Block No. 11 (the lot) of the subdivision, covered by TCT No. T-74582 (a transfer from TCT-20717) with
an area of 1,424 square meters at P170.00 per square meter or for the total price of P242,080.00.
Under the contract, petitioner was to pay upon execution P35,749.60 and the balance, including interest
at the rate of 14% per annum, in 60 monthly installments of P4,791.40, without necessity of demand;
and if petitioner failed to pay the installments, respondents were given the right to demand interest
thereon at the rate of 14% per annum, to be computed on the same day of the month the installments
became due.
Petitioner did make the down payment alright and paid monthly installments up to June 1982 after
which he stopped paying. At that time, petitioner had paid a total of P59,706.60.
In the meantime, as EAP had abandoned the development of the subdivision, respondents filed on
June 27, 1985 a complaint against EAP for rescission of their Indenture contract before the Regional
Trial Court (RTC) of Davao, docketed as Civil Case No. 17625.[3]
More than five years after the parties executed the contract on April 30, 1981,[4] respondents appear to
have sent petitioner a letter demanding payment of the lot, for in a letter[5] dated December 24, 1986
addressed to respondents, petitioner stated that he intentionally desisted from paying further monthly
installments due to non-development of the subdivision as agreed upon in the contract.
Nothing had been heard from the parties until January 2, 1991 when, after noting that the development
of the subdivision was in progress, petitioner issued Prudential Bank Check No. 023014 [6] dated
January 2, 1991 in the amount of P270,527.00 purportedly representing full payment of the purchase
price of the lot, for which he was issued a receipt.[7]
Respondents immediately returned the check to petitioner, however, by letter of January 9, 1991, they
claiming that their employee had committed a mistake in receiving it. Respondents letter bearing the
check was returned unopened, drawing respondents to return it again, by letter[8] dated February 28,
1991 addressed to and received by petitioners son.
Petitioner later filed a complaint[9] on July 24, 1997 against respondents, for specific performance and
delivery of title with damages, before the Housing and Land Use Regulatory Board (HLURB), Region
XI, Davao City, the subject of the petition at bar, anchoring his rights under Presidential Decree No. 957
(THE SUBDIVISION AND CONDOMINIUM BUYERS PROTECTIVE DECREE).
In his complaint before the HLURB, petitioner posited that from the execution of the contract up to the
time he sent his above-said letter dated December 24, 1986, respondents failed to develop the
subdivision, in support of which he submitted the January 31, 1990 decision[10] of Branch 14 of the RTC
Davao City in Civil Case No. 17625 rescinding the Indenture forged by respondents and EAP for the
latters failure to develop the subdivision. Petitioner also submitted a Certification[11] dated November 24,
1997 of the President of Homeowners Association of the subdivision that the entrance road of the
subdivision connecting to the Quimpo Boulevard was concreted only about two years earlier, and that
as of said date, the drainage system was not completed and some of the roads were not yet concreted.
In their Answer to the complaint,[12] respondents averred that the EAP stopped the development of the
subdivision only by the end of 1983; petitioner had no factual or legal basis for not paying his monthly
installment beginning July 1982 since the development of the subdivision was then in progress; the
contract was deemed rescinded on April 30, 1986 five (5) years after its execution, and if petitioner
wanted to go on with the purchase of the lot, it would be under terms different from those executed in
the contract; petitioner was not entitled to the provisions of Republic Act No. 6552 (THE REALTY
INSTALLMENT BUYER ACT) as the therein prescribed condition of two-year continuous payment of
monthly installments for entitlement to rights thereunder was not complied with; and if petitioner had
any right at all, it was only to a refund of what he had already paid.
In the interim, petitioner consigned on September 4, 1997 with the HLURB two checks, one dated
August 29, 1997, and the other dated September 2, 1997, in the amounts of P270,000.00 and P527.00,
respectively.[13]
By a Counter-Manifestation,[14] respondents informed that they were refusing to accept petitioners
checks as these were issued and consigned long after the expiration of the contract on April 30, 1986.
By Decision[15] of February 16, 1998, HLRUB Arbiter Atty. Joselito F. Melchor dismissed petitioners
complaint, holding that payment by tender and consignation was not legally effected, the check dated
January 9, 1991 having been sent back to petitioners son, and the consignation of the two checks
dated 1997 having failed to meet the requirements set forth by law for a valid consignation.
And so the HLURB decision disposed:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered ordering:
1. The DISMISSAL of the instant case for lack of merit.
2. The complainant to immediately pay in full his account with the payment of corresponding interest
and penalty under the terms and conditions of his contract with the respondents. In the event
cancellation procedures of the contract between the parties have already been effected by respondents
in accordance with RA 6552, the respondent shall give the complainant a grace period of not less than
sixty days from finality of this judgment to pay his unpaid obligations as stated above. Failure on the
part of the complainant to pay said unpaid obligations at the expiration of the grace period, the
respondents may cancel the contract after thirty days from receipt by the complainant of the notice of
cancellation or demand for rescission of the contract by notarial act;
3. The complainant to pay respondents the amount of P100,000.00 as damages because of formers
breach of obligation and P50,000.00 as attorneys fee; and
4. The complainant to pay the cost of litigation.
[16]
SO ORDERED. (Underscoring supplied)
Petitioner thereupon filed a petition for review before the HLURB Board of Commissioners questioning
the award of damages and attorneys fee to respondents, and praying that respondents be ordered to
receive the amount of P270,527.00 consigned with the HLURB Davao City and execute the final deed
of sale and deliver the title.
By Decision of August 25, 1998, the HLURB Board of Commissioners affirmed the Arbiters decision,
but deleted the award to respondents of damages and costs.
Respondents appealed the HLURB Board of Commissioners decision to the Office of the President
(OP).
During the pendency of the appeal before the OP, respondents filed on October 13, 2000 a
Manifestation and Motion,[17] averring for the first time that on April 1997, they sold the disputed lot to
one Nene Abijar in whose favor a Deed of Absolute Sale was executed on November 2, 1997, and to
whom was issued on November 11, 1997 TCT No. T-292279[18] which cancelled respondents TCT No.
