CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner, vs.

COURT OF APPEALS, ANACLETO NOOL and EMILIA

NEBRE,respondents.
DECISION
PANGANIBAN, J.:
A contract of repurchase arising out of a contract of sale where the seller did not have any title to the property sold is not
valid. Since nothing was sold, then there is also nothing to repurchase.

Statement of the Case

This postulate is explained by this Court as it resolves this petition for review on certiorari assailing the January 20, 1993
Decision[1] of Respondent Court of Appeals[2] in CA-G.R. CV No. 36473, affirming the decision [3] of the trial court[4] which disposed as
follows:[5]
WHEREFORE, judgment is hereby rendered dismissing the complaint for no cause of action, and hereby:
1. Declaring the private writing, Exhibit C, to be an option to sell, not binding and considered validly
withdrawn by the defendants for want of consideration;
2. Ordering the plaintiffs to return to the defendants the sum of P30,000.00 plus interest thereon at the legal
rate, from the time of filing of defendants counterclaim until the same is fully paid;
3. Ordering the plaintiffs to deliver peaceful possession of the two hectares mentioned in paragraph 7 of the
complaint and in paragraph 31 of defendants answer (counterclaim);
4. Ordering the plaintiffs to pay reasonable rents on said two hectares at P5,000.00 per annum or
at P2,500.00 per cropping from the time of judicial demand mentioned in paragraph 2 of the dispositive
portion of this decision, until the said two hectares shall have been delivered to the defendants; and
5. To pay the costs.
SO ORDERED.

The Antecedent Facts

The facts, which appear undisputed by the parties, are narrated by the Court of Appeals as follows:
Two (2) parcels of land are in dispute and litigated upon here. The first has an area of 1 hectare . It was formerly owned by
Victorino Nool and covered by Transfer Certificate of Title No. T-74950. With an area of 3.0880 hectares, the other parcel
was previously owned by Francisco Nool under Transfer Certificate of Title No. T-100945. Both parcels are situated in San
Manuel, Isabela. The plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the appellants, seek recovery of the
aforementioned parcels of land from the defendants, Anacleto Nool, a younger brother of Conchita, and Emilia Nebre, now
the appellees.
In their complaint, plaintiff-appellants alleged inter alia that they are the owners of subject parcels of land, and they bought the same
from Conchitas other brothers, Victorino Nool and Francisco Nool; that as plaintiffs were in dire need of money, they obtained a loan
from the Iligan Branch of the Development Bank of the Philippines, in Ilagan, Isabela, secured by a real estate mortgage on said
parcels of land, which were still registered in the names of Victorino Nool and Francisco Nool, at the time, and for the failure of
plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the
period of redemption, plaintiffs contacted defendant Anacleto Nool for the latter to redeem the foreclosed properties from DBP,
which the latter did; and as a result, the titles of the two (2) parcels of land in question were transferred to Anacleto Nool; that as
part of their arrangement or understanding, Anacleto Nool agreed to buy from the plaintiff Conchita Nool the two (2) parcels of land
under controversy, for a total price of P100,000.00,P30,000.00 of which price was paid to Conchita, and upon payment of the
balance of P14,000.00, plaintiffs were to regain possession of the two (2) hectares of land, which amounts defendants failed to pay,
and the same day the said arrangement[6] was made; another covenant[7] was entered into by the parties, whereby defendants
agreed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that plaintiffs asked the
defendants to return the same but despite the intervention of the Barangay Captain of their place, defendants refused to return the
said parcels of land to plaintiffs; thereby impelling them (plaintiffs) to come to court for relief.
In their answer defendants-appellees theorized that they acquired the lands in question from the Development Bank of the
Philippines, through negotiated sale, and were misled by plaintiffs when defendant Anacleto Nool signed the private writing
agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto having been
made to believe, then, that his sister, Conchita, still had the right to redeem the said properties.
The pivot of inquiry here, as aptly observed below, is the nature and significance of the private document, marked Exhibit
D for plaintiffs, which document has not been denied by the defendants, as defendants even averred in their Answer that
they gave an advance payment of P30,000.00 therefor, and acknowledged that they had a balance ofP14,000.00 to
complete their payment. On this crucial issue, the lower court adjudged the said private writing (Exhibit D) as an option to
sell not binding upon and considered the same validly withdrawn by defendants for want of consideration; and decided the
case in the manner abovementioned.
There is no quibble over the fact that the two (2) parcels of land in dispute were mortgaged to the Development Bank of the
Philippines, to secure a loan obtained by plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For the non-payment of said loan, the
mortgage was foreclosed and in the process, ownership of the mortgaged lands was consolidated in DBP (Exhibits 3 and 4 for

defendants). After DBP became the absolute owner of the two parcels of land, defendants negotiated with DBP and succeeded in
buying the same. By virtue of such sale by DBP in favor of defendants, the titles of DBP were cancelled and corresponding Transfer
Certificates of Title (Annexes C and D to the complaint) issued to the dependants. [8]
It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the one-year redemption period was from
March 16, 1982 up to March 15, 1983 and that the Mortgagors right of redemption was not exercised within this period. [9] Hence,
DBP became the absolute owner of said parcels of land for which it was issued new certificates of title, both entered on May 23,
1983 by the Registry of Deeds for the Province of Isabela. [10] About two years thereafter, on April 1, 1985, DBP entered into a Deed
of Conditional Sale[11] involving the same parcels of land with Private Respondent Anacleto Nool as vendee. Subsequently, the latter
was issued new certificates of title on February 8, 1988. [12]
The Court of Appeals ruled:[13]
WHEREFORE, finding no reversible error infirming it, the appealed Judgment is hereby AFFIRMED in toto. No
pronouncement as to costs.

The Issues
Petitioners impute to Respondent Court the following alleged errors:
1. The Honorable Court of Appeals, Second Division has misapplied the legal import or meaning of Exhibit C in a way
contrary to law and existing jurisprudence in stating that it has no binding effect between the parties and considered
validly withdrawn by defendants-appellees for want of consideration.
2. The Honorable Court of Appeals, Second Division has miserably failed to give legal significance to the actual
possession and cultivation and appropriating exclusively the palay harvest of the two (2) hectares land pending the
payment of the remaining balance of fourteen thousand pesos (P14,000.00) by defendants-appellees as indicated in
Exhibit C.
3. The Honorable Court of Appeals has seriously erred in affirming the decision of the lower court by awarding the
payment of rents per annum and the return of P30,000.00 and not allowing the plaintiffs-appellants to re-acquire the four
(4) hectares, more or less upon payment of one hundred thousand pesos (P100,000.00) as shown in Exhibit D.[14]

The Courts Ruling

The petition is bereft of merit.

First Issue: Are Exhibits C and D Valid and Enforceable?

The petitioner-spouses plead for the enforcement of their agreement with private respondents as contained in Exhibits C and
D, and seek damages for the latters alleged breach thereof. In Exhibit C, which was a private handwritten document labeled by the
parties as Resibo ti Katulagan or Receipt of Agreement, the petitioners appear to have sold to private respondents the parcels of
land in controversy covered by TCT No. T-74950 and TCT No. T-100945. On the other hand, Exhibit D, which was also a private
handwritten document in Ilocano and labeled as Kasuratan, private respondents agreed that Conchita Nool can acquire back or
repurchase later on said land when she has the money.[15]
In seeking to enforce her alleged right to repurchase the parcels of land, Conchita (joined by her co-petitioner-husband)
invokes Article 1370 of the Civil Code which mandates that (i)f the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control. Hence, petitioners contend that the Court of
Appeals erred in affirming the trial courts finding and conclusion that said Exhibits C and D were not merely voidable but utterly void
and inexistent.
We cannot sustain petitioners view. Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. The
Regional Trial Court and the Court of Appeals ruled that the principal contract of sale contained in Exhibit C and the auxilliary
contract of repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find support in Dignos vs.
Court of Appeals,[16] where the Court held:
Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of
the same and the sale is null and void.
In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D,
the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a
valid one.[17] Verily, Article 1422 of the Civil Code provides that (a) contract which is the direct result of a previous illegal contract, is
also void and inexistent.
We should however add that Dignos did not cite its basis for ruling that a sale is null and void where the sellers were no longer
the owners of the property. Such a situation (where the sellers were no longer owners) does not appear to be one of the void
contracts enumerated in Article 1409 of the Civil Code. [18] Moreover, the Civil Code[19] itself recognizes a sale where the goods are to
be acquired x x x by the seller after the perfection of the contract of sale, clearly implying that a sale is possible even if the seller
was not the owner at the time of sale, provided he acquires title to the property later on.
In the present case however, it is likewise clear that the sellers can no longer deliver the object of the sale to the buyers, as the
buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be
deemed to be inoperative[20] and may thus fall, by analogy, under item no. 5 of Article 1409 of the Civil Code: Those which
contemplate an impossible service. Article 1459 of the Civil Code provides that the vendor must have a right to transfer the

ownership thereof [object of the sale] at the time it is delivered. Here, delivery of ownership is no longer possible. It has become
impossible.
Furthermore, Article 1505 of the Civil Code provides that where goods are sold by a person who is not the owner thereof, and
who does not sell them under authority or with consent of the owner, the buyer acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell. Here, there is no allegation
at all that petitioners were authorized by DBP to sell the property to the private respondents.Jurisprudence, on the other hand,
teaches us that a person can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than
what the seller can legally transfer.[21] No one can give what he does not have neno dat quod non habet. On the other hand, Exhibit
D presupposes that petitioners could repurchase the property that they sold to private respondents. As petitioners sold nothing, it
follows that they can also repurchase nothing. Nothing sold, nothing to repurchase. In this light, the contract of repurchase is also
inoperative and by the same analogy, void.

Contract of Repurchase
Dependent on Validity of Sale
As borne out by the evidence on record, the private respondents bought the two parcels of land directly from DBP on April 1,
1985 after discovering that petitioners did not own said property, the subject of Exhibits C and D executed on November 30,
1984. Petitioners, however, claim that they can exercise their alleged right to repurchase the property, after private respondents had
acquired the same from DBP.[22] We cannot accede to this, for it clearly contravenes the intention of the parties and the nature of
their agreement. Exhibit D reads:

WRITING
Nov. 30, 1984
That I, Anacleto Nool have bought from my sister Conchita Nool a land an area of four hectares (4 has.) in the value of
One Hundred Thousand (100,000.00) Pesos. It is our agreement as brother and sister that she can acquire back or
repurchase later on said land when she has the money. [Underscoring supplied]
As proof of this agreement we sign as brother and sister this written document this day of Nov. 30, 1984, at District 4, San
Manuel, Isabela.
Sgd ANACLETO NOOL
Anacleto Nool
Sgd Emilio Paron
Witness
Sgd Conchita Nool
Conchita Nool[23]
One repurchases only what one has previously sold. In other words, the right to repurchase presupposes a valid contract of
sale between the same parties.Undisputedly, private respondents acquired title to the property from DBP, and not from the
petitioners.
Assuming arguendo that Exhibit D is separate and distinct from Exhibit C and is not affected by the nullity of the latter, still
petitioners do not thereby acquire a right to repurchase the property. In that scenario, Exhibit D ceases to be a right to repurchase
ancillary and incidental to the contract of sale; rather, it becomes an accepted unilateral promise to sell. Article 1479 of the Civil
Code, however, provides that an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price. In the present case, the alleged written contract of
repurchase contained in Exhibit D is bereft of any consideration distinct from the price. Accordingly, as an independent contract, it
cannot bind private respondents. The ruling inDiamante vs. CA[24] supports this. In that case, the Court through Mr. Justice Hilario G.
Davide, Jr. explained:
Article 1601 of the Civil Code provides:
Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with
the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed
upon.
In Villarica, et al. Vs. Court of Appeals, et al., decided on 29 November 1968, or barely seven (7) days before the
respondent Court promulgated its decisions in this case, this Court, interpreting the above Article, held:
The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the
instrument of absolute sale is executed, the vendor can not longer reserve the right to repurchase, and any right
thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some
other right like the option to buy in the instant case. x x x.
In the earlier case of Ramos, et al. vs. Icasiano, et al., decided in 1927, this Court had already ruled that an
agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is made
without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants the
vendor the right to repurchase, it is a new contract entered into by the purchaser, as absolute owner already of
the object. In that case the vendor has nor reserved to himself the right to repurchase.

In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found another occasion to apply the foregoing principle.
Hence, the Option to Repurchase executed by private respondent in the present case, was merely a promise to sell, which
must be governed by Article 1479 of the Civil Codewhich reads as follows:
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.

Right to Repurchase Based on

Homestead or Trust Non-Existent
Petitioners also base their alleged right to repurchase on (1) Sec. 119 of the Public Land Act [25] and (2) an implied trust relation
as brother and sister.[26]
The Court notes that Victorino Nool and Francisco Nool mortgaged the land to DBP. The brothers, together with Conchita Nool
and Anacleto Nool, were all siblings and heirs qualified to repurchase the two parcels of land under Sec. 119 of the Public Land Act
which provides that (e)very conveyance of land acquired under the free patent or homestead provisions, when proper, shall be
subject to repurchase by the applicant, his widow or legal heirs, within a period of five years from the date of conveyance. Assuming
the applicability of this statutory provision to the case at bar, it is indisputable that Private Respondent Anacleto Nool already
repurchased from DBP the contested properties. Hence, there was no more right of repurchase that his sister Conchita or brothers
Victorino and Francisco could exercise. The properties were already owned by an heir of the homestead grantee and the rationale
of the of the provision to keep homestead lands within the family of the grantee was thus fulfilled. [27]
The claim of a trust relation is likewise without merit. The records show that private respondents did not purchase the
contested properties from DBP in trust for petitioners. The former, as previously mentioned, in fact bought the land from DBP upon
realization that the latter could not validly sell the same. Obviously, petitioners bought it for themselves. There is no evidence at all
in the records that they bought the land in trust for private respondents. The fact that Anacleto Nool was the younger brother of
Conchita Nool and that they signed a contract of repurchase, which as discussed earlier was void, does not prove the existence of
an implied trust in favor of petitioners.

Second Issue: No Estoppel in Impugning the

Validity of Void Contracts
Petitioners argue that when Anacleto Nool took the possession of the two hectares, more or less, and let the other two
hectares to be occupied and cultivated by plaintiffs-appellants, Anacleto Nool cannot later on disclaim the terms or contions (sic)
agreed upon and his actuation is within the ambit of estoppel x x x. [28] We disagree. The private respondents cannot be estopped
from raising the defense of nullity of contract, specially in this case where they acted in good faith, believing that indeed petitioners
could sell the two parcels of land in question. Article 1410 of the Civil Code mandates that (t)he action or defense for the declaration
of the inexistence of a contract does not prescribe. It is well-settled doctrine that as between parties to a contract, validity cannot be
given to it by estoppel if it is prohibited by law or it is against public policy (19 Am. Jur. 802). It is not within the competence of any
citizen to barter away what public policy by law seeks to preserve. [29] Thus, it is immaterial that private respondents initially acted to
implement the contract of sale, believing in good faith that the same was valid. We stress that a contract void at inception cannot be
validated by ratification or prescription and certainly cannot be binding on or enforceable against private respondents. [30]

Third Issue: Return of P30,000.00 with Interest

and Payment of Rent
Petitioners further argue that it would be a miscarriage of justice to order them (1) to return the sum of P30,000.00 to private
respondents when allegedly it was Private Respondent Anacleto Nool who owed the former a balance of P14,000.00 and (2) to
order petitioners to pay rent when they were allowed to cultivate the said two hectares. [31]
We are not persuaded. Based on the previous discussion, the balance of P14,000.00 under the void contract of sale may not
be enforced. Petitioners are the ones who have an obligation to return what they unduly and improperly received by reason of the
invalid contract of sale. Since they cannot legally give title to what they sold, they cannot keep the money paid for the object of the
sale. It is basic that (e)very person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same. [32] Thus, if a void contract
has already been performed, the restoration of what has been given is in order. [33] Corollarily and as aptly ordered by respondent
appellate court, interest thereon will run only from the time of private respondents demand for the return of this amount in their
counterclaim.[34] In the same vein, petitioners possession and cultivation of the two hectares are anchored on private respondents
tolerance. Clearly, the latters tolerance ceased upon their counterclaim and demand on the former to vacate. Hence, their right to
possess and cultivate the land ipso facto ceased.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals affirming that of the trial court is
hereby AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-59266 February 29, 1988
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.

BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9th Division, Court of Appeals dated July
31,1981, affirming with modification the Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case No.
23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of
Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16, 1981, denying defendant-appellant's
(Petitioner's) motion for reconsideration, for lack of merit.
The undisputed facts as found by the Court of Appeals are as follows:
The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral survey of Opon,
Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold the said parcel of land to plaintiffappellant (respondent Atilano J. Jabil) for the sum of P28,000.00, payable in two installments, with an assumption
of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged
by the vendors in the deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the next installment in the
sum of P4,000.00 to be paid on or before September 15, 1965.
On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses, Luciano Cabigas
and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of absolute sale (Exh. J,
also marked Exh. 3) was executed by the Dignos spouses in favor of the Cabigas spouses, and which was
registered in the Office of the Register of Deeds pursuant to the provisions of Act No. 3344.
As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price of the land, and
as plaintiff- appellant discovered the second sale made by defendants-appellants to the Cabigas spouses, plaintiffappellant brought the present suit. (Rollo, pp. 27-28)
After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the decretal portion of which reads:
WHEREFORE, the Court hereby declares the deed of sale executed on November 25, 1965 by defendant Isabela
L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States of America, null and void ab
initio, and the deed of sale executed by defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not
rescinded. Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen Thousand Pesos
(P16,000.00) to the defendants-spouses upon the execution of the Deed of absolute Sale of Lot No. 3453, Opon
Cadastre and when the decision of this case becomes final and executory.
The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and Jovita L. de Cabigas,
through their attorney-in-fact, Panfilo Jabalde, reasonable amount corresponding to the expenses or costs of the
hollow block fence, so far constructed.
It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos should return
to defendants-spouses Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as equity demands that
nobody shall enrich himself at the expense of another.
The writ of preliminary injunction issued on September 23, 1966, automatically becomes permanent in virtue of this
decision.
With costs against the defendants.
From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners herein) appealed to the Court of Appeals,
which appeal was docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al."
On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the portion ordering Jabil to pay for the
expenses incurred by the Cabigas spouses for the building of a fence upon the land in question. The disposive portion of said
decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the judgment as pertains to
plaintiff-appellant above indicated, the judgment appealed from is hereby AFFIRMED in all other respects.
With costs against defendants-appellants.

SO ORDERED.
Judgment MODIFIED.
A motion for reconsideration of said decision was filed by the defendants- appellants (petitioners) Dignos spouses, but on
December 16, 1981, a resolution was issued by the Court of Appeals denying the motion for lack of merit.
Hence, this petition.
In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack of merit. A motion for
reconsideration of said resolution was filed on March 16, 1982. In the resolution dated April 26,1982, respondents were required to
comment thereon, which comment was filed on May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with the
resolution of June 16,1 982. On August 9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed, this
Court resolved to reconsider its resolution of February 10, 1982 and to give due course to the instant petition. On September 6,
1982, respondents filed a rejoinder to reply of petitioners which was noted on the resolution of September 20, 1982.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY INTERPRETING THE
TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP
OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO
SELL; THE COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT,
EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT
OF PROMISE TO SELL.
II
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR IN MISAPPLYING
ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS CONCLUSION THAT THE NOTICE OF
RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT.
III
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE APPLICABILITY OF ARTICLES 2208,2217
and 2219 OF THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES
AND ATTORNEY'S FEES TO PETITIONERS.
IV
PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO COURT
WITH UNCLEAN HANDS.
V
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION THE DECISION OF
THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF
THE QUESTIONED CONTRACT AND THE LAW APPLICABLE THERETO.
The foregoing assignment of errors may be synthesized into two main issues, to wit:
I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell.
II. Whether or not there was a valid rescission thereof.
There is no merit in this petition.
It is significant to note that this petition was denied by the Second Division of this Court in its Resolution dated February 1 0, 1 982
for lack of merit, but on motion for reconsideration and on the basis of all subsequent pleadings filed, the petition was given due
course.
I.
The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:
1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil. Philippine Currency as
advance payment;
2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan from the First
Insular Bank of Cebu;

3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos (P4,000.00) on or before
September 15,1965;
4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on the said property;
5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the above-mentioned property
upon the payment of the balance of Four Thousand Pesos. (Original Record, pp. 10-11)
In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit "C") is a mere contract to sell and not an
absolute sale; that the same is subject to two (2) positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or before
September 15,1965 and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that
in said contract, title or ownership over the property was expressly reserved in the vendor, the Dignos spouses until the suspensive condition of full
and punctual payment of the balance of the purchase price shall have been met. So that there is no actual sale until full payment is made (Rollo,
pp. 51-52).
In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is absolutely nothing in Exhibit "C" that
indicates that the vendors thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a
private instrument and the absence of a formal deed of conveyance is a very strong indication that the parties did not intend "transfer of ownership
and title but only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very terms and conditions of
the contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the herein mentioned property to Atilano G.
Jabil ..." and condition number five which reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned property upon
the payment of the balance of four thousand pesos."
Such contention is untenable.
By and large, the issues in this case have already been settled by this Court in analogous cases.
Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where nowhere in the
contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase
price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed
period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305).
A careful examination of the contract shows that there is no such stipulation reserving the title of the property on the vendors nor does it give them
the right to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the
minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that
"The ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan
v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing sold
passes to the vendee upon actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of the land sold in the case at bar, as subject Deed of Sale is a private
instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of
the land in question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach
Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were
admitted by petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108).
Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of petitioners, contemporaneous with the contract,
clearly show that an absolute deed of sale was intended by the parties and not a contract to sell.
Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is
null and void.
II.
Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was already rescinded.
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the case at bar, the contract of sale being absolute
in nature is governed by Article 1592 of the Civil Code. It is undisputed that petitioners never notified private respondents Jabil by notarial act that
they were rescinding the contract, and neither did they file a suit in court to rescind the sale. The most that they were able to show is a letter of
Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter had no
money and further advised petitioners to sell the land in litigation to another party (Record on Appeal, p. 23). As correctly found by the Court of
Appeals, there is no showing that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the latter who, on the
contrary, vigorously denied having sent Amistad to tell petitioners that he was already waiving his rights to the land in question. Under Article 1358
of the Civil Code, it is required that acts and contracts which have for their object the extinguishment of real rights over immovable property must
appear in a public document.
Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on the stipulated date of payment on September
15,1965 and was able to raise the necessary amount only by mid-October 1965.
It has been ruled, however, that "where time is not of the essence of the agreement, a slight delay on the part of one party in the performance of
his obligation is not a sufficient ground for the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering that private respondent
has only a balance of P4,000.00 and was delayed in payment only for one month, equity and justice mandate as in the aforecited case that Jabil
be given an additional period within which to complete payment of the purchase price.
WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed decision of the Court of Appeals is Affirmed in toto.
SO ORDERED.

G.R. No. L-61623 December 26, 1984

PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant,
vs.
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. MENDOZA, respondents-appellees.
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner PHHC.
Tolentino, Cruz, Reyes, Lava and Manuel for private respondents.

AQUINO, J.:
The question in this case is whether the People's Homesite & Housing Corporation bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs4564 of the revised consolidation subdivision plan with an area of 2,6,08.7 (2,503.7) square meters located at Diliman, Quezon City.
The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein it stated "that subject to the approval of the Quezon City
Council of the above-mentioned Consolidation Subdivision Plan, Lot 4. containing4,182.2 square meters be, as it is hereby awarded to Spouses
Rizalino Mendoza and Adelaida Mendoza, at a price of twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to the
approval of the OEC (PHHC) Valuation Committee and higher authorities".
The city council disapproved the proposed consolidation subdivision plan on August 20, 1961 (Exh. 2). The said spouses were advised by
registered mail of the disapproval of the plan (Exh. 2-PHHC). Another subdivision plan was prepared and submitted to the city council for approval.
The revised plan, which included Lot 4, with a reduced area of 2,608.7, was approved by the city council on February 25, 1964 (Exh. H).
On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of lots to persons who failed to pay the deposit or down
payment for the lots awarded to them (Exh. 5). The Mendozas never paid the price of the lot nor made the 20% initial deposit.
On October 18, 1965 the PHHC board of directors passed Resolution No. 218, withdrawing the tentative award of Lot 4 to the Mendoza -spouses
under Resolution No. 513 and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon,
Leonardo Redublo and Jose Fernandez, subject to existing PHHC rules and regulations. The prices would be the same as those of the adjoining
lots. The awardees were required to deposit an amount equivalent to 20% of the total selling price (Exh. F).
The five awardees made the initial deposit. The corresponding deeds of sale were executed in their favor. The subdivision of Lot 4 into five lots
was approved by the city council and the Bureau of Lands.
On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of the previous award to them of Lot 4 and for the
cancellation of the re-award of said lot to Sto. Domingo and four others. Before the request could be acted upon, the spouses filed the instant
action for specific performance and damages.
The trial court sustained the withdrawal of the award. The Mendozas appealed. The Appellate Court reversed that decision and declared void the
re-award of Lot 4 and the deeds of sale and directed the PHHC to sell to the Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a
square meter and pay to them P4,000 as attorney's fees and litigation expenses. The PHHC appealed to this Court.
The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which they can enforce against the PHHC by an
action for specific performance.
We hold that there was no perfected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas subject to the approval by the city
council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities.
The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the disapproval. In 1964, when the plan with the
area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should have manifested in writing their acceptance of the award for
the purchase of Lot 4 just to show that they were still interested in its purchase although the area was reduced and to obviate ally doubt on the
matter. They did not do so. The PHHC board of directors acted within its rights in withdrawing the tentative award.
"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 law governing the form of contracts." (Art. 1475, Civil Code).
"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de las partes o de la ley, se celebra la venta bajo una
condicion suspensiva, y en los cuales no se perfecciona la venta hasta el cumplimiento de la condicion" (4 Castan Tobenas, Derecho Civil
Espaol 8th ed. p. 81).
"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. (Art. 1181, Civil Code). "Se llama suspensive la condicion de la que depende la perfeccion,
o sea el principio del contrato". (9 Giorgi, Teoria de las Obligaciones, p. 57).
Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a
square meter.
The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the awardee in that case applied for the purchase of the lot, paid
the 10% deposit and a conditional contract to sell was executed in his favor. The PHHC could not re-award that lot to another person.
WHEREFORE, the decision of the Appellate Court is reversed and set aside and the judgment of the trial court is affirmed. No costs.
SO ORDERED.

G.R. No. 135634 May 31, 2000

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners,
vs.
VICENTE RODRIGUEZ, respondent.
MENDOZA, J.:
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.
The antecedent facts are as follows:
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. R-21, 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.
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.
(Sgd.)
JUAN R. SAN ANDRES
Vendor
Noted:
(Sgd.)
VICENTE RODRIGUEZ
Vendee
Respondent also attached to his answer a letter of judicial administrator Ramon San Andres (Exh. 3), 6asking payment of
the balance of the purchase price. The letter reads:
Dear Inting,
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.
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
(Sgd.)
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
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.
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.
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 LACKING ONE OF THE ESSENTIAL ELEMENTS OF A
CONTRACT, NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED.
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.
III. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT CONSIGNATION WAS VALID
DESPITE NON-COMPLIANCE WITH THE MANDATORY REQUIREMENTS THEREOF.
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 pre-requisite 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. 20Thus, 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.
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.
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.

SECOND DIVISION
JACINTO GALANG, GREGORIA GALANG
and MARISSA GALANG,
P e t i t i o n e r s,
- versus HON. COURT OF APPEALS, INES
CAMAGANAKAN,
ANTONIO
CAMAGANAKAN,
MARITA
CAMAGANAKAN
and
BELINDA
CAMAGANAKAN
R e s p o n d e n t s.

G.R. No. 139448

Present:
PUNO,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,*
TINGA and
CHICO-NAZARIO, JJ.
Promulgated:

October 11, 2005

x--------------------------------------------------x
DECISION

CHICO-NAZARIO, J.:
Before this Court is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 47417 dated 27
May 1999 and its Resolution[2] dated 27 July 1999 granting private respondents petition for annulment of judgment with prayer for
injunction of the decision of the Securities and Exchange Commission (SEC) in SEC EB Case No. 550.
A summary of the facts that gave rise to the present action follows:
As of 1992, the entire capital stock of CGP Transportation and Services Corp. (CGP) was equally divided between the
Galang family and the family of Lamberto C. Camaganakan, Jr. (Lamberto). Each family had an aggregate of five thousand (5,000)
shares of stock.[3]

On 08 October 1992, the Galangs sold their entire interest in the CGP to Lamberto in a handwritten document. [4]

On 27 August 1993, the Galangs filed a petition before the SEC (SEC Case No. 08-93-45567) against CGP and/or
Lamberto seeking, among other things, the dissolution of the corporation and the liquidation of its assets. [5] Thereafter, or on 08
November 1993, a more formal Memorandum of Agreement (MOA) was entered into between the Galangs and Lamberto which
confirmed the formers earlier sale of its entire 50% interest in the corporation to the latter. [6]Accordingly, the Galangs withdrew SEC
Case No. 08-93-45567. However, on 24 February 1994, the Galangs filed a petition for mandamus against Lamberto with the SEC
(SEC Case No. 02-94-4697), which sought, among other remedies, Lamberto to pay damages. [7]

On 03 May 1995, Lamberto entered into a compromise settlement with the Galangs in SEC Case No. 02-94-4697 which
agreement was embodied in a Joint Motion for Approval of Compromise Agreement dated 03 May 1995.[8] The agreement stipulated
the terms of the payments to be made by Lamberto on the shares of stock of the Galangs earlier sold to him. [9] On 09 May 1995,
Ines, Honorato, Marita, Cecilia, Belinda, Mario, Aniceto and Antonio, all surnamed Camaganakan, executed a Special Power of
Attorney (SPA) authorizing Lamberto to (a) acquire CGP shares of stock of the Galang family in their behalf; and (b) to enter into a
compromise agreement in SEC Case No. 02-94-4697 (the case for mandamus).[10] Thus, on 16 May 1995, the SEC issued a
Judgment By Compromise Agreement.[11]

About a year later, in a MOA dated 30 May 1996 between Lamberto and CGP (referred collectively in the MOA as
Camaganakans) and the Galangs, certain conditions in the Compromise Agreement dated 03 May 1995 were revised.[12] Said
agreement was signed by Jacinto, Gregoria and Marissa Galang on one hand, and by Lamberto, for himself, and Nilda Santos,
ostensibly representing CGP, on the other.[13] The same was submitted to the SEC for which Hearing Officer Enrique L. Flores
issued an Order dated 18 June 1996 approving the same and rendering judgment in SEC Case No. 02-94-4697 on the basis
thereof.[14]

Almost a year thereafter, or on 11 April 1997, it was CGPs turn to file a case before the SEC. CGP filed a petition for
annulment of the compromise agreement claiming that Lamberto had no authority to involve it in the compromise agreement in SEC
Case No. 02-94-4697 and prayed that the petition, docketed as SEC Case No. 04-97-5608, be consolidated with SEC Case No. 0294-4697.[15] The petition was verified by herein private respondent Ines Camaganakan as President of CGP.[16]

Meanwhile, Lamberto failed to comply with his obligations contained in the Compromise Agreement dated 30 May 1996.
Hence, on 18 April 1997, Hearing Officer Rosalina Tividad-Tesoro issued an Order entering the Judgment by Compromise in the
Judgment Book of the SEC and issuing a writ of execution to implement said agreement. [17] The writ of execution was issued
likewise on 18 April 1997.[18]

On 28 April 1997, CGP filed another case in the SEC, this time, a petition for certiorari with prayer for temporary restraining
order (TRO)/writ of preliminary injunction docketed as SEC EB Case No. 550 which sought to annul the 18 April 1997 Order.[19] CGP
specifically questioned its inclusion in the judgment of compromise.

