G.R. No. 103577 October 7, 1996 3.
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of
Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-
in-fact, respondents.
MELO, J.:p
The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last
named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt
Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels) executed a
document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred
to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 Total amount
50,000 Down payment
P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of
our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer
certificate of title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property
and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased
father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00)
Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion),
mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").
On February 6, 1985, the property originally registered in the name of the Coronels' father was transferred in their names
under TCT
No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B.
Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the
latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry
of Deeds of Quezon City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. "G";
Exh. "7").
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. "H";
Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case
for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their
documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their corresponding submarkings.
Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as
Exhibits "1" through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court
gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days
within which to submit their corresponding comment or reply thereof, after which, the case would be deemed submitted
for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed
to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from
his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a
deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now
TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all
liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon
receipt thereof, the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay
defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No.
331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without
force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the
subject property and deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees, as well as the
counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but the same
was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned
Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April
14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding
Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did
not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be
submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo
Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned
Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to
have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the
decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a
Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any
pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe,
Pampanga, he did not lose his authority to decide or resolve such cases submitted to him for decision or resolution because
he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing
rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the
case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case,
resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary
evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the
Incumbent Presiding Judge" dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad
Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply Memorandum,
was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due
to the voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the
trial court's decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled "Receipt of Down Payment" which was offered in evidence
by both parties. There is no dispute as to the fact that said document embodied the binding contract between Ramona
Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and
lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to
give something or to render some service.
While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of sale,
which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that
what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of
the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a
contract absolute sale.
Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be
available on record, this, Court, as were the courts below, is now called upon to adjudge what the real intent of the parties
was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What
the seller agrees or obliges himself to do is to fulfill is promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective
seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion
to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or
title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective seller's obligation to sell the subject property by entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous
delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to him.
The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a
contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of
the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title
to the property will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but
the latter, of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and
this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the
seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have
any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may
have had actual or constructive knowledge of such defect in the seller's title, or at least was charged with the obligation to
discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a
title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered
into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners
declared in the said "Receipt of Down Payment" that they
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of
our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is
that they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent
on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of
petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay
the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which,
they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon,
the latter shall, in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership
or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full
payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume
that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why
an absolute contract of sale could not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to private
respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject
property, they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the
written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings
of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father,
completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order.
It just happened, however, that the transfer certificate of title was then still in the name of their father. It was more
expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause
the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of
P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately
execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price
arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the one who were unable to enter into a
contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father.
It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an
contract of absolute sale.
What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment"
was prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners'
father, Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on
said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became
obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution
of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as
evidenced by the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of
the contract and upon the price.
From the moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the
form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was
fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually
demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to
private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on
her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated". The
sale was still subject to this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names,
there could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the
fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was
issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of Down
Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the
sellers shall effect the issuance of new certificate title from that of their father's name to their names and that, on February
6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently provides
Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has
been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the
absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to be extent and value of
the inheritance of a person are transmitted through his death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory
heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners
stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto
became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the
moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is rendered
moot by the fact that they were able to effect the transfer of the title to the property from the decedent's name to their
names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the
agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now
that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz,
the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to the
United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14
and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so
petitioners conclude, they were correct in unilaterally rescinding rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that
these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which by
express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised
Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We
have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882
[1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify
petitioner-sellers' act of unilaterally and extradicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda.
de Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence
on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with
Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own behalf.
Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in
behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to
represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards
payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona
P. Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz
as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in
their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their
agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in
default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale
where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith, if it should be movable property.
Should if be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in
Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and,
in the absence thereof to the person who presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale
was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name
of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer.
Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first
buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court,
Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the
second sale cannot defeat the first buyer's rights except when the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R.
No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held that it is
essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02
September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject property only on
February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she
is buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good
faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect
in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale
entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the
transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in
April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to
the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of
the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired knowledge that there was a previous sale of the same
property to a third party or that another person claims said property in a pervious sale, the registration will constitute a
registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior
to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion,
her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also
acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed
between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this
point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.
FACTS:
This case is about a sale of land in Roosevelt Avenue, Quezon City by the vendor Romulo Coronel to the vendees Conception
Alcaraz and her daughter Ramona Patricia Alcaraz with the following conditions:
The Coronels will immediately transfer the certificate of title in their name upon receipt of the downpayment
which is 50,000.
Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in
favor of Ramona and then Ramona shall immediately pay the Coronels the whole balance of 1,190,000.
On January 15, 1985, Conception paid the downpayment of 50,000 and then on February 6, 1985, the property was now
registered under the name of Coronels. By Feb. 18, 1985, the Coronels sold the property to Catalina B. Mabanag for
1,580,000 after she made a 300,000 downpayment. This is the reason why the Coronels cancelled and rescind the
contract with the Alcaraz by depositing back the 50,000 to Ramonas bank account.
On Feb. 22, Conception filed a complaint for specific performance against the Coronels. On April, the Coronels executed a
deed of absolute sale over the subject property to Catalina after which on June Catalina was issued a new title over the
subject property.
ISSUE:
Whether or not the Receipt of Down payment embodied a perfected contract of sale or just a mere contract to sell? The Case

Before us is a petition for review on certiorari1 under Rule 45 of the Rules of Court filed by Estelita Villamar (Villamar) to
assail the Decision2 rendered by the Court of Appeals (CA) on February 20, 2009 in CA-G.R. CV No. 86286, the dispositive
HELD: portion of which reads:

CONTRACT OF SALE- contracting parties obligates himself to transfer the ownership and to deliver a determinate
thing and the other to pay a price certain in money or its equivalent.
CONTRACT TO SELL- the prospective seller explicitly reserves the transfer of the title to the prospective buyer,
meaning the seller does not yet agree or consent to transfer the ownership of the property until the happening of
a contingent event like full payment of price.
SUPREME COURT RULING:
When the Receipt of Down Payment document was prepared and signed by Romulo Coronel, the parties had
agreed to a conditional contract of sale the consummation of the contract is subject only to the successful transfer of the
certificate of Title.
WHEREFORE, the instant appeal is DISMISSED. The assailed decision is AFFIRMED in toto.
SO ORDERED.3
The resolution4 issued by the CA on July 8, 2009 denied the petitioner's motion for reconsideration to the foregoing.
The ruling5 of Branch 23, Regional Trial Court (RTC) of Roxas, Isabela, which was affirmed by the CA in the herein assailed
decision and resolution, ordered the (1) rescission of the contract of sale of real property entered into by Villamar and
Balbino Mangaoil (Mangaoil); and (2) return of the down payment made relative to the said contract.
Antecedents Facts
The CA aptly summarized as follows the facts of the case prior to the filing by Mangaoil of the complaint6 for rescission of
contract before the RTC:

According to Supreme Court, the receipt of down payment document manifests a clear intent of the Coronels to transfer
the title to the buyer, but since the title is still in the name effect the transfer even though the buyers are able and willing to
immediately pay the purchase price. The agreement as well could not have been a contract to sell because the seller or the
Coronels made no express reservation of ownership or the title of the land.
On Feb. 6, 1985, the Contract of Sale between the Coronels and the Alcaraz became obligatory.
Villamar is the registered owner of a 3.6080 hectares parcel of land [hereinafter referred as the subject property] in San
Francisco, Manuel, Isabela covered by Transfer Certificate of Title (TCT) No. T-92958-A. On March 30, 1998, she entered into
an Agreement with Mangaoil for the purchase and sale of said parcel of land, under the following terms and conditions:
"1. The price of the land is ONE HUNDRED AND EIGHTY THOUSAND (180,000.00) PESOS per hectare but only the 3.5000 hec.
shall be paid and the rest shall be given free, so that the total purchase or selling price shall be []630,000.00 only;

2. ONE HUNDRED EIGHTY FIVE THOUSAND (185,000.00) PESOS of the total price was already received on March 27, 1998 for
payment of the loan secured by the certificate of title covering the land in favor of the Rural Bank of Cauayan, San Manuel
Republic of the Philippines Branch, San Manuel, Isabela [Rural Bank of Cauayan], in order that the certificate of title thereof be withdrawn and released
SUPREME COURT from the said bank, and the rest shall be for the payment of the mortgag[e]s in favor of Romeo Lacaden and Florante
Baguio Parangan;

SECOND DIVISION 3. After the release of the certificate of title covering the land subject-matter of this agreement, the necessary deed of
absolute sale in favor of the PARTY OF THE SECOND PART shall be executed and the transfer be immediately effected so that
G.R. No. 188661 April 11, 2012 the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefor,
and the proceeds of the loan, whatever be the amount, be given to the PARTY OF THE FIRST PART;
ESTELITA VILLAMAR, Petitioner,
vs. 4. Whatever balance left from the agreed purchase price of the land subject matter hereof after deducting the proceed of
BALBINO MANGAOIL, Respondent. the loan and the []185,000.00 already received as above-mentioned, the PARTY OF THE SECOND PART shall pay unto the
PARTY OF THE FIRST PART not later than June 30, 1998 and thereafter the parties shall be released of any obligations for and
DECISION
against each other; xxx"
REYES, J.:
On April 1, 1998, the parties executed a Deed of Absolute Sale whereby Villamar (then Estelita Bernabe) transferred the
subject parcel of land to Mangaoil for and in consideration of []150,000.00.
In a letter dated September 18, 1998, Mangaoil informed Villamar that he was backing out from the sale agreed upon giving
as one of the reasons therefor:
"3. That the area is not yet fully cleared by incumbrances as there are tenants who are not willing to vacate the land without
giving them back the amount that they mortgaged the land."
Mangaoil demanded refund of his []185,000.00 down payment. Reiterating said demand in another letter dated April 29,
1999, the same, however, was unheeded.7 x x x (Citations omitted)
On January 28, 2002, the respondent filed before the RTC a complaint8 for rescission of contract against the petitioner. In
the said complaint, the respondent sought the return of 185,000.00 which he paid to the petitioner, payment of interests
thereon to be computed from March 27, 1998 until the suit's termination, and the award of damages, costs and 20,000.00
attorney's fees. The respondent's factual allegations were as follows:
5. That as could be gleaned the "Agreement" (Annex "A"), the plaintiff [Mangaoil] handed to the defendant [Villamar] the
sum of []185,000.00 to be applied as follows; []80,000 was for the redemption of the land which was mortgaged to the
Rural Bank of Cauayan, San Manuel Branch, San Manuel, Isabela, to enable the plaintiff to get hold of the title and register
the sale x x x and []105,000.00 was for the redemption of the said land from private mortgages to enable plaintiff to
posses[s] and cultivate the same;
6. That although the defendant had already long redeemed the said land from the said bank and withdrawn TCT No. T-
92958-A, she has failed and refused, despite repeated demands, to hand over the said title to the plaintiff and still refuses
and fails to do so;
7. That, also, the plaintiff could not physically, actually and materially posses[s] and cultivate the said land because the
private mortgage[e]s and/or present possessors refuse to vacate the same;
xxxx
11. That on September 18, 1998, the plaintiff sent a letter to the defendant demanding a return of the amount so advanced
by him, but the latter ignored the same, x x x;
12. That, again, on April 29, 1999, the plaintiff sent to the defendant another demand letter but the latter likewise ignored
the same, x x x;
13. That, finally, the plaintiff notified the defendant by a notarial act of his desire and intention to rescind the said contract
of sale, xxx;
x x x x.9 (Citations omitted)
In the respondents answer to the complaint, she averred that she had complied with her obligations to the respondent.
Specifically, she claimed having caused the release of TCT No. T-92958-A by the Rural Bank of Cauayan and its delivery to a
certain "Atty. Pedro C. Antonio" (Atty. Antonio). The petitioner alleged that Atty. Antonio was commissioned to facilitate the
transfer of the said title in the respondent's name. The petitioner likewise insisted that it was the respondent who
unceremoniously withdrew from their agreement for reasons only the latter knew.
The Ruling of the RTC
On September 9, 2005, the RTC ordered the rescission of the agreement and the deed of absolute sale executed between
the respondent and the petitioner. The petitioner was, thus directed to return to the respondent the sum of 185,000.00
which the latter tendered as initial payment for the purchase of the subject property. The RTC ratiocinated that:
There is no dispute that the defendant sold the LAND to the plaintiff for []630,000.00 with down payment of
[]185,000.00. There is no evidence presented if there were any other partial payments made after the perfection of the
contract of sale.
Article 1458 of the Civil Code provides:
"Art. 1458. By the contract of sale[,] one of the contracting parties obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other to pay therefore a price certain in money or its equivalent."
As such, in a contract of sale, the obligation of the vendee to pay the price is correlative of the obligation of the vendor to
deliver the thing sold. It created or established at the same time, out of the same course, and which result in mutual
relations of creditor and debtor between the parties.
The claim of the plaintiff that the LAND has not been delivered to him was not refuted by the defendant. Considering that
defendant failed to deliver to him the certificate of title and of the possession over the LAND to the plaintiff, the contract
must be rescinded pursuant to Article 1191 of the Civil Code which, in part, provides:
"Art. 1191. The power of rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with
what is incumbent upon him."10
The petitioner filed before the CA an appeal to challenge the foregoing. She ascribed error on the part of the RTC when the
latter ruled that the agreement and deed of sale executed by and between the parties can be rescinded as she failed to
deliver to the respondent both the subject property and the certificate of title covering the same.
The Ruling of the CA
On February 20, 2009, the CA rendered the now assailed decision dismissing the petitioners appeal based on the following
grounds:
Burden of proof is the duty of a party to prove the truth of his claim or defense, or any fact in issue necessary to establish his
claim or defense by the amount of evidence required by law. In civil cases, the burden of proof is on the defendant if he
alleges, in his answer, an affirmative defense, which is not a denial of an essential ingredient in the plaintiff's cause of action,
but is one which, if established, will be a good defense i.e., an "avoidance" of the claim, which prima facie, the plaintiff
already has because of the defendant's own admissions in the pleadings.
Defendant-appellant Villamar's defense in this case was an affirmative defense. She did not deny plaintiff-appellees (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to
allegation that she had an agreement with plaintiff-appellee for the sale of the subject parcel of land. Neither did she deny pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing;
that she was obliged under the contract to deliver the certificate of title to plaintiff-appellee immediately after said
title/property was redeemed from the bank. What she rather claims is that she already complied with her obligation to (2) An implied warranty that the thing shall be free from any hidden defaults or defects, or any change or encumbrance not
deliver the title to plaintiff-appellee when she delivered the same to Atty. Antonio as it was plaintiff-appellee himself who declared or known to the buyer.
engaged the services of said lawyer to precisely work for the immediate transfer of said title in his name. Since, however,
x x x."
this affirmative defense as alleged in defendant-appellant's answer was not admitted by plaintiff-appellee, it then follows
that it behooved the defendant-appellant to prove her averments by preponderance of evidence.
shows that actual, and not mere constructive delivery is warrantied by the seller to the buyer. "(P)eaceful possession of the
thing" sold can hardly be enjoyed in a mere constructive delivery.
Yet, a careful perusal of the record shows that the defendant-appellant failed to sufficiently prove said affirmative
defense. She failed to prove that in the first place, "Atty. Antonio" existed to receive the title for and in behalf of plaintiff-
The obligation of defendant-appellant Villamar to transfer ownership and deliver possession of the subject parcel of land
appellee. Worse, the defendant-appellant failed to prove that Atty. Antonio received said title "as allegedly agreed upon."
was her correlative obligation to plaintiff-appellee in exchange for the latter's purchase price thereof. Thus, if she fails to
comply with what is incumbent upon her, a correlative right to rescind such contract from plaintiff-appellee arises, pursuant
We likewise sustain the RTC's finding that defendant-appellant V[i]llamar failed to deliver possession of the subject property
to Article 1191 of the Civil Code.11 x x x (Citations omitted)
to plaintiff-appellee Mangaoil. As correctly observed by the RTC - "[t]he claim of the plaintiff that the land has not been
delivered to him was not refuted by the defendant." Not only that. On cross-examination, the defendant-appellant gave Us
The Issues
insight on why no such delivery could be made, viz.:
Aggrieved, the petitioner filed before us the instant petition and submits the following issues for resolution:
"x x x x
I.
Q: So, you were not able to deliver this property to Mr. Mangaoil just after you redeem the property because of the presence
of these two (2) persons, is it not? WHETHER THE FAILURE OF PETITIONER-SELLER TO DELIVER THE CERTIFICATE OF TITLE OVER THE PROPERTY TO
RESPONDENT-BUYER IS A BREACH OF OBLIGATION IN A CONTRACT OF SALE OF REAL PROPERTY THAT WOULD WARRANT
xxx
RESCISSION OF THE CONTRACT;
A: Yes, sir.
II.
Q: Forcing you to file the case against them and which according to you, you have won, is it not?
WHETHER PETITIONER IS LIABLE FOR BREACH OF OBLIGATION IN A CONTRACT OF SALE FOR FAILURE OF RESPONDENT[-
]BUYER TO IMMEDIATELY TAKE ACTUAL POSSESSION OF THE PROPERTY NOTWITHSTANDING THE ABSENCE OF ANY
A: Yes, sir.
STIPULATION IN THE CONTRACT PROVIDING FOR THE SAME;
Q: And now at present[,] you are in actual possession of the land?
III.
A: Yes, sir. x x x"
WHETHER THE EXECUTION OF A DEED OF SALE OF REAL PROPERTY IN THE PRESENT CASE IS ALREADY EQUIVALENT TO A
With the foregoing judicial admission, the RTC could not have erred in finding that defendant-[appellant] failed to deliver the VALID AND CONSTRUCTIVE DELIVERY OF THE PROPERTY TO THE BUYER;
possession of the property sold, to plaintiff-appellee.
IV.
Neither can We agree with defendant-appellant in her argument that the execution of the Deed of Absolute Sale by the
WHETHER OR NOT THE CONTRACT OF SALE SUBJECT MATTER OF THIS CASE SHOULD BE RESCINDED ON SLIGHT OR CASUAL
parties is already equivalent to a valid and constructive delivery of the property to plaintiff-appellee. Not only is it doctrinally
BREACH;
settled that in a contract of sale, the vendor is bound to transfer the ownership of, and to deliver the thing that is the object of
the sale, the way Article 1547 of the Civil Code is worded, viz.:
V.
"Art. 1547. In a contract of sale, unless a contrary intention appears, there is:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE RTC ORDERING THE RESCISSION OF
THE CONTRACT OF SALE[.]12
The Petitioner's Arguments
The petitioner avers that the CA, in ordering the rescission of the agreement and deed of sale, which she entered into with
the respondent, on the basis of her alleged failure to deliver the certificate of title, effectively imposed upon her an extra
duty which was neither stipulated in the contract nor required by law. She argues that under Articles 149513 and 149614 of
the New Civil Code (NCC), the obligation to deliver the thing sold is complied with by a seller who executes in favor of a
buyer an instrument of sale in a public document. Citing Chua v. Court of Appeals,15 she claims that there is a distinction
between transferring a certificate of title in the buyer's name, on one hand, and transferring ownership over the property
sold, on the other. The latter can be accomplished by the seller's execution of an instrument of sale in a public document.
The recording of the sale with the Registry of Deeds and the transfer of the certificate of title in the buyer's name are
necessary only to bind third parties to the transfer of ownership.16
The petitioner contends that in her case, she had already complied with her obligations under the agreement and the law
when she had caused the release of TCT No. T-92958-A from the Rural Bank of Cauayan, paid individual mortgagees Romeo
Lacaden (Lacaden) and Florante Parangan (Paranga), and executed an absolute deed of sale in the respondent's favor. She
adds that before T-92958-A can be cancelled and a new one be issued in the respondent's favor, the latter decided to
withdraw from their agreement. She also points out that in the letters seeking for an outright rescission of their agreement
sent to her by the respondent, not once did he demand for the delivery of TCT.
The petitioner insists that the respondent's change of heart was due to (1) the latter's realization of the difficulty in
determining the subject property's perimeter boundary; (2) his doubt that the property he purchased would yield harvests
in the amount he expected; and (3) the presence of mortgagees who were not willing to give up possession without first
being paid the amounts due to them. The petitioner contends that the actual reasons for the respondent's intent to rescind
their agreement did not at all constitute a substantial breach of her obligations.
The petitioner stresses that under Article 1498 of the NCC, when a sale is made through a public instrument, its execution is
equivalent to the delivery of the thing which is the contract's object, unless in the deed, the contrary appears or can be
inferred. Further, in Power Commercial and Industrial Corporation v. CA,17 it was ruled that the failure of a seller to eject
lessees from the property he sold and to deliver actual and physical possession, cannot be considered a substantial breach,
when such failure was not stipulated as a resolutory or suspensive condition in the contract and when the effects and
consequences of the said failure were not specified as well. The execution of a deed of sale operates as a formal or symbolic
delivery of the property sold and it already authorizes the buyer to use the instrument as proof of ownership.18
The petitioner argues that in the case at bar, the agreement and the absolute deed of sale contains no stipulation that she
was obliged to actually and physically deliver the subject property to the respondent. The respondent fully knew Lacaden's
and Parangan's possession of the subject property. When they agreed on the sale of the property, the respondent
consciously assumed the risk of not being able to take immediate physical possession on account of Lacaden's and
Parangan's presence therein.
The petitioner likewise laments that the CA allegedly misappreciated the evidence offered before it when it declared that
she failed to prove the existence of Atty. Antonio. For the record, she emphasizes that the said lawyer prepared and
notarized the agreement and deed of absolute sale which were executed between the parties. He was also the petitioners
counsel in the proceedings before the RTC. Atty. Antonio was also the one asked by the respondent to cease the transfer of
the title over the subject property in the latter's name and to return the money he paid in advance.
The Respondent's Contentions
In the respondent's comment,19 he seeks the dismissal of the instant petition. He invokes Articles 1191 and 1458 to argue
that when a seller fails to transfer the ownership and possession of a property sold, the buyer is entitled to rescind the
contract of sale. Further, he contends that the execution of a deed of absolute sale does not necessarily amount to a valid
and constructive delivery. In Masallo v. Cesar,20 it was ruled that a person who does not have actual possession of real
property cannot transfer constructive possession by the execution and delivery of a public document by which the title to
the land is transferred. In Addison v. Felix and Tioco,21 the Court was emphatic that symbolic delivery by the execution of a
public instrument is equivalent to actual delivery only when the thing sold is subject to the control of the vendor.
Our Ruling
The instant petition is bereft of merit.
There is only a single issue for resolution in the instant petition, to wit, whether or not the failure of the petitioner to deliver
to the respondent both the physical possession of the subject property and the certificate of title covering the same amount
to a substantial breach of the former's obligations to the latter constituting a valid cause to rescind the agreement and deed
of sale entered into by the parties.
We rule in the affirmative.
The RTC and the CA both found that the petitioner failed to comply with her obligations to deliver to the respondent both
the possession of the subject property and the certificate of title covering the same.
Although Articles 1458, 1495 and 1498 of the NCC and case law do not generally require the seller to deliver to the buyer the
physical possession of the property subject of a contract of sale and the certificate of title covering the same, the agreement
entered into by the petitioner and the respondent provides otherwise. However, the terms of the agreement cannot be
considered as violative of law, morals, good customs, public order, or public policy, hence, valid.
Article 1458 of the NCC obliges the seller to transfer the ownership of and to deliver a determinate thing to the buyer, who
shall in turn pay therefor a price certain in money or its equivalent. In addition thereto, Article 1495 of the NCC binds the
seller to warrant the thing which is the object of the sale. On the other hand, Article 1498 of the same code provides that
when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing
which is the object of the contract, if from the deed, the contrary does not appear or cannot clearly be inferred.
In the case of Chua v. Court of Appeals,22 which was cited by the petitioner, it was ruled that "when the deed of absolute
sale is signed by the parties and notarized, then delivery of the real property is deemed made by the seller to the
buyer."23 The transfer of the certificate of title in the name of the buyer is not necessary to confer ownership upon him.
In the case now under our consideration, item nos. 2 and 3 of the agreement entered into by the petitioner and the
respondent explicitly provide:
2. ONE HUNDRED EIGHTY FIVE THOUSAND (185,000.00) PESOS of the total price was already received on March 27, 1998
for payment of the loan secured by the certificate of title covering the land in favor of the Rural Bank of Cauayan, San
Manuel Branch, San Manuel, Isabela, in order that the certificate of title thereof be withdrawn and released from the said
bank, and the rest shall be for the payment of the mortgages in favor of Romeo Lacaden and Florante Parangan;
3. After the release of the certificate of title covering the land subject-matter of this agreement, the necessary deed of
absolute sale in favor of the PARTY OF THE SECOND PART shall be executed and the transfer be immediately effected so that
the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefor,
and the proceeds of the loan, whatever be the amount, be given to the PARTY OF THE FIRST PART;24 (underlining supplied)
As can be gleaned from the agreement of the contending parties, the respondent initially paid the petitioner 185,000.00
for the latter to pay the loan obtained from the Rural Bank of Cauayan and to cause the release from the said bank of the
certificate of title covering the subject property. The rest of the amount shall be used to pay the mortgages over the subject
property which was executed in favor of Lacaden and Parangan. After the release of the TCT, a deed of sale shall be
executed and transfer shall be immediately effected so that the title covering the subject property can be used as a
collateral for a loan the respondent will apply for, the proceeds of which shall be given to the petitioner.
Under Article 1306 of the NCC, the contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy.
While Articles 1458 and 1495 of the NCC and the doctrine enunciated in the case of Chua do not impose upon the petitioner
the obligation to physically deliver to the respondent the certificate of title covering the subject property or cause the
transfer in the latter's name of the said title, a stipulation requiring otherwise is not prohibited by law and cannot be
regarded as violative of morals, good customs, public order or public policy. Item no. 3 of the agreement executed by the
parties expressly states that "transfer [shall] be immediately effected so that the latter can apply for a loan from any lending
institution using the corresponding certificate of title as collateral therefore." Item no. 3 is literal enough to mean that there
should be physical delivery of the TCT for how else can the respondent use it as a collateral to obtain a loan if the title
remains in the petitioners possession. We agree with the RTC and the CA that the petitioner failed to prove that she
delivered the TCT covering the subject property to the respondent. What the petitioner attempted to establish was that she
gave the TCT to Atty. Antonio whom she alleged was commissioned to effect the transfer of the title in the respondent's
name. Although Atty. Antonio's existence is certain as he was the petitioners counsel in the proceedings before the RTC,
there was no proof that the former indeed received the TCT or that he was commissioned to process the transfer of the title
in the respondent's name.
It is likewise the petitioners contention that pursuant to Article 1498 of the NCC, she had already complied with her
obligation to deliver the subject property upon her execution of an absolute deed of sale in the respondents favor. The
petitioner avers that she did not undertake to eject the mortgagors Parangan and Lacaden, whose presence in the premises
of the subject property was known to the respondent.
We are not persuaded.
In the case of Power Commercial and Industrial Corporation25 cited by the petitioner, the Court ruled that the failure of the
seller to eject the squatters from the property sold cannot be made a ground for rescission if the said ejectment was not
stipulated as a condition in the contract of sale, and when in the negotiation stage, the buyer's counsel himself undertook to
eject the illegal settlers.
The circumstances surrounding the case now under our consideration are different. In item no. 2 of the agreement, it is
stated that part of the 185,000.00 initially paid to the petitioner shall be used to pay the mortgagors, Parangan and
Lacaden. While the provision does not expressly impose upon the petitioner the obligation to eject the said mortgagors, the
undertaking is necessarily implied. Cessation of occupancy of the subject property is logically expected from the mortgagors
upon payment by the petitioner of the amounts due to them.
We note that in the demand letter26 dated September 18, 1998, which was sent by the respondent to the petitioner, the
former lamented that "the area is not yet fully cleared of incumbrances as there are tenants who are not willing to vacate
the land without giving them back the amount that they mortgaged the land." Further, in the proceedings before the RTC
conducted after the complaint for rescission was filed, the petitioner herself testified that she won the ejectment suit
against the mortgagors "only last year".27 The complaint was filed on September 8, 2002 or more than four years from the
execution of the parties' agreement. This means that after the lapse of a considerable period of time from the agreement's
execution, the mortgagors remained in possession of the subject property.
Notwithstanding the absence of stipulations in the agreement and absolute deed of sale entered into by Villamar and
Mangaoil expressly indicating the consequences of the former's failure to deliver the physical possession of the subject
property and the certificate of title covering the same, the latter is entitled to demand for the rescission of their contract
pursuant to Article 1191 of the NCC.
We note that the agreement entered into by the petitioner and the respondent only contains three items specifying the
parties' undertakings. In item no. 5, the parties consented "to abide with all the terms and conditions set forth in this
agreement and never violate the same."28
Article 1191 of the NCC is clear that "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 respondent cannot be deprived of his right to demand
for rescission in view of the petitioners failure to abide with item nos. 2 and 3 of the agreement. This remains true
notwithstanding the absence of express stipulations in the agreement indicating the consequences of breaches which the
parties may commit. To hold otherwise would render Article 1191 of the NCC as useless.
Article 1498 of the NCC generally considers the execution of a public instrument as constructive delivery by the seller to the
buyer of the property subject of a contract of sale. The case at bar, however, falls among the exceptions to the foregoing rule
since a mere presumptive and not conclusive delivery is created as the respondent failed to take material possession of the
subject property.
Further, even if we were to assume for argument's sake that the agreement entered into by the contending parties does not
require the delivery of the physical possession of the subject property from the mortgagors to the respondent, still, the
petitioner's claim that her execution of an absolute deed of sale was already sufficient as it already amounted to a
constructive delivery of the thing sold which Article 1498 of the NCC allows, cannot stand.
In Philippine Suburban Development Corporation v. The Auditor General,29 we held:
When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the
thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.1wphi1
In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument,
unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties.
Such would be the case, for instance, x x x where the vendor has no control over the thing sold at the moment of the sale,
and, therefore, its material delivery could not have been made.30 (Underlining supplied and citations omitted)
Stated differently, as a general rule, the execution of a public instrument amounts to a constructive delivery of the thing
subject of a contract of sale. However, exceptions exist, among which is when mere presumptive and not conclusive delivery
is created in cases where the buyer fails to take material possession of the subject of sale. A person who does not have
actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public
instrument.
In the case at bar, the RTC and the CA found that the petitioner failed to deliver to the respondent the possession of the
subject property due to the continued presence and occupation of Parangan and Lacaden. We find no ample reason to
reverse the said findings. Considered in the light of either the agreement entered into by the parties or the pertinent
provisions of law, the petitioner failed in her undertaking to deliver the subject property to the respondent.
IN VIEW OF THE FOREGOING, the instant petition is DENIED. The February 20, 2009 Decision and July 8, 2009 Resolution of
the Court of Appeals, directing the rescission of the agreement and absolute deed of sale entered into by Estelita Villamar
and Balbino Mangaoil and the return of the down payment made for the purchase of the subject property,
are AFFIRMED. However, pursuant to our ruling in Eastern Shipping Lines, Inc. v. CA,31 an interest of 12% per annum is
imposed on the sum of 185,000.00 to be returned to Mangaoil to be computed from the date of finality of this Decision
until full satisfaction thereof.
SO ORDERED.
Villamar vs. Mangaoil
sale in accordance of Art. 1458 and Art. 1191 of the Civil Code. The petitioner filed before the CA an appeal to challenge the
foregoing. She ascribed error on the part of the RTC when the latter ruled that the agreement and deed of sale executed by
and between the parties can be rescinded as she failed to deliver to the respondent both the subject property and the
certificate of title covering the same. On February 20, 2009, the CA rendered the now assailed decision dismissing the
petitioners appeal.
The Petitioner filed an instant petition in the supreme court. The petitioner contends that in her case, she had already
complied with her obligations under the agreement and the law when she had caused the release of TCT No. T-92958-A
from the Rural Bank of Cauayan, paid individual mortgagees Romeo Lacaden and Florante Parangan, and executed an
absolute deed of sale in the respondents favor.
Issue:
Whether or not the failure of petitioner-seller to deliver the certificate of title over the property to respondent-buyer is a
breach of obligation in a contract of sale of real property that would warrant rescission of the contract?
Held:
The RTC and CA both found the petitioner failed to comply with her obligations to deliver to the respondent both the
possession of the subject property and the certificate of title covering the same.
The petition was denied for failure to deliver to the respondent the possession of the subject property due to the continued
presence and occupation of one Parangan and Lacaden. The Court directed the rescission of the agreement and absolute
deed of sale entered by Estelita Villamar and Balbino Mangaoil and return of the down payment made for the purchase of
the subject property. And an interest of 12% per annum on the sum of 185,000 to be returned to Balbino Mangaoil.

