2003hs103 Sales

Haystacks
Sales
Michael Vernon Guerrero Mendiola 2003 Shared under Creative Commons AttributionNonCommercial-ShareAlike 3 0 !hili""ines license
Some #i$hts #eserved
%able o& Contents

Aca" vs CA 'G# (()((*+ , -ecember (../0 1 ( Adalin vs CA 'G# (20(.(+ (0 2ctober (..,0 1 3 Addison vs 3eli4 'G# (23*2+ 3 Au$ust (.()0 1 5 Adel&a !ro"erties vs CA 'G# (((23)+ 2/ 6anuary (../0 1 . A$ricultural and Home 74tension -evelo"ment Grou" vs CA 'G# .23(0+ 3 Se"tember (..20 1 Almendra vs 8AC 'G# ,/(((+ 2( November (..(0 1 (, An$ 9u Asuncion+ et al+ vs CA 'G# (0.(2/+ 2 -ecember (..*0 1 20 An$eles vs Calasan: 'G# ;-*22)3+ () March (.)/0 1 2* A:cona vs #eyes 'G# 3./.0+ 5 3ebruary (.3*0 1 2, A:nar vs 9a"dian$co 'G# ;-()/35+ 3( March (.5/0 1 2. <abasa vs CA 'G# (2*0*/+ 2( May (..)0 1 3( <a$nas vs CA 'G# 3)*.)+ (0 Au$ust (.).0 1 3* <alatbat vs CA 'G# (0.*(0+ 2) Au$ust (..50 1 3, Calimlim-Canullas vs 3ortun 'G# /,*..+ 22 6une (.)*0 1 *0 Carbonell vs CA 'G# ;-2..,2+ 25 6anuary (.,50 1 *2 Carumba vs CA 'G# ;-2,/),+ () 3ebruary (.,00 1 *. Celestino Co vs Collector o& 8nternal #evenue 'G# ;-)/05+ 3( Au$ust (./50 1 Chen$ vs Genato 'G# (2.,50+ 2. -ecember (..)0 1 /2 C8# vs 7n$ineerin$ 7=ui"ment and Su""ly 'G# ;-2,0**+ 30 6une (.,/0 1 Coronel vs CA 'G# (03/,,+ , 2ctober (..50 1 52 Coronel vs 2na 'G# (02)0+ , 3ebruary (.(50 1 5) Cru: vs Cabana 'G# /5232+ 22 6une (.)*0 1 ,( Cru: vs 3ili"inas 8nvestment 'G# ;-2*,,2+ 2, May (.5)0 1 ,3 Cuyugan vs. Santos ......... [unavailable] -a$u"an %radin$ vs Macam 'G# ;-()*.,+ 3( May (.5/0 1 ,5 -alion vs CA 'G# ,).03+ 2) 3ebruary (..00 1 ,, -a$uilan vs 8AC 'G# ;-5..,0+ 2) November (.))0 1 ,. -e la Cavada vs -ia: 'G# ;-((55)+ ( A"ril (.()0 1 )2 -elta Motors Sales vs Niu >im -uan 'G# 5(0*3+ 2 Se"tember (..20 1 -i$nos vs ;umun$sod 'G# ;-/.255+ 2. 3ebruary (.))0 1 ),
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Dizon vs. CA, 302 SCRA 288 ......... [unavailable] -oromal vs CA 'G# ;-350)3+ / Se"tember (.,/0 1 .0 -y vs CA 'G# .2.).+ ) 6uly (..(0 1 .3 7-CA !ublishin$ vs Santos 'G# )02.)+ 25 A"ril (..00 1 .5 Elisco ool !anu"actu#ing vs. CA, 308 SCRA $3% &%'''( ......... [unavailable] 7n$ineerin$ and Machinery Cor" vs CA 'G# /225,+ 2* 6anuary (..50 1 .. 7=uatorial #ealty vs May&air %heater 'G# (05053+ 2( November (..50 1 (02 8ntestate 7state o& 7milio Camon? 7reneta vs <e:ore 'G# ;-2.,*5+ 25 November (.,30 1 Heirs o& 7scanlar+ et al+ vs CA 'G# ((.,,,+ 23 2ctober (..,0 1 ((0 7s"iritu vs Valerio 'G# ;-()0()+ 25 -ecember (.530 1 ((5 7sto=ue vs !a@imula 'G# ;-2**(.+ (/ 6uly (.5)0 1 ((, 3ilinvest Credit vs CA 'G# )2/0)+ 2. Se"tember (.).0 1 (() 3ili"inas 8nvestment vs #idad 'G# ;-2,5*/+ 2) November (.5.0 1 (2( )i#st *+ili,,ine -nte#national .an/ vs. CA, 202 SCRA &%''1( ......... [unavailable] )#oilan vs. *an23#iental S+i,,ing Co., %2 SCRA 2$1 &%'14( ......... [unavailable] 3ule vs CA 'G# ((22(2+ 2 March (..)0 1 (2* Gaite vs 3onacier 'G# ;-(()2,+ 3( 6uly (.5(0 1 (2) Goldenrod 8nc+ vs CA 'G# (25)(2+ 2* November (..)0 1 (3( Guian$ vs CA 'G# (2/(,2+ 25 6une (..)0 1 (33 6+ Schuback A Sons vs CA 'G# (0/3),+ (( November (..30 1 (3/
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S"ouses ;adan$a vs CA 'G# ;-//...+ 2* Au$ust (.)*0 1 (3, ;e$arda Hermanos vs Saldana 'G# ;-25/,)+ 2) 6anuary (.,*0 1 (3) ;evy Hermanos vs Gervacio 'G# *5305+ 2, 2ctober (.3.0 1 (*0 5i6 vs. CA, 213 SCRA 01' &%''1( ......... [unavailable] ;imketkai Sons Millin$ vs CA 'G# (()/0.+ ( -ecember (../0 1 (*( ;oyola vs CA 'G# ((/,3*+ 23 3ebruary 20000 1 (*, 5uzon .#o/e#age vs. !a#iti6e, 81 SCRA 300 &%'$8( ......... [unavailable] Macondray vs 7usta=uio 'G# *35)3+ (5 6uly (.3,0 1 (/0 Manila #acin$ Club vs Manila 6ockey Club 'G# ;-*5/33+ 2) 2ctober (.3.0 1 Ma"alo vs Ma"alo 'G# ;-2(*). and ;-2(52)+ (. May (.550 1 (//
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Mate vs CA 'G #+ Nos+ (20,2*-2/+ 2( May (..)0 1 (/) !claug+in vs. CA, %44 SCRA 1'3 &%'81( ......... [unavailable] Medina vs Collector o& 8nternal #evenue 'G# ;-(/((3+ 2) 6anuary (.5(0 1 (50 Melli:a vs 8loilo City 'G# ;-2*,32+ 30 A"ril (.5)0 1 (5( Mendo:a vs >alaB 'G# (5*20+ (2 2ctober (.2(0 1 (53 Mindanao Academy vs 9a" 'G# ;-(,5)(+ 25 3ebruary (.5/0 1 (5/ Montilla vs CA 'G# ;-*,.5)+ . May (.))0 1 (5) National Grains Authority vs 8AC 'G# ,**,0+ ) March (.).0 1 (,0 Navera vs CA 'G# ;-/5)3)+ 25 A"ril (..00 1 (,( 7ietes vs. CA, 41 SCRA 104 ......... [unavailable] Noel vs CA 'G# /.//0+ (( 6anuary (../0 1 (,5 S"ouses Nonato vs 8AC 'G# ;-5,()(+ 22 November (.)/0 1 (,. Nool vs CA 'G# ((553/+ 2* 6uly (..,0 1 ()0 Northern Motors vs Sa"inoso 'G# ;-2)0,*+ 2. May (.,00 1 ()* 38yssey *a#/ -nc, vs. CA, 280 SCRA 203 &%''$( ......... [unavailable] 2n$ vs CA 'G# .,3*,+ 5 6uly (...0 1 ()5 2n$ vs 2n$ 'G# ;-5,)))+ ) 2ctober (.)/0 1 (). *angilinan vs. CA, 2$' SCRA 0'0 &%''$( ......... [unavailable] !asa$ui vs Villablanca 'G# ;-2(..)+ (0 November (.,/0 1 (.0 !aulmitan vs CA 'G# 5(/)*+ 2/ November (..20 1 (.( !hili""ine %rust Com"any vs !N< 'G# (5*)3+ , -ecember (.2(0 1 (.* !hili""ine %rust Co vs #oldan 'G# ;-)*,,+ 3( May (./50 1 (.) !ichel vs Alon:o 'G# ;-35.02+ 30 6anuary (.)20 1 (.. *7. vs. CA, 212 SCRA 414 &%''0( ......... [unavailable] !oBer Commercial and 8ndustrial Cor" vs CA 'G# ((.,*/+ 20 6une (..,0 1 203 !uyat A Sons vs Arco Amusement 'G# *,/3)+ 20 6une (.*(0 1 205 Cui@ada vs CA 'G# (25***+ * -ecember (..)0 1 20) Cuimson vs #osete 'G# ;-23.,+ . Au$ust (./00 1 2(( Cuiro$a vs !arsons HardBare 'G# ((*.(+ 23 Au$ust (.()0 1 2(3 #adioBealth 3inance vs !alileo 'G# )3*32+ 20 May (..(0 1 2(/ #e"ublic vs !hili""ine -evelo"ment Cor" 'G# ;-(0(*(+ 3( 6anuary (./)0 1 2(5 #idad vs 3ili"inas 8nvestment 'G# ;-3.)05+ 2, 6anuary (.)30 1 2(. #illo vs CA 'G# (2/3*,+ (. 6une (..,0 1 22( #omero vs CA 'G# (03/,,+ , 2ctober (..50 1 223 Ro9ue vs. 5a,uz, '1 SCRA $4% &%'80( ......... [unavailable] #ubias vs <atiller 'G# ;-3/,02+ 2. May (.,30 1 225 Sanche: vs #i$os 'G# ;-2/*.*+ (* 6une (.,20 1 22. Siy Con$ <ien$ and Co vs Hon$kon$ and Shan$hai <ankin$ Cor" 'G# 3*5//+ / March (.320 1 Soriano+ et al vs <autista+ et al 'G# ;-(/,/2+ 2. -ecember (.520 1 23* Sta Ana vs Hernande: 'G# ;-(53.*+ (, -ecember (.550 1 235
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Su#ia vs. -AC, %0% SCRA 11%&%'8$( ......... [unavailable] agatac vs. :i6enez, 03 3; 3$'2 &%'0$( ......... [unavailable] %a@anlan$it vs Southern Motors 'G# ;-(0,).+ 2) May (./,0 1 23. %anedo vs CA 'G# (0**)2+ 22 6anuary (..50 1 2*( %orres vs CA 'G# (3*//.+ . -ecember (...0 1 2*3 %oyota ShaB vs CA 'G# ((55/0+ 23 May (../0 1 2*5 <nive#sal )oo8 Co#,. vs. CA, 33 SCRA % &%'$0( ......... [unavailable] Dy vs CA 'G# (20*5/+ . Se"tember (...0 1 2*. Vallarta vs CA 'G# ;-*0(./+ 2. May (.),0 1 2/3 Vas=ue: vs CA 'G# )3,/.+ (2 6uly (..(0 1 2/5 Vda+ -e Gordon vs CA 'G# ;-3,)3(+ 23 November (.)(0 1 2/) Vda+ -e 6omoc vs CA 'G# .2),(+ 2 Au$ust (..(0 1 250 Vda+ -e Cuiambao vs Manila Motor Com"any 'G# ;-(,3)*+ 3( 2ctober (.5(0 1 Velasco vs CA 'G# ;-3(0()+ 2. 6une (.,30 1 25* Villa&lor vs CA 'G# ./5.*+ . 2ctober (..,0 1 25) Villamor vs CA 'G# .,332+ (0 2ctober (..(0 1 2,* Villonco #ealty vs <ormaheco 8nc+ 'G# ;-25),2+ 2/ 6uly (.,/0 1 2,, =ao >a Sin #a8ing vs. CA, 20' SCRA $13 ......... [unavailable] 9u %ek vs Gon:ales 'G# ..3/+ ( 3ebruary (.(/0 1 2)3 =uviengco vs. Dacuycuy, %04 SCRA 118 &%'8%( ......... [unavailable] Eayas vs ;uneta Motor Com"any 'G# ;-30/)3+ 23 2ctober (.)20 1 2)/
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This collection contains one hundred three (103) out of one hundred twenty one (121) assigned cases summarized in this format by Michael Vernon M. uerrero (as a so!homore law student) during the "irst #emester$ school year 2003%200& in the #ales class under 'tty. 'mado (aolo )imayuga at the 'rellano *ni+ersity #chool of ,aw ('*#,). -om!iled as ()"$ .uly 2011. /erne uerrero entered '*#, in .une 2002 and e+entually graduated from '*#, in 2000. 1e !assed the (hili!!ine bar e2aminations immediately after ('!ril 2003).
BBB berne$uerrero com
Haystacks F<erne GuerreroG
'(0 Aca" v CA 'G # No (()((* -ecember ,+ (../ 0 "irst )i+ision$ (adilla (.)4 & concurring 3actsH The title to ,ot 1130 of the -adastral #ur+ey of 1inigaran$ 5egros 6ccidental was e+idenced by 6-T 7%12138. The lot has an area of 13$320 s9. m. The title was issued and is registered in the name of s!ouses #antiago Vas9uez and ,orenza 6ruma. 'fter both s!ouses died$ their only son "eli2berto inherited the lot. :n 183;$ "eli2berto e2ecuted a duly notarized document entitled <)eclaration of 1eirshi! and )eed of 'bsolute #ale= in fa+or of -osme (ido. #ince 1800$ Teodoro 'ca! had been the tenant of a !ortion of the said land$ co+ering an area of 8$;00 s9. m. >hen ownershi! was transferred in 183; by "eli2berto to -osme (ido$ 'ca! continued to be the registered tenant thereof and religiously !aid his leasehold rentals to (ido and thereafter$ u!on (ido?s death$ to his widow ,aurenciana. The contro+ersy began when (ido died interstate and on 23 5o+ember 18@1$ his sur+i+ing heirs e2ecuted a notarized document denominated as <)eclaration of 1eirshi! and >ai+er of 7ights of ,ot 1130 1inigaran -adastre$= wherein they declared to ha+e adAudicated u!on themsel+es the !arcel of land in e9ual share$ and that they wai+e$ 9uitclaim all right$ interests and !artici!ation o+er the !arcel of land in fa+or of Bdy de los 7eyes. The document was signed by all of (ido?s heirs. Bdy de los 7eyes did not sign said document. :t will be noted that at the time of -osme (ido?s death$ title to the !ro!erty continued to be registered in the name of the Vas9uez s!ouses. *!on obtaining the )eclaration of 1eirshi! with >ai+er of 7ights in his fa+or$ de los 7eyes filed the same with the 7egistry of )eeds as !art of a notice of an ad+erse claim against the original certificate of title. Thereafter$ delos 7eyes sought for 'ca! to !ersonally inform him that he had become the new owner of the land and that the lease rentals thereon should be !aid to him. )elos 7eyes alleged that he and 'ca! entered into an oral lease agreement wherein 'ca! agreed to !ay 10 ca+ans of !alay !er annum as lease rental. :n 18@2$ 'ca! allegedly com!lied with said obligation. :n 18@3$ howe+er$ 'ca! refused to !ay any further lease rentals on the land$ !rom!ting delos 7eyes to seeC the assistance of the then Ministry of 'grarian 7eform (M'7) in 1inigaran$ 5egros 6ccidental. The M'7 in+ited 'ca!$ who sent his wife$ to a conference scheduled on 13 6ctober 18@3. The wife stated that the she and her husband did not recognize delos 7eyes?s claim of ownershi! o+er the land. 6n 2@ '!ril 18@@$ after the la!se of four (&) years$ delos 7eys field a com!laint for reco+ery of !ossession and damages against 'ca!$ alleging that as his leasehold tenant$ 'ca! refused and failed to !ay the agreed annual rental of 10 ca+ans of !alay des!ite re!eated demands. 6n 20 'ugust 1881$ the lower court rendered a decision in fa+or of delos 7eyes$ ordering the forfeiture of 'ca!?s !referred right of a -ertificae of ,and Transfer under () 23 and his farmholdings$ the return of the farmland in 'ca!?s !ossession to delos 7eyes$ and 'ca! to !ay (;$000.00 as attorney?s fees$ the sum of (1$000.00 as e2!enses of litigation and the amount of (10$000.00 as actual damages. 'ggrie+ed$ !etitioner a!!ealed to the -ourt of '!!eals. #ubse9uently$ the -' affirmed the lower court?s decision$ holding that de los 7eyes had ac9uired ownershi! of ,ot 5o. 1130 of the -adastral #ur+ey of 1inigaran$ 5egros 6ccidental based on a document entitled <)eclaration of 1eirshi! and >ai+er of 7ights=$ and ordering the dis!ossession of 'ca! as leasehold tenant of the land for failure to !ay rentals. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt granted the !etition$ set aside the decision of the 7T- 5egros 6ccidental$ dismissed the com!laint for reco+ery of !ossession and damages against 'ca! for failure to !ro!erly state a cause of action$ without !reAudice to !ri+ate res!ondent taCing the !ro!er legal ste!s to establish the legal mode by
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which he claims to ha+e ac9uired ownershi! of the land in 9uestion. ( res Asserted ri$ht or claim to oBnershi" not su&&icient "er se to $ive rise to oBnershi" over the
'n asserted right or claim to ownershi! or a real right o+er a thing arising from a Auridical act$ howe+er Austified$ is not !er se sufficient to gi+e rise to ownershi! o+er the res. That right or title must be
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com!leted by fulfilling certain conditions im!osed by law. 1ence$ ownershi! and real rights are ac9uired only !ursuant to a legal mode or !rocess. >hile title is the Auridical Austification$ mode is the actual !rocess of ac9uisition transfer of ownershi! o+er a thing in 9uestion. 2 Classes o& modes o& ac=uirin$ oBnershi" *nder 'rticle 312 of the -i+il -ode$ the modes of ac9uiring ownershi! are generally classified into two (2) classes$ namely$ the original mode (i.e$ through occu!ation$ ac9uisiti+e !rescri!tion$ law or intellectual creation) and the deri+ati+e mode (i.e.$ through succession mortis causa or tradition as a result of certain contracts$ such as sale$ barter$ donation$ assignment or mutuum). 3 Contract o& Sale? I-eclaration o& Heirshi" and Jaiver o& #i$htsK an e4tra@udicial settlement betBeen heirs under #ule ,* o& the #ules o& Court :n a -ontract of #ale$ one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determinate thing$ and the other !arty to !ay a !rice certain in money or its e9ui+alent. 6n the other hand$ a declaration of heirshi! and wai+er of rights o!erates as a !ublic instrument when filed with the 7egistry of )eeds whereby the intestate heirs adAudicate and di+ide the estate left by the decedent among themsel+es as they see fit. :t is in effect an e2traAudicial settlement between the heirs under 7ule 3& of the 7ules of -ourt. :n the !resent case$ the trial court erred in e9uating the nature and effect of the )eclaration of 1eirshi! and >ai+er of 7ights the same with a contract (deed) of sale. * Sale o& hereditary ri$hts and Baiver o& hereditary ri$hts distin$uished There is a marCed difference between a sale of hereditary rights and a wai+er of hereditary rights. The first !resumes the e2istence of a contract or deed of sale between the !arties. The second is$ technically s!eaCing$ a mode of e2tinction of ownershi! where there is an abdication or intentional relin9uishment of a Cnown right with Cnowledge of its e2istence and intention to relin9uish it$ in fa+or of other !ersons who are co%heirs in the succession. :n the !resent case$ de los 7eyes$ being then a stranger to the succession of -osme (ido$ cannot conclusi+ely claim ownershi! o+er the subAect lot on the sole basis of the wai+er document which neither recites the elements of either a sale$ or a donation$ or any other deri+ati+e mode of ac9uiring ownershi!. / sale Summon o& Ministry o& A$rarian #e&orm does not conclude actuality o& sale nor notice o& such
The conclusion$ made by the trial and a!!ellate courts$ that a <sale= trans!ired between -osme (ido?s heirs and de los 7eyes and that 'ca! ac9uired actual Cnowledge of said sale when he was summoned by the Ministry of 'grarian 7eform to discuss de los 7eyes? claim o+er the lot in 9uestion$ has no basis both in fact and in law. 5 A notice o& adverse claim does not "rove oBnershi" over the lot? Adverse claim not su&&icient to cancel the certi&icate o& tile and &or another to be issued in his name ' notice of ad+erse claim$ by its nature$ does not howe+er !ro+e !ri+ate res!ondent?s ownershi! o+er the tenanted lot. <' notice of ad+erse claim is nothing but a notice of a claim ad+erse to the registered owner$ the +alidity of which is yet to be established in court at some future date$ and is no better than a notice of lis !endens which is a notice of a case already !ending in court.= :n the !resent case$ while the e2istence of said ad+erse claim was duly !ro+en (thus being filed with the 7egistry of )eeds which contained the )eclaration
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of 1eirshi! with >ai+er of rights an was annotated at the bacC of the 6riginal -ertificate of Title to the land in 9uestion)$ there is no e+idence whatsoe+er that a deed of sale was e2ecuted between -osme (ido?s heirs and de los 7eyes transferring the rights of the heirs to the land in fa+or of de los 7eyes. )e los 7eyes? right or interest therefore in the tenanted lot remains an ad+erse claim which cannot by itself be sufficient to cancel the 6-T to the land and title to be issued in de los 7eyes? name. , o& %ransaction betBeen heirs and de los #eyes bindin$ betBeen "arties+ but cannot a&&ect ri$ht
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Aca" to tenanted land Bithout corres"ondin$ "roo& thereo& >hile the transaction between (ido?s heirs and de los 7eyes may be binding on both !arties$ the right of 'ca! as a registered tenant to the land cannot be !erfunctorily forfeited on a mere allegation of de los 7eyes? ownershi! without the corres!onding !roof thereof. 'ca! had been a registered tenant in the subAect land since 1800 and religiously !aid lease rentals thereon. :n his mind$ he continued to be the registered tenant of -osme (ido and his family (after (ido?s death)$ e+en if in 18@2$ de los 7eyes allegedly informed 'ca! that he had become the new owner of the land. ) No un@usti&ied or deliberate re&usal to "ay the lease rentals to the landoBner L a$ricultural lessor )e los 7eyes ne+er registered the )eclaration of 1eirshi! with >ai+er of 7ights with the 7egistry of )eeds or with the M'7$ but instead$ he filed a notice of ad+erse claim on the said lot to establish ownershi! thereof (which cannot be done). :t stands to reason$ therefore$ to hold that there was no unAustified or deliberate refusal by 'ca! to !ay the lease rentals or amortizations to the landownerDagricultural lessor which$ in this case$ de los 7eyes failed to established in his fa+or by clear and con+incing e+idence. This notwithstanding the fact that initially$ 'ca! may ha+e$ in good faith$ assumed such statement of de los 7eyes to be true and may ha+e in fact deli+ered 10 ca+ans of !alay as annual rental for 18@2 to latter. "or in 18@3$ it is clear that 'ca! had misgi+ings o+er de los 7eyes? claim of ownershi! o+er the said land because in the 6ctober 18@3 M'7 conference$ his wife ,aurenciana categorically denied all of de los 7eyes? allegations. :n fact$ 'ca! e+en secured a certificate from the M'7 dated 8 May 18@@ to the effect that he continued to be the registered tenant of -osme (ido and not of delos 7eyes. . Sanction o& &or&eiture o& tenantMs "re&erred ri$ht and "ossession o& &armholdin$s should not be a""lied The sanction of forfeiture of his !referred right to be issued a -ertificate of ,and Transfer under () 23 and to the !ossession of his farmholdings should not be a!!lied against 'ca!$ since de los 7eyes has not established a cause of action for reco+ery of !ossession against 'ca!. '20 Adalin vs CA 'G # No (20(.( 2ctober (0+ (.., 0 "irst )i+ision$ 1ermosisima .r. (.)4 3 concurring$ 1 tooC no !art 3actsH :n 'ugust 18@3$ Blena E. (alanca$ in behalf of the Eado siblings$ commissioned Bster /autista to looC for buyers for their !ro!erty fronting the :m!erial 1otel in -otabato -ity. /autista logically offered said !ro!erty to the owners of the :m!erial 1otel which may be e2!ected to grab the offer and taCe ad+antage of the !ro2imity of the !ro!erty to the hotel site. True enough$ "austino Fu$ the (resident% eneral Manager of :m!erial 1otel$ agreed to buy said !ro!erty. Thus during that same month of 'ugust 18@3$ a conference was held in Fu?s office at the :m!erial 1otel. (resent there were Fu$ ,oreto 'dalin who was one of the tenants of the ;%door$ 1%storey building standing on the subAect !ro!erty$ and Blena (alanca and Teofilo Eado in their own behalf as sellers and in behalf of the other tenants of said building. )uring the conference$ Fu and ,im categorically asCed (alanca whether the other tenants were interested to buy the !ro!erty$ but (alanca also categorically answered that the other tenants were not interested to buy the same. -onse9uently$ they agreed to meet at the house of (alanca on 2 #e!tember 18@3 to finalize the sale. 6n said date$ ,oreto 'dalinG Fu and ,im and their legal counselG (alanca and Eado and their legal counselG and one other tenant$ Magno 'dalin$ met at (alanca?s house. Magno 'dalin was there in his own behalf as tenant of two of the fi+e doors of the one%storey building standing on the subAect !ro!erty and in behalf of the tenants of the two other doors$ namely. -arlos -alingasan and )emetrio 'daya. 'gain$ Fu and ,im asCed (alanca and Magno 'dalin whether the other tenants were interested to buy the subAect !ro!erty$ and Magno 'dalin une9ui+ocally answered that he and the other tenants were not so interested mainly
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because they could not afford it. 1owe+er$ Magno 'dalin asserted that he and the other tenants were each entitled to a disturbance fee of
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(;0$000.00 as consideration for their +acating the subAect !ro!erty. )uring said meeting$ (alanca and Eado$ as sellers$ and ,oreto 'dalin and Fu and ,im$ as buyers$ agreed that the latter will !ay (300$000 as down!ayment for the !ro!erty and that as soon as the former secures the e+iction of the tenants$ they will be !aid the balance of (2$300$000. (ursuant to the abo+e terms and conditions$ a )eed of -onditional #ale was drafted by the counsel of Fu and ,im. 6n @ #e!tember 18@3$ at Fu?s :m!erial 1otel office$ (alanca and Bduarda Vargas$ re!resenting the sellers$ and ,oreto 'dalin and Fu and ,im signed the )eed of -onditional #ale. They also agreed to defer the registration of the deed until after the sellers ha+e secured the e+iction of the tenants from the subAect !ro!erty. The tenants$ howe+er$ refused to +acate the subAect !ro!erty. /eing under obligation to secure the e+iction of the tenants$ in accordance with the terms and conditions of the )eed of -onditional #ale$ Blena (alanca filed with the /arangay -a!tain a letter com!laint for unlawful detainer against the said tenants. Two days after (alanca filed an eAectment case before the /arangay -a!tain against the tenants of the subAect !ro!erty$ Magno 'dalin$ )emetrio 'daya and -arlos -alingasan wrote letters to (alanca informing the Eado siblings that they ha+e decided to !urchase the doors that they were leasing for the !urchase !rice of (000$000 !er door. 'lmost instantly$ (alanca$ in behalf of the Eado siblings$ acce!ted the offer of the said tenants and returned the down!ayments of Fu and ,im. 6f course$ the latter refused to acce!t the reimbursements. Fu and ,im filed a com!laint witht the /arangay -a!tain for /reach of -ontract against Blena (alanca. )uring the conference$ Fu and ,im$ if only to accommodate Magno 'dalin and settle the case amicably$ agreed to buy only 1 door each so that the latter could !urchase the two doors he was occu!ying. 1owe+er$ Magno 'dalin adamantly refused$ claiming that he was already the owner of the 2 doors. >hen ,im asCed Magno 'dalin to show the )eed of #ale for the two doors$ the latter insouciantly walCed out. There being no settlement forged$ on 10 May 18@@$ the /arangay -a!tain issued the -ertification to "ile 'ction. 6n ; May 18@@$ Fu and ,im filed their com!laint for H#!ecific (erformance? against the (alanca$ et. al. and 'dalin in the 7T-. 6n 1& .une 18@@$ Fu and ,im caused the annotation of a <5otice of ,is (endens= at the dorsal !ortion of T-T 12803. 6n 2; 6ctober 18@@$ -alingasan$ 'dalin$ et.al. filed a HMotion for :nter+ention as (laintiffs%:nter+enors? a!!ending thereto a co!y of the H)eed of #ale of 7egistered ,and? signed by (alanca$ et.al. 6n 23 6ctober 18@@$ -alingasan et.al. filed the <)eed of #ale of 7egistered ,and= with the 7egister of )eeds on the basis of which T-T 2&381 o+er the !ro!erty was issued under their names. 6n the same day$ -alingasan$ et.al. filed in the -ourt a 9uo a <Motion To 'dmit -om!laint%:n%:nter+ention=. 'ttached to the -om!laint%:n%:nter+ention was the <)eed of #ale of 7egistered ,and.= Fu and ,im were shocCed to learn that (alanca$ et. al. had signed the said deed. 's a counter%mo+e$ Fu and ,im filed a motion for lea+e to amend -om!laint and$ on 115o+ember18@@$ filed their 'mended -om!laint im!leading -alingasan$ et. al. as additional )efendants. (alanca$ et.al. suffered a rebuff when$ on 10 .anuary 18@8$ the 7T- eneral #antos -ity issued an 6rder dismissing the (etition of -alingasan$ et. al. for consignation. :n the meantime$ on 30 5o+ember 18@8$ ,oreto 'dalin died and was substituted$ !er order of the -ourt a 9uo$ on ; .anuary 1880$ by his heirs$ namely$ 'nita$ 'nelita$ ,oreto$ .r.$ Teresita$ >ilfredo$ ,ilibeth$ 5elson$ 1elen and .ocel$ all surnamed 'dalin. 'fter trial$ the -ourt a 9uo rendered Audgment in fa+or of -alingasan$ 'dalin$ et.al. The -ourt order (alanca$ et.al. in solidum to !ay moral damages of (;00$000.00$ (100$000.00 e2em!lary damages each to both Fu and ,im and (;0$000.00 as and for attorney?s fees. They were ordered to return the (200$000.00 initial !ayment recei+ed by them with legal interest from date of recei!t thereof u! to 3 5o+ember 18@3. Fu and ,im wasted no time in a!!ealing from the decision of the trial court. They were +indicated when the -ourt of '!!eals rendered its decision in their fa+or. 'ccordingly$ the -ourt of '!!eals rendered another Audgment in the case and ordered that the <)eed of -onditional #ale= was declared +alidG that the <)eeds of #ale of 7egistered ,and= and T-T 2&381 were hereby declared null and +oidG that -alingasan$
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et.al. e2ce!t the heirs of ,oreto 'dalin were ordered to +acate the !ro!erty within 30 days from the finality of the )ecisionG that (alanca$ et.al were ordered to e2ecute$ in fa+or of Fu and ,im$ a <)eed of 'bsolute #ale=
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co+ering & doors of the !ro!erty (which includes the area of the !ro!erty on which said four doors were constructed) e2ce!t the door !urchased by ,oreto 'dalin$ free of any liens or encumbrancesG that Fu amd ,im were ordered to remit to (alanca$ et.al. the balance of the !urchase !rice of the & doors in the amount of (1$@@0$000G that (alanca$ et.al. were ordered to refund to -alingasan$ et.al. the amount of (@&0$000 which they !aid for the !ro!erty under the <)eed of -onditional #ale of 7egistered ,and= without interest considering that they also acted in bad faithG that Magno 'dalin was ordered to !ay the amount of (3$000 a month$ and each of other tenants$ e2ce!t ,oreto 'dalin$ the amount of (1$;00 to Fu and ,im$ from 5o+ember 18@3$ u! to the time the !ro!erty was +acated and deli+ered to the latter$ as reasonable com!ensation for the occu!ancy of the !ro!erty$ with interest thereon at the rate of 0I !er annumG and that (alanca$ et.al. were ordered to !ay$ Aointly and se+erally$ to Fu and ,im$ indi+idually$ the amount of (100$000.00 by way of moral damages$ (20$000.00 by way of e2em!lary damages and (20$000.00 by way of attorney?s fees. 1ence$ the !etition for re+iew. The #u!reme -ourt dismissed the !etitionG with costs against -alingasan$ 'dalin$ et.al. ( Grounds merely s"lits as"ects o& the issue+ i e the true nature o& transaction entered by 9u and ;im Bith the >ado siblin$s The grounds relied u!on by -alingasan$ 'dalin$ et.al. are essentially a s!litting of the +arious as!ects of the one !i+otal issue that holds the Cey to the resolution of this contro+ersy4 the true nature of the sale transaction entered into by the Eado siblings with "austino Fu and 'ntonio ,im. The -ourts tasC amounts to a declaration of what Cind of contract had been entered into by said !arties and of what their res!ecti+e rights and obligations are thereunder. 2 -eed o& Conditional Sale? 2bli$ation o& the seller to e@ect the tenants and the obli$ation o& the buyer to "ay the balance o& the "urchase "rice? Choice as to Bhom to sell is determined (alanca$ in behalf of the Eado siblings who had already committed to sell the !ro!erty to Fu and ,im and ,oreto 'dalin$ understood her obligation to eAect the tenants on the subAect !ro!erty. 1a+ing gone to the e2tent of filing an eAectment case before the /arangay -a!tain$ (alanca clearly showed an intelligent a!!reciation of the nature of the transaction that she had entered into4 that she$ in behalf of the Eado siblings$ had already sold the subAect !ro!erty to Fu and ,im and ,oreto 'dalin$ and that only the !ayment of the balance of the !urchase !rice was subAect to the condition that she would successfully secure the e+iction of their tenants. :n the sense that the !ayment of the balance of the !urchase !rice was subAect to a condition$ the sale transaction was not yet com!leted$ and both sellers and buyers ha+e their res!ecti+e obligations yet to be fulfilled4 the former$ the eAectment of their tenantsG and the latter$ the !ayment of the balance of the !urchase !rice. :n this sense$ the )eed of -onditional #ale may be an accurate denomination of the transaction. /ut the sale was conditional only inasmuch as there remained yet to be fulfilled$ the obligation of the sellers to eAect their tenants and the obligation of the buyers to !ay the balance of the !urchase !rice. The choice of who to sell the !ro!erty to$ howe+er$ had already been made by the sellers and is thus no longer subAect to any condition nor o!en to any change. :n that sense$ therefore$ the sale made by (alanca to Fu$ ,im$ and 'dalin was definiti+e and absolute. 3 No acts o& "arties @usti&ies radical chan$e o& !alancaMs "osture? No le$al basis &or the acce"tance o& tenantMs o&&er to buy 5othing in the acts of the sellers and buyers before$ during or after the said transaction Austifies the
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radical change of !osture of (alanca who$ in order to !ro+ide a legal basis for her later acce!tance of the tenants? offer to buy the same !ro!erty$ in effect claimed that the sale$ being conditional$ was de!endent on the sellers not changing their minds about selling the !ro!erty to Fu and ,im. The tenants$ for their !art$ defended (alanca?s subse9uent dealing with them by asserting their o!tion rights under (alanca?s letter of 2 #e!tember 18@3 and harCing on the non%fulfillment of the condition that their eAectment be secured first. * No le$al rationali:in$ can sanction !alancaMs arbitrary breach o& contract
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The -ourt cannot countenance the double dealing !er!etrated by (alanca in behalf of the Eado siblings. 5o amount of legal rationalizing can sanction the arbitrary breach of contract that (alanca committed in acce!ting the offer of Magno 'dalin$ 'daya and -alingasan to !urchase a !ro!erty already earlier sold to Fu and ,im. / Alle$ed 30-day o"tion &or tenant to "urchase void &or lack o& consideration The 30%day o!tion to !urchase the subAect !ro!erty allegedly gi+en to the tenants as contained in the 2 #e!tember 18@3 letter of (alanca$ is not +alid for utter lacC of consideration. 5 !alanca and tenants esto""ed Fu and ,im twice asCed (alanca and the tenants concerned as to whether or not the latter were interested to buy the subAect !ro!erty$ and twice$ too$ the answer gi+en was that the said tenants were not interested to buy the subAect !ro!erty because they could not afford it. -learly$ said tenants and (alanca$ who re!resented the former in the initial negotiations with Fu and ,im$ are esto!!ed from denying their earlier statement to the effect that the said tenants Magno 'dalin$ 'daya and -alingasan had no intention of buying the four doors that they were leasing from the Eado siblings. , Subse=uent sale clearly made in bad &aith The subse9uent sale of the subAect !ro!erty by (alanca to the tenants$ smacCs of gross bad faith$ considering that (alanca and the said tenants were in full awareness of the 'ugust and #e!tember negotiations between /autista and (alanca$ on the one hand$ and ,oreto 'dalin$ "austino Fu and 'ntonio ,im$ on the other$ for the sale of the one%storey building. :t cannot be denied$ thus$ that (alanca and the said tenants entered into the subse9uent or second sale notwithstanding their full Cnowledge of the subsistence of the earlier sale o+er the same !ro!erty to Fu and ,im. ) !rior re$istration cannot erase $ross bad &aith characteri:in$ second sale Though the second sale to the said tenants was registered$ such !rior registration cannot erase the gross bad faith that characterized such second sale$ and conse9uently$ there is no legal basis to rule that such second sale !re+ails o+er the first sale of the said !ro!erty to Fu and ,im. . #e&usal o& tenants &rom vacatin$ "ro"erty not a valid @usti&ication to rene$e on obli$ation to sell (alanca$ et.al. cannot in+oCe the refusal of the tenants to +acate the !ro!erty and the latter?s decision to themsel+es !urchase the !ro!erty as a +alid Austification to renege on and turn their bacCs against their obligation to deli+er or cause the e+iction of the tenants from and deli+er !hysical !ossession o the !ro!erty to Fu and ,im. :t would be the zenith of ine9uity for (alanca$ et. al. to in+oCe the occu!ation by the tenants$ as of the !ro!erty$ as a Austification to ignore their obligation to ha+e the tenants e+icted from the !ro!erty and for them to gi+e (;0$000.00 disturbance fee for each of the tenants and a Austification for the latter to hold on to the !ossession of the !ro!erty. (0 Second sale cannot be "re&erred even i& the "rior conditional sale Bas not consummated 'ssuming$ gratia arguendi$ for the nonce$ that there had been no consummation of the <)eed of -onditional #ale= by reason of the non%deli+ery to Fu and ,im of the !ro!erty$ it does not thereby mean that the <)eed of #ale of 7egistered ,and= e2ecuted by (alanca$ et.al and the tenants should be gi+en !reference. '30 Addison vs 3eli4 'G # No (23*2 Au$ust 3+ (.() 0 Bn /anc$ "isher (.)4 ; concurring 3actsH /y a !ublic instrument dated 11 .une 181&$ '. '. 'ddison sold to Marciana "eli2$ with the consent
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of her husband$ /albino Tioco$ & !arcels of land. "eli2 !aid$ at the time of the e2ecution of the deed$ the sum of
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(3$000 on account of the !urchase !rice$ and bound herself to !ay the remainder in installments$ the first of (2$000 on 1; .uly 181&$ the second of (;$000 30 days after the issuance to her of a certificate of title under the ,and 7egistration 'ct$ and further$ within 10 years from the date of such title$ (10 for each coconut tree in bearing and (; for each such tree not in bearing$ that might be growing on said & !arcels of land on the date of the issuance of title to her$ with the condition that the total !rice should not e2ceed (@;$000. :t was further sti!ulated that the !urchaser was to deli+er to the +endor 2;I of the +alue of the !roducts that she might obtain from the & !arcels from the moment she taCes !ossession of them until the Torrens certificate of title be issued in her fa+or. :t was also co+enanted that within 1 year from the date of the certificate of title in fa+or of Marciana "eli2$ this latter may rescind the !resent contract of !urchase and sale$ in which case "eli2 shall be obliged to return to 'ddison the net +alue of all the !roducts of the & !arcels sold$ and shall be obliged to return to her all the sums that was !aid$ together with interest at the rate of 10I !er annum. 'fter the e2ecution of the deed of sale$ at the re9uest of "eli2. 'ddison went to ,ucena$ accom!anied by the former?s re!resentati+e$ for the !ur!ose of designating and deli+ering the lands sold. 1e was able to designate only 2 of the & !arcels$ and more than 2D3s of these were found to be in the !ossession of one .uan Villafuerte$ who claimed to be the owner of the !arts so occu!ied by him. 'ddison admitted that "eli2 would ha+e to bring suit to obtain !ossession of the land. :n .une 181&$ "eli2 filed an a!!lication with the ,and -ourt for the registration in her name of & !arcels of land described in the deed of sale e2ecuted in her fa+or$ to obtain from the ,and -ourt a writ of inAunction against the occu!ants$ and for the !ur!ose of the issuance of this writ. The !roceedings in the matter of this a!!lication were subse9uently dismissed$ for failure to !resent the re9uired !lans within the !eriod of the time allowed for the !ur!ose. :n .anuary 181;$ 'ddison filed suit in the -": Manila to com!el "eli2 to maCe !ayment of the first installment of (2$000$ demandable on 1; .uly 181&$ and of the interest in arrears$ at the sti!ulated rate of @I !er annum. "eli2 and Tioco answered the com!laint and alleged by way of s!ecial defense that 'ddison had absolutely failed to deli+er the lands that were the subAect matter of the sale$ notwithstanding the demands made u!on him for this !ur!ose. #he therefore asCed that she be absol+ed from the com!laint$ and that$ after a declaration of the rescission of the contract of the !urchase and sale of said lands$ 'ddison be ordered to refund the (3$000 that had been !aid to him on account$ together with the interest agreed u!on$ and to !ay an indemnity for the losses and damages which the defendant alleged she had suffered through 'ddison?s nonfulfilment of the contract. The trial court rendered Audgment in fa+or of "eli2$ holding the contract of sale to be rescinded and ordering the return the (3$000 !aid on account of the !rice$ together with interest thereon at the rate of 10I !er annum. "rom this Audgment 'ddison a!!ealed. The #u!reme -ourt held that the contract of !urchase and sale entered into by and between the (arties on 11 .une 181& is rescinded$ and ordered 'ddison to maCe restitution of the sum of (3$000 recei+ed by him on account of the !rice of the sale$ together with interest thereon at the legal rate of 0I !er annum from the date of the filing of the com!laint until !ayment$ with the costs of both instances against 'ddison. ( sold Cross Com"laint not &ounded on conventional rescission but on the &ailure to deliver the land
The -ross com!laint is not founded on the hy!othesis of the con+entional rescission relied u!on by the court$ but on the failure to deli+er the land sold. The right to rescind the contract by +irtue of the s!ecial agreement not only did not e2ist from the moment of the e2ecution of the contract u! to one year after the registration of the land$ but does not accrue until the land is registered. The wording of the clause substantiates the contention. The one year?s deliberation granted to the !urchaser was to be counted <from the date of the certificate of title . . ..= Therefore the right to elect to rescind the contract was subAect to a condition$ namely$ the issuance of the title. The record shows that u! to the !resent time that condition has not been fulfilledG conse9uently "eli2 cannot be heard to in+oCe a right which de!ends on the e2istence of that condition.
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I3ul&illment o& condition im"ossible &or reason im"utable to "artyK not "resented
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:f in%the cross%com!laint it had been alleged that the fulfillment of the condition was im!ossible for reasons im!utable to 'ddison$ and if this allegation had been !ro+en$ !erha!s the condition would ha+e been considered as fulfilled (arts. 1113$ 111@$ and 1118$ -i+. -ode). This issue$ howe+er$ was not !resented in "eli2?s answer. 3 %radition L -elivery by the vendor o& the thin$ sold The -ode im!oses u!on the +endor the obligation to deli+er the thing sold. The thing is considered to be deli+ered when it is !laced <in the hands and !ossession of the +endee.= (-i+. -ode$ art. 1&02.) :t is true that the same article declares that the e2ecution of a !ublic instrument is e9ui+alent to the deli+ery of the thing which is the obAect of the contract$ but$ in order that this symbolic deli+ery may !roduce the effect of tradition$ it is necessary that the +endor shall ha+e had such control o+er the thing sold that$ at the moment of the sale$ its material deli+ery could ha+e been made. :t is not enough to confer u!on the !urchaser the ownershi! and the right of !ossession. The thing sold must be !laced in his control. >hen there is no im!ediment whate+er to !re+ent the thing sold !assing into the tenancy of the !urchaser by the sole will of the +endor$ symbolic deli+ery through the e2ecution of a !ublic instrument is sufficient. /ut if$ notwithstanding the e2ecution of the instrument$ the !urchaser cannot ha+e the enAoyment and material tenancy of the thing and maCe use of it himself or through another in his name$ because such tenancy and enAoyment are o!!osed by the inter!osition of another will$ then fiction yields to reality J the deli+ery has not been effected. * -elivery+ accordin$ to -allo: The word Hdeli+ery? e2!resses a com!le2 idea$ the abandonment of the thing by the !erson who maCes the deli+ery and the taCing control of it by the !erson to whom the deli+ery is made ()allozG en. 7e!.$ +ol. &3$ !. 13& in his commentaries on article 100& of the "rench -i+il -ode). / 74ecution o& a "ublic instrument+ Bhen su&&icient The e2ecution of a !ublic instrument is sufficient for the !ur!oses of the abandonment made by the +endor$ but it is not always sufficient to !ermit of the a!!rehension of the thing by the !urchaser. 5 3ictitious tradition not necessarily im"lies real tradition o& the thin$ sold >hen the sale is made through the means of a !ublic instrument$ the e2ecution of this latter is e9ui+alent to the deli+ery of the thing sold4 which does not and cannot mean that this fictitious tradition necessarily im!lies the real tradition of the thing sold$ for it is incontro+ertible that$ while its ownershi! still !ertains to the +endor (and with greater reason if it does not)$ a third !erson may be in !ossession of the same thingG wherefore$ though$ as a general rule$ he who !urchases by means of a !ublic instrument should be deemed to be the !ossessor in fact$ yet this !resum!tion gi+es way before !roof to the contrary (#u!reme court of #!ain$ decision of 5o+ember 10$ 1803$ K-i+. 7e!.$ +ol. 80$ !. ;00L inter!reting article 1&02 of the -i+il -ode). , #escission o& sale and return o& "rice due to non-delivery o& thin$ sold :n the !resent case$ the mere e2ecution of the instrument was not a fulfillment of the +endor?s obligation to deli+er the thing sold$ and that from such nonfulfillment arises the !urchaser?s right to demand$ as she has demanded$ the rescission of the sale and the return of the !rice. (-i+. -ode$ arts. 1;00 and 112&.) ) No a$reement &or vendee to take ste"s to obtain material "ossession o& thin$ sold :f the sale had been made under the e2!ress agreement of im!osing u!on the !urchaser the obligation to taCe the necessary ste!s to obtain the material !ossession of the thing sold$ and it were !ro+en that she Cnew that the thing was in the !ossession of a third !erson claiming to ha+e !ro!erty rights therein$ such agreement would be !erfectly +alid. /ut there is nothing in the instrument which would indicate$ e+en im!licitly$ that such was the agreement.
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!ossession Bhile land is bein$ re$istered contem"lated in contract The obligation was incumbent u!on "eli2 to a!!ly for and obtain the registration of the land in the new registry of !ro!ertyG but from this it cannot be concluded that she had to await the final decision of the -ourt of ,and 7egistration$ in order to be able to enAoy the !ro!erty sold. 6n the contrary$ it was e2!ressly sti!ulated in the contract that the !urchaser should deli+er to the +endor 1D& <of the !roducts of the & !arcels from the moment when she taCes !ossession of them until the Torrens certificate of title be issued in her fa+or.= This ob+iously shows that it was not foreseen that the !urchaser might be de!ri+ed of her !ossession during the course of the registration !roceedings$ but that the transaction rested on the assum!tion that she was to ha+e$ during said !eriod$ the material !ossession and enAoyment of the & !arcels of land. . ;e$al interest due as rescission is made by virtue o& "rovisions o& laB 's the rescission is made by +irtue of the !ro+isions of law and not by contractual agreement$ it is not the con+entional but the legal interest that is demandable. '*0 Adel&a !ro"erties vs CA 'G # No (((23) (../ 0 #econd )i+ision$ 7egalado (.)4 3 concurring 6anuary 2/+
3actsH 7osario .imenez%-astaneda$ #alud .imenez and their brothers$ .ose and )ominador .imenez$ were the registered co%owners of a !arcel of land consisting of 13$310 s9. ms (T-T 308333) situated in /arrio -ulasi$ ,as (iMas$ Metro Manila. 6n 2@ .uly 18@@$ .ose and )ominador .imenez sold their share consisting of 1D2 of said !arcel of land$ s!ecifically the eastern !ortion thereof$ to 'delfa (ro!erties !ursuant to a <Easulatan sa /ilihan ng ,u!a.= #ubse9uently$ a <-onfirmatory B2traAudicial (artition 'greement= was e2ecuted by the .imenezes$ wherein the eastern !ortion of the subAect lot$ with an area of @$@;; s9. ms. was adAudicated to .ose and )ominador .imenez$ while the western !ortion was allocated to 7osario and #alud .imenez. Thereafter$ 'delfa (ro!erties e2!ressed interest in buying the western !ortion of the !ro!erty from 7osario and #alud. 'ccordingly$ on 2; 5o+ember 18@8$ an <B2clusi+e 6!tion to (urchase= was e2ecuted between the !arties$ with the condition that the selling !rice shall be (2$@;0$1;0$ that the o!tion money of (;0$000 shall be credited as !artial !ayment u!on the consummation of sale$ that the balance is to be !aid on or before 30 5o+ember 18@8$ and that in case of default by 'delfa (ro!erties to !ay the balance$ the o!tion is cancelled and ;0I of the o!tion money shall be forfeited and the other ;0I refunded u!on the sale of the !ro!erty to a third !arty$ and that all e2!enses including ca!ital gains ta2$ cost of documentary stam!s are for the account of the +endors and the e2!enses for the registration of the deed of sale for the account of 'delfa !ro!erties. -onsidering$ howe+er$ that the owner?s co!y of the certificate of title issued to #alud .imenez had been lost$ a !etition for the re%issuance of a new owner?s co!y of said certificate of title was filed in court through 'tty. /ayani ,. /ernardo. B+entually$ a new owner?s co!y of the certificate of title was issued but it remained in the !ossession of 'tty. /ernardo until he turned it o+er to 'delfa (ro!erties$ :nc. /efore 'delfa (ro!erties could maCe !ayment$ it recei+ed summons on 28 5o+ember 18@8$ together with a co!y of a com!laint filed by the ne!hews and nieces of 7osario and #alud against the latter$ .ose and )ominador .imenez$ and 'delfa (ro!erties in the 7T- MaCati (-i+il -ase @8%;;&1)$ for annulment of the deed of sale in fa+or of 1ousehold -or!oration and reco+ery of ownershi! of the !ro!erty co+ered by T-T 308333. 's a conse9uence$ in a letter dated 28 5o+ember 18@8$ 'delfa (ro!erties informed 7osario and #alud that it would hold !ayment of the full !urchase !rice and suggested that the latter settle the case with their ne!hews and nieces$ adding that <if !ossible$ although 30 5o+ember 18@8 is a holiday$ we will be waiting for you and said !laintiffs at our office u! to 3400 !.m.= 'nother letter of the same tenor and of
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e+en date was sent by 'delfa (ro!erties to .ose and )ominador .imenez. #alud .imenez refused to heed the suggestion of 'delfa (ro!erties and attributed the sus!ension of !ayment of the !urchase !rice to <lacC of word of honor.= 6n 3 )ecember 18@8$ 'delfa (ro!erties caused to be annotated on the title of the lot its o!tion contract with #alud and 7osario$ and its contract of sale with .ose and )ominador .imenez$ as Bntry
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5o. 1&33%& and entry 5o. 1&3@%&$ res!ecti+ely. 6n 1& )ecember 18@8$ 7osario and #alud sent "rancisca .imenez to see 'tty. /ernardo$ in his ca!acity as 'delfa (ro!erties? counsel$ and to inform the latter that they were cancelling the transaction. :n turn$ 'tty. /ernardo offered to !ay the !urchase !rice !ro+ided that (;00$000.00 be deducted therefrom for the settlement of the ci+il case. This was reAected by 7osario and #alud. 6n 22 )ecember 18@8$ 'tty. /ernardo wrote 7osario and #alud on the same matter but this time reducing the amount from (;00$000.00 to (300$000.00$ and this was also reAected by the latter. 6n 23 "ebruary 1880$ the 7T- dismissed -i+il -ase @8%;;&1. 6n 2@ "ebruary 1880$ 'delfa (ro!erties caused to be annotated anew on T-T 308333 the e2clusi+e o!tion to !urchase as Bntry &&&2%&.6n the same day$ 2@ "ebruary 1880$ 7osario and #alud e2ecuted a )eed of -onditional #ale in fa+or of Bmylene -hua o+er the same !arcel of land for (3$028$2;0.00$ of which (1$;00$000.00 was !aid to the former on said date$ with the balance to be !aid u!on the transfer of title to the s!ecified 1D2 !ortion. 6n 10 '!ril 1880$ 'tty. /ernardo wrote 7osario and #alud informing the latter that in +iew of the dismissal of the case against them$ 'delfa (ro!erties was willing to !ay the !urchase !rice$ and he re9uested that the corres!onding deed of absolute sale be e2ecuted. This was ignored by 7osario and #alud. 6n 23 .uly 1880$ .imenez? counsel sent a letter to 'delfa (ro!erties enclosing therein a checC for (2;$000.00 re!resenting the refund of ;0I of the o!tion money !aid under the e2clusi+e o!tion to !urchase. 7osario and #alud then re9uested 'delfa (ro!erties to return the owner?s du!licate co!y of the certificate of title of #alud .imenez. 'delfa (ro!erties failed to surrender the certificate of title. 7osario and #alud .imenez filed -i+il -ase 3;32 in the 7T- (asay -ity (/ranch 113) for annulment of contract with damages$ !raying$ among others$ that the e2clusi+e o!tion to !urchase be declared null and +oidG that 'delfa (ro!erties be ordered to return the owner?s du!licate certificate of titleG and that the annotation of the o!tion contract on T-T 308333 be cancelled. Bmylene -hua$ the subse9uent !urchaser of the lot$ filed a com!laint in inter+ention. 6n ; #e!tember 1881$ the trial court rendered Audgment holding that the agreement entered into by the !arties was merely an o!tion contract$ and declaring that the sus!ension of !ayment by 'delfa (ro!erties constituted a counter%offer which$ therefore$ was tantamount to a reAection of the o!tion. :t liCewise ruled that 'delfa (ro!erties could not +alidly sus!end !ayment in fa+or of 7osario and #alud on the ground that the +indicatory action filed by the latter?s Cin did not in+ol+e the western !ortion of the land co+ered by the contract between the !arties$ but the eastern !ortion thereof which was the subAect of the sale between 'delfa (ro!erties and the brothers .ose and )ominador .imenez. The trial court then directed the cancellation of the e2clusi+e o!tion to !urchase$ declared the sale to inter+enor Bmylene -hua as +alid and binding$ and ordered 'delfa (ro!erties to !ay damages and attorney?s fees to 7osario and #alud$ with costs. 6n a!!eal$ the -ourt of a!!eals affirmed in toto the decision of the court a 9uo (-'% 7 3&303) and held that the failure of !etitioner to !ay the !urchase !rice within the !eriod agreed u!on was tantamount to an election by !etitioner not to buy the !ro!ertyG that the sus!ension of !ayment constituted an im!osition of a condition which was actually a counter%offer amounting to a reAection of the o!tionG and that 'rticle 1;80 of the -i+il -ode on sus!ension of !ayments a!!lies only to a contract of sale or a contract to sell$ but not to an o!tion contract which it o!ined was the nature of the document subAect of the case at bar. #aid a!!ellate court similarly u!held the +alidity of the deed of conditional sale e2ecuted by 7osario and #alud in fa+or of inter+enor Bmylene -hua. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt affirmed the assailed Audgment of the -ourt of '!!eals in -'% 7 -V 3&303$ with modificatory !remises. ( A$reement betBeen "arties a contract to sell and not an o"tion contract or a contract o& sale The alleged o!tion contract is a contract to sell$ rather than a contract of sale. The distinction between the two is im!ortant for in contract of sale$ the title !asses to the +endee u!on the deli+ery of the thing soldG whereas in a contract to sell$ by agreement the ownershi! is reser+ed in the +endor and is not to !ass until the
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full !ayment of the !rice. :n a contract of sale$ the +endor has lost and cannot reco+er ownershi! until and unless the contract is resol+ed or rescindedG whereas in a contract to sell$ title is retained by the +endor until the full !ayment of the !rice$ such !ayment being a !ositi+e sus!ensi+e condition and failure of which is not a breach but an e+ent that !re+ents the obligation of the +endor to con+ey title from becoming effecti+e. Thus$ a deed of sale is considered absolute in nature where there is neither a sti!ulation in the deed that title to the !ro!erty sold is reser+ed in the seller until the full !ayment of the !rice$ nor one gi+ing the +endor the right to unilaterally resol+e the contract the moment the buyer fails to !ay within a fi2ed !eriod. 2 8ntent not to trans&er oBnershi" need not be e4"ressed The !arties ne+er intended to transfer ownershi! to 'delfa (ro!erties to com!letion of !ayment of the !urchase !rice$ this is inferred by the fact that the e2clusi+e o!tion to !urchase$ although it !ro+ided for automatic rescission of the contract and !artial forfeiture of the amount already !aid in case of default$ does not mention that 'delfa (ro!erties is obliged to return !ossession or ownershi! of the !ro!erty as a conse9uence of non%!ayment. There is no sti!ulation anent re+ersion or recon+eyance of the !ro!erty in the e+ent that !etitioner does not com!ly with its obligation. >ith the absence of such a sti!ulation$ it may legally be inferred that there was an im!lied agreement that ownershi! shall not !ass to the !urchaser until he had fully !aid the !rice. 'rticle 1&3@ of the -i+il -ode does not re9uire that such a sti!ulation be e2!ressly made. -onse9uently$ an im!lied sti!ulation to that effect is considered +alid and binding and enforceable between the !arties. ' contract which contains this Cind of sti!ulation is considered a contract to sell. Moreo+er$ that the !arties really intended to e2ecute a contract to sell is bolstered by the fact that the deed of absolute sale would ha+e been issued only u!on the !ayment of the balance of the !urchase !rice$ as may be gleaned from 'delfa (ro!erties? letter dated 10 '!ril 1880 wherein it informed the +endors that it <is now ready and willing to !ay you simultaneously with the e2ecution of the corres!onding deed of absolute sale.= 3 No actual or constructive delivery o& "ro"erty to indicate contract o& sale? Circumstances ne$ate "resum"tion o& "ossession o& title is to be understood as delivery :t has not been shown that there was deli+ery of the !ro!erty$ actual or constructi+e$ made. The e2clusi+e o!tion to !urchase is not contained in a !ublic instrument the e2ecution of which would ha+e been considered e9ui+alent to deli+ery. 5either did 'delfa (ro!erties taCe actual$ !hysical !ossession of the !ro!erty at any gi+en time. :t is true that after the reconstitution of the certificate of title$ it remained in the !ossession of 'tty. /ayani ,. /ernardo$ 'delfa?s counsel. 5ormally$ under the law$ such !ossession by the +endee is to be understood as a deli+ery. 1owe+er$ 7osario and #alud e2!lained that there was really no intention on their !art to deli+er the title to 'delfa (ro!erties with the !ur!ose of transferring ownershi! to it. They claim that 'tty. /ernardo had !ossession of the title only because he was their counsel in the !etition for reconstitution. The court found no reason not to belie+e said e2!lanation$ aside from the fact that such contention was ne+er refuted or contradicted by 'delfa (ro!erties. * !er&ected contract to sell The contro+erted document should legally be considered as a !erfected contract to sell$ and not <strictly an o!tion contract.= / Contract inter"reted to ascertain intent o& "arties? %itle not controllin$ i& te4t shoBs otherBise The im!ortant tasC in contract inter!retation is always the ascertainment of the intention of the contracting !arties and that tasC is to be discharged by looCing to the words they used to !roAect that intention in their contract$ all the words not Aust a !articular word or two$ and words in conte2t not words standing alone. Moreo+er$ Audging from the subse9uent acts of the !arties which will hereinafter be discussed$ it is undeniable that the intention of the !arties was to enter into a contract to sell. :n addition$ the title of a contract does not necessarily determine its true nature. 1ence$ the fact that the
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document under discussion is entitled <B2clusi+e 6!tion to (urchase= is not controlling where the te2t thereof shows that it is a contract to sell.
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2"tion de&ined 's used in the law on sales$ an o!tion is a continuing offer or contract by which the owner sti!ulates with another that the latter shall ha+e the right to buy the !ro!erty at a fi2ed !rice within a certain time$ or under$ or in com!liance with$ certain terms and conditions$ or which gi+es to the owner of the !ro!erty the right to sell or demand a sale. :t is also sometimes called an <unacce!ted offer.= 'n o!tion is not of itself a !urchase$ but merely secures the !ri+ilege to buy. :t is not a sale of !ro!erty but a sale of the right to !urchase. :t is sim!ly a contract by which the owner of !ro!erty agrees with another !erson that he shall ha+e the right to buy his !ro!erty at a fi2ed !rice within a certain time. 1e does not sell his landG he does not then agree to sell itG but he does sell something$ that is$ the right or !ri+ilege to buy at the election or o!tion of the other !arty. :ts distinguishing characteristic is that it im!oses no binding obligation on the !erson holding the o!tion$ aside from the consideration for the offer. *ntil acce!tance$ it is not$ !ro!erly s!eaCing$ a contract$ and does not +est$ transfer$ or agree to transfer$ any title to$ or any interest or right in the subAect matter$ but is merely a contract by which the owner of !ro!erty gi+es the o!tionee the right or !ri+ilege of acce!ting the offer and buying the !ro!erty on certain terms. , Contract de&ined ' contract$ liCe a contract to sell$ in+ol+es a meeting of minds between two !ersons whereby one binds himself$ with res!ect to the other$ to gi+e something or to render some ser+ice. -ontracts$ in general$ are !erfected by mere consent$ which is manifested by the meeting of the offer and the acce!tance u!on the thing and the cause which are to constitute the contract. The offer must be certain and the acce!tance absolute. ) -istinction betBeen an o"tion and a contract o& sale The distinction between an <o!tion= and a contract of sale is that an o!tion is an unacce!ted offer. :t states the terms and conditions on which the owner is willing to sell his land$ if the holder elects to acce!t them within the time limited. :f the holder does so elect$ he must gi+e notice to the other !arty$ and the acce!ted offer thereu!on becomes a +alid and binding contract. :f an acce!tance is not made within the time fi2ed$ the owner is no longer bound by his offer$ and the o!tion is at an end. ' contract of sale$ on the other hand$ fi2es definitely the relati+e rights and obligations of both !arties at the time of its e2ecution. The offer and the acce!tance are concurrent$ since the minds of the contracting !arties meet in the terms of the agreement. . Acce"tance? &ormal or in&ormal B2ce!t where a formal acce!tance is so re9uired$ although the acce!tance must be affirmati+ely and clearly made and must be e+idenced by some acts or conduct communicated to the offeror$ it may be made either in a formal or an informal manner$ and may be shown by acts$ conduct$ or words of the acce!ting !arty that clearly manifest a !resent intention or determination to acce!t the offer to buy or sell. Thus$ acce!tance may be shown by the acts$ conduct$ or words of a !arty recognizing the e2istence of the contract of sale. :n the !resent case$ a !erusal of the contract in+ol+ed$ as well as the oral and documentary e+idence !resented by the !arties$ readily shows that there is indeed a concurrence of 'delfa?s offer to buy and the .imenezes? acce!tance thereof. (0 Contract clear+ only "er&ormance o& obli$ations re=uired o& "arties The offer to buy a s!ecific !iece of land was definite and certain$ while the acce!tance thereof was absolute and without any condition or 9ualification. The agreement as to the obAect$ the !rice of the !ro!erty$ and the terms of !ayment was clear and well%defined. 5o other significance could be gi+en to such acts that than that they were meant to finalize and !erfect the transaction. The !arties e+en went beyond the basic re9uirements of the law by sti!ulating that <all e2!enses including the corres!onding ca!ital gains ta2$ cost of documentary stam!s are for the account of the +endors$ and e2!enses for the registration of the deed of sale in the 7egistry of )eeds are for the account of 'delfa (ro!erties$ :nc.= 1ence$
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there was nothing left to be done e2ce!t the !erformance of the res!ecti+e obligations of the !arties.
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((
No counter-o&&er The offer of 'delfa (ro!erties to deduct (;00$000.00$ (later reduced to (300$000.00) from the !urchase !rice for the settlement of the ci+il case was not a counter%offer. There already e2isted a !erfected contract between the !arties at the time the alleged counter%offer was made. Thus$ any new offer by a !arty becomes binding only when it is acce!ted by the other. :n the case of the .imenezes$ they actually refused to concur in said offer of !etitioner$ by reason of which the original terms of the contract continued to be enforceable. 't any rate$ the same cannot be considered a counter%offer for the sim!le reason that 'delfa (ro!erties? sole !ur!ose was to settle the ci+il case in order that it could already com!ly with its obligation. :n fact$ it was e+en indicati+e of a desire by 'delfa (ro!erties to immediately com!ly therewith$ e2ce!t that it was being !re+ented from doing so because of the filing of the ci+il case which$ it belie+ed in good faith$ rendered com!liance im!robable at that time. :n addition$ no inference can be drawn from that suggestion gi+en by 'delfa (ro!erties that it was totally abandoning the original contract. (2 %est to determine contract as a Icontract o& sale or "urchaseK or mere Io"tionK The test in determining whether a contract is a <contract of sale or !urchase= or a mere <o!tion= is whether or not the agreement could be s!ecifically enforced. There is no doubt that 'delfa?s obligation to !ay the !urchase !rice is s!ecific$ definite and certain$ and conse9uently binding and enforceable. 1ad the .imenezes chosen to enforce the contract$ they could ha+e s!ecifically com!elled 'delfa to !ay the balance of (2$@00$1;0.00. This is distinctly made manifest in the contract itself as an integral sti!ulation$ com!liance with which could legally and definitely be demanded from !etitioner as a conse9uence. (3 2"tion a$reement 'n agreement is only an <o!tion= when no obligation rests on the !arty to maCe any !ayment e2ce!t such as may be agreed on between the !arties as consideration to su!!ort the o!tion until he has made u! his mind within the time s!ecified. 'n o!tion$ and not a contract to !urchase$ is effected by an agreement to sell real estate for !ayments to be made within s!ecified time and !ro+iding for forfeiture of money !aid u!on failure to maCe !ayment$ where the !urchaser does not agree to !urchase$ to maCe !ayment$ or to bind himself in any way other than the forfeiture of the !ayments made. This is not a case where no right is as yet created nor an obligation declared$ as where something further remains to be done before the buyer and seller obligate themsel+es. (* Contract not an o"tion contract? I<alanceK >hile there is Auris!rudence to the effect that a contract which !ro+ides that the initial !ayment shall be totally forfeited in case of default in !ayment is to be considered as an o!tion contract$ the contract e2ecuted between the !arties is an o!tion contract$ for the reason that the !arties were already contem!lating the !ayment of the balance of the !urchase !rice$ and were not merely 9uoting an agreed +alue for the !ro!erty. The term <balance$= connotes a remainder or something remaining from the original total sum already agreed u!on. (/ Jhen earnest money $iven in a contract o& sale >hene+er earnest money is gi+en in a contract of sale$ it shall be considered as !art of the !rice and as !roof of the !erfection of the contract. :t constitutes an ad+ance !ayment and must$ therefore$ be deducted from the total !rice. 'lso$ earnest money is gi+en by the buyer to the seller to bind the bargain. (5 -istinctions betBeen earnest and o"tion money There are clear distinctions between earnest money and o!tion money$ +iz.4 (a) earnest money is !art of the !urchase !rice$ while o!tion money is the money gi+en as a distinct consideration for an o!tion contractG (b) earnest money is gi+en only where there is already a sale$ while o!tion money a!!lies to a sale not yet !erfectedG and (c) when earnest money is gi+en$ the buyer is bound to !ay the balance$ while when the would%be buyer gi+es o!tion money$ he is not re9uired to buy.
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(,
Article (/.0+ NeB Civil Code 'rticle 1;80 of the -i+il -ode !ro+ides <#hould the +endee be disturbed in the !ossession or ownershi! of the thing ac9uired$ or should he ha+e reasonable grounds to fear such disturbance$ by a +indicatory action or a foreclosure of mortgage$ he may sus!end the !ayment of the !rice until the +endor has caused the disturbance or danger to cease$ unless the latter gi+es security for the return of the !rice in a !ro!er case$ or it has been sti!ulated that$ notwithstanding any such contingency$ the +endee shall be bound to maCe the !ayment. ' mere act of tres!ass shall not authorize the sus!ension of the !ayment of the !rice.= 's the agreement between the !arties was not an o!tion contract but a !erfected contract to sellG and therefore$ 'rticle 1;80 would !ro!erly a!!ly. () Adel&a !ro"erties @usti&ied in sus"endin$ "ayment o& balance by reason o& vindicatory action &iled a$ainst it :n -i+il -ase @8%;;&1$ it is easily discernible that$ although the com!laint !rayed for the annulment only of the contract of sale e2ecuted between 'delfa (ro!erties and the .imenez brothers$ the same liCewise !rayed for the reco+ery of therein .imenez? share in that !arcel of land s!ecifically co+ered by T-T 308333. :n other words$ the .imenezes were claiming to be co%owners of the entire !arcel of land described in T-T 308333$ and not only of a !ortion thereof nor did their claim !ertain e2clusi+ely to the eastern half adAudicated to the .imenez brothers. Therefore$ 'delfa (ro!erties was Austified in sus!ending !ayment of the balance of the !urchase !rice by reason of the aforesaid +indicatory action filed against it. The assurance made by the .imenezes that 'delfa (ro!erties did not ha+e to worry about the case because it was !ure and sim!le harassment is not the Cind of guaranty contem!lated under the e2ce!ti+e clause in 'rticle 1;80 wherein the +endor is bound to maCe !ayment e+en with the e2istence of a +indicatory action if the +endee should gi+e a security for the return of the !rice. (. 6imene:es may no lon$er be com"elled to sell and deliver sub@ect "ro"erty /e that as it may$ and the +alidity of the sus!ension of !ayment notwithstanding$ the .imenezes may no longer be com!elled to sell and deli+er the subAect !ro!erty to 'delfa (ro!erties for two reasons$ that is$ 'delfa?s failure to duly effect the consignation of the !urchase !rice after the disturbance had ceasedG and$ secondarily$ the fact that the contract to sell had been +alidly rescinded by the .imenezes. 20 %ender and consi$nation re=uired in dischar$e o& obli$ation Fe$ Contract to sellG? -i&&erent in cases involvin$ e4ercise o& ri$ht or "rivile$e The mere sending of a letter by the +endee e2!ressing the intention to !ay$ without the accom!anying !ayment$ is not considered a +alid tender of !ayment. /esides$ a mere tender of !ayment is not sufficient to com!el the .imenezes to deli+er the !ro!erty and e2ecute the deed of absolute sale. :t is consignation which is essential in order to e2tinguish 'delfa (ro!erties? obligation to !ay the balance of the !urchase !rice. The rule is different in case of an o!tion contract or in legal redem!tion or in a sale with right to re!urchase$ wherein consignation is not necessary because these cases in+ol+e an e2ercise of a right or !ri+ilege (to buy$ redeem or re!urchase) rather than the discharge of an obligation$ hence tender of !ayment would be sufficient to !reser+e the right or !ri+ilege. This is because the !ro+isions on consignation are not a!!licable when there is no obligation to !ay. ' contract to sell in+ol+es the !erformance of an obligation$ not merely the e2ercise of a !ri+ilege or a right. -onse9uently$ !erformance or !ayment may be effected not by tender of !ayment alone but by both tender and consignation.
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2(
Adel&a no lon$er had ri$ht to sus"end "ayment a&ter dismissal o& civil case a$ainst it 'delfa (ro!erties no longer had the right to sus!end !ayment after the disturbance ceased with the dismissal of the ci+il case filed against it. 5ecessarily$ therefore$ its obligation to !ay the balance again arose and resumed after it recei+ed notice of such dismissal. *nfortunately$ 'delfa failed to seasonably maCe !ayment$ as in fact it has failed to do so u! to the !resent time$ or e+en to de!osit the money with the trial court when this case was originally filed therein.
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22
#escission in a contract to sell 'rticle 1;82 of the -i+il -ode which re9uires rescission either by Audicial action or notarial act is not a!!licable to a contract to sell. "urthermore$ Audicial action for rescission of a contract is not necessary where the contract !ro+ides for automatic rescission in case of breach$ as in the contract in+ol+ed in the !resent contro+ersy. /y 'delfa?s failure to com!ly with its obligation$ the .imenezes elected to resort to and did announce the rescission of the contract through its letter to 'delfa dated 23 .uly 1880. That written notice of rescission is deemed sufficient under the circumstances. 23 #esolution o& reci"rocal contracts may be made e4tra@udicially+ unless im"u$ned in court :t was held in *ni+ersity of the (hili!!ines +s. )e los 'ngeles$ etc. that the right to rescind is not absolute$ being e+er subAect to scrutiny and re+iew by the !ro!er court. 1owe+er$ this rule a!!lies to a situation where the e2traAudicial rescission is contested by the defaulting !arty. :n other words$ resolution of reci!rocal contracts may be made e2traAudicially unless successfully im!ugned in court. :f the debtor im!ugns the declaration$ it shall be subAect to Audicial determination. 6therwise$ if said !arty does not o!!ose it$ the e2traAudicial rescission shall ha+e legal effect. :n the !resent case$ although 'delfa (ro!erties was duly furnished and did recei+e a written notice of rescission which s!ecified the grounds therefore$ it failed to re!ly thereto or !rotest against it. :ts silence thereon suggests an admission of the +eracity and +alidity of .imenezes? claim. 2* Adel&a esto""ed "urthermore$ the initiati+e of instituting suit was transferred from the rescinder to the defaulter by +irtue of the automatic rescission clause in the contract. /ut then$ aside from the lacCadaisical manner with which 'delfa (ro!erties treated the .imenezes? letter of cancellation$ it utterly failed to seriously seeC redress from the court for the enforcement of its alleged rights under the contract. :f the .imenezes had not taCen the initiati+e of filing -i+il -ase 3;32$ e+idently 'delfa had no intention to taCe any legal action to com!el s!ecific !erformance from the former. /y such ca+alier disregard$ it has been effecti+ely esto!!ed from seeCing the affirmati+e relief it desires but which it had theretofore disdained. '/0 A$ricultural and Home 74tension -evelo"ment Grou" vs CA 'G # No .23(0 Se"tember 3+ (..2 0 "irst )i+ision$ -ruz (.)4 3 concurring 3actsH 6n 28 March 1832$ the s!ouses 'ndres )iaz and .osefa Mia sold to /runo undran a 18%hectare !arcel of land in ,as (iMas$ 7izal$ co+ered by T-T 2@3&10. The owner?s du!licate co!y of the title was turned o+er to undran. 1owe+er$ he did not register the )eed of 'bsolute #ale because he said he was ad+ised in the 6ffice of the 7egister of )eeds of (asig of the e2istence of notices of lis !endens on the title. 6n 20 5o+ember 1832$ undran and 'gricultural and 1ome )e+elo!ment rou! ('1) ) entered into a .oint Venture 'greement for the im!ro+ement and subdi+ision of the land. This agreement was also not annotated on the title. 6n 30 'ugust 1830$ the s!ouses 'ndres )iaz and .osefa Mia again entered into another contract of sale of the same !ro!erty with ,ibrado -abautan. 6n 3 #e!tember 1830$ by +irtue of an order of the -": 7izal$ a new owner?s co!y of the certificate of title was issued to the )iaz s!ouses$ who had alleged the loss of their co!y. 6n that same date$ the notices of lis !endens annotated on T-T 2@3&10 were canceled and the )eed of #ale in fa+or of -abautan was recorded. ' new T-T #%33@;0DT%132 was thereu!on issued in his name in lieu of the canceled T-T 2@3&10. 6n 1& March 1833$ undran instituted an action for recon+eyance before the -": (asay -ity N against ,ibrado -abautan and .osefa Mia seeCing$ among others$ the cancellation of T-T 33@;0DT%132 and the
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issuance of a new certificate of title in his name. 6n 31 'ugust 1833$ '1) $ re!resented by 5icasio ). #anchez$ #r. (later substituted by Milagros #. /ucu)$ filed a com!laint in inter+ention with substantially the same allegations and !rayers as that in undran?s com!laint. :n a decision dated 12 .anuary 18@3$ undran?s
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com!laint and !etitioner?s com!laint in inter+ention were dismissed for lacC of merit. #o was -abautan?s counterclaims$ for insufficiency of e+idence. *!on a!!eal$ this decision was affirmed by the -ourt of '!!eals$ with the modification that .osefa Mia was ordered to !ay undran the sum of (80$000.00$ with legal interest from 3 #e!tember 1830$ !lus the costs of suit. The #u!reme -ourt denied the !etition and affirmed in toto the 9uestioned decisionG with costs against '1) . ( Article (/** *nder 'rticle 1;&& of the -i+il -ode of the (hili!!ines$ it is !ro+ided that <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossessionG and$ in the absence thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith. 2 !re&erential ri$ht o& &irst to re$ister The first sale to undran was not registered while the second sale to -abautan was registered. (referential rights are accorded to -abautan$ who had registered the sale in his fa+or$ as against '1) ?s co% +enturer whose right to the same !ro!erty had not been recorded. 3 !urchaser in $ood &aith ' !urchaser in good faith is defined as <one who buys the !ro!erty of another without notice that some other !erson has a right to or interest in such !ro!erty and !ays a full and fair !rice for the same at the time of such !urchase or before he has notice of the claim or interest of some other !erson in the !ro!erty.= :n the !resent case$ an e2amination of T-T 2@3&10 discloses no annotation of any sale$ lien$ encumbrance or ad+erse claim in fa+or of undran or '1)-. * #e$istered "ro"erty under %orrens system? !erson char$e Bith notice o& burdens noted on the re$ister o& title >hen the !ro!erty sold is registered under the Torrens system$ registration is the o!erati+e act to con+ey or affect the land insofar as third !ersons are concerned. Thus$ a !erson dealing with registered land is only charged with notice of the burdens on the !ro!erty which are noted on the register or certificate of title. / Notices o& lis "endes not a lien or encumbrance+ merely notice o& liti$ation o& "ro"erty sub@ect to the result o& the suit 5otices of lis !endens in fa+or of other !ersons were earlier inscribed on the title did not ha+e the effect of establishing a lien or encumbrance on the !ro!erty affected. Their only !ur!ose was to gi+e notice to third !ersons and to the whole world that any interest they might ac9uire in the !ro!erty !ending litigation would be subAect to the result of the suit. 5 Cabautan a "urchaser in $ood &aith and &or value -abautan tooC the risC of ac9uiring the !ro!erty e+en in the light of notice of lis !endens inscribed in the title. #ignificantly$ three days after the e2ecution of the deed of sale in his fa+or$ the notices of lis !endens were canceled by +irtue of the orders of the -": 7izal$ /ranch 23$ dated 1 and & '!ril 183&. -abautan
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therefore ac9uired the land free of any liens or encumbrances and so could claim to be a !urchaser in good faith and for +alue.
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No evidence o& alle$ed "ossession by AH-G '1) insists that it was already in !ossession of the dis!uted !ro!erty when -abautan !urchased it and that he could not ha+e not Cnown of that !ossession. #uch Cnowledge should belie his claim that he was an innocent !urchaser for +alue. 1owe+er$ the courts below found no e+idence of the alleged !ossession$ which the #u!reme -ourt must also reAect in deference to this factual finding. ) Casis vs CA not a""licable? -i&&erent issues The issue in the !resent case is whether -abautan is an innocent !urchaser for +alue and so entitled to the !riority granted under 'rticle 1;&& of the -i+il -ode. The -asis case$ on the other hand$ in+ol+ed the issues of whether or not4 1) certiorari was the !ro!er remedy of the !etitioner4 2) the !re+ious !etition for certiorari which originated from the 9uieting of title case was similar to and$ hence$ a bar to the !etition for certiorari arising from the forcible entry caseG and 3) the court a 9uo committed gra+e abuse of discretion amounting to lacC or e2cess of Aurisdiction in issuing the order which dissol+ed the restraining order issued in connection with the eAectment case. The -ourt was not called u!on in that case to determine who as between the two !urchasers of the subAect !ro!erty should be !referred. . 74cer"t used by AH-G a narration o& back$round &acts and not ado"ted as a doctrine by the Su"reme Court '1) in+oCes the ruling of the lower court in that case to the effect that the registration of the sale in fa+or of the second !urchaser and the issuance of a new certificate of title in his fa+or did not in any manner +est in him any right of !ossession and ownershi! o+er the subAect !ro!erty because the seller$ by reason of their !rior sale$ had already lost whate+er right or interest she might ha+e had in the !ro!erty at the time the second sale was made. The e2cer!t was included in the !onencia only as !art of the narration of the bacCground facts and was not thereby ado!ted as a doctrine of the -ourt. :t was considered only for the !ur!ose of ascertaining if the court below had determined the issue of the !ossession of the subAect !ro!erty !ending resolution of the 9uestion of ownershi!. 6b+iously$ the -ourt could not ha+e ado!ted that 9uestionable ruling as it would clearly militate against the !ro+ision of 'rticle 1;&&. (0 No one can sell Bhat he does not oBn? Article (/** either an e4ce"tion to the $eneral rule or a reiteration o& the $eneral rule inso&ar as innocent third "arties are concerned .ustice Bdgardo ,. (aras obser+ed that <5o one can sell what he does not own$ but this is merely the general rule. :s 'rt. 1;&& then an e2ce!tion to the general ruleO :n a sense$ yes$ by reason of !ublic con+enience (#ee 'itCen +. ,ao$ 30 (hil. ;10)G in still another sense$ it really reiterates the general rule in that insofar as innocent third !ersons are concerned$ the registered owner (in the case of real !ro!erty) is still the owner$ with !ower of dis!osition. (( ;an$ua$e o& Article (/** clear? Cabautan deemed oBner The language of 'rticle 1;&& is clear and une9ui+ocal. :n light of its mandate and of the facts established in the !resent case$ 6wnershi! must be recognized in the !ri+ate res!ondent$ who bought the !ro!erty in good faith and$ as an innocent !urchaser for +alue$ duly and !rom!tly registered the sale in his fa+or. '50 Almendra vs 8AC 'G # No ,/((( November 2(+ (..( 0 Third )i+ision$ "ernan (-.)4 & concurring 3actsH The mother$ 'leAa -eno$ was first married to .uanso Fu /ooC with whom she had 3 children named Magdaleno$ Melecia and /ernardina$ all surnamed -eno. #ometime in the 1820?s$ .uanso Fu /ooC tooC his family to -hina where he e+entually died. 'leAa and her daughter /ernardina later returned to the (hili!!ines. )uring said marriage$ 'leAa ac9uired a !arcel of land which she declared in her name under
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Ta2 )eclaration
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11;00. 'fter .uanso Fu /ooC?s death$ /ernardina filed against her mother a case for the !artition of the said !ro!erty in the then -": ,eyte. 6n 13 'ugust 1830$ the lower court rendered a <su!!lemental decision= finding that the said !ro!erty had been subdi+ided into ,ots 03;& (13$33@ s9.ms.)$ 03;3 (10$00& s9.ms.)$ 03;2 (23$@0@ s9.ms.) and 0300 (31$0;0 s9.ms.). The -ourt declared /ernardina 6Aeda owner of and entitled to !ossession of ,ot 03;&G 6Aeda as owner of and entitled to !ossession of ,ot 03;3 without !reAudice to whate+er rights her sister Melecia -eno (!resently in -hina) may ha+e o+er the !ro!ertyG 'leAa 'lmendra as owner of and entitled to !ossession of ,ot 0300G and 'leAa 'lmendra as owner of and entitled to !ossession of ,ot 03;2$ subAect to whate+er may be the rights thereto of her son Magdaleno -eno (!resently in -hina). The -ourt ordered the !arties to bear the fees of the commissioner. Meanwhile$ 'leAa married #antiago 'lmendra with whom she had & children named Margarito$ 'ngeles$ 7oman and )elia. )uring said marriage 'leAa and #antiago ac9uired a ;8$180%s9.ms. !arcel of land in -agbolo$ 'buyog$ ,eyte. 6-T 1008& was issued therefor in the name of #antiago 'lmendra married to 'leAa -eno and it was declared for ta2 !ur!oses in his name. :n addition to said !ro!erties$ 'leAa inherited from her father$ .uan eno$ a 10$000%s9.ms. !arcel of land also in -agbolo. "or his !art$ her husband #antiago inherited from his mother$ 5icolasa 'l+ero$ a 10%s9. ms. !arcel of residential land located in 5alibunan$ 'buyog$ ,eyte. >hile #antiago was ali+e$ he a!!ortioned these !ro!erties among 'leAa?s children in the (hili!!ines$ including /ernardina$ who$ in turn$ shared the !roduce of the !ro!erties with their !arents. 'fter #antiago?s death$ 'leAa sold to her daughter$ 'ngeles 'lmendra$ for (2$000 two !arcels of land in the deed of sale dated 10 'ugust 1833 (P !ortion or conAugal share of land KT) 2223&$ 6-T 1008&L$ and P !ortion or conAugal share of land KT) 23180L both located in /o. -agbolo$ 'buyog$ ,eyte. 6n 20 )ecember 1833$ 'leAa sold to her son$ 7oman 'lmendra$ also for (2$000 a !arcel of land described in the deed of sale as located in -agbolo$ 'buyog$ ,eyte <under TD) 11;00 which cancelled TD) 803;G ha+ing an area of 0.01@1 hec.$ assessed at (1$;@0.00.= 6n the same day$ 'leAa sold to 'ngeles and 7oman again for (2$000 yet another !arcel of land described in the deed of sale (,ot 03;2). 'leAa died on 3 May 183;. 6n 21 .anuary 1833 Margarito$ )elia and /ernardina (!laintiffs) filed a com!laint against 'ngeles and 7oman for the annulment of the deeds of sale in their fa+or$ !artition of the !ro!erties subAects therein and accounting of their !roduce. "rom -hina$ their sister Melecia signed a s!ecial !ower of attorney in fa+or of /ernardina. Magdaleno$ who was still in -hina$ was im!leaded as a defendant in the case and summons by !ublication was made on him. ,ater$ the !laintiffs informed the court that they had recei+ed a document in -hinese characters which !ur!ortedly showed that Magdaleno had died. #aid document$ howe+er$ was not !roduced in court. Thereafter$ Magdaleno was considered as in default without !reAudice to the !ro+isions of #ection &$ 7ule 1@ of the 7ules of -ourt which allows the court to decide a case wherein there are se+eral defendants u!on the e+idence submitted only by the answering defendants. 6n 30 '!ril 18@1$ the lower court rendered a decision declaring the deeds of sale to be simulated and therefore null and +oidG ordering the !artition of the estate of the deceased 'leAa -eno among her heirs and assignsG a!!ointing the 'cting -lerC of -ourt$ 'tty. -ristina T. (onteAos$ as commissioner$ for the !ur!ose of said !artition$ who is e2!ected to !roceed accordingly u!on recei!t of a co!y of this decisionG and to render her re!ort on or before 30 days from said recei!t. The e2!enses of the commissioner shall be borne !ro!ortionately by the !arties. The defendants a!!ealed to the then :ntermediate '!!ellate -ourt which$ on 20 "ebruary 18@0 rendered a decision u!holding the +alidity of the deeds of sale and ordered the !artition of the <undis!osed= !ro!erties left by 'leAa and #antiago 'lmendra and$ if an e2traAudicial !artition can be had$ that it be made within a reasonable !eriod of time after recei!t of its decision. The !laintiffs filed their motion for reconsideration$ which was denied. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt affirmed the decision of the then :ntermediate '!!ellate -ourt subAect to the modifications stated in the !resent decision. The -ourt directed the lower court to facilitate with dis!atch the !re!aration and a!!ro+al of a !roAect of !artition of the !ro!erties considered unsold under the !resent
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decision.
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( No convincin$ reason to nulli&y deeds o& sale? %estimony o& the notary $iven more credence There is no +alid$ legal and con+incing reason for nullifying the 9uestioned deeds of sale. (etitioner had not !resented any strong$ com!lete and conclusi+e !roof to o+erride the e+identiary +alue of the duly notarized deeds of sale. Moreo+er$ the testimony of the lawyer who notarized the deeds of sale that he saw not only 'leAa signing and affi2ing her thumbmarC on the 9uestioned deeds but also 'ngeles and 'leAa <counting money between them$= deser+es more credence than the self%ser+ing allegations of the !etitioners. #uch testimony is admissible as e+idence without further !roof of the due e2ecution of the deeds in 9uestion and is conclusi+e as to the truthfulness of their contents in the absence of clear and con+incing e+idence to the contrary. 2 No "roo& that "rice F!2+000G Bas $rossly inade=uate The !etitioners? allegations that the deeds of sale were <obtained through fraud$ undue influence and misre!resentation$= and that there was a defect in the consent of 'leAa in the e2ecution of the documents because she was then residing with 'ngeles$ had not been fully substantiated. They failed to show that the uniform !rice of (2$000 in all the sales was grossly inade9uate. :t should be em!hasized that the sales were effected between a mother and two of her children in which case filial lo+e must be taCen into account. 3 -e&endants "roved they have means to "urchase the "ro"erties 'ngeles and 7oman am!ly !ro+ed that they had the means to !urchase the !ro!erties. (etitioner Margarito 'lmendra himself admitted that 'ngeles had a sari%sari store and was engaged in the business of buying and selling logs. 20 7oman was a !oliceman before he became an auto mechanic and his wife was a school teacher. * Con@u$al "ro"erty? Ale@a cannot claim title &or de&inite "ortion o& the con@u$al "ro"erty be&ore its "artition The 10 'ugust 1833 sale to 'ngeles of one%half !ortion of the conAugal !ro!erty co+ered by 6-T (% 1008& may only be considered +alid as a sale of 'leAa?s one%half interest therein. 'leAa could not ha+e sold the !articular hilly !ortion s!ecified in the deed of sale in the absence of !roof that the conAugal !artnershi! !ro!erty had been !artitioned after the death of #antiago. /efore such !artition$ 'leAa could not claim title to any definite !ortion of the !ro!erty for all she had was an ideal or abstract 9uota or !ro!ortionate share in the entire !ro!erty. / !ara"hernal "ro"erty? Sale valid The sale of the one%half !ortion of the !arcel of land co+ered by Ta2 )eclaration 23180 is +alid because the said !ro!erty is !ara!hernal being 'leAa?s inheritance from her own father. 5 ;and sub@ect to Civil Case *3),? Ale@a could not have intended the sale o& Bhole "ro"erty already subdivided 's regards the sale of the !ro!erty co+ered by Ta2 )eclaration 11;00$ since the !ro!erty had been found in -i+il -ase &3@3 to ha+e been subdi+ided$ 'leAa could not ha+e intended the sale of the whole !ro!erty co+ered by said ta2 declaration. #he could e2ercise her right of ownershi! only o+er ,ot 0300 which was unconditionally adAudicated to her in said case. , Caveat em"tor on ;ot 53/2? ;ot still sub@ect to ri$hts o& Ma$daleno Ceno ,ot 03;2 was gi+en to 'leAa in -i+il -ase &3@3 <subAect to whate+er may be the rights thereto of her son Magdaleno -eno.= ' reading of the deed of #ale co+ering this !arcel of land would show that the sale is subAect to the condition stated abo+eG hence$ the rights of Magdaleno -eno are am!ly !rotected. The role on ca+eat em!tor a!!lies.
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',0
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An$ 9u Asuncion+ et al vs CA 'G # No (0.(2/ -ecember 2+ (..* 0 Bn /anc$ Vitug (.)4 11 concurring$ 1 tooC no !art$ 1 on lea+e 3actsH 6n 28 .uly 18@3 a #econd 'mended -om!laint for #!ecific (erformance was filed by 'nn Fu 'suncion$ 'rthur o$ and Eeh Tiong against /obby -u *nAieng$ 7ose -u *nAieng and .ose Tan before the 7T- Manila (/ranch 31$ -i+il -ase @3%&10;@) alleging$ among others$ that the former are tenants or lessees of residential and commercial s!aces owned by the latter described as 030%03@ 6ng!in #treet$ /inondo$ ManilaG that they ha+e occu!ied said s!aces since 183; and ha+e been religiously !aying the rental and com!lying with all the conditions of the lease contractG that on se+eral occasions before 8 6ctober 18@0$ the latter informed the former that they are offering to sell the !remises and are gi+ing them !riority to ac9uire the sameG that during the negotiations$ /obby -u *nAieng offered a !rice of (0%million while 'ng Fu 'suncion$ et.al. (!laintiffs) made a counter offer of (;%millionG that !laintiffs thereafter asCed /obby -u *nAieng$ 7ose -u *nAueng and .ose Tan (defendants) to !ut their offer in writing to which re9uest defendants accededG that in re!ly to defendants? letter$ !laintiffs wrote them on 2& 6ctober 18@0 asCing that they s!ecify the terms and conditions of the offer to sellG that when !laintiffs did not recei+e any re!ly$ they sent another letter dated 2@ .anuary 18@3 with the same re9uestG that since defendants failed to s!ecify the terms and conditions of the offer to sell and because of information recei+ed that defendants were about to sell the !ro!erty$ !laintiffs were com!elled to file the com!laint to com!el defendants to sell the !ro!erty to them. 'fter the issues were Aoined$ defendants filed a motion for summary Audgment which was granted by the lower court. The trial court found that defendants? offer to sell was ne+er acce!ted by the !laintiffs for the reason that the !arties did not agree u!on the terms and conditions of the !ro!osed sale$ hence$ there was no contract of sale at all. 5onetheless$ the lower court ruled that should the defendants subse9uently offer their !ro!erty for sale at a !rice of (11 million or below$ !laintiffs will ha+e the right of first refusal. 'ggrie+ed by the decision$ !laintiffs a!!ealed to the -ourt of '!!eals (-'% 7 -V 21123). :n a decision !romulgated on 21 #e!tember 1880 (!enned by .ustice #egundino . -hua and concurred in by .ustices Vicente V. Mendoza and "ernando '. #antiago)$ the a!!ellate court affirmed with modification the lower court?s Audgment$ holding that there was no meeting of the minds between the !arties concerning the sale of the !ro!erty and thus$ the claim for s!ecific !erformance will not lie. The a!!ellate did not grant the a!!ellants the right of first refusal in the e+ent the subAect !ro!erty is sold for a !rice in e2cess of (11 million. The decision of the a!!ellate court was brought to the #u!reme -ourt by !etition for re+iew on certiorari. The #u!reme -ourt denied the a!!eal on 0 May 1881 <for insufficiency in form and substances.= 6n 1; 5o+ember 1880$ while -'% 7 -V 21123 was !ending consideration by the a!!ellate court$ the -u *nAieng s!ouses e2ecuted a )eed of #ale transferring the !ro!erty in 9uestion to /uen 7ealty and )e+elo!ment -or!oration for (1; million. 's a conse9uence of the sale$ T-T 10;2;&DT%@@1 in the name of the -u *nAieng s!ouses was cancelled and$ in lieu thereof$ T-T 18;@10 was issued in the name of /uen 7ealty on 3 )ecember 1880. 6n 1 .uly 1881$ /uen 7ealty as the new owner of the subAect !ro!erty wrote a letter to the lessees demanding that the latter +acate the !remises. 6n 10 .uly 1881$ the lessees wrote a re!ly to /uen 7ealty stating that !etitioner brought the !ro!erty subAect to the notice of lis !endens regarding -i+il -ase @3%&10;@ annotated on T-T 10;2;&DT%@@1 in the name of the -u *nAiengs. The lessees filed a Motion for B2ecution dated 23 'ugust 1881 of the )ecision in -i+il -ase @3%&10;@ as modified by the -ourt of '!!eals in -'% 7 -V 21123. 6n 30 'ugust 1881$ the .udge issued an order
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ordering -u *nCieng to e2ecute the necessary )eed of #ale of the !ro!erty in litigation in fa+or of !laintiffs 'ng Fu 'suncion$ Eeh Tiong and 'rthur o for the consideration of (1; Million !esos in recognition of the latter?s right of first refusal and that a new T-T be issued in fa+or of the buyer$ and thus$ setting aside all !re+ious transactions in+ol+ing the same !ro!erty notwithstanding the issuance of another title to /uen 7ealty -or!oration$ which was said to ha+e been e2ecuted in bad faith. 6n 22 #e!tember 1881$ the .udge issue another order directing the )e!uty #heriff to im!lement the >rit of B2ecution ordering the defendants among
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others to com!ly with the 6rder of the -ourt within a !eriod of 1 weeC from recei!t of this 6rder and for defendants to e2ecute the necessary )eed of #ale of the !ro!erty in litigation in fa+or of the !laintiffs 'ng Fu 'suncion$ Eeh Tiong and 'rthur o for the consideration of (1;$000$000.00 and ordering the 7egister of )eeds of the -ity of Manila$ to cancel and set aside the title already issued in fa+or of /uen 7ealty -or!oration which was !re+iously e2ecuted between the latter and defendants and to register the new title in fa+or of the aforesaid !laintiffs 'ng Fu 'suncion$ Eeh Tiong and 'rthur o. 6n the same day$ the corres!onding writ of e2ecution was issued. 6n & )ecember 1881$ the a!!ellate court$ on a!!eal to it by /uen 7ealty (-'% 7 #( 203&;)$ set aside and declared without force and effect the 9uestioned orders of the court a 9uo. 1ence$ the !etition for certiorari. The #u!reme -ourt u!held the decision of the -ourt of '!!eals in ultimately setting aside the 9uestioned 6rders$ dated 30 'ugust 1881 and 23 #e!tember 1881$ of the court a 9uoG with costs against 'ng Fu 'suncion$ et. al. ( 2 2bli$ation de&ined 'n obligation is a Auridical necessity to gi+e$ to do or not to do ('rt. 11;0$ -i+il -ode).
2bli$ation+ elements The obligation is constituted u!on the concurrence of the essential elements thereof$ +iz4 (a) The +inculum Auris or Auridical tie which is the efficient cause established by the +arious sources of obligations (law$ contracts$ 9uasi%contracts$ delicts and 9uasi%delicts)G (b) the obAect which is the !restation or conductG re9uired to be obser+ed (to gi+e$ to do or not to do)G and (c) the subAect%!ersons who$ +iewed from the demandability of the obligation$ are the acti+e (obligee) and the !assi+e (obligor) subAects. 3 Contract as a source o& obli$ation 'mong the sources of an obligation is a contract ('rt. 11;3$ -i+il -ode)$ which is a meeting of minds between two !ersons whereby one binds himself$ with res!ect to the other$ to gi+e something or to render some ser+ice ('rt. 130;$ -i+il -ode). *ntil the contract is !erfected$ it cannot$ as an inde!endent source of obligation$ ser+e as a binding Auridical relation. * Various sta$es o& a contractH Ne$otiation+ "re"aration+ and consummation ' contract undergoes +arious stages that include its negotiation or !re!aration$ its !erfection and$ finally$ its consummation. 5egotiation co+ers the !eriod from the time the !ros!ecti+e contracting !arties indicate interest in the contract to the time the contract is concluded (!erfected). The !erfection of the contract taCes !lace u!on the concurrence of the essential elements thereof. ' contract which is consensual as to !erfection is so established u!on a mere meeting of minds$ i.e.$ the concurrence of offer and acce!tance$ on the obAect and on the cause thereof. ' contract which re9uires$ in addition to the abo+e$ the deli+ery of the obAect of the agreement$ as in a !ledge or commodatum$ is commonly referred to as a real contract. :n a solemn contract$ com!liance with certain formalities !rescribed by law$ such as in a donation of real !ro!erty$ is essential in order to maCe the act +alid$ the !rescribed form being thereby an essential element thereof. The stage of consummation begins when the !arties !erform their res!ecti+e undertaCings under the contract culminating in the e2tinguishment thereof. / !er&ection o& a contract o& sale :n sales$ the contract is !erfected when a !erson$ called the seller$ obligates himself$ for a !rice certain$ to deli+er and to transfer ownershi! of a thing or right to another$ called the buyer$ o+er which the latter agrees. 'rticle 1&;@ of the -i+il -ode !ro+ides that </y the contract of sale one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determinate thing$ and the other to !ay therefor a !rice certain in money or its e9ui+alent. ' contract of sale may be absolute or conditional.=
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Contract to sell is conditional? 7&&ect o& breach o& condition >hen the sale is not absolute but conditional$ such as in a <-ontract to #ell= where in+ariably the ownershi! of the thing sold is retained until the fulfillment of a !ositi+e sus!ensi+e condition (normally$ the full !ayment of the !urchase !rice)$ the breach of the condition will !re+ent the obligation to con+ey title from ac9uiring an obligatory force. , Sti"ulations $overn over title in determinin$ contract to be a contract o& sale or contract to sell :n Dignos vs. Court of Appeals (1;@ #-7' 33;)$ although denominated a <)eed of -onditional #ale$= a sale is still absolute where the contract is de+oid of any !ro+iso that title is reser+ed or the right to unilaterally rescind is sti!ulated$ e.g.$ until or unless the !rice is !aid. 6wnershi! will then be transferred to the buyer u!on actual or constructi+e deli+ery (e.g.$ by the e2ecution of a !ublic document) of the !ro!erty sold. >here the condition is im!osed u!on the !erfection of the contract itself$ the failure of the condition would !re+ent such !erfection. :f the condition is im!osed on the obligation of a !arty which is not fulfilled$ the other !arty may either wai+e the condition or refuse to !roceed with the sale ('rt. 1;&;$ -i+il -ode). ) Dnconditional mutual "romise to buy and sell obli$atory on the "arties 'n unconditional mutual !romise to buy and sell$ as long as the obAect is made determinate and the !rice is fi2ed$ can be obligatory on the !arties$ and com!liance therewith may accordingly be e2acted. . !er&ected contract o& o"tion 'n acce!ted unilateral !romise which s!ecifies the thing to be sold and the !rice to be !aid$ when cou!led with a +aluable consideration distinct and se!arate from the !rice$ is what may !ro!erly be termed a !erfected contract of o!tion. This contract is legally binding$ and in sales$ it conforms with the second !aragra!h of 'rticle 1&38 of the -i+il -ode$ which !ro+ides that <'n acce!ted unilateral !romise to buy or to sell a determinate thing for a !rice certain is binding u!on the !romissor if the !romise is su!!orted by a consideration distinct from the !rice. (1&;1a)= (0 2"tion not the contract o& sale itsel& The o!tion is not the contract of sale itself. The o!tionee has the right$ but not the obligation$ to buy. 6nce the o!tion is e2ercised timely$ i.e.$ the offer is acce!ted before a breach of the o!tion$ a bilateral !romise to sell and to buy ensues and both !arties are then reci!rocally bound to com!ly with their res!ecti+e undertaCings. (( 2&&er ' negotiation is formally initiated by an offer. 'n im!erfect !romise (!olicitacion) is merely an offer. (ublic ad+ertisements or solicitations and the liCe are ordinarily construed as mere in+itations to maCe offers or only as !ro!osals. These relations$ until a contract is !erfected$ are not considered binding commitments. Thus$ at any time !rior to the !erfection of the contract$ either negotiating !arty may sto! the negotiation. The offer$ at this stage$ may be withdrawnG the withdrawal is effecti+e immediately after its manifestation$ such as by its mailing and not necessarily when the offeree learns of the withdrawal (,audico +s. 'rias$ &3 (hil. 230). (2 2&&er Bith a "eriod? 7&&ects o& BithdraBal (1) :f the !eriod is not itself founded u!on or su!!orted by a consideration$ the offeror is still free and has the right to withdrawal the offer before its acce!tance$ or$ if an acce!tance has been made$ before the offeror?s coming to Cnow of such fact$ by communicating that withdrawal to the offeree (see 'rt. 132&$ -i+il -odeG see also 'tCins$ Eroll Q -o. +s. -ua$ 102 (hil. 8&@$ holding that this rule is a!!licable to a unilateral !romise to sell under 'rt. 1&38$ modifying the !re+ious decision in #outh >estern #ugar +s. 'tlantic ulf$ 83 (hil. 2&8G see also 'rt. 1318$ -i+il -odeG 7ural /anC of (araMa9ue$ :nc.$ +s. 7emolado$ 13; #-7' &08G #anchez +s. 7igos$ &; #-7' 30@). The right to withdraw$ howe+er$ must not be e2ercised whimsically or
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arbitrarilyG otherwise$ it could gi+e rise to a damage claim under 'rticle 18 of the -i+il -ode which ordains that <e+ery !erson must$ in the e2ercise of his rights and in the !erformance of his duties$ act with Austice$
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gi+e e+eryone his due$ and obser+e honesty and good faith.= (2) :f the !eriod has a se!arate consideration$ a contract of <o!tion= is deemed !erfected$ and it would be a breach of that contract to withdraw the offer during the agreed !eriod. The o!tion$ howe+er$ is an inde!endent contract by itself$ and it is to be distinguished from the !roAected main agreement (subAect matter of the o!tion) which is ob+iously yet to be concluded. :f$ in fact$ the o!tioner%offeror withdraws the offer before its acce!tance (e2ercise of the o!tion) by the o!tionee%offeree$ the latter may not sue for s!ecific !erformance on the !ro!osed contract (<obAect= of the o!tion) since it has failed to reach its own stage of !erfection. The o!tioner%offeror$ howe+er$ renders himself liable for damages for breach of the o!tion. :n these cases$ care should be taCen of the real nature of the consideration gi+en$ for if$ in fact$ it has been intended to be !art of the consideration for the main contract with a right of withdrawal on the !art of the o!tionee$ the main contract could be deemed !erfectedG a similar instance would be an <earnest money= in a contract of sale that can e+idence its !erfection ('rt. 1&@2$ -i+il -ode). (3 #i$ht o& &irst re&usal innovative? neither an o"tion nor an o&&er :n the law on sales$ the so%called <right of first refusal= is an inno+ati+e Auridical relation. :t cannot be deemed a !erfected contract of sale under 'rticle 1&;@ of the -i+il -ode. 5either can the right of first refusal$ understood in its normal conce!t$ !er se be brought within the !ur+iew of an o!tion under the second !aragra!h of 'rticle 1&38$ or !ossibly of an offer under 'rticle 1318 of the same -ode. (* -istinction o& ri$ht o& &irst re&usal to an o"tion or to an o&&er 'n o!tion or an offer would re9uire$ among other things$ a clear certainty on both the obAect and the cause or consideration of the en+isioned contract. :n a right of first refusal$ while the obAect might be made determinate$ the e2ercise of the right$ howe+er$ would be de!endent not only on the grantor?s e+entual intention to enter into a binding Auridical relation with another but also on terms$ including the !rice$ that ob+iously are yet to be later firmed u!. (rior thereto$ it can at best be so described as merely belonging to a class of !re!aratory Auridical relations go+erned not by contracts (since the essential elements to establish the +inculum Auris would still be indefinite and inconclusi+e) but by$ among other laws of general a!!lication$ the !ertinent scattered !ro+isions of the -i+il -ode on human conduct. (/ <reach o& ri$ht o& &irst re&usal does not Barrant issuance o& a Brit o& e4ecution nor sanction an action &or s"eci&ic "er&ormance? may only Barrant recovery &or dama$es under Article (. o& the Civil Code B+en on the !remise that such right of first refusal has been decreed under a final Audgment$ its breach cannot Austify corres!ondingly an issuance of a writ of e2ecution under a Audgment that merely recognizes its e2istence$ nor would it sanction an action for s!ecific !erformance without thereby negating the indis!ensable element of consensuality in the !erfection of contracts. :t is not to say$ howe+er$ that the right of first refusal would be inconse9uential for an unAustified disregard thereof$ the circumstances e2!ressed in 'rticle 18 of the -i+il -ode$ can warrant a reco+ery for damages. :n the !resent case$ !etitioners are aggrie+ed by the failure of !ri+ate res!ondents to honor the right of first refusal$ the remedy is not a writ of e2ecution on the Audgment$ since there is none to e2ecute$ but an action for damages in a !ro!er forum for the !ur!ose. (5 8ssue on <uen #ealtyMs $ood &aith should be addressed in a""ro"riate "roceedin$s+ as <uen #ealty Bas not im"leaded in Civil Case ),-*(0/) >hether /uen 7ealty )e+elo!ment -or!oration$ the alleged !urchaser of the !ro!erty$ has acted in good faith or bad faith and whether or not it should$ in any case$ be considered bound to res!ect the registration of the lis !endens in -i+il -ase @3%&10;@ are matters that must be inde!endently addressed in a!!ro!riate !roceedings. /uen 7ealty$ not ha+ing been im!leaded in -i+il -ase @3%&10;@$ cannot be held subAect to the writ of e2ecution issued$ let alone ousted from the ownershi! and !ossession of the !ro!erty$ without first being duly afforded its day in court.
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(,
-ecision in Civil Case ),-*(0/) could have not been decreed
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The decision in -i+il -ase @3%&10;@ could not ha+e decreed at the time the e2ecution of any deed of sale between the -u *nAiengs and /uen 7ealty. There was nothing in the decision$ as modified by the a!!ellate court$ that decreed the e2ecution of a deed of sale between the -u *nAiengs and the lessees$ or the fi2ing of the !rice of the sale$ or the cancellation of title in the name of /uen 7ealty (,im!in +s. :'-$ 1&3 #-7' ;10G (amantasan ng ,ungsod ng Maynila +s. :'-$ 1&3 #-7' 311G )e uzman +s. -'$ 133 #-7' 330G (astor +s. -'$ 122 #-7' @@;).= ')0 An$eles vs Calasan: 'G # No ;-*22)3 March ()+ (.)/ 0 Bn /anc$ utierrez .r. (.)4 ; concurring$ 1 tooC no !art 3actsH 6n 18 )ecember 18;3$ *rsula Torres -alasanz and Tomas -alasanz and /uena+entura 'ngeles and Teofila .uani entered into a contract to sell a !iece of land located in -ainta$ 7izal for the amount of (3$820.00 !lus 3I interest !er annum. 'ngeles made a down!ayment of (382.00 u!on the e2ecution of the contract. They !romised to !ay the balance in monthly installments of (&1.20 until fully !aid$ the installments being due and !ayable on the 18th day of each month. They !aid the monthly installments until .uly 1800$ when their aggregate !ayment already amounted to (&$;33.3@. 6n numerous occasions$ -alasanz acce!ted and recei+ed delayed installment !ayments from 'ngeles. 6n 3 )ecember 1800$ -alasanz wrote 'ngeles a letter re9uesting the remittance of !ast due accounts. 6n 2@ .anuary 1803$ -alasanz cancelled the said contract because 'ngeles failed to meet subse9uent !ayments. 'ngeles? letter with their !lea for reconsideration of the said cancellation was denied by -alasanz. 'ngeles filed -i+il -ase @8&3 with the -": 7izal$ #e+enth .udicial )istrict$ /ranch R to com!el -alasanz to e2ecute in their fa+or the final deed of sale alleging inter alia that after com!uting all subse9uent !ayments for the land in 9uestion$ they found out that they ha+e already !aid the total amount of (&$;33.3@ including interests$ realty ta2es and incidental e2!enses for the registration and transfer of the land. -alasanz$ on the other hand$ alleged that the com!laint states no cause of action and that 'ngeles +iolated !aragra!h 0 of the contract to sell when they failed and refused to !ay andDor offer to !ay the monthly installments corres!onding to the month of 'ugust$ 1800 for more than ; months$ thereby constraining -alasanz to cancel the said contract. The lower court rendered Audgment in fa+or of 'ngeles$ ordering that the contract was not +alidly cancelled by -alasanz$ and ordered the latter to e2ecute a final )eed of #ale :n fa+or of 'ngeles$ and to !ay the sum of (;00 by way of attorney?s feesG with costs against -alasanz. ' motion for reconsideration filed by -alasanz was denied. 6n '!!eal$ the then -ourt of '!!eals certified the case to the #u!reme -ourt considering that the a!!eal in+ol+es !ure 9uestions of law. The #u!reme -ourt denied the !etition for lacC of merit$ affirmed the decision a!!ealed from is with the modification that 'ngeles should !ay the balance of (031.03 without any interestsG with costs against -alasanz. ( Contents o& !ara$ra"h 5 o& the Contract (aragra!h si2 of the contract !ro+ides <:n case the !arty of the #B-65) ('7T fails to satisfy any monthly installments$ or any other !ayments herein agreed u!on$ he is granted a month of grace within which to maCe the retarded !ayment$ together with the one corres!onding to the said month of graceG it is understood$ howe+er$ that should the month of grace herein granted to the !arty of the #B-65) ('7T e2!iredG without the !ayments corres!onding to both months ha+ing been satisfied$ an interest of 10I !er annum will be charged on the amounts he should ha+e !aidG it is understood further$ that should a !eriod of 80 days ela!se$ to begin from the e2!iration of the month of grace herein mentioned$ and the !arty of #B-65) ('7T has not !aid all the amounts he should ha+e !aid with the corres!onding interest u! to
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that date$ the
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!arty of the ":7#T ('7T has the right to declare this contract cancelled and of no effect$ and as conse9uence thereof$ the !arty of the ":7#T ('7T may dis!ose of the !arcel of land co+ered by this contract in fa+or of other !ersons$ as if this contract had ne+er been entered into. :n case of such cancellation of the contract$ all the amounts !aid in accordance with this agreement together with all the im!ro+ements made on the !remises$ shall be considered as rents !aid for the use and occu!ation of the abo+e mentioned !remises$ and as !ayment for the damages suffered by failure of the !arty of the #B-65) ('7T to fulfill his !art of the agreement$ and the !arty of the #B-65) ('7T hereby renounces all his right to demand or reclaim the return of the same and obliges himself to !eacefully +acate the !remises and deli+er the same to the !arty of the ":7#T ('7T.= 2 Article ((.( o& the Civil Code? #escission o& reci"rocal obli$ations 'rticle 1181 of the -i+il -ode on the rescission of reci!rocal obligations !ro+ides4=The !ower to rescind obligations is im!lied in reci!rocal ones$ in case one of the obligors should not com!ly with what is incumbent u!on him. The inAured !arty may choose between the fulfillment and the rescission of the obligation$ with the !ayment of damages in either case. 1e may also seeC rescission$ e+en after he has chosen fulfillment$ if the later should become im!ossible.= 'rticle 1181 is e2!licit. :n reci!rocal obligations$ either !arty has the right to rescind the contract u!on the failure of the other to !erform the obligation assumed thereunder. 3 6udicial action &or rescission not necessary Bhere contract "rovides &or revocation &or breach? 3roilan vs !an 2riental Shi""in$ There is nothing in the law that !rohibits the !arties from entering into an agreement that +iolation of the terms of the contract would cause its cancellation e+en without court inter+ention ("roilan +. (an 6riental #hi!!ing$ -o.$ et al.$ 12 #-7' 230). ' Audicial action for the rescission of a contract is not necessary where the contract !ro+ides that it may be re+oCed and cancelled for +iolation of any of its terms and conditions? (,o!ez +. -ommissioner of -ustoms$ 33 #-7' 323$ 33&$ and cases cited therein). 7esort to Audicial action for rescission is ob+iously not contem!lated . . . The +alidity of the sti!ulation can not be seriously dis!uted. :t is in the nature of a facultati+e resolutory condition which in many cases has been u!held by the #u!reme -ourt. ((once Bnrile +. -ourt of '!!eals$ 28 #-7' ;0&).= * D! vs delos An$elesH Cuali&ication to the 3roilan rulin$? #escission must be @usti&ied The rule that it is not always necessary for the inAured !arty to resort to court for rescission of the contract when the contract itself !ro+ides that it may be rescinded for +iolation of its terms and conditions$ was 9ualified by the -ourt in *ni+ersity of the (hili!!ines +. )e los 'ngeles$ (3; #-7' 102). :t was held therein that <the act of a !arty in treating a contract as cancelled or resol+ed on account of infractions by the other contracting !arty must be made Cnown to the other and is always !ro+isional$ being e+er subAect to scrutiny and re+iew by the !ro!er court. :f the other !arty denies that rescission is Austified$ it is free to resort to Audicial action in its own behalf$ and bring the matter to court. Then$ should the court$ after due hearing$ decide that the resolution of the contract was not warranted$ the res!onsible !arty will be sentenced to damagesG in the contrary case$ the resolution will be affirmed$ and the conse9uent indemnity awarded to the !arty !reAudiced. Thus$ the !arty who deems the contract +iolated many consider it resol+ed or rescinded$ and act accordingly$ without !re+ious court action$ but it !roceeds at its own risC. "or it is only the final Audgment of the corres!onding court that will conclusi+ely and finally settle whether the action taCen was or was not correct in law . . .= / 74tra@udicial resolution remains contestable and thus sub@ect to @udicial invalidation+ unless barred by ac=uiescence+ esto""el or "rescri"tion There is no conflict between this ruling and the !re+ious Auris!rudence of the -ourt declaring that
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Audicial action is necessary for the resolution of a reci!rocal obligationG (6ceAo$ (erez Q -o. +. :nternational /anCing -or!.$ 33 (hil. 031G 7e!ublic +. 1os!ital de #an .uan de )ios$ et al.$ @& (hil. @20) since in e+ery case where the e2traAudicial resolution is contested only the final award of the court of com!etent Aurisdiction
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can conclusi+ely settle whether the resolution was !ro!er or not. :t is in this sense that Audicial action will be necessary$ as without it$ the e2traAudicial resolution will remain contestable and subAect to Audicial in+alidation$ unless attacC thereon should become barred by ac9uiescence$ esto!!el or !rescri!tion. 5 #i$ht to rescind contract &or non-"er&ormance o& sti"ulations not absolute? Dniversal 3ood Cor" vs CA The right to rescind the contract for non%!erformance of one of its sti!ulations is not absolute. :n *ni+ersal "ood -or!. +. -ourt of '!!eals (33 #-7' 1) the -ourt stated that <the general rule is that rescission of a contract will not be !ermitted for a slight or casual breach$ but only for such substantial and fundamental breach as would defeat the +ery obAect of the !arties in maCing the agreement. (#ong "o Q -o. +. 1awaiian%(hili!!ine -o.$ &3 (hil. @21$ @23) The 9uestion of whether a breach of a contract is substantial de!ends u!on the attendant circumstances. (-or!us +. 1on. 'liC!ala$ et al.$ ,%23303 Q ,% 23320$ .an. 13$ 180@).= , <reach too sli$ht? Sanctionin$ the rescission Bill do in@ustice+ leads to un@ust enrichment The breach of the contract ad+erted to by -alasanz is so slight and casual considering that a!art from the initial down!ayment of (382.00 'ngeles had already !aid the monthly installments for a !eriod of almost 8 years. :n other words$ in only a short time$ the entire obligation would ha+e been !aid. "urthermore$ although the !rinci!al obligation was only (3$820.00 e2cluding the 3I interests$ 'ngeles had already !aid an aggregate amount of (&$;33.3@. To sanction the rescission made by -alasanz will worC inAustice to 'ngeles. (#ee ..M. Tuazon and -o.$ :nc. +. .a+ier$ 31 #-7' @28) :t would unAustly enrich -alasanz. ) Article (23* o& the Civil Code? Substantial "er&ormance 'rticle 123& of the -i+il -ode which !ro+ides that4 <:f the obligation has been substantially !erformed in good faith$ the obligor may reco+er as though there had been a strict and com!lete fulfillment$ less damages suffered by the obligee.= . !ur"ose o& subdivisions 'lthough the !rimary obAect of selling subdi+ided lots is business$ yet$ it cannot be denied that this subdi+ision is liCewise !ur!osely done to afford those landless$ low income grou! !eo!le of realizing their dream of a little !arcel of land which they can really call their own. (0 Acce"tance o& delayed "ayments o& installments+ a Baiver? Sellers esto""ed &rom e4ercisin$ ri$ht o& rescission >hen -alasanz$ instead of a+ailing of their alleged right to rescind$ ha+e acce!ted and recei+ed delayed !ayments of installments$ though 'ngeles ha+e been in arrears beyond the grace !eriod mentioned in !aragra!h 0 of the contract$ -alasanz has wai+ed and is now esto!!ed from e2ercising her alleged right of rescission. (( -e Gu:man vs Guieb in "oint :n )e uzman +. uieb (&@ #-7' 0@)$ the -ourt held therein that <:n s!ite of the long arrearages$ neither they nor their !redecessor$ Teodoro de uzman$ e+en tooC ste!s to cancel the o!tion or to eAect the a!!ellees from the home%lot in 9uestion. 6n the contrary$ it is admitted that the delayed !ayments were recei+ed without !rotest or 9ualification.= *nder these circumstances$ the -ourt <cannot but agree with the lower court that at the time a!!ellees e2ercised their o!tion$ a!!ellants had already forfeited their right to in+oCe the abo+e%9uoted !ro+ision regarding the nullifying effect of the non%!ayment of si2 months rentals by a!!ellees by their ha+ing acce!ted without 9ualification on .uly 21$ 180& the full !ayment by a!!ellees of all their arrearages.=
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(2
!resent contract to sell has characteristics o& contract o& adhesion The contract to sell entered into by the !arties has some characteristics of a contract of adhesion.
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-alasanz drafted and !re!ared the contractG while 'ngeles$ eager to ac9uire a lot u!on which to build a home$ affi2ed their signatures and assented to the terms and conditions of the contract. They had no o!!ortunity to 9uestion nor change any of the terms of the agreement. :t was offered to them on a <taCe it or lea+e it= basis. (3 Contract o& adhesion? SBeet ;ines vs %eves :n #weet ,ines$ :nc. +. Te+es (@3 #-7' 301)$ the -ourt held that <while generally$ sti!ulations in a contract come about after deliberate drafting by the !arties thereto$ .. there are certain contracts almost all the !ro+isions of which ha+e been drafted only by one !arty$ usually a cor!oration. #uch contracts are called contracts of adhesion$ because the only !artici!ation of the !arty is the signing of his signature or his Sadhesion? thereto. :nsurance contracts$ bills of lading$ contracts of sale of lots on the installment !lan fall into this category.? ((aras$ -i+il -ode of the (hili!!ines$ #e+enth ed.$ Vol. :$ !. @0.)= (* Construction o& a contract o& adhesion The contract to sell$ being a contract of adhesion$ must be construed against the !arty causing it. The terms of a contract must be inter!reted against the !arty who drafted the same$ es!ecially where such inter!retation will hel! effect Austice to buyers who$ after ha+ing in+ested a big amount of money$ are now sought to be de!ri+ed of the same thru the !rayed a!!lication of a contract cle+er in its !hraseology$ condemnable in its lo!sidedness and inAurious in its effect which$ in essence$ and in its entirety is most unfair to the buyers. '.0 A:cona vs #eyes 'G # No 3./.0 3ebruary 5+ (.3* 0 #econd )i+ision$ Villa%7eal (.)4 & concurring 3actsH 6n 11 6ctober 1820$ "lorentina -ordero$ now deceased$ e2ecuted a !ower of attorney authorizing her only daughter$ 'lberta ,. 7eyes$ to mortgage in her name and re!resentation all her land situated in the munici!ality of (ola$ Mindoro. 6n 22 6ctober 1820$ 7eyes$ !ersonally and as attorney in fact of her mother "lorentina -ordero$ in consideration of the sum of (0$;00 recei+ed from Bnri9ue 'zcona$ now deceased$ sold to the latter$ with the right of re!urchase within the !eriod of & years$ ; !arcels of land with certificates of title belonging to her and -ordero. The +endors became lessees of the !ro!erty sold$ at a yearly rental of (3@0. 6n 23 6ctober 1820$ 7eyes$ as attorney in fact of -ordero$ in consideration of the sum of (;$000 recei+ed from 'zcona$ sold to the latter$ with the right of re!urchase within the !eriod of & years$ a !arcel of land with certificate of title ;@ of the registry of deeds of Mindoro$ belonging to -ordero. -ordero became the lessee of said !ro!erty at a yearly rental of (000. 6n 1 6ctober 182;$ 7eyes and -ordero Aointly e2ecuted a !ower of attorney authorizing regorio Venturanza to sell and encumber all their real and !ersonal including their cattle. 'zcona died on 12 May 182;$ and was succeeded in all his rights by his only son$ .esus 'zcona$ to whom the entire estate of his deceased father$ together with the credits$ was Audicially adAudicated. :nasmuch as neither 7eyes nor -ordero$ during her lifetime$ had e2ercised her right of redem!tion within the !eriod of& years$ and inasmuch as they had asCed for an e2tension of time$ on 28 5o+ember 1820$ regorio Venturanza$ as attorney in fact of 7eyes and -ordero$ on one side$ and .esus 'zcona$ on the other$ e2ecuted a deed whereby the deeds of sale with the right of re!urchase dated 6ctober 22 and 23$ 1820$ res!ecti+ely$ were cancelled and their res!ecti+e amounts of (0$;00 and (;$000$ together with the sum of (1$000 re!resenting the un!aid accrued interest thereon$ or a total amount of (12$;00$ were con+erted into a mortgage credit. :n order to secure the cancellation of the registration of the alleged sales with the right of re!urchase$ the !arcels of land described in the res!ecti+e deeds were resold to the +endors and a mortgage
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was constituted thereon to secure the !ayment of said mortgage credit of (12$;00 within the !eriod of 2 years$ e2tensible to another two years$ with interest at 12I !er annum. *nder said contract the mortgagors 7eyes and -ordero were !ermitted to li9uidate said debt by installments in the sum of (2$;00 with the interest due$ to be !aid on )ecember 1 of e+ery year$ beginning in 1823. 7eyes and -ordero$ through Venturanza$ !aid by way of amortization and
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interest ((2$;00 on 1; "ebruary 1823$ (2$200 on 13 6ctober 1823$ (1$200 on 8 "ebruary 1828$ (3;0 on 30 .une 1828$ and (000 on 20 #e!tember 1828G lea+ing a balance of (@$83;.12). #ince the last mentioned date$ the mortgagors failed to !ay amortization and interest so that on 30 .une 1832$ the un!aid balance thereof together with the un!aid accrued interest amounted to (11$8;@.0;. ? +e "acts 8o not ,#ovi8e t+e 6anne# on +o@ t+e issue @as #aise8 in t+e C)- !in8o#oA. The !arties (.esus 'zcona$ on one handG and 'lberta 7eyes and er+asio ,arracas as s!ecial administrator of the estate of "lorentina -ordero$ on the other) admit and the trial court so found that$ although the instruments are in the form of deeds of sale with !acto de retro$ in reality they re!resent mortgage loans. The -": ordered 7eyes$ as administrati2 of -ordero?s estate$ to !ay 'zcona the um of (11$8@;.0; with 12I interest until fully !aid$ 10T of the sum re!resenting e2!enses and attorney?s fees$ and (2 as fees for the registration of the mortgage deed. The court also ordered that in case 7eyes fails to !ay the sums within 80 days from final Audgment$ the !arcels of land shall be sold at !ublic auction and the !roceeds thereof a!!lied to the !ayment of the sum and the balance deli+ered to 7eyes. 7eyes and ,arracas a!!ealed se!arately. The #u!reme -ourt found no error in the Audgment a!!ealed from$ and thus affirmed it in toto$ with the costs against 7eyes and ,arracas. ( -eeds o& sale are not true deeds o& "acto de retro sale but o& mort$a$e? #esale mere &ormality to cancellation o& re$istration and the notation o& the mort$a$e deed The instruments are not true deeds of sale with !acto de retro but of mortgage$ the resale of the !arcels of land$ made by .esus 'zcona in fa+or of 7eyes and -ordero$ is null and +oid on the ground that$ as mere mortgagors$ they ne+er ceased to be the owners thereof and that Bnri9ue 'zcona$ as a mere mortgagee$ ne+er ac9uired any title of ownershi! thereto. :n order for a sale to be +alid$ it is necessary that the +endor be the owner of the thing sold$ inasmuch as it is a !rinci!le of law that nobody can dis!ose of that which does not belong to him. 1owe+er$ the sales with !acto de retro were fictitious for the reason that the contracts entered into by 7eyes and the deceased Bnri9ue 'zcona were really mortgage in their nature. Therefore$ the resale was a mere formality resorted to for the !ur!ose of obtaining the lawful cancellation of the registration thereof in the registry of deeds and the notation of the mortgage deed. 2 Mort$a$e deed not void+ does not lack consideration or "rinci"al obli$ation Bhich it "ur"orts to secure 7eyes recei+ed the sum of (0$;00 and another sum of (;$000 from the deceased Bnri9ue 'zcona$ both sums re!resenting the !urchase !rice of certain !arcels of land$ which were sold with the right of re!urchase. The sum of (12$;00 which constitutes the cause or consideration of the deed of resale and mortgage B2hibit ' is the total of the sums of (0$;00 and (;$000 which 7eyes$ !ersonally and as attorney in fact of -ordero$ recei+ed from Bnri9ue 'zcona$ together with the sum of (1$000 re!resenting the un!aid credits !assed by inheritance to .esus 'zcona. :t cannot be said that the mortgage$ e2ecuted by Venturanza$ as attorney in fact of 7eyes and -ordero$ in fa+or of .esus 'zcona$ lacCs consideration or !rinci!al obligation for the fulfillment of which said instrument was e2ecuted as security. 3 Contracts o& mort$a$e loans e4ecuted in &orm Fattachment o& S!AG+ binds Cordero *!on e2amination of said documents$ 7eyes made it a!!ear that she acted as "lorentina -ordero?s attorney in fact under a !ower of attorney issued to her by attaching a co!y of said !ower of attorney to the deed in 9uestion. :n the case of 6rden de )ominicos +s. )e -oster (;0 (hil.$ 11;)$ the -ourt held that such form is +alid and sufficient under the law. -onsidered as mere contracts of mortgage loans$ the deeds dated 22%23 6ctober 1820 are binding u!on -ordero$ and com!liance with the obligations contracted thereunder may be demanded in her intestate !roceedings either as credit in fa+or of the intestate estate of Bnri9ue 'zcona or as credit in fa+or of .esus 'zcona against -ordero under the mortgage deed.
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No statement o& &acts o& alle$ed usury
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:n regard to the 9uestion of usury raised$ although it is true that failure to file a sworn answer to a cross%com!laint for the reco+ery of usurious interest !aid im!lies an admission of the e2istence of a usurious rate of interest (,o /un -hay +s. (aulino$ ;& (hil.$ 1&&$ cited with a!!ro+al in the case of 7amirez and (olido +s. /ergado$ ;0 (hil.$ @10)$ howe+er$ the counterclaim and cross%com!laint filed in the !resent case failed to state facts constituting the alleged usury but merely allege that in !ayment of a debt of (8$;00 'zcona and his !redecessor in interest recei+ed the amount of (20$130. #uch statement does not in itself constitute an allegation of usury and failure to file a re!ly thereto im!lies denial of such allegation (#ec. 10&$ 'ct 5o. 180). / 74istence o& usurious interest not "roven? (2N "er annum sti"ulated+ Char$in$ com"ound interest does not make loan usurious The e2istence of usurious interest has not been !ro+en during the trial inasmuch as it is sti!ulated that the +endors$ as lessees$ would ha+e to !ay the sum of (1$3@0 as yearly rental. #uch sum$ com!uted on the basis of a ca!ital of (11$;00 gi+es a rate of interest of only 12I !er annum$ which is allowed by law (7obinson +s. #acCermann and (ostal #a+ings /anC$ &0 (hil.$ ;38). "urthermore$ in the deed of resale and mortgage loan$ interest at the rate of only 12I !er annum is sti!ulated. The e2istence of a sti!ulation to the effect that accrued interest shall bear interest does not im!ly that the loans in 9uestion are usurious inasmuch as it is !ermitted to charge com!ound interest (sec. ;$ 'ct 5o. 20;;$ as amended by sec. 3 of 'ct 5o. 3281G -u *nAieng e 1iAos +s. Mabalacat #ugar -o.$ ;& (hil.$ 830). '(00 A:nar vs 9a"dian$co 'G # No ;-()/35 (.5/ 0 Bn /anc$ 7egala (.)4 10 concurring March 3(+
3actsH :n May 18;8$ Teodoro #antos ad+ertised in two metro!olitan !a!ers the sale of his "ord "airlane ;00. :n the afternoon of 2@ May 18;8$ a certain ,. )e )ios$ claiming to be a ne!hew of Vicente Marella$ went to the #antos residence to answer the ad. 1owe+er$ Teodoro was out during this call and only the latter?s son$ :rineo recei+ed and talCed with )e )ios. The latter told the young #antos that he had come in behalf of his uncle$ Marella$ who was interested to buy the ad+ertised car. 6n being informed of the abo+e$ Teodoro instructed his son to see Marella the following day at his gi+en address4 10&2 -risostomo #treet$ #am!aloc$ Manila. 'nd so$ in the morning of 28 May 18;8$ :rineo went to said address. 't this meeting$ Marella agreed to buy the car for (1&$300.00 on the understanding that the !rice would be !aid only after the car had been registered in his name. :rineo then fetched his father who$ together with )e )ios$ went to the office of a certain 'tty. .ose (adolina where the deed of sale for the car was e2ecuted in Marella?s fa+or. The !arties to the contract thereafter !roceeded to the Motor Vehicles? 6ffice in Uuezon -ity where the registration of the car in Marella?s name was effected. *! to that stage of the transaction$ the !urchase !rice had not been !aid. "rom the Motor Vehicles 6ffice$ Teodoro returned to his house. 1e ga+e the registration !a!ers and a co!y of the deed of sale to his son and instructed him not to !art with them until Marella shall ha+e gi+en the full !ayment for the car. :rineo and )e )ios then !roceeded to 10&2 -risostomo #treet$ #am!aloc in Manila where the former demanded for the !ayment from Marella. Marella said that the amount he had on hand then was short by some (2$000.00 and begged off to be allowed to secure the shortage from a sister su!!osedly li+ing somewhere in 'zcarraga #treet$ also in Manila. Thereafter$ he ordered )e )ios to go to the said sister and suggested that :rineo to go with him. 't the same time$ he re9uested for the registration !a!ers and the deed of sale from :reneo on the !rete2t that he would liCe to show them to his lawyers. Trusting the good faith of Marella$ :reneo handed o+er the same to the latter and thereu!on$ in the com!any of )e )ios and another unidentified !erson$ !roceeded to the alleged house of Marella?s sister. 't a !lace in 'zcarraga$ :rineo and )e )ios alighted from the car and entered a house$ while their unidentified com!anion remained in the car. 6nce inside$ )e )ios asCed :rineo to wait at the sala while he went inside a room. That was the last that :reneo saw of him. "or$ after a
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considerable length of time waiting in +ain for )e )ios to return$ :reneo went down to disco+er that neither the car nor their unidentified com!anion was there anymore. oing bacC to the house$ he in9uired from a woman he saw for )e )ios and he was told that no such name li+ed or was e+en Cnown
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therein. >hereu!on$ :reneo rushed to 10&2 -risostomo to see Marella. 1e found the house closed and Marella gone. "inally$ he re!orted the matter to his father who !rom!tly ad+ised the !olice authorities. That +ery same day$ Marella was able to sell the car in 9uestion to .ose /. 'znar$ for (1;$000.00. 'znar ac9uired the said car from Marella in good faith$ for a +aluable consideration and without notice of the defect a!!ertaining to the +endor?s title. >hile the car was thus in the !ossession of 'znar and while he was attending to its registration in his name$ agents of the (hili!!ine -onstabulary seized and confiscated the same in conse9uence of the re!ort to them by Teodoro that the said car was unlawfully taCen from him. 'znar filed a com!laint for re!le+in before the -": Uuezon -ity (/ranch :V) against -a!tain 7afael Fa!diangco$ the head of the (hili!!ine -onstabulary unit which seized the car. -laiming ownershi! of the +ehicle$ he !rayed for its deli+ery to him. :n the course of the litigation$ howe+er$ Teodoro #antos mo+ed and was allowed to inter+ene by the lower court. 't the end of the trial$ the lower court rendered a decision awarding the dis!uted motor +ehicle to #antos. "rom the decision$ 'znar a!!ealed. The #u!reme -ourt dismissed the a!!eal and affirmed the decision of the lower court in fullG with costs against 'znar. ( Article //. o& the Civil Code? Santos entitled to recovery o& "ersonal "ro"erty #antos had been unlawfully de!ri+ed of his !ersonal !ro!erty by Marella$ from whom 'znar traces his right. -onse9uently$ although 'znar ac9uired the car in good faith and for a +aluable consideration from Marella$ the said decision concluded$ still #antos was entitled to its reco+ery on the mandate of 'rticle ;;8 of the 5ew -i+il -ode which !ro+ides4 < The !ossession of mo+able !ro!erty ac9uired in good faith is e9ui+alent to title. 5e+ertheless$ one who has lost any mo+able or has been unlawfully de!ri+ed thereof$ may reco+er it from the !erson in !ossession of the same. :f the !ossessor of a mo+able lost or of which the owner has been unlawfully de!ri+ed$ has ac9uired it in good faith at a !ublic sale$ the owner cannot obtain its return without reimbursing the !rice !aid therefor.= *nder 'rticle ;;8$ the rule is to the effect that if the owner has lost the thing$ or if he has been unlawfully de!ri+ed of it$ he has a right to reco+er it$ not only from the finder$ thief or robber$ but also from the third !erson who may ha+e ac9uired it in good faith from such finder$ thief or robber. 2 SellerMs title+ voidable at least+ essential in Article (/05? Article //. a""lies 'rticle 1;00 !ro+ides4= >here the seller of goods has a +oidable title thereto$ but his title has not been +oided at the time of the sale$ the buyer ac9uires a good title to the goods$ !ro+ided he buys them in good faith$ for +alue$ and without notice of the seller?s defect of title.= *nder the !ro+ision$ it is essential that the seller should ha+e a +oidable title at least. :t is +ery clearly ina!!licable where the seller had no title at all. 3 Code 2Bnershi" or title ac=uired only by tradition or delivery? Article ,(2 o& the Civil
*nder 'rticle 312 of the -i+il -ode$ <ownershi! and other real rights o+er !ro!erty are ac9uired and transmitted by law$ by donation$ by testate and intestate succession$ and in conse9uence of certain contracts$ by tradition.= 's inter!reted by this -ourt in a host of cases$ by this !ro+ision$ ownershi! is not transferred by contract merely but by tradition or deli+ery. -ontracts only constitute titles or rights to the transfer or ac9uisition of ownershi!$ while deli+ery or tradition is the mode of accom!lishing the same. ( onzales +s. 7oAas$ 10 (hil. ;1G 6ceAo$ (erez and -o. +s. :nternational /anC$ 33 (hil. 031G "idelity and )e!osit -o. +s. >ilson$ @ (hil. ;1G Euenzle Q #treiff +s. >acCe Q -handler$ 1& (hil. 010G Baston +s. )iaz Q -o.$ 32 (hil.
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1@0). "or the legal ac9uisition and transfer of ownershi! and other !ro!erty rights$ the thing transferred must be deli+ered$ inasmuch as$ according to settled Auris!rudence the tradition of the thing is a necessary and indis!ensable re9uisite in the ac9uisition of said ownershi! by +irtue of a contract. (>alter Baston +s. B. )iaz Q -o. Q the (ro+incial #heriff of 'lbay$ su!ra.) #o long as !ro!erty is not deli+ered$ the ownershi! o+er it is not transferred by contract merely but by deli+ery. -ontracts only constitute titles or rights to the transfer or ac9uisition of ownershi!$ while deli+ery or tradition is the method of accom!lishing the same$ the title and the method of ac9uiring it being different in our law.= ( onzales +s. 7oAas$ 10 (hil. ;1) :n the !resent case$ the
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car was ne+er deli+ered to the +endee by the +endor as to com!lete or consummate the transfer of ownershi! by +irtue of the contract. :t should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro #antos$ the former$ as +endee$ tooC !ossession of the subAect matter thereof by stealing the same while it was in the custody of the latter?s son. * -elivery o& key not delivery contem"lated by Article ,(2? 8ntent must be "resent There is no ade9uate e+idence on record as to whether :rineo #antos +oluntarily deli+ered the Cey to the car to the unidentified !erson who went with him and ,. )e )ios to the !lace in 'zcarraga where a sister of Marella allegedly li+ed. /ut e+en if :rineo #antos did$ it was not the deli+ery contem!lated by 'rticle 312 of the -i+il -ode. "or then$ it would be indis!utable that he turned it o+er to the unidentified com!anion only so that he may dri+e :rineo #antos and )e )ios to the said !lace in 'zcarraga and not +est the title to the said +ehicle to him as agent of Vicente Marella. 'rticle 312 abo+e contem!lates that the act be cou!led with the intent of deli+ering the thing. (10 Manresa 132) / Article //. establishes e4ce"tion to the $eneral rule or irrevindicability 'rticle ;;8 establishes two e2ce!tions to the general rule of irre+indicability to wit4 when the owner (1) has lost the thing$ or (2) has been unlawfully de!ri+ed thereof. :n these cases$ the !ossessor cannot retain the thing as against the owner$ who may reco+er it without !aying any indemnity$ e2ce!t when the !ossessor ac9uired it in a !ublic sale. ()el 7osario +s. ,ucena$ @ (hil. ;3;G Varela +s. "innicC$ 8 (hil. &@2G Varela +s. Matute$ 8 (hil. &38G 'renas +s. 7aymundo$ 18 (hil. &0. Tolentino$ id.$ Vol ::$ !. 201.) 5 Cru: vs !ahati on Article //. :n the case of -ruz +s. (ahati$ et al.$ ;2 6 30;3$ the -ourt ruled that <*nder 'rticle ;;8 of the new -i+il -ode$ a (erson illegally de!ri+ed of any mo+able may reco+er it from the !erson in !ossession of the same and the only defense the latter may ha+e is if he has ac9uired it in good faith at a !ublic sale$ in which case$ the owner cannot obtain its return without reimbursing the !rice !aid therefor. :n the !resent case$ !laintiff has been illegally de!ri+ed of his car through the ingenious scheme of defendant / to enable the latter to dis!ose of it as if he were the owner thereof. (laintiff$ therefore$ can still reco+er !ossession of the car e+en if it is in the !ossession of a third !arty who had ac9uired it in good faith from defendant /. The ma2im that <no man can transfer to another a better title than he has himself? obtains in the ci+il as well as in the common law.= (*.#. +s. #ootelo$ 2@ (hil. 1&3) , Common laB "rinci"le yields to statutory "rovision The right of the owner to reco+er !ersonal !ro!erty ac9uired in good faith by another$ is based on his being dis!ossessed without his consent. The common law !rinci!le that where one of two innocent !ersons must suffer by a fraud !er!etrated by another$ the law im!oses the loss u!on the !arty who$ by his mis!laced confidence$ has enabled the fraud to be committed$ cannot be a!!lied in a case which is co+ered by an e2!ress !ro+ision of the new -i+il -ode$ s!ecifically 'rticle ;;8. /etween a common law !rinci!le and a statutory !ro+ision$ the latter must !re+ail in this Aurisdiction. (-ruz +s. (ahati$ su!ra). '((0 <abasa vs CA 'G # No (2*0*/ May 2(+ (..) 0 "irst )i+ision$ /ellosillo (.)4 & concurring 3actsH 6n 11 '!ril 18@1 a contract of <-onditional #ale of 7egistered ,ands= was e2ecuted between the s!ouses Vi+encio and Blena /abasa as +endors and Tabangao 7ealty :nc. (Tabangao) as +endee o+er 3 !arcels of land$ ,ots 13@23%'$ 13@23%/ and 13@23%-$ situated in /rgy. ,ibAo$ /atangas -ity. #ince the certificates of title o+er the lots were in the name of third !ersons who had already e2ecuted deeds of recon+eyance and disclaimer in fa+or of the /abasas$ it was agreed that the total !urchase !rice of
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(2$121$820.00 would be !aid in the following manner4 (300$000.00 u!on signing of the contract$ and (1$@21$820.00 u!on !resentation by
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the /abasas of transfer certificates of titles in their name$ free from all liens and encumbrances$ and deli+ery of registerable documents of sale in fa+or of Tabangao within 20 months from the signing of the contract. :n the meantime$ the retained balance of the !urchase !rice would earn interest at 13I !er annum or (20$0&@.&3 monthly !ayable to the /abasas until 31 )ecember 18@2. :t was e2!ressly sti!ulated that Tabangao would ha+e the absolute and unconditional right to taCe immediate !ossession of the lots as well as introduce any im!ro+ements thereon. 6n 1@ May 18@1 Tabangao leased the lots to #hell as (hili!!ines$ :nc. (#1B,,)$ which immediately started the construction thereon of a ,i9uefied (etroleum as Terminal (roAect$ an a!!ro+ed zone e2!ort enter!rise of the B2!ort (rocessing Vone. Tabangao is the real estate arm of #1B,,. The !arties substantially com!lied with the terms of the contract. Tabangao !aid the first installment of (300$000.00 to the /abasas while the latter deli+ered actual !ossession of the lots to the former. :n addition$ Tabangao !aid (338$02;.00 to the tenants of the lots as disturbance com!ensation and as !ayment for e2isting cro!s as well as (33&$300.00 to the owners of the houses standing thereon in addition to granting them residential lots with the total area of 2$@00 s9uare meters. Tabangao liCewise !aid the sti!ulated monthly interest for the 20%month !eriod amounting to (&0@$;@0.@0. Meanwhile$ the /abasas filed -i+il -ase ;18 and (etition 333 for the transfer of titles of the lots in their name. 1owe+er$ 2 days !rior to the e2!iration of the 20%month !eriod$ s!ecifically on 31 )ecember 18@2$ the /abasas asCed Tabangao for an indefinite e2tension within which to deli+er clean titles o+er the lots. They asCed that Tabangao continue !aying the monthly interest of (20$0&@.&3 starting .anuary 18@3 on the ground that -i+il -ase ;18 and (etition 333 had not yet been resol+ed with finality in their fa+or. Tabangao refused the re9uest. :n retaliation the /abasas e2ecuted a notarized unilateral rescission dated 2@ "ebruary 18@3 to which Tabangao res!onded by reminding the /abasas that they were the ones who did not com!ly with their contractual obligation to deli+er clean titles within the sti!ulated 20%month !eriod$ hence$ had no right to rescind their contract. The /abasas insisted on the unilateral rescission and demanded that #1B,, +acate the lots. 6n 18 .uly 18@3 Tabangao instituted an action for s!ecific !erformance with damages in the 7T/atangas -ity to com!el the s!ouses to com!ly with their obligation to deli+er clean titles o+er the !ro!erties. The /abasas mo+ed to dismiss the com!laint on the ground that their contract with Tabangao became null and +oid with the e2!iration of the 20%month !eriod gi+en them within which to deli+er clean certificates of title. #1B,, entered the dis!ute as inter+enor !raying that its lease o+er the !remises be res!ected by the /abasas. B+entually$ Audgment was rendered in fa+or of Tabangao and #1B,,$ declaring that the notarial rescission e2ecuted by the /abasas +oid and of no legal effectG declaring that the lease contract between Tabangao and #1B,, deemed legally binding on the s!ousesG ordering the s!ouses to deli+er to Tabangao clean transfer certificates in their name and e2ecute all necessary deeds and document necessary for the 7egister of )eeds to facilitate the issuance of T-TsG directing Tabangao to !ay the s!ouses the remaining balance of (1$@21$820.00 out of the full !urchase !rice for these three lots enumerated in the agreement !lus interest thereon of 13I !er annum or (20$0&@.&3 a month com!ounded annually beginning .anuary 18@3 until fully !aidG maCing the restraining order against the s!ouses in !utting u! structures interfering with the acti+ities of #1B,,$ its em!loyees and agents$ and canceling the bond !osted by #hellG and ordering the s!ouses to !ay the cost of the !roceedings as well as the !remium #1B,, !aid in the !osting of the (2 million bond for the issuance of the restraining order. The s!ouses a!!ealed to the -ourt of '!!eals which on 28 "ebruary 1880 affirmed the decision of the trial courtG but ordered that the com!ounded interest to be !aid from 18 .uly 18@3 only and not from .anuary 18@3 as decreed by the trial court. 1ence$ the a!!eal. The #u!reme -ourt denied the !etition$ and affirmed the a!!ealed decision of the -ourt of '!!eals in -'% 7 -V 38;;&G without costs. ( Contract o& sale and not o& lease The contract is re!lete with terms and sti!ulations clearly indicati+e of a contract of sale. Thus$ the o!ening whereas clause states that the !arties desire and mutually <agreed on the sale and !urchase of the . . .
