G.R. No.

L-22571 May 25, 1973

JOSEFINA VALDEZ, JAIME VALDEZ, ROGELIO ALMONTE, RAQUEL ALMONTE and RAUL ALMONTE,
the latter two minors, represented in this action by their father, FRANCISCO
ALMONTE, plaintiffs-appellees,
vs.
TEOFILA OLORGA, by herself and in representation of minor CARMEN VALDEZ and RENATO
OLORGA,defendants-appellants.
Salvador P. Socrates for plaintiffs-appellees.
Perfecto de los Reyes and Clarito A. Demaala for defendants-appellants.

MAKALINTAL, J.:
The present appeal was taken by the defendants directly to this Court by record on appeal filed way back
in 1964. The case, however, was submitted for decision only on September 4, 1970. In a motion dated
April 25, 1973, the defendants appellants prayed that decision herein be expedited.
A reading of the brief of the appellants shows that most of the arguments advanced therein challenge the
findings of fact made by the court a quo. As pointed out by the plaintiffs-appellees, such findings are no
longer reviewable by this Court, its jurisdiction being limited to deciding purely legal questions.
The following facts as stated in the decision appealed from may therefore be considered established:
This is an action for partition filed by the living children and grandchildren of the late
spouses Federico Valdez, Sr. and Juanita Batul against the heir and widow of Federico Valdez,
Jr. The action concerns Lot No. 18, of Puerto Princesa Cadastre, covered by T.C.T. No. T-94 in
the name of Federico Valdez, Jr.
Federico Valdez, Sr. died in Manila in the year 1931 and his wife, Juanita Batul, died in 1939.
The spouses left the following children as their heirs: (1) Avelina Olorga, who died in 1941,
leaving as her heir co-defendant Renato Olorga; (2) Elisa Valdez-Almonte, who died in 1947,
leaving Rogelio, Raquel and Raul, all surnamed Almonte, as her heirs; (3) the plaintiff
Josefina Valdez; (4) Federico Valdez, Jr., who died in September, 1960, leaving as his heirs
defendants Teofila Olorga, his wife, and Carmen Valdez, his daughter; and (5) Jaime Valdez,
co-plaintiff herein. In 1924, the spouses Federico Valdez, Sr. and Juanita Batul, bought Lot
No. 18, the property now in dispute, from Dolores M. de Gutierrez for P500.00. In 1930, the
old Valdez family, as vendees, occupied and lived in the premises of Lot No. 18. After the
death of Federico Valdez, Sr., Juanita Batul, in the year 1936, executed a contract of lease
over a portion of Lot No. 18 in favor of the protestant church of Puerto Princesa, Exhibit "A".
The same Juanita Batul leased in 1939 a portion of Lot No. 18 to Mr. Gregorio Quicho.
The transfer of the lot in the name of Federico, Sr., was never done because the owner's
original certificate of title was lost.
Josefina Valdez and Federico Valdez, Jr. commissioned their cousin Concepcion Castro to
negotiate with the Gutierrez family (Exhibit "C") in 1948 in order that the property in
question may be transferred to them. It turned out that the Gutierrez family was asking for
an additional amount of P2,500.00 (Exh. "D").
Mrs. Castro came back to Puerto Princess without having realized her mission. In the same
year she went back to Manila with Federico Valdez, Jr., and Mr. Gregorio Quicho. The deed
was executed for the amount of P2,200.00 which was given by Mr. Gregorio Quicho, as
payment for back rentals and payment for the purchase of that portion of lot No. 18 which
he was renting and occupying. In executing the deed of sale, EXHIBIT "I" , the name of
Federico Valdez, Jr. appeared as the only vendee. This was done pursuant to the wishes of
Mr. Quicho who advanced the money, in order that he could facilitate the deed of sale
between him and the Valdezes, with the understanding that Federico Valdez, Jr. will hold the
same in trust for his other brother and sisters (Testimony of Mrs. Castro).
When Federico Valdez, Jr. was still living, he never attempted to exclude the herein plaintiffs
from ownership of the land in question. Said plaintiffs have been in open continuous and
uninterrupted possession of the premises they are occupying inside the lot in question long
before the execution of the deed of sale (Exh. "I"). It was only after the death of Federico
Valdez, Jr. that the widow Teofila Olorga tried to eject the plaintiffs.

As clearly stated in the memorandum for the plaintiffs the following facts are undisputed:
(1) That the land in question Lot No. 18 of the Puerto Princesa Cadastre, was originally
purchased by the spouses Federico Valdez, Sr. and Juanita Batul from Dolores M. de Gutierrez
for P500.00;
(2) That the parties herein, plaintiffs and defendants alike, are all successors-in-interest of
the spouses Federico Valdez, Sr., and Juanita Batul, either as forced or compulsory heirs or in
representation thereof;
(3) That the above-named spouses had been in open, public, peaceful and uninterrupted
occupation and possession of Lot No. 18, the property in question, since the year 1930 or
1933;
(4) That in 1939, Mr. Gregorio Quicho rented a portion of the lot in question from Juanita
Batul;
(5) That Mr. Quicho advanced the amount of P2,200.00 partly as purchase price of the
portion purchased by him, in the final execution of the deed of sale, Exhibit "I"; and
(6) That a part of the property in question, Lot 18-B, is still registered in the name of
Federico Valdez, Jr., under T.C.T. No. T-634, cancelling T.C.T. No. 75.
The following facts, although not admitted by the defendants, were not disputed:
(1) That the Valdez Family, in 1930 or 1933, entered into, possessed and occupied Lot 18,
the property in question;
(2) That Juanita Batul, in 1936, entered into a contract of lease (Exh. "A") with the Baptist
Church of Puerto Princesa over a portion of Lot 18;
(3) That in 1947, upon discovering that the land in question had not been transferred in the
name of their parents, Josefina Valdez made efforts to have the said land transferred to
them, and commissioned Mrs. Castro, together with Federico Valdez, Jr., to negotiate with
the Gutierrez family for the purpose, which culminated in the execution of the deed of sale,
Exhibit "I";
(4) That in the course of said negotiation undertaken by Mrs. Castro, Federico Valdez, Jr, was
brought to Manila where the deed of sale was finally placed in his name alone, with the
express understanding that he will hold the same in trust for his other brother and sisters;
(5) That the placing of the deed of sale in the name of Federico Valdez, Jr. alone, instead of
the "Heirs of Federico Valdez, Sr." or "Heirs of Juanita Batul" was done through the
suggestion of Mr. Quicho who wanted to facilitate his own deed of sale over the portion that
he purchased;
(6) That at the time of the execution of the deed of sale (Exh. "I"), Valdez, Jr. was barely 21
years old, a sophomore student in the high school, and he, together with his wife, were
without any lucrative trade or calling;
(7) That Josefina Valdez and her co-plaintiffs had been in continuous, public, peaceful and
uninterrupted possession and occupation of the premises in question long before the death
of Valdez, Jr.;
(8) That Valdez, Jr. never asserted, nor attempted to assert, during his lifetime, sole and
exclusive ownership of the premises in question, against the herein plaintiffs; and
(9) That during the lifetime of Valdez, Jr. he sold a portion of the land in question and leased
other portions thereof to private parties, but he did so with the consent and approval of her
elder sister, Josefina Valdez.
In this connection we have to consider also the offer of evidence by the plaintiffs as matters
to be testified by Mr. Gregorio Quicho were he present and able to testify and which were
admitted by the defendants, such that the presentation of Mr. Quicho was waived by the
plaintiffs. The testimony of Mr. Quicho which would have been given by him if he were
presented and which were admitted by the defendants are as follows:
(1) That a deed of sale for a consideration of P500.00 was executed by the spouses Gutierrez
in favor of the spouses Federico Valdez, Sr. and Juanita Batul, over Lot 18 of Puerto Princesa
Cadastre, the very lot in question, in the year 1924;

(2) That Mr. Quicho rented and occupied since 1939, a portion of Lot 18, the lot in question,
from Juanita Batul;
(3) That the amount of P2,200.00 which was paid to Dolores M. Gutierrez for the execution of
the deed of sale, Exhibit "I", was delivered by Mr. Gregorio Quicho, for payment of unpaid
back rentals and as advances for the purchase of the portion of Lot 18 which he finally
acquired;
(4) That Mr. Quicho was instrumental in having the deed of sale executed in the name of
Federico Valdez, Jr. the portion which he wanted to acquire.
The legal point raised by the appellants is that since the land in question was sold to the late Federico
Valdez, Jr. in 1948 and the Transfer Certificate of Title, so he alleges, was issued in his name in 1950, the
action had already prescribed when it was filed more than ten (10) years thereafter, or in 1962; that
furthermore, from the date of the sale up to the time his death in 1960 he exercised exclusive ownership of
the land. In other words the appellants claim both extinctive and acquisitive prescription.
Both claims are belied by the facts as found by the court a quo, which held: (1.) that when the deed of sale
was executed and the name of Federico Valdez, Jr. was made to appear therein as the only vendee, "this
was done pursuant to the wishes of Mr. Quicho who advanced the money, in order that he could facilitate
the deed of sale between him and the Valdezes, With the understanding that Federico Valdez, Jr. will hold
the same in, trust for his other brother and sisters;" and (2) that when 'Federico Valdez, Jr. was still living,
"he never attempted to exclude the herein plaintiffs from ownership of the land in question, (and) said
plaintiffs have been in continuous and uninterrupted possession of the premises they are occupying inside
the lot in question long before the execution of the deed of sale (Exh. "I"), (and) it was only after the death
of Federico Valdez, Jr. (in 1960) that the widow, Teofila Olorga, tried to eject the plaintiffs."
Given the antecedents of the property and the fact that its acquisition by Federico Valdez, Jr. was for the
benefit not of himself alone but also of his brother and sisters, although for purposes of convenience he
was made to appear as the sole vendee, the juridical relation that arose among them was one of coownership, with the plaintiffs-appellees actually in possession of a portion of the property. Under Article
494 of the Civil Code, "No prescription shall run in favor of a co-owner or co-heir against his co-owners or
co-heirs so long as he expressly or impliedly recognizes the co-ownership." Insofar as the aspect of
extinctive prescription referred to in this article is concerned, it is but a restatement of Article 1965 of the
Spanish Civil Code, which provides: "As between co-heirs, co-owners, or proprietors of adjacent estates,
the action to demand the partition of the inheritance or of the thing held in common, or the survey of the
adjacent properties, does not prescribe." And from the standpoint of acquisitive prescription, or
prescription of ownership, this Court has held in numerous decisions involving fiduciary relations such as
those occupied by a trustee with respect to the cestui que trust that as a general-rule the former's
possession is not adverse and therefore cannot ripen into a title by prescription. Adverse possession in
such a case requires, the concurrence of the following-circumstances: (a) that the trustee has performed
unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) that such, positive acts
of repudiation have been made known to the cestui que trust and (c) that the evidence thereon should be
clear and conclusive. * These circumstances are not present in this case.
In view of the foregoing considerations the judgment appealed from is hereby affirmed. With costs.
Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

G.R. No. L-33580

February 6, 1931

MAXIMILIANO SANCHO, plaintiff-appellant,

vs.
SEVERIANO LIZARRAGA, defendant-appellee.
Jose Perez Cardenas and Jose M. Casal for appellant.
Celso B. Jamora and Antonio Gonzalez for appellee.
ROMUALDEZ, J.:
The plaintiff brought an action for the rescission of a partnership contract between himself and the
defendant, entered into on October 15, 1920, the reimbursement by the latter of his 50,000 peso
investment therein, with interest at 12 per cent per annum form October 15, 1920, with costs, and any
other just and equitable remedy against said defendant.
The defendant denies generally and specifically all the allegations of the complaint which are incompatible
with his special defenses, cross-complaint and counterclaim, setting up the latter and asking for the
dissolution of the partnership, and the payment to him as its manager and administrator of P500 monthly
from October 15, 1920, until the final dissolution, with interest, one-half of said amount to be charged to
the plaintiff. He also prays for any other just and equitable remedy.
The Court of First Instance of Manila, having heard the cause, and finding it duly proved that the defendant
had not contributed all the capital he had bound himself to invest, and that the plaintiff had demanded
that the defendant liquidate the partnership, declared it dissolved on account of the expiration of the
period for which it was constituted, and ordered the defendant, as managing partner, to proceed without
delay to liquidate it, submitting to the court the result of the liquidation together with the accounts and
vouchers within the period of thirty days from receipt of notice of said judgment, without costs.
The plaintiff appealed from said decision making the following assignments of error:
1. In holding that the plaintiff and appellant is not entitled to the rescission of the partnership
contract, Exhibit A, and that article 1124 of the Civil Code is not applicable to the present case.
2. In failing to order the defendant to return the sum of P50,000 to the plaintiff with interest from
October 15, 1920, until fully paid.
3. In denying the motion for a new trial.
In the brief filed by counsel for the appellee, a preliminary question is raised purporting to show that this
appeal is premature and therefore will not lie. The point is based on the contention that inasmuch as the
liquidation ordered by the trial court, and the consequent accounts, have not been made and submitted,
the case cannot be deemed terminated in said court and its ruling is not yet appealable. In support of this
contention counsel cites section 123 of the Code of Civil Procedure, and the decision of this court in the
case of Natividad vs. Villarica (31 Phil., 172).
This contention is well founded. Until the accounts have been rendered as ordered by the trial court, and
until they have been either approved or disapproved, the litigation involved in this action cannot be
considered as completely decided; and, as it was held in said case of Natividad vs .Villarica, also with
reference to an appeal taken from a decision ordering the rendition of accounts following the dissolution of
partnership, the appeal in the instant case must be deemed premature.
But even going into the merits of the case, the affirmation of the judgment appealed from is inevitable. In
view of the lower court's findings referred to above, which we cannot revise because the parol evidence
has not been forwarded to this court, articles 1681 and 1682 of the Civil Code have been properly applied.
Owing to the defendant's failure to pay to the partnership the whole amount which he bound himself to

pay, he became indebted to it for the remainder, with interest and any damages occasioned thereby, but
the plaintiff did not thereby acquire the right to demand rescission of the partnership contract according to
article 1124 of the Code. This article cannot be applied to the case in question, because it refers to the
resolution of obligations in general, whereas article 1681 and 1682 specifically refer to the contract of
partnership in particular. And it is a well known principle that special provisions prevail over general
provisions.
By virtue of the foregoing, this appeal is hereby dismissed, leaving the decision appealed from in full force,
without special pronouncement of costs. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns and Villa-Real, JJ., concur.

G.R. No. L-15398. December 29, 1962.]

