SECOND DIVISION G.R. No.

133749 August 23, 2001

HERNANDO R. PEALOSA alias "HENR PEALOSA," petitioner, vs. SE!ER"NO #. SAN$OS %&'('as'&), Su*stitut'& *+ ,is ,'i-s. OL"!ER SAN$OS a/& AD LL 0. SAN$OS, a/& ADELA D1RAN 0ENDE2 SAN$OS, respondents. 31"S104"NG, J.. Petitioner appeals by certiorari from the decision of the Court of ppeals, !hich affirmed the "ud#ment of the $e#ional %rial Court of &ue'on City, (ranch )*, in Civil Case No. &+,-+./0/., declarin# the deed of absolute sale entered into bet!een petitioner and respondents as void and ine1istent and orderin# petitioner to vacate the sub"ect property and to pay reasonable compensation for its use. %he facts, as revealed by the records, are as follo!s2 $espondents Severino C. Santos 3deceased4 and dela 5ende' Santos are re#istered o!ners of a residential house and lot located at No. ../ Scout $allos Street, &ue'on City under %C% No. P%+ -/60* 3066/64.. In .,**, Severino and dela decided to sell their property and for this purpose, ne#otiated !ith petitioner 7ernando 3or 7enry4 Pe8alosa. %he property !as then occupied by a lessee, Eleuterio Pere', !ho !as #iven preference to buy it under the same terms offered by the buyer.- Pere' proposed less favorable terms/ and e1pectedly, Severino re"ected his offer. On u#ust ., .,**, petitioner 7enry Pe8alosa and respondent Severino Santos attempted to enter into an a#reement !hereby the latter, for a consideration of P1,800.000.00, !ould sell to the former the property sub"ect of the instant case. %he deed of absolute sale6 3first deed4 evidencin# this transaction !as si#ned by 7enry but not by Severino, because accordin# to the latter, 7enry 9too: time to decide9 on the matter.0 On u#ust .0, .,**, 7enry si#ned a document; statin# that the first deed !as e1ecuted bet!een him and Severino, for the sole purpose of helpin# the latter e"ect Pere', the occupant of the property. 7enry ac:no!led#ed in said document that althou#h Severino had a#reed to sell the property to him, he had not paid the consideration stated in the first deed. %hereafter, 7enry and Severino e1ecuted another deed of absolute sale) 3second deed4 for a hi#her consideration of P2,000,000.00. lthou#h the second deed !as ori#inally dated 9 u#ust .,**9, superimposed upon the same !as the date 9September .-, .,**9. %his second deed !as si#ned by both parties and duly notari'ed. It states that Severino sells and transfers the house and lot to 7enry, !ho had paid the full price of P-,<<<,<<<.<< therefor. Severino e1plained that his initial as:in# price for the property !as only P.,*<<,<<<.<< as sho!n in the first deed. (ut he later as:ed for a hi#her price because 7enry could not #ive the money as soon as e1pected. 7o!ever, Severino claimed that he made it clear to 7enry that he a#reed to

