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Republic of the Philippines

G.R. No. L-36902 January 30, 1982
LUIS PICEL, petitioner,
PRU!ENCIO "LON#O, respondent.

This is a petition to revie on certiorari the decision of the !ourt of First Instance of
"asilan !it# dated $anuar# %, &'() in !ivil !ase No. *+, entitled -Prudencio .lon/o,
plaintiff, vs. 0uis Pichel, defendant.-
This case ori1inated in the loer !ourt as an action for the annul2ent of a -Deed of
Sale- dated .u1ust &3, &'4* and e5ecuted b# Prudencio .lon/o, as vendor, in favor of
0uis Pichel, as vendee, involvin1 propert# aarded to the for2er b# the Philippine
6overn2ent under Republic .ct No. 3((. Pertinent portions of the docu2ent sued
upon read as follos7
That the V8NDOR for and in consideration of the su2 of FO9R T:O9S.ND T;O
:9NDR8D P8SOS <P3,+,,.,,=, Philippine !urrenc#, in hand paid b# the V8ND88 to
the entire satisfaction of the V8NDOR, the V8NDOR hereb# sells transfers, and
conve#s, b# a# of absolute sale, all the coconut fruits of his coconut land, desi1nated
as 0ot No. +& > Subdivision Plan No. Psd> )+34%, situated at "alactasan Plantation,
0a2itan, "asilan !it#, Philippines?
That for the herein sale of the coconut fruits are for all the fruits on the afore2entioned
parcel of land presentl# found therein as ell as for future fruits to be produced on the
said parcel of land durin1 the #ears period? hich sha1 co22ence to run as of
S8PT8M"8R &%,&'4*? up to $.N9.R@ &, &'(4 <sic=?
That the deliver# of the subAect 2atter of the Deed of Sale shall be fro2 ti2e to ti2e
and at the e5pense of the V8ND88 ho shall do the harvestin1 and 1atherin1 of the
That the VendorBs ri1ht, title, interest and participation herein conve#ed is of his on
e5clusive and absolute propert#, free fro2 an# liens and encu2brances and he
arrants to the Vendee 1ood title thereto and to defend the sa2e a1ainst an# and all
clai2s of all persons ho2soever.
.fter the pre>trial conference, the !ourt a Cuo issued an Order dated Nove2ber ',
&'(+ hich in part read thus7
The folloin1 facts are ad2itted b# the parties7
Plaintiff Prudencio .lon/o as aarded b# the 6overn2ent that parcel of land
desi1nated as 0ot No. +& of Subdivision Plan Psd )+34% of "alactasan, 0a2itan,
"asilan !it# in accordance ith Republic .ct No. 3((. The aard as cancelled b# the
"oard of 0iCuidators on $anuar# +(, &'4% on the 1round that, previous thereto, plaintiff
as proved to have alienated the land to another, in violation of la. In &'( +, plaintiffBs
ri1hts to the land ere reinstated.
On .u1ust &3, &'4*, plaintiff and his ife sold to defendant an the fruits of the coconut
trees hich 2a# be harvested in the land in Cuestion for the period, Septe2ber &%,
&'4* to $anuar# &, &'(4, in consideration of P3,+,,.,,. 8ven as of the date of sale,
hoever, the land as still under lease to one, Ra2on Sua, and it as the a1ree2ent
that part of the consideration of the sale, in the su2 of P),4%,.,,, as to be paid b#
defendant directl# to Ra2on Sua so as to release the land fro2 the clutches of the
latter. Pendin1 said pa#2ent plaintiff refused to sno the defendant to 2aDe an#
In $ul# &'(+, defendant for the first ti2e since the e5ecution of the deed of sale in his
favor, caused the harvest of the fruit of the coconut trees in the land.
555 555 555
!onsiderin1 the fore1oin1, to issues appear posed b# the co2plaint and the anser
hich 2ust needs be tested in the crucible of a trial on the 2erits, and the# are7
First.E ;hether or nor defendant actuall# paid to plaintiff the full su2 of P3,+,,.,,
upon e5ecution of the deed of sale.
