SECOND DIVISION

[G.R. No. 153827. April 25, 2006.]

ASIAN
CONSTRUCTION
AND
DEVELOPMENT
CORPORATION, petitioner, vs. PHILIPPINE COMMERCIAL
INTERNATIONAL BANK, respondent.

DECISION

GARCIA, J :
p

In this petition for review under Rule 45 of the Rules of Court, petitioner Asian
Construction and Development Corporation or "ASIAKONSTRUKT," seeks the reversal
and setting aside of the decision 1 dated March 15, 2002 and the Resolution 2 dated June
3, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 68189. The assailed decision
affirm with modification the Summary Judgment rendered by the Regional Trial Court
(RTC) of Makati City in an action for a sum of money thereat commenced by the herein
respondent, Philippine Commercial International Bank (PCIBANK) against the petitioner,
while the challenged resolution denied petitioner's motion for reconsideration.
The facts:
On February 24, 1999, in the RTC of Makati City, respondent PCIBANK filed a complaint
3 for a sum of money with prayer for a writ of preliminary attachment against petitioner
ASIAKONSTRUKT. Docketed as Civil Case No. 99-432, the complaint alleged, inter alia,
as follows:
FIRST CAUSE OF ACTION
2.01 On various occasions, ASIAKONSTRUKT obtained U.S. dollar
denominated credit accommodations from PCIBANK in the amount of
Four Million Four Hundred Eighty Seven Thousand U.S. dollars
(US$4,487,000.00), exclusive of interests, charges and fees thereon and
the cost of collecting the same. These credit accommodations are covered
by the following promissory notes:
xxx xxx xxx

2.02 Prompt and faithful payment of all the foregoing promissory notes was
secured by the following deeds of assignment executed by
ASIAKONSTRUKT in favor of PCIBANK:
(a) Deed of Assignment of Receivables/Contract Proceeds dated 20 July
1994 . . . where ASIAKONSTRUKT assigned its receivables from
its Contract . . . with the National Power Corporation (NPC) in the
amount of . . . P54,500,000;
(b) Deed of Assignment of Receivables . . . dated 28 June 1995 . . . where
ASIAKONSTRUKT assigned its receivables from its Contract . .
. with the NPC in the amount of . . . P26,281,000.00;
(c) Deed of Assignment of Receivables dated 28 August 1995 . . . where
ASIAKONSTRUKT assigned its receivables from its SubContract with ABB Power, Inc., in the amount of P43,000,000.00;
(d) Deed of Assignment of Contract Proceeds dated 27 March 1996 . . .
where ASIAKONSTRUKT assigned its receivables from its
contracts with PNOC . . . in the aggregate amount of
P46,000,000.00; and
cSHIaA

(e) Deed of Assignment of Contract Proceeds . . . dated 20 February 1997

. . . where ASIAKONSTRUKT assigned its receivables from the
Ormat Philippines, Inc., in the aggregate amount of
US$3,350,000.00;
2.03 All the foregoing deeds of assignments stipulate, among others, the
following terms and conditions:
a) The assignment is for the purpose of securing payment of the principal
amount and the interests and bank charges accruing thereon, the
costs of collecting the same and all other expenses which
PCIBANK may be put in connection with or as an incident of the
assignment;
b) That the assignment secures also any extension or renewal of the credit
which is the subject thereof as any and all other obligations of
ASIAKONSTRUKT of whatever kind and nature as appear in the
records of PCIBANK, which ASIAKONSTRUKT accepts as the
final and conclusive evidence of such obligations to PCIBANK,
"whether contracted before, during or after the constitution of [the
assignment agreement]";

c) That PCIBANK authorizes ASIAKONSTRUKT, at the latter's

expense, to "collect and receive for [PCIBANK] all the
Receivables"; and
d) That ASIAKONSTRUKT "shall have no right, and agrees not to use
any of the proceeds of any collections, it being agreed by the
parties that [ASIAKONSTRUKT] divests itself of all the rights,
title and interest in said Receivables and the proceeds of the
collection received thereon."
2.04 The promissory notes have remained not fully paid despite their having
become due and demandable. Repeated verbal and written demands were
made upon ASIAKONSTRUKT, but to no avail. It has failed and refused,
and continues to fail and refuse, to pay its outstanding obligations to
PCIBANK. . .;
2.05 As a result of ASIAKONSTRUKT's refusal to pay its outstanding
obligations, PCIBANK was constrained to refer the matter . . . to counsel
and thus incur attorney's fees and legal costs.
2.06 The aggregate unpaid obligation of ASIAKONSTRUKT to PCIBANK, as
of 31 December 1998, amounts to. . . US$4,553,446.06, broken down as
follows:
Principal US$ 4,067,867.23
Interest US$ 291,263.27
Penalties US$ 194,315.56
TOTAL US$ 4,553,446.06