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three !arcels of landG= the /abasas were described as the <+endors= while Tabangao as the <+endee= from the beginning of the contract to its endG the amount of (2$121$820.00 was stated as the !urchase !rice of the lotsG Tabangao$ as +endee$ was granted absolute and unconditional right to taCe immediate !ossession of the !remises while the /abasas$ as +endors$ warranted such !eaceful !ossession fore+erG Tabangao was to shoulder the ca!ital gains ta2$ andG lastly$ the /abasas were e2!ected to e2ecute a "inal )eed of 'bsolute #ale in fa+or of Tabangao necessary for the issuance of transfer certificates of title the moment they were able to secure clean certificates of title in their name. :t cannot be said that the contract was one of lease sim!ly because the word <ownershi!= was ne+er mentioned therein. /esides$ the s!ouses did not obAect to the terms and sti!ulations em!loyed in the contract at the time of its e2ecution when they could ha+e easily done so considering that they were then ably assisted by their counsel$ 'tty. Bdgardo M. -arreon$ whose legal training negates their !retended ignorance on the matter. 2 Contracts valid thou$ht "arties entered into it a$ainst oBn Bish and desire+ or even a$ainst his better @ud$ment 'lthough Tabangao dangled the threat of e2!ro!riation by the go+ernment (through the B2!ort (rocessing Vone 'uthority) in the e+ent +oluntary negotiations failed$ a cause to commiserate with the s!ouses may be !ercei+ed$ it is not enough to !ro+ide them with an a+enue to esca!e contractual obligations +alidly entered into. -ontracts are +alid e+en though one of the !arties entered into it against his own wish and desire$ or e+en against his better Audgment. /esides$ a threat of eminent domain !roceedings by the go+ernment cannot be legally classified as the Cind of imminent$ serious and wrongful inAury to a contracting !arty as to +itiate his consent. (ri+ate landowners ought to realize$ and e+entually acce!t$ that !ro!erty rights must yield to the +alid e2ercise by the state of its all%im!ortant !ower of eminent domain. 3 Contract is absolute althou$h denominated a conditional sale? Actual and constructive delivery 'lthough denominated <-onditional #ale of 7egistered ,ands$= the contract of 11 '!ril 18@1 between the s!ouses and Tabangao is one of absolute sale. 'side from the terms and sti!ulations used therein indicating such Cind of sale$ there is absolutely no !ro+iso reser+ing title in the /abasas until full !ayment of the !urchase !rice$ nor any sti!ulation gi+ing them the right to unilaterally rescind the contract in case of non% !ayment. ' deed of sale is absolute in nature although denominated a conditional sale= absent such sti!ulations. :n such cases$ ownershi! of the thing sold !asses to the +endee u!on the constructi+e or actual deli+ery thereof. :n the instant case$ ownershi! o+er ,ots 13@23%'$ 13@23%/ and 13@23%- !assed to Tabangao both by constructi+e and actual deli+ery. -onstructi+e deli+ery was accom!lished u!on the e2ecution of the contract of 11 '!ril 18@1 without any reser+ation of title on the !art of the /abasas while actual deli+ery was made when Tabangao tooC unconditional !ossession of the lots and leased them to its associate com!any #1B,, which constructed its multi%million !eso ,( (roAect thereon. * -istinction betBeen conditions im"osed on the "er&ection o& contract and condition im"osed on the "er&ormance o& an obli$ation :n 7omero +. -ourt of '!!eals and ,im +. -ourt of '!!eals$ the -ourt distinguished between a condition im!osed on the !erfection of a contract and a condition im!osed merely on the !erformance of an obligation. >hile failure to com!ly with the first condition results in the failure of a contract$ failure to com!ly with the second merely gi+es the other !arty the o!tion to either refuse to !roceed with the sale or to wai+e the condition. :n the !resent case$ the s!ouses? contract with Tabangao did not lose its efficacy when the 20%month !eriod sti!ulated therein e2!ired without the s!ouses being able to deli+er clean certificates of title such that Tabangao may no longer demand !erformance of their obligation. / Dnilateral rescission o& the contract by the s"ouses unBarranted The s!ouses? act of unilaterally rescinding their contract with Tabangao is unwarranted. The failure of !etitioners to deli+er clean titles within 20 months from the signing of the contract merely gi+es Tabangao
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the o!tion to either refuse to !roceed with the sale or to wai+e the condition in consonance with 'rticle 1;&; of the 5ew -i+il -ode. /esides$ it would be the height of ine9uity to allow the /abasas to rescind their contract
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of sale with Tabangao by in+oCing as a ground therefor their own failure to deli+er the titles o+er the lots within the sti!ulated !eriod. '(20 <a$nas v CA 'G # No 3)*.) Au$ust (0+ (.). 0 "irst )i+ision$ 5ar+asa (.)4 & concurring 3actsH 1ilario Mateum of Eawit$ -a+ite$ died on 11 March 180&$ single$ without ascendants or descendants$ and sur+i+ed only by collateral relati+es$ of whom :saac$ Bncarnacion$ #il+estre$ Ma2imina$ and #i2to /agtas$ and 'gatona Bncarnacion$ his first cousins$ were the nearest. Mateum left no will$ no debts$ and an estate consisting of 28 !arcels of land in Eawit and :mus$ -a+ite$ 10 of which are in+ol+ed in the case. 6n 3 '!ril 180&$ 7osa ,. 7etonil$ Teofilo Bncarnacion and .ose /. 5ambayan$ themsel+es collateral relati+es of Mateum though more remote in degree$ registered with the 7egistry of )eeds for the (ro+ince of -a+ite 2 deeds of sale !ur!ortedly e2ecuted by Mateum in their fa+or co+ering 10 !arcels of land. /oth deeds were in Tagalog$ sa+e for the Bnglish descri!tions of the lands con+eyed under one of themG and each recited the reconsideration of the sale to be (1$ ser+ices rendered and to be rendered for Mateum?s benefit. 6ne deed was dated 0 "ebruary 1803 and co+ered ; !arcels of land$ and the other was dated & March 1803$ co+ering ; other !arcels$ both$ therefore$ antedating Mateum?s death by more than a year. :t is asserted by the /agtas$ et.al.$ but denied by 7etonil$ et.al.$ that said sales notwithstanding$ Mateum continued in the !ossession of the lands !ur!ortedly con+eyed until his death$ that he remained the declared owner thereof and that the ta2 !ayments thereon continued to be !aid in his name. >hate+er the truth$ howe+er$ is not crucialG what is not dis!uted is that on the strength of the deeds of sale$ 7etonil$ et.al. were able to secure title in their fa+or o+er 3 of the 10 !arcels of land con+eyed thereby. 6n 22 May 180&$ /agtas et.al. commenced suit against 7etonil$ et.al. in the -": -a+ite$ seeCing annulment of the deeds of sale as fictitious$ fraudulent or falsified$ or$ alternati+ely$ as donations +oid for want of acce!tance embodied in a !ublic instrument. -laiming ownershi! !ro indi+iso of the lands subAect of the deeds by +irtue of being intestate heirs of 1ilario Mateum$ /agtas$ et. al. !rayed for reco+ery of ownershi! and !ossession of said lands$ accounting of the fruits thereof and damages. 'lthough the com!laint originally sought reco+ery of all the 28 !arcels of land left by Mateum$ at the !re%trial the !arties agreed that the contro+ersy be limited to the 10 !arcels subAect of the 9uestioned sales$ and the Trial -ourt ordered the e2clusion of the 18 other !arcels from the action. 6f the 10 !arcels which remained in litigation$ 8 were assessed for !ur!oses of ta2ation at +alues aggregating (10$;00.00. The record does not disclose the assessed +alue of the tenth !arcel$ which has an area of 1$&&3 s9.ms. 7etonil$ et.al. denied the allegations. 'fter /agtas$ et.al. had !resented their e+idence$ 7etonil$ et.al. filed a motion for dismissal J in effect$ a demurrer to the e+idence J reasserting the defense set u! in their answer that /agtas$ et.al.$ as mere collateral relati+es of 1ilario Mateum had no right to im!ugn the latter?s dis!osition of his !ro!erties by means of the 9uestioned con+eyances and submitting$ additionally$ that no e+idence of fraud tainting said transfers had been !resented. The Trial -ourt granted the motion to dismiss$ holding on the authority of 'rmentia +s. (atriarca$ that /agtas$ et.al.$ as mere collateral relati+es$ not forced heirs$ of 1ilario Mateum$ could not legally 9uestion the dis!osition made by said deceased during his life time$ regardless of whether$ as a matter of obAecti+e reality$ said dis!ositions were +alid or notG and that /agtas$ et.al.?s e+idence of alleged fraud was insufficient$ the fact that the deeds of sale each stated a consideration of only (1 not being in itself e+idence of fraud or simulation. 6n a!!eal by /agtas$ et. al. to the -ourt of '!!eals$ that court affirmed$ ad+erting with a!!ro+al to the Trial -ourt?s reliance on the 'rmentia ruling which$ it would a!!ear$ both courts saw as denying$ without e2ce!tion$ to collaterals$ of a decedent$ not forced heirs$ the right to im!ugn the latter?s dis!ositions inter +i+os of his !ro!erty.
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The #u!reme -ourt re+ersed the a!!ealed )ecision of the -ourt of '!!eals$ and declared the 9uestioned
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transfers +oid and of no force or effect. The -ourt ordered the annulment of such certificates of title 7etonil$ et.al. may ha+e obtained o+er the !ro!erties subAect of said transfers$ and ordered them to return to /agtas$ et.al. !ossession of all the !ro!erties in+ol+ed in the action$ to account to the latter for the fruits thereof during the !eriod of their !ossession$ and to !ay the costs. 5o damages$ attorney?s fees or litigation e2!enses were awarded$ there being no e+idence thereof before the -ourt. ( Void contractsH Cause not e4istin$ at time o& transaction and contract Bithout or Bith &alse cause FBhere no hidden cause is "rovedG *nder the -i+il -ode of the (hili!!ines$ 'rticle 1&08$ !aragra!h 3$ -ontracts$ with a cause that did not e2ist at the time of the transaction are in e2istent and +oid from the beginning. The same is true of contracts stating a false cause (consideration) unless the !ersons interested in u!holding the contract should !ro+e that there is another true and lawful consideration therefor. ('rticle 13;3). 2 8ntestate heirs have le$al standin$? !ro"erty sub@ect o& void contract does not leave "atrimony o& trans&eror and recoverable by the heirs or the estate administrator The heirs intestate ha+e legal standing to contest the con+eyance made by the deceased if the same were made without any consideration$ or for a false and fictitious consideration. :f therefore the contract has no causa or consideration$ or the causa is false and fictitious (and no true hidden causa is !ro+ed) the !ro!erty allegedly con+eyed ne+er really lea+es the !atrimony of the transferor$ u!on the latter?s death without a testament$ such !ro!erty would !assed to the transferor?s hairs intestate and be$ reco+erable by them or by the 'dministrator of the transferor?s estate. 3 Armentia rulin$ clari&ied Conce"cion and Solis rulin$s? 3alse cause Bithout hidden cause noB not merely voidable+ but void ab initio The 'rmentia ruling does not reAect$ and is not to be construed as reAecting$ the -once!cion and #olis rulings &Conce,cion vs. Sta. Ana, 8$ *+il. $8$ an8 Solis vs. C+ua *ua Be#6anos, 00 *+il. 031( as outrightly erroneous. 6n the contrary$ those rulings undoubtedly read and a!!lied correctly the law e2tant in their time4 'rticle 1230 of the -i+il -ode of 1@@8 under which the statement of a false cause in a contract rendered it +oidable only$ not +oid ab initio. The fact that the law as it is now (during the time of 'rmentia) no longer deems contracts with a false cause$ or which are absolutely simulated or fictitious$ merely +oidable$ but declares them +oid$ i.e.$ ine2istent (<nulo=) unless it is shown that they are su!!orted by another true and lawful cause or consideration. * Armentia case? 7&&ect o& the chan$e in the @uridical status o& contracts based on &alse cause ' logical conse9uence of that change is the Auridical status of contracts without$ or with a false$ cause is that con+eyances of !ro!erty affected with such a +ice cannot o!erate to di+est and transfer ownershi!$ e+en if unim!ugned. :f afterwards the transferor dies the !ro!erty descends to his heirs$ and without regard to the manner in which they are called to the succession$ said heirs may bring an action to reco+er the !ro!erty from the !ur!orted transferee. #uch an action is not founded on fraud$ but on the !remise that the !ro!erty ne+er lea+es the estate of the transferor and is transmitted u!on his death to heirs$ who would labor under no inca!acity to maintain the action from the mere fact that they may be only collateral relati+es and bound neither !rinci!ally or subsidiarily under the deed D contract of con+eyance. / Armentia case? Conveyance merely annullable as action based on &raud vitiatin$ conveyance :n 'rmentia$ the -ourt determined that the con+eyance 9uestioned was merely annullable$ not +oid ab initio$ and that the action was based on fraud +itiating said con+eyance. The court found that Marta 'rmentia e2ecuted the document$ a fact uncontro+erted by the case?s !laintiff. 'lso$ the +endees$ being minors$ maCes the contract$ at worst$ only annullable by them. Moreo+er$ inade9uacy of consideration does not im!ly total want of consideration. "urther$ the !ur!orted acts of Marta 'rmentia after the sale did not indicate that the said sale was +oid from the beginning. Thus$ in essence the !laintiffs? case is bottomed on fraud$ which renders the contract merely +oidable.
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5 Armentia case a""lies to voidable contracts obtained or made &raudulently? does not a""ly to trans&ers Bhich are void &or lack or &alsity o& consideration 's a !recedent$ 'rmentia only ruled that transfers made by a decedent in his lifetime$ which are +oidable for ha+ing been fraudulently made or obtained$ cannot be !osthumously im!ugned by collateral relati+es succeeding to his estate who are not !rinci!ally or subsidiarily bound by such transfers. That ruling is not e2tendible to transfers which$ though made under closely similar circumstances$ are +oid ab initio for lacC or falsity of consideration. , 3alse and &ictitious consideration+ Bithout any alternative true or laB&ul cause "resented+ renders contract void *!on the consideration alone that the a!!arent gross$ not to say enormous$ dis!ro!ortion between the sti!ulated !rice in each deed of (1 !lus uns!ecified and un9uantilled ser+ices and the undis!utably +aluable real estate allegedly sold (worth at least (10$;00.00 going only by assessments for ta2 !ur!oses which$ it is well%Cnown$ are notoriously low indicators of actual +alue) !lainly and un9uestionably demonstrates that they state a false and fictitious consideration$ and no other true and lawful cause ha+ing been shown$ the -ourt finds both said deeds$ insofar as they !ur!ort to be sales$ not merely +oidable$ but +oid ab initio. (0 -onations o& immovable "ro"erty must be made and acce"ted in a "ublic document? ;iberality as cause denied The +alidity of the con+eyances cannot be defended on the theory that their true causa is the liberality of the transferor and they may be considered in reality donations$ because the law also !rescribes that donations of immo+able !ro!erty$ to be +alid$ must be made and acce!ted in a !ublic instrument$ and it is not denied by 7etonil$ et. al. that there has been no such acce!tance which they claim is not re9uired. (( !ro"erties remained as "art o& estate o& Mateum+ and thus recoverable The transfers in 9uestion being +oid$ it follows as a necessary conse9uence and conformably to the concurring o!inion in 'rmentia$ with which the -ourt fully agrees$ that the !ro!erties !ur!ortedly con+eyed remained !art of the estate of 1ilario Mateum$ said transfers notwithstanding$ reco+erable by his intestate heirs$ i.e. /agtas$ et.al.$ whose status as such is not challenged. (2 ;ack o& "roo& that could have saved trans&ers &rom taint o& invalidity? <urden o& "roo& in the e4istence o& a valid and licit contract 7etonil$ et.al. ha+e only themsel+es to blame for the lacC of !roof that might ha+e sa+ed the 9uestioned transfers from the taint of in+alidity as being fictitious and without licit causeG !roof$ to be brief$ of the character and +alue of the ser+ices$ !ast$ !resent$ and future$ constituting J according to the +ery terms of said transfers the !rinci!al consideration therefor. The onus of showing the e2istence of +alid and licit consideration for the 9uestioned con+eyances rested on 7etonil$ et.al.. /ut e+en on a contrary assum!tion$ and !ositing that /agnas$ et.al. initially had the burden of showing that the transfers lacCed such consideration as they alleged in their com!laint$ that burden was shifted to 7etonil$ et.al. when /agnas$ et.al. !resented the deeds which they claimed showed that defect on their face and it became the duty of 7etonil$ et.al. to offer e+idence of e2istent$ lawful consideration. (3 -emurrer to evidence? 7&&ect 7etonil$ et. al.$ o!ting to rely on a demurrer to /agtas$ et. al.?s e+idence and u!on the thesis that the latter$ being mere collateral relati+es of the deceased transferor$ were without right to the con+eyances in 9uestion. :n effect$ they gambled their right to adduce e+idence on a dismissal in the Trial -ourt and lost$ it being the rule that when a dismissal thus obtained is re+ersed on a!!eal$ the mo+ant loses the right to !resent e+idence in his behalf.
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'(30
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<alatbat v CA 'G # No (0.*(0 Au$ust 2)+ (..5 0 #econd di+ision$ Torres .r (.)4 & concurring 3actsH 6n 1; .une 1833$ 'urelio '. 7o9ue filed a com!laint for !artition against his children -orazon$ "eliciano$ #e+era and 6smundo 7o9ue$ and 'lberto de los #antos before the -": Manila (/ranch :R$ -i+il -ase 108032). The 7o9ue children were declared in default and 'urelio !resented e+idence e2%!arte. 6n 28 March 1838$ the trial court rendered a decision in fa+or of 'urelioG holding that 'urelio and his wife Maria Mesina ac9uired the lot (T-T ;1330) during their conAugal union$ as well as the house that was constructed thereonG that when Maria Mesina died on 2@ 'ugust 1800$ lea+ing no debt$ 'urelio (as sur+i+ing s!ouse) was entitled to P share !ro%indi+iso of the conAugal !ro!erty (i.e. house and lot) and that 'urelio and his & children were entitled to 1D; share !ro%indi+iso each of the P share !ro%indi+iso forming the estate of Maria MesinaG ordering the !artition of the !ro!ertiesG and dismissing 'urelio?s claim for moral$ e2em!lary and actual damages and attorney?s feesG without !ronouncement as to costs. 6n 2 .une 1838$ the decision became final and e2ecutoryG with the corres!onding entry of Audgment made 28 March 1838. 6n ; 6ctober 1838$ the 7egister of )eeds of Manila issued T-T 13;031 (with 'urelio 7o9ue ha+ing 0D10 shareG and the 7o9ue children with 1D10 share each). 6n 1 '!ril 18@0$ 'urelio sold his 0D10 share in T-T 13;031 to s!ouses 'urora Tuazon%7e!uyan and .ose 7e!uyan as e+idenced by a <)eed of 'bsolute #ale.= 6n 21 .uly 18@0$ 'urora Tuazon 7e!uyan caused the annotation of her affida+it of ad+erse claim on the T-T 13;031$ <claiming that she bought 0D10 !ortion of the !ro!erty from 'urelio 7o9ue for the amount of (;0$000.00 with a down!ayment of (;$000.00 and the balance of (&;$000.00 to be !aid after the !artition and subdi+ision of the !ro!erty.= 6n 20 'ugust 18@0$ 'urelio 7o9ue filed a com!laint for <7escission of -ontract= against s!ouses 7e!uyan before the then -": Manila (/ranch :V$ -i+il -ase 13&131). The com!laint is grounded on s!ouses 7e!uyan?s failure to !ay the balance of (&;$000.00 of the !urchase !rice. 6n ; #e!tember 18@0$ s!ouses 7e!uyan filed their answer with counterclaim. :n the meantime$ the trial court issued an order in -i+il -ase 108032 ((artition case) dated 2 "ebruary 18@2$ ordering the )e!uty -lerC of the court to sign the deed of absolute sale for and in behalf of 7o9ue children !ursuant to #ection 10$ 7ule 38 of the 7ules of -ourt$ in order to effect the !artition of the !ro!erty in+ol+ed in the case ((100$000 !urchase !rice for the @& s9. ms. :n -alleAon #ulu$ #ta. -ruz$ Manila is reasonable and fairG and that o!!ortunities ha+e been gi+en to the children to sign the deed +oluntarily). ' deed of absolute sale was e2ecuted on & "ebruary 18@2 between 'urelio$ -orazon$ "eliciano$ #e+era and 6smundo 7o9ue and -lara /alatbat$ married to 'leAandro /alatbat. 6n 1& '!ril 18@2$ -lara /alatbat filed a motion for the issuance of a writ of !ossession which was granted by the trial court on 1& #e!tember 18@2 <subAect$ howe+er$ to +alid rights and interest of third !ersons o+er the same !ortion thereof$ other than +endor or any other !erson or !ersons !ri+y to or claiming any rights or interest under it.= The corres!onding writ of !ossession was issued on 20 #e!tember 18@2. 6n 20 May 18@2$ -lara /alatbat filed a motion to inter+ene in -i+il -ase 13&131 which was granted as !er court?s resolution of 21 6ctober 18@2. 1owe+er$ -lara /alatbat failed to file her com!laint in inter+ention. 6n 1; '!ril 18@0$ the trial court rendered a decision dismissing the com!laint$ and declaring the )eed of 'bsolute #ale dated 1 '!ril 18@0 as +alid and enforceable and 'urelio is$ as he is hereby ordered$ to !artition and subdi+ide the land co+ered by T-T 13;031$ and to aggregate therefrom a !ortion e9ui+alent to 0D10 thereof$ and cause the same to be titled in the name of s!ouses 7e!uyan$ and after which$ the latter to !ay 'urelio the sum of (&;$000.00. -onsidering further that the s!ouses suffered damages since they were forced to litigate unnecessarily$ by way of their counterclaim$ 'urelio is hereby ordered to !ay the s!ouses the sum of (1;$000.00 as moral damages$ attorney?s fees in the amount of (;$000.00G with costs against 'urelio.
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6n 3 March 18@3$ /alatbat filed a notice of lis !endens in -i+il -ase 108032 before the 7egister of )eeds of
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Manila. 6n 8 )ecember 18@@$ /alatbat and her husband filed a com!laint for deli+ery of the owners du!licate co!y of T-T 13;031 before the 7T- Manila (/ranch 2&$ -i+il -ase @@%&3130) against .ose and 'urora 7e!uyan. 6n 23 .anuary 18@8$ s!ouses 7e!uyan filed their answer with affirmati+e defenses and com!ulsory counterclaim. The 7e!uyans and the /alatbats submitted their memoranda on 13 5o+ember 18@8 and 23 5o+ember 18@8$ res!ecti+ely. 6n 2 'ugust 1880$ the 7T- Manila rendered a decision dismissing the com!laint$ finding that the /alatbats were not able to establish their cause of action against the 7e!uyans and ha+e no right to the reliefs demanded in the com!laint$ and ordering /alatbat to !ay the 7e!uyans the amount of (10$000 as attorney?s fees$ (;$000 as costs of litigation$ and to !ay the costs of the suit. )issatisfied$ /alatbat filed an a!!eal before the -ourt of '!!eals (-'% 7 -V 2888&) which rendered decision on 12 'ugust 1882$ affirming the Audgment a!!ealed from with modification deleting the awards of (10$000 for attomey?s fees and (;$000 as costs of litigation. 6n 22 March 1883$ the -ourt of '!!eals denied /alatbat?s motion for reconsideration. 1ence$ the !etition for re+iew !ursuant to 7ule &; of the 7e+ised 7ules of -ourt. The #u!reme -ourt dismissed the !etition for re+iew for lacC of meritG without !ronouncement as to costs. ( ( A"ril (.)0 sale consummated+ valid and en&orceable The sale dated 1 '!ril 18@0 in fa+or the 7e!uyan s!ouses is consummated$ hence$ +alid and enforceableG not merely e2ecutory for the reason that there was no deli+ery of the subAect !ro!erty and that considerationD!rice was not fully !aid. :n a decision dated 1; '!ril 18@0 of the 7T- Manila (/ranch :V$ -i+il -ase 13&131)$ the -ourt dismissed 'urelio com!laint for rescission of the deed of sale and declared that the sale dated 1 '!ril 18@0$ as +alid and enforceable. 5o a!!eal ha+ing been made$ the decision became final and e2ecutory. :t must be noted that /alatbat filed a motion for inter+ention in that case but did not file her com!laint in inter+ention. 2 ( A"ril (.)0 -eed o& Sale devoid o& sti"ulation Bithholdin$ oBnershi" o& thin$ until &ull "ayment? 2Bnershi" "ass u"on delivery o& thin$ sold even i& "urchase "rice not &ully "aid The terms and conditions of the <)eed of #ale= dated 1 '!ril 18@0$ the (&;$000.00 balance is !ayable only after the !ro!erty co+ered by T-T 13;031 has been !artitioned and subdi+ided$ and title issued in the name of the buyer hence$ the +endor cannot demand !ayment of the balance unless and until the !ro!erty has been subdi+ided and titled in the name of the 7e!uyan s!ouses. )e+oid of any sti!ulation that <ownershi! in the thing shall not !ass to the !urchaser until he has fully !aid the !rice=$ ownershi! in the thing shall !ass from the +endor to the +endee u!on actual or constructi+e deli+ery of the thing sold e+en if the !urchase !rice has not yet been fully !aid. 3 Non-"ayment in a contract o& sale merely creates ri$ht to demand &ul&illment o& obli$ation or rescission o& contract? Article ((.( The failure of the buyer to maCe good the !rice does not$ in law$ cause the ownershi! to re+est to the seller unless the bilateral contract of sale is first rescinded or resol+ed !ursuant to 'rticle 1181 of the 5ew -i+il -ode. 5on%!ayment only creates a right to demand the fulfillment of the obligation or to rescind the contract. >ith res!ect to the non%deli+ery of the !ossession of the subAect !ro!erty to the !ri+ate res!ondent$ suffice it to say that ownershi! of the thing sold is ac9uired only from the time of deli+ery thereof$ either actual or constructi+e. 2@
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* 2Bnershi" o& a thin$ sold ac=uired &rom time o& actual or constructive delivery? !ossession o& "ublic instrument o& the land accords buyer ri$hts o& oBnershi" 'rticle 1&8@ of the -i+il -ode !ro+ides that J when the sale is made through a !ublic instrument$
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the e2ecution thereof shall be e9ui+alent to the deli+ery of the thing which is the obAect of the contract$ if from the deed the contrary does not a!!ear or cannot be inferred. The e2ecution of the !ublic instrument$ without actual deli+ery of the thing$ transfers the ownershi! from the +endor to the +endee$ who may thereafter e2ercise the rights of an owner o+er the same. :t is not necessary that +endee be !hysically !resent at e+ery s9uare inch of the land bought by him$ !ossession of the !ublic instrument of the land is sufficient to accord him the rights of ownershi!. Thus$ deli+ery of a !arcel of land may be done by !lacing the +endee in control and !ossession of the land (real) or by embodying the sale in a !ublic instrument (constructi+e). :n the !resent case$ +endor 7o9ue deli+ered the owner?s certificate of title to the 7e!uyan s!ouses. / Necessity o& "ublic document merely &or convenience+ and not &or validity or en&orceability o& a contract o& sale The !ro+ision of 'rticle 13;@ on the necessity of a !ublic document is only for con+enience$ not for +alidity or enforceability. :t is not a re9uirement for the +alidity of a contract of sale of a !arcel of land that this be embodied in a !ublic instrument. 5 Contract o& sale consensual+ "er&ected by mere consent o& the "arties? Non-"ayment does not render sale null and void &or lack o& consideration ' contract of sale being consensual$ it is !erfected by the mere consent of the !arties. )eli+ery of the thing bought or !ayment of the !rice is not necessary for the !erfection of the contractG and failure of the +endee to !ay the !rice after the e2ecution of the contract does not maCe the sale null and +oid for lacC of consideration but results at most in default on the !art of the +endee$ for which the +endor may e2ercise his legal remedies. , !resent case is a double sale The !resent case is a case of double sale contem!lated under 'rticle 1;&& of the 5ew -i+il -ode. :n the !resent case$ 'urelio 7o9ue sold 0D10 !ortion of his share in T-T 13;031 to the 7e!uyan s!ouses on 1 '!ril 18@0. #ubse9uently$ the same lot was sold again by +endor 'urelio 7o9ue (0D10) and his children (&D10)$ re!resented by the -lerC of -ourt !ursuant to #ection 10$ 7ule 38 of the 7ules of -ourt$ on & "ebruary 18@2. ) Article (/**? -ouble sale 'rticle 1;&& of the 5ew -i+il -ode !ro+ides that <if the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be mo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossession and in the absence thereof$ to the !erson who !resent the oldest title$ !ro+ided there is good faith.= 'rticle 1;&& of the -i+il -ode !ro+ides that in case of double sale of an immo+able !ro!erty$ ownershi! shall be transferred (1) to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!ertyG (2) in default thereof$ to the !erson who in good faith was first in !ossessionG and (3) in default thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith. . 2Bnershi" vests in "erson Bho ac=uired the immovable "ro"erty in $ood &aith and Bho &irst recorded it in the #e$istry o& !ro"erty? Annotation o& adverse claim su&&icient :n an instance of a double sale of an immo+able !ro!erty$ the ownershi! shall +ests in the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. :n the !resent case$ the 7e!uyan s!ouses caused the annotation of an ad+erse claim on the title of the subAect !ro!erty denominated as Bntry ;023DT%13;031 on 21 .uly 18@0. The annotation of the ad+erse claim on T-T 13;031 in the 7egistry of (ro!erty is sufficient com!liance as mandated by law and ser+es notice to the whole world. /alatbat$ on the other hand$ filed a notice of lis !endens only on 2 "ebruary 18@2. 'ccordingly$ the 7e!uyan s!ouses who
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first caused the annotation of the ad+erse claim in good faith shall ha+e a better right o+er /alatbat.
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(0
!ossession o& <alatbat merely "rovisionary The !hysical !ossession of /alatbat by +irtue of a writ of !ossession issued by the trial court on 20 #e!tember 18@2 is <subAect to the +alid rights and interest of third !ersons o+er the same !ortion thereof$ other than +endor or any other !erson or !ersons !ri+y to or claiming any rights to interest under it.= (( 3irst re$istrant+ &irst in "ossession+ else oldest title 's between two !urchasers$ the one who has registered the sale in his fa+or$ has a !referred right o+er the other who has not registered his title e+en if the latter is in actual !ossession of the immo+able !ro!erty. B+en in default of the first registrant or first in !ossession$ the 7e!uyan s!ouses ha+e !resented the oldest title. Thus$ the s!ouses who ac9uired the subAect !ro!erty in good faith and for +aluable consideration established a su!erior right as against /alatbat. (2 &aith -ue dili$ence in the "urchase o& real estate re=uired to alle$e $ood
:t is incumbent u!on the +endee of the !ro!erty to asC for the deli+ery of the owner?s du!licate co!y of the title from the +endor. ' !urchaser of a +alued !iece of !ro!erty cannot Aust close his eyes to facts which should !ut a reasonable man u!on his guard and then claim that he acted in good faith and under the belief that there were no defect in the title of the +endor. 6ne who !urchases real estate with Cnowledge of a defect or lacC of title in his +endor cannot claim that he has ac9uired title thereto in good faith as against the true owner of the land or of an interest thereinG and the same rule must be a!!lied to one who has Cnowledge of facts which should ha+e !ut him u!on such in9uiry and in+estigation as might be necessary to ac9uaint him with the defects in the title of his +endor. ood faith$ or the want of it is not a +isible$ tangible fact that can be seen or touched$ but rather a state or condition of mind which can only be Audged of by actual or fancied toCens or signs. (3 <alatbat not a buyer in $ood &aith /alatbat cannot be considered as a buyer in good faith. :n the com!laint for rescission filed by 'urelio 7o9ue on 20 'ugust 18@0$ /alatbat filed a motion for inter+ention on 20 May 18@2 but did not file her com!laint in inter+ention$ hence$ the decision was rendered ad+ersely against her. :f /alatbat did in+estigate before buying the land on & "ebruary 18@2$ she should ha+e Cnown that there was a !ending case and an annotation of ad+erse claim was made in the title of the !ro!erty before the 7egister of )eeds and she could ha+e disco+ered that the subAect !ro!erty was already sold to the 7e!uyan s!ouses. (* Gross ne$li$ence e=uvalent to intentional Bron$ /alatbat had nobody to blame but herself in dealing with the dis!uted !ro!erty for failure to in9uire or disco+er a flaw in the title to the !ro!erty$ thus$ it is a2iomatic that J cul!a lata dolo ae9ui!aratur J gross negligence is e9ui+alent to intentional wrong. '(*0 Calimlim-Canullas v 3ortun 'G # No /,*.. 6une 22+ (.)* 0 "irst )i+ision$ Melencio%1errera (.)4 ; concurring 3actsH Mercedes -alimlim%-anullas and "ernando -anullas were married on 18 )ecember 1802. They begot fi+e children. They li+ed in a small house on the residential land in 9uestion with an area of a!!ro2imately @81 s9. m.$ located at /acabac$ /ugallon$ (angasinan. 'fter -anullas? father died in 180;$ he inherited the land. :n 183@$ -anullas abandoned his family and li+ed with -orazon )aguines. 6n 1; '!ril 18@0$ -anullas sold the subAect !ro!erty with the house thereon to )aguines for the sum of (2$000.00. :n the document of sale$ -anullas described the house as <also inherited by me from my deceased !arents.= *nable to taCe !ossession of the lot and house$ )aguines initiated a com!laint beore the -": (angasinan (/ranch 1$ -i+il
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-ase 1;020) on 18 .une 18@0 for 9uieting of title and damages against -alimlim%-anullas. -alimlim%
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-anullas resisted and claimed that the house in dis!ute where she and her children were residing$ including the coconut trees on the land$ were built and !lanted with conAugal funds and through her industryG that the sale of the land together with the house and im!ro+ements to )aguines was null and +oid because they are conAugal !ro!erties and she had not gi+en her consent to the sale. 6n 0 6ctober 18@0$ the trial court ruled in fa+or of )aguines as the lawful owner of the land as well as P of the house erected on the land. *!on reconsideration and on 23 5o+ember 18@0$ howe+er$ the lower court modified the Audgment by declaring )aguines as the lawful owner of the land and 10 coconut trees thereon but declaring the sale of the conAugal house including 3 coconuts and other cro!s during the conAugal relation of the s!ouses null and +oid. ' !etition for re+iew on certiorari was filed with #u!reme -ourt. )uring the !endency of the a!!eal$ howe+er$ "ernando -anullas and -orazon )aguines were con+icted of concubinage in a Audgment rendered on 23 6ctober 18@1 by the then -": (angasinan$ /ranch ::$ which Audgment has become final. The #u!reme -ourt set aside the decision and resolution of the lower court$ and declared the sale of the lot$ house and im!ro+ements null and +oidG without costs. ( ;and and buildin$ belon$s to the con@u$al "artnershi"+ s"ouse oBnin$ the land becomes the creditor o& the con@u$al "artnershi" (ursuant to the second !aragra!h of 'rticle 1;@ of the -i+il -ode$ which !ro+ides that <buildings constructed at the e2!ense of the !artnershi! during the marriage on land belonging to one of the s!ouses also !ertain to the !artnershi!$ but the +alue of the land shall be reimbursed to the s!ouse who owns the same$= both the land and the building belong to the conAugal !artnershi! but the conAugal !artnershi! is indebted to the husband for the +alue of the land. The s!ouse owning the lot becomes a creditor of the conAugal !artnershi! for the +alue of the lot$ which +alue would be reimbursed at the li9uidation of the conAugal !artnershi!. 2 !adilla v !aterno is better rule than Maramba v ;o:ano? S"ouse cannot alienate "ro"erty Bithout the consent o& the other :n the case of Maramba +s. ,ozano$ it was held that the land belonging to one of the s!ouses$ u!on which the s!ouses ha+e built a house$ becomes conAugal !ro!erty only when the conAugal !artnershi! is li9uidated and indemnity !aid to the owner of the land. The better rule$ howe+er$ is that held in (adilla +s. (aterno$ where the con+ersion of the !ro!erties from !ara!hernal to conAugal assets should be deemed to retroact to the time the conAugal buildings were first constructed thereon or at the +ery latest$ to the time immediately before the death of one s!ouse that ended the conAugal !artnershi!. They can not be considered to ha+e become conAugal !ro!erty only as of the time their +alues were !aid to the estate of the widow because by that time the conAugal !artnershi! no longer e2isted and it could not ac9uire the ownershi! of said !ro!erties. The ac9uisition by the !artnershi! of the !ro!erties was$ under the 18&3 decision$ subAect to the sus!ensi+e condition that their +alues would be reimbursed to the widow at the li9uidation of the conAugal !artnershi!G once !aid$ the effects of the fulfillment of the condition should be deemed to retroact to the date the obligation was constituted ('rticle 11@3$ 5ew -i+il -ode). Thus$ in the !resent case$ considering the foregoing !remises$ -anullas cannot ha+e alienated the house and lot to )aguines since the wife had not gi+en her consent to the sale. 3 Contract o& sale null and void &or bein$ contrary to morals and "ublic "olicy 'rticle 1&08 of the -i+il -ode !ro+ides <contracts whose cause$ obAect$ or !ur!ose is contrary to law$ morals$ good customs$ !ublic order$ or !ublic !olicy are +oid and ine2istent from the +ery beginning.= 'rticle 13;2 also !ro+ides that <contracts without cause$ or with unlawful cause$ !roduce no effect whatsoe+er. The cause is unlawful if it is contrary to law$ morals$ good customs$ !ublic order$ or !ublic !olicy.= :n the
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!resent case$ the contract of sale was null and +oid for being contrary to morals and !ublic !olicy. The sale was made by a husband in fa+or of a concubine after he had abandoned his family and left the conAugal home where his
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wife and children li+ed and from whence they deri+ed their su!!ort. That sale was sub+ersi+e of the stability of the family$ a basic social institution which !ublic !olicy cherishes and !rotects. * ;aB "rohibits sale and donation betBeen husband and Bi&e+ such a""lies even those livin$ to$ether Bithout bene&it o& marria$e The law !rohibits the s!ouses from selling !ro!erty to each other subAect to certain e2ce!tions. #imilarly$ donations between s!ouses during marriage are !rohibited. 'nd this is so because if transfers or con+eyances between s!ouses were allowed during marriage$ that would destroy the system of conAugal !artnershi!$ a basic !olicy in ci+il law. :t was also designed to !re+ent the e2ercise of undue influence by one s!ouse o+er the other$ as well as to !rotect the institution of marriage$ which is the cornerstone of family law. The !rohibitions a!!ly to a cou!le li+ing 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 !ro+isions are dictated by !ublic interest and their criterion must be im!osed u!on the will of the !arties. &.uenaventu#a v. .autista [CA]( / -isabilities attached to marria$e also a""lies to concubina$e The ruling in /uena+entura +s. /autista K-'L was cited in Matabuena +s. -er+antes$ reiterating that while 'rticle 133 of the -i+il -ode considers as +oid a donation between the s!ouses during the marriage$ !olicy considerations of the most e2igent character as well as the dictates of morality re9uire that the same !rohibition should a!!ly to a common%law relationshi!. :f the !olicy of the law is to !rohibit donations in fa+or of the other consort and his descendants because of fear of undue influence and im!ro!er !ressure u!on the donor$ a !reAudice dee!ly rooted in our ancient law$ then there is e+ery reason to a!!ly the same !rohibiti+e !olicy to !ersons li+ing together as husband and wife without benefit of nu!tials. "or it is not to be doubted that assent to such irregular connection for thirty years bes!eaCs greater influence of one !arty o+er the other$ so that the danger that the law seeCs to a+oid is corres!ondingly increased. Moreo+er$ as !ointed out by *l!ian$ it would not be Aust that such donations should subsist$ lest the conditions of those who incurred guilt should turn out to be better. #o long as marriage remains the cornerstone of our family law$ reason and morality aliCe demand that the disabilities attached to marriage should liCewise attach to concubinage. '(/0 Carbonell vs CA 'G # No ;-2..,2 6anuary 25+ (.,5 0 "irst )i+ision$ MaCasiar (.)4 3 concurring 3actsH (rior to 23 .anuary 18;;$ .ose (oncio$ a nati+e of the /atanes :slands$ was the owner of the !arcel of land with im!ro+ements situated at 138 V. 'gan #t.$ #an .uan$ 7izal$ ha+ing an area of some 18; s9uare meters$ more or less$ co+ered by T-T ;0&0 and subAect to a mortgage in fa+or of the 7e!ublic #a+ings /anC for the sum of (1$;00.00. 7osario -arbonell$ a cousin and adAacent neighbor of (oncio$ and also from the /atanes :slands$ li+ed in the adAoining lot at 133 V. 'gan #treet. /oth 7osario -arbonell and Bmma :nfante offered to buy the said lot from (oncio. (oncio$ unable to Cee! u! with the installments due on the mortgage$ a!!roached -arbonell one day and offered to sell to the latter the said lot$ e2cluding the house wherein he li+ed. -arbonell acce!ted the offer and !ro!osed the !rice of (8.;0 !er s9uare meter. (oncio$ after ha+ing secured the consent of his wife and !arents$ acce!ted the !rice !ro!osed by -arbonell$ on the condition that from the !urchase !rice would come the money to be !aid to the banC. -arbonell and (oncio went to the banC and secured the consent of the (resident thereof for her to !ay the arrears on the mortgage and to continue the !ayment of the installments as they fall due. The amount in arrears reached a total sum of (2&3.20. /ut because (oncio had !re+iously told her that the money needed was only (200$ only the latter amount was brought by -arbonell constraining res!ondent (oncio to withdraw the sum of (&3 from his banC de!osit with 7e!ublic #a+ings /anC. The ne2t day$ -arbonell refunded to (oncio the sum of (&3. 6n 23 .anuary 18;;$ -arbonell and (oncio$ in the !resence of a witness$ made and e2ecuted a
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document in the /atanes dialect$ allowing (oncio to occu!y the land sold within one year$ and may continue occu!ying the site with rent
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thereafter if could not find any !lace to mo+e his house. Thereafter$ -arbonell asCed 'tty. #al+ador 7eyes$ also from the /atanes :slands$ to !re!are the formal deed of sale$ which she brought to (oncio together with the amount of some (&00$ the balance she still had to !ay in addition to her assuming the mortgage obligation to 7e!ublic #a+ings /anC. *!on arri+ing at (oncio?s house$ howe+er$ the latter told -arbonell that he could not !roceed any more with the sale$ because he had already gi+en the lot to Bmma :nfante (and 7amon :nfante)G and that he could not withdraw from his deal with :nfante$ e+en if he were to go to Aail. -arbonell then sought to contact :nfante$ but the latter refused to see her. 6n ; "ebruary 18;;$ -arbonell saw :nfante erecting a wall around the lot with a gate. -arbonell then consulted 'tty. .ose arcia$ who ad+ised her to !resent and ad+erse claim o+er the land in 9uestion with the 6ffice of the 7egister of )eeds 7izal. 'tty. arcia actually sent a letter of in9uiry to the 7egister of )eeds and demand letters to .ose (oncio and Bmma :nfante. :n his answer to the com!laint$ (oncio admitted <that on 30 .anuary 18;;$ :nfante im!ro+ed her offer and he agreed to sell the land and its im!ro+ements to her for (3$;3;.00. :n a !ri+ate memorandum agreement dated 31 .anuary 18;;$ (oncio indeed bound himself to sell to :nfante$ the !ro!erty for the sum of (2$3;3.;2$ with :nfante still assuming the e2isting mortgage debt in fa+or of 7e!ublic #a+ings /anC in the amount of (1$133.&@. :nfante li+es Aust behind the houses of (oncio and -arbonell. 6n 2 "ebruary 18;;$ (oncio e2ecuted the formal deed of sale in fa+or of :nfante in the total sum of (3$;;&.00 and on the same date$ the latter !aid 7e!ublic #a+ings /anC the mortgage indebtedness of (1$;00.00. The mortgage on the lot was e+entually discharged. :nformed that the sale in fa+or of :nfante had not yet been registered$ 'tty. arcia !re!ared an ad+erse claim for -arbonell$ who signed and swore to and registered the same on @ "ebruary 18;;. The deed of sale in fa+or of :nfante was registered only on 12 "ebruary 18;;. 's a conse9uence thereof$ a T-T was issued to her but with the annotation of the ad+erse claim of -arbonell. :nfante tooC immediate !ossession of the lot in+ol+ed$ co+ered the same with ;00 cubic meters of garden soil and built therein a wall and gate$ s!ending the sum of (1$;00. #he further contracted the ser+ices of an architect to build a houseG but the construction of the same started only in 18;8$ years after the litigation actually began and during its !endency. :nfante s!ent for the house the total amount of (11$828. 6n 1 .une 18;;$ -arbonell$ thru counsel$ filed a second amended com!laint against (oncio and :nfante$ !raying that she be declared the lawful owner of the 9uestioned !arcel of landG that the subse9uent sale to :nfante be declared null and +oid$ and that (oncio be ordered to e2ecute the corres!onding deed of con+eyance of said land in her fa+or and for damages and attorney?s fees. (oncio and :nfante first mo+ed to dismiss the com!laint on the ground$ among others$ that -arbonell?s claim is unenforceable under the #tatute of "rauds$ the alleged sale in her fa+or not being e+idenced by a written documentG and when said motion was denied without !reAudice to !assing on the 9uestion raised therein when the case would be tried on the merits$ (oncio and :nfante filed se!arate answers$ reiterating the grounds of their motion to dismiss. :n its order of 20 '!ril 1800$ the trial court sustained the obAection and dismissed the com!laint on the ground that the memorandum !resented by -arbonell to !ro+e said sale does not satisfy the re9uirements of the law. "rom the abo+e order of dismissal$ -arbonnel a!!ealed to the #u!reme -ourt ( 7 ,%11231) which ruled in a decision dated 12 May 18;@$ that the #tatute of "rauds$ being a!!licable only to e2ecutory contracts$ does not a!!ly to the alleged sale between -arbonell and (oncio$ which -arbonell claimed to ha+e been !artially !erformed$ so that -arbonell is entitled to establish by !arol e+idence <the truth of this allegation$ as well as the contract itself.= The order a!!ealed from was thus re+ersed$ and the case remanded to the court a 9uo for further !roceedings. 'fter trial in the court a 9uo$ a decision was rendered on ; )ecember 1802$ declaring the second sale by (oncio to :nfante of the land in 9uestion null and +oid and ordering (oncio to e2ecute the !ro!er deed of con+eyance of said land in fa+or of -arbonell after com!liance by the latter of her co+enants under her agreement with (oncio. 6n 23 .anuary 1803$ :nfante$ through another counsel$ filed a motion for re%trial to adduce e+idence for the !ro!er im!lementation of the court?s decision in case it would be affirmed on
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a!!eal$
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which motion was o!!osed by -arbonell for being !remature. /efore their motion for re%trial could be resol+ed$ :nfante$ this time through their former counsel$ filed another motion for new trial$ claiming that the decision of the trial court is contrary to the e+idence and the law$ which motion was also o!!osed by -arbonell. The trial court granted a new trial$ at which re%hearing only :nfante introduced additional e+idence consisting !rinci!ally of the cost of im!ro+ements they introduced on the land in 9uestion. 'fter the re% hearing$ the trial court rendered a decision$ re+ersing its decision of ; )ecember 1802 on the ground that the claim of :nfante was su!erior to the claim of -arbonell$ and dismissing the com!laintW. "rom this decision$ -arbonell a!!ealed to the -ourt of '!!eals. 6n 2 5o+ember 1803$ the -ourt of '!!eals ("ifth )i+ision com!osed of .ustices Magno atmaitan$ #al+ador V. Bsguerra and 'ngel 1. MoAica$ s!eaCing through .ustice Magno atmaitan)$ rendered Audgment re+ersing the decision of the trial court$ declaring -arbonell to ha+e a su!erior right to the land in 9uestion$ and condemning :nfante to recon+ey to -arbonell$ after her reimbursement to them of the sum of (3$000 !lus legal interest$ the land in 9uestion and all its im!ro+ements. :nfante sought reconsideration of said decision and acting on the motion for reconsideration$ the '!!ellate -ourt$ three .ustices (Villamor$ Bsguerra and 5olasco)$ of #!ecial )i+ision of "i+e$ granted said motion$ annulled and set aside its decision of 2 5o+ember 1803$ and entered another Audgment affirming in toto the decision of the court a 9uo$ with .ustices atmaitan and 7odriguez dissenting. -arbonell mo+ed to reconsider the 7esolution of the #!ecial )i+ision of "i+e$ which motion was denied by Minute 7esolution of 0 )ecember 180@ (but with .ustices 7odriguez and atmaitan +oting for reconsideration). 1ence$ this a!!eal by certiorari. The #u!reme -ourt re+ersed the decision of the s!ecial di+ision of fi+e of the court of a!!eals of 30 6ctober 180@G declared -arbonell to ha+e the su!erior right to the land in 9uestion and directed -arbonell to reimburse to :nfante the sum of (1$;00 within 3 months from the finality of the decisionG directed the 7egister of )eeds of 7izal to cancel T-T 33@&2 issued in fa+or of :nfante co+ering the dis!uted lot$ which cancelled T-T ;0&0 in the name of (oncio$ and to issue a new T-T in fa+or of -arbonell u!on !resentation of !roof of !ayment by her to :nfante of the aforesaid amount. :nfante may remo+e their useful im!ro+ements from the lot within 3 months from the finality of this decision$ unless -arbonell elects to ac9uire the same and !ay :nfante the amount of (13$&28 within 3 months from the finality of the decision. #hould -arbonell fail to !ay the said amount within the !eriod of 3 months from the finality of the decision$ the !eriod of 3 months within which :nfante may remo+e their useful im!ro+ements shall commence from the e2!iration of the 3 months gi+en -arbonell to !ay for the said useful im!ro+ementsG with costs against (oncio and :nfante. ( -ouble sale? Article (/** 'rticle 1;&&$ 5ew -i+il -ode$ which is decisi+e of this case$ recites <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossessionG and$ in the absence thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith.= 2 Good &aith essential in re$isterin$ deed o& sale :t is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the !rotection of the second !aragra!h of said 'rticle 1;&&. *nliCe the first and third !aragra!hs of said 'rticle 1;&&$ which accord !reference to the one who first taCes !ossession in good faith of !ersonal or real !ro!erty$ the second !aragra!h directs that ownershi! of immo+able !ro!erty should be recognized in fa+or of one <who in good faith first recorded= his right. *nder the first and third !aragra!hs$ good faith must characterize
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the !rior !ossession. *nder the second !aragra!h$ good faith must characterize the act of anterior registration
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()/( +s. Mangawang$ et al.$ 11 #-7' &0;G #oriano$ et al. +s. Magale$ et al.$ @ #-7' &@8). 3 -ecisive &act i& there is no inscri"tion+ or i& there is inscri"tion :f there is no inscri!tion$ what is decisi+e is !rior !ossession in good faith. :f there is inscri!tion$ as in the !resent case$ !rior registration in good faith is a !re%condition to su!erior title. * CarbonellMs "rior "urchase and re$istration in $ood &aith >hen -arbonell bought the lot from (oncio on 23 .anuary 18;;$ she was the only buyer thereof and the title of (oncio was still in his name solely encumbered by banC mortgage duly annotated thereon. -arbonell was not aware of any sale to :nfante as there was no such sale to :nfante then. 1ence$ -arbonell?s !rior !urchase of the land was made in good faith. 1er good faith subsisted and continued to e2ist when she recorded her ad+erse claim & days !rior to the registration of :nfante?s deed of sale. -arbonell?s good faith did not cease after (oncio told her on 31 .anuary 18;; of his second sale of the same lot to :nfante. /ecause of that information$ -arbonell wanted an audience with :nfante$ which desire underscores -arbonell?s good faith. :nfante refused to see her. -arbonell did the ne2t best thing to !rotect her right$ she registered her ad+erse claim on @ "ebruary 18;;. *nder the circumstances$ this recording of her ad+erse claim should be deemed to ha+e been done in good faith and should em!hasize :nfante?s bad faith when she registered her deed of sale & days later on 12 "ebruary 18;;. / <ad &aith o& 8n&ante? 3acts shoBin$ bad &aith /ad faith arising from !re+ious Cnowledge by :nfante of the !rior sale to -arbonell is shown by the following facts4 (1) :nfante refused to see -arbonell$ who wanted to see :nfante after she was informed by (oncio that he sold the lot to :nfante but se+eral days before :nfante registered her deed of sale. 6rdinarily$ one will not refuse to see a neighbor. 1er refusal to talC to -arbonell could only mean that she did not want to listen to -arbonell?s story that the latter had !re+iously bought the lot from (oncio. (2) -arbonell was already in !ossession of the mortgage !assbooC Knot (oncio?s sa+ings de!osit !assbooC4 :nfantesL and (oncio?s co!y of the mortgage contract$ when (oncio sold the lot to :nfante. This shows that the lot was already sold to -arbonell who$ after !aying the arrearages of (oncio$ assumed the balance of his mortgage indebtedness to the banC$ which in the normal course of business must ha+e necessarily informed :nfante about the said assum!tion by -arbonell of the mortgage indebtedness of (oncio. /efore or u!on !aying in full the mortgage indebtedness of (oncio to the banC$ :nfante naturally must ha+e demanded from (oncio the deli+ery to her of his mortgage !assbooC as well as (oncio?s mortgage contract so that the fact of full !ayment of his banC mortgage will be entered thereinG and (oncio$ as well as the banC$ must ha+e ine+itably informed her that said mortgage !assbooC could not be gi+en to her because it was already deli+ered to -arbonellG (3) The fact that (oncio was no longer in !ossession of his mortgage !assbooC and that the said mortgage !assbooC was already in !ossession of -arbonell$ should ha+e com!elled :nfante to in9uire from (oncio why he was no longer in !ossession of the mortgage !assbooC and from -arbonell why she was in !ossession of the same ((aglago$ et al.$ +s. .arabe$ et al.$ 22 #-7' 12&3$ 12;2%12;3)G (&) -arbonell registered on @ "ebruary 18;; her ad+erse claim$ which was accordingly annotated on (oncio?s title & days before :nfante registered on 12 "ebruary 18;; her deed of sale e2ecuted on 2 "ebruary 18;;. :nfante was again on notice of the !rior sale to -arbonell. #uch registration of ad+erse claim is +alid and effecti+e (.o+ellanos +s. )imalanta$ ,%11330% 33$ .anuary 30$ 18;8$ 10; (hil. 12;0%;1)G (;) :n his answer to the com!laint filed by (oncio$ as defendant in the -":$ he alleged that both :nfante and -arbonell offered to buy the lot at (1; !er s9.m.$ which offers he reAected as he belie+ed that his lot is worth at least (20 !er s9.m. Enowledge of this should ha+e !ut :nfante on her guard and should ha+e com!elled her to in9uire from (oncio whether or not he had already sold the !ro!erty to -arbonell (#ee -arbonell +s. (oncio$ ,%11231$ 12 May 18;@). 5 IContract &or O lot1K not in the "urvieB o& Statute o& 3rauds? not a contract o& sale? indicates sale as an accom"lished act
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The !ri+ate document e2ecuted by (oncio and -arbonell and witnessed by -onstancio Meonada ca!tioned <-ontract for 6ne%half ,ot which : /ought from .ose (oncio$= was not such a memorandum in
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writing within the !ur+iew of the #tatute of "rauds. The memorandum in 9uestion merely states that (oncio is allowed to stay in the !ro!erty which he had sold to -arbonell. There is no mention of the consideration$ a descri!tion of the !ro!erty and such other essential elements of the contract of sale. There is nothing in the memorandum which would tend to show e+en in the slightest manner that it was intended to be an e+idence of contract of sale. 6n the contrary$ from the terms of the memorandum$ it tends to show that the sale of the !ro!erty in fa+or of -arbonell is already an accom!lished act. /y the +ery contents of the memorandum itself$ it cannot therefore$ be considered to be the memorandum which would show that a sale has been made by (oncio in fa+or of -arbonell.= , Contract o& Sale not in the "urvieB o& Statute o& 3rauds as it is alle$edly "artially "er&ormed /ecause the com!laint alleges and the -arbonell claims that the contract of sale was !artly !erformed$ the same is remo+ed from the a!!lication of the #tatute of "rauds and -arbonell should be allowed to establish by !arol e+idence the truth of her allegation of !artial !erformance of the contract of sale. There was a !artial !erformance of the +erbal sale e2ecuted by (oncio in fa+or of the -arbonell$ when the latter !aid (2&3.20 to the 7e!ublic #a+ings /anC on account of (oncio?s mortgage indebtedness. ) ;an$ua$e F-ialectG used o& memorandum indicates lack o& intent on the "art o& Carbonell to mislead !oncio The document signed by (oncio is in the /atanes dialect$ which$ according to -arbonell?s uncontradicted e+idence$ is the one s!oCen by (oncio$ he being a nati+e of said region. The allegation in (oncio?s answer to the effect that he signed the document under the belief that it Hwas a !ermit for him to remain in the !remises in the e+ent? that Hhe decided to sell the !ro!erty? to -arbonell at (20 a s9. m. is$ on its face$ difficult to belie+e. :f he had not decided as yet to sell the land to -arbonell$ who had ne+er increased her offer of (1; a s9$m.$ there was no reason for (oncio to get said !ermit from her. *!on the other hand$ if -arbonell intended to mislead (oncio$ she would ha+e caused the document to be drafted$ !robably$ in Bnglish$ instead of taCing the trouble of seeing to it that it was written !recisely in his nati+e dialect$ the /atanes. Moreo+er$ (oncio?s signature on the document suggests that he is neither illiterate nor so ignorant as to sign a document without reading its contents$ a!art from the fact that Meonada had read the document to him and gi+en him a co!y thereof $ before he signed thereon$ according to Meonada?s uncontradicted testimony. . Carbonell entitled to introduce "arol evidence The -ourt would not Cnow why (oncio?s banC de!osit booC is in -arbonell?s !ossession$ or whether there is any relation between the (2&3.20 entry therein and the !artial !ayment of (2&3.20 allegedly made by -arbonell to (oncio on account of the !rice of his land$ if the -ourt does not allow -arbonell to e2!lain it on the witness stand. #he is entitled$ legally as well as from the +iew!oint of e9uity$ to an o!!ortunity to introduce !arol e+idence in su!!ort of the allegations of her second amended com!laint. (0 2ne-hal& lot clearly the "arcel o& land occu"ied by !oncio and Bhere he has his im"rovements erected The one half lot was mentioned in the document because the original descri!tion carried in the title states that it was formerly !art of a bigger lot and only segregated later. #uch e2!lanation is tenable$ in considering the time +alue of the contents of the document$ there is a sufficient descri!tion of the lot referred to as none other than the !arcel of land occu!ied by (oncio and where he has his im!ro+ements erected. The identity of the !arcel of land in+ol+ed is sufficiently established by the contents of the note. (( 74istence o& a contract o& sale There had been celebrated a sale of the !ro!erty e2cluding the house for the !rice of (8.;0 !er s9uare meter$ so much so that on faith of that$ 7osario had ad+anced the sum of (2&3.20 and binding herself to
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!ay unto .ose the balance of the !urchase !rice after deducting the indebtedness to the /anC. #ince the wording of the !ri+ate document goes so far as to describe their transaction as one of sale$ already consummated between
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them$ as can be noted with the !ast tense used in the !hrase$ Hthe lot sold by him to me? and going so far e+en as to state that from that day onwards$ +endor would continue to li+e therein$ for one year$ Hduring which time he will not !ay anything? this can only mean that between 7osario and .ose$ there had been a true contract of sale$ consummated by deli+ery constitutum !ossessorium ('rt.1;00$ 5ew -i+il -ode)G +endor?s !ossession ha+ing become con+erted from then on$ as a mere tenant of +endee$ with the s!ecial !ri+ilege of not !aying rental for one year. (2 Contract is consensual? 2ral contract does not invalidate sale but merely inca"able o& "roo& B+en if the document was not registered at all$ it was a +alid contract nonetheless. *nder the law$ a contract sale is consensual$ !erfected by mere consent (-outo +s. -ortes$ @ (hil. &;8). *nder the 5ew -i+il -ode$ while a sale of an immo+able is ordered to be reduced to a !ublic document ('rt. 13;@)$ that mandate does not render an oral sale of realty in+alid$ but merely inca!able of !roof. >here still e2ecutory and action is brought and resisted for its !erformance (1&03$ !ar. 2$ 3)G but where already wholly or !artly e2ecuted or where e+en if not yet$ it is e+idenced by a memorandum$ in any case where e+idence to further demonstrate is !resented and admitted$ then the oral sale becomes !erfectly good$ and becomes a good cause of action not only to reduce it to the form of a !ublic document$ but e+en to enforce the contract in its entirety ('rt. 13;3). (3 !er&ected sale? 6ustice Gatmaitan correct :n his dissent concurred in by .ustice 7odriguez$ .ustice atmaitan maintains his decision of 2 5o+ember 1803 as well as his findings of facts therein$ and reiterated that the !ri+ate memorandum is a !erfected sale$ as a sale is consensual and consummated by mere consent$ and is binding on and effecti+e between the !arties. This statement of the !rinci!le is correct. (* Mort$a$e o& lot about to be &oreclosed Bhen !oncio a$reed to sell the lot to Carbonell? Am"le consideration in the sale The mortgage on the lot was about to be foreclosed by the banC for failure on the !art of (oncio to !ay the amortizations thereon. To forestall the foreclosure and at the same time to realize some money from his mortgaged lot$ (oncio agreed to sell the same to -arbonell at (8.;0 !er s9uare meter$ on condition that -arbonell K1L should !ay (a) the amount of (&00.00 to (oncio and (b) the arrears in the amount of (2&3.20 to the banCG and K2L should assume his mortgage indebtedness. The banC !resident agreed to the said sale with assum!tion of mortgage in fa+or of -arbonell and -arbonell accordingly !aid the arrears of (2&3.20. 6n .anuary 23$ 18;;$ she !aid the amount of (200.00 to the banC because that was the amount that (oncio told her as his arrearages and (oncio ad+anced the sum of (&3.20 which amount was refunded to him by -arbonell the following day. This con+eyance was confirmed that same day$ .anuary 23$ 18;;$ by the !ri+ate document which was !re!ared in the /atanes dialect by the witness -onstancio Meonada$ who is also from /atanes liCe (oncio and -arbonell. The sale did not include (oncio?s house on the lot. (oncio was gi+en the right to continue staying on the land without !aying any rental for one year$ after which he should !ay rent if he could not still find a !lace to transfer his house. 'll these terms are !art of the consideration of the sale to -arbonell. There was am!le consideration$ and not merely the sum of (200.00$ for the sale of (oncio to -arbonell of the lot in 9uestion. (/ Carbonell+ not 8n&ante+ victim o& in@ustice and outra$e (oncio$ induced by the higher !rice offered to him by :nfante$ reneged on his commitment to -arbonell and told -arbonell$ who confronted him about it$ that he would not withdraw from his deal with :nfante e+en if he is sent to Aail. The +ictim$ therefore$ <of inAustice and outrage= is the widow -arbonell and not the :nfantes$ who without moral com!unction e2!loited the greed and treacherous nature of (oncio$ who$ for lo+e of money and without remorse of conscience$ dishonored his own !lighted word to -arbonell$ his own cousin. (5 8n&ante not entitled to recover value o& im"rovements introduced in the lot
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The bad faith of Bmma :nfante X from the time she enticed (oncio to dishonor his contract with
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-arbonell$ and instead to sell the lot to her (:nfante) by offering (oncio a much hinger !rice than the !rice for which he sold the same to -arbonell X is clear. /eing guilty of bad faith$ both in taCing !hysical !ossession of the lot and in recording their deed of sale$ the :nfantes cannot reco+er the +alue of the im!ro+ements they introduced in the lot. 'nd after the filing by -arbonell of the com!laint in .une 18;;$ the :nfantes had less Austification to erect a building thereon since their title to said lot is seriously dis!uted by -arbonell on the basis of a !rior sale to her. (, !oncio did not remain oBner by "ossessin$ the lot /eing a +alid consensual contract$ the document effecti+ely transferred the !ossession of the lot to the +endee -arbonell by constitutum !ossessorium ('rticle 1;00$ 5ew -i+il -ode)G because thereunder the +endor (oncio continued to retain !hysical !ossession of the lot as tenant of the +endee and no longer as owner thereof. More than Aust the signing of the document by (oncio and -arbonell with -onstancio Meonada as witness to !erfect the contract of sale$ the transaction was further confirmed when (oncio agreed to the actual !ayment by -arbonell of his mortgage arrearages to the banC on 23 .anuary 18;; and by his conse9uent deli+ery of his own mortgage !assbooC to -arbonell. :f he remained owner and mortgagor$ (oncio would not ha+e surrendered his mortgage !assbooC to -arbonell. () !oncio does not oBn another "arcel o& land Bith the same area ad@acent to Carbonell :t is not shown that (oncio owns another !arcel with the same area$ adAacent to the lot of his cousin -arbonell and liCewise mortgaged by him to the 7e!ublic #a+ings /anC. The transaction therefore between (oncio and -arbonell can only refer and does refer to the lot in+ol+ed. :f (oncio had another lot to remo+e his house$ the document would not ha+e sti!ulated to allow him to stay in the sold lot without !aying any rent for one year and thereafter to !ay rental in case he cannot find another !lace to transfer his house. (. Carbonell liable to e&und amount 8n&ante "aid the bank to redeem the mort$a$e >hile -arbonell has the su!erior title to the lot$ she must howe+er refund to :nfante the amount of (1$;00$ which :nfante !aid to the 7e!ublic #a+ings /anC to redeem the mortgage. 20 Article /*5 and /*, The :nfante s!ouses being !ossessors in bad faith$ their rights to the im!ro+ements they introduced on the dis!uted lot are go+erned by 'rticles ;&0 and ;&3 of the 5ew -i+il -ode. 2( 8n&anteMs e4"enses Their e2!enses consisting of (1$;00 for draining the !ro!erty$ filling it with ;00 cubic meters of garden soil$ building a wall around it and installing a gate and (11$828for erecting a bungalow thereon$ are useful e2!endituresG for they add to the +alue of the !ro!erty ('ringo +s. 'renas$ 1& (hil. 203G 'lburo +s. Villanue+a$ 3 (hil. 233G Valencia +s. 'yala de 7o2as$ 13 (hil. &;). 2( Article /*5 and /*,? !ossessor in $ood &aith entitled to ri$ht o& retention o& use&ul im"rovement and ri$ht to a re&und &or use&ul e4"enses? 8m"lies contrary to "ossessor in bad &aith *nder the second !aragra!h of 'rticle ;&0$ the !ossessor in good faith can retain the useful im!ro+ements unless the !erson who defeated him in his !ossession refunds him the amount of such useful e2!enses or !ay him the increased +alue the land may ha+e ac9uired by reason thereof. *nder 'rticle ;&3$ the !ossessor in good faith has also the right to remo+e the useful im!ro+ements if such remo+al can be done without damage to the land$ unless the !erson with the su!erior right elects to !ay for the useful im!ro+ements or reimburse the e2!enses therefor under !aragra!h 2 of 'rticle ;&0. These !ro+isions seem to im!ly that the !ossessor in bad faith has neither the right of retention of useful im!ro+ements nor the right to a refund for useful e2!enses.
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22 7=uity? 8n&anteMs ri$ht o& remotion or the value o& the im"rovements Fnot current valueG i& Carbonell a""ro"riates &or hersel& the im"rovements
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:f the lawful !ossessor can retain the im!ro+ements introduced by the !ossessor in bad faith for !ure lu2ury or mere !leasure only by !aying the +alue thereof at the time he enters into !ossession ('rticle ;&8 5--)$ as a matter of e9uity$ the :nfantes$ although !ossessors in bad faith$ should be allowed to remo+e the im!ro+ements$ unless -arbonell chooses to !ay for their +alue at the time :nfante introduced said useful im!ro+ements in 18;; and 18;8. :nfante cannot claim reimbursement for the current +alue of the said useful im!ro+ementsG because they ha+e been enAoying such im!ro+ements for about 2 decades without !aying any rent on the land and during which !eriod -arbonell was de!ri+ed of its !ossession and use. '(50 Carumba vs CA 'G # No ;-2,/), 3ebruary ()+ (.,0 0 Bn /anc$ 7eyes ./, (.)4 10 concurring 3actsH 6n 12 '!ril 18;0$ the s!ouses 'mado -anuto and 5emesia :basco$ by +irtue of a )eed of #ale of *nregistered ,and with -o+enants of <>arranty$? sold a !arcel of land$ !artly residential and !artly coconut land with a !eri!hery (area) of 3;8.08 s9uare meters$ more or less$ located in the barrio of #anto )omingo$ :riga$ -amarines #ur$ to the s!ouses 'mado -arumba and /enita -anuto$ for the sum of (3;0.00. The referred deed of sale was ne+er registered in the 6ffice of the 7egister of )eeds of -amarines #ur$ and the 5otary$ Mr. Vicente Malaya$ was not then an authorized notary !ublic in the !lace. /esides$ it has been e2!ressly admitted by -arumba that he is the brother%in%law of -anuto$ the alleged +endor of the !ro!erty sold to him. -anuto is the older brother of the wife of -arumba. 6n 21 .anuary 18;3$ a com!laint for a sum of money was filed by #antiago /albuena (and wife 'ngeles /oa9uina) against -anuto and :basco before the .ustice of the (eace -ourt of :riga$ -amarines #ur (-i+il -ase 138) and on 1; '!ril 1803$ a decision was rendered in fa+or of /albuena. 6n 1 6ctober 18;@$ the e2% officio #heriff$ .usto V. :m!erial$ of -amarines #ur$ issued a <)efinite )eed of #ale of the !ro!erty in fa+or of /albuena$ which instrument of sale was registered before the 6ffice of the 7egister of )eeds of -amarines #ur$ on 3 6ctober 18;@. The aforesaid !ro!erty was declared for ta2ation !ur!oses in the name of /albuena in 18;@.= The -ourt of "irst :nstance -amarines #ur (-i+il -ase &0&0)$ finding that after e2ecution of the document -arumba had taCen !ossession of the land$ !lanting bananas$ coffee and other +egetables thereon$ declared him to be the owner of the !ro!erty under a consummated saleG held +oid the e2ecution le+y made by the sheriff$ !ursuant to a Audgment against -arumba?s +endor$ 'mado -anutoG and nullified the sale in fa+or of the Audgment creditor$ /albuena. The -ourt$ therefore$ declared -arumba the owner of the litigated !ro!erty and ordered /albuena to !ay (30.00$ as damages$ !lus the costs. The -ourt of '!!eals (-ase 3008&%7)$ without altering the findings of fact made by the court of origin$ declared that there ha+ing been a double sale of the land subAect of the suit /albuena?s title was su!erior to that of his ad+ersary under 'rticle 10&& of the -i+il -ode of the (hili!!ines$ since the e2ecution sale had been !ro!erly registered in good faith and the sale to -arumba was not recorded. 1ence$ the !etition for re+iew on certiorari by 'mado -arumba. The #u!reme -ourt re+ersed the decision of the -ourt of '!!eals and affirmed that of the -":G with costs against #antiago /albuena. ( Dnre$istered land? Article (/** does not a""ly >hile under the in+oCed 'rticle 1;&&$ registration in good faith !re+ails o+er !ossession in the e+ent of a doubt sale by the +endor of the same !iece of land to different +endees$ said article is of no a!!lication to the !resent case$ e+en if /albuena$ the later +endee$ was ignorant of the !rior sale made by his Audgment debtor in fa+or of -arumba. The reason is that the !urchaser of *nregistered land at a sheriff?s e2ecution
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sale
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only ste!s into the shoes of the Audgment debtor$ and merely ac9uires the latter?s interest in the !ro!erty sold as of the time the !ro!erty was le+ied u!on. This is s!ecifically !ro+ided by section 3; of 7ule 38 of the 7e+ised 7ules of -ourt$ the second !aragra!h of said section s!ecifically !ro+iding that <*!on the e2ecution and deli+ery of said (final) deed the !urchaser$ redem!tioner$ or his assignee shall be substituted to and ac9uire all the right$ title$ interest$ and claim of the Audgment debtor to the !ro!erty as of the time of the le+y$ e2ce!t as against the Audgment debtor in !ossession$ in which case the substitution shall be effecti+e as of the time of the deed.= 2 -eed o& sale Feven in "rivate instrumentG cou"led Bith "ossession o& re$istered land su&&ice to vest oBnershi" The deed of sale in fa+or of -anuto had been e2ecuted on 12 '!ril 18;;$ two years before the decision against the former owners of the land was rendered in fa+or of /albuena (1; '!ril 18;3)$ and while only embodied in a !ri+ate document$ the same$ cou!led with the fact that the buyer (-arumba) had taCen !ossession of the unregistered land sold$ sufficed to +est ownershi! on the said buyer. >hen the le+y was made by the #heriff$ therefore$ the Audgment debtor no longer had dominical interest nor any real right o+er the land that could !ass to the !urchaser at the e2ecution sale. 1ence$ the latter must yield the land to !etitioner -arumba. 3 title #ule di&&erent in cases covered by %orrens
The rule is different in case of lands co+ered by Torrens titles$ where the !rior sale is neither recorded nor Cnown to the e2ecution !urchaser !rior to the le+yG but the land here in 9uestion is admittedly not registered under 'ct &80. '(,0 Celestino Co v Collector o& 8nternal #evenue 'G # No ;-)/05 Au$ust 3(+ (./5 0 "irst )i+ision$ /engzon (.)4 3 concurring 3actsH -elestino -o Q -om!any is a duly registered general co!artnershi! doing business under the trade name of <6riental #ash "actory=. "rom 18&0 to 18;1 it !aid !ercentage ta2es of 3I on the gross recei!ts of its sash$ door and window factory$ in accordance with section 1@0 of the 5ational 7e+enue -ode im!osing ta2es on sales of manufactured articles. 1owe+er in 18;2 it began to claim liability only to the contractor?s 3I ta2 (instead of 3I) under section 181 of the same -odeG and ha+ing failed to con+ince the /ureau of :nternal 7e+enue$ it brought the matter to the -ourt of Ta2 '!!eals$ where it also failed. 1ence$ the a!!eal. The #u!reme -ourt affirmed the a!!ealed decision. ( <usiness name and income militates a$ainst claim as ordinary contractor The com!any has taCen all the trouble and e2!ense of registering a s!ecial trade name for its sash business and has ordered com!any stationery carrying the bold !rint <6riental #ash "actory (-elestino -o Q -om!any$ (ro!.) 820 7aon #t. Uuia!o$ Manila$ Tel. 5o. 33030$ Manufacturers of all Cinds of doors$ windows$ sashes$ furnitures$ etc. used season%dried and Ciln%dried lumber$ of the best 9uality worCmanshi!.= :t is unliCely that these act were made solely for the !ur!ose of su!!lying the needs for doors$ windows and sash of its s!ecial and limited customers. "urther$ the -om!any has chosen for its tradename and has offered itself to the !ublic as a <"actory=$ which means it is out to do business$ in its chosen lines on a big scale. Moreo+er$ as shown from the in+estigation of the -om!any?s booCs of accounts (for transactions co+ering the !eriod of 1 .anuary 18;2 to 30 #e!tember 18;2)$ it sold sash$ doors and windows worth (1@@$3;&.08. :t will be difficult to belie+e that such amount that ran to si2 figures was deri+ed entirely from its few customers who made s!ecial orders. Thus$ -elestino -o Q -om!any
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habitually maCes sash$ windows and doors$ as it has re!resented in its stationery and ad+ertisements to the !ublic$ and it has admitted by the a!!ellant itself that the com!any <manufactures.=
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Construction Bork contractors de&ined -onstruction worC contractors are those who alter or re!air buildings$ structures$ streets$ highways$ sewers$ street railways$ railroads$ logging roads$ electric$ steam or water !lants telegra!h and tele!hone !lants and lines$ electric lines or !ower lines$ and includes any other worC for the construction$ altering or re!airing for which machinery dri+en by mechanical !ower is used. &*ayton vs. City o" Ana8a#8o 14 *. 28 8$8, 880, %$' 3/l. 18(. 3 Nature o& business does not &all in any o& the occu"ation that may be classi&ied as contractor Bithin the "urvieB o& Section (.( o& the National 8nternal #evenue Code B+en if it were to belie+e that the com!any does not manufacture ready%made sash$ doors and windows for the !ublic and that it maCes these articles only u!on s!ecial order of its customers$ that does not maCe it a contractor within the !ur+iew of section 181 of the 5ational :nternal 7e+enue -ode. There are no less than fifty occu!ations enumerated in the said section of the 5ational :nternal 7e+enue -ode subAect to !ercentage ta2$ not one under which the business enter!rise of !etitioner could a!!ro!riately fall. :t would re9uire a stretch of the law to maCe the business of manufacturing sash$ doors and windows u!on s!ecial order of customers fall under the category of Hroad$ building$ na+igation$ artesian well$ water worCs and other construction worC contractors. * !ercenta$e ta4 im"osed under Section (.( o& the %a4 Code a ta4 on sales o& service+ Bhile ta4 im"osed by Section ()5 a ta4 on ori$inal sales o& articles The !ercentage ta2 im!osed in section 181 of the Ta2 -ode is generally a ta2 on the sales of ser+ices$ in contradiction with the ta2 im!osed in section 1@0 of the same -ode which is a ta2 on the original sales of articles by the manufacturer$ !roducer or im!orter. ("ormilleza?s -ommentaries and .uris!rudence on the 5ational :nternal 7e+enue -ode$ Vol ::$ !. 3&&). The fact that the articles sold are manufactured by the seller does not e2change the contract from the !ur+iew of section 1@0 of the 5ational :nternal 7e+enue -ode as a sale of articles. / Custom s"eci&ications re=uired by customer does not alter character o& business+ the com"any does not become an em"loyee or servant o& the customer 5obody will say that when a sawmill cuts lumber in accordance with the !eculiar s!ecifications of a customer$ sizes not !re+iously held in stocC for sale to the !ublic$ it thereby becomes an em!loyee or ser+ant of the customer$ not the seller of lumber. The same consideration a!!lies to this sash manufacturer. The #ash "actory does nothing more than sell the goods that it mass%!roduces or habitually maCesG sash$ !anels$ mouldings$ frames$ cutting them to such sizes and combining them in such forms as its customers may desire. 5 8nstallation o& BindoB "anels not construction Bork in common "arlance (etitioner?s idea of being a contractor doing construction Aobs is untenable. 5obody would regard the doing of two window !anels as construction worC in common !arlance. , Contract o& sale distin$uished &rom a contract &or a "iece o& Bork 'rticle 1&03 of the 5ew -i+il -ode !ro+ides that <a contract for the deli+ery at a certain !rice of an article which the +endor in the ordinary course of his business manufactures or !rocures for the general marCet$ whether the same is on hand at the time or not$ is a contract of sale$ but if the goods are to be manufactured s!ecially for the customer and u!on his s!ecial order$ and not for the general marCet$ it is contract for a !iece of worC.= :n the !resent case$ it is a!!arent that the "actory did not merely sell its ser+ices to Teodoro Q -o. because it also sold the materials. >hen it sold materials ordinarily manufactured by it (sash$ !anels$ mouldings)$ although in such form or combination as suited the fancy of the !urchaser$ such new form does not di+est the "actory of its character as manufacturer. 5either does it taCe the transaction out of the category of sales under 'rticle 1&03 because although the "actory does not$ in the ordinary course of
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its business$ manufacture and Cee! on stocC doors of the Cind sold to Teodoro$ it could stocC andDor !robably had
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in stocC the sash$ mouldings and !anels it used therefor. ) Contract &or a "iece o& Bork in 3actory ha""ens i& the use o& e4traordinary or additional e=ui"ment is re=uired or i& it involves services not $enerally "er&ormed by it >hen the "actory acce!ts a Aob that re9uires the use of e2traordinary or additional e9ui!ment$ or in+ol+es ser+ices not generally !erformed by it$ it thereby contracts for a !iece of worC$ i.e. filling s!ecial orders within the meaning of 'rticle 1&03. :n the !resent case$ howe+er$ the orders e2hibited were not shown to be s!ecial. They were merely orders for worC$ regular worC. . Code %rans&ers under Section ()5 o& the %a4
:f all the worC of a!!ellant is only to fill orders !re+iously made$ such orders should not be called s!ecial worC$ but regular worCG and su!!osing for the moment that the transactions were not sales$ they were neither lease of ser+ices nor contract Aobs by a contractor. #till$ as the doors and windows had been admittedly <manufactured= by the #ash "actory$ such transactions could be$ and should be ta2ed as <transfers= thereof under section 1@0 of the 5ational 7e+enue -ode. '()0 Chen$ vs Genato 'G # No (2.,50 -ecember 2.+ (..) 0 #econd )i+ision$ Martinez (.)4 3 concurring 3actsH 7amon /. enato is the owner of two !arcels of land located at (aradise "arms$ #an .ose del Monte$ /ulacan co+ered by T-Ts T%30.180 (M) and T%30.183 (M) with an aggregate area of 3;$@21 s9uare meters$ more or less. 6n 0 #e!tember 18@8$ enato entered into an agreement with s!ouses Brnesto 7. )a .ose and #ocorro /. )a .ose ()a .ose s!ouses) o+er the two !arcels of land. The agreement culminated in the e2ecution of a contract to sell for which the !urchase !rice was (@0 !er s9. m. The contract was in a !ublic instrument and was duly annotated at the bacC of the two certificates of title on the same day. 6n 6ctober &$ 18@8$ the )a .ose s!ouses$ not ha+ing finished +erifying the titles (to confirm the truth and authenticity of documents$ and that no restrictions$ limitations$ and de+elo!ments im!osed on andDor affecting the !ro!erty subAect of this contract shall be detrimental to his interest)$ asCed for and was granted by enato an e2tension of another 30 days$ or until ; 5o+ember 18@8. 1owe+er$ according to enato$ the e2tension was granted on condition that a new set of documents is made 3 days from & 6ctober 18@8$ which was denied by the )a .ose s!ouses. (ending the effecti+ity of the aforesaid e2tension !eriod$ and without due notice to the )a .ose s!ouses$ enato e2ecuted an 'ffida+it to 'nnul the -ontract to #ell on 13 6ctober 18@8. Moreo+er$ no annotation of the said affida+it at the bacC of his titles was made right away. The affida+it contained the sti!ulation that the !arties agreed that the down!ayment of (8;0$000 shall be !aid 30 days from the e2ecution of the -ontract (thus$ on 0 6ctober 18@8)$ that the +endees failed to !ay the down!ayment (thus$ a breach of contract)$ and that the affida+it was e2ecuted to annul the contract to sell. 6n 2& 6ctober 18@8$ 7icardo -heng went to enato?s residence and e2!ressed interest in buying the subAect !ro!erties. 6n that occasion$ enato showed -heng co!ies of his T-Ts and the annotations at the bacC thereof of his contract to sell with the )a .ose s!ouses. enato also showed him the 'ffida+it to 'nnul the -ontract to #ell which has not been annotated at the bacC of the titles. )es!ite these$ -heng went ahead and issued a checC for (;0$000.00 u!on the assurance by enato that the !re+ious contract with the )a .ose s!ouses will be annulled for which enato issued a handwritten recei!t. 6n 2; 6ctober 18@8$ enato de!osited -heng?s checC. 6n the same day$ -heng called u! enato reminding him to register the affida+it to annul the contract to sell. The following day$ acting on -heng?s re9uest$ enato caused the registration of the 'ffida+it to 'nnul the -ontract to #ell in the 7egistry of )eeds$ Meycauayan$ /ulacan as !rimary entry 202302. >hile the )a .ose s!ouses were at the 6ffice of the 7egistry of )eeds of Meycauayan$ /ulacan on 23 6ctober 18@8$ they met enato by coincidence. :t was only then that the )a .ose s!ouses disco+ered about the affida+it to annul their
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contract. The latter were shocCed at the disclosure and !rotested against the rescission of their contract. 'fter being reminded that enato had gi+en the )a .ose s!ouses an additional 30%day !eriod to finish their
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+erification of his titles$ that the !eriod was still in effect$ and that they were willing and able to !ay the balance of the agreed down !ayment$ later on in the day$ enato decided to continue the -ontract he had with them. The agreement to continue with their contract was formalized in a conforme letter dated 23 6ctober 18@8. Thereafter$ enato ad+ised -heng of his decision to continue his contract with the )a .ose s!ouses and the return of -heng?s (;0$000.00 checC. -onse9uently$ on 30 6ctober 18@8$ -heng?s lawyer sent a letter to enato demanding com!liance with their agreement to sell the !ro!erty to him stating that the contract to sell between him and enato was already !erfected and threatening legal action. 6n 2 5o+ember 18@8$ enato sent a letter to -heng enclosing a /(: -ashier?s -hecC for (;0$000 and e2!ressed regret for his inability to <consummate his transaction= with him. 'fter ha+ing recei+ed the letter of enato on & 5o+ember 18@8$ -heng$ howe+er$ returned the said checC to the former +ia 7-(: telegram dated 0 5o+ember 18@8$ reiterating that <our contract to sell your !ro!erty had already been !erfected.= Meanwhile$ also on 2 5o+ember 18@8$ -heng e2ecuted an affida+it of ad+erse claim and had it annotated on the subAect T-T?s. 6n the same day$ consistent with the decision of enato and the )a .ose s!ouses to continue with their -ontract to #ell$ the )a .ose s!ouses !aid enato the com!lete down !ayment of (8;0$000 and deli+ered to him 3 !ostdated checCs (all dated 0 May 1880$ the sti!ulated due date) in the total amount of (1$@0;$0@0 to co+er full !ayment of the balance of the agreed !urchase !rice. 6n @ )ecember 18@8$ -heng instituted a com!laint for s!ecific !erformance with the 7T- Uuezon -ity (/ranch 80) to com!el enato to e2ecute a deed of sale to him of the subAect !ro!erties !lus damages and !rayer for !reliminary attachment. 'fter trial on the merits$ and on 1@ .anuary 188&$ the lower court ruled that the recei!t issued by enato to -heng unerringly meant a sale and not Aust a !riority or an o!tion to buy. :t cannot be true that the transaction was subAected to some condition or reser+ation$ liCe the !riority in fa+or of the )a .ose s!ouses as first buyer because$ if it were otherwise$ the recei!t would ha+e !ro+ided such material condition or reser+ation$ es!ecially as it was enato himself who had made the recei!t in his own hand. :t also o!ined that there was a +alid rescission of the -ontract to #ell by +irtue of the 'ffida+it to 'nnul the -ontract to #ell. Time was of the essence in the e2ecution of the agreement between enato and -heng$ under this circumstance demand$ e2traAudicial or Audicial$ is not necessary. :t falls under the e2ce!tion to the rule !ro+ided in 'rticle 1108 of the -i+il -ode. The right of enato to unilaterally rescind the contract is said to be under 'rticle 1181 of the -i+il -ode. 'dditionally$ after reference was made to the substance of the agreement between enato and the )a .ose s!ouses$ the lower court also concluded that -heng should be !referred o+er the )a .ose s!ouses in the !urchase of the subAect !ro!erties. The trial court rendered its decision declaring the contract to sell dated 0 #e!tember 18@8 e2ecuted between enato$ as +endor$ and #!ouses )a .ose$ as +endees$ resol+ed and rescinded in accordance with 'rticle 1181$ -i+il -ode$ by +irtue of enato?s affida+it to annul contract to sell dated 13 6ctober 18@8 and as the conse9uence of the s!ouses? failure to e2ecute within 3 days from & 6ctober 18@8 another contract to sell !ursuant to their mutual agreement with enatoG ordering enato to return to the s!ouses the sum of (1 million !lus interest at the legal rate from 2 5o+ember 18@8 until full !aymentG directing enato to return to the s!ouses the 3 !ostdated checCs immediately u!on finality of this AudgmentG commanding enato to e2ecute with and in fa+or of -heng$ as +endee$ a deed of con+eyance and sale of the real !ro!erties described and co+ered in T-Ts T%30% 180 (M) and T%30.183 (M) of the 7egistry of )eeds of /ulacan$ Meycauayan /ranch$ at the rate of (30Ds9uare meter$ less the amount of (;0$000.00 already !aid to enato$ which is considered as !art of the !urchase !rice$ with the -heng being liable for !ayment of the ca!ital gains ta2es and other e2!enses of the transfer !ursuant to the agreement to sell dated 2& 6ctober 18@8G and ordering enato to !ay -heng and the s!ouses (;0$000.00$ as nominal damages$ to -hengG (;0$000.00$ as nominal damages$ to the s!ousesG (20$000.00$ as and for attorney?s fees$ to -hengG (20$000.00 as and for attorney?s fees$ to the s!ousesG and the cost of the suit. 5ot satisfied with the decision$ enato and )a .ose s!ouses a!!ealed to the a!!ellate court (in -'% 7
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&&300) which$ on 3 .uly 1883$ re+ersed such Audgment and ruled that the !rior contract to sell in fa+or of the )a .ose s!ouses was not +alidly rescindedG that the subse9uent contract to sell between enato and -heng$ embodied in the handwritten recei!t$ was without force and effect due to the failure to rescind the !rior
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contractG and that -heng should !ay damages to enato and the s!ouses herein being found to be in bad faith. The -ourt of '!!eals re+ersed and set aside the a!!ealed decision ordering the dismissal of the com!laintG the cancellation of the annotations of the enato?s 'ffida+it to 'nnul -ontract to #ell and -heng?s 5otice of 'd+erse -laim in the subAect T-T?s namely$ T-T 5o. T%30.180 (M) and T-T 5o. T%30.183 (M)G !ayment by the s!ouses of the remaining balance of the !urchase !rice !ursuant to their agreement with the enato to sus!end encashment of the three !ost%dated checCs issued since 18@8G e2ecution by the enato of the )eed of 'bsolute #ale o+er the subAect two lots in fa+or of the s!ousesG return by enato of the (;0$000.00 !aid to him by -hengG and !ayment by -heng of moral damages to the s!ouses of (100$000$ e2em!lary damages of (;0$000$ attorney?s fees of (;0$000$ and costs of suitG and to enato$ of (100$000 in e2em!lary damages$ (;0$000 in attorney?s fees. The amounts !ayable to enato may be com!ensated by -heng with the amount of the checC enato has to !ay -heng. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt denied the instant !etition for re+iew and affirmed the assailed decision en toto. ( Contract to sell? non-"ayment o& "urchase "rice not a breach :n a -ontract to #ell$ the !ayment of the !urchase !rice is a !ositi+e sus!ensi+e condition$ the failure of which is not a breach$ casual or serious$ but a situation that !re+ents the obligation of the +endor to con+ey title from ac9uiring an obligatory force. :t is one where the ha!!ening of the e+ent gi+es rise to an obligation. Thus$ for its non%fulfillment there will be no contract to s!eaC of$ the obligor ha+ing failed to !erform the sus!ensi+e condition which enforces a Auridical relation. :n fact with this circumstance$ there can be no rescission of an obligation that is still non%e2istent$ the sus!ensi+e condition not ha+ing occurred as yet. 2 ((.( <reach contem"lated in Article
The breach contem!lated in 'rticle 1181 of the 5ew -i+il -ode is the obligor?s failure to com!ly with an obligation already e2tant$ not a failure of a condition to render binding that obligation. 3 No de&ault can be ascribed to the s"ouses 5o default can be ascribed to the )a .ose s!ouses since the 30%day e2tension !eriod has not yet e2!ired. The )a .ose s!ouses? contention that no further condition was agreed when they were granted the 30% days e2tension !eriod from 3 6ctober 18@8 in connection with a clause of their contract to sell dated 0 #e!tember 18@8 should be u!held4 firstly$ :f this were not true$ enato could not ha+e been !ersuaded to continue his contract with them and later on agree to acce!t the full settlement of the !urchase !rice Cnowing fully well that he himself im!osed such sine 9ua non condition in order for the e2tension to be +alidG secondly$ enato could ha+e immediately annotated his affida+it to annul the contract to sell on his title when it was e2ecuted on 13 6ctober 18@8 and not only on 20 6ctober 18@8 after -heng reminded him of the annotationG thirdly$ enato could ha+e sent at least a notice of such fact$ there being no sti!ulation authorizing him for automatic rescission$ so as to finally clear the encumbrance on his titles and maCe it a+ailable to other would be buyers. :t liCewise settles the holding of the trial court that enato <needed money urgently.= * A&&idavit to annul contract uncalled &or? Conditional obli$ation does not e4ist i& sus"ensive condition does not take "lace B+en assuming in gratia argumenti that the )a .ose s!ouses defaulted$ in their -ontract to #ell$ the e2ecution by enato of the affida+it to annul the contract is not e+en called for. "or with or without the affida+it their non%!ayment to com!lete the full down!ayment of the !urchase !rice i!so facto a+oids their contract to sell$ it being subAected to a sus!ensi+e condition. >hen a contract is subAect to a sus!ensi+e condition$ its birth or effecti+ity can taCe !lace only if and when the e+ent which constitutes the condition
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ha!!ens or is fulfilled. :f the sus!ensi+e condition does not taCe !lace$ the !arties would stand as if the conditional obligation had ne+er e2isted. / Notice to other "arty re=uired to cancel contract? Act alBays "rovisional enato is not relie+ed from the gi+ing of a notice$ +erbal or written$ to the )a .ose s!ouses for his
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decision to rescind their contract. :n many cases$ e+en though the +alidity of a sti!ulation in a contract to sell authorizing automatic rescission for a +iolation of its terms and conditions is u!held$ at least a written notice must be sent to the defaulter informing him of the same. The act of a !arty in treating a contract as cancelled should be made Cnown to the other. "or such act is always !ro+isional. :t is always subAect to scrutiny and re+iew by the courts in case the alleged defaulter brings the matter to the !ro!er courts. 5 74tra@udicial ste"s to "rotect interest an e4ercise o& due dili$ence to minimi:e dama$es :n University of the Philippines vs. De Los Angeles$ it was held that the !arty who deems the contract +iolated may consider it resol+ed or rescinded$ and act accordingly$ without !re+ious court action$ but it !roceeds at its own risC. "or it is only the final Audgment of the corres!onding court that will conclusi+ely and finally settle whether the action taCen was or was not correct in law. /ut the law definitely does not re9uire that the contracting !arty who belie+es itself inAured must first file suit and wait for a Audgment before taCing e2traAudicial ste!s to !rotect its interest. 6therwise$ the !arty inAured by the other?s breach will ha+e to !assi+ely sit and watch its damages accumulate during the !endency of the suit until the final Audgment of rescission is rendered when the law itself re9uires that he should e2ercise due diligence to minimize its own damages (-i+il -ode. 'rticle 2203). , Notice re=uired to "revent de&aultin$ "arty &rom assumin$ o&&er still in e&&ect The rule +alidates$ both in e9uity and Austice$ contracts$ in order to a+oid and !re+ent the defaulting !arty from assuming the offer as still in effect due to the obligee?s tolerance for such non%fulfillment. 7esultantly$ litigations shall be !re+ented and the relations among would%be !arties may be !reser+ed. ) 8ssue not raised durin$ trial cannot be raised &or the &irst time on a""eal 'n issue which was not raised during the trial in the court below cannot be raised for the first time on a!!eal. :ssues of fact and arguments not ade9uately brought to the attention of the trial court need not be and ordinarily will not be considered by a re+iewing court as they cannot be raised for the first time on a!!eal. :n the !resent case$ -heng alleged that the (;0$000 was earnest money$ but in his testimony$ offered to !ro+e the transaction was actually a !erfected contract to sell. /oth courts correctly held that the recei!t which was the result of their agreement is a contract to sell. This was$ in fact -heng?s contention in his !leadings before said courts. The !atent twist only o!erates against -heng?s !osture which is indicati+e of the weaCness of his claim. . #ecei"t+ even i& a conditional contract o& sale does not have any obli$atory &orce B+en if it is assumed that the recei!t is to be treated as a conditional contract of sale$ it did not ac9uire any obligatory force since it was subAect to sus!ensi+e condition that the earlier contract to sell between enato and the )a .ose s!ouses should first be cancelled or rescinded$ a condition ne+er met$ as enato$ to his credit$ u!on realizing his error$ redeemed himself by res!ecting and maintaining his earlier contract with the )a .ose s!ouses. (0 #ecei"t does not contain re=uisites o& a valid contract o& sale ' careful reading of the recei!t alone would not e+en show that a conditional contract of sale has been entered by enato and -heng. >hen the re9uisites of a +alid contract of sale are lacCing in said recei!t$ therefore the <sale= is neither +alid or enforceable. (( Coronel vs CA not &ours=uare The factual milieu in -oronel is not on all fours with those in the !resent case. :n -oronel$ the -ourt found that the !etitioners therein clearly intended to transfer title to the buyer which !etitioner themsel+es
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admitted in their !leading. The agreement of the !arties therein was definiti+ely outlined in the <7ecei!t of )own (ayment= both as to !ro!erty$ the !urchase !rice$ the deli+ery of the seller of the !ro!erty and the manner of the transfer of title subAect to the s!ecific condition that u!on the transfer in their names of the subAect !ro!erty the -oronels will e2ecute the deed of absolute sale. >hereas$ in the !resent case$ e+en by a
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careful !erusal of the recei!t alone$ such Cind of circumstances cannot be ascertained without howe+er resorting to the e2ce!tions of the 7ule on (arol B+idence. (2 -ouble sale? Article (/** 'rticle 1;&& !ro+ides that <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in !ossessionG and in the absence thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith= (3 Article (/** is not a"ro"os to "resent case+ accordin$ to Court o& A""eals ' meticulous reading of the 'rticle 1;&& shows that said law is not a!ro!os to the !resent case. This !ro+ision connotes that the following circumstances must concur4 <(a) The two (or more) sales transactions in issue must !ertain to e2actly the same subAect matter$ and must be +alid sales transactions. (b) The two (or more) buyers at odds o+er the rightful ownershi! of the subAect matter must each re!resent conflicting interestsG and (c) The two (or more) buyers at odds o+er the rightful ownershi! of the subAect matter must each ha+e bought from the +ery same seller.= These situations ob+iously are lacCing in a contract to sell for neither a transfer of ownershi! nor a sales transaction has been consummated. The contract to be binding u!on the obligee or the +endor de!ends u!on the fulfillment or non%fulfillment of an e+ent. (/ ri$ht Article (/** a""lies in the "resent case+ accordin$ to Su"reme CourtH 3irst in time+ stron$er in
The go+erning !rinci!le of 'rticle 1;&&$ -i+il -ode$ a!!lies in the !resent situation. .uris!rudence teaches us that the go+erning !rinci!le is (7:M*# TBM(67B$ (67T:67 .*7B (first in time$ stronger in right). "or not only was the contract between enato and the s!ouses first in timeG it was also registered long before -heng?s intrusion as a second buyer. This !rinci!le only a!!lies when the s!ecial rules !ro+ided in 'rticle 1;&& of the -i+il -ode do not a!!ly or fit the s!ecific circumstances mandated under said law or by Auris!rudence inter!reting the article. (5 Article (/**+ HoB second buyer can dis"lace &irst buyer The rule e2acted by 'rticle 1;&& of the -i+il -ode for the second buyer to be able to dis!lace the first buyer are4 (1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the first sale and of the first buyer?s rights) from the time of ac9uisition until title is transferred to him by registration or failing registration$ by deli+ery of !ossessionG (2) the second buyer must show continuing good faith and innocence or lacC of Cnowledge of the first sale until his contract ri!ens into full ownershi! through !rior registration as !ro+ided by law. :n the !resent case$ Cnowledge gained by -heng of the first transaction between the )a .ose s!ouses and enato defeats his rights e+en if he is first to register the second transaction$ since such Cnowledge taints his !rior registration with bad faith. (, >noBled$e o& &irst buyer o& the second transaction does not de&eat his ri$hts The Cnowledge gained by the )a .ose s!ouses$ as first buyers$ of the new agreement between -heng and enato will not defeat their rights as first buyers e2ce!t where -heng$ as second buyer$ registers or annotates his transaction or agreement on the title of the subAect !ro!erties in good faith ahead of the )a .ose s!ouses. Moreo+er$ although the )a .ose s!ouses$ as first buyers$ Cnew of the second transaction it will not bar them from a+ailing of their rights granted by law$ among them$ to register first their agreement as against the second buyer.
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()
#e$istration de&ined <7egistration=$ as defined by #oler and -astillo$ means any entry made in the booCs of the registry$ including both registration in its ordinary and strict sense$ and cancellation$ annotation$ and e+en marginal
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notes. :n its strict acce!tation$ it is the entry made in the registry which records solemnly and !ermanently the right of ownershi! and other real rights. (. 8nscri"tion o& -eed o& Sale in re$istry o& "ro"erty on ori$inal document a re$istration o& sale >hen a )eed of #ale is inscribed in the registry of !ro!erty on the original document itself$ what was done with res!ect to said entries or annotations and marginal notes amounted to a registration of the sale. :n the !resent case$ there is no reason why the annotation made by the )a .ose s!ouses with res!ect to their -ontract to #ell dated 0 #e!tember 18@8 should not be gi+en !riority in right. 20 Good &aith in re$istration &or ri$ht to be en&orceable ood faith must concur with registration for such !rior right to be enforceable. :n the !resent case$ the annotation made by the )a .ose s!ouses on the titles of enato of their <-ontract To #ell= more than satisfies this re9uirement. >hereas in the case of enato?s agreement with -heng such is una+ailing. "or e+en before the recei!t was issued to -heng information of such !re%e2isting agreement has been brought to his Cnowledge which did not deter him from !ursuing his agreement with enato. #ince -heng was fully aware$ or could ha+e been if he had chosen to in9uire$ of the rights of the )a .ose s!ouses under the -ontract to #ell duly annotated on the T-Ts of enato$ it becomes unnecessary to further elaborate in detail the fact that he is indeed in bad faith in entering into such agreement. 2( >noBled$e o& de&ect in tile cannot claim $ood &aith a$ainst another interest :n ,eung Fee +s. " . , . #trong Machinery -o.$ it was stated that <6ne who !urchases real estate with Cnowledge of a defect of title in his +endor cannot claim that he has ac9uired title thereto in good faith as against an interest thereinG and the same rule must be a!!lied to one who has Cnowledge of facts which should ha+e !ut him u!on such in9uiry and in+estigation as might be necessary to ac9uaint him with the defects in the title of his +endor. ' !urchaser cannot close his eyes to facts which should !ut a reasonable man u!on his guard$ and then claim that he acted in good faith under the belief that there was no defect in the title of the +endor. 1is mere refusal to belie+e that such defect e2ists$ or his willful closing of his eyes to the !ossibility of the e2istence of a defect in his +endor?s title$ will not maCe him an innocent !urchaser for +alue$ if it afterwards de+elo!s that the title was in fact defecti+e$ and it a!!ears that he had such notice of the defect as would ha+e led to its disco+ery had he acted with that measure of !recaution which may reasonably be re9uired of a !rudent man in a liCe situation. ood faith$ or lacC of it$ is in its last analysis a 9uestion of intentionG but in ascertaining the intention by which one is actuated on a gi+en occasion$ we are necessarily controlled by the e+idence as to the conduct and outward acts by which alone the inward moti+e may$ with safety$ be determined. #o it is that Hthe honesty of intention$? Hthe honest lawful intent$? which constitutes good faith im!lies a Hfreedom from Cnowledge and circumstances which ought to !ut a !erson on in9uiry$? and so it is that !roof of such Cnowledge o+ercomes the !resum!tion of good faith in which the courts always indulge in the absence of the !roof to the contrary. ood faith$ or the want of it$ is not a +isible$ tangible fact that can be seen or touched$ but rather a state or condition of mind which can only be Audge of by actual or fancied toCens or signs.= (>ilder +s. ilman$ ;; Vt. ;0&$ ;0;G -f. -ardenas +s. Miller$ 10@ -al.$ 2;0G /reau2% 7enoudet$ -y!ress ,umber -o. +s. #hadel$ ;2 ,a. 'nn.$ 208&%208@G (inCerton /ros. -o. +s. /romely$ 118 Mich.$ @$ 10$ 13) 22 <ad &aith basis &or dama$es )amages were awarded by the a!!ellate court on the basis of its finding that -heng <was in bad faith when he filed the suit for s!ecific !erformance Cnowing fully well that his agreement with enato did not !ush through.= #uch bad faith$ cou!led with his wrongful interference with the contractual relations between enato and the )a .ose s!ouses$ which culminated in his filing of the !resent suit and thereby creating what the counsel for enato and the s!ouses describes as <a !rolonged and economically unhealthy gridlocC= on both the land itself and their rights !ro+ides am!le basis for the damages awarded. /ased on these o+erwhelming e+idence of bad faith on the !art of -heng$ the award of damages made by the a!!ellate court is in order.
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'(.0 C8# v 7n$ineerin$ 7=ui"ment and Su""ly 'G # No ;-2,0** 6une 30+ (.,/ 0 Enginee#ing E9ui,6ent an8 Su,,ly v. C-R [;.R. 7o. 522$402. :une 30, %'$0.] "irst )i+ision$ Bsguerra (.)4 & concurring 3actsH Bngineering B9ui!ment and #u!!ly -o. is an engineering and machinery firmG and being an o!erator of an integrated engineering shi!$ is engaged in the design and installation of central ty!e air conditioning system$ !um!ing !lants and steel fabrications. 6n 23 .uly 18;0$ one .uan de la -ruz$ wrote the then -ollector$ now -ommissioner$ of :nternal 7e+enue denouncing the -om!any for ta2 e+asion by misdeclaring its im!orted articles and failing to !ay the correct !ercentage ta2es due thereon in conni+ance with its foreign su!!liers. The -om!any was liCewise denounced to the -entral /anC for alleged fraud in obtaining its dollar allocations. 'cting on these denunciations$ a raid and search was conducted by a Aoint team of -entral /anC$ (-/)$ 5ational /ureau of :n+estigation (5/:) and /ureau of :nternal 7e+enue (/:7) agents on 23 #e!tember 18;0$ on which occasion +oluminous records of the firm were seized and confiscated. 6n 30 #e!tember 18;3$ re+enue e2aminers re!orted and recommended to the then -ollector$ now -ommissioner$ of :nternal 7e+enue that the -om!any be assessed for (&@0$812.01 as deficiency ad+ance sales ta2 on the theory that it misdeclared its im!ortation of air conditioning units and !arts and accessories thereof which are subAect to ta2 under #ection 1@;(m) 1 of the Ta2 -ode$ instead of #ection 1@0 of the same -ode. This assessment was re+ised on 23 .anuary 18;8$ in line with the obser+ation of the -hief$ /:7 ,aw )i+ision$ and was raised to (810$302.;0 re!resenting deficiency ad+ance sales ta2 and manufacturers sales ta2$ inclusi+e of the 2;I and ;0I surcharges. 6n 3 March 18;8$ the -ommissioner assessed against$ and demanded u!on$ the -om!any !ayment of the increased amount and suggested that (10$000 be !aid as com!romise in e2traAudicial settlement of the -om!any?s !enal liability for +iolation of the Ta2 -ode. The firm$ howe+er$ contested the ta2 assessment and re9uested that it be furnished with the details and !articulars of the -ommissioner?s assessment. The -ommissioner re!lied that the assessment was in accordance with law and the facts of the case. 6n 30 .uly 18;8$ the -om!any a!!ealed the case to the -ourt of Ta2 '!!eals (-T') and during the !endency of the case the in+estigating re+enue e2aminers reduced the -om!any?s deficiency ta2 liabilities from (810$302.0; to (3&0$;@3.@0$ based on findings after conferences had with the -om!any?s 'ccountant and 'uditor. 6n 28 5o+ember 1800$ the -T' rendered its decision$ modifying the decision a!!ealed from$ declaring the -om!any as contractor e2em!t from the deficiency manufacturers sales ta2 co+ering the !eriod from 1 .une 18&@ to 2 #e!tember 18;0 but ordered said com!any to !ay the -ommissioner$ or his collection agent$ the sum of (13&$1&1.02 as com!ensating ta2 and 2;I surcharge for the !eriod from 18;3 to #e!tember 18;0G >ith costs against the -om!any. The -ommissioner$ not satisfied with the decision of the -T'$ a!!ealed to the #u!reme -ourt on 1@ .anuary 1803$ ( 7 ,%230&&). 6n the other hand$ the -om!any$ on & .anuary 1803$ filed with the -T' a motion for reconsiderationG which was denied on 0 '!ril 1803$ !rom!ting the -om!any to file also with the #u!reme -ourt its a!!eal ( 7 ,%23&;2). #ince the two cases in+ol+e the same !arties and issues$ the -ourt decided to consolidate and Aointly decide them. The #u!reme -ourt affirmed the decision a!!ealed from with modification that the -om!any is also made liable to !ay the ;0I fraud surcharge.
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Manu&acturer de&ined #ection 18& of the Ta2 code !ro+ides that <?Manufacturer? includes e+ery !erson who by !hysical or chemical !rocess alters the e2terior te2ture or form or inner substance of any raw material or manufactured or
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!artially manufactured !roducts in such manner as to !re!are it for a s!ecial use or uses to which it could not ha+e been !ut in its original condition$ or who by any such !rocess alters the 9uality of any such material or manufactured or !artially manufactured !roduct so as to reduce it to marCetable sha!e$ or !re!are it for any of the uses of industry$ or who by any such !rocess combines any such raw material or manufactured or !artially manufactured !roducts with other materials or !roducts of the same or of different Cinds and in such manner that the finished !roduct of such !rocess of manufacture can be !ut to s!ecial use or uses to which such raw material or manufactured or !artially manufactured !roducts in their original condition could not ha+e been !ut$ and who in addition alters such raw material or manufactured or !artially manufactured !roducts$ or combines the same to !roduce such finished !roducts for the !ur!ose of their sale or distribution to others and not for his own use or consum!tion.= 2 %est to distin$uish contract o& sale and contract &or Bork+ labor and materials The distinction between a contract of sale and one for worC$ labor and materials is tested by the in9uiry whether the thing transferred is one not in e2istence and which ne+er would ha+e e2isted but for the order of the !arty desiring to ac9uire it$ or a thing which would ha+e e2isted and has been the subAect of sale to some other !ersons e+en if the order had not been gi+en. :f the article ordered by the !urchaser is e2actly such as the !laintiff maCes and Cee!s on hand for sale to anyone$ and no change or modification of it is made at defendant?s re9uest$ it is a contract of sale$ e+en though it may be entirely made after$ and in conse9uence of$ the defendants order for it. 3 Contract o& sale distin$uished &rom a contract &or a "iece o& Bork The 5ew -i+il -ode distinguishes a contract of sale from a contract for a !iece of worC. 'rticle 1&03 !ro+ides that <a contract for the deli+ery at a certain !rice of an article which the +endor in the ordinary course of his business manufactures or !rocures for the general marCet$ whether the same is on hand at the time or not$ is a contract of sale$ but if the goods are to be manufactured s!ecially for the customer and u!on his s!ecial order and not for the general marCet$ it is a contract for a !iece of worC.= * Contractor de&ined? %est to determine contractor The word <contractor= has come to be used with s!ecial reference to a !erson who$ in the !ursuit of the inde!endent business$ undertaCes to do a s!ecific Aob or !iece of worC for other !ersons$ using his own means and methods without submitting himself to control as to the !etty details. &A#aCas, Annotations an8 :u#is,#u8ence on t+e 7ational -nte#nal Revenue Co8e, ,. 3%8, ,a#. %'%&2(, %'$0 E8.( The true test of a contractor as was held in the cases of 5uzon Steve8o#ing Co., vs. #ini8a8 43, *+il. 803, 80$2808, an8 5a Ca#lota Suga# Cent#al vs. #ini8a8 43, *+il. 8%1, 8%', would seem to be that he renders ser+ice in the course of an inde!endent occu!ation$ re!resenting the will of his em!loyer only as to the result of his worC$ and not as to the means by which it is accom!lished. / 7n$ineerin$ 7=ui"ment Co is a contractor and not a manu&acturer The -om!any did not manufacture air conditioning units for sale to the general !ublic$ but im!orted some items (as refrigeration com!ressors in com!lete set$ heat e2changers or coils)$ which were used in e2ecuting contracts entered into by it. The -om!any fabricates$ assembles$ su!!lies and installs in the buildings of its +arious customers the central ty!e air conditioning systemG !re!ares the !lans and s!ecifications therefor which are distinct and different from each otherG the air conditioning units and s!are !arts or accessories thereof used are not the window ty!e of air conditioner which are manufactured$ assembled and !roduced locally for sale to the general marCetG and the im!orted air conditioning units and s!are !arts or accessories thereof are su!!lied and installed u!on !re+ious orders of its customers conformably with their needs and re9uirements.= The facts and circumstances su!!ort the theory that the -om!any is a contractor rather than a manufacturer. 5 7n$ineerin$ 7=ui"ment Co sub@ect to contractors ta4 FSection (.(G? As it im"orts $oods not
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sub@ect to sales ta4+ it also liable to 30N com"ensation ta4 FSection (.0 in relation to Section ()'m0+ but Bithout the /0N mark u" "rovided in Section ()3'b0
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The -om!any$ being a contractor and not a manufacturer$ is subAect to the contractors ta2 !rescribed by #ection 181 of the -ode and not to the ad+ance sales ta2 im!osed by #ection 1@;(m) in relation to #ection 18& of the same -ode. #ince it has been !ro+ed that the -om!any im!orted air conditioning units !arts or accessories thereof for use in its construction business and these items were ne+er sold resold bartered or e2changed the -om!any should be held liable to !ay ta2es !rescribed under #ection 180 of the -ode. This com!ensating ta2 is not a ta2 on the im!ortation of goods but a ta2 on the use of im!orted goods not subAect to sales ta2. The -om!any$ therefore$ should be held liable to the !ayment of 30I com!ensating ta2 in accordance with #ection 180 of the Ta2 -ode in relation to #ection 1@;(m) of the same$ but without the ;0I marC u! !ro+ided in #ection 1@3(b). , Air conditionin$ e=ui"ment $rou"ed into 2 classi&ications+ unitary and central system There is a great +ariety of e9ui!ment in use to do air conditioning. #ome de+ices are designed to ser+e a s!ecific ty!e of s!aceG others to !erform a s!ecific functionG and still others as com!onents to be assembled into a tailor%made system to fit a !articular building. enerally$ howe+er$ they may be grou!ed into two classifications$ unitary and central system. The unitary e9ui!ment classification includes those designs such as room air conditioner$ where all of the functional com!onents are included in one or two !acCages$ and installation in+ol+es only maCing ser+ice connection such as electricity$ water and drains. -entral%station systems$ often referred to as a!!lied or built%u! systems$ re9uire the installation of com!onents at different !oints in a building and their interconnection. The room air conditioner is a unitary e9ui!ment designed s!ecifically for a room or similar small s!ace. :t is uni9ue among air conditioning e9ui!ment in two res!ects4 :t is in the electrical a!!liance classification$ and it is made by a great number of manufacturers (Bngineering handbooC by ,- Morrow). The central ty!e air conditioning system is an engineering Aob that re9uires !lanning and meticulous layout due to the fact that usually architects assign definite s!ace and usually the s!aces they assign are +ery small and of +arious sizes$ in buildings dissimilar to e2isting buildings. The window ty!e air conditioner is a sort of com!romiseG it cannot control humidity to the desired le+elG rather the manufacturers$ by hit and miss$ were able to satisfy themsel+es that the desired comfort within a room could be made by a definite setting of the machine as it comes from the factoryG whereas the central ty!e system definitely re9uires an intelligent o!erator. ) Celestino Co v C8#+ Advertisin$ Associates v Collector o& customs+ Manila %radin$ v City o& Manila not a""licable The -om!any did not and was not engaged in the manufacture of air conditioning units but had its ser+ices contracted for the installation of a central system. The cases cited by the -ommissioner ('d+ertising 'ssociates$ :nc. +s. -ollector of -ustoms$ 83$ (hil. 030G -elestino -o Q -o. +s. -ollector of :nternal 7e+enue$ 88 (hil. @&1 and Manila Trading Q #u!!ly -o. +s. -ity of Manila$ ;0 6. . 3028)$ are not in !oint. 5either are they a!!licable because the facts in all the cases cited are entirely different. :n -elestino -o$ the -ourt held the ta2!ayer to be a manufacturer rather than a contractor of sash$ doors and windows manufactured in its factory. "rom the +ery start$ -elestino -o intended itself to be a manufacturer of doors$ windows$ sashes etc. as it did register a s!ecial trade name for its sash business and ordered com!any stationery carrying the bold !rint <67:B5T', #'#1 "'-T67F (-B,B#T:56 -6 '5) -6M('5F$ (76(.) 820 7aon #t.$ Uuia!o$ Manila$ Tel. 5o. etc.$ Manufacturers of 'll Einds of )oors$ >indows . . .= ,iCewise$ -elestino -o ne+er !ut u! a contractor?s bond as re9uired by 'rticle 1328 of the -i+il -ode. 'lso$ as a general rule$ sash factories recei+e orders for doors and windows of s!ecial design only in !articular cases$ but the bulC of their sales is deri+ed from ready%made doors and windows of standard sizes for the a+erage home$ which <sales= were reflected in their booCs of accounts totalling (11@$3;&.08 for the
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!eriod of only nine (8) months. The -ourt found said sum difficult to ha+e been deri+ed from its few customers who !laced s!ecial orders for these items. :n the !resent case$ the -om!any ad+ertised itself as Bngineering B9ui!ment and #u!!ly -om!any$ Machinery Mechanical #u!!lies$ Bngineers$ -ontractors$ 13& Mar9ues de -omillas$ Manila and not as manufacturers. :t liCewise !aid the contractors ta2 on all the contracts for the design and construction of central system. #imilarly$ ot did not ha+e ready%made air conditioning units for sale.
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. SM ;aBrence Co v Mc3arland+ C8# o& the State o& %ennessee and McCanless is on all &ours Bith "resent case The case of #.M. ,awrence -o. +s. Mc"arland$ -ommissioner of :nternal 7e+enue of the #tate of Tennessee and Mc-anless$ 3;; #> 2d$ 100$ 101$ is the one on all fours with the !resent case$ <where the cause !resents the 9uestion of whether one engaged in the business of contracting for the establishment of air conditioning system in buildings$ which worC re9uires$ in addition to the furnishing of a cooling unit$ the connection of such unit with electrical and !lumbing facilities and the installation of ducts within and through walls$ ceilings and floors to con+ey cool air to +arious !arts of the building$ is liable for sale or use ta2 as a contractor rather than a retailer of tangible !ersonal !ro!erty. '!!ellee tooC the !osition that a!!ellant was not engaged in the business of selling air conditioning e9ui!ment as such but in the furnishing to its customers of com!leted air conditioning systems !ursuant to contract$ was a contractor engaged in the construction or im!ro+ement of real !ro!erty$ and as such was liable for sales or use ta2 as the consumer of materials and e9ui!ment used in the consummation of contracts$ irres!ecti+e of the ta2 status of its contractors. To transmit the warm or cool air o+er the buildings$ the a!!ellant installed system of ducts running from the basic units through walls$ ceilings and floors to registers. The contract called for com!leted air conditioning systems which became !ermanent !art of the buildings and im!ro+ements to the realty.= The -ourt held the a!!ellant a contractor which used the materials and the e9ui!ment u!on the +alue of which the ta2 herein im!osed war le+ied in the !erformance of its contracts with its customers$ and that the customers did not !urchase the e9ui!ment and ha+e the same installed. (0 7n$ineerin$ 7=ui"ment had intent to misdeclare its im"ortation as evidenced by its communications? Com"any liable to /0N &raud surchar$e The communications (between the -om!any and +arious su!!liers such as Trane -o.$ 'cme :ndustries :nc.$ and 6wens%-orning "iberglass -or!.) !resented as e2hibits in the case were strongly indicati+e of the fraudulent intent of the -om!any to misdeclare its im!ortation of air conditioning units and s!are !arts or accessories thereof to e+ade !ayment of the 30I ta2. #ince the commission of fraud is altogether too glaring$ the -ourt cannot agree with the -T' in absol+ing the -om!any from the ;0I fraud surcharge$ otherwise it will be tantamount to gi+ing !remium to a !lainly intolerable act of ta2 e+asion. (( Com"any liable to 2/N com"ensation ta4? Section (.0 as amended The original te2t of #ection 180 of -ommonwealth 'ct &00$ otherwise Cnow as the 5ational :nternal 7e+enue -ode$ as amended by -' ;03$ effecti+e on 1 6ctober 1838$ does not !ro+ide for the filing of a com!ensating ta2 return and !ayment of the 2;I surcharge for late !ayment thereof. *nder the original te2t of #ection 180 of the Ta2 -ode$ as amended by -' ;03$ the contention of the -om!any that it is not subAect to the 2;I surcharge a!!ears to be legally tenable. 1owe+er$ #ection 180 of the Ta2 -ode was subse9uently amended by 7' &@$ 2;3$ 301$ 1;11 and 1012 effecti+e 1 6ctober 18&0$ 1 .uly 18&@$ 8 .une 18&8$ 10 .une 18;0 and 2& 'ugust 18;0 res!ecti+ely$ which in+ariably !ro+ides among others$ that <if any article withdrawn from the customhouse or the !ost office without !ayment of the com!ensating ta2 is subse9uently used by the im!orter for other !ur!oses corres!onding entry should be made in the looCs of accounts if any are Ce!t or a written notice thereof sent to the -ollector of :nternal 7e+enue and !ayment of the corres!onding com!ensating ta2 made within 30 days from the date of such entry or notice and if ta2 is not !aid within such !eriod the amount of the ta2 shall be increased by 2;I the increment to be a !art of the ta2$= and that <since the im!orted air conditioning units and s!are !arts or accessories thereof are subAect to the com!ensating ta2 of 30I as the same were used in the construction business of Bngineering$ it is incumbent u!on the latter to com!ly with the afore9uoted re9uirement of #ection 180 of the -ode$ by !osting in its booCs of accounts or notifying the -ollector of :nternal 7e+enue that the im!orted articles were used for other !ur!oses within 30 days. . . . -onse9uently$ as the 30I com!ensating ta2 was not !aid by !etitioner within the time !rescribed by #ection 180 of the Ta2 -ode as amended$ it is therefore subAect to the 2;I surcharge for delin9uency in the !ayment of the said ta2.=
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(2 !rescri"tion not yet set in? !rescri"tion o& ta4 assessment is (0 years i& based on &alse or &raudulent return to evade ta4 ' re+iew of the record re+eals that the -om!any filed a ta2 return or declaration with the /ureau of -ustoms before it !aid the ad+ance sales ta2 of 3I$ and the declaration filed re+eals that it did in fact misdeclare its im!ortations. #ection 332 (a) of the Ta2 -ode therefore is a!!licable. #ection 332 (a) !ro+ides for the e2ce!tions as to !eriod of limitation of assessment and collection of ta2es$ !ro+iding that <(a) in the case of a false or fraudulent return with intent to e+ade ta2 or of a failure to file a return$ the ta2 may be assessed$ or a !roceeding in court for the collection of such ta2 may be begun without assessment at any time within ten years after the disco+ery of the falsity$ fraud or omission.= Thus$ considering the !re!onderance of e+idence of fraud with the intent to e+ade the higher rate of !ercentage ta2 due from the -om!any$ the ta2 assessment was made within the !eriod !rescribed by law and !rescri!tion had not set in against the o+ernment. '200 Coronel v CA 'G # No (03/,, 2ctober ,+ (..5 0 Third di+ision$ Melo (.)4 3 concurring$ 1 tooC no !art 3actsH 6n 18 .anuary 18@;$ 7omulo -oronel$ et al. e2ecuted a document entitled <7ecei!t of )own (ayment= in fa+or of 7amona (atricia 'lcaraz for (;0$000 down!ayment of the total amount of (1.2&M as !urchase !rice for an inherited house and lot (T-T 118023$ 7egistry of )eeds of Uuezon -ity)$ !romising to e2ecute a deed of absolute sale of said !ro!erty as soon as such has been transferred in their name. The balance of (1.18M is due u!on the e2ecution of said deed. 6n the same date$ -once!cion ). 'lcaraz$ mother of 7amona$ !aid the down !ayment of (;0$000.00. 6n 0 "ebruary 18@;$ the !ro!erty originally registered in the name of the -oronels? father was transferred in their names (T-T 3230&3). 1owe+er$ on 1@ "ebruary 18@;$ the -oronels sold the !ro!erty to -atalina /. Mabanag for (1$;@0$000.00 after the latter has !aid (300$000.00. "or this reason$ -oronels canceled and rescinded the contract with 'lcaraz by de!ositing the down !ayment in the banC in trust for 'lcaraz. 6n 22 "ebruary 18@;$ 'lcaraz filed a com!laint for s!ecific !erformance against the -oronels and caused the annotation of a notice of lis !endens at the bacC of T-T 323&03. 6n 2 '!ril 18@;$ Mabanag caused the annotation of a notice of ad+erse claim co+ering the same !ro!erty with the 7egistry of )eeds of Uuezon -ity. 6n 2; '!ril 18@;$ the -oronels e2ecuted a )eed of 'bsolute #ale o+er the subAect !ro!erty in fa+or of Mabanag. 6n ; .une 18@;$ a new title o+er the subAect !ro!erty was issued in the name of Mabanag under T-T 3;1;@2. :n the course of the !roceedings$ the !arties agreed to submit the case for decision solely on the basis of documentary e2hibits. *!on submission of their res!ecti+e memoranda and the corres!onding comment or re!ly thereto$ and on 1 March 18@8$ Audgment was handed down in fa+or of the !laintiffs$ ordering the defendant to e2ecute a deed of absolute sale of the land co+ered by T-T 323&03 and canceling T-T 331;@2 and declaring the latter without force and effect. -laims for damages by !laintiffs and counterclaims by the defendants and inter+enors were dismissed. ' motion for reconsideration was thereafter filed$ which was denied. (etitioners inter!osed an a!!eal$ but on 10 )ecember 1881$ the -' rendered its decision fully agreeing with the trial court. 1ence$ the instant !etition. The #u!reme -ourt dismissed the !etition and affirmed the a!!ealed Audgment.
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#ecei"t o& doBn"ayment a bindin$ contract? Meetin$ o& the minds The document embodied the binding contract between 7amona (atricia 'lcaraz and the heirs of
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-onstancio (. -oronel$ !ertaining to a !articular house and lot co+ered by T-T 118023$ as defined in 'rticle 130; of the -i+il -ode of the (hili!!ines. 2 -e&inition o& contract o& sale The -i+il -ode defines a contract of sale$ in Article 1458$ as <one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determinate thing$ and the other to !ay therefor a !rice certain in money or its e9ui+alent.= #ale$ thus$ by its +ery nature a consensual contract because it is !erfected by mere consent. 3 7lements o& contract o& sale? Contract to sell not contract o& sale due to the lack o& &irst element? -istinction necessary Bhen "ro"erty is sold to a third "erson The essential elements of a contract of sale are (a) -onsent or meeting of the minds$ that is$ consent to transfer ownershi! in e2change for the !riceG (b) )eterminate subAect matterG and (c) (rice certain in money or its e9ui+alent. ' -ontract to #ell may not be considered as a -ontract of #ale because the first essential element is lacCing. :t is essential to distinguish between a contract to sell and a conditional contract of sale s!ecially in cases where the subAect !ro!erty is sold by the owner not to the !arty the seller contracted with$ but to a third !erson. * Contract to sellH Seller a$rees to sell "ro"erty Bhen "urchase "rice is delivered to him? seller reserves trans&er o& title until &ul&illment o& sus"ensive condition F"aymentG :n a contract to sell$ the !ros!ecti+e seller e2!licitly reser+es the transfer of title to the !ros!ecti+e buyer$ meaning$ the !ros!ecti+e seller does not as yet agree or consent to transfer ownershi! of the !ro!erty subAect of the contract to sell until the ha!!ening of an e+ent$ which for !resent !ur!oses taCen to be the full !ayment of the !urchase !rice. >hat the seller agrees or obliges himself to do is to fulfill his !romise to sell the subAect !ro!erty when the entire amount of the !urchase !rice is deli+ered to him. :n other words the full !ayment of the !urchase !rice !artaCes of a sus!ensi+e condition$ the non%fulfillment of which !re+ents the obligation to sell from arising and thus$ ownershi! is retained by the !ros!ecti+e seller without further remedies by the !ros!ecti+e buyer. / Contract to sellH &ailure to deliver "ayment is not a breach but event "reventin$ vendor to convey title? obli$ation demandable u"on &ull "ayment o& "rice? "romise bindin$ i& su""orted by "ayment distinct &rom the "rice >hen a contract is a contract to sell where the ownershi! or title is retained by the seller and is not to !ass until the full !ayment of the !rice$ such !ayment being a !ositi+e sus!ensi+e condition and failure of which is not a breach$ casual or serious$ but sim!ly an e+ent that !re+ented the obligation of the +endor to con+ey title from ac9uiring binding force &Ro9ue v. 5a,uz(. *!on the fulfillment of the sus!ensi+e condition which is the full !ayment of the !urchase !rice$ the !ros!ecti+e seller?s obligation to sell the subAect !ro!erty by entering into a contract of sale with the !ros!ecti+e buyer becomes demandable as !ro+ided in Article 1479 of the -i+il -ode (<' !romise to buy and sell a determinate thing for a !rice certain is reci!rocally demandable.=) 'n acce!ted unilateral !romise to buy or to sell a determinate thing for a !rice certain is binding u!on the !romissor if the !romise is su!!orted by a consideration distinct from the !rice. 5 Contract to sell de&ined ' contract to sell be defined as a bilateral contract whereby the !ros!ecti+e seller$ while e2!ressly reser+ing the ownershi! of the subAect !ro!erty des!ite deli+ery thereof to the !ros!ecti+e buyer$ binds himself to sell the said !ro!erty e2clusi+ely to the !ros!ecti+e buyer u!on fulfillment of the condition agreed u!on$ that is$ full !ayment of the !urchase !rice.
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Contract to sell not a conditional contract o& sale Fe4istence o& &irst elementG ' contract to sell may not e+en be considered as a conditional contract of sale where the seller may liCewise reser+e title to the !ro!erty subAect of the sale until the fulfillment of a sus!ensi+e condition$ because
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in a conditional contract of sale$ the first element of consent is !resent$ although it is conditioned u!on the ha!!ening of a contingent e+ent which may or may not occur. ) Conditional contract o& saleH i& sus"ensive condition not &ul&illed+ "e&ection abated? i& &ul&illed+ contract o& sale "er&ected and oBnershi" automatically trans&ers to buyer :f the sus!ensi+e condition is not fulfilled$ the !erfection of the contract of sale is com!letely abated &c". Bo6esite an8 Bousing Co#,. vs. Cou#t o" A,,eals, %33 SCRA $$$ [%'84]( . 1owe+er$ if the sus!ensi+e condition is fulfilled$ the contract of sale is thereby !erfected$ such that if there had already been !re+ious deli+ery of the !ro!erty subAect of the sale to the buyer$ ownershi! thereto automatically transfers to the buyer by o!eration of law without any further act ha+ing to be !erformed by the seller. . Contract to sellH i& sus"ensive condition &ul&illed+ seller has still to convey title even i& "ro"erty is "reviously delivered :n a contract to sell$ u!on the fulfillment of the sus!ensi+e condition which is the full !ayment of the !urchase !rice$ ownershi! will not automatically transfer to the buyer although the !ro!erty may ha+e been !re+iously deli+ered to him. The !ros!ecti+e seller still has to con+ey title to the !ros!ecti+e buyer by entering into a contract of absolute sale. (0 Contract to sellH there is no double sale? i& "ro"erty sold to another+ the seller may be sued &or dama$es :n a contract to sell$ there being no !re+ious sale of the !ro!erty$ a third !erson buying such !ro!erty des!ite the fulfillment of the sus!ensi+e condition such as the full !ayment of the !urchase !rice$ for instance$ cannot be deemed a buyer in bad faith and the !ros!ecti+e buyer cannot seeC the relief of recon+eyance of the !ro!erty. There is no double sale in such case. Title to the !ro!erty will transfer to the buyer after registration because there is no defect in the owner%seller?s title !er se$ but the latter$ of course$ may be sued for damages by the intending buyer. (( Conditional contract o& saleH sale becomes absolute u"on &ul&illment o& condition? i& "ro"erty sold to another+ &irst buyer may seek reconveyance :n a conditional contract of sale$ u!on the fulfillment of the sus!ensi+e condition$ the sale becomes absolute and this will definitely affect the seller?s title thereto. :n fact$ if there had been !re+ious deli+ery of the subAect !ro!erty$ the seller?s ownershi! or title to the !ro!erty is automatically transferred to the buyer such that$ the seller will no longer ha+e any title to transfer to any third !erson. '!!lying Article 1544 of the -i+il -ode$ such second buyer of the !ro!erty who may ha+e had actual or constructi+e Cnowledge of such defect in the seller?s title$ or at least was charged with the obligation to disco+er such defect$ cannot be a registrant in good faith. #uch second buyer cannot defeat the first buyer?s title. :n case a title is issued to the second buyer$ the first buyer may seeC recon+eyance of the !ro!erty subAect of the sale. (2 8nter"retation o& contracts+ natural and meanin$ o& Bords unless technical meanin$ Bas intended :t is a canon in the inter!retation of contracts that the words used therein should be gi+en their natural and ordinary meaning unless a technical meaning was intended & an vs. Cou#t o" A,,eals, 2%2 SCRA 081 [%''2](. (3 -ocument entitled I#ecei"t o& -oBn !aymentK indicates Conditional Contract o& Sale and not contract to sell The agreement could not ha+e been a contract to sell because the sellers made no e2!ress reser+ation
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of ownershi! or title to the subAect !arcel of land. "urthermore$ the circumstance which !re+ented the !arties from entering into an absolute contract of sale !ertained to the sellers themsel+es (the certificate of title was not in their names) and not the full !ayment of the !urchase !rice. *nder the established facts and circumstances of the case$ had the certificate of title been in the names of !etitioners%sellers at that time$ there
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would ha+e been no reason why an absolute contract of sale could not ha+e been e2ecuted and consummated right there and then. Moreo+er$ unliCe in a contract to sell$ !etitioners did not merely !romise to sell the !ro!erty to !ri+ate res!ondent u!on the fulfillment of the sus!ensi+e condition. 6n the contrary$ ha+ing already agreed to sell the subAect !ro!erty$ they undertooC to ha+e the certificate of title changed to their names and immediately thereafter$ to e2ecute the written deed of absolute sale. >hat is clearly established by the !lain language of the subAect document is that when the said <7ecei!t of )own (ayment= was !re!ared and signed by !etitioners$ the !arties had agreed to a conditional contract of sale$ consummation of which is subAect only to the successful transfer of the certificate of title from the name of !etitioners? father to their names. The sus!ensi+e condition was fulfilled on 0 "ebruary 18@; and thus$ the conditional contract of sale between the !arties became obligatory$ the only act re9uired for the consummation thereof being the deli+ery of the !ro!erty by means of the e2ecution of the deed of absolute sale in a !ublic instrument$ which !etitioners une9ui+ocally committed themsel+es to do as e+idenced by the <7ecei!t of )own (ayment.= (* Article (*,/ and (()( a""lies to "resent case? !er&ection o& a contract o& sale and Conditional obli$ation based on the ha""enin$ o& the event Article 1475 of the 5ew -i+il -ode !ro+ides that <the contract of sale is !erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice.= "rom that moment$ the !arties may reci!rocally demand !erformance$ subAect to the !ro+isions of the law go+erning the form of contracts. Article 1181 of the same code !ro+ides that <in conditional obligations$ the ac9uisition of rights$ as well as the e2tinguishment or loss of those already ac9uired$ shall de!end u!on the ha!!ening of the e+ent which constitutes the condition.= :n the !resent case$ since the condition contem!lated by the !arties which is the issuance of a certificate of title in !etitioners? names was fulfilled on 0 "ebruary 18@;$ the res!ecti+e obligations of the !arties under the contract of sale became mutually demandable$ i.e. the sellers were obliged to !resent the T-T already in their names to he buyer$ and to immediately e2ecute the deed of absolute sale$ while the buyer on her !art$ was obliged to forthwith !ay the balance of the !urchase !rice amounting to (1$180$000.00. (/ Condition deemed &ul&illed Bhen obli$or voluntary "revents its &ul&illment? Condition &ul&illed+ such &act controllin$ over hy"othetical ar$uments Article 118 !ro+ides that <the condition shall be deemed fulfilled when the obligor +oluntarily !re+ents its fulfillment.= Thus$ in the !resent case$ the !etitioners ha+ing recognized that they entered into a contract of sale subAect to a sus!ensi+e condition$ as e+idenced in the first !aragra!h in !age 8 of their !etition$ cannot now contend that there could ha+e been no !erfected contract of sale had the !etitioners not com!lied with the condition of first transferring the title of the !ro!erty under their names. :t should be stressed and em!hasized that the condition was fulfilled on 0 "ebruary 18@;$ when T-T 323&03 was issued in !etitioners? name$ and such fact is more controlling than mere hy!othetical arguments. (5 #etroactivity o& conditional obli$ation to day o& constitution o& obli$ation 'rticle 11@3 !ro+ides that <the effects of conditional obligation to gi+e$ once the condition has been fulfilled$ shall retroact to the day of the constitution of the obligation.= :n obligations to do or not to do$ the courts shall determine$ in each case$ the retroacti+e effect of the condition that has been com!lied with. :n the !resent case$ the rights and obligations of the !arties with res!ect to the !erfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the sus!ensi+e condition on 0 "ebruary 18@;. 's of that !oint in time$ reci!rocal obligations of both seller and buyer arose. (, Succession as a mode o& trans&errin$ oBnershi" 'rticle 33& of the -i+il -ode defines #uccession as a mode of transferring ownershi!$ !ro+iding <succession is a mode of ac9uisition by +irtue of which the !ro!erty$ rights and obligations to the e2tent and +alue of the inheritance of a !erson are transmitted through his death to another or others by his will
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or by o!eration of law.= :n the !resent case$ !etitioners%sellers being the sons and daughters of the decedent -onstancio (. -oronel are com!ulsory heirs who were called to succession by o!eration of law. Thus$ at the
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instance of their father?s death$ !etitioners ste!!ed into his shoes insofar as the subAect !ro!erty is concerned$ such that any rights or obligations !ertaining thereto became binding and enforceable u!on them. :t is e2!ressly !ro+ided that rights to the succession are transmitted from the moment of death of the decedent &A#ticle $$$, Civil Co8eD Cuison vs. Eillanueva, '0 *+il. 800 [%'02](. () 7sto""el+ as to lack o& ca"acity 'rticle 1&31 !ro+ides that <through esto!!el an admission or re!resentation is rendered conclusi+e u!on the !erson maCing it$ and cannot be denied or dis!ro+ed as against the !erson relying thereon.= :n the !resent case$ the !etitioners$ ha+ing re!resented themsel+es as the true owners of the subAect !ro!erty at the time of sale$ cannot claim now that they were not yet the absolute owners thereof at the time they entered into agreement. (. Mere alle$ation is not evidence The su!!osed grounds for !etitioners? rescission$ are mere allegations found only in their res!onsi+e !leadings$ which by e2!ress !ro+ision of the rules$ are deemed contro+erted e+en if no re!ly is filed by the !laintiffs &Sec. %%, Rule 1, Revise8 Rules o" Cou#t(. The records are absolutely bereft of any su!!orting e+idence to substantiate !etitioners? allegations. >e ha+e stressed time and again that allegations must be !ro+en by sufficient e+idence &7g C+o Cio vs. 7g Diong, %%0 *+il. 882 [%'1%]D Reca#o vs. E6bisan, 2 SCRA 0'8 [%'1%](. Mere allegation is not an e+idence &5agasca vs. De Ee#a, $' *+il. 3$1 [%'4$](. 20 No sti"ulation to authori:e e4tra@udicial rescission o& contract o& sale B+en assuming arguendo that 7amona (. 'lcaraz was in the *nited #tates of 'merica on 0 "ebruary 18@;$ !etitioners%sellers? act of unilaterally and e2traAudicially rescinding the contract of sale cannot be Austified as there was no e2!ress sti!ulation authorizing the sellers to e2traAudicially rescind the contract of sale. &c" Dignos vs. CA, %08 SCRA 3$0 [%'88]D aguba vs. E8a. 8e 5eon, %32 SCRA $22 [%'84]( 2( 7sto""el+ acce"tance o& check &rom buyerMs mother? buyerMs absence not a $round &or rescission (etitioners are esto!!ed from raising the alleged absence of 7amona (. 'lcaraz because although the e+idence on record shows that the sale was in the name of 7amona (. 'lcaraz as the buyer$ the sellers had been dealing with -once!cion ). 'lcaraz$ 7amona?s mother$ who had acted for and in behalf of her daughter$ if not also in her own behalf. :ndeed$ the down !ayment was made by -once!cion ). 'lcaraz with her own !ersonal checC (B2h. </=G B2h. <2=) for and in behalf of 7amona (. 'lcaraz. There is no e+idence showing that !etitioners e+er 9uestioned -once!cion?s authority to re!resent 7amona (. 'lcaraz when they acce!ted her !ersonal checC. 5either did they raise any obAection as regards !ayment being effected by a third !erson. 'ccordingly$ as far as !etitioners are concerned$ the !hysical absence of 7amona (. 'lcaraz is not a ground to rescind the contract of sale. 22 <uyer not in de&ault as there is no "roo& that seller "resented the %C% and si$ni&y their readiness to e4ecute the deed o& absolute sale Article 11 9 of the -i+il -ode defines when a !arty in a contract in+ol+ing reci!rocal obligations may be considered in default. #aid article !ro+ides that <those obliged to deli+er or to do something$ incur in delay from the time the obligee Audicially or e2traAudicially demands from them the fulfillment of their obligation. 222 :n reci!rocal obligations$ neither !arty incurs in delay if the other does not com!ly or is not ready to com!ly in a !ro!er manner with what is incumbent u!on him. "rom the moment one of the !arties fulfill his obligation$ delay by the other begins.= -n t+e ,#esent case$ there is no !roof offered whatsoe+er to show that the seller actually !resented the new transfer certificate of title in their names and signified their willingness and readiness to e2ecute the deed of absolute sale in accordance with their agreement.
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7amona?s corres!onding obligation to !ay the balance of the !urchase !rice in the amount of (1$180$000.00 (as buyer) ne+er became due and demandable and$ therefore$ she cannot be deemed to ha+e been in default. 23 -ouble sale? Article (/**+ "ara$ra"h 2 a""lies in the "resent case
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Article 1544 of the -i+il -ode !ro+ides that <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould if be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossessionG and$ in the absence thereof to the !erson who !resents the oldest title$ !ro+ided there is good faith.= -n t+e ,#esent case$ the record of the case shows that the )eed of 'bsolute #ale dated 2; '!ril 18@; as !roof of the second contract of sale was registered with the 7egistry of )eeds of Uuezon -ity gi+ing rise to the issuance of a new certificate of title in the name of -atalina /. Mabanag on ; .une 18@;. Thus$ the second !aragra!h of 'rticle 1;&& shall a!!ly. 2* -ouble sale "resumes title to "ass to &irst buyer+ e4ce"tions 'rticle 1;&&$ the !ro+ision on double sale$ !resumes title or ownershi! to !ass to the first buyer$ the e2ce!tions being4 (a) when the second buyer$ in good faith$ registers the sale ahead of the first buyer$ and (b) should there be no inscri!tion by either of the two buyers$ when the second buyer$ in good faith$ ac9uires !ossession of the !ro!erty ahead of the first buyer. *nless$ the second buyer satisfies these re9uirements$ title or ownershi! will not transfer to him to the !reAudice of the first buyer. 2/ &aith !rius tem"ore+ "otior @ure F&irst in time+ stron$er in ri$htG? 3irst to re$ister in $ood
The go+erning !rinci!le is !rius tem!ore$ !otior Aure (first in time$ stronger in right). Enowledge by the first buyer of the second sale cannot defeat the first buyer?s rights e2ce!t when the second buyer first registers in good faith the second sale &3liva#es vs. ;onzales, %0' SCRA 33(. -on+ersely$ Cnowledge gained by the second buyer of the first sale defeats his rights e+en if he is first to register$ since Cnowledge taints his registration with bad faith &see also Asto#ga vs. Cou#t o" A,,eals, ;.R. 7o. 08030, 21 Dece6be# %'84(. :t was further held that it is essential$ to merit the !rotection of 'rticle 1;&&$ second !aragra!h$ that the second realty buyer must act in good faith in registering his deed of sale &C#uz v. Cabana, %2' SCRA 101, citing Ca#bonell vs. Cou#t o" A,,eals, 1' SCRA '', C#isosto6o vs. CA, ;.R. 7o. '0843, 02 Se,te6be# %''2(. 25 -ouble sale? $ood &aith in recordin$ o& second sale+ not in buyin$ :n a case of double sale$ what finds rele+ance 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 Cnowledge of any defect in the title of the !ro!erty sold. :n the !resent case$ Mabanag could not ha+e in good faith registered the sale entered into on 1@ "ebruary 18@; because as early as 22 "ebruary 18@;$ a notice of lis !endens had been annotated on the T-T in the names of !etitioners$ whereas Mabanag registered the said sale sometime in '!ril 18@;. 't the time of registration$ therefore$ !etitioner Cnew that the same !ro!erty had already been !re+iously sold to -oronel$ or$ at least$ she was charged with Cnowledge that a !re+ious buyer is claiming title to the same !ro!erty. Mabanag thus cannot close her eyes to the defect in !etitioners? title to the !ro!erty at the time of the registration of the !ro!erty. 2, -ouble sale? <ad &aith in re$istration does not con&er re$istrant any ri$ht :f a +endee in a double sale registers the sale after he has ac9uired Cnowledge that there was a !re+ious sale of the same !ro!erty to a third !arty or that another !erson claims said !ro!erty in a !re+ious sale$ the registration will constitute a registration in bad faith and will not confer u!on him any right. (#al+oro +s. Tanega$ @3 #-7' 3&8 K18@1LGciting (alarca +s. )irector of ,and$ &3 (hil. 1&0G -agaoan +s. -agaoan$ &3 (hil. ;;&G "ernandez +s. Mercader$ &3 (hil. ;@1.) 2) A$ency? %he issue Bhether Conce"cion+ mother o& #amona+ is an a$ent or a co-buyer is
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undisturbed 'lthough there may be am!le indications that there was in fact an agency between 7amona as !rinci!al and -once!cion$ her mother$ as agent insofar as the subAect contract of sale is concerned$ the issue of whether or not -once!cion was also acting in her own behalf as a co%buyer is not s9uarely raised in the
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instant !etition$ nor in such assum!tion dis!uted between mother and daughter. The -ourt did not touch this issue and did not disturb the lower courts? ruling on this !oint. '2(0 Coronel vs 2na 'G # No (02)0 3ebruary ,+ (.(5 0 "irst )i+ision$ Torres (.)4 3 concurring$ 1 tooC no !art 3actsH :n the administration of the intestate estate of the deceased :sidra -oronel$ the administrator thereof$ Bngracio -oronel$ disco+ered certain arrangements between the sur+i+ing s!ouse$ -enon 6na$ and other !ersons$ which decreased and inAured the !ro!erty under administration$ whereof$ by !ermission of the court$ the said administrator on 10 May 1813$ filed suit against -enon$ et. al.$ in which suit$ by agreement of the !arties$ they were included as !laintiffs the heirs of the said deceased named "rancisco -oronel$ 'gri!ina -oronel$ Bngracia Torres$ Manuela Torres and her husband ,ucio (aMganiban$ and the minor 'nastacia 7amon$ re!resented by his curator ad litem$ Bngracio -oronel. -oronel$ et. al. allege in their com!laint that the administration is the owner of one%half !ro indi+iso of a rural estate$ 10 hectares and &2 centares in area$ situate in the barrio of ,agalag of the town of Tiaong$ (ro+ince of Tayabas$ !lanted with 2$000 coco !alms from & to ; years old$ the boundaries whereof are set forth in the com!laint$ said realty being conAugal !ro!erty as it was ac9uired for a consideration by the deceased :sidra -oronel and her husband -enon 6na during their marriageG that u!on the death of the wife in '!ril 1811$ the sur+i+ing s!ouse -enon 6na became the administrator of said undi+ided !ro!erty$ taCing all its !roducts and refusing to maCe !artition of the land with the lawful heirs of his deceased wifeG that on ; 5o+ember 1812$ -enon 6na and the other defendants formed a cons!iracy$ with intent of gain for themsel+es$ to the fraud and inAury of the !laintiff administration$ and drew u! and signed an alleged instrument of sale$ whereby -enon 6na sold to the s!ouses /enigno 5adres and Victoria Villa the said land$ which instrument they falsely dated as !rior to the death of his wife :sidra -oronel and forged and imitated her signature or marC by writing her name and surname thereon with a cross between themG that on the same date$ ; 5o+ember 1812$ the same defendants$ continuing their fraudulent !roceedings$ e2ecuted another instrument of sale of the same land$ wherein they made to a!!ear as +endors thereof /enigno 5adres and Victoria Villa and as +endees the s!ouses -ris!in -astillo and Maria recto$ so that thereby it would be more difficult for the !laintiff administration to reco+er said estate$ and from that date -enon 6na surrendered !ossession and enAoyment of the said land to the s!ouses -ris!in -astillo and Maria 7ecto$ who ha+e been u! to the !resent time in !ossession thereof and ha+e taCen the !roducts therefrom$ ha+ing refused to gi+e the administration any !ortion of the latterG that by reason of the malicious and fraudulent acts of these defendants the administration has suffered damages to the e2tent of (1$000. 6n 28 May 1813$ /enigno 5adres$ Victoria Villa$ -ris!in -astillo$ and Maria 7ecto answered the com!laint$ denying all the allegations thereof generally and s!ecifically$ and alleging in s!ecial defense4 That on @ 5o+ember 1810$ the s!ouses /enigno 5adres and Victoria -astillo KVillaL had ac9uired the land which is the subAect matter of the com!laint at a genuine and absolute sale from the s!ouses -enon 6na and :sidra -oronel$ and that s!ouses -ris!in -astillo and Maria 7ecto ac9uired the same land on ; 5o+ember 1812$ at a genuine and absolute sale from 5adres and Villa. :n another document of a later date$ -ris!in -astillo and Maria 7ecto$ denied the facts set forth in the com!laint and in s!ecial defense alleged that they are the e2clusi+e owners of the land described in the com!laint$ as they ac9uired it by !urchase from the s!ouses 5adres and Villa. -ounsel for -enon 6na in answer denied generally and s!ecifically all the !aragra!hs of the com!laint and alleged solely in s!ecial defense that he had ne+er$ either before or at the time of the sale made by him and his deceased wife :sidra -oronel of the land which is the subAect matter of the com!laint$ concerted or cons!ired with his codefendants to effect said sale. 'fter trial and e2amination of the e+idence adduced by both !arties and on 28 '!ril 181&$ the -": Tayabas rendered the Audgment denying the claim of
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s!ouses -ris!in -astillo and Maria 7ecto$ for reco+ery of damages they had suffered by reason of the filing of the com!laint against them$ finding that the instruments of con+eyance of the land in litigation +oid and of no force or legal effect because the !arties who sold the land by means of said instruments lacCed any right to alienate itG denying the claim of -oronel$ et. al. that the defendants !ay the +alue of one%half of the !roducts
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of this land recei+ed by them and a sum of money in the nature of com!ensatory damages$ and merely sentencing -enon 6na and /enigno 5adres to the !ayment of the costs in e9ual !arts. 1ence the a!!eal through a bill of e2ce!tions by counsel for the defendants. The #u!reme affirmed the Audgment a!!ealed from$ with the costs against the a!!ellants. ( 3actsH 8dentity o& "ro"erty not dis"uted There is no 9uestion whatsoe+er as to the identity of the land claimed in the com!laint$ it being a rural estate situated in the barrio of ,agalag of the munici!ality of Tiaong$ Tayabas$ with an area of ten hectares and forty%two centiares and !lanted with 2$000 coco !alms. 2 !ro"erty con@u$al? CoronelMs heirs by o"eration o& laB -enon 6na was lawfully married to :sidra -oronel and during their marriage they ac9uired by !urchase from .uan -adiz the land$ wherefore said realty is their conAugal !ro!erty. This marriage was dissol+ed by the death of :sidra -oronel on 13 '!ril 1811$ without issue from these s!ouse and without a will e2ecuted in life by the woman$ so the heirs that by o!erations of law must succeed said deceased :sidra -oronel are her brothers and sisters and ne!hews and nieces$ residing in the town of #an .uan de /ocboc$ /atangas. The land in litigation is not only conAugal !ro!erty$ with one%half thereof belonging to the deceased :sidra -oronel$ but also from the moment of her death it !assed by o!eration of law into the ownershi! of her intestate heirs$ and for this reason her widower could not dis!ose of said half to the inAury of the nearest relati+es and heirs of his deceased wife. ('rts. 0;3$ 0;8$ 001$ -i+il -ode.) 3 3actsH Sti"ulations in the instrument o& "urchase and sale :n the instrument of !urchase and sale$ written in the Tagalog dialect (-ase 330) and translated in the !resent case$ the s!ouses -enon 6na and :sidra -oronel transferred by absolute sale on @ 5o+ember 1810$ the land litigation to te s!ouses /enigno 5adres and Victoria Villa$ under the following conditions4 (1) The s!ouses -enon 6na and :sidra -oronel had !lanted coco !alms on a certain tract of land belonging to /enigno 5adres and his wife$ which land -enon 6na and :sidra -oronel had alienated without the consent of the owners thereof$ the said 5adres and wifeG (2) on their !art the s!ouses 6na and -oronel !ossessed another tract of land which they had !urchased from .uan -adiz$ whereon they has already set out 1$&00 young coco !alms and @00 more could be !lantedG (3) as /enigno 5adres and his wife were demanding return of the land !re+iously sold by 6na and -oronel$ the latter thought it fair to cede their own land to said 5adres and wife in e2change for what they had alienated$ 5adres and his wife there in hand !aying (2$;00 as the increase in the !riceG (&) this e2change was made on the condition that -enon 6na and his wife should for the !eriod of four yearsG (;) the betel nut$ !addy$ buri$ and other !roducts shall !ertain e2clusi+ely to the +endors$ -enon 6na and :sidra -oronel$ who shall !ay the land ta2 for the said four years of the life of the contractG and (0) the s!ouses /enigno 5adres and Victoria Villa were agreed that they would no !artici!ation in the cro!s from the land. This instrument is signed by the contracting !arties and the witnesses$ e2ce!t :sidra -oronel$ who !laced her marC on the instrument her name and surname$ which must ha+e been affi2ed by another !erson$ as she could not write. * -educed &acts o& the case "rom the abundant$ but contradictory$ e+idence adduced at the trial$ the following facts are deduced4 (1) The consideration which ga+e rise to the e2ecution by -enon 6na and :sidra -oronel$ with reference to their ha+ing alienated a !arcel of land belonging to /enigno 5adres and his wife$ is not a +alid oneG (2) the consideration for the transfer of the land in 9uestion to the 5adres cou!le$ with !ayment by them of (2$;00 to the +endors$ is false and simulatedG (3) the instrument e+idencing the sale of this land was e2ecuted after :sidra -oronel?s death and cannot therefore !roduce any effect against her heirsG and (&) the transfer by e2change and sale of the land to the +endee /enigno 5adres is not +alid$ as said transfer was
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recorded in the instrument for the sole and deliberate !ur!ose of !re+enting the lawful heirs of :sidra -oronel from inheriting their !ortion thereof.