Second.E Is the deed of sale, 85hibit B.B, the prohibited encu2brance conte2plated in
Section * of Republic .ct No. 3((F

.nent the first issue, counsel for plaintiff .lon/o subseCuentl# Bstipulated and a1reed
that his client ... ad2its fun pa#2ent thereof b# defendant.
The re2ainin1 issue bein1
one of la, the !ourt belo considered the case sub2itted for su22ar# Aud12ent on
the basis of the pleadin1s of the parties, and the ad2ission of facts and docu2entar#
evidence presented at the pre>trial conference.
The loer court rendered its decision no under revie, holdin1 that althou1h the
a1ree2ent in Cuestion is deno2inated b# the parties as a deed of sale of fruits of the
coconut trees found in the vendorBs land, it actuall# is, for all le1al intents and purposes,
a contract of lease of the land itself. .ccordin1 to the !ourt7
... the sale aforestated has 1iven defendant co2plete control and enAo#2ent of the
i2prove2ents of the land. That the contract is consensual? that its purpose is to allo
the enAo#2ent or use of a thin1? that it is onerous because rent or price certain is
stipulated? and that the enAo#2ent or use of the thin1 certain is stipulated to be for a
certain and definite period of ti2e, are characteristics hich ad2it of no other
conclusion. ... The provisions of the contract itself and its characteristics 1overn its

The !ourt, therefore, concluded that the deed of sale in Cuestion is an encu2brance
prohibited b# Republic .ct No. 3(( hich provides thus7
Sec. *. 85cept in favor of the 6overn2ent or an# of its branches, units, or institutions,
land acCuired under the provisions of this .ct or an# per2anent i2prove2ents thereon
shall not be thereon and for a ter2 of ten #ears fro2 and after the date of issuance of
the certificate of title, nor shall the# beco2e liable to the satisfaction of an# debt
contracted prior to the e5piration of such period.
.n# occupant or applicant of lands under this .ct ho transfers hatever ri1hts he has
acCuired on said lands andGor on the i2prove2ents thereon before the date of the
aard or si1nature of the contract of sale, shall not be entitled to appl# for another
piece of a1ricultural land or urban, ho2esite or residential lot, as the case 2a# be, fro2
the National .baca and Other Fibers !orporation? and such transfer shall be
considered null and void.
The dispositive portion of the loer !ourtBs decision states7
;:8R8FOR8, it is the Aud12ent of this !ourt that the deed of sale, 85hibit B.B, should
be, as it is, hereb# declared nun and void? that plaintiff be, as he is, ordered to pa# bacD
to defendant the consideration of the sale in the su2 of P3,+,,.,, the sa2e to bear
le1al interest fro2 the date of the filin1 of the co2plaint until paid? that defendant shall
pa# to the plaintiff the su2 of P%,,.,, as attorne#Bs fees.
!osts a1ainst the defendant.
"efore 1oin1 into the issues raised b# the instant Petition, the 2atter of hether, under
the ad2itted facts of this case, the respondent had the ri1ht or authorit# to e5ecute the
-Deed of Sale- in &'4*, his aard over 0ot No. +& havin1 been cancelled previousl# b#
the "oard of 0iCuidators on $anuar# +(, &'4%, 2ust be clarified. The case in point is
Ras vs. Sua
herein it as cate1oricall# stated b# this !ourt that a cancellation of an
aard 1ranted pursuant to the provisions of Republic .ct No. 3(( does not
auto2aticall# divest the aardee of his ri1hts to the land. Such cancellation does not
result in the i22ediate reversion of the propert# subAect of the aard, to the State.