On 05 February 1998, the SEC came out with a decision in SEC EB Case No. 550, where it held that the compromise
agreement between the Galangs and Lamberto is enforceable only against their respective shareholdings and not against the corporate assets
and properties of CGP. The dispositive portion of the decision reads:

WHEREFORE, premises considered, and there being grave abuse of discretion in issuing the Writ of Execution against
the properties of the petitioner corporation, the following Orders are hereby issued:
1.

Setting aside the Order dated April 18, 1997 granting the issuance of a Writ of Execution to
execute properties of the corporation which included the eleven (11) buses, attached and levied by
the SEC Sheriff and instead, a Writ of Execution be issued to attach and levy the shares of stocks of
the Camaganakan family.

2.

Lifting any and all levy, the respondent Sheriff may have made on the properties of the
corporation.[20] (Emphasis supplied)

The Galangs moved for reconsideration of the afore-quoted decision which motion they subsequently withdrew. [21] The decision became final and
executory on24 March 1998.[22] On even date, Associate Commissioner Edijer A. Martinez directed the Hearing Officer to issue a writ of execution.
[23]

A writ of execution was issued on 06 April 1998.[24]

Pursuant to the writ of execution, a notice of garnishment and a notice on levy upon personal properties, all dated 14 April 1998, were issued by
Sheriff Edgardo Grueso.

On 17 April 1998, Ines, Belinda, Honorato, Marita, Aniceto, Cecilia and Antonio, all surnamed Camaganakan, filed before the Court of Appeals
a petition for annulment of judgment of the 05 February 1998 decision of the SEC in SEC EB Case No. 550 with prayer for
injunction against the SEC and Sheriff Grueso as public respondents and against herein petitioners, Jacinto, Gregoria and Marissa Galang.
[25]

The Camaganakans alleged in their petition that the decision in SEC EB Case No. 550 specifically commanded the enforcement of the claims

of the Galangs against their shares of stocks in CGP when in truth and in fact they were not parties in SEC EB Case No. 550, thus, said decision
is void as to them for lack of jurisdiction and for violation of their constitutional right to due process. Likewise, the Camaganakans contended that
the singling out of their shares of stock for levy in satisfaction of the claim of the Galangs violates the rules on enforcement of a writ of execution.

In the afternoon of 17 April 1998, the Court of Appeals issued a TRO directed against then public respondents SEC and Sheriff Grueso restraining
them from pursuing the scheduled auction sale on 20 April 1998.[26] The TRO was received by the SEC en banc in the afternoon of 20 April
1998[27] after Sheriff Grueso had already conducted the auction earlier in the day, or at ten oclock in the morning.[28] In his Sheriffs Return dated 20
April 1998, Sheriff Grueso stated that he only sold the shares owned by Lamberto per corporate records with the SEC (amounting to 4,500 shares)
and that the shares of the other members of the Camaganakans were not touched.[29] The 4,500 shares were sold for P3 Million with herein
petitioner Jacinto Galang as the lone and highest bidder.[30]

In the meantime, the Galangs filed their Comment to the petition for annulment of judgment. [31] In their Reply to the Comment, the Camaganakans
brought forth for the first time a photocopy of a notarized deed of assignment dated 26 May 1995 which would ostensibly show that the Galang
family transferred to Ines Camaganakan their 5,000 shares in CGP for and in consideration of Five Hundred Thousand Pesos ( P500,000.00).
According to the Camaganakans, another strong reason why the SEC should not have enforced Lambertos P15 Million personal obligation against
the CGP shares of stocks is that these shares were not owned by Lamberto but by Ines.[32]

On 16 May 1998, the Galangs set the case for oral argument.[33]

On 28 May 1998, the Camaganakans filed a Supplemental Petition (With Prayer For Expanded TRO, Preliminary Mandatory Injunction
and to Cite respondent Sheriff Grueso and private respondents in Contempt of Court) where they alleged in the main that the supplemental
petition was actuated by events subsequent to the filing of the original petition as the SEC had proceeded with the auction sale of the 4,500 CGP
shares originally owned by the Galangs but later sold not to Lamberto but to Ines. [34]

On 17 June 1998, the Special Twelfth Division of the Court of Appeals granted the Camaganakans prayer for an amended TRO if only to
put the parties on status quo, which existed before the filing of herein original petition.[35]

On 27 May 1999, the Special Fifth Division of the Court of Appeals rendered the assailed Decision, the dispositive portion of which reads:

THE FOREGOING CONSIDERED, the contested Decision is hereby nullified but only in so far as it directed the
issuance of a Writ of Execution for the purpose of attaching the shares of stocks of the Camaganakan family, precisely referring
to the properties of herein petitioners.[36]

On 27 July 1999, the assailed Resolution was rendered denying the Galangs Motion for Reconsideration.[37]

Hence, the present petition anchored on the following arguments:

I.
THE CONTROVERSY BEFORE THE CA INVOLVED INTRA-CORPORATE CONFLICTS WHICH IS WITHIN THE EXCLUSIVE
JURISDICTION OF THE SEC
II.
THE PENDING MOTION WITH THE SEC CONSTITUTED A BAR TO THE FILING OF THE PETITION FOR ANNULMENT OF
JUDGMENT WITH THE CA ON THE GROUND OF FORUM SHOPPING
III.
THE HONORABLE COURT OF APPEALS SET ASIDE AND NULLIFIED THE FINAL AND EXECUTORY JUDGMENT OF THE
SEC ARISING FROM A COMPROMISE AGREEMENT FINALLY SETTLED UPON THE RESOLUTION OF THE PETITION FOR
CERTIORARI FILED AGAINST AN EARLIER SEC DECISION
IV.
RULE 47 [OF THE 1997 RULES OF CIVIL PROCEDURE] CANNOT BE APPLIED BY THE HONORABLE COURT OF
APPEALS IN A PETITION FOR ANNULMENT OF JUDGMENT [OF THE SEC] AS THE SAME APPLIES ONLY TO
ANNULMENT BY THE COURT OF APPEALS OF JUDGMENTS OR FINAL ORDERS AND RESOLUTIONS IN CIVIL ACTIONS
OF REGIONAL TRIAL COURTS XXX
V.
IN RENDERING THE QUESTIONED DECISION [AND RESOLUTION DENYING THE MOTION FOR RECONSIDERATION]
1.

The Honorable CA acted with manifest disregard of the right of petitioners to a fair and impartial
hearing when the CA totally ignored the documentary exhibits of substance and gave credence to
manufactured evidence fabricated shortly before the petition was submitted for resolution;

2.

There is a clear denial of due process of law when the CA failed to resolve prior to rendition of
judgment incidents of substantial importance;

3.

There is undue haste amounting to denial of due process of law when the CA resolved the
Motion for Reconsideration before the expiration of the period to file REPLY to OPPOSITION [which
was prayed for in the {unresolved} MOTION FOR EXTENSION of the herein petitioners, (said
extension prayed yet to expire on July 31, 1999); and

4.

There was an undue haste in the issuance of the TRO by the Division to which Honorable
Demetrio Demetria belongs and there is an unexplained mystery in the case being assigned to the
Division of Justice Demetrio Demetria and his sudden departure from the division after issuing the
TRO.

As we navigate through the seemingly endless diatribes of the parties and their counsels that have muddled the issues of what is already
a complicated case insofar as the facts thereof are concerned, we have come to the inescapable conclusion that the resolution of this controversy
will not depend on the arguments of the parties but on the central issue of whether or not the Court of Appeals committed reversible error in
granting the Camaganakans petition for annulment of judgment under Rule 47 of the Rules on Civil Procedure.

Section 1, Rule 47 states:

SECTION 1. Coverage. This Rule shall govern the annulment by the Court of Appeals of judgments or final orders and
resolutions in civil actions ofRegional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other
appropriate remedies are no longer available through no fault of the petitioner. (Emphasis supplied)

Rule 47 on annulment of judgments is a new provision under the 1997 Rules of Civil Procedure albeit the remedy has long been given
imprimatur by the courts.[38] It covers only the judgments or final orders and resolutions in civil actions of Regional Trial Courts [39] and not those of
the SEC. In fact, Section 9 of Batas Pambansa Blg. 129, as amended, only vests in the Court of Appeals exclusive jurisdiction over actions for
annulment of judgments of Regional Trial Courts.[40]

An action for annulment of judgment is a remedy in law independent of the case where the judgment sought to be annulled is rendered.
[41]

The concern that the remedy could so easily be resorted to as an instrument to delay a final and executory judgment has prompted safeguards

to be put in place in order to avoid an abuse of the rule. [42] Thus, among other things, the right to have a final judgment annulled must be expressly
granted by law.[43] In Macalalag v. Ombudsman[44] we emphatically held that

. . . The right to appeal is a mere statutory privilege and may be exercised only in the manner prescribed by, and in
accordance with, the provisions of law. There must then be a law expressly granting such right. This legal axiom is also
applicable and even more true in actions for annulment of judgments which is an exception to the rule on finality of judgments.

Unfortunately for the Camaganakans, the Revised Rules of Procedure in the SEC is silent as to the remedy of annulment of judgments of
its final orders and resolutions.[45]

And so we hold that the Court of Appeals indeed erred as it is without jurisdiction to entertain a petition for annulment of judgment of a
final decision of the Securities and Exchange Commission.

What the Camaganakans should have done was to seek for clarification from the SEC as to the inclusion of the Camaganakan family in the
dispositive portion of the decision. However, as the records of the case are already before us, and in the interest of substantial justice in order to
put this issue finally to rest, we will rule squarely on whether or not the SEC erroneously exercised jurisdiction over the Camaganakans who are
non-parties to the case.[46]

In their original petition dated 16 April 1998, the Camaganakans alleged lack of jurisdiction and violation of due process as the parties to
SEC EB Case No. 550 were just CGP, the Galangs and Lamberto, yet, the dispositive portion of the decision mentioned the Camaganakan family.
Thus, the Camaganakans lamented that the SEC decision and writ of execution were null and void as to them for lack of jurisdiction as they were
non-parties.

Scrupulously dissecting the decision in SEC EB Case No. 550 as well as the proceedings leading thereto, it becomes apparent that
nowhere from the decision are the Camaganakans (i.e., Ines, Belinda, Honorato, Marita, Aniceto, Cecilia and Antonio) mentioned except
Lamberto. This can only mean then, that when the SEC mentioned the Camaganakan family in the dispositive portion of the decision, it only
referred to Lamberto Camaganakan, Jr. as he was the only Camaganakan that had anything to do with the case. Verily, in case of any ambiguity
or uncertainty in the dispositive portion of a decision, the body of the opinion may be referred to for purposes of construing the dispositive part of
the judgment.[47] The dispositive part of the decision must find support in the body of the decision spelling out the ratio decidendi.[48] And, in the
body of the decision, it is only Lamberto who is clearly referred to as one of the main parties in the case.

Special note must likewise be made of the fact that SEC EB Case No. 550 referred to CGPs petition for certiorari to annul the SEC Order
dated 18 April 1997 entering the 30 May 1996 Judgment by Compromise in the Judgment Book of the SEC and issuing a writ of execution to
implement said agreement. The parties to the judgment by compromise were the Galangs (i.e., Jacinto, Gregoria and Marissa) on one hand and
Lamberto on the other.[49] The agreement referred to Lamberto as Camaganakans. This might explain why the SEC as well referred to Lamberto

as the Camaganakan family. Clearly therefore, tagging Lamberto as Camaganakan family in the dispositive portion was, at most, an oversight on
the part of the SEC which could be remedied without affecting the validity and the effectiveness of the decision.

We thus quote with approval the comment of the then public respondent SEC:

The portion of the SEC Decision dated February 5, 1998 being questioned by the petitioners state:
Setting aside the Order dated April 18, 1997 granting the issuance of a Writ of Execution to execute
properties of the corporation which included the eleven (11) buses, attached and levied by the SEC Sheriff
and instead, a Writ of Execution be issued to attach and levy the shares of stocks of the Camaganakan
family. (p. 4, Decision)
The afore-quoted portion of the decision merely states that the attachment and levy be made on the shares of stock of
the Camaganakan family. The decision did not specifically indicate that petitioners are included in the Camaganakan family. The
decision did not also specifically order the attachment and levy of the shares of stock of petitioners. Thus, the phrase
Camaganakan family should be construed to refer only to the members of the Camaganakan family who have been involved in
the case before the SEC.
The record of the cases filed with the SEC show [sic] that only Lamberto has been involved in these cases before the
SEC. In fact, he was the signatory to the compromise agreements and other documents filed before the SEC. Hence, the phrase
Camaganakan family should be construed to refer only to Lamberto.[50]

Prescinding from the foregoing, the reference to the Camaganakan family in the dispositive portion of the SEC decision could only pertain
to Lamberto. InFilipino Legion Corporation v. Court of Appeals, et al.[51] we held:

. . . [W]here there is ambiguity caused by an omission or mistake in the dispositive portion of a decision the court may
clarify such ambiguity by an amendment even after the judgment had become final, and for this purpose it may resort to the
pleadings filed by the parties, the courts findings of facts and conclusions of law as expressed in the body of the decision.

Going now to the Supplemental Petition for Annulment of Judgment dated 24 May 1998, a perusal of the arguments contained therein
would readily reveal that what is being questioned by the Camaganakans is not the decision itself but how it was implemented. [52] Any alleged
irregular implementation of a writ of execution, however, cannot be corrected through the equitable relief of annulment of judgment. The purpose
of annulment of judgment is to have the final and executory judgment set aside so that there will be a renewal of litigation. [53] The remedy to correct
any alleged irregular implementation of the writ of execution thus lies elsewhere. In Canlas v. Court of Appeals,[54] we stated that while there is no
appeal from execution of judgment, appeal lies in case of irregular implementation of the writ. As a rule, irregular execution means the failure of
the writ to conform to the decree of the decision executed.[55]

In sum, in deciding this case, we have been ultimately governed by the fact that the rule on annulment of judgment is grounded on equity;
thus, the relief it affords is of an extraordinary character and not as readily available as the remedies obtaining a judgment that is not yet final.[56]

WHEREFORE, premises considered, the instant petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 47417
dated 27 May 1999 and its Resolution dated 27 July 1999 are hereby SET ASIDE. The Decision of the Securities and Exchange Commission in
SEC EB Case No. 550 dated05 February 1998 is hereby AFFIRMED with the clarification that the reference to Camaganakan family in the
dispositive portion thereof pertains to Lamberto Camaganakan, Jr. only. Costs against private respondents.

G.R. No. L-67115 January 20, 1989

FILOIL MARKETING CORPORATION (now Petrophil Corporation), petitioner,

vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and JOSEFINA ALBERTO DE PABALAN,respondents.
Juan T. David for respondent.
Josefina Alberto de Pabalan.