sell the property under the second deed for P-,<<<,<<<.<<, provided that payment be immediately effected. Severino said that he !anted to use the money to invest in another property located in laban# and told 7enry that if payment !as made at a later date, the price !ould be the current mar:et value at the time of payment. 7enry then #ave Severino P/<<,<<<.<< as 9earnest money9, purportedly !ith the understandin# that the former !as to pay the balance !ithin ;< days. Other!ise, said amount !ould be forfeited in favor of Severino.* %he latter also maintained that he si#ned the second deed only for the purpose of facilitatin# 7enry=s ac>uisition of a ban: loan to finance payment of the balance of the purchase price, and added that e1ecution of the second deed !as necessary to enable 7enry to file a court action for e"ectment of the tenant..< fter e1ecution of the second deed, 7enry filed a loan application !ith the Philippine merican ?ife Insurance Company 3Philam ?ife4 for the amount of P-,0<<,<<<.<<... ccordin# to 7enry, he had a#reed !ith Severino durin# the si#nin# of the second deed, that the balance of P.,)<<,<<<.<< !ould be paid by means of a loan, !ith the property itself #iven as collateral..5ean!hile, on the stren#th of the first deed and as ne! 9o!ner9 of the property, 7enry !rote a letter./ dated u#ust *, .,** to the lessee, Eleuterio Pere', demandin# that the latter vacate the premises !ithin .< days. @ailin# in this effort, 7enry brou#ht a complaint for e"ectment.6 a#ainst Pere' before the Office of the (aran#ay Captain. On September ., .,**, a Certification %o @ile ction.0 !as issued by the baran#ay lupon. %his led to the subse>uent filin# of Civil Case No. ** <6/, for unla!ful detainer, before the 5etropolitan %rial Court of &ue'on City, (ranch 6/, entitled 9Henry Pealosa, Plaintiff vs. Eleuterio Perez, Defendant9. Claimin# that he still had a subsistin# contract of lease over the property, Pere' countersued and brou#ht Civil Case No. &+**+.<;- before the $e#ional %rial Court of &ue'on City, (ranch ,;, entitled 9Eleuterio Perez, Plaintiffs vs. Severino Santos, et. al, Defendants9. In this latter case, Pere' assailed the validity of the sale transaction bet!een 7enry and Severino and impleaded the former as co+defendant of Severino. Ahile the aforesaid court cases !ere pendin# resolution, Philam ?ife informed Severino throu#h a letter,.; that 7enry=s loan application had been approved by the company on Banuary .*, .,*,. Philam ?ife stated in the letter that of the total purchase price of P2,500,000.00, the amount of P.,)<<,<<<.<< !ould be paid directly to Severino by Philam ?ife, !hile P*<<,<<<.<< !ould be paid by 7enry. %he release of the loan proceeds !as made sub"ect to the submission of certain documents in Severino=s possession, one of !hich is the o!ner=s duplicate of the %ransfer Certificate of %itle 3%C%4 pertainin# to the property. 7o!ever, !hen 7enry and Severino met !ith officials of Philam ?ife to finali'e the loanCmort#a#e contract, Severino refused to surrender the o!ner=s duplicate title and insisted on bein# paid immediately in cash..) s a conse>uence, the loanCmort#a#e contract !ith Philam ?ife did not materiali'e. Subse>uently, on pril -*, .,*,, "ud#ment.* !as rendered by the 5%C+&C, (ranch 6/, in Civil Case No. <6/,, orderin# the tenant Pere' to vacate and surrender possession of the property to

7enry. In said "ud#ment, 7enry !as e1plicitly reco#ni'ed as the ne! o!ner of the property by virtue of the contract of sale dated September .-, .,**, after full payment of the purchase price of P-,<<<,<<<.<<, receipt of !hich !as duly ac:no!led#ed by Severino. Dpon finality of said "ud#ment, 7enry and his family moved into the disputed house and lot on u#ust .,*,, after ma:in# repairs and improvements.., 7enry spent a total of P)<<,<<<.<< for the renovation, as evidenced by receipts.-< On Buly -), .,,-, Severino sent a letter-. to 7enry, throu#h counsel, demandin# that 7enry vacate the house and lot, on the #round that 7enry did not conclusively offer nor tender a price certain for the purchase of the property. %he letter also stated that 7enry=s alle#ed offer and promise to buy the property has since been re"ected by Severino. Ahen 7enry refused to vacate the property, Severino brou#ht this action for >uietin# of title, recovery of possession and dama#es before the $e#ional %rial Court of &ue'on City, (ranch )*, on September -*, .,,-. Severino alle#ed in his complaint-- that there !as a cloud over the title to the property, brou#ht about by the e1istence of the second deed of sale. Essentially, Severino averred that the second deed !as void and ine1istent because2 a4 there !as no cause or consideration therefor, since he did not receive the P-,<<<,<<<.<< stated in the deedE b4 his !ife, dela, in !hose name the property !as titled, did not consent to the sale nor si#n the deedE c4 the deed !as not re#istered !ith the $e#ister of DeedsE d4 he did not ac:no!led#e the deed personally before the notary publicE e4 his residence certificate, as appearin# in the deed, !as falsifiedE and f4 the deed is fictitious and simulated because it !as e1ecuted only for the purpose of placin# 7enry in possession of the property because he tendered 9earnest money9. Severino also claimed that there !as no meetin# of minds !ith respect to the cause or consideration, since 7enry=s varied offers of P.,*<<,<<<.<<, P-,<<<,<<<.<<, and P-,0<<,<<<.<<, !ere all re"ected by him. @or his part, 7enry asserted that he !as already the o!ner of the property bein# claimed by Severino, by virtue of a final a#reement reached !ith the latter. Contrary to Severino=s claim, the price of the property !as pe##ed at P-,<<<,<<<.<<, as a#reed upon by the parties under the second deed. Prior to the filin# of the action, his possession of the property remained undisturbed for three 3/4 years. Nevertheless, he admitted that since the si#nin# of the second deed, he has not paid Severino the balance of the purchase price. 7e, ho!ever, faulted the latter for the non+ payment, since accordin# to him, Severino refused to deliver the o!ner=s duplicate title to the financin# company. On u#. -<, .,,/, the trial court rendered "ud#ment in favor of Severino and disposed2 A7E$E@O$E, "ud#ment is rendered as follo!s2 .4 DEC? $INF the 9Deed of bsolute Sale9 !hich !as si#ned by the plaintiff Severino C. Santos as vendor and the defendant as vendee and !hich !as entered in the notarial re#ister of notary public Dionilo 5arfil of &ue'on City as Doc. No. 6)6, Pa#e No. ,0, (oo: No. .)/, Series of .,**, as ine1istent and void from the be#innin#E and