SpeaDin1 throu1h Mr. $ustice $.".0. Re#es, this !ourt ruled that -until and unless an
appropriate proceedin1 for reversion is instituted b# the State, and its reacCuisition of
the onership and possession of the land decreed b# a co2petent court, the 1rantee
cannot be said to have been divested of hatever ri1ht that he 2a# have over the
sa2e propert#.-

There is nothin1 in the record to sho that at an# ti2e after the supposed cancellation
of herein respondentBs aard on $anuar# +(, &'4%, reversion proceedin1s a1ainst 0ot
No. +& ere instituted b# the State. Instead, the ad2itted fact is that the aard as
reinstated in &'(+. .ppl#in1 the doctrine announced in the above>cited Ras case,
therefore, herein respondent is not dee2ed to have lost an# of his ri1hts as 1rantee of
0ot No. +& under Republic .ct No. 3(( durin1 the period 2aterial to the case at bar,
i.e., fro2 the cancellation of the aard in &'4% to its reinstate2ent in &'(+. ;ithin said
period, respondent could e5ercise all the ri1hts pertainin1 to a 1rantee ith respect to
0ot No. +&.
This brin1s 9s to the issues raised b# the instant Petition. In his "rief, petitioner
contends that the loer !ourt erred7
&. In resortin1 to construction and interpretation of the deed of sale in Cuestion here
the ter2s thereof are clear and una2bi1uous and leave no doubt as to the intention of
the parties?
+. In declarin1 E 1rantin1 ithout ad2ittin1 that an interpretation is necessar# E the
deed of sale in Cuestion to be a contract of lease over the land itself here the
respondent hi2self aived and abandoned his clai2 that said deed did not e5press the
true a1ree2ent of the parties, and on the contrar#, respondent ad2itted at the pre>trial
that his a1ree2ent ith petitioner as one of sale of the fruits of the coconut trees on
the land?
). In decidin1 a Cuestion hich as not in issue hen it declared the deed of sale in
Cuestion to be a contract of lease over 0ot +&?
3. In declarin1 further2ore the deed of sale in Cuestion to be a contract of lease over
the land itself on the basis of facts hich ere not proved in evidence?
%. In not holdin1 that the deed of sale, 85hibit -.- and -+-, e5presses a valid contract of
4. In not decidin1 sCuarel# and to the point the issue as to hether or not the deed of
sale in Cuestion is an encu2brance on the land and its i2prove2ents prohibited b#
Section * of Republic .ct 3((? and
(. In aardin1 respondent attorne#Bs fees even 1rantin1, ithout ad2ittin1, that the
deed of sale in Cuestion is violative of Section * of Republic .ct 3((.
The first five assi1ned errors are interrelated, hence, ;e shall consider the2 to1ether.
To be1in ith, ;e a1ree ith petitioner that construction or interpretation of the
docu2ent in Cuestion is not called for. . perusal of the deed fails to disclose an#
a2bi1uit# or obscurit# in its provisions, nor is there doubt as to the real intention of the
contractin1 parties. The ter2s of the a1ree2ent are clear and uneCuivocal, hence the
literal and plain 2eanin1 thereof should be observed. Such is the 2andate of the !ivil
!ode of the Philippines hich provides that7
.rt. &)(,. If the ter2s of a contract are clear and leave no doubt upon the intention of
the contractin1 parties, the literal 2eanin1 of its stipulation shall control ... .
Pursuant to the afore>Cuoted le1al provision, the first and funda2ental dut# of the
courts is the application of the contract accordin1 to its e5press ter2s, interpretation
bein1 resorted to onl# hen such literal application is i2possible.
Si2pl# and directl# stated, the -Deed of Sale dated .u1ust &3, &'4* is precisel# hat it
purports to be. It is a docu2ent evidencin1 the a1ree2ent of herein parties for the sale
of coconut fruits of 0ot No. +&, and not for the lease of the land itself as found b# the
loer !ourt. In clear and e5press ter2s, the docu2ent defines the obAect of the
contract thus7 -the herein sale of the coconut fruits are for an the fruits on the
afore2entioned parcel of land durin1 the #ears ...<fro2= S8PT8M"8R &%, &'4*? up to
$.N9.R@ &, &'(4.- Moreover, as petitioner correctl# asserts, the docu2ent in Cuestion
e5presses a valid contract of sale. It has the essential ele2ents of a contract of sale as
defined under .rticle &3*% of the Ne !ivil !ode hich provides thus7
.rt. &3%*. "# the contract of sale one of the contractin1 parties obli1ates hi2self to
transfer the onership of and to deliver a deter2inate thin1, and the other to pa#
therefor a price certain in 2one# or its eCuivalent.