CRUZ, J.:
There were three principal defendants in the original action for rescission and damages filed by the herein private respondent. They
were all held solidarily liable. Only the petitioner herein has appealed from the decision of the respondent court sustaining the trial
court. The other defendant has not done so and so is bound by the decision no before us.
This case arose from a sale of a piece of land belonging to Josefina Alberto de Pabalan in favor of Villa Rey Transit on December
22, 1971. 1 The purchase price was P140,000.00, payable in installments. On the day of the sale, TCT No. 87322 covering the land
was delivered by Pabalan to Jose M. Villarama, President of Villa Rey Transit, 2who on February 2,5, 1972, caused its cancellation
and the issuance of TCT No. 94229 in his own name. 3 The new certificate of title was clean; no conditions were annotated thereon;
and the transfer appeared to have been made by virtue of an absolute deed of sale.
On that very same date, Villarama mortgaged the land on behalf of Villa Rey Transit to the herein petitioner as security for a loan of
P350,000. 00. 4 Filoil Marketing Corporation was at the time already occupying the land by virtue of a contract of lease earlier
entered into with Pabalan. In the deed of mortgage, Villarama warranted that this was the only encumbrance on the land, which was
otherwise free from all liens and encumbrances. On January 25, 1974, the mortgagor having defaulted in the payment of the debt,
the mortgage was extrajudicially foreclosed and the land was sold at public auction. 5
Filoil was the highest bidder. 6 The certificate of sale was duly annotated on the certificate of title. 7 However, before the petitioner
could consolidate its ownership over the property, Pabalan, having learned of these developments, filed a complaint in the Court of
First Instance of Pangasinan, principally against Villa Rey Transit, Villarama and Filoil. 8
The complainant alleged that her contract of sale with Villa Rey Transit was conditional and did not transfer title to the latter pending
full payment to her of the purchase price. Villarama acted fraudulently when without her knowledge he caused the cancellation of
TCT No. 87322 and its replacement with TCT No. 94229 and thereafter mortgaged the land to Filoil. Filoil, for its part, acted in bad
faith if not in complicity with the other defendants when it purchased the land at the foreclosure sale knowing the property belonged
not to Villa Rey Transit but to her, from whom it had earlier leased the land. Pabalan asked for the rescission of the contract and for
damages.9
In their answer, Villa Rey Transit and Villarama contended that by its terms the contract of sale effected immediate transfer of
ownership over the land to them although payment was to be made in installments. The transaction was. not a mere contract to sell.
Hence, they had the right to mortgage it after securing a new certificate of title over it in the name of Villarama. 10
Filoil's defense was that of an innocent purchaser for value. It argued that it bad a right to rely on TCT No. 94229 and the warranties
of the mortgagor and could not be held liable for the acts of the other defendants. Neither should it be prejudiced by a rescission of
the contract. 11
The trial court 12 held in favor of the complainant. It declared the contract of sale rescinded for violation of its conditions by the
vendee; annulled TCT No. 94229, the deed of mortgage, and the auction sale of the land to Filoil; and reinstated TCT No. 87322 in
the complainant's name. Filoil was required to pay the rentals on the land. The defendants were also held solidarity liable to the
plaintiff in the amounts of P100,000.00 as moral damages; P25,000.00 as exemplary damages, and P45,000.00 as attorney's fees
plus the costs of the suit. 13
Villa Rey Transit and Filoil appealed to the then Intermediate Appellate Court, 14 which affirmed the decision of the trial court in
toto. 15 In due time, the petitioner came to this Court to challenge this affirmance. Its claim is that the respondent court erred in
imputing bad faith to Filoil and in canceling the questioned transactions notwithstanding the protection extended to it by law and
jurisprudence as an innocent purchaser for value of the disputed property.
The contract of sale reads as follows:
DEED OF SALE OF REAL PROPERTY
KNOW ALL MEN BY THESE PRESENTS:
This contract entered into by and between
JOSEFINA ALBERTO DE PABALAN, of legal age, married to Javier Pabalan, residing at 1812 Singalong Street,
Malate, Manila, hereinafter called the VENDOR
-andVILLA REY TRANSIT, INC. a domestic corporation duly organized and existing according to the laws of the
Philippines, represented in this act by its President, JOSE M. VILLARAMA, of legal age, with principal office at 942
Gov. Forbes, Sampaloc, Manila, hereinafter called the VENDEE,

WITNESSETH
1. WHEREAS, the VENDOR is the owner in fee simple of certain parcel of land covered by TCT No. 87322 of the
Registry of Deeds of Pangasinan, located at Carmen Resales, Pangasinan, may be specifically described as
follows:
A parcel of land (Lot 2-A-4-B-2-B-3 of the subdivision plan, [LRC] psd- 131340, being a portion of Lot 2-A-4-B-2-B,
described on plan [LRC] psd-89635, LRC Record No. 5463), situated in the Barrio of Carmen, Municipality of
Resales, Province of Pangasinan, Island of Luzon. Bounded on the NE., points 2 to 3, by Provincial Road; on the
SE., points 3 to 4, Lot 2-A-4-B-2-B-2 of the subdivision plan; on the SW., points 4 to 1, Lot 2-A-4-B-2-A, [LRC] psd89635; and on the NW., points 1 to 2, by Lot 2-A-4-A, [LRC] psd-38571. Beginning at a point marked 1 on plan,
being N. 72 deg. 44' E., 1664.57 m. from B.L.L.M. 1, Mp. of Sto. Tomas, Pangasinan; thence N. 65 deg. 2T E.,
35.00 m. to point 2; thence S. 27 deg. 5 1'E., 40.20 m. to point 3; thence S. 65 deg. 40 W., 32.02 m. to point 4;
thence N. 27 dog. 61'W., 40.00 m. to the point of beginning; containing an area of one thousand three hundred and
ninety-eight (1,398) square meters, more or less. All points referred to are indicated on the plan and are marked on
the ground as follows; point 3, by P.S. cyl. conc., mon., 15 x 60 cine., and the rest, by old P.S. cyl. conc. mons. 15 x
60 cms.; bearings true; declination 0 deg. 44'E.; date of the original survey, July 1924-June, 1925, and that of the
Subdivision Survey, November 3, 1970.
2. WHEREAS, the VENDOR is fully authorized to SELL, among others, the aforementioned parcel of land by her
spouse Javier Pabalan, as described in the General Absolute and Irreparable Power of Attorney executed by the
latter in favor of the former in Document No. 269, Page No. 97, Book No. 4, Series of 1958 rectified before Notary
Public, Atty. Antonio R. Ramaat;
3. 'WHEREAS, all real estate taxes on the aforementioned parcel of land are correct and paid as evidenced by
Official Receipt No. 2975212, of the Treasurer's Office of Pangasinan;
4. WHEREAS, the aforementioned parcel of land is free from all liens and encumbrances except for the Lease
Agreement between the Vendor and Filoil Marketing Corporation, dated January 25, 1960, as described in
Document No. 8, Page No. 5, Book No. 1, Series of 1960, of Notary Public Cesar Generosa for the City of Manila;
5. WHEREAS, the VENDOR is willing to sell and the VENDEE is willing to buy the aforementioned parcel of land
and for the following terns and conditions:
That the total consideration shall be in the sum of ONE HUNDRED FORTY THOUSAND (P140,000.00) PESOS,
payable annually at TEN THOUSAND (P10,000.00) PESOS, commencing from 1972 to 1975 inclusive, provided
that the payments corresponding to the first four (4) years (1972, 1973, 1974, 1975) shall be advanced as follows:
TEN THOUSAND (P10,000.00) PESOS upon the signing of this Deed, FIFTEEN THOUSAND (Pl5,000.00) PESOS
on or before January 5, 1972 and FIFTEEN THOUSAND (Pl5,000.00) PESOS on or before March 31, 1972,
provided, that the VENDOR may request advance payments not exceeding the equivalent of four (4) years at a
discounted rate according to prevalent rates charged by financing institutions; provided further that the VENDEE
shall honor and respect the lease contract entered into between the VENDOR and FILOIL MARKETING
CORPORATION, as described in the Document aforementioned provided finally that should the VENDEE, prior to
full payment of all the amounts aforementioned, shall decide to sell or to assign part or all of the aforementioned
parcel of land the VENDOR shall be informed by writing and shall have the option to repurchase the property at the
same price and or the same terms and conditions as may be offered to this person. Upon receipt of each written
offer from any third person, the VENDEE shall submit the same to the VENDOR who shall be entitled to thirty (30)
days to decide whether or not to repurchase. Should the VENDOR herein decide to repurchase and the property is
sold or transferred to a third person, the balance of the consideration herein still due to the vendor shall constitute
automatically a prior lien on the consideration to be paid by the third person to herein VENDEE.
NOW, therefore, for and in consideration of the sum of ONE HUNDRED FORTY THOUSAND (P140,000.00)
PESOS, payable under the terms and conditions stated in the foregoing premises, the VENDOR sells, transfer ,
and conveys unto the VENDEE its successors or assigns the above-described parcel of land, free from all liens and
encumbrances except for the lease contract by the VENDOR and FILOIL MARKETING CORPORATION, the terms
of which shall be respected by the VENDEE.
IN WITNESS HEREOF, the parties are hereunto set forth their signature in the City of Manila, this 22nd day of
December, 1971.
VILLA REY TRANSIT, INC.
(Vendee)
By:
(Sgd.) JOSE M. VILLARAMA (T) JOSE M. VILLARAMA President
(Sgd.) JOSEFINA ALBERTO (T) JOSEFINA ALBERTO
Vendor **
It is obvious that the above instrument is not a contract to sell as contended by the private respondent. We read it as a deed of sale
in which title to the subject land was transferred to the vendee as of the date of the transaction notwithstanding that the purchase
price had not yet been fully paid at that time.

In the first place, the dispositive part of the deed states that "for and in consideration of the sum of ONE HUNDRED FORTY
THOUSAND (Pl40,000.00) PESOS, payable under the terms and conditions stated in the foregoing premises, the VENDOR sells,
transfers and conveys unto the VENDEE ... the property in question as of December 22, 1971, the date of the said document.
Secondly, and more importantly, it is provided in paragraph 5 thereof that "should the VENDEE, prior to full payment of all the
amounts aforementioned, decide to sell or to assign part or all of the aforementioned parcel of land, the VENDOR shall be informed
in writing and shall have the option to repurchase the property ... Should the VENDOR herein decide to repurchase and the property
is sold or transferred to a third person, the balance of the consideration herein still due to the VENDOR shall constitute
automatically a prior lien on the consideration to be paid by the third person to herein VENDEE.'
Under the first-cited stipulation, what is deferred is not the transfer of ownership but the full payment of the purchase price, which is
to be made in installments, on the dates indicated. Under the second stipulation, it is recognized that the vendee may sell the
property even "prior to full payment of all the amounts aforementioned," which simply means that although the purchase price had
not yet been completely paid, the vendee had already become the owner of the land. As such, he could sell the same, subject to the
right of repurchase reserved to the vendor. In fact, the contract also provides for the possibility of the vendee selling the property to
a third person, in which case the vendor, if she wishes to repurchase the land, shall have a lien on any balance of the consideration
to be paid by the third person to the vendee.
But all this notwithstanding, we agree with the trial court, as sustained by the respondent court, that Villarama acted with less than
good faith and candor when he secured the cancellation of the vendor's certificate of title and replaced it with one in his name
without even informing the complainant about it. Worse, he thereafter mortgaged the property, also without her knowledge, and
then, to add insult to injury, also omitted to advice her that it had been sold at public auction because he had defaulted in the
payment of his mortgage debt. He did not even share the P350,000.00 loan with her and pay her therefrom the P100,000.00
balance of the purchase price.
All the while, the plaintiff had thought Villarama had taken TCT No. 87322 from her only for the purpose of having the deed of sale
annotated thereon. 16 She believed, not being a lawyer, that title to the property would not pass to the vendee until the purchase
price had been paid in full. The deed of sale, as the plaintiff testified, bad been drawn up by the legal staff of Villa Rey Transit. 17 As
far as she understood it, the land she was selling would pass to Villa Rey Transit only after the purchase price had been paid in
full. 18
It is true that she should have consulted a lawyer of her own to advice her and protect her interests, but the fact is she did not. She
just left the drafting of the deed to Villarama, whom she trusted. This circumstance alone imposed upon Villarama the moral if not
legal responsibility to explain the meaning and consequences of the contract she was signing. But he did not discharge this
responsibility. On the contrary, what he did was take advantage of the private respondent's confidence and use the subject property
to enable him to secure the loan he did not repay.
The fact that he mortgaged the property the very day he secured the transfer certificate in his name is meaningful, if not suspicious.
It suggests that he had meant all the while to use the transaction with the complainant to support the loan he was then negotiating
with Filoil, and that his purpose was not only not to inform the plaintiff about it but indeed to conceal it from her to prevent her from
obstructing his plan. While, in the strict legal sense, Villarama had the right as owner to mortgage the property to Filoil, we feel he
did so with demonstrated bad faith toward the private respondent, who had placed her confidence in him.
At any rate, Villarama has not appealed the decision of the trial court and is now deemed to have accepted it, including the
imputation to him of malice and deceit, as affirmed by the Court of Appeals.
What we are concerned with in this petition is the appeal of Filoil, the other defendant which has been held solidarity liable with
Villarama and Villa Rey Transit. Filoil, the herein petitioner, claims the status of an innocent purchaser for value and insists that the
deed of sale is not subject to rescission as far as it is concerned. Moreover, even assuming that the contract is rescissible as
between Pabalan and Villa Rey transit, it cannot now be canceled as to the petitioner because it had no participation therein.
Legally speaking, except only for the circumstance that Villarama and Villa Rey Transit have not appealed to this Court, the
rescission could not have been valid even as to them under the Civil Code. The Court of Appeals erred in holding that the contract
of sale was subject to rescission on the ground of non-compliance with one of its conditions, presumably the payment of the
purchase price, under Article 1191 of the said Code. That ground was merely assumed and not established. In fact, it did not exist at
the time of the filing of the complaint.
Under the provisions of the deed, the purchase price of P100,000.00 was to be paid in annual installments of P10,000.00, beginning
1972, except that there was to be an advance payment of P40,000.00 covering the installments for 1972 until 1975. It is not denied
by Pabalan that she received this advance payment, Payment in installments of the balance of P100,000.00 would thus begin only
in 1976. Hence, when Pabalan filed her complaint for rescission in 1974, the contract could not yet be faulted for non-performance
by the vendee of its obligation to pay the balance of the purchase price.
It follows that if the contract was not rescissible as to the other defendants (who are nevertheless bound by the decision of the
respondent court), much less would it be rescissible as to the petitioner, which was not even a party to that contract.
We nevertheless must examine Filoil's defense of an innocent purchaser for value, as the private respondent contends that it was
privy to the plans of Villarama and Villa Rey Transit and so equally liable with them to her in damages.
It is noted that at the time the contract of sale between Pabalan and Villa Rey was concluded on December 22, 1971, the subject
property was under lease to and occupied by Filoil. Filoil had earlier recognized that the owner of the land was Pabalan, who had
been its lessor since 1960. However, when that same land (which it continued to occupy by virtue of the lease) was later mortgaged
to it, the registered owner thereof had been changed and now appeared to be Villarama, who had TCT No. 94229 to prove it. Filoil
seems to have accepted this change without question.