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Consideration &alse and simulated -enon 6na stated that he and his wife :sidra -oronel had recei+ed a tract of land from said /enigno 5adres$ on which to set out coco%!alms$ with the condition that after the !lanting had been finished and 0 years had ela!sed$ he and his wife should become the owners if one%half of the said tract$ as had ha!!ened$ and as he was then in need of money he had sold to a third !erson said !ortion of land that then belonged to himG but it is not true that he obligated himself not to sell that !ortion of land to anybody but its original owner$ 5adres. This testimony of 6na$ which was not rebutted or contradicted by the other defendants$ constitutes conclusi+e !roof of the in+alidity of the reason gi+en for the e2change of the land in 9uestion for that !re+iously sold and for transferring it to the said /enigno 5adres and his wifeG and it is furthermore to be noted that 6na himself stated under oath that in transferring this land to 5adres on @ 5o+ember 1810$ he had no intention of transferring it absolutely but had made this transfer a!!ear in an instrument so that 5adres might taCe charge of the land and not bother him$ as he was then old$ and also to !re+ent the heirs of his wife -oronel from !artici!ating in her inheritance. 1ence it is inferred that the consideration which ga+e rise to the transfer of this land to 5adres and his wife is not +alid$ but false and simulated. 1ence$ said realty was not sold to 5adres but a !retense was made of transferring it in order to sell it as the agent of 6na$ and therefore the land continued to belong to 6na and his wife$ the deceased -oronel. :t is furthermore to be noted that when said transfer was made to 5adres the heirs of the deceased -oronel had already filed a claim for the land and conse9uently any alienation thereof that may ha+e been made after the date of said claim filed by the heirs of the deceased -oronel is fraudulent. (6ria +s. McMicCing$ 21 (hil.$ 7e!.$ 2&3$2&8) , 8nstrument simulated The simulation of the instrument is corroborated by the fact that -enon 6na deli+ered to the administrator$ Bngracio -oronel$ the sum of (800 so that the latter and his co!laintiffs should desist from filing a Audicial$ claim to the land in litigation$ and$ according to agreement$ they e2ecuted the instrument setting forth that sum$ both !arties$ signing it in the !resence of two witnesses and ratifying it before a Austice of the !eace. -oronel and 6na affirm the truth of the fact set forth in said instrument to demonstrate that the land was not absolutely alienated but continued to be at the dis!osition of the widower. /ut the -": disa!!ro+ed said agreement and ordered restitution to the widower 6na of the money recei+ed by -oronel. ) Su""ressed testimony "resumed "re@udicial 6ne of the indi+iduals who !layed a !rinci!al !art in the sale of the realty$ /enigno 5adres$ was not !resented by the defendants s a witness at the trial to clear u! certain obscure and doubtful !oints$ for he only testified in rebuttal$ although he was !resent in the court at the last session of the trial in this caseG wherefore it is to be su!!osed$ in the absence of !roof to the contrary$ that his testimony$ which was willfully su!!ressed by the defendants$ would ha+e been !reAudicial to them (5o. ;$ section 33&$ -ode of -i+il (rocedure)$ while the record shows that -enon 6na made declarations contrary to the interest of his other codefendants$ which could not be contradicted or im!ugned as false. . 3irst sale simulated+ Second sale void and ine&&ective &or lack o& ri$ht to dis"ose o& land 1a+ing reached the conclusion that the instrument$ where it a!!ears that the s!ouses /enigno 5adres and Victoria Villa !urchased the land in 9uestion$ is false and +oid$ because said sale was not effected. Therefore$ the sale made by them to the s!ouses -ris!in -astillo and Maria 7ecto on ; 5o+ember 1812$ is also +oid and ineffecti+e$ for the !arties who figure therein as +endors had no right to dis!ose of the land$ nor could they transmit to the +endees any title of ownershi!$ nor could the latter ac9uire ownershi! of the land sold. (0 Article (2/* o& the Civil Code? Consent 'rticle 12;& of the -i+il -ode states <' contract e2ists from the moment one or more !ersons
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consent to bind himself or themsel+es$ with regard to another or others$ to gi+e something or to render some ser+ice.= :n the !resent case$ since -oronel was dead on the date when the contract was drawn u! and could
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not ha+e taCen !art in the e2ecution thereof or gi+en her consent to the !retended sale of the land to which it refers and which belonged to the conAugal !artnershi! of 6na and -oronel$ said contract has ne+er e2isted$ and being +oid it could not ser+e as a legal means for transferring ownershi! to the alleged !urchasers$ 5adres and VillaG and as they could not ac9uire any right of ownershi! to the land sold by +irtue of a contract that had not e2isted and was conse9uently null and +oid they had not transfer such a right to the s!ouses -ris!in -astillo and Maria 7ecto. (( #e=uisites o& a valid contract? Article (25( There is no contract$ says article 1201 of the same -ode$ unless there e2ist the essential re9uisites of consent of the contracting !arties$ a definite obAect which may be the subAect of the contract$ and the consideration for the obligation which may be established. :n the !resent case$ :sidra -oronel was not !resent to gi+e her consent to the alleged contract of sale$ because she was dead when said contract was simulated$ nor is any consideration for the obligation stated therein$ and conse9uently the contract set forth in said instrument is flagrantly null and +oid. 'lthough it a!!ears to ha+e been dated @ 5o+ember 1810$ while :sidra -oronel was still ali+e$ it was !re!ared on ; 5o+ember 1812$ for the widower -enon 6na so testified. (2 Cris"in Castillo and Maria #ecto not entitled to dama$es #ince -oronel$ et. al. did not taCe !art in the e2ecution of the contracts of sale and did not act in bad faith in filing this com!laint against the efendants$ -ris!in -astillo and Maria 7ecto$ the latter are not entitled to reco+er any indemnity for damages. (3 Coco "alms not yet borne &ruit+ there&ore claim on value o& "roducts cannot be $ranted /y the declaration of the administrator himself$ Bngracio -oronel$ and by that of -enon 6na$ that the coco !alms set out on the land in dis!ute ha+e not yet borne fruit$ wherefore -oronel et.al?s claim that they be !aid the +alue of one%half of the !roducts taCen from the land in 9uestion cannot be granted. '220 Cru: vs Cabana 'G # No /5232 6une 22+ (.)* 0 "irst )i+ision$ TeehanCee (.)4 ; concurring 3actsH The land in 9uestion was sold by ,eodegracia -abana with right of re!urchase on 1 .une 180; to #!ouses Teofilo ,egas!i and lluminada -abaMa. The said document H/ilihang Muling Mabibili? sti!ulated that the land can be re!urchased by the +endor within 1 year from 31 )ecember 1800. #aid land was not re!urchased and in the meantime$ said s!ouses tooC !ossession of the land. *!on re9uest of ,eodegaria -abaMa$ the title of the land was lent to her in order to mortgage the !ro!erty to the (5/. #aid title was$ forthwith$ de!osited with the (5/. 6n 21 6ctober 180@$ -abaMa sold the land by way of absolute sale to the s!ouses. #aid s!ouses attem!ted to register the deed of sale but said registration was not accom!lished because they could not !resent the owner?s du!licate of title which was at that time in the !ossession of the (5/ as mortgage. 1owe+er$ on 28 5o+ember 180@ -abana sold the same !ro!erty to 'bellardo -ruz. ,iCewise$ when -ruz tried to register the deed of sale e2ecuted by ,eodegaria -abaMa on 3 #e!tember 1830$ he was informed that the owner thereof had sold the land to the s!ouses on 21 6ctober 180@. #till$ -ruz was able to register the land in his name on 8 "ebruary 1831. 7aised in the -": Uuezon (ro+ince$ the court ruled in fa+or of the s!ouses. '!!eal was made in the -ourt of '!!eals. 'belardo -ruz died while the case was !ending$ and by resolution$ he was substituted by his heirs$ -onsuelo -. -ruz$ -laro -. -ruz and #te!hen -. -ruz. The -ourt of '!!eals affirmed the decision of the -":. The #u!reme -ourt affirmed in toto the a!!ealed Audgment of a!!ellate court$ u!holding s!ouses Teofilo ,egas!i and :luminada -abana as the true and rightful owners of the !ro!erty in litigation and ordering the
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issuance of a new title with the cancellation as null and +oid of Title T%881&0 obtained by 'belardo -. -ruzG and ordered ,eodegracia -abana$ in accordance with the !artial grant of -ruz? !rayer for alternati+e relief$ to reimburse and !ay to -ruz? heirs the total sum of (;$3;0 ((2$3;2.;0 as !ayment to (5/ to discharge mortgage obligation$ and (3$383.;0 as consideration of the sale with !acto de retro of the !ro!erty). ( &aith CA #ulin$H A""licability o& Article (/**+ Bhen invoked? #e$istration should be in $ood
:n order that the !ro+isions of 'rticle 1;&& of the new -i+il -ode may be in+oCed$ it is necessary that the con+eyance must ha+e been made by a !arty who has an e2isting right in the thing and the !ower to dis!ose of it (10 Manresa 130$ 131). :t cannot be set u! by a second !urchaser who comes into !ossession of the !ro!erty that has already been ac9uired by the first !urchaser in full dominion (/autista +s. #ison$ 38 (hil. 01;)$ this notwithstanding that the second !urchaser records his title in the !ublic registry$ if the registration be done in bad faith. The !hiloso!hy underlying this rule being that the !ublic records cannot be co+ered into instruments of fraud and o!!ression by one who secures an inscri!tion therein in bad faith (-hu!inghong +s. /orreros$ 3 -' 7e!. 088). 2 &aith CA #ulin$H !urchaser Bith knoBled$e o& de&ect o& vendorMs title not a "urchaser in $ood
' !urchaser who has Cnowledge of fact which would !ut him u!on in9uiry and in+estigation as to !ossible defects of the title of the +endor and fails to maCe such in9uiry and in+estigation$ cannot claim that he is a !urchaser in good faith. Enowledge of a !rior transfer of a registered !ro!erty by a subse9uent !urchaser maCes him a !urchaser in bad faith and his Cnowledge of such transfer +itiates his title ac9uired by +irtue of the latter instrument of con+eyance which creates no right as against the first !urchaser (7eylago +s. .arabe$ ,%200&0$ March 23$ 180@$ 22 #-7' 12&3). 3 CA #ulin$H S"ouses &irst to re$ister deed o& sale The s!ouses registered the deed of absolute sale ahead of -ruz. #aid s!ouses were not only able to obtain the title because at that time$ the owner?s du!licate certificate was still with the (hili!!ine 5ational /anC. * CA #ulin$H S"ouses &irst in "ossession The s!ouses ha+e been in !ossession all along of the land in 9uestion. :f immo+able !ro!erty is sold to different +endees$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the registry of !ro!ertyG and should there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossession (#oriano$ et al. +s. The 1eirs of )omingo Magali$ et al.$ ,%1;133$ .uly 31$ 1803$ @ #-7' &@8). (riority of !ossession stands good in fa+or of the s!ouses (B+angelista +s. 'bad$ K-'L 30 6. . 2813G #anchez +s. 7amos$ &0 (hil. 01&G Uuimson +s. 7osete$ @3 (hil. 1;8).= / -ouble Sale? Article (/** 'rticle 1;&& !ro+ides that <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossessionG and$ in the absence thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith.= 5 S"ouses are &irst buyers? S"ouses &irst and only ones in "ossession #!ouses were the first buyers$ first on 1 .une 180; under a sale with right of re!urchase and later on 21 6ctober 180@ under a deed of absolute sale and that they had taCen !ossession of the land sold to them. -ruz was the second buyer under a deed of sale dated 28 5o+ember 180@$ which to all indications$ contrary to the te2t$ was a sale with right of re!urchase for 80 days. The s!ouses were the first and the only ones to be in
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!ossession of the subAect !ro!erty.
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, &aith
S"ouses &irst to re$ister sale? Cru: re$istered sale in bad
The s!ouses were liCewise the first to register the sale with right of re!urchase in their fa+or on 13 May 180; under (rimary Bntry 210113 of the 7egister of )eeds. They could not register the absolute deed of sale in their fa+or and obtain the corres!onding transfer certificate of title because at that time the seller?s du!licate certificate was still with the banC. >hen -ruz succeeded in registering the later sale in his fa+or$ he Cnew and he was informed of the !rior sale in fa+or of the s!ouses. #uch <Cnowledge of a !rior transfer of a registered !ro!erty by a subse9uent !urchaser maCes him a !urchaser in bad faith and his Cnowledge of such transfer +itiates his title ac9uired by +irtue of the latter instrument of con+eyance which creates no right as against the first !urchaser.= ) <uyer must act in $ood daith to merit "rotection o& the second "ara$ra"h o& Article (/**? Governin$ "rinci"le is !rius tem"ore+ "otior @ure? HoB second buyer may dis"lace &irst buyer 's held in Car!onell vs. Court of Appeals$ <it is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the !rotection of the second !aragra!h of 'rticle 1;&&.= The go+erning !rinci!le here is !rius tem!ore$ !otior Aure (first in time$ stronger in right). Enowledge gained by the first buyer of the second sale cannot defeat the first buyer?s rights e2ce!t only as !ro+ided by the -i+il -ode and that is where the second buyer first registers in good faith the second sale ahead of the first. #uch Cnowledge of the first buyer does not bar her from a+ailing of her rights under the law$ among them$ to register first her !urchase as against the second buyer. /ut in con+erso Cnowledge gained by the second buyer of the first sale defeats his rights e+en if he is first to register the second sale$ since such Cnowledge taints his !rior registration with bad faith. This is the !rice e2acted by 'rticle 1;&& of the -i+il -ode for the second buyer being able to dis!lace the first buyerG that before the second buyer can obtain !riority o+er the first$ he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer?s rights) J from the time of ac9uisition until the title is transferred to him by registration or failing registration$ by deli+ery of !ossession. The second buyer must show continuing good faith and innocence or lacC of Cnowledge of the first sale until his contract ri!ens into full ownershi! through !rior registration as !ro+ided by law.= . Cru:M "rayer o& a&&irmative relie&? Cabana+ not the ;e$as"i s"ouses+ liable &or amounts "aid? No reimbursement &or realty ta4es -ruz? !rayer for alternati+e relief for reimbursement of the amount of (2$3;2.;0 !aid by him to the banC to discharge the e2isting mortgage on the !ro!erty and of the amount of (3$383.;0 re!resenting the !rice of the second sale are well taCen insofar as the seller ,eodegaria -abana is concerned. These amounts ha+e been recei+ed by -abana on account of a +oid second sale and must be duly reimbursed by her to -ruz? heirs$ but the ,egas!i s!ouses cannot be held liable therefor since they had nothing to do with the said second sale nor did they recei+e any benefit therefrom. -ruz? claim for reimbursement of the amount of (102.;@ as real estate ta2es !aid on the !ro!erty is not well taCen because the ,egas!i s!ouses had been !aying the real estate ta2es on the same !ro!erty since 1 .une 1808. '230 Cru: vs 3ili"inas 8nvestment 'G # No ;-2*,,2 May 2,+ (.5) 0 Bn /anc$ 7eyes ./, (.)4 3 concurring$ 1 on lea+e 3actsH 6n 1; .uly 1803$ 7u!erto . -ruz !urchased on installments$ from the "ar Bast Motor -or!oration$ 1 unit of :suzu )iesel /us for (&&$010.2&$ !ayable in installments of (1$&@3.20 !er month for 30 months$ beginning 22 6ctober 1803$ with 12I interest !er annum$ until fully !aid. 's e+idence of said indebtedness$ -ruz e2ecuted and deli+ered to the "ar Bast Motor -or!oration a negotiable !romissory in the sum of (&&$010.2&. To secure the !ayment of the !romissory note$ -ruz e2ecuted in fa+or of the seller "ar Bast Motor -or!oration$ a chattel mortgage o+er the motor +ehicle. 's no down !ayment was made by -ruz$ the
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seller$ "ar Bast Motor -or!oration$ on the +ery same date$ 1; .uly 1803$ re9uired and -ruz agreed to gi+e$ additional security for his obligation besides the chattel mortgage. 'dditional security was gi+en by "elicidad
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Vda. de 7eyes in the form of #econd Mortgage on a !arcel of land owned by her (0@$802 s9. ms.$ T-T T% 30&@0 of the 7egistry of )eeds of /ulacan$ mortgaged to the )/( to secure loan of (2$000)$ together with the building and im!ro+ements thereon$ in #an Miguel$ /ulacan. 6n 1; .uly 1803$ the "ar Bast Motors for +alue recei+ed indorsed the !romissory note and assigned all its rights and interest in the )eeds of -hattel Mortgage and in the )eed of 7eal Bstate Mortgage to "ili!inas :n+estment Q "inance -or!oration (":"-)$ with due notice of such assignment to -ruz$ et.al. -ruz defaulted in the !ayment of the !romissory note and that the only sum e+er !aid was (;00 on 2 6ctober 1803$ which was a!!lied as !artial !ayment of interests on his !rinci!al obligation. 5otwithstanding ":"-?s demands$ -ruz made no !ayment on any of the installments sti!ulated in the !romissory note. /y reason of -ruz?s default$ ":"- tooC ste!s to foreclose the chattel mortgage on the bus. 1owe+er$ said +ehicle had been damaged in an accident while in the !ossession of -ruz. 't the foreclosure sale held on 31 .anuary 180& by the #heriff of Manila$ ":"- was the highest bidder (for (1;$000.00). The !roceeds of the sale of the bus were not sufficient to co+er the e2!enses of sale$ the !rinci!al obligation$ interests$ and attorney?s fees$ i.e.$ they were not sufficient to discharge fully the indebtedness of -ruz to ":"-. 6n 12 "ebruary 180&$ !re!aratory to foreclosing its real estate mortgage on Mrs. 7eyes? land$ ":"- !aid the mortgage indebtedness of Mrs. 7eyes to the )/($ in the sum of (2$1&@.03$ the un!aid balance of said obligation. (ursuant to a !ro+ision of the real estate mortgage contract$ authorizing the mortgagee to foreclose the mortgage Audicially or e2tra%Audicially$ ":"- on 28 "ebruary 180& re9uested the (ro+incial #heriff of /ulacan to taCe !ossession of$ and sell$ the land subAect of the 7eal Bstate Mortgage to satisfy the sum of (&3$31@.82$ the total outstanding obligation of -ruz$ et. al. to ":"-. 5otices of sale were duly !osted and ser+ed to the Mortgagor$ Mrs. 7eyes$ !ursuant to and in com!liance with the re9uirements of 'ct 313;. 6n 20 March 180&$ 7eyes through counsel$ wrote a letter to ":"- asCing for the cancellation of the real estate mortgage on her land$ but ":"- did not com!ly with such demand as it was of the belief that 7eyes? re9uest was without any legal basis. 'n action was commenced by -ruz and 7eyes in the -": 7izal (-i+il -ase U% 38&8)$ for cancellation of the real estate mortgage constituted on 7eyes? land in fa+or of ":"- (as assignee of the "ar Bast Motor -or!oration). The !ro+incial #heriff of /ulacan held in abeyance the sale of the mortgaged real estate !ending the resolution of the case. The trial court in its decision of 21 '!ril 180;$ sustained -ruz$ et.al.?s stand and declared that the e2traAudicial foreclosure of the chattel mortgage on the bus barred further action against the additional security !ut u! by 7eyes. -onse9uently$ the real estate mortgage constituted on 7eyes? land was ordered cancelled and ":"- was directed to !ay 7eyes attorney?s fees in the sum of (200.00. 1ence$ the a!!eal by ":"-. The #u!reme -ourt modified the decision a!!ealed from$ by ordering 7eyes to reimburse to ":"- the sum of (2$1&@.03$ with legal interest thereon from the finality of this decision until it is fully !aid. :n all other res!ects$ the Audgment of the trial court was affirmed$ with costs against ":"-. ( Article (*)* o& the Civil Code 'rticle 1&@& of the -i+il -ode of the (hili!!ines is the !ertinent legal !ro+ision on sale of !ersonal !ro!erty on installments. :t !ro+ides that <:n a contract of sale of !ersonal !ro!erty the !rice of which is !ayable in installments$ the +endor may e2ercise any of the following remedies4 (1) B2act fulfillment of the obligation$ should the +endee fail to !ayG (2) -ancel the sale$ should the +endee?s failure to !ay co+er two or more installmentsG (3) "oreclose the chattel mortgage on the thing sold$ if one has been constituted$ should the +endee?s failure to !ay co+er two or more installments. :n this case$ he shall ha+e no further action against the !urchaser to reco+er any un!aid balance of the !rice. 'ny agreement to the contrary shall be +oid.= 2 !rovision clear as to available remedies? #emedies alternative not cumulative The !ro+ision is clear and sim!le4 should the +endee or !urchaser of a !ersonal !ro!erty default in the
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!ayment of two or more of the agreed installments$ the +endor or seller has the o!tion to a+ail of any one of these three remedies J either to e2act fulfillment by the !urchaser of the obligation$ or to cancel the sale$ or to foreclose the mortgage on the !urchased !ersonal !ro!erty$ if one was constituted. These remedies ha+e
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been recognized as alternati+e$ not cumulati+e$ that the e2ercise of one would bar the e2ercise of the orders. 3 3oreclosure and actual sale o& mort$a$e chattel bars recovery o& any balance by vendor? #eason &or the doctrine The foreclosure and actual sale of a mortgage chattel bars further reco+ery by the +endor of any balance on the !urchaser?s outstanding obligation not so satisfied by the sale. The reason for the doctrine was a!tly stated in the case of /achrach Motor -o. +s. Millan$ thus <the !rinci!al obAect of the amendment was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment !re+ents mortgagees from seizing the mortgaged !ro!erty$ buying it at foreclosure sale for a low !rice and then bringing suit against the mortgagor for a deficiency Audgment. The almost in+ariable result of this !rocedure was that the mortgagor found himself minus the !ro!erty and still owing !ractically the full amount of his original indebtedness. *nder this amendment the +endor of !ersonal !ro!erty$ the !urchase !rice of which is !ayable in installments$ has the right to cancel the sale or foreclose the mortgage if one has been gi+en on the !ro!erty. >hiche+er right the +endor elects he need not return to the !urchaser the amount of the installments already !aid$ Hif there be an agreement to that effect. "urthermore$ if the +endor a+ails himself of the right to foreclose the mortgage this amendment !rohibits him from bringing an action against the !urchaser for the un!aid balance.= * 3urther action a$ainst $uarantor Bould indirectly subvert "rotection $iven by Article (*)* to "urchaser To sustain ":"-?s argument (that what is being withheld from the +endor$ by the !ro+iso of 'rticle 1&@& of the -i+il -ode$ is only the right to reco+er <against the !urchaser= and not a recourse to the additional security !ut u!$ not by the !urchaser himself$ but by a third !erson) is to o+erlooC the fact that if the guarantor should be com!elled to !ay the balance of the !urchaser !rice$ the guarantor will in turn be entitled to reco+er what she has !aid from the debtor +endee ('rticle 2000$ -i+il -ode). Thus$ ultimately$ it will be the +endee who will be made to bear the !ayment of the balance of the !rice$ des!ite the earlier foreclosure of the chattel mortgage gi+en by him. Thus$ the !rotection gi+en by 'rticle 1&@& would be indirectly sub+erted$ and !ublic !olicy o+erturned. / IActionK Bithout a de&initive or e4clusive meanin$? Action re&erred to in Article (*)* thus may be @udicial or e4tra@udicial The word <action= is without a definite or e2clusi+e meaning. :t has been in+ariably defined as <the legal demand of one?s right$ or rightsG the lawful demand of one?s rights in the form gi+en by lawG a demand of a right in a court of AusticeG the lawful demand of one?s right in a court of AusticeG the legal and formal demand of one?s rights from another !erson or !arty$ made and insisted on in a court of AusticeG a claim made before a tribunalG an assertion in a court of Austice of a right gi+en by lawG a demand or legal !roceeding in a court of Austice to secure one?s rightsG the !rosecution of some demand in a court of AusticeG the means by which men litigate with each otherG the means that the law has !ro+ided to !ut the cause of action into effect= ( utierrez 1ermanos +s. )e la 7i+a$ &0 (hil. @23$ @3&%@3;). -onsidering the !ur!ose for which the !rohibition contained in 'rticle 1&@& was intended$ the word <action= used therein may be construed as referring to any Audicial or e2traAudicial !roceeding by +irtue of which the +endor may lawfully be enabled to e2act reco+ery of the su!!osed unsatisfied balance of the !urchase !rice from the !urchaser or his !ri+y. -ertainly$ an e2traAudicial foreclosure of a real estate mortgage is one such !roceeding.
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5 ABard o& attorneyMs &ees? ;iti$ation Bas avoidable as laB and @uris"rudence are e4"licit The !ro+ision of law and Auris!rudence on the matter being e2!licit so that this litigation could ha+e been a+oided$ the award by the lower court of attorney?s fees to -ruz$ et.al. in the sum of (200.00 is reasonable and in order. , #eimbursement &or 383C "ayment o& #eyesM outstandin$ balance on loan Bith -<! To the e2tent that she was benefited by the !ayment of ":"- to )/($ for the release of the first
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mortgage of 7eyes? land$ 7eyes should ha+e been re9uired to reimburse ":"-. '2*0 Cuyugan v. Santos, 34 *B-5 %00 &%'%1( '2/0 -a$u"an %radin$ vs Macam 'G # No ;-()*., May 3(+ (.5/ 0 Bn /anc$ )izon (.)4 3 concurring 3actsH :n 18;;$ #ammy Maron and his 3 brothers and sisters were !ro%indi+iso owners of a !arcel of unregistered land located in barrio (arayao$ /inmaley$ (angasinan. >hile their a!!lication for registration of said land under 'ct &80 was !ending$ they e2ecuted$ on .une 18 and 21 #e!tember 18;;$ two deeds of sale con+eying the !ro!erty to 7ustico Macam$ who thereafter tooC !ossession thereof and !roceeded to introduce substantial im!ro+ements therein. 6ne month later$ that is on 1& 6ctober 18;;$ 6-T 08&2 co+ering the land was issued in the name of the Marons$ free from all liens and encumbrances. 6n & 'ugust 18;0$ by +irtue of a final Audgment rendered in -i+il -ase &221; of the Munici!al -ourt of Manila against #ammy Maron in fa+or of the Manila Trading and #u!!ly -om!any$ le+y was made u!on whate+er interest he had in the the !ro!erty$ and thereafter said interest was sold at !ublic auction to the Audgment creditor. The corres!onding notice of le+y$ certificate of sale and the sheriff?s certificate of final sale in fa+or of the Manila Trading and #u!!ly -o. (because nobody e2ercised the right of redem!tion) were duly registered. 6n 1 March 18;@$ the latter sold all its rights and title in the !ro!erty to )agu!an Trading -om!any. 6n & #e!tember 18;@$ )agu!an Trading commenced an action against Macam with the -": (angasinan (-i+il -ase 13332)$ !raying that it be declared owner of 1D3 !ortion of the landG that a !artition of the whole !ro!erty be madeG that Macam be ordered to !ay it the amount of (;00.00 a year as damages from 18;@ until said !ortion is deli+ered$ !lus attorney?s fees and costs. 'nswering the com!laint$ Macam alleged that #ammy Maron?s share in the !ro!erty$ as well as that of all his co%heirs$ had been ac9uired by !urchase by him since .une 18 and 21 #e!tember 18;;$ before the issuance of the 6-T in their nameG that at the time le+y in e2ecution was made on Maron?s share therein$ the latter had no longer any right or interest in said !ro!ertyG that )agu!an Trading and its !redecessor in interest were cognizant of the facts already mentionedG that since the sales made in his fa+or$ he had enAoyed uninterru!ted !ossession of the !ro!erty and introduced considerable im!ro+ements therein. Macam liCewise sought to reco+er damages by way of counterclaim. 'fter trial u!on the issue thus Aoined$ the court rendered Audgment dismissing the com!laint$ which$ on a!!ear$ was affirmed by the -ourt of '!!eals. 1ence$ the a!!eal by )agu!an Trading. The #u!reme -ourt affirmed the decision a!!ealed fromG with costs. ( '8&0 Situation (H Dnre$istered land+ Macam havin$ better ri$ht :f the !ro!erty co+ered by the conflicting sales were unregistered land$ Macam would undoubtedly ha+e the better right in +iew of the fact that his claim is based on a !rior sale cou!led with !ublic$ e2clusi+e and continuous !ossession thereof as owner. 2 ri$ht '8&0 Situation 2H #e$istered ;and+ -a$u"an %radin$ havin$ better
>ere the land in+ol+ed in the conflicting transactions duly registered land$ )agu!an Trading has the better right because in case of con+eyance of registered real estate$ the registration of the deed of sale is
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the o!erati+e act that gi+es +alidity to the transfer. This would be fatal to Macam?s claim$ the deeds of sale e2ecuted in his fa+or by the Marons not ha+ing been registered$ while the le+y in e2ecution and the !ro+isional certificate of sale as well as the final deed of sale in fa+or of a!!ellant were registered.
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-onse9uently$ this registered con+eyance must !re+ail although !osterior to the one e2ecuted in fa+or of Macam$ and )agu!an Trading must be deemed to ha+e ac9uired such right$ title and interest as a!!eared on the certificate of title issued in fa+or of #ammy Maron$ subAect to no lien$ encumbrance or burden not noted thereon. ('nderson Q -o.$ +s. arcia 0& (hil. ;00G 7eynes et al.$ +s. /arrera$ et al.$ 0@ (hil. 0;0G /anco 5ational$ etc. +s. -amus$ 30 (hil. 2@8) 3 !resent case does not &all Bithin either situation? ;ast "ara$ra"h o& Section 3/+ #ule 3. o& #ules o& Court a""lies The sale in fa+or of Macam was e2ecuted before the land subAect matter thereof was registered$ while the conflicting sale in fa+or of )agu!an Trading was e2ecuted after the same !ro!erty had been registered. The case$ therefore$ cannot be decide the case in the light of whate+er adAudicated cases there are co+ering the two situations mentioned. >hat should determine the issue are the !ro+isions of the last !aragra!h of #ection 3;$ 7ule 38 of the 7ules of -ourt$ to the effect that u!on the e2ecution and deli+ery of the final certificate of sale in fa+or of the !urchaser of land sold in an e2ecution sale$ such !urchaser <shall be substituted to and ac9uire all the right$ title$ interest and claim of the Audgment debtor to the !ro!erty as of the time of the le+y=. * Maron does not have claim and interest on (L) "ortion o& land at time o& levy #ammy Maron has no interest or claim on the 1D@ !ortion of the !ro!erty inherited by him and his co% heirs$ at the time of the le+y$ because for a considerable time !rior to the le+y$ his interest had already been con+eyed to Macam$ <fully and irretrie+ably.= / ;evy Bas void and o& no e&&ect -onse9uently$ subse9uent le+y made on the !ro!erty for the !ur!ose of satisfying the Audgment rendered against #ammy Maron in fa+or of the Manila Trading -om!any was +oid and of no effect. (/uson +s. ,icauco 13 (hil. 3;3%3;@G ,andig +s. *. #. -ommercial -om!any$ @8 (hil. 03@). 5 %orrens title did not cancel unre$istered sale and conse=uent conveyance o& title and oBnershi" The unregistered sale and the conse9uent con+eyance of title and ownershi! in fa+or of Macam could not ha+e been cancelled and rendered of no effect u!on the subse9uent issuance of the Torrens title o+er the entire !arcel of land. , #i$ht &i4ed and established cannot be overthroBn by arti&icial and technical $rounds :n the ine+itable conflict between a right of ownershi! already fi2ed and established under the -i+il ,aw andDor the #!anish Mortgage ,aw (which cannot be affected by any subse9uent le+y or attachment or e2ecutions) and a new law or system which would maCe !ossible the o+erthrowing of such ownershi! on admittedly artificial and technical grounds$ the former must be u!held and a!!lied. ) Circumstances does not @usti&y technicality to "revail? 6ustice and 7=uity 'n im!ortant circumstance must be notedG that u!on the e2ecution of the deed of sale in his fa+or by #ammy Maron$ Macam tooC !ossession of the land con+eyed as owner thereof$ and introduced considerable im!ro+ements therein. To de!ri+e him now of the same by sheer force of technicality would be against both Austice and e9uity. '250 -alion vs CA 'G # No ,).03 3ebruary 2)+ (..0 0 "irst )i+ision$ Medialdea (.)4 3 concurring
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3actsH 6n 2@ May 1833$ 7u!erto #abesaAe .r. sued to reco+er ownershi! of a !arcel of land (located at (anyawan$ #ogod$ #outhern ,eyteG T-T 111&@$ with an area of @8&3 s9.ms.$ assessed at (1@0)$ based on a !ri+ate document of absolute sale$ dated 1 .uly 180;$ allegedly e2ecuted by #egundo )alion$ who$ howe+er
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denied the fact of sale$ contending that the document sued u!on is fictitious$ his signature thereon$ a forgery$ and that subAect land is conAugal !ro!erty$ which he and his wife (B!ifania #abesaAe%)alion) ac9uired in 1800 from #aturnina #abesaAe as e+idenced by the <Bscritura de Venta 'bsoluta.= The s!ouses denied claims of #abesaAe that after e2ecuting a deed of sale o+er the !arcel of land$ they had !leaded with #abesaAe$ their relati+e$ to be allowed to administer the land because )alion did not ha+e any means of li+elihood. They admitted$ howe+er$ administering since 18;@$ ; !arcels of land in #ogod$ #outhern ,eyte$ which belonged to ,eonardo #abesaAe$ grandfather of #abesaAe$ who died in 18;0. They ne+er recei+ed their agreed 10I and 1;I J commission on the sales of co!ra and abaca$ res!ecti+ely. #abesaAe?s suit$ they countered$ was intended merely to harass$ !reem!t and forestall )alion?s threat to sue for these un!aid commissions. The trial court rendered its decision on 13 .anuary 18@&$ ordering )alion to deli+er to #abesaAe the !arcel of land subAect of the case and to e2ecute the corres!onding formal deed of con+eyance in a !ublic document in fa+or of #abesaAe (or in case of default$ the deed shall be e2ecuted in their behalf by the (ro+incial #heriff or his de!uty)$ ordering )alion to !ay #abesaAe the amount of (2$000 as attorney fees and (;00 as litigation fees$ and to !ay the costs. "rom the ad+erse decision of the trial court$ )alion a!!ealed$ assigning errors some of which$ howe+er$ were disregarded by the a!!ellate court$ not ha+ing been raised in the trial court. 6n 20 May 18@3$ the -ourt of '!!eals affirmed in toto the ruling of the trial court$ u!holding the +alidity of the sale of a !arcel of land by #egundo )alion in fa+or of 7u!erto #abesaAe$ .r. 1ence$ the !etition. The #u!reme -ourt denied the !etition$ and affirmed the decision of the -ourt of '!!eals u!holding the ruling of the trial courtG without costs. ( Admissibility o& a "rivate Britin$ #ection 21$ 7ule 132 of the 7ules of -ourt ((ri+ate writing$ its e2ecution and authenticity$ how !ro+ed) !ro+ides that </efore any !ri+ate writing may be recei+ed in e+idence$ its due e2ecution and authenticity must be !ro+ed either4 (a) /y anyone who saw the writing e2ecutedG (b) /y e+idence of the genuineness of the handwriting of the maCerG or (c) /y a subscribing witness.= 2 !roo& o& HandBritin$ #ection 23$ 7ule 132 of the 7ules of -ourt (1andwriting$ how !ro+ed.) !ro+ides that <The handwriting of a !erson may be !ro+ed by any witness who belie+es it to be the handwriting of such !erson$ and has seen the !erson write$ or has seen writing !ur!orting to be his u!on which the witness has acted or been charged$ and has thus ac9uired Cnowledge of the handwriting of such !erson. B+idence res!ecting the handwriting may also be gi+en by a com!arison$ made by the witness or the court$ with writings admitted or treated as genuine by the !arty against whom the e+idence is offered$ or !ro+ed to be genuine to the satisfaction of the Audge.= 3 7ach "arty must "rove his oBn a&&irmative alle$ations 'gainst )alion?s mere denial that he signed the document$ the !ositi+e testimonies of the instrumental witnesses 6gsoc (the one who !re!ared the deed) and Bs!ina$ aside from the testimony of #abesaAe$ must !re+ail. )alion has affirmati+ely alleged forgery$ but he ne+er !resented any witness or e+idence to !ro+e his claim of forgery. Bach !arty must !ro+e his own affirmati+e allegations (#ection 1$ 7ule 131$ 7ules of -ourt). * 3or$ery not "resumed? !resum"tion o& innocence :t is !resumed that a !erson is innocent of a crime or wrong (#ection ; (a)$ idem)$ and defense should ha+e come forward with clear and con+incing e+idence to show that #abesaAe committed forgery or caused said forgery to be committed$ to o+ercome the !resum!tion of innocence. Mere denial of ha+ing signed
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does not suffice to show forgery.
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3or$er Bould attem"t to &or$e an unnecessary si$nature Two signatures of #egundo ). )alion a!!ear on the face of the 9uestioned document$ one at the right corner bottom of the document and the other at the left hand margin thereof. The second signature is already a sur!lusage. ' forger would not attem!t to forge another signature$ an unnecessary one$ for fear he may commit a re+ealing error or an erroneous stroCe. 5 Conclusions and &indin$s o& &act by trial court entitled to $reat Bei$ht on a""eal '!!ellate courts ha+e consistently subscribed to the !rinci!le that conclusions and findings of fact by the trial courts are entitled to great weight on a!!eal and should not be disturbed unless for strong and cogent reasons$ since it is undeniable that the trial court is in a more ad+antageous !osition to e2amine real e+idence$ as well as to obser+e the demeanor of the witnesses while testifying in the case (-hase +. /uencamino$ #r.$ .7. 5o. ,%2038;$ May 13$ 18@;$ 130 #-7' 30;G (ring +. -ourt of '!!eals$ .7. 5o. ,%&100;$ 'ugust 18$ 18@;$ 13@ #-7' 1@;) , Article (3/) &or convenience+ not &or validity or en&orceability The !ro+ision of 'rticle 13;@ on the necessity of a !ublic document (i.e. <acts and contracts which ha+e for their obAect the creation$ transmission$ modification or e2tinction of real rights o+er immo+able !ro!erty must a!!ear in a !ublic instrument=) is only for con+enience$ not for +alidity or enforceability. :t is not a re9uirement for the +alidity of a contract of sale of a !arcel of land that this be embodied in a !ublic instrument. ) Contract o& sale is consensual ' contract of sale is a consensual contract$ which means that the sale is !erfected by mere consent. 5o !articular form is re9uired for its +alidity. *!on !erfection of the contract$ the !arties may reci!rocally demand !erformance ('rt. 1&3;$ 5--)$ i.e.$ the +endee may com!el transfer of ownershi! of the obAect of the sale$ and the +endor may re9uire the +endee to !ay the thing sold ('rt. 1&;@$ 5--). . thin$ -elivery? 74ecution o& &ormal deed o& conveyance in "ublic document e=uivalent to delivery o&
*nder 'rt. 1&8@$ 5--$ when the sale is made through a !ublic instrument$ the e2ecution of the corres!onding formal deed of con+eyance in a !ublic document thereof is e9ui+alent to the deli+ery of the thing. )eli+ery may either be actual (real) or constructi+e. Thus deli+ery of a !arcel of land may be done by !lacing the +endee in control and !ossession of the land (real) or by embodying the sale in a !ublic instrument (constructi+e). (0 Suit &or recovery o& oBnershi" is "ro"er 'rticle 1&3; of the -i+il -ode gi+es the !arties to a !erfected contract of sale the right to reci!rocally demand !erformance$ and to obser+e a !articular form$ if warranted$ ('rt. 13;3). #abesaAe?s com!laint sufficiently alleged a cause of action to com!el )alion to e2ecute a formal deed of sale$ and the suit for reco+ery of ownershi!$ which is !remised on the binding effect and +alidity inter !artes of the contract of sale$ merely seeCs consummation of said contract. (( Sale o& real "ro"erty may be in a "rivate instrument ' sale of a real !ro!erty may be in a !ri+ate instrument$ but that contract is +alid and binding between the !arties u!on its !erfection. 'nd a !arty may com!el the other !arty to e2ecute a !ublic instrument embodying their contract affecting real rights once the contract a!!earing in a !ri+ate instrument has been !erfected (#ee 'rt. 13;3).
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'2,0 -a$uilan vs 8AC 'G # No ;-5..,0 November 2)+ (.)) 0
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"irst )i+ision$ -ruz (.)4 & concur 3actsH Two lots were owned by )omingo Melad. The lots are claimed by both "eli2 )aguilan and '!olonia Melad (and her husband .ose Tagacay). 6n 28 .anuary 1802$ '!olonia Melad filed a com!laint against )aguilan in the then -": -agayan for reco+ery of a farm lot and a residential lot which she claimed she had !urchased from )omingo Melad in 18&3 and were now being unlawfully withheld by )aguilan. :n his answer$ )aguilan denied the allegation and a+erred that he was the owner of the said lots of which he had been in o!en$ continuous and ad+erse !ossession$ ha+ing ac9uired them from )omingo Melad in 18&1 and 18&3. The case was dismissed for failure to !rosecute but was refiled in 1803. 't the trial$ Melad !resented a deed of sale dated & )ecember 18&3$ !ur!ortedly signed by )omingo Melad and duly notarized$ which con+eyed the said !ro!erties to her for the sum of (@0.00. #he said the amount was earned by her mother as a worCer at the Tabacalera factory. #he claimed to be the illegitimate daughter of )omingo Melad$ with whom she and her mother were li+ing when he died in 18&;. #he mo+ed out of the farm only when in 18&0 "eli2 )anguilan a!!roached her and asCed !ermission to culti+ate the land and to stay therein. #he had agreed on condition that he would deli+er !art of the har+est from the farm to her$ which he did from that year to 18;@. The deli+eries ha+ing sto!!ed$ she then consulted the munici!al Audge who ad+ised her to file the com!laint against )anguilan. Melad?s mother$ her only other witness$ corroborated this testimony. )aguilan testified that he was the husband of :sidra Melad$ )omingo?s niece$ whom )omingo Melad and his wife .uana Malu!ang had taCen into their home as their ward as they had no children of their own. 1e and his wife li+ed with the cou!le in their house on the residential lot and hel!ed )omingo with the culti+ation of the farm. )omingo Melad signed in 18&1 a !ri+ate instrument in which he ga+e )aguilan the farm and in 18&3 another !ri+ate instrument in which he also ga+e him the residential lot$ on the understanding that the latter would taCe care of the grantor and would bury him u!on his death. )anguilan !resented three other witnesses to corroborate his statements and to !ro+e that he had been li+ing in the land since his marriage to :sidra and had remained in !ossession thereof after )omingo Melad?s death in 18&;. Two of said witnesses declared that neither the !laintiff nor her mother li+ed in the land with )omingo Melad. The trial court belie+ed )aguilan and rendered a decision based mainly on the issue of !ossession. 6n a!!eal$ howe+er$ the a!!ellate court u!held Melad as the true and lawful owner of the dis!uted !ro!erty$ holding that the !ri+ate instruments where )omingo Melad had con+eyed the land to )aguilan were null and +oid for reason that donation of real !ro!erty should be effected through a !ublic instrument. 1ence$ the !etition to the #u!reme -ourt. The #u!reme -ourt set aside the decision of the a!!ellate court and reinstated that of the trial court$ with costs against '!olonia Melad. ( 2nerous donations not covered by Articled ,*.+ re=uirin$ donations o& real "ro"erties be e&&ected throu$h a "ublic instrument -onsidering the language of the two !ri+ate instruments deli+ering the residential lots$ )omingo Melad did intend to donate the !ro!erties to )a9guilan. The donee$ howe+er$ was not mo+ed by !ure liberality. >hile truly donations$ the con+eyances were onerous donations as the !ro!erties were gi+en to )aguilan in e2change for his obligation to taCe care of the donee for the rest of his life and !ro+ide for his burial. 1ence$ it was not co+ered by the rule in 'rticle 3&8 of the -i+il -ode re9uiring donations of real !ro!erties to be effected through a !ublic instrument. 2 -octrine in Manalo vs de Mesa a""lies The !resent case is s9uarely under the doctrine laid down in Manalo +. )e Mesa$ where it was held that <the donation in 9uestion was made for a +aluable consideration$ since the donors made it conditional u!on the donees? bearing the e2!enses that might be occasioned by the death and burial of the donor$ a condition and obligation which the donee carried out in his own behalf and for his wife. Therefore$ in order to
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determine whether or not said donation is +alid and effecti+e$ it should be sufficient to demonstrate that$ as a
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contract$ it embraces the conditions the law re9uires and is +alid and effecti+e$ although not recorded in a !ublic instrument. 3 No evidence adduced to su""ort values e4chan$ed Bere dis"ro"ortionate or e=ual 5o e+idence has been adduced to su!!ort the contention that the +alues e2changed (the +alue of the lands donated and the ser+ices for which they were being e2changed) were dis!ro!ortionate or une9ual for the two transactions to be considered !ure or gratuitous donations of real rights$ and hence$ be effected through a !ublic instrument and not by mere !ri+ate writings. * -a$uilan took care o& the Melad s"ouses? !roo& o& onerous donation /oth the trial and a!!ellate court affirmed the factual allegation that )aguilan tooC care of )omingo Melad and later arranged for his burial in accordance with the condition im!osed by the donor. )aguilan farmed the land !ractically by himself and so !ro+ided for the donee (and his wife) during the latter !art of )omingo Melad?s life. :t may be assumed that there was a fair e2change between the donor and the donee that made the transaction an onerous donation. / -eed o& Sale in &avor o& A"olonia Melad sus"icious The deed of sale in fa+or of '!olonia Melad was sus!icious. :t was allegedly e2ecuted when '!olonia was only three years old and the consideration was su!!osedly !aid by her mother$ Maria Fedan$ from her earnings as a wage worCer in a factory. 6ne may well wonder why the transfer was not made to the mother herself$ who was after all the one !aying for the lands. The sale was made out in fa+or of '!olonia Melad although she had been using the surname Fedan$ her mother?s surname$ before that instrument was signed and in fact e+en after she got married. '+erment was also made that the contract was simulated and !re!ared after )omingo Melad?s death in 18&;. :t was also alleged that e+en after the su!!osed e2ecution of the said contract$ '!olonia Melad considered )omingo Melad the owner of the !ro!erties and that she had ne+er occu!ied the same. -onsidering these serious challenges$ the a!!ellate court could ha+e de+oted a little more time to e2amining the deed and the circumstances surrounding its e2ecution before !ronouncing its +alidity. 5 !resum"tion o& due e4ecution o& a "ublic instrument )ue e2ecution of a !ublic instrument is !resumed$ the !resum!tion is dis!utable and will yield to contradictory e+idence$ which in the !resent case was not refuted. , sale MeladMs testimony inconsistent+ &ails to "rove actual delivery o& thin$ sold in the alle$ed deed o&
B+en assuming the +alidity of the deed of sale$ the record shows that Melad did not taCe !ossession of the dis!uted !ro!erties and indeed waited until 1802 to file the action for reco+ery of the lands from )aguilan. :f she did ha+e !ossession$ she transferred the same to )aguilan in 18&0$ by her own sworn admission$ and mo+ed out to another lot belonging to her ste!%brother. 1er claim that )aguilan was her tenant (later changed to administrator) was disbelie+ed by the trial court$ and !ro!erly so$ for its inconsistency. :n short$ she failed to show that she consummated the contract of sale by actual deli+ery of the !ro!erties to her and her actual !ossession thereof in conce!t of !urchaser%owner. ) Garchitorena vs Almeda? %raditionH 2Bnershi" does not "ass by mere sti"ulation but only by delivery 's held in "architorena v. Al#e$a$ it is a fundamental and elementary !rinci!le that ownershi! does not !ass by mere sti!ulation but only by deli+ery (-i+il -ode$ 'rt. 108;G "idelity and #urety -o. +. >ilson$ @ (hil. ;1)$ and the e2ecution of a !ublic document does not constitute sufficient deli+ery where the !ro!erty in+ol+ed is in the actual and ad+erse !ossession of third !ersons ('ddison +s. "eli2$ 3@ (hil. &0&G Masallo +s. -esar$ 38 (hil. 13&)$ it becomes incontestable that e+en if included in the contract$ the ownershi! of the !ro!erty in dis!ute did not !ass to the +endee.
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. Garchitorena vs Almeda? !ro"er action a$ainst "resent "ossessorsH s"eci&ic "er&ormance o& sale and not revindicacion 5ot ha+ing become the owner for lacC of deli+ery$ the +endee cannot !resume to reco+er the !ro!erty from its !resent !ossessors. 1is action$ therefore$ is not one of re+indicacion$ but one against his +endor for s!ecific !erformance of the sale to him. . Non mudis "actis+ sed traditione dominia rerum trans&eruntur :n %i$elity an$ Deposit Co. v. &ilson $ it was declared that it is a fundamental !rinci!le in all matters of contracts and a well%Cnown doctrine of law that <non mudis !actis$ sed traditione dominia rerum transferuntur=. 's established in !aragra!h 2 of article 008 of -i+il -ode$ the ownershi! and other !ro!erty rights are ac9uired and transmitted by law$ by gift$ by testate or intestate succession$ and$ in conse9uence of certain contracts$ by tradition. The logical a!!lication of this dis!osition article 108; !rescribes that a creditor has the rights to the fruits of a thing from the time the obligation to deli+er it arises. 1owe+er$ he shall not ac9uire a real right (and the ownershi! is surely such) until the !ro!erty has been deli+ered to him. :n accordance with such dis!osition and !ro+isions the deli+ery of a thing constitutes a necessary and indis!ensable re9uisite for the !ur!ose of ac9uiring the ownershi! of the same by +irtue of a contract. (0 -octrine o& trans&er o& "ro"erty by mere consent not admitted 's Manresa states in his -ommentaries on the -i+il -ode$ +olume 10$ !ages 338 and 3&04 <6ur law does not admit the doctrine of the transfer of !ro!erty by mere consent but limits the effect of the agreement to the due e2ecution of the contract . . . The ownershi!$ the !ro!erty right$ is only deri+ed from the deli+ery of a thing . . . < (( Actual delivery o& the thin$ sold The -ode im!oses u!on the +endor the obligation to deli+er the thing sold. The thing is considered to be deli+ered when it is !laced in the hands and !ossession of the +endee. (-i+il -ode$ art. 1&02). :t is true that the same article declares that the e2ecution of a !ublic instrument is e9ui+alent to the deli+ery of the thing which is the obAect of the contract$ but$ in order that this symbolic deli+ery may !roduce the effect of tradition$ it is necessary that the +endor shall ha+e had such control o+er the thing sold that$ at the moment of the sale$ its material deli+ery could ha+e been made. :t is not enough to confer u!on the !urchaser the ownershi! and the right of !ossession. The thing sold must be !laced in his control. >hen there is no im!ediment whate+er to !re+ent the thing sold !assing into the tenancy of the !urchaser by the sole will of the +endor$ symbolic deli+ery through the e2ecution of a !ublic instrument is sufficient. /ut if$ notwithstanding the e2ecution of the instrument$ the !urchaser cannot ha+e the enAoyment and material tenancy of the thing and maCe use of it himself or through another in his name$ because such tenancy and enAoyment are o!!osed by the inter!osition of another will$ then fiction yields to reality J the deli+ery has not been effected. :n the !resent case$ )aguilan and not Melad is in actual !ossession of the litigated !ro!erties. (2 8n case the res"ective claims o& the "arties are Beak? Santos A 7s"inosa v 7ste@ada B+en if the res!ecti+e claims of the !arties were both to be discarded as being inherently weaC$ the decision should still incline in fa+or of )aguilan !ursuant to the doctrine announced in 'antos ( )spinosa v. )ste*a$a$ where the -ourt announced that if the claim of both the !laintiff and the defendant are weaC$ Audgment must be for the one who is in !ossession$ as he is !resumed to be the owner$ and cannot be obliged to show or !ro+e a better right.
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'2)0 -e la Cavada v -ia: 'G # No ;-((55) A"ril (+ (.() 0 "irst )i+ision$ .ohnson (.)4 ; concurring
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3actsH 6n 1; 5o+ember 1812$ 'ntonio )iaz and 'ntonio Bnri9uez de la -a+ada entered into a <contract of o!tion= for the latter to !urchase the former?s hacienda at (itogo$ within the !eriod necessary for the a!!ro+al and issuance of a Torrens title thereto by the o+ernment for (30$000 in cash or (&0$000 with 0I interest !er annum within 0 years with due security$ i.e. the 100 hectares of land in (itogo$ TayabasG containing 20$000 coconut trees and 10$000 ni!a%!alm trees sold to Bnri9uez for (30$000. #ubse9uently$ Bnri9uez informed )iaz of his conformity with the letter of o!tion under the condition that he shall send a sur+eyor to sur+ey the said !ro!erty$ and to a!!ly to the o+ernment for a Torrens title therefor$ and$ if the e2!enses incurred for the same should not e2ceed (1$000$ he shall !ay the (;00 and you the other (;00G (ro+ided$ howe+er$ that )iaz shall gi+e the sur+eyor all necessary assistance during his stay at the haciendaG and that he shall !ay the !urchase !rice to you in conformity with our letter of o!tion of this date$ and after the Torrens title shall ha+e been officially a!!ro+ed. #oon after the e2ecution of said contract$ and in !art com!liance with the terms thereof$ )iaz !resented 2 !etitions in the -ourt of ,and 7egistration (13808 and 13818)$ each for the !ur!ose of obtaining the registration of a !art of the <1acienda de (itogo.= #aid !etitions were granted$ and each !arcel was registered and a certificate of title was issued for each !art under the Torrens system to )iaz. ,ater$ and !retending to com!ly with the terms of said contract$ )iaz offered to transfer to Bnri9uez one of said !arcels only$ which was a !art of said <hacienda.= Bnri9uez refused to acce!t said certificate for a !art only of said <hacienda= u!on the ground that it was only a !art of the <1acienda de (itogo$= and under the contract he was entitled to a transfer to him a all said <hacienda.= 7aised in the lower court$ )iaz? theorized that the contract of sale of said <1acienda de (itogo= included only 100 hectares$ more or less$ of said <hacienda$= and that offering to con+ey to Bnri9uez a !ortion of said <hacienda$= and that by offering to con+ey to Bnri9uez a !ortion of said <hacienda= com!osed of <100 hectares$ more or less$= he thereby com!lied with the terms of the contract. Bnri9uez theorized$ on the other hand$ that he had !urchased all of said <hacienda$= and that the same contained$ at least$ 100 hectares$ more or less. The lower court sustained the contention of Bnri9uez$ that the sale was a sale of the <1acienda de (itogo= and not a sale of a !art of it. The -ourt ordered )iaz$ within 30 days from the date u!on which this decision becomes final$ con+ey to Bnri9uez a good and sufficient title in fee sim!le to the -ourt of ,and 7egistration$ u!on !ayment or legal tender of !ayment by Bnri9uez of the sum of (30$000 in cash$ and u!on Bnri9uez gi+ing security a!!ro+ed by this court for the !ayment within the term of 0 years from the date of the con+eyance for the additional sum of (&0$000 with interest at the rate of 0I !er annum. The -ourt further ordered and adAudged that in the e+ent of the failure of )iaz to e2ecute the con+eyance$ Bnri9uez has and reco+er Audgment against him$ )iaz$ for the sum of (20$000$ with interest at the rate of 0I (0I !er annum from the date u!on which the con+eyance should ha+e been made). "rom the Audgment$ )iaz a!!ealed. The #u!reme -ourt affirmed the Audgment of the lower court$ with costs. ( A$reement betBeen "arties in civil liti$ation valid 6n 21 5o+ember 181&$ the !arties agreed (with reference to the method of !resenting their !roof) that each of the litigating !arties shall !resent his e+idence before )on "eli!e -anillas$ assistant clerC of the -": Manila$ who$ for such !ur!ose$ should be a!!ointed commissionerG that said commissioner shall set a day and hour for the !resentation of the e+idence$ both oral and documentary$ and in the stenogra!hic notes shall ha+e record entered of all obAections made to the e+idence by either !arty$ in order that they may afterwards be decided by the courtG that the transcri!tion of the stenogra!hic notes$ containing the record of the e+idence taCen$ shall be !aid for in e9ual shares by both !artiesG and that at the close of the taCing of the e+idence$ each of the !arties shall file his brief in res!ect to such e+idence$ whereu!on the case as it then stands shall be submitted to the decision of the court. #aid agreement was a!!ro+ed by the lower court. There is nothing in the law nor in !ublic !olicy which !rohibits the !arties in a ci+il litigation from maCing an agreement on the method of !resentation of their !roofs. >hile the law concedes to !arties litigant$ generally$ the right to ha+e their !roof taCen in the !resence of the Audge$ such a right is a renounceable one.
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:n a ci+il action the !arties litigant ha+e a right to agree$ outside of the court$ u!on the facts in litigation. *nder certain conditions the
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!arties litigant ha+e a right to taCe the de!ositions of witnesses and submit the sworn statements in that form to the court. The !roof$ as it was submitted to the court in the !resent case$ by +irtue of said agreement$ was$ in effect$ in the form of a de!osition of the +arious witnesses !resented. 1a+ing agreed to the method of taCing the !roof$ and the same ha+ing been taCing in com!liance with said agreement$ it is now too late$ there being no law to the contrary$ for them to deny and re!udiate the effect of their agreement. &.iunas vs. !o#a, R.;. 7o. %%414, !a#c+ %%, %'%8D .e+# vs. 5evy Be#6anos, R.;. 7o. %22%%, !a#c+ %', %'%8.( 5ot only is there no law !rohibiting the !arties from entering into an agreement to submit their !roof to the court in ci+il actions$ but it may be a method highly con+enient$ not only to the !arties$ but to busy courts. The Audgment of the lower court$ therefore$ should not be modified or re+ersed. 2 Contract o&&ered in evidence+ and not ob@ected to? thus+ Bas "ro"erly "resented The contract was offered in e+idence and admitted as !roof without obAection. #aid contract was$ therefore$ !ro!erly !resented to the court as !roof. 5ot only was the contract before the court by reason of its ha+ing been !resented in e+idence$ but that )iaz himself made said contract an integral !art of his !leadings. )iaz admitted the e2ecution and deli+ery of the contract$ and alleged that he made an effort to com!ly with its terms. 1is only defense is that he sold to Bnri9uez a !art of the <hacienda= only and that he offered$ in com!liance with the terms of the contract$ to con+ey to Bnri9uez all of the land which he had !romised to sell. 3 8nade=uacy o& consideration raised &or the &irst time on a""eal >ith reference to the obAection that there was no consideration for said contract it may be said (a) that the contract was for the sale of a definite !arcel of land4 (b) that it was reduced to writingG (c) that )iaz !romised to con+ey to Bnri9uez said !arcel of landG (d) that Bnri9uez !romised to !ay therefor the sum of (30$000 in the manner !rescribed in said contractG (e) that )iaz admitted the e2ecution and deli+ery of the contract and alleged that he made an effort to com!ly with the same and re9uested Bnri9uez to com!ly with his !art of the contractG and (f) that no defense or !re+ention was made in the lower court that there was no consideration for his contract. 1a+ing admitted the e2ecution and deli+ery of the contract$ ha+ing admitted an attem!t to com!ly with its terms$ and ha+ing failed in the court below to raise any 9uestion whatsoe+er concerning the inade9uacy of consideration$ it is rather late$ in the face of said admissions$ to raise that 9uestion for the first time in the #u!reme -ourt. * A "romise made in accordance Bith &orms re=uired by laB may be a $ood consideration &or a another "artyMs "romise ' !romise made by one !arty$ if made in accordance with the forms re9uired by the law$ may be a good consideration (causa) for a !romise made by another !arty. ('rt. 123&$ -i+il -ode.) The consideration (causa) need not !ass from one to the other at the time the contract is entered into. "or e2am!le$ ' !romises to sell a certain !arcel of land to / for the sum of (30$000. :f '$ by +irtue of the !romise of / to (30$000$ !romises to sell said !arcel of land to / for said sum$ then the contract is com!lete$ !ro+ided they ha+e com!lied with the forms re9uired by the law. ' cannot enforce a com!liance with the contract and re9uire / to !ay said sum until he has com!lied with his !art of the contract. / Contract not an Io"tional contractK in its ordinary meanin$+ but an absolute "romise to sell a land &or a &i4ed "rice u"on de&inite condition The contract was not an <o!tional contract= as that !hrase in generally used. :t is clearly an absolute !romise to sell a definite !arcel of land for a fi2ed !rice u!on definite conditions. )iaz !romised to con+ey to Bnri9uez the land in 9uestion as soon as the same was registered under the Torrens system$ and Bnri9uez !romised to !ay to )iaz the sum of (30$000$ under the condition named$ u!on the ha!!ening of that e+ent.
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Contract o& o"tion distin$uished &rom "resent contract The contract was not what is generally Cnown as a <contract of o!tion.= :t differs +ery essentially from a contract of o!tion. 'n o!tional contract is a !ri+ilege e2isting in one !erson$ for which he had !aid a consideration$ which gi+es him the right to buy$ for e2am!le$ certain merchandise of certain s!ecified
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!ro!erty$ from another !erson$ if he chooses$ at any time within the agreed !eriod$ at a fi2ed !rice. The contract of o!tion is a se!arate and distinct contract from the contract which the !arties may enter into u!on the consummation of the o!tion. ' consideration for an o!tional contract is Aust as im!ortant as the consideration for any other Cind of contract. :f there was no consideration for the contract of o!tion$ then it cannot be enforced any more than any other contract where no consideration e2ists. +o illustrate, ' and / the sum of (100$000 for the o!tion of buying his !ro!erty within the !eriod of 30 days. >hile it is true that the conditions u!on which ' !romises to buy the !ro!erty at the end of the !eriod mentioned are usually fi2ed in the o!tion$ the consideration from the consideration of the contract with reference to which the o!tion e2ists. ' contract of o!tion is a contract by +irtue of the terms of which the !arties thereto !romise and obligate themsel+es to enter into another contract at a future time$ u!on the ha!!ening of certain e+ents$ or the fulfillment of certain conditions. , ;ayin$ the &oundation &or action dama$es >hen )iaz alleged that he had com!lied with his !art of the contract and demanded that Bnri9uez should immediately com!ly with his !art of the same$ he e+ident was laying the foundation for an action damages$ the nullification or a s!ecific com!liance with contract. ) Contract made Bith 7nri=ue:+ and not #osenstock *!on the face of the contract$ the contract was made by )iaz with Bnri9uez. 5ot ha+ing raised the contention$ that the contract was made with 7osenstocC$ Blser Q -o. and not with Bnri9uez$ in the lower court$ and ha+ing admitted the e2ecution and deli+ery of the contract in 9uestion with the !laintiff$ )iaz? admission is conclusi+e u!on that 9uestion and need not be further discussed. . Action not "remature? !ayment simultaneous Bith delivery o& deed o& conveyance but not need not be made until deed o& conveyance is o&&ered The action was not !remature. The contention that Bnri9uez had not !aid nor offered to !ay the !rice agreed u!on$ under the conditions named$ for the land in 9uestion was not raised in the lower court$ which fact$ ordinarily$ would be a sufficient answer to the contention of the a!!ellant. #till$ )iaz could not demand the !ayment until he had offered the deeds of con+eyance$ in accordance with the terms of the contract$ as he did not offer to com!ly with the terms of his contract. 1e offered to com!ly !artially with the terms of the contract$ but not fully. >hile the !ayment must be simultaneous with the deli+ery of the deeds of con+eyance$ the !ayment need not be made until deed of con+eyance is offered. Bnri9uez stood ready and willing to !erform his !art of the contract immediately u!on on the !art of )iaz. ('rts. 12;@ and 1&;1 of -i+il -ode.) (0 7nri=ue: stood ready to com"ly :t cannot be said that )iaz was not obligated to sell the <1acienda de (itogo= to Bnri9uez due to Bnri9uez? alleged nonfulfillment$ renunciation$ abandonment and negligence$ as such 9uestion was not !resented to the lower court. #till$ the record shows that Bnri9uez$ at all times$ insisted u!on a com!liance with the terms of the contract on the !art of )iaz$ standing ready to com!ly with his !art of the same. Bnri9uez was constantly insisting u!on com!liance with the terms of the contract$ to wit$ a con+eyance to him of the <1acienda de (itogo= by )iaz. 5aturally$ he refused$ under the contract$ to acce!t a con+eyance of a !art only be said <hacienda.= (( No modi&ication due to 7nri=ue:M claim &or dama$es The only !roof u!on the 9uestion of damages suffered by Bnri9uez for the noncom!liance with the terms of the contract in 9uestion on the !art of )iaz is that Bnri9uez$ in contem!lation of the com!liance with the terms of the contract on the !art of )iaz$ entered into a contract with a third !arty to sell the said <hacienda= at a !rofit of (30$000. That !roof is not dis!uted. 5o attem!t was made in the lower court to deny that fact. The !roof shows that the !erson with whom Bnri9uez had entered into a conditional sale of the land in 9uestion had made a de!osit for the !ur!ose of guaranteeing the final consummation of the that contract.
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/y reason of the failure of )iaz to com!ly with the contract here in 9uestion$ )iaz was obliged to return the
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sum de!osited by said third !arty with a !romise to !ay damages. The record does not show why Bnri9uez did not asC for damages in the sum of (30$000$ but asCed for a Audgment only in the sum of (20$000. -onsidering the fact that he neither asCed for a Audgment for more than (20$000 nor a!!ealed from the Audgment of the lower court$ Bnri9uez? re9uest to modify the Audgment of the lower court cannot be granted. (2 Subse=uent sale o& land to third "erson not an e4cuse &or com"liance o& terms o& contracts or to ansBer &or dama$es The mere fact that )iaz had sold a !art of the <hacienda= to other !erson$ is no sufficient reason for not re9uiring a strict com!liance with the terms of his contract with Bnri9uez$ or to answer in damages for his failure. ('rts. 1101 and 12;1 of the -i+il -ode.) '2.0 -elta Motors Sales vs Niu >im -uan 'G # No 5(0*3 Se"tember 2+ (..2 0 #econd )i+ision$ 5ocon (.)4 & concurring 3actsH 6n ; .uly 183;$ 5iu Eim )uan and -han "ue Bng (defendants) !urchased from )elta Motor #ales -or!oration 3 units of H)':E:5? air%conditioner all +alued at (18$3;0.00. The deed of sale sti!ulates that the defendants shall !ay a down !ayment of (33&.00 and the balance of (1@$;30.00 shall be !aid by them in 2& installmentsG that the title to the !ro!erties !urchased shall remain with )elta Motors until the !urchase !rice thereof is fully !aidG that if any two installments are not !aid by the defendants on their due dates$ the whole of the !rinci!al sum remaining un!aid shall become due$ with interest at the rate of 1&I !er annum4 and in case of a suit$ the defendants shall !ay an amount e9ui+alent to 2;I of the remaining un!aid obligation as damages$ !enalty and attorney?s feesG that to secure the !ayment of the balance of (1@$;30.00 the defendants Aointly and se+erally e2ecuted in fa+or of the )elta Motors a !romissory note. The 3 air% conditioners were deli+ered to and recei+ed by the defendants. 'fter !aying the amount of (0$800.00$ the defendants failed to !ay at least 2 monthly installmentsG that as of 0 .anuary 1833$ the remaining un!aid obligation of the defendants amounted to (12$820.0@. #tatements of accounts were sent to the defendants and the )elta Motors? collectors !ersonally went to the former to effect collections but they failed to do so. /ecause of the unAustified refusal of the defendants to !ay their outstanding account and their wrongful detention of the !ro!erties in 9uestion$ )elta Motors tried to reco+er the said !ro!erties e2tra%Audicially but it failed to do so. The matter was later referred by )elta Motors to its legal counsel for legal action. :n its +erified com!laint dated 2@ .anuary 1833$ )elta Motors !rayed for the issuance of a writ of re!le+in$ which the -ourt granted in its 6rder dated 2@ "ebruary 1833$ after )elta Motors !osted the re9uisite bond. 6n 11 '!ril 1833$ )elta Motors$ by +irtue of the writ$ succeeded in retrie+ing the !ro!erties in 9uestion. 's of 3 6ctober 1833$ the outstanding account of the defendants is only in the amount of (0$1@@.28 as shown by the com!utation$ after deducting the interests in arrears$ co+er charges$ re!le+in bond !remiums$ the +alue of the units re!ossessed and the liCe. :n +iew of the failure of the defendants to !ay their obligations$ the amount of (0$800.00 which had been !aid by way of installments were treated as rentals for the units in 9uestion for 2 years !ursuant to the !ro+isions of !aragra!h ; of the )eed of -onditional #ale. The trial court !romulgated its decision on 11 6ctober 1833 ordering the defendants to !ay )elta Motors the amount of (0$1@@.28 with a 1&I !er annum interest which was due on the 3 <)aiCin= air%conditioners the defendants !urchased from )elta Motors under a )eed of -onditional #ale$ after the same was declared rescinded by the trial court. They were liCewise ordered to !ay )elta Motors (1$000.00 for and as attorney?s fees. 5iu Eim )uan and -han "ue Bng a!!ealed. The case was ele+ated to the #u!reme -ourt by the -ourt of '!!eals$ in its 7esolution of 20 May 18@2$ on a !ure 9uestion of law.
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The #u!reme -ourt set aside the Audgment of the trial court in -i+il -ase 2;;3@ and dismissed the com!laint filed by )elta Motor #ales -or!orationG without costs.
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( %reatment o& installment "ayments as rentals not unconscionable Feven i& it a""ro4imates (L3 o& cost o& the 3 airconditionersG )efendants cannot com!lain that their down!ayment of (33&.00 and installment !ayments of (;$0;;.82 were treated as rentals$ e+en though the total amount of (0$&28$82 which they had !aid$ a!!ro2imates one%third (1D3) of the cost of the 3 air%conditioners. ' sti!ulation in a contract that the installments !aid shall not be returned to the +endee is +alid insofar as the same may not be unconscionable under the circumstances is sanctioned by 'rticle 1&@0 of the 5ew -i+il -ode. The monthly installment !ayable by defendants was (33&.00. The (;$0;;.82 installment !ayments corres!ond only to 3 monthly installments. #ince they admit ha+ing used the air%conditioners for 22 months$ this means that they did not !ay 1; monthly installments on the said air%conditioners and were thus using the same "7BB for said !eriod$ to the !reAudice of )elta Motors. *nder the circumstances$ the treatment of the installment !ayments as rentals cannot be said to be unconscionable. 2 #emedies available to vendor in a sale o& "ersonal "ro"erty "ayable in installments The +endor in a sale of !ersonal !ro!erty !ayable in installments may e2ercise one of three remedies$ namely$ (1) e2act the fulfillment of the obligation$ should the +endee fail to !ayG (2) cancel the sale u!on the +endee?s failure to !ay two or more installmentsG (3) foreclose the chattel mortgage$ if one has been constituted on the !ro!erty sold$ u!on the +endee?s failure to !ay two or more installments. The third o!tion or remedy$ howe+er$ is subAect to the limitation that the +endor cannot reco+er any un!aid balance of the !rice and any agreement to the contrary is +oid ('rt. 1&@&). 3 #emedies alternative+ not cumulative The 3 remedies are alternati+e and 56T cumulati+e. :f the creditor chooses one remedy$ he cannot a+ail himself of the other two. * "rice Air-conditionin$ units re"ossessed+ bars action to e4act "ayment &or balance o& the
)elta Motors had taCen !ossession of the 3 air%conditioners$ through a writ of re!le+in when defendants refused to e2tra%Audicially surrender the same. The case )elta Motors filed was to seeC a Audicial declaration that it had +alidly rescinded the )eed of -onditional #ale. )elta Motors thus chose the second remedy of 'rticle 1&@& in seeCing enforcement of its contract with defendants. 1a+ing done so$ it is barred from e2acting !ayment from defendants of the balance of the !rice of the three air%conditioning units which it had already re!ossessed. :t cannot ha+e its caCe and eat it too. '300 -i$nos vs ;umun$sod 'G # No ;-/.255 3ebruary 2.+ (.)) 0 Third )i+ision$ /idin (.)4 & concurring 3actsH The s!ouses #il+estre )ignos and :sabel ,umungsod were owners of a !arcel of land (,ot 3&;3$ 6!on -adastre)$ of the cadastral sur+ey of 6!on$ ,a!u%,a!u -ity. 6n 3 .une 180;$ the )ignos s!ouses sold the said !arcel of land to 'tilano .. .abil for the sum of (2@$000.00$ !ayable in two installments$ with an assum!tion of indebtedness with the "irst :nsular /anC of -ebu in the sum of (12$000.00$ which was !aid and acCnowledged by the +endors in the deed of sale e2ecuted in fa+or of .abil$ and the ne2t installment in the sum of (&$000.00 to be !aid on or before 1; #e!tember 180;. 6n 2; 5o+ember 180;$ the )ignos s!ouses sold the same land in fa+or of ,uciano -abigas and .o+ita ,. )e -abigas$ who were then *# citizens$ for the !rice of (3;$000.00. ' deed of absolute sale was e2ecuted by the )ignos s!ouses in fa+or of the -abigas s!ouses$ and which was registered in the 6ffice of the 7egister of )eeds !ursuant to the !ro+isions of 'ct 33&&.
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's the )ignos s!ouses refused to acce!t from .abil the balance of the !urchase !rice of the land$ and as .abil
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disco+ered the second sale made by the )ignos s!ouses to the -abigas s!ouses$ .abil filed the suit with the -": -ebu (-i+il -ase 23%,). 'fter due trial$ the -": -ebu rendered its )ecision on 2; 'ugust 1832$ declaring the deed of sale e2ecuted on 2; 5o+ember 180; in fa+or of the -abigas s!ouses null and +oid$ and the deed of sale in fa+or of .abil not rescindedG ordering .abil to !ay the sum of (10$0000 to the )ignos s!ouses u!on the e2ecution of the )eed of 'bsolute #ale and when the decision of the case becomes final and e2ecutoryG ordering .abil to reimburse the -abigas cou!le reasonable amount corres!onding to the e2!enses or costs of the hollow blocC fence$ so far constructedG ordering the )ignos s!ouses to return to the -abigas s!ouses the sum of (3;$000G and maCing the writ of !reliminary inAunction issued 23 #e!tember 1800 !ermanent by +irtue of the decision. .abil and the )ignos s!ouses a!!ealed to the -ourt of '!!eals (-'% 7 ;&383%7). 6n 31 .uly 18@1$ the -ourt of '!!eals affirmed the decision of the lower court e2ce!t as to the !ortion ordering .abil to !ay for the e2!enses incurred by the -abigas s!ouses for the building of a fence u!on the land in 9uestion. ' motion for reconsideration of said decision was filed by the )ignos s!ouses$ but on 10 )ecember 18@1$ a resolution was issued by the -ourt of '!!eals denying the motion for lacC of merit. 1ence$ the !etition for re+iew on certiorari. :n the resolution of 10 "ebruary 18@2$ the #econd )i+ision of the #u!reme -ourt denied the !etition for lacC of merit. ' motion for reconsideration of said resolution was filed on 10 March 18@2. :n the resolution dated 20 '!ril 18@2$ .abil was re9uired to comment thereon$ which comment was filed on 11 May 18@2 and a re!ly thereto was filed on 20 .uly 18@2 in com!liance with the resolution of 10 .une 18@2 . 6n 8 'ugust 18@2$ acting on the motion for reconsideration and on all subse9uent !leadings filed$ the #u!reme -ourt resol+ed to reconsider its resolution of 10 "ebruary 18@2 and to gi+e due course to the !resent !etition. 6n 0 #e!tember 18@2$ .abil filed a reAoinder to re!ly of the )ignos s!ouses which was noted on the resolution of 20 #e!tember 18@2. The #u!reme -ourt dismissed the !etition filed for lacC of merit and affirmed the assailed decision of the -ourt of '!!eals in toto. ( Contract is a -eed o& Sale The contract in 9uestion is a )eed of #ale$ with the conditions that (1) 'tilano . .abil is to !ay the amount of Twel+e Thousand (esos ((12$000.00) (hili!!ine -urrency as ad+ance !aymentG (2) 'tilano . .abil is to assume the balance of Twel+e Thousand (esos ((12$000.00) ,oan from the "irst :nsular /anC of -ebuG (3) 'tilano . .abil is to !ay the said s!ouses the balance of "our Thousand (esos ((&$000.00) on or before #e!tember 1;$ 180;. (&) That the said s!ouses agreed to defend the said 'tilano . .abil from other claims on the said !ro!ertyG (;) the s!ouses agrees to sign a final deed of absolute sale in fa+or of 'tilano . .abil o+er the abo+e%mentioned !ro!erty u!on the !ayment of the balance of "our Thousand (esos.= /y and large$ the issues in the !resent case ha+e already been settled by the -ourt in analogous cases. 2 -eed o& Sale absolute althou$h denominated as a I-eed o& Conditional SaleK ' deed of sale is absolute in nature although denominated as a <)eed of -onditional #ale= where nowhere in the contract in 9uestion is a !ro+iso or sti!ulation to the effect that title to the !ro!erty sold is reser+ed in the +endor until full !ayment of the !urchase !rice$ nor is there a sti!ulation gi+ing the +endor the right to unilaterally rescind the contract the moment the +endee fails to !ay within a fi2ed !eriod & aguba v. E8a. 8e 5eon, %32 SCRA $22D 5uzon .#o/e#age Co., -nc. v. !a#iti6e .uil8ing Co., -nc., 81 SCRA 300(. :n the !resent case$ there is no sti!ulation reser+ing the title of the !ro!erty on the +endors nor does it gi+e them the right to unilaterally rescind the contract u!on non%!ayment of the balance thereof within a fi2ed !eriod. 3 7lements o& valid contract "resent? Article (*/) 'll the elements of a +alid contract of sale under 'rticle 1&;@ of the -i+il -ode$ are !resent$ such as4 (1) consent or meeting of the mindsG (2) determinate subAect matterG and (3) !rice certain in money or its e9ui+alent.
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2Bnershi" trans&erred u"on actual or constructive delivery? 3roilan vs !an 2riental Shi""in$ :n addition$ 'rticle 1&33 of the same -ode !ro+ides that <The ownershi! of the thing sold shall be transferred to the +endee u!on actual or constructi+e deli+ery thereof. 's a!!lied in the case of "roilan +. (an 6riental #hi!!ing -o.$ et al. (12 #-7' 230)$ the #u!reme -ourt held that in the absence of sti!ulation to the contrary$ the ownershi! of the thing sold !asses to the +endee u!on actual or constructi+e deli+ery thereof. . / Actual delivery made in the "resent case >hile there was no constructi+e deli+ery of the land sold in the !resent case$ as subAect )eed of #ale is a !ri+ate instrument$ it is beyond 9uestion that there was actual deli+ery thereof. 's found by the trial court$ the )ignos s!ouses deli+ered the !ossession of the land in 9uestion to .abil as early as 23 March 180; so that the latter constructed thereon #ally?s /each 7esort also Cnown as .abil?s /each 7esort in March$ 180;G Mactan >hite /each 7esort on 1; .anuary 1800 and /e+irlyn?s /each 7esort on 1 #e!tember 180;. #uch facts were admitted by the )ignos s!ouses. 5 Contem"oraneous acts shoB that absolute deed o& sale Bas intended The -ourt of '!!eals in its resolution dated 10 )ecember 18@1 found that the acts of the )ignos s!ouses$ contem!oraneous with the contract$ clearly show that an absolute deed of sale was intended by the !arties and not a contract to sell. , Subse=uent sale to the Cabi$as s"ouses null and void >hen the )ignoes s!ouses sold said land to the -abigas s!ouses$ they were no longer owners of the same and the sale is null and +oid. ) Code %a$uba vs Vda -e ;eon on all &ours? Articles (/.2 o& the Civil
'!!lying the rationale of the case of Taguba +. Vda. de ,eon (su!ra) which is on all fours with the !resent case$ the contract of sale being absolute in nature is go+erned by 'rticle 1;82 of the -i+il -ode. The )ignos s!ouses ne+er notified .abil by notarial act that they were rescinding the contract$ and neither did they file a suit in court to rescind the sale. . Article (3/) o& the Civil Code+ Acts and contracts &or the e4tin$uishments o& rea=l ri$hts over immovable "ro"erty must a""ear in "ublic document The most that the )ignos s!ouses were able to show is a letter of -i!riano 'mistad who$ claiming to be an emissary of .abil$ informed the )ignos s!ouses not to go to the house of .abil because the latter had no money and further ad+ised the )ignos s!ouses to sell the land in litigation to another !arty. There is no showing that 'mistad was !ro!erly authorized by .abil to maCe such e2tra Audicial rescission for the latter who$ on the contrary$ +igorously denied ha+ing sent 'mistad to tell the )ignos s!ouses that he was already wai+ing his rights to the land in 9uestion. *nder 'rticle 13;@ of the -i+il -ode$ it is re9uired that acts and contracts which ha+e for their obAect the e2tinguishment of real rights o+er immo+able !ro!erty must a!!ear in a !ublic document. (0 Sli$ht delay by one "arty not su&&icient $round &ro rescission >here time is not of the essence of the agreement$ a slight delay on the !art of one !arty in the !erformance of his obligation is not a sufficient ground for the rescission of the agreement (Taguba +. Vda. de ,eon$ su!ra). -onsidering that .abil has only a balance of (&$000.00 and was delayed in !ayment only for one month$ e9uity and Austice mandate as in the case that .abil be gi+en an additional !eriod within which to com!lete !ayment of the !urchase !rice.
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'3(0 Dizon v. CA, 302 SCRA 288
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'320 -oromal vs CA 'G # No ;-350)3 Se"tember /+ (.,/ 0 Bn /anc$ /arredo (.)4 0 concurring$ 2 tooC no !art$ 2 on lea+e 3actsH ,ot 3;0& of the cadastral sur+ey of :loilo$ situated in the !oblacion of ,a (az$ one of its districts$ with an area of a little more than 2%1D2 hectares was originally decreed in the name of the late .ustice 'ntonio 1orilleno$ in 1810$ under 6-T 131&. /efore he died$ on a date not !articularized in the record$ he e2ecuted a last will and testament attesting to the fact that it was a co%ownershi! between himself and his brothers and sisters. The truth was that the owners or better stated$ the co%owners were$ besides .ustice 1orilleno$ ,uis$ #oledad$ "e$ 7osita$ -arlos and Bs!eranza$ all surnamed 1orilleno$ in the !ro!ortion of 1D3 undi+ided ownershi! each. #ince Bs!eranza had already died$ she was succeeded by her only daughter$ "ilomena .a+ellana. #till$ e+en though their right had not as yet been annotated in the title$ the co%owners led by -arlos$ and as to deceased .ustice 'ntonio 1orilleno$ his daughter Mary$ sometime since early 1803$ had wanted to sell their shares$ or if !ossible if "ilomena .a+ellana were agreeable$ to sell the entire !ro!erty. They hired an ac9uaintance -resencia 1arder$ to looC for buyers$ and the latter came to the interest of 7amon )oromal$ #r. and .r. :n !re!aration for the e2ecution of the sale (since the brothers and sisters 1orilleno were scattered in +arious !arts of the country4 -arlos in :locos #ur$ Mary in /aguio$ #oledad and "e$ in Mandaluyong$ 7izal$ and 7osita in /asilan -ity)$ the 1orillenos e2ecuted +arious !owers of attorney in fa+or of their niece$ Mary 1. .imenez. They also caused !re!aration of a !ower of attorney of identical tenor for signature by .a+ellana$ and sent it with a letter of -arlos$ dated 1@ .anuary 180@ unto her thru Mrs. 1arder. -arlos informed .a+ellana that the !rice was (&.00 a s9uare meter. :t a!!ears$ howe+er$ that as early as 22 6ctober$ 1803$ -arlos had recei+ed in checC as earnest money from 7amon )oromal$ .r.$ the sum of (;$000.00 and the !rice therein agreed u!on was (;.00 a s9uare meter. 't any rate$ .a+ellana$ not being agreeable$ did not sign the !ower of attorney$ and the rest of the co%owners went ahead with their sale of their 0D3. -arlos saw to it that the deed of sale !re!ared by their common attorney in fact$ Mary 1. .imenez$ be signed and ratified. The )eed was signed and ratified in -andon$ :locos #ur$ on 1; .anuary 180@$ and was brought to :loilo by -arlos in the same month. The 7egister of )eeds of :loilo refused to register right away$ since the original registered owner$ .ustice 'ntonio 1orilleno was already dead. -arlos had to hire 'tty. Teotimo 'randela to file a !etition within the cadastral case$ on 20 "ebruary 180@$ for the !ur!ose. 'fter which$ -arlos returned to ,uzon. 'fter com!liance with the re9uisites of !ublication$ hearing and notice$ the !etition was a!!ro+ed. 6n 28 '!ril 180@$ -arlos (in :loilo) went to the 7egister of )eeds and caused the registration of the order of the cadastral court a!!ro+ing the issuance of a new title in the name of the co%owners$ as well as of the deed of sale to the )oromals$ as a result of which on that same date$ a new title was issued T-T 231;2$ in the name of the 1orillenos to 0D3 and .a+ellana to 1D3$ B2h. )$ only to be cancelled on the same day under T-T 231;3$ $ already in the names of the +endees )oromals for 0D3 and to .a+ellana$ 1D3. 6n 30 '!ril 180@$ the )oromals !aid -arlos the sum of (83$000.00 by a checC of the -hartered /anC which was later substituted by checC of (5/$ because there was no -hartered /anC /ranch in :locos #ur. /esides the amount !aid in checC$ the )oromals according to their e+idence still !aid an additional amount in cash of (1@$2;0.00 since the agreed !rice was (;.00 a s9uare meterG and thus was consummated the transaction. 6n 10 .une 180@$ 'tty. 'rturo 1. Villanue+a (.a+ellana?s lawyer) arri+ed at the residence of the )oromals in )umangas$ :loilo$ bringing with him her letter of that date$ maCing a formal offer to re!urchase or redeem the 0D3 undi+ided share in ,ot 5o. 3;0&$ of the :loilo -adastre$ which the )oromals bought from her erstwhile co%owners$ the 1orillenos$ for the sum of (30$000.00 (the sum 'tty. Villanue+a has with him which he would deli+er to the )oromals as soon as they e2ecute the contract of sale in her fa+or). The )oromals refused. 6n 11 .une$ 180@$ .a+ellana filed the case before the -": :loilo seeCing to e2ercise her right to redeem the share of the !ro!erty$ as co%owner$ at the !rice stated in the deed of sale$ i.e. (30$000.00. The trial Audge$ after hearing the e+idence$ ruled in fa+or of the )oromals$ holding that .a+ellana had no more right$ to
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redeem as she was already informed of the intended sale of the 0D3 share belonging to the 1orillenos$ and further condemned .a+ellana to !ay attorney?s fees$ and moral and e2em!lary damages. .a+ellana a!!ealed.
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The -ourt of '!!eals (in -'% 7 &38&;%7) re+ersed the trial court?s decision and held that although res!ondent .a+ellana was informed of her co%owners? !ro!osal to sell the land in 9uestion to the )oromals she was$ howe+er$ <ne+er notified least of all$ in writing=$ of the actual e2ecution and registration of the corres!onding deed of sale$ hence$ .a+ellana Hs right to redeem had not yet e2!ired at the time she made her offer for that !ur!ose thru her letter of 10 .une 180@ deli+ered to the )oromals on e+en date. The intermediate court further held that the redem!tion !rice to be !aid by .a+ellana should be that stated in the deed of sale which is (30$000 notwithstanding that the !re!onderance of the e+idence !ro+es that the actual !rice !aid by the )oromals was (11;$2;0. The )oromals a!!ealed. The #u!reme -ourt affirmed the decision of the -ourt of '!!eals$ with costs against #!ouses )oromal #r. and )oromal .r. ( #i$ht o& "re-em"tion or redem"tion 'rticle 1023 of the -i+il -ode which !ro+ides that <The right of legal !re%em!tion or redem!tion shall not be e2ercised e2ce!t within thirty days from the notice in writing by the !ros!ecti+e +endor$ or by the +endor$ as the case may be. The deed of sale shall not be recorded in the 7egistry of (ro!erty$ unless accom!anied by an affida+it of the +endor that he has gi+en written notice thereof to all !ossible redem!tioners. The right of redem!tion of co%owners e2cludes that of adAoining owners.= 2 CarlosM letters do not constitute notice &or the com"utation o& the 30-day "eriod in Article (523? Alle$ed letters do not re&er to a consummated sale The letters sent by -arlos 1orilleno to "ilomena .a+ellana (dated 1@ .anuary 180@ and ; 5o+ember 1803) do not constitute the re9uired notice in writing from which the 30%day !eriod fi2ed in said !ro+ision should be com!uted. There is no showing that said letters were in fact recei+ed by .a+ellana and when they were actually recei+ed. :n any e+ent$ neither of said letters referred to a consummated sale. :t was -arlos 1orilleno alone who signed them$ and as of 1@ .anuary 180@$ !owers of attorney from the +arious co%owners were still to be secured. :ndeed$ the later letter of 1@ .anuary 180@ mentioned that the !rice was (&.00Ds9.m. whereas in the earlier letter of ; 5o+ember 1803 it was (;.00. :n fact$ as early as 21 6ctober 1803$ -arlos had already recei+ed (;$000 from the )oromals su!!osedly as earnest money$ of which$ howe+er$ mention was made by him to his niece only in the later letter of 1@ .anuary 180@$ the e2!lanation being that <at later negotiation it was increased to (;.00Ds9.m.= 3 Sale not yet "er&ected durin$ the time o& the sendin$ o& letters? I7arnest moneyK Bas made as understood under the 2ld Civil Code >hile the letters relied u!on by the )oromals could con+ey the idea that more or less some Cind of consensus had been arri+ed at among the other co%owners to sell the !ro!erty in dis!ute to the )oromals$ it cannot be said definitely that such a sale had e+en been actually !erfected. The difference in the !rices !er s9uare meter in the two letters negati+es the !ossibility that a <!rice definite= had already been agreed u!on. >hile (;$000 might ha+e indeed been !aid to -arlos in 6ctober 1803$ there is nothing to show that the same was in the conce!t of the earnest money contem!lated in 'rticle 1&@2 of the -i+il -ode as signifying !erfection of the sale. Viewed in the bacCdro! of the factual milieu thereof e2tant in the record$ said (;$000 were !aid in the conce!t of earnest money as the term was understood under the 6ld -i+il -ode$ that is$ as a guarantee that the buyer would not bacC out$ considering that it is not clear that there was already a definite agreement as to the !rice then and that the )oromals were decided to buy 0D3 only of the !ro!erty should .a+ellana refuse to agree to !art with her 1D3 share. 3 #i$ht o& redem"tion? #e=uirement o& notice+ must be in a "ublic instrument FArticle (520 and (523G "or !ur!oses of the co%owner?s right of redem!tion granted by 'rticle 1020 of the -i+il -ode$ the notice in writing which 'rticle 1023 re9uires to be made to the other co%owners and from recei!t of which the
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30%day !eriod to redeem should be counted is a notice not only of a !erfected sale but of the actual e2ecution and deli+ery of the deed of sale. This is im!lied from the latter !ortion of 'rticle 1023 which re9uires that before a register of deeds can record a sale by a co%owner$ there must be !resented to him$ an affida+it to the effect that the notice of the sale had been sent in writing to the other co%owners. ' sale may not be !resented to the register of deeds for registration unless it be in the form of a duly e2ecuted !ublic instrument. Moreo+er$ the law !refers that all the terms and conditions of the sale should be definite and in writing. * Co-oBnerMs ri$ht o& redem"tion FArticle (5(.G 'rticle 1018 of the -i+il -ode bestows unto a co%owner the right to redeem and <to be subrogated under the same terms and conditions sti!ulated in the contract=$ and to a+oid any contro+ersy as to the terms and conditions under which the right to redeem may be e2ercised$ it is best that the !eriod therefor should not be deemed to ha+e commenced unless the notice of the dis!osition is made after the formal deed of dis!osal has been duly e2ecuted. / 6avellana not noti&ied in Britin$ .a+ellana has ne+er been notified in writing of the e2ecution of the deed of sale by which the )oromals ac9uired the subAect !ro!erty$ it necessarily follows that her tender to redeem the same made on 10 .une 180@ was well within the !eriod !rescribed by law. :ndeed$ it is immaterial when she might ha+e actually come to Cnow about said deed$ it a!!earing she has ne+er been shown a co!y thereof through a written communication by either any of the )oromals or any of the 1orillenos. (-f. -orneAo et al. +s. -' et al.$ 10 #-7' 33;.) 5 %a4 evasion must be condemned :t is im!ossible for the #u!reme -ourt to sanction the )oromals? !ragmatic but immoral !osture. /eing !atently +iolati+e of !ublic !olicy and inAurious to !ublic interest$ the seemingly wide !ractice of understating considerations of transactions for the !ur!ose of e+ading ta2es and fees due to the go+ernment must be condemned and all !arties guilty thereof must be made to suffer the conse9uences of their ill% ad+ised agreement to defraud the state. The trial court fell short of its de+otion and loyalty to the 7e!ublic in officially gi+ing its stam! of a!!ro+al to the stand of the )oromals and e+en berating .a+ellana as wanting to enrich herself <at the e2!ense of her own blood relati+es who are her aunts$ uncles and cousins.= 6n the contrary$ said <blood relati+es= should ha+e been sternly told that they are in !ari%delicto with the )oromals in committing ta2 e+asion and should not recei+e any consideration from any court in res!ect to the money !aid for the sale in dis!ute. Their situation is similar to that of !arties to an illegal contract. , Consideration is !30+000 The consideration of (30$000 only was !laced in the deed of sale to minimize the !ayment of the registration fees$ stam!s and sales ta2. The redem!tion in contro+ersy should be only for the !rice sti!ulated in the deed$ regardless of what might ha+e been actually !aid by the )oromals. ) Article (5(.H ;e$al redem"tion as the ri$ht to be subro$ated ,egal redem!tion is the right to be subrogated$ u!on the same terms and conditions sti!ulated in the contract$ in the !lace of one who ac9uires a thing by !urchase or dation in !ayment$ or by any other transaction whereby ownershi! is transmitted by onerous title. :n the !resent case$ the sti!ulation in the !ublic e+idence of the contract$ made !ublic by both +endors and +endees is that the !rice was (30$000.00. . Article (520 and (523? #easonable "rice <' co%owner of a thing may e2ercise the right of redem!tion in case the share of all the other co%
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owners or any of them$ are sold to a third !erson. :f the !rice of the alienation is grossly e2cessi+e$ the redem!tioner shall !ay only a reasonable one.= The law seeCs to !rotect redem!tioner and con+erts his !osition into one not that of a contractually but of a legally subrogated creditor as to the right of redem!tion$ if the !rice is not Hgrossly e2cessi+e?$ what the law had intended redem!tioner to !ay can be read in 'rt. 1023$
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which !ro+ides that <The right of a legal !re%em!tion or redem!tion shall not be e2ercised e2ce!t within thirty (30) days from the notice in writing by the !ros!ecti+e +endor$ or by the +endor as the case may be. The deed of sale shall not be recorded in the 7egistry of (ro!erty$ unless accom!anied by an affida+it of the +endor that he has gi+en written notice thereof of all !ossible redem!tioners.= (0 A&&idavits intended &or a de&initive "ur"ose 'ffida+it must ha+e been intended by the lawmaCers for a definite !ur!ose$ to argue that this affida+it has no !ur!ose is to go against all canons of statutory construction. 5o law mandatory in character and worse$ !rohibiti+e should be understood to ha+e no !ur!ose at all. That would be an absurdity. (ur!ose could not but ha+e been to gi+e a clear and unmistaCable guide to redem!tioner$ on how much he should !ay and when he should redeem. 5otice must ha+e been intended to state the truth and if +endor and +endee should ha+e instead$ decided to state an untruth therein$ it is they who should bear the conse9uences of ha+ing thereby misled the redem!tioner who had the right to rely and act thereon and on nothing else. (( 7=uitable esto""el #tated otherwise$ all the elements of e9uitable esto!!el are !resent since the re9uirement of the law is to submit the affida+it of notice to all !ossible redem!tioners$ that affida+it to be a condition !recedent to registration of the sale therefore. The law must ha+e intended that it be by the !arties understood that they were there asCing a solemn re!resentation to all !ossible redem!tioners$ who u!on faith of that are thus induced to act. :n the !resent case$ the !arties to the sale sought to a+oid com!liance with the law and certainly refusal to com!ly cannot be rewarded with e2ce!tion and acce!tance of the !lea that they cannot be now esto!!ed by their own re!resentation. (2 No un@ust enrichment+ as ri$ht is not contractual but $ranted by laB .a+ellana?s right is not contractual$ but a mere legal one$ the e2ercise of a right granted by the law$ and the law is definite that she can subrogate herself in !lace of the buyer$ u!on the same terms and conditions sti!ulated in the contract$ in the words of 'rt. 1018$ and here the !rice. sti!ulated in the contract was (30$000.00$ in other words$ if this be !ossible enrichment on the !art of .a+ellana$ it was not unAust but Aust enrichment because !ermitted by the law. (3 74ercise o& ri$ht+ @ust solution+ "romotion o& @ustice >hat .a+ellana sought to enforce is not an abuse but a mere e2ercise of a right. The solution is not unAust because it only binds the !arties to maCe good their solemn re!resentation to !ossible redem!tioners on the !rice of the sale$ to what they had solemnly a+erred in a !ublic document re9uired by the law to be the only basis for that e2ercise of redem!tion. This thus !romote Austice. '330 -y vs CA 'G # No .2.). 6uly )+ (..( 0 Third )i+ision$ utierrez .r. (.)4 3 concur$ 1 tooC no !art 3actsH (erfecto )y and >ilfredo )y are brothers. #ometime in 1838$ >ilfredo )y !urchased a trucC and a farm tractor through financing e2tended by ,ibra "inance and :n+estment -or!oration (,ibra). /oth trucC and tractor were mortgaged to ,ibra as security for the loan. (erfecto )y wanted to buy the tractor from his brother so on 20 'ugust 1838$ he wrote a letter to ,ibra re9uesting that he be allowed to !urchase from >ilfredo )y the said tractor and assume the mortgage debt of the latter. :n a letter dated 23 'ugust 1838$ ,ibra thru its manager$ -i!riano 'res a!!ro+ed the (erfecto?s re9uest. Thus$ on & #e!tember 1838$ >ilfredo e2ecuted a deed of absolute sale in fa+or of (erfecto o+er the tractor in 9uestion. 't that time$ the subAect tractor was in the !ossession of ,ibra "inance due to >ilfredo?s failure to !ay the amortizations. )es!ite the offer of full !ayment by (erfecto to ,ibra for the tractor$ the immediate release could not be
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effected because >ilfredo had obtained financing not only for said tractor but also for a trucC and ,ibra insisted on full
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!ayment for both. (erfecto was able to con+ince his sister$ -arol )y%#eno$ to !urchase the trucC so that full !ayment could be made for both. 6n 22 5o+ember 1838$ a (5/ checC was issued in the amount of (22$000 in fa+or of ,ibra$ thus settling in full the indebtedness of >ilfredo with the financing firm. (ayment ha+ing been effected through an out%of%town checC$ ,ibra insisted that it be cleared first before ,ibra could release the chattels in 9uestion. Meanwhile$ -i+il -ase 7%100&0 entitled < elac Trading$ :nc. +. >ilfredo )y=$ a collection case to reco+er the sum of (12$208.@0 was !ending in another court in -ebu. 6n the strength of an alias writ of e2ecution issued on 23 )ecember 1838$ the !ro+incial sheriff was able to seize and le+y on the tractor which was in the !remises of ,ibra in -armen$ -ebu. The tractor was subse9uently sold at !ublic auction where elac Trading was the lone bidder. ,ater$ elac sold the tractor to one of its stocCholders$ 'ntonio onzales. :t was only when the checC was cleared on 13 .anuary 18@0 that (erfecto learned about B,'- ha+ing already taCen custody of the subAect tractor. (erfecto )y filed an action to reco+er the subAect tractor against B,'- Trading with the 7T- -ebu -ity. 6n @ '!ril 18@@$ the 7T- rendered Audgment in fa+or of (erfecto$ !ronouncing that (erfecto is the owner of the tractor and directing elac Trading -or!oration and 'ntonio onzales to return the same to (erfectoG directing the elac Trading and onzales Aointly and se+erally to !ay (erfecto the amount of (1$;&1.00 as e2!enses for hiring a tractorG (;0$000 for moral damagesG (;0$000 for e2em!lary damagesG and to !ay the cost. 6n a!!eal$ the -ourt of '!!eals re+ersed the decision of the 7T- and dismissed the com!laint with costs against (erfecto. The -ourt of '!!eals held that the tractor in 9uestion still belonged to >ilfredo )y when it was seized and le+ied by the sheriff by +irtue of the alias writ of e2ecution issued in -i+il -ase 7% 100&0. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt granted the !etition$ set aside the decision of the -ourt of '!!eals !romulgated on 23 March 1880$ and reinstated the decision of the 7egional Trial -ourt dated @ '!ril 18@@. ( Sale o& mort$a$ed "ro"erty valid? Mort$a$or maintains oBnershi" o& the "ro"erty o&&ered as security :n the case of 'ervice-i$e 'pecialists .nc. v. .nter#e$iate Appellate Court (13& #-7' @0 K18@8L)$ it was stated that <the chattel mortgagor continues to be the owner of the !ro!erty$ and therefore$ has the !ower to alienate the sameG howe+er$ he is obliged under !ain of !enal liability$ to secure the written consent of the mortgagee. ("rancisco$ Vicente$ .r.$ 7e+ised 7ules of -ourt in the (hili!!ines$ K1832L$ Volume :V%s (art :$ !. ;s2;1) Thus$ the instruments of mortgage are binding$ while they subsist$ not only u!on the !arties e2ecuting them but also u!on those who later$ by !urchase or otherwise$ ac9uire the !ro!erties referred to therein. The absence of the written consent of the mortgagee to the sale of the mortgaged !ro!erty in fa+or of a third !erson$ therefore$ effects not the +alidity of the sale but only the !enal liability of the mortgagor under the 7e+ised (enal -ode and the binding effect of such sale on the mortgagee under the )eed of -hattel Mortgage.= The mortgagor who ga+e the !ro!erty as security under a chattel mortgage did not !art with the ownershi! o+er the same. 1e had the right to sell it although he was under the obligation to secure the written consent of the mortgagee or he lays himself o!en to criminal !rosecution under the !ro+ision of 'rticle 318 !ar. 2 of the 7e+ised (enal -ode. 'nd e+en if no consent was obtained from the mortgagee$ the +alidity of
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the sale would still not be affected. :n the !resent case$ >ilfredo )y can sell the subAect tractor. The consent of ,ibra "inance was obtained. :n a letter dated 23 'ugust 1838$ ,ibra allowed (erfecto to !urchase the tractor and assume the mortgage debt of his brother. The sale between the brothers was therefore +alid and binding as between them and to the mortgagee$ as well. 2 (*.5 2Bnershi" ac=uired Bhen thin$ delivered to vendee? Article 'rticle 1&80 of the -i+il -ode states that the ownershi! of the thing sold is ac9uired by the +endee
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from the moment it is deli+ered to him in any of the ways s!ecified in 'rticles 1&83 to 1;01 or in any other manner signing an agreement that the !ossession is transferred from the +endor to the +endee. 3 Article (*.) and (*.. a""licable in "resent case? %ractor cannot be delivered 'rticles 1&8@ and 1&88 are a!!licable in the !resent case. 'rticle 1&8@ states that <when the sale is made through a !ublic instrument$ the e2ecution thereof shall be e9ui+alent to the deli+ery of the thing which is the obAect of the contract$ if from the deed the contrary does not a!!ear or cannot clearly be inferred.= 'rticle 1&88 !ro+ides that <The deli+ery of mo+able !ro!erty may liCewise be made by the mere consent or agreement of the contracting !arties$ if the thing sold cannot be transferred to the !ossession of the +endee at the time of the sale$ or if the latter already had it in his !ossession for any other reason.= :n the !resent case$ actual deli+ery of the subAect tractor could not be made. 1owe+er$ there was constructi+e deli+ery already u!on the e2ecution of the !ublic instrument !ursuant to 'rticle 1&8@ and u!on the consent or agreement of the !arties when the thing sold cannot be immediately transferred to the !ossession of the +endee. * Mort$a$eeMs ri$ht o& &oreclosure? im"lied ri$ht to "ossess "ro"erty to e&&ect &oreclosure ' mortgagee has the right of foreclosure u!on default by the mortgagor in the !erformance of the conditions mentioned in the contract of mortgage. The law im!lies that the mortgagee is entitled to !ossess the mortgaged !ro!erty because !ossession is necessary in order to enable him to ha+e the !ro!erty sold. :n the !resent case$ it was ,ibra "inance which was in !ossession of the subAect tractor due to >ilfredo?s failure to !ay the amortization as a !reliminary ste! to foreclosure. / Mort$a$ee not oBner o& the "ro"erty mort$a$ed? Mort$a$eeMs remedy is to have "ro"erty sold in "ublic auction and to a""ly "roceeds to obli$ation secured >hile it is true that >ilfredo )y was not in actual !ossession and control of the subAect tractor$ his right of ownershi! was not di+ested from him u!on his default. 5either could it be said that ,ibra was the owner of the subAect tractor because the mortgagee can not become the owner of or con+ert and a!!ro!riate to himself the !ro!erty mortgaged. ('rticle 20@@$ -i+il -ode) #aid !ro!erty continues to belong to the mortgagor. The only remedy gi+en to the mortgagee is to ha+e said !ro!erty sold at !ublic auction and the !roceeds of the sale a!!lied to the !ayment of the obligation secured by the mortgagee. (#ee Martinez +. (5/$ 83 (hil. 30;$ 303 K18;3L) There is no showing that ,ibra "inance has already foreclosed the mortgage and that it was the new owner of the subAect tractor. 5 %hird "erson Bho "urchases the mort$a$ed "ro"erty assumes obli$ation o& ori$inal mort$a$or >here a third !erson !urchases the mortgaged !ro!erty$ he automatically ste!s into the shoes of the original mortgagor. (#ee :ndustrial "inance -or!. +. '!ostol$ 133 #-7' ;21K18@8L). 1is right of ownershi! shall be subAect to the mortgage of the thing sold to him. :n the !resent case$ (erfecto was fully aware of the e2isting mortgage of the subAect tractor to ,ibra. :n fact$ when he was obtaining ,ibra?s consent to the sale$ he +olunteered to assume the remaining balance of the mortgage debt of >ilfredo which ,ibra undeniably agreed to. , "rice !ayment o& check intended to e4tin$uish mort$a$e obli$ation and not a "ayment o& "urchase
The !ayment of the checC was actually intended to e2tinguish the mortgage obligation so that the tractor could be released to (erfecto. :t was ne+er intended nor could it be considered as !ayment of the !urchase !rice because the relationshi! between ,ibra and (erfecto is not one of sale but still a mortgage. The clearing or encashment of the checC which !roduced the effect of !ayment determined the full !ayment of the money obligation and the release of the chattel mortgage. :t was not determinati+e of the consummation of the sale. The transaction between the brothers is distinct and a!art from the transaction between ,ibra and
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(erfecto. The contention$ therefore$ that the consummation of the sale de!ended u!on the encashment of the checC is untenable.
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Sale consummated u"on e4ecution o& "ublic instrument? Constructive delivery The sale of the subAect tractor was consummated u!on the e2ecution of the !ublic instrument on & #e!tember 1838. 't this time constructi+e deli+ery was already effected. 1ence$ the subAect tractor was no longer owned by >ilfredo )y when it was le+ied u!on by the sheriff in )ecember 1838. . 2nly "ro"erties un=uestionably oBned by @ud$ment debtor can be levied u"on 6nly !ro!erties un9uestionably owned by the Audgment debtor and which are not e2em!t by law from e2ecution should be le+ied u!on or sought to be le+ied u!on. "or the !ower of the court in the e2ecution of its Audgment e2tends only o+er !ro!erties belonging to the Audgment debtor. (-onsolidated /anC and Trust -or!. +. -ourt of '!!eals$ .7. 5o. 3@331$ .anuary 23$ 1881). (0 %hird "arty not "recluded &rom takin$ other le$al remedies to "rosecute claim :t is inconse9uential whether a third !arty claim has been filed or not by (erfecto during the time the sheriff le+ied on the subAect tractor. ' !erson other than the Audgment debtor who claims ownershi! or right o+er le+ied !ro!erties is not !recluded$ howe+er$ from taCing other legal remedies to !rosecute his claim. (-onsolidated /anC and Trust -or!. +. -ourt of '!!eals$ su!ra) This is !recisely what the !etitioner did when he filed the action for re!le+in with the 7T-. (( 3actual &indin$ o& trial court $iven $reat res"ect and Bei$ht? 3raud not "resumed but established by clear evidence? #elationshi" not a bad$e o& &raud The -ourt accords great res!ect and weight to the findings of fact of the trial court. There is no sufficient e+idence to show that the sale of the tractor was in fraud of >ilfredo and creditors. >hile it is true that >ilfredo and (erfecto are brothers$ this fact alone does not gi+e rise to the !resum!tion that the sale was fraudulent. 7elationshi! is not a badge of fraud ( o9uiolay +. #yci!$ 8 #-7' 003 K1803L). Moreo+er$ fraud can not be !resumedG it must be established by clear con+incing e+idence. (2 Actuations o& Gelac tradin$ violative o& "rovisions on human relations elac Trading Cnew +ery well of the transfer of the !ro!erty to (erfecto on 1& .uly 18@0 when it recei+ed summons based on the com!laint for re!le+in filed by (erfecto with the 7T-. 5otwithstanding said summons$ it continued to sell the subAect tractor to one of its stocCholders on 2 'ugust 18@0. '3*0 7-CA !ublishin$ vs Santos 'G # No )02.) A"ril 25+ (..0 0 "irst )i+ision$ -ruz (.)4 & concur 3actsH 6n ; 6ctober 18@1$ a !erson identifying himself as (rofessor .ose -ruz !laced an order by tele!hone with B)-' (ublishing and )istributing -or!. for &00 booCs$ !ayable on deli+ery. B)-' !re!ared the corres!onding in+oice and deli+ered the booCs as ordered$ for which -ruz issued a !ersonal checC co+ering the !urchase !rice of (@$88;.0;. 6n 3 6ctober 18@1$ -ruz sold 120 of the booCs to ,eonor #antos who$ after +erifying the seller?s ownershi! from the in+oice he showed her$ !aid him (1$300.00. Meanwhile$ B)-' ha+ing become sus!icious o+er a second order !laced by -ruz e+en before clearing of his first checC$ made in9uiries with the )e la #alle -ollege where he had claimed to be a dean and was informed that there was no such !erson in its em!loy. "urther +erification re+ealed that -ruz had no more account or de!osit with the (hili!!ine 'manah /anC$ against which he had drawn the !ayment checC. B)-' then went to the !olice$ which set a tra! and arrested -ruz on 3 6ctober 18@1. :n+estigation disclosed his real name as Tomas de la (eMa and his sale of 120 of the booCs he had ordered from B)-' to ,eonor #antos (and erardo #antos$ doing business as #antos /ooCstore). 6n the night of said date 3 6ctober 18@1$ B)-' sought the assistance
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of the !olice in (recinct ; at the *5 '+enue$ which forced their way into #antos /ooCstore and threatened ,eonor #antos with !rosecution for buying stolen !ro!erty. They seized the 120 booCs without warrant$ loading them in a +an belonging to B)-'$ and thereafter turned them o+er to B)-'. (rotesting this high%
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handed action$ the #antos s!ouses sued for reco+ery of the booCs after demand for their return was reAected by B)-'. ' writ of !reliminary attachment was issued and B)-'$ after initial refusal$ finally surrendered the booCs to the #antos s!ouses. 6wnershi! of the booCs was recognized in the #antos s!ouses by the Munici!al Trial -ourt$ which was sustained by the 7egional Trial -ourt$ which was in turn sustained by the -ourt of '!!eals. B)-' a!!ealed to the #u!reme -ourt. The #u!reme -ourt affirmed the challenged decision and denied the !etition$ with costs against B)-' (ublishing. ( Article //. o& the Civil Code 'rticle ;;8 !ro+ides that <The !ossession of mo+able !ro!erty ac9uired in good faith is e9ui+alent to a title. 5e+ertheless$ one who has lost any mo+able or has been unlawfully de!ri+ed thereof$ may reco+er it from the !erson in !ossession of the same. :f the !ossessor of a mo+able lost or of which the owner has been unlawfully de!ri+ed has ac9uired it in good faith at a !ublic sale$ the owner cannot obtain its return without reimbursing the !rice !aid therefor. 2 Arbitrary action+ act o& takin$ the laB on oBn hands+ condemned The -ourt e2!resses its disa!!ro+al of the arbitrary action of B)-' (ublishing in taCing the law into its own hands and forcibly reco+ering the dis!uted booCs from the #antos s!ouses. The circumstance that it did so with the assistance of the !olice$ which should ha+e been the first to u!hold legal and !eaceful !rocesses$ has com!ounded the wrong e+en more de!lorably. Uuestions$ such as the ownershi! of the booCs$ are decided not by !olicemen but by Audges and with the use not of brute force but of lawful writs. 3 !ossession o& movable "ro"erty ac=uired in $ood &aith e=uivalent to title The first sentence of 'rticle ;;8 !ro+ides that <the !ossession of mo+able !ro!erty ac9uired in good faith is e9ui+alent to a title$= thus dis!ensing with further !roof. :t cannot be said that the s!ouses cannot establish their ownershi! of the dis!uted booCs because they ha+e not e+en !roduced a recei!t to !ro+e they had bought the stocC. * Santos a "urchaser in $ood &aith+ even i& books Bere bou$ht at discount ,eonor #antos first ascertained the ownershi! of the booCs from the B)-' in+oice showing that they had been sold to -ruz$ who said he was selling them for a discount because he was in financial need. The #antos s!ouses are in the business of buying and selling booCs and often deal with hard%u! sellers who urgently ha+e to !art with their booCs at reduced !rices. To ,eonor #antos$ -ruz must ha+e been only one of the many such sellers she was accustomed to dealing with. :t is hardly bad faith for any one in the business of buying and selling booCs to buy them at a discount and resell them for a !rofit. / Contract o& sale consensual and is "er&ected u"on a$reement The contract of sale is consensual and is !erfected once agreement is reached between the !arties on the subAect matter and the consideration. 'ccording to 'rticle 1&3; of the -i+il -ode$ <The contract of sale is !erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice. "rom that moment$ the !arties may reci!rocally demand !erformance$ subAect to the !ro+isions of the law go+erning the form of contracts.= 'rticle 1&33$ on the other hand$ !ro+ides that <The ownershi! of the thing sold shall be transferred to the +endee u!on the actual or constructi+e deli+ery thereof.= 'rticle 1&3@ !ro+ides that <The !arties may sti!ulate that ownershi! in the thing shall not !ass to the !urchaser until he has fully !aid the !rice.= 5 #ule in the trans&er o& oBnershi" 6wnershi! in the thing sold shall not !ass to the buyer until full !ayment of the !urchase !rice only if
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there is a sti!ulation to that effect. 6therwise$ the rule is that such ownershi! shall !ass from the +endor to the +endee u!on the actual or constructi+e deli+ery of the thing sold e+en if the !urchase !rice has not yet been !aid. 'bsent the sti!ulation$ deli+ery of the thing sold will effecti+ely transfer ownershi! to the buyer who can in turn transfer it to another. , 7&&ect o& non-"ayment? #elie& 5on%!ayment only creates a right to demand !ayment or to rescind the contract$ or to criminal !rosecution in the case of bouncing checCs. ) valid Asiatic Commercial Cor"oration vs An$? Com"any not unlaB&ully de"rived o& "ro"erty+ sale
:n 'siatic -ommercial -or!oration +. 'ng$ the com!any sold some cosmetics to "rancisco 'ng$ who in turn sold them to Tan #it /in. 'siatic not ha+ing been !aid by 'ng$ it sued for the reco+ery of the articles from Tan$ who claimed he had +alidly bought them from 'ng$ !aying for the same in cash. "inding that there was no cons!iracy between Tan and 'ng to decei+e 'siatic$ the -ourt of '!!eals declared that the com!any was not unlawfully de!ri+ed of the cartons of loco Tonic within the sco!e of this legal !ro+ision. :t has +oluntarily !arted with them !ursuant to a contract of !urchase and sale. The circumstance that the !rice was not subse9uently !aid did not render illegal a transaction which was +alid and legal at the beginning. . %a$atac vs 6imene:? Sale voidable due to &raud but subsists as valid until annulled :n Tagatac +. .imenez$ Trinidad -. Tagatac sold her car to >arner "eist$ who sold it to #anchez$ who sold it to .imenez. >hen the !ayment checC issued to Tagatac by "eist was dishonored$ Tagatac sued to reco+er the +ehicle from .imenez on the ground that she had been unlawfully de!ri+ed of it by reason of "eist?s dece!tion. :n ruling for .imenez$ the -ourt of '!!eals held that <the fraud and deceit !racticed by "eist earmarCs this sale as a +oidable contract ('rticle 1380). /eing a +oidable contract$ it is susce!tible of either ratification or annulment. :f the contract is ratified$ the action to annul it is e2tinguished ('rticle 1382) and the contract is cleansed from all its defects ('rticle 1380)G if the contract is annulled$ the contracting !arties are restored to their res!ecti+e situations before the contract and mutual restitution follows as a conse9uence ('rticle 138@). 1owe+er$ as long as no action is taCen by the !arty entitled$ either that of annulment or of ratification$ the contract of sale remains +alid and binding. >hen Tagatac deli+ered the car to "eist by +irtue of said +oidable contract of sale$ the title to the car !assed to "eist (the title was defecti+e and +oidable). 5e+ertheless$ at the time he sold the car to "eli2 #anchez$ his title thereto had not been a+oided and he therefore conferred a good title on the latter$ !ro+ided he bought the car in good faith$ for +alue and without notice of the defect in "eist?s title ('rticle 1;00). There being no !roof on record that "eli2 #anchez acted in bad faith$ it is safe to assume that he acted in good faith. (0 2Bnershi" validly trans&erred to the Santos s"ouses 'ctual deli+ery of the booCs ha+ing been made$ -ruz ac9uired ownershi! o+er the booCs which he could then +alidly transfer to the #antos s!ouses. The fact that he had not yet !aid for them to B)-' was a matter between him and B)-' and did not im!air the title ac9uired by the s!ouses to the booCs. (( 8n@ustice Bill arise i& IunlaB&ully de"rivedK Bould be inter"reted in a di&&erent manner 6ne may well imagine the ad+erse conse9uences if the !hrase <unlawfully de!ri+ed= were to be inter!reted in the manner !remised on the argument that the im!ostor ac9uired no title to the booCs that he could ha+e +alidly transferred to the s!ouses. ' !erson relying on the seller?s title who buys a mo+able !ro!erty from him would ha+e to surrender it to another !erson claiming to be the original owner who had not yet been !aid the !urchase !rice therefor. The buyer in the second sale would be left holding the bag$ so to
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s!eaC$ and would be com!elled to return the thing bought by him in good faith without e+en the right to reimbursement of the amount he had !aid for it. (2 -ili$ence e4ercised by Santos+ but not by 7-CA
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,eonor #antos tooC care to ascertain first that the booCs belonged to -ruz before she agreed to !urchase them. The B)-' in+oice -ruz showed her assured her that the booCs had been !aid for on deli+ery. #antos did not ha+e to go beyond that in+oice to satisfy herself that the booCs being offered for sale by -ruz belonged to himG yet she did. 'lthough the title of -ruz was !resumed under 'rticle ;;8 by his mere !ossession of the booCs$ these being mo+able !ro!erty$ ,eonor #antos ne+ertheless demanded more !roof before deciding to buy them. /y contrast$ B)-' was less than cautious J in fact$ too trusting J in dealing with the im!ostor. 'lthough it had ne+er transacted with him before$ it readily deli+ered the booCs he had ordered (by tele!hone) and as readily acce!ted his !ersonal checC in !ayment. :t did not +erify his identity although it was easy enough to do this. :t did not wait to clear the checC of this unCnown drawer. >orse$ it indicated in the sales in+oice issued to him$ by the !rinted terms thereon$ that the booCs had been !aid for on deli+ery$ thereby +esting ownershi! in the buyer. (3 Santos s"ouses cannot be made to su&&er :t would certainly be unfair to maCe the s!ouses bear the !reAudice sustained by B)-' as a result of its own negligence. There is no Austice in transferring B)-'?s loss to the #antoses who had acted in good faith$ and with !ro!er care$ when they bought the booCs from -ruz. >hile the -ourt sym!athized with B)-' for its !light$ it is clear that its remedy is not against the s!ouses but against Tomas de la (eMa$ who has a!!arently caused all this trouble. (* Santos have the ri$ht to com"lain The s!ouses ha+e themsel+es been unduly incon+enienced$ and for merely transacting a customary deal not really unusual in their Cind of business. :t is they and not B)-' who ha+e a right to com!lain. '3/0 Elisco &%'''( '350 7n$ineerin$ and Machinery Cor" v CA 'G # No /225, 6anuary 2*+ (..5 0 Third )i+ision$ (anganiban (.)4 3 concur 3actsH (ursuant to the contract dated 10 #e!tember 1802 between the Bngineering and Machinery -or!oration (the -or!oration) and 'lmeda$ the former undertooC to fabricate$ furnish and install the air% conditioning system in the latter?s building along /uendia '+enue$ MaCati in consideration of (12$000.00. The -or!oration was to furnish the materials$ labor$ tools and all ser+ices re9uired in order to so fabricate and install said system. The system was com!leted in 1803 and acce!ted by 'lmeda$ who !aid in full the contract !rice. 6n 2 #e!tember 180;$ 'lmeda sold the building to the 5ational :n+estment and )e+elo!ment -or!oration (5:)-). The latter tooC !ossession of the building but on account of 5:)-?s noncom!liance with the terms and conditions of the deed of sale$ 'lmeda was able to secure Audicial rescission thereof. The ownershi! of the building ha+ing been decreed bacC to 'lmeda$ he re% ac9uired !ossession sometime in 1831. :t was then that he learned from some 5:)- em!loyees of the defects of the air%conditioning system of the building. 'cting on this information$ 'lmeda commissioned Bngineer )a+id 7. #a!ico to render a technical e+aluation of the system in relation to the contract with the -or!oration. :n his re!ort$ #a!ico enumerated the defects of the system and concluded that it was <not ca!able of maintaining the desired room tem!erature of 30Y" J 2Y".= 6n the basis of this re!ort$ 'lmeda filed on @ May 1831 an action for damages against the -or!oration with
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ool !anu"actu#ing v. CA, 308 SCRA $3%
the then -": 7izal (-i+il -ase 1&312). The com!laint alleged that the air%conditioning system installed by the -or!oration did not com!ly with the agreed !lans and s!ecifications$ hence$ 'lmeda !rayed for the amount of (210$000.00 re!resenting the rectification cost$ (100$000.00 as damages and (1;$000.00 as attorney?s fees.
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The -or!oration mo+ed to dismissed the Thereafter$ 'lmeda filed an e2%!arte -or!oration?s own statement to the effect Manila. The trial court granted the motion issuance of a writ of attachment.
case$ alleging !rescri!tion$ but which was denied by the -ourt. motion for !reliminary attachment on the strength of the that it had sold its business and was no longer doing business in and$ u!on 'lmeda?s !osting of a bond of (;0$000.00$ ordered the
:n due course$ and on 1; '!ril 183&$ the trial court rendered a decision$ which ordered the -or!oration to !ay 'lmeda the amount needed to rectify the faults and deficiencies of the air%conditioning system installed by the -or!oration in 'lmeda?s building$ !lus damages$ attorney?s fees and costs). (etitioner a!!ealed to the -ourt of '!!eals$ which affirmed on 2@ 5o+ember 183@ the decision of the trial court. 1ence$ it instituted a !etition for re+iew on certiorari under 7ule &; of the 7ules of -ourt. The #u!reme -ourt denied the !etition and affirmed the decision assailedG without costs. ( %he CourtMs "oBer to revieB The #u!reme -ourt re+iews only errors of law in !etitions for re+iew on certiorari under 7ule &;. :t is not the function of this -ourt to re%e2amine the findings of fact of the a!!ellate court unless said findings are not su!!orted by the e+idence on record or the Audgment is based on a misa!!rehension of facts. The -ourt has consistently held that the factual findings of the trial court$ as well as the -ourt of '!!eals$ are final and conclusi+e and may not be re+iewed on a!!eal. 'mong the e2ce!tional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on s!eculation$ surmises or conAecturesG when the inference made is manifestly absurd$ mistaCen or im!ossibleG when there is gra+e abuse of discretion in the a!!reciation of factsG when the Audgment is !remised on a misa!!rehension of factsG when the findings went beyond the issues of the case and the same are contrary to the admissions of both a!!ellant and a!!ellee. 'fter a careful study of the case at bench$ we find none of the abo+e grounds !resent to Austify the re%e+aluation of the findings of fact made by the courts below. 2 Contract o& a "iece o& Bork de&ined 'rticle 1313 of the -i+il -ode defines a contract for a !iece of worC as <by the contract for a !iece of worC the contractor binds himself to e2ecute a !iece of worC for the em!loyer$ in consideration of a certain !rice or com!ensation. The contractor may either em!loy only his labor or sCill$ or also furnish the material.= 3 Contract &or a "iece o& Bork distin$uished &rom a contract o& sale ' contract for a !iece of worC$ labor and materials may be distinguished from a contract of sale by the in9uiry as to whether the thing transferred is one not in e2istence and which would ne+er ha+e e2isted but for the order of the !erson desiring it . :n such case$ the contract is one for a !iece of worC$ not a sale. 6n the other hand$ if the thing subAect of the contract would ha+e e2isted and been the subAect of a sale to some other !erson e+en if the order had not been gi+en$ then the contract is one of sale. <' contract for the deli+ery at a certain !rice of an article which the +endor in the ordinary course of his business manufactures or !rocures for the general marCet whether the same is on hand at the time or not is a contract of sale$ but if the goods are to be manufactured s!ecially for the customer and u!on his s!ecial order$ and not for the general marCet$ it is a contract for a !iece of worC ('rt. 1&03$ -i+il -ode). The mere fact alone that certain articles are made u!on !re+ious orders of customers will not argue against the im!osition of the sales ta2 if such articles are ordinarily manufactured by the ta2!ayer for sale to the !ublic.= &Celestino Co. vs. Collecto#, '' *+il. 84%%(. To Tolentino$ the distinction between the two contracts de!ends on the intention of the !arties.
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Thus$ if the !arties intended that at some future date an obAect has to be deli+ered$ without considering the worC or labor of the !arty bound to deli+er$ the contract is one of sale. /ut if one of the !arties acce!ts the undertaCing on the basis of some !lan$ taCing into account the worC he will em!loy !ersonally or through another$ there is a contract for a !iece of worC.
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Contract in =uestion is one &or a "iece o& Bork The contract in 9uestion is one for a !iece of worC. :t is not the -or!oration?s line of business to manufacture air%conditioning systems to be sold <off%the%shelf.= :ts business and !articular field of e2!ertise is the fabrication and installation of such systems as ordered by customers and in accordance with the !articular !lans and s!ecifications !ro+ided by the customers. 5aturally$ the !rice or com!ensation for the system manufactured and installed will de!end greatly on the !articular !lans and s!ecifications agreed u!on with the customers. / 2bli$ations o& a contractor &or a "iece o& Bork The obligations of a contractor for a !iece of worC are set forth in 'rticles 131& and 131; of the -i+il -ode. 'rticle 131& !ro+ides that <if the contractor agrees to !roduce the worC from material furnished by him$ he shall deli+er the thing !roduced to the em!loyer and transfer dominion o+er the thing. J This contract shall be go+erned by the following articles as well as by the !ertinent !ro+isions on warranty of title and against hidden defects and the !ayment of !rice in a contract of sale.= 'rticle 131; !ro+ides that <the contractor shall e2ecute the worC in such a manner that it has the 9ualities agreed u!on and has no defects which destroy or lessen its +alue or fitness for its ordinary or sti!ulated use. #hould the worC be not of such 9uality$ the em!loyer may re9uire that the contractor remo+e the defect or e2ecute another worC. :f the contractor fails or refuses to com!ly with this obligation$ the em!loyer may ha+e the defect remo+ed or another worC e2ecuted$ at the contractor?s cost.= 5 !rovisions on Barranty a$ainst hidden de&ects The !ro+isions on warranty against hidden defects$ referred to in 'rticle 131&$ are found in 'rticles 1;01 and 1;00. 'rticle 1;01 !ro+ides that <the +endor shall be res!onsible for warranty against the hidden defects which the thing sold may ha+e$ should they render it unfit for the use for which it is intended$ or should they diminish its fitness for such use to such an e2tent that$ had the +endee been aware thereof$ he would not ha+e ac9uired it or would ha+e gi+en a lower !rice for itG but said +endor shall not be answerable for !atent defects or those which may be +isible$ or for those which are not +isible if the +endee is an e2!ert who$ by reason of his trade or !rofession$ should ha+e Cnown them.= 'rticle 1;00 !ro+ides that <the +endor is res!onsible to the +endee for any hidden faults or defects in the thing sold$ e+en though he was not aware thereof$= and !ro+ides further that the !ro+ision <shall not a!!ly if the contrary has been sti!ulated$ and the +endor was not aware of the hidden faults or defects in the thing sold.= , #emedy a$ainst violation o& the Barranty a$ainst hidden de&ects The remedy against +iolations of the warranty against hidden defects is either to withdraw from the contract (rehibitory action) or to demand a !ro!ortionate reduction of the !rice (accion 9uanti minoris)$ with damages in either case. ) !rescri"tive "eriod as s"eci&ied in e4"ress Barranty+ or in the absence o& Bhich+ * years? !rescri"tive "eriod o& 5 months &or rehibitory action is a""licable only in im"lied Barranties >hile it is true that 'rticle 1;31 of the -i+il -ode !ro+ides for a !rescri!ti+e !eriod of si2 months for a rehibitory action$ a cursory reading of the ten !receding articles to which it refers will re+eal that said rule may be a!!lied only in case of im!lied warrantiesG and where there is an e2!ress warranty in the contract$ the !rescri!ti+e !eriod is the one s!ecified in the e2!ress warranty$ and in the absence of such !eriod$ the general rule on rescission of contract$ which is four years ('rticle 13@8$ -i+il -ode) shall a!!ly. &Eillostas v. CA( . 2ri$inal com"laint is one &or arisin$ &rom breach o& a Britten contact and not a suit to en&orce Barranty a$ainst hidden de&ects? Article (,(/ in relation to Article ((** a""ly+ "rescri"tion in (0 years? Action not "rescribed
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The lower courts o!ined and so held that the failure of the defendant to follow the contract s!ecifications and said omissions and de+iations ha+ing resulted in the o!erational ineffecti+eness of the system installed maCes the defendant liable to the !laintiff in the amount necessary to rectify to !ut the air
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conditioning system in its !ro!er o!erational condition to maCe it ser+e the !ur!ose for which the !laintiff entered into the contract with the defendant. Thus$ ha+ing concluded that the original com!laint is one for damages arising from breach of a written contract$ and not a suit to enforce warranties against hidden defects$ the go+erning law therefore is 'rticle 131;. 1owe+er$ inasmuch as this !ro+ision does not contain a s!ecific !rescri!ti+e !eriod$ the general law on !rescri!tion$ which is 'rticle 11&& of the -i+il -ode$ will a!!ly. #aid !ro+ision states$ inter alia$ that actions <u!on a written contract= !rescribe in 10 years. #ince the go+erning contract was e2ecuted on 10 #e!tember 1802 and the com!laint was filed on @ May 1831$ it is clear that the action has not !rescribed. (0 Acce"tance o& the Bork by the em"loyer does not relieve the contractor o& liability &or any de&ect in the Bork The mere fact that 'lmeda acce!ted the worC does not$ i!so facto$ relie+e the -or!oration from liability for de+iations from and +iolations of the written contract$ as the law gi+es him 10 years within which to file an action based on breach thereof. 's held by the -ourt of '!!eals$ <as the breach of contract consisted in a!!ellant?s omission to install the e9ui!ment KsicL$ !arts and accessories not in accordance with the !lan and s!ecifications !ro+ided for in the contract and the de+iations made in !utting into the air% conditioning system !arts and accessories not in accordance with the contract s!ecifications$ it is e+ident that the defect in the installation was not a!!arent at the time of the deli+ery and acce!tance of the worC$ considering further that 'lmeda is not an e2!ert to recognize the same. "rom the +ery nature of things$ it is im!ossible to determine by the sim!le ins!ection of air conditioning system installed in an @%floor building whether it has been furnished and installed as !er agreed s!ecifications.= '3,0 7=uatorial #ealty vs May&air %heater 'G # No (05053 November 2(+ (..5 0 Bn /anc$ 1ermosisima .r. (.)4 13 concur$ 1 tooC no !art 3actsH -armelo Q /auermann :nc. (-armelo) owned a !arcel of land$ together with two 2%storey buildings constructed thereon located at -laro M 7ecto '+enue$ Manila (T-T 1@;28$ 7egister of )eeds of Manila). 6n 1 .une 1803$ -armelo entered into a contract of lease with Mayfair Theater for the latter?s lease of a !ortion of -armelo?s !ro!erty$ i.e. a !ortion of the 2D" of the two%storey building with floor area of 1010 s9.ms. and the second floor and mezzanine of the two%storey building situated at -M 7ecto '+enue$ Manila with a floor area of 1;0 s9.ms. for use by Mayfair as a motion !icture theater and for a term of 20 years. Mayfair thereafter constructed on the leased !ro!erty a mo+ie house Cnown as Ma2im Theatre. 6n 31 March 1808$ Mayfair entered into a second contract of lease with -armelo for the lease of another !ortion of -armelo?s !ro!erty$ i.e. a !ortion of the 2D" of the two%storey building with floor area of 100& s9.ms. and two store s!aces at the ground floor and mezzanine of the two%storey building situated at -M 7ecto '+enue$ Manila with a floor area of 300 s9.ms. and bearing street numbers 1@31 and 1@3; for similar use as a mo+ie theater and for a similar term of 20 years. Mayfair !ut u! another mo+ie house Cnown as HMiramar Theatre? on this leased !ro!erty. /oth contracts of lease !ro+ide identically worded !aragra!h @$ which reads <That if the ,B##67 should desire to sell the leased !remises$ the lessee shall be gi+en 30%days e2clusi+e o!tion to !urchase the same. :n the e+ent$ howe+er$ that the leased !remises is sold to someone other than the ,essee$ the lessor is bound and obligated$ as it hereby binds and obligates itself$ to sti!ulate in the )eed of #ale thereof that the !urchaser shall recognize this lease and be bound by all the terms and conditions thereof.= #ometime in 'ugust 183&$ Mr. 1enry (ascal of -armelo informed Mr. 1enry Fang$ (resident of Mayfair$ through a tele!hone con+ersation that -armelo was desirous of selling the entire -laro M. 7ecto !ro!erty. Mr. (ascal told Mr. Fang that a certain .ose 'raneta was offering to
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buy the whole !ro!erty for *#T1$200$000$ and Mr. (ascal asCed Mr. Fang if the latter was willing to buy the !ro!erty for (0 million to (3 million. Mr. Fang re!lied that he would let Mr. (ascal Cnow of his decision. 6n 23 'ugust 183&$ Mayfair re!lied through a letter confirming the corres!ondence between (ascual and Fang and reiterating !aragra!h @ of the two contracts of lease. -armelo did no re!ly to this letter. 6n 1@ #e!tember 183&$ Mayfair sent another letter to
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-armelo !ur!orting to e2!ress interest in ac9uiring not only the leased !remises but the entire building and other im!ro+ements if the !rice is reasonable. 1owe+er$ both -armelo and B9uatorial 9uestioned the authenticity of the second letter. "our years later$ on 30 .uly 183@$ -armelo sold its entire -M. 7ecto '+enue land and building$ which included the leased !remises housing the HMa2im? and HMiramar? theatres$ to B9uatorial by +irtue of a )eed of 'bsolute #ale$ for the total sum of (1$300$000. :n #e!tember 183@$ Mayfair instituted the action for s!ecific !erformance and annulment of the sale of the leased !remises to B9uatorial. :n its 'nswer$ -armelo alleged as s!ecial and affirmati+e defense that it had informed Mayfair of its desire to sell the entire -M. 7ecto '+enue !ro!erty and offered the same to Mayfair$ but the latter answered that it was interested only in buying the areas under lease$ which was im!ossible since the !ro!erty was not a condominiumG and that the o!tion to !urchase in+oCed by Mayfair is null and +oid for lacC of consideration. B9uatorial$ in its 'nswer$ !leaded as s!ecial and affirmati+e defense that the o!tion is +oid for lacC of consideration and is unenforceable by reason of its im!ossibility of !erformance because the leased !remises could not be sold se!arately from the other !ortions of the land and building. :t counterclaimed for cancellation of the contracts of lease$ and for increase of rentals in +iew of alleged su!er+ening e2traordinary de+aluation of the currency. B9uatorial liCewise cross% claimed against codefendant -armelo for indemnification in res!ect of Mayfair?s claims. 'fter assessing the e+idence$ the court rendered decision dismissing the com!laint with costs against MayfairG ordering Mayfair to !ay -armelo Q /auermann (&0$000.00 by way of attorneys?s fees on its counterclaimG and ordering Mayfair to !ay B9uatorial 7ealty (3;$000.00 !er month as reasonable com!ensation for the use of areas not co+ered by the contracts of lease from 31 .uly 1838 until Mayfair +acates said areas !lus legal interest from 31 .uly 183@G (30$000.00 !er month as reasonable com!ensation for the use of the !remises co+ered by the contracts of lease dated (1 .une 1803 from 1 .une 18@3 until Mayfair +acates the !remises !lus legal interest from 1 .une 18@3G (;;$000.00 !er month as reasonable com!ensation for the use of the !remises co+ered by the contract of lease dated 31 March 1808 from 30 March 18@8 until Mayfair +acates the !remises !lus legal interest from 30 March 18@8G and (&0$000.00 as attorney?s feesG and dismissing B9uatorial?s crossclaim against -armelo Q /auermann. The trial court adAudged the identically worded !aragra!h @ found in both lease contracts to be an o!tion clause which howe+er cannot be deemed to be binding on -armelo because of lacC of distinct consideration therefor. Mayfair taCing e2ce!tion to the decision of the trial court$ a!!ealed to the -ourt of '!!eals. The a!!ellate court re+ersed the trial court and rendered Audgment re+ersing and setting aside the a!!ealed )ecisionG directing Mayfair to !ay and return to B9uatorial the amount of (11$300$000.00 within 1; days from notice of this )ecision$ and ordering B9uatorial to acce!t such !aymentG directing B9uatorial$ u!on !ayment of the sum of (11$300$000$ to e2ecute the deeds and documents necessary for the issuance and transfer of ownershi! to Mayfair of the lot registered under T-T 133;0$ 11@012$ 00830$ and ;2;31G and should Mayfair be unable to !ay the amount as adAudged$ declaring the )eed of 'bsolute #ale between -armelo and B9uatorial as +alid and binding u!on an the !arties. 1ence$ the !etition for re+iew. The #u!reme -ourt denied the !etition for re+iew of the decision of the -ourt of '!!eals (23 .une 1882$ in -'% 7 -V 3281@)$ declaring the )eed of 'bsolute #ale between B9uatorial and -armelo as deemed rescindedG ordering -armelo to return to B9uatorial the !urchase !riceG directing B9uatorial to e2ecute the deeds and documents necessary to return ownershi! to -armelo of the dis!uted lotsG and ordering -armelo to allow Mayfair to buy the lots for (11$300$000. ( 8ssue on irre$ularities in Court o& A""eals "assed u"on so as not to "reem"t the administrative "roceedin$s related thereto :t was raised that the -ourt of '!!eals +iolated its own internal rules in the assignment of a!!ealed cases when it allowed the same )i+ision R::$ !articularly .ustice Manuel 1errera$ to resol+e all the motions in the <-om!letion (rocess= and to still resol+e the merits of the case in the <)ecision #tage.= This was
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related to letter com!laint written by the counsel for B9uatorial on 20 #e!tember 1882 to the #u!reme -ourt
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alleging certain irregularities and infractions committed by certain lawyers$ and .ustices of the -ourt of '!!eals and of the #u!reme -ourt in connection with case -'% 7 -V 3281@ ( 7 100003). This !artaCes of the nature of an administrati+e com!laint for misconduct$ against members of the Audiciary. >hile the letter% com!laint arose as an incident in said case$ the dis!osition thereof should be se!arate and inde!endent from case 7 100003. :t would be correct$ !rudent and consistent course of action not to !re%em!t the administrati+e !roceedings to be undertaCen res!ecting the said irregularities. ' discussion of such in the !resent case would entail a finding on the merits as to the real nature of the 9uestioned !rocedures and the true intentions and moti+es of the !layers therein. 2 !ara$ra"h ) o& lease contracts "rovides &or a ri$ht o& &irst re&usal+ and is not an o"tion clause nor an o"tion contract The contractual sti!ulation ((aragra!h @) !ro+ides for a right of first refusal in fa+or of Mayfair. :t is not an o!tion clause or an o!tion contact. :t is a contract of a right of first refusal. The true nature of the !aragra!h @ is ascertained to be that of a contractual grant of the right of first refusal to Mayfair. 3 2"tion contract? Validity based on a se"arate and distinct consideration 's early as 1810$ in the case of /eaumont +s. (rieto$ une9ui+ocal was our characterization of an o!tion contract as one necessarily in+oCing the choice granted to another for a distinct and se!arate consideration as to whether or not to !urchase a determinate thing at a !redetermined fi2ed !rice. T he deed of o!tion or o!tion clause in a contract$ in order to be +alid and enforceable$ must$ among other things$ indicate the definite !rice at which the !erson granting the o!tion$ is willing to sell. * 2"tion contract+ accordin$ to <ouvier ;aB -ictionary /ou+ier$ in his ,aw )ictionary (edition of 1@83) defines an o!tion as a contract$ <a contract by +irtue of which '$ in consideration of the !ayment of a certain sum to /$ ac9uires the !ri+ilege of buying from$ or selling to /$ certain securities or !ro!erties within a limited time at a s!ecified !rice. (#tory +s #alamon$ 31 5.F. &20.)= / 2"tion contract+ accordin$ to IJords and !hrasesK 'n agreement in writing to gi+e a !erson the o!tion to !urchase lands within a gi+en time at a named !rice is neither a sale nor an agreement to sell. :t is sim!ly a contract by which the owner of !ro!erty agrees with another !erson that he shall ha+e the right to buy his !ro!erty at a fi2ed !rice within a certain time. 1e does not sell his land$ he does not then agree to sell itG but he does sell somethingG that is$ the right or !ri+ilege to buy at the election or o!tion of the other !arty. The second !arty gets in !raesenti$ not lands$ nor an agreement that he shall ha+e lands$ but he does get something of +alue$ that is$ the right to call for and recei+e lands if he elects The owner !arts with his right to sell his lands$ e2ce!t to the second !arty$ for a limited !eriod The second !arty recei+es this right$ or$ rather$ from his !oint of +iew$ he recei+es the right to elect to buy. (Vol. 0$ !age ;001$ of the worC H>ords and (hrases$ H citing the case of :de +s. ,eiser K2& (ac.$ 08;G 10 Mont.$ ;G 2& 'm. #t. 7e!.$ 13L). 5 Cases involvin$ o"tion contracts :n +uason vs. $e Asis (103 (1:, 131 K1800L)$ it was held that the lessee loses his right to buy the leased !ro!erty for a named !rice !er s9uare meter u!on failure to maCe the !urchase within the time s!ecified. :n /en$o0a vs. Co#ple (1; #-7' 102)$ the -ourt freed the landowner from her !romise to sell her land if the !ros!ecti+e buyer could raise (&$;00.00 in 3 weeCs because such o!tion was not su!!orted by a
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distinct consideration. :n the same +ein$ in 'anche0 vs. 1igos (&; #-7' 30@ K1832L)$ the -ourt also in+alidated an instrument entitled$ <6!tion to (urchase= a !arcel of land for the sum of (1$;10.00 because of lacC of consideration. 'nd as an e2ce!tion to the doctrine enumerated in the two !receding cases$ in 2$a $e 3uirino vs. Palarca (28 #-7' 1 K1808L)$ it was ruled that the o!tion to buy the leased !remises for (12$000.00 as sti!ulated in the lease contract$ is not without consideration for in reci!rocal contracts$ liCe lease$ the obligation or !romise of each !arty is the consideration for that of the other. :n all these cases$ the
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selling !rice of the obAect thereof is always !redetermined and s!ecified in the o!tion clause in the contract or in the se!arate deed of o!tion. An$ caseH , 9u Asuncion
!er&ection o& a contract o& sale :n sales$ the contract is !erfected when a !erson$ called the seller$ obligates himself$ for a !rice certain$ to deli+er and to transfer ownershi! of a thing or right to another$ called the buyer$ o+er which the latter agrees. 'rticle 1&;@ of the -i+il -ode !ro+ides that </y the contract of sale one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determinate thing$ and the other to !ay therefor a !rice certain in money or its e9ui+alent. ' contract of sale may be absolute or conditional.= ) Contract to sell is conditional? 7&&ect o& breach o& condition >hen the sale is not absolute but conditional$ such as in a <-ontract to #ell= where in+ariably the ownershi! of the thing sold is retained until the fulfillment of a !ositi+e sus!ensi+e condition (normally$ the full !ayment of the !urchase !rice)$ the breach of the condition will !re+ent the obligation to con+ey title from ac9uiring an obligatory force. . Dnconditional mutual "romise to buy and sell obli$atory on the "arties 'n unconditional mutual !romise to buy and sell$ as long as the obAect is made determinate and the !rice is fi2ed$ can be obligatory on the !arties$ and com!liance therewith may accordingly be e2acted. (0 !er&ected contract o& o"tion 'n acce!ted unilateral !romise which s!ecifies the thing to be sold and the !rice to be !aid$ when cou!led with a +aluable consideration distinct and se!arate from the !rice$ is what may !ro!erly be termed a !erfected contract of o!tion. This contract is legally binding$ and in sales$ it conforms with the second !aragra!h of 'rticle 1&38 of the -i+il -ode$ which !ro+ides that <'n acce!ted unilateral !romise to buy or to sell a determinate thing for a !rice certain is binding u!on the !romissor if the !romise is su!!orted by a consideration distinct from the !rice. (1&;1a)= (( 2"tion not the contract o& sale itsel& The o!tion is not the contract of sale itself. The o!tionee has the right$ but not the obligation$ to buy. 6nce the o!tion is e2ercised timely$ i.e.$ the offer is acce!ted before a breach of the o!tion$ a bilateral !romise to sell and to buy ensues and both !arties are then reci!rocally bound to com!ly with their res!ecti+e undertaCings. (2 2&&er ' negotiation is formally initiated by an offer. 'n im!erfect !romise (!olicitacion) is merely an offer. (ublic ad+ertisements or solicitations and the liCe are ordinarily construed as mere in+itations to maCe offers or only as !ro!osals. These relations$ until a contract is !erfected$ are not considered binding commitments. Thus$ at any time !rior to the !erfection of the contract$ either negotiating !arty may sto! the negotiation. The offer$ at this stage$ may be withdrawnG the withdrawal is effecti+e immediately after its manifestation$ such as by its mailing and not necessarily when the offeree learns of the withdrawal (,audico +s. 'rias$ &3 (hil. 230). (3 2&&er Bith a "eriod? 7&&ects o& BithdraBal (1) :f the !eriod is not itself founded u!on or su!!orted by a consideration$ the offeror is still free and has the right to withdrawal the offer before its acce!tance$ or$ if an acce!tance has been made$ before the
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offeror?s coming to Cnow of such fact$ by communicating that withdrawal to the offeree (see 'rt. 132&$ -i+il -odeG see also 'tCins$ Eroll Q -o. +s. -ua$ 102 (hil. 8&@$ holding that this rule is a!!licable to a unilateral !romise to sell under 'rt. 1&38$ modifying the !re+ious decision in #outh >estern #ugar +s. 'tlantic ulf$ 83 (hil. 2&8G see also 'rt. 1318$ -i+il -odeG 7ural /anC of (araMa9ue$ :nc.$ +s. 7emolado$ 13; #-7' &08G
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#anchez +s. 7igos$ &; #-7' 30@). The right to withdraw$ howe+er$ must not be e2ercised whimsically or arbitrarilyG otherwise$ it could gi+e rise to a damage claim under 'rticle 18 of the -i+il -ode which ordains that <e+ery !erson must$ in the e2ercise of his rights and in the !erformance of his duties$ act with Austice$ gi+e e+eryone his due$ and obser+e honesty and good faith.= (2) :f the !eriod has a se!arate consideration$ a contract of <o!tion= is deemed !erfected$ and it would be a breach of that contract to withdraw the offer during the agreed !eriod. The o!tion$ howe+er$ is an inde!endent contract by itself$ and it is to be distinguished from the !roAected main agreement (subAect matter of the o!tion) which is ob+iously yet to be concluded. :f$ in fact$ the o!tioner%offeror withdraws the offer before its acce!tance (e2ercise of the o!tion) by the o!tionee%offeree$ the latter may not sue for s!ecific !erformance on the !ro!osed contract (<obAect= of the o!tion) since it has failed to reach its own stage of !erfection. The o!tioner%offeror$ howe+er$ renders himself liable for damages for breach of the o!tion. :n these cases$ care should be taCen of the real nature of the consideration gi+en$ for if$ in fact$ it has been intended to be !art of the consideration for the main contract with a right of withdrawal on the !art of the o!tionee$ the main contract could be deemed !erfectedG a similar instance would be an <earnest money= in a contract of sale that can e+idence its !erfection ('rt. 1&@2$ -i+il -ode). (* #e=uirement &or se"arate consideration has no a""licability as "ara$ra"h ) is not an o"tion contract but a ri$ht o& &irst re&usal 5o o!tion to !urchase in contem!lation of the second !aragra!h of 'rticle 1&38 of the -i+il -ode$ has been granted to Mayfair under the said lease contracts. (aragra!h @ grants the right of first refusal to Mayfair and is not an o!tion contract. The re9uirement of a se!arate consideration for the o!tion$ thus$ has no a!!licability in the case. There is nothing in !aragra!h <@= of the contracts which would bring them into the ambit of the usual offer or o!tion re9uiring an inde!endent consideration. (/ 2"tion and #i$ht o& 3irst #e&usal distin$uished 'n o!tion is a contract granting a !ri+ilege to buy or sell within an agreed time and at a determined !rice. :t is a se!arate and distinct contract from that which the !arties may enter into u!on the consummation of the o!tion. :t must be su!!orted by consideration. :n the instant case$ the right of first refusal is an integral !art of the contracts of lease. The consideration is built into the reci!rocal obligations of the !arties. (5 #i$ht o& 3irst #e&usal inutile i& $overned by Article (32* on BithdraBal o& the o&&er on Article (*,. on "romise to buy and sell To rule that a contractual sti!ulation such as that found in !aragra!h @ of the contracts is go+erned by 'rticle 132& on withdrawal of the offer on 'rticle 1&38 on !romise to buy and sell would render ineffectual or <inutile= the !ro+isions on right of first refusal so commonly inserted in leases of real estate nowadays. (aragra!h @ was incor!orated into the contracts of lease for the benefit of Mayfair which wanted to be assured that it shall be gi+en the first cracC or the first o!tion to buy the !ro!erty at the !rice which -armelo is willing to acce!t. (, Consideration in an a$reement o& ri$ht o& &irst re&usalH Consideration &or lease :t is not correct to say that there is no consideration in an agreement of right of first refusal. The sti!ulation is !art and !arcel of the entire contract of lease. The consideration for the lease includes the consideration for the right of first refusal. () Consideration in an a$reement o& ri$ht o& &irst re&usalH Consideration is obli$ation or "romise Freci"rocal contractG Mayfair is in effect stating that it consents to lease the !remises and to !ay the !rice agreed u!on !ro+ided the lessor also consents that$ should it sell the leased !ro!erty$ then$ Mayfair shall be gi+en the right to match the offered !urchase !rice and to buy the !ro!erty at that !rice. 's stated in 2$a. De 3uirino vs. Palarca$ in reci!rocal contract$ the obligation or !romise of each !arty is the consideration
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for that of the other.
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(.