. contract of sale 2a# be absolute or conditional.
The subAect 2atter of the contract of sale in Cuestion are the fruits of the coconut trees
on the land durin1 the #ears fro2 Septe2ber &%, &'4* up to $anuar# &, &'(4, hich
subAect 2atter is a deter2inate thin1. 9nder .rticle &34& of the Ne !ivil !ode, thin1s
havin1 a potential e5istence 2a# be the obAect of the contract of sale. .nd in Sibal vs.
Valdez, %, Phil. %&+, pendin1 crops hich have potential e5istence 2a# be the subAect
2atter of the sale. :ere, the Supre2e !ourt, citin1 Meche2 on Sales and .2erican
cases said hich have potential e5istence 2a# be the subAect 2atter of sale. :ere, the
Supre2e !ourt, citin1 Meche2 on Sales and .2erican cases said7
Mr. Meche2 sa#s that a valid sale 2a# be 2ade of a thin1, hich thou1h not #et
actuall# in e5istence, is reasonabl# certain to co2e into e5istence as the natural
incre2ent or usual incident of so2ethin1 alread# in e5istence, and then belon1in1 to
the vendor, and the title ill vest in the bu#er the 2o2ent the thin1 co2es into
e5istence. <82erson vs. 8uropean Raila# !o., 4( Me., )*(? !uttin1 vs. PacDers
85chan1e, +& .2. St. Rep. 4)= Thin1s of this nature are said to have a potential
e5istence. . 2an 2a# sell propert# of hich he is potentiall# and not actuall# possess.
:e 2a# 2aDe a valid sale of the ine that a vine#ard is e5pected to produce? or the
1rain a field 2a# 1ro in a 1iven ti2e? or the 2ilD a co 2a# #ield durin1 the co2in1
#ear? or the ool that shall thereafter 1ro upon sheep? or hat 2a# be taDen at the
ne5t case of a fisher2anBs net? or fruits to 1ro? or #oun1 ani2als not #et in e5istence?
or the 1oodill of a trade and the liDe. The thin1 sold, hoever, 2ust be specific and
Identified. The# 2ust be also oned at the ti2e b# the vendor. <:ull vs. :ull 3* !onn.
+%, <3, .2. Rep., &4%= <pp. %++>%+)=.
;e do not a1ree ith the trial court that the contract e5ecuted b# and beteen the
parties is -actuall# a contract of lease of the land and the coconut trees there.- <!FI
Decision, p. 4+, Records=. The !ourtBs holdin1 that the contract in Cuestion fits the
definition of a lease of thin1s herein one of the parties binds hi2self to 1ive to another
the enAo#2ent or use of a thin1 for a price certain and for a period hich 2a# be
definite or indefinite <.rt. &43), !ivil !ode of the Philippines= is erroneous. The
essential difference beteen a contract of sale and a lease of thin1s is that the deliver#
of the thin1 sold transfers onership, hile in lease no such transfer of onership
results as the ri1hts of the lessee are li2ited to the use and enAo#2ent of the thin1
In Rodriguez vs. Borromeo, 3) Phil. 3(', 3',, the Supre2e !ourt held7
Since accordin1 to article &%3) of the sa2e !ode the contract of lease is defined as the
1ivin1 or the concession of the enAo#2ent or use of a thin1 for a specified ti2e and
fi5ed price, and since such contract is a for2 of enAo#2ent of the propert#, it is evident
that it 2ust be re1arded as one of the 2eans of enAo#2ent referred to in said article
)'*, inas2uch as the ter2s enAo#2ent, use, and benefit involve the sa2e and
analo1ous 2eanin1 relative to the 1eneral utilit# of hich a 1iven thin1 is capable. <&,3
$urisprudencia !ivil, 33)=
In concludin1 that the possession and enAo#2ent of the coconut trees can therefore be
said to be the possession and enAo#2ent of the land itself because the defendant>
lessee in order to enAo# his ri1ht under the contract, he actuall# taDes possession of the
land, at least durin1 harvest ti2e, 1ather all of the fruits of the coconut trees in the land,
and 1ain e5clusive use thereof ithout the interference or intervention of the plaintiff>