It is curious that despite this important development which directly affected its lease, Filoil appears to have done nothing at all to
verify it. Filoil could have at least checked with Pabalan about the matter if only because of their existing contract of lease. It is also
strange that Villarama's deed of mortgage over the property was executed, as if by pre- arrangement with Filoil, on the very day be
obtained the transfer certificate in his own name. The decision to extend the not inconsiderable loan of P350,000.00 to Villarama
seems to have been readily made by Filoil, on the spur of the moment as it were.
Somehow Filoil's claim that it was ignorant of Villarama's acts vis-a-vis Pabalan does not ring true. We are not convinced when it
insists it had a right to rely alone on the assurances of the mortgagor and its own examination of the transfer certificate of title that
the subject land was unencumbered save for the lease in its favor. The doctrine it invokes, 19 while normally acceptable, is not
exactly applicable in this case. We feel that more vigilance was required of Filoil under the circumstances. As a business
corporation with its own legal staff, and in view of its direct involvement as the actual occupant and lessee of the disputed land, it
was bound to inquire more closely into the antecedents of its transfer to Villarama. Filoil had the legal staff to do this but it did not
see fit to prove further. This omission might fuel the suspicion that Filoil already knew about Villarama's plans and was in effect
going along with him as its new landlord and prospective borrower.
Given this situation, the Court hesitates to fully accept Filoil's wounded claim of innocence. At the same time, however, we are also
not certain it was deliberately involved in the scheme of the other defendants to take advantage of the private respondent. In fine,
while we are not prepared to acknowledge its claimed neivete, neither are we disposed, in fairness, to denounce its alleged malice.
But one thing is certain in this maze of surmises and suspicions. We find that the petitioner, if not knowingly involved in the scheme
to deceive Pabalan, was at least negligent in not closely examining the facts before accepting the land as security for the loan to
Villa Rey Transit. Filoil must bear the consequences of its own omission. But more than this, it must also share the blame for the
injury suffered by the private respondent, who now finds herself with neither the disputed property nor the balance of the purchase
price. Whether or not it acted in good faith, Filoil must also be held liable to Pabalan, albeit not in equal degree with Villarama and
Villa Rey Transit, for its part in her deception.
On page 33 of its brief, 20 the petitioner makes the following statement:
Be this as it may, the circumstance that the lawyers of Filoil could have discovered that the sale is on installment
basis, would, given the most favorable implication in favor of the vendor, at most render Filoil liable for the unpaid
balance of the purchase price in the amount of P100,000.00.
Considering the antecedents of this case as above discussed, the Court will accept this expressed willingness of Filoil to make
amends, to the extent indicated and offered. Accordingly we hereby order the petitioner to pay the private respondent, in atonement
for its part in the impairment of her interests, the balance of the purchase price in the sum of P100,000.00 plus interest. Its payment
was not decreed by the Court of Appeals because it had rescinded the contract instead; hence, it is not recoverable from Villarama
and Villa Rey Transit under the challenged decision. As it does not appear in the record that this amount has been received by
Pabalan from them, it is only fair that Filoil pay her this balance now, subject to its right to demand reimbursement from Villarama
and Villa Rey Transit in a separate appropriate action. What is important is that, in justice to the private respondent, she should not
be left holding the bag, so to speak, and without recourse to collect this amount.
Filoil's obligation includes the payment of interest at 6% per annum beginning 1976 and until the balance of P100,000.00 is fully
settled, to be compounded yearly, on the annual installments of P10,000.00 stipulated in the contract of sale. As of December 31,
1988, the total amount due to Pabalan from Filoil on the balance plus interest is P166,404.63.
For the reasons already given, Filoil is absolved from all other liabilities under the challenged decision. The award of moral and
exemplary damages and attorney's fees shall be enforceable only on the other defendants pursuant to the said decision. TCT No.
94229 is declared valid as to Filoil. The deed of mortgage and the auction sale of the disputed land in its favor are also recognized
as lawful and entitle Filoil now, in view of the lapse of the redemption period, to register the property in its name.
Corporations and businessmen should exercise more fairness in dealing with ordinary persons, especially if they do not have the
assistance and advice of counsel. Such persons are not likely to read the fine print in a contract or to understand the instruments
they are signing unless they are properly informed of the implications of their unsuspecting and headless acts. This is not to say that
such instruments are per se invalid without such explanation. What it simply means is that in proper cases, like the one at bar,
contracts should be read in the light of the layman's understanding of their esoteric legal language, that they may not ensnare him,
because of his trusting lack of caution, in their intricate stipulations.
WHEREFORE, the challenged decision is modified as applied to the petitioner in the sense that:
(1) TCT No. 94229, the deed of mortgage and the foreclosure sale in its favor over the subject land are declared
valid.
(2) The petitioner shall pay the private respondent the sum of P166,404.63, representing the balance of the
purchase price and 6% interest thereon as of December 31, 1988, plus 6% interest from that date until full payment
is made.
(3) The award against it of moral and exemplary damages and the attorney's fees is disallowed. This decision is
immediately executory.

G.R. No. 74553 June 8, 1989

SERVICEWIDE SPECIALISTS, INCORPORATED, petitioner,
vs.

THE HONORABLE INTERMEDIATE APPELLATE COURT, GALICANO SITON AND JUDGE JUSTINIANO DE
DUMO respondents.
Labaguis, Loyola, Angara & Associates for petitioner.
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."
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 twodoor with air-conditioning, Engine 2M-62799, 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 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.
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.
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."
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.
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.
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.
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.
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:
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 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).
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)
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:
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
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.

G.R. No. 93397 March 3, 1997

TRADERS ROYAL BANK, petitioner,
vs.

COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the
PHILIPPINES, respondents.

TORRES, JR., J.:

Assailed in this Petition for Review on Certiorari is the Decision of the respondent Court of Appeals dated January 29,
1990, 1 affirming the nullity of the transfer of Central Bank Certificate of Indebtedness (CBCI) No. D891, 2with a face value of
P500,000.00, from the Philippine Underwriters Finance Corporation (Philfinance) to the petitioner Trader's Royal Bank (TRB), under
a Repurchase Agreement 3 dated February 4, 1981, and a Detached Assignment 4dated April 27, 1981.
Docketed as Civil Case No. 83-17966 in the Regional Trial Court of Manila, Branch 32, the action was originally filed as a Petition
for Mandamus 5 under Rule 65 of the Rules of Court, to compel the Central Bank of the Philippines to register the transfer of the
subject CBCI to petitioner Traders Royal Bank (TRB).
In the said petition, TRB stated that:
3. On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached
Assignment" . . ., whereby Filriters, as registered owner, sold, transferred, assigned and delivered unto Philippine
Underwriters Finance Corporation (Philfinance) all its rights and title to Central Bank Certificates of Indebtedness of
PESOS: FIVE HUNDRED THOUSAND (P500,000) and having an aggregate value of PESOS: THREE MILLION
FIVE HUNDRED THOUSAND (P3,500,000.00);
4. The aforesaid Detached Assignment (Annex "A") contains an express authorization executed by the transferor
intended to complete the assignment through the registration of the transfer in the name of PhilFinance, which
authorization is specifically phrased as follows: '(Filriters) hereby irrevocably authorized the said issuer (Central
Bank) to transfer the said bond/certificates on the books of its fiscal agent;
5. On February 4, 1981, petitioner entered into a Repurchase Agreement with PhilFinance . . ., whereby, for and in
consideration of the sum of PESOS: FIVE HUNDRED THOUSAND (P500,000.00), PhilFinance sold, transferred
and delivered to petitioner CBCI 4-year, 8th series, Serial No. D891 with a face value of P500,000.00 . . ., which
CBCI was among those previously acquired by PhilFinance from Filriters as averred in paragraph 3 of the Petition;
6. Pursuant to the aforesaid Repurchase Agreement (Annex "B"), Philfinance agreed to repurchase CBCI Serial No.
D891 (Annex "C"), at the stipulated price of PESOS: FIVE HUNDRED NINETEEN THOUSAND THREE HUNDRED
SIXTY-ONE & 11/100 (P519,361.11) on April 27, 1981;
7. PhilFinance failed to repurchase the CBCI on the agreed date of maturity, April 27, 1981, when the checks it
issued in favor of petitioner were dishonored for insufficient funds;
8. Owing to the default of PhilFinance, it executed a Detached Assignment in favor of the Petitioner to enable the
latter to have its title completed and registered in the books of the respondent. And by means of said Detachment,
Philfinance transferred and assigned all, its rights and title in the said CBCI (Annex "C") to petitioner and,
furthermore, it did thereby "irrevocably authorize the said issuer (respondent herein) to transfer the said
bond/certificate on the books of its fiscal agent." . . .
9. Petitioner presented the CBCI (Annex "C"), together with the two (2) aforementioned Detached Assignments
(Annexes "B" and "D"), to the Securities Servicing Department of the respondent, and requested the latter to effect
the transfer of the CBCI on its books and to issue a new certificate in the name of petitioner as absolute owner
thereof;
10. Respondent failed and refused to register the transfer as requested, and continues to do so notwithstanding
petitioner's valid and just title over the same and despite repeated demands in writing, the latest of which is hereto
attached as Annex "E" and made an integral part hereof;
11. The express provisions governing the transfer of the CBCI were substantially complied with the petitioner's
request for registration, to wit:
"No transfer thereof shall be valid unless made at said office (where the Certificate has been
registered) by the registered owner hereof, in person or by his attorney duly authorized in writing,
and similarly noted hereon, and upon payment of a nominal transfer fee which may be required, a
new Certificate shall be issued to the transferee of the registered holder thereof."
and, without a doubt, the Detached Assignments presented to respondent were sufficient authorizations in writing
executed by the registered owner, Filriters, and its transferee, PhilFinance, as required by the above-quoted
provision;
12. Upon such compliance with the aforesaid requirements, the ministerial duties of registering a transfer of
ownership over the CBCI and issuing a new certificate to the transferee devolves upon the respondent;
Upon these assertions, TRB prayed for the registration by the Central Bank of the subject CBCI in its name.

On December 4, 1984, the Regional Trial Court the case took cognizance of the defendant Central Bank of the Philippines' Motion
for Admission of Amended Answer with Counter Claim for Interpleader 6 thereby calling to fore the respondent Filriters Guaranty
Assurance Corporation (Filriters), the registered owner of the subject CBCI as respondent.
For its part, Filriters interjected as Special Defenses the following:
11. Respondent is the registered owner of CBCI No. 891;
12. The CBCI constitutes part of the reserve investment against liabilities required of respondent as an insurance
company under the Insurance Code;
13. Without any consideration or benefit whatsoever to Filriters, in violation of law and the trust fund doctrine and to
the prejudice of policyholders and to all who have present or future claim against policies issued by Filriters, Alfredo
Banaria, then Senior Vice-President-Treasury of Filriters, without any board resolution, knowledge or consent of the
board of directors of Filriters, and without any clearance or authorization from the Insurance Commissioner,
executed a detached assignment purportedly assigning CBCI No. 891 to Philfinance;
xxx xxx xxx
14. Subsequently, Alberto Fabella, Senior Vice-President-Comptroller are Pilar Jacobe, Vice-President-Treasury of
Filriters (both of whom were holding the same positions in Philfinance), without any consideration or benefit
redounding to Filriters and to the grave prejudice of Filriters, its policy holders and all who have present or future
claims against its policies, executed similar detached assignment forms transferring the CBCI to plaintiff;
xxx xxx xxx
15. The detached assignment is patently void and inoperative because the assignment is without the knowledge
and consent of directors of Filriters, and not duly authorized in writing by the Board, as requiring by Article V,
Section 3 of CB Circular No. 769;
16. The assignment of the CBCI to Philfinance is a personal act of Alfredo Banaria and not the corporate act of
Filriters and such null and void;
a) The assignment was executed without consideration and for that reason, the assignment is void from the
beginning (Article 1409, Civil Code);
b) The assignment was executed without any knowledge and consent of the board of directors of Filriters;
c) The CBCI constitutes reserve investment of Filriters against liabilities, which is a requirement under the
Insurance Code for its existence as an insurance company and the pursuit of its business operations. The
assignment of the CBCI is illegal act in the sense of malum in se or malum prohibitum, for anyone to make, either
as corporate or personal act;
d) The transfer of dimunition of reserve investments of Filriters is expressly prohibited by law, is immoral and
against public policy;
e) The assignment of the CBCI has resulted in the capital impairment and in the solvency deficiency of Filriters (and
has in fact helped in placing Filriters under conservatorship), an inevitable result known to the officer who executed
assignment.
17. Plaintiff had acted in bad faith and with knowledge of the illegality and invalidity of the assignment.
a) The CBCI No. 891 is not a negotiable instrument and as a certificate of indebtedness is not payable to bearer but
is a registered in the name of Filriters;
b) The provision on transfer of the CBCIs provides that the Central Bank shall treat the registered owner as the
absolute owner and that the value of the registered certificates shall be payable only to the registered owner; a
sufficient notice to plaintiff that the assignments do not give them the registered owner's right as absolute owner of
the CBCI's;
c) CB Circular 769, Series of 1980 (Rules and Regulations Governing CBCIs) provides that the registered
certificates are payable only to the registered owner (Article II, Section 1).
18. Plaintiff knew full well that the assignment by Philfinance of CBCI No. 891 by Filriters is not a regular transaction
made in the usual of ordinary course of business;
a) The CBCI constitutes part of the reserve investments of Filriters against liabilities requires by the Insurance Code
and its assignment or transfer is expressly prohibited by law. There was no attempt to get any clearance or
authorization from the Insurance Commissioner;
b) The assignment by Filriters of the CBCI is clearly not a transaction in the usual or regular course of its business;

c) The CBCI involved substantial amount and its assignment clearly constitutes disposition of "all or substantially
all" of the assets of Filriters, which requires the affirmative action of the stockholders (Section 40, Corporation [sic]
Code. 7
In its Decision 8 dated April 29, 1988, the Regional Trial Court of Manila, Branch XXXIII found the assignment of CBCI No. D891 in
favor of Philfinance, and the subsequent assignment of the same CBCI by Philfinance in favor of Traders Royal Bank null and void
and of no force and effect. The dispositive portion of the decision reads:
ACCORDINGLY, judgment is hereby rendered in favor of the respondent Filriters Guaranty Assurance Corporation
and against the plaintiff Traders Royal Bank:
(a) Declaring the assignment of CBCI No. 891 in favor of PhilFinance, and the subsequent assignment of CBCI by
PhilFinance in favor of the plaintiff Traders Royal Bank as null and void and of no force and effect;
(b) Ordering the respondent Central Bank of the Philippines to disregard the said assignment and to pay the value
of the proceeds of the CBCI No. D891 to the Filriters Guaranty Assurance Corporation;
(c) Ordering the plaintiff Traders Royal Bank to pay respondent Filriters Guaranty Assurance Corp. The sum of
P10,000 as attorney's fees; and
(d) to pay the costs.
SO ORDERED. 9
The petitioner assailed the decision of the trial court in the Court of Appeals 10, but their appeals likewise failed. The findings of the
fact of the said court are hereby reproduced:
The records reveal that defendant Filriters is the registered owner of CBCI No. D891. Under a deed of assignment
dated November 27, 1971, Filriters transferred CBCI No. D891 to Philippine Underwriters Finance Corporation
(Philfinance). Subsequently, Philfinance transferred CBCI No. D891, which was still registered in the name of
Filriters, to appellant Traders Royal Bank (TRB). The transfer was made under a repurchase agreement dated
February 4, 1981, granting Philfinance the right to repurchase the instrument on or before April 27, 1981. When
Philfinance failed to buy back the note on maturity date, it executed a deed of assignment, dated April 27, 1981,
conveying to appellant TRB all its right and the title to CBCI No. D891.
Armed with the deed of assignment, TRB then sought the transfer and registration of CBCI No. D891 in its name
before the Security and Servicing Department of the Central Bank (CB). Central Bank, however, refused to effect
the transfer and registration in view of an adverse claim filed by defendant Filriters.
Left with no other recourse, TRB filed a special civil action for mandamus against the Central Bank in the Regional
Trial Court of Manila. The suit, however, was subsequently treated by the lower court as a case of interpleader
when CB prayed in its amended answer that Filriters be impleaded as a respondent and the court adjudge which of
them is entitled to the ownership of CBCI No. D891. Failing to get a favorable judgment. TRB now comes to this
Court on appeal. 11
In the appellate court, petitioner argued that the subject CBCI was a negotiable instrument, and having acquired the said certificate
from Philfinance as a holder in due course, its possession of the same is thus free fro any defect of title of prior parties and from any
defense available to prior parties among themselves, and it may thus, enforce payment of the instrument for the full amount thereof
against all parties liable thereon. 12
In ignoring said argument, the appellate court that the CBCI is not a negotiable instrument, since the instrument clearly stated that it
was payable to Filriters, the registered owner, whose name was inscribed thereon, and that the certificate lacked the words of
negotiability which serve as an expression of consent that the instrument may be transferred by negotiation.
Obviously, the assignment of the certificate from Filriters to Philfinance was fictitious, having made without consideration, and did
not conform to Central Bank Circular No. 769, series of 1980, better known as the "Rules and Regulations Governing Central Bank
Certificates of Indebtedness", which provided that any "assignment of registered certificates shall not be valid unless made . . . by
the registered owner thereof in person or by his representative duly authorized in writing."
Petitioner's claimed interest has no basis, since it was derived from Philfinance whose interest was inexistent, having acquired the
certificate through simulation. What happened was Philfinance merely borrowed CBCI No. D891 from Filriters, a sister corporation,
to guarantee its financing operations.
Said the Court:
In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalf of Filriters,
did not have the necessary written authorization from the Board of Directors of Filriters to act for the latter. For lack
of such authority, the assignment did not therefore bind Filriters and violated as the same time Central Bank
Circular No. 769 which has the force and effect of a law, resulting in the nullity of the transfer (People v. Que Po
Lay, 94 Phil. 640; 3M Philippines, Inc. vs. Commissioner of Internal Revenue, 165 SCRA 778).
In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to Traders
Royal Bank and which the latter can register with the Central Bank.