J. M. TUASON & CO., INC., represented by its Managing Partner, GREGORIO ARANETA;
INC.,Plaintiff-Appellee, v. TEODOSIO MACALINDONG, Defendant-Appellant.
Leandro Sevilla and Ramon S. Aquino, for Defendant-Appellant.
Araneta & Araneta for Plaintiff-Appellee.
SYLLABUS
1. APPEAL AND ERROR; RAISING QUESTIONS BELOW, ISSUES OF PRESCRIPTION AND LACHES CANNOT BE
RAISED FOR THE FIRST TIME ON APPEAL. Neither prescription of appellees claim or bar of the action for
recovery due to laches was averred in appellants defenses. Appellant cannot raise them now for the first
time on appeal. Verily, the failure to raise the issue of prescription and laches, amounts to a waiver of such
defenses (Sec. 10, Rule 98; Maxilon v. Tobacco, 9 Phil., 390; Domingo v. Osorio, 7 Phil., 405).
2. TORRENS REGISTRATION; IMPRESCRIPTIBILITY OF TORRENS TITLE; DOCTRINE OF LACHES NOT
AVAILABLE AGAINST OWNER OF THE TITLE BUT AGAINST POSSESSOR. The right of the appellee to file an
action to recover possession based on its Torrens Title is imprescriptible and not barred under the doctrine
of laches (Art. 348, Civil Code; Francisco, Et Al., v. Cruz, Et Al., (CA) 43 Off. Gaz. 5105). On the contrary, the
laws on prescription of actions and on estoppel and laches presently operate against appellant. After many
years of inactionforty-four (44) years from July 8, 1914 (issuance of O.C.T. No. 735, Rizal), or nineteen
(19) years from May 29, 1939 (issuance of T.C.T. No. 1267), appellant should be completely barred from
assailing the decree of registration of the subject property (Tiburcio v. PHHC, 106 Phil., 477; 57 Off. Gaz. [4]
638, See also J.M. Tuason & Co. Inc., v. Bolaos 95 Phil., 106, and J.M. Tuason & Co, Inc. v. Santiago, 99
Phil., 615; 50 Off. Gaz [11] 5727, involving the same Decree).
3. ID.; ACTION FOR ANNULMENT OF TORRENS TITLE; GROUNDS. To sustain an action for annulment of a
Torrens Title, for being void ab initio, it must be shown that the Land Court which had issue the pertinent
decree of registration, did not acquire jurisdiction over the case.
4. ID.; ACTION FOR RECONVEYANCE; GROUNDS. To succeed in an action for reconveyance after the
lapse of one year from the decree of registration, actual fraud in securing the title must be proved
(Bernardo v. Siojo, 58 Phil. 89, 102).
5. ID.; POSSESSOR IS NOT BUILDER IN GOOD FAITH WHERE HE HAD PRESUMPTIVE KNOWLEDGE OF
OWNERS TORRENS TITLE. It appears that appellant was not a builder in good faith. From the initial
certificate of title of appellees predecessors-in-interest there is a presumptive knowledge by appellant of
appellees Torrens Title (which is a notice to the whole world) over the subject premises and consequently
appellant cannot, in good conscience, say now that he believed his vendor, his vendors vendor and the
latters seller had rights of ownership over said lot (Francisco, Et Al., v. Cruz, supra). Appellant, had
likewise, a sufficient warning from the fact that the lot, subject of his purchase, is described in his Exhibits
1, 2 and 3, to be a portion of an unnumbered and, therefore, unapproved subdivision plan. Had he
investigated before buying and before building his house on the questioned lot, he would have been
informed that the land is registered under the Torrens system in the name of J.M. Tuason & Co., Inc. If he
failed to make the necessary inquiry, appellant is now bound conclusively to appellees Torrens Title (Sec.
51, Act 496; Emos v. Zuzuargui, 35 Phil., 144). Moreover, when appellant was trying to declare the
property, the Office of the City Assessor told him he could not do so, because there was "a question to

that." Lastly, appellants remedy in this regard, should have been directed against his predecessors-ininterest.
DECISION
PAREDES, J.:
On September 9, 1958, plaintiff instituted Civil Case No. Q-3303 in the Court of First Instance of Rizal,
against Teodosio Macalindong, alleging therein that it is the registered owner of a parcel of land, commonly
known as the Sta. Mesa Heights Subdivision, located at Quezon City and covered by Transfer Certificate of
Title No. 1267 (37686-Rizal) of the Registry of Deeds of Quezon City; that on or about December 5, 1955,
the defendant, thru force, strategy and stealth, unlawfully entered into the possession of some 200 square
meters, within said parcel of land, situated at Barrio North Tatalon, Quezon City, and constructed his house
thereon; and that because of this act it suffered and will continue to suffer damages at the rate of P60.00
monthly, representing the fair rental value of the portion occupied. Defendant Answering, stated among
others, that
". . . prior to 1955 and since time immemorial, he and his predecessors-in-interest have been in open,
adverse, public, continuous and actual possession of the lot in question in the concept of owner and, by
reason of such possession, he had made improvement thereon valued at P9,000.00."cralaw virtua1aw
library
As a counterclaim, he asked an award of P25,000.00 for moral and exemplary damages and P600.00 as
attorneys fees.
Defendant presented documents tending to show that the portion in question was acquired by him on June
28, 1954, thru purchase from Graciano M. Flores (Exh. 1), who in turn acquired the same from Lucia T.
Teotico on April 27, 1954 (Exh. 2). The latter bought the same from Agustin de Torres on April 1, 1950 (Exh.
3), who allegedly derived his title from Telesforo Deudor, a party in the Compromise Agreement, which
formed the basis of the joint decisions in Civil Cases Nos. Q- 135, 139, 174, 177 and 186, of the same
court.
The court a quo rendered judgment, the pertinent portions of which read
". . . In the first place, the Court takes judicial notice of the fact that this property has been registered
under the Torrens System, in the name of plaintiff since 1914, hence, the claim of possession of defendant
cannot defeat the efficacy of the title of the plaintiff in the second place, as testified to by the defendant
himself when he was trying to declare the property in question in the Office of the City Assessor he could
not do so because he was told that there was a question to that. In fine, the documents presented by the
defendant cannot be considered by the Court as to vest in him any rights over the property in question as
against the title of the plaintiff which has been issued since 1914. . . .
WHEREFORE, the Court renders judgment in favor of the plaintiff and against the defendant by declaring
the defendant to have no valid right of possession and title whatever in plaintiffs premises; ordering him
and all persons claiming under him to vacate the premises in question and to remove his house and other
construction therefrom; ordering him to pay the plaintiff the sum of P30.00 a month from the date of
usurpation in 1955 until the plaintiff is restored to the possession of the same; and for him to pay the
costs."cralaw virtua1aw library
Defendant presented a Motion to Reconsider and/or to Set Aside Decision, alleging that the said decision is
contrary to the evidence and law. It was contended that while the plaintiff secured title over the land, the
portion in question, however, had been in the adverse, open, public and continuous possession of the
defendants predecessor- in-interest, since 1893. Defendant reproduced portions of the Compromise
Agreement used in the Civil Cases earlier enumerated, to show the possession of his predecessors-ininterest, to wit:
"SECOND. That within the perimeter of said land is an area measuring fifty (50) quiones, over which
the DEUDORS have claimed possessory rights by virtue of what purports to be an abstract of an
informacion posesoria covering the latter property, which recites that at the time of issuance thereof in
1893, the Records of the Registry of Deeds of Manila (South District) showed that said property was
registered in the name of the old Telesforo Deudor, predecessor-in-interest of the present Deudors who are
parties hereto. . . .
"THIRD. That said DEUDORS have been in possession of the land in question and claim to be the owners
thereof and during the period of possession have sold their possessory rights to various third persons;
"FOURTH. That in the middle of 1950, DEUDORS, under a mistaken impression of the nature of their
rights in said property, began the following suits against the OWNERS in the Court of First Instance of
Quezon City . . ."cralaw virtua1aw library
The motion for reconsideration having been denied on February 21, 1959, defendant appealed directly to

this Court, claiming that the court a quo erred

(1) In not holding that plaintiff-appellees Torrens Certificate of Title is Null and Void insofar as the property
in controversy is concerned;
(2) In not holding that plaintiff-appellees action has already prescribed or is already barred by laches;
(3) In not holding that defendant-appellant is a possessor in good faith and is entitled to retention until
reimbursed of the value of his improvements;
(4) In ordering defendant-appellant to pay rentals to the sum of P30 per month from 1955 until plaintiffappellee is restored to the possession of the land in controversy; and
(5) In not dismissing the complaint.
The appellees cause of action is based on its ownership of the subject land, evidenced by TCT No. 1267 of
the Register of Deeds of Quezon City (Exhibit A), which was issued in appellees name on May 29, 1939
(Decree No. 17431 G.L.R.O. No. 7681), and was traceable to O.C.T. No. 735 (Rizal, issued on July 8, 1914.)
Appellants defense is that he is the owner of the subject premises. His only counter-claim is for attorneys
fees and moral and exemplary damages, for appellees supposedly malicious and frivolous presentation of
the complaint. Nullity of appellees title and reconveyance were never set up, either as defenses or as
counter-claims. Neither prescription of appellees claim or bar of the action for recovery due to laches was
averred in appellants defenses. Appellant cannot raise them now for the first time on appeal. Verily, the
failure to raise the issue of prescription and laches, amounts to a waiver of such defenses (Sec. 10, Rule 9;
Maxilom v. Tabotabo, 9 Phil., 390; Domingo v. Osorio, 7 Phil., 405). Moreover, the right of the appellee to
file an action to recover possession based on its Torrens Title is imprescriptible and not barred under the
doctrine of laches (Art. 348, Civil Code; Francisco, Et Al., v. Cruz, Et Al., [CA] 43 O.G. 5105). On the
contrary, the laws on prescription of actions and on estoppel and laches presently operate against
appellant. After many years of inaction forty-four (44) years, from July 8, 1914 (issuance of O. C. T. No.
735, Rizal), or nineteen (19) years from May 29, 1939 (issuance of T. C. T. No. 1267), appellant should be
completely barred from assailing the decree of registration of the subject property (Tiburcio v. PHHC, G.R.
No. L-13429, Oct. 31, 1959; See also J. M. Tuason & Co., Inc., v. Bolaos, L-4935, May 28, 1954, and J. M.
Tuason & Co., Inc. v. Santiago, G.R. No. L-5079, July 31, 1956, involving the same Decree).
We are in accord with appellants contention that Act No. 496 is not intended to shield fraud and that
registration thereunder merely confirms title but does not vest any, when there is none, because
registration under the Torrens system is not a mode of acquiring ownership. We are not, however, justified
to apply these principles to the facts of the case and partially annul appellees Torrens Title, which, as
stated above, is traceable to an original certificate of title issued way back in 1914, or over 44 years ago,
and which is now incontrovertible and conclusive against the whole world (sec. 38, Act 496). To sustain an
action for annulment of a Torrens Title, for being void ab initio, it must be shown that the land Court which
had issued the pertinent decree of registration, did not acquire jurisdiction over the case; and to succeed
in an action for reconveyance after the lapse of one year from the decree of registration, actual fraud in
securing the title must be proved (Bernardo v. Siojo, 58 Phil. 89, 102). The pleadings filed by appellant
before the trial court, alleged no such lack of jurisdiction and no evidence whatsoever was adduced or
attempted to be adduced on the question of jurisdiction of the said land court; and the record also fails to
show fraudulent acts or any knowledge of others adverse rights by the original Tuason registrants in G. L.
R. O. Rec. No. 7681, or that the latter knew of Telesforo Deudors or Agustin de Torres supposed right of
ownership.
Appellant mentions an informacion posesoria, subject of Compromise Agreement dated March 16, 1953,
between Deudor and Tuason & Co., Inc., allegedly issued in 1893 to Telesforo Deudor, who sold a portion of
his land to Agustin de Torres, who possessed it until it passed to Lucia T. Teotico, to show that he had a
previous title to the land, before the appellee had obtained a Torrens Title in 1914. In the first place, the
compromise agreement had already been rescinded (Deudor, Et. Al. v. J. M. Tuason & Co., Inc. L-13768,
May 30, 1961). In the second place, the records do not indicate that either Telesforo Deudor or Agustin de
Torres was in possession of the subject lot, at the time appellees predecessor-in-interest had obtained a
Torrens Title thereto in 1914, or at any time before World War II. And there is no finding of the trial court to
this effect. On the contrary, it is a fact that in December 1955, appellant entered a portion of 200 square
meters of appellees land, without the consent and knowledge of appellee, and on September 9, 1958,
appellee commenced the present action for recovery of possession. To this finding of fact, the parties are
bound, because the appeal, according to appellant, would only raise questions of law. Moreover, if We were
to give due weight to the compromise agreement which, by the way, was not presented in evidence in the
case at bar, the appellant will have to concede that "The Deudors had a wrong impression of the nature of
their rights" in the subject property, and perforce admit that Telesforo Deudor and Agustin de Torres had no
dominical title to the property in question.
Appellant claims that he should have been declared a builder in good faith, that he should not have been
ordered to pay rentals, and that the complaint should have been dismissed. Again this question is being
raised for the first time on appeal. It was not alleged as a defense or counter-claim and the trial court did
not make any finding on this factual issue. From the documents submitted, however, it appears that
appellant was not a builder in good faith. From the initial certificate of title of appellees predecessors-ininterest issued on July 8, 1914, there is a presumptive knowledge by appellant of appellees Torrens Title
(which is a notice to the whole world) over the subject premises and consequently appellant can not, in

good conscience, say now that he believed his vendor (Flores), his vendors vendor (Teotico) and the
latters seller (De Torres) had rights of ownership over said lot (Francisco, Et Al., v. Cruz, supra). Appellant,
had likewise, a sufficient warning from the fact that the lot, subject of his purchase, is described in his
Exhibits 1, 2 and 3, to be a portion of an unnumbered and, therefore, unapproved subdivision plan. Had he
investigated before buying and before building his house on the questioned lot, he would have been
informed that the land is registered under the Torrens system in the name of J. M. Tuason & Co., Inc. If he
failed to make the necessary inquiry, appellant is now bound conclusively to appellees Torrens Title (Sec.
51, Act 496 Emas v. Zuzuarregui, 35 Phil., 144). Moreover, when appellant was trying to declare the
property, the Office of the City Assessor told him he could not do so, because there was "a question to
that." Lastly, appellants remedy in this regard, should have been directed against his predecessors-ininterest.
The decision appealed from, is therefore, affirmed, with costs against the defendant Appellant.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera and Makalintal, JJ., concur.

G.R. No. L-18703

August 28, 1922

INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en C., appellee,

vs.
PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM CO., and INTERNATIONAL BANKING
CORPORATION,petitioners-appellants.
Jose Yulo, Ross and Lawrence and J. A. Wolfson for appellants.
Antonio Sanz for appellee.
ROMUALDEZ, J.:
The record of this proceeding having been transmitted to this court by virtue of an appeal taken herein, a
motion was presented by the appellants praying this court that this case be considered purely a moot
question now, for the reason that subsequent to the decision appealed from, the partnership Campos
Rueda & Co., voluntarily filed an application for a judicial decree adjudging itself insolvent, which is just
what the herein petitioners and appellants tried to obtain from the lower court in this proceeding.
The motion now before us must be, and is hereby, denied even under the facts stated by the appellants in
their motion aforesaid. The question raised in this case is not purely moot one; the fact that a man was
insolvent on a certain day does not justify an inference that he was some time prior thereto.
Proof that a man was insolvent on a certain day does not justify an inference that he was on a day
some time prior thereto. Many contingencies, such as unwise investments, losing contracts,
misfortune, or accident, might happen to reduce a person from a state of solvency within a short
space of time. (Kimball vs. Dresser, 98 Me., 519; 57 Atl. Rep., 767.)