For its second cause of action, PCIBANK alleged in the same complaint as follows:
SECOND CAUSE OF ACTION
4.02 . . . as a result of the fraudulent acts of ASIAKONSTRUKT, PCIBANK
suffered the following damages, all of which ASIAKONSTRUKT must
be held to pay PCIBANK:
4.02.1 Exemplary damages, in the interest of public good and purposes of
correction, in the amount of not less than . . . P50,000.00;
4.02.2 Attorney's fees in the amount of not less than . . . P1,800,000.00;
and
DHSaCA

4.02.3 Costs of suit.

In support of its prayer for a writ of preliminary attachment embodied in the complaint,
plaintiff PCIBANK alleges the following:
3.02 . . . ASIAKONSTRUKT is guilty of fraud in contracting the debt, in the
performance thereof, or both, . . . ;
303. PCIBANK agreed to enter into the above-mentioned credit accommodations
primarily because of the existence of the deeds of assignment listed above.
However, from telephone inquiries made with responsible officers of the
National Power Corporation, ABB Power, Inc., PNOC and Ormat
Philippines, Inc., PCIBANK was surprised to learn that
ASIAKONSTRUKT had long ago collected the contract proceeds, or
portions thereof, which were previously assigned to PCIBANK. However,
to date, it has yet to turn over these proceeds to PCIBANK. Worse,
PCIBANK learned that the contract proceeds were used by
ASIAKONSTRUKT for its own purposes clear evidence of fraud,
which has deprived PCIBANK of its security. ASIAKONSTRUKT's
unauthorized use of the contract proceeds for its own purposes was
subsequently confirmed by Mr. Napoleon Garcia, Vice President for
Finance of ASIAKONSTRUKT, in a telephone discussion on 12 January
1999 with Ms. Maricel E. Salaveria of PCIBANK. . . . Needless to say,
ASIAKONSTRUKT has fraudulently collected such receivables to the
prejudice of PCIBANK.
3.04 . . . it is evident that ASIAKONSTRUKT never had any intention of
complying with the deeds of assignment. ASIAKONSTRUKT only
misled PCIBANK into believing that it had sufficient security to ensure
payment of its loan obligations.
3.05 Alternatively, granting, in argumenti gratia, that ASIAKONSTRUKT, at the
time it executed the foregoing deeds of assignment, really intended to
abide by their terms and conditions, it nevertheless committed manifest
fraud when it collected the contract proceeds, and instead of remitting
them to PCIBANK, used them for its own purposes.

In an order 4 dated April 13, 1999, the trial court, after receiving ex parte PCIBANK's
evidence in support of its prayer for preliminary attachment, directed the issuance of the
desired writ, thus:
WHEREFORE, let a writ of preliminary attachment issue against all the property
of defendant not exempt from execution or so much thereof as may be sufficient
to satisfy plaintiff's principal claim of US$4,553,446.06, representing the alleged
unpaid obligation of defendant, inclusive of interest and penalty charges, as of
December 31, 1998, which is equivalent to P174,260,380.72, upon plaintiff's

filing of a bond in an equal amount to answer for all it may sustain by reason of
the attachment if the Court shall finally adjudge that plaintiff was not entitled
thereto.
SO ORDERED.

With plaintiff PCIBANK having posted the requisite bond, a writ of preliminary
attachment was thereafter issued by the trial court. Per records, defendant
ASIAKONSTRUKT did not file any motion for the quashal or dissolution of the writ.
Meanwhile, on August 27, 1999, defendant ASIAKONSTRUKT filed its Answer, 5
thereunder making admissions and denials. Defendant admits, subject to its defenses, the
material allegations of the Complaint as regards its indebtedness to plaintiff PCIBANK
and its execution of the various deeds of assignment enumerated therein. It, however,
denies, for lack of knowledge sufficient to form a belief as to the truth thereof, the
averments in the Complaint that it has not paid, despite demands, its due and demandable
obligations, as well as the amounts due the plaintiff as itemized in paragraph 2.06, supra,
of the Complaint. It likewise denies PCIBANK's allegations in the same Complaint in
support of its prayer for a writ of preliminary attachment, particularly its having
fraudulently misappropriated for its own use the contract proceeds/receivables under the
contracts mentioned in the several deeds of assignments, claiming in this respect that it has
still remaining receivables from those contracts.
SEHaDI