WHEREFORE, the judgment appealed from is AFFIRMED, with costs against plaintiff-appellant.
SO ORDERED. 13
Petitioner's present position rests solely on the argument that Philfinance owns 90% of Filriters equity and the two corporations
have identical corporate officers, thus demanding the application of the doctrine or piercing the veil of corporate fiction, as to give
validity to the transfer of the CBCI from registered owner to petitioner TRB. 14This renders the payment by TRB to Philfinance of
CBCI, as actual payment to Filriters. Thus, there is no merit to the lower court's ruling that the transfer of the CBCI from Filriters to
Philfinance was null and void for lack of consideration.
Admittedly, the subject CBCI is not a negotiable instrument in the absence of words of negotiability within the meaning of the
negotiable instruments law (Act 2031).
The pertinent portions of the subject CBCI read:
xxx xxx xxx
The Central Bank of the Philippines (the Bank) for value received, hereby promises to pay bearer, of if this
Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE CORPORATION, the
registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND PESOS.
xxx xxx xxx
Properly understood, a certificate of indebtedness pertains to certificates for the creation and maintenance of a permanent
improvement revolving fund, is similar to a "bond," (82 Minn. 202). Being equivalent to a bond, it is properly understood as
acknowledgment of an obligation to pay a fixed sum of money. It is usually used for the purpose of long term loans.
The appellate court ruled that the subject CBCI is not a negotiable instrument, stating that:
As worded, the instrument provides a promise "to pay Filriters Guaranty Assurance Corporation, the registered
owner hereof." Very clearly, the instrument is payable only to Filriters, the registered owner, whose name is
inscribed thereon. It lacks the words of negotiability which should have served as an expression of consent that the
instrument may be transferred by negotiation. 15
A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY ASSURANCE CORPORATION, and to
no one else, thus, discounting the petitioner's submission that the same is a negotiable instrument, and that it is a holder in due
course of the certificate.
The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute
for money. Hence, freedom of negotiability is the touchtone relating to the protection of holders in due course, and the freedom of
negotiability is the foundation for the protection which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This
freedom in negotiability is totally absent in a certificate indebtedness as it merely to pay a sum of money to a specified person or
entity for a period of time.
As held in Caltex (Philippines), Inc. v. Court of Appeals, 16:
The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that
is, from the face of the instrument itself. In the construction of a bill or note, the intention of the parties is to control,
if it can be legally ascertained. While the writing may be read in the light of surrounding circumstance in order to
more perfectly understand the intent and meaning of the parties, yet as they have constituted the writing to be the
only outward and visible expression of their meaning, no other words are to be added to it or substituted in its
stead. The duty of the court in such case is to ascertain, not what the parties may have secretly intended as
contradistinguished from what their words express, but what is the meaning of the words they have used. What the
parties meant must be determined by what they said.
Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the negotiable
instruments law. The pertinent question then is, was the transfer of the CBCI from Filriters to Philfinance and subsequently from
Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the CBCI registered in its name with the Central Bank?
The following are the appellate court's pronouncements on the matter:
Clearly shown in the record is the fact that Philfinance's title over CBCI No. D891 is defective since it acquired the
instrument from Filriters fictitiously. Although the deed of assignment stated that the transfer was for "value
received", there was really no consideration involved. What happened was Philfinance merely borrowed CBCI No.
D891 from Filriters, a sister corporation. Thus, for lack of any consideration, the assignment made is a complete
nullity.
What is more, We find that the transfer made by Filriters to Philfinance did not conform to Central Bank Circular No.
769, series of 1980, otherwise known as the "Rules and Regulations Governing Central Bank Certificates of
Indebtedness", under which the note was issued. Published in the Official Gazette on November 19, 1980, Section
3 thereof provides that any assignment of registered certificates shall not be valid unless made . . . by the
registered owner thereof in person or by his representative duly authorized in writing.

In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalf of Filriters,
did not have the necessary written authorization from the Board of Directors of Filriters to act for the latter. For lack
of such authority, the assignment did not therefore bind Filriters and violated at the same time Central Bank Circular
No. 769 which has the force and effect of a law, resulting in the nullity of the transfer (People vs. Que Po Lay, 94
Phil. 640; 3M Philippines, Inc. vs. Commissioner of Internal Revenue, 165 SCRA 778).
In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to Traders
Royal Bank and which the latter can register with the Central Bank
Petitioner now argues that the transfer of the subject CBCI to TRB must upheld, as the respondent Filriters and Philfinance, though
separate corporate entities on paper, have used their corporate fiction to defraud TRB into purchasing the subject CBCI, which
purchase now is refused registration by the Central Bank.
Says the petitioner;
Since Philfinance own about 90% of Filriters and the two companies have the same corporate officers, if the
principle of piercing the veil of corporate entity were to be applied in this case, then TRB's payment to Philfinance
for the CBCI purchased by it could just as well be considered a payment to Filriters, the registered owner of the
CBCI as to bar the latter from claiming, as it has, that it never received any payment for that CBCI sold and that
said CBCI was sold without its authority.
xxx xxx xxx
We respectfully submit that, considering that the Court of Appeals has held that the CBCI was merely borrowed by
Philfinance from Filriters, a sister corporation, to guarantee its (Philfinance's) financing operations, if it were to be
consistent therewith, on the issued raised by TRB that there was a piercing a veil of corporate entity, the Court of
Appeals should have ruled that such veil of corporate entity was, in fact, pierced, and the payment by TRB to
Philfinance should be construed as payment to Filriters. 17
We disagree with Petitioner.
Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this merely an equitable remedy, and may be awarded
only in cases when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime or where
a corporation is a mere alter ego or business conduit of a person. 18
Peiercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from
liabilities that ordinarily, they could be subject to, or distinguished one corporation from a seemingly separate one, were it not for the
existing corporate fiction. But to do this, the court must be sure that the corporate fiction was misused, to such an extent that
injustice, fraud, or crime was committed upon another, disregarding, thus, his, her, or its rights. It is the protection of the interests of
innocent third persons dealing with the corporate entity which the law aims to protect by this doctrine.
The corporate separateness between Filriters and Philfinance remains, despite the petitioners insistence on the contrary. For one,
other than the allegation that Filriters is 90% owned by Philfinance, and the identity of one shall be maintained as to the other, there
is nothing else which could lead the court under circumstance to disregard their corporate personalities.
Though it is true that when valid reasons exist, the legal fiction that a corporation is an entity with a juridical personality separate
from its stockholders and from other corporations may be disregarded, 19 in the absence of such grounds, the general rule must
upheld. The fact that Filfinance owns majority shares in Filriters is not by itself a ground to disregard the independent corporate
status of Filriters. In Liddel & Co., Inc. vs. Collector of Internal Revenue,20 the mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of
separate corporate personalities.
In the case at bar, there is sufficient showing that the petitioner was not defrauded at all when it acquired the subject certificate of
indebtedness from Philfinance.
On its face the subject certificates states that it is registered in the name of Filriters. This should have put the petitioner on notice,
and prompted it to inquire from Filriters as to Philfinance's title over the same or its authority to assign the certificate. As it is, there is
no showing to the effect that petitioner had any dealings whatsoever with Filriters, nor did it make inquiries as to the ownership of
the certificate.
The terms of the CBCI No. D891 contain a provision on its TRANSFER. Thus:
TRANSFER. This Certificate shall pass by delivery unless it is registered in the owner's name at any office of the
Bank or any agency duly authorized by the Bank, and such registration is noted hereon. After such registration no
transfer thereof shall be valid unless made at said office (where the Certificates has been registered) by the
registered owner hereof, in person, or by his attorney, duly authorized in writing and similarly noted hereon and
upon payment of a nominal transfer fee which may be required, a new Certificate shall be issued to the transferee
of the registered owner thereof. The bank or any agency duly authorized by the Bank may deem and treat the
bearer of this Certificate, or if this Certificate is registered as herein authorized, the person in whose name the
same is registered as the absolute owner of this Certificate, for the purpose of receiving payment hereof, or on
account hereof, and for all other purpose whether or not this Certificate shall be overdue.
This is notice to petitioner to secure from Filriters a written authorization for the transfer or to require Philfinance to submit such an
authorization from Filriters.

Petitioner knew that Philfinance is not registered owner of the CBCI No. D891. The fact that a non-owner was disposing of the
registered CBCI owned by another entity was a good reason for petitioner to verify of inquire as to the title Philfinance to dispose to
the CBCI.
Moreover, CBCI No. D891 is governed by CB Circular No. 769, series of 1990 21, known as the Rules and Regulations Governing
Central Bank Certificates of Indebtedness, Section 3, Article V of which provides that:
Sec. 3. Assignment of Registered Certificates. Assignment of registered certificates shall not be valid unless
made at the office where the same have been issued and registered or at the Securities Servicing Department,
Central Bank of the Philippines, and by the registered owner thereof, in person or by his representative, duly
authorized in writing. For this purpose, the transferee may be designated as the representative of the registered
owner.
Petitioner, being a commercial bank, cannot feign ignorance of Central Bank Circular 769, and its requirements. An entity which
deals with corporate agents within circumstances showing that the agents are acting in excess of corporate authority, may not hold
the corporation liable. 22 This is only fair, as everyone must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith. 23
The transfer made by Filriters to Philfinance did not conform to the said. Central Bank Circular, which for all intents, is considered
part of the law. As found by the courts a quo, Alfredo O. Banaria, who had signed the deed of assignment from Filriters to
Philfinance, purportedly for and in favor of Filriters, did not have the necessary written authorization from the Board of Directors of
Filriters to act for the latter. As it is, the sale from Filriters to Philfinance was fictitious, and therefore void and inexistent, as there
was no consideration for the same. This is fatal to the petitioner's cause, for then, Philfinance had no title over the subject certificate
to convey the Traders Royal Bank. Nemo potest nisi quod de jure potest no man can do anything except what he can do lawfully.
Concededly, the subject CBCI was acquired by Filriters to form part of its legal and capital reserves, which are required by law
be maintained at a mandated level. This was pointed out by Elias Garcia, Manager-in-Charge of respondent Filriters, in his
testimony given before the court on May 30, 1986.

24

to

Q Do you know this Central Bank Certificate of Indebtedness, in short, CBCI No. D891 in the face
value of P5000,000.00 subject of this case?
A Yes, sir.
Q Why do you know this?
A Well, this was CBCI of the company sought to be examined by the Insurance Commission
sometime in early 1981 and this CBCI No. 891 was among the CBCI's that were found to be
missing.
Q Let me take you back further before 1981. Did you have the knowledge of this CBCI No. 891
before 1981?
A Yes, sir. This CBCI is an investment of Filriters required by the Insurance Commission as legal
reserve of the company.
Q Legal reserve for the purpose of what?
A Well, you see, the Insurance companies are required to put up legal reserves under Section 213
of the Insurance Code equivalent to 40 percent of the premiums receipt and further, the Insurance
Commission requires this reserve to be invested preferably in government securities or government
binds. This is how this CBCI came to be purchased by the company.
It cannot, therefore, be taken out of the said funds, without violating the requirements of the law. Thus, the anauthorized use or
distribution of the same by a corporate officer of Filriters cannot bind the said corporation, not without the approval of its Board of
Directors, and the maintenance of the required reserve fund.
Consequently, the title of Filriters over the subject certificate of indebtedness must be upheld over the claimed interest of Traders
Royal Bank.
ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated January 29, 1990 is hereby AFFIRMED.
SO ORDERED.

G.R. No. 86150 March 2, 1992

GUZMAN, BOCALING & CO., petitioner,
vs.
RAOUL S. V. BONNEVIE, respondent.
E. Voltaire Garcia for petitioner.
Guinto Law Office for private respondent.

CRUZ, J.:
The subject of the controversy is a parcel of land measuring six hundred (600) square meters, more or less, with two buildings
constructed thereon, belonging to the Intestate Estate of Jose L. Reynoso.
This property was leased to Raoul S. Bonnevie and Christopher Bonnevie by the administratrix, Africa Valdez de Reynoso, for a
period of one year beginning August 8, 1976, at a monthly rental of P4,000.00.
The Contract of lease contained the following stipulation:
20. In case the LESSOR desire or decides to sell the lease property, the LESSEES shall be given a first priority
to purchase the same, all things and considerations being equal.
On November 3, 1976 according to Reynoso, she notified the private respondents by registered mail that she was selling the leased
premises for P600.000.00 less a mortgage loan of P100,000.00, and was giving them 30 days from receipt of the letter within which
to exercise their right of first priority to purchase the subject property. She said that in the event that they did not exercise the said
right, she would expect them to vacate the property not later then March, 1977.
On January 20, 1977, Reynoso sent another letter to private respondents advising them that in view of their failure to exercise their
right of first priority, she had already sold the property.
Upon receipt of this letter, the private respondents wrote Reynoso informing her that neither of them had received her letter dated
November 3, 1976; that they had advised her agent to inform them officially should she decide to sell the property so negotiations
could be initiated; and that they were "constrained to refuse (her) request for the termination of the lease.
On March 7, 1977, the leased premises were formally sold to petitioner Guzman, Bocaling & Co. The Contract of Sale provided for
immediate payment of P137,500.00 on the purchase price, the balance of P262,500.00 to be paid only when the premises were
vacated.
On April 12, 1977, Reynoso wrote a letter to the private respondents demanding that they vacate the premises within 15 days for
their failure to pay the rentals for four months. When they refuse, Reynoso filed a complaint for ejectment against them which was
docketed as Civil Case No. 043851-CV in the then City Court of Manila.
On September 25, 1979, the parties submitted a Compromise Agreement, which provided inter alia that "the defendant Raoul S.V.
Bonnevie shall vacate the premises subject of the Lease Contract, Voluntarily and Peacefully not later than October 31, 1979."
This agreement was approved by the City Court and became the basis of its decision. However, as the private respondents failed to
comply with the above-qouted stipulation, Reynoso filed a motion for execution of the judgment by compromise, which was granted
on November 8, 1979.
On November 12, 1979, private respondent Raoul S. Bonnevie filed a motion to set aside the decision of the City Court as well as
the Compromise Agreement on the sole ground that Reynoso had not delivered to him the "records of payments and receipts of all
rentals by or for the account of defendant ..." The motion was denied and the case was elevated to the then Court of First Instance.
That Court remanded the case to the City Court of Manila for trial on the merits after both parties had agreed to set aside the
Compromise Agreement.
On April 29, 1980, while the ejectment case was pending in the City Court, the private respondents filed an action for annulment of
the sale between Reynoso and herein petitioner Guzman, Bocaling & Co. and cancellation of the transfer certificate of title in the
name of the latter. They also asked that Reynoso be required to sell the property to them under the same terms ands conditions
agreed upon in the Contract of Sale in favor of the petitioner This complaint was docketed as Civil Case No. 131461 in the then
Court of First Instance of Manila.
On May 5, 1980, the City Court decided the ejectment case, disposing as follows:
WHEREFORE, judgment is hereby rendered ordering defendants and all persons holding under them to vacate the
premises at No. 658 Gen. Malvar Street, Malate, Manila, subject of this action, and deliver possession thereof to
the plaintiff, and to pay to the latter; (1) The sum of P4,000.00 a month from April 1, 1977 to August 8, 1977; (2) The
sum of P7,000.00 a month, as reasonable compensation for the continued unlawful use and occupation of said
premises, from August 9, 1977 and every month thereafter until defendants actually vacate and deliver possession
thereof to the plaintiff; (3) The sum of P1,000.00 as and for attorney's fees; and (4) The costs of suit.

