Sales Part III Page |1
G.R. No. L-22487 May 21, 1969
ASUNCION ATILANO, CRISTINA ATILANO, ROSARIO ATILANO,
assisted by their respective husbands, HILARIO ROMANO, FELIPE
BERNARDO, and MAXIMO LACANDALO, ISABEL ATILANO and
GREGORIO ATILANO, plaintiffs-appellees,
vs.
LADISLAO ATILANO and GREGORIO M. ATILANO, defendants-
appellants.
Civil law; Contracts; Reformation of instruments; Remedy where there is
simple mistake in the drafting of the document.—The remedy where there is
simple mistake in the drafting of the document of sale in designating the
land object of the sale, is reformation of the instrument, there being a
meeting of the minds of the parties to a contract.
Same; Same; Mistake; When not a ground for annulment of contract of
sale.—Where the real intention of the parties is the sale of a piece of land
but there is a mistake in designating the particular lot to be sold in the
document, the mistake does not vitiate the consent of the parties, or affect
the validity and binding effect of the contract.
Same; Same; Same; Same; Reason.—The reason is that when one sells or
buys real property—a piece of land, for example—one sells or buys the
property as he sees it, in its actual setting and by its physical metes and
bounds, and not by the mere lot number assigned to it in the certif icate of
title.
Same; Same; When reconveyance, not reformation of instrument, is
proper.—In this case, the deed of sale need not be reformed. The parties
have retained possession of their respective properties conformably to the
real intention of the parties to that sale, and all they should do is to execute
mutual deeds of conveyance.
Climaco and Azcarraga for plaintiff-appellee.
T. de los Santos for defendants-appellants.
MAKALINTAL, J.:
In 1916 Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva,
lot No. 535 of the then municipality of Zamboanga cadastre. The vendee
thereafter obtained transfer certificate of title No. 1134 in his name. In 1920
he had the land subdivided into five parts, identified as lots Nos. 535-A, 535-
B, 535-C, 535-D and 535-E, respectively. On May 18 of the same year, after
the subdivision had been effected, Eulogio Atilano I, for the sum of P150.00,
executed a deed of sale covering lot No. 535-E in favor of his brother Eulogio
Atilano II, who thereupon obtained transfer certificate of title No. 3129 in his
name. Three other portions, namely lots Nos. 535-B, 535-C and 535-D, were
likewise sold to other persons, the original owner, Eulogio Atilano I, retaining
for himself only the remaining portion of the land, presumably covered by the
title to lot No. 535-A. Upon his death the title to this lot passed to Ladislao
Atilano, defendant in this case, in whose name the corresponding certificate
(No. T-5056) was issued.
On December 6, 1952, Eulogio Atilano II having become a widower upon the
death of his wife Luisa Bautista, he and his children obtained transfer
certificate of title No. 4889 over lot No. 535-E in their names as co-owners.
Then, on July 16, 1959, desiring to put an end to the co-ownership, they had
the land resurveyed so that it could properly be subdivided; and it was then
discovered that the land they were actually occupying on the strength of the
deed of sale executed in 1920 was lot No. 535-A and not lot 535-E, as referred
to in the deed, while the land which remained in the possession of the vendor,
Eulogio Atilano I, and which passed to his successor, defendant Ladislao
Atilano, was lot No. 535-E and not lot No. 535-A.
On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also
deceased, filed the present action in the Court of First Instance of Zamboanga,
alleging, inter alia, that they had offered to surrender to the defendants the
possession of lot No. 535-A and demanded in return the possession of lot No.
535-E, but that the defendants had refused to accept the exchange. The
plaintiffs' insistence is quite understandable, since lot No. 535-E has an area
of 2,612 square meters, as compared to the 1,808 square-meter area of lot
No. 535-A.
In their answer to the complaint the defendants alleged that the reference to
lot No. 535-E in the deed of sale of May 18, 1920 was an involuntary error;
that the intention of the parties to that sale was to convey the lot correctly
identified as lot No. 535-A; that since 1916, when he acquired the entirety of
lot No. 535, and up to the time of his death, Eulogio Atilano I had been
possessing and had his house on the portion designated as lot No. 535-E, after
which he was succeeded in such possession by the defendants herein; and
that as a matter of fact Eulogio Atilano I even increased the area under his
possession when on June 11, 1920 he bought a portion of an adjoining lot,
 Sales Part III Page |2

No. 536, from its owner Fruto del Carpio. On the basis of the foregoing
allegations the defendants interposed a counterclaim, praying that the
plaintiffs be ordered to execute in their favor the corresponding deed of
transfer with respect to lot No. 535-E.
The trial court rendered judgment for the plaintiffs on the sole ground that
since the property was registered under the Land Registration Act the
defendants could not acquire it through prescription. There can be, of course,
no dispute as to the correctness of this legal proposition; but the defendants,
aside from alleging adverse possession in their answer and counterclaim, also
alleged error in the deed of sale of May 18, 1920, thus: "Eulogio Atilano 1.o,
por equivocacion o error involuntario, cedio y traspaso a su hermano Eulogio
Atilano 2.do el lote No. 535-E en vez del Lote No. 535-A."lawphi1.ñet
intention is not expressed in the instrument purporting to embody the
agreement by reason of mistake, fraud, inequitable conduct on accident (Art.
1359, et seq.) In this case, the deed of sale executed in 1920 need no longer
reformed. The parties have retained possession of their respective properties
conformably to the real intention of the parties to that sale, and all they should
do is to execute mutual deeds of conveyance.
WHEREFORE, the judgment appealed from is reversed. The plaintiffs are
ordered to execute a deed of conveyance of lot No. 535-E in favor of the
defendants, and the latter in turn, are ordered to execute a similar document,
covering lot No. 595-A, in favor of the plaintiffs. Costs against the latter.

The logic and common sense of the situation lean heavily in favor of the
defendants' contention. When one sells or buys real property — a piece of
land, for example — one sells or buys the property as he sees it, in its actual
setting and by its physical metes and bounds, and not by the mere lot number
assigned to it in the certificate of title. In the particular case before us, the
portion correctly referred to as lot No. 535-A was already in the possession of
the vendee, Eulogio Atilano II, who had constructed his residence therein,
even before the sale in his favor even before the subdivision of the entire lot
No. 535 at the instance of its owner, Eulogio Atillano I. In like manner the
latter had his house on the portion correctly identified, after the subdivision,
as lot No. 535-E, even adding to the area thereof by purchasing a portion of
an adjoining property belonging to a different owner. The two brothers
continued in possession of the respective portions the rest of their lives,
obviously ignorant of the initial mistake in the designation of the lot subject of
the 1920 until 1959, when the mistake was discovered for the first time.

The real issue here is not adverse possession, but the real intention of the
parties to that sale. From all the facts and circumstances we are convinced
that the object thereof, as intended and understood by the parties, was that
specific portion where the vendee was then already residing, where he
reconstructed his house at the end of the war, and where his heirs, the
plaintiffs herein, continued to reside thereafter: namely, lot No. 535-A; and
that its designation as lot No. 535-E in the deed of sale was simple mistake in
the drafting of the document.1âwphi1.ñet The mistake did not vitiate the
consent of the parties, or affect the validity and binding effect of the contract
between them. The new Civil Code provides a remedy for such a situation by
means of reformation of the instrument. This remedy is available when, there
having been a meeting of the funds of the parties to a contract, their true