T-74582.[19] The records disclose that on September 3, 2001, Abijar oddly filed an Answer with Counter-
claim against petitioner and Cross-claim against respondents in HLURB REM-A-980316-0042 before
the HLURB Davao after the said case had been resolved by the HLURB Davao and while it was on
appeal before the OP.[20]
By Decision of December 12, 2001, the OP upheld the HLURB finding that there was no effective
cancellation of the contract, but nevertheless ruled that Abijars right as an innocent purchaser for value
must be accorded preference over that of petitioner, without prejudice to the right of petitioner to
recover what he had paid under the contract.[21] Thus the OP held:
x x x M[s]. Abijar, three (3) months before the appellee[-herein petitioner] instituted the present action,
bought the property from the appellants[-herein respondents] apparently without notice that some other
person has a right to, or has interest over the same. Fact is, M[s]. Abijar was able to register title to the
property under h[er] name, and there appears nothing in h[er] title which indicates any encumbrance,
lien or inchoate right which may subsequently defeat h[er] right thereto. A person dealing with a
registered land is not, as a rule, required to go behind the register to determine the condition of the
property, and is only charged with notice of the burdens on the property which are noted on the face of
the register or certificate of title [Radiowealth Finance Company v. Manuelito S. Palileo, 197 SCRA
245]. It thus strikes us as rather unconscionable, if not legally impossible, to take the literal application
of RA 6552. Otherwise, we shall be asking the appellants to surrender the subject property to the
appellee after its sale to, and registration under the name of, M[s]. Abijar. If that would be the case, then
our judgment would run counter to the doctrine on the efficacy and conclusiveness of the certificate of
title which the Torrens system seeks to ensure and protect.[22] (Underscoring supplied)
The OP thus reversed the decision of the HLURB Board of Commissioners, the dispositive portion of
which reads:
WHEREFORE, premises considered judgment is hereby MODIFIED to wit:
1) Ordering appellants[-herein respondents] to refund to appellee the amount of P59,706.00, the
sum total of the amortizations paid by the appellee, with legal interest from the date of conveyance by
appellants of the subject parcel of land to Mr. Nene Abijar;
2) Ordering the release to appellee Carlos R. Tamayo of the amount of P270,537.00 which he
consigned to the HLURB; and
3) Ordering the appellants[-herein respondents] to pay to HLURB the amount of P 20,000 as
administrative fine.
SO ORDERED. (Underscoring supplied)
His motion for reconsideration having been denied by Order[23] of June 17, 2003, petitioner filed a
petition for review with the appellate court before which he argued, inter alia, that the OP erred in
applying equity in favor of Abijar who was not a party to the case.
By decision[24] rendered on January 23, 2004, the appellate court dismissed the petition for lack of
merit. Petitioners motion for reconsideration having been denied by resolution of June 29, 2004, he filed
the present petition.
It is not disputed that EAP, acting as the Attorney-in-Fact and Manager of respondents, totally
abandoned the development of the subdivision in 1983,[25] thus prompting respondents to continue
development thereof on May 22, 1985[26] and to even file a complaint to rescind its contract of Indenture
with EAP which the RTC Davao granted.
Paragraph 8 of the contract between petitioner and respondents through EAP provides:
Eight. SUBDIVISION IMPROVEMENTS: - To insure the beauty of the subdivision in line with the
modern trend of urban development, EAP Development Corporation hereby obligates itself to provide
the subdivision with:
(a) Concrete Paved road or asphalt when price of cement becomes prohibitive
(b) Concrete curbs and gutters
(c) Underground drainage system
(d) Water distribution system
(e) Electrical lighting system
(f) 24 hour Security Guard Service
x x x x (Underscoring supplied)
The SUBDIVISION AND CONDOMINIUM BUYERS PROTECTIVE DECREE directs every owner and
developer of real property to provide the necessary facilities, improvements, infrastructures and other
forms of development, failure to carry out which is sufficient cause for the buyer to suspend payment,
and any sums of money already paid shall not be forfeited.
Sections 20 and 23 of P.D. 957 of the same decree further direct as follows:
Sec. 20. Time of Completion. - Every owner or developer shall construct and provide the facilities,
improvements, infrastructures and other forms of development, including water supply and lighting
facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures,
prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the
issuance of the license for the subdivision or condominium project or such other period of time as may
be fixed by the Authority. (Underscoring supplied)
Sec. 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or
condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the owner or developer, desists from further payment due
to the failure of the owner or developer to develop the subdivision or condominium project according to
the approved plans and within the time limit for complying with the same. Such buyer may, at his option,
be reimbursed the total amount paid including amortization interest but excluding delinquency interests,
with interest thereon at the legal rate. (Underscoring supplied)
In case the developer of a subdivision or condominium fails in its obligation under Section 20, Section
23 gives the buyer the option to demand reimbursement of the total amount paid, or to wait for further
development of the subdivision,[27] and when the buyer opts for the latter alternative, he may suspend
payment of installments until such time that the owner or developer had fulfilled its obligation to him. [28]
From petitioners earlier-mentioned letter of December 24, 1986, he made clear his intention not to seek
reimbursement of the total amount he had already paid but to comply with his obligation to pay the
balance in full upon completion of the development of the subdivision.
Please be informed that I int[en]tionally stopped paying my monthly installment because I could not see
any development in your subdivision, like concrete road, electrical facilities, drainage and water among
others as stipulated in our contract. Under existing laws, I understand I can suspend my payment
pending your completion of the subdivision facilities as agreed in our contract. Ill only resume payment
if you complete the development of the subdivision.
The claim-advice of petitioner notwithstanding, respondents were mum about it. Such silence suggests
an admission of the veracity and validity of petitioners claim.[29]
Respondents nevertheless claim that the contract was deemed rescinded five years after its execution
on April 30, 1981. Respondents demand for payment of the unpaid balance sometime between the
period of April 30, 1986 to December 24, 1986 betrays such claim, however. In any event, it puts them
in estoppel.
As for respondents position that before petitioner could lawfully withhold his monthly payments, he
needed to secure previous clearance from the HLURB following Section 23 of Rule VI of the Rules
implementing the SUBDIVISION AND CONDOMINIUM BUYERS PROTECTIVE DECREE, law and
jurisprudence are not on their side.
Section 23 of PD 957 -- the law upon which the Implementing Rule cited was based -- requires only due
notice to the owner or developer for stopping further payments by reason of the latters failure to
develop the subdivision according to the approved plans and within the time limit. x x x
To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the
enabling law. An implementing rule or regulation cannot modify, expand, or subtract from the law it is
intended to implement. Any rule that is not consistent with the statute itself is null and void. x x x
Section 23 of Rule VI of the Implementing Rules cannot rise higher than Section 23 of PD 957, which is
the source of its authority. For that matter, PD 957 would have expressly required the written approval
of the HLURB before any stoppage of amortization payments if it so intended, in the same manner that
the decree specifically mandates written consent or approval by the NHA (now the HLURB) in Section
18.
Apropos, to require clearance from the HLURB before stopping payment would not be in keeping with
the intent of the law to protect innocent buyers of lots or homes from scheming subdivision developers.