By way of defenses, defendant pleads in its Answer the alleged "severe financial and
currency crisis" which hit the Philippines in July 1997, which adversely affected and
ultimately put it out of business. Defendant adds that the deeds of assignments it executed
in favor of PCIBANK were standard forms proposed by the bank as pre-condition for the
release of the loans and therefore partake of the nature of contracts of adhesion, leaving the
defendant to the alternative of "taking it or leaving it." By way of counterclaim, defendant
prayed for an award of P1,000,000.00 as and for attorney's fees and P200,000.00 as
litigation expenses.
On January 24, 2000, plaintiff PCIBANK filed a verified Motion for Summary Judgment,
6 therein contending that the defenses interposed by the defendant are sham and contrived,
that the alleged financial crisis pleaded in the Answer is not a fortuitous event that would
excuse debtors from their loan obligations, nor is it an exempting circumstance under
Article 1262 of the New Civil Code where, as here, the same is attended by bad faith. In
the same motion, PCIBANK also asserts that the deeds of assignments executed in its favor
are not contracts of adhesion, and even if they were, the same are valid.

To the Motion for Summary Judgment, defendant interposed an Opposition 7 insisting that
its Answer tendered or raised genuine and substantial issues of material facts which require
full-blown trial, namely:
1. Whether or not defendant received all or part of the proceeds/receivables due
from the contracts mentioned in the deeds of assignment at the time the complaint
was filed;
2. Granting that defendant received those proceeds/receivables, whether or not
defendant fraudulently misappropriated the same;
3. Whether or not defendant is virtually insolvent as a result of the regionwide
economic crisis that hit Asia, causing the Philippine peso to depreciate drastically;
and
4. Whether the parties dealt with each other on equal footing with respect to the
execution of the deeds of assignment as to give the defendant an honest
opportunity to reject the onerous terms imposed therein.

Significantly, defendant did not append to its aforementioned Opposition any affidavit in
support of the alleged genuine issues of material facts mentioned therein.
AICTcE

Before the pending incident (motion for summary judgment) could be resolved by the trial
court, plaintiff PCIBANK waived its claim for exemplary damages and agreed to reduce
its claim for attorney's fees from P1,800,000.00 to P1,260,000.00, but made it clear that its
waiver of exemplary damages and reduction of attorney's fees are subject to the condition
that a full and final disposition of the case is obtained via summary judgment.
On May 16, 2000, the trial court, acting favorably on PCIBANK's motion for summary
judgment, came out with its Summary Judgment, 8 the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff:
1. the sum of US$4,553,446.06, or its equivalent in Philippine currency at
the time of payment, with interest thereon at the rate of 8.27% per
annum from February 24, 1999 until fully paid;
2. P1,260,000.00 as and for attorney's fees; and
3. the costs of suit.
SO ORDERED.

Explains the trial court in rendering its Summary Judgment:

A thorough examination of the parties' pleadings and their respective stand in the
foregoing motion, the court finds that indeed with defendant's admission of the
first cause of action there remains no question of facts in issue. Further, the
proffered defenses are worthless, unsubstantial, sham and contrived.
Considering that there is no more issue to be resolved, the court hereby grants
plaintiff's Motion and renders Judgment in favor of the plaintiff against the
defendant based on their respective pleadings in accordance with Section 4, Rule
35 of the Rules of Court.

In time, petitioner went to the CA whereat its appellate recourse was docketed as CA-G.R.
CV No. 68189. As stated at the threshold hereof, the CA, in its decision 9 of May 15, 2002,
affirmed with modification the Summary Judgment rendered by the trial court, the
modification being as regards the award for attorney's fees which the CA reduced to
P1,000,000.00, to wit:
IN THE LIGHT OF ALL THE FOREGOING, the appeal is PARTIALLY
GRANTED. The "Decision" appealed from is AFFIRMED with the
MODIFICATION THAT THE AWARD FOR ATTORNEY'S FEES is reduced
to P1,000,000.00.
SO ORDERED.