The decision was appealed to the then Court of First Instance of Manila, docketed as Civil Case No. 132634 and consolidated with
Civil Case No. 131461. In due time, Judge Tomas P. Maddela, Jr., decided the two cases as follows:
WHEREFORE, premises considered, this Court in Civil Case No. 132634 hereby modifies the decision of the lower
court as follows:
1 Ordering defendants Raoul S.V. Bonnevie and Christopher Bonnevie and all persons holding under them to
vacate the premises at No. 658 Gen. Malvar St., Malate, Manila subject of this action and deliver possessions
thereof to the plaintiff; and
2 To pay the latter the sum of P4,000.00 a month from April 1, 1977 up to September 21, 1980 (when possession of
the premises was turned over to the Sheriff) after deducting whatever payments were made and accepted by Mrs.
Africa Valdez Vda. de Reynoso during said period, without pronouncement as to costs.
As to Civil Case No. 131461, the Court hereby renders judgment in favor of the plaintiff Raoul Bonnevie as against
the defendants Africa Valdez Vda. de Reynoso and Guzman and Bocaling & Co. declaring the deed of sale with
mortgage executed by defendant Africa Valdez Vda. de Reynoso in favor of defendant Guzman and Bocaling null
and void; cancelling the Certificate of Title No. 125914 issued by the Register of Deeds of Manila in the name of
Guzman and Bocaling & Co.,; the name of Guzman and Bocaling & Co.,; ordering the defendant Africa Valdez Vda.
de Reynoso to execute favor of the plaintiff Raoul Bonnevie a deed of sale with mortgage over the property leased
by him in the amount of P400,000.00 under the same terms and conditions should there be any other occupants or
tenants in the premises; ordering the defendants jointly and severally to pay the plaintiff Raoul Bonnevie the
amount of P50,000.00 as temperate damages; to pay the plaintiff jointly and severally the of P2,000.00 per month
from the time the property was sold to defendant Guzman and Bocaling by defendant Africa Valdez Vda de
Reynoso on March 7, 1977, up to the execution of a deed of sale of the property by defendant Africa Valdez Vda.
de Reynoso in favor of plaintiff Bonnevie; to pay jointly and severally the plaintiff Bonnevie the amount of
P20,000.00 as exemplary damages, for attorney's fees in the amount of P10,000.00, and to pay the cost of suit.
Both Reynoso and the petitioner company filed with the Court of Appeals a petition for review of this decision. The appeal was
eventually resolved against them in a decision promulgated on March 16, 1988, where the respondent court substantially affirmed
the conclusions of the lower court but reduced the award of damages. 1
Its motion for reconsideration having been denied on December 14, 1986, the petitioner has come to this Court asserting inter
alia that the respondent court erred in ruling that the grant of first priority to purchase the subject properties by the judicial
administratrix needed no authority from the probate court; holding that the Contract of Sale was not voidable but rescissible;
considering the petitioner as a buyer in bad faith ordering Reynoso to execute the deed of sale in favor of the Bonnevie; and not
passing upon the counterclaim. Reynoso has not appealed.
The Court has examined the petitioner's contentions and finds them to be untenable.
Reynoso claimed to have sent the November 3, 1976 letter by registered mail, but the registry return card was not offered in
evidence. What she presented instead was a copy of the said letter with a photocopy of only the face of a registry return card
claimed to refer to the said letter. A copy of the other side of the card showing the signature of the person who received the letter
and the data of the receipt was not submitted. There is thus no satisfactory proof that the letter was received by the Bonnevies.
Even if the letter had indeed been sent to and received by the private respondent and they did not exercise their right of first priority,
Reynoso would still be guilty of violating Paragraph 20 of the Contract of Lease which specifically stated that the private
respondents could exercise the right of first priority, "all things and conditions being equal." The Court reads this mean that there
should be identity of the terms and conditions to be offered to the Bonnevies and all other prospective buyers, with the Bonnevies to
enjoy the right of first priority.
The selling price qouted to the Bonnevies was P600,000.00, to be fully paid in cash less only the mortgage lien of
P100,000.00. 2 On the other hand, the selling price offered to and accepted by the petitioner was only P400,000.00 and only
P137,500.00 was paid in cash while the balance of P272,500.00 was to be paid "when the property (was) cleared of tenants or
occupants. 3
The fact that the Bonnevies had financial problems at that time was no justification for denying them the first option to buy the
subject property. Even if the Bonnevies could not buy it at the price qouted, Reynoso could not sell it to another for a lower price and
under more favorable terms and conditions. Only if the Bonnevies failed to exercise their right of first priority could Reynoso lawfully
sell the subject property to others, and at that onlyunder the same terms and conditions offered to the Bonnevies.
The Court agrees with the respondent court that it was not necessary to secure the approval by the probate court of the Contract of
Lease because it did not involve an alienation of real property of the estate nor did the term of the lease exceed one year so as top
make it fall under Article 1878(8) of the Civil Code. Only if Paragraph 20 of the Contract of Lease was activated and the said
property was intended to be sold would it be required of the administratrix to secure the approval of the probate court pursuant to
Rule 89 of the Rules of Court.
As a strict legal proposition, no judgment of the probate court was reviewed and eventually annuled collaterally by the respondent
court as contended by the petitioner. The order authorizing the sale in its favor was duly issued by the probate court, which
thereafter approved the Contract of Sale resulting in the eventual issuance if title in favor of the petitioner. That order was valid
insofar as it recognized the existence of all the essential elements of a valid contract of sale, but without regard to the special
provision in the Contract of Lease giving another party the right of first priority.
Even if the order of the probate court was valid, the private respondents still had a right to rescind the Contract of Sale because of
the failure of Reynoso to comply with her duty to give them the first opportunity to purchase the subject property.

The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could bring an action to annul it
pursuant to Article 1397 of the Civil Code. It is stressed that private respondents are strangers to the agreement and therefore have
no personality to seek its annulment.
The respondent court correctly held that the Contract of Sale was not voidable rescissible. Under Article 1380 to 1381 (3) of the Civil
Code, a contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The
status of creditors could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the
subject property to the petitioner without recognizing their right of first priority under the Contract of Lease.
According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to thirdpersons, to secure
reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their
condition at the moment prior to the celebration of said contract. 4 It is a relief allowed for the protection of one of the contracting
parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferent
right created by the contract. 5 Recission implies a contract which, even if initially valid, produces a lesion or pecuniary damage to
someone that justifies its invalidation for reasons of equity. 6
It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the action for its rescission
where it is shown that such third person is in lawful possession of the subject of the contract and that he did not act in bad
faith. 7 However, this rule is not applicable in the case before us because the petitioner is not considered a third party in relation to
the Contract of Sale nor may its possession of the subject property be regarded as acquired lawfully and in good faith.
Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale. Moreover, the petitioner cannot be deemed a purchaser
in good faith for the record shows that its categorically admitted it was aware of the lease in favor of the Bonnevies, who were
actually occupying the subject property at the time it was sold to it. Although the Contract of Lease was not annotated on the
transfer certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of
such lease which was equivalent to and indeed more binding than presumed notice by registration.
A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to
or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the
claim or interest of some other person in the property. 8 Good faith connotes an honest intention to abstain from taking
unconscientious advantage of another. 9 Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith
as it had notice of the lease of the property by the Bonnevies and such knowledge should have cautioned it to look deeper into the
agreement to determine if it involved stipulations that would prejudice its own interests.
The petitioner insists that it was not aware of the right of first priority granted by the Contract of Lease, Assuming this to be true, we
nevertherless agree with the observation of the respondent court that:
If Guzman-Bocaling failed to inquire about the terms of the Lease Contract, which includes Par. 20 on priority right
given to the Bonnevies, it had only itself to blame. Having known that the property it was buying was under lease, it
behooved it as a prudent person to have required Reynoso or the broker to show to it the Contract of Lease in
which Par. 20 is contained.
Finally, the petitioner also cannot invoke the Compromise Agreement which it says canceled the right of first priority granted to the
Bonnevies by the Contract of Lease. This agreement was set side by the parties thereto, resulting in the restoration of the original
rights of the private respondents under the Contract of Lease. The Joint Motion to Remand filed by Reynoso and the private
respondents clearly declared inter alia:
That without going into the merits of instant petition, the parties have agreed to SET ASIDE the compromise
agreement, dated September 24, 1979 and remand Civil Case No. 043851 of the City Court of Manila to Branch IX
thereof for trial on the merits. 10
We find, in sum, that the respondent court did not commit the errors imputed to it by the petitioner. On the contrary, its decision is
conformable to the established facts and the applicable law and jurisprudence and so must be sustained.
WHEREFORE, the petition in DENIED, with costs against the petitioner. The challeged decision is AFFIRMEDin toto. It is so
ordered.
Narvasa, C.J., Grio-Aquino and Medialdea, JJ., concur.

[G.R. No. 143513. November 14, 2001]

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and FIRESTONE CERAMICS,
INC., respondents.

[G.R. No. 143590. November 14, 2001]

NATIONAL DEVELOPMENT CORPORATION, petitioner, vs. FIRESTONE CERAMICS, INC., respondents.

DECISION
BELLOSILLO, J.:
A litigation is not simply a contest of litigants before the bar of public opinion; more than that, it is a pursuit of justice through
legal and equitable means. To prevent the search for justice from evolving into a competition for public approval, society invests the
judiciary with complete independence thereby insulating it from demands expressed through any medium, the press not
excluded. Thus, if the court would merely reflect, and worse, succumb to the great pressures of the day, the end result, it is feared,
would be a travesty of justice.
In the early sixties, petitioner National Development Corporation (NDC), a government owned and controlled corporation
created under CA 182 as amended by CA 311 and PD No. 668, had in its disposal a ten (10)-hectare property located along Pureza
St., Sta. Mesa, Manila. The estate was popularly known as the NDC compound and covered by Transfer Certificates of Title Nos.
92885, 110301 and 145470.
Sometime in May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested its desire to lease a portion of
the property for its ceramic manufacturing business.On 24 August 1965 NDC and FIRESTONE entered into a contract of lease
denominated as Contract No. C-30-65 covering a portion of the property measured at 2.90118 hectares for use as a manufacturing
plant for a term of ten (10) years, renewable for another ten (10) years under the same terms and conditions. [1] In consequence of
the agreement, FIRESTONE constructed on the leased premises several warehouses and other improvements needed for the
fabrication of ceramic products.
Three and a half (3-1/2) years later, or on 8 January 1969, FIRESTONE entered into a second contract of lease with NDC over
the latter's four (4)-unit pre-fabricated reparation steel warehouse stored in Daliao, Davao. FIRESTONE agreed to ship the
warehouse to Manila for eventual assembly within the NDC compound. The second contract, denominated as Contract No. C-2668, was for similar use as a ceramic manufacturing plant and was agreed expressly to be "co-extensive with the lease of LESSEE
with LESSOR on the 2.60 hectare-lot."[2]
On 31 July 1974 the parties signed a similar contract concerning a six (6)-unit pre-fabricated steel warehouse which, as agreed
upon by the parties, would expire on 2 December 1978. [3] Prior to the expiration of the aforementioned contract, FIRESTONE wrote
NDC requesting for an extension of their lease agreement. Consequently on 29 November 1978 the Board of Directors of NDC
adopted Resolution No. 11-78-117 extending the term of the lease, subject to several conditions among which was that in the event
NDC "with the approval of higher authorities, decide to dispose and sell these properties including the lot, priority should be given to
the LESSEE"[4] (underscoring supplied). On 22 December 1978, in pursuance of the resolution, the parties entered into a new
agreement for a ten-year lease of the property, renewable for another ten (10) years, expressly granting FIRESTONE the first option
to purchase the leased premises in the event that it decided "to dispose and sell these properties including the lot . . . . "[5]
The contracts of lease conspicuously contain an identically worded provision requiring FIRESTONE to construct buildings and
other improvements within the leased premises worth several hundred thousands of pesos. [6]
The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE, cognizant of the impending
expiration of their lease agreement with NDC, informed the latter through several letters and telephone calls that it was renewing its
lease over the property. While its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who
promised immediate action on the matter, the rest of its communications remained unacknowledged. [7] FIRESTONE's predicament
worsened when rumors of NDC's supposed plans to dispose of the subject property in favor of petitioner Polytechnic University of
the Philippines (PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the
property in the exercise of its contractual right of first refusal.
Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an action for specific performance
to compel NDC to sell the leased property in its favor. FIRESTONE averred that it was pre-empting the impending sale of the NDC
compound to petitioner PUP in violation of its leasehold rights over the 2.60-hectare [8] property and the warehouses thereon which
would expire in 1999. FIRESTONE likewise prayed for the issuance of a writ of preliminary injunction to enjoin NDC from disposing
of the property pending the settlement of the controversy.[9]
In support of its complaint, FIRESTONE adduced in evidence a letter of Antonio A. Henson dated 15 July 1988 addressed to
Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary Catalino Macaraeg, reviewing a proposed
memorandum order submitted to then President Corazon C. Aquino transferring the whole NDC compound, including the leased
property, in favor of petitioner PUP. Attached to the letter was a draft of the proposed memorandum order as well as a summary of
existing leases on the subject property.The survey listed FIRESTONE as lessee of a portion of the property, placed at
29,000[10] square meters, whose contract with NDC was set to expire on 31 December 1989 [11]renewable for another ten (10) years
at the option of the lessee. The report expressly recognized FIRESTONE's right of first refusal to purchase the leased property
"should the lessor decide to sell the same."[12]
Meanwhile, on 21 February 1989 PUP moved to intervene and asserted its interest in the subject property, arguing that a
"purchaser pendente lite of property which is subject of a litigation is entitled to intervene in the proceedings." [13] PUP referred
to Memorandum Order No. 214 issued by then President Aquino ordering the transfer of the whole NDC compound to the National