To give full effect to such intent, it would be fitting to treat the right to stop payment to be immediately
effective upon giving due notice to the owner or developer or upon filing a complaint before the HLURB
against the erring developer. Such course of action would be without prejudice to the subsequent
determination of its propriety and consequences, should the suspension of payment subsequently be
found improper.[30] (Italics supplied)
Section 4 of THE REALTY INSTALLMENT ACT directs as follows in case a buyer defaults in the
payment of succeeding installments where he has paid less than two years of installments, as in
petitioners case
SECTION 4. In case where less than two years of installments were paid, the seller shall give the buyer
a grace period of not less than sixty days from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel
the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act. (Underscoring supplied)
As noted earlier, petitioner, by letter of December 24, 1986, informed respondents that he desisted from
further paying monthly installments and that he would resume payment if the development of the
subdivision had been completed. Yet respondents sent no notarized notice or any notice of cancellation
at all. In fact, it was only after petitioner filed on July 24, 1997 the complaint before the HLURB that
respondents offered to reimburse petitioner of the total amount he had already paid.
The contract not having been cancelled in accordance with law, it has remained valid and subsisting. It
was, therefore, within petitioners right to maintain his option to await the completion of the development
of and introduction of improvements in the subdivision and thereafter, upon full payment of the
purchase price, without interest, compel respondents to execute a deed of absolute sale.
The decision of the OP, however, which passed upon the sale of the lot to Abijar whom it found to be a
buyer in good faith and for value basis of its ruling that petitioner can no longer exercise above-said
right, which decision was deemed affirmed too by the appellate court, does not lie. For, the subsequent
sale was brought to light by respondents only while their appeal was pending before the OP, and as
correctly argued by petitioner, Abijar was not a party to the case. Parenthetically, the records of the
case do not bear whether the deed of absolute sale in favor of Abijar was in fact registered, and TCT
No. T-74582 in the name of respondents was indeed cancelled and TCT No. T-292279 in the name of
Abijar was issued in its stead. As petitioner points out, what was appended to the records of the OP
was a plain uncertified photocopy of TCT No. T-292279.
The decision of the OP which was deemed affirmed by the appellate court ordering a full refund of the
installment payments of petitioner in the amount of P59,706.00 and the release to petitioner of the
amount of P270,537.00 he had consigned does not lie too, for under the law, petitioner is entitled to the
lot he contracted to purchase after payment of the outstanding balance which he was ready and willing
to do.[31]
If the sale of the lot to Abijar is eventually declared valid, respondents should refund petitioner its actual
value as resold to Abijar, to bear 12% interest per annum computed from the date of such sale until fully
paid or deliver a substitute lot at the option of petitioner. So this Court instructs in Active Realty and
Development Corporation v. Daroya:[32]
In the case at bar, respondent offered to pay for her outstanding balance of the contract price but
respondent refused to accept it. Neither did petitioner adduce proof that the respondent's offer to pay
was made after the effectivity date stated in its notice of cancellation. Moreover, there was no formal
notice of cancellation or court action to rescind the contract. Given the circumstances, we find it illegal
and iniquitous that petitioner, without complying with the mandatory legal requirements for canceling the
contract, forfeited both respondent's land and hard-earned money after she has paid for, not just the
contract price, but more than the consideration stated in the contract to sell.
Thus, for failure to cancel the contract in accordance with the procedure provided by law, we hold that
the contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No.
6552, respondent has the right to offer to pay for the balance of the purchase price, without interest,
which she did in this case. Ordinarily, petitioner would have had no other recourse but to accept
payment. However, respondent can no longer exercise this right as the subject lot was already sold by
the petitioner to another buyer which lot, as admitted by the petitioner, was valued at P1,700.00 per
square meter. As respondent lost her chance to pay for the balance of the P875,000.00 lot, it is only
just and equitable that the petitioner be ordered to refund to respondent the actual value of the lot
resold, i.e., P875,000.00, with 12% interest per annum computed from August 26, 1991 until fully paid
or to deliver a substitute lot at the option of the respondent. (Italics in the original; underscoring
supplied)
This Court, not being a trier of facts, thus resolves to remand the case to the HLURB for a proper
determination of the respective rights of the parties vis a vis the alleged sale of the lot to Abijar in
accordance with the foregoing discussions.
WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE. The case is
REMANDED to the Housing and Land Use Regulatory Board of Davao City for further proceedings in
accordance with the directive in the immediately preceding paragraph.
G.R. No. 171399
VICENTA CANTEMPRATE, ZENAIDA DELFIN, ELVIRA MILLAN, FEVITO G. OBIDOS, MACARIO
YAP, CARMEN YAP,
versus
CRS REALTY DEVELOPMENT CORPORATION, CRISANTA SALVADOR, CESAR CASAL
This is a petition for review on certiorari[if !supportFootnotes][1][endif] under Rule 45 of the 1997 Rules of Civil
Procedure assailing the decision[if !supportFootnotes][2][endif] and resolution[if !supportFootnotes][3][endif] of the Court of
Appeals in CA-G.R. SP No. 81859. The Court of Appeals decision affirmed the decision[if
!supportFootnotes][4][endif]
of the Office of the President, which adopted the decision[if !supportFootnotes][5][endif] of the
Housing Land Use and Regulatory Board (HLURB) dismissing petitioners complaint for lack of
jurisdiction, while the resolution denied petitioners motion for reconsideration.
The following factual antecedents are matters of record.