lessor such that said plaintiff>lessor is e5cluded in fact fro2 the land durin1 the period
aforesaid, the trial court erred. The contract as clearl# a -sale of the coconut fruits.-
The vendor sold, transferred and conve#ed -b# a# of absolute sale, all the coconut
fruits of his land,- thereb# divestin1 hi2self of all onership or do2inion over the fruits
durin1 the seven>#ear period. The possession and enAo#2ent of the coconut trees
cannot be said to be the possession and enAo#2ent of the land itself because these
ri1hts are distinct and separate fro2 each other, the first pertainin1 to the accessor# or
i2prove2ents <coconut trees= hile the second, to the principal <the land=. . transfer of
the accessor# or i2prove2ent is not a transfer of the principal. It is the other a#
around, the accessor# follos the principal. :ence, the sale of the nuts cannot be
interpreted nor construed to be a lease of the trees, 2uch less e5tended further to
include the lease of the land itself.
The real and pivotal issue of this case hich is taDen up in petitionerBs si5th assi1n2ent
of error and as alread# stated above, refers to the validit# of the -Deed of Sale-, as
such contract of sale, vis>a>vis the provisions of Sec. *, R... No. 3((. The loer !ourt
did not rule on this Cuestion, havin1 reached the conclusion that the contract at bar as
one of lease. It as fro2 the conte5t of a lease contract that the !ourt belo
deter2ined the applicabilit# of Sec. *, R... No. 3((, to the instant case.
Resolvin1 no this principal issue, ;e find after a close and careful e5a2ination of the
ter2s of the first para1raph of Section * hereinabove Cuoted, that the 1rantee of a
parcel of land under R... No. 3(( is not prohibited fro2 alienatin1 or disposin1 of the
natural andGor industrial fruits of the land aarded to hi2. ;hat the la e5pressl#
disallos is the encu2brance or alienation of the land itself or an# of the per2anent
i2prove2ents thereon. Per2anent i2prove2ents on a parcel of land are thin1s
incorporated or attached to the propert# in a fi5ed 2anner, naturall# or artificiall#. The#
include hatever is built, planted or son on the land hich is characteri/ed b# fi5it#,
i22utabilit# or i22ovabilit#. :ouses, buildin1s, 2achiner#, ani2al houses, trees and
plants ould fall under the cate1or# of per2anent i2prove2ents, the alienation or
encu2brance of hich is prohibited b# R... No. 3((. ;hile coconut trees are
per2anent i2prove2ents of a land, their nuts are natural or industrial fruits hich are
2eant to be 1athered or severed fro2 the trees, to be used, enAo#ed, sold or otherise
disposed of b# the oner of the land. :erein respondents, as the 1rantee of 0ot No. +&
fro2 the 6overn2ent, had the ri1ht and prero1ative to sell the coconut fruits of the
trees 1roin1 on the propert#.
"# virtue of R... No. 3((, bona fide occupants, veterans, 2e2bers of 1uerilla
or1ani/ations and other Cualified persons ere 1iven the opportunit# to acCuire
1overn2ent lands b# purchase, taDin1 into account their li2ited 2eans. It as intended
for these persons to 2aDe 1ood and productive use of the lands aarded to the2, not
onl# to enable the2 to i2prove their standard of livin1, but liDeise to help provide for
the annual pa#2ents to the 6overn2ent of the purchase price of the lots aarded to
the2. Section * as included, as stated b# the !ourt a Cuo, to protect the 1rantees
fro2 the2selves and the incursions of opportunists ho pre# on their 2iser# and
povert#.- It is there to insure that the 1rantees the2selves benefit fro2 their respective
lots, to the e5clusion of other persons.