GR No. 188661, April 11, 2012

G. R. No. 158149 February 9, 2006
Reyes, J.
BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF COMMERCE), Petitioner,
Facts: vs.
PERLA P. MANALO and CARLOS MANALO, JR., Respondents.
Estelita villamar a registered owner of 3.6080 hectares of parcel of land, decided to sell it Balbino Mangaoil with the certain
conditions; The price of the land is ONE HUNDRED AND EIGHTY THOUSAND (180,000.00) PESOS per hectare but only the DECISION
3.5000 hec. shall be paid and the rest shall be given free, so that the total purchase or selling price shall be
CALLEJO, SR., J.:
[P]630,000.00 only. The respondent paid the amount of 185,000 as a down payment for the land title to be given to him .
After some time, Mangaoil decided to back out from the agreement because the area is not yet fully cleared by
Before us is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 47458
incumbrances as these are tenants who are not willing to vacate the land without giving them back the amount that they
affirming, on appeal, the Decision2 of the Regional Trial Court (RTC) of Quezon City, Branch 98, in Civil Case No. Q-89-3905.
mortgage the lad.
The Antecedents
Mangaoil demanded a refund for his 185,000, reiterating his demand on another date but the same as unheeded. The
respondent filed a complaint in the RTC and the latter ordered the rescission of the agreement and the deed of absolute
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 5,187,000.00, and the Central Bank of the Philippines as
security for advances amounting to 22,185,193.74.4 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
34,887.66, 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 34,887.66 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 200.00 per square meter, or a total of 348,060.00, with a 20% down payment of the purchase price amounting
to 69,612.00 less the 34,887.66 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 34,724.34 on the downpayment of the two lots after
deducting the account of Ramos, plus 3,819.6810 interest thereon from September 1, 1972 to July 31, 1973, and that the
interests on the unpaid balance of the purchase price of 278,448.00 from September 1, 1972 to July 31, 1973 amounted to
30,629.28.11 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 complaint27 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 (313,172.34), per agreement with XEI, through Ramos. However, on July 28, 1988, CBM
wrote the spouses, through counsel, proposing that the price of 1,500.00 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 complaint31 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 2,000,000.00 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 313,172.34 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 313,172.34, 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 313,172.34, 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 300,000.00 and 30,000.00,
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 50,000.00 to enforce their rights in the premises and appearance fee of 500.00;
(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 942,648.70, 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 4,500,000.00, 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-Roque41 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 34,877.66 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 942,978.70 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 150,000.00; and
(c) To pay attorneys fees in the sum of 50,000.00 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 "942,978.70" appearing [in] par.
(a) of the dispositive portion thereof is changed to "313,172.34 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 278,448.00 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
278,448.00. 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 200.00
per square meter (or 348,060.00), the amount of the downpayment thereon and the application of the 34,887.00 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 Appeals48 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.51Although 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, such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.58
In a contract to sell property by installments, it is not enough that the parties agree on the price as well 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 of the perfection of any purchase and sale between the parties. Indeed, this Court
ruled in Velasco v. Court of Appeals59 that:
It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the
respondent still had to meet and agree on how and when the down-payment and the 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 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 10,000.00 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 the petitioners themselves admit that some essential matter
the terms of payment still had to be mutually covenanted.60
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 to 278,448.00. 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 (348,060.00), the 20% downpayment of the purchase
price (69,612.00), and credited respondents for the 34,887.00 owing from Ramos as part of the 20% downpayment. The
timeline for the payment of the balance of the downpayment (34,724.34) was also agreed upon, that 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 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 settlement
of the balance of the downpayment.
The February 8, 1972 letter of XEI reads:
Mr. Carlos T. Manalo, Jr.
Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City
Dear Mr. Manalo:
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.
Please let us know your choice lot so that we can fix the price and terms of payment in our conditional sale. (Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO
Sincerely yours,
President Buyer63
XAVIERVILLE ESTATE, INC.
Based on these two letters, the determination of the terms of payment of the 278,448.00 had yet to be agreed upon on or
(Signed)
before December 31, 1972, or even afterwards, when the parties sign the corresponding contract of conditional sale.
EMERITO B. RAMOS, JR.
President
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,
CONFORME:
no legal obligation arises until such future agreement is concluded.65
(Signed)
So long as an essential element entering into the proposed obligation of either of the parties remains to be determined by
CARLOS T. MANALO, JR.
an agreement which they are to make, the contract is incomplete and unenforceable.66 The reason is that such a contract is
Hurricane Rotary Well Drilling62
lacking in the necessary qualities of definiteness, certainty and mutuality.67
The August 22, 1972 letter agreement of XEI and the respondents reads:
There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after December 31, 1972, on the
Mrs. Perla P. Manalo terms of payment of the balance of the purchase price of the property and the other substantial terms and conditions
1548 Rizal Avenue Extensionbr>Caloocan City 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
Dear Mrs. Manalo:
The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because the issue of the manner of
This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-subdivision plan as amended, consisting payment of the purchase price of the property was not raised therein.
of 1,740.3 square meters more or less, at the price of 200.00 per square meter or a total price of 348,060.00.
We reject the submission of respondents that they and Ramos had intended to incorporate the terms of payment contained
It is agreed that as soon as we resume selling operations, you must pay a down payment of 20% of the purchase price of the in the three contracts of conditional sale executed by XEI and other lot buyers in the "corresponding contract of conditional
said lots and sign the corresponding Contract of Conditional Sale, on or before December 31, 1972, provided, however, that sale," which would later be signed by them.69 We have meticulously reviewed the respondents complaint and find no such
if we resume selling after December 31, 1972, then you must pay the aforementioned down payment and sign the aforesaid allegation therein.70 Indeed, respondents merely alleged in their complaint that they were bound to pay the balance of the
contract within five (5) days from your receipt of our notice of resumption of selling operations. 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
In the meanwhile, you may introduce such improvements on the said lots as you may desire, subject to the rules and under the contracts of conditional sale executed by XEI and other lot buyers would form part of the "corresponding contract
regulations of the subdivision. of conditional sale" to be signed by them simultaneously with the payment of the balance of the downpayment on the
purchase price.
If the above terms and conditions are acceptable to you, please signify your conformity by signing on the space herein
below provided. 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, 1972 letter agreement, XEI stated, in part, that respondents had purchased the property "on installment
Thank you.
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
Very truly yours,
evidence to prove that they were obliged to pay the 278,448.00 monthly, semi-annually or annually. The allegation that
XAVIERVILLE ESTATE, INC. CONFORME: the payment of the 278,448.00 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
By:
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 278,448.00 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 Appeals75 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 278,448.00 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 278,448.00.
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 deeds77 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 278,448.00 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 thereto85 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 buyers90 as basis for or mode of determination of the schedule of the payment
by the respondents of the 278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light Company91 is not applicable in this case
because the basic price fixed in the contract was 9.45 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 278,448.00.
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 278,448.00 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.
Boston Bank of the Phil. vs. Manalo, GR 158149, Feb. 9, 2006
Doctrine:
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, such that a
disagreement on the manner of payment is tantamount to a failure to agree on the price.
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.
Short Facts:
Sps Manalo are purported buyers of 2 lots sold by OBM (initial bank). In a letter-agreement, the total purchase price and
20% downpayment was agreed upon. Spouses Manalo began construction in the lot. When rights to lots was acquired by
Boston bank from OBM, Boston Bank tried to stop construction stating that the spouses did not have permission, stating
that there was no valid Contract-to-Sell since the manner of payment of the 80% balance was not agreed upon, therefore
the letter-agreement was not binding contract.
Facts:
1. Xavierville Estate, Inc. (XEI) sold to OBM (initial bank-buyer) some residential lots in Xavierville subdivision. XEI became
agent of the bank, and continued selling the residential lots.
2. Carlos Manalo, Jr. proposed to XEI, through its President Emerito Ramos(Ramos), that he will purchase two lots in the
subdivision and offered as part of the downpayment the P34,887.66 that Ramos owed him. XEI,through Ramos, agreed.
3. In a letter-agreement dated August 22, 1972 to Perla Manalo (Carlos wife), Ramos confirmed the reservation of the lots.
In the letter he also pegged the price of the lots at P348,060 with a 20% down payment of the purchase price amounting to
P69,612.00 (less the P34,887.66 owing from Ramos), payable as soon as XEI resumes its selling operations; the
corresponding Contract of Conditional Sale would then be signed on or before the same date. Perla Manalo conformed to
the letter agreement.
4. The spouses constructed a house on the property. They were notified of XEIs resumption of selling operations but they
did not pay the balance of the downpayment because XEI failed to give them a contract of conditional sale.
5. XEI turned over its selling operations to OBM. Then, CBM (later renamed as Boston Bank) acquired the Xavierville Estate
from OBM.
6. CBM/Boston Bank requested Perla Manalo to stop any on-going construction on the property since she had no
permission for such construction. Perla informed them that her husband had a contract with OBM, through XEI, to purchase
the property. She promised to send CBM the documents but she failed to do so. 6. The spouses filed a complaint for
damages and specific performance against bank to obtain contract. The spouses alleged that upon their partial payment of
the downpayment, they were entitled to the execution and delivery of a Deed of Absolute Sale covering the subject lots.
7. RTC ruled in favor of spouses and ordered delivery of Deed of Sale of lots, stating that letter agreement was a valid CTS.
CA upheld ruling of RTC
Issue: WON letter agreement was a valid contract to sell (CTS)? - NO.
Held:
NO. Contract is unenforceable because manner of payment of 80% balance has yet to be agreed upon.
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.
Price is an essential element in the formation of a binding and enforceable contract of sale. In a contract
to sell property by installments, it is not enough that the parties agree on the price as well 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 of the perfection of any purchase and sale
between the parties.
In this case, there is no showing that there was a schedule of payment of the
balance of the purchase price. In the letter agreements, parties confined themselves to agreeing on the
price of the property, the 20% downpayment, and credited respondents for the amount owned by
Ramos as part of the 20% downpayment. However, the determination of the terms of payment of the
80% BALANCE had yet to be agreed uponon or before December 31, 1972, or even afterwards, when the
parties sign the corresponding contract of conditional sale.
Jurisprudence has ruled that if a material element of a contemplated contract is left for future
negotiations, the same is too indefinite to be enforceable.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.
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.
On the other hand, XEI and OBM failed and refused to transmit a contract of conditional sale to the respondents.
The respondent-spouses 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.
Petition is GRANTED. RTC and CA decisions reversed and set aside.
G.R. No. L-11827 July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO DANTE,
PACIFICO ESCANDOR and FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance because the claims involved aggregate more than
P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself or in a representative capacity, of 11
iron lode mineral claims, known as the Dawahan Group, situated in the municipality of Jose Panganiban, province of
Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier constituted and appointed plaintiff-appellee
Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for
the exploration and development of the mining claims aforementioned on a royalty basis of not less than P0.50 per ton of
ore that might be extracted therefrom. On March 19, 1954, Gaite in turn executed a general assignment (Record on Appeal,
pp. 17-19) conveying the development and exploitation of said mining claims into the Larap Iron Mines, a single
proprietorship owned solely by and belonging to him, on the same royalty basis provided for in Exhibit "3". Thereafter, Gaite
embarked upon the development and exploitation of the mining claims in question, opening and paving roads within and
outside their boundaries, making other improvements and installing facilities therein for use in the development of the
mines, and in time extracted therefrom what he claim and estimated to be approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to exploit and
develop the mining claims in question, and Gaite assented thereto subject to certain conditions. As a result, a document
entitled "Revocation of Power of Attorney and Contract" was executed on December 8, 1954 (Exhibit "A"),wherein Gaite
transferred to Fonacier, for the consideration of P20,000.00, plus 10% of the royalties that Fonacier would receive from the
mining claims, all his rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to
use the business name "Larap Iron Mines" and its goodwill, and all the records and documents relative to the mines. In the
same document, Gaite transferred to Fonacier all his rights and interests over the "24,000 tons of iron ore, more or less"
that the former had already extracted from the mineral claims, in consideration of the sum of P75,000.00, P10,000.00 of
which was paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from and out of the first letter of credit covering
the first shipment of iron ores and of the first amount derived from the local sale of iron ore made by the Larap Mines &
Smelting Co. Inc., its assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite a surety bond, and
pursuant to the promise, Fonacier delivered to Gaite a surety bond dated December 8, 1954 with himself (Fonacier) as
principal and the Larap Mines and Smelting Co. and its stockholders George Krakower, Segundina Vivas, Pacifico Escandor,
Francisco Dante, and Fernando Ty as sureties (Exhibit "A-1"). Gaite testified, however, that when this bond was presented to
him by Fonacier together with the "Revocation of Power of Attorney and Contract", Exhibit "A", on December 8, 1954, he
refused to sign said Exhibit "A" unless another bond under written by a bonding company was put up by defendants to
secure the payment of the P65,000.00 balance of their price of the iron ore in the stockpiles in the mining claims. Hence, a
second bond, also dated December 8, 1954 (Exhibit "B"),was executed by the same parties to the first bond Exhibit "A-1",
with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company
would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not
less then P65,000.00, and that, furthermore, the liability of said surety company would automatically expire on December 8,
1955. Both bonds were attached to the "Revocation of Power of Attorney and Contract", Exhibit "A", and made integral
parts thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two executed and signed the
"Revocation of Power of Attorney and Contract", Exhibit "A", Fonacier entered into a "Contract of Mining Operation",
ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the right to develop, exploit, and explore
the mining claims in question, together with the improvements therein and the use of the name "Larap Iron Mines" and its
good will, in consideration of certain royalties. Fonacier likewise transferred, in the same document, the complete title to
the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap & Smelting Co., in consideration for
the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite (Record on Appeal, pp.
82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far Eastern Surety and Insurance Company,
no sale of the approximately 24,000 tons of iron ore had been made by the Larap Mines & Smelting Co., Inc., nor had the
P65,000.00 balance of the price of said ore been paid to Gaite by Fonacier and his sureties payment of said amount, on the
theory that they had lost right to make use of the period given them when their bond, Exhibit "B" automatically expired
(Exhibits "C" to "C-24"). And when Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the present
complaint against them in the Court of First Instance of Manila (Civil Case No. 29310) for the payment of the P65,000.00
balance of the price of the ore, consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by Gaite was subject to
a condition that the amount of P65,000.00 would be payable out of the first letter of credit covering the first shipment of
iron ore and/or the first amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.; that up
to the time of the filing of the complaint, no sale of the iron ore had been made, hence the condition had not yet been
fulfilled; and that consequently, the obligation was not yet due and demandable. Defendant Fonacier also contended that
only 7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered, and counterclaimed for
more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00 become due and demandable when
the defendants failed to renew the surety bond underwritten by the Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"),
which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were actually in existence in
the mining claims when these parties executed the "Revocation of Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to pay plaintiff the P65,000.00 balance of
the price of the approximately 24,000 tons of iron ore was one with a term: i.e., that it would be paid upon the sale of
sufficient iron ore by defendants, such sale to be effected within one year or before December 8, 1955; that the giving of
security was a condition precedent to Gait's giving of credit to defendants; and that as the latter failed to put up a good and
sufficient security in lieu of the Far Eastern Surety bond (Exhibit "B") which expired on December 8, 1955, the obligation
became due and demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have approximately 24,000 tons of iron ore at the
mining claims in question at the time of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally,
P65,000.00 with interest at 6% per annum from December 9, 1955 until payment, plus costs. From this judgment,
defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were presented for resolution: a motion to declare the
appellants Larap Mines & Smelting Co., Inc. and George Krakower in contempt, filed by appellant Fonacier, and two motions
to dismiss the appeal as having become academic and a motion for new trial and/or to take judicial notice of certain
documents, filed by appellee Gaite. The motion for contempt is unmeritorious because the main allegation therein that the
appellants Larap Mines & Smelting Co., Inc. and Krakower had sold the iron ore here in question, which allegedly is
"property in litigation", has not been substantiated; and even if true, does not make these appellants guilty of contempt,
because what is under litigation in this appeal is appellee Gaite's right to the payment of the balance of the price of the ore,
and not the iron ore itself. As for the several motions presented by appellee Gaite, it is unnecessary to resolve these
motions in view of the results that we have reached in this case, which we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite the P65,000.00
(balance of the price of the iron ore in question)is one with a period or term and not one with a suspensive condition, and
that the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of iron ore sold by appellee
Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his rights and interests over the 24,000
tons of iron ore, more or less, above-referred to together with all his rights and interests to operate the mine in
consideration of the sum of SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from and out of the first letter of credit covering
the first shipment of iron ore made by the Larap Mines & Smelting Co., Inc., its assigns, administrators, or successors in
interest.
We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is not a condition
precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability)
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 never existed. That the parties to the contract Exhibit "A" did not
intend any such state of things to prevail is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of Sixty-Five Thousand
Pesos (P65,000.00) will be paid out of the first letter of credit covering the first shipment of iron ores . . ." etc. There is no
uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which
it will be made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative
obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price),but each party
anticipates performance by the other from the very start. While in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he
gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence,
the contingent character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite desired
or assumed to run the risk of losing his right over the ore without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an
not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one by a
surety company; and the fact that appellants did put up such bonds indicates that they admitted the definite existence of
their obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or shipment of the ore as a condition
precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the sale or shipment could not
be made unless the appellants took steps to sell the ore. Appellants would thus be able to postpone payment indefinitely.
The desireability of avoiding such a construction of the contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the parties indented a suspensive condition
or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules of interpretation would incline the scales
in favor of "the greater reciprocity of interests", since sale is essentially onerous. The Civil Code of the Philippines, Article
1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be actually existing, with
only its maturity (due date) postponed or deferred, that if such obligation were viewed as non-existent or not binding until
the ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an aleatory
contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment
of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix
the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his sureties, still have the right to insist that
Gaite should wait for the sale or shipment of the ore before receiving payment; or, in other words, whether or not they are
entitled to take full advantage of the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the right court below that the appellants have forfeited the
right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of their
failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration
of the bonding company's undertaking on December 8, 1955 substantially reduced the security of the vendor's rights as
creditor for the unpaid P65,000.00, a security that Gaite considered essential and upon which he had insisted when he
executed the deed of sale of the ore to Fonacier (Exhibit "A"). The case squarely comes under paragraphs 2 and 3 of Article
1198 of the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has promised.
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through
fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities given to
the creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on
its face it would automatically expire within one year was a waiver of its renewal after the expiration date. No such waiver
could have been intended, for Gaite stood to lose and had nothing to gain barely; and if there was any, it could be rationally
explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on
December 8, 1955. But in the latter case the defendants-appellants' obligation to pay became absolute after one year from
the transfer of the ore to Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding payment and
instituting this action one year from and after the contract (Exhibit "A") was executed, either because the appellant debtors
had impaired the securities originally given and thereby forfeited any further time within which to pay; or because the term
of payment was originally of no more than one year, and the balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really 24,000 tons of iron ore in the stockpiles
sold by appellee Gaite to appellant Fonacier, and whether, if there had been a short-delivery as claimed by appellants, they
are entitled to the payment of damages, we must, at the outset, stress two things: first, that this is a case of a sale of a
specific mass of fungible goods for a single price or a lump sum, the quantity of "24,000 tons of iron ore, more or less,"
stated in the contract Exhibit "A," being a mere estimate by the parties of the total tonnage weight of the mass; and second,
that the evidence shows that neither of the parties had actually measured of weighed the mass, so that they both tried to
arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then multiplying it by the
estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or perfect the sale, nor was the price of P75,000,00 agreed upon
by the parties based upon any such measurement.(see Art. 1480, second par., New Civil Code). The subject matter of the
sale is, therefore, a determinate object, the mass, and not the actual number of units or tons contained therein, so that all
that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass,
notwithstanding that the quantity delivered is less than the amount estimated by them (Mobile Machinery & Supply Co.,
Inc. vs. York Oilfield Salvage Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil Code). There is no charge in this
case that Gaite did not deliver to appellants all the ore found in the stockpiles in the mining claims in questions; Gaite had,
therefore, complied with his promise to deliver, and appellants in turn are bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy, not a definite mass, but approximately
24,000 tons of ore, so that any substantial difference in this quantity delivered would entitle the buyers to recover damages
for the short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or weighed the whole mass of ore cubic meter
by cubic meter, or ton by ton. Both parties predicate their respective claims only upon an estimated number of cubic meters
of ore multiplied by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the stockpiles of ore that he sold to Fonacier,
while appellants contend that by actual measurement, their witness Cirpriano Manlagit found the total volume of ore in
the stockpiles to be only 6.609 cubic meters. As to the average weight in tons per cubic meter, the parties are again in
disagreement, with appellants claiming the correct tonnage factor to be 2.18 tons to a cubic meter, while appellee Gaite
claims that the correct tonnage factor is about 3.7.
In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor of iron ore in this case to
be that made by Leopoldo F. Abad, chief of the Mines and Metallurgical Division of the Bureau of Mines, a government
pensionado to the States and a mining engineering graduate of the Universities of Nevada and California, with almost 22
years of experience in the Bureau of Mines. This witness placed the tonnage factor of every cubic meter of iron ore at
between 3 metric tons as minimum to 5 metric tons as maximum. This estimate, in turn, closely corresponds to the average
tonnage factor of 3.3 adopted in his corrected report (Exhibits "FF" and FF-1") by engineer Nemesio Gamatero, who was
sent by the Bureau of Mines to the mining claims involved at the request of appellant Krakower, precisely to make an official
estimate of the amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles made by appellant's witness Cipriano
Manlagit is correct, if we multiply it by the average tonnage factor of 3.3 tons to a cubic meter, the product is 21,809.7
tons, which is not very far from the estimate of 24,000 tons made by appellee Gaite, considering that actual weighing of