Herein petitioners Vicenta Cantemprate, Zenaida Delfin, Elvira Millan, Fevito G. Obidos, Macario Yap,
Carmen Yap, Lilia Camacho, Lilia Mejia, Emilia Dimas, Estrella Eugenio, Milagros L. Cruz, Leonardo
Ecat, Nora Masangkay, Jesus Ayson, Nilo Samia, Carmencita Morales and Lorna Ramirez were among
those who filed before the HLURB a complaint[if !supportFootnotes][6][endif] for the delivery of certificates of title
against respondents CRS Realty Development Corporation (CRS Realty), Crisanta Salvador and Cesar
Casal.[if !supportFootnotes][7][endif]
The complaint alleged that respondent Casal was the owner of a parcel of land situated in General
Mariano Alvarez, Cavite known as the CRS Farm Estate while respondent Salvador was the president
of respondent CRS Realty, the developer of CRS Farm Estate. Petitioners averred that they had bought
on an installment basis subdivision lots from respondent CRS Realty and had paid in full the agreed
purchase prices; but notwithstanding the full payment and despite demands, respondents failed and
refused to deliver the corresponding certificates of title to petitioners. The complaint prayed that
respondents be ordered to deliver the certificates of title corresponding to the lots petitioners had
purchased and paid in full and to pay petitioners damages.[if !supportFootnotes][8][endif]
An amended complaint[if !supportFootnotes][9][endif] was subsequently filed impleading other respondents,
among them, the Heirs of Vitaliano and Enrique Laudiza, who were the predecessors-in-interest of
respondent Casal, herein respondents Bennie Cuason and Caleb Ang, to whom respondent Casal
purportedly transferred the subdivision lots and one Leticia Ligon. The amended complaint alleged that
by virtue of the deed of absolute sale executed between respondent Casal and respondents Ang and
Cuason, Transfer Certificate of Title (TCT) No. 669732 covering the subdivided property was issued in
the names of respondents Ang and Cuason as registered owners thereof. [if !supportFootnotes][10][endif]
The amended complaint prayed for additional reliefs, namely: (1) that petitioners be declared the lawful
owners of the subdivision lots; (2) that the deed of absolute sale executed between respondent Casal
and respondents Cuason and Ang and TCT No. 669732 be nullified; and (3) that respondents Cuason
and Ang be ordered to reconvey the subdivision lots to petitioners.[if !supportFootnotes][11][endif
In his answer,[if !supportFootnotes][12][endif] respondent Casal averred that despite his willingness to deliver them,
petitioners refused to accept the certificates of title with notice of lis pendens covering the subdivision
lots. The notice of lis pendens pertained to Civil Case No. BCV-90-14, entitled Heirs of Vitaliano and
Enrique Laudiza, represented by their Attorney-In-Fact Rosa Medina, Plaintiffs, v. Cesar E. Casal, CRS
Realty and Development Corporation and the Register of Deeds of Cavite, Defendants, which was
pending before the Regional Trial Court (RTC), Branch 19, Bacoor, Cavite. Leticia Ligon was said to
have intervened in the said civil case.[if !supportFootnotes][13][endif]
By way of special and affirmative defenses, respondent Casal further averred that the obligation to
deliver the certificate of titles without encumbrance fell on respondent CRS Realty on the following
grounds: (1) as stipulated in the subdivision development agreement between respondents Casal and
CRS Realty executed on 06 September 1988, the certificates of title of the subdivision lots would be
transferred to the developer or buyers thereof only upon full payment of the purchase price of each lot;
(2) the contracts to sell were executed between petitioners and respondent CRS Realty; and (3) the
monthly amortizations were paid to respondent CRS Realty and not to respondent Casal. [if
!supportFootnotes][14][endif]
Respondent Casal also alleged that he subsequently entered into a purchase agreement over the
unsold portions of the subdivision with respondents Ang, Cuason and one Florinda Estrada who
assumed the obligation to reimburse the amortizations already paid by petitioners. [if !supportFootnotes][15][endif]
In her answer, respondent Salvador alleged that the failure by respondent Casal to comply with his
obligation under the first agreement to deliver to CRS or the buyers the certificates of title was caused
by the annotation of the notice of lis pendens on the certificate of title covering the subdivision property.
Respondent Salvador further averred that the prior agreements dated 6 September 1988 and 08
August 1989 between respondents Casal and CRS Realty were superseded by an agreement dated 30
August 1996 between respondents Casal and Salvador. In the subsequent agreement, respondent
Casal purportedly assumed full responsibility for the claims of the subdivision lot buyers while
respondent Salvador sold her share in CRS Realty and relinquished her participation in the business
Respondents Ang and Cuason claimed in their answer with counterclaim [if !supportFootnotes][16][endif] that
respondent Casal remained the registered owner of the subdivided lots when they were transferred to
them and that the failure by petitioners to annotate their claims on the title indicated that they were
unfounded. Respondent CRS Realty and the Heirs of Laudiza were declared in default for failure to file
their respective answers.[if !supportFootnotes][17][endif]
On 18 December 1998, HLURB Arbiter Ma. Perpetua Y. Aquino rendered a decision[if !supportFootnotes][18][endif]
primarily ruling that the regular courts and not the HLURB had jurisdiction over petitioners complaint,
thus, the complaint for quieting of title could not be given due course. The Heirs of Laudiza and Ligon
were dropped as parties on the ground of lack of cause of action. However, she found respondents
CRS Realty, Casal and Salvador liable on their obligation to deliver the certificates of title of the
subdivision lots to petitioners who had paid in full the purchase price of the properties. She also found
as fraudulent and consequently nullified the subsequent transfer of a portion of the subdivision to
respondents Ang and Cuason.
The dispositive portion of the decision reads:
WHEREFORE, in view of the foregoing, judgement [sic] is hereby rendered as follows:
1) For respondents CRS Realty and Development Corp., Crisanta Salvador, and Cesar Casal to, jointly
and severally:
a) cause the delivery or to deliver the individual titles, within thirty (30) days from the finality of the
decision, to the following complainants who have fully paid the purchase price of their lots, and to whom
Deeds of Sale were issued, to wit:
1. Vicenta Cantemprate = Lots 1 to 8 Block 2
Lots 5 & 6 Block 13
2. Leonardo/Felicidad Ecat = Lots 21, 23 & 25 Block 11
3. Jesus Ayson = Lot 2 Block 9
4. Lilia Camacho = Lot 4 Block 11
5. Zenaida Delfin = Lot 2 Block 3
6. Natividad Garcia = Lot 8 Block 11
7. Nora Masangkay = Lot 7 Block 13
8. Elvira Millan = Lot 10 Block 13