No. L-24732. April 30, 1968.
Pio SIAN MELLIZA, petitioner, vs. CITY OF ILOILO, UNIVERSITY OF
THE PHILIPPINES and THE COURT OF APPEALS, respondents.
Contracts; Interpretation of contracts involves question of law.—The appeal
before the Supreme Court calls for the interpretation of a contract, a public
instrument dated November 15, 1932. Interpretation of such contract
involves a question of law since the contract is in the nature of law as
between the parties and their successors-in-interest.
Sale; Object of sale must be determinate- or capable of being determinate.—
The requirement of the law is that a sale must have for its object a
determinate thing and this requirement is fulfilled as long as, at the time the
contract is entered into, the object of the sale is capable of being made
determinate without the necessity of a new or further agreement between
the parties (Art. 1273, old Civil Code; Art. 1460, new Civil Code).
APPEAL from a decision of the Court of Appeals.
BENGZON, J.P., J.:
Juliana Melliza during her lifetime owned, among other properties, three
parcels of residential land in Iloilo City registered in her name under Original
Certificate of Title No. 3462. Said parcels of land were known as Lots Nos. 2,
5 and 1214. The total area of Lot No. 1214 was 29,073 square meters.
On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000
square meters of Lot 1214, to serve as site for the municipal hall. 1 The
donation was however revoked by the parties for the reason that the area
donated was found inadequate to meet the requirements of the development
plan of the municipality, the so-called "Arellano Plan". 2
Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into
Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into
Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of
Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot 1214-
B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C;
and Lot 1214-B-13, with 4,135 square meters, became Lot 1214-D.
Sales Part III Page |3
On November 15, 1932 Juliana Melliza executed an instrument without any
caption containing the following:
Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS
VEINTIDOS PESOS (P6,422.00), moneda filipina que por la presente
declaro haber recibido a mi entera satisfaccion del Gobierno Municipal
de Iloilo, cedo y traspaso en venta real y difinitiva a dicho Gobierno
Municipal de Iloilo los lotes y porciones de los mismos que a
continuacion se especifican a saber: el lote No. 5 en toda su extension;
una porcion de 7669 metros cuadrados del lote No. 2, cuya porcion
esta designada como sub-lotes Nos. 2-B y 2-C del piano de subdivision
de dichos lotes preparado por la Certeza Surveying Co., Inc., y una
porcion de 10,788 metros cuadrados del lote No. 1214 — cuya porcion
esta designada como sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo
plano de subdivision.
Asimismo nago constar que la cesion y traspaso que ariba se
mencionan es de venta difinitiva, y que para la mejor identificacion de
los lotes y porciones de los mismos que son objeto de la presente,
hago constar que dichos lotes y porciones son los que necesita el
Gobierno Municipal de Iloilo para la construccion de avenidas, parques
y City Hall site del Municipal Government Center de iloilo, segun el
plano Arellano.
On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to
Remedios Sian Villanueva who thereafter obtained her own registered title
thereto, under Transfer Certificate of Title No. 18178. Remedios in turn on
November 4, 1946 transferred her rights to said portion of land to Pio Sian
Melliza, who obtained Transfer Certificate of Title No. 2492 thereover in his
name. Annotated at the back of Pio Sian Melliza's title certificate was the
following:
... (a) that a portion of 10,788 square meters of Lot 1214 now
designated as Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision plan
belongs to the Municipality of Iloilo as per instrument dated November
15, 1932....
On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of
Iloilo, donated the city hall site together with the building thereon, to the
University of the Philippines (Iloilo branch). The site donated consisted of Lots

Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square meters,
more or less.
Sometime in 1952, the University of the Philippines enclosed the site donated
with a wire fence. Pio Sian Melliza thereupon made representations, thru his
lawyer, with the city authorities for payment of the value of the lot (Lot 1214-
B). No recovery was obtained, because as alleged by plaintiff, the City did not
have funds (p. 9, Appellant's Brief.)
The University of the Philippines, meanwhile, obtained Transfer Certificate of
Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D.
On December 10, 1955 Pio Sian Melliza filed an action in the Court of First
Instance of Iloilo against Iloilo City and the University of the Philippines for
recovery of Lot 1214-B or of its value.
The defendants answered, contending that Lot 1214-B was included in the
public instrument executed by Juliana Melliza in favor of Iloilo municipality in
1932. After stipulation of facts and trial, the Court of First Instance rendered
its decision on August 15, 1957, dismissing the complaint. Said court ruled that
the instrument executed by Juliana Melliza in favor of Iloilo municipality
included in the conveyance Lot 1214-B. In support of this conclusion, it
referred to the portion of the instrument stating:
Asimismo hago constar que la cesion y traspaso que arriba se
mencionan es de venta difinitiva, y que para la major identificacion de
los lotes y porciones de los mismos que son objeto de la presente,
hago constar que dichos lotes y porciones son los que necesita el
Gobierno municipal de Iloilo para la construccion de avenidas, parques
y City Hall site del Municipal Government Center de Iloilo, segun el
plano Arellano.
and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and
1214-D but also such other portions of lots as were necessary for the municipal
hall site, such as Lot 1214-B. And thus it held that Iloilo City had the right to
donate Lot 1214-B to the U.P.
Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19,
1965, the Court of Appeals affirmed the interpretation of the Court of First
Instance, that the portion of Lot 1214 sold by Juliana Melliza was not limited
to the 10,788 square meters specifically mentioned but included whatever was
Sales Part III Page |4
needed for the construction of avenues, parks and the city hall site.
Nonetheless, it ordered the remand of the case for reception of evidence to
determine the area actually taken by Iloilo City for the construction of avenues,
parks and for city hall site.
The present appeal therefrom was then taken to Us by Pio Sian Melliza.
Appellant maintains that the public instrument is clear that only Lots Nos.
1214-C and 1214-D with a total area of 10,788 square meters were the
portions of Lot 1214 included in the sale; that the purpose of the second
paragraph, relied upon for a contrary interpretation, was only to better identify
the lots sold and none other; and that to follow the interpretation accorded
the deed of sale by the Court of Appeals and the Court of First Instance would
render the contract invalid because the law requires as an essential element
of sale, a "determinate" object (Art. 1445, now 1448, Civil Code).
Appellees, on the other hand, contend that the present appeal improperly
raises only questions of fact. And, further, they argue that the parties to the
document in question really intended to include Lot 1214-B therein, as shown
by the silence of the vendor after Iloilo City exercised ownership thereover;
that not to include it would have been absurd, because said lot is contiguous
to the others admittedly included in the conveyance, lying directly in front of
the city hall, separating that building from Lots 1214-C and 1214-D, which
were included therein. And, finally, appellees argue that the sale's object was
determinate, because it could be ascertained, at the time of the execution of
the contract, what lots were needed by Iloilo municipality for avenues, parks
and city hall site "according to the Arellano Plan", since the Arellano plan was
then already in existence.
The appeal before Us calls for the interpretation of the public instrument dated
November 15, 1932. And interpretation of such contract involves a question of
law, since the contract is in the nature of law as between the parties and their
successors-in-interest.
At the outset, it is well to mark that the issue is whether or not the conveyance
by Juliana Melliza to Iloilo municipality included that portion of Lot 1214 known
as Lot 1214-B. If not, then the same was included, in the instrument
subsequently executed by Juliana Melliza of her remaining interest in Lot 1214
to Remedios Sian Villanueva, who in turn sold what she thereunder had
acquired, to Pio Sian Melliza. It should be stressed, also, that the sale to
Remedios Sian Villanueva — from which Pio Sian Melliza derived title — did
not specifically designate Lot 1214-B, but only such portions of Lot 1214 as
were not included in the previous sale to Iloilo municipality (Stipulation of