-i&&erence to An$ 9u Asuncion caseH 7=uatorial #ealty and Carmelo acted in bad &aith -armelo and B9uatorial 7ealty acted in bad faith to render (aragra!h @ <inutile.= >hat -armelo and Mayfair agreed to$ by e2ecuting the two lease contracts$ was that Mayfair will ha+e the right of first refusal in the e+ent -armelo sells the leased !remises. :t is undis!uted that -armelo did recognize this right of Mayfair$ for it informed the latter of its intention to sell the said !ro!erty in 183&. There was an e2change of letters e+idencing the offer and counter%offers made by both !arties. -armelo$ howe+er$ did not !ursue the e2ercise to its logical end. >hile it initially recognized Mayfair?s right of first refusal$ -armelo +iolated such right when without affording its negotiations with Mayfair the full !rocess to ri!en to at least an interface of a definite offer and a !ossible corres!onding acce!tance within the <30%day e2clusi+e o!tion= time granted Mayfair$ -armelo abandoned negotiations$ Ce!t a low !rofile for some time$ and then sold$ without !rior notice to Mayfair$ the entire -laro M. 7ecto !ro!erty to B9uatorial. 20 #escission lies Bhen the "urchase is in bad &aith B9uatorial (being aware of the lease contracts because its lawyers had$ !rior to the sale$ studied the said contracts) is a buyer in bad faith$ and thus renders the sale to it of the !ro!erty in 9uestion rescissible. Gu:man+ <ocalin$ A Co vs <onnevie case 2( #escission as remedy 7escission is a remedy granted by law to the contracting !arties and e+en to third !ersons$ to secure re!aration for damages caused to them by a contract$ e+en if this should be +alid$ by means of the restoration of things to their condition at the moment !rior to the celebration of said contract. :t is a relief allowed for the !rotection of one of the contracting !arties and e+en third !ersons from all inAury and damage the contract may cause$ or to !rotect some incom!atible and !referential right created by the contract. 7escission im!lies a contract which$ e+en if initially +alid$ !roduces a lesion or !ecuniary damage to someone that Austifies its in+alidation for reasons of e9uity. 22 !urchaser not considered a third "arty :t is true that the ac9uisition by a third !erson of the !ro!erty subAect of the contract is an obstacle to the action for its rescission where it is shown that such third !erson is in lawful !ossession of the subAect of the contract and that he did not act in bad faith. 1owe+er$ this rule is not a!!licable in the case before us because the !etitoner is not considered a third !arty in relation to the -ontract of #ale nor may its !ossession of the subAect !ro!erty be regarded as ac9uired lawfully and in good faith. 23 !urchaser in $ood &aith de&ined ' !urchaser in good faith and for +alue who buys the !ro!erty of another without notice that some other !erson has a right to or interest in such !ro!erty and !ays a full and fair !rice for the same at the time of such !urchase or before he has notice of the claim or interest of some other !erson in the !ro!erty. ood faith connotes an honest intention to abstain from taCing unconscientious ad+antage of another. Tested by these !rinci!les$ the !etitioner cannot tenably claim to be a buyer in good faith as it had notice of the lease of the !ro!erty and such Cnowledge should ha+e cautioned it to looC dee!er into the agreement to determine if it in+ol+ed sti!ulations that would !reAudice its own interests. 2* !urchaser re=uired to knoB term o& lease contract Bhen buyin$ "ro"erty under lease 1a+ing Cnown that the !ro!erty it was buying was under lease$ it behoo+ed it as a !rudent !erson to ha+e re9uired the owner of the !ro!erty or the broCer to show to it the -ontract of ,ease in which the right of first refusal is contained. 2/ 8ndivisibility o& the "ro"erty -ommon sense and fairness dictate that instead of nullifying the agreement on the basis that the entire
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!ro!erty is indi+isible !ro!erty$ the sti!ulation should be gi+en effect by including the indi+isible a!!urtenances in the sale of the dominant !ortion under the right of first refusal. ' +alid and legal contract where the ascendant or the more im!ortant of the two !arties is the landowner should be gi+en effect$ if !ossible$ instead of being nullified on a selfish !rete2t !osited by the owner. "ollowing the arguments of !etitioners and the !artici!ation of the owner in the attem!t to stri! Mayfair of its rightsG the right of first refusal should include not only the !ro!erty s!ecified in the contracts but also the a!!urtenant !ortions sold to B9uatorial which are claimed by !etitioners to be indi+isible. 25 <oundaries o& the "ro"erty sold Mayfair is authorized to e2ercise its right of first refusal under the contract to include the entirety of the indi+isible !ro!erty. The boundaries of the !ro!erty sold should be the boundaries of the offer under the right of first refusal. 2, -octrine in An$ 9u Asuncion deemed modi&ied 's to the remedy to enforce Mayfair?s right$ the -ourt disagrees to a certain e2tent with the concluding !art of the dissenting o!inion of .ustice Vitug. The doctrine enunciated in 'ng Fu 'suncion +s. -ourt of '!!eals should be modified$ it not am!lified under the !eculiar facts of the !resent case. 2) Multi"licity o& suits &roBned u"on by Court? #elie&H F(G Contract betBeen 7=uatorial and Carmelo rescinded+ F2G !rice &i4ed The #u!reme -ourt has always been against multi!licity of suits where all remedies according to the facts and the law can be included. #ince Mayfair has a right of first refusal$ it can e2ercise the right only if the fraudulent sale is first set aside or rescinded. 'll of these matters are now before us and so there should be no !iecemeal determination of this case and lea+e festering sores to deteriorate into endless litigation. #ince -armelo sold the !ro!erty for (11$300$000 to B9uatorial$ the !rice at which Mayfair could ha+e !urchased the !ro!erty is$ therefore$ fi2ed. The damages which Mayfair suffered are in terms of actual inAury and lost o!!ortunities. The fairest solution would be to allow Mayfair to e2ercise its right of first refusal at the !rice which it was entitled to acce!t or reAect which is (11$300$000. To follow an alternati+e solution that -armelo and Mayfair may resume negotiations for the sale to the latter of the dis!uted !ro!erty would be unAust and unCind to Mayfair because it is once more com!elled to litigate to enforce its right. 2. !resent case covered by laB on contracts+ not merely by codal "rovisions on human relations *nder the 'ng Fu 'suncion +s. -ourt of '!!eals decision$ the -ourt stated that there was nothing to e2ecute because a contract o+er the right of first refusal belongs to a class of !re!aratory Auridical relations go+erned not by the law on contracts but by the codal !ro+isions on human relations. This may a!!ly if the contract is limited to the buying and selling of the real !ro!erty. 1owe+er$ the obligation of -armelo to first offer the !ro!erty to Mayfair is embodied in a contract. :t is (aragra!h @ on the right of first refusal which created the obligation. :t should be enforced according to the law on contracts instead of the !anoramic and indefinite rule on human relations. The latter remedy encourages multi!licity of suits. There is something to e2ecute and that is for -armelo to com!ly with its obligation to the !ro!erty under the right of the first refusal according to the terms at which they should ha+e been offered then to Mayfair$ at the !rice when that offer should ha+e been made. 'lso$ Mayfair has to acce!t the offer. This Auridical relation is not amor!hous nor is it merely !re!aratory. (aragra!hs @ of the two leases can be e2ecuted according to their terms. 30 No interest due -armelo and B9uatorial cannot a+ail of considerations based on e9uity which might warrant the grant of interests. The +endor recei+ed as !ayment from the +endee what$ at the time$ was a full and fair !rice for the !ro!erty. :t has used the (11$300$000.00 all these years earning income or interest from the amount.
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B9uatorial$ on the other hand$ has recei+ed rents and otherwise !rofited from the use of the !ro!erty turned o+er to it by -armelo. :n fact$ during all the years that this contro+ersy was being litigated$ Mayfair !aid rentals regularly to the buyer who had an inferior right to !urchase the !ro!erty. Mayfair is under no
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obligation to !ay any interests arising from this Audgment to either -armelo or B9uatorial. '3)0 8ntestate 7state o& 7milio Camon? 7reneta v <e:ore 'G # No ;-2.,*5 (.,3 0 "irst )i+ision$ -astro (.)4 ; concur November 25+
3actsH Bmilio -amon was the lessee of the hacienda 7osario$ located in (onte+edra$ 5egros 6ccidental$ for the !eriod from cro! year 18&0%&1 to cro! year 1800%01. P !ro%indi+iso of the said sugar !lantation belonged to :gnatius 1enry /ezore$ Blwood EnicCerbocCer and Mary :rene "allon Mc-ormicC (as their inheritance from the late Thomas "allon)$ while the other half belonged to (etronila 'lunan +da. de #ta. 7omana$ 'm!aro #ta. 7omana and 'lberta +da. de 1o!on (as their inheritance from their mother 7osario #ta. 7omana). *!on the death of Bmilio -amon in 1803$ his widow$ Concepcion )re4eta, file$ a petition in the -": 5egros 6ccidental (#!ecial (roceeding @300) !raying for the grant to her of letters of administration of the estate of the deceased -amon. The !etition was granted. Thereafter$ the court issued an order re9uiring all !ersons with money claims against the estate to file their claims within the !eriod !rescribed in the order.Thru their Audicial administrator and counsel$ Martiniano 6. de la -ruz$ 5e0ore, et al. file$ a clai# against the estate in the amounts of (02$00; as the money +alue of sugar allotments and allowances and (2$100 as the money +alue of !alay and rentals$ or a total of (0&$10;$ a!!ertaining to the claimants? half%share in the hacienda. /ezore$ et. al. and Breneta are agreed that the late Bmilio -amon a!!ro!riated for himself the amounts claimed. /ezore$ et. al. had demanded !ayment of their claim from Bmilio -amon when he was still ali+e$ but )reneta ignore$ the $e#an$s. 't the trial$ 6 $ocu#ents -ere su!#itte$ in evi$ence !y )reneta $ the authenticity of each of which is not contro+erted by /ezore$ et.al.G i.e. (1) 'n <'greement to #ell$= e2ecuted on 11 .anuary 1801$ whereby /ezore$ et al.$ agreed to sell their P share in the hacienda 7osario to 'm!aro #ta. 7omana and 'lberta +da. de 1o!onG (2) ' <7elease and >ai+er of -laims$= e2ecuted on 12 .anuary 801$ whereby 'm!aro #ta. 7omana and 'lberta +da. de 1o!on$ for and in consideration of <their gratitude for the +arious ser+ices$ financial and !ersonal= e2tended to them by Bmilio -amon$ released him from <any and all claims that may ha+e accrued !ertaining to the 2D& !ro%indi+iso share in 1acienda 7osario= owned by /ezore$ et. al. who had bound themsel+es <to sell their share in the said 1acienda 7osario= to 'm!aro and 'lberta$ <including rights accrued or accruing$= and whereby 'm!aro and 'lberta bound themsel+es <to wai+e in fa+or of Mr. Bmilio -amon for his own use and benefit said rights accrued or accruingG= and (3) ' <)eed of #ale$= e2ecuted on & 'ugust 1801$ whereby /ezore$ et al.$ for and in consideration of the sum of (3@$000$ to be !aid in the manner stated in the instrument$ sold$ transferred and con+eyed <all their rights$ title$ interest and !artici!ation$ whether accrued or accruing in their 2D& !ro%indi+iso share= in the hacienda 7osario$ <together with all the im!ro+ements e2isting thereon$ including its sugar 9uota$= in fa+or of 'm!aro #ta. 7omana and 'lberta +da. de 1o!on. 6n 20 .uly 180@$ the lo-er court $is#isse$ the clai# $ reAecting /ezore et.al?s contention that the sugar allotments and allowances$ subAect of their claim against the estate of Bmilio -amon$ were not included in the sale$ and held that by the !ositi+e and categorical terms of the deed of sale$ all benefits accrued and accruing to the a!!ellants before & 'ugust 1801 were included in the sale. 5e0ore, et.al. file$ a $irect appeal with the #u!reme -ourt. The #u!reme -ourt affirmed the order of the lower court$ at /ezore et. al.?s cost. ( #i$ht to accrued claims not Baived in 6anuary (.5( 't the time of the e2ecution$ on 12 .anuary 1801$ of the deed of <7elease and >ai+er of -laims$= 'm!aro #ta. 7omana and 'lberta +da. de 1o!on could not release or wai+e accrued claims
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belonging to /ezore et..al$ because the right that 'm!aro and 'lberta then had was a mere !romise by /ezore$ et.al. to sell their share in the hacienda$ not the right to the accrued claims. >hat was agreed to be sold in the future was different from what was !ur!ortedly wai+edG and e+en if the obAect in both contracts were the same$ the wai+er would still be in+alid for it is essential that a right$ in order that it may be +alidly wai+ed$ must be in
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e2istence at the time of the wai+er. 2 -e&ect in Baiver cured in Au$ust (.5(? <e:ore+ et al "arted Bith their accrued ri$hts >hate+er defect there was in the wai+er was subse9uently cured by the deed of sale of & 'ugust 1801 by +irtue of which /ezore$ et.al. sold not only their !ro%indi+iso half%share in the hacienda but also their accrued rights therein. :t is immaterial that Bmilio -amon was not the +endee since what mattered is that /ezore$ et.al. !arted with their accrued rights for a +aluable consideration. 3 Cuestion o& &act not revieBable in direct a""eal to Su"reme Court >hether the +endees (/ezore etal) re!resented to Martiniano 6. de la -ruz that the sugar 9uedans and !alay were not included in the sale and that such was the intention of the !arties$ in+ol+es a 9uestion of fact which is not re+iewable in a direct a!!eal to the #u!reme -ourt. * clear IAccrued or accruin$K? ;iteral meanin$ o& contractual sti"ulations control i& terms are
The words <accrued or accruing? in the deed of sale are not obscure and$ as the lower court declared$ are in fact !ositi+e and categorical enough to include accrued allotments and allowances. #ince the said words are not ambiguous$ there is no need to inter!ret them. 'rticle 1330 of the -i+il -ode !ro+ides that <if the terms of a contract are clear and lea+e no doubt u!on the intention of the contracting !arties$ the literal meaning of its sti!ulations shall control.= / 8nade=uacy o& cause does not o& itsel& invalidates the contract That the consideration in the sale was <chea!= is not a ground for the infirmity of the sale. :nade9uacy of cause in a contract does not of itself in+alidate the contract. 5 Silence as to demand letters not admission o& debt The silence of -amon with res!ect to the se+eral demand letters sent to him was an admission of his debt$ is without su!!ort or sanction in law of e+idence. , No chan$e in the @uridical relationshi" betBeen hacienda oBners and 7milio Camon a&ter the Britten contract o& lease? Continued cultivation merely im"lied a neB lease+ did not convert into e4"ress trust There was no change in the Auridical relationshi! between the hacienda owners and Bmilio -amon when$ after the e2!iration of their written contract of lease$ he continued culti+ating the hacienda during the cro! years 18;2%;3 to 1800%01. The continuance in the culti+ation$ with the ac9uiescence of the owners$ did not con+ert the original relationshi! into an e2!ress trust but merely im!lied a new lease o+er the !ro!erty$ with the same terms and conditions !ro+ided in the original contract$ e2ce!t as to the !eriod of the lease. ) Article (5,0 o& the Civil Code 'rticle 1030 of the -i+il -ode !ro+ides that <if at the end of the contract the lessee should continue enAoying the thing leased for 1; days with the ac9uiescence of the lessor$ and unless a notice to the contrary by either !arty has !re+iously been gi+en$ it is understood that there is an im!lied new lease$ not for the !eriod of the original contract$ but for the time established in articles 10@2 and 10@3. The other terms of the original contract shall be re+i+ed.= . 3iduciary relationshi" an essential characteristic o& trust? No e4"ress trust There is nothing in the record that e+idence the creation of a fiduciary relationshi! between the lessors and the lessee after the e2!iration of their written contract of lease. "iduciary relationshi! is an
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essential characteristic of trust$ and no written instrument has been !ointed to as establishing an e2!ress trust$ which writing is re9uired in e2!ress trusts o+er immo+ables. There is no basis for the claim that an e2!ress trust was created when -amon continued to culti+ate the land after the e2!iration of the written contract of lease.
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'3.0 Heirs o& 7scanlar+ et al v CA 'G # No ((.,,, (.., 0 1olgado$ et. al. +. -' K .7. 5o. 120080. 6ctober 23$ 1883.L Third di+ision$ 7omero (.)4 3 concur$ 1 on lea+e 2ctober 23+
3actsH #!ouses uillermo 5ombre and Victoriana -ari%an died without issue in 182& and 183@$ res!ecti+ely. 5ombre?s heirs include his ne!hews and grandne!hews. Victoriana -ari%an was succeeded by her late brother?s son$ regorio -ari%an. The latter was declared as Victoriana?s heir in the estate !roceedings for 5ombre and his wife (#!ecial (roceeding 3%3238). 'fter regorio died in 1831$ his wife$ enerosa Martinez$ and children$ 7odolfo$ -armen$ ,eonardo and "redisminda -ari%an$ were also adAudged as heirs by re!resentation to Victoriana?s estate. ,eonardo -ari%an !assed away$ lea+ing his widow$ 5elly -hua +da. de -ari%an and minor son ,eonell$ as his heirs. 2 !arcels of land$ denominated as ,ot 1010 and 1013 of the EabanCalan -adastre with an area of 28$3;0 s9.ms. and &00$8&@ s9.ms.$ res!ecti+ely$ formed !art of the estate of 5ombre and -ari%an. 6n 1; #e!tember 183@$ regorio -ari%an?s heirs e2ecuted the )eed of #ale of 7ights$ :nterests and (artici!ation in fa+or of (edro Bscanlar and "rancisco 1olgado P !ortion !ro%indi+iso of ,ot 1010 and 1013 of the EabanCalan -adastre$ !ertaining to the P !ortion !ro%indi+iso of the late Victoriana -ari%an in consideration of (23;$000 to be !aid to the heirs e2ce!t the share of the minor ,eonell -ari%an$ which shall be de!osited with the Munici!al Treasurer of 1imamaylan$ 5egros 6ccidentalG !ursuant to the order of the -": 5egros 6ccidental (/ranch V:) 1iimamaylanG said contract of sale being effecti+e only u!on the a!!ro+al of said -": in 1imamaylan. Bscanlar and 1olgado$ the +endees$ were concurrently the lessees of the lots referred to. They sti!ulated that the balance of the !urchase !rice ((22;$000.00) shall be !aid on or before May 1838 in a )eed of 'greement e2ecuted by the !arties on the same day confirming and affirming the )eed of #ale of 1; #e!tember 183@G that !ending com!lete !ayment thereof$ the +endees are not to assign$ sell$ lease$ nor mortgage the rights$ interests and !artici!ation o+er said landG and that in the e+ent the +endees fail andDor omit to !ay the balance of said !urchase !rice on 31 May 1838 and the cancellation of said -ontract of #ale is made thereby$ the sum of (;0$000.00 shall be deemed as damages thereof to +endors. Bscanlar and 1olgado were unable to !ay the -ari%an heirs? indi+idual shares$ amounting to (;;$000.00 each$ by the due date. 1owe+er$ said heirs recei+ed at least 12 installments from them after May 1838. 7odolfo -ari%an was fully !aid by 21 .une 1838. enerosa Martinez$ -armen -ari%an and "redisminda -ari%an were liCewise fully com!ensated for their indi+idual shares$ !er recei!ts gi+en in e+idence. The minor ,eonell?s share was de!osited with the 7T- on 3 #e!tember 18@2. /eing former lessees$ Bscanlar and 1olgado continued in !ossession of ,ots 1010 and 1013. :nterestingly$ they continued to !ay rent based on their lease contract. 6n 10 #e!tember 18@1$ Bscanlar and 1olgado mo+ed to inter+ene in the !robate !roceedings of 5ombre and -ari%an as the buyers of the -ari%ans? share in ,ots 1010 and 1013. Their motion for a!!ro+al of the 1; #e!tember 183@ sale before the same court$ filed on 10 5o+ember 18@1$ was o!!osed by the -ari%ans on ; .anuary 18@2. 6n 10 #e!tember 18@2$ the !robate court a!!ro+ed a motion filed by the heirs of -ari%an and 5ombre to sell their res!ecti+e shares in the estate. 6n 21 #e!tember 18@2$ the -ari%ans$ in addition to some heirs of uillermo 5ombre$ sold their shares in @ !arcels of land including ,ots 1010 and 1013 to the s!ouses 5ey #arrosa -hua and (a9uito -hua for (1$@;0$000.00. ' weeC later$ the +endor%heirs$ including the -ari% ans$ filed a motion for a!!ro+al of sale of hereditary rights$ i.e. the sale made on 21 #e!tember 18@2 to the -huas. The -ari%ans instituted a case for cancellation of sale against Bscanlar and 1olgado on 3 5o+ember 18@2.
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They com!lained of the latter?s failure to !ay the balance of the !urchase !rice by 31 May 1838 and alleged that they only recei+ed a total of (132$;;1.00 in cash and goods. Bscanlar and 1olgado re!lied that the -ari% ans$ ha+ing been !aid$ had no right to resell the subAect lotsG that the -huas were !urchasers in bad faithG and
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that the court a!!ro+al of the sale to the -huas was subAect to their e2isting claim o+er said !ro!erties. 6n 20 '!ril 18@3$ Bscanlar and 1olgado also sold their rights and interests in the subAect !arcels of land (,ots 1010 and 1013) to Bdwin .ayme for (33;$000.00 and turned o+er !ossession of both lots to the latter. The .aymes in turn$ were included in the ci+il case as fourth%!arty defendants. 6n 3 )ecember 18@&$ the !robate court a!!ro+ed the 21 #e!tember 18@2 sale <without !reAudice to whate+er rights$ claims and interests o+er any of those !ro!erties of the estate which cannot be !ro!erly and legally +entilated and resol+ed by the court in the same intestate !roceedings.= The certificates of title o+er the @ lots sold by the heirs of 5ombre and -ari%an were later issued in the name of the s!ouses -hua. The trial court allowed a third%!arty com!laint against the s!ouses -hua on 3 .anuary 18@0 where Bscanlar and 1olgado alleged that the -ari%ans cons!ired with the -huas when they e2ecuted the second sale on 21 #e!tember 18@2 and that the latter sale is illegal and of no effect. #!ouses -hua countered that they did not Cnow of the earlier sale of P !ortion of the subAect lots to Bscanlar and 1olgado. /oth !arties claimed damages. 6n 2@ '!ril 18@@$ the trial court a!!ro+ed the -huas? motion to file a fourth%!arty com!laint against the s!ouses .ayme. #!ouses -hua alleged that the .aymes refused to +acate said lots des!ite re!eated demandsG and that by reason of the illegal occu!ation of ,ots 1010 and 1013 by the .aymes$ they suffered materially from uncollected rentals. Meanwhile$ the 7T- 1imamaylan which tooC cognizance of #!ecial (roceeding 3%3238 (:ntestate Bstate of uillermo 5ombre and Victoriana -ari%an) had rendered its decision on 30 6ctober 18@3. The !robate court concluded that since all the !ro!erties of the estate were dis!osed of or sold by the declared heirs of both s!ouses$ the case is considered terminated and the intestate estate of uillermo 5ombre and Victoriana -ari% an is closed$ and thus found it unnecessary to resol+e the Motion for #ubrogation of mo+ants Bscanlar and 1olgado in +iew of the !roceeding?s summary nature and the !robate court?s lacC of Aurisdiction u!on the +alidity of sale of rights of the 5ombre and -ari%an heirs to third !arties. 6n 1@ )ecember 1881$ the trial court resol+ed the case in fa+or of the cancellation of the 1; #e!tember 183@ sale as it was not a!!ro+ed by the !robate court as re9uired by the contested deed of sale of rights$ interests and !artici!ation and because the -ari%ans were not fully !aid. -onse9uently$ the )eed of #ale e2ecuted by the heirs of 5ombre and -ari%an in fa+or of the s!ouses -hua$ which was a!!ro+ed by the !robate court$ was u!held. Thus$ the court declared the 1; #e!tember 183@ )eed of #ale$ and liCewise the )eed of 'greement of the same date$ e2ecuted by the heirs in fa+or of Bscanlar and 1olgadoG the 20 '!ril 18@3 )eed of sale$ and liCewise the sale of leasehold rights$ e2ecuted by Bscanlar and 1olgado in fa+or of s!ouses .aymeG were declared null and +oid and of no effect. The court also declared the amount of (;0$000 as forfeited in fa+or of the heirs but ordering the heirs to return to Bscanlar and 1olgado the amounts they recei+ed after 31 May 1838 and the amount of (3;$21@.3; de!osited with the Treasurer of 1imamaylanG declared the 23 #e!tember 18@2 )eed of #ale in fa+or of s!ouses -hua as legal$ +alid and enforceable subAect to the burdens of the estateG ordered 1olgado$ Bscanlar and s!ouses .ayme to !ay in solidum the amount of (100$000 as moral damages$ (30$000 as attorney?s fees to s!ouses -huaG ordered s!ouses .ayme to !ay s!ouses -hua the sum of (1;3$000 as rentals for the 7iceland and (3$200$000 as rentals for the fish!ond from 6ctober 18@; to 2& .uly 18@8 !lus rentals from the latter date until the !ro!erty is deli+ered to the s!ouses -huaG ordered Bscanlar$ 1olgado and s!ouses .ayme to immediately +acate ,ots 1010 and 1013$ and to !ay the costs. Bscanlar and 1olgado raised the case to the -ourt of '!!eals (-'% 7 -V 3883;). The a!!ellate court affirmed the decision of the trial court on 13 "ebruary 188; and held that the 9uestioned deed of sale of rights$ interests and !artici!ation is a contract to sell because it shall become effecti+e only u!on a!!ro+al
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by the !robate court and u!on full !ayment of the !urchase !rice. Their motion for reconsideration was denied by the a!!ellate court on 3 '!ril 188;. 1ence$ the consolidated !etitions for re+iew. The #u!reme -ourt granted the !etitionsG re+ersed and set aside the decision of the -ourt of '!!eals under
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re+iewG remanded the case to the 7T- 5egros 6ccidental (/ranch 01) for Bscanlar and 1olgado and the -ari% ans or their successors%in%interest to determine e2actly which P !ortion of ,ots 1010 and 1013 will be owned by each !arty$ at the o!tion of Bscanlar and 1olgadoG and directed the trial court to order the issuance of the corres!onding certificates of title in the name of the res!ecti+e !arties and to resol+e the matter of rental !ayments of the land not deli+ered to the -hua s!ouses subAect to the rates s!ecified by the -ourt with legal interest from date of demand. ( -istinction Bith contracts o& sale and contract to sell Bith reserved title The distinction between contracts of sale and contracts to sell with reser+ed title has been recognized by the -ourt in re!eated decisions$ such as that in ,uzon /roCerage -o. :nc. +. Maritime /uilding -o.$ :nc.$ u!holding the !ower of !romisors under contracts to sell in case of failure of the other !arty to com!lete !ayment$ to e2traAudicially terminate the o!eration of the contract$ refuse the con+eyance$ and retain the sums of installments already recei+ed where such rights are e2!ressly !ro+ided for. 2 Contract to sell vs -eed o& conditional sale :n contracts to sell$ ownershi! is retained by the seller and is not to !ass until the full !ayment of the !rice. #uch !ayment is a !ositi+e sus!ensi+e condition$ the failure of which is not a breach of contract but sim!ly an e+ent that !re+ented the obligation of the +endor to con+ey title from ac9uiring binding force. To illustrate$ although a deed of conditional sale is denominated as such$ absent a !ro+iso that title to the !ro!erty sold is reser+ed in the +endor until full !ayment of the !urchase !rice nor a sti!ulation gi+ing the +endor the right to unilaterally rescind the contract the moment the +endee fails to !ay within a fi2ed !eriod$ by its nature$ it shall be declared a deed of absolute sale. 3 %he (/ Se"tember (.,) -eed o& Sale o& #i$hts+ 8nterests and !artici"ation a contract o& sale The 1; #e!tember 183@ sale of rights$ interests and !artici!ation as to P !ortion !ro indi+iso of the 2 subAect lots is a contract of sale for the reasons that (1) the sellers did not reser+e unto themsel+es the ownershi! of the !ro!erty until full !ayment of the un!aid balance of (22;$000.00G (2) there is no sti!ulation gi+ing the sellers the right to unilaterally rescind the contract the moment the buyer fails to !ay within the fi2ed !eriod. * -elivery e&&ected &or the (/ Se"tember (.,) deed o& sale? %raditio brevi manu (rior to the sale$ Bscanlar were in !ossession of the subAect !ro!erty as lessees. *!on sale to them of the rights$ interests and !artici!ation as to the P !ortion !ro indi+iso$ they remained in !ossession$ not in conce!t of lessees anymore but as owners now through symbolic deli+ery Cnown as traditio bre+i manu. *nder 'rticle 1&33 of the -i+il -ode$ the ownershi! of the thing sold is ac9uired by the +endee u!on actual or constructi+e deli+ery thereof. / Non-"ayment o& "rice in a contract o& sale? #emedies :n a contract of sale$ the non%!ayment of the !rice is a resolutory condition which e2tinguishes the transaction that$ for a time$ e2isted and discharges the obligations created thereunder. The remedy of an un!aid seller in a contract of sale is to seeC either s!ecific !erformance or rescission. 5 Contracts+ #e=uisites *nder 'rticle 131@ of the -i+il -ode$ the essential re9uisites of a contract are4 consent of the contracting !artiesG obAect certain which is the subAect matter of the contract and cause of the obligation which is established. 'bsent one of the abo+e$ no contract can arise. -on+ersely$ where all are !resent$ the result is a +alid contract.
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, Modalities and restrictions do not a&&ect validity o& the contract+ merely its e&&ectivity #ome !arties introduce +arious Cinds of restrictions or modalities$ the lacC of which will not$ howe+er$ affect the +alidity of the contract. :n the !resent case$ the )eed of #ale is a +alid one$ e+en if it did
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not bear the stam! of a!!ro+al of the !robate court. The contract?s +alidity was not affected for in the words of the sti!ulation$ <this -ontract of #ale of rights$ interests and !artici!ations shall become effecti+e only u!on the a!!ro+al by the 1onorable -ourt.= 6nly the effecti+ity and not the +alidity of the contract is affected. ) Need o& "robate courtMs a""roval e4ists Bhere s"eci&ic "ro"erties o& the estate are sold and not Bhen ideal and indivisible shares o& an heir are dis"osed o& The need for a!!ro+al by the !robate court e2ists only where s!ecific !ro!erties of the estate are sold and not when only ideal and indi+isible shares of an heir are dis!osed of. :n Dillena v. Court of Appeals$ the -ourt declared that it is within the Aurisdiction of the !robate court to a!!ro+e the sale of !ro!erties of a deceased !erson by his !ros!ecti+e heirs before final adAudication. The !robate court?s a!!ro+al is necessary for the +alidity of any dis!osition of the decedent?s estate. 1owe+er$ reference to Audicial a!!ro+al cannot ad+ersely affect the substanti+e rights of the heirs to dis!ose of their ideal share in the co%heirshi! andDor co% ownershi! among the heirs. :t must be recalled that during the !eriod of indi+ision of a decedent?s estate$ each heir$ being a co%owner$ has full ownershi! of his !art and may therefore alienate it. /ut the effect of the alienation with res!ect to the co%owners shall be limited to the !ortion which may be allotted to him in the di+ision u!on the termination of the co%ownershi!. . Hereditary ri$hts in an estate validly sold Bithout need o& court a""roval 1ereditary rights in an estate can be +alidly sold without need of court a!!ro+al. :n the !resent case$ when the -ari%ans sold their rights$ interests and !artici!ation in ,ots 1010 and 1013$ they could legally sell the same without the a!!ro+al of the !robate court. (0 Contractual sti"ulations considered laB betBeen "arties? 74ce"tionH contem"oraneous acts o& "arties 's a general rule$ the !ertinent contractual sti!ulation (re9uiring court a!!ro+al) should be considered as the law between the !arties. 1owe+er$ the !resence of two factors militate against this conclusion4 (1) the e+ident intention of the !arties a!!ears to be contrary to the mandatory character of said sti!ulation. >hoe+er crafted the document of con+eyance$ must ha+e been of the belief that the contro+ersial sti!ulation was a legal re9uirement for the +alidity of the sale. /ut the contem!oraneous and subse9uent acts of the !arties re+eal that the original obAecti+e of the !arties was to gi+e effect to the deed of sale e+en without court a!!ro+al. 7ecei!t and acce!tance of the numerous installments on the balance of the !urchase !rice by the -ari%ans$ although the !eriod to !ay the balance of the !urchase !rice e2!ired in May 1838$ and lea+ing Bscanlar and 1olgado in !ossession of ,ots 1010 and 1013 re+eal their intention to effect the mutual transmission of rights and obligations. The -ari%ans did not seeC Audicial relief until late 18@2 or three years laterG (2) the re9uisite a!!ro+al was +irtually rendered im!ossible by the -ari%ans because they o!!osed the motion for a!!ro+al of the sale filed by Bscanlar and 1olgado$ and sued the latter for the cancellation of that sale. 1a+ing !ro+ided the obstacle and the Austification for the sti!ulated a!!ro+al not to be granted$ the -ari%ans should not be allowed to cancel their first transaction with Bscanlar and 1olgado because of lacC of a!!ro+al by the !robate court$ which lacC is of their own maCing. (( #escission o& a sale o& real "ro"erty? Vendee may "ay beyond due date as lon$ as there is no @udicial or notarial demand &or rescission >ith res!ect to rescission of a sale of real !ro!erty$ 'rticle 1;82 of the -i+il -ode go+erns. The !ro+ides that <in the sale of immo+able !ro!erty$ e+en though it may ha+e been sti!ulated that u!on failure to !ay the !rice at the time agreed u!on the rescission of the contract shall of right taCe !lace$ the +endee may !ay$ e+en after the e2!iration of the !eriod$ a long as no demand for rescission of the contract has been made u!on him either Audicially or by a notarial act. 'fter the demand$ the court may not grant him a new term.= :n the !resent case$ the sellers ga+e the buyers until May 1838 to !ay the balance of the !urchase !rice. 'fter the
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latter failed to !ay installments due$ the former made no Audicial demand for rescission of the contract nor did they e2ecute any notarial act demanding the same$ as re9uired under 'rticle 1;82. -onse9uently$ the buyers
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could lawfully maCe !ayments e+en after the May 1838 deadline$ as in fact they !aid se+eral installments to the sellers which the latter acce!ted. (2 Acce"tance o& "ayment beyond due date a Baiver to ri$ht to rescind? Sellers esto""ed 's the sellers$ u!on the e2!iration of the !eriod to !ay$ made no mo+e to rescind but continued acce!ting late !ayments$ such act cannot but be construed as a wai+er of the right to rescind. >hen the sellers$ instead of a+ailing of their right to rescind$ acce!ted and recei+ed delayed !ayments of installments beyond the !eriod sti!ulated$ and the buyers were in arrears$ the sellers in effect wai+ed and are now esto!!ed from e2ercising said right to rescind. (3 7vidence does not "rove 7scanlar and Hol$ado Bere unable to com"lete "ayments )es!ite all her claims$ "redisminda?s testimony fails to con+ince the -ourt that the heirs were not fully com!ensated by Bscanlar and 1olgado. "redisminda admits that her mother and her sister signed their indi+idual recei!ts of full !ayment on their own and not in her !resence. The recei!ts !resented in e+idence show that enerosa Martinez was !aid (&;$02;.00G -armen -ari%an$ (&;$02;.00G 7odolfo -ari%an$ (&3$;00.00 on .une 21$ 1838G 5elly -hua +da. de -ari%an$ (11$33&.00 and the sum of (3&$21@.00 was consigned in court for the minor ,eonell -ari%an. "redisminda insists that she signed a recei!t for full !ayment without recei+ing the money therefor and admits that she did not obAect to the com!utation. :t is incredible that a mature woman liCe "redisminda -ari%an$ would sign a recei!t for money she did not recei+e. "urthermore$ her claims regarding the actual amount of the installments !aid to her and her Cin are 9uite +ague and unsu!!orted by com!etent e+idence. #he e+en admits that all the recei!ts were taCen by Bscanlar. #u!!orting testimony from her co%heirs and siblings -armen -ari%an$ 7odolfo -ari%an and 5elly -hua +da. de -ari%an is also absent. Thus$ in the absence of !roof on the contrary$ the -ari%ans were indeed !aid the balance of the !urchase !rice$ des!ite ha+ing acce!ted installments therefor belatedly. There is thus no ground to rescind the contract of sale because of non%!ayment. (* Continued "ayment o& lease indicate vendees did not take undue advanta$e o& the Cari-an heirs Bscanlar and 1olgado$ in continuing to !ay the rent for the !arcels of land they allegedly bought until 18@0 in com!liance with their lease contract$ only !ro+es that they res!ected the contract and did not taCe undue ad+antage of the heirs of 5ombre and -ari%an who benefited from the leaseG contrary to the findings of the lower court that such act admits that the !urchase !rice was not fully !aid the -ari%ans. :t should be stressed that Bscanlar and 1olgado !urchased the hereditary shares solely of the -ari%ans and not the entire lot. (/ Subse=uent sale o& ) "arcels o& land to s"ouses Chua is valid e4ce"t to the e4tent o& Bhat Bas sold to 7scanlar and Hol$ado on (/ Se"tember (.,) :t must be em!hasized that what was sold to Bscanlar and 1olgado was only the -ari%an?s hereditary shares in ,ots 1010 and 1013 being held !ro indi+iso by them and is thus a +alid con+eyance only of said ideal shares. #!ecific or designated !ortions of land were not in+ol+ed. Thus$ the subse9uent sale of @ !arcels of land$ including ,ots 1010 and 1013$ to the s!ouses -hua is +alid e2ce!t to the e2tent of what was sold to Bscanlar and 1olgado in the 1; #e!tember 183@ con+eyance. (5 8ntestate "roceedin$s &inal and cannot be re-o"ened? Need &or the Su"reme Court to resolve case de&initively The !roceedings surrounding the estate of 5ombre and -ari%an ha+ing attained finality for nearly a decade since$ the same cannot be re%o!ened. :t must be noted that the !robate court desisted from awarding the indi+idual shares of each heir because all the !ro!erties belonging to the estate had already been sold. Thus it is not certain how much the -ari%ans were entitled to with res!ect to the two lots$ or if they were e+en going to be awarded shares in said lots. The !rotracted !roceedings which ha+e undoubtedly left the !ro!erty under a cloud and the !arties in+ol+ed in a state of uncertainty com!els the #u!reme -ourt to resol+e it
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definiti+ely.
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(, Cari-an heirs Fand successor-in-interestG entitled to hal& o& the estate+ or hal& interest in each "ro"erty in the estate The -ari%ans are the sole heirs by re!resentation of Victoriana -ari%an who was indis!utably entitled to half of the estate. There being no e2act a!!ortionment of the shares of each heir and no com!etent !roof that the heirs recei+ed une9ual shares in the dis!osition of the estate$ it can be assumed that the heirs of Victoriana -ari%an collecti+ely are entitled to half of each !ro!erty in the estate. More !articularly$ the -ari% ans are entitled to half of ,ots 1010 and 1013 (1&$03; s9.ms. of ,ot 1010 and 230$&3& s9.ms. of ,ot 1013). -onse9uently$ Bscanlar and 1olgado$ as their successors%in%interest$ own said half of the subAect lots and ought to deli+er the !ossession of the other half$ as well as !ay rents thereon$ to the s!ouses -hua but only if the former (Bscanlar and 1olgado) remained in !ossession thereof. () #ate o& rentals The rate of rental !ayments to be made were gi+en in e+idence by 5ey #arrosa -hua in her unrebutted testimony on 2& .uly 18@84 "or the fish!ond (,ot 1013) J "rom 18@2 u! to 18@0$ rental !ayment of (3$000.00 !er hectareG from 18@0%18@8 (and succeeding years)$ rental !ayment of (10$000.00 !er hectare. "or the riceland (,ot 1010) J 1; ca+ans !er hectare !er yearG from 18@2 to 18@0$ (12;.00 !er ca+anG 18@3% 18@@G (13;.00 !er ca+anG and 18@8 and succeeding years$ (200.00 !er ca+an. '*00 7s"iritu vs Valerio 'G # No ;-()0() (.53 0 Bn /anc$ )izon (.)4 8 concur$ 1 tooC no !art -ecember 25+
3actsH 6n 1; #e!tember 18;; Valerio filed an action to 9uiet title in the -": (angasinan (-i+il -ase 13283) against Bs!eranza Bs!iritu and 'ntonia '!ostol$ alleging in his com!laint that he was the owner of a !arcel of unregistered land containing an area of a!!ro2imately @$;33 s9uare meters situated in /arrio 6lo$ Munici!ality of Mangatarem$ (angasinan$ ha+ing ac9uired the same from the former owner$ (elagia Vegilia$ as e+idenced by a deed of sale e2ecuted by the latter in his fa+or on 31 .anuary 18;;G that Bs!iritu and '!ostol had been asserting ad+ersary rights o+er said land and disturbing his !ossession thereof. Bs!iritu and '!ostol denied the material allegations of the com!laint and alleged that they were the owners of the land in 9uestion$ ha+ing ac9uired it by inheritance from the late #antiago '!ostol$ husband and father of a!!ellants Bs!iritu and '!ostol$ res!ecti+elyG that said deceased bought the !ro!erty from Mariano Vegilia on 3 .une 183&$ as e+idenced by the deed of sale$ who$ in turn$ had ac9uired it from his niece$ (elagia Vegilia$ on 20 May 1832$ by +irtue of the deed of sale. The -": rendered decision declaring Valerio to be the owner of the land and enAoined Bs!iritu and '!ostol from molesting him in the !eaceful !ossession thereof. 1ence$ the a!!eal by Bs!iritu and her daughter '!ostol. The #u!reme -ourt affirmed the decision a!!ealed from$ with costs. ( valid 7s"iritu and A"ostol have better ri$ht only i& both their deeds Bere
The !resent a!!eal de!ends entirely u!on the +alidity of the )eed of #ale allegedly e2ecuted by (elagia Vegilia in fa+or of Mariano Vegilia$ and of the )eed of #ale allegedly e2ecuted by the latter in fa+or of #antiago '!ostol. :f both are +alid$ Bs!iritu?s and '!ostol?s contention that they ha+e a better right than that claimed by Valerio would seem to be meritorious in the light of the facts of the case and the !ro+isions of 'rticle 1;&& of the 5ew -i+il -ode$ it not being dis!uted that the )eed of #ale in fa+or of Valerio was registered under the !ro+isions of 'ct 33&& on 10 .une 18;;$ while the two deeds of Bs!iritu
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and '!ostol were similarly registered 11 days before. 2 -eeds L -ocuments &alsi&ied? Jitnesses and "roo& The document dated 20 May 1832$ <is fictitious and a falsification$= and that the !ri+ate document of
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3 .une 183& is liCewise null and +oid$ being without the necessary formal re9uisites$ aside to its being fictitious and the fact that the alleged +endor ac9uired no right whatsoe+er in the land. The determination that the documents are falsified is based u!on the testimony of (elagia Vegilia and Mariano Vegilia. (elagia em!hatically denied that she sold the land in 9uestion to Mariano Vegilia$ and that she a!!eared before 5otary (ublic ,ino 'bad (ine before whom the HBscritura de -om!ra+enta )efinita?$ was allegedly ratified. 6n the other hand$ Mariano denied that he bought the said land from (elagia Vegilia$ and that he sold the same to #antiago '!ostol as recited in H(eci+o?. :n gi+ing credence to the testimony of the two witnesses$ the trial court said that (1) an e2amination of first deed re+eals the glaring fact that it cannot be determined whose thumbmarC is the one a!!earing on said document for the sim!le reason that it immediately !recedes the name 'nselmo Vegilia but it is under the name (elagia Vegilia. 6rdinarily$ this thumbmarC would be considered as the thumbmarC of 'nselmo Vegilia and not of (elagia VegiliaG (2) that the one who wrote the name 'nselmo Vegilia is the +ery one who wrote the name (elagia VegiliaG (3) that 'nselmo Vegilia could not ha+e written the name 'nselmo Vegilia in the document for the sim!le reason that it has been certified by the 5otary (ublic that said 'nselmo Vegilia is !hysically inca!able (inutil !hysicamente)G (&) that there is an a!!arent difference of the inC used in writing the names of (elagia Vegilia and 'nselmo Vegilia from the inC used by the other !ersons who signed the document indicating that the names (elagia Vegilia and 'nselmo Vegilia must ha+e been written in a much later date than the other names a!!earing in the said document. 6n the other document$ the names Mariano Vegilia and .ose /. '+iles must ha+e been written by only one man. '*(0 7sto=ue vs !a@imula 'G # No ;-2**(. 6uly (/+ (.5) 0 Bn /anc$ 7eyes ./, (.)4 @ concur 3actsH ,ot @02 of the -adastral sur+ey of 7osario$ co+ered by 6-T 76%2320 (5.'.)$ was originally owned by the late s!ouses 7osendo (erez and "ortunata /ernal$ who were sur+i+ed by their children namely$ -ris!ina (erez$ ,orenzo (erez and 7icardo (erez. 7icardo (erez is also now dead. 6n 2@ 6ctober 18;1$ -ris!ina (. Vda. de '9uitania sold her right and !artici!ation in ,ot @02 consisting of 1D3 !ortion with an area of 0&0 s9uare meters to ,eonora Bsto9ue. 6n 28 6ctober 18;1$ ,orenzo (erez$ -ris!ina (erez and Bmilia (. (osadas$ widow of her deceased husband$ 7icardo (erez$ for herself and in behalf of her minor children$ umersindo$ 7a9uel$ Bmilio and 7icardo$ .r.$ e2ecuted a deed of e2traAudicial settlement wherein ,orenzo (erez$ Bmilia (. (osadas and her minor children assigned all their right$ interest and !artici!ation in ,ot @02 to -ris!ina (erez. 6n 30 )ecember 18;8$ -ris!ina (erez and her children$ 7osita '9uitania /elmonte$ 7emedios '9uitania Misa$ Manuel '9uitania$ #ergio '9uitania and 'urora '9uitania sold to Blena (aAimula (and -iriaco (aAimula)$ the remaining 2D3 western !ortion of ,ot @02 with an area of 8;@ s9uare meters. ,eonora Bsto9ue based her com!laint for legal redem!tion on a claim that she is a co%owner of lot @02$ for ha+ing !urchased 1D3 !ortion thereof$ containing an area of 0&0 s9uare meters as e+idenced by a deed of sale$ which was e2ecuted on 2@ 6ctober 18;1 by -ris!ina (erez de '9uitania$ one of the co%owners$ in her fa+or. 6n the other hand$ Blena (aAimula (and -iriaco (aAimula)$ who on 30 )ecember 18;8 ac9uired the other 2D3 !ortion of ,ot @02 from -ris!ina '9uitania and her children$ claimed that Bsto9ue bought the 1D3 southeastern !ortion$ which is definitely identified and segregated hence there e2isted no co%ownershi! at the time and after Bsto9ue bought the !ortion$ u!on which right of legal redem!tion can be e2ercised or taCen ad+antage of. The -": ,a *nion (-i+il -ase 1880)$ u!on motion by (aAimula$ dismissed the com!laint for legal redem!tion by a co%owner (retracto legal de comuneros) on account of failure to state a cause of action. The -ourt held that the deeds of sale show that the lot ac9uired by Bsto9ue was different from that of the (aAimulaG hence they ne+er became co%owners$ and the alleged right of legal redem!tion was not !ro!er. Bsto9ue a!!ealed. The #u!reme -ourt affirmed the a!!ealed order of dismissalG with cost against Bsto9ue.
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Co-oBnershi" does not e4ist? Article (520 does not a""ly The lower court held that the deeds of sale show that the lot ac9uired by Bsto9ue was different from that of the (aAimulaG hence they ne+er became co%owners$ and the alleged right of legal redem!tion was not !ro!er. 'rticle 1020$ which !ro+ides that <' co%owner of a thing may e2ercise the right of redem!tion in case the shares of all the other co%owners or of any of them$ are sold to a third !erson. :f the !rice of the alienation is grossly e2cessi+e the redem!tioner shall !ay only a reasonable one. #hould two or more co%owners desire to e2ercise the right of redem!tion$ they may only do so in !ro!ortion to the share they may res!ecti+ely ha+e in the thing owned in common$= does not a!!ly. 2 2b@ect sold is the southeastern third "ortion+ not one-third undivided interest in ;ot )02 The deed of sale to Bsto9ue clearly s!ecifies the obAect sold as the southeastern third !ortion of ,ot @02 of the 7osario -adastre$ with an area of @&0 s9uare meters$ more or less. ranting that the seller$ -ris!ina (erez Vda. de '9uitania could not ha+e sold this !articular !ortion of the lot owned in common by her and her two brothers$ ,orenzo and 7icardo (erez$ by no means does it follow that she intended to sell to Bsto9ue her 1D3 undi+ided interest in the lot. There is nothing in the deed of sale to Austify such inference. That the seller could ha+e +alidly sold her one%third undi+ided interest to a!!ellant is no !roof that she did choose to sell the same. 'b !osse ad actu non +alet illatio. 3 7sto=ueMs deed initially ine&&ective but validated Bhen Cris"ina !ere: ac=uired entire interest in ;ot )02 >hile on the date of the sale to Bsto9ue said contract may ha+e been ineffecti+e$ for lacC of !ower in the +endor to sell the s!ecific !ortion described in the deed$ the transaction was +alidated and became fully effecti+e when the ne2t day the +endor$ -ris!ina (erez$ ac9uired the entire interest of her remaining co% owners and thereby became the sole owner of ,ot @02 of the 7osario -adastral sur+ey (,lacer +s. MuMoz$ 12 (hil. 32@). 'rticle 1&3& of the -i+il -ode of the (hili!!ines clearly !rescribes that <>hen a !erson who is not the owner of a thing sells or alienates and deli+ers it$ and later the seller or grantor ac9uires title thereto$ such title !asses by o!eration of law to the buyer or grantee.= (ursuant to this rule$ Bsto9ue became the actual owner of the southeastern third of lot @02 on 28 6ctober 18;1. * 7sto=ue ac=uired no undivided interest in ;ot )02 as "ortions sold to 7sto=ue and !a@imula distinct and se"arate Bsto9ue ne+er ac9uired an undi+ided interest in ,ot @02. 'nd when eight years later -ris!ina (erez sold to (aAimula the western two%thirds of the same lot Bsto9ue did not ac9uire a right to redeem the !ro!erty thus sold$ since their res!ecti+e !ortions were distinct and se!arate. '*20 3ilinvest Credit vs CA 'G # No )2/0) Se"tember 2.+ (.). 0 #econd )i+ision$ #armiento (.)4 3 concur$ 1 on lea+e 3actsH The s!ouses .ose #y /ang and :luminada Tan were engaged in the sale of gra+el !roduced from crushed rocCs and used for construction !ur!oses. :n order to increase their !roduction$ they engaged the ser+ices of Mr. 7uben Mercurio$ the !ro!rietor of emini Motor #ales in ,ucena -ity$ to looC for a rocC crusher which they could buy. Mr. Mercurio referred the s!ouses to the 7izal -onsolidated -or!oration which then had for sale one such machinery (,i!!man !ortable crushing !lant$ reconditionedG .aw crusher$ 10 2 10$ )ouble roll crusher$ 10 2 10G 3 units !roduct con+eyor$ 3; 1( electric motor$ @ !cs. /rand new tiresG -hassis 18080$ ood running condition). 6scar #y /ang$ a brother of .ose #y /ang$ went to ins!ect the machine at the 7izal -onsolidated?s !lant site. '!!arently satisfied with the machine$ #y /ang signified their intent to !urchase the same. They were confronted with a !roblem$ the rocC crusher carried a cash !rice tag of (;;0$000.00. /ent on ac9uiring the machinery$ the s!ouses a!!lied for financial assistance from
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"ilin+est -redit -or!oration. "ilin+est agreed to e2tend to the s!ouses financial aid on the following conditions4 that
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the machinery be !urchased in "ilin+est?s nameG that it be leased (with o!tion to !urchase u!on the termination of the lease !eriod) to the s!ousesG and that the s!ouses e2ecute a real estate mortgage in fa+or of "ilin+est as security for the amount ad+anced by the latter. 'ccordingly$ on 1@ May 18@1$ a contract of lease of machinery (with o!tion to !urchase) was entered into by the !arties whereby the s!ouses agreed to lease from the !etitioner the rocC crusher for two years starting from ; .uly 18@1 !ayable at (10$000.00 for first 3 months$ (23$000.00 for the ne2t 0 months$ and (2&$@00.00 for the ne2t 1; months. The contract liCewise sti!ulated that at the end of the two%year !eriod$ the machine would be owned by the s!ouses. Thus$ the s!ouses issued in fa+or of "ilin+est a checC for (1;0$;;0.00$ as initial rental (or guaranty de!osit)$ and 2& !ostdated checCs corres!onding to the 2& monthly rentals. :n addition$ to guarantee their com!liance with the lease contract$ the s!ouses e2ecuted a real estate mortgage o+er two !arcels of land in fa+or of "ilin+est. The rocC crusher was deli+ered to the s!ouses on 8 .une 18@1. Three months from the date of deli+ery$ or on 3 #e!tember 18@1$ howe+er$ the s!ouses$ claiming that they had only tested the machine that month$ sent a letter%com!laint to "ilin+est$ alleging that contrary to the 20 to &0 tons !er hour ca!acity of the machine as stated in the lease contract$ the machine could only !rocess ; tons of rocCs and stones !er hour. They then demanded that "ilin+est maCe good the sti!ulation in the lease contract. They followed that u! with similar written com!laints to "ilin+est$ but the latter did not$ howe+er$ act on them. #ubse9uently$ the s!ouses sto!!ed !ayment on the remaining checCs they had issued to "ilin+est. 's a conse9uence of the non%!ayment by the s!ouses of the rentals on the rocC crusher as they fell due des!ite the re!eated written demands$ "ilin+est e2traAudicially foreclosed the real estate mortgage. 6n 1@ '!ril 18@3$ the s!ouses recei+ed a #heriff a 5otice of 'uction #ale informing them that their mortgaged !ro!erties were going to be sold at a !ublic auction on 2; May 18@3$ 10400 a.m.$ at the 6ffice of the (ro+incial #heriff in ,ucena -ity to satisfy their indebtedness to "ilin+est. To thwart the im!ending auction of their !ro!erties$ the s!ouses filed before the 7T- Uuezon (/ranch ,:R$ ,ucena -ity)$ on & May 18@3$ a com!laint against "ilin+est for the rescission of the contract of lease$ annullment of the real estate mortgage$ and for inAunction and damages$ with !rayer for the issuance of a writ of !reliminary inAunction. 6n 23 May 18@3$ 3 days before the scheduled auction sale$ the trial court issued a tem!orary restraining order commanding the (ro+incial #heriff of Uuezon$ and "ilin+est$ to refrain and desist from !roceeding with the !ublic auction. Two years later$ on & #e!tember 18@;$ the trial court rendered a decision in fa+or of the s!ouses$ maCing the inAunction !ermanent$ rescinding the contract of lease of the machinery and e9ui!ment and ordering the s!ouses to return to the "ilin+est the machinery subAect of the lease contract$ and "ilin+est to return to the s!ouses the sum of (&30$8;0.00 it recei+ed from the latter as guaranty de!osit and rentals with legal interest thereon until the amount is fully restitutedG annulling the real estate mortgage constituted o+er the !ro!erties of the s!ouses co+ered by T-Ts T%32&@0 and T%;338 of the 7egistry of )eeds of ,ucena -ityG and ordering the "ilin+est to !ay the s!ouses (30$000.00 as attorney?s fees and the costs of the suit. )issatisfied with the trial court?s decision$ "ilin+est ele+ated the case to the -ourt of '!!eals. 6n 13 March 18@@$ the a!!ellate court$ finding no error in the a!!ealed Audgment$ affirmed the same in toto. 1ence$ the !etition for re+iew on certiorari by "ilin+est. The #u!reme -ourt granted the !etition$ re+ersed and set aside the 13 March 18@@ )ecision of the -ourt of '!!eals$ and rendered another one dismissing the com!laintG with costs against the s!ouses. ( 3inancial institution not immune &rom recourse o& the s"ouses? 3ilinvest oBns crusher >hile it is acce!ted that "ilin+est -redit -or!oration is a financing institution$ it is not$ howe+er$ immune from any recourse by the !ri+ate res!ondents. 5otwithstanding the testimony of .ose #y /ang that he did not !urchase the rocC crusher from "ilin+est$ the fact that the rocC crusher was !urchased from 7izal
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-onsolidated -or!oration in the name and with the funds of "ilin+est !ro+es beyond doubt that the ownershi! thereof was effecti+ely transferred to it. :t is !recisely this ownershi! which enabled "ilin+est to enter into the <-ontract of ,ease of Machinery and B9ui!ment= with the s!ouses
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Nomenclature o& a$reement cannot chan$e its true essence? sale on installment The real intention of the !arties should !re+ail. The nomenclature of the agreement cannot change its true essence$ i.e.$ a sale on installments. :t is basic that a contract is what the law defines it and the !arties intend it to be$ not what it is called by the !arties. :t is a!!arent that the intent of the !arties to the subAect contract is for the so%called rentals to be the installment !ayments. *!on the com!letion of the !ayments$ then the rocC crusher$ subAect matter of the contract$ would become the !ro!erty of the s!ouses. This form of agreement has been criticized as a lease only in name. 3 !ayment in contract o& lease Bith o"tion to buy are installment "ayments :n Vda. de .ose +. /arrueco$ it was stated that <#ellers desirous of maCing conditional sales of their goods$ but who do not wish o!enly to maCe a bargain in that form$ for one reason or another$ ha+e fre9uently resorted to the de+ice of maCing contracts in the form of leases either with o!tions to the buyer to !urchase for a small consideration at the end of term$ !ro+ided the so%called rent has been duly !aid$ or with sti!ulations that if the rent throughout the term is !aid$ title shall thereu!on +est in the lessee. :t is ob+ious that such transactions are leases only in name. The so%called rent must necessarily be regarded as !ayment of the !rice in installments since the due !ayment of the agreed amount results$ by the terms of bargain$ in the transfer of title to the lessee.= * Article (*)* 'rticle 1&@& of the new -i+il -ode$ which !ro+ides for the remedies of an un!aid seller of mo+ables in installment basis$ states <:n a contract of sale of !ersonal !ro!erty the !rice of which is !ayable in installments$ the +endor may e2ercise any of the following remedies4 (1) B2act fulfillment of the obligation$ should the +endee fail to !ayG (2) -ancel the sale$ should the +endee?s failure to !ay co+er two or more installmentsG (3) "oreclose the chattel mortgage or the thing sold$ if one has been constituted$ should the +endee?s failure to !ay co+er two or more installments. :n this case$ he shall ha+e no further action against the !urchaser to reco+er any un!aid balance of the !rice. 'ny agreement to the contrary shall be +oid.= / #emedies under Article (*)* alternative and not cumulative *nder 'rticle 1&@&$ the seller of mo+ables in installments$ in case the buyer fails to !ay two or more installments$ may elect to !ursue either of the following remedies4 (1) e2act fulfillment by the !urchaser of the obligationG (2) cancel the saleG or (3) foreclose the mortgage on the !urchased !ro!erty if one was constituted thereon. :t is now settled that the said remedies are alternati+e and not cumulati+e and therefore$ the e2ercise of one bars the e2ercise of the others. 5 Contract o& lease Bith o"tion to buy a device to circumvent Article (*)* The de+ice J contract of lease with o!tion to buy J is at times resorted to as a means to circum+ent 'rticle 1&@&$ !articularly !aragra!h (3) thereof. Through the set%u!$ the +endor$ by retaining ownershi! o+er the !ro!erty in the guise of being the lessor$ retains$ liCewise$ the right to re!ossess the same$ without going through the !rocess of foreclosure$ in the e+ent the +endee%lessee defaults in the !ayment of the installments. There arises therefore no need to constitute a chattel mortgage o+er the mo+able sold. More im!ortant$ the +endor$ after re!ossessing the !ro!erty and$ in effect$ canceling the contract of sale$ gets to Cee! all the installments%cum%rentals already !aid. , Article (*)/ "laces contract o& lease Bith o"tion to buy Bithin the a""licability o& Article (*)* 'rticle 1&@; of the new -i+il -ode !ro+ides that <The !receding article shall be a!!lied to contracts !ur!orting to be leases of !ersonal !ro!erty with o!tion to buy$ when the lessor has de!ri+ed the lessee of !ossession or enAoyment of the thing.= ) No reason to hold 3ilinvest liable &or &ailure o& rock crusher to "roduce in accordance Bith its ca"acity
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The -ourt failed to find any reason to hold the !etitioner liable for the rocC crusher?s failure to !roduce in accordance with its described ca!acity. :t was the s!ouses who chose$ ins!ected$ and tested the subAect machinery. :t was only after they had ins!ected and tested the machine$ and found it to their satisfaction$ that the s!ouses sought financial aid from "ilin+est. These allegations of the !etitioner had ne+er been rebutted by the s!ouses$ but in fact$ e+en been admitted in the contract they signed (<,B##BB?# #B,B-T:65$ :5#(B-T:65 '5) VB7:":-'T:65. J The ,B##BB hereby confirms and acCnowledges that he has inde!endently ins!ected and +erified the leased !ro!erty and has selected and recei+ed the same from the )ealer of his own choosing in good order and e2cellent running and o!erating condition and on the basis of such +erification$ etc. the ,B##BB has agreed to enter into this -ontract.=) . S"ouses "resumed knoBled$eable on machinery sub@ect o& the contract? S"ouses ne$li$ent -onsidering that between the !arties$ it is the s!ouses$ by reason of their business$ who are !resumed to be more Cnowledgeable$ if not e2!erts$ on the machinery subAect of the contract$ they should not therefore be heard now to com!lain of any alleged deficiency of the said machinery. :t is their failure or neglect to e2ercise the caution and !rudence of an e2!ert$ or$ at least$ of a !rudent man$ in the selection$ testing$ and ins!ection of the rocC crusher that ga+e rise to their difficulty and to this conflict. ' well%established !rinci!le in law is that between two !arties$ he$ who by his negligence caused the loss$ shall bear the same. (0 S"ouses "recluded &rom im"utin$ liability on 3ilinvest? 74"ress Baiver o& Barranties B+en if the s!ouses could not be adAudged as negligent$ they still are !recluded from im!uting any liability on "ilin+est. 6ne of the sti!ulations in the contract they entered into with "ilin+est is an e2!ress wai+er of warranties in fa+or of the latter. /y so signing the agreement$ the s!ouses absol+ed "ilin+est from any liability arising from any defect or deficiency of the machinery they bought. The sti!ulation on the machine?s !roduction ca!acity being <ty!ewritten= and that of the wai+er being <!rinted= does not militate against the latter?s effecti+ity. 's such$ whether <a ca!acity of 20 to &0 tons !er hour= is a condition or a descri!tion is of no moment. >hat stands is that the s!ouses had e2!ressly e2em!td "ilin+est from any warranty whatsoe+er. Their -ontract of ,ease 6f Machinery 'nd B9ui!ment states <>'77'5TF J ,B##BB absolutely releases the lessor from any liability whatsoe+er as to any and all matters in relation to warranty in accordance with the !ro+isions hereinafter sti!ulated.= (( Common sense dictates buyer ins"ects "roduct be&ore "urchasin$ it? Caveat em"tor -ommon sense dictates that a buyer ins!ects a !roduct before !urchasing it (under the !rinci!le of ca+eat em!tor or <buyer beware=) and does not return it for defects disco+ered later on$ !articularly if the return of the !roduct is not co+ered by or sti!ulated in a contract or warranty. (2 -eclaration o& Baiver as non-e&&ective Bould im"air obli$ations o& contracts TaCing into account that due to the nature of its business and its mode of !ro+iding financial assistance to clients$ "ilin+est deals in goods o+er which it has no sufficient Cnow%how or e2!ertise$ and the selection of a !articular item is left to the client concerned$ the latter$ therefore$ shoulders the res!onsibility of !rotecting himself against !roduct defects. This is where the wai+er of warranties is of !aramount im!ortance. :n the !resent case$ to declare the wai+er as non%effecti+e would im!air the obligation of contracts. -ertainly$ the wai+er in 9uestion could not be considered a mere sur!lusage in the contract between the !arties. Moreo+er$ nowhere is it shown in the records of the case that the s!ouses has argued for its nullity or illegality. (3 No ambi$uity in the lan$ua$e o& the Baiver :n any e+ent$ there is no ambiguity in the language of the wai+er or the release of warranty. There is therefore no room for any inter!retation as to its effect or a!!licability +is%a%+is the deficient out!ut of the rocC crusher. #uffice it to say that the s!ouses ha+e +alidly e2cused "ilin+est from any warranty on the rocC crusher. 1ence$ they should bear the loss for any defect found therein.
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'*30 3ili"inas 8nvestment vs #idad 'G # No ;-2,5*/ November 2)+ (.5. 0 Bn /anc$ -astro (.)4 8 concur 3actsH The s!ouses 7idad (,ourdes V. 7idad and ,uis 7idad) bought from the #u!reme #ales Q )e+elo!ment -or!oration$ "ili!inas :n+estment and "inance -or!oration (":"-)?s assignor%in%interest$ a "ord -onsul sedan for the total !rice of (13$331.&0. The sum of (1$100 was !aid on deli+ery$ the balance of (12$211.;0 being !ayable in 2& e9ual monthly installments$ with interest at 12I !er annum$ secured by a !romissory note and a chattel mortgage on the car e2ecuted on 18 March 180&. The s!ouses thereafter failed to !ay ; consecuti+e installments on a remaining balance of (;$23&.;3. 6n 13 6ctober 180;$ ":"- instituted a re!le+in suit in the city court of Manila for the seizure of the car$ or the reco+ery of the un!aid balance in case deli+ery could not be effected. The car was then seized by the sheriff of Manila and !ossession thereof was awarded to ":"-. )uring the !rogress of the case$ ":"- instituted e2traAudicial foreclosure !roceedings$ as a result of which$ on 22 )ecember 180;$ the car was sold at !ublic auction with ":"- as the highest bidder and !urchaser. Meanwhile$ in +iew of the failure of the s!ouses to a!!ear at the scheduled hearing of the case$ allegedly due to non%recei!t of the summons$ they were declared in default. The default Audgment ordered them to !ay to ":"- the sum of (;00 as attorney?s fees$ and (103$0; re!resenting actual e2!enses relati+e to the seizure of the car$ !lus costs. Their motion to set aside the order of default and the decision ha+ing been denied$ they a!!ealed to the -ourt of "irst :nstance of Manila. The -": ad+anced the o!inion (during !re%trial) that there was no need for the !arties to adduce e+idence and that the case could be decided on the basis of the !leadings submitted by the !arties. 6n ; #e!tember 1800$ the trial court rendered Audgment holding that ":"- is entitled to reco+er the amout of (103.0; which re!resents the e2!enses incurred by ":"- in the seizure of the car in+ol+ed. The court also reduced the attorney?s fees granted to the !laintiff to (300.00 considering that ":"- reco+ered the car while still in the lower court and that the 7idads did not resist the case. The s!ouses 7idads a!!ealed. The #u!reme -ourt affirmed the AudgmentG without costs. ( -ecision com"lies Bith re=uirements o& laB by re&errin$ to "re-trial order as "art o& its conclusion The dis!uted decision of the lower court com!lies substantially with the re9uirements of law because it referred to the !re%trial order it issued on 23 May 1800 which contains substantial findings of facts. "or although settled is the doctrine that a decree with absolutely nothing to su!!ort it is a nullity$ the law$ howe+er$ merely re9uires that a decision state the <essential ultimate facts u!on which the court?s conclusion is drawn.= There being an e2!ress reference to the !re%trial order$ the latter must be considered and taCen as forming !art of the decision. The claim$ therefore$ that the Audgment clearly transgresses the legal !rece!t because it does not state the facts of the case and the law on which it is based and hence$ is a nullity$ finds no Austification here. 2 Article (*)* a""lies even i& case is one &or re"levin as it culminated in the &oreclosure o& chattel mort$a$e :t is true that the !resent action is one for re!le+in$ but because it culminated in the foreclosure of the chattel mortgage and the sale of the car at !ublic auction$ it is our +iew that the !ro+isions of art. 1&@& of the -i+il -ode (7ecto ,aw) must go+ern the resolution of the issue !resented. 3 Article (*)* <:n a contract of sale of !ersonal !ro!erty the !rice of which is !ayable in installments$ the +endor
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may e2ercise any of the following remedies4 (1) B2act fulfillment of the obligation$ should the +endee fail to !ayG (2) -ancel the sale$ should the +endee?s failure to !ay co+er two or more installmentsG (3) "oreclose the chattel mortgage on the thing sold$ if one has been constituted$ should the +endee?s failure to !ay co+er two or more installments. :n this case$ he shall ha+e no further action against the !urchaser to reco+er any un!aid balance of the !rice. 'ny agreement to the contrary shall be +oid.= * Source o& Article (*/* 'rticle 1&;& was re!roduced from the old 'rticle 1&;&%'$ which in turn was inserted by 'ct &122 (7ecto ,aw). <Three remedies are a+ailable to the +endor who has sold !ersonal !ro!erty on the installment !lan4 (1) 1e may elect to e2act the fulfillment of the obligation. (/achrach Motor -o. +s. Millan$ 01 (hil. &08) (2) :f the +endee shall ha+e failed to !ay two or more installments$ the +endor may cancel the sale. (3) :f the +endee shall ha+e failed to !ay two or more installments$ the +endor may foreclose the mortgage$ if one has been gi+en on the !ro!erty. The basis of the first o!tion is the -i+il -ode. The basis of the last two o!tions is 'ct &122 (inserted in the #!anish -i+il -ode as art. &1;&%' and now re!roduced in arts. 1&@; and 1&@;)$ amendatory of the -i+il -ode. 'nd the !ro+iso to the right to foreclose is that if the +endor has chosen this remedy$ he shall ha+e no further action against the !urchaser for the reco+ery of any un!aid balance owing by the same. :n other words$ as we see it$ the 'ct does no more than 9ualify the remedy.= / Macondray A Co vs 7usta=uio? Mort$a$e limited to "ro"erty mort$a$e and not entitled to attorneyPs &ees and cost o& suit *nder the amendment$ in all !roceedings for the foreclosure of a chattel mortgage$ e2ecuted on chattels which ha+e been sold on the installment !lan$ the mortgagee is limited to the !ro!erty mortgaged and is not entitled to attorney?s fees and costs of suit. 5 ;uneta Motor vs Salvador? Cancellation o& attorneyMs &ees and cost o& suit Bhen chattel mort$a$e Bas &oreclosed durin$ "ro$ress o& action to recover un"aid balance o& "urchase "rice :n a subse9uent case$ where the +endor in a sale of !ersonal !ro!erty in installments$ u!on failure of the +endee to !ay his obligations$ the +endor commenced$ through court action$ to reco+er the un!aid balance of the !urchase !rice$ but later$ during the !rogress of the action$ foreclosed the chattel mortgage constituted on the !ro!erty$ attorney?s fees and costs of suit were denied to the +endor. , ;uneta Motor vs Salvador? #emedies alternative not "ursued con@unctively (aragra!h 3 of 'rticle 1&@&$ 5ew -i+il -ode$ is clear that foreclosure of the chattel mortgage and reco+ery of the un!aid balance of the !rice are alternati+e remedies and may not be !ursued conAuncti+ely. :t a!!earing that the +endor had already foreclosed the chattel mortgage constituted on the !ro!erty and had taCen !ossession thereof$ the lower court acted rightly in dismissing the com!laint filed for the !ur!ose of reco+ering the un!aid balance of the !urchase !rice. Thus$ in that case$ by seizing the trucC and foreclosing the mortgage at the !rogress of the suit$ the !laintiff renounced whate+er claim it may ha+e had under the !romissory note$ and conse9uently$ he has no more cause of action against the !romisor and the guarantor. 'nd he has no more right either to the costs and the attorney?s fees that would go with the suit. This might be considered a reiteration of the ruling in Macondray. ) !ur"ose o& the doctrine as to Article (*)* F3G The doctrine?s ultimate and salutary !ur!ose is to !re+ent the +endor from circum+enting the 7ecto ,aw. -ongress sought to !rotect the buyers on installment who more often than not ha+e been +ictimized by sellers who$ before the enactment of this law$ succeeded in unAustly enriching themsel+es at the e2!ense of the buyers$ because aside from reco+ering the goods sold$ u!on default of the buyer in the !ayment of two installments$ still retained for themsel+es all amounts already !aid$ and$ in addition$ were adAudged entitled to damages$ such as attorney?s fees$ e2!enses of litigation and costs. -ongress could not ha+e intended to im!air much less do away with$ the right of the seller to maCe commercial use of his credit
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against the buyer$ !ro+ided the buyer is not burdened beyond what this law allows.
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!hiloso"hy o& the #ecto ;aB The em!hasis and !recision of the language em!loyed in the decisions already ad+erted to that in no instance whatsoe+er may the mortgagee re co+er from the mortgagor any amount or sum after the foreclosure of the mortgage$ for$ as we understand it$ the !hiloso!hy of the 7ecto ,aw is that the under!ri+ileged mortgagors must be afforded full !rotection against the ra!acity of the mortgagees. (0 Action &or re"levin? Necessary e4"enses borne by mort$a$or :t is !art of con+entional wisdom and the rule of law that no man can taCe the law into his own handsG so it is not to be su!!osed that the ,egislature intended that the mortgagee should wrest or seize the chattel forcibly from the control and !ossession of the mortgagor$ e+en to the e2tent of using +iolence which is unwarranted in law. #ince the mortgagee would enforce his rights through the means and within the limits delineated by law$ the ne2t ste! in such situations being the filing of an action for re!le+in to the end that he may reco+er immediate !ossession of the chattel and$ thereafter$ enforce his rights in accordance with the contractual relationshi! between him and the mortgagor as embodied in their agreement$ then it logically follows as a matter of common sense$ that the necessary e2!enses incurred in the !rosecution by the mortgagee of the action for re!le+in so that he can regain !ossession of the chattel$ should be borne by the mortgagor. 7eco+erable e2!enses would include e2!enses !ro!erly incurred in effecting seizure of the chattel and reasonable attorney?s fees in !rosecuting the action for re!le+in. The amounts awarded by the lower court to the mortgagee are reasonable. (( Note as to "otential matters Bhich may be obiter dictum To the e2tent that the !ronouncement in the !resent case conflicts with the ruling announced and followed in the cases discussed$ the latter must be considered !ro tanto 9ualified. '**0 )i#st *+ili,,ine -nte#national .an/ v. CA, 202 SCRA &%''1( '*/0 )#oilan v. *an23#iental S+i,,ing Co., %2 SCRA 2$1 &%'14( '*50 3ule v CA 'G # No ((22(2 March 2+ (..) 0 Third di+ision$ 7omero (.)4 3 concur 3actsH "r. 'ntonio .acobe initially mortgage a 10%hectare !ro!erty in Tanay$ 7izal (co+ered by T-T 32032;) to the 7ural /anC of 'laminos$ ,aguna to secure a loan in the amount of (10$000. #aid mortgage was later foreclosed and the !ro!erty offered for !ublic auction u!on his default. :n .une 18@&$ regorio "ule$ as cor!orate secretary of the banC$ asCed 7emelia )ichoso and 6li+ia Mendoza to looC for a buyer who might be interested in the Tanay !ro!erty. The two found one in the !erson of 5ine+etch -ruz. :t so ha!!ened that in .anuary of said year$ regorio "ule$ also a Aeweler$ has shown interest in buying a !air of emerald%cut diamond earrings owned by )r. -ruz. )r. -ruz has declined "ule?s offer to buy said Aewelry for (100$000G and a subse9uent bid by "ule to buy them for *#T0$000 at T1 to (2; while maCing a sCetch of said Aewelry during an ins!ection at the lobby of (rudential /anC (the latter instance was declined$ since the e2change rate a!!reciated to (18 !er dollar). #ubse9uently$ howe+er$ negotiations for the barter of the Aewelry and the Tanay !ro!erty ensued. 'tty. /elarmino was re9uested by )r. -ruz to checC the !ro!erty
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and found out that no sale or barter was feasible as the 1%year !eriod of redem!tion has not e2!ired. :n an effort to cut through any legal im!ediment$ "ule e2ecuted on 18 6ctober 18@&$ a deed of redem!tion on behalf of "r. .acobe !ur!ortedly in
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the amount of (1;$8@3.3@$ and on e+en date$ "r. .acobe sold the !ro!erty to "ule for (3;$000.00. The haste with which the two deeds were e2ecuted is shown by the fact that the deed of sale was notarized ahead of the deed of redem!tion. 's )r. -ruz had already agreed to the !ro!osed barter$ "ule went to (rudential /anC to taCe a looC at the Aewelry. 6n 23 6ctober 18@&$ "ule met 'tty. /elarmino at the latter?s residence to !re!are the documents of sale. 'tty. /elarmino accordingly caused the !re!aration of a deed of absolute sale while "ule and )r. -ruz attended to the safeCee!ing of the Aewelry. The following day$ "ule$ together with )ichoso and Mendoza$ arri+ed at the residence of 'tty. /elarmino to finally e2ecute a deed of absolute sale. "ule signed the deed and ga+e 'tty. /elarmino the amount of (13$300.00 for necessary e2!enses in the transfer of title o+er the Tanay !ro!ertyG and issued a certification to the effect that the actual consideration of the sale was (200$000.00 and not (@0$000.00 as indicated in the deed of absolute sale (the dis!arity !ur!ortedly aimed at minimizing the amount of the ca!ital gains ta2 that "ule would ha+e to shoulder). #ince the Aewelry was a!!raised only at (100$000.00$ the !arties agreed that the balance of (&0$000.00 would Aust be !aid later in cash. Thereafter$ at the banC$ as !re%arranged$ )r. -ruz and the cashier o!ened the safety de!osit bo2$ and deli+ered the contents thereof to "ule. "ule ins!ected the Aewelry$ near the electric light at the banC?s lobby$ for 10%1; minutes. "ule e2!ressed his satisfaction by nodding his head when asCed by )r. -ruz if the Aewelry was oCay. "or ser+ices rendered$ "ule !aid the agents$ )ichoso and Mendoza$ the amount of *#T300.00 and some !ieces of Aewelry. 1e did not$ howe+er$ gi+e them half of the !air of earrings in 9uestion$ which he had earlier !romised. ,ater in the e+ening$ "ule arri+ed at the residence of 'tty. /elarmino com!laining that the Aewelry gi+en him was faCe. )ichoso$ who borrowed the car of )r. -ruz$ called u! 'tty. /elarmino. :nformed that "ule was at the lawyer?s house$ went there !osthaste thinCing that "ule had finally agreed to gi+e them half of the !air of earrings$ only to find "ule demonstrating with a tester that the earrings were faCe. "ule then accused )ichoso and Mendoza of decei+ing him which they$ howe+er$ denied. They countered that "ule could not ha+e been fooled because he had +ast e2!erience regarding Aewelry. "ule nonetheless tooC bacC the *#T300.00 and Aewelry he had gi+en them. Thereafter$ the grou! decided to go to the house of a certain Macario )imayuga$ a Aeweler$ to ha+e the earrings tested. )imayuga$ after taCing one looC at the earrings$ immediately declared them counterfeit. 't around 8430 !.m.$ "ule went to one 'tty. 7eynaldo 'lcantara residing at ,aCeside #ubdi+ision in #an (ablo -ity$ com!laining about the faCe Aewelry. *!on being ad+ised by the latter$ "ule re!orted the matter to the !olice station where )ichoso and Mendoza liCewise e2ecuted sworn statements. 6n 20 6ctober 18@&$ "ule filed a com!laint before the 7T- #an (ablo -ity against !ri+ate res!ondents !raying$ among other things$ that the contract of sale o+er the Tanay !ro!erty be declared null and +oid on the ground of fraud and deceit. 6n 30 6ctober 18@&$ the lower court issued a tem!orary restraining order directing the 7egister of )eeds of 7izal to refrain from acting on the !ertinent documents in+ol+ed in the transaction. 6n 20 5o+ember 18@&$ howe+er$ the same court lifted its !re+ious order and denied the !rayer for a writ of !reliminary inAunction. 'fter trial$ the lower court rendered its decision on 3 March 18@8G holding that the genuine !air of earrings used as consideration for the sale was deli+ered by )r. -ruz to "ule$ that the contract was +alid e+en if the agreement between the !arties was !rinci!ally a barter contract$ that the agreement has been consummated at the time the !rinci!al !arties !arted ways at the banC$ and that damages are due to the defendants. "rom the trial court?s ad+erse decision$ !etitioner ele+ated the matter to the -ourt of '!!eals. 6n 20 6ctober 1882$ the -ourt of '!!eals$ howe+er$ rendered a decision affirming in toto the lower court?s decision. 1is motion for reconsideration ha+ing been denied on 18 6ctober 1883. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt affirmed in toto the decision of the -ourt of '!!eals$ but ordered )r. -ruz to !ay "ule the balance of the !urchase !rice of (&0$000 within 10 days from the finality of the decisionG with costs against !etitioner. ( NeB &actual issues cannot be e4amined as it unduly transcends the limits o& the Su"reme
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CourtMs revieB "oBer
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The #u!reme -ourt cannot entertain a factual issue$ and thus e2amine and weigh anew the facts regarding the genuineness of the earrings bartered in e2change for the Tanay !ro!erty$ as this would unduly transcend the limits of the -ourt?s re+iew !ower in !etitions of this nature which are confined merely to !ure 9uestions of law. 's a general rule$ the #u!reme -ourt accords conclusi+eness to a lower court?s findings of fact unless it is shown$ inter alia$ that4 (1) the conclusion is a finding grounded on s!eculations$ surmises or conAecturesG (2) the inference is manifestly mistaCen$ absurd and im!ossibleG (3) when there is a gra+e abuse of discretionG (&) when the Audgment is based on a misa!!rehension of factsG (;) when the findings of fact are conflictingG and (0) when the -ourt of '!!eals$ in maCing its findings$ went beyond the issues of the case and the same is contrary to the admission of both !arties. To reiterate$ the #u!reme -ourt?s Aurisdiction is only limited to re+iewing errors of law in the absence of any showing that the findings com!lained of are totally de+oid of su!!ort in the record or that they are glaringly erroneous as to constitute serious abuse of discretion. 2 8mmediate rendition o& decision not anomalous 5o !roof has been adduced that .udge .aramillo was moti+ated by a malicious or sinister intent in dis!osing of the case with dis!atch. 5either is there !roof that someone else wrote the decision for him. The immediate rendition of the decision was no more than .udge .aramillo?s com!liance with his duty as a Audge to <dis!ose of the court?s business !rom!tly and decide cases within the re9uired !eriods.= The two%year !eriod within which .udge .aramillo handled the case !ro+ided him with all the time to study it and e+en write down its facts as soon as these were !resented to court. :n fact$ the #u!reme -ourt does not see anything wrong in the !ractice of writing a decision days before the scheduled !romulgation of Audgment and lea+ing the dis!ositi+e !ortion for ty!ing at a time close to the date of !romulgation$ !ro+ided that no malice or any wrongful conduct attends its ado!tion. The !ractice ser+es the dual !ur!oses of safeguarding the confidentiality of draft decisions and rendering decisions with !rom!tness. 5either can .udge .aramillo be made administrati+ely answerable for the immediate rendition of the decision. The acts of a Audge which !ertain to his Audicial functions are not subAect to disci!linary !ower unless they are committed with fraud$ dishonesty$ corru!tion or bad faith. 1ence$ in the absence of sufficient !roof to the contrary$ .udge .aramillo is !resumed to ha+e !erformed his Aob in accordance with law and should instead be commended for his close attention to duty. 3 Contract "er&ected by mere consent+ binds "arties to sti"ulation and all the conse=uences? Contract o& sale "er&ected u"on meetin$ o& minds u"on the thin$ ob@ect o& the contract and u"on "rice? 7mbodiment o& contract in "ublic instrument only &or convenience+ and re$istration only to a&&ect third "arties? ;ack o& &ormal re=uirements does not invalidate the contract The -i+il -ode !ro+ides that contracts are !erfected by mere consent. "rom this moment$ the !arties are bound not only to the fulfillment of what has been e2!ressly sti!ulated but also to all the conse9uences which$ according to their nature$ may be in Cee!ing with good faith$ usage and law. ' contract of sale is !erfected at the moment there is a meeting of the minds u!on the thing which is the obAect of the contract and u!on the !rice. /eing consensual$ a contract of sale has the force of law between the contracting !arties and they are e2!ected to abide in good faith by their res!ecti+e contractual commitments. 'rticle 13;@ of the -i+il -ode which re9uires the embodiment of certain contracts in a !ublic instrument$ is only for con+enience$ and registration of the instrument only ad+ersely affects third !arties. "ormal re9uirements are$ therefore$ for the benefit of third !arties. 5on%com!liance therewith does not ad+ersely affect the +alidity of the contract nor the contractual rights and obligations of the !arties thereunder. * Voidable or annullable contracts -ontracts that are +oidable or annullable$ e+en though there may ha+e been no damage to the contracting !arties are4 (1) those where one of the !arties is inca!able of gi+ing consent to a contractG and (2) those where the consent is +itiated by mistaCe$ +iolence$ intimidation$ undue influence or fraud. The contract
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can be +oided in accordance with law so as to com!el the !arties to restore to each other the things that ha+e been the subAect of the contract with their fruits$ and the !rice with interest.
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3raud? No inducement made by the "rivate res"ondents There is fraud when$ through the insidious words or machinations of one of the contracting !arties$ the other is induced to enter into a contract which$ without them$ he would not ha+e agreed to. :n the !resent case$ the records$ are bare of any e+idence manifesting that !ri+ate res!ondents em!loyed such insidious words or machinations to entice !etitioner into entering the contract of barter. 5either is there any e+idence showing that )r. -ruz induced !etitioner to sell his Tanay !ro!erty or that she caAoled him to taCe the earrings in e2change for said !ro!erty. 6n the contrary$ )r. -ruz did not initially accede to !etitioner?s !ro!osal to buy the said Aewelry. 7ather$ it a!!ears that it was !etitioner$ through his agents$ who led )r. -ruz to belie+e that the Tanay !ro!erty was worth e2changing for her Aewelry as he re!resented that its +alue was (&00$000.00 or more than double that of the Aewelry which was +alued only at (100$000.00. :f indeed !etitioner?s !ro!erty was truly worth that much$ it was certainly contrary to the nature of a businessman% banCer liCe him to ha+e !arted with his real estate for half its !rice. :n short$ it was in fact !etitioner who resorted to machinations to con+ince )r. -ruz to e2change her Aewelry for the Tanay !ro!erty. 5 Mistake? Mistake caused by mani&est ne$li$ence cannot invalidate a @udicial act To in+alidate a contract$ mistaCe must <refer to the substance of the thing that is the obAect of the contract$ or to those conditions which ha+e !rinci!ally mo+ed one or both !arties to enter into the contract.= 'n e2am!le of mistaCe as to the obAect of the contract is the substitution of a s!ecific thing contem!lated by the !arties with another. :n the !resent case$ the !etitioner failed to !ro+e the fact that !rior to the deli+ery of the Aewelry to him$ !ri+ate res!ondents endea+ored to maCe such substitution of an inferior one or one with 7ussian diamonds for the Aewelry he wanted to e2change with his 10%hectare land. "urther$ on account of his worC as a banCer%Aeweler$ it can be rightfully assumed that he was an e2!ert on matters regarding gems. 1e had the intellectual ca!acity and the business acumen as a banCer to taCe !recautionary measures to a+ert such a mistaCe$ considering the +alue of both the Aewelry and his land. ' mistaCe caused by manifest negligence cannot in+alidate a Auridical act. 's the -i+il -ode !ro+ides$ <(t)here is no mistaCe if the !arty alleging it Cnew the doubt$ contingency or risC affecting the obAect of the contract.= , Contract o& sale absolute i& no sti"ulation that title to "ro"erty is reserved to seller until &ull "ayment? 2Bnershi" trans&erred u"on actual or constructive delivery ' contract of sale being absolute in nature$ title !assed to the +endee u!on deli+ery of the thing sold since there was no sti!ulation in the contract that title to the !ro!erty sold has been reser+ed in the seller until full !ayment of the !rice or that the +endor has the right to unilaterally resol+e the contract the moment the buyer fails to !ay within a fi2ed !eriod. #uch sti!ulations are not manifest in the contract of sale. :n the !resent case$ both the trial and a!!ellate courts$ therefore$ correctly ruled that there were no legal bases for the nullification of the contract of sale. 6wnershi! o+er the !arcel of land and the !air of emerald%cut diamond earrings had been transferred to )r. -ruz and "ule$ res!ecti+ely$ u!on the actual and constructi+e deli+ery thereof. ) Contract silent Bhen balance is due and demandable? non-"ayment does not invalidate the contract >hile it is true that the amount of (&0$000.00 forming !art of the consideration was still !ayable to "ule$ its non!ayment by )r. -ruz is not a sufficient cause to in+alidate the contract or bar the transfer of ownershi! and !ossession of the things e2changed considering the fact that their contract is silent as to when it becomes due and demandable. . No interest due i& it is not sti"ulated "ailure to !ay the balance of the !urchase !rice does not result in the !ayment of interest thereon. 'rticle 1;@8 of the -i+il -ode !rescribes the !ayment of interest by the +endee <for the !eriod between the deli+ery of the thing and the !ayment of the !rice= in cases <(1) #hould it ha+e been so sti!ulatedG (2) #hould
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the thing sold and deli+ered !roduce fruits or incomeG (3) #hould he be in default$ from the time of Audicial or
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e2traAudicial demand for the !ayment of the !rice.= (0 Case distin$uished &rom de la Cru: v ;e$as"i The !resent case should be distinguished from )e la -ruz +. ,egas!i$ where the court held that failure to !ay the consideration after the notarization of the contract as !re+iously !romised resulted in the +endee?s liability for !ayment of interest. :n the !resent$ there is no sti!ulation for the !ayment of interest in the contract of sale nor !roof that the Tanay !ro!erty !roduced fruits or income. 5either did !etitioner demand !ayment of the !rice as in fact he filed an action to nullify the contract of sale. (( ABard o& moral and e4em"lary dama$es Moral and e2em!lary damages may be awarded without !roof of !ecuniary loss. :n awarding such damages$ the court shall taCe into account the circumstances obtaining in the case and assess damages according to its discretion. To warrant the award of damages$ it must be shown that the !erson to whom these are awarded has sustained inAury. 1e must liCewise establish sufficient data u!on which the court can !ro!erly base its estimate of the amount of damages. #tatements of facts should establish such data rather than mere conclusions or o!inions of witnesses. Thus$ for moral damages to be awarded$ it is essential that the claimant must ha+e satisfactorily !ro+ed during the trial the e2istence of the factual basis of the damages and its causal connection with the ad+erse !arty?s acts. :f the court has no !roof or e+idence u!on which the claim for moral damages could be based$ such indemnity could not be outrightly awarded. The same holds true with res!ect to the award of e2em!lary damages where it must be shown that the !arty acted in a wanton$ o!!ressi+e or male+olent manner. (2 #ule that moral dama$es cannot be recovered &rom "erson Bho &iled a com"laint does not a""ly in "resent case >hile$ as a rule$ moral damages cannot be reco+ered from a !erson who has filed a com!laint against another in good faith because it is not sound !olicy to !lace a !enalty on the right to litigate$ the same$ howe+er$ cannot a!!ly in the !resent case. This is not a situation where !etitioner?s com!laint was sim!ly found later to be based on an erroneous ground which$ under settled Auris!rudence$ would not ha+e been a reason for awarding moral and e2em!lary damages. :nstead$ the cause of action of the instant case a!!ears to ha+e been contri+ed by !etitioner himself. The factual findings of the courts a 9uo to the effect that !etitioner filed this case because he was the +ictim of fraudG that he could not ha+e been such a +ictim because he should ha+e e2amined the Aewelry in 9uestion before acce!ting deli+ery thereof$ considering his e2!osure to the banCing and Aewelry businessesG and that he filed the action for the nullification of the contract of sale with unclean hands$ all deser+e full faith and credit to su!!ort the conclusion that !etitioner was moti+ated more by ill will than a sincere attem!t to !rotect his rights in commencing suit against res!ondents. :t must be noted that before !etitioner was able to con+ince )r. -ruz to e2change her Aewelry for the Tanay !ro!erty$ !etitioner tooC !ains to thoroughly e2amine said Aewelry$ e+en going to the e2tent of sCetching their a!!earance. >hy at the !recise moment when he was about to taCe !hysical !ossession thereof he failed to e2ert e2tra efforts to checC their genuineness des!ite the large consideration in+ol+ed has ne+er been e2!lained at all by !etitioner. 1is acts thus failed to accord with what an ordinary !rudent man would ha+e done in the same situation. '*,0 Gaite v 3onacier 'G # No ;-(()2, (.5( 0 Bn /anc$ 7eyes ./, (.)4 8 concur 6uly 3(+
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3actsH :sabelo "onacier was the owner andDor holder of 11 iron lode mineral claims ()awahan rou!)$ situated in .ose (anganiban$ -amarines 5orte. /y a <)eed of 'ssignment= dated 28 #e!tember 18;2$ "onacier constituted and a!!ointed "ernando '. aite as his true and lawful attorney%in%fact to enter into a contract with any indi+idual or Auridical !erson for the e2!loration and de+elo!ment of the mining claims on a
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royalty basis of not less than (0.;0 !er ton of ore that might be e2tracted therefrom. 6n 18 March 18;&$ aite in turn e2ecuted a general assignment con+eying the de+elo!ment and e2!loitation of said mining claims unto the ,ara! :ron Mines$ owned solely by him. Thereafter aite embarCed u!on the de+elo!ment and e2!loitation of the mining claims$ o!ening and !a+ing roads within and outside their boundaries$ maCing other im!ro+ements and installing facilities therein for use in the de+elo!ment of the mines$ and in time e2tracted therefrom what he claimed and estimated to be a!!ro2imately 2&$000 metric tons of iron ore. "or some reason or another$ :sabelo "onacier decided to re+oCe the authority granted by him to aite$ and aite assented thereto subAect to certain conditions. 's a result$ a document entitled <7e+ocation of (ower of 'ttorney and -ontract= was e2ecuted on @ )ecember 18;&$ wherein aite transferred to "onacier$ for the consideration of (20$000$ !lus 10I of the royalties that "onacier would recei+e from the mining claims$ all his rights and interests on all the roads$ im!ro+ements$ and facilities in or outside said claims$ the right to use the business name <,ara! :ron Mines= and its goodwill$ and all the records and documents relati+e to the mines. :n the same document$ aite transferred to "onacier all his rights and interests o+er the <2&$000 tons of iron ore$ more or less= that the former had already e2tracted from the mineral claims$ in consideration of the sum of (3;$000$ (10$000$ of which was !aid u!on the signing of the agreement$ and the balance to be !aid out of the first letter of credit co+ering the first shi!ment of iron ores or the first amount deri+ed from the local sale of iron ore made by the ,ara! Mines Q #melting -o. To secure the !ayment of the balance$ "onacier !romised to e2ecute in fa+or of aite a surety bondG deli+ered on @ )ecember 18;& with "onacier as !rinci!al and the ,ara! Mines and #melting -o. and its stocCholders as sureties. ' second bond was e2ecuted by the !arties to the first bond$ on the same day$ with the "ar Bastern #urety and :nsurance -o. as additional surety$ but it !ro+ided that the liability of the surety com!any would attach only when there had been an actual sale of iron ore by the ,ara! Mines Q #melting -o. for an amount of not less than (0;$000. /oth bond were attached and made integral !arts of the <7e+ocation of (ower of 'ttorney and -ontract.= 6n the same day that "onacier re+oCed the !ower of attorney$ "onacier entered into a <-ontract of Mining 6!eration= with ,ara! Mines and #melting -o.$ :nc. to grant it the right to de+elo!$ e2!loit$ and e2!lore the mining claims$ together with the im!ro+ements therein and the use of the name <,ara! :ron Mines= and its goodwill$ in consideration of certain royalties. "onacier liCewise transferred$ in the same document$ the com!lete title to the a!!ro2imately 2&$000 tons of iron ore which he ac9uired from aite$ to the ,ara! Mines Q #melting -o.$ in consideration for the signing by the com!any and its stocCholders of the surety bonds deli+ered by "onacier to aite. 6n @ )ecember 18;;$ the bond with res!ect to the "ar Bastern #urety and :nsurance -om!any e2!ired with no sale of the a!!ro2imately 2&$000 tons of iron ore$ nor had the 0;$000 balance of the !rice of said ore been !aid to aite by "onacier and his sureties. >hereu!on$ aite demanded from "onacier and his sureties !ayment of said amount. >hen "onacier and his sureties failed to !ay as demanded by aite$ the latter filed a com!laint against them in the -": Manila (-i+il -ase 28310) for the !ayment of the (0;$000 balance of the !rice of the ore$ conse9uential damages$ and attorney?s fees. .udgment was$ accordingly$ rendered in fa+or of !laintiff aite ordering defendants to !ay him$ Aointly and se+erally$ (0;$000 with interest at 0I !er annum from 8 )ecember 18;; until full !ayment$ !lus costs. "rom this Audgment$ defendants Aointly a!!ealed to the #u!reme -ourt as the claims in+ol+ed aggregate to more than (200$000. The #u!reme -ourt affirmed the decision a!!ealed from$ with costs against a!!ellants. ( term Shi"ment or local sale o& ore not a condition "recedent but a sus"ensive "eriod or
The shi!ment or local sale of the iron ore is not a condition !recedent (or sus!ensi+e) to the !ayment of the balance of (0;$000$ but was only a sus!ensi+e !eriod or term. >hat characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is
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subordinated to the ha!!ening of a future and uncertain e+entG so that if the sus!ensi+e condition does not taCe !lace$ the !arties would stand as if the conditional obligation had ne+er e2isted.
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2 "ay
%he Bords o& the contract e4"ress no contin$ency in the buyerMs obli$ation to
The contract sti!ulates that <the balance of #i2ty%"i+e Thousand (esos ((0;$000) will be !aid out of the first letter of credit co+ering the first shi!ment of iron ore . . .= etc. There is no uncertainty that the !ayment will ha+e to be made sooner or laterG what is undetermined is merely the e2act date at which it will be made. /y the +ery terms of the contract$ therefore$ the e2istence of the obligation to !ay is recognizedG only its maturity or demandability is deferred. 3 Contract o& sale commutative and onerous? 7ach "arty assume correlative obli$ation and antici"ate "er&ormance &rom the other ' contract of sale is normally commutati+e and onerous4 not only does each one of the !arties assume a correlati+e obligation (the seller to deli+er and transfer ownershi! of the thing sold and the buyer to !ay the !rice)$ but each !arty antici!ates !erformance by the other from the +ery start. >hile in a sale the obligation of one !arty can be lawfully subordinated to an uncertain e+ent$ so that the other understands that he assumes the risC of recei+ing nothing for what he gi+es (as in the case of a sale of ho!es or e2!ectations$ em!tio s!ei)$ it is not in the usual course of business to do soG hence$ the contingent character of the obligation must clearly a!!ear. :n the !resent case$ nothing is found in the record to e+idence that aite desired or assumed to run the risC of losing his rights o+er the ore without getting !aid for it$ or that "onacier understood that aite assumed any such risC. The fact that a!!ellants did !ut u! such bonds indicates that they admitted the definite e2istence of their obligation to !ay the balance of (0;$000. * %o consider sale as a condition "recedent leaves the "ayment at the discretion o &the debtor To subordinate the obligation to !ay the remaining (0;$000 to the sale or shi!ment of the ore as a condition !recedent$ would be tantamount to lea+ing the !ayment at the discretion of the debtor$ for the sale or shi!ment could not be made unless the a!!ellants tooC ste!s to sell the ore. '!!ellants would thus be able to !ost!one !ayment indefinitely. #uch construction of the contract should be a+oided. / 8nter"retation incline in &avor o& the I$reatest reci"rocity o& interestsK 'ssuming that there could be doubt whether by the wording of the contract the !arties intended a sus!ensi+e condition or a sus!ensi+e !eriod (dies ad 9uem) for the !ayment of the (0;$000$ the rules of inter!retation would incline the scales in fa+or of <the greatest reci!rocity of interests=$ since sale is essentially onerous. The -i+il -ode of the (hili!!ines$ 'rticle 133@$ !aragra!h 1$ in fine$ !ro+ides <if the contract is onerous$ the doubt shall be settled in fa+or of the greatest reci!rocity of interests= and there can be no 9uestion that greater reci!rocity obtains if the buyer?s obligation is deemed to be actually e2isting$ with only its maturity (due date) !ost!oned or deferred$ than if such obligation were +iewed as non%e2istent or not binding until the ore was sold. 5 Sale o& ore to 3onacier Bas a sale on credit+ not an aleatory contract The sale of the ore to "onacier was a sale on credit$ and not an aleatory contract where the transferor$ aite$ would assume the risC of not being !aid at allG and that the !re+ious sale or shi!ment of the ore was not a sus!ensi+e condition for the !ayment of the balance of the agreed !rice$ but was intended merely to fi2 the future date of the !ayment. , Non-reneBal o& bond im"aired the securities $iven to the creditor
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'!!ellants ha+e forfeited the right to com!el aite to wait for the sale of the ore before recei+ing !ayment of the balance of (0;$000$ because of their failure to renew the bond of the "ar Bastern #urety -om!any or else re!lace it with an e9ui+alent guarantee. The e2!iration of the bonding com!any?s undertaCing on @ )ecember 18;; substantially reduced the security of the +endor?s rights as creditor for the un!aid (0;$000$ a security that aite considered essential and u!on which he had insisted when he e2ecuted the deed of sale of the ore to "onacier. The case s9uarely comes under !aragra!hs 2 and 3 of 'rticle 118@ of the -i+il -ode of the (hili!!ines which !ro+ides <(2) >hen he does not furnish to the creditor the guaranties or securities which he has !romised. (3) >hen by his own acts he has im!aired said guaranties or securities
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after their establishment$ and when through fortuitous e+ent they disa!!ear$ unless he immediately gi+es new ones e9ually satisfactory.= '!!ellants? failure to renew or e2tend the surety com!any?s bond u!on its e2!iration !lainly im!aired the securities gi+en to the creditor (a!!ellee aite)$ unless immediately renewed or re!laced. ) No Baiver intended by creditor aite?s acce!tance of the surety com!any?s bond with full Cnowledge that on its face it would automatically e2!ire within one year was not a wai+er of its renewal after the e2!iration date. 5o such wai+er could ha+e been intended$ for aite stood to lose and had nothing to gain therebyG and if there was any$ it could be rationally e2!lained only if the a!!ellants had agreed to sell the ore and !ay aite before the surety com!any?s bond e2!ired on @ )ecember 18;;. /ut in the latter case the defendants% a!!ellants? obligation to !ay became absolute after 1 year from the transfer of the ore to "onacier by +irtue of the deed. . No short-delivery made by Gaite This is a case of a sale of a s!ecific mass of fungible goods for a single !rice or a lum! sum$ the 9uantity of <2&$000 tons of iron ore$ more or less=$ stated in the contract$ being a mere estimate by the !arties of the total tonnage weight of the massG and second$ that the e+idence shows that neither of the !arties had actually measured or weighed the mass$ so that they both tried to arri+e at the total 9uantity by maCing an estimate of the +olume thereof in cubic meters and then multi!lying it by the estimated weight !er ton of each cubic meter. The sale between the !arties is a sale of a s!ecific mass of iron ore because no !ro+ision was made in their contract for the measuring or weighing of the ore sold in order to com!lete or !erfect the sale$ nor was the !rice of (3;$000 agreed u!on by the !arties based u!on any such measurement (see 'rt. 1&@0$ second !ar.$ 5ew -i+il -ode). The subAect%matter of the sale is$ therefore$ a determinate obAect$ the mass$ and not the actual number of units or tons contained therein$ so that all that was re9uired of the seller aite was to deli+er in good faith to his buyer all of the ore found in the mass$ notwithstanding that the 9uantity deli+ered is less than the amount estimated by them &!obile !ac+ine#y F Su,,ly Co., -nc. vs. =o#/ 3il"iel8 Salvage Co., -nc. %$% So. 8$2, a,,lying a#t. 240' o" t+e 5uisiana Civil Co8e(. The contract e2!ressly stated the amount to be 2&$000 tons$ more or less. '!!lying the tonnage factor !ro+ided by the chief of Mines and Metallurgical )i+ision of the /ureau of Mines which was between 3 metric tons minimum to ; metric tons ma2imum$ which was near the 3.3 metric ton tonnage factor ado!ted by Bngr. amatero (at the re9uest of EraCower$ a stocCholder of ,ara!) , and if a!!ellant?s witness is correct in his estimate of 0$008 cubic meters of ore$ the !roduct is 21$@08.3 tons which is not far from the 2&$000 tons estimate. &c". *ine Rive# 5ogging F -6,#ove6ent Co. vs. <. S., %81 <.S. 2$', 41, 5. E8. %%14(. Thus$ there was no short%deli+ery as would entitle a!!ellants to the !ayment of damages$ nor could aite ha+e been guilty of any fraud in maCing any misre!resentation to a!!ellants as to the total 9uantity of ore in the stocC!iles of the mining claims in 9uestion since aite?s estimate a!!ears to be substantially correct. '*)0 Goldenrod 8nc vs CA 'G # No (25)(2 November 2*+ (..) 0 "irst )i+ision$ /ellosillo4 & concur 3actsH (io /arreto and #ons$ :nc. owned &3 of registered land with a total area of 1@$;00 s9. ms. located at -arlos (alanca #t. Uuia!o$ Manila which were mortgaged with the *nited -oconut (lanters /anC (*-(/). :n 18@@$ the obligation of the cor!oration with *-(/ remained un!aid maCing foreclosure of the mortgage imminent. oldenrod$ :nc. offered to buy the !ro!erty from /arreto Q #ons. 6n 2; May 18@@$ through its !resident #onya . Mathay$ oldenrod wrote 'nthony Uue$ (resident of /arreto Q #ons$ confirming the latter?s acce!tance of former?s offer to buy the Bchague !ro!erty (with the latter?s amendments that the !ayment of interest should be monthly instead of semi%annually and the !eriod to remo+e the trusses$ steel frames etc. which shall be 1@0 days instead of 80 days only)$ and enclosing the earnest money of (1 million.
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75arreto 1ealty8 A$$itional agree#ent9 >hen the term of e2istence of /arreto Q #ons e2!ired$ all its assets and liabilities including the !ro!erty located in Uuia!o$ were transferred to (io /arreto 7ealty )e+elo!ment$ :nc. oldenrod?s offer to buy the !ro!erty resulted in its agreement with /arreto 7ealty that oldenrod would !ay the amounts of (2&.; million re!resenting the outstanding obligations of /arreto 7ealty with *-(/ on 30 .une 18@@$ the deadline set by the banC for !aymentG and (20 million which was the balance of the !urchase !rice of the !ro!erty to be !aid in installments within a 3%year !eriod with interest at 1@I !er annum. oldenrod did not !ay *-(/ the (2&.; million loan obligation of /arreto 7ealty on the deadline set for !aymentG instead$ it asCed for an e2tension of 1 month or u! to 31 .uly 18@@ to settle the obligation$ which the banC granted. 6n 31 .uly 18@@$ oldenrod re9uested another e2tension of 00 days to !ay the loan. This time the banC demurred. :n the meantime /arreto 7ealty was able to cause the reconsolidation of the &3 titles co+ering the !ro!erty subAect of the !urchase into 2 titles co+ering ,ots 1 and 2$ which were issued on & 'ugust 18@@. The reconsolidation of the titles was made !ursuant to the re9uest of oldenrod in its letter to /arreto and #ons (or /arreto 7ealty) on 2; May 18@@. /arreto 7ealty allegedly incurred e2!enses for the reconsolidation amounting to (2;0$000. 6n 2; 'ugust 18@@ oldenrod sought reconsideration of the denial by the banC of its re9uest for e2tension of 00 days by asCing for a shorter !eriod of 30 days. This was again denied by *-(/. 71escission of agree#ent !y "ol$enro$9 6n 30 'ugust 18@@ 'licia (. ,ogarta$ (resident of ,ogarta 7ealty and )e+elo!ment -or!oration$ which acted as agent and broCer of oldenrod$ wrote 'nthony Uue informing him on behalf of oldenrod that it could not go through with the !urchase of the !ro!erty due to circumstances beyond its fault$ i.e.$ the denial by *-(/ of its re9uest for e2tension of time to !ay the obligation. :n the same letter$ ,ogarta also demanded the refund of the earnest money of (1 million which oldenrod ga+e to /arreto 7ealty. 7Lot : sol$ to Asia-orl$9 6n 31 'ugust 18@@ /arreto 7ealty sold to 'siaworld Trade -enter (hils.$ :nc.$ ,ot 2$ one of the 2 consolidated lots$ for the !rice of (23 million. 6n 13 6ctober 18@@ /arreto 7ealty e2ecuted deed transferring by way of <dacion= the !ro!erty reconsolidated as ,ot 1 in fa+or of *-(/$ which in turn sold the !ro!erty to 'siaworld for (2& million. 7De#an$ for rei#!urse#ent of earnest #oney9 6n 12 )ecember 18@@ ,ogarta again wrote Uue demanding the return of the earnest money to oldenrod. 6n 3 "ebruary 18@8 oldenrod through its lawyer reiterated its demand$ but the same remained un%heeded by /arreto 7ealty. oldenrod filed a com!laint with the 7T- Manila against /arreto 7ealty$ et.al. for the return of the amount of (1 million and the !ayment of damages including lost interests or !rofits. :n their answer$ /arreto 7ealty$ et.al. contended that it was the agreement of the !arties that the earnest money of (1 million would be forfeited to answer for losses and damages that might be suffered by /arreto 7ealty in case of failure by oldenrod to com!ly with the terms of their !urchase agreement. 6n 1; March 1881 the trial court rendered a decision ordering /arreto 7ealty$ et.al. Aointly and se+erally to !ay oldenrod (1$000$000.00 with legal interest from 8 "ebruary 18@8 until fully !aid$ (;0$000.00 re!resenting unrealized !rofits and (10$000.00 as attorney?s fees. The trial court found that there was no written agreement between the !arties concerning forfeiture of the earnest money if the sale did not !ush through. :t further declared that the earnest money gi+en by oldenrod to /arreto 7ealty was intended to form !art of the !urchase !riceG thus$ the refusal of the latter to return the money when the sale was not consummated +iolated 'rts. 22 and 23 of the -i+il -ode against unAust enrichment. 6b+iously dissatisfied with the decision of the trial court$ /arreto 7ealty a!!ealed to the -ourt of '!!eals which re+ersed the trial court and ordered the dismissal of the com!laintG hence$ the !etition. The #u!reme -ourt granted the !etition$ re+ersed and set aside the decision of the -ourt of '!!eals$ and ordered /arreto 7ealty$ its successors and assigns are ordered to return to oldenrod$ the amount of (1$000$000.00 with legal interest thereon from 30 'ugust 18@@$ the date of notice of e2traAudicial rescission$ until the amount is fully !aid$ with costs against /arreto 7ealty$ et.al. ( !ur"ose o& earnest money
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*nder 'rticle 1&@2 of the -i+il -ode$ whene+er earnest money is gi+en in a contract of sale$ it shall
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be considered as !art of the !urchase !rice and as !roof of the !erfection of the contract. :n the !resent case$ oldenrod clearly stated without any obAection from /arreto 7ealty that the earnest money was intended to form !art of the !urchase !rice. :t was an ad+ance !ayment which must be deducted from the total !rice. 1ence$ the !arties could not ha+e intended that the earnest money or ad+ance !ayment would be forfeited when the buyer should fail to !ay the balance of the !rice$ es!ecially in the absence of a clear and e2!ress agreement thereon. 2 #i$ht to rescind not absolute+ must be success&ully im"u$ned in court :n University of the Philippines v. $e los Angeles $ the right to rescind contracts is not absolute and is subAect to scrutiny and re+iew by the !ro!er court. :n A$elfa Properties, .nc. v. Court of Appeals$ that rescission of reci!rocal contracts may be e2traAudicially rescinded unless successfully im!ugned in court. 3 ;ack o& o""osition to rescission an admission o& validity o& the claim o& rescindin$ "arty :f the !arty does not o!!ose the declaration of rescission of the other !arty$ s!ecifying the grounds therefor$ and it fails to re!ly or !rotest against it$ its silence thereon suggests an admission of the +eracity and +alidity of the rescinding !arty?s claim. :n the !resent case$ /arreto 7ealty did not inter!ose any obAection to the rescission by oldenrod of the agreement. /arreto 7ealty e+en sold ,ot 2 of the subAect consolidated lots to another buyer$ 'siaworld$ one day after its (resident 'nthony Uue recei+ed the broCer?s letter rescinding the sale. #ubse9uently$ on 13 6ctober 18@@ res!ondent /arreto 7ealty also con+eyed ownershi! o+er ,ot 1 to *-(/ which$ in turn$ sold the same to 'siaworld. * #escission creates obli$ation to return thin$s sub@ect o& contract Bith &ruits and interests 'rticle 13@; of the -i+il -ode !ro+ides that rescission creates the obligation to return the things which were the obAect of the contract together with their fruits and interest. The +endor is therefore obliged to return the !urchase !rice !aid to him by the buyer if the latter rescinds the sale$ or when the transaction was called off and the subAect !ro!erty had already been sold to a third !erson$ as what obtained in this case. :n the !resent case$ by +irtue of the e2traAudicial rescission of the contract to sell$ /arreto 7ealty as the +endor$ had the obligation to return the earnest money of (1$000$000 !lus legal interest from the date it recei+ed notice of rescission from oldenrod$ i.e.$ 30 'ugust 18@@$ u! to the date of the return or !ayment. '*.0 Guian$ v CA 'G # No (2/(,2 6une 25+ (..) 0 "irst )i+ision$ (anganiban (.)4 & concur 3actsH ilda and .udie -or!uz were married ci+illy on 2& )ecember 180@ in /acolod -ity. The cou!le ha+e 3 children (.unie$ 1arriet$ and .odie or .oAi. 6n 1& "ebruary 18@3$ the -or!uzes$ with ilda -or!uz as +endee$ bought a &21 s9. m. lot (,ot @$ /locC 8$ (,7-) (sd%10;&08) located in /arangay en. (aulino #antos (/o. 1)$ Eoronadal$ #outh -otabato from Manuel -alleAo who signed as +endor through a conditional deed of sale for a total consideration of (1&$33;.00. The consideration was !ayable in installment$ with right of cancellation in fa+or of +endor should +endee fail to !ay 3 successi+e installments. 6n 22 '!ril 18@@$ the -or!uzes sold P !ortion of their lot to s!ouses 'ntonio and ,uz+iminda uiang. The latter ha+e since then occu!ied the P !ortion and built their house thereon. They are thus adAoining neighbors of the -or!uzes. 6n .une 18@8$ ilda -or!uz left for Manila$ with the consent of her husband$ to looC for worC abroad. *nfortunately$ she became a +ictim of an unscru!ulous illegal recruiter$ was not able to go abroad$ and stayed for sometime in Manila. #ometime in .anuary 1880$ 1arriet -or!uz learned that her father intended to sell the remaining P !ortion including their house$ of their homelot to the uiangs. #he wrote a letter to her mother informing her$ who in turn re!lied that she was obAecting to the sale. 1arriet$ howe+er$ did not inform her father about thisG but instead ga+e the letter to Mrs. ,uz+iminda uiang so that uiang
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would ad+ise her father. 1owe+er$ in the absence of his wife ilda -or!uz$ and on 1 March 1880$ .udie -or!uz sold the remaining P !ortion of the lot and the house thereon to ,uz+iminda uiang thru a document Cnown as H)eed of Transfer of 7ights? (B2h.
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H'?) for a total consideration of (30$000.00 of which (;$000.00 was to be !aid in .une 1880. .udie -or!uz?s children .unie and 1arriet signed the document as witnesses. 6n ; March 1880$ ob+iously to cure whate+er defect in .udie -or!uz?s title o+er the lot transferred$ ,uz+iminda uiang as +endee e2ecuted another agreement o+er the lot with Manuela .imenez -alleAo$ widow of Manuel -alleAo (the original registered owner)$ who signed as +endor for a consideration of (8$000.00. .udie -or!uz signed as a witness to the sale. The new sale describes the lot sold as ,ot @$ /locC 8$ (,7-) (sd%10;&0@. 's a conse9uence of the sale$ the uiangs s!ent (000.00 for the !re!aration of the )eed of Transfer of 7ightsG (8$000.00 as the amount they !aid to Mrs. Manuela -alleAo$ ha+ing assumed the remaining obligation of the -or!uzes to Mrs. -alleAoG (100.00G a total of (3;8.02 basic ta2 and s!ecial educational fund on the lotG (123.;0 as the total documentary stam! ta2 on the +arious documentsG (;3;.32 for the ca!ital gains ta2G (22.;0 as transfer ta2G a standard fee of (13.00G certification fee of (;.00. These e2!enses !articularly the ta2es and other e2!enses towards the transfer of the title to the uiangs were incurred for the whole ,ot 8$ /locC @$ (,7-) (sd%10;&08. 6n 11 March 1880$ ilda -or!uz returned home. #he gathered her children$ who were staying in different households$ together and stayed at their house. 1er husband was nowhere to be found. #he was informed by her children that their father had a wife already. "or staying in their house sold by her husband$ ilda was com!lained against by the uiangs before the /arangay authorities of /arangay eneral (aulino #antos (/o. 1)$ Eoronadal$ #outh -otabato$ for tres!assing (/arangay -ase 3@). 6n 10 March 1880$ the !arties thereat signed a document Cnown as Hamicable settlement? re9uiring the -or!uzes to lea+e the house +oluntarily on or before 3 '!ril 1880$ without any charge. /elie+ing that she had recei+ed the shorter end of the bargain$ ilda a!!roached the /arangay -a!tain for the annulment of the settlement. 'nnulment not ha+ing been made$ ilda stayed !ut in her house and lot. The uiangs followed thru the amicable settlement with a motion for the e2ecution of the amicable settlement$ filing the same with the MT- Eoronadal$ #outh -otabato. The !roceedings KareL still !ending before the said court$ with the filing of the instant suit. 6n 2@ May 1880$ ilda -or!uz filed an 'mended -om!laint against her husband .udie -or!uz and the uiangs. The said -om!laint sought the declaration of a certain deed of sale$ which in+ol+ed the conAugal !ro!erty of !ri+ate res!ondent and her husband$ null and +oid. 6n 8 #e!tember 1882$ The 7T- Eoronodal$ #outh -otabato (/ranch 2;) rendered a decision in fa+or of ilda -or!uz$ recognizing her lawful and +alid ownershi! and !ossession o+er the remaining P !ortion of the lot$ declaring the deed of transfer of rights and the amicable settlement null and +oid$ and ordering ilda -or!uz to reimburse the uiangs the amount of (8$000 corres!onding to the !ayment made by the uiangs to -alleAo for the un!aid balance and another (338.02 re!resenting P of the amount of realty ta2es !aid by the uiangs$ both with legal interests thereon com!uted from the finality of the decisionG without !ronouncement as to costs. )issatisfied$ the uiangs filed an a!!eal with the -ourt of '!!eals. 6n 30 .anuary 1880$ the a!!ellate court affirmed the decision of the lower court. Their motion for reconsideration was also denied. ' !etition for re+iew was before the #u!reme -ourt. The #u!reme -ourt denied the !etition$ and affirmed the challenged decision and resolutionG with costs against the uiangs. ( Valid contract+ elements To constitute a +alid contract$ the -i+il -ode re9uires the concurrence of the following elements4 (1) cause$ (2) obAect$ and (3) consent. The last element is indubitably absent in the !resent case$ thus the nullity of the contract of sale is !remised on the absence of !ri+ate res!ondent?s consent. 2 Contract void &or lack o& consent by the other s"ouse The consent of one s!ouse to the contract of sale of the conAugal !ro!erty was totally ine2istent or absent. This being the case$ said contract !ro!erly falls within the ambit of 'rticle 12& of the "amily -ode. 'rticle 12& of the "amily -ode !ro+ides that <the administration and enAoyment of the conAugal !artnershi!
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!ro!erty shall belong to both s!ouses Aointly. :n case of disagreement$ the husband?s decision shall !re+ail$
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subAect to recourse to the court by the wife for !ro!er remedy$ which must be a+ailed of within fi+e years from the date of the contract im!lementing such decision= and that <in the e+ent that one s!ouse is inca!acitated or otherwise unable to !artici!ate in the administration of the conAugal !ro!erties$ the other s!ouse may assume sole !owers of administration. These !owers do not include the !owers of dis!osition or encumbrance which must ha+e the authority of the court or the written consent of the other s!ouse. :n the absence of such authority or consent$ the dis!osition or encumbrance shall be +oid. 1owe+er$ the transaction shall be construed as a continuing offer on the !art of the consenting s!ouse and the third !erson$ and may be !erfected as a binding contract u!on the acce!tance by the other s!ouse or authorization by the court before the offer is withdrawn by either or both offerors. (10;a)= 3 NCC Amendatory e&&ect o& Article (2* 3C to Article (55 NCC in relation to Article (,3
*nder 'rticle 100 of the -i+il -ode$ the husband cannot generally alienate or encumber any real !ro!erty of the conAugal !artnershi! without the wife?s consent. The alienation or encumbrance if so made howe+er is not null and +oid. :t is merely +oidable. The offended wife may bring an action to annul the said alienation or encumbrance. Thus$ the !ro+ision of 'rticle 133 of the -i+il -ode of the (hili!!ines !ro+ides that <the wife may$ during the marriage and within ten years from the transaction 9uestioned$ asC the courts for the annulment of any contract of the husband entered into without her consent$ when such consent is re9uired$ or any act or contract of the husband which tends to defraud her or im!air her interest in the conAugal !artnershi! !ro!erty. #hould the wife fail to e2ercise this right$ she or her heirs after the dissolution of the marriage$ may demand the +alue of !ro!erty fraudulently alienated by the husband.= The !articular !ro+ision gi+ing the wife 10 years during the marriage to annul the alienation or encumbrance was not carried o+er to the "amily -ode. :t is thus clear that any alienation or encumbrance made after 3 'ugust 18@@ when the "amily -ode tooC effect by the husband of the conAugal !artnershi! !ro!erty without the consent of the wife is null and +oid. * 74ecution o& document Iamicable settlementK does not a&&ect void character o& deed o& sale The fraud and the intimidation referred to by !etitioners were !er!etrated in the e2ecution of the document embodying the amicable settlement. ilda -or!uz alleged during trial that barangay authorities made her sign said document through misre!resentation and coercion. :n any e+ent$ its e2ecution does not alter the +oid character of the deed of sale between the husband and the uiangs. The fact remains that such contract was entered into without the wife?s consent. / Void contract cannot be rati&ied /y the s!ecific !ro+ision of the law K'rticle 1380$ -i+il -odeL$ the )eed of Transfer of 7ights cannot be ratified$ e+en by an Hamicable settlement?. The !artici!ation by some barangay authorities in the Hamicable settlement? cannot otherwise +alidate an in+alid act. Moreo+er$ it cannot be denied that the Hamicable settlement? entered into by ilda -or!uz and the uiangs is a contract. :t is a direct offshoot of the )eed of Transfer of 7ights. /y e2!ress !ro+ision of law ('rticle 1&22)$ such a contract is also +oid. 'rticle 1&22 of the -i+il -ode !ro+ides that <a contract which is the direct result of a !re+ious illegal contract$ is also +oid and ine2istent.= 5 Amicable settlement cannot be considered a continuin$ o&&er 5either can the <amicable settlement= be considered a continuing offer that was acce!ted and !erfected by the !arties$ following the last sentence of 'rticle 12&. The order of the !ertinent e+ents is clear4 after the sale$ the uiangs filed a com!laint for tres!assing against ilda -or!uz$ after which the barangay authorities secured an <amicable settlement= and the uiangs filed before the MT- a motion for its e2ecution. The settlement$ howe+er$ does not mention a continuing offer to sell the !ro!erty or an acce!tance of such a continuing offer. :ts tenor was to the effect that the uiangs would +acate the !ro!erty. /y no stretch of the imagination$ can the -ourt inter!ret this document as the acce!tance mentioned in 'rticle 12&.
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'/00
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6 Schuback A Sons v CA 'G # No (0/3), (..3 0 Third )i+ision$ 7omero (.)4 & concur
November ((+
3actsH :n 18@1$ 7amon #an .ose ((hili!!ine #. :ndustrial Trading) established contact with .ohannes #chubacC Q #ons (hili!!ine Trading -or!oration through the (hili!!ine -onsulate eneral in 1amburg$ >est ermany$ because he wanted to !urchase M'5 bus s!are !arts from ermany. #chubacC communicated with its trading !artner$ .ohannes #chubacC and #ohne 1andelsgesellschaft m.b.n. Q -o. (#chubacC 1amburg) regarding the s!are !arts #an .ose wanted to order. 6n 10 6ctober 18@1$ #an .ose submitted to #chubacC a list of the !arts he wanted to !urchase with s!ecific !art numbers and descri!tion. #chubacC referred the list to #chubacC 1amburg for 9uotations. *!on recei!t of the 9uotations$ #chubacC sent to #an .ose a letter dated 2; 5o+ember 18@1 enclosing its offer on the items listed. 6n & )ecember 18@1$ #an .ose informed #chubacC that he !referred genuine to re!lacement !arts$ and re9uested that he be gi+en a 1;I discount on all items. 6n 13 )ecember 18@1$ #chubacC submitted its formal offer containing the item number$ 9uantity$ !art number$ descri!tion$ unit !rice and total to #an .ose. 6n 2& )ecember 18@1$ #an .ose informed #chubacC of his desire to a+ail of the !rices of the !arts at that time and enclosed its (urchase 6rder 0101 dated 1& )ecember 18@1. 6n 28 )ecember 18@1$ #an .ose !ersonally submitted the 9uantities he wanted to Mr. )ieter 7eichert$ eneral Manager of #chubacC$ at the latter?s residence. The 9uantities were written in inC by #an .ose in the same (6 !re+iously submitted. 't the bottom of said (6$ #an .ose wrote in inC abo+e his signature4 <56TB4 'bo+e (6 will include a 3I discount. The abo+e will ser+e as our initial (6.= #chubacC immediately ordered the items needed by #an .ose from #chubacC 1amburg. #chubacC 1amburg in turn ordered the items from 5)E$ a su!!lier of M'5 s!are !arts in >est ermany. 6n & .anuary 18@2$ #chubacC 1amburg sent #chubacC a !roforma in+oice to be used by #an .ose in a!!lying for a letter of credit. #aid in+oice re9uired that the letter of credit be o!ened in fa+or of #chubacC 1amburg. #an .ose acCnowledged recei!t of the in+oice. 'n order confirmation was later sent by #chubacC 1amburg to #chubacC which was forwarded to and recei+ed by #an .ose on 3 "ebruary 18@1. 6n 10 "ebruary 18@2$ #chubacC reminded #an .ose to o!en the letter of credit to a+oid delay in shi!ment and !ayment of interest. :n the meantime$ #chubacC 1amburg recei+ed in+oices from 5)E for !artial deli+eries on 6rder 1220&. 6n 10 "ebruary 18@&$ #chubacC 1amburg !aid 5)E. 6n 1@ 6ctober 18@2$ #chubacC again reminded #an .ose of his order and ad+ised that the case may be endorsed to its lawyers. #an .ose re!lied that he did not maCe any +alid (6 and that there was no definite contract between him and #chubacC. #chubacC sent a reAoinder e2!laining that there is a +alid (6 and suggesting that #an .ose either !roceed with the order and o!en a letter of credit or cancel the order and !ay the cancellation fee of 30I ".6./. +alue$ or #chubacC will endorse the case to its lawyers. #chubacC 1amburg issued a #tatement of 'ccount to #chubacC enclosing therewith )ebit 5ote charging #chubacC 30I cancellation fee$ storage and interest charges in the total amount of )M ;1$813.@1. #aid amount was deducted from #chubacC?s account with #chubacC 1amburg. )emand letters sent to #an .ose by #chubacC?s counsel dated 22 March 18@3 and 8 .une 18@3 were to no a+ail. #chubacC filed a com!laint for reco+ery of actual or com!ensatory damages$ unearned !rofits$ interest$ attorney?s fees and costs against #an .ose. :n its decision dated 13 .une 18@@$ the trial court ruled in fa+or of #chubacC by ordering #an .ose to !ay it$ among others$ actual com!ensatory damages in the amount of )M ;1$813.@1$ unearned !rofits in the amount of )M 1&$001.03$ or their !eso e9ui+alent. #an .ose ele+ated his case before the -ourt of '!!eals. 6n 1@ "ebruary 1882$ the a!!ellate court re+ersed the decision of the trial court and dismissed #chubacC?s com!laint. :t ruled that there was no !erfection of contract since there was no meeting of the minds as to the !rice between the last weeC of )ecember 18@1 and the first weeC of .anuary 18@2. 1ence$ the !etition for re+iew on certiorari.
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The #u!reme -ourt granted the !etition$ and reinstated the decision of the trial court dated 13 .une 18@@ with modification. ( !er&ection o& a contract o& sale
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' <contract of sale is !erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice.= 2 Consent mani&estedH 2&&er and acce"tance 'rticle 1318 of the -i+il -ode !ro+ides that <consent is manifested by the meeting of the offer and acce!tance u!on the thing and the cause which are to constitute the contract. The offer must be certain and the acce!tance absolute. ' 9ualified acce!tance constitutes a counter offer.= :n the !resent case$ the facts indicate that consent on both sides has been manifested. The offer was manifested on 13 )ecember 18@1 when #chubacC submitted its !ro!osal containing the item number$ 9uantity$ !art number$ descri!tion$ the unit !rice and total to #an .ose. 6n 2& )ecember 18@1$ #an .ose informed #chubacC of his desire to a+ail of the !rices of the !arts at that time and simultaneously enclosed its (6 0101 dated 1& )ecember 18@1. 't this stage$ a meeting of the minds between +endor and +endee has occurred$ the obAect of the contract being the s!are !arts and the consideration$ the !rice stated in #chubacC?s offer dated 13 )ecember 18@1 and acce!ted by #an .ose on 2& )ecember 18@1. 3 Cuantity is immaterial to the "er&ection o& a sales contract 'lthough the 9uantity to be ordered was made determinate only on 28 )ecember 18@1$ 9uantity is immaterial in the !erfection of a sales contract. >hat is of im!ortance is the meeting of the minds as to the obAect and cause$ which from the facts disclosed$ show that as of 2& )ecember 18@1$ these essential elements had already concurred. Thus$ !erfection of the contract tooC !lace$ not on 28 )ecember 18@1$ but rather on 2& )ecember 18@1. * sale ;etter o& credit only a mode o& "ayment+ not an essential re=uirement o&
The o!ening of a letter of credit in fa+or of a +endor is only a mode of !ayment. :t is not among the essential re9uirements of a contract of sale enumerated in 'rticle 130; and 1&3& of the -i+il -ode$ the absence of any of which will !re+ent the !erfection of the contract from taCing !lace. :n the !resent case$ when #an .ose failed to o!en an irre+ocable letter of credit without recourse in fa+or of #chubacC 1amburg$ such did not !re+ent the !erfection of the contract between the !arties$ for the o!ening of a letter of credit is not to be deemed a sus!ensi+e condition. #chubacC did not reser+e title to the goods until #an .uan had o!ened a letter of credit. #chubacC did not incor!orate any !ro+ision declaring their contract of sale without effect until after the fulfillment of the act of o!ening a letter of credit. To ado!t the -ourt of '!!eals? ruling that the contract of sale was de!endent on the o!ening of a letter of credit would be untenable from a !ragmatic !oint of +iew because #an .ose would not be able to a+ail of the old !rices which were o!en to him only for a limited !eriod of time. '/(0 S"ouses ;adan$a v CA 'G # No ;-//... Au$ust 2*+ (.)* 0 #econd )i+ision$ '9uino (.)4 & concur$ 1 tooC no !art$ 1 reser+ed +ote 3actsH -lemencia '. 'seneta$ a s!inster who retired as di+ision su!erintendent of !ublic schools at 0; in 1801$ had a ne!hew named /ernardo #. 'seneta$ the child of her sister loria$ and a niece named #al+acion$ the daughter of her sister "lora. #he legally ado!ted /ernardo in 1801. 6n a single date$ 0 '!ril 183&$ she 8then 3@ years old) signed 8 deeds of sale in fa+or of #al+acion$ for +arious real !ro!erties. 6ne deed of sale concerned the said (aco !ro!erty (100 s9. m. lot located at 123@ #ison #treet (aco Manila and administered by the ,adanga s!ouses$ 'gustin and #al+acion) which !ur!ortedly was sold to #al+acion for (20$000. The total !rice in+ol+ed in the 8 deeds of sale and in the 10th sale e2ecuted on @ 5o+ember 183& was (82$200. The deed of sale for the (aco !ro!erty was signed in the office of the Uuezon -ity registry of deeds.
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:n May 183;$ /ernardo$ as guardian of -lemencia$ filed an action for recon+eyance of the (aco !ro!erty$ accounting of the rentals and damages$ with the -": Manila. -lemencia was not mentally incom!etent but she
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was !laced under guardianshi! because she was an easy !rey for e2!loitation and deceit. -lemencia testified and denied ha+ing <recei+ed e+en one centa+o= of the !rice of (20$000)$ much less the (82$000. This testimony was corroborated by #oledad ,. Maninang$ 08$ a dentist with whom -lemencia had li+ed for more than 30 years in Eamuning$ Uuezon -ity. The notary !ublic stated that he did not see #al+acion hand any money to -lemencia for the !ur!orted sale when the deed was signed in the registry of deeds. The trial court declared +oid the sale of the (aco !ro!erty. -lemencia died on 21 May 1833 at the age of @0. #he allegedly be9ueathed her !ro!erties in a hologra!hic will dated 23 5o+ember 1833 to )octor Maninang. :n that will she disinherited /ernardo. The will was !resented for !robate. The testate case was consolidated with the intestate !roceeding filed by /ernardo in the sala of .udge 7icardo ,. (rono+e at (asig$ 7izal. 1e dismissed the testate case. 1e a!!ointed /ernardo as administrator in the intestate case. 6n a!!eal$ the -ourt of '!!eals affirmed the decision of the -":$ ordered the register of deeds to issue a new title to -lemencia$ and ordered the s!ouses to !ay -lemencia?s estate (21$000 as moral and e2em!lary damages and attorney?s fees and to render to /ernardo an accounting of the rentals of the !ro!erty from 0 '!ril 183&. The s!ouses a!!ealed to the #u!reme -ourt. The #u!reme -ourt affirmed the Audgment of the '!!ellate -ourt with the modification that the adAudication for moral and e2em!lary damages is discardedG >ithout costs. ( 2nly le$al issues may be raised in a revieB o& the decision o& the a""ellate court 's a rule$ only im!ortant legal issues$ as contem!lated in section &$ 7ule &; of the 7ules of -ourt$ may be raised in a re+iew of the '!!ellate -ourt?s decision. The !resent case does not fall within any of the e2ce!tions to that rule ( 2 !o#anGs Co66ents on t+e Rules o" Cou#t, %'$' E8. ,. 4$0D Ra6os vs. *e,si2 Cola .ottling Co., %20 *+il. $0%(. 2 <urden o& "roo& -lemencia herself testified that the !rice of (20$000 was not !aid to herG and thus$ the burden of the e+idence shifted to the ,adanga s!ouses. They were not able to !ro+e the !ayment of that amount$ thus the sale was fictitious. 3 Void contract in the absence o& "rice bein$ "aid? Sale ine4istent and cannot be considered consummated ' contract of sale is +oid and !roduces no effect whatsoe+er where the !rice$ which a!!ears therein as !aid$ has in fact ne+er been !aid by the !urchaser to the +endor &!eneses E8a. 8e Catin8ig vs. Bei#s o" Catalina Ro9ue, 5220$$$, 7ove6be# 21, %'$1, $4 SCRA 83, 88D !a,alo vs. !a,alo, %23 *+il. '$', '8$D Syllabus, 3ceHo, *e#ez F Co. vs. )lo#es an8 .as, 40 *+il. '2%(. #uch a sale is ine2istent and cannot be considered consummated &.o##o6eo vs. .o##o6eo, '8 *+il. 432D C#uza8o vs. .ustos an8 Escale#, 34 *+il. %$D ;a#anciang vs. ;a#anciang, 522230%, !ay 2%, %'1', 28 SCRA 22'(. * No evidence o& intention o& vendor to donate the "ro"erty -lemencia did not intended to donate the (aco !ro!erty to the ,adangas. 1er testimony and the notary?s testimony destroyed any !resum!tion that the sale was fair and regular and for a true consideration. :t seemed that the ,adangas abused -lemencia?s confidence and defrauded her of !ro!erties with a marCet +alue of (383$;;8.2; when she was already 3@ years old. / <ernardoMs ca"acity to sue
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/ernardo was -lemencia?s ado!ted son. Moreo+er$ -lemencia$ by testifying in this case$ tacitly a!!ro+ed the action brought in her behalf. /ernardo had the right to institute the instant action.
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ABard o& moral dama$es not sanctioned The moral damages awarded by the trial court is not sanctioned by articles 2213 to 2220 of the -i+il -ode. -lemencia?s own signature in the deed brought about the mess within which she was entangled. '/20 ;e$arda Hermanos vs Saldana 'G # No ;-25/,) 6anuary 2)+ (.,* 0 "irst )i+ision$ TeehanCee (.)4 ; concur 3actsH "eli!e #aldana had entered into two written contracts with ,egarda 1ermanos as subdi+ision owner$ whereby the latter agreed to sell to him ,ots 3 and @ of blocC ;5 of the subdi+ision with an area of 1;0 s9. ms. each$ for the sum of (1$;00.00 !er lot$ !ayable o+er the s!an of 10 years di+ided into 120 e9ual monthly installments of (18.@3 with 10I interest !er annum$ to commence on 20 May 18&@$ date of e2ecution of the contracts. #aldana faithfully !aid for @ continuous years about 8; (of the sti!ulated 120) monthly installments totalling (3$;@2.00 u! to the month of "ebruary 18;0$ which as !er ,egarda 1ermanos? own statement of account$ was a!!lied to #aldana?s account (without distinguishing the two lots). 'fter "ebruary 18;0 u! to the filing of the com!laint$ #aldana did not maCe further !ayments. The account shows that he owed ,egarda 1ermanos the sum of (1$311.32 on account of the balance of the !urchase !rice (!rinci!al) of the two lots (in the total sum of (3$000.00)$ although he had !aid more than the sti!ulated !urchase !rice of (1$;00.00 for one lot. 'lmost ; years later$ on 2 "ebruary 1801 Aust before the filing of the action$ #aldana wrote ,egarda 1ermanos stating that his desire to build a house on the lots was !re+ented by their failure to introduce im!ro+ements on the subdi+ision as <there is still no road to these lots$= and re9uesting information of the amount owing to u!date his account as <: intend to continue !aying the balance due on said lots.= ,egarda 1ermanos re!lied in their letter of 11 "ebruary 1801 that as #aldana had failed to com!lete total !ayment of the 120 installments by May 18;@ as sti!ulated in the contracts to sell$ <!ursuant to the !ro+isions of both contracts all the amounts !aid in accordance with the agreement together with the im!ro+ements on the !remises ha+e been considered as rents !aid and as !ayment for damages suffered by your failure$= and <#aid cancellation being in order$ is hereby confirmed.= #aldana filed an action in the -": Manila as a com!laint for deli+ery of two !arcels of land in #am!aloc$ Manila and for e2ecution of the corres!onding deed of con+eyance after !ayment of the balance still due on their !urchase !rice. #ubse9uently$ ,egarda 1ermanos !artitioned the subdi+ision among the brothers and sisters$ and the two lots were among those allotted to .ose ,egarda$ who was included as co%res!ondent as a result thereof in the case. 6n 13 .uly 1803$ the trial court sustained ,egarda 1ermanos? cancellation of the contracts and dismissing #aldana?s com!laint. 6n a!!eal and on 23 .uly 1800$ the a!!ellate court rendered its Audgment re+ersing the lower court?s Audgment and ordering ,egarda 1ermanos to deli+er to #aldana !ossession of one of the two lots$ at the choice of ,egarda 1ermanos$ and to e2ecute the corres!onding deed of con+eyance to #aldana for the said lot. 1ence$ the !resent !etition for re+iew. The #u!reme -ourt affirmed the a!!ealed Audgment of the a!!ellate courtG without !ronouncement as to costs. ( A""lication o& broad "rinci"les o& e=uity and @ustice by Court o& A""eals The -ourt of '!!eals elected to a!!ly the broad !rinci!les of e9uity and Austice. #aldana has !aid the total sum of (3$;@2.00 including interests$ which is e+en more than the +alue of the two lots. 'nd e+en if the sum a!!lied to the !rinci!al alone were to be considered$ which was of the total of (1$0@2.2@$ the same was already more than the +alue of one lot$ which is (1$;00.00. The only balance due on both lots was (1$313.32$ which was e+en less than the +alue of one lot. The -ourt considered as fully !aid by #aldana at least one of
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the two lots$ at the choice of ,egarda 1ermanos. This is more in line with good conscience than a total denial
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to #aldana of a little toCen of what he has !aid ,egarda 1ermanos. 2 (/.2 Court o& A""ealMs rulin$ &air and @ust and in accordance Bith laB and e=uity? Article (23* vs
The a!!ellate court?s Audgment finding that of the total sum of (3$;@2.00 (including interests of (1$@@8.3@) already !aid by #aldana (which was more than the +alue of two lots)$ the sum a!!lied by !etitioners to the !rinci!al alone in the amount of (1$0@2.2@ was already more than the +alue of one lot of (1$;00.00 and hence one of the two lots as chosen by ,egarda 1ermanos would be considered as fully !aid$ is fair and Aust and in accordance with law and e9uity. B+en considering that #aldana as ha+ing defaulted after "ebruary 18;0$ when he sus!ended !ayments after the 8;th installment$ he had as of the already !aid by way of !rinci!al ((1$0@2.2@) more than the full +alue of one lot ((1$;00.00). The Audgment recognizing this fact and ordering the con+eyance to him of one lot of his choice while also recognizing ,egarda 1ermanos? right to retain the interests of (1$@@8.3@ !aid by him for eight years on both lots$ besides the cancellation of the contract for one lot which thus re+erts to ,egarda 1ermanos$ cannot be deemed to deny substantial Austice to ,egarda 1ermanos nor to defeat their rights under the letter and s!irit of the contracts in 9uestion. "urther$ regardless of the !ro!riety of a!!lying 'rticle 1;82 thereto$ ,egarda 1ermanos has not been denied substantial Austice$ for$ according to 'rticle 123& of the -ode4 <:f the obligation has been substantially !erformed in good faith$ the obligor may reco+er as though there had been a strict and com!lete fulfillment$ less damages suffered by the obligee$= and <that in the interest of Austice and e9uity$ the decision a!!ealed from may be u!held u!on the authority of 'rticle 123& of the -ode.= 3 -octrine in 6M %uason A Co vs 6avier case &ully a""licable The doctrine in the case of ..M. Tuason Q -o. :nc. +s. .a+ier is fully a!!licable to the !resent case$ with the buyer being granted lesser benefits$ since no rescission of contract was therein !ermitted. There$ where the buyer had liCewise defaulted in com!leting the !ayments after ha+ing religiously !aid the sti!ulated monthly installments for almost @ years and notwithstanding that the seller had duly notified the buyer of the rescission of the contract to sell$ the -ourt u!held the lower court?s Audgment denying Audicial confirmation of the rescission and instead granting the buyer an additional grace !eriod of 00 days from notice of Audgment to !ay all the installment !ayments in arrears together with the sti!ulated 10I interest !er annum from the date of default$ a!art from reasonable attorney?s fees and costs$ which !ayments$ the -ourt obser+ed$ would ha+e the seller <reco+er e+erything due thereto$ !ursuant to its contract with the defendant$ including such damages as the former may ha+e suffered in conse9uence of the latter?s default.= '/30 ;evy Hermanos vs Gervacio 'G # No *5305 2ctober 2,+ (.3. 0 Bn /anc$ Moran (.)4 ; concur 3actsH 6n 1; March 1833$ ,e+y 1ermanos$ :nc.$ sold to ,azaro /las er+acio$ a (acCard car. er+acio$ after maCing the initial !ayment$ e2ecuted a !romissory note for the balance of (2$&00$ !ayable on or before 1; .une 1833$ with interest at 12I !er annum$ and to secure the !ayment of the note$ he mortgaged the car to ,e+y 1ermanos. er+acio failed to !ay the note at its maturityG wherefore$ ,e+y 1ermanos foreclosed the mortgage and the car was sold at !ublic auction$ at which !laintiff was the highest bidder for (@00. 6n 2& "ebruary 183@$ ,e+y 1ermanos filed a com!laint in the -": Manila for the collection of the balance of (1$000 and interest. er+acio admitted the allegations of the com!laint$ and with this admission$ the !arties submitted the case for decision. The lower court a!!lied the !ro+isions of 'ct &122$ inserted as articles 1&;&% ' of the -i+il -ode$ and rendered Audgment in fa+or of er+acio. ,e+y 1ermanos a!!ealed. The #u!reme -ourt re+ersed the Audgment$ and er+acio is hereby sentenced to !ay ,e+y 1ermanos the sum
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of (1$000 interest at the rate of 12I !er annum from 1; .une 1833$ and the sum of (;2.0@ with interest at the
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rate of 0I from the date of the filing of the com!laint$ with costs in both instances against er+acio. ( Article (*/*-A o& Civil Code 'rticle 1&;&%' of the -i+il -ode !ro+ides that <:n a contract for the sale of !ersonal !ro!erty !ayable in installments$ failure to !ay two or more installments shall confer u!on the +endor the right to cancel the sale or foreclose the mortgage if one has been gi+en on the !ro!erty$ without reimbursement to the !urchaser of the installments already !aid$ if there be an agreement to this effect. 1owe+er$ if the +endor has chosen to foreclose the mortgage he shall ha+e no further action agaist the !urchaser for the reco+ery of any un!aid balance owing by the same$ and any agreement to the contrary shall be null and +oid.= 2 A""lication o& Article (*/*H Contract o& sale o& "ersonal "ro"erty in installment Bhere there is &ailure to "ay 2 or more installments :n /acon$ray ( Co. vs. De 'antos (33 6 2130)$ it was held that <in order to a!!ly the !ro+isions of article 1&;&%' of the -i+il -ode it must a!!ear that there was a contract for the sale of !ersonal !ro!erty !ayable in installments and that there has been a failure to !ay two or more installments.= The contract$ in the !resent case$ while a sale of !ersonal !ro!erty$ is not$ howe+er$ one on installments$ but on straight term$ in which the balance$ after !ayment of the initial sum$ should be !aid in its totality at the time s!ecified in the !romissory note. The transaction is not$ therefore$ the one contem!lated in 'ct &122 and accordingly the mortgagee is not bound by the !rohibition therein contained as to its right to the reco+ery of the un!aid balance. 3 Article (*/*? !rice "ayable in several installments? "ossible miscalculation o& ability to "ay The law is aimed at those sales where the !rice is !ayable in se+eral installments$ for$ generally$ it is in these cases that !artial !ayments consist in relati+ely small amounts$ constituting thus a great tem!tation for im!ro+ident !urchasers to buy beyond their means. There is no such tem!tation where the !rice is to be !aid in cash$ or !artly in cash and !artly in one term$ for$ in the latter case$ the !artial !ayments are not so small as to !lace !urchasers off their guard and delude them to a miscalculation of their ability to !ay. * -i&&erence e4ists in actual "ractice betBeen "ayin$ "rice in 2 installments and "ayin$ "artly in cash and "artly in an installment Theoretically$ there is no difference between !aying the !rice in two installments and !aying the same !artly in cash and !artly in one installment$ in so far as the size of each !artial !ayment is concernedG but in actual !ractice the difference e2ists$ for$ according to the regular course of business$ in contracts !ro+iding for !ayment of the !rice in two installments$ there is generally a !ro+ision for initial !ayment. / ;aB clear+ does not re=uire construction The considerations made in the discussion of the decision in the current case are immaterial as the language of the law being so clear as to re9uire no construction at all. 5 Article (*/* does not a""ly? cash "ayment not a "ayment by installment ' cash !ayment cannot be considered as a !ayment by installment$ and e+en if it can be so considered$ still the law does not a!!ly$ for it re9uires non%!ayment of two or more installments in order that its !ro+isions may be in+oCed. :n the !resent case$ only one installment was un!aid.
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'/*0 5i6 v. CA, 213 SCRA 01' &%''1( '//0 ;imketkai Sons Millin$ v CA 'G # No (()/0. (../ 0 -ecember (+
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Third )i+ision$ Melo (.)4 & concur 3actsH 6n 1& May 1830$ (hili!!ine 7emnants -o.$ :nc. constituted the /anC of the (hili!!ine :slands (/(:) as its trustee to manage$ administer$ and sell its real estate !ro!erty. 6ne such !iece of !ro!erty !laced under trust was the dis!uted lot$ a 33$0;0%s9.ms. lot at /arrio /agong :log$ (asig (T-T &83122). 6n 23 .une 18@@$ (edro 7e+illa$ .r.$ a licensed real estate broCer was gi+en formal authority by /(: to sell the lot for (1$000.00 !er s9.m. This arrangement was concurred in by the owners of the (hili!!ine 7emnants. /roCer 7e+illa contacted 'lfonso ,im of ,imCetCai #ons Milling (,#M) who agreed to buy the land. 6n @ .uly 18@@$ ,#M?s officials and 7e+illa were gi+en !ermission to enter and +iew the !ro!erty they were buying (by 7olando V. 'romin$ /(: 'ssistant Vice%(resident). 6n 8 .uly 18@@$ 7e+illa formally informed /(: that he had !rocured a buyer$ ,#M. 6n 11 .uly 18@@$ ,#M?s officials$ 'lfonso ,im and 'lbino ,imCetCai$ went to /(: to confirm the sale. They were entertained by Vice%(resident Merlin 'lbano and 'sst. Vice%(resident 'romin. ,#M asCed that the !rice of (1$000.00 !er s9.m. be reduced to (800.00 while 'lbano stated the !rice to be (1$100.00. The !arties finally agreed that the lot would be sold at (1$000.00 !er s9.m. to be !aid in cash. #ince the authority to sell was on a first come$ first ser+ed and non%e2clusi+e basis$ it may be mentioned at this Auncture that there is no dis!ute o+er ,#M?s being the first comer and the buyer to be first ser+ed. 5otwithstanding the final agreement to !ay (1$000.00 !er s9.m. on a cash basis$ 'lfonso ,im asCed if it was !ossible to !ay on terms. The banC officials stated that there was no harm in trying to asC for !ayment on terms because in !re+ious transactions$ the same had been allowed. :t was the understanding$ howe+er$ that should the term !ayment be disa!!ro+ed$ then the !rice shall be !aid in cash. :t was 'lbano who dictated the terms under which the installment !ayment may be a!!ro+ed$ and acting thereon$ 'lfonso ,im$ on the same date$ 11 .uly 18@@$ wrote /(: through Merlin 'lbano embodying the !ayment initially of 10I and the remaining 80I within a !eriod of 80 days. 2 or 3 days later$ ,#M learned that its offer to !ay on terms had been frozen. 'lfonso ,im went to /(: on 1@ .uly 18@@ and tendered the full !ayment of (33$0;0$000.00 to 'lbano. The !ayment was refused because 'lbano stated that the authority to sell that !articular !iece of !ro!erty in (asig had been withdrawn from his unit. The same checC was tendered to /(: Vice%(resident 5elson /ona who also refused to recei+e !ayment. 'n action for s!ecific !erformance with damages was thereu!on filed on 2; 'ugust 18@@ by ,#M against /(: with the 7T- (asig (/ranch 1;1). :n the course of the trial$ /(: informed the trial court that it had sold the !ro!erty under litigation to 5ational /ooC #tore (5/#) on 1& .uly 18@8. The com!laint was thus amended to include 5/#. 6n 10 .une 1881$ the trial court rendered Audgment in fa+or of ,#MG holding that there was a !erfected contract between ,#M and /(:$ and thus declared the )eed of #ale in+ol+ing the lot in (asig in the name of /(: and in fa+or of 5/# as null and +oidG ordered the 7egister of )eeds of the (ro+ince of 7izal to cancel the T-T which may ha+e been issued in fa+or of 5/# by +irtue of the said deedG ordered /(: u!on recei!t by it from ,#M of the sum of (33$0;0$000$00 to e2ecute a )eed of #ale in fa+or of the latter of the said !ro!erty at the !rice of (1$000.00 !er s9.m. and in default thereof$ the -lerC of -ourt is directed to e2ecute the deed dated 1& .uly 18@8G ordered the 7egister of )eeds of (asig$ u!on registration of the said deed$ whether e2ecuted by /(: or the -lerC of -ourt and !ayment of the corres!onding fees and charges$ to cancel said T-T &83122 and to issue$ in lieu thereof$ another transfer certificate of title in the name of ,#MG ordered /(: and 5/# to !ay in solidum to ,#M the sums of (10$000$000.00 as actual and conse9uential damages and (1;0$000.00 as attorney?s fees and litigation e2!enses$ both with interest at 12I !er annum from date of AudgmentG on the cross%claim by the banC against 5/#$ ordered 5/# to indemnify the banC of whate+er /(: shall ha+e !aid to ,#MG dismissed the counterclaim of both /(: and 5/# against ,#M and the cross%claim of 5/# against /(:G with costs against /(: and 5/#. *!on ele+ation of the case to the -ourt of '!!eals$ the decision of the trial court was re+ersed and the com!laint dismissed on 12 'ugust 188&. :t was held that no contract of sale was !erfected because there was no concurrence of the three re9uisites enumerated in 'rticle 131@ of the -i+il -ode. 1ence$ the !etition.