each unit of the mass was practically impossible, so that a reasonable percentage of error should be allowed anyone making
an estimate of the exact quantity in tons found in the mass. It must not be forgotten that the contract Exhibit "A" expressly
stated the amount to be 24,000 tons, more or less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would entitle appellants to the payment of damages, nor could
Gaite have been guilty of any fraud in making any misrepresentation to appellants as to the total quantity of ore in the
stockpiles of the mining claims in question, as charged by appellants, since Gaite's estimate appears to be substantially
correct.
WHEREFORE, finding no error in the decision appealed from, we hereby affirm the same, with costs against appellants.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, De Leon and Natividad, JJ., concur.
FACTS
Fonacier, owner of mining claims, constituted Gaite as his attorney-in-fact. Gaite was authorized to enter into a contract
with other persons with respect to the mining claims.
Gaite then entered into a contract with Larap Iron Mines, a company Gaite solely owned, to develop the mining claims.
Later, Fonacier abruptly decided to revoke Gaites authority as attorney-in-fact.
Afterwards, Gaite sold the developments his company made in the mining claims areas and the ore already mined for a sum
of money to Fonacier. Fonacier secured the sale with a surety company. Part of the money was paid upon sale while the
other part was payable out of the first loan of credit covering the first shipment of iron ore and the first amount derived
from the local sale of the iron ore.
After the surety expired, Gaite demanded payment of the remainder of the purchase price but Fonacier refused arguing no
sale of iron ore had yet taken place.
ISSUE
WHETHER OR NOT THE SELLING OF THE IRON ORES IS A SUSPENSIVE CONDITION FOR PAYING GAITE
HELD: NO.
The sale isnt a suspensive condition but is only a suspensive period or term. This interpretation is supported by:
1. The contract expresses no contingency in the buyers obligation to pay. The contract
recognizes the existence of an obligation to pay and only the maturity is deferred
2. Gaite never desired or assumed to run the risk of losing his right over the ore without getting paid for it as shown by his
insistence on a surety
3. Treating the condition as a suspensive condition would leave payment at the debtors
discretion because the ore will be sold only when the debtor wants it to be sold.
4. In onerous contracts the rules of interpretation favor the greater reciprocity of interest and because sale is onerous this
rule applies. Greater reciprocity is obtained if the buyers
obligation to pay is deemed existing compared to such obligation non-existing until the ore was sold.
G.R. No. 152658. July 29, 2005
LILY ELIZABETH BRAVO-GUERRERO, BEN MAURICIO P. BRAVO,1 ROLAND P. BRAVO, JR., OFELIA BRAVO-QUIESTAS, HEIRS OF
CORPUSINIA BRAVO-NIOR namely: GERSON U. NIOR, MARK GERRY B. NIOR, CLIFF RICHARD B. NIOR, BRYAN B. NIOR, WIDMARK
B. NIOR, SHERRY ANNE B. NIOR, represented by LILY ELIZABETH BRAVO-GUERRERO as their attorney-in-fact, and HONORABLE
FLORENTINO A. TUASON, JR., Presiding Judge, Regional Trial Court, Branch 139, Makati City, Petitioners,
vs.
EDWARD P. BRAVO, represented by his attorney-in-fact FATIMA C. BRAVO, respondent, and DAVID B. DIAZ, JR., intervenor-
respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review2 assailing the Decision3 of 21 December 2001 of the Court of Appeals in CA-G.R. CV
No. 67794. The Court of Appeals reversed the Decision4 of 11 May 2000 of the Regional Trial Court of Makati, Branch No.
139, in Civil Case No. 97-1379 denying respondents prayer to partition the subject properties.
Antecedent Facts
Spouses Mauricio Bravo ("Mauricio") and Simona5 Andaya Bravo ("Simona") owned two parcels of land ("Properties")
measuring 287 and 291 square meters and located along Evangelista Street, Makati City, Metro Manila. The Properties are
registered under TCT Nos. 58999 and 59000 issued by the Register of Deeds of Rizal on 23 May 1958. The Properties contain
a large residential dwelling, a smaller house and other improvements.
Mauricio and Simona had three children - Roland, Cesar and Lily, all surnamed Bravo. Cesar died without issue. Lily Bravo
married David Diaz, and had a son, David B. Diaz, Jr. ("David Jr."). Roland had six children, namely, Lily Elizabeth Bravo-
Guerrero ("Elizabeth"), Edward Bravo ("Edward"), Roland Bravo, Jr. ("Roland Jr."), Senia Bravo, Benjamin Mauricio Bravo,
and their half-sister, Ofelia Bravo ("Ofelia").
Simona executed a General Power of Attorney ("GPA") on 17 June 1966 appointing Mauricio as her attorney-in-fact. In the
GPA, Simona authorized Mauricio to "mortgage or otherwise hypothecate, sell, assign and dispose of any and all of my
property, real, personal or mixed, of any kind whatsoever and wheresoever situated, or any interest therein xxx."6 Mauricio
subsequently mortgaged the Properties to the Philippine National Bank (PNB) and Development Bank of the Philippines
(DBP) for 10,000 and 5,000, respectively.7
On 25 October 1970, Mauricio executed a Deed of Sale with Assumption of Real Estate Mortgage ("Deed of Sale") conveying
the Properties to "Roland A. Bravo, Ofelia A. Bravo and Elizabeth Bravo"8 ("vendees"). The sale was conditioned on the
payment of 1,000 and on the assumption by the vendees of the PNB and DBP mortgages over the Properties.
As certified by the Clerk of Court of the Regional Trial Court of Manila, the Deed of Sale was notarized by Atty. Victorio Q.
Guzman on 28 October 1970 and entered in his Notarial Register.9 However, the Deed of Sale was not annotated on TCT
Nos. 58999 and 59000. Neither was it presented to PNB and DBP. The mortage loans and the receipts for loan payments
issued by PNB and DBP continued to be in Mauricios name even after his death on 20 November 1973. Simona died in
1977.
On 23 June 1997, Edward, represented by his wife, Fatima Bravo, filed an action for the judicial partition of the Properties.
Edward claimed that he and the other grandchildren of Mauricio and Simona are co-owners of the Properties by succession.
Despite this, petitioners refused to share with him the possession and rental income of the Properties. Edward later
amended his complaint to include a prayer to annul the Deed of Sale, which he claimed was merely simulated to prejudice
the other heirs.
In 1999, David Jr., whose parents died in 1944 and who was subsequently raised by Simona, moved to intervene in the case.
David Jr. filed a complaint-in-intervention impugning the validity of the Deed of Sale and praying for the partition of the
Properties among the surviving heirs of Mauricio and Simona. The trial court allowed the intervention in its Order dated 5
May 1999.10
The Ruling of the Trial Court
The trial court upheld Mauricios sale of the Properties to the vendees. The trial court ruled that the sale did not prejudice
the compulsory heirs, as the Properties were conveyed for valuable consideration. The trial court also noted that the Deed
of Sale was duly notarized and was in existence for many years without question about its validity.
The dispositive portion of the trial courts Decision of 11 May 2000 reads:
WHEREFORE, premises considered, the Court hereby DENIES the JUDICIAL PARTITION of the properties covered by TCT Nos.
58999 and 59000 registered with the Office of the Register of Deeds of Rizal.
SO ORDERED.11
Dissatisfied, Edward and David Jr. ("respondents") filed a joint appeal to the Court of Appeals.
The Ruling of the Court of Appeals
Citing Article 166 of the Civil Code ("Article 166"), the Court of Appeals declared the Deed of Sale void for lack of Simonas
consent. The appellate court held that the GPA executed by Simona in 1966 was not sufficient to authorize Mauricio to sell
the Properties because Article 1878 of the Civil Code ("Article 1878") requires a special power of attorney for such
transactions. The appellate court reasoned that the GPA was executed merely to enable Mauricio to mortgage the
Properties, not to sell them.
The Court of Appeals also found that there was insufficient proof that the vendees made the mortgage payments on the
Properties, since the PNB and DBP receipts were issued in Mauricios name. The appellate court opined that the rental
income of the Properties, which the vendees never shared with respondents, was sufficient to cover the mortgage
payments to PNB and DBP.
The Court of Appeals declared the Deed of Sale void and ordered the partition of the Properties in its Decision of 21
December 2001 ("CA Decision"), as follows:
WHEREFORE, the decision of the Regional Trial Court of Makati City, Metro-Manila, Branch 13[9] dated 11 May 2000[,]
review of which is sought in these proceedings[,] is REVERSED.
1. The Deed of Sale with Assumption of Real Estate Mortgage (Exh. 4) dated 28 October 1970 is hereby declared null and
void;
2. Judicial Partition on the questioned properties is hereby GRANTED in the following manner:
A. In representation of his deceased mother, LILY BRAVO-DIAZ, intervenor DAVID DIAZ, JR., is entitled to one-half (1/2)
interest of the subject properties;
B. Plaintiff-appellant EDWARD BRAVO and the rest of the five siblings, namely: LILY ELIZABETH, EDWARD, ROLAND, JR.,
SENIA, BENJAMIN and OFELIA are entitled to one-sixth (1/6) representing the other half portion of the subject properties;
C. Plaintiff-appellant Edward Bravo, intervenor DAVID DIAZ, JR., SENIA and BENJAMIN shall reimburse the defendant-
appellees LILY ELIZABETH, OFELIA and ROLAND the sum of One Thousand (P1,000.00) PESOS representing the consideration
paid on the questioned deed of sale with assumption of mortgage with interest of six (6) percent per annum effective 28
October 1970 until fully paid.
SO ORDERED.12
The Issues
Petitioners seek a reversal of the Decision of the Court of Appeals, raising these issues:
1. WHETHER THE COURT OF APPEALS ERRED IN NOT UPHOLDING THE VALIDITY AND ENFORCEMENT OF THE DEED OF SALE
WITH ASSUMPTION OF MORTGAGE.
2. WHETHER THE COURT OF APPEALS ERRED IN ORDERING THE PARTITION OF THE PROPERTY IN QUESTION.13
At the least, petitioners argue that the subject sale is valid as to Mauricios share in the Properties.
On the other hand, respondents maintain that they are co-owners of the Properties by succession. Respondents argue that
the sale of the conjugal Properties is void because: (1) Mauricio executed the Deed of Sale without Simonas consent; and
(2) the sale was merely simulated, as shown by the grossly inadequate consideration Mauricio received for the Properties.
While this case was pending, Leonida Andaya Lolong ("Leonida"), David Jr.s aunt, and Atty. Cendaa, respondents counsel,
informed the Court that David Jr. died on 14 September 2004. Afterwards, Leonida and Elizabeth wrote separate letters
asking for the resolution of this case. Atty. Cendaa later filed an urgent motion to annotate attorneys lien on TCT Nos.
58999 and 59000. In its Resolution dated 10 November 2004,14 the Court noted the notice of David Jr.s death, the letters
written by Leonida and Elizabeth, and granted the motion to annotate attorneys lien on TCT Nos. 58999 and 59000.
The Ruling of the Court
The petition is partly meritorious.
The questions of whether Simona consented to the Deed of Sale and whether the subject sale was simulated are factual in
nature. The rule is factual findings of the Court of Appeals are binding on this Court. However, there are exceptions, such as
when the factual findings of the Court of Appeals and the trial court are contradictory, or when the evidence on record does
not support the factual findings.15 Because these exceptions obtain in the present case, the Court will consider these issues.
On the Requirement of the Wifes Consent
We hold that the Court of Appeals erred when it declared the Deed of Sale void based on Article 166, which states:
Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined
in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wifes
consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same.
This article shall not apply to property acquired by the conjugal partnerships before the effective date of this Code.
Article 166 expressly applies only to properties acquired by the conjugal partnership after the effectivity of the Civil Code of
the Philippines ("Civil Code"). The Civil Code came into force on 30 August 1950.16 Although there is no dispute that the
Properties were conjugal properties of Mauricio and Simona, the records do not show, and the parties did not stipulate,
when the Properties were acquired.17 Under Article 1413 of the old Spanish Civil Code, the husband could alienate conjugal
partnership property for valuable consideration without the wifes consent.18
Even under the present Civil Code, however, the Deed of Sale is not void. It is well-settled that contracts alienating conjugal
real property without the wifes consent are merely voidable under the Civil Code that is, binding on the parties unless
annulled by a competent court and not void ab initio.19
Article 166 must be read in conjunction with Article 173 of the Civil Code ("Article 173"). The latter prescribes certain
conditions before a sale of conjugal property can be annulled for lack of the wifes consent, as follows:
Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the
annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or
contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the
wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of property
fraudulently alienated by the husband. (Emphasis supplied)
Under the Civil Code, only the wife can ask to annul a contract that disposes of conjugal real property without her consent.
The wife must file the action for annulment during the marriage and within ten years from the questioned transaction.
Article 173 is explicit on the remedies available if the wife fails to exercise this right within the specified period. In such case,
the wife or her heirs can only demand the value of the property provided they prove that the husband fraudulently
alienated the property. Fraud is never presumed, but must be established by clear and convincing evidence.20
Respondents action to annul the Deed of Sale based on Article 166 must fail for having been filed out of time. The marriage
of Mauricio and Simona was dissolved when Mauricio died in 1973. More than ten years have passed since the execution of
the Deed of Sale.
Further, respondents, who are Simonas heirs, are not the parties who can invoke Article 166. Article 173 reserves that
remedy to the wife alone. Only Simona had the right to have the sale of the Properties annulled on the ground that Mauricio
sold the Properties without her consent.
Simona, however, did not assail the Deed of Sale during her marriage or even after Mauricios death. The records are bereft
of any indication that Simona questioned the sale of the Properties at any time. Simona did not even attempt to take
possession of or reside on the Properties after Mauricios death. David Jr., who was raised by Simona, testified that he and
Simona continued to live in Pasay City after Mauricios death, while her children and other grandchildren resided on the
Properties.21
We also agree with the trial court that Simona authorized Mauricio to dispose of the Properties when she executed the GPA.
True, Article 1878 requires a special power of attorney for an agent to execute a contract that transfers the ownership of an
immovable. However, the Court has clarified that Article 1878 refers to the nature of the authorization, not to its
form.22 Even if a document is titled as a general power of attorney, the requirement of a special power of attorney is met if
there is a clear mandate from the principal specifically authorizing the performance of the act.23
In Veloso v. Court of Appeals,24 the Court explained that a general power of attorney could contain a special power to sell
that satisfies the requirement of Article 1878, thus:
An examination of the records showed that the assailed power of attorney was valid and regular on its face. It was notarized
and as such, it carries the evidentiary weight conferred upon it with respect to its due execution. While it is true that it was
denominated as a general power of attorney, a perusal thereof revealed that it stated an authority to sell, to wit:
"2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other forms of
real property, more specifically TCT No. 49138, upon such terms and conditions and under such covenants as my said
attorney shall deem fit and proper."
Thus, there was no need to execute a separate and special power of attorney since the general power of attorney had
expressly authorized the agent or attorney in fact the power to sell the subject property. The special power of attorney can
be included in the general power when it is specified therein the act or transaction for which the special power is required.
(Emphasis supplied)
In this case, Simona expressly authorized Mauricio in the GPA to "sell, assign and dispose of any and all of my property, real,
personal or mixed, of any kind whatsoever and wheresoever situated, or any interest therein xxx" as well as to "act as my
general representative and agent, with full authority to buy, sell, negotiate and contract for me and in my behalf." 25 Taken
together, these provisions constitute a clear and specific mandate to Mauricio to sell the Properties. Even if it is called a
"general power of attorney," the specific provisions in the GPA are sufficient for the purposes of Article 1878. These
provisions in the GPA likewise indicate that Simona consented to the sale of the Properties.
Whether the Sale of the Properties was Simulated
or is Void for Gross Inadequacy of Price
We point out that the law on legitime does not bar the disposition of property for valuable consideration to descendants or
compulsory heirs. In a sale, cash of equivalent value replaces the property taken from the estate.26 There is no diminution of
the estate but merely a substitution in values. Donations and other dispositions by gratuitous title, on the other hand, must
be included in the computation of legitimes.27
Respondents, however, contend that the sale of the Properties was merely simulated. As proof, respondents point to the
consideration of 1,000 in the Deed of Sale, which respondents claim is grossly inadequate compared to the actual value of
the Properties.
Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects. When the parties to
an alleged contract do not really intend to be bound by it, the contract is simulated and void.28 A simulated or fictitious
contract has no legal effect whatsoever29 because there is no real agreement between the parties.
In contrast, a contract with inadequate consideration may nevertheless embody a true agreement between the parties. A
contract of sale is a consensual contract, which becomes valid and binding upon the meeting of minds of the parties on the
price and the object of the sale.30 The concept of a simulated sale is thus incompatible with inadequacy of price. When the
parties agree on a price as the actual consideration, the sale is not simulated despite the inadequacy of the price.31
Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the
validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or
some other contract.32 Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue
influence.33 In this case, respondents have not proved any of the instances that would invalidate the Deed of Sale.
Respondents even failed to establish that the consideration paid by the vendees for the Properties was grossly inadequate.
As the trial court pointed out, the Deed of Sale stipulates that, in addition to the payment of 1,000, the vendees should
assume the mortgage loans from PNB and DBP. The consideration for the sale of the Properties was thus 1,000 in cash and
the assumption of the 15,000 mortgage.
Respondents argue that 16,000 is still far below the actual value of the Properties. To bolster their claim, respondents
presented the following: (1) Tax Declarations No. A-001-0090534 and A-001-0090635 for the year 1979, which placed the
assessed value of the Properties at 70,020 and their approximate market value at 244,290; and (2) a certified copy of the
Department of Finances Department Order No. 62-9736 dated 6 June 1997 and attached guidelines37 which established the
zonal value of the properties along Evangelista Street at 15,000 per square meter.
The subject Deed of Sale, however, was executed in 1970. The valuation of the Properties in 1979 or 1997 is of little
relevance to the issue of whether 16,000 was a grossly inadequate price to pay for the Properties in 1970. Certainly, there
is nothing surprising in the sharp increase in the value of the Properties nine or twenty-seven years after the sale,
particularly when we consider that the Properties are located in the City of Makati.
More pertinent are Tax Declarations No. 1581238 and No. 15813,39 both issued in 1967, presented by petitioners. These tax
declarations placed the assessed value of both Properties at 16,160. Compared to this, the price of 16,000 cannot be
considered grossly inadequate, much less so shocking to the conscience40 as to justify the setting aside of the Deed of Sale.
Respondents next contend that the vendees did not make the mortgage payments on the Properties. Respondents allege
that the rents paid by the tenants leasing portions of the Properties were sufficient to cover the mortgage payments to DBP
and PNB.
Again, this argument does not help respondents cause. Assuming that the vendees failed to pay the full price stated in the
Deed of Sale, such partial failure would not render the sale void. In Buenaventura v. Court of Appeals,41 the Court held:
xxx 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. xxx
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. (Emphasis
supplied.)
Neither was it shown that the rentals from tenants were sufficient to cover the mortgage payments. The parties to this case
stipulated to only one tenant, a certain Federico M. Puno, who supposedly leased a room on the Properties for 300 per
month from 1992 to 1994.42 This is hardly significant, when we consider that the mortgage was fully paid by 1974. Indeed,
the fact that the Properties were mortgaged to DBP and PNB indicates that the conjugal partnership, or at least Mauricio,
was short of funds.
Petitioners point out that they were duly employed and had the financial capacity to buy the Properties in 1970.
Respondents did not refute this. Petitioners presented 72 receipts43 showing the mortgage payments made to PNB and DBP,
and the Release of the Real Estate Mortgage44 ("Mortgage Release") dated 5 April 1974. True, these documents all bear
Mauricios name. However, this tends to support, rather than detract from, petitioner-vendees explanation that they
initially gave the mortgage payments directly to Mauricio, and then later directly to the banks, without formally advising the
bank of the sale. The last 3 mortgage receipts and the Mortgage Release were all issued in Mauricios name even after his
death in 1970. Obviously, Mauricio could not have secured the Mortgage Release and made these last payments.
Presumption of Regularity and Burden of Proof
The Deed of Sale was notarized and, as certified by the Regional Trial Court of Manila, entered in the notarial books
submitted to that court. As a document acknowledged before a notary public, the Deed of Sale enjoys the presumption of
regularity45 and due execution.46 Absent evidence that is clear, convincing and more than merely preponderant, the
presumption must be upheld.47
Respondents evidence in this case is not even preponderant. Respondents allegations, testimony and bare denials cannot
prevail over the documentary evidence presented by petitioners. These documents the Deed of Sale and the GPA which
are both notarized, the receipts, the Mortgage Release and the 1967 tax declarations over the Properties support
petitioners account of the sale.
As the parties challenging the regularity of the Deed of Sale and alleging its simulation, respondents had the burden of
proving these charges.48 Respondents failed to discharge this burden. Consequentially, the Deed of Sale stands.
On the Partition of the Property
Nevertheless, this Court finds it proper to grant the partition of the Properties, subject to modification.
Petitioners have consistently claimed that their father is one of the vendees who bought the Properties. Vendees Elizabeth
and Ofelia both testified that the "Roland A. Bravo" in the Deed of Sale is their father,49 although their brother, Roland
Bravo, Jr., made some of the mortgage payments. Petitioners counsel, Atty. Paggao, made the same clarification before the
trial court.50
As Roland Bravo, Sr. is also the father of respondent Edward Bravo, Edward is thus a compulsory heir of Roland Bravo, and
entitled to a share, along with his brothers and sisters, in his fathers portion of the Properties. In short, Edward and
petitioners are co-owners of the Properties.
As such, Edward can rightfully ask for the partition of the Properties. Any co-owner may demand at any time the partition of
the common property unless a co-owner has repudiated the co-ownership.51 This action for partition does not prescribe and
is not subject to laches.52
WHEREFORE, we REVERSE the Decision of 21 December 2001 of the Court of Appeals in CA-G.R. CV No. 67794. We
REINSTATE the Decision of 11 May 2000 of the Regional Trial Court of Makati, Branch No. 139, in Civil Case No. 97-137,
declaring VALID the Deed of Sale with Assumption of Mortgage dated 28 October 1970, with the following MODIFICATIONS:
1. We GRANT judicial partition of the subject Properties in the following manner:
a. Petitioner LILY ELIZABETH BRAVO-GUERRERO is entitled to one-third (1/3) of the Properties;
b. Petitioner OFELIA BRAVO-QUIESTAS is entitled to one-third (1/3) of the Properties; and
c. The remaining one-third (1/3) portion of the Properties should be divided equally between the children of ROLAND
BRAVO.
2. The other heirs of ROLAND BRAVO must reimburse ROLAND BRAVO, JR. for whatever expenses the latter incurred in
paying for and securing the release of the mortgage on the Properties.
SO ORDERED.
[G.R. No. 152658. July 29, 2005]
LILY ELIZABETH BRAVO-GUERRERO, BEN MAURICIO P. BRAVO,[1] ROLAND P. BRAVO, JR., OFELIA BRAVO-QUIESTAS, HEIRS OF
CORPUSINIA BRAVO-NIOR namely: GERSON U. NIOR, MARK GERRY B. NIOR, CLIFF RICHARD B. NIOR, BRYAN B. NIOR,
WIDMARK B. NIOR, SHERRY ANNE B. NIOR, represented by LILY ELIZABETH BRAVO-GUERRERO as their attorney-in-fact, and
HONORABLE FLORENTINO A. TUASON, JR., Presiding Judge, Regional Trial Court, Branch 139, Makati City, petitioners, vs.
EDWARD P. BRAVO, represented by his attorney-in-fact FATIMA C. BRAVO, respondent, and DAVID B. DIAZ, JR., intervenor-
respondent.
FACTS:
Spouses Mauricio Bravo ("Mauricio") and Simona Andaya Bravo ("Simona") owned two parcelsof land ("Properties") located
along Evangelista Street, Makati City, Metro Manila. They have three children - Roland, Cesar and Lily, all surnamed Bravo.
Cesar died without issue. Lily Bravo married David Diaz, and had a son, David B. Diaz, Jr. ("David Jr."). Roland had six children,
namely, Lily Elizabeth Bravo-Guerrero ("Elizabeth"), Edward Bravo ("Edward"), Roland Bravo, Jr. ("Roland Jr."), Senia Bravo,
Benjamin Mauricio Bravo, and their half-sister, Ofelia Bravo ("Ofelia").
Simona executed a General Power of Attorney ("GPA") on 17 June 1966 appointing Mauricio as her attorney-in-fact. In the As Roland Bravo, Sr. is also the father of respondent Edward Bravo, Edward is thus a compulsory heir of Roland Bravo, and
GPA, Simona authorized Mauricio to "mortgage or otherwise hypothecate, sell, assign and dispose of any and all of my entitled to a share, along with his brothers and sisters, in his fathers portion of the Properties. In short, Edward and
property, real, personal or mixed, of any kind whatsoever and wheresoever situated, or any interest therein xxx." Mauricio petitioners are co-owners of the Properties.
subsequently mortgaged the Properties to the Philippine National Bank (PNB) and Development Bank of the Philippines
(DBP) for P10,000 and P5,000, respectively. As such, Edward can rightfully ask for the partition of the Properties. Any co-owner may demand at any time the partition of
the common property unless a co-owner has repudiated the co-ownership. This action for partition does not prescribe and
On 25 October 1970, Mauricio executed a Deed of Sale with Assumption of Real Estate Mortgage "Deed of Sale") conveying is not subject to laches.
the Properties to "Roland A. Bravo, Ofelia A. Bravo and Elizabeth Bravo" ("vendees"). However, the Deed of Sale was not
annotated on TCT Nos.58999 and 59000. Neither was it presented to PNB and DBP. The mortgage loans and the receipts for
loan payments issued by PNB and DBP continued to be in Mauricios name even after his death on 20 November 1973.
OTHER ISSUES:
Simona died in 1977.On 23 June 1997, Edward, represented by his wife, Fatima Bravo, filed an action for the judicial
1. Whether Simona validly appointed Mauricio as her attorney-in-fact to dispose the properties in question - YES
partition of the Properties. Edward claimed that he and the other grandchildren of Mauricio and Simona are co-owners of
the Properties by succession. Despite this, petitioners refused to share with him the possession and rental income of the
HELD:
Properties.
We hold that the Court of Appeals erred when it declared the Deed of Sale void. In this case, Simona expressly authorized
In 1999, David Jr., whose parents died in 1944 and who was subsequently raised by Simona, moved to intervene in the case.
Mauricio in the GPA to "sell, assign and dispose of any and all of my property, real, personal or mixed, of any kind
David Jr. filed a complaint-in-intervention impugning the validity of the Deed of Sale and praying for the partition of the
whatsoever and wheresoever situated, or any interest therein xxx" as well as to "act as my general representative and
Properties among the surviving heirs of Mauricio and Simona. The trial court allowed the intervention.
agent,with full authority to buy, sell, negotiate and contract for me and in my behalf." Taken together, these provisions
constitute a clear and specific mandate to Mauricio to sell the Properties. Even if it is called a "general power of attorney,"
Trial Court: The trial court upheld Mauricios sale of the Properties to the vendees. The trial court ruled that the sale did not
the specific provisions in the GPA are sufficient for the purposes of Article 1878. These provisions in the GPA likewise
prejudice the compulsory heirs, as the Properties were conveyed for valuable consideration. The trial court also noted that
indicate that Simona consented to the sale of the Properties
the Deed of Sale was duly notarized and was in existence for many years without question about its validity. It DENIED the
JUDICIAL PARTITION of the properties.
2. Whether the Sale of the Properties was Simulated or is Void for Gross Inadequacy of Price - No
Court of Appeals: REVERSED; the Court of Appeals declared the Deed of Sale void for lack of Simonas consent. The
HELD: We point out that the law on legitime does not bar the disposition of property for valuable consideration to
appellate court held that the GPA executed by Simona in 1966 was not sufficient to authorize Mauricio to sell the
descendants or compulsory heirs. In a sale, cash of equivalent value replaces the property taken from the estate. There is
Properties.
no diminution of the estate but merely a substitution in values. Donations and other dispositions by gratuitous title, on the
other hand, must be included in the computation of legitimes.

Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the
ISSUE: WHETHER THE COURT OF APPEALS ERRED IN ORDERING THE PARTITION OF THE PROPERTY IN QUESTION
validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or
some other contract. Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue
influence. In this case, respondents have not proved any of the instances that would invalidate the Deed of Sale.
HELD:
G.R. No. L-11491 August 23, 1918
This Court finds it proper to grant the partition of the Properties.
ANDRES QUIROGA, plaintiff-appellant,
Petitioners have consistently claimed that their father is one of the vendees who bought the Properties. Vendees Elizabeth vs.
and Ofelia both testified that the Roland A. Bravo in the Deed of Sale is their father, although their brother, Roland Bravo, PARSONS HARDWARE CO., defendant-appellee.
Jr., made some of the mortgage payments. Petitioners counsel, Atty. Paggao, made the same clarification before the trial
court. Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Crossfield & O'Brien for appellee.
AVANCEA, J.:
On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by and between the plaintiff,
as party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), as
party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA,
FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the
following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice
them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25
per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of
the same or of different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from the date of their
shipment.
(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, and cost of
unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as
a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice.
The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to
make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order
pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered,
but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the
obligation to invoice the beds at the price at which the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr. Parsons
may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the preference to Mr. Parsons in
case anyone should apply for the exclusive agency for any island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the
Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a
previous notice of ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subject matter of this
appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the
beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to
keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the
dozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to order
the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of
action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his
beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore,
reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a
purchaser or an agent of the plaintiff for the sale of his beds.
In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was
essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which
the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The
price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to
25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request,
or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt
payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part
of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its
price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not
succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving
the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as
to whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase
and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for
these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is
found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of
an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself,
than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant
was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least
that can be said is that they are not incompatible with the contract of purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and who
established and managed the latter's business in Iloilo. It appears that this witness, prior to the time of his testimony, had
serious trouble with the defendant, had maintained a civil suit against it, and had even accused one of its partners,
Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned as to
what was his purpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect a
commission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of the
corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement as to what
was his idea in contracting with the plaintiff is of no importance, inasmuch as the agreements contained in Exhibit A which
he claims to have drafted, constitute, as we have said, a contract of purchase and sale, and not one of commercial agency.
This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be understood that a
contract is what the law defines it to be, and not what it is called by the contracting parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous
notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds
sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there
was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract
considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to,
and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract,
when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and
plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of certain
brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for
the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not
considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds
without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for
this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they
merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the
plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of
advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement.
In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of
its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions;
but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of
purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the
defendant, either by agreement or by law.
The judgment appealed from is affirmed, with costs against the appellant. So ordered.
Quiroga vs. Parsons Hardware
Quiroga vs. Parsons Hardware
38 Phil 501
August 1918
FACTS:
On January 24, 1911, plaintiff Andres Quiroga and J. Parsons (to whose rights and obligations the present defendant Parsons
Hardware Co. later subrogated itself) entered into a contract, where it was stated among others that Quiroga grants in favor
of Parsons the exclusive rights to sell his beds in the Visayan Islands under some conditions. One of the said conditions
provided that Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the
Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval
while another one passed on to Parsons the obligation to order by the dozen and in no other manner the beds from
Quiroga.
Alleging that the Parsons was his agent for the sale of his beds in Iloilo, Quiroga filed a complaint against the former for
violating the following obligations implied in what he contended to be a contract of commercial agency: not to sell the beds
at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and
in no other manner.
ISSUE:
Is the defendant, by reason of the contract, a purchaser or an agent of the plaintiff for the sale of the latters beds in Iloilo?
COURT RULING:
The Supreme Court declared that the contract by and between the plaintiff and the defendant was one of purchase and
sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either
by agreement or by law.
In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was
essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which
the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. There
was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These
features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to
sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it.
G.R. No. 188064 June 1, 2011
MILA A. REYES, Petitioner,
vs.
VICTORIA T. TUPARAN, Respondent.
DECISION
MENDOZA, J.:
Subject of this petition for review is the February 13, 2009 Decision1 of the Court of Appeals (CA) which affirmed with
modification the February 22, 2006 Decision2 of the Regional Trial Court, Branch 172, Valenzuela City (RTC), in Civil Case No.
3945-V-92, an action for Rescission of Contract with Damages.
On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against Victoria
T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged, among others, that she was the registered
owner of a 1,274 square meter residential and commercial lot located in Karuhatan, Valenzuela City, and covered by TCT No.
V-4130; that on that property, she put up a three-storey commercial building known as RBJ Building and a residential
apartment building; that since 1990, she had been operating a drugstore and cosmetics store on the ground floor of RBJ
Building where she also had been residing while the other areas of the buildings including the sidewalks were being leased
and occupied by tenants and street vendors.
Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, respondent was bound to pay the
petitioner a lump sum of 1.2 million pesos without interest as part of the purchase price in three (3) fixed installments as
follows:
a) 200,000.00 due January 31, 1991