9. Fevito Obidos = Lot 1 Block 3
10. Josefina Quinia = Lot 1 & 2 Block 12
11. Nilo Samia = Lot 1 Block 9
12. Rosel Vedar = Lot 10 Block 4
13. Macario/Carmen Yap = Lot 14 Block 4
14. Estrella/Danilo Eugerio = Lot 10 Block 5
15. Nerissa Cabanag = Lot 5 Block 4
16. Milagros Cruz = Lots 11 & 13 to 16 Block 3
17. Erlinda Delleva = Lot 6 Block 4
18. Lilia Mejia = Lot 2 & 3 Block 4
19. Carmen Yap/H. Capulso = Lot 13 Block 11
20. Mercedes Montano = Lot 4 Block 4
21. Teresita Manuel = Lot 11 Block 5
22. Amalia Sambile = Lot 3 Block 3
23. Carmencita Lorna Ramirez = Lot 13 Block 13
24. Emilia Dimas = Lot 16 Block 13
25. Rosita Torres = Lot 2 Block 13
26. Alladin Abubakar = Lot 9 Block 6
27. Manuel Andaya = Lot 5 & 6 Block 11
28. Remigio Araya = Lot 11 Block 4
29. J. Ayson/R. Elquiero = Lot 5 Block 3
30. L. Bernal/D. Morada = Lot 19 Block 11
31. Rosa Nely Buna = Lot 9 Block 5
32. Nestor Calderon = Lot 6 Block 3
33. Ernesto Capulso = Lot 15 Block 11
34. Jorge Chiuco = Lots 12, 13 & 15 to 17 Block 4
35. Carolina Cruz = Lot 4 Block 14
36. Erna Daniel = Lot 6 Block 5
37. Zenaida De Guzman = Lots 19, 20 & 21 Block 10
38. Joselito De Lara = Lot 1 Block 11
39. J. De Lara/N. Gusi = Lot 11, Block 11
40. Virginia De La Paz = Lot 22, Block 11
41. Anastacia De Leon = Lot 10, Block 11
42. Salvador De Leon = Lot 7 & 8 Block 4
43. Josefina De Vera = Lot 20 Block 11
44. Julieta Danzon = Lot 4 Block 13
45. Constancia Diestro = Lot 17 Block 13
46. Corazon Ducusin = Lots 14, 16 & 18 Block 11
47. Juanita Flores = Lots 2 & 4 Block 5
48. Remedios Galman = Lot 12 Block 11
49. Mila Galamay = Lot 12 Block 5
50. Grace Baptist Church = Lot 24 Block 11
51. Rizalina Guerrero = Lot 26 Block 10
52. Nema Ida = Lot 9 Block 4
53. Milagros Jamir = Lot 8 Block 13
54. Violeta Josef = Lots 3 & 5 Block 5
55. Marivic Ladines = Lot 3 Block 13
56. Eulogio Legacion = Lots 8 & 9 Block 3
57. Emerita Mauri = Lot 12 Block 3
58. Mina Mary & Co. = Lot 1 Block 4
59. Babyrose Navarro = Lot 22 Block 10
60. Lauretto Nazarro = Lots 14 to 18 Block 10
61. Amelia Nomura = Lots 4 & 5 Block 9
62. Virgilio Ocampo = Lot 5 Block 12
63. Norma Paguagan = Lot 8 Block 12
64. Nicostrato Pelayo = Lots 7 & 9 Block 11
65. Gloria Racho = Lot 1 Block 5
66. Pepito Ramos = Lot 9 Block 13
67. Pedro Rebustillo = Lot 8 Block 5
68. S. Recato/A. Rebullar = Lot 11 Block 13
69. Laura Regidor = Lot 4 Block 3
70. Zenaida Santos = Lot 7 Block 5
71. R. Sarmiento/H. Eugenio = Lot 1 Block 13
72. Lourdes Teran = Lot 17 Block 6
73. R. Valdez/F. Corre = Lot 3 Block 9
74. Teodoro Velasco = Lot 17 Block 11
75. Edgardo Villanueva = Lots 1 to 5 Block 1
76. Gregorio Yao = Lots 2 & 3 Block 11
77. Willie Atienza = Lot 3 Block 12
78. Z. Zacarias/A. Guevarra = Lot 6 Block 12
That as concern[ed] complainant LEONARDO/FELICIDAD ECAT, whose total lost area is deficient by
278 square meters from the 2,587 square meters provided for in the Contract to Sell and that covered
by the Deed of Sale which is 2,309 square meters, for respondents to deliver the deficiency by the
execution of the Deed of Sale on the said portion and the delivery of the titles on their three (3) lots.
b) submit to the Register of Deeds of Trece Martires City, Cavite a certified true copy of the approved
subdivision plan of CRS Farm Estate, as well as photocopies of the technical description of
complainants individual lots, blue prints and tracing cloth: In the event that said respondents cannot
surrender said documents, complainants are hereby ordered to secure said documents and be the
ones to submit them to the Register of Deeds;
c) to refund to complainants the expenses theyve incurred in registering their individual Deeds of Sale
with the Register of Deeds of Trece Martires City, Cavite;
d) pay each of the complainants the sum of P10,000.00[,] as actual damages; the sum of P15,000.00[,]
as moral damages; and the sum of P20,000.00[,] as exemplary damages;
e) pay complainants the sum of P30,000.00 as and by way of attorneys fees;
f) pay to the Board the sum of P20,000.00 as administrative fine for violation of section 25 of P.D. No.
957 in relation to sections 38 and 39 of the same decree.
2.) The sale of the subject property in whole to respondents Caleb Ang and Bennie Cuason is hereby
declared annulled and of no effect especially that which pertains to the portion of the subdivision which
have already been previously sold by the respondent CRS Realty to herein complainants, prior to the
sale made by respondent Cesar Casal to Caleb Ang and Bennie Cuason. As a consequence thereof,
respondents Ang and Cuason are hereby ordered to surrender to the Register of Deeds of Trece
Martires City, Cavite, the owners duplicate copy of TCT No. 669732 in order for the said Register of
Deeds to issue the corresponding certificates of title to all complainants named herein;
3.) The Register of Deeds of Trece Martires City, Cavite is hereby ordered to cancel TCT No. 669732
and reinstate TCT No. T-2500 in the name of Cesar Casal, from which the individual titles of herein
complainants would be issued, with all the annotations of encumbrances inscribed at the back of TCT
No. 669732 carried over to the said reinstated title.
All other claims and counterclaims are hereby dismissed.
SO ORDERED.[if !supportFootnotes][19][endif]
From the decision of the HLURB Arbiter, respondents Casal, Cuason and Ang, as well as Leticia Ligon,
filed separate petitions for review before the Board of Commissioners (Board).
On 22 November 1999, the Board rendered a decision,[if !supportFootnotes][20][endif] affirming the HLURB
Arbiters ruling that the HLURB had no jurisdiction over an action for the quieting of title, the nullification
of a certificate of title or the reconveyance of a property. Notably, the Board referred to an earlier case,
HLURB Case No. REM-A-0546, involving respondent Casal and the Heirs of Laudiza, where the Board
deferred the issuance of a license to sell in favor of CRS Farm Estate until the issue of ownership
thereof would be resolved in Civil Case No. BCV-90-14 pending before the RTC of Bacoor, Cavite.
Furthermore, the Board ruled that to allow petitioners to proceed with the purchases of the subdivision
lots would be preempting the proceedings before the RTC of Bacoor, Cavite and compounding the
prejudice caused to petitioners. Thus, the Board dismissed the complaint for quieting of title but ordered
the refund of the amounts paid by petitioners and other buyers to CRS Realty, to wit:
WHEREFORE, premises considered, judgment is hereby rendered, MODIFYING the Decision dated
December 18, 1998 by the Office below, to wit:
[if !supportLists]1. [endif]The complaint for quieting of title against Cesar Casal,
Bennie Cuason, Caleb Ang, Heirs of Vitaliano and Enrique Laudiza, and Leticia Ligon is DISMISSED
for lack of jurisdiction.
[if !supportLists]2. [endif]Ordering CRS Realty and/or any of the Officers to refund to
complainants for all payments made plus 12% from the time the contract to sell is executed until fully
paid.