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The #u!reme -ourt re+ersed and set aside the 9uestioned Audgment of the -ourt of '!!eals$ and reinstated the
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10 .une 1881 Audgment of /ranch 1;1 of the 7T- of The 5ational -a!ital .udicial 7egion stationed in (asig$ Metro Manila e2ce!t for the award of (10$000$000.00 damages$ which was deleted. ( <roker $iven authority to sell and not merely to look &or a buyer /(: as trustee of the !ro!erty of (hili!!ine 7emnant -o. authorized a licensed broCer$ (edro 7e+illa$ to sell the lot for (1$000.00 !er s9.m. (hili!!ine 7emnants confirmed the authority to sell of 7e+illa and the !rice at which he may sell the lot. ,#M and 7e+illa agreed on the former buying the !ro!erty. /(: 'ssistant Vice%(resident 7olando V. 'romin allowed the broCer and the buyer to ins!ect the !ro!erty. /(: was formally informed about the broCer ha+ing !rocured a buyer. 't the start of the transactions$ 7e+illa by himself already had full authority to sell the dis!uted lot. The note dated 23 .une 18@@ states$ <this will ser+e as your authority to sell on an as is$ where is basis the !ro!erty located at (asig /l+d.$ /agong :log.= Thus$ the authority gi+en to 7e+illa was to sell and not merely to looC for a buyer. 7e+illa testified that at the time he !erfected the agreement to sell the litigated !ro!erty$ he was acting for and in behalf of the /(: as if he were the /anC itself. This notwithstanding and to firm u! the sale of the land$ 7e+illa saw it fit to bring /(: officials into the transaction. 2 <!8 Vice !residents have authority to sell The alleged lacC of authority of the banC officials acting in behalf of /(: is not sustained by the record. :f /(: could gi+e the authority to sell to a licensed broCer$ there is no reason to doubt the authority to sell of the two /(: Vice%(residents whose !recise Aob in the /anC was to manage and administer real estate !ro!erty. 7olando 'romin was /(: 'ssistant Vice%(resident and Trust 6fficer. 1e directly su!er+ised the /(: 7eal (ro!erty Management *nit. 1e had been in the 7eal Bstate )i+ision since 18@; and was the head su!er+ising officer of real estate matters. 1e had been with the /(: Trust )e!artment since 180@ and had been in+ol+ed in the handling of !ro!erties of beneficial owners since 183;. 1e was in charge of Torrens titles$ lease contracts$ !roblems of tenants$ insurance !olicies$ installment recei+ables$ management fees$ 9uitclaims$ and other matters in+ol+ing real estate transactions. 1is immediate su!erior$ Vice%(resident Merlin 'lbano had been with the 7eal Bstate )i+ision for only 1 weeC but he was !resent and Aoined in the discussions with ,#M. There is nothing to show that 'lfonso ,im and 'lbino ,imCetCai Cnew 'romin before the incident. 7e+illa brought the brothers directly to 'romin u!on entering the /(: !remises. 'romin acted in a !erfectly natural manner on the transaction before him with not the slightest indication that he was acting ultra +ires. This shows that /(: held 'romin out to the !ublic as the officer routinely handling real estate transactions and$ as Trust 6fficer$ entering into contracts to sell trust !ro!erties. "urther$ it must be noted that the authority to buy and sell this !articular trust !ro!erty was later withdrawn from Trust 6fficer 'romin and his entire unit. :f 'romin did not ha+e any authority to act as alleged$ there was no need to withdraw authority which he ne+er !ossessed. B+erything in the record !oints to the full authority of 'romin to bind the banC$ e2ce!t for the self%ser+ing memoranda or letters later !roduced by /(: that 'romin was an inefficient and undesirable officer and who$ in fact$ was dismissed after he testified in this case. /ut$ of course$ 'romin?s alleged inefficiency is not !roof that he was not fully clothed with authority to bind /(:. 3 %rust Committee does not have to "ass on re$ular transactions 6n the allegation that sales of trust !ro!erty need the a!!ro+al of a Trust -ommittee made u! of to! banC officials$ it a!!ears from the record that this trust committee meets rather infre9uently and it does not ha+e to !ass on regular transactions. * <ank liable to innocent third "ersons Bhere re"resentation is made in course o& its business even i& a$ent abused his authority :n Areola vs. Court of Appeals (230 #-7' 0&3 K188&L) which cited Pru$ential 5an; vs. Court of Appeals (22 #-7' 3;0 K1883L)$ which in turn relied u!on /c.ntosh vs. Da;ota +rust Co. (;2 5) 3;2$
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20& 5> @1@$ &0 ',7 1021)$ it was stated that <a banCing cor!oration is liable to innocent third !ersons where the re!resentation is made in the course of its business by an agent acting within the general sco!e of his authority e+en though$ in the !articular case$ the agent is secretly abusing his authority and attem!ting to
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!er!etrate a fraud u!on his !rinci!al or some other !erson for his own ultimate benefit.= :n the present case$ the !osition and title of 'romin alone$ not to mention the testimony and documentary e+idence about his worC$ lea+e no doubt that he had full authority to act for /(: in the 9uestioned transaction. There is no allegation of fraud$ nor is there the least indication that 'romin was acting for his own ultimate benefit. /(: later dismissed 'romin because it a!!eared that a to! official of the banC was !ersonally interested in the sale of the (asig !ro!erty and did not liCe 'romin?s testimony. 'romin was charged with !oor !erformance but his dismissal was only sometime after he testified in court. More than 2 long years after the dis!uted transaction$ he was still 'ssistant Vice%(resident of /(:. / Meetin$ o& the minds on the "rice? Manner o& "ayment 'sst. Vice%(resident 'romin admitted that there was a meeting of the minds between the buyer and the banC in res!ect to the !rice of (1$000.00 !er s9.m. The re9uirements in the !ayment of the !urchase !rice on terms instead of cash were suggested by /(: Vice%(resident 'lbano. #ince the authority gi+en to broCer 7e+illa s!ecified cash !ayment$ the !ossibility of !aying on terms was referred to the Trust -ommittee but with the mutual agreement that <if the !ro!osed !ayment on terms will not be a!!ro+ed by our Trust -ommittee$ ,imCetCai should !ay in cash$ the amount was no longer subAect to the a!!ro+al or disa!!ro+al of the -ommittee$ it is only on the terms.= The record shows that if !ayment was in cash$ either broCer 7e+illa or 'romin had full authority. /ut because ,#M tooC ad+antage of the suggestion of Vice%(resident 'lbano$ the matter was sent to higher officials. :mmediately u!on learning that !ayment on terms was frozen andDor denied$ ,imCetCai e2ercised his right within the !eriod gi+en to him and tendered !ayment in full. The /(: reAected the !ayment. 5 Sta$es o& the contract The stages of a contracts are (a) !re!aration$ conce!tion or generation$ which is the !eriod of negotiation and bargaining$ ending at the moment of agreement of the !artiesG (b) !erfection or birth of the contract$ which is the moment when the !arties come to agree on the terms of the contractG and (c) consummation or death$ which is the fulfillment or !erformance of the terms agreed u!on in the contract & oyota S+a@ -nc. vs. Cou#t o" A,,eals, ;.R. 7o. %%1100, !ay 23, %''0(. , An$ 9u Asuncion? Sta$es in ordinary contracts FconsensualG? #eal contractH delivery re=uired? Solemn contractH com"liance Bith &ormalities "rescribe by laB ' contract undergoes +arious stages that include its negotiation or !re!aration$ its !erfection and$ finally$ its consummation. 5egotiation co+ers the !eriod from the time the !ros!ecti+e contracting !arties indicate interest in the contract to the time the contract is concluded (!erfected) The !erfection of the contract taCes !lace u!on the concurrence of the essential elements thereof. ' contract which is consensual as to !erfection is so established u!on a mere meeting of minds$ i.e.$ the concurrence of offer and acce!tance$ on the obAect and on the cause thereof. ' contract which re9uires$ in addition to the abo+e$ the deli+ery of the obAect of the agreement$ as in a !ledge or commodatum$ is commonly referred to as a real contract. :n a solemn contract$ com!liance with certain formalities !rescribed by law$ such as in a donation of real !ro!erty$ is essential in order to maCe the act +alid$ the !rescribed form being thereby an essential element thereof. The stage of consummation begins when the !arties !erform their res!ecti+e undertaCings under the contract culminating in the e2tinguishment thereof. ) sale An$ 9u Asuncion? !er&ected contract o&
*ntil the contract is !erfected$ it cannot$ as an inde!endent source of obligation$ ser+e as a binding Auridical relation. :n sales$ !articularly$ the contract is !erfected when a !erson$ called the seller$ obligates himself$ for a !rice certain$ to deli+er and to transfer ownershi! of a thing or right to another$ called the buyer$ o+er which the latter agrees &Ang =u Asuncion(.
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Sta$es o& the contract in the "resent case The negotiation or preparation stage started with the authority gi+en by (hili!!ine 7emnants to /(:
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to sell the lot$ followed by the authority gi+en by /(: and confirmed by (hili!!ine 7emnants to broCer 7e+illa to sell the !ro!erty$ the offer to sell to ,imCetCai$ the ins!ection of the !ro!erty and the negotiations with 'romin and 'lbano at the /(: offices. The perfection of the contract tooC !lace when 'romin and 'lbano$ acting for /(:$ agreed to sell and 'lfonso ,im with 'lbino ,imCetCai$ acting for ,#M$ agreed to buy the dis!uted lot at (1$000.00 !er s9.m.. 'side from this there was the earlier agreement between ,#M and the authorized broCer. There was a concurrence of offer and acce!tance$ on the obAect$ and on the cause thereof. (0 Villonco #ealty v <ormaheco? !er&ected contract o& sale The contract of sale is !erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice. "rom that moment$ the !arties may reci!rocally demand !erformance$ subAect to the !ro+isions of the law go+erning the form of contracts.= ('rt. 1&3; :bid). (( Villonco #ealty v <ormaheco? Consent -onsent is manifested by the meeting of the offer and the acce!tance u!on the thing and the cause which are to constitute the contract. The offer must be certain and the acce!tance absolute. ' 9ualified acce!tance constitutes a counter%offer= ('rt. 1318$ -i+il -ode). <'n acce!tance may be e2!ress or im!lied= ('rt. 1320$ -i+il -ode). (2 Villonco #ealty v <ormaheco? A contract is &ormed i& o&&er is acce"ted+ Bhether re=uest &or chan$es in terms is $ranted or not? Chan$e does not amount to re@ection o& o&&er or a counter-o&&er 'n acce!tance may contain a re9uest for certain changes in the terms of the offer and yet be a binding acce!tance. #o long as it is clear that the meaning of the acce!tance is !ositi+ely and une9ui+ocally to acce!t the offer. whether such re9uest is granted or not$ a contract is formed. (#tuart +s. "ranClin ,ife :ns. -o.$ 10; "ed. 2nd 80;$ citing #ec. 38$ >illiston on -ontracts). The +endor?s change in a !hrase of the offer to !urchase$ which change does not essentially change the terms of the offer$ does not amount to a reAection of the offer and the tender or a counter%offer.= (#tuart +s. "ranClin ,ife :ns. -o.$ su!ra.) 13 #e=uisite &orm under Article (*/) merely &or $reater e&&icacy or convenience The fact that the deed of sale still had to be signed and notarized does not mean that no contract had already been !erfected. ' sale of land is +alid regardless of the form it may ha+e been entered into &Clau8el vs. Cou#t o" A,,eals, %'' SCRA %%3, %%' [%''%](. The re9uisite form under 'rticle 1&;@ of the -i+il -ode is merely for greater efficacy or con+enience and the failure to com!ly therewith does not affect the +alidity and binding effect of the act between the !arties. :f the law re9uires a document or other s!ecial form$ as in the sale of real !ro!erty$ the contracting !arties may com!el each other to obser+e that form$ once the contract has been !erfected. Their right may be e2ercised simultaneously with action u!on the contract ('rticle 13;8$ -i+il -ode). (* Abrenica #uleH Contracts in&rin$in$ the Statute o& 3rauds rati&ied Bhen de&ense &ails to ob@ect or asks =uestions on cross-e4amination :n A!renica vs. "on$a (3& (hil. 338 K1810L) it was held that contracts infringing the #tatute of "rauds are ratified when the defense fails to obAect$ or asCs 9uestions on cross%e2amination. The reason for the rule is that <if the answers of those witnesses were stricCen out$ the cross%e2amination could ha+e no obAect whatsoe+er and if the 9uestions were !ut to the witnesses and answered by them$ they could only be taCen into account by connecting them with the answers gi+en by those witnesses on direct e2amination.= *nder said rule (reiterated in a number of cases$ among them Talosig +s. Vda. de 5ieba$ &3 #-7' &32 K1832L)$ e+en
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assuming that !arol e+idence was initially inadmissible$ the same became com!etent and admissible because of the cross%e2amination$ which elicited e+idence !ro+ing the e+idence of a !erfected contract. The cross% e2amination on the contract is deemed a wai+er of the defense of the #tatute of "rauds. :n the present case$ counsel for res!ondents cross%e2amined !etitioner?s witnesses at length on the contract itself$ the !urchase !rice$ the tender of cash !ayment$ the authority of 'romin and 7e+illa$ and other details of the litigated
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contract. (/ Jritten note or memorandum an e4ce"tion to the unen&orceability o& contracts "ursuant to Statute o& 3rauds *nder 'rticle 1&03 of the -i+il -ode$ an e2ce!tion to the unenforceability of contracts !ursuant to the #tatute of "rauds is the e2istence of a written note or memorandum e+idencing the contract. The memorandum may be found in se+eral writings$ not necessarily in one document. The memorandum or memoranda isDare written e+idence that such a contract was entered into. Thus$ the e2istence of a written contract of the sale is not necessary so long as the agreement to sell real !ro!erty is e+idenced by a written note or memorandum$ embodying the essentials of the contract and signed by the !arty charged or his agent. #uch note or memorandum suffices to maCe the +erbal agreement enforceable$ taCing it out of the o!eration of the statute. :n the !resent case$ while there is no written contract of sale of the (asig !ro!erty e2ecuted by /(: in fa+or of ,#M$ there are abundant notes and memoranda e2tant in the records of this case e+idencing the elements of a !erfected contract. (5 3orm o& memorandum or note 5o !articular form of language or instrument is necessary to constitute a memorandum or note in writing under the statute of fraudsG any document or writing$ formal or informal$ written either for the !ur!ose of furnishing e+idence of the contract or for another !ur!ose$ which satisfies all the re9uirements of the statute as to contents and signature is a sufficient memorandum or note. ' memorandum may be written as well with lead !encil as with !en and inC. :t may also be filled in on a !rinted form. &3$ C.:.S., 1032104(. The note or memorandum re9uired by the statute of frauds need not be contained in a single document$ nor$ when contained in two or more !a!ers$ need each !a!er be sufficient as to contents and signature to satisfy the statute. Two or more writings !ro!erly connected may be considered together$ matters missing or uncertain in one may be su!!lied or rendered certain by another$ and their sufficiency will de!end on whether$ taCen together$ they meet the re9uirements of the statute as to contents and the re9uirements of the statutes as to signature. (, -emeanor o& Bitnesses as &actor &or Court to incline to the version o& the case by one "arty The demeanor of the witnesses the !arties !resented is one im!ortant factor that inclined the trial court to belie+e in the +ersion gi+en by ,#M because its witnesses$ including hostile witness 7oland V. 'romin$ an assistant +ice%!resident of the banC$ were straight forward$ candid and unhesitating in gi+ing their res!ecti+e testimonies. *!on the other hand$ the witnesses of /(: were e+asi+e$ less than candid and hesitant in gi+ing their answers to cross e2amination 9uestions. Moreo+er$ the witnesses for /(: and 5/# contradicted each other. () Credibility o& Bitnesses Bhere the &indin$s o& the trial and a""ellate courts are contrary to each other? %rial courtMs &indin$s $iven $reat res"ect 6n the matter of credibility of witnesses where the findings or conclusions of the -ourt of '!!eals and the trial court are contrary to each other$ the !ronouncement of the -ourt in #errano +s. -ourt of '!!eals (180 #-7' 103 K1881L) bears stressing <:t is a settled !rinci!le of ci+il !rocedure that the conclusions of the trial court regarding the credibility of witnesses are entitled to great res!ect from the a!!ellate courts because the trial court had an o!!ortunity to obser+e the demeanor of witnesses while gi+ing testimony which may indicate their candor or lacC thereof. >hile the #u!reme -ourt ordinarily does not rule on the issue of credibility of witnesses$ that being a 9uestion of fact not !ro!erty raised in a !etition under 7ule &;$ the -ourt has undertaCen to do so in e2ce!tional situations where$ for instance$ as here$ the trial court and the -ourt of '!!eals arri+ed at di+ergent conclusions on 9uestions of fact and the credibility of witnesses.=
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(.
N<S not an innocent "urchaser &or value 5ational /ooCstore (5/#) is not an innocent !urchaser for +alue$ as it acted in bad faith. 5/# ignored the notice of lis !endens annotated on the title when it bought the lot. :t was the willingness and
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design of 5/# to buy !ro!erty already sold to another !arty which led /(: to dishonor the contract with ,#M. :t is the +ery nature of the deed of absolute sale between /(: and 5/# which clearly negates any allegation of good faith on the !art of the buyer. :nstead of the +endee insisting that the +endor guarantee its title to the land and recognize the right of the +endee against the +endor if the title to the land turns out to be defecti+e as when the land belongs to another !erson$ the re+erse is found in the deed of sale between /(: and 5/#. 'ny losses which 5/# may incur in the e+ent the title turns out to be +ested in another !erson are to be borne by 5/# alone. /(: is e2!ressly freed under the contract from any recourse of 5/# against it should /(:?s title be found defecti+e. 20 7numeration o& bad$es o& &raud &ound in 2ria v McMickin$ cannot cover all indications &rom (.(2 to "resent and &uture 5/# sim!ly cited the badges of fraud mentioned in 6ria +s. McMicCing (21 (hil. 2&3 (1812L) in its memorandum and argues that the enumeration there is e2clusi+e. The decision in said case !lainly states <the following are some of the circumstances attending sales which ha+e been denominated by courts (as) badges of fraud.= There are innumerable situations where fraud is manifested. 6ne enumeration in a 1812 decision cannot !ossibly co+er all indications of fraud from that time u! to the !resent and into the future. 2( -ama$es? ;oss o& "ro&its and use o& land com"ensated by a""reciation in land value The !rofits and the use of the land which were denied to ,#M because of the non%com!liance or interference with a solemn obligation by /(: and 5/# is somehow made u! by the a!!reciation in land +alues. '/50 ;oyola v CA 'G # No ((/,3* 3ebruary 23+ 2000 0 #econd )i+ision$ Uuisumbing (.)4 3 concur$ 1 on lea+e 3actsH ' !arcel of land (,ot 11;%'%1 of subdi+ision !lan K,7-L (sd%32113$ a !ortion of ,ot 11;%' described on (lan (sd%;;22@$ ,7- K ,76L 7ecord @33&$ located in (oblacion$ /inan$ ,aguna$ and containing 3;3 s9.m.$ T-T T%32003) was originally owned in common by the siblings Mariano and audencia Varraga$ who inherited it from their father. Mariano !redeceased his sister who died single$ without offs!ring on ; 'ugust 18@3$ at the age of 83. Victorina Varraga +da. de ,oyola and -ecilia Varraga$ are sisters of audencia and Mariano. The !ro!erty was subAect of -i+il -ase /%108& before the then -": ,aguna (/ranch 1$ #!ouses 7omualdo Varraga$ et al. +. audencia Varraga$ et al.). 7omualdo Varraga was the !laintiff in -i+il -ase /%108&. The defendants were his siblings4 5ie+es$ 7omana$ uillermo$ (urificacion$ 'ngeles$ 7oberto$ Bstrella$ and .ose$ all surnamed Varraga$ as well as his aunt$ audencia. The trial court decided -i+il -ase /%108& in fa+or of the defendants. audencia was adAudged owner of the 1D2 !ortion of ,ot 11;%'%1. 7omualdo ele+ated the decision to the -ourt of '!!eals and later the #u!reme -ourt. The !etition ( 7 ;8;28) was denied by the -ourt on 13 March 18@2. 6n 2& 'ugust 18@0$ nearly 3 years before the death of audencia while 7 ;8;28 was still !ending before the #u!reme -ourt. 6n said date$ audencia allegedly sold to the children of Mariano Varraga (5ie+es$ 7omana$ 7omualdo$ uillermo$ ,ucia$ (urificacion$ 'ngeles$ 7oberto$ Bstrella Varraga) and the heirs of .ose Varraga 'urora$ Marita$ .ose$ 7onaldo$ Victor$ ,auriano$ and 'riel VarragaG first cousins of the ,oyolas) her share in ,ot 11;%'% 1 for (3&$000.00. The sale was e+idenced by a notarized document
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denominated as </ilihang Tuluyan ng Ealahati (1D2) ng :sang ,agay na ,u!a.= 7omualdo$ the !etitioner in 7 ;8;28$ was among the +endees. The decision in -i+il -ase /%108& became final. The children of Mariano Varraga and the heirs of .ose
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Varraga (!ri+ate res!ondents) filed a motion for e2ecution. 6n 10 "ebruary 18@&$ the sheriff e2ecuted the corres!onding deed of recon+eyance to audencia. 6n 23 .uly 18@&$ howe+er$ the 7egister of )eeds of ,aguna$ -alamba /ranch$ issued in fa+or of !ri+ate res!ondents$ T-T T%110003$ on the basis of the sale on 2& 'ugust 18@0 by audencia to them. 6n 31 .anuary 18@;$ Victorina and -ecilia filed a com!laint$ docCeted as -i+il -ase /%218&$ with the 7Tof /iMan$ ,aguna$ for the !ur!ose of annulling the sale and the T-T. Victorina died on 1@ 6ctober 18@8$ while -i+il -ase /%218& was !ending with the trial court. -ecilia died on & 'ugust 1880$ unmarried and childless. Victorina and -ecilia were substituted by 7uben$ -andelaria$ ,orenzo$ "lora$ 5icadro$ 7osario$ Teresita and Vicente ,oyola as !laintiffs. The trial court rendered Audgment in fa+or of com!lainantsG declaring the simulated deed of absolute sale as well as the issuance of the corres!onding T-T null and +oid$ ordering the 7egister of )eeds of ,aguna to cancel T-T T%1100@3 and to issue another one in fa+or of the !laintiffs and the defendants as co%owners and legal heirs of the late audencia$ ordering the defendants to recon+ey and deli+er the !ossession of the shares of the !laintiff on the subAect !ro!erty$ ordering the defendants to !ay (20$000 as attorney?s fees and cost of suit$ dismissing the !etitioner?s claim for moral and e2em!lary damages$ and dismissing the defendants? counterclaim for lacC of merit. 6n a!!eal$ and on 31 'ugust 1883$ the a!!ellate court re+ersed the trial court (-'% 7 -V 30080). 6n #e!tember 1;$ 1883$ the !etitioners (as substitute !arties for Victorina and -ecilia$ the original !laintiffs) filed a motion for reconsideration$ which was denied on 0 .une 188&. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt denied the !etition$ and affirmed the assailed decision of the -ourt of '!!ealsG with costs against !etitioners. ( !resum"tion o& re$ularity o& notari:ed document ' notarized document carries the e+identiary weight conferred u!on it with res!ect to its due e2ecution$ and documents acCnowledged before a notary !ublic ha+e in their fa+or the !resum!tion of regularity. :n the !resent case$ the !etitioners allege that since the notary !ublic who !re!ared and acCnowledged the 9uestioned /ilihan did not !ersonally Cnow audencia$ the e2ecution of the deed was sus!ect. 1owe+er$ the notary !ublic testified that he inter+iewed audencia !rior to !re!aring the deed of sale. /y their failure to o+ercome this !resum!tion$ with clear and con+incing e+idence$ !etitioners are esto!!ed from 9uestioning the regularity of the e2ecution of the deed. 2 6ose Earra$a alive Bhen the sale took "lace (etitioners charge that one of the +endees$ .ose Varraga$ was already dead at the time of the sale. 1owe+er$ the records re+eal that .ose died on 28 .uly 18@1. 1e was still ali+e on 2& 'ugust 18@0$ when the sale tooC !lace. 3 Simulation de&ined #imulation is <the declaration of a fictitious will$ deliberately made by agreement of the !arties$ in order to !roduce$ for the !ur!oses of dece!tion$ the a!!earances of a Auridical act which does not e2ist or is different what that which was really e2ecuted.= -haracteristic of simulation is that the a!!arent contract is not really desired or intended to !roduce legal effect or in any way alter the Auridical situation of the !arties. "urther$ in a simulated contract$ the !arties ha+e no intention to be bound by the contract. :n the !resent case$ !erusal of the 9uestioned deed shows that the sale of the !ro!erty would con+ert the co%owners to +endors and +endees$ a clear alteration of the Auridical relationshi!s. This is contrary to the re9uisite of simulation that the a!!arent contract was not really meant to !roduce any legal effect. The !arties clearly intended to be bound by the contract of sale$ an intention they did not deny.
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Simulation+ re=uisites The re9uisites for simulation are4 (a) an outward declaration of will different from the will of the
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!artiesG (b) the false a!!earance must ha+e been intended by mutual agreementG and (c) the !ur!ose is to decei+e third !ersons. :n the !resent case$ none of these are !resent in the assailed transaction. / Contracts bindin$ only u"on "arties e4ecutin$ them -ontracts are binding only u!on the !arties who e2ecute them. 'rticle 1311 of the -i+il -ode clearly co+ers this situation. :n the !resent case 7omualdo had no Cnowledge of the sale$ and thus$ he was a stranger and not a !arty to it. B+en if curiously 7omualdo$ one of those included as buyer in the deed of sale$ was the one who 9uestioned audencia?s ownershi! in -i+il -ase /%108&$ 7omana testified that 7omualdo really had no Cnowledge of the transaction and he was included as a buyer of the land only because he was a brother. 5 3raud is never "resumed "raud is ne+er !resumed$ but must be both alleged and !ro+ed. "or a contract to be annulled on the ground of fraud$ it must be shown that the +endor ne+er ga+e consent to its e2ecution. :f a com!etent !erson has assented to a contract freely and fairly$ said !erson is bound. There also is a dis!utable !resum!tion$ that !ri+ate transactions ha+e been fair and regular. '!!lied to contracts$ the !resum!tion is in fa+or of +alidity and regularity. :n the !resent case$ the allegations of fraud was unsu!!orted$ and the !resum!tion stands that the contract audencia entered into was fair and regular. , !erson not inca"acitated to contract merely because o& advanced a$e or due to "hysical in&imities ' !erson is not inca!acitated to contract merely because of ad+anced years or by reason of !hysical infirmities. 6nly when such age or infirmities im!air his mental faculties to such e2tent as to !re+ent him from !ro!erly$ intelligently$ and fairly !rotecting his !ro!erty rights$ is he considered inca!acitated. :n the !resent case$ !etitioners show no !roof that audencia had lost control of her mental faculties at the time of the sale. The notary !ublic who inter+iewed her$ testified that when he talCed to audencia before !re!aring the deed of sale$ she answered correctly and he was con+inced that audencia was mentally fit and Cnew what she was doing. ) (33, Dndue in&luence de&ined+ circumstances considered? Article
'rticle 1333 of the -i+il -ode !ro+ides that <there is undue influence when a !erson taCes im!ro!er ad+antage of his !ower o+er the will of another$ de!ri+ing the latter of a reasonable freedom of choice. The following circumstances shall be considered4 confidential$ family$ s!iritual$ and other relations between the !arties$ or the fact that the !erson alleged to ha+e been unduly influenced was suffering from mental weaCness$ or was ignorant or in financial distress.= . Dndue in&luence case-to-case basis? 7lements *ndue influence de!ends u!on the circumstances of each case and not on bare academic rules. "or undue influence to be established to Austify the cancellation of an instrument$ three elements must be !resent4 (a) a !erson who can be influencedG (b) the fact that im!ro!er influence was e2ertedG (c) submission to the o+erwhelming effect of such unlawful conduct. (0 Con&idential or &iduciary relationshi" :n the absence of a confidential or fiduciary relationshi! between the !arties$ the law does not !resume that one !erson e2ercised undue influence u!on the other. ' confidential or fiduciary relationshi! may include any relation between !ersons$ which allows one to dominate the other$ with the o!!ortunity to use that su!eriority to the other?s disad+antage. :ncluded are those of attorney and client$ !hysician and !atient$ nurse and in+alid$ !arent and child$ guardian and ward$ member of a church or
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sect and s!iritual ad+iser$ a !erson and his confidential ad+iser$ or whene+er a confidential relationshi! e2ists as a fact. To !ro+e a confidential relationshi! from which undue influence may arise$ the relationshi! must reflect a dominant$ o+ermastering influence which controls o+er the de!endent !erson. :n the !resent case$ that audencia looCed after 7omana in her old age is not sufficient to show that the relationshi! was confidential.
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(etitioners failed to show that 7omana used her aunt?s reliance u!on her to taCe ad+antage or dominate her and dictate that she sell her land. (( Dndue in&luence cannot be in&erred &rom a$e+ sickness+ or debility o& body *ndue influence is not to be inferred from age$ sicCness$ or debility of body$ if sufficient intelligence remains. :n the !resent case. !etitioners ne+er rebutted the testimony of the notary !ublic that he obser+ed audencia still alert and shar!. (2 Solicitation+ im"ortunity+ ar$ument+ and "ersuasion not undue in&luence :n 5a4e0 v. Court of Appeals$ &0' SCRA %0 [%'$4](, it was held that solicitation$ im!ortunity$ argument$ and !ersuasion are not undue influence. ' contract is not to be set aside merely because one !arty used these means to obtain the consent of the other. :n /artine0 v. <ong;ong an$ 'hanghai 5an; &%0 *+il. 202 [%'%0](, that influence obtained by !ersuasion$ argument$ or by a!!eal to the affections is not !rohibited either in law or morals$ and is not obno2ious e+en in courts of e9uity. :n the !resent case$ absent any !roof that 7omana e2erted undue influence$ the !resum!tion is that she did not. (3 8ssue cannot be raised &or the &irst time on a""eal ,esion was not an issue raised before the lower courts. 'n issue which was neither a+erred in the com!laint nor raised in the court below$ cannot be raised for the first time on a!!eal. To do so would be offensi+e to the basic rules of fair !lay. (* Grounds o& simulated sale and inade=uacy o& the "rice not reconcilable (etitioners seem to be unsure whether they are assailing the sale of ,ot 11;%'%1 for being absolutely simulated or for inade9uacy of the !rice. These two grounds are irreconcilable. :f there e2ists an actual consideration for transfer e+idenced by the alleged act of sale$ no matter how inade9uate it be$ the transaction could not be a <simulated sale.= 5o re+ersible error was thus committed by the -ourt of '!!eals in refusing to annul the 9uestioned sale for alleged inade9uacy of the !rice. '/,0 5uzon .#o/e#age v. !a#iti6e, 81 SCRA 300 &%'$8( '/)0 Macondray vs 7usta=uio 'G # No *35)3 6uly (5+ (.3, 0 "irst )i+ision$ :m!erial (.)4 0 concur 3actsH Macondray Q -o. :nc. sold *rbano Busta9uio a )e #oto car$ #edan$ for the !rice of which$ (;8;$ he e2ecuted in its fa+or the note of 22 May 183&. *nder the note$ Busta9uio undertooC to !ay the car in 12 monthly installments with 12I interest !er annum$ liCewise agreed that$ should he fail to !ay any monthly installment together with interest$ the remaining installments would become due and !ayable$ and Busta9uio shall !ay 20I u!on the !rinci!al owing as attorney?s fees$ e2!enses of collection which the !laintiff might incur$ and the costs. To guarantee the !erformance of his obligations under the note$ Busta9uio on the same date mortgaged the !urchased car in fa+or of Macondray$ and bound himself under the same condition sti!ulated in the note relati+e to the monthly installments$ interest$ attorney?s fees$ e2!enses of collection$ and costs. The mortgaged deed was registered on 11 .une 183&$ in the office of the register of deeds of the (ro+ince of 7izal. 6n the 22nd of the same month$ Busta9uio !aid (&3.3; u!on the first installment$ and thereafter failed to !ay any of the remaining installments. :n accordance with the terms of the mortgage$ Macondray called u!on the sheriff to taCe !ossession of the car$ but Busta9uio refused
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to yield !ossession thereof. >hereu!on$ Macondray brought the re!le+in sought and thereby succeeded in getting !ossession of the car. The car was sold at !ublic auction to Macondray for (2;0$ the latter incurring legal e2!enses in the
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amount of (10.0@. Macondray brought the action against Busta9uio to obtain the !ossession of an automobile mortgaged by the latter$ and to reco+er the balance owing u!on a note e2ecuted by him$ the interest thereon$ attorney?s fees$ e2!enses of collection$ and the costs ('ccording to the li9uidation filed by Macondray$ Busta9uio was still indebted in the amount of (3&2.20$ interest at 12I from 20 5o+ember 183&$ (110.2; as attorney?s fees$ and the costs.). Busta9uio was duly summoned$ but he failed to a!!ear or file his answer$ wherefore$ he was declared in default. #till$ the -": Manila dismissed the com!laint$ without costs. 1ence$ the a!!eal by Macondray. The #u!reme -ourt affirmed the a!!ealed Audgment$ with the costs against Macondray and -o. ( Non-a""earance by de&endant does not im"ly a Baiver o& ri$hts e4ce"ts those o& bein$ heard and o& "resentin$ evidence in his &avor? Court did not err in a""lyin$ Act *(22 *nder section 12@ of the -ode of -i+il (rocedure$ the Audgment by default against a defendant who has neither a!!eared nor filed his answer does not im!ly a wai+er of rights e2ce!t that of being heard and of !resenting e+idence in his fa+or. :t does not im!ly admission by the defendant of the facts and causes of action of the !laintiff$ because the codal section re9uires the latter to adduce his e+idence in su!!ort of his allegations as an indis!ensable condition before final Audgment could be gi+en in his fa+or. 5or could it be inter!reted as an admission by the defendant that the !laintiff?s causes of action find su!!ort in the law or that the latter is entitled to the relief !rayed for. &C+a""in vs. !c)a88en, 4% A#/., 42D :o+nson vs. *ie#ce, %2 A#/., 0''D !ay8en vs. :o+nson, 0' ;a., %00D *eo. vs. Rust, 2'2 -ll., 4%2D !a8ison County vs. S6it+, '0 -ll., 328D >een vs. 5ei,ol8, 2%% -ll. A., %13D C+icago etc. Elect#ic R. Co. vs. >#e6,el, %%1 -ll. A., 203.( Thus$ the defendant did not wai+e the a!!lication by the court of 'ct &122. 2 Act *(22 valid? Conclusion in Manila %radin$ vs #eyes sustained :n Manila Trading Q #u!!ly -o. +s. 7eyes (02 (hil.$ &01)$ the +alidity of the 'ct &122 was already !assed u!on when it was 9uestioned for the same reasons ad+anced$ i.e. that it taCes !ro!erty without due !rocess of law$ denies the e9ual !rotection of the laws$ and im!airs the obligations of contract$ thereby +iolating the !ro+isions of section 3 of the 'ct of The *nited #tates -ongress of 28 'ugust 1810$ Cnown as the .ones ,aw. 's Macondray$ through counsel$ ad+anced no new arguments which ha+e not already been considered in the 7eyes case$ there is no reason for reaching a different conclusion. The law seeCs to remedy an e+il which the ,egislature wished to su!!ressG this legislati+e body has !ower to !romulgate the law. The law does not com!letely de!ri+e +endors on the installment basis of a remedy$ but re9uires them to elect among three alternati+e remedies. The law$ on the other hand$ does not com!letely e2onerate the !urchasers$ but only limits their liabilities. "inally$ there is no +ested right when a !rocedural law is in+ol+ed$ wherefore the ,egislature could enact 'ct &122 without +iolating the organic law. 3 Manila %radin$ vs #eyes? Validity o& act solely one o& constitutional "oBer? Motive or results irrelevant The 9uestion of the +alidity of an act is solely one of constitutional !ower. Uuestions of e2!ediency$ of moti+e$ or of results are irrele+ant. 5e+ertheless it is not im!ro!er to in9uire as to the occasion for the enactment of a law. The legislati+e !ur!ose thus disclosed can then ser+e as a fit bacCground for constitutional in9uiry.
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* *(22
Manila %radin$ vs #eyes? !ur"ose o& Act
'ct &122 aims to correct a social and economic e+il$ the inordinate lo+e for lu2ury of those who$ without sufficient means$ !urchase !ersonal effects$ and the ruinous !ractice of some commercial houses of !urchasing bacC the goods sold for a nominal !rice besides Cee!ing a !art of the !rice already !aid and collecting the balance$ with sti!ulated interest$ costs$ and attorney?s fees. 's a conse9uence$ the +endor does not only reco+er the goods sold$ used hardly 2 months !erha!s with only slight wear and tear$ but also collects
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the entire sti!ulated !urchase !rice$ !robably swelled u! ;0I including interest$ costs$ and attorney?s fees. This !ractice is worse than usurious in many instances. 'nd although$ of course$ the !urchaser must suffer the conse9uences of his im!rudence and lacC of foresight$ the chastisement must not be to the e2tent of ruining him com!letely and$ on the other hand$ enriching the +endor in a manner which shocCs the conscience. The obAect of the law is highly commendable. / Manila %radin$ vs #eyes+ citin$ <achrach Motor vs Millan? !ur"ose o& amendment The !rinci!al obAect of the amendment was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. The amendment !re+ents mortgagees from seizing the mortgaged !ro!erty$ buying it at foreclosure sale for a low !rice and then bringing suit against the mortgagor for a deficiency Audgment. The almost in+ariable result of this !rocedure was that the mortgagor found himself minus the !ro!erty and still owing !ractically the full amount of his original indebtedness. *nder this amendment the +endor of !ersonal !ro!erty$ the !urchase !rice of which is !ayable in installments$ has the right to cancel the sale or foreclose the mortgage if one has been gi+en on the !ro!erty. >hiche+er right the +endor elects he need not return to the !urchaser the amount of the installments already !aid$ <if there be an agreement to that effect.= "urthermore$ if the +endor a+ails himself of the right to foreclose the mortgage this amendment !rohibits him from bringing an action against the !urchaser for the un!aid balance. *nder the amendment$ in$ all !roceedings for the foreclosure of chattel mortgages$ e2ecuted on chattels which ha+e been sold on the installment !lan$ the mortgagee is limited to the !ro!erty included in the mortgage. (/achrach Motor -o. +s. Millan K183;L$ 01 (hil.$ &08.) 5 Manila %radin$ vs #eyes? DS 6uris"rudence+ ()., Act "assed in State o& Jashin$ton not controllin$ :n 1@83$ an 'ct was !assed in the #tate of >ashington which !ro+ided <that in all !roceedings for the foreclosure of mortgages hereafter e2ecuted$ or on Audgments rendered u!on the debt thereby secured$ the mortgagee or assignee shall be limited to the !ro!erty included in the mortgage.= :t was held by a di+ided court of three to two that the statute since limiting the right to enforce a debt secured by mortgage to the !ro!erty mortgaged$ whether realty or chattels$ was an undue restraint u!on the liberty of a citizen to contract with res!ect to his !ro!erty rights. /ut as is readily a!!arent$ the >ashington law and the (hili!!ine law are radically different in !hraseology and in effect. ()ennis +s. Moses K1@8@L$ &0 ,. 7. '.$ 302.) , Manila %radin$ vs #eyes? DS 6uris"rudence+ Act "assed in State o& 2re$on not controllin$ :n 6regon$ in a decision of a later date$ an 'ct abolishing deficiency Audgments u!on the foreclosure of mortgages to secure the un!aid balance of the !urchase !rice of real !ro!erty was unanimously sustained by the #u!reme -ourt of that #tate. The im!ortance of the subAect matter in that Aurisdiction was re+ealed by the fact that four se!arate o!inions were !re!ared by the Austices !artici!ating$ in one of which Mr. .ustice .ohns$ shortly thereafter to become a member of this court$ concurred. 1owe+er$ it is but fair to state that one of the reasons !rom!ting the court to u!hold the law was the financial de!ression which had !re+ailed in that #tate. >hile in the (hili!!ines$ the court can taCe Audicial notice of the stringency of finances that !resses u!on the !eo!le$ there is no reason to belie+e that this was the reason which moti+ated the enactment of 'ct &122. (>right +s. >imberley K1818L$ 1@& (ac.$ 3&0). ) Manila %radin$ vs #eyes? DS 6uris"rudence+ <ron:on vs >in:ie :n the case of /ronzon +s. Einzie K1@&3L$ 1 1ow.$ 311)$ decided by the #u!reme -ourt of the *nited
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#tates$ the -ourt had under consideration a law !assed in the #tate of :llinois$ which !ro+ided that the e9uitable estate of the mortgagor should not be e2tinguished for 12 months after sale on decree$ and which !re+ented any sale of the mortgaged !ro!erty unless 2D3 of the amount at which the !ro!erty had been +alued by a!!raisers should be bid therefor. The court declared that <Mortgages made since the !assage of these laws must undoubtedly be go+erned by themG for e+ery #tate has the !ower to describe the legal and e9uitable obligations of a contract to be made and e2ecuted within its Aurisdiction. :t may e2em!t any !ro!erty it thinCs !ro!er from sale for the !ayment of a debtG and may im!ose such conditions and restrictions u!on the creditor
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as its Audgment and !olicy may dictate. 'nd all future contracts would be subAect to such !ro+isionsG and they would be obligatory u!on the !arties in the courts of the *nited #tates$ as well as in those of the #tate.= . Manila %radin$ vs #eyes? DS 6uris"rudence+ !arties have no vested ri$ht in "articular remedies or modes o& "rocedure (arties ha+e no +ested right in !articular remedies or modes of !rocedure$ and the legislature may change e2isting remedies or modes of !rocedure without im!airing the obligation of contracts$ !ro+ided an efficacious remedy remains for enforcement. /ut changes in the remedies a+ailable for the enforcement of a mortgage may not$ e+en when !ublic !olicy is in+oCed as an e2cuse$ be !ressed so far as to cut down the security of a mortgage without moderation or reason or in a s!irit of o!!ression. (/rotherhood of 'merican Feoman +s. Manz K1822L$ 200 (ac.$ &03G 6shCosh >aterworCs -o. +s. 6shCosh K180@L$ 1@3 *. #.$ &33G >. /. >orthen -o. +s. Ea+anaugh K183;L$ 38 *. #. #u!reme -ourt 'd+ance 6!inions$ 03@.) (0 Manila %radin$ vs #eyes? Chattel Mort$a$e ;aB does not "rovide &or de&iciency @ud$ment u"on &oreclosure o& mort$a$e :n the (hili!!ines$ the -hattel Mortgage ,aw did not e2!ressly !ro+ide for a deficiency Audgment u!on the foreclosure of a mortgage. :ndeed$ it re9uired decisions of the -ourt to authorize such a !rocedure. (/anC of the (hili!!ine :slands +s. 6lutanga ,umber -o. K182&L$ &3 (hil.$ 20G Manila Trading Q #u!!ly -o. +s. Tamaraw (lantation -o.$ su!ra.) /ut the !ractice became uni+ersal enough to ac9uire the force of direct legislati+e enactment regarding !rocedure. To a certain e2tent the ,egislature has now disauthorized the !ractice$ but has left a sufficient remedy remaining. (( Manila %radin$ vs #eyes? #emedies available to vendor Bho has sold "ersonal "ro"erty on installment "lan? <asis o& remedies Three remedies are a+ailable to the +endor who has sold !ersonal !ro!erty on the installment !lan. (1) 1e may elect to e2act the fulfillment of the obligation. (/achrach Motor -o. +s. Millan$ su!ra.) (2) :f the +endee shall ha+e failed to !ay two or more installments$ the +endor may cancel the sale. (3) :f the +endee shall ha+e failed to !ay two or more installments$ the +endor may foreclose the mortgage$ if one has been gi+en on the !ro!erty. The basis of the first o!tion is the -i+il -ode. The basis of the last two o!tions is 'ct &122$ amendatory of the -i+il -ode. 'nd the !ro+iso to the right to foreclose is$ that if the +endor has chosen this remedy$ he shall ha+e no further action against the !urchaser for the reco+ery of any un!aid balance owing by the same. :n other words$ as we see it$ the 'ct does no more than 9ualify the remedy. (2 Manila %radin$ vs #eyes? -etermination o& constitutional issues+ all doubts resolve in the "resum"tion to their validity Most constitutional issues are determined by the court?s a!!roach to them. The !ro!er a!!roach in cases of this character should be to resol+e all !resum!tions in fa+or of the +alidity of an act in the absence of a clear conflict between it and the constitution. 'll doubts should be resol+ed in its fa+or. (3 Manila %radin$ vs #eyes? !ublic "olicy de&ined and established by le$islature+ courts to "er"etuate "olicy The controlling !ur!ose of 'ct &122 is re+ealed to be to close the door to abuses committed in connection with the foreclosure of chattel mortgages when sales were !ayable in installments. That !ublic !olicy$ ob+ious from the statute$ was defined and established by legislati+e authority. :t is for the courts to !er!etuate it.
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(* Manila %radin$ vs #eyes? ;e$islature may chan$e @udicial methods and remedies &or the en&orcement o& contracts The ,egislature may change Audicial methods and remedies for the enforcement of contracts$ as it has done by the enactment of 'ct &122$ without unduly interfering with the obligation of the contract$ without sanctioning class legislation$ and without a denial of the e9ual !rotection of the laws.
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(/ 8nter"retation o& laBs+ 8ntent o& le$islature? #estriction o& meanin$ o& Iun"aid balanceK should be e4"ressly stated The !ro+ision <1owe+er$ if the +endor has chosen to foreclose the mortgage he shall ha+e no further action against the !urchaser for the reco+ery of any un!aid balance owing by the same$ and any agreement to the contrary shall be null and +oid$= is the subAect of the inter!retation. The !aragra!h$ as its language shows$ refers to the mortgage contract e2ecuted by the !arties$ whereby the !urchaser mortgages the chattel sold to him on the installment basis in order to guarantee the !ayment of its !rice$ and the words <any un!aid balance= should be inter!reted as ha+ing reference to the deficiency Audgment to which the mortgagee may be entitled where$ after the mortgaged chattel is sold at !ublic auction$ the !roceeds obtained therefrom are insufficient to co+er the full amount of the secured obligations which$ in the case at bar as shown by the note and by the mortgage deed$ include interest on the !rinci!al$ attorney?s fees$ e2!enses of collection$ and the costs. The fundamental rule which should go+ern the inter!retation of laws is to ascertain the intention and meaning of the ,egislature and to gi+e effect thereto. (#ec. 2@@$ -ode of -i+il (rocedureG *. #. +s. Toribio$ 1; (hil.$ @;G *. #. +s. 5a+arro$ 18 (hil.$ 13&G )e .esus +s. -ity of Manila$ 28 (hil.$ 33G /orromeo +s. Mariano$ &1 (hil.$ 322G (eo!le +s. -once!cion$ && (hil.$ 120.) >ere it the intention of the ,egislature to limit its meaning to the un!aid balance of the !rinci!al$ it would ha+e so stated. '/.0 Manila #acin$ Club vs Manila 6ockey Club 'G # No ;-*5/33 2ctober 2)+ (.3. 0 Bn /anc$ '+ancena (.)4 0 concur 3actsH 6n 1@ #e!tember 1830$ 7afael .. -am!os entered into a contract with the Manila .ocCey -lub$ an unregistered !artnershi!$ whereby he !urchased from it the !arcel of land described in T-T @32& with its im!ro+ements$ the good%will$ and certain !ersonal !ro!erty. The !rice agreed u!on in this transaction is (1$200$000 ((;0$000 u!on the signing of the contractG (;0$000 on or before 2@ #e!tember 1830G (300$000 on or before 2& )ecember 1830G (200$000 on or before 2& March 1833G and (000$000 on or before 2& #e!tember 1833). :t was agreed that should the !urchaser fail to !ay the amount corres!onding to each installment in due time$ the +endor may rescind the contract and Cee! the amounts !aid for itself. 6ne of the clauses of the deed also states that the !urchaser may form a cor!oration called the Manila 7acing -lub$ :nc.$ to whom he may transfer all his rights and obligations under the contract. The !urchaser -am!os made the down !ayment of (;0$000 u!on signing the contract and on 2@ #e!tember 183@ !aid the second installment of (;0$000. 6n 22 6ctober 1830$ the Manila 7acing -lub$ :nc.$ was organized and -am!os transferred to it all his rights and obligations under his contract with the Manila .ocCey -lub. 's the third installment of (300$000 became due on 2& )ecember 1830$ and the !urchaser could not !ay it$ the +endor$ on 11 .anuary 1833$ declared the contract cancelled and Ce!t the amount of (100$000 already !aid. The !urchaser was$ howe+er$ granted an e2tension until 22 .anuary 1833$ to re+i+e the contract by !aying the (300$000$ but ha+ing failed to do this$ the !artners of the +endor ratified on 23 .anuary 1833$ the cancellation of the contract agreed u!on by its board of directors and the forfeiture of the (100$000 !aid by the !urchaser. 6n 23 March 1833 the Manila .ocCey -lub$ :nc.$ was organized and to it were transferred all the !ro!erties$ rights and actions of the Manila .ocCey -lub. 'n action was filed by the Manila 7acing -lub against the Manila .ocCey -lub and its !artners for the reco+ery from them of the forfeited amount of (100$000 and for the !ayment of (;0$000 as damages. The trial court rendered Audgment absol+ing the Manila .ocCey -lub and its !artners.
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The #u!reme -ourt affirmed the a!!ealed Audgment$ with the costs against the Manila 7acing -lub. ( Clause re&errin$ to &or&eiture o& amounts "aid valid+ not contrary to laB+ morals or "ublic order? !ur"ose o& a "enal clause
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The clause regarding the forfeiture of what has been !artially !aid is +alid. :t is in the nature of a !enal clause which may be legally established by the !arties (articles 11;2 and 12;; of the -i+il -ode). :n its double !ur!ose of insuring com!liance with the contract and of otherwise measuring beforehand the damages which may result from non%com!liance$ it is not contrary to law$ morals or !ublic order because it was +oluntarily and Cnowingly agreed u!on by the !arties. Viewing concretely the true effects thereof in the !resent case$ the amount forfeited constitutes only @I of the sti!ulated !rice$ which is not e2cessi+e if considered as the !rofit which would ha+e been obtained had the contract been com!lied with. There is e+idence that the Manila .ocCey -lub$ because of the contract with -am!os$ had to reAect other !ro!ositions to buy the same !ro!erty. 't any rate$ the !enal clause does away with the duty to !ro+e the e2istence and measure of the damages caused by the breach. 2 Alle$ation that Manila 6ockey Club res"onsible &or non-com"liance Bith contract not @usti&ied The allegation that the Manila .ocCey -lub was res!onsible for the non%com!liance with the contract is not Austified. There is no sufficient e+idence that the maAority of the members of the Manila .ocCey -lub !romised to subscribe to one%half of the shares of Manila 7acing -lub$ and for failure to li+e u! to this !romise$ the money to !ay the third installment of (300$000 could not be raised. -am!os himself attributes the failure to !ay the third installment to the fact that the !ublic$ due to the state of the stocC marCet$ did not res!ond to the e2!ectations of the incor!orators of the Manila 7acing -lub. /ut it seems that e+en this is not the cause of the breach$ for on the date the third installment became due$ the Manila 7acing -lub had subscribed shares of its ca!ital stocC in the amount of (000$000$ !aid in !art and the remainder !ayable on demand. The deduction from all this is that the breach of the contract cannot be attributed to the Manila .ocCey -lub and$ much less$ to the com!any which$ it is also alleged$ the defendants brought into being to defeat the organization of the Manila 7acing -lub. '500 Ma"alo v Ma"alo 'G # No ;-2(*). and ;-2(52) May (.+ (.55 0 Bn /anc$ /engzon .( (.)4 10 concur 3actsH #!ouses Miguel Ma!alo and -andida Uuiba$ sim!le illiterate farmers$ were registered owners of a 1$03; s9.ms. residential land in Manaoag$ (angasinan (6-T &0;03). The s!ouses%owners$ out of lo+e and affection for Ma2imo Ma!alo$ brother of Miguel who was about to get married$ decided to donate the eastern half of the land to him. 6-T &0;03 was deli+ered. 's a result$ howe+er$ they were decei+ed into signing$ on 1; 6ctober 1830$ a deed of absolute sale o+er the entire land in his fa+or. Their signature thereto were !rocured by fraud$ i.e. they were made to belie+e by Ma2imo Ma!alo and the attorney who acted as notary !ublic who <translated= the document$ that the same was a deed of donation in Ma2imo?s fa+or co+ering P (the eastern half) of their land. 'lthough the document of sale stated a consideration of (;00$ the s!ouses did not recei+e anything of +alue for the land. The attorney?s misbeha+ior was the subAect of an in+estigation but its result does not a!!ear on record. "ollowing the e2ecution of the document the s!ouses immediately built a fence of !ermanent structure in the middle of their land segregating the eastern !ortion from its western !ortion. #aid fence still e2ists. The s!ouses ha+e always been in continued !ossession o+er the western half of the land u! to the !resent. *nCnown to them$ Ma2imo Ma!alo$ on 1; March 183@$ registered the deed of sale in his fa+or and obtained in his name T-T 12@28 o+er the entire land. 13 years later$ on 20 6ctober 18;1$ he sold for (2$;00.00 said entire land in fa+or B+aristo$ (etronila$ (acifico and Miguel 5arciso. The sale to the 5arcisos was in turn registered on ; 5o+ember 18;1 and T-T 113;0 was issued for the whole land in their names. The 5arcisos tooC !ossession only of the eastern !ortion of the land in 18;1$ after the sale in their fa+or was made. 6n 3 "ebruary 18;2 the 5arcisos filed suit in the -": (angasinan (-i+il -ase 11881) to be declared owners of the entire landG for !ossession of its western !ortionG for damagesG and for rentals. :t was brought against the
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Ma!alo s!ouses as well as against "loro
uieb and 7osalia Ma!alo
uieb who had a house on the western
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!art of the land with the consent of the s!ouses Ma!alo and Uuiba. The Ma!alo s!ouses filed their answer with a counterclaim on 13 March 18;2$ seeCing cancellation of the T-T of the 5arcisos as to the western half of the land$ on the grounds that their signatures to the deed of sale of 1830 were !rocured by fraud and that the 5arcisos were buyers in bad faith. They asCed for recon+eyance to them of the western !ortion of the land and issuance of a T-T in their names as to said !ortion. :n addition$ the Ma!alo s!ouses filed on 10 )ecember 18;3 their own com!laint in the -": (angasinan (-i+il -ase *%133) against the the 5arcisos and Ma2imo Ma!alo. They asCed that the deeds of sale of 1830 and of 18;1 o+er the land in 9uestion declared null and +oid as to the western half of said land. .udge 'mado #antiago of the -": (angasinan located in the munici!ality of *rdaneta the two cases Aointly. #aid court rendered Audgment on 1@ .anuary 1801 dismissing the com!laint in -i+il -ase 11881$ declaring the deed as that of donation only o+er the eastern half !ortion of the land$ and as null and +oid with res!ect to the western half !ortion thereof$ declaring T-T 12@28 issued to Ma2imo Ma!alo as regards the western !ortion of the land null and +oid and without legal force as well as T-T 113;0 subse9uently issued to the 5arcisos$ ordering the Ma!alo s!ouses and the 5arcisos to ha+e the land subdi+ided by a com!etent land sur+eyor$ the e2!enses of which to be borne out by the !arties !ro%rata$ ordering the 7egister of )eed to issue in lieu of T-T 113;0 two new titles u!on com!letion of the subdi+ision !lan (one in fa+or of the Ma!alo s!ouses for the western !ortion$ and one for the 5arcisos co+ering the eastern half)$ and ordering Ma2imo Ma!alo and the 5arcisos to !ay the costs. The 5arcisos a!!ealed to the -ourt of '!!eals. :n its decision on 2@ May 1803$ the -ourt of '!!eals re+ersed the .udgment of the -":$ solely on the ground that the consent of the Ma!alo s!ouses to the deed of sale of 1830 ha+ing been obtained by fraud$ the same was +oidable$ not +oid ab initio$ and$ therefore$ the action to annul the same$ within & years from notice of the fraud$ had long !rescribed. :t recConed said notice of the fraud from the date of registration of the sale on 1; March 183@. The -": and the -' are therefore unanimous that the s!ouses Ma!alo and Uuiba were definitely the +ictims of fraud. :t was only on !rescri!tion that they lost in the -ourt of '!!eals. "rom said decision of the -ourt of '!!eals$ the Ma!alo s!ouses a!!ealed to the -ourt. The #u!reme -ourt re+ersed and set aside the decision of the -ourt of '!!eals$ and rendered another affirming in toto the Audgment of the -":$ with attorneys? fees on a!!eal in fa+or of the Ma!alo #!ouses in the amount of (1$000.00$ !lus the costs$ both against Ma2imo Ma!alo and the 5arcisos. ( Contract? #e=uisites *nder the -i+il -ode$ either old or the new$ for a contract to e2ist at all$ three essential re9uisites must concur4 (1) consentG (2) obAect$ and (3) cause or consideration. 2 7astern hal& donated? 3indin$ o& the loBer court as to the donation not assailed and thus is &inal 's regards the eastern !ortion of the land$ the Ma!alo s!ouses are not claiming the same$ it being their stand that they had donated and freely gi+en said half of their land to Ma2imo Ma!alo. 'nd since they did not a!!eal from the decision of the trial court finding that there was a +alid and effecti+e donation of the eastern !ortion of their land in fa+or of Ma2imo Ma!alo$ the same !ronouncement has become final as to them$ rendering it no longer !ro!er herein to e2amine the e2istence$ +alidity or efficacy of said donation as to said eastern !ortion. 3 Contracts Bithout a cause void *nder the -i+il -ode$ be it the old or the new$ is that contracts without a cause or consideration !roduce no effect whatsoe+er. * 2ld Civil Code? Contracts Bith &alse consideration voidable? !rescri"tion o& voidable contracts *nder the 6ld -i+il -ode$ the statement of a false consideration renders the contract +oidable$ unless
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it is !ro+en that it is su!!orted by another real and licit consideration. 'nd it is further !ro+ided by the 6ld -i+il -ode that the action for annulment of a contract on the ground of falsity of consideration shall last &
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years$ the term to run from the date of the consummation of the contract. / 3alse consideration a real consideration but not the one stated in the document 'ccording to Manresa$ what is meant by a contract that states a false consideration is one that has in fact a real consideration but the same is not the one stated in the document. (<The difference between simulation and the contract with fraudulent intention (!ur!ose). This$ although illicit is realG but the first is false in fact$ although it a!!ears to be real.= KManresa$ -i+il -ode Volume V:::$ +ol. ::$ !. 3;&L). 5 2nly a disturbed man Bould contract Bithout cause? 3alse cause vitiates consent and annuls contract FSanche: #omanG The ins!ection of cause in the contract is necessary$ and that without it they are nullG it can only be concei+ed that a disturbed man would$ in his reason$ contract without cause. "or the same reason of the necessity of ins!ection of cause in the contract$ it is !recise that such is real and not su!!osed$ as it !retends or a!!ears. The falsification of the cause +itiates the consent and annuls the contract$ that is$ not only as a doctrine undoubtedly of scientific law$ but also of old laws of -astile$ that in multitude of laws that declare it.= (#anchez 7oman$ -i+il 7ight$ Volume :V$ !. 200.) , No consideration does not mean &alse consideration &or Article (2,5 to be a""lied >here there was in fact no consideration$ the statement of one in the deed will not suffice to bring it under the rule of 'rticle 1230 of the 6ld -i+il -ode as stating a false consideration. ) 2ceio !ere: v 3lores a""lies? Contract null and void i& Bithout cause or consideration The ruling of the -ourt in 6ceAo (erez Q -o. +s. "lores (&0 (hil. 821)$ is s9uarely a!!licable herein. :n that case$ it was ruled that a contract of !urchase and sale is null and +oid and !roduces no effect whatsoe+er where the same is without cause or consideration in that the !urchase !rice which a!!ears thereon as !aid has in fact ne+er been !aid by the !urchaser to the +endor. . Void contract incurable and cannot be sub@ect o& "rescri"tion The ine2istence of a contract is !ermanent and incurable and cannot be the subAect of !rescri!tion. The none2istence is !er!etual and irre!laceable not being able to be obAect of confirmation nor !rescri!tion. 's held in )ugenio vs. Per$i$o (83 (hil. &1$ &2%&3 K1832L)$ it was stated that <under the e2isting classification$ such contract would be Hine2istent? and Hthe action or defense for declaration? of such ine2istence Hdoes not !rescribe?. ('rt. 1&10$ 5ew -i+il -ode.) >hile it is true that this is a new !ro+ision of the 5ew -i+il -ode$ it is ne+ertheless a !rinci!le recognized since i,ton vs. Eelasco (0 (hil. 03) that Hmere a la!se of time cannot gi+e efficacy to contracts that are null and +oid?. (0 Narcisos not "urchasers in $ood &aith :t has been !ositi+ely shown by the undis!uted testimony of -andida Uuiba that (acifico 5arciso and B+aristo 5arciso stayed for some days on the western side of the land until their house was remo+ed in 18&0 by the s!ouses Ma!alo. 'lso$ (acifico 5arciso admitted in his testimony that when they bought the !ro!erty$ Miguel Ma!alo was still in the !remises in 9uestion (western !art) which he is occu!ying and his house is still standing thereon. Moreo+er$ (acifico 5arciso when !resented as a rebuttal and sub% rebuttal witness categorically declared that before buying the land in 9uestion he went to the house of s!ouses Ma!alo and asCed them if they will !ermit Ma2imo Ma!alo to sell the !ro!erty. "urther$ as the !arties in the cases are neighbors (e2ce!t Ma2imo Ma!alo)$ it is clear that the 5arcisos were aware of the e2tent of the interest of Ma2imo Ma!alo o+er the land before and after the e2ecution of the deed of sale.
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*nder the situation$ thus$ the 5arcisos may be considered in +alue but certainly not as !urchasers in good faith. (( No need to remand case to trial court as &acts o& trial court sustained by Court o& A""eals 's the -ourt of '!!eals declared that <on the merits$ the a!!ealed decision called ha+e been u!held under 'rticle 1332 of -i+il -ode and the following authorities4 'yola +s. Valderrama ,umber Manufacturers
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-a.$ :nc.$ &8 6 8@0$ 8@2G Tras!orte /eltran$ ;1 6 1&3&$ 1&3;G -ortez +s. -ortez$ -'% 1@&;1%7$ 'ugust @$ 1801G -astilllo +s. ,aberinto$ -'% .7. 5o. 1@11@%7$ )ecember 20$ 1801G and 13 -. .. 332%333$ as well as the se+eral facts and circumstances a!!reciated by the trial court as su!!orting the Ma!alo s!ouses? case$= it thus sustained J barring only its ruling on !rescri!tion J the Audgment and findings of the trial court$ including that of bad faith on the !art of the 5arcisos in !urchasing the land in 9uestion. The #u!reme -ourt thus do not see the need to further remand the case to the -ourt of '!!eals for a ruling on the !oint in the e+ent that the 1830 contract is held to be ine2istent as regards the western !ortion of the land. (2 <ad &aith @usti&ies aBard o& attorneyMs &ees :n +iew of the 5arcisos? bad faith under the circumstances we deem it Aust and e9uitable to award$ in the Ma!alo s!ouses? fa+or$ attorneys? fees on a!!eal$ in the amount of (1$000.00 as !rayed for in the counterclaim. '5(0 Mate v CA 'G # Nos (20,2*-2/ May 2(+ (..) 0 #econd )i+ision$ Martinez (.)4 & concur 3actsH 6n 0 6ctober 18@0 .osefina 7. 7ey and :nocencio Tan went to the residence of "ernando Mate at Tacloban -ity. .osie who is a cousin of Mate?s wife solicited his hel! to sta+e off her and her family?s !rosecution by Tan for +iolation of /( 22 on account of the rubber checCs that she$ her mother$ sister and brother issued to Tan amounting to (&$&32$003.00. #he re9uested Mate to cede to Tan his 3 lots in Tacloban -ity in order to !lacate him. 6n hearing .osie?s !ro!osal$ he immediately reAected it as he owed Tan nothing and he was under no obligation to con+ey to him his !ro!erties. "urthermore$ his lots were not for sale. .osie e2!lained to him that he was in no danger of losing his !ro!erties as he will merely e2ecute a simulated document transferring them to Tan but they will be redeemed by her with her own funds. 'fter a long discussion$ he agreed to e2ecute a fictitious deed of sale with right to re!urchase co+ering his 3 lots$ subAect to the conditions that the amount to be stated in the document is (1$&00$000.00 with interest thereon at ;I a monthG the !ro!erties will be re!urchased within 0 months or on or before & '!ril 18@3G although it would a!!ear in the document that Mate is the +endor$ it is .osie who will !ro+ide the money for the redem!tion of the !ro!erties with her own fundsG and the titles to the !ro!erties will be deli+ered to Tan but the sale will not be registered in the 7egister of )eeds and annotated on the titles. .osie$ to assure Mate that she will redeem the !ro!erties$ issued him 2 /(: checCs both !ostdated 1; )ecember 18@0. 6ne checC was for (1$&00$000.00 su!!osedly for the selling !rice and the other was for (&20$000.00 corres!onding to the interests for 0 months. :mmediately thereafter Mate !re!ared the )eed of #ale with 7ight to 7e!urchase and after it has been signed and notarized$ it was gi+en to Tan together with the titles of the !ro!erties and the latter did not register the transaction in the 7egister of )eeds as agreed u!on. 6n 1& .anuary 18@3$ Mate de!osited the checC for (1$&00$000.00 in his account at the *-(/ and the other checC for (&20$000.00 in his account at Metro/anC !re!aratory to the redem!tion of his !ro!erties. /oth of them were dishonored by the drawee banC for ha+ing been drawn against a closed account. 7ealizing that he was swindled$ he sent .osie a telegram about her checCs and when she failed to res!ond$ he went to Manila to looC for her but she could not be found. Mate returned to Tacloban -ity and filed -riminal -ases @310 and @312 against her for +iolation of /( 22 but the cases were later archi+ed as the accused (.osie) could not be found as she went into hiding. To !rotect his interest$ he filed -i+il -ase 3380 of the 7T- ,eyte (/ranch V::$ Mate +s. 7ey and Tan) for 'nnulment of -ontract with )amages. .osie was declared in default and the case !roceeded against Tan. /ut during the trial the 7T- court asCed Tan to file an action for consolidation of ownershi! of the !ro!erties subAect of the sale and !ursuant thereto he filed -i+il -ase 3;@3 that was consolidated with the case he filed
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earlier which were later decided Aointly by the trial court in fa+or of Tan and was subse9uently a!!ealed to the -ourt of '!!eals. The a!!ellate court$ on 28 'ugust 188& (-'% 7 -V 2@22;%20)$ affirmed the decision with modification that
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Mate is ordered to !ay Tan the sum of (1&0$000 for and as attorney?s feesG with costs against Mate. Thereu!on$ Mate filed a motion to reconsider the decision but it was denied. 1ence$ the !etition for re+iew. The #u!reme -ourt affirmed the decision of the -ourt of '!!eals dated 28 'ugust 188&$ and denied due course to the !etition for re+iew for lacC of merit. ( Consideration e4ist in the -eed o& Sale Bith #i$ht to #e"urchase FSale Bith !acto de #etroG To ensure that he could re!urchase his lots$ Mate got a checC of (1$&00$000.00 from .osie. /y allowing his titles to be in !ossession of Tan for a !eriod of 0 months$ Mate secured from her another checC for (&20$000.00. :t is thus !lain that consideration e2isted at the time of the e2ecution of the deed of sale with right of re!urchase. :t is not only Mate?s Cindness to .osefina$ being his cousin$ but also his recei!t of (&20$000.00 from her which im!elled him to e2ecute such contract. >hile Mate did not recei+e the (1.&M !urchase !rice from Tan$ he had in his !ossession a !ostdated checC of .osie in an e9ui+alent amount !recisely to re!urchase the 2 lots on or before the 0th month. 2 No basis to &ile an action to annul the "acto de retro sale? !ro"er cause o& action is <! 22 a$ainst 6osie? 3ilin$ o& criminal case a tacit admission that there is consideration o& the "acto de retro sale There is absolutely no basis for Mate to file a com!laint against Tan and .osie to annul the !acto de retro sale on the ground of lacC of consideration$ in+oCing his failure to encash the two checCs. Mate?s cause of action was to file criminal actions against .osie under /( 22$ which he did. The filing of the criminal cases was a tacit admission by !etitioner that there was a consideration of the !acto de retro sale. Mate Cnew that he was bound by the deed of sale with right to re!urchase$ as e+idenced by his filing criminal cases against .osie when the two checCs bounced. 3 Sin$son v 8sabela SaBmill does not a""ly Mate?s reliance on the doctrine in #ingson +s. :sabela #awmill &88 SCRA 133, 143(, where the -ourt said that <where one or two innocent !ersons must suffer$ that !erson who ga+e occasion for the damages to be caused must bear conse9uences= is mis!laced. 1e is not an innocent !erson. 's a matter of fact$ he ga+e occasion for the damage caused by +irtue of the deed of sale with right to re!urchase which he !re!ared and signed. Thus$ there is the e9uitable ma2im that between two innocent !arties$ the one who made it !ossible for the wrong to be done should be the one to bear the resulting loss. * %an incurred no &alse "retense? Mate has no one to blame but himsel& &or his mis&ortune? Mate a laByer Tan did not em!loy any de+ious scheme to maCe the former sign the deed of sale. Tan wai+ed his right to collect from .osie by +irtue of the !acto de retro sale. :n turn$ .osie ga+e Mate a !ostdated checC in the amount of (1.&M to ensure that the latter would not lose his two lots. Mate$ a lawyer$ should ha+e Cnown that the transaction was fraught with risCs since .osie and family had a checCered history of issuing worthless checCs. /ut had Mate not agreed to the arrangement$ Tan would not ha+e agreed to wai+e !rosecution of .osie. '!!arently$ it was Mate?s greed for a huge !rofit that im!elled him to accede to the scheme of .osie e+en if he Cnew it was a dangerous undertaCing. >hen he drafted the !acto de retro document$ he threw caution to the winds forgetting that !rudence might ha+e been the better course of action. >hen .osie?s checCs
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bounced$ he should ha+e re!urchased his lots with his own money. :nstead$ he sued not only .osie but also Tan for annulment of contract on the ground of lacC of consideration and false !retenses on their !art. / Contracts ' contract is a contract. 6nce agreed u!on$ and !ro+ided all the essential elements are !resent$ it is +alid and binding between the !arties. '520
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!claug+in v. CA, %44 SCRA 1'3 &%'81( '530 Medina v Collector o& 8nternal #evenue 'G # No ;-(/((3 (.5( 0 Bn /anc$ 7eyes ./, (.)4 0 concur 6anuary 2)+
3actsH 6n 20 May 18&&$ 'ntonio Medina married 'ntonia 7odriguez. /efore 18&0$ the s!ouses had neither !ro!erty nor business of their own. ,ater$ howe+er$ 'ntonio ac9uired forest concessions in the munici!alities of #an Mariano and (alanan$ :sabela. "rom 18&0 to 18&@$ the logs cut and remo+ed by the 'ntonio from his concessions were sold to different !ersons in Manila through his agent$ Mariano 6sorio. :n 18&8$ 'ntonia started to engage in business as a lumber dealer$ and u! to around 18;2$ 'ntonio sold to her almost all the logs !roduced in his #an Mariano concession. 'ntonia$ in turn$ sold in Manila the logs bought from her husband through the same agent$ Mariano 6sorio. The !roceeds were either recei+ed by 6sorio for 'ntonio or de!osited by said agent in 'ntonio?s current account with the (5/. 6n the thesis that the sales made by 'ntonio to his wife were null and +oid !ursuant to the !ro+isions of 'rticle 1&80 of the -i+il -ode of the (hili!!ines$ the -ollector considered the sales made by 'ntonia as 'ntonio?s original sales ta2able under #ection 1@0 of the 5ational :nternal 7e+enue -ode and$ therefore$ im!osed a ta2 assessment on 'ntonio. 6n 30 5o+ember 1803$ 'ntonio !rotested the assessmentG howe+er$ the -ollector insisted on his demand. 6n 8 .uly 18;&$ 'ntonio filed a !etition for reconsideration$ re+ealing for the first time the e2istence of an alleged !remarital agreement of com!lete se!aration of !ro!erties between him and his wife$ and contending that the assessment for the years 18&0 to 18;2 had already !rescribed. 'fter one hearing$ the -onference #taff of the /ureau of :nternal 7e+enue eliminated the ;0I fraud !enalty and held that the ta2es assessed against him before 18&@ had already !rescribed. /ased on these findings$ the -ollector issued a modified assessment$ demanding the !ayment of only (3$32;.0@. 'ntonio again re9uested for reconsideration$ but the -ollector$ in his letter of & '!ril 18;;$ denied the same. 'ntonio a!!ealed to the -ourt of Ta2 '!!eals$ which rendered Audgment u!holding a ta2 assessment of the -ollector of :nternal 7e+enue e2ce!t with res!ect to the im!osition of so%called com!romise !enalties$ which were set aside. 1ence a !etition to re+iew the decision of the -T'. The #u!reme -ourt affirmed the a!!ealed decision with cost against the !etitioner. ( No evidence "rovin$ "re-marital a$reement o& absolute se"aration betBeen the s"ouses 'side from the material inconsistencies in the testimony of !etitioner?s witnesses$ the circumstantial e+idence is against !etitioner?s claim. (1) :t a!!ears that at the time of the marriage between the !etitioner and his wife$ they neither had any !ro!erty nor business of their own$ as to ha+e really urged them to enter into the su!!osed !ro!erty agreement. (2) The testimony that the se!aration of !ro!erty agreement was recorded in the 7egistry of (ro!erty 3 months before the marriage$ is !atently absurd$ since such a !re%nu!tial agreement could not be effecti+e before marriage is celebrated. (3) )es!ite their insistence on the e2istence of the ante% nu!tial contract$ the cou!le$ strangely enough$ did not act in accordance with its alleged co+enantsG but that e+en during their ta2able years$ the ownershi!$ usufruct$ and administration of their !ro!erties and business were in the husband. (&) 'lthough !etitioner already Cnew that 'rticle 1&80 !rohibits sales between s!ouses married under a community system$ it was not until .uly 18;& that the allege the e2istence of the alleged !ro!erty se!aration agreement. (;) The )ay /ooC of the 7egister of )eeds on which the agreement would ha+e been entered$ which was sa+ed from the ra+ages of war$ did not show that
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the document in 9uestion was among those recorded therein. 2 %rial courtMs @ud$ment on the de$ree o& credence o& Bitness considered seriously by the Su"reme Court
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>hen the credibility of witnesses is the one at issue$ the trial court?s Audgment as to their degree of credence deser+es serious consideration by this -ourt &Collecto# vs. .autista, et al., ;. R. 7os. 52%2200, 52 %220', !ay 2$, %'0'(. This is all the more true because not e+ery co!y of the su!!osed agreement$ !articularly the one that was said to ha+e been filed with the -lerC of -ourt of :sabela$ was accounted for as lostG so that$ a!!lying the <best e+idence rule=$ the court did right in gi+ing little or no credence to the secondary e+idence to !ro+e the due e2ecution and contents of the alleged document &see Co66ents on t+e Rules o" Cou#t, !o#an, %'0$ E8., Eol. 3, ,,. %02 %2(. 3 Article , and (0 o& Code o& Commerce does not e4em"t &rom the "rohibition o& sale betBeen s"ouses under Article (*.0 o& the Civil Code 'rticle 3 and 10 of the -ode of -ommerce merely state$ under certain conditions$ a !resum!tion that the wife is authorized to engage in business and for the incidents that flow therefrom when she so engages therein. The transactions !ermitted therein howe+er are those entered into with strangers$ and do not constitute e2ce!tions to the !rohibitory !ro+isions of 'rticle 1&80 against sales between s!ouses. * Government alBays an interested "arty in ta4able transactions The go+ernment is always an interested !arty to all matters in+ol+ing ta2able transactions and 9ualified to 9uestion their +alidity or legitimacy whene+er necessary to blocC ta2 e+asion. :t cannot be contended thus that the -ollector cannot assail the 9uestioned sales$ he being a stranger to said transactions. / Contracts violative o& Article (*.0 null and void -ontracts +iolati+e of the !ro+isions of 'rticle 1&80 of the -i+il -ode are null and +oid &<y Sui *in vs. Cantollas, $0 *+il. 00D <y Co9ue vs. Sioca, 40 *+il. 43(. :n the !resent case$ being +oid transactions$ the sales made by the !etitioner to his wife were correctly disregarded by the -ollector in his ta2 assessments that considered as the ta2able sales those made by the wife through the s!ouses? common agent$ Mariano 6sorio. 5 FQG 8lle$ally obtained documents and "a"ers admissible to evidence? #evenue o&&icers can re=uire "roduction o& books o& accounts and other records &rom ta4"ayers :llegally obtained documents and !a!ers are admissible in e+idence$ if they are found to be com!etent and rele+ant to the case &see Iong F 5ee vs. Collecto# o" -nte#nal Revenue, %04 *+il., 41'( . (etitioner?s im!utation$ that the documentary e+idence is illegally seized$ is +ehemently denied by him$ and relying on #ections 3$ 8$ 333 and 33@ of the Ta2 -ode and the !ertinent !ortions of 7e+enue 7egulations 5o. V%1 and citing this -ourt?s ruling in *.#. +s. '+iado 3@ (hil.$ 10$ the -ollector maintains that he and other internal re+enue officers and agents could re9uire the !roduction of booCs of accounts and other records from a ta2!ayer. '5*0 Melli:a v 8loilo City 'G # No ;-2*,32 A"ril 30+ (.5) 0 Bn /anc$ /engzon .( (.)4 @ concur$ 1 on lea+e 3actsH .uliana Melliza during her lifetime owned$ among other !ro!erties$ 3 !arcels of residential land in :loilo -ity (6-T 3&02). #aid !arcels of land were Cnown as ,ots 5os. 2$ ; and 121&. The total area of ,ot 121& was 28$033 s9. m. 6n 23 5o+ember 1831 she donated to the then Munici!ality of :loilo$ 8$000 s9. m. of ,ot 121&$ to ser+e as site for the munici!al hall. The donation was howe+er re+oCed by the !arties for the
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reason that the area donated was found inade9uate to meet the re9uirements of the de+elo!ment !lan of the munici!ality$ the so% called <'rellano (lan.= #ubse9uently$ ,ot 121& was di+ided by -erteza #ur+eying -o.$ :nc. into ,ots 121&%' and 121&%/. 'nd still later$ ,ot 121&%/ was further di+ided into ,ots 121&%/% 1$ ,ot 121&%/%2 and ,ot 121&%/%3. 's a!!ro+ed by the /ureau of ,ands$ ,ot 121&%/%1$ with &$;02 s9. m.$ became Cnown as ,ot 121&%/G ,ot 121&%/%2$ with 0$0;3 s9. m.$ was designated as ,ot 121&%-G and ,ot 121&%/%3$ with &$13; s9. m.$ became ,ot 121&%). 6n 1; 5o+ember 1832$ .uliana Melliza e2ecuted an instrument
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without any ca!tion !ro+iding for the absolute sale in+ol+ing all of lot ;$ 3008 s9. m. of ,ot 2 (sublots 2%/ and 2%-)$ and a !ortion of 10$3@@ s9. m. of ,ot 121& (sublots 121&%/2 and 121&%/3) in fa+or of the Munici!al o+ernment of :loilo for the sum of (0$&22G these lots and !ortions being the ones needed by the munici!al go+ernment for the construction of a+enues$ !arCs and -ity hall site according the <'rellano !lan.= 6n 1& .anuary 183@$ Melliza sold her remaining interest in ,ot 121& to 7emedios #ian Villanue+a (thereafter T-T 1@13@). 7emedios in turn on & 5o+ember 18&0 transferred her rights to said !ortion of land to (io #ian Melliza (thereafter T-T 2&82). 'nnotated at the bacC of (io #ian Melliza?s title certificate was the following <that a !ortion of 10$3@@ s9. m. of ,ot 121& now designated as ,ots 1&12%/%2 and 121&%/%3 of the subdi+ision !lan belongs to the Munici!ality of :loilo as !er instrument dated 1; 5o+ember 1832.= 6n 2& 'ugust 18&8 the -ity of :loilo$ which succeeded to the Munici!ality of :loilo$ donated the city hall site together with the building thereon$ to the *ni+ersity of the (hili!!ines (:loilo branch). The site donated consisted of ,ots 121&%/$ 121&%- and 121&%)$ with a total area of 1;$3;0 s9. m.$ more or less. #ometime in 18;2$ the *ni+ersity of the (hili!!ines enclosed the site donated with a wire fence. (io #ian Melliza thereu!on made re!resentations$ thru his lawyer$ with the city authorities for !ayment of the +alue of the lot (,ot 121&%/). 5o reco+ery was obtained$ because as alleged by (io #ian Melliza$ the -ity did not ha+e funds. The *ni+ersity of the (hili!!ines$ meanwhile$ obtained Transfer -ertificate of Title 5o. 31;2 co+ering the three lots$ 5os. 121&%/$ 121&%- and 121&%). 6n 10 )ecember 18;; (io #ian Melizza filed an action in the -": :loilo against :loilo -ity and the *ni+ersity of the (hili!!ines for reco+ery of ,ot 121&%/ or of its +alue. 'fter sti!ulation of facts and trial$ the -": rendered its decision on 1; 'ugust 18;3$ dismissing the com!laint. #aid court ruled that the instrument e2ecuted by .uliana Melliza in fa+or of :loilo munici!ality included in the con+eyance ,ot 121&%/$ and thus it held that :loilo -ity had the right to donate ,ot 121&%/ to *(. (io #ian Melliza a!!ealed to the -ourt of '!!eals. 6n 18 May 180;$ the -' affirmed the inter!retation of the -": that the !ortion of ,ot 121& sold by .uliana Melliza was not limited to the 10$3@@ s9uare meters s!ecifically mentioned but included whate+er was needed for the construction of a+enues$ !arCs and the city hall site. 5onetheless$ it ordered the remand of the case for rece!tion of e+idence to determine the area actually taCen by :loilo -ity for the construction of a+enues$ !arCs and for city hall site. 1ence$ the a!!eal by (io #an Melliza to the #u!reme -ourt. The #u!reme -ourt affirmed the decision a!!ealed from insofar as it affirms that of the -":$ and dismissed the com!laintG without costs. ( 8nter"retation o& contract involves =uestion o& laB The inter!retation of the !ublic instrument dated 1; 5o+ember 1832 in+ol+es a 9uestion of law$ since the contract is in the nature of law as between the !arties and their successors in interest. 2 8ntent o& the "arties as to the ob@ect o& the "ublic instrument The !aramount intention of the !arties was to !ro+ide :loilo munici!ality with lots sufficient or ade9uate in area for the construction of the :loilo -ity hall site$ with its a+enues and !arCs. "or this matter$ a !re+ious donation for this !ur!ose between the same !arties was re+oCed by them$ because of inade9uacy of the area of the lot donated. #aid instrument described & !arcels of land by their lot numbers and areaG and then it goes on to further describe$ not only those lots already mentioned$ but the lots obAect of the sale$ by stating that said lots were the ones needed for the construction of the city hall site$ a+enues and !arCs according to the 'rellano !lan. :f the !arties intended merely to co+er the s!ecified lots (,ots 2$ ;$ 121&%- and 121&%))$ there would scarcely ha+e been any need for the ne2t !aragra!h$ since these lots were already !lainly and +ery clearly described by their res!ecti+e lot number and areas. #aid ne2t !aragra!h does not really add to the clear descri!tion that was already gi+en to them in the !re+ious one. :t is therefore the more reasonable inter!retation to +iew it as describing those other !ortions of land contiguous to the lots that$ by reference to the 'rellano !lan$ will be found needed for the !ur!ose at hand$ the construction of the city hall site.
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#e=uirement+ that sale must have a determinate thin$ as ob@ect+ is &ul&illed i& ob@ect o& sale is
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ca"able o& bein$ made determinate at the time o& the contract The re9uirement of the law that a sale must ha+e for its obAect a determinate thing$ is fulfilled as long as$ at the time the contract is entered into$ the obAect of the sale is ca!able of being made determinate without the necessity of a new or further agreement between the !arties ('rt. 1233$ old -i+il -odeG 'rt. 1&00$ 5ew -i+il -ode). The s!ecific mention of some of the lots !lus the statement that the lots obAect of the sale are the ones needed for city hall siteG a+enues and !arCs$ according to the 'rellano !lan$ sufficiently !ro+ides a basis$ as of the time of the e2ecution of the contract$ for rendering determinate said lots without the need of a new and further agreement of the !arties. * Arellano "lan in e4istence since (.2)? Area o& land needed &or the city hall site knoBn The 'rellano !lan was in e2istence as early as 182@. Tthe !re+ious donation of land for city hall site on 23 5o+ember 1831 was re+oCed on 0 March 1832 for being inade9uate in area under said 'rellano !lan. The area needed under that !lan for city hall site was then already CnownG that the s!ecific mention of some of the lots co+ered by the sale in effect fi2ed the corres!onding location of the city hall site under the !lanG that$ therefore$ considering the said lots s!ecifically mentioned in the !ublic instrument$ and the !roAected city hall site$ with its area$ as then shown in the 'rellano !lan (B2hibit 2)$ it could be determined which$ and how much of the !ortions of land contiguous to those s!ecifically named$ were needed for the construction of the city hall site. / ;ot (2(*-< is conti$uous to ;ot (2(*-C and (2(*--+ and is in the heart o& the city hall site ,ot 121&%/ is contiguous to ,ots 121&%- and 121&%)$ admittedly co+ered by the !ublic instrument. :t is sti!ulated that$ after e2ecution of the contract$ the Munici!ality of :loilo !ossessed it together with the other lots sold. :t sits !ractically in the heart of the city hall site. 5 !io Sian Melli:a a notary "ublic and thus aBare o& the terms o& the "ublic instrument (io #ian Melliza$ from the sti!ulation of facts$ was the notary !ublic of the !ublic instrument. 's such$ he was aware of its terms. #aid instrument was also registered with the 7egister of )eeds and such registration was annotated at the bacC of the corres!onding title certificate of .uliana Melliza. "rom these sti!ulated facts$ it can be inferred that (io #ian Melliza Cnew of the aforesaid terms of the instrument or is chargeable with Cnowledge of themG that Cnowing so$ he should ha+e e2amined the 'rellano !lan in relation to the !ublic instrumentG that furthermore$ he should ha+e taCen notice of the !ossession first by the Munici!ality of :loilo$ then by the -ity of :loilo and later by the *ni+ersity of the (hili!!ines of ,ot 121&%/ as !art of the city hall site con+eyed under that !ublic instrument$ and raised !ro!er obAections thereto if it was his !osition that the same was not included in the same. , !rinci"les o& civil laB+ as Bell as laches+ esto""el and e=uity a""lied? ;ot included in conveyance "or 20 long years$ (io #ian Melliza and his !redecessors%in%interest$ did not obAect to said !ossession$ nor e2ercise any act of !ossession o+er ,ot 121&%/. '!!lying$ therefore$ !rinci!les of ci+il law$ as well as laches$ esto!!el$ and e9uity$ said lot must necessarily be deemed included in the con+eyance in fa+or of :loilo munici!ality$ now :loilo -ity. '5/0 Mendo:a vs >alaB 'G # No (5*20 2ctober (2+ (.2( 0 #econd )i+ision$ .ohnson (.)4 & concur 3actsH 6n 2& #e!tember 1818$ "ederico -aMet sold$ under a conditional sale$ the !arcel of land in 9uestion to the (rimiti+o Ealaw. 6n @ 5o+ember 1818$ -aMet made an absolute sale of said !arcel of land to 'gri!ino Mendoza. 6n 12 5o+ember 1818$ Mendoza entered u!on$ and tooC actual !ossession of$ said
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!arcel of land$ enclosed it with a fence$ and began to clean the same. 'fter doing so$ a re!resentati+e of Ealaw claimed and attem!ted to obtain !ossession of said lot$ but Mendoza$ who was then in !ossession$ refused to deli+er the
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!ossession$ u!on the ground that he was the owner. 6n 13 5o+ember (1@ 5o+ember) 1818$ Ealaw attem!ted to ha+e his title registered in the registry of deeds of the -ity of Manila$ but such registration was denied by the register of deeds for the reason that there e2isted some defect in the descri!tion of the !ro!erty$ and for the reason that the title of the +endor had not theretofore been registered. The register of deeds$ howe+er$ did maCe an <anotacion !re+enti+a.= 6n 20 5o+ember 1818$ 'gri!ino Mendoza filed a !etition in the -": Manila for the registration$ under the Torrens system$ of a !iece or !arcel of land$ !articularly described in !aragra!h ' of the !etition. The said lot is alleged to ha+e an area of 331.0 s9uare meters. Mendoza alleged that he was the owner in fee sim!le of said !arcel of land for the reason that he had !urchased the same of "ederico -aMet on @ 5o+ember 1818. 'ccom!anying the !etition$ there was united a !lan containing a technical descri!tion of the metes and bounds of said !arcel of land. To the registration of said !arcel of land the o!!ositor$ (rimiti+o Ealaw$ !resented his o!!osition$ alleging that he was the owner of the same and that he had ac9uired it from the said "ederico -aMet. *!on the issue thus !resented by the !etition and o!!osition$ and on 23 .anuary 1820$ the -ourt reached the conclusion that Mendoza was the owner in fee sim!le of said !arcel of land$ and ordered it registered in his name in accordance with the !ro+isions of the ,and 7egistration 'ct. "rom that decree the o!!ositor a!!ealed to the #u!reme -ourt. The #u!reme -ourt affirmed the Audgment ordering the registration of the !arcel of land in 9uestion in Mendoza?s nameG with costs. ( ;ot sold to Mendo:a in absolute sale? Mendo:a &irst in "ossession? Mendo:a actually "aid "urchase "rice "ederico -aMet made two sales of the same !ro!erty J one to Ealaw and the other to Mendoza. The first was but a conditional sale while the latter was an absolute sale. >hile the absolute sale to Mendoza was subse9uent to the conditional sale to Ealaw$ the former obtained the actual !ossession of the !ro!erty first. 7eading B2hibits 1 and /$ it may be found that Mendoza actually !aid to his +endor the !urchase !rice of the !ro!erty in 9uestion$ while the !ayment by Ealaw de!ended u!on the !erformance of certain conditions mentioned in the contract of sale. 2 Conditional sale hardly said to be a sale o& "ro"erty? Article (*,3 o& the Civil Code does not a""ly >hile there were two sales of the !arcel of land in 9uestion$ that is hardly the fact$ because a conditional sale$ before the !erformance of the condition$ can hardly be said to be a sale of !ro!erty$ es!ecially where the condition has not been !erformed or com!lied with. Thus$ article 1&33 of the -i+il -ode can hardly be said to be a!!licable. 3 Anotacion "reventiva creates no advanta$e? "rotects ri$hts o& "erson securin$ it &or 30 days The <anotacion !re+enti+a= obtained by Ealaw does not created any ad+antage in his fa+or$ for the reason that a !re+entati+e !recautionary notice on the records of the registry of deeds only !rotects the rights of the !erson securing it for a !eriod of thirty days. ((ar. 2$ art. 13$ Mortgage ,aw.) ' !re+entati+e !recautionary notice only !rotects the interests and rights of the !erson who secures it against those who ac9uire an interest in the !ro!erty subse9uent thereto$ and then$ only for a !eriod of 30 days. :t cannot affect the rights or interests of !ersons who ac9uired an interest in the !ro!erty theretofore. (Veguillas +s. .aucian$ 2; (hil.$ 31;G #amson +s. arcia and Fcalina$ 3& (hil.$ @0;.) * Anotacion "reventiva does not a&&ect ri$ht and or interests o& "ersons Mendoza had ac9uired an absolute deed to the land in 9uestion$ and had actually entered into the !ossession of the same$ before the !re+entati+e !recautionary notice was noted in the office of the registry of deeds. Therefore$ under the !ro+isions of the Mortgage ,aw$ it could in no way affect the rights or interests of
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!ersons$ ac9uired theretofore.
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'550 Mindanao Academy vs 9a" 'G # No ;-(,5)( (.5/ 0 )e 5u9ui +s. Fa! K .7. 5o. ,%130@2. "ebruary 20$ 180;L Bn /anc$ MaCalintal (.)4 0 concur$ & tooC no !art 3ebruary 25+
3actsH /y deed entitled <Mutual 'greement$= e2ecuted on 10 May 180&$ 7osenda '. de 5u9ui (widow of #otero )ionisio) and her son #otero )ionisio$ .r. sold 3 !arcels of residential land in 6ro9uieta$ Misamis 6ccidental$ and another !arcel in 6zamis -ity in fa+or of :ldefonso ). Fa!. :ncluded in the sale were certain buildings situated on said lands as well as laboratory e9ui!ment$ booCs$ furniture and fi2tures used by 2 schools established in the res!ecti+e !ro!erties4 the Mindanao 'cademy in 6ro9uieta and the Misamis 'cademy in 6zamis -ity. The aggregate !rice stated in the deed was (100$300.00$ to be !aid according to the terms and conditions s!ecified in the contract. /esides 7osenda and her son #otero$ .r.$ both of whom signed the instrument$ 'delaida )ionisio 5uesa (a daughter of 7osenda$ and married to >ilson 5uesa) is also named therein as co%+endor$ but actually did not taCe !art either !ersonally or through her uncle and su!!osed attorney%in%fact$ 7estituto 'buton. These three (mother and children) are referred to in the deed as the owners !ro%indi+iso of the !ro!erties sold. The truth$ howe+er$ was that there were other co%owners of the lands$ namely$ Brlinda ). )iaz (and 'ntolin )iaz)$ Bster 'ida ). /as (and Mauricio 6. /as)$ 7osalinda ). /elleza (and '!olinario /elleza) and ,uz Minda ). )aAao (and Blifio -. )aAao)$ children also of 7osenda by her deceased husband #otero )ionisio$ #r.$ and that as far as the school buildings$ e9ui!ment$ booCs$ furniture and fi2tures were concerned$ they were owned by the Mindanao 'cademy$ :nc.$ a cor!oration o!erating both the Mindanao 'cademy in 6ro9uieta and the Misamis 'cademy in 6zamis -ity. The buyer$ :ldefonso ). Fa!$ obtained !ossession of the !ro!erties by +irtue of the sale$ tooC o+er the o!eration of the two schools and e+en changed their names to 1ar+ardian -olleges. Two actions were commenced in the -": Misamis 6ccidentalG one for annulment of the sale and reco+ery of rents and damages (-i+il -ase 133&$ filed 3 May 18;;) with the Mindanao 'cademy$ :nc.$ the fi+e children of 7osenda 5u9ui who did not taCe !art in the deed of sale$ and se+eral other !ersons who were stocCholders of the said cor!oration ((edro 5. 'buton$ #y (aoco$ .osefa )ignum and (erfecto Velas9uez)$ as !laintiffs$ and the !arties who signed the deed of sale as defendantsG and another for rescission (-i+il -ase 1803$ filed 13 .uly 18;0) with 7osenda 5u9ui$ #otero )ionisio$ .r. and Brlinda ). )iaz (and the latter?s husband 'ntolin )iaz) as !laintiffs$ and :ldefonso ). Fa! as lone defendant. The other & children of 7osenda did not Aoin$ ha+ing !re+iously ceded and 9uitclaimed their shares in the litigated !ro!erties in fa+or of their sister Brlinda ). )iaz. The actions were tried Aointly and on 31 March 1800 the court rendered Audgment$ declaring the Mutual 'greement null and +oid ab initio and ordering :ldefonso Fa! to !ay the costs of the !roceedings in both cases. The -ourt also ordered Fa!$ in -i+il -ase 1803$ to restore to the !laintiffs in said case all the buildings and grounds described in the Mutual 'greement together with all the !ermanent im!ro+ements thereonG and to !ay to the !laintiffs therein the amount of (300.00 monthly from 31 .uly 18;0 u! to the time he shall ha+e surrendered the !ro!erties in 9uestion to the !laintiffs therein$ !lus (1$000.00 as attorney?s fees to !laintiffs 'ntolin and Brlinda ). )iaz. The -ourt ordered Fa!$ in -i+il -ase 133&$ to restore to the Mindanao 'cademy$ :nc.$ all the booCs$ laboratory a!!aratus$ furniture and other e9ui!ments described in the Mutual 'greement and s!ecified in the :n+entory attached to the 7ecords of this caseG or in default thereof$ their +alue in the amount of (23$;00.00G to return all the 7ecords of the Mindanao 'cademy and Misamis 'cademyG and to !ay to the !laintiffs stocCholders of the Mindanao 'cademy$ :nc.$ the amount of (10$000.00 as nominal damagesG (3$000.00 as e2em!lary damagesG and (2$000.00 as attorney?s fees. These damages being a!!ortioned to each of the !laintiff%stocCholders in !ro!ortion to their res!ecti+e interests in the cor!oration. :ldefonso ). Fa! a!!ealed from the Audgment.
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The #u!reme -ourt affirmed the Audgment a!!ealed from but modified it by eliminating therefrom the award of attorney?s fees of (1$000.00 in fa+or of Brlinda ). )iaz and her husband$ and the award of nominal and
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e2em!lary damages in -i+il -ase 133&G and maCing the award of attorney?s fees in the sum of (2$000.00 !ayable to counsel for the account of the Mindanao 'cademy$ :nc. instead of the !laintiff stocCholdersG without !ronouncement as to costs. ( Mutual A$reement entirely void and non-e4istent? Cuestion on rescission not cate$orically ruled on The mutual agreement dated 10 May 18;& is entirely +oid and legally non%e2istent in that the +endors therein ceded to Fa! not only their interest$ rights$ shares and !artici!ation in the !ro!erty sold but also those that belonged to !ersons who were not !arties thereto. This conclusion is !remised on two grounds4 (a) the contract !ur!orted to sell !ro!erties of which the sellers were not the only owners$ since of the four !arcels of land mentioned in the deed their shares consisted only of 3D12$ (0D124 7osenda 5u9ui and 1D12 for #otero$ .r.)$ while in the buildings$ laboratory e9ui!ment$ booCs$ furniture and fi2tures they had no !artici!ation at all$ the owner being the Mindanao 'cademy$ :nc.G and (b) the !restation in+ol+ed in the sale was indi+isible$ and therefore inca!able of !artial annulment$ inasmuch as Fa! would not ha+e entered into the transaction e2ce!t to ac9uire all of the !ro!erties !urchased by him. 2 No bad &aith committed by co-oBners Bho did not take "art in sale The 9uitclaim$ in the form of an e2traAudicial !artition$ was made on 0 May 18;0$ after the action for annulment was filed$ wherein$ the !laintiffs were not only Brlinda but also the other co%owners who tooC no !art in the sale and to whom there has been no im!utation of bad faith. "urther$ the trial courts? finding of bad faith is an erroneous conclusion induced by a manifest o+ersight of an undis!uted fact$ namely$ that on 10 .une 18;&$ Aust a month after the deed of sale in 9uestion$ Brlinda ). )iaz did file an action against :ldefonso ). Fa! and 7osenda 5u9ui$ among others$ asserting her rights as co%owner of the !ro!erties (-ase 10&0). "inally$ bad faith on the !art of Brlinda would not militate against the nullity of the sale$ considering that it included not only the lands in common by 7osenda 5u9ui and her si2 children but also the buildings and school facilities owned by the Mindanao 'cademy$ :nc.$ an entity which had nothing to do with the transaction and which could be re!resented solely by its /oard of Trustees. 3 Vendor and vendee both in bad &aith? treated to have acted in $ood &aith vis-R-vis each other /oth +endors and +endee in the sale acted in bad faith and therefore must be treated$ +is%a%+is each other$ as ha+ing acted in good faith. The return of the !ro!erties by the +endee is a necessary conse9uence of the decree of annulment. 5o !art of the !urchase !rice ha+ing been !aid$ as far as the record shows$ the trial court correctly made no corres!onding order for the restitution thereof. 7osenda 5u9ui and her son #otero$ it is true$ acted in bad faith when they sold the !ro!erties as theirs aloneG but so did the defendant Fa! when he !urchased them with Cnowledge of the fact that there were other co%owners. 'lthough the bad faith of one !arty neutralizes that of the other and hence as between themsel+es their rights would be as if both of them had acted in good faith at the time of the transaction$ this legal fiction of Fa!?s good faith ceased when they sold the !ro!erties as theirs alone. * 7rlinda -ia: entitled to recover share o& rents in "ro"ortion to her oBn interest? !ossessor in $ood &aith entitled to &ruits as lon$ as "ossession is not le$ally interru"ted (rior to the sale$ the Mindanao 'cademy :nc. was !aying (300.00 monthly for its occu!ancy of the lands on which the buildings are situated. This is the amount the defendant has been ordered to !ay to the !laintiffs in -i+il -ase 1803$ beginning 31 .uly 18;0$ when he filed his <first !leading= in the case. There can
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be no doubt that Brlinda ). )iaz is entitled to reco+er a share of the said rents in !ro!ortion to her own interest in the lands and the interest of her four co%owners which she had ac9uired. ' !ossessor in good faith is entitled to the fruits only so long as his !ossession is not legally interru!ted$ and such interru!tion taCes !lace u!on ser+ice of Audicial summons ('rts. ;&& and 1123$ -i+il -ode). / ABard o& attorneyMs &ees to 7rlinda -ia: erroneous? 7rlinda had no cause o& action &or rescission in Civil Case (.0, as she Bas not "arty to the a$reement
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The award of attorney?s fees to Brlinda ). )iaz and her husband is erroneous. -i+il -ase 1803$ in which said fees ha+e been adAudged$ is for rescission (more !ro!erly resolution) of the so%called <mutual agreement= on the ground that Fa! failed to com!ly with certain undertaCings s!ecified therein relati+e to the !ayment of the !urchase !rice. Brlinda )iaz was not a !arty to that agreement and hence had no cause of action for rescission. The trial court did not decide the matter of rescission because of the decree of annulment it rendered in the other case (-i+il -ase 133&)$ wherein the defendants are not only :ldefonso ). Fa! but also 7osenda 5u9ui and her son #otero. Brlinda ). )iaz could Aust as well ha+e refrained from Aoining as !laintiff in the action for rescission$ not being a !art to the contract sought to be rescinded and being already one of the !laintiffs in the other action. :n other words$ it cannot be said with Austification that she was constrained to litigate$ in -i+il -ase 1803$ because of some cause attributable to the a!!ellant. 5 <uilder in bad &aith not entitled to reimbursement FNeB buildin$G Fa! claims reimbursement for the +alue of the im!ro+ements he allegedly introduced in the schools$ consisting of new building worth (@$000.00 and a toilet costing (@00.00$ besides laboratory e9ui!ment$ furniture$ fi2tures and booCs for the libraries. :t should be noted that the Audgment of the trial court s!ecifies$ for deli+ery to the !laintiffs (in -i+il -ase 1803)$ only <the buildings and grounds described in the mutual agreement together with all the !ermanent im!ro+ements thereon.= :f Fa! constructed a new building$ he cannot reco+er its +alue because the construction was done after the filing of the action for annulment$ thus rendering him a builder in bad faith who is denied by law any right of reimbursement. , 7=ui"ment+ books+ &urniture and &i4ture brou$ht in by him may be retained by him as they are outside the sco"e o& the @ud$ment :n connection with the e9ui!ment$ booCs$ furniture and fi2tures brought in by him$ he is not entitled to reimbursement either$ because the Audgment does not award them to any of the !laintiffs in the two actions. >hat is adAudged (in -i+il -ase 133&) is for Fa! to restore to the Mindanao 'cademy$ :nc. all the booCs$ laboratory a!!aratus$ furniture and other e9ui!ment <described in the Mutual 'greement and s!ecified in the :n+entory attached to the records of this caseG or in default thereof$ their +alue in the amount of (23$;00.00.= :n other words$ whate+er has been brought in by the defendant is outside the sco!e of the Audgment and may be retained by him. ) Stockholders not entitled to nominal and e4em"lary dama$es 'ccording to the second amended com!laint the stocCholders were Aoined merely !ro forma$ and <for the sole !ur!ose of the moral damage which has been all the time alleged in the original com!laint.= :ndeed the interests of the said stocCholders$ if any$ were already re!resented by the cor!oration itself$ which was the !ro!er !arty !laintiffG and no cause of action accruing to them se!arately from the cor!oration is alleged in the com!laint$ other than that for moral damages due to <e2treme mental anguish$ serious an2iety and wounded feelings.= The trial court$ howe+er$ ruled out the claim for moral damages and no a!!eal from such ruling has taCen. The award for nominal and e2em!lary damages should be eliminated in toto. . ABard &or attorneyMs &ees u"held &or the cor"oration but not to stockholders The award for attorney?s fees in the amount of (2$000.00 was u!held$ although the same should be for the account of the cor!oration and not of the !laintiff stocCholders of the Mindanao 'cademy$ :nc.G and !ayable to their common counsel as !rayed for in the com!laint. (0 Nullity o& contract "recludes en&orcement o& its sti"ulation ' warranty clause in the deeds !ro+ides that if any claim shall be filed against the !ro!erties or any right$ share or interest which are in the !ossession of the !arty of the +endors which had been hereby
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transferred$ ceded and con+eyed unto the +endee the +endor assumes as it hereby holds itself answerable. :t is unnecessary to !ass u!on the 9uestion in +iew of the total annulment of the sale on grounds concerning which both !arties thereto were at fault. The nullity of the contract !recludes enforcement of any of its sti!ulations.
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'5,0 Montilla vs CA 'G # No ;-*,.5) May .+ (.)) 0 "irst )i+ision$ 5ar+asa (.)4 3 concur 3actsH 6n 23 '!ril 1832$ Bmilio 'ragon .r. filed an action before the -": :loilo to com!el ,ina Montilla to com!ly with a +erbal contract to sell to him a !iece of land situated at (oblacion$ :loilo -ity$ Cnown as ,ot & of the -onsolidated #ubdi+ision !lan (,7-) (sc%1100;. :n his com!laint$ 'ragon claimed that in the last weeC of .une 1808$ Montilla had orally offered to sell the lot to him at a !rice of (;3$0;0.00 (at the rate of (;0 !er s9. m.)$ the !rice being !ayable at any time within a 3%year !eriod from .une$ 1808 !ro+ided that 'ragon constructed on the lot a house of strong materials and !aid a nominal monthly rental in the meantimeG but des!ite 'ragon?s acce!tance of the offer$ fulfillment by him of the s!ecified conditions$ and his seasonable tender of the !urchase !rice$ Montilla had refused to com!ly with her obligation. :n her answer Montilla categorically denied e+er ha+ing entered into such an agreement$ and set u! the affirmati+e defenses of (1) unenforceability of the alleged agreement under the #tatute of "raudsG and (2) failure of the com!laint to state a cause of action$ no allegation ha+ing been made therein of any consideration for the !romise to sell distinct and se!arate from the !rice$ as re9uired by 'rticle 1&38 of the -i+il -ode. 't Montilla?s instance$ a !reliminary hearing was had on her affirmati+e defenses in accordance with #ection 0$ 7ule 10 of the 7ules of -ourt$ <as if a motion to dismiss had been filed.= /y 6rder dated ; )ecember 1832$ the -ourt denied the im!licit motion to dismiss. 'fter trial$ the -ourt rendered Audgment on 22 'ugust 183& sentencing Montilla <to e2ecute the re9uisite deed of con+eyance of ,ot &$ co+ered by T-T T%28830 in fa+or of 'ragon u!on full !ayment by him to Montilla of the total consideration thereof in the aggregate sum of (;3$0;0.00G to !ay to Montilla (2$000.00 as attorney?s fees$ and to !ay the costs.= The decision was affirmed by the -ourt of '!!eals. The latter?s adAudgment has$ in turn$ been duly brought u! to the #u!reme -ourt by Montilla$ on a!!eal by certiorari under 7ule &; of the 7ules of -ourt. The #u!reme -ourt re+ersed and set aside the )ecision of the -ourt of '!!eals dated 1@ .anuary 183@ and that of the -": dated 22 'ugust 183& thereby affirmed$ and entered a new one dismissing 'ragon?s com!laint$ with costs against him. ( No admission by Montilla on the claimed verbal contract to sell? A&&irmative de&ense could not be taken as unconditional and irretrievably bindin$ &actual admission :t is difficult to see by what !rocess of ratiocination the Trial -ourt arri+ed at the conclusion that Montilla?s answer had <admitted the offer to sell= as any such admission is absolutely !recluded by the s!ecific and une9ui+ocal denial by Montilla of the claimed +erbal contract to sell. #he in fact branded the allegations to that effect in the com!laint as <outrageously false$ fantastically ridiculous and des!icable fabrications of !laintiff .= 5or may any admission be inferred from the circumstance that Montilla$ a!art from un9ualifiedly denying the contract to sell$ had also asserted in her res!onsi+e !leading that the contract was unenforceable because +iolati+e of the #tatute of "rauds and because not su!!orted by any consideration distinct from the !rice. "or while those defenses im!ly an acce!tance by the !leader of the truth of the agreement at which the defenses are directed$ the acce!tance is at best hy!othetical$ assumed only for !ur!oses of determining the +alidity of the defenses$ but cannot in any sense be taCen as an unconditional and irretrie+ably binding factual admission. The im!ort of the answer$ couched in language that could not be made any !lainer$ is that there was no +erbal contract to sell e+er agreed to by Montilla$ but that$ e+en assuming hy!othetically$ or for the saCe of argument that there was$ the agreement was unenforceable because in breach of the #tatute of "rauds. 2 #es @udicata does not a""ly to interlocutory orders as these cannot become &inal and e4ecutory The -ourt?s interlocutory order of ; )ecember 1832 cannot become conclusi+e$ i.e.$ conclusi+e on
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Montilla <with res!ect to the matter directly adAudged or as to any other matter that could ha+e been raised in relation thereto$ as the doctrine of res Audicata or bar by !rior Audgment (or$ for that matter$ conclusi+eness of Audgment or esto!!el by Audgment) has rele+ance to$ and will become o!erati+e only on the basis of a final Audgment or final order$ the 9ualifying term <final= being used in the sense of <final and e2ecutory$= i.e.$ not only final J because finally dis!osing of the case and lea+ing nothing more to be done by the adAudging court relati+e to its merits$ but also e2ecutory J because the !eriod for a!!eal has e2!ired without an a!!eal ha+ing been taCen$ or an a!!eal ha+ing been !erfected$ the Audgment or order has otherwise attained finality. 'n order such as that rendered on ; )ecember 1832$ being interlocutory$ cannot become final and e2ecutory in the sense described$ and cannot bring the doctrine of res adAudicata into !lay at all. :ndeed$ the correctness of such an interlocutory order may subse9uently be im!ugned on a!!eal by any !arty ad+ersely affected thereby$ regardless of whether or not he had !resented a motion for the reconsideration thereof$ if he has otherwise made of record his !osition thereon. 3 8denti&ication o& identity o& alle$ed vendor Montilla?s acCnowledgment of being the defendant in the case can not in any manner whatsoe+er be considered an admission that she had gone to see 'ragon to offer her !ro!erty for sale. 5on se9uitur. 'ragon?s disconcerting failure to identify Montilla is cogent confutation of his allegation that he !ersonally Cnew Montilla and had negotiated with her for his !urchase of the !ro!erty in 9uestion$ and strongly indicati+e of the inaccuracy of the testimony of the witnesses who corroborated his dubious tale. * <asis o& dismissalH Statute o& 3rauds in relation to #ule (5 o& the #ules o& Court There being therefore no admission whate+er on Montilla?s !art of the e2istence or ratification of the claimed contract to sell$ and taCing account of her disa+owal in her !leadings and in her e+idence of that contract$ and necessarily of any fulfillment of the terms thereof$ it is clear that the action for its enforcement should ha+e been dismissed !ursuant to the #tatute of "rauds$ in relation to 7ule 10 of the 7ules of -ourt. / <asis o& dismissalH Article (*,. The action is also dismissible u!on another legal ground. 'ssuming arguendo +eritability of the oral !romise to sell by Montilla$ the !romise was ne+ertheless not binding u!on her in +iew of the absence of any consideration therefor distinct from the sti!ulated !rice. This is the !rinci!le laid down by the second !aragra!h of 'rticle 1&384 <'n acce!ted unilateral !romise to . . sell a determinate thing for a !rice certain is binding u!on the !romissor if the !romise is su!!orted by a consideration distinct from the !rice.= 5 sell -ocument e4ecuted by Ara$on as to lease? Absent any mention o& alle$ed "romise to
' document$ e2ecuted by 'ragon on 8 .uly 1808 (some 8 or 10 days after Montilla had su!!osedly !romised to sell the lot in 9uestion to him)$ re+eals se+eral things. "or one$ the lot on which 'ragon?s house was being built was ob+iously !art of the <Montilla estate$= and did not as yet belong to any !articular heir or !erson entitled thereto. "or another$ 'ragon had been gi+en !ermission by the re!resentati+e of the estate$ Mr. Manaloto$ to stay on the lot in consideration of a !rescribed rental$ and he was im!loring said Mr. Manaloto and the owners for lea+e to stay in the !remises until his children could finish their schooling$ !romising to <meet the !rescribed rental obligations.= 'gain$ and this is 9uite significant as regards his claim of a !romise to sell by one of the Montillas$ since that !romise is not referred to or e+en hinted at in any manner whatsoe+er$ the genuineness of the claim is strongly sus!ectG for surely$ 'ragon would ne+er ha+e <im!lored= for <consideration of the owners and Mr. Manaloto= to stay in the !remises until his children could finish their schooling$ as lessee$ if it be true that he had acce!ted a !romise for the sale thereof to him. The document cannot therefore be inter!reted otherwise than as denoting the concession to him of the !ri+ilege to build a house on a lot belonging to the Montillas$ and a solicitation by him of the owners? !ermission to lease the lot to him for a longer$ and more or less
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determinable term$ and as an im!lied$ though nonetheless clear$ negation of any right on his !art to !urchase the !ro!erty. , ;ot * ad@udicated to ;ina Montilla "ursuant to settlement o& the Montilla 7state 2 years a&ter
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her alle$ed o&&er to sell ' -ourt 6rder issued on 13 .une 1831 in the Audicial !roceedings for the settlement of the Montilla Bstate$ ob+iously the same <Montilla estate= referred to by 'ragon in his certification of 8 .uly 1808 Aust described$ a!!ro+ed the !roAect of !artition of said estate$ !resented on ; May 1831G and it states that ,ot & was adAudicated to ,ina Montilla on 13 .une 1831$ more than 2 years after she had su!!osedly offered to sell the !ro!erty to 'ragon. 't the time of the alleged !romise to sell$ ,ot & still formed !art of the amor!hous mass of !ro!erty constituting the <Montilla estateG= at any rate$ that !articular lot had not been allotted to ,ina Montilla yet. The uncertainty of the e+entual ownershi! of said ,ot &$ considered conAointly with the ostensible status of 'ragon as a mere su!!licant of fa+ors from <the owners of the Montilla estate$= maCe it +ery im!robable indeed that Montilla would !ersonally go to him and !romise to sell the lot to him. '5)0 National Grains Authority v 8AC 'G # No ,**,0 (.). 0 Third )i+ision$ Medialdea (.)4 & concur March )+
3actsH 5ational rains 'uthority (now 5ational "ood 'uthority$ 5"') is a go+ernment agency created under () &. 6ne of its incidental functions is the buying of !alay grains from 9ualified farmers. 6n 23 'ugust 1838$ ,eon #oriano offered to sell !alay grains to the 5"'$ through the (ro+incial Manager (>illiam -abal) of 5"' in Tuguegarao$ -agayan. 1e submitted the documents re9uired by the 5"' for !re%9ualifying as a seller$ which were !rocessed and accordingly$ he was gi+en a 9uota of 2$0&0 ca+ans of !alay. The 9uota noted in the "armer?s :nformation #heet re!resented the ma2imum number of ca+ans of !alay that #oriano may sell to the 5"'. 6n 23 and 2& 'ugust 1838$ #oriano deli+ered 030 ca+ans of !alay. The !alay deli+ered were not rebagged$ classified and weighed. >hen #oriano demanded !ayment of the 030 ca+ans of !alay$ he was informed that its !ayment will be held in abeyance since Mr. -abal was still in+estigating on an information he recei+ed that #oriano was not a bona fide farmer and the !alay deli+ered by him was not !roduced from his farmland but was taCen from the warehouse of a rice trader$ /en de uzman. 6n 2@ 'ugust 1838$ -abal wrote #oriano ad+ising him to withdraw from the 5"' warehouse the 030 ca+ans stating that 5"' cannot legally acce!t the said deli+ery on the basis of the subse9uent certification of the /'BR technician (5a!oleon -allangan) that #oriano is not a bona fide farmer. :nstead of withdrawing the 030 ca+ans of !alay$ #oriano insisted that the !alay grains deli+ered be !aid. 1e then filed a com!laint for s!ecific !erformance andDor collection of money with damages on 2 5o+ember 1838$ against the 5"' and >illiam -abal (-i+il -ase 23;&). Meanwhile$ by agreement of the !arties and u!on order of the trial court$ the 030 ca+ans of !alay in 9uestion were withdrawn from the warehouse of 5"'. 6n 30 #e!tember 18@2$ the trial court found #oriano a bona fide farmer and rendered Audgment ordering the 5"'$ its officers and agents to !ay #oriano the amount of (&3$2;0.00 re!resenting the un!aid !rice of the 030 ca+ans of !alay !lus legal interest thereof (12I !er annum$ from the filing of com!laint on 20 5o+ember 1838 until fully !aid). 5"' and -abal filed a motion for reconsideration$ which was denied by the court on 0 )ecember 18@2. '!!eal was filed with the :ntermediate '!!ellate -ourt. 6n 23 )ecember 18@0$ the then :'-u!held the findings of the trial court and affirmed the decision ordering 5"' and its officers to !ay #oriano the !rice of the 030 ca+ans of rice !lus interest. The motion for reconsideration of the a!!ellate court?s decision was denied in a resolution dated 13 '!ril 18@0. 1ence$ the !resent !etition for re+iew with the sole issue of whether or not there was a contract of sale in the !resent case. The #u!reme -ourt dismissed the instant !etition for re+iew$ and affirmed the assailed decision of the
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then :'- (now -ourt of '!!eals) is affirmedG without costs. ( Sale de&ined
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'rticle 1&;@ of the -i+il -ode of the (hili!!ines defines sale as a contract whereby one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determinate thing$ and the other !arty to !ay therefore a !rice certain in money or its e9ui+alent. 2 Contract de&ined? re=uisites ' contract$ on the other hand$ is a meeting of minds between two (2) !ersons whereby one binds himself$ with res!ect to the other$ to gi+e something or to render some ser+ice ('rt. 130;$ -i+il -ode of the (hili!!ines). The essential re9uisites of contracts are4 (1) consent of the contracting !arties$ (2) obAect certain which is the subAect matter of the contract$ and (3) cause of the obligation which is established ('rt. 131@$ -i+il -ode of the (hili!!ines.) 3 !resent case involves a "er&ected contract o& sale :n the !resent case$ #oriano initially offered to sell !alay grains !roduced in his farmland to 5"'. >hen the latter acce!ted the offer by noting in #oriano?s "armer?s :nformation #heet a 9uota of 2$0&0 ca+ans$ there was already a meeting of the minds between the !arties. The obAect of the contract$ being the !alay grains !roduced in #oriano?s farmland and the 5"' was to !ay the same de!ending u!on its 9uality. The contention that X since the deli+ery were not rebagged$ classified and weighed in accordance with the !alay !rocurement !rogram of 5"'$ there was no acce!tance of the offer thus X this is a clear case of !olicitation or an unacce!ted offer to sell$ is untenable. * Cuantity bein$ indeterminate does not a&&ect "er&ection o& contract? No need to create neB contract The fact that the e2act number of ca+ans of !alay to be deli+ered has not been determined does not affect the !erfection of the contract. 'rticle 13&8 of the 5ew -i+il -ode !ro+ides that <the fact that the 9uantity is not determinate shall not be an obstacle to the e2istence of the contract$ !ro+ided it is !ossible to determine the same$ without the need of a new contract between the !arties.= :n the !resent case$ there was no need for 5"' and #oriano to enter into a new contract to determine the e2act number of ca+ans of !alay to be sold. #oriano can deli+er so much of his !roduce as long as it does not e2ceed 2$0&0 ca+ans. / Sale a consensual contract? Acce"tance is on the o&&er and not the $oods delivered #ale is a consensual contract$ <there is !erfection when there is consent u!on the subAect matter and !rice$ e+en if neither is deli+ered.= (6bana +s. -.'.$ ,%302&8$ March 28$ 18@;$ 13; #-7' ;;3$ ;00) 'rticle 1&3; of the -i+il -ode !ro+ides that <The contract of sale is !erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice.= The acce!tance referred to which determines consent is the acce!tance of the offer of one !arty by the other and not of the goods deli+ered. 5 Com"liance o& mutual obli$ations once a contract o& sale is "er&ected "rom the moment the contract of sale is !erfected$ it is incumbent u!on the !arties to com!ly with their mutual obligations or <the !arties may reci!rocally demand !erformance= thereof. ('rticle 1&3;$ -i+il -ode$ 2nd !ar.) '5.0 Navera vs CA 'G # No ;-/5)3) A"ril 25+ (..0 0 "irst )i+ision$ Medialdea (.)4 & concur 3actsH ,eocadio 5a+era has ; children$ namely4 Blena$ Mariano$ /asilio$ Bduarda and "eli2$ all surnamed 5a+era. Mariano 5a+era is the father of !etitioner enaro 5a+era (married to Bmma 'mador). Blena 5a+era$
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on the other hand has three children by 'ntonio 5ares. Two of them are res!ondent 'rsenio 5ares and "eli2 5ares. The other child$ )ionisia is already deceased and has left children. (etitioner and res!ondents are
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therefore$ first cousins. >ay bacC in 1810$ ,eocadio 5a+era donated to "austo Mustar in a !ri+ate instrument a certain !ro!erty in consideration of the marriage of the former?s son$ Mariano 5a+era$ to the daughter of "austo Mustar by the name of 7estituta Mustar. 6n 18 .uly 1823$ 6-T 76%1;&(5') was issued in the name of <Blena 5a+era$ et al.=$ co+ering the land in dis!ute$ namely ,ot 1&00$ situated in the Munici!ality of -amalig$ 'lbay. #ometime in 182&$ Blena 5a+era died. 6n 1& May 18&3$ Bduarda 5a+era$ by means of a !ublic instrument$ sold to her ne!hew$ 'rsenio 5ares$ all of her share in ,ot 1&00$ which is titled in the name of <Blena 5a+era$ et al.=. Bduarda 5a+era?s share in the lot is 1D2 of the total area of ,ot 1&00 (The other half allegedly owned by ,ina 5a+era$ the deceased mother of the buyer$ who was the administrator of said half. 'rsenio 5ares thus taCe care of the whole !ro!erty). 6n 20 .une 18&@$ Bduarda 5a+era sold for the second time a !ortion of ,ot 1&00 to Mariano 5a+era (;0 meters long and ;8 meters wide). 6n 30 .anuary 18;3$ 'rsenio 5ares sold to (er!etua )acillo a !ortion of ,ot &103 containing an area of ;$320 s9. ms. (er!etua )acillo thereafter donated the said !ro!erty to "rancisco )acillo. 6n 13 'ugust 18;;$ Mariano 5a+era$ sold to his brother%in%law$ #era!io Mustar$ the lot which he bought from Bduarda 5a+era. 6n 11 "ebruary 18;0$ a deed of sale was su!!lemented by the following sti!ulation <(b) as to the !ro!erty under !aragra!h (2) thereof$ the same !ertains to -adastral ,ot 5o. 1&00$ containing an area of 1%88%08 s9uare meters$ more or less$ (in the said document there was clerical error of the area$ as !re+iously stated in the total area of 00%08% 10$ which is hereto corrected as 1%80%31 s9uare meters$ as the total area sold).= 6n 3 '!ril 18;8$ #era!io Mustar later sold to enaro 5a+era ,ot 1&00 which he bought from the latter?s father$ Mariano 5a+era$ containing an area of 18$808 s9. ms. more or less. 6n 3 #e!tember 1831$ "rancisco )acillo sold to enaro 5a+era the land which the former recei+ed by way of donation from (er!etua )acillo. 'll of the foregoing transfers of ,ot 1&00 were not annotated and inscribed in the 6-T. 7=ares co#plaint9 :n their com!laint dated 1& March 1831 filed with the then -": 'lbay (now 7T-G -i+il -ase &3;8)$ 'rsenio and "eli2 5ares$ alleged inter alia4 that they are the absolute owners of the whole of ,ot 1&00 co+ered by 6-T 5o. 76%1;&(5')$ and are entitled to the !ossession of the sameG that ,ot 1&00 is registered in the name of <Blena 5a+era$ et al.=$ the <et al.= being Bduarda 5a+eraG that they ac9uired the !ro!erty by inheritance from their deceased mother Blena 5a+eraG that a !ortion thereof which had been adAudicated to Bduarda 5a+era was later sold to 'rsenio 5aresG that sometime in 'ugust$ 18;;$ Mariano 5a+era$ without any legal right whatsoe+er and under the !retense of ownershi! sold the said !ro!erty to his brother%in%law #era!io Mustar$ who in turn sold the same to enaro 5a+era$ son of Mariano. They also claimed that all the foregoing sales were sham and mani!ulated transactions and that Mariano 5a+era Cnew fully well that he had no right to sell the !ro!erty. They admitted howe+er$ that they sold a !ortion of the !ro!erty containing 0$320 s9uare meters to (er!etua )acillo$ so that the remaining !ortion still belongs to them. They further contended that enaro 5a+era entered the land after the sale to him by Mustar and tooC !ossession of the same and ac9uired the !roduce thereof since 18;3 u! to the !resent timeG and that they ha+e e2erted earnest efforts toward a com!romise but 5a+era instead challenged them to go to court. 7=avera>s counterclai#9 enaro 5a+era and Bmma 'mador filed their answer with counterclaim$ denying 5ares? claims$ and alleging inter alia4 that ,eocadio 5a+era is the father of fi+e children$ namely$ Blena$ Mariano$ Bduarda$ /asilio and "eli2G that after deducting 12$&1; s9uare meters which ,eocadio 5a+era donated to "austo Mustar in 1810$ the remaining area of ,ot 1&00 was di+ided in e9ual shares among Blena$ Mariano and Bduarda$ to the e2tent of &$@00 s9uare meters eachG that /asilio and "eli2 were gi+en their shares in other !arcels of land. They also submitted that the <et al.= a!!earing in the title of the !ro!erty refers to "austo Mustar (12$&1; s9. ms.)$ Bduarda 5a+era (&$@00 s9. ms.)$ Mariano 5a+era (&$@00 s9. ms.) and Blena 5a+era (&$@00 s9. ms.)G that Bduarda 5a+era sold 2$08; s9. ms. of her share to Mariano 5a+era while the remaining 2$100 s9 s9. ms. of her share was sold to 'rsenio 5aresG that 'rsenio?s !ro!erty totalled 3$020 s9. ms. which he later sold to (er!etua )acillo. They further contended that they are !resently in !ossession of ,ot 1&00 and their !ossession tacCed to that of their !redecessor%in%interest as early as 1810G that the com!laint states no cause of action and that if 5ares had any$ the same has long !rescribed. 7Court>s ruling9 6n 2@ "ebruary
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183@$ the trial court rendered a decision declaring 5ares owners of the lot described in the 6-T 76%1;&@0$ e2ce!t ;$320 s9. ms. which rightfully belongs to enaro 5a+era.
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5ot satisfied with the decision of the trial court$ 5a+era a!!ealed to the -ourt of '!!eals (-'% 7 03820% 7). 6n 10 )ecember 18@0$ the a!!ellate court rendered Audgment affirming in toto the decision of the trial court. 1ence the !etition for re+iew on certiorari. The #u!reme -ourt denied the !etition but modified the decision of the -ourt of '!!eals dated 10 )ecember 18@0 to the effect that as against enaro 5a+era and Bmma 'mador$ 'rsenio 5ares and "eli2 5ares are declared the rightful owners of the dis!uted ,ot 1&00$ e2ce!t with res!ect to ;$320 s9uare meters thereof which belongs to enaro 5a+era$ without !reAudice howe+er$ to whate+er rights and interests that the other com!ulsory heirs of Blena 5a+era may ha+e in the one%half !ortion of ,ot 1&00. The res!ecti+e rights of res!ondents to ,ot 1&00 as between themsel+es is a matter outside of the contro+ersy and is therefore$ beyond the Aurisdiction of the -ourt to !ass u!on. ( I7t alK re&er only to 7duarda? 3actual &indin$ o& courts conclusive u"on the Su"reme Court The whole of ,ot 1&00 is titled in the name of <Blena 5a+era$ et al.=$ the !hrase <et al.= referring only to Bduarda$ sister of Blena since the other brothers of Blena and Bduarda namely$ Mariano$ /asilio and "eli2 had recei+ed their shares from the other !ro!erties of their father ,eocadio 5a+era. These factual findings are conclusi+e u!on the #u!reme -ourt. Thus$ when Blena 5a+era died sometime in 182&$ her com!ulsory heirs including 'rsenio 5ares and "eli2 5ares ac9uired Blena?s shares in ,ot 1&00 by inheritance$ which is 1D2of ,ot 1&00. 's to the other half of ,ot 1&00 owned by Bduarda 5a+era$ the latter sold the same to two +endees$ one in fa+or of 'rsenio 5ares and the other in fa+or of Mariano 5a+era$ enaro 5a+era?s !redecessor%in% interest. 2 -ouble Sale? 7duarda Navera had no e4istin$ ri$ht anymore to convey "ortion o& "ro"erty in a subse=uent sale to Mariano Navera 6n this matter of double sale$ all the transfers or con+eyances are not inscribed in the 6-T 76% 1;&@0(5'). :t would not be amiss to state that the sale of Bduarda 5a+era to 'rsenio 5ares$ and the sale of Bduarda 5a+era to Mariano 5a+era$ the !ro!erty referred to in both sales is the +ery same !ro!erty co+ered by reconstituted title. The sale of Bduarda 5a+era to 'rsenio 5ares co+ered all her !ortion to the !ro!erty$ thus$ she could not !ossibly sell on 20 .une 18&@$ another !ortion of the same !ro!erty to Mariano 5a+era. Thus$ the !ortion referred to in the sale to Mariano 5a+era by Bduarda 5a+era may not be +alidly transferred by Mariano 5a+era to #era!io Mustar. :t liCewise follow that #era!io Mustar may not effecti+ely con+ey the same to enaro 5a+era. :t is irremissible to state that the alleged con+eyance made by #era!io Mustar in fa+or of enaro 5a+era ha+e no legal effect whatsoe+er$ for the sim!le reason that #era!io Mustar could not !ro!erly con+ey the !ortion referred to in the sale of 20 .une 18&@$ by Bduarda 5a+era in fa+or of Mariano 5a+era. :n the first !lace$ Bduarda 5a+era has no e2isting right to con+ey another !ortion of the !ro!erty because she had already sold all her !ortion to 'rsenio 5ares. Thus at the time Bduarda 5a+era con+eyed a !ortion of the !ro!erty which she already con+eyed to a!!ellee 'rsenio 5ares$ she has no right on the !ro!erty and the !ower to dis!ose it. Mariano 5a+era therefore ne+er ac9uired that !ortion subAect of the sale on 20 .une 8&@. 1a+ing ac9uired that !ortion of the !ro!erty subAect of the sale on 20 .une 18&@ from Mariano 5a+era$ #era!io Mustar has liCewise no e2isting right and !ower to dis!ose of that !ortion of the !ro!erty to enaro 5a+era. 3 Navera not "ossessors in $ood &aith? >noBled$e o& &laB o& title 'rticle ;20 of the 5ew -i+il -ode !ro+ides that a !ossessor in good faith is one who is not aware that there e2ists in his title or mode of ac9uisition any flaw which in+alidates it and a !ossessor in bad faith is one who !ossesses in any case contrary to the foregoing. <B+ery !ossessor in good faith becomes a !ossessor in bad faith from the moment he becomes aware that what he belie+ed to be true is not so.= 1is !ossession is legally interru!ted when he is summoned to trial according to 'rticle 1123 of the 5ew -i+il -ode (Tacas +. Tabon$ ;3 (hil. 3;0).=
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Conclusions and &indin$ o& &acts by trial court $iven $reat Bei$ht
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The conclusions and findings of facts by the trial court are entitled to great weight and will not be disturbed on a!!eal unless for strong and cogent reasons because the trial court is in a better !osition to e2amine real e+idence as well as to obser+e the demeanor of witnesses while testifying on the ease. (Macua +s. :ntermediate '!!ellate -ourt$ 5o. ,%30@10$ 6ctober 20$ 18@3$ 1;; #-7' 28). / Article (/** o& the Civil Code 'rticle 1;&& of the -i+il -ode !ro+ides that <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossessionG and$ in the absence thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith.= 5 Sales not re$istered? 2Bnershi" vested u"on &irst "ossessor in $ood &aith The first sale of Bduarda 5a+era?s share in the said lot to 'rsenio 5ares was made in a !ublic instrument on 1& May 18&3. The second sale of the same !ro!erty was e2ecuted also in a !ublic instrument in fa+or of Mariano 5a+era$ who is the !redecessor in interest of enaro 5a+era$ on 20 .une 18&@$ or more than a year after the first sale. #ince the records show that both sales were not recorded in the 7egistry of (ro!erty$ the law clearly +ests the ownershi! u!on the !erson who in good faith was first in !ossession of the dis!uted lot. , !ossession o& vendor includes not only the material but also symbolic "ossession? Vendor does not transmit anythin$ to second vendee The !ossession mentioned in 'rticle 1;&& for determining who has better right when the same !iece of land has been sold se+eral times by the same +endor includes not only the material but also the symbolic !ossession$ which is ac9uired by the e2ecution of a !ublic instrument. This means that after the sale of a realty by means of a !ublic instrument$ the +endor$ who resells it to another$ does not transmit anything to the second +endee$ and if the latter$ by +irtue of this second sale$ taCes material !ossession of the thing$ he does it as mere detainer$ and it would be unAust to !rotect this detention against the rights of the thing lawfully ac9uired by the first +endee (Uuimson +s. 7osete$ @3 (hil. 1;8G #anchez +s. 7amos$ &0 (hil. 01&G "lorendo +s. "oz$ 20 (hil. 3@@). ) Constructive delivery in the e4ecution o& "ublic instrument The !rior sale of the land to 'rsenio 5ares by means of a !ublic instrument is clearly tantamount to a deli+ery of the land resulting in the material and symbolic !ossession thereof by the latter. "urther$ actual e+idence !oints to the !rior actual !ossession by 5ares before he was e+icted from the land by 5a+era and their !redecessors in 18;3 when the latter entered the dis!uted !ro!erty. 5o other e+idence e2ists on record to show the contrary. . !rior est in tem"ore+ "otior est in @ure (rior est in tem!ore$ !otior est in Aure (he who is first in time is !referred in right). The !riority of !ossession stands good in fa+or of 5ares. 6wnershi! should therefore be recognized in fa+or of the first +endee$ 'rsenio 5ares. (0 !rescri"tion must be e4"ressly relied u"on in the "leadin$s? 2ne assertin$ oBnershi" throu$h adverse "ossession must "rove essential elements o& ac=uisitive "rescri"tion 5a+era alleged that they ha+e been in !ossession of the lot for more than &0 years. (rescri!tion$ as a defense$ must be e2!ressly relied u!on in the !leadings. :t cannot be a+ailed of$ unless it is s!ecially !leaded in the answerG and it must be !ro+ed or established with the same degree of certainty as any essential allegation in the ci+il action (1odges +s. #alas$ 03 (hil. ;03G -or!oracion de ((. 'ugustinus 7ecolectos +s. -risostomo$ 32 (hil. &23). :n the !resent case$ 5a+era did not claim ac9uisiti+e !rescri!tion in their answer in
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the lower court$ and e+en if they did$ it cannot be gi+en Audicial sanction on mere allegations. The law re9uires one who asserts ownershi! by ad+erse !ossession to !ro+e the !resence of the essential elements of ac9uisiti+e !rescri!tion (Morales +s. -":$ et al.$ 5o. ,%;223@$ May 28$ 18@0$ 83 #-7' @32). (( Nares evicted+ thus Navera is in bad &aith? 30-year re=uirement in adverse "ossession not met Fsuit &iled (.,(+ (* years a&ter dis"ossessionG There is lacC of sufficient !roof to establish clearly and !ositi+ely 5a+era?s claim of ac9uisiti+e !rescri!tion. The -ourt is more inclined to belie+e 5ares? +ersion that he was e+icted from the !ro!erty by 5a+era sometime in 18;3$ thereby showing the latter?s bad faith in ac9uiring the !ossession of the !ro!erty until 1831 when the action against 5a+era was filed. Thus$ the ordinary ac9uisiti+e !rescri!tion of 10 years cannot be considered in fa+or of 5a+era in the absence of good faith. 5either is 5a+era entitled to e2traordinary ac9uisiti+e !rescri!tion$ in the absence of sufficient !roof of com!liance with the thirty% year re9uirement of !ossession in case of bad faith. (2 Navera has knoBled$e o& ri$ht and interest o& cousins in dis"uted land The law clearly states that <!ossession has to be in the conce!t of an owner$ !ublic$ !eaceful and uninterru!ted= ('rticle 111@$ -i+il -ode). ' reading of the demand letter from 5ares dated 23 May 1830$ submitted in e+idence by 5a+era$ shows that the dis!ute o+er ,ot 1&00 had been going on for a number of years among them and their families. )uring the time when 5a+era bought the land in 18;8 and the following years thereafter when the latter !ossessed the !ro!erty$ they ha+e Cnown or should ha+e Cnown of the rights and interests of their cousins o+er the dis!uted land. (3 NaveraMs "redecessor-in-interest did not declare themselves oBner o& land &or ta4ation "ur"oses Moreo+er$ the ta2 declarations for the years 18;1 and 180; showed that 'rsenio and "eli2 5ares were the declared owners. 5a+era?s !redecessors in interest$ namely$ Mariano 5a+era and the subse9uent !urchasers of the lot$ had not bothered to declare the land in their own names for !ur!oses of ta2ation during the time that they were allegedly in !ossession of the land. :t was only in the year 1800 when enaro 5a+era started to declare himself owner of the land for ta2ation !ur!oses. (* Nares not bound by alle$ed donation "ro"ter nu"tias in &avor o& Mustar? No evidence that donated "ro"erty Bas trans&erred to Mariano Navera 'rsenio and "eli2 5ares are not bound by their alleged Cnowledge of the !re+ious donation !ro!ter nu!tias by their ancestor$ ,eocadio 5a+era in fa+or of "austo Mustar. The donation !ro!ter nu!tias made by ,eocadio 5a+era sometime in 6ctober 1810$ should ha+e been at least recorded in the registry of !ro!erty or inscribed in the 6riginal -ertificate of Title or the donee shall ha+e titled the !ro!erty in his name. The alleged donee "austo Mustar is not a !arty to the case nor had he transferred the said donated !ro!erty to the s!ouses Mariano 5a+era in a !ublic instrument or con+eyance. 5owhere in the e+idence on record would show that the said donated !ro!erty was e+er transferred to Mariano 5a+era$ father of enaro 5a+era. (/ >noBled$e o& alle$ed donation immaterial? 2C% clear Bithout mention o& any "revious donation o& any "ortion o& the land The Cnowledge of 5ares concerning the alleged !re+ious donation is immaterial. The facts are clear that the original certificate of title itself co+ers the whole of 20$88; s9uare meters of the dis!uted ,ot 1&00 in the name of <Blena 5a+era$ et al.=$ without any mention of any !re+ious donation of a !ortion of the said lot to the alleged donee. ',00
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7ietes v. CA, 41 SCRA 104 ',(0
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Noel v CA 'G # No /.//0 6anuary ((+ (../ 0 Mercado +. -' K .7. 5o. 00030. .anuary 11$ 188;.L "irst )i+ision$ Uuiason (.)4 & concur 3actsH regorio 5anaman and 1ilaria Tabuclin were a childless$ legally%married cou!le. regorio$ howe+er$ had a child named Virgilio 5anaman by another woman. Virgilio was reared by the 5anaman s!ouses since he was two years old. )uring their marriage$ regorio and 1ilaria ac9uired certain !ro!erty including a 3&.3% hectare land in Tambo$ :ligan -ity on which they !lanted sugarcane$ corn and bananasG where they li+ed with Virgilio and 1; tenants. 6n 2 6ctober 18&;$ regorio died. 1ilaria then administered the !ro!erty with the hel! of Virgilio. Through their tenants$ 1ilaria and Virgilio enAoyed the !roduce of the land to the e2clusion of .uan 5anaman$ the brother of regorio$ and Bs!eranza and -aridad 5anaman$ regorio?s daughters by still another woman. :n 18;3$ Virgilio declared the !ro!erty in his name for ta2ation !ur!oses under Ta2 )eclaration ;;3&. 6n 1 5o+ember 18;2$ 1ilaria and Virgilio$ mortgaged the 3&.3%hectare land in fa+or of .ose -. )eleste$ in consideration of the amount of (&$@00.00. 6n 10 "ebruary 18;&$ 1ilaria and Virgilio e2ecuted a deed of sale o+er the same tract of land also in fa+or of )eleste in consideration of the sum of (10$000.00. >itnesses to the sale were the wife of Virgilio$ 7osita #. 5anaman$ 7ufo -. #alas ()eleste?s dri+er)$ and 7emedios (ilotan. The document was notarized on 13 "ebruary 18;& and was registered with the 7egister of )eeds of :ligan -ity on 2 March 18;&. 1a+ing disco+ered that the !ro!erty was in arrears in the !ayment of ta2es from 18;2$ )eleste !aid the ta2es for 18;2$ 18;3 and 18;&. "rom then on$ )eleste has !aid the ta2es on the !ro!erty. 6n 1; May 18;&$ 1ilaria died. 6n 23 6ctober 18;&$ Bs!eranza and -aridad 5anaman filed intestate estate !roceedings concerning the estate of their father$ regorio. 's only Bs!eranza$ -aridad and Virgilio 5anaman were named as heirs of regorio in the !etition$ .uan 5anaman o!!osed it. 6n 20 5o+ember 18;&$ the !etition was amended to include the estate of 1ilaria with 'leAo Tabuclin$ 1ilaria?s brother$ and .ulio Tabuclin$ a son of 1ilaria?s deceased brother$ .ose$ as additional !etitioners. 1a+ing been a!!ointed s!ecial administrator of the estate of the 5anaman cou!le$ .uan 5anaman included the 3&.3% hectare land in the list of the assets of the estate. 6n 10 .une 18;0$ when Bdilberto 5oel tooC o+er as regular administrator of the estate$ he was not able to taCe !ossession of the land in 9uestion because it was in the !ossession of )eleste and some heirs of 1ilaria. 6n 1@ .uly 18;3$ )eleste and the heirs of the 5anaman s!ouses e2ecuted an amicable settlement of the 5anaman estate. :n the document$ )eleste agreed <to relin9uish his rights to P of the entire !arcel of land in Tambo$ :ligan -ity sold to him by 1ilaria Tabuclin$ in fa+or of all the heirs of the intestate estate for the reason that not all of the heirs of regorio 5anaman ha+e signed and agreed. The court a!!ro+ed the amicable settlement but when it was 9uestioned by some heirs$ the court set aside its a!!ro+al and declared it null and +oid. The court thereafter ordered 5oel$ as regular administrator$ to file an action to reco+er the 3&.3%hectare land from )eleste. -onse9uently$ on 30 '!ril 1803$ 5oel filed an action against )eleste for the re+ersion of title o+er the 3&.3%hectare land to the 5anaman estate and to order )eleste to !ay the rentals and attorney?s fees to the estate. 6n 1& )ecember 1833$ the trial court rendered a decision$ holding that the action for annulment of the deed of sale had !rescribed in 18;@ inasmuch as the sale was registered in 18;& and that regorio?s heirs had sle!t on their rights by allowing 1ilaria to e2ercise rights of ownershi! o+er regorio?s share of the conAugal !ro!erty after his death in 18&;. 5oel a!!ealed to the -ourt of '!!eals. 6n 1@ "ebruary 18@0$ the a!!ellate court ruled that the transaction between 1ilaria and Virgilio$ and )eleste$ was indeed a sale. :t found that no fraud$ mistaCe or misre!resentation attended in the e2ecution of the deed of sale and that no !roof was shown that the contract was merely a mortgage. The a!!ellate court$ howe+er$ agreed with 5oel that 1ilaria could not +alidly sell the 33.3%hectare land because it was conAugal !ro!erty$ and 1ilaria could sell only her P share thereof. The -ourt also ruled that the !rescri!ti+e !eriod of 10 years had not yet ela!sed when the action to reco+er the !ro!erty was filed in 1803.G and held that in the absence of !roof of ad+erse !ossession by 1ilaria$ she should be considered as holding the !ro!erty !ursuant to her usufructuary rights o+er the same
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under the !ro+isions of the #!anish -i+il -ode of 1@@8$ the law in force at the time of the death of regorio. The -ourt further ordered )eleste to return the land in 9uestion to the administrator of the estate$ to !ay the sum of (2$;00 as rental of the P interest of the estate from 18;3 until the land is returned$ and to !ay the e2!enses of litigation and the sum of (3$000 as attorney?s fees. )eleste filed a motion for the reconsideration of said decision !raying for the total affirmance of the decision of the trial court. 6n 1& May 18@1$ the -ourt of '!!eals !romulgated an amended decision. :t affirmed its !re+ious decision regarding the due e2ecution of the deed of sale adding that since no fraud attended its e2ecution$ there was no basis for the action to annul the sale and therefore there was no starting !oint in recConing the !rescri!ti+e !eriod of four years. :t reconsidered the )ecision of 1@ "ebruary 18@0 insofar as it declared )eleste and the estate of regorio as co%owners of the 3&.3%hectare land. (inito >. Mercado$ as new administrator of the estate$ a!!ealed to the #u!reme -ourt$ 9uestioning the -ourt of '!!eals? 'mended )ecision a!!lying the doctrine of laches and e9uating the said doctrine with ac9uisiti+e !rescri!tion ( 7 ;8;;0). #ubse9uently$ another !etition for certiorari to declare the sale to )eleste as an e9uitable mortgage$ was filed by 'tty. /onifacio ,egas!i$ re!resenting the heirs of 1ilaria ( 7 00030). The two cases$ arising from the same decision of the -ourt of '!!eals$ were consolidated in the resolution of 2 #e!tember 1881 and were Aointly considered. The #u!reme -ourt re+ersed and set aside the amended decision dated 1& May 18@1 of the -ourt of '!!eals$ and reinstated and affirmed in toto the )ecision dated 1@ "ebruary 18@0. ( Seemin$ly inade=uate consideration does not render a contract o& sale as one o& mort$a$e The contract in+ol+ing the 3&.3%hectare !ro!erty was one of sale and not of mortgage in the absence of a showing that the findings com!lained of are totally de+oid of su!!ort in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion &An8#es v. !anu"actu#e#s Banove# F #ust Co#,o#ation, %$$ SCRA 1%8 [%'8'](. :t should be noted that two contracts had been e2ecuted in+ol+ing said !ro!erty (the 1 5o+ember 18;2 mortgage and the 10 "ebruary 18;& sale). :n the absence of !roof of gross inade9uacy of the !rice$ that the sale was made with what might a!!ear as an inade9uate consideration does not maCe the contract one of mortgage &As/ay v. Cosalan, 41 *+il. %$' [%'24](. 2 Succession in the "resent case $overned by the Civil Code o& ()). regorio died in 18&; long before the effecti+ity of the -i+il -ode of the (hili!!ines on 30 'ugust 18;0. *nder 'rticle 2203 of the said -ode$ <rights to the inheritance of a !erson who died$ with or without a will$ before the effecti+ity of this -ode$ shall be go+erned by the -i+il -ode of 1@@8$ by other !re+ious laws$ and by the 7ules of -ourt.= Thus$ succession to the estate of regorio was go+erned !rimarily by the !ro+isions of the #!anish -i+il -ode of 1@@8. 3 ()). Civil Code? Ji&e has &ull oBnershi" o& undivided hal&-interest and the usu&ruct over the other? #i$ht to alienate hal&-interest *nder 'rticle 8;3 thereof$ a s!ouse liCe 1ilaria$ who is sur+i+ed by brothers or sisters or children of brothers or sisters of the decedent was entitled to recei+e in usufruct the !art of the inheritance !ertaining to said heirs. 1ilaria$ howe+er$ had full ownershi!$ not merely usufruct$ o+er the undi+ided half of the estate (#!anish -i+il -ode of 1@@8$ 'rt. &83). :t is only this undi+ided half%interest that she could +alidly alienate. *nder the law in force in 18&;$ the sur+i+ing s!ouse was gi+en the management of the conAugal !ro!erty until the affairs of the conAugal !artnershi! were terminated. The sur+i+ing s!ouse became the owner of one% half interest of the conAugal estate in his own right. 1e also became a trustee with res!ect to the other half for
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the benefit of whoe+er may be legally entitled to inherit the said !ortion. * ()). Civil Code? Vir$ilio is not a heir o& Gre$orio+ bein$ ille$itimate? No ri$ht to trans&er oBnershi"
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Virgilio was not an heir of regorio under the #!anish -i+il -ode of 1@@8. 'lthough he was treated as a child by the 5anaman s!ouses$ illegitimate children who were not natural were dis9ualified to inherit under the said -ode &Ci8 v. .u#na6an, 24 SCRA 434 [%'18](. 'rticle 88@ of the -i+il -ode of the (hili!!ines$ which ga+e an illegitimate child certain hereditary rights$ could not benefit Virgilio because the right of ownershi! of the collateral heirs of regorio had become +ested u!on his death &Civil Co8e o" t+e *+ili,,ines, A#t. 2203D <son v. Del Rosa#io, '2 *+il. 030 [%'03]( . Therefore$ Virgilio had no right at all to transfer ownershi! o+er which he did not own. / Contract o& sale? essential that seller is the oBner o& the "ro"erty :n a contract of sale$ it is essential that the seller is the owner of the !ro!erty he is selling. The !rinci!al obligation of a seller is <to transfer the ownershi! of= the !ro!erty sold (-i+il -ode of the (hili!!ines$ 'rt. 1&;@). This law stems from the !rinci!le that nobody can dis!ose of that which does not belong to him &Azcona v. Reyes, 0' *+il. 441 [%'34]D Co#onel v. 3na, 33 *+il. 401 [%'%1]( . 5BM6 )'T U*') 565 1'/BT . 5 Mistake attended sale o& undivided interest in "ro"erty belon$in$ to the collateral heirs o& Gre$orio >hile it cannot be said that fraud attended the sale to )eleste$ clearly there was a mistaCe on the !art of 1ilaria and Virgilio in selling an undi+ided interest in the !ro!erty which belonged to the collateral heirs of regorio. , !urchaser is a trustee o& an im"lied trust i& "ro"erty is ac=uired by mistake or &raud The sale$ ha+ing been made in 18;&$ was go+erned by the -i+il -ode of the (hili!!ines. *nder 'rticle 1&;0 of said -ode$ an im!lied trust was created on the one%half undi+ided interest o+er the 3&.3% hectare land in fa+or of the real owners. #aid 'rticle !ro+ides that <if the !ro!erty is ac9uired through mistaCe or fraud$ the !erson obtaining it is$ by force of law$ considered a trustee of an im!lied trust for the benefit of the !erson from whom the !ro!erty comes.= :n Dia0 v. "orricho$ 103 (hil. 201 (18;@)$ the -ourt said that 'rticle 1&;0 merely e2!resses a rule recognized in "ayon$ato v. .nsular +reasurer$ &8 (hil. 2&& (1820). '!!lying said rule$ the ayondato court held that the buyer of a !arcel of land at a !ublic auction to satisfy a Audgment against a widow ac9uired only one%half interest on the land corres!onding to the share of the widow and the other half belonging to the heirs of her husband became im!ressed with a constructi+e trust in behalf of said heirs. ) Survivin$ s"ouse cannot ac=uire a title by "rescri"tion over said administered hal& /eing a trustee with res!ect to the other half for the benefit of whoe+er may be legally entitled to inherit the said !ortion$ the sur+i+ing s!ouse <could therefore no more ac9uire a title by !rescri!tion against those for whom he was administering the conAugal estate than could a guardian against his ward or a Audicial administrator against the heirs of an estate. The sur+i+ing husband as the administrator and li9uidator of the conAugal estate occu!ies the !osition of a trustee of the highest order and is not !ermitted by the law to hold that estate or any !ortion thereof ad+ersely to those for whose benefit the law im!oses u!on him the duty of administration and li9uidation= &*a6ittan v. 5asa6, 10 *+il. '08 [%'34](. . Vir$ilioMs "ossession not under the claim o& oBnershi" The !ossession of Virgilio$ his registration of the land in his name for ta2 !ur!oses$ his hiring of tenants to till the land$ and his enAoyment of the !roduce of the tenants$ a!!ear more as acts done to hel! 1ilaria in managing the conAugal !ro!erty. There is no e+idence to !ro+e indubitably that Virgilio asserted a claim of ownershi! o+er the !ro!erty in his own right and ad+erse to all including 1ilaria. (0 ;aches do not a""ly? -octrine cannot "re@udice the ri$hts o& an oBner or ori$inal trans&eree The doctrine of laches does not a!!ly. *!on orders of the court in the intestate !roceedings$ 5oel$ the administrator of the estate of the 5anaman s!ouses$ immediately filed an action to reco+er !ossession
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and
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ownershi! of the !ro!erty. There is no e+idence showing any failure or neglect on his !art$ for an unreasonable and une2!lained length of time$ to do that which$ by e2ercising due diligence$ could or should ha+e been done earlier &C#istobal v. !elc+o#, $8 SCRA %$0 [%'$$]( . The doctrine of stale demands would a!!ly only where by reason of the la!se of time$ <KiLt would be ine9uitable to allow a !arty to enforce his legal rights= &J.E. 5ot+o, -nc. v. -ce an8 Col8 Sto#age -n8ust#ies o" t+e *+ili,,ines, -nc., 3 SCRA $44 [%'1%]( . Moreo+er$ this -ourt$ e2ce!t for +ery strong reasons$ is not dis!osed to sanction the a!!lication of the doctrine of laches to !reAudice or defeat the rights of an owner or original transferee &Raneses v. -nte#6e8iate A,,ellate Cou#t, %8$ SCRA 3'$ [%''0](. (( !rescri"tion is ten years in an action to recover the undivided hal&interest The action to reco+er the undi+ided half%interest of the collateral heirs of regorio !rescribes in 10 years. The cause of action is based on 'rticle 1&;0 of the -i+il -ode of the (hili!!ines$ which made )eleste a trustee of an im!lied trust in fa+or of the said heirs. *nder 'rticle 11&& of the -i+il -ode of the (hili!!ines$ actions based u!on an obligation created by law$ can be brought within ten years from the time the right of action accrues &Rosa#io v. Au8ito# ;ene#al, %03 *+il. %%32 [%'08](. The 10%year !rescri!ti+e !eriod within which the collateral heirs of regorio could file an action to reco+er their share in the !ro!erty sold to )eleste (!rescri!cion e2tinti+a) accrued only on 2 March 18;&$ when the deed of sale was registered with the 7egister of )eeds &C". A##a8aza v. Cou#t o" A,,eals, %$0 SCRA %2 [%'8$]( . "rom 2 March 18;& to 30 '!ril 1803$ when the com!laint for the reco+ery of the !ro!erty was filed$ less than 10 years had ela!sed. Therefore$ the action had not been barred by !rescri!tion. The 10%year !rescri!ti+e !eriod before title to real estate shall +est by ad+erse !ossession (!rescri!cion ad9uisiti+a) is also recConed in the case of )eleste from 2 March 18;& &Co#,o#acion 8e **. Agustinos Recoletos v. C#isosto6o, 32 *+il. 42$ [%'%0](. ',20 S"ouses Nonato vs 8AC 'G # No ;-5,()( November 22+ (.)/ 0 #econd )i+ision$ Bscolin (.)4 & concur 3actsH 6n 2@ .une 1830$ s!ouses 7estituto 5onato and Bster 5onato !urchased 1 unit of VolCswagen #aCbayan from the (eo!le?s -ar$ :nc.$ on installment basis. To secure com!lete !ayment$ they e2ecuted a !romissory note and a chattel mortgage in fa+or of (eo!le?s -ar$ :nc. (eo!le?s -ar$ :nc.$ assigned its rights and interests o+er the note and mortgage in fa+or of :n+estor?s "inance -or!oration (:"-). "or failure of the s!ouses to !ay two or more installments$ des!ite demands$ the car was re!ossessed by :"- on 20 March 183@. )es!ite re!ossession$ :"- demanded from the s!ouses that they !ay the balance of the !rice of the car. 6n 8 .une 183@$ :"- filed before the -": 5egros 6ccidental a com!laint against the s!ouses for the latter to !ay the balance of the !rice of the car$ with damages and attorney?s fees. :n their answer$ the s!ouses alleged by way of defense that when the com!any re!ossessed the +ehicle$ it had$ by that act$ effecti+ely cancelled the sale of the +ehicle. :t is therefore barred from e2acting reco+ery of the un!aid balance of the !urchase !rice$ as mandated by the !ro+isions of 'rticle 1&@& of the -i+il -ode. The trial court$ howe+er$ after due hearing$ rendered a decision in fa+or of :"-$ ordering the s!ouses to !ay :"- the amount of (13$;33.00 with interest at the rate of 1&I !er annum from 2@ .uly 1830 until fully !aid$ 10I of the amount due as attorney?s fees$ litigation e2!enses in the amount of (133.0; !lus the costs of the suitG without any !ronouncement as to other charges and damages$ the same not ha+ing been !ro+en to the satisfaction of the -ourt. 6n a!!eal$ the a!!ellate court affirmed the Audgment. 1ence$ the !etition for re+iew on certiorari.