In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building for her pawnshop b) 200,000.00 due June 30, 1991
business for a monthly rental of 4,000.00. A close friendship developed between the two which led to the respondent
c) 800,000.00 due December 31, 1991
investing thousands of pesos in petitioners financing/lending business from February 7, 1990 to May 27, 1990, with interest
at the rate of 6% a month.
Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying the amounts due in
lump sum on their respective maturity dates, respondent paid petitioner in small amounts from time to time. To
On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc. (FSL
compensate for her delayed payments, respondent agreed to pay petitioner an interest of 6% a month. As of August 31,
Bank) to secure a loan of 2,000,000.00 payable in installments. On November 15, 1990, petitioners outstanding account
1992, respondent had only paid 395,000.00, leaving a balance of 805,000.00 as principal on the unpaid installments and
on the mortgage reached 2,278,078.13. Petitioner then decided to sell her real properties for at least 6,500,000.00 so
466,893.25 as unpaid accumulated interest.
she could liquidate her bank loan and finance her businesses. As a gesture of friendship, respondent verbally offered to
conditionally buy petitioners real properties for 4,200,000.00 payable on installment basis without interest and to assume
Petitioner further averred that despite her success in finding a prospective buyer for the subject real properties within the 3-
the bank loan. To induce the petitioner to accept her offer, respondent offered the following conditions/concessions:
month period agreed upon, respondent reneged on her promise to allow the cancellation of their deed of conditional sale.
Instead, respondent became interested in owning the subject real properties and even wanted to convert the entire
1. That the conditional sale will be cancelled if the plaintiff (petitioner) can find a buyer of said properties for the amount of
property into a modern commercial complex. Nonetheless, she consented because respondent repeatedly professed
6,500,000.00 within the next three (3) months provided all amounts received by the plaintiff from the defendant
friendship and assured her that all their verbal side agreement would be honored as shown by the fact that since December
(respondent) including payments actually made by defendant to Farmers Savings and Loan Bank would be refunded to the
1990, she (respondent) had not collected any rentals from the petitioner for the space occupied by her drugstore and
defendant with additional interest of six (6%) monthly;
cosmetics store.
2. That the plaintiff would continue using the space occupied by her and drugstore and cosmetics store without any rentals
On March 19, 1992, the residential building was gutted by fire which caused the petitioner to lose rental income in the
for the duration of the installment payments;
amount of 8,000.00 a month since April 1992. Respondent neglected to renew the fire insurance policy on the subject
3. That there will be a lease for fifteen (15) years in favor of the plaintiff over the space for drugstore and cosmetics store at buildings.
a monthly rental of only 8,000.00 after full payment of the stipulated installment payments are made by the defendant;
Since December 1990, respondent had taken possession of the subject real properties and had been continuously collecting
4. That the defendant will undertake the renewal and payment of the fire insurance policies on the two (2) subject buildings and receiving monthly rental income from the tenants of the buildings and vendors of the sidewalk fronting the RBJ building
following the expiration of the then existing fire insurance policy of the plaintiff up to the time that plaintiff is fully paid of without sharing it with petitioner.
the total purchase price of 4,200,000.00.3
On September 2, 1992, respondent offered the amount of 751,000.00 only payable on September 7, 1992, as full payment
After petitioners verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL Banks of the purchase price of the subject real properties and demanded the simultaneous execution of the corresponding deed
approval for respondent to assume her (petitioners) outstanding bank account. The assumption would be part of of absolute sale.
respondents purchase price for petitioners mortgaged real properties. FSL Bank approved their proposal on the condition
Respondents Answer
that petitioner would sign or remain as co-maker for the mortgage obligation assumed by respondent.
Respondent countered, among others, that the tripartite agreement erroneously designated by the petitioner as a Deed of
On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real Properties
Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract of sale with a
with Assumption of Mortgage. Due to their close personal friendship and business relationship, both parties chose not to
term period. It could not be considered a conditional sale because the acquisition of contractual rights and the performance
reduce into writing the other terms of their agreement mentioned in paragraph 11 of the complaint. Besides, FSL Bank did
of the obligation therein did not depend upon a future and uncertain event. Moreover, the capital gains and documentary
not want to incorporate in the Deed of Conditional Sale of Real Properties with Assumption of Mortgage any other side
stamps and other miscellaneous expenses and real estate taxes up to 1990 were supposed to be paid by petitioner but she
agreement between petitioner and respondent.
failed to do so.
Respondent further averred that she successfully rescued the properties from a definite foreclosure by paying the assumed 2. Directing the defendant to allow the plaintiff to continue using the space occupied by her for drugstore and cosmetic
mortgage in the amount of 2,278,078.13 plus interest and other finance charges. Because of her payment, she was able to store without any rental pending payment of the aforesaid balance of the purchase price.
obtain a deed of cancellation of mortgage and secure a release of mortgage on the subject real properties including
petitioners ancestral residential property in Sta. Maria, Bulacan. 3. Ordering the defendant, upon her full payment of the purchase price together with interest, to execute a contract of
lease for fifteen (15) years in favor of the plaintiff over the space for the drugstore and cosmetic store at a fixed monthly
Petitioners claim for the balance of the purchase price of the subject real properties was baseless and unwarranted rental of 8,000.00; and
because the full amount of the purchase price had already been paid, as she did pay more than 4,200,000.00, the agreed
purchase price of the subject real properties, and she had even introduced improvements thereon worth more than 4. Directing the plaintiff, upon full payment to her by the defendant of the purchase price together with interest, to execute
4,800,000.00. As the parties could no longer be restored to their original positions, rescission could not be resorted to. the necessary deed of sale, as well as to pay the Capital Gains Tax, documentary stamps and other miscellaneous expenses
necessary for securing the BIR Clearance, and to pay the real estate taxes due on the subject property up to 1990, all
Respondent added that as a result of their business relationship, petitioner was able to obtain from her a loan in the amount necessary to transfer ownership of the subject property to the defendant.
of 400,000.00 with interest and took several pieces of jewelry worth 120,000.00. Petitioner also failed and refused to pay
the monthly rental of 20,000.00 since November 16, 1990 up to the present for the use and occupancy of the ground floor No pronouncement as to damages, attorneys fees and costs.
of the building on the subject real property, thus, accumulating arrearages in the amount of 470,000.00 as of October
SO ORDERED.5
1992.
Ruling of the CA
Ruling of the RTC
On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The CA agreed with the
On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full the 4.2 million total
RTC that the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission could not apply
purchase price of the subject real properties leaving a balance of 805,000.00. It stated that the checks and receipts
because the respondents failure to pay the petitioner the balance of the purchase price in the total amount of 805,000.00
presented by respondent refer to her payments of the mortgage obligation with FSL Bank and not the payment of the
was not a breach of contract, but merely an event that prevented the seller (petitioner) from conveying title to the
balance of 1,200,000.00. The RTC also considered the Deed of Conditional Sale of Real Property with Assumption of
purchaser (respondent). It reasoned that out of the total purchase price of the subject property in the amount of
Mortgage executed by and among the two parties and FSL Bank a contract to sell, and not a contract of sale. It was of the
4,200,000.00, respondents remaining unpaid balance was only 805,000.00. Since respondent had already paid a
opinion that although the petitioner was entitled to a rescission of the contract, it could not be permitted because her non-
substantial amount of the purchase price, it was but right and just to allow her to pay the unpaid balance of the purchase
payment in full of the purchase price "may not be considered as substantial and fundamental breach of the contract as to
price plus interest. Thus, the decretal portion of the CA Decision reads:
defeat the object of the parties in entering into the contract."4 The RTC believed that the respondents offer stated in her
counsels letter dated September 2, 1992 to settle what she thought was her unpaid balance of 751,000.00 showed her
WHEREFORE, premises considered, the Decision dated 22 February 2006 and Order dated 22 December 2006 of the
sincerity and willingness to settle her obligation. Hence, it would be more equitable to give respondent a chance to pay the
Regional Trial Court of Valenzuela City, Branch 172 in Civil Case No. 3945-V-92 are AFFIRMED with MODIFICATION in that
balance plus interest within a given period of time.
defendant-appellant Victoria T. Tuparan is hereby ORDERED to pay plaintiff-appellee/appellant Mila A. Reyes, within 30 days
from finality of this Decision, the amount of 805,000.00 representing the unpaid balance of the purchase price of the
Finally, the RTC stated that there was no factual or legal basis to award damages and attorneys fees because there was no
subject property, plus interest thereon at the rate of 6% per annum from 11 September 1992 up to finality of this Decision
proof that either party acted fraudulently or in bad faith.
and, thereafter, at the rate of 12% per annum until full payment. The ruling of the trial court on the automatic rescission of
Thus, the dispositive portion of the RTC Decision reads: the Deed of Conditional Sale with Assumption of Mortgage is hereby DELETED. Subject to the foregoing, the dispositive
portion of the trial courts decision is AFFIRMED in all other respects.
WHEREFORE, judgment is hereby rendered as follows:
SO ORDERED.6
1. Allowing the defendant to pay the plaintiff within thirty (30) days from the finality hereof the amount of 805,000.00,
representing the unpaid purchase price of the subject property, with interest thereon at 2% a month from January 1, 1992 After the denial of petitioners motion for reconsideration and respondents motion for partial reconsideration, petitioner
until fully paid. Failure of the defendant to pay said amount within the said period shall cause the automatic rescission of the filed the subject petition for review praying for the reversal and setting aside of the CA Decision anchored on the following
contract (Deed of Conditional Sale of Real Property with Assumption of Mortgage) and the plaintiff and the defendant shall
ASSIGNMENT OF ERRORS
be restored to their former positions relative to the subject property with each returning to the other whatever benefits
each derived from the transaction;
A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISALLOWING THE OUTRIGHT RESCISSION OF
THE SUBJECT DEED OF CONDITIONAL SALE OF REAL PROPERTIES WITH ASSUMPTION OF MORTGAGE ON THE GROUND THAT
RESPONDENT TUPARANS FAILURE TO PAY PETITIONER REYES THE BALANCE OF THE PURCHASE PRICE OF 805,000.00 IS
NOT A BREACH OF CONTRACT DESPITE ITS OWN FINDINGS THAT PETITIONER STILL RETAINS OWNERSHIP AND TITLE OVER
THE SUBJECT REAL PROPERTIES DUE TO RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE TOTAL PURCHASE PRICE OF
805,000.00 WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF 4,200,000.00 OR 66% OF THE STIPULATED LAST
INSTALLMENT OF 1,200,000.00 PLUS THE INTEREST THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED AND
ADOPTED THE TRIAL COURTS CONCLUSION THAT THE RESPONDENTS NON-PAYMENT OF THE 805,000.00 IS ONLY A
SLIGHT OR CASUAL BREACH OF CONTRACT.
B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISREGARDING AS GROUND FOR THE
RESCISSION OF THE SUBJECT CONTRACT THE OTHER FRAUDULENT AND MALICIOUS ACTS COMMITTED BY THE RESPONDENT
AGAINST THE PETITIONER WHICH BY THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE PERIOD OF THIRTY (30) DAYS
TO THE RESPONDENT WITHIN WHICH TO PAY TO THE PETITIONER THE 805,000.00 PLUS INTEREST THEREON.
C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED TO THE RESCISSION OF THE SUBJECT CONTRACT, THE
COURT OF APPEALS STILL SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN REDUCING THE INTEREST ON THE 805,000.00
TO ONLY "6% PER ANNUM STARTING FROM THE DATE OF FILING OF THE COMPLAINT ON SEPTEMBER 11, 1992" DESPITE
THE PERSONAL COMMITMENT OF THE RESPONDENT AND AGREEMENT BETWEEN THE PARTIES THAT RESPONDENT WILL
PAY INTEREST ON THE 805,000.00 AT THE RATE OF 6% MONTHLY STARTING THE DATE OF DELINQUENCY ON DECEMBER
31, 1991.
D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION AND/OR
MISAPPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR ACTUAL DAMAGES
WHICH CORRESPOND TO THE MILLIONS OF PESOS OF RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WHICH
RESPONDENT TUPARAN COLLECTED CONTINUOUSLY SINCE DECEMBER 1990, EVEN WITH THE UNPAID BALANCE OF
805,000.00 AND DESPITE THE FACT THAT RESPONDENT DID NOT CONTROVERT SUCH CLAIM OF THE PETITIONER AS
CONTAINED IN HER AMENDED COMPLAINT DATED APRIL 22, 2006.
E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION OF FACTS RESULTING
INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR THE 29,609.00 BACK RENTALS THAT WERE COLLECTED BY
RESPONDENT TUPARAN FROM THE OLD TENANTS OF THE PETITIONER.
F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE PETITIONERS EARLIER
"URGENT MOTION FOR ISSUANCE OF A PRELIMINARY MANDATORY AND PROHIBITORY INJUNCTION" DATED JULY 7, 2008
AND THE "SUPPLEMENT" THERETO DATED AUGUST 4, 2008 THEREBY CONDONING THE UNJUSTIFIABLE FAILURE/REFUSAL
OF JUDGE FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11) YEARS THE PETITIONERS THREE (3) SEPARATE "MOTIONS FOR
PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME" DATED
MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7, 2006 THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY ENRICH
HERSELF BY CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WITHOUT ANY
ACCOUNTING AND COURT DEPOSIT OF THE COLLECTED RENTALS/FRUITS AND THE PETITIONERS "URGENT MOTION TO
DIRECT DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED UNPAID REAL ESTATE TAXES AND SEF TAXES ON THE
SUBJECT REAL PROPERTIES" DATED JANUARY 13, 2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES TO IMMINENT
AUCTION SALE BY THE CITY TREASURER OF VALENZUELA CITY.
G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE PETITIONERS CLAIM FOR
MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES AGAINST THE RESPONDENT.
In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in ruling that there was no legal
basis for the rescission of the Deed of Conditional Sale with Assumption of Mortgage.
Position of the Petitioner
The petitioner basically argues that the CA should have granted the rescission of the subject Deed of Conditional Sale of Real
Properties with Assumption of Mortgage for the following reasons:
1. The subject deed of conditional sale is a reciprocal obligation whose outstanding characteristic is reciprocity arising from
identity of cause by virtue of which one obligation is correlative of the other.
2. The petitioner was rescinding not enforcing the subject Deed of Conditional Sale pursuant to Article 1191 of the Civil
Code because of the respondents failure/refusal to pay the 805,000.00 balance of the total purchase price of the
petitioners properties within the stipulated period ending December 31, 1991.
3. There was no slight or casual breach on the part of the respondent because she (respondent) deliberately failed to
comply with her contractual obligations with the petitioner by violating the terms or manner of payment of the
1,200,000.00 balance and unjustly enriched herself at the expense of the petitioner by collecting all rental payments for
her personal benefit and enjoyment.
Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of 6% per month on her unpaid
installment of 805,000.00 from the date of the delinquency, December 31, 1991, because she obligated herself to do so.
Finally, the petitioner asserts that her claim for damages or lost income as well as for the back rentals in the amount of
29,609.00 has been fully substantiated and, therefore, should have been granted by the CA. Her claim for moral and
exemplary damages and attorneys fees has been likewise substantiated.
Position of the Respondent
The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage entered into between the
parties is a contract to sell and not a contract of sale because the title of the subject properties still remains with the
petitioner as she failed to pay the installment payments in accordance with their agreement.
Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may not be considered
as a substantial and fundamental breach of the subject contract and it would be more equitable if she would be allowed to
pay the balance including interest within a certain period of time. She claims that as early as 1992, she has shown her
sincerity by offering to pay a certain amount which was, however, rejected by the petitioner.
Finally, respondent states that the subject deed of conditional sale explicitly provides that the installment payments shall
not bear any interest. Moreover, petitioner failed to prove that she was entitled to back rentals.
The Courts Ruling
The petition lacks merit.
The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with Assumption of Mortgage
entered into by and among the two parties and FSL Bank on November 26, 1990 is a contract to sell and not a contract of
sale. The subject contract was correctly classified as a contract to sell based on the following pertinent stipulations:
8. That the title and ownership of the subject real properties shall remain with the First Party until the full payment of the
Second Party of the balance of the purchase price and liquidation of the mortgage obligation of 2,000,000.00. Pending
payment of the balance of the purchase price and liquidation of the mortgage obligation that was assumed by the Second
Party, the Second Party shall not sell, transfer and convey and otherwise encumber the subject real properties without the
written consent of the First and Third Party.
9. That upon full payment by the Second Party of the full balance of the purchase price and the assumed mortgage
obligation herein mentioned the Third Party shall issue the corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in favor of the Second Party.7
Based on the above provisions, the title and ownership of the subject properties remains with the petitioner until the
respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank shall
then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of
absolute sale in favor of the respondent.
Accordingly, the petitioners obligation to sell the subject properties becomes demandable only upon the happening of the
positive suspensive condition, which is the respondents full payment of the purchase price. Without respondents full
payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title.
Respondents failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the
New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent.
The 2009 case of Nabus v. Joaquin & Julia Pacson8is enlightening:
The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to sell, not a contract
of sale.
A contract of sale is defined in Article 1458 of the Civil Code, thus:
Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
xxx
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What
the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words, the full payment of the purchase price partakes of a suspensive
condition, the non-fulfillment of which prevents the obligation to sell from arising and, thus, ownership is retained by the
prospective seller without further remedies by the prospective buyer.
xxx xxx xxx
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such
that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to him.
The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.
Further, Chua v. Court of Appeals, cited this distinction between a contract of sale and a contract to sell:
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell,
ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase
price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and
unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment
of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach
but an event that prevents the obligation of the vendor to convey title from becoming effective.
It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into by the
parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to sell. The contract stipulated
that "as soon as the full consideration of the sale has been paid by the vendee, the corresponding transfer documents shall
be executed by the vendor to the vendee for the portion sold." Where the vendor promises to execute a deed of absolute
sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell." The aforecited
stipulation shows that the vendors reserved title to the subject property until full payment of the purchase price.
xxx
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a contract to
sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. The full
payment of the purchase price is the positive suspensive condition, the failure of which is not a breach of contract, but
simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Thus, for its non-
fulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a
juridical relation. With this circumstance, there can be no rescission or fulfillment of an obligation that is still non-existent,
the suspensive condition not having occurred as yet. Emphasis should be made that the breach contemplated in Article
1191 of the New Civil Code is the obligors failure to comply with an obligation already extant, not a failure of a condition to
render binding that obligation. [Emphases and underscoring supplied]
Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v. Espidol, 9 where it was written:
Regarding the right to cancel the contract for non-payment of an installment, there is need to initially determine if what the
parties had was a contract of sale or a contract to sell. In a contract of sale, the title to the property passes to the buyer
upon the delivery of the thing sold. In a contract to sell, on the other hand, the ownership is, by agreement, retained by the
seller and is not to pass to the vendee until full payment of the purchase price. In the contract of sale, the buyers non-
payment of the price is a negative resolutory condition; in the contract to sell, the buyers full payment of the price is a
positive suspensive condition to the coming into effect of the agreement. In the first case, the seller has lost and cannot
recover the ownership of the property unless he takes action to set aside the contract of sale. In the second case, the title
simply remains in the seller if the buyer does not comply with the condition precedent of making payment at the time
specified in the contract. Here, it is quite evident that the contract involved was one of a contract to sell since the Atienzas,
as sellers, were to retain title of ownership to the land until respondent Espidol, the buyer, has paid the agreed price.
Indeed, there seems no question that the parties understood this to be the case.
Admittedly, Espidol was unable to pay the second installment of 1,750,000.00 that fell due in December 2002. That
payment, said both the RTC and the CA, was a positive suspensive condition failure of which was not regarded a breach in
the sense that there can be no rescission of an obligation (to turn over title) that did not yet exist since the suspensive
condition had not taken place. x x x. [Emphases and underscoring supplied]
Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional Sale was not
cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property in the amount of
4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only 805,000.00, a substantial amount of the
purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the
purchase price to Reyes."10
Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that, considering
the circumstances, there was only a slight or casual breach in the fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental to
the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant
circumstances.11 In the case at bench, the subject contract stipulated the following important provisions:
2. That the purchase price of 4,200,000.00 shall be paid as follows:
a) 278,078.13 received in cash by the First Party but directly paid to the Third Party as partial payment of the mortgage
obligation of the First Party in order to reduce the amount to 2,000,000.00 only as of November 15, 1990;
b) 721,921.87 received in cash by the First Party as additional payment of the Second Party;
c) 1,200,000.00 to be paid in installments as follows:
1. 200,000.00 payable on or before January 31, 1991;
2. 200,000.00 payable on or before June 30, 1991;
3. 800,000.00 payable on or before December 31, 1991;
Note: All the installments shall not bear any interest.
d) 2,000,000.00 outstanding balance of the mortgage obligation as of November 15, 1990 which is hereby assumed by the
Second Party.
xxx
3. That the Third Party hereby acknowledges receipts from the Second Party 278,078.13 as partial payment of the loan
obligation of First Party in order to reduce the account to only 2,000,000.00 as of November 15, 1990 to be assumed by
the Second Party effective November 15, 1990.12
From the records, it cannot be denied that respondent paid to FSL Bank petitioners mortgage obligation in the amount of
2,278,078.13, which formed part of the purchase price of the subject property. Likewise, it is not disputed that respondent
paid directly to petitioner the amount of 721,921.87 representing the additional payment for the purchase of the subject
property. Clearly, out of the total price of 4,200,000.00, respondent was able to pay the total amount of 3,000,000.00,
leaving a balance of 1,200,000.00 payable in three (3) installments.
Out of the 1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of
200,000.00 each. She, however, failed to pay the third and last installment of 800,000.00 due on December 31, 1991.
Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of 751,000.00, which was
rejected by petitioner for the reason that the actual balance was 805,000.00 excluding the interest charges.
Considering that out of the total purchase price of 4,200,000.00, respondent has already paid the substantial amount of
3,400,000.00, more or less, leaving an unpaid balance of only 805,000.00, it is right and just to allow her to settle, within
a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with the courts below that the
respondent showed her sincerity and willingness to comply with her obligation when she offered to pay the petitioner the
amount of 751,000.00.
On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal commitment to pay a
6% monthly interest on the 805,000.00 from the date of delinquency, December 31, 1991. As can be gleaned from the
contract, there was a stipulation stating that: "All the installments shall not bear interest." The CA was, however, correct in
imposing interest at the rate of 6% per annum starting from the filing of the complaint on September 11, 1992.1avvphi1
Finally, the Court upholds the ruling of the courts below regarding the non-imposition of damages and attorneys fees. Aside
from petitioners self-serving statements, there is not enough evidence on record to prove that respondent acted
fraudulently and maliciously against the petitioner. In the case of Heirs of Atienza v. Espidol,13 it was stated:
Respondents are not entitled to moral damages because contracts are not referred to in Article 2219 of the Civil Code,
which enumerates the cases when moral damages may be recovered. Article 2220 of the Civil Code allows the recovery of
moral damages in breaches of contract where the defendant acted fraudulently or in bad faith. However, this case involves
a contract to sell, wherein full payment of the purchase price is a positive suspensive condition, the non-fulfillment of which
is not a breach of contract, but merely an event that prevents the seller from conveying title to the purchaser. Since there is
no breach of contract in this case, respondents are not entitled to moral damages.
In the absence of moral, temperate, liquidated or compensatory damages, exemplary damages cannot be granted for they
are allowed only in addition to any of the four kinds of damages mentioned.
WHEREFORE, the petition is DENIED.
SO ORDERED.
Mila A. Reyes Vs. Victoria Tuparan
FACTS
Petitioner Mila Reyes owns a three-storey commercial building in Valenzuela City. Respondent, Victoria Tuparan leased a
space on said building for a monthly rental of P4, 000. A close friendship developed between the two which led the
respondent to invest in petitioner's financing business. On June 20, 1988, Petitioner borrowed P2 Million from Farmers
Savings and Loan Bank (FSL Bank) and mortgaged the building and lot (subject real properties). Reyes decided to sell the
property for P6.5 Million to liquidate her loan and finance her business. Respondent offered to conditionally buy the real
properties for P4.2 Million on installment basis without interest and to assume the bank loan. The conditions are the
following:
1. Sale will be cancelled if the petitioner can find a buyer of said properties for the amount of P6.5 Million within the next
three months. All payments made by the respondent to the petitioner and the bank will be refunded to Tuparan with an
additional 6% monthly interest.
2. Petitioner Reyes will continue using the space occupied by her drug store without rentals for the duration of the
installment payments.
3. There will be a lease for 15 years in favor of Reyes for a monthly rental of P8, 000 after full payment has been made by
the defendant.
4. The defendant will undertake the renewal and payment of the fire insurance policies of the 2 buildings, following the
expiration of the current policies, up to the time the respondent has fully paid the purchase price.
They presented the proposal for Tuparan to assume the mortgage to FSL Bank. The bank approved on the condition that the
petitioner would remain as co-maker of the mortgage obligation. FSL Bank and and the parties executed Deed of Conditional
Sale of Real Properties wiyh Assumption of Mortgage.
Petitioner's Contention
Under their Deed of Conditional Sale, the respondent is obliged to pay a lump sum of P1.2 Million in three fixed
installments. Respondent, however defaulted in the payment of the installments. To compensate for her delayed payments,
respondent agreed to pay petitioner monthly interest. But again, respondent failed to fulfill this obligation. The petitioner
further alleged that despite her success in finding another buyer according to their conditional sale agreement, respondent
refused to cancel their transaction. The respondent also neglected to renew the fire insurance policy of the buildings. So the
petitioner filed a Complaint for Rescission of Contract with damages against Victoria Tuparan.
Respondent's Answer
Respondent alleges that the deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and
absolute contract of sale with a term period. It could not be considered a conditional sale because the performance of the
obligation therein did not depend upon a future and uncertain event. She also averred that she was able to fully pay the
loan and secure the release of the mortgage. Since she also paid more than the P4.2 Million purchase price, rescission could
not be resorted to since the parties could no longer be restored to their original positions.
ISSUE
Can the Deed of Conditional Sale be Rescinded?
RULING(S)
RTC
The deed of conditional sale was a contract to sell. It was of the opinion that although the petitioner was entitled to a
rescission of the contract, it could not be permitted because her non-payment in full of the purchase price may not be
considered as substantial and fundamental breach of the contract as to defeat the object of the parties in entering into the
contract. The RTC believed that respondent showed her sincerity and willingness to settle her obligation. Hence, it would
be more equitable to give respondent a chance to pay the balance plus interest within a given period of time. The court
ordered the respondent to pay the petitioner the unpaid balance of the purchase price within 30 days from the finality,
failure to pay said amount will cause automatic rescission.
CA
The CA affirmed but modifiedRTCs decision. They ruled that the remedy of rescission could not apply because the
respondents failure to pay the petitioner the balance of the purchase price in the total amount of 805,000.00 was not a
breach of contract, but merely an event that prevented the seller (petitioner) from conveying title to the purchaser
(respondent). Since respondent had already paid a substantial amount of the purchase price, it was but right and just to
allow her to pay the unpaid balance of the purchase price plus interest.The rulling of the RTC on the automatic rescission of
the Deed Of Conditional Sale is deleted.
SC
The SC agrees that the conditional sale is a contract to sell. The title and ownership of the subject properties remains with
the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage
obligation. Without respondents full payment, there can be no breach of contract to speak of because petitioner has no
obligation yet to turn over the title. The court agrees that a substantial amount of the purchase price has already been paid.
It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes. Granting that a
rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that, considering the
circumstances, there was only a slight or casual breach in the fulfillment of the obligation. The court considered fulfillment
of 20% of the purchase price is NOT a substantial breach. Unless the parties stipulated it, rescission is allowed only when the
breach of the contract is substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or
substantial is largely determined by the attendant circumstance. As for the 6% interest, petitioner failed to substantiate her
claim that the respondent committed to pay it. Petition is denied.
In a contract to sell, title is retained by the vendor until the full payment of the purchase price. Thus, the non-payment of
the purchase price is an event which terminates the contract to sell. Since title has not transferred, there is no need of
judicial action to terminate the contract.
In a contract of sale, the seller conveys ownership over the property and cannot recover it until and unless the contract is
resolved or rescinded. If the contract is silent on the manner of rescission, the seller must file an action for rescission in
court. However, it is permissible to stipulate in the contract of sale that default by the buyer shall result to automatic
rescission without need of judicial action. Thus, it is advisable to include an automatic rescission clause in a contract of sale
in order to avoid unnecessary litigation.
G.R. No. 170405 February 2, 2010
RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG.1 Respondent.
DECISION
CORONA, J.:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements situated in Antipolo,
Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage3 stating:
xxx xxx xxx
That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (1.1 million), Philippine
currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable, unto
said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other improvements
existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED
(415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of [respondent] without any
further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE
HUNDRED PESOS (684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis supplied)
xxx xxx xxx
Pursuant to this deed, respondent gave petitioner 415,500 as partial payment. Petitioner, on the other hand, handed the
keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent
and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed RSLAI
of her agreement with petitioner for her to assume petitioners outstanding loan. RSLAI required her to undergo credit
investigation.
Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993
and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the
credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the
certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and
damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since
petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to
Viloria. Thus, petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently prayed
for the dismissal of the complaint. He claimed that since the transaction was subject to a condition (i.e., that RSLAI approve
the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a loan from
RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the properties.
Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with gross and evident bad
faith.
Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was
subject to a condition. The perfection of a contract of sale depended on RSLAIs approval of the assumption of mortgage.
Since RSLAI did not allow respondent to assume petitioners obligation, the RTC held that the sale was never perfected.
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of cause of action and ordered respondent to
pay petitioner 100,000 moral damages, 20,000 attorneys fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the court a quo erred in dismissing the
complaint.
The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held
that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he
sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and exemplary damages
for fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise ordered
respondent to reimburse petitioner 715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered
to deliver the certificates of titles to respondent and pay her 50,000 moral damages and 15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.10 Hence, this
petition,11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive
condition, that is, the approval by RSLAI of respondents assumption of mortgage. Because RSLAI did not allow respondent
to assume his (petitioners) obligation, the condition never materialized. Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full
ownership of the subject properties upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to sell
while the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should
the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.12
On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of
the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller
can only sue for damages.13
The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a
manner absolute and irrevocable" for a sum of 1.1 million.14 With regard to the manner of payment, it required respondent
to pay 415,500 in cash to petitioner upon the execution of the deed, with the balance15payable directly to RSLAI (on behalf
of petitioner) within a reasonable time.16 Nothing in said instrument implied that petitioner reserved ownership of the
properties until the full payment of the purchase price.17 On the contrary, the terms and conditions of the deed only
affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized contract)
from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the
performance of the contract, not the perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer.18In this
regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale is equivalent to the
delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did
petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent
and release his certificates of title to her. The totality of petitioners acts clearly indicates that he had unqualifiedly delivered
and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to
approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this
connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate
occasions.20 However, the second sale was not void for the sole reason that petitioner had previously sold the same
properties to respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller to
the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 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. (emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to
say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or
an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice
of some other persons claim or interest in the property.21 The law requires, on the part of the buyer, lack of notice of a
defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any
defect in the sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to assume the balance of petitioners outstanding obligation to
RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioners obligation. However,
because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself
rendered respondents obligation to assume petitioners indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible
without the fault of the obligor.
Since respondents obligation to assume petitioners outstanding balance with RSLAI became impossible without her fault,
she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition vis--vis
the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the
Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is deemed to
have fully complied with the condition of the payment of the remainder of the purchase price.
Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which
she undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent.
Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of
deeds, the one who took prior possession of the properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed the notarized deed22 and handed over
to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof
by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus,
respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled, respondents
obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner 684,500, the amount stated in the deed. This is because the provisions, terms
and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the
assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the
certificates of title to respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No. 59748
are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner Raymundo de
Leon 684,500 representing the balance of the purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.
Facts:
De Leon sold 3 parcels of land to Ong. The properties were mortgaged to Real Savings and Loan Association. The parties
executed a notarized deed of absolute sale with assumption of mortgage. The deed of Assumption of mortgage shall be
executed in favor of Ong after the payment of 415K. Ong complied with it. De Leon handed the keys of to Ong and informed
the loan company that the mortgage has been assumed by Ong. Ong made some improvements in the property. After
sometime, Ong learned that the properties were sold to Viloria and changed the locks to it. Ong went to the mortgage
company and learned that the mortgage was already paid and the titles were given to Viloria. Ong filed a complaint for the
nullity of second sale and damages. De Leon contended that Ong does not have a cause of action against him because the
sale was subject to a condition which requires the approval of the loan company and that he and Ong only entered a
contract to sell.
Issue:
Whether or not the parties entered into a contract of sale
Ruling:
Yes, the parties entered into a contract of sale. In a contract of sale, the seller conveys ownership of the property to the
buyer upon the perfection of the contract. The non-payment of the price is a negative resolutory condition. Contract to sell
is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until he fully pays the
purchase price. In the present case, the deed executed by the parties did not show that the owner intends to reserve
ownership of the properties. The terms and conditions affected only the manner of payment and not the immediate
transfer of ownership. It was clear that the owner intended a sale because he unqualifiedly delivered and transferred On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter4 to respondent stating that petitioner Amparo
ownership of the properties to the respondent 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 100,000.00 anytime.
G.R. No. 139173 February 28, 2007
Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his counsel Philippine National Bank
SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners Managers Check No. 790537 dated April 6, 1990 in the amount of 100,000.00 payable to him.
vs.
GODOFREDO CAGUIAT, Respondent. 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
DECISION
On June 27, 1994, after hearing, the trial court rendered its Decision7 finding there was a perfected contract of sale between
SANDOVAL-GUTIERREZ, J.: the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the
Decision1 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 1,500.00
per square meter. Respondent then gave petitioners 100,000.00 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 (100,000.00) 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. Ponciano Espiritu, 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
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 100,000.00 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 14589 in relation to Article
147510 of the Civil Code. The delivery to them of 100,000.00 as down payment cannot be considered as proof of the
perfection of a contract of sale under Article 148211 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.14 Indeed, 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.1awphi1.net12 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 (100,000.00) 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.
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.
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 never existed. The suspensive condition is commonly full payment
of the purchase price.15
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 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 consummated upon full payment of the purchase price.21 Now, since the earnest
money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
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.
WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals is REVERSED and
respondents complaint is DISMISSED.
SO ORDERED.