conse>uently, plaintiff=s title to the property under %.C.%. No. P%+-/60* 3066/64 issued by the $e#ister of Deeds of &ue'on City is >uieted, sustained and maintainedE -4 O$DE$INF the defendant to pay plaintiffs the amount of P.0, <<<.<< a month as reasonable compensation for the use of the 7ouse and ?ot located at No. ../ Scout $allos St., &ue'on City, be#innin# on the month of u#ust, .,,/, until the premises is fully vacated, 3the compensation for the use thereof from the time the defendant had occupied the premises up to Buly, .,,/, is recompensed for the repairs made by him4E and /4 O$DE$INF the plaintiffs to reimburse the defendant the amount of P/<<,<<<.<< after defendant had vacated the premises in >uestion, and the reasonable compensation for the use thereof had been paid. ll other claims and counterclaims are DENIED for lac: of le#al and factual bases. No pronouncement as to costs. SO O$DE$ED.-/ (oth 7enry and Severino appealed the above decision to the Court of ppeals. (efore the appellate court could decide the same, Severino passed a!ay and !as substituted by his !ife and children as respondents. 7enry filed a motion for leave to be allo!ed to deposit P.,)<<,<<<.<< in escro! !ith the ?andban: of the Philippines to ans!er for the money portion of the decision.-6 %his motion !as #ranted. On December -,, .,,), the appellate court affirmed-0 the "ud#ment of the trial court and thereafter, denied 7enry=s motion for reconsideration.-; %hus, 7enry brou#ht this petition, citin# the follo!in# as alle#ed errors2 I. %7E 7ONO$ (?E COD$% O@ PPE ?S F$IEVODS?G E$$ED IN CONC?DDINF %7 % %7E$E A S NO PE$@EC%ED CON%$ C% O@ S ?E (E%AEEN SEVE$INO C. S N%OS ND PE%I%IONE$ 7EN$G $. PEH ?OS . II. %7E 7ONO$ (?E COD$% O@ PPE ?S F$IEVODS?G E$$ED IN CONSIDE$INF NON+P G5EN% O@ %7E @D?? PD$C7 SE P$ICE S C DSE @O$ DEC? $INF PE$@EC%ED CON%$ C% O@ S ?E S ND?? ND VOID. III. %7E 7ONO$ (?E COD$% O@ PPE ?S F$IEVODS?G E$$ED IN $E@DSINF %O $ECOFNIIE %7 % OANE$S7IP O@ %7E SD(BEC% P$OPE$%G 7 D (EEN E@@EC%IVE?G VES%ED DPON PE%I%IONE$ 7EN$G $. PEH ?OS A7EN C%D ? POSSESSION %7E$EO@ 7 D ? A@D??G %$ NS@E$$ED %O PE%I%IONE$ 7EN$G $.