Facts, par. 5, Record on Appeal, p. 23). And thus, if said Lot 1214-B had been
included in the prior conveyance to Iloilo municipality, then it was excluded
from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.
The point at issue here is then the true intention of the parties as to the object
of the public instrument Exhibit "D". Said issue revolves on the paragraph of
the public instrument aforequoted and its purpose, i.e., whether it was
intended merely to further describe the lots already specifically mentioned, or
whether it was intended to cover other lots not yet specifically mentioned.
First of all, there is no question that the paramount intention of the parties
was to provide Iloilo municipality with lots sufficient or adequate in area for
the construction of the Iloilo City hall site, with its avenues and parks. For this
matter, a previous donation for this purpose between the same parties was
revoked by them, because of inadequacy of the area of the lot donated.
Secondly, reading the public instrument in toto, with special reference to the
paragraphs describing the lots included in the sale, shows that said instrument
describes four parcels of land by their lot numbers and area; and then it goes
on to further describe, not only those lots already mentioned, but the
lots object of the sale, by stating that said lots are the ones needed for the
construction of the city hall site, avenues and parks according to the Arellano
plan. If the parties intended merely to cover the specified lots — Lots 2, 5,
1214-C and 1214-D, there would scarcely have been any need for the next
paragraph, since these lots are already plainly and very clearly described by
their respective lot number and area. Said next paragraph does not really add
to the clear description that was already given to them in the previous one.
It is therefore the more reasonable interpretation, to view it as describing
those other portions of land contiguous to the lots aforementioned that, by
reference to the Arellano plan, will be found needed for the purpose at hand,
the construction of the city hall site.
Appellant however challenges this view on the ground that the description of
said other lots in the aforequoted second paragraph of the public instrument
would thereby be legally insufficient, because the object would allegedly not
be determinate as required by law.
Such contention fails on several counts. The requirement of the law that a sale
must have for its object a determinate thing, is fulfilled as long as, at the time
the contract is entered into, the object of the sale is capable of being made
Sales Part III Page |5
determinate without the necessity of a new or further agreement between the
parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific
mention of some of the lots plus the statement that the lots object of the sale
are the ones needed for city hall site, avenues and parks, according to the
Arellano plan, sufficiently provides a basis, as of the time of the execution of
the contract, for rendering determinate said lots without the need of a new
and further agreement of the parties.
The Arellano plan was in existence as early as 1928. As stated, the previous
donation of land for city hall site on November 27, 1931 was revoked on March
6, 1932 for being inadequate in area under said Arellano plan. Appellant claims
that although said plan existed, its metes and bounds were not fixed until
1935, and thus it could not be a basis for determining the lots sold on
November 15, 1932. Appellant however fails to consider that the area needed
under that plan for city hall site was then already known; that the specific
mention of some of the lots covered by the sale in effect fixed the
corresponding location of the city hall site under the plan; that, therefore,
considering the said lots specifically mentioned in the public instrument Exhibit
"D", and the projected city hall site, with its area, as then shown in the Arellano
plan (Exhibit 2), it could be determined which, and how much of the portions
of land contiguous to those specifically named, were needed for the
construction of the city hall site.
And, moreover, there is no question either that Lot 1214-B is contiguous to
Lots 1214-C and 1214-D, admittedly covered by the public instrument. It is
stipulated that, after execution of the contract Exhibit "D", the Municipality of
Iloilo possessed it together with the other lots sold. It sits practically in the
heart of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation
of facts, was the notary public of the public instrument. As such, he was aware
of its terms. Said instrument was also registered with the Register of Deeds
and such registration was annotated at the back of the corresponding title
certificate of Juliana Melliza. From these stipulated facts, it can be inferred that
Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable
with knowledge of them; that knowing so, he should have examined the
Arellano plan in relation to the public instrument Exhibit "D"; that, furthermore,
he should have taken notice of the possession first by the Municipality of Iloilo,
then by the City of Iloilo and later by the University of the Philippines of Lot
1214-B as part of the city hall site conveyed under that public instrument, and
raised proper objections thereto if it was his position that the same was not
included in the same. The fact remains that, instead, for twenty long years ,
Pio Sian Melliza and his predecessors-in-interest, did not object to said
possession, nor exercise any act of possession over Lot 1214-B. Applying,
 Sales Part III Page |6

therefore, principles of civil law, as well as laches, estoppel, and equity, said
lot must necessarily be deemed included in the conveyance in favor of Iloilo
municipality, now Iloilo City.

WHEREFORE, the decision appealed from is affirmed insofar as it affirms that

of the Court of First Instance, and the complaint in this case is dismissed. No
costs. So ordered.

G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON
SORIANO, respondents.
Civil Law; Sale; Contract; Definitions; Requisites of Contract.—Article 1458 of
the Civil Code of the Philippines defines sale as a contract whereby one of
the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other party to pay therefore a price
certain in money or its equivalent. A contract, on the other hand, is a
meeting of minds between two (2) persons whereby one binds himself, with
respect to the other, to give something or to render some service (Art. 1305,
Civil Code of the Philippines). The essential requisites of contracts are: (1)
consent of the contracting parties, (2) object certain which is the subject
matter of the contract, and (3) cause of the obligation which is established.
Same; Same; Same; When the offer of Soriano was accepted by the NFA,
there was already a meeting of the minds between the parties.—In case at
bar, Soriano initially offered to sell palay grains produced in his farmland to
NFA. When the latter accepted the offer by noting in Soriano’s Farmer’s
Information Sheet a quota of 2,640 cavans, there was already a meeting of
the minds between the parties. The object of the contract, being the palay
grains produced in Soriano’s farmland and the NFA was to pay the same
depending upon its quality. The fact that the exact number of cavans of
palay to be delivered has not been determined does not affect the perfection
of the contract.
Same; Same; Same; Contention that there was no contract of sale because
of the absence of consent not correct; acceptance referred to is the
acceptance of the offer and not of the goods delivered.—The above
contention of petitioner is not correct. Sale is a consensual contract, “x x x,
there is perfection when there is consent upon the subject matter and price,
even if neither is delivered.” (Obana vs. C.A., L-36249, March 29, 1985, 135
SCRA 557, 560). This is provided by Article 1475 of the Civil Code which
states: “Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price. “x x x.” The acceptance referred to which determines
consent is the acceptance of the offer of one party by the other and not of
the goods delivered as contended by petitioners.
Sales Part III Page |7
Same; Same; Same; Once the contract is perfected, the parties are bound to
comply with their mutual obligations.—From the moment the contract of sale
is perfected, it is incumbent upon the parties to comply with their mutual
obligations or “the parties may reciprocally demand performance” thereof.
National Grains Authority vs. IAC, 171 SCRA 131, G.R. No. 74470 March 8,
1989Cordoba, Zapanta, Rola & Garcia for petitioner National Grains
Authority.
Plaridel Mar Israel for respondent Leon Soriano.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate
Appellate Court (now Court of Appeals) dated December 23, 1985 in A.C. G.R.
CV No. 03812 entitled, "Leon Soriano, Plaintiff- Appellee versus National Grains
Authority and William Cabal, Defendants Appellants", which affirmed the
decision of the Court of First Instance of Cagayan, in Civil Case No. 2754 and
its resolution (p. 28, Rollo) dated April 17, 1986 which denied the Motion for
Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority, NFA for
short) is a government agency created under Presidential Decree No. 4. One
of its incidental functions is the buying of palay grains from qualified farmers.
On August 23, 1979, private respondent Leon Soriano offered to sell palay
grains to the NFA, through William Cabal, the Provincial Manager of NFA
stationed at Tuguegarao, Cagayan. He submitted the documents required by
the NFA for pre-qualifying as a seller, namely: (1) Farmer's Information Sheet
accomplished by Soriano and certified by a Bureau of Agricultural Extension
(BAEX) technician, Napoleon Callangan, (2) Xerox copies of four (4) tax
declarations of the riceland leased to him and copies of the lease contract
between him and Judge Concepcion Salud, and (3) his Residence Tax
Certificate. Private respondent Soriano's documents were processed and
accordingly, he was given a quota of 2,640 cavans of palay. The quota noted
in the Farmer's Information Sheet represented the maximum number of
cavans of palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August 24,
1979, Soriano delivered 630 cavans of palay. The palay delivered during these