A decree of insolvency begins to operate on the date it is issued. It is one thing to adjudge Campos Rueda
& Co. insolvent in December, 1921, as prayed for in this case, and another to declare it insolvent in July,
1922, as stated in the motion.
Turning to the merits of this appeal, we find that this limited partnership was, and is, indebted to the
appellants in various sums amounting to not less than P1,000, payable in the Philippines, which were not
paid more than thirty days prior to the date of the filing by the petitioners of the application for involuntary
insolvency now before us. These facts were sufficient established by the evidence.
The trial court denied the petition on the ground that it was not proven, nor alleged, that the members of
the aforesaid firm were insolvent at the time the application was filed; and that was said partners are
personally and solidarily liable for the consequence of the transactions of the partnership, it cannot be
adjudged insolvent so long as the partners are not alleged and proven to be insolvent. From this judgment
the petitioners appeal to this court, on the ground that this finding of the lower court is erroneous.
The fundamental question that presents itself for decision is whether or not a limited partnership, such as
the appellee, which has failed to pay its obligation with three creditors for more than thirty days, may be
held to have committed an act of insolvency, and thereby be adjudged insolvent against its will.
Unlike the common law, the Philippine statutes consider a limited partnership as a juridical entity for all
intents and purposes, which personality is recognized in all its acts and contracts (art. 116, Code of
Commerce). This being so and the juridical personality of a limited partnership being different from that of
its members, it must, on general principle, answer for, and suffer, the consequence of its acts as such an
entity capable of being the subject of rights and obligations. If, as in the instant case, the limited
partnership of Campos Rueda & Co. Failed to pay its obligations with three creditors for a period of more
than thirty days, which failure constitutes, under our Insolvency Law, one of the acts of bankruptcy upon
which an adjudication of involuntary insolvency can be predicated, this partnership must suffer the
consequences of such a failure, and must be adjudged insolvent. We are not unmindful of the fact that
some courts of the United States have held that a partnership may not be adjudged insolvent in an
involuntary insolvency proceeding unless all of its members are insolvent, while others have maintained a
contrary view. But it must be borne in mind that under the American common law, partnerships have no
juridical personality independent from that of its members; and if now they have such personality for the
purpose of the insolvency law, it is only by virtue of general law enacted by the Congress of the United
States on July 1, 1898, section 5, paragraph (h), of which reads thus:
In the event of one or more but not all of the members of a partnership being adjudged bankrupt,
the partnership property shall not be administered in bankruptcy, unless by consent of the partner
or partners not adjudged bankrupt; but such partner or partners not adjudged bankrupt shall settle
the partnership business as expeditiously as its nature will permit, and account for the interest of
the partner or partners adjudged bankrupt.
The general consideration that these partnership had no juridical personality and the limitations prescribed
in subsection (h) above set forth gave rise to the conflict noted in American decisions, as stated in the case
of In reSamuels (215 Fed., 845), which mentions the two apparently conflicting doctrines, citing one
from In reBertenshaw (157 Fed., 363), and the other from Francis vs. McNeal (186 Fed., 481).
But there being in our insolvency law no such provision as that contained in section 5 of said Act of
Congress of July 1, 1898, nor any rule similar thereto, and the juridical personality of limited partnership
being recognized by our statutes from their formation in all their acts and contracts the decision of
American courts on this point can have no application in this jurisdiction, nor we see any reason why these
partnerships cannot be adjudged bankrupt irrespective of the solvency or insolvency of their members,
provided the partnership has, as such, committed some of the acts of insolvency provided in our law.
Under this view it is unnecessary to discuss the other points raised by the parties, although in the
particular case under consideration it can be added that the liability of the limited partners for the
obligations and losses of the partnership is limited to the amounts paid or promised to be paid into the
common fund except when a limited partner should have included his name or consented to its inclusion in
the firm name (arts. 147 and 148, Code of Commerce).
Therefore, it having been proven that the partnership Campos Rueda & Co. failed for more than thirty days
to pay its obligations to the petitioners the Pacific Commercial Co. the Asiatic Petroleum Co. and the
International Banking Corporation, the case comes under paragraph 11 of section 20 of Act No. 1956, and
consequently the petitioners have the right to a judicial decree declaring the involuntary insolvency of said
partnership.
Wherefore, the judgment appealed from is reversed, and it is adjudged that the limited partnership
Campos Rueda & Co. is and was on December 28, 1921, insolvent and liable for having failed for more
than thirty days to meet its obligations with the three petitioners herein, and it is ordered that this
proceeding be remanded to the Court of First Instance of Manila with instruction to said court to issue the
proper decrees under section 24 of Act No. 1956, and proceed therewith until its final disposition.
It is so ordered without special finding as to costs.

Araullo, C. J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand, and Johns, JJ., concur.

G.R. No. 6906

September 27, 1911

FLORENTINO RALLOS, ET AL., plaintiff-appellee,

vs.
TEODORO R. YANGCO, defendant-appellant.
Mariano Escueta, for appellant.
Martin M. Levering, for appellees.
MORELAND, J.:
This is an appeal from a judgment of the Court of First Instance of the Province of Cebu, the Hon. Adolph
Wislizenus presiding, in favor of the plaintiffs, in the sum of P1,537.08, with interest at 6 per cent per
annum from the month of July, 1909, with costs.
The defendant in this case on the 27th day of November, 1907, sent to the plaintiff Florentino Rallos,
among others, the following letter:
CIRCULAR NO. 1.

MANILA, November 27, 1907

MR. FLORENTINO RALLOS, Cebu.
DEAR SIR: I have the honor to inform you that I have on this date opened in my steamship office at
No. 163 Muelle de la Reina, Binondo, Manila, P. I., a shipping and commission department for buying
and selling leaf tobacco and other native products, under the following conditions:
1. When the consignment has been received, the consignor thereof will be credited with a sum not
to exceed two-thirds of the value of the goods shipped, which may be made available by
acceptance of a draft or written order of the consignor on five to ten day's sight, or by his ordering
at his option a bill of goods. In the latter case he must pay a commission of 2 per cent.
2. No draft or written order will be accepted without previous notice forwarding the consignment of
goods to guarantee the same.
3. Expenses of freight, hauling and everything necessary for duly executing the commission will be
charged in the commission.
4. All advances made under sections (1) and (3) shall bear interest at 10 per cent a year, counting
by the sale of the goods shipped or remittance of the amount thereof.
5. A commission of 2 per cent will be collected on the amount realized from the sale of the goods
shipped.
6. A Payment will be made immediately after collection of the price of the goods shipped.
7. Orders will be taken for the purchase of general merchandise, ship-stores, cloths, etc., upon
remittance of the amount with the commission of 2 per cent on the total value of the goods bought.
Expenses of freight, hauling, and everything necessary for properly executing the commission will
be charged to the consignor.
8. The consignor of the good may not fix upon the consignee a longer period than four months,
counting from the date of receipt, for selling the same; with the understanding that after such
period the consignee is authorized to make the sale, so as to prevent the advance and cost of
storage from amounting to more than the actual value of said goods, as has often happened.
9. The shipment to the consignors of the goods ordered on account of the amount realized from the
sale of the goods consigned and of the goods bought on remittance of the value thereof, under
sections (1) and (3), will not be insured against risk by sea and land except on written order of the
interested parties.
10. On all consignments of goods not insured according to the next preceding section, the
consignors will bear the risk.
11. All the foregoing conditions will take effect only after this office has acknowledged the
consignor's previous notice.
12. All other conditions and details will be furnished at the office of the undersigned.
If you care to favor me with your patronage, my office is at No. 163 Muelle de la Reinna, Binondo,
Manila, P. I., under the name of "Teodoro R. Yangco." In this connection it gives me great pleasure to
introduce to you Mr. Florentino Collantes, upon whom I have conferred public power of attorney
before the notary, Mr. Perfecto Salas Rodriguez, dated November 16, 1907, to perform in my name
and on my behalf all acts necessary for carrying out my plans, in the belief that through his
knowledge and long experience in the business, along with my commercial connections with the
merchants of this city and of the provinces, I may hope to secure the most advantageous prices for
my patrons. Mr. Collantes will sign by power of attorney, so I beg that you make due note of his
signature hereto affixed.
Very respectfully,
(Sgd.) T. R. YANGCO.
(Sgd.) F. COLLANTES.
Accepting this invitation, the plaintiffs proceeded to do a considerable business with the defendant through
the said Collantes, as his factor, sending to him as agent for the defendant a good deal of produce to be
sold on commission. Later, and in the month of February, 1909, the plaintiffs sent to the said Collantes, as
agent for the defendant, 218 bundles of tobacco in the leaf to be sold on commission, as had been other

produce previously. The said Collantes received said tobacco and sold it for the sum of P1,744. The charges
for such sale were P206.96. leaving in the hands of said Collantes the sum of P1,537.08 belonging to the
plaintiffs. This sum was, apparently, converted to his own use by said agent.
It appears, however, that prior to the sending of said tobacco the defendant had severed his relations with
Collantes and that the latter was no longer acting as his factor. This fact was not known to the plaintiffs;
and it is conceded in the case that no notice of any kind was given by the defendant to the plaintiffs of the
termination of the relations between the defendant and his agent. The defendant refused to pay the said
sum upon demand of the plaintiffs, placing such refusal upon the ground that at the time the said tobacco
was received and sold by Collantes he was acting personally and not as agent of the defendant. This action
was brought to recover said sum.
As is seen, the only question for our decision is whether or not the plaintiffs, acting in good faith and
without knowledge, having sent produce to sell on commission to the former agent of the defendant, can
recover of the defendant under the circumstances above set forth. We are of the opinion that the
defendant is liable. Having advertised the fact that Collantes was his agent and having given them a
special invitation to deal with such agent, it was the duty of the defendant on the termination of the
relationship of principal and agent to give due and timely notice thereof to the plaintiffs. Failing to do so,
he is responsible to them for whatever goods may have been in good faith and without negligence sent to
the agent without knowledge, actual or constructive, of the termination of such relationship.
For these reasons the judgment appealed from is confirmed, without special finding as to costs.
Torres, Mapa, Johnson and Carson, JJ., concur.

EN BANC
G.R. No. 2962

February 27, 1907

B. H. MACKE, ET AL., plaintiffs-appellees,

vs.
JOSE CAMPS, defendant-appellant.
Manuel G. Gavieres for appellant.
Gibbs & Gale for appellees.
CARSON, J.:
The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing business under the firm name
of Macke, Chandler & Company, allege that during the months of February and March, 1905, they sold to
the defendant and delivered at his place of business, known as the "Washington Cafe," various bills of

goods amounting to P351.50; that the defendant has only paid on account of said accounts the sum of
P174; that there is still due them on account of said goods the sum of P177.50; that before instituting this
action they made demand for the payment thereof; and that defendant had failed and refused to pay the
said balance or any part of it up to the time of the filing of the complaint.
B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented himself
to be agent of the defendant, he shipped the said goods to the defendants at the Washington Cafe; that
Flores later acknowledged the receipt of said goods and made various payments thereon amounting in all
to P174; that on demand for payment of balance of the account Flores informed him that he did not have
the necessary funds on hand, and that he would have to wait the return of his principal, the defendant,
who was at that time visiting in the provinces; that Flores acknowledged the bill for the goods furnished
and the credits being the amount set out in the complaint; that when the goods were ordered they were
ordered on the credit of the defendant and that they were shipped by the plaintiffs after inquiry which
satisfied the witness as to the credit of the defendant and as to the authority of Flores to act as his agent;
that the witness always believed and still believes that Flores was the agent of the defendant; and that
when he went to the Washington Cafe for the purpose of collecting his bill he found Flores, in the absence
of the defendant in the provinces, apparently in charge of the business and claiming to be the business
manager of the defendant, said business being that of a hotel with a bar and restaurant annexed.
A written contract dated May 25, 1904, was introduced in evidence, from which it appears that one
Galmes, the former owner of the business now know as the "Washington Cafe," subrented the building
wherein the business was conducted, to the defendant for a period of one year, for the purpose of carrying
on that business, the defendant obligating himself not to sublet or subrent the building or the business
without the consent of the said Galmes. This contract was signed by the defendant and the name of
Ricardo Flores appears thereon as a witness, and attached thereto is an inventory of the furniture and
fittings which also is signed by the defendant with the word "sublessee" (subarrendatario) below the name,
and at the foot of this inventory the word "received" (recibo) followed by the name "Ricardo Flores," with
the words "managing agent" (el manejante encargado) immediately following his name.
Galmes was called to the stand and identified the above- described document as the contract and
inventory delivered to him by the defendant, and further stated that he could not tell whether Flores was
working for himself or for some one else that it to say, whether Flores was managing the business as
agent or sublessee.
The defendant did not go on the stand nor call any witnesses, and relies wholly on his contention that the
foregoing facts are not sufficient to establish the fact that he received the goods for which payment is
demanded.
In the absence of proof of the contrary we think that this evidence is sufficient to sustain a finding that
Flores was the agent of the defendant in the management of the bar of the Washington Cafe with authority
to bind the defendant, his principal, for the payment of the goods mentioned in the complaint.
The contract introduced in evidence sufficiently establishes the fact that the defendant was the owner of
business and of the bar, and the title of "managing agent" attached to the signature of Flores which
appears on that contract, together with the fact that, at the time the purchases in question were made,
Flores was apparently in charge of the business, performing the duties usually entrusted to managing
agent, leave little room for doubt that he was there as authorized agent of the defendant. One who clothes
another apparent authority as his agent, and holds him out to the public as such, can not be permitted to
deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with
such person in good faith and in the following preassumptions or deductions, which the law expressly
directs to be made from particular facts, are deemed conclusive:
(1) "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such belief, he can not, in any litigation arising
out such declaration, act, or omission, be permitted to falsify it" (subsec. 1, sec. 333, Act no. 190); and
unless the contrary appears, the authority of an agent must be presumed to include all the necessary and
usual means of carrying his agency into effect. (15 Conn., 347; 90 N. C. 101; 15 La. Ann, 247; 43 Mich.,
364; 93 N. Y., 495; 87 Ind., 187.)
That Flores, as managing agent of the Washington Cafe, had authority to buy such reasonable quantities of
supplies as might from time to time be necessary in carrying on the business of hotel bar may fairly be
presumed from the nature of the business, especially in view of the fact that his principal appears to have
left him in charge during more or less prolonged periods of absence; from an examination of the items of
the account attached to the complaint, we are of opinion that he was acting within the scope of his
authority in ordering these goods are binding on his principal, and in the absence of evidence to the
contrary, furnish satisfactory proof of their delivery as alleged in the complaint.
The judgment of the trial court is affirmed with the costs of his instance against the appellant. After
expiration of twenty days judgment will be rendered in accordance herewith, and ten days thereafter the
case remanded to the lower court for proper action. So ordered.

Arellano, C.J., Torres and Willard, JJ., concur.

Tracey, J., dissents.

The Lawphil Project - Arellano Law Foundation

G.R. No. L-22331

June 6, 1967

IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE VENDEES OF A HOUSE AND THE RIGHTS
TO A LOT.
MARIA BAUTISTA VDA. DE REYES, ET AL., vendees-petitioners-appellees.
RODOLFO LANUZA, vendor,
vs.
MARTIN DE LEON, intervenor-appellant.

Erasmo R. Cruz and C. R. Pascual for intervenor-appellant.