With its motion for reconsideration having been denied by the CA in its Resolution 10 of
June 3, 2002, petitioner is now with us via the present recourse, raising the following
issues:
I WHETHER OR NOT THERE IS A GENUINE ISSUE AS TO A MATERIAL
FACT WHICH RULES OUT THE PROPRIETY OF A SUMMARY
JUDGMENT.
caIEAD

II WHETHER OR NOT THE AWARD OF ATTORNEY'S FEES IS

EXORBITANT OR UNCONSCIONABLE.

We DENY.
As in the two courts below, it is petitioner's posture that summary judgment is improper in
this case because there are genuine issues of fact which have to be threshed out during trial,
to wit: (a) whether or not petitioner was able to collect only a portion of the contract
proceeds/receivables it was bound to deliver, remit and tender to respondent under the
several deeds of assignment it executed in favor of the latter; and (b) whether or not
petitioner fraudulently misappropriated and used for its benefit the said
proceeds/receivables. Ergo, so petitioner maintains, genuine triable issues of fact are
present in this case, which thereby precludes rendition of summary judgment.

We are not persuaded.

Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the amount of
damages, when there is no genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law, summary judgment may be allowed. 11 Summary
or accelerated judgment is a procedural technique aimed at weeding out sham claims or
defenses at an early stage of litigation thereby avoiding the expense and loss of time
involved in a trial. 12
Under the Rules, summary judgment is appropriate when there are no genuine issues of
fact which call for the presentation of evidence in a full-blown trial. Even if on their face
the pleadings appear to raise issues, when the affidavits, depositions and admissions show
that such issues are not genuine, then summary judgment as prescribed by the Rules must
ensue as a matter of law. The determinative factor, therefore, in a motion for summary
judgment, is the presence or absence of a genuine issue as to any material fact.
A "genuine issue" is an issue of fact which requires the presentation of evidence as
distinguished from a sham, fictitious, contrived or false claim. When the facts as pleaded
appear uncontested or undisputed, then there is no real or genuine issue or question as to
the facts, and summary judgment is called for. The party who moves for summary
judgment has the burden of demonstrating clearly the absence of any genuine issue of fact,
or that the issue posed in the complaint is patently unsubstantial so as not to constitute a
genuine issue for trial. Trial courts have limited authority to render summary judgments
and may do so only when there is clearly no genuine issue as to any material fact. When
the facts as pleaded by the parties are disputed or contested, proceedings for summary
judgment cannot take the place of trial. 13
The CA, in its challenged decision, stated and we are in full accord with it:
In the present recourse, the [petitioner] relied not only on the judicial admissions
. . . in its pleadings, more specifically its "Answer" to the complaint, the
testimony of Maricel Salaveria as well as Exhibits "A" to "T-3", adduced in
evidence by the [respondent], during the hearing on its plea for the issuance, by
the Court a quo, of a writ of preliminary attachment. Significantly, the [petitioner]
did not bother filing a motion for the quashal of the "Writ" issued by the Court a
quo.
CIScaA

It must be borne in mind, too, that the [petitioner] admitted, in its "Answer" . . .
the due execution and authenticity of the documents appended to the complaint .
. . . The [petitioner] did not deny its liability for the principal amount claimed by
the [respondent] in its complaint. The [petitioner] merely alleged, by way of
defenses, that it failed to pay its account . . . because of the region-wide economic
crisis that engulfed Asia, in July, 1997, and the "Deeds of Assignment" executed
by it in favor of the [respondent] were contracts of adhesion:

xxx xxx xxx

The [petitioner] elaborated on and catalogued its defenses in its "Appellants
Brief" what it believed, as "genuine issues".
"(i) Whether or not [petitioner] received all or part of the
proceeds/receivables due from the construction contracts at the
time the civil action was filed;
(ii) Granting that [petitioner] received the proceeds/receivables from the
construction contracts, whether or not [petitioner] fraudulently
misappropriated the same;
(iii) Whether or not [petitioner] had become virtually insolvent as a result
of the region-wide economic crisis that hit Asia, causing the
Philippine peso to depreciate dramatically; and
(iv) Whether or not [respondent] and [petitioner] dealt with each other on
equal footing with respect to the execution of the deeds of
assignment of receivables as to give [petitioner] an honest
opportunity to reject the onerous terms imposed on it."
However, the [petitioner] failed to append, to its "Opposition" to the "Motion
for Summary Judgment", . . . "Affidavits" showing the factual basis for its
defenses of "extraordinary deflation," including facts, figures and data showing
its financial condition before and after the economic crisis and that the crisis was
the proximate cause of its financial distress. It bears stressing that the [petitioner]
was burdened to demonstrate, by its "Affidavits" and documentary evidence,
that, indeed, the Philippines was engulfed in an extraordinary deflation of the
Philippine Peso and that the same was the proximate cause of the financial
distress, it claimed, it suffered.
xxx xxx xxx
Where, on the basis of the records, inclusive of the pleadings of the parties, and
the testimonial and documentary evidence adduced by the [respondent],
supportive of its plea for a writ of preliminary attachment, the [respondent] had
causes of action against the [petitioner], it behooved the [petitioner] to controvert
the same with affidavits/documentary evidence showing a prima facie genuine
defense. As the Appellate Court of Illinois so aptly declared:
The defendant must show that he has a bona fide defense to the action,
one which he may be able to establish. It must be a plausible ground of
defense, something fairly arguable and of a substantial character. This he
must show by affidavits or other proof.

The trial court, of course, must determine from the affidavits filed whether
the defendant has interposed a sufficiently good defense to entitle it to
defend, but where defendant's affidavits present no substantial triable
issues of fact, the court will grant the motion for summary judgment.

xxx xxx xxx

The failure of the [petitioner] to append to its "Opposition" any "Affidavits"
showing that its defenses were not contrived or cosmetic to delay judgment . . .
created a presumption that the defenses of the [petitioner] were not offered in
good faith and that the same could not be sustained (Unites States versus Fiedler,
et al., Federal Reported, 2nd, 578).
If, indeed, the [petitioner] believed it that was prevented from complying with its
obligations to the [respondent], under its contracts, it should have interposed a
counterclaims for rescission of contracts, conformably with the pronouncement
of our Supreme Court, thus:
xxx xxx xxx
The [petitioner] did not. This only exposed the barrenness of the pose of the
[petitioner].
CDAcIT

The [petitioner] may have experienced financial difficulties because of the "1997
economic crisis" that ensued in Asia. However, the same does not constitute a
valid justification for the [petitioner] to renege on its obligations to the
[respondent]. The [petitioner] cannot even find solace in Articles 1266 and 1267
of the New Civil Code for, as declared by our Supreme Court:
It is a fundamental rule that contracts, once perfected, bind both
contracting parties, and obligations arising therefrom have the force of
law between the parties and should be complied with in good faith. But
the law recognizes exceptions to the principle of the obligatory force of
contracts. One exception is laid down in Article 1266 of the Civil Code,
which reads: 'The debtor in obligations to do shall also be released when
the prestation becomes legally or physically impossible without the fault
of the obligor.'
Petitioner cannot, however, successfully take refuge in the said article, since it is
applicable only to obligations "to do," and not obligations "to give." An obligation
"to do" includes all kinds of work or service; while an obligation "to give" is a
prestation which consists in the delivery of a movable or an immovable thing in
order to create a real right, or for the use of the recipient, or for its simple
possession, or in order to return it to its owner.

xxx xxx xxx

In this case, petitioner wants this Court to believe that the abrupt change in the
political climate of the country after the EDSA Revolution and its poor financial
condition "rendered the performance of the lease contract impractical and
inimical to the corporate survival of the petitioner." (Philippine National
Construction Corporation versus Court of Appeals, et al., 272 SCRA 183, at
pages 191-192, supra)
The [petitioner] even failed to append any "Affidavit" to its "Opposition"
showing how much it had received from its construction contracts and how and
to whom the said collections had been appended. The [petitioner] had personal
and sole knowledge of the aforesaid particulars while the [respondent] did not.

In fine, we rule and so hold that the CA did not commit any reversible error in affirming
the summary judgment rendered by the trial court as, at bottom, there existed no genuine
issue as to any material fact. We also sustain the CA's reduction in the award of attorney's
fees to only P1,000,000.00, given the fact that there was no full-blown trial.
DaACIH

WHEREFORE, the assailed CA decision is AFFIRMED in toto and this petition is

DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona and Azcuna, JJ., concur.
Puno, J., is on leave.
(Asian Construction and Development Corp. v. PCI Bank, G.R. No. 153827, [April 25,
2006], 522 PHIL 168-182)
|||

THIRD DIVISION
[G.R. No. 170405. February 2, 2010.]
RAYMUNDO S. DE LEON, petitioner, vs. BENITA T. ONG, 1
respondent.