G.R. No. 104482 January 22, 1996
BELINDA TAEDO, for herself and in representation of her brothers and sisters, and TEOFILA CORPUZ TAEDO, representing
her minor daughter VERNA TAEDO, petitioners,
vs.
THE COURT OF APPEALS, SPOUSES RICARDO M. TAEDO AND TERESITA BARERA TAEDO, respondents.
DECISION
PANGANIBAN, J.:
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 court's 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 Court's 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 ponente 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 latter's 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-13829 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 . . . " (Exh. 4). He acknowledged therein his receipt of P10,000.00 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 tinder 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 (Lazaro's)
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 (Lazaro's) 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 proponderance 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 Court's 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 court's 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
memorandum4 concede 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 Lazaro's 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
extra-judicial 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 court's 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 Taedo 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" (p. 111, tsn, Nov. 28, 1984). . . .6
The respondent Court, reviewing the trial court's findings, refused to overturn the latter's assessment of the testimonial
evidence, as follows;
We are not prepared to set aside the finding of the lower court upholding Ricardo Taedo's 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 Taedo . . ." 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 . . . ;
5. The respondent Court erred in not giving credence to petitioners' evidence, especially Lazaro Taedo's 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 Goldrock 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. . . . (I)t is not the function of this Court to
assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly where,
such as here, the findings of both the trial court and the appellate court on the matter coincide. (emphasis supplied)
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. No Costs.
SO ORDERED.
FACTS:
Lazaro Taedo executed a deed of absolute sale in favor of Ricardo Taedo and Teresita Barrera in which he conveyed a
parcel of land which he will inherit. Upon the death of his father he executed an affidavit of conformity to reaffirm the said
sale. He also executed another deed of sale in favor of the spouses covering the parcel of land he already inherited. Ricardo
registered the last deed of sale in the registry of deeds in their favor.
Ricardo later learned that Lazaro sold the same property to his children through a deed of sale.
ISSUE:
WON the Taedo spouses have a better right over the property against the children of Lazaro Taedo.
HELD:
Since a future inheritance generally cannot be a subject of a contract, the deed of sale and the affidavit of conformity made
by Lazaro has no effect. The subject of dispute therefore is the deed of sale made by him in favor of spouses Taedo and
another to his children after he already legally acquired the property.
Thus, although the deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership x --------------------------------------------------------------------------------------- x
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 DECISION
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.
ABAD, J.:

THIRD DIVISION

The present case involves a determination of the perfection of contract of sale.

STARBRIGHT SALES G.R. No. 177936

The Facts and the Case
ENTERPRISES, INC.,
On April 17, 1988 Ramon Licup wrote Msgr. Domingo A. Cirilos, offering to buy three contiguous parcels of land in Paraaque
Petitioner, Present:
that The Holy See and Philippine Realty Corporation (PRC) owned for P1,240.00 per square meter. Licup accepted the
VELASCO, JR., J., Chairperson, responsibility for removing the illegal settlers on the land and enclosed a check for P100,000.00 to close the
transaction.[1] He undertook to pay the balance of the purchase price upon presentation of the title for transfer and once
- versus - PERALTA, the property has been cleared of its occupants.

ABAD, Msgr. Cirilos, representing The Holy See and PRC, signed his name on the conforme portion of the letter and accepted the
check. But the check could not be encashed due to Licups stop-order payment. Licup wrote Msgr. Cirilos on April 26, 1988,
MENDOZA, and requesting that the titles to the land be instead transferred to petitioner Starbright Sales Enterprises, Inc. (SSE). He enclosed
a new check for the same amount. SSEs representatives, Mr. and Mrs. Cu, did not sign the letter.
PERLAS-BERNABE, JJ.
On November 29, 1988 Msgr. Cirilos wrote SSE, requesting it to remove the occupants on the property and, should it
PHILIPPINE REALTY CORPORATION,
decide not to do this, Msgr. Cirilos would return to it the P100,000.00 that he received. On January 24, 1989 SSE replied
with an updated proposal.[2] It would be willing to comply with Msgr. Cirilos condition provided the purchase price is
MSGR. DOMINGO A. CIRILOS,
lowered to P1,150.00 per square meter.
TROPICANA PROPERTIES AND
On January 26, 1989 Msgr. Cirilos wrote back, rejecting the updated proposal. He said that other buyers were willing to
DEVELOPMENT CORPORATION acquire the property on an as is, where is basis at P1,400.00 per square meter. He gave SSE seven days within which to buy
the property at P1,400.00 per square meter, otherwise, Msgr. Cirilos would take it that SSE has lost interest in the same. He
and STANDARD REALTY Promulgated: enclosed a check for P100,000.00 in his letter as refund of what he earlier received.