Augusto J. Salas for vendees-petitioners-appellees.
REGALA, J.:
Rodolfo Lanuza and his wife Belen were the owners of a two-story house built on a lot of the Maria Guizon
Subdivision in Tondo, Manila, which the spouses leased from the Consolidated Asiatic Co. On January 12,
1961, Lanuza executed a document entitled "Deed of Sale with Right to Repurchase" whereby he conveyed
to Maria Bautista Vda. de Reyes and Aurelia R. Navarro the house, together with the leasehold rights to the
lot, a television set and a refrigerator in consideration of the sum of P3,000. The deed reads:
DEED OF SALE WITH RIGHT TO REPURCHASE KNOW ALL MEN BY THESE PRESENTS:
That I, RODOLFO LANUZA, Filipino, of legal age, married to Belen Geronimo, and residing at
783-D Interior 14 Maria Guizon, Gagalangin, Tondo, Manila, hereby declare that I am the true
and absolute owner of a new two storey house of strong materials, constructed on a rented
lot Lot No. 12 of the Maria Guizon Subdivision, owned by the Consolidated Asiatic Co. as
evidenced by the attached Receipt No. 292, and the plan of the subdivision, owned by said
company.
That for and in consideration of the sum of THREE THOUSAND PESOS (P3,000.00) which I
have received this day from Mrs. Maria Bautista Vda. de Reyes, Filipino, of legal age, widow;
and Aurelia Reyes, married to Jose S. Navarro, Filipinos, of legal ages, and residing at 1112
Antipolo St., Tondo, Manila, I hereby SELL, CEDE, TRANSFER, AND CONVEY unto said Maria
Bautista Vda. de Reyes, her heirs, succesors, administrators and assigns said house,
including my right to the lot on which it was constructed, and also my television, and
frigidaire "Kelvinator" of nine cubic feet in size, under the following conditions:
I hereby reserve for myself, my heirs, successors, administrators, and assigns the right to
repurchase the above mentioned properties for the same amount of P3,000.00, without
interest, within the stipulated period of three (3) months from the date hereof. If I fail to pay
said amount of P3,000.00, within the stipulated period of three months, my right to
repurchase the said properties shall be forfeited and the ownership thereto shall
automatically pass to Mrs. Maria Bautista Vda. de Reyes, her heirs, successors,
administrators, and assigns, without any Court intervention, and they can take possession of
the same.1wph1.t
IN WITNESS WHEREOF, we have signed this contract in the City of Manila, this 12th day of
January, 1961.

s/t RODOLFO LANUZA

Vendor

s/t MARIA BAUTISTA VDA. DE REYES

Vendee

s/t AURELIA REYES

Vendee

WITH MY MARITAL CONSENT:

s/t JOSE S. NAVARRO

When the original period of redemption expired, the parties extended it to July 12, 1961 by an annotation
to this effect on the left margin of the instrument. Lanuza's wife, who did not sign the deed, this time
signed her name below the annotation.
It appears that after the execution of this instrument, Lanuza and his wife mortgaged the same house in
favor of Martin de Leon to secure the payment of P2,720 within one year. This mortgage was executed on
October 4, 1961 and recorded in the Office of the Register of Deeds of Manila on November 8, 1961 under
the provisions of Act No. 3344.
As the Lanuzas failed to pay their obligation, De Leon filed in the sheriff's office on October 5, 1962 a
petition for the extra-judicial foreclosure of the mortgage. On the other hand, Reyes and Navarro followed
suit by filing in the Court of First Instance of Manila a petition for the consolidation of ownership of the
house on the ground that the period of redemption expired on July 12, 1961 without the vendees
exercising their right of repurchase. The petition for consolidation of ownership was filed on October 19. On
October 23, the house was sold to De Leon as the only bidder at the sheriffs sale. De Leon immediately
took possession of the house, secured a discharge of the mortgage on the house in favor of a rural bank by
paying P2,000 and, on October 29, intervened in court and asked for the dismissal of the petition filed by
Reyes and Navarro on the ground that the unrecorded pacto de retro sale could not affect his rights as a
third party.

The parties1 thereafter entered into a stipulation of facts on which this opinion is mainly based and
submitted the case for decision. In confirming the ownership of Reyes and Navarro in the house and the
leasehold right to the lot, the court said:
It is true that the original deed of sale with pacto de retro, dated January 12, 1961, was not signed
by Belen Geronimo-Lanuza, wife of the vendor a retro, Rodolfo Lanuza, at the time of its execution.
It appears, however, that on the occasion of the extension of the period for repurchase to July 12,
1961, Belen Geronimo-Lanuza signed giving her approval and conformity. This act, in effect,
constitutes ratification or confirmation of the contract (Annex "A" Stipulation) by Belen GeronimoLanuza, which ratification validated the act of Rodolfo Lanuza from the moment of the execution of
the said contract. In short, such ratification had the effect of purging the contract (Annex "A"
Stipulation) of any defect which it might have had from the moment of its execution. (Article 1396,
New Civil Code of the Philippines; Tang Ah Chan and Kwong Koon vs. Gonzales, 52 Phil. 180)
Again, it is to be noted that while it is true that the original contract of sale with right to repurchase
in favor of the petitioners (Annex "A" Stipulation) was not signed by Belen Geronimo-Lanuza, such
failure to sign, to the mind of the Court, made the contract merely voidable, if at all, and, therefore,
susceptible of ratification. Hence, the subsequent ratification of the said contract by Belen
Geronimo-Lanuza validated the said contract even before the property in question was mortgaged
in favor of the intervenor.
It is also contended by the intervenor that the contract of sale with right to repurchase should be
interpreted as a mere equitable mortgage. Consequently, it is argued that the same cannot form
the basis for a judicial petition for consolidation of title over the property in litigation. This argument
is based on the fact that the vendors a retro continued in possession of the property after the
execution of the deed of sale with pacto de retro. The mere fact, however, that the vendors a
retro continued in the possession of the property in question cannot justify an outright declaration
that the sale should be construed as an equitable mortgage and not a sale with right to repurchase.
The terms of the deed of sale with right to repurchase (Annex "A" Stipulation) relied upon by the
petitioners must be considered as merely an equitable mortgage for the reason that after the
expiration of the period of repurchase of three months from January 12, 1961.
Article 1602 of the New Civil Code provides:
"ART. 1602. The contract shall be presumed to be in equitable mortgage, in any of the
following cases;
xxx

xxx

xxx

"(3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed.
xxx

xxx

xxx

In the present case, it appears, however, that no other instrument was executed between the
parties extending the period of redemption. What was done was simply to annotate on the deed of
sale with right to repurchase (Annex "A" Stipulation) that "the period to repurchase, extended as
requested until July 12, 1961." Needless to say, the purchasers a retro, in the exercise of their
freedom to make contracts, have the power to extend the period of repurchase. Such extension is
valid and effective as it is not contrary to any provision of law. (Umale vs. Fernandez, 28 Phil. 89,
93)
The deed of sale with right to repurchase (Annex "A" Stipulation) is embodied in a public document.
Consequently, the same is sufficient for the purpose of transferring the rights of the vendors a
retro over the property in question in favor of the petitioners. It is to be noted that the deed of sale
with right to repurchase (Annex "A" Stipulation) was executed on January 12, 1961, which was very
much ahead in point of time to the execution of the real estate mortgage on October 4, 1961, in
favor of intervenor (Annex "B" Stipulation). It is obvious, therefore, that when the mortgagors,
Rodolfo Lanuza and Belen Geronimo Lanuza, executed the real estate mortgage in favor of the
intervenor, they were no longer the absolute owners of the property since the same had already
been sold a retro to the petitioners. The spouses Lanuza, therefore, could no longer constitute a
valid mortgage over the property inasmuch as they did not have any free disposition of the
property mortgaged. (Article 2085, New Civil Code.) For a valid mortgage to exist, ownership of the
property mortgaged is an essential requisite. A mortgage executed by one who is not the owner of
the property mortgaged is without legal existence and the registration cannot validate. (Philippine
National Bank vs. Rocha, 55 Phil. 497).
The intervenor invokes the provisions of article 1544 of the New Civil Code for the reason that while
the real estate mortgage in his favor (Annex "B" Stipulation) has been registered with the Register
of Deeds of Manila under the provisions of Act No. 3344 on November 3, 1961, the deed of sale with
right to repurchase (Annex "A" Stipulation) however, has not been duly registered. Article 1544 of

the New Civil Code, however, refers to the sale of the same property to two or more vendees. This
provision of law, therefore, is not applicable to the present case which does not involve sale of the
same property to two or more vendees. Furthermore, the mere registration of the property
mortgaged in favor of the intervenor under Act No. 3344 does not prejudice the interests of the
petitioners who have a better right over the property in question under the old principle of first in
time, better in right. (Gallardo vs. Gallardo, C.B., 46 O.G. 5568)
De Leon appealed directly to this Court, contending (1) that the sale in question is not only voidable but
void ab initio for having been made by Lanuza without the consent of his wife; (2) that the pacto de
retro sale is in reality an equitable mortgage and therefore can not be the basis of a petition for
consolidation of ownership; and (3) that at any rate the sale, being unrecorded, cannot affect third parties.
We are in accord with the trial court's ruling that a conveyance of real property of the conjugal partnership
made by the husband without the consent of his wife is merely voidable. This is clear from article 173 of
the Civil Code which gives the wife ten years within which to bring an action for annulment. As such it can
be ratified as Lanuza's wife in effect did in this case when she gave her conformity to the extension of the
period of redemption by signing the annotation on the margin of the deed. We may add that actions for the
annulment of voidable contracts can be brought only by those who are bound under it, either principally or
subsidiarily (art. 1397), so that if there was anyone who could have questioned the sale on this ground it
was Lanuza's wife alone.
We also agree with the lower court that between an unrecorded sale of a prior date and a recorded
mortgage of a later date the former is preferred to the latter for the reason that if the original owner had
parted with his ownership of the thing sold then he no longer had the ownership and free disposal of that
thing so as to be able to mortgage it again. Registration of the mortgage under Act No. 3344 would, in
such case, be of no moment since it is understood to be without prejudice to the better right of third
parties.2 Nor would it avail the mortgagee any to assert that he is in actual possession of the property for
the execution of the conveyance in a public instrument earlier was equivalent to the delivery of the thing
sold to the vendee.3
But there is one aspect of this case which leads us to a different conclusion. It is a point which neither the
parties nor the trial court appear to have sufficiently considered. We refer to the nature of the so-called
"Deed of Sale with Right to Repurchase" and the claim that it is in reality an equitable mortgage. While De
Leon raised the question below and again in this Court in his second assignment of error, he has not
demonstrated his point; neither has he pursued the logical implication of his argument beyond stating that
a petition for consolidation of ownership is an inappropriate remedy to enforce a mortgage.
De Leon based his claim that the pacto de retro sale is actually an equitable mortgage on the fact that,
first, the supposed vendors (the Lanuzas) remained in possession of the thing sold and, second, when the
three-month period of redemption expired the parties extended it. These are circumstances which indeed
indicate an equitable mortgage.4 But their relevance emerges only when they are seen in the perspective
of other circumstances which indubitably show that what was intended was a mortgage and not a
sale.These circumstances are:
1. The gross inadequacy of the price. In the discussion in the briefs of the parties as well as in the decision
of the trial court, the fact has not been mentioned that for the price of P3,000, the supposed vendors
"sold" not only their house, which they described as new and as being made of strong materials and which
alone had an assessed value of P4,000, but also their leasehold right television set and refrigerator,
"Kelvinator of nine cubic feet in size." indeed, the petition for consolidation of ownership is limited to the
house and the leasehold right, while the stipulation of facts of the parties merely referred to the object of
the sale as "the property in question." The failure to highlight this point, that is, the gross inadequacy of
the price paid, accounts for the error in determining the true agreement of the parties to the deed.
2. The non-transmission of ownership to the vendees. The Lanuzas, the supposed vendors did not really
transfer their ownership of the properties in question to Reyes and Navarro. What was agreed was that
ownership of the things supposedly sold would vest in the vendees only if the vendors failed to pay P3,000.
In fact the emphasis is on the vendors payment of the amount rather than on the redemption of the things
supposedly sold. Thus, the deed recites that
If I (Lanuza) fail to pay said amount of P3,000.00 within the stipulated period of three months, my
right to repurchase the said properties shall be forfeited and the ownership thereto automatically
pass to Mrs. Maria Bautista Vda. de Reyes . . . without any Court intervention and they can take
possession of the same.
This stipulation is contrary to the nature of a true pacto de retro sale under which a vendee acquires
ownership of the thing sold immediately upon execution of the sale, subject only to the vendor's right of
redemption.5 Indeed, what the parties established by this stipulation is an odious pactum
commissorium which enables the mortgages to acquire ownership of the mortgaged properties without
need of foreclosure proceedings. Needless to say, such a stipulation is a nullity, being contrary to the
provisions of article 2088 of the Civil Code.6 Its insertion in the contract of the parties is an avowal of an
intention to mortgage rather than to sell.7

3. The delay in the filing of the petition for consolidation. Still another point obviously overlooked in the
consideration of this case is the fact that the period of redemption expired on July 12, 1961 and yet this
action was not brought until October 19, 1962 and only after De Leon had asked on October 5, 1962 for
the extra-judicial for closure of his mortgage. All the while, the Lanuzas remained in possession of the
properties they were supposed to have sold and they remained in possession even long after they had lost
their right of redemption.
Under these circumstances we cannot but conclude that the deed in question is in reality a mortgage. This
conclusion is of far-reaching consequence because it means not only that this action for consolidation of
ownership is improper, as De Leon claims, but, what is more that between the unrecorded deed of Reyes
and Navarro which we hold to be an equitable mortgage, and the registered mortgage of De Leon, the
latter must be preferred. Preference of mortgage credits is determined by the priority of registration of the
mortgages,8 following the maxim "Prior tempore potior jure" (He who is first in time is preferred in
right.)9 Under article 2125 of the Civil Code, the equitable mortgage, while valid between Reyes and
Navarro, on the one hand, and the Lanuzas, on the other, as the immediate parties thereto, cannot prevail
over the registered mortgage of De Leon.

[G.R. No. L-29388. December 28, 1970.]

VINCENT P. DAYRIT, Petitioner, v. THE COURT OF APPEALS, HON. FRANCISCO ARCA, Judge of the
Court of First Instance of Manila, Branch I, MOBIL OIL PHILIPPINES, INC., and ELADIO YLAGAN,
Special Sheriff, Respondents.
Ramon Quisumbing, Jr., for Petitioner.
Faylona, Cruz, Berroya, Norte & Nentanilla for respondent Mobil Oil Philippines, Inc.
DECISION
CASTRO, J.:
Petition for certiorari by way of appeal from the Court of Appeals minute resolution of June 14, 1968
dismissing the petition for certiorari in CA-G.R. No. 41359-R, as well as its resolutions of July 9, 1968 and
August 5, 1968 denying the first and second motions for reconsideration, respectively, in the same case.
On July 21, 1965, the defendants Vincent Dayrit, Leonila T. Sumbillo and Reynaldo Angeles entered into a
contract with the Mobil Oil Philippines, Inc., entitled "LOAN & MORTGAGE AGREEMENT," providing, among
others, that:jgc:chanrobles.com.ph
"(a) For and in consideration of Sales Agreement dated July 21, 1965 among, the parties herein, Mobil
grants a loan of P150,000 to borrowers.
"(b) Defendants-Borrowers shall repay Mobil the whole amount of P150,000 plus 10% interest per annum
on the diminishing balance for 48 months.
"(c) To secure the prompt repayment of such loan by defendants-borrowers to Mobil and the faithful
performance by Borrowers of that Sales Agreement, Defendants-Borrowers hereby transfer in favor of
Mobil by way of first mortgage lands covered by TCT No. 45169 and TCT No. 45170, together with the
improvements existing in said two (2) parcels of land.
"(d) In case of default of Defendants-Borrowers in payment of any of the installments and/or their failure to
purchase the quantity of products stated therein Mobil shall have the right to foreclose this mortgage.
"(e) Mobil, in case of default and foreclosure, shall be entitled to attorneys fees and cost of collection
equivalent to not less than 25% of total indebtedness remaining unpaid.
"(f) All expenses in connection with the preparation and registration of this mortgage as well as
cancellation of same shall be for the account of Defendants-Borrowers.
"(g) If Defendants-Borrowers shall perform the full obligation above stated according to the terms thereof,
then this obligation shall be null and void, otherwise, it shall remain in full force and effect."cralaw
virtua1aw library
The defendants violated the Loan & Mortgage Agreement, they having paid but one installment in the
amount of P3,816, of which P1,250 was applied to interest, and the remaining P2,566 to the principal
obligation. The defendants likewise failed to buy the quantities of products as required in the Sales
Agreement (exh. D). The plaintiff made due demand (exh. I), which the defendant Dayrit answered,
acknowledging his liability in his letter exh. I-1.