two days were not rebagged, classified and weighed. when Soriano demanded
payment of the 630 cavans of palay, he was informed that its payment will be
held in abeyance since Mr. Cabal was still investigating on an information he
received that Soriano was not a bona tide farmer and the palay delivered by
him was not produced from his farmland but was taken from the warehouse
of a rice trader, Ben de Guzman. On August 28, 1979, Cabal wrote Soriano
advising him to withdraw from the NFA warehouse the 630 cavans Soriano
delivered stating that NFA cannot legally accept the said delivery on the basis
of the subsequent certification of the BAEX technician, Napoleon Callangan
that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, private respondent Soriano
insisted that the palay grains delivered be paid. He then filed a complaint for
specific performance and/or collection of money with damages on November
2, 1979, against the National Food Authority and Mr. William Cabal, Provincial
Manager of NFA with the Court of First Instance of Tuguegarao, and docketed
as Civil Case No. 2754.
Meanwhile, by agreement of the parties and upon order of the trial court, the
630 cavans of palay in question were withdrawn from the warehouse of NFA.
An inventory was made by the sheriff as representative of the Court, a
representative of Soriano and a representative of NFA (p. 13, Rollo).
On September 30, 1982, the trial court rendered judgment ordering petitioner
National Food Authority, its officers and agents to pay respondent Soriano (as
plaintiff in Civil Case No. 2754) the amount of P 47,250.00 representing the
unpaid price of the 630 cavans of palay plus legal interest thereof (p. 1-2, CA
Decision). The dispositive portion reads as follows:
WHEREFORE, the Court renders judgment in favor of the
plaintiff and against the defendants National Grains Authority,
and William Cabal and hereby orders:
1. The National Grains Authority, now the National Food
Authority, its officers and agents, and Mr. William Cabal, the
Provincial Manager of the National Grains Authority at the time
of the filing of this case, assigned at Tuguegarao, Cagayan,
whomsoever is his successors, to pay to the plaintiff Leon T.
Soriano, the amount of P47,250.00, representing the unpaid
price of the palay deliveries made by the plaintiff to the
Sales Part III Page |8
defendants consisting of 630 cavans at the rate Pl.50 per kilo
of 50 kilos per cavan of palay;
2. That the defendants National Grains Authority, now
National Food Authority, its officer and/or agents, and Mr.
William Cabal, the Provincial Manager of the National Grains
Authority, at the time of the filing of this case assigned at
Tuguegarao, Cagayan or whomsoever is his successors, are
likewise ordered to pay the plaintiff Leon T. Soriano, the legal
interest at the rate of TWELVE (12%) percent per annum, of
the amount of P 47,250.00 from the filing of the complaint on
November 20, 1979, up to the final payment of the price of P
47,250.00;
3. That the defendants National Grains Authority, now
National Food Authority, or their agents and duly authorized
representatives can now withdraw the total number of bags
(630 bags with an excess of 13 bags) now on deposit in the
bonded warehouse of Eng. Ben de Guzman at Tuguegarao,
Cagayan pursuant to the order of this court, and as appearing
in the written inventory dated October 10, 1980, (Exhibit F for
the plaintiff and Exhibit 20 for the defendants) upon payment
of the price of P 47,250.00 and TWELVE PERCENT (12%) legal
interest to the plaintiff,
4. That the counterclaim of the defendants is hereby
dismissed;
5. That there is no pronouncement as to the award of moral
and exemplary damages and attorney's fees; and
6. That there is no pronouncement as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was denied on
December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate Appellate
Court. In a decision promulgated on December 23, 1986 (pp. 9-21, Rollo) the
then Intermediate Appellate Court upheld the findings of the trial court and

affirmed the decision ordering NFA and its officers to pay Soriano the price of
the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of
the appellate court's decision was denied in a resolution dated April 17, 1986
(p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority and Mr.
William Cabal on May 15, 1986 assailing the decision of the Intermediate
Appellate Court on the sole issue of whether or not there was a contract of
sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by Soriano on
August 23, 1979 was made only for purposes of having it offered for sale.
Further, petitioners stated that the procedure then prevailing in matters of
palay procurement from qualified farmers were: firstly, there is a rebagging
wherein the palay is transferred from a private sack of a farmer to the NFA
sack; secondly, after the rebagging has been undertaken, classification of the
palay is made to determine its variety; thirdly, after the determination of its
variety and convinced that it passed the quality standard, the same will be
weighed to determine the number of kilos; and finally, it will be piled inside
the warehouse after the preparation of the Warehouse Stock Receipt (WSP)
indicating therein the number of kilos, the variety and the number of bags.
Under this procedure, rebagging is the initial operative act signifying
acceptance, and acceptance will be considered complete only after the
preparation of the Warehouse Stock Receipt (WSR). When the 630 cavans of
palay were brought by Soriano to the Carig warehouse of NFA they were only
offered for sale. Since the same were not rebagged, classified and weighed in
accordance with the palay procurement program of NFA, there was no
acceptance of the offer which, to petitioners' mind is a clear case of solicitation
or an unaccepted offer to sell.
The petition is not impressed with merit.
Article 1458 of the Civil Code of the Philippines defines sale as a contract
whereby one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other party to pay
therefore a price certain in money or its equivalent. A contract, on the other
hand, is a meeting of minds between two (2) persons whereby one binds
himself, with respect to the other, to give something or to render some service
(Art. 1305, Civil Code of the Philippines). The essential requisites of contracts
are: (1) consent of the contracting parties, (2) object certain which is the
subject matter of the contract, and (3) cause of the obligation which is
established (Art. 1318, Civil Code of the Philippines.
Sales Part III Page |9
In the case at bar, Soriano initially offered to sell palay grains produced in his
farmland to NFA. When the latter accepted the offer by noting in Soriano's
Farmer's Information Sheet a quota of 2,640 cavans, there was already a
meeting of the minds between the parties. The object of the contract, being
the palay grains produced in Soriano's farmland and the NFA was to pay the
same depending upon its quality. The fact that the exact number of cavans of
palay to be delivered has not been determined does not affect the perfection
of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact
that the quantity is not determinate shall not be an obstacle to the existence
of the contract, provided it is possible to determine the same, without the need
of a new contract between the parties." In this case, there was no need for
NFA and Soriano to enter into a new contract to determine the exact number
of cavans of palay to be sold. Soriano can deliver so much of his produce as
long as it does not exceed 2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners
further contend that there was no contract of sale because of the absence of
an essential requisite in contracts, namely, consent. It cited Section 1319 of
the Civil Code which states: "Consent is manifested by the meeting of the offer
and the acceptance of the thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contend that there was no consent
because there was no acceptance of the 630 cavans of palay in question.
The above contention of petitioner is not correct Sale is a consensual contract,
" ... , there is perfection when there is consent upon the subject matter and
price, even if neither is delivered." (Obana vs. C.A., L-36249, March 29, 1985,
135 SCRA 557, 560) This is provided by Article 1475 of the Civil Code which
states:
Art. 1475. The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object
of the contract and upon the price.
xxx
The acceptance referred to which determines consent is the acceptance of the
offer of one party by the other and not of the goods delivered as contended
by petitioners.
 S a l e s P a r t I I I P a g e | 10

From the moment the contract of sale is perfected, it is incumbent upon the
parties to comply with their mutual obligations or "the parties may reciprocally
demand performance" thereof. (Article 1475, Civil Code, 2nd par.).

The reason why NFA initially refused acceptance of the 630 cavans of palay
delivered by Soriano is that it (NFA) cannot legally accept the said delivery
because Soriano is allegedly not a bona fide farmer. The trial court and the
appellate court found that Soriano was a bona fide farmer and therefore, he
was qualified to sell palay grains to NFA.

Both courts likewise agree that NFA's refusal to accept was without just cause.
The above factual findings which are supported by the record should not be
disturbed on appeal.

ACCORDINGLY, the instant petition for review is DISMISSED. The assailed

decision of the then Intermediate Appellate Court (now Court of Appeals) is
affirmed. No costs.

G.R. No. 105387 November 11, 1993
JOHANNES SCHUBACK & SONS PHILIPPINE TRADING
CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing
business under the name and style "PHILIPPINE SJ INDUSTRIAL
TRADING," respondents.
Civil Law; Obligations and Contracts; When contract of sale is perfected; A
contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.—We reverse
the decision of the Court of Appeals and reinstate the decision of the trial
court. It bears emphasizing that a “contract of sale is perfected at the
moment there is a meeting of minds upon the thing which is the object of
the contract and upon the price x x x.”
Same; Same; Same; Letter of Credit; The opening of a letter of credit in
favor of a vendor is only a mode of payment; It is not among the essential
requirements of a contract of sale enumerated in Arts. 1305 and 1474 of the
Civil Code and therefore does not prevent the perfection of the contract
between the parties.—On the part of the buyer, the situation reveals that
private respondent failed to open an irrevocable letter of credit without
recourse in favor of Johannes Schuback of Hamburg, Germany. This
omission, however, does not prevent the perfection of the contract between
the parties, for the opening of a letter of credit is not to be deemed a
suspensive condition. The facts herein do not show that petitioner reserved
title to the goods until private respondent had opened a letter of credit.
Petitioner, in the course of its dealings with private respondent, did not
incorporate any provision declaring their contract of sale without effect until
after the fulfillment of the act of opening a letter of credit. The opening of a
letter of credit in favor of a vendor is only a mode of payment. It is not
among the essential requirements of a contract of sale enumerated in
Articles 1305 and 1474 of the Civil Code, the absence of any of which will
prevent the perfection of the contract from taking place. Johannes Schuback
& Sons Philippine Trading Corporation vs. Court of Appeals, 227 SCRA 717,
G.R. No. 105387 November 11, 1993
Hernandez, Velicaria, Vibar & Santiago for petitioner.
Ernesto M. Tomaneng for private respondent.
S a l e s P a r t I I I P a g e | 11
ROMERO, J.:
In this petition for review on certiorari, petitioner questions the reversal by the
Court of Appeals 1 of the trial court's ruling that a contract of sale had been
perfected between petitioner and private respondent over bus spare parts.
The facts as quoted from the decision of the Court of Appeals are as follows:
Sometime in 1981, defendant 2 established contact with
plaintiff through the Philippine Consulate General in Hamburg, West
3
Germany, because he wanted to purchase MAN bus spare parts from
Germany. Plaintiff communicated with its trading partner. Johannes
Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback
Hamburg) regarding the spare parts defendant wanted to order.
On October 16, 1981, defendant submitted to plaintiff a list of the
parts (Exhibit B) he wanted to purchase with specific part numbers
and description. Plaintiff referred the list to Schuback Hamburg for
quotations. Upon receipt of the quotations, plaintiff sent to defendant
a letter dated 25 November, 1981 (Exh. C) enclosing its offer on the
items listed by defendant.
On December 4, 1981, defendant informed plaintiff that he preferred
genuine to replacement parts, and requested that he be given 15%
on all items (Exh. D).
On December 17, 1981, plaintiff submitted its formal offer (Exh. E)
containing the item number, quantity, part number, description, unit
price and total to defendant. On December, 24, 1981, defendant
informed plaintiff of his desire to avail of the prices of the parts at that
time and enclosed Purchase Order No. 0101 dated 14 December 1981
(Exh. F to F-4). Said Purchase Order contained the item number, part
number and description. Defendant promised to submit the quantity
per unit he wanted to order on December 28 or 29 (Exh. F).
On December 29, 1981, defendant personally submitted the quantities
he wanted to Mr. Dieter Reichert, General Manager of plaintiff, at the
latter's residence (t.s.n., 13 December, 1984, p. 36). The quantities
were written in ink by defendant in the same Purchase Order
previously submitted. At the bottom of said Purchase Order, defendant

wrote in ink above his signature: "NOTE: Above P.O. will include a 3%
discount. The above will serve as our initial P.O." (Exhs. G to G-3-a).
Plaintiff immediately ordered the items needed by defendant from
Schuback Hamburg to enable defendant to avail of the old prices.
Schuback Hamburg in turn ordered (Order No. 12204) the items from
NDK, a supplier of MAN spare parts in West Germany. On January 4,
1982, Schuback Hamburg sent plaintiff a proforma invoice (Exhs. N-1
to N-3) to be used by defendant in applying for a letter of credit. Said
invoice required that the letter of credit be opened in favor of
Schuback Hamburg. Defendant acknowledged receipt of the invoice
(t.s.n., 19 December 1984, p. 40).
An order confirmation (Exhs. I, I-1) was later sent by Schuback
Hamburg to plaintiff which was forwarded to and received by
defendant on February 3, 1981 (t.s.n., 13 Dec. 1984, p. 42).
On February 16, 1982, plaintiff reminded defendant to open the letter
of credit to avoid delay in shipment and payment of interest (Exh. J).
Defendant replied, mentioning, among others, the difficulty he was
encountering in securing: the required dollar allocations and applying
for the letter of credit, procuring a loan and looking for a partner-
financier, and of finding ways 'to proceed with our orders" (Exh. K).
In the meantime, Schuback Hamburg received invoices from, NDK for
partial deliveries on Order No.12204 (Direct Interrogatories., 07 Oct,
1985, p. 3). Schuback Hamburg paid NDK. The latter confirmed receipt
of payments made on February 16, 1984 (Exh.C-Deposition).
On October 18, 1982, Plaintiff again reminded defendant of his order
and advised that the case may be endorsed to its lawyers (Exh. L).
Defendant replied that he did not make any valid Purchase Order and
that there was no definite contract between him and plaintiff (Exh. M).
Plaintiff sent a rejoinder explaining that there is a valid Purchase Order
and suggesting that defendant either proceed with the order and open
a letter of credit or cancel the order and pay the cancellation fee of
30% of F.O.B. value, or plaintiff will endorse the case to its lawyers
(Exh. N).
Schuback Hamburg issued a Statement of Account (Exh. P) to plaintiff
enclosing therewith Debit Note (Exh. O) charging plaintiff 30%
S a l e s P a r t I I I P a g e | 12
cancellation fee, storage and interest charges in the total amount of
DM 51,917.81. Said amount was deducted from plaintiff's account with
Schuback Hamburg (Direct Interrogatories, 07 October, 1985).
Demand letters sent to defendant by plaintiff's counsel dated March
22, 1983 and June 9, 1983 were to no avail (Exhs R and S).
Consequently, petitioner filed a complaint for recovery of actual or
compensatory damages, unearned profits, interest, attorney's fees and costs
against private respondent.
In its decision dated June 13, 1988, the trial court 4 ruled in favor of petitioner
by ordering private respondent to pay petitioner, among others, actual
compensatory damages in the amount of DM 51,917.81, unearned profits in
the amount of DM 14,061.07, or their peso equivalent.
Thereafter, private respondent elevated his case before the Court of Appeals.
On February 18, 1992, the appellate court reversed the decision of the trial
court and dismissed the complaint of petitioner. It ruled that there was no
perfection of contract since there was no meeting of the minds as to the price
between the last week of December 1981 and the first week of January 1982.
The issue posed for resolution is whether or not a contract of sale has been
perfected between the parties.
We reverse the decision of the Court of Appeals and reinstate the decision of
the trial court. It bears emphasizing that a "contract of sale is perfected at the
moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price. . . . " 5
Article 1319 of the Civil Code states: "Consent is manifested by the meeting of
the offer and acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter offer." The facts presented to us
indicate that consent on both sides has been manifested.
The offer by petitioner was manifested on December 17, 1981 when petitioner
submitted its proposal containing the item number, quantity, part number,
description, the unit price and total to private respondent. On December 24,
1981, private respondent informed petitioner of his desire to avail of the prices
of the parts at that time and simultaneously enclosed its Purchase Order No.
 S a l e s P a r t I I I P a g e | 13

0l01 dated December 14, 1981. At this stage, a meeting of the minds between
vendor and vendee has occurred, the object of the contract: being the spare
parts and the consideration, the price stated in petitioner's offer dated
December 17, 1981 and accepted by the respondent on December 24,1981.
Although said purchase order did not contain the quantity he wanted to order,
private respondent made good, his promise to communicate the same on
December 29, 1981. At this juncture, it should be pointed out that private
respondent was already in the process of executing the agreement previously
reached between the parties.
Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement made
by private respondent: "Note. above P.O. will include a 3% discount. The
above will serve as our initial P.O." This notation on the purchase order was
another indication of acceptance on the part of the vendee, for by requesting
a 3% discount, he implicitly accepted the price as first offered by the vendor.
The immediate acceptance by the vendee of the offer was impelled by the fact
that on January 1, 1982, prices would go up, as in fact, the petitioner informed
him that there would be a 7% increase, effective January 1982. On the other
hand, concurrence by the vendor with the said discount requested by the
vendee was manifested when petitioner immediately ordered the items needed
by private respondent from Schuback Hamburg which in turn ordered from
NDK, a supplier of MAN spare parts in West Germany.
When petitioner forwarded its purchase order to NDK, the price was still
pegged at the old one. Thus, the pronouncement of the Court Appeals that
there as no confirmed price on or about the last week of December 1981
and/or the first week of January 1982 was erroneous.
the perfection of the contract between the parties, for the opening of the letter
of credit is not to be deemed a suspensive condition. The facts herein do not
show that petitioner reserved title to the goods until private respondent had
opened a letter of credit. Petitioner, in the course of its dealings with private
respondent, did not incorporate any provision declaring their contract of sale
without effect until after the fulfillment of the act of opening a letter of credit.
The opening of a etter of credit in favor of a vendor is only a mode of payment.
It is not among the essential requirements of a contract of sale enumerated in
Article 1305 and 1474 of the Civil Code, the absence of any of which will
prevent the perfection of the contract from taking place.
To adopt the Court of Appeals' ruling that the contract of sale was dependent
on the opening of a letter of credit would be untenable from a pragmatic point
of view because private respondent would not be able to avail of the old prices
which were open to him only for a limited period of time. This explains why
private respondent immediately placed the order with petitioner which, in turn
promptly contacted its trading partner in Germany. As succinctly stated by
petitioner, "it would have been impossible for respondent to avail of the said
old prices since the perfection of the contract would arise much later, or after
the end of the year 1981, or when he finally opens the letter of credit." 6
WHEREFORE, the petition is GRANTED and the decision of the trial court dated
June 13, 1988 is REINSTATED with modification.
SO ORDERED.