[if !supportLists]3. [endif]All other claims and counterclaims are hereby DISMISSED.
[if !supportLists]4. [endif]Directing CRS to pay P10,000.00 as administrative fine for
each and every sale without license.
Let case be referred to the Legal Services Group (LSG) for possible criminal prosecution against the
Officers of CRS Realty and Casal.
SO ORDERED.[if !supportFootnotes][21][endif]
Ligon, respondent Casal and herein petitioners filed separate motions for reconsideration. On 28
November 2000, the Board issued a resolution,[if !supportFootnotes][22][endif] modifying its Decision dated 22
November 2009 by imposing the payment of damages in favor of petitioners, thus:
WHEREFORE, based on the foregoing:
1. The decision of this Board dated November 22, 1999 is hereby MODIFIED to read as follows:
WHEREFORE, premises considered, judgment is hereby rendered, MODIFYING the Decision dated
December 18, 1998 by the Office below, thus:
[if !supportLists]1. [endif]The complaint for quieting of title against Cesar Casal, Bennie Cuason,
Caleb Ang, Heirs of Vitaliano and Enrique Laudiza and Leticia Ligon is DISMISSED for lack of
jurisdiction;
[if !supportLists]2. [endif]CRS Realty and/or any of the officers jointly and severally is/are ordered to
refund to complainants, at the complainants option, all payments made for the purchase of the lots plus
12% interest from the time the contract to sell is executed until fully paid and cost of improvement, if
any;
[if !supportLists]3. [endif]CRS Realty and/or any of its officers jointly and severally is/are ordered [to]
pay each of the complainants the sum of P30,000.00 as and by way [of] moral damages, P30,000.00 as
and by way of exemplary damages, and P20,000.00 as attorneys fees;
[if !supportLists]4. [endif]CRS Realty and/or any of its officers is/are hereby ordered to pay this
Board P10,000.00 as administrative fine for each and every sale executed without license
[if !supportLists]5. [endif]All other claims and counterclaims are hereby DISMISSED.
Let the case be referred to the Legal Services Group (LSG) for possible criminal prosecution against
the officers of CRS Realty and Casal.
2. Complainants Motion for Reconsideration, save in so far as we have above given due course, is
hereby DISMISSED.
3. Likewise respondents Motion for Reconsideration are hereby DISMISSED for lack of merit.
4. Respondent Bennie Cuasons Motion to Cancel Lis Pendens is hereby DENIED, the same being
premature.
Let the records be elevated to the Office of the President in view of the appeal earlier filed by
complainants.
SO ORDERED.[if !supportFootnotes][23][endif]
Upon appeal, the Office of the President (OP) on 03 December 2003 affirmed in toto both the decision
and resolution of the Board.[if !supportFootnotes][24][endif] Aggrieved, petitioners elevated the matter to the Court
of Appeals via a Rule 43 petition for review.
Before the Court of Appeals, petitioners argued that the OP erred in rendering a decision which
adopted by mere reference the decision of the HLURB and that the HLURB erred in ruling that it had no
jurisdiction over petitioners complaint, in not nullifying the deed of absolute sale executed between
respondent Casal and respondents Cuason and Ang and in ordering the refund of the amounts paid by
petitioners for the subdivision lots.[if !supportFootnotes][25][endif]
On 21 June 2005, the Court of Appeals rendered the assailed decision, [if !supportFootnotes][26][endif] affirming the
OP Decision dated 03 December 2003. On 03 February 2006, the appellate court denied petitioners
motion for reconsideration for lack of merit.[if !supportFootnotes][27][endif]
Hence, the instant petition, essentially praying for judgment ordering the cancellation of the deed of
absolute sale entered between respondent Casal, on the one hand, and respondents Ang and Cuason,
on the other, the delivery of the certificates of title of the subdivision lots, and the payment of damages
to petitioners.
Petitioners have raised the following issues: (1) whether or not the absence of a license to sell has
rendered the sales void; (2) whether or not the subsequent sale to respondent Cuason and Ang
constitutes double sale; (3) whether or not the HLURB has jurisdiction over petitioners complaint; and
(4) whether a minute decision conforms to the requirement of Section 14, Article VIII of the
Constitution.[if !supportFootnotes][28][endif]
We shall resolve the issues in seriatim.
Petitioners assail the Court of Appeals ruling that the lack of the requisite license to sell on the part of
respondent CRS Realty rendered the sales void; hence, neither party could compel performance of
each others contractual obligations.
The only requisite for a contract of sale or contract to sell to exist in law is the meeting of minds upon
the thing which is the object of the contract and the price, including the manner the price is to be paid
by the vendee. Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or
conditional, one of the contracting parties obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.[if
!supportFootnotes][29][endif]
In the instant case, the failure by respondent CRS Realty to obtain a license to sell the subdivision lots
does not render the sales void on that ground alone especially that the parties have impliedly admitted
that there was already a meeting of the minds as to the subject of the sale and price of the contract.
The absence of the license to sell only subjects respondent CRS Realty and its officers civilly and
criminally liable for the said violation under Presidential Decree (P.D.) No. 957 [if !supportFootnotes][30][endif] and
related rules and regulations. The absence of the license to sell does not affect the validity of the
already perfected contract of sale between petitioners and respondent CRS Realty.

[if !supportFootnotes][31][endif]
In Co Chien v. Sta. Lucia Realty and Development, Inc., the Court ruled that the
requisite registration and license to sell under P.D. No. 957 do not affect the validity of the contract
between a subdivision seller and buyer. The Court explained, thus:
A review of the relevant provisions of P.D. [No.] 957 reveals that while the law penalizes the selling
subdivision lots and condominium units without prior issuance of a Certificate of Registration and
License to sell by the HLURB, it does not provide that the absence thereof will automatically render a
contract, otherwise validly entered, void. Xxx
As found by the Court of Appeals, in the case at bar, the requirements of Sections 4 and 5 of P.D. [No.]
957 do not go into the validity of the contract, such that the absence thereof would automatically render
the contract null and void. It is rather more of an administrative convenience in order to allow a more
effective regulation of the industry. x x x[if !supportFootnotes][32][endif]
The second and third issues are interrelated as they pertain to whether the HLURB has jurisdiction over
petitioners complaint for the delivery of certificates of titles and for quieting of title.
Petitioners are partly correct in asserting that under Section 1 of P.D. No. 1344, [if !supportFootnotes][33][endif] an
action for specific performance to compel respondents to comply with their obligations under the
various contracts for the purchase of lots located in the subdivision owned, developed and/or sold by
respondents CRS Realty, Casal and Salvador is within the province of the HLURB.