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The #u!reme -ourt set aside the Audgment of the a!!ellate court in -'% 7 08230%7 and dismissed the com!laint filed by :n+estors "inance -or!oration against the 5onato s!ouses in -i+il -ase 13@;2G without costs.
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( Article (*)* o& the Civil Code? #emedies available to vendor o& "ersonal "ro"erty in sale "ayable in installments 'rticle 1&@& of the -i+il -ode (on sale of !ersonal !ro!erty on installment) !ro+ides that <:n a contract of sale of !ersonal !ro!erty the !rice of which is !ayable in installments$ the +endor may e2ercise any of the following remedies4 (1) B2act fulfillment of the obligation$ should the +endee fail to !ayG (2) -ancel the sale$ should the +endee?s failure to !ay co+er two or more installmentsG (3) "oreclose the chattel mortgage on the thing sold$ if one has been constituted$ should the +endee?s failure to !ay co+er two or more installments. :n this case$ he shall ha+e no further action against the !urchaser to reco+er any un!aid balance of the !rice. 'ny agreement to the contrary shall be +oid.= 2 Meanin$ o& Article (*)* The meaning of the !ro+ision has been re!eatedly enunciated in a long line of cases. ThusG <#hould the +endee or !urchaser of a !ersonal !ro!erty default in the !ayment of two or more of the agreed installments$ the +endor or seller has the o!tion to a+ail of any of these three remedies J either to e2act fulfillment by the !urchaser of the obligation$ or to cancel the sale$ or to foreclose the mortgage on the !urchased !ersonal !ro!erty$ if one was constituted. These remedies ha+e been recognized as alternati+e$ not cumulati+e$ that the e2ercise of one would bar the e2ercise of the others.= 3 #e"ossession an e4ercise o& cancelin$ the contract o& sale not merely to a""raise the carMs value :t is not dis!uted that the com!any had taCen !ossession of the car !urchased by the 5onatos on installments. >hile the 5onatos maintain that the com!any had$ by that act$ e2ercised its o!tion to cancel the contract of sale$ the com!any contends that the re!ossession of the +ehicle was only for the !ur!ose of a!!raising its +alue and for storage and safeCee!ing !ending full !ayment by the 5onatos of the !urchasing !rice. The records show otherwise. The recei!t issued by the com!any to the 5onatos when it tooC !ossession of the +ehicle states that the +ehicle could be redeemed within 1; days. This could only mean that should the s!ouses fail to redeem the car within the !eriod by !aying the balance of the !urchase !rice$ the com!any would retain !ermanent !ossession of the +ehicle. The assertion that the com!any re!ossessed the +ehicle merely for the !ur!ose of a!!raising its current +alue is untenable$ for e+en after it had notified the 5onatos that the +alue of the car was not sufficient to co+er the balance of the !urchase !rice$ there was no attem!t at all on the !art of the com!any to return the re!ossessed car. * Cancellation o& contract bars com"any &rom e4actin$ "ayment o& balance The acts !erformed by the cor!oration are wholly consistent with the conclusion that it had o!ted to cancel the contract of sale of the +ehicle. :t is thus barred from e2acting !ayment from !etitioners of the balance of the !rice of the +ehicle which it had already re!ossessed. :t cannot ha+e its caCe and eat it too. ',30 Nool v CA 'G # No ((553/ 6uly 2*+ (.., 0 Third )i+ision$ (anganiban (.)4 & concur 3actsH 6ne lot formerly owned by Victorio 5ool (T-T T%3&8;0) has an area of 1 hectare. 'nother lot !re+iously owned by "rancisco 5ool (T-T T%1008&;) has an area of 3.0@@0 hectares. /oth !arcels are situated in #an Manuel$ :sabela. #!ouses -onchita 5ool and audencio 'lmoAera ( plaintiffs) allege$ that they are the owners of the subAect land as they bought the same from Victorio and "rancisco 5ool$ and that as they are in dire need of money$ they obtained a loan from the :lagan /ranch of the )/( (:lagan$ :sabela)$
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secured by a real estate mortgage on said !arcels of land$ which were still registered in the names of Victorino and "rancisco 5ool$ at the time$ and for the failure of the !laintiffs to !ay the said loan$ including interest and surcharges$ totaling (;0$000.00$ the mortgage was foreclosedG that within the !eriod of redem!tion$ the !laintiffs contacted 'nacleto 5ool for the latter to redeem the foreclosed !ro!erties from )/($ which the latter didG and as a result$ the titles of the 2 !arcels of land in 9uestion were transferred to 'nacletoG that as
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!art of their arrangement or understanding$ 'nacleto agreed to buy from -onchita the 2 !arcels of land under contro+ersy$ for a total !rice of (100$000.00$ (30$000.00 of which !rice was !aid to -onchita$ and u!on !ayment of the balance of (1&$000.00$ the !laintiffs were to regain !ossession of the 2 hectares of land$ which amounts s!ouses 'nacleto 5ool and Bmilia 5ebre (defendants) failed to !ay$ and the same day the said arrangement was madeG another co+enant was entered into by the !arties$ whereby the defendants agreed to return to !laintiffs the lands in 9uestion$ at anytime the latter ha+e the necessary amountG that latter asCed the defendants to return the same but des!ite the inter+ention of the /arangay -a!tain of their !lace$ defendants refused to return the said !arcels of land to !laintiffsG thereby im!elling the !laintiffs to come to court for relief. 6n the other hand$ $efen$ants theori0e$ that they ac9uired the lands in 9uestion from the )/($ through negotiated sale$ and were misled by !laintiffs when defendant 'nacleto 5ool signed the !ri+ate writing$ agreeing to return subAect lands when !laintiffs ha+e the money to redeem the sameG defendant 'nacleto ha+ing been made to belie+e$ then$ that his sister$ -onchita$ still had the right to redeem the said !ro!erties. :t should be stressed that Manuel #. Mallorca$ authorized officer of )/($ certified that the 1%year redem!tion !eriod (from 10 March 18@2 u! to 1; March 18@3) and that the mortgagors? right of redem!tion was not e2ercised within this !eriod. 1ence$ )/( became the absolute owner of said !arcels of land for which it was issued new certificates of title$ both entered on 23 May 18@3 by the 7egistry of )eeds for the (ro+ince of :sabela. 'bout 2 years thereafter$ on 1 '!ril 18@;$ )/( entered into a )eed of -onditional #ale in+ol+ing the same !arcels of land with 'nacleto 5ool as +endee. #ubse9uently$ the latter was issued new certificates of title on @ "ebruary 18@@. The trial court ruled in fa+or of the defendants$ declaring the !ri+ate writing to be an o!tion to sell$ not binding and considered +alidly withdrawn by the defendants for want of considerationG ordering the !laintiffs to return to the defendants the sum of (30$000.00 !lus interest thereon at the legal rate$ from the time of filing of defendants? counterclaim until the same is fully !aidG to deli+er !eaceful !ossession of the 2 hectaresG and to !ay reasonable rents on said 2 hectares at (;$000.00 !er annum or at (2$;00.00 !er cro!!ing from the time of Audicial demand until the said lots shall ha+e been deli+ered to the defendantsG and to !ay the costs. The !laintiffs a!!ealed to the -ourt of '!!eals (-' 7 -V 30&33)$ which affirmed the a!!ealed Audgment in toto on 20 .anuary 1883. 1ence$ the !etition before the #u!reme -ourt. The #u!reme -ourt denied the !etition$ and affirmed the assailed decision of the -ourt of '!!eals. ( valid Contract o& re"urchase arisin$ out o& a contract o& sale Bhere the seller does not have title not
' contract of re!urchase arising out of a contract of sale where the seller did not ha+e any title to the !ro!erty <sold= is not +alid. #ince nothing was sold$ then there is also nothing to re!urchase. 2 Article (3,0 NCC a""licable only to valid and en&orcement contracts 'rticle 1330 of the -i+il -ode$ which !ro+ides that <if the terms of a contract are clear and lea+e no doubt u!on the intention of the contracting !arties$ the literal meaning of its sti!ulations shall control$= is a!!licable only to +alid and enforceable contracts. 3 A void contract cannot $ive rise to a valid one ' +oid contract cannot gi+e rise to a +alid one. 'rticle 1&22 of the -i+il -ode !ro+ides that <a contract which is the direct result of a !re+ious illegal contract$ is also +oid and ine2istent.= :n the !resent case. the alleged contract of re!urchase being de!endent on the +alidity of the contract of sale$ it is itself +oid. Thus$ the !rinci!al contract of sale and the au2iliary contract of re!urchase are both +oid.
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* Clari&ication o& Isale o& "ro"erty+ Bhen seller is no lon$er the oBner+ null and voidK? Sale "ossible even i& oBner is not oBner at time o& sale+ "rovided that he ac=uires title to the "ro"erty at time o& delivery
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:n the case of )ignos +. -'$ the -ourt did not cite its basis for ruling that a <sale is null and +oid= where the sellers <were no longer the owners= of the !ro!erty. #uch a situation (where the sellers were no longer owners) does not a!!ear to be one of the +oid contracts enumerated in 'rticle 1&08 of the -i+il -ode. Moreo+er$ the -i+il -ode itself recognizes a sale where the goods are to be <ac9uired by the seller after the !erfection of the contract of sale$= clearly im!lying that a sale is !ossible e+en if the seller was not the owner at the time of sale$ !ro+ided he ac9uires title to the !ro!erty later on. / Void contracts FArticle (*0. '/0G? those Bhich contem"lates an im"ossible service 'rticle 1&;8 of the -i+il -ode !ro+ides that <the +endor must ha+e a right to transfer the ownershi! thereof KobAect of the saleL at the time it is deli+ered.= 1ere$ deli+ery of ownershi! is no longer !ossible. The sellers can no longer deli+er the obAect of the sale to the buyers$ as the buyers themsel+es ha+e already ac9uired title and deli+ery thereof from the rightful owner$ the )/(. Thus$ such contract may be deemed to be ino!erati+e and may thus fall$ by analogy$ under item ; of 'rticle 1&08 of the -i+il -ode4 <Those which contem!late an im!ossible ser+ice.= 5 Nono dat =uod non habet+ No one can $ive Bhat he does not have? Contract o& re"urchase ino"erative thus void 'rticle 1;0; of the -i+il -ode !ro+ides that <where goods are sold by a !erson who is not the owner thereof$ and who does not sell them under authority or with consent of the owner$ the buyer ac9uires no better title to the goods than the seller had$ unless the owner of the goods is by his conduct !recluded from denying the seller?s authority to sell.= .uris!rudence$ on the other hand$ teaches us that <a !erson can sell only what he owns or is authorized to sellG the buyer can as a conse9uence ac9uire no more than what the seller can legally transfer.= 5o one can gi+e what he does not ha+e J nono dat 9uod non habet. :n the !resent case$ there is no allegation at all that !etitioners were authorized by )/( to sell the !ro!erty to the !ri+ate res!ondents. "urther$ the contract of re!urchase that the !arties entered into !resu!!oses that !etitioners could re!urchase the !ro!erty that they <sold= to !ri+ate res!ondents. 's !etitioners <sold= nothing$ it follows that they can also <re!urchase= nothing. :n this light$ the contract of re!urchase is also ino!erati+e and by the same analogy$ +oid. , #i$ht to re"urchase "resu""oses a valid contract o& sale 6ne <re!urchases= only what one has !re+iously sold. :n other words$ the right to re!urchase !resu!!oses a +alid contract of sale between the same !arties. *ndis!utedly$ !ri+ate res!ondents ac9uired title to the !ro!erty from )/($ and not from !etitioners. ) Ar$uendo+ Scenario Bhere the Contract o& re"urchase distinct &rom that o& sale? !etitions still do not ac=uire a ri$ht to re"urchase the "ro"erty? Dnilateral "romise to "ay only bindin$ i& su""orted by consideration distinct &rom "rice 'ssuming arguendo that the contract of re!urchase is se!arate and distinct from the contract of sale and is not affected by the nullity of the latter$ still !etitioners do not thereby ac9uire a right to re!urchase the !ro!erty. :n that scenario$ the contract of re!urchase ceases to be a <right to re!urchase= ancillary and incidental to the contract of saleG rather$ it becomes an acce!ted unilateral !romise to sell. 'rticle 1&38 of the -i+il -ode$ howe+er$ !ro+ides that <an acce!ted unilateral !romise to buy or sell a determinate thing for a !rice certain is binding u!on the !romissor if the !romise is su!!orted by a consideration distinct from the !rice.= :n the !resent case$ the alleged written contract of re!urchase is bereft of any consideration distinct from the !rice. 'ccordingly$ as an inde!endent contract$ it cannot bind !ri+ate res!ondents. . Conventional redem"tion? Com"liance Bith Article (5(5 and other a$reed sti"ulations 'rticle 1001 of the -i+il -ode !ro+ides that <con+entional redem!tion shall taCe !lace when the
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+endor reser+es the right to re!urchase the thing sold$ with the obligation to com!ly with the !ro+isions of 'rticle 1010 and other sti!ulations which may ha+e been agreed u!on.?=
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(0 #i$ht o& re"urchase a ri$ht $ranted by vendor in the same instrument o& sale+ not in a subse=uent instrument :n 2illarica v. CA &2' 7ove6be# %'18(, the -ourt ruled that the right of re!urchase is not a right granted the +endor by the +endee is a subse9uent instrument$ but is a right reser+ed by the +endor in the same instrument of sale as one of the sti!ulations of the contract. 6nce the instrument of absolute sale is e2ecuted$ the +endor can no longer reser+e the right to re!urchase$ and any right thereafter granted the +endor by the +endee in a se!arate instrument cannot be a right of re!urchase but some other right (liCe the o!tion to buy). (( Sale+ Bithout a$reement to re"urchase+ absolute :n 1a#os, et al. vs. .casiano, et al. (1823) the -ourt ruled that <an agreement to re!urchase becomes a !romise to sell when made after the sale$ because when the sale is made without such an agreement$ the !urchaser ac9uires the thing sold absolutely. and if he afterwards grants the +endor the right to re!urchase$ it is a new contract entered into by the !urchaser$ as absolute owner already of the obAect. :n that case the +endor has not reser+ed to himself the right to re!urchase. (2 (*,. 2"tion to re"urchase a "romise to sell+ $overned by Article
The 6!tion to 7e!urchase e2ecuted by !ri+ate res!ondent in the !resent case$ was merely a !romise to sell$ which must be go+erned by 'rticle 1&38 of the -i+il -ode which !ro+ides that <a !romise to buy and sell a determinate thing for a !rice certain is reci!rocally demandable. 'n acce!ted unilateral !romise to buy or to sell a determinate thing for a !rice certain is binding u!on the !romissor if the !romise is su!!orted by a consideration distinct from the !rice.= (3 Ar$uendo+ Section ((. o& !ublic ;and Act The brothers Victorino and "rancisco 5oel$ together with -onchita 5ool and 'nacleto 5ool$ were all siblings and heirs 9ualified to re!urchase the two !arcels of land under #ection 118 of the (ublic ,and 'ct which !ro+ides that <(e)+ery con+eyance of land ac9uired under the free !atent or homestead !ro+isions$ when !ro!er$ shall be subAect to re!urchase by the a!!licant$ his widow or legal heirs$ within a !eriod of ; years from the date of con+eyance.= 'ssuming the a!!licability of this statutory !ro+ision to the !resent case$ it is indis!utable that 'nacleto 5ool already re!urchased from )/( the contested !ro!erties. 1ence$ there was no more right of re!urchase that his sister -onchita or brothers Victorino and "rancisco could e2ercise. The !ro!erties were already owned by an heir of the homestead grantee and the rationale of the !ro+ision to Cee! homestead lands within the family of the grantee was thus fulfilled. (* ActionL-e&ense &or the declaration o& an ine4istent contract does not "rescribe? Validity o& a contract cannot be ac=uired throu$h esto""el The !ri+ate res!ondents cannot be esto!!ed from raising the defense of nullity of contract$ s!ecially in this case where they acted in good faith$ belie+ing that indeed !etitioners could sell the two !arcels of land in 9uestion. 'rticle 1&10 of the -i+il -ode mandates that <the action or defense for the declaration of the ine2istence of a contract does not !rescribe.= :t is a well%settled doctrine that <as between !arties to a contract$ +alidity cannot be gi+en to it by esto!!el if it is !rohibited by law or it is against !ublic !olicy. :t is not within the com!etence of any citizen to barter away what !ublic !olicy by law seeCs to !reser+e.= Thus$ it is immaterial that !ri+ate res!ondents initially acted to im!lement the contract of sale$ belie+ing in good faith that the same was +alid. ' contract +oid at ince!tion cannot be +alidated by ratification or !rescri!tion and certainly cannot be binding on or enforceable against !ri+ate res!ondents. (/ rent !etitioners re=uired to return sum o& !30+000 Bith interest and to "ay The balance of (1&$000.00 under the +oid contract of sale may not be enforced. (etitioners are the
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ones who ha+e an obligation to return what they unduly and im!ro!erly recei+ed by reason of the in+alid contract of sale. #ince they cannot legally gi+e title to what they <sold$= they cannot Cee! the money !aid for the obAect of the sale. :t is basic that <e+ery !erson who through an act of !erformance by another$ or any other means$ ac9uires or comes into !ossession of something at the e2!ense of the latter without Aust or legal
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ground$ shall return the same.= Thus$ if a +oid contract has already <been !erformed$ the restoration of what has been gi+en is in order.= (5 8nterest runs &rom the time tolerance ceased u"on counterclaim :nterest to the amount will run only from the time of !ri+ate res!ondents? demand for the return of this amount in their counterclaim$ for the !etitioners? !ossession and culti+ation of the two hectares are anchored on !ri+ate res!ondents? tolerance. The latter?s tolerance ceased u!on their counterclaim and demand on the former to +acate. 1ence$ their right to !osses and culti+ate the land i!so facto ceased. ',*0 Northern Motors vs Sa"inoso 'G # No ;-2)0,* May 2.+ (.,0 0 Bn /anc$ Villamor (.)4 3 concur$ 1 concur in result$ 1 on lea+e of absence 3actsH 6n & .une 180;$ -asiano #a!inoso !urchased from 5orthern Motors$ :nc. an 6!el Eadett car for the !rice of (12$131.00$ maCing a down !ayment and e2ecuting a !romissory note for the balance of (10$;&0.00 !ayable in installments with interest at 12I !er annum$ as follows4 (301.00 on ; .uly 180;$ and (3;1.00 on the ;th day of each month beginning 'ugust 180;$ u! to and including )ecember$ 1803. To secure the !ayment of the !romissory note$ #a!inoso e2ecuted in fa+or of 5orthern Motors$ :nc. a chattel mortgage on the car. The mortgage contract !ro+ided$ among others$ that u!on default by the mortgagor in the !ayment of any !art of the !rinci!al or interest due$ the mortgagee may elect any of the following remedies4 (a) sale of the car by the mortgageeG (b) cancellation of the contract of saleG (c) e2traAudicial foreclosureG (d) Audicial foreclosureG (e) ordinary ci+il action to e2act fulfillment of the mortgage contract. :t was further sti!ulated that <KwLhiche+er remedy is elected by the mortgagee$ the mortgagor e2!ressly wai+es his right to reimbursement by the mortgagee of any and all amounts on the !rinci!al and interest already !aid by him.= #a!inoso failed to !ay the first installment of (301.00 due on ; .uly 180;$ and the second$ third$ fourth and fifth installments of (3;1.00 each due on the ;th day of 'ugust$ #e!tember$ 6ctober and 5o+ember$ 180;$ res!ecti+ely. #e+eral !ayments were$ howe+er$ made by #a!inoso$ to wit4 (;30.;2 on 21 5o+ember 180;$ (&@0.00 on 21 )ecember 180;$ and (&00.00 on 30 '!ril 1800. The first and third !ayments aforesaid were a!!lied to accrued interest u! to 13 '!ril 1800$ while the second !ayment was a!!lied !artly ((1;@.10) to interest$ and !artly ((321.80) to the !rinci!al$ thereby reducing the balance un!aid to (10$21@.10. #a!inoso ha+ing failed to maCe further !ayments$ 5orthern Motors$ :nc. filed a com!laint on 22 .uly 1800$ against #a!inoso and a certain !erson whose name$ identity and address were still unCnown to 5orthern Motors$ hence denominated in the com!laint as <.ohn )oe.= :n its com!laint$ 5orthern Motors$ :nc. stated that it was a+ailing itself of the o!tion gi+en it under the mortgage contract of e2traAudicially foreclosing the mortgage$ and !rayed that a writ of re!le+in be issued u!on its filing of a bond for the seizure of the car and for its deli+ery to itG that after hearing$ it be adAudged to ha+e the rightful !ossession and ownershi! of the carG that in default of deli+ery$ #a!inoso and <)oe= be ordered to !ay 5orthern Motors the sum of (10$21@.10 with interest at 12I !er annum from 1@ '!ril 1800$ until full !ayment of the said sum$ as well as an amount e9ui+alent to 2;I of the sum due as and for attorney?s fees and e2!enses of collection$ and the costs of the suit. 5orthern Motors also !rayed for such other remedy as might be deemed Aust and e9uitable in the !remises. #ubse9uent to the commencement of the action$ but before the filing of his answer$ #a!inoso made 2 !ayments on the !romissory note$ the first on 22 'ugust 1800$ for (;00.00$ and the second on 23 #e!tember 1800$ for (3;0.00. :n the meantime$ on 8 'ugust 1800$ u!on 5orthern Motor?s filing of a bond$ a writ of re!le+in was issued by the court. 6n 20 6ctober 1800$ co!ies of the summons$ com!laint and anne2es thereto were ser+ed on #a!inoso by the sheriff who e2ecuted the seizure warrant by seizing the car from #a!inoso on the same date$ and turning o+er its !ossession to the !laintiff on 2; 6ctober 1800. 'fter trial and on & '!ril 1803$ the trial court held that #a!inoso ha+ing failed to !ay more than 2 installments$ 5orthern Motors
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ac9uired the right to foreclose the chattel mortgage$ which it could a+ail of by filing an action of re!le+in to secure !ossession of the mortgaged car as a !reliminary ste! to the foreclosure sale contem!lated in the
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-hattel Mortgage ,awG and that the foreclosure of the chattel mortgage and the reco+ery of the un!aid balance of the !rice are alternati+e remedies which may not be !ursued conAuncti+ely$ so that in a+ailing itself of its right to foreclose the chattel mortgage$ 5orthern Mortors thereby renounced whate+er claim it may ha+e had on the !romissory note$ and$ therefore$ it has no more right to the collection of the attorney?s fees sti!ulated in the !romissory note$ and should return to #a!inoso the sum of (1$2;0.00 which 5orthern Motors had recei+ed from the latter after ha+ing filed the !resent case on 22 .uly 1800$ and elected to foreclose the chattel mortgage. )irect a!!eal was made by 5orthern Motors on 9uestions of law from the !ortion of the Audgment of the -": Manila$ /ranch RR:: (-i+il -ase 00188)$ ordering 5orthern Motors to !ay #a!inoso the sum of (1$2;0.00. The #u!reme -ourt modified the Audgment a!!ealed from by setting aside the !ortion thereof which orders 5orthern Motors to !ay #a!inoso the sum of (1$2;0.00$ with costs in this instance against #a!inoso. ( #e"levin as a "reliminary ste" to the &oreclosure sale :n issuing a writ of re!le+in$ and$ after trial$ in u!holding 5orthern Motors? right to the !ossession of the car$ and ratifying and confirming its deli+ery to the aforementioned$ the trial court correctly considered the action as one of re!le+in to secure !ossession of the mortgaged +ehicle as a !reliminary ste! to the foreclosure sale contem!lated in #ection 1& of 'ct 1;0@ (/achrach Motor -o. +s. #ummers$ &2 (hil.$ 3G #eMo +s. (estolante$ .7. 5o. ,%113;;$ '!ril 23$ 18;@). 2 note #e"levin does not bar seller &rom acce"tin$ &urther "ayments on the "romissory
The trial court erred in concluding that the legal effect of the filing of the action was to bar 5orthern Motors from acce!ting further !ayments on the !romissory note. 3 3act o& &oreclosure and actual sale o& mort$a$e chattel one that bars recovery o& outstandin$ balance That the ultimate obAect of the action is the foreclosure of the chattel mortgage$ is of no moment$ for it is the fact of foreclosure and actual sale of the mortgaged chattel that bar further reco+ery by the +endor of any balance on the !urchaser?s outstanding obligation not satisfied by the sale (Manila Motor -o.$ :nc. +s. "ernandez$ 88 (hil.$ 3@2$ 3@0G /achrach Motor -o. +s. Millan$ 01 (hil.$ &08G Manila Trading Q #u!!y -o. +s. 7eyes$ 02 (hil. &01$ &31G -ruz et al. +s. "ili!inas :n+estment Q "inance -or!oration$ .7. 5o. ,%2&332$ May 23$ 180@ K23 #-7' 381$ 380L.) * Article (*)* F3G? I3urther actionK to recover un"aid balance "rohibited? !rohibition does not "reclude voluntary "ayments >hat 'rticle 1&@&(3) !rohibits is <further action against the !urchaser to reco+er any un!aid balance of the !rice.= 'lthough the -ourt has construed the word <action= in said 'rticle 1&@& to mean <any Audicial or e2traAudicial !roceeding by +irtue of which the +endor may lawfully be enabled to e2act reco+ery of the su!!osed unsatisfied balance of the !urchase !rice from the !urchaser or his !ri+y= (-ruz$ et al. +s. "ili!inas :n+estment Q "inance -or!oration$ su!ra)$ there is no occasion at this stage to a!!ly the restricti+e !ro+ision of the said article$ because there has not yet been a foreclosure sale resulting in a deficiency. The !ayment of the sum of (1$2;0.00 by #a!inoso was a +oluntary act on his !art and did not result from a <further action= instituted by 5orthern Motors. :f the mortgage creditor$ before the actual foreclosure sale$ is not !recluded from reco+ering the un!aid balance of the !rice although he has filed an action of re!le+in for the !ur!ose of e2tra%Audicial foreclosure$ or if a mortgage creditor who has elected to foreclose but who subse9uently desists from !roceeding with the auction sale$ without gaining any ad+antage or benefit$ and without causing any
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disad+antage or harm to the +endee%mortgagor$ is not barred from suing on the un!aid account (7adiowealth$ :nc. +s. ,a+in$ et al.$ .7. 5o. ,%1@;03$ '!ril 23$ 1803 K3 #-7' @0&$ @03L)$ there is no reason why a mortgage creditor should be barred from acce!ting$ before a foreclosure sale$ !ayments +oluntarily tendered by the debtor%mortgagor who admits a subsisting indebtedness.
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',/0 38yssey *a#/ -nc. v. CA, 280 SCRA 203 &%''$( ',50 2n$ v CA 'G # No .,3*, 6uly 5+ (... 0 "irst di+ision$ Fnares%#antiago (.)4 & concur 3actsH 6n 10 May 18@3$ .aime 6ng and s!ouses Miguel and 'leAandra 7obles e2ecuted an <'greement of (urchase and #ale= res!ecting 2 !arcels of land situated at /arrio (uri$ #an 'ntonio$ Uuezon (agricultural including rice mill$ !iggery) for (2M (initial !ayment of (000$000 broCen into (103$&88.81 directly !aid to seller on 22 March 18@3 and (&80$;00.08 directly !aid to /(: to answer for !art of seller?s loan with the banCG and balance of 1.&M to be !aid in & e9ual 9uarterly installments of (3;0$000 the first of which due and demandable on 1; .une 18@3)G binding themsel+es that u!on the !ayment of the total !urchase !rice the seller deli+ers a good and sufficient deed of sale and con+eyance for the !arcels of land free and clear from liens and encumbrances$ that seller deli+ers$ surrenders and transfers the !arcels of land including all im!ro+ements thereon and to transfer the o!erations of the !iggery and rice mill to the buyerG and that all !ayments due and demandable under the contract effected in the residence of the seller unless otherwise designated by the !arties in writing. 6n 1; May 18@3$ 6ng tooC !ossession of the subAect !arcels of land together with the !iggery$ building$ ricemill$ residential house and other im!ro+ements thereon. (ursuant to the contract$ 6ng !aid the s!ouses the sum of (103$&88.81 2 by de!ositing it with the **-(/. #ubse9uently$ 6ng de!osited sums of money with the /(:$ in accordance with their sti!ulation that !etitioner !ay the loan of the s!ouses with /(:. To answer for his balance of ( 1.&M$ 6ng issued & !ost%dated Metro /anC checCs !ayable to the s!ouses in the amount of (3;0$000.00 each (-hecC 13330@%1;3311). >hen !resented for !ayment$ howe+er$ the checCs were dishonored due to insufficient funds. 6ng !romised to re!lace the checCs but failed to do so. To maCe matters worse$ out of the (&80$;00.00 loan of the s!ouses with /(:$ which ong$ as !er agreement$ should ha+e !aid$ 6ng only managed to dole out no more than (383$038.00. >hen the banC threatened to foreclose the s!ouses? mortgage$ they sold 3 transformers of the rice mill worth (;1$&11.00 to !ay off their outstanding obligation with said banC$ with the Cnowledge and conformity of 6ng. 6ng$ in return$ +oluntarily ga+e the s!ouses authority to o!erate the rice mill. 1e$ howe+er$ continued to be in !ossession of the two !arcels of land while the s!ouses were forced to use the rice mill for residential !ur!oses. 6n 2 'ugust 18@;$ the s!ouses$ through counsel$ sent 6ng a demand letter asCing for the return of the !ro!erties. Their demand was left unheeded$ so$ on 2 #e!tember 18@;$ they filed with the 7T- ,ucena -ity$ /ranch 00$ a com!laint for rescission of contract and reco+ery of !ro!erties with damages. ,ater$ while the case was still !ending with the trial court$ 6ng introduced maAor im!ro+ements on the subAect !ro!erties by constructing a com!lete fence made of hollow blocCs and e2!anding the !iggery. These !rom!ted the s!ouses to asC for a writ of !reliminary inAunctionG which the trial court granted$ and thus enAoined 6ng from introducing im!ro+ements on the !ro!erties e2ce!t for re!airs. 6n 1 .une 18@8$ the trial court rendered a decision in fa+or of the s!ouses4 ordering the contract entered into by the !arties set aside$ ordering the deli+ery of the !arcels of land and the im!ro+ements thereon to the s!ouses$ ordering the return of the sum of (&83$138.;1 to 6ng by the s!ouses$ ordering 6ng to !ay the s!ouses (100$000 for e2em!lary damages and (20$000 as attorney?s fees and litigation e2!enses. "rom this decision$ !etitioner a!!ealed to the -ourt of '!!eals$ which affirmed the decision of the 7T- but deleted the award of e2em!lary damages. :n affirming the decision of the trial court$ the -ourt of '!!eals noted that the failure of !etitioner to com!letely !ay the !urchase !rice is a substantial breach of his obligation which entitles the !ri+ate res!ondents to rescind their contract under 'rticle 1181 of the 5ew -i+il -ode. 1ence$ the !etition for re+iew on certiorari.
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The #u!reme -ourt affirmed the decision rendered by the -ourt of '!!eals with the modification that the
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s!ouses are ordered to return to 6ng the sum (&@$0@0.00 in addition to the amounts already awardedG with costs against !etitioner 6ng. ( #eevaluation o& evidence not the &unction o& the Su"reme Court :t is not the function of the #u!reme -ourt to assess and e+aluate all o+er again the e+idence$ testimonial and documentary$ adduced by the !arties to an a!!eal$ !articularly where the findings of both the trial court and the a!!ellate court on the matter coincide. There is no cogent reason shown that would Austify the court to discard the factual findings of the two courts below and to su!erim!ose its own. 2 (3)0 #escission as a remedy to secure the re"aration o& dama$es caused by a contract? Article
7escission$ as contem!lated in 'rticles 13@0$ et se9.$ of the 5ew -i+il -ode$ is a remedy granted by law to the contracting !arties and e+en to third !ersons$ to secure the re!aration of damages caused to them by a contract$ e+en if this should be +alid$ by restoration of things to their condition at the moment !rior to the celebration of the contract. :t im!lies a contract$ which e+en if initially +alid$ !roduces a lesion or a !ecuniary damage to someone. 3 ((.( #escission a""licable to reci"rocal obli$ations under Article
'rticle 1181 of the 5ew -i+il -ode refers to rescission a!!licable to reci!rocal obligations. 7eci!rocal obligations are those which arise from the same cause$ and in which each !arty is a debtor and a creditor of the other$ such that the obligation of one is de!endent u!on the obligation of the other. They are to be !erformed simultaneously such that the !erformance of one is conditioned u!on the simultaneous fulfillment of the other. * #escission o& reci"rocal obli$ations under Article ((.( distin$uished &rom rescission o& contract under Article (3)3 7escission of reci!rocal obligations under 'rticle 1181 of the 5ew -i+il -ode should be distinguished from rescission of contracts under 'rticle 13@3. 'lthough both !resu!!ose contracts +alidly entered into and subsisting and both re9uire mutual restitution when !ro!er$ they are not entirely identical. >hile 'rticle 1181 uses the term <rescission$= the original term which was used in the old -i+il -ode$ from which the article was based$ was <resolution.= 7esolution is a !rinci!al action which is based on breach of a !arty$ while rescission under 'rticle 13@3 is a subsidiary action limited to cases of rescission for lesion under 'rticle 13@1 of the 5ew -i+il -ode. / #escissible contract under Article (3)( 'rticle 13@1 of the 5ew -i+il -ode enumerates rescissible contracts as <(1) those which are entered into by guardians whene+er the wards whom they re!resent suffer lesion by more than one fourth of the +alue of the things which are the obAect thereofG (2) those agreed u!on in re!resentation of absentees$ if the latter suffer the lesion stated in the !receding numberG (3) those undertaCen in fraud of creditors when the latter cannot in any manner collect the claims due themG (&) those which refer to things under litigation if they ha+e been entered into by the defendant without the Cnowledge and a!!ro+al of the litigants or of com!etent Audicial authorityG (;) all other contracts s!ecially declared by law to be subAect to rescission.= :n the !resent case$ the contract entered into by the !arties ob+iously does not fall under any of those mentioned by 'rticle 13@1. -onse9uently$ 'rticle 13@3 is ina!!licable. 5 Contract to sell distin$uished &rom contract o& sale :n a contract of sale$ the title to the !ro!erty !asses to the +endee u!on the deli+ery of the thing soldG while in a contract to sell$ ownershi! is$ by agreement$ reser+ed in the +endor and is not to !ass to the +endee
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until full !ayment of the !urchase !rice. :n a contract to sell$ the !ayment of the !urchase !rice is a !ositi+e sus!ensi+e condition$ the failure of which is not a breach$ casual or serious$ but a situation that !re+ents the obligation of the +endor to con+ey title from ac9uiring an obligatory force.
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IA$reement o& !urchase and SaleK is in the nature o& contract to sell ' careful reading of the !arties? <'greement of (urchase and #ale= shows that it is in the nature of a contract to sell. The s!ouses bound themsel+es to deli+er a deed of absolute sale and clean title co+ering the two !arcels of land u!on full !ayment by the buyer of the !urchase !rice of (2M. This !romise to sell was subAect to the fulfillment of the sus!ensi+e condition of full !ayment of the !urchase !rice by the 6ng. The non%fulfillment of the condition of full !ayment rendered the contract to sell ineffecti+e and without force and effect. :t must be stressed that the breach contem!lated in 'rticle 1181 of the 5ew -i+il -ode is the obligor?s failure to com!ly with an obligation already e2tant$ not a failure of a condition to render binding that obligation. "ailure to !ay$ in this instance$ is not e+en a breach but merely an e+ent which !re+ents the +endor?s obligation to con+ey title from ac9uiring binding force. 1ence$ the agreement of the !arties the !resent case may be set aside$ but not because of a breach on the !art of 6ng for failure to com!lete !ayment of the !urchase !rice. 7ather$ his failure to do so brought about a situation which !re+ented the obligation of the s!ouses to con+ey title from ac9uiring an obligatory force. ) Contract Bas not novated as to the manner and time o& "ayment? Novation not "resumed 'rticle 1282 of the 5ew -i+il -ode states that$ <:n order that an obligation may be e2tinguished by another which substitutes the same$ it is im!erati+e that it be so declared in une9ui+ocal terms$ or that the old and the new obligations be on e+ery !oint incom!atible with each other.= 5o+ation is ne+er !resumed$ it must be !ro+en as a fact either by e2!ress sti!ulation of the !arties or by im!lication deri+ed from an irreconcilable incom!atibility between the old and the new obligation. -n t+e ,#esent case, the !arties ne+er e+en intended to no+ate their !re+ious agreement. :t is true that 6ng !aid the s!ouses small sums of money amounting to (&@$0@0.00$ in contra+ention of the manner of !ayment sti!ulated in their contract. These installments were$ howe+er$ obAected to by the s!ouses$ and ong re!lied that these re!resented the interest of the !rinci!al amount which he owed them. 7ecords further show that 6ng agreed to the sale of MB7',-6 transformers by the s!ousess to !ay for the balance of their subsisting loan with /(:. 'lthough the !arties agreed to credit the !roceeds from the sale of the transformers to !etitioner?s obligation$ he was su!!osed to reimburse the same later to res!ondent s!ouses. This can only mean that there was ne+er an intention on the !art of either of the !arties to no+ate !etitioner?s manner of !ayment. . #e=uisites o& novation :n order for no+ation to taCe !lace$ the concurrence of the following re9uisites is indis!ensable4 (1) there must be a !re+ious +alid obligationG (2) there must be an agreement of the !arties concerned to a new contractG (3) there must be the e2tinguishment of the old contractG and (&) there must be the +alidity of the new contract. :n the !resent case$ the re9uisites are not found. The subse9uent acts of the !arties hardly demonstrate their intent to dissol+e the old obligation as a consideration for the emergence of the new one. 5o+ation is ne+er !resumed$ there must be an e2!ress intention to no+ate. (0 <uilder in bad &aith 's regards the im!ro+ements introduced by 6ng to the !remises and for which he claims reimbursement$ the -ourt found no reason to de!art from the ruling of the trial court and the a!!ellate court that !etitioner is a builder in bad faith. 1e introduced the im!ro+ements on the !remises Cnowing fully well that he has not !aid the consideration of the contract in full and o+er the +igorous obAections of res!ondent s!ouses. Moreo+er$ 6ng introduced maAor im!ro+ements on the !remises e+en while the case against him was !ending before the trial court. (( -eletion o& aBard o& e4em"lary dama$es correct The award of e2em!lary damages was correctly deleted by the -ourt of '!!eals inasmuch as no moral$ tem!erate$ li9uidated or com!ensatory damages in addition to e2em!lary damages were awarded. ',,0
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2n$ v 2n$ 'G # No ;-5,))) 2ctober )+ (.)/ 0 "irst )i+ision$ 7elo+a (.)4 ; concur$ 1 concur in result 3actsH 6n 2; "ebruary 1830$ :melda 6ng for and in consideration of (1 and other +aluable considerations$ e2ecuted in fa+or of #andra Maruzzo$ then a minor$ a Uuitclaim )eed whereby she transferred$ released$ assigned and fore+er 9uitclaimed to #andra Maruzzo$ her heirs and assigns$ all her rights$ title$ interest and !artici!ation in 1D2 undi+ided !ortion of a !arcel of land (,ot 10%/ of the subdi+ision !lan (,7-) (sd% 1;3@&1$ a !ortion of lot 10 /locC 1@ of (#)%132@@ ,-7 ( ,7-) 7ecord 2028$ situated in MaCati$ containing 12; s9uare meters. 6n 18 5o+ember 18@0$ :melda 6ng re+oCed the aforesaid )eed of Uuitclaim and$ thereafter$ on 20 .anuary 18@2 donated the whole !ro!erty to her son$ 7e2 6ng .imenez. 6n 20 .une 18@3$ #andra Maruzzo$ through her guardian ad litem 'lfredo 6ng$ filed with the 7T- MaCati an action against :melda 6ng$ for the reco+ery of ownershi!D!ossession and nullification of the )eed of )onation o+er the !ortion belonging to her and for accounting. :melda 6ng claimed that the Uuitclaim )eed is null and +oid inasmuch as it is e9ui+alent to a )eed of )onation$ acce!tance of which by the donee is necessary to gi+e it +alidity. "urther$ it is a+erred that the donee$ #andra Maruzzo$ being a minor$ had no legal !ersonality and therefore inca!able of acce!ting the donation. *!on admission of the documents in+ol+ed$ the !arties filed their res!onsi+e memoranda and submitted the case for decision. 6n 12 )ecember 18@3$ the trial court rendered Audgment in fa+or of Maruzzo and held that the Uuitclaim )eed is e9ui+alent to a )eed of #ale and$ hence$ there was a +alid con+eyance in fa+or of the latter. :melda 6ng a!!ealed to the :ntermediate '!!ellate -ourt. 6n 20 .une 18@&$ :'- !romulgated its )ecision affirming the a!!ealed Audgment and held that the Uuitclaim )eed is a con+eyance of !ro!erty with a +alid cause or considerationG that the consideration is (1 which is clearly stated in the deed itselfG that the a!!arent inade9uacy is of no moment since it is the usual !ractice in deeds of con+eyance to !lace a nominal amount although there is a more +aluable consideration gi+en. 1ence$ the !etition for re+iew on certiorari. 6n 1; March 18@;$ #andra Maruzzo$ through her guardian ad litem 'lfredo 6ng$ filed an 6mnibus Motion informing this -ourt that she has reached the age of maAority as e+idenced by her /irth -ertificate and she !rays that she be substituted as !ri+ate res!ondent in !lace of her guardian ad litem. 6n 1; '!ril 18@;$ the -ourt issued a resolution granting the same. The #u!reme -ourt affirmed the a!!ealed decision of the :'-$ with costs against :melda 6ng. ( Consideration or cause is not !( alone but also other valuable considerations The subAect deed re+eals that the con+eyance of the 1D2 undi+ided !ortion of the !ro!erty was for and in consideration of (1 and the other +aluable considerations !aid by #andra Maruzzo$ through her re!resentati+e$ 'lfredo 6ng$ to !etitioner :melda 6ng. #tated differently$ the cause or consideration is not (1 alone but also the other +aluable considerations. 2 Cause not stated in contract is "resumed e4istin$ unless "roven to the contrary? 74ecution o& deed a "rima &acie evidence o& e4istence o& valuable consideration 'lthough the cause is not stated in the contract it is !resumed that it is e2isting unless the debtor !ro+es the contrary &A#ticle %304 o" t+e Civil Co8e(. 6ne of the dis!utable !resum!tions is that there is a sufficient cause of the contract &Section 0, &#(, Rule %3%, Rules o" Cou#t(. :t is a legal !resum!tion of sufficient cause or consideration su!!orting a contract e+en if such cause is not stated therein &A#ticle %304, 7e@ Civil Co8e( This !resum!tion cannot be o+ercome by a sim!le assertion of lacC of consideration es!ecially when the contract itself states that consideration was gi+en$ and the same has been reduced into a !ublic
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instrument with all due formalities and solemnities. To o+ercome the !resum!tion of consideration the alleged lacC of consideration must be shown by !re!onderance of e+idence in a !ro!er action. &Sa6anilla vs. CaHuco6, et al., %0$ *+il. 432(. The e2ecution of a deed !ur!orting to con+ey ownershi! of a realty is in itself !rima facie
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e+idence of the e2istence of a +aluable consideration$ the !arty alleging lacC of consideration has the burden of !ro+ing such allegation. &Caballe#o, et al. vs. Caballe#o, et al., &CA(, 40 3.;. 2031(. 3 Acce"tance by le$al re"resentatives o& minor a""lies to onerous and conditional donations ranting that the Uuitclaim deed is a donation$ 'rticle 3&1 of the -i+il -ode !ro+ides that the re9uirement of the acce!tance of the donation in fa+or of minor by !arents of legal re!resentati+es a!!lies only to onerous and conditional donations where the donation may ha+e to assume certain charges or burdens &A#ticle $21, Civil Co8e(. The acce!tance by a legal guardian of a sim!le or !ure donation does not seem to be necessary &*e#ez vs. Calingo, CA240 3.;. 03(. Thus$ #u!reme -ourt ruled in Ea!unan +s. -asilan and -' &%0' *+il. 88'( that the donation to an inca!acitated donee does not need the acce!tance by the lawful re!resentati+e if said donation does not contain any condition. :n sim!le and !ure donation$ the formal acce!tance is not im!ortant for the donor re9uires no right to be !rotected and the donee neither undertaCes to do anything nor assumes any obligation. The Uuitclaim in 9uestion does not im!ose any condition. * <ad &aith and inade=uacy o& monetary consideration does not render conveyance ine4istent+ assi$norMs liberality may be su&&icient cause &or a valid contract :t is not unusual in deeds of con+eyance adhering to the 'nglo%#a2on !ractice of stating that the consideration gi+en is the sum of (1$ although the actual consideration may ha+e been much more. Moreo+er$ assuming that said consideration of (1 is sus!icious$ this circumstance$ alone$ does not necessarily Austify the inference that the +endees were not !urchasers in good faith and for +alue. 5either does this inference warrant the conclusion that the sales were null and +oid ab initio. :ndeed$ bad faith and inade9uacy of the monetary consideration do not render a con+eyance ine2istent$ for the assignor?s liberality may be sufficient cause for a +alid contract &A#ticle %300, Civil Co8e($ whereas fraud or bad faith may render either rescissible or +oidable$ although +alid until annulled$ a contract concerning an obAect certain entered into with a cause and with the consent of the contracting !arties &See !o#ales Develo,6ent v. CA, 2$ SCRA 484(. ',)0 *angilinan v. CA, 2$' SCRA 0'0 &%''$( ',.0 !asa$ui vs Villablanca 'G # No ;-2(..) November (0+ (.,/ 0 #econd )i+ision$ 'ntonio (.)4 & concur$ 1 on lea+e$ 1 designated to sit in the #econd )i+ision 3actsH 6n & "ebruary 1803$ -ali2to (asagui and "austa Mosar filed a com!laint with the -": Tacloban -ity$ alleging that on 1; 5o+ember 1802$ for and in consideration of (2$@00$ they bought from Busta9uia /ocar and -atalina /ocar a !arcel of agricultural land with an area of 2.0@1& hectares$ situated in 1amindangon$ (astrana$ ,eyteG that the corres!onding document of sale was e2ecuted$ notarized on the same date$ and recorded in the 7egistry of )eeds of Tacloban$ ,eyte on 10 5o+ember 1802G that during the first weeC of "ebruary 1803$ s!ouses Bster T. Villablanca and Vosimo Villablanca$ <illegally and without any right$ whatsoe+er$ tooC !ossession of the !ro!erty har+esting coconuts from the coconut !lantation thereon$ thus de!ri+ing (asa9ui and Mosar of its !ossessionG that des!ite demands made by (asagui and Mosar u!on the Villablancas <to surrender to them the !ro!erty and its !ossession= the latter failed or refused to return said !arcel of land to the former$ causing them damageG and that Busta9uia and -atalina /ocar$ +endors of the !ro!erty$ are included defendants in the com!laint by +irtue of the warranty clause contained in the document of sale.
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6n 13 May 1803$ the trial court issued an order dismissing the com!laint for lacC of Aurisdiction$ it a!!earing from the allegations in the com!laint that the case is one for forcible entry$ which belongs to the e2clusi+e Aurisdiction of the .ustice of the (eace (now Munici!al -ourt) of (astrana$ ,eyte. The first Motion for
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7econsideration was denied on 23 May 1803 and the second was liCewise denied on ; .uly 1803. "rom the orders$ a!!eal on a !ure 9uestion of law was inter!osed to the #u!reme -ourt. The #u!reme -ourt set aside the order of dismissal$ and remanded the case to the court a 9uo for further !roceedingsG with costs against the Villablancas and the /ocars. ( Averments o& com"laint and character o& relie& determines @urisdiction o& munici"al court in a &orcible entry case >hat determines the Aurisdiction of the munici!al court in a forcible entry case is the nature of the action !leaded as a!!ears from the allegations in the com!laint. :n ascertaining whether or not the action is one of forcible entry within the original e2clusi+e Aurisdiction of the munici!al court$ the a+erments of the com!laint and the character of the relief sought are the ones to be consulted. :n the !resent case$ the com!laint does not allege that (asagui and Mosar were in !hysical !ossession of the land and ha+e been de!ri+ed of that !ossession through force$ intimidation$ threat$ strategy$ or stealth. :n order that an action may be considered as one for forcible entry$ it is not only necessary that the !laintiff should allege his !rior !hysical !ossession of the !ro!erty but also that he was de!ri+ed of his !ossession by any of the means !ro+ided in section 1$ 7ule 30 of the 7e+ised 7ules of -ourt$ namely4 force$ intimidation$ threats$ strategy and stealth. "or$ if the dis!ossession did not taCe !lace by any of these means$ the courts of first instance$ not the munici!al courts$ ha+e Aurisdiction. The bare allegation in the com!laint that the !laintiff has been <de!ri+ed= of the land of which he is and has been the legal owner for a long !eriod has been held to be insufficient. Though it is true that the mere act of a tres!asser in unlawfully entering the land$ !lanting himself on the ground and e2cluding therefrom the !rior !ossessor would im!ly the use of force$ no such inference could be made as (asagui and Mosar had not claimed that they were in actual !hysical !ossession of the !ro!erty !rior to the entry of the Villablancas. 2 74ecution o& deed o& absolute sale in "ublic instrument e=uivalent to delivery o& land+ unless there is im"ediment The e2ecution of the deed of absolute sale in a !ublic instrument is e9ui+alent to deli+ery of the land subAect of the sale. This !resum!ti+e deli+ery only holds true when there is no im!ediment that may !re+ent the !assing of the !ro!erty from the hands of the +endor into those of the +endee. :t can be negated by the reality that the +endees actually failed to obtain material !ossession of the land subAect of the sale. :n the !resent case$ (asagui and Mosar had not ac9uired !hysical !ossession of the land since its !urchase on 12 5o+ember 1802. 's a matter of fact$ their !ur!ose in filing the com!laint in -i+il -ase 32@; is !recisely to <get the !ossession of the !ro!erty.= 3 Case is not an action o& &orcibly entry The case is$ not the summary action of forcible entry within the conte2t of the 7ulesG as (asagui and Mosar are not only seeCing to get the !ossession of the !ro!erty$ but as an alternati+e cause of action$ they seeC the return of the !rice and !ayment of damages by the +endors <in case of e+iction or loss of ownershi!= of the said !ro!erty. ')00 !aulmitan vs CA 'G # No 5(/)* November 2/+ (..2 0 Third )i+ision$ 7omero (.)4 & concur 3actsH "rom her marriage with -iriaco (aulmitan$ deceased$ 'gatona #agario (aulmitan begot two legitimate children$ (ascual and )onato (aulmitan. 'gatona #agario (aulmitan died sometime in 18;3 and left the 2 !arcels of land located in the (ro+ince of 5egros 6ccidental (,ot 3;3 with an area of 1$8&0 s9.ms.$ 6-T 76% @330G and ,ot 1081 with an area of 08$0@0 s9.ms.$ 6-T 76%110;3). (ascual (aulmitan also died in 18;3$ a!!arently shortly after his mother !assed away$ lea+ing his children$ namely4 'licio$ Blena$ 'belino$
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'delina$
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'nita$ /aCing and 'nito$ all surnamed (aulmitan. *ntil 1803$ the estate of 'gatona #agario (aulmitan remained unsettled and the titles to the two lots remained in the name of 'gatona. 1owe+er$ on 11 'ugust 1803$ )onato (aulmitan e2ecuted an 'ffida+it of )eclaration of 1eirshi!$ e2traAudicially adAudicating unto himself ,ot 3;3 based on the claim that he is the only sur+i+ing heir of 'gatona #agario. The affida+it was filed with the 7egister of )eeds of 5egros 6ccidental who$ on 20 'ugust 1803$ cancelled 6-T 76%@330 in the name of 'gatona #agario and issued T-T 3;838 in )onato?s name. 's regards ,ot 1081$ )onato e2ecuted on 2@ May 183& a )eed of #ale o+er the same in fa+or of .uliana (. "anesa$ his daughter (married to 7odolfo "anesa). :n the meantime$ sometime in 18;2$ for non%!ayment of ta2es$ ,ot 1081 was forfeited and sold at a !ublic auction$ with the (ro+incial o+ernment of 5egros 6ccidental being the buyer. ' -ertificate of #ale o+er the land was e2ecuted by the (ro+incial Treasurer in fa+or of the (ro+incial /oard of 5egros 6ccidental. 6n 28 May 183&$ .uliana (. "anesa redeemed the !ro!erty from the (ro+incial o+ernment of 5egros 6ccidental for the amount of (2$8;8.08. 6n learning of these transactions$ the children of the ,ate (ascual (aulmitan filed on 1@ .anuary 183; with th the -": 5egros 6ccidental (12 .udicial )istrict$ /ranch :V$ /acolod -ity$ -i+il -ase 11330) a -om!laint against )onato and .uliana to !artition the !ro!erties !lus damages. )onato and .uliana set u! the affirmati+e defense of !rescri!tion (com!laint being filed 11 years after the issuance of the title) with res!ect to ,ot 3;3. The trial court issued an order dated 22 '!ril 1830 dismissing the com!laint as to the said !ro!erty u!on finding merit in )onato?s and .uliana?s affirmati+e defense. This order became final after (ascual?s children failed to a!!eal therefrom. Trial !roceeded with res!ect to ,ot 1081. :n a decision dated 20 May 1833$ the trial court decided in fa+or of (ascual?s children as to ,ot 1081. 'ccording to the trial court$ the res!ondents$ as descendants of 'gatona #agario (aulmitan were entitled to P of ,ot 1081$ !ro indi+iso. The sale by )onato (aulmitan to his daughter$ .uliana "anesa$ did not !reAudice their rightsG and the re!urchase by .uliana of the land from the (ro+incial o+ernment of 5egros 6ccidental did not +est in .uliana e2clusi+e ownershi! o+er the entire land but only ga+e her the right to be reimbursed for the amount !aid to redeem the !ro!erty. The trial court ordered the !artition of the land and directed )onato and .uliana to !ay !ascual?s -hildren certain amounts re!resenting the latter?s share in the fruits of the land. 6n the other hand$ the children were directed to !ay (1$&38.;; to .uliana as their share in the redem!tion !rice !aid by "anesa to the (ro+incial o+ernment of 5egros 6ccidental. 6n a!!eal and on 1& .uly 18@2 (-'% 7 022;;%7)$ the -ourt of '!!eals affirmed the trial court?s decision. 1ence the !etition for re+iew on certiorari. The #u!reme -ourt denied the !etition and affirmed the decision of the -ourt of '!!eals. ( !ascual "redecease mother+ "recludes o"eration o& "rovisions on ri$ht o& re"resentation (ascual did not !redecease his mother$ decedent 'gatona #agario (aulmitan$ thus !recluding the o!eration of the !ro+isions in the -i+il -ode on the right of re!resentation with res!ect to his se+en children. 2 #i$hts o& succession transmitted at the moment o& the decedentMs death? <oth !ascual and -onato entitled to oBnershi" >hen 'gatona #agario (aulmitan died intestate in 18;2$ her two (2) sons )onato and (ascual were
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still ali+e. #ince it is well%settled by +irtue of 'rticle 333 of the -i+il -ode that <KtLhe rights to the succession are transmitted from the moment of the death of the decedent$= the right of ownershi!$ not only of )onato but also of (ascual$ o+er their res!ecti+e shares in the inheritance was automatically and by o!eration of law +ested in them in 18;3 when their mother died intestate. 't that stage$ the children of )onato and (ascual did not yet ha+e any right o+er the inheritance since <KiLn e+ery inheritance the relati+e nearest in degree e2cludes the more distant ones.= )onato and (ascual e2cluded their children as to the right to inherit from 'gatona
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#agario (aulmitan$ their mother. 3 Heirs oBn in common the estate o& the decedent be&ore its "artition "rom the time of the death of 'gatona #agario (aulmitan to the subse9uent !assing away of her son (ascual in 18;3$ the estate remained un!artitioned. )onato and (ascual (aulmitan were co%owners of the estate left by their mother as no !artition was e+er made$ !ursuant to 'rticle 103@ of the -i+il -ode$ which !ro+ides that <where there are two or more heirs$ the whole estate of the decedent is$ before its !artition$ owned in common by such heirs$ subAect to the !ayment of debts of the deceased.= * !ascualMs children succeeded him in the co-oBnershi" o& the "ro"erty Bhen he died intestate >hen (ascual (aulmitan died intestate in 18;3$ his children succeeded him in the co%ownershi! of the dis!uted !ro!erty. (ascual (aulmitan?s right of ownershi! o+er an undi+ided !ortion of the !ro!erty !assed on to his children$ who$ from the time of (ascual?s death$ became co%owners with their uncle )onato o+er the dis!uted decedent estate. / 3anesaMs claim o& oBnershi" .uliana (. "anesa$ )onato?s daughter$ claims ownershi! o+er ,ot 1081 by +irtue of two transactions$ namely4 (a) the sale made in her fa+or by her father )onato (aulmitanG and (b) her redem!tion of the land from the (ro+incial o+ernment of 5egros 6ccidental after it was forfeited for non% !ayment of ta2es. 5 Sale o& ;ot (0.( by -onato to 6uliana did not "re@udice ri$hts o& !ascualMs children over the O undivided share >hen )onato (aulmitan sold on 2@ May 183& ,ot 1081 to his daughter .uliana (. "anesa$ he was only a co%owner with (ascual?s children and as such$ he could only sell that !ortion which may be allotted to him u!on termination of the co%ownershi!. The sale did not !reAudice the rights of the children to P undi+ided share of the land which they inherited from their father. :t did not +est ownershi! in the entire land with the buyer but transferred only the seller?s !ro indi+iso share in the !ro!erty and conse9uently made the buyer a co%owner of the land until it is !artitioned. , 7&&ect o& sale o& "ro"erty by one co-oBner Bithout the consent o& all co-oBners? Article *.3H 2nly the ri$hts o& the seller are trans&erred+ buyer becomes co-oBner :n 5ailon?Casilao v. Court of Appeals $ the -ourt outlined the effects of a sale by one co%owner without the content of all the co%owners. The rights of a co%owner of a certain !ro!erty are clearly s!ecified in 'rticle &83 of the -i+il -ode which !ro+ides that <each co%owner shall ha+e the full ownershi! of his !art and of the fruits and benefits !ertaining thereto$ and he may therefore alienate$ assign or mortgage it and e+en substitute another !erson in its enAoyment$ e2ce!t when !ersonal rights are in+ol+ed. /ut the effect of the alienation or mortgage$ with res!ect to the co owners$ shall be limited to the !ortion which may be allotted to him in the di+ision u!on the termination of the co%ownershi!.= B+en if a co%owner sells the whole !ro!erty as his$ the sale will affect only his own share but not those of the other co%owners who did not consent to the sale K(unsalan +. /oon ,iat$ && (hil. 320 (1823)L. This is because under the codal !ro+ision$ the sale or other dis!osition affects only his undi+ided share and the transferee gets only what would corres!ond to his grantor in the !artition of the thing owned in common. K7amirez +. /autista$ 1& (hil. ;2@ (1808)L. Thus$ it may be deduced that since a co%owner is entitled to sell his undi+ided share$ a sale of the entire !ro!erty by one co% owner without the consent of the other co%owners is not null and +oid. 1owe+er$ only the rights of the co% owner%seller are transferred$ thereby maCing the buyer a co%owner of the !ro!erty.= Thus$ in the !resent case$ the sale by )onato (aulmitan of the land to his daughter did not gi+e to the latter ownershi! o+er the entire land but merely transferred to her the P undi+ided share of her father$ thus maCing her the co%owner of the land in 9uestion with her first cousins. ) #edem"tion does not terminate the co-oBnershi" nor $ive her title to the entire land The redem!tion of the land made by "anesa did not terminate the co%ownershi! nor gi+e her title to
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the entire land subAect of the co%ownershi!. #!eaCing on the same issue$ the -ourt$ in A$ille v. Court of Appeals$ resol+ed the same by holding that the right of re!urchase may be e2ercised by a co%owner with res!ect to his share alone (-:V:, -6)B$ art. 1012G -:V:, -6)B (1@@8)$ art. 1;1&.). >hile the records show that the !ro!erty was redeemed in its entirety$ the !laintiff shouldering the e2!enses therefor$ that did not maCe him the owner of all of it. :n other words$ it did not !ut to end the e2isting state of co%ownershi! (#u!ra$ art. &@8). There is no doubt that redem!tion of !ro!erty entails a necessary e2!ense. . #i$ht to com"el other co-oBners to contribute to e4"enses o& "reservation o& thin$ oBned in common? !ayer in redem"tion holds lien u"on the sub@ect "ro"erty until reimbursed 'rticle &@@ of the -i+il -ode !ro+ides that <each co%owner shall ha+e a right to com!el the other co% owners to contribute to the e2!enses of !reser+ation of the thing or right owned in common and to the ta2es. 'ny one of the latter may e2em!t himself from this obligation by renouncing so much of his undi+ided interest as may be e9ui+alent to his share of the e2!enses and ta2es. 5o such wai+er shall be made if it is !reAudicial to the co%ownershi!.= Thus$ although "anesa did not ac9uire ownershi! o+er the entire lot by +irtue of the redem!tion she made$ ne+ertheless$ she did ac9uire the right to be reimbursed for half of the redem!tion !rice she !aid to the (ro+incial o+ernment of 5egros 6ccidental on behalf of her co%owners. *ntil reimbursed$ "anesa holds a lien u!on the subAect !ro!erty for the amount due her. (0 ;ease issue not "assed on as it is a &actual issue? 3actual &indin$s o& loBer courts &inal and conclusive u"on the Su"reme Court )onato and .uliana dis!ute the order of the trial court$ which the -ourt of '!!eals affirmed$ for them to !ay (ascual?s children (;$000.00 !er year from 1800 until the !artition of the estate which re!resents the latter?s share in the fruits of the land. 'ccording to the former$ the land is being leased for (2$000.00 !er year only. This assigned error$ howe+er$ raises a factual 9uestion. The settled rule is that only 9uestions of law may be raised in a !etition for re+iew. 's a general rule$ findings of fact made by the trial court and the -ourt of '!!eals are final and conclusi+e and cannot be re+iewed on a!!eal. ')(0 !hili""ine %rust Com"any vs !N< 'G # No (5*)3 (.2( 0 "irst )i+ision$ .ohns (.)4 3 concur -ecember ,+
3actsH The (hili!!ine Trust com!any and the (hili!!ine 5ational /anCs are cor!orations organized under the laws of the (hili!!ine :slands and domiciled in the city of Manila. #al+ador 1ermanos was a co!artnershi! and during the month of .anuary 1818$ e2ecuted to (5/ @ !romissory notes aggregating (1;0$000$ !ayable on demand$ and each secured by a 9uedan$ or warehouse recei!t$ issued by the firm of 5ie+a$ 7uiz Q -om!any. Bach note recites that it is !ayable on demand after date$ for +alue recei+ed$ and that the firm has de!osited <with the said banC as collateral security for the !ayment of this note$ or any note gi+en in e2tension or renewal thereof$ as well as for the !ayment of any other liability or liabilities of the undersigned to the said banC$ due or to become due$ whether now e2isting or hereafter arising$ the following !ro!erty owned by the undersigned.= The note then s!ecifies the number of the 9uedan and the amount of co!ra in !iculs$ and states that the 9uedan was issued by 5ie+a$ 7uiz Q -om!any. The note for (@$000$ dated 1@ .anuary 1818$ was secured by warehouse 7ecei!t 30G for (20$000$ dated 22 .anuary 1818$ was secured by 7ecei!t 3;G for (20$000$ dated 2& .anuary 1818$ was secured by 7ecei!t 3@G for (20$000$ dated 23 .anuary 1818$ was secured by 7ecei!t &1G for (1&$000$ dated 2@ .anuary 1818$ was secured by 7ecei!t &2G for (1@$000$ dated 21 .anuary 1818$ was secured by 7ecei!t 33G for (1@$000$ dated 23 .anuary 1818$ was secured by 7ecei!t 30G and for (1@$000$ dated 2; .anuary 1818$ was secured by 7ecei!t 38$ maCing a total of 10$0;1.10 !iculs of co!ra$ co+ered by the warehouse recei!ts of the firm of 5ie+a$ 7uiz Q -om!any issued to
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the firm of #al+ador 1ermanos$ and by that firm !ledged as collateral to (5/ to secure the !ayment of the eight notes. Bach of them further recites that <on the non!erformance of this !romise$ or u!on the non% !ayment of any of the liabilities abo+e%mentioned$ or u!on the failure of the undersigned forthwith$ with or
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without notice$ to furnish satisfactory additional securities in case of decline$ as aforesaid$ then and in either such case$ this note and all liabilities of the undersigned$ or any of them$ shall forthwith become due and !ayable$ without demand or notice$ and full !ower and authority are hereby gi+en to said banC to sell$ assign transfer and deli+er the whole of the said securities$ or any !art thereof$ or any substitutes therefor or any additions thereto$ or any other securities or !ro!erty gi+en unto or left in the !ossession of or hereafter gi+en unto or left in the !ossession of the said banC by the undersigned for safe Cee!ing or otherwise$ at any broCers? board or at !ublic or !ri+ate sale$ at the o!tion of said banC or of its !resident or secretary$ without either demand$ ad+ertise mentor notice of any Cind$ which are hereby e2!ressly wai+ed. 't any such sale$ the said banC may itself !urchase the whole or any !art of the !ro!erty sold$ free from any right of redem!tion on the !art of the undersigned$ which is hereby wai+ed and released.= #tam!ed in red inC across the face of each 9uedan are the words <5egotiable >arrant$= and each of them was in the usual form of warehouse recei!ts. 6n 10 "ebruary 1818$ the firm of #al+ador 1ermanos withdrew from the banC$ by and with its consent$ warehouse recei!ts 33$ 30$ and 38$ which the banC was holding as collateral security for each of the 3 1@$000% !eso notes amounting to (;&$000. The total amount of co!ra e+idenced by the recei!ts withdrawn was 0$02&.;; !iculs$ the declared +alue of which$ shown on the face of such recei!ts$ was (80$30@.2;. 't the time of the withdrawal$ the firm e2ecuted a writing$ !romising to return to the banC the warehouse recei!ts on or before the 23 .anuary$ the recei!ts being guaranteed by the attached certificate of e2istence of the effects issued by the firm on @ "ebruary 1818. 5either writing was in any manner authenticated by a notary or by a com!etent !ublic official. The writing of "ebruary 10 is in form a recei!t from the firm of #al+ador 1ermanos to the (5/ of the 9uedans$ or warehouse recei!ts$ for the co!ra. The one of "ebruary @ is$ in legal effect$ the certificate of #al+ador 1ermanos <that there e2ist the following articles in our bodegas as follows4= That is to say$ that the firm certifies that the !ro!erty described is in the warehouse of the firm. 6n 21 '!ril 1818$ #al+ador 1ermanos filed a !etition of insol+ency in the -": Manila. 6n 3 May 1818$ regorio #al+ador$ a member of the firm of #al+ador 1ermanos$ deli+ered certain goods$ wares$ and merchandise to and in the warehouse of 5ie+a$ 7uiz Q -om!any$ and re9uested that firm to issue its recei!t therefor to and in fa+or of the (5/$ and that$ !ursuant to such re9uest$ that firm did issue @ 9uedans to the banC (101 for 32 bales of hem!G 102 for 8;3 bundles of rattanG 10; for 32 bundles of em!ty sacCsG 103 for 130 sacCs of gumG 10@ for 1$&01 bales of Ca!oCG 13; for 2@@ !acCages of Talcum (owderG 130 for 3; !acCages of cardboardG and 1@; for 13& bundles of em!ty sacCs). 6n and between 0 May 1818 and 3 'ugust 1818$ acting under the terms and !ro+isions of its res!ecti+e notes$ the banC sold all of the !ersonal !ro!erty for which it held warehouse recei!ts$ or which had been surrendered to it by the 1ermanos firm$ sa+e and e2ce!t the !ro!erty described in the three warehouse recei!ts$ which were released and surrendered to that firm on 10 "ebruary 1818. /ased u!on its insol+ency !etition$ and in the ordinary course of business$ the firm of #al+ador 1ermanos was adAudged insol+ent$ and on 18 .uly 1818$ the (hili!!ine Trust -om!any was elected assignee of said firm and duly 9ualified. 6n 13 #e!tember 1818$ as such assignee$ it made a demand u!on the banC for the surrender and deli+ery of the !ro!erty described in all of the abo+e recei!ts. *!on the banC?s refusal$ (hili!!ine Trust -om!any commenced this action to reco+er its +alue alleged to be (2&2$;38.01$ claiming that on 21 '!ril 1818$ the firm of #al+ador 1ermanos was the sole and e2clusi+e owner of the !ro!erty$ and that$ as to the co!ra$ about 2@ .une 1818$ and after the filing of the insol+ency !etition$ the banC unlawfully seized and con+erted the co!ra to its own use$ the +alue of which was (182$200. "or a second cause of action$ (hili!!ine Trust alleged that$ as such assignee$ it was the owner of the remaining !ersonal !ro!erty$ and that$ after the insol+ency !etition was filed$ the banC unlawfully seized and con+erted such !ro!erty to its own use$ and that it was of the +alue of (;0$318.01. "or answer$ the banC maCes a general denial$ as to each cause of action$ of all of the material allegations of the com!laint. The #u!reme -ourt$ on the first cause of action$ held that in .anuary 1818$ the banC became and remained the owner of the ; 9uedans 30$ 3;$ 3@$ &1$ and &2G that they were in form negotiable$ and that$ as such owner$
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it was legally entitled to the !ossession and control of the !ro!erty therein described at the time the insol+ency !etition was filed and had a right to sell it and a!!ly the !roceeds of the sale to its !romissory notes$ including
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the 3 notes of (1@$000 each$ which were formerly secured by the 3 9uedans 33$ 30$ and 38$ which the banC surrendered to the firm. That is to say$ the banC had a legal right to a!!ly the (roceeds from the !ro!erty described in the fi+e remaining 9uedans to the !ayment of its eight !romissory notes. The -ourt$ howe+er re+ersed the Audgment of the lower court as to the second cause of action$ and one entered in fa+or of the (hili!!ine Trust -om!any and against the (5/$ for (&0$3&2.02$ the declared +alue of the !ro!erty described in 9uedans 5os. 101 to 1@;$ inclusi+e$ and for the further sum of (3$031.&0$ the +alue of the gasoline sold in May$ 1818$ or a total of (&@$33&.02$ with interest thereon from #e!tember 22$ 1818$ at the rate of 0 !er cent !er annum$ and for the costs and disbursements in the -ourts. ( !ur"ose o& Act (./5 or the 8nsolvency ;aB 'ct 18;0 of the (hili!!ine ,egislature !ro+ides for the sus!ension of !ayments$ the relief of insol+ent debtors$ the !rotection of creditors$ and the !unishment of fraudulent debtors. 2 Section ( o& Act (./5 #ection 1 !ro+ides that <this 'ct shall be Cnown and may be cited as The :nsol+ency ,aw$ and in accordance with its !ro+isions e+ery insol+ent debtor may be !ermitted to sus!end !ayments or be discharged from his debts and liabilities.= 3 Section 2 o& Act (./5 #ection 2 !ro+ides that debtor who !ossesses sufficient !ro!erty to co+er the debts$ be it an indi+idual$ firm or cor!oration$ and who is unable to meet them at maturity$ <may !etition that he be declared in the state of sus!ension of !ayments by the court$ or the Audge thereof in +acation.= * Section 3 o& Act (./5 #ection 3 enacts that u!on the filing of the !etition$ the court shall maCe an order calling a meeting of creditors s!ecifying the time and !laceG that notice thereof shall be !ublished in a news!a!er$ and that <said order shall further contain an absolute inAunction forbidding the !etitioning debtor from dis!osing in any manner of his !ro!erty$ e2ce!t in so far as concerns the ordinary o!erations of commerce or of industry in which the !etitioner is engaged$ and$ furthermore$ from maCing any !ayments outside of the necessary or legitimate e2!enses of his business or industry$ so long as the !roceedings relati+e to the sus!ension of !ayments are !ending$ and said !roceedings for the !ur!oses of this 'ct shall be considered to ha+e been instituted from the date of the filing of the !etition.= / Section (* o& Act (./5 #ection 1&$ cha!ter 3$ !ro+ides that any !erson owing debts e2ceeding (1$000 may a!!ly to be discharged from his debts and liabilities by !etition to the -ourt of "irst :nstance in which he has resided for si2 months !receding the filing of the !etition. 5 Section () o& Act (./5 #ection 1@ enacts that u!on recei+ing and filing of the !etition$ schedule$ and in+entory$ the court$ or the Audge$ shall maCe an order declaring the !etitioner insol+ent$ and <shall further forbid the !ayment to the debtor of any debts due to him and the deli+ery to the debtor$ or to any !erson for him$ of any !ro!erty belonging to him$ and the transfer of any !ro!erty by him$ and shall further a!!oint a time and !lace for a meeting of the creditors to choose an assignee of the estate.= , Cuedans reco$ni:ed to be oBned by !N< 't the time the eight !romissory notes were e2ecuted$ a gi+en 9uedan$ or warehouse recei!t$ was described and incor!orated in the note as to its number$ when and by whom issued$ and the !ro!erty it re!resented$ and each recei!t was then deli+ered by the firm to the defendant banC$ all of which was during the month of .anuary$ 1818. The banC ne+er had the manual !ossession or the !hysical control of any of this
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!ro!erty until after the insol+ency !etition was filed$ and it is for such reason that the !laintiff claims that it
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was the !ro!erty of the firm$ and that the defendant should account to the assignee. Bach 9uedan$ or warehouse recei!t$ was s!ecifically described in a gi+en note$ and was made a !art of it$ and the note recites that$ for any breach of its terms or conditions$ the banC has full !ower and authority <to sell$ assign$ transfer and deli+er the whole of the said security$ or any !art thereof$ etc.$= and that <at any such sale$ the said banC may itself !urchase the whole or any !art of the !ro!erty sold$ free from any right of redem!tion on the !art of the undersigned$ which is hereby wai+ed and released.= :n addition$ the 9uedan itself was deli+ered to and held by the banC$ and the warehouseman recognized the banC as the owner of the !ro!erty. ,egally s!eaCing$ the owner of the 9uedans$ or warehouse recei!ts$ was the owner of the !ro!erty described in them$ and the 9uedans were gi+en as collateral to secure !romissory notes$ which$ for +alue recei+ed$ were e2ecuted to the banC. ) %he e4ecution o& the notes+ the "hysical "ossession o& the ne$otiable =uedan+ or Barehouse recei"t+ and the reco$nition o& oBnershi" by the Barehouseman+ le$ally carries Bith it both the title to+ and the "ossession o&+ the "ro"erty The e2ecution of the notes$ the !hysical !ossession of the negotiable 9uedan$ or warehouse recei!t$ and the recognition of ownershi! by the warehouseman$ legally carries with it both the title to$ and the !ossession of$ the !ro!erty. :n such a case$ title is not founded on a !ublic instrument which should be authenticated by a notary or by a com!etent !ublic official. ,egally s!eaCing$ the e2ecution of the !romissory notes and the !ledging of the 9uedans$ or warehouse recei!ts$ as collateral$ and the describing of them in the notes$ and the manual deli+ery of the 9uedan$ or warehouse recei!t itself$ carries with it not only the title$ but the legal !ossession of the !ro!erty. :n other words$ as to the !ro!erty described in the 9uedans$ or warehouse recei!ts$ which were !ledged$ as collateral$ in .anuary$ 1818$ to secure the eight res!ecti+e !romissory notes$ both the title and the !ossession of that !ro!erty were deli+ered to and +ested in (5/ in .anuary 31818. Three of those 9uedans$ or warehouse recei!ts$ were returned to the firm by the banC on 10 "ebruary 1818$ but the banC still owned and held the notes$ which were secured but those warehouse recei!ts$ and no !art of the debt itself was !aid by or through the surrender of the recei!ts. . ;e$al e&&ect o& the (0 3ebruary recei"t? Statement o& ) 3ebruary merely a re"resentation o& "ro"erty inside its Barehouse? Jritin$ does not vest oBnershi" o& Barehoused items to !N< The legal effect of this recei!t is a !romise on the !art of the firm to return the three 9uedans on or before 23 .anuary 1818$ and a statement that such recei!ts are guaranteed by the attached certificate of the e2istence in the warehouse of the !ro!erty described in the certificate. The statement of "ebruary @$ recites <we hereby certify that there e2ist the following articles in our bodegas.= Then follows a descri!tion of the !ro!erty. This is nothing but a statement or re!resentation to the effect that the firm has the !ro!erty in its warehouse. 5othing more. 'fter describing the !ro!erty$ the certificate then says4 <'nd !romise that none of the abo+e articles would be remo+ed without consulting first with the (hili!!ine 5ational /anC.= There is no statement or re!resentation of any Cind showing when or from whom the !ro!erty was recei+ed$ or how it was held$ or who was the owner$ or when or to whom it would be deli+ered. >hen analyzed$ this writing is nothing more than a certificate of the firm that the described !ro!erty was then in its warehouse$ and a !romise that none of the <articles would be remo+ed without consulting first with the (hili!!ine 5ational /anC.= #uch a writing would not transfer the title of the !ro!erty to the banC$ or gi+e it !ossession$ either actual or constructi+e. :t will be noted that both the recei!t of "ebruary 10 and the certificate and !romise of "ebruary @$ are signed by the firm of #al+ador 1ermanos$ and that the certificate says that the !ro!erty was then in the firm?s warehouse$ and that neither instrument was in any manner authenticated by a notary or a com!etent !ublic official$ as !ro+ided by article 1210 of the -i+il -ode$ and that the !ro!erty was in the warehouse of the firm. (0 Article ()53 o& the Civil Code? !ro"erty not le&t to the "ossession o& the bank? thus it cannot sell+ trans&er and deliver the Bhole or "art o& said securities 'rticle 1@03 of the -i+il -ode !ro+ides <:n addition to the re9uisites mentioned in article 1@;3$ it shall be necessary$ in order to constitute the contract of !ledge$ that the !ledge be !laced in the !ossession
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of
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the creditor or of a third !erson a!!ointed by common consent.= :t a!!ears in the !resent case howe+er that from the certificate that the !ro!erty was then in the !ossession of the firm$ who made the certificate$ and that it was in the !ossession of that firm when its insol+ency !etition was filed on 21 '!ril 1818. :t will be noted that the !romissory notes e2ecuted by the firm to the banC recite that <"ull !ower and authority are hereby gi+en to said banC to sell$ assign$ transfer and deli+er the whole of the said securities$ or any !art thereof$ or any substitutes therefor or any additions thereto$ or any other securities or !ro!erty gi+en unto or left in the !ossession of or hereafter gi+en unto or left in the !ossession of the said /anC by the undersigned.= Thus$ the !ower and authority of the banC to sell$ assign$ or transfer is confined to !ro!erty which was gi+en unto or left in its !ossession. 5one of the !ro!erty described in the certificate of "ebruary @ was e+er gi+en unto or left in the !ossession of the banC. (( Ca"acity o& !hili""ine %rust Com"any? Althou$h a""ointed 6uly (.+ "oBer and authority Bas vested on it 2( A"ril (.(. Bhen the insolvency "etition Bas &iled The insol+ency !etition was filed 21 '!ril 1818$ and the (hili!!ine Trust -o was duly elected and 9ualified$ as assignee$ on 18 .uly 1818$ and$ as such$ it re!resents both the creditors and the firm. 'lthough it was not a!!ointed until .uly 1818$ yet when it did 9ualify its right and title to all the !ro!erty of the firm related bacC and became +ested as of 21 '!ril 1818$ when the insol+ency !etition was filed$ and from that time it alone had the !ower and authority to act for and re!resent the firm. *nder the terms and !ro+isions of 'ct 18;0 of the (hili!!ine ,egislature$ after it was filed$ the !ower of the firm or any member of it to deli+er !ossession of the !ro!erty to secure a !ree2isting debt was sus!ended !ending final adAudication. That is to say$ if the debt was not legally secured before the insol+ency !etition was filed$ no member of the firm had any legal right to secure it after the !etition was filed$ and any attem!t to do so would be null and +oid. ')20 !hili""ine %rust Co v #oldan 'G # No ;-)*,, (./5 0 Bn /anc$ /engzon (.)4 @ concur May 3(+
3actsH 13 !arcels located in uiguinto$ /ulacan$ were !art of the !ro!erties inherited by Mariano ,. /ernardo from his father$ the late Marcelo /ernardo. :n +iew of his minority$ guardianshi! !roceedings were instituted$ wherein #ocorro 7oldan$ sur+i+ing s!ouse of /ernardo and ste!mother to Mariano$ was a!!ointed his guardian. 6n 23 .uly 18&3$ 7oldan filed in said guardianshi! !roceedings (#!ecial (roceeding 2&@;$ Manila)$ a motion asCing for authority to sell as guardian the 13 !arcels for the sum of (1&$300 to )r. "idel -. 7amos$ her brother%in%law$ the !ur!ose of the sale being allegedly to in+est the money in a residential house$ which the minor desired to ha+e on Tindalo #treet$ Manila. The motion was granted. 6n ; 'ugust 18&3$ 7oldan$ as guardian$ e2ecuted the !ro!er deed of sale in fa+or of 7amos$ and on 12 'ugust 18&3 obtained a Audicial confirmation of the sale. 6n 13 'ugust 18&3$ 7amos e2ecuted in fa+or of 7oldan$ a deed of con+eyance co+ering the same 13 !arcels$ for the sum of (1;$000. 6n 21 6ctober 18&3$ 7oldan sold & !arcels out of the 13 to Bmilio -ruz for (3$000$ reser+ing to herself the right to re!urchase. The (hili!!ine Trust -om!any re!laced 7oldan as guardian on 10 'ugust 18&@. Two months later$ the -om!any$ as guardian$ filed before the -": Manila a com!laint against 7oldan to annul 2 contracts regarding 13 !arcels of land claiming that the ste!%mother in effect$ sold to herself$ the !ro!erties of her ward$ and the sale should be annulled for +iolating 'rticle 1&;8 of the -i+il -ode !rohibiting the guardian from !urchasing the !ro!erty of her ward. The trial court u!held the contracts but allowing the minor to re!urchase all the !arcels by !aying (1;$000$ within 1 year. The -' affirmed the Audgment. 1ence$ the a!!eal.
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The #u!reme -ourt annulled the 3 contracts of sale in 9uestionG declared the minor as the owner of the 13 !arcels of land$ with the obligation to return to 7oldan the !rice of (1&$300 with legal interest from 12 'ugust 18&3G ordered 7oldan and Bmilio -ruz to deli+er said !arcels of land to the minorG re9uired 7oldan to !ay him beginning with 18&3 the fruits$ which her attorney admits$ amounted to (1$;22 a yearG authorized the
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minor to deli+er directly to Bmilio -ruz$ out of the !rice of (1&$300 abo+e mentioned$ the sum of (3$000G and charged a!!ellees with the costs. ( Guardianshi" is a trust o& the hi$hest order? Article (*/. a""lies 7emembering the general doctrine that guardianshi! is a trust of the highest order$ and the trustee cannot be allowed to ha+e any inducement to neglect his ward?s interest and in line with the court?s sus!icion whene+er the guardian ac9uires the ward?s !ro!erty$ the -ourt has no hesitation to declare that$ in the eyes of the law$ the guardian (7oldan) tooC by !urchase her ward?s !arcels (thru )r. 7amos)$ and that 'rticle 1&;8 of the -i+il -ode a!!lies. 2 Annulment o& the transaction+ even i& no collusion is "roved+ Bould u"hold e=uity and @ustice The guardian may ha+e acted without maliceG there may ha+e been no !re+ious agreement between her and )r. 7amos to the effect that the latter would buy the lands for her but the fact remains that she ac9uired her !rotege?s !ro!erties$ through her brother%in%law. That she !lanned to get them for herself at the time of selling them to )r. 7amos$ may be deduced from the +ery short time between the two sales. The tem!tation which naturally besets a guardian so circumstanced$ necessitates the annulment of the transaction$ e+en if no actual collusion is !ro+ed (so hard to !ro+e) between such guardian and the intermediate !urchaser. This would u!hold a sound !rinci!le of e9uity and Austice. 3 #odri$ue: v Mactal does not a""ly? len$th o& time di&&erent+ su&&icient to dis"el sus"icion :n 7odrigues +. Mactal$ where the guardian Mactal sold in .anuary 1820 the !ro!erty of her ward to #il+erio -hioco$ and in March 182@ she bought it from -hioco$ the -ourt declared the <in order to bring the sale in this case within the !art of 'rticle 1&;8$ 9uoted abo+e$ it is essential that the !roof submitted establish some agreement between #il+erio -hioco and Trinidad Mactal to the effect that -hioco should buy the !ro!erty for the benefit of Mactal. :f there was no such agreement$ either e2!ress or im!lied$ then the sale cannot be set aside.= The subse9uent !urchase of Mactal$ in said case$ cannot be annulled as there was no !roof of a !re+ious agreement between -hioco and her. Two years had ela!sed between the sales$ and such !eriod of time was sufficient to dis!el the natural sus!icion of the guardian?s moti+es or actions. :n the !resent case$ only 1 weeC had ela!sed. 'nd if we were technical$ only 1 day had ela!sed from the Audicial a!!ro+al of the sale ('ugust 12)$ to the !urchase by the guardian ('ugust 13). * Minor on losin$ end in the transaction The calculation$ that the in+estment in the Tindalo #treet house !roduces to the minor the rentals of (2$&00 yearly while the !arcels of land yield for the ste!mother an a+erage o (1$;22 yearly$ does not include the !rice of the lot on which the house was erected. Bstimating such lot at (1&$300 only$ (ordinarily the city lot is more +aluable than the building) the result is that the !rice !aid for the 13 !arcels ga+e the minor an income of only (1$200 a year$ whereas the har+est from the se+enteen !arcels netted his ste!% mother a yearly !rofit of (1$;22.00. The minor was on the losing end. / %hree Sales void "rom both the legal and e9uitable stand!oints these three sales should not be sustained4 the first two for +iolation of article 1&;8 of the -i+il -odeG and the third because 7oldan could !ass no title to Bmilio -ruz. The annulment carries with is ('rticle 1303 -i+il -ode) the obligation of 7oldan to return the 13 !arcels together with their fruits and the duty of the minor$ through his guardian to re!ay (1&$300 with legal interest. ')30 !ichel v Alon:o 'G # No ;-35.02 (.)2 0 6anuary 30+
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"irst )i+ision$ uerrero (.)4 ; concur
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3actsH (rudencio 'lonzo was awarded by the o+ernment that !arcel of land designated as ,ot 21 of #ubdi+ision (lan (sd%32&0; of /alactasan$ ,amitan$ /asilan -ity in accordance with 7' &33. The award was cancelled by the /oard of ,i9uidators on 23 .anuary 180; on the ground that$ !re+ious thereto$ 'lonzo was !ro+ed to ha+e alienated the land to another$ in +iolation of law. :n 1832$ 'lonzo?s rights to the land were reinstated. 6n 1& 'ugust 180@$ 'lonzo and his wife sold to (ichel through a <deed of sale= all the fruits of the coconut trees which may be har+ested in the land for the !eriod$ from 1; #e!tember 180@ to 1 .anuary 1830$ in consideration of (&$200.00. :t was further sti!ulated that the +endor?s right$ title$ interest and !artici!ation herein con+eyed is of his own e2clusi+e and absolute !ro!erty$ free from any liens and encumbrances and he warrants to the Vendee good title thereto and to defend the same against any and all claims of all !ersons whomsoe+er. B+en as of the date of sale$ howe+er$ the land was still under lease to one 7amon #ua$ and it was the agreement that !art of the consideration of the sale$ in the sum of (3$0;0.00$ was to be !aid by (ichel directly to 7amon #ua so as to release the land from the clutches of the latter. (ending said !ayment 'lonzo refused to allow the (ichel to maCe any har+est. :n .uly 1832$ (ichel for the first time since the e2ecution of the deed of sale in his fa+or$ caused the har+est of the fruit of the coconut trees in the land. 'lonzo filed an action for the annulment of a <)eed of #ale= before the -": /asilan -ity. 6n ; .anuary 1833$ the lower court rendered its decision holding that although the agreement in 9uestion is denominated by the !arties as a deed of sale of fruits of the coconut trees found in the +endor?s land$ it actually is$ for all legal intents and !ur!oses$ a contract of lease of the land itselfG an encumbrance !rohibited under 7' &33. The court thus held that the deed of sale is null and +oid$ and ordered 'lonzo to !ay bacC (ichel the consideration of the sale in the sum of (&$200 with interests from the date of the filing of the com!laint until !aid$ and (ichel to !ay the sum of (;00.00 as attorney?s feesG with costs against (ichel. 1ence$ the !etition to re+iew on certiorari was raised before the #u!reme -ourt. The #u!reme -ourt set aside the Audgment of the lower court and entered another dismissing the com!laintG without costs. ( Vendor $rantee under #A *,,+ and could e4ercise all the ri$hts "ertainin$ thereto+ &olloBin$ rulin$ in #as v Sua :n 7as +s. #ua$ it was categorically stated that a cancellation of an award granted !ursuant to the !ro+isions of 7' &33 does not automatically di+est the awardee of his rights to the land. #uch cancellation does not result in the immediate re+ersion of the !ro!erty subAect of the award$ to the #tate. *ntil and unless an a!!ro!riate !roceeding for re+ersion is instituted by the #tate$ and its reac9uisition of the ownershi! and !ossession of the land decreed by a com!etent court$ the grantee cannot be said to ha+e been di+ested of whate+er right that he may ha+e o+er the same !ro!erty. :n the !resent case$ there is nothing in the record to show that at any time after the su!!osed cancellation of the award on 23 .anuary 180;$ re+ersion !roceedings against ,ot 21 were instituted by the #tate. :nstead$ the admitted fact is that the award was reinstated in 1832. '!!lying the doctrine announced in the 7as case$ therefore$ 'lonzo is not deemed to ha+e lost any of his rights as grantee of ,ot 21 under 7' &33 during the !eriod material to the !resent case$ i.e.$ from the cancellation of the award in 180; to its reinstatement in 1832. >ithin said !eriod$ 'lonzo could e2ercise all the rights !ertaining to a grantee with res!ect to ,ot 21. 2 Court to a""ly the contract accordin$ to its e4"ress terms The first and fundamental duty of the courts is the a!!lication of the contract according to its e2!ress terms$ inter!retation being resorted to only when such literal a!!lication is im!ossible. 3 Contract clear and une=uivocal? Construction or inter"retation o& document not called &or -onstruction or inter!retation of the document in 9uestion is not called for. ' !erusal of the deed fails to disclose any ambiguity or obscurity in its !ro+isions$ nor is there doubt as to the real intention of the contracting !arties. The terms of the agreement are clear and une9ui+ocal$ hence the literal and !lain meaning
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thereof should be obser+ed. #uch is the mandate of the -i+il -ode of the (hili!!ines which !ro+ides that <if
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the terms of a contract are clear and lea+e no doubt u!on the intention of the contracting !arties$ the literal meaning of its sti!ulation shall control.= :n the !resent case$ the <)eed of #ale= dated 1& 'ugust 180@ is !recisely what it !ur!orts to be. :t is a document e+idencing the agreement of herein !arties for the sale of coconut fruits of ,ot 21$ and not for the lease of the land itself. :n clear and e2!ress terms$ the document defines the obAect of the contract thus4 <the herein sale of coconut fruits are for all the fruits on the aforementioned !arcel of land during the years from 1; #e!tember 180@G u! to 1 .anuary 1830.= * Contract o& sale valid+ essential elements valid The document in 9uestion e2!resses a +alid contract of sale as it has the essential elements of a contract of sale as defined under 'rticle 1&;@ of the 5ew -i+il -ode. 'rticle 1&;@ !ro+ides that <by the contract of sale one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determinate thing$ and the other to !ay therefor a !rice certain in money or its e9ui+alent$= and that <a contract of sale may be absolute or conditional.= The subAect matter of the contract of sale are the fruits of the coconut trees on the land during the years from 1; #e!tember 180@ u! to 1 .anuary 1830$ which subAect matter is a determinate thing. / %hin$s havin$ "otential e4istence may be the ob@ect o& the contract o& sale *nder 'rticle 1&01 of the 5ew -i+il -ode$ things ha+ing a !otential e2istence may be the obAect of the contract of sale. ' +alid sale may be made of a thing$ which though not yet actually in e2istence$ is reasonably certain to come into e2istence as the natural increment or usual incident of something already in e2istence$ and then belonging to the +endor$ and the title will +est in the buyer the moment the thing comes into e2istence &E6e#son vs. Eu#o,ean Rail@ay Co., 1$ !e., 38$D Cutting vs. *ac/e#s EKc+ange, 2% A6. St. Re,., 13(. Things of this nature are said to ha+e a !otential e2istence. ' man may sell !ro!erty of which he is !otentially and not actually !ossessed. 1e may maCe a +alid sale of the wine that a +ineyard is e2!ected to !roduceG or the grain a fieldmay grow in a gi+en timeG or the milC a cow may yield during the coming yearG or the wool that shall thereafter grow u!on shee!G or what may be taCen at the ne2t case of a fisherman?s netG or fruits to growG or young animals not yet in e2istenceG or the good will of a trade and the liCe. The thing sold$ howe+er$ must be s!ecific and identified. They must be also owned at the time by the +endor &Bull vs. Bull, 48 Conn., 200D 40 A6. Re,., %10(L ,,. 0222023(. Thus$ !ending cro!s which ha+e !otential e2istence may be the subAect matter of sale &Sibal vs. Eal8ez, 00 *+il. 0%2(. 5 Contract o& sale and lease o& thin$s distin$uished The essential difference between a contract of sale and a lease of things is that the deli+ery of the thing sold transfers ownershi!$ while in lease no such transfer of ownershi! results as the rights of the lessee are limited to the use and enAoyment of the thing leased. :n the !resent case$ the lower court?s holding that the contract in 9uestion fits the definition of a lease of things wherein one of the !arties binds himself to gi+e to another the enAoyment or use of a thing for a !rice certain and for a !eriod which may be definite or indefinite ('rt. 10&3$ -i+il -ode of the (hili!!ines) is erroneous. , Contract o& lease+ en@oyment o& "ro"erty 'rticle 1;&3 of the -i+il -ode defines the contract of lease as the gi+ing or the concession of the enAoyment or use of a thing for a s!ecified time and fi2ed !rice$ and since such contract is a form of enAoyment of the !ro!erty$ it is e+ident that it must be regarded as one of the means of enAoyment referred to in said 'rticle 38@$ inasmuch as the terms enAoyment$ use$ and benefit in+ol+e the same and analogous meaning relati+e to the general utility of which a gi+en thing is ca!able. &%04 :u#is,#u8encia Civil, 443D Ro8#iguez vs. .o##o6eo, 43 *+il. 4$', 4'0(. ) %rans&er o& accessory does not trans&er "rinci"al The !ossession and enAoyment of the coconut trees cannot be said to be the !ossession and enAoyment of the land itself because these rights are distinct and se!arate from each other$ the first !ertaining to the
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accessory or im!ro+ements (coconut trees) while the second$ to the !rinci!al (the land). ' transfer of the
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accessory or im!ro+ement is not a transfer of the !rinci!al. :t is the other way around$ the accessory follows the !rinci!al. :n the !resent case$ the sale of the nuts cannot be inter!reted nor construed to be a lease of the trees$ much less e2tended further to include the lease of the land itself. :n cannot be said that the !ossession and enAoyment of the coconut trees to be the !ossession and enAoyment of the land itself because the lessee in order to enAoy his right under the contract$ he actually taCes !ossession of the land$ at least during har+est time$ gathers all of the fruits of the coconut trees in the land$ and gains e2clusi+e use thereof without the interference or inter+ention of the lessor. . him Grantee under #A *,, not "rohibited to sell the naturalLindustrial &ruits o& the land aBarded to
The grantee of a !arcel of land under 7' &33 is not !rohibited from alienating or dis!osing of the natural andDor industrial fruits of the land awarded to him$ !ursuant to the terms of the first !aragra!h of #ection @. >hat the law e2!ressly disallows is the encumbrance or alienation of the land itself or any of the !ermanent im!ro+ements thereon. (ermanent im!ro+ements on a !arcel of land are things incor!orated or attached to the !ro!erty in a fi2ed manner$ naturally or artificially. They include whate+er is built$ !lanted or sown on the land which is characterized by fi2ity$ immutability or immo+ability. 1ouses$ buildings$ machinery$ animal houses$ trees and !lants would fall under the category of !ermanent im!ro+ements$ the alienation or encumbrance of which is !rohibited by 7' &33. >hile coconut trees are !ermanent im!ro+ements of a land$ their nuts are natural or industrial fruits which are meant to be gathered or se+ered from the trees$ to be used$ enAoyed$ sold or otherwise dis!osed of by the owner of the land. 1ence$ the grantee of ,ot 21 had the right and !rerogati+e to sell the coconut fruits of the trees growing on the !ro!erty. (0 !ur"ose o& #A *,,+ and Section ) thereo& /y +irtue of 7' &33$ bona fide occu!ants$ +eterans$ members of guerilla organizations and other 9ualified !ersons were gi+en the o!!ortunity to ac9uire go+ernment lands by !urchase$ taCing into account their limited means. :t was intended for these !ersons to maCe good and !roducti+e use of the lands awarded to them$ not only to enable them to im!ro+e their standard of li+ing$ but liCewise to hel! !ro+ide for the annual !ayments to the o+ernment of the !urchase !rice of the lots awarded to them. #ection @ was included to !rotect the grantees <from themsel+es and the incursions of o!!ortunists who !rey on their misery and !o+erty.= :t is there to insure that the grantees themsel+es benefit from their res!ecti+e lots$ to the e2clusion of other !ersons. (( ;e$islature does not intend to "rohibit the $rantee &rom sellin$ natural and industrial &ruits o& his land The !ur!ose of the law is not +iolated when a grantee sells the !roduce or fruits of his land. 6n the contrary$ the aim of the law is thereby achie+ed$ for the grantee is encouraged and induced to be more industrious and !roducti+e$ thus maCing it !ossible for him and his family to be economically self% sufficient and to lead a res!ectable life. 't the same time$ the o+ernment is assured of !ayment on the annual installments on the land. :t could not ha+e been the intention of the legislature to !rohibit the grantee from selling the natural and industrial fruits of his land$ for otherwise$ it would lead to an absurd situation wherein the grantee would not be able to recei+e and enAoy the fruits of the !ro!erty in the real and com!lete sense. (2 !arty cannot im"u$n the validity o& the contract a&ter receivin$ the consideration &or the sale The +endor%grantee$ after ha+ing recei+ed the consideration for the sale of his coconut fruits$ cannot be allowed to im!ugn the +alidity of the contracts he entered into$ to the !reAudice of !etitioner who contracted in good faith and for a consideration. The +endor cannot claim that he has the <!ri+ilege to
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change his mind and claim it as (an) im!lied lease$= and he has the <legitimate right= to file an action for annulment <which no law can sto!= as there is a !erfected and +alid contract. (3 Grant o& attorneyMs &ees not @usti&ied 'rticle 220@ of the -i+il -ode !ro+ides that <in the absence of sti!ulation$ attorney?s fees and
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e2!enses of litigation$ other than Audicial costs$ cannot be reco+ered$ e2ce!t (1) >hen e2em!lary damages are awardedG (2) >hen the defendant?s act or omission has com!elled the !laintiff to litigate with third !ersons or to incur e2!enses to !rotect his interestG (3) :n criminal cases of malicious !rosecution against the !laintiffG (&) :n case of a clearly unfounded ci+il action or !roceeding against the !laintiffG (;) >here the defendant acted in gross and e+ident bad faith in refusing to satisfy the !laintiff?s !lainly +alid$ Aust and demandable claimG (0) :n actions for legal su!!ortG (3) :n actions for the reco+ery of wages of household hel!ers$ laborers and sCilled worCersG (@) :n actions for indemnity under worCmen?s com!ensation and em!loyer?s liability lawsG (8) :n a se!arate ci+il action to reco+er ci+il liability arising from a crimeG (10) >hen at least double Audicial costs are awardedG (11) :n any other case where the court deems it Aust and e9uitable that attorney?s fees and e2!enses of litigation should be reco+ered. :n all cases$ the attorney?s fees and e2!enses of litigation must be reasonable.= 5one of the legal grounds enumerated e2ists to Austify or warrant the grant of attorney?s fees. ')*0 *7. v. CA, 212 SCRA 414 &%''0( ')/0 !oBer Commercial and 8ndustrial Cor" vs CA 'G # No ((.,*/ (.., 0 Third )i+ision$ (anganiban (.)4 3 concur$ 1 on lea+e 6une 20+
3actsH (ower -ommercial Q :ndustrial )e+elo!ment -or!oration ((-:))$ an industrial asbestos manufacturer$ needed a bigger office s!ace and warehouse for its !roducts. "or this !ur!ose$ on 31 .anuary 1838$ it entered into a contract of sale with the s!ouses 7eynaldo and 'ngelita 7. Uuiambao. The contract in+ol+ed a 012 s9. m. !arcel of land co+ered by T-T #%00@0 located at the corner of /agtican and #t (aul #treets$ #an 'ntonio Village$ MaCati -ity. The !arties agreed that (-:) would !ay the s!ouses (10@$000.00 as down !ayment$ and the balance of (28;$000.00 u!on the e2ecution of the deed of transfer of the title o+er the !ro!erty. "urther$ (-:) assumed$ as !art of the !urchase !rice$ the e2isting mortgage on the land. :n full satisfaction thereof$ he !aid (38$1&;.33 to (5/$ the mortgagee. 6n 1 .une 1838$ the s!ouses mortgaged again said land to (5/ to guarantee a loan of (1&;$000.00$ (@0$000.00 of which was !aid to the s!ouses. (-:) agreed to assume !ayment of the loan. 6n 20 .une 1838$ the !arties e2ecuted a )eed of 'bsolute #ale >ith 'ssum!tion of Mortgage ((28;$000 !ayment$ with assum!tion of (5/ mortgage worth (1&;$000$ !ending consent by (5/. The )eed of #ale also !ro+ides a clause stating that <>e hereby also warrant that we are the lawful and absolute owners of the abo+e described !ro!erty$ free from any lien andDor encumbrance$ and we hereby agree and warrant to defend its title and !eaceful !ossession thereof in fa+or of the said (ower -ommercial and :ndustrial )e+elo!ment -or!oration$ its successors and assigns$ against any claims whatsoe+er of any and all third !ersonsG subAect$ howe+er$ to the !ro+isions hereunder !ro+ided to wit.=). 6n the same date$ Mrs. -.). -onstantino$ then (-:)?s eneral Manager$ submitted to (5/ said deed with a formal a!!lication for assum!tion of mortgage. 6n 1; "ebruary 18@0$ (5/ informed the s!ouses that$ for (-:)?s failure to submit the !a!ers necessary for a!!ro+al !ursuant to the the s!ouses? letter dated 1; .anuary 18@0$ the a!!lication for assum!tion of mortgage was considered withdrawnG that the outstanding balance of (1&;$000.00 was deemed fully due and demandableG and that said loan was to be !aid in full within 1; days from notice. (-:) !aid (5/ (&1$@@0.&; on 2& .une 18@0 and (20$2@3.1& on 23 )ecember 18@0$ !ayments which were to be a!!lied to the outstanding loan. 6n 23 )ecember 18@0$ (5/ recei+ed a letter from (-:) re9uesting that its assum!tion of mortgage be gi+en fa+orable consideration$ and that the title be transferred to its name so that it may undertaCe the necessary !rocedures to maCe use of the lot$ in e2clusion of !eo!le currently in !hysical occu!ation of the lot. 6n 18 "ebruary 18@2$ (5/ sent (-:) a letter informing (-:) that
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the loan is !ast due from last maturity with interest arrearages amounting to (2;$@20.0@ as of 18 "ebruary 18@2$ and re9uesting (-:) to remit !ayments to co+er interest$ charges$ and at least !art of the !rinci!al in order to !lace (-:)?s account in current form.
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6n 13 March 18@2$ (-:) filed -i+il -ase &;213 against the s!ouses for rescission and damages before the 7T- (asig$ /ranch 1;8. Then$ in its re!ly to (5/?s letter of 18 "ebruary 18@2$ (-:) demanded the return of the !ayments it made on the ground that its assum!tion of mortgage was ne+er a!!ro+ed. 6n 31 May 18@3$ while the case was !ending$ the mortgage was foreclosed. The !ro!erty was subse9uently bought by (5/ during the !ublic auction. Thus$ an amended com!laint was filed im!leading (5/ as !arty defendant. 6n 12 .uly 1880$ the trial court ruled that the failure of res!ondent s!ouses to deli+er actual !ossession to !etitioner entitled the latter to rescind the sale$ and in +iew of such failure and of the denial of the latter?s assum!tion of mortgage$ the s!ouses and (5/ was obliged to return the !ayments made by (-:) ((1@3$1&&.33 with legal interest of 12I !er annum from the date of the filing of the com!laint until fully !aid by the s!ousesG and (02$103.;8 with 12I from date of Audgment until fully !aid by the banC). 5o award of other damages and attorney?s fees were made. The counterclaim of the s!ouses and (5/ were dismissed for lacC of merit. 6n a!!eal by the s!ouses and (5/$ and on 23 March 188;$ the -ourt of '!!eals (in -'% 7 -V 3228@) re+ersed the trial court. :t held that the deed of sale between the s!ouses and (-:) did not obligate the former to eAect the lessees from the land in 9uestion as a condition of the sale$ nor was the occu!ation thereof by said lessees a +iolation of the warranty against e+iction. 1ence$ there was no substantial breach to Austify the rescission of said contract or the return of the !ayments made. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt denied the !etition$ and affirmed the assailed decision. ( Alle$ed &ailure to e@ect lessee &rom lot not substantial breach The alleged <failure= of the s!ouses to eAect the lessees from the lot in 9uestion and to deli+er actual and !hysical !ossession thereof cannot be considered a substantial breach of a condition for two reasons4 first$ such <failure= was not sti!ulated as a condition J whether resolutory or sus!ensi+e J in the contractG and second$ its effects and conse9uences were not s!ecified either. The !ro+ision ad+erted to does not im!ose a condition or an obligation to eAect the lessees from the lot. /y his own admission$ 'nthony (owers$ (-:)?s eneral Manager$ did not asC its lawyers to sti!ulate in the contract that the s!ouses were guaranteeing the eAectment of the occu!ants$ because there was already a !ro+iso in said deed of sale that the sellers were guaranteeing the !eaceful !ossession by the buyer of the land. 2 2bscurity in a contract construed a$ainst "arty causin$ it 'ny of obscurity in a contract$ if the abo+e%9uoted !ro+ision can be described$ must be construed against the !arty who caused it. (-:) itself caused the obscurity because it omitted this alleged condition when its lawyer drafted said contract. 3 Sti"ulation similar to #omero vs CA re=uired in e@ectin$ tenants? Jhat Bas not intended by "arties cannot be a $round &or rescission :f the !arties intended to im!ose on the s!ouses the obligation to eAect the tenants from the lot sold$ it should ha+e included in the contract a !ro+ision similar to that referred to in 1o#ero vs. Court of Appeals $ where the eAectment of the occu!ants of the lot sold was the o!erati+e act which set into motion the !eriod of buyer?s com!liance with his own obligation$ i.e.$ to !ay the balance of the !urchase !rice. "ailure to remo+e the s9uatters within the sti!ulated !eriod ga+e the other !arty the right to either refuse to !roceed with the agreement or to wai+e that condition of eAectment in consonance with 'rticle 1;&; of the -i+il -ode. :n the case cited$ the contract s!ecifically sti!ulated that the eAectment was a condition to be fulfilledG otherwise$ the obligation to !ay the balance would not arise. This is not so in the !resent case. 'bsent a sti!ulation therefor$ the !arties could not ha+e intended to maCe its nonfulfillment a ground for rescission. :f they did intend this$ their contract should ha+e e2!ressly sti!ulated so.
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* #escission also not alloBed i& breach is not substantial and &undament to &ul&illment o& obli$ation to sell :n Ang vs. C.A.$ rescission was sought on the ground that the seller had failed to fulfill their
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obligation <to remo+e and clear= the lot sold$ the !erformance of which would ha+e gi+en rise to the !ayment of the consideration by buyer. 7escission was not allowed$ howe+er$ because the breach was not substantial and fundamental to the fulfillment by the !etitioners of the obligation to sell. / clear Jarranty and not condition? %erms o& contract
The !ro+ision ad+erted to in the contract !ertains to the usual warranty against e+iction$ and not to a condition that was not met. The terms of the contract are so clear as to lea+e no room for any other inter!retation. 5 -elivery an indis"ensable re=uisite? Actual or constructive? Symbolic delivery 'lthough most authorities consider transfer of ownershi! as the !rimary !ur!ose of saleG deli+ery remains an indis!ensable re9uisite as the law does not admit the doctrine of transfer of !ro!erty by mere consent. The -i+il -ode !ro+ides that deli+ery can either be (1) actual ('rticle 1&83) or (2) constructi+e ('rticles 1&8@%1;01). #ymbolic deli+ery ('rticle 1&8@)$ as s!ecies of constructi+e deli+ery$ effects the transfer of ownershi! through the e2ecution of a !ublic document. :ts efficacy can$ howe+er$ be !re+ented if the +endor does not !ossess control o+er the thing sold$ in which case this legal fiction must yield to reality. , #e=uisites &or symbolic delivery to "roduce e&&ect o& tradition :n order that this symbolic deli+ery may !roduce the effect of tradition$ it is necessary that the +endor shall ha+e had such control o+er the thing sold that . . . its material deli+ery could ha+e been made. :t is not enough to confer u!on the !urchaser the ownershi! and the right of !ossession. The thing sold must be !laced in his control. >hen there is no im!ediment whate+er to !re+ent the thing sold !assing into the tenancy of the !urchaser by the sole will of the +endor$ symbolic deli+ery through the e2ecution of a !ublic instrument is sufficient. /ut if$ notwithstanding the e2ecution of the instrument$ the !urchaser cannot ha+e the enAoyment and material tenancy of the thing and maCe use of it himself or through another in his name$ because such tenancy and enAoyment are o!!osed by the inter!osition of another will$ then fiction yields to reality J the deli+ery has not been effected. ) -elivery e&&ected throu$h e4ecution o& deed+ alloBin$ !C8- to &ile e@ectment suit a$ainst occu"ants -onsidering that the deed of sale between the !arties did not sti!ulate or infer otherwise$ deli+ery was effected through the e2ecution of said deed. The lot sold had been !laced under the control of (-:)G thus$ the filing of the eAectment suit was subse9uently done. :t signified that its new owner intended to obtain for itself and to terminate said occu!ants? actual !ossession thereof. (rior !hysical deli+ery or !ossession is not legally re9uired and the e2ecution of the deed of sale is deemed e9ui+alent to deli+ery. This deed o!erates as a formal or symbolic deli+ery of the !ro!erty sold and authorizes the buyer to use the document as !roof of ownershi!. 5othing more is re9uired. . #e=uisites o& <reach o& Jarranty A$ainst 7viction ' breach of this warranty re9uires the concurrence of the following circumstances4 (1) The !urchaser has been de!ri+ed of the whole or !art of the thing soldG (2) This e+iction is by a final AudgmentG (3) The basis thereof is by +irtue of a right !rior to the sale made by the +endorG and (&) The +endor has been summoned and made co%defendant in the suit for e+iction at the instance of the +endee. :n the absence of these re9uisites$ a breach of the warranty against e+iction under 'rticle 1;&3 cannot be declared.
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(0 !resence o& lessee does not constitute encumbrance o& land nor de"rives control thereo& The !resence of lessees does not constitute an encumbrance of the land$ nor does it de!ri+e (-:) of its control thereof. :t should be noted that (-:)?s de!ri+ation of ownershi! and control finally occurred when it failed andDor discontinued !aying the amortizations on the mortgage$ causing the lot to be foreclosed and sold at !ublic auction. /ut this de!ri+ation is due to (-:)?s fault$ and not to any act attributable to the s!ouses.
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((
Contract "resumed to be valid and subsistin$ /ecause (-:) failed to im!ugn its integrity$ the contract is !resumed$ under the law$ to be +alid and subsisting. (2 A""lication o& Solutio 8ndebiti The doctrine of #olutio :ndebiti a!!lies where4 (1) a !ayment is made when there e2ists no binding relation between the !ayor$ who has no duty to !ay$ and the !erson who recei+ed the !ayment$ and (2) the !ayment is made through mistaCe$ and not through liberality or some other cause. #olutio indebiti does not a!!ly in the !resent case. (3 !C8- has duty to "ay amorti:ations (-:) was under obligation to !ay the amortizations on the mortgage under the contract of sale and the deed of real estate mortgage. *nder the deed of sale$ both !arties agreed to abide by any and all the re9uirements of (5/ in connection with the real estate mortgage. (-:) was aware that the deed of mortgage made it solidarily$ and$ therefore$ !rimarily liable for the mortgage obligation. :t was sti!ulated that < t+e !o#tgago# s+all neit+e# lease t+e 6o#tgage8 ,#o,e#ty no# sell o# 8is,ose o" t+e sa6e in any 6anne#, @it+out t+e @#itten consent o" t+e !o#tgagee. Bo@eve#, i" not @it+stan8ing t+is sti,ulation an8 8u#ing t+e eKistence o" t+is 6o#tgage, t+e ,#o,e#ty +e#ein 6o#tgage8, o# any ,o#tion t+e#eo", is sol8, it s+all be t+e obligation o" t+e !o#tgago# to i6,ose as a con8ition o" t+e sale, alienation o# encu6b#ance t+at t+e ven8ee, o# t+e ,a#ty in @+ose "avo# t+e alienation o# encu6b#ance is to be 6a8e, s+oul8 ta/e t+e ,#o,e#ty subHect to t+e obligation o" t+is 6o#tgage in t+e sa6e te#6s an8 con8ition un8e# @+ic+ it is constitute8, it being un8e#stoo8 t+at t+e !o#tgago# is not in any 6anne# #elieve8 o" +is obligation to t+e !o#tgagee un8e# t+is 6o#tgage by suc+ sale, alienation o# encu6b#anceD on t+e cont#a#y bot+ t+e ven8o# an8 t+e ven8ee, o# t+e ,a#ty in @+ose "avo# t+e alienation o# encu6b#ance is 6a8e s+all be Hointly an8 seve#ally liable "o# sai8 6o#tgage obligations. = (* No mistake in the "ayment o& amorti:ation to !N< B+en if (-:) was a third !arty in regard to the mortgage of the land !urchased (on the insistence that (5/ disa!!ro+ed (-:)?s assum!tion of mortgage after it failed to submit the necessary !a!ers for the a!!ro+al of such assum!tion)$ the !ayment of the loan by (-:) was a condition clearly im!osed by the contract of sale. This fact alone dis!ro+es (-:)?s insistence that there was a <mistaCe= in !ayment. 6n the contrary$ such !ayments were necessary to !rotect its interest as a <the buyer(s) and new owner(s) of the lot.= (/ No un@ust enrichment The 9uasi%contract of solutio indebiti is one of the concrete manifestations of the ancient !rinci!le that no one shall enrich himself unAustly at the e2!ense of another. The !ayment of the mortgage was an obligation (-:) assumed under the contract of sale. There is no unAust enrichment where the transaction$ as in the !resent case$ is 9uid !ro 9uo$ +alue for +alue. ')50 !uyat A Sons v Arco Amusement 'G # No *,/3) (.*( 0 "irst )i+ision$ ,aurel (.)4 & concur 6une 20+
3actsH :n the year 1828$ the HTeatro 'rco?$ was engaged in the business of o!erating cinematogra!hs. :n 1830$ its name was changed to 'rco 'musement -om!any. 'bout the same time$ onzalo (uyat Q #ons$ :nc.$ in addition to its other business$ was acting as e2clusi+e agents in the (hili!!ines for the #tarr (iano -om!any of 7ichmond$ :ndiana$ *#'$ which dealt in cinematogra!h e9ui!ment and machinery. 'rco$ desiring to e9ui! its cinematogra!h with sound re!roducing de+ices$ a!!roached (uyat. 'fter some negotiations$ it was agreed between the !arties$ (uyat would$ on behalf of 'rco 'musement$ order sound
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re!roducing e9ui!ment from the #tar (iano -om!any and that 'rco 'musement would !ay (uyat$ in addition to the !rice of the
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e9ui!ment$ 10I commission$ !lus all e2!enses$ such as$ freight$ insurance$ banCing charges$ cables$ etc. 't the e2!ense of the 'rco$ (uyat sent a cable to the #tarr (iano -om!any$ in9uiring about the e9ui!ment desired and maCing the said com!any to 9uote its !rice of T1$300 "6/ factory 7ichmond$ :ndiana. (uyat informed the !laintiff of the !rice of T1$300$ and being agreeable to the !rice$ 'rco$ in a letter dated 18 5o+ember 1828$ formally authorized the order. The e9ui!ment arri+ed about the end of the year 1828$ and u!on deli+ery of the same to 'rco and the !resentation of necessary !a!ers$ the !rice of T1$300$ !lus the 10I commission agreed u!on the !lus all the e2!enses and charges$ was duly !aid by the 'rco to (uyat. he following year$ another order for sound re!roducing e9ui!ment was !laced by 'rco with (uyat$ on the same terms as the first order. The e9ui!ment under the second order arri+ed in due time$ and the defendant was duly !aid the !rice of T1$000 with its 10 !er cent commission$ and T100$ for all e2!enses and charges. This amount of T100 does not re!resent actual out%of%!ocCet e2!enses !aid by (uyat$ but a mere flat charge and rough estimate made by (uyat e9ui+alent to 10I of the !rice of T1$000 of the e9ui!ment. Three years later$ in connection with a ci+il case in Vigan$ filed by one "idel 7eyes against (uyat$ the officials of the 'rco disco+ered that the !rice 9uoted to them by (uyat with regard to their two orders was not the net !rice but rather the list !rice$ and that the defendant had obtained a discount from the #tarr (iano -om!any. Moreo+er$ by reading re+iews and literature on !rices of machinery and cinematogra!h e9ui!ment$ said officials of 'rco were con+inced that the !rices charged them by the defendant were much too high including the charges for out%of%!ocCet e2!enses. "or these reasons$ they sought to obtain a reduction from (uyat or rather a reimbursement. "ailing in this they brought an action with the -": Manila. The trial court held that the contract between the !arties was one of the outright !urchase and sale$ and absol+ed (uyat from the com!laint. The a!!ellate court$ howe+er$ held that the relation between the !arties was that of agent and !rinci!al$ (uyat acting as agent of 'rco in the !urchase of the e9ui!ment in 9uestion$ and sentenced (uyat to !ay 'rco alleged o+er!ayments in the total sum of T1$33;.;2 or (2$031.0&$ together with legal interest thereon from the date of the filing of the com!laint until said amount is fully !aid$ as well as to !ay the costs of the suit in both instances. 1ence$ the !etition for the issuance of a writ of certiorari to the -ourt of '!!eals for the !ur!osed of re+iewing its decision in ci+il case 7 1023. The #u!reme -ourt granted the writ of certiorari$ re+ersed the decision of the a!!ellate court$ and absol+ed (uyat Q #ons from the com!laint in 7 1023$ without !ronouncement regarding costs. ( Contract+ and those a$reed u"on+ is the laB betBeen the "arties? Jhat does not a""ear are re$arded as dealerMs or traderMs not bindin$ the "arties The contract is the law between the !arties and should include all the things they are su!!osed to ha+e been agreed u!on. >hat does not a!!ear on the face of the contract should be regarded merely as <dealer?s= or <trader?s talC=$ which can not bind either !arty. &7olb#oo/ v. Conne#, 01 So., 0$1, %% A6. Re,., 2%2D .an/ v. .#osscell, %20 -ll., %1%D .an/ v. *al6e#, 4$ -ll., '2D Bosse# v. Co,,e#, 8 Allen, 334D Doles v. !e##ill, %$3 !ass., 4%%.( The letters which 'rco acce!ted the !rices of T1$300 and T1$000$ res!ecti+ely$ for the sound re!roducing e9ui!ment subAect of its contract with (uyat$ are clear in their terms and admit of no other inter!retation than that 'rco agreed to !urchase from (uyat the e9ui!ment in 9uestion at the !rices indicated which are fi2ed and determinate. 2 A$ency? A$ent e4em"t &rom all liability in dischar$e o& commission i& in accordance Bith instructions received &rom "rinci"al :n agency$ the agent is e2em!ted from all liability in the discharge of his commission !ro+ided he acts in accordance with the instructions recei+ed from his !rinci!al (section 2;&$ -ode of -ommerce)$ and the !rinci!al must indemnify the agent for all damages which the latter may incur in carrying out the agency
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without fault or im!rudence on his !art (article 1328$ -i+il -ode). The fact that <whate+er unforseen e+ents might ha+e taCen !lace unfa+orable to the defendant (!etitioner)$ such as change in !rices$ mistaCe in their 9uotation$ loss of the goods not co+ered by insurance or failure of the #tarr (iano -om!any to !ro!erly fill
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the orders as !er s!ecifications$ the !laintiff (res!ondent) might still legally hold the defendant (!etitioner) to the !rices fi2ed of T1$300 and T1$000= is incom!atible with the !retended relation of agency between the !arties. 3 Commission does not necessarily make one the a$ent o& the other >hile the letters state that (uyat was to recei+e 10I commission$ this does not necessarily maCe the !etitioner an agent of the res!ondent$ as this !ro+ision is only an additional !rice which the res!ondent bound itself to !ay$ and which sti!ulation is not incom!atible with the contract of !urchase and sale. (#ee Uuiroga +s. (arsons 1ardware -o.$ 3@ (hil.$ ;01.) * !uyat A Sons already the a$ent o& Starr !iano Com"any o& #ichmond+ 8ndiana+ in the !hili""ines To hold the !etitioner an agent of 'rco in the !urchase of e9ui!ment and machinery from the #tarr (iano -om!any of 7ichmond$ :ndiana$ is incom!atible with the admitted fact that (uyat is the e2clusi+e agent of #tarr (iano in the (hili!!ines. :t is out of the ordinary for one to be the agent of both the +endor and the !urchaser. The facts and circumstances indicated to not !oint to anything but !lain ordinary transaction where 'rco enters into a contract transaction$ a contract of !urchase and sale$ with (uyat$ the latter as e2clusi+e agent of the #tarr (iano -om!any in the *nited #tates. / "rice Vendor not bound to reimburse di&&erence o& cost and sales
' +endor is not bound to the +endee for any difference between the cost !rice and the sales !rice which re!resents the !rofit realized by the +endor out of the transaction. This is the +ery essence of commerce without which merchants or middleman would not e2ist. 5 Not every concealment is &raud+ maybe business acumen? <uyer esto""ed Bhen it a$reed to conditions and "rice :t is well Cnown that local dealers acting as agents of foreign manufacturers$ aside from obtaining a discount from the home office$ sometimes add to the list !rice when they resell to local !urchasers. :t was a!!arently to guard against an e2horbitant additional !rice that 'rco sought to limit it to 10It. 'rco is esto!!ed from 9uestioning that additional !rice. :f the res!ondent later on disco+ers itself at the short end of a bad bargain. it alone must bear the blame$ and it cannot rescind the contract$ much less com!el a reimbursement of the e2cess !rice$ on that ground alone. The fact that (uyat obtained more or less !rofit than 'rco calculated before entering into the contract of !urchase and sale$ is no ground for rescinding the contract of !urchase and sale$ is no ground for rescinding the contract or reducing the !rice agreed u!on between the !arties. (uyat was not duty bound to re+eal the !ri+ate arrangement it had with the #tarr (iano -om!any relati+e to such discount to its !ros!ecti+e customers. 5ot e+ery concealment is fraudG and short of fraud$ it were better that$ within certain limits$ business acumen !ermit of the loosening of the slee+es and of the shar!ening of the intellect of men and women in the business world. '),0 Cui@ada v CA 'G # No (25*** -ecember *+ (..) 0 #econd )i+ision$ Martinez (.)4 3 concur 3actsH (etitioners ('lfonso$ -resente$ 7eynalda$ )emetrio$ Bliuteria$ Bulalio$ and >arlito) are the children of the late Trinidad -or+era Vda. de UuiAada. Trinidad was one of the heirs of the late (edro -or+era and inherited from the latter the 2%hectare !arcel of land subAect of the case$ situated in the barrio of #an 'gustin$ Talacogon$ 'gusan del #ur. 6n ; '!ril 18;0$ Trinidad UuiAada together with her sisters ,eonila -or+era Vda. de #e9ueMa and (az -or+era -abiltes and brother B!a!iadito -or+era e2ecuted a conditional
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deed of donation of the 2%hectare !arcel of land in fa+or of the Munici!ality of Talacogon$ the condition being that the !arcel of land shall be used solely and e2clusi+ely as !art of the cam!us of the !ro!osed !ro+incial high school in
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Talacogon. '!!arently$ Trinidad remained in !ossession of the !arcel of land des!ite the donation. 6n 28 .uly 1802$ Trinidad sold 1 hectare of the subAect !arcel of land to 7egalado MondeAar. #ubse9uently$ Trinidad +erbally sold the remaining 1 hectare to MondeAar without the benefit of a written deed of sale and e+idenced solely by recei!ts of !ayment. :n 18@0$ the heirs of Trinidad$ who at that time was already dead$ filed a com!laint for forcible entry against MondeAar$ which com!laint was$ howe+er$ dismissed for failure to !rosecute. :n 18@3$ the !ro!osed !ro+incial high school ha+ing failed to materialize$ the #angguniang /ayan of the munici!ality of Talacogon enacted a resolution re+erting the 2 hectares of land donated bacC to the donors. :n the meantime$ MondeAar sold !ortions of the land to "ernando /autista$ 7odolfo oloran$ Bfren uden$ and Brnesto oloran. 6n ; .uly 18@@$ the !etitioners filed a com!laint against !ri+ate res!ondents (MondeAar$ 7odulfo and Brnesto oloran$ 'sis$ 7as$ 'biso$ /autista$ Macasero and Maguisay) for 9uieting of title$ reco+ery of !ossession and ownershi! of !arcels of land with claim for attorney?s fees and damages. The trial court rendered Audgment in fa+or of the !etitioners$ holding that Trinidad UuiAada did not ha+e legal title or right to sell the land to MondeAar as it belongs to the Munici!ality of Talacogon at that time$ and that the deed of sale in fa+or of MondeAar did not carry the conformity and ac9uiescence of her children considering that Trinidad was already 03 years old and a widow. The trial court ordered the defendants (!ri+ate res!ondents)$ and any !erson acting in defendants? behalf to return and +acate the 2 hectares of land to the !laintiff$ and to remo+e their im!ro+ements constructed on the lotG ordered the cancellation of the deed of sale e2ecuted by Trinidad to MondeAar$ as well as the deeds of saleDrelin9uishments e2ecuted by MondeAar to the other defendantsG and ordered the defendants to !ay the !laintiffs$ in solidum$ the amount of (10$000$ (@$000$ and (30$000 as attorney?s fees$ e2!enses of litigation and moral damages$ res!ecti+ely. 6n a!!eal$ the -ourt of '!!eals re+ersed and set aside the Audgment a 9uo ruling that the sale made by Trinidad UuiAada to res!ondent MondeAar was +alid as the former retained an inchoate interest on the lots by +irtue of the automatic re+ersion clause in the deed of donation. Thereafter$ !etitioners filed a motion for reconsideration. >hen the -' denied their motion$ !etitioners instituted a !etition for re+iew to the #u!reme -ourt. The #u!reme -ourt affirmed the assailed decision of the -ourt of '!!eals. ( Condition valid in donation i& not contrary to laB+ morals+ $ood customs+ "ublic order or "ublic "olicy The donation made on '!ril ;$ 18;0 by Trinidad UuiAada and her brother and sisters was subAect to the condition that the donated !ro!erty shall be <used solely and e2clusi+ely as a !art of the cam!us of the !ro!osed (ro+incial 1igh #chool in Talacogon.= The donation further !ro+ides that should <the !ro!osed (ro+incial 1igh #chool be discontinued or if the same shall be o!ened but for some reason or another$ the same may in the future be closed= the donated !ro!erty shall automatically re+ert to the donor. #uch condition$ not being contrary to law$ morals$ good customs$ !ublic order or !ublic !olicy was +alidly im!osed in the donation. 2 -onation as mode o& ac=uirin$ oBnershi" >hen the Munici!ality?s acce!tance of the donation was made Cnown to the donor$ the former became the new owner of the donated !ro!erty$ donation being a mode of ac9uiring and transmitting ownershi!$ notwithstanding the condition im!osed by the donee. The donation is !erfected once the acce!tance by the donee is made Cnown to the donor. 'ccordingly$ ownershi! is immediately transferred to the latter and that ownershi! will only re+ert to the donor if the resolutory condition is not fulfilled. 3 Condition to construct school is a resolutory condition
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The resolutory condition$ in the !resent case$ is the construction of the school. :t has been ruled that when a !erson donates land to another on the condition that the latter would build u!on the land a school$ the
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condition im!osed is not a condition !recedent or a sus!ensi+e condition but a resolutory one. #o long as the resolutory condition subsists and is ca!able of fulfillment$ the donation remains effecti+e and the donee continues to be the owner subAect only to the rights of the donor or his successors%in%interest under the deed of donation. #ince no !eriod was im!osed by the donor on when must the donee com!ly with the condition$ the latter remains the owner so long as he has tried to com!ly with the condition within a reasonable !eriod. #uch !eriod$ howe+er$ became irrele+ant herein when the donee manifested that it cannot com!ly with the condition and the same was made Cnown to the donor. 6nly then$ when the non%fulfillment of the resolutory condition was brought to the donor?s Cnowledge$ that ownershi! of the donated !ro!erty re+erted to the donor as !ro+ided in the automatic re+ersion clause of the deed of donation. * 8nchoate interest may be sub@ect o& contract includin$ a contract o& sale? 8nterest over "ro"erty under conditional deed o& donation+ not the land itsel& The donor may ha+e an inchoate interest in the donated !ro!erty during the time that ownershi! of the land has not re+erted to her. #uch inchoate interest may be the subAect of contracts including a contract of sale. :n the !resent case$ howe+er$ what the donor sold was the land itself which she no longer owns. :t would ha+e been different if the donor%seller sold her interests o+er the !ro!erty under the deed of donation which is subAect to the !ossibility of re+ersion of ownershi! arising from the non%fulfillment of the resolutory condition. / ;aches+ elements ,aches !resu!!oses failure or neglect for an unreasonable and une2!lained length of time$ to do that which$ by e2ercising due diligence$ could or should ha+e been done earlierG <it is negligence or omission to assert a right within a reasonable time$ thus$ gi+ing rise to a !resum!tion that the !arty entitled to assert it either has abandoned or declined to assert it.= :ts essential elements of (a) -onduct on the !art of the defendant$ or of one under whom he claims$ gi+ing rise to the situation com!lained ofG (b) )elay in asserting com!lainant?s right after he had Cnowledge of the defendant?s conduct and after he has an o!!ortunity to sueG (c) ,acC of Cnowledge or notice on the !art of the defendant that the com!lainant would assert the right on which he bases his suitG and$ (d) :nAury or !reAudice to the defendant in the e+ent relief is accorded to the com!lainant= are absent in this case. :n the !resent case$ !etitioners? cause of action to 9uiet title commenced only when the !ro!erty re+erted to the donor andDor his successors%in%interest in 18@3$ not in the 1800?s when they had no interest o+er the !ro!erty at that time e2ce!t under the deed of donation to which !ri+ate res!ondents were not !ri+y. Moreo+er$ !etitioners had !re+iously filed an eAectment suit against !ri+ate res!ondents only that it did not !ros!er on a technicality. 5 Sale+ bein$ a consensual contract+ is "er&ected by mere consent? Seller need not oBn "ro"erty Bhen sold but Bhen delivered #ale$ being a consensual contract$ is !erfected by mere consent$ which is manifested the moment there is a meeting of the minds as to the offer and acce!tance thereof on three (3) elements4 subAect matter$ !rice and terms of !ayment of the !rice. 6wnershi! by the seller on the thing sold at the time of the !erfection of the contract of sale is not an element for its !erfection. >hat the law re9uires is that the seller has the right to transfer ownershi! at the time the thing sold is deli+ered. (erfection !er se does not transfer ownershi! which occurs u!on the actual or constructi+e deli+ery of the thing sold. ' !erfected contract of sale cannot be challenged on the ground of non%ownershi! on the !art of the seller at the time of its !erfectionG hence$ the sale is still +alid. , SellerMs title "asses by o"eration o& laB to the buyer The consummation of the !erfected contract is another matter. :t occurs u!on the constructi+e or actual deli+ery of the subAect matter to the buyer when the seller or her successors%in%interest subse9uently
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ac9uires ownershi! thereof. :n the !resent case$ such circumstance ha!!ened in this case when !etitioners (Trinidad?s heirs) became the owners of the subAect !ro!erty u!on the re+ersion of the ownershi! of the land to them. -onse9uently$ ownershi! is transferred to MondeAar and those who claim their right from him.
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'rticle 1&3& of the 5ew -i+il -ode su!!orts the ruling that the seller?s <title !asses by o!eration of law to the buyer.= This rule a!!lies not only when the subAect matter of the contract of sale is goods$ but also to other Cinds of !ro!erty$ including real !ro!erty. ) Article (*0. F*G does not "rovide that the "ro"erties o& a munici"ality are outside the commerce o& man? 2b@ects outside o& the commerce o& man are those Bhich cannot be a""ro"riated 5owhere in 'rticle 1&08 (&) is it !ro+ided that the !ro!erties of a munici!ality$ whether it be those for !ublic use or its !atrimonial !ro!erty$ are outside the commerce of menG so as to render the contract in+ol+ing the same ine2istent and +oid from the beginning when sold. :n the !resent case$ the lots were conditionally owned by the munici!ality. To rule that the donated !ro!erties are outside the commerce of men would render nugatory the unchallenged reasonableness and Austness of the condition which the donor has the right to im!ose as owner thereof. Moreo+er$ the obAects referred to as outside the commerce of man are those which cannot be a!!ro!riated$ such as the o!en seas and the hea+enly bodies. . No &actual or le$al basis &or the aBard o& &ees and dama$es There is neither factual nor legal basis for the trial court?s award of attorney?s fees$ litigation e2!enses and moral damages. 'ttorney?s fees and e2!enses of litigation cannot$ following the general rule in 'rticle 220@ of the 5ew -i+il -ode$ be reco+ered in the !resent case$ there being no sti!ulation to that effect and the case does not fall under any of the e2ce!tions. :t cannot be said that !ri+ate res!ondents had com!elled !etitioners to litigate with third !ersons. 5either can it be ruled that the former acted in <gross and e+ident bad faith= in refusing to satisfy the latter?s claims considering that !ri+ate res!ondents were under an honest belief that they ha+e a legal right o+er the !ro!erty by +irtue of the deed of sale. Moral damages cannot liCewise be Austified as none of the circumstances enumerated under 'rticles 2218 23 and 2220 2@ of the 5ew -i+il -ode concur in this case. '))0 Cuimson v #osete 'G # No ;-23., Au$ust .+ (./0 0 Bn /anc$ Tuason (.)4 ; concur 3actsH The !ro!erty$ i.e. the land$ originally belonged to the late )ionisio Uuimson$ who$ on 3 .une 1832$ e2ecuted a deed B2hibit ' transferring the same in fa+or of his daughter Tomasa Uuimson$ but remaining in continuous !ossession and enAoyment. :t was sold to the s!ouses Magno 'gustin and (aulina Manzano on 3 May 183;$ with right to re!urchase within the term of si2 yearsG and two years after$ on ; '!ril 1833$ again was sold to "rancisco 7osete$ also with !acto de retro within fi+e years$ thereafter ha+ing +erified its re!urchase of 'gustin and Manzano$ with money furnished to him by 7osete$ e2ecuting in the end the deed B2hibit 1. #ince then$ 7osete was the one in !ossession and who enAoys$ in a !eaceful manner e+en after the death of )ionisio Uuimson$ which occurred on 0 .une 1838$ until .anuary 18&3$ when Tomasa Uuimson filed with the .ustice of (eace of #an Marcelino$ Vambales$ inter+ening in the agreement with 7osete o+er the said !ro!erty$ whose failure was the reason for the race toward :ba$ the ca!ital of Vambales$ to ac9uire !riority in the registration and inscri!tion of the deeds of sale B2hibits ' and 1 which )ionisio Uuimson e2ecuted in fa+or of Tomasa Uuimson and "rancisco 7osete$ res!ecti+ely$ the former arri+ing one hour earlier$ at 8430 a.m. of 13 "ebruary 18&3$ whereas the latter arri+ed at 10430 a.m. of the same day. The -ourt of "irst instance of Vambales ruled in fa+or of Tomasa Uuimson and Marcos #antosG the decision being re+ersed later by the -ourt of '!!eals. 1ence$ the a!!eal by certiorari.
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The #u!reme -ourt set aside the decision of the -ourt of '!!eals$ and acce!ted the trial court?s a!!raisal of the damages (assessed damages of (1@0 for the occu!ation of the land for the agricultural years 18&3%&&$ 18&&%&; and 18&;%&0$ and (00 a year thereafter until the !ossession of the !ro!erty was restituted)G with costs against 7osete.
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Article (*52 and (*,3 o& the Civil Code 'rticles 1&02 of the -i+il -ode !ro+ides that <The thing sold shall be deemed deli+ered$ when it is !laced in the control and !ossession of the +endee. >hen the sale is made by means of a !ublic instrument$ the e2ecution thereof shall be e9ui+alent to the deli+ery of the thing which is the obAect of the contract$ if from the said instrument the contrary does not a!!ear or may not be clearly inferred.= 'rticle 1&33 !ro+ides$ on the other hand$ that <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who first recorded it in the registry. #hould there be no inscri!tion$ the ownershi! shall belong to the !erson who in good faith was first in the !ossessionG and$ in the absence of this$ to the !erson who !resents the oldest title$ !ro+ided there is good faith.= 2 <uencamino vs Viceo? 74ecution o& notarial document o& sale su&&icient delivery :n the case of /uencamino +s. Viceo (13 (hil.$ 83)$ 'rticle 1&02 was cited. The !ro+ision !ro+ides that <*!on a sale of real estate the e2ecution of a notarial document of sale is a sufficient deli+ery of the !ro!erty sold.= 3 3lorendo vs 3o:H 74ecution o& sale thru "ublic instrument tantamount to conveyance :n the case of "lorendo +s. "oz (20 (hil.$ 3@@)$ it was ruled that <>hen the sale is made by means of a !ublic instrument$ the e2ecution thereof is tantamount to con+eyance of the subAect matter$ unless the contrary clearly follows or be deduced from such instrument itself$ and in the absence of this condition such e2ecution by the +endor is !er se a formal or symbolical con+eyance of the !ro!erty sold$ that is$ the +endor in the instrument itself authorizes the !urchaser to use the title of ownershi! as !roof that the latter is thenceforth the owner of the !ro!erty.= * Sanche: vs #amos almost on all &ours :n the case of #anchez +s. 7amos (&0 (hil.$ 01&)$ it a!!eared that one "ernandez sold a !iece of land to Marcelino omez and 5arcisa #anchez under !acto de retro in a !ublic instrument. The !urchasers neither recorded their deed in the registry of !ro!erty nor e+er tooC material !ossession of the land. ,ater$ "ernandez sold the same !ro!erty by means of a !ri+ate document to 7amos who immediately entered u!on the !ossession of it. :t was held that$ according to article 1&33 of the -i+il -ode$ omez and #anchez were the first in !ossession and$ conse9uently$ that the sale in their fa+or was su!erior. / 8nter"retation o& Article (*,3? Material and symbolic "ossession (ossession is ac9uired by the material occu!ancy of the thing or right !ossessed$ or by the fact that the latter is subAected to the action of our will$ or by the a!!ro!riate acts and legal formalities established for ac9uiring !ossession (art. &3@$ -i+il -ode). /y a sim!le reasoning$ it a!!ears that$ because the law does not mention to which of these Cinds of !ossession the article (1&33) refers$ it must be understood that it refers to all of these Cinds. The !ossession mentioned in article 1&33 (for determining who has better right when the same !iece of land has been sold se+eral times by the +endor) includes not only the material but also the symbolic !ossession$ which is ac9uired by the e2ecution of a !ublic instrument. 5 8nter"retation o& Article (*,3H in consonance Bith the "rinci"les o& @ustice The -ourt?s inter!retation of article 1&33 is more in consonance with the !rinci!les of Austice. The e2ecution of a !ublic instrument is e9ui+alent to the deli+ery of the realty sold (art.1&02$ -i+il -ode) and its !ossession by the +endee (art. &3@). *nder these conditions the sale is considered consummated and com!letely transfers to the +endee all of the +endor?s rights of ownershi! including his real right o+er the thing. The +endee by +irtue of this sale has ac9uired e+erything and nothing$ absolutely nothing$ is left to the
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+endor. "rom this moment the +endor is a stranger to the thing sold liCe any other who has ne+er been its owner. 's the thing is considered deli+ered$ the +endor has no longer the obligation of e+en deli+ering it. :f he
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continues taCing material !ossession of it$ is sim!ly on account of +endee?s tolerance and$ in this sense$ his !ossession is +endor?s !ossession. 'nd if the latter should ha+e to asC him for the deli+ery of this material !ossession$ it would not be by +irtue of the sale$ because this has been already consummated and has !roduced all its effects$ but by +irtue of the +endee?s ownershi!$ in the same way as said +endee could re9uire of another !erson although same were not the +endor. This means that after the sale of a realty by means of a !ublic instrument$ the +endor$ who resells it to another$ does not transmit anything to the second +endee and if the latter$ by +irtue of this second sale$ taCes material !ossession of the thing$ he does it as mere detainer$ and it would be unAust to !rotect this detention against the rights to the thing lawfully ac9uired by the first +endee. , S"irit or intent o& laB "revails over its letter The statement of #r. Manresa (!!. 1;3$ 1;@$ Vol. R$ of his treatise on the #!anish -i+il -ode) e2!resses the literal meaning of article 1&33$ for the decision of 2& 5o+ember 1@8& reflects$ according to the learned author$ the intention of the lawmaCer and is in conformity with the !rinci!les of Austice. 5ow$ under both the #!anish and the (hili!!ine rules of inter!retation$ the s!irit$ the intent$ of the law !re+ails o+er its letter. ) -eed o& conveyance means land Bas sold+ in absence o& any =uali&yin$ statement The finding that a deed of con+eyance was made by )ionisio Uuimson in fa+or of his daughter could ha+e no other meaning$ in the absence of any 9ualifying statement$ than that the land was sold by the father to his daughter. The trial court?s e2!licit finding which was not re+ersed by the -ourt of '!!eals and stands as the fact of the case. ,ooCing into the document itself$ B2hibit ' states categorically that the +endor recei+ed from the +endee the consideration of sale$ (2;0$ and acCnowledged before the notary !ublic ha+ing e2ecuted the instrument of his own free will. . Cru:ado vs 7scaler+ obiter dictum? !rescri"tion The e2!ression in thedecision in the case of -ruzado +s. Bscaler (3& (hil.$ 13)$ a!!arently to the effect that !hysical !ossession by the !urchaser is essential to the consummation of a sale of real estate$ is at best obiter dictumG for the court distinctly found that the sale to -ruzado?s father was a sham$ e2ecuted with the sole !ur!ose of enabling the senior -ruzado to mortgage the !ro!erty and become !rocurador. 'nd with reference to the failure of the second +endee$ Bscaler$ to register his !urchase$ the court disregarded the omission as well as the entry of the first sale in the registry because that entry was made by the son and heir of the first su!!osed +endee$ more than a score years after the alleged transaction$ when -ruzado <was no longer or had any right therein (in the land)$ because it already belonged to the Bscaler$ its lawful owner.= >hen Bscaler$ the second !urchaser was sued$ he had become the owner of the land by !rescri!tion. :n the !resent case$ 7osete?s !ossession fell far short of ha+ing ri!ened into title by !rescri!tion when the Uuimson commenced her action. ').0 Cuiro$a v !arsons HardBare 'G # No ((*.( (.() 0 Bn /anc$ '+ancena (.)4 ; concur Au$ust 23+
3actsH 6n 2& .anuary 1811$ in Manila$ a contract was entered into by and between the Uuiroga and .. (arsons (to whose rights and obligations (arsons 1ardware later subrogated itself) for the e2clusi+e sale of Uuiroga /eds in the Visayan :slands. Uuiroga was to furnish the (arson with the beds (which the latter might order$
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at the !rice sti!ulated) and that (arson was to !ay the !rice in the manner sti!ulated. The !rice agreed u!on was the one determined by Uuiroga for the sale of these beds in Manila$ with a discount of from 20 to 2; !er cent$ according to their class. (ayment was to be made at the end of si2ty days$ or before$ at Uuiroga?s re9uest$ or in cash$ if (arson so !referred$ and in these last two cases an additional discount was to be allowed for !rom!t !ayment.