Government, which in turn would convey the aforementioned property in favor of PUP at acquisition cost. The issuance was
supposedly made in recognition of PUP's status as the "Poor Man's University" as well as its serious need to extend its campus in
order to accommodate the growing student population. The order of conveyance of the 10.31-hectare property would automatically
result in the cancellation of NDC's total obligation in favor of the National Government in the amount of P57,193,201.64.
Convinced that PUP was a necessary party to the controversy that ought to be joined as party defendant in order to avoid
multiplicity of suits, the trial court granted PUP's motion to intervene. FIRESTONE moved for reconsideration but was denied. On
certiorari, the Court of Appeals affirmed the order of the trial court. FIRESTONE came to us on review but in a Resolution dated 11
July 1990 we upheld PUP's inclusion as party-defendant in the present controversy.
Following the denial of its petition, FIRESTONE amended its complaint to include PUP and Executive Secretary Catalino
Macaraeg, Jr., as party-defendants, and sought the annulment of Memorandum Order No. 214. FIRESTONE alleged that
although Memorandum Order No. 214 was issued "subject to such liens/leases existing [on the subject property]," PUP disregarded
and violated its existing lease by increasing the rental rate at P200,000.00 a month while demanding that it vacated the premises
immediately.[14] FIRESTONE prayed that in the event Memorandum Order No. 214 was not declared unconstitutional, the property
should be sold in its favor at the price for which it was sold to PUP - P554.74 per square meter or for a total purchase price
of P14,423,240.00.[15]
Petitioner PUP, in its answer to the amended complaint, argued in essence that the lease contract covering the property had
expired long before the institution of the complaint, and that further, the right of first refusal invoked by FIRESTONE applied solely to
the six-unit pre-fabricated warehouse and not the lot upon which it stood.
After trial on the merits, judgment was rendered declaring the contracts of lease executed between FIRESTONE and NDC
covering the 2.60-hectare property and the warehouses constructed thereon valid and existing until 2 June 1999. PUP was ordered
and directed to sell to FIRESTONE the "2.6 hectare leased premises or as may be determined by actual verification and survey of
the actual size of the leased properties where plaintiff's fire brick factory is located" at P1,500.00 per square meter considering that,
as admitted by FIRESTONE, such was the prevailing market price thereof.
The trial court ruled that the contracts of lease executed between FIRESTONE and NDC were interrelated and inseparable
because "each of them forms part of the integral system of plaintiff's brick manufacturing plant x x x if one of the leased premises
will be taken apart or otherwise detached from the two others, the purpose of the lease as well as plaintiff's business operations
would be rendered useless and inoperative." [16] It thus decreed that FIRESTONE could exercise its option to purchase the property
until 2 June 1999 inasmuch as the 22 December 1978 contract embodied a covenant to renew the lease for another ten (10) years
at the option of the lessee as well as an agreement giving the lessee the right of first refusal.
The trial court also sustained the constitutionality of Memorandum Order No. 214 which was not per se hostile to
FIRESTONE's property rights, but deplored as prejudicial thereto the "very manner with which defendants NDC and PUP
interpreted and applied the same, ignoring in the process that plaintiff has existing contracts of lease protectable by express
provisions in the Memorandum No. 214 itself." [17] It further explained that the questioned memorandum was issued "subject to such
liens/leases existing thereon"[18] and petitioner PUP was under express instructions "to enter, occupy and take possession of the
transferred property subject to such leases or liens and encumbrances that may be existing thereon"[19](underscoring supplied).
Petitioners PUP, NDC and the Executive Secretary separately filed their Notice of Appeal, but a few days thereafter, or on 3
September 1996, perhaps realizing the groundlessness and the futility of it all, the Executive Secretary withdrew his appeal. [20]
Subsequently, the Court of Appeals affirmed the decision of the trial court ordering the sale of the property in favor of
FIRESTONE but deleted the award of attorney's fees in the amount of Three Hundred Thousand Pesos ( P300,000.00). Accordingly,
FIRESTONE was given a grace period of six (6) months from finality of the court's judgment within which to purchase the property
in questioned in the exercise of its right of first refusal. The Court of Appeals observed that as there was a sale of the subject
property, NDC could not excuse itself from its obligation TO OFFER THE PROPERTY FOR SALE FIRST TO FIRESTONE BEFORE
IT COULD TO OTHER PARTIES. The Court of Appeals held: "NDC cannot look to Memorandum Order No. 214 to excuse or shield
it from its contractual obligations to FIRESTONE. There is nothing therein that allows NDC to disavow or repudiate the solemn
engagement that it freely and voluntarily undertook, or agreed to undertake." [21]
PUP moved for reconsideration asserting that in ordering the sale of the property in favor of FIRESTONE the courts a
quo unfairly created a contract to sell between the parties. It argued that the "court cannot substitute or decree its mind or consent
for that of the parties in determining whether or not a contract (has been) perfected between PUP and NDC." [22]PUP further
contended that since "a real property located in Sta. Mesa can readily command a sum of P10,000.00 per square (meter)," the
lower court gravely erred in ordering the sale of the property at only P1,500.00 per square meter. PUP also advanced the theory
that the enactment of Memorandum Order No. 214 amounted to a withdrawal of the option to purchase the property granted to
FIRESTONE. NDC, for its part, vigorously contended that the contracts of lease executed between the parties had expired without
being renewed by FIRESTONE; consequently, FIRESTONE was no longer entitled to any preferential right in the sale or disposition
of the leased property.
We do not see it the way PUP and NDC did. It is elementary that a party to a contract cannot unilaterally withdraw a right of
first refusal that stands upon valuable consideration.That principle was clearly upheld by the Court of Appeals when it denied on 6
June 2000 the twin motions for reconsideration filed by PUP and NDC on the ground that the appellants failed to advance new
arguments substantial enough to warrant a reversal of the Decision sought to be reconsidered. [23] On 28 June 2000 PUP filed an
urgent motion for an additional period of fifteen (15) days from 29 June 2000 or until 14 July 2000 within which to file a Petition for
Review on Certiorari of the Decision of the Court of Appeals.
On the last day of the extended period PUP filed its Petition for Review on Certiorari assailing the Decision of the Court of
Appeals of 6 December 1999 as well as the Resolutionof 6 June 2000 denying reconsideration thereof. PUP raised two issues: (a)
whether the courts a quo erred when they "conjectured" that the transfer of the leased property from NDC to PUP amounted to a
sale; and, (b) whether FIRESTONE can rightfully invoke its right of first refusal. Petitioner posited that if we were to place
our imprimatur on the decisions of the courts a quo, "public welfare or specifically the constitutional priority accorded to education"
would greatly be prejudiced.[24]
Paradoxically, our paramount interest in education does not license us, or any party for that matter, to destroy the sanctity of
binding obligations. Education may be prioritized for legislative or budgetary purposes, but we doubt if such importance can be used
to confiscate private property such as FIRESTONE's right of first refusal.

On 17 July 2000 we denied PUP's motion for extension of fifteen (15) days within which to appeal inasmuch as the aforesaid
pleading lacked an affidavit of service of copies thereof on the Court of Appeals and the adverse party, as well as written
explanation for not filing and serving the pleading personally.[25]
Accordingly, on 26 July 2000 we issued a Resolution dismissing PUP's Petition for Review for having been filed out of
time. PUP moved for reconsideration imploring a resolution or decision on the merits of its petition. Strangely, about the same time,
several articles came out in the newspapers assailing the denial of the petition. The daily papers reported that we unreasonably
dismissed PUP's petition on technical grounds, affirming in the process the decision of the trial court to sell the disputed property to
the prejudice of the government in the amount of P1,000,000,000.00.[26] Counsel for petitioner PUP, alleged that the trial court and
the Court of Appeals "have decided a question of substance in a way definitely not in accord with law or jurisprudence." [27]
At the outset, let it be noted that the amount of P1,000,000,000.00 as reported in the papers was way too exaggerated, if not
fantastic. We stress that NDC itself sold the whole 10.31-hectare property to PUP at only P57,193,201.64 which represents NDC's
obligation to the national government that was, in exchange, written off. The price offered per square meter of the property was
pegged at P554.74. FIRESTONE's leased premises would therefore be worth only P14,423,240.00. From any angle, this amount is
certainly far below the ballyhooed price of P1,000,000,000.00.
On 4 October 2000 we granted PUP's Motion for Reconsideration to give it a chance to ventilate its right, if any it still had in the
leased premises, thereby paving the way for a reinstatement of its Petition for Review.[28] In its appeal, PUP took to task the courts a
quo for supposedly "substituting or decreeing its mind or consent for that of the parties (referring to NDC and PUP) in determining
whether or not a contract of sale was perfected." PUP also argued that inasmuch as "it is the parties alone whose minds must meet
in reference to the subject matter and cause," it concluded that it was error for the lower courts to have decreed the existence of a
sale of the NDC compound thus allowing FIRESTONE to exercise its right of first refusal.
On the other hand, NDC separately filed its own Petition for Review and advanced arguments which, in fine, centered on
whether or not the transaction between petitioners NDC and PUP amounted to a sale considering that ownership of the property
remained with the government.[29] Petitioner NDC introduced the novel proposition that if the parties involved are both government
entities the transaction cannot be legally called a sale.
In due course both petitions were consolidated.[30]
We believe that the courts a quo did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor of
petitioner PUP. Aside from the fact that the intention of NDC and PUP to enter into a contract of sale was clearly expressed in
the Memorandum Order No. 214,[31] a close perusal of the circumstances of this case strengthens the theory that the conveyance of
the property from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper transfer as argued by
petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the
ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its
equivalent.[32] It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually
obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the
vendee to receive and pay for the property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision
which effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the questioned
transaction. Petitioners NDC and PUP have their respective charters and therefore each possesses a separate and distinct
individual personality.[33] The inherent weakness of NDCs proposition that there was no sale as it was only the government which
was involved in the transaction thus reveals itself. Tersely put, it is not necessary to write an extended dissertation on government
owned and controlled corporations and their legal personalities. Beyond cavil, a government owned and controlled corporation has
a personality of its own, distinct and separate from that of the government. [34] The intervention in the transaction of the Office of the
President through the Executive Secretary did not change the independent existence of these entities. The involvement of the
Office of the President was limited to brokering the consequent relationship between NDC and PUP. But the withdrawal of the
appeal by the Executive Secretary is considered significant as he knew, after a review of the records, that the transaction was
subject to existing liens and encumbrances, particularly the priority to purchase the leased premises in favor of FIRESTONE.
True that there may be instances when a particular deed does not disclose the real intentions of the parties, but their action
may nevertheless indicate that a binding obligation has been undertaken. Since the conduct of the parties to a contract may be
sufficient to establish the existence of an agreement and the terms thereof, it becomes necessary for the courts to examine the
contemporaneous behavior of the parties in establishing the existence of their contract.
The preponderance of evidence shows that NDC sold to PUP the whole NDC compound, including the leased premises,
without the knowledge much less consent of private respondent FIRESTONE which had a valid and existing right of first refusal.
All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and
"transfer" of the property from NDC to PUP - consent of the parties, determinate subject matter, and consideration therefor.
Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which explicitly states the
acquiescence of the parties to the sale of the property WHEREAS, PUP has expressed its willingness to acquire said NDC properties and NDC has expressed its willingness to
sell the properties to PUP (underscoring supplied).[35]
Furthermore, the cancellation of NDC's liabilities in favor of the National Government in the amount of P57,193,201.64
constituted the "consideration" for the sale. As correctly observed by the Court of AppealsThe defendants-appellants' interpretation that there was a mere transfer, and not a sale, apart from being specious sophistry and a
mere play of words, is too strained and hairsplitting.For it is axiomatic that every sale imposes upon the vendor the obligation to
transfer ownership as an essential element of the contract. Transfer of title or an agreement to transfer title for a price paid, or
promised to be paid, is the very essence of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid & Oberly, Inc., v. RJL Martinez
Fishing Corp., 166 SCRA 493). At whatever legal angle we view it, therefore, the inescapable fact remains that all the requisites of a
valid sale were attendant in the transaction between co-defendants-appellants NDC and PUP concerning the realities subject of the
present suit.[36]

What is more, the conduct of petitioner PUP immediately after the transaction is in itself an admission that there was a sale of
the NDC compound in its favor. Thus, after the issuance of Memorandum Order No. 214 petitioner PUP asserted its ownership over
the property by posting notices within the compound advising residents and occupants to vacate the premises. [37] In its Motion for
Intervention petitioner PUP also admitted that its interest as a "purchaser pendente lite" would be better protected if it was joined as
party-defendant in the controversy thereby confessing that it indeed purchased the property.
In light of the foregoing disquisition, we now proceed to determine whether FIRESTONE should be allowed to exercise its right
of first refusal over the property. Such right was expressly stated by NDC and FIRESTONE in par. XV of their third contract
denominated as A-10-78 executed on 22 December 1978 which, as found by the courts a quo, was interrelated to and inseparable
from their first contract denominated as C-30-65 executed on 24 August 1965 and their second contract denominated as C-26-68
executed on 8 January 1969. Thus Should the LESSOR desire to sell the leased premises during the term of this Agreement, or any extension thereof, the LESSOR
shall first give to the LESSEE, which shall have theright of first option to purchase the leased premises subject to mutual agreement
of both parties.[38]
In the instant case, the right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the
whole contract. The consideration for the right is built into the reciprocal obligations of the parties. Thus, it is not correct for
petitioners to insist that there was no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the
stipulation is part and parcel of the contract of lease making the consideration for the lease the same as that for the option.
It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to
the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee
has failed to accept it.[39] The lessee has a right that the lessor's first offer shall be in his favor.
The option in this case was incorporated in the contracts of lease by NDC for the benefit of FIRESTONE which, in view of the
total amount of its investments in the property, wanted to be assured that it would be given the first opportunity to buy the property
at a price for which it would be offered. Consistent with their agreement, it was then implicit for NDC to have first offered the leased
premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its right of first
priority could NDC lawfully sell the property to petitioner PUP.
It now becomes apropos to ask whether the courts a quo were correct in fixing the proper consideration of the sale
at P1,500.00 per square meter. In contracts of sale, the basis of the right of first refusal must be the current offer of the seller to sell
or the offer to purchase of the prospective buyer. Only after the lessee-grantee fails to exercise its right under the same terms and
within the period contemplated can the owner validly offer to sell the property to a third person, again, under the same terms as
offered to the grantee.[40] It appearing that the whole NDC compound was sold to PUP for P554.74 per square meter, it would have
been more proper for the courts below to have ordered the sale of the property also at the same price. However, since FIRESTONE
never raised this as an issue, while on the other hand it admitted that the value of the property stood at P1,500.00 per square meter,
then we see no compelling reason to modify the holdings of the courts a quo that the leased premises be sold at that price.
Our attention is invited by petitioners to Ang Yu Asuncion v. CA[41] in concluding that if our holding in Ang Yu would be applied
to the facts of this case then FIRESTONE's "option, if still subsisting, is not enforceable," the option being merely a preparatory
contract which cannot be enforced.
The contention has no merit. At the heels of Ang Yu came Equatorial Realty Development, Inc., v. Mayfair Theater, Inc.,
where after much deliberation we declared, and so we hold, that a right of first refusal is neither "amorphous nor merely
preparatory" and can be enforced and executed according to its terms. Thus, in Equatorial we ordered the rescission of the sale
which was made in violation of the lessee's right of first refusal and further ordered the sale of the leased property in favor of Mayfair
Theater, as grantee of the right. Emphatically, we held that "(a right of first priority) should be enforced according to the law on
contracts instead of the panoramic and indefinite rule on human relations." We then concluded that the execution of the right of first
refusal consists in directing the grantor to comply with his obligation according to the terms at which he should have offered the
property in favor of the grantee and at that price when the offer should have been made.
[42]

One final word. Petitioner PUP should be cautioned against bidding for public sympathy by bewailing the dismissal of its
petition before the press. Such advocacy is not likely to elicit the compassion of this Court or of any court for that matter. An
entreaty for a favorable disposition of a case not made directly through pleadings and oral arguments before the courts do not
persuade us, for as judges, we are ruled only by our forsworn duty to give justice where justice is due.
WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590 are DENIED. Inasmuch as the first contract of lease
fixed the area of the leased premises at 2.90118 hectares while the second contract placed it at 2.60 hectares, let a ground survey
of the leased premises be immediately conducted by a duly licensed, registered surveyor at the expense of private respondent
FIRESTONE CERAMICS, INC., within two (2) months from finality of the judgment in this case. Thereafter, private respondent
FIRESTONE CERAMICS, INC., shall have six (6) months from receipt of the approved survey within which to exercise its right to
purchase the leased property at P1,500.00 per square meter, and petitioner Polytechnic University of the Philippines is ordered to
reconvey the property to FIRESTONE CERAMICS, INC., in the exercise of its right of first refusal upon payment of the purchase
price thereof.