The HLURB has exclusive jurisdiction over the complaint for specific performance to compel
respondents CRS Realty, Casal and Salvador as subdivision owners and developers to deliver to
petitioners the certificates of title after full payment of the subdivision lots. On this score, the Court
affirms the findings of HLURB Arbiter Aquino with respect to the obligation of respondents Casal,
Salvador and CRS Realty to deliver the certificates of title of the subdivision to petitioners pursuant to
their respective contracts to sell.
Indeed, under Section 25 of P.D. No. 957, among the obligations of a subdivision owner or developer is
the delivery of the subdivision lot to the buyer by causing the transfer of the corresponding certificate of
title over the subject lot.[if !supportFootnotes][34][endif] The provision states:
Sec. 25. Issuance of Title.The owner or developer shall deliver the title of the lot or unit to the buyer
upon full payment of the lot or unit. No fee, except those required for the registration of the deed of sale
in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over
the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer
shall redeem the mortgage or the corresponding portion thereof within six months from such issuance
in order that the title over any fully paid lot or unit may be secured and delivered to the buyer in
accordance herewith.
In the instant case, the contract to sell itself expressly obliges the vendor to cause the issuance of the
corresponding certificate of title upon full payment of the purchase price, to wit:
3. Title to said parcel of land shall remain in the name of the VENDOR until complete payment of the
agreed price by the VENDEE and all obligations herein stipulated, at which time the VENDOR agrees
to cause the issuance of a certificate of title in the Land Registration Act and the restrictions as may be
provided in this Contract.[if !supportFootnotes][35][endif]
From the foregoing it is clear that upon full payment, the seller is duty-bound to deliver the title of the
unit to the buyer. Thus, for instance, even with a valid mortgage over the lot, the seller is still bound to
redeem said mortgage without any cost to the buyer apart from the balance of the purchase price and
registration fees.[if !supportFootnotes][36][endif]
There is no question that respondents Casal, Salvador and CRS Realty breached their obligations to
petitioners under the contracts to sell. It is settled that a breach of contract is a cause of action either for
specific performance or rescission of contracts.[if !supportFootnotes][37][endif] Respondents Casal, Salvador and
CRS Realty have the obligation to deliver the corresponding clean certificates of title of the subdivision
lots, the purchase price of which have been paid in full by petitioners. That the subject subdivision
property is involved in a pending litigation between respondent Casal and persons not parties to the
instant case must not prejudice petitioners.
Respondents obligation to deliver the corresponding certificates of title is simultaneous and reciprocal.
Upon the full payment of the purchase price of the subdivision lots, respondents obligation to deliver the
certificates of title becomes extant. Respondents must cause the delivery of the certificates of title to
petitioners free of any encumbrance. But since the lots are involved in litigation and there is a notice of
lis pendens at the back of the titles involved, respondents have to be given a reasonable period of time
to work on the adverse claims and deliver clean titles to petitioners. The Court believes that six (6)
months is a reasonable period for the purpose.
Should respondents fail to deliver such clean titles at the end of the period, they ought to pay petitioners
actual or compensatory damages. Article 1191 of the Civil Code sanctions the right to rescind the
obligation in the event that specific performance becomes impossible, to wit:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing
of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage Law. [if !supportFootnotes][38][endif]
Rescission creates the obligation to return the object of the contract. It can be carried out only when the
one who demands rescission can return whatever he may be obliged to restore. Rescission abrogates
the contract from its inception and requires a mutual restitution of the benefits received. [if
!supportFootnotes][39][endif]
Thus, respondents Casal, Salvador and CRS Realty must return the benefits
received from the contract to sell if they cannot comply with their obligation to deliver the corresponding
certificates of title to petitioners.
Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in
satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural
justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted
and not to impose a penalty.[if !supportFootnotes][40][endif] Also, under Article 2200, indemnification for damages
shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee
failed to obtain. Thus, there are two kinds of actual or compensatory damages: one is the loss of what a
person already possesses, and the other is the failure to receive as a benefit that which would have
pertained to him.[if !supportFootnotes][41][endif]
In the event that respondents Casal, Salvador and CRS Realty cannot deliver clean certificates of title
to petitioners, the latter must be reimbursed not only of the purchase price of the subdivision lots sold to
them but also of the incremental value arising from the appreciation of the lots. Thus, petitioners are
entitled to actual damages equivalent to the current market value of the subdivision lots.
In Solid Homes, Inc. v. Spouses Tan,[if !supportFootnotes][42][endif] the Court ordered instead the payment of the
current market value of the subdivision lot after it was established that the subdivision owner could no
longer comply with its obligation to develop the subdivision property in accordance with the approved
plans and advertisements.
On this score, in its Decision dated 28 November 2000 which was affirmed by the OP and the Court of
Appeals, the Board found respondent CRS Realty and its officers solidarily liable to refund the
complainants or herein petitioners the installments paid by them including interest, to pay them moral
and exemplary damages and attorneys fees and to pay the corresponding fine to the Board. The
decision, however, failed to name the responsible officers of respondent CRS Realty who should be
solidarily liable petitioners.
The 18 December 1998 Decision of the HLURB Arbiter is quite instructive on this matter, thus:
Obviously, respondents CRS Realty Development Corporation, Crisanta R. Salvador and Cesar E.
Casal, avoided responsibility and liability for their failure to comply with their contractual and statutory
obligation to deliver the titles to the individual lots of complainants, by passing the buck to each other.
The Board[,] however, is not oblivious to the various schemes willfully employed by developers and
owners of subdivision projects to subtly subvert the law, and evade their obligations to lot buyers, as it
finds the justifications advanced by respondents CRS Realty Development Corp., Crisanta R. Salvador,
and Cesar E. Casal grossly untenable. The failure in the implementation of the agreement dated 06
September 1998 entered into by respondent CRS, Salvador and Casal involving the subject property
should not operate and work to prejudice complainants, who are lot buyers in good faith and who have
complied with their obligations by paying in full the price of their respective lots in accordance with the
terms and conditions of their contract to sell. Respondent Casal is not without recourse against
respondents CRS Realty or Salvador for the violation of their agreement and as such, the same reason
could not be made and utilized as a convenient excuse to evade their obligation and responsibility to
deliver titles to complainants.
Under the so called doctrine of estoppel, where one of two innocent persons, as respondents CRS
Development Corp./Crisanta R. Salvador and Cesar E. Casal claimed themselves to be, must suffer, he
whose acts occasioned the loss must bear it. In the herein case, it is respondents CRS Realty
Development Corp./Crisanta Salvador and Cesar E. Casal who must bear the loss. x x x[if
!supportFootnotes][43][endif]
In denying any liability, respondent Salvador argues that even before the filing of the case before the
HLURB, the agreements between her and respondent Casal involving the development and sale of the
subdivision lots were superseded by an agreement dated 30 August 1996, whereby respondent Casal
purportedly assumed full responsibility over the claims of the subdivision lot buyers while respondent
Salvador sold her share in CRS Realty and relinquished her participation in the business.