CORPORATION,

Respondents. January 18, 2012

On February 4, 1989 SSE wrote Msgr. Cirilos that they already had a perfected contract of sale in the April 17, 1988 letter
which he signed and that, consequently, he could no longer impose amendments such as the removal of the informal
settlers at the buyers expense and the increase in the purchase price.
SSE claimed that it got no reply from Msgr. Cirilos and that the next thing they knew, the land had been sold to Tropicana
Properties on March 30, 1989. On May 15, 1989 SSE demanded rescission of that sale. Meanwhile, on August 4, 1989
Tropicana Properties sold the three parcels of land to Standard Realty.
Its demand for rescission unheeded, SSE filed a complaint for annulment of sale and reconveyance with damages before
the Regional Trial Court (RTC) of Makati, Branch 61, against The Holy See, PRC, Msgr. Cirilos, and Tropicana Properties in
Civil Case 90-183. SSE amended its complaint on February 24, 1992, impleading Standard Realty as additional defendant.
The Holy See sought dismissal of the case against it, claiming that as a foreign government, it cannot be sued without its
consent. The RTC held otherwise but, on December 1, 1994,[3] the Court reversed the ruling of the RTC and ordered the case
against The Holy See dismissed. By Order of January 26, 1996 the case was transferred to the Paraaque RTC, Branch 258.
SSE alleged that Licups original letter of April 17, 1988 to Msgr. Cirilos constituted a perfected contract. Licup even gave an
earnest money of P100,000.00 to close the transaction. His offer to rid the land of its occupants was a mere gesture of
accommodation if only to expedite the transfer of its title.[4] Further, SSE claimed that, in representing The Holy See and
PRC, Msgr. Cirilos acted in bad faith when he set the price of the property at P1,400.00 per square meter when in truth, the
property was sold to Tropicana Properties for only P760.68 per square meter.
Msgr. Cirilos maintained, on the other hand, that based on their exchange of letters, no contract of sale was perfected
between SSE and the parties he represented. And, only after the negotiations between them fell through did he sell the land
to Tropicana Properties.
In its Decision of February 14, 2000, the Paraaque RTC treated the April 17, 1988 letter between Licum and Msgr. Cirilos as
a perfected contract of sale between the parties. Msgr. Cirilos attempted to change the terms of contract and return SSEs
initial deposit but the parties reached no agreement regarding such change. Since such agreement was wanting, the original
terms provided in the April 17, 1988 letter continued to bind the parties.
On appeal to the Court of Appeals (CA), the latter rendered judgment on November 10, 2006,[5] reversing the Paraaque RTC
decision. The CA held that no perfected contract can be gleaned from the April 17, 1988 letter that SSE had relied
on. Indeed, the subsequent exchange of letters between SSE and Msgr. Cirilos show that the parties were grappling with the
terms of the sale. Msgr. Cirilos made no unconditional acceptance that would give rise to a perfected contract.
As to the P100,000.00 given to Msgr. Cirilos, the CA considered it an option money that secured for SSE only the privilege to
buy the property even if Licup called it a deposit. The CA denied SSEs motion for reconsideration on May 2, 2007.
The Issue Presented
The only issue in this case is whether or not the CA erred in holding that no perfected contract of sale existed between SSE
and the land owners, represented by Msgr. Cirilos.
The Courts Ruling
Three elements are needed to create a perfected contract: 1) the consent of the contracting parties; (2) an object certain
which is the subject matter of the contract; and (3) the cause of the obligation which is established.[6] Under the law on
sales, a contract of sale is perfected when the seller, obligates himself, for a price certain, to deliver and to transfer
ownership of a thing or right to the buyer, over which the latter agrees.[7] From that moment, the parties may demand
reciprocal performance.
The Court believes that the April 17, 1988 letter between Licup and Msgr. Cirilos, the representative of the propertys
owners, constituted a perfected contract. When Msgr. Cirilos affixed his signature on that letter, he expressed his
conformity to the terms of Licups offer appearing on it. There was meeting of the minds as to the object and consideration
of the contract.
But when Licup ordered a stop-payment on his deposit and proposed in his April 26, 1988 letter to Msgr. Cirilos that the
property be instead transferred to SSE, a subjective novation took place.
A subjective novation results through substitution of the person of the debtor or through subrogation of a third person to
the rights of the creditor. To accomplish a subjective novation through change in the person of the debtor, the old debtor
needs to be expressly released from the obligation and the third person or new debtor needs to assume his place in the
relation.[8]
Novation serves two functions one is to extinguish an existing obligation, the other to substitute a new one in its place
requiring concurrence of four requisites: 1) a previous valid obligation; 2) an agreement of all parties concerned to a new
contract; 3) the extinguishment of the old obligation; and 4) the birth of a valid new obligation.[9]
Notably, Licup and Msgr. Cirilos affixed their signatures on the original agreement embodied in Licups letter of April 26,
1988. No similar letter agreement can be found between SSE and Msgr. Cirilos.
The proposed substitution of Licup by SSE opened the negotiation stage for a new contract of sale as between SSE and the
owners. The succeeding exchange of letters between Mr. Stephen Cu, SSEs representative, and Msgr. Cirilos attests to an
unfinished negotiation. Msgr. Cirilos referred to his discussion with SSE regarding the purchase as a pending transaction.[10]
Cu, on the other hand, regarded SSEs first letter to Msgr. Cirilos as an updated proposal.[11] This proposal took up two
issues: which party would undertake to evict the occupants on the property and how much must the consideration be for
the property. These are clear indications that there was no meeting of the minds between the parties. As it turned out, the
parties reached no consensus regarding these issues, thus producing no perfected sale between them.
Parenthetically, Msgr. Cirilos did not act in bad faith when he sold the property to Tropicana even if it was for a lesser
consideration. More than a month had passed since the last communication between the parties on February 4, 1989. It is
not improbable for prospective buyers to offer to buy the property during that time.
The P100,000.00 that was given to Msgr. Cirilos as deposit cannot be considered as earnest money. Where the parties
merely exchanged offers and counter-offers, no contract is perfected since they did not yet give their consent to such
offers.[12] Earnest money applies to a perfected sale.
SSE cannot revert to the original terms stated in Licups letter to Msgr. Cirilos dated April 17, 1988 since it was not privy to
such contract. The parties to it were Licup and Msgr. Cirilos. Under the principle of relativity of contracts, contracts can only
bind the parties who entered into it. It cannot favor or prejudice a third person.[13] Petitioner SSE cannot, therefore, impose
the terms Licup stated in his April 17, 1988 letter upon the owners.
WHEREFORE, the Court DISMISSES the petition and AFFIRMS the Court of Appeals Decision dated November 10, 2006 in CA-
G.R. CV 67366.
SO ORDERED.
STARBRIGHT SALES ENTERPRISES, INC., PETITIONER, VS. PHILIPPINE REALTY CORPORATION, MSGR. DOMINGO A.
CIRILOS, TROPICANA PROPERTIES AND DEVELOPMENT CORPORATION AND STANDARD REALTY CORPORATION,
RESPONDENTS.
[G.R. No. 177936, January 18, 2012]
ABAD, J.:
Facts:
On April 17, 1988 Ramon Licup wrote Msgr. Domingo A. Cirilos, offering to buy three contiguous parcels of land in
Paraaque that The Holy See and Philippine Realty Corporation (PRC) owned for P1,240.00 per square meter. Licup
accepted the responsibility for removing the illegal settlers on the land and enclosed a check for P100,000.00 to "close the
transaction. He undertook to pay the balance of the purchase price upon presentation of the title for transfer and once
the property has been cleared of its occupants. Msgr. Cirilos, representing The Holy See and PRC, signed his name on the
conforme portion of the letter and accepted the check. But the check could not be encashed due to Licup's stop-order
payment. Licup wrote Msgr. Cirilos on April 26, 1988, requesting that the titles to the land be instead transferred to
petitioner Starbright Sales Enterprises, Inc. (SSE). He enclosed a new check for the same amount. SSE's representatives,
Mr. and Mrs. Cu, did not sign the letter.
On November 29, 1988 Msgr. Cirilos wrote SSE, requesting it to remove the occupants on the property and, should it
decide not to do this, Msgr. Cirilos would return to it the P100,000.00 that he received. On January 24, 1989 SSE replied
with an "updated proposal. It would be willing to comply with Msgr. Cirilos' condition provided the purchase price is
lowered to P1,150.00 per square meter.
On January 26, 1989 Msgr. Cirilos wrote back, rejecting the "updated proposal." He said that other buyers were willing to
acquire the property on an "as is, where is" basis at P1,400.00 per square meter. He gave SSE seven days within which to
buy the property at P1,400.00 per square meter, otherwise, Msgr. Cirilos would take it that SSE has lost interest in the
same. He enclosed a check for P100,000.00 in his letter as refund of what he earlier received. The property was eventually
sold to Tropicana Properties and then sold Standard Realty.
Issue:
Whether or not there is a perfected contract existing between SSE and land owners, represented by Msgr. Cirilos.
Ruling:
Three elements are needed to create a perfected contract: 1) the consent of the contracting parties; (2) an object certain
which is the subject matter of the contract; and (3) the cause of the obligation which is established. Under the law on
sales, a contract of sale is perfected when the seller, obligates himself, for a price certain, to deliver and to transfer
ownership of a thing or right to the buyer, over which the latter agrees. From that moment, the parties may demand
reciprocal performance.
The Court believes that the letter between Licup and Msgr. Cirilos, the representative of the property's owners,
constituted a perfected contract. However, when Licup ordered to stop his deposit and instead transferred the property
to SSE, a novation took place. Novation serves two functions - one is to extinguish an existing obligation, the other to
substitute a new one in its place - requiring concurrence of four requisites: 1) a previous valid obligation; 2) an agreement
of all parties concerned to a new contract; 3) the extinguishment of the old obligation; and 4) the birth of a valid new
obligation. In the given case, it was noted that the signatures present during Licup and Msgr. Cirilos agreement are not
present in the letter of agreement between SSE and Msgr. Cirilos. SSE cannot revert to the original terms stated in Licup's
letter to Msgr. Cirilos since it was not privy to such contract. The parties to it were Licup and Msgr. Cirilos. Under the
principle of relativity of contracts, contracts can only bind the parties who entered into it.
IRST OPTIMA REALTY CORPORATION, Petitioner, v. SECURITRON SECURITY SERVICES,
INC., Respondents.
DECISION
DEL CASTILLO, J.:
In a potential sale transaction, the prior payment of earnest money even before the property
owner can agree to sell his property is irregular, and cannot be used to bind the owner to the
obligations of a seller under an otherwise perfected contract of sale; to cite a well-worn clich, the
carriage cannot be placed before the horse. The property owner-prospective seller may not be
legally obliged to enter into a sale with a prospective buyer through the latters employment of
questionable practices which prevent the owner from freely giving his consent to the transaction;
this constitutes a palpable transgression of the prospective sellers rights of ownership over his
property, an anomaly which the Court will certainly not condone.
This Petition for Review on Certiorari1 seeks to set aside: 1) the September 30, 2011 Decision2 of
the Court of Appeals (CA) in CA-G.R. CV No. 93715 affirming the February 16, 2009 Decision3 of
the Regional Trial Court (RTC) of Pasay City, Branch 115 in Civil Case No. 06-0492 CFM; and 2)
the CAs December 9, 2011 Resolution4 denying the herein petitioners Motion for
Reconsideration5 of the assailed judgment.
Factual Antecedents
Petitioner First Optima Realty Corporation is a domestic corporation engaged in the real estate
business. It is the registered owner of a 256-square meter parcel of land with improvements
located in Pasay City, covered by Transfer Certificate of Title No. 125318 (the subject property).6
Respondent Securitron Security Services, Inc., on the other hand, is a domestic corporation with
offices located beside the subject property.
Looking to expand its business and add to its existing offices, respondent through its General
Manager, Antonio Eleazar (Eleazar) sent a December 9, 2004 Letter7 addressed to petitioner
through its Executive Vice-President, Carolina T. Young (Young) offering to purchase the subject
property at P6,000.00 per square meter. A series of telephone calls ensued, but only between Thereafter, respondent through counsel demanded in writing that petitioner proceed with the sale
Eleazar and Youngs secretary;8 Eleazar likewise personally negotiated with a certain Maria of the property.16 In a March 3, 2006 Letter17 addressed to respondents counsel, petitioner wrote
Remoso (Remoso), who was an employee of petitioner.9 At this point, Eleazar was unable to back:chanRob lesvi rtual Lawl ibra ry

personally negotiate with Young or the petitioners board of directors.

Dear Atty. De Jesus: cha nRoblesvi rtu alLaw lib rary

Sometime thereafter, Eleazar personally went to petitioners office offering to pay for the subject
property in cash, which he already brought with him. However, Young declined to accept Anent your letter dated January 16, 2006 received on February 20, 2006, please be informed of
payment, saying that she still needed to secure her sisters advice on the matter.10 She likewise the following: chanRoblesvirt ual Lawlib rary

informed Eleazar that prior approval of petitioners Board of Directors was required for the
transaction, to which remark Eleazar replied that respondent shall instead await such 1. It was your client SECURITRON SECURITY SERVICES, INC. represented by Mr. Antonio
approval.11chanroblesvi rt uallawl ibra ry

Eleazar who offered to buy our property located at corner Layug and Lim-An St., Pasay
City;
On February 4, 2005, respondent sent a Letter12 of even date to petitioner. It was accompanied
chanro bles law

by Philippine National Bank Check No. 24677 (the subject check), issued for P100,000.00 and
2. It tendered an earnest money despite the fact that we are still undecided to sell the said
made payable to petitioner. The letter states thus:
property;
chanRoble svirtual Lawli brary

chanrob leslaw

Gentlemen:
3. Our Board of Directors failed to pass a resolution to date whether it agrees to sell the
chanRoblesvi rtual Lawli bra ry

property;
As agreed upon, we are making a deposit of ONE HUNDRED THOUSAND PESOS (Php 100,000.00)
chanrob leslaw

as earnest money for your property at the corner of Layug St., & Lim-An St., Pasay City as per
4. We have no Contract for the earnest money nor Contract to Sell the said property with
TCT No. 125318 with an area of 256 sq. m. at 6,000.00/ sq. m. for a total of ONE MILLION FIVE
your client;
HUNDRED THIRTY SIX THOUSAND PESOS (Php 1,536,000.00).

Full payment upon clearing of the tenants at said property and signing of the Deed of Sale. Considering therefore the above as well as due to haste and demands which we feel [are forms] of
intimidation and harassment, we regret to inform you that we are now incline (sic) not to accept
(signed) your offer to buy our property. Please inform your client to coordinate with us for the refund of
ANTONIO S. ELEAZAR13 this (sic) money.

Despite the delicate nature of the matter and large amount involved, respondent did not deliver Very truly yours,
the letter and check directly to Young or her office; instead, they were coursed through an
ordinary receiving clerk/receptionist of the petitioner, who thus received the same and therefor (signed)
issued and signed Provisional Receipt No. 33430.14 The said receipt reads: chanRoblesvirt ual Lawlib rary
CAROLINA T. YOUNG
Executive Vice[-]President18
Received from x x x Antonio Eleazar x x x the sum of Pesos One Hundred Thousand x x x
Ruling of the Regional Trial Court of Pasay City
IN PAYMENT OF THE FOLLOWING x x x
On April 18, 2006, respondent filed with the Pasay RTC a civil case against petitioner for specific
Earnest money or Partial payment of Pasay Property Layug & Lim-an St. x x x. performance with damages to compel the latter to consummate the supposed sale of the subject
property. Docketed as Civil Case No. 06-0492 CFM and assigned to Branch 115 of the Pasay RTC,
the Complaint19 is predicated on the claim that since a perfected contract of sale arose between
Note: This is issued to the parties after negotiations were conducted and respondent paid the P100,000.00 supposed
transactions not yet earnest money which petitioner accepted, the latter should be compelled to sell the subject
cleared but subsequently property to the former. Thus, respondent prayed that petitioner be ordered to comply with its
obligation as seller, accept the balance of the purchase price, and execute the corresponding deed
an Official Receipt will be of sale in respondents favor; and that petitioner be made to pay P200,000.00 damages for its
issued. x x x15 breach and delay in the performance of its obligations, P200,000.00 by way of attorney's fees, and
costs of suit.
The check was eventually deposited with and credited to petitioners bank account.
In its Answer with Compulsory Counterclaim,20 petitioner argued that it never agreed to sell the
subject property; that its board of directors did not authorize the sale thereof to respondent, as no
corresponding board resolution to such effect was issued; that the respondents P100,000.00
check payment cannot be considered as earnest money for the subject property, since said
payment was merely coursed through petitioners receiving clerk, who was forced to accept the
same; and that respondent was simply motivated by a desire to acquire the subject property at
any cost. Thus, petitioner prayed for the dismissal of the case and, by way of counterclaim, it
sought the payment of moral damages in the amount of P200,000.00; exemplary damages in the
amount of P100,000.00; and attorneys fees and costs of suit.
In a Reply,21 respondent countered that authorization by petitioners Board of Directors was not
necessary since it is a real estate corporation principally engaged in the buying and selling of real
property; that respondent did not force nor intimidate petitioners receiving clerk into accepting
the February 4, 2005 letter and check for P100,000.00; that petitioners acceptance of the check
and its failure for more than a year to return respondents payment amounts to estoppel and a
ratification of the sale; and that petitioner is not entitled to its counterclaim.
After due proceedings were taken, the Pasay RTC issued its Decision dated February 16, 2009,
decreeing as follows:chanRoblesvi rtua lLaw lib rary
WHEREFORE, defendant First Optima Realty Corporation is directed to comply with its obligation
by accepting the remaining balance of One Million Five Hundred Thirty-Six Thousand Pesos and
Ninety-Nine Centavos (P1,536,000.99), and executing the corresponding deed of sale in favor of
the plaintiff Securitron Security Services, Inc. over the subject parcel of land.
No costs.
SO ORDERED.22
In ruling for the respondent, the trial court held that petitioners acceptance of P100,000.00
earnest money indicated the existence of a perfected contract of sale between the parties; that
there is no showing that when respondent gave the February 4, 2005 letter and check to
petitioners receiving clerk, the latter was harassed or forced to accept the same; and that for the
sale of the subject property, no resolution of petitioners board of directors was required since
Young was free to represent the corporation in negotiating with respondent for the sale thereof.
Ruling of the Court of Appeals
Petitioner filed an appeal with the CA. Docketed as CA-G.R. CV No. 93715, the appeal made out a
case that no earnest money can be considered to have been paid to petitioner as the supposed
payment was received by a mere receiving clerk, who was not authorized to accept the same; that
the required board of directors resolution authorizing the sale of corporate assets cannot be
dispensed with in the case of petitioner; that whatever negotiations were held between the parties
only concerned the possible sale, not the sale itself, of the subject property; that without the
written authority of petitioners board of directors, Young cannot enter into a sale of its corporate
property; and finally, that there was no meeting of the minds between the parties in the first
place.
On September 30, 2011, the CA issued the assailed Decision affirming the trial courts February
16, 2009 Decision, pronouncing thus: chanRob lesvi rtual Lawl ibra ry
Article 1318 of the Civil Code declares that no contract exists unless the following requisites
concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of the
contract; and (3) cause of the obligation established.
A careful perusal of the records of the case show[s] that there was indeed a negotiation between
the parties as regards the sale of the subject property, their disagreement lies on whether they
have arrived on an agreement regarding said sale. Plaintiff-appellee avers that the parties have
already agreed on the sale and the price for it and the payment of earnest money and the
remaining balance upon clearing of the property of unwanted tenants. Defendant-appellant on the
other hand disputes the same and insists that there was no concrete agreement between the
parties.
Upon a careful consideration of the arguments of the parties and the records of the case, we are
more inclined to sustain the arguments of the plaintiff-appellee and affirm the findings of the trial
court that there was indeed a perfected contract of sale between the parties. The following
instances militate against the claim of the defendant-appellant: First. The letter of the plaintiff-
appellee dated February 4, 2005 reiterating their agreement as to the sale of the realty for the
consideration of Php 1,536,000.00 was not disputed nor replied to by the defendant-appellant, the
said letter also provides for the payment of the earnest money of Php 100,000.00 and the full
payment upon the clearing of the property of unwanted tenants, if the defendant-appellant did not
really agree on the sale of the property it could have easily replied to the said letter informing the
plaintiff-appellee that it is not selling the property or that the matter will be decided first by the
board of directors, defendant-appellants silence or inaction on said letter shows its conformity or
consent thereto; Second. In addition to the aforementioned letter, defendant-appellants
acceptance of the earnest money and the issuance of a provisional receipt clearly shows that there
was indeed an agreement between the parties and we do not subscribe to the argument of the
defendant-appellant that the check was merely forced upon its employee and the contents of the
receipt was just dictated by the plaintiff-appellees employee because common sense dictates that
a person would not issue a receipt for a check with a huge amount if she does not know what that
is for and similarly would not issue [a] receipt which would bind her employer if she does not have
prior instructions to do [so] from her superiors; Third. The said check for earnest money was
deposited in the bank by defendant-appellant and not until after one year did it offer to return the
same. Defendant-appellant cannot claim lack of knowledge of the payment of the check since
there was a letter for it, and it is just incredible that a big amount of money was deposited in [its]
account [without knowing] about it [or] investigat[ing] what [it was] for. We are more inclined to
believe that their inaction for more than one year on the earnest money paid was due to the fact
that after the payment of earnest money the place should be cleared of unwanted tenants before
the full amount of the purchase price will be paid as agreed upon as shown in the letter sent by
the plaintiff-appellee.
As stated above the presence of defendant-appellants consent and, corollarily, the existence of a
perfected contract between the parties are evidenced by the payment and receipt of Php
100,000.00 as earnest money by the contracting parties x x x. Under the law on sales,
specifically Article 1482 of the Civil Code, it 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. Although the presumption is not conclusive, as the parties may treat the earnest money
differently, there is nothing alleged in the present case that would give rise to a contrary
presumption.
We also do not find merit in the contention of the defendant-appellant that there is a need for a
board resolution for them to sell the subject property since it is a corporation, a juridical entity
which acts only thru the board of directors. While we agree that said rule is correct, we must also
point out that said rule is the general rule for all corporations [but] a corporation [whose main
business is buying and selling real estate] like herein defendant-appellant, is not required to have
a board resolution for the sale of the realty in the ordinary course of business, thus defendant-
appellants claim deserves scant consideration.
Furthermore, the High Court has held that a corporate officer or agent may represent and bind
the corporation in transactions with third persons to the extent that the authority to do so has
been conferred upon him, and this includes powers which have been intentionally conferred, and
also such powers as, in the usual course of the particular business, are incidental to, or may be
implied from, the powers intentionally conferred, powers added by custom and usage, as usually
pertaining to the particular officer or agent, and such apparent powers as the corporation has
caused persons dealing with the officer or agent to believe that it was conferred.
In the case at bench, it is not disputed and in fact was admitted by the defendant-appellant that
Ms. Young, the Executive Vice-President was authorized to negotiate for the possible sale of the
subject parcel of land. Therefore, Ms. Young can represent and bind defendant-appellant in the
transaction.
Moreover, plaintiff-appellee can assume that Ms. Young, by virtue of her position, was authorized
to sell the property of the corporation. Selling of realty is not foreign to [an] executive vice[-
]presidents function, and the real estate sale was shown to be a normal business activity of
defendant-appellant since its primary business is the buy and sell of real estate. Unmistakably, its
Executive Vice-President is cloaked with actual or apparent authority to buy or sell real property,
an activity which falls within the scope of her general authority.
Furthermore, assuming arguendo that a board resolution was indeed needed for the sale of the
subject property, the defendant-appellant is estopped from raising it now since, [it] did not inform
the plaintiff-appellee of the same, and the latter deal (sic) with them in good faith. Also it must
be stressed that the plaintiff-appellee negotiated with one of the top officer (sic) of the company
thus, any requirement on the said sale must have been known to Ms. Young and she should have
informed the plaintiff-appellee of the same.
In view of the foregoing we do not find any reason to deviate from the findings of the trial court,
the parties entered into the contract freely, thus they must perform their obligation faithfully.
Defendant-appellants unjustified refusal to perform its part of the agreement constitutes bad faith
and the court will not tolerate the same.
WHEREFORE, premises considered, the Decision of the Regional Trial Court of Pasay City Branch
115, in Civil Case No. 06-0492 CFM is hereby AFFIRMED.
SO ORDERED.23
Petitioner moved for reconsideration,24 but in a December 9, 2011 Resolution, the CA held its
ground. Hence, the present Petition.
Issues
In an October 9, 2013 Resolution,25 this Court resolved to give due course to the Petition, which
raises the following issues:
chanRoble svirtual Lawlib ra ry
I
THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE
MONEY RESPONDENT DELIVERED TO PETITIONER WAS EARNEST MONEY THEREBY PROVIDING A
PERFECTED CONTRACT OF SALE.
II
THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE
TIME THAT LAPSED IN RETURNING THE MONEY AND IN REPLYING TO THE LETTER IS PROOF OF
ACCEPTANCE OF EARNEST MONEY.
III
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND GRAVE ERROR WHEN IT
IGNORED THE RESERVATION IN THE PROVISIONAL RECEIPT Note: This is issued to
transactions not yet cleared but subsequently an Official Receipt will be issued.26
Petitioners Arguments
In its Petition and Reply27 seeking to reverse and set aside the assailed CA dispositions and in
effect to dismiss Civil Case No. 06-0492 CFM, petitioner argues that respondent failed to prove its
case that a contract of sale was perfected between the parties. It particularly notes that, contrary
to the CAs ruling, respondents delivery of the February 4, 2005 letter and check; petitioners
failure to respond to said letter; petitioners supposed acceptance of the check by depositing the
same in its account; and its failure to return the same after more than one year from its tender
these circumstances do not at all prove that a contract of sale was perfected between the parties.
It claims that there was never an agreement in the first place between them concerning the sale
of the subject property, much less the payment of earnest money therefor; that during trial,
Eleazar himself admitted that the check was merely a deposit;28 that the February 4, 2005 letter
and check were delivered not to Young, but to a mere receiving clerk of petitioner who knew
nothing about the supposed transaction and was simply obliged to accept the same without the
prerogative to reject them; that the acceptance of respondents supposed payment was not
cleared and was subject to approval and issuance of the corresponding official receipt as noted in
Provisional Receipt No. 33430; that respondent intentionally delivered the letter and check in the
manner that it did in order to bind petitioner to the supposed sale with or without the latters
consent; that petitioner could not be faulted for receiving the check and for depositing the same
as a matter of operational procedure with respect to checks received in the course of its day-to-
day business.