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? +e case "acts a#e be#e"t o" 8etails #ega#8ing t+e event t+at le8 to t+e cont#ove#sy o" t+e case, t+e litigation in t+e lo@e# cou#ts, u, to a,,ealA Uuiroga alleges that (arson +iolated its obligation not to sell the beds at higher !rices than those of the in+oicesG to ha+e an o!en establishment in :loiloG itself to conduct the agencyG to Cee! the beds on !ublic e2hibition$ and to !ay for the ad+ertisement e2!enses for the sameG and to order the beds by the dozen and in no other manner. 5one of these$ e2ce!t the obligation to order the beds by the dozen and in no other manner$ are e2!ressly set forth in the contract. Uuiroga maintains that (arsons is his agent for the sale of his bed in :loilo$ and such obligations im!lied in a contract of commercial agency. The #u!reme -ourt held that the contract by and between the !laintiff and the defendant was one of !urchase and sale$ and that the obligations the breach of which is alleged as a cause of action are not im!osed u!on the defendant$ either by agreement or by law. The -ourt thus affirmed the Audgment a!!ealed from$ with costs against the a!!ellant. ( 7ssential clauses $iven due re$ard to classi&y a contract? Contract o& "urchase and sale :n order to classify a contract$ due regard must be gi+en to its essential clauses. :n the contract in 9uestion$ the clauses$ constituting its cause and subAect matter$ are !recisely the essential features of a contract of !urchase and sale. There was the obligation on the !art of Uuiroga to su!!ly the beds$ and$ on the !art of (arson$ to !ay their !rice. These features e2clude the legal conce!tion of an agency or order to sell whereby the mandatory or agent recei+ed the thing to sell it$ and does not !ay its !rice$ but deli+ers to the !rinci!al the !rice he obtains from the sale of the thing to a third !erson$ and if he does not succeed in selling it$ he returns it. /y +irtue of the contract between Uuiroga and (arson$ the latter$ on recei+ing the beds$ was necessarily obliged to !ay their !rice within the term fi2ed$ without any other consideration and regardless as to whether he had or had not sold the beds. 2 Commission on sale merely a discount+ other clauses are not incom"atible Bith contract o& "urchase and sale The contract by and between the defendant and the !laintiff is one of !urchase and sale. /esides the clause made in the basis of a commission on sales$ none of the other clauses of the contract is found to substantially su!!ort Uuiroga?s contention. 5one of these con+eys the idea of an agency. The words commission on sales used in clause (') of article 1 mean nothing else than a mere discount on the in+oice !rice. The word agency$ also used in articles 2 and 3$ only e2!resses that the defendant was the only one that could sell Uuiroga?s beds in the Visayan :slands. >ith regard to the remaining clauses$ the least that can be said is that they are not incom!atible with the contract of !urchase and sale. 3 Classi&ication o& a contract de&ined by laB+ and not one called by the "arties The agreements contained in the document that has been drafted$ constitute a contract of !urchase and sale$ and not one of commercial agency. :n the classification of the contract$ it must be understood that a contract is what the law defines it to be$ and not what it is called by the contracting !arties. * Acts subse=uent to contract su""letory+ not considered Bhen essential a$reements are set &orth in the contract The acts of the !arties merely show that$ on the !art of each of them$ there was mutual tolerance in the !erformance of the contract in disregard of its termsG and it gi+es no right to ha+e the contract considered$ not as the !arties sti!ulated it$ but as they !erformed it. 6nly the acts of the contracting !arties$ subse9uent to$
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and in connection with$ the e2ecution of the contract$ must be considered for the !ur!ose inter!reting the contract$ when such inter!retation is necessary$ but not when$ as in the instant case$ its essential agreements are clearly set forth and !lainly show that the contract belongs to a certain Cind and not to another. / 7&&ect o& breach+ and e&&ect o& subse=uent consent to such breach
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:n res!ect to the defendant?s obligation to order by the dozen$ the only one e2!ressly im!osed by the contract$ the effect of its breach would only entitle the !laintiff to disregard the orders which the defendant might !lace under other conditionsG but if the !laintiff consents to fill them$ he wai+es his right and cannot com!lain for ha+ing acted thus at his own free will. '.00 #adioBealth 3inance vs !alileo 'G # No )3*32 May 20+ (..( 0 "irst )i+ision$ ancayco (.)4 & concur 3actsH 6n 13 '!ril 1830$ s!ouses Bnri9ue -astro and 1erminia 7. -astro sold to Manuelito (alileo$ a !arcel of unregistered coconut land situated in -andiis$ Mansayaw$ Mainit$ #urigao del 5orte. The sale is e+idenced by a notarized )eed of 'bsolute #ale. The deed was not registered in the 7egistry of (ro!erty for unregistered lands in the !ro+ince of #urigao del 5orte. #ince the e2ecution of the deed of sale$ Manuelito (alileo who was then em!loyed at ,ianga$ #urigao del #ur$ e2ercised acts of ownershi! o+er the land through his mother 7afaela (alileo$ as administratri2 or o+erseer. 1e has continuously !aid the real estate ta2es on said land from 1831 until the !resent. 6n 28 5o+ember 1830$ a Audgment was rendered against Bnri9ue T. -astro$ in -i+il -ase 01031&; by the then -": Manila$ /ranch R:R$ to !ay 7adiowealth "inance -om!any$ the sum of (22$3;0.3; with interest thereon at the rate of 10I !er annum from 2 5o+ember 183; until fully !aid$ and the for the sum of (2$23;.03 as attorney?s fees$ and to !ay the costs. *!on the finality of the Audgment$ a writ of e2ecution was issued. (ursuant to said writ$ the !ro+incial #heriff Marietta B. B+iota$ through )e!uty (ro+incial #heriff ,eo!oldo 7isma$ le+ied u!on and finally sold at !ublic auction the subAect land that -astro had sold to (alileo. ' certificate of sale was e2ecuted by the (ro+incial #heriff in fa+or of 7adiowealth "inance -om!any$ being the only bidder. 'fter the !eriod of redem!tion had e2!ired$ a deed of final sale was also e2ecuted by the same (ro+incial #heriff. /oth the certificate of sale and the deed of final sale were registered with the 7egistry of )eeds. ,earning of what ha!!ened to the land$ (alileo filed an action for 9uieting of title o+er the same. 'fter a trial on the merits$ the court a 9uo rendered a decision in his fa+or. 6n a!!eal (-'% 7 -V 103@@)$ the decision of the trial court was affirmed. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt affirmed the decision of the -ourt of '!!ealsG without costs. ( Article (/**? No ambi$uity Bith res"ect to lands re$istered under the %orrens System 'rticle 1;&& of the -i+il -ode !ro+ides that in case of double sale of an immo+able !ro!erty$ ownershi! shall be transferred4 (1) to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!ertyG (2) in default thereof$ to the !erson who in good faith was first in !ossessionG and (3) in default thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith. There is no ambiguity regarding the a!!lication of the law with res!ect to lands registered under the Torrens #ystem. 2 Section /( o& !- (/2.? #e$istration an o"erative act to convey or a&&ect re$istered lands inso&ar as third "ersons are concerned #ection ;1 of (residential )ecree 5o. 1;28 (amending #ection ;0 of 'ct 5o. &80 clearly !ro+ides that the act of registration is the o!erati+e act to con+ey or affect registered lands insofar as third !ersons are concerned. Thus$ a !erson dealing with registered land is not re9uired to go behind the register to determine the condition of the !ro!erty. 1e is only charged with notice of the burdens on the !ro!erty which are noted
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on the face of the register or certificate of title. 3 title !urchaser in $ood &aith o& re$istered land under the %orrens system ac=uires $ood
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' !urchaser in good faith of registered land (co+ered by a Torrens Title) ac9uires a good title as against all the transferees thereof whose right is not recorded in the registry of deeds at the time of the sale. * 3indin$ o& &act by Court o& A""eals conclusive u"on the Su"reme Court? Notari:ed deed o& sale "resumed authentic The findings of fact of the -ourt of '!!eals are conclusi+e on this -ourt and will not be disturbed unless there is gra+e abuse of discretion. The finding of the -ourt of '!!eals that the !ro!erty in 9uestion was already sold to (alileo by its !re+ious owner before the e2ecution sale is e+idenced by a deed of sale. #aid deed of sale is notarized and is !resumed authentic. There is no substanti+e !roof to su!!ort !etitioner?s allegation that the document is fictitious or simulated. There is no reason to reAect the conclusion of the -ourt of '!!eals that (alileo was not a mere administrator of the !ro!erty. :t is undis!uted that he e2ercised acts of ownershi! through his mother. / ;evy on land "reviously sold to !alileo contrary to directive in Brit o& e4ecution The e2ecution is contrary to the directi+e contained in the writ of e2ecution which commanded that the lands and buildings belonging to Bnri9ue -astro be sold to satisfy the e2ecution. >hat the (ro+incial #heriff le+ied u!on and sold to 7adiowealth "inance is a !arcel of land that does not belong to Bnri9ue -astro$ the Audgment debtor. 5 title <ona &ide "urchaser o& re$istered land at auction sale ac=uires $ood
There is no doubt that had the !ro!erty in 9uestion been a registered land$ this case would ha+e been decided in fa+or of 7adiowealth "inance since it was 7adiowealth that had its claim first recorded in the 7egistry of )eeds. Therefore$ a bona fide !urchaser of a registered land at an e2ecution sale ac9uires a good title as against a !rior transferee$ if such transfer was unrecorded. , #e$istration a&&ectin$ unre$istered lands Bithout "re@udice to third "arty Bith a better ri$ht *nder 'ct 33&&$ registration of instruments affecting unregistered lands is <without !reAudice to a third !arty with a better right=. The mere registration of a sale in one?s fa+or does not gi+e him any right o+er the land if the +endor was not anymore the owner of the land ha+ing !re+iously sold the same to somebody else e+en if the earlier sale was unrecorded. ) Carumba vs CA a case in "oint The case of -arumba +s. -ourt of '!!eals 0 is a case in !oint. :t was held therein that 'rticle 1;&& of the -i+il -ode has no a!!lication to land not registered under 'ct &80. #imilar to the !resent case$ -arumba dealt with a double sale of the same unregistered land. The first sale was made by the original owners and was unrecorded while the second was an e2ecution sale that resulted from a com!laint for a sum of money filed against the said original owners. '!!lying #ection 3;$ 7ule 38 of the 7e+ised 7ules of -ourt$ it was held that 'rticle 1;&& of the -i+il -ode cannot be in+oCed to benefit the !urchaser at the e2ecution sale though the latter was a buyer in good faith and e+en if this second sale was registered. :t was e2!lained that this is because the !urchaser of unregistered land at a sheriff s e2ecution sale only ste!s into the shoes of the Audgment debtor$ and merely ac9uires the latter?s interest in the !ro!erty sold as of the time the !ro!erty was le+ied u!on. '!!lying the !rinci!le to the !resent case$ the -ourt of '!!eals correctly held that the e2ecution sale of the unregistered land in fa+or of !etitioner is of no effect because the land no longer belonged to the Audgment debtor as of the time of the said e2ecution sale. '.(0 #e"ublic v !hili""ine -evelo"ment Cor" 'G # No ;-(0(*( 6anuary 3(+ (./) 0 Bn /anc$ (adilla (.)4 10 concur
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3actsH 6n 0 May 18;;$ the 7e!ublic of the (hili!!ines in re!resentation of the /ureau of (risons instituted
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against Macario '!ostol and the Bm!ire :nsurance -o. a com!laint with the -": Manila (-i+il -ase 20100). The com!laint alleges that '!ostol submitted the highest bid in the amount of (&;0.00 !er ton for the !urchase of 100 tons of (alawan 'lmaciga from the /ureau of (risonsG that a contract therefor was drawn and by +irtue of which$ '!ostol obtained goods from the /ureau of (risons +alued (1;$@3@.;8G that of said account$ '!ostol !aid only (081.10 lea+ing a balance obligation of (1;$ 1@3.&8. The com!laint further a+ers that '!ostol submitted the best bid with the /ureau of (risons for the !urchase of 3 million board feet of logs at (@@.00 !er 1$000 board feetG that a contract was e2ecuted between the )irector of (risons and '!ostol !ursuant to which contract '!ostol obtained deli+eries of logs +alued at (0;$@30.00G and that '!ostol failed to !ay a balance account of (1@$@23.;3. 'll told$ the total demand set forth in com!laint against '!ostol is for (3&$01;.00 with legal interests thereon from @ .anuary 18;2. The Bm!ire :nsurance -om!any was included in the com!laint ha+ing e2ecuted a !erformance bond of (10$000.00 in fa+or of '!ostol. :n his answer$ '!ostol inter!osed !ayment as a defense and sought the dismissal of the com!laint. 6n 18 .uly 18;;$ the (hili!!ine 7esources )e+elo!ment -or!. mo+ed to inter+ene$ a!!ending to its motion$ the com!laint in inter+ention of e+en date. The com!laint recites that for sometime !rior to '!ostol?s transactions the cor!orate had some goods de!osited in a warehouse at 1201 1erran$ ManilaG that '!ostol$ then the !resident of the cor!oration but without the Cnowledge or consent of the stocCholders thereof$ dis!osed of said goods by deli+ering the same to the /ureau of (risons in an attem!t to settle his !ersonal debts with the latter entityG that u!on disco+ery of '!ostol?s act$ the cor!oration tooC ste!s to reco+er said goods by demanding from the /ureau of (risons the return thereofG and that u!on the refusal of the /ureau to return said goods$ the cor!oration sought lea+e to inter+ene in -i+il -ase 20100. The .udge (Magno atmaitan) denied the motion for inter+ention and thereby issued an order to this effect on 23 .uly 18;;. ' motion for the reconsideration of said order was filed by the cor!oration and the same was liCewise denied on 1@ 'ugust 18;;. 6n 3 #e!tember 18;;$ the cor!oration filed a !etition for a writ of certiorari with the -ourt of '!!eals by. 6n 12 )ecember 18;; the -ourt of '!!eals set aside the order denying the motion to inter+ene and ordered the trial court to admit the cor!oration?s com!laint%in%inter+ention$ with costs against Macario '!ostol. 6n 8 .anuary 18;0 the o+ernment filed a !etition under 7ule &0 to re+iew the Audgment rendered by the a!!ellate court (-'% 7 1;303%7) with the #u!reme -ourt. The o+ernment contends that the inter+enor has no legal interest in the matter in litigation$ because the action brought in the -": Manila against Macario '!ostol and the Bm!ire :nsurance -om!any (-i+il -ase 20100) is Aust for the collection from the defendant '!ostol of a sum of money$ the un!aid balance of the !urchase !rice of logs and almaciga bought by him from the /ureau of (risons$ whereas the inter+enor seeCs to reco+er ownershi! and !ossession of .:. sheets$ blacC sheets$ M.#. !lates$ round bars and .:. !i!es that it claims it owns J an inter+ention which would change a !ersonal action into one ad rem and would unduly delay the dis!osition of the case. The #u!reme -ourt affirmed the Audgment under re+iew$ without !ronouncement as to costs. ( 8ntervenor has le$al ca"acity as it stands to be adversely a&&ected by the @ud$ment o& the court :t is true that the +ery subAect matter of the original case is a sum of money$ but it is liCewise true as borne out by the records$ that the materials !ur!ortedly belonging to the cor!oration ha+e been assessed and e+aluated and their !rice e9ui+alent in terms of money ha+e been determinedG and that said materials for whate+er !rice they ha+e been assessed$ ha+e been assigned by '!ostol as toCens of !ayment of his !ri+ate debts with the /ureau of (risons. :n +iew of these considerations$ it becomes enormously !lain in the e+ent the Audge decides to credit Macario '!ostol with the +alue of the goods deli+ered by the latter to the /ureau
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of (risons$ the cor!oration stands to be ad+ersely affected by such Audgment. The conclusion is inesca!able that the cor!oration !ossesses a legal interest in the matter in litigation and that such interest is of an actual$ material$ direct and immediate nature as to entitle the cor!oration to inter+ene. 2 ;oBer court has discretion to alloB or disa""rove a motion &or intervention? !rinci"le
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#ection 3 of 7ule 13 of the 7ules of -ourt endows the lower court with discretion to allow or disa!!ro+e a motion for inter+ention &Santa##o6ana et al. vs. .a##ios, 13 *+il. 401( G and that in the e2ercise of such discretion$ the court shall consider whether or not the inter+ention will unduly delay or !reAudice the adAudication of the rights of the original !arties and whether or not the inter+enor?s rights may be fully !rotected in a se!arate !roceeding. :n the !resent case$ the cor!oration is !ositi+ely authorized to file a se!arate action against any of all the res!ondentsG but considering that the resolution of the issues raised in and Aoined by the !leadings in the main case$ would +itally affect the rights not only of the original !arties but also of the cor!orationG that far from unduly delaying or !reAudicing the adAudication of the rights of the original !arties or bringing about confusion in the original case$ the admission of the com!laint in inter+ention would hel! clarify the +ital issue of the true and real ownershi! of the materials in+ol+ed$ besides !re+enting an abhorrent multi!licity of suits. The motion to inter+ene should be gi+en due course. 3 Article (*/) admits "urchaser may "ay a "rice certain in money or its e=uivalent The o+ernment argues that <(rice is always !aid in terms of money and the su!!osed !ayment being in Cind$ it is no !ayment at all$= citing article 1&;@ of the new -i+il -ode. 1owe+er$ the same article !ro+ides that the !urchaser may !ay <a !rice certain in money or its e9ui+alent$= which means that !ayment of the !rice need not be in money. >hether the .:. sheets$ blacC sheets$ M.#. !lates$ round bars and .:. !i!es claimed by the cor!oration to belong to it and deli+ered to the /ureau of (risons by '!ostol in !ayment of his account is sufficient !ayment therefor$ is for the -ourt to !ass u!on and decide after hearing all the !arties in the case. #hould the trial court hold that it is as to credit '!ostol with the +alue or !rice of the materials deli+ered by him$ certainly the cor!oration would be affected ad+ersely if its claim of ownershi! of such sheets$ !lates$ bars and !i!es is true. * Authority o& cor"orate counsel "resumed /y +irtue of #ection 20 of 7ule 123$ the authority of cor!oration?s counsel is !resumed. >ithal$ the claim of the counsel for the !etitioner that a resolution to !roceed against '!ostol$ had been unanimously ado!ted by the stocCholders of the cor!oration$ has not been refuted. :t cannot be said that the counsel is acting merely in an indi+idual ca!acity without the benefit of a cor!orate act authorizing him to bring suit. 's counsel?s authority to a!!ear for the cor!oration was ne+er 9uestioned in the -":$ it is to be !resumed that he was !ro!erly authorized to file the com!laint%in inter+ention and a!!ear for his client. :t was only in the -ourt of '!!eals where his authority to a!!ear was 9uestioned. 's the -ourt of '!!eals was satisfied that counsel was duly authorized by his client to file the com!laint%in%inter+ention and to a!!ear in its behalf$ the resolution of the -ourt of '!!eals should not be disturbed. / Cor"oration has se"arate "ersonality &rom "resident or stockholder? !oBer to sue lod$ed in the board o& directors and not the "resident (hili!!ine 7esource -or!oration is a duly organized cor!oration with offices at the #amanillo /uilding and that as such$ it is endowed with a !ersonality distinct and se!arate from that of its !resident or stocCholders. :t has the right to bring suit to safeguard its interests and ordinarily$ such right is e2ercised at the instance of the !resident. 1owe+er$ under the circumstance$ such right !ro!erly de+ol+es u!on the other officers of the cor!oration as said right is sought to be e2ercised against the !resident himself who is the +ery obAect of the intended suit. The !ower of a cor!oration to sue and be sued in any court is lodged in the board of directors which e2ercises its cor!orate !owers$ and not in the !resident. 5 Counsel is the secretary-treasurer o& the cor"oration ranting that counsel has not been actually authorized by the board of directors to a!!ear for and in behalf of the cor!oration$ the fact that counsel is the secretary%treasurer of the cor!oration and a member of the board of directorsG and that the other members of the board$ namely$ Macario '!ostol$ the !resident$ and his wife (acita 7. '!ostol$ who should normally initiate the action to !rotect the cor!orate !ro!erties and
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interests are the ones to be ad+ersely affected thereby$ a single stocCholder under such circumtances may sue in behalf of the cor!oration. -ounsel as a stocCholder and director of the cor!oration may sue in its behalf and
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file the com!laint%in%inter+ention in the !ro!er court. '.20 #idad vs 3ili"inas 8nvestment 'G # No ;-3.)05 6anuary 2,+ (.)3 0 #econd )i+ision$ de -astro (.)4 0 concur 3actsH 6n 1& '!ril 180&$ ,uis and ,ourdes 7idad !urchased from the #u!reme #ales and )e+elo!ment -or!oration 2 brand new "ord -onsul #edans com!lete with accessories$ for (20$@@3 !ayable in 2& monthly installments. To secure !ayment thereof$ the 7idads e2ecuted on the same date a !romissory note co+ering the !urchase !rice and a deed of chattel mortgage not only on the 2 +ehicles !urchased but also on another car (-he+rolet) and their franchise or certificate of !ublic con+enience granted by the defunct (ublic #er+ice -ommission for the o!eration of a ta2i fleet. Then$ with the conformity of the 7idads$ the +endor assigned its rights$ title and interest to the !romissory note and chattel mortgage to "ili!inas :n+estment and "inance -or!oration. )ue to the failure of the 7idads to !ay their monthly installments as !er !romissory note$ the cor!oration foreclosed the chattel mortgage e2traAudicially$ and at the !ublic auction sale of the 2 "ord -onsul cars$ of which the 7idads were not notified$ the cor!oration was the highest bidder and !urchaser. 'nother auction sale was held on 10 5o+ember 180;$ in+ol+ing the remaining !ro!erties subAect of the deed of chattel mortgage since the 7idads? obligation was not fully satisfied by the sale of the aforesaid +ehicles$ and at the !ublic auction sale$ the franchise of the 7idads to o!erate ; units of ta2icab ser+ice was sold for (@$000 to the highest bidder$ the cor!oration$ which subse9uently sold and con+eyed the same to .ose ). #ebastian$ who then filed with the (ublic #er+ice -ommission an a!!lication for a!!ro+al of said sale in his fa+or. 6n 21 "ebruary 1800$ !laintiffs filed an action for annulment of contract before the -": 7izal (/ranch :$ -i+il -ase 81&0) with "ili!inas :n+estment and "inance -or!oration$ .ose ). #ebastian and #heriff .ose #an 'gustin$ as !arty%defendants. /y agreement of the !arties$ the case was submitted for decision in the lower court on the basis of the documentary e+idence adduced by the !arties during the !re%trial conference. Thereafter$ the lower court rendered Audgment declaring the chattel mortgage null and +oid insofar as the ta2icab franchise and the used -he+rolet car of the !laintiffs are concerned$ that the !ublic auction conducted concerning said franchise to be of no legal effect$ that the certificate of sale issued by the sheriff concerning the franchise is cancelled and set aside$ and that the assignment made by "ili!inas :n+estment in fa+or of #ebastian was declared +oid and of no legal effect. '!!eal was filed with the -ourt of '!!eals but was subse9uently certified to the #u!reme -ourt !ursuant to #ection 3 of 7ule ;0 of the 7ules of -ourt$ there being no issue of fact in+ol+ed in the a!!eal. The #u!reme -ourt affirmed the Audgment a!!ealed from$ with costs against "ili!inas :n+estment$ et. al. ( Article (*)* o& the Civil Code 'rticle 1&@& of the -i+il -ode !ro+ides that <:n a contract of sale of !ersonal !ro!erty the !rice of which is !ayable in installments$ the +endor may e2ercise any of the following remedies4 (1) B2act fulfillment of the obligation$ should the +endee fail to !ayG (2) -ancel the sale$ should the +endee?s failure to !ay co+er two or more installmentsG (3) "oreclose the chattel mortgage on the thing sold$ if one has been constituted$ should the +endee?s failure to !ay co+er two or more installments. :n this case$ he shall ha+e no further action against the !urchaser to reco+er any un!aid balance of the !rice. 'ny agreement to the contrary shall be +oid.=
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2 #emedies o& vendor alternative+ not cumulative? 8& vendor elects ti$ht to &oreclose mort$a$e+ laB "rohibits him &rom brin$in$ &urther action to recover balance o& debt *nder 'rticle 1&@& of the -i+il -ode$ the +endor of !ersonal !ro!erty the !urchase !rice of which is !ayable in installments$ has the right$ should the +endee default in the !ayment of two or more of the agreed
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installments$ to e2act fulfillment by the !urchaser of the obligation$ or to cancel the sale$ or to foreclose the mortgage on the !urchased !ersonal !ro!erty$ if one was constituted. >hiche+er right the +endor elects$ he cannot a+ail of the other$ these remedies being alternati+e$ not cumulati+e. "urthermore$ if the +endor a+ails himself of the right to foreclose his mortgage$ the law !rohibits him from further bringing an action against the +endee for the !ur!ose of reco+ering whate+er balance of the debt secured not satisfied by the foreclosure sale. The !recise !ur!ose of the law is to !re+ent mortgagees from seizing the mortgaged !ro!erty$ buying it at foreclosure sale for a low !rice and then bringing suit against the mortgagor for a deficiency Audgment$ otherwise$ the mortgagor%buyer would find himself without the !ro!erty and still owing !ractically the full amount of his original indebtedness. 3 383C barred &rom &urther action as to "ayment o& un"aid balance ":"- elected to foreclose its mortgage u!on default by the !laintiffs in the !ayment of the agreed installments. 1a+ing chosen to foreclose the chattel mortgage$ and bought the !urchased +ehicles at the !ublic auction as the highest bidder$ it submitted itself to the conse9uences of the law as s!ecifically mentioned$ by which it is deemed to ha+e renounced any and all rights which it might otherwise ha+e under the !romissory note and the chattel mortgage as well as the !ayment of the un!aid balance. * VendorMs ri$ht to &oreclose chattel mort$a$e only o& the thin$ sold? not other mort$a$es? ;evy Hermanos case a""lies The chattel mortgage in 9uestion is a nullity insofar as the ta2icab franchise and the used -he+rolet car of the 7idads are concerned$ under the authority of the ruling in the case of ,e+y 1ermanos$ :nc. +s. (acific -ommercial -o.$ et al.$ 31 (hil. ;@3$ the facts of which are similar to those in the !resent case. There$ the same situation occurred wherein the +endees offered as security for the !ayment of the !urchase !rice not only the motor +ehicles which were bought on installment$ but also a residential lot and a house of strong materials. This -ourt sustained the !ronouncement made by the lower court on the nullity of the mortgage in so far as it included the house and lot of the +endees$ holding that under the law$ should the +endor choose to foreclose the mortgage$ he has to content himself with the !roceeds of the sale at the !ublic auction of the chattels which were sold on installment and mortgaged to him$ and ha+ing chosen the remedy of foreclosure$ he cannot nor should he be allowed to insist on the sale of the house and lot of the +endees$ for to do so would be e9ui+alent to obtaining a writ of e2ecution against them concerning other !ro!erties which are se!arate and distinct from those which were sold on installment. This would indeed be contrary to !ublic !olicy and the +ery s!irit and !ur!ose of the law$ limiting the +endor?s right to foreclose the chattel mortgage only on the thing sold. / Cru: vs 383C? Additional mort$a$ed cancelled as it indirectly subverts "rotection $iven by Article (*)* :n the case of -ruz +. "ili!inas :n+estment Q "inance -or!oration$ 23 #-7' 381$ the -ourt ruled that the +endor of !ersonal !ro!erty sold on the installment basis is !recluded$ after foreclosing the chattel mortgage on the thing sold$ from ha+ing a recourse against the additional security !ut u! by a third !arty to guarantee the !urchaser?s !erformance of his obligation on the theory that to sustain the same would o+erlooC the fact that if the guarantor should be com!elled to !ay the balance of the !urchase !rice$ said guarantor will in turn be entitled to reco+er what he has !aid from the debtor%+endee$ and ultimately it will be the latter who will be made to bear the !ayment of the balance of the !rice$ des!ite the earlier foreclosure of the chattel mortgage gi+en by him$ thereby indirectly sub+erting the !rotection gi+en the latter. -onse9uently$ the additional mortgage was ordered cancelled. 5 #ulin$ in Cru: vs 383C reiterated in !ascual vs Dnited Motors? Vendor "recluded &rom &urther e4tra@udicial &oreclose o& additional security The ruling in -ruz +s. ":"- was reiterated in the case of (ascual +. *ni+ersal Motors -or!oration$ 01
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#-7' 121. :f the +endor under such circumstance is !rohibited from ha+ing a recourse against the additional security for reasons therein stated$ there is no ground why such +endor should not liCewise be !recluded from
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further e2traAudicially foreclosing the additional security !ut u! by the +endees themsel+es$ it being tantamount to a further action that would +iolate 'rticle 1&@& of the -i+il -ode$ for there is actually no difference between an additional security !ut u! by the +endee himself and such security !ut u! by a third !arty insofar as how the burden would ultimately fall on the +endee himself is concerned. , Southern Motors vs Moscoso does not a""ly as remedy availed o& i& that case is the &ul&illment o& the obli$ation and not the &oreclosure o& the chattel mort$a$e The ruling in #outhern Motors$ :nc. +. Moscoso$ 2 #-7' 10@ X that in sales on installments$ where the action instituted is for s!ecific !erformance and the mortgaged !ro!erty is subse9uently attached and sold$ the sale thereof does not amount to a foreclosure of the mortgage$ hence$ the seller%creditor is entitled to a deficiency Audgment X does not fortify the stand of the a!!ellants for that case is entirely different from the !resent case. :n that case$ the +endor has a+ailed of the first remedy !ro+ided by 'rticle 1&@& of the -i+il -ode$ i.e.$ to e2act fulfillment of the obligationG whereas in the !resent case$ the remedy a+ailed of was foreclosure of the chattel mortgage. ) 8ssue on the validity o& auction sale su"er&luous The dis!osition of the -ourt renders su!erfluous a determination of the other issue raised by the !arties as to the +alidity of the auction sale$ insofar as the 7idads? franchise is concerned$ which sale had been admittedly held without any notice to them. '.30 #illo vs CA 'G # No (2/3*, 6une (.+ (.., 0 #econd )i+ision$ (uno (.)4 & concur 3actsH 6n 1@ .une 18@;$ Bmiliano 7illo signed a <-ontract To #ell of -ondominium *nit= with -orb 7ealty :n+estment -or!oration. *nder the contract$ -orb 7ealty agreed to sell to 7illo a 01.; s9. m. condominium unit located in Mandaluyong$ Metro Manila. The contract !rice was (1;0$000.00$ P of which was !aid u!on its e2ecution$ while the balance of (3;$000.00 was to be !aid in 12 e9ual monthly installments of (3$082.00 beginning 1@ .uly 18@;. :t was also sti!ulated that all outstanding balance would bear an interest of 2&I !er annumG the installment in arrears would be subAect to li9uidated !enalty of 1.;I for e+ery month of default from due date. :t was further agreed that should the buyer default in the !ayment of 3 or & monthly installments$ forfeiture !roceedings would be go+erned by e2isting laws$ !articularly the -ondominium 'ct. 6n 1@ .uly 18@;$ 7illo failed to !ay the initial monthly amortization. 6n 1@ 'ugust 18@;$ he again defaulted in his !ayment. 6n 20 #e!tember 18@;$ he !aid the first monthly installment of (3$082.00. 6n 2 6ctober 18@;$ he !aid the second monthly installment of (3$082.00. 1is third !ayment was on 2 "ebruary 18@0 but he !aid only (;$000.00 instead of the sti!ulated (3$082.00. 6n 20 .uly 18@3 or 13 months after 7illo?s last !ayment$ -orb 7ealty informed him by letter that it is cancelling their contract due to his failure to settle his accounts on time. -orb 7ealty also e2!ressed its willingness to refund 7illo?s money. -orb 7ealty$ howe+er$ did not cancel the contract for on 2@ #e!tember 18@3$ it recei+ed (00$000.00 from 7illo. 7illo defaulted again in his monthly installment !ayment. -onse9uently$ -orb 7ealty informed 7illo through letter that it was !roceeding to rescind their contract. :n a letter dated 28 'ugust 18@@$ it re9uested 7illo to come to its office and withdraw (102$&;8.3; less the rentals of the unit from 1 .uly 18@; to 2@ "ebruary 18@8. 'gain the threatened rescission did not materialize. ' <com!romise= was entered into by the !arties on 12 March 18@8 (7estructure 6utstanding /alance )own to (;0$000.00G (ayment Z (2$000.00DMonth Z 1@I %Monthly% To -om!ute 5o. of :nstallmentsG To (ay Titling (lus 'ny 7eal Bstate Ta2 )ueG :nstallments to start 1; '!ril 18@8). 7illo once more failed to honor their agreement. 7illo was able to !ay (2$000.00 on 2; '!ril 18@8 and (2$000.00 on 1; May 18@8. 6n 3 '!ril 1880$ -orb 7ealty sent 7illo a statement of accounts which fi2ed his
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total arrears$ including interests and !enalties$ to (1;;$128.00. >hen 7illo failed to !ay the amount$ -orb 7ealty filed a com!laint for cancellation of the contract to sell
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with the 7T- (asig. :n his answer to the com!laint$ 7illo a+erred$ among others$ that while he had already !aid a total of (1&8$000.00$ -orb 7ealty could not deli+er to him his indi+idual title to the subAect !ro!ertyG that -orb 7ealty could not claim any right under their !re+ious agreement as the same was already no+ated by their new agreement for him to !ay (;0$000.00 re!resenting interest charges and other !enalties s!read through 2; months beginning '!ril 18@8G and that -orb 7ealty?s claim of (1;;$128.88 o+er and abo+e the amount he already !aid has no legal basis. 'fter trial$ the 7T- held that -orb 7ealty cannot rescind the <-ontract to #ell= because 7illo did not commit a substantial breach of its terms. :t found that 7illo substantially com!lied with the <-ontract to #ell= by !aying a total of (1;&$1@&.00. :t ruled that the remedy of -orb 7ealty is to file a case for s!ecific !erformance to collect the outstanding balance of the !urchase !rice. -orb 7ealty a!!ealed the decision to the -ourt of '!!eals (-' 7 -V 3810@)$ which re+ersed the decision. :t ruled that rescission does not a!!ly as the contract between the !arties is not an absolute con+eyance of real !ro!erty but is a contract to sellG that the -ondominium 'ct (7' &320$ as amended by 7' 3@88) does not !ro+ide anything on forfeiture !roceedings in cases in+ol+ing installment sales of condominium units$ hence$ it is () 8;3 (#ubdi+ision and -ondominium /uyers (rotecti+e )ecree) which should be a!!lied to the !resent case. *nder () 8;3$ the rights of a buyer in the e+ent of failure to !ay installment due$ other than the failure of the owner or de+elo!er to de+elo! the !roAect$ shall be go+erned by 7' 0;;2 or the 7ealty :nstallment /uyer (rotection 'ct also Cnown as the Maceda ,aw (enacted on 1& #e!tember 1832). The -ourt thus declared the contract to sell cancelled and rendered ineffecti+e and ordered -orb 7ealty to return ;0I of (1;@$1@&.00 (or (38$082.00) to 7illo who was ordered to +acate the subAect !remises. 7illo a!!ealed !ursuant to 7ule &; of the 7ules of -ourt. The #u!reme -ourt affirmed with modification the decision a!!ealed from$ in the sense that the refund of ;0I (1;@$1@&.00 or (38$082.00 made in fa+or of 7illo is deletedG without costs. ( Article ((.( and (/.2 do not a""ly as contract is not an absolute conveyance o& real "ro"erty but a contract to sell? !ayment is a "ositive sus"ensive condition and not a breach? No rescission o& an obli$ation Bhich is still not e4istent The a!!ellate court did not err when it did not a!!ly 'rticles 1181 and 1;82 of the -i+il -ode on rescission to the !resent case. The contract between the !arties is not an absolute con+eyance of real !ro!erty but a contract to sell. :n a contract to sell real !ro!erty on installments$ the full !ayment of the !urchase !rice is a !ositi+e sus!ensi+e condition$ the failure of which is not considered a breach$ casual or serious$ but sim!ly an e+ent which !re+ented the obligation of the +endor to con+ey title from ac9uiring any obligatory force.= The transfer of ownershi! and title would occur after full !ayment of the !urchase !rice. :t was held in ,uzon /roCerage -o.$ :nc. +. Maritime /uilding -o.$ :nc. that there can be no rescission of an obligation that is still non%e2istent$ the sus!ensi+e condition not ha+ing ha!!ened. 2 #A 5//2+ or Maceda ;aB+ a""lies i+en the nature of the contract of the !arties$ the a!!ellate court correctly a!!lied 7' 0;;2$ also Cnown as the Maceda ,aw. T' 0;;2 recognizes in conditional sales of all Cinds of real estate (industrial$ commercial$ residential) the right of the seller to cancel the contract u!on non%!ayment of an installment by the buyer$ which is sim!ly an e+ent that !re+ents the obligation of the +endor to con+ey title from ac9uiring binding force. :t also !ro+ides the right of the buyer on installments in case he defaults in the !ayment of succeeding installments$ i.e. <(1) >here he has !aid at least 2 years of installments$ (a) To !ay$ without additional interest$ the un!aid installments due within the total grace !eriod earned by him$ which is hereby fi2ed at the rate of 1 month grace !eriod for e+ery year of installment !ayments made4 (ro+ided$ That this right shall be e2ercised by the buyer only once in e+ery ; years of the life of the contract and its e2tensions$ if anyG or (b) :f the contract is cancelled$ the seller shall refund to the buyer the cash surrender +alue of the !ayments on the !ro!erty e9ui+alent to ;0I of the total !ayments made and$ after ; years of installments$ an
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additional ;I e+ery year but not to e2ceed 80I of the total !ayments made4 (ro+ided$ That the actual
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cancellation of the contract shall taCe !lace after cancellation or the demand for rescission of the contract by a notarial act and u!on full !ayment of the cash surrender +alue to the buyer. )own !ayments$ de!osits or o!tions on the contract shall be included in the com!utation of the total number of installments made=G <(2) >here he has !aid less than two years in installments$ (#ec. &) the seller shall gi+e the buyer a grace !eriod of not less than 00 days from the date the installment became due. :f the buyer fails to !ay the installments due at the e2!iration of the grace !eriod$ the seller may cancel the contract after 30 days from recei!t by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.= 3 #illo not entitled to $race "eriod o& 50 days? Corb #ealty has ri$ht to cancel contract a&ter 30 days o& #illoMs recei"t o& cancellation 7illo !aid less than two years in installment !ayments$ hence$ he is only entitled to a grace !eriod of not less than 00 days from the due date within which to maCe his installment !ayment. -orb 7ealty$ on the other hand$ has the right to cancel the contract after 30 days from recei!t by 7illo of the notice of cancellation. The a!!ellate court did not err when it u!held -orb 7ealty?s right to cancel the subAect contract u!on re!eated defaults in !ayment by 7illo. * Novation not "resumed? 8n absence o& e4"ress a$reement+ novation occurs Bhen old and neB obli$ations are incom"atible on every "oint? Contract in "resent case not novated 'rticle 1282 of the -i+il -ode !ro+ides that <:n order that an obligation may be e2tinguished by another which substitutes the same$ it is im!erati+e that it be so declared in une9ui+ocal terms$ or that the old and the new obligations be on e+ery !oint incom!atible with each other.= 5o+ation is ne+er !resumed. (arties to a contract must e2!ressly agree that they are abrogating their old contract in fa+or of a new one. :n the absence of an e2!ress agreement$ no+ation taCes !lace only when the old and the new obligations are incom!atible on e+ery !oint. :n the !resent case$ the !arties e2ecuted their 12 May 18@8 <com!romise agreement= !recisely to gi+e life to their <-ontract to #ell=. :t merely clarified the total sum owed by 7illo to -orb 7ealty with the +iew that the former would find it easier to com!ly with his obligations under the -ontract to #ell. :n fine$ the <com!romise agreement= can stand together with the -ontract to #ell. / #illo not entitled to re&und o& /0N o& "ayments *nder 7' 0;;2$ the right of the buyer to a refund accrues only when he has !aid at least 2 years of installments. :n the !resent case$ 7illo has !aid less than 2 years in installments$ hence$ he is not entitled to a refund. '.*0 #omero v CA 'G # No (03/,, (..5 0 Third di+ision$ Vitug (.)4 & concur 2ctober ,+
3actsH Virgilio 7. 7omero$ a ci+il engineer$ was engaged in the business of !roduction$ manufacture and e2!ortation of !erlite filter aids$ !ermalite insulation and !rocess !erlite ore. :n 18@@$ 7omero and his foreign !artners decided to !ut u! a central warehouse in Metro Manila on a land area of a!!ro2imately 2$000 s9. m. The !roAect was made Cnown to se+eral freelance real estate broCers. ' day or so after the announcement$ 'lfonso "lores and his wife$ accom!anied by a broCer$ offered a !arcel of land measuring 1$8;2 s9. m. ,ocated in /arangay #an )ionisio$ (araMa9ue$ Metro Manila$ the lot was co+ered by T-T 301&02 in the name of Bnri9ueta -hua Vda. de 6ngsiong. 7omero +isited the !ro!erty and$ e2ce!t for the !resence of s9uatters in the area$ he found the !lace suitable for a central warehouse. ,ater$ the "lores s!ouses called on 7omero with a !ro!osal that should he ad+ance the amount of (;0$000.00 which could be used in taCing u!
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an eAectment case against the s9uatters$ 6ngsiong would agree to sell the !ro!erty for only (@00.00 !er s9. m. 7omero e2!ressed his concurrence. 6n 08 .une 18@@$ a contract$ denominated <)eed of -onditional #ale$= was e2ecuted between 7omero and 6ngsiong. "lores$ in behalf of 6ngsiong$ forthwith recei+ed and acCnowledge a checC for (;0$000.00 from 7omero.
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(ursuant to this agreement$ 6ngsiong filed a com!laint for eAectment (-i+il -ase 3;38) against Melchor Musa and 28 other s9uatter families with the MT- (araMa9ue. ' few months later$ or on 21 "ebruary 18@8$ Audgment was rendered ordering the defendants to +acate the !remises. The decision was handed down beyond the 00%day !eriod (e2!iring 08 'ugust 18@@) sti!ulated in the contract. The writ of e2ecution of the Audgment was issued$ still later$ on 30 March 18@8. :n a letter$ dated 03 '!ril 18@8$ 6ngsiong sought to return the (;0$000.00 she recei+ed from 7omero since$ she said$ she could not <get rid of the s9uatters= on the lot. 'tty. #ergio '.". '!ostol$ counsel for 7omero$ refused the tender$ citing the fa+orable decision and the writ of e2ecution issued !ursuant thereto$ and e2!ressed 7omero?s willingness to underwrite the e2!enses for the e2ecution of the Audgment and eAectment of the occu!ants chargeable to the !urchase !rice of the land. Meanwhile$ the (residential -ommission for the *rban (oor (<(-*)=)$ through its 7egional )irector for ,uzon (Viloria)$ asCed the MT- (araMa9ue for a grace !eriod of &; days from 21 '!ril 18@8 within which to relocate and transfer the s9uatter families. 'cting fa+orably on the re9uest$ the court sus!ended the enforcement of the writ of e2ecution accordingly. 6n 0@ .une 18@8$ 'tty. '!ostol reminded 6ngsiong on the e2!iry of the &;%day grace !eriod and reiterated his client?s willingness to underwrite the e2!enses for the e2ecution of the Audgment and eAectment of the occu!ants. 6n 18 .une 18@8$ 'tty. .oa9uin Fuseco$ .r.$ counsel for 6ngsion$ ad+ised 'tty. '!ostol that the )eed of -onditional #ale had been rendered null and +oid by +irtue of his client?s failure to e+ict the s9uatters from the !remises within the agreed 00%day !eriod. 1e added that !ri+ate res!ondent had <decided to retain the !ro!erty.= Meanwhile$ on 2; 'ugust 18@8$ the MT- issued an alias writ of e2ecution in -i+il -ase 3;38 on motion of 6ngsiong but the s9uatters a!!arently still stayed on. 6n 23 .une 18@8$ 6ngsiong !rom!ted by 7omero?s continued refusal to acce!t the return of the (;0$000.00 ad+ance !ayment$ filed with the 7T- MaCati (/ranch 133$ -i+il -ase @8%&38&) for a rescission of the deed of <conditional= sale$ !lus damages$ and for the consignation of (;0$000.00 cash. 6n 20 .une 1880$ the 7T- rendered decision holding that 6ngsiong had no right to rescind the contract since it was she who <+iolated her obligation to eAect the s9uatters from the subAect !ro!erty= and that 7omero$ being the inAured !arty$ was the !arty who could$ under 'rticle 1181 of the -i+il -ode$ rescind the agreement. The lower court$ thus dismissed the com!laint and ordered 6ngsiong to eAect or cause the eAectment of the s9uatters from the !ro!erty and to e2ecute the absolute deed of con+eyance u!on !ayment of the full !urchase !rice by 7omero. 6ngsiong a!!ealed to the -ourt of '!!eals. 6n 28 May 1882$ the a!!ellate court rendered its decision$ re+ersed and set aside the decision a!!ealed from and entered another declaring he contract of conditional sale of 8 .une 18@@ cancelled and ordering 7omero to acce!t the return of the down!ayment in the amount of (;0$000 de!osited with the trial courtG without !ronouncement as to cost. "ailing to obtain a reconsideration$ 7omero filed his !etition for re+iew on certiorari before the #u!reme -ourt. The #u!reme -ourt re+ersed and set aside the 9uestioned decision of the -ourt of '!!eals$ and entered another ordering 7omero to !ay 6ngsiong the balance of the !urchase !rice and the latter to e2ecute the deed of absolute sale in fa+or of !etitionerG without costs. ( !er&ected contract o& sale+ absolute or conditional ' !erfected contract of sale may either be absolute or conditional de!ending on whether the agreement is de+oid of$ or subAect to$ any condition im!osed on the !assing of title of the thing to be con+eyed or on the obligation of !arty thereto. >hen ownershi! is retained until the fulfillment of a !ositi+e
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condition the breach of the condition will sim!ly !re+ent the duty to con+ey title from ac9uiring an obligatory force. :f the condition is im!osed on an obligation of a !arty which is not com!lied with$ the other !arty may either refuse to !roceed or wai+e said condition ('rt. 1;&;$ -i+il -ode). >here$ of course$ the condition is im!osed u!on the !erfection of the contract itself$ the failure of such condition would !re+ent the Auridical relation itself from coming into e2istence. 2 #eal character o& a contract+ substance more si$ni&icant than title $iven to it by "arties :n determining the real character of the contract$ the title gi+en to it by the !arties is not as much as significant as its substance. "or e2am!le$ a deed of sale$ although denominated as a deed of conditional sale$ may be treated as absolute in nature$ if title to the !ro!erty sold is not reser+ed in the +endor or if the +endor is not granted the right to unilaterally rescind the contract !redicated on the fulfillment or non%fulfillment$ as the case may be$ of the !rescribed condition. 3 Condition in the conte4t o& a "er&ected contract o& sale The term <condition= in the conte2t of a !erfected contract of sale !ertains$ in reality$ to the com!liance by one !arty of an undertaCing the fulfillment of which would becCon$ in turn$ the demandability of the reci!rocal !restation of the other !arty. The reci!rocal obligations referred to would normally be$ in the case of +endee$ the !ayment of the agreed !urchase !rice and$ in the case of the +endor$ the fulfillment of certain e2!ress warranties (which$ in the !resent case is the timely e+iction of the s9uatters on the !ro!erty). * !er&ection o& a sale? !arties bound to &ul&ill Bhat is e4"ressly sti"ulated and all conse=uences in kee"in$ Bith $ood &aith+ usa$e and laB ' sale is at once !erfected where a !erson (the seller) obligates himself$ for a !rice certain$ to deli+er and to transfer ownershi! of a s!ecified thing or right to another (the buyer) o+er which the latter agrees. "rom the moment the contract is !erfected$ the !arties are bound not only to the fulfillment of what has been e2!ressly sti!ulated but also to all the conse9uences which$ according to their nature$ may be in Cee!ing with good faith$ usage and law. :n the !resent cas$ under the agreement$ 6ngsiong is obligated to e+ict the s9uatters on the !ro!erty. The eAectment of the s9uatters is a condition the o!erati+e act of which sets into motion the !eriod of com!liance by 7omero of his own obligation$ i.e.$ to !ay the balance of the !urchase !rice. / 2"tions available under Article (/*/ belon$s to in@ured "arty 6ngsiong?s failure to <remo+e the s9uatters from the !ro!erty= within the sti!ulated !eriod gi+es 7omero the right to either refuse to !roceed with the agreement or wai+e that condition in consonance with 'rticle 1;&; of the -i+il -ode. This o!tion clearly belongs to !etitioner (7omero) and not to !ri+ate res!ondent (6ngsiong). :n contracts of sale !articularly$ 'rticle 1;&; of the -i+il -ode allows the obligee to choose between !roceeding with the agreement or wai+ing the !erformance of the condition. B+idently$ 7omero has wai+ed the !erformance of the condition im!osed on 6ngsiong to free the !ro!erty from s9uatters. 5 !otestative condition is mi4ed+ and not de"endent on the sole Bill o& the debtor? 8& condition is im"osed on the &ul&illment o& the obli$ation and not the birth thereo&+ only the condition is avoided and does not a&&ect obli$ation itsel& The undertaCing re9uired of !ri+ate res!ondent does not constitute a <!otestati+e condition de!endent solely on his will= that might$ otherwise$ be +oid in accordance with 'rticle 11@2 of the -i+il -ode but a <mi2ed= condition <de!endent not on the will of the +endor alone but also of third !ersons liCe the s9uatters and go+ernment agencies and !ersonnel concerned.= 1owe+er$ where the so%called <!otestati+e condition= is
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im!osed not on the birth of the obligation but on its fulfillment$ only the condition is a+oided$ lea+ing unaffected obligation itself. , ((.( #escission by non-in@ured "arty not Barranted? Article The right of resolution of a !arty to an obligation under 'rticle 1181 of the -i+il -ode is !redicated
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on a breach of faith by the other !arty +iolates the reci!rocity between them. :n the !resent case$ 6ngsiong?s action for rescission was not warranted as she was not the inAured !arty. :t was 6ngsiong who has failed in her obligation under the contract. 7omero did not breach the agreement. 1e has agreed$ in fact$ to shoulder the e2!enses of the e2ecution of the Audgment in the eAectment case and to maCe arrangement with the sheriff to effect such e2ecution. (arenthetically$ this offer to !ay$ hiring been made !rior to the demand for rescission$ assuming for the saCe of argument that such a demand is !ro!er under 'rticle 1;82 of the -i+il -ode$ would liCewise suffice to defeat 6ngsiong?s !rerogati+e to rescind thereunder. ) !etitioner+ o"tin$ to "roceed Bith sale+ may not demand the reimbursement o& the advance "ayment >hen !etitioner ha+ing o!ted to !roceed with the sale$ neither may !etitioner demand its reimbursement from !ri+ate res!ondent. "urther$ !ri+ate res!ondent may not subAect it to forfeiture. './0 Ro9ue v. 5a,uz, '1 SCRA $4% &%'80( '.50 #ubias v <atiller 'G # No ;-3/,02 May 2.+ (.,3 0 "irst )i+ision$ TeehanCee (.)4 @ concur 3actsH "rancisco Militante claimed ownershi! of a !arcel of land located in the /arrio eneral ,una$ /arotac VieAo$ :loilo$ which he caused to be sur+eyed on 1@%31 .uly 183&$ whereby he was issued a !lan (su%88381 (containing an area of 131.3;01 hectares.) /efore the war with .a!an$ Militante filed with the -": :loilo an a!!lication for the registration of title of the land technically described in (su%88381 o!!osed by the )irector of ,ands$ the )irector of "orestry and other o!!ositors. 1owe+er$ during the war with .a!an$ the record of the case was lost before it was heard$ so after the war Militante !etitioned the -ourt to reconstitute the record of the case. The record was reconstituted in the -": :loilo (,and -ase 7%08;$ ,76 7ec. ;&@;2). The -": heard the land registration case on 11 5o+ember 18;2$ and after trial the -ourt dismissed the a!!lication for registration. Militante a!!ealed to the -ourt of '!!eals (-'% 7 13&83%7). (ending the dis!osal of the a!!eal or on 1@ .une 18;0$ Militante sold to )omingo 7ubias$ his son%in%law and a lawyer by !rofession$ the land technically described in (su%88381. The sale was duly recorded in the 6ffice of the 7egister of )eeds for the (ro+ince of :loilo (Bntry 13008) on 1& .uly 1800. 6n 22 #e!tember 18;@$ the -' !romulgated its Audgment confirming the decision of the trial court dismissing the '!!lication for 7egistration filed by Militante. )omingo 7ubias declared the land for ta2ation !ur!oses under Ta2 )eclaration (T)) @;@; for 18;3G T) 8;33 and T) 10018 for 1801G T) 8@0@ for 180&$ !aying the land ta2es under T) @;@; and T) 8;33. Militante has also declared the land for ta2ation !ur!oses under T) ;132 in 18&0$ under T) T%@0 for 18&;$ under T) 3122 for 18&@$ and !aid the land ta2es for 18&0$ for 18&;%&0$ for 18&3$ for 18&3 Q 18&@$ for 18&@$ and for 18&@ and 18&8. T) 2&3& in the name of ,iberato )emontaMo for the land described therein was cancelled by T) ;132 of Militante. )emontaMo !aid the land ta2 under T) 2&3& on 20 )ecember 1838 for the years 183@ and 18;8. :saias /atiller had declared for ta2ation !ur!oses ,ot 2 of (su%1&&2&1 under T) @;@3 for 18;3 and a !ortion of ,ot 2 under T) @;@& for 18&;. T) @&@3 was re+ised by T) 8&8@ while T) 8;@& was cancelled by T) 8;@& both in the name of /atiller. /atiller !aid the land ta2es for ,ot 2 on 8 5o+ember 1800 for the year 18&; and 18&0$ 18;0 and 1800 as shown by the certificate of the treasurer.The land claimed by /atiller as his own was sur+eyed on 0%3 .une 18;0$ and a !lan a!!ro+ed by )irector of ,ands on 1; 5o+ember 18;0 was issued$ identified as (su 1;;2&1.
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6n 22 '!ril 1800$ 7ubias filed a forcible Bntry and )etainer case against /atiller in the .ustice of the (eace -ourt of /arotac VieAo$ :loilo. 6n May 1801 and after trial$ the Munici!al -ourt of /arotac VieAo decided the
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case in fa+or of the /atiller. 7ubias a!!ealed from the decision of the Munici!al -ourt of /arotac VieAo to the -": :loilo. 6n 20 5o+ember 180& and after the trial$ the -": decided the case liCewise in fa+or of /atiller$ holding that he has <better right to !ossess the land in 9uestion ha+ing been in the actual !ossession thereof under a claim of title many years before Militante sold the land to 7ubias. 6n 31 'ugust 180&$ 7ubias filed a suit to reco+er the ownershi! and !ossession of certain !ortions of lot under (su%88381$ bought from his father%in%law$ "rancisco Militante in 18;0$ against its !resent occu!ant /atiller$ who allegedly entered said !ortions of the lot in 18&; and in 18;8. 7ubias !rayed also for damages and attorney?s fees. 6n 13 'ugust 180;$ the -": dismissed the case$ the court therein !ractically agreeing that the contract between 7ubias and Militante was null and +oid. 7ubias filed a motion for reconsideration$ which was liCewise denied by the lower court on 1& .anuary 1800. Thereafter$ 7ubias filed an a!!eal before the -ourt of '!!eals$ which certified said a!!eal to the #u!reme as in+ol+ing !urely legal 9uestions. The #u!reme -ourt affirmed the order of dismissal a!!ealed$ with costs against 7ubias. ( !re-trial "ractically amounted to a &ull dress trial Bhen "arties a$reed and sti"ulated on &acts and submitted their res"ective documentary e4hibits The !re%trial conference held by the trial court at which the !arties with their counsel agreed and sti!ulated on the material and rele+ant facts and submitted their res!ecti+e documentary e2hibits as referred to in the !re%trial order$ !ractically amounted to a full dress trial which !laced on record all the facts and e2hibits necessary for adAudication of the case. 7ubias? e+idence dealing with the source of the alleged right and title of Militante?s !redecessors are already made of record. The chain of Militante?s alleged title and right to the land allegedly tracing bacC to )emontano in the land registration case and was reAected by the :loilo land registration court$ the decision of which was affirmed by final Audgment by the -ourt of '!!eals. /atiller?s e+idence dealing with his and his ancestors? continuous$ o!en$ !ublic and !eaceful !ossession in the conce!t of owner of the land and the )irector of ,ands? a!!ro+al of his sur+ey !lan thereof$ are liCewise already duly established facts of record$ in the land registration case as well as in the eAectment case wherein the :loilo -": recognized the su!eriority of /atiller?s right to the land as against 7ubias. Therefore$ the lower court did not err in dismissing 7ubias? com!laint u!on /atiller?s motion after the !re%trial. 2 #ubias had no cause o& action 7ubias com!laint$ to be declared absolute owner of the land and to be restored to !ossession thereof with damages$ was bereft of any factual or legal basis. The -'?s final Audgment affirming the dismissal of Militante?s a!!lication of registration made it conclusi+e that Militante lacC rightful claim or title to the land. There was no right or title to the land that could be transferred or sold by Militante?s !ur!orted sale in fa+or of 7ubias in 18;0. 3 !urchase o& a laByer o& a "ro"erty in liti$ation "rohibited? Contract void and cannot be rati&ied The !urchase by a lawyer of the !ro!erty in litigation from his client is categorically !rohibited by 'rticle 1&81$ !aragra!h (;) of the (hili!!ine -i+il -ode (<The following !ersons cannot ac9uire any !urchase$ e+en at a !ublic or Audicial auction$ either in !erson or through the mediation of another 222 K;L .ustices$ Audges$ !rosecuting attorneys$ clerCs of su!erior and inferior courts$ and other officers and em!loyees connected with the administration of Austice$ the !ro!erty and rights in litigation or le+ied u!on an e2ecution before the court within whose Aurisdiction or territory their e2ercise their res!ecti+e functionsG this !rohibition includes the act of ac9uiring by assignment and shall a!!ly to lawyers$ with res!ect to the
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!ro!erty and rights which may be the obAect of any litigation in which they may taCe !art by +irtue of their !rofession.=) and that conse9uently$ 7ubias? !urchase of the !ro!erty in litigation from his client(and father% in%law) was +oid and could !roduce no legal effect$ by +irtue of 'rticle 1&08$ !aragra!h (3) of our -i+il -ode which !ro+ides that contracts <e2!ressly !rohibited or declared +oid by law= are <ine2istent and +oid from the beginning= and that <(T)hese contracts cannot be ratified. 5either can the right to set u! the defense of illegality be wai+ed.=
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* Jol&son v 7state o& Martine: su"erceded by case o& -irector o& ;ands v Aba$at The 1811 case of >olfson +. Bstate of Martinez which held that a sale of !ro!erty in litigation to the !arty litigant?s lawyer <its not +oid but +oidable at the election of the +endor= has been su!erseded by the 1828 case of )irector of ,ands +s. 'bagat. :n this later case of 'bagat$ the -ourt e2!ressly cited two antecedent cases in+ol+ing the same transaction of !urchase of !ro!erty in litigation by the lawyer which was e2!ressly declared in+alid under 'rticle 1&;8 of the -i+il -ode of #!ain (of which 'rticle 1&81 of our -i+il -ode of the (hili!!ines is the counter!art) u!on challenge thereof not by the +endor%client but by the ad+erse !arties against whom the lawyer was seeCing to enforce his rights as +endee thus ac9uired. Thus$ the -ourt in 'bagat affirmed the in+alidity and nullity of the lawyer?s !urchase of the land in litigation from his client$ ordered the issuance of a writ of !ossession for the return of the land by the lawyer to the ad+erse !arties without reimbursement of the !rice !aid by him and other e2!enses$ and ruled that the !urchaser%lawyer is a lawyer and is !resumed to Cnow the law. 1e must$ therefore$ from the beginning$ ha+e been well aware of the defect in his title and is$ conse9uently$ a !ossessor in bad faith. / !rohibitions under Article (*.( NCC FArticle (*/. S"anish Civil CodeG 'rticle 1&81 of our -i+il -ode (liCe 'rticle 1&;8 of the #!anish -i+il -ode) !rohibits in its si2 !aragra!hs certain !ersons$ by reason of the relation of trust or their !eculiar control o+er the !ro!erty$ from ac9uiring such !ro!erty in their trust or control either directly or indirectly and <e+en at a !ublic or Audicial auction$= as follows4 (1) guardiansG (2) agentsG (3) administratorsG (&) !ublic officers and em!loyeesG Audicial officers and em!loyees$ !rosecuting attorneys$ and lawyersG and (0) others es!ecially dis9ualified by law. 5 Jol&son case decided in line Bith ManresaMs vieB :n >olfson$ the -ourt e2!ressly reser+ed decision on <whether or not the Audgment in 9uestion actually falls within the !rohibition of the article= and held only that the sale?s <+oidability can not be asserted by one not a !ro!erty to the transaction or his re!resentati+e$= citing from Manresa that <(-)onsidering the 9uestion from the !oint of +iew of the ci+il law$ the +iew taCen by the code$ the -ourt must limit oursel+es to classifying as +oid all acts done contrary to the e2!ress !rohibition of the statute. 5ow then4 's the code does not recognize such nullity by the mere o!eration of law$ the nullity of the acts hereinbefore referred to must be asserted by the !erson ha+ing the necessary legal ca!acity to do so and decreed by a com!etent court.= , ManresaMs vieB not a""licable under the NCC? S"anish Su"reme Court and modern authors have veered aBay &rom Manresa on this "oint The reason gi+en by Manresa in considering such !rohibited ac9uisitions under 'rticle 1&;8 of the #!anish -i+il -ode as merely +oidable at the instance and o!tion of the +endor and not +oid is <that the -ode does not recognize such nullity de !leno derecho.= This is no longer true and a!!licable to the (hili!!ine -i+il -ode which does recognize the absolute nullity of contracts <whose cause$ obAect$ or !ur!ose is contrary to law$ morals$ good customs$ !ublic order or !ublic !olicy= or which are <e2!ressly !rohibited or declared +oid by law= and declares such contracts <ine2istent and +oid from the beginning.= The #u!reme -ourt of #!ain and modern authors ha+e liCewise +eered from Manresa?s +iew of the #!anish codal !ro+ision itself. :n its sentencia of 11 .une 1800$ the #u!reme -ourt of #!ain ruled that the !rohibition of 'rticle 1&;8 of the #!anish -i+il -ode is based on !ublic !olicy$ that +iolation of the !rohibition contract cannot be +alidated by confirmation or ratification. The criterion of nullity of such !rohibited contracts
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under 'rticle 1&;8 of the #!anish -i+il -ode ('rticle 1&81 of our -i+il -ode) as a matter of !ublic order and !olicy as a!!lied by the #u!reme -ourt of #!ain to administrators and agents should certainly a!!ly with greater reason to Audges$ Audicial officers$ fiscals and lawyers under !aragra!h ; of the codal article. Kalso see +iew!oints of ullon /allesteros in -urso de )erecho -i+il (-ontratos Bs!eciales 180@)$ of (erez onzales$ and of -astanL ) Nullity o& "rohibited contracts de&inite and "ermanent and cannot be cured by rati&ication? 8& ob@ect has subse=uently become le$al+ such may be sub@ect to second contract
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The nullity of !rohibited contracts is definite and !ermanent and cannot be cured by ratification. The !ublic interest and !ublic !olicy remain !aramount and do not !ermit of com!romise or ratification. :n this as!ect$ the !ermanent dis9ualification of !ublic and Audicial officers and lawyers grounded on !ublic !olicy differs from the first three cases of guardians$ agents and administrators ('rticle 1&81$ -i+il -ode)$ as to whose transactions$ it has been o!ined that they may be <ratified= by means of and in <the form of a new contract$ in which case its +alidity shall be determined only by the circumstances at the time of e2ecution of such new contract. The causes of nullity which ha+e ceased to e2ist cannot im!air the +alidity of the new contract. Thus$ the obAect which was illegal at the time of the first contract$ may ha+e already become lawful at the time of the ratification or second contractG or the ser+ice which was im!ossible may ha+e become !ossibleG or the intention which could not be ascertained may ha+e been clarified by the !arties. The ratification or second contract would then be +alid from its e2ecutionG howe+er$ it does not retroact to the date of the first contract. . Jho may invoke the ine4istence o& contract? !ro"er action to be &iled Tolentino$ in his treaties on the -i+il -ode$ stated that (as to !ersons affected) <any !erson may in+oCe the ine2istence of the contract whene+er Auridical effects founded thereon are asserted against him. Thus$ if there has been a +oid transfer of !ro!erty$ the transferor can reco+er it by the accion rei+indicatoriaG and any !ossessor may refuse to deli+er it to the transferee$ who cannot enforce the contract. -reditors may attach !ro!erty of the debtor which has been alienated by the latter under a +oid contractG a mortgagee can allege the ine2istence of a !rior encumbranceG a debtor can assert the nullity of an assignment of credit as a defense to an action by the assignee.= 1e further stated that (as to action on contract) <e+en when the contract is +oid or ine2istent$ an action is necessary to declare its ine2istence$ when it has already been fulfilled. 5obody can taCe the law into his own handsG hence$ the inter+ention of the com!etent court is necessary to declare the absolute nullity of the contract and to decree the restitution of what has been gi+en under it. The Audgment$ howe+er$ will retroact to the +ery day when the contract was entered into. :f the +oid contract is still fully e2ecutory$ no !arty need bring an action to declare its nullityG but if any !arty should bring an action to enforce it$ the other !arty can sim!ly set u! the nullity as a defense.= '.,0 Sanche: vs #i$os 'G # No ;-2/*.* 6une (*+ (.,2 0 Bn /anc$ -once!cion (.)4 3 concur$ 1 tooC no !art$ 1 concurs in se!arate o!inion 3actsH 6n 3 '!ril 1801$ 5icolas #anchez and #e+erina 7igos e2ecuted an instrument$ entitled <6!tion to (urchase$= whereby Mrs. 7igos <agreed$ !romised and committed . . . to sell= to #anchez$ for the sum of (1$;10.00$ a !arcel of land situated in the barrios of 'bar and #ibot$ munici!ality of #an .ose$ !ro+ince of 5ue+a BciAa$ and more !articularly described in T-T 5T%12;2@ of said !ro+ince$ within two (2) years from said date with the understanding that said o!tion shall be deemed <terminated and ela!sed$= if <#anchez shall fail to e2ercise his right to buy the !ro!erty= within the sti!ulated !eriod. :nasmuch as se+eral tenders of !ayment of the sum of (1$;10.00$ made by #anchez within said !eriod$ were reAected by Mrs. 7igos$ on 12 March 1803$ the former de!osited said amount with the -": 5ue+a BciAa and commenced against the latter the !resent action$ for s!ecific !erformance and damages. 6n 11 "ebruary 180&$ after the filing of defendant?s answer$ both !arties$ assisted by their res!ecti+e counsel$ Aointly mo+ed for a Audgment on the !leadings. 'ccordingly$ on 2@ "ebruary 180&$ the lower court rendered Audgment for #anchez$ ordering Mrs. 7igos to acce!t the sum Audicially consigned by him and to e2ecute$ in his fa+or$ the re9uisite deed of con+eyance. Mrs. 7igos was$ liCewise$ sentenced to !ay (200.00$ as attorney?s fees$ and the costs. 1ence$ the a!!eal by Mrs. 7igos to the -ourt of '!!eals$ which case was the certified by the latter court to the #u!reme -ourt u!on the ground that it in+ol+es a 9uestion !urely of law.
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The #u!reme -ourt affirmed the decision a!!ealed from$ with costs against #e+erina 7igos.
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2"tion to "urchase not a contract to buy and sell The o!tion did not im!ose u!on #anchez the obligation to !urchase 7igos? !ro!erty. The contract denominated as <6!tion to (urchase= is not a <contract to buy and sell$= it merely granted #anchez an <o!tion= to buy$ and both !arties so understood it$ as indicated by the ca!tion gi+en by them to said instrument. *nder the !ro+isions thereof$ 7igos <agreed$ !romised and committed= herself to sell the land therein described to #anchez for (1$;10.00$ but there is nothing in the contract to indicate that her aforementioned agreement$ !romise and undertaCing is su!!orted by a consideration <distinct from the !rice= sti!ulated for the sale of the land. 2 Article (3/* a""licable to contracts in $eneral+ Article (*,. re&ers to sales in "articular 7elying u!on 'rticle 13;& of the -i+il -ode$ which !ro+ides that <when the offerer has allowed the offeree a certain !eriod to acce!t$ the offer may be withdrawn at any time before acce!tance by communicating such withdrawal$ e2ce!t when the o!tion is founded u!on consideration$ as something !aid or !romised$= the lower court !resumed the e2istence of a consideration distinct from the !rice. :t must be noted howe+er that 'rticle 13;& a!!lies to contracts in general$ whereas the second !aragra!h of 'rticle 1&38 refers to <sales= in !articular$ and$ more s!ecifically$ to <an acce!ted unilateral !romise to buy or to sell.= :n other words$ 'rticle 1&38 is controlling in the !resent case. 'rticle 1&38 !ro+ides that <' !romise to buy and sell a determinate thing for a !rice certain is reci!rocally demandable. 'n acce!ted unilateral !romise to buy or to sell a determinate thing for a !rice certain is binding u!on the !romissor if the !romise is su!!orted by a consideration distinct from the !rice.= 3 Article (*,. im"oses condition &or a unilateral "romise to be bindin$? <urden o& "roo& :n order that a unilateral !romise may be <binding= u!on the !romisor$ 'rticle 1&38 re9uires the concurrence of a condition$ namely$ that the !romise be <su!!orted by a consideration distinct from the !rice.= 'ccordingly$ the !romisee can not com!el the !romisor to com!ly with the !romise$ unless the former establishes the e2istence of said distinct consideration. :n other words$ the !romisee has the burden of !ro+ing such consideration. :n the !resent case$ #anchez has not e+en alleged the e2istence thereof in his com!laint. * 8m"lied admission o& the truth o& the other "artyMs averment i& "arty @oins in the "etition &or a @ud$ment based on the "leadin$s Bithout introducin$ evidence :n the case of 5auer#ann v. Casas (1& March 180@)$ it was held that <one who !rays for Audgment on the !leadings without offering !roof as to the truth of hie own allegations$ and without gi+ing the o!!osing !arty an o!!ortunity to introduce e+idence$ must be understood to admit the truth of all the material and rele+ant allegations of the o!!osing !arty$ and to rest his motion for Audgment on those allegations taCen together with such of his own as are admitted in the !leading. ( La @e!ana Co#pany vs. 'evilla$ 8 (hil. 210).= This +iew was reiterated in )vangelista 2. De la 1osa and /ercy>s .ncorporate$ v. <er#inia 2er$e. :n the !resent case$ 7igos e2!licitly a+erred in her answer$ and !leaded as a s!ecial defense$ the absence of said consideration for her !romise to sell and$ by Aoining in the !etition for a Audgment on the !leadings$ #anchez has im!liedly admitted the truth of said a+erment in 7igos? answer. / case SouthBestern Su$ar A Molasses Co v Atlantic Gul& A !aci&ic Co
The -ourt in the #outhwestern #ugar case held that <under article 1&38 of the new -i+il -ode Han o!tion to sell$? or Ha !romise to buy or to sell$? as used in said article$ to be +alid must be Hsu!!orted by a consideration distinct from the !rice.? This is clearly inferred from the conte2t of said article that a unilateral !romise to buy or to sell$ e+en if acce!ted$ is only binding if su!!orted by a consideration. :n other words$ Han acce!ted unilateral !romise? can only ha+e a binding effect if su!!orted by a consideration$ which means that the o!tion can still be withdrawn$ e+en if acce!ted$ if the same is not su!!orted by any consideration.
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1ere it is not dis!uted that the o!tion is without consideration. :t can therefore be withdrawn notwithstanding the acce!tance made of it by a!!ellee. The -ourt held that the general rule regarding offer and acce!tance under 'rticle 132& must be inter!reted as modified by the !ro+ision of article 1&38$ which a!!lies to Ha !romise to
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buy and sell? s!ecifically. :n short$ the rule re9uires that a !romise to sell to be +alid must be su!!orted by a consideration distinct from the !rice. 5 %ek Atkins+ >roll and Co v Cua Hian
:n the case of 'tCins$ Eroll and -o.$ :nc. +. -ua 1ian TeC$ decided later than #outhwestern #ugar Q Molasses -o. +. 'tlantic ulf Q (acific -o.$ the -ourt saw no distinction between 'rticles 132& and 1&38 of the -i+il -ode and a!!lied the former where a unilateral !romise to sell similar to the one sued u!on here was in+ol+ed$ treating such !romise as an o!tion which$ although not binding as a contract in itself for lacC of a se!arate consideration$ ne+ertheless generated a bilateral contract of !urchase and sale u!on acce!tance. , 2"tion is unilateral "urthermore$ an o!tion is unilateral4 a !romise to sell at the !rice fi2ed whene+er the offeree should decide to e2ercise his o!tion within the s!ecified time. 'fter acce!ting the !romise and before he e2ercises his o!tion$ the holder of the o!tion is not bound to buy. 1e is free either to buy or not to buy later. :n the !resent case$ howe+er$ u!on acce!ting 7igos? offer a bilateral !romise to sell and to buy ensued$ and #anchez i!so facto assumed the obligation of a !urchaser. 1e did not Aust get the right subse9uently to buy or not to buy. :t was not a mere o!tion thenG it was bilateral contract of sale. ) 2"tion Bithout consideration is a mere o&&er o& a contract o& sale+ Bhich is not bindin$ until acce"ted :f the o!tion is gi+en without a consideration$ it is a mere offer of a contract of sale$ which is not binding until acce!ted. :f$ howe+er$ acce!tance is made before a withdrawal$ it constitutes a binding contract of sale$ e+en though the o!tion was not su!!orted by a sufficient consideration. . . . &$$ Co#,us :u#is Secun8u6 ,. 102. See also 2$ Ruling Case 5a@ 33' an8 cases cite8.( :t can be taCen for granted that the o!tion contract was not +alid for lacC of consideration. /ut it was$ at least$ an offer to sell$ which was acce!ted by latter$ and of the acce!tance the offerer had Cnowledge before said offer was withdrawn. The concurrence of both acts J the offer and the acce!tance J could at all e+ents ha+e generated a contract$ if none there was before (arts. 12;& and 1202 of the -i+il -odeG Vayco +s. #erra$ && (hil. 331.) :n other words$ since there may be no +alid contract without a cause or consideration$ the !romisor is not bound by his !romise and may$ accordingly$ withdraw it. (ending notice of its withdrawal$ his acce!ted !romise !artaCes$ howe+er$ of the nature of an offer to sell which$ if acce!ted$ results in a !erfected contract of sale. . !ro"er construction o& con&lictin$ "rovisions o& the same laB? Harmoni:e to im"lement the same "rinci"le rather than to create e4ce"tions :n line with the cardinal rule of statutory construction that$ in construing different !ro+isions of one and the same law or code$ such inter!retation should be fa+ored as will reconcile or harmonize said !ro+isions and a+oid a conflict between the same. :ndeed$ the !resum!tion is that$ in the !rocess of drafting the -ode$ its author has maintained a consistent !hiloso!hy or !osition. Moreo+er$ the decision in #outhwestern #ugar Q Molasses -o. +. 'tlantic ulf Q !acific -o.$ holding that 'rt. 132& (on the general !rinci!les on contracts) is modified by 'rt. 1&38 (on sales) of the -i+il -ode$ in effect$ considers the latter as an e2ce!tion to the former$ and e2ce!tions are not fa+ored$ unless the intention to the contrary is clear$ and it is not so$ insofar as said 2 articles are concerned. >hat is more$ the reference$ in both the second !aragra!h of 'rt. 1&38 and 'rt. 132&$ to an o!tion or !romise su!!orted by or founded u!on a consideration$ strongly suggests that the 2 !ro+isions intended to enforce or im!lement the same !rinci!le. (0 Atkins+ >roll A Co case modi&ies or abandons SouthBestern Su$ar case inso&ar as to inconsistencies
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*!on mature deliberation$ the -ourt is of the considered o!inion that it should$ as it hereby reiterates the doctrine laid down in the 'tCins$ Eroll Q -o. case$ and that$ insofar all inconsistent therewith$ the +iew adhered to in the #outh western #ugar Q Molasses -o. case should be deemed abandoned or modified.
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'.)0 Siy Con$ <ien$ and Co vs Hon$kon$ and Shan$hai <ankin$ Cor" 'G # No 3*5// March /+ (.32 0 Bn /anc$ 6strand (.)4 0 concur 3actsH #iy -ong /ieng Q -o.$ a cor!oration engaged in business generally$ and 1ongCong Q #hanghai /anCing -or!oration$ a foreign banC authorized to engage in the banCing business in the (hili!!ines$ are domiciled in the -ity of Manila. 6n 2; .une 1820$ certain negotiable warehouse recei!ts were !ledged by 6tto 7anft to the banC to secure the !ayment of his !ree2isting debts to the latter (#iy -ong /ieng as de!ositor4 1303$ (ublic >arehouse -o.$ 23 balesG 133$ >.". #te+enson -o$ 03 balesG 1322$ (ublic >arehouse -o.$ 00 balesG 1323$ >.". #te+enson -o$ & balesG 103&$ The (hili!!ine >arehouse -om!any$ 88 balesG 1302$ The (hili!!ine >arehouse -om!any$ 38 bales. 6. 7anft as de!ositor4 181@$ (ublic >arehouse -o$ 100 balesG 2$ #iy -ong /ieng Q -o. :nc.$ 2 bales). The baled hem! co+ered by the warehouse recei!ts was worth (31$03;G recei!ts numbers 1303$ 133$ 1322$ 1323$ 103&$ and 1302 being endorsed in blanC by #iy -ong /ieng and 6tto 7anft$ and numbers 181@ and 2$ by 6tto 7anft alone. 6n 2; .une 1820$ 7anft called at the office of #iy -ong /ieng to !urchase hem! (abaca)$ and he was offered the bales of hem! as described in the 9uedans. The !arties agreed to the !rice ((31$0&;)$ and on the same date the 9uedans$ together with the co+ering in+oice$ were sent to 7anft$ without ha+ing been !aid for the hem!$ but #iy -ong /ieng?s understanding was that the !ayment would be made against the same 9uedans$ and it a!!ears that in !re+ious transactions of the same Cind between the banC and #iy -ong /ieng$ 9uedans were !aid one or two days after their deli+ery to them. :n the e+ening of the day u!on which the 9uedans in 9uestion were deli+ered to the banC$ 7anft died suddenly at his home in the city of Manila$ and when #iy -ong /ieng found that such was the case$ it immediately demanded the return of the 9uedans$ or the !ayment of the +alue$ but was told that the 9uedans had been sent to the banC as soon as they were recei+ed by 7anft. #iy -ong /ieng filed a claim for the sum of (31$0&; (the +alue of &0& bales of hem! de!osited in certain bonded warehouses) in the intestate !roceedings of the estate of the deceased 6tto 7anft$ which on an a!!eal from the decision of the committee on claims$ was allowed by the -": in case 31332 (-ity of Manila). :n the meantime$ demand had been made by #iy -ong /ieng on the banC for the return of the 9uedans (warehouse recei!ts)$ or their +alue$ which demand was refused by the banC on the ground that it was a holder of the 9uedans in due course. Thereu!on #iy -ong /ieng filed its first com!laint against the banC$ wherein it alleged that it had <sold= the 9uedans in 9uestion to the deceased 7anft for cash$ but that the said 7anft had not fulfilled the conditions of the sale. ,ater on$ #iy -ong /ieng filed an amended com!laint$ wherein they changed the word <sold= referred to in the first com!laint to the words <attem!ted to sell=. *!on trial the Audge of the lower court rendered Audgment in fa+or of #iy -ong /ieng. The #u!reme -ourt re+ersed the a!!ealed Audgment and absol+ed the banC from the com!laintG >ithout costs. ( Circumstances involvin$ the =uedans The 9uedans in 9uestion were negotiable in form. They were !ledged by 6tto 7anft to the banC to secure the !ayment of his !ree2isting debts to said banC. #uch of the 9uedans as were issued in the name of #iy -ong /ieng were duly endorsed in blanC by #iy -ong /ieng and by 6tto 7anft. The two remaining 9uedans which were issued directly in the name of 6tto 7anft were also duly endorsed in blanC by him. 2 Cuedans Bere received by the bank to secure the "ayment o& #an&tMs "ree4istin$ debts >hen the 9uedans were negotiated$ 6tto 7anft was indebted to the 1ongCong Q #hanghai /anCing -or!oration in the sum of (022$3;3.22$ which indebtedness was !artly co+ered by 9uedans. 1e was also being !ressed to de!osit additional !ayments as a further security to the banC.
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3 No evidence that bank is bound to "ay back #an&t the amount o& the =uedans? 2n the delivery o& the =uedans+ indorser does not oBn "ro"erty anymore unless he li=uidated his debt Bith the bank
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:t has been the !ractice of the banC in its transactions with 7anft that the +alue of the 9uedans has been entered in the current accounts between 7anft and the banC$ but there is no e+idence to the effect that the banC was at any time bound to !ay bacC to 7anft the amount of any of the 9uedans. There is also nothing in the record to show that the banC has !romised to !ay the +alue of the 9uedans neither to 7anft nor to #iy -ong /ieng. 6n the contrary$ as stated in the sti!ulation of facts$ the <negotiable warehouse recei!ts J were !ledged by 6tto 7anft to the 1ongCong Q #hanghai /anCing -or!oration to secure the !ayment of his !ree2isting debts to the latter=$ and taCing into consideration that the 9uedans were negotiable in form and duly endorsed in blanC by #iy -ong /ieng and by 6tto 7anft$ it follows that on the deli+ery of the 9uedans to the banC they were no longer the !ro!erty of the indorser unless he li9uidated his debt with the banC. * No com"ellin$ reason to com"el bank to investi$ate indorser There is nothing in the record which in any manner would ha+e com!elled the banC to in+estigate the indorser$ es!ecially as to his authority to negotiate the 9uedans. The banC had a !erfect right to act as it did$ and its action is in accordance with sections &3$ 3@$ and &0 of the >arehouse 7ecei!ts 'ct ('ct 2133). / Section *, o& the Jarehouse #ecei"ts Act? Jhen ne$otiation not im"aired by &raud+ mistake or duress #ection &3 (>hen negotiation not im!aired by fraud$ mistaCe$ or duress) !ro+ides that <the +alidity of the negotiation of a recei!t is not im!aired by the fact that such negotiation was a breach of duty on the !art of the !erson maCing the negotiation$ or by the fact that the owner of the recei!t was induced by fraud$ mistaCe$ or duress to intrust the !ossession or custody of the recei!t to such !erson$ if the !erson to whom the recei!t was negotiated$ or a !erson to whom the recei!t was subse9uently negotiated$ !aid +alue therefor$ without notice of the breach of duty$ or fraud$ mistaCe$ or duress.= 5 Section 3) o& the Jarehouse #ecei"ts Act? Ne$otiation o& ne$otiable recei"ts by indorsement #ection 3@ (5egotiation of negotiable recei!ts by indorsement) !ro+ides that <a negotiable recei!t may be negotiated by the indorsement of the !erson to whose order the goods are$ by the terms of the recei!t$ deli+erable. #uch indorsement may be in blanC$ to bearer or to a s!ecified !erson. . . #ubse9uent negotiation may be made in liCe manner.= , Section *0 o& the Jarehouse #ecei"ts Act? Jho may ne$otiate a recei"t #ection &0 (>ho may negotiate a recei!t) !ro+ides that <a negotiable recei!t may be negotiated <(a) /y the owner thereof$ or (b) /y any !erson to whom the !ossession or custody of the recei!t has been entrusted by the owner$ if$ by the terms of the recei!t$ the warehouseman undertaCes to deli+er the goods to the order of the !erson to whom the !ossession or custody of the recei!t has been entrusted$ or if at the time of such entrusting the recei!t is in such form that it may be negotiated by deli+ery.= ) Act #i$hts o& bank over the =uedans a&ter indorsement? Section *( o& the Jarehouse #ecei"ts
The rights the banC ac9uired o+er the 9uedans after indorsement and deli+ery to it by 7anft are co+ered by #ection &1 of the >arehouse 7ecei!t 'ct. #ection &1 (7ights of !erson to whom a recei!t has been negotiated) !ro+ides that <a !erson to whom a negotiable recei!t has been duly negotiated ac9uires thereby4 (a) #uch title to the goods as the !erson negotiating the recei!t to him had or had ability to con+ey to a !urchaser in good faith for +alue$ and also such title to the goods as the de!ositor of !erson to whose order the goods were to be deli+ered by the terms of the recei!t had or had ability to con+ey to a !urchaser in good faith for +alue.=
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. Dse o& Barehouse recei"ts as documents o& title? 8ntrustin$ recei"ts more than delivery+ it is to intrust title to the $oods? !urchasers &or value entitled to rely on re"resentation des"ite breach o& trust and a$reement :n the case of the Co##ercial =ational 5an; of =e- Arleans vs. Canal?Louisiana 5an; ( +rust Co. (238 *. #.$ ;20)$ it was obser+ed that <one who taCes by tres!ass or a finder is not included within the
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descri!tion of those who may negotiate.= (7e!ort of -ommissioner on *niform #tate ,aws$ .anuary 1$ 1810$ !. 20&.) 'side from this$ the intention is !lain to facilitate the use of warehouse recei!ts as documents of title. *nder #ection &0$ the !erson who may negotiate the recei!t is either the <owner thereof=$ or a <!erson to whom the !ossession or custody of the recei!t has been intrusted by the owner= if the recei!t is in the form described. The warehouse recei!t re!resents the goods$ but the intrusting of the recei!t$ as stated$ is more than the mere deli+ery of the goodsG it is a re!resentation that the one to whom the !ossession of the recei!t has been so intrusted has the title to the goods. /y #ection &3$ the negotiation of the recei!t to a !urchaser for +alue without notice is not im!aired by the fact that it is a breach of duty$ or that the owner of the recei!t was induced <by fraud$ mistaCe$ or duress= to intrust the recei!t to the !erson who negotiated it. 'nd$ under #ection &1$ one to whom the negotiable recei!t has been duly negotiated ac9uires such title to the goods as the !erson negotiating the recei!t to him$ or the de!ositor or !erson to whose order the goods were deli+erable by the terms of the recei!t$ either had or <had ability to con+ey to a !urchaser in good faith for +alue.= The clear im!ort of these !ro+isions is that if the owner of the goods !ermits another to ha+e the !ossession or custody of negotiable warehouse recei!ts running to the order of the latter$ or to bearer$ it is a re!resentation of title u!on which bona fide !urchasers for +alue are entitled to rely$ des!ite breaches of trust or +iolations of agreement on the !art of the a!!arent owner. (0 Siy Con$ <ien$ esto""ed to deny bank had valid title to the =uedans #iy -ong /ieng is esto!!ed to deny that the banC had a +alid title to the 9uedans for the reason that #iy -ong /ieng had +oluntarily clothed 7anft with all the attributes of ownershi! and u!on which the banC relied. (( 7=uitable esto""el? Jhere one or tBo innocent "ersons must su&&er a loss+ he Bho by his conduct made the loss "ossible must bear it :n the =ational 'afe Deposit vs. <i!!s (228 *. #.$ 381)$ certain certificates of stocC were !ledged as collateral by the defendant in error to the banC$ which certificates were con+erted by one of the trusted em!loyees of the banC to his own use and sold by him. The stocC certificates were un9ualifiedly endorsed in blanC by the defendant when deli+ered to the banC. The #u!reme -ourt of the *nited #tates a!!lied the familiar rule of e9uitable esto!!el that where one of two innocent !ersons must suffer a loss he who by his conduct made the loss !ossible must bear it. Thus$ when the broCer obtained the stocC certificates$ containing all the indicia of ownershi! and !ossible of ready transfer$ from one who had !ossession with the banC?s consent$ and who brought the certificates to him$ a!!arently clothed with the full ownershi! thereof by all the tests usually a!!lied by business men to gain Cnowledge u!on the subAect before maCing a !urchase of such !ro!erty. 6n the other hand$ the banC$ for a legitimate !ur!ose$ with confidence in one of its own em!loyees$ instrusted the certificates to him$ with e+ery e+idence of title and transferability u!on them. The banC?s trusted agent$ in gross breach of his duty$ whether with technical criminality or not is unim!ortant$ tooC such certificates$ thus authenticated with e+idence of title$ to one who$ in the ordinary course of business$ sold them to !arties who !aid full +alue for them. :n such case we thinC the !rinci!les which underlie e9uitable esto!!el !lace the loss u!on him whose mis!laced confidence has made the wrong !ossible. (2 No remedy available to Siy Con$ <ien$ #iy -ong /ieng has suffered the loss of the 9uedans$ but there is now no remedy a+ailable to it. The banC is not res!onsible for the lossG the negotiable 9uedans wee duly negotiated to the banC and as far as the record shows$ there has been no fraud on the !art of the banC. '..0 Soriano+ et al v <autista+ et al 'G # No ;-(/,/2 -ecember 2.+
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(.52 0 /autista$ et. al. +. #oriano$ et. al. K .7. 5o. ,%13&;3. )ecember 28$ 1802.L Bn /anc$ MaCalintal (.)4 8 concur
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3actsH #!ouses /asilio /autista and #ofia de 7osas are the absolute and registered owners of a !arcel of land$ situated in Teresa$ 7izal (6-T 380;$ 7egister of )eeds of 7izal). 6n 30 May 18;0$ the said s!ouses for and in consideration on the sum of (1$@00$ signed a document entitled <Easulatan 5g #anglaan= in fa+or of 7u!erto #oriano and 6lim!ia de .esus. #imultaneously with the signing of the deed$ the s!ouses /autista and de 7osas transferred the !ossession of the said land to #oriano and de .esus who ha+e been and are still in !ossession of the said !ro!erty and ha+e since that date been and are culti+ating the said land and ha+e enAoyed and are still enAoying the !roduce thereof to the e2clusion of all other !ersons. #ometimes after 30 May 18;0$ the s!ouses /autista and de 7osas recei+ed from #oriano and de .esus$ the sum of (&;0.00 !ursuant to the conditions agreed u!on in the document for which no recei!t was issued and which was returned by the s!ouses sometime on 31 May 18;@. 6n 13 May 18;@$ a certain 'tty. 'ngel 6. Ver wrote a letter to the s!ouses /autista informing the said s!ouses that his clients #oriano and de .esus ha+e decided to buy the !arcel of land in 9uestion !ursuant to !aragra!h ; of the document in 9uestion (<That it has liCewise been agreed that if the financial condition of the mortgagees will !ermit$ they may !urchase said land absolutely on any date within the two%year term of this mortgage at the agreed !rice of (3$800.00.=). The s!ouses in s!ite of the recei!t of the letter refused to com!ly with the demand contained therein. 6n 31 May 18;@$ #oriano and de .esus filed before the Trial -ourt -i+il -ase ;023$ !raying that they be allowed to consign or de!osit with the -lerC of -ourt the sum of (1$0;0.00 as the balance of the !urchase !rice of the !arcel of land in 9uestion. 'fter due hearing$ Audgment be rendered ordering /autista and de 7osas to e2ecute an absolute deed of sale of the said !ro!erty in their fa+or$ !lus damages. 6n 8 .une 18;@$ s!ouses /autista and de 7osas filed a com!laint against #oriano and de .esus$ which case after hearing was dismissed for lacC of Aurisdiction. 6n ; 'ugust 18;8$ the s!ouses /autista and de 7osas again filed a case in the -": against #oriano and de .esus asCing the -ourt to order #oriano and de .esus to acce!t the !ayment of the !rinci!al obligation and release the mortgage and to maCe an accounting of the har+est for the two har+est seasons (18;0%18;3). The two cases$ were by agreement of the !arties assigned to one branch so that they can be tried Aointly. 6n 10 March 18;8$ the -": 7izal$ after a Aoint trial of both cases$ ordered /autista and de 7osas to e2ecute a deed of sale co+ering the !ro!erty in 9uestion in fa+or of #oriano and de .esus u!on !ayment by the latter of (1$0;0.00 which is the balance of the !rice agreed u!on$ i.e. (3$800.00$ and the amount !re+iously recei+ed by way of loan by the said s!ouses from #oriano and de .esus$ to !ay the sum of (;00.00 by way of attorney?s fees$ and to !ay the costs. The #u!reme -ourt affirmed the Audgment a!!ealed from$ with costs. ( buy Mort$a$orsM ri$ht to redeem de&easible due to sti"ulation on o"tion to
>hile the transaction is undoubtedly a mortgage and contains the customary sti!ulation concerning redem!tion$ it carries the added s!ecial !ro+ision$ which renders the mortgagors? right to redeem defeasible at the election of the mortgagees. There is nothing illegal or immoral in this. :t is sim!ly an o!tion to buy$ sanctioned by 'rticle 1&38 of the -i+il -ode$ which states4 <' !romise to buy and sell a determinate thing for a !rice certain is reci!rocally demandable. 'n acce!ted unilateral !romise to buy or to sell a determinate thing for a !rice certain is binding u!on the !romisor if the !romise is su!!orted by a consideration distinct from the !rice.= 2 !romise to sell su""orted by same consideration o& the mort$a$e+ Bhich is distinct &rom Bhich Bould su""ort the sale? Continuin$ o&&er :n the !resent case$ the mortgagors? !romise to sell is su!!orted by the same consideration as that of the mortgage itself$ which is distinct from that which would su!!ort the sale$ an additional amount ha+ing been agreed u!on$ to maCe u! the entire !rice of (3$800.00$ should the o!tion be e2ercised. The mortgagors?
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!romise was in the nature of a continuing offer$ non%withdrawable during a !eriod of two years$ which u!on acce!tance by the mortgagees ga+e rise to a !erfected contract of !urchase and sale.
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3 8ni$o vs CA case a&&irms ri$ht o& a""ellees &or s"eci&ic "er&ormance &or the e4ecution o& deed o& sale :n the case of :Migo +s. -ourt of '!!eals (80 (hil.$ 33G ;0 6. . 11 ;2@1)$ it was held that a sti!ulation in a contract of mortgage to sell the !ro!erty to the mortgagee does not bind the same but creates only a !ersonal obligation on the !art of the mortgagor. The citation$ confirms the !osition of the a!!ellees$ who are not enforcing any real right to the dis!uted land but are rather seeCing to obtain s!ecific !erformance of a !ersonal obligation$ namely$ the e2ecution of a deed of sale for the !rice agreed u!on$ the corres!onding amount to co+er which was duly de!osited in court u!on the filing of the com!laint. * %ender ine&&ective as "reem"tive ri$ht to "urchase by other "arty has been e4ercised The tender of the sum of (1$@00 to redeem the mortgage by /autista and de 7osas was ineffecti+e for other !ur!ose intended. #uch tender must ha+e been made after the o!tion to !urchase had been e2ercised by #oriano and de .esus (-i+il -ase 88 was filed on 8 .une 18;@$ only to be dismissed for lacC of Aurisdiction). /autista?s and de 7osas? offer to redeem could be defeated by #oriano?s and de .esus? !reem!ti+e right to !urchase within the !eriod of 2 years from 30 May 18;0. #uch right was a+ailed of and /autista and de 7osas were accordingly notified by letter dated 13 May 18;@$ which was recei+ed by them on the following May 22. 6ffer and acce!tance con+erged and ga+e rise to a !erfected and binding contract of !urchase and sale. '(000 Sta Ana vs Hernande: 'G # No ;-(53.* -ecember (,+ (.55 0 Bn /anc$ 7eyes ./, (.)4 @ concur$ 1 tooC no !art 3actsH #!ouses .ose #anta 'na$ .r. and ,ourdes #to. )omingo$ owned a 11;$@;0%s9.m. !arcel of land situated in barrio /alasing$ #ta. Maria$ /ulacan$ and co+ered by T-T T%3;8@. 6n 2@ May 18;&$ they sold two (2) se!arate !ortions of the land for (11$000.00 to 7osa 1ernandez. These !ortions were described in the deed of sale as the northern lot (54 Maria (erez and 'urelio (erez$ #4 adAoining lot K#ta. 'naL$ B4 Mariano "lores and Bmilio :gnacio$ >4 -ornelio :gnacioG 12$;00 s9.m.) and eastern lot (54 7osa 1ernandez$ B4 )omingo and 'ntonio 1ernandez$ #4 #ta. Maria%Tigbi 7oadG >4 adAoining lot K#ta. 'naLG 20$;00 s9.m.) 'fter the sale (there were 2 other !re+ious sales to different +endees of other !ortions of the land)$ the s!ouses caused the !re!aration of a subdi+ision !lan$ of the entire land by a sur+eyor$ whole subdi+ision !lan (sd%&31@3$ was a!!ro+ed on 13 .anuary 18;; by the )irector of ,ands. 7osa 1ernandez$ howe+er$ unliCe the !re+ious +endees$ did not conform to the !lan and refused to e2ecute an agreement of subdi+ision and !artition for registration with the 7egister of )eeds of /ulacanG and she$ liCewise$ refused to +acate the areas that she had occu!ied. :nstead$ she caused the !re!aration of a different subdi+ision !lan$ which was a!!ro+ed by the )irector of ,ands on 2& "ebruary 18;;. This !lan$ (sd%&2@&&$ tallied with the areas that 7osa 1ernandez had actually occu!ied. 6n 2@ "ebruary 18;;$ the s!ouses filed suit against 7osa 1ernandez in the -": /ulacan (-i+il -ase 1030)$ claiming that 1ernandez was occu!ying an e2cess of 13$000 s9. m. in area of what she had bought from them. 1ernandez$ on the other hand$ claimed that the alleged e2cess was !art of the areas that she bought. The only 9uestion determined is whether or not the s!ouses had sold two !ortions without clear boundaries but with e2act areas (12$;00 s9. m. and 20.000 s9. m.) at the rate of (0.28 !er s9uare meter or two !ortions$ the areas of which were not definite but which were well defined on the land and with definite boundaries and sold for the lum! sum of (11$000.00. "inding for the s!ouses$ the said court ordered 1ernandez$ among other things$ to +acate <the e2cess !artitions actually occu!ied by her and to confine her occu!ation only to ,ots &%a and &% b as shown in the !lan of the s!ouses.
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5ot satisfied with the Audgment$ 1ernandez a!!ealed to the -ourt of '!!eals. The -ourt of '!!eals (-'% 7 20;@2%7) dismissed the com!laint and declared 7osa 1ernandez the owner of lots &%a and &%b in her !lan$ (sd%&2@&&G in effect re+ersing the decision of the -": /ulacan. 1ence$ the a!!eal.
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The #u!reme -ourt affirmed the decision of the -ourt of '!!eals$ with costs against .ose #anta 'na$ .r. and ,ourdes #to. )omingo. ( area JitnessM testimonyH <oundaries "revail over
onzalo V. :gnacio$ the notarial officer before whom the contract of sale was e2ecuted$ testified that 1ernandez com!lained to him and #ta. 'na to the effect that the areas stated in the contract were less than the actual areas of the !arcels of land being sold. :gnacio assured her that <the area stated in the document will not be the one to !re+ail but the one to !re+ail is the boundary of the land which you already Cnow.= #ta. 'na being the ne!hew of 1ernandez$ and the former?s assurance !robably a!!eased the latter against insisting in the correction of the areas stated in the contract of sale. 2 sums JitnessM testimonyH !urchase "rice alBays lum"
Two witnesses testified for 1ernandez. .esus (olicar!io di+ulged that the same !arcels of land in+ol+ed in this case were !re+iously offered to him by #ta. 'na for the single !urchase !rice of (12$000.00. .ulio 1ernandez stated that his sister$ 7osa 1ernandez$ had offered (10$000.00 as against #ta. 'na?s !rice of (12$000.00$ end that he was able to !ersuade the !arties to meet halfway on the !rice. "urthermore$ the !re+ious con+eyances made by #ta. 'na for other !ortions of the same !ro!erty are also for lum! sums. 3 !arcels o& land sold are identi&ied by cons"icuous boundaries #ta. 'na admitted the lands in 9uestion were se!arated from the rest of their !ro!erty by a long and continuous H!ila!il? or diCe$ and there is con+incing !roof to show that the bigger lot (,ot &%a) was wholly tenanted for #ta. 'na by -iriaco 5icolas and #antiago -astillo and the smaller lot (,ot &%b) was wholly tenanted for #ta. 'na by regorio atchalian. These facts su!!ort the theory that the two !arcels of land sold to 1ernandez were identified by the cons!icuous boundaries and the e2tent or area each tenant used to till or the +endors. #ta. 'na should not be heard to com!lain about the deficiency in the area (13$000 s9. m. or P total are of two !arcels of land) because registered owners and !ossessors of the entire land since 18&8 they can rightly be !resumed to ha+e ac9uired a good estimate of the +alue and areas of the !ortions they subse9uently sold. "rom the facts$ the difference in the lot area does not infer gross mistaCe on the !art of #ta. 'na. * Article (/*2 a""lied 'rticle 1;&2 of the new -i+il -ode !ro+ides that <:n the sale of real estate$ made for a lum! sum and not at the rate of a certain sum for a unit of measure or number$ there shall be no increase or decrease of the !rice$ although there be greater or less area or number than that stated in the contract. The same rule shall be a!!lied when two or more immo+ables are sold for a single !riceG but if$ besides mentioning the boundaries$ which is indis!ensable in e+ery con+eyance of real estate$ its area or number should be designated in the contract$ the +endor shall be bound to deli+er all that is included within said boundaries$ e+en when it e2ceeds the area or number s!ecified in the contractG and$ should he not be able to do so$ he shall suffer a reduction in the !rice$ in !ro!ortion to what is lacCing in the area or number$ unless the contract is rescinded because the +endee does not accede to the failure to deli+er what has been sti!ulated.= / 6urisdiction o& the Courts The credibility of witnesses and the weighing of conflicting e+idence are matters within the e2clusi+e authority of the -ourt of '!!eals$ and it is not necessarily bound by the conclusions of the trial court. /oth the .udiciary 'ct (7.'. 280$ section 28) and the 7ules of -ourt (7ule &;$ section 2) only allow a re+iew of decisions of the -ourt of '!!eals on 9uestion of lawG and numerous decisions of this -ourt ha+e in+ariably and re!eatedly held that findings of fact by the -ourt of '!!eals are conclusi+e and not re+iewable by the
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#u!reme -ourt ( alang +s. -ourt of '!!eals$ ,%132&@$ 28 .anuary 1802G "onnacier +s. -ourt of '!!eals$ 80 (hil. &1@$ &21G and cases therein citedG 6nglengco +s. 6zaeta$ 30 (hil. &3G 5azareno +s. Magwagi$ 31 (hil. 101). /arring$ therefore$ a showing that the findings com!lained of are totally de+oid of su!!ort in the record$
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or that they are so glaringly erroneous as to constitute serious abuse of discretion$ such findings must stand$ for the #u!reme -ourt is not e2!ected or re9uired to e2amine and correct the oral and documentary e+idence submitted by the !arties. 's !ointed out by former -hief .ustice Moran in his -omments on the 7ules of -ourt (1803 Bd.$ Vol. 2$ !. &12)$ the law creating the -ourt of '!!eals was intended mainly to taCe away from the #u!reme -ourt the worC of e2amining the e+idence$ and confine its tasC for the determination of 9uestions which do not call for the reading and study of transcri!ts containing the testimony of witnesses. 5 Cor"us centum The two !arcels of land sold to 7osa 1ernandez were identified by the cons!icuous boundaries$ consisting in a long and continuous !ila!il or diCe that se!arated the lands in 9uestion from the rest of the !ro!erty. 6n the basis of such findings$ it is un9uestionable that the sale made was of a definite and identified tract$ a cor!us certum$ that obligated the +endors to deli+er to the buyer all the land within the boundaries$ irres!ecti+e of whether its real area should be greater or smaller than what is recited in the deed ( oyena +s. Tambunting$ : (hil. &80G Teran +s. Villanue+a$ ;0 (hil. 033G 'zarraga +s. ay$ ;2 (hil. ;88G Mondragon +s. #antos$ @3 (hil. &31). 'nd this is !articularly true where the area gi+en is 9ualified to be a!!ro2imate only <humigit Cumulang=$ i.e.$ more or less. :t cannot be said that the boundaries are indefinite Aust because the deed of sale !ro+ides boundaries gi+en as <lu!ang Casanib.= , #e=uisites to hold buyer to no more than the area recited To hold the buyer to no more than the area recited on the area$ it must be made clear therein that the sale was made by unit of measure at a definite !rice for each unit. :f the defendant intended to buy by the meter he should ha+e so stated in the contract= ( oyena +s. Tambunting$ su!ra). ) ;a venta a cuer"o cierto? Sale o& a certain thin$ The ruling of the #u!reme -ourt of #!ain$ in construing 'rticle 1&31 of the #!anish -i+il -ode (co!ied +erbatim in 'rticle 1;&2 of the -i+il -ode) is highly !ersuasi+e that as between the absence of a recital of a gi+en !rice !er unit of measurement$ and the s!ecification of the total area sold$ the former must !re+ail and determines the a!!licability of the norms concerning sales for a lum! sum. O The sale of a certain thing is doubtlessly +erified when in the contract there is no single nor !recise !rice by unit of measurement$ without neither indicating the global dimensions of the immo+able$ but it also +erified when e+en ha+ing not indicated a singular !rice by unit of measurement$ ne+ertheless the total dimension of immo+able$ in which ultimately entered contrasting indices$ constituted a KbyL the lacC of a singular !rice for a unit of measure$ and another by the concretion of the global dimensions of the immo+able$ the !re+ailing law is the first$ and !resumes that the indi+idualization does not s!eaC of the !arts of essential +alue that constitutes an o+er!rice$ and does not mean that the !arts ha+e been agreed that the global !rice of the immo+able is for the total dimensions$ considering that this is an absolute !resum!tion$ against any !roof !resented by either the buyer or the seller. O Therefore$ neither the buyer nor the seller can try to reduce or !ro+ide a !rice su!!lement$ when the global dimensions of a larger or smaller immo+able results therefrom from the ones indicated in the contract$ unless it can be adduced that they ha+e agreed u!on !recisely are the dimensions of the thing in the contract.= (#u!reme -ourt of #!ain$ )ecision of 20$ .une 18;0G 7e!. .uris!. 'ranzadi$ 2328) . Section /) o& Act *.5 merely a "rocedure directive to #e$isters o& -eeds and does not modi&y Civil Code #ule as to sales Ia cuer"o ciertoK The -i+il -ode?s rule as to sales <a cuer!o cierto= was not modified by 'ct &80$ section ;@ !rohibiting the issuance of a certificate of title to a grantee of !art of a registered tract until a subdi+ision !lan and technical descri!tion are duly a!!ro+ed by the )irector of ,ands$ and authorizing only the entry of a memorandum on the grantor?s certificate of title in default of such !lan. The latter !ro+ision is !urely a !rocedural directi+e to 7egisters of )eeds that does not attem!t to go+ern the rights of +endor and +endee
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inter se$ that remain controlled by the -i+il -ode of the (hili!!ines. :t does not e+en bar the registration of the contract itself to bind the land.
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'(0(0 Su#ia v. 11%&%'8$( '(020 agatac v. :i6enez, 03 3; 3$'2 &%'0$( '(030 %a@anlan$it vs Southern Motors 'G # No ;-(0,). (./, 0 #econd )i+ision$ /engzon (.)4 @ concur May 2)+ -AC, %0% SCRA
3actsH :n '!ril 18;3 'mador TaAanlangit and his wife 'ngeles$ bought from the #outhern Motors :nc. of :loilo two tractors and a thresher. :n !ayment for the same$ they e2ecuted the !romissory note whereby they undertooC to satisfy the total !urchase !rice of (2&$3;;.3; in se+eral installments (with interest) !ayable on stated dates from 1@ May 18;3 to 10 )ecember 18;;. The note sti!ulated that if default be made in the !ayment of interest or of any installment$ then the total !rinci!al sum still un!aid with interest shall at once become demandable etc. The s!ouses failed to meet any installment. The s!ouses were sued (-i+il -ase 28&2)$ for the amount of the !romissory note. The s!ouses defaulted$ and the court$ after listening to the #outhern Motors? e+idence entered Audgment for it in the total sum of (2&$3;;.3; together with interest at 12I$ !lus 10I of the total amount due as attorney?s fees and costs of collection. -arrying out the order of e2ecution$ the sheriff le+ied on the same machineries and farm im!lements which had been bought by the s!ousesG and later sold them at !ublic auction to the highest bidder$ which turned out to be the #outhern Motors itself$ for the total sum of (10$000. 's its Audgment called for much more$ the #outhern Motors subse9uently asCed and obtained$ an alias writ of e2ecutionG and !ursuant thereto$ the !ro+incial sheriff le+ied attachment on the TaAanlangits? rights and interests in certain real !ro!erties$ with a +iew to another sale on e2ecution. To !re+ent such sale$ the TaAanlangits instituted the action in the -": :loilo for the !ur!ose among others$ of annulling the alias writ of e2ecution and all !roceedings subse9uent thereto. They alleged that (1) they had returned the machineries and farm im!lements to the #outhern Motors :nc.$ the latter acce!ted them$ and had thereby settled their accountsG for that reason$ said s!ouses did not contest the action in -i+il -ase 28&2G and (2) as the #outhern Motors :nc. had re!ossessed the machines !urchased on installment (and mortgaged) the buyers were thereby relie+ed from further res!onsibility$ in +iew of the 7ecto ,aw$ now article 1&@& of the 5ew -i+il -ode. "or answer$ the com!any denied the alleged <settlement and understanding= during the !endency of -i+il -ase 28&2. :t also denied ha+ing re!ossessed the machineries$ the truth being that they were attached by the sheriff and then de!osited by the latter in its sho! for safeCee!ing$ before the sale at !ublic auction. The case was submitted for decision mostly u!on a sti!ulation of facts. 'dditional testimony was offered together with documentary e+idence. The lower court dismissed the com!laint$ holding that it has no authority and Aurisdiction to declare null and +oid the order directing the issuance of alias writ of e2ecution because it was made by another court of e9ual ranC and category. The s!ouses reasonably brought the matter to the -ourt of '!!eals$ but the latter forwarded the e2!ediente$ being of the o!inion that the a!!eal in+ol+ed 9uestions of Aurisdiction andDor law.
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The #u!reme -ourt affirmed the decision dismissing the com!laint$ with costs against the a!!ellants. ( Article (*)* o& the Civil Code
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'rticle 1&@& of the -i+il -ode !ro+ides that <in a contract of sale of !ersonal !ro!erty the !rice of which is !ayable in installments$ the +endor may e2ercise any of the following remedies4 (1) B2act fulfillment of the obligation$ should the +endee fail to !ayG (2) -ancel the sale$ should the +endee?s failure to !ay co+er two or more installmentsG (3) "oreclose the chattel mortgage on the thing sold$ if one has been constituted$ should the +endee?s failure to !ay co+er two or more installments. :n this case$ he shall ha+e no further action against the !urchaser to reco+er any un!aid balance of the !rice. 'ny agreement to the contrary shall be +oid.= 2 Article (*)* F3G does not a""ly The s!ouses in+oCed the last !aragra!h of 'rticle 1&@&$ but there has been no foreclosure of the chattel mortgage nor a foreclosure sale in the !resent case. Therefore the !rohibition against further collection does not a!!ly. 3 Sale o& mort$a$e chattel :t is the actual sale of the mortgaged chattel in accordance with section 1& 'ct 1;0@ that would bar the creditor (who chooses to foreclose) from reco+ering any un!aid balance. ((acific -om. -o. +s. )e la 7ama$ 32 (hil. 3@0G Manila Motor -o. +s. "ernandez$ 88 (hil.$ 3@2.) * 2"tion e4ercised by Southern Motors :t is true that there was a chattel mortgage on the goods sold$ but the #outhern Motors elected to sue on the note e2clusi+ely$ i.e. to e2act fulfillment of the obligation to !ay. :t had a right to select among the three remedies established in 'rticle 1&@&. :n choosing to sue on the note$ it was not thereby limited to the !roceeds of the sale$ on e2ecution$ of the mortgaged good. / Similar situation in Southern Motors vs Ma$banua :n #outhern Motors :nc. +s. Magbanua$ (100 (hil.$ 1;;) a similar situation arose in connection with the !urchase on installment of a -he+rolet trucC by Magbanua. *!on the latter?s default$ suit on the note was filed$ and the trucC le+ied on together with other !ro!erties of the debtor. -ontending that the seller was limited to the trucC$ the debtor obtained a discharge of the other !ro!erties. This court said that <by !raying that the defendant be ordered to !ay the sum of (&$080 together with the sti!ulated interest at 12I !er annum from 13 March 18;& until fully !aid$ !lus 10I of the total amount due as attorney?s fees and cost of collection$ the !laintiff elected to e2act the fulfillment of the obligation and not to foreclose the mortgage on the trucC.'s the !laintiff has chosen to e2act the fulfillment of the defendant?s obligation$ the former may enforce e2ecution of the Audgment rendered in its fa+or on the !ersonal and real !ro!erties of the latter not e2em!t from e2ecution sufficient to satisfy the Audgment. That !art of the Audgment de!ri+ing the !laintiff of its right to enforce Audgment against the !ro!erties of the defendant e2ce!t the mortgaged trucC and discharging the writ of attachment on his other !ro!erties is erroneous.= 5 Cancellation and settlement theory o& s"ouses not heeded as it Bould contravene decision in Civil Case 2.*2 The argument of the s!ouses (that <u!on the return of the same chattels and due acce!tance of the same by the +endor%mortgagee$ the conditional sale is i!so facto cancelled$ with the right of the +endor% mortgagee to a!!ro!riate whate+er down%!ayment and !osterior monthly installments made by the !urchaser=) assumes that acce!tance of the goods by the #outhern Motors -o. with a +iew to <cancellation= of the sale. The com!any denies such acce!tance and cancellation$ asserting the goods were de!osited in its sho! when the sheriff attached them in !ursuance of the e2ecution. :ts assertion is bacCed u! by the sheriff$ of whose credibility there is no reason to doubt. The cancellation or settlement theory may not be heeded$ because it would contra+ene the decision in -i+il -ase 28&2 (it would show the TaAanlangits owned nothing to #outhern Motors :nc.). #uch decision is binding u!on them$ unless and until they manage to set it aside in a
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!ro!er !roceeding$ which is not the !resent case.
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!rocedural as"ect not necessary to deal Bith as s"ouses are not entitled to relie& demanded The -ourt deemed it unnecessary to deal with the !rocedural as!ect$ such as the authority of the Audge of one branch of the -": to enAoin !roceedings in another branch of the same court$ inasmuch as that$ on the merits$ the s!ouses are not entitled to the relief demanded. '(0*0 %anedo vs CA 'G # No (0**)2 6anuary 22+ (..5 0 Third )i+ision$ (anganiban (.)4 & concur 3actsH 6n 20 6ctober 1802$ ,azardo TaMedo e2ecuted a notarized deed of absolute sale in fa+or of his eldest brother$ 7icardo TaMedo$ and the latter?s wife$ Teresita /arera$ whereby he con+eyed to the latter in consideration of (1$;00$ 1 hectare of whate+er share he shall ha+e o+er ,ot 181 of the cadastral sur+ey of erona$ Tarlac (T-T T%13@8 of the 7egister of )eeds of Tarlac)$ the said !ro!erty being his <future inheritance= from his !arents. *!on the death of his father Matias$ ,azaro e2ecuted an <'ffida+it of -onformity= dated 2@ "ebruary 18@0 to re%affirm res!ect$ acCnowledge and +alidate the sale he made in 1802. 6n 13 .anuary 18@1$ ,azaro e2ecuted another notarized deed of sale in fa+or of 7icardo Tanedo and his wife co+ering his undi+ided 1D12 of a !arcel of land Cnown as ,ot 181. 1e acCnowledged therein his recei!t of (10$000 as consideration therefor. :n "ebruary 18@1$ 7icardo learned that ,azaro sold the same !ro!erty to his children$ through a deed of sale dated 28 )ecember 18@0. 6n 3 .une 18@2$ 7icardo Tanedo and his wife recorded the )eed of #ale in their fa+or in the 7egistry of )eeds and the corres!onding entry was made in T-T100&;. /elinda Tanedo$ for herself and in re!resentation of her brothers and sisters$ and Teofila -or!uz Tanedo$ re!resenting her minor daughter$ Verna Tanedo$ on 10 .uly 18@2 filed a com!laint for rescission (!lus damages) of the deeds of sale e2ecuted by ,azaro in fa+or of 7icardo Tanedo and his wife co+ering the !ro!erty inherited by ,azaro from his father with the 7egional Trial -ourt Tarlac (/ranch 03$ Third .udicial 7egion$ Tarlac$ TarlacG -i+il -ase 032@). They claimed that their father$ ,azaro$ e2ecuted an <'bsolute )eed of #ale= dated 28 )ecember 18@0$ con+eying to his 10 children his allotted !ortion under the e2traAudicial !artition e2ecuted by the heirs of Matias$ which deed included the land in litigation (,ot 181). 7icardo Tanedo$ on the other hand$ !resented in e+idence a <)eed of 7e+ocation of a )eed of #ale= dated 12 March 18@1$ wherein ,azaro re+oCed the sale in fa+or of !etitioners for the reason that it was <simulated or fictitious J without any consideration whatsoe+er=. ,azaro howe+er e2ecuted a sworn statement which +irtually re!udiated the contents of the )eed of 7e+ocation of a )eed of #ale and the )eed of #ale in fa+or of 7icardo Tenedo$ but testified that he sold the !ro!erty to 7icardo$ and that it was a lawyer who induced him to e2ecute a deed of sale in fa+or of his children after gi+ing him (; to buy a <drinC.= The trial court decided in fa+or of 7icardo Tanedo and his wife$ holding that his children failed <to adduce a !re!onderance of e+idence to su!!ort (their) claim.= 6n a!!eal and on 20 #e!tember 1881$ the -ourt of '!!eals (-'% 7 -V 2&8@3) affirmed the decision of the trial court$ ruling that the )eed of #ale dated 13 .anuary 18@1 was +alid and that its registration in good faith +ested title in 7icardo Tanedo and his wife. The motion for reconsideration was denied on 23 May 1882. 1ence$ the !etition for re+iew on certiorari under 7ule &; of the 7ules of -ourt by the children. The #u!reme -ourt denied the !etition and affirmed the assailed )ecision of the -ourt of '!!ealsG without costs. ( 7rrors revieBable by Su"reme Court are those committed by the Court o& A""eals? 8ssues delved into to $ive "arties substantial @ustice
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The <errors= which are re+iewable by the -ourt in the !etition for re+iew on certiorari are only those allegedly committed by the -ourt of '!!eals and not directly those of the trial court$ which is not a !arty. The
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<assignment of errors= in the !etition are totally mis!laced$ and for that reason$ the !etition should be dismissed. /ut in order to gi+e the !arties substantial Austice$ the -ourt decided to del+e into the issues as re!hrased. The errors attributed to the trial court would be discussed only insofar as they are rele+ant to the a!!ellate court?s assailed )ecision and 7esolution. 2 Contract u"on a &uture inheritance void unless authori:ed by laB (ursuant to 'rticle 13&3 of the -i+il -ode$ <(n)o contract may be entered into u!on a future inheritance e2ce!t in cases e2!ressly authorized by law.= The contract made in 1802 is not +alid and cannot be the source of any right nor the creator of any obligation between the !arties. 3 Validatin$ contract also useless The <affida+it of conformity= dated 2@ "ebruary 18@0$ insofar as it sought to +alidate or ratify the 1802 sale$ is also useless and <suffers from the same infirmity.= * sale Critical documents in the resolution o& the case? documents not in&ected Bith in&irmities o& (.52
The documents that are critical to the resolution of this case are4 (a) the deed of sale of 13 .anuary 18@1 in fa+or of 7icardo Tanedo co+ering ,azaro?s undi+ided inheritance of 1D12 share in ,ot 181$ which was subse9uently registered on 3 .une 18@2G and (b) the deed of sale dated 28 )ecember 18@0 in fa+or of ,azaro?s children co+ering the same !ro!erty. These two documents were e2ecuted after the death of Matias (and his s!ouse) and after a deed of e2tra%Audicial settlement of his (Matias?) estate was e2ecuted$ thus +esting in ,azaro actual title o+er said !ro!erty. These dis!ositions$ though conflicting$ were no longer infected with the infirmities of the 1802 sale. / (.( Sub@ect matter o& sale is the ;a:aroMs entire undivided (L(2 share in ;ot
The subAect matter of the 13 .anuary 18@1 sale to be the entire undi+ided 1D12 share of ,azaro in ,ot 181 and which is the same !ro!erty dis!osed of on 28 )ecember 18@0 in fa+or of ,azaro?s children. 5 -ouble sale? Article (/** 'rticle 1;&& of the -i+il -ode go+erns the !referential rights of +endees in cases of multi!le sales. :t !ro+ides that <:f the same thing should ha+e been sold to different +endees$ the ownershi! shall be transferred to the !erson who may ha+e first taCen !ossession thereof in good faith$ if it should be mo+able !ro!erty. #hould it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty. #hould there be no inscri!tion$ the ownershi! shall !ertain to the !erson who in good faith was first in the !ossessionG and$ in the absence thereof$ to the !erson who !resents the oldest title$ !ro+ided there is good faith.= , 8mmovable "ro"erty? 3irst to re$ister has better ri$ht The !ro!erty in 9uestion is land$ an immo+able. 6wnershi! therefore shall belong to the buyer who in good faith registers it first in the registry of !ro!erty. Thus$ although the deed of sale in fa+or of 7icardo Tanedo was later than the one in fa+or of the children$ ownershi! would +est in the former because of the undis!uted fact of registration. 6n the other hand$ the -hildren ha+e not registered the sale to them at all. ) #e$istration "re&erred+ even i& one Bithout his title re$istered actually "ossesses the "ro"erty 's between two !urchasers$ the one who registered the sale in his fa+or has a !referred right o+er the
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other who has not registered his title$ e+en if the latter is in actual !ossession of the immo+able !ro!erty. . Alle$ation o& bad &aith a =uestion o& &act? Su"reme Court not trier o& &acts ,azaro?s children (!etitioners) alleged that <the res!ondent -ourt allegedly ignored the claimed fact that res!ondent 7icardo <by fraud and deceit and with foreCnowledge= that the !ro!erty in 9uestion had already been sold to !etitioners$ made ,azaro e2ecute the deed of 13 .anuary 18@1G that there is allegedly
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ade9uate e+idence to show that only 1D2 of the !urchase !rice of (10$000 was !aid at the time of the e2ecution of the deed of sale$ contrary to the written acCnowledgment$ thus showing bad faithG that there is allegedly sufficient e+idence showing that the deed of re+ocation of the sale in fa+or of !etitioners <was tainted with fraud or deceit=G that there is allegedly enough e+idence to show that !ri+ate res!ondents <tooC undue ad+antage o+er the weaCness and unschooled and !itiful situation of ,azaro TaMedo= and that 7icardo TaMedo <e2ercised moral ascendancy o+er his younger brother he being the eldest brother and who reached fourth year college of law and at one time a former Vice% o+ernor of Tarlac$ while his younger brother only attained first year high school=G and that the res!ondent -ourt erred in not gi+ing credence to !etitioners? e+idence$ es!ecially ,azaro TaMedo?s #inum!aang #alaysay dated 23 .uly 18@2 stating that 7icardo TaMedo decei+ed the former in e2ecuting the deed of sale in fa+or of !ri+ate res!ondents.= There are indeed many conflicting documents and testimonies as well as arguments o+er their !robati+e +alue and significance. 'll the contentions in+ol+e 9uestions of fact$ a!!reciation of e+idence and credibility of witnesses$ which are not !ro!er in the !resent re+iew. The #u!reme -ourt is not a trier of facts. #uffice that the a!!ellate court$ in re+iewing the trial court?s findings$ refused to o+erturn the latter?s assessment of the testimonial e+idence$ declaring that it was not !re!ared to set aside the finding of the lower court u!holding 7icardo TaMedo?s testimony$ as it in+ol+es a matter of credibility of witnesses which the trial Audge$ who !resided at the hearing$ was in a better !osition to resol+e. (0 2nly =uestions o& laB may be raised in "etition &or revieB under #ule */ :n !etitions for re+iew under 7ule &; of the 7e+ised 7ules of -ourt$ only 9uestions of law may be raised and !assed u!on. 'bsent any whimsical or ca!ricious e2ercise of Audgment$ and unless the lacC of any basis for the conclusions made by the lower courts be am!ly demonstrated$ the #u!reme -ourt will not disturb their findings. 't most$ it a!!ears that ,azaro?s children ha+e shown that their e+idence was not belie+ed by both the trial and the a!!ellate courts$ and that the said courts tended to gi+e more credence to the e+idence !resented by 7icardo Tanedo. /ut this in itself is not a reason for setting aside such findings. The -ourt is far from con+inced that both courts gra+ely abused their res!ecti+e authorities and Audicial !rerogati+es. (( 3actual &indin$s o& trial court as Bell as Court o& A""eals are &inal and conclusive? 74ce"tions 's held in Chua +iong +ay vs. Court of Appeals an$ "ol$roc; Construction an$ Develop#ent Corp.4 <the -ourt has consistently held that the factual findings of the trial court$ as well as the -ourt of '!!eals$ are final and conclusi+e and may not be re+iewed on a!!eal. 'mong the e2ce!tional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on s!eculation$ surmises or conAecturesG when the inference made is manifestly absurd$ mistaCen or im!ossibleG when there is gra+e abuse of discretion in the a!!reciation of factsG when the Audgment is !remised on a misa!!rehension of factsG when the findings went beyond the issues of the case and the same are contrary to the admissions of both a!!ellant and a!!ellee.= (2 #eassessment and reevaluation o& evidence not the &unction o& the Su"reme Court :n #outh #ea #urety and :nsurance -om!any$ :nc. +s. 1on. -ourt of '!!eals$ et al.$ it was held that :t is not the function of the #u!reme -ourt to assess and e+aluate all o+er again the e+idence$ testimonial and documentary$ adduced by the !arties$ !articularly where the findings of both the trial court and the a!!ellate court on the matter coincide. '(0/0 %orres v CA 'G # No (3*//. -ecember .+ (... 0 Third di+ision$ (anganiban (.)4 & concur
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3actsH #isters 'ntonia Torres and Bmeteria /aring entered into a <Aoint +enture agreement= with Manuel Torres for the de+elo!ment of a !arcel of land into a subdi+ision. (ursuant to the contract$ they e2ecuted a
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)eed of #ale co+ering the said !arcel of land in fa+or of Manuel$ who then had it registered in his name. /y mortgaging the !ro!erty$ Manuel obtained from B9uitable /anC a loan of (&0$000 which$ under the .oint Venture 'greement$ was to be used for the de+elo!ment of the subdi+ision. 'll 3 of them also agreed to share the !roceeds from the sale of the subdi+ided lots. The !roAect did not !ush through$ and the land was subse9uently foreclosed by the banC. Antonia an$ )#eteria allege$ that the !roAect failed because of <Manuel?s lacC of funds or means and sCills.= They add that Manuel used the loan not for the de+elo!ment of the subdi+ision$ but in furtherance of his own com!any$ *ni+ersal *mbrella -om!any.6n the other hand$ /anuel allege$ that he used the loan to im!lement the 'greement. >ith the said amount$ he was able to effect the sur+ey and the subdi+ision of the lots. 1e secured the ,a!u ,a!u -ity -ouncil?s a!!ro+al of the subdi+ision !roAect which he ad+ertised in a local news!a!er. 1e also caused the construction of roads$ curbs and gutters. ,iCewise$ he entered into a contract with an engineering firm for the building of 00 low%cost housing units and actually e+en set u! a model house on one of the subdi+ision lots. 1e did all of these for a total e2!ense of (@;$000. 1e further claimed that the subdi+ision !roAect failed because 'ntonia and Bmeteria and their relati+es had se!arately caused the annotations of ad+erse claims on the title to the land$ which e+entually scared away !ros!ecti+e buyers. )es!ite his re9uests$ 'ntonia and Bmeteria refused to cause the clearing of the claims$ thereby forcing him to gi+e u! on the !roAect. 'ntonia and Bmeteria filed a criminal case for estafa against Manuel and his wife$ who were howe+er ac9uitted. Thereafter$ they filed the !resent ci+il case which$ u!on Manuel?s motion$ was later dismissed by the trial court in an 6rder dated 0 #e!tember 18@2. 6n a!!eal$ howe+er$ the a!!ellate court remanded the case for further !roceedings. Thereafter$ the 7T- -ebu -ity (-i+il -ase 7%2120@) issued its assailed )ecision$ which was affirmed by the -' on ; March 188@ (-'% 7 -V &233@). 7econsideration was denied by the -ourt of '!!eals through its 7esolution of ; March 188@. 1ence$ the !etition for re+iew on certiorari. The #u!reme -ourt denied the !etition and affirmed the challenged decisionG with costs against 'ntonia and Bmeteria. ( !artnershi" e4ists ' reading of the terms embodied in the 'greement indubitably shows the e2istence of a !artnershi! !ursuant to 'rticle 1303 of the -i+il -ode$ which !ro+ides that </y the contract of !artnershi! two or more !ersons bind themsel+es to contribute money$ !ro!erty$ or industry to a common fund$ with the intention of di+iding the !rofits among themsel+es.= :n the !resent case$ 'ntonia and Bmeteria would contribute !ro!erty to the !artnershi! in the form of land which was to be de+elo!ed into a subdi+isionG while Manuel would gi+e$ in addition to his industry$ the amount needed for general e2!enses and other costs. "urthermore$ the income from the said !roAect would be di+ided according to the sti!ulated !ercentage. -learly$ the contract manifested the intention of the !arties to form a !artnershi!. 2 !arties im"lemented contract? !artners may contribute not only money or "ro"erty but also industry The !arties im!lemented the contract. 'ntonia and Bmeteria transferred the title to the land to facilitate its use in the name of Manuel. 6n the other hand$ Manuel caused the subAect land to be mortgaged$ the !roceeds of which were used for the sur+ey and the subdi+ision of the land. 1e de+elo!ed the roads$ the curbs and the gutters of the subdi+ision and entered into a contract to construct low%cost housing units on the !ro!erty. Manuel?s actions clearly belie 'ntonia?s and Bmeteria?s contention that he made no contribution to the !artnershi!. *nder 'rticle 1303 of the -i+il -ode$ a !artner may contribute not only money or !ro!erty$ but also industry. 3 Contract binds "arty to sti"ulations and all necessary conse=uences thereo& *nder 'rticle 131; of the -i+il -ode$ contracts bind the !arties not only to what has been e2!ressly
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sti!ulated$ but also to all necessary conse9uences thereof. 'rticle 131; !ro+ides that <-ontracts are !erfected by mere consent$ and from that moment the !arties are bound not only to the fulfillment of what has been
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e2!ressly sti!ulated but also to all the conse9uences which$ according to their nature$ may be in Cee!ing with good faith$ usage and law.= :t is undis!uted that 'ntonia and Bmeteria are educated and are thus !resumed to ha+e understood the terms of the contract they +oluntarily signed. :f it was not in consonance with their e2!ectations$ they should ha+e obAected to it and insisted on the !ro+isions they wanted. * Courts may not e4tricate "arties &rom the necessary conse=uences o& their acts -ourts may not e2tricate !arties from the necessary conse9uences of their acts$ and the fact that the terms of a contract turn out to be financially disad+antageous to them will not relie+e them of their obligations therein. They cannot now disa+ow the relationshi! formed from such agreement due to their su!!osed misunderstanding of its terms. / Article (,,3 must be inter"reted in relation to Article (,,(? !resent case does not "re@udice third "arties The lacC of an in+entory of real !ro!erty will not i!so facto release the contracting !artners from their res!ecti+e obligations to each other arising from acts e2ecuted in accordance with their agreement. 'rticle 1333 !ro+iding that <a contract of !artnershi! is +oid$ whene+er immo+able !ro!erty is contributed thereto$ if an in+entory of said !ro!erty is not made$ signed by the !arties$ and attached to the !ublic instrument= was intended !rimarily to !rotect third !ersons. Tolentino states that under the !ro+ision which is a com!lement of 'rticle 1331$ <the e2ecution of a !ublic instrument would be useless if there is no in+entory of the !ro!erty contributed$ because without its designation and descri!tion$ they cannot be subAect to inscri!tion in the 7egistry of (ro!erty$ and their contribution cannot !reAudice third !ersons. This will result in fraud to those who contract with the !artnershi! in the belief KinL the efficacy of the guaranty in which the immo+ables may consist. Thus$ the contract is declared +oid by the law when no such in+entory is made.= The !resent case does not in+ol+e third !arties who may be !reAudiced. 5 !arties cannot ado"t inconsistent "ositions in re$ard to a contract 'ntonia and Bmeteria in+oCe the allegedly +oid contract as basis for their claim that Manuel should !ay them 00I of the +alue of the !ro!erty. They cannot in one breath deny the contract and in another recognize it$ de!ending on what momentarily suits their !ur!ose. (arties cannot ado!t inconsistent !ositions in regard to a contract and courts will not tolerate$ much less a!!ro+e$ such !ractice. , Nullity o& "artnershi" does not "revent courts &rom considerin$ 6oint Venture A$reement as an ordinary contract The alleged nullity of the !artnershi! will not !re+ent courts from considering the .oint Venture 'greement an ordinary contract from which the !arties? rights and obligations to each other may be inferred and enforced. ) 6oint Venture A$reement states consideration The .oint Venture 'greement clearly states that the consideration for the sale was the e2!ectation of !rofits from the subdi+ision !roAect. :ts first sti!ulation states that 'ntonia and Bmeteria did not actually recei+e !ayment for the !arcel of land sold to Manuel. Thus$ it cannot be contended that the .oint Venture 'greement is +oid under 'rticle 1&22 of the -i+il -ode$ because it is the direct result of an earlier illegal contract$ which was for the sale of the land without +alid consideration. . Consideration or cause may take many &orms -onsideration$ more !ro!erly denominated as cause$ can taCe different forms$ such as the !restation or !romise of a thing or ser+ice by another. :n the !resent case$ the cause of the contract of sale consisted not in the stated !eso +alue of the land$ but in the e2!ectation of !rofits from the subdi+ision !roAect$ for which the land was intended to be used. The land was in effect gi+en to the !artnershi! as 'ntonia?s and Bmeteria?s !artici!ation therein. There was therefore a consideration for the sale$ 'ntonia and Bmeteria
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acting in the e2!ectation that$ should the +enture come into fruition$ they would get 00I of the net !rofits.
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(0
3actual issues cannot be resolved on a "etition o& revieB under #ule */? -ama$es not due "actual issues cannot be resol+ed in a !etition for re+iew under 7ule &;$ as in the !resent case. 'ntonia and Bmeteria ha+e not alleged$ not to say shown$ that their !etition constitutes one of the e2ce!tions to this doctrine. The -ourt of '!!eals held that the acts of 'ntonia and Bmeteria did not cause the failure of the !roAect$ nor was Manuel res!onsible therefore. :n im!uting the blame solely to him$ 'ntonia and Bmeteria failed to gi+e any reason why the -ourt should disregard the factual findings of the a!!ellate court relie+ing him of fault. 'ntonia and Bmeteria$ thus$ are not entitled to damages. '(050 %oyota ShaB v CA 'G # No ((55/0 May 23+ (../ 0 "irst )i+ision$ )a+ide .r (.)4 3 concur$ 1 on lea+e 3actsH #ometime in .une 18@8$ ,una ,. #osa wanted to !urchase a Toyota ,ite 'ce. :t was then a seller?s marCet and #osa had difficulty finding a dealer with an a+ailable unit for sale. /ut u!on contracting Toyota #haw$ :nc.$ he was told that there was an a+ailable unit. #o on 1& .une 18@8$ #osa and his son$ ilbert$ went to the Toyota #haw /oule+ard$ (asig$ Metro Manila. They met (o!ong /ernardo$ a sales re!resentati+e of Toyota. #osa em!hasized to /ernardo that he needed the ,ite 'ce not later than 13 .une 18@8 because he$ his family$ and a baliCbayan guest would use it on 1@ .une 18@8 to go Marindu9ue$ his home !ro+ince$ where he would celebrate his birthday on 18 .une. 1e added that if he does not arri+e in his hometown with the new car$ he would become a <laughing stocC.= /ernardo assured #osa that a unit would be ready for !icC u! at 10400 a.m. on 13 .une 18@8. /ernardo then signed a document entitled <'greements /etween Mr. #osa Q (o!ong /ernardo of Toyota #haw$ :nc$= sti!ulating that all necessary documents will be submitted to Toyota #haw ((o!ong /ernardo) a weeC after$ u!on arri+al of Mr. #osa from the (ro+ince (Marindu9ue) where the unit will be used on the 18 .uneG that the down!ayment of (100$000.00 will be !aid by Mr. #osa on 1; .une 18@8G and that the Toyota #haw$ :nc. will be released a yellow ,ite 'ce unit. :t was also agreed u!on by the !arties that the balance of the !urchase !rice would be !aid by credit financing through /.'. "inance$ and for this ilbert$ on behalf of his father$ signed the documents of Toyota and /.'. "inance !ertaining to the a!!lication for financing. The ne2t day$ #osa and ilbert went to Toyota to deli+er the down!ayment of (100$000.00. They met /ernardo who then accom!lished a !rinted Vehicle #ales (ro!osal (V#() 82@$ on which ilbert signed under the subheading <conforme=. This document shows that the customer?s name is <Mr. ,una #osa= with home address at 2310 uiAo #treet$ *nited (araMa9ue ::G that the model series of the +ehicle is a <,ite 'ce 1;00= described as <& )r minibus=G that !ayment is by <installment$= to be financed by </.'.$= with the initial cash outlay of (100$000.00 (down!ayment4 (;3$1&@.00G insurance4 (13$830.00G /,T registration fee4 (1$003.00G -1M6 fee4 (2$31;.00G #er+ice fee4 (;00.00G and accessories4 (28$000.00) and the balance to be financed is (23&$133.00. The s!aces !ro+ided for <deli+ery terms= were not filled%u!. :t also contains conditions of sales !ro+iding that the sale is subAect to the a+ailability of the unit$ and that the stated !rice is subAect to change without !rior notice$ and that the !rice !re+ailing and in effect at time of selling will a!!ly. 7odrigo Uuirante$ the #ales #u!er+isor of /ernardo$ checCed and a!!ro+ed the V#(. 6n 13 .une (8430 a.m.)$ /ernardo called ilbert to inform him that the +ehicle would not be ready for !icC u! at 10400 a.m. as !re+iously agreed u!on but at 2400 !.m. that same day. 't 2400 !.m.$ #osa and ilbert met /ernardo at the latter?s office. 'ccording to #osa$ /ernardo informed them that the ,ite 'ce was being readied for deli+ery. 'fter waiting for about an hour$ /ernardo told them that the car could not be deli+ered because it was ac9uired by a more influential !erson. Toyota contends$ howe+er$ that the ,ite 'ce was not deli+ered to #osa because of the disa!!ro+al of /.'. "inance of the credit financing a!!lication of #osa. :t further alleged that a !articular unit had already been re+ersed and earmarCed for #osa but could
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not be released due to the uncertainty of !ayment of the balance of the !urchase !rice. Toyota then ga+e #osa the o!tion to !urchase the unit by !aying the full !urchase !rice in cash but #osa refused. 'fter it became clear that the ,ite 'ce would not be deli+ered to him$ #osa asCed that his down!ayment be refunded. Toyota did so
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on the +ery same day by issuing a "ar Bast /anC checC for the full amount of (100$000.00$ the recei!t of which was shown by a checC +oucher of Toyota$ which #osa signed with the reser+ation$ <without !reAudice to our future claims for damages.= Thereafter$ #osa sent two letters to Toyota4 one on 23 .une 18@8 demanding the refund$ within ; days from recei!t$ of the down!ayment of (100$000.00 !lus interest from the time he !aid it and the !ayment of damages with a warning that in case of Toyota?s failure to do so he would be constrained to taCe legal actionG and the other on & 5o+ember 18@8 (signed by M.6. -aballes$ #osa?s counsel) demanding (1M re!resenting interest and damages$ again$ with a warning that legal action would be taCen if !ayment was not made within 3 days. Toyota?s counsel answered through as letter dated 23 5o+ember 18@8 @ refusing to accede to the demands of #osa. /ut e+en before the answer was made and recei+ed by #osa$ the latter filed on 20 5o+ember 18@8 with the 7T- Marindu9ue (/ranch 3@) a com!laint against Toyota for damages under 'rticles 18 and 21 of the -i+il -ode in the total amount of (1$230$000.00. 'fter trial on the issue agreed u!on during the !re%trial session$ the trial court rendered on 1@ "ebruary 1882 a decision in fa+or of #osa. :t ruled that the <'greement between Mr. #osa and (o!ong /ernardo$= was a +alid !erfected and contract of sale between #osa and Toyota which bound Toyota to deli+er the +ehicle to #osa$ and further agreed with #osa that Toyota acted in bad faith in selling to another the unit already reser+ed for himG that /ernardo$ as an authorized sales e2ecuti+e of Toyota #haw$ was the latter?s agent and thus bound Toyota #hawG that ,una #osa !ro+ed his social standing in the community and suffered besmirched re!utation$ wounded feelings and slee!less nights for which he ought to be com!ensatedG and thus rendered Audgment ordering Toyota #haw to !ay #osa the sum of (3;$000 as moral damages$ (10$000 as e2em!lary damages$ (30$000 as attorney?s fees !lus (2$000 lawyer?s trans!ortation fare !er tri! in attending to the hearing of the case$ (2$000 for #osa?s trans!ortation fare !er tri! in attending the hearing of the case$ and to !ay the cost of the suit. )issatisfied with the trial court?s Audgment$ Toyota a!!ealed to the -ourt of '!!eals (-'% 7 -V &00&3). :n its decision !romulgated on 28 .uly 188&$ the -ourt of '!!eals affirmed in toto the a!!ealed decision. 1ence the !etition for re+iew by certiorari by Toyota #haw. The #u!reme -ourt granted the !etition$ and dismissed the challenged decision of the -ourt of '!!eals and that of /ranch 3@ of the 7egional Trial -ourt of Marindu9ue$ and the counterclaim thereinG without !ronouncement as to costs. ( Contract o& sale de&ined? >inds 'rticle 1&;@ of the -i+il -ode defines a contract of sale as </y the contract of the sale one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determinate thing$ and the other to !ay therefor a !rice certain in money or its e9ui+alent. ' contract of sale may be absolute or conditional. 2 Contract o& sale+ Bhen "er&ected? 7&&ect 'rticle 1&3; of the -i+il -ode s!ecifically !ro+ides when the contract of sale is deemed !erfected$ i.e. <The contract of sale is !erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice. "rom that moment$ the !arties may reci!rocally demand !erformance$ subAect to the !ro+isions of the law go+erning the form of contracts. 3 sale IA$reement betBeen Mr Sosa A !o"on$ <ernardo o& %oyota ShaB+ 8nc K not a contract o&
The <'greements between Mr. #osa Q (o!ong /ernardo of Toyota #haw$ :nc.= e2ecuted on & .une 18@8$ is not a contract of sale. 5o obligation on the !art of Toyota to transfer ownershi! of a determinate thing to #osa and no correlati+e obligation on the !art of the latter to !ay therefor a !rice certain a!!ears
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therein. The !ro+ision on the down!ayment of (100$000.00 made no s!ecific reference to a sale$ it could only refer to a sale on installment basis$ as the V#( e2ecuted the following day confirmed. /ut nothing was mentioned about the full !urchase !rice and the manner the installments were to be !aid. 5either logic nor
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recourse to one?s imagination can lead to the conclusion that such agreement is a !erfected contract of sale. * sale -e&initive "rice is an essential element in the &ormation o& a bindin$ and en&orceable contract o&
' definite agreement on the manner of !ayment of the !rice is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of !ayment goes into the !rice such that a disagreement on the manner of !ayment is tantamount to a failure to agree on the !rice. )efiniteness as to the !rice is an essential element of a binding agreement to sell !ersonal !ro!erty. / No meetin$ o& the minds The <'greements between Mr. #osa Q (o!ong /ernardo of Toyota #haw$ :nc.= shows the absence of a meeting of minds between Toyota and #osa. #osa did not e+en sign it. "urther$ #osa was well aware from its title$ written in bold letters$ and thus Cnew that he was not dealing with Toyota but with (o!ong /ernardo and that the latter did not misre!resent that he had the authority to sell any Toyota +ehicle. 5 !rudence and reasonable dili$ence in in=uirin$ authority o& a$ent #osa Cnew that /ernardo was only a sales re!resentati+e of Toyota and hence a mere agent of the latter. :t was incumbent u!on #osa to act with ordinary !rudence and reasonable diligence to Cnow the e2tent of /ernardo?s authority as an agent in res!ect of contracts to sell Toyota?s +ehicles. ' !erson dealing with an agent is !ut u!on in9uiry and must disco+er u!on his !eril the authority of the agent. , %hree sta$es in the contract o& sale There are three stages in the contract of sale$ namely (a) !re!aration$ conce!tion$ or generation$ which is the !eriod of negotiation and bargaining$ ending at the moment of agreement of the !artiesG (b) !erfection of birth of the contract$ which is the moment when the !arties come to agree on the terms of the contractG and (c) consummation or death$ which is the fulfillment or !erformance of the terms agreed u!on in the contract. :n the !resent case$ the <'greements between Mr. #osa Q (o!ong /ernardo of Toyota #haw$ :nc.= may be considered as !art of the initial !hase of the generation of negotiation stage of a contract sale. The second !hase of the generation or negotiation stage was the e2ecution of the V#( (the down!ayment of the !urchase !rice was (;3$1&@.00 while the balance to be !aid on installment should be financed by /.'. "inance. :t is assumed that /.' "inance was acce!table to Toyota). ) 3inancin$ com"anies de&ined "inancing com!anies are defined in #ection 3(a) of 7' ;8@0$ as amended by ()s 1&;& and 1383$ as <cor!orations or !artnershi!s$ e2ce!t those regulated by the -entral /anC of the (hili!!ines$ the :nsurance -ommission and the and the -oo!erati+es 'dministration 6ffice$ which are !rimarily organized for the !ur!ose of e2tending credit facilities to consumers and to industrial$ commercial$ or agricultural enter!rises$ either by discounting or factoring commercial !a!ers or accounts recei+able$ or by buying and selling contracts$ leases$ chattel mortgages$ or other e+idence of indebtedness$ or by leasing of motor +ehicles$ hea+y e9ui!ment and industrial machinery$ business and office machines and e9ui!ment$ a!!liances and other mo+able !ro!erty.= . !arties in a sale on installment basis &inanced by a &inancin$ com"any? No meetin$ o& minds as &inancin$ a""lication Bas disa""roved :n a sale on installment basis which is financed by a financing com!any$ 3 !arties are thus in+ol+ed4 (1) the buyer who e2ecutes a note or notes for the un!aid balance of the !rice of the thing !urchased on installment$ (2) the seller who assigns the notes or discounts them with a financing com!any$ and (3) the financing com!any which is subrogated in the !lace of the seller$ as the creditor of the installment buyer. #ince /.'. "inance did not a!!ro+e #osa?s a!!lication$ there was then no meeting of minds on the sale on installment basis.
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(0 %oyotaMs version o& circumstances leadin$ to non-release o& vehicle more credible Toyota?s +ersion that /.'. "inance disa!!ro+ed #osa?s a!!lication for which reason it suggested to #osa that he !ay the full !urchase !rice is more credible. >hen the latter refused$ Toyota cancelled the V#( and returned to him his (100$000.00. #osa?s +ersion$ that the V#( was cancelled because the +ehicle was deli+ered to another because of a more influential client$ is contradicted by !aragra!h 3 of his com!laint which states that /ernardo <for reasons Cnown only to its re!resentati+es$ refused andDor failed to release the +ehicle to the !laintiff . (laintiff demanded for an e2!lanation$ but nothing was gi+en.= (( VS! mere "ro"osal and did not create demandable ri$ht in &avor o& Sosa Bhen it Bas aborted The V#( was a mere !ro!osal which was aborted in lieu of subse9uent e+ents. Thus$ the V#( created no demandable right in fa+or of #osa for the deli+ery of the +ehicle to him$ and its non%deli+ery did not cause any legally indemnifiable inAury. (2 ABard o& moral dama$es Bithout le$al basis The award of moral damages is without legal basis. The only ground u!on which #osa claimed moral damages is that since it was Cnown to his friends$ townmates$ and relati+es that he was buying a Toyota ,ite 'ce which they e2!ected to see on his birthday$ he suffered humiliation$ shame$ and slee!less nights when the +an was not deli+ered. The +an became the subAect matter of talCs during his celebration that he may not ha+e !aid for it$ and this created an im!ression against his business standing and re!utation created an im!ression against his business standing and re!utation. 't the bottom of this claim is nothing but mis!laced !ride and ego. 1e should not ha+e announced his !lan to buy Toyota ,ite 'ce Cnowing that he might not be able to !ay the full !urchase !rice. :t was he who brought embarrassment u!on himself by bragging about a thing which he did not own yet. (3 ABard o& e4em"lary dama$es Bithout basis? !ur"ose o& e4em"lary dama$es #ince #osa is not entitled to moral damages and there being no award for tem!erate$ li9uidated$ or com!ensatory damages$ he is liCewise not entitled to e2em!lary damages. *nder 'rticle 2228 of the -i+il -ode$ e2em!lary or correcti+e damages are im!osed by way of e2am!le or correction for the !ublic good$ in addition to moral$ tem!erate$ li9uidated$ or com!ensatory damages. (* ABard o& attorneyMs &ees Bithout basis "or attorney?s fees to be granted the court must e2!licitly state in the body of the decision$ and not only in the dis!ositi+e !ortion thereof$ the legal reason for the award of attorney?s fees. 5o such e2!licit determination thereon was made in the body of the decision of the trial court. Thus$ no reason e2ists for such award. '(0,0 <nive#sal )oo8 Co#,. v. CA, 33 SCRA % &%'$0( '(0)0 Dy v CA 'G # No (20*5/ Se"tember .+ (... 0 "irst )i+ision$ Ea!unan (.)4 3 concur$ 1 on lea+e 3actsH >illiam *y and 7odel 7o2as are agents authorized to sell @ !arcels of land by the owners thereof. /y +irtue of such authority$ they offered to sell the lands$ located in Tuba$ Tadiangan$ /enguet to 5ational
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1ousing 'uthority (51') to be utilized and de+elo!ed as a housing !roAect. 6n 1& "ebruary 18@8$ the 51' /oard !assed 7esolution 1032 a!!ro+ing the ac9uisition of said lands$ with an area of 31.@231 hectares$ at the cost of (23.@03 million$ !ursuant to which the !arties e2ecuted a series of )eeds of 'bsolute #ale co+ering the subAect lands. 6f the @ !arcels of land$ howe+er$ only ; were !aid for by the 51' because of the re!ort it
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recei+ed from the ,and eosciences /ureau of the )e!artment of Bn+ironment and 5atural 7esources ()B57) that the remaining area is located at an acti+e landslide area and therefore$ not suitable for de+elo!ment into a housing !roAect. 6n 22 5o+ember 1881$ the 51' issued 7esolution 23;2 cancelling the sale o+er the 3 !arcels of land. The 51'$ through 7esolution 238&$ subse9uently offered the amount of (1.22; million to the landowners as daMos !erAuicios. 6n 8 March 1882$ !etitioners *y and 7o2as filed before the 7T- Uuezon -ity a -om!laint for )amages against 51' and its eneral Manager 7obert /alao. 'fter trial$ the 7T- rendered a decision declaring the cancellation of the contract to be Austified. The trial court ne+ertheless awarded damages to !laintiffs in the sum of (1.2;; million$ the same amount initially offered by 51' to !etitioners as damages. *!on a!!eal by !etitioners$ the -ourt of '!!eals re+ersed the decision of the trial court and entered a new one dismissing the com!laint. :t held that since there was <sufficient Austifiable basis= in cancelling the sale$ <it saw no reason= for the award of damages. The -ourt of '!!eals also noted that !etitioners were mere attorneys%in%fact and$ therefore$ not the real !arties%in%interest in the action before the trial court. Their motion for reconsideration ha+ing been denied$ !etitioners seeC relief from the #u!reme -ourt. The #u!reme -ourt denied the !etition. ( #eal "arty-in-interest de&ined? Action to be "rosecuted in the name o& a "arty Bhose ri$ht is sou$ht to be en&orced #ection 2$ 7ule 3 of the 7ules of -ourt re9uires that e+ery action must be !rosecuted and defended in the name of the real !arty%in%interest. The real !arty%in%interest is the !arty who stands to be benefited or inAured by the Audgment or the !arty entitled to the a+ails of the suit. <:nterest$= within the meaning of the rule$ means material interest$ an interest in the issue and to be affected by the decree$ as distinguished from mere interest in the 9uestion in+ol+ed$ or a mere incidental interest. -ases construing the real !arty%in%interest !ro+ision can be more easily understood if it is borne in mind that the true meaning of real !arty%in%interest may be summarized as follows4 'n action shall be !rosecuted in the name of the !arty who$ by the substanti+e law$ has the right sought to be enforced. 2 Action brou$ht by an attorney-in-&act in his name and not in the name o& his "rinci"al dismissed >here the action is brought by an attorney%in%fact of a land owner in his name$ (as in our !resent action) and not in the name of his !rinci!al$ the action was !ro!erly dismissed &)e##e# vs. Eilla6o#, 10 SCRA 401 [%'$4]D !a#celo vs. 8e 5eon, %00 *+il. %%$0( because the rule is that e+ery action must be !rosecuted in the name of the real !arties%in%interest &Section 2, Rule 3, Rules o" Cou#t(. 3 Article (3(( o& the Civil Code 'rticle 1311 of the -i+il -ode$ !ro+ides that <-ontracts taCe effect only between the !arties$ their assigns$ and heirs$ e2ce!t in case where the rights and obligations arising from the contract are not transmissible by their nature$ or by sti!ulation$ or by !ro+ision of law. :f a contract should contain some sti!ulation in fa+or of a third !erson$ he may demand its fulfillment !ro+ided he communicated his acce!tance to the obligor before its re+ocation. ' mere incidental benefit or interest of a !erson is not sufficient. The contracting !arties must ha+e clearly and deliberately conferred a fa+or u!on a third !erson.= * A$ents renderin$ service in behal& o& "arties do not render them "arties to the contract o& sale (etitioners are not !arties to the contract of sale between their !rinci!als and 51'. They are mere agents of the owners of the land subAect of the sale. 's agents$ they only render some ser+ice or do something in re!resentation or on behalf of their !rinci!als. The rendering of such ser+ice did not maCe them !arties to
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the contracts of sale e2ecuted in behalf of the latter. #ince a contract may be +iolated only by the !arties thereto as against each other$ the real !arties%in%interest$ either as !laintiff or defendant$ in an action u!on that
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contract must$ generally$ either be !arties to said contract. 5either has there been any allegation$ much less !roof$ that !etitioners are the heirs of their !rinci!als. / Assi$nment o& ri$hts :n /c/ic;ing vs. 5anco )spa4ol?%ilipino$ it was held that the rule re9uiring e+ery action to be !rosecuted in the name of the real !arty%in%interest recognizes the assignments of rights of action and also recognizes that when one has a right of action assigned to him he is then the real !arty in interest and may maintain an action u!on such claim or right. The !ur!ose is to re9uire the !laintiff to be the real !arty in interest$ or$ in other words$ he must be the !erson to whom the !roceeds of the action shall belong$ and to !re+ent actions by !ersons who ha+e no interest in the result of the same. Thus$ an agent$ in his own behalf$ may bring an action founded on a contract made for his !rinci!al$ as an assignee of such contract. 5 Section 3,2 F(G o& the #estatement o& the ;aB on A$ency #ection 332 (1) of the 7estatement of the ,aw on 'gency K'gent as 6wner of -ontract 7ightL declares that <*nless otherwise agreed$ an agent who has or who ac9uires an interest in a contract which he maCes on behalf of his !rinci!al can$ although not a !romisee$ maintain such action thereon as might a transferee ha+ing a similar interest.= , A$ent-trans&eree? Section 3,2 F(G e4"lained 6ne who has made a contract on behalf of another may become an assignee of the contract and bring suit against the other !arty to it$ as any other transferee. The customs of business or the course of conduct between the !rinci!al and the agent may indicate that an agent who ordinarily has merely a security interest is a transferee of the !rinci!al?s rights under the contract and as such is !ermitted to bring suit. :f the agent has settled with his !rinci!al with the understanding that he is to collect the claim against the obligor by way of reimbursing himself for his ad+ances and commissions$ the agent is in the !osition of an assignee who is the beneficial owner of the chose in action. 1e has an irre+ocable !ower to sue in his !rinci!al?s name. 'nd$ under the statutes which !ermit the real !arty in interest to sue$ he can maintain an action in his own name. This !ower to sue is not affected by a settlement between the !rinci!al and the obligor if the latter has notice of the agent?s interest. B+en though the agent has not settled with his !rinci!al$ he may$ by agreement with the !rinci!al$ ha+e a right to recei+e !ayment and out of the !roceeds to reimburse himself for ad+ances and commissions before turning the balance o+er to the !rinci!al. :n such a case$ although there is no formal assignment$ the agent is in the !osition of a transferee of the whole claim for securityG he has an irre+ocable !ower to sue in his !rinci!al?s name and$ under statutes which !ermit the real !arty in interest to sue$ he can maintain an action in his own name. ) !etitioners not assi$nees (etitioners ha+e not shown that they are assignees of their !rinci!als to the subAect contracts. >hile they alleged that they made ad+ances and that they suffered loss of commissions$ they ha+e not established any agreement granting them <the right to recei+e !ayment and out of the !roceeds to reimburse themsel+es for ad+ances and commissions before turning the balance o+er to the !rinci!als.= "urther$ it does not a!!ear that !etitioners are beneficiaries of a sti!ulation !our autrui under the second !aragra!h of 'rticle 1311 of the -i+il -ode. :ndeed$ there is no sti!ulation in any of the )eeds of 'bsolute #ale <clearly and deliberately= conferring a fa+or to any third !erson. . Section 3,2 F2G o& the #estatement o& the ;aB on A$ency #ection 332 (2) of the 7estatement of the ,aw on 'gency (#econd) !ro+ides that <'n agent does not ha+e such an interest in a contract as to entitle him to maintain an action at law u!on it in his own name merely because he is entitled to a !ortion of the !roceeds as com!ensation for maCing it or because he is liable for its breach.= The fact that an agent who maCes a contract for his !rinci!al will gain or suffer loss by the !erformance or non!erformance of the contract by the !rinci!al or by the other !arty thereto does not entitle him to maintain an action on his own behalf against the other !arty for its breach. 'n agent entitled to
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recei+e a commission from his !rinci!al u!on the !erformance of a contract which he has made on his !rinci!al?s account does not$ from this fact alone$ ha+e any claim against the other !arty for breach of the contract$ either in an action on the contract or otherwise. 'n agent who is not a !romisee cannot maintain an action at law against a !urchaser merely because he is entitled to ha+e his com!ensation or ad+ances !aid out of the !urchase !rice before !ayment to the !rinci!al. (0 3ailure to obtain commissions due non-"er&ormance o& contract does not entitle "etitioners to &ile action a$ainst NHA :n <op;ins vs. .ves$ the #u!reme -ourt of 'rCansas$ citing #ection 332 (2) abo+e$ denied the claim of a real estate broCer to reco+er his alleged commission against the !urchaser in an agreement to !urchase !ro!erty. :n "o$uco vs. Court of Appeals$ it was held that <granting that a!!ellant had the authority to sell the !ro!erty$ the same did not maCe the buyer liable for the commission she claimed. 't most$ the owner of the !ro!erty and the one who !romised to gi+e her a commission should be the one liable to !ay the same and to whom the claim should ha+e been directed.= #imilarly$ in the !resent case$ that !etitioners did not obtain their commissions or recou! their ad+ances because of the non%!erformance of the contract did not entitle them to file the action below against 51'. 's !etitioners are not !arties$ heirs$ assignees$ or beneficiaries of a sti!ulation !our autrui under the contracts of sale$ they do not$ under substanti+e law$ !ossess the right they seeC to enforce. (( -ecision "ointless i& "etitioners are not real "arties-in-interest (etitioners not being the real !arties%in%interest$ any decision rendered would be !ointless since the same would not bind the real !arties%in%interest. (2 ((.( Cancellation o& contract in "resent case not rescission under Article
The right of rescission or$ more accurately$ resolution$ of a !arty to an obligation under 'rticle 1181 is !redicated on a breach of faith by the other !arty that +iolates the reci!rocity between them. The !ower to rescind$ therefore$ is gi+en to the inAured !arty. 'rticle 1181 states that <the !ower to rescind obligations is im!lied in reci!rocal ones$ in case one of the obligors should not com!ly with what is incumbent u!on him. The inAured !arty may choose between the fulfillment and the rescission of the obligation$ with the !ayment of damages in either case. 1e may also seeC rescission$ e+en after he has chosen fulfillment$ if the latter should become im!ossible.= :n the !resent case$ the 51' did not rescind the contract. :ndeed$ it did not ha+e the right to do so for the other !arties to the contract$ the +endors$ did not commit any breach$ much less a substantial breach$ of their obligation. Their obligation was merely to deli+er the !arcels of land to the 51'$ an obligation that they fulfilled. The 51' did not suffer any inAury by the !erformance thereof. (3 Cancellation based on the ne$ation o& cause The cancellation was based on the negation of the cause arising from the realization that the lands$ which were the obAect of the sale$ were not suitable for housing. (* Cause de&ined? -istin$uished &rom motive -ause is the essential reason which mo+es the contracting !arties to enter into it. The cause is the immediate$ direct and !ro2imate reason which Austifies the creation of an obligation through the will of the contracting !arties. -ause$ which is the essential reason for the contract$ should be distinguished from moti+e$ which is the !articular reason of a contracting !arty which does not affect the other !arty. "or e2am!le$ in a contract of sale of a !iece of land$ such as in this case$ the cause of the +endor in entering into the contract is to obtain the !rice. "or the +endee$ it is the ac9uisition of the land. The moti+e of the 51'$ on the other hand$ is to use said lands for housing.