On November 17, 1967, after trial and after the parties had submitted their memoranda, 1 the trial court
rendered its decision, the dispositive portion of which reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants Vincent
Dayrit, Leonila T. Sumbillo and Reynaldo Angeles, ordering them to pay to the plaintiff one-third each of the
sum of P147,434.00 with interest of 10% per annum from the time it fell due according to agreement, and
in default of such payment, the properties put up in collateral shall be sold in foreclosure sale in
accordance with law, the proceeds to be applied in payment of the amount due to the plaintiff from the
defendants as claimed in the complaint provided that, as to Dayrit, his liability shall in no case exceed 1/3
of the total obligation.
"The defendants are likewise ordered to pay to the plaintiff, in the same proportion of 1/3 each, 25% of the
obligation as attorneys fees as provided in the contract; and P300.60 for the registration of the contract.
x

"Each of the three said defendants shall also pay 1/3 of the costs."cralaw virtua1aw library
No appeal having been interposed by the defendants, the above decision became final and executory.
An undated Mobils motion for execution of the decision and for the appointment of Eladio Ylagan as
special sheriff (annex D) was received by the herein petitioner Dayrit on February 8, 1968. Whereupon, he
filed his opposition and motion to stay execution, alleging that before the finality of the aforesaid
judgment, he and the plaintiff had agreed not to appeal and/or file any motion for reconsideration, the
petitioner offering to pay his one-third share with a reasonable discount, if possible, in so far as the
interests and the award for attorneys fees were concerned, with the corresponding release of the
mortgage on all his properties, and praying, in view thereof, for a 30-day grace period within which to pay
the plaintiff. The 30-day grace period was granted by the court in its order of February 24, 1968.
On March 25, 1968 the petitioner filed another motion for 20 days extension within which to pay his onethird share of the judgment obligation and to submit the corresponding compromise agreement for the
satisfaction of the judgment. The said motion was granted on April 1, 1968.
Thereafter, the respondent Mobil filed an "Urgent Reply to Opposition and Motion to Stay Execution dated
Feb. 21, 1968 and Motion dated March 25, 1968," alleging therein that the respondent agreed to release
the mortgage or collateral for the entire judgment obligation only if "the whole principal mortgaged debt
plus the whole accrued interest" were fully paid. Mobil further prayed for a writ of execution to be issued
against the petitioner after the lapse of 20 days from March 25, 1968, if by then the parties shall not have
submitted to compromise agreement for the satisfaction of the judgment; Mobil also reiterated its prayer
for the appointment of respondent Eladio Ylagan as special sheriff.
On April 3, 1968 the petitioner filed a manifestation and motion, praying that he be allowed to deposit with
the Clerk of Court the amount corresponding to his one-third share of the obligation under the decision of
November 17, 1967, and that thereupon the collateral or mortgage over petitioners properties or lands be
ordered released or cancelled.
On April 10, 1968 the court a quo ordered all pending incidents set for hearing on April 19, 1968, "so that
the Court may have the opportunity to confer with the parties to thresh out the settlement of this case." At
this hearing Mobil did not appear; the court reset the hearing for May 23, 1968.
Under date of May 8, 1968, Mobil filed an addendum to its reply dated April 1, 1968 and opposition to
petitioners motion dated April 3, 1968, praying that the motion of petitioner Dayrit that the entire
mortgaged collateral be released upon his payment of mere 1/3 of the loan obligation, be denied and
instead a writ of execution against him in accordance with the dispositive portion of the decision and
sections 2 and 3 of Rule 68 of the Revised Rules of Court be issued.
On May 18, 1968 the petitioner filed his rejoinder to respondent Mobils aforesaid addendum and
opposition.
On May 23, 1968, after hearing oral argument, the court denied the manifestation and motion of Dayrit
filed thru counsel and dated April 3, 1968; the court further ruled that "There is no further need to issue an
order for the issuance of a writ of execution and appointment of special sheriff . . . considering that the
Court, in its order of February 24, 1968, has already ordered the issuance of a writ of execution for the
satisfaction of the judgment."cralaw virtua1aw library
The petitioner then filed his petition for certiorari with the Court of Appeals, dated May 30, 1968, alleging
that "respondent Judge Arca acted without or in excess of his jurisdiction and/or with grave abuse of
discretion, in denying petitioners motion to allow him to pay or deposit his one-third share of the judgment
obligation" as well as the consequent release or cancellation of the mortgage on his properties.
The Court of Appeals, however, in its minute resolution of June 14, 1968, dismissed the petition
forcertiorari, in the following words:jgc:chanrobles.com.ph

"Upon consideration of the petition for certiorari filed in this case, the Court RESOLVED TO DISMISS the
petition, there being no abuse of discretion in ordering the execution of a final judgment. Details of
execution for satisfaction of Vincent Dayrits liability will be worked out in connection with the sale of the
collateral for mortgaged debt, and the judgment in Civil Case No. 64138 of the CFI-Manila will control the
disposition and application of the collateral."cralaw virtua1aw library
The petitioner filed a motion for reconsideration dated June 9, 1968 which the Court of Appeals denied in
its resolution of July 9, 1968, as follows:jgc:chanrobles.com.ph
"Both the petition and the motion for reconsideration are based on a misapprehension of the terms of the
judgment. The mortgage obligation is one and indivisible. it was executed to assure payment of the total
indebtedness of the three defendants in Civil Case No. 64138, and not merely one-third (1/3) thereof
corresponding to petitioner Vincent P. Dayrits liability."cralaw virtua1aw library
The petitioners second motion for reconsideration of July 25, 1968 was summarily dismissed on August 5,
1968, for lack of merit.
The petitioner, in his present petition, tenders the following issues for resolution:jgc:chanrobles.com.ph
"1) Whether or not respondent Judge [CFI-Manila] acted without or in excess of his jurisdiction, and/or with
grave abuse of discretion in denying petitioners motion to allow him to exercise his clearly legal right to
pay or deposit his one-third share of the judgment obligation;
"2) The next issue was that brought about by the Court of Appeals resolution dismissing the petition
for certiorari, and which was raised in petitioners motion dated June 19, 1968 for reconsideration of said
resolution, contending that the ground for dismissal did not jibe with the issue raised in the petition
for certiorari
"3) And lastly the Court of Appeals resolution of July 9, 1968 denying said motion for reconsideration
injected the issue of alleged misapprehension on the part of petitioner of the terms of the judgment of
respondent judge."cralaw virtua1aw library
1. The question raised by the respondent Mobil that the present petition for certiorari was filed way beyond
the reglementary period of 15 days from appellants receipt of notice of judgment or of the denial of his
motion for reconsideration pursuant to section 1, Rule 45 of the Revised Rules of Court, 2 needs to be
resolved before consideration of this case on the merits. Admittedly, the ex parte first motion for
reconsideration filed by the herein petitioner was denied, and copy of such denial was received by the
petitioner on July 15, 1968. Still not satisfied, petitioner filed another ex parte motion for reconsideration
on July 26, 1968, notice of the denial of which, under CA resolution dated August 5, 1968, was received by
said petitioner on August 9, 1968.
Respondent Mobil contends that the second motion for reconsideration filed by the petitioner was a mere
scrap of paper and pro-forma since it was filed ex parte and without express leave of court, contrary to the
mandate of section 1, Rule 52 of the Rules of Court. 3
The rule appears to be inflexible in the sense that no more than one motion for reconsideration shall be
filed without express leave of court. The requirement that the second motion for reconsideration must be
presented, with leave of court, within fifteen days from notice of the order or judgment, deducting the time
during which the first motion was pending, is to afford the court sufficient time to evaluate whether there
is prima facie merit therein, so that, "if the court finds merit prima facie in the motion for re-hearing or
reconsideration, the adverse party shall be given time to answer, after which the court, in its discretion,
may set the case for oral argument." 4 And only upon compliance with the above stated requirements may
the second motion for reconsideration stay the final order or judgment sought to be re-examined. 5
The Court of Appeals gave due course to the second motion for reconsideration of the herein petitioner,
but nevertheless, dismissed the same summarily for lack of merit.
However, even assuming, that the ex parte second motion for reconsideration was properly filed so as to
toll the reglementary period within which to appeal, it appears that the petition for certiorarifiled with this
Court on August 20, 1968 was time-barred. From the date of denial of the petitioners ex parte first motion
for reconsideration received by him on July 15, 1968 assuming that the period was interrupted by the ex
parte second motion for reconsideration from July 26, 1968 to August 9, 1968 (15 days) to the elevation
of the said case to this Court on August 20, 1968, 36 days had elapsed. Deducting the 15 days during
which the ex parte second motion for reconsideration was pending from the total period of 36 days leaves
21 days. This means that the present petition was filed with this Court six days late, contrary to and in
violation of section 1, Rule 45, which specifically provides that a petition for certiorari under such Rule
should be filed within 15 days from notice of judgment or denial of motion for reconsideration. Hence, the
present petition may be dismissed on the aforestated ground.
But we opt, nevertheless, to consider the merits of this case, if only to demonstrate to the petitioner his
error.
2. The decision of the lower court, let it not be forgotten, has admittedly become final and executory. The

controverted judgment ordered the defendants (Dayrit, Sumbillo and Angeles) "to pay to the plaintiff onethird each of the sum of P147,434.00 with interest of 10% per annum from the time it fell due according to
agreement, and in default of such payment, the properties put up in collateral shall be sold in foreclosure
sale in accordance with law, the proceeds to be applied in payment of the amount due to the plaintiff from
the defendants as claimed in the complaint, provided that, as to Dayrit, his liability shall in no case exceed
1/3 of the total obligation."cralaw virtua1aw library
In sum, the issue that must be resolved in the instant case is, whether or not the Court of First Instance of
Manila erred in ordering the sale at public auction of the mortgaged properties to answer for the entire
P147,434 principal obligation after the defendants (Dayrit, Sumbillo and Angeles) had failed to pay their
respective one-third shares of the obligation to the respondent Mobil; otherwise stated, whether or not the
respondents Court of First Instance and the Court of Appeals erred in refusing to allow the alleged
proposed deposit of a sum equivalent to 1/3 of the loan agreed upon and in refusing to release forever the
collaterals owned by Dayrit, although the other 2/3 portion of the loan obligation had not been satisfied
due to insolvency of the other two co-defendants.
To begin with, the prayer of the complaint filed with the respondent Court of First Instance recites as
follows:jgc:chanrobles.com.ph
"WHEREFORE, it is respectfully prayed that judgment be rendered
"a) Ordering the defendants to pay the sum of P147,434 with 10% interest per annum from the time it fell
due as agreed upon and that in default of such payment, the above described properties be sold and the
proceeds of sale be applied to the payment of the amount due to the plaintiff from the defendant under
this complaint."cralaw virtua1aw library
The complaint, in effect, is a collection suit with damages and foreclosure of mortgage against the three
defendants, Leonila Sumbillo, Reynaldo Angeles and Vincent Dayrit. Although the Loan and Mortgage
Agreement was signed by the three defendants as mortgagors, the properties being foreclosed belong
solely to, and are registered solely in the name of, the petitioner Vincent Dayrit.
The pertinent dispositive portion of the decision rendered by the lower court reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants Vincent
Dayrit, Leonila T. Sumbillo and Reynaldo Angeles, ordering them to pay to the plaintiff one-third each of the
sum of P147,434 with interest of 10% per annum from the time it fell due according to agreement, and in
default of such payment, the properties put up in collateral shall be sold in foreclosure sale in accordance
with law, the proceeds to be applied in payment of the amount due to the plaintiff from the defendants as
claimed in the complaint, provided that, as to Dayrit, his liability shall in no case exceed 1/3 of the total
obligation."cralaw virtua1aw library
The petitioner contends that the said judgment is a simple money judgment and not a foreclosure
judgment, and that because the respondent Mobil resorted to the remedy of enforcing his right by a
complaint against the defendant-petitioner for collection of a sum of money, with the consequent simple
money judgment, the satisfaction of his 1/3 share of the joint obligation would release all the mortgaged
properties put up as collateral to secure the payment of the whole obligation. The reason advanced by the
petitioner is that the decision rendered being a simple money judgment and not a mortgage-foreclosure
judgment, the distinction in its execution is decisive, that is, whereas in mortgage foreclosure the
judgment should conform to the requirement, embodied in section 2, Rule 68 of the Rules of Court, that
the order of payment be made into the court "within a period not less than ninety (90) days . . . and in
default of such payment, the property mortgaged be sold to realize" the indebtedness, in a simple money
judgment, upon satisfaction of part in the instant case his 1/3 share) of the joint obligation, the mortgaged
properties should be released from such mortgage contract.
This contention of the petitioner is clearly devoid of merit.
The decision which the petitioner describes as a simple money judgment orders the defendants Vincent
Dayrit, Leonila T. Sumbillo and Reynaldo Angeles to pay the plaintiff the sum of P147,434, and in default of
such payment, the properties put up in collateral shall be sold in foreclosure sale in accordance with law,
the proceeds to be applied in payment of the amount due to the plaintiff from the defendants as claimed in
the complaint. While it is true that the obligation is merely joint and each of the defendants is obliged to
pay only his/her 1/3 share of the joint obligation, the undisputed fact remains that the intent and purpose
of the Loan and Mortgage Agreement was to secure, inter alia, the entire loan of P150,000 that the
respondent Mobil extended to the defendants. The court below found that the defendants had violated the
Loan and Mortgage Agreement, they having paid but one installment. The undisputed fact also remains
that the petitioner alone benefited from the proceeds of the loan of P150,000, the said amount having
been paid directly to the Bank of the Philippines to bail out the same properties from a mortgage that was
about to be foreclosed. In effect, Mobil merely stepped into the shoes of the Bank of the Philippines.
The petitioner insists that the dispositive portion of the judgment declaring the obligation merely joint with
the proviso that "as to Dayrit, his liability shall in no case exceed 1/3 of the total obligation," should be
construed in the light of the opinion of the lower court that "said collateral must answer in full but only to
the extent of Dayrits liability which as above determined" is 1/3 of the obligation," thereby entitling him to
pay or deposit in court his corresponding share of the joint obligation in satisfaction thereof, with the

automatic release of all the mortgaged properties.