Petitioner argues that ultimately, it cannot be said that it gave its consent to any transaction with
respondent or to the payment made by the latter. Respondents letter and check constitute
merely an offer which required petitioners acceptance in order to give rise to a perfected sale;
[o]therwise, a buyer can easily bind any unsuspecting seller to a contract of sale by merely
devising a way that prevents the latter from acting on the communicated offer.29 chanrob lesvi rtua llawli bra ry
Petitioner thus theorizes that since it had no perfected agreement with the respondent, the latters
check should be treated not as earnest money, but as mere guarantee, deposit or option money to
prevent the prospective seller from backing out from the sale,30 since the payment of any
consideration acquires the character of earnest money only after a perfected sale between the
parties has been arrived at.31chanro blesvi rtua llawli bra ry
Respondents Arguments
In its Comment,32 respondent counters that petitioners case typifies a situation where the seller
has had an undue change of mind and desires to escape the legal consequences attendant to a
perfected contract of sale. It reiterates the appellate courts pronouncements that petitioners
failure to reply to respondents February 4, 2005 letter indicates its consent to the sale; that its
acceptance of the check as earnest money and the issuance of the provisional receipt prove that
there is a prior agreement between the parties; that the deposit of the check in petitioners
account and failure to timely return the money to respondent militates against petitioners claim of
lack of knowledge and consent. Rather they indicate petitioners decision to sell subject property
as agreed. Respondent adds that contrary to petitioners claim, negotiations were in fact held
between the parties after it sent its December 9, 2004 letter-offer, which negotiations precisely
culminated in the preparation and issuance of the February 4, 2005 letter; that petitioners failure
to reply to its February 4, 2005 letter meant that it was amenable to respondents terms; that the
issuance of a provisional receipt does not prevent the perfection of the agreement between the
parties, since earnest money was already paid; and that petitioner cannot pretend to be ignorant
of respondents check payment, as it involved a large sum of money that was deposited in the
formers bank account.
Our Ruling
The Court grants the Petition. The trial and appellate courts erred materially in deciding the case;
they overlooked important facts that should change the complexion and outcome of the case.
It cannot be denied that there were negotiations between the parties conducted after the
respondents December 9, 2004 letter-offer and prior to the February 4, 2005 letter. These
negotiations culminated in a meeting between Eleazar and Young whereby the latter declined to
enter into an agreement and accept cash payment then being tendered by the former. Instead,
Young informed Eleazar during said meeting that she still had to confer with her sister and
petitioners board of directors; in turn, Eleazar told Young that respondent shall await the
necessary approval.
Thus, the trial and appellate courts failed to appreciate that respondents offer to purchase the
subject property was never accepted by the petitioner at any instance, even after negotiations
were held between them. Thus, as between them, there is no sale to speak of. When there is
merely an offer by one party without acceptance of the other, there is no contract.33 To borrow a
pronouncement in a previously decided case,
The stages of a contract of sale are: (1) negotiation, starting 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; and (3)
consummation, which commences when the parties perform their respective undertakings under
the contract of sale, culminating in the extinguishment of the contract.
In the present case, the parties never got past the negotiation stage. Nothing shows that the
parties had agreed on any final arrangement containing the essential elements of a contract of
sale, namely, (1) consent or the meeting of the minds of the parties; (2) object or subject matter
of the contract; and (3) price or consideration of the sale.34
Respondents subsequent sending of the February 4, 2005 letter and check to petitioner without
awaiting the approval of petitioners board of directors and Youngs decision, or without making a
new offer constitutes a mere reiteration of its original offer which was already rejected
previously; thus, petitioner was under no obligation to reply to the February 4, 2005 letter. It
would be absurd to require a party to reject the very same offer each and every time it is made;
otherwise, a perfected contract of sale could simply arise from the failure to reject the same offer
made for the hundredth time. Thus, said letter cannot be considered as evidence of a perfected
sale, which does not exist in the first place; no binding obligation on the part of the petitioner to
sell its property arose as a consequence. The letter made no new offer replacing the first which
was rejected.
Since there is no perfected sale between the parties, respondent had no obligation to make
payment through the check; nor did it possess the right to deliver earnest money to petitioner in
order to bind the latter to a sale. As contemplated under Art. 1482 of the Civil Code, there must
first be a perfected contract of sale before we can speak of earnest money.35 Where the parties
merely exchanged offers and counter-offers, no contract is perfected since they did not yet give
their consent to such offers. Earnest money applies to a perfected sale.36 chanroble svi rtual lawlib rary
This Court is inclined to accept petitioners explanation that since the check was mixed up with all
other checks and correspondence sent to and received by the corporation during the course of its
daily operations, Young could not have timely discovered respondents check payment; petitioners
failure to return the purported earnest money cannot mean that it agreed to respondents offer.
Besides, respondents payment of supposed earnest money was made under dubious
circumstances and in disregard of sound business practice and common sense. Indeed,
respondent must be faulted for taking such a course of action that is irregular and extraordinary:
common sense and logic dictate that if any payment is made under the supposed sale transaction,
it should have been made directly to Young or coursed directly through her office, since she is the
officer directly responsible for negotiating the sale, as far as respondent is concerned and
considering the amount of money involved; no other ranking officer of petitioner can be expected
to know of the ongoing talks covering the subject property. Respondent already knew, from
Eleazars previous meeting with Young, that it could only effectively deal with her; more than that,
it should know that corporations work only through the proper channels. By acting the way it did
coursing the February 4, 2005 letter and check through petitioners mere receiving clerk or
receptionist instead of directly with Youngs office, respondent placed itself under grave suspicion
of putting into effect a premeditated plan to unduly bind petitioner to its rejected offer, in a
manner which it could not achieve through negotiation and employing normal business practices.
It impresses the Court that respondent attempted to secure the consent needed for the sale by
depositing part of the purchase price and under the false pretense that an agreement was already
arrived at, even though there was none. Respondent achieved the desired effect up to this point,
but the Court will not be fooled.
Thus, as between respondents irregular and improper actions and petitioners failure to timely
return the P100,000.00 purported earnest money, this Court sides with petitioner. In a manner of
speaking, respondent cannot fault petitioner for not making a refund since it is equally to blame
for making such payment under false pretenses and irregular circumstances, and with improper
motives. Parties must come to court with clean hands, as it were.
In a potential sale transaction, the prior payment of earnest money even before the property
owner can agree to sell his property is irregular, and cannot be used to bind the owner to the
obligations of a seller under an otherwise perfected contract of sale; to cite a well-worn clich, the
carriage cannot be placed before the horse. The property owner-prospective seller may not be
legally obliged to enter into a sale with a prospective buyer through the latters employment of
questionable practices which prevent the owner from freely giving his consent to the transaction;
this constitutes a palpable transgression of the prospective sellers rights of ownership over his
property, an anomaly which the Court will certainly not condone. An agreement where the prior
free consent of one party thereto is withheld or suppressed will be struck down, and the Court
shall always endeavor to protect a property owners rights against devious practices that put his
property in danger of being lost or unduly disposed without his prior knowledge or consent. As
this ponente has held before, [t]his Court cannot presume the existence of a sale of land, absent
any direct proof of it.37
chanroble svi rtual lawlib rary
Nor will respondents supposed payment be treated as a deposit or guarantee; its actions will not
be dignified and must be called for what they are: they were done irregularly and with a view to
acquiring the subject property against petitioners consent.
Finally, since there is nothing in legal contemplation which petitioner must perform particularly for
the respondent, it should follow that Civil Case No. 06-0492 CFM for specific performance with
damages is left with no leg to stand on; it must be dismissed.
With the foregoing view, there is no need to resolve the other specific issues and arguments raised
by the petitioner, as they do not materially affect the rights and obligations of the parties the
Court having declared that no agreement exists between them; nor do they have the effect of
altering the outcome of the case.
WHEREFORE, the Petition is GRANTED. The September 30, 2011 Decision and December 9,
2011 Resolution of the Court of Appeals in CA-G.R. CV No. 93715, as well as the February 16,
2009 Decision of the Regional Trial Court of Pasay City, Branch 115 in Civil Case No. 06-0492
CFM are REVERSED and SET ASIDE. Civil Case No. 06-0492 CFM is ordered DISMISSED.
Petitioner First Optima Realty Corporation is ordered to REFUND the amount of P100,000.00 to
respondent Securitron Security Services, Inc. without interest, unless petitioner has done so
during the course of the proceedings.
SO ORDERED.
FIRST OPTIMA REALTY CORPORATION, Petitioner, vs. SECURITRON SECURITY SERVICES, INC., Respondent. G.R. No. 199648
January 28, 2015 SECOND DIVISION DEL CASTILLO, J.: Earnest money
Facts: The petitioner looking to expand business and add to its existing offices, respondent through its General Manager,
Antonio Eleazar (Eleazar) sent a letter to the petitoner offering to purchase the subject property at P6,000.00 per square
meter. A series of telephone calls ensued, but only between Eleazar and Youngs secretary; Eleazar likewise personally
negotiated with a certain Maria Remoso (Remoso), who was an employee of petitioner. At this point, Eleazar was unable to
personally negotiate with Young or the petitioners board of directors. Sometime thereafter, Eleazar personally went to
petitioners office offering to pay for the subject property in cash, which he already brought with him. However, Young
declined to accept payment, saying that she still needed to secure her sisters advice on the matter. 10She likewise informed
Eleazar that prior approval of petitioners Board of Directors was required for the transaction, to which remark Eleazar
replied that respondent shall instead await such approval.11 On February 4, 2005, respondent sent a Letter of even date to
petitioner. It was accompanied by Philippine National Bank Check No. 24677, issued for P100,000.00 and made payable to
petitioner. The check was eventually deposited with and credited to petitioners bank account Thereafter, respondent
through counsel demanded in writing that petitioner proceed with the sale of the property Issue: Whether there is a
contract of sale when the respondent accepted the supposed earnest money.
Held No. In the present case, the parties never got past the negotiation stage. Nothing shows that the parties had agreed on
any final arrangement containing the essential elements of a contract of sale, namely, (1) consent or the meeting of the
minds of the parties; (2) object or subject matter of the contract; and (3) price or consideration of the sale.34 Respondents
subsequent sending of the February 4, 2005 letter and check to petitioner without awaiting the approval of petitioners
board of directors and Youngs decision, or without making a new offer constitutes a mere reiteration of its original offer
which was already rejected previously; thus, petitioner was under no obligation to reply to the February 4, 2005 letter. It
would be absurd to require a party to reject the very same offer each and every time it is made; otherwise, a perfected
contract of sale could simply arise from the failure to reject the same offer made for the hundredth time.1wphi1 Thus, said
letter cannot be considered as evidence of a perfected sale, which does not exist in the first place; no binding obligation on
the part of the petitioner to sell its property arose as a consequence. The letter made no new offer replacing the first which
was rejected.
G.R. No. 165879 November 10, 2006
MARIA B. CHING, Petitioner,
vs.
JOSEPH C. GOYANKO, JR., EVELYN GOYANKO, JERRY GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO, MARY ELLEN GOYANKO
AND JESS GOYANKO, Respondents.
DECISION
CARPIO MORALES, J.:
On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married.1 Out of the union were
born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko.
Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu City
but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt,
Sulpicia Ventura (Sulpicia).
On May 1, 1993, Sulpicia executed a deed of sale2 over the property in favor of respondents father Goyanko. In turn,
Goyanko executed on October 12, 1993 a deed of sale3 over the property in favor of his common-law-wife-herein petitioner
Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioners name.
After Goyankos death on March 11, 1996, respondents discovered that ownership of the property had already been
transferred in the name of petitioner. Respondents thereupon had the purported signature of their father in the deed of
sale verified by the Philippine National Police Crime Laboratory which found the same to be a forgery.4
Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages against
petitioner, praying for the nullification of the deed of sale and of TCT No. 138405 and the issuance of a new one in favor of
their father Goyanko.
In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price. To
disprove that Goyankos signature in the questioned deed of sale is a forgery, she presented as witness the notary public
who testified that Goyanko appeared and signed the document in his presence.
By Decision of October 16, 1998,5 the trial court dismissed the complaint against petitioner, the pertinent portions of which
decision read:
There is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated. The signature on the
questioned Deed of Sale is genuine. The testimony of Atty. Salvador Barrameda who declared in court that Joseph Goyanko,
Sr. and Maria Ching together with their witnesses appeared before him for notarization of Deed of Sale in question is more
reliable than the conflicting testimonies of the two document examiners. Defendant Maria Ching asserted that the Deed of
Sale executed by Joseph Goyanko, Sr. in her favor is valid and genuine. The signature of Joseph Goyanko, Sr. in the
questioned Deed of Absolute Sale is genuine as it was duly executed and signed by Joseph Goyanko, Sr. himself.
The parcel of lands known as Lot No. 6 which is sought to be recovered in this case could never be considered as the
conjugal property of the original Spouses Joseph C. Goyanko and Epifania dela Cruz or the exclusive capital property of the
husband. The acquisition of the said property by defendant Maria Ching is well-elicited from the aforementioned testimonial
and documentary evidence presented by the defendant. Although for a time being the property passed through Joseph
Goyanko, Sr. as a buyer yet his ownership was only temporary and transitory for the reason that it was subsequently sold to
herein defendant Maria Ching. Maria Ching claimed that it was even her money which was used by Joseph Goyanko, Sr. in
the purchase of the land and so it was eventually sold to her. In her testimony, defendant Ching justified her financial
capability to buy the land for herself. The transaction undertaken was from the original owner Sulpicia Ventura to Joseph
Goyanko, Sr. and then from Joesph Goyanko, Sr. to herein defendant Maria Ching.
The land subject of the litigation is already registered in the name of defendant Maria Ching under TCT No. 138405. By
virtue of the Deed of Sale executed in favor of Maria Ching, Transfer Certificate of Title No. 138405 was issued in her favor.
In recognition of the proverbial virtuality of a Torrens title, it has been repeatedly held that, unless bad faith can be
established on the part of the person appearing as owner on the certificate of title, there is no other owner than that in
whose favor it has been issued. A Torrens title is not subject to collateral attack. It is a well-known doctrine that a Torrens
title, as a rule, is irrevocable and indefeasible, and the duty of the court is to see to it that this title is maintained and
respected unless challenged in a direct proceedings [sic].6(Citations omitted; underscoring supplied)
Before the Court of Appeals where respondents appealed, they argued that the trial court erred:
1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr.
and the defendant-appellee, despite the proliferation in the records and admissions by both parties that defendant-appellee
was the "mistress" or "common-law wife" of Joseph, Sr..
2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr.
and the defendant-appellee, despite the fact that the marriage of Joseph, Sr. and Epifania was then still subsisting thereby
rendering the subject property as conjugal property of Joseph, Sr. and Epifania.
3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of the sale of the subject property between
Joseph, Sr. and the defendant-appellee, despite the clear findings of forgery and the non-credible testimony of notary
public.7
By Decision dated October 21, 2003,8 the appellate court reversed that of the trial court and declared null and void the
questioned deed of sale and TCT No. 138405. Held the appellate court:
. . . The subject property having been acquired during the existence of a valid marriage between Joseph Sr. and Epifania dela
Cruz-Goyanko, is presumed to belong to the conjugal partnership. Moreover, while this presumption in favor of conjugality
is rebuttable with clear and convincing proof to the contrary, we find no evidence on record to conclude otherwise. The
record shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and defendant-appellant
Maria Ching, have in fact been living together as common-law husband and wife, there has never been a judicial decree
declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore undeniable that the 661-
square meter property located at No. 29 F. Cabahug Street, Cebu City belongs to the conjugal partnership.
Even if we were to assume that the subject property was not conjugal, still we cannot sustain the validity of the sale of the
property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on records that they have
been living together as common-law husband and wife. On this score, Art. 1352 of the Civil Code provides:
"Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is
contrary to law, morals, good customs, public order or public policy."
We therefore find that the contract of sale in favor of the defendant-appellant Maria Ching was null and void for being
contrary to morals and public policy. The purported sale, having been made by Joseph Sr. in favor of his concubine,
undermines the stability of the family, a basic social institution which public policy vigilantly protects. Furthermore, the law
emphatically prohibits spouses from selling property to each other, subject to certain exceptions. And this is so because
transfers or conveyances between spouses, if allowed during the marriage would destroy the system of conjugal
partnership, a basic policy in civil law. The prohibition was designed to prevent the exercise of undue influence by one
spouse over the other and is likewise applicable even to common-law relationships otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal union.9 (Underscoring supplied)
Hence, the present petition, petitioners arguing that the appellate court gravely erred in:
I.
. . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN
LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO, AS
THE EXCLUSIVE PROPERTY OF PETITIONER, AND THAT THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE
MARRIAGE BETWEEN RESPONDENTS MOTHER EPIFANIA GOYANKO AND PETITIONERS COMMON LAW HUSBAND, JOSEPH
GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE THE SAME WAS VALIDLY
ACQUIRED BY PETITIONER.
II.
. . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF THE NEW
CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW SPOUSES.
III.
. . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE BY A TRUSTEE, WHO BECAME AS SUCH IN
CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND OF THE BENEFICIARY, IS NOT A
VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN
LEGITIMATE AND COMMON LAW SPOUSES.
IV.
. . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL THEORY OF THEIR CASE DURING APPEAL.10
The pertinent provisions of the Civil Code which apply to the present case read:
ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is
contrary to law, morals, good customs, public order or public policy.
ART. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
ARTICLE 1490. The husband and wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under Article 191. (Underscoring supplied)
The proscription against sale of property between spouses applies even to common law relationships. So this Court ruled
in Calimlim-Canullas v. Hon. Fortun, etc., et al.:11
Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public
policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home
where his wife and children lived and from whence they derived their support. The sale was subversive of the stability of the
family, a basic social institution which public policy cherishes and protects.
Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes is contrary to law, morals,
good customs, public order, or public policy are void and inexistent from the very beginning.
Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause
is unlawful if it is contrary to law, morals, good customs, public order, or public policy."
Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain
exceptions.1wphi1 Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers
or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a
basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well
as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as
husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be
better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon
the will of the parties. . . .12 (Italics in the original; emphasis and underscoring supplied)
As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein petitioner, it was null and
void.
Petitioners argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as provided
in Articles 1448 and 1450 of the Civil Code which read:
ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is
paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter
is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.
ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the
conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of
the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a
conveyance thereof to him.

does not persuade.

For petitioners testimony that it was she who provided the purchase price is uncorroborated. That she may have been
considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her
claim.

As to the change of theory by respondents from forgery of their fathers signature in the deed of sale to sale contrary to
public policy, it too does not persuade. Generally, a party in a litigation is not permitted to freely and substantially change
the theory of his case so as not to put the other party to undue disadvantage by not accurately and timely apprising him of
what he is up against,13 and to ensure that the latter is given the opportunity during trial to refute all allegations against him
by presenting evidence to the contrary. In the present case, petitioner cannot be said to have been put to undue
disadvantage and to have been denied the chance to refute all the allegations against her. For the nullification of the sale is
anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED