Vous êtes sur la page 1sur 52

1 .

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 157374

August 27, 2009

HEIRS OF CAYETANO PANGAN and CONSUELO PANGAN, * Petitioners,


vs.
SPOUSES ROGELIO PERRERAS and PRISCILLA PERRERAS, Respondents.
DECISION
BRION, J.:
The heirs1 of spouses Cayetano and Consuelo Pangan (petitioners-heirs) seek the
reversal of the Court of Appeals (CA) decision2 of June 26, 2002, as well its resolution
of February 20, 2003, in CA-G.R. CV Case No. 56590 through the present petition for
review on certiorari.3 The CA decision affirmed the Regional Trial Courts (RTC)
ruling4 which granted the complaint for specific performance filed by spouses Rogelio
and Priscilla Perreras (respondents) against the petitioners-heirs, and dismissed the
complaint for consignation instituted by Consuelo Pangan (Consuelo) against the
respondents.
THE FACTUAL ANTECEDENTS
The spouses Pangan were the owners of the lot and two-door apartment (subject
properties) located at 1142 Casaas St., Sampaloc, Manila. 5 On June 2, 1989,
Consuelo agreed to sell to the respondents the subject properties for the price
of P540,000.00. On the same day, Consuelo received P20,000.00 from the
respondents as earnest money, evidenced by a receipt (June 2, 1989 receipt)6 that
also included the terms of the parties agreement.
Three days later, or on June 5, 1989, the parties agreed to increase the purchase
price from P540,000.00 toP580,000.00.
In compliance with the agreement, the respondents issued two Far East Bank and
Trust Company checks payable to Consuelo in the amounts of P200,000.00
and P250,000.00 on June 15, 1989. Consuelo, however, refused to accept the checks.
She justified her refusal by saying that her children (the petitioners-heirs) co-owners
of the subject properties did not want to sell the subject properties. For the same
reason, Consuelo offered to return the P20,000.00 earnest money she received from
the respondents, but the latter rejected it. Thus, Consuelo filed a complaint for
consignation against the respondents on September 5, 1989, docketed as Civil Case
No. 89-50258, before the RTC of Manila, Branch 28.
The respondents, who insisted on enforcing the agreement, in turn instituted an action
for specific performance against Consuelo before the same court on September 26,
1989. This case was docketed as Civil Case No. 89-50259. They sought to compel
Consuelo and the petitioners-heirs (who were subsequently impleaded as codefendants) to execute a Deed of Absolute Sale over the subject properties.
In her Answer, Consuelo claimed that she was justified in backing out from the
agreement on the ground that the sale was subject to the consent of the petitionersheirs who became co-owners of the property upon the death of her husband,
Cayetano. Since the petitioners-heirs disapproved of the sale, Consuelo claimed that
the contract became ineffective for lack of the requisite consent. She nevertheless
expressed her willingness to return theP20,000.00 earnest money she received from
the respondents.
The RTC ruled in the respondents favor; it upheld the existence of a perfected
contract of sale, at least insofar as the sale involved Consuelos conjugal and
hereditary shares in the subject properties. The trial court found that Consuelos
receipt of the P20,000.00 earnest money was an "eloquent manifestation of the
perfection of the contract." Moreover, nothing in the June 2, 1989 receipt showed that
the agreement was conditioned on the consent of the petitioners-heirs. Even so, the
RTC declared that the sale is valid and can be enforced against Consuelo; as a coowner, she had full-ownership of the part pertaining to her share which she can
alienate, assign, or mortgage. The petitioners-heirs, however, could not be compelled
to transfer and deliver their shares in the subject properties, as they were not parties to

the agreement between Consuelo and the respondents. Thus, the trial court ordered
Consuelo to convey one-half (representing Consuelos conjugal share) plus one-sixth
(representing Consuelos hereditary share) of the subject properties, and to
pay P10,000.00 as attorneys fees to the respondents. Corollarily, it dismissed
Consuelos consignation complaint.
Consuelo and the petitioners-heirs appealed the RTC decision to the CA claiming that
the trial court erred in not finding that the agreement was subject to a suspensive
condition the consent of the petitioners-heirs to the agreement. The CA, however,
resolved to dismiss the appeal and, therefore, affirmed the RTC decision. As the RTC
did, the CA found that the payment and receipt of earnest money was the operative
act that gave rise to a perfected contract, and that there was nothing in the parties
agreement that would indicate that it was subject to a suspensive condition. It
declared:
Nowhere in the agreement of the parties, as contained in the June 2, 1989 receipt
issued by [Consuelo] xxx, indicates that [Consuelo] reserved titled on [sic] the
property, nor does it contain any provision subjecting the sale to a positive suspensive
condition.
Unconvinced by the correctness of both the RTC and the CA rulings, the petitionersheirs filed the present appeal by certiorari alleging reversible errors committed by the
appellate court.
THE PETITION
The petitioners-heirs primarily contest the finding that there was a perfected contract
executed by the parties. They allege that other than the finding that Consuelo
received P20,000.00 from the respondents as earnest money, no other evidence
supported the conclusion that there was a perfected contract between the parties; they
insist that Consuelo specifically informed the respondents that the sale still required
the petitioners-heirs consent as co-owners. The refusal of the petitioners-heirs to sell
the subject properties purportedly amounted to the absence of the requisite element of
consent.
Even assuming that the agreement amounted to a perfected contract, the petitionersheirs posed the question of the agreements proper characterization whether it is a
contract of sale or a contract to sell. The petitioners-heirs posit that the agreement
involves a contract to sell, and the respondents belated payment of part of the
purchase price, i.e., one day after the June 14, 1989 due date, amounted to the nonfulfillment of a positive suspensive condition that prevented the contract from acquiring
obligatory force. In support of this contention, the petitioners-heirs cite the Courts
ruling in the case of Adelfa Rivera, et al. v. Fidela del Rosario, et al.: 7
In a contract of sale, the title to the property passes to the vendee upon the delivery of
the thing sold; while in a contract to sell, ownership is, by agreement, reserved in the
vendor and is not to pass to the vendee until full payment of the purchase price. In a
contract to sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation
that prevents the obligation of the vendor to convey title from acquiring an
obligatory force.
[Rivera], however, failed to complete payment of the second installment. The nonfulfillment of the condition rendered the contract to sell ineffective and without force
and effect. [Emphasis in the original.]
From these contentions, we simplify the basic issues for resolution to three questions:
1. Was there a perfected contract between the parties?
2. What is the nature of the contract between them? and
3. What is the effect of the respondents belated payment on their
contract?
THE COURTS RULING
There was a perfected contract between the parties since all the essential
requisites of a contract were present

Article 1318 of the Civil Code declares that no contract exists unless the following
requisites concur: (1) consent of the contracting parties; (2) object certain which is the
subject matter of the contract; and (3) cause of the obligation established. Since the
object of the parties agreement involves properties co-owned by Consuelo and her
children, the petitioners-heirs insist that their approval of the sale initiated by their
mother, Consuelo, was essential to its perfection. Accordingly, their refusal amounted
to the absence of the required element of consent.
That a thing is sold without the consent of all the co-owners does not invalidate the
sale or render it void. Article 493 of the Civil Code8 recognizes the absolute right of a
co-owner to freely dispose of his pro indiviso share as well as the fruits and other
benefits arising from that share, independently of the other co-owners. Thus, when
Consuelo agreed to sell to the respondents the subject properties, what she in fact
sold was her undivided interest that, as quantified by the RTC, consisted of one-half
interest, representing her conjugal share, and one-sixth interest, representing her
hereditary share.
The petitioners-heirs nevertheless argue that Consuelos consent was predicated on
their consent to the sale, and that their disapproval resulted in the withdrawal of
Consuelos consent. Yet, we find nothing in the parties agreement or even conduct
save Consuelos self-serving testimony that would indicate or from which we can
infer that Consuelos consent depended on her childrens approval of the sale. The
explicit terms of the June 8, 1989 receipt 9 provide no occasion for any reading that the
agreement is subject to the petitioners-heirs favorable consent to the sale.
The presence of Consuelos consent and, corollarily, the existence of a perfected
contract between the parties are further evidenced by the payment and receipt
of P20,000.00, an earnest money by the contracting parties common usage. The law
on sales, specifically Article 1482 of the Civil Code, provides that whenever earnest
money is given in a contract of sale, it shall be considered as part of the price
and proof of the perfection of the contract. Although the presumption is not
conclusive, as the parties may treat the earnest money differently, there is nothing
alleged in the present case that would give rise to a contrary presumption. In cases
where the Court reached a conclusion contrary to the presumption declared in Article
1482, we found that the money initially paid was given to guarantee that the buyer
would not back out from the sale, considering thatthe parties to the sale have yet to
arrive at a definite agreement as to its terms that is, a situation where the contract
has not yet been perfected.10 These situations do not obtain in the present case, as
neither of the parties claimed that the P20,000.00 was given merely as guarantee by
the respondents, as vendees, that they would not back out from the sale. As we have
pointed out, the terms of the parties agreement are clear and explicit; indeed, all the
essential elements of a perfected contract are present in this case. While the
respondents required that the occupants vacate the subject properties prior to the
payment of the second installment, the stipulation does not affect the perfection of the
contract, but only its execution.
In sum, the case contains no element, factual or legal, that negates the existence of a
perfected contract between the parties.
The characterization of the contract can be considered irrelevant in this case in
light of Article 1592 and the Maceda Law, and the petitioners-heirs payment
The petitioners-heirs posit that the proper characterization of the contract entered into
by the parties is significant in order to determine the effect of the respondents breach
of the contract (which purportedly consisted of a one-day delay in the payment of part
of the purchase price) and the remedies to which they, as the non-defaulting party, are
entitled.
The question of characterization of the contract involved here would necessarily call
for a thorough analysis of the parties agreement as embodied in the June 2, 1989
receipt, their contemporaneous acts, and the circumstances surrounding the contracts
perfection and execution. Unfortunately, the lower courts factual findings provide
insufficient detail for the purpose. A stipulation reserving ownership in the vendor until
full payment of the price is, under case law, typical in a contract to sell. 11 In this case,
the vendor made no reservation on the ownership of the subject properties. From this
perspective, the parties agreement may be considered a contract of sale. On the other
hand, jurisprudence has similarly established that the need to execute a deed of
absolute sale upon completion of payment of the price generally indicates that it is a
contract to sell, as it implies the reservation of title in the vendor until the vendee has
completed the payment of the price. When the respondents instituted the action for
specific performance before the RTC, they prayed that Consuelo be ordered to
execute a Deed of Absolute Sale; this act may be taken to conclude that the parties
only entered into a contract to sell.

Admittedly, the given facts, as found by the lower courts, and in the absence of
additional details, can be interpreted to support two conflicting conclusions. The failure
of the lower courts to pry into these matters may understandably be explained by the
issues raised before them, which did not require the additional details. Thus, they
found the question of the contracts characterization immaterial in their discussion of
the facts and the law of the case. Besides, the petitioners-heirs raised the question of
the contracts characterization and the effect of the breach for the first time through the
present Rule 45 petition.
Points of law, theories, issues and arguments not brought to the attention of the lower
court need not be, and ordinarily will not be, considered by the reviewing court, as they
cannot be raised for the first time at the appellate review stage. Basic considerations
of fairness and due process require this rule. 12
At any rate, we do not find the question of characterization significant to fully pass
upon the question of default due to the respondents breach; ultimately, the breach
was cured and the contract revived by the respondents payment a day after the due
date.1avvphi1
In cases of breach due to nonpayment, the vendor may avail of the remedy of
rescission in a contract of sale. Nevertheless, the defaulting vendee may defeat the
vendors right to rescind the contract of sale if he pays the amount due before he
receives a demand for rescission, either judicially or by a notarial act, from the vendor.
This right is provided under Article 1592 of the Civil Code:
Article 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may pay, even after the expiration of
the period, as long as no demand for rescission of the contract has been made upon
him either judicially or by a notarial act. After the demand, the court may not grant him
a new term. [Emphasis supplied.]
Nonpayment of the purchase price in contracts to sell, however, does not constitute a
breach; rather, nonpayment is a condition that prevents the obligation from acquiring
obligatory force and results in its cancellation. We stated in Ong v. CA13 that:
In a contract to sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring obligatory force.
The non-fulfillment of the condition of full payment rendered the contract to sell
ineffective and without force and effect. [Emphasis supplied.]
As in the rescission of a contract of sale for nonpayment of the price, the defaulting
vendee in a contract to sell may defeat the vendors right to cancel by invoking the
rights granted to him under Republic Act No. 6552 or the Realty Installment Buyer
Protection Act (also known as the Maceda Law); this law provides for a 60-day grace
period within which the defaulting vendee (who has paid less than two years of
installments) may still pay the installments due. Only after the lapse of the grace
period with continued nonpayment of the amounts due can the actual cancellation of
the contract take place. The pertinent provisions of the Maceda Law provide:
xxxx
Section 2. It is hereby declared a public policy to protect buyers of real estate on
installment payments against onerous and oppressive conditions.
Sec. 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act
Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered
Sixty-three hundred eighty-nine, where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in case he defaults in the
payment of succeeding installments:
xxxx
Section 4. In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than 60 days from the date the installment
became due. If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from the receipt by the buyer
of the notice of cancellation or the demand for rescission of the contract by notarial
act. [Emphasis supplied.]

Significantly, the Court has consistently held that the Maceda Law covers not only
sales on installments of real estate, but also financing of such acquisition; its Section 3
is comprehensive enough to include both contracts of sale and contracts to sell,
provided that the terms on payment of the price require at least two installments. The
contract entered into by the parties herein can very well fall under the Maceda Law.
Based on the above discussion, we conclude that the respondents payment on June
15, 1989 of the installment due on June 14, 1989 effectively defeated the petitionersheirs right to have the contract rescinded or cancelled. Whether the parties
agreement is characterized as one of sale or to sell is not relevant in light of the
respondents payment within the grace period provided under Article 1592 of the Civil
Code and Section 4 of the Maceda Law. The petitioners-heirs obligation to accept the
payment of the price and to convey Consuelos conjugal and hereditary shares in the
subject properties subsists.

Penned by Associate Justice Elvi John S. Asuncion (separated from the


service), with Associate Justice Portia Alio-Hormachuelos and Associate
Justice Edgardo F. Sundiam (deceased), concurring, id., pp. 21-25.
2

Under Rule 45 of the Rules of Court; id., pp. 10-18.

In Civil Case Nos. 89-50258 and 89-50259, penned by Judge Ed Vincent


S. Albano on January 27, 1997,id., pp. 33-49.
4

The land is covered by TCT No. 16098 and registered in the name of
spouses Cayetano and Consuelo Pangan.
5

Rollo, p. 6. The receipt stated:

WHEREFORE, we DENY the petitioners-heirs petition for review on certiorari, and


AFFIRM the decision of the Court of Appeals dated June 24, 2002 and its resolution
dated February 20, 2003 in CA-G.R. CV Case No. 56590. Costs against the
petitioners-heirs.

Received from Mrs. Prisicilla Perreras of #35 Nicanor Roxas


St., Sta. Mesa Heights, Q.C. the amount of Twenty Thousand
Pesos (P20,000.00) as EARNEST MONEY for the house and
lot located at 1140-1142 Casaas St., Sampaloc, Manila.

SO ORDERED.

The total purchased [sic] price is Five Hundred Forty


Thousand Pesos (P540,000.00).

ARTURO D. BRION
Associate Justice

Two Hundred Fifty Thousand Pesos (P250,000.00) to be


given on or before June 14/89.

WE CONCUR:

The total balance of Two Hundred Seventy Thousand Pesos


(P270,000.00) to be given once the tenants vacated [sic] the
premises. [Emphasis in the original.]

LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO-MORALES
Associate Justice

MARIANO C. DEL CASTILLO


Associate Justice

G.R. No. 144934, January 15, 2004, 419 SCRA 626.

The full text of Article 493 of the Civil Code reads:

ROBERTO A. ABAD
Associate Justice

Each co-owner shall have full ownership of his part and of the
fruits and benefits pertaining thereto, and he may therefore
alienate, assign or mortgage it, and even substitute another
person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or the mortgage, with
respect to the co-owners, shall be limited to the portion which
may be allotted to him in the division upon the termination of
the co-ownership.

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, it is hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.
REYNATO S. PUNO
Chief Justice

Supra note 6.

See Manila Metal Container Corporation v. Tolentino, G.R. No. 166862,


December 20, 2006, 511 SCRA 444; San Miguel Properties Phil., Inc. v.
Huang, G.R. No. 137290, July 31, 2000, 336 SCRA 737, citingSpouses
Doromal v. CA, 66 SCRA 575 (1975).
10

See Cordero v. F.S. Management and Development Corporation, Inc.,


G.R. No. 167213, October 31, 2006, 506 SCRA 451; Ramos v. Santiago,
G.R. No. 145330, October 14, 2005, 473 SCRA 79; Rayos v. CA, G.R.
No. 135528, July 14, 2004, 434 SCRA 365.
11

Pag-Asa Steel Works, Inc. v. CA, G.R. No. 166647, March 31, 2006,
486 SCRA 475.
12

13

Footnotes
*

Deceased.

Victor, Ludinila, Hermelina, Virgilio, and Editha, all surnamed


Pangan; rollo, p. 33.
1

G.R. No. 97347, July 6, 1999, 310 SCRA 1.

2. Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 176474

November 27, 2008

HEIRS OF ARTURO REYES, represented by Evelyn R. San


Buenaventura, petitioners,
vs.
ELENA SOCCO-BELTRAN, respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision1dated 31 January 2006 rendered by the Court of Appeals in CAG.R. SP No. 87066, which affirmed the Decision2 dated 30 June 2003 of the Office of
the President, in O.P. Case No. 02-A-007, approving the application of respondent
Elena Socco-Beltran to purchase the subject property.
The subject property in this case is a parcel of land originally identified as Lot No. 6-B,
situated in Zamora Street, Dinalupihan, Bataan, with a total area of 360 square
meters. It was originally part of a larger parcel of land, measuring 1,022 square
meters, allocated to the Spouses Marcelo Laquian and Constancia Socco (Spouses
Laquian), who paid for the same with Japanese money. When Marcelo died, the
property was left to his wife Constancia. Upon Constancias subsequent death, she left
the original parcel of land, along with her other property, with her heirs her siblings,
namely: Filomena Eliza Socco, Isabel Socco de Hipolito, Miguel R. Socco, and Elena
Socco-Beltran.3 Pursuant to an unnotarized document entitled "Extrajudicial
Settlement of the Estate of the Deceased Constancia R. Socco," executed by
Constancias heirs sometime in 1965, the parcel of land was partitioned into three
lotsLot No. 6-A, Lot No. 6-B, and Lot No. 6-C.4 The subject property, Lot No. 6-B, was
adjudicated to respondent, but no title had been issued in her name.
On 25 June 1998, respondent Elena Socco-Beltran filed an application for the
purchase of Lot No. 6-B before the Department of Agrarian Reform (DAR), alleging
that it was adjudicated in her favor in the extra-judicial settlement of Constancia
Soccos estate.5
Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondents
petition before the DAR on the ground that the subject property was sold by
respondents brother, Miguel R. Socco, in favor of their father, Arturo Reyes, as
evidenced by the Contract to Sell, dated 5 September 1954, stipulating that: 6
That I am one of the co-heirs of the Estate of the deceased Constancia
Socco; and that I am to inherit as such a portion of her lot consisting of
Four Hundred Square Meters (400) more or less located on the (sic)
Zamora St., Municipality of Dinalupihan, Province of Bataan, bounded as
follows:
xxxx
That for or in consideration of the sum of FIVE PESOS (P5.00) per square
meter, hereby sell, convey and transfer by way of this conditional
sale the said 400 sq.m. more or less unto Atty. Arturo C. Reyes, his heirs,
administrator and assigns x x x. (Emphasis supplied.)
Petitioners averred that they took physical possession of the subject property in 1954
and had been uninterrupted in their possession of the said property since then.
Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office
conducted an investigation, the results of which were contained in her Report/
Recommendation dated 15 April 1999. Other than recounting the afore-mentioned
facts, Legal Officer Pinlac also made the following findings in her
Report/Recommendation:7

Further investigation was conducted by the undersigned and based on the


documentary evidence presented by both parties, the following facts were
gathered: that the house of [the] Reyes family is adjacent to the
landholding in question and portion of the subject property consisting of
about 15 meters [were] occupied by the heirs of Arturo Reyes were a
kitchen and bathroom [were] constructed therein; on the remaining portion
a skeletal form made of hollow block[s] is erected and according to the
heirs of late Arturo Reyes, this was constructed since the year (sic) 70s at
their expense; that construction of the said skeletal building was not
continued and left unfinished which according to the affidavit of Patricia
Hipolito the Reyes family where (sic) prevented by Elena Socco in their
attempt of occupancy of the subject landholding; (affidavit of Patricia
Hipolito is hereto attached as Annex "F"); that Elena Socco cannot
physically and personally occupy the subject property because of the
skeletal building made by the Reyes family who have been requesting that
they be paid for the cost of the construction and the same be demolished
at the expense of Elena Socco; that according to Elena Socco, [she] is
willing to waive her right on the portion where [the] kitchen and bathroom
is (sic) constructed but not the whole of Lot [No.] 6-B adjudicated to her;
that the Reyes family included the subject property to the sworn statement
of value of real properties filed before the municipality of Dinalupihan,
Bataan, copies of the documents are hereto attached as Annexes "G" and
"H"; that likewise Elena Socco has been continuously and religiously
paying the realty tax due on the said property.
In the end, Legal Officer Pinlac recommended the approval of respondents petition for
issuance of title over the subject property, ruling that respondent was qualified to own
the subject property pursuant to Article 1091 of the New Civil Code. 8 Provincial
Agrarian Reform Officer (PARO) Raynor Taroy concurred in the said recommendation
in his Indorsement dated 22 April 1999.9
In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta,
however, dismissed respondents petition for issuance of title over the subject property
on the ground that respondent was not an actual tiller and had abandoned the said
property for 40 years; hence, she had already renounced her right to recover the
same.10 The dispositive part of the Order reads:
1. DISMISSING the claims of Elena Socco-Beltran, duly represented by
Myrna Socco for lack of merit;
2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360
square meters, more or less, situated Zamora Street, Dinalupihan,
Bataan, in favor of the heirs of Arturo Reyes.
3. ORDERING the complainant to refrain from any act tending to disturb
the peaceful possession of herein respondents.
4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent
documents for the issuance of CLOA in favor of the heirs of Arturo
Reyes.11
Respondent filed a Motion for Reconsideration of the foregoing Order, which was
denied by DAR Regional Director Acosta in another Order dated 15 September
1999.12
Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9
November 2001, the DAR Secretary reversed the Decision of DAR Regional Director
Acosta after finding that neither petitioners predecessor-in-interest, Arturo Reyes, nor
respondent was an actual occupant of the subject property. However, since it was
respondent who applied to purchase the subject property, she was better qualified to
own said property as opposed to petitioners, who did not at all apply to purchase the
same. Petitioners were further disqualified from purchasing the subject property
because they were not landless. Finally, during the investigation of Legal Officer
Pinlac, petitioners requested that respondent pay them the cost of the construction of
the skeletal house they built on the subject property. This was construed by the DAR
Secretary as a waiver by petitioners of their right over the subject property.13 In the
said Order, the DAR Secretary ordered that:
WHEREFORE, premises considered, the September 15, 1999 Order is
hereby SET ASIDE and a new Order is hereby issued APPROVING the
application to purchase Lot [No.] 6-B of Elena Socco-Beltran.14

Petitioners sought remedy from the Office of the President by appealing the 9
November 2001 Decision of the DAR Secretary. Their appeal was docketed as O.P.
Case No. 02-A-007. On 30 June 2003, the Office of the President rendered its
Decision denying petitioners appeal and affirming the DAR Secretarys
Decision.15 The fallo of the Decision reads:
WHEREFORE, premises considered, judgment appealed from
is AFFIRMED and the instant appeal DISMISSED.16
Petitioners Motion for Reconsideration was likewise denied by the Office of the
President in a Resolution dated 30 September 2004.17 In the said Resolution, the
Office of the President noted that petitioners failed to allege in their motion the date
when they received the Decision dated 30 June 2003. Such date was material
considering that the petitioners Motion for Reconsideration was filed only on 14 April
2004, or almost nine months after the promulgation of the decision sought to be
reconsidered. Thus, it ruled that petitioners Motion for Reconsideration, filed beyond
fifteen days from receipt of the decision to be reconsidered, rendered the said decision
final and executory.
Consequently, petitioners filed an appeal before the Court of Appeals, docketed as
CA-G.R. SP No. 87066. Pending the resolution of this case, the DAR already issued
on 8 July 2005 a Certificate of Land Ownership Award (CLOA) over the subject
property in favor of the respondents niece and representative, Myrna SoccoBeltran.18 Respondent passed away on 21 March 2001, 19 but the records do not
ascertain the identity of her legal heirs and her legatees.
Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its
Decision, dated 31 January 2006, affirming the Decision dated 30 June 2003 of the
Office of the President. It held that petitioners could not have been actual occupants of
the subject property, since actual occupancy requires the positive act of occupying and
tilling the land, not just the introduction of an unfinished skeletal structure thereon. The
Contract to Sell on which petitioners based their claim over the subject property was
executed by Miguel Socco, who was not the owner of the said property and, therefore,
had no right to transfer the same. Accordingly, the Court of Appeals affirmed
respondents right over the subject property, which was derived form the original
allocatees thereof.20 The fallo of the said Decision reads:
WHEREFORE, premises considered, the instant PETITION FOR
REVIEW is DISMISSED. Accordingly, the Decision dated 30 June 2003
and the Resolution dated 30 December 2004 both issued by the Office of
the President are hereby AFFIRMED in toto.21
The Court of Appeals denied petitioners Motion for Reconsideration of its Decision in
a Resolution dated 16 August 2006.22
Hence, the present Petition, wherein petitioners raise the following issues:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED
IN AFFIRMING THE FINDINGS OF THE OFFICE OF THE PRESIDENT
THAT THE SUBJECT LOT IS VACANT AND THAT PETITIONERS ARE
NOT ACTUAL OCCUPANTS THEREOF BY DENYING THE LATTERS
CLAIM THAT THEY HAVE BEEN IN OPEN, CONTINUOUS,
EXCLUSIVE, NOTORIOUS AND AVDERSE POSSESSION THEREOF
SINCE 1954 OR FOR MORE THAN THIRTY (30) YEARS.
II
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT
HELD THAT PETITIONERS "CANNOT LEGALLY ACQUIRE THE
SUBJECT PROPERTY AS THEY ARE NOT CONSIDERED LANDLESS
AS EVIDENCED BY A TAX DECLARATION."
III
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING
THAT "WHATEVER RESERVATION WE HAVE OVER THE RIGHT OF
MYRNA SOCCO TO SUCCEED WAS ALREADY SETTLED WHEN NO
LESS THAN MIGUEL SOCCO (PREDECESSOR-IN INTEREST OF
HEREIN PETITIONERS) EXECUTED HIS WAIVER OF RIGHT DATED

APRIL 19, 2005 OVER THE SUBJECT PROPERTY IN FAVOR OF


MYRNA SOCCO.
IV
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT
DENIED PETITIONERS MOTION FOR NEW TRIAL THEREBY
BRUSHING ASIDE THE FACT THAT MYRNA V. SOCCO-ARIZO
GROSSLY MISREPRESENTED IN HER INFORMATION SHEET OF
BENEFICIARIES AND APPLICATION TO PURCHASE LOT IN LANDED
ESTATES THAT SHE IS A FILIPINO CITIZEN, WHEN IN TRUTH AND IN
FACT, SHE IS ALREADY AN AMERICAN NATIONAL. 23
The main issue in this case is whether or not petitioners have a better right to the
subject property over the respondent. Petitioners claim over the subject property is
anchored on the Contract to Sell executed between Miguel Socco and Arturo Reyes
on 5 September 1954. Petitioners additionally allege that they and their predecessorin-interest, Arturo Reyes, have been in possession of the subject lot since 1954 for an
uninterrupted period of more than 40 years.
The Court is unconvinced.
Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It
was unmistakably stated in the Contract and made clear to both parties thereto that
the vendor, Miguel R. Socco, was not yet the owner of the subject property and was
merely expecting to inherit the same as his share as a co-heir of Constancias
estate.24 It was also declared in the Contract itself that Miguel R. Soccos conveyance
of the subject to the buyer, Arturo Reyes, was a conditional sale. It is, therefore,
apparent that the sale of the subject property in favor of Arturo Reyes was conditioned
upon the event that Miguel Socco would actually inherit and become the owner of the
said property. Absent such occurrence, Miguel R. Socco never acquired ownership of
the subject property which he could validly transfer to Arturo Reyes.
Under Article 1459 of the Civil Code on contracts of sale, "The thing must be licit and
the vendor must have a right to transfer ownership thereof at the time it is delivered."
The law specifically requires that the vendor must have ownership of the property at
the time it is delivered. Petitioners claim that the property was constructively delivered
to them in 1954 by virtue of the Contract to Sell. However, as already pointed out by
this Court, it was explicit in the Contract itself that, at the time it was executed, Miguel
R. Socco was not yet the owner of the property and was only expecting to inherit it.
Hence, there was no valid sale from which ownership of the subject property could
have transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of
the subject property, Arturo Reyes also could not have conveyed the same to his
heirs, herein petitioners.
Petitioners, nevertheless, insist that they physically occupied the subject lot for more
than 30 years and, thus, they gained ownership of the property through acquisitive
prescription, citing Sandoval v. Insular Government 25 and San Miguel Corporation v.
Court of Appeals. 26
In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of
Act No. 926, otherwise known as the Land Registration Act, which required -- for the
issuance of a certificate of title to agricultural public lands -- the open, continuous,
exclusive, and notorious possession and occupation of the same in good faith and
under claim of ownership for more than ten years. After evaluating the evidence
presented, consisting of the testimonies of several witnesses and proof that fences
were constructed around the property, the Court in the afore-stated case denied the
petition on the ground that petitioners failed to prove that they exercised acts of
ownership or were in open, continuous, and peaceful possession of the whole land,
and had caused it to be enclosed to the exclusion of other persons. It further decreed
that whoever claims such possession shall exercise acts of dominion and ownership
which cannot be mistaken for the momentary and accidental enjoyment of the
property. 27
In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and
undisputed possession of alienable public land for the period prescribed by law
creates the legal fiction whereby land ceases to be public land and is, therefore,
private property. It stressed, however, that the occupation of the land for 30 years
must be conclusively established. Thus, the evidence offered by petitioner therein
tax declarations, receipts, and the sole testimony of the applicant for registration,
petitioners predecessor-in-interest who claimed to have occupied the land before
selling it to the petitioner were considered insufficient to satisfy the quantum of proof

required to establish the claim of possession required for acquiring alienable public
land.28
As in the two aforecited cases, petitioners herein were unable to prove actual
possession of the subject property for the period required by law. It was underscored
in San Miguel Corporation that the open, continuous, exclusive, and notorious
occupation of property for more than 30 years must be no less than conclusive, such
quantum of proof being necessary to avoid the erroneous validation of actual fictitious
claims of possession over the property that is being claimed.29
In the present case, the evidence presented by the petitioners falls short of being
conclusive. Apart from their self-serving statement that they took possession of the
subject property, the only proof offered to support their claim was a general statement
made in the letter30 dated 4 February 2002 ofBarangay Captain Carlos Gapero,
certifying that Arturo Reyes was the occupant of the subject property "since peace
time and at present." The statement is rendered doubtful by the fact that as early as
1997, when respondent filed her petition for issuance of title before the DAR, Arturo
Reyes had already died and was already represented by his heirs, petitioners herein.

respondent, does not automatically mean that the subject property will go to Myrna
Socco-Arizo, absent any proof that there is no other qualified heir to respondents
estate. Thus, this Decision does not in any way confirm the issuance of the CLOA in
favor of Myrna Socco-Arizo, which may be assailed in appropriate proceedings.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision
of the Court of Appeals in CA-G.R. SP No. 87066, promulgated on 31 January 2006,
is AFFIRMED withMODIFICATION. This Court withholds the confirmation of the
validity of title over the subject property in the name of Myrna Socco-Arizo pending
determination of respondents legal heirs in appropriate proceedings. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes
occupied the premises for an unspecified period of time, i.e., since peace time until the
WE CONCUR:
present, cannot prevail over Legal Officer Pinlacs more particular findings in her
Report/Recommendation. Legal Officer Pinlac reported that petitioners admitted that it
was only in the 1970s that they built the skeletal structure found on the subject
property. She also referred to the averments made by Patricia Hipolito in an
Affidavit,31 dated 26 February 1999, that the structure was left unfinished because
respondent prevented petitioners from occupying the subject property. Such findings
disprove petitioners claims that their predecessor-in-interest, Arturo Reyes, had been
MA. ALICIA AUSTRIA-MARTINEZ
in open, exclusive, and continuous possession of the property since 1954. The
Associate Justice
adverted findings were the result of Legal Officer Pinlacs investigation in the course of
Acting Chairperson
her official duties, of matters within her expertise which were later affirmed by the DAR
Secretary, the Office of the President, and the Court of Appeals. The factual findings of
such administrative officer, if supported by evidence, are entitled to great respect. 32
In contrast, respondents claim over the subject property is backed by sufficient
evidence. Her predecessors-in-interest, the spouses Laquian, have been identified as
the original allocatees who have fully paid for the subject property. The subject
property was allocated to respondent in the extrajudicial settlement by the heirs of
Constancias estate. The document entitled "Extra-judicial Settlement of the Estate of
the Deceased Constancia Socco" was not notarized and, as a private document, can
only bind the parties thereto. However, its authenticity was never put into question, nor
was its legality impugned. Moreover, executed in 1965 by the heirs of Constancia
Socco, or more than 30 years ago, it is an ancient document which appears to be
genuine on its face and therefore its authenticity must be upheld.33 Respondent has
continuously paid for the realty tax due on the subject property, a fact which, though
not conclusive, served to strengthen her claim over the property.34
From the foregoing, it is only proper that respondents claim over the subject property
be upheld. This Court must, however, note that the Order of the DAR Secretary, dated
9 November 2001, which granted the petitioners right to purchase the property, is
flawed and may be assailed in the proper proceedings. Records show that the DAR
affirmed that respondents predecessors-in-interest, Marcelo Laquian and Constancia
Socco, having been identified as the original allocatee, have fully paid for the subject
property as provided under an agreement to sell. By the nature of a contract or
agreement to sell, the title over the subject property is transferred to the vendee upon
the full payment of the stipulated consideration. Upon the full payment of the purchase
price, and absent any showing that the allocatee violated the conditions of the
agreement, ownership of the subject land should be conferred upon the
allocatee.35 Since the extrajudicial partition transferring Constancia Soccos interest in
the subject land to the respondent is valid, there is clearly no need for the respondent
to purchase the subject property, despite the application for the purchase of the
property erroneously filed by respondent. The only act which remains to be performed
is the issuance of a title in the name of her legal heirs, now that she is deceased.
Moreover, the Court notes that the records have not clearly established the right of
respondents representative, Myrna Socco-Arizo, over the subject property. Thus, it is
not clear to this Court why the DAR issued on 8 July 2005 a CLOA 36 over the subject
property in favor of Myrna Socco-Arizo. Respondents death does not automatically
transmit her rights to the property to Myrna Socco-Beltran. Respondent only
authorized Myrna Socco-Arizo, through a Special Power of Attorney 37dated 10 March
1999, to represent her in the present case and to administer the subject property for
her benefit. There is nothing in the Special Power of Attorney to the effect that Myrna
Socco-Arizo can take over the subject property as owner thereof upon respondents
death. That Miguel V. Socco, respondents only nephew, the son of the late Miguel R.
Socco, and Myrna Socco-Arizos brother, executed a waiver of his right to inherit from

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
ANTONIO EDUARDO B. NACHURA
Associate Justice

RUBEN T. REYES
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts
Division.
REYNATO S. PUNO
Chief Justice

Footnotes
Penned by Associate Justice Bienvenido L. Reyes with Associate
Justices Arturo D. Brion (now an Associate Justice of the Supreme Court)
and Mariflor Punzalan Castillo, concurring. Rollo, pp. 32-40.
1

Penned by Senior Deputy Executive Secretary Waldo Q. Flores. Rollo,


pp. 81-82.
2

Records, p. 113.

31

Rollo, pp. 55-58.

32

Records, p. 26.

Rollo, p. 54.

Records, pp. 112-113.

Id. at 112. Art. 1091 of the Civil Code provides that:

Spouses Calvo v. Spouses Vergara, 423 Phil. 939, 947 (2001); Dulos
Realty and Development Corporation v. Court of Appeals, 422 Phil. 292,
304 (2001); Advincula v. Dicen, G.R. No. 162403, 16 May 2005, 458
SCRA 696, 712; Balbastro v. Junio, G.R. No. 154678, 17 July 2007, 527
SCRA 680, 693.
33

Id. at 114.

10

Rollo, pp. 59-61.

11

Id. at 60-61.

12

Id. at 65-66.

13

CA rollo, pp. 42-46.

14

Id. at 46.

15

Rollo, pp. 81-82.

16

Id. at 82.

17

Id. at 86-88.

18

CA rollo, pp. 153, 160-161.

19

Id. at 64.

20

Rollo, pp. 36-38.

21

Id. at 40.

22

Id. at 41-43.

23

Id. at 16.

In the Contract To Sell, Miguel R. Socco states that, "That I am one of


the co-heirs of the Estate of the deceased Constancia Socco; and that I
am to inherit as such a portion of her lot consisting of Four Hundred
Square Meters (400) more or less located on the (sic) Zamora St.,
Municipality of Dinalupihan, Province of Bataan." (Rollo, p. 54.)
24

25

12 Phil. 648 (1909).

26

G.R. No. 57667, 28 May 1990, 185 SCRA 722.

27

Sandoval v. Insular Government, supra note 25 at 654-656.

28

San Miguel Corporation v. Court of Appeals, supra note 26 at 724-726.

29

Id.

30

Rollo, p. 117.

Sec. 22, Rule 132 of the Revised Rules of Court states that:
SEC. 22. How genuineness of handwriting proved. The
handwriting of a person may be proved by any witness who
believes it to be the handwriting of such person because he
has seen the person write, or has seen writing purporting to
be his upon which the witness has acted or been charged,
and has thus acquired knowledge of the handwriting of such
person. Evidence respecting the handwriting may also be
given by a comparison, made by the witness or the court, with
writings admitted or treated as genuine by the party against
whom the evidence is offered, or proved to be genuine to the
satisfaction of the judge. (Manongsong v. Estimio, 452 Phil.
862, 878 [2003].)

Art. 1091. A partition legally made confers upon each heir the exclusive
ownership of the property adjudicated to him.
9

Records, p. 105.

34

Records, p. 112.

35

Spouses Tuazon v. Hon. Garilao, 415 Phil. 62, 69 and 72 (2001).

36

CA rollo, pp. 160-161.

37

Records, p. 100.

3. Republic of the Philippines


SUPREME COURT
Manila

covering an area of 2,000 hectares southwest of and adjoining the area of the
concession subject of the deed of assignment. Hence, on February 28, 1966, private
respondent and petitioners entered into another "Agreement" 5 with the following
stipulations:

SECOND DIVISION
xxx xxx xxx
G.R. No. L-48194 March 15, 1990
JOSE M. JAVIER and ESTRELLA F. JAVIER, petitioners,
vs.
COURT OF APPEALS and LEONARDO TIRO, respondents.
Eddie Tamondong for petitioners.
Lope Adriano and Emmanuel Pelaez, Jr. for private respondent.

REGALADO, J.:
Petitioners pray for the reversal of the decision of respondent Court of Appeals in CAG.R. No. 52296-R, dated March 6, 1978, 1 the dispositive portion whereof decrees:
WHEREFORE, the judgment appealed from is hereby set
aside and another one entered ordering the defendantsappellees, jointly and solidarily, to pay plaintiff-appellant the
sum of P79,338.15 with legal interest thereon from the filing
of the complaint, plus attorney's fees in the amount of
P8,000.00. Costs against defendants-appellees. 2
As found by respondent court or disclosed by the records, 3 this case was generated
by the following antecedent facts.
Private respondent is a holder of an ordinary timber license issued by the Bureau of
Forestry covering 2,535 hectares in the town of Medina, Misamis Oriental. On
February 15, 1966 he executed a "Deed of Assignment" 4 in favor of herein petitioners
the material parts of which read as follows:
xxx xxx xxx
I, LEONARDO A. TIRO, of legal age, married and a resident
of Medina, Misamis Oriental, for and in consideration of the
sum of ONE HUNDRED TWENTY THOUSAND PESOS
(P120,000.00), Philippine Currency, do by these presents,
ASSIGN, TRANSFER AND CONVEY, absolutely and forever
unto JOSE M. JAVIER and ESTRELLA F. JAVIER, spouses,
of legal age and a resident (sic) of 2897 F.B. Harrison, Pasay
City, my shares of stocks in the TIMBERWEALTH
CORPORATION in the total amount of P120,000.00, payment
of which shall be made in the following manner:
1. Twenty thousand (P20,000.00)
Pesos upon signing of this contract;
2. The balance of P100,000.00 shall
be paid P10,000.00 every shipment
of export logs actually produced from
the forest concession of
Timberwealth Corporation.
That I hereby agree to sign and endorse the stock certificate
in favor of Mr. & Mrs. Jose M. Javier, as soon as stock
certificates are issued.
xxx xxx xxx
At the time the said deed of assignment was executed, private respondent had a
pending application, dated October 21, 1965, for an additional forest concession

1. That LEONARDO TIRO hereby agrees and binds himself


to transfer, cede and convey whatever rights he may acquire,
absolutely and forever, to TIMBERWEALTH
CORPORATION, a corporation duly organized and existing
under the laws of the Philippines, over a forest concession
which is now pending application and approval as additional
area to his existing licensed area under O.T. License No.
391-103166, situated at Medina, Misamis Oriental;
2. That for and in consideration of the aforementioned
transfer of rights over said additional area to
TIMBERWEALTH CORPORATION, ESTRELLA F. JAVIER
and JOSE M. JAVIER, both directors and stockholders of said
corporation, do hereby undertake to pay LEONARDO TIRO,
as soon as said additional area is approved and transferred to
TIMBERWEALTH CORPORATION the sum of THIRTY
THOUSAND PESOS (P30,000.00), which amount of money
shall form part of their paid up capital stock in
TIMBERWEALTH CORPORATION;
3. That this Agreement is subject to the approval of the
members of the Board of Directors of the TIMBERWEALTH
CORPORATION.
xxx xxx xxx
On November 18, 1966, the Acting Director of Forestry wrote private respondent that
his forest concession was renewed up to May 12, 1967 under O.T.L. No. 391-51267,
but since the concession consisted of only 2,535 hectares, he was therein informed
that:
In pursuance of the Presidential directive of May 13, 1966,
you are hereby given until May 12, 1967 to form an
organization such as a cooperative, partnership or
corporation with other adjoining licensees so as to have a
total holding area of not less than 20,000 hectares of
contiguous and compact territory and an aggregate allowable
annual cut of not less than 25,000 cubic meters, otherwise,
your license will not be further renewed. 6
Consequently, petitioners, now acting as timber license holders by virtue of the deed
of assignment executed by private respondent in their favor, entered into a Forest
Consolidation Agreement 7 on April 10, 1967 with other ordinary timber license holders
in Misamis Oriental, namely, Vicente L. De Lara, Jr., Salustiano R. Oca and Sanggaya
Logging Company. Under this consolidation agreement, they all agreed to pool
together and merge their respective forest concessions into a working unit, as
envisioned by the aforementioned directives. This consolidation agreement was
approved by the Director of Forestry on May 10, 1967. 8 The working unit was
subsequently incorporated as the North Mindanao Timber Corporation, with the
petitioners and the other signatories of the aforesaid Forest Consolidation Agreement
as incorporators. 9
On July 16, 1968, for failure of petitioners to pay the balance due under the two deeds
of assignment, private respondent filed an action against petitioners, based on the said
contracts, for the payment of the amount of P83,138.15 with interest at 6% per annum
from April 10, 1967 until full payment, plus P12,000.00 for attorney's fees and costs.
On September 23, 1968, petitioners filed their answer admitting the due execution of
the contracts but interposing the special defense of nullity thereof since private
respondent failed to comply with his contractual obligations and, further, that the
conditions for the enforceability of the obligations of the parties failed to materialize. As
a counterclaim, petitioners sought the return of P55,586.00 which private respondent
had received from them pursuant to an alleged management agreement, plus
attorney's fees and costs.

On October 7, 1968, private respondent filed his reply refuting the defense of nullity of
the contracts in this wise:
What were actually transferred and assigned to the
defendants were plaintiff's rights and interest in a logging
concession described in the deed of assignment, attached to
the complaint and marked as Annex A, and agreement Annex
E; that the "shares of stocks" referred to in paragraph II of the
complaint are terms used therein merely to designate or
identify those rights and interests in said logging concession.
The defendants actually made use of or enjoyed not the
"shares of stocks" but the logging concession itself; that since
the proposed Timberwealth Corporation was owned solely
and entirely by defendants, the personalities of the former
and the latter are one and the same. Besides, before the
logging concession of the plaintiff or the latter's rights and
interests therein were assigned or transferred to defendants,
they never became the property or assets of the
Timberwealth Corporation which is at most only an
association of persons composed of the defendants. 10
and contending that the counterclaim of petitioners in the amount of P55,586.39 is
actually only a part of the sum of P69,661.85 paid by the latter to the former in partial
satisfaction of the latter's claim. 11
After trial, the lower court rendered judgment dismissing private respondent's
complaint and ordering him to pay petitioners the sum of P33,161.85 with legal interest
at six percent per annum from the date of the filing of the answer until complete
payment. 12
As earlier stated, an appeal was interposed by private respondent to the Court of
Appeals which reversed the decision of the court of a quo.
On March 28, 1978, petitioners filed a motion in respondent court for extension of time
to file a motion for reconsideration, for the reason that they needed to change
counsel. 13 Respondent court, in its resolution dated March 31, 1978, gave petitioners
fifteen (15) days from March 28, 1978 within which to file said motion for
reconsideration, provided that the subject motion for extension was filed on time. 14 On
April 11, 1978, petitioners filed their motion for reconsideration in the Court of
Appeals. 15 On April 21, 1978, private respondent filed a consolidated opposition to
said motion for reconsideration on the ground that the decision of respondent court
had become final on March 27, 1978, hence the motion for extension filed on March
28, 1978 was filed out of time and there was no more period to extend. However, this
was not acted upon by the Court of Appeals for the reason that on April 20, 1978, prior
to its receipt of said opposition, a resolution was issued denying petitioners' motion for
reconsideration, thus:
The motion for reconsideration filed on April 11, 1978 by
counsel for defendants-appellees is denied. They did not file
any brief in this case. As a matter of fact this case was
submitted for decision without appellees' brief. In their said
motion, they merely tried to refute the rationale of the Court in
deciding to reverse the appealed judgment. 16
Petitioners then sought relief in this Court in the present petition for review
on certiorari. Private respondent filed his comment, reiterating his stand that the
decision of the Court of Appeals under review is already final and executory.
Petitioners countered in their reply that their petition for review presents substantive
and fundamental questions of law that fully merit judicial determination, instead of
being suppressed on technical and insubstantial reasons. Moreover, the aforesaid one
(1) day delay in the filing of their motion for extension is excusable, considering that
petitioners had to change their former counsel who failed to file their brief in the
appellate court, which substitution of counsel took place at a time when there were
many successive intervening holidays.
On July 26, 1978, we resolved to give due course to the petition.
The one (1) day delay in the filing of the said motion for extension can justifiably be
excused, considering that aside from the change of counsel, the last day for filing the
said motion fell on a holiday following another holiday, hence, under such
circumstances, an outright dismissal of the petition would be too harsh. Litigations
should, as much as possible, be decided on their merits and not on technicalities. In a

number of cases, this Court, in the exercise of equity jurisdiction, has relaxed the
stringent application of technical rules in order to resolve the case on its
merits. 17 Rules of procedure are intended to promote, not to defeat, substantial justice
and, therefore, they should not be applied in a very rigid and technical sense.
We now proceed to the resolution of this case on the merits.
The assignment of errors of petitioners hinges on the central issue of whether the
deed of assignment dated February 15, 1966 and the agreement of February 28, 1966
are null and void, the former for total absence of consideration and the latter for nonfulfillment of the conditions stated therein.
Petitioners contend that the deed of assignment conveyed to them the shares of
stocks of private respondent in Timberwealth Corporation, as stated in the deed itself.
Since said corporation never came into existence, no share of stocks was ever
transferred to them, hence the said deed is null and void for lack of cause or
consideration.
We do not agree. As found by the Court of Appeals, the true cause or consideration of
said deed was the transfer of the forest concession of private respondent to petitioners
for P120,000.00. This finding is supported by the following considerations, viz:
1. Both parties, at the time of the execution of the deed of assignment knew that the
Timberwealth Corporation stated therein was non-existent. 18
2. In their subsequent agreement, private respondent conveyed to petitioners his
inchoate right over a forest concession covering an additional area for his existing
forest concession, which area he had applied for, and his application was then
pending in the Bureau of Forestry for approval.
3. Petitioners, after the execution of the deed of assignment, assumed the operation of
the logging concessions of private respondent. 19
4. The statement of advances to respondent prepared by petitioners stated:
"P55,186.39 advances to L.A. Tiro be applied to succeeding shipments. Based on the
agreement, we pay P10,000.00 every after (sic) shipment. We had only 2
shipments" 20
5. Petitioners entered into a Forest Consolidation Agreement with other holders of
forest concessions on the strength of the questioned deed of assignment. 21
The aforesaid contemporaneous and subsequent acts of petitioners and private
respondent reveal that the cause stated in the questioned deed of assignment is false.
It is settled that the previous and simultaneous and subsequent acts of the parties are
properly cognizable indica of their true intention. 22 Where the parties to a contract
have given it a practical construction by their conduct as by acts in partial
performance, such construction may be considered by the court in construing the
contract, determining its meaning and ascertaining the mutual intention of the parties
at the time of contracting. 23 The parties' practical construction of their contract has
been characterized as a clue or index to, or as evidence of, their intention or meaning
and as an important, significant, convincing, persuasive, or influential factor in
determining the proper construction of the agreement. 24
The deed of assignment of February 15, 1966 is a relatively simulated contract which
states a false cause or consideration, or one where the parties conceal their true
agreement. 25 A contract with a false consideration is not null and void per se. 26 Under
Article 1346 of the Civil Code, a relatively simulated contract, when it does not
prejudice a third person and is not intended for any purpose contrary to law, morals,
good customs, public order or public policy binds the parties to their real agreement.
The Court of Appeals, therefore, did not err in holding petitioners liable under the said
deed and in ruling that
. . . In view of the analysis of the first and second assignment
of errors, the defendants-appellees are liable to the plaintiffappellant for the sale and transfer in their favor of the latter's
forest concessions. Under the terms of the contract, the
parties agreed on a consideration of P120,000.00.
P20,000.00 of which was paid, upon the signing of the
contract and the balance of P100,000.00 to be paid at the
rate of P10,000.00 for every shipment of export logs actually

produced from the forest concessions of the appellant sold to


the appellees. Since plaintiff-appellant's forest concessions
were consolidated or merged with those of the other timber
license holders by appellees' voluntary act under the Forest
Consolidation Agreement (Exhibit D), approved by the Bureau
of Forestry (Exhibit D-3), then the unpaid balance of
P49,338.15 (the amount of P70,661.85 having been received
by the plaintiff-appellant from the defendants-appellees)
became due and demandable. 27
As to the alleged nullity of the agreement dated February 28, 1966, we agree with
petitioners that they cannot be held liable thereon. The efficacy of said deed of
assignment is subject to the condition that the application of private respondent for an
additional area for forest concession be approved by the Bureau of Forestry. Since
private respondent did not obtain that approval, said deed produces no effect. When a
contract is subject to a suspensive condition, its birth or effectivity can take place only
if and when the event which constitutes the condition happens or is fulfilled. 28 If the
suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed. 29
The said agreement is a bilateral contract which gave rise to reciprocal obligations,
that is, the obligation of private respondent to transfer his rights in the forest
concession over the additional area and, on the other hand, the obligation of
petitioners to pay P30,000.00. The demandability of the obligation of one party
depends upon the fulfillment of the obligation of the other. In this case, the failure of
private respondent to comply with his obligation negates his right to demand
performance from petitioners. Delivery and payment in a contract of sale, are so
interrelated and intertwined with each other that without delivery of the goods there is
no corresponding obligation to pay. The two complement each other. 30
Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of
the sale of a mere hope or expectancy is deemed subject to the condition that the
thing will come into existence. In this case, since private respondent never acquired
any right over the additional area for failure to secure the approval of the Bureau of
Forestry, the agreement executed therefor, which had for its object the transfer of said
right to petitioners, never became effective or enforceable.

10 Rollo, 73; Record on Appeal, CA-G.R. No. 52296-R, 3536.


11 Ibid., id., id., 36-37.
12 Ibid., id., id., 103-114.
13 Rollo, CA-G.R. No. 52296-R, 73-74.
14 Ibid., id., 75.
15 Ibid., id., 76-86.
16 Ibid., id., 87.
17 Helmuth, Jr. vs. People of the Philippines, et al., 112
SCRA 573 (1982); St. Peter Memorial Park, Inc., et al. vs.
Cleofas, et al., 121 SCRA 287 (1983); Serrano vs. Court of
Appeals, et al., 139 SCRA 179 (1985).
18 Rollo, 34.
19 Ibid., 54.
20 Folder of Original Exhibits for Defendants, Exh. 9.
21 Folder of Original Exhibits for Plaintiff, Exh. D.
22 Velasquez, et al. vs. Teodoro, et al., 16 Phil. 757 (1923);
Bacordo vs. Alcantara, et al., 14 SCRA 730 (1965).
23 17A C.J.S. 228.

WHEREFORE, the decision of respondent Court of Appeals is hereby MODIFIED. The


agreement of the parties dated February 28, 1966 is declared without force and effect
and the amount of P30,000.00 is hereby ordered to be deducted from the sum
awarded by respondent court to private respondent. In all other respects, said decision
of respondent court is affirmed.

24 Op. cit., 233-231.


25 Art. 1345, Civil Code.

SO ORDERED.

26 Concepcion vs. Sta. Ana, 87 Phil. 787 (1950).

Melencio-Herrera, Paras, Padilla and Sarmiento JJ., concur.

27 Rollo, 58-59.
28 Art. 1181, Civil Code; Araneta vs. Rural Progress
Administration, 92 Phil. 98 (1952).

Footnotes

29 Gaite vs. Fonacier, et al., 2 SCRA 830 (1961).


1 Penned by Justice Crisolito Pascual, with Justices Samuel
F. Reyes and Rafael C. Climaco concurring.
2 Rollo, 60.
3 Ibid., 49-55.
4 Ibid., 49-55.
5 Ibid., 16-17.
6 Folder of Original Exhibits for Plaintiff, Exh. A.
7 Id., Exh. D, D-1 to D-2.
8 Id., Exh. D-3.
9 Folder of Original Exhibits for Defendants, Exh. 18.

30 Pio Barretto Sons, Inc. vs. Compania Maritima, 62 SCRA


147 (1975).

4 Republic of the Philippines


SUPREME COURT
Manila

The review by the respondent court 11 of this decision was manifestly less than
thorough. For the most part it merely affirmed the factual findings of the trial court
except for an irrelevant modification, and it was only toward the end that it went to and
resolved what it considered the lone decisive issue.

FIRST DIVISION
G.R. No. L-69970 November 28, 1988
FELIX DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her
husband, JOSE TAGACAY,respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.

CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo Melad which is claimed
by both the petitioner and the respondent. The trial court believed the petitioner but the
respondent court, on appeal, upheld the respondent. The case is now before us for a
resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner in the
then Court of First Instance of Cagayan for recovery of a farm lot and a residential lot
which she claimed she had purchased from Domingo Melad in 1943 and were now
being unlawfully withheld by the defendant. 1 In his answer, the petitioner denied the
allegation and averred that he was the owner of the said lots of which he had been in
open, continuous and adverse possession, having acquired them from Domingo Melad
in 1941 and 1943. 2 The case was dismissed for failure to prosecute but was refiled in
1967. 3
At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly
signed by Domingo Melad and duly notarized, which conveyed the said properties to
her for the sum of P80.00. 4 She said the amount was earned by her mother as a
worker at the Tabacalera factory. She claimed to be the illegitimate daughter of
Domingo Melad, with whom she and her mother were living when he died in 1945. She
moved out of the farm only when in 1946 Felix Danguilan approached her and asked
permission to cultivate the land and to stay therein. She had agreed on condition that
he would deliver part of the harvest from the farm to her, which he did from that year to
1958. The deliveries having stopped, she then consulted the municipal judge who
advised her to file the complaint against Danguilan. The plaintiff 's mother, her only
other witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of Isidra Melad,
Domingo's niece, whom he and his wife Juana Malupang had taken into their home as
their ward as they had no children of their own. He and his wife lived with the couple in
their house on the residential lot and helped Domingo with the cultivation of the farm.
Domingo Melad signed in 1941 a private instrument in which he gave the defendant
the farm and in 1943 another private instrument in which he also gave him the
residential lot, on the understanding that the latter would take care of the grantor and
would bury him upon his death. 6 Danguilan presented three other witnesses 7 to
corroborate his statements and to prove that he had been living in the land since his
marriage to Isidra and had remained in possession thereof after Domingo Melad's
death in 1945. Two of said witnesses declared that neither the plaintiff nor her mother
lived in the land with Domingo Melad. 8
The decision of the trial court was based mainly on the issue of possession. Weighing
the evidence presented by the parties, the judge 9 held that the defendant was more
believable and that the plaintiff's evidence was "unpersuasive and unconvincing." It
was held that the plaintiff's own declaration that she moved out of the property in 1946
and left it in the possession of the defendant was contradictory to her claim of
ownership. She was also inconsistent when she testified first that the defendant was
her tenant and later in rebuttal that he was her administrator. The decision concluded
that where there was doubt as to the ownership of the property, the presumption was
in favor of the one actually occupying the same, which in this case was the
defendant. 10

The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad
had conveyed the two parcels of land to the petitioner, were null and void. The reason
was that they were donations of real property and as such should have been effected
through a public instrument. It then set aside the appealed decision and declared the
respondents the true and lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows: 12
I, DOMINGO MELAD, of legal age, married, do hereby
declare in this receipt the truth of my giving to Felix
Danguilan, my agricultural land located at Barrio FuguMacusi, Penablanca, Province of Cagayan, Philippine
Islands; that this land is registered under my name; that I
hereby declare and bind myself that there is no one to whom I
will deliver this land except to him as he will be the one
responsible for me in the event that I will die and also for all
other things needed and necessary for me, he will be
responsible because of this land I am giving to him; that it is
true that I have nieces and nephews but they are not living
with us and there is no one to whom I will give my land except
to Felix Danguilan for he lives with me and this is the length
175 m. and the width is 150 m.
IN WITNESS WHEREOF, I hereby sign my name below and
also those present in the execution of this receipt this 14th
day of September 1941.
Penablanca Cagayan, September 14, 1941.
(SGD.) DOMINGO MELAD
WITNESSES:
1. (T.M.) ISIDRO MELAD
2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows: 13
I, DOMINGO MELAD, a resident of Centro, Penablanca,
Province of Cagayan, do hereby swear and declare the truth
that I have delivered my residential lot at Centro, Penablanca,
Cagayan, to Felix Danguilan, my son-in-law because I have
no child; that I have thought of giving him my land because he
will be the one to take care of SHELTERING me or bury me
when I die and this is why I have thought of executing this
document; that the boundaries of this lot ison the east,
Cresencio Danguilan; on the north, Arellano Street; on the
south by Pastor Lagundi and on the west, Pablo Pelagio and
the area of this lot is 35 meters going south; width and length
beginning west to east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th
day of December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO
It is our view, considering the language of the two instruments, that Domingo Melad
did intend to donate the properties to the petitioner, as the private respondent

contends. We do not think, however, that the donee was moved by pure liberality.
While truly donations, the conveyances were onerous donations as the properties
were given to the petitioner in exchange for his obligation to take care of the donee for
the rest of his life and provide for his burial. Hence, it was not covered by the rule in
Article 749 of the Civil Code requiring donations of real properties to be effected
through a public instrument. The case at bar comes squarely under the doctrine laid
down in Manalo v. De Mesa, 14 where the Court held:
There can be no doubt that the donation in question was
made for a valuable consideration, since the donors made it
conditional upon the donees' bearing the expenses that might
be occasioned by the death and burial of the donor Placida
Manalo, a condition and obligation which the donee Gregorio
de Mesa carried out in his own behalf and for his wife Leoncia
Manalo; therefore, in order to determine whether or not said
donation is valid and effective it should be sufficient to
demonstrate that, as a contract, it embraces the conditions
the law requires and is valid and effective, although not
recorded in a public instrument.
The private respondent argues that as there was no equivalence between the value of
the lands donated and the services for which they were being exchanged, the two
transactions should be considered pure or gratuitous donations of real rights, hence,
they should have been effected through a public instrument and not mere private
writings. However, no evidence has been adduced to support her contention that the
values exchanged were disproportionate or unequal.
On the other hand, both the trial court and the respondent court have affirmed the
factual allegation that the petitioner did take care of Domingo Melad and later arranged
for his burial in accordance with the condition imposed by the donor. It is alleged and
not denied that he died when he was almost one hundred years old, 15which would
mean that the petitioner farmed the land practically by himself and so provided for the
donee (and his wife) during the latter part of Domingo Melad's life. We may assume
that there was a fair exchange between the donor and the donee that made the
transaction an onerous donation.
Regarding the private respondent's claim that she had purchased the properties by
virtue of a deed of sale, the respondent court had only the following to say: "Exhibit 'E'
taken together with the documentary and oral evidence shows that the preponderance
of evidence is in favor of the appellants." This was, we think, a rather superficial way of
resolving such a basic and important issue.
The deed of sale was allegedly executed when the respondent was only three years
old and the consideration was supposedly paid by her mother, Maria Yedan from her
earnings as a wage worker in a factory. 16 This was itself a suspicious circumstance,
one may well wonder why the transfer was not made to the mother herself, who was
after all the one paying for the lands. The sale was made out in favor of Apolonia
Melad although she had been using the surname Yedan her mother's surname, before
that instrument was signed and in fact even after she got married. 17 The averment
was also made that the contract was simulated and prepared after Domingo Melad's
death in 1945. 18 It was also alleged that even after the supposed execution of the said
contract, the respondent considered Domingo Melad the owner of the properties and
that she had never occupied the same. 19
Considering these serious challenges, the appellate court could have devoted a little
more time to examining Exhibit "E" and the circumstances surrounding its execution
before pronouncing its validity in the manner described above. While it is true that the
due execution of a public instrument is presumed, the presumption is disputable and
will yield to contradictory evidence, which in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the record shows that the
private respondent did not take possession of the disputed properties and indeed
waited until 1962 to file this action for recovery of the lands from the petitioner. If she
did have possession, she transferred the same to the petitioner in 1946, by her own
sworn admission, and moved out to another lot belonging to her step-brother. 20 Her
claim that the petitioner was her tenant (later changed to administrator) was
disbelieved by the trial court, and properly so, for its inconsistency. In short, she failed
to show that she consummated the contract of sale by actual delivery of the properties
to her and her actual possession thereof in concept of purchaser-owner.
As was held in Garchitorena v. Almeda: 21

Since in this jurisdiction it is a fundamental and elementary


principle that ownership does not pass by mere stipulation but
only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co.
v. Wilson, 8 Phil. 51), and the execution of a public document
does not constitute sufficient delivery where the property
involved is in the actual and adverse possession of third
persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar,
39 Phil. 134), it becomes incontestable that even if included in
the contract, the ownership of the property in dispute did not
pass thereby to Mariano Garchitorena. Not having become
the owner for lack of delivery, Mariano Garchitorena cannot
presume to recover the property from its present possessors.
His action, therefore, is not one of revindicacion, but one
against his vendor for specific performance of the sale to him.
In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa declared
for the Court:
Therefore, in our Civil Code it is a fundamental principle in all
matters of contracts and a well- known doctrine of law that
"non mudis pactis sed traditione dominia rerum
transferuntur". In conformity with said doctrine as established
in paragraph 2 of article 609 of said code, that "the ownership
and other property rights are acquired and transmitted by law,
by gift, by testate or intestate succession, and, in
consequence of certain contracts, by tradition". And as the
logical application of this disposition article 1095 prescribes
the following: "A creditor has the rights to the fruits of a thing
from the time the obligation to deliver it arises. However, he
shall not acquire a real right" (and the ownership is surely
such) "until the property has been delivered to him."
In accordance with such disposition and provisions the
delivery of a thing constitutes a necessary and indispensable
requisite for the purpose of acquiring the ownership of the
same by virtue of a contract. As Manresa states in his
Commentaries on the Civil Code, volume 10, pages 339 and
340: "Our law does not admit the doctrine of the transfer of
property by mere consent but limits the effect of the
agreement to the due execution of the contract. ... The
ownership, the property right, is only derived from the delivery
of a thing ... "
As for the argument that symbolic delivery was effected through the deed of sale,
which was a public instrument, the Court has held:
The Code imposes upon the vendor the obligation
to deliver the thing sold. The thing is considered to be
delivered when it is placed "in the hands and possession of
the vendee." (Civil Code, art. 1462). It is true that the same
article declares that the execution of a public instrument is
equivalent to the delivery of the thing which is the object of
the contract, but, in order that this symbolic delivery may
produce the effect of tradition, it is necessary that the vendor
shall have had such control over the thing sold that, at the
moment of the sale, its material delivery could have been
made. It is not enough to confer upon the purchaser
the ownership and the right of possession. The thing sold
must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But
if, notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material tenancy of
the thing and make use of it himself or through another in his
name, because such tenancy and enjoyment are opposed by
the interposition of another will, then fiction yields to reality
the delivery has not been effected. 23
There is no dispute that it is the petitioner and not the private respondent who is in
actual possession of the litigated properties. Even if the respective claims of the
parties were both to be discarded as being inherently weak, the decision should still
incline in favor of the petitioner pursuant to the doctrine announced in Santos &
Espinosa v. Estejada 24 where the Court announced:

If the claim of both the plaintiff and the defendant are weak,
judgment must be for the defendant, for the latter being in
possession is presumed to be the owner, and cannot be
obliged to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial
court REINSTATED, with costs against the private respondent. It is so ordered.
Narvasa (Chairman), Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Footnotes
1 Exh. "I" (Orig. Records, p. 11).
2 Exh. "G" (Orig. Records, p. 7).
3 Exh. "J" (Orig. Records, p. 13).
4 Exh. "E" (Orig. Records, p.5).
5 TSN, April 25,1972, pp. 57-58,70.
6 TSN, Dec. 7, 1943, pp. 1-9.
7 Juanita Marallag, Narciso Fuggan and Abelardo Calebag.
8 TSN, March 29, 1973 (J. Marallag), pp. 76, 78, 80; Oct. 26,
1973, p. 35 (N. Fuggan).
9 Hon. Bonifacio A. Cacdac.
10 Trial Court's Decision, pp. 9-11 (Orig. Records, pp. 140142).
11 Through Justice Marcelino R. Veloso, with the
concurrence of Justices Porfirio V. Sison, Abdulwahid A. Bidin
and Desiderio P. Jurado.
12 Orig. Records, p. 17.
13 Ibid., p. 19.
14 29 Phil. 495.
15 TSN, Nov. 29, 1973 (J. Marallag), p. 78; Sept. 13, 1974 (A.
Calebag), p. 4.
16 TSN, April 6,1972, pp. 18 & 20.
17 Ibid., pp. 15-16.
18 Memorandum of Petitioner, p. 18.
19 Ibid., pp. 18-22.
20 TSN, April 6,1972, p. 47.
21 48 O.G. 3432.
22 8 Phil. 51.
23 Addison v. Felix and Tioco, 38 Phil. 404.

24 26 Phil. 399.

5. FIRST DIVISION
[G.R. No. 126376. November 20, 2003]
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN,
SPOUSES JUANITO EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and
EMMA JOAQUIN, and NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS,
SPOUSES LEONARDO JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL
JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN and
SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES,
SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES
TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ
and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.

5.
Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan
(LRC) Psd-256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a
consideration of P20,000.00 (Exh. G), pursuant to which TCT No. 157203 was issued
in her name (Exh. G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395
executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of
P25,000.00 (Exh. K), pursuant to which TCT No. 157779 was issued in his name (Exh.
K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of
title, plaintiffs, in their complaint, aver:
- XX-

DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1[1] to annul the Decision2[2] dated 26 June
1996 of the Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed
the Decision3[3] dated 18 February 1993 rendered by Branch 65 of the Regional Trial
Court of Makati (trial court) in Civil Case No. 89-5174. The trial court dismissed the
case after it found that the parties executed the Deeds of Sale for valid consideration
and that the plaintiffs did not have a cause of action against the defendants.

The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are
NULL AND VOID AB INITIO because
a)

Firstly, there was no actual valid consideration for the deeds


of sale xxx over the properties in litis;

b)

Secondly, assuming that there was consideration in the sums


reflected in the questioned deeds, the properties are more
than three-fold times more valuable than the measly sums
appearing therein;

c)

Thirdly, the deeds of sale do not reflect and express the true
intent of the parties (vendors and vendees); and

d)

Fourthly, the purported sale of the properties in litis was the


result of a deliberate conspiracy designed to unjustly deprive
the rest of the compulsory heirs (plaintiffs herein) of their
legitime.

The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of
plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel,
Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The
married Joaquin children are joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property
executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of
their co-defendant children and the corresponding certificates of title issued in their
names, to wit:
1.
Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC)
Psd-256395 executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a
consideration of P6,000.00 (Exh. C), pursuant to which TCT No. [36113/T-172] was
issued in her name (Exh. C-1);
2.
Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd256394 executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a
consideration of P1[2],000.00 (Exh. D), pursuant to which TCT No. S-109772 was
issued in her name (Exh. D-1);
3
Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd256394 executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and
Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh. E), pursuant to which
TCT No. 155329 was issued to them (Exh. E-1);
4.
Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd256394 executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and
Socorro Angeles, for a consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT
No. 155330 was issued to them (Exh. F-1); and

- XXI Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos.


36113/T-172, S-109772, 155329, 155330, 157203 [and 157779] issued by the
Registrar of Deeds over the properties in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action
against them as well as the requisite standing and interest to assail their titles over the
properties in litis; (2) that the sales were with sufficient considerations and made by
defendants parents voluntarily, in good faith, and with full knowledge of the
consequences of their deeds of sale; and (3) that the certificates of title were issued
with sufficient factual and legal basis.4[4] (Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant
spouses Gavino Joaquin and Lea Asis.5[5] Instead of filing an Answer with their codefendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss.6[6] In granting the
dismissal to Gavino Joaquin and Lea Asis, the trial court noted that compulsory heirs
have the right to a legitime but such right is contingent since said right commences
only from the moment of death of the decedent pursuant to Article 777 of the Civil
Code of the Philippines.7[7]
After trial, the trial court ruled in favor of the defendants and dismissed the complaint.
The trial court stated:
4[4] Rollo, pp. 29-31.

1[1] Under Rule 45 of the Rules of Court.


5[5] Records, pp. 189, 204.
2[2] Penned by Associate Justice Artemio G. Tuquero, with Associate Justices Cancio
C. Garcia and Romeo J. Callejo, Sr., concurring.

6[6] Ibid., pp. 170-175.

3[3] Penned by Judge Salvador S. Abad Santos.

7[7] Ibid., p. 189.

In the first place, the testimony of the defendants, particularly that of the xxx father will
show that the Deeds of Sale were all executed for valuable consideration. This
assertion must prevail over the negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action
against defendants since there can be no legitime to speak of prior to the death of their
parents. The court finds this contention tenable. In determining the legitime, the value
of the property left at the death of the testator shall be considered (Art. 908 of the New
Civil Code). Hence, the legitime of a compulsory heir is computed as of the time of the
death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime
while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the
counterclaim is likewise DISMISSED.
No costs.

Issues
Petitioners assign the following as errors of the Court of Appeals:
1.
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
CONVEYANCE IN QUESTION HAD NO VALID CONSIDERATION.
2.
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN
ASSUMING THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY
INADEQUATE.
3.
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
DEEDS OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
4.
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
CONVEYANCE WAS PART AND PARCEL OF A CONSPIRACY AIMED AT
UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES
LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER
THE SUBJECT PROPERTIES.

SO ORDERED.8[8]
The Ruling of the Court of Appeals

5.
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
PETITIONERS HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF ACTION
AGAINST THE PRIVATE RESPONDENTS.10[10]

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
The Ruling of the Court
To the mind of the Court, appellants are skirting the real and decisive issue in this
case, which is, whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant
brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin
and Feliciana Landrito, who are their parents. However, their right to the properties of
their defendant parents, as compulsory heirs, is merely inchoate and vests only upon
the latters death. While still alive, defendant parents are free to dispose of their
properties, provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither
do they claim to be creditors of their defendant parents. Consequently, they cannot be
considered as real parties in interest to assail the validity of said deeds either for gross
inadequacy or lack of consideration or for failure to express the true intent of the
parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al.,
101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or
subsidiarily bound thereby; hence, they have no legal capacity to challenge their
validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime
by the dispositions made by their defendant parents in favor of their defendant
brothers and sisters. But, as correctly held by the court a quo, the legitime of a
compulsory heir is computed as of the time of the death of the decedent. Plaintiffs
therefore cannot claim an impairment of their legitime while their parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffsappellants is inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against
plaintiffs-appellants.

We find the petition without merit.


We will discuss petitioners legal interest over the properties subject of the Deeds of
Sale before discussing the issues on the purported lack of consideration and gross
inadequacy of the prices of the Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint,
petitioners asserted that the purported sale of the properties in litis was the result of a
deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs
(plaintiffs herein) of their legitime. Petitioners strategy was to have the Deeds of Sale
declared void so that ownership of the lots would eventually revert to their respondent
parents. If their parents die still owning the lots, petitioners and their respondent
siblings will then co-own their parents estate by hereditary succession.11[11]
It is evident from the records that petitioners are interested in the properties subject of
the Deeds of Sale, but they have failed to show any legal right to the properties. The
trial and appellate courts should have dismissed the action for this reason alone. An
action must be prosecuted in the name of the real party-in-interest.12[12]
[T]he question as to real party-in-interest is whether he is the party who would be
benefitted or injured by the judgment, or the party entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the real parties are those
who are parties to the agreement or are bound either principally or subsidiarily or are
prejudiced in their rights with respect to one of the contracting parties and can show
the detriment which would positively result to them from the contract even though they
did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.

SO ORDERED.9[9]
Hence, the instant petition.

10[10] Ibid., pp. 16-17.

8[8] Ibid., pp. 355-356.

11[11] Article 1078 of the Civil Code of the Philippines states: Where there are two or
more heirs, the whole estate of the decedent is, before its partition, owned in common
by such heirs, subject to the payment of debts of the deceased.

9[9] Rollo, pp. 32-33.

12[12] Section 2, Rule 3, 1997 Rules of Civil Procedure.

These are parties with a present substantial interest, as distinguished from a mere
expectancy or future, contingent, subordinate, or consequential interest. The phrase
present substantial interest more concretely is meant such interest of a party in the
subject matter of the action as will entitle him, under the substantive law, to recover if
the evidence is sufficient, or that he has the legal title to demand and the defendant
will be protected in a payment to or recovery by him.13[13]
Petitioners do not have any legal interest over the properties subject of the Deeds of
Sale. As the appellate court stated, petitioners right to their parents properties is
merely inchoate and vests only upon their parents death. While still living, the parents
of petitioners are free to dispose of their properties. In their overzealousness to
safeguard their future legitime, petitioners forget that theoretically, the sale of the lots
to their siblings does not affect the value of their parents estate. While the sale of the
lots reduced the estate, cash of equivalent value replaced the lots taken from the
estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in
the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare
the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual
contract, a contract of sale becomes a binding and valid contract upon the meeting of
the minds as to price. If there is a meeting of the minds of the parties as to the price,
the contract of sale is valid, despite the manner of payment, or even the breach of that
manner of payment. If the real price is not stated in the contract, then the contract of
sale is valid but subject to reformation. If there is no meeting of the minds of the
parties as to the price, because the price stipulated in the contract is simulated, then
the contract is void.14[14] Article 1471 of the Civil Code states that if the price in a
contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale.
Payment of the price has nothing to do with the perfection of the contract. Payment of
the price goes into the performance of the contract. Failure to pay the consideration is
different from lack of consideration. The former results in a right to demand the
fulfillment or cancellation of the obligation under an existing valid contract while the
latter prevents the existence of a valid contract.15[15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely
simulated. To prove simulation, petitioners presented Emma Joaquin Valdozs
testimony stating that their father, respondent Leonardo Joaquin, told her that he
would transfer a lot to her through a deed of sale without need for her payment of the
purchase price.16[16] The trial court did not find the allegation of absolute simulation
of price credible. Petitioners failure to prove absolute simulation of price is magnified
by their lack of knowledge of their respondent siblings financial capacity to buy the
questioned lots.17[17] On the other hand, the Deeds of Sale which petitioners
presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in
the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully
paid the price to their respondent father.18[18]

Whether the Deeds of Sale are void


for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly
inadequate as to invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue influence.
(Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as
may indicate a defect in the consent, or that the parties really intended a donation or
some other act or contract. (Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of
the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there
is no requirement that the price be equal to the exact value of the subject matter of
sale. All the respondents believed that they received the commutative value of what
they gave. As we stated in Vales v. Villa:19[19]
Courts cannot follow one every step of his life and extricate him from bad bargains,
protect him from unwise investments, relieve him from one-sided contracts, or annul
the effects of foolish acts. Courts cannot constitute themselves guardians of persons
who are not legally incompetent. Courts operate not because one person has been
defeated or overcome by another, but because he has been defeated or overcome
illegally. Men may do foolish things, make ridiculous contracts, use miserable
judgment, and lose money by them indeed, all they have in the world; but not for that
alone can the law intervene and restore. There must be, in addition, a violation of the
law, the commission of what the law knows as an actionable wrong, before the courts
are authorized to lay hold of the situation and remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and
carry greater weight when they coincide with the factual findings of the trial court. This
Court will not weigh the evidence all over again unless there has been a showing that
the findings of the lower court are totally devoid of support or are clearly erroneous so
as to constitute serious abuse of discretion.20[20] In the instant case, the trial court
found that the lots were sold for a valid consideration, and that the defendant children
actually paid the purchase price stipulated in their respective Deeds of Sale. Actual
payment of the purchase price by the buyer to the seller is a factual finding that is now
conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

13[13] Kilosbayan v. Morato, 316 Phil. 652 (1995).


14[14] See Ladanga, et al. v. CA, et al., 216 Phil. 332 (1984). CESAR L.
VILLANUEVA, PHILIPPINE LAW ON SALES 54 (1998).
15[15] Rido Montecillo v. Ignacia Reynes and Spouses Redemptor and Elisa Abucay,
G.R. No. 138018, 26 July 2002.
16[16] TSN, 17 May 1991, pp. 497-498.
17[17] See Embrado v. Court of Appeals, G.R. No. 51457, 27 June 1994, 233 SCRA
335; TSN, 17 May 1991, 497-498 (Emma Joaquin Valdoz); TSN, 22 May 1991, pp. 1112, 20-21 (Nora Joaquin Edra).
18[18] TSN, 14 June 1991, p. 19 (Leonardo Joaquin); TSN, 30 October 1991, p. 6
(Fidel Joaquin); TSN, 27 November 1991, p. 10 (Felicitas Joaquin Carreon); TSN, 7

January 1992, pp. 5-6 (Artemio Joaquin); TSN, 31 January 1992, p. 12 (Clarita
Joaquin Mendoza); TSN, 11 March 1992, pp. 16-17 (Tomas Joaquin).
19[19] 35 Phil. 769 (1916).
20[20] Nazareno v. Court of Appeals, G.R. No. 138842, 18 October 2000, 343 SCRA
637.

6. Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173881

Respondent filed a Motion for Reconsideration. 10 On August 17, 2003, the RTC issued
a Resolution11 denying respondent's motion. Respondent then filed a Notice of
Appeal.12
On April 20, 2006, the CA rendered a Decision finding merit in respondent's appeal,
the dispositive portion of which reads:

December 1, 2010

HYATT ELEVATORS and ESCALATORS CORPORATION, Petitioner,


vs.
CATHEDRAL HEIGHTS BUILDING COMPLEX ASSOCIATION, INC., Respondent.

WHEREFORE, premises considered, the instant appeal is GRANTED. The Judgment


of the Regional Trial Court, Branch 100, Quezon City, dated March 5, 2003, is hereby
REVERSED and SET ASIDE. The complaint below is dismissed.
SO ORDERED.13

DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari, 1 under Rule 45 of the Rules of
Court, seeking to set aside the April 20, 2006 Decision2 and July 31, 2006 Resolution3
of the Court of Appeals (CA), in CA-G.R. CV No. 80427.
The facts of the case are as follows:
On October 1, 1994, petitioner Hyatt Elevators and Escalators Corporation entered
into an "Agreement to Service Elevators" (Service Agreement)4 with respondent
Cathedral Heights Building Complex Association, Inc., where petitioner was contracted
to maintain four passenger elevators installed in respondent's building. Under the
Service Agreement, the duties and obligations of petitioner included monthly
inspection, adjustment and lubrication of machinery, motors, control parts and
accessory equipments, including switches and electrical wirings. 5 Section D (2) of the
Service Agreement provides that respondent shall pay for the additional charges
incurred in connection with the repair and supply of parts.
Petitioner claims that during the period of April 1997 to July 1998 it had incurred
expenses amounting to Php 1,161,933.47 in the maintenance and repair of the four
elevators as itemized in a statement of account. 6 Petitioner demanded from
respondent the payment of the aforesaid amount allegedly through a series of demand
letters, the last one sent on July 18, 2000. 7 Respondent, however, refused to pay the
amount.
Petitioner filed with the Regional Trial Court (RTC), Branch 100, Quezon City, a
Complaint for sum of money against respondent. Said complaint was docketed as Civil
Case No. Q-01-43055.
On March 5, 2003, the RTC rendered Judgment 8 ruling in favor of petitioner, the
dispositive portion of which reads:
WHEREFORE, premises considered, JUDGMENT IS HEREBY RENDERED IN
FAVOR OF THE PLAINTIFF AND AGAINST THE DEFENDANT ordering the latter to
pay Plaintiff as follows:
1. The sum of P1,161,933.27 representing the costs of the elevator parts
used, and for services and maintenance, with legal rate of interest from
the filing of the complaint;

In reversing the RTC, the CA ruled that respondent did not give its consent to the
purchase of the spare parts allegedly installed in the defective elevators. Aside from
the absence of consent, the CA also held that there was no perfected contract of sale
because there was no meeting of minds upon the price. On this note, the CA ruled that
the Service Agreement did not give petitioner the unbridled license to purchase and
install any spare parts and demand, after the lapse of a considerable length of time,
payment of these prices from respondent according to its own dictated price.
Aggrieved, petitioner filed a Motion for Reconsideration, 14 which was, however, denied
by the CA in a Resolution dated July 31, 2006.
Hence, herein petition, with petitioner raising a lone issue for this Court's resolution, to
wit:
WHETHER OR NOT THERE IS A PERFECTED CONTRACT OF SALE BETWEEN
PETITIONER AND RESPONDENT WITH REGARDS TO THE SPARE PARTS
DELIVERED AND INSTALLED BY PETITIONER ON THE FOUR ELEVATORS OF
RESPONDENT AT ITS HOSPITAL UNDER THE AGREEMENT TO SERVICE
ELEVATORS AS TO RENDER RESPONDENT LIABLE FOR THEIR PRICES? 15
Before anything else, this Court shall address a procedural issue raised by respondent
in its Comment16 that the petition should be denied due course for raising questions of
fact.
The determination of whether there exists a perfected contract of sale is essentially a
question of fact. It is already a well-settled rule that the jurisdiction of this Court in
cases brought before it from the CA by virtue of Rule 45 of the Revised Rules of Court
is limited to reviewing errors of law. Findings of fact of the CA are conclusive upon this
Court. There are, however, recognized exceptions to the foregoing rule, namely: (1)
when the findings are grounded entirely on speculation, surmises, or conjectures; (2)
when the inference made is manifestly mistaken, absurd, or impossible; (3) when there
is grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when, in making its findings, the
Court of Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary
to those of the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the petition,
as well as in the petitioners main and reply briefs, are not disputed by the respondent;
and (10) when the findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record.17
The present case falls under the 7th exception, as the RTC and the CA arrived at
conflicting findings of fact.

2. The sum of P50,000.00 as attorney's fees;


3. The costs of suit.
SO ORDERED.9
The RTC held that based on the sales invoices presented by petitioner, a contract of
sale of goods was entered into between the parties. Since petitioner was able to fulfill
its obligation, the RTC ruled that it was incumbent on respondent to pay for the
services rendered. The RTC did not give credence to respondent's claim that the
elevator parts were never delivered and that the repairs were questionable, holding
that such defense was a mere afterthought and was never raised by respondent
against petitioner at an earlier time.

Having resolved the procedural aspect, this Court shall now address the substantive
issue raised by petitioner. Petitioner contends that the CA erred when it ruled that
there was no perfected contract of sale between petitioner and respondent with regard
to the spare parts delivered and installed.
It is undisputed that a Service Agreement was entered into by petitioner and
respondent where petitioner was commissioned to maintain respondent's four
elevators. Embodied in the Service Agreement is a stipulation relating to expenses
incurred on top of regular maintenance of the elevators, to wit:
SERVICE AND INSPECTION FEE:
xxxx

(2) In addition to the service fee mentioned in the preceding paragraph under this
article, the Customer shall pay whatever additional charges in connection with the
repair, supply of parts other than those specifically mentioned in ARTICLE A.2., or
servicing of the elevator/s subject of this contract. 18
Petitioner claims that during the period of April 1997 to July 1998, it had used parts in
the maintenance and repair of the four elevators in the total amount of P1,161,933.47
as itemized in a statement of account 19 and supported by sales invoices, delivery
receipts, trouble call reports and maintenance and checking reports. Respondent,
however, refuses to pay the said amount arguing that petitioner had not complied with
the Standard Operating Procedure (SOP) following a breakdown of an elevator.
As testified to by respondent's witness Celestino Aguilar, the SOP following an
elevator breakdown is as follows: (a) they (respondent) will notify petitioner's
technician; (b) the technician will evaluate the problem and if the problem is
manageable the repair was done right there and then; (c) if some parts have to be
replaced, petitioner will present the defective parts to the building administrator and a
quotation is made; (d) the quotation is then indorsed to respondent's Finance
Department; and (e) a purchase order is then prepared and submitted to the Board of
Directors for approval.20

A: A part will be brought to the project cite and they will install it and note it
in the trouble call report and have it received properly by the building
guard or the receptionist or by the building engineers, and they will test it
for a couple of weeks to determine if the parts are the correct part needed
for that elevator and we will secure their approval, thereafter we will
issue our invoices and delivery receipts.
Q: This trouble call reports, are these in writing?
A: Yes, sir. These are in writing and these are being written within that
day.
Q: Within the day of?
A: Of the trouble. And have it received by the duly personnel of St. Lukes
Cathedral.
Q: And who prepared this trouble call reports?

Based on the foregoing procedure, respondent contends that petitioner had failed to
follow the SOP since no purchase orders from respondent's Finance Manager, or
Board of Directors relating to the supposed parts used were secured prior to the
repairs. Consequently, since the repairs were not authorized, respondent claims that it
has no way of verifying whether the parts were actually delivered and installed as
alleged by petitioner.

A: The technician who actually checked the elevator.

At the outset, this Court observes that the SOP is not embodied in the Service
Agreement nor was a document evidencing the same presented in the RTC. The SOP
appears, however, to be the industry practice and as such was not contested by
petitioner. Nevertheless, petitioner offers an excuse for non-compliance with the SOP
on its claim that the SOP was not followed upon the behest and request of respondent.

Q: You mentioned sales invoice and delivery receipts. Who prepared


these invoice?

A perusal of petitioner's petition and evidence in the RTC shows that the main thrust of
its case is premised on the following claims: first, that the nature and operations of a
hospital necessarily dictate that the elevators are in good running condition at all
times; and, second, that there was a verbal agreement between petitioner's service
manager and respondent's building engineer that the elevators should be running in
good condition at all times and breakdowns should only last one day.
In order to prove its allegations, petitioner presented Wilson Sua, its finance manager,
as its sole witness. Sua testified to the procedure followed by petitioner in servicing
respondent's elevators, to wit:
Q: Can you tell us Mr. witness, what is the procedure actually followed
whenever there is a need for trouble call maintenance or repair?
A: The St. Lukes Cathedrals personnel, which includes the administrative
officers, the guard on duty, or the receptionist, will call us through the
phone if their elevators brake (sic) down.
Q: Then, what happened?
A: Immediately, we dispatched our technicians to check the trouble.
Q: And who were these technicians whom you normally or regularly
dispatched to attend to the trouble of the elevators of the defendant?
A: With regard to this St. Lukes, we dispatched Sunny Jones and Gilbert
Cinamin.
Q: And what happened after dispatching these technicians?
A: They come back immediately to the office to request the parts needed
for the troubleshooting of the elevators.
Q: Then what happened?

Q: When do the parts being installed?


A: On the same date they brought the parts on the project cite.

A: Those were prepared by our inventory clerk under my supervision?


Q: How about the delivery receipts?
A: Just the same.
Q: When would the sales invoice be prepared?
A: After the approval of the building engineer.
Q: But at the time that the sales invoice and delivery receipts were being
prepared after the approval of the building engineer, what happened to the
parts? Were they already installed or what?
A: They were already installed.
Q: Now, why would the parts be installed before the preparation of
the sales invoice and the delivery receipts?
A: There was an agreement between the building engineer and our
service manager that the elevator should be running in good
condition at all times, breakdown should be at least one day only. It
cannot stop for more than a day.21
On cross examination, Sua testified that the procedure was followed on the authority
of a verbal agreement between petitioner's service manager and respondent's
engineer, thus:
Q: So, you mean to say that despite the fact that material are expensive
you immediately installed these equipments without the prior approval of
the board?
A: There is no need for the approval of the board since there is a verbal
agreement between the building engineer and the Hyatt service manager
to have the elevator run.
Q: Aside from the building engineer, there is a building administrator?

A: No, ma'am. He is already the building administrator and the building


engineer. That is engineer Tisor.
Q: And with regard to the fact that the delivery receipts were
acknowledged by the engineer, is that true?

11. If respondent had any complaint that the parts were not actually
installed or delivered or did not agree with the price of the parts indicated
in the sales invoices, then it should bring its complaint or disagreement to
the attention of petitioner. In this regard, no complaint or disagreement as
to the prices of the spare parts has been lodged by respondent. 23

Q: You also mentioned earlier that aside from the building engineer, the
receptionist and guards are also authorized. Are you sure that they are
authorized to receive the delivery receipts?

In varying language, our Rules of Court, in speaking of burden of proof in civil cases,
states that each party must prove his own affirmative allegations and that the burden
of proof lies on the party who would be defeated if no evidence were given on either
side.1avvphi1 Thus, in civil cases, the burden of proof is generally on the plaintiff, with
respect to his complaint.24 In the case at bar, it is petitioner's burden to prove that it is
entitled to its claims during the period in dispute.

A: Yes, ma'am. It was an instruction given by Engineer Tisor, the building


engineer and also the building administrator to have it received.

After an extensive review of the records and evidence on hand, this Court rules that
petitioner has failed to discharge its burden.

Q: So, all these agreements are only verbally, it is not in writing?

This Court finds that the testimony of Sua alone is insufficient to prove the existence of
the verbal agreement, especially in view of the fact that respondent insists that the
SOP should have been followed. It is an age-old rule in civil cases that one who
alleges a fact has the burden of proving it and a mere allegation is not evidence.25

A: Yes, ma'am.

A: Yes, ma'am.22
In its petition, petitioner claims that because of the special circumstances of the
building being a hospital, the procedure actually followed since October 1, 1994 was
as follows:
1. Whenever any of the four elevators broke down, the administrative
officers, security guard or the receptionist of respondent called petitioner
by telephone;
2. Petitioner dispatched immediately a technician to the St. Lukes
Cathedral Heights Building to check the trouble;
3. If the breakdown could be repaired without installation of parts, repair
was done on the spot;
4. If the repair needed replacement of damaged parts, the technician went
back to petitioners office to get the necessary replacement parts;
5. The technician then returned to the St. Lukes Cathedral Heights
Building and installed the replacement parts and finished the repair;
6. The placement parts, which were installed in the presence of the
security guard, building engineers or receptionist of respondents whoever
was available, were indicated in the trouble call report or sometimes in the
delivery receipt and copy of the said trouble call report or delivery receipt
was then given to the blue security guard, building engineers or
receptionist, who duly acknowledged the same;
7. Based on the trouble call report or the delivery receipts, which already
indicated the replacement parts installed and the services rendered,
respondent should prepare the purchase order, but this step was never
followed by respondent for whatever reason;
8. In the meantime, the elevator was tested for a couple of weeks to see if
the replacement parts were correct and the approval of the building
engineers was secured;
9. After the building engineers gave their approval that the replacement
parts were correct or after the lapse of two weeks and nothing was heard
or no complaint was lodged, then the corresponding sales invoices and
delivery receipts, if nothing had been issued yet, were prepared by
petitioner and given to respondent, thru its receptionists or security
guards;
10. For its purposes, respondent should compare the trouble call reports
or delivery receipts which indicated the replacement parts installed or with
the sales invoices and delivery receipts to confirm the correctness of the
transaction;

The testimony of Sua, at best, only alleges but does not prove the existence of the
verbal agreement. It may even be hearsay. It bears stressing, that the agreement was
supposedly entered into by petitioner's service manager and respondent's building
engineer. It behooves this Court as to why petitioner did not present their service
manager and Engineer Tisor, respondent's building engineer, the two individuals who
were privy to the transactions and who could ultimately lay the basis for the existence
of the alleged verbal agreement. It should have occurred to petitioner during the
course of the trial that said testimonies would have proved vital and crucial to its
cause. Therefore, absent such testimonies, the existence of the verbal agreement
cannot be sustained by this Court.
Moreover, even assuming arguendo, that this Court were to believe the procedure
outlined by Sua, his testimony26 clearly mentions that prior to the preparation of the
sales invoices and delivery receipts, the parts delivered and installed must have been
accepted by respondent's engineer or building administrator. However, again,
petitioner offered no evidence of such acceptance by respondents engineer prior to
the preparation of the sales invoices and delivery receipts.
This Court is not unmindful of the fact that petitioner also alleges in its petition that the
non-observance of the SOP was the practice way back in 1994 when petitioner started
servicing respondent's elevators. On this note, petitioner argued in the following
manner:
And most importantly, the Court of Appeals failed to appreciate that the parts being
sought to be paid by petitioner in the Complaint were delivered and installed during the
period from April 1997 to July 1998, which followed the same actual procedure
adopted since October 1, 1994. Based on the same procedure adopted because of the
special circumstances of St. Luke's Cathedral Heights Building being a hospital,
respondent has paid the replacement parts installed from October 1994 to March
1997. Never did respondent question the adopted actual procedure from October 1994
to March 1997. x x x27
Was the procedure claimed by petitioner the adopted practice since 1994? This Court
rules that other than the foregoing allegation, petitioner has failed to prove the same. A
perusal of petitioner's Formal Offer of Evidence28 would show that the only documents
presented by it are sales invoices, trouble call reports and delivery receipts, all relating
to the alleged transactions between 1997 to 1998. It is unfortunate that petitioner had
failed to present in the RTC the documents from 1994 to 1996 for it may have proven
that the non-observance of the SOP was the practice since 1994. Such documents
could have shown that respondent had paid petitioner in the past without objection on
similar transactions under similar billing procedures. The same would have also
validated petitioner's claim that the secretary and security guards were all authorized
to sign the documents. Unfortunately, for petitioner's cause, this Court has no basis to
validate its claim, because other than its bare allegation in the petition, petitioner offers
no proof to substantiate the same.
By the contract of sale, one of the contracting parties obligates himself to transfer the
ownership of and deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent. 29 The absence of any of the essential elements will
negate the existence of a perfected contract of sale. In the case at bar, the CA ruled
that there was no perfected contract of sale between petitioner and respondent, to wit:

Aside from the absence of consent, there was no perfected contract of sale because
there was no meeting of minds upon the price. As the law provides, the fixing of the
price can never be left to the discretion of one of the contracting parties. In this case,
the absence of agreement as to the price is evidenced by the lack of purchase orders
issued by CHBCAI where the quantity, quality and price of the spare parts needed for
the repair of the elevators are stated. In these purchase orders, it would show that the
quotation of the cost of the spare parts earlier informed by Hyatt is acceptable to
CHBCAI. However, as revealed by the records, it was only Hyatt who determined the
price, without the acceptance or conformity of CHBCAI. From the moment the
determination of the price is left to the judgment of one of the contracting parties, it
cannot be said that there has been an arrangement on the price since it is not possible
for the other contracting party to agree on something of which he does not know
beforehand.30
Based on the evidence presented in the RTC, it is clear to this Court that petitioner
had failed to secure the necessary purchase orders from respondent's Board of
Directors, or Finance Manager, to signify their assent to the price of the parts to be
used in the repair of the elevators. In Boston Bank of the Philippines v. Manalo,31 this
Court explained that the fixing of the price can never be left to the decision of one of
the contracting parties, to wit:
A definite agreement as to the price is an essential element of a binding agreement to
sell personal or real property because it seriously affects the rights and obligations of
the parties. Price is an essential element in the formation of a binding and enforceable
contract of sale. The fixing of the price can never be left to the decision of one of
the contracting parties. But a price fixed by one of the contracting parties, if
accepted by the other, gives rise to a perfected sale.32
There would have been a perfected contract of sale had respondent accepted the
price dictated by petitioner even if such assent was given after the services were
rendered. There is, however, no proof of such acceptance on the part of respondent.
This Court shares the observation of the CA that the signatures of receipt by the
information clerk or the guard on duty on the sales invoices and delivery receipts
merely pertain to the physical receipt of the papers. It does not indicate that the parts
stated were actually delivered and installed. Moreover, because petitioner failed to
prove the existence of the verbal agreement which allegedly authorized the
aforementioned individuals to sign in respondents behalf, such signatures cannot be
tantamount to an approval or acceptance by respondent of the parts allegedly used
and the price quoted by petitioner. Furthermore, what makes the claims doubtful and
questionable is that the date of the sales invoice and the date stated in the
corresponding delivery receipt are too far apart as aptly found by the CA, to wit:
Further, We note that the date stated in the sales invoice vis-a-vis the date stated in
the corresponding delivery receipt is too far apart. For instance, Delivery Receipt No.
3492 dated February 13, 1998 has a corresponding Sales Invoice No. 7147 dated
June 30, 1998. What puts doubt to this transaction is the fact that the sales invoice
was prepared only after four (4) months from the delivery. The considerable length of
time that has lapsed from the delivery to the issuance of the sales invoice is
questionable. Further the delivery receipts were received months after its preparation.
In the case of Delivery Receipt No. 3850 dated November 26, 1997, Gumisad received
this only on July 20, 1998, or after a lapse of eight (8) months. Such kind of procedure
followed by Hyatt is certainly contrary to usual business practice, especially since in
this case, it involves considerable amount of money. 33
Based on the foregoing, the CA was thus correct when it concluded that "the Service
Agreement did not give petitioner the unbridled license to purchase and install any
spare parts and demand, after the lapse of a considerable length of time, payment of
these prices from respondent according to its own dictated price."34
Withal, this Court rules that petitioner's claim must fail for the following reasons: first,
petitioner failed to prove the existence of the verbal agreement that would authorize
non-observance of the SOP; second, petitioner failed to prove that such procedure
was the practice since 1994; and, third, there was no perfected contract of sale
between the parties as there was no meeting of minds upon the price.
To stress, the burden of proof is on the plaintiff. He must rely on the strength of his
case and not on the weakness of respondent's defense. Based on the manner by
which petitioner had presented its claim, this Court is of the opinion that petitioner's
case leaves too much to be desired.

WHERFORE, premises considered, the petition is DENIED. The April 20, 2006
Decision and July 31, 2006 Resolution of the Court of Appeals, in CA-G.R. CV No.
80427, are AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ANTONIO EDUARDO B. NACHURA
Associate Justice

ROBERTO A. ABAD
Associate Justice

JOSE CATRAL MENDOZA


Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Second Division, Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts
Division.
RENATO C. CORONA
Chief Justice

Footnotes
1

Rollo, pp. 8-22.

Penned by Associate Justice Rosmari D. Carandang, with Associate


Justices Andres B. Reyes, Jr. and Japar B. Dimaampao, concurring; id. at
27-39.
2

Id. at 41-42.

Id. at 46-49.

Id. at 47.

Id. at 50-51.

Id. at 52.

Id. at 62-64.

Id. at 64.

10Records,

pp. 141-153.

11

Id. at 160.

12Id.

at 164-165.

13

Rollo, p. 38.

14

CA rollo, pp. 76-83.

15Rollo,

16Id.

p. 15.

at 67-105.

17Citibank,

N.A. (Formerly First National City Bank) v. Sabeniano, G.R.


No. 156132, October 16, 2006, 504 SCRA 378, 409; Herbosa v. Court of
Appeals, 425 Phil. 431, 444 (2002).
18

Rollo, p. 48.

19

Id. at 50-51.

20

TSN, March 18, 2002, p. 11.

21

TSN, January 25, 2002, pp. 7-9. (Emphasis supplied).

22

Id. at 16-17.

23

Rollo, pp. 18-19.

Villanueva v. Balaguer, G.R. No. 180197, June 23, 2009, 590 SCRA
661, 670.
24

Heirs of Cipriano Reyes v. Calumpang, G.R. No.138463, October 30,


2006, 506 SCRA 56, 72.
25

26

Q: Then what happened?


A: A part will be brought to the project cite and they will install
it and note it in the trouble call report and have it received
properly by the building guard or the receptionist or by the
building engineers, and they will test it for a couple of weeks
to determine if the parts are the correct part needed for that
elevator and we will secure their approval, thereafter we
will issue our invoices and delivery receipts.
xxxx
Q: How about the delivery receipts?
A: Just the same.
Q: When would the sales invoice be prepared?
A: After the approval of the building engineer. (TSN,
January 25, 2002, pp. 7-9) (Emphasis supplied.)

27Rollo,

p. 20.

28Folder

29

New Civil Code, Art. 1458.

30Rollo,

31

of Exhibits, pp. 1-3.

pp. 36-37.

G.R. No. 158149, February 9, 2006, 482 SCRA 108.

32

Id. at 129. (Emphasis supplied.)

33

Rollo, p. 36.

34

Id. at 37-38.

7. Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

(Sgd.)
JUAN R. SAN ANDRES
Vendor

G.R. No. 135634 May 31, 2000

Noted:

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA,


petitioners,
vs.
VICENTE RODRIGUEZ, respondent.

(Sgd.)
VICENTE RODRIGUEZ
Vendee

MENDOZA, J.:

Respondent also attached to his answer a letter of judicial administrator


Ramon San Andres (Exh. 3), 6 asking payment of the balance of the
purchase price. The letter reads:

This is a petition for review on certiorari of the decision of the Court of Appeals 1
reversing the decision of the Regional Trial Court, Naga City, Branch 19, in Civil Case
No. 87-1335, as well as the appellate court's resolution denying reconsideration.

Dear Inting,

The antecedent facts are as follows:

Please accommodate my request for Three Hundred


(P300.00) Pesos as I am in need of funds as I intimated to
you the other day.

Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton,
Naga City. On September 28, 1964, he sold a portion thereof, consisting of 345 square
meters, to respondent Vicente S. Rodriguez for P2,415.00. The sale is evidenced by a
Deed of Sale. 2
Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was
appointed judicial administrator of the decedent's estate in Special Proceedings No. R21, RTC, Branch 19, Naga City. Ramon San Andres engaged the services of a
geodetic engineer, Jose Peero, to prepare a consolidated plan (Exh. A) of the estate.
Engineer Peero also prepared a sketch plan of the 345-square meter lot sold to
respondent. From the result of the survey, it was found that respondent had enlarged
the area which he purchased from the late Juan San Andres by 509 square meters. 3
Accordingly, the judicial administrator sent a letter, 4 dated July 27, 1987, to
respondent demanding that the latter vacate the portion allegedly encroached by him.
However, respondent refused to do so, claiming he had purchased the same from the
late Juan San Andres. Thereafter, on November 24, 1987, the judicial administrator
brought an action, in behalf of the estate of Juan San Andres, for recovery of
possession of the 509-square meter lot.
In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart
from the 345-square meter lot which had been sold to him by Juan San Andres on
September 28, 1964, the latter likewise sold to him the following day the remaining
portion of the lot consisting of 509 square meters, with both parties treating the two
lots as one whole parcel with a total area of 854 square meters. Respondent alleged
that the full payment of the 509-square meter lot would be effected within five (5) years
from the execution of a formal deed of sale after a survey is conducted over said
property. He further alleged that with the consent of the former owner, Juan San
Andres, he took possession of the same and introduced improvements thereon as
early as 1964.

We will just adjust it with whatever balance you have payable


to the subdivision.
Thanks.
Sincerely,
(Sgd.)
RAMON SAN ANDRES
Vicente Rodriguez
Penafrancia Subdivision, Naga City
P.S.
You can let bearer Enrique del Castillo sign for the amount.
Received
One
Hundred
Only

As proof of the sale to him of 509 square meters, respondent attached to his answer a
receipt (Exh. 2) 5 signed by the late Juan San Andres, which reads in full as follows:
Received from Vicente Rodriguez the sum of Five Hundred
(P500.00) Pesos representing an advance payment for a
residential lot adjoining his previously paid lot on three sides
excepting on the frontage with the agreed price of Fifteen
(15.00) Pesos per square meter and the payment of the full
consideration based on a survey shall be due and payable in
five (5) years period from the execution of the formal deed of
sale; and it is agreed that the expenses of survey and its
approval by the Bureau of Lands shall be borne by Mr.
Rodriguez.
Naga City, September 29, 1964.

RAMON
SAN
ANDRES
3/30/66
Respondent deposited in court the balance of the purchase price amounting to
P7,035.00 for the aforesaid 509-square meter lot.

While the proceedings were pending, judicial administrator Ramon San Andres died
and was substituted by his son Ricardo San Andres. On the other band, respondent
Vicente Rodriguez died on August 15, 1989 and was substituted by his heirs. 7

LACKING ONE OF THE


ESSENTIAL ELEMENTS OF A
CONTRACT, NAMELY, OBJECT
CERTAIN AND SUFFICIENTLY
DESCRIBED.

Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peero, 8
testified that based on his survey conducted sometime between 1982 and 1985,
respondent had enlarged the area which he purchased from the late Juan San Andres
by 509 square meters belonging to the latter's estate. According to Peero, the titled
property (Exh. A-5) of respondent was enclosed with a fence with metal holes and
barbed wire, while the expanded area was fenced with barbed wire and bamboo and
light materials.

II. THE HON. COURT OF APPEALS


ERRED IN HOLDING THAT
PETITIONER IS OBLIGED TO
HONOR THE PURPORTED
CONTRACT TO SELL DESPITE
NON-FULFILLMENT BY
RESPONDENT OF THE
CONDITION THEREIN OF
PAYMENT OF THE BALANCE OF
THE PURCHASE PRICE.

The second witness, Ricardo San Andres, 9 administrator of the estate, testified that
respondent had not filed any claim before Special Proceedings No. R-21 and denied
knowledge of Exhibits 2 and 3. However, he recognized the signature in Exhibit 3 as
similar to that of the former administrator, Ramon San Andres. Finally, he declared that
the expanded portion occupied by the family of respondent is now enclosed with
barbed wire fence unlike before where it was found without fence.

III. THE HON. COURT OF


APPEALS ERRED IN HOLDING
THAT CONSIGNATION WAS VALID
DESPITE NON-COMPLIANCE
WITH THE MANDATORY
REQUIREMENTS THEREOF.

On the other hand, Bibiana B. Rodriguez, 10 widow of respondent Vicente Rodriguez,


testified that they had purchased the subject lot from Juan San Andres, who was their
compadre, on September 29, 1964, at P15.00 per square meter. According to her,
they gave P500.00 to the late Juan San Andres who later affixed his signature to
Exhibit 2. She added that on March 30, 1966; Ramon San Andres wrote them a letter
asking for P300.00 as partial payment for the subject lot, but they were able to give
him only P100.00. She added that they had paid the total purchase price of P7,035.00
on November 21, 1988 by depositing it in court. Bibiana B. Rodriquez stated that they
had been in possession of the 509-square meter lot since 1964 when the late Juan
San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know at
that time the exact area sold to them because they were told that the same would be
known after the survey of the subject lot.
On September 20, 1994, the trial court 11 rendered judgment in favor of petitioner. It
ruled that there was no contract of sale to speak of for lack of a valid object because
there was no sufficient indication in Exhibit 2 to identify the property subject of the
sale, hence, the need to execute a new contract.
Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a
decision reversing the decision of the trial court. The appellate court held that the
object of the contract was determinable, and that there was a conditional sale with the
balance of the purchase price payable within five years from the execution of the deed
of sale. The dispositive portion of its decision's reads:
IN VIEW OF ALL THE FOREGOING, the judgment appealed
from is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the complaint and rendering judgment
against the plaintiff-appellee:
1. to accept the P7,035.00 representing the balance of the
purchase price of the portion and which is deposited in court
under Official Receipt No. 105754 (page 122, Records);
2. to execute the formal deed of sale over the said 509
square meter portion of Lot 1914-B-2 in favor of appellant
Vicente Rodriguez;
3. to pay the defendant-appellant the amount of P50,000.00
as damages and P10,000.00 attorney's fees as stipulated by
them during the trial of this case; and
4. to pay the costs of the suit.
SO ORDERED.
Hence, this petition. Petitioner assigns the following errors as having been allegedly
committed by the trial court:
I. THE HON. COURT OF APPEALS
ERRED IN HOLDING THAT THE
DOCUMENT (EXHIBIT "2") IS A
CONTRACT TO SELL DESPITE ITS

IV. THE HON. COURT OF


APPEALS ERRED IN HOLDING
THAT LACHES AND
PRESCRIPTION DO NOT APPLY
TO RESPONDENT WHO SOUGHT
INDIRECTLY TO ENFORCE THE
PURPORTED CONTRACT AFTER
THE LAPSE OF 24 YEARS.
The petition has no merit.
First. Art. 1458 of the Civil Code provides:
By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price
certain in money or its equivalent.
A contract of sale may be absolute or conditional.
As thus defined, the essential elements of sale are the following:
a) Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price;
b) Determinate subject matter; and,
c) Price certain in money or its equivalent. 12
As shown in the receipt, dated September 29, 1964, the late Juan San Andres
received P500.00 from respondent as "advance payment for the residential lot
adjoining his previously paid lot on three sides excepting on the frontage; the agreed
purchase price was P15.00 per square meter; and the full amount of the purchase
price was to be based on the results of a survey and would be due and payable in five
(5) years from the execution of a deed of sale.
Petitioner contends, however, that the "property subject of the sale was not described
with sufficient certainty such that there is a necessity of another agreement between
the parties to finally ascertain the identity; size and purchase price of the property
which is the object of the alleged sale." 1 He argues that the "quantity of the object is
not determinate as in fact a survey is needed to determine its exact size and the full
purchase price therefor" 14 In support of his contention, petitioner cites the following
provisions of the Civil Code:
Art. 1349. The object of every contract must be determinate
as to its kind. The fact that the quantity is not determinable
shall not be an obstacle to the existence of a contract,

provided it is possible to determine the same without the need


of a new contract between the parties.
Art. 1460. . . . The requisite that a thing be determinate is
satisfied if at the time the contract is entered into, the thing is
capable of being made determinate without the necessity of a
new and further agreement between the parties.
Petitioner's contention is without merit. There is no dispute that respondent purchased
a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in
the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly
what was referred to in the receipt as the "previously paid lot." Since the lot
subsequently sold to respondent is said to adjoin the "previously paid lot" on three
sides thereof, the subject lot is capable of being determined without the need of any
new contract. The fact that the exact area of these adjoining residential lots is subject
to the result of a survey does not detract from the fact that they are determinate or
determinable. As the Court of Appeals explained: 15
Concomitantly, the object of the sale is certain and
determinate. Under Article 1460 of the New Civil Code, a
thing sold is determinate if at the time the contract is entered
into, the thing is capable of being determinate without
necessity of a new or further agreement between the parties.
Here, this definition finds realization.
Appellee's Exhibit "A" (page 4, Records) affirmingly shows
that the original 345 sq. m. portion earlier sold lies at the
middle of Lot 1914-B-2 surrounded by the remaining portion
of the said Lot 1914-B-2 on three (3) sides, in the east, in the
west and in the north. The northern boundary is a 12 meter
road. Conclusively, therefore, this is the only remaining 509
sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot
initially purchased by Rodriguez. It is quite difined,
determinate and certain. Withal, this is the same portion
adjunctively occupied and possessed by Rodriguez since
September 29, 1964, unperturbed by anyone for over twenty
(20) years until appellee instituted this suit.
Thus, all of the essential elements of a contract of sale are present, i.e., that there was
a meeting of the minds between the parties, by virtue of which the late Juan San
Andres undertook to transfer ownership of and to deliver a determinate thing for a
price certain in money. As Art. 1475 of the Civil Code provides:
The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the
contract and upon the price. . . .
That the contract of sale is perfected was confirmed by the former administrator of the
estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966
asking for P300.00 as partial payment for the subject lot. As the Court of Appeals
observed:
Without any doubt, the receipt profoundly speaks of a
meeting of the mind between San Andres and Rodriguez for
the sale of the property adjoining the 345 square meter
portion previously sold to Rodriguez on its three (3) sides
excepting the frontage. The price is certain, which is P15.00
per square meter. Evidently, this is a perfected contract of
sale on a deferred payment of the purchase price. All the prerequisite elements for a valid purchase transaction are
present. Sale does not require any formal document for its
existence and validity. And delivery of possession of land sold
is a consummation of the sale (Galar vs. Husain, 20 SCRA
186 [1967]). A private deed of sale is a valid contract between
the parties (Carbonell v. CA, 69 SCRA 99 [1976]).
In the same vein, after the late Juan R. San Andres received
the P500.00 downpayment on March 30, 1966, Ramon R.
San Andres wrote a letter to Rodriguez and received from
Rodriguez the amount of P100.00 (although P300.00 was
being requested) deductible from the purchase price of the
subject portion. Enrique del Castillo, Ramon's authorized
agent, correspondingly signed the receipt for the P100.00.

Surely, this is explicitly a veritable proof of he sale over the


remaining portion of Lot 1914-B-2 and a confirmation by
Ramon San Andres of the existence thereof. 16
There is a need, however, to clarify what the Court of Appeals said is a conditional
contract of sale. Apparently, the appellate court considered as a "condition" the
stipulation of the parties that the full consideration, based on a survey of the lot, would
be due and payable within five (5) years from the execution of a formal deed of sale. It
is evident from the stipulations in the receipt that the vendor Juan San Andres sold the
residential lot in question to respondent and undertook to transfer the ownership
thereof to respondent without any qualification, reservation or condition. In Ang Yu
Asuncion v. Court of Appeals, 17 we held:
In Dignos v. Court of Appeals (158 SCRA 375), we have said
that, although denominated a "Deed of Conditional Sale," a
sale is still absolute where the contract is devoid of any
proviso that title is reserved or the right to unilaterally rescind
is stipulated, e.g., until or unless the price is paid. Ownership
will then be transferred to the buyer upon actual or
constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure
of the condition would prevent such perfection. If the condition
is imposed on the obligation of a party which is not fulfilled,
the other party may either waive the condition or refuse to
proceed with the sale. (Art. 1545, Civil Code).
Thus, in. one case, when the sellers declared in a "Receipt of Down Payment" that
they received an amount as purchase price for a house and lot without any reservation
of title until full payment of the entire purchase price, the implication was that they sold
their property. 18 In People's Industrial Commercial Corporation v. Court of Appeals, 19
it was stated:
A deed of sale is considered absolute in nature where there is
neither a stipulation in the deed that title to the property sold
is reserved in the seller until full payment of the price, nor one
giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
Applying these principles to this case, it cannot be gainsaid that the contract of sale
between the parties is absolute, not conditional. There is no reservation of ownership
nor a stipulation providing for a unilateral rescission by either party. In fact, the sale
was consummated upon the delivery of the lot to respondent. 20 Thus, Art. 1477
provides that the ownership of the thing sold shall be transferred to the vendee upon
the actual or constructive delivery thereof.
The stipulation that the "payment of the full consideration based on a survey shall be
due and payable in five (5) years from the execution of a formal deed of sale" is not a
condition which affects the efficacy of the contract of sale. It merely provides the
manner by which the full consideration is to be computed and the time within which the
same is to be paid. But it does not affect in any manner the effectivity of the contract.
Consequently, the contention that the absence of a formal deed of sale stipulated in
the receipt prevents the happening of a sale has no merit.
Second. With respect to the contention that the Court of Appeals erred in upholding
the validity of a consignation of P7,035.00 representing the balance of the purchase
price of the lot, nowhere in the decision of the appellate court is there any mention of
consignation. Under Art. 1257 of this Civil Code, consignation is proper only in cases
where an existing obligation is due. In this case, however, the contracting parties
agreed that full payment of purchase price shall be due and payable within five (5)
years from the execution of a formal deed of sale. At the time respondent deposited
the amount of P7,035.00 in the court, no formal deed of sale had yet been executed by
the parties, and, therefore, the five-year period during which the purchase price should
be paid had not commenced. In short, the purchase price was not yet due and
payable.
This is not to say, however, that the deposit of the purchase price in the court is
erroneous. The Court of Appeals correctly ordered the execution of a deed of sale and
petitioners to accept the amount deposited by respondent.
Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable.
The amount is based on the agreement of the parties as evidenced by the receipt
(Exh. 2). Time and again, we have stressed the rule that a contract is the law between

the parties, and courts have no choice but to enforce such contract so long as they are
not contrary to law, morals, good customs or public policy. Otherwise, court would be
interfering with the freedom of contract of the parties. Simply put, courts cannot
stipulate for the parties nor amend the latter's agreement, for to do so would be to alter
the real intentions of the contracting parties when the contrary function of courts is to
give force and effect to the intentions of the parties.

18

Coronel v. Court of Appeals, 263 SCRA 15 (1996)

19

281 SCRA 206 (1997).

20

Cf. Lim v. Court of Appeals, 263 SCRA 569 (1996).

Fourth. Finally, petitioners argue that respondent is barred by prescription and laches
from enforcing the contract. This contention is likewise untenable. The contract of sale
in this case is perfected, and the delivery of the subject lot to respondent effectively
transferred ownership to him. For this reason, respondent seeks to comply with his
obligation to pay the full purchase price, but because the deed of sale is yet to be
executed, he deemed it appropriate to deposit the balance of the purchase price in
court. Accordingly, Art. 1144 of the Civil Code has no application to the instant case. 21
Considering that a survey of the lot has already been conducted and approved by the
Bureau of Lands, respondent's heirs, assign or successors-in-interest should
reimburse the expenses incurred by herein petitioners, pursuant to the provisions of
the contract.

21

See Bucton v. Gabar, 55 SCRA 499 (1974).

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the


modification that respondent is ORDERED to reimburse petitioners for the expenses of
the survey.
SO ORDERED.
Bellosillo and Buena, JJ., concur.
Quisumbing and De Leon, Jr., JJ., are on leave.
Footnotes
Per Justice Conrado M. Vasquez and concurred in by
Justices Fermin A. Martin, Jr. and Artemio S. Tuquero.
1

Records, p. 119.

TSN, pp. 1-23, April 5, 1993.

Records, p. 84.

Id., p. 120.

Id., p. 121.

Id., p. 69.

TSN, pp. 1-23, April 5, 1993.

TSN, pp. 1-22, July 7, 1993.

10

TSN, pp. 1-33, April 13, 1994.

11

Presided over by Judge Gregorio E. Manio, Jr.

Jovan Land, Inc. v. Court of Appeals, 268 SCRA 160


(1997); Coronel v. Court of Appeals, 263 SCRA 15 (1996).
12

13

Rollo, p. 15.

14

Id., p. 16.

15

CA Decision, p. 5.

16

Id., pp. 5-6.

17

238 SCRA 602, 612 (1994).

8. Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 125088

April 14, 2004

LAGRIMAS A. BOY, petitioner,


vs.
COURT OF APPEALS, ISAGANI P. RAMOS and ERLINDA GASINGAN
RAMOS, respondents.

additional amount. Erlinda Ramos claimed that after signing and reading the
document, she realized that it did not contain the true facts of the situation since they
had already purchased the subject property and were, therefore, the owners thereof.
Erlinda Ramos, thereafter, refused to give her residence certificate and asked the
notary public not to notarize the document. Said incident was attested to by way of
affidavit by Lutgarda Reyes, the friend and companion of Lagrimas.11
Moreover, the MeTC ruled that the continued occupation by Lagrimas of said property
after the sale, without payment of rent, was by mere tolerance. It held that since the
spouses Ramos, who were staying in a rented place, were asked to vacate the same,
they were in need to take possession of their own property. 12
The MeTC thus rendered judgment in favor of private respondents, the dispositive
portion of which reads:

DECISION
AZCUNA, J.:
Before us is a petition for review on certiorari of the decision of the Court of Appeals in
an ejectment case, docketed as CA-G.R. SP No. 38716, which reversed and set aside
the decision1 of the Regional Trial Court of Manila, Branch 54,2 and reinstated the
decision3 of the Metropolitan Trial Court of Manila, Branch 14,4 ordering petitioner to
vacate the disputed premises and to pay rent until the premises are vacated and
possession is turned over to private respondents.
The facts, as stated by the Court of Appeals, are as follows:
On September 24, 1993, the spouses Isagani P. Ramos and Erlinda
Gasingan Ramos, private respondents herein, filed an action for ejectment
against Lagrimas A. Boy (Lagrimas), petitioner herein, with the
Metropolitan Trial Court of Manila. In their Complaint, the spouses Ramos
alleged that they are the owners of a parcel of land with an area of 55.75
square meters, and the house existing thereon, situated at 1151
Florentino Torres St., Singalong, Manila. They acquired the said
properties from Lagrimas who sold the same to them by virtue of a Deed
of Absolute Sale,5 which was executed on June 4, 1986. However,
Lagrimas requested for time to vacate the premises, and they agreed
thereto, because they were not in immediate need of the premises. Time
came when they needed the said house as they were only renting their
own residence. They then demanded that Lagrimas vacate the subject
premises, but she refused to do so. Hence, they initiated this action for
ejectment against Lagrimas.6
In her Answer, Lagrimas alleged that sometime in September 1984, in order to
accommodate her brothers need for a placement fee to work abroad, she
borrowed P15,000 from the spouses Ramos, who asked for the subject property as
collateral. On June 4, 1986, the spouses Ramos caused her to sign a Deed of
Absolute Sale purporting to show that she sold the property in question to them for the
sum of P31,000. The balance of P16,000 was promised to be paid on that date, but
the promise was never fulfilled. Sometime in May 1988, Erlinda Ramos and Lagrimas
executed an agreement (Kasunduan)7 acknowledging that the subject parcel of land,
together with the upper portion of the house thereon, had been sold by Lagrimas to the
spouses Ramos for P31,000; that of the said price, the sum of P22,500
(representing P15,000 cash loan plus P7,500 as interest from September 1984 to May
1988) had been paid; that the balance of P8,500 would be paid on the last week of
August 1988; and that possession of the property would be transferred to the spouses
Ramos only upon full payment of the purchase price. 8
Lagrimas admitted that the counsel of the spouses Ramos sent her a letter demanding
that she vacate the premises. Lagrimas alleged that the demand for her to pay the
sum of P6,000 per month has no legal basis. Lagrimas was summoned by the Punong
Barangay for conciliation, but no settlement was reached. 9

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs


[herein private respondents] and against the defendant [herein petitioner],
ordering the latter and the persons claiming rights under her to vacate the
premises known as 1151 Florentino [Torres] Street, Singalong, Manila.
The defendant is likewise ordered to pay plaintiffs the sum of P1,000.00
per month as reasonable compensation for the use and occupation of the
premises from the filing of this complaint until the premises is vacated and
possession is turned over to the plaintiffs; the further sum of P5,000.00 as
attorneys fees plus the costs of the suit.
Defendants counterclaim is hereby dismissed for lack of merit.
SO ORDERED.13
Petitioner appealed said decision to the Regional Trial Court, which rendered judgment
in her favor, thus:
In view of the foregoing, this Court hereby reverses the assailed Decision
and dismisses the complaint. Costs against the appellee.
The order previously issued granting execution pending appeal is
accordingly recalled.
SO ORDERED.14
The Regional Trial Court (RTC) held that the Kasunduan was binding between the
parties and was the true agreement between them. It ruled that pending the
determination of the question of ownership, it cannot deprive the party in actual
possession of the right to continue peacefully with said possession. Since the question
of ownership was inextricably woven with that of possession, the RTC held that the
MeTC should have dismissed the case because jurisdiction pertains to another
tribunal.15
Private respondents filed a petition for review of the decision of the RTC with the Court
of Appeals. They faulted the respondent Judge for giving credence to
the Kasunduan and holding that it prevailed over the Deed of Absolute Sale. The Court
of Appeals ruled in favor of private respondents, thus:
WHEREFORE, the decision of the respondent Judge herein appealed
from is hereby REVERSED and SET ASIDE, and the decision of the
Metropolitan Trial Court is hereby REINSTATED.
SO ORDERED.16
The Court of Appeals found, thus:

The Metropolitan Trial Court (MeTC) noted the existence of a Deed of Absolute Sale
executed by the spouses Ramos and Lagrimas on June 4, 1986. The Deed was duly
acknowledged before a Notary Public and the parties therein did not deny its due
execution. The MeTC observed that Lagrimas defense that the spouses Ramos still
had to pay the amount of P16,000 to complete the full consideration of P31,000 was
nowhere to be found in the Deed of Absolute Sale.10
The MeTC held that the Kasunduan, which Lagrimas attached to her Answer, cannot
be given binding effect. The MeTC stated that while Erlinda Ramos admitted the
existence of said document, she thought that Lagrimas was only asking for an

A review of the records discloses that the private respondent [herein


petitioner Lagrimas] acquired the subject property from one Marianita C.
Valera by virtue of two instruments. The first one is a Deed of Sale dated
September 27, 1984, in which the vendor Marianita C. Valera sold a
house of light wooden materials and her rights as a bonafide tenant of the
land on which it stands, to the vendee Lagrimas A. Boy forP31,000.00
(Annex 1 to the Affidavit of Lagrimas A. Boy, p. 67, Record). The second
one is a deed of absolute sale and assignment of rights dated March 18,
1985, in which the vendor Ma. Nita C. Valera sold a residential house and

her rights and interests over a parcel of land in which it is located, to


vendee Lagrimas A. Boy, for the price of P31,000.00 (Annex 2, Affidavit of
Lagrimas A. Boy, pp. 68-69, Record).

not paid the purchase price in full. It, therefore, ruled that the preponderance of
evidence is against petitioner.
Hence, this petition, with the following assigned errors:

It appears from the foregoing that Marianita C. Valera was originally one
of the tenants/residents of 669 square meters of land owned by the PNB.
She constructed a house on a 55.75 square meter portion of the said land.
In 1984, she sold the house and only her rights as tenant of the land to
private respondent, because the PNB had not yet sold the land to the
residents. In 1985, the sale of the land to the residents had already been
accomplished. Hence, she sold the house and her rights and interests to
the land to the private respondent.
Significantly, these contracts coincide with certain events in the
relationship between the petitioners [herein private respondents spouses
Ramos] and private respondent. According to the Answer of private
respondent, sometime in September, 1984, she borrowed the sum
of P15,000.00 from the petitioners to accommodate her brothers
placement fee to work abroad (par. 7, Answer, p. 19, Record). And on
March 19, 1985, the private respondent executed a deed of real estate
mortgage (Annex a to the Affidavit of Erlinda C. Ramos, pp. 54-55,
Record), in which she mortgaged the properties she has acquired from
Marianita C. Valera to the petitioners, to secure a loan in the amount
of P26,200.00, payable within three months.
One year later, on June 4, 1986, the private respondent executed a deed
of absolute sale in which she sold the same property acquired from
Marianita C. Valera to the petitioners, for the price of P31,000.00.17
Considering that petitioner borrowed P26,200 from private respondents, which loan
was covered by a real estate mortgage of the subject house and lot, and the
subsequent sale of the property to private respondents forP31,000 after non-payment
of the loan, the Court of Appeals did not give credence to the statement in
theKasunduan that private respondents paid only P22,500 to petitioner since her
indebtedness already reachedP26,200. The Court of Appeals gave weight to the
argument of private respondents that Erlinda Ramos was merely tricked into signing
the Kasunduan. It gave credence to the version of private respondents on how
theKasunduan came to be executed but not notarized, thus:
x x x Erlinda G. Ramos alleged in her affidavit that sometime in May,
1988, the exact date of which she cannot recall, Lagrimas Boy went to
their residence and pleaded that even if they have already fully paid the
subject house and lot, she was asking for an additional amount because
she needed the money and there was no one for her to approach (walang
ibang matatakbuhan). She [Erlinda Ramos] claimed she committed a
mistake because she agreed to give an additional amount and went with
[Lagrimas] to Atty. Estacio at the City Hall. [Lagrimas] arrive[d] ahead [of]
Atty. Estacio in company with her friend Lutgarda Bayas. Atty. Estacio told
her [Erlinda Ramos] that she will give an additional amount and she
agreed without the knowledge of her husband. Atty. Estacio handed to her
a piece of paper and she was made to sign and she acceded and signed it
without reading. After [Lagrimas] and her witnesses including her
companion Lutgarda Bayas signed the paper, she [Erlinda Ramos] go[t] it
and read it. It was at that point that she discovered that what were written
thereon were not in accordance with the true and real fact and situation
that the subject house and lot already belongs to them because they have
purchased it already and {Lagrimas} only requested for an addition. She
[Erlinda Ramos] told Atty. Estacio to change (baguhin) the statement
because she was not agreeable and she did not give her residence
certificate (Cedula). Notary Public Estacio said that he cannot notarize the
document (purported Kasunduan) because she [Erlinda Ramos] refused
saying she was "Pumapalag." He said that Erlinda Ramos and [Lagrimas]
should talk to each other again. She [Erlinda Ramos] committed another
mistake because she left the place leaving the piece of paper -purported "Kasunduan" without knowing that [Lagrimas] kept it. Erlinda
Ramos innocently failed to demand the said piece of paper which
[Lagrimas] is now using. She returned to Atty. Estacio to get the piece of
paper but he answered her saying naibasura na and she trusted him but
this time, it turned out that [Lagrimas] kept it which she is using now in this
case.18
The Court of Appeals stated that the fact that petitioner has remained in possession of
the property sold, and paid its real estate taxes, would have made out a case for
equitable mortgage. However, it noted that petitioner did not raise this defense, but
admitted having sold the property to private respondents, alleging only that they have

I
THE RESPONDENT COURT GRAVELY ERRED AND
ABUSED ITS DISCRETION IN NOT INTERPRETING THAT
THE "KASUNDUAN" EXECUTED BY AND BETWEEN
PETITIONER (DEFENDANT) AND PRIVATE RESPONDENT
(PLAINTIFF) SUPERSEDES THE DEED OF SALE WHICH
HAS NOT BEEN CONSUMMATED.
II
THE RESPONDENT COURT GRAVELY ERRED AND
ABUSED ITS DISCRETION IN MISINTERPRETING AND
DISREGARDING THE "KASUNDUAN" AS NOT
APPLICABLE IN THE CASE AT BAR.
III
THE RESPONDENT COURT ERRED AND ABUSED ITS
DISCRETION IN REVERSING AND DISMISSING THE
DECISION OF THE REGIONAL TRIAL COURT AND [IN
REINSTATING] THE DECISION OF THE COURT A QUO. 19
Petitioner contends that, as ruled by the RTC, since the question of ownership in this
case is interwoven with that of possession, the MeTC should have dismissed the case
because jurisdiction pertains to another tribunal.
The contention is without merit.
The only issue for resolution in an unlawful detainer case is physical or material
possession of the property involved, independent of any claim of ownership by any of
the party litigants.20
Prior to the effectivity of Batas Pambansa Blg. 129 (The Judiciary Reorganization Act
of 1980), the jurisdiction of inferior courts was confined to receiving evidence of
ownership in order to determine only the nature and extent of possession, by reason of
which such jurisdiction was lost the moment it became apparent that the issue of
possession was interwoven with that of ownership. 21
With the enactment of Batas Pambansa Blg. 129, inferior courts were granted
jurisdiction to resolve questions of ownership provisionally in order to determine the
issue of possession, thus:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in Civil Cases.Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall
exercise:
xxx
(2) Exclusive original jurisdiction over cases of forcible entry
and unlawful detainer: Provided, That when in such cases,
the defendant raises the question of ownership in his
pleadings and the question of possession cannot be resolved
without deciding the issue of ownership, the issue of
ownership shall be resolved only to determine the issue of
possession.
Section 16, Rule 70 (Forcible Entry and Unlawful Detainer) of the Rules of Court, as
amended, similarly provides:
Sec. 16. Resolving defense of ownership.When the defendant raises
the defense of ownership in his pleadings and the question of possession

cannot be resolved without deciding the issue of ownership, the issue of


ownership shall be resolved only to determine the issue of possession.
Thus, in forcible entry and unlawful detainer cases, if the defendant raises the question
of ownership in his pleadings and the question of possession cannot be resolved
without deciding the issue of ownership, the inferior courts have the undoubted
competence provisionally to resolve the issue of ownership for the sole purpose of
determining the issue of possession. 22 The MeTC, therefore, did not err in taking
cognizance of the instant case.
Petitioner also contends that the Court of Appeals erred by misinterpreting and
disregarding the Kasunduan, which is binding between the parties and expressed their
true intent. Petitioner asserts that the Kasunduansupersedes the Deed of Absolute
Sale, which is actually a contract to sell. In effect, petitioner is asking this Court to
review the factual finding of Court of Appeals on the true nature of the Kasunduan.
As a rule, the findings of the fact of the Court of Appeals are final and cannot be
reviewed on appeal by this Court, provided they are borne out by the record or are
based on substantial evidence.23 After reviewing the records herein, this Court finds no
ground to change the factual finding of the Court of Appeals on the Kasunduan, with
the resulting holding that it is not binding on the parties.

In Civil Case No. 95-73140.

CA Rollo, p. 28.

In Civil Case No. 142623 CV.

CA Rollo, pp. 33-34.

Decision of the Court of Appeals, Rollo, pp. 25-26.

CA Rollo, p. 35.

Rollo, p. 26.

CA Rollo, p. 29.

10

Ibid.

11

CA Rollo, p. 30.

12

Ibid.

It has been established that petitioner sold the subject property to private respondents
for the price of P31,000, as evidenced by the Deed of Absolute Sale, 24 the due
execution of which was not controverted by petitioner. The contract is absolute in
nature,

13

CA Rollo, p. 30.

14

CA Rollo, pp. 26-27.

without any provision that title to the property is reserved in the vendor until full
payment of the purchase price.25By the contract of sale,26 petitioner (as vendor),
obligated herself to transfer the ownership of, and to deliver, the subject property to
private respondents (as vendees) after they paid the price of P31,000. Under Article
1477 of the Civil Code, the ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof. In addition, Article 1498 of the
Civil Code provides that when the sale is made through a public instrument, as in this
case, the execution thereof shall be equivalent to the delivery of the thing which is the
object of the contract, if from the deed the contrary does not appear or cannot clearly
be inferred. In this case, the Deed of Absolute Sale does not contain any stipulation
against the constructive delivery of the property to private respondents. In the absence
of stipulation to the contrary, the ownership of the property sold passes to the vendee
upon the actual or constructive delivery thereof. 27 The Deed of Absolute Sale,
therefore, supports private respondents right of material possession over the subject
property.

15

Ibid.

16

Rollo, p. 31.

17

Rollo, pp. 29-30.

18

Rollo, pp. 27-28.

19

Rollo, pp. 13-14.

20

Anicete, et al. v. Balanon, G.R. Nos. 150820-21, April 30, 2003.

21

Refugia v. Court of Appeals, 258 SCRA 347, 362 (1996).

The remaining issue is whether the Court of Appeals correctly ruled that private
respondents have a right of material possession over the disputed property.

The finding of the MeTC, sustained by the Court of Appeals, is that the continued
occupation by petitioner of said property after the sale, without payment of rent, was
by mere tolerance. Private respondents claimed that petitioner requested for time to
vacate the premises and they agreed thereto because they did not need the property
at that time. However, when private respondents were asked to vacate their rented
residence, they demanded that petitioner vacate the subject property, but petitioner
refused to do so. A person who occupies the land of another at the latters tolerance or
permission, without any contract between them, is bound by an implied promise that
he will vacate the same upon demand, failing which a summary action for ejectment is
the proper remedy against him.28
WHEREFORE, the assailed decision of the Court of Appeals, in CA-G.R. SP No.
38716, which reversed and set aside the decision of the Regional Trial Court, and
reinstated the decision of the Metropolitan Trial Court, is hereby AFFIRMED. No costs.

Anicete v. Balanon, supra, note 20; Refugia v. Court of Appeals, supra,


note 21.
22

23

Bantingal v. Court of Appeals, 351 SCRA 60, 66 (2001)

24

Annex "F," CA Rollo, p. 33.

25

Dignos v. Court of Appeals, 158 SCRA 375, 382 (1988).

Civil Code, Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in money
or its equivalent.
26

SO ORDERED.
A contract of sale may be absolute or conditional.
Davide, Jr., Panganiban, Ynares-Santiago, and Carpio, JJ., concur.
Dignos v. Court of Appeals, supra, note 25, at 383; Froilan v. Pan
Oriental Shipping Co., et al., 12 SCRA 276, 285 (1964).
27

Rivera v. Rivera, G.R. No. 154203, July 8, 2003.; Refugia v. Court of


Appeals, supra, note 21, at 370.
28

Footnotes
1

CA Rollo, p. 23.

9 Republic of the Philippines


SUPREME COURT
Manila

On September 17, 2001, the RTC issued an Order13 declaring Lourdes and the De
Leons in default for their failure to appear before the court for the second time despite
notice. Upon a Motion for Reconsideration, 14 the trial court in an Order15 dated October
19, 2001 set aside its Order of default.

FIRST DIVISION
G.R. No. 168325

December 8, 2010

ROBERTO D. TUAZON, Petitioner,


vs.
LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R. SUAREZ-DE LEON,
WILFREDO DE LEON, MIGUEL LUIS S. DE LEON, ROMMEL LEE S. DE LEON,
and GUILLERMA L. SANDICO-SILVA, as attorney-in-fact of the defendants,
except Lourdes Q. Del Rosario-Suarez, Respondents.

After trial, the court a quo rendered a Decision declaring the Deed of Absolute Sale
made by Lourdes in favor of the De Leons as valid and binding. The offer made by
Lourdes to Roberto did not ripen into a contract to sell because the price offered by the
former was not acceptable to the latter. The offer made by Lourdes is no longer
binding and effective at the time she decided to sell the subject lot to the De Leons
because the same was not accepted by Roberto. Thus, in a Decision dated November
18, 2002, the trial court dismissed the complaint. Its dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the
above-entitled Complaint for lack of merit, and ordering the Plaintiff to pay the
Defendants, the following:

DECISION
1. the amount of P30,000.00 as moral damages;
DEL CASTILLO, J.:
2. the amount of P30,000.00 as exemplary damages;
In a situation where the lessor makes an offer to sell to the lessee a certain property at
a fixed price within a certain period, and the lessee fails to accept the offer or to
purchase on time, then the lessee loses his right to buy the property and the owner
can validly offer it to another.

3. the amount of P30,000.00 as attorneys fees; and


4. cost of the litigation.

Certiorari1

Decision2

This Petition for Review on


assails the
dated May 30, 2005 of the
Court of Appeals (CA) in CA-G.R. CV No. 78870, which affirmed the Decision3 dated
November 18, 2002 of the Regional Trial Court (RTC), Branch 101, Quezon City in
Civil Case No. Q-00-42338.
Factual Antecedents
Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of
land, containing more or less an area of 1,211 square meters located along Tandang
Sora Street, Barangay Old Balara, Quezon City and previously covered by Transfer
Certificate of Title (TCT) No. RT-561184 issued by the Registry of Deeds of Quezon
City.

SO ORDERED.16
Ruling of the Court of Appeals
On May 30, 2005, the CA issued its Decision dismissing Robertos appeal and
affirming the Decision of the RTC.
Hence, this Petition for Review on Certiorari filed by Roberto advancing the following
arguments:
I.

On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a
Contract of Lease5 over the abovementioned parcel of land for a period of three years.
The lease commenced in March 1994 and ended in February 1997. During the
effectivity of the lease, Lourdes sent a letter 6 dated January 2, 1995 to Roberto where
she offered to sell to the latter subject parcel of land. She pegged the price
at P37,541,000.00 and gave him two years from January 2, 1995 to decide on the said
offer.
On June 19, 1997, or more than four months after the expiration of the Contract of
Lease, Lourdes sold subject parcel of land to her only child, Catalina Suarez-De Leon,
her son-in-law Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and
Rommel S. De Leon (the De Leons), for a total consideration of onlyP2,750,000.00 as
evidenced by a Deed of Absolute Sale7 executed by the parties. TCT No. 1779868 was
then issued by the Registry of Deeds of Quezon City in the name of the De Leons.
The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to
vacate the premises. Roberto refused hence, the De Leons filed a complaint for
Unlawful Detainer before the Metropolitan Trial Court (MeTC) of Quezon City against
him. On August 30, 2000, the MeTC rendered a Decision9 ordering Roberto to vacate
the property for non-payment of rentals and expiration of the contract.
Ruling of the Regional Trial Court
On November 8, 2000, while the ejectment case was on appeal, Roberto filed with the
RTC of Quezon City a Complaint10 for Annulment of Deed of Absolute Sale,
Reconveyance, Damages and Application for Preliminary Injunction against Lourdes
and the De Leons. On November 13, 2000, Roberto filed a Notice of Lis Pendens11with
the Registry of Deeds of Quezon City.
On January 8, 2001, respondents filed An Answer with Counterclaim12 praying that the
Complaint be dismissed for lack of cause of action. They claimed that the filing of such
case was a mere leverage of Roberto against them because of the favorable Decision
issued by the MeTC in the ejectment case.

The Trial Court and the Court of Appeals had decided that the "Right of First Refusal"
exists only within the parameters of an "Option to Buy", and did not exist when the
property was sold later to a third person, under favorable terms and conditions which
the former buyer can meet.
II.
What is the status or sanctions of an appellee in the Court of Appeals who has not
filed or failed to file an appellees brief?17
Petitioners Arguments
Roberto claims that Lourdes violated his right to buy subject property under
the principle of "right of first refusal" by not giving him "notice" and the opportunity to
buy the property under the same terms and conditions or specifically based on the
much lower price paid by the De Leons.
Roberto further contends that he is enforcing his "right of first refusal" based
on Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. 18 which is the leading
case on the "right of first refusal."
Respondents Arguments
On the other hand, respondents posit that this case is not covered by the principle of
"right of first refusal" but an unaccepted unilateral promise to sell or, at best, a contract
of option which was not perfected. The letter of Lourdes to Roberto clearly embodies
an option contract as it grants the latter only two years to exercise the option to buy
the subject property at a price certain of P37,541,000.00. As an option contract, the
said letter would have been binding upon Lourdes without need of any consideration,

had Roberto accepted the offer. But in this case there was no acceptance made
neither was there a distinct consideration for the option contract.

In this case, the controversy is whether the letter of Lourdes to Roberto dated January
2, 1995 involved an option contract or a contract of a right of first refusal. In its entirety,
the said letter-offer reads:

Our Ruling
The petition is without merit.
This case involves an option contract and not a contract of a right of first refusal
In Beaumont v. Prieto,19 the nature of an option contract is explained thus:
In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the
following language:
A contract by virtue of which A, in consideration of the payment of a certain sum to B,
acquires the privilege of buying from, or selling to, B certain securities or properties
within a limited time at a specified price. (Story vs. Salamon, 71 N. Y., 420.)
From Vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs.
Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has
been taken:
An agreement in writing to give a person the option to purchase lands within a given
time at a named price is neither a sale nor an agreement to sell. It is simply a
contract by which the owner of property agrees with another person that he
shall have the right to buy his property at a fixed price within a certain time. He
does not sell his land; he does not then agree to sell it; but he does sell something;
that is, the right or privilege to buy at the election or option of the other party. The
second party gets in praesenti, not lands, nor an agreement that he shall have lands,
but he does get something of value; that is, the right to call for and receive lands if he
elects. The owner parts with his right to sell his lands, except to the second party, for a
limited period. The second party receives this right, or rather, from his point of view, he
receives the right to elect to buy.

206 Valdes Street


Josefa Subd. Balibago
Angeles City 2009
January 2, 1995
Tuazon Const. Co.
986 Tandang Sora Quezon City
Dear Mr. Tuazon,
I received with great joy and happiness the big box of sweet grapes and ham, fit for a
kings party. Thanks very much.
I am getting very old (79 going 80 yrs. old) and wish to live in the U.S.A. with my only
family. I need money to buy a house and lot and a farm with a little cash to start.
I am offering you to buy my 1211 square meter at P37,541,000.00 you can pay me in
dollars in the name of my daughter. I never offered it to anyone. Please shoulder the
expenses for the transfer. I wish the Lord God will help you buy my lot easily and you
will be very lucky forever in this place. You have all the time to decide when you
can, but not for 2 years or more.
I wish you long life, happiness, health, wealth and great fortune always!
I hope the Lord God will help you be the recipient of multi-billion projects aid from other
countries.
Thank you,

But the two definitions above cited refer to the contract of option, or, what amounts to
the same thing, to the case where there was cause or consideration for the obligation
x x x. (Emphasis supplied.)

Lourdes Q. del Rosario vda de Suarez

On the other hand, in Ang Yu Asuncion v. Court of Appeals, 20 an elucidation on the


"right of first refusal" was made thus:

It is clear that the above letter embodies an option contract as it grants Roberto a fixed
period of only two years to buy the subject property at a price certain
of P37,541,000.00. It being an option contract, the rules applicable are found in
Articles 1324 and 1479 of the Civil Code which provide:

In the law on sales, the so-called right of first refusal is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article
1458 of the Civil Code. Neither can the right of first refusal, understood in its normal
concept, per se be brought within the purview of an option under the second
paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 of
the same Code. An option or an offer would require, among other things, a clear
certainty on both the object and the cause or consideration of the envisioned
contract. In a right of first refusal, while the object might be made determinate,
the exercise of the right, however, would be dependent not only on the grantor's
eventual intention to enter into a binding juridical relation with another but also
on terms, including the price, that obviously are yet to be later firmed up. Prior
thereto, it can at best be so described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the essential elements to establish
the vinculum juris would still be indefinite and inconclusive) but by, among other laws
of general application, the pertinent scattered provisions of the Civil Code on human
conduct.
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its existence, nor would it sanction
an action for specific performance without thereby negating the indispensable element
of consensuality in the perfection of contracts. It is not to say, however, that the right of
first refusal would be inconsequential for, such as already intimated above, an
unjustified disregard thereof, given, for instance, the circumstances expressed in
Article 19 of the Civil Code, can warrant a recovery for damages. (Emphasis supplied.)
From the foregoing, it is thus clear that an option contract is entirely different and
distinct from a right of first refusal in that in the former, the option granted to the
offeree is for a fixed period and at a determined price. Lacking these two essential
requisites, what is involved is only a right of first refusal.

Art. 1324. When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as something
paid or promised.
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.
It is clear from the provision of Article 1324 that there is a great difference between the
effect of an option which is without a consideration from one which is founded upon a
consideration. If the option is without any consideration, the offeror may withdraw his
offer by communicating such withdrawal to the offeree at anytime before acceptance; if
it is founded upon a consideration, the offeror cannot withdraw his offer before the
lapse of the period agreed upon.
The second paragraph of Article 1479 declares that "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." Sanchez v.
Rigos21 provided an interpretation of the said second paragraph of Article 1479 in
relation to Article 1324. Thus:
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.
Hence, it is not disputed that the option is without consideration. It can therefore be
withdrawn notwithstanding the acceptance made of it by appellee.

There is no such similar provision in the Contract of Lease between Roberto and
Lourdes. What is involved here is a separate and distinct offer made by Lourdes
through a letter dated January 2, 1995 wherein she is selling the leased property to
Roberto for a definite price and which gave the latter a definite period for acceptance.
Roberto was not given a right of first refusal. The letter-offer of Lourdes did not form
part of the Lease Contract because it was made more than six months after the
commencement of the lease.

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 asmodified 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.

It is also very clear that in Equatorial, the property was sold within the lease period. In
this case, the subject property was sold not only after the expiration of the period
provided in the letter-offer of Lourdes but also after the effectivity of the Contract of
Lease.

In Diamante v. Court of Appeals,22 this Court further declared that:


A unilateral promise to buy or sell is a mere offer, which is not converted into a
contract except at the moment it is accepted. Acceptance is the act that gives life to
a juridical obligation, because, before the promise is accepted, the promissor
may withdraw it at any time. Upon acceptance, however, a bilateral contract to sell
and to buy is created, and the offeree ipso facto assumes the obligations of a
purchaser; the offeror, on the other hand, would be liable for damages if he fails to
deliver the thing he had offered for sale.
xxxx
Even if the promise was accepted, private respondent was not bound thereby in
the absence of a distinct consideration. (Emphasis ours.)
In this case, it is undisputed that Roberto did not accept the terms stated in the letter of
Lourdes as he negotiated for a much lower price. Robertos act of negotiating for a
much lower price was a counter-offer and is therefore not an acceptance of the offer of
Lourdes. Article 1319 of the Civil Code provides:
Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptanceconstitutes a counter-offer.
(Emphasis supplied.)
The counter-offer of Roberto for a much lower price was not accepted by Lourdes.
There is therefore no contract that was perfected between them with regard to the sale
of subject property. Roberto, thus, does not have any right to demand that the property
be sold to him at the price for which it was sold to the De Leons neither does he have
the right to demand that said sale to the De Leons be annulled.
Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not applicable here
It is the position of Roberto that the facts of this case and that of Equatorial are similar
in nearly all aspects. Roberto is a lessee of the property like Mayfair Theater
in Equatorial. There was an offer made to Roberto by Lourdes during the effectivity of
the contract of lease which was also the case in Equatorial. There were negotiations
as to the price which did not bear fruit because Lourdes sold the property to the De
Leons which was also the case in Equatorial wherein Carmelo and Bauermann sold
the property to Equatorial. The existence of the lease of the property is known to the
De Leons as they are related to Lourdes while in Equatorial, the lawyers of Equatorial
studied the lease contract of Mayfair over the property. The property in this case was
sold by Lourdes to the De Leons at a much lower price which is also the case
in Equatorial where Carmelo and Bauerman sold to Equatorial at a lesser price. It is
Robertos conclusion that as in the case of Equatorial, there was a violation of his right
of first refusal and hence annulment or rescission of the Deed of Absolute Sale is the
proper remedy.
Robertos reliance in Equatorial is misplaced. Despite his claims, the facts
in Equatorial radically differ from the facts of this case. Roberto overlooked the fact
that in Equatorial, there was an express provision in the Contract of Lease that
(i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be
given 30-days exclusive option to purchase the same.

Moreover, even if the offer of Lourdes was accepted by Roberto, still the former is not
bound thereby because of the absence of a consideration distinct and separate from
the price. The argument of Roberto that the separate consideration was the liberality
on the part of Lourdes cannot stand. A perusal of the letter-offer of Lourdes would
show that what drove her to offer the property to Roberto was her immediate need for
funds as she was already very old. Offering the property to Roberto was not an act of
liberality on the part of Lourdes but was a simple matter of convenience and
practicality as he was the one most likely to buy the property at that time as he was
then leasing the same.
All told, the facts of the case, as found by the RTC and the CA, do not support
Robertos claims that the letter of Lourdes gave him a right of first refusal which is
similar to the one given to Mayfair Theater in the case ofEquatorial. Therefore, there is
no justification to annul the deed of sale validly entered into by Lourdes with the De
Leons.
What is the effect of the failure of Lourdes to file her appellees brief at the CA?
Lastly, Roberto argues that Lourdes should be sanctioned for her failure to file her
appellees brief before the CA.
Certainly, the appellees failure to file her brief would not mean that the case would be
automatically decided against her. Under the circumstances, the prudent action on the
part of the CA would be to deem Lourdes to have waived her right to file her appellees
brief. De Leon v. Court of Appeals,23 is instructive when this Court decreed:
On the second issue, we hold that the Court of Appeals did not commit grave abuse of
discretion in considering the appeal submitted for decision. The proper remedy in case
of denial of the motion to dismiss is to file the appellees brief and proceed with the
appeal. Instead, petitioner opted to file a motion for reconsideration which,
unfortunately, was pro forma. All the grounds raised therein have been discussed in
the first resolution of the respondent Court of Appeals. There is no new ground raised
that might warrant reversal of the resolution. A cursory perusal of the motion would
readily show that it was a near verbatim repetition of the grounds stated in the motion
to dismiss; hence, the filing of the motion for reconsideration did not suspend the
period for filing the appellees brief. Petitioner was therefore properly deemed to
have waived his right to file appellees brief.(Emphasis supplied.)lawphi1
In the above cited case, De Leon was the plaintiff in a Complaint for a sum of money in
the RTC. He obtained a favorable judgment and so defendant went to the CA. The
appeal of defendant-appellant was taken cognizance of by the CA but De Leon filed a
Motion to Dismiss the Appeal with Motion to Suspend Period to file Appellees Brief.
The CA denied the Motion to Dismiss. De Leon filed a Motion for Reconsideration
which actually did not suspend the period to file the appellees brief. De Leon therefore
failed to file his brief within the period specified by the rules and hence he was deemed
by the CA to have waived his right to file appellees brief.
The failure of the appellee to file his brief would not result to the rendition of a decision
favorable to the appellant. The former is considered only to have waived his right to file
the Appellees Brief. The CA has the jurisdiction to resolve the case based on the
Appellants Brief and the records of the case forwarded by the RTC. The appeal is
therefore considered submitted for decision and the CA properly acted on it.
WHEREFORE, the instant petition for review on certiorari is DENIED. The assailed
Decision of the Court of Appeals in CA-G.R. CV No. 78870, which affirmed the
Decision dated November 18, 2002 of the Regional Trial Court, Branch 101, Quezon
City in Civil Case No. Q-00-42338 is AFFIRMED.
SO ORDERED.

MARIANO C. DEL CASTILLO


Associate Justice

16

Id. at 162.

17

Id. at 121-122.

18

332 Phil 525, 550 (1996).

19

41 Phil 670, 686-687 (1916).

20

G.R. No. 109125, December 2, 1994, 238 SCRA 602, 614-615.

WE CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
TERESITA J. LEONARDO-DE
CASTRO
Associate Justice

ROBERTO A. ABAD*
Associate Justice

JOSE PORTUGAL PEREZ


Associate Justice
CERTIFICATION

150-A Phil. 714, 721-722 (1972), citing Southwestern Sugar and


Molasses Co. v. Atlantic Gulf and Pacific Co., 97 Phil. 249 251-252
(1955).
21

G.R. No. 51824, February 7, 1992, 206 SCRA 52, 62, citing Tolentino,
Civil Code of the Philippines, vol. V, 1959 ed., 20-21.
22

23

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice

Footnotes
In lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order
No. 917 dated November 24, 2010.
*

Rollo, pp. 9-26.

CA rollo, pp. 41-55; penned by Associate Justice Vicente S.E. Veloso


and concurred in by Associate Justices Roberto A. Barrios and Amelita G.
Tolentino.
2

Records, pp. 154-162.

Id. at 7-9.

Id. at 10-11.

Id. at 14.

Id. at 15-16.

Id. at 17-18.

Id. at 23-25.

10

Id. at 1-6.

11

Id. at 33-35.

12

Id. at 48-54.

13

Id. at 74.

14

Id. at 75-78.

15

Id. at 97.

432 Phil. 775, 791 (2002).

10. Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 139173

February 28, 2007

SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners


vs.
GODOFREDO CAGUIAT, Respondent.

On June 27, 1994, after hearing, the trial court rendered its Decision 7 finding there was
a perfected contract of sale between the parties and ordering petitioners to execute a
final deed of sale in favor of respondent. The trial court held:
xxx
In the evaluation of the evidence presented by the parties as to the issue as to who
was ready to comply with his obligation on the verbal agreement to sell on March 23,
1990, shows that plaintiffs position deserves more weight and credibility. First,
the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed
that there was already a perfected contract. Art. 1482 of the Civil Code of the
Philippines, reads as follows, to wit:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract.

DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 of the Court of Appeals dated January
29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot
located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the
lot. Petitioners agreed to sell it atP1,500.00 per square meter. Respondent then
gave petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent
the corresponding receipt stating that respondent promised to pay the balance of the
purchase price on or before March 23, 1990, thus:

On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed
the trial courts judgment.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the
appellate court in its Resolution8 dated July 14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled "Receipt for Partial
Payment" signed by both parties earlier mentioned is a contract to sell or a contract of
sale.

Las Pias, Metro Manila


March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T9905, LAS PIAS, METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED
THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT
SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON
OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE
FINAL DEED OF SALE ON THIS DATE.
SIGNED THIS 19th DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA

Second, plaintiff was the first to react to show his eagerness to push through with the
sale by sending defendants the letter dated March 25, 1990. (Exh. D) and reiterated
the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the
balance of the purchase price ready for payment (Exh. C). Defendants mere
allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing.
Defendants letters (Exhs. 2 and 5) appear to be mere afterthought.

(SGD) ONNIE SERRANO"2

On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote
petitioners informing them of his readiness to pay the balance of the contract price and
requesting them to prepare the final deed of sale.3
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter 4 to
respondent stating that petitioner Amparo Herrera is leaving for abroad on or before
April 15, 1990 and that they are canceling the transaction. Petitioners also informed
respondent that he can recover the earnest money of P100,000.00 anytime.
Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his
counsel Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in
the amount of P100,000.00 payable to him.
In view of the cancellation of the contract by petitioners, respondent filed with the
Regional Trial Court, Branch 63, Makati City a complaint against them for specific
performance and damages, docketed as Civil Case No. 90-1067.6

Petitioners contend that the Receipt is not a perfected contract of sale as provided for
in Article 14589 in relation to Article 147510 of the Civil Code. The delivery to them
of P100,000.00 as down payment cannot be considered as proof of the perfection of a
contract of sale under Article 148211 of the same Code since there was no clear
agreement between the parties as to the amount of consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and
should not be disturbed except for cogent reasons.14 Indeed, they should not be
changed on appeal in the absence of a clear showing that the trial court
overlooked, disregarded, or misinterpreted some facts of weight and
significance, which if considered would have altered the result of the
case.1awphi1.net12 In the present case, we find that both the trial court and the Court
of Appeals interpreted some significant facts resulting in an erroneous resolution of the
issue involved.
In holding that there is a perfected contract of sale, both courts mainly relied on the
earnest money given by respondent to petitioners. They invoked Article 1482 of the
Civil Code which provides that "Whenever earnest money is given in a contract of sale,
it shall be considered as part of the price and as proof of the perfection of the
contract."
We are not convinced.
In San Miguel Properties Philippines, Inc. v. Spouses Huang, 13 we held that the stages
of a contract of sale are: (1) negotiation, covering the period from the time the
prospective contracting parties indicate interest in the contract to the time the contract
is perfected; (2) perfection, which takes place upon the concurrence of the essential
elements of the sale, which is the meeting of the minds of the parties as to the object
of the contract and upon the price; and (3) consummation, which begins when the
parties perform their respective undertakings under the contract of sale, culminating in
the extinguishment thereof.
With the above postulates as guidelines, we now proceed to determine the real nature
of the contract entered into by the parties.

It is a canon in the interpretation of contracts that the words used therein should be
given their natural and ordinary meaning unless a technical meaning was
intended.14 Thus, when petitioners declared in the said "Receipt for Partial Payment"
that they
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED
THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT
SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
AREA OF 439 SQUARE METERS.

WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of
the Court of Appeals isREVERSED and respondents complaint is DISMISSED.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:

MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON


OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE
FINAL DEED OF SALE ON THIS DATE.

REYNATO S. PUNO
Chief Justice
Chairperson

there can be no other interpretation than that they agreed to a conditional contract of
sale, consummation of which is subject only to the full payment of the purchase price.
RENATO C. CORONA
Associate Justice

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of
the vendor's obligation to transfer title is subordinated to the happening of a future and
uncertain event, so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed. The suspensive
condition is commonly full payment of the purchase price.15

CANCIO C. GARCIA
Associate Justice
CERTIFICATION

The differences between a contract to sell and a contract of sale are well-settled in
jurisprudence. As early as 1951, in Sing Yee v. Santos,16 we held that:
x x x [a] distinction must be made between a contract of sale in which title passes to
the buyer upon delivery of the thing sold and a contract to sell x x x where by
agreement the ownership is reserved in the seller and is not to pass until the full
payment, of the purchase price is made. In the first case, non-payment of the price is a
negative resolutory condition; in the second case, full payment is a positive suspensive
condition. Being contraries, their effect in law cannot be identical. In the first case, the
vendor has lost and cannot recover the ownership of the land sold until and unless the
contract of sale is itself resolved and set aside. In the second case, however, the title
remains in the vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract.

(On official leave)


ADOLFO S. AZCUNA
Asscociate Justice

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

Footnotes
In other words, in a contract to sell, ownership is retained by the seller and is not to
pass to the buyer until full payment of the price.17
In this case, the "Receipt for Partial Payment" shows that the true agreement between
the parties is a contract to sell.
First, ownership over the property was retained by petitioners and was not
to pass to respondent until full payment of the purchase price. Thus,
petitioners need not push through with the sale should respondent fail to
remit the balance of the purchase price before the deadline on March 23,
1990. In effect, petitioners have the right to rescind unilaterally the
contract the moment respondent fails to pay within the fixed period. 18
Second, the agreement between the parties was not embodied in a deed
of sale. The absence of a formal deed of conveyance is a strong indication
that the parties did not intend immediate transfer of ownership, but only a
transfer after full payment of the purchase price. 19
Third, petitioners retained possession of the certificate of title of the lot.
This is an additional indication that the agreement did not transfer to
respondent, either by actual or constructive delivery, ownership of the
property.20
It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is
given in a contract of sale, it shall be considered as part of the price and proof of the
perfection of the contract." However, this article speaks ofearnest money given in a
contract of sale. In this case, the earnest money was given in a contract to sell. The
earnest money forms part of the consideration only if the sale is consummated upon
full payment of the purchase price.21 Now, since the earnest money was given in a
contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by
respondent) did not take place. Clearly, respondent cannot compel petitioners to
transfer ownership of the property to him.

Penned by Associate Justice Conchita Carpio Morales (now a member


of this Court) and concurred in by Associate Justice Jainal D. Rasul and
Associate Justice Bernardo P. Abesamis (both retired).
1

Exhibit "B," Records, p. 124.

Exhibit "D," id., p. 125.

Exhibit "2," id., p. 173.

Exhibit "5," Rollo, p. 177.

Records, pp. 1-4.

Id., pp. 423-430.

Id., p. 25.

Article 1458. By the contract of sale one of the contracting parties


obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other himself to pay therefore a price certain in money or its
equivalent. A contract of sale may be absolute or conditional.
9

Article 1475. The contract of sale is perfected at the moment there is a


meeting of the minds upon the thing which is the object of the contract and
upon the price.
10

From that moment, the parties may reciprocally demand


performance, subject to the provisions of the law governing
the form of contracts.

Article 1482. Whenever earnest money is given in a contract of sale, it


shall be considered as part of the price and as proof of the perfection of
the contract.
11

Gamaliel C. Villanueva and Irene C. Villanueva v. Court of Appeals,


Spouses Jose and Leonila Dela Cruz, and Spouses Guido and Felicitas
Pile, G.R. No. 107624, January 28, 1997, 267 SCRA 89.
12

G.R. No. 137290, July 31, 2000, 336 SCRA 737, citing Ang Yu
Asuncion v. Court of Appeals, 238 SCRA 602 (1994).
13

Tan v. Court of Appeals, G.R. No. 100942, August 12, 1992, 212 SCRA
586.
14

Philippine National Bank v. Court of Appeals and Lapaz Kaw Ngo, G.R.
No. 119580, September 26, 1996, citing Rose Packing Co., Inc. v. Court
of Appeals, 167 SCRA 309, 318 (1988) and Lim v. Court of Appeals, 182
SCRA 564, 670 (1990), with citations.
15

16

47 O.G. 6372 (1951).

17

Id., citing Jacinto v. Kaparaz, 209 SCRA 246, 254 (1992).

Tomas K. Chua v. Court of Appeals and Encarnacion Valdes-Choy,


G.R. No. 119255, April 9, 2003, 401 SCRA 54.
18

19

Id.

20

Id.

21

Id.

11. Republic of the Philippines


SUPREME COURT
Manila

delivering the policy as endorsed to the mortgagee within five (5) days after the
execution of the mortgage or the expiry date of the insurance, the mortgagee may, at
his option but without any obligation to do so, effect such insurance or obtain such
renewal for the account of the mortgagor.

FIRST DIVISION
G.R. No. 74553 June 8, 1989

The credit covered by the promissory note and chattel mortgage executed by
respondent Galicano Siton was first assigned by Car Traders Philippines, Inc. in favor
of Filinvest Credit Corporation. Subsequently, Filinvest Credit Corporation likewise
reassigned said credit in favor of petitioner Servicewide Specialists, Inc. and
respondent Siton was advised of this second assignment.

SERVICEWIDE SPECIALISTS, INCORPORATED, petitioner,


vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, GALICANO SITON AND
JUDGE JUSTINIANO DE DUMO respondents.

Alleging that Siton failed to pay the part of the installment which fell due on November
2, 1981 as well as the subsequent installments which fell due on December 2, 1981
and January 2, 1982, respectively, the petitioner filed this action against Galicano
Siton and "John Doe."

Labaguis, Loyola, Angara & Associates for petitioner.

The relief sought by the plaintiff is a Writ of Replevin over subject motor vehicle or, in
the alternative, for a sum of money of P 20,319.42 plus interest thereon at the rate of
14% per annum from January 11, 1982 until fully paid; and in either case, for
defendants to pay certain sum of money for attorney's fees, liquidated damages,
bonding fees and other expenses incurred in the seizure of the motor vehicle plus
costs of suit.

Godofredo de Guzman for respondents.

MEDIALDEA, J.:
This is a petition for review on certiorari of a decision of the Intermediate Appellate
Court (now Court of Appeals) in ACG.R. CV No. 03876 affirming in toto the decision of
the Regional Trial Court of Manila in Civil Case No. 82-4364 entitled, "Servicewide
Specialists, Inc. vs. Galicano Siton and John Doe."

After the service of summons, Justiniano de Dumo, identifying himself as the "John
Doe" in the Complaint, inasmuch as he is in possession of the subject vehicle, filed his
Answer with Counterclaim and with Opposition to the prayer for a Writ of Replevin.
Said defendant, alleged the fact that he has bought the motor vehicle from Galicano
Siton on November 24, 1979; that as such successor, he stepped into the rights and
obligations of the seller; that he has religiously paid the installments as stipulated upon
in the promissory note. He also manifested that the Answer he has filed in his behalf
should likewise serve as a responsive pleading for his co-defendant Galicano Siton.

The antecedent facts in this case as found by the lower court are as follows:
The private respondent Galicano Siton purchased from Car Traders Philippines, Inc. a
vehicle described as Mitsubishi Celeste two-door with air-conditioning, Engine 2M62799, Serial No. A73-2652 and paid P 25,000.00 as downpayment of the price. The
remaining balance of P 68,400.00, includes not only the remaining principal obligation
but also advance interests and premiums for motor vehicle insurance policies.
On August 14, 1979, Siton executed a promissory note in favor of Car Traders
Philippines, Inc. expressly stipulating that the face value of the note which is P 68,400.
00, shall "be payable, without need of notice of demand, in installments of the amounts
following and at the dates hereinafter set forth, to wit: P 1,900.00 monthly for 36
months due and payable on the 14th day of each month starting September 14, 1979,
thru and inclusive of August 14, 1982" (p. 84, Rollo). There are additional stipulations
in the Promissory Note consisting of, among others:
1 Interest at the rate of 14% per annum to be added on each
unpaid installment from maturity;
2 If default is made in the payment of any of the installments
or interest thereon, the total principal sum then remaining
unpaid, together with accrued interest thereon shall at once
become due and demandable;
3 In case of default, and attorney's services are availed of,
there shall be added a sum equal to 25% of the total sum due
thereon to cover attorney's fees, aside from expenses of
collection and legal costs (p. 84, Rollo).
As further security, Siton executed a Chattel Mortgage over the subject motor vehicle
in favor of Car Traders Philippines, Inc. (pp. 85-88, Rollo). The Chattel Mortgage
Contract provides additional stipulations, such as: a) the waiver by the mortgagor of
his rights under Art. 1252 of the Civil Code to designate the application of his
payments and authorize the mortgagee or its assigns to apply such payments to either
his promissory note or to any of his existing obligations to the mortgagee or its assigns
at the latter's discretion; and b) concerning the insurance of the subject motor vehicle,
the mortgagor is under obligation to secure the necessary policy in an amount not less
than the outstanding balance of the mortgage obligation and that loss thereof shall be
made payable to the mortgagee or its assigns as its interest may appear, with the
further obligation of the mortgagor to deliver the policy to the mortgagee. The
mortgagor further agrees that in default of his effecting or renewing the insurance and

On January 12, 1984, the Regional Trial Court rendered a decision, the dispositive
portion of which states:
WHEREFORE, judgment is hereby rendered as follows:
1. Denying the issuance of a Writ of Replevin in this case;
2. Ordering defendants to pay jointly and severally, the
plaintiff, the remaining balance on the motor vehicle reckoned
as of January 25, 1982, without additional interest and
charges, and the same to be paid by installments, per the
terms of the Promissory Note, payable on the 14th day of
each month starting the month after this Decision shall have
become final, until the full payment of the remaining
obligation;
3. The Chattel Mortgage contract is deemed to cover the
obligation petition stated in par. 2, supra, without prejudice to
the parties, including defendant de Dumo, to now execute a
new promissory note and/or chattel mortgage contract;
4. Ordering defendants to pay, jointly and severally, the sum
of another P 3,859.90 to the plaintiff by way of refunding the
premium payments in the past on insurance policies over
subject car;
5. Each party shall bear his own expenses and attorney's
fees; and
6. The claim of one party against the other(s) for damages,
and vice-versa are hereby denied and dismissed. There is no
pronouncement as to costs.
SO ORDERED. (pp. 95-96, Rollo)
Not satisfied with the decision of the trial court, the petitioner appealed to the
Intermediate Appellate Court.

On April 25, 1986, the respondent Appellate Court rendered judgment affirming in toto
the decision of the trial court. The dispositive portion of the judgment states:
WHEREFORE, the appealed judgment is in full accord with
the evidence and the law is hereby therefore affirmed in all its
parts. Costs against plaintiff-appellant.

Anent its second, third and fifth assigned errors, petitioner submits that it is not bound
by the deed of sale made by Siton in favor of De Dumo, as neither petitioner nor its
predecessor has given their written or verbal consent thereto pursuant to the Deed of
Chattel Mortgage.
On this matter, the appellate court upheld the findings of the trial court, as follows, to
wit:

SO ORDERED. (p. 42, Rollo).


Hence, the instant petition was filed, praying for a reversal of the above-mentioned
decision in favor of private respondents, with the petitioner assigning the following
errors:
2.1 The Honorable Respondent, the Intermediate Appellate
Court erred and gravely abused its discretion in concluding
that there was a valid sale of the mortgaged vehicle between
Siton and De Dumo;
2.2 The Honorable Respondent, the Intermediate Appellate
Court erred and gravely abused its discretion in holding that
the petitioner (plaintiff) and its predecessors-in-interest are
bound by the questionable and invalid unnotarized Deed of
Sale between Siton and De Dumo, even as neither petitioner
(plaintiff) nor its predecessors-in-interest had knowledge nor
had they given their written or verbal consent thereto;
2.3 The Honorable Respondent, the Intermediate Appellate
Court erred and gravely abused its discretion in ruling that the
mortgagee (petitioner) has the obligation to make demands to
De Dumo for payment on the Promissory Note when De
Dumo is not privy thereto;
2.4 The Honorable Respondent, the Intermediate Appellate
Court erred and acted with grave abuse of discretion in
refusing to issue the Writ of Replevin despite due compliance
by petitioner of the requirements of Rule 60, Sections 1 and 2
of REVISED RULES OF COURT;
2.5 The Honorable Respondent, the Intermediate Appellate
Court acted with grave abuse of discretion in ruling that
petitioner (creditor-mortgagee) is obliged to inform
respondent De Dumo (not privy to the mortgage) to submit
the insurance policy over the mortgaged "res" and to demand
the payor-third-party (De Dumo) to redeem his rubber check;
(pp. 4-5, Rollo).
In its first assigned error, petitioner alleges that the sale of the mortgaged vehicle
between the mortgagor Siton and De Dumo was void, as the sale is prohibited under
the provisions of the Deed of Chattel Mortgage, the Chattel Mortgage Act (Act 1508)
and the Revised Penal Code. The Deed of Chattel Mortgage executed by the
petitioner and Siton stipulates:
The Mortgagor shall not sell, mortgage or in any other way,
encumber or dispose of the property herein mortgaged
without the previous written consent of the Mortgagee. (p. 85,
Rollo).
The rule is settled that the chattel mortgagor continues to be the owner of the property,
and therefore, has the power to alienate the same; however, he is obliged under pain
of penal liability, to secure the written consent of the mortgagee. (Francisco, Vicente,
Jr., Revised Rules of Court in the Philippines, (1972), Volume IV-B Part I, p. 525).
Thus, the instruments of mortgage are binding, while they subsist, not only upon the
parties executing them but also upon those who later, by purchase or otherwise,
acquire the properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the mortgaged
property in favor of a third person, therefore, affects not the validity of the sale but only
the penal liability of the mortgagor under the Revised Penal Code and the binding
effect of such sale on the mortgagee under the Deed of Chattel Mortgage.

The first issue is whether or not the sale and transfer of the
motor vehicle, subject matter of the chattel mortgage, made
by Siton in favor of Atty. de Dumo is illegal and violative of the
Chattel Mortgage Law. The supposition is that if it were
illegal, then plaintiff has all the right to file this action and to
foreclose on the chattel mortgage. Both defendants testified
that, before the projected sale, they went to a certain. Atty.
Villa of Filinvest Credit Corporation advising the latter of the
intended sale and transfer. Defendants were accordingly
advised that the verbal information given to the corporation
would suffice, and that it would be tedious and impractical to
effect a change of transfer of ownership as that would require
a new credit investigation as to the capacity and worthiness of
Atty. De Dumo, being the new debtor. The further suggestion
given by Atty. Villa is that the account should be maintained in
the name of Galicano Siton. Plaintiff claims that it and its
predecessor had never been notified of the sale much less
were they notified in writing as required by the contract. On
this particular issue, it would really appear that, since the
transfer, it was Atty. de Dumo who had been paying said
account, almost invariably with his personal checks. In fact,
one of the checks that supposedly bounced, marked Exhibit J
and the relative receipt as Exhibit 16, was Atty. de Dumo's
personal check. Note that plaintiff has been accepting such
payments by defendant de Dumo. It would appear, therefore,
that there was an implied acceptance by the plaintiff and its
predecessor of the transfer. Another reasonable conclusion is
that, while there was failure on the part of defendants to
comply strictly and literaly with their contract, there was
substantial compliance therewith. (pp. 92-93, Rollo)
We agree with the aforequoted findings and conclusions of the lower court which were
affirmed on appeal by the Court of Appeals. The conclusions and findings of facts by
the trial court are entitled to great weight and will not be disturbed on appeal unless for
strong and cogent reasons because the trial court is in a better position to examine
real evidence as well as to observe the demeanor of witnesses while testifying on the
case. (Macua vs. Intermediate Appellate Court, No. L-70810, October 26, 1987,155
SCRA 29)
There is no dispute that the Deed of Chattel Mortgage executed between Siton and
the petitioner requires the written consent of the latter as mortgagee in the sale or
transfer of the mortgaged vehicle. We cannot ignore the findings, however, that before
the sale, prompt inquiries were made by private respondents with Filinvest Credit
Corporation regarding any possible future sale of the mortgaged property; and that it
was upon the advice of the company's credit lawyer that such a verbal notice is
sufficient and that it would be convenient if the account would remain in the name of
the mortgagor Siton.
Even the personal checks of de Dumo were accepted by petitioner as payment of
some of the installments under the promissory note (p. 92, Rollo). If it is true that
petitioner has not acquiesced in the sale, then, it should have inquired as to why de
Dumo's checks were being used to pay Siton's obligations.
Based on the foregoing circumstances, the petitioner is bound by its predecessor
company's representations. This is based on the doctrine of estoppel, through which,
"an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon" (Art. 1431, Civil
Code). Like the related principles of volenti non lit injuria (consent to injury), waiver and
acquiescence, estoppel finds its origin generally in the equitable notion that one may
not change his position, and profit from his own wrongdoing when he has caused
another to rely on his former representations (Sy vs. Central Bank, No. L-41480, April
30, 1976, 70 SCRA 570).
Further, it is worthy to note that despite the arguments of petitioner that it is not bound
by the sale of the vehicle to de Dumo, and that the latter is a stranger to the
transaction between Filinvest and Siton, nevertheless, it admitted de Dumo's obligation

as purchaser of the property when it named the latter as one of the defendants in the
lower court. Petitioner even manifested in its prayer in the appellant's brief and in the
petition before Us, that de Dumo be ordered to pay petitioner, jointly and severally with
Siton the unpaid balance on the promissory note (pp. 32 and 72, Rollo).
In the fourth assigned error by petitioner, the latter claims that the appellate court
gravely erred in upholding the trial court's refusal to issue that Writ of Replevin despite
compliance with the requirements of the Rules. This contention is devoid of merit.
Article 1484 of the New Civil Code prescribes three remedies which a vendor may
pursue in a contract of sale of personal property the price of which is payable in
installments, to wit: 1) to exact fulfillment of the obligation; 2) cancel the sale; and 3)
foreclose the mortgage on the thing sold. These remedies are alternative and the
vendor cannot avail of them at the same time.

It is evident from the foregoing findings that the checks issued by the defendants as
payment for the installments for November and December, 1981 and January, 1982
were dishonored and were not shown to have been replaced. The delivery of
promissory notes payable to order, or bills of exchange or other mercantile documents
shall produce the effect of payment only when they have been cashed. (Art. 1249, Civil
Code). When the existence of the debt is fully established by the evidence contained
in the record, the burden of proving that it has been extinguished by payment devolves
upon the debtor who offers such a defense to the claim of the creditor. (Chua Chienco
vs. Vargas, 11 Phil. 219). In the absence of any showing that the aforestated checks
were replaced and subsequently cashed, We can only infer that the monthly
installments for November, 1981, December, 1981 and January, 1982 have not been
paid. In view of the above, it is not correct for the appellate court to ignore the
evidence on record showing the default of private respondents in their obligations. The
fact that Siton and de Dumo were not advised or notified of their failure to comply with
their obligations under the note and under the Deed of Chattel Mortgage is of no
importance. Article 1169 of the Civil Code provides:

It is clear from the prayer of petitioner in its brief on appeal to the appellate court that it
had chosen the remedy of fulfillment when it asked the appellate court to order private
respondents to pay the remaining unpaid sums under the promissory note (p. 31,
Rollo). By having done so, it has deemed waived the third remedy of foreclosure, and
it cannot therefore ask at the same time for a Writ of Replevin as preparatory remedy
to foreclosure of mortgage. In a similar case, where the vendor filed an action
containing three remedies: to collect the purchase price; to seize the property
purchased by suing for replevin and to foreclose the mortgage executed thereon, We
held that such a scheme is not only irregular but is a flagrant circumvention of the
prohibition of the law (Luneta Motor Company vs. Dimagiba No. L-17061, December
30, 1961, 3 SCRA 884).

Those obliged to deliver or to do something incur in delay


from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary
in order that delay may exist:
1. When the obligation or the law expressly so declares;
xxx xxx xxx

Finally, the petitioner argues that the judgment of the appellate court was not in
accordance with its own findings and those of the trial court showing private
respondents' default in the payment of three monthly installments as a result of the
dishonor of three checks issued as payments; and that as a consequence thereof, the
full amount of the unpaid balance under the promissory note became due and
demandable pursuant to the terms of the promissory note.
This contention is impressed with merit. The findings of the trial court on this issue,
which were affirmed by the appellate court, state, as follows:
The second point of issue is whether or not defendants were
in arrears when the complaint was filed on January 25, 1982.
Plaintiff claims that there were three payments by checks
made by defendants, which are ineffective (Art. 1249, Civil
Code) as said checks bounced for insufficient finding. .... The
debtor/obligor is allegedly obliged, as per the Chattel
Mortgage Contract, to have the motor vehicle insured and,
failing which, the creditor may insure the same for the
account of the debtor. Such payments, therefore, together
with the value of the three checks that had been dishonored,
are the reasons for defendants' delinquency. On defendant's
part, more particularly Atty. de Dumo's, they submit that there
was no delinquency as, in fact, defendants have receipts to
evidence payment for the months of November 1981 (Exhibit
18 dated November 3, 1981), December 1981 (Exhibit 17
dated December 2, 1981), and January, 1982 (Exhibit 30,
dated January 5, 1982).
On cross-examination, Atty. de Dumo admitted that really one
of his checks (Exhibit J) was dishonored. There is no
evidence on way [or] the other whether said check was
replaced subsequently with a good one. Likewise, there is no
clarification in the record as to whether the two other
dishonored checks had been replaced. As to the insurance
policies, defendants claimed on the witness stand that they
were the ones who had the vehicle insured, for, otherwise,
defendant de Dumo could not have registered the motor
vehicle for the years 1980 up to 1982. Defendants further
contend that they complied with their undertaking by notifying
verbally the creditor of that fact. There is no denying the fact
however, that the insurance policies obtained were not
endorsed, much less surrendered, to the plaintiff; in fact such
policies were not shown in court to evidence the proper
indorsement of the policies in favor of the creditor. (pp. 93-94,
Rollo). (Emphasis supplied)

The promissory note executed by Siton in favor of Car Traders Philippines, Inc.
expressly stipulates that the unpaid balance shall be payable, without need of notice or
demand, in fixed monthly installments; and that if default be made in the payment of
any of the installments or interest thereon as and when the same becomes due and
payable as specified above, the total principal sum then remaining unpaid, together
with accrued interest thereon, shall at once become due and payable (p. 84, Rollo).
The parties are bound by this agreement.
In view of the foregoing, We find it correct to hold both the respondents Galicano Siton
and Justiniano de Dumo liable for their obligations to petitioner herein. In the case at
bar, the purchase of the car by respondent de Dumo from respondent Siton does not
necessarily imply the extinguishment of the liability of the latter. Since it was neither
established nor shown that Siton was released from responsibility under the
promissory note, the same does not constitute novation by substitution of debtors
under Article 1293 of the Civil Code. Likewise, the fact that petitioner company accepts
payments from a third person like respondent de Dumo, who has assumed the
obligation, will result merely to the addition of debtors and not novation. Hence, the
creditor may therefore enforce the obligation against both debtors. (Straight vs.
Hashell, 49 Phil. 614; Mata vs. Serra, 47 Phil. 464; McCullough vs. Veloso, 46 Phil. 1;
Pacific Commercial vs. Sotto, 34 Phil. 237). If there is no agreement as to solidarity,
the first and new debtors are considered obligated jointly. (Lopez vs. Court of Appeals,
et al., No. L-33157, June 29, 1982, 114 SCRA 671; Dungo vs. Lopena, et al., L-18377,
December 29, 1962, 6 SCRA 1007).
ACCORDINGLY, the petition is GRANTED and the assailed decision of the Court of
Appeals dated April 25, 1986 is hereby REVERSED and SET ASIDE, and a new one
entered, ordering the private respondents Galicano Siton and Justiniano de Dumo,
jointly to pay to petitioner Servicewide Specialists, Incorporated, the total sum of the
remaining unpaid balance on the promissory note with interest thereon at fourteen
percent per annum from January 25, 1982 until fully paid, as well as stipulated
attorney's fees and liquidated damages; and to reimburse to petitioner the sum of P
3,859.90 for the premium payments on the insurance policies over the subject vehicle.
Costs against private respondents.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

12. EN BANC

redemption over the property for one year. The right of redemption could be exercised
by paying the amount of the judgment debt within the aforesaid period. [13]
At the auction sale, Benavente purchased Castros property for Five Hundred
U.S. Dollars (US$500.00), the amount which Castro was adjudged to pay him. [14]

[B.M. No. 793. July 30, 2004]

On December 21, 1987, Castro, in consideration of Maqueras legal services in


the civil case involving Benavente, entered into an oral agreement with Maquera and
assigned his right of redemption in favor of the latter.[15]

IN RE: SUSPENSION FROM THE PRACTICE OF LAW IN THE TERRITORY OF


GUAM OF ATTY. LEON G. MAQUERA

On January 8, 1988, Maquera exercised Castros right of redemption by paying


Benavente US$525.00 in satisfaction of the judgment debt. Thereafter, Maquera had
the title to the property transferred in his name.[16]

RESOLUTION

On December 31, 1988, Maquera sold the property to C.S. Chang and C.C.
Chang for Three Hundred Twenty Thousand U.S. Dollars (US$320,000.00). [17]

TINGA, J.:
May a member of the Philippine Bar who was disbarred or suspended from the
practice of law in a foreign jurisdiction where he has also been admitted as an attorney
be meted the same sanction as a member of the Philippine Bar for the same infraction
committed in the foreign jurisdiction? There is a Rule of Court provision covering this
cases central issue. Up to this juncture, its reach and breadth have not undergone the
test of an unsettled case.
In a Letter dated August 20, 1996,[1] the District Court of Guam informed this
Court of the suspension of Atty. Leon G. Maquera (Maquera) from the practice of law
in Guam for two (2) years pursuant to the Decision rendered by the Superior Court of
Guam on May 7, 1996 in Special Proceedings Case No. SP0075-94,[2] a disciplinary
case filed by the Guam Bar Ethics Committee against Maquera.
The Court referred the matter of Maqueras suspension in Guam to the Bar
Confidant for comment in its Resolution dated November 19, 1996.[3] Under Section
27, Rule 138 of the Revised Rules of Court, the disbarment or suspension of a
member of the Philippine Bar in a foreign jurisdiction, where he has also been
admitted as an attorney, is also a ground for his disbarment or suspension in this
realm, provided the foreign courts action is by reason of an act or omission constituting
deceit, malpractice or other gross misconduct, grossly immoral conduct, or a violation
of the lawyers oath.
In a Memorandum dated February 20, 1997, then Bar Confidant Atty. Erlinda
C. Verzosa recommended that the Court obtain copies of the record of Maqueras case
since the documents transmitted by the Guam District Court do not contain the factual
and legal bases for Maqueras suspension and are thus insufficient to enable her to
determine whether Maqueras acts or omissions which resulted in his suspension in
Guam are likewise violative of his oath as a member of the Philippine Bar. [4]
Pursuant to this Courts directive in its Resolution dated March 18, 1997,[5] the
Bar Confidant sent a letter dated November 13, 1997 to the District Court of Guam
requesting for certified copies of the record of the disciplinary case against Maquera
and of the rules violated by him. [6]
The Court received certified copies of the record of Maqueras case from the
District Court of Guam on December 8, 1997. [7]
Thereafter, Maqueras case was referred by the Court to the Integrated Bar of
the Philippines (IBP) for investigation report and recommendation within sixty (60)
days from the IBPs receipt of the case records. [8]
The IBP sent Maquera a Notice of Hearing requiring him to appear before the
IBPs Commission on Bar Discipline on July 28, 1998. [9] However, the notice was
returned unserved because Maquera had already moved from his last known address
in Agana, Guam and did not leave any forwarding address. [10]
On October 9, 2003, the IBP submitted to the Court its Report and
Recommendation and its Resolution No. XVI-2003-110, indefinitely suspending
Maquera from the practice of law within the Philippines until and unless he updates
and pays his IBP membership dues in full. [11]
The IBP found that Maquera was admitted to the Philippine Bar on February
28, 1958. On October 18, 1974, he was admitted to the practice of law in the territory
of Guam. He was suspended from the practice of law in Guam for misconduct, as he
acquired his clients property as payment for his legal services, then sold it and as a
consequence obtained an unreasonably high fee for handling his clients case.[12]
In its Decision, the Superior Court of Guam stated that on August 6, 1987,
Edward Benavente, the creditor of a certain Castro, obtained a judgment against
Castro in a civil case.Maquera served as Castros counsel in said case. Castros
property subject of the case, a parcel of land, was to be sold at a public auction in
satisfaction of his obligation to Benavente.Castro, however, retained the right of

On January 15, 1994, the Guam Bar Ethics Committee (Committee) conducted
hearings regarding Maqueras alleged misconduct. [18]
Subsequently, the Committee filed a Petition in the Superior Court of Guam
praying that Maquera be sanctioned for violations of Rules 1.5 [19] and 1.8(a)[20] of the
Model Rules of Professional Conduct (Model Rules) in force in Guam. In its
Petition, the Committee claimed that Maquera obtained an unreasonably high fee for
his services. The Committee further alleged that Maquera himself admitted his failure
to comply with the requirement in Rule 1.8 (a) of the Model Rules that a lawyer shall
not enter into a business transaction with a client or knowingly acquire a pecuniary
interest adverse to a client unless the transaction and the terms governing the lawyers
acquisition of such interest are fair and reasonable to the client, and are fully disclosed
to, and understood by the client and reduced in writing. [21]
The Committee recommended that Maquera be: (1) suspended from the
practice of law in Guam for a period of two [2] years, however, with all but thirty (30)
days of the period of suspension deferred; (2) ordered to return to Castro the
difference between the sale price of the property to the Changs and the amount due
him for legal services rendered to Castro; (3) required to pay the costs of the
disciplinary proceedings; and (4) publicly reprimanded. It also recommended that other
jurisdictions be informed that Maquera has been subject to disciplinary action by the
Superior Court of Guam.[22]
Maquera did not deny that Castro executed a quitclaim deed to the property in
his favor as compensation for past legal services and that the transaction, except for
the deed itself, was oral and was not made pursuant to a prior written
agreement. However, he contended that the transaction was made three days
following the alleged termination of the attorney-client relationship between them, and
that the property did not constitute an exorbitant fee for his legal services to Castro. [23]
On May 7, 1996, the Superior Court of Guam rendered
its Decision[24] suspending Maquera from the practice of law in Guam for a period of
two (2) years and ordering him to take the Multi-State Professional Responsibility
Examination (MPRE) within that period. The court found that the attorney-client
relationship between Maquera and Castro was not yet completely terminated when
they entered into the oral agreement to transfer Castros right of redemption to
Maquera on December 21, 1987. It also held that Maquera profited too much from the
eventual transfer of Castros property to him since he was able to sell the same to the
Changs with more than US$200,000.00 in profit, whereas his legal fees for services
rendered to Castro amounted only to US$45,000.00. The court also ordered him to
take the MPRE upon his admission during the hearings of his case that he was aware
of the requirements of the Model Rules regarding business transactions between an
attorney and his client in a very general sort of way. [25]
On the basis of the Decision of the Superior Court of Guam, the IBP concluded
that although the said court found Maquera liable for misconduct, there is no evidence
to establish that [Maquera] committed a breach of ethics in the
Philippines.[26] However, the IBP still resolved to suspend him indefinitely for his failure
to pay his annual dues as a member of the IBP since 1977, which failure is, in turn, a
ground for removal of the name of the delinquent member from the Roll of Attorneys
under Section 10, Rule 139-A of the Revised Rules of Court. [27]
The power of the Court to disbar or suspend a lawyer for acts or omissions
committed in a foreign jurisdiction is found in Section 27, Rule 138 of the Revised
Rules of Court, as amended by Supreme Court Resolution dated February 13, 1992,
which states:
Section 27. Disbarment or suspension of attorneys by Supreme Court, grounds
therefor.A member of the bar may be disbarred or suspended from his office as
attorney by the Supreme Court for any deceit, malpractice, or other gross
misconduct in such office, grossly immoral conduct, or by reason of his conviction of
a crime involving moral turpitude, or for any violation of the oath which he is
required to take before admission to practice, or for a willful disobedience

appearing as attorney for a party to a case without authority to do so. The practice of
soliciting cases at law for the purpose of gain, either personally or through paid agents
or brokers, constitutes malpractice.
The disbarment or suspension of a member of the Philippine Bar by a competent
court or other disciplinatory agency in a foreign jurisdiction where he has also
been admitted as an attorney is a ground for his disbarment or suspension if the
basis of such action includes any of the acts hereinabove enumerated.
The judgment, resolution or order of the foreign court or disciplinary agency
shall be prima facie evidence of the ground for disbarment or
suspension (Emphasis supplied).
The Court must therefore determine whether Maqueras acts, namely: acquiring
by assignment Castros right of redemption over the property subject of the civil case
where Maquera appeared as counsel for him; exercising the right of redemption; and,
subsequently selling the property for a huge profit, violate Philippine law or the
standards of ethical behavior for members of the Philippine Bar and thus constitute
grounds for his suspension or disbarment in this jurisdiction.
The Superior Court of Guam found that Maquera acquired his clients property
by exercising the right of redemption previously assigned to him by the client in
payment of his legal services. Such transaction falls squarely under Article 1492 in
relation to Article 1491, paragraph 5 of the Civil Code of the Philippines. Paragraph 5
of Article 1491[28] prohibits the lawyers acquisition by assignment of the clients property
which is the subject of the litigation handled by the lawyer. Under Article 1492,[29] the
prohibition extends to sales in legal redemption.
The prohibition ordained in paragraph 5 of Article 1491 and Article 1492 is
founded on public policy because, by virtue of his office, an attorney may easily take
advantage of the credulity and ignorance of his client[30] and unduly enrich himself at
the expense of his client.
The case of In re: Ruste[31] illustrates the significance of the aforementioned
prohibition. In that case, the attorney acquired his clients property subject of a case
where he was acting as counsel pursuant to a deed of sale executed by his clients in
his favor. He contended that the sale was made at the instance of his clients because
they had no money to pay him for his services. The Court ruled that the lawyers
acquisition of the property of his clients under the circumstances obtaining therein
rendered him liable for malpractice. The Court held:
Whether the deed of sale in question was executed at the instance of the spouses
driven by financial necessity, as contended by the respondent, or at the latters behest,
as contended by the complainant, is of no moment. In either case an attorney
occupies a vantage position to press upon or dictate his terms to a harassed client, in
breach of the rule so amply protective of the confidential relations, which must
necessarily exist between attorney and client, and of the rights of both. [32]

constitutes prima facie evidence of Maqueras unethical acts as a lawyer. [36] More
fundamentally, due process demands that he be given the opportunity to defend
himself and to present testimonial and documentary evidence on the matter in an
investigation to be conducted in accordance with Rule 139-B of the Revised Rules of
Court. Said rule mandates that a respondent lawyer must in all cases be notified of the
charges against him. It is only after reasonable notice and failure on the part of the
respondent lawyer to appear during the scheduled investigation that an investigation
may be conducted ex parte.[37]
The Court notes that Maquera has not yet been able to adduce evidence on his
behalf regarding the charges of unethical behavior in Guam against him, as it is not
certain that he did receive the Notice of Hearing earlier sent by the IBPs Commission
on Bar Discipline. Thus, there is a need to ascertain Maqueras current and correct
address in Guam in order that another notice, this time specifically informing him of the
charges against him and requiring him to explain why he should not be suspended or
disbarred on those grounds (through this Resolution), may be sent to him.
Nevertheless, the Court agrees with the IBP that Maquera should be
suspended from the practice of law for non-payment of his IBP membership dues from
1977 up to the present.[38]Under Section 10, Rule 139-A of the Revised Rules of Court,
non-payment of membership dues for six (6) months shall warrant suspension of
membership in the IBP, and default in such payment for one year shall be ground for
removal of the name of the delinquent member from the Roll of Attorneys. [39]
WHEREFORE, Atty. Leon G. Maquera is required to SHOW CAUSE, within
fifteen (15) days from receipt of this Resolution, why he should not be suspended or
disbarred for his acts which gave rise to the disciplinary proceedings against him in the
Superior Court of Guam and his subsequent suspension in said jurisdiction.
The Bar Confidant is directed to locate the current and correct address of Atty.
Maquera in Guam and to serve upon him a copy of this Resolution.
In the meantime, Atty. Maquera is SUSPENDED from the practice of law for
ONE (1) YEAR or until he shall have paid his membership dues, whichever comes
later.
Let a copy of this Resolution be attached to Atty. Maqueras personal record in
the Office of the Bar Confidant and copies be furnished to all chapters of the
Integrated Bar of the Philippines and to all courts in the land.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, SandovalGutierrez, Carpio, Austria-Martinez, Carpio-Morales, Callejo, Sr., Azcuna, and ChicoNazario, JJ., concur.
Corona, J., on leave.

[1]

Rollo, p. 1.

The Superior Court of Guam also hinted that Maqueras acquisition of Castros
right of redemption, his subsequent exercise of said right, and his act of selling the
redeemed property for huge profits were tainted with deceit and bad faith when it
concluded that Maquera charged Castro an exorbitant fee for his legal services. The
court held that since the assignment of the right of redemption to Maquera was in
payment for his legal services, and since the property redeemed by him had a market
value of US$248,220.00 as of December 21, 1987 (the date when the right of
redemption was assigned to him), he is liable for misconduct for accepting payment for
his legal services way beyond his actual fees which amounted only to US$45,000.00.

[2]

Guam Bar Ethics Committee, petitioner, v. Leon G. Maquera, respondent.

[3]

Rollo, p. 11.

[4]

Id. at 14-15.

[5]

In said Resolution, Court directed the Bar Confidant to obtain copies of the entire
record of Maqueras case from the appropriate authorities in Guam.

[6]

Rollo, p. 16.

Maqueras acts in Guam which resulted in his two (2)-year suspension from the
practice of law in that jurisdiction are also valid grounds for his suspension from the
practice of law in the Philippines. Such acts are violative of a lawyers sworn duty to act
with fidelity toward his clients. They are also violative of the Code of Professional
Responsibility, specifically, Canon 17 which states that [a] lawyer owes fidelity to the
cause of his client and shall be mindful the trust and confidence reposed in him; and
Rule 1.01 which prohibits lawyers from engaging in unlawful, dishonest, immoral or
deceitful conduct. The requirement of good moral character is not only a condition
precedent to admission to the Philippine Bar but is also a continuing requirement to
maintain ones goods standing in the legal profession. [33]

[7]

Report of the Bar Confidant dated January 21, 1998, Id. at 39. In compliance with
the requirements for the admissibility of public documents issued by a
foreign jurisdiction under Sections 24 and 25 in relation to Section 19(a),
Rule 132 of the Revised Rules of Court, the Deputy Clerk of Court of the
District Court of Guam certified that the documents comprising the record
of Maqueras case transmitted to this Court are true copies of the original
on file with the District Court of Guam (See Id. at 20 and 33).

[8]

En Banc Resolution dated February 10, 1998, Id. at 40.

[9]

Notice of Hearing dated June 24, 1998, Id. at 65.

It bears stressing that the Guam Superior Courts judgment ordering Maqueras
suspension from the practice of law in Guam does not automatically result in his
suspension or disbarment in the Philippines. Under Section 27,[34] Rule 138 of the
Revised Rules of Court, the acts which led to his suspension in Guam are mere
grounds for disbarment or suspension in this jurisdiction, at that only if the basis of the
foreign courts action includes any of the grounds for disbarment or suspension in this
jurisdiction.[35] Likewise, the judgment of the Superior Court of Guam only

[10]

IBP Report and Recommendation, Id. at 72.

[11]

Id.

[12]

Id., at 69-70.

[13]

Decision of the Superior Court of Guam dated May 7, 1996, Id. at 50.

[14]

Ibid.

[15]

Id.

[16]

Id.

[17]

Id.

[18]

Id

[19]

The record of the case does not contain a copy of the text of Rule 1.5 of the Model
Rules of Professional Conduct but the Decision of the Guam Superior
Court states that Rule 1.5 prohibits a lawyer from obtaining an
unreasonably high fee for his services (Rollo, p. 52).

[20]

Rule 1.8 (a). A lawyer shall not enter into a business transaction with a client or
knowingly acquire an ownership, possessory, security or other pecuniary
interest adverse to a client unless:

1. the transaction and terms on which the lawyer acquires the interest are fair and
reasonable to the client and are fully disclosed and transmitted in writing
to the client in a manner which can reasonably be understood by the
client;
2. the client is given a reasonable opportunity too seek the advice of independent
counsel in the transaction; and
3. the client consents in writing thereto. (Ibid)
[21]

Decision of the Superior Court of Guam dated May 7, 1996, Id. at 52-53.

[22]

Id. at 53.

[23]

Id. at 54.

[24]

Id. at 49-50.

[25]

Id. at 49-60.

[26]

IBP Report and Recommendation, Id. at 72.

[27]

Id. at 73.

[28]

Article 1491, paragraph 5, of the Civil Code provides:

The following persons cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another:
(5) Judges, justices, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice,
the property and rights in litigation or levied upon an execution before the
court within whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they
may take part by virtue of their profession. (Emphasis supplied)
[29]

Art. 1492. The prohibitions in the two preceding articles are applicable to sales in
legal redemption, compromises and renunciations (Civil Code; emphasis
supplied).

[30]

Cruz v. Jacinto, Adm. Case No. 5235, March 22, 2000, 328 SCRA 636; Nakpil v.
Valdes, Adm. Case No. 2040, March 4, 1998, 286 SCRA 758; Sotto v.
Samson, G.R. No. L-16917, July 31, 1962, 5 SCRA 733.

[31]

70 Phil. 243 (1940).

[32]

Id. at 247, citing Hernandez v. Villanueva, 40 Phil 775 (1920).

[33]

Villanueva v. Sta. Ana, CBD Case No. 251, July 11, 1995, 245 SCRA 707;
Cordova v. Cordova, Adm. Case No. 3249, November 29, 1989, 179
SCRA 680.

[34]

Supra, p. 10.

[35]

Ibid.

[36]

The characterization of the judgment of a foreign court or disciplinary agency


suspending or disbarring of a member of the Philippine Bar for acts
committed in that foreign jurisdiction as prima facie evidence of the ground
for suspension or disbarment is consistent with Section 48, Rule 139 of
the Revised Rules of Court which provides that the judgment of a foreign
court cannot be enforced by execution in the Philippines, but only creates
a right of action. Section 48 further states that a foreign judgment against

a person is only presumptive evidence of a right against that


person. Hence, the same may be repelled by evidence of clear mistake of
law (seeNagarmull v. Binalbagan-Isabela Sugar Co., Inc., 144 Phil 72
[1970]).
[37]

Section 8, Rule 139-B provides:

Investigation. Upon joinder issues or upon failure of the respondent to answer, the
Investigator shall, with deliberate speed, proceed with the investigation of
the case. He shall have the power to issue subpoenas and administer
oaths. The respondent shall be given full opportunity to defend himself, to
present witnesses on his behalf, and be heard by himself and
counsel. However, if upon reasonable notice, the respondent fails to
appear, the investigation shall proceed ex parte .
The Investigator shall terminate the investigation within three (3) months from the date
of its commencement, unless extended for good cause by the Board of
Governors upon prior application.
Willful failure to refusal to obey a subpoena or any other lawful order issued by the
Investigator shall be dealt with as for indirect contempt of court. The
corresponding charge shall be filed by the Investigator before the IBP
Board of Governors which shall require the alleged contemnor to show
cause within ten (10) days from notice. The IBP Board of Governors may
thereafter conduct hearings, if necessary, in accordance with the
procedure set forth in this Rule for hearing before the Investigator. Such
hearing shall as far as practicable be terminated within fifteen (15) days
form its commencement. Thereafter, the IBP Board of Governors shall
within a like period of fifteen (15) days issue a resolution setting forth its
findings and recommendations, which shall forthwith be transmitted to the
Supreme Court for final action and if warranted, the imposition of penalty.
See also Baldomar v. Paras, Adm. Case No. 4980, December 15, 2000, 348 SCRA
212; Cottam v. Laysa, Adm. Case No. 4834, February 29, 2000, 326
SCRA 614.
[38]

IBP Report and Recommendation dated October 12, 2000, Rollo, pp. 72-73.

[39]See

also Santos v. Soliman, Adm. Case No. 4749, January 20, 2000, 322 SCRA
529; In the Matter of the IBP Membership Dues Delinquency of Atty. M.A.
Edillon, Adm. Case No. 1928, December 19, 1980, 101 SCRA 617.

13 Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-68838

March 11, 1991

FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio


Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case
Division) and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo,
Flor M. Agcaoili and Charito M. Babol),respondents.
Francisco A. Tan for petitioners.
Von Kaiser P. Soro for private respondent.

That by reason of the Order of the Court of First Instance of


Leyte dated June 2, 1962, my claim for the house and lot
mentioned in paragraph one (1) of the last will and testament
of the late Justina Fabillo, was denied altho the will was
probated and allowed by the Court;
That acting upon the counsel of Atty. Alfredo M. Murillo, I
have cause(d) the preparation and filing of another case,
entitled "Florencio Fabillo vs. Gregorio D. Brioso," which was
docketed as Civil Case No. 3532 of the Court of First Instance
of Leyte;
That I have retained and engaged the services of Atty.
ALFREDO M. MURILLO, married and of legal age, with
residence and postal address at Santa Fe, Leyte to be my
lawyer not only in Social Proceedings No. 843 but also in Civil
Case No. 3532 under the following terms and conditions;
That he will represent me and my heirs, in case of my demise
in the two cases until their successful conclusion or until the
case is settled to my entire satisfaction;

FERNAN, C.J.:
In the instant petition for review on certiorari, petitioners seek the reversal of the
appellate court's decision interpreting in favor of lawyer Alfredo M. Murillo the contract
of services entered into between him and his clients, spouses Florencio Fabillo and
Josefa Taa.
In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her
brother, Florencio, a house and lot in San Salvador Street, Palo, Leyte which was
covered by tax declaration No. 19335, and to her husband, Gregorio D. Brioso, a piece
of land in Pugahanay, Palo, Leyte. 1 After Justina's death, Florencio filed a petition for
the probate of said will. On June 2, 1962, the probate court approved the project of
partition "with the reservation that the ownership of the land declared under Tax
Declaration No. 19335 and the house erected thereon be litigated and determined in a
separate proceedings." 2
Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in
recovering the San Salvador property. Acquiescing to render his services, Murillo
wrote Florencio the following handwritten letter:
Dear Mr. Fabillo:

That for and in consideration for his legal services, in the two
cases, I hereby promise and bind myself to pay Atty.
ALFREDO M. MURILLO, in case of success in any or both
cases the sum equivalent to FORTY PER CENTUM (40%) of
whatever benefit I may derive from such casesto be
implemented as follows:
If the house and lot in question is finally awarded to me or a
part of the same by virtue of an amicable settlement, and the
same is sold, Atty. Murillo, is hereby constituted as Atty. infact to sell and convey the said house and lot and he shall be
given as his compensation for his services as counsel and as
attorney-in-fact the sum equivalent to forty per centum of the
purchase price of the house and lot;
If the same house and lot is just mortgage(d) to any person,
Atty. Murillo shall be given the sum equivalent to forty per
centum (40%) of the proceeds of the mortgage;

I have instructed my stenographer to prepare the complaint and file the same on
Wednesday if you are ready with the filing fee and sheriffs fee of not less than P86.00
including transportation expenses.

If the house and lot is leased to any person, Atty. Murillo shall
be entitled to receive an amount equivalent to 40%
(FORTY PER CENTUM) of the rentals of the house and lot,
or a part thereof;

Considering that Atty. Montilla lost this case and the present action is a revival of a lost
case, I trust that you will gladly give me 40% of the money value of the house and
lot as a contigent (sic) fee in case of a success. When I come back I shall prepare the
contract of services for your signature.

If the house and lot or a portion thereof is just occupied by the


undersigned or his heirs, Atty. Murillo shall have the option of
either occupying or leasing to any interested party FORTY
PER CENT of the house and lot.

Thank you.

Atty. Alfredo M. Murillo shall also be given as part of his


compensation for legal services in the two cases
FORTY PER CENTUM of whatever damages, which the
undersigned can collect in either or both cases, provided, that
in case I am awarded attorney's fees, the full amount of
attorney's fees shall be given to the said Atty. ALFREDO M.
MURILLO;

Cordially yours,
(Sgd.) Alfredo M. Murillo
Aug. 9, 1964 3
Thirteen days later, Florencio and Murillo entered into the following contract:
CONTRACT OF SERVICES
KNOW ALL MEN BY THESE PRESENTS:
That I, FLORENCIO FABILLO, married to JOSEFA TANA, of
legal age, Filipino citizen and with residence and postal
address at Palo, Leyte, was the Petitioner in Special
Proceedings No. 843, entitled "In the Matter of the Testate
Estate of the late Justina Fabillo, Florencio Fabillo, Petitioner"
of the Court of First Instance of Leyte;

That in the event the house and lot is (sic) not sold and the
same is maintained by the undersigned or his heirs, the costs
of repairs, maintenance, taxes and insurance premiums shall
be for the account of myself or my heirs and Attorney Murillo,
in proportion to our rights and interest thereunder that is forty
per cent shall be for the account of Atty. Murillo and sixty per
cent shall be for my account or my heirs.
IN WITNESS HEREOF, I hereby set unto my signature below
this 22nd day of August 1964 at Tacloban City.
(Sgd.) FLORENCIO FABILLO

(Sgd.) JOSEFA T. FABILLO


WITH MY CONFORMITY:
(Sgd.) ALFREDO M. MURILLO
(Sgd.) ROMAN T. FABILLO
(Witness)

(Sgd.) CRISTETA F. MAGLINTE


(Witness) 4

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against
Gregorio D. Brioso to recover the San Salvador property. The case was terminated on
October 29, 1964 when the court, upon the parties' joint motion in the nature of a
compromise agreement, declared Florencio Fabillo as the lawful owner not only of the
San Salvador property but also the Pugahanay parcel of land.
Consequently, Murillo proceeded to implement the contract of services between him
and Florencio Fabillo by taking possession and exercising rights of ownership over
40% of said properties. He installed a tenant in the Pugahanay property.
Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties
and refused to give Murillo his share of their produce. 5 Inasmuch as his demands for
his share of the produce of the Pugahanay property were unheeded, Murillo filed on
March 23, 1970 in the then Court of First Instance of Leyte a complaint captioned
"ownership of a parcel of land, damages and appointment of a receiver" against
Florencio Fabillo, his wife Josefa Taa, and their children Ramon (sic) Fabillo and
Cristeta F. Maglinte. 6
Murillo prayed that he be declared the lawful owner of forty per cent of the two
properties; that defendants be directed to pay him jointly and severally P900.00 per
annum from 1966 until he would be given his share of the produce of the land plus
P5,000 as consequential damages and P1,000 as attorney's fees, and that defendants
be ordered to pay moral and exemplary damages in such amounts as the court might
deem just and reasonable.
In their answer, the defendants stated that the consent to the contract of services of
the Fabillo spouses was vitiated by old age and ailment; that Murillo misled them into
believing that Special Proceedings No. 843 on the probate of Justina's will was already
terminated when actually it was still pending resolution; and that the contingent fee of
40% of the value of the San Salvador property was excessive, unfair and
unconscionable considering the nature of the case, the length of time spent for it, the
efforts exerted by Murillo, and his professional standing.
They prayed that the contract of services be declared null and void; that Murillo's fee
be fixed at 10% of the assessed value of P7,780 of the San Salvador property; that
Murillo be ordered to account for the P1,000 rental of the San Salvador property which
he withdrew from the court and for the produce of the Pugahanay property from 1965
to 1966; that Murillo be ordered to vacate the portion of the San Salvador property
which he had occupied; that the Pugahanay property which was not the subject of
either Special Proceedings No. 843 or Civil Case No. 3532 be declared as the
exclusive property of Florencio Fabillo, and that Murillo be ordered to pay moral
damages and the total amount of P1,000 representing expenses of litigation and
attorney's fees.
In its decision of December 2, 1975, 7 the lower court ruled that there was insufficient
evidence to prove that the Fabillo spouses' consent to the contract was vitiated. It
noted that the contract was witnessed by two of their children who appeared to be
highly educated. The spouses themselves were old but literate and physically fit.
In claiming jurisdiction over the case, the lower court ruled that the complaint being
one "to recover real property from the defendant spouses and their heirs or to enforce
a lien thereon," the case could be decided independent of the probate proceedings.
Ruling that the contract of services did not violate Article 1491 of the Civil Code as
said contract stipulated a contingent fee, the court upheld Murillo's claim for
"contingent attorney's fees of 40% of the value of recoverable properties." However,
the court declared Murillo to be the lawful owner of 40% of both the San Salvador and
Pugahanay properties and the improvements thereon. It directed the defendants to
pay jointly and severally to Murillo the amount of P1,200 representing 40% of the net
produce of the Pugahanay property from 1967 to 1973; entitled Murillo to 40% of the
1974 and 1975 income of the Pugahanay property which was on deposit with a bank,
and ordered defendants to pay the costs of the suit.
Both parties filed motions for the reconsideration of said decision: Fabillo, insofar as
the lower court awarded 40% of the properties to Murillo and the latter insofar as it

granted only P1,200 for the produce of the properties from 1967 to 1973. On January
29, 1976, the lower court resolved the motions and modified its decision thus:
ACCORDINGLY, the judgment heretofore rendered is modified to read as
follows:
(a) Declaring the plaintiff as entitled to and the true and lawful owner of
forty percent (40%) of the parcels of land and improvements thereon
covered by Tax Declaration Nos. 19335 and 6229 described in Paragraph
5 of the complaint;
(b) Directing all the defendants to pay jointly and severally to the plaintiff
the sum of Two Thousand Four Hundred Fifty Pesos (P2,450.00)
representing 40% of the net produce of the Pugahanay property from
1967 to 1973;
(c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of
said riceland now on deposit with the Prudential Bank, Tacloban City,
deposited by Mr. Pedro Elona, designated receiver of the property;
(d) Ordering the defendants to pay the plaintiff the sum of Three Hundred
Pesos (P 300.00) as attorney's fees; and
(e) Ordering the defendants to pay the costs of this suit.
SO ORDERED.
In view of the death of both Florencio and Justina Fabillo during the pendency of the
case in the lower court, their children, who substituted them as parties to the case,
appealed the decision of the lower court to the then Intermediate Appellate Court. On
March 27, 1984, said appellate court affirmed in toto the decision of the lower court. 8
The instant petition for review on certiorari which was interposed by the Fabillo
children, was filed shortly after Murillo himself died. His heirs likewise substituted him
in this case. The Fabillos herein question the appellate court's interpretation of the
contract of services and contend that it is in violation of Article 1491 of the Civil Code.
The contract of services did not violate said provision of law. Article 1491 of the Civil
Code, specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase
even at a public or judicial auction, properties and rights which are the objects of
litigation in which they may take part by virtue of their profession. The said prohibition,
however, applies only if the sale or assignment of the property takes place during the
pendency of the litigation involving the client's property. 9
Hence, a contract between a lawyer and his client stipulating a contingent fee is not
covered by said prohibition under Article 1491 (5) of the Civil Code because the
payment of said fee is not made during the pendency of the litigation but only after
judgment has been rendered in the case handled by the lawyer. In fact, under the
1988 Code of Professional Responsibility, a lawyer may have a lien over funds and
property of his client and may apply so much thereof as may be necessary to satisfy
his lawful fees and disbursements. 10
As long as the lawyer does not exert undue influence on his client, that no fraud is
committed or imposition applied, or that the compensation is clearly not excessive as
to amount to extortion, a contract for contingent fee is valid and
enforceable. 11 Moreover, contingent fees were impliedly sanctioned by No. 13 of the
Canons of Professional Ethics which governed lawyer-client relationships when the
contract of services was entered into between the Fabillo spouses and Murillo. 12
However, we disagree with the courts below that the contingent fee stipulated between
the Fabillo spouses and Murillo is forty percent of the properties subject of the litigation
for which Murillo appeared for the Fabillos. A careful scrutiny of the contract shows
that the parties intended forty percent of the value of the properties as Murillo's
contingent fee. This is borne out by the stipulation that "in case of success of any or
both cases," Murillo shall be paid "the sum equivalent to forty per centum of whatever
benefit" Fabillo would derive from favorable judgments. The same stipulation was
earlier embodied by Murillo in his letter of August 9, 1964 aforequoted.
Worth noting are the provisions of the contract which clearly states that in case the
properties are sold, mortgaged, or leased, Murillo shall be entitled respectively to 40%
of the "purchase price," "proceeds of the mortgage," or "rentals." The contract is

vague, however, with respect to a situation wherein the properties are neither sold,
mortgaged or leased because Murillo is allowed "to have the option of occupying or
leasing to any interested party forty per cent of the house and lot." Had the parties
intended that Murillo should become the lawful owner of 40% of the properties, it
would have been clearly and unequivocally stipulated in the contract considering that
the Fabillos would part with actual portions of their properties and cede the same to
Murillo.
The ambiguity of said provision, however, should be resolved against Murillo as it was
he himself who drafted the contract. 13 This is in consonance with the rule of
interpretation that, in construing a contract of professional services between a lawyer
and his client, such construction as would be more favorable to the client should be
adopted even if it would work prejudice to the lawyer. 14 Rightly so because of the
inequality in situation between an attorney who knows the technicalities of the law on
the one hand and a client who usually is ignorant of the vagaries of the law on the
other hand. 15
Considering the nature of the case, the value of the properties subject matter thereof,
the length of time and effort exerted on it by Murillo, we hold that Murillo is entitled to
the amount of Three Thousand Pesos (P3,000.00) as reasonable attorney's fees for
services rendered in the case which ended on a compromise agreement. In so ruling,
we uphold "the time-honored legal maxim that a lawyer shall at all times uphold the
integrity and dignity of the legal profession so that his basic ideal becomes one of
rendering service and securing justice, not money-making. For the worst scenario that
can ever happen to a client is to lose the litigated property to his lawyer in whom all
trust and confidence were bestowed at the very inception of the legal controversy." 16
WHEREFORE, the decision of the then Intermediate Appellate Court is hereby
reversed and set aside and a new one entered (a) ordering the petitioners to pay Atty.
Alfredo M. Murillo or his heirs the amount of P3,000.00 as his contingent fee with legal
interest from October 29, 1964 when Civil Case No. 3532 was terminated until the
amount is fully paid less any and all amounts which Murillo might have received out of
the produce or rentals of the Pugahanay and San Salvador properties, and (b)
ordering the receiver of said properties to render a complete report and accounting of
his receivership to the court below within fifteen (15) days from the finality of this
decision. Costs against the private respondent.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.

Footnotes
1

Exhibit J.

Exhibit C.

Exhibit 5, emphasis supplied.

Exhibit A, emphasis supplied; acknowledgment omitted.

Record on Appeal, p. 4.

Civil Case No. 4434.

Penned by Judge Auxencio C. Dacuycuy.

Penned by Justice Mariano A. Zosa and concurred in by Justices Jorge


R. Coquia and Floreliana Castro-Bartolome.
8

Director of Lands vs. Ababa, G.R. No. 26096, February 27, 1979, 88
SCRA 513.
9

10

Rule 16.03, Canon 16.

11

Ulanday vs. Manila Railroad Co., 45 Phil. 540, 554.

12

See Recto vs. Harden, 100 Phil. 427, 428.

13

Reyes vs. De la Cruz, 105 Phil. 372.

14

De los Santos vs. Palanca, 119 Phil. 765.

15

Amalgamated Laborers Association vs. CIR, 131 Phil. 374.

Licudan et al. vs. The Hon. Court of Appeals and Teodoro O.


Domalanta, G.R. No. 91958, January 24, 1991.
16

14 Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170115

February 19, 2008

absolute sale in their favor, and that TCT No. 104310 in the name of petitioner be
cancelled.16
Petitioner filed its answer but failed to present evidence despite several opportunities
given thus, it was deemed to have waived its right to present evidence. 17
On March 6, 1996, the trial court rendered judgment, the dispositive part of which
reads:

PROVINCE OF CEBU, petitioner,


vs.
HEIRS OF RUFINA MORALES, NAMELY: FELOMINA V. PANOPIO, NENITA
VILLANUEVA, ERLINDA V. ADRIANO and CATALINA V. QUESADA, respondents.

WHEREFORE, judgment is rendered in favor of the plaintiffs and against


the defendant Province of Cebu, hereby directing the latter to convey Lot
646-A-3 to the plaintiffs as heirs of Rufina Morales, and in this connection,
to execute the necessary deed in favor of said plaintiffs.

DECISION
No pronouncement as to costs.
YNARES-SANTIAGO, J.:
SO ORDERED.18
Decision1

This is a petition for review on certiorari of the


of the Court of Appeals dated
March 29, 2005 in CA-G.R. CV No. 53632, which affirmed in toto the Decision2 of the
Regional Trial Court of Cebu City, Branch 6, in Civil Case No. CEB-11140 for specific
performance and reconveyance of property. Also assailed is the Resolution 3dated
August 31, 2005 denying the motion for reconsideration.
On September 27, 1961, petitioner Province of Cebu leased4 in favor of Rufina
Morales a 210-square meter lot which formed part of Lot No. 646-A of the Banilad
Estate. Subsequently or sometime in 1964, petitioner donated several parcels of land
to the City of Cebu. Among those donated was Lot No. 646-A which the City of Cebu
divided into sub-lots. The area occupied by Morales was thereafter denominated as
Lot No. 646-A-3, for which Transfer Certificate of Title (TCT) No. 30883 5 was issued in
favor of the City of Cebu.
On July 19, 1965, the city sold Lot No. 646-A-3 as well as the other donated lots at
public auction in order to raise money for infrastructure projects. The highest bidder for
Lot No. 646-A-3 was Hever Bascon but Morales was allowed to match the highest bid
since she had a preferential right to the lot as actual occupant thereof.6 Morales thus
paid the required deposit and partial payment for the lot.7
In the meantime, petitioner filed an action for reversion of donation against the City of
Cebu docketed as Civil Case No. 238-BC before Branch 7 of the then Court of First
Instance of Cebu. On May 7, 1974, petitioner and the City of Cebu entered into a
compromise agreement which the court approved on July 17, 1974. 8 The agreement
provided for the return of the donated lots to petitioner except those that have already
been utilized by the City of Cebu. Pursuant thereto, Lot No. 646-A-3 was returned to
petitioner and registered in its name under TCT No. 104310.9
Morales died on February 20, 1969 during the pendency of Civil Case No. 238BC.10 Apart from the deposit and down payment, she was not able to make any other
payments on the balance of the purchase price for the lot.
On March 11, 1983, one of the nieces of Morales, respondent Catalina V. Quesada,
wrote to then Cebu Governor Eduardo R. Gullas asking for the formal conveyance of
Lot No. 646-A-3 to Morales surviving heirs, in accordance with the award earlier made
by the City of Cebu.11 This was followed by another letter of the same tenor dated
October 10, 1986 addressed to Governor Osmundo G. Rama. 12
The requests remained unheeded thus, Quesada, together with the other nieces of
Morales namely, respondents Nenita Villanueva and Erlinda V. Adriano, as well as
Morales sister, Felomina V. Panopio, filed an action for specific performance and
reconveyance of property against petitioner, which was docketed as Civil Case No.
CEB-11140 before Branch 6 of the Regional Trial Court of Cebu City.13 They also
consigned with the court the amount of P13,450.00 representing the balance of the
purchase price which petitioner allegedly refused to accept. 14

In ruling for the respondents, the trial court held thus:


[T]he Court is convinced that there was already a consummated sale
between the City of Cebu and Rufina Morales. There was the offer to sell
in that public auction sale. It was accepted by Rufina Morales with her bid
and was granted the award for which she paid the agreed downpayment.
It cannot be gainsaid that at that time the owner of the property was the
City of Cebu. It has the absolute right to dispose of it thru that public
auction sale. The donation by the defendant Province of Cebu to Cebu
City was not voided in that Civil Case No. 238-BC. The compromise
agreement between the parties therein on the basis of which judgment
was rendered did not provide nullification of the sales or disposition made
by the City of Cebu. Being virtually successor-in-interest of City of Cebu,
the defendant is bound by the contract lawfully entered into by the former.
Defendant did not initiate any move to invalidate the sale for one reason
or another. Hence, it stands as a perfectly valid contract which defendant
must respect. Rufina Morales had a vested right over the property. The
plaintiffs being the heirs or successors-in-interest of Rufina Morales, have
the right to ask for the conveyance of the property to them. While it may
be true that the title of the property still remained in the name of the City of
Cebu until full payment is made, and this could be the reason why the lot
in question was among those reverted to the Province, the sellers
obligation under the contract was, for all legal purposes, transferred to,
and assumed by, the defendant Province of Cebu. It is then bound by
such contract.19
Petitioner appealed to the Court of Appeals which affirmed the decision of the trial
court in toto. Upon denial of its motion for reconsideration, petitioner filed the instant
petition under Rule 45 of the Rules of Court, alleging that the appellate court erred in:
FINDING THAT RUFINA MORALES AND RESPONDENTS, AS HER
HEIRS, HAVE THE RIGHT TO EQUAL THE BID OF THE HIGHEST
BIDDER OF THE SUBJECT PROPERTY AS LESSEES THEREOF;
FINDING THAT WITH THE DEPOSIT AND PARTIAL PAYMENT MADE
BY RUFINA MORALES, THE SALE WAS IN EFFECT CLOSED FOR ALL
LEGAL PURPOSES, AND THAT THE TRANSACTION WAS
PERFECTED AND CONSUMMATED;
FINDING THAT LACHES AND/OR PRESCRIPTION ARE NOT
APPLICABLE AGAINST RESPONDENTS;
FINDING THAT DUE TO THE PENDENCY OF CIVIL CASE NO. 238-BC,
PLAINTIFFS WERE NOT ABLE TO PAY THE AGREED
INSTALLMENTS;

Panopio died shortly after the complaint was filed.15


Respondents averred that the award at public auction of the lot to Morales was a valid
and binding contract entered into by the City of Cebu and that the lot was inadvertently
returned to petitioner under the compromise judgment in Civil Case No. 238-BC. They
alleged that they could not pay the balance of the purchase price during the pendency
of said case due to confusion as to whom and where payment should be made. They
thus prayed that judgment be rendered ordering petitioner to execute a final deed of

AFFIRMING THE DECISION OF THE TRIAL COURT IN FAVOR OF THE


RESPONDENTS AND AGAINST THE PETITIONERS. 20
The petition lacks merit.

The appellate court correctly ruled that petitioner, as successor-in-interest of the City
of Cebu, is bound to respect the contract of sale entered into by the latter pertaining to
Lot No. 646-A-3. The City of Cebu was the owner of the lot when it awarded the same
to respondents predecessor-in-interest, Morales, who later became its owner before
the same was erroneously returned to petitioner under the compromise judgment. The
award is tantamount to a perfected contract of sale between Morales and the City of
Cebu, while partial payment of the purchase price and actual occupation of the
property by Morales and respondents effectively transferred ownership of the lot to the
latter. This is true notwithstanding the failure of Morales and respondents to pay the
balance of the purchase price.
Petitioner can no longer assail the award of the lot to Morales on the ground that she
had no right to match the highest bid during the public auction. Whether Morales, as
actual occupant and/or lessee of the lot, was qualified and had the right to match the
highest bid is a foregone matter that could have been questioned when the award was
made. When the City of Cebu awarded the lot to Morales, it is assumed that she met
all qualifications to match the highest bid. The subject lot was auctioned in 1965 or
more than four decades ago and was never questioned. Thus, it is safe to assume, as
the appellate court did, that all requirements for a valid public auction sale were
complied with.
A sale by public auction is perfected "when the auctioneer announces its perfection by
the fall of the hammer or in other customary manner". 21 It does not matter that Morales
merely matched the bid of the highest bidder at the said auction sale. The contract of
sale was nevertheless perfected as to Morales, since she merely stepped into the
shoes of the highest bidder.
Consequently, there was a meeting of minds between the City of Cebu and Morales as
to the lot sold and its price, such that each party could reciprocally demand
performance of the contract from the other.22 A contract of sale is a consensual
contract and is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. From that moment, the parties
may reciprocally demand performance subject to the provisions of the law governing
the form of contracts. The elements of a valid contract of sale under Article 1458 of the
Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter;
and (3) price certain in money or its equivalent. 23 All these elements were present in
the transaction between the City of Cebu and Morales.
There is no merit in petitioners assertion that there was no perfected contract of sale
because no "Contract of Purchase and Sale" was ever executed by the parties. As
previously stated, a contract of sale is a consensual contract that is perfected upon a
meeting of minds as to the object of the contract and its price. Subject to the
provisions of the Statute of Frauds, a formal document is not necessary for the sale
transaction to acquire binding effect. 24 For as long as the essential elements of a
contract of sale are proved to exist in a given transaction, the contract is deemed
perfected regardless of the absence of a formal deed evidencing the same.
Similarly, petitioner erroneously contends that the failure of Morales to pay the balance
of the purchase price is evidence that there was really no contract of sale over the lot
between Morales and the City of Cebu. On the contrary, the fact that there was an
agreed price for the lot proves that a contract of sale was indeed perfected between
the parties. Failure to pay the balance of the purchase price did not render the sale
inexistent or invalid, but merely gave rise to a right in favor of the vendor to either
demand specific performance or rescission of the contract of sale. 25 It did not abolish
the contract of sale or result in its automatic invalidation.
As correctly found by the appellate court, the contract of sale between the City of Cebu
and Morales was also partially consummated. The latter had paid the deposit and
downpayment for the lot in accordance with the terms of the bid award. She first
occupied the property as a lessee in 1961, built a house thereon and was continuously
in possession of the lot as its owner until her death in 1969. Respondents, on the other
hand, who are all surviving heirs of Morales, likewise occupied the property during the
latters lifetime and continue to reside on the property to this day.26
The stages of a contract of sale are as follows: (1) negotiation, covering the period
from the time the prospective contracting parties indicate interest in the contract to the
time the contract is perfected; (2) perfection, which takes place upon the concurrence
of the essential elements of the sale which are the meeting of the minds of the parties
as to the object of the contract and upon the price; and (3) consummation, which
begins when the parties perform their respective undertakings under the contract of
sale, culminating in the extinguishment thereof.27 In this case, respondents
predecessor had undoubtedly commenced performing her obligation by making a
down payment on the purchase price. Unfortunately, however, she was not able to
complete the payments due to legal complications between petitioner and the city.

Thus, the City of Cebu could no longer dispose of the lot in question when it was
included as among those returned to petitioner pursuant to the compromise agreement
in Civil Case No. 238-BC. The City of Cebu had sold the property to Morales even
though there remained a balance on the purchase price and a formal contract of sale
had yet to be executed. Incidentally, the failure of respondents to pay the balance on
the purchase price and the non-execution of a formal agreement was sufficiently
explained by the fact that the trial court, in Civil Case No. 238-BC, issued a writ of
preliminary injunction enjoining the city from further disposing the donated lots.
According to respondents, there was confusion as to the circumstances of payment
considering that both the city and petitioner had refused to accept payment by virtue of
the injunction.28 It appears that the parties simply mistook Lot 646-A-3 as among those
not yet sold by the city.
The City of Cebu was no longer the owner of Lot 646-A-3 when it ceded the same to
petitioner under the compromise agreement in Civil Case No. 238-BC. At that time, the
city merely retained rights as an unpaid seller but had effectively transferred ownership
of the lot to Morales. As successor-in-interest of the city, petitioner could only acquire
rights that its predecessor had over the lot. These rights include the right to seek
rescission or fulfillment of the terms of the contract and the right to damages in either
case.29
In this regard, the records show that respondent Quesada wrote to then Cebu
Governor Eduardo R. Gullas on March 11, 1983, asking for the formal conveyance of
Lot 646-A-3 pursuant to the award and sale earlier made by the City of Cebu. On
October 10, 1986, she again wrote to Governor Osmundo G. Rama reiterating her
previous request. This means that petitioner had known, at least as far back as 1983,
that the city sold the lot to respondents predecessor and that the latter had paid the
deposit and the required down payment. Despite this knowledge, however, petitioner
did not avail of any rightful recourse to resolve the matter.
Article 1592 of the Civil Code pertinently provides:
Article 1592. In the sale of immovable property, even though it may have
been stipulated that upon failure to pay the price at the time agreed upon
the rescission of the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by
notarial act. After the demand, the court may not grant him a new term.
(Underscoring supplied)
Thus, respondents could still tender payment of the full purchase price as no demand
for rescission had been made upon them, either judicially or through notarial act. While
it is true that it took a long time for respondents to bring suit for specific performance
and consign the balance of the purchase price, it is equally true that petitioner or its
predecessor did not take any action to have the contract of sale rescinded. Article
1592 allows the vendee to pay as long as no demand for rescission has been
made.30 The consignation of the balance of the purchase price before the trial court
thus operated as full payment, which resulted in the extinguishment of respondents
obligation under the contract of sale.
Finally, petitioner cannot raise the issue of prescription and laches at this stage of the
proceedings. Contrary to petitioners assignment of errors, the appellate court made
no findings on the issue because petitioner never raised the matter of prescription and
laches either before the trial court or Court of Appeals. It is basic that defenses and
issues not raised below cannot be considered on appeal. 31 Thus, petitioner cannot
plead the matter for the first time before this Court.
WHEREFORE, in view of the foregoing, the petition is hereby DENIED and the
decision and resolution of the Court of Appeals in CA-G.R. CV No. 53632
are AFFIRMED.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

MA. ALICIA AUSTRIA-MARTINEZ


Associate Justice
*RENATO

C. CORONA
Associate Justice

ANTONIO EDUARDO B. NACHURA


Associate Justice
RUBEN T. REYES
Associate Justice

13

Id. at 1-6.

14

Id. at 125.

15

Id. at 133.

16

Id. at 4-5.

17

Id. at 143.

18

Rollo, p. 36.

19

Id. at 35-36.

20

Id. at 17-18.

21

CIVIL CODE, Art. 1476(2).

22

Id., Art. 1475.

23

City of Cebu v. Heirs of Candido Rubi, 366 Phil. 70, 78 (1999).

24

Article 1483 of the Civil Code states:

ATTESTATION
I attest that the conclusions in the above decision were reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, it is hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.
REYNATO S. PUNO
Chief Justice

Art. 1483. Subject to the provisions of the Statute of Frauds


and of any other applicable statute, a contract of sale may be
made in writing, or by word of mouth, or partly in writing and
partly by word of mouth, or may be inferred from the conduct
of the parties.
25

Buenaventura v. Court of Appeals, 461 Phil. 761, 772 (2003).

26

TSN, August 12, 1994, pp. 11 and 36.

San Miguel Properties Phils., Inc. v. Spouses Huang, 391 Phil. 636, 645
(2000).
27

Footnotes
In lieu of Justice Minita V. Chico-Nazario, per Special Order No. 484
dated January 11, 2008.
*

28

TSN, August 12, 1994, p. 32.

29

Article 1191 of the Civil Code states:

Rollo, pp. 26-32.

Id. at 33-36.

Id. at 37-38.

Id. at 39-41.

RTC Records, pp. 8-9.

Id. at 119.

Id. at 12.

30

Id. at 134-141.

31

Id. at 15.

10

Id. at 105.

11

Id. at 130.

12

Id. at 131.

Art. 1191. The power to rescind obligations is implied in


reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between fulfillment and the
rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
See note 23 at 83.

Ramos v. Sarao, G.R. No. 149756, February 11, 2005, 451 SCRA 103,
122.

15 THIRD DIVISION

[G.R. No. 103577. October 7, 1996]

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,


ANNABELLE C. GONZALES (for herself and on behalf of Floraida C.
Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A.
ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE
COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA
PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-infact, respondents.

On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz


(hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of
Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels
father was transferred in their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One
Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona
by depositing the down payment paid by Concepcion in the bank in trust for Ramona
Patricia Alcaraz.

DECISION

On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the back
of TCT No. 327403 (Exh. E; Exh. 5).

The petition before us has its roots in a complaint for specific performance to
compel herein petitioners (except the last named, Catalina Balais Mabanag) to
consummate the sale of a parcel of land with its improvements located along
Roosevelt Avenue in Quezon City entered into by the parties sometime in January
1985 for the price of P1,240,000.00.

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering
the same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).

MELO, J.:

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. G; Exh. 7).

The undisputed facts of the case were summarized by respondent court in this
wise:

On June 5, 1985, a new title over the subject property was issued in the name of
Catalina under TCT No. 351582 (Exh. H; Exh. 8).

On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter


referred to as Coronels) executed a document entitled Receipt of Down Payment (Exh.
A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona)
which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
-----------------------------------------P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT
No. 119627 of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the
down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the
deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall
immediately pay the balance of theP1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon
execution of the document aforestated;

(Rollo, pp. 134-136)


In the course of the proceedings before the trial court (Branch 83,
RTC, Quezon City) the parties agreed to submit the case for decision solely on the
basis of documentary exhibits.Thus, plaintiffs therein (now private respondents)
proffered their documentary evidence accordingly marked as Exhibits A through J,
inclusive of their corresponding submarkings. Adopting these same exhibits as their
own, then defendants (now petitioners) accordingly offered and marked them as
Exhibits 1 through 10, likewise inclusive of their corresponding submarkings.Upon
motion of the parties, the trial court gave them thirty (30) days within which to
simultaneously submit their respective memoranda, and an additional 15 days within
which to submit their corresponding comment or reply thereto, after which, the case
would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the
RTC of Quezon City. OnMarch 1, 1989, judgment was handed down by Judge Roura
from his regular bench at Macabebe, Pampanga for the Quezon City branch,
disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering
defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel
of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT
No. 331582) of the Registry of Deeds for Quezon City, together with all the
improvements existing thereon free from all liens and encumbrances, and once
accomplished, to immediately deliver the said document of sale to plaintiffs and upon
receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the
purchase price amounting toP1,190,000.00 in cash. Transfer Certificate of Title No.
331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby
canceled and declared to be without force and effect. Defendants and intervenor and
all other persons claiming under them are hereby ordered to vacate the subject
property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages and
attorneys fees, as well as the counterclaims of defendants and intervenors are hereby
dismissed.
No pronouncement as to costs.

2. The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the Fifty Thousand
(P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute
the deed of absolute sale in favor of Ramona and the latter will pay the former the
whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.

So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)

A motion for reconsideration was filed by petitioners before the new presiding
judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada,
thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render
anew decision by the undersigned Presiding Judge should be denied for the following
reasons: (1) The instant case became submitted for decision as of April 14, 1988 when
the parties terminated the presentation of their respective documentary evidence and
when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they
were allowed to file memoranda at some future date did not change the fact that the
hearing of the case was terminated before Judge Roura and therefore the same
should be submitted to him for decision; (2) When the defendants and intervenor did
not object to the authority of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time before the undersigned
Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on
November 11, 1988, they were deemed to have acquiesced thereto and they are now
estopped from questioning said authority of Judge Roura after they received the
decision in question which happens to be adverse to them; (3) While it is true that
Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he
was in all respects the Presiding Judge with full authority to act on any pending
incident submitted before this Court during his incumbency. When he returned to his
Official Station at Macabebe, Pampanga, he did not lose his authority to decide or
resolve cases submitted to him for decision or resolution because he continued as
Judge of the Regional Trial Court and is of co-equal rank with the undersigned
Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to
whom a case is submitted for decision has the authority to decide the case
notwithstanding his transfer to another branch or region of the same court (Sec. 9,
Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned
Presiding Judge, after a meticulous examination of the documentary evidence
presented by the parties, she is convinced that the Decision of March 1, 1989 is
supported by evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul
Decision and Render Anew Decision by the Incumbent Presiding Judge dated March
20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the
Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision
fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading,
private respondents Reply Memorandum, was filed on September 15, 1993. The case
was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition
of respondent court in the affirmance of the trial courts decision, we definitely find the
instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the
other issues in the case at bar is the precise determination of the legal significance of
the document entitled Receipt of Down Payment which was offered in evidence by
both parties. There is no dispute as to the fact that the said document embodied the
binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of
Constancio P. Coronel on the other, pertaining to a particular house and lot covered by
TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which
reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.
While, it is the position of private respondents that the Receipt of Down
Payment embodied a perfected contract of sale, which perforce, they seek to enforce
by means of an action for specific performance, petitioners on their part insist that
what the document signified was a mere executory contract to sell, subject to certain

suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for
the United States of America, said contract could not possibly ripen into a contract of
absolute sale.
Plainly, such variance in the contending parties contention is brought about by
the way each interprets the terms and/or conditions set forth in said private
instrument. Withal, based on whatever relevant and admissible evidence may be
available on record, this Court, as were the courts below, is now called upon to
adjudge what the real intent of the parties was at the time the said document was
executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by
mere consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange
for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a contract to sell, the
prospective seller explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or consent to transfer ownership
of the property subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to sell the subject property
when the entire amount of the purchase price is delivered to him. In other words the
full payment of the purchase price partakes of a suspensive condition, the nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is
retained by the prospective seller without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass
until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the
full payment of the purchase price, the prospective sellers obligation to sell the subject
property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
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 of the promise is supported by a consideration distinct
from the price.
A contract to sell may thus be defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that
is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a
conditional contract of sale where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or may not occur. If
the suspensive condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA
777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is
thereby perfected, such that if there had already been previous delivery of the property

subject of the sale to the buyer, ownership thereto automatically transfers to the buyer
by operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, ownership will not automatically transfer to the
buyer although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional
contract of sale specially in cases where the subject property is sold by the owner not
to the party the seller contracted with, but to a third person, as in the case at bench. In
a contract to sell, there being no previous sale of the property, a third person buying
such property despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
and the prospective buyer cannot seek the relief of reconveyance of the
property. There is no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-sellers title per se, but
the latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the
suspensive condition, the sale becomes absolute and this will definitely affect the
sellers title thereto. In fact, if there had been previous delivery of the subject property,
the sellers ownership or title to the property is automatically transferred to the buyer
such that, the seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second buyer of the property
who may have had actual or constructive knowledge of such defect in the sellers title,
or at least was charged with the obligation to discover such defect, cannot be a
registrant in good faith. Such second buyer cannot defeat the first buyers title. In case
a title is issued to the second buyer, the first buyer may seek reconveyance of the
property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners and private
respondents.
It is a canon in the interpretation of contracts that the words used therein
should be given their natural and ordinary meaning unless a technical meaning was
intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners
declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by
TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the
natural and ordinary idea conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes
more manifest that there was a clear intent on the part of petitioners to transfer title to
the buyer, but since the transfer certificate of title was still in the name of petitioners
father, they could not fully effect such transfer although the buyer was then willing and
able to immediately pay the purchase price. Therefore, petitioners-sellers undertook
upon receipt of the down payment from private respondent Ramona P. Alcaraz, to
cause the issuance of a new certificate of title in their names from that of their father,
after which, they promised to present said title, now in their names, to the latter and to
execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the sellers
herein made no express reservation of ownership or title to the subject parcel of
land. Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title was
not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-sellers at that time, there
would have been no reason why an absolute contract of sale could not have been
executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not
merely promise to sell the property to private respondent upon the fulfillment of the
suspensive condition. On the contrary, having already agreed to sell the subject
property, they undertook to have the certificate of title change to their names and
immediately thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers,
after compliance by the buyer with certain terms and conditions, promised to sell the
property to the latter.What may be perceived from the respective undertakings of the

parties to the contract is that petitioners had already agreed to sell the house and lot
they inherited from their father, completely willing to transfer ownership of the subject
house and lot to the buyer if the documents were then in order. It just so happened,
however, that the transfer certificate of title was then still in the name of their father. It
was more expedient to first effect the change in the certificate of title so as to bear
their names. That is why they undertook to cause the issuance of a new transfer of the
certificate of title in their names upon receipt of the down payment in the amount
of P50,000.00. As soon as the new certificate of title is issued in their names,
petitioners were committed to immediately execute the deed of absolute sale. Only
then will the obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly
entered into so as to protect the seller against a buyer who intends to buy the property
in installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the
ones who were unable to enter into a contract of absolute sale by reason of the fact
that the certificate of title to the property was still in the name of their father. It was the
sellers in this case who, as it were, had the impediment which prevented, so to speak,
the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is
that when the said Receipt of Down Payment was prepared and signed by petitioners
Romulo A. Coronel,et. al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of
title from the name of petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled
on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of
sale between petitioners and private respondent Ramona P. Alcaraz became
obligatory, the only act required for the consummation thereof being the delivery of the
property by means of the execution of the deed of absolute sale in a public instrument,
which petitioners unequivocally committed themselves to do as evidenced by the
Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly
applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioners names was fulfilled on February 6, 1985, the respective
obligations of the parties under the contract of sale became mutually demandable, that
is, petitioners, as sellers, were obliged to present the transfer certificate of title already
in their names to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her part, was
obliged to forthwith pay the balance of the purchase price amounting
to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition,
petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the
transfer in our names from our deceased father Constancio P.
Coronel, the transfer certificate of title immediately upon receipt of
the downpayment above-stated". The sale was still subject to
this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale
subject to a suspensive condition. Only, they contend, continuing in the same
paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title
to the property under their names, there could be no perfected contract of
sale. (Emphasis supplied.)

(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil
Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents
its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling
than these mere hypothetical arguments is the fact that the condition herein referred
to was actually and indisputably fulfilled on February 6, 1985, when a new title
was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh.
4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the
document denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties
entered into a contract of sale subject to the suspensive condition that the sellers shall
effect the issuance of new certificate title from that of their fathers name to their names
and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently
provides Art. 1187. The effects of conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the
retroactive effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale
became mutually due and demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in time, reciprocal
obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19,
1985 because they were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring
ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights
and obligations to the extent and value of the inheritance of a person are transmitted
through his death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the
decedent Constancio P. Coronel are compulsory heirs who were called to succession
by operation of law.Thus, at the point their father drew his last breath, petitioners
stepped into his shoes insofar as the subject property is concerned, such that any
rights or obligations pertaining thereto became binding and enforceable upon them. It
is expressly provided that rights to the succession are transmitted from the moment of
death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850
[1952]).
Be it also noted that petitioners claim that succession may not be declared
unless the creditors have been paid is rendered moot by the fact that they were able to
effect the transfer of the title to the property from the decedents name to their names
on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of
capacity to enter into an agreement at that time and they cannot be allowed to now
take a posture contrary to that which they took when they entered into the agreement
with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person
relying thereon.
Having represented themselves as the true owners of the subject property at the time
of sale, petitioners cannot claim now that they were not yet the absolute owners
thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of
sale between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation
when she rendered impossible the consummation thereof by going to the United
States of America, without leaving her address, telephone number, and Special Power
of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they
were correct in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the
contract of sale in the instant case. We note that these supposed grounds for
petitioners rescission, are mere allegations found only in their responsive pleadings,
which by express provision of the rules, are deemed controverted even if no reply is
filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are
absolutely bereft of any supporting evidence to substantiate petitioners allegations. We
have stressed time and again that allegations must be proven by sufficient evidence
(Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598
[1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of
America on February 6, 1985, we cannot justify petitioners-sellers act of unilaterally
and extrajudicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA,
158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of
Ramona P. Alcaraz because although the evidence on record shows that the sale was
in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with
Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of her
daughter, if not also in her own behalf. Indeed, the down payment was made by
Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf
of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned
Concepcions authority to represent Ramona P. Alcaraz when they accepted her
personal check. Neither did they raise any objection as regards payment being
effected by a third person. Accordingly, as far as petitioners are concerned, the
physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar
as her obligation to pay the full purchase price is concerned. Petitioners who are
precluded from setting up the defense of the physical absence of Ramona P. Alcaraz
as above-explained offered no proof whatsoever to show that they actually presented
the new transfer certificate of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance with their
agreement. Ramonas corresponding obligation to pay the balance of the purchase
price in the amount of P1,190,000.00 (as buyer) never became due and demandable
and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving
reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or
is not ready to comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale
between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B.
Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will
apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof to the person who
presents the oldest title, provided there is good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25,
1985 as proof of the second contract of sale was registered with the Registry of Deeds
of Quezon City giving rise to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544
shall apply.
The above-cited provision on double sale presumes title or ownership to pass
to the buyer, the exceptions being: (a) when the second buyer, in good faith, registers
the sale ahead of the first buyer, and (b) should there be no inscription by either of the
two buyers, when the second buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or
ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject,
now a distinguished member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in
right). Knowledge by the first buyer of the second sale cannot defeat the first buyers
rights except when the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second
buyer of the first sale defeats his rights even if he is first to register, since knowledge
taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No.
58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129
SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in registering his deed
of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R.
No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was
annotated on the title of the subject property only on February 22, 1985, whereas, the
second sale between petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time
petitioner Mabanag, the second buyer, bought the property under a clean title, she
was unaware of any adverse claim or previous sale, for which reason she is a buyer in
good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or
not the second buyer in good faith but whether or not said second buyer registers such
second sale in good faith, that is, without knowledge of any defect in the title of the
property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not
have in good faith, registered the sale entered into on February 18, 1985 because as
early as February 22, 1985, a notice of lis pendens had been annotated on the transfer
certificate of title in the names of petitioners, whereas petitioner Mabanag registered
the said sale sometime in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been previously sold to private
respondents, or, at least, she was charged with knowledge that a previous buyer is
claiming title to the same property. Petitioner Mabanag cannot close her eyes to the
defect in petitioners title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that
there was a previous sale of the same property to a third party or that another person
claims said property in a previous sale, the registration will constitute a registration in
bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349
[1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P.
Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina
B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency
between Ramona as principal and Concepcion, her mother, as agent insofar as the
subject contract of sale is concerned, the issue of whether or not Concepcion was also
acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor
in such assumption disputed between mother and daughter. Thus, We will not touch
this issue and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED
and the appealed judgment AFFIRMED.
SO ORDERED.

Narvasa, C.J. (Chairman), Davide, Jr., and Francisco, JJ., concur.


Panganiban, J., no part.