PEH ?OS (G VI$%DE O@ %7E COD$% BDDF5EN% IN %7E EBEC%5EN% SDI% F INS% %7E @O$5E$ ?ESSEE.-) %he pivotal issue presented before us is !hether or not the second deed is valid and constitutes evidence of the final a#reement bet!een the parties re#ardin# the sale transaction entered into by them. Petitioner maintains that the e1istence of a perfected contract of sale in this case is beyond doubt, since there clearly !as a meetin# of minds bet!een the parties as to the ob"ect and consideration of the contract. ccordin# to petitioner, the a#reement of the parties is evidenced by provisions contained in the second deed, !hich cannot possibly be simulated or fictitious. Subse>uent and contemporaneous acts indubitably point to the fact that the parties truly intended to be bound by the second deed. ccordin#ly, the P-,<<<,<<<.<< stated therein !as the actual price a#reed upon by the parties as consideration for the sale. On the other hand, in their memorandum, respondents insist that the second deed is a complete nullity because, as found by both the appellate and trial court2 a4 the consideration stated in the deed !as not paidE b4 Severino=s passport sho!ed that he !as in the D.S. !hen said deed !as notari'edE c4 Severino did not surrender a copy of the title at the time of the alle#ed saleE d4 petitioner did not pay real estate ta1es on the propertyE e4 it !as e1ecuted only for the purpose of helpin# Severino e"ect the tenantE f4 Severino=s !ife, dela, did not si#n the deedE and #4 the various documentary e1hibits proved that there !as no price certain accepted or paid. $espondents additionally ar#ue that petitioner merely see:s a revie! of the aforesaid factual findin#s of the lo!er court and that conse>uently, !e should deny the petition on the #round that it raises only factual >uestions. Considerin# the pivotal issue presented after close scrutiny of the assi#ned errors as !ell as the ar#uments of the parties, !e are unable to a#ree !ith respondents and !e must #ive due course to the petition. @irst of all, the petition filed before this Court e1plicitly >uestions 9the le#al si#nificance and conse>uences of the established facts9-* and not the findin#s of fact themselves. s pointed out by petitioner, he submits to the factual findin#s of the lo!er court, but maintains that its le#al conclusions are irreconcilable and inconsistent there!ith. 7e also states that the #rounds relied upon in this petition do not call for the !ei#hin# of conflictin# evidence submitted by the parties. $ather, he merely as:s the Court to #ive due si#nificance to certain undisputed and admitted facts spread throu#hout the record, !hich, if properly appreciated, !ould "ustify a different conclusion. t any rate, in Baricuatro, r. vs. !ourt of "##eals, /-0 SC$ ./), .60 3-<<<4, !e reiterated the doctrine that findin#s of fact of the Court of ppeals are bindin# and conclusive upon this Court, sub"ect to certain e1ceptions, one of !hich is !hen the "ud#ment is based on a misapprehension of facts. In this case, after carefully porin# over the records, !e are convinced that the lo!er courts misappreciated the evidence presented by the parties and that, indeed, a reversal of the assailed "ud#ment is in order.