A judgment must be distinguished from an opinion. The latter is the informal expression of the views of the
court and cannot prevail against its final order or decision. "While the two may be combined in one
instrument, the opinion forms no part of the judgment. There is a distinction between the findings and
conclusion of a court and its judgment. While they may constitute its decision and amount to a rendition of
a judgment they are not the judgment itself. They amount to nothing more than an order for judgment
which must be distinguished from the judgment Only the dispositive portion may be executed." 6
Besides, well-entrenched in law is the rule that a mortgage directly and immediately subjects the property
upon which it is imposed, 7 the same being indivisible even though the debt may be divided, 8 and such
indivisibility likewise being unaffected by the fact that the debtors are not solidarily liable. 9 As Tolentino,
in his Commentaries and Jurisprudence on the Civil Code of the Philippines, 10 puts it
"When several things are pledged or mortgaged, each thing for a determinate portion of the debt, the
pledges or mortgages are considered separate from each other. But when the several things are given to
secure the same debt in its entirety, all of them are liable for the debt, and the creditor does not have to
divide his action by distributing the debt among the various things pledged or mortgaged. Even when only
a part of the debt remains unpaid, all the things are still liable for such balance. Hence, a mortgage
voluntarily constituted by the debtor on two or more parcels of land is one and indivisible, and the
mortgagee has the right to have either or both parcels, jointly or singly, sold to satisfy his claim. In case
the mortgaged properties are a house and lot, it can not be claimed that the lot and the house should be
sold separately and not together."cralaw virtua1aw library
But then there is this other seeming posture of the petitioner: that the judgment which has become final
and executory either modified or superseded the Loan and Mortgage Agreement between the parties, and
since the obligation is merely joint, upon payment thereof, as in attachment, the properties mortgaged are
released from liability. The decision under consideration, however, did nothing of the sort. The petitioner
conveniently refuses to recognize the true import of the dispositive portion of the judgment. The said
portion unequivocally states that "in default of such payment, the properties put up in collateral shall be
sold in foreclosure sale in accordance with law, the proceeds to be applied in payment of the amount due
to the plaintiff as claimed in the complaint." And the claim in the complaint was the full satisfaction of the
total indebtedness of P147,434; therefore, the release of all the mortgaged properties may be authorized
only upon the full payment of the above-stated amount secured by the said mortgage.
With respect to the provisions of section 2 of Rule 68 of the Rules of Court giving the petitioner a period of
90 days within which he might voluntarily pay the debt before the sale of the collateral at public auction
was ordered, we agree that the trial court failed to provide such period. However, this failure can be
regarded as having resulted in mere damnum absque injuria. From November 17, 1967 when the decision
was rendered to May 23, 1968 when the final order to sell the mortgaged properties was issued, a period
of more than six months had passed, which is considerably much more than the 90-day period of grace
allowed the petitioner to validly tender the proper payment.
ACCORDINGLY, the petition is denied, at petitioners cost.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Teehankee, Barredo, Villamor and Makasiar, JJ.,
concur.
Fernando, J., did not take part.

G.R. No. L-16666

April 10, 1922

ROMULO MACHETTI, plaintiff-appelle,

vs.
HOSPICIO DE SAN JOSE, defendant-appellee, and
FIDELITY & SURETY COMPANY OF THE PHILIPPINE ISLANDS, defendant-appellant
Ross and Laurence and Wolfson & Scwarzkopf for appellant.
Gabriel La O for appellee Hospicio de San Jose.
No appearance for the other appellee.
OSTRAND, J.:
It appears from the evidence that on July 17, 1916, one Romulo Machetti, by a written agreement
undertook to construct a building on Calle Rosario in the city of Manila for the Hospicio de San Jose, the
contract price being P64,000. One of the conditions of the agreement was that the contractor should
obtain the "guarantee" of the Fidelity and Surety Company of the Philippine Islands to the amount of
P128,800 and the following endorsement in the English language appears upon the contract:
MANILA, July 15, 1916.
For value received we hereby guarantee compliance with the terms and conditions as
outlined in the above contract.
FIDELITY AND SURETY COMPANY OF THE PHILIPPINE ISLANDS.
(Sgd) OTTO VORSTER,
Vice-President.
Machetti constructed the building under the supervision of architects representing the Hospicio de San Jose
and, as the work progressed, payments were made to him from time to time upon the recommendation of
the architects, until the entire contract price, with the exception of the sum of the P4,978.08, was paid.
Subsequently it was found that the work had not been carried out in accordance with the specifications
which formed part of the contract and that the workmanship was not of the standard required, and the
Hospicio de San Jose therefore answered the complaint and presented a counterclaim for damages for the
partial noncompliance with the terms of the agreement abovementioned, in the total sum of P71,350. After
issue was thus joined, Machetti, on petition of his creditors, was, on February 27, 1918, declared insolvent
and on March 4, 1918, an order was entered suspending the proceeding in the present case in accordance
with section 60 of the Insolvency Law, Act No. 1956.
The Hospicio de San Jose on January 29, 1919, filed a motion asking that the Fidelity and Surety Company
be made cross-defendant to the exclusion of Machetti and that the proceedings be continued as to said
company, but still remain suspended as to Machetti. This motion was granted and on February 7, 1920, the
Hospicio filed a complaint against the Fidelity and Surety Company asking for a judgement for P12,800
against the company upon its guaranty. After trial, the Court of First Instance rendered judgment against
the Fidelity and Surety Company for P12,800 in accordance with the complaint. The case is now before this
court upon appeal by the Fidelity and Surety Company form said judgment.
As will be seen, the original action which Machetti was the plaintiff and the Hospicio de San Jose defendant,
has been converted into an action in which the Hospicio de San Jose is plaintiff and the Fidelity and Surety
Company, the original plaintiff's guarantor, is the defendant, Machetti having been practically eliminated
from the case.
But in this instance the guarantor's case is even stronger than that of an ordinary surety. The contract of
guaranty is written in the English language and the terms employed must of course be given the
signification which ordinarily attaches to them in that language. In English the term "guarantor" implies an
undertaking of guaranty, as distinguished from suretyship. It is very true that notwithstanding the use of
the words "guarantee" or "guaranty" circumstances may be shown which convert the contract into one of
suretyship but such circumstances do not exist in the present case; on the contrary it appear affirmatively
that the contract is the guarantor's separate undertaking in which the principal does not join, that its rests
on a separate consideration moving from the principal and that although it is written in continuation of the
contract for the construction of the building, it is a collateral undertaking separate and distinct from the
latter. All of these circumstances are distinguishing features of contracts of guaranty.
Now, while a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to
pay if the principal cannot pay. The one is the insurer of the debt, the other an insurer of the solvency of
the debtor. (Saintvs. Wheeler & Wilson Mfg. Co., 95 Ala., 362; Campbell, vs. Sherman, 151 Pa. St., 70;
Castellvi de Higgins and Higgins vs. Sellner, 41 Phil., 142; ;U.S. vs. Varadero de la Quinta, 40 Phil., 48.) This
latter liability is what the Fidelity and Surety Company assumed in the present case. The undertaking is

perhaps not exactly that of a fianzaunder the Civil Code, but is a perfectly valid contract and must be
given the legal effect if ordinarily carries. The Fidelity and Surety Company having bound itself to pay only
the event its principal, Machetti, cannot pay it follows that it cannot be compelled to pay until it is shown
that Machetti is unable to pay. Such ability may be proven by the return of a writ of execution unsatisfied
or by other means, but is not sufficiently established by the mere fact that he has been declared insolvent
in insolvency proceedings under our statutes, in which the extent of the insolvent's inability to pay is not
determined until the final liquidation of his estate.
The judgment appealed from is therefore reversed without costs and without prejudice to such right of
action as the cross-complainant, the Hospicio de San Jose, may have after exhausting its remedy against
the plaintiff Machetti. So ordered.
Araullo, C.J., Malcolm, Villamor, Johns and Romualdez, JJ., concur.

The Lawphil Project - Arellano Law Foundation

G.R. No. L-158025

November 5, 1920

CARMEN CASTELLVI DE HIGGINS and HORACE L. HIGGINS, plaintiffs-appellants,

vs.
GEORGE C. SELLNER, defendant-appellee.
Wolfson, Wolfson and Schwarzkopf for appellants.
William and Ferrier for appellee.

MALCOLM, J.:
This is an action brought by plaintiffs to recover from defendant the sum of P10,000. The brief decision of
the trial court held that the suit was premature, and absolved the defendant from the complaint, with the
costs against the plaintiffs.
The basis of plaintiff's action is a letter written by defendant George C. Sellner to John T. Macleod, agent for
Mrs. Horace L. Higgins, on May 31, 1915, of the following tenor:lawph!l.net
DEAR SIR: I hereby obligate and bind myself, my heirs, successors and assigns that if the
promissory note executed the 29th day of May, 1915 by the Keystone Mining Co., W.H. Clarke, and
John Maye, jointly and severally, in your favor and due six months after date for Pesos 10,000 is not
fully paid at maturity with interest, I will, within fifteen days after notice of such default, pay you in
cash the sum of P10,000 and interest upon your surrendering to me the three thousand shares of
stock of the Keystone Mining Co. held by you as security for the payment of said note.
Respectfully,
(Sgd.) GEO. C. SELLNER.
Counsel for both parties agree that the only point at issue is the determination of defendant's status in the
transaction referred to. Plaintiffs contend that he is a surety; defendant contends that he is a guarantor.
Plaintiffs also admit that if defendant is a guarantor, articles 1830, 1831, and 1834 of the Civil Code
govern.
In the original Spanish of the Civil Code now in force in the Philippine Islands, Title XIV of Book IV is entitled
"De la Fianza." The Spanish word "fianza" is translated in the Washington and Walton editions of the Civil
Code as "security." "Fianza" appears in the Fisher translation as "suretyship." The Spanish world "fiador" is

found in all of the English translations of the Civil Code as "surety." The law of guaranty is not related of by
that name in the Civil Code, although indirect reference to the same is made in the Code of Commerce. In
terminology at least, no distinction is made in the Civil Code between the obligation of a surety and that of
a guarantor.
As has been done in the State of Louisiana, where, like in the Philippines, the substantive law has a civil
law origin, we feel free to supplement the statutory law by a reference to the precepts of the law
merchant.
The points of difference between a surety and a guarantor are familiar to American authorities. A surety
and a guarantor are alike in that each promises to answer for the debt or default of another. A surety and a
guarantor are unlike in that the surety assumes liability as a regular party to the undertaking, while the
liability as a regular party to upon an independent agreement to pay the obligation if the primary pay or
fails to do so. A surety is charged as an original promissory; the engagement of the guarantor is a
collateral undertaking. The obligation of the surety is primary; the obligation of the guarantor is secondary.
(See U.S. vs. Varadero de la Quinta [1919], 40 Phil., 48; Lachman vs. Block [1894], 46 La. Ann., 649;
Bedford vs. Kelley [1913], 173 Mich., 492; Brandt, on Suretyship and Guaranty, sec. 1, cited approvingly by
many authorities.)
Turning back again to our Civil Code, we first note that according to article 1822 "By fianza (security or
suretyship) one person binds himself to pay or perform for a third person in case the latter should fail to do
so." But "If the surety binds himself in solidum with the principal debtor, the provisions of Section fourth,
Chapter third, Title first, shall be applicable." What the first portion of the cited article provides is,
consequently, seen to be somewhat akin to the contract of guaranty, while what is last provided is
practically equivalent to the contract of suretyship. When in subsequent articles found in section 1 of
Chapter II of the title concerning fianza, the Code speaks of the effects of suretyship between surety and
creditor, it has, in comparison with the common law, the effect of guaranty between guarantor and
creditor. The civil law suretyship is, accordingly, nearly synonymous with the common law guaranty; and
the civil law relationship existing between codebtors liable in solidum is similar to the common law
suretyship.
It is perfectly clear that the obligation assumed by defendant was simply that of a guarantor, or, to be
more precise, of the fiador whose responsibility is fixed in the Civil Code. The letter of Mr. Sellner recites
that if the promissory note is not paid at maturity, then, within fifteen days after notice of such default and
upon surrender to him of the three thousand shares of Keystone Mining Company stock, he will assume
responsibility. Sellner is not bound with the principals by the same instrument executed at the same time
and on the same consideration, but his responsibility is a secondary one found in an independent collateral
agreement, Neither is Sellner jointly and severally liable with the principal debtors.
With particular reference, therefore, to appellants assignments of error, we hold that defendant Sellner is a
guarantor within the meaning of the provisions of the Civil Code.
There is also an equitable aspect to the case which reenforces this conclusion. The note executed by the
Keystone Mining Company matured on November 29, 1915. Interest on the note was not accepted by the
makers until September 30, 1916. When the note became due, it is admitted that the shares of stock used
as collateral security were selling at par; that is, they were worth pesos 30,000. Notice that the note had
not been paid was not given to and when the Keyston Mining Company stock was worthless. Defendant,
consequently, through the laches of plaintiff, has lost possible chance to recoup, through the sale of the
stock, any amount which he might be compelled to pay as a surety or guarantor. The "indulgence," as this
word is used in the law of guaranty, of the creditors of the principal, as evidenced by the acceptance of
interest, and by failure promptly to notify the guarantor, may thus have served to discharge the guarantor.
For quite different reasons, which, nevertheless, arrive at the same result, judgment is affirmed, with costs
of this instance against the appellants. So ordered.
Johnson, Araullo, and Villamor, JJ., concur.
Mapa, C.J. and Avancea, J., concur in the result.

G.R. No. L-25494 June 14, 1972

NICOLAS SANCHEZ, plaintiff-appellee,
vs.
SEVERINA RIGOS, defendant-appellant.
Santiago F. Bautista for plaintiff-appellee.
Jesus G. Villamar for defendant-appellant.

CONCEPCION, C.J.:p
Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which certified
the case to Us, upon the ground that it involves a question purely of law.
The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed
an instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed ... to
sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot,
municipality of San Jose, province of Nueva Ecija, and more particularly described in Transfer Certificate of
Title No. NT-12528 of said province, within two (2) years from said date with the understanding that said
option shall be deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the
property" within the stipulated period. Inasmuch as several tenders of payment of the sum of Pl,510.00,
made by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited
said amount with the Court of First Instance of Nueva Ecija and commenced against the latter the present
action, for specific performance and damages.
After the filing of defendant's answer admitting some allegations of the complaint, denying other
allegations thereof, and alleging, as special defense, that the contract between the parties "is a unilateral
promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil
Code, is null and void" on February 11, 1964, both parties, assisted by their respective counsel, jointly
moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered
judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute,
in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as
attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos.
This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which provides:
ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.
In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed and
committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option, copy
of which was annexed to said pleading as Annex A thereof and is quoted on the margin. 1 Hence, plaintiff
maintains that the promise contained in the contract is "reciprocally demandable," pursuant to the first
paragraph of said Article 1479. Although defendant had really "agreed, promised and committed" herself
to sell the land to the plaintiff, it is not true that the latter had, in turn, "agreed and committed himself " to
buy said property. Said Annex A does not bear out plaintiff's allegation to this effect. What is more, since
Annex A has been made "an integral part" of his complaint, the provisions of said instrument form part
"and parcel" 2 of said pleading.
The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a
"contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so understood it,
as indicated by the caption, "Option to Purchase," given by them to said instrument. Under the provisions
thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the
plaintiff for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement,
promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of
the land.
Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said consideration,
and this would seem to be the main factor that influenced its decision in plaintiff's favor. It should be
noted, however, that:
(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to
"sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." In other
words, Article 1479 is controlling in the case at bar.
(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the
concurrence of a condition, namely, that the promise be "supported by a consideration distinct from the
price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the
former establishes the existence of said distinct consideration. In other words, the promisee has the
burden of proving such consideration. Plaintiff herein has not even alleged the existence thereof in his
complaint.
(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special defense, the
absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the

pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's answer. Indeed as
early as March 14, 1908, it had been held, in Bauermann v. Casas, 3 that:
One who prays for judgment on the pleadings without offering proof as to the truth of his
own allegations, and without giving the opposing party an opportunity to introduce
evidence, must be understood to admit the truth of all the material and relevant allegations
of the opposing party, and to rest his motion for judgment on those allegations taken
together with such of his own as are admitted in the pleadings. (La Yebana Company vs.
Sevilla, 9 Phil. 210). (Emphasis supplied.)
This view was reiterated in Evangelista v. De la Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5
Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 6 from which We
quote:
The main contention of appellant is that the option granted to appellee to sell to it barge No.
10 for the sum of P30,000 under the terms stated above has no legal effect because it is not
supported by any consideration and in support thereof it invokes article 1479 of the new
Civil Code. The article provides:
"ART. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or sell a determinate thing for a price
certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price."
On the other hand, Appellee contends that, even granting that the "offer of option" is not
supported by any consideration, that option became binding on appellant when the appellee
gave notice to it of its acceptance, and that having accepted it within the period of option,
the offer can no longer be withdrawn and in any event such withdrawal is ineffective. In
support this contention, appellee invokes article 1324 of the Civil Code which provides:
"ART. 1324. When the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn any time before acceptance by
communicating such withdrawal, except when the option is founded upon
consideration as something paid or promised."
There is no question that under article 1479 of the new Civil Code "an option to sell," or "a
promise to buy or to sell," as used in said article, to be valid must be "supported by a
consideration distinct from the price." This is clearly inferred from the context of said article
that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by
consideration. In other words, "an accepted unilateral promise can only have a binding effect
if supported by a consideration which means that the option can still be withdrawn, even if
accepted, if the same is not supported by any consideration. It is not disputed that the
option is without consideration. It can therefore be withdrawn notwithstanding the
acceptance of it by appellee.
It is true that under article 1324 of the new Civil Code, the general rule regarding offer and
acceptance is that, when the offerer gives to the offeree a certain period to accept, "the
offer may be withdrawn at any time before acceptance" except when the option is founded
upon consideration, but this general rule must be interpreted as modified by the provision of
article 1479 above referred to, which applies to "a promise to buy and sell" specifically. As
already stated, this rule requires that a promise to sell to be valid must be supported by a
consideration distinct from the price.
We are not oblivious of the existence of American authorities which hold that an offer, once
accepted, cannot be withdrawn, regardless of whether it is supported or not by a
consideration (12 Am. Jur. 528). These authorities, we note, uphold the general
rule applicable to offer and acceptance as contained in our new Civil Code. But we are
prevented from applying them in view of the specific provision embodied in article 1479.
While under the "offer of option" in question appellant has assumed a clear obligation to sell
its barge to appellee and the option has been exercised in accordance with its terms, and
there appears to be no valid or justifiable reason for appellant to withdraw its offer, this
Court cannot adopt a different attitude because the law on the matter is clear. Our
imperative duty is to apply it unless modified by Congress.
However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, 8 decided later
thatSouthwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction between Articles
1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the
one sued upon here was involved, treating such promise as an option which, although not binding as a

contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of
purchase and sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar
Bengzon, this Court said:
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree
should decide to exercise his option within the specified time. After accepting the promise
and before he exercises his option, the holder of the option is not bound to buy. He is free
either to buy or not to buy later. In this case, however, upon accepting herein petitioner's
offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed
the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy.
It was not a mere option then; it was a bilateral contract of sale.
Lastly, even supposing that Exh. A granted an option which is not binding for lack of
consideration, the authorities hold that:
"If the option is given without a consideration, it is a mere offer of a contract
of sale, which is not binding until accepted. If, however, acceptance is made
before a withdrawal, it constitutes a binding contract of sale, even though the
option was not supported by a sufficient consideration. ... . (77 Corpus Juris
Secundum, p. 652. See also 27 Ruling Case Law 339 and cases cited.)
"It can be taken for granted, as contended by the defendant, that the option
contract was not valid for lack of consideration. But it was, at least, an offer to
sell, which was accepted by letter, and of the acceptance the offerer had
knowledge before said offer was withdrawn. The concurrence of both acts
the offer and the acceptance could at all events have generated a contract,
if none there was before (arts. 1254 and 1262 of the Civil Code)." (Zayco vs.
Serra, 44 Phil. 331.)
In other words, since there may be no valid contract without a cause or consideration, the promisor is not
bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted
promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected
contract of sale.
This view has the advantage of avoiding a conflict between Articles 1324 on the general principles on
contracts and 1479 on sales of the Civil Code, in line with the cardinal rule of statutory construction
that, in construing different provisions of one and the same law or code, such interpretation should be
favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the
presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy
or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific
Co., 10 holding that Art. 1324 is modifiedby Art. 1479 of the Civil Code, in effect, considers the latter as
an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear,
and it is not so, insofar as said two (2) articles are concerned. What is more, the reference, in both the
second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a
consideration, strongly suggests that the two (2) provisions intended to enforce or implement the same
principle.
Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the
doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as inconsistent therewith, the view
adhered to in theSouthwestern Sugar & Molasses Co. case should be deemed abandoned or modified.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant
Severina Rigos. It is so ordered.

G.R. No. L-11491

August 23, 1918

ANDRES QUIROGA, plaintiff-appellant,

vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Crossfield & O'Brien for appellee.
AVANCEA, J.:
On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by and
between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present
defendant later subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH

MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA"
BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan
Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's
establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in
Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the
invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the
dozen, whether of the same or of different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of
sixty days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the
freight, insurance, and cost of unloading from the vessel at the point where the beds are
received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment
when made shall be considered as a prompt payment, and as such a deduction of 2 per cent
shall be made from the amount of the invoice.
The same discount shall be made on the amount of any invoice which Mr. Parsons may deem
convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any
alteration in price which he may plan to make in respect to his beds, and agrees that if on
the date when such alteration takes effect he should have any order pending to be served to
Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be
lowered, but shall not be affected by said alteration if the price thereby be increased, for, in
this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which
the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the benefit of both
contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the
exclusive agency for any island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga"
beds in all the towns of the Archipelago where there are no exclusive agents, and shall
immediately report such action to Mr. Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be terminated by either of the
contracting parties on a previous notice of ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the
subject matter of this appeal and both substantially amount to the averment that the defendant violated
the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open
establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for
the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. As
may be seen, with the exception of the obligation on the part of the defendant to order the beds by the
dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of
action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for
the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The
whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of the
contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.
In order to classify a contract, due regard must be given to its essential clauses. In the contract in
question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the price stipulated, and that the
defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined
by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to
their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in
cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed
for prompt payment. These are precisely the essential features of a contract of purchase and sale. There
was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay
their price. These features exclude the legal conception of an agency or order to sell whereby the

mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the
price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he
returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the
beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and
regardless as to whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is
one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales,
as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining
the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not
a single one of these clauses necessarily conveys the idea of an agency. The words commission on
sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere
discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the
defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the
remaining clauses, the least that can be said is that they are not incompatible with the contract of
purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant
corporation and who established and managed the latter's business in Iloilo. It appears that this witness,
prior to the time of his testimony, had serious trouble with the defendant, had maintained a civil suit
against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He testified that it
was he who drafted the contract Exhibit A, and, when questioned as to what was his purpose in contracting
with the plaintiff, replied that it was to be an agent for his beds and to collect a commission on sales.
However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of the
corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his
statement as to what was his idea in contracting with the plaintiff is of no importance, inasmuch as the
agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said, a contract
of purchase and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistaken
in his classification of the contract. But it must be understood that a contract is what the law defines it to
be, and not what it is called by the contracting parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that,
without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant
received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the
most only shows that, on the part of both of them, there was mutual tolerance in the performance of the
contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties
stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in
connection with, the execution of the contract, must be considered for the purpose of interpreting the
contract, when such interpretation is necessary, but not when, as in the instant case, its essential
agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to
another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for the
price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the
plaintiff's prior consent with respect to said beds, which shows that it was not considered that the
defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds
without previous notice, it is insinuated in the record that these brass beds were precisely the ones so
shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called
commissions, we have said that they merely constituted a discount on the invoice price, and the reason for
applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the
defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds,
such sales were to be considered as a result of that advertisement.
In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the
contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant
might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the
defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause
of action are not imposed upon the defendant, either by agreement or by law.
The judgment appealed from is affirmed, with costs against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Digests
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Sun Brothers & Co. v. Velasco
SUN BROTHERS & CO. [SBC] v. JOSE VELASCO & CO KANG CHIU
1958 / Angeles / Appeal from CFI judgment [Note that this is a CA, not SC, decision.]
FACTS
SBC delivered to Francisco Lopez an Admiral refrigerator. The stipulated price was P1,700, but only the
downpayment of P500 was paid. Their contract stipulated the following:

Lopez shall not remove the ref nor part possession without the express written consent of SBC.

In the event of a violation of the agreement, SBC may rescind the contract of sale and recover
possession of the ref. In addition, any amount previously paid shall be forfeited as liquidated damages,
and the ref remains as SBCs absolute property until Lopez is able to pay the full purchase price.
Without SBCs knowledge, Lopez (who misrepresented himself as Jose Lim) sold it to JV Trading (owned by
Jose Velasco) for P850, and Lopez executed a document that stated that he is the absolute owner of the
ref. Without SBCs knowledge, after displaying the ref at his store, JV Trading sold the ref to Co Kang Chiu
for P985, and it was delivered to the latters house.
SBC filed a complaint for replevin against Lopez and Co Kang Chiu (later, JV Trading / Jose Velasco was
included), and asked for a preliminary writ of replevin for the recovery of the possession of the ref, and it
was issued. However, on Co Kang Chius request and having filed a counter-bond, the ref was not taken out
of his residence.
CFI decided in favor of SBC, declaring it as the absolute owner. Co Kang Chiu should return ref, or else,
Lopez shall pay full amount of P1,700 to SBC, and JV Trading should reimburse Co Kang Chiu the amount of
P985.
CFI ERRED; CO KANG CHIU IS THE ABSOLUTE OWNER; LOPEZ MUST PAY SBC P1,700
ALSO, NCC 1505 PARAGRAPH 3 (ON MERCHANT STORE) SHOULD BE APPLIED

The lower court erred in applying the first paragraph of NCC 1505. It is true that Lopez never had title since
it would only be vested on him upon full payment of the purchase price. As regards JV Trading, it did not
acquire any better right than what Lopez had. The Court also found that he was not a purchaser in good
faith. Since he was purchasing a ref from a private person who is not engaged in such business, he should
have inquired WON Lopez has paid for the ref in full.
Paragraph 3 should be applied since Co Kang Chiu purchased the ref from JV Trading, which is a merchant
store. Co Kang Chiu should be declared to have acquired a valid title, although his predecessors-in-interest
did not have any right of ownership thereto. Here is a case where an imperfect or void title ripens into a
valid one, because of some intervening causes.
The rights and interests of an innocent buyer for value should be protected when it comes into
clash with the rights and interests of a vendor. This is embodied in NCC 1505 (3) to facilitate commercial
sales of movables and to give stability to business transactions.
SBCs recourse should be a claim for indemnity against Lopez, and not recovery upon
reimbursement, since SBC did not lose ref nor was the company unlawfully deprived of it.
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Velasco v. ApostolIn "Digests"

G.R. No. L-36083 September 5, 1975

Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON DOROMAL, JR., and
GAUDELIA VEGA, petitioners,

vs.
HON. COURT OF APPEALS and FILOMENA JAVELLANA, respondents.
Salonga, Ordonez, Yap, Parlade and Associates and Marvin J. Mirasol for petitioners. Arturo H. Villanueva, Jr.
for private respondent.

BARREDO, J.:
Petition for review of the decision of the Court of Appeals in CA-G.R. No.
47945-R entitled Filomena Javellana vs. Spouses Ramon Doromal, Sr., et al. which reversed the decision of
the Court of First Instance of Iloilo that had in turn dismissed herein private respondent Filomena
Javellana's action for redemption of a certain property sold by her co-owners to herein petitioners for
having been made out of time.
The factual background found by the Court of Appeals and which is binding on this Court, the same not
being assailed by petitioners as being capricious, is as follows:
IT RESULTING: That the facts are quite simple; Lot 3504 of the cadastral survey of Iloilo,
situated in the poblacion of La Paz, one of its districts, with an area of a little more than 2-
hectares was originally decreed in the name of the late Justice Antonio Horilleno, in 1916,
under Original Certificate of Title No. 1314, Exh. A; but before he died, on a date not
particularized in the record, he executed a last will and testament attesting to the fact that it
was a co-ownership between himself and his brothers and sisters, Exh. C; so that the truth
was that the owners or better stated, the co-owners were; beside Justice Horilleno,
"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was succeeded by her
only daughter and heir herein plaintiff. Filomena Javellana, in the proportion of 1/7 undivided
ownership each; now then, even though their right had not as yet been annotated in the
title, the co-owners led by Carlos, and as to deceased Justice Antonio Horilleno, his daughter
Mary, sometime since early 1967, had wanted to sell their shares, or if possible if Filomena
Javellana were agreeable, to sell the entire property, and they hired an acquaintance
Cresencia Harder, to look for buyers, and the latter came to interest defendants, the father
and son, named Ramon Doromal, Sr. and Jr., and in preparation for the execution of the sale,
since the brothers and sisters Horilleno were scattered in various parts of the country, Carlos
in Ilocos Sur, Mary in Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan
City, they all executed various powers of attorney in favor of their niece, Mary H. Jimenez
Exh. 1-8, they also caused preparation of a power of attorney of identical tenor for signature
by plaintiff, Filomena Javellana, Exh. M, and sent it with a letter of Carlos, Exh. 7 dated 18
January, 1968 unto her thru Mrs. Harder, and here, Carlos informed her that the price was
P4.00 a square meter, although it now turns out according to Exh. 3 that as early as 22
October, 1967, Carlos had received in check as earnest money from defendant Ramon
Doromal, Jr., the sum of P5,000.00 and the price therein agreed upon was five (P5.00) pesos
a square meter as indeed in another letter also of Carlos to Plaintiff in 5 November, 1967,
Exh. 6, he had told her that the Doromals had given the earnest money of P5,000.00 at
P5.00 a square meter, at any rate, plaintiff not being agreeable, did not sign the power of
attorney, and the rest of the co-owners went ahead with their sale of their 6/7, Carlos first
seeing to it that the deed of sale by their common attorney in fact, Mary H. Jimenez be
signed and ratified as it was signed and ratified in Candon, Ilocos Sur, on 15 January, 1968,
Exh. 2, then brought to Iloilo by Carlos in the same month, and because the Register of
Deeds of Iloilo refused to register right away, since the original registered owner, Justice
Antonio Horilleno was already dead, Carlos had to ask as he did, hire Atty. Teotimo Arandela
to file a petition within the cadastral case, on 26 February, 1968, for the purpose, Exh. C,
after which Carlos returned to Luzon, and after compliance with the requisites of publication,
hearing and notice, the petition was approved, and we now see that on 29 April, 1968,
Carlos already back in Iloilo went to the Register of Deeds and caused the registration of the
order of the cadastral court approving the issuance of a new title in the name of the coowners, as well as of the deed of sale to the Doromals, as a result of which on that same
date, a new title was issued TCT No. 23152, in the name of the Horillenos to 6/7 and plaintiff
Filomena Javellana to 1/7, Exh. D, only to be cancelled on the same day under TCT No.
23153, Exh. 2, already in the names of the vendees Doromals for 6/7 and to herein plaintiff,
Filomena Javellana, 1/7, and the next day 30 April, 1968, the Doromals paid unto Carlos by
check, the sum of P97,000.00 Exh. 1, of Chartered Bank which was later substituted by
check of Phil. National Bank, because there was no Chartered Bank Branch in Ilocos Sur, but
besides this amount paid in check, the Doromals according to their evidence still paid an
additional amount in cash of P18,250.00 since the agreed price was P5.00 a square meter;
and thus was consummated the transaction, but it is here where complications set in,