The subsequent agreement which purportedly rescinded the subdivision development agreement
between respondents Casal and Salvador could not affect third persons like herein petitioners because
of the basic civil law principle of relativity of contracts which provides that contracts can only bind the
parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such
contract and has acted with knowledge thereof. [if !supportFootnotes][44][endif] The fact remains that the contracts
to sell involving the subdivision lots were entered into by and between petitioners, as vendees, and
respondent Salvador, on behalf of respondent CRS Realty as vendor. As one of the responsible officers
of respondent CRS Realty, respondent Salvador is also liable to petitioners for the failure of CRS Realty
to perform its obligations under the said contracts and P.D. No. 957, notwithstanding that respondent
Salvador had subsequently divested herself of her interest in the CRS Realty.
One of the purposes of P.D. No. 957 is to discourage and prevent unscrupulous owners, developers,
agents and sellers from reneging on their obligations and representations to the detriment of innocent
purchasers.[if !supportFootnotes][45][endif] The Court cannot countenance a patent violation on the part of the said
respondents that will cause great prejudice to petitioners. The Court must be vigilant and should punish,
to the fullest extent of the law, those who prey upon the desperate with empty promises of better lives,
only to feed on their aspirations.[if !supportFootnotes][46][endif]
As regards petitioners prayer to declare them the absolute owners of the subdivision lots, the HLURB
correctly ruled that it had no jurisdiction over the same. Petitioners amended complaint[if
!supportFootnotes][47][endif]
included a cause of action for reconveyance of the subdivision lots to petitioners
and/or the quieting of petitioners title thereto and impleaded a different set of defendants, namely, the
Heirs of Laudiza and respondents Ang and Cuason, who allegedly bought the subdivision lots
previously sold to petitioners.
In Spouses Suntay v. Gocolay,[if !supportFootnotes][48][endif] the Court held that the HLURB has no jurisdiction
over the issue of ownership, possession or interest in the condominium unit subject of the dispute
therein because under Section 19 of Batas Pambansa (B.P.) Blg. 129, [if !supportFootnotes][49][endif] the Regional
Trial Courts shall exercise exclusive original jurisdiction in all civil actions which involve the title to, or
possession of, real property, or any interest therein.
In view of the aforequoted delineation of jurisdiction between the HLURB and the RTCs, the HLURB
has no jurisdiction to declare petitioners as absolute owners of the subdivision lots as against the Heirs
of Laudiza who filed an action for reconveyance against respondent Casal, which is still pending before
the RTC.
However, nothing prevents the HLURB from adjudicating on the issue of whether the alleged
subsequent sale of the subdivision lots to respondents Ang and Cuason constituted a double sale
because the issue is intimately related to petitioners complaint to compel respondents CRS Realty,
Casal and Salvador to perform their obligation under the contracts to sell. Considering that the alleged
subsequent sale to respondents Ang and Cuason apparently would constitute a breach of respondents
obligation to issue the certificate of title to petitioners, if not an unsound business practice punishable
under Section 1 of P.D. No. 1344,[if !supportFootnotes][50][endif] the HLURB cannot shirk from its mandate to
enforce the laws for the protection of subdivision buyers.
WHEREFORE, the instant petition for review on certiorari is PARTLY GRANTED. The decision and
resolution of the Court of Appeals in CA-G.R. SP No. 81859, which upheld the decisions of the Office of
the President and the Housing and Land Use Regulatory Board, are AFFIRMED in all respects except
for the following MODIFICATIONS, to wit:

In Union Bank of the Philippines v. Housing and Land Use Regulatory Board,[if !supportFootnotes][51][endif] the
Court upheld HLURBs jurisdiction over a condominium unit buyers complaint to annul the certificate of
title over the unit issued to the highest bidder in the foreclosure of the mortgage constituted on the unit
by the condominium developer without the consent of the buyer.
(1) Respondents CRS Realty, Cesar E. Casal and Crisanta R. Salvador are ORDERED to secure and
deliver to each of petitioners the corresponding certificates of titles, free of any encumbrance, in this
names for the lots they respectively purchased and fully paid for, within six (6) months from the finality
of this Decision and, in case of default, jointly and severally to pay petitioners the prevailing or current
fair market value of the lots as determined by the Housing and Land Use Regulatory Board; and

The remand of the instant case to the HLURB is in order so that the HLURB may determine if the
alleged subsequent sale to respondents Ang and Cuason of those lots initially sold to petitioners
constituted a double sale and was tainted with fraud as opposed to the respondents claim that only the
unsold portions of the subdivision property were sold to them.
One final note. Contrary to petitioners contention, the decision of the OP does not violate the mandate
of Section 14, Article VIII of the Constitution, which provides that No decision shall be rendered by any
court without expressing therein clearly and distinctly the facts and the law on which it is based.
(2) Without prejudice to the implementation of the other reliefs granted in this Decision, including the
reliefs awarded by the HLURB which are affirmed in this Decision, this case is REMANDED to the
HLURB for the purpose of determining (a) the prevailing or current fair market value of the lots and (b)
the validity of the subsequent sale of the lots to respondents Bennie Cuason and Caleb Ang by
ascertaining whether or not the sale was attended with fraud and executed in bad faith. No costs.
SO ORDERED.

The OP decision ruled that the findings of fact and conclusions of law of the office a quo are amply
supported by substantial evidence and that it is bound by said findings of facts and conclusions of law
and hereby adopt(s) the assailed resolution by reference.

The Court finds these legal bases in conformity with the requirements of the Constitution. The Court
has sanctioned the use of memorandum decisions, a species of succinctly written decisions by
appellate courts in accordance with the provisions of Section 40, B.P. Blg. 129 on the grounds of
expediency, practicality, convenience and docket status of our courts. The Court has declared that
memorandum decisions comply with the constitutional mandate. [if !supportFootnotes][52][endif]

As already discussed, the Court affirms the ruling of the HLURB Arbiter insofar as it ordered
respondents Casal, Salvador and CRS Realty, jointly and severally, to cause the delivery of clean
certificates of title to petitioners at no cost to the latter. Said respondents have six months from the
finality of this decision to comply with this directive, failing which they shall pay petitioners actual
damages equivalent to the current market value of the subdivision lots sold to them, as determined by
the HLURB.

However, the Court finds in order and accordingly affirms the Boards award of moral and exemplary
damages and attorneys fees in favor of each petitioner, as well as the imposition of administrative fine,
against respondents Casal, Salvador and CRS Realty.