While we agree with the trial court's conclusion that indeed a perfection of
contract was reached between the parties, we differ as to the exact date when
it occurred, for perfection took place, not on December 29, 1981. Although the
quantity to be ordered was made determinate only on December 29, 1981,
quantity is immaterial in the perfection of a sales contract. What is of
importance is the meeting of the minds as to the object and cause, which from
the facts disclosed, show that as of December 24, 1981, these essential
elements had already occurred.

On the part of the buyer, the situation reveals that private respondent failed
to open an irrevocable letter of credit without recourse in favor of Johannes
Schuback of Hamburg, Germany. This omission, however. does not prevent

[G.R. No. 116635. July 24, 1997]
CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner,
vs. COURT OF APPEALS, ANACLETO NOOL and EMILIA
NEBRE, respondents.
Contracts; Sales; Void Contracts; Article 1370 of the Civil Code is applicable
only to valid and enforceable contracts.—We cannot sustain petitioners’ view.
Article 1370 of the Civil Code is applicable only to valid and enforceable
contracts. The Regional Trial Court and the Court of Appeals ruled that the
principal contract of sale contained in Exhibit C and the auxiliary contract of
repurchase in Exhibit D are both void. This conclusion of the two lower
courts appears to find support in Dignos vs. Court of Appeals, where the
Court held: “Be that as it may, it is evident that when petitioners sold said
land to the Cabigas spouses, they were no longer owners of the same and
the sale is null and void.”
Same; Same; Same; A void contract cannot give rise to a valid one.—In the
present case, it is clear that the sellers no longer had any title to the parcels
of land at the time of sale. Since Exhibit D, the alleged contract of
repurchase, was dependent on the validity of Exhibit C, it is itself void. A void
contract cannot give rise to a valid one. Verily, Article 1422 of the Civil Code
provides that “(a) contract which is the direct result of a previous illegal
contract, is also void and inexistent.”
Same; Same; Same; Where the sellers can no longer deliver the object of
the sale to the buyers, as the buyers themselves have already acquired title
and delivery thereof from the rightful owner, such contract may be deemed
to be inoperative and may thus fall, by analogy, under item No. 5 of Article
1409 of the Civil Code—“Those which contemplate an impossible service.”—
In the present case however, it is likewise clear that the sellers can no longer
deliver the object of the sale to the buyers, as the buyers themselves have
already acquired title and delivery thereof from the rightful owner, the DBP.
Thus, such contract may be deemed to be inoperative and may thus fall, by
analogy, under item No. 5 of Article 1409 of the Civil Code: “Those which
contemplate an impossible service.” Article 1459 of the Civil Code provides
that “the vendor must have a right to transfer the ownership thereof [object
of the sale] at the time it is delivered.” Here, delivery of ownership is no
longer possible. It has become impossible.
Same; Same; Same; Pacto de Retro; The right to repurchase presupposes a
valid contract of sale between the same parties.—One “repurchases” only
S a l e s P a r t I I I P a g e | 14
what one has previously sold. In other words, the right to repurchase
presupposes a valid contract of sale between the same parties. Undisputedly,
private respondents acquired title to the property from DBP, and not from
petitioners.
Same; Same; Same; Options; An accepted unilateral promise to buy or 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.—Assuming
arguendo that Exhibit D is separate and distinct from Exhibit C and is not
affected by the nullity of the latter, still petitioners do not thereby acquire a
right to repurchase the property. In that scenario, Exhibit D ceases to be a
“right to repurchase” ancillary and incidental to the contract of sale; rather, it
becomes an accepted unilateral promise to sell. Article 1479 of the Civil
Code, however, provides that “an accepted unilateral promise to buy or 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.” In the
present case, the alleged written contract of repurchase contained in Exhibit
D is bereft of any consideration distinct from the price. Accordingly, as an
independent contract, it cannot bind private respondents. The ruling in
Diamante vs. CA supports this.
Same; Same; Same; Estoppel; One is not estopped in impugning the validity
of void contracts; It is a well-settled doctrine that “as between parties to a
contract, validity cannot be given to it by estoppel if it is prohibited by law or
it is against public policy.”—Petitioners argue that “when Anacleto Nool took
the possession of the two hectares, more or less, and let the other two
hectares to be occupied and cultivated by plaintiffs-appellants, Anacleto Nool
cannot later on disclaim the terms or contions (sic) agreed upon and his
actuation is within the ambit of estoppel x x x.” We disagree. The private
respondents cannot be estopped from raising the defense of nullity of
contract, specially in this case where they acted in good faith, believing that
indeed petitioners could sell the two parcels of land in question. Article 1410
of the Civil Code mandates that “(t)he action or defense for the declaration
of the inexistence of a contract does not prescribe.” It is a well-settled
doctrine that “as between parties to a contract, validity cannot be given to it
by estoppel if it is prohibited by law or it is against public policy (19 Am. Jur.
802). It is not within the competence of any citizen to barter away what
public policy by law seeks to preserve.” Thus, it is immaterial that private
respondents initially acted to implement the contract of sale, believing in
good faith that the same was valid. We stress that a contract void at
inception cannot be validated by ratification or prescription and certainly
cannot be binding on or enforceable against private respondents.

Same; Same; Same; If a void contract has already been performed, the
restoration of what has been given is in order, and, corollarily, interest
thereon will run only from the time of the aggrieved party’s demand for the
return of this amount.—We are not persuaded. Based on the previous
discussion, the balance of P14,000.00 under the void contract of sale may
not be enforced. Petitioners are the ones who have an obligation to return
what they unduly and improperly received by reason of the invalid contract
of sale. Since they cannot legally give title to what they “sold,” they cannot
keep the money paid for the object of the sale. It is basic that “(e)very
person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same.” Thus, if a void contract
has already “been performed, the restoration of what has been given is in
order.” Corollarily and as aptly ordered by respondent appellate court,
interest thereon will run only from the time of private respondents’ demand
for the return of this amount in their counterclaim. In the same vein,
petitioners’ possession and cultivation of the two hectares are anchored on
private respondents’ tolerance. Clearly, the latter’s tolerance ceased upon
their counterclaim and demand on the former to vacate. Hence, their right to
possess and cultivate the land ipso facto ceased.
DECISION
PANGANIBAN, J.:
A contract of repurchase arising out of a contract of sale where the seller did
not have any title to the property sold is not valid. Since nothing was sold,
then there is also nothing to repurchase.
Statement of the Case
This postulate is explained by this Court as it resolves this petition for review
on certiorari assailing the January 20, 1993 Decision[1] of Respondent Court
of Appeals[2] in CA-G.R. CV No. 36473, affirming the decision[3] of the trial
court[4] which disposed as follows:[5]
WHEREFORE, judgment is hereby rendered dismissing the complaint for no
cause of action, and hereby:
S a l e s P a r t I I I P a g e | 15
1. Declaring the private writing, Exhibit C, to be an option to sell, not binding
and considered validly withdrawn by the defendants for want of
consideration;
2. Ordering the plaintiffs to return to the defendants the sum
of P30,000.00 plus interest thereon at the legal rate, from the time
of filing of defendants counterclaim until the same is fully paid;
3. Ordering the plaintiffs to deliver peaceful possession of the two
hectares mentioned in paragraph 7 of the complaint and in paragraph
31 of defendants answer (counterclaim);
4. Ordering the plaintiffs to pay reasonable rents on said two
hectares at P5,000.00 per annum or at P2,500.00 per cropping from
the time of judicial demand mentioned in paragraph 2 of the
dispositive portion of this decision, until the said two hectares shall
have been delivered to the defendants; and
5. To pay the costs.
SO ORDERED.
The Antecedent Facts
The facts, which appear undisputed by the parties, are narrated by the Court
of Appeals as follows:
Two (2) parcels of land are in dispute and litigated upon here. The
first has an area of 1 hectare . It was formerly owned by Victorino
Nool and covered by Transfer Certificate of Title No. T-74950. With
an area of 3.0880 hectares, the other parcel was previously owned
by Francisco Nool under Transfer Certificate of Title No. T-
100945. Both parcels are situated in San Manuel, Isabela. The
plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the
appellants, seek recovery of the aforementioned parcels of land from
the defendants, Anacleto Nool, a younger brother of Conchita, and
Emilia Nebre, now the appellees.
In their complaint, plaintiff-appellants alleged inter alia that they are the
owners of subject parcels of land, and they bought the same from
Conchitas other brothers, Victorino Nool and Francisco Nool; that as
plaintiffs were in dire need of money, they obtained a loan from the Iligan
Branch of the Development Bank of the Philippines, in Ilagan, Isabela,
secured by a real estate mortgage on said parcels of land, which were still