On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo, plaintiff's lawyer, Atty.
Arturo H. Villanueva, bringing with him her letter of that date, reading,
"P.O. Box 189,
Bacolod City
June 10, 1968
Mr. & Mrs. Ramon Doromal, Sr.
and Mr. and Mrs. Ramon Doromal, Jr.
"Dumangas Iloilo
Dear Mr. and Mrs. Doromal:
The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., of this
City. Through him, I am making a formal offer to repurchase or redeem from
you the 6/7 undivided share in Lot No. 3504, of the Iloilo Cadastre, which you
bought from my erstwhile co-owners, the Horillenos, for the sum of
P30,000.00, Atty. Villanueva has with him the sum of P30,000.00 in cash,
which he will deliver to you as soon as you execute the contract of sale in my
favor.
Thank you very much for whatever favorable consideration you can give this request.
Very truly yours,
(SIGNED)
Mrs. FILOMENA
JAVELLANA"
p. 26, Exh. "J", Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he had the P30,000.00 with
him in cash, and tendered it to them, for the exercise of the legal redemption, the Doromals
were aghast, and refused. and the very next day as has been said. 11 June, 1968, plaintiff
filed this case, and in the trial, thru oral and documentary proofs sought to show that as coowner, she had the right to redeem at the price stated in the deed of sale, Exh. 2, namely
P30,000.00 of the but defendants in answer, and in their evidence, oral and documentary
sought to show that plaintiff had no more right to redeem and that if ever she should have,
that it should be at the true and real price by them paid, namely, the total sum of
P115,250.00, and trial judge, after hearing the evidence, believed defendants, that plaintiff
had no more right, to redeem, because,
"Plaintiff was informed of the intended sale of the 6/7 share belonging to the
Horillenos."
and that,
"The plaintiff have every reason to be grateful to Atty. Carlos Horilleno because in the
petition for declaration of heirs of her late uncle Antonio Horilleno in whose name only the
Original Certificate of Title covering the Lot in question was issued, her uncle Atty. Carlos
Horilleno included her as one of the heirs of said Antonio Horilleno. Instead, she filed this
case to redeem the 6/7 share sold to the Doromals for the simple reason that the
consideration in the deed of sale is the sum of P30,000.00 only instead of P115,250.00
approximately which was actually paid by the defendants to her co-owners, thus she wants
to enrich herself at the expense of her own blood relatives who are her aunts, uncles and
cousins. The consideration of P30,000.00 only was placed in the deed of sale to minimize the
payment of the registration fees, stamps, and sales tax. pp. 77-78, R.A.,
and dismiss and further condemned plaintiff to pay attorney's fees, and moral and
exemplary damages as set forth in few pages back, it is because of this that plaintiff has
come here and contends, that Lower Court erred:
"I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of the Iloilo Cadastre, the
right of legal redemption under Art. 1620, of the Civil Code:
"II. ... as a consequence of the above error, in refusing to order the defendants-appellees,
the vendees of a portion of the aforesaid Lot No. 3504 which they bought from the coowners of the plaintiff-appellant, to reconvey the portion they purchased to the herein
plaintiff-appellant..

"III. ... in admitting extrinsic evidence in the determination of the consideration of the sale,
instead of simply adhering to the purchase price of P30,000.00, set forth in the pertinent
Deed of Sale executed by the vendors and owners of the plaintiff-appellant in favor of the
defendants-appellees.
"IV. ... in dismissing the complaint filed in this case." pp. 1-3, Appellant's Brief,.
which can be reduced to the simple question of whether or not on tile basis of the evidence
and the law, the judgment appealed from should be maintained; (Pp. 16-22, Record.) .
Upon these facts, the Court of Appeals reversed the trial court's decision and held that although
respondent Javellana was informed of her co-owners' proposal to sell the land in question to petitioners she
was, however, "never notified ... least of all, in writing", of the actual execution and registration of the
corresponding deed of sale, hence, said respondent's right to redeem had not yet expired at the time she
made her offer for that purpose thru her letter of June 10, 1968 delivered to petitioners on even date. The
intermediate court further held that the redemption price to be paid by respondent should be that stated in
the deed of sale which is P30,000 notwithstanding that the preponderance of the evidence proves that the
actual price paid by petitioners was P115,250. Thus, in their brief, petitioners assign the following alleged
errors:
I
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN WRITING OF THE
SALE CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE REFERS TO A NOTICE IN WRITING
AFTER THE EXECUTION AND REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF THE
DOCUMENT OF SALE.
II
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE INSCRIPTION OF THE SALE IN
THE REGISTRY OF PROPERTY TAKES EFFECT AS AGAINST THIRD PERSONS INCLUDING CLAIMS
OF POSSIBLE REDEMPTIONERS.
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT TO REDEEM, THE
COURT OF APPEALS ERRED IN HOLDING THAT THE REDEMPTION PRICE SHOULD BE THAT
STATED IN THE DEED OF SALE. (Pp. 1-2, Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 co-owner of the
property in dispute. The thrust of their first assignment of error is that for purposes of Article 1623 of the
Civil Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within
thirty days from the notice in writing by the prospective vendor, or by the vendor, as the
case may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit 7, and November 5,
1967, Exhibit 6, constituted the required notice in writing from which the 30-day period fixed in said
provision should be computed. But to start with, there is no showing that said letters were in fact received
by respondent and when they were actually received. Besides, petitioners do not pinpoint which of these
two letters, their dates being more than two months apart, is the required notice. In any event, as found by
the appellate court, neither of said letters referred to a consummated sale. As may be observed, it was
Carlos Horilleno alone who signed them, and as of January 18, 1968, powers of attorney from the various
co-owners were still to be secured. Indeed, the later letter of January 18, 1968 mentioned that the price
was P4.00 per square meter whereas in the earlier letter of November 5, 1967 it was P5.00, as in fact, on
that basis, as early as October 27, 1967, Carlos had already received P5,000 from petitioners supposedly
as earnest money, of which, however, mention was made by him to his niece only in the later letter of
January 18, 1968, the explanation being that "at later negotiation it was increased to P5.00 per square
meter." (p. 4 of petitioners' brief as appellees in the Court of Appeals quoting from the decision of the trial
court.) In other words, while the letters relied upon by petitioners could convey the idea that more or less
some kind of consensus had been arrived at among the other co-owners to sell the property in dispute to
petitioners, it cannot be said definitely that such a sale had even been actually perfected. The fact alone
that in the later letter of January 18, 1968 the price indicated was P4.00 per square meter while in that of
November 5, 1967, what was stated was P5.00 per square meter negatives the possibility that a "price
definite" had already been agreed upon. While P5,000 might have indeed been paid to Carlos in October,
1967, there is nothing to show that the same was in the concept of the earnest money contemplated in

Article 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale. Viewed in the
backdrop of the factual milieu thereof extant in the record, We are more inclined to believe that the said
P5,000 were paid in the concept of earnest money as the term was understood under the Old Civil Code,
that is, as a guarantee that the buyer would not back out, considering that it is not clear that there was
already a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the
property should respondent Javellana refuse to agree to part with her 1/7 share.
In the light of these considerations, it cannot be said that the Court of Appeals erred in holding that the
letters aforementioned sufficed to comply with the requirement of notice of a sale by co-owners under
Article 1623 of the Civil Code. We are of the considered opinion and so hold that for purposes of the coowner's right of redemption granted by Article 1620 of the Civil Code, the notice in writing which Article
1623 requires to be made to the other co-owners and from receipt of which the 30-day period to redeem
should be counted is a notice not only of a perfected sale but of the actual execution and delivery of the
deed of sale. This is implied from the latter portion of Article 1623 which requires that before a register of
deeds can record a sale by a co-owner, there must be presented to him, an affidavit to the effect that the
notice of the sale had been sent in writing to the other co-owners. A sale may not be presented to the
register of deeds for registration unless it be in the form of a duly executed public instrument. Moreover,
the law prefers that all the terms and conditions of the sale should be definite and in writing. As aptly
observed by Justice Gatmaitan in the decision under review, Article 1619 of the Civil Code bestows unto a
co-owner the right to redeem and "to be subrogated under the same terms and conditions stipulated in the
contract", and to avoid any controversy as to the terms and conditions under which the right to redeem
may be exercised, it is best that the period therefor should not be deemed to have commenced unless the
notice of the disposition is made after the formal deed of disposal has been duly executed. And it being
beyond dispute that respondent herein has never been notified in writing of the execution of the deed of
sale by which petitioners acquired the subject property, it necessarily follows that her tender to redeem
the same made on June 10, 1968 was well within the period prescribed by law. Indeed, it is immaterial
when she might have actually come to know about said deed, it appearing she has never been shown a
copy thereof through a written communication by either any of the petitioners-purchasers or any of her coowners-vendees. (Cornejo et al. vs. CA et al., 16 SCRA 775.)
The only other pivotal issue raised by petitioners relates to the price which respondent offered for the
redemption in question. In this connection, from the decision of the Court of Appeals, We gather that there
is "decisive preponderance of evidence" establishing "that the price paid by defendants was not that
stated in the document, Exhibit 2, of P30,000 but much more, at least P97,000, according to the check,
Exhibit 1, if not a total of P115,250.00 because another amount in cash of P18,250 was paid afterwards."
It is, therefore, the contention of petitioners here that considering said finding of fact of the intermediate
court, it erred in holding nevertheless that "the redemption price should be that stated in the deed of sale."
Again, petitioners' contention cannot be sustained. As stated in the decision under review, the trial court
found that "the consideration of P30,000 only was placed in the deed of sale to minimize the payment of
the registration fees, stamps and sales tax." With this undisputed fact in mind, it is impossible for the
Supreme Court to sanction petitioners' pragmatic but immoral posture. Being patently violative of public
policy and injurious to public interest, the seemingly wide practice of understating considerations of
transactions for the purpose of evading taxes and fees due to the government must be condemned and all
parties guilty thereof must be made to suffer the consequences of their ill-advised agreement to defraud
the state. Verily, the trial court fell short of its devotion and loyalty to the Republic in officially giving its
stamp of approval to the stand of petitioners and even berating respondent Javellana as wanting to enrich
herself "at the expense of her own blood relatives who are her aunts, uncles and cousins." On the contrary,
said "blood relatives" should have been sternly told, as We here hold, that they are in pari-delicto with
petitioners in committing tax evasion and should not receive any consideration from any court in respect
to the money paid for the sale in dispute. Their situation is similar to that of parties to an illegal contract. 1
Of course, the Court of Appeals was also eminently correct in its considerations supporting the conclusion
that the redemption in controversy should be only for the price stipulated in the deed, regardless of what
might have been actually paid by petitioners that style inimitable and all his own, Justice Gatmaitan states
those considerations thus:
CONSIDERING: As to this that the evidence has established with decisive preponderance that
the price paid by defendants was not that stated in the document, Exh. 2 of P30,000.00 but
much more, at least P97,000.00 according to the check, Exh. 1 if not a total of P115,250.00
because another amount in cash of P18,250.00 was paid afterwards, perhaps it would be
neither correct nor just that plaintiff should be permitted to redeem at only P30,000.00, that
at first glance would practically enrich her by the difference, on the other hand, after some
reflection, this Court can not but have to bear in mind certain definite points.
1st According to Art. 1619
"Legal redemption is the right to be subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by purchase or dation in
payment, or by any other transaction whereby ownership is transmitted by onerous title."
pp. 471-472, New Civil Code,

and note that redemptioner right is to be subrogated

"upon the same terms and conditions stipulated in the contract."
and here, the stipulation in the public evidence of the contract, made public by both vendors
and vendees is that the price was P30,000.00;
2nd According to Art. 1620,
"A co-owner of a thing may exercise the right of redemption in case the share of all the other co-owners or
any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner
shall pay only a reasonable one. p. 472, New Civil Code, .
from which it is seen that if the price paid is 'grossly excessive' redemptioner is required to
pay only a reasonable one; not that actually paid by the vendee, going to show that the law
seeks to protect redemptioner and converts his position into one not that of a contractually
but of a legally subrogated creditor as to the right of redemption, if the price is not 'grossly
excessive', what the law had intended redemptioner to pay can be read in Art. 1623.
The right of a legal pre-emption or redemption shall not be exercised except
within thirty (30) days from the notice in writing by the prospective vendor, or
by the vendor as the case may be. The deed of sale shall not be recorded in
the Registry of Property, unless accompanied by an affidavit of the vendor
that he has given written notice thereof of all possible redemptioners.' p. 473,
New Civil Code,
if that be so that affidavit must have been intended by the lawmakers for a definite purpose,
to argue that this affidavit has no purpose is to go against all canons of statutory
construction, no law mandatory in character and worse, prohibitive should be understood to
have no purpose at all, that would be an absurdity, that purpose could not but have been to
give a clear and unmistakable guide to redemptioner, on how much he should pay and when
he should redeem; from this must follow that that notice must have been intended to state
the truth and if vendor and vendee should have instead, decided to state an untruth therein,
it is they who should bear the consequences of having thereby misled the redemptioner who
had the right to rely and act thereon and on nothing else; stated otherwise, all the elements
of equitable estoppel are here since the requirement of the law is to submit the affidavit of
notice to all possible redemptioners, that affidavit to be a condition precedent to registration
of the sale therefore, the law must have intended that it be by the parties understood that
they were there asking a solemn representation to all possible redemptioners, who upon
faith of that are thus induced to act, and here worse for the parties to the sale, they sought
to avoid compliance with the law and certainly refusal to comply cannot be rewarded with
exception and acceptance of the plea that they cannot be now estopped by their own
representation, and this Court notes that in the trial and to this appeal, plaintiff earnestly
insisted and insists on their estoppel;
3rd If therefore, here vendors had only attempted to comply with the law, they would
have been obligated to send a copy of the deed of sale unto Filomena Javellana and from
that copy, Filomena would have been notified that she should if she had wanted to redeem,
offered no more, no less, that P30,000.00, within 30 days, it would have been impossible for
vendors and vendees to have inserted in the affidavit that the price was truly P97,000.00
plus P18,250.00 or a total of P115,250.00; in other words, if defendants had only complied
with the law, they would have been obligated to accept the redemption money of only
P30,000.00;
4th If it be argued that foregoing solution would mean unjust enrichment for plaintiff, it
need only be remembered that plaintiff's right is not contractual, but a mere legal one, the
exercise of a right granted by the law, and the law is definite that she can subrogate herself
in place of the buyer,
"upon the same terms and conditions stipulated in the contract,"
in the words of Art. 1619, and here the price
"stipulated in the contract"
was P30,000.00, in other words, if this be possible enrichment on the part of Filomena, it was
not unjust but just enrichment because permitted by the law; if it still be argued that plaintiff
would thus be enabled to abuse her right, the answer simply is that what she is seeking to
enforce is not an abuse but a mere exercise of a right; if it be stated that just the same, the
effect of sustaining plaintiff would be to promote not justice but injustice, the answer again
simply is that this solution is not unjust because it only binds the parties to make good their

solemn representation to possible redemptioners on the price of the sale, to what they had
solemnly averred in a public document required by the law to be the only basis for that
exercise of redemption; (Pp. 24-27, Record.)