DECISION

CORONA, J :
p

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land
2 with improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale with
assumption of mortgage 3 stating:
xxx xxx xxx
That for and in consideration of the sum of ONE MILLION ONE HUNDRED
THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is
hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey
in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs
and assigns that certain real estate together with the buildings and other
improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal
under the following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR
HUNDRED FIFTEEN THOUSAND FIVE HUNDRED
(P415,000), [petitioner] shall execute and sign a deed of
assumption of mortgage in favor of [respondent] without any
further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX
HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED
PESOS (P684,500) with REAL SAVINGS AND LOAN, 4
Cainta, Rizal . . . (emphasis supplied)
cTACIa

xxx xxx xxx

Pursuant to this deed, respondent gave petitioner P415,500 as partial payment.

Petitioner, on the other hand, handed the keys to the properties and wrote a letter
informing RSLAI of the sale and authorizing it to accept payment from respondent and
release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the
properties. 5 Respondent likewise informed RSLAI of her agreement with petitioner
for her to assume petitioner's outstanding loan. RSLAI required her to undergo credit
investigation.
Subsequently, respondent learned that petitioner again sold the same properties
to one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys
he gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit
investigation. However, she was informed that petitioner had already paid the amount
due and had taken back the certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance,
declaration of nullity of the second sale and damages 6 against petitioner and Viloria in
the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since
petitioner had previously sold the properties to her on March 10, 1993, he no longer
had the right to sell the same to Viloria. Thus, petitioner fraudulently deprived her of
the properties.
AcSEHT

Petitioner, on the other hand, insisted that respondent did not have a cause of
action against him and consequently prayed for the dismissal of the complaint. He
claimed that since the transaction was subject to a condition (i.e., that RSLAI approve
the assumption of mortgage), they only entered into a contract to sell. Inasmuch as
respondent did apply for a loan from RSLAI, the condition did not arise. Consequently,
the sale was not perfected and he could freely dispose of the properties. Furthermore,
he made a counter-claim for damages as respondent filed the complaint allegedly with
gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that
she knew that the validity of the sale was subject to a condition. The perfection of a
contract of sale depended on RSLAI's approval of the assumption of mortgage. Since
RSLAI did not allow respondent to assume petitioner's obligation, the RTC held that
the sale was never perfected.
In a decision dated August 27, 1999, 7 the RTC dismissed the complaint for lack
of cause of action and ordered respondent to pay petitioner P100,000 moral damages,
P20,000 attorney's fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting that
the court a quo erred in dismissing the complaint.

The CA found that the March 10, 2003 contract executed by the parties did not
impose any condition on the sale and held that the parties entered into a contract of sale.
Consequently, because petitioner no longer owned the properties when he sold them to
Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral
and exemplary damages for fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005, 9 the CA upheld the sale to respondent and
nullified the sale to Viloria. It likewise ordered respondent to reimburse petitioner
P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered
to deliver the certificates of titles to respondent and pay her P50,000 moral damages
and P15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated
November 11, 2005. 10 Hence, this petition, 11 with the sole issue being whether the
parties entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the
transaction was subject to a suspensive condition, that is, the approval by RSLAI of
respondent's assumption of mortgage. Because RSLAI did not allow respondent to
assume his (petitioner's) obligation, the condition never materialized. Consequently,
there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as
petitioner already conveyed full ownership of the subject properties upon the execution
of the deed.
We modify the decision of the CA.
CONTRACT OF SALE OR CONTRACT TO SELL?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed.
The RTC ruled that it was a contract to sell while the CA held that it was a contract of
sale.
DTSaHI