The purpose of the la is not violated hen a 1rantee sells the produce or fruits of his
land. On the contrar#, the ai2 of the la is thereb# achieved, for the 1rantee is
encoura1ed and induced to be 2ore industrious and productive, thus 2aDin1 it possible
for hi2 and his fa2il# to be econo2icall# self>sufficient and to lead a respectable life. .t
the sa2e ti2e, the 6overn2ent is assured of pa#2ent on the annual install2ents on
the land. ;e a1ree ith herein petitioner that it could not have been the intention of the
le1islature to prohibit the 1rantee fro2 sellin1 the natural and industrial fruits of his
land, for otherise, it ould lead to an absurd situation herein the 1rantee ould not
be able to receive and enAo# the fruits of the propert# in the real and co2plete sense.
Respondent throu1h counsel, in his .nser to the Petition contends that even 1rantin1
arguendo that he e5ecuted a deed of sale of the coconut fruits, he has the -privile1e to
chan1e his 2ind and clai2 it as <an= i2plied lease,- and he has the -le1iti2ate ri1ht- to
file an action for annul2ent -hich no la can stop.- :e clai2s it is his -sole
construction of the 2eanin1 of the transaction that should prevail and not petitioner.
RespondentBs counsel either 2isapplies the la or is tr#in1 too hard and 1oin1
too far to defend his clientBs hopeless cause. Suffice it to sa# that respondent>1rantee,
after havin1 received the consideration for the sale of his coconut fruits, cannot be
alloed to i2pu1n the validit# of the contracts he entered into, to the preAudice of
petitioner ho contracted in 1ood faith and for a consideration.
The issue raised b# the seventh assi1n2ent of error as to the propriet# of the aard of
attorne#Bs fees 2ade b# the loer !ourt need not be passed upon, such aard havin1
been apparentl# based on the erroneous findin1 and conclusion that the contract at bar
is one of lease. ;e shall li2it Ourselves to the Cuestion of hether or not in
accordance ith Our rulin1 in this case, respondent is entitled to an aard of attorne#Bs
fees. The !ivil !ode provides that7
.rt. ++,*. In the absence of stipulation, attorne#Bs fees and e5penses of liti1ation, other
than Audicial costs, cannot be recovered, e5cept7
<&= ;hen e5e2plar# da2a1es are aarded?
<+= ;hen the defendantBs act or o2ission has co2pelled the plaintiff to liti1ate ith third
persons or to incur e5penses to protect his interest?
<)= In cri2inal cases of 2alicious prosecution a1ainst the plaintiff?
<3= In case of a clearl# unfounded civil action or proceedin1 a1ainst the plaintiff?
<%= ;here the defendant acted in 1ross and evident bad faith in refusin1 to satisf# the
plaintiffBs plainl# valid, Aust and de2andable clai2?
<4= In actions for le1al support?
<(= In actions for the recover# of a1es of household helpers, laborers and sDilled
<*= In actions for inde2nit# under orD2enBs co2pensation and e2plo#erBs liabilit#
<'= In a separate civil action to recover civil liabilit# arisin1 fro2 a cri2e?
<&,= ;hen at least double Audicial costs are aarded?
<&&= In an# other case here the court dee2s it Aust and eCuitable that attorne#Bs fees
and e5penses of liti1ation should be recovered.
In all cases, the attorne#Bs fees and e5penses of liti1ation 2ust be reasonable.
;e find that none of the le1al 1rounds enu2erated above e5ists to Austif# or arrant the
1rant of attorne#Bs fees to herein respondent.
IN VI8; OF T:8 FOR86OIN6, the Aud12ent of the loer !ourt is hereb# set aside
and another one is entered dis2issin1 the !o2plaint. ;ithout costs.