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(/ Motives ordinarily a&&ects the contract+ unless i& it "redetermines the cause? motive thus may be re$arded as the cause 6rdinarily$ a !arty?s moti+es for entering into the contract do not affect the contract. 1owe+er$ when
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the moti+e !redetermines the cause$ the moti+e may be regarded as the cause. :n Ligue0 vs. Court of Appeals$ it was noted that <Manresa himself (Vol. @$ !!. 0&1%0&2)$ while maintaining the distinction and u!holding the ino!erati+eness of the moti+es of the !arties to determine the +alidity of the contract$ e2!ressly e2ce!ts from the rule those contracts that are conditioned u!on the attainment of the moti+es of either !arty.= The same +iew is held by the #u!reme -ourt of #!ain$ in its decisions of & "ebruary 18&1$ and & )ecember 18&0$ holding that the moti+e may be regarded as causa when it !redetermines the !ur!ose of the contract. :n the !resent case$ it is clear that 51' would not ha+e entered into the contract were the lands not suitable for housing. The 9uality of the land was an im!lied condition for the 51' to enter into the contract. 6n the !art of the 51'$ therefore$ the moti+e was the cause for its being a !arty to the sale. (5 #e"ort o& ;and Geosciences <ureau is su&&icient basis &or the cancellation o& the sale The findings contained in the re!ort of the ,and eosciences /ureau dated 1; .uly 1881 sufficient basis for the cancellation of the sale. The re!ort stated that <:n Tadiangan$ Tuba$ the housing site is situated in an area of moderate to!ogra!hy. There are more areas of less slo!ing ground a!!arently habitable. The site is underlain by thicC slide de!osits (&%&;m) consisting of huge conglomerate boulders mi2ed with silty clay materials. These clay !articles when saturated ha+e some swelling characteristics which is dangerous for any ci+il structures es!ecially mass housing de+elo!ment. (, Assessment "reliminary only inso&ar as to the ascertainment o& $eolo$ical attributes? otherBise conclusive The !ortion stating that <there is a need to conduct further geottechnical KsicL studies in the 51' !ro!erty. #tandard (enetration Test (#(T) must be carried out to gi+e an estimate of the degree of com!action (the relati+e density) of the slide de!osit and also the bearing ca!acity of the soil materials. 'nother thing to consider is the +ulnerability of the area to landslides and other mass mo+ements due to thicC soil co+er. (re+enti+e !hysical mitigation methods such as surface and subsurface drainage and regrading of the slo!e must be done in the area= mean only that further tests are re9uired to determine the <degree of com!action$= <the bearing ca!acity of the soil materials$= and the <+ulnerability of the area to landslides$= since the tests already conducted were inade9uate to ascertain such geological attributes. :t is only in this sense that the assessment was <!reliminary.= () Vendee @usti&ied in cancelin$ contract? #e=uisites o& contract 51' was Austified in cancelling the contract. The realization of the mistaCe as regards the 9uality of the land resulted in the negation of the moti+eDcause thus rendering the contract ine2istent. 'rticle 131@ of the -i+il -ode states that <There is no contract unless the following re9uisites concur4 (1) -onsent of the contracting !artiesG (2) 6bAect certain which is the subAect matter of the contractG and (3) -ause of the obligation which is established. (. !etitioners not entitled to dama$es 'ssuming that !etitioners are !arties$ assignees or beneficiaries to the contract of sale$ they would not be entitled to any award of damages$ as the cancellation of the contract is Austified. '(0.0 Vallarta vs CA 'G # No ;-*0(./ May 2.+ (.), 0 Bn /anc$ -ortes (.)4 11 concur$ 1 on lea+e
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3actsH 7osalinda -ruz and Victoria Vallarta are long time friends and business ac9uaintances. 6n 20 5o+ember 180@$ -ruz entrusted to Vallarta 3 !ieces of Aewelry. :n )ecember 180@$ Vallarta decided to buy some items$ e2changed one item with another$ and issued a !ost%dated checC in the amount of (;$000 dated 30 .anuary 1808. -ruz de!osited said checC with the banC. 1owe+er$ u!on !resentment$ the checC was dishonored and -ruz was informed that Vallarta?s account had been closed. -ruz a!!rised Vallarta of the
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dishonor and the latter !romised to gi+e another checC. ,ater$ Vallarta !leaded for more time. #till later$ she started a+oiding -ruz. 1ence$ the criminal action was instituted. /ased on the foregoing facts$ both the trial court and the -ourt of '!!eals found Vallarta guilty beyond reasonable doubt of the crime of estafa. Vallarta seeCs re+ersal of the -'?s decision of 13 )ecember 183&. The #u!reme -ourt denied the !etition initially but granted a motion for reconsideration and ga+e the !etition due course. The #u!reme -ourt affirmed the assailed decision of the -ourt of '!!eals$ with costs against Vallarta. ( *))/ 7sta&aH Article 3(/ F2dG as amended by #A
Vallarta is charged under 'rt. 31; (2) (d) as amended by 7' &@@;$ of the 7e+ised (enal -ode$ which !enalizes any !erson who shall defraud another <by !ostdating a checC$ or issuing a checC in !ayment of an obligation when the offender had no funds in the banC$ or his funds de!osited therein were not sufficient to co+er the amount of the checC.= /y +irtue of 7' &@@;$ <the failure of the drawer of the checC to de!osit the amount necessary to co+er his checC within 3 days from recei!t of notice from the banC and or the !ayee or holder that said checC has been dishonored for lacC or insufficiency of funds= is deemed !rima facie e+idence of deceit constituting false !retense or fraudulent act. To constitute estafa under this !ro+ision the act of !ostdating or issuing a checC in !ayment of an obligation must be the efficient cause of defraudation$ and as such it should be either !rior to$ or simultaneous with the act of fraud. The offender must be able to obtain money or !ro!erty from the offended !arty because of the issuance of a checC whether !ostdated or not. That is$ the latter would not ha+e !arted with his money or other !ro!erty were it not for the issuance of the checC. ,iCewise$ the checC should not be$ issued in !ayment of a !re%e2isting obligation ((eo!le +. ,ilius$ ;8 (hil. 338 K1833L). 2 Sale "er&ected -ecember (.5) and not 20 November (.5) Vallarta changed the ruby ring because it was not acce!table to her$ and chose another ring. ,iCewise$ the !rice to be !aid for the Aewelry was finally agreed u!on only in )ecember 180@. Thus$ there was a meeting of the minds between the !arties as to the obAect of the contract and the consideration therefore only in )ecember 180@$ the same time that the checC was issued. The deli+ery made on 20 5o+ember 180@ was only for the !ur!ose of enabling Vallarta to select what Aewelry she wanted. 3 ISale on a""rovalK and not a Isale or returnK The transaction entered into by -ruz and Vallarta was not a <sale or return= but a <sale on a!!ro+al= (also called <sale on acce!tance$= <sale on trial$= or <sale on satisfaction= K-:V:, -6)B$ art. 1;02L). :n a <sale or return$= the ownershi! !asses to the buyer on deli+ery (-:V:, -6)B$ art. 1;02). (The subse9uent return of the goods re+erts ownershi! in the seller K-:V:, -6)B$ art. 1;02L). )eli+ery$ or tradition$ as a mode of ac9uiring ownershi! must be in conse9uence of a contract (-:V:, -6)B$ art$ 312)$ e.g. sale. :t was a <sale on a!!ro+al= since ownershi! !assed to the buyer on )ecember 1803$ the date when the checC was issued$ when Vallarta signified her a!!ro+al or acce!tance to the seller$ -ruz$ and the !rice was agreed u!on. * Check Bas not "ayment o& a "re-e4istin$ obli$ation >hen the checC which later bounced was issued$ it was not in !ayment of a !re%e2isting obligation. :nstead the issuance of the checC was simultaneous with the transfer of ownershi! o+er the Aewelry. There was no meeting of the minds on 20 5o+ember 180@$ and thus$ as of that date$ there was yet no contract of sale which could be the basis of deli+ery or tradition. The deli+ery made on 20 5o+ember 180@ was not a deli+ery
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for !ur!oses of transferring ownershi! J the !restation incumbent on the +endor. 6wnershi! !assed to the buyer on )ecember 1803$ the date when the checC was issued$ when Vallarta signified her a!!ro+al or acce!tance to the seller$ -ruz$ and the !rice was agreed u!on. ;. (rima facie e+idence of deceit established in 7' &@@;
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7' &@@;$ amending 'rt. 31; (2) (d)$ 7e+ised (enal -ode$ establishes a !rima facie e+idence of deceit u!on !roof that the drawer of the checC failed to de!osit the amount necessary to co+er his checC within three (3) days from recei!t of notice of dishonor for lacC or insufficiency of funds. 'dmittedly$ (1) the checC was dishonored as Vallarta?s account had been earlier closedG (2) she was notified by -ruz of the dishonor4 and$ (3) Vallarta failed to maCe it good within three days. )eceit is therefore !resumed. 5 Absence o& deceit cannot be based on social "osition :t cannot be suggested that in light of a !erson?s social standing$ he or she cannot be guilty of deceit$ at least in so far as issuing bouncing checCs is concerned. This reasoning does not merit serious consideration for if acce!ted$ it could result in a law that falls une9ually on !ersons de!ending on their social !osition. , 6eBelry obtained because o& issuance o& check Vallarta was able to obtain the Aewelry because she issued the checC$ not solely because -ruz Cnew Vallarta to be rich. 1er failure to de!osit the necessary amount to co+er it within three days from notice of dishonor created the !rima facie !resum!tion established by the amendatory law$ 7' &@@;$ which she failed to rebut. ) !resum"tion o& deceit under #A *))/ rebuttable The !resum!tion of deceit under 7' &@@; is not conclusi+e. :t is rebuttable. "or instance$ in the case of People v. 2illapan$o (;0 (hil. 31K1831L)$ good faith is a defense to a charge of estafa by !ostdating a checC$ as when the drawer$ foreseeing his inability to !ay the checC at maturity$ made an arrangement with his creditor as to the manner of !ayment of the debt. 7' &@@; is not unconstitutional as it does not +iolate the constitutional !resum!tion of innocence. . Constitutionality o& laBs "rovidin$ contrary "resum"tion on innocence <There is no constitutional obAection to the !assage of a law !ro+iding that the !resum!tion of innocence may be o+ercome by a contrary !resum!tion founded u!on the e2!erience of human conduct$ and enacting what e+idence shall be sufficient to o+ercome such !resum!tion of innocence= ((eo!le +. Mingoa$ 82 (hil. @;0 K18;3L at @;@%;8$ citing : -ooley$ ' Treatise on the -onstitutional ,imitations$ 038%0&1). The <legislature may enact that when certain facts ha+e been !ro+ed they shall be !rima facie e+idence of the e2istence of the guilt of the accused and shift the burden of !roof !ro+ided there be a rational connection between the facts !ro+ed and the ultimate fact !resumed so that the inference of the one from !roof of the others is not unreasonable and arbitrary because of lacC of connection between the two in common e2!erience= ((eo!le +. Mingoa$ su!ra. #ee also *# +. ,uling$ 3& (hil. 32; K1810L). (0 Art 3(/ F2dG characteri:e &raudulent act or &alse "retense <(ostdating or issuing of a checC in !ayment of an obligation when the offender had no funds in the banC$ or his funds de!osited therein were not sufficient to co+er the amount of the checC$ < is a false !retense or a fraudulent act. :t is so characterized by 'rt. 31; (2) (d)$ 7e+ised (enal -ode. 7' &@@; does nothing more than limit the !eriod within which the drawerDissuer must !ay the creditor. (( #A *))/ still "ursues criminal &raud or deceit in the issuance o& a check and not the non"ayment o& the debt :n People v. 'a!io (5o. ,%&;&80$ 5o+ember 20$ 183@$ @0 #-7' ;0@)$ the -ourt ruled that 7' &@@; has not changed the rule established in 'rt. 31; (2) (d) !rior to the amendmentG that 7' &@@; merely established the !rima facie e+idence of deceit$ and eliminated the re9uirement that the drawer inform the !ayee that he had no funds in the banC or the funds de!osited by him were not sufficient to co+er the amount of the checC. Thus$ e+en with the amendment introduced by 7' &@@; it is still criminal fraud or deceit in the issuance of a checC which is made !unishable under the 7e+ised (enal -ode$ and not the non%!ayment of the debt.
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'((00 Vas=ue: vs CA 'G # No )3,/. 6uly (2+ (..( 0 Third )i+ision$ utierrez .r. (.)4 & concur 3actsH 6n 21 #e!tember 180&$ ValleAera and 6lea sold the lot to Vas9uez and ayaleno under a )eed of #ale for the amount of (8$000.00. The )eed of #ale was duly ratified and notarized. 6n the same day and along with the e2ecution of the )eed of #ale$ a se!arate instrument$ denominated as 7ight to 7e!urchase$ was e2ecuted by the !arties granting the ValleAera and 6lea the right to re!urchase the lot for (12$000.00$ said document was liCewise duly ratified and notarized. /y +irtue of the sale$ the Vas9uez and ayaleno secured T-T T%;@@8@ in their name. 6n 2 .anuary 1808$ ValleAera and 6lea sold the same lot to /enito )errama$ .r.$ after securing Vas9uez and ayaleno?s title$ for the sum of (12$000.00. *!on the !rotestations of Vas9uez and ayaleno$ assisted by counsel$ the said second sale was cancelled after the !ayment of (12$000.00 by Vas9uez and ayaleno to )errama. 6n 1; .anuary 183;$ #!ouses Martin ValleAera and '!olonia 6lea filed an action against #!ouses -ir!riano Vas9uez and Valeriana ayaleno seeCing to redeem ,ot 1@00 of the 1imamaylan -adastre which was !re+iously sold by the former to the latter on 21 #e!tember 180&. #aid lot was registered in the name of ValleAera and 6lea. 6n 6ctober 18;8$ the same was leased by them to Vas9uez and ayalleno u! to cro! year 1800%03$ which was e2tended to cro! year 180@%08. 'fter the e2ecution of the lease$ Vas9uez and ayaleno tooC !ossession of the lot$ u! to now and de+oted the same to the culti+ation of sugar. Vas9uez and ayeleno resisted the action for redem!tion on the !remise that the 7ight to 7e!urchase is Aust an o!tion to buy since it is not embodied in the same document of sale but in a se!arate document$ and since such o!tion is not su!!orted by a consideration distinct from the !rice$ said deed for right to re!urchase is not binding u!on th them. 'fter trial$ the 7T- 1imamaylan$ 5egros 6ccidental (0 .udicial 7egion$ /ranch ;0$ -i+il -ase @38) rendered Audgment against Vas9uez and ayeleno$ ordering them to resell lot 1@00 of the 1imamaylan -adastre to ValleAera and 6lea for the re!urchase !rice of (2&$000.00$ which amount combines the !rice !aid for the first sale and the !rice !aid by the former to /enito )errama$ .r. ValleAera and ayeleno mo+ed for$ but were denied reconsideration. B2ce!ting thereto$ they a!!ealed. The -ourt of '!!eals affirmed the decision of the 7T- 1imamaylan$ 5egros 6ccidental in -i+il -ase @38. :n addition$ the a!!ellate court ordered Vas9uez and ayeleno to !ay the amount of (;$000.00 as necessary and useful e2!enses in accordance with 'rticle 1010 of the -i+il -ode. 1ence$ the !etition. The #u!reme -ourt granted the !etition$ re+ersed and set aside the 9uestioned decision and resolution of the -ourt of '!!eals $ and dismissed the com!laint in -i+il -ase @38 of the then -": 5egros 6ccidental 12th .udicial )istrict /ranch 0G without costs. ( #i$ht o& re"urchase not su""orted by a consideration distinct &rom the "rice? <urden o& "roo& :n the !resent case$ it is clear that the right to re!urchase was not su!!orted by a consideration distinct from the !rice. The rule is that the !romisee has the burden of !ro+ing such consideration. *nfortunately$ the !romises (ValleAera) in the right to re!urchase failed to !ro+e such consideration. They did not e+en allege the e2istence thereof in their com!laint. (#ee #anchez +. 7igos su!ra).
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A""lication o& Sanche: vs #i$os case :n order that the #anchez case can be a!!lied$ the e+idence must show that the ValleAera and 6lea acce!ted the right to re!urchase. The record$ howe+er$ does not show that they acce!ted the <7ight to 7e!urchase= the land in 9uestion. 3 Annotation and re$istration o& ri$ht to re"urchase not an acce"tance but &or the "ur"ose o&
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bindin$ "urchasers o& such re$istered land The annotation and registration of the right to re!urchase at the bacC of the certificate of title of Vas9uez and ayeleno can not be considered as acce!tance of the right to re!urchase. 'nnotation at the bacC of the certificate of title of registered land is for the !ur!ose of binding !urchasers of such registered land. :n the case of /el 'ir Village 'ssociation$ :nc. +. )ionisio (13& #-7' ;@8 K18@8L)$ citing Tanchoco +. '9uino (1;& #-7' 1 K18@3L)$ and -onstantino +. Bs!iritu (&; #-7' ;;3 K1832L)$ it was ruled that !urchasers of a registered land are bound by the annotations found at the bacC of the certificate of title co+ering the subAect !arcel of land. :n effect$ the annotation of the right to re!urchase found at the bacC of the certificate of title o+er the subAect !arcel of land of Vas9uez and ayeleno only ser+ed as notice of the e2istence of such unilateral !romise of Vas9uez and ayeleno to resell the same to ValleAera and 6lea. This$ howe+er$ can not be e9uated with acce!tance of such right to re!urchase. * Si$nature in the document called Iri$ht to re"urchaseK does not si$ni&y acce"tance o& ri$ht to re"urchase 5either can the signature of Vas9uez and ayeleno in the document called <right to re!urchase= signify acce!tance of the right to re!urchase$ as ValleAera and 6lea did not sign the offer. 'cce!tance should be made by the !romisee and not the !romisors. :t would be absurd to re9uire the !romisor of an o!tion to buy to acce!t his own offer instead of the !romisee to whom the o!tion to buy is gi+en. * Actions o& Valle@era and 2lea cannot be considered as acce"tance? Sendin$ o& letters Bithout tender o& redem"tion "rice &alls short o& re=uirement to re"urchase The actions of the !ri+ate res!ondents J (a) filing a com!laint to com!el re%sale and their demands for resale !rior to filing of the com!laint cannot be considered acce!tance. 's stated in Vda. de Vulueta +. 6cta+iano (121 #-7' 31& K18@3L)$ mere sending of letters by the +endor e2!ressing his desire to re!urchase the !ro!erty without accom!anying tender of the redem!tion !rice fell short of the re9uirements of law. (,ee +. -ourt of '!!eals$ 0@ #-7' 183 K1832L). 5either did a Audicial consignation of the re!urchase !rice made within the agreed !eriod. / Contract o& sale Bith ri$ht o& re"urchase :n a contract of sale with a right of re!urchase$ the redem!tioner who may offer to maCe the re!urchase on the o!tion date of redem!tion should de!osit the full amount in court . . . (7umbaoa +. 'rzaga$ @& (hil. @12 K18&8L).? 5 #i$ht o& vendor a retro to re"urchase To effecti+ely e2ercise the right to re!urchase the +endor a retro must maCe an actual and simultaneous tender of !ayment or consignation.? (-atangcatang +. ,egayada$ @& #-7' ;1 K183@L). , #e&usal to sell "arcel o& land a BithdraBal o& the o"tion to buy The ineffectual acce!tance of the o!tion to buy +alidated the +endor?s refusal to sell the !arcel which can be considered as a withdrawal of the o!tion to buy. ) Conventional redem"tion+ Bhen occurs -on+entional redem!tion taCes !lace when the +endor reser+es the right to re!urchase the thing sold$ with the obligation to com!ly with the !ro+isions of 'rticle 1010 and other sti!ulations which may ha+e been agreed u!on. ('rticle 1001$ -i+il -ode). . #i$ht o& re"urchase not $ranted in a subse=uent document but in the same instrument o& sale 's held in Villarica +. -ourt of '!!eals (20 #-7' 1@8 K180@L)$ HThe right of re!urchase is not a
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right granted the +endor by the +endee in a subse9uent instrument$ but is a right reser+ed by the +endor in the same instrument of sale as one of the sti!ulations of the contract. 6nce the instrument of absolute sale is e2ecuted$ the +endor can no longer reser+e the right to re!urchase$ and any right thereafter granted the +endor by the
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+endee in a se!arate instrument cannot be a right of re!urchase but some other right liCe the o!tion to buy. (0 A""licability o& the Eulueta case as to the transaction bein$ not a o"tion to re"urchase but an o"tion to buy 's in the !resent case$ the o!tion to re!urchase in+ol+ed in the Vulueta case was e2ecuted in a se!arate document but on the same date that the deed of definite sale was e2ecuted. >hile it is true that the -ourt in the Vulueta case found Vulueta guilty of laches$ this$ howe+er$ was not the !rimary reason why the -ourt disallowed the redem!tion of the !ro!erty by Vulueta. :t is clear from the decision that the ruling in the Vulueta case was based mainly on the finding that the transaction between Vulueta and 6cta+iano was not a sale with right to re!urchase and that the <o!tion to re!urchase was but an o!tion to buy or a mere !romise on the !art of 6cta+iano to resell the !ro!erty to Vulueta. :n the !resent case$ since the transaction between the !etitioners and !ri+ate res!ondents was not a sale with right to re!urchase$ the !ri+ate res!ondents cannot a+ail of 'rticle 1001 of the -i+il -ode which !ro+ides for con+entional redem!tion. '(((0 Vda -e Gordon v CA 'G # No ;-3,)3( November 23+ (.)( 0 "irst )i+ision$ TeehanCee (.)4 & concur$ 1 tooC no !art 3actsH Two !arcels of land belong to 7estituta V. Vda. )e ordon (co+ered by T-T 1220& and 1220;). "or the years 18;3 to 1803$ inclusi+e$ the ta2es against said !arcels of land remained un!aid. The combined assessed +alue of the !arcels of land is (10$@00 and the residential house on the land was assessed at (&;$;@0. The -ity Treasurer of Uuezon -ity$ u!on warrant of a certified co!y of the record of such delin9uency$ ad+ertised for sale the !arcels of land to satisfy the ta2es$ !enalties and costs for a !eriod of 30 days !rior to the sale on 3 )ecember 180&$ by Cee!ing a notice of sale !osted at the main entrance on the -ity 1all and in a !ublic and cons!icuous !lace in the district where the same is located and by !ublication of said notice once a weeC for 3 weeCs in the <)aily Mirror=$ a news!a!er of general circulation in Uuezon -ity$ the ad+ertisement stating the amount of ta2es and !enalties due$ time and !lace of sale$ name of the ta2!ayer against whom the ta2es are le+ied$ a!!ro2imate area$ lot and blocC number$ location by district$ street and street number of the !ro!erty. The !ublic sale on 3 )ecember 180&$ the !arcels of land were sold to 7osario )uazo for the amount of (10$;00.00 re!resenting the ta2$ !enalty and costs. The certificate of sale e2ecuted by the -ity Treasurer was duly registered on 2@ )ecember 180& in the office of the 7egister of )eeds of Uuezon -ity. *!on the failure of the registered owner to redeem the !arcels of land within the 1%year !eriod !rescribed by law$ the -ity Treasurer of Uuezon -ity e2ecuted on & .anuary 1800 a final deed of sale of said lands and the im!ro+ements thereon. #aid final deed of sale was also registered in the 6ffice of the 7egister of )eeds of Uuezon -ity on 1@ .anuary 1800. ,ater on$ )uazo filed a !etition for consolidation of ownershi!. ?Case "acts involving ,#ocee8ings in lo@e# cou#t absentD -t 6ay be i6,lie8 +o@eve# t+at lo@e# cou#t 8enie8 t+e ,etition as it cite8 t+e case o" Di#ecto# o" 5an8s v. Aba#ca in its 8ecisionA The a!!ellate court u!held the ta2 sale of the real !ro!erties at which )uazo ac9uired the same and her ownershi! u!on +da. de ordon?s failure to redeem the same$ ha+ing found the sale to ha+e been conducted <under the direction and su!er+ision of the -ity Treasurer of Uuezon -ity after the !ro!er !rocedure and legal formalities had been duly accom!lished.= ?-t a,,ea#s t+at t+e a,,ellate cou#t #eve#se8 t+e lo@e# cou#tGs 8ecision, @it+ ;o#8on a,,ealing t+e#e"#o6A
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The #u!reme -ourt affirmed the a!!ellate court?s decision under re+iewG >ithout costs. ( FCA -ecisionG Material averments admitted The o!!osition Kto )uazo?s !etition for consolidation of ownershi!L has not contro+erted by s!ecific
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denials the material a+erments in the !etition. 1ence$ the material a+erments in the !etition are deemed admitted. (#ection 1$ 7ule 8$ 7e+ised 7ules of -ourt) 2 FCA -ecisionG 8ssue on the irre$ularity o& "ublic sale o& "arcels o& land Baived The o!!osition has not raised the issue of irregularity in the !ublic sale of the two !arcels of land in 9uestion. This defense is deemed wai+ed. (#ection 2$ 7ule 8$ id.) 3 FCA -ecisionG !rice in auction sale not $rossly inade=uate to be shockin$ to the conscience o& court 5oting that the 1801 assessment of the combined +alue of the two !arcels of land is (10$@00$ and the residential house on the land is (&;$;@0G that the !resent +alue of the house would be much less considering the de!reciation for o+er 10 yearsG and that while the !rice of (10$;00 is less than the total assessed +alue of the land and the im!ro+ement thereon$ said !rice cannot be considered so grossly inade9uate as to be shocCing to the conscience of the court. * FCA -ecisionG -irector o& ;ands v AbarcaH !rice inade=uate to shock conscience o& court :n )irector of ,ands +s. 'barca (01 (hil. 30)$ the #u!reme -ourt considered the !rice of (@33.2; as so inade9uate to shocC the conscience of the court because the assessed +alue of the !ro!erty in 9uestion was (00$000.00. The assessed +alue of the land was more than 00 times the !rice !aid at the auction sale. :n the !resent case$ the !rice of (10$;00.00 is about 1D0 of the total assessed +alue of the two !arcels of land in 9uestion and the residential house thereon. The finding of the lower court that the house and land in 9uestion ha+e a fair marCet +alue of not less than (200$000.00 has no factual basis. :t cannot be said$ therefore$ that the !rice of (10$;00.00 is so inade9uate as to be shocCing to the conscience of the court. / FCA -ecisionG Mere inade=uacy o& "rice not $round to annul "ublic sale+ unlike in ordinary sale? 8nade=uacy o& "rice an advanta$e in relation to oBnerMs ri$ht to redeem Mere inade9uacy of the !rice alone is not sufficient ground to annul the !ublic sale. (/arrozo +s. Macaraeg$ @3 (hil. 33@) :n 2elasBue0 vs. Coronel (; #-7' 8@;$ 8@@)$ it was held that <while in ordinary sales for reasons of e9uity a transaction may be in+alidated on the ground of inade9uacy of !rice$ or when such inade9uacy shocCs one?s conscience as to Austify the courts to interfere$ such does not follow when the law gi+es to the owner the right to redeem$ as when a sale is made at !ublic auction$ u!on the theory that the lesser the !rice the easier it is for the owner to effect the redem!tion. 'nd so it was a!tly said4 H>hen there is the right to redeem$ inade9uacy of !rice should not be material$ because the Audgment debtor may reac9uire the !ro!erty or also sell his right to redeem and thus reco+er the loss he claims to ha+e suffered by reason of the !rice obtained at the auction sale.= 5 FCA -ecisionG !ublic Sale $overned by Section *0 o& CA *,0 The !ublic sale is go+erned by #ection &0 of -ommonwealth 'ct &30 which gi+es the delin9uent ta2!ayer a !eriod of 1 year from the date of the sale within which to re!urchase the !ro!erty sold. :n case the delin9uent ta2!ayer does not re!urchase the !ro!erty sold within the !eriod of 1 year from the date of the sale$ it becomes a mandatory duty of the !ro+incial treasurer to issue in fa+or of the !urchaser a final deed of sale. (Velas9uez +s. -oronel) , No lack o& "ersonal notice o& ta4 sale The alleged lacC of !ersonal notice of the ta2 sale is negated by her own a+erments in her own o!!osition filed in the lower court a 9uo that <the 6!!ositor in the !etition is a woman @0 years of age. #he was not aware of the auction sale conducted by the -ity Treasurer of Uuezon -ity on 3 )ecember 180& or if there was any notice sent to her$ the same did not reach her or it must ha+e esca!ed her mind considering her age. < ) Cue:on City Charter FCA /02G+ not #A (2,/+ controllin$ on len$th o& redem"tion "eriod?
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S"ecial laB "revails over $eneral laB The !eriod for redem!tion is not the 2%year !eriod !ro+ided in 7' 123;$ since the s!ecific law go+erning ta2 sales of !ro!erties in Uuezon -ity is the Uuezon -ity -harter$ -ommonwealth 'ct ;02 which !ro+ides in section 31 thereof for a 1%year redem!tion !eriod. The s!ecial law co+ering Uuezon -ity necessarily !re+ails o+er the general law. :n the !resent case$ since the filing of )uazo?s brief in 183&$ Vda. )e ordon had not sought to e2ercise her alleged right of redem!tion or maCe an actual tender thereof. . Gross inade=uacy o& "urchase "rice not material i& oBner has ri$ht to redeem 's held in Velas9uez +s. -oronel$ alleged gross inade9uacy of !rice is not material <when the law gi+es the owner the right to redeem as when a sale is made at !ublic auction$ u!on the theory that the lesser the !rice the easier it is for the owner to effect the redem!tion.= (0 ;aBs on ta4 sales &or delin=uent ta4es necessary as ta4es essential to li&e o& Government 's stressed in TaAonera +s. -ourt of '!!eals$ the law go+erning ta2 sales for delin9uent ta2es may be <harsh and drastic$ but it is a necessary means of insuring the !rom!t collection of ta2es so essential to the life of the o+ernment.= '((20 Vda -e 6omoc vs CA 'G # No .2),( Au$ust 2+ (..( 0 ,im ,eong 1ong +s. #o K .7. 5o. 82@00. 'ugust 2$ 1881.L Third )i+ision$ utierrez .r. (.)4 & concur 3actsH The subAect lot in -agayan de 6ro -ity forms !art of the estate of the late (antaleon .omoc. /ecause it was fictiously sold and transferred to third !ersons$ Maria (. Vda. .omoc$ as administratri2 of the estate and in behalf of all the heirs$ filed suit to reco+er the !ro!erty before the trial court of Misamis 6riental in -i+il -ase &3;0. Mariano #o$ the last of the transferees and the husband of Maria #o$ inter+ened. The case was decided in fa+or of .omoc and was accordingly a!!ealed by Mariano #o and one aw #ur -heng to the -ourt of '!!eals. :n "ebruary 1838$ !ending the a!!eal$ .omoc e2ecuted a )eed of B2traAudicial #ettlement and #ale of ,and with Maria #o for (300$000. The document was not yet signed by all the !arties nor notarized but in the meantime$ Maura #o had made !artial !ayments amounting to (&8$000. :n 18@3$ Mariano #o$ the a!!ellant in the reco+ery !roceeding$ agreed to settle the case by e2ecuting a )eed of 7econ+eyance of the land in fa+or of the heirs of (antaleon .omoc. The recon+eyance was in com!liance with the decision in the reco+ery case and resulted in the dismissal of his a!!eal. 6n 2@ "ebruary 18@3$ the heirs of .omoc e2ecuted another e2traAudicial settlement with absolute sale in fa+or of inter+enors ,im ,eong Eang and ,im (ue Eing. ,ater$ Maura #o demanded from the .omoc family the e2ecution of a final deed of con+eyance. They ignored the demand. Maria #o sued the heirs for s!ecific !erformance to com!el them to e2ecute and deli+er the !ro!er registrable deed of sale o+er the lot (-i+il -ase @8@3). #o then filed a notice of lis !endens with the 7egister of )eeds on 2@ "ebruary 18@3. :t was on the same date$ allegedly u!on the .omocs? belief that Maura #o had bacCed out from the transaction that the .omocs e2ecuted the other e2traAudicial settlement with sale of registered land in fa+or of the s!ouses ,im for a consideration of (200$000.00 !art of which amount was allegedly intended to be returned to Maura #o as reimbursement. The s!ouses ,im$ howe+er$ registered their settlement and sale only on 23 '!ril 18@3. The lower court$ finding that there was no sufficient e+idence to show com!lainant% res!ondents? withdrawal from the sale$ concluded that4 (1) the case is one of double saleG (2) the s!ouses% inter+enors are registrants in bad faith who registered their 9uestioned deed of sale long after the notice of lis !endens of -i+il -ase @8@3 was recorded. 6n a!!eal$ the trial court decision was affirmed e2ce!t for the award of moral and e2em!lary damages and attorney?s fees and e2!enses for litigation. 1ence$ the !etitions.
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The #u!reme -ourt dismissed the !etitions$ and affirmed the decision of the -ourt of '!!eals dated 13 #e!tember 18@8 and its resolution dated 2 '!ril 1880. ( Valid and e4istent+ and "artially e4ecuted Fthus en&orceableG contract The heirs do not deny the e2istence of B2hibit <'=G including its terms and contents$ notwithstanding the incom!leteness in form. The meeting of the minds and the deli+ery of sums as !artial !ayment is clear and this is admitted by both !arties to the agreement. 1ence$ there was already a +alid and e2isting contract$ not merely !erfected as the trial court saw it$ but !artly e2ecuted. :t is of no moment whether or not it is enforceable under the #tatute of "rauds$ which rule is not a!!licable because of !artial !ayment of the +endee?s obligation and its acce!tance by the +endors%heirs. The contract of sale of real !ro!erty e+en if not com!lete in form$ so long as the essential re9uisites of consent of the contracting !arties$ obAect$ and cause of the obligation concur and they were clearly established to be !resent$ is +alid and effecti+e as between the !arties. *nder 'rticle 13;3 of the -i+il -ode$ its enforceability is recognized as each contracting !arty is granted the right to com!el the other to e2ecute the !ro!er !ublic instrument so that the +alid contract of sale of registered land can be duly registered and can bind third !ersons. The com!lainant%res!ondent correctly e2ercised such right simultaneously with a !rayer for the enforcement of the contract in one com!laint. 2 Continuin$ interest by Maura So? !arole evidence cannot re&orm intention o& "arties Maura #o did not subse9uently abandon her intention of !urchasing the subAect lot. The facts re+eal an agreement between the contracting !arties to B2hibit <'= to the effect that <the consideration of (300$000 or whate+er balance remains after deducting the ad+anced !ayments thereon$ shall be !aid u!on the termination of (Mariano #o?s) a!!eal in the case in+ol+ing the !ro!erty in 9uestion.= ( 7 82@31). B+en if the sums !aid by Maura #o were allegedly intended to e2!edite the dismissal of the a!!eal of Mariano #o$ such !ayment only indicates interest in ac9uiring the subAect lot. :n addition$ the claim by the defendants% !etitioners that the !ayments were for the gathering of the se+eral heirs from far !laces to sign B2hibit <'= confirms Maura #o?s continuing interest. The terms of B2hibit <'= and the actual intention of the !arties are clear and no reform re9uiring !arole e+idence is being sought to elucidate the intention further. The oral e+idence offered by defendants%!etitioners to show a subse9uent refusal to !roceed with the sale cannot be considered to re+erse the e2!ress intention in the contract. 3 &or 8ssue o& double sale material to determination Bhether So is entitled to relie&s "rayed
The issue of double sale had to be resol+ed to determine whether or not com!lainant Maura #o was entitled to the reliefs !rayed for. There was no hard e+idence to show that the +inculum or contractual relation between !etitioners%heirs and Maura #o had been cut%off. Fet$ !etitioners%heirs sold the same lot to s!ouses ,im. The case re9uires the discernment of who has the better right to the !ro!erty. * Article (/**+ NCC? So has better ri$ht o& oBnershi" 'rticle 1;&& of the -i+il -ode !ro+ides that <should it be immo+able !ro!erty$ the ownershi! shall belong to the !erson ac9uiring it who in good faith first recorded it in the 7egistry of (ro!erty.= :n +iew of this !ro+ision$ the s!ouses ,im do not ha+e a better right. They !urchased the land with full Cnowledge of a !re+ious sale to Maura #o and without re9uiring from the +endors%heirs any !roof of the !rior +endee?s re+ocation of her !urchase. / ;im s"ouses not buyers in $ood &aith The s!ouses ,im cannot be said to be buyers in good faith as they should ha+e e2ercised e2tra caution in their !urchase es!ecially if at the time of the sale$ the land was still co+ered by T-T 180&@ bearing the name of Mariano #o and was not yet registered in the name of the heirs of (antaleon .omoc$ although it had
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been recon+eyed to said heirs. >hen they registered the sale on 23 '!ril 18@3 after ha+ing been charged with notice of lis !endens annotated as early as 2@ "ebruary 18@3$ they did so in bad faith or on the belief that a registration may im!ro+e their !osition being subse9uent buyers of the same lot. *nder 'rticle 1;&&$ mere
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registration is not enough to ac9uire new title. ood faith must concur. (/ergado +. -ourt of '!!eals$ 133 #-7' &83 K18@8LG -once!cion +. -ourt of '!!eals$ .7. 5o. @320@$ "ebruary 0$ 1881) '((30 Vda -e Cuiambao vs Manila Motor Com"any 'G # No ;-(,3)* 2ctober 3(+ (.5( 0 Bn /anc$ 7eyes ./, (.)4 @ concur$ 1 tooC no !art 3actsH 6n 3 March 18&0$ audencio 7. Uuiambao$ deceased husband of 5estora 7igor Vda. de Uuiambao and father of the other !etitioners$ bought from Manila Motor -om!any$ :nc. 1 #tudebaCer car on the installment !lan. *!on default in the !ayment of a number of installments$ the com!any sued audencio Uuiambao in -i+il -ase ;@0&3 of the -": Manila. 6n & )ecember 18&0$ Audgment was entered in said case$ awarding in fa+or of the com!any the sum of (3$0;&.32$ with interest thereon at 12I !er annum$ and (300.00 attorneys? fees. 6n 1& .uly 18&1$ the court issued a writ of e2ecution directed to the (ro+incial #heriff of Tarlac$ who thereu!on le+ied on and attached two !arcels of land co+ered by T-T 1@380 of the 6ffice of the 7egister of )eeds for Tarlac. 6n 23 'ugust 18&1$ 'ttorney "eli2 (. )a+id$ then counsel for the Manila Motor -om!any$ accom!anied by the sheriff$ !ersonally a!!rised audencio Uuiambao of the le+y. The latter !leaded to ha+e the e2ecution sale sus!ended and begged for time within which to satisfy the Audgment debt$ !ro!osing that in the meanwhile$ he would surrender to the com!any the #tudebaCer car. This !ro!osition was acce!tedG accordingly$ audencio Uuiambao deli+ered the car to the com!any$ and 'ttorney )a+id issued a recei!t therefore. 6n 10 6ctober 18&1$ audencio Uuiambao remitted to the com!any$ on account of the Audgment$ the sum of (;00.00G he$ howe+er$ failed to maCe further !ayments$ thus lea+ing a balance still unsettled of (1$8;2.&3$ with interest thereon at 12I !er annum from 0 March 18&0. :n the meantime$ the (acific war broCe out$ and when the .a!anese forces occu!ied the country shortly thereafter$ the in+aders seized all the assets of the Manila Motor -om!any$ :nc. as enemy !ro!erty. 'fter the war$ the com!any filed with the (hili!!ine >ar )amage -ommission$ among other things$ a claim for its mortgage lien on the car of audencio Uuiambao and was awarded the sum of (3@0.&3$ (&08.3; of which amount had already been !aid. 6n 12 6ctober 18&8$ the com!any addressed a letter to audencio Uuiambao asCing him to fill a blanC form relati+e to the lost car. Uuiambao ha+ing since died$ his widow$ 5estora 7igor Vda. de Uuiambao$ returned the form with the statement that the 9uestioned car was surrendered to the com!any for storage. 6n 1@ May 18;3$ a demand was made on the widow to settle the deceased?s un!aid accounts$ but in +iew of her refusal$ the com!any urged the (ro+incial #heriff of Tarlac to carry out the !re% war writ of e2ecution issued in -i+il -ase ;@0&3. 'lthough the records of that case had been lost during the war$ and ha+e not been reconstituted$ a co!y of said writ of e2ecution Ce!t on file by the !ro+incial sheriff was sa+ed. 'ccordingly$ the latter ad+ertised for sale at !ublic auction the !ro!erties le+ied u!on. 5otified of the sheriff?s action$ the heirs of the deceased Uuiambao filed the suit to annul and set aside the writ of e2ecution and to reco+er damages. .udgment was rendered by the -": in fa+or of the Uuiambaos$ but on a!!eal to the -ourt of '!!eals (-'% 7 13031%7)$ the decision was re+ersed and another entered dismissing the com!laint. 1ence$ the a!!eal by writ of certiorari. The #u!reme -ourt affirmed the Audgment of the -ourt of '!!eals a!!ealed from$ with costs against the Uuiambaos. ( Heacock case does not a""ly? -elivery o& car to com"any did not "roduce e&&ect o& rescindin$ or annullin$ the contract o& sale? <uyer surrendered car to "ost"one satis&action o& the @ud$ment amount *nliCe the situation that arose in the 1. B. 1eacocC -om!any case (00 (1:, 2&;%2&0) wherein the
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+endor demanded the return of the thing sold$ and thereby indicated an une9ui+ocal desire on its !art to rescind its contract with the +endee$ here it was the buyer (deceased audencio Uuiambao) who offered indeed !leaded$ to surrender his car only in order that he might be gi+en more time within which to satisfy the
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Audgment debt$ and sus!end the im!ending e2ecution sale of the !ro!erties le+ied u!on. The +ery recei!t issued then by the com!any$ and acce!ted without obAection by the deceased ( audencio Uuiambao)$ indicated that the car was recei+ed <!ending settlement of the Audgment in -i+il -ase ;@0&3.= 6ther circumstances that militate against the Uuiambaos? theory of rescission or annulment of the contract of sale and wai+er of the Audgment debt and$ con+ersely$ strengthen the !ro!osition that the deli+ery of the car to the com!any was merely to !ost!one the satisfaction of the Audgment amount$ are that the deceased still !aid the further sum of (;00.00 on account of his indebtedness about two months after the car was surrendered$ and that des!ite the com!any?s acce!tance of the car$ the com!any made re!eated demands against the !etitioners to settle the deceased?s un!aid accounts. 2 #ecei"t o& car not &or a""ro"riation but as security to satis&action o& @ud$ment credit? -oes not amount to &oreclosure o& chattel mort$a$e #ince the com!any did not recei+e the car for the !ur!ose of a!!ro!riating the same$ but merely as security for the ultimate satisfaction of its Audgment credit$ the situation under consideration could not ha+e amounted to a foreclosure of the chattel mortgage. 3 !ayment o& Bar dama$e com"ensation does not "roduce same and e=ual le$al e&&ect as &ormal &oreclosure 1a+ing been the !arty who was last in !ossession of the lost car$ the com!any was well within its rights$ or better still$ under obligation$ to !rotect the interest of the car owner$ as well as its own$ by claiming$ as it did$ the corres!onding war damage com!ensation for the car. #uch action of the com!any cannot reasonably be construed as a constriction of its rights under the !re%war Audgment. * Scenario barrin$ recovery o& any un"aid balance :n Manila Motor -om!any$ :nc.$ +s. "ernandez (;2 6 10$ 0@@3$ 0@@;)$ it was held that <it is the actual sale of the mortgaged chattel in accordance with section 1& of 'ct 1;0@ that would bar the creditor (who chooses to foreclose) from reco+ering any un!aid balance ((acific -ommercial -om!any +s. )e la 7ama$ 32 (hil$ 3@0).= / sale Suit &iled Bas &or s"eci&ic "er&ormance and not &or rescission or cancellation o& contract o&
The best reason why res!ondent com!any may not be construed as ha+ing rescinded or cancelled the contract of sale or foreclosed the mortgage on the automobile is !recisely because it brought suit for s!ecific !erformance$ and won$ in the !re%war -i+il -ase ;@0&3. 5 !re-Bar @ud$ment has not "rescribed? !eriod covered by moratorium laB and closure o& re$ular courts at the outbreak o& Bar deducted The !re%war Audgment was entered on & )ecember 18&0$ and on 1& .uly 18&1$ a writ of e2ecution was issued. The com!any tooC no further ste! to enforce the Audgment until 18 May 18;&$ on which date$ Manila Motors scheduled 2 !arcels of land owned by the Uuiambaos for sale at !ublic auction !ursuant to the writ of 1& .uly 18&1. "rom the entry of the Audgment to 18 May 18;&$ a !eriod of 13 years$ ; months and 1; days had ela!sed. "rom this term$ the !eriod co+ered by the debt moratorium under B2ecuti+e 6rder 32 (which a!!lied to all debts !ayable within the (hili!!ines)$ from the time the order tooC effect on 10 March 18&;$ until it was !artially lifted by 7' 3&2 on 20 .uly 18&@ must be deducted. )educting the !eriod during which B6 32 was in force$ which is 3 years$ & months and 10 days$ from 13 years$ ; months and 1; days$ the !eriod co+ered from the entry of the !re%war Audgment to the time the com!any attem!ted to sell the le+ied !ro!erties at auction$ there is still left a !eriod of 10 years and 28 days. /ut as held in +alens vs. Chua;ay ( Co.$ .7. 5o. ,%10123$ .une 30$ 18;@$ the -ourt tooC Audicial notice of the fact that regular courts in ,uzon were closed for months during the early !art of the .a!anese occu!ation until they were reconstituted by order of the -hairman of the B2ecuti+e -ommission on 30
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.anuary 18&2. This interru!tion in the functions of the courts has also been held to interru!t the running of the
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!rescri!ti+e !eriod (see also (alma +s. -elda$ @1 (hil. &10). That being the case$ res!ondent com!any could not be barred by !rescri!tion from !roceeding with the e2ecution sale !ursuant to the le+y and writ of e2ecution issued under the !re%war Audgment$ considering that e+en the minimum !eriod of from @ )ecember 18&1$ the outbreaC of the (acific >ar$ to 30 .anuary 18&2 is already a term of 1 month and 23 days. , !re-Bar Brit o& e4ecution and levy may still be en&orced by sale o& the levied "ro"erty a&ter the la"se o& the /-year "eriod Bithin Bhich a @ud$ment may be e4ecuted by motion ' +alid e2ecution issued and le+y made within the !eriod !ro+ided by law may be enforced by a sale thereafter. The sale of the !ro!erty by the sheriff and the a!!lication of the !roceeds are sim!ly the carrying out of the writ of e2ecution and le+y which when issued were +alid. This rests u!on the !rinci!le that the le+y is the essential act by which the !ro!erty is set a!art for the satisfaction of the Audgment and taCen into custody of the law$ and that after it has been taCen from the defendant$ his interest is limited to its a!!lication to the Audgment$ irres!ecti+e of the time when it may be sold (#outhern -al. ,. -o. +s. 1otel -o.$ 8& -al. 213$ 222G o+ernment of (.:. +s. Bchaus$ 31 (hil. 31@). Thus$ a +alid Audgment may be enforced by motion within ; years after its entry$ and by action after the la!se of said !eriod but before the same shall ha+e been barred by any statute of limitations$ and that a +alid e2ecution issued and le+y made within the ;%year !eriod after entry of the Audgment may be enforced by sale of the !ro!erty le+ied u!on thereafter$ !ro+ided the sale is made within 10 years after the entry of the Audgment. ) Ansaldo vs 3idelity not in "oint The case of 'nsaldo +s. "idelity and #urety -om!any of the (hili!!ine :slands$ .7. 5o. ,%233@$ '!ril 23$ 18;1$ is not in !oint$ for there the Audgment creditor attem!ted to carry out the writ of e2ecution 10 years after the entry of Audgment. . Amount received &rom the !hili""ine Jar -ama$e Commission must be credited to the CuiambaosM account The Uuiambaos should be credited the amount of (&08.3; which the Manila Motors actually recei+ed from the (hili!!ine >ar )amage -ommission on account of the car of audencio Uuiambao that had been seized from it by the enemy occu!ant during the war. This should reduce the !rinci!al amount still due Manila Motors from the Uuiambaos to the sum of (1$;&2.32. '((*0 Velasco v CA 'G # No ;-3(0() 6une 2.+ (.,3 0 "irst )i+ision$ -astro (.)43 concur$ 1 concurs with reser+ation$ 2 dissents$ 1 concurring with a dissent$ 1 tooC no !art 3actsH ' suit for s!ecific !erformance filed by ,orenzo Velasco against the Magdalena Bstate (-i+il -ase 3301) on the allegation that on 28 5o+ember 1802$ Velasco and the Magdalena Bstate had entered into a contract of sale by +irtue of which Magdalena Bstate offered to sell Velasco$ to which the latter agreed to buy$ a !arcel of land with an area of 2$0;8 s9.ms. (,ot 1;$ /locC 3$ (sd%0128$) located at 5o. 38 corner 0th #treet and (acific '+enue$ 5ew Manila$ Uuezon -ity$ for the total !urchase !rice of (100$000.00. 2elasco allege$ that he was to gi+e a down !ayment of (10$000.00 to be followed by (20$000.00 and the balance of (30$000.00 would be !aid in installments$ the e9ual monthly amortization of which was to be determined as soon as the (30$000.00 down !ayment had been com!leted. 1e further alleged that he !aid the
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down!ayment on 28 5o+ember 1802 (7ecei!t 203@&@) and that when on @ .anuary 180& he tendered to the !ayment of the additional (20$000.00 to com!lete the (30$000.00$ Magdalena Bstate refused to acce!t and that e+entually it liCewise refused to e2ecute a formal deed of sale ob+iously agreed u!on. Velasco demanded (2;$000.00 e2em!lary damages$ (2$000.00 actual damages and (3$000.00 attorney?s fees. /ag$alena )state $enie$ that it has had any direct%dealings$ much less$ contractual relations with the ,orenzo Velasco regarding the !ro!erty in 9uestion$ and contends that the alleged contract described in the document attached to the
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com!laint is entirely unenforceable under the #tatute of "raudsG that the truth of the matter is that a !ortion of the !ro!erty in 9uestion was being leased by a certain #ocorro Velasco who$ on 28 5o+ember 1802$ went to the office of Magdalena Bstate indicated her desire to !urchase the lotG that the latter indicated its willingness to sell the !ro!erty to her at the !rice of (100$000.00 under the condition that a down !ayment of (30$000.00 be made$ (20$000.00 of which was to be !aid on 31 5o+ember 1802$ and that the balance of (30$000.00 including interest at 8I !er annum was to be !aid on installments for a !eriod of 10 years at the rate of (;$3@1.32 on .une 30 and )ecember of e+ery year until the same shall ha+e been fully !aidG that on 28 5o+ember 1802$ #ocorro Velasco offered to !ay (10$000.00 as initial !ayment instead of the agreed (20$000.00 but because the amount was short of the alleged (20$000.00 the same was acce!ted merely as de!osit and u!on re9uest of #ocorro Velasco the recei!t was made in the name of her brother%in%law $,orenzo VelascoG that #ocorro Velasco failed to com!lete the down !ayment of (30$000.00 and neither has she !aid any installments on the balance of (30$000.00 u! to the !resent timeG that it was only on @ .anuary 180& that #ocorro Velasco tendered !ayment of (20$000.00$ which offer Magdalena Bstate refused to acce!t because it had considered the offer to sell rescinded on account of her failure to com!lete the down !ayment on or before 31 )ecember 1802. 6n 3 5o+ember 180@$ the C%. 3ue0on City ren$ere$ a $ecision$ dismissing the com!laint filed by ,orenzo and #ocorro Velasco against the Magdalena Bstate$ :nc. for the !ur!ose of com!elling s!ecific !erformance by Magdalena Bstate of an alleged deed of sale of a !arcel of residential land in fa+or of the Velascos. The basis for the dismissal of the com!laint was that the alleged !urchase and sale agreement <was not !erfected.= 6n 1@ 5o+ember 180@$ after the !erfection of their a!!eal to the -ourt of '!!eals$ the Velascos recei+ed a notice from the said court re9uiring them to file their !rinted record on a!!eal within 00 days from recei!t of said notice. This 00%day term was to e2!ire on 13 .anuary 1808. 'llegedly on 1; .anuary 1808$ the Velascos allegedly sent to the -' and to counsel for Magdalena Bstate$ by registered mail allegedly de!osited !ersonally by its mailing clerC$ one .uanito ). Uuiachon$ at the MaCati (ost 6ffice$ a <Motion "or B2tension of Time To "ile (rinted 7ecord on '!!eal.= The e2tension of time was sought on the ground <of mechanical failures of the !rinting machines$ and the +oluminous !rinting Aob now !ending with the Vera (rinting (ress.= 6n 10 "ebruary 1808$ the Velascos filed their !rinted record on a!!eal in the -'. Thereafter$ the Velascos recei+ed from Magdalena Bstate a motion filed on @ "ebruary 1808 !raying for the dismissal of the a!!eal on the ground that the Velascos had failed to file their !rinted record on a!!eal on time. The -'$ on 2; "ebruary 1808$ denied the Magdalena Bstate?s motion to dismiss$ granted the Velasco?s motion for 30%day e2tension from 1; .anuary 1808$ and admitted the latter?s !rinted record on a!!eal. 6n 11 March 1808$ Magdalena Bstate !rayed for a reconsideration of said resolution. The Velascos o!!osed the motion for reconsideration and submitted to the -' the registry recei!ts (021; and 0210)$ both stam!ed 1; .anuary 1808$ which were issued by the recei+ing clerC of the registry section of the MaCati (ost 6ffice co+ering the mails for the dis!uted motion for e2tension of time to file their !rinted record on a!!eal and the affida+it of its mailing clerC. 'fter se+eral other !leadings and manifestations relati+e to the motion for reconsideration and on 2@ .une 1808$ the -' !romulgated a resolution granting the motion for reconsideration and ordered 'tty. (atrocinio -or!uz (Velasco?s counsel) to show cause within 10 days from notice why he should not be sus!ended from the !ractice of his !rofession for deceit$ falsehood and +iolation of his sworn duty to the -ourt$ and directed the (ro+incial "iscal of 7izal to conduct the necessary in+estigation against .uanito ). Uuiachon of the #alonga$ 6rdoMez$ Fa!$ #icat Q 'ssociates ,aw 6ffice and "la+iano 6. Malindog$ a letter carrier at the MaCati (ost 6ffice$ and to file the a!!ro!riate criminal action against them (it a!!ears that Malindog !ostmarC the letters 1; .anuary 1808 on 3 "ebruary 1808 at the re9uest of Uuiachon). 6n ; #e!tember 1808$ the -' !romulgated another resolution$ denying the motion for reconsideration of the Velascos but$ at the same time$ acce!ting as satisfactory the e2!lanation of 'tty. -or!uz why he should not be sus!ended from the !ractice of the legal !rofession.
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6n 20 #e!tember 1808$ the "irst 'ssistant "iscal of 7izal notified the -ourt of '!!eals that he had found a !rima facie case against Malindog and would file the corres!onding information for falsification of !ublic documents against him$ but dismissed the com!laint against Uuiachon for lacC of sufficient e+idence.
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' !etition for certiorari and mandamus was filed by the Velascos against the resolution of the -ourt of '!!eals dated 2@ .une 1808 in -'% 7 &2330$ which ordered the dismissal of the a!!eal inter!osed by them from a decision of the -": Uuezon -ity on the ground that they had failed seasonably to file their !rinted record on a!!eal. The #u!reme -ourt denied the instant !etitionG without !ronouncement as to costs. ( 8ssues raised by Velascos? Some issues are sub@ect o& a""eal on certiorari under #ule */ rather than that o& certiorari under #ule 5/ The Velascos contend that the -ourt of '!!eals acted without or in e2cess of Aurisdiction$ or with such whimsical and gra+e abuse of discretion as to amount to lacC of Aurisdiction$ because (a) it declared that the motion for e2tension of time to file the !rinted record on a!!eal was not mailed on 1; .anuary 1808$ when$ in fact$ it was mailed on the said date as e+idenced by the registry recei!ts and the !ost office stam! of the MaCati (ost 6fficeG (b) it declared that the record on a!!eal was filed only on 10 "ebruary 1808$ beyond the time authorized by the a!!ellate court$ when the truth is that the said date of filing was within the 30%day e2tension granted by itG (c) the ad+erse conclusions of the a!!ellate court were not su!!orted by the records of the case$ because the said court ignored the affida+it of the mailing clerC of the !etitioners? counsel$ the registry recei!ts and !ostmarCed en+elo!es and$ instead$ chose to rely u!on the affida+it of the mail carrier Malindog$ which affida+it was !re!ared by counsel for Magdalena Bstate at the affiant himself so declared at the !reliminary in+estigation at the "iscal?s office which absol+ed the Velascos? counsel mailing clerC Uuiachon from any criminal liabilityG (d) section 1$ 7ule ;0 of the 7ules of -ourt$ which enumerates the grounds u!on which the -ourt of '!!eals may dismiss an a!!eal$ does not include as a ground the failure to file a !rinted record on a!!ealG (e) the said section does not state either that the mismailing of a motion to e2tend the time to file the !rinted record on a!!eal$ assuming this to be the case$ may be a basis for the dismissal of the a!!ealG (f) the -ourt of '!!eals has no Aurisdiction to re+oCe the e2tension of time to file the !rinted record on a!!eal it had granted to the !etitioners based on a ground not s!ecified in section 1$ 7ule ;0 of the 7ules of -ourtG and (g) the obAection to an a!!eal may be wai+ed as when the a!!ellee has allowed the record on a!!eal to be !rinted and a!!ro+ed. #ome of the obAections raised by the Velascos to the 9uestioned resolution of the -ourt of '!!eals are ob+iously matters in+ol+ing the correct construction of our rules of !rocedure and$ conse9uently$ are !ro!er subAects of an a!!eal by way of certiorari under 7ule &; of the 7ules of -ourt$ rather than a s!ecial ci+il action for certiorari under 7ule 0;. The !etitioners$ howe+er$ ha+e correctly a!!reciated the nature of its obAections and ha+e asCed this -ourt to treat the instant !etition as an a!!eal by way of certiorari under 7ule &; <in the e+ent that the #u!reme -ourt should deem that an a!!eal is an ade9uate remedy= The nature of the !resent case !ermits a dis9uisition of both ty!es of assignments. 2 -ate stam"ed on recei"ts and envelo"es? Hennin$ and Calte4 cases do not a""ly >hile it is true that stam!ed on the registry recei!ts 021; and 0210 as well as on the en+elo!es co+ering the mails in 9uestion is the date 1; .anuary 1808$ this$ by itself$ does not establish an unrebuttable !resum!tion of the fact or date of mailing. The 1enning and -alte2 cases are not in !oint because the s!ecific adAecti+e issue resol+ed in those cases was whether or not the date of mailing a !leading is to be considered as the date of its filing$ The issue in the !resent case is whether or not the motion of the !etitioners for e2tension of time to file the !rinted record on a!!eal was$ in !oint of fact$ mailed (and$ therefore$ filed) on 1; .anuary 1808. 3 Certi&ication o& "ostmasters and Malindo$Ms sBorn declaration believable? Malindo$ induced to
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issue &alse re$istry recei"ts &or the VelascoMs counsel The certifications issued by the two !ostmasters of MaCati$ 7izal and the sworn declaration of the mail carrier Malindog describing how the said registry recei!ts came to be issued$ are worthy of belief. :t will be obser+ed that the said certifications e2!lain clearly and in detail how it was im!robable that the registry recei!ts in 9uestion could ha+e been issued to Velascos? counsel in the ordinary course of official business$
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while Malindog?s sworn statement$ which constitutes a +ery gra+e admission against his own interest$ !ro+ides am!le basis for a finding that where official duty was not !erformed it was at the behest of a !erson interested in the Velascos? side of the action below. That at the !reliminary in+estigation at the "iscal?s office$ Malindog failed to identify Uuiachon as the !erson who induced him to issue falsified recei!ts$ contrary to what he declared in his affida+it$ is of no moment since the findings of the in9uest fiscal as reflected in the information for falsification filed against Malindog indicate that someone did induce Malindog to maCe and issue false registry recei!ts to the counsel for the Velascos. * #i$ht to a""eal a statutory "rivile$e and not a natural ri$ht nor a "art o& due "rocess :n /ello +s. "ernando$ it was held that the right to a!!eal is not a natural right nor a !art of due !rocessG it is merely a statutory !ri+ilege. and may he e2ercised only in the manner !ro+ided by law. / -uty o& a""ellant to &ile "rinted record on a""eal Bith CA Bithin 50 days &rom recei"t o& notice The 7ules of -ourt e2!ressly maCes it the duty of an a!!ellant to file a !rinted record on a!!eal with the -ourt of '!!eals within 00 days from recei!t of notice from the clerC of that court that the record on a!!eal a!!ro+ed by the trial court has already been recei+ed by the said court. #ection ; of 7ule &0 ()uty of a!!ellant u!on recei!t of notice) states that <:t shall be the duty of the a!!ellant within 1; days from the date of the notice referred to in the !receding section$ to !ay the clerC of the -ourt of '!!eals the fee for the docCeting of the a!!eal$ and within 00 days from such notice to submit to the court &0 !rinted co!ies of the record on a!!eal$ together with !roof of ser+ice of 1; !rinted co!ies thereof u!on the a!!ellee.= 5 A""ellate court did not abuse its discretion 'fter a careful study and a!!raisal of the !leadings$ admissions and denials res!ecti+ely adduced and made by the !arties$ it is clear that the -ourt of '!!eals did not gra+ely abuse its discretion and did not act without or in e2cess of its Aurisdiction. 's the Velascos failed to com!ly with the duty to file the !rinted record on a!!eal within 00 days from recei!t of notice which the 7ules of -ourt enAoins$ and considering that there was a deliberate effort on their !art to mislead the said -ourt in granting them an e2tension of time within which to file their !rinted record on a!!eal$ it stands to reason that the a!!ellate court cannot be said to ha+e abused its discretion or to ha+e acted without or in e2cess of its Aurisdiction in ordering the dismissal of their a!!eal. , 6uris"rudence re"lete Bith cases Bhere Court dismissed a""eal on $rounds not mentioned s"eci&ically in #ule /0+ Section ( .uris!rudence is re!lete with cases in which this -ourt dismissed an a!!eal on grounds not mentioned s!ecifically in #ection 1$ 7ule ;0 of the 7ules of -ourt. (#ee$ for e2am!le$ )e la -ruz +s. /lanco$ 33 (hil. ;80 (18&2)G o+ernment of the (hili!!ines +s. -ourt of '!!eals. 10@ (hil. @0 (1800)G "erinion +s. #ta. 7omana$ ,%2;;21$ "ebruary 2@$ 00$ 10 #-7' 330$ 33;). ) Motion &or e4tension o& "eriod must be made be&ore the e4"iration o& the "eriod to be e4tended :nasmuch as the motion for e2tension of the !eriod to file the !rinted record on a!!eal was belatedly filed$ then$ it is as though the same were non%e2istent. :n 5aBuiran vs. Court of Appeals$ it was stated that <the motion for e2tension of the !eriod for filing !leadings and !a!ers in court must be made before the e2!iration of the !eriod to be e2tended.= The soundness of this dictum in matters of !rocedure is self%e+ident. "or$ were the doctrine otherwise$ the uncertainties that would follow when litigants are left to determine and redetermine for themsel+es whether to seeC further redress in court forthwith or taCe their own sweet time will result in litigations becoming more unbearable than the +ery grie+ances they are intended to redress. . 2b@ection to a""eal not Baived Magdalena Bstate did file a motion in the -ourt of '!!eals on @ "ebruary 1808 !raying for the dismissal of the a!!eal on the ground that u! to the said date the Velascos had not yet filed their record on a!!eal and$ therefore$ must be considered to ha+e abandoned their a!!eal. The obAection to an a!!eal was
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thus
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not wai+ed$ contrary to Velasco?s argument that it was wai+ed when the a!!ellee allows the record on a!!eal to be !rinted and a!!ro+edD (0 No contract o& sale "er&ected because the minds o& the "arties did not meet in re$ard to the manner o& "ayment 5o contract of sale was !erfected because the minds of the !arties did not meet <in regard to the manner of !ayment.= The material a+erments contained in Velasco?s com!laint themsel+es disclose a lacC of com!lete <agreement in regard to the manner of !ayment= of the lot in 9uestion. The com!laint states !ertinently <that !laintiff and defendant further agreed that the total down !ayment shall be (30$000.00$ including the (10$000.00 !artial !ayment mentioned in !aragra!h 3 hereof$ and that u!on com!letion of the said down !ayment of (30$000.00$ the balance of (30$000.00 shall be !aid by the !laintiff to the defendant in 10 years from 5o+ember 28$ 1802G and that the time within which the full down !ayment of the (30$000.00 was to be com!leted was not s!ecified by the !arties but the defendant was duly com!ensated during the said time !rior to com!letion of the down !ayment of (30$000.00 by way of lease rentals on the house e2isting thereon which was earlier leased by defendant to the !laintiff?s sister%in%law$ #ocorro .. Velasco$ and which were duly !aid to the defendant by checCs drawn by !laintiff.= The Velascos themsel+es admit that they and Magdalena Bstate still had to meet and agree on how and when the down !ayment and the installment !ayments were to be !aid. #uch being the situation$ it cannot be said that a definite and firm sales agreement between the !arties had been !erfected o+er the lot in 9uestion. (( -e&inite a$reement on the matter o& "ayment o& "urchase "rice an essential element to &orm bindin$ and en&orceable contract o& sale ' definite agreement on the manner of !ayment of the !urchase !rice is an essential element in the formation of a binding and enforceable contract of sale. :n the !resent case$ the Velascos deli+ered to Magdalena Bstate the sum of (10$000 as !art of the down!ayment that they had to !ay cannot be considered as sufficient !roof of the !erfection of any !urchase and sale agreement between the !arties under article 1&@2 of the new -i+il -ode$ as the Velascos themsel+es admit that some essential matter (the terms of !ayment) still had to be mutually co+enanted. '((/0 Villa&lor v CA 'G # No ./5.* 2ctober .+ (.., 0 Third )i+ision$ (anganiban (.)4 3 concur$ 1 tooC no !art 3actsH 6n 10 .anuary 18&0$ -irilo (iencena+es$ in a )eed of 'bsolute #ale$ sold to Vicente Villafor$ a !arcel of agricultural land (!lanted to 'baca) containing an area of ;0 hectares$ more or less. The deed states that the land was sold to Villaflor on 22 .une 1833$ but no formal document was then e2ecuted$ and since then until the !resent time$ Villaflor has been in !ossession and occu!ation of the same. /efore the sale of said !ro!erty$ (iencena+es inherited said !ro!erty form his !arents and was in ad+erse !ossession of such without interru!tion for more than ;0 years. 6n the same day$ -laudio 6tero$ in a )eed of 'bsolute #ale sold to Villaflor a !arcel of agricultural land (!lanted to corn)$ containing an area of 2& hectares$ more or lessG 1ermogenes (atete$ in a )eed of 'bsolute #ale sold to Villaflor$ a !arcel of agricultural land (!lanted to abaca and corn)$ containing an area of 20 hectares$ more or less. /oth deed state the same details or circumstances as that of (iencena+es?. 6n 1; "ebruary 18&0$ "ermin /ocobo$ in a )eed of 'bsolute #ale sold to Villaflor$ a !arcel of agricultural land (!lanted with abaca)$ containing an area of 1@ hectares$ more or less. 6n @ 5o+ember 18&0$ Villaflor leased to 5asi!it ,umber -o.$ :nc. a !arcel of land$ containing an area of 2 hectares$ together with all the im!ro+ements e2isting thereon$ for a !eriod of ; years (from 1 .une 18&0) at
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a rental of (200.00 !er annum to co+er the annual rental of house and building sites for 33 houses or buildings. The lease agreement allowed the lessee to sublease the !remises to any !erson$ firm or cor!orationG and to build and construct additional houses with the condition the lessee shall !ay to the lessor the amount of ;0
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centa+os !er month for e+ery house and buildingG !ro+ided that said constructions and im!ro+ements become the !ro!erty of the lessor at the end of the lease without obligation on the !art of the latter for e2!enses incurred in the construction of the same. 6n 3 .uly 18&@$ in an <'greement to #ell= Villaflor con+eyed to 5asi!it ,umber$ 2 !arcels of land. (arcel 1 contains an area of 112$000 hectares more or less$ di+ided into lots ;&12$ ;&13$ ;&@@$ ;&80$ ;&81$ ;&82$ ;@;0$ ;@&8$ ;@00$ ;@;;$ ;@;1$ ;@;&$ ;@;;$ ;@;8$ ;@;@$ ;@;3$ ;@;3$ and ;@;2G and containing abaca$ fruit trees$ coconuts and thirty houses of mi2ed materials belonging to the 5asi!it ,umber -om!any. (arcel 2 contains an area of &@$000 more or less$ di+ided into lots ;&11$ ;&10$ ;&08$ and ;388$ and containing 100 coconut trees$ !roducti+e$ and 300 cacao trees. "rom said day$ the !arties agreed that 5asi!it ,umber shall continue to occu!y the !ro!erty not anymore in conce!t of lessee but as !ros!ecti+e owners. 6n 2 )ecember 18&@$ Villaflor filed #ales '!!lication V%@03 with the /ureau of ,ands$ Manila$ to !urchase under the !ro+isions of -ha!ter V$ R: or :R of -' 1&1 (The (ublic ,ands 'ct)$ as amended$ the tract of !ublic lands. (aragra!h 0 of the '!!lication$ states4 H: understand that this a!!lication con+eys no right to occu!y the land !rior to its a!!ro+al$ and : recognize that the land co+ered by the same is of !ublic domain and any and all rights : may ha+e with res!ect thereto by +irtue of continuous occu!ation and culti+ation are hereby relin9uished to the o+ernment. 6n 3 )ecember 18&@$ Villaflor and 5asi!it ,umber e2ecuted an <'greement$= confirming the 'greement to #ell of 3 .uly 18&@$ but with reference to the #ales '!!lication filed with the /ureau of ,and. 6n 31 )ecember 18&8$ the 7e!ort by the !ublic land ins!ector ()istrict ,and 6ffice$ /ureau of ,ands$ in /utuan) contained an endorsement of the said officer recommending reAection of the #ales '!!lication of Villaflor for ha+ing leased the !ro!erty to another e+en before he had ac9uired transmissible rights thereto. :n a letter of Villaflor dated 23 .anuary 18;0$ addressed to the /ureau of ,ands$ he informed the /ureau )irector that he was already occu!ying the !ro!erty when the /ureau?s 'gusan 7i+er Valley #ubdi+ision (roAect was inaugurated$ that the !ro!erty was formerly claimed as !ri+ate !ro!erty$ and that therefore$ the !ro!erty was segregated or e2cluded from dis!osition because of the claim of !ri+ate ownershi!. ,iCewise$ in a letter of 5asi!it ,umber dated 22 "ebruary 18;0 addressed to the )irector of ,ands$ the cor!oration informed the /ureau that it recognized Villaflor as the real owner$ claimant and occu!ant of the landG that since .une 18&0$ Villaflor leased 2 hectares inside the land to the com!anyG that it has no other interest on the landG and that the #ales '!!lication of Villaflor should be gi+en fa+orable consideration. 6n 2& .uly 18;0$ the scheduled date of auction of the !ro!erty co+ered by the #ales '!!lication$ 5asi!it ,umber offered the highest bid of (&1.00 !er hectare$ but since an a!!licant under -' 1&1$ is allowed to e9ual the bid of the highest bidder$ Villaflor tendered an e9ual bid$ de!osited the e9ui+alent of 10I of the bid !rice and then !aid the assessment in full. 6n 10 'ugust 18;0$ Villaflor e2ecuted a document$ denominated as a <)eed of 7elin9uishment of 7ights$= in fa+or on 5asi!it ,umber$ in consideration of the amount of (;$000 that was to be reimbursed to the former re!resenting !art of the !urchase !rice of the land$ the +alue of the im!ro+ements Villaflor introduced thereon$ and the e2!enses incurred in the !ublication of the 5otice of #aleG in light of his difficulty to de+elo! the same as Villaflor has mo+ed to Manila. (ursuant thereto$ on 10 'ugust 18;0$ 5asi!it ,umber filed a #ales '!!lication o+er the 2 !arcels of land$ co+ering an area of 1&0 hectares$ more or less. This a!!lication was also numbered V%@03. 6n 13 'ugust 18;0 the )irector of ,ands issued an <6rder of 'ward= in fa+or of 5asi!it ,umberG and its a!!lication was entered in the record as #ales Bntry V%&03. 6n 23 5o+ember 1833$ Villafor wrote a letter to 5asi!it ,umber$ reminding the latter of their +erbal agreement in 18;;G but the new set of cor!orate officers refused to recognize Villaflor?s claim. :n a formal !rotest dated 31 .anuary 183& which Villaflor filed with the /ureau of ,ands$ he !rotested the #ales '!!lication of 5asi!it ,umber$ claiming that the com!any has not !aid him (;$000.00 as !ro+ided in the )eed of 7elin9uishment of 7ights dated 10 'ugust 18;0. 6n @ 'ugust 1833$ the )irector of ,ands found that the !ayment of the amount of (;$000.00 in the )eed and the consideration in the 'greement
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to #ell were duly !ro+en$ and ordered the dismissal of Villaflor?s !rotest.
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6n 0 .uly 183@$ Villaflor filed a com!laint in the trial court for <)eclaration of 5ullity of -ontract ()eed of 7elin9uishment of 7ights)$ 7eco+ery of (ossession (of two !arcels of land subAect of the contract)$ and )amages= at about the same time that he a!!ealed the decision of the Minister of 5atural 7esources to the 6ffice of the (resident. 6n 2@ .anuary 18@3$ he died. The trial court ordered his widow$ ,ourdes ). Villaflor$ to be substituted as !etitioner. 'fter trial in due course$ the then -": 'gusan del 5orte and /utuan -ity$ /ranch :::$ dismissed the com!laint on the grounds that4 (1) !etitioner admitted the due e2ecution and genuineness of the contract and was esto!!ed from !ro+ing its nullity$ (2) the +erbal lease agreements were unenforceable under 'rticle 1&03 (2)(e) of the -i+il -ode$ and (3) his causes of action were barred by e2tincti+e !rescri!tion andDor laches. :t ruled that there was !rescri!tion andDor laches because the alleged +erbal lease ended in 1800$ but the action was filed only on 0 .anuary 183@. The 0%year !eriod within which to file an action on an oral contract !er 'rticle 11&; (1) of the -i+il -ode e2!ired in 1832. 5asi!it ,umber was declared the lawful owner and actual !hysical !ossessor of the 2 !arcels of land (containing a total area of 100 hectares). The 'greements to #ell 7eal 7ights and the )eed of 7elin9uishment of 7ights o+er the 2 !arcels were liCewise declared binding between the !arties$ their successors and assignsG with double costs against Villaflor. The heirs of !etitioner a!!ealed to the -ourt of '!!eals which$ howe+er$ rendered Audgment against them +ia the assailed )ecision dated 23 #e!tember 1880 finding !etitioner?s !rayers J (1) for the declaration of nullity of the deed of relin9uishment$ (2) for the e+iction of !ri+ate res!ondent from the !ro!erty and (3) for the declaration of !etitioner?s heirs as owners J to be without basis. 5ot satisfied$ !etitioner?s heirs filed the !etition for re+iew dated 3 )ecember 1880. :n a 7esolution dated 23 .une 1881$ the -ourt denied this !etition <for being late.= 6n reconsideration$ the -ourt reinstated the !etition. The #u!reme -ourt dismissed the !etition. ( -octrine o& "rimary @urisdiction? Court does not inter&ere i& =uestion is Bithin @urisdiction o& an administrative tribunal *nderlying the rulings of the trial and a!!ellate courts is the doctrine of !rimary AurisdictionG i.e.$ courts cannot and will not resol+e a contro+ersy in+ol+ing a 9uestion which is within the Aurisdiction of an administrati+e tribunal$ es!ecially where the 9uestion demands the e2ercise of sound administrati+e discretion re9uiring the s!ecial Cnowledge$ e2!erience and ser+ices of the administrati+e tribunal to determine technical and intricate matters of fact. :n cases where the doctrine of !rimary Aurisdiction is clearly a!!licable$ the court cannot arrogate unto itself the authority to resol+e a contro+ersy$ the Aurisdiction o+er which is initially lodged with an administrati+e body of s!ecial com!etence. 2 -octrine o& "rimary @urisdiction? may a""ly even to =uestions Bhich are @udicial character :t has been the Auris!rudential trend to a!!ly the doctrine to cases in+ol+ing matters that demand the s!ecial com!etence of administrati+e agencies e+en if the 9uestion in+ol+ed is also Audicial in character. :t a!!lies <where a claim is originally cognizable in the courts$ and comes into !lay whene+er enforcement of the claim re9uires the resolution of issues which$ under a regulatory scheme$ ha+e been !laced within the s!ecial com!etence of an administrati+e bodyG in such case$ the Audicial !rocess is sus!ended !ending referral of such issues to the administrati+e body for its +iew.= 3 -octrine o& "rimary @urisdiction? cases :n /achete vs. Court of Appeals$ the -ourt u!held the !rimary Aurisdiction of the )e!artment of 'grarian 7eform 'dAudicatory /oard ()'7'/) in an agrarian dis!ute o+er the !ayment of bacC rentals under a leasehold contract. :n Concerne$ Afficials of the /etropolitan &ater-or;s an$ 'e-erage 'yste# vs. 2asBue0, the -ourt recognized that the M>## was in the best !osition to e+aluate and to decide which bid for a waterworCs !roAect was com!atible with its de+elo!ment !lan. :n the !resent case$ the 9uestions on the identity of the land in dis!ute and the factual 9ualification of !ri+ate res!ondent as an awardee of a sales a!!lication re9uire a technical determination by the /ureau of ,ands as the administrati+e agency with the
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e2!ertise to determine such matters. /ecause these issues !reclude !rior Audicial determination$ it behoo+es the courts to stand aside e+en when they a!!arently ha+e statutory !ower to !roceed$ in recognition of the !rimary Aurisdiction of the administrati+e agency. * 8nter"retation o& contracts and determination o& "rivate ri$hts no lon$er uni=uely @udicial &unction 6ne thrust of the multi!lication of administrati+e agencies is that the inter!retation of contracts and the determination of !ri+ate rights thereunder is no longer a uni9uely Audicial function$ e2ercisable only by our regular courts. / !rimary @urisdiction o& director o& lands and minister or natural resources re$ardin$ identity o& dis"uted land and =uali&ication o& aBardee o& a sales "atent The !rimary Aurisdiction of the director of lands and the minister of natural resources o+er the issues regarding the identity of the dis!uted land and the 9ualification of an awardee of a sales !atent is established by #ections 3 and & of -' 1&1$ also Cnown as the (ublic ,and 'ct. #ection 3 of said act !ro+ides that <the #ecretary of 'griculture and -ommerce (now #ecretary of 5atural 7esources) shall be the e2ecuti+e officer charged with carrying out the !ro+isions of this 'ct through the )irector of ,ands$ who shall act under his immediate control.= #ection & !ro+ides that <subAect to said control$ the )irector of ,ands shall ha+e direct e2ecuti+e control of the sur+ey$ classification$ lease$ sale or any other form of concession or dis!osition and management of the lands of the !ublic domain$ and his decision as to 9uestions of fact shall be conclusi+e when a!!ro+ed by the #ecretary of 'griculture and -ommerce.= #ections 3 and & of the (ublic ,and ,aw mean that the #ecretary of 'griculture and 5atural 7esources shall be the final arbiter on 9uestions of fact in !ublic land conflicts &Bei#s o" Ea#ela vs. A9uino, $% *+il 1'D :ulian vs. A,ostol, 02 *+il 442(. The #u!reme -ourt has recognized that the )irector of ,ands is a 9uasi%Audicial officer who !asses on issues of mi2ed facts and law &3#tua vs. .ingson Enca#nacion, 0' *+il 440(. 5 3indin$ o& &act by administrative a$ency accorded $reat res"ect 7eliance by the trial and the a!!ellate courts on the factual findings of the )irector of ,ands and the Minister of 5atural 7esources is not mis!laced. /y reason of the s!ecial Cnowledge and e2!ertise of said administrati+e agencies o+er matters falling under their Aurisdiction$ they are in a better !osition to !ass Audgment thereonG thus$ their findings of fact in that regard are generally accorded great res!ect$ if not finality$ by the courts. The findings of fact of an administrati+e agency must be res!ected as long as they are su!!orted by substantial e+idence$ e+en if such e+idence might not be o+erwhelming or e+en !re!onderant. :t is not the tasC of an a!!ellate court to weigh once more the e+idence submitted before the administrati+e body and to substitute its own Audgment for that of the administrati+e agency in res!ect of sufficiency of e+idence. , 3indin$ o& &act by administrative a$ency accorded $reat res"ect ? 74ce"tion to the rule The rule that factual findings of an administrati+e agency are accorded res!ect and e+en finality by courts admits of e2ce!tions. This is true also in assessing factual findings of lower courts. :t is incumbent on the !etitioner to show that the resolution of the factual issues by the administrati+e agency andDor by the trial court falls under any of the e2ce!tions. 6therwise$ this -ourt will not disturb such findings. ) !ublic land? ;ack o& %echnical descri"tion does not "rove that the &indin$s lacked substantial evidence The lacC of technical descri!tion did not !ro+e that the finding of the )irector of ,ands lacCed substantial e+idence. The e+idence adduced by !etitioner to establish his claim of ownershi! o+er the subAect area consists of deeds of absolute sale e2ecuted in his fa+or. 1owe+er$ an e2amination of the technical descri!tions of the tracts of land subAect of the deeds of sale will disclose that said !arcels are not identical to$ and do not tally with$ the area in contro+ersy.
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!ublic land? !ro"erty admitted to be "ublic+ cannot noB be claimed otherBise
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The !ro+ision of the law is s!ecific that !ublic lands can only be ac9uired in the manner !ro+ided for therein and not otherwise (#ec. 11$ -'. 5o. 1&1$ as amended). :n his sales a!!lication$ !etitioner e2!ressly admitted that said !ro!erty was !ublic land. This is formidable e+idence as it amounts to an admission against interest. The records show that Villaflor had a!!lied for the !urchase of lands in 9uestion with this 6ffice (#ales '!!lication V%@03) on 2 )ecember 8&@. There is a condition in the sales a!!lication to the effect that he recognizes that the land co+ered by the same is of !ublic domain and any and all rights he may ha+e with res!ect thereto by +irtue of continuous occu!ation and culti+ation are relin9uished to the o+ernment of which Villaflor is +ery much aware. :t also a!!ears that Villaflor had !aid for the !ublication fees a!!urtenant to the sale of the land. 1e !artici!ated in the !ublic auction where he was declared the successful bidder. 1e had fully !aid the !urchase !rice thereof. :t would be a height of absurdity for Villaflor to be buying that which is owned by him if his claim of !ri+ate ownershi! thereof is to be belie+ed. The area in dis!ute is not the !ri+ate !ro!erty of the !etitioner. (0 ;ands belon$ to the state+ unless alienated :t is a basic assum!tion of !ublic !olicy that lands of whate+er classification belong to the state. *nless alienated in accordance with law$ it retains its rights o+er the same as dominus. &Santiago vs. 8e los Santos, 522024%, 7ove6be# 22, %'$4, 1% SCRA %02( . 5o !ublic land can be ac9uired by !ri+ate !ersons without any grant$ e2!ress or im!lied from the go+ernment. :t is indis!ensable then that there be showing of title from the state or any other mode of ac9uisition recognized by law. &5ee Bong Bo/, et al. vs. Davi8, et al., 523038', Dece6be# 2$, %'$2, 48 SCRA 3$'(. (( 3ilin$ o& sales a""lication acknoBled$es that the land is not the "rivate "ro"erty o& the a""licant 's such sales a!!licant manifestly acCnowledged that he does not own the land and that the same is a !ublic land under the administration of the /ureau of ,ands$ to which the a!!lication was submitted$ all of its acts !rior thereof$ including its real estate ta2 declarations$ characterized its !ossessions of the land as that of a <sales a!!licant=. 'nd conse9uently$ as one who e2!ects to buy it$ but has not as yet done so$ and is not$ therefore$ its owner. &*ala@an Ag#icultu#al an8 -n8ust#ial Co., -nc. vs. Di#ecto# o" 5an8s, 5220'%4, !a#c+ 2%, %'$2, 44 SCRA %0(. (2 #ule on the inter"retation o& contracts is used in a&&irmin$+ not ne$atin$+ their validity The rule on the inter!retation of contracts ('rticle 1331) is used in affirming$ not negating$ their +alidity. 'rticle 1333$ which is a conAunct of 'rticle 1331$ !ro+ides that$ if the instrument is susce!tible of two or more inter!retations$ the inter!retation which will maCe it +alid and effectual should be ado!ted. :n this light$ it is not difficult to understand that the legal basis urged by !etitioner does not su!!ort his allegation that the contracts to sell and the deed of relin9uishment are simulated and fictitious. (3 Simulation not e4istin$ in the "resent case #imulation occurs when an a!!arent contract is a declaration of a fictitious will$ deliberately made by agreement of the !arties$ in order to !roduce$ for the !ur!ose of dece!tion$ the a!!earance of a Auridical act which does not e2ist or is different from that which was really e2ecuted. #uch an intention is not a!!arent in the agreements. The intent to sell$ on the other hand$ is as clear as daylight. The fact$ that the agreement to sell (3 )ecember 18&@) did not absolutely transfer ownershi! of the land to !ri+ate res!ondent$ does not show that the agreement was simulated. (etitioner?s deli+ery of the -ertificate of 6wnershi! and e2ecution of the deed of absolute sale were sus!ensi+e conditions$ which ga+e rise to a corres!onding obligation on the !art of the !ri+ate res!ondent$ i.e.$ the !ayment of the last installment of the consideration mentioned in the 'greement. #uch conditions did not affect the !erfection of the contract or !ro+e simulation. (* Non"ayment o& the consideration does not "rove simulation 5on!ayment$ at most$ gi+es the +endor only the right to sue for collection.
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enerally$ in a contract
of sale$ !ayment of the !rice is a resolutory condition and the remedy of the seller is to e2act fulfillment or$ in
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case of a substantial breach$ to rescind the contract under 'rticle 1181 of the -i+il -ode. 1owe+er$ failure to !ay is not e+en a breach$ but merely an e+ent which !re+ents the +endor?s obligation to con+ey title from ac9uiring binding force. (/ <urden o& "roo& rests u"on the "arty Bho asserts the a&&irmative o& an issue (rior to the amendment of the rules on e+idence on March 1&$ 18@8$ #ection 1$ 7ule 131$ states that each !arty must !ro+e his or her own affirmati+e allegations. Thus$ the burden of !roof in any cause rested u!on the !arty who$ as determined by the !leadings or the nature of the case$ asserts the affirmati+e of an issue and remains there until the termination of the action. 'lthough non!ayment is a negati+e fact which need not be !ro+ed$ the !arty seeCing !ayment is still re9uired to !ro+e the e2istence of the debt and the fact that it is already due. (etitioner showed the e2istence of the obligation with the !resentation of the contracts$ but did not !resent any e+idence that he demanded !ayment from !ri+ate res!ondent. The demand letters dated .anuary 2 and ;$ 183&$ adduced in e+idence by !etitioner$ were for the !ayment of bacC rentals$ damages to im!ro+ements and reimbursement of ac9uisition costs and realty ta2es$ not !ayment arising from the contract to sell. (5 ;ack o& Notice o& the ABard not a su""ression o& evidence The lacC of notice for !etitioner (not listed as one of the !arties to furnished a co!y by the )irector of ,ands) can be easily e2!lained. (etitioner was not entitled to said notice of award from the )irector of ,ands$ because by then$ he had already relin9uished his rights to the dis!uted land in fa+or of !ri+ate res!ondent. :n the heading of the order$ he was referred to as sales a!!licant%assignor. :n !aragra!h number &$ the order stated that$ on 10 'ugust 18;0$ he relin9uished his rights to the land subAect of the award to !ri+ate res!ondent. "rom such date$ the sales a!!lication was considered to be a matter between the /ureau of ,ands and !ri+ate res!ondent only. -onsidering these facts$ the failure to gi+e !etitioner a co!y of the notice of the award cannot be considered as su!!ression of e+idence. "urthermore$ this order was in fact a+ailable to !etitioner and had been referred to by him since 31 .anuary 183& when he filed his !rotest with the /ureau of ,ands. (, (*( #e=uirement &or a sales a""lication under CA
The re9uirements for a sales a!!lication under the (ublic ,and 'ct are4 (1) the !ossession of the 9ualifications re9uired by said 'ct (under #ection 28) and (2) the lacC of the dis9ualifications mentioned therein (under #ections 121$ 122$ and 123). #ection 121 of the 'ct !ertains to ac9uisitions of !ublic land by a cor!oration from a grantee4 The !ri+ate res!ondent$ not the !etitioner$ was the direct grantee of the dis!uted land. #ections 122 and 123 dis9ualify cor!orations$ which are not authorized by their charter$ from ac9uiring !ublic landG the records do not show that !ri+ate res!ondent was not so authorized under its charter. () -etermination o& =uali&ication o& a""licant included in the "oBers to dis"ose "ublic lands :n Bs!inosa +s. MaCalintal$ the -ourt ruled that$ by law$ the !owers of the #ecretary of 'griculture and 5atural 7esources regarding the dis!osition of !ublic lands J including the a!!ro+al$ reAection$ and reinstatement of a!!lications J are of e2ecuti+e and administrati+e nature. (#uch !owers$ howe+er$ do not include the Audicial !ower to decide contro+ersies arising from disagreements in ci+il or contractual relations between the litigants.) -onse9uently$ the determination of whether !ri+ate res!ondent is 9ualified to become an awardee of !ublic land under -' 1&1 by sales a!!lication is included therein. (. !rohibition o& (.,3 Constitution a$ainst the holdin$ o& "ublic alienable lands by cor"oration not retroactive
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:n Ayog vs. Cusi, Cr.$ the -ourt ruled that the constitutional !rohibition of the 1833 -onstitution against the holding of alienable lands of the !ublic domain by cor!orations had no retroacti+e effect and could not !re+ail o+er a +ested right to the land. Vested rights ha+e to be res!ected. :t could not be abrogated by the new -onstitution. #ection 2$ 'rticle R::: of the 183; -onstitution allowed !ri+ate cor!orations to !urchase !ublic agricultural lands not e2ceeding 1$02& hectares. 'ction for !rohibition is barred by the doctrine of
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+ested rights in constitutional law. 20 Vested ri$ht ' right is +ested when the right to enAoyment has become the !ro!erty of some !articular !erson or !ersons as a !resent interest. :t is the !ri+ilege to enAoy !ro!erty legally +ested$ to enforce contracts$ and enAoy the rights of !ro!erty conferred by e2isting law or some right or interest in !ro!erty which has become fi2ed and established and is no longer o!en to doubt or contro+ersy &Do@ns vs. .lount, %$0 )e8. %0, 20, cite8 in .alboa vs. )a##ales, 0% *+il, 4'8, 002(. enerally$ the term <+ested right= e2!resses the conce!t of !resent fi2ed interest$ which in right reason and natural Austice should be !rotected against arbitrary #tate action$ or an innately Aust and im!erati+e right which an enlightened free society$ sensiti+e to inherent and irrefragable indi+idual rights$ cannot deny &%1 C.:.S. %%$4, 7ote $%, 7o. 0, citing *ennsylvania ;#ey+oun8 5ines, -nc. vs. Rosent+al, %'2 At. 2n8 08$(. 2( -ue "rocess "rohibits annihilation o& vested ri$hts The due !rocess clause !rohibits the annihilation of +ested rights. ' state may not im!air +ested rights by legislati+e enactment$ by the enactment or by the subse9uent re!eal of a munici!al ordinance$ or by a change in the constitution of the #tate$ e2ce!t in a legitimate e2ercise of the !olice !ower. 22 Vested interest in sales a""lication? 2"inions o& the Secretary o& 6ustice :n 6!inion 0&$ series of 1833$ the #ecretary of .ustice held that where the a!!licant$ before the -onstitution tooC effect$ had fully com!lied with all his obligations under the (ublic ,and 'ct in order to entitle him to a sales !atent$ there would seem to be no legal or e9uitable Austification for refusing to issue or release the sales !atent. :n 6!inion 1&0$ series of 183&$ the #ecretary of .ustice held that as soon as the a!!licant had fulfilled the construction or culti+ation re9uirements and has fully !aid the !urchase !rice$ he should be deemed to ha+e ac9uired by !urchase the !articular tract of land and to him the area limitation in the new -onstitution would not a!!ly. :n 6!inion 1@;$ series of 1830$ the #ecretary of .ustice held that where the culti+ation re9uirements were fulfilled before the new -onstitution tooC effect but the full !ayment of the !rice was com!leted after 13 .anuary 1833$ the a!!licant was$ ne+ertheless$ entitled to a sales !atent. 23 74ecutive construction $iven $reat res"ect ' contem!oraneous construction of the constitutional !rohibition by a high e2ecuti+e official carries great weight and should be accorded much res!ect. :t is a correct inter!retation of section 11 of 'rticle R:V. 2* 8m"lementation o& -26 2"inion 5*+ s (.,3? Sales a""lication &or &ish"onds and &or a$ricultural use :m!lementing 6!inion 0&$ the then #ecretary of 'griculture and 5atural 7esources issued a memorandum$ dated 1@ "ebruary 183&$ !ro+iding that sales a!!lication of !ri+ate indi+iduals co+ering areas in e2cess of 2& hectares and those of cor!orations$ associations$ or !artnershi! which fall under any of the following categories shall be gi+en due course and issued !atents$ to wit4 #ales a!!lication for fish!onds and for agricultural !ur!oses (#"'$ #' and : (#') wherein !rior to 13 .anuary 1833$ the land co+ered thereby was awardedG culti+ation re9uirements of law were com!lied with as shown by in+estigation re!orts submitted !rior to 13 .anuary 1833G land was sur+eyed and sur+ey returns already submitted to the )irector of ,ands for +erification and a!!ro+alG and !urchase !rice was fully !aid. '((50 Villamor vs CA 'G # No .,332 2ctober (0+ (..( 0 "irst )i+ision$ Medialdea (.)4 2 concur$ 1 tooC no !art 3actsH Macaria ,abingisa 7eyes was the owner of a 000%s9uare meter lot located at /aesa$ -aloocan -ity
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(T-T K1@&31L 1@83@$ 7egister of )eeds of 7izal). :n .uly 1831$ Macaria sold a !ortion of 300 s9. ms. of the
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lot to the #!ouses .ulio and Marina Villamor for the total amount of (21$000.00. Barlier$ Macaria borrowed (2$000.00 from the s!ouses which amount was deducted from the total !urchase !rice of the 300 s9. m. lot sold. The !ortion sold to the Villamor s!ouses is now co+ered by T-T 3883; while the remaining !ortion which is still in the name of Macaria ,abingisa% is co+ered by T-T 3883&. 6n 11 5o+ember 1831$ Macaria e2ecuted a <)eed of o!tion= in fa+or of Villamor in which the remaining 300 s9. m. !ortion (T-T 5o. 3883&) of the lot would be sold to Villamor under the conditions stated therein. 'ccording to Macaria$ when her husband$ 7oberto 7eyes$ retired in 18@&$ they offered to re!urchase the lot sold by them to the Villamor s!ouses but Marina Villamor refused and reminded them instead that the )eed of 6!tion in fact ga+e them the o!tion to !urchase the remaining !ortion of the lot. The Villamors$ on the other hand$ claimed that they had e2!ressed their desire to !urchase the remaining 300 s9. m. !ortion of the lot but the 7eyes had been ignoring them. 6n 13 .uly 18@3$ after conciliation !roceedings in the barangay le+el failed$ the Villamors filed a com!laint for s!ecific !erformance against the 7eyes before the 7T- -aloocan -ity (/ranch 121$ -i+il -ase -%128&2). 6n 20 .uly 18@8$ Audgment was rendered by the trial court in fa+or of the Villamor s!ouses$ ordering the 7eyeses to sell the land to the Villamors$ to !ay the the latter the sum of (3$000 as attorney?s fees$ and to !ay the cost of suit. The court dismissed the counterclaim for lacC of merit. 5ot satisfied with the decision of the trial court$ the 7eyes s!ouses a!!ealed to the -ourt of '!!eals (-'% 7 -V 2&130). 6n 12 "ebruary 1881$ the -ourt of '!!eals rendered a decision re+ersing the decision of the trial court and dismissing the com!laint. The re+ersal of the trial court?s decision was !remised on the finding of res!ondent court that the )eed of 6!tion is +oid for lacC of consideration. The Villamor s!ouses brought the !etition for re+iew on certiorari before the #u!reme -ourt. The #u!reme -ourt denied the !etition$ affirmed the decision of the a!!ellate court for reasons cited in the decision$ and dismissed the com!laint in -i+il -ase -%128&2 on the ground of !rescri!tion and laches. ( Consideration de&ined 's e2!ressed in "on0ales v. +rini$a$ (03 (hil. 0@2)$ consideration is <the why of the contracts$ the essential reason which mo+es the contracting !arties to enter into the contract.= :n the !resent case$ the cause or the im!elling reason on the !art of !ri+ate res!ondent in e2ecuting the deed of o!tion as a!!earing in the deed itself is the Villamors? ha+ing agreed to buy the 300 s9. m. !ortion of 7eyes s!ouses? land at (30.00 !er s9. m. <which was greatly higher than the actual reasonable !re+ailing !rice.= This cause or consideration is clear from the deed which stated <that the only reason why the s!ouses%+endees .ulio Villamor and Marina V Villamor agreed to buy the said one%half !ortion at the abo+e stated !rice of about (30.00 !er s9uare meter$ is because :$ and my husband 7oberto 7eyes$ ha+e agreed to sell and con+ey to them the remaining one%half !ortion still owned by me . . .= :t must be noted that in 1808 the Villamor s!ouses bought an adAacent lot from the brother of Macaria ,abing%isa for only (1@.00 !er s9uare meter$ such fact not being rebutted by Macaria. Thus$ e2!ressed in terms of money$ the consideration for the deed of o!tion is the difference between the !urchase !rice of the 300 s9. m. !ortion of the lot in 1831 ((30.00 !er s9. m.) and the !re+ailing reasonable !rice of the same lot in 1831. >hate+er it is$ ((2;.00 or (1@.00) though not s!ecifically stated in the deed of o!tion$ was ascertainable. Villamors? allegedly !aying (;2.00 !er s9uare meter for the o!tion may$ as o!ined by the a!!ellate court$ be im!robable but im!robabilities does not in+alidate a contract freely entered into by the !arties. 2 2"tion contract de&ined 'n o!tional contract is a !ri+ilege e2isting in one !erson$ for which he had !aid a consideration and which gi+es him the right to buy$ for e2am!le$ certain merchandise or certain s!ecified !ro!erty$ from another !erson$ if he chooses$ at any time within the agreed !eriod at a fi2ed !rice (Bnri9uez de la -a+ada +. )iaz$ 33 (hil. 8@2).
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-eed o& o"tion uni=ue? $rants o"tion to sell to both the Villamors and the #eyeses The <deed of o!tion= entered into by the !arties in the !resent case had uni9ue features. The first !art co+ered the statement on the sale of the 300 s9. m. !ortion of the lot to #!ouses Villamor at the !rice of (30 !er s9. m. Hwhich was higher than the actual reasonable !re+ailing +alue of the lands in that !lace at that time (of sale).= The second !art stated that the only reason why the Villamor s!ouses agreed to buy the said lot at a much higher !rice is because the +endor (7eyes) also agreed to sell to the Villamors the other half%!ortion of 300 s9uare meters of the land. 1ad the deed sto!!ed there$ there would be no dis!ute that the deed is really an ordinary deed of o!tion granting the Villamors the o!tion to buy the remaining 300 s9. m.%half !ortion of the lot in consideration for their ha+ing agreed to buy the other half of the land for a much higher !rice. /ut$ the <deed of o!tion= went on and stated that the sale of the other half would be made <whene+er the need of such sale arises$ either on our (7eyes) !art or on the !art of the #!ouses .ulio Villamor and Marina V. Villamor. :t was not only the Villamors who were granted an o!tion to buy for which they !aid a consideration. The 7eyes as well were granted an o!tion to sell should the need for such sale on their !art arise. * 2&&er and Acce"tance :n the !resent case$ the o!tion offered by the 7eyeses had been acce!ted by the Villamors$ the !romises$ in the same document. The acce!tance of an offer to sell for a !rice certain created a bilateral contract to sell and buy and u!on acce!tance$ the offered$ i!so facto assumes obligations of a +endee (#ee 'tCins$ Eroll Q -o. +. -ua Mian TeC$ 102 (hil. 8&@). / !er&ection o& contract o& sale? -emandability ' contract of sale is$ under 'rticle 1&3; of the -i+il -ode$ <!erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice. "rom that moment$ the !arties may reci!rocally demand !erformance$ subAect to the !ro+isions of the law go+erning the form of contracts.= #ince there was$ between the !arties$ a meeting of minds u!on the obAect and the !rice$ there was already a !erfected contract of sale. >hat was$ howe+er$ left to be done was for either !arty to demand from the other their res!ecti+e undertaCings under the contract. :n #anchez +. 7igos$ 5o. ,%2;&8&$ .une 1&$ 1832$ &; #-7' 30@$ 330$ it was held that < since there may be no +alid contract without a cause of consideration$ the !romisor is not bound by his !romise and may$ accordingly withdraw it. (ending notice of its withdrawal$ his acce!ted !romise !artaCes$ howe+er$ of the nature of an offer to sell which$ if acce!ted$ results in a !erfected contract of sale.= :n the !resent case$ demandability may be e2ercised at any time after the e2ecution of the deed. The 7eyeses may com!el the Villamors to !ay for the !ro!erty or that the latter may com!el the former to deli+er the !ro!erty. 5 -eed o& 2"tion does not "rovide &or "eriod &or both "arties to demand "er&ormance o& undertakin$+ renders contract ine&&ective The )eed of 6!tion did not !ro+ide for the !eriod within which the !arties may demand the !erformance of their res!ecti+e undertaCings in the instrument. The !arties could not ha+e contem!lated that the deli+ery of the !ro!erty and the !ayment thereof could be made indefinitely and render uncertain the status of the land. The failure of either !arties to demand !erformance of the obligation of the other for an
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unreasonable length of time renders the contract ineffecti+e. , !rescri"tion o& actions u"on Britten contracts *nder 'rticle 11&& (1) of the -i+il -ode$ actions u!on a written contract must be brought within 10 years. The )eed of 6!tion was e2ecuted on 11 5o+ember 1831. The acce!tance$ as already mentioned$ was also acce!ted in the same instrument. The com!laint in this case was filed by the Villamors on 13 .uly 18@3$ 13 years from the time of the e2ecution of the contract. 1ence$ the right of action had !rescribed. There were allegations by the Villamors that they demanded from the 7eyeses as early as 18@& the enforcement of their rights under the contract. #till$ it was beyond the 10 year !eriod !rescribed by the -i+il -ode. (#ee also #antos +s. enayo$ ,%31@;&$ 8 #e!tember 18@2$ 110 #-7' &314 bar by laches)
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Court in e4ercise o& its e=uity @urisdiction :t is of Audicial notice that the !rice of real estate in Metro Manila is continuously on the rise. To allow the !etitioner to demand the deli+ery of the !ro!erty subAect 13 years or 13 years after the e2ecution of the deed at the !rice of only (30 !er s9. m. is ine9uitous. "or reasons also of e9uity and in consideration of the fact that the 7eyeses ha+e no other decent !lace to li+e$ the -ourt$ in the e2ercise of its e9uity Aurisdiction is not inclined to grant Villamor?s !rayer. '((,0 Villonco #ealty vs <ormaheco 8nc 'G # No ;-25),2 6uly 2/+ (.,/ 0 Bn /anc$ '9uino (.)4 8 concur$ 1 on lea+e 3actsH "rancisco 5. -er+antes and his wife$ 7osario (. 5a+arra%-er+antes$ are the owners of ,ots 3$ 1; and 10 located at 2&; /uendia '+enue$ MaCati$ 7izal with a total area of 3$;00 s9.ms. (T-Ts &3;30$ &3;31 and &3;32). The lots were mortgaged to the )e+elo!ment /anC of the (hili!!ines ()/() on 21 '!ril 18;8 as security for a loan of (&&1$000. The mortgage debt was fully !aid on 10 .uly 1808. -er+antes is the !resident of /ormaheco$ :nc.$ a dealer and im!orter of industrial and agricultural machinery. The entire three lots are occu!ied by the building$ machinery and e9ui!ment of /ormaheco$ :nc. and are adAacent to the !ro!erty of Villonco 7ealty -om!any situated at 218 /uendia '+enue. 7=egotiations9 :n the early !art of "ebruary 180& there were negotiations for the sale of the said lots and the im!ro+ements thereon between 7omeo Villonco of Villonco 7ealty -om!any <and /ormaheco$ :nc.$ re!resented by its !resident$ "rancisco 5. -er+antes$ through the inter+ention of Bdith (erez de Tagle$ a real estate%broCer=. :n the course of the negotiations$ the brothers 7omeo and Teofilo Villonco conferred with -er+antes in his office to discuss the !rice and terms of the sale. ,ater$ -er+antes <went to see Villonco for the same reason until some agreement= was arri+ed at. 6n a subse9uent occasion$ -er+antes$ accom!anied by Bdith (erez de Tagle$ discussed again the terms of the sale with Villonco. )uring the negotiations$ Villonco 7ealty -om!any assumed that the lots belonged to /ormaheco and that -er+antes was duly authorized to sell the same. -er+antes did not disclose to the broCer and to Villonco 7ealty that the lots were conAugal !ro!erties of himself and his wife and that they were mortgaged to the )/(. /ormaheco$ through -er+antes$ made a written offer dated 12 "ebruary 180&$ to 7omeo Villonco for the sale of the !ro!erty (sti!ulating !rice at (&00Ds9.m.$ de!osit of (100$000 in earnest money$ consummation !ending /ormaheco?s !urchase of !ro!erty in #ta. 'na Manila$ the final negotiations on both !ro!erties Cnown after &; days). The !ro!erty mentioned in /ormaheco?s letter was the land of the 5ational #hi!yards Q #teel -or!oration (5assco)$ with an area of 20$000 s9.ms.$ located at (unta$ #ta. 'na$ Manila. 't the bidding held on 13 .anuary 180& that land was awarded to /ormaheco$ the highest bidder$ for the !rice of (;;2$000. The 5assco /oard of )irectors in its resolution of 1@ "ebruary 180& authorized the eneral Manager to sign the necessary contract. 6n 2@ "ebruary 180&$ the 5assco 'cting eneral Manager wrote a letter to the Bconomic -oordinator$ re9uesting a!!ro+al of that resolution. The 'cting Bconomic -oordinator a!!ro+ed the resolution on 2& March 180&. Meanwhile$ /ormaheco and Villonco 7ealty continued their negotiations for the sale of the /uendia '+enue !ro!erty. -er+antes and Teofilo Villonco had a final conference on 23 "ebruary 180&. 's a result of that conference Villonco 7ealty$ in its letter of & March 180& made a re+ised counter%offer (7omeo Villonco?s first counter%offer was dated 2& "ebruary 180&) for the !urchase of the !ro!erty. 7Perfection9 The counter%offer was acce!ted by -er+antes (sti!ulating interest of 10I of the amount tendered in case the #ta. 'na !urchase does not !ush through$ down!ayment at (0;0$000 and the balance !ayable e+ery 3 months in & !ayments K(100$000$ (12;$000$ (212$;00$ and (212$;00L). Bnclosed to it was a M/T- -hecC worth (100$000 as earnest money. The checC for (100$000 was deli+ered by (erez de Tagle to /ormaheco on & March 180& and was recei+ed by -er+antes. :n the +oucher%recei!t e+idencing the deli+ery the broCer indicated in her handwriting that the earnest money was <subAect to the
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terms and conditions embodied in /ormaheco?s letter= of "ebruary 12 and Villonco 7ealty -om!any?s letter of & March 180&. 71escission9 *ne2!ectedly$ in a letter dated 30 March 180&$ -er+antes returned the earnest money$ with interest amounting to (08&.2& (at 10I !er annum). -er+antes cited as an e2cuse the circumstance that <des!ite the la!se of &; days from 12 "ebruary 180& there is no certainty yet= for the
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ac9uisition of the (unta !ro!erty. Villonco 7ealty -om!any refused to acce!t the letter and the checCs of /ormaheco. -er+antes sent them by registered mail. >hen he rescinded the contract$ he was already aware that the (unta lot had been awarded to /ormaheco. Bdith (erez de Tagle$ the broCer$ in a letter to -er+antes dated 31 March 180& articulated her shocC and sur!rise at /ormaheco?s turnabout. -er+antes in his letter of 0 '!ril 180&$ a re!ly to Miss Tagle?s letter$ alleged that the &; day !eriod had already e2!ired and the sale to /ormaheco$ :nc. of the (unta !ro!erty had not been consummated. -er+antes said that his letter was a <manifestation that we are no longer interested to sell= the /uendia '+enue !ro!erty to Villonco 7ealty. The latter was furnished with a co!y of that letter. :n a letter dated 3 '!ril 180& Villonco 7ealty -om!any returned the two checCs to /ormaheco$ :nc.$ stating that the condition for the cancellation of the contract had not arisen and at the same time announcing that an action for breach of contract would be filed against /ormaheco. 6n that same date$ 3 '!ril 180& Villonco 7ealty filed the com!laint (dated '!ril 0) for s!ecific !erformance against /ormaheco. ' notice of lis !endens was annotated on the titles of the said lots. /ormaheco in its answers dated ; May and 2; May 180& !leaded the defense that the !erfection of the contract of sale was subAect to the conditions <that final acce!tance or not shall be made after &; days= and that /ormaheco <ac9uires the #ta. 'na !ro!erty=. 6n 2 .une 180& or during the !endency of this case$ the 5assco 'cting eneral Manager wrote to /ormaheco$ :nc.$ ad+ising it that the /oard of )irectors and the Bconomic -oordinator had a!!ro+ed the sale of the (unta lot to /ormaheco and re9uesting the latter to send its duly authorized re!resentati+e to the 5assco for the signing of the deed of sale. The deed of sale for the (unta land was e2ecuted on 20 .une 180&. /ormaheco was re!resented by -er+antes. :n +iew of the disclosure in /ormaheco?s amended answer that the 3 lots were registered in the names of the -er+antes s!ouses and not in the name of /ormaheco$ Villonco 7ealty on 21 .uly 180& filed an amended com!laint im!leading the said s!ouses as defendants. /ormaheco and the -er+antes s!ouses filed se!arate answers. 's of 1; .anuary 180; Villonco 7ealty had !aid to the Manufacturers? /anC Q Trust -om!any the sum of (@$312.2; as interests on the o+erdraft line of (100$000 and the sum of (23.38 as interests daily on the same loan since 10 .anuary 180;. (That o+erdraft line was later settled by Villonco 7ealty on a date not mentioned in its manifestation of 18 "ebruary 183;). Villonco 7ealty had obligated itself to !ay the sum of (20$000 as attorney?s fees to its lawyers. :t claimed that it was damaged in the sum of (10$000 a month from 2& March 180& when the award of the (unta lot to /ormaheco was a!!ro+ed. 6n the other hand$ /ormaheco claimed that it had sustained damages of (200$000 annually due to the notice of lis !endens which had !re+ented it from constructing a multistory building on the 3 lots. Miss Tagle testified that for her ser+ices /ormaheco$ through -er+antes$ obligated itself to !ay her a 3I commission on the !rice of (1$&00$000 or the amount of (&2$000. 'fter trial$ the lower court rendered a decision ordering the -er+antes s!ouses to e2ecute in fa+or of /ormaheco a deed of con+eyance for the 3 lots and directing /ormaheco to con+ey the same lots to Villonco 7ealty$ to !ay the latter$ as conse9uential damages$ the sum of (10$000 monthly from 2& March 180& u! to the consummation of the sale$ to !ay Bdith (erez de Tagle the sum of (&2$000 as broCer?s commission and to !ay (20$000 as attorney?s fees /ormaheco$ :nc. and the -er+antes s!ouses a!!ealed. The #u!reme -ourt tooC cognizance of the a!!eal because the amount in+ol+ed is more than (200$000 and the a!!eal was !erfected before 7' ;&&0 tooC effect on 8 #e!tember 180@. The #u!reme court modified the trial court?s decision by ordering the s!ouses -er+antes$ within 10 days from the date they recei+e notice from the clerC of the lower court that the records of the case ha+e been recei+ed from the #u!reme -ourt$ to e2ecute a deed con+eying to /ormaheco their 3 lots co+ered by
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T-T &3;30$ &3;31 and &3;32 of the 7egistry of )eeds of 7izalG ordering /ormaheco$ within ; days from the e2ecution of such deed of con+eyance$ to e2ecute in fa+or of Villonco 7ealty a registerable deed of sale for the said 3 lots
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and all the im!ro+ements thereon$ free from all lien and encumbrances$ at the !rice of (&00 !er s9.m.$ deducting from the total !urchase !rice the sum of (100$000 !re+iously !aid by Villonco 7ealty -om!any to /ormaheco$ :nc.G and obligating Villonco 7ealty$ u!on the e2ecution of such deed of sale$ to !ay /ormaheco the balance of the !rice in the sum of (1$300$000G and ordering /ormaheco to !ay Villonco 7ealty (20$000 as attorney?s fees and to !ay Bdith (erez de Tagle the sum of (&2$000 as commissionG with costs against Villonco 7ealty. ( Contract o& sale /y the contract of sale one of the contracting !arties obligates himself to transfer the ownershi! of and to deli+er a determining thing$ and the other to !ay therefor a !rice certain in money or its e9ui+alent. ' contract of sale may be absolute or conditional ('rt. 1&;@$ -i+il -ode). 2 !er&ection o& a contract o& sale? !resent case The contract of sale is !erfected at the moment there is a meeting of minds u!on the thing which is the obAect of the contract and u!on the !rice. "rom that moment$ the !arties may reci!rocally demand !erformance$ subAect to the !ro+isions of the law go+erning the form of contracts ('rt. 1&3;$ :bid.). :n the !resent case$ /ormaheco?s acce!tance of Villonco 7ealty?s offer to !urchase the /uendia '+enue !ro!erty$ as shown in Teofilo Villonco?s letter dated & March 180& indubitably !ro+es that there was a meeting of minds u!on the subAect matter and consideration of the sale. Therefore$ on that date the sale was !erfected. (-om!are with Mc-ullough +s. 'enlle Q -o.$ 3 (hil. 2@;G oyena +s. Tambunting$ 1 (hil. &80) 3 !er&ection o& contracts? 7&&ect -ontracts are !erfected by mere consent$ and from that moment the !arties are bound not only to the fulfillment of what has been e2!ressly sti!ulated but also to all the conse9uences which$ according to their nature$ may be in Cee!ing with good faith$ usage and law ('rt. 131;$ -i+il -ode). * ConsentH 2&&er+ counter-o&&er+ acce"tance -onsent is manifested by the meeting of the offer and the acce!tance u!on the thing and the cause which are to constitute the contract. The offer must be certain and the acce!tance absolute. ' 9ualified acce!tance constitutes a counter%offer ('rt. 1318$ -i+il -ode). 'n acce!tance may be e2!ress or im!lied= ('rt. 1320$ -i+il -ode). / !resent contract conditionally consummated or "artly e4ecuted /ormaheco?s acce!tance of the !art !ayment of (100$000 shows that the sale was conditionally consummated or !artly e2ecuted subAect to the !urchase by /ormaheco$ :nc. of the (unta !ro!erty. The non% consummation of that !urchase would be a negati+e resolutory condition (Taylor +s. *y Tieng (iao$ &3 (hil. @33). 5 <orhamecoMs bid already acce"ted by Nassco 6n 1@ "ebruary 180& /ormaheco?s bid for the (unta !ro!erty as already acce!ted by the 5assco which had authorized its eneral Manager to sign the corres!onding deed of sale. >hat was necessary only was the a!!ro+al of the sale by the Bconomic -oordinator and a re9uest for that a!!ro+al was already !ending in the office of that functionary on & March 180&. , u"on #evised counter o&&er not material but are merely clari&ications o& Bhat Bas a$reed
There is no e+idence as to what changes were made by -er+antes in Villonco?s re+ised offer$ and there is no e+idence that Villonco 7ealty did not assent to the su!!osed changes and that such assent was
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ne+er made Cnown to -er+antes. The alleged changes or 9ualifications made by -er+antes were a!!ro+ed by Villonco 7ealty and that such a!!ro+al was duly communicated to -er+antes or /ormaheco by the broCer as shown by the fact that Villonco 7ealty !aid$ and /ormaheco acce!ted$ the sum of (100$000 as earnest money or down !ayment. That crucial fact im!lies that -er+antes was aware that Villonco 7ealty had acce!ted the
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modifications which he had made in Villonco?s counter%offer. 1ad Villonco 7ealty not asserted to those insertions and annotations$ then it would ha+e sto!!ed !ayment on its checC for (100$000. The fact that Villonco 7ealty allowed its checC to be cashed by /ormaheco signifies that the com!any was in conformity with the changes made by -er+antes and that /ormaheco was aware of that conformity. 1ad those insertions not been binding$ then /ormaheco would not ha+e !aid interest at the rate of 10I !er annum on the earnest money of (100$000. The truth is that the alleged changes or 9ualifications in the re+ised counter% offer are not material or are mere clarifications of what the !arties had !re+iously agreed u!on. ) Amendment o& IanotherK instead o& INasscoK in "ara$ra"h 3 o& counter-o&&er is trivial -er+antes allegedly crossed out the word <5assco= in !aragra!h 3 of Villonco?s re+ised counter% offer and substituted for it the word <another= so that the original !hrase <5assco?s !ro!erty in #ta. 'na=$ was made to read as <another !ro!erty in #ta. 'na=. That change is tri+ial. >hat -er+antes did was merely to adhere to the wording of !aragra!h 3 of /ormaheco?s original offer which mentions <another !ro!erty located at #ta. 'na= 1is ob+ious !ur!ose was to a+oid Aeo!ardizing his negotiation with the 5assco for the !urchase of its #ta. 'na !ro!erty by unduly !ublicizing it. :t is noteworthy that -er+antes$ in his letter to the broCer dated 0 '!ril 180& or after the 5assco !ro!erty had been awarded to /ormaheco alluded to the <5assco !ro!erty=. 't that time$ there was no more need of concealing from the !ublic that /ormaheco was interested in the 5assco !ro!erty. . 8nsertion o& letters I!AK not a ma@or alteration+ alternative contem"lation to be monthly or semi-annually Bould be usurious -er+antes? alleged insertion of the letters <('= (!er annum) after the word <interest= in that same !aragra!h 3 of the re+ised counter%offer could not be categorized as a maAor alteration of that counter% offer that !re+ented a meeting of the minds of the !arties. :t was understood that the !arties had contem!lated a rate of 10I !er annum since 10I a month or semi%annually would be usurious. (0 #evised counter-o&&er merely am"li&ies ori$inal o&&er? acce"tance is not =uali&ied and conditional The sti!ulation <subAect to the terms and conditions embodied in /ormaheco?s letter of "ebruary 12$ 180& and your (Villonco?s) letter of March &$ 180&[ does not maCe /ormaheco?s acce!tance <9ualified and conditional=. There is no incom!atibility between /ormaheco?s offer of "ebruary 12$ 180& and Villonco?s counter%offer of March &$ 180& (B2h. )). The re+ised counter%offer merely am!lified /ormaheco?s original offer. (( !ayment o& earnest money "roo& o& "er&ection o& contract The controlling fact is that there was agreement between the !arties on the subAect matter$ the !rice and the mode of !ayment and that !art of the !rice was !aid. <>hene+er earnest money is gi+en in a contract of sale$ it shall be considered as !art of the !rice and as !roof of the !erfection of the contract= ('rt. 1&@2$ -i+il -ode). (2 o&&er Non-essential chan$es in terms does not re@ect o&&er nor tender a counter
:t is true that an acce!tance may contain a re9uest for certain changes in the terms of the offer and yet be a binding acce!tance. <#o long as it is clear that the meaning of the acce!tance is !ositi+ely and une9ui+ocally to acce!t the offer$ whether such re9uest is granted or not$ a contract is formed.= (#tuart +s. "ranClin ,ife :ns. -o.$ 10; "ed. 2nd 80;$ citing #ec. 38$ >illiston on -ontracts). Thus$ it was held that the
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+endor?s change in a !hrase of the offer to !urchase$ which change does not essentially change the terms of the offer$ does not amount to a reAection of the offer$ and the tender of a counter%offer (#tuart +s. "ranClin ,ife :ns. -o.$ su!ra). (3 <eaumont vs !rieto and Eayco vs Serra do not a""ly The !resent case is not go+erned by the rulings laid down in /eaumont +s. (rieto$ &1 (hil. 030$ 8@;$
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03 ,. Bd. 330$ and Vayco +s. #erra$ && (hil. 320. :n those two cases the acce!tance radically altered the offer and$ conse9uently$ there was no meeting of the minds of the !arties. (* Eayco CaseH 3acts :n the Vayco case$ #al+ador #erra offered to sell to ,orenzo Vayco his sugar central for (1$000$000 on condition that the !rice be !aid in cash$ or$ if not !aid in cash$ the !rice would be !ayable within 3 years !ro+ided security is gi+en for the !ayment of the balance within three years with interest. Vayco$ instead of unconditionally acce!ting those terms$ countered that he was going to maCe a down !ayment of (100$000$ that #erra?s mortgage obligation to the (5/ of (000$000 could be transferred to Vayco?s account and that he (!laintiff) would gi+e a bond to secure the !ayment of the balance of the !rice. :t was held that the acce!tance was conditional or was a counter%offer which had to be acce!ted by #erra. There was no such acce!tance. #erra re+oCed his offer. 1ence$ there was no !erfected contract. (/ <eaumont caseH 3acts :n the /eaumont case$ /enito Valdes offered to sell to > /orcC the 5agtahan 1acienda owned by /enito ,egarda$ who had em!owered Valdes to sell it. /orcC was gi+en three months from )ecember &$ 1811 to buy the hacienda for (303$000. 6n 13 .anuary 1812 /orcC wrote to Valdes$ offering to !urchase the hacienda for (303$000 !ayable on 1 May 1812. 5o re!ly was made to that letter. /orcC wrote other letters modifying his !ro!osal. ,egarda refused to con+ey the !ro!erty. :t was held that /orcC?s .anuary 13th letter !lainly de!arted from the terms of the offer as to the time of !ayment and was a counter%offer which amounted to a reAection of Valdes? original offer. ' subse9uent unconditional acce!tance could not re+i+e that offer. (5 ;audico and Harden vs Arias #odri$ue: does not a""ly The !resent case is different from ,audico and 1arden +s. 'rias 7odriguez$ &3 (hil. 230 where the written offer to sell was re+oCed by the offeror before the offeree?s acce!tance came to the offeror?s Cnowledge. (, */-day "eriod merrely an estimate and &orecast+ not a condition or deadline set &or cor"oration to decide to "ursue transaction The &;%day !eriod was merely an estimate or a forecast of how long it would taCe /ormaheco to ac9uire the 5assco !ro!erty and it was not <a condition or a deadline set for the defendant cor!oration to decide whether or not to go through with the sale of its /uendia !ro!erty=. The statement <that final negotiations on both !ro!erty can be definitely Cnown after &; days= does not and cannot mean that /ormaheco should ac9uire the 5assco !ro!erty within &; days from 12 "ebruary 180& as !retended by -er+antes. :t is sim!ly a surmise that after &; days (in fact when the &; day !eriod should be com!uted is not clear) it would be Cnown whether /ormaheco would be able to ac9uire the 5assco !ro!erty and whether it would be able to sell the /uendia !ro!erty. (aragra!h ; does not e+en s!ecify how long after the &; days the outcome of the final negotiations would be Cnown. #till$ the condition that /ormaheco should ac9uire the 5assco !ro!erty was fulfilled. 'ssuming that had -er+antes been more assiduous in following u! the transaction$ the 5assco !ro!erty could ha+e been transferred to /ormaheco by 2@ March 180&$ the su!!osed last day of the &;%day !eriod. () Cervantes misled "arties as to oBnershi" o& the lots? 2""osition o& Bi&e Bas not raised durin$ rescission -er+antes$ in rescinding the contract of sale and in returning the earnest money$ cited as an e2cuse the circumstance that there was no certainty in /ormaheco?s ac9uisition of the 5assco !ro!erty. 1e did not say that Mrs. -er+antes was o!!osed to the sale of the three lots. 1e did not tell Villonco 7ealty that he could not bind the conAugal !artnershi!. :n truth$ he concealed the fact that the three lots were registered <in the name
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of "rancisco -er+antes$ "ili!ino$ of legal age$ married to 7osario (. 5a+arra$ as owner thereof in fee sim!le=. 1e certainly led the Villonco brothers to belie+e that as !resident of /ormaheco he could dis!ose of the said lots.
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1e in+eigled the Villoncos into belie+ing that he had untrammelled control of /ormaheco$ that /ormaheco owned the lots and that he was in+ested with ade9uate authority to sell the same. The !leadings disclose that /ormaheco and -er+antes deliberately and studiously a+oided maCing the allegation that -er+antes was not authorized by his wife to sell the 3 lots or that he acted merely as !resident of /ormaheco. That defense was not inter!osed so as not to !lace -er+antes in the ridiculous !osition of ha+ing acted under false !retenses when he negotiated with the Villoncos for the sale of the 3 lots. /ormaheco in its 3 answers$ which were +erified by -er+antes$ ne+er !leaded as an affirmati+e defense that Mrs. -er+antes o!!osed the sale of the 3 lots or that she did not authorize her husband to sell those lots. ,iCewise$ it should he noted that in their se!arate answer the -er+antes s!ouses ne+er !leaded as a defense that Mrs. -er+antes was o!!osed to the sale of 3 lots or that -er+antes could not bind the conAugal !artnershi!. The a!!ellants were at first hesitant to maCe it a!!ear that -er+antes had committed the sCullduggery of trying to sell !ro!erty which he had no authority to alienate. (. -e&ense Baived &or not havin$ "leaded The defense$ that Mrs. -er+antes o!!osed to the sale$ must ha+e been an afterthought or was e+ol+ed !ost litem motam since it was ne+er disclosed in -er+antes? letter of rescission and in his letter to Miss Tagle. Moreo+er$ Mrs. -er+antes did not testify at the trial to fortify that defense which had already been wai+ed for not ha+ing been !leaded (#ee sec. 2$ 7ule 8$ 7ules of -ourt). 20 !lea that Cervantes has no authority to sell the lots strain the rives o& credibility TaCing into account the situation of -er+antes +is%a%+is /ormaheco$ :nc. and his wife and the fact that the three lots were entirely occu!ied by /ormaheco?s building$ machinery and e9ui!ment and were mortgaged to the )/( as security for its obligation$ and considering that a!!ellants? +ague affirmati+e defenses do not include Mrs. -er+antes? alleged o!!osition to the sale$ the !lea that -er+antes had no authority to sell the lots strains the ri+ets of credibility (-f. (a!a and )elgado +s. Montenegro$ ;& (hil. 331G 7iobo +s. 1onti+eros$ 21 (hil. 31). 2( Contract is the laB betBeen "arties <6bligations arising from contracts ha+e the force of law between the contracting !arties and should be com!lied with in good faith= ('rt. 11;8$ -i+il -ode). :nasmuch as the sale was !erfected and e+en !artly e2ecuted$ /ormaheco$ :nc. and the -er+antes s!ouses$ as a matter of Austice and good faith$ are bound to com!ly with their contractual commitments. 22 %he necessity o& a laByer in dra&tin$ contract to sell Much misunderstanding could ha+e been a+oided had the broCer and the buyer taCen the trouble of maCing some research in the 7egistry of )eeds and a+ailing themsel+es of the ser+ices of a com!etent lawyer in drafting the contract to sell. 23 -ama$es not s"eci&ically "leaded and "roven #ti!ulation of facts sim!ly means that Villonco 7ealty -om!any s!eculates that it has suffered damages but it does not mean that the !arties ha+e agreed that Villonco 7ealty -om!any is entitled to those damages. The damages in 9uestion were not s!ecifically !leaded and !ro+en and were <clearly conAectural and s!eculati+e=. 2* AttorneyMs &ees due *nder the facts of the case$ it is e+ident that /ormaheco acted in gross and e+ident bad faith in refusing to satisfy the +alid and Aust demand of Villonco 7ealty for s!ecific !erformance. :t com!elled Villonco 7ealty to insure e2!enses to !rotect its interest. Moreo+er$ this is a case where it is Aust and e9uitable that the Villonco 7ealty should reco+er attorney?s fees ('rt. 220@$ -i+il -ode).
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2/ %a$le commission
is
entitled
to
brokerMs
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(aragra!h 3 of the sti!ulation of facts and by the documentary e+idence !ro+es that /ormaheco engaged Tagle?s ser+ices as a broCer in the !roAected sale of the 3 lots and the im!ro+ements thereon. :t was sti!ulated that Miss Tagle inter+ened in the negotiations for the sale of the 3 lots. -er+antes in his original offer of 12 "ebruary 180& a!!rised Villonco 7ealty that the earnest money should be deli+ered to Miss Tagle$ the bearer of the letter%offer. '(()0 =ao >a Sin $13 '((.0 9u %ek v Gon:ales 'G # No ..3/ 3ebruary (+ (.(/ 0 "irst )i+ision$ Trent (.)4 & concur$ 1 dissents 3actsH ' written contract was e2ecuted between /asilio onzalez and Fu TeC and -o.$ where onzales was st nd obligated to deli+er 000 !iculs of sugar of the 1 and 2 grade to Fu TeC$ within the !eriod of 3 months (1 .anuary%31 March 1812) at any !lace within the munici!ality of #ta. 7osa$ which Fu TeC Q -o. or its re!resentati+e may designateG and in case$ onnzales does not deli+er$ the contract will be rescinded and onzales shall be obligated to return the (3$000 recei+ed and also the sum of (1$200 by way of indemnity for loss and damages. 5o sugar had been deli+ered to Fu TeC Q -o. under this contract nor had it been able to reco+er the (3$000. Fu TeC Q -o. filed a com!laint against onzales$ and !rayed for Audgment for the (3$000 and the additional (1$200. .udgment was rendered for (3$000 only$ and from this Audgment both !arties a!!ealed. The #u!reme -ourt affirmed the Audgment a!!ealed from with the modification allowing the reco+ery of (1$200 under !aragra!h & of the contract$ without costs. ( #i$hts determined by the Britin$ itsel& (arties are !resumed to ha+e reduced to writing all the essential conditions of their contract. The rights of the !arties must be determined by the writing itself. 2 !arol evidence not admissible as it should not serve to incor"orate additional conditions into a contract >hile !arol e+idence is admissible in a +ariety of ways to e2!lain the meaning of written contracts$ it cannot ser+e the !ur!ose of incor!orating into the contract additional contem!oraneous conditions which are not mentioned at all in the writing$ unless there has been fraud or mistaCe. :n the !resent case$ onzales alleged that the court erred in refusing to !ermit !arol e+idence showing that the !arties intended that the sugar was to be secured from the cro! which the defendant raised on his !lantation$ and that he was unable to fulfill the contract by reason of the almost total failure of his cro!. The case a!!ears to be one to which the rule which e2cludes !arol e+idence to add to or +ary the terms of a written contract is decidedly a!!licable. There is not the slightest intimation in the contract that the sugar was to be raised by onzales. :n the contract$ onzales undertooC to deli+er a s!ecified 9uantity of sugar within a s!ecified time. The contract !laced no restriction u!on him in the matter of obtaining the sugar$ as he was at liberty to !urchase it on the marCet or raise it himself$ notwithstanding that he owned a !lantation himself.
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#a8ing v. CA, 20' SCRA
Cases Bhere "arol evidence Bas denied by the Court :n Pastor v. "aspar (2 (hil ;82) the -ourt declined to allow !arol e+idence showing that a !arty to a written contract was to become a !artner in a firm instead of a creditor of the firm. :n )velan$ vs. )astern /ining Co. (1& (hil ;08) a contract of em!loyment !ro+ided that the !laintiff should recei+e from the
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defendant a sti!ulated salary and e2!enses The defendant in said case sought to inter!ose as a defense to reco+ery that the !ayment of the salary was contingent u!on the !laintiff?s em!loyment redounding to the benefit of the defendant com!any. The contract contained no such condition and the court declined to recei+e !arol e+idence thereof. * !er&ected contract o& sale de&ined? #elie& &or non-delivery 'rticle 1&;0 defines a !erfected sale as follows4 <The sale shall be !erfected between +endor and +endee and shall be binding on both of them$ if they ha+e agreed u!on the thing which is the obAect of the contract and u!on the !rice$ e+en when neither has been deli+ered.= 'rticle 1&;2 !ro+ides that <the inAury to or the !rofit of the thing sold shall$ after the contract has been !erfected$ be go+erned by the !ro+isions of articles 1080 and 11@2.= There is a !erfected sale with regard to the <thing= whene+er the article of sale has been !hysically segregated from all other articles. / !er&ected sale? Cases :n /cCullough vs. Aenlle ( Co. (3 (hil 2@;)$ a !articular tobacco factory with its contents was held sold under a contract which did not !ro+ide for either deli+ery of the !rice or of the thing until a future time. :n 5arretto vs. 'anta /arina (20 (hil 200)$ s!ecified shares of stocC in a tobacco factory were held sold by a contract which deferred deli+ery of both the !rice and the stocC until the latter had been a!!raised by an in+entory of the entire assets of the com!any. :n 5orro#eo vs. %ranco (; (hil. 7e!.$ &8) a sale of a s!ecific house was held !erfected between the +endor and +endee$ although the deli+ery of the !rice was withheld until the necessary documents of ownershi! were !re!ared by the +endee. :n +an Leonco vs. "o .nBui (@ (hil. 7e!.$ ;31) the !laintiff had deli+ered a 9uantity of hem! into the warehouse of the defendant. The defendant drew a bill of e2change in the sum of (@00$ re!resenting the !rice which had been agreed u!on for the hem! thus deli+ered. (rior to the !resentation of the bill for !ayment$ in said case$ the hem! was destroyed. >hereu!on$ the defendant sus!ended !ayment of the bill. :t was held that the hem! ha+ing been already deli+ered$ the title had !assed and the loss was the +endee?s. :t is our !ur!ose to distinguish the case at bar from all these cases. 5 sale Contract in "resent case merely an e4ecutory a$reementH a "romise o& sale and not a
The contract in the !resent case was merely an e2ecutory agreementG a !romise of sale and not a sale. 's there was no !erfected sale$ it is clear that articles 1&;2$ 1080$ and 11@2 are not a!!licable. The agreement u!on the <thing= which was the obAect of the contract was not within the meaning of article 1&;0. #ugar is one of the sta!le commodities of this country. "or the !ur!ose of sale its bulC is weighed$ the customary unit of weight being denominated a H?!icul.?? There was no deli+ery under the contract. :f called u!on to designate the article sold$ it is clear that onzales could only say that it was <sugar.= 1e could only use this generic name for the thing sold. There was no <a!!ro!riation= of any !articular lot of sugar. 5either !arty could !oint to any s!ecific 9uantity of sugar. , !resent case di&&erent &rom cases cited Bith "er&ected contracts The contract in the !resent case is different from the contracts discussed in the cases referred to. :n the /cCullough case$ for instance$ the tobacco factory which the !arties dealt with was s!ecifically !ointed out and distinguished from all other tobacco factories. #o$ in the 5arretto case$ the !articular shares of stocC which the !arties desired to transfer were ca!able of designation. :n the +an Leonco case$ where a 9uantity of hem! was the subAect of the contract$ it was shown that 9uantity had been de!osited in a s!ecific warehouse$ and thus set a!art and distinguished from all other hem!. ) American @uris"rudence? 74ecutory contracts :n &itt 'hoe Co. vs. 'eegars ( Co. (122 ,a.$ 1&;G &3 #ou.$ &&&)$ a contract was entered into by a tra+eling salesman for a 9uantity of shoes$ the sales ha+ing been made by sam!le. #ince Mitchell was offering
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to sell by sam!le shoes$ !art of which had not been manufactured and the rest of which were incor!orated in >itt #hoe -o.?s stocC in ,ynchburg$ Va.$ it was im!ossible that he and #eegars Q -o. should at that time ha+e
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agreed u!on the s!ecific obAects$ the title to which was to !ass$ and hence there could ha+e been no sale. :n 'tate vs. 'hiel$s, et al. (110 ,a.$ ;&3$ 3& #ou.$ 033)$ it was held that in recei+ing an order for a 9uantity of goods$ of a Cind and at a !rice agreed on$ to be su!!lied from a general stocC$ warehoused at another !lace$ the agent recei+ing the order merely enters into an e2ecutory contract for the sale of the goods$ which does not di+est or transfer the title of any determinate obAect$ and which becomes effecti+e for that !ur!ose only when s!ecific goods are thereafter a!!ro!riated to the contractG and$ in the absence of a more s!ecific agreement on the subAect$ that such a!!ro!riation taCes !lace only when the goods as ordered are deli+ered to the !ublic carriers at the !lace from which they are to be shi!!ed$ consigned to the !erson by whom the order is gi+en$ at which time and !lace$ therefore$ the sale is !erfected and the title !asses.= . case American @uris"rudenceH #ecovery o& "ayment? A""licability to "resent
:n Larue ( Prevost vs. 1ugely, 5lair ( Co. (10 ,a. 'nn.$ 2&2)$ the defendants therein had made a contract for the sale$ by weight$ of a lot of cotton$ had recei+ed T3$000 on account of the !rice$ and had gi+en an order for its deli+ery$ which had been !resented to the !urchaser$ and recognized by the !ress in which the cotton was stored$ but that the cotton had been destroyed by fire before it was weighed. :t was held that it was still at the risC of the seller$ and that the buyer was entitled to reco+er the T3$000 !aid on account of the !rice. #imilarly$ in the !resent case$ onzales ha+ing defaulted in his engagement$ Fu TeC Q -o. is entitled to reco+er the (3$000 which it ad+anced to onzales. (0 Contractin$ "arties &ree to sti"ulate? Sti"ulation clear+ no room &or inter"retation? ;i=uidated dama$e The contract !lainly states that if onzales fails to deli+er the 000 !iculs of sugar within the time agreed on$ the contract will be rescinded and he will be obliged to return the (3$000 and !ay the sum of (1$200 by way of indemnity for loss and damages. There cannot be the slightest doubt about the meaning of this language or the intention of the !arties. There is no room for either inter!retation or construction. *nder the !ro+isions of article 12;; of the -i+il -ode contracting !arties are free to e2ecute the contracts that they may consider suitable$ !ro+ided they are not in contra+ention of law$ morals$ or !ublic order. :n our o!inion there is nothing in the contract under consideration which is o!!osed to any of these !rinci!les. Thus$ this is a clear case of li9uidated damages. '(200 =uviengco v. Dacuycuy, %04 SCRA 118 &%'8%( '(2(0 Eayas vs ;uneta Motor Com"any 'G # No ;-30/)3 2ctober 23+ (.)2 0 "irst )i+ision$ utierrez .r. (.)4 ; concur 3actsH Butro!io Vayas$ .r. !urchased on installment basis a "ord Thames "reighter with (*1 /ody (Bngine &00B%12333@ and -hassis &00B%12333@) from Mr. 7o9ue BscaMo of the BscaMo Bnter!rises in -agayan de 6ro -ity$ dealer of ,uneta Motor -om!any (-onditions4 #elling !rice$ ( 3$;00.00G "inancing charge$ 1$&20.@2G Total #elling (rice$ @$820.@2G (ayable on )eli+ery$ 1$000.@2G (ayable in 2& months at 12 I interest !er annum$ 3$820.00) The motor +ehicle was deli+ered to the Vayas who !aid the initial !ayment in the amount of (1$000.@2$ and e2ecuted a !romissory note in the amount of (3$820.00$ the balance of the total selling !rice$ in fa+or of ,uneta Motor -om!any. The !romissory note stated the
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amounts and dates of !ayment of 20 installments co+ering the (3$820.00 debt. #imultaneously with the e2ecution of the !romissory note and to secure its !ayment$ Vayas e2ecuted a chattel mortgage on the subAect motor +ehicle in fa+or of ,uneta Motors. 'fter !aying a total amount of (3$1&@.00$ Vayas was unable to !ay further monthly installments !rom!ting the ,uneta Motors to e2traAudicially foreclose the chattel mortgage. The motor +ehicle was sold at !ublic auction with the ,uneta Motors re!resented by 'tty. ,eandro /. "ernandez as the highest
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bidder in the amount of (;$000.00. #ince the !ayments made by Vayas !lus the (;$000.00$ realized from the foreclosure of the chattel mortgage could not co+er the total amount of the !romissory note e2ecuted by Vayas in fa+or of the res!ondent ,uneta Motors$ the latter filed -i+il -ase 10;203 with the -ity -ourt of Manila for the reco+ery of the balance of (1$;;1.3& !lus interests. 'fter se+eral !ost!onements$ the case was set for hearing. 's a result of ,uneta Motor?s and its counsel?s non%a!!earance on the date set for hearing$ Vayas$ .r. mo+ed to ha+e the case dismissed for lacC of interest on the !art of ,uneta Motors. 1e also asCed the court to allow him to discuss the merits of his affirmati+e defense as if a motion to dismiss had been filed. The issue raised and argued by Vayas was whether or not a deficiency amount after the motor +ehicle$ subAect of the chattel mortgage$ has been sold at !ublic auction could still be reco+ered. Vayas cited the case of 7u!erto -ruz +. "ili!inas :n+estment (23 #-7' 381). 'cting on the motion$ the case was dismissed without !ronouncement as to costs. ,uneta Motor -om!any filed an <*rgent Motion for 7econsideration$= which the court denied for lacC of merit. ,uneta Motor -om!any a!!ealed the case to the -": Manila (/ranch RRR:$ !resided by .udge .uan 6. 7eyesG -i+il -ase 3&3@1). 'fter +arious incidents$ the -": issued an order remanding the case to the court of origin for further !roceedings at it is in the o!inion that the -ity -ourt should ha+e not decided the case merely on the 9uestion of law since the !resentation of e+idence is necessary to adAudicate the 9uestions in+ol+ed. 1ence$ the !etition for re+iew by certiorari filed by Vayas. The #u!reme -ourt granted the !etition$ annulled the orders remanding the case to the court of origin and denying the motion for reconsideration of the -": Manila$ directed the -": to dismiss the a!!eal in -i+il -ase 3&3@1$ and affirmed the order of the -ity -ourt of Manila dismissing the com!laint in -i+il -ase 10;203. ( 7scano 7nter"rises an a$ent o& ;uneta Motor Com"any The BscaMo Bnter!rises of -agayan de 6ro -ity was an agent of ,uneta Motor -om!any. ' +ery significant e+idence which !ro+es the nature of the relationshi! between ,uneta Motor -om!any and BscaMo Bnter!rises is a certification from the cashier of BscaMo Bnter!rises on the monthly installments !aid by Mr. Butro!io Vayas$ .r. :n the certification$ the !romissory note in fa+or of ,uneta Motor -om!any was s!ecifically mentioned. There was only one !romissory note e2ecuted by Butro!io Vayas$ .r. in connection with the !urchase of the motor +ehicle. The !romissory note mentioned in the certification refers to the !romissory note e2ecuted by Butro!io Vayas$ .r. in fa+or of ,uneta Motor -om!any. Thus$ BscaMo Bnter!rises$ a dealer of ,uneta Motor -om!any$ was merely a collecting%agent as far as the !urchase of the subAect motor +ehicle was concerned. The !rinci!al and agent relationshi! is clear. ,uneta Motors? argument that Bscano Bnter!rises is a distinct and different entity$ that its role in the said transaction was only to finance the !urchase !rice of the motor +ehicleG that in order to !rotect its interest as regards the !romissory note e2ecuted in its fa+or$ a chattel mortgage co+ering the same motor +ehicle was e2ecuted by VayasG and thus that the contract between the !arties was only an ordinary loan remo+ed from the co+erage of 'rticle 1&@& of the 5ew -i+il -odeG is without merit. 2 Nature o& transaction remains to be a sale o& "ersonal "ro"erty in installment covered by Article (*)* B+en assuming that the <distinct and inde!endent entity= theory of ,uneta Motors is +alid$ the nature of the transaction as a sale of !ersonal !ro!erty on installment basis remains. >hen$ therefore$ BscaMo Bnter!rises$ assigned its rights +is%a%+is the sale to ,uneta Motors$ the nature of the transaction in+ol+ing BscaMo Bnter!rises and Butro!io Vayas$ .r. did not change at all. 's assignee$ ,uneta Motors had no better rights than assignor BscaMo Bnter!rises under the same transaction. The transaction would still be a sale of !ersonal !ro!erty in installments co+ered by 'rticle 1&@& of the 5ew -i+il -ode.
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Article (*)* o& the Civil Code
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'rticle 1&@& of the 5ew -i+il -ode$ on the foreclosure of chattel mortgages o+er !ersonal !ro!erty sold on installment basis$ !ro+ides that <:n a contract of sale of !ersonal !ro!erty the !rice of which is !ayable in installments$ the +endor may e2ercise any of the following remedies4 (3) "oreclose the chattel $mortgage on the thing sold$ if one has been constituted$ should the +endee?s failure to !ay co+er two or more installments. :n this case$ he shall ha+e no further action against the !urchaser to reco+er any un!aid balance of the !rice. 'ny agreement to the contrary shall be +oid.= * 3oreclosure and actual sale o& a mort$a$ed chattel bars &urther recovery o& balance by vendor The foreclosure and actual sale of a mortgaged chattel bars further reco+ery by the +endor of any balance on the !urchaser?s outstanding obligation not so satisfied by the sale. The reason for the doctrine was a!tly stated in the case of /achrach Motor -o. +s. Millan$ thus < the !rinci!al obAect of the amendment was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment !re+ents mortgagees from seizing the mortgaged !ro!erty$ buying it at foreclosure sale for a low !rice and then bringing suit against the mortgagor for a deficiency Audgment. The almost in+ariable result of this !rocedure was that the mortgagor found himself minus the !ro!erty and still owing !ractically the full amount of his original indebtedness. *nder this amendment the +endor of !ersonal !ro!erty$ the !urchase !rice of which is !ayable in installments$ has the right to cancel the sale or foreclose the mortgage if one has been gi+en on the !ro!erty. >hiche+er right the +endor elects he need not return to the !urchaser the amount of the installments already !aid$ Hif there be an agreement to that effect?. "urthermore$ if the +endor a+ails himself of the right to foreclose the mortgage this amendment !rohibits him from bringing an action against the !urchaser for the un!aid balance.?= (-ruz +. "ili!inas :n+estment Q "inance -or!oration 23 #-7' 381) / No need &or remand o& records to city court The -ourt?s findings and conclusions are borne out by the records a+ailable to the a!!ellate court. There was no necessity for the remand of records to the city court for the !resentation of e+idence on the issue raised in the case.
Sales+ 2003 F **/ G

2003hs103 Sales

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-ecision in Civil Case ),-*(0/) could have not been decreed

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that date$ the

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No statement o& &acts o& alle$ed usury

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