In a contract of sale, the seller conveys ownership of the property to the buyer
upon the perfection of the contract. Should the buyer default in the payment of the
purchase price, the seller may either sue for the collection thereof or have the contract
judicially resolved and set aside. The non-payment of the price is therefore a negative
resolutory condition. 12
On the other hand, a contract to sell is subject to a positive suspensive condition.
The buyer does not acquire ownership of the property until he fully pays the purchase
price. For this reason, if the buyer defaults in the payment thereof, the seller can only
sue for damages. 13
The deed executed by the parties (as previously quoted) stated that petitioner
sold the properties to respondent "in a manner absolute and irrevocable" for a sum of
P1.1 million. 14 With regard to the manner of payment, it required respondent to pay
P415,500 in cash to petitioner upon the execution of the deed, with the balance 15

payable directly to RSLAI (on behalf of petitioner) within a reasonable time. 16

Nothing in said instrument implied that petitioner reserved ownership of the properties
until the full payment of the purchase price. 17 On the contrary, the terms and
conditions of the deed only affected the manner of payment, not the immediate transfer
of ownership (upon the execution of the notarized contract) from petitioner as seller to
respondent as buyer. Otherwise stated, the said terms and conditions pertained to the
performance of the contract, not the perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and
deliver the same to the buyer. 18 In this regard, Article 1498 of the Civil Code 19
provides that, as a rule, the execution of a notarized deed of sale is equivalent to the
delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of
respondent. Moreover, not only did petitioner turn over the keys to the properties to
respondent, he also authorized RSLAI to receive payment from respondent and release
his certificates of title to her. The totality of petitioner's acts clearly indicates that he
had unqualifiedly delivered and transferred ownership of the properties to respondent.
Clearly, it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was
subject to the condition that RSLAI had to approve the assumption of mortgage, the
said condition was considered fulfilled as petitioner prevented its fulfillment by paying
his outstanding obligation and taking back the certificates of title without even notifying
respondent. In this connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.

VOID SALE OR DOUBLE SALE?

Petitioner sold the same properties to two buyers, first to respondent and then to
Viloria on two separate occasions. 20 However, the second sale was not void for the
sole reason that petitioner had previously sold the same properties to respondent. On
this account, the CA erred.
aTcSID

This case involves a double sale as the disputed properties were sold validly on
two separate occasions by the same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith. (emphasis
supplied)

This provision clearly states that the rules on double or multiple sales apply only to
purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice
that some other person has a right to, or an 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 some
other person's claim or interest in the property. 21 The law requires, on the part of the
buyer, lack of notice of a defect in the title of the seller and payment in full of the fair
price at the time of the sale or prior to having notice of any defect in the seller's title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by
the mortgage to RSLAI. According to her agreement with petitioner, respondent had
the obligation to assume the balance of petitioner's outstanding obligation to RSLAI.
Consequently, respondent informed RSLAI of the sale and of her assumption of
petitioner's obligation. However, because petitioner surreptitiously paid his outstanding
obligation and took back her certificates of title, petitioner himself rendered
respondent's obligation to assume petitioner's indebtedness to RSLAI impossible to
perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation
become legally or physically impossible without the fault of the obligor.

Since respondent's obligation to assume petitioner's outstanding balance with RSLAI

became impossible without her fault, she was released from the said obligation.
Moreover, because petitioner himself willfully prevented the condition vis--vis the
payment of the remainder of the purchase price, the said condition is considered
fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of
determining whether respondent was a purchaser in good faith, she is deemed to have
fully complied with the condition of the payment of the remainder of the purchase price.
Respondent was not aware of any interest in or a claim on the properties other
than the mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought
the properties from petitioner after the latter sold them to respondent. Respondent was
therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the
sale of the properties with the registrar of deeds, the one who took prior possession of
the properties shall be the lawful owner thereof.

In this instance, petitioner delivered the properties to respondent when he

executed the notarized deed 22 and handed over to respondent the keys to the properties.
For this reason, respondent took actual possession and exercised control thereof by
making repairs and improvements thereon. Clearly, the sale was perfected and
consummated on March 10, 1993. Thus, respondent became the lawful owner of the
properties.
Nonetheless, while the condition as to the payment of the balance of the purchase
price was deemed fulfilled, respondent's obligation to pay it subsisted. Otherwise, she
would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the
deed. This is because the provisions, terms and conditions of the contract constitute the
law between the parties. Moreover, the deed itself provided that the assumption of
mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must
deliver the certificates of title to respondent. We likewise affirm the award of damages.
cECaHA

WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution
of the Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with
MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner
Raymundo de Leon P684,500 representing the balance of the purchase price as
provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.
Carpio, * Velasco, Jr., Nachura and Peralta, JJ., concur.
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(De Leon v. Ong, G.R. No. 170405, [February 2, 2010], 625 PHIL 221-232)