It should have been readily apparent to the trial court that the circumstances it cited in its decision are not proper #rounds for holdin# that the second deed is simulated. Simulation is a declaration of a fictitious !ill, deliberately made by a#reement of the parties, in order to produce, for purposes of deception, the appearance of a "uridical act !hich does not e1ist or is different from that !hich !as really e1ecuted. Its re>uisites are2 a4 an out!ard declaration of !ill different from the !ill of the partiesE b4 the false appearance must have been intended by mutual a#reementE and c4 the purpose is to deceive third persons.-, None of these re>uisites is present in this case. %he basic characteristic of an absolutely simulated or fictitious contract is that the apparent contract is not really desired or intended to produce le#al effects or alter the "uridical situation of the parties in any !ay./< 7o!ever, in this case, the parties already undertoo: certain acts !hich !ere directed to!ards fulfillment of their respective covenants under the second deed, indicatin# that they intended to #ive effect to their a#reement. In particular, as early as u#ust *, .,**, after e1ecution of the first deed, Severino authori'ed petitioner to brin# an action for e"ectment a#ainst the overstayin# tenant and allo!ed petitioner to pursue the e"ectment case to its final conclusion, presumably to secure possession of the property in petitioner=s favor. Petitioner also applied for a loan, !hich !as approved by Philam ?ife, to complete payment of the stipulated price. fter ma:in# e1tensive repairs !ith the :no!led#e of Severino, petitioner moved into the premises and actually occupied the same for three years before this action !as brou#ht. 5oreover, simultaneous !ith the e1ecution of the second deed, petitioner #ave Severino P/<<,<<<.<< in earnest money, !hich under rticle .6*-/. of the Ne! Civil Code, is part of the purchase price and proof of perfection of the contract. Ahat may have led the lo!er courts into incorrectly believin# that the second deed !as simulated is E1hibit D J a document in !hich petitioner declared that the deed !as e1ecuted only for the purpose of helpin# Severino e"ect the tenant. 7o!ever, a perusal of this document reveals that it made reference to the first deed and not the second deed, !hich !as e1ecuted only after E1hibit D. So that !hile the first deed !as >ualified by stipulations contained in E1hibit D, the same cannot be said of the second deed !hich !as si#ned by both parties. @urther, the fact that Severino e1ecuted the t!o deeds in >uestion, primarily so that petitioner could e"ect the tenant and enter into a loanCmort#a#e contract !ith Philam ?ife, is to our mind, a stron# indication that he intended to transfer o!nership of the property to petitioner. @or !hy else !ould he authori'e the latter to sue the tenant for e"ectment under a claim of o!nership, if he truly did not intend to sell the property to petitioner in the first placeK Needless to state, it does not ma:e sense for Severino to allo! petitioner to pursue the e"ectment case, in petitioner=s o!n name, !ith petitioner ar#uin# that he had bou#ht the property from Severino and thus entitled to possession thereof, if petitioner did not have any ri#ht to the property. lso !orth notin# is the fact that in the case filed by Severino=s tenant a#ainst Severino and petitioner in .,*,, assailin# the validity of the sale made to petitioner, Severino e1plicitly asserted in his s!orn ans!er to the complaint that the sale !as a le#itimate transaction. 7e further alle#ed that the e"ectment case filed by petitioner a#ainst the tenant !as a le#itimate action by an o!ner a#ainst one !ho refuses to turn over possession of his property. /-

Our attention is also dra!n to the fact that the #enuineness and due e1ecution of the second deed !as not denied by Severino. E1cept to alle#e that he !as not physically present !hen the second deed !as notari'ed before the notary public, Severino did not assail the truth of its contents nor deny that he ever si#ned the same. s a matter of fact, he even admitted that he affi1ed his si#nature on the second deed to help petitioner ac>uire a loan. %his can only si#nify that he consented to the manner proposed by petitioner for payment of the balance and that he accepted the stipulated price of P-,<<<,<<<.<< as consideration for the sale. Since the #enuineness and due e1ecution of the second deed !as not seriously put in issue, it should be upheld as the best evidence of the intent and true a#reement of the parties. Oral testimony, dependin# as it does e1clusively on human memory, is not as reliable as !ritten or documentary evidence.// It should be emphasi'ed that the non+appearance of the parties before the notary public !ho notari'ed the deed does not necessarily nullify nor render the parties= transaction void a$ initio. Ae have held previously that the provision of rticle ./0*/6 of the Ne! Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. @ailure to follo! the proper form does not invalidate a contract. Ahere a contract is not in the form prescribed by la!, the parties can merely compel each other to observe that form, once the contract has been perfected./0 %his is consistent !ith the basic principle that contracts are obli#atory in !hatever form they may have been entered into, provided all essential re>uisites are present./; %he elements of a valid contract of sale under rt. .60* of the Civil Code are2 3.4 consent or meetin# of the mindsE 3-4 determinate sub"ect matterE and 3/4 price certain in money or its e>uivalent./) In the instant case, the second deed reflects the presence of all these elements and as such, there is already a perfected contract of sale. $espondent=s contention that the second deed !as correctly nullified by the lo!er court because Severino=s !ife, dela, in !hose name the property !as titled, did not si#n the same, is unavailin#. %he records are replete !ith admissions made by dela that she had a#reed !ith her husband to sell the property/* !hich is con"u#al in nature/, and that she !as a!are of this particular transaction !ith petitioner. She also said that it !as Severino !ho actually administered their properties !ith her consent, because she did not consider this as her responsibility.6< Ae also observe that Severino=s testimony in court contained 3.4 admissions that he indeed a#reed to sell the property and 3-4 references to petitioner=s failure to pay the purchase price.6. 7e did not mention that he did not intend at all to sell the property to petitioner and instead, stressed the fact that the purchase price had not yet been paid. Ahy !ould Severino stress non+payment if there !as no sale at allK 7o!ever, it is !ell+settled that non+payment of the purchase price is not amon# the instances !here the la! declares a contract to be null and void. It should be pointed out that the second deed specifically provides2