registered in the names of Victorino Nool and Francisco Nool, at the time,
and for the failure of plaintiffs to pay the said loan, including interest and
surcharges, totaling P56,000.00, the mortgage was foreclosed; that within
the period of redemption, plaintiffs contacted defendant Anacleto Nool for
the latter to redeem the foreclosed properties from DBP, which the latter
did; and as a result, the titles of the two (2) parcels of land in question
were transferred to Anacleto Nool; that as part of their arrangement or
understanding, Anacleto Nool agreed to buy from the plaintiff Conchita
Nool the two (2) parcels of land under controversy, for a total price
of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon
payment of the balance of P14,000.00, plaintiffs were to regain possession
of the two (2) hectares of land, which amounts defendants failed to pay,
and the same day the said arrangement[6] was made; another
covenant[7] was entered into by the parties, whereby defendants agreed
to return to plaintiffs the lands in question, at anytime the latter have the
necessary amount; that plaintiffs asked the defendants to return the same
but despite the intervention of the Barangay Captain of their place,
defendants refused to return the said parcels of land to plaintiffs; thereby
impelling them (plaintiffs) to come to court for relief.
In their answer defendants-appellees theorized that they acquired the
lands in question from the Development Bank of the Philippines, through
negotiated sale, and were misled by plaintiffs when defendant Anacleto
Nool signed the private writing agreeing to return subject lands when
plaintiffs have the money to redeem the same; defendant Anacleto having
been made to believe, then, that his sister, Conchita, still had the right to
redeem the said properties.
The pivot of inquiry here, as aptly observed below, is the nature and
significance of the private document, marked Exhibit D for plaintiffs, which
document has not been denied by the defendants, as defendants even
averred in their Answer that they gave an advance payment of P30,000.00
therefor, and acknowledged that they had a balance of P14,000.00 to
complete their payment. On this crucial issue, the lower court adjudged
the said private writing (Exhibit D) as an option to sell not binding upon
and considered the same validly withdrawn by defendants for want of
consideration; and decided the case in the manner abovementioned.
There is no quibble over the fact that the two (2) parcels of land in dispute
were mortgaged to the Development Bank of the Philippines, to secure a loan
obtained by plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For the non-
payment of said loan, the mortgage was foreclosed and in the process,
ownership of the mortgaged lands was consolidated in DBP (Exhibits 3 and 4
S a l e s P a r t I I I P a g e | 16
for defendants). After DBP became the absolute owner of the two parcels of
land, defendants negotiated with DBP and succeeded in buying the same. By
virtue of such sale by DBP in favor of defendants, the titles of DBP were
cancelled and corresponding Transfer Certificates of Title (Annexes C and D to
the complaint) issued to the dependants.[8]
It should be stressed that Manuel S. Mallorca, authorized officer of DBP,
certified that the one-year redemption period was from March 16, 1982 up to
March 15, 1983 and that the Mortgagors right of redemption was not exercised
within this period.[9] Hence, DBP became the absolute owner of said parcels of
land for which it was issued new certificates of title, both entered on May 23,
1983 by the Registry of Deeds for the Province of Isabela.[10] About two years
thereafter, on April 1, 1985, DBP entered into a Deed of Conditional
Sale[11] involving the same parcels of land with Private Respondent Anacleto
Nool as vendee. Subsequently, the latter was issued new certificates of title
on February 8, 1988.[12]
The Court of Appeals ruled:[13]
WHEREFORE, finding no reversible error infirming it, the appealed
Judgment is hereby AFFIRMED in toto. No pronouncement as to costs.
The Issues
Petitioners impute to Respondent Court the following alleged errors:
1. The Honorable Court of Appeals, Second Division has
misapplied the legal import or meaning of Exhibit C in a way
contrary to law and existing jurisprudence in stating that it has
no binding effect between the parties and considered validly
withdrawn by defendants-appellees for want of consideration.
2. The Honorable Court of Appeals, Second Division has
miserably failed to give legal significance to the actual
possession and cultivation and appropriating exclusively the
palay harvest of the two (2) hectares land pending the payment
of the remaining balance of fourteen thousand pesos
(P14,000.00) by defendants-appellees as indicated in Exhibit C.
3. The Honorable Court of Appeals has seriously erred in affirming
the decision of the lower court by awarding the payment of rents
per annum and the return of P30,000.00 and not allowing the
plaintiffs-appellants to re-acquire the four (4) hectares, more or less

upon payment of one hundred thousand pesos (P100,000.00) as
shown in Exhibit D.[14]
The Courts Ruling
The petition is bereft of merit.
First Issue: Are Exhibits C and D Valid and Enforceable?
The petitioner-spouses plead for the enforcement of their agreement with
private respondents as contained in Exhibits C and D, and seek damages for
the latters alleged breach thereof. In Exhibit C, which was a private
handwritten document labeled by the parties as Resibo ti Katulagan or Receipt
of Agreement, the petitioners appear to have sold to private respondents the
parcels of land in controversy covered by TCT No. T-74950 and TCT No. T-
100945. On the other hand, Exhibit D, which was also a private handwritten
document in Ilocano and labeled as Kasuratan, private respondents agreed
that Conchita Nool can acquire back or repurchase later on said land when she
has the money.[15]
In seeking to enforce her alleged right to repurchase the parcels of land,
Conchita (joined by her co-petitioner-husband) invokes Article 1370 of the Civil
Code which mandates that (i)f the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall control. Hence, petitioners contend that the Court of Appeals
erred in affirming the trial courts finding and conclusion that said Exhibits C
and D were not merely voidable but utterly void and inexistent.
We cannot sustain petitioners view. Article 1370 of the Civil Code is applicable
only to valid and enforceable contracts. The Regional Trial Court and the Court
of Appeals ruled that the principal contract of sale contained in Exhibit C and
the auxilliary contract of repurchase in Exhibit D are both void. This conclusion
of the two lower courts appears to find support in Dignos vs. Court of
Appeals,[16] where the Court held:
Be that as it may, it is evident that when petitioners sold said land to
the Cabigas spouses, they were no longer owners of the same and
the sale is null and void.
In the present case, it is clear that the sellers no longer had any title to the
parcels of land at the time of sale. Since Exhibit D, the alleged contract of
repurchase, was dependent on the validity of Exhibit C, it is itself void. A void
contract cannot give rise to a valid one.[17] Verily, Article 1422 of the Civil Code
S a l e s P a r t I I I P a g e | 17
provides that (a) contract which is the direct result of a previous illegal
contract, is also void and inexistent.
We should however add that Dignos did not cite its basis for ruling that a sale
is null and void where the sellers were no longer the owners of the
property. Such a situation (where the sellers were no longer owners) does not
appear to be one of the void contracts enumerated in Article 1409 of the Civil
Code.[18] Moreover, the Civil Code[19] itself recognizes a sale where the goods
are to be acquired x x x by the seller after the perfection of the contract of
sale, clearly implying that a sale is possible even if the seller was not the owner
at the time of sale, provided he acquires title to the property later on.
In the present case however, it is likewise clear that the sellers can no longer
deliver the object of the sale to the buyers, as the buyers themselves have
already acquired title and delivery thereof from the rightful owner, the
DBP. Thus, such contract may be deemed to be inoperative [20] and may thus
fall, by analogy, under item no. 5 of Article 1409 of the Civil Code: Those which
contemplate an impossible service. Article 1459 of the Civil Code provides that
the vendor must have a right to transfer the ownership thereof [object of the
sale] at the time it is delivered. Here, delivery of ownership is no longer
possible. It has become impossible.
Furthermore, Article 1505 of the Civil Code provides that where goods are sold
by a person who is not the owner thereof, and who does not sell them under
authority or with consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods is by his conduct
precluded from denying the sellers authority to sell. Here, there is no allegation
at all that petitioners were authorized by DBP to sell the property to the private
respondents. Jurisprudence, on the other hand, teaches us that a person can
sell only what he owns or is authorized to sell; the buyer can as a consequence
acquire no more than what the seller can legally transfer. [21] No one can give
what he does not have neno dat quod non habet. On the other hand, Exhibit
D presupposes that petitioners could repurchase the property that they sold
to private respondents. As petitioners sold nothing, it follows that they can
also repurchase nothing. Nothing sold, nothing to repurchase. In this light, the
contract of repurchase is also inoperative and by the same analogy, void.
Contract of Repurchase Dependent on Validity of Sale
As borne out by the evidence on record, the private respondents bought the
two parcels of land directly from DBP on April 1, 1985 after discovering that
petitioners did not own said property, the subject of Exhibits C and D executed
on November 30, 1984. Petitioners, however, claim that they can exercise their
alleged right to repurchase the property, after private respondents had

acquired the same from DBP.[22] We cannot accede to this, for it clearly
contravenes the intention of the parties and the nature of their
agreement. Exhibit D reads:
WRITING
Nov. 30, 1984
That I, Anacleto Nool have bought from my sister Conchita Nool a
land an area of four hectares (4 has.) in the value of One Hundred
Thousand (100,000.00) Pesos. It is our agreement as brother and
sister that she can acquire back or repurchase later on said land
when she has the money. [Underscoring supplied]
As proof of this agreement we sign as brother and sister this written
document this day of Nov. 30, 1984, at District 4, San Manuel,
Isabela.
Sgd ANACLETO NOOL
Anacleto Nool
Sgd Emilio Paron
Witness
Sgd Conchita Nool
Conchita Nool[23]
One repurchases only what one has previously sold. In other words, the right
to repurchase presupposes a valid contract of sale between
the same parties. Undisputedly, private respondents acquired title to the
property from DBP, and not from the petitioners.
Assuming arguendo that Exhibit D is separate and distinct from Exhibit C and
is not affected by the nullity of the latter, still petitioners do not thereby acquire
a right to repurchase the property. In that scenario, Exhibit D ceases to be a
right to repurchase ancillary and incidental to the contract of sale; rather, it
becomes an accepted unilateral promise to sell. Article 1479 of the Civil Code,
however, provides that an accepted unilateral promise to buy or 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. In the present
case, the alleged written contract of repurchase contained in Exhibit D is bereft
of any consideration distinct from the price. Accordingly, as an independent
contract, it cannot bind private respondents. The ruling in Diamante vs.
S a l e s P a r t I I I P a g e | 18
CA[24] supports this. In that case, the Court through Mr. Justice Hilario G.
Davide, Jr. explained:
Article 1601 of the Civil Code provides:
Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of article 1616 and
other stipulations which may have been agreed upon.
In Villarica, et al. Vs. Court of Appeals, et al., decided on 29
November 1968, or barely seven (7) days before the
respondent Court promulgated its decisions in this case, this
Court, interpreting the above Article, held:
The right of repurchase is not a right granted the vendor by
the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as
one of the stipulations of the contract. Once the instrument
of absolute sale is executed, the vendor can not longer
reserve the right to repurchase, and any right thereafter
granted the vendor by the vendee in a separate instrument
cannot be a right of repurchase but some other right like
the option to buy in the instant case. x x x.
In the earlier case of Ramos, et al. vs. Icasiano, et al.,
decided in 1927, this Court had already ruled that an
agreement to repurchase becomes a promise to sell when
made after the sale, because when the sale is made without
such an agreement, the purchaser acquires the thing sold
absolutely, and if he afterwards grants the vendor the right
to repurchase, it is a new contract entered into by the
purchaser, as absolute owner already of the object. In that
case the vendor has nor reserved to himself the right to
repurchase.
In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found
another occasion to apply the foregoing principle.
Hence, the Option to Repurchase executed by private respondent in the
present case, was merely a promise to sell, which must be governed by
Article 1479 of the Civil Codewhich reads as follows:

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.
Right to Repurchase Based on Homestead or Trust Non-
Existent
Petitioners also base their alleged right to repurchase on (1) Sec. 119 of the
Public Land Act[25] and (2) an implied trust relation as brother and sister.[26]
The Court notes that Victorino Nool and Francisco Nool mortgaged the land to
DBP. The brothers, together with Conchita Nool and Anacleto Nool, were all
siblings and heirs qualified to repurchase the two parcels of land under Sec.
119 of the Public Land Act which provides that (e)very conveyance of land
acquired under the free patent or homestead provisions, when proper, shall
be subject to repurchase by the applicant, his widow or legal heirs, within a
period of five years from the date of conveyance. Assuming the applicability
of this statutory provision to the case at bar, it is indisputable that Private
Respondent Anacleto Nool already repurchased from DBP the contested
properties. Hence, there was no more right of repurchase that his sister
Conchita or brothers Victorino and Francisco could exercise. The properties
were already owned by an heir of the homestead grantee and the rationale of
the of the provision to keep homestead lands within the family of the grantee
was thus fulfilled.[27]
The claim of a trust relation is likewise without merit. The records show that
private respondents did not purchase the contested properties from DBP in
trust for petitioners. The former, as previously mentioned, in fact bought the
land from DBP upon realization that the latter could not validly sell the
same. Obviously, petitioners bought it for themselves. There is no evidence at
all in the records that they bought the land in trust for private
respondents. The fact that Anacleto Nool was the younger brother of Conchita
Nool and that they signed a contract of repurchase, which as discussed earlier
was void, does not prove the existence of an implied trust in favor of
petitioners.
Second Issue: No Estoppel in Impugning the Validity of Void
Contracts
S a l e s P a r t I I I P a g e | 19
Petitioners argue that when Anacleto Nool took the possession of the two
hectares, more or less, and let the other two hectares to be occupied and
cultivated by plaintiffs-appellants, Anacleto Nool cannot later on disclaim the
terms or contions (sic) agreed upon and his actuation is within the ambit of
estoppel x x x.[28] We disagree. The private respondents cannot be estopped
from raising the defense of nullity of contract, specially in this case where they
acted in good faith, believing that indeed petitioners could sell the two parcels
of land in question.Article 1410 of the Civil Code mandates that (t)he action or
defense for the declaration of the inexistence of a contract does not
prescribe. It is well-settled doctrine that as between parties to a contract,
validity cannot be given to it by estoppel if it is prohibited by law or it is against
public policy (19 Am. Jur. 802). It is not within the competence of any citizen
to barter away what public policy by law seeks to preserve. [29] Thus, it is
immaterial that private respondents initially acted to implement the contract
of sale, believing in good faith that the same was valid.We stress that a
contract void at inception cannot be validated by ratification or prescription
and certainly cannot be binding on or enforceable against private
respondents.[30]
Third Issue: Return of P30,000.00 with Interest and Payment of
Rent
Petitioners further argue that it would be a miscarriage of justice to order them
(1) to return the sum of P30,000.00 to private respondents when allegedly it
was Private Respondent Anacleto Nool who owed the former a balance of
P14,000.00 and (2) to order petitioners to pay rent when they were allowed
to cultivate the said two hectares.[31]
We are not persuaded. Based on the previous discussion, the balance
of P14,000.00 under the void contract of sale may not be enforced. Petitioners
are the ones who have an obligation to return what they unduly and improperly
received by reason of the invalid contract of sale. Since they cannot legally
give title to what they sold, they cannot keep the money paid for the object of
the sale. It is basic that (e)very person who through an act of performance by
another, or any other means, acquires or comes into possession of something
at the expense of the latter without just or legal ground, shall return the
same.[32] Thus, if a void contract has already been performed, the restoration
of what has been given is in order.[33] Corollarily and as aptly ordered by
respondent appellate court, interest thereon will run only from the time of
private respondents demand for the return of this amount in their
counterclaim.[34] In the same vein, petitioners possession and cultivation of the
two hectares are anchored on private respondents tolerance. Clearly, the
latters tolerance ceased upon their counterclaim and demand on the former
 S a l e s P a r t I I I P a g e | 20

to vacate. Hence, their right to possess and cultivate the land ipso
facto ceased.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court
of Appeals affirming that of the trial court is hereby AFFIRMED.
SO ORDERED.