%hat for and in consideration of= the sum of %AO 5I??ION PESOS 3P-,<<<,<<<.<<4, Philippine Currency paid in full by 7EN$G $. PEH ?OS , receipt of !hich is hereby ac:no!led#ed by me to my full satisfaction, I hereby by these presents, sells 3sic4, cede, convey and other!ise dispose of the above described parcel of land, unto 7EN$G $. PEH ?OS , his heirs, successors and assi#ns, free from all liens and encumbrances. 111 111 111 3SFD.4 SEVE$INO C. S N%OS VENDO$ 111 111 1116-

s can be seen from above, the contract in this case is absolute in nature and is devoid of any #roviso that title to the property is reserved in the seller until full payment of the purchase price. Neither does the second deed #ive Severino a unilateral ri#ht to resolve the contract the moment the buyer fails to pay !ithin a fi1ed period.6/ t most, the non+payment of the contract price merely results in a breach of contract for non+performance and !arrants an action for rescission or specific performance under rticle ..,. of the Civil Code.66 (e that as it may, !e a#ree !ith petitioner that althou#h the la! allo!s rescission as a remedy for breach of contract, the same may not be availed of by respondents in this case. %o be#in !ith, it !as Severino !ho prevented full payment of the stipulated price !hen he refused to deliver the o!ner=s ori#inal duplicate title to Philam ?ife. 7is refusal to cooperate !as un"ustified, because as Severino himself admitted, he si#ned the deed precisely to enable petitioner to ac>uire the loan. 7e also :ne! that the property !as to be #iven as security therefor. %hus, it cannot be said that petitioner breached his obli#ation to!ards Severino since the former has al!ays been !illin# to and could comply !ith !hat !as incumbent upon him. In sum, the only conclusion !hich can be deduced from the aforesaid circumstances is that o!nership of the property has been transferred to petitioner. rticle .6)) of the Civil Code states that o!nership of the thin# sold shall be transferred to the vendee upon the actual or constructive delivery thereof. It is undisputed that the property !as placed in the control and possession of petitioner60 !hen he came into material possession thereof after "ud#ment in the e"ectment case. Not only !as the contract of sale perfected, but also actual delivery of the property effectively consummated the sale. A7E$E@O$E, the petition is F$ N%ED. %he decision of the Court of ppeals dated December -,, .,,) and its resolution dated pril .0, .,,* in C +F.$. CV No. 60-<; !hich had affirmed the "ud#ment of the $e#ional %rial Court of &ue'on City, (ranch )*, are $EVE$SED and SE% SIDE. ne! "ud#ment is hereby rendered DP7O?DINF the validity of E1hibit (, the Deed of bsolute Sale dated September .-, .,**, entered into bet!een the parties. %he ?andban: of the Philippines is further ordered to $E?E SE to respondents the amount of P.,)<<,<<<.<< held in escro!, representin# the balance of the purchase price a#reed upon by the

parties under the deed of absolute sale. @inally, the respondents are ordered to DE?IVE$ to petitioner the o!ner=s duplicate copy of %C% No. P%+-/60* after said release, !ith the correspondin# payment of ta1es due. Costs a#ainst respondents. SO O$DE$ED. Bellosillo, %endoza, Buena and De &eon